Leadership Thought #442 – A Few Basic Truths About Business

Here are a few basic truths to help ensure your success:

It all starts with simple math.  The formula is actually pretty straightforward: Revenue – Expenses = Profit.  You need to sell enough of something and price it properly so that it exceeds your costs of doing business.  Knowingly taking work at a loss is a stupid not strategic decision and cannot be absorbed for long.  Without consistent profit, you ultimately run into cash flow issues and/or become too reliant of debt to sustain the operation.  If you are not careful the cost of servicing the debt becomes too cumbersome on the business and you can no longer remain price competitive, invest in your future or fund basic operations.  The financial hole will grow more quickly and deeply than you can imagine.  Know your numbers inside and out and get the math right!

You are also only ever as good as your people.  Hiring competent people who are a good fit with your culture is critical to any business.  So much time is wasted on people issues that it is mind boggling.  As the saying goes, “one rotten apple can spoil the barrel.” I’ve watched many a business owner suffer because of their inability to effectively deal with a bad hire or promotion decision.   I don’t care how good your business strategy or product/service is, without the right people with the right attitude in the right roles you are destined to achieve less than stellar business results. You may survive but it is doubtful you will thrive.  You’ll also have a lot less fun in the process.

Lastly, the customer may not always be right but without him/her you wouldn’t be in business.  Having an adversarial or disconnected relationship with your customers makes no sense whatsoever.  Satisfied customers will buy more from you and tend to refer other customers – dissatisfied customer do not.  When you decide to start your own company you are making a conscious decision to serve others who already have an abundance of choices. I read a fortune cookie once that said, “Happy customers equal happy owner.” I couldn’t agree more.

In summary, get the basic business math right, don’t become too reliant on debt, make good people decisions, commit to high quality customer service and good things will happen….

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