I am an entrepreneur.
When I was 7 or 8 years old I was running my own gambling game and market stall at my public school. With glass marbles, dozens of us would offer games of skill and chance. If you could hit the tiny ball bearing with a marble, you would get a larger ball bearing or a crystal boulder (a large marble). Sometimes you would amass a bag full of “misses” when people tried to hit your tiny ball bearing. And there was a clear ranking as to the value of all sizes of marbles, boulders, and ball bearings, one that changed regularly, depending on supply and demand. Besides the games, there was a brisk market for trading various types of balls based on these values. Ten marbles might get you a crystal boulder, for example. Or on a good day, you might negotiate a better deal, only to trade it for a higher value deal the next day. Then there were bullies who tried to steal your collection. The school yard was pretty well policed by teachers, but without overt permission for this marketplace to take place, the market was basically unregulated. When the inevitable day came when the games and market were shut down by the powers-that-be, there was a true sense of loss for many of us. But then we moved on to trading hockey cards. One entrepreneurial addiction to another…and just 8 years old.
Living in a town where alcohol was the preferred choice of entertainment, I would ride my bike up and down miles of roads looking for empty beer cans and bottles in ditches. What a great gig for a 10 year old! As soon as the snow had melted in the spring it was bonanza time: A whole winter of drinking and driving throwaways were mine for the taking. That is, if Lou, the retired Hawaiian guy who lived across the street, didn’t get them first. He was a real competitor: Arising at 5 am, Lou would head to the backstreets of the industrial area of town where guys in cars would drink themselves silly, throw away the cans and bottles, and then drive on. I had a secret weapon, however: Lou would walk his dog. I would ride my bike. So I had vast areas to scout for my glass and tin loot that he couldn’t get to. But he was a clever guy: He knew that Saturday and Sunday mornings were the best days, after workers got paid their weekly wages on Friday. I listened to his proudly announced techniques and learned. I loved to learn how to do things smarter and better.
When I was a bit older my brother and I would cut lawns in the summer, rake leaves in the fall, and shovel snow off people’s driveways in the winter. Newspaper routes were, of course, also thrown in there for good measure during those years.
As a teenager I tried buying and selling comic books, which was a real money pit. I learned that the commercial trader bought comics at a pittance for what they sold them to me for. And of course when I tried to sell my collection, I was offered only this pittance. Once rid of that business, I instead learned about the horse racing and horse trading business (literally) from another neighbour. Another summer I worked in his greenhouse business, seeing what an amazing cash cow bedding flowers were. As the teenage years rolled on, I wandered through a handful of businesses, learning how the world worked: Window frames, house painting, furniture manufacturing, building supplies, a department store. Of course, the teenage years meant wanting to socialize with girls, so I often held down 2 or 3 jobs and businesses at the same time. From Burger King to babysitting. I did it all. Money and having an excuse to hang around girls. Perfect.
My adult years meant a dozen more businesses: From importing water filters with my college friend Reiaz to buying bicycles from police auctions, tuning them up, and reselling them at a tidy profit in the spring. Online businesses, consulting businesses, writing, training, buying and renovating properties, selling door lites, distributing infra-red heating panels, keynote speaking, … and the list goes on. All great learning experiences and deepening of my understanding of how the world works.
From 40 years of business successes and failures come 10 principles I base my new business ventures on:
1. Is there any money in it?
Want to help others? Volunteer. I do, and it feels great to give from the heart.
Want to make money? Always be sure to leave your “do gooding” feelings at home. Is there little chance for significant revenues and profits in the short or long run? Immediately and firmly shut down any attention to that idea. Only start businesses where you can clearly make a good profit with reasonable effort.
And context is important here: What is the scale of profit you want to make? Doubling your money on a $50 sale sounds wonderful. But you can’t live on the profits from a $50 sale if you only make one sale a month. Is this a “fun” business or a “pay the bills” business? Being clear on the context of this business opportunity helps to put into perspective your expectations and how those expectations compare to the scale of profitability of the business.
2. Are there enough possible customers who would want your product or service?
No guessing here. Yes, you can prove there are enough customers or no, you can’t. Yes? Take the next step. No? Stop that business idea immediately.
3. Can they actually pay for it? And will they?
“Never try to sell something to someone who can’t afford what you are offering.” This is a paradox, because often in life those in most need can’t afford to pay to have that need met. Even more subtly, many people who can afford what you have to offer say they can’t afford it and want it for free. Then they turn around and spend 10 times the amount of money on some luxury they want. So clearly, there must also be a strong desire for what you have to offer – a desire that is not a nicety, but a “here is my cash: give it to me now” kind of desire.
4. Can you get them to buy your product or service?
Most of my business failures resulted from me not having the confidence, tenacity, acumen, and willpower to promote my products and services properly. I always felt that a great product – one that offered excellent value – would sell itself. True, if you have something unique and differentiated. Or something that people know well and want more of: A Subway franchise, for example. But false if you are just a “me too” business. Another standard offering. Then you have to work hard at promotion.
Marketing has been the most complicated and stressful part of all my efforts. And I know it is for many others.
But now, I have a simple and clear question to guide me: “Can I simply and easily get people to buy what I am selling?” Yes? Proceed. No? Shut down that idea right away. I will not engage in a “me-too” business, unless I can offer significant differentiation or access to a customer group that makes marketing clear and simple.
5. Understand and offer what your customers want to buy, not what you want to sell.
You want to sell lawn cutting services. Your customers don’t want their neighbours thinking bad thoughts about them because of an unkempt lawn.
Two completely different products. Your view is irrelevant. Theirs is always right. Learn how the world works: You are almost never selling a functional product or service. You are always meeting emotional needs. Learn to speak to customers in a way that means something to them, not you.
So, I ask: “What emotional needs am I offering to meet? Will customers pay lots of money to get those emotional needs met? Can I correctly and fully meet those emotional needs so that I can get lots of money in return?”
6. Deliver excellent value, above and beyond what your customers expect.
Giving them everything you can think of? Then find a way to give them more.
7. Fire your worst customers right away.
I hated the guy who demanded his driveway be shoveled right away after it snowed, and then got his expensive car stuck trying to push his way through the snow piles, because he couldn’t wait for us to finish our shoveling work. Instead he had us push him out. And when we were done shoveling, he told us to come back another day for payment because he didn’t have any cash.
Never, never do business with bad customers. Fire them immediately or better still, simply say “no” to selling them your product or service in the first place.
8. Pareto Principle your efforts
80% of your sales and profits will come from 20% of your customers. Give those 20% of your customers your best attention and service.
80% of your work will come from 20% of your customers who make you no profit and give you all the grief. Find out who those 20% are and get rid of them.
9. Buy low and sell high.
If you can’t buy low and sell high right away, don’t start the business. Low profit margins never get better. They just get lower as costs go up.
And the key here is real margins: Not 10%, 20% or even 30%. Never touch a startup business idea without a 50%, 100% or even 200% profit margin. This is not greed, it is simply logical: No real profits and you don’t have a real business. You have a charity. Great, if you are rich. Not great if need money to live on.
10. Start right away and stop right away.
Start up your business at minimal cost and right away while you have hungry customers. Even if you don’t have it all planned and organized perfectly yet. Just do it.
And shut down your business right away when the customers don’t need you any more. The moment your sales look like they are going to drop significantly due to factors beyond your control, shut down that business right away.
I learned this early in my career I pushed for the sale of our first house only 6 months after we bought it and I had done a bunch of renos on it by myself. My wife and all our extended family were shocked at the idea of selling and discouraged the sale. To them, it was a home, something that you didn’t treat as a saleable asset. To me, it was a freshly renovated asset in a market that had just peaked. Further, the cash from the sale of the asset was needed for our Masters degrees, something my wife and I had both just started working on full-time.
One month after we sold, the market plummeted, eventually dropping the value our house 25%.
Business decisions will often be unpopular. But if you know when to start a business and when to stop it, hold firm and make the decisions, despite naysayers. Even if you are occasionally wrong, you establish a pattern of thinking, listening to intuition, and trusting yourself. This is a confidence that is very, very valuable to you in the long run.
11. Fall, get back up, and do something differently.
A bonus principle: Expect to fail. And then learn why you failed. The only real failure is to not learn why you failed. If you do learn, then it is not a real failure, but rather a great learning experience.
And when you do fall down, get up right away and do something differently.
Entrepreneurs are not those who get their businesses right the first time. They are the ones who make 10 mistakes, learn all they can, and then succeed spectacularly the 11th time they try.
A week after I wrote this blog post another question came to mind: “Where did I make the most money from all these ventures?”
Buying houses, renovating them, and reselling them. Hands down the biggest payoff in absolute profit terms.
In relative terms, for the capital and effort involved? Selling myself: Teaching in Dubai on contract was the most spectacular payoff, in cash, personal growth, and the lifestyle “wow” factor.
The most satisfying? Collecting bottles and cans as a kid. Every one you find, pick up, and return feels like a gift. Is there anything more satisfying in business than feeling grateful when you make money?
Photo credit: Marbles, Flickr User: “Rebecca Barray”. Creative Commons Licensed, accessed February 21, 2014.