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An Entrepreneur’s Main Dilemma

by Mehmet Soyer, Contributor

[su_dropcap style=”flat”]I[/su_dropcap] HAVE BEEN IN BUSINESS for more than 40 years and have sold 5 of my companies in the last 20 years. I call myself a chronic entrepreneur, a disease I think that won’t leave me as long as I live.

When my dear friend Ludmila asked me to write an article for her LinkedIn group Management, Technology and Entrepreneurship Roundtable I had the idea to take two words of the name of her group as the building columns for my essay.

Management is an art, some say. I might not go that far but for sure it is something that has to be handled by people who know how to do it and are educated and trained for it.

Management is a word used in connection with almost all issues related to business. Managing people, time, suppliers, complaints, etc.

As an entrepreneur one has to understand the general limitations of a manager:

[message type=”custom” width=”100%” start_color=”#F0F0F0 ” end_color=”#F0F0F0 ” border=”#BBBBBB” color=”#333333″]

1- You have only 24 hours like all the other people.

2- Having luck is a part of your success.

3- If you are not doing great in satisfying the requirements of clients, then there is soon no business. Thus, daily operation is important.

4- You have to be one of the front-runners in a certain sector to have sustainable business. Vision and investing into the future is important.[/message]

Point (3) above describes the main duty of a general manager. Point (4) on the other hand describes more the job of the chairman of the board of directors.

Every entrepreneur dreams about managing his own business, created by working day and night. The problem is that only few of those entrepreneurs satisfy the basic requirements of a general manager or CEO. When asked why they do not employ a general manager for their company the owners usually say that theirs is a very special business or they don’t have the money for such a position in their budget.

entrepreneur-startupThe owners of a new business have to know that managing the future and managing the business of today are two totally different functions. These can take more than one man’s working time. Of course there are points where they overlap and you cannot manage one without knowing the other. The trick is to have a good communication between the two people managing them.

So we have the first dilemma for an entrepreneur: Should I manage the company myself or find a manager for the job?

My experience shows that there are only few entrepreneurs who can decide objectively in such an issue and not become slaves of their egos. To confess to yourself that you are not able to manage your company as good as you want it to be managed is something very hard to do for many people. Instead, their egos tell them that they will find the best solutions in time since they are clever people and would not need to be taught by somebody who does not even have risked something in his/her life.

That is sometimes the reason why you do not understand what has happened when you see a great company going down due to having made mistakes a somehow reasonable management crew wouldn’t do.

Entrepreneurship is a word that gets more and more trendy in these days. Since people loved this word they are expanding its meaning so that it can cover adjacent areas in its main definition. Why? Many people see in those areas a business for themselves.

So let’s stay with the main definition taken from Business Dictionary:

The capacity and willingness to develop organize and manage a business venture along with any of its risks in order to make a profit. The most obvious example of entrepreneurship is the starting of new businesses.”

There are several sub-groups to entrepreneurship like Social Entrepreneurship, which includes people who pursue an innovative idea with the potential to solve a community problem. These individuals are willing to take on risks and make the necessary effort to create positive changes in society through their initiatives. I leave such sub-groups out of our today’s discussion.

An entrepreneur has to generate the idea, which will bring in profit, find the finances to supply the needed resources and then market the produce into the target audience.

Before handing over the company to a general manager –or himself as the general manager- the entrepreneur has to understand the main problems and their possible solutions and must have checked the marketability of his products and services.

There are quite a number of good people out there who have developed a medium sized company from their start-ups. They are already cheered by their peers. And exactly at this point the allure of diversification starts to be experienced, thinking also to overcome the problem of “putting all eggs in one basket”.

Since he is a successful entrepreneur people knowing him or having heard of him start coming to him with new business ideas and they ask him to be a partner in their new ventures.

Or he looks at some other entrepreneurs, who he thinks, are making more money than him. There is then the challenge for the entrepreneur of doing that type of business too – in parallel to his existing successful one.

The basic argument to diversify into new business is that in today’s world change happens very quickly and to minimize the risks one has to go into more than one type of sector. In theory this argument is justified. It is a sound strategy only if you can finance your new investments independently from your existing business.

But usually in such cases described as above where does the money come from, not taking into consideration the case in which you have unlimited personal resources? Of course from the existing successful business. Based on optimistic feasibility studies, it is thought that the new venture would be making money in some months and be paying back the money borrowed from the successful operation.

So the second dilemma is in deciding whether to invest into the existing successful business or to invest into a “more” profitable new business using the resources of the existing company.

Thousands of companies went bankrupt after the 2008 financial crises especially in the developing markets. The resources lent did not come back to the existing businesses and the entrepreneurs had to close down all of their businesses due to insufficient working capital or similar reasons.

Most successful young businessmen think that if they were successful once, they will be successful also from then onwards. They assume that they can control their environment. This is an illusion. In 2008 they even could not control their companies, leave alone their environment.

To have a sustainable business for many years, I think that entrepreneurs have to concentrate themselves on their core business and let it be managed by people who know how to manage companies. And there will be no dilemmas.


 

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Mehmet Soyer
Mehmet Soyerhttp://www.mehmetsoyer.com
MEHMET has 40+ years of business experience during which he has sold 5 of his companies, assisted more than 60 business owners in Turkey, Bulgaria and Romania to sell theirs, consults every year about 100 companies from a variety of sectors and created prominent brands like Pimapen (now a generic trademark for plastic windows in Turkey). For the past 5+ years he has been consulting, giving conferences and blogging extensively on M&A and entrepreneurship.

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2 CONVERSATIONS

  1. Thanks for this information. We’ve seen that companies grow through stages. The received wisdom is that there are six broad stages. The entrepreneurial stage which is typically a (hopefully benign) Autocracy, then the “Family Stage.” After this the “Formal stage” as the “children” grow in number and maturity requiring more rules and policies, then the “Leader-Centered Team,” followed by the “Self-Led” team. The final stage, seldom achieved, is the stage at which the line between work and play dissolves. Various terms have been used such as the “Holistic” stage. Though a bit “new agey” for me, I’m not sure I have a better suggestion. Perhaps another reader might offer one. Each of these stages calls for a shift in approach to governance. Knowing when to shift matters, and selecting the right person with the skills to provide the appropriate governance approach is crucial. Very few people can do it all. Thank you again.

    • You are right William… Companies grow in more or less a typical path. There are many descriptions to various phases on this journey.
      Although many people, like yourself, have described this road, quite a few owners are aware of it. Their egos and seeing the financial rewards as the main goal make them take decisions which derail them out of the usual route.

      Enjoy life.
      Mehmet

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