Text: Steven Cohen. Article from the December 2012/January 2013 issue of Your Business Magazine.
Expect little sleep, difficult employment decisions, and to make mistakes. Here’s how Steven Cohen survived and thrived when building his business empire…
In 1989 Steven Cohen and his two partners started their business in his garage. Today, that business is SA’s leading developer of accounting and business software, supplying 52 countries, and is part of the London-listed Sage Group. Here he shares some of the key lessons and survival strategies learned along the way, which will no doubt help your business prosper in 2013 and beyond…
1. Take baby steps
This is my number one survival strategy: the smaller you start the smaller your mistakes will be. Accept that mistakes are par for the course and learn from them so that they don’t become major catastrophes and derail your business at some point down the line.
At the same time learn how to forgive yourself for any mistakes made. You’re an entrepreneur because of your willingness to take risks; so there are bound to be mistakes along the way.
Acknowledge what you’ve done right so that you can do it again and again. In our start-up phase we did a number of things right – we managed to sell our value proposition confidently and always remained ahead of our competitors and industry challenges; we understood our landscape clearly and always kept an eye on industry trends; we drew our own conclusions and then shared this information with employees, and we continue to do this today, we have a monthly staff meeting where there are no sacred cows.
2. Be prepared to make sacrifices
Pastel had an extremely humble start; it really was back-of-the-garage stuff. We didn’t pay ourselves for six months and lived from hand to mouth – you must be prepared to make sacrifices. We had all put money away before we started to make sure that we could pay the rent. Each and every purchase in those early days was carefully thought through.
3. Develop your financial acumen
Not all business owners have financial backgrounds. Many start up because they are particularly talented in a specific area – whether it be programming, flower arranging or carpentry. They tend to disregard the financial aspects of the business and focus on delivering quality goods and services. I’d recommend going on a financial course to ensure that you understand the nitty gritty of this side of the business.
Financial acumen involves tracking your cash flow all the time because no matter how much collateral you have, your business will fail if you can’t pay the bills. You need cash on hand to pay the rent, electricity and other bills. Having millions tied up in property, forthcoming orders, bank loans or clients who owe you money, will not help you when you need cash now.
4. Develop systems
The only way to become a successful business owner is to learn how to delegate. In the beginning, entrepreneurs normally take on all tasks from answering telephones to sales. It is important to eventually extricate yourself so that you are free to expand your business. The trick to doing this is to put systems in place. This allows for delegation of tasks to employees in each division such as bookkeeping, marketing and administration. And eventually each system should be able to manage itself. This rests on two essential things: management and leadership.
5. Manage and lead
Many believe that my partners and I had the right mindset to get where we did – truly entrepreneurial mindsets. And while I agree that we are successful entrepreneurs, we also had what many entrepreneurs don’t; a good understanding of management and leadership. You can have the best idea in the world, but if you don’t know how to build it into a sustainable business, you have nothing.
As the business grew, we empowered key people to take control of the management issues within our systems. We became hands-off but not uninvolved.
I believe in leading by example. This creates credibility and new recruits know exactly what is expected of them. I’ve never backed away from telling someone face to face that they aren’t meeting my expectations. Of course, I also take the time to recognise people who go the extra mile. Don’t paralyse employees by lashing out when they make mistakes. Rather let them operate in a supportive environment where they can learn from their mistakes. If you don’t, you will suffocate your business in the pursuit of perfection.
At the end of the day a leader needs to create a workplace that people love coming to and allows them to do the best possible job while they are there.
One of the best pieces of leadership advice I received is that there is no wrong or right decision – so make a decision and then work it! As a leader you have to make decisions; bottlenecking activities can be incredibly de-motivating for the people who work for you.
6. Hire only the right people
When it comes to hiring, I believe it’s better to pay more money for a good person with the right overall fit for the organisation, including an appropriate work ethic, rather than someone with the “right credentials”. Don’t be tempted to pay less for an under-qualified person who you believe can be taught the right stuff on the job.
7. Grow organically
At Pastel we opted to begin with organic growth. Yes, it’s slower than acquisitive expansion, but it is less risky in the long term because your management team can form strategic goals to guide the enterprise’s direction.
This method also gave us a chance to test our business model. Once we listed we grew acquisitively as well. Purchasing other businesses has its merits, particularly in terms of gaining new customers and revenue quickly but it comes with its own set of challenges, including shareholders that may not be a great fit. Integrating two businesses also involves streamlining different cultures, systems and work ethics into one entity with common values and goals – not always an easy task.
8. Find new clients
It’s easy to get comfortable with just one or two main clients. You know them well, can service their needs and they keep you ticking over. This is very dangerous particularly as you have no control over what could happen to their businesses. Focus your energy on seeking out new clients all the time so if one falls away, orders from others can keep you going.
It’s also important to know what your customers and potential customers want. Don’t forget: if you don’t have customers, you don’t have a business. So look after them, talk to them, and understand their needs and how they expect you to fulfil them.
9. Take a holiday
It can be difficult to take time off when running a business, but this is not healthy in the long run. A good break can restore creativity and innovative thinking. And taking a holiday is also a good way to test how robust your business really is. If you come back from a trip and everything is still intact; it’s a good sign that your systems are strong. So enjoy the festive season and a new start to another year of business success!
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