The
idea of entrepreneurship is not a new phenomenon as some people may think. It
has been practiced throughout the history of mankind. Although it was the
French who gave it the name as it is currently known in the world, it had been
practiced through all the ages by many tribes and civilizations. This fact
serves as testament to its significance.
It
is widely known that it is better to have a well based financial literacy to
have a financially liberated life. Than just seeking to be successful in your
profession whatever that might be and directly assuming money will flow sooner
or later after that.
Taking
the salary or whatever form of compensation of your profession will rarely
bring you the financial solution you will need.
A
financial literacy on the other hand will give you an edge. It helps you find a
way on how to monetize your profession. Thus making you an entrepreneur. Be it
you maybe an individual or a business. Financial literacy is just like any
other literacy, it means grasping the fundamentals. To be a successful
entrepreneur you need to grasp the fundamentals of finance.
To
be a successful entrepreneur it does not matter what business you are in. You
should not think – which industry is it best currently to make great money. The
key factor is you – not some place you have to be in to be a success.
There
are certain factors important to becoming a successful entrepreneur, the key
being – investment.
First
there is finance, that is your source of finance. Where are you going to get
the investment from?
Second
is investment. Where are you going to invest your finances on or how are you
going to use the finance you have raised.
The
third factor is sales and marketing. How are you going to create exposure for
your product?
Now
all of these three factors are interrelated to each other. It is in their
nature to be fulfilled as a set.
The
most important of the three is investment. It is the how of the three. It is
the where of the three. It is the application of the three. How are you going
to use the finance that you have raised? Where are you going to invest your
finances on?
Historical precedence of investing in
yourself, your idea, your business
The
percentage of income big companies spend on themselves is amazing. They use
those huge budgets to cover many shortcomings they have. They use them to cover
many deficiencies, and in the most important instance to get ahead of the
competition. That is the key that successful companies remain so while others
fail.
What
is fascinating is that these successful companies did not even question this
ideology. They were doing them before they articulated why they were engaging
in such activities.
Research
and development emerged as a phenomenon during the early 1980s. Although
businesses had been indulging themselves in such activities since the start of
time it had not been labeled as such till this recent times.
Research
and development is the creative and systematic work done with the intent of
increasing your volume and level of knowledge. It also enables you to develop
new application of the knowledge you already have.
When
you start out a business as an entrepreneur you might not have a deep and
weathered knowledge. But what will be key to your survival would be the speed
and level of your grasp of your business. Your learning curve must be steep.
During
the economic crises of 2008 businesses were destroyed, many dreams were crashed.
Almost everybody never saw it coming. It was the most severe global recession
since the great depression. And yet some unexpected businesses passed the storm
and stood standing after the ordeal was done. That’s because they behaved in a
certain way. These companies included Netflix and Wells Fargo. Those were
companies which invested in themselves.
These
companies did not decide to enter new areas of business to improve their
position because of the recession. They simply improved the quality of their
services and products, and the recognition their brand has. Those companies
kept it simple and focused on finding better ways to deliver their service.
What they spent to identify a better way to do their business is more than what
they actually spent executing their plan.
There
is a certain pattern that successful companies create which is identifiable
after some analysis is done. They spend a large part of their gross profit on
research of the work that they do and on the development of better ways to go
about their business. This usually even includes on the development of their employees’
capacity.
Ford
the number one company in the automobile industry in the US based on sales
spends one third of its gross profit on research and development.
Microsoft
a pioneer on the software and computer service industry has the target of using
12% of its revenue within its company each year. Their biggest asset is their
ingenuity.
Samsung
electronics which has around 19.2% of the world market share of mobile phone
sales does not part with around 7% of its gross profit. You know what it does –
it circulates it again within its company.
Research
and development is a valuable tool for growing and improving your business.
Businesses that have a research & development strategy have a greater
chance of success than businesses that don’t. A research and development strategy
can lead to innovation and increased productivity and can boost your businesses
competitive advantage.
Investing in yourself as building a
base
So
history says you must master your craft. But what is actually achieved from
investing in your business in terms of more study of your business?
What
these investments companies make within themselves is very much like building a
house. What do you do before building a house? You conduct a survey. That is
research about where it is better to position the house, based on your
preference and based on the area.
Conducting
research is just like that. It is building your base. You dig your base so deep
that you can stand strong and weather any wind.
Entrepreneurs
investing in themselves in terms of research and development remain constant in
their mission. You have a goal when you start up. You design a blue print. What
you must do is continuously polish your blueprint. Continuously investing in
yourself will give you this sense of renewal of your mission. If you are the
architect of your project nobody might even be able to decipher your code.
Nothing can unearth your plan, because no one has your plan, because no one has
your blue print. You are not leaning against any other external structure. You
are standing on your own feet which are dug deep on the ground. So you are
protecting your business from any vulnerability.
With
that structure you can send out shock waves. Once you are setup like that others
turn to observe what you decide because you are continuously overcoming storms.
They use your decisions as indicators. Your output becomes their input. You are
not consuming raw materials you are creating them.
Creating assets rather than
purchasing them
Another
important characteristic of investing in your business in terms of research and
development is the ability to create your own assets.
In
its 45 years of life Microsoft has patented 90,000 licenses for discoveries it
has made. If they need something they automatically think – how can we develop
that for ourselves not where can we get that. They invent these amazing things
so that they can use it for their products and services. The situations they
find themselves in make them think – well we better come up with some solution
for our such and such problem.
Many
inexperienced entrepreneurs on the other hand think of acquiring assets. If you
ask them why – they say it would make them more financially valuable. That is a
mistaken way. Why do you need to acquire assets when you can create them? You
can invest in yourself in terms of creating brands, acquiring customers or
author titles.
The
whole idea of entrepreneurship is creation. You create your business idea, so
it is natural you create the elements as well. Once you make up the elements
they take the positions they are supposed to take and make the puzzle whole. If
you acquire them externally they may not fit perfectly. In that case you have
to move your already set up elements or even the whole project to create room
for that external component which is not an easy fit. You are having to alter
your dream because of that. Nobody knows what you exactly want. So you may not
get an exact fit as long as you are acquiring externally. If you are generating
your component internally that is a different story. You may even create an
asset that does not exist in the market. Nobody might have even thought about
it.
Cheapness and discretion of investing
in your business
The
golden characteristic of research and development, of investing in your
business is that it is not fixed. It does not demand you to incur more than
your means. If you purchase raw materials you would have to incur the expense
of those raw materials to produce the product you want to sell. With research
and development, with investing in yourself you can start from zero. Zero. That
investment in your craft is discretionary. You can build your way up as you
continue expanding as an entrepreneur. Once you make a profit take a bit of
that profit and invest it again in your business so that you can find a way to
lower down the cost of those raw materials that you are using. That is the
genius of a successful entrepreneur, that is the genius of a successful
business.
When
you are an entrepreneur there is no list of criteria to meet. As you keep
expanding, as your capabilities improve you can start to fulfill more
requirements. The mentality of an entrepreneur protects you from thinking that
you have certain requirements you must fulfill for your business to start. With
the mentality of an entrepreneur you can start your business right now right
here.
You
become free from competition. Nothing can crush your business, no external
volatility will demand you to shrink your business or else. Because what you
need does not even exist in the market. You decide what you need and how much
of it you need. The market does not supply you, you are not a consumer. You
supply the market because you become a creator.
Finally the psychology of investing
in your business – you get a separate identity
Many
people just have an idea of the kind of businesses in their industry. That is a
vague conception. Because many researches conclude that, what a budding
entrepreneur is ideally exposed to about the industry they are involved in is
just the tip of the ice berg. That means you do not know what you are up
against. What will get you across the hurdles is continuous investment in your
business, after you keep advancing your business you start to have a certain
unique shape. And then one day certain customers start to come to you and then
when you ask them why they choose you over others, they say – because you are
the only company who provide this or do this such and such activity in the
business. You did not even realize it – but you have become this different
image, a unique identity. You have mastered your craft so much so that you are
not even what you thought you were. You have become a pioneer in your business.
Why
businesses who invest in research and development succeed to conclude is
because they do not need the strength of the market to determine the amount of
demand their business will get. You become such a company that your consumers
cannot survive without you, you become irreplaceable.
Yosief K. Afewerki
Financial Consultant
