About 20 years ago, I stood in a parking lot with a friend who has since become a billionaire and one of the most successful entrepreneurs in the country. On that day, he gave me advice that infuriated me, which I now espouse.
To give you context, I was 21 years old, and he was my client. I was building software to manage the installation of 5,000 tracking units in government vehicles. He used my reports to bill his clients. But there was a problem. Many tracking units installed were not reporting to the server — they were faulty. Meanwhile, he was billing based on installations. After a while, his client — the government — queried the discrepancy, stopped paying and launched an investigation.
The reason we met that day was that I had not been paid for two months. Apart from boycotting some of the work, I had also become disruptive, protesting non-payment. When I demanded my money, he said, “Business is not about money.” As you can imagine, this made me furious! He was living in Sandton, driving a fancy car, and occupying shiny offices, while I was driving my dad’s car, living at home, and barely eking out a living. How dare he say business is not about money?
Over the years, I firmly held the view that business is about nothing but money. But lately, my sentiments are changing. As I write, I think business is indeed not about money, even though it is essential. This is how I reconcile the idea:
A good analogy is the body. It has many organs, including the brain, the heart, the lungs… and so on. Blood courses through all the organs, making it an essential fluid for their proper functioning. However, we do not say that the body is about blood. Instead, we study the blood to ascertain the body’s condition.
Likewise, business has many parts: people, marketing, sales, products, strategy… and so on. Similarly, none of these parts can function without money flowing through them somehow. A strategy is meaningless without resources; you cannot build a team without paying them; products do not exist without some investment. Therefore, money and how it moves is essential for understanding business health. This is an entrepreneur’s first job — cash flow management.
Important as money is, however, we should not mistakenly elevate its status to business itself. Business is about sustainably providing value where it is needed most. The market signals this need with a willingness to pay. In other words, every cent that comes into a business should signal value captured by the market, and every cent that leaves the business should signal value created for the market.
The view that business is about money overlooks this essential rhythm — value creation and value capture. When value is created but not captured, the business runs out of money. If value is captured without creating it, it’s a scam.
So, I hold the view that business is not about money. However, watching how money flows in and out of a business — and its organs — is critical for understanding its health and capacity.
Until next week.
Vusi.
P.S you might have missed something I said. “Business is about sustainably providing value where it is needed most.” Sustainability is about the profit motive, which I will explore in next week’s post.
If you are not subscribed, use the link below to join. And please favour me by sharing this article with a friend you think might find it helpful.
