People become entrepreneurs for a host of reasons. The most common reason, in my experience, is for the business to provide the owner with sufficient resources to retire one day in comfort.
If you intend to build your business to provide you with a healthy retirement, then this article is for you.
There is a wonderful book called The Founder’s Dilemmas by Noam T. Wasserman.
You can see more by connecting to: https://hbr.org/2008/02/the-founders-dilemma.
The brief extract below is a preamble to the message I want to convey in this blog.
Inside the Founder’s Mind
Founders are usually convinced that only they can lead their start-ups to success. “I’m the one with the vision and the desire to build a great company. I have to be the one running it,” several entrepreneurs have told me. There’s a great deal of truth to that view. At the start, the enterprise is only an idea in the mind of its founder, who possesses all the insights about the opportunity, the innovative product, service, or business model that will capitalize on that opportunity, and who the potential customers are. The founder hires people to build the business according to that vision and develops close relationships with those first employees. The founder creates the organizational culture, which extends their style, personality, and preferences. From the get-go, employees, customers, and business partners identify start-ups with their founders, who take great pride in their founder-cum-CEO status.
Choosing power: Founders motivated by control will make decisions that enable them to lead the business at the expense of increasing its value.
While the author references raising capital, stepping down as CEO, creating a board, and a host of other ways of growing a business, I’m using the above extracts to make a point in this blog.
By hanging on to power, making most or all of the decisions without being transparent with your employees, you will likely become the constraint when growing your business.
YOUR EMPLOYEES ARE THE CUSTODIANS OF YOUR COMPANY’S PROFITS™
It’s not reasonable to expect your employees to think and act like owners if you don’t engage and educate them while providing them with appropriate incentives.
You might respond by saying, “I’m not willing to share all my numbers” or “I don’t trust my people to make decisions in the same way as me.”
You don’t have to share all your numbers, and you shouldn't expect all your people to make decisions the same as you.
Remember that not everything interesting is useful. Here are some ideas to consider:
There is a delicate balance between sharing too much data, which creates information overload, versus not communicating enough to help your team make prudent decisions. Share what is needed to help your team make responsible decisions.
Be cautious of examining numbers in isolation. In other words, ensure that your numbers have context. For example, your salespeople might celebrate a 20% increase in gross sales while the costs needed to support the increase in revenue exceeded the incremental profit.
You don’t need to share salary details. Consider “banding,” creating a high and low level for each skill set.
You are in business to generate sustainable profits and cash flow: You don’t know what you don’t know. Get yourself and your people educated so everyone can link their decisions to the financial outcomes of decisions.
Summary: Nobody washes a rented car. People tend to leave businesses because of money but stay because of culture. Help them think and act like owners by creating the appropriate incentives and culture. Educate them to always understand the financial implications of their decisions with profits and cash flow in mind. Revenues are Vanity, Profits are Sanity, and Cash flow is Reality.