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Building the Business

Wheelin’ and Dealin’

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Entrepreneurs are the most optimistic people on the planet.  If you look at the odds of succeeding in business, it makes sense that anyone who wants to start a business is naively optimistic.  As empowering as this optimism may be, it can also set a growing business up for failure.  Longshot deals that have a 1% chance of going through are “Done!” in most entrepreneurs’ minds.  If a startup gets a tiny nibble from a Fortune 500 company, for example, the founders might decide to redirect all of their resources to focus on closing that deal.  But if they don’t have a backup plan when the deal inevitably falls through, they’re up the creek without a paddle.

Everyone from investors, to strategic partners, to potential customers will play footsie with you, only to leave you stranded in the eleventh hour.  Be skeptical and expect the worst – 99% of potential deals will fall through.  And the bigger the deal, the more skeptical you should be.  Stay focused on the fundamentals and keep executing.  Then, if a deal actually closes, you can think of it as a bonus!

The First Question to Ask

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Small business owners are the busiest people around.  They are constantly juggling dozens of projects and hundreds of tasks.  The workload can become so overwhelming that it creates paralysis, confusion, or hopelessness.  Any time you find yourself in this situation, break out of the funk with one question, “If I could only get one thing done today, what would make the biggest difference in my business?”

Ask this question first thing in the morning, before you open email or attend your first meeting, when your mind is clear and focused.  Intentionally plan your day so you can focus on the company’s most pressing issues.

For the question to do you any good, you have to take action.  Once you determine what to do, the best thing to do is to get started on it immediately.  If you can’t do that, set aside some time that will allow you to focus. Ask this question for a week and you’ll find that a sense of clarity and purpose is reentered your world. Ask it for a month and you’ll be amazed at what you can accomplish.

Think On Paper

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As an entrepreneur, you have to make dozens of decisions each and every day.  Combine project management with day-to-day operations, and it’s easy to get overwhelmed with details and planning.   Instead of trying to juggle projects and tasks in your head, write it out and think on paper.  When your tasks are no longer clogging up your thoughts, your mind will be unclouded and free to focus on the big picture.

More than the to-dos, you should also do your strategic thinking on paper.  Write your ideas down, and watch them transform from nebulous and overwhelming to tangible and actionable.  The simple act of writing out your thoughts will help you synthesize important issues, highlight critical points, and figure out the best way forward.  When you have to make an important decision, write a short memo that outlines the key points, and use it to decide the best way forward.

In addition to helping you gain clarity, thinking on paper allows you to solicit feedback from advisors and mentors.  Also, you now have a written record that you can refer to in the future.

When thinking on paper, you’ll find that your perception of the business is clearer and more sophisticated, which facilitates faster and better decision making.

Tipping Point

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When you first start out you spend half your time dreaming about how you’re going to spend all of the money you make, and the other half about worried that this is a crazy idea and it’s never going to work.  This sense of extreme uncertainty will stay with you until one day, when your business reaches a tipping point.  It is on this day that you realize that your business is going to make it.  The funny thing about the tipping point is how seemingly abrupt it is.  One day you’ll be worried about paying the bills, and the next you’ll wake up with a feeling of supreme confidence that your business is here to stay.

It takes time and faith to fight through the uncertainty every entrepreneur faces.  Unbelievably, most people quit on the 95 yard line.  Don’t let that be you.  Keep believing and don’t stop building.  If you work hard and catch a little luck, you might wake up one day to realize that your business has tipped.

Nail It Before You Scale It

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If there is one factor that most contributes to a startup’s success, it’s knowing when to nail it and when to scale it.  Nail the business model first, and then scale the business.  Don’t try to do both at once.  Invariably, winning startups figure out a profitable, repeatable business model before they ramp up their overhead.  It might be months (or years) before you create a business model that works, so by prematurely ramping your overhead, you sign your own death warrant.  Not only does it increase the monthly cash burn rate, but more employees and divisions create a lot of unnecessary complexity.

As tempting as it may be to start hiring, anything that increases your overhead also shortens your runway.  It’s hard to take off from short runways.  Wait to scale until you’ve nailed it.  Wait until you have a few highly profitable customers clamoring for your product.  Wait until you know exactly how your customers think, what they need, and how to give it to them.  Low overhead is the key to helping your startup live a long, fruitful life.