I believe many people would connect entrepreneurs and profit in one thought. Entrepreneurship is about profit, and good entrepreneurs become wealthy through the many businesses that they seed and build. However, this connection of entrepreneurs and profit does not create solid foundations for a business and is a false narrative of success.

 

Active Knowledge Question:

Are you one and are there many others around you – entrepreneurs that is?

 

Entrepreneurs are those persons in our society who step forward and seek to create and build businesses in varying shapes and forms. Many commence this journey as individuals or in partnership, but there are also those working within existing businesses, from large to small. They see unmet needs in our community and seek to meet those needs with inspiration and a vision of what could be.

They are key to the growth of our communities and economies, and it is essential that we do not allow the context of who they are to become distorted.

 

The Fallacies

The linkage of entrepreneurship and the pursuit of profit is not a good one.

The current market language around start-ups and market value certainly do not help in breaking this connection. For example, ‘Your goal as a successful entrepreneur is to seed your start-up and build its market value to unicorn status, being a privately held start-up with a value over $1billion’.

It creates a false narrative that undermines building businesses with real competitive strength. It leads many to look at capital value through the eyes of a market which is often based around speculation about the future and a belief that value will always increase irrespective of profitability.

Here are some of the fallacies that I believe incorrectly define entrepreneurs:

• Entrepreneurs create businesses to make more money for themselves.
• If you want to become wealthy, become an entrepreneur and find the ‘next big thing’.
• In the life of an entrepreneur, there will be many businesses.
• Entrepreneurs don’t need to understand an industry, they just need to know how to make money.
• Successful entrepreneurs are those who build a business and then sell it off.

This narrative can lead people to:

• Search for ideas that will make ‘big money’.
• Chase a business model focused on profit.
• See being in business as the means to become wealthy.
• Not seeing themselves as being a successful entrepreneur unless they can sell their business for at least a small fortune.
• Deter many from starting up a business if this narrative does not sit well with them.

Profit is an essential ingredient for any business to be sustainable, grow and reward those who have created it and work within it. But profit is an outcome. An outcome earned by a business that is able to compete well. And businesses compete around the customer value they can deliver against a clear need.

 

Would The Real Entrepreneurs Please Stand Up

Great businesses are built by persons – entrepreneurs – who see a need and intuitively know how to meet it. They step forward and invest themselves in meeting that need. And if they do that well, great profits and capital value can be one, and only one, of the outcomes, gained.

But there are and will be more businesses that only yield fair to good profits than there are those that deliver unicorn status. These businesses are not failures, they are far from it, and they are led by entrepreneurs who have chosen not to chase profit as their first outcome but have chosen to meet customer needs first and foremost.

The Dangers Of Profit First

We live in a society where some choose to define success through wealth, power and position. And sell this outcome as the means to deliver all that you may want in your life. This narrative flows directly through to define success in business. But it is a fallacy in business as well.

Make profit your motive for being in business and you will spend every day solving problems, fighting fires and listening to everyone’s else’s complaints. Profit as a motive seeds self-interest, selfishness, politics and short-termism. It literally saps the competitive strength out of any business. If you are not sure about this then just reflect on the many large businesses who focus on profit and who are presently fighting battles on many fronts with regulators, governments and their customers.

And for those persons where profit is truly your most important goal, then building a competitive engine in your business that is the catalyst of that profit is a more strategic approach than chasing the dollars coming out of that engine.

A Great Business

All entrepreneurs should focus on building a great business first and foremost and the profit that it yields will be an outcome of how well they compete and the dynamics of the market they have chosen, for example, size of the market.

Here is my list of what a great business looks like, it is one that:

• Delivers greater customer value every day.
• Continually finds opportunities for growth and innovation.
• Whose leaders are thriving in and being fulfilled by their business.
• Whose employees are passionate about their work.
• Whose customers just love it.

A business like this will be growing and compounding its capital value, throwing off free cash flow and be highly profitable.

And importantly it will be a business that is contributing to the growth of the community whose needs it seeks to fulfil and the community in which it operates.

It will be a business whose leaders recognise the existence of the competitive engine within their business and are focused on leveraging every aspect of that engine to lift their performance to an entirely new level.

 

Entrepreneurs may become financially wealthy through their business efforts, or they might not. Financial wealth does not define their success as a business person. Their success is defined by the type of business they build and the contributions it makes to our community at many different levels.

We need to celebrate all entrepreneurs who step forward and take on the efforts, challenges and risks that starting any business entail. And recognise those who build great businesses as this is what reflects a real entrepreneur.

 

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 An entirely new level of performance.

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All the best in the success of your business,

Richard Shrapnel