Over the years, I’ve seen so many people with high potential diminish their prospects for success in business because they lacked a few key axioms of business.
To that end, I’d like to share a few things I’ve learned (often the hard way) about what is what in business:
#1 Risk capital trumps “sweat equity”. The guy willing to risk real dollars is worth 100X as much as the guy who is willing to “risk” working hard for some period of time. If you disagree, you’ve probably never remortgaged your house to pay for something you believe in.
#2 NEVER burn bridges. If you read Steve Jobs book, one of the things that becomes clear is that this is a person who, while often mean, was pretty good at maintaining relationships. Even after Steve Jobs founded Apple, he would regularly go back to his former employer (Atari) and get advice or help in some form or other.
#3 It really is “just business”. If it is good for the company, it is good for the company. A fierce competitor today may be a partner tomorrow. Don’t make business decisions from a place of emotion. I’ve had to overrule managers in teaming up with companies because those companies had competed with us in some unrelated area in the past. It’s just business.
#4 Understand your compensation system. You pay people for a specific reason. A reason that should be clearly defined and understood by both parties. Never compensate someone to try to win “good will”. I’ve learned this the hard way. No matter how big the bonus for a “job well done” it will rarely build long-term loyalty or good will. Once you start own that road, people will become resentful because in their mind their contribution to the success on a project is always far greater than your estimation of their contribution (see rule #1 for a common example). The best policy is to have a very clear compensation plan and abide by it scrupulously.
#5 Separate your business life from your personal life. This can be hard to do but not doing it will cost you in the long-run. Your business is a tool to accomplish a set of goals that are determined by you (and your fellow stock holders). It’s amazingly easy, over time, to lose the reason you have your business in the first place.