It’s ironic that in order to get what you really want from owning your own company — wealth, security, freedom, for example — You must do the most unnatural, difficult thing for a small business owner; you must systematically reduce the dependency of the business on you. Don’t overlook this. This is the secret to becoming financially independent through entrepreneurship.
Most entrepreneurs have no understanding of this and give it very little thought until it’s too late. They wind up being owned by their businesses. To their surprise, they find that they’ve traded one old boss for a plethora of new ones: stockholders, investors and lenders, employees and associates, customers and clients, vendors and government agencies. Their ideas of independence dissolve against these forces.
There’s an old joke about the government bureaucrat descending on the small-business owner. He says: “We’ve received a report that you have some poor fellow working here 18 hours a day, 7 days a week, for nothing but room, board, meals, all the tobacco he can smoke and all the liquor he can drink. Is that true?” “Yes, I’m afraid it is,” admits the owner. “And I’m sad to say, you’re looking at him.”
You’re probably wondering about the security of your business. If the typical entrepreneur leaves the business alone for a week, it does a Jekyll-and-Hyde transformation. You have got to be there! I know many business owners who go years without a vacation. And, those who do go on vacation don’t enjoy. One half hopes everything’s okay back at the ranch, which he or she checks every few hours by phone, and the other half is disappointed if it is okay; after all, how could it be without his or her indispensable presence?
Too many people get into business only to discover they’ve acquired a new, tougher, more demanding, more stressful job, and they cannot see any way to change it.
The trick is to let the business mature – and the faster, the better. An immature business is entrepreneur driven. In its early days, that’s okay and usually necessary. You are the business. From day one, though, if your business is to provide security, freedom, and wealth, you should be working at weaning the business from dependence on you and creating dependence on systems.
TAKING ON PEOPLE FOR THE RIGHT REASONS
Very few people can or want to go it totally alone. Even the Lone Ranger had Tonto. There are many reasons for this urge to surround yourself with others, some good, some not so good.
Some entrepreneurs build up excess staff, for example, out of feelings of insecurity, a feeling that theirs is more of a real business if there are a bunch of employees milling around. Many want associates and employees to counter the stark loneliness of entrepreneurship compared to the camaraderie of a corporate environment. Others need a cheering section. But these are all poor reasons for taking on partners, associates, or employees.
Last year, a client of mine returned home to meet with his accountant after an arduous, week-long business travel adventure. After the meeting, he fired his 14 employees, put his 6,000-square-foot office complex up for lease, and went home to announce to his wife that he was moving his business back into the spare bedroom where it had started a decade before. One year later, he has done about 40% as much gross business as the previous year, but kept more money for himself and his family. And he calculates that the extra hours of work he has to do for himself are offset by three-to-one by time saved not dealing with his employees’ personal problems, petty disputes with co-workers, and so on.
Of course, not every business lends itself to such dramatic downsizing and simplified operation, but the point remains: too often, entrepreneurs take on people for the wrong reasons.
The right reason to add people to your venture is to contribute to increased profits. There was a time when I would have said that this was the only right reason, but there are others. You may choose, for example, to employ a person who makes your life easier, handles problems for you, and frees up some of your time for personal or family activities, even if, in hard dollars, that person represents expense, not profit. As long as you do that knowingly and deliberately, fine.
The other very good reason is to obtain creativity and experience you cannot provide. Most successful entrepreneurs develop and depend on a small circle of close, trusted associates from their network of partners, key employees, friends, family, even peers, for input, encouragement, and support.
Andrew Carnegie described the formation of such a team as “the master mind concept.” The greatest caution that Carnegie, and his protege, Napoleon Hill, had to offer was about choosing the people you include in your master mind group or groups. The need for harmony, these men pointed out, is crucial.
In the entertainment world, we can look at the enormous success and longevity of the “Tonight Show” and see an effective master mind group: Johnny Carson, Ed McMahon, and producer Fred DeCordova. In the infommercial business, I’m proud to be part of the “brain trust” at Guthy-Renker Corporation that yields successful infommercials such as “Personal Power with Tony Robbins,” the “Victoria Principal Skin Care Program,” and the Entrepreneur magazine show, “Be Your Own Boss.” Different Guthy-Renker projects involve different members of a master mind group of about a dozen people including writers, producers, technical people, product development people, and marketing consultants. For my independent productions, I, too, have a pool I draw from for a quality master mind group for each project.
You will no doubt be eager to develop a team of people you can work with in your business. It’s important to exercise caution in assembling your team. And you should be very aware of the problems that can arise.
TAKE OFF YOUR ROSE-COLORED GLASSES
Because entrepreneurs tend to be optimists, they generally view people in their best light. But that may be unrealistic and regrettably, this attitude can lead to frustration more often than to fulfillment. As hard as it may be to understand, some people just do not want to be motivated, to be helped, to be coached, to improve. And, when you try to force it on them, bad things usually happen.
On more than one occasion, I have made the mistake of bringing on a partner with unrealistic expectations. In one case, I brought in a close, personal friend as an executive of a company I had acquired, but I did so without considering the full picture. I saw him as I wanted him to be, not as he really was, and I tried to make him into someone he wasn’t prepared to be. The end result was the destruction of a friendship and significant expense to me.
With these experiences under my belt, I’ve developed some opinions about the special qualifications to look for in key associates.
HOW TO CHOOSE YOUR KEY PEOPLE
Entrepreneurs tend to leap between extremes of refusing to delegate tasks to delegating wildly, sloppily, and hastily. The most important person in the entrepreneur’s business life will be very good at running behind, scooping up the pieces, and making sure initiatives get implemented. This key person has to cheerfully accept all this responsibility and, often, read the enttepreneur’s mind!
That calls for four strong characteristics:
Ability to accept responsibility
Relatively low need for reassurance and recognition
Ability to cooperate
Ability to confront problems with maturity
This person can’t worry about who gets the credit for success or who to blame for mistakes, He or she has to be secure enough about his or her own worth to not need recognition from afar. He or she needs to be very results oriented.
This person also needs to be good at creating and fostering cooperation among others. Because the entrepreneur often moves very quickly and assertively, he or she sometimes runs over other people’s sensibilities. Somebody has to clean up that mess, too.
Behind just about every high-profile, highly successful entrepreneur, you’ll find several of these key support people. These behind-the-scenes people are much like assistant coaches of major basketball or football teams. The high-profile, head coach does the interviews, has the camera’s eye, and gets the glory (or the criticism). But that head coach couldn’t get through a game without the team of assistant coaches.
Last, the entrepreneur’s key associate has to have great maturity in his or her handling of problems. This means no panic, no emotional overreactions — just the calm voice of reason. I know several entrepreneurs who have just such people working with them, and they are very fortunate. One real estate broker I know pays his executive secretary $125,000 a year plus perks. Some of the few people who know of this think it’s outrageous, but it is good value for what she does — and good business.
IF IT’S NOT MEANT TO BE…
Very few business relationships go the distance. That’s why the smartest entrepreneurs develop dissolution agreements at the start of relationships. I know that I will never again take on a partner without such an agreement.
When it becomes evident to you that you have a “cancer” in your business, you cannot afford to hesitate or procrastinate for even a day. Cut out the cancer before it spreads. And this goes double for cancer within your master mind group. If your relationship with a key person deteriorates and there is no hope for recovery, you cannot afford the luxury of keeping that person around.
When you “divorce,” do it as decisively, cleanly, and courteously as possible. Avoiding unnecessary animosity is important for many reasons. It’s an energy drain. It can block sensible negotiation and settlement. Biting your lip until it bleeds for a few days while getting the person out is infinitely preferable to bleeding for years from vengeful negative attacks. If there’s anything reasonable you can do to diffuse the other person’s anger, do it. On the other hand, if bloody battle is unavoidable, make it quick. Do what you must do to protect your business.
MONEY ALONE ISN’T THE ANSWER
Money is not going to be your problem. But I also want to emphasize that money is not going to be your solution either.
Dan Kennedy’s Eternal Truth #10
If you can’t make money without money,
you won’t make money with money either.
The business battlefield is littered with the skeletons of entrepreneurs who erroneously believed that a big chunk of cash would solve their problems. I’ve been there; I’ve believed that, too. I’ve sold others on that idea. And I’ve been wrong. I’m sorry to say that I’ve wasted well over $200,000 into what oil wildcatters call “dry holes,” thanks to a stubborn belief in cash as a cure-all. But I’ve also taken nothing and made it into something.
The most successful entrepreneurs I know, including those who now have tons of money, are like the main character in the popular television show “McGyver.” McGyver is always getting out of a jam by creating some incredible gadget with whatever happens to be lying around.
Entrepreneurs, too, sometimes have to turn thin air, spare parts, and other people’s discards into resources with which empires can be built. Drop one of these McGyver-type entrepreneurs out of an airplane into a strange city with nothing else but the clothes on his or her back and $5 cash, and he or she will have an office or store opened and be doing business by the sunrise.
The story of Doug W. exemplifies this kind of unique resourcefulness that successful entrepreneurs need. Doug went broke in a big way in a direct sales business and wound up sitting in his bare house, all the furniture gone, and nothing left but a box of 48 copies of the book, Think and Grow Rich, and a dozen broken down auto-dialing (telephone marketing) computers. Doug had used these machines to set up appointments for his salespeople in his now-defunct business. He knew they could work and he believed in them. He had used the books in his classes to motivate his salespeople.
Doug asked himself what resources he could draw on to get some cash. He repaired the auto-dialers so they could be sold as used but operable equipment. Then he got on the phone, calling insurance salespeople, real estate agents, and other salespeople, inviting them to a free seminar on using auto-dialers to increase business. He offered a free copy of Think and Grow Rich to anybody who came to the meeting.
Doug called and invited hundreds. About a dozen salespeople showed up. He nervously stood up in front of the group, explained how auto-dialers worked, how he used them successfully, and how others used them. Then he gave a demonstration and offered a unique “rent-and-try-then-buy” offer on the machines he had in stock. That evening, Doug sold eight machines; in the first month he collected $800 from rentals. He discovered that he had a knack for selling this type of equipment.
In short order, Doug found a manufacturer of auto-dialers and convinced him to sell the machines at wholesale as Doug needed them, without an inventory requirement, franchise fee, or other up-front payment. In the next few years, Doug built a large business, with national advertising and sales representatives, selling these machines. He also used some of the profits from that business to invest in a new idea for computer software, and that, too, turned into a very successful business. Doug went from bankruptcy to big money without borrowing a nickel.
The last I talked to Doug, a couple of years ago, he was grooming replacements to run his companies, personally working two weeks a month, and sailing the Caribbean on his yacht the other two weeks of the month.
WHAT ABOUT RAISING MONEY?
I am not opposed to raising money. In fact, I believe, in most cases it is necessary to “use other people’s money” to get a business from some stage to another. I’m not suggesting that you go through your business life avoiding borrowing or raising capital, but I have seen a lot of people borrow huge amounts of cash suffer from the erroneous beliefs in the power of that cash. By itself, cash cannot change things for the better.
The bottom line is that there’s no point in getting money before, unless, and until you have a solid plan for matching and merging it with other resources for productive purposes.