Be an Ethical Entrepreneur, Marketer, and Business Builder

Should a parent of a toddler start a business?

Nine years ago at the age of 26 I bought my first business.
Since then, I’ve bought and sold 3 businesses, started a 4th, got married, and now have a 17-month old.

So, if I had to start that process from scratch today, would I do it with a young, growing family?

To set the stage, you will not find a bigger supporter of entrepreneurs and capitalism (not to be confused with cronyism).

I love business.
The challenges, the changes, the rewards, the people and the lives that are enriched by it.

Though I made many mistakes, I would be an entrepreneur all over again if I could go back in time.

However, would I start a business from scratch as a 35-year old with a wife and baby???

If I was giving my sister or best friend, who both have 2 children and are in their mid-30’s, advice on whether to start a business, here are a few questions I’d ask.

Do you hate your job?
Like really hate it.
Does your spouse cringe when you sit down at the dinner table because she knows it’s just going to be a barrage of negativity?
Do your friends “get busy” when you call because they know it’s just going to be a complaining session?

First, if that’s just your personality, fix it.
But if that’s truly the opposite of your personality (seek the honest feedback from people you trust), then get out as fast as you can.

No job is worth anxiety, depression, or a heart attack.
More importantly, no job is worth alienating your spouse, friends, and family.

Consider trying to fix the culture at your current job while you start looking for a new job.

But, instead of another job, should you just start a business?

Questions to ask yourself before starting a business as a parent

  1. Do you have at least 6 months of living expenses saved up (preferably 12)? Trying to start a business without the cash to survive for AT LEAST 6 months while you have a family to support is simply selfish and irresponsible. Can you make it work? Maybe. Is it worth risking your livelihood and providing for your family? No. If you are unemployed and can’t find work, then, by all means, start a business. In fact, according to The Millionaire Next Door, this is one of the most common reasons people start a business – they have no other option.
  2. Do you have access to the capital you’ll need (in addition to your living expenses) to fund the business? This doesn’t have to be a lot but you generally will need some money to invest in marketing, software, sales materials, uniforms, gas, insurance, etc.
  3. Do you have potential backup jobs available? Most businesses fail. Don’t delude yourself going in. Accept the risks and face them. Part of that is having a backup plan. Only fools believe blindly in their business idea.
  4. Do you have multiple business ideas that you can launch in a short amount of time if needed? Hedge your bet a bit. If your full-time job is to make a business successful and you currently have no clients or income, be prepared to try a few different ideas while you’re living off of your savings.
  5. Are you living below your means? If not, then don’t even consider starting a business. Making a business successful is about delayed gratification which means continually trading your short term time and money for a long-term result. If you already spend your full paycheck, then you aren’t ready for the financial sacrifices of getting a business off-the-ground.

In summary, there’s a myth that entrepreneurs are stubbornly obsessed and risk everything to follow that one great idea!

That’s not true at all.

Smart entrepreneurs fail fast and ditch the bad ideas or pivot them to good ideas and THEN, once they’ve proven they have a good idea through finding some paying clients, stubbornly pursue it.

This is why your first 1-3 businesses are learning businesses.

Why do you want to start a business?

Most people answer some version of more money and more time.

That’s a reasonable answer.

What most people don’t consider is, to get more time you need money. And if you don’t have a lot of money right now, then you need to invest lots of time.

As an example, if you have $2 million dollars in the bank, you could put that in a few Dividend Aristocrat stocks that generate 5% dividends, live off of the $100k in annual dividends, and never work again.

That’s an extreme example of buying back all of your time.

In a small business, once you invest the time to build your business, then you can use the profits to hire people to do your work – once again, you’re buying more time.

If you don’t have time or money, then you can’t start a business.

Granted, if you do have money, forget about starting a business and just buy one. Rare is the business model you can start from scratch that will grow your wealth faster than acquiring an already successful business (or business model).

Keep in mind up to 8 out of 10 new businesses fail whereas nearly 7 out of 10 acquired businesses succeed. (Depending on which study you read, those numbers do vary a bit but the point is still valid, buying a successful business is a lot less risky.)

How long does it take to be successful?

To become an overnight success takes 10 years.

Michael Masterson wrote a book called Seven Years to Seven Figures that claims you can be a millionaire in 7 years.

Mark Cuban didn’t take a vacation for 7 years.

Jeffrey Immelt, CEO of GE, worked 100 hour weeks for 24 years before becoming CEO.

Brad Sugars breaks it down a bit more in the time it takes to be a millionaire:

  • For most people – at least 10 years.
  • For those with a head start, like lots of experience, capital, or the right connections – 7-9 years
  • All of the above plus you’re super-lucky and amazingly talented – 3-5 years

This is important to keep in mind if you have a 2-year-old running around. How much time with your family are you willing to miss to hit your desired success?

There is no right answer and I can’t answer that question for you.
BUT it is a real, serious question that you need to answer with your spouse.

And if you think I’m exaggerating about the time and sacrifices needed to be successful in business, maybe you’ll believe Elon Musk, Mark Cuban, or the CEO of Pepsi who says her intense dedication to her job may have made her a worse parent.

Ouch.

Is starting your business and making it successful the most important thing in your life?

Listen – of course, you’re going to say no. I would say, no.

You will say your spouse, your children, your family, your faith, your health are all more important.

Fair enough. I’ll second that.

However, in the last week, how much time have you spent truly with your spouse? Sleeping and watching TV together while on your phones doesn’t count.

How about with your children? Again, watching TV doesn’t count.

On your health (working out and preparing healthy meals)?
Praying?

Now, how much time did you spend working?

If time is your most important asset, where are you investing it?

If you took your limited time working out, with children, with your spouse, praying, and with family and friends and you had to cut it in half for the next 3-5 years to make your business successful, would you?

What if you had to cut it in half again? (That takes us down to ¼ the amount of time you currently spend on the most important things in life.)

Of course, if your evenings and weekends are spent watching TV, surfing the internet, or posting on social media, then you have some time available.

But the point still stands.

At this stage in your life, can you invest the time needed to make your startup successful?

Recently, a coaching group for budding entrepreneurs was working on accountability partners.

This line of thinking boggles my mind.

How committed are you to success if you need an accountability partner for your business!?

Mentor? Absolutely.
Coach? Sure.
Cheerleader? Awesome.

But someone to hold you accountable to do what’s needed to succeed?
If you need that, why even start?

Sacrifices I made as a young, single start-up founder

  1. I slept on an air mattress for almost a year in an apartment with no furniture.
  2. I charged up a 0% interest credit card to cover living expenses (over $5,000 worth). However, I never paid a dime in interest charges or late fees.
  3. To chase the opportunities, in a span of 10 years I moved from WI to PA to NM to NC, back to NM, back to NC and finally back to PA including a few short stints staying with friends and family in-between.
  4. I worked a lot. Let’s not blow this out of proportion, I’m no Jeffrey Immelt or Marissa Mayer, however, I also rarely went an entire day without working. Some weeks were probably 80 or 100 hours. Most were probably around 60. A bit higher if you include all the books I read to learn how to build a business.
  5. I worked out a lot more than I do now. With a family, I’m just not willing to give up that much time from my family now. These days I work out 4-5 days/week in about 15-20 minute sessions. No more 5 mile runs or 10-mile bike rides.
  6. I didn’t take any income from the business I started for about 3 years. (I lived off of consulting income.)

Could I do all of these things now, again, with a family to support?
Yes.
One way or another, I could scrimp, scrounge, sacrifice, and save to make it work.

More importantly, would I be willing to?
No.

To most, that answer sounds completely and utterly unbelievable.

And if you had asked me that same question 18 months ago, I would have given you a different answer.

As cliche’ as it sounds, having a family changes everything.

Earlier I asked if your business idea is the most important thing in your life because, unless you’re unbelievably lucky and brilliant, it will take precedent in your life if you want to succeed.

Today, with a 17-month old and a wife, the sacrifices to start a business aren’t worth it to me.

Here’s why…

Most mornings I get my son up, get him some milk, change his diaper and get him ready.

Most evenings I play with him, wrestle with him, teach him and just have fun for a few hours. I then bathe him, get him ready for bed, read to him, and snuggle until he falls asleep at which point I put him to bed.

Most weekends I don’t do any work beyond maybe checking some emails. Just typing that out seems strange to me since it was my habit for so long to get “caught up” with work on the weekends.

These days my wife and I make it a priority to spend time with both of our families and do something fun with our son nearly every weekend. (Just this past weekend. for instance, we took him to the PA Trolley Museum to visit Daniel Tiger.)

As I was starting on my entrepreneurial journey, this family schedule would have been impossible.

For me, no business is worth giving that up.

Again, if I had no other options, was unemployed, and needed to put food on the table, I would start a business and make the sacrifices necessary to support my family.

So what are you going to do?

Ask yourself the above questions, discuss them with your spouse, and determine if starting a business at this stage in your life is what’s best for you and your family.

To your success,
Bryan

P.S. If you started a business with a young family and still were able to work a “normal” schedule to spend time with your family, you’re a bit of a unicorn. I’d love to hear from you so please leave a comment.

photo by: joejungmann

The best way to grow your business without venture capital or outside investments

In our current internet economy, you can flesh out the viability of almost any idea for very little money.

These are the first steps. Get customers. Get revenue. Get profit.

Bill Gates sold DOS before he owned it in the Pirates of Silicon Valley.

Bill Gates sold DOS before he owned it in the Pirates of Silicon Valley.

Your best option is to sell something you don’t have. Yet.

Bill Gates did this in the movie Pirates of Silicon Valley when he sold DOS to IBM before he bought it. Watch the movie. It was brilliant.

When I started my Performance Engine Tuning business, I got my first client and check before I invested a penny in the $2500 oscilloscope I needed to troubleshoot engine sensors.

When I started business coaching, I got my first 2 clients before I had any coaching systems in place. I quickly made them from the systems I had developed at my previous business though, and 3 years later those clients are still with me.

When I launched my internet marketing business, I received my first check to build a website before I knew how to build a website (unless you count that one I built on GeoCities in 1996).

Are you seeing a pattern here?

In all of those instances, I delivered what I promised and more, even though I had nothing to provide for my clients when they first paid me.

The only way to know if you have a good idea is to find someone to pay for it.

Get cash without giving up ownership or taking on debt.

Raise capital without losing any ownership or starting your new business by taking on debt.

If you absolutely need capital to make your idea work, probably the best option for “selling” your idea and finding customers is CrowdSource Funding with websites like KickStarter.com.

CrowdSourcing is brilliant because people give you money before you have a product.

  1. You get money
  2. You prove your idea has a customer base
  3. You retain 100% ownership and control.
  4. You even get some free marketing in the process.

KickStarter lends itself more to product-based businesses where you can provide an easily replicated product to your KickStarter investors.

In some instances you do need cash. Let’s say you have a complicated software product that is hard to “sell” without showing people it’s available.

Then do what ZenPayroll.com did and write some blogs, get some articles written about you, market on Google Adwords and Facebook ads to send people to a landing page where they can opt-in to your email list to be kept up-to-date on your products.

ZenPayroll started doing this before they had a product to sell. I signed up for their email list months ago and look forward to when they have a product that works in the 4 states I employ team members.

Building an email list isn’t nearly as good as getting money out of people, however having an email list with thousands of names on it before launching your product is a huge advantage.

Even authors know that you build your crowd first, through blogging and social media, before you write your book. That way when your book comes out you know it will sell and publishers will be lining up to work with you.

With the cheap 3d printers, you can build, test and sell prototype parts one at a time without expensive manufacturing contracts.

The bottom line is, there are dozens of inexpensive ways to get customers or very interested prospects before you have a product.

The Scaling Trap

Like all of my businesses that I mentioned above, do everything manually first, then once you know their are people willing to pay you, start systematizing, automating, and streamlining so that you can eventually scale.

NEVER scale your business before you have paying customers.

Here are a few other great options for your first business.

  • Start in an incubator. There are hundreds if not thousands of colleges around the country with incubators. These often provide cheap rent and access to professors and other entrepreneurs who can provide you with good advice. It’s also a good way to network with other startups to find new clients.
  • Buy an existing business. Five years after buying an existing business, 80% of them are still around. The reason for this is pretty simple – no one buys unprofitable small businesses. So if you’re buying a business, all you should have to do is “fix” a few things in the business to increase its profitability. If possible, buy a franchise. It’s also easier to get funding to buy an existing business with SBA 7a loans.
  • Grow the business profitably. This is the route I’ve always taken and the one promoted in Rework by Jason Fried. Only grow as fast as you can maintain profitability. This forces you to bootstrap and quickly weed out inefficiencies. The fewer inefficiencies, the more profitable you become, and the easier it is to grow in an ever improving cycle of growth.

How to raise money for your startup

Debt is not inherently bad and, when well-planned, can be very useful.
One of my first businesses was a house I bought in college to rent out rooms to save on my own rent.

For that business, I had to take on debt to buy the home.
It was a great investment and the same can be true for a lot of business debt however not all sources of capital and debt are equal.

Preferred methods of obtaining capital in order of highest to lowest preference:

  1. CrowdSourcing – You get money, retain 100% ownership, have not debt and receive free marketing.
  2. Banks – They generally charge very reasonable interest rates, you still retain 100% ownership, and they don’t tell you how to run your business.
  3. Family and Friends – Be very careful with this as you don’t want to sacrifice valued relationships and you don’t want to invite your friends and family to “dictate” what you should do with your business. Ideally you won’t need this until your 3rd-4th business once you have a proven track record of success and you’ve made most of the dumb mistakes we all inevitably make.
  4. Employee Owned – Employee-owned businesses can provide a great source of cash as well as a highly-committed team.
  5. Venture Capitalists – Once you’ve proven to have a profitable business, have worked out most inefficiencies, and are ready to scale, this can actually be a reasonable option.
  6. Go Public in an IPO – You only do this when you need 10’s or hundreds of millions of dollars. The costs to meet SEC regulations alone will run well over 6 figures annually so this has to be your last resort.

Most people get hyper-focused on one or 2 common ways to grow a business. That tunnel vision comes from a lack of understanding all of your options.

Widen your gaze to put together the best growth and funding plan for your business.

To your business-funding success, Bryan

P.S. My last blog addressed some major downsides of Venture Capital however, I disdain people who point out problems without listing any solutions. Hopefully this article provided you ideas on some better alternatives.

photo by: Tanzen80

Avoid Venture Capital and Outside Investors for your Startup

One of the most exciting days for a startup company is the day they receive money from an investor. The day someone believes in your idea so much they show up with their checkbook. The TV show Shark Tank unabashedly captures the exuberance that comes with that financial backing.

This guy is not your friend.

This guy is not your friend.

However, the opposite should be true…

Instead of popping open champagne in celebration, a lonely evening with a bottle of scotch would be more appropriate. Getting VC money, particularly if your business is pre-profit, is practically a kiss of death.

You have a better chance of winning at craps in Vegas than your company does of succeeding and becoming profitable after your VC check.

Let me clarify that VC money and outside investors, are the same thing. Whether money comes from a major VC company or your father-in-law, outside investment too early is the real problem.

The facts are simple, 75% of venture backed businesses fail according to research by Shikhar Ghosh, a Harvard Business School lecturer.

By comparison, overall only 55% of business startups fail after 5 years. In other words, venture backed businesses are 36% more likely to fail than startups overall in the first 5 years.

So if you’re spending most of your time as a startup seeking out VC funding, you are, statistically speaking, setting yourself up for failure.

Why are so many startups obsessed with outside investments?

The answer is pretty simple. The VC’s want you to be.

Anyone familiar with silicon valley knows of Peter Thiel and how he made his billions on Paypal (a company he co-founded) and Facebook which he bought into in 2004 for $500k in exchange for more than 10% of ownership.

What most people don’t realize is that he’s also invested in over 40 other companies of which you’ve probably never heard of any of them.

This is how venture capitalists work. Even if only 1 out of 4 businesses last, they can still be way ahead of the game. More importantly, they can still win big with an IPO even if the business fails shortly thereafter.

In other words, they don’t much care if your business succeeds.

Why do VC-backed businesses fail at such a high rate?

The Business Genome Project studied over 3200 startups to find out why they fail and their results should be common sense…

The #1 reason 74% of startups fail is premature scaling.

In other words, pre-profit, pre-revenue, or sometimes pre-customer start-ups start hiring and investing in infrastructure.

This is, quite frankly, insane!

Until you can get a sale and a customer, you have no business whatsoever trying to “grow” your business through hiring.

The reason these VC-backed businesses fail is the same reason government is so inefficient. The startup is now playing with someone else’s money.

The founder now no longer feels the pain of losing everything or the need to scrape by on table-scraps when he has $1,000,000 in the bank today after having $0 yesterday.

In the 2 years since my internet lead-generation business started, I’ve had numerous offers from investors that I’ve never accepted for one main reason:

The only thing more money would do for us now is make us less efficient more quickly.

This is true of every business in the early stages.
Even the 25% of VC-backed businesses that succeed are made less efficient with large checks.

As a start-up, you lose either way.

If you get VC money, most likely you’re going to fail. If you don’t fail, then you just gave up a very sizable chunk of your business and control.

The whole concept that to be successful at business you must take risks is ridiculous. The greatest entrepreneurs rarely take major risks and any risks they take are painstakingly calculated. The Heath brothers discuss this in their free Kindle book, The Myth of the Garage.

High risk examples of VC-backed businesses

If you’re still looking forward to that first VC check, let me give you a few examples of businesses that went that route.

  • SnapChat – Valued at $4 billion dollars with $0 in revenue and no plans for generating any revenue.
  • 4Square – Valued at $600 million dollars with $2 million in revenue.
  • Living Social – After being one of the hottest tech startups in the country, it posted a $566 million 3rd quarter loss in October 2012 and I wouldn’t bet on it being around in 10 years.
  • Groupon – Which IPOed at over $26 to drop all the way to $2.60 only to now start rebounding back to $10.65 while still losing $.15/share.
  • Yodle – Though this business is currently profitable and will probably stay that way, they took a major gamble when they took a profitable start-up with $700k in revenue and leveraged it until it wasn’t profitable again until they had over $100 million in revenue. That’s an extremely large risk to take. I do commend them, however, for proving the business model first.
  • Zynga – IPOed in December 2011 around $9.50 before being hyped up to $14.69/share and since tanking to $2.09 and hovering between $2.60 and $4 for the last 52 weeks. Not surprisingly, it’s still not profitable.

Even when you take a group of industry veterans who should know better and put them together to make a “super team”, the injection of too much money too quickly inevitably causes inefficiency and often failure as we saw in the case of BlueGlass SEO.

This list could go on all day. The number of great business ideas and innovations that have been harmed by too much money too early is far larger than those helped.

The concept of riding your idea to change the world a la Mark Zuckerberg is so strong, here’s a list of companies who turned down $100 million dollar buyout offers including Viddy, 4Square, Qwiki and Path.

Keep in mind, many of the VC’s who invested early in the businesses above made a killing when those companies went public or simply sought additional rounds of funding. They made their money on the hype of the IPOs not on the profits of the businesses.

The point is, it’s good business for the VC’s but rarely good business for the businesses themselves.

Private Companies with Higher Profit than their Peers

Here are a few examples of how growing profitably has created great companies.

  • Chick Fil-A – $400 million in revenue with no outside capital investments (privately owned)
  • Leo Burnett – $600 million in revenue with no outside capital investments (privately owned)
  • State Farm – no outside capital investments and now has over 18,000 agents.
  • Northwestern Mutual – privately owned and the largest provider of individual direct life insurance in the US

All of these businesses were case studies from the book The Loyalty Effect.

What’s most impressive is that the author didn’t seek out privately owned companies with no outside investments when searching for the most profitable businesses within an industry.

Instead, once he found the most profitable businesses in an industry he realized those were a few things they had in common.

He then examined these businesses and their industries and learned that avoiding outside investments was a major factor in their successes.

Lessons from VC’s

As of the end of 2012:
Apple’s Market Cap was $392BN on Revenue of $156.5 BN for a multiple of 2.5x revenue
Amazon’s Market Cap was $115BN on Revenue of $61BN for a multiple of 1.88x revenue
Netflix’s Market Cap was $12BN on Revenue of $3.6BN for a multiple of 3.33x revenue
Facebook’s Market Cap was $64BN on Revenue of $5.1BN for a multiple of 12.5x revenue
Recently 4Square’s Market Valuation was $600 million on Revenue of $2M for a multiple of 300x revenue

In other words, to match the revenue multiplier of Facebook, 4Square will have to grow its revenue by 2,400% to $48 million.

Maybe 4Square has something up its sleeve to grow revenues 24 fold in the next few years… After all, these VC guys have made billions so they know what they are doing.

Not exactly.

It’s a gamble. A big one. One that’s reliant on public opinion more than actual business fundamentals. That’s what VCs bank on. That’s why Thiel quickly sold the majority of his shares when Facebook went public while making $1 billion dollars.

In other words, early-stage VC’s couldn’t care less if most companies they’ve invested in fail. All they need is for the company to go public to cash out. Even then they only need a small percentage of their investments to go public to make money.

Take the story Tony Hsieh told in his book Delivering Happiness.

After making $30 million on his first web venture, he became a VC and lost almost all of his money by investing in around 30 different ideas. He finally decided to take Zappos over himself and pour in everything he had left in terms of time, money, and passion.

Considering he grew Zappos to over $1 billion in revenue before selling to Amazon, you could say that one paid off. But he was extremely close to losing everything.

He didn’t have to drive himself to the brink of bankruptcy (something he seemed to learn as well) to build a profitable business.

Most ideas don’t need millions of dollars prior to turning a profit to prove a concept. That’s one thing that made Zappos unique. The founder who came to Hsieh with the idea actually proved that it worked by creating his own crude website, selling shoes, and then going down to local shoe retailers to buy the shoes and ship them off.

That method wasn’t profitable but it did PROVE that people would indeed buy shoes online. Once you know that, it’s a lot easier to determine how buying shoes at wholesale, eliminating expensive store fronts, and utilizing an efficient nationwide delivery system can make internet sales of shoes highly profitable.

Considering Hsieh seems to have forced out the original founder (a topic he doesn’t explain in his book) that’s also more proof that VC’s are rarely your friend.

Unfortunately, the rare stories of companies like Instagram and 4Square, along with Shark Tank and the Inc 500, do not put the focus on how to grow a business profitably. They put the focus on securing funding, top-line growth, and cashing out.

That’s how the VC and early-stage outside investors like it.

Unfortunately, that’s very rarely what’s best for your startup.

To your startup success, Bryan

P.S. People who point out problems without providing solutions rarely fully understand the issue. Hopefully my next blog on funding your startup will provide you ideas on some better alternatives to venture capital.

The fundamentals of Buying, Building, and Selling a business

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To my knowledge, there is no other blog or book or lesson or presenter who shows someone the basic pieces necessary to generate wealth with real world experience as I will. It’s the nuts and bolts of the whole buy, build, sell process.

There are basically 4 steps:

  1. Preparing – What you need to know prior to getting started.
  2. Buying – How to find, value, negotiate, and purchase a business.
  3. Building – What you can do quickly to increase the value of the business.
  4. Selling – The ins and outs of selling your business.

Preparing

Ironically, as my most recent blog has pointed out (it’s ironic because it took me 18 months to write the blog that I should have written first), the most important part is your mindset and your attitude. Next, you’ll also need to take the first 3 steps to becoming wealthy including, always spending less than you earn, understanding the difference between where you are and where you want to be is education, and framing your goals into  Do x Be = Have context. Possibly most importantly, you need to have a clear motivation for being an entrepreneur (even if it’s different than mine) and you need to appreciate that the ethical route is always the most profitable. And make sure you’re able to get over your fear of failure in trying new things.

It’s important to understand that there’s no better, quicker way to go from very little money (let’s say less than $5,000) to a lot of money. You can even take it to the next level and setup a business to generate $1,000,000 per year if that’s your desire. Recently, as part of another blog, I’ve outlined a basic plan for how someone can go from $5,000 or less to $1,000,000 primarily through business. To stress the point even further that buy, build, sell is the best way to generate wealth for the average individual, review my suggestion to skip getting your MBA and just buy a small business for your business education.

Buying

In the buy, build, sell strategy, the part that will have the greatest influence on your profit is the purchase price so learn as much as you can for this stage.

First, you’ll want to know some basic questions to ask the seller about their business and maybe even what questions to ask about any given business idea. Then you’ll have to understand how banks value a business in case you need to go to them for financing and also how EBIDTA can tie into business values (since sellers and business brokers may reference it). As you start looking for businesses, you need to have some ideas of where to find businesses for sale for little money down and how to deal with the business brokers once you find one you’re interested in.

Before you start making any offers, it’s very important that you get the seller (or broker) to like you since then they’ll be more likely to accept your business valuation. It’s very simple to turn someone down you don’t like anyway. Once you’re ready to make an offer, make sure you only purchase the assets and then put them into an LLC filing as an S-corp. If you do that, you won’t have to spend nearly as much time fighting with lawyers. But since you may need one anyway here are a few tips for getting the best rates from your lawyer.

When you’re just starting out you may be considering a partner but make sure you don’t take on a business partner unless absolutely necessary.

Building

In the building stage you’re going to need to know what to do your first 2 weeks onsite at a business you’ve just purchased. If you don’t already know the difference between profits and cashflow, I’m sure you’ll learn very quickly.

Immediately you need to work on polarizing your company’s culture, improving teamwork, and communicating effectively. Right out of the gate you need to start setting up your business for running without you through the effective use of technology, incentives, and empowering your team. If you don’t do that immediately, you’ll soon be asked to do lots of things “in” the business that will take away from you working “on” the business. This is vitally important because if you’re not working on the business you’re not taking the time necessary to double profits, improve marketing, teach your team the importance of NLP, create systems, processes and scripts, or improve closing ratios. In other words, your primary focus for building value in your business is going to entail 3 parts:

  1. Increasing Sales – through new and improved marketing and better conversion rates. In other words you have to make sure your system for taking a lead and converting it to a customer is top-notch. Don’t forget that your back-end sales (sales to existing customers) will always be your most profitable business. With that in mind, if you can buy an already profitable business that’s horrible at back-end sales you can quickly increase its value.
  2. Cutting Costs – look at all of your expenses and simply cut those that aren’t needed. We reworked our accounting and phone costs alone to save thousands of dollars per year.
  3. Improving Efficiencies – this is primarily about scripts, systems, and processes for every aspect of your business.

Don’t make the mistake I did and wait until cash gets tight to realize that cashflow is king and then start building recurring revenue while looking for quick, easy, cheap ways to generate immediate cashflow.

Chances are you’re going to run into some issues with team members so it’s helpful to know the proper way to fire someone without having to pay unemployment and effective ways to get your team members to do what they do best.

As you’re building your business you need to work on getting it to achieve critical mass by, in particular, hiring or training the 3 leaders every business needs to succeed.

In summary, you need to have a game plan from day one including an exit strategy or else you might end up like one of the 300 businesses in NYC who failed because they failed to plan for success.

Selling

Since this blog is getting long and selling isn’t much different than buying I’ll keep this short. You need to basically understand 3 things:

  1. How to value your business just the same as discussed in buying so you can justify your price.
  2. Where to list your business which is again the same places where you’d go to find a business for sale (such as bizbuysell.com)
  3. How to foster relationships so that when it’s time to sell, you have a few personal contacts in mind.

With regards to the 3rd, you may want to get to know other business owners in your area who have complimentary (or even competing businesses). You may also consider hiring a leader who would like to take over and own their own business some day. If you have a franchise like mine, you will also want to stay in touch with owners in other areas as they might want to expand their operations.

The goal with this post is to organize and direct the many varied posts I’ve written about my adventure buying, building, and now selling my business over the last 18 months. As I add more posts I’ll try to keep this summary updated so you can always reference it for new material.

To your generating-wealth-through-business success, Bryan

I have a great idea for a business. Now what?

A friend recently contacted me with the idea of starting a topless hair salon wondering what my thoughts were on the project. Granted that’s not the style of business I would ever own or start, however I realized my thoughts on, and more importantly my process for evaluating his business idea are the same that I would apply to any business. If you came to me asking if your idea is a good one and if you should start a business I’d answer in almost the exact same way. Since you may have to evaluate dozens of businesses before you find a great one, it’s important that you train yourself to think the same way. So here are my thoughts…

  1. I don’t recall ever seeing one in the 40+ states I’ve visited but I could have driven right by one and just not realized it.
  2. Sounds like it has business potential and I’m a big fan of owning businesses vs. working for them.
  3. It’s almost always better to buy vs. start a business since they already have a location, customers, equipment, cashflow etc. etc. In this instance I’m not sure that’s the case since the customer base may change drastically and the current employees may not be interested in your changes. Maybe take over a lease from one that’s going out of business so that all the equipment is there but the employees and customers are not… Have you been able to find one of these businesses yet? It’s always easier to steal ideas from other established businesses than come up with all of them on your own.
  4. If you’re really interested in buying/starting a business there’s a LOT more to it than coming up with an idea so you’ll really need to work on educating yourself. Check out my blog and particularly the Recommended Reading section. It gives a lot of good resources for you to learn what it takes to start/buy a business. Particularly since it chronicles a lot of what was involved with me doing the same.
  5. Las Vegas is in Carson County which currently has the highest unemployment rate by county in the US at about 12.5%. In the last year over 10,000 have left that county (for the first time in like 20 years the population has stopped increasing). Major hotel and building projects have been cancelled and thousands have been laid off. On the plus side, you can probably find cheap space to lease for a business. On the negative side, it may not be as easy to get an extra $20 out of someone for a haircut… This was in essence my target market evaluation. He mentioned starting the business in Sin City for obvious reasons so don’t you think information on the current economy in Las Vegas might be pertinent? Notice how I didn’t discount the idea altogether. A year or 2 ago when things were booming the upfront costs themselves may have made this idea completely cost prohibitive. The down turn in the economy in Vegas may just provide the perfect opportunity for a lease takeover and recruitment of team members at reasonable wages. That’s the beauty of buying and selling businesses. No matter what the economy is doing some businesses will always be available.
  6. Once you educate yourself a bit about the questions you need to ask about buying/starting a business,  call one that’s already established and ask them about marketing, growth, pricing, how the community reacted, how they recruit talent, etc. If they don’t see you as competition a lot of times business owners/managers are willing to lend a hand by answering questions. This is very true. We entrepreneurs are a tough lot who work hard to get where we are. However we tend to appreciate and respect those trying to accomplish the same thing and so don’t mind helping out a little bit when we can. Obviously you can’t abuse the privilege of talking with someone who’s been there and done that. The best thing to do is to build up a long list of business contacts so that when you have questions you can always find an answer without bugging the same person every time.

Can you answer those questions about your business idea in the affirmative? If you can, the next step is determining your break-even point, your potential market, and your marketing plan. Starting with the break-even, if you can risk the money it’s going to take to get you to the break-even point go for it. What do you have to lose? Just be aware that over 90% of businesses fail within the first 5 years so if you don’t want that to be you, over prepare.

To your business starting success, Bryan