The Art of Winning. The Startup Guide

…At the age of seventeen, I took part-time jobs like most of my peers, Some did construction work, while others harvested crops or unloaded freight trains. I prepared mortar and brought it to a bricklayer: first one, then two, and in a week I was already helping three bricklayers at once. I wanted to earn some money and was strong enough.

And then I heard that a construction crew was being put together to work at a roofing plant in the city of Odessa. I signed up. On the very first day, I got bored at my work place: my only responsibility was to occasionally empty a bucket of white oily liquid called “kagalin” into a vessel through which the tape of the future roofing roll crept. I decided that I could simultaneously master another operation and soon started working two shifts in a row. Just a week later, I was able to perform fifteen operations at a conveyor belt 100—150 meters long.

A month passed. By then, apart from the two shifts, I spent several hours a day unloading train wagons loaded with roofing. For each type of work, I got a mark in my time-sheet. I was already counting how much I had earned. And then I went to get my paycheck, and saw that only part of the money was indicated in the account book. For three days the headsmen of the two shifts kept sending me to each other, until I finally gave up. I went to the train station, tired and disappointed. But I did have 200 rubles (out of the 450 that I had earned) in my pocket, so I decided to stop by the well-known “Privoz” market in Odessa and buy some presents for my family. And there I fell for a simple conman’s trick: a planted package (which at first glance contained enough money to buy a car), a scuffle, a fuss… 200 rubles covered in blood and given away in a sort of slumber, and the so-called “dummy” – a wad of paper with only two real bills in my hands. How angry I was at Odessa and its “Privoz”! And how grateful I was to it later, when I became an entrepreneur for showing me how crooked and unjust people could be, and letting me see that such incidents could never break me.

A lot of things in business are based on trust, and the stronger you get, the more trust you are going to need. This goes both for amounts of money and contract responsibilities: at times entrepreneurs give each other large sums of money without any warrant relying solely on their word.

Never try to push your way in business through cheating or manipulation. A reputation can be worked on for years and lost in a second!

As a rule, an entrepreneur is stronger than the majority of people surrounding him – those who are envious of his or her ability to run a business. Many of them dream about trying their hand at entrepreneurship. That is why is it so important to be as decent and civil as possible not just with your business colleagues, but with everyone around you.

– Business case —

…At the beginning of his entrepreneurial career, a colleague of mine (he is still a prominent businessman) asked me to do him an urgent favor: to lend him a set of leather seats for a tuned car that was produced at my shops. I did so, taking his word that he would pay me back.

When the time was up, instead of money he offered me a barter deal (an exchange of goods was common in the 90s) – a five-speed gear-box. Although I was clearly losing money, a bird in the hand is better etc, so I had to accept the offer. One of his employees brought the gear-box and we put it in the storehouse. After a while we installed it in one of our tuned cars. How disappointed we were to find out that all the gears inside the box were old and it was not even assembled correctly. I had been paid back with a “dummy” once again, but this time I knew who had done it and when. I approached my colleague with a request to exchange it, but received a flat refusal: “You should have checked at once.” But how could I have checked without installing it in a car? However, he was not going to listen to my reasoning.

Years passed by. That businessman deceived everyone around him and never gained respect. Today, he has the worst reputation among our city’s and region’s entrepreneurs. I am sure that in the end he will pay for having treated his business colleagues so unfairly.

If you belong to the “magical minority” of true entrepreneurs, be as polite as possible with those who depend on you, and the community will grow more tolerant towards you. We must treat others the way we want them to treat us.

From a leader to an entrepreneur

What makes an entrepreneur? The striving for competition, driven and stimulated by healthy ambition. Here a harsh axiom comes into play: only one shall be left in the end. That is the sort of masochism, characterizing any entrepreneur – the need to catch up with their opponents, to surpass them, to reach the top. Sometimes it is not so much the result that is important, but rather the process nourished by the spirit of competition – the source of the propulsive force.

An indispensable part of competition is the evaluation by each and every entrepreneur (both fledgling and experienced) of their level of ambition. For some, a fruit stall is the limit, for someone else it is a plant, for yet another it is a corporation or an international holding.

For instance, in sports there is always a champion, who sets the bar for everyone else until this leader inevitably loses, and their once-high achievements become run-of-the-mill entry standards to any sport schools. The same kind of dynamics characterizes the current situation in business, which is why you should be able to evaluate competitive abilities correctly. Entering the business world is not like finding a usual job, and not every burgeoning entrepreneur is ready for the upcoming struggle.

Successful entrepreneurship requires three motivational causes:

1 – eagerness to compete

2 – eagerness to keep developing your business

3 – eagerness to learn

Eagerness to compete

Even if at the beginning you are not “one of a hundred”, those whom I talked about in the previous chapter, but you have set a goal and you are persevering to achieve it… In a while you will be able to join the ranks of the most successful entrepreneurs. Provided that you are not afraid of the competition, of experimenting and finding original solutions for market expansion, developing new products, and offering new services, entrepreneurial luck is sure to wait upon you.

Learn from the strongest and the best – this is the most effective way to pass the stage of original accumulation of capital faster than your opponents. But never steal intellectual property, never infringe copyright: you can steal a bucket of water, but not the spring itself.

Eagerness to keep developing your business

Being an entrepreneur always means being an “owner” rather than “someone, who holds the purse strings”. He or she makes the money work through creative projects, and then hires managers for these projects. A rentier, i.e. someone who lives off the interest from their investments, is not an entrepreneur. Stopping and saying “that’s enough” means reaching the level of your own incompetence. Surely, there is nothing bad about it in itself, but when this moment comes, even the strongest leader stops being an entrepreneur.

Eagerness to learn

You can widen the limit of your competence. And every time I reach those limits, I tell myself: if you do not learn, you will turn into a lifelong manager. Mind you, being a top-class manager is good too, but I have always wanted to have a business of my own.

There are a number of gifted entrepreneurs and naturally talented people capable of building a business out of thin air, as they say. But the majority have to keep improving their knowledge and raising their level of professionalism.

– Business case —

…I have already told you about my experience of working in a big corporation. Half a year did it for me. And the biggest vice that I discovered in the course of those six months was that ignorance dominated at all management levels. Their way of thinking was decades behind our time. It is no wonder that for many years Russian automobile plants have been virtually devoured by foreign companies, not as leading businesses bought as successful investments, but as platforms for a fast entry into the Russian market.

Having returned to the world of entrepreneurship, I left my position of CEO for that of a hired manager and went to study first in Switzerland, then the USA and Japan. I wanted to absorb the most progressive ideas in industry, marketing and logistics, understand how the already successful businesses develop, and how you continue building up entrepreneurial success.

The thinker, researcher and classic capitalism author Karl Marx said that when someone “learns to walk he also learns to fall, and it is only through falling that he learns to walk”.

One of the elements of a successful business is the choice of the right field, or, colloquially, the right “turf”. It is possible that after all the failures and misfortunes in the area you originally set your heart on, you are still willing to persevere. However, you are very unlikely to achieve anything. The failures will overstrain you, undermine your abilities, and, most importantly, destroy your confidence.

Never be afraid of experimenting when searching for a suitable field and environment for a business.

For example, wholesale purchasing of food from individual or collective farms and subsequently selling it by retail is rather a simple thing, but it requires a lot of physical labor (driving around, meetings). Not everyone is able to endure so many business trips and negotiations. Then the entrepreneur, having no time to manage all aspects of their business, decides to hire employees. They have to share the profits with them, and at this point it is important to balance the expenses, in order not to go bankrupt. Lack of profit or, even worse, loss of money is bound to cause disappointment and break your entrepreneurial spirit. Making profits is the main purpose of any business.

If an entrepreneur does not set him or herself the goal of making profits, and is trying to fulfill the desire to be appraised by someone without relying on the final results, they will inevitably find themselves at a dead-end.

In the world of entrepreneurship success is estimated solely on results, not intermediate actions. After all, the winner is determined by the score. Remember, the people around you are not going to judge every step you take.

Admirers, critics and analysts – everyone who is ready to buy the fruits of your labor and call you a successful entrepreneur, will appear only after results are reached.

If there are no results, everything seems pointless and you find yourself face to face with your failures. It does not matter that the failed entrepreneur was an art patron, that they helped the weak and the poor: they become a “nobody”.

If a company collapses, a good lathe operator or a baker will always find a new employer. Hired workers have it much easier: they collect diplomas, ranks, titles which have an impact on their competence and rates of remuneration.

As for entrepreneurs, having no qualifications, rank or title, they might not find their path a second time. There have been numerous examples in history when owners of great fortunes went bankrupt and found themselves on the margins of life.

Nevertheless, surely everyone has the right to go back to entrepreneurship. A potential merchant or industrialist may return to business after being a hired worker. If a person is aspirational enough to dream of becoming a member of the royal family, getting a title of nobility, earning billions, then ambitions supported by the abilities and extremely hard work will help him or her to reach the desired level, or at the very least pave the way for his or her children. That is what happened to Ford, as well as many other well-known European and American entrepreneurs. But 99.9% of people who start their own business do not focus on such lofty goals. Maybe, they should: sometimes the impossible is possible!

As a rule, going back to being an entrepreneur after a failure is much harder because of the looser label, which is both an inner, psychological and an outside manifestation. This is another reason why it is not worth going back into the area where you once failed. Of course, there are exceptions to this rule, but these are few. It is better and safer in every way to drop out of the game prior to a total meltdown, which will give you a small chance of recovering in a different field, either related or opposite.

Business growth, occasional bad luck and even state of instability – these are equally constant elements of entrepreneurship.

Business is more demanding than sports, it is better to give up bad habits and hobbies at the very outset of your business career. Your regime becomes totally dependent on your work and is no longer regulated in accordance with the orthodox eight-hour working day and a five-day working week. Business takes over all your free time, especially at the beginning. The environment for a leader after becoming an entrepreneur requires mobilization of all physical and psychological abilities. This is something that not only the burgeoning entrepreneur, but also their nearest and dearest should be prepared for. You should not expect to stay afloat working half-steam. This would mean fooling yourself: there are no such things as half-measures in business.

I mentioned before that when business starts consuming all an entrepreneur’s time, he or she inevitably hires people to boost production and sales. But it will not get any easier unless you concern yourself with the HR policy, get to know more complicated accounting techniques and arrange the production system. In this case it is very important to perfect the schemes and mechanisms of profit-making in the face of growing expenses (salaries, the amount of rented facilities, transport, etc.). Theoretical knowledge given at colleges and universities is not enough. Until the aspiring entrepreneur fully understands the entire mechanism of controlling overhead expenses in the course of the production process, and then gains the first profits, they will never get the feel of how their business is functioning. Evaluate the advantages and disadvantages of certain steps you take, dispose of the first and increase the second. And even if the business is growing successfully, one should never stop developing it, otherwise the vector of luck will immediately go down.

The job of an entrepreneur is an endless succession of events and struggles. If you are truly interested in business, you should accept a simple truth: entrepreneurs virtually exchange their time, their loved ones, and themselves, for what they do and love.

Being a “composer”

Becoming an entrepreneur is not something you can do effortlessly. But you can become an entrepreneur following the rules of the consumer market, and at the same time breaking them. This is something that only people with non-standard abilities and ways of thinking can allow themselves to do.

The crucial quality of a future entrepreneur is the ability to “compose” the process. An entrepreneur must be a “composer” or aspire to become one.

It is great for a burgeoning entrepreneur to combine the qualities of a “creator” and an “organizer”. A businessman must not only be able to “create a melody”, but also to “organize” its production and marketing, moving from the handicraft stage to one of modern structured production.

Creativity, aimed not only at producing goods and services, but also their marketing is the cornerstone, or one might even say, the philosopher’s stone of entrepreneurship.

Many examples of success on the market are based on exceptions, and it is those exceptions that modern gurus use as the basis of their training programs in business schools. However, the reality of business is way beyond the examples of Coca-Cola, McDonalds, Microsoft, Ford, Trump or Steve Jobs.

The overwhelming majority of aspiring entrepreneurs do not understand how it’s possible to create a miracle such as the internet.

Entrepreneurship is a daily routine, full of headaches and hard work, which very rarely turns into a celebration of unexpected financial success. Moreover, success must never be a one-time thing, but a matter of years of stable growth. A business process can be compared to an escalator that only moves downwards. Want to be successful? Walk upwards! Want to get ahead of the others? Run without stopping!

So, your business has taken off, you reached your first success – you allow yourself to buy an expensive car and an elite house, guided, at times, not only by your own desires, but rather by established traditions…

A villa, a yacht, VIP-resorts, exotic countries… Out of fear of losing it all, the entrepreneur holds on to the steering wheel of their business so desperately that it gives them white knuckles. But as long as you are driving on your own, you remain a manager. This kind of a “split personality” – the owner and the manager – is like being a composer, who spends most of his time at the piano, but simultaneously acts as a musician in the orchestra of his own creation. To avoid wasting energy that can be channeled into creativity, the “entrepreneur-composer” must only “compose” the business, and the management itself can be delegated into the hands of a hired manager.

Success in the competitive struggle is a result of constant growth, as well as an ability to suggest new interesting methods of promoting your products and services, and constant renewal. If at the same time the entrepreneur remains a “composer”, they will always be one step ahead of their opponents.

However, there is a limit to any development, so we are inevitably facing the following question: how can you determine your maximum? Should you be satisfied with owning a cigarette stall, a hairdresser’s, or a small bakery? Is there a possibility of running a life-long small-sized business, limiting your expenses at the very beginning? Originally no one thinks about how high they will rise, but even those who sell homespun stockings, or stamp metal, want their products and their mastery to be recognized by the maximum number of people.

Recognition is measured in demand. “I want to produce something worth a dollar, but I want every person on the planet to buy it” – this is the kind of thinking appropriate for a burgeoning entrepreneur.

– Business case —

…I have witnessed a number of my friends open their businesses and suddenly their ambitions change and develop in new ways. One such company is now working with tent materials and has become one of the strongest and most well known in its segment. When they started, the business owners (a married couple) sold shoes bought wholesale and sold retail, accumulating experience, competence and the original capital. They visited Italian plants, increased the number of sales points, but at a certain moment they suddenly decided to sow tents for motor trucks.

Why would they shift into a totally different field? The answer is simple: they were unable to resist growing competition within the shoe business. And their “composing” talent told them to change the market, channel their efforts into a field where the competition was not so harsh.

At that time, the market for tents was empty and growing. At first, they decided to collaborate with “Kamtent”, a company from Tatarstan, but pretty soon an independent company “Nizhtent” was born. In the course of the first decade, “Nizhtent” not only became a dominating company in its region, but also started developing in other parts of Russia. The equipment they bought, and their production sites with dozens of well-trained employees, allowed them to step into making pavilions from tent and other special materials, and later rent them out. All that was possible because they chose to leave the “narrowing” shoe market and move to another guaranteeing them stable business growth.

I started by selling spare parts, but one day strolling through a market, I noticed that dashboard components (there were over a hundred of them) were sold separately, and all the parts, including the tiniest ones, were in stock. Adding up the price, I realized in the same market a full dashboard was two or three times more expensive. So I bought all the components, assembled a dashboard and sold it at the nearest consignment shop, thus doubling the capital I had invested in the components.

In a few months several dashboard assemblers were working in my shops, and in the following years my fledgling business produced thousands of dashboards for the growing automobile market.

Just as one cannot write a score without notes, or become a composer without an ear for music, an entrepreneur can never develop and expand their business without education and discretion.

I have travelled and studied a lot, and visited various business-schools. One training program in Switzerland was based on a very useful slogan: “Pry!”

Pry and learn: the path that others have already walked is something to be studied as quickly as possible. It is very important to get to know the process intimately, to try and come to grips with everything that is connected with supplies, to find out how dealers and distributors work in the field that you are interested in, what are the legal norms, the taxes and the limitations, what licenses are required, and how your products or services should be licensed.

– Business case —

…A buddy of mine, having already become a successful entrepreneur in the wholesale and retail food trade, decided to start a second business. In no time at all he bought equipment for the production of toothpicks and opened a small workshop. He had learned the technological process somewhere and reasoned that having over fifty shops (and the experience of selling large batches in other friendly retail networks), it wouldn’t take long to make his toothpick business a profitable one. Unfortunately, neither his business experience, nor the perfectly copied technological process helped him, because, as it turned out, he did not have the entire “score” for the process of producing toothpicks. It was very important to determine certain things. How much was the cost of a cubic meter of timber? What quality timber should be used? Was there a possibility for regular cooperation with a serious supplier and how should one deal with packaging?

He opened that production line because he owned a small forestry, which could provide him with cheap timber of any size and quality. But it transpired that timber logging, production of toothpicks, packing and selling them are separate businesses that vary in profits, volumes and complexity. When the entrepreneur combined them, the result he got was a failing toothpick business he subsequently had to sell along with the logging business. As for food retail, he is still very successful in this field.