Deseret News Archives,
Sunday, December 2, 2001

Edition: All
Section: Money
Page: M01
Length: 74 lines

Start small: a guide to success

Start Small, Think Big. Most people confuse big companies with successful companies, which is why so many entrepreneurs try to start out that way. Take Dennis, for example. He said he needed to get $10,000 of business every month, immediately. When I asked why, he explained that he had moved his business from his basement to leased office space. Now he needed to find employees, desks and office equipment to fill that space -- and enough business to pay for it all.

Dennis was thinking big, but soon he was back in his basement -- small again. He should have stayed there until he outgrew that space. As one of my business teachers used to say, "Better to get a Wright Brothers plane in the air than try to launch a 747."

Buy Low, Sell High. In business, what you pay for your inventory is more important than what you sell it for. Pay too much and you can tie up your money for months. Buy right and there is room for a big margin. Similarly, I also believe in asking what the market will bear. A student recently complained that philosophy would result in obscene profits. I told him there is no such thing. The only time those two words should be linked is when there aren't enough profits.

Now, THAT is obscene!

Collect Early, Pay Late. The single biggest problem small businesses have -- especially service businesses -- is they don't collect on delivery, they don't invoice immediately and they don't follow up on the invoices on a daily basis. Cash flow is the lifeblood of any business. Without it you are dead. Recently I consulted with a small business owner, and his accounts receivables was an average of 60 days old. No wonder he was having cash-flow problems.

The other side of that advice is pay late. This same businessman was proud that he was current on all his payables. He had this key to business success backward. He was paying early and collecting late, and then he wonders why he is always out of cash.

Hire Slow, Fire Fast. Your business is growing, and you need to hire help. So what do you do? You hire a friend, who happens to be available. In three weeks you know you made a mistake, but you don't want to fire your friend. What should you do? Fire him now!

Look at it this way. If you have an employee you wish would quit because he isn't working out, then you have to be strong enough to fire him now. I have been hurt more over the years by keeping people that I should have fired, than I ever have by firing someone too early.

Small Salaries, Big Bonuses. I don't agree with paying people for attendance or longevity. I believe people should be paid solely on their contribution to the bottom line. If they aren't either making money or saving money they should be gone. So pay small salaries with generous bonuses based on measurable contributions.

Manage More, Do Less. Most managers are so busy doing that they really aren't managing. Managing can best be defined as planning, directing and controlling your employees so that company objectives are met or exceeded. You can't manage if you are so busy doing.

There you have it. Twenty-four words that lead to real business success.

Oh, I have one final word on the subject. Plan. It only hurts if you don't.

Stephen W. Gibson is associated with the BYU Center for Entrepreneurship. He can be reached via e-mail at cfe@byu.edu.

© 2001 Deseret News Publishing Co.