The Notorious CEO: Ten Startup Commandments from Biggie Smalls[originally posted by Jake Stein at RJMetrics on Mon, Aug 10, 2009] [dropcap font="0"] A[/dropcap]s you may have noticed from our video anthem Business Intelligence, we enjoy our fair share of rap music here at RJMetrics. It’s not a coincidence that many rap stars are also successful entrepreneurs, and lyrics about business and entrepreneurial ambition are rampant in the genre.
Yesterday, my iTunes shuffled its way to “The Ten Crack Commandments,” a classic and often-referenced track from The Notorious BIG’s 1997 double-album ”Life After Death.” The track is meant to be a crash-course for would-be crack dealers, but Biggie’s ten commandments actually add up to some pretty sound business advice for any industry.
I list each of the Ten Crack Commandments below, along with its underlying message for modern business operators.
“Rule nombre uno: never let no one know how much dough you hold”
For most companies, there isn’t a tremendous amount of upside to disclosing financials. As such, few privately held companies choose to do so. As Biggie says, broadcasting your financial performance can “breed jealousy,” increasing operational risks and arming your competitors with a more informed sense of your company’s weaknesses.
“Number two: never let ‘em know your next move”
Innovation drives long-term business value. If your company prematurely discloses its strategic plans, it gives your competitors a head-start on emulating or surpassing your innovative strides. It may be tempting to post your 12-month plan on the company blog, but beware the strategic edge it provides to your competitors once it’s out there.
“Number three: never trust nobody”
A healthy sense of paranoia is a valuable asset for business operators. Businesses should take steps to protect their intellectual property, including protection through patents or well-protected trade secrets.
“Number four: never get high on your own supply”
Even if you are the only shareholder in your business, you should separate what’s best for you personally from what’s best for your company. If you make suboptimal business decisions for the sake of bettering your personal life, your company will be less likely to succeed.
Another interpretation of this rule is to resist developing a strong emotional commitment to your own ideas. If you’re too wrapped up or emotionally invested in any aspect of your business, it won’t be easy to modify that idea when it leads you to a better opportunity or strategy. Sunk costs are sunk, and strategic decisions should be made as such.
“Number five: never sell no crack where you rest at”
Biggie is right: your family members are not real customers, and serving them can often do more harm than good. They will provide an unrealistic sales experience and their feedback will often be skewed by the preexisting relationship. Also, if you have a desirable product they may feel a sense of entitlement to a discount or freebies. Granting such requests can hurt your bottom line, but denying them can strain your personal relationships.
“Number six: that credit… forget it”
Biggie is warning about the risks of issuing credit to customers before you have enough scale to hedge the associated default risk. The broader lesson here is to place a strong focus on cash revenue generation while your business is working toward sustained profitability. Getting cash in the door is extremely important, and anything that delays cash flow will slow down your forward progress.
“Seven: keep your family and business completely seperated”
This one doesn’t need much translation: work and family don’t always mix well. While there are many successful family businesses out there, the cost of things going sour becomes far greater when family is involved. Don’t work with your family simply out of convenience– only do it if the increased upside truly outweighs the true costs of failure.
“Number eight: never keep no weight on you”
Here, Biggie is driving home the importance of physical security. Sensitive passwords, documents, products, and prototypes should never be stored or transported (either digitally or physically) in a format that could be compromised.
“Number nine: if you ain’t gettin bags stay [away] from police”
The company you keep can be misinterpreted by your customers and competitors, and sending the wrong message can put these relationships at risk. Keep strategic conversations as silent as possible until things are set in stone and it is optimal to make an announcement (if ever).
“Number ten: consignment [is] not for freshmen”
Accumulating debt prematurely is a bad move for any business. Both debt and equity financings consume company time and may drive startups to overspend before their plans are fully-baked. They also put a greater pressure on financial performance, which is only a good thing when a company is confident in their product’s maturiy and ability to generate returns. Biggie says it best: “if you aint got the clientele say ‘hell no’ — ’cause they gon want they money rain, sleet, hail, snow.”
“Follow these rules, you’ll have mad bread to break up”
This song predates mainstream internet usage but still translates well into the language of today’s web economy. I hope at least some of these commandments strike a chord with other entrepreneurs out there. Until next time, keep it real.