Beyond Good Ideas

I am not a successful entrepreneur. I have a small business, but that is not what pays my bills, and I am the sole employee. At the moment I have no clients, and I have only had a few small projects. Most of my work is unpaid musing and study. I started the business to do Engine repairs, and to use my monetizable skills in a stomachable way. I live off my Engine which I built using money I was paid for professional work. I had a few public shares in the first company I worked at, that were given to us as part of a Broad-Based Share Scheme. I had no shares in the other two, which are privately held. My Engine is invested in two Equity Funds (from the firms I worked at) and a portfolio (that I selected) of large publicly held global businesses. My thoughts on business are therefore academic. Small business is hard. The odds are steep. With plenty of musing, I see few easy paths. It’s not just about good ideas. It is also about building Capital, overcoming barriers to entry, managing risk, and navigating complexity.

Melilla Border Fence

Stock Cubes

Not all good ideas are good business ideas. Not all good business ideas are good ideas. Because our lives revolve around earning ability, and what we “will be” when we grow up, this gets presented as a false choice. STEM (Science, Technology, Engineering, Maths) subjects tend to be the skills and knowledge that are good stock for business idea soup. To make money, you need something you can count. In order to create a container with control over supply and demand. There is a world of other paths that are fascinating and full of value, but very difficult to make money out of. It is possible to free yourself from the constraints of money making by being honest about what they are. Then by building Capital. The first step is to find a good business idea (which may be a job) and earn more than you spend. Then build a buffer to reduce the noise. To release the control of erratic expenses on your life. Then gradually put money to work, so that you can be empowered to focus on good ideas. They may still be good business ideas, but whether that is true won’t hold you back.

From Good Stock

Your Own Believer

There are a limited number of jobs. There are a limited number of employers. Many of the jobs that people currently do are being mechanised and automated. This means that however you go about planning your career, you have to think about what it would look like as a business. Employers are a middle man between you and clients. The key to every business is identifying the needs of decision makers with money. Solving decision makers’ problems. You can divide work into the categories of cost centres and profit centres. Cost centres are things that don’t finance themselves. They can be very valuable, and even foundational to profit centres, but they don’t make money. They need money. Quality Content is a cost centre. Advertising is a profit centre. Without advertising, print media started dying. Cost centres need believers. Not all good ideas are good business ideas. Good business ideas make money. Fortunately, that doesn’t have to trap us in profit centres. Gradually we can reinvest money in profit centres, and turn ourselves into decision makers with money. We can be our own believers.

Newseum

Crystallising Creativity

Investing isn’t betting. It is true that you can trade anything with a number and a pulse. It doesn’t matter what thing is behind the number, as long as there is someone else you can play pass the parcel with. But that isn’t investing. When you invest you buy a slice of ownership in a company. You are a business owner. What the business does matters. You don’t have to find someone else to sell it to. The business has a product which it sells. It has the skills and knowledge to recognise a problem someone has, and to solve it. The problem may be someone wants Jam. The problem may be someone needs help making their own Jam. As long as there are problems, and as long as we are human and can’t know everything, there will be value to be created in cooperating. Investing isn’t playing the stock market. You become a part owner in a real company solving real problems. You get your money a real job. It has to work. If it does a good job, then it grows. If it doesn’t, it doesn’t. It grows by solving problem for money and reinvesting that money. There is no magic. It is simply the crystallising of creativity. Good businesses are built to last. Built to adapt, adjust, and accommodate a changing world. 

Deafening Silence

For any business, but particularly a small business, a hiring decision is a big decision. Meeting Payroll is the primary stress of most owners I know. The caricature of fat cats is not one that resonates with my experience. Rational people will work at big Institutions where their contribution is amplified by the success of those who have come before. Most small businesses are in the survival period before significant growth kicks in. It is long term belief in potential growth that keeps the owner going. The most successful entrepreneur I have met said it took him 7 years post pulling the trigger to earn what he was getting as a salary man. And he was the definition of an outlier jumping over aligned stars. The rational approach is to be an underconfident overachiever and let someone else stress over payroll. A salary is like a bond. You are lending your labour to the owner in exchange for a predictable, consistent, income. But that income is normally pass-the-parcel. The owner has to get the money to pay you from the customer. To commit to the risk that the customer will be there. Even Big Institutions can over commit to how many parcels they can pass. Going to zero is a reality when the music stops. Silence is deafening.

Managing Stress

Vusi Thembekwayo makes the point that if you can’t take leave because your business stops, you aren’t an Entrepreneur, you are Self-Employed. We glamourize Business Ownership, but part of running a Business is coordinating the efforts of others and smoothing their experience. Taking on the stress. Holiday leave. Sick leave. Maternity and Paternity leave. A regular paycheck. Security that if a reasonable job is done, it should be hard to ask the person to leave. Self-Employment means you end up needing to provide those benefits to yourself. You need an Engine or a Buffer to do that. For Businesses, this means a strong Balance Sheet (Capital not just Debt) and good Cash Flow (Money there when it is needed). The ability to weather difficult periods, and discipline during the good periods. If the underlying creativity is there, with patience and time, endurance and resilience increases. The stress doesn’t disappear. It is managed.

Pic: Jessie Eastland