Entrepreneur

 

“Only those who dare to fail greatly can ever achieve greatly.”

-Robert F. Kennedy

Create wealth, Get rich, Millionaire

Ready to stop working for someone else?

In real estate, the leverage of a mortgage gives you tax benefits and cash flow to build equity with. In a business, your leverage is people. The talents and time of your employees help you grow your business.

Isn’t it time you took your talent, energy and enthusiasm and used them to create wealth for yourself?

Do you see a market opportunity?

Are you willing to accept personal, professional or financial risks to chase it?

Do you take actions and assume responsibility for the outcome?

Do you fear failure?

Or do you see it as a chance to take a different direction?

If you answered “yes”, “yes”, “yes”, “no” and “yes”, then you probably understand that seeing failure as opportunity is the greatest indicator of your ability to create wealth.

If you’re honest and admit you fear failure, don’t worry. These are skills you can learn and eventually turn into habits.

 

 

 

Don’t Play Fair

April 15, 2012 1 Comment

Let’s play word association. Or to be more accurate, acronym association. I’ll go first.

“IRS”.

“Invasive.” “Confiscatory.” “Heartless.” “Unbending.” “Bureaucratic.” “Dictatorial.” “Arbitrary.” “Capricious.”

Okay, that’s a start. Here’s another one: “Anti-business.”

Or more specifically, anti-sole proprietorship.

If you’ve spent as much time trudging the depths of our nation’s tax code as I have, you reach two inevitable conclusions:

1. The whole colossal, unreadable, internally contradictory thing needs to be demolished;

2. As it stands right now, it treats regular salaried workers worse than it treats anyone else.

No one pays through the nose come April 15 worse than Lunchpail Larry and Cubicle Candice alike. And who benefits while they suffer? Those no-good businessmen, that’s who.

You developed a skill, became an expert in your field, found clients, made them happy, continue to, and now you’re turning profits. The American dream — better living through entrepreneurship. Everything is going great, so should you bother with the extra work and the legality of it all?

If all you do is create a product or perform a service that people love and are willing to pay for, you will be pecked to death by state and federal income taxes.  So much so that you’ll want to give up your aspirations of self-determination.

Play The Game

You can rail about the unfairness of this. Or you can do what almost everyone can, but few bother to: play the IRS’s game; only make sure that you’re on the winning team.

In other words, if you own and/or operate a business, incorporate. Create an artificial entity that doesn’t eat, sleep, or breathe. All it does is get tax breaks.

Tax Breaks

“Tax breaks” is a vague term, but for our purposes, we’ll define it as being taxes that a salaried worker pays that an entrepreneur doesn’t. By the way, it’s not like there’s some special 4-year training period you have to complete to become an official entrepreneur. Nor do you need a prohibitive amount of money. The ranks are wide open. When you incorporate, you reduce the tax liability for you and everyone else who owns a piece of your company.

Liability Protection

Say your business loses a massive amount of money in a short time, by incurring an unforeseen, uninsured expenditure like a civil suit. The sole proprietorship could end up owing more money than the business itself is worth.  So where would the additional money come from? You, the owner. That’s called personal liability, and it sucks all manner of foodstuffs.

When you structure your business as a corporation, you’re taking advantage of the legal principle of limited liability: (your share of) the business can’t be responsible for any more than what you put into it. For example, if you owned $2,000 worth of Enron shares, and it turned out that the company didn’t really produce anything, the worst that could happen to you as a shareholder was that you’d be out your $2,000 when the stock price fell to $0. No one who sued the company (and there were plenty) could sue you, as an owner, for more than your investment. Now if you were a director of Enron, on the other hand…

This is called the corporate veil, and it really comes in handy on the smaller scale of a you-sized business. Considering that 2/3 of new businesses fail, you have to protect yourself against any inevitable downside. Unless you’re so masochistic that you enjoy having creditors come after your car, house, personal bank accounts, and maybe your baby if it’s healthy and has all its organs.

2 Ways to Incorporate Your Business

If you know even a little bit about this, you might know that there are two common ways for your business to incorporate. The more common one is called an S Corporation, the other is as a limited liability company.

Under either an S corporation or an LLC, your private assets are protected. No one who feels slighted by your company can “sue you for all you’re worth”, as the invective goes. This isn’t the case when you’re a sole proprietor: for legal and tax purposes, you’re indistinguishable from the business itself.

An LLC doesn’t technically pay taxes. Instead, the government taxes the LLC’s (taxable) profits, which are distributed among the owners. Those profits get taxed at the same rate as regular income. Your LLC issues you a K-1 statement, which lists your share of the LLC’s income and expenses, to be transferred to your 1040.

An S corporation is a little more work, but usually worth it.

There are minutes, resolutions, the election of officers, formal financial statements, etc. You’re even supposed to hold an annual shareholder meeting, but that’s not hard to do if you own all the shares.

From a tax standpoint, there’s virtually no difference between an LLC and an S corporation. The biggest difference between them is how the IRS treats excess profits. If you own and operate an S Corporation and pay yourself a “reasonable” salary, the remaining profit is “distributed” to you at the end of the year and isn’t subject to 15.3% self-employment tax. Not so with an LLC.

Other Reasons to Incorporate

Hopefully, your business gets so successful that you end up selling it. Which for most of us is the ultimate goal anyway. Take it from someone who’s been there; while a sole proprietorship is easy to create, it’s a pain to sell.

If you operate your real estate business as a sole proprietorship, you have to sell every single asset individually. If you incorporate, the entire business moves as a unit.

Besides, if your business is viable and the new owner halfway intelligent, the first thing he’ll do is incorporate anyway.  Save him the trouble and do the incorporating yourself, then add the incorporation fee into the price. And charge a premium for the privilege, of course.

Even if your business has multiple owners, and even if those owners are just you and a spouse or a sibling, selling your share will remain a snap if you’re incorporated.

Are you ready to play the game?

Or you could just keep filing your annual 1040s, and try to figure out why you’re not getting rich.

 

Obligatory legal disclaimer:  Although most states allow a real estate licensee to operate under a single-member LLC, you should check with your state real estate division to be sure.  Ask your attorney or accountant if an LLC or an S Corporation is the right choice for you.

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Think, Plan, Do, Achieve

March 22, 2012 Leave a Comment

4 easy steps to success

 

Think


Who do you want to be?

What does your future look, feel & sound like?

Create a picture of what you want through stories, drawings or photographs.
The future is yours. All you have to do is create it.

Plan


How do you get there from here?

Find out where you are now then plot a route to where you want to be.
Once you’re on the path, every action moves you closer to your outcome.

Act


To achieve your goal, you have to act.  Implement your plan today.  Be accountable for your behavior. Stay on the path, don’t make excuses and don’t get distracted.

Achieve


If you have a compelling vision, create a plan and take action on that plan every day; you will succeed.

What are you waiting for?

 

Filed Under: Entrepreneur, Strategist, Visionary Tagged With: , , , , , , ,

Victim or Victor?

January 25, 2012 2 Comments

When you subscribe to the belief that everything is out of your control, you give up your power.  To create the life of your dreams, you don’t have to be smarter, better connected nor luckier than anyone else. You’ve only got to be willing to take control of your life. Start now by doing these things:

“The best way to predict the future is to create it.”  Peter Drucker

What do you want your life to look, smell, taste and feel like?  There’s a reason why all my articles about success start with a vision.  It’s the foundation for everything. Until you’re completely engaged, excited and immersed in your future vision, you’re just going through the motions. Every thing and everyone will be able to make you react instead of act.  It’s when you react to people and situations that bad things happen. Or, you’ll be so busy dealing with everything coming at you that you can’t act on opportunity. If you don’t know what the outcome looks like, you can’t make the best choices on how to get there.

Write out a plan

“Success is where preparation and opportunity meet.”  Bobby Unser

With your vision firmly in mind, it’s time to write down exactly how you’re going to make it a reality. I’m not going to lie, it’ll be hard work. Most people you think of as lucky are just way more prepared than you are.  What will you do every hour, every day, every year to make your vision real? Your plan is part inspiration, perspiration and aspiration. Reach high, work hard, believe in your future. Ready to get to work?

Live with integrity

“Borrow trouble for yourself, if that’s your nature, but don’t lend it to your neighbours.” Rudyard Kipling

If your plan is the map, your values determine which road you’ll take.  We all have friends who say one thing and do the opposite.  We call them hypocrites. They’re also unhappy. Be honest about what’s important to you and then hold yourself and everyone in your life to the highest standards. Don’t allow anyone in your life who’s not going to live by the same standards you set for yourself. When you loosen this rule, you end up hanging out with people who will distract you from your journey. If misery loves company, happiness demands a certain level of solitude.

Live below your means

Net worth has nothing to do with your annual income. It’s all about how you handle your cash flow. Every month cash comes in and it goes back out. Where is your cash going? Are you spending your cash on stuff or assets? Even worse, are you using credit cards to purchase that stuff? Here’s one easy way to spend less money: don’t smoke, drink, gamble or do illegal drugs. All of these addictions cost lots of money.

Stay out of debt 

“I can get no remedy against this consumption of the purse: borrowing only lingers and lingers it out, but the disease is incurable.”  William Shakespeare

Do whatever it takes to get and stay out of debt. If you don’t have debt, it’s a lot easier to live below your means. When you’re debt-free, you have more options, more freedom, more happiness.

Work your plan everyday

Are you ready to work hard everyday to make your perfect future a reality?  Do something everyday that will move you toward your outcome. Don’t get sidetracked by the frivolous, futile, or feel-good for now. Sacrifice today for tomorrow.

Invest in yourself and your future

What do you need to know, do or be to reach your goal?  Go to school, find a mentor, take an apprenticeship to get the knowledge you need.  Practice these skills every day until you become unconsciously competent. Delay the gratification that comes from spending money you don’t have on trinkets, alcohol and frivolity. Spend your time planning, learning and practicing.

Create a network

We all want to do business with someone we know, trust and who gives us business in return. This is the premise of all networking.  When you meet someone new, ask yourself: “How can I be of unique service?” and  ”Who do I know who can be of benefit to this person?”  You’ll need to know your market, your product, and how to communicate its benefits concisely. This should not be a sales pitch; it should be a natural extension of your introduction. Linking your connections to others maximizes your exposure and brings additional value to your inner circle.

Be thankful 

Take a moment every day to give thanks for all that you have,  Don’t think you have much?  Concentrate on all the people who have even less than you.

Follow these steps and people will call you lucky.

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What’s your problem?

January 2, 2012 3 Comments

Your customer doesn’t care what title is on your business card, what school you went to or what your grade point average was.  He wants one thing:

His problem solved.

It sounds so simple, yet most companies can’t do it.

So often, we tell customers what we think they should want instead of listening to them.

How to succeed in 3 easy steps:

1) Understand exactly what your customer’s problem is:

Mr. & Mrs. Smith want to buy a restored 1965 blue Mustang convertible for  $35,000.

2) Honestly assess if you can solve it:

Tom Dealer has connections with rare auto dealers across the nation and can find the best vintage cars at the lowest prices.

3) Determine if you’re willing to – and if you can do it quickly, cheaply, and/or with the best service:

The Smiths and Tom Dealer seem compatible. But if Tom doesn’t act, the Smiths will find someone who can.

This is a variation of finding the job no one wants and excelling at it.

Anyone can say she’s going to solve the problem.
Be different: actually do it.

Filed Under: Entrepreneur, Lessons from the Lemonade Stand Tagged With: , , ,

Negotiating: It’s Not Just For Men

December 16, 2011 Leave a Comment

Do you hate to ask for what you want (or think you deserve)? You’re not alone.  Linda C. Babcock, professor of economics at Carnegie Mellon and author of Women Don’t Ask, looked at the ways men and women negotiate. She got the idea when her female doctoral students complained that they weren’t offered teaching assistant positions, despite never asking for them:

“The dean said each of the guys had come to him and said, ‘I want to teach a course,’ and none of the women had done that,” (Babcock) said. “The female students had expected someone to send around an e-mail saying, ‘Who wants to teach?’ “

Need more proof? Read this anonymous post from a manager for a multinational tech company:

“…a woman will enter the salary negotiation phase and I’ll tell them a number will be sent to them in a couple days. Usually we start around $45k for an entry level position. 50% to 60% of the women I interview simply take this offer. It’s insane, I already know I can get authorization for more if you simply refuse. Inversely, almost 90% of the men I interview immediately ask for more upon getting the offer.

The next major mistake happens with how they ask for more. In general, the women I have negotiated with will say 45k is not enough and they need more, but not give a number. I will then usually give a nominal bump to 48k or 50k. Company policy won’t let me bump more than 5k over the initial offer unless they specifically request more. On the other hand, men more frequently will come back with a number along the lines of 65k to 75k, and I will be forced to negotiate down from there. After this phase, almost all women will take the offer or move on to somewhere else, not knowing they could have gotten more if they asked.

At the end, most of the women I hire make between 45k and 50k, whereas the men make between 60k and 70k. Even more crazy, they ask for raises far less often, so the disparity only grows.”

The First Rule of Negotiation: Ask for What You Want

Whether it’s a salary, a promotion, a specific behavior, or getting the best deal when buying a car, you have to know the outcome you want and what you’re willing to do to get it.

Babcock conducted experiments to figure out why women wouldn’t ask for what they wanted.  She claims that her results show that men don’t want to work with women who ask for what they want.  Babcock also quotes the absurd trope that women make 23% less then men, so I’m disinclined to take her word*. It’s more likely that the men weren’t turned off by women asking for what they wanted, but by the way those women did so:

The Second Rule of Negotiation: Keep Your Emotions in Check

Be willing to walk away from any deal.  As women, we often show our emotion by talking loudly or shrilly. We talk too much. Or worst of all, we cry. To control your emotions, detach yourself from the outcome.  Pretend you’re negotiating for someone else. It’s easier to be tough on someone else’s behalf.

The Third Rule of Negotiation: Give to Get

Find out what the other party wants, then figure out how to give it to them. Juliet Nierenberg, author of Women and the Art of Negotiation explains:

One of the most overlooked features of negotiating successfully is trying to figure everything from the other point of view. We’re so stuck in our own point of view that we don’t stop to consider, how will they look at all of this? What possible things are going on in their minds?

Looking at the transaction from the other party’s viewpoint gives you valuable information about when to compromise, when to hold your position, and when to walk away.

The Fourth Rule of Negotiation: Be Prepared

She who has the most information wins. Do your homework. Know more than your opposition, but don’t use the information to prove how smart you are: use it to make your case. Being prepared will also calm your nerves.

Being prepared doesn’t mean you should do all the talking.

The Fifth Rule of Negotiation: Stop Talking

State your case concisely. Provide the relevant facts to back up your argument. Then, shut up.

One of 2 things will happen. The other person will jump right in with a response, or the silence will deafen you.  Either way, keep quiet until the other person asks you a direct question.

You can learn and eventually perfect negotiation. Just like driving a car or tying your shoes.  Start by using the 5 rules in low-risk situations. Evaluate your performance and outcomes. As you practice, you’ll improve.

*The article quoting Babcock linked above even debunks that statistic: “That figure does not take differing professions and educational levels into account, but when those and other factors are controlled for, women who work full time and have never taken time off to have children earn about 11% less than men with equivalent education and experience.”

Filed Under: Entrepreneur, Strategist Tagged With: , , , , ,

Cause and Effect Meets Profit and Loss

November 28, 2011 4 Comments

 Cause and Effect meets Profit and Loss

 

Our real-world business lesson of the day comes to us from Rachel Brown, owner of Need a Cake bakery in Woodley, Berkshire, UK.  Rachel, wanting to embrace social media, offered a discounted dozen cupcakes through Groupon. Her strategy succeeded, as Groupon delivered her 8,500 customers.

Journalists reported on Rachel’s story with sensationalistic headlines like “Baker Forced to Make 102,000 Cupcakes” , “Baker is Burnt on Cake Offer” and my favorite, “Bakery Terrorized by Groupon Deal”. According to Rachel, “We are still working to make up the lost money and will not be doing this again.” Instead of blaming Groupon, let’s look at what went wrong:

Price

Groupon.com says the company negotiates each deal individually, but a quick search shows that Groupon usually gets half the gross income on redeemed deals and all the income from unredeemed vouchers.

Here’s Rachel’s offer:

“Twelve Cupcakes with a Choice of Flavours and Designs for £6.50 from Need a Cake (Value £26).”

Groupon and Need a Cake sold 13,078 deals, 65% of which were redeemed*. The proceeds were split between the 2 parties as follows:

GrouponNeed a Cake
Deals Redeemed£27,625£27,625
Deals Purchased but not Redeemed £29,7570
Total£55,250£27,625

Note: All of these numbers are based on the statements in the linked articles.  I have no idea if they’re accurate.*According to this extremely detailed post and this case study.

I’m sure Rachel looked at the £27,625 gross income and thought: “Wow, that’s pretty close to what I make in a year.** How can I go wrong?” Here’s what I estimate her normal annual income is:

Gross income
(from 1200 dozen cupcakes per year)		£31,200
Ordinary overhead£5,136
Net Income£26,064

Do you know how much it costs you to make $1?  Do you even know how to find out? Rachel didn’t.

Here are the numbers she easily could have run before doing the Groupon deal:

Per DozenTotal
Gross income£3.25£27,625
Ordinary overhead£4.28£36,380
Projected loss-£1.03-£8,755
Extra overhead£1.47£12,495
Actual loss-£2.50-£21,250

The Groupon deal price couldn’t cover Rachel’s ordinary overhead, let alone her additional expenses due to overwhelming demand.

If you want to build a profitable business, you have to know your numbers.  Learn how to read a balance sheet and a cash flow statement.  Set reasonable and competitive prices, but never charge below cost.  You’re not Walmart.  Volume won’t make up your losses. Get rid of all non-performing services, items or divisions.

Production & Distribution

Rachel normally produces 1200 dozen cupcakes per year. After 8500 customers redeemed her Groupon deal, she had to pump out more than 7 years’ worth of product in just a few months.  Rachel ended up paying £12,500 for extra staff and distribution.

You’ve created a great product, priced it right, and now the customers are clamoring.   Do you have the infrastructure in place to deliver?

-Simplify and automate your ordering process. Or outsource it.

-Offer the minimum customization required to compete.  If Rachel had at least limited the flavors and designs, she wouldn’t have needed quite so much help filling the orders.

-Streamline your production by breaking it down into easily duplicated steps. Then you can use checklists and assembly line tactics to ensure a consistent outcome.

-Limit your sales until you’re sure you can accurately deliver an exceptional product on time. If Rachel had limited her deal to 200 customers, she would probably have been able to complete the extra orders with minimal additional staff and expense.

Strategy

Rachel didn’t have a strategy, or even a stated goal, for her Groupon partnership.

Do you have a plan? Where do you want your business to be in 2 years? 5 years?  How will using Groupon, or any other advertising and marketing campaign, help get you there?

Here’s what Rachel’s plan could have looked like:

  • 12 cupcakes for £13
  • Limit 200 customers
  • 65% of the vouchers will be redeemed before they expire
  • 40% of those customers will buy an additional item at £3 each
  • 20% of customers who redeemed the voucher will return at least once more to spend the same amount of money
Projected
Profit & Loss
Coupon income
(130 coupons)		£845
Additional income
(52 sales @ £3)		£156
Repeat business
(26 sales @ £13)		£338
Total Gross Income£1,339
Ordinary overhead
(130 coupons plus 26 repeat sales)		£668
Overhead on Additional Income (16%)£25Based on normal overhead
Extra overhead
(130 coupons)		£96Half of extra overhead with 8500 orders
Total overhead£789
Projected profit£550

This post shows you how to calculate return on investment for a Groupon campaign.

To execute this plan, you need a to give a compelling reason and make it easy for your new customers to spend more. In-store advertising, buy-one-get-one deals and redirecting your web order confirmations to a sales landing page are just 3 ways to sell your other services.

Since Groupon doesn’t share its mailing lists, you’ll need to collect customer contact information and set up consistent, compelling follow-up announcements and offers.  Your goal is to convert the one-time repeat sales into forever customers.

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The 3 Ps that add up to Profit

November 21, 2011 1 Comment
Entrepreneurship, Junior Achievement

Look how cool I was back then

 

“The future belongs to the common man with uncommon determination.”

Baba Amte

When I was in junior high school, I joined the local Junior Achievement chapter. My “company” made Christmas tree skirts which we later sold to our parents.

The lesson I learned from this:

cheap material + even cheaper labor + parental connections = profit

Find your unique gift; create a product or service that fills a need, than sell it to your network. How did I get that from felt skirts? Our product weren’t poorly constructed Christmas accessory; they were handcrafted symbols of ourselves that our target audience would pay a premium for.

What is your product?

What makes it (or you) unique?

Who is your audience?

Why do they want your product?

Who is your competitor?

What are they doing better (or worse) than you?

What is your cost of sale? In other words, what does each sale (income) cost you to produce (expense)

How will you market your product to your audience?

What will that cost?

Where do you want to be, in terms of production, in 1 year-2 years-5 years?

What will it take to accomplish this?

Your business plan should answer all of these questions, and more. Some people (e.g. me) prefer a deep strategic plan over a conventional business plan. In a strategic plan, you create your company culture as you create your plan for success.

A strategic plan typically includes a company’s mission, vision and value statements, and an expectation about how you’ll conduct business. If you plan to have partners, this step is vital

Successful people:

are passionate.

Your passion is the reason you get up in the morning, work late at night or borrow money from your family to finance start-up costs.  Without passion, you’ll quit at the first sign of trouble or when a better offer comes along. Are you following your passion?

solve problems.

If you can solve other people’s problems, they’ll throw money at you. Easy, right?

Find a job no one else wants and do it. Find the knowledge few know and learn it.

To sell yourself and your product or service, define what value you bring to the table.

Are you faster?

Cheaper?

Better?

Any 2 of the 3 will do.  If you’re faster than your competition, you don’t have to be cheaper, but your quality has to be at least as good as theirs.  Your customer will pay a premium for speed, but won’t accept inferiority at any price.

produce.

Do you have a business plan (see above)? Are you working it every day?  Do you account for your results?

Does your plan focus on the problem you’re solving for the customer and/or the unique value that you’re adding to the transaction?

Who are your customers? How do they find you?

Every sale results from you talking to your customers or would-be customers.  Talk to them everyday.

Don’t waste time with mediocre people, thoughts or actions. Just take daily steps toward your goal

By the way, I still have the Christmas tree skirt. Now an antique family heirloom, it’s value has no doubt increased accordingly.

If you’re ready to stop treating yourself like an employee, and instead develop the skills and leadership of a CEO, signup for the online version of The Business of your Business: Formula, Financials, Function and Freedom.

This article originally ran in the Las Chapter of the Women’s Council of REALTORS newsletter.

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The Philosophy of Peak Performance

November 7, 2011 3 Comments

When you work at your highest efficiency, everything seems easier. You complete projects more quickly, and balance work and personal time more easily. People become drawn to your ability to execute and volunteer to help you succeed (sometimes without even realizing it.) Success begets success.

It starts with attitude. Here are 3 easy things you can do today to start fine-tuning your performance:

Think like an entrepreneur, even if you work for someone else.

You and only you are responsible for your success. Even if you’re working for someone else, you have the power to decide how you contribute.

Think like a business owner. How many times have you complained about your job?

What if you acted as if you were the owner? How would that change your perspective? Your attitude?

If your job is so bad that you wouldn’t want to be the boss, devise a plan to leave within 6 months. (Or just make excuses and keep whining.) Either stay and change the way you think about your job, or leave and seek your success elsewhere.

Find the opportunity. They’re everywhere

Find something that’s undervalued, add value to it and sell it for a profit. Simple, right?

In 1975, Bill Gates thought: “If I could figure out how to make a computer operating system that was affordable, easy to use and added value to people’s lives, everyone would buy it.” He founded Microsoft with the mission to put “A computer on every desk and in every home.”

Before Steve Jobs, we never realized we had to have our music collections with us 24/7. I certainly never thought I’d choose a new car based on whether it has an iPod port.

Ray Kroc, the man who made hamburgers universal, knew that if he provided a fast food that tasted the same no matter where it was served, we would embrace the comfort of such familiarity.

And, when it absolutely, positively has to be there overnight*….FedEx founder Fred Smith knew we’d be willing to pay to get it there.

Where do you find these overlooked opportunities?
Where no one else is looking. Create your market and you’ll own that market.

Think of things that no one else wants to do nor believes can be done profitably.

Take a risk. Failure is an option.

Because successful entrepreneurs believe strongly about whatever market opportunities they’ve decided to capitalize on, they’re willing to accept high personal, professional or financial risk to pursue that opportunity.

Do you fear failure, or accept it hand-in-hand with opportunity?

Fear tells you you’re missing something important: it might be knowledge, experience or a skill. You can overcome the fear by figuring out what you need to succeed. Do you need to go learn how to read financial statements so that you can overcome your fear of losing money? Maybe you need to beef up your customer interaction to offset your fear of losing business.

If you didn’t know how to swim, and someone took you to the edge of a deep pool and asked you to jump in, you’d be scared and unwilling. And that’s perfectly reasonable.
Now, same scenario, except there’s $1 million on the bottom waiting for you to take it. Now what?

You could mitigate the risk. You’d have incentive to learn how to swim and be comfortable in deep water. Once you did, could you still drown? Yes, but, it’s less likely than it was before. And of course, you’ve now got a chance at riches.

Analyze risk by looking at the worst-case scenario. If you can live with that, then the action’s worth the risk. If you can’t live with that particular worst-case scenario, improve your odds through knowledge and training.

Start with easy risks. Practice negotiation by calling your cable company and asking for free channels or try to get your cell phone company to reduce your monthly bill.

No matter how you determine your personal risk tolerance, you have to act. There are tons of people who are smart but unsuccessful, because they’re unwilling or unable to act.

*Yes, I know their current slogan is “Relax, it’s FedEx” but the original slogan is the better one.

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From Concept to Company

October 4, 2011 Leave a Comment

UNLV is home to a groundbreaking program that should revolutionize post-secondary education: a partnership between the two most crucial schools at the college, engineering and business. (UNLV doesn’t teach medicine.)

The UNLV engineering/business partnership began as the fusion of two separate but easily unifiable ideas. Since 2000, the curriculum has required senior engineering students to form small teams and enter a design competition. The teams have to invent something practical. Their brainchildren have been not just feasible, but inspiring: a cane that uses sonar (for blind people), motorcycle headlights that see around corners, etc.

A few hundred yards away, business students were doing something similar: creating plans and projections for potential businesses. The last couple of years I’ve had the pleasure of serving as one of the judges for the business students’ contest, and I’ve seen some impressive proposals. They include the group that was going to import and distribute a revolutionary weatherproofing compound from South Korea, and the “micro-farmer” team that wanted to grow vegetables on abandoned urban lots. Some of the other ideas were less marketable than they were creative, still others were quite the opposite. But the very act of conceiving and developing these ideas did and will do far more good for the world than the nearby English class looking for meaning in the short stories of Jack Kerouac.

The trouble was that none of the engineering projects ever got off the ground. (Figuratively speaking, particularly in the case of the dolly that lifts 300-pound payloads 3 feet in the air.) Meanwhile the business projects, while some of them had potential, weren’t exactly recalibrating the boundaries of human endeavor.

So the deans of the departments got together and meted out a little interdiscipline. For full credit, the engineering students had to partner with the business students (and vice versa) to develop a viable plan. For the engineers, it meant developing an appreciation for normally mundane tasks like securing warehouses, filing paperwork, and learning how to market. For the aspiring MBAs, it meant gathering the requisite technical knowledge about how moneymaking gadgets make money. (Dr. Andrew Hardin, director of the Center for Entrepreneurship, got the inspiration for this from a similar program at Washington State University.)

I show up once or twice a year as a guest lecturer.  This year’s class New Venture Feasibility is all about taking an idea for a product or service from concept to business plan.  I told the MBA students they have to add value, plan for success and write mission statements that are simple and direct.

 

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Mark Cuban doesn’t want you to pay more taxes. He wants you to stop being a leech on society.

September 27, 2011 Leave a Comment

When Mark Cuban posted his now infamous take on patriotism I tweeted a link to the article along with a one-word commentary: “Awesome.”  It wasn’t long before I started to see and hear other people sharing this same article under the headline: “Mark Cuban wants rich people to pay more taxes.”

I assumed that a self-made man like Cuban would understand this basic truth: the best way to prevent poverty is by ensuring that you don’t become poor.  As such, these first sentences strike me as being more about taking control of your destiny, creating opportunities, and taking action, than paying taxes:

“Make a boatload of money. Pay your taxes. Lots of taxes. Hire people. Train people. Pay people. Spend money on rent, equipment, services. Pay more taxes.”

Paying taxes means you’re profiting.  Some of you will read this quote and tell us all the reasons why you can’t start a business, make money or succeed.  Your boss screwed you, the banks did you wrong and no one will invest in your revolutionary new idea.  Before you share, watch Cuban’s reality show Shark Tank.  You’ll see entrepreneurs pitching their business plans to 5 experienced and sharp-tongued venture capitalists.  Here’s what else you’ll see:

-Someone who’s overpriced his business.
-Someone who can’t let go of her initial concept despite receiving a more lucrative alternative.
-Someone who thinks she’s the linchpin of her business plan and isn’t.
-Someone who doesn’t listen.
-Maybe, someone who has a detailed plan, a product that solves a problem and a willingness to learn.

Which one will get funding?

We live in a society that gives everyone awards just for showing up, considers proper spelling a relic and never questions the wisdom of borrowing $100,000 for a liberal arts degree that will qualify its recipient for a $10-per-hour barista job. We’ve failed to teach the most important lesson: You’re not entitled to capital. You earn it by being prepared and willing to fight for your dream.

How can you best make a difference? What would the impact be on the federal budget if each of us just took care of himself andhis immediate family?

You have to put on your own oxygen mask before helping someone else when the plane is losing cabin pressure. You can’t improve society until you secure your own future.  Or, as Cuban puts it:

“I don’t care what anyone says. Being rich is a good thing. Not just in the obvious sense of benefiting you and your family, but in the broader sense.  Profits are not a zero-sum game. The more you make, the more of a financial impact you can have.”

I’m not anti-tax; I’m against being overtaxed.  Here’s where the details matter.
Can I be trusted to spend my own money effectively and compassionately?  The current government doesn’t think so.

After re-reading Cuban’s article, I’m forced to acknowledge a sad truth.  Mark Cuban doesn’t think he’s capable of making a difference.  He’s given up on our government and is reduced to throwing money at our problems.

“I’m not saying that the government’s use of tax money is the most efficient use of our hard-earned capital. It obviously is not.”

Me, I’d rather cut my losses and try something new.

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