You may decide that, arising out of your passion (the previous chapter), you’re going to start your own business. Good for you.

If you do, then hopefully you’re not starting your own business just to make money. Sure, money is important and making lots of it would be a very nice thing indeed. But I’d like to think your primary reason for starting your own thing is that you’re passionate about it.

But in one sense, running your own business is all about the money. Once you get your business up and running – by which I mean from the moment the gun goes off and you’re out there hawking your wares, there’s one consideration that overrides all others. In a sense it’s the only rule of running your own business.

Don’t run out of money.

Here are the things I have learned in this regard. Most of them are stating the bleeding obvious. Despite this, most of them have all been learned by me at some cost, financial and otherwise.

Your customers better have money

Whatever business you decide to go into, make sure that whatever customers you start to court have money. There’s nothing worse (or more useless) that customers who don’t have money. The retail business I invested in – even though it bombed – was correct in this sense. It targeted people who had money.

Premium pricing or be expensive

Here’s something I learned at no cost and it has served me well down the years. Although it wouldn’t be applicable to all industries. For example, if you’re setting out to be the cut price darling of your sector, it doesn’t apply. But I’ll tell you what it is anyway and you can draw your own conclusions.

Unless you’ve been living on Mars for the last 15 years, you’ve heard of Ryanair. It’s named after its founder, the late Tony Ryan. But Tony Ryan also started another enterprise called GPA, at one point the world’s largest commercial aircraft leasing company.

The story goes that just before Ryan started GPA, when he was still an employee of Aer Lingus, he was in Thailand on company business. He was thinking of starting his own thing and wondering what sort of business he should get into. He happened to look out the window of his hotel room and saw a street vendor selling snacks for a few baht. Ryan thought about how many snacks the guy would have to sell to make any kind of a living. And so, the story goes, Ryan resolved that he would go into an expensive business. Hence, aircraft leasing.

I took this lesson on board when I started my business. I had no experience of selling so assumed I wouldn’t be very good at it and therefore wouldn’t make many sales. Thus, my thinking went, any sale I did make better count – and count big. So we started out expensive – and have been ever since. Even when prices of certain of our offerings have eroded we have stayed very much on the high side. (We reckon that if we lose about 10% of business because of price, we have it about right.)

An interesting angle on this is the following: for years I have had a sales conversion rate of almost exactly 50%. In other words, half the proposals I send out result in business, the other half go away for a variety of reasons – things change at the customer’s, we’re too expensive, the person I was dealing with leaves and so on. Recently I stopped offering some of the standard discounts we offer on our pricing which meant that our pricing effectively increased.

Result?

My sales conversion rate went up to 75%.

Go figure.

Bad debts and getting stung

We’re lucky to operate in a sector where bad debts are rare. As far as I can remember we’ve only had one in our career and that was when I spoke at a conference and then found out that the organizers had gone bust. Boy, did we learn from that. Now we get paid upfront.

So make sure you don’t put yourself in a position where you’re going to get stung. Ask yourself what happens if they cancel? Or if they go bust? It’s risk management – what are the things that could happen that could cause you not to get your money? And what can you do to stop these things from happening? Or how do you deal with them if they do?

And when you do get stung, as you almost certainly will, learn from it. Learn big and learn quickly. As the saying goes, ‘Fool me once, shame on you. Fool me twice, shame on me’.

The job’s not over until the money’s in the bank

I have a colleague, Karen, who manages our company’s finances. The woman should be Minister for Finance or Chancellor of the Exchequer. If there’s a (financially) more well-managed company than ours on the planet, I’d like to know about it.

One of Karen’s many great ideas was the 5% early payment discount, which she dreamt up 10 or 12 years ago. A simple idea. Pay early and you get a 5% discount. I’ve literally lost count of the number of times this has saved our bacon – especially in the last few years of economic depression.

Remember that the job’s not over until the money’s in the bank and Karen’s 5% early payment discount has been/is one way of ensuring exactly that.

If you get into trouble

I don’t know of any business that hasn’t had periods of financial trouble over the years. Ours is no exception. But whenever those periods have come along, we’ve found that it’s possible to do deals with everyone – even the taxman.

Ultimately, it’s simple. Everybody wants to get their money. And while, in certain circumstances, it’s possible to walk away from debts, I’ve never been a great believer in that. Legally it may be possible. Financially it may be a no-brainer. But karmically you’re on thin ice, I think. So I’ve never done it. If that makes me the biggest fool on the planet, so be it.

So if you get into trouble, be straight with your creditors. Tell them your situation, that you want them to get their money but that they’re going to have to do a deal. Most creditors will know that situation only too well. In all likelihood, they’ll have been in exactly that place themselves sometime.

We all support each other and everybody wins.