Two-Cents of Advice to Entrepreneurs!?

Recently I had the privilege of participating on a panel for BIPOC Entrepreneurs at Entrepreneur Day, hosted by MEDA (Metropolitan Economic Development Assn) at the University of St. Thomas. There were several questions we panelists had to answer. Other panelists had inspiring stories and brilliant ideas to share and I applaud them all. Here are my answers to the questions...

What is one piece of advice you wish someone had given you before starting on your entrepreneurial journey? Many may consider this heresy: Growth is not necessary. I used to think our businesses need to grow or they're dying. 90 percent of all businesses in the US have fewer than 10 employees. It's enough to generate profit and survive. I coach some businesses in Haiti who have survived earthquakes, hurricanes, gangs, government collapse, shaky supply chains, etc. I applaud them for being able to stay in business for 3, 5, 10 or more years.

What was the biggest misconception I had about entrepreneurship? I thought I'd be spending all my time on the core activities of the business--whether it's fabrication, assembly, retail, consulting, etc. Instead a large portion of my time was spent on bookkeeping, regulatory compliance & regulatory research, sales tax laws and compliance checks, etc.

What was a major mistake I made in early stages? I wasn't bold enough to talk to customers about why they were doing business with us, and with non-customers regarding why they weren't. We saw great growth that evaporated "overnight" because we weren't getting the feedback and spotting some initial stages of rot, mold, decay in our performance and execution.

Looking back, what financial strategies or practices do I wish I had implemented? Putting in strict cash flow management so operating managers couldn't spend all the cash right away. I lost tens of thousands of dollars on a business that spent all its cash before the first sale was made. That company eventually went bankrupt. Cash needs to be meted out judiciously. I advised one entrepreneur not to buy grand pianos at a great bargain for a future music studio; he was still 3 years away from beginning the studio. The cash would be gone, additional expenses for storage would be incurred and future piano purchasing opportunities would be there when he needs them. Another entrepreneur wanted to build a hotel on beach property. Unfortunately, it was the heart of COVID and nobody locally nor internationally was going to be able to travel there: just wait till the time is right. Another company was trying to invest in opportunities before paying for current activities. Another company moved operations overseas without realizing that it was a huge cash drain to start up "there" and have a bunch of "not quite right" product for several months/years till the process bugs were worked out.

How did I handle the balance between work and personal life? I didn't do a good job of it for quite a while. Then I learned from someone else how to tap into our assets/resources/sources of capital: financial, physical, intellectual, relational and spiritual. We have more resources than we realize and can tap into them appropriately without draining any one area to depletion.

Common Sense Economics: not so common sense?

 From my Goodreads review: The authors cover a lot of ground in macroeconomics. While they claim this is common sense, there are still a lot of assumptions and conclusions based on a certain worldviews and political biases. For example, they say lower tax rates boost the overall economy. In this example, most argue that high tax rates reduce capital expenditures and expansion in hiring, etc. However, the authors give examples that show businesses make expenditures because high marginal tax rates (such as Britain’s 98 percent in the 1970s) actually boosted expenditures, boosting the economy because the tax savings paid for the expenditures. Likewise, common sense would tell you that a business owner will invest in an opportunity—buy equipment, hire employees—when the opportunity will make money, such as customer demand is increasing. Taxes will take a portion of the profit, but a big chunk will go into the business owner’s pocket or be reinvested for further growth. If a business owner has a money-making opportunity, and says to himself/herself, “Well, I’d do it if Congress would cut taxes” then that business owner is not showing common sense and is claiming to pass on business growth when demand is high.

There are a lot of platitudes in this book and reliance on the free market. They ignored their own discussion of how free markets led businesses to petition governments to restrict trade through licensing, certifications and other barriers for new entrants into the market space. They also ignored history that led to slavery for economic reasons, robber barons in the late 1800s as the Industrial Revolution heated up. Free markets meant low wages, unsafe workplaces, unsafe food, monopolistic pricing, and so on. Adam Smith’s invisible hand of the free market was also fooled by the “growth” of 1930s Germany and fueled Hitler’s militaristic expansion. Depending on abundance of resources, free trade can decimate national economies, or at minimum certain business sectors. We just have to look at how much of our consumer goods in the US are produced in China. Or as one person told me, “It costs me more to raise chickens in Haiti than the cost to import from the other side of the island, from the Dominican Republic.” 

Surprisingly, they seem to totally ignore the work of Kahnemann, Tversky and Thaler who pointed out the irrational decision-making processes of consumers, business leaders and economists. Thaler mentions in an interview how even economists won’t drive 10 minutes to save $5 on a $400 item, but will drive that distance to save the same amount on a $20 item. The cost and savings are the same but the decision is different. Why? Anyone who pays attention understands that most of us in the real world don’t see common sense or rationality applied. But neither does this book.

I appreciate the publisher providing an advanced copy.