Many of the rules we hear in business are wrong, or at least not right for small businesses under a million in revenue. These rules are the top seven counterintuitive ideas I’ve used to grow businesses from an idea to a seven-figure company (often in the first year)
1. Getting good at spending is more important than saving money.
When building businesses, I focus on how to spend as much as I possibly can as fast as I can. I want to spend more on marketing, promotions, product improvements and team; not less. I’m looking at every possible way to responsibly deploy cash to drive the businesses revenues up.
Our whole lives we get taught to fear spending money and to focus on saving – which makes sense on a fixed income but not when a business has growth potential.
Until a business is turning over £1M+ there’s little point in cost-cutting or saving money; any gains will not be worth your time – it’s easy to waste five hours figuring out how to cut a bill by £150. Your focus is better spent spending money on things that help generate immediate revenue.
The savings mindset will kill the expansive energy your business needs to reach ‘escape velocity’ where it can pay reasonable costs of doing business. It’s better to focus on ways to spend.
2. Revenue is more important than profit.
There’s an old saying ‘revenue is vanity; profit is sanity and cash is king’.
I agree that cash is king and you must never let your business run out of cash BUT I don’t agree that profit is sanity until you hit a certain size.
In the early stages of business, revenue matters more than profit. Let me stress, you have to be able to pay your bills, however if you have the chance to take on new business but you know it’s probably not very profitable, take it on.
You’ll figure out the profit later – hopefully. Honestly, who cares if you’re making 40 per cent profit margins on £50k of total business, you’d still be better off going and getting a job at Starbucks.
It’s far better to be making no profit on a £1m and then try and figure out how you can improve margins by five per cent. The profit-seeking mindset will stop you from growing to a viable size.
I like the quote from billionaire investor Peter Theil, “Profit is what you have when you’ve run out of ideas.”
3. Improving cash at bank is better than keeping accurate records.
In the early days of business, the only real number that matters is cash at bank. Spending too much time on detailed reports isn’t worth your focus.
Do anything to improve your cash at bank but don’t sit around analysing your early numbers. Get on the phone, have more meetings, send more invoices.
Once or twice a year, you can sit down and take a closer look at the numbers but in the early stages of business your entire operation is barely a rounding error on where it needs to be. Detailed reports are for businesses that have £1m+ revenues.
The detail-seeking mindset will take your eye off the bigger picture. The only management number you need to know in the early stages of fast-growth is cash at bank; let your accountant worry about the rest.
4. Band-Aid solutions are better than well thought out systems.
Band-Aid solutions get a bad name. What’s actually wrong with a Band-Aid? It’s fast, it’s cheap, it works – job done! Imagine remodelling your kitchen because you cut your finger! Sometimes Band-Aids are the perfect solution.
People glorify expensive long-tern solutions but in small businesses they are overkill. In the early stages of business, an Excel spreadsheet that’s working, is better than a CRM system that takes up time and money.
A shoebox full of business cards is perfectly acceptable if it means you spend more time on the phone and less time on data entry. A brochure with a spelling error is better than a brochure that took an extra three weeks and £500 to remove every mistake.
There’s nothing wrong with solutions that are fast, cheap and do the job for now – if anything they are the best for a business with less than £1m revenue.
5. A brochure is more important than a website.
A small business doesn’t get in-bound enquiries, it doesn’t have people Googling it or trying to buy online.
Every sale is won on the phone and face-to-face. A good brochure is more valuable to a small business than a great website because it helps in the sales process.
A brochure is perfect over a coffee meeting to explain the business or the product. It also beats an iPad because people often associate an iPad with an idea whereas a printed brochure has a sense of commercial reality about it. You also can’t leave your iPad with someone.
A website feels safe because it puts a barrier between the market and the entrepreneur, it feels like the website is out there winning business and doing some work. This is an illusion, all the weight is on the shoulders of the entrepreneur and every sale will be hard one – it’s best not to kid yourself about this.
6. The only brand that matters is your personal brand.
Large companies spend millions and millions on developing a trusted faceless brand – and it still doesn’t work. Big faceless companies are constantly losing business to upstarts who are willing to ‘be their brand’. Have a look at Elon Musk of Tesla Motors beating the established car companies.
Look at Richard Branson of Virgin beating the established airlines. People who front their brand succeed at a faster rate than people who hide behind a visual identity.
As an entrepreneur or leader of a small business your job is to speak at events, comment in the media, use social media and personally meet people who you could do business with. There’s countless companies that are looking good but going nowhere; your role is to be a key person of influence who gets things done.
7. Passive income and automation will send you broke.
Many entrepreneurs fantasize about a business that runs itself. They want recurring revenue, multiple streams of passive income and automated systems that just work.
It’s a fantasy and it’s a dangerous one at that. Your business exists to solve problems for people that they can’t or don’t want to solve for themselves. By that definition if it was easy to automate or if it didn’t require effort and energy people wouldn’t find it very valuable – someone else would be giving it away.
There’s a lot of truth in the saying, ‘if it were easy everyone would be doing it’.
Expect your business to be time-consuming and hard. Look for complex problems to solve. Get hands on in fixing problems. Don’t try to simplify the solution too quickly. Remember that the desire for a smooth road creates a bumpy road and the desire for a challenge creates a game. Enjoy the bumps – you’re an entrepreneur or a leader and that’s what makes you valuable.
After you hit a million pounds in revenue you’ll start to notice ways for technology, systems and assets to do some of the heavy lifting in your business. You might also stumble upon some opportunities for recurring revenues and you might develop some methodologies that help you to deliver solutions more efficiently. These insights rarely come in the early days so don’t force them, let them evolve.
I know these seven ideas fly in the face of conventional wisdom but conventional wisdom has 80 per cent of UK businesses earning less than £100K revenue each year – clearly some of the common ideas don’t work.
Turn your back on convention and adopt some of these counter-intuitive ideas as you grow from an idea to a seven-figure business.
Daniel Priestley is a successful entrepreneur and a best-selling business author. He’s built companies in Australia, Singapore, USA and the UK as well as giving talks all over the world.
Daniel Priestley will speak in the Great Minds Seminar Room and in Seminar Room 2 at The Best You Expo on 27-28 February 2016. Book your place at thebestyouexhibition.com, where you can also download The Best You Expo programme today!