Dave Berg from Syracuse University sent over the following to me regarding the six shocks of entrepreneurship. Thanks Dave...very interesting and thought provoking.
Six Shocks of Entrepreneurship
By JAY GOLTZ
There’s nothing like a tough economy – and unemployment – to encourage people to take the plunge and open their own businesses. Some have more business experience than others. Some have more education than others. When I started my company, I went through a series of surprises and shocks and the occasional nightmare. With all of the recent interest in entrepreneurship, I thought I would highlight six warning signs that you are about to be broadsided by one of the classic and inevitable struggles of business ownership. If you hear yourself saying these words, take a step back and think about what you’re doing. My hope is that by being more aware you will be better prepared.
1. “Where’s all the business from our marketing launch?” Marketing can be very expensive, and it is difficult to know what will work. It can propel your company, or it can have minimal or no impact. There will be no shortage of people looking to take your money to help you with your advertising and marketing. The people who sell advertising are usually not marketing experts — they’re salespeople. It is their job to sell. It is your job to be discerning. If you can, test before you invest.
2. “The accountant must be wrong! We must be making money! We’re so busy I can hardly keep up.” You can’t just be a salesperson. You need to do the math. It’s about margins, cost accounting and discounting. It is about the bottom line, not the top line. Plenty of people are very busy right up until the day they run out money. Accounting can be exciting — exciting like finding out you are going broke, or exciting like driving a big profit.
3. “We don’t need customers like that!” Are you sure? Maybe you do. It is easy to take things personally and conclude that you don’t need a customer’s business. It is also easy to lose potential business worth millions of dollars from customers who may be demanding, wrong or just in a bad mood. There are only so many customers out there. I don’t want to lose their business or their friends’ business. It is not about ego, it is about money.
4. “Where’s all the money?” Cash flow is not the same thing as profitability. Cash gets stuck in places — inventory, receivables, fixed assets, debt repayment. Hence the lack of flow. You need to get a handle on your cash flow as well as your profitability. Companies go broke because they run out of cash. Cash is king. Cash flow is a dictator. It will dictate your success.
5. “He did WHAT?” Management is about setting standards, training, empowerment, motivation and holding people responsible. Not everyone is going to figure things out for themselves. Forget the phrase “common sense.” It may be common to you, but you are going to have to tell some employees once, twice, maybe three times. You eventually are going to have to decide whether it is you or them. Were they trained properly? Are you not clear? Are you not consistent? Do they not care? Are they unable? It’s not always an easy answer.
6. “Why is the new salesperson in the bathroom crying?” Twenty minutes earlier I had asked one of my veteran salespeople how the new salesperson was doing. She said she wasn’t catching on too fast. I said I was afraid of that. As soon as I walked away, my veteran told the newbie, “Jay doesn’t think you are catching on fast enough.” When you are the boss, you can no longer assume that any conversation have will remain private. Anything you say can and will be used against you.
Here’s the good news: Once you figure it out, business should get easier. Making mistakes is unavoidable. The key is to learn from them (or from mine) — and not repeat them. This might seem obvious, but I have to tell you, I have watched people do the same things over and over again with disappointing results. While I get tremendous satisfaction from good decisions and happy customers, there isn’t a day that goes by that I don’t look around and try to figure out what I could be doing better.
Jay Goltz owns five small businesses in Chicago.