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Wednesday 13 October 2010

Lessons I didn't learn until I ran my own business - Lesson 1

This post follows on from an earlier one, 5 Lessons I didn't learn until I ran my own business where I listed the top lessons I have learned since starting my own business nearly 10 years ago. I promised I would revisit them in more detail later, so here goes with Lesson 1.

Lesson 1: The salesmen and women were right. Sales must come first.

This is a tough one to swallow from a financial background. I am sure we've all at times thought that salesmen are so full of themselves, thinking that the whole business should revolve around them. They would always think that they are key to the business and we financial people are just overheads. Well, although I wouldn't go that far, there was a lot of truth in what they said.

No matter how fantastic our back-office systems and  processes are, they are still a cost. By making them better, we can reduce that cost, but not eliminate it.

As accountants we should know better than anyone,

Profit = Sales - Costs

If we are being paid our wages, then costs must be positive and it doesn't matter how much we reduce costs, profits will be negative unless sales exceed them.

Like many of us from an accounting background, I followed my instincts and set up all of the back office processes straight away. Thereby creating overheads before sales and guaranteeing early losses.

Starting over I would do it differently. Believe me, it's a lot nicer problem to have sales flooding in and a need to set up processes to account for them, than to have overheads to pay and a need for sales to meet them.

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  1. Kind of with you here! To me, sales are in the same box as taxes: something I've got to do but would rather not! :)

  2. And you're not even an accountant, Simon!

  3. Dear Glen,

    Oh so true.
    Like you I'm an accountant by training and thought the same way. However I think the smart start-up today would use web services on a per user basis to do their admin. initially. Combined with working from home you would have a very low cost base and time to sell your goods and services.