Malaysia Entrepreneurship

Top Line vs Bottom Line

balance sheet

Enterprises are paid to create wealth, not to control costs. But that obvious fact is not reflected in traditional measurements. First-year accounting students are taught that the balance sheet portrays the liquidation value of the enterprise and provides creditors with worst-case information. But enterprises are not normally run to be liquidated. They have to be managed as going concerns, that is, for wealth creation.

To do that requires information that enables executives to make informed judgments. It requires four sets of diagnostic tools: foundation information, productivity information, competence information, and information about the allocation of scarce resources. Together, they constitute the executive’s tool kit for managing the current business.

Peter Drucker, an excerpt from ‘The Essential Drucker’

Very often, I find myself trying to cut down expenses at the expense (pun not intended) of long term growth. There’s only that much savings you can implement on your bottom line. Every resources you throw at maximizing your bottom lines is an opportunity cost to your top lines. That is why it can be a dangerous habit seeking business advisories from your accountant. Leave your accountants to bookkeeping.

In my own experience, I have seen business owners who don’t give much thoughts on their operating expenses. To be fair, they do not splurge on fancy furniture and grandiose renovations in their business premise. But these business owners are very focused on the revenue aspect of their business. They spend a lot of time on customer acquisitions,  working on their sales pitches, training their sales team and perfecting their sourcing strategies. They spend very little time comparing quotes that don’t have much impact on their bottom line. Electrician A might be 5%  more expensive than Electrician B, but if A can fix the problem right away, he gets the job.

They also don’t worry too much on how much they are taxed. Rather, they worry about the sales they are missing out if they spent too much time agonizing over their tax relieves and deductibles.

In their head, they just keep telling themselves, “The show must go on!”

2017-04-07T14:27:08+00:00 April 7th, 2017|Entrepreneurship|0 Comments

Entrepreneurs Are Risk-Takers?

Cliffhanger

This pretty much sums up what I’ve always felt about running your own gig. When you’ve decided to stop living on the security of regular paycheck and charting out your own path into unknown, it’s all too easy to let your adrenaline do the planning.

A year or two ago I attended a university symposium on entrepreneurship at which a number of psychologists spoke. Although their papers disagreed on everything else, they all talked of an “entrepreneurial personality,” which was characterized by a “propensity for risk-taking.”

A well-known and successful innovator and entrepreneur who had built a process-based innovation into a substantial worldwide business in the space of twenty-five years was then asked to comment. He said: “I find myself baffled by your papers. I think I know as many successful innovators and entrepreneurs as anyone, beginning with myself. I have never come across an ‘entrepreneurial personality.’ The successful ones I know all have, however, one thing – and only one thing – in common: they are not ‘risk-takers’. They try to define the risks they have to take and to minimize them as much as possible. Otherwise none of us could have succeeded. As for myself, if I had wanted to be a risk-taker, I would have gone into real estate or commodity trading, or I would have become the professional painter my mother wanted me to be.”

This jibes with my own experience. I, too, know a good many successful innovators and entrepreneurs. Not one of them has a “propensity for risk-taking”.

The popular picture of innovators- half pop-psychology, half Hollywood- makes them look like a a cross between Superman and the Knights of the Round Table. Alas, most of them in real life are unromantic figures, and much more likely to spend hours on a cash-flow projection than to dash-off looking for “risks”.

Successful innovators are conservative. They have to be. They are not “risk-focused”; they are “opportunity-focused”.

Extracted from ‘The Essential Drucker’, by Peter F. Drucker

 

 

 

2017-03-27T04:20:05+00:00 March 13th, 2017|Entrepreneurship|0 Comments

The Focus Dilemma

That’s one piece of advice I am sure you have been given many times by successful entrepreneurs and in many business books- stay focus.

I am saying it’s good or bad advice but allow me to elaborate a bit on that advice. Telling someone to focus is like telling someone to work hard. It’s a very vague advice and can potentially do more harm than good. Why is that so?

From the point of the recipient, the well-intended advice of working hard can be interpreted as unless you are willing to work your ass off, there’s no chance you will succeed. Unfortunately, you can be working hard your thus far but you might just not be achieving the results that you want.

Yet, there’s nothing wrong with working hard. Every successful entrepreneurs I personally know truly worked very hard, especially in the beginning phases of their ventures. To put things in context, by successful I mean the venture is making profits and the company’s culture is healthy with a team of great people working together to grow the company. However, the critical difference here is not just working hard but rather what are you working hard on?

You can work hard in ensuring every one in your company washes their hands after using the bathroom but that would hardly create any positive impact in your company’s bottom line.

Therein lies the most important piece of puzzle that you must figure out. You may have the talents, perseverance, discipline and even the passionate drive to succeed. But if you are working on the wrong stuffs, you will only be ‘rewarded’ with the results you don’t want.

Take a step back and look at the bigger picture. Slow down or even stop whatever you are doing just to gain clarity. You cannot see very clearly with all that noise that’s constantly seeking your attention 24/7. Re-calibrate your compass and regroup your soldiers.

Speed is important but speed in the wrong direction can sometimes be fatal.

2017-01-18T02:57:49+00:00 January 18th, 2017|Entrepreneurship|0 Comments

This versus That

Ever since we started setting up e-commerce stores 6 years ago, we’ve been using OpenCart – one of the most popular open-source shopping cart systems. And the more we use OpenCart, the better we get at maximizing the features it has to offer. We also realized some of the stuff that OpenCart doesn’t do very well.

And then it comes to a point where you start evangelizing the product you use. Because you now understand the products much better, you become more attached to it. Which is a good thing, in my opinion.

However, it only becomes not-so-good when you start to spend time trying to convince someone who’s using Shopify or Magento (both of these are also shopping cart systems) on why OpenCart is superior than theirs. It’s like the whole Android vs Apple thing. Pointless. A solid profitable e-commerce business depends not just on the shopping cart system, but a lot of other factors as well. You need a good selection of products, photography skills, copy writing skills,  inventory system etc.

Just a few minutes ago, out of curiosity, I attempted to setup my first WordPress-based Woo Commerce store. I am actually quite impressed with the whole setup process. There’s a lot of things I think Woo Commerce has got it right. Of course the Woo Commerce team knows what they are doing- they got bought over by WordPress and I don’t remember any other theme or plugin developer who got to that status.

So, instead of cheer leading for just one particular product, your perspective will be expanded much more when you attempt to solve a problem with a variety of other solutions. Sometimes, this also forces you to look at the problem from a different angle, which you’ve never thought possible. Let the fanboys fight among themselves.

It’s what you ultimately produce that really matters.

2016-11-26T03:06:28+00:00 November 26th, 2016|E-Commerce, Entrepreneurship, OpenCart|0 Comments

Not Good Enough

We can never be good enough. The bar gets higher all the time.

The moment I published a post or submitted the final draft for a product description, I always get that annoying feeling that there are better ways to write it. Each time we sent the product catalog to print, I always felt that I could have spend a few more minutes fine tuning it (there’s surely a better font for the title!).

They say you are your own harshest critics. Of course, you should always set high standards for your work. The quality and outcome of your work speaks a lot about you and your values.

But don’t let that paralyze and hinder you from starting a new project.

The key is to make sure the next version is always better than the last one.

2016-11-25T03:48:02+00:00 November 25th, 2016|Entrepreneurship|0 Comments

Charting the Future

Though not much of a business plan writer, I recently realized the importance of having a plan for what you want to achieve in your entrepreneurship journey. While it’s true that we cannot predict what will happen tomorrow, that doesn’t mean we can use it as an excuse not to chart the path of where the enterprise will be 10 years down the road.

And while I was fantasizing about where to bring the company, I begin to think along the line of life goals and business goals. I believe we should always put the life goals before the business goals. Not that business goals are less important, but if your business goals are not supporting what you want to with your life, what’s the point then?

To create a valuable business, at least in monetary terms, it could easily take anywhere between 5 to 10 years. And if I am to live to 60 years old, that would be about 8% of my life allocated into this pursuit. My grandpa lived to a ripe age of 98 years old though. So, it becomes pretty obvious that there should be some correlation between what you want to with your life as well as your business.

If one of my goals is to travel the world, it would make sense that my business would allow me to do that at least once every year. It could be a business trip or just a simple getaway, but if my business cannot allow me to even take a few days off, perhaps I am building a business that my life will hate.

I am going to put off my business goals for now while I work on the check list for my life.

2016-01-21T00:37:35+00:00 January 21st, 2016|Entrepreneurship|0 Comments