In my Practical Finance text, which I use in the undergraduate courses I teach, I write about the responsibilities that entrepreneurs have to those but for whom they would not be in business in the first place:

Customers

You can’t have a business without customers, clients or patients. Your responsibilities include delivering good-quality products and services that are fairly priced, which will be hard to do if your business isn’t financially sound or properly run. This is not to say that the “customer is always right.” Sometimes he isn’t. Or it may turn out that satisfying his demands is too disruptive or costly. Either way, all customers deserve to be treated respectfully—whether or not you plan to continue to serve them—because doing so preserves your good reputation.

Lenders

You can’t operate a business without credit. Your responsibility is not only to repay the money you borrow but also to appropriately manage your finances so you’re able to satisfy the additional requirements of the loan agreements you’ll be asked to sign.

Investors

You won’t be able to create—let alone expand—your business unless you have the support of your financial backers, which often include family members and close friends. The capital they provide isn’t a gift. You’ll need to pay it back, whether in the form of an annual share of profits or a percentage of the proceeds when the company is sold. Demonstrating that you have a good handle on your company’s financial performance will help them feel comfortable about entrusting you with their money.

Vendors

The companies that supply the materials you need to create the goods and services you sell have to be paid. On time. Otherwise they won’t do business with you again, or if they do, they’ll jack up their prices to compensate for your lousy payment practices. Consider the impact on your competitive position should that happen.

Employees

This final category of constituents has actually stumped my students. They were so focused on finding jobs after graduation, they never considered the possibility that their employers might not be able to pay them for the work they were hired to do.

Willfully shortchanging lenders, investors, suppliers and employees, and swindling customers does not make a business owner smart.

Just a deadbeat.

Mitchell D. Weiss
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