HOW NOT TO DO BUSINESS?

In recent weeks the issue of good business and good business practice has come up again and again. The economy is hard and businesses are struggling.  Many more than some. There will be real costs to founders, investors and employees when some of them shut down.

Often times the death of the companies were inevitable at their inception. They were dead on arrival. They survived only because the owners kept subsidizing them, they grew beyond the founders’ competence or because the wrong assumptions about the market on which they were based took time to play out.

Here is Shillings & Cents rough and ready check list for how to survive in business, in no order of preference.

1.       Enthusiasm, Intelligence and Integrity

My favourite American Warren Buffett has counselled that in looking for employees three qualities are key – enthusiasm, intelligence and integrity and then goes on to warn that without the last one the first two will kill you. When recruiting for your business you will do well to take this into consideration, we have seen enough brilliant and energetic workers who failed businesses because of their lack of integrity.

Business is about selling to people by people who work in the business. You get the management and workers wrong and your business is a disaster waiting to happen. You get the right people in place and your business will survive, even thrive under the toughest of conditions.

2.       Cash flow, profit, growth

Its possible for a business to be profitable and cash strapped. Profit is an opinion but cash is fact. What this means is that not only do you have to sell, but you have to get paid for what you sold, you have to have a tight rein on costs and you have to be focused on value of money when you spend. Once your cash flows are in order profits can follow and growth after that. Growth is important because if you are not growing you are dying, susceptible to strong competition.

The challenge in most businesses is that the owners when they get a windfall go on holiday or buy a 4WD or marry another wife. Businesses, like people should find ways to save for a rainy day, because rainy days inevitably come and if they don’t those savings can be built into new revenue streams. Increasing the resilience of the business.

3.       Have a vision and a plan

From the intangible comes the real world. From the spiritual comes the material. People prefer to jump into business without a long-term vision and a plan to actualize that vision.  They do this because thinking is difficult, they would rather run around busying themselves, so people can see that they are working than seat down and just think what they are trying to achieve and where they hope it will take them.

Abraham Lincoln once said, “Give me six hours to chop down a tree and I will spend the first four sharpening the axe.”

Its not rocket science. Where do you see your business in a year, in five or ten years and how do you plan to get there. You don’t need sophisticated graphics and MBAs dazzling you with English. They advise change the plan but not the vision, that may be a bit too rigid, but the point is that with a good enough vision you will be able to make the necessary adjustments to the plan to cope with speed bumps and wrong assumptions.

4.       Work on and not in your business

Related to the above in order for your business to be sustainable, that is last longer, you need to prioritise building system that will allow it to work without you, because it will have to work without you one day. In the beginning the founder is everything CEO, marketing manager, human resource manager and even gateman. This is useful so that he knows how every part of the company works but he has to start delegating or planning to delegate as soon as the business starts. If only because two heads are better than one. And its not about hiring for the sake, these managers need to run or build systems that will run the business.

5.       You will fail more than you succeed

I saw somewhere that the opposite of success is not failure. Failure is a part of success. Think of the baby trying to walk, the baby will fall many times before they learn to walk. As with any learning. You will fail more than you succeed. Business is a skill that has to be learned so expect that there will be failure. The difference between the successful businessman and the rest is that they don’t let failure get to them, instead they acknowledge it, learn from it and adjust.

The worst thing is to live in denial about your failures, keep doing the same thing over and over and hope for a different result. The definition of madness.

Anybody who is in half a business will tell you that it is a living thing. Changing and shifting, demanding attention and time.  They will also tell you if you get the beginning wrong the business may very well be doomed.