Secrets of a $110 Million Man
There are no guarantees when it comes to running a business. But the best entrepreneurs I know follow these guidelines.
Norm Brodsky is a veteran entrepreneur.
I've been an entrepreneur for almost 30 years now -- 29 years and two months, to be exact, but who's counting? -- and one thing I've learned is that there is no formula for success in business. Believe me, I wish there were. I would love to be able to give you a step-by-step guide to achieving your business goals. But I can't. That's because no challenge in business is identical to any other. Each is shaped by a multitude of factors that give it unique characteristics, and your response has to be tailored accordingly.
Then how is it, you might ask, that some entrepreneurs are able to start one successful business after another and rarely -- if ever -- fail? By successful, I mean a business that lives off its own cash flow, provides a good living for its owners and employees, and generates the profit it needs to keep growing. You have no doubt run into people with the ability to create such businesses almost at will. In the media, they are often referred to as serial entrepreneurs. I suppose I'm one of them, although I have certainly had my share of failures. So what do serial entrepreneurs know that allows us to have a relatively high batting average when it comes to starting businesses? Or is it just a matter of luck?
Far be it from me to downplay the role of luck in any business venture, but I don't believe luck alone accounts for the success I have enjoyed. Nor does it explain the successes of other accomplished company builders I have had the privilege of knowing. Rather, what we have in common is a certain mentality, a way of thinking that allows us to overcome many obstacles and take advantage of many opportunities as they arise. I call it the knack.
What exactly is the knack? I think it boils down to a set of rules that can be applied to a wide variety of situations. Some of these rules we learn as children. Others we pick up from mentors of one sort or another. Most we develop the old-fashioned way -- by making mistakes, falling down, picking ourselves up, and figuring out how not to do it again. However we learn the rules, they are the tools we use to deal with the challenges encountered in the course of building any business from scratch. Not that the rules guarantee success, but they do improve our chances significantly. We win more than we lose, and the longer we stay in the game, the more often we come out on top.
I believe that almost any person can learn these rules and use them to create the kind of life he or she wants. Granted, they will come more easily to some people than to others, and not everyone will have the same success in applying them. In business, as elsewhere, some individuals have God-given gifts that allow them to play the game better than others. We can't all be Tiger Woods or Picasso or Shakespeare, but anybody can learn to play golf or paint or write a sonnet, and we can all learn how to be financially self-sufficient as well.
It would take a whole book to list these rules and explain the logic behind them. In fact, my co-author, Bo Burlingham, and I have written one. It's called The Knack: How Street-Smart Entrepreneurs Learn to Handle Whatever Comes Up, and it goes on sale this month. Rather than repeat what's there, I thought I would give you what I believe are the 10 most important lessons I have learned over the past 29-plus years, the rules that I still rely on today:
1. Numbers run a business. If you don't know how to read them, you are flying blind.
When I started out, I thought that CEOs ran businesses with the help of their top executives. What I didn't realize is that a business is a living entity with needs of its own, and unless the leaders pay attention to those needs, the business will fail. So how do you know what those needs are? There's only one way: by looking at the numbers and understanding the relationships between them. They will tell you how good your sales are, whether you can afford to hire a new salesperson or office manager, how much cash you will need to deal with new business coming in, how your market is changing, and on and on. You can't afford to wait until your accountant tells you these things. Nor do you have to become an accountant. You do have to know enough accounting, however, to figure out which numbers are most important in your particular business, and then you should develop the habit of watching them like a hawk.
2. A sale isn't a sale until you collect.
There's a common assumption that when somebody buys something from you, it's like money in the bank. Sooner or later, you are going to get paid. That's not always true, of course, and just how much sooner or later the payment arrives can make a big difference. But most people don't think about that when they first go into business. The term bad debt doesn't enter their vocabulary until they suddenly find themselves with a receivable they can't collect. By the same token, the concept of collection time doesn't become meaningful until they discover they don't have enough cash to pay their bills despite having made a lot of sales.
As I have written previously, every business that generates receivables is, in effect, a bank (see "What Are You, a Bank?" November 2007). When you deliver a product or a service in the belief that the customer will eventually pay you for it, you are making a loan, and you should treat it accordingly. That means determining whether customers are creditworthy and finding out in advance how long they take to pay their bills. It also means getting into the habit of checking the quality of your loan portfolio regularly and making sure your average collection time is what it should be.
