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5 cold hard realities about owning a business

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5 cold hard realities about owning a business

from JoeUser Forums

Over the years, I’ve seen so many people with high potential diminish their prospects for success in business because they lacked a few key axioms of business.

To that end, I’d like to share a few things I’ve learned (often the hard way) about what is what in business:

#1 Risk capital trumps “sweat equity”.  The guy willing to risk real dollars is worth 100X as much as the guy who is willing to “risk” working hard for some period of time. If you disagree, you’ve probably never remortgaged your house to pay for something you believe in.

#2 NEVER burn bridges.  If you read Steve Jobs book, one of the things that becomes clear is that this is a person who, while often mean, was pretty good at maintaining relationships. Even after Steve Jobs founded Apple, he would regularly go back to his former employer (Atari) and get advice or help in some form or other. 

#3 It really is “just business”.  If it is good for the company, it is good for the company. A fierce competitor today may be a partner tomorrow. Don’t make business decisions from a place of emotion. I’ve had to overrule managers in teaming up with companies because those companies had competed with us in some unrelated area in the past. It’s just business.

#4 Understand your compensation system.  You pay people for a specific reason. A reason that should be clearly defined and understood by both parties. Never compensate someone to try to win “good will”.  I’ve learned this the hard way. No matter how big the bonus for a “job well done” it will rarely build long-term loyalty or good will. Once you start own that road, people will become resentful because in their mind their contribution to the success on a project is always far greater than your estimation of their contribution (see rule #1 for a common example). The best policy is to have a very clear compensation plan and abide by it scrupulously.

#5 Separate your business life from your personal life. This can be hard to do but not doing it will cost you in the long-run. Your business is a tool to accomplish a set of goals that are determined by you (and your fellow stock holders). It’s amazingly easy, over time, to lose the reason you have your business in the first place.

59,935 views 33 replies
Reply #26 from Elemental Forums Top

That rule can have a downside:  IAt least in the past, Stardock had a rule about how higher-ups had to work more hours then the ones below them (Brad mentioned this once) .  While it's understandable, I think it can lead to folks working hard instead of working smart.

 

Crunching employees is bad for the long-term success of a project.   Sometimes a short crunch is needed, if you have deadlines, but doing it over a long stretch just burns people out.  I often wonder how many of the problems with WOM were due to crunch.

 

 

Reply #27 from WinCustomize Forums Top

Never park your Porsche in the Handicapped space!  :w00t:

Galactic Civilizations IV
Reply #28 from Sins Forums Top

It would be interesting to look at the differences with people who have reached high levels in their company's success and those who have done so and retained deep, long-lasting  employee commitment.

For every person who is living these rules as part of their own understanding (which I'd say Frogboy is) there are ten dweebs who read them in a book and "think" they are--and inherited cash from mom and dad, making them an "expert".

Money does trump hard work 99% of the time.  You have to have an incredibly unique idea to win with sweat over cash--and the risks of having your idea co-opted by the aforementioned rich dweebs is always a risk.

Hard work beats cash only when you are smarter than your competitors.  Then you have a chance.

I'm not bitter...really.

;P

 

Reply #29 from Sins Forums Top

Quoting Alstein, reply 26
That rule can have a downside:  IAt least in the past, Stardock had a rule about how higher-ups had to work more hours then the ones below them (Brad mentioned this once) .  While it's understandable, I think it can lead to folks working hard instead of working smart.

 

Crunching employees is bad for the long-term success of a project.   Sometimes a short crunch is needed, if you have deadlines, but doing it over a long stretch just burns people out.  I often wonder how many of the problems with WOM were due to crunch.

 

 

 

I'm not a business owner but this rule of work smarter, not harder is applicable to just about anything in life.  I just graduated from college and did well while working far less than many others.  People tend to think that just working a lot of hours or studying a lot of hours = improved performance.  While this is true to a point, the law of diminishing returns takes effect eventually: study 10 hours for a test, get a 95, study 15 hours, get a 97.  Are those extra 5 hours worth it? NO!  I used that extra time to have a social life, work on research, watch sports, etc.  

 

And 10 quality hours of studying vs. 10 hours of studying is even more important.  I always focused on the areas I knew I was weakest in, why waste time on stuff I already know?  Only so much time and cognitive (and neural) resources to go around.  

Another area I've seen this in is running competitively.  I ran cross country in HS and training smart instead of training harder was the key.  Running more miles tends to improve performance but it's better to train smartly.  After a certain point, running more miles = greater chance of injury = less total amount of training = terrible race times.  

Anything that you can get better at/produce better results tends to benefit from smarter work.  Of course, you do need to work a lot, but just working more more more doesn't help after a certain point.

Reply #30 from WinCustomize Forums Top

Quoting BasedDoc, reply 29
While this is true to a point, the law of diminishing returns takes effect eventually: study 10 hours for a test, get a 95, study 15 hours, get a 97. Are those extra 5 hours worth it? NO!

Um, yes they are...if all your 'competition' worked the 15 and scored 97 ....you're the bottom of the bell curve and flunk out.

If a person doesn't have commitment and/or dedication to his 'work' then he doesn't deserve the employment..... not when others may/do.

You'll learn this once you are out of a closeted/false society [school] and are in the real world.

Smug complacency gets you nowhere, not in the school-of-hard-knocks ....;)

Reply #31 from Elemental Forums Top

Quoting Jafo, reply 31

Quoting BasedDoc, reply 29While this is true to a point, the law of diminishing returns takes effect eventually: study 10 hours for a test, get a 95, study 15 hours, get a 97. Are those extra 5 hours worth it? NO!

Um, yes they are...if all your 'competition' worked the 15 and scored 97 ....you're the bottom of the bell curve and flunk out.

If a person doesn't have commitment and/or dedication to his 'work' then he doesn't deserve the employment..... not when others may/do.

You'll learn this once you are out of a closeted/false society [school] and are in the real world.

Smug complacency gets you nowhere, not in the school-of-hard-knocks ....

 

Wasted effort gets you nowhere, burns you out and destroys your creativity.

There are times when sweat and blood are the only options, but if that's not the case then those extra 5 hours could likely have been spent on something much more valuable. You could invest the time into another job/class/whatever, or spend it on yourself. Either way, you've probably spent the time more wisely than getting a %1.9 increase on your test score.

As someone with ADHD and who is a bit of a perfectionist (they go hand-in-hand oftentimes), I've learned that being productive is more about selecting your battles wisely than putting your head down and charging forward.

Reply #32 from Sins Forums Top

Get away from all of your advisers now and then is another one to consider.

I'm really amazed that the "Rules of Acquisition" are not included here.

 

:hrmph:

Reply #33 from Elemental Forums Top

I disagree, FB (not really, joke inc).  Time is proportional to money; money is proportional to time, it's just that the coefficients of proportionality are different in the different directions.  If you have a little more time, you can make a little more money; the proportionality is close to unity.  However, it costs you a whole buncha more money to make a little more time.  It's what we electrochemists call non-Nerstian. :)