Running It Like a Business
10:03am MST, 5 Mar 2004

I've often found myself telling individuals to run it like a business - whether it's a small venture or a small business, or even a not-for-profit organization.

However it seems we need to clear up what this really means.

The issue comes up a lot in the world of performing arts but the lessons to be learned apply to any business: would-be entrepreneurs decide to organize an event, set up a not-for-profit, or even open up a business. The motivation is passionate and idealistic: they love what they do and they want to bring their own enjoyment to others. Now let's look at the background story that precedes the inevitable comment - you need to run this like a business!

The passion

The beginning of many small businesses is a passion, as Michael Gerber explains so well in his book The E-Myth. Whether it's an artist opening up her first gallery or a computer geek becoming a programming consultant, in a very real way the business begins for all the right reasons, because the entrepreneurs have found something they love and want to share with the rest of the world.

At this point, often the entrepreneur believes strongly in a set of values they believe intrinsic to their art. In my recent experience in the swing dancing world, I've seen this more than probably any other domain. People easily fall in love with the carefree, fun nature of the music and dancing of the Swing era and the open, inviting attitude of the people. Often the first time an enthusiast decides to organize an event, they become obsessed with keeping the event as cheap as possible in the hopes of encouraging as many people as possible to attend. Unfortunately often the downside is a less enjoyable event due to the low budget, what I often call "floor-hockey" events. Instead of the kind of classy event people would normally associate with the Big Bands of the 30's and 40's or even the modern Jazz lounge, you get a basement room with a cheap sound system.

Even worse, I've known organizers who, in their deep generosity and love of their art have absorbed thousands of dollars in costs out of their own pockets in order to put together an event. As generous as this might seem, these organizers rarely put together a second event.

This doesn't apply just to businesses, but often even more so for Not-For-Profits (NFPs). Often the NFP starts out with a community-oriented intention: "To increase the visibility of aboriginal art in Greater Montreal, and offer artists working in native art forms the chance to receive exposure and improve their artistic skills and expression." However, one day the budding organization realizes that either that haven't done a whole lot to fulfill their mission statement, or that they have, and there is no more money.

Making Money Like a Business

If the entrepreneurs survive that first stage without running out of steam (and cash), then we're lucky enough to see them in the next stage: the Business.

Maybe they've talked to someone like me, who has insisted that they need to make some changes, run it like a business. Maybe they've simply come to the conclusion on their own that there's only so much money they can throw away before their passion isn't enough to drive them. This is when they decide to keep their eyes on the bottom line and run the show profits-first.

You can easily tell when a business owner has reached the Business stage. These entrepreneurs seem to carry a calculator everywhere they go, and you get a sneaking suspicion that they're checking their sales figures and bank account whenever you're not looking directly at them. All of a sudden talk of "furthering the art form," community, and ideals seems to have gone out the window. In its place is a kind of nervous desperation and a lot of talk about money. How much will that cost? Is it really necessary? Could we get that a little cheaper? I don't think we can afford it right now.

The main problem is that this is when you forget about the customers, losing them behind the money madness. Often business owners will instinctively raise prices without really examining what prices make sense given the client base and the company's figures. The company will focus a lot on competition and aggressiveness, avoiding partnerships and cooperation that might prove beneficial.

The worst danger in this stage, however, is that your product or service will suffer in your efforts to achieve profitability. This often happens in one of two ways:

1. Cutting Corners

   This is a huge danger. Often the reason that people came to you in the first place is because of the quality they were assured. They knew that your passion and dedication ensured that everything you did would be top-notch. Whether it's the quality of the ingredients in your pizza or the skills of your dance teachers, as soon as you start saying, "well, these details aren't that important" and assuming your customers don't care, you risk alienating your existing client base and losing one of the most valuable assets of a small company - word of mouth.

2. Losing Customer Focus

   The other great danger at this point is that you lose track of the need to satisfy the customer, even when it might mean losing some short-term benefit. One example that has come up in dance is how you approach competing events and organizations. While in the short term you might think that it's best to avoid letting your customers know about other events and dance schools, in the end it's not the way to compete. If an experience could be valuable to a client, let them know. And then seek to make sure that you consistently offer the best services they can get. In the long run this builds the kind of customer relationship that money can't buy, and that good small businesses thrive on.

Now this stage is also a very valuable one for a business as well. Often for these entrepreneurs it's the first time they've ever approached things with business issues such as costs, profitability, marketing or even customers in mind. The Business stage is when you learn not to make unfortunate mistakes that lose money needlessly and effectively prevent your business from offering the best it can.

Customers, Values and Goals

Eventually, however, it becomes obvious that money is the lifeblood of a company, but not its reason for living. If making money is the primary goal of an enterprise it will have difficulty reaching its maximum potential. Instead if a business focuses on its core values and offering great customer-centered products or services, the money will come.

This is where I would say a business really begins to run like a business. Not focusing on the bottom line, but focusing on its goals as a company - its raison d'être. For a swing dancing and entertainment company such as ours, this has meant constantly asking ourselves and our clients if we are giving the clients what they need. It's about letting our passion guide us in the right direction, and our business sense tell us how to get there.

Whether an event, NFP or small business, running it like a business isn't about the bottom line, it's about that combination of passion and good business sense.

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