THE 10 COMMANDMENTS OF ENTREPRENEURSHIP Condensed from Entrepreneuring: The Ten Commandments for Building a Growth Company by Steven C.

Brandt Mentor Books, 1983

1.

Limit the number of primary participants to those who can consciously agree upon and contribute directly to the enterprise. Primary participants are those who share in the initial ownership and participate in management and decision making. Forming a founding team should not be a haphazard affair. Be careful of involving people who are not compatible with the goals of the enterprise. Six common mistakes made in the formation stage: 1. Founding Group formed spontaneously. Choice should flow from an understanding of the requirements for success of the enterprise. The Business Plan will dictate the desired specifics of your staff and management needs. You do not want to involve anyone who does not have the skills or talents you need involved. 2. Family or personal lawyer/accountant are automatically used. The professionals you bring on board MUST have company building skills. This means they MUST understand small business. Most bankers, attorneys and accountants do not understand growth dynamics. 3. Harmony is sought at the expense of creative conflict.

Humans tend to tell people what they want to hear. This may be good for ones ego, but it can be disaster for the business. The participants should bring a balance of viewpoints.

4.

Administrative people are given stock in lieu of salary. Spreading stock around is a bad answer. If nothing else, you may later have to fire your stockholder. In a small, start-up enterprise this could lead to a number of problems. Secondround investors may not want to be in business with your clerical staff. Repurchase options may come at a bad time. Worst of all is that loose shares could wind up in your competitor's hands.

5.

Board of Directors consists solely of insiders, i.e.: officers, spouses and friends. Outside objective viewpoint is important. Directors should bring new skills and varied experience to your management team. Even if you are not a corporation with a board of directors, you should develop a circle of experienced business people with whom you can discuss important problems.

6.

People with different motives are mixed together in the same financial boat. Those persons looking for long-term gains will conflict with those seeking early dividends or quick payback. Some want to reinvest for growth while others want to take the profits. This will lead to conflicts.

II.

Define your business in terms of what is to be bought, by whom, and why. Remember customers buy need satisfactions, not products. Do not be market driven, (concentrating on what has to be sold and overlooking what is being bought). Never generalize about your customer and remember your Market Segmentation Grid: (1) What is being bought?

(2) (3)

Who buys? Why are they buying?

Target your market carefully. Be sure to pinpoint the reasons why people might buy your product. Do your market research and understand your customer.

III.

Concentrate your resources on accomplishing two or three specific operational objectives within a given time period. You are dealing with limited resources. Good managers determine what they want to accomplish and when to have it accomplished. Avoid the tendency to try to do everything at once. Work towards a set of realistic objectives. Remember that to be valid, an objective must meet the three-point test: 1. 2. 3. It must be reasonable. It must be quantifiable. (You have to be able to put a number to it.) It must be time-able. (When is it going to happen?)

IV.

Prepare and work from a written plan: Who in the organization is to do what job and when should he/she complete the job? Absence of this document will not allow the fully coordinated use of resources, yet this is the most put-off and overlooked document in business. Why? An entrepreneur often does not have complete grasp of his/her ideas or maybe the idea is not as good as he/she thinks it is. Understand that your business plan is your blueprint - you would not build a house without one. Even if you do not plan to borrow money from someone who will require a business plan (a bank or investor), it is your initial operating document. If you do use your plan as a fund-raising tool, it is evidence of your drive and achievement orientation. It demonstrates your experience. It shows your ability to communicate plans and ideas. And it shows that you have given thorough thought to the enterprise.

V.

Employ key people with proven records of doing what you need done.

Perhaps the best indicator of future performance is how he/she did in the past. How do you protect yourself when hiring key people? You must conduct tough face-to-face interviews. You should conduct reference checks. Do multiple interviews and ask scenario questions: "What If..." Find out what they have done for the past five years. In a start-up situation, you will probably not have time to do extensive training. Make sure the people you hire can do the job you need to have done.

VI.

Reward individual performance that exceeds agreed-upon standards. Forms of compensation are important to the performer. People work for many reasons: 1. 2. 3. 4. Money Recognition Promotion Expectations

You must listen to people to know what turns them on. However, remember that most persons have financial obligations just as you do. Recognition, plaques, and Employee of the Month parking spaces are nice but they do not pay the mortgage. You must know when to and not to manage. If you hire competent people, all you have to do is to tell them what needs to be done, then get out of the way and let them do it. Micro-management of employees is time consuming and frustrating for both you and the employee. People like to know the score what and how soon something is expected of them. Most importantly, communicate. The company's objective must become meaningful to the staff. VII. Expand methodically from profitable base to a balanced business. Do not grow for the sake of growth. Growth must be logical - do what you do best. Keep in mind that resources are limited - re-invest and grow from profits.

Know what is profitable to your business and what contribution it makes to overall success of venture. Remember that there are only three fundamental elements of profitability: 1. 2. 3. Sales Volume Fixed Cost Contribution

If that is so, then there are only three ways to increase profitability: 1. 2. 3. Increase sales. Reduce fixed cost. Increase contribution rate.

Likewise, there are only three ways to increase contribution rate. 1. 2. 3. Increase selling price. Decrease variable costs. Change product mix to increase NET contribution rate for all products.

These are the dynamics of business and are really the only things you have to juggle. You must be sensitive to them. VIII. Project, monitor, and conserve cash and credit capability. Cash flow is your life's blood. You must keep funds readily available or at the very least, cultivate financial sources. Keep a close watch on: 1. 2. 3. Interest rates. Inventory. Accounts receivable (Do not become a banker!).

This is the key value of a Business Plan. It helps you project how much money you will require at various points. IX. Maintain a detached viewpoint. You can get consumed by your business and lose your objectivity/perspective. This is where outside Board members and advisers can help. It has been said that you should never fall in love with your

business. Love is a function of the heart and can make you do some very strange things. Business should be a function of the brain, not the heart. Be sure you know when to get away. The pressures of business can be consuming. At the very least, learn how to ease stress. X. Anticipate change by periodically testing and reviewing your business plan. Make sure it is consistent with the reality of the marketplace. Recognize and deal with reality. You will have to adjust management style to changing needs. Likewise, organizational structure is variable--change it as needed. You must nurture a process of management. This implies a continuing sequence of events and gives order to your enterprise, e.g., regular management meetings, annual reviews and regular budget sessions with your key employees. You must verbalize information and expectations. Your key employees are not mind readers, therefore you must communicate. Remember that communication is a two way street--seek out ideas, opinions and critiques from both your employees and your customers. Remain costumercentered. Everyone has heard that the customer is ALWAYS right. We all know that is not true, but we must never forget that the customer is ALWAYS the customer (the one who pays for your goods or services), so listen to them.