There’s a middle class of businesses that are the backbone of the economy. Professor Saras Sarasvathy coined that term, and we’re pleased to adopt it.
These businesses sit between the big corporations of the major stock indexes and the VC-funded gazelles and unicorns of Silicon Valley and Silicon Hills. The watchwords for these backbone businesses are duration and durability. They last and prosper because they are well-run, following the entrepreneurial method.
Entrepreneurship is usually portrayed from the perspective of ends: identifying unmet customer needs, creating new and innovative solutions, taking them to market, making a success.
That’s all true. However, there is another perspective that comes from actually running a business, ensuring that operations are smooth and efficient, monitoring daily cash flows and monthly P&Ls, and managing people’s performance.
Often, running a business requires an intensified focus on means. Cash flow, operations, employee performance — these are means, and running a business is a science of managing means. Business advisor Andrew Frazier helped us focus on means in this week’s Economics For Business podcast.
Key Takeaways And Actionable Insights
Knowledge is an entrepreneurs most important means. Accumulate it purposefully (but not by losing money).
The more you know, the more you grow. That’s a mantra from Andrew Frazier. He advises thoughtful accumulation of knowledge. One way to learn is to lose money — you learn what doesn’t work, and what not to do. Avoid this form of learning by purposive knowledge gathering. This includes truly knowing your purpose — at least part of which is to build the business resiliency that delivers durability and duration.
Knowing your numbers is a critical component of durability and duration, and of shepherding your means.
In his advisory and consulting roles, Andrew encounters many business owners who don’t know their own numbers intimately — their daily cash inflows and outflows, the precise identification of fixed and variable expenses, the condition of the P&L and the balance sheet. Some, he says, fear the numbers. They delegate accounting to an outside service, or even to an internal “back room” employee. Don’t delegate “knowing your numbers” to anyone. Be on top of them every day. They tell you your means.
Sales and marketing are the most important means of lasting business growth, and not necessarily expensive.
There is no business without the sales and marketing activities that identify the right customer niche and tell your story to those customers in a credible, warm and persuasive fashion. Many business owners and entrepreneurs see sales and marketing as an expense to be incurred only if there is cash leftover from other variable and fixed costs that take precedence. This is wrong-way thinking. Sales and marketing are job #1.
Hiring employees is the biggest change you will make to your business and to your role in it.
You want to hire employees for the growth of your business. As you do so, you are changing your business. You change its structure: it now needs organizational design. You change your role: you are now a leader. You change the business’s operational flow because it now needs detailed processes and systems. You change the culture: it becomes more indeterminate and therefore requires more of your attention. You stop working in your business and start working on it.
Duration and durability require sacrifices from you.
One aspect of the entrepreneurial ethic is personal sacrifice today for market reward in the future. Sacrifice is part of your means. You’ll work harder and longer hours. Your business and social and family lives will become inextricably intertwined. Your business will become your identity. Realize this and embrace it.
A lasting business requires an exit plan.
A business that prospers over an extended period needs an exit plan for its owner or founding entrepreneur. This can range from an IPO or sale to an acquirer to leaving it to your kids or turning it over to employees. Whatever the case, the owner needs to plan ahead for exit, almost from the beginning. For example, if you have a professional services business, what will make it saleable when you want to exit? Is there asset value over and above revenue flow? Will customers stay after you leave? Are your kids even interested?
“Running Your Business” (PDF): Mises.org/E4B_122_PDF1
Visit Andrew Frazier’s Website: RunningYourSmallBusinessLikeAPro.com
Running Your Small Business Like A Pro by Andrew Frazier: Mises.org/E4B_122_Book
“The Masterpreneur Playbook Summary” (PDF): Mises.org/E4B_122_PDF2