Have you ever dreamt of starting a business? If so, consider these guidelines to bump up your odds of success.
At the behest of my good friend Steven Poh — award-winning journalist, entrepreneur, and communications specialist-turned-academic for Berjaya University College — I was one of three speakers invited to an on-campus seminar excellently organised by Berjaya UC’s students. During my presentation, I asked the participants who among them wanted to secure a conventional job after graduation yet hoped to start their own business five or 10 years later.
Some students raised their hands. Many more, however, responded positively to another mutually-exclusive question I posed. Their plan was to secure a job and to remain employed their entire working lives. That’s wise for most people because of the oft-quoted statistic: 90 per cent of new businesses fail within the first five years of start-up!
There’s no point beating around the bush. Starting a business is tough. But sustaining it is tougher.
Financial guru Robert Kiyosaki’s sound advice to would-be entrepreneurs is to start small and to fail often! Failure in this arena is not something to be ashamed of but rather a badge of courage and a stepping stone to eventual economic success.
QUESTIONS TO ASK
When assessing any potential business idea for long-term economic and personal viability, it is most sensible to only pursue ventures that meet all three of these criteria:
3. Economic demand
1. Are you passionate about your business idea?
2. Do you possess the needed skills, or can you secure the requisite skills, to propel your business to eventual success?
3. Is there sufficient market demand to suggest your business might succeed?
If all three criteria are met, you could have a possible winner on your hands. Nonetheless, you can’t be certain of profitability until you launch. To bolster your odds of success, it would be wise to nurture a tight network of friends and family members eager to see you succeed in your venture.
NETWORK OF SUPPORT
The best way to deepen your network ties is to offer to help other members of this core group succeed first without asking for anything at all in return. Do so repeatedly.
Over time, such steady deposits into the ‘emotional bank accounts’ of others will accrete into a massive store of goodwill that will prove invaluable to your own business’s eventual possible success.
As you nurture this crucial group of supportive individuals, your twin goals should be to achieve a wise balance of healthy inter-dependence with them while avoiding the debilitating unhealthy trap of over-dependence.
LESSON IN SELF-RELIANCE
The lifeblood of any successful business is profitable sales. In the early stages though, also having in place sufficient cash reserves will go a long way toward raising your odds of success down that lonely road.
Such cash stashes usually come from two sources:
1. Borrowings; and
With regard to both approaches, the world’s third wealthiest person and most successful value investor Warren Buffett wrote these words of advice on behalf of his business partner Charlie Munger and himself in his latest letter to the shareholders of their listed investment vehicle Berkshire Hathaway:
“Charlie and I never will operate Berkshire in a manner that depends on the kindness of strangers — or even that of friends who may be facing liquidity problems of their own.”
Let’s get real: We all know what it’s like to face a cash flow crunch. Furthermore almost all of us have borrowed money from, and lent money to, others. Those commonplace occurrences — and their aftermath — help us better appreciate Buffett’s advice on funding business expansion endeavours:
“During the 2008-2009 crisis, we liked having Treasury Bills — loads of Treasury Bills — that protected us from having to rely on funding sources such as bank lines or commercial paper. We have intentionally constructed Berkshire in a manner that will allow it to comfortably withstand economic discontinuities, including such extremes as extended market closures.”
Even if we aren’t billionaires or more prosaic millionaires (yet), Buffett’s fascinating lesson concerning self-reliance in the key business step of capital fund raising for economic expansion is applicable to us all. Regardless of whether we have access to borrowed funds from banks or from friends and family within our network, over time we should salt away retained profits from our businesses (or savings from our salaries) to reduce our dependence on such lines of credit.
Not doing so during good times will diminish our capacity to build a robust, shockproof business that takes no prisoners during bad times; and that grows from strength to strength throughout every phase of the business cycle. (Even if you harbour no compulsion to start your own business, Buffett’s advice to accumulate large personal cash reserves will hold you in good stead in the decades ahead.)
BENEFITS TO BE REAPED
Incidentally, if we’re able to keep our businesses (and lives) going during rough, tough times through responsible fiscal restraint and intentional conservatism during great times, we’ll reap two mega benefits:
1. Immense peace of mind throughout episodes of general, external financial stress; and
2. Opportunities to buy income-generating prime assets at distressed prices when conventional lines of credit dry up for most others.
The first listed benefit will grant us a massive emotional dividend; the second, many lasting financial ones.
© 2018 Rajen Devadason