The reluctant entrepreneur turning dreams into profits

THE RELUCTANT ENTREPRENEUR THE RELUCTANT ENTREPRENEUR Turning Dreams Into Profits MICHAEL MASTERSON John Wiley & Sons, Inc Copyright © 2012 by Michael Masterson All rights reserved Published by John Wiley & Sons, Inc., Hoboken, New Jersey Published simultaneously in Canada No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http:// www.wiley.com/go/permissions Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose No warranty may be created or extended by sales representatives or written sales materials The advice and strategies contained herein may not be suitable for your situation You should consult with a professional where appropriate Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993, or fax (317) 572-4002 Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books For more information about Wiley products, visit our web site at www.wiley.com Library of Congress Cataloging-in-Publication Data: Masterson, Michael, 1950  The reluctant entrepreneur : turning dreams into profits / Michael Masterson     p cm – (Agora series ; 73)   Includes index    ISBN 978-1-118-17844-7 (hardback); ISBN 978-1-118-22727-5 (ebk);    ISBN 978-1-118-24021-2 (ebk); ISBN 978-1-118-26492-8 (ebk) 1.  Entrepreneurship.  2.  New business enterprises–Management 3.  Small business–Management.  I.  Title   HB615.M3723 2012   658.1'1–dc23 2012004737 Printed in the United States of America 10  9  8  7  6  5  4  3  2  This book is dedicated to the hundreds of thousands of people who read Early to Rise from 2000 to 2011 when I was writing for it Contents Foreword Acknowledgments INTRODUCTION  Entrepreneurship: What It Is        and Isn’t xiii xix The Reality of Calculated Risk The Reluctant Entrepreneur Launching a Successful Business Takes More Than Motivation It’s Okay to Be Cautious Success Is Not a Roll of the Dice And One More Thing        CHAPTER 1  What, Exactly, Is a Reluctant Entrepreneur? Philip Knight’s Story 10 What We Can Learn From This        11 vii viii  CONTENTS Hatching a Business While You Keep Your Day Job 12 The Myth of the “Entrepreneurial Type” 16 CHAPTER 2  The First Question You Must Be Able to Answer 21 Rule Number One of Reluctant Entrepreneurship 23 Your Initial Challenge: Generating Positive Cash Flow 24 Educating Yourself About Business 25 CHAPTER 3  What It Takes to Be a Successful Reluctant Entrepreneur 27 The Reluctant Entrepreneur Is a Smart Entrepreneur 29 The Foundation of Your Business: Six Strategic Choices You Have to Make at the Very Beginning 31 It’s Not Rocket Science 38 CHAPTER 4  Hatching the New Business: Overcoming Fear and Taking Action 41 Your First Three Action Steps 43 How Do You Find a Mentor? 48 Putting Fear on Your Side 49 CHAPTER 5  The Magic Happens When You Hire Superstars 51 Recognizing Superstar Potential 52 Knowing What You’re Looking For 53 How Do You Find These People? 54 The Care and Feeding of a Superstar 56 How to Structure a Superstar Organization 59 The Best Investment You Will Ever Make 61 152  APPENDIX My partner and I were always going after the short money, as he called it The short money was the profits you could garner over a matter of weeks or months We never thought about the long-term development of our business It was there to make us money as fast as it possibly could We didn’t have long-term plans We just didn’t think that way After I retired and came back into business as a consultant, I decided to work only with clients who had long-term ambitions My first (and eventually biggest) client had absolutely no interest in short-term profits He was focused on building a business that he could pass on to his children He lived frugally and took a small salary When profits were made, 90 percent of them were routinely plowed back into the business for future growth That made a huge difference Key employees understood the company’s philosophy on profits and had to be in agreement with them or find another job Instead of asking, “Which decision will give us the quickest return?” they asked, “What will make us a stronger company five years from now?” This long-term orientation automatically prevented my client from making the second big mistake I had made There is only one way to ensure long-term profitability—and that is to produce quality products that customers are happy to keep buying, year after year Everyone in business gives lip service to quality, but few are willing to invest time and money to achieve it Those who get the golden goose—a business that produces profits more easily as time goes on Those who don’t are condemned to keep running like hamsters in a cage for their profits        until they either drop dead of a heart attack or get exposed as the hacks they are So if you want to make wealth building your number one goal, go for it But make sure you go after that wealth with a long-range view of making profits and a serious commitment to creating good products Appendix  153 If you it that way, it will be a little tougher at first You will have to spend more money improving your products, and you’ll have to wait a little longer for them to be produced But in the long run, you’ll make more money and you will be happier, because your customers will stay with you and reward you with continued buying I was talking to “Eliza” yesterday about her career She was considering a job offer that would double her income and put her on a rapid road to wealth “I am tempted to take the job,” she told me, “but I don’t want to make money the center of my life I want to good for people.” Had she said this to me many years ago, I would have told her to get real Now, I realize that she’s right She should never make the pursuit of money her primary objective She should be in a business that she wants to be in She should sell products she’s proud of selling She should find some way to make her business interests coincide with her personal ethics and dreams “Yes,” I said to Eliza, “make the good you can for people your primary goal But pay attention to the money as well, because it will be the best and simplest way to measure the financial health of your business.” You should be in business to provide people with something of value If you conduct your business correctly and offer them a good deal—and if the product you sell is something they really want—you’ll make plenty of money One business acquaintance of mine put it this way: “Money is a result, not a cause If you get into business solely for the money, chances are you will never be great at what you’re doing.” That’s why so many people fail at network-marketing businesses They’re attracted by the promise of big profits, but then they realize they have to sell soap or vitamins or lotions or whatever, and don’t want to that Get into a business that you like, learn it thoroughly, and it right The money will come automatically 154  APPENDIX I’ve heard the same thing said by professional athletes The guys who it right—who have long careers—think in terms of long-term success They are always practicing to improve their game They are always interested in learning new skills They are happy to make as much money as they can, but they know that their lifetime wealth depends on how many years of income they can enjoy, not on how much money they can make in any single year Michael Jordan is a great example Tiger Woods is too And you’d have to include Andre Agassi and the Williams sisters in that group There are many athletes who have a short streak of high earnings, but only a handful who enjoy long, profitable careers In the world of entertainment, I think of Oprah Winfrey and Howard Stern (an unlikely pairing, I grant you) And Johnny Carson and David Letterman These wealth builders must have put making lots of money on top of their priority lists, but they thought in terms of the long run and they constantly worked to be better at what they did They worked tirelessly because they wanted to be the best And in being the best, they earned amazing amounts of money The money was the result, not the cause The moral of the story (if you don’t mind hearing it from a reformed sinner) is that money isn’t the root of all evil, but the love of money is Don’t love money Love the idea of building a good business that will last Love the good that your business does—the value it brings to your customers and the quality of life it affords your employees Cherish the unsolicited testimonials you get from your customers, your vendors, and your subcontractors Enjoy the thought that one day you may be able to hand over your business to a child or grandchild or a protégé you care about Appendix  155 See money for what it is—a neutral indicator of how good your business is at doing what it does, at fulfilling the promises it makes and keeping its customers engaged If the value you provide is worth the money you get for it, people will buy what you’re selling The better the value you give, the more money you will get “Time is money.” —Benjamin Franklin THE TIME-MANAGEMENT SYSTEM THAT WORKS FOR ME My business life got much better when I started to focus on long-term profitability and quality But I wasn’t able to master my time and get all my personal goals accomplished until I started writing about personal achievement That forced me to rethink everything I was doing And after several years of trying different time-management programs, I finally arrived at a system that allowed me to get everything done that I had neglected for the previous 30 years The first big breakthrough came when I accepted the fact that I had to manage my time Until I did that, I insisted I could just fine by working late at night and expecting everyone around me to keep up with me and clean up the mess I made along the way But when I began to set goals and methodically work on them, I discovered how much time I had been wasting I was able to double my productivity in a matter of months The next big breakthrough came when I recognized the importance of prioritizing my goals I developed a system— borrowed from various experts—that made a huge difference in what I could accomplish I tweaked this system every chance I got, and it seemed to keep getting better 156  APPENDIX It evolved into the system I still use to this day Let’s say your main goal for the year is to get a business started Here’s how my system can help you that        Step One: You begin by breaking your yearly goal into 12 manageable, bite-sized monthly goals In this case, you would determine what you need to each month to get your business up and running, from doing the initial research to the grand opening Step Two: You break each of those 12 monthly goals into four weekly objectives For instance, if your first monthly goal in getting a new business started is to identify a good business opportunity, perhaps each of your four weekly goals would be to research at least 10 possibilities Step Three: You work your way down to the action you will take each day to fulfill your weekly objective If you have made a commitment to research 10 business opportunities each week, that means one of the top priorities on your daily to-do list would be to research two possibilities Expect to spend one full day planning out your year Once a month, you’ll sit down for two or three hours to map out your goals for the next four weeks Once a week, you’ll spend one hour establishing your goals for the next seven days And you’ll spend about 10 or 15 minutes each morning organizing your day Daily Planning: Getting the Most From Every Minute There is no better time to collect your thoughts, review your goals, determine your current responsibilities, and plan your day than early in the morning when everything around you is quiet and still This is the early morning routine that I recommend: Get your inputs (5 to 10 minutes) I start the day by scanning my daily task list, which I have written the night before If for some reason I haven’t prepared Appendix  157 a task list, I it then, based on my weekly list of objectives I then scan my e-mails, not responding to anything but noting responses that will need to be made and putting some of them down on my daily task list I the same with the in-box that sits on my desk Finally, I retrieve any phone messages—and if one of them requires action, I make a note of it on my daily task list I make it a point not to any work at that point (e.g., send out a quick e-mail response or return a phone message) because I know if I I’ll get bogged down in a lot of small stuff Instead, I devote this input time to finalizing my daily task list Sort and prioritize (5 to 10 minutes) Now comes the fun part For each task on my daily to-do list, I indicate the approximate amount of time I expect it will take to complete it I always try to be realistic in my estimations of time required Over the years, I’ve trained myself to be very conservative As a general rule, I break up tasks into 15-, 30-, 45-minute, and 1-hour increments But every once in a while I allow myself two or two and a half hours for a single task I like to prioritize my tasks in terms of their importance and urgency This idea is based on the quadrant developed by Stephen Covey in his bestselling book The Habits of Highly Effective People He identifies tasks as being either (1) Important and Urgent, (2) Important but Not Urgent, (3) Unimportant but Urgent, or (4) Unimportant and Not Urgent If we work with this idea, your daily schedule should be focused mainly on (1) and (2) tasks, because these require immediate attention or will advance you toward your ultimate goals Your schedule should contain a diminishing number of (3) tasks (since they indicate that you are not in control of your schedule), and no (4) tasks at all 158  APPENDIX Start with something really important (15 to 60 minutes) Doing an important task right off the bat gives me an immediate sense of accomplishment that fills me with energy that fuels my work for the rest of the day I like to make it a non-urgent task, because these are usually the tasks that make the biggest long-term differences—and because they are not urgent, they tend to get overlooked This is how I establish my goals, focus my objectives, and set daily tasks It is not, by any means, an entirely original system It is a patchwork of systems that have been developed by others and added to by me But there is something about this particular system that seems to work very well for everyone I have convinced to try it I encourage you to try it too About the Author Michael Masterson is not your typical businessman A former Peace Corps volunteer, he never took a class in business, rarely reads the business press, and doesn’t like to talk business But he has played an integral role in dozens of successful businesses—public and private, service- and product-oriented, local and international As the primary growth strategist for one of those businesses (a former competitor), he helped grow its revenues from $8 million to more than $500 million Another exceeded the $350 million mark Eight more have grown to $10 million plus Masterson’s entrepreneurial experience is immense, even compared to other successful entrepreneurs He has owned restaurants, bars, nightclubs, and art galleries At one time or another, he has been in businesses as diverse as information publishing, investment advisories, health and nutrition, sports and fitness, public relations, career advancement, and real estate He has written more than a dozen business books Several of them were New York Times and Wall Street Journal bestsellers He has also been a regular contributor to Early to Rise, the 159 160  ABOUT THE AUTHOR Internet’s most popular self-improvement newsletter; M, an e-zine on entrepreneurship; and Michael Masterson’s Journal, which reached more than 900,000 readers These days, he consults for a handful of private clients and writes for The Palm Beach Letter, a newsletter for individual investors Index The Habits of Highly Effective People, 157 A B accountability, culture of, 119 accounts payable, 105 advertising campaign, Unique Selling Proposition and, 91–92 advice, 57 African Business & Trade, 136–138 Agassi, Andre, 154 agenda, 123 Ali, Muhammad, 135 Amazon.com, 127–128 American Writers & Artists Inc., 84, 131 angel investors, 44–45 Apple, apprenticeship, 46–47 art gallery, 81–82 Ash, Mary Kay, authority, 57 AWAI See American Writers & Artists Inc balance sheet, 105 bandwagon, jumping on, 125 Barnard (The furniture shop owner), 139 Ben and Jerry’s, benefits deeper benefits versus, 89 features versus, 88–89 Bezos, Jeff, 127–128 Bloomberg, Michael, 59 Blue Ribbon Sports, 11 Bonaparte, Napoleon, 114 Bonner, Bill, 136–137, 148 Boothman, Nicholas, 76 Borders Books, 27–28 Borders, Louis, 27–28, 30 bottom-line goal, 123 Bowerman, Bill, 11–12 Breakthrough Advertising, 85 Buffett, Warren, 105 161 162  INDEX build on what you know, 31–33 business owner would-be, 4–5 successful, 18 business plan, foundation of, 129 business relationships, 65–66 getting more from, 70–71 maintaining, 78–79 rewards of, 66 business success cutthroat and, 144–149 mindset and, 135–139 business bad reasons to start own, 30–31 day job and, 12–16 educating self about, 25 financing, 44–45 foundation of, 31–38 launching, 4–5 learning, 46–48 starting, 12–16 success, 13 ten commandments of, 148–149 use of humor in, 139–144 C calculated risk, 2–3 Caples, John, 85 career-building contacts, making, 68 Carnegie, Andrew, Carnegie, Dale, 120 Carson, Johnny, 154 cash, 105 cash flow, generating, 24 caution, 5–6 Chamber of Commerce, 44 champion, mindset of, 135–139 Changing the Channel, 85 charisma, 69 Cialdini, Robert, 70–71, 85–86 Clinton, Bill, 69 Cohen, Ben, communicators, leaders as, 120 compensation CEO, 101–102 determining own, 102–103 competition, cooperation versus, 115 competitive edge, 105–106 conceit of outside knowledge, 33–34 Confucius, 29 connections, making, 75–76 consideration, 124–125 control, maintaining, 132 cooperation, competition versus, 115 copy, marketing, 37–38 Covey, Stephen, 119, 157 Crazy Dave, 66 Crosby, John C., 47 customer standards, setting high standards for, 107–109 customers, 115 respect for, 54 cutthroat, business success and, 144–149 D daily planning, 156–158 David, Larry, 140 day job starting a business and, 12–16 when to quit, 23 deadlock, 124 decisions, fast, 116 deeper benefits, benefits versus, 89 delegation, 117–118 Dell, Demosthenes, 75 design, finalizing, 129 development, product, 36–37 Index  163 differences, value-creating, 123 direct marketing, 83–85 Disney, Walt, 43 Disraeli, Benjamin, 98 Donatello, 46 Drucker, Peter F., 82 durable competitive advantage, 105–106 E Ellis, John, 21 employee-employer relationship, 124–125 employees, as investments, 61–63 entrepreneurial type, myth, 16–19 Esther’s Health Soup, 21 F fear, using, 49–50 features, benefits versus, 88–89 feedback, 57 Ferriss, Tim, 16 financing the business, 44–45 flattery, 72–73 Florida Atlantic University, 144 The Four Hour Work Week, 16 Fox, Jeffrey F., 86 Franklin, Benjamin, 155 G gambling, Gates, Bill, GE, 113 goal, bottom-line, 123 Godin, Seth, 16–17, 42 Goldstein, Noah, 85–86 Google, Greenfield, Jerry, H Hahn, Fred E., 85 Hefner, Hugh, Hightower, Jim, 125 Holmes, Oliver Wendell, 144 Hopkins, Claude, 85 How to Become a Rainmaker, 86 How to Make People Like You, 76 How to Make Your Advertising Make Money, 85 Huizenga, Wayne, humor, using in business, 139–144 I Iacocca, Lee, 61 ideas generating support for, 116–117 selling to your organization, 117 If You’re Clueless About Starting Your Own Business, 16–18 Influence: The Psychology of Persuasion, 70–71, 85–86 inspire, 132–133 J job, when to quit, 23 Johnson, Jeff, 11 Jordan, Michael, 136, 154 journeyman, 47 K Kiam, Victor, 9–10 Kiyosaki, Robert, 16 Knight, Philip, 9–12 Kroc, Ray, L Lastman, Pieter, 46 leadership, 114–125 The Leap, learning the business, 46–48 Leno, Jay, 69 164  INDEX Letterman, David, 154 long-term profits, short-term results versus, 93–95 M Marden, Orison Swett, 116 marketing copy, writing, 37–38 marketing direct, 83–85 product, 36–37 Martin, Steve J., 85–86 Mary Kay Cosmetics, master communicators, 120 master-in-training, 47 Maugham, W Somerset, 139 McDonald’s, 9, 106 McKinley, Liz, 41–42 meetings, 121–122 Mellon, Andrew W., mentor, 46 mentor, finding, 48 Metro, Marty, 28–30, 39 Michelangelo, 46 micromanaging, 118–119 Microsoft, money, 57 respecting, 103–104 side effects of making, 149–155 motivate, 132–133 motivating others, leaders, 114 mutually-beneficial partnerships, seeking, 76–78 N National Venture Capital Association, 44 needs, wants versus, 87–88 negotiation, 122–124 networking, 55, 75–76 Nicholas, Ted, 73–74 Nike, 10–12 novice, 46–47 O O’Connor’s Pub, 66 offer, picking, 37 Ogilvy on Advertising, 85 Ogilvy, David, 23, 56, 85 online publishing, 15 OPM See other people’s money, 44 Optimum Selling Strategy (OSS), 82, 97, 131–132 OSS See Optimum Selling Strategy other people’s money, 44 others, learning from, 73–75 outside knowledge, conceit of, 33–34 overwork, 110–112 own business, bad reasons to start, 30–31 owners, successful, 18 P partnerships, mutually beneficial, 76–78 pay, CEO, 101–102 Peace Corps, 136 persistence, 100–101 personal encounters, making count, 76 persuasion, mastering art of, 85–86 Pinnacle Petroleum, 41–42 politics, work versus, 114–115 Portland State University, 11 positive cash flow, generating, 24 product development, 36–37 product adding value to, 36 finding the right one to sell, 34–35 marketing, 36–37 profit statements, 104–105 Index  165 profits, 98–100 reinvesting, 101–102 results versus, 93–95 R Ready, Fire, Aim, 4, 16, 50, 97 Ready, Fire, Aim, 15, 116 relationships employee-employer, 124–125 maintaining, 78–79 reluctant entrepreneur, 12–13 Rembrandt, 46 results, profits versus, 93–95 Rich Dad, Poor Dad, 16 Ridicule, 143 right product, finding to sell, 34–35 risk, reality of, 2–3 Robbins, Tony, 69 Rockefeller, John D., Rosten, Leo C., 143 S Schwartz, Eugene M., 85 Scientific Advertising, 85 SCORE, 21–22 Seinfeld, Jerry, 140 selling, 82, 131–132 Seven Years to Seven Figures, 12 sharing, competition versus, 115 short-term results, long-term profits versus, 93–95 side business day job and, 13 success, 13 side effects of making money, 149–155 Six Degrees of Separation, 75 Small Business Administration, 44 Smith, Rick, stalemate, 124 Starbucks, 106 starting business, day job and, 12–16 Stern, Howard, 154 success trap, 110–112 success learning from others, 73–75 side business and, 13 successful business, launching, 4–5 superstar organization, structuring, 59–61 superstar potential, recognizing, 52–53 superstars, 51–52 finding, 54–56 motivating, 57–58 Swinmurn, Nick, 36 T T-Bone, 66 teamwork, 119–120 temper, controlling, 124 ten commandments of business, 148–149 Tested Advertising Methods, 85 Tiffany & Co., 106–107 Tiger brand shoes, 10–11 time management, 43–44 time-management system, 155–158 trade journals, 67 trade shows, 68 Tribby, MaryEllen, 85 Trump, Donald, 147–148 U U.S Small Business Administration, 44 Unique Selling Proposition (USP), 90–91, 106 advertising campaign and, 91–92 University of Oregon, 10–11 urgency, sense of, 54 UsedCardboardBoxes.com, 29 using fear, 49–50 USP See Unique Selling Proposition 166  INDEX V value-creating differences, 123 value, adding to product, 36 venture capitalists, 44–45 Venture, Ken, 135 von Goethe, Johann Wolfgang, 58 Williams, Serena, 154 Williams, Venus, 154 Winfrey, Oprah, 154 Woods, Tiger, 154 work ethic, 54 work, politics versus, 114–115 worst-case scenario, 123 W wants, needs versus, 87–88 Waste Management, Webvan, 27–28 Welch, Jack, 113 White, Hugh, 149 Whole Foods Market, 22 Y Yes! 50 Scientifically Proven Ways to be Persuasive, 85–86 Z Zappos, 36 ... THE RELUCTANT ENTREPRENEUR THE RELUCTANT ENTREPRENEUR Turning Dreams Into Profits MICHAEL MASTERSON John Wiley & Sons, Inc Copyright... to Be a Successful Reluctant Entrepreneur 27 The Reluctant Entrepreneur Is a Smart Entrepreneur 29 The Foundation of Your Business: Six Strategic Choices You Have to Make at the Very Beginning... successful entrepreneurs got to the top by taking a very conservative approach 2  THE RELUCTANT ENTREPRENEUR THE REALITY OF CALCULATED RISK Take Bill Gates Legend has it that when the entrepreneurial