Editor’s note: This article was first published in March 2011, when Steve Jobs’s case was the most recent example and Pablo Isla was Amancio Ortega’s right hand at Inditex; Jobs died in October 2011 and Isla left Inditex in 2022.
There is only one way to give advice that can lead you to professional success in the business world, although rather than advice, I would call these rules you must follow and never forget. What would Carlos Slim, Warren Buffett, Amancio Ortega or Bill Gates tell us? As it happens, they have all followed the same rules to become the people they are today and to manage the fortunes they have managed to build.
To begin with, each of them would tell us:
1. Choose a business you are passionate about.
Whatever you do in this life, you have to enjoy it. You can spend 14 hours doing a job, and as long as you love that job, the time you put into it won’t weigh on you. On the other hand, spending just 3 hours a day on something you don’t like, simply to make money, would make you miserable. This brings us to point number two.
2. Hard work.
There are no rewards or results without working very hard. A business takes a lot of time and dedication, especially at the beginning, and the better that business does, the more time you will have to give it, until it can run on its own. We have often said that a business that needs you to be there is not a business but a job, but the truth is that business owners are starting to take that Robert Kiyosaki theory apart. Not having to be there doesn’t mean you won’t spend much of the day making decisions and even working while you eat. This brings us to the third point.
3. Sacrifice.
They all agree that succeeding in business takes a large dose of sacrifice, although they wouldn’t call it sacrifice, since they are actually doing something they enjoy. We have to consider how far we would be willing to give up other pleasures in life to devote our lives to business. Sometimes we wish we were rich so we could be on holiday all day, and the truth is that most major business leaders rarely take holidays, although, as Carlos Slim and Amancio Ortega have said, since the internet arrived they can go on holiday with their families and keep an eye on their businesses from a computer and a mobile phone.
4. Austerity.
A word used by Carlos Slim. In the fat years, be austere for when the lean years come. Practically every business and company goes through cycles, so we should make the most of the profits from the good part of the cycle and not spend them or invest them badly, because a sizeable capital reserve means we won’t feel a crisis when it arrives.
5. Keep learning all the time.
All the business leaders mentioned above, whether or not they went to university, have one thing in common: they have never stopped studying and preparing themselves in the subjects they need day to day in their companies and in their personal finances. Whatever you take on, you must understand it, although you must also…
6. Surround yourself with people smarter than you.
Clearly, as we have said before, a business owner doesn’t need to know everything, but they do need to know how to hire people who master the areas where we lack knowledge. We can’t master the legal side, but we should hire a good law firm. We may not know much about international markets, but there are people whose job is to bring companies into other markets. Remember: a successful business owner rarely works alone.
7. Choose a second-in-command.
The most recent case is Steve Jobs (Apple): had it not been for his number two, the shares would have fallen much further than they did when the news of his illness broke. Having a qualified right-hand person is becoming more and more important. If most business owners in Spain don’t have a right hand, it is simply because they are afraid that person will know too much and one day become a competitor (a big mistake). Today, by his own account, much of Amancio Ortega’s success is owed to Pablo Isla, his right-hand man.
See also: Business ideas that quickly recover the capital invested
8. Financial know-how.
Who better than Warren Buffett to point out how important it is to understand finance today? According to Mr Buffett, both an investor and an entrepreneur need fiscal discipline. Obviously, you must never spend more than you earn, and you should invest the rest.
Warren Buffett explained a formula at a conference a few years ago. It is called the 33% formula. A business is working properly when you can take your monthly income and 33% of it is enough to cover fixed costs, another 33% goes into a savings account set aside for variable and unexpected expenses, and the last 33% is invested with a strong return in mind. The 1% left over is the money you can spend on yourself. If you manage that, your business and your finances are in perfectly good health.
9. Avoid debt at all costs.
The longer you put off taking on a mortgage, the more likely you are to achieve financial freedom. If your business income lets you pay a mortgage comfortably, congratulations: it’s time to find a way to invest the money you were going to put towards the mortgage in investment vehicles that make interest work for you, not against you. Remember that many problems come from trying to look wealthy, when what you should really pursue is being wealthy. Luxuries are unnecessary expenses on the road to financial and business success.
10. Remember who the banks are and how to use them.
We have already talked about the saver’s greatest enemy, credit cards. You should listen to the word credit but, as far as possible, never carry it in your wallet. A bank is rich because it creates poverty among 95% of its customers. Only the other 5% use banks to make their money earn a return. Be a shareholder of a bank, not a customer (Warren Buffett, Bill Gates, Kiyosaki, Donald Trump).
And now you’ll say: what do finance and investing have to do with it if all I want is to start a business?
The main cause of business failure is a lack of financial education, along with a lack of business knowledge and failing to draw up a business plan or carry out a proper market study. Most businesses start to take off at some point. At that moment, when the kite is in the air, either you know how to control it and steer it, or the strong wind will send it crashing to the ground.
An entrepreneur is an investor, just as an investor needs to understand business. The two have to go together, and if you try to separate them, the result is failure or a lack of growth in both the business and your personal finances.
Further reading
- Why new businesses fail
- The main mistakes Spanish entrepreneurs make
- Differences between Spanish and American entrepreneurs
- How to be a successful entrepreneur, part 1
- Warren Buffett’s ideas in his own words
Featured image: Conal Gallagher, CC BY 2.0, via Flickr.
