Updated on 01.08.09

The Secrets to Entrepreneurship? Or More?

Trent Hamm

Earlier this week, I stumbled across an October article from Inc. entitled Street Smarts: Secrets of a $110 Million Man. The article carefully outlined ten essential tactics that underlie any successful entrepreneurial endeavor:

1. Numbers run a business. If you don’t know how to read them, you are flying blind.
2. A sale isn’t a sale until you collect.
3. When your short-term liabilities exceed your short-term assets, you are bankrupt.
4. Forget about shortcuts. Run a business as if it’s forever.
5. Cash is hard to get and easy to spend. Make it before you spend it.
6. You have no friends in business, only associates.
7. Don’t focus on the top line. Gross margin is the most important number on the income statement.
8. Identify your true competitors, and treat them with respect.
9. Culture drives a company. In the long run, the boss’s most important job is to define and enforce it.
10. The life plan has to come before the business plan.

Excellent advice for entrepreneurs, all around, but what really stood out for me from these ten points is how most of these tactics really help out in our day to day lives, too. Let’s look at several of them.

If you don’t know how to read numbers, you’re flying blind.
In order to succeed with personal finance, one needs to have at least a minimal ability to work with numbers – to add and subtract in a logical fashion and a basic understanding of how interest rates work. Without that, you truly are flying blind – it’s impossible to know whether or not you can really afford purchases or not. If you’re trying to get your financial life turned around but you’re quite afraid of numbers, ask for help – one should never be ashamed of asking for assistance when trying to improve oneself.

Money isn’t money until you have it.
This is a solid, simple rule to live by – don’t spend money you don’t have yet. The easiest way to do this is to simply avoid credit cards, or to only use them if you have enough cash in your checking account to immediately pay off the full balance. Doing this ensures that you’ll not run up a big debt tab that will be difficult to pay off.

Don’t focus on the top line. Gross margin is the most important number on the income statement.
What’s “gross margin”? It simply means spend less than you earn – it’s the difference between how much you bring in and how much you spend. The bigger the difference between what you spend and what you earn, the better shape you’ll be in over the long term. That means it pays to both be frugal and push yourself to earn more – one or the other alone isn’t enough to achieve strong, lasting financial success and security.

Culture drives a company.
What does this mean for you? Surround yourself with friends and people who all practice a healthy financial lifestyle. Friends who socialize by shopping don’t help. Friends who constantly try to one-up each other with the biggest, best, and latest gadgets don’t help. Friends who encourage each other to improve and do better? They help. Friends who constantly help each other out with tasks? They help.

Forget about shortcuts.
Putting yourself in a healthy long-term solution for financial success is never easy. It’s going to take work and diligence. One month of scrimping isn’t going to make all the debt go away. Instead, you need a long-term plan for turning things around. Take things one step at a time, retain the tactics that work, and ditch the ones that don’t. Be persistent, and don’t give into frivolous temptations.

The tactics for success in business, in the end, aren’t that different than the tactics for success in everyday life. Spend less than you earn, do it consistently, and surround yourself with support for that lifestyle, and you’ll do well.

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  1. Debbie says:

    This all seems like common sense. I’m always amazed by the vast quantity of people that just do not get this.

  2. jreed says:

    In small business, NET INCOME is your most important number…what do you have in your pocket after all the shuffling of numbers. A friend of mine is a “personal coach” and was touting her success this year in doubling her sales. The question is did you double your net income? Her answer was no, she actually ended up with less that last year.
    True business is about making money. In todays economy, people are finally realizing this. Advertisers are now being asked not if their ads won awards or were funny but did the ad increase sales of the product?
    A good boss looks at who is contributing to the bottom line and gets rid of the ones who aren’t.

  3. Great post! It really does come down to that. I like the idea of running our personal finances like a business. With all of the technology to draw up spreadsheets, graphs etc. with little effort or money, you could really be creative in the process and make it look professional.

    I do know the dangers of the culture part. Wow, we’ve had friends who are not only willing to spend their money, but they’ll have yours spent too if you’re around them long enough. Not just big ticket items, but the little things that add up like, “Hey, let’s meet for lunch.” We’ve had to make a conscious effort to be up front with them or cut ties. Living in certain neighborhoods can also clean out your pockets because of the pressure of keeping up the acceptable standards that area has set.

    Thanks so much!

  4. Studenomics says:

    I have to say that I agree totally with the whole forget about shortcuts idea. I have learned this the hard way through attending school full time and having to work during the school year. Money won’t come easy neither will good grades. You can buy all the get rick quick books you want or all the exam prep books you can find, but if you don’t put in the work you won’t get the results you desire.

  5. “Money isn’t money until you have it.”

    It seems simple, but a lot of people sure tend to forget this.

  6. The Personal Finance Playbook says:

    As far as the ability to read numbers, I think the basics of accounting are essential knowledge to anyone trying to run a business. If you can read a balance sheet, income statement, and cash flow statement you are at a serious disadvantage.

    I think of entrepreneurship as the ability to start a business…but once you start a business you need to have the knowledge to run it and keep it going.

  7. As I go through my journey in becoming debt-free, I’ve began looking at my personal finances like a small business. Cut out the fat, budget responsibly, and look at ways to increase income. I’m also focusing on keeping an eye on the long term goals. Good post!

  8. Sean says:

    There’s a concept in accounting called the “going concern assumption.” The idea is that you always assume, when looking at financial statements, that a company intends to keep operating indefinitely.

    The same applies to personal finance. In every financial decision you make, you should assume that you are going to keep functioning, more or less as you do now, for the foreseeable future.

    Thus, no shortcuts. Every decision you make needs to be looked at not only in its short-term impact, but long-term as well. You’re still going to be around, so why damage your long-term prospects for a short-term gain?

  9. Elisabeth says:

    I liked this post. I think your ideas are right on.

    I also had an idea for you though – I was just looking at your “Most Popular Articles”. Some of them seem interesting, but I was just thinking – if you base it solely on the number of visitors, then aren’t they more likely to stay the most popular articles forever, just because more people are likely to visit them because they are listed here on every post?

    I don’t really have a suggestion for a better way to do it. Just pointing it out.

  10. Michael says:

    One of the best posts from you. I’m going to find
    “scratch beginnings”. Thanks for all that you do.

  11. Savvy Frugality says:

    You didn’t go into detail about #10, but I assume it has to do with “put family before business”. How many of us put off family obligations due to work? When starting a business, if the family isn’t on board with it every aspect of your life will suffer.

  12. Gabriel says:

    Another great post! It reminds me a great deal of a book I checked out from my local library – 100 ways to create wealth. Each tip was mostly a philosophical way to approach business – a business mindset, if you will. I found it quite inspiring, especially as I’m learning about entrepreneurship myself. I’ve just started a jewelry business, as well as two blogs. Thanks for inspiration, Trent!

  13. shadox says:

    I agree with jreed – Net Margin is far more important than gross margin. At the end of the day, the only thing that counts in a business is how much money is left in the bank when all is said and done.

  14. Having made (many) millions from building (then selling) businesses across three countries, I feel reasonably qualified to comment:

    I was lousy at the first one (numbers) but I can tell you that a quirky (and hard to find book) by a very interesting Aussie, Andee Sellman, will go a LONG way to fixing that problem for other aspiring entrpreneurs. Check out this video on his blog:


  15. BTW: as Andee is quick to point out, you can go broke on either Gross Margin or Net Income … even Warren Buffett only buys companies that produce one OBVIOUS thing: CASH

    Remember, in ANY market, cash is still king :)

  16. Saver Queen says:

    So true. I learned the “money isn’t money until you have it” rule the hard-way, when my partner’s employer ran out of money and no one in the company got their monthly paycheque.

  17. Love the bit about shortcuts and numbers. Think about the business being your child: would you really take shortcuts on raising your kid? I don’t think so.

  18. Especially that last one. I would go so far as to argue that if your life plan isn’t figured out, the business plan won’t make any sense because you won’t know what kind of business suits you.

  19. Shaine Mata says:

    This is a great find. Starting out as a freelancer, again, I now see some potential problem areas where I could end my escape to freedom prematurely. Thanks.

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