PERSONAL FINANCE: Keep your eye on the right ball

Centonomy was privileged to mentor young entrepreneurs in a recently held contest. Naturally, after the winner was announced, there was excitement and a lot of noise, and everybody had an opinion on the outcome.

Some of the comments got me thinking about how we sometimes confuse one moment for the entire journey when running a business. Yes, the finalists in the contest we participated in had gone through a process and grown. But anyone who has ran a business for a couple of years can attest to the fact that the real test is only beginning, and it rarely has anything to with the noise the people around you are making. There are various ways in which we get wrapped up in the show of entrepreneurship rather than the real stuff that makes a business work.

I use the analogy of a car in my entrepreneurship classes. People buy cars for various reason – how it looks, colour, how comfortable the seats are, and so forth. However, the real performance of a car is its engine and the people who really know their cars discuss the engine. Are you focused on the engine of your business or just the cosmetics? Here are a few ways we get misled by the show.

It’s a noble cause so you think it makes business sense. The word ‘social entrepreneur’ is the latest buzzword. However, being a social entrepreneur is not a business – at least not the way people are using the term these days. What exactly do you do? What is the product and how does it have an impact? How do you keep the business running? The fact that it’s a noble cause may get you attention but if there is no strategy behind it, you will not be able to attract and manage the resources that you need. A big part of finding business opportunities is identifying solutions to problems, but it doesn’t stop there.

I met somebody who was trying to raise money for low cost medical clinics. This is a fantastic cause, and there is a market need. However, she could not illustrate how these clinics would run sustainably even if she did get the capital. That, to any investor, means she was not ready for the capital. Noble ideas can be great businesses – but you still have to do the same checks and balances that you would if you were opening a bakery.

Sometimes we also get caught up in a cool sounding idea. I have been speaking to several people in creative lines of work who definitely mistake the show for the business. Say you are a singer. You may get loads of attention and therefore think that you have business success. You may even have hundreds of thousands of social media followers on social media. Don’t confuse this for the actual business. You still have to have a strategy for how to keep creating and distributing your music. Social media fame does not necessarily translate into revenues. An app is cool but again it is not the business. It may help in convenient delivery but you still have to think through the business.

Sooner or later, the show starts to be about how you are perceived rather than what you are actually doing. We start to make business decisions and incur expenses that are more about the perception not the actual business. I have seen marketing activities that look nice on paper but have very little effect to the bottom line; office space rentals that the business cannot afford. If the business has been known to be successful and is going through a rough time, this perception keeps people from making the hard choices they may need to make.

We sometimes mistake a big client for the right or profitable client. The name of the client sounds good but when we look at the time and resources needed to service that type of client, it may not be the most effective way of operating. Smaller clients have been known to make decisions and pay faster, though they may not have the name that will bring attention.

The show may help in some ways, just like the colour of the car may attract buyers. But always remember the business is the engine, which is the product and the strategy behind getting that product to market in a profitable way. This is why the greatest ideas are not the greatest businesses. Keep your eye on the right ball.

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