8 Principals and Laws Every Business Owner Should Know

8 Principals and Laws Every Business Owner Should Know

Every business owner has their own set of guiding principles that helps their business stay the course.  These sets of rules and principles help guide the business and helps to create standards and consistency in the business.

As the owner of your business, you largely create these sets of laws and principles.  These may take the form of your customer service promise, your employee code of conduct, and how you as a business owner operate your business.  These guiding practices help to ensure that your business remains consistent and you don't go off track as time passes.

There are also universal laws and principles that can help guide you as a business and a business owner.  There are hundreds of these universal laws and principles, some hundreds of years old, and others quite recent.  The 8 laws and principles below are one's that every business owner should know about.  Hopefully, they will help to keep you on the track of creating a great business.


Kanter’s Law

Everything can look like a failure in the middle, also known as “The messy middle”

Ain't that the truth.  This term was coined by

This term was coined by Rosabeth Moss Kanter, a Harvard Business School professor, after seeing hundreds of businesses languishing months after their pie-eyed startup launches.  Everyone loves the beginning and the end, it’s that middle part, the part where the only thing that’s left is the work itself and your persistence and determination is the only thing to see you through.
Why it’s important.  After the excitement of starting a new business is gone, many business owners get into a rut.  It’s the rut where the business isn't forming as expected and you’re not sure where the end is.  You may even wonder if this is the end.  It’s important to know that most businesses go through this “messy middle” and this is the time the real work begins to start reaching that light at the end of the tunnel.  In simple terms, don’t give up!  If you find yourself struggling as a small business owner, read “The E-Myth” by Michael Gerber.  It's in my opinion, a must read for every small business owner.

Pareto Principal

Otherwise known as the 80-20 principle.

Everyone’s heard of this principle in one form or another.  Some examples are: 20% of the tasks we do account for 80% of the results we get or 80% of the value you get from relationships is from 20% of the people you know.

Why it’s important.  As a business owner, most of the value you create for your business and yourself are from a small percentage of your activities.  Your job is to figure out what activities take up your time but don’t deliver high value for you and your business, and either stop doing them or get someone else to do them.  Being busy doesn't mean you are being productive or growing your business, it just means you are using up your time.  Use your time wisely.

Parkinson’s Law

Work expands so as to fill the time available for its completion.

Do you find it strange that every employee, no matter what company they work for, can complete all of their work in approximately 40 hours each week?  Strange indeed.  Maybe it’s that those 40 hours are arbitrary and most people can complete the same amount of work in less than half the time, maybe that's why social media activity is highest during work hours.  But since they get paid based on 40 hours, they need to expand their work to fit inside these allocated hours.  With some web surfing and daydreaming mixed in of course. And yes, I've read The 4 Hour Workweek…..twice.

Why it’s important.  Realize that you (and your employees) can complete tasks much faster…….if the need arises. All you need is a sense of urgency. College kids do it all the time when they “forget” to study for several weeks and then pull off an “all nighter” to successfully pass an exam the next day.  When assigning important tasks, either to yourself or an employee, give clear and short timeframes for completion.  And be sure to follow up.

Murphy’s Law

Anything that can go wrong will go wrong

Murphy’s law is probably the most well known on this list.  When it rains, it pours.  If something can go wrong, it probably will.
Why it’s important.  Don’t go turning into Eeyore over this law, the important thing is to understand what can potentially go wrong and to be prepared if it does.  Military strategists do this all the time, creating contingency plans…..just in case.  An hour of planning will save you two hours of headaches and frustration later on.

Peter Principal

When I was first starting my career in the NYC, Fire Dept,  I once asked my senior Lieutenant why he’s spent the last 20 years in this rank and why he didn't become a Captain.  His response was, “Gary, I've risen to my highest level of incompetence”.  I didn't know there was an official principal named after this, but there is.  Kind of makes sense, you do a great job and keep getting promoted until you start not doing a great job, and remain in your current position until you eventually retire, quit or get fired.

Why it’s important.  Business owners make this mistake all the time, assuming a great employee will also make a great manager.  While an employee may be great at doing the actual work, they may not have the skills to successfully manage others to do the same level of work.The important thing is recognizing an employee's strengths and making sure they remain in a position to show those strengths off to the fullest.  Worried about losing great employees because you aren't promoting them?  Read the book,

The important thing is recognizing an employee's strengths and making sure they remain in a position to show these strengths off to the fullest.  Worried about losing great employees because you aren't promoting them?  Read the book, “First Break All The Rules”, by Marcus Buckingham for some great ideas on this subject.

*Bonus Principal!  The Dilbert Principle was coined by Scott Adams, creator of the Dilbert comic strip.  It states: “companies tend to systematically promote their least-competent employees to management (generally middle management), in order to limit the amount of damage they are capable of doing.”
Well said Scott, well said indeed!

The Dilbert Principle

Hicks Law

The time it takes for a person to make a decision as a result of the possible choices he or she has.

More choice makes for more thinking, which makes for slower decision making.  “paralysis by analysis” is the common term used to describe this. It’s like going to an ice cream shop with 100 flavors, takes forever to make a decision as opposed to choosing between chocolate or vanilla ice cream.  Numerous studies have been conducted on this subject and the results have been that offering fewer choices led to quicker decisions and a person more likely to “buy on the spot”.  Simplifying decision-making process also leads to less stress and anxiety.
Why it’s important.  Offering more to your customers is not always better, at least not if you want them to make a purchase when they walk into your store.  Even if you do offer a lot of variety, understand that you may need to actively work with a prospect during the buying process to help them narrow down their choices and to guide them on that road to a sale.  If you leave it to them to decide, you may find that it’s easier for them not to decide and go get a Latte instead.

Occam’s Razor

Among competing hypotheses, the one that makes the fewest assumptions should be selected.

The simple answer is often the correct answer.  One of the most famous examples of Occam's Razor is the Apollo moon landing hoax.  Conspiracy theorists think the whole moon landing was an elaborate hoax.  If that was true, then over 400,000 engineers, employees, and other individuals were all duped or were a part of the most elaborate hoax in world history.  NASA’s explanation was that a brilliant team of engineers created a shuttle that could transport people to the moon.  That explanation sounds a lot simpler and more likely true.
Why it’s important.  In business, we sometimes over complicate matters that offer a simple explanation.  Make decisions based on the information in front of you and try and avoid unnecessarily complicating matters unless new information tells you otherwise.

Suttons Law

The law is named after the bank robber Willie Sutton, who reputedly replied to a reporter's inquiry as to why he robbed banks by saying “because that's where the money is.”

This is a pretty simple law, go where the opportunities are. 

Why it’s important.  Make sure there is a market for your product or service before you spend your hard-earned time and money creating it.  Many businesses fail because they find out after the fact there isn't a market for what they have to offer.  Conduct your market research before going “all in”.

What principles and laws govern your business?

What rules do you find to be helpful for your business?   What other rules would you add?

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CEO at 3Bug Media
Gary Shouldis is the founder of 3Bug Media, a web marketing company that helps businesses create 360 Marketing Strategies to dominate their market. His blog is read by over 20 thousand small business owners a month and has been featured in the N.Y. Times Small Business, Business Insider and Yahoo Small Business.
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