Entrepreneurs who run private companies are now driving the economy more than the publicly traded companies.
If you think about it, when was the last time we had a significant stream of companies going public? Given the current regulatory environment for public companies, why would you want to be public?
Entrepreneurs used to need the public markets for liquidity. That is not the case anymore. There is so much money in the market looking for a place to go that liquidity is easily solved. In every deal we have seen in the last couple of years, the private equity firms have been offering as good of a deal as any public company has in a purchase or investment scenario.
More important than liquidity is market sensitivity.
In the quarter leading up to the US Presidential election, we normally see economic slowdown or even outright recession. Not this year. For the most dysfunctional election cycle ever, we should have been in economic depression given the state of the news media coverage of the campaigns.
Instead we got the hottest “real” economic environment I have ever seen.
This is not the “hot” dot com market that had more fake than real, this was not the “hot” real estate market with speculation.
This was real business doing real things making “real profit”!
Since we do work all over the US and Canada, we get a pulse of economic information every month across a wide range of industries. Unless you were in the oil industry, you had more new revenue coming in that you were struggling to find the qualified labor to handle. We even had some clients related to oil that were doing well because that is how entrepreneurs attack the market.
Entrepreneurs find opportunities when the big guys can’t see it.
As I studied the economic results of the past couple of years, the simplicity of entrepreneurial success in a business model dawned on me (note: simple, not easy).
To have a successful business model as an entrepreneur, you only need to do three things:
- Figure out what the market needs.
- Find a way to do it profitably.
- Then tell everybody about it.
You would be amazed at how often we ignore some of these three or get them out of sequence.
What the Market Needs
I have clients who do market research and even they will tell you that potential customers lie to you about what they want. Some of us have been successful here by having a great gut feel for what the market needs, others do it by trial and error.
One of my best most recent examples is a client who started an Etsy store and in one year drove it to $3 million in revenue and 15% bottom line profit (yes, after real owner compensation too!). His ability to do quick testing of what the market wanted in small runs led to not making a big bet too early that wasted capital.
Find a Way to Do It Profitably
I personally think this is the easiest task. Using our Simple Numbers® Profit Model, we have simplified the key drivers of profitability rates and volume needed at each stage of the business. More importantly, we can set key production targets for direct labor as well as management labor. It also flushes out if you have the willingness to do what is necessary to be profitable and create a sustainable business.
Being a successful entrepreneur is often more about eating your vegetables than getting desert every day.
Tell Everybody About It
Marketing is too often “confusing activity with accomplishment”.
We take a real net dollars approach to evaluating effective marketing. I may not be a marketing professional to tell you what to do, but I can keep score. Most marketing efforts in today’s world has a quick payback so measuring success rates is easier now than ever, but you may not like what it says.
My Etsy client example was a great one in this arena. The owner has a great sense of the market but did not let that sway him to over bet. He did small test runs to make sure he could attract the quantity of activity he needed to make a product run successfully.
For every business segment, you need a balance of rate and volume. I can have a great rate, but not enough of it, or I can have a lot of volume at a bad rate, both will kill me.
This is a great time to be an Entrepreneur!