4 Business Lessons I Learnt From A Street-Smart Self-Made Millionaire

Transitioning from an employee to a business owner can present a series of challenges.

This is especially true for those who believe that having the technical competence to do the work they were doing for their employer is all it takes to succeed in starting and running a business of their own.

In this article, I will share with you 4 business lessons I learnt from my mentor that have proved to be worth more than what meets the eye:

1.  Cash flow is king

As clichéd as it may sound, cash flow is the lifeblood of a business.

Once you understand this rule, you will make dramatic changes to the way you operate your business. In business you will either make a cash sale or a credit sale.

If a large percentage of your sales are on credit, your creditors (the people who owe you money) can cripple your business.

You can only bank cheques and cash but not profits.

As a business school graduate, this took a while to sink in for me, until I got into consulting and saw seemingly profitable businesses collapse due to cash flow problems.

2.  The lack of capital or financial resources has never been a hindrance for a go-getter

The key ingredients to starting a profitable business are passion, the appropriate skill set based on experience or training and profitable effective demand.

Notice that capital is not listed because with the key ingredients above, you should be able to sell your business idea to investors or business angels who should believe you have what it takes to succeed in your venture and all you need is their money.

If you start off with capital to invest in a business idea that does not meet the criteria above, you are very likely to waste that money.

With the other three, you can get started in business, however with capital alone, if all the others are missing. Capital comes last and not first.

To test an idea, you can always start by being a middleman, although you have to guard against not getting paid. Winning Through Intimidation by Robert Ringer is one of the best books I have read on the subject.

3.  Never earn your money a second time in the process of collecting it

This simply means that getting paid or collecting your cheque should never be more difficult for you than delivering your product or service.

This problem usually results from the practice of getting paid long after you have performed a service or sold a product.

Where possible, focus on cash sales and keep your receivables to a minimum. If you offer services, insist on getting paid a sizeable portion of your fee before you start work.

4.  Learn to be a good negotiator

Good negotiation skills can give you a lot of leverage in business and get you out of a tight spot.

That could include getting good bargains that can save your business money, and buying time to match your cash inflows and outflows.

For instance, if you owe $10,000 to your suppliers and that’s all you have at the moment, negotiate with them to accept $1,000 now and use the $9,000 to generate more money from which you will repay the rest.

That beats paying all the $10,000 now and looking to borrow from somewhere else to meet your cash flow needs.

These business lessons are not based on theory or ideas that just sound good, but on proven principles that continue to work again and again for those who apply them consistently.

Try them out and see the results for yourself.