Understanding & Creating
a
Business Philosophy
by
S. Robert Sherby
© Copyright 2007 S. Robert Sherby
Forward
For about twenty five years, the author has developed numerous business models, started and operated many of these businesses, subsequently selling some of them. From building contracting, toys, posters, software, data publishing, advertising, data management, property management, map making, telemarketing and others, two business patterns emerged:
1) Some businesses ran very smoothly, and,
2) Some business were less “user friendly”.
Just wanting to “own your own company” wasn’t enough to ensure being financially successful and happy. Before long into the entrepreneurial career, two questions emerged: 1) what is the “ideal” business, and, 2) what is the “ideal” business for ME?
The author’s findings are universal and valuable to all entrepreneurs.
I What is a Business?
By definition: An organization providing a good/service to make money. What is the “best” business? A seemingly simple, but yet, very complex question.
By definition: The best business is that business which makes the most money, in the shortest period of time, with the lowest overhead. However, one person’s “best” business could be another person’s nightmare.
Ask yourself: What is the fastest way to make money? This scientific approach to answering this question, first requires a determination for the “pure science”. That is, to first define the ideal solution without any limitations imposed. Once the Pure Science is determined, then begin adding back any limitations, one-by-one. As you reintroduce the limitations, you modify your “science” to accommodate / overcome / work around the limitations, but still preserve a working Business Model.
As it turns out, the Pure Science to the questions, “What is the best business, which makes the most money, in the shortest period of time, with the lowest overhead?”, is: To print money. There is no faster way to make money. If there were a faster way to make money, the Federal Government would be doing THAT instead operating the U.S. Mint!
Printing money is what type of business? Well, it’s publishing. Unfortunately this particular publishing business is a U.S. Government monopoly, carefully guarded by the FBI.
But there are many different concepts publishing: putting ink on paper, dye on film, magnetic patters on media, etc., that are only a few steps away from “printing money”.
There are only two types of businesses:
The corn farmer v. the apple farmer
Ask yourself: What does a corn farmer see each and every spring when he looks at his fields? What does an apple farmer see? The difference is key.
The corn farmer sees NOTHING. The apple farmer sees blossoms.
In business terms, the corn farmer has no EQUITY in his work and the apple farmer has nearly 100% equity. Compare the accountant to the author, the building contractor to the software publisher, the doctor to the record company, the lawyer to the movie company.
In each case one guy wakes up “unemployed” each day, while the other guy adds to his base.
II What is a Business Plan?
The purpose of a business plan is to set out all aspects of a business. This is useful as it allows not only the business's owner, but potential investors, support personnel and employees to understand the vision of the business owner.
The basic elements of a Business Plan are:
1. What is the purpose of the business
2. Who is going to run the business
3. How is the business going to work
4. What is the competition to the business
5. How much money will it cost to run the business
6. How much money will the business make.
Unfortunately, a business plan is not designed to inform a business owner as to the suitability of the business for the owner’s professional skill set, personality, life style and/or owner’s time table
III What is the relationship between a business and the owner?
There is a bond between a business and its owner that is just as demanding as the relationship between a husband and wife. It is important for the entrepreneur to determine before initiating a business, if the business will:
1. Suit their professional skill set
2. Fit their life style
3. Fit their cash flow requirements
4. Match their time table
5. Have a suitable exit strategy
etc.
If not, the business may well end up running the owner? The latter scenario happens more often than not. The one-year failure rate for new businesses is 80%, three-year failure rate is 96%.
Will the business satisfy the goals and sensibilities of the entrepreneur? Money is not everything. Some businesses are lucrative, but are so demanding that they debilitate or even kill the owner.
IV What is a Business Philosophy?
A Business Philosophy analyses the entrepreneur NOT the business. A Business Philosophy is the set of personal Strategic Parameters that define an entrepreneur’s suitability for a given Business Model and Business Plan. It is easer to modify a Business Model/Plan than it is an entrepreneur.
What are Strategic Parameters?
Strategic Parameters are the core descriptors of one’s being. They are the personality DNA of the entrepreneur. Perhaps no two entrepreneur’s will have the same set of Strategic Parameters. Some Strategic Parameters might include the following:
Short, medium and long term $ goals
$ assets available for investment
Cash flow requirements (living expenses)
Work ethic
Work experience
Aspects of general business you like
Travel, employee relations, accounting expertise, etc.
Personality type
Ability to work with others
Attitude toward Partners
Family life dynamics
Affinity for detail
Spending habits
Criminal record
Outside demands on your time and money
Anything that you have ever known experienced or have been told about general business hat you liked or disliked.
etc.
V How to make a Business Philosophy
First get a spiral notebook. As each page is used, draw a vertical line from the top of the page to the bottom through the middle of the page. About an inch from the top of the page, draw a horizontal header line across the page. On the left-hand header line write a “+”, on the right-hand side write a “-”.
For the next several weeks, longer if necessary, begin to log in beneath the left “+” any positive aspects of ANY generic business you have ever known, experienced, can imagine, or have been told about. Conversely, on the right “-” side, log in any negative aspects of ANY generic business you have ever known, experienced, or have been told about.
Try to avoid jotting down obvious opposites. i.e.:
“+” | “-”
_____________________________________________________________
“like to sleep in” | “do not like to arise early”
|
This process takes time. Carry your notebook with you so that you can jot things down extemporaneous revelations. DO NOT SHARE WHAT YOU ARE DOING WITH ANYONE ELSE!
If you have a business partner or involved spouse, they must do this exercise as well,- independently from you.
After several weeks you will begin to run out of new comments. When you feel that you have exhausted the process, then rewrite the lists in descending order of priority,- with the most important items at the top.
You now have documented the Strategic Parameters of your Business Philosophy.
If you have a partner, now is the time to compare your results. The outcome may shock you both. But THIS is the time to be shocked, not $50,000 too late. It will be much less expensive to discover this potential mismatch up front, rather than later.
VI As you encounter Business Models/Plans, you now have a firm template by which you can evaluate the suitability of potential business opportunities. Compare requirements of a given Business Model/Plan with your Business Philosophy.
If the potential business opportunity is not at least 75% to 80% compatible with the Strategic Parameters of the Business Philosophy, then you should seriously consider passing.