Luke Johnson writes a piece in the FT piece titled "Ten pieces of advice that should be ignored". Every entrepreneur and, arguably, everyone else associated with a young business should read this list. Says Johnson, don't listen when someone tells you:
- "Never borrow money." What? Why wouldn't an entrepreneur want to borrow money? Equity is much more expensive than debt. Sometimes, much, much more expensive. (As you can see, I use very specific technical terminology like "much, much more"!) Given that I am in the business of providing equity capital, you might think I am making things hard for myself but I stand by this. Of course, best of all is funding yourself via internal accruals, but that doesn't sound very start-up-ish.
- "Profit is all that matters." As Johnson says, different situations call for different metrics of success. Accounting profits aren't the only thing to strive for. For example, one of my portfolio company CEOs has this slogan in his email signature: "Revenue is Vanity, Profits is Sanity but only Cash is reality".
- "Don’t worry about your competitors." The lay reader might wonder why an entrepreneur might even fall into this trap. Surely every business has rivals, you'd think, (and if it truly doesn't, consider the possibility that it isn't a very attractive business to be in), but you'd be surprised how often some entrepreneurs fall into the trap of complacency and ignoring their competitors. I'm not saying that entrepreneurs should be paralysed by the presence of rivals -- sometimes competition can even be a good thing, for instance if it helps educate prospective customers -- but razor sharp focus on who else is in the market is very important.
- "Don’t work with partners." Johnson doesn't say much about this but I cannot stress this enough. In contrast to the first point, where I talk about how some entrepreneurs unnecessarily dilute their shareholding, the same entrepreneurs sometimes don't like working with partners because it feels like they're "sharing" an opportunity with someone else or giving away control. This kind of thinking is a bit upside-down. 1 + 1 really can be more than 2 sometimes... subject to picking the right partner and forging the right partnership arrangement. I use the term "partners" broadly, whether these are formal business partnerships with another company or getting seasoned execs to join your team.
These are the four out of Johnson's ten tips that I have personal experience with and can assure current and aspiring entrepreneurs that they really can have a big impact on the success or failure of a business.
Comments