Confessions of an Entrepreneur: Axioms to Live By

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Following up on my last blogpost where I provided my best advice for graduating seniors, I thought it might be good to share axioms I have lived by that would benefit anyone who plans on owning a business.

Here they are, in no particular order of importance:

1. People problems are what will keep you awake at night.

When I think back over the last 32 years of business ownership, the most difficult situations that caused me angst were always related to people. Why was someone upset? How could I get two good people to get along with each other? Why was someone leaving us? What were we going to do about someone who wasn’t performing?

While the present day may be an exception, these things were always more worrisome to me than how we were going to meet payroll or where our next project would come from.

2. Your reputation is your single most valuable asset.

I have seen this fact demonstrated over and over again. A good reputation will allow you to get business, find capital, and hire good people – but a bad reputation will eventually lead to your undoing. This applies to you as an individual as well as your company.

You cannot afford ethical breaches without risking your reputation.

3. Paranoia keeps you out of trouble.

I have always been a worrier about what can go wrong. That helps me anticipate problems before they occur, and it has become a more critical part of my survival toolkit over time. You have to assume that people will have miscommunications. Or that things will take longer than you expect. Or that someone will let you down and get greedy. Or that the business environment will change in a way that impacts the business.

There are always things that can go wrong and while you don’t want to be negative, you can’t afford to be stupid.

4. You cannot spend too much time communicating with your people.

I never subscribed to the theory that your employees can’t be your friends. In fact, I think it is essential. If people don’t like you, they won’t trust you.

That means you have to invest in building relationships. That means you need to exchange a lot of information with and show a lot of interest in your people. Calling, emailing, texting, meeting with them – and regularly sharing financial information and information about your plans for the business – these things are critical to building support and keeping other people pulling the wagon.

5. Recruiting is a job that never ends.

As a business owner you are like a coach. You must constantly work to upgrade the quality of your team. My experience is that most business owners do not devote sufficient time nor energy to recruitment.

That leads to a whole host of problems. Key roles go unfilled. The wrong people get hired. And performance problems with existing staff are not confronted because the firm has no one waiting in the wings to replace them should it prove necessary.

6. A business is much more than the sum of its parts.

Once you get up and running and are established, you will end up with someone in the organization who is obsessed with analyzing each part of your business to determine its profitability. They do this in the name of “good management.”

The goal is to eliminate unprofitable operations. Unfortunately, in my experience, this often backfires because people don’t understand the complexity of the business and the interrelationship of the parts. Eliminating a product or service that appears on the surface to be unprofitable may make sense. Or it may not.

How much overhead does that unprofitable business pay for? What other sales or revenue will be reduced if it isn’t there? How many customers first discovered your business through this unprofitable product or service line?

There are many things to look at besides profitability.

7. Long-term success is based in part on your ability to maintain long-term relationships.

This takes effort if you aren’t someone who naturally does this.

You need to be the one who extends a hand. You need to be the one who makes the effort to call or see people even when they have no business with you. When you only contact people you want something from, they will eventually figure that out and drop you from their “friend” list.

You need friends to survive the long haul – friends as suppliers, customers and even regulators.

8. ANY source of capital has strings attached.

I always advise my students of this fact. All capital has strings attached. Whether it is a bank loan that requires you to maintain certain ratios in your business or equity capital that wants to dictate how you do things – even PPP funds that require you to use the money for payroll – there are always conditions that have to be met.

If you don’t like anyone telling you what to do or how to do it, don’t take their money!

9. Your ultimate success as a leader depends on your ability to make the transition from being obsessed with details to letting go at the right time.

This is one of those fuzzy “laws” that I have come to appreciate more the older I get and the older my businesses get. That obsession with how everything is done could be a huge part of your early success.

But if you want your business to keep growing, you will eventually have to drop that and develop a lot more trust for the people and systems you create to deliver the client or customer experience you feel is crucial to your success. That is a difficult transition for many business owners to make.

10. There are times that institutional leaders are needed.

But there are also times that charismatic leaders are needed. Anyone who has followed my writing over the past 20 years knows I have been critical of “Good to Great” and the whole concept of Level 5 (institutional) leadership.

What works for a multi-billion dollar mature organization may not be what works in a small, undercapitalized business. What works for managing a well-oiled machine with tremendous inertia may not be what works in an unproven, growing company, or one in trouble.

That said, one’s leadership style will have to change over time if you want that business to outlast you as the founder. A transition will be necessary.

Leaders who are too charismatic and who make themselves too instrumental in their business’ success will have a very hard time passing the reins to someone else. Hence the need for a more institutional approach.

One size definitely does not fit all when it comes to leadership style in a privately held company.

11. The value of effective marketing cannot be overestimated.

Every business that makes it over the long haul builds a brand. Doing so allows them to do a higher volume and charge higher prices than other businesses that don’t understand this reality.

Building a brand takes a continued and sustained investment in promotional activities that never ends. That takes understanding of and investment in marketing.

And marketing is much broader than just promotion. It touches every aspect of the enterprise and includes decisions on exactly what the business provides, to where they provide it from, to how they provide it.

That means marketing has to be front and center at all times.

12. Owning your own business is stressful.

But so is having a job and working in a larger organization. There’s a cartoon I have seen that shows a goldfish in a blender and the fish is sweating.

That is my view of what it can be like to work for a large company. At any time, someone can “flip a switch” and turn the blender on and you are toast.

It may have nothing to do with how you are doing your job. Your area may be outsourced. Or the company could do a new strategic plan and exit the business you work in. The point is having a job is like being self-employed but having only one client or customer. And that’s risky!

Those are my thoughts. What axioms have you lived by? I would love to hear from you at mzweig@walton.uark.edu!