The Moral Quandaries Entrepreneurs Face
Navigating the road to successful entrepreneurship isn’t easy, and shortcuts that seem like great ideas often lead to bumpy roads. Instead of focusing on profit at any cost, entrepreneurs that use morality as their compass form strong relationships and profit follows naturally.
Entrepreneurs are passionate. Working nonstop and tackling every project that comes their way is expected of them, but they shouldn’t expect the same from their employees.
Employees should do their best work but entrepreneurs need to keep a close eye on the line between inspiring an employee and suffocating them.
Look at it this way: if an employee demanded excessive pay, the entrepreneur would dismiss the demand. Entrepreneurs who demand more hours than an employee has agreed to should expect the same reaction. Forcing excessive overtime without proper expectations should not be made a condition of retaining a position or earning an appropriate raise.
Generous payment may dent the bottom line but entrepreneurs should make themselves responsible for the health and contentment of their employees; and happy employees produce better results.
Honesty with Investors
The temptation to do a little rounding up on profits and rounding down on expenses is a common moral quandary for an entrepreneur, especially when communicating with investors — a less formal arrangement than IRS reporting.
And it’s usually not black-and-white rounding. Timing when to recognize revenue can be a mess. For example, I worked with a company that reported ACV (annual contract value) to investors by using each contract’s final year, not the current year. The final year is usually the highest revenue. The company internally justified the report by believing that first years are often heavily discounted so subsequent years are a better indicator of the worth of the contract. But they didn’t disclose that information to investors. The truth is that exaggerating a business’s attractiveness helps no one.
Investors will eventually see that a timeline or promised profit can’t be reached if the entrepreneur wasn’t honest. Investors walk away from dishonesty, leaving entrepreneurs with a tarnished reputation and without cash.
Total honesty forms trust and matches entrepreneurs with the right investors.
Share the Road
Because consumers consult reviews before making choices, and offers of positive reviews in exchange for cash are increasing, it can be tempting to bolster a business’ image by inflating reviews. Consumers see through fake reviews and cease to trust a business who uses them.
Unfortunately, in business and politics, fear, uncertainty and doubt provoke consumer responses. But leaving negative reviews for competitors is unethical. Rather than denigrating a competitor in a sales pitch or review, entrepreneurs should emphasize their own outstanding qualities instead of the failings of others. This (in-the-very-long-run) builds their brand’s respectability.
Avoid Moral Quandaries by Planning Ahead
Beginning an entrepreneurship with clear standards of conduct is crucial. Ensuring safety, equality, and legality early presents less opportunity for moral questions to become big issues.
Careful budgeting not only prepares for responsible growth, it reduces the temptation to fudge the numbers later on. Accounting software like that offered by my company, ZipBooks, can help with that.
Success is More than Profit
Measuring success by profit alone is easy but incomplete. A meteoric rise at the expense of morality doesn’t denote a healthy structure, and entrepreneurs who choose a moral, if harder, route create a firmer foundation that attracts employees, investors, and consumers for years to come.