Here are a few basic truths about business to help ensure your success:
It all starts with simple math. The formula is straightforward: Revenue minus Expenses equals Profit. You need to sell enough of something and price it correctly so that it exceeds your costs of doing business. Taking on work at a loss is not a wise strategic choice and cannot be sustained for long. Without consistent profits, you ultimately face cash flow issues and/or become overly reliant on debt to sustain the operation. If you are not careful, the cost of servicing the debt becomes too burdensome for 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. Understand your numbers thoroughly and perform the math correctly!
You are also only ever as good as your people. Hiring competent individuals who are a good cultural fit is crucial to any business. A significant amount of time is wasted on people-related issues, which is mind-boggling. As the saying goes, “one rotten apple can spoil the barrel.” I’ve witnessed many business owners suffer due to their inability to effectively manage 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. Satisfied customers are more likely to make repeat purchases and tend to refer other customers. Dissatisfied customers rarely do either. 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, avoid becoming too reliant on debt, make informed personnel decisions, and commit to delivering high-quality customer service; good things will happen.
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