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Successful Entrepreneurs Don't Aim to Make Money

Of course all entrepreneurs want to make lots of money. Who doesn't? But the difference between entrepreneurs who do make money and those who don't, is that successful ones don't focus on making money. They focus on building their businesses. And that relies on having an attitude of pouring any money their businesses do make, back into them, rather than rubbing their hands and taking it out as soon as they can.

True entrepreneurs are gamblers and thrifty by nature. Given the choice of a holiday of a lifetime versus the chance to create a great business, they'll always choose the business - and take it for granted that if the business does eventually make surplus money, they can have that holiday - although entrepreneurs can become so hooked, holidays become a guilty wrench away from the businesses they need to protect. I didn't have a single days holiday, or off sick, for 10 years after I started my first business. I probably could have afforded it (in fact my wife took our kids to relatives' holiday homes), but my sense of responsibility towards my business baby meant I simply couldn't take the risk of being away in case the phone rang.

To grow their businesses, successful entrepreneurs will always prefer to plough it back in for the following reasons:

  1. De-risk the business by increasing the number of customers. That means investing in more sales and marketing.
  2. Develop and test new products. Successful businesses never stand still. The word 'better' is in their DNA.
  3. Increase customer satisfaction in order to encourage referral. Invest in customer support activities. Don't hope your customers like you, make them love you.
  4. And my favourite... Buy great management! Not too many, just the very best you can afford.
Entrepreneurs rarely make good business people. They love talking to suppliers and customers while constantly seeking to try new things. Running companies making and selling stuff is not their forte. Looking after finance, HR, production, supply chain, sales etc will quickly bore entrepreneurs. The only traditional business discipline that might interest them is marketing where they apply their inventive skills to thinking up messages that convey their passion for their products.

And of course entrepreneurs love R&D... but only if they've hit the nail on the head by offering what people really want to buy in the first place. Discovering that is rarely easy. If it was, there would be too many companies competing for the same market and they'd drive each other into loss. And if there are only a few companies trying to sell into a gap in the market, then that gap will be small. New entrants will always struggle to find a significant corner for themselves. It's either really hard to compete with existing players in a well established market, and or it's really hard to find and develop a niche.

I meet many people who want to start their own business. My first question is always 'why?'. Why choose the hardest possible way to make a living? Why gamble with your future when there are far safer options? If they answer 'to make money', I tell them not to bother. If they answer 'because I really believe people want to buy what I want to sell', then they stand a chance.

If you want to get rich, you won't. If you want a successful business, you might.

Comments

  1. Sound advice. Too many people watch Dragons Den and think they can do what the Dragons have done. What they can't see are the thousands of people who tried to do the same thing, and failed. Dragons make it look too easy. The idea for the business has to come first, not the desire to create a business and then think 'what shall I do?'.

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