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Run Your Business as a Business

I’ve thought this for a long time: you need to run your business as a business, not an investment. Too often it seems that public companies, and many startups, are run like an investment, someone seeking to maximize a stock price (or a selling price) by making short term decisions. My guess is that Venture Capital firms have driven this for startups and executive pay for public companies.

I was thinking about this as I ran across a post from 37 Signals(Sequoia Captial: Armchair Quarterback), a company that I think does things the right way. The post references a slide show from Sequoia Capital that talks about things changing as the US appears to be heading into recession. I flipped through the slideshow and it made sense to me, but I like that 37 Signals is questioning what they used to advise clients. My guess, since I was a part of a company that was VC-backed in 2000, was that they were told to grow revenue, preferably along a curve and grow the company, so it “appeared” you were doing well. Acceleration, regardless of the potential for a crash (because expenses were too high), was king.

I fundamentally disagree with that strategy, and it’s completely driven by greed and the desire to close out an investment early. Even a 5-10 year time fra

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me, which is what I’ve heard some VCs pushing, it too quick for a business.

My view is that you build for 50 years, conserve cash, make good decisions, and then if you’re running a fundamentally sound enterprise, consider buyout offers (or IPOs, if that’s possible).

VCs can succeed with this strategy, then they won’t be expecting 4 or 5 of their 10 investments to fail. They can have 6 or 7 produce decent enterprises that might be neutral in terms of their investment, 1 or 2 that fail, and then 1 that hits it big.

All that have to do is think single or double, not home run.

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Steve Jones is the editor of SQLServerCentral.com and visits a wide variety of data related topics in his daily editorial. Steve has spent years working as a DBA and general purpose Windows administrator, primarily working with SQL Server since it was ported from Sybase in 1990. You can follow Steve on Twitter at twitter.com/way0utwest

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