It may be a controversial opinion, but there’s an argument to be made that this modern-day, small-business dynamic of not worrying about profit for the first three years is a dangerous trend. While many startups rely on significant investments and the notion that “you have to spend money to make money” to achieve high-speed growth, those that don’t may actually be setting themselves up for bigger success in the long run. The true legacy in the United States’ small-business world is establishing a business with minimal debt and hard work, building off receipts, and creating a 20- to 30-year type of commitment.
The companies that shy away from investors do so because those investors often look to trade funding for control, potentially looking to transform the core meaning of a customer-first focus. Oftentimes investors want to exclude or limit client services from a business model to increase profitability. But customers seek out the unique level of service small businesses can offer, and if a company can provide that, profitability usually follows.
Not only do entrepreneurs have the responsibility of deciding what types of investments—if any—are right for them, but they also carry the burden of making difficult decisions to protect the bottom line. Oftentimes, investment opportunities that look great on the surface require taking on excessive debt and giving up significant profits or royalties. After all, nobody wants to invest in a business for free.
However, that’s not to say entrepreneurs should never consider seeking investment opportunities. Exploring venture capital makes sense for many small and independent businesses under the right terms, as long as the integrity of the business remains intact. But a business’ goal shouldn’t be how much money it can raise or how popular it becomes on social media outlets with its inflated marketing budget. In today’s business climate, social media can be used as a driver to increase brand awareness and sales, but it’s important to remember that “likes” and “shares” don’t affect the bottom line.
Profitability and fiscal health should be at the forefront of every decision for the benefit of both the clients and the employees. There is value in complete ownership, where success is dependent upon client satisfaction and not shareholder needs.
Stephen Wright is the President & CEO of Houston-based Wright Business Technologies.
Jul 08, 2016 Comments Off on If You Build It, Will They Come?