#16 Know the Costs: Sun Tzu’s Forgotten Lesson for Modern Entrepreneurs
Sun Tzu observes: “Operations of war shall normally require a thousand swift chariots, a thousand leather-covered wagons for carrying stores and a hundred thousand armored troops, with food supplies transported over a thousand li. Thus, the expenditure at home and along the way, for fees of advisers and visitors, materials for repair and maintenance, chariots and armor, can sum up to a thousand pieces of gold a day. Only then can an army of a hundred thousand soldiers be raised.” (Sun Tzu 2:1-3)
He could see it was costly to raise and maintain an army for war. The USA ‘s massive US$36 trillion debt today (2025) came from maintaining 750 military bases in 80 countries so it could dictate to the world.
To run a business can be costly too. This doesn’t mean requiring lots of money to start a business. While money is essential, most important is the right attitude to know keep costs down to stretch the limited funnds and the gumption to persevere.
Starting with little
One businessman who lacked start-up capital was Terence Kok. He was in my Strategic Corporate Planning class in the 1990s at the Singapore Institute of Management. After he graduated with RMIT University’s BBBA (Distinction) degree, instead of seeking employment, with limited funds, he started VoIUM Communications Pte Ltd with a partner and hired a few classmates. As VoIUM was among the pioneers in mobile applications development, Singapore Telecommunications (SingTel) subsequently invested in it, and later, a US-listed corporation bought it.
In 2002 he founded Cool N Lite Solar Film Pte Ltd. Again, the insufficient start-up capital required his partners and him to save costs by re-using old personal furniture and equipment, and challenged their attitude to work in such Spartan condition and accept low pay. Everyone aggressively goes all out to sell but ever mindful of limited cash-flow to plan their inventory. He recalls that stocks would run out every other day which taught them to be very prudent with cash-flow. Today, the company is recognized by leading automotive suppliers and building developers at home and abroad as it also exports to regional countries.
Know the costs
Many Sun Tzu’s Art of War “experts” love to quote “Know yourself, know your enemy” but neglect the passage above, which is about “Know the costs.” My late father taught me that profitable business comes from knowing the costs. Having a good grasp of expenses will give us two advantages:
First, to do well in business, sell aggressively while prudently keeping our overheads low. Many people had failed mainly because they did not watch their costs. From the moment they started their business, they went on a spending spree, paying fat salaries to themselves and cronies, locating in a posh office, spending unnecessarily on fanciful renovation, decorating the office with expensive furniture and equipment, and buying expensive cars for their use.
When I founded my consultancy in 1994, many friends advised renting a swanky office to impress clients to use my services. Instead, I used my auditor’s office as my registered and mailing address while I worked from my home. Till today, as bookings for in-house seminar and conference-appearance are done on-line or at client’s office. Not surprisingly, no client has ever asked to visit my office.
Secondly, a good knowledge of costs enables us to plan our pricing. It also supports quick decision and response to customers.
When Seet Cher Hung was Managing Director of Phoenix Contact (SEA) Pte Ltd in Singapore, he demanded his staff to have good knowledge of the costs of the company’s range of products so that they could make a quick decision on prices should any customer make enquiries.
He said: “While those working for our competitors have to revert to their bosses for a decision, we would have by then already secured the orders.”
It is imperative then to consistently keep abreast of changes in cost structures
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