Small Business -- Can They Grow and Profit Without Taking on Staggering Debt?

This past June, Manny Skevofilax published a book entitled Ultimate Profit Management: Maximizing Profitability as You Grow Your Business, which details how small businesses can achieve reasonable, prudent growth while avoiding debt. He explains the readily available tools entrepreneurs can use to ensure that their businesses do not turn unprofitable as they grow them. He posits that it makes sense to resist the lure of the high-growth, no-profit strategy and instead embrace the approach of steady growth with profits.

When I spoke with Manny this month, I asked him: "How do you define prudent growth and how can small businesses avoid crushing debt?” Here is his full answer:

In my opinion, “prudent growth” is defined as growth that increases the net income of a business.  “Prudent growth” is usually accomplished slowly, with new revenue acquired at your business’s appropriate margin, in conjunction with the judicious use of debt.  In simpler terms, you do your best to increase the profit of your business without increasing the debt much.  For example, some businesses bring in new revenue (“growth”) that isn’t profitable for one reason or another.  If the business incurred marketing expenses to bring on this unprofitable revenue, how are these marketing expenses going to be paid?  Since there was no profit made from this revenue, there is no money to pay these marketing expenses.  The money needs to come from somewhere and it usually comes from taking on debt.  This scenario describes how a business can grow its revenue and make less profit overall.

If this scenario continues, a business will have poor cash flow and more debt than it can repay.  Sometimes, this scenario causes a business to turn unprofitable which can further aggravate its poor financial situation. Therefore, it is important to make sure that you are growing your business profitably and that you are taking on debt for the right reason.  If you see the need for short-term debt for a sound business reason, then determine what cash flow expectations or enhancements will occur to repay it in the short term. Otherwise, your debt continues accumulating, as do the interest payments, and your flexibility is continually reduced.

To avoid crushing debt, use a portion of the profits that you earn to reinvest in your business for growth. Use a bank line of credit to finance the carry of your accounts receivable and inventory. You grow best when you’re in a strong position, not when you have your hat in your hand in line at the bank. The takeaway here is to use borrowed funds judiciously! 

What are your thoughts regarding Manny Skevofilax's perspective? What are your experiences with growing a small business?

When 45 Business Gurus Share Their Most Important Insights

Last month, a very interesting book entitled The GuruBook: Insights from 45 Pioneering Entrepreneurs and Leaders on Business Strategy and Innovation, compiled by Jonathan Løw, was published. In it, 45 of the world’s leading entrepreneurs and leaders -- such as Salim Ismail (Singularity University), Naveen Jain (Moon Express), Jimmy Maymann (Huffington Post), Otto Scharmer (Theory U), and Blake Mycoskie (TOMS) -- plainly discuss their ideas about innovation, entrepreneurship, and authentic leadership.


I had the chance to speak with Jonathan Løw about this book, and one of the main questions I asked was: "What inspired you to compile the thoughts of these particular entrepreneurs, innovators, and leaders?" Here is his complete response:  

The GuruBook is first and foremost about listening. Although I have been a serial entrepreneur and have tried to start a number of businesses, have worked with innovation in both large and small organizations, and have been a leader in several organizations, I do not imagine in any way that I have all the answers in these exciting but also complex areas.

I believe that the ability to listen is one of the most important characteristics for future entrepreneurs, innovators, and leaders. This ability to listen, and the curiosity that is inherent in it, may be the factor that gives you an advantage over the competition. Consider, for example, the English mathematician and physicist Isaac Newton, who, like millions of others, saw an apple fall from a tree. The difference was that Newton asked "why."

As a result of my own curiosity and desire to listen more, it was obvious that I should invite the people who, in my eyes, have generated inspiring and pioneering ideas, organizations, and results, to share their thoughts and knowledge with the readers in The GuruBook.

This book’s gurus have been asked to talk/write about what they’re enthusiastic about. That means that you can look forward to becoming more knowledgeable about:

• How to start a business without an idea.

• Why some ideas succeed while others fail.

• How to demystify the task of scaling up a startup as an entrepreneur.

• How you can be enterprising, no matter what phase your organization is in.

• How to create an innovative culture.

• Why simple questions lead to the greatest innovations.

Why businesses and local authorities aren't startups, and what both can learn from each other.

• How to become authentic as a leader.

• Why authentic leadership is a strength.

• Why there’s an entrepreneur in every successful leader.

• Why the ability to listen is all-important whether you’re an entrepreneur or a leader.

The contents of The GuruBook have weight and value because the articles and/or interviews are with people who, for years, have perfected their ability to listen and have consistently become better at understanding their customers, partners, and colleagues.

Through thousands of meetings, sales calls, customer service responses, innovation processes, brainstorms, mail dialogues, LinkedIn discussions, and so on, they have listened and then acted on what they heard. These are the insights that The GuruBook contains.

I fundamentally believe the future belongs to the curious. The future belongs to the entrepreneurs, innovators, leaders, and passionate souls who are not only capable of “listening more intently” to the world about them, but who are capable of “ listening more intently” to the world about them but who also have the ability to act on the input they get.

A website for the book -- https://www.thegurubook.org/ -- includes a list of the gurus participating as well as some more background on the book.

The Changing Face of Startups?

I was quite happy that, during this past month, I got the chance to speak to Boyd Cohen -- one of the foremost climate strategists helping to lead communities, cities, and companies on the journey towards the low carbon economy -- about his most recent book, Post-Capitalist Entrepreneurship: Startups for the 99%. His thought-provoking book challenges many of our underlying assumptions about how entrepreneurs form startups and the objectives and roles (or lack thereof) of startup investors in a post-capitalist society.

During our conversation, I asked him: “Why has there been such a radical change in the dynamics of startups?" Here is his response:

Several factors have been evolving and even disrupting the startup scene during the past 5 to10 years. The democratization of the tools of innovation have led to massive reductions in costs, time, and barriers for startups. This includes the proliferation of cloud computing, Software as a Service, and co-working spaces.  But furthermore, the growing number of technologically unemployed and the resentment and frustration with growing inequality has given rise to a new breed of entrepreneur who is less focused on private ownership of land, capital, and human resources (the basic tenets of capitalism) and instead focused on inclusive, open, and collaborative business models, such as platform cooperatives and commons-based peer production. The highly disruptive, and distributed capabilities of blockchain even further these trends, opening up opportunities for alternative currencies and initial coin offerings (token sales) as well as automated distributed autonomous organizations where no intermediary monetizes transactions between peers. 

What do you think of Boyd's perspective? What are your thoughts on entrepreneurs who are pursuing radically different approaches to value creation and extraction?