Eternal Truths for the Entrepreneur
Philosophers while away many an idle hour discussing whether it is even possible for eternal truths to exist, that is, truths that hold good whatever the context or circumstances. I’ve got news for the academics. They do – in business, at least.
Among the 20,000 or so things that the entrepreneur has to consider (no, I haven’t counted them – it just feels like that), five key issues stand head and shoulders above the rest
1. To get into business, you need an idea, one that you can carry out. It doesn’t have to be terribly original – though that can help – but originality calls on powers of communication to get the newfangled idea across. It can sometimes be better to do something that’s familiar to potential buyers, but to do it better than their other suppliers.
2. As a new entrant, never start a price war. You will lose. Moreover, customers associate cheapness with unreliability. Better to start with higher prices that you discount for specific reasons. You then look like quality at a keen price, a much better place to be. And a firm with healthy profit-margins is a nicer one to run than one teetering on the edge.
3. Research and plan. As Sun Tzu said about 2500 years ago: ‘Every battle is won before it is even fought’ and ‘Many calculations lead to victory; few calculations, to defeat’. Take his advice: win your battles before you even go into business, by doing your research and planning. It’s arduous and demanding, but if you’re looking for an easy life, don’t try entrepreneurship. As another sage, Thomas Jefferson, remarked, the harder he worked the luckier he seemed to get.
4. Sell for more than cost. Obvious? You’d be surprised how few businesspeople really know their costs and how those costs behave with changes in volumes. Know the numbers in your firm and you’ll be in control of it. Talking of control, keep records and compare your performance over time. Dividing the year into13 four-weekly accounting periods makes comparison easier than using 12 calendar month.
5. Profit is important, but cash is what keeps you in business. It is so important that I’ll repeat myself: cash is what keeps you in business. If you always have enough in the bank to pay the bills, fine. If you’ve too little, creditors can foreclose and you’re out of business. Plan the cash-flows out of the firm on wages, things you buy and taxes you pay; and control the inflows (largely from customers paying their bills) to keep what’s coming in ahead of what’s going out. Most failed firms expire because they run out of cash. So never be shy of asking firmly for payment when it is due – let it slide and you could fail. There’s a bit more to controlling cash-flows than this, but these headline matters cover maybe 80 per cent of what you need to do.
I’m not sure if my final point is an eternal truth, but it is certainly an inescapable fact. To make their dreams come true, entrepreneurs need to be forceful, single-minded people. Most cannot, however do it all on their own: someone has to produce supper and tomorrow’s clean underwear. Even entrepreneurs depend on friends and family, a support network that it is all too easy to take for granted. Loved ones will take a lot of neglect in a good cause, but if it ever feels to them that it’s slipped into exploitation, beware.
If that all sounds like a slog – it is. But the ultimate reward, of being your own boss, making your mark, proving your point and, one hopes, gaining a handsome income, lead to a sense of fulfilment that few, if any, employed people ever experience.