Calling all entrepreneurs - don't neglect the Left Brain!
Photo by David Cassolato (Pexels)
So, you’re ready to go – you have a well researched business plan, assessed the risks, defined your goals, thought about your work life balance, and got your priorities in order. Surely we're ready to start!
In this series of articles we have looked at key areas highlighted by a 2019 Entrepreneurs Survey which highlighted those areas where entrepreneurs report they typically struggle. We have looked at finding customers, cashflow, time management and wellbeing (work life balance). A recurring theme in each of the articles has been the need for preparation, and at the heart of preparation is the business plan. In this article, we consider the final area which encapsulates finance, legal, and human resource management, which I will refer to collectively as the 'left brain' activities.
90% of businesses fail in the first 12 months. Fact.
All that creative endeavour, long hours, energy and enthusiasm lost for one simple reason – running out of money. Money to the business is like air for breathing or oil for an engine - without it, the business will fail - doom and gloom you may think.
On the contrary - manage the money and the risks effectively, and the business will not fail. It may not achieve your aspirations, it may (and most probably will) change direction (pivot), you may have to take a second job (or side hustle!) but the business will not fail if you do not run out of money.
So we plan – we set goals – we measure and review progress so we can make informed decisions and take action – simple isn’t it! However, this means that for all the creative energy and enthusiasm 'front of house', you need to balance this with a pragmatic, unemotional commitment to setting and measuring progress against your goals and managing cash, and the more complex the business model, the more critical this is.
A journey of a thousand miles begins with a single step
So here we are. Yesterday, before you declared yourself an entrepreneur and started the business, you painstakingly identified a series of key assumptions on which the whole business model is based. These assumptions are at the heart of your priorities, and will focus on two things above all else: Customers - where to find them, what to say, what to sell, the price, the channels to market and so on - and Cash - what you have, how long it will last, and what your contingencies are. There are a seemingly endless things to do, but as an entrepreneur your focus is inevitably finding customers and keeping the lights on.
So how do you deal with the other demands on your time, and how does this fit with your own skills and experience? In thinking about this, we can think about the business in two distinct categories:
1. Creative: Target customers, customer personas, marketing campaigns, channels to market, customer service, product strategy, can be considered the more externally focused, creative aspects of the business, the ‘right brain’ activities.
2. Logical: Corporate governance, risk management, finance & tax, legal and human resources, are the ‘left brain’ functions. Setting up the company, shareholder agreements, employment contracts, terms of business, financial management, cashflow, insurance, tax, and so on.
These are both important parts of the business, but it can be challenging to switch between the two categories, and the two states of mind, and we each have a bias towards one or the other based on our personal characteristics.
For the majority of entrepreneurs (outside the finance and legal professions at least), often the priority and personal preference is to focus on the creative, right brain activities. For many entrepreneurs the right brain activities are what inspired them to take that step into the unknown and start their own business, to provide products and services which solve real problems for people and for society generally, 'in the hope of profit'.
From the 2019 Entrepreneurs Survey, Left Brain activities prove a significant distraction for new and experienced entrepreneurs alike, particularly in the areas of cashflow management, accounting, taxation and legal requirements.
If the discipline of regularly preparing and reviewing this information is poor, this can have disastrous consequences.
Prepare for success
To ensure the business is in a position to trade professionally and responsibly from the outset, it is vital you have an effective process for ensuring the Left Brain functions are addressed in a routine and professional manner. As you secure those first hard won customers, the efficiency of the customer engagement process is key to building confidence in your new organisation, and your customers, whether businesses or individuals, will expect you to be as proficient in the order processing department as in customer services team.
It is vital you look at this area thoroughly. If this is not your area of expertise, engage with those who have the experience and expertise to help you (also see the second article on cashflow for more details). It is far simpler to spend some time setting up administrative processes from the start than to retrofit them later, and with a broad range of cloud based software solutions available depending on your business model, it has never been simpler or more cost effective to research and implement a process which works for you and your business.
Even if you have experience, having a third party preparing your key management information, particularly in terms of cashflow forecasts, can provide an important independent perspective on how you are performing which can be invaluable when you are riding the roller coaster of running your own business.
Remember, when you're looking for expertise, it’s the products and services which are creative - from personal experience the last thing in the world you want is a risk taking accountant!
Conclusion
In this series of five blogs we have focused on effective preparation in the areas of Finding Clients, Cashflow, Time Management, Wellbeing and Left Brain activities. Prepare well, and you will be in a good position to continuously plan, act, measure and review your progress against a well-researched business plan, goals and metrics. With focus, discipline, and a sustainable work life balance, you have a solid grounding for any entrepreneurial endeavour.
So what’s stopping you?
Colin Aurelius is an entrepreneur, investor and strategic adviser who has worked with a broad range of start-ups and early stage businesses over a 20 year period. Colin’s experience derives from both successes and failures as an entrepreneur in a broad range of industries including IT, enterprise software, electronics, health and digital media.
Colin works with both established businesses and start-ups in the quest to encourage talented business leaders and entrepreneurs to build profitable businesses which have a positive impact on the world. Colin has worked with Henley Business School on entrepreneurial development programmes, and more recently with the Oxford Said Business School in areas including Fintech, Blockchain and Disruptive Marketing.