Matching Ends and Means

Wealth or What?

Financing Your StartupEnds & Means: Is your number one objective is to seek wealth? 

If yes, it will probably mean that a business startup is the wrong way to achieve you goal. Successful businesses are built on offering superior value to others.

You aim to make money, above all else? You might do better to learn about the stock market (in better times), the real estate business (in better times) or other ways to become wealthy, like

  • saving not spending;
  • living below your means;
  • avoiding taking credit;
  • making your money earn more than inflation.

You can make a fortune in business but most people don’t. Those that do, are almost certainly not driven by money (unless they are fraudsters). However, entrepreneurs tend to be significantly wealthier than those who work in paid employment. For example, Gentry and Hubbard (2004) found that entrepreneurs comprise just under 9% of households in the U.S., but they hold 38% of household assets and 39% of the total net worth.

This perhaps no surprise when you know that raising finance for a startup is often constrained or facilitated by the amount of personal collateral that the entrepreneur can furnish. For those without the net worth they need, then creative ways of financing the business are needed: bootstrapping the business is the only way to go.

Clearly you expect reward for the calculated risk that you take by starting a business. The reward in financial terms may indeed be high. Chances are, though that you are not the next Richard Branson or Sergey Brin and Larry Page. If you have done your planning, you probably will not lose your shirt either.

Business is a Process

Whatever your purpose and goals, business is a process. It is a system by which you can meet your purpose and achieve your goals, and the process you use to get there must be aligned with them. Where you want to be is most likely to be affected by the way you are.

cunard_white_starOne of my grandfathers, William Pollok, was a entrepreneur, who made ship’s ropes in the great days of transatlantic steamers in the early part of the twentieth century. Based in Lodge Lane, Liverpool in the UK, his firm, Hutchison & Pollok Ltd (1896-1980) was the premier supplier to the Cunard White Star Line, owners of the Queen Mary, the Queen Elizabeth and other liners, many of which transported immigrants to the US. His high quality products were made from natural fibers such as hemp and sisal. 

Dedicated to quality, he took absolute responsibility for his product and personally guaranteed them to his clients. His commitment to product and client was so great that he was prepared to go out of business, rather than to see his customers move to steel wire ropes than began to appear in his day.

Stick to Your Purpose and Values

Sticking to your purpose and values should always be your guide when you face any of the many sticky situations that you will confront as an entrepreneur. Trite as it is, asking yourself the question, “is this right?” will ensure you do make the right decision.  A right decision is one that accords with the values of the business.

A value system is a set of consistent values and measures. Having values without the means or measures to express or achieve them may be pious, but is not productive. Simply doing things without values may occasionally produce good value, but without consistency. Doing well is more likely to meet your purpose by doing good. Take a look at Five Habits to Help You Start: remember the “A” words, an article by the Startup Owl, before you go too much further with your adventure.

A 2009 poll by Time Magazine showed that nearly 40% of respondents said they purchased a product in 2009 because they liked the social or political values of the company that produced it, so itr certainly won’t do you any harm and increasingly it will do your bottom line good. Socially Responsible Investment funds now manage approximately 11% of all the money invested in U.S. financial markets—an estimated $2.7 trillion. Corporate America has discovered that social responsibility attracts investment capital as well as customer loyalty, creating a virtuous circle.

Business integrity will be recognized. The business that has integrity must be integrated–that’s to say all actions must be consistent with the values that underpin the business. Inconsistency and lack of integrity can ruin a business very quickly and even its early stages.

Ends Set the Value–Means Create the Value

Value creation is cannot be measured simply by quantified results. Financial or other numerical results can be indicators of value creation. Recent economic woes have demonstrated the risk of leaving the numbers do be the only measure of value. The invisible hand that Adam Smith talked about guiding self-interest may exist and yet it denies the frailty of man. We need clarity and transparency about our purpose in business.

Entrepreneurs can (and should) be more easily explicit about ends than large corporations, but they need to be clear about the ends of their business right from the startup. Not only will they be more likely to succeed, but success will be accompanied by satisfaction.