You have an idea.
That’s how it always starts. A bright, shiny, unique baby idea that, when fully developed, will be a game changer for society, and for your bank account. It’s all you can think about. You know that if you can operationalize this incredible idea, you’ll make millions. It consumes you. It’s that good. You develop a healthy case of “getaheadofyourselfidis,” and begin seeking investment dollars to create a prototype, in effect skipping to step 1,000 (not an exaggeration). Your house of cards inevitably crumbles when you discover that someone is already doing what you’re trying to do, that selling requires marketing, that your time is a zero-sum game, or that maybe there wasn’t even a market for your product or service in the first place.
You begin the process of painfully losing everything you “built” and end up with a fear of trying, which is probably the worst outcome of this scenario.
The good news? It doesn’t have to be that way. In fact, the numbers may be more in your favor than you originally would have guessed. You just have to pump the brake, get you some education, and continuously ask yourself four transcendent questions (at every…single…step of the way):
- Why am I doing this?
- What defines success?
- What’s the next first thing?
- What is my exit strategy?
More on these in a minute.
With small businesses accounting for sixty to eighty percent of all U.S. jobs, it’s clear that the American dream may now favor entrepreneurship over white picket fences.
Small businesses produce 13 times more patents than larger firms, and generate over $11 Trillion in receipts per year, according to a Paychex study.
In other words, a lot is riding on the success or failure of our nation’s entrepreneurs.
Now we’ve all heard the doom and gloom associated with starting a business. We’ve heard things like “half of all small businesses fail in the first year,” and “you need to borrow a ton of money to launch a business.”
Let’s just dispel some of those myths right now:
a. According to 2016 statistics published by the Small Business Administration, about 78% of small business startups survive the first year and about half of all employer establishments survive at least five years.
b. Obviously, the more you leverage yourself (borrow) getting into a business, the more risk you are taking on, and the more pressure you will be under to generate revenue early to offset the cost of the debt. But check out the concept of Effectuation and pay special attention to the first component: Bird in Hand. The “Bird in Hand” idea challenges entrepreneurs to start out by asking what they can do with their current resources. From effectuation.org: “When expert entrepreneurs set out to build a new venture, they start with their means: who I am, what I know, and whom I know.” By doing this, we can determine how to prove out our concept without going into massive debt to do so.
“Risk comes from not knowing what you’re doing.” — Warren Buffet
This all sounds pretty good, but there’s gotta be risk involved in starting a business, right? Absolutely, but we can control the amount of risk we are “exposed to,” to an extent. Do things like:
- Talk in-depth with your spouse or family about the changes you are proposing. Relationship strain can derail even the best thought-out plan.
- Start the business as a side-hustle while we still have a primary income to sustain ourselves. Once we close the gap between our day-job and our dream-job, then we can say goodbye to the nine-to-five and take the leap. For a thoughtful and thorough guide on this, read the book “Quitter” by Jon Acuff. Seriously, do it.
- Save 12 months of cost-of-living expenses to cover your household while the business is getting up and running.
- Have appropriate liability protection via the business structure you decide to operate under. For a description of the different types of business structures, go to the IRS website and do some homework.
- Seek excellent council in every area of the idea and business. Yes, every area includes the areas you think you are already strong in. Build a team that can support you in every (there’s that word again) decision.
- Tom Peters said “test fast, fail fast, adjust fast.” Be agile and flexible when you can — fast adjustments can save your business and lower compounding risk.
- Constantly ask yourself the four transcendent questions.
OK, so we’ve heard about these four transcendent questions a few times now, but what do they cover, and when should I be asking myself these questions? The answers, respectively, are everything and all the time.
Why Am I Doing What I’m Doing?
In his book “Start With Why,” Simon Sinek expertly observes that “people don’t buy what you do, they buy why you do it.” To succeed (especially in the beginning), you may get the answer of “what” to do from excellent council, but “why” is, and should be, a “you-thing.”
If “what” is the rocket ship, “why” if the fuel. You can’t get to where you’re trying to go without the “why.”
From a personal standpoint, creating a personal mission statement is a great way to dig deep and discover what your “why” really is. It’s usually covered in layers of values, experiences, and dreams, so you’ve got to acknowledge those things before you uncover the real pay-dirt: your “why.”
My “why” is to inspire others to take massive action (a phrase borrowed from Tony Robbins). To do this requires massive action, which permeates just about every aspect of my life and daily activity. Your “why” can be the same, but will probably be different based on your calling. Take time to figure it out, it will be worth it.
From a business standpoint, this question should be applied like a cream to a burn — generously.
You’re thinking about running as an LLC versus a sole proprietorship — why? Your calling a weekly staff-meeting with your small team to discuss successes or challenges — why? You’re spending $20 a day on Facebook ads instead of spending that money on training — why? Your business is thinking of expanding into another field which will generate another revenue stream, but will require tremendous up-front cost — why?
Always ask why. In doing so you should be constantly re-aligning to your mission, vision, and values, and will know when to say no, even if the opportunity is financially appealing. Knowing your why will keep you in check, and remind you that just because you can do something, doesn’t mean you should.
What Defines Success?
What defines success for your business in the first year? the first three years? after ten?
Now take that vision down to a granular level — what defines success for you this month? this week? today?
How about in the next five minutes?
As business-owners we naturally define success quantitatively — through sales.
But this transcendent question asks so much more of us. Go beyond sales and ask yourself, what defines success in terms of not only tangible results — but also intangible.
If I’m in the lawn-care business, how do I want the yard to smell when I’m done? Weird thought, right? How should it look when the morning sun hits the dew on each blade of grass? Will neighbors notice my work? Maybe I define success as getting a call from at least one neighbor who was referred or has seen my business’s work within a week of the cut. Anything less requires more.
Now that’s highly-defined success.
Define success before every project, every meeting, every call, and every engaged interaction. Match results against your definition, and where you are lacking — adjust.
While it’s important to have long-term goals associated with your business, it can be equally as important to keep an eye on what’s right around the corner. This brings us to our next transcendent question:
What’s the Next First Thing?
“Do first things first and second things not at all.” — Peter Drucker
Remember our ambitious entrepreneur skipping steps 1–999 in the beginning? Sometimes our excitement and energy can get us in over our heads, and lead us out of order in our plan.
To prevent this, ask yourself — what’s the next thing I should do right now. And do that thing. Not the thing after that, or the thing that’s supposed to be done next month. Just do the next first thing first.
If we keep focusing on what our next first step is, there will never be a second or third step, only a series of firsts.
This doesn’t mean that you should scrap business planning, or not use a gantt chart for you project manager types, but it does infer that multi-tasking is actually not a thing. If your time is really a zero-sum game, which it is, then the choices you make for how you will use it by nature prevent you from using it on another task simultaneously.
Can’t happen — it’s physics (probably).
Don’t quit your day job before you have income to support yourself from your side hustle. Don’t market a faulty product. Don’t borrow money before having a (proven) plan to pay it off. Don’t buy a bunch of nails and show up on-site only to realize you never bought the hammer. Do keep first things first and second things never.
What’s My Exit Strategy?
“Begin with the end in mind.” — Stephen Covey
Do you know someone who owns a business and would love to retire, but can’t? Maybe they haven’t saved enough in their investment critical mass (nest-egg) to live off of in perpetuity, or they haven’t established a succession plan. Riding off into the sunset becomes a lot harder when you know the world is on fire behind you — and things like saving and succession don’t just happen overnight. They take diligent work over long periods of time. In fact, the way you set up your business and scale it can have a major impact on this, so better to do as Stephen Covey said in “7 Habits for Highly Successful People,” and “begin with the end in mind.”
You may be one of those types that wants to work until they die because you love what you do so much. That’s awesome — you already know your exit strategy from your business, which just so happens to closely align with your exit strategy from life. You may want to ask a question or two about who’s going to take the reigns after you leave, or if your business is going to die with you. Work with your excellent council to develop a plan that will take into consideration things like estate tax (if you have a lot of assets), setting beneficiaries on accounts, and implementing training pipelines toward a seamless transition. The earlier you create these solutions, the better. We can’t predict the future, so take care of your legacy while you are still of sound mind and body to do so.
Then there are the gardeners — people who start or grow a business specifically to harvest in order to fund retirement. This can be done a couple ways, but the two most obvious are selling the business or becoming an absentee-owner. A prudent business owner will begin with the end in mind here by familiarizing themselves with what buyers will look for in an attractive purchase down the road. A list of questions small business buyers are encouraged to ask themselves can be found at the SBA site.
If your business is generating enough income for you to unplug, hire a president/manager, and still collect checks, you’ve become an absentee-owner, and your time is now yours. Congratulations! You are now the equivalent of Bruce Wayne (maybe minus the billions), and have the financial independence to choose what to do with your days. This is a common definition of financial freedom.
Whether you’re a lifer or a gardener, the point is that you develop the infrastructure while the business is in early stages to allow for these types of transitions down the road. The decisions you make in the formative years of the business will either make it easier or harder for you to let go later.
“Things work out best for those who make the best out of how things work out.” — John Wooden
Use this playbook to guide you on your journey. Whether you’re just starting, or have been running a successful business for decade — use the transcendent questions as your guiding light: Identify your why, always define success, focus on the next first thing, and set the groundwork for your legacy.
Originally published at level1life.com on April 17, 2017.
Originally published at medium.com