Things about running business I wanted to know 10 years ago - part 2

Published Aug 23, 2017. 4 minutes to read.
Tagged with Business.

Part 1 available here.

Control your expenses.

Especially vital for companies and start-ups not turning any profit and living of private sources or venture capital. Always try to strip all non-essential costs and expenses.

Essential expenses: raw materials that are vital to production, legal expenses, taxes, salaries (if applicable), services your company can not operate without, rent.

Non-essential expenses: shiny office in business district, freebies, convenience things. Anything really that does not mean immediate failure of business operations if absent.

Unless you are making profit, and enough of it to have at least 8–12 months of runway, avoid burning cash, even if you have cash to burn.

Reinvest what you earn.

Forget about dividends, bonuses and things alike if you do not have reached substantial profit margin and in first couple of years of operation. In initial stages, business comes first, yachts and limos comes last.

Many are afraid that, unless you pay over-the-top salaries and do not provide bonuses, your staff will be unhappy and leave.

In reality though, people tend to flock to startups and new companies because they want to get behind the idea of what you are building.

For the most part, everyone understands that you will not find bathtubs of cash in a startup. As for those who don’t — you probably don’t want them around anyway.

In fact, I personally tend to keep distance between myself and companies that seem to be spending tons of cash on absolutely irrelevant matters before breaking profit or paying off investment. Such unicorns are destined for failure — tomorrow or in 5 years, does not matter. It’s time of my life I will not get back, and I consider time investment. Not a small one at that.

Be extremely careful with venture capital.

Venture capital is great asset for growth. It is also massive liability. Yes, there is potential to get funding behind your thing, but you forfeit a lot of control over the direction of the company, and potentially, company itself.

Venture capitalists are not there to baby sit you and capital firms are not charities. They are there to make cash. Despite the “we want the world to be better place” doodly-doo most investors tend to repeat on hourly basis, the end motivation is cash, or potential there of.

That being said, venture capital can also help you grow, not only by providing you with funding, but also with knowledge and giving access to networks of people you might want to have access to.

It’s up to you to weigh risks against benefits for each scenario.

If you are making, or about to make, stable profit and need funding to expand your operations, bank loan is a good option. Loans are usually cash-for-cash kind of operations, e.g. you need to repay the loan and pay the percentage due, but that’s about the only liability there is.

With venture capital however, you exchange short term profit (capital) for long term profit and influence in the company. That is, investors usually take part in decision making and have direct influence over direction and focus of the company.

Not necessarily a bad thing. But not always good either.

Focus.

This is pretty obvious, but I still see many completely miss it. Focus on the product, service or whatever you are building. Focus on delivering essentials of it before bells and whistles. The rest will come, in due time.

That being said, don’t forget that business essentials are also part of whatever your building, all those things you hate — paperwork, taxes, contracts.

Don’t start business with intent of selling it.

If your focus is more on getting funding or building the company to the point you can sell it, you have already failed and that’s the end of it.

This is because you can only focus on so much at a time. By focusing on getting paid you will undoubtedly neglect the actual thing you are building.

Care for your people.

Care for your people, be it employees, customers or partners. Care enough and they will care for your company. Simple as that.

Exceptional care fosters exceptional relationships and loyalty.

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