If You Want to Be a Successful Entrepreneur, Take Note of These 7 Lessons
While everyone seems to have a good business concept, few ever execute their ideas successfully.
One of the main objectives of creating a business is related to the generation of wealth: for the environment, for society and for the business owner.
The generation of wealth is related to money and its correct management. Many entrepreneurs start their business as operators or technicians and never delve into money management. That makes their businesses stay small or not survive over time.
That is why I decided to write this article entitled "7 secrets of money to undertake successfully":
1. Entrepreneurial Mindset
Many people think that all they need to start is a good idea. Unfortunately it is not like that, good ideas abound everywhere and are destined to die, if you do not have an entrepreneurial mindset.
Creating a new business requires hard work, high tolerance for frustration, being willing to carry on when it seems like all is lost, implementation, implementation, and more implementation. But above all, it requires an obsession to achieve your dreams, more than an obsession to generate money.
If you look for money, your chances of success will decrease (because at the beginning you won't have it). If you seek to transform people's lives and make a change on the planet, money will come as a consequence.
So do you or do you not have an entrepreneurial mindset?
2. Viable Business Model
Most people who start a business become obsessed with their brand and their product, and this is one of the most common mistakes I see in entrepreneurs. Your brand and your product are worth nothing, unless they show that they are capable of generating money.
- First: you need to make sure that someone is willing to buy your product / service. Describe who your valuable customer would be, approach people who meet the characteristics and see if they are willing to buy.
- Second: you need to develop your business model — that is, know how to interconnect all parts of your business. You need to know how you are going to attract prospects, how you are going to convert them into customers, how you are going to produce and deliver your product or service, how you are going to charge and how you are going to pay. When you have it assembled, you will realize that your model requires money to function. Those are your costs and your expenses.
- Third: you need to make your financial statements or your numbers and make sure that your business is profitable and scalable. You find profitability when you calculate your sales minus your costs and minus your expenses. You find scalability when you validate that there are many people who meet the characteristics of your valued customer, that you can serve them through your business model and that you have enough money to start and maintain it.
If you meet these three points, we can say that your business is viable. If you realize that it is not, you can adjust your business model as long as you validate that someone is willing to buy what you offer.
3. Absolute Austerity
One of the mistakes people make when starting their business is that they buy and overspend. They look for the best computer, the best offices, the best car or they use their money in things that are not directly related to generating sales.
A principle that Carlos Slim uses that I highly recommend is called Absolute Austerity. When you buy something, make sure that it is directly related to the generation of sales.
If you need a computer, ask yourself which computer meets your basic needs (not which one meets the needs of your ego). And ask yourself, if I buy a more expensive computer, will this increase my sales?
4. Cash Flow
Cash flow is the gasoline that drives businesses. Many businesses that are highly profitable (that is, that generate profit), die because the entrepreneur or business owner did not know how to manage their cash flow.
There are three levers that I recommend to manage your cash flow well:
- The first: charge before and pay later. In this way you can finance your business with the money of your clients, instead of you becoming their bank.
- The second: handle low inventories. One of the places where your money gets stuck is in inventories, if you have too much of it. Try not to give in to the temptation to buy too high a volume for a discount.
- The third: reserve of protection. Try to have enough backup money to pay for one to two months of business. There are always fat cows and skinny cows. When you don't have the money to pay for the lean operation, a profitable business ends up going out of business.
5. Reinvest Your Profits
One of the temptations of the entrepreneur is to spend his earnings as soon as they arrive. My suggestion is to reinvest them in the same business. You can use them to attract more prospects with marketing and sales, or to streamline your operation and lower your costs and expenses.
Until when should you reinvest your earnings? Until you have reached a good critical mass and the business can operate even without you.
6. Plan Your Transition
One of the questions that I get asked the most is: when is the right time to quit my job and dedicate myself fully to my business?
The answer is when your business is able to generate enough money (consistently and constantly) to replace the salary that your work generates.
It is important to plan the transition with clear goals and objectives. In such a way that you say: in six months the business must leave me this amount of money. When I reach this amount of money I will quit my job. This way you will know where to focus and when the transition will occur.
And I know that many entrepreneurs are kamikazes and are willing to quit right now.
Can you do it and achieve it successfully? Of course. However, if you want to avoid or lessen the impact of entrepreneurial trauma and emotional crises, I recommend planning your transition.
7. Continuous Learning
This part is essential for any entrepreneur. You need to be willing to continually learn if you want to be successful. If you don't like learning, maybe entrepreneurship is not for you because, in a short time, you will become obsolete and the business will end up failing.
Now, there is a type of education for every purpose.
- If you want to learn to be a better collaborator in a company, you need to consider academic education (such as masters, diplomas, specialties).
- If what you want is to learn how to generate better results in your business, what you need is focused education (such as conferences, seminars, workshops).
The difference between the two is that the first gives you a lot of theory (and takes a lot of time) and teaches you how to run someone else's business and the second teaches you implementable principles (in a short time) and teaches you how to run your business.
What is the first thing that I recommend you learn? To manage your money. To manage your personal finances.
Business money is a reflection of how you handle your money. If you learn to do it, you will achieve that your business generates sustainable results.