My advice on how to become a successful entrepreneur
People ask me all the time what the essentials are of running a start-up and whether they have what it takes.
I’ve worked with a number of entrepreneurial duos, and typically one is the technological genius and the other the commercial brain.
It’s true you can hire the finance skillset, as opposed to making someone with such knowledge a cofounder, and I’ve seen business plans that clearly were not prepared by the entrepreneurs but rather by a hired hand.
Understand The Numbers
But it is essential for the CEO to own the numbers. If he or she cannot explain the key assumptions in the revenue line or what the business is most sensitive to, then it has a fundamental flaw and shouldn’t be backed.
You have to be profitable, but more than that, you have to measure the profitability of the key unit in your business – whether that’s a shop, a type of transaction, a service or a product. What typically happens when you start tracking profitability per lines of product in a business and assigning the costs to them is that your increase your prices.
This is because most entrepreneurs undersell their goods because they don’t full understand all of the costs, such a pay as you earn (Paye) and National Insurance.
Timesheets are a great tool for applying the cost of time against the cost of delivering the core product.
Another key reality: if you’re in a technology, business development, marketing function and you’re trying to move up to general management, finance is the key.
You have to be able to read and understand balance sheets, profit and loss (P&Ls) and cash flow statements. Marketing, increasingly with online advertising, is becoming a revenue centre, no longer a cost centre. But if you can’t demonstrate that by speaking the language of finance, you’ll stay in a marketing ghetto.
Tips and Tricks
Finally, there are a few things you must do if you are running your own company: ask yourself if any fixed cost can become variable – tie performance and costs together wherever possible.
Build a good relationship with your bank manager; over-communicate all financial goals to your team; you must align the strength of the team to achieving together.
Take capital when it is offered; don’t hold out for the ideal offer. Money has a time value, and you can lose months waiting for a better deal. Under capitalised firms never succeed, and there have been no exceptions to this rule.
Keep looking for ways of getting more leverage from your sales pipeline. How many pitches must you make to get one secured client? Where can you automate or delegate to save time?
Successful businesses move from being full of potential and risk steadily through key de-risking points, from the storm of the high-seas to the calm of the approaching shore. Best of luck.