Advice for Entrepreneurial Success

Over the years many people have asked me, “Can you give me the 3 (or other small number) key factors to be successful as an Entrepreneur?” Well, for me, there are many, many more reasons. My mind can’t boil it down to just a few. So, I put together 50 answers to this question in no order of priority.

I would like to hear from you if you have other ones. I know there are many more important ones. Thanks.

 

Here’s my list.

 

  1. Have passion for your business.
  2. Set an example from day one that you are a trustworthy company. Spell out what you expect from your employees.
  3. Know your business: product, industry, competition. Knowledge rules.
  4. Look to hire people different than yourself (can be smarter) who speak up and are curious. Incentivize them.
  5. Look for mentors and work hard at building the relationship.
  6. Always watch the cash.
  7. Always pay your bills on time.
  8. Work on your listening skills.
  9. Work on your sales skills and everyone else’s in your company.
  10. Don’t be afraid to give up equity under the right circumstances.
  11. Plan for tomorrow. (Not necessarily elaborate business plans) In planning your strategies, ask why should your prospective customer buy from you?
  12. Create an environment where innovation can flourish.
  13.  Be flexible, except with core values, and don’t be afraid to change course.
  14. Make timely decisions.
  15. Encourage and accept criticism graciously.
  16. The major asset of the company is you. Take care of yourself. Maintain your energy level.
  17. Maintain balance in your life. It doesn’t have to be your family or your company. Play or work, etc.
  18. Insist on quality in your product or service.
  19. Make sure customers’ expectations are met. Under commit and over perform.
  20. Don’t try to do everything yourself. Delegate but with the authority that goes with it.
  21. Success breeds copycats. Don’t take it personally. However, do compete vigorously.
  22. Treat good suppliers like gold.
  23. New product ideas need not be blockbusters.
  24. Don’t let fear of failure hold you back.
  25. Move quickly to fire people you are convinced are bad for your company.
  26. Don’t forget the details.
  27. As company grows, people’s roles change, including yours. Can you/they adapt and what will you do with the people who can’t?
  28.  Profits are good and essential to sustain your business.
  29. Periodically, get out of your comfort zone. It is important to grow personally and your business.
  30. Don’t confuse risk to your business with risk to your ego.
  31. Keep learning: knowledge is power.
  32. Rebound quickly from setbacks.
  33. Give raises to your best employees before they ask.
  34. Treat the little people as if they were big people.
  35. Keep track of your competition, but don’t fear them.
  36. Give back.
  37. Outwork your competition but equally outsmart them.
  38. Change is good: embrace it.
  39. Admit your mistakes and pay for them if appropriate.
  40. Thank you and please go a long way. They are still in the dictionary.
  41. Know what you don’t know and don’t be afraid to admit it.
  42. Never compromise your core values.
  43. The most effective form of advertising is word of mouth.
  44. An initial sale is good but nowhere as valuable as a re-order, which is a vote for your company and its product.
  45. Regularly talk to the users of your product.
  46. Regularly talk to those who sell your product, whether they are on your payroll or not.
  47. Aggressively protect your intellectual properties, but remember it is better to sell someone than sue them. Also calculate the cost of suing emotionally, your time as well as monetarily, with a calm mind.
  48. Keep track of your numbers. You need not be good at math to do so.
  49. Bootstrapping creates healthy habits to your benefit in good as well as in difficult times.
  50. Mission statements are only good if they are strictly adhered to.
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Curiosity – A Key Entrepreneurial Trait

Most of us will agree that creativity is a key element in a company’s growth and sustainability. This applies to small and large companies, start-ups, and service or product companies. Without creativity, you are susceptible to becoming a me-too company, which will lead to lower profit margins, loss of market share, and eventual demise in today’s fast moving entrepreneurial world.

So, the big trick is knowing how to foster the maximum creativity in everyone in the company. One of the most important ways is to have curious people in the firm. You want people who ask a lot of questions-not gossip questions. They should ask how questions. How do we know if our ads work? Who buys our products? How do we stack up against our competition? How can we improve, etc.

You want a diversity of curious people, who may disagree with each other but always in a civil tone without politics in play.

This curiosity element should begin in the hiring process. Look for curious people and think of questions to ask them. Do they know what is going on in the world? What do they read? How much do they know about  your company or industry? Etc.

You, as the Small Business owner, need to have a high patience level to listen to all these questions. Many will seem silly or a waste of time to you. You can’t say that is a stupid question because that will halt the flow of questions, and there goes your creative environment. This could be difficult for you as many action-oriented entrepreneurs are short of patience.

Curious people are also much more apt to always be learning. They are not complacent with their current knowledge level. Continuous learning is a lifelong process and should be encouraged. It will pay off in your business and employee retention.

This patience with questions carries over to your home life, particularly with kids. Their barrage of questions can be annoying at times. However, that is how they learn. Your patience will help the process.

10 Tips to Build Better Trust in your Business

Trust Builds Confidence

 

The single most important thing you can do in starting and building a business is to get people to trust you. Trust needs to be earned and takes time, although you can lose it in a second. Telling people to trust you doesn’t cut it. In fact, when people I just meet tell me to trust them, my antennae is up to watch my back.

 

The benefits of being trusted are enormous. People have confidence in those they trust. Confidence leads to wanting to do business with you. Employees want to work for trustworthy bosses and are more highly motivated when they do. Customers are more likely to write orders for sales people they trust. Investors and lenders will not write the check to anyone they suspect is not high on the trustworthy ladder. A great deal of their due diligence is in finding out your trust score. And in my opinion, the most important thing about being trusted is that you live a better life. The only way to teach your children about trust is to set the example for them.

 

You should always do the right thing. Most people know right from wrong but are compromised when money is at stake. Many people differ on what is right or wrong in a business situation. It takes lots of little things and time to build trust. Some people never even think about it as they instinctively do the right thing. Here are 10 specific trust building ideas to get you thinking in the right direction. There are many, many more.

 

10 Tips to Build Better Trust in your Business

 

1.  Listen to people you deal with.

2.  Admit mistakes right away.

3.  Pay bills on time. If you can’t, call and tell why and when you will pay. Give a date

you can meet or beat.

4.  Acknowledge what you don’t know. Don’t BS.

5.  Don’t duck or procrastinate dealing with a problem.

6.  Demand quality.

7.  Don’t over promise.

8.  Move quickly to correct mistakes no matter the cost.

9.  Keep your promises.

10.  Never betray confidential information.

 

Bootstrapping 101 lists 38 trust building ideas.

 

Also, remember trust is portable. Wherever you go, it follows you: good or bad.

 

ENTREPRENEURS–TIME TO BE THANKFUL

Whether you’ve had a difficult year in this current environment or have been one of the fortunate ones and prospered, it would serve you well to pause and take stock of all the things you should be thankful for.

Be thankful you are in your own business and your own boss. Millions of people aspire for the same.

Be thankful for all your customers without whom you would have no business.

Be thankful you live in the United States, which affords you the opportunity to pursue your passion and to succeed with no limitations– and yes to fail, which is one of life’s great teachers.

Be thankful you can choose which 80 hours each week that you can work.

Be thankful for your family and friends who are your support team–an essential element for Small Business owners.

Be thankful for your loyal employees who are helping you fulfill your dreams.

Be thankful you are rewarded for your company’s successes while knowing you can pay for its risks.

Be thankful that you can make sure everything is done the right way.

Be thankful you can try to implement any ideas you have and bring them to fruition. The corporate people can’t say that.

Be thankful you are in a position to positively impact other people’s lives.

Bob Reiss www.bootstrapping101.com

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Outsourcing Turns Fixed Costs Into Variable Cost

Low monthly overhead could save your company during a cash crunch.

A fixed cost is one that your business incurs whether or not it makes any sales. An example is rent: It has to be paid every month whether or not you’re generating any income, and it’s the same every month.

A variable cost, by contrast, is incurred only when you make a sale. A variable cost usually varies depending on the amount of the sale. A commissioned salesperson, for example, is a variable cost. If the rep is paid 10 percent of sales, and the sales for a given month are $25,000, then that person gets $2,500 in commissions. If sales drop to $1,000, then the commission drops to $100.

Converting fixed to variable costs is a major way to reduce your need for money. It could also be the difference between success or failure for young companies. Every fixed cost should be scrutinized for conversion to a variable cost.

Here are some examples of fixed costs that can be converted to variable:

Sales: Instead of hiring full-time salespeople and being burdened with weekly or monthly wages, go with independent sales representatives who work on a percentage basis. You pay none of their expenses. Reps don’t incur the burden of benefits, which can run as high as 30 percent of the salary of a full-time employee. Plus, ineffective reps are easier and less costly to replace than full-time salespeople.

The best reps have strong relationships with customers in their territory, which can translate to quick access and orders.

Manufacturing: You don’t have to own a factory just because you want to produce, assemble, store, ship and build your product. Contract manufacturers are happy to do all or some of the above for you. (Find them on search engines or the phone book.) They charge either for the space you take up or the functions you ask them to do. Most will work out a deal with you to charge a percentage of your billing, making this a variable expense.

Contract manufacturers also maintain insurance on your goods in their possession. They cover the cost of their employees’ benefits. This represents a huge saving in fixed and operating costs.

Yes, there are some downsides — including the fact that you may have to vie with their other customers for priority. Here persuasion and salesmanship are your best weapons. As soon as your volume warrants it, allocate a full-time person to cultivate the relationship with your “extended factory.” At some point, you may even want to position your employee on their premises for more control (and reduced risk).

You may have the type of product that would permit you to pay another manufacturer to make it for you under your brand. (This would be their “private label.”) Products like beer, liquor, drugs and computers are often made under this kind of arrangement.

Administration: Guess what? Your billing, sales reports, commission statements, royalty statements, inventory reports and aging reports can also be done on a percentage basis by your contract manufacturer (or a company specializing in doing all the administration for you). Of course, the more functions you outsource, the higher your percentage payment will be. But remember: everything you’re outsourcing is a function that you’re not hiring a salaried body to perform.

And it’s not just bodies, either. Why should you pay for the latest computers and software to run them? By outsourcing administrative tasks, you don’t have to pay the price of obsolescence, which can be very high in the world of computers. Your customers will have absolutely no idea that these functions are outsourced. (They probably wouldn’t care if they did know.) And your company takes on the aura of a well-established business from the outset.

Inventors/designers: You can get quality people to invent, develop and design products for you on a percentage of the products’ billing — in other words, on a variable expense basis.

Many will want to work on upfront fees only, a fixed expense. Salesmanship on your part can get them to charge your way. If they’re sold on your company, you personally, or the product, they’re more likely to comply with your wishes. Sometimes a compromise is required where you pay a modest upfront fee and a modest percentage on sales of the product.

Public relations: Some public relations firms charge on performance rather than the more typical fee basis. A performance-based agreement should be carefully spelled out, with specific accomplishments and their exact costs.

As your company grows and volume increases, there may come a time when the fixed cost is less expensive than a variable one. Before you switch, make sure you can maintain this high volume. Don’t switch on the basis of sales projections or a one-time uptick. As a general rule, investments in overhead should be made only when you have a high degree of certainty about the product, and when customer demand is strong and well understood.

Maximizing variable expenses reduces the amount of capital you’ll need to handle overhead and operating expenses in slow-selling periods. A low monthly fixed expense ensures that you’ll break even (and even profit) faster.

 

This is my November column in Entrepreneur.

FUNNY TAKE ON HOW ENTREPRENEURS ARE BORN

This past Saturday, November 6, Scott Adams the creator of Dilbert wrote an article for the Wall Street Journal and showed us why he is one of the iconic humorists of our time. His hilarious take on how Bad Management spawns new start-ups has much truth in it. I thought I should share this article with anyone who missed it. For those who saw it, enjoy again. Here it is in its entirety:


The Perfect Stimulus: Bad Management

If no one had a hamster-brained sociopath for a boss, who would start new businesses?

by Scott Adams

One of my earliest childhood jobs involved shoveling manure at my uncle’s dairy farm in upstate New York. Things were going well until my uncle explained that no matter how well I performed, I would never be promoted to farmer. Or even cow. I had hit the manure ceiling.

I consider that experience my first economic stimulus package—the unwelcome realization that my current job was a dead end. While my classmates were building snowmen with carrot noses (mostly the girls) and carrot genitalia (mostly the boys), I started to do some serious career planning about how to get out of the fecal relocation profession and into the warm embrace of a loving corporation. I studied hard, and I earned money for college by mowing lawns, shoveling snow, shoveling even more manure, and (my personal favorite) shoveling frozen manure covered with snow. I saved my meager funds, and with the help of my parents, who both took extra jobs, plus a few scholarships, I clawed my way into college.

Years later, my dream came true. I got a job with a large bank, and I never again needed to shovel manure. Corporations use something called PowerPoint instead. Thanks to my farm training, I was so good at designing PowerPoint slides that my coworkers called me “The Natural.” Jaws dropped when I introduced my signature move: the frozen PowerPoint slide with snow on top.

In those days, I was a furious bundle of ambition and determination. The old-timers told me I had a “rocket strapped to my ass.” All I needed to do was get my “ticket punched.” It wasn’t long before I was able to enjoy my second economic stimulus package: bad management.

Though most of my immediate bosses were entirely reasonable and competent, the organization at large was riddled with hamster-brained sociopaths in leadership roles. Surely, I thought, this must be a problem that exists no place else on Earth. Otherwise we’d all be living in caves and holding long meetings on the feasibility of using sticks as stabby things.

One day, a position opened above me, and I was the most obvious candidate to fill it. My boss called me into her office and said she had some bad news. She explained that the media was giving our company a lot of heat because almost all of our managers and executives were white males. Promoting me, she explained, would only make things worse. I asked how long I might need to wait for all of this to blow over. My boss was vague, but she said the timeline involved smoothing out the effects of two centuries of corporate discrimination.

I decided to jump ship and go where my talent and hard work would be rewarded. I took a job at the local phone company and soon discovered, to my horror, that banking was not the only industry in the world managed by hamster-brained sociopaths. Once again, my immediate bosses were quite capable, but interacting with other departments was like being the last human in Zombieville and trying to buy groceries at dusk. Still, it was marginally better than shoveling manure, so I doubled down. I finished my MBA classes at night and distinguished myself as an up-and-comer.

One day my boss called me into his office and explained that the media was giving the phone company a lot of heat because almost all of the managers and executives were white males. So, he explained, promoting me would only make things worse. You might say that was the day that the “Dilbert” comic strip was born, although I had not yet drawn one. Let’s call it a tipping point. From that day on, I considered myself an entrepreneur. All I had to do was figure out what business I was in. The phone company was willing to pay for almost any sort of semi-relevant training or education that I was willing to endure. It was like an accidental school for entrepreneurs. From an economic viewpoint, I was in exactly the right place, with exactly the right amount of career discomfort.

I wasn’t suffering alone. Many of my co-workers already had active side businesses and ambitious expansion plans. The guy in the cubicle behind me was running a concert equipment rental business. Across from me was a guy running a computer tech support business. We had Amway dealers, Mary Kay sales people, inventors, authors and just about any other business you can imagine. That’s not counting all of the business plans in the incubation phase. I think we all understood that working in a cubicle and being managed by Satan’s learning-challenged little brother was not a recipe for happiness.

The way I describe it may sound pessimistic, but consider the alternative. Imagine a parallel universe where employees enjoy going to work. They feel empowered and fulfilled—so much so that they don’t care about the size of their paychecks and never want to leave their jobs. That’s exactly the sort of nightmare scenario that would destroy the economy. The last thing this world needs is a bunch of dopey-happy workers who can’t stop humming and grinning. Our system requires a continuous supply of highly capable people who are so disgruntled with their jobs that they are willing to chew off their own arms to escape their bosses. The economy needs hamster-brained sociopaths in management to drive down the opportunity cost of entrepreneurship. Luckily, we’re blessed with an ample supply.

To put it in plainer terms: The primary purpose of management is to kill any hope that staying in your current job will work out for you. That sort of hope is like gravel in the engine of progress. The economy needs workers who are fed up, desperate and willing to quit their jobs for something better. Remember, only quitters can be winners, because you can’t do something great until first you quit doing something that isn’t.

You see this same dynamic with countries. The United States is a nation founded by people who couldn’t stand the leaders of their old homelands. I’m no geneticist, but I suspect that the “screw it, I’m out of here” attitude can get passed on. We’re probably the most disgruntled, self-loathing, hard-to-satisfy people on Earth. It’s no wonder our GDP is awesome.

Israel is another perfect example. The entire nation is full of people who were displeased with their last situation. And Israel’s economy is one of the most vibrant in the world. If every Israeli became satisfied at once, they couldn’t keep the lights on for a week.

I have always assumed there’s a correlation between imagination and risk-taking. You wouldn’t leave an unpleasant but relatively safe situation unless you could imagine a better outcome. So the people who leave a company first tend to be the visionaries who can best imagine entrepreneurial success. The last wave of people who leave are usually excreted just before the door is chained. They didn’t imagine it would happen so soon. Bad management is how imagination gets wings.


RISK: IDENTIFY, PRIORITIZE, AND MANAGE IT (Part 1)

(First in a 3 part installment)

A Google alert steered me to an article called “Beating the Odds When You Launch a New Venture” that had just come out in the May issue of Harvard Business Review, authored by Clark G. Gilbert and Matthew J. Eyring. It was one of the best pieces Iʼve ever read about entrepreneurs, their attitudes, and management of risk. They said that entrepreneurs arenʼt cowboys—theyʼre methodical managers of risk.

I thought their concepts applied equally to small and big business. I contacted one of the authors, Clark Gilbert, to discuss his ideas and decided I wanted to share his thoughts with my small business friends. The result is my interview (below) with Clark.

My comments follow his answers and are primarily addressed to small business owners.

Clark Gilbert (gilbert@deseretdigital.com) is the president and CEO of Deseret Digital Media and was formerly a professor at Harvard Business School.

1. BR: Do you think Small Businesses spend enough time identifying their risks and planning on how to deal with them?

CG: Because capital is scarce, start-ups are not likely to get very far without having to adjust to data from the market. In this sense risk identification is almost “imposed” on a start-up. The scarcity of capital forces discipline. That said, entrepreneurs who think more carefully about the risks they face, systematically target the most critical risks, and remove them will be more successful that those who do not. When you start a new venture, you donʼt have all the data to make the right decisions. You just have to wade into the venture process and learn from the data that comes out. For example, you might have a hypothesis about the pricing structure and you can do things to test it, but until you actually close a sale, you donʼt have the data as to the price people are really willing to pay.

BR: I have found that in start-ups and small businesses, so much time and energy is spent on putting out fires and surviving, that risk management gets short changed. Periodic time outs for reflection are needed.

2. BR: Does this differ between start-ups and established companies?

CG: Believe it or not, one advantage start-ups often have vs. established companies is the lack of available capital. This forces start-ups to be more disciplined with their at-risk capital either because it is scarce or it will cost them equity. Too often, big companies had an overabundance of capital, which makes them less responsive to changes they need to make while the venture is being formatively developed.

BR: To bolster this point and no. 1, I would like to tell you about an interview I had with Stephen Gordon, the founder of Restoration Hardware. In response to my asking, “What were the factors that most contributed to your success?” He answered, “If sufficient capital had been available to me in the companyʼs early stages, I might not have been as successful as I was.” I myself learned that Bootstrapping out of necessity helps you form good habits that stand you in good stead even when you are in a healthy cash position.

3. BR: Do you think Entrepreneurs go into their own business with the idea that they must take risks to be successful and therefore accept more risk than they are comfortable with or capable of overcoming?

CG: Good entrepreneurs donʼt take risks, they manage them. Of course you can manage them completely away, but what I find differentiates good entrepreneurs from others is the ability to not to take risks, but to manage them.

BR: I believe the media has promoted the idea that to be successful, entrepreneurs must see and take on risk. (Think of reality shows like the Apprentice and Shark Tank.) Those that buy into this and donʼt identify risks, no less manage them, will find themselves a statistic in the long list of failed companies. It is surely a myth that good entrepreneurs love risk.

4. BR: In your recent article for Harvard Business Review titled “Beating the Odds When You Launch a New Venture,” you refer to the R&R case to illustrate some of your premises. As I have an intimate knowledge of this case, I was wondering if you thought its lessons apply to service companies as well as to product ones, which R&R is? Also if they apply to large companies, which R&R was not?

CG: I have used the R&R case with non-profit leaders, Fortune 500 companies, and more traditional entrepreneurs. Its lesson applies universally and grows from the idea that entrepreneurship is a way of managing, not a type of company. I remember teaching the case to the new venture group of a major U.S. media company when the lights went on for everyone. They had initially looked at the case as something for a small business owner. But as they got in and looked at how you used risk reduction not just to save money, but to fundamentally increase the prospects of the venture, their perspective began to change. Ironically, the scarcity of capital imposed on the start-up entrepreneur gives him an advantage over big corporations with all of their resources. One executive finally realized: “We need to manage like we donʼt have capital, not to save money, but to raise the probability that we find a winning strategy.”

BR: When the Harvard Business School case was written, R&R was my one person company in a small office in New York City. The case was about my venture to ride the coattails of the rapidly rising Trivial Pursuit game. To give R&R credibility, we obtained a license form TV Guide to use their name and create the 6,000 questions that were needed. It was a time sensitive project as we knew the large toy companies were developing their own Trivia games. Briefly, we outsourced the manufacturing, selling, shipping, and financing of the game. Our major RISK was that we wouldnʼt get the purchase orders we wanted because the large toy companies, who promote their games on TV and Trivial Pursuit reorders would come ahead of us in the order chain. To combat this risk, we asked for and received 5 free ads in TV Guide in exchange for increased royalties. We then promised major retailers their names in these expensive ads at no cost to them. This translated into immediate purchase orders of $3,000,000 prior to our first shipments and eliminated our risk. (This case and all the Bootstrapping tactics employed are spelled out in my book, Bootstrapping 101.)

Part 2 Continued Next Week…

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