10 Business Fundamentals

10 business fundamentals I believe, but I can’t necessarily prove.

  1. Long-term business success is rooted in value. Businesses that offer value to customers and respect value for employees are more likely to survive. Business ethics are good business; they are like a long-term insurance policy.
  2. Strategy is focus. A great quote: “I don’t know the secret to success, but I do know that the secret to failure is trying to please everybody.”
  3. One of the most dangerous confusions in business is about business planning. Every company, large, small, and not-yet-started, can benefit from business planning. Way too many people confuse business planning with a big formal business plan document. You can have planning without the formal plan and you can have the formal plan without the planning. A great quote: “The plan is useless, but planning is essential.” –Dwight D. Eisenhower
  4. The more priorities in a plan, the less likelihood of implementing that plan.
  5. Passion and persistence don’t guarantee business success. There are a lot of other factors.
  6. Bootstrapping is underrated. A great quote: “God bless the child that’s got its own.”  –lyrics  by Billie Holiday/Arthur Herzog, Jr.
  7. Cash flow is vital but not intuitive. Profits don’t guarantee cash flow. Many profitable companies die for lack of cash.
  8. Investors don’t invest in business plans. They invest in businesses they believe will make them money. They invest in the people and the market. But people without business plans are far less likely to get investment than people who plan. It’s about getting your story straight, and reducing uncertainty.
  9. There are very few good reasons to spend more than you bring in for more than a very short time. A long-term company-building effort is one of them.
  10. Everything you do in a business rules out something else that you can’t do. That’s the principal of displacement. It’s really important.

Comments

  • Tim Berry says:

    Frederic, re #7, (and thanks for asking) the importance of cash flow is before, during, and after the current credit crisis.

    Note the "not intuitive" part of that is very important. We tend to focus on profits, assuming intuitively that with profits, we'll have cash. However, profits are an accounting concept that is sometimes radically different from cash in the bank. That difference gets a lot of people in trouble. Tim.

  • Frederic Abramson says:

    Regarding item #7, are you alluding to the credit crisis or something else?

  • Sheryl Schuff, CPA says:

    RE: #3 Yes, planning is important, but beware of getting too attached to outcomes. One of the greatest strengths of small business owners can be their ability to be flexible and make rapid changes when market conditions shift.

    Don't invent red tape for yourself. Remember that a plan is just a plan.

  • Tim Berry says:

    Richard: interesting question, because that displacement problem does apply to work/life balance too; but no, in this case, in this post, I was referring strictly to business, and business strategy development in the real world.

    In a strictly business context, we want to do everything, but we can't; because of displacement, it doesn't work. Sometimes we have to realize that we're finite — and I'm talking business here, just business — and we can't do everything.

    I've seen many times how companies can improve their strategy and actual business performance by recognizing the principal of displacement, and, therefore, not trying to do more than they can actually do. Resources — time, money, people, etc. — are finite.

    Actually I posted more on displacement on this blog in an earlier post: http://blog.timberry.com/2006/02/why_dont_we_tal.html

  • Rob Lindberg says:

    Wow. This is great!

  • Doug says:

    Now there's a list to hang your hat on!

  • Richard says:

    Interesting point on #10. Are you referring to a work/life balance or something else? Please elaborate.

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