Some legendary advice and thoughts (On Making Money)
I found a really great post on The Fastlane Forums, posted by the user Snowbank. His advice was so good, I just had to share it here. Enjoy!
Thought I’d share some things that I see/notice people doing when thinking/talking about business ventures that might be helpful advice for some people here…
The first thing I’d have to say is to do something you enjoy. Too many people try to be followers when they see someone else making money at something. They’ll try to jump into markets they don’t know about and probably don’t enjoy because they see others having success there.(I used to do this a lot) Your thought process shouldn’t be, “this person is successful, how can I make money like them,” it should be “here’s what I like doing, how can I find a way to turn this idea/passion of mine into a successful business like this person has done with theirs.”
Don’t go into business trying to sell X amount of Y to try and make $Z. Too many people go in with the mindset of, “if I can just sell 5,000 of this product I should make $250,000.” When you ask about the demand/the market their response is, “well, even if they only buy 1,000 I’ll still make $50,000.” That’s thinking backwards about it. You can’t go into a business thinking about what it’s going to do for you, you need to first go into it thinking about what it’s going to do for the potential customers, and if after your due diligence you decide the demand is there for what you have in mind, then you can figure out your strategy for how you can make these sales. It’s at this point after you’ve done that where you can start crunching numbers to look at the potential of profit for your business venture.
When people want to start a business they often don’t know where to start. In my opinion there’s only two steps you need:
Step 1: How can you create something of value better than what’s out there?
Step 2: When you do that, how can you reach your potential audience?
It’s really that simple if you think about it. All the details where people want to think about complex business plans and all that is kind of pointless since if you don’t have 1 and 2 you don’t know if you have a business yet. Worry about the details later, until then it’s just noise.
Due diligence: Most of the times newbies aren’t doing due diligence. People who’ve had success did crazy amounts of due diligence. Plenty of things they did due diligence on they didn’t pursue, because after the due diligence they figured out that it wasn’t worth pursuing. Oftentimes people just sit around wondering if they should do something without looking into it. By looking into it I don’t mean asking a couple people if they should do it. I mean, really digging in and finding out whatever you need to know for you to figure out if it’s worth your while. Before I took a ‘leave of absence’ from entrepreneurism to play poker, and plenty of times during my poker playing, I can remember staying up through the entire night many times trying to learn everything I could about a certain business I was interested in. One example of one way back in the day was candy and vending machines. I remember thinking it might be a good way to get cashflow with very little investment since I didn’t have much money at the time, and I think within 1-2 days I’d read almost every single post ever made on candy/vending machines, read articles from authority people in the business, been in contact with a couple big vending/candy people who were willing to spend a few minutes talking to a kid about their business, knew what all sorts of different equipment would cost to get going and who to get it from, why I shouldn’t buy new, etc… By the end of a couple days I knew I didn’t want to be in the business because it was a ton of work for not the type of money I was aiming for. But without the due diligence I wouldn’t have known that. People don’t hear of the due diligence on things that don’t happen, so when someone starts a company and people see them doing well they think, “man, they’re lucky.” Often businesses don’t end up being worth the time to pursue but if you didn’t look into them you’d miss the one where you’d get “lucky” since you decided random ideas weren’t worth looking into.
Change your thinking: If you do things the way other people do them, you can only be as good as those people. Think outside the box. Stop thinking a-b-c. A crazy idea is way better than thinking along the same lines as everyone else. Think about it. You’ve got all sorts of people thinking the same way. Then you’ve got a few people thinking different and willing to be a little ‘out there’ with their ideas. Where do you think there’s more money to be made?
Ideas: Ideas only mean a little. Implementation is where it’s at. I didn’t understand that for a long time, but it’s real important. I don’t talk about a lot of my ideas on the forum, but as anyone who talks to me much off the forums can probably say about me is I love coming up with ideas/thinking of doing things in ways people just aren’t doing them that should drastically change the end result. When I was younger I’d have a ton of ideas and just never do anything with them because I didn’t know what to do. You need the two to work together, and you can improve both by practice. I didn’t know how to implement things because I wasn’t practicing implementation with my ideas. I always worked on coming up with crazy ideas and I’d put money up against anyone in an “idea contest”, but without ever implementing an idea it’s basically worthless. The same with people who know an industry and would know how to implement it/have the contacts or whatever to make it happen. They say, “well, if only i had an idea.” Chances are you haven’t practiced being creative with ideas. Both ideas, and implementation of ideas are ‘practiceable’ in my opinion. You’re not just going to wake up tomorrow and all the sudden be an “idea guy.”
Variance: You’ll have variance being an entrepreneur; get used to it. If you had a weighted coin and you’d win more than half the times you flipped, and someone offered to flip you for money for as long as you wanted, you’d never stop flipping the coin, and you’d end up being very rich. The thing with being an entrepreneur, some people take one or two “flips” and give up because the first couple didn’t go the way they wanted. Go in understanding the variance, and you’ll be mentally prepared. The funny thing in the game of entrepreneurism is the more you flip the coin, the more weighted the coin becomes in your favor since you’re learning as you play.
A lot of people get gun shy about pulling the trigger on deals that could end up being very profitable for them because of the variance involved. A lot of people don’t break it down logically because they become emotionally involved.
Example:
Person A says, “I can invest $20,000 and if it goes well I’ll make $100,000, but if it doesn’t I’ll lose $20,000. $20,000 is a lot.”
Person B, who understands equity realizes that they only have to be successful over 20% of the time to have the deal be profitable, and that a lot of times if it doesn’t work out like they had hoped, oftentimes they’ll return some of their initial investment anyways.” So if they did their due diligence and thought they’d be successful 50% of the time, they’d pull the trigger since they know their equity in the deal is at least a $30,000 profit. Person A would have never got that far because they were thinking emotionally and not logically.
If they pull the trigger on this deal and lose, they lose $20,000. If they pull the trigger on the next deal like this, and succeed, they make $100,000. They’ve made $60,000($30k/deal) because they were willing to “risk” it. If you just break down the numbers it’s really not risky, just math.
Start up money/cashflow: You don’t need a bunch of start up capital to start a business. Be creative. With the ease of starting something on the internet, “needing” a bunch of money is crazy talk. For the people who want to start cashflow businesses, I don’t know how people could ever consider saving up a $30,000 downpayment for 1 house so they can hopefully have $200/month in cashflow, where on the internet with $300 you could create the same $200/month cashflow.(You could also make $20,000/month) I didn’t know much about internet businesses and still have lots to learn, but if I could go backwards I’d have started a bunch of internet businesses by now because you can try ideas with barely any risk, and the potential is insane. The potential for a house is maybe you can charge an extra $25 on rent next year. Ceiling is insanely low. Get into things with high ceilings, and realize that a requirement for doing so isn’t high start up funds.
Time is money: Don’t spend a bunch of energy trying to program a $300 site if you’re not a programmer. Outsource it. By the time you programmed it you could have been testing 3 or 4 of your ideas. Ideas and your ability to market your ideas are how you make the money. Why do you buy your furniture from the store? Why didn’t you just make it yourself and save money? I know that’s an extreme example, because obviously the answer is it’d take you a long time to make it yourself where you could have been doing things that would have been more beneficial for you and someone else can do it better. Start to view your business ventures the same way.
This wasn’t in any specific order just wrote things as they came to mind. Just some advice I thought might be helpful.
Many people think that starting a business requires a significant funding from the start, whether that