To meet the challenges of survival, an entrepreneur must understand and follow certain rules of competition -- in addition to having a good idea and a market that has at least a marginal interest in that idea.

Each challenge comes with its own pressures -- but failure to respond to these challenges with flexibility can -- and all too often does -- lead directly to the venture's demise.

The following are a few important "rules of competition". Break them at your peril! Following these rules will keep your venture flexible -- and greatly enhance its prospects for survival.

Compete on a "variable" versus a "fixed" cost basis.
Because there are virtually no economies of scale for small businesses, there is little reason to invest in capital equipment that brings down your costs of goods sold in volume production. The less fixed costs you have to support, the more survivable your business will be when facing the unexpected. Always -- your first choice should be to outsource versus investing in bricks or paychecks!

Conserve cash by managing cash flow.
Control costs by fostering a frugal corporate culture -- through your example. Lavish perks send the wrong message to both employees and customers. Strive to get paid early by customers, pay suppliers late, and pay yourself last. Don't expect to pay yourself a salary until you are absolutely certain that the business venture has consistent sustaining monthly revenues. Having a positive cash flow is a key element in ensuring that you have the flexibility to react to business changes.

Continually adjust your product/service to the market.
Your product/service should be unique enough to differentiate your venture from your competitors -- but not so different that customers don't know what to make of it. Listen to your customers! Involve them when changing your product or service -- to guard against isolation and arrogance. Accept change in the marketplace by striving to obsolete your own products and services -- before your rivals figure out how to do it themselves.

Invest only in technology that increases business flexibility.
The use of advanced telecommunications -- as an infrastructure for reengineering business processes -- may provide you with better time management (read: productivity) and thus competitive advantage. For example, if you or your employees are mostly with your customers (i.e., out of the office), a notebook computer for anywhere-database decision making, report/proposal writing, and/or eMail communication with associates could increase your responsiveness to customer requests.

Use a mentor or consultant to help guide you through the reengineering of business processes.
Doing things differently can allow your venture to make a quantum leap over the competition -- or cause you to crash land the venture. It is always important to talk through your planned actions with someone who has an arms-length relationship with the venture, who has good business judgement, and who will be open with you and your blind spots. The market place will continually push you to rethink your strategies. You need to bounce your new ideas off someone who will treat your discussions seriously.