The Entrepreneur Equation

Many venture capitalists say they invest in the entrepreneur as much, if not more, than the entrepreneur’s business idea.Read more at location 279 • Delete this highlight Add a note If entrepreneurial success is something you long for, ask yourself: • Do I want to make a living, make a difference, or leave a legacy? • Am I done personally growing, or am I willing to let my business force me to continuously change and develop myself?Read more at location 285 • Delete this highlight Add a note I am, however, suggesting that potential entrepreneurs are continually lured into businesses with a false picture (or at least a gross misunderstanding) of what entrepreneurship is, with unrealistic promises regarding the potential financial and other rewards they can gain from opening a business, and with no means to assess whether the investment justifies the risk, or if the opportunity is appropriate for them.Read more at location 313 • Delete this highlight Add a note “More people start businesses each year than get married or have children… and the typical start-up isn’t innovative, has no plans to grow, has one employee, and generates less than $100,000 in revenue.” Plus, the greater majority of entrepreneurs do not succeed. With so many people attempting entrepreneurship who are misinformed, underprepared, and generally a poor fit with that path, and with so many other choices available, how do we address this problem?Read more at location 322 • Delete this highlight Add a note Sometimes, the answer to a problem is so obvious that nobody sees it. This usually starts with somebody relying on an incorrect assumption.Read more at location 329 • Delete this highlight Add a note You can do anything you put your mind to, but just because you can, doesn’t mean you should.Read more at location 367 • Delete this highlight Add a note “all of the systemizing in the world won’t help a business succeed if the business model doesn’t have scalability, leveragability, profitability, and remarkability.”Read more at location 400 • Delete this highlight Add a note You should be wary of taking advice (business, sexual, or otherwise) from someone who has done something just once.Read more at location 426 • Delete this highlight Add a note While you may be able to find some common themes, success is very difficult to replicate. Failure, on the other hand, always boils down to the same handful of issues. IRead more at location 430 • Delete this highlight Add a note I can’t think of another career or life path where a 90 percent failure rate would be acceptable. Can you imagine if 90 percent of doctors failed within a few years? How about if nine in ten policemen failed? Obviously something is way out of whack here. Why would so many people risk their time, money, and effort in a journey with such low odds of success? And why does the belief that entrepreneurship fits all persist? ItRead more at location 495 • Delete this highlight Add a note 1. Aspiring entrepreneurs are basing their dreams of prosperity on an approach that worked for new businesses decades ago, not today. 2. They usually start their businesses without first going through a screening process. Clearly the game of entrepreneurship has changed, and nobody has alerted the players. Being an entrepreneur today—particularly a successful entrepreneur—is more difficult than it has ever been.Read more at location 558 • Delete this highlight Add a note However, being an entrepreneur doesn’t really have a standardized and effective screening process, which is unfortunate since, unlike other career paths, to become an entrepreneur you typically have to put your own money at risk (as well as spend your time and effort). This essentially means that so long as you can get some money together, you can attempt entrepreneurship—even though you may not have any idea whether or not you are a good fit in that role or whether it is just a passing fancy that looks great on paper, but one in which you will quickly lose interest after getting your hands a bit dirty.Read more at location 591 • Delete this highlight Add a note OUR SOCIETY IS BUILT UPON BLOWING SMOKE UP EACH OTHERS’ ASSES . . . SUNSHINE, CUPCAKES, AND PUPPY DOGS CREATE WARM, FUZZY, GOOD FEELINGS, AND MORE IMPORTANTLY, SELL! OUR COLLECTIVE UNWILLINGNESS TO ENGAGE IN A REALITY CHECK HAS GOTTEN US INTO DEEP DOO-DOO.Read more at location 638 • Delete this highlight Add a note However, I would like to make a case that the definition of a business should be changed to: a business is an entity that sells goods or services to customers in exchange for money and whose existence is not dependent upon any one person or small subset of employees.Read more at location 746 • Delete this highlight Add a note job, with a job-business you are not building equity value, which I believe is the really compelling reason to create a business. In a true business, you as the owner have an entity with value that is separate from you. This is the value that you create for the business as a going concern, above and beyond the strict value of your assets minus your liabilities, which makes owning a business worthwhile. That means you can eventually leave the business (down the road, after many years of hard work) or sell the business (again, after many years of hard work) and get value for it. That is how most successful entrepreneurs make the “big bucks,” by capitalizing upon the value of their business entity.Read more at location 760 • Delete this highlight Add a note If you are the one-man band and the only reason the business exists is because of your relationships and your personal flair of doing things, nobody is going to buy the business down the road. How could they? Without you, the business isn’t worth anything—you are the business,Read more at location 766 • Delete this highlight Add a note If you are not creating equity value, then you are not creating a valuable business. If you are just creating a job for yourself, you not only forgo equity value, but you now have a job that takes more time and energy and risk than any job you could otherwise get.Read more at location 770 • Delete this highlight Add a note Basically, being an entrepreneur means that you have to wear lots of hats. You don’t get to pick those hats, and even if you don’t like those hats, or think that you look good in those hats, you still have to wear them part of the time.Read more at location 789 • Delete this highlight Add a note The reality is that if you open a business, your job is now to run a business.Read more at location 802 • Delete this highlight Add a note IT IS MUCH EASIER TO REACH AND SELL YOURSELF AS A PROSPECTIVE EMPLOYEE TO POTENTIAL EMPLOYERS A FEW TIMES IN YOUR LIFE, THAN REACH YOUR TARGET CUSTOMERS AND KEEP SELLING YOUR GOODS AND SERVICES TO THEM EACH AND EVERY DAY.Read more at location 1118 • Delete this highlight Add a note business ideas by themselves have no value. The value is in the business execution. I have said it a thousand times if I have said it once: good ideas can fail, and bad ideas can succeed. The difference is the risk, time, commitment, and perseverance to take an idea, decipher if there is a market need for it, create a way to reach potential customers with that need in a cost-effective manner, and make the product or service at a cost that it will be desired by the customer and still leave enough money left over for you to profit from it. Not to mention working at it every day indefinitely, constantly innovating and providing outstanding service and value to your customer so that someone doesn’t steal your customers and business away from you.Read more at location 1205 • Delete this highlight Add a note As a business owner, what matters most is what your customers want because they are the ones paying you.Read more at location 1418 • Delete this highlight Add a note If you don’t have money, you should consider making and saving as much as you can before starting a business. The opportunity will still be there once you have saved up the start-up capital (and if it is not, then it was a fad, not a business, and you dodged a bullet).Read more at location 1882 • Delete this highlight Add a note If you can’t manage your own finances, then you shouldn’t be an entrepreneur trying to manage a business (and implicitly, the business’s finances).Read more at location 1885 • Delete this highlight Add a note While some businesses benefit from a honeymoon period, other businesses endure a reverse honeymoon period. Nobody knows that the new business exists, so it takes a good deal of time to build the business. The business may go through months of virtual nothingness. It may take months and months to get through a sales cycle and gain momentum. This can be emotionally devastating, as the business is so slow in the beginning that you wonder if you will ever gain any realRead more at location 2043 • Delete this highlight Add a note IF YOU ARE A PERSON WHO APPRECIATES HAVING CONTROL—WHICH IRONICALLY IS WHAT MANY ASPIRING ENTREPRENEURS CITE AS A MAIN REASON TO START A BUSINESS—THE ROLLER-COASTER RIDE OF A NEW BUSINESS MAY MAKE YOU INSANE OR AT LEAST EMOTIONALLY AND MENTALLY EXHAUSTED.Read more at location 2066 • Delete this highlight Add a note Liking new things isn’t bad except when you are trying to make a commitment. There are people who take commitment very seriously, and then there is someone like Larry King, who has been married eight times to seven different women. I am not judging; you can feel whatever way you want about commitment. I personally hate commitment in a lot of areas in my life.Read more at location 2095 • Delete this highlight Add a note If you are someone who is easily intoxicated by a new idea, business concept, or business model, but you have the attention span of a fly, then you are going to have a hard time following through and making your business a success. Sometimes a new business model seems exhilarating. It is new, shiny, and fun, and you are pumped about it. You tell a few people about it and you are really convinced that you are going to have the best business ever. So, you do some research and as you are learning more about the industry, you start thinking about all of the work that is required to make this cool new thing a reality. Then it becomes less exciting. It is still cool and still new, but it isn’t quite as cool as it was when it was brand-new. As more time goes by and you think about spending your life (or even the next five years) focused on this one thing—and I do mean focused, as all of your efforts are going to be focused on this business—then the once-shiny fun thing starts to look like torture.Read more at location 2113 • Delete this highlight Add a note Financial success aside, everything else in a new business is going to take two to three times as long (maybe longer) than you think it should (and than it probably should) take.Read more at location 2173 • Delete this highlight Add a note Consumer businesses can take a while to build momentum, and business-to-business products and services often have a long sales cycle. These factors are consistently not processed or severely underestimated by new entrepreneurs. When the business opens and dollars don’t start flowing, discouragement sets in. This doesn’t mean that you should sit around and do nothing (conversely, you have to work extra hard to reach and convert customers), but it doesn’t mean you should give up either.Read more at location 2191 • Delete this highlight Add a note In keeping focused on core competencies, if you are a doer, then you should do a doer’s work. There is no shame in being a doer. In fact, not much progress would be made in this world if there weren’t doers. The doers get things done! They lay the bricks that build the buildings, they prepare the food that customers enjoy, and they teach the children that are the world’s future. The doers may not get to fully participate in the upside of any endeavor; however, the doer’s life is typically a lot less stressful because doers wait to be told what to do (and don’t have a big risk if the doing doesn’t get done!).Read more at location 2240 • Delete this highlight Add a note Hoping and Dreaming Aren’t Doing People who wish and hope and dream for things are not so good with business. They spend more time hoping than doing. Have you ever met someone who spent so much time telling you about their dreams, that if they spent half the time they spent talking actually doing something, they would have accomplished whatever it was they were dreaming about in the first place?Read more at location 2278 • Delete this highlight Add a note IRead more at location 2281 • Delete this highlight Add a note Wishing never translates well into becoming an entrepreneur.Read more at location 2281 • Delete this highlight Add a note Three turtles sat on a log in the edge of the swamp. One decided to jump in. How many are now on the log? Nope, there are still three. Deciding and doing is not the same thing.Read more at location 2284 • Delete this highlight Add a note If you do not (or cannot) evaluate whether you will be making an appropriate return on your investment, and whether the financial trade-off of the business is worth the risk from a financial perspective, stop, drop, and absolutely do not quit your day job.Read more at location 2344 • Delete this highlight Add a note your financial statements should be educated guesses based on a set of logical assumptions (e.g., if you need to capture 90 percent of a market to break even, you probably don’t want to be in that business).Read more at location 2366 • Delete this highlight Add a note The worst part of raising capital is that it is rarely a one-time occurrence. If you ever want to grow your business (which you should, since the point of having a business is creating equity value and growing your business is a necessary part of that), you need to constantly be raising capital.Read more at location 2455 • Delete this highlight Add a note So, if you like the idea of never-ending competition with major competitors with tons of resources and bad competitors who could damage your reputation, all to gain the attention of customers who are hard to find and even when you do find them they are so overloaded with information that they ignore you anyways, you are going to love being in business.Read more at location 2614 • Delete this highlight Add a note If you do decide to move forward and want to learn about the slow but effective process of building relationships with your customers, I recommend The Contrarian Effect by Michael Port and Elizabeth Marshall.Read more at location 2639 • Delete this highlight Add a note Another thing that has changed, and continues to get worse, is the way that a lot of kids are raised. Parents have engaged in lots of touchy-feely B.S. that eliminates most competition and creates a so-called feel good environment. If you go to a swim meet, the winner isn’t the only one to get a trophy. No, not even just the first, second, and third place finishers get a trophy. Some genius decided that everyone in the swim meet should get a freaking trophy for participation. Supposedly, this way nobody feels like a “loser.”Read more at location 2825 • Delete this highlight Add a note This all sounds great in a sunshine-and-sprinkles environment, but I live in reality. So does business. When children don’t learn to compete, strive to improve, or do more work and preparation for the next time (because, hey, why should they if they are going get a trophy anyway?), they don’t develop the critical skills that are needed in the real world and certainly in the business world.Read more at location 2829 • Delete this highlight Add a note When you are starting your business, you are also investing in it. If all of your money is in your business, you will not have the opportunity to diversify with other investments. So, if your business doesn’t do well, all of your eggs will be in a basket that is broken.Read more at location 3126 • Delete this highlight Add a note Exponentially more important than providing paper clips and coffee is the extra Cs that working for an established company gives you. These three Cs are credibility, clout, and contacts.Read more at location 3253 • Delete this highlight Add a note If you have ever tried obtaining health insurance as a self-employed person or small business owner, it absolutely sucks. It costs a small fortune, and it is a pain in the butt to apply for. I know there are a number of well-known folks who contend that this isn’t as difficult as it sounds. I am guessing these people have a very clean health history, because it has been my personal experience (and that of many other small business owners that I know) that if you have a history of having a “health issue” as minor as say, hangnails, the insurance company is going to find a reason to charge you more or potentially deny you coverage, for your health care package.Read more at location 3317 • Delete this highlight Add a note As Matt’s story illustrates, working with other people gives you continuing education and helps you to grow professionally. Plus, interaction is healthy—it keeps your mind sharp and helps you avoid feeling isolated.Read more at location 3363 • Delete this highlight Add a note WE LIVE IN A CULTURE WHERE PEOPLE LIKE TO DO THE LEAST AMOUNT POSSIBLE AND DON’T LIKE TO TAKE RESPONSIBILITY FOR THEIR ACTIONS. WHEN YOU WORK IN A COMPANY WITH OTHER PEOPLE, THIS IS EASY TO DO. WHEN YOU OWN YOUR OWN COMPANY, THIS IS NEARLY IMPOSSIBLE TO DO.Read more at location 3377 • Delete this highlight Add a note When you own your own business, you can’t play The Blame Game. Even if it is someone else’s fault, if something doesn’t get done, or is done poorly or incorrectly, it is your problem. You can blame your employees, but the full impact of the problem falls on you.Read more at location 3399 • Delete this highlight Add a note When you add your first employee, everything changes. And I don’t just mean that you can no longer leave the bathroom door open when you pee. The moment you decide to hire an employee, just one measly employee, your paperwork and legal headaches increase by a factor of several hundred.Read more at location 3433 • Delete this highlight Add a note This is an incredibly powerful example of the employee issue. Two rogue employees again could cause incalculable brand damage to an established company with rigorous systems and procedures. When you think about starting a business and evaluate the risks and rewards of entrepreneurship, think about having employees and keep these two situations in the front of your mind.Read more at location 3548 • Delete this highlight Add a note You may have to install security cameras, you definitely have to build appropriate procedures, and most of all you need to keep an eye on your employees. I have heard of all kinds of stories regarding employee theft from entrepreneurs, from workers who would bag up inventory with the garbage, throw out the “garbage” and go back late at night to collect the goods and later sell them on eBay, to employees who were in charge of purchasing who ordered unrelated products and supplies for themselves.Read more at location 3555 • Delete this highlight Add a note Working capital deals with the balance sheet of a business. A very cursory and basic explanation of working capital is that it is your business’s current assets less its current liabilities.Read more at location 3629 • Delete this highlight Add a note You may assemble a world-class advisory board, have lots of moral support, and tons of friends, but let me tell you that whether your business succeeds will be 100 percent up to you. You will decide whether you sink or swim.Read more at location 3764 • Delete this highlight Add a note I noticed something odd. The company sold a lot of gift certificates. Every time the company sold a gift certificate, instead of recording it as a “liability” (i.e., noting that the company took a customer’s money that day and in exchange, had to provide goods to the gift certificate holder in the future), it was marked as a sale at the time the gift certificate was sold.Read more at location 3803 • Delete this highlight Add a note There was no associated cost to the gift certificate. There would be when it is used by the holder; that is when the revenue from the certificate should have been booked.Read more at location 3806 • Delete this highlight Add a note At the end of the day, if your name is on a contract, even if someone else’s is there too, you are still 100 percent responsible for it, and any implications that come as a result.Read more at location 3838 • Delete this highlight Add a note What if the worst-case scenario isn’t you, it is the business? Can you financially and emotionally withstand a worst-case scenario? What if nobody comes to your store, wants your goods, or desires your services?Read more at location 3904 • Delete this highlight