At dinner with group of high-growth business entrepreneurs and serial investors we had a debate about the priority that should be given (time, capital, resource) to marketing, sales, delivery and for won’t of a better word, the business model. Which should come first? When and Why? The brain or the brawn? Experience has told me that the answer is not sequential. Indeed, entrepreneurs and executives need a strategy for a growth strategy – a framework – within, which knowledge is applied to organisational issues in order to make wise decisions in support of the firm’s strategic goals. It is a simple construct but I find far too many investors, executives and entrepreneurs not applying this advice.
The worst of these “crimes” is seeking to do things on the cheap. A mindset that we must conserve cash at all times. Drawing little or no distinction between expenditure on the “brain” (self-development, mentor, financial adviser or a qualified profitable growth expert) and the “brawn” (print and graphic designers, bookkeepers, sales and business development, subcontractors and so on, who are in abundant supply and are largely a commodity willing to work on a hourly fee). I used to think that this was a rookie failure of first-time entrepreneurs and executives new to high-growth business expansion. I am not so sure. I think it is a philosophical issue largely informed by the beliefs that an investor, entrepreneur or executive has about their contribution to the world (“how they look at themselves”).
Why is this important?
It can stifle or even kill dramatic growth plans. High potential opportunities are passed over or receive insufficient capital and resource for “fear” that the business will run out of cash. Lesser quality management and employees are hired on the “cheap” to save pennies but the effect is to dramatically increase the amount of uncertainty within the business (failure to market or deliver products and services well) and costs pounds. Consequently, the business has little or no insulation to competitive threats (increased financial and operational risk).
As someone who has sat on all sides of the table with my own money at risk, I am familiar with financial concerns and the corrosive effects this “cheap mentality” has on common sense decision-making. What I have learned is that I can certainly make savings on the “brawn” (have the client undertake some of the work, outsource most activities and so on), what I remind myself is that I must invest in the best “brains” I can reasonably afford to hire in order to be successful. Almost every error I have seen made with the profitable growth and expansion of large and small businesses leads back to an investor, executive or entrepreneur, who allowed a “cheap mentality” to cut corners on the quality of the “brains” they brought into support the growth of their organisation.
© James Berkeley 2015. All Rights Reserved.