Personal assets and contacts

Every business entrepreneur must have personal assets of some kind. These may be tangible or intangible. Any personal finance, property or equipment would count as an asset. So also would intellectual properties, experience, special expertise or talents. Even an ability to network or sell would constitute an asset.

These assets represent the core of the business and the more of them that can be applied to a business situation the more efficient the business will be. This provides a sixth rule:

6) The business must be chosen such that it makes full and appropriate use of the founder(s)'s assets.

As has been covered earlier in the book, an individual's ability and capability is enhanced by their choice of personal contacts. The quantity and quality of these contacts determine the range of business opportunities that can be considered. Also, they determine the effectiveness with which opportunities can be realised and the ability to expand the business. This choice of contacts applies not only to immediate contacts, but also to the contacts of the contacts. These are equally as important because they will enhance the total value of the network of personal contacts.

This provides a seventh rule that will affect the choice of a business:

7) There must be enough suitable contacts, direct or indirect, available to cover all aspects of the chosen business situation.

Employees count as valuable contacts, but, they come with a penalty attached. They represent a liability unless they are directly or indirectly responsible for increasing the efficiency or income of the business: creating real value. With a young business, particularly at start up stage, it is not possible to keep employees gainfully employed all of the time. Any discontinuities, setbacks or changes in direction can dramatically change the efficiency of a business, maybe even throwing it into a loss making situation.

The penalties associated with employees are heightened by the increase in overheads they generate: floor space, services, management time, training, taxes, government regulations, working practices, etceteras. These may be accommodated in a large organisation that has a steady cash flow, but can greatly reduce the efficiency of a young business where income is uncertain and subject to unexpected changes.

This leads to an eighth rule:

8) All employees must be revenue producing and fully covered by a stable and reliable income.