10 Lessons every entrepreneur should learn
The dictionary defines an entrepreneur as a person who organises and operates a business or businesses, taking on greater than normal financial risks in order to do so.
In economics, there are four factors of production. These are basically the things essential for production of goods or services. These are: Land, Capital, Labour and Entrepreneurship. The first three have to be put together (or organised) by someone (an entrepreneur) for a business to be successful. Land, Capital and Labour are compensated by rent, interest and wages respectively while the entrepreneur is compensated by profits. From the look of things, it is the entrepreneur who is paid last. If a business is not profitable, the other three factors will still be compensated, while the entrepreneur may not. As a result, he is the one taking a greater financial risk than say someone who is employed for wages.
Being an entrepreneur is full of ups and downs, challenges and lessons that one learns every day. Different experiences and situations ensure that different entrepreneurs will learn different lessons as time goes by. The most important thing is that there are lessons and entrepreneur will learn that someone who is in employment will never learn.
I have been an entrepreneur for a short time, and as a result, I still have so much to learn. However, here are some of the lessons that I can share with anyone who wants to be an entrepreneur or who is in entrepreneurship.
1. It will get worse before it gets better:
Unless you are in things to do with IT, most businesses will struggle in the first year. Before you build a reliable clientele, the business will be difficult to keep afloat especially if it will be your only source of income too. However, if one weathers the storm and business starts coming in, it will be worth it. Most people give up just before they strike gold. Any businessman will tell you he had a rough first few years, but they adapted with the times and the experience made them better.
2. Do what you love:
When things are not going well, it is so easy to give up. However, if you are doing what you love, then it will be much easier to see yourself through the tough period. Confucius said, “Choose a job you love and you will never have to work a day in your life!”
3. Stick to what you know:
Your probability of success in a business field that you know well is higher than in a field you have no idea of. If you have majored in Business A and an opportunity comes in Business B, do your best to study and understand what you are getting into in Business B. If it is not clear, or if you cannot understand how Business B works, stick with Business A that you are comfortable with. It is something that Warren Buffett swears by.
4. If the deal is too good, think twice:
So you get a deal in which your input is minimal but your return is way up there you cannot believe you got such a deal? It may be a good deal, but more often than not, it is not! If a deal is too good, sit back and examine it from all angles. If it is in an area you are not very good at, seek expert advice.
5. Identify a mentor:
In any type of business, there is always someone who has made it. Befriend these people and choose a nice mentor for yourself. Someone who will not consider you or your business as competition. Your mentor needs not be someone who has made it in your kind of business but someone who has made it. The experience and lessons you can learn from such people is invaluable. Warren Buffett had one in Benjamin Graham; Bill Gates has one in Warren Buffett!
The world is dynamic. What used to work yesterday is no longer working today and what is working today will be obsolete tomorrow. New innovations are coming up every day. It is upto an entrepreneur to study the trends and know what is happening in his area of expertise. This enables you to be up to date with the current times and to adopt accordingly. A quarter a century ago, Kodak was one of the biggest companies in terms of production of cameras and film pictures. Now, no one uses the technology anymore thanks to digital cameras and mobile phones that have cameras.
7. There is such a thing as good debt:
Most people will tell you how getting a loan is bad and what not. However, most rich people will tell you they got rich by debt rather than by equity. If for example you get an LPO to supply things worth Kshs. 1,500,000. If the cost of the goods is Kshs. 1,000,000, where do you get the Kshs. 1,000,000? If you saved Kshs 50,000 a month, it will take you about two years to raise the capital. You could sell an asset, but what are the odds that you will have an asset worth a million, and if you do, how long will it take you to sell it? On the other hand, walk into a bank, borrow the money, and you will have it in your account in less than a week. The interest will be less than 20% meaning your profit will be about Kshs 300,000 (1,500,000 – 1,000,000 – 200,000).
8. Be ready to market your business:
There are so many times I have talked to a stranger for five minutes, and he was interested in what I do and I had only five minutes to convince them we are the best. Since people forget easily, I make sure I leave them with my business card. When I was employed, I never saw the need to carry business cards. Now, I carry them everywhere I go. Marketing your business is not limited to marketers alone, but to anyone associated with the business.
9. The Client is king:
The client may not always be right, but they are the reason you are in business. Treat them well, and your business will grow. They will refer other people to your business and you will get more clients. Treat them badly and you will lose them and get a bad referral and consequently lose out on prospective clients. Are you running late on deliveries? Communicate to the client in advance. Do not switch off your phone or ignore the calls. The client will appreciate a delay which is communicated in advance rather than you missing their calls.
10. Treat your employees well:
Your employees are very important to the business. Happy employees give good quality services which results in happy clients and future business. However, badly treated employees will produce poor services which will result in loss of business.
These are just a few lessons that an entrepreneur should learn. Are there any lessons you would like to share? Share them in the comment section.