Planning to be rich is hard

Most of the richest people I know didn’t plan to be that way. They mostly fell into it.

Most of the time poor and stressed people I know plan to be rich. What gives?

One of the mistakes that many people make is being too literal in looking at how other people succeeded and then building their business plan around it.

The former head of the CSIRO used a great analogy to explain why success is hard to replicate.

His analogy was of an ant climbing a big tree. At every point of the climb, the ant is faced with decisions such as left, right, go around an obstacle, go back to find another path etc. At some point the ant is on a leaf high up in the tree.

When we find successful companies we think that if only we could replicate the path the ant followed then we too could succeed.

Yep, but it doesn’t work that way. Working backwards from the end point is only mapping a route which can never be taken again.

Sure, getting big is a good ideal, and investors like to hear how their investment will pay off. But the fact is that getting big is about hundreds of small steps, each of which may not appear to be bringing you growth, but as a whole make you big.

If you turn down sales because they don’t meet your objectives of getting rich, then you may have just turned down one of those incremental steps that help you. Not bringing in cash flow is not good business.

So I say follow your dreams, but don’t set them so high that they feel unachievable.

Opportunistic Serendipity

Luck plays a big part in the growth of any business.

Luck often brings opportunities. A casual comment at a dinner party, a phone call from an old friend, a newspaper article, etc. The size of the opportunity varies, but the opportunities come.

The hard part is recognising that luck and then acting on it. This is where experience and openness come into play.

Are you ready to gamble yet again? Spend another $5000 to $10000 to capture a big client, or opportunity?

Do your networks include the kind of people who can help you take advantage of an opportunity?

Are you prepared to share the prize in order to win?

Success comes when luck and preparation meet. I call this opportunistic serendipity.

Sell a stake in your product run, not your company

Raising capital is hard, especially if you are not running an exciting hi-tech company.

The property development industry often use an interesting model. They take a lot of the risks with setting up the business and getting approvals from government, but they minimise their financial risk on the construction by pre-selling, otherwise known as selling off the plan. Basically, they are raising equity funds to meet the requirements of their construction loan.

If you are selling software, you can pre-sell licences for a 3 year period, or for free updates. That way your foundation customers get something out of the deal.

For manufacturing industries your biggest upfront cost and risk is the finalisation of the design and the tooling costs for large runs. There are trends right now to sell a limited production run to cover those costs. For example, you could provide the first 100 customers with the product at cost, and their orders have effectively paid for the tooling costs, so that future production runs are cheap.

Anyway, that’s the principal. You will likely have to spend quite a bit of time and money on prototypes and functional websites, etc. however, this is a great way to grow that shares the risks and minimises your need to sell equity in your own company.

Sometimes you need to be an asshole

As much as I think Dale Carnegie had a lot of good ideas on how to get on with people and get the best out of relationships, sometimes you just need to be an asshole.

You are running a business, not a charity. If you always take a step back and let the other party get their way, then you are letting them improve their business, not yours.

You need to stick up for yourself and your business sometimes.

When you have been to 15 sales meetings and they still want more information, tell them that you have given them all the information that they need. The product is perfect for their needs, the price is good and all they need to do is actually buy.

Staff who give you lip and act like they own the place need to be reminded who is in charge.

When a customer asks for extra service without paying extra “Just as a favour” – learn to say, “sure, I’ll send you a variation notice for that as it is out of scope.”

When a customer tells you that they don’t like what you did and won’t pay remind them that you have a contract under the law and that you have delivered on exactly what they asked for and that you will be happy to pursue them in Small Claims Court.

The point is that humans are humans. We all try it on occasionally and we all need to be reminded how relationships work and how contracts work.

It’s not about actually being an asshole, but having those difficult conversations with people that need to happen. You may feel like an asshole, but it may help straighten things out.

Sometimes you need to scream

Almost every aspect of setting up your business is frustrating.

• Your customers seem to ignore the value you are offering.
• Advertising seems to have no correlation with sales.
• Your suppliers are slow to deliver and there are quality problems.
• Your business partner is more interested in everything else but the business.
• Your employees need so much help with decisions you sometimes wonder if they can even go to the bathroom without asking “When am I supposed to flush?”
• Then you have family asking you why you aren’t successful yet.
• Your server crashed for 2 days straight and you lost a lot of sales.
• One of your friends sets up a business on a seemingly trivial juvenile idea and they get rich in 6 months.

There’s a lot that can and does go wrong. Being frustrated by all this is only human.

Don’t bottle it, let it out.

• Try talking to your wife/husband/partner. Just ask them to listen.
• Alcohol in moderation may help, but not too much.
• Hold a pillow to your face and just scream and curse until you let it out.
• Get a punching bag and use it.

If you don’t let it out you will end up in a very weird place which is one step away from insanity – and trust me when I say that others will see it.

Catch the fisherman, not the fish

Time is your most precious asset.

If you spend all your time tracking down potential leads and then trying to convert them to sales you will have no time left to do anything else.

Think of how you can get to a bigger audience.

• Blogs are okay – but you need to market a bit.
• Organize to be a guest speaker or offer continuing education to a professional society.
• Sponsor a conference, and get a trade booth and a speakers spot.
• Find a complementary business that works with your client base and ask for referrals with the proviso that you offer referrals to them for their kind of work.
• Meet successful businesspeople who may champion you in to their business.
• Get to senior management if you can as if they can understand the value proposition of your product then they will try to make sure the decision makers pay you attention.
• If you have government clients, go to conferences or events they run to hear their views, and then meet them to understand what they really need.

The list goes on – use your imagination and stick to the principle.

Make your own luck

One of the first things I learned when I got into business is the concept of making your luck.

You can have the best business idea in the world, but if nobody knows about it you can’t sell anything.

Location and timing are everything.

• A basic example for a consulting business is to have your office in the same place as most of your potential customer base. I can’t tell you how many jobs I have picked up by bumping into someone I knew on the street. It’s great when someone looks at you and says – “Do you have any time to help out at the moment?”
• Go to conferences and exhibitions – introduce yourself, ask questions, ask for referrals.
• Think of the other businesses that sell products and services into your customer base. Show them what you can do and see if they will promote you into the company.
• If you are offering new products or services that your clients won’t understand by explanation alone, give them sample units of technology or free trials of your web based service.
• Stay in touch with contacts on about a 90 day basis.
• Go to professional society meetings/lunches – they’ll often let non-members come for a fee.

Go find a way for luck to happen.

Stick to your knitting

There are always distractions.

• One of your main competitors just started offering prizes to customers.
• You read in Wired magazine about a new technology that could make all the difference to automating your business.
• You think that if only you could organize all the files better then everything would work better.
• You just saw a brilliant new business opportunity that you want to pursue.
• Business is slow, you get bored and start looking for new things to do.
• The latest trends in management say that you should eat an orange every morning and talk to small furry animals to boost your own morale.

Okay, so I am deliberately exaggerating on that last one to make the point here.

Stick to your knitting means to always ask the following question – What is that I should do today to help bring in my next sale, or deliver on what I should to my customers.

It’s both that simple and that hard.

Real entrepreneurs don’t go to business school

An entrepreneur friend who has a great web based business recently caught up with an old family friend. The conversation went something like this.

“So, your mum tells me you are running a business now.”

“Yes, we are going really well, we have some amazing big name customers who recognise that we fulfil a need they didn’t know how to service.”

“Who’s the MBA in your organisation?”

“Umm, we don’t have one.”

“Who’s the CEO?”

“I am.”

And it went downhill from there. The family friend was of course in the middle of studying an MBA.

There are a lot of great business schools. There are a lot of great people who eagerly learn how to run a business while doing their MBA.

However, I’d add another observation. Almost all of the most successful entrepreneurs I know of didn’t finish university, and many didn’t even finish high school.

Business is about identifying an opportunity and backing yourself to take the risk of doing it. You don’t need to understand all the nuances of ‘business administration’ – instead you can surround yourself by people who do.

So don’t put off starting for years while you study your MBA part time – jump in the deep end now. You will learn – I can guarantee it.

Stay at the front of the queue – working with suppliers

It all seems so easy at first. You find a supplier, you negotiate a contract and you get your goods.

A few weeks later when the delivery is due you hear nothing. Panic starts to set in as you promised a firm delivery date to your main customer.  The following week when you do hear from your supplier it is only to hear that they will take another week or two – and it is due to their suppliers running late.

Sound familiar?

Here are a few tips.

• First – a bit of humility is called for. Your supplier has an existing customer base they will service first.
• Go introduce yourself – this is the beginning of a relationship after all.
• Have a look at their facilities and see what else they are up to. You may be surprised what you will learn from them on how to do things better and cheaper.
• Do ask how to ensure better outcomes and prices for you.
• Ensure you know how to specify your needs up front, send a purchase order promptly and pay upfront fees quickly.
• Keep in mind that big discounts are given to reward loyalty so you’ll need to order more than once. Ask about this.
• Negotiation is important, but if you try to screw them down to the lowest price on the first transaction you are damaging the relationship unless it is a pure commodity type business. Remember, once the order is placed they have the power. In other words, leave something on the table for them.
• When talking about dates indicate that you need it soon, and ask when is the best you can realistically receive it.
• Allow for extra time for schedule slippage in your own business - but don't tell them that.
• Stay in touch, and be pleasant. That way they will feel that you are working with them.
• Recognise that many suppliers are only human. For example when one of their own suppliers is late they may respond passively and say that this is just the way it is. Try working with them constructively to solve the problem.
• Demanding outcomes may help first time round, but damages your chances of a timely and quality delivery second time round.
• If you are not hearing from them, give them a call. They are busy too and may just forget to call.
• Try multiple suppliers and split the order in two.

Even with all the above, some suppliers may not work out, but at least you gave them a chance.

Think like a customer

Pretend you are your own customer.

• How do I find you?
• What are your products?
• How do I buy your products (e.g. contract types, retail locations, etc)?
• How is the product delivered? (physically for products, or for services by location and resources)
• Are there any lead times I should be aware of?
• What are the prices?
• What are the options and how much do they cost?
• How do you compare to the competition?

When you look at your company this way then you can better prioritise and find ways to run your business better. 

Follow your own path to grow your business

When you look at your competitors you will quickly realise that there are a few basic business models. These business models survive because they have been shown to be profitable.

A question to always ask is whether or not they suit what you want for your business. Make up your own mind on where you want to go with your business.  Typical choices include: Small with lifestyle benefits , salary replacement, a few hundred thousand a year, rapid growth, global behemoth, and more.

Follow your own instincts. You can take the best from your own industry and add the good parts from others. 

You will find that you learn from your failures and you will have a clearer idea of the path to growing your business.

What I am trying to say here is:

• Do look at successful companies – work out what they are doing right and emulate them.
• Do look at your competitors – see what they are doing better and improve yourself.
• Do look at other industries – see what they do differently and is there anything you can learn from them.

The comfort of sticking to a proven business model makes life easier. However, if you really listen to your customers you may find ways to do things that your competitors haven’t thought of yet.

Give up control to gain an advantage

There are so many details to get right in your business and you are the only one who really cares.

When my house was getting built a few years ago my wife and I went through countless hours of choosing colours, tiles, bathroom fittings, kitchen bench, and so on. It seemed so important at the time. Then when we finally moved in there were a lot of small details in the finish that annoyed us.

Two weeks later we stopped noticing, and now a couple of years later I wouldn’t be able to tell you what the problem was.

Setting up your business is just like that. So many things are new and you are probably giving equal importance to all your decisions. Suppliers and staff may have opinions, but they don’t really get it – or do they.

Take a step back and look at what really is mission critical to your business. That is, what really makes a difference to you running your business and selling your product.

For all non-mission critical matters take a standard off the shelf solution or product. In other words stop trying to optimise the outcomes for inconsequential decisions.

Even for mission critical matters try asking others for their opinions and give them the option of coming up your answers.

When you free yourself up from all the trivia and give up some control, you give yourself more time to run the business.

Retaining full control of decisions will mean that you are the bottleneck for decisions and that everything will take longer than planned. Also the lack of trust you show people will affect long term relationships crucial to success. So give up the control habit where you can.

Good mentors make a difference

Having mentors definitely helps when you are starting up.

You probably already know how to do the fundamentals of the work required, but there are so many aspects to the business that are new to you.

For example you will be dealing with issues such as  pricing, contracts, locations, marketing, advertising, hiring and managing employees, dealing with landlords, IT support arrangements, branding,  and so on. You also need some help to learn you how to get through those days where it all seems overwhelming.

It makes good sense to shortcut the learning curve and learn from others.

Most business owners look forward to talking to other business owners. You are like minded after all.

Be creative. While your direct competitors will be reluctant to talk, think of similar businesses . For example, if you are a retail startup then find someone who has been successful in that. If you are going into consulting, then find a fellow consultant.

I have often found the Managing Directors of companies to be very helpful as they have been through the startup phase themselves and are only too happy to pass on their experience.

You may even find that you need  a few mentors to cover different aspects of your business.

The internet also opens up possibilities. You may find mentors in your exact business in a different city, or even a different country.

A good mentor will give you a combination of practical advice and also teach you new ways to think.

As a mentor myself I find my relationships with startups highly rewarding too. I am constantly learning and I make some great new friends.

A good mentor can really help – go find one.

Being trendy can cost

Fashions come and go in a matter of months, sometimes years, but mostly shorter.

Gearing up to deliver goods and services to match a trend costs money, and you are always taking risks that it might not work out.

Let’s look at the example of retail products.

First you have to identify the trend. If it is coming from an overseas market then if you watch that market you might have advanced warning – but you are still taking a bet that it will come to your shores.

Second – you need to identify suppliers – this can take a while, and because others are looking at the same trend you can have a period of negotiation. This is a case of first in best dressed.

Third – there is a lead time for manufacture and delivery, don’t forget clearance with customs too. The goods need to meet your country’s standards to be saleable in the first place.

Fourth – you need to market and get the goods out in time to be sold.

A few companies do this well – for example Zara out of Spain which can release a new line of clothes into stores in almost no time. They compete well against cheaper Asian clothing because they are more timely. However, it has taken many years and a large economies of scale for this to work out for them.

For everyone else, my advice would be to limit the risk you are taking always selling the latest and greatest. 

Remember that the trick is to sell people what they want and not what you think they want – this can take a lifetime to learn and you will make mistakes.

If you decided to follow the trends and it doesn’t work out too well, at best you will fill your storage space and your garage at home with unsold inventory (my wife often reminds me of the value of unsold goods I am storing) and at worst you will have interesting cash flow problems.