Entrepreneurs and the 5 C’s

Every small-business borrower and banker is familiar with the “five C’s” of credit that affect lending decisions — character, capacity, capital, collateral and conditions.

Of the five, only the first one is entirely personal. Numbers rule the other four. Based upon my decades of working with hundreds and hundreds of small-business owners and budding entrepreneurs, I can report the lack of good character is most often the “C” that causes business decline or failure. Absentee owners, those who refuse to implement relevant changes and those who ignore the need to update and refresh their business model or staff are most likely to fail or run a good business into the ditch.

For new entrepreneurs and seasoned business owners alike to be successful, they should be present in all aspects, progressive in all aspects and passionate in all aspects.

Present in All Aspects.
A phrase uttered that is indicative of a business owner with a poor work ethic is “I just want to be my own boss.” Translation: “I want to work less and have other people make money for me.”

Successful owners know that they must be on duty 24/7, and this “schedule” is the tradeoff for getting to live and work in their passion. Small businesses compete with corporations by their owners being available and present to customers, thus giving the business an identity which in turn encourages recognition, customer loyalty and respect.

Staff members are the daily face of the business, and so the owner must be consistently present training them and leading them in order to ensure great customer relationships. This presence also ensures the culture of the business is preserved. An owner of good character will jump behind the register when the store is busy and clean the parking lot trash all in the same day he or she is forecasting next year’s sales figures, selecting new products and meeting with suppliers.

Progressive in All Aspects.
A successful entrepreneur is always studying local and national industry trends. She or he observes and makes frequent contact with the local competition in order to anticipate trends or discover better ideas to implement. Being receptive to the ideas of others is proof of a healthy ego. Listening to customers, staff and online feedback in order to improve the customer experience or workplace all help to ensure the business remains relevant and poised for long-term sustainability. Once a business becomes successful, the progressive attitude is even more important to prevent complacency.

Technology and equipment needs, service or product delivery methods, store appearance, and customer service offerings are the areas of a business that the owner must constantly seek to improve and adapt to local expectations.

Passionate in All Aspects.
Business passion does not just apply to the goods made or the services rendered by the owner. A successful small-business owner learns the accounting system to understand how the numbers reflect the life of the business, analyzes profit margins and looks for ways to improve the bottom line with the same passion as testing new products. Numbers aren’t boring; they are the lifeblood of the business, and any owner should be actively interested, not just passing information along to an accountant each month. Passionate curiosity about the products sold in the store from a supplier, the ingredients in dishes created or the origins of changes coming in the national industry should always be evident in an owner. A passionate curiosity is a contagious and positive force.

Entrepreneurs who strive to become small-business owners and long-term successful small-business owners must be present, progressive and passionate every day to keep the many wheels of a small business rolling forward in a successful manner.
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Editor’s note: Martha Londagin is an SBA/commercial loan officer with Springdale-based Legacy National Bank, and a former business consultant with the Arkansas Small Business and Technology Development Center at the Sam M. Walton College of Business at the University of Arkansas. The opinions expressed are those of the author.