It’s a fact of life that if you want to do well at anything, you need to know the rules that apply to whatever it is you’re trying to do.
This applies whether you’re driving a car, playing cards, trying to attract a mate, playing rugby, or being in business.
Understanding the rules that apply to whatever you’re doing will give you a better chance of getting what you want.
Don’t believe me? Try driving a car without knowing the rules of the road (the road code) and see how far you get. Not far I wager.
When you don’t know the rules of whatever you’re trying to do, you will invariably end up paying a fine of some sort. That could include losing some of what you already have, being kicked out of the game, or being held back. All things that slow you down or stop you from achieving whatever it is you’re aiming for.
Knowing the rules, and living within the rules helps you get what you want faster and easier.
For some things, the rules are clearly defined. Playing chess, we know that the bishops can only move diagonally through squares that don’t already have pieces on them. And we know in chess the game continues until one player loses their king.
For other things in life, the rules aren’t so clear.
For example, trying to attract a mate. There are social niceties to follow. It helps if you know a bit about the person that you’re going out with, and what they like. It helps if the friends or family of the person you’re interested in like you. It can help if you know what’s important to the person you’re interested in, and you can deliver that. But these are very personal and can differ between both the person who is trying to attract a mate and the person that they are attracted to.
Business too, isn’t so clear.
What are the rules of business?
Search online for the rules of business, and you’re going to find lots of possible answers. Interestingly enough most of the answers to the question of the rules of business are different and relate to what you do rather than your business.
Because businesses are unique (as are their owners), working out the basic rules of business that apply to any business no matter how big or small and no matter what they do isn’t easy.
But if you look harder, there are some things that are common to every business, and they never change no matter what the business, who the owner is, and how many things around us change.
I believe the basic rules of any business are as simple as this:
- You offer something that somebody wants – you gotta solve a problem someone wants solved; you gotta have a reason for people to choose you
- for a price they’re willing to pay – you have to know the benefits of what you offer to your customer; the price you ask can’t be more than the value to your customer of using whatever you offer.
- for more than it costs you to do it – you have to earn enough to cover all your costs, including taxes.
No one enforces these basic rules of business. These basic rules of business are self-policing – break them and you and your business will end up wearing some sort of cost. So it’s all up to you.
Laws of the land
As well as respecting the rules of business, there is another set of rules over and above them. The laws of the land.
Generally speaking, the laws of the land are different depending on what business you’re in and where you do business. That makes things a little trickier for small businesses because you have to know the laws of the land that apply to you, and they could be different to someone else doing the same business across the road (if they happen to be across some line on a map that puts you both in different council areas or countries).
The laws of the land are set by local Councils and Governments – the legislation, policies, guidelines, etc. These rules generally:
- differ between countries/industries/business activities
- apply to a specific group – maybe entity type (companies, trusts etc); country/regions; business activity (food, transport, construction, finance).
- provide exemptions so the laws don’t affect you – if you meet specific circumstances
- are enforced by the Courts and argued by lawyers
- have fines/penalties if you break them
In most cases, ignorance of the laws that affect you is no defense should you end up being caught breaking a law. You should know the laws that apply to you (that’s your responsibility).
Playing within the rules versus playing with the rules
When you know the rules (whether that’s the rules of business or the laws of the land) and you play within them, you tend to do better than people who don’t.
If you know that following the rules helps you do better, and breaking them makes you do worse, you tend to end up ‘playing within the rules’. That’s human nature because fines/penalties hurt.
But there is another option … you don’t have to play within the rules all the time. ‘Sometimes, you can play with the rules (where it’s helpful to your business).
When it comes to the rules of business, you can play with the rules by
- bending/breaking the rule temporarily about reducing the price you’re willing to accept for what you offer and reduce the price your customers are expected to pay to get rid of unwanted stock and free up storage/shelving for other stock that moves faster and is more profitable; or
- change what you offer to customers, or the price they’re willing to pay (give more value), or change the cost of how you do what you offer (by changing processes, systems, employees, suppliers).
When playing with the rules of business, you should make sure you have a plan to cover any costs of breaking that rule – i.e. you have some savings to cover extra costs or reduced income. It’s also helpful to make sure there is an upside to what you’re doing (e.g. more customers, freeing up cash for faster/more profitable stock).
When it comes to the laws of the land, you can play with the laws by using whatever exemptions might apply (or could apply with some acceptable changes to your business) to get what you want from the relevant laws:
- This is great when you can meet certain exemptions for laws of the land that add more costs to your business, and you’d prefer not to be caught in that legislation – e.g. accountants caught by the Anti Money Laundering and Countering Financing of Terrorism legislation. That legislation (apart from being a mouthful to say) adds a layer of costs to: check any new customers aren’t terrorists or criminals; prove they have checked customers by reporting back to Government officials; and be audited to make sure their processes are okay. Getting out of that legislation saves thousands of dollars.
- It’s also great if you want certain laws of the land to apply to you and you don’t want to qualify for any exemptions – e.g. the new Research and Development tax credits. If you spend more than $50K in a year on eligible research and development costs, you qualify for a tax credit. If you normally spend $45K on eligible R&D in a year, maybe spending an extra $5K in eligible R&D is helpful?
You don’t have to accept that certain laws apply to you or not. You can run your business in a way where you are caught by certain laws and not others, where you qualify for certain exemptions and not others.
Play within the rules or not? Play with the rules or not? Change your business to fit the rules you want? Change the rules to fit the business you want? The choice is yours! But if you want to do better – play within the rules you’re happy to accept, you should … assuming you want better for you and/or your business.
So do you know the rules that apply to you and your business? Do you know who your customers are? Do you know what’s important to them? Do you know what they value from what you offer and how much that’s worth to them? Do you know how much you need to make to cover all your costs? Do you know what legislation that affects you both positively and negatively?
If you want help knowing the rules of you and your business, and how you could play with and within them, drop me a line or give me a call.