...millions of
people who have never seen the inside of a business school are running
successful companies.
There are three
areas of knowledge that are critical for starting a successful business:
1 In-depth knowledge
of the competitive structure of an industry and a network of contacts within
that industry;
2 The skills to run
the daily operations of a small, rapidly growing company; and
3 The ability to
raise money
Industry Knowledge
Understanding the
industry’s competitive structure means knowing the history and current status
of customers, suppliers, competitors, product substitutes and barriers to
entry. You must understand why people buy your product and what alternatives
they have. You should understand the production process and the cost, value and
volume tradeoffs within it. You should be familiar with the history of the
competitive rivalry and how competitors are likely to respond to your moves.
You should understand the barriers to entry and determine if you have skills
that give you an edge. You must have a keen sense of the key industry trends
and how they will affect your position. Studying an industry for several months
is never enough preparation. Almost without exception, you must be immersed in
an industry for years to pick up the nuances.
Almost without exception, you must be immersed in an
industry for years to pick up the nuances.
Day-to-Day
Operations Understanding daily operations is a must for entrepreneurs. Daily
operations include many issues, from accounting, production, organizational and
administrative dilemmas to general business philosophy. All of these must be
woven into a consistent set of principles and procedures. If the company
culture is flawed, almost any strategy is in jeopardy. A disorganized
accounting system or poor physical surroundings can likewise take a heavy toll
on profits.
If the company culture is flawed, almost any strategy
is in jeopardy.
Raising Money
Raising money is the least important and most generic of the three skills. Most
worthy projects eventually are funded, though “eventually” can seem like an
eternity when your creditors are calling. Money is the fuel for a start-up
business. Fail to raise it or run out before the venture turns cash-flow
positive, and your business will die.
The Value of Each
Area of Knowledge
Industry Knowledge
Industry knowledge
is the most valuable of the three areas because it provides the ability to spot
and seize an extraordinary opportunity. People with deep industry knowledge and
sharp analytical skills ultimately will discover unique opportunities. Almost
without exception, you must be immersed in an industry for years to pick up the
nuances. If the company culture is flawed, almost any strategy is in jeopardy.
2 Unfortunately, extraordinary opportunities occur in an industry at best once
every four or five years. This means you cannot be at the airport when your
“ship comes in.” For instance, someone planning to start a family may find an
opportunity surfacing at just the wrong moment.
Day-to-Day Operations
The ability to run a
business is less valuable than the chance to seize an extraordinary
opportunity, but successful operators are far from a commodity. If you are good
at running and building a business, and willing to put in the hours and
attention it takes, then you always will be able to add value while making a
comfortable living.
Raising MONEY
How Do I Get the Knowledge I Need?
There are two ways
to acquire the skills above: learn them yourself or find a partner who already
has them. The successful entrepreneur generally does both. Accumulating each
type of knowledge requires a slightly different approach.Money is a commodity. People
who can raise money are often paid a commission, just like a real estate broker
or used car salesperson. Being a money broker may allow (or force) you to wear
fancy suits and stay in nice hotels, but money-raising knowledge is the least
valuable of the three areas of knowledge.
Your Partner
Few people have all
three types of knowledge, so while you are developing your skill set, catalog
people whose strengths supplement yours. This will give you a source of
complementary partners when you are ready to go on your own. Two partners with
complementary skills, contacts and chemistry are far more powerful than the sum
of their parts.
Stages and Goals
Few undergraduates
or MBAs find an entrepreneurial job straight out of school. The key is not to
land the perfect first job but to use each position as a steppingstone.
With enough
creativity and effort, any job can help you acquire new tools or contacts for
one or more of the three skill sets. Always look at the next position as a way
to put more items in your “bag” and check them off your list. This does not
mean neglecting your current responsibilities. Rather, it Sources of money come
in all shapes, sizes and flavors. With enough creativity and effort, any job
can help you acquire new tools or contacts for one or more of the three skill
sets. 4 means creating opportunities to analyze a strategy or industry; meet a
new friend; or learn from co-workers. Preparing for your next step will not
only develop entrepreneurial skills but will also make you a more valuable
asset to your current employer.
Always keep your
ultimate goals in mind. They will help you make the right longterm career
moves. As a future entrepreneur, your reaction to a promotion, transfer or
opportunity may be far different from someone who wants to retire as a vice
president.
Summary
Very few would-be
entrepreneurs will get their dream job straight out of school. The secret is
not to tilt at windmills, but to choose a position in which you can develop
industry, operational and fundraising skills. If you keep your final goal in
mind, work step by step to gain knowledge and take notice of people who might
be complementary partners, eventually an irresistible opportunity will appear
and you will be prepared for the challenge.
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