Fast facts
The owners of a business that's only in its start-up phase should learn to sacrifice and defer their "caprichos" in the meantime. Should they request salary increases right away, tell them that any salary increases will reduce working capital and whatever extra cash you need to improve facilities. Go ahead and show them the figures.
How can I help my business partners think like real entrepreneurs?
The owners of a start-up business should learn to sacrifice their personal needs first to make the business grow.
Q: Together with my partners, we set up a small business. We are owners and employees at the same time. I am the only one with background in business (because of my course) and the others have technical background in non-business fields. This is the problem: I am thinking about limiting expenses (including salaries) so we can channel our funds, efforts, etc. to company profits, dividends, and improvement of facilities. However, probably because of personal finances, my partners are thinking of increasing their salaries. In short, they view themselves as plain employees, and I am having a hard time convincing them to think like real entrepreneurs. I have made my salary the lowest so I can lead by example but it's not working. Instead they think that I'm "up to something" for lowering my salary. Is there anything that I can do stop their "employee mentality" without dissolving the business or quitting the partnership?
— V.C., Makati City
A: We understand your predicament, especially if your partners are only depending on your small business for living from day to day.
Why don't you try to explain it to them by using the working capital concept: "Ito 'yung perang pinapaikot." This is what the business needs. And these are the normal expenses: for supplies and raw materials, rent, power and water. How much do you need per month? How much do you have available? How much sales are being realized?
Tell them that any salary increases will reduce working capital and whatever extra cash you need to improve facilities. Go ahead and show them the figures. To prevent the business from stagnating or even sinking, everyone should go on reduced pay, perhaps with the prospect of sharing in the profits, say, every quarter. The balance should be plowed back into the business. This way the financial rewards (or non-rewards) come more often and would be obviously dependent on the performance of the business—where your partners have a stake.
Borrowing from a bank is out of the question, as your business still has to establish a track record of sorts. Besides, there is the principal and the interest that will have to be paid. Does the business have sufficient cash? If there is none, everyone should sacrifice and defer their "caprichos" in the meantime. This approach is not new. Lee Iacoca of Chrysler took on the job as CEO for $1.00 a year, but he got compensated adequately when the company became profitable.
We wish you luck in making your sales pitch, and in your small business.
Ask a Question
Got questions for our UP ISSI experts? Email us at smallbizclinic@eyp.ph. Replies will be posted in future columns.
“SmallBiz Clinic” is a joint project of EYP and the UP Institute for Small-Scale Industries (UP ISSI) that aims to provide free online consultancy and information services to small and medium-scale enterprises. A team of expert consultants from UP ISSI answers questions sent in by SME readers and advise them on general actions to take to better manage their businesses.
The UP ISSI is a training and research organization created in 1966 to help promote the development of small enterprises in the country. It has trained generations of successful Filipino entrepreneurs via comprehensive development programs in management, marketing, and finance, as well as other innovative development strategies such as the training of small business consultants.
UP ISSI brings to the “SmallBiz Clinic” over 35 years of frontline expertise in the day-to-day challenges and issues of running a Philippine-based enterprise.
Source: Philstar.com
The owners of a business that's only in its start-up phase should learn to sacrifice and defer their "caprichos" in the meantime. Should they request salary increases right away, tell them that any salary increases will reduce working capital and whatever extra cash you need to improve facilities. Go ahead and show them the figures.
How can I help my business partners think like real entrepreneurs?
The owners of a start-up business should learn to sacrifice their personal needs first to make the business grow.
Q: Together with my partners, we set up a small business. We are owners and employees at the same time. I am the only one with background in business (because of my course) and the others have technical background in non-business fields. This is the problem: I am thinking about limiting expenses (including salaries) so we can channel our funds, efforts, etc. to company profits, dividends, and improvement of facilities. However, probably because of personal finances, my partners are thinking of increasing their salaries. In short, they view themselves as plain employees, and I am having a hard time convincing them to think like real entrepreneurs. I have made my salary the lowest so I can lead by example but it's not working. Instead they think that I'm "up to something" for lowering my salary. Is there anything that I can do stop their "employee mentality" without dissolving the business or quitting the partnership?
— V.C., Makati City
A: We understand your predicament, especially if your partners are only depending on your small business for living from day to day.
Why don't you try to explain it to them by using the working capital concept: "Ito 'yung perang pinapaikot." This is what the business needs. And these are the normal expenses: for supplies and raw materials, rent, power and water. How much do you need per month? How much do you have available? How much sales are being realized?
Tell them that any salary increases will reduce working capital and whatever extra cash you need to improve facilities. Go ahead and show them the figures. To prevent the business from stagnating or even sinking, everyone should go on reduced pay, perhaps with the prospect of sharing in the profits, say, every quarter. The balance should be plowed back into the business. This way the financial rewards (or non-rewards) come more often and would be obviously dependent on the performance of the business—where your partners have a stake.
Borrowing from a bank is out of the question, as your business still has to establish a track record of sorts. Besides, there is the principal and the interest that will have to be paid. Does the business have sufficient cash? If there is none, everyone should sacrifice and defer their "caprichos" in the meantime. This approach is not new. Lee Iacoca of Chrysler took on the job as CEO for $1.00 a year, but he got compensated adequately when the company became profitable.
We wish you luck in making your sales pitch, and in your small business.
Ask a Question
Got questions for our UP ISSI experts? Email us at smallbizclinic@eyp.ph. Replies will be posted in future columns.
“SmallBiz Clinic” is a joint project of EYP and the UP Institute for Small-Scale Industries (UP ISSI) that aims to provide free online consultancy and information services to small and medium-scale enterprises. A team of expert consultants from UP ISSI answers questions sent in by SME readers and advise them on general actions to take to better manage their businesses.
The UP ISSI is a training and research organization created in 1966 to help promote the development of small enterprises in the country. It has trained generations of successful Filipino entrepreneurs via comprehensive development programs in management, marketing, and finance, as well as other innovative development strategies such as the training of small business consultants.
UP ISSI brings to the “SmallBiz Clinic” over 35 years of frontline expertise in the day-to-day challenges and issues of running a Philippine-based enterprise.
Source: Philstar.com
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