Entrepreneurship is like crack

It’s Friday the 13th, so here are my 13 rules for success.

1. Never give up. In my career I have missed payrolls, been behind on payments for every one of my credit cards and, at one point, had amassed more than $12,000 in overdraft fees at $20 each.  Looking back I can see that these were all stepping stones for me to achieve financial independence.  It’s tempting to quit when your financial situation is looking bleak, but as Thomas Edison said “Many of life’s failures are people who did not realize how close they were to success when they gave up.”
   
   
   
2. Befriend well networked people. Become close to well-networked people and suddenly you will gain access to well-developed networks. I found my CFO, two key advisors and a primary investor from one well-networked lawyer. Return the favor and do whatever you can to help these people, a one-sided relationship won’t last.
   
   
   
3. Surround yourself with experts in areas where you are not an expert. I always surround myself with the smartest people I can find. Spend at least 25% of your time searching for these people. Never stop searching, everyone is a potential employee.
   
   
   
4. Entrepreneur/Business groups are a superb resource (e.g. EO, Master Minds, Vistage). These groups allow you to learn from others’ experiences. You can avoid serious headaches and stress by learning from other people’s mistakes. You also gain insight into what the successful people are doing that their competitors are not.
   
   
   
5. Stay balanced so that you remain creative and your brain functions at 100 %. Take vacations at least three times a year and rarely work on weekends.  You’ll be more effective if you do. Read the Sharpen The Saw story for more on this subject.
   
   
6. Constantly seek new ways to grow your business. I changed the way Client Shop attracted customers every six months. From pay-per-click marketing to e-mail to affiliate programs to partnerships with marketing companies to offline marketing to an in-house call center to an oversees call center. The reason for doing this: competitors will catch onto your strategies and tactics. What once worked will no longer work. You always need to stay one step ahead.
   
   
   
7. Generate Creative Ideas Consistently – Take time every week to read, listen or watch some type of information pertaining to your specific business, sales or marketing. I often find when I’m reading a magazine, marketing article, book, blog or even watching a movie on business is when my ideas to improve the business are born.
   
   
   
8. Motivate your team. Hold pep rallies / weekly meetings to pump up your troops and keep everyone accountable.
   
   
   
9. Have Goals, Scoreboards and Top Priorities – Everyone in the organization should have a monthly goal that directly effects their departments goal that directly effects the companies #1 goal.  A goal should be stated as we are here right now, we want to be here by the end of the month, so X to Y by Date.  There should be a visible scoreboard that anyone can see at any time.  There should be individual planners that management reviews weekly to ensure each employee is accomplishing their top priorities.
   
   
   
10. Read, Read, Read – When facing a certain business challenge, select the highest rated book on Amazon.com that is directly related to that issue.
    
    
    
11. Never criticize an employee. It will only break down their morale. If you are upset with someone in your organization, wait a day or two before addressing them or approaching them and start the conversation with appreciation for something positive that they have done. Then, in a cooperative and fostering manner, look for a solution to the problem.
    
    
    
12. Stay Laser Focused. There are always plenty of ideas that seem like great ways to make money. Focus on your core competencies / core business. Never try to run two businesses at the same time. Example: My second company Client Shop was a lead generator that happened to start in the mortgage industry. We had plenty of opportunities to go after other verticals like insurance. But we chose to stay focused on mortgage to come up with creative ways to generate better leads than our competitors. In the end, we were acquired due to the fact that we had a superior mortgage lead generation business than the competition – why – because we stayed focused on mortgage. Many entrepreneurs get caught attacking multiple ideas. This will only assure one thing: you will be mediocre at multiple businesses instead of excellent at one, which ultimately will ensure a mediocre outcome at best.
    
    
    
13. Retirement for true entrepreneurs is worse than death. Don’t believe that the goal is to make lots of money and retire. It’s about the journey and not the destination. You will find when you’ve made a ton of money that you can’t retire like you always thought you would or you will die of boredom. A true entrepreneur sees a problem and wants to solve it.
    
    
    

Bonus: Tips to happiness and less stress

1. Cash in whatever you can whenever you can. When you get offered a good deal to sell your company act on this instead of waiting for an ‘amazing deal’ that might never happen. You can eliminate so much stress with a little ‘safety net’ in the bank.  I promise you’ll be able to find another business idea that can make the world a better place, there is an endless supply of problems that need solving.
   
   
2. When you have achieved your financial safety net, never touch it. Invest it conservatively (70% bonds / 30% equities). This is a safety net and is not intended to make you rich; it’s intended to support you between your companies in case one fails. The risk you take with your company is the vehicle that may make you rich. Use OPM (other people’s money) to fund your next business.
   
   
3. We are lucky to be entrepreneurs. We get to follow our dreams, live an exciting life, be free, create jobs, help the economy and change the world for the better.
   
   
4. Stay humble. Be confident not cocky (nobody likes a cocky person).
   
   
5. Never compromise on integrity…period.
   
   
6. Materialism is a slippery slope. The path of materialism leads to loneliness and being constantly unfulfilled.  The opposite of materialism is focusing on forming lasting loving relationships with people, that is the guaranteed route to happiness.

I spent the weekend at Michael Robertson’s Ranch.  He is one of San Diego’s most successful Internet entrepreneurs.  He sold MP3.com for over $350M, he also started Lindows (Linux based windows), MP3Tunes.com (cloud based music) and Gizmo5 (voip).  There are rumors floating around that Michael sold the domain name MP3.com for $350M, got lucky and never built a great company.  That is, well, just a rumor.

What people don’t know unless they get a chance to talk to Michael is he built a great company, one that was exploding in organic traffic and revenue before it was purchased.  We all know that to generate explosive organic traffic and revenue you need a lot more than just a great domain name.

The story he tells is very entertaining.  Back in the early days of the Internet he was watching for search terms that were growing in popularity.  He found the search word MP3 was gaining in popularity and bought it for around $1,000, which in 1996 was an expensive price.

He didn’t even know what MP3s were or how to make a site around them but through trial and error he grew MP3.com into the #1 place for musicians to show off their music and for consumers to find great music, sort of the first Myspace.

The real secret of his success came from creating a network effect.  He allowed Bands to upload their music and have a custom website to host their music all for free (revolutionary back in the late 90’s).  They could even create a CD and sell it for whatever price they deemed necessary above the $5.00 cost of creating the CD. The network effect occurred when the bands would promote their music on MP3.com.  Michael gave them all their own URL’s like MP3.com/bandname.  The bands would have this URL on their business cards, email it to their fans, etc. and then the more fans that used the site the more bands that came on, and therefore a network effect was created.

By giving his customers (the bands) total freedom and making the service free he empowered them to become an army of marketers bringing consumers to site by the millions.

He was able to raise money from Sequoia and eventually sell the company not based on a domain name but based on this network effect.

What is your businesses network effect?

I just finished reading the book “Referral of a lifetime” by Tim Templeton and Ken Blanchard.  It’s a quick and easy read to help you systematize your networking efforts.  I love systems, they set you free, so I’m a fan of this book.  The concept is basic, cold calls don’t work well and are painful, referrals are much more effective at helping you achieve success.  The good news is you don’t have to smooze at tons of awkward networking events to make this happen.  To generate referrals you need to keep in touch consistently, personally and systematically with the people you already know (which is most likely 200 or more according to statistics).

• Step 1
  Send out an email to all the people in your database letting them know that you are committed to keeping in better touch and if there is anything you can do for them “just let me know”

• Step 2
  Plan your calendar in advance for keeping in touch throughout the year. If you don’t have someone at your company who can manage the fulfillment of this system you can outsource this to a mail-house. Example:
  
  January - New Years Greeting Card
  February - Item of Value letter
  March - Personalized Newsletter
  April - Springtime Greeting Card
  May - Item of Value Letter
  June - Personalized Newsletter
  July - Fourth of July Card
  August - Item of Value Letter
  September - Personalized Newsletter
  October - Item of Value Letter
  November - Thanksgiving Card
  December - Personalized Newsletter

• Step 3
  Research the Internet for creative thank you gifts that can be sent out when appropriate to contacts that have done something nice for you.  Tier it out from $10 to $200 depending on the contact and what they did for you.

• Step 4
  In your correspondence (like emails, newsletters, phone calls) always ask for a referral.  It won’t rub the person the wrong way if you’ve kept in consistent contact and have/will do the same for them.

Disclaimer:
This system will work but it is reliant on the fact that you really do care about the people in your network and you mean it when you say “If you need anything, just let me know”

I had the good fortune of watching the Padres game from the owners box with Jeff Moorad yesterday.  Jeff has recently come to San Diego to take over leadership of the Padres as their new CEO.  Before this Jeff ran a successful turnaround of the Arizona Diamondbacks and before that was one of the most successful sports agents in both football and baseball. Jeff took time to share some of his lessons learned from his career and his strategy for the Padres.  Here are a few tips he shared.

• Set your goals according to your industry, not based on what the norms are.
  • He believes sports teams can and should be cash flow neutral.  Neutral? I thought he was really setting the bar low.  But I learned that sports teams are almost never cash flow positive, but almost always cash flow negative.  So while I thought his goal seemed to be shooting low, for his industry that was a high mark.
    
    
    
• Don’t micro manage, BUT hold people firmly to financial goals.
  • He made his success sound so easy. “I just hire the right people, and hold them accountable to their financial goals, if they are good they will figure it out eventually.”
    
    
    
• Take your time to find the right people, and look outside your industry.
  
  • He was looking for a critical role for his company, he interviewed everyone in the baseball world to find a fit and yet they just weren’t happy with the potential candidates.  They did something unprecedented by going outside the baseball world and looked into candidates from Football, they found their man and he’s doing an amazing job.
    
    
    
• Take care of customers and put resources on brand management.
  
  • The Padres will be doing things unheard of in the baseball space like having a dedicated rep for every ticket season holder so they can have someone to call with issues or questions.  Another ground breaking move was he created a new position - VP of Brand Management, baseball team’s don’t have someone dedicated 100% to improving brand image.  What can you do that your competition is not?
    

http://bit.ly/J7xkD

RankSpeed.com

I’m looking forward to the rise of more semantic products like this.

Shouldn’t entrepreneurs try many different opportunities so if one fails the other ones might make it?  No… and yes.  NO, meaning an entrepreneur should never try more than one opportunity at a time.  Yes, meaning if the opportunity doesn’t pan out quickly move on to the next.  Most of the time diversification is good, like when investing or dating, but the word diversification for entrepreneurs, especially in start-up situations, is deadly.

Here’s why diversification will kill a start-up

• Focusing on more than one thing guarantees mediocrity
  • It’s hard enough to build one really good widget (website, product, content etc.) but try building two at the same time and those widgets are going to be half as good as they would have been if you just picked one.

• Your competition already knows not to diversify
  • The competition is smart, someone over there already knows this lesson to stay focused and has all their resources focused on one widget, and it’s going to be amazing.  You can’t afford to have your competition  be focused and you be spread out.

• You have limited resources
  • Even with focus you’re lucky if you can build a better widget than the 800 pound guerrilla in your space.  It’s a crap shoot because large corporations have lot’s of capital and human resources, you don’t.  But you have passion and creativity on your side and a team willing to work crazy hours to win, so do them a favor and focus them all at 1 goal.

• It’s hard to say NO
  • Opportunities are like kryptonite to entrepreneurs.  It’s against every fiber in our bodies to turn down an opportunity.  It seems counter intuitive and crazy to say no to an opportunity that could deliver piles of cash.  But this is what separates the successful entrepreneurs from the unsuccessful, the ability to say no to tempting but DISTRACTING opportunities.

• Choose wisely, if it fails, choose again
  • So what if your 1 focus isn’t working.  Put a bullet in it and move on to the next one.  It’s called “failing fast”, pick your one focus, give it all you’ve got and if it’s not working kill it and focus on the next one.  But only one at a time!

I leave you with this fact:

A 5 watt light bulb can barely light a closet, but when focused like a laser can burn through steel

And this Chinese proverb

“Try to catch two rabbits at the same time and you will catch none.”

And finally this book, it talks about how In-N-Out rules all other burger fast food chains because they stayed focused on creating the best burger (for less money) while others diversified into breakfast, Teriyaki bowls, tacos etc.

In-N-Out-Burger, a behind-the-counter look at the fast-food chain that breaks all the rules

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