This post focuses on the basic skills that all entrepreneurs need, there’s probably a billion articles online about “Read these 5 things billionaires do that no one else does” but let’s be honest with each other and drop the non-sense. There a couple key critical skills you need, you don’t need to be a genius or have some revolutionary idea. Here’s my top 5 skills I believe all entrepreneurs should either know, learn or brush up on before starting a company;
1. Have a basic understanding of accounting
2. Know the difference between cash flow & profit and how to handle both
3. Word of mouth referrals – happy customers make great sales people
4. People are not your biggest asset, the RIGHT people are
5. Know what you are good at and where you need help
Have a basic understanding of accounting – seems simple enough but it is the single biggest issue I see with entrepreneurs. Many times you get an entrepreneur that believes they just don’t have time to devote to accounting and that their accountant will let them know if anything goes bad. If you don’t understand how to read your income statement or balance sheet you are setting yourself up for failure. Getting a basic understanding of if you are making money, is your balance sheet strong or weak and how your money is getting spent is crucial to your success. I’m not suggesting you need to run out and become a Chartered Accountant, but all I am saying is get informed. Know where your money is going. Ignorance is not an acceptable excuse when things go wrong and you could have seen it coming.
Know the difference between cash flow & profit – this is another one I see regularly, entrepreneurs not understanding the difference between cash flow & profit. Sure you might be making a healthy profit, but does it take your customers 120 days to pay your invoices. Or on the other side, are your customers paying quickly but yet you are losing money because you priced your product or service incorrectly. Start by first understanding how to navigate a cash flow statement, second either hire someone to give you one daily or learn how to do it yourself.
Word of mouth referrals – happy customers make great sales people because they promote your product to others (friends, co-workers, other businesses). You’ll hear a ton about online marketing but nothing and I mean nothing beats a solid word of mouth referral. If it was me, I’d take one good word of mouth referral over a thousand views of my website.
People are not your biggest asset, the RIGHT people are – this is one that has started to catch on as of late. If you looked back at business texts books from 5 years ago it was all about People Are Our Biggest Resource/Asset. I’ve never liked that concept and finally someone with some clout pointed out how stupid of an idea it is. Finding the right people is way more critical to the success of your business than finding a person who fills the void. A lot of times businesses don’t have the resources or time to find the right person but there are ways to get around this. It starts with fully understanding the skills & personality you want in the ideal candidate and then not settling for less than that. Many of the most successful businesses of all time focused on hiring the right people, even if they didn’t immediately have a position for that person they hired them because they were the ideal fit.
Know what you are good at and where you need help – full-disclosure, I went the first 10 months of my entrepreneurial life thinking I could just wear all the hats and do it all in house…after letting a client go it finally dawned on me that;
1. I’m not good at everything, for example building my own website was a horrible idea because it looks like junk, and;
2. Use a simple formula, I charge my clients X for my product or service, consider how many hours it takes you to do something you aren’t good at (my website took me approx. 100 hours). Multiply the two and that’s how much money you spent of your own time that could have been devoted to something you are good at, like serving your clients and leaving the rest up to experts in those fields. Almost 100% of the time, you’d save money by outsourcing what you aren’t good at.
That’s when I decided, I’ll focus on what I can do really well. I’ll either hire or outsource all the functions I’m not good at. Although it took me a while to come to that realization, it was hands down the single greatest move I made for my business. Within a few months, I doubled my revenue.