Crap Filter

 
I know it’s a gross title for a post but it is appropriate.

I watched an interview done at the Khan Academy with Elon Musk and it was his words that led to this title.

Entrepreneurship might be glamorous and could prove quite lucrative but it’s also the hardest work you’ll ever do. I’ll let Elon Musk take it from here.

Everyone thinks they want to be the boss but when you’re at the bottom of the “filter for the crapest problems in the company” it’s not a lot of fun. I can speak from experience and while my high points are not as high as Elon Musk’s neither are my low points. When SpaceX had three failed launches in a row and only had one last chance for a very big contract with NASA, that’s really low. When Tesla was a week away from running out of money with no investors willing to step in, that was very low.

In spite of all that, he still felt “quite compelled to do it” and that made all the difference.

In the face of skepticism and failure, to push forward anyway is the sign of a person who will be successful. I have wanted to give up many times, I have wanted to sell my business many times, but I have stuck it out and now it is beginning (these things take time) to pay off. I still have bad days but having come through past obstacles and problems makes the future problems easier to handle.

Feel free to share how you have been stuck at the bottom of the crap filter and come through it stronger than before.


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Blame is Good!

 
Blame me!I don’t like to be blamed but not because I feel the person blaming me is attacking me or out to get me. I don’t like blame because it means I did something wrong, or missed something. I’m not afraid of blame and that allows me the freedom to think outside the box, to try things even if they might seem a little unorthodox, and to view criticism as opportunity for improvement.

People need to move past the blame mentality. Blame is not a bad word. When I do something wrong and another person points it out, they are not blaming me, they are showing me an issue or mistake and helping me to correct it.

When my staff makes a mistake and I investigate and find the cause of the mistake I’m not blaming someone so they can get in trouble, or so I can fire them, I’m simply pointing out an error so it doesn’t happen again. This is the attitude I have when it’s determined that my action caused a problem. I’m not mad or scared, I’m glad, happy that an issue was discovered and that action can be taken to correct it. I’m also angry that I let it happen and that’s a good thing.

Everyone has two choices when someone “blames” them for something:

1. Get mad and upset which leads to a bad attitude

2. Be thankful someone caught the issue before it became a problem, fix it, and become better

Which will you choose?

If your choice is number 1 then you are doomed to a mentality of cover-up, fear, and passing the buck. All of that leads to a bad workplace, a bad marriage, and bad relationships.

The second choice gives you power; power to take control of the situation and to learn from mistakes which leads to open communication, the freedom to think differently, the comfort to speak up.

The bottom line is that we all have to re-think the word blame and recognize it for what it really is, help and a way to improve.

So I pledge that if I mess up and you blame me, I’ll thank you and we will all be better for it.


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Million Dollar Lunch

 
Warren BuffettIf you had the chance to have lunch with Warren Buffet, would you? If you had the chance to ask, one on one, Richard Branson for advice, would you?

I think the answer to both of those questions is a resounding yes! I would too, but would you pay a million dollars, or in the case of Warren Buffet’s latest charity auction, 2.3 million for lunch?

Even if I could afford it my answer would be no. From my perspective the fabulously wealthy offer little value. Sure, their success sets the bar high but I’m more interested in people who have done a lot with relatively little, the people whose advice can actually lead somewhere.

I’d rather have lunch with the man or woman who opened a local restaurant and now owns several throughout the state. I’d rather meet and talk to the person who created something that a lot of people use. Maybe they didn’t make billions but they did fill a need and did well doing so.

These are people I have access to, or more access than I do to Richard Branson or Warren Buffet.

By looking for lessons and advice from these entrepreneurial rock stars you might be overlooking the valuable advice that’s sitting next to you at the barber shop or on the subway.

Many people don’t listen enough, aren’t curious enough to ask questions, to discover the wisdom that’s right under their nose.

 


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Entrepreneur Cheerleaders

 
EasyReally this is about entrepreneur cheerleaders and success cheerleaders, people who sell hope and, this is the important part, make it sound easy. I’m a realist and nothing worth getting is easy. It might be enjoyable but it’s not easy. These cheerleaders remind me of the Geico commercial with Pinocchio as a motivational speaker, as he points to people he says have potential, his nose grows. Not everyone is going to be a wild success, not everyone can run a successful business. If a cheerleader like Anthony Robbins was Pinocchio his nose could hurt someone.

I’m not saying that having confidence is a bad thing or that being positive is a waste of time, I’m not telling you success isn’t worth working toward. I’m an advocate for curiosity, for adventure, for pushing yourself to your limits in order to discover what you’re good at, to find what excites you. Do all of those things but understand what you’re getting into, what you’ll likely face. I saw a tweet yesterday that is appropriate here:

DefyOdds

Successful people are very good at managing risk, at understanding the odds and finding ways to tilt the odds in their favor.

You might think you’re good at that too and that’s where self-awareness comes into play. The cheerleaders out there will tell you you’re great, that everything will work out if you just believe but that’s not necessarily true. Belief only gets you so far.

This is why I’m a big fan of Gary Vaynerchuk, he puts a lot of value on self awareness, he’s not a cheerleader in the sense that he’s honest with himself and has no problem being honest with his advice.

Listen to the cheerleaders for inspiration, get fired up, but then get real. Look at your What Next from every angle and anticipate as many problems from the start. Be an optimist in the dream phase and a pessimist in the implementation phase.


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Side Hustle

 
http://www.dreamstime.com/stock-image-hand-displaying-spread-cash-us-one-hundred-dollar-bills-image42507251Make Money Blogging!

Work from Home just Hours a Day!

Turn Your Hobby into Profits!

This all sounds easy and could fit into the definition of what so many entrepreneur cheerleaders call a side hustle. A lot of people post on social media about their side hustles, and Gary Vaynerchuk is a big proponent of hustle in general. The reality, however, is that what many think is a side hustle is really just a time, energy, and money suck.

A side hustle is a way to earn extra money on the side. If you aren’t smart about it and think it will be easy then you will probably fail.

Side hustle isn’t a get rich quick scheme – just ask people who thought flipping houses in the mid 2000s would be easy money.

Most of my side hustles didn’t work out but the difference is that it didn’t cost me much either.

In the appendix of What Next I have a trail map of my career and entrepreneurial side hustles – some are dead ends, some go on for a while, and some have made me lots of money. The point is that I didn’t put all my effort into one thing and I didn’t stop looking for a next hustle. Maybe most important, I was willing to walk away from ones I grew tired of or were becoming a drain rather than an addition to my income, time, or energy.

It’s great to have the motivation to pursue a side hustle but you also have the common sense to know when something is just a pyramid scheme or when an investment could end up costing you more than it makes you. The emphasis should be on the word hustle because these things take work, hard work, and too many people think it will be easy.


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Diving in the Shallow End

 
http://www.dreamstime.com/stock-photos-girl-diving-pool-image2866893Are you conservative or aggressive? Are you more Warren Buffet or Richard Branson? Is one of them reckless and the other careful?

I say they’re more alike than you think.

It comes down to a topic I’ve touched on several times – risk. Both take risks but they are not risky – they find ways to minimize and manage risk.

Risk in business is like a swimmer approaching a pool. Diving into the water is not a risky thing on its own but diving into a pool with an unknown depth is.

Doing your research, finding out the depth of the pool, then planning your entry is how you minimize risk. The angle of entry is how you manage risk. What neither Warren Buffet nor Richard Branson do is dive in the shallow end, the risk is too high. Instead they seek out the deep end. The deep end offers the most benefit with the least risk. It might still be dangerous but it’s less dangerous.

Of course once the research is done and the decision is made you still have to dive in and that’s what a lot of people don’t do, or wait too long to do and miss out on the opportunity. Once the key information is determined you have to move. Like a quote I used in the chapter called Risk in What Next, Lee Ioccoca, former CEO of Chrysler said: ““I have always found that if I move with seventy-five percent or more of the facts that I usually never regret it. It’s the guys who wait to have everything perfect that drive you crazy.”

So avoid diving in the shallow end but do dive in!

 


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The Good and Bad of 401ks

 
401kHighwayI believe blanket statements are too simplistic and that’s why I flipped out on James Altucher for saying that people in their 20s should not invest in 401k plans. That’s dumb advice, so here’s my reasoning why 401k plans are a good investment, but not the best, and why they should be part of your investing life but not the only part. If you’re a numbers geek then you’ll love this post.

One of the completely idiotic statements James made was that you’ll only get a 1/2 percent return on a 401k so let’s take a look at my experience. A few things: I’m a consistent investor who believes in buy and hold and favors index funds over actively managed funds. Obviously I’m not going to use my actual account balances so instead I’ll use a hypothetical based on about $1,000 invested over 18 or so years which is how long I’ve been in the 401ks I’m using for this example.

Let’s say my current 401k account balance is $4,180. There are four parts that make up this balance:

1. How much I invested over the years

2. My company matching funds – free money

3. Dividends that are reinvested

4. Growth – what James Altucher said would be about 1/2 a percent (I’m shaking my head writing that)

My investments, the money that came out of my paycheck, accounts for 23.4% of that total or $978.12.

The company match, the free money James didn’t even mention, accounts for 5.1% or $213.18.

The dividends were a big part of this and is the reason I have mutual funds that pay higher dividends in my tax deferred retirement accounts, another item James was not impressed with but can be very important. You don’t pay taxes on dividends in a tax deferred account! So the dividends were 18.6% or $777.48.

Add all that up and you only get $1,968.78 far below my balance of $4,180 so where is the rest? The rest is growth over 18 years and accounts for 52.9% of the value of my 401k balance. That’s a lot more than the 1/2 a percent James mentioned is his video. Also of note is that this includes the huge losses in 2008, losses that were quickly recovered because I didn’t panic and stuck with my plan.

But in some small way I do agree with James that 401k plans are not always the best option. I have reduced the amount I’m investing in my 401k plan for a couple of reasons. First because the money is locked up until I’m 59 and a half (not 65 as James said in his video). I want to retire early and need money available before I’m 59.5 so I’ve been investing more in my taxable accounts.

Another reason I’ve reduced my 401k investments is so that I have funds available for other investment options like a business I opened a couple of years ago. If all my money was tied up in retirement accounts I’d be investment rich but cash poor like so many people are house rich and cash poor.

One size does not fit all and blanket statements are useless. The power of compounding, as evidenced here, is incredible! So please do invest in a 401k plan as early as possible and put enough money to at least get the full match your company offers (if they offer a match). After that make decisions that work for your situation.


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Broaden the Definition of Failure

 
Failure sounds so final, like there is no recovery but the truth is that you can recover from all but the most catastrophic failure. As long as the end result is not death recovery is possible.

I’m not one of those pie in the sky, failure is a gift, kind of people but I do believe a lot can be learned from mistakes and that failure is far more common than we like to admit. Some people don’t want to focus on failures but I want to expand the definition and see failure even in success. If I can pick out the one thing I did wrong in an otherwise successful endeavor, I’ll be even better the next time.

FailinsuccessFailure is not the opposite of success!

Without a crystal ball it’s easy to think of every setback as a catastrophe but the reality is that it’s probably just a bump in the road.

When my most requested massage therapist quit I thought my spa business was doomed, that my descent into bankruptcy was beginning (yes I can be over dramatic sometimes). The reality was that we had many capable and skilled therapists who could and did pick up the slack. Instead of bankruptcy, our revenue increased every week after her departure.

But there was still failure in this situation. I’m not sure the outcome would have been any different but I could have worked smarter to keep her rather than letting my stubbornness get in the way.

Later when another therapist was showing up late, calling out, and otherwise being disruptive, I was less worried. Again she was our most requested therapist but I knew we’d be just fine without her. I had many conversations with her to discover the source of her behavior but to no avail. The outcome was the same, other capable therapists took up the slack and revenue stayed on its upward trajectory.

In each case I failed in some way but I was able to manage the situation, look inside myself and come up with changes to improve myself and my business. If instead of seeing these events as failures, I just saw them as the normal course of doing business, I would not learn from them, I would not be able to make the necessary adjustments to improve my connection with my employees.

I see failure all around because my definition is broader than most, and while I sometimes panic and think the end of the world is near, I know that a solution is probably near as well.


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Are You Profitable?

 
Stack of cashAs a business owner you hear this question or one like it all the time. It starts as small talk – how’s business? – is usually the first question. Fairly quickly, because they want you to succeed, they’ll ask if you’re breaking even or making a profit.

If they’re asking that question then they probably haven’t been in business themselves because the answer is rather complicated.

Start-up costs are huge and can’t be recovered in a short time. While that money isn’t all out of pocket, loans need to be paid back and the term for business loans are not very long, 5-7 years, so payments are fairly high. I’ve had people ask me if my business was profitable after I was only open a few months. That’s the field of dreams concept of business, if you build it they will come, as if customers flood you with money the moment your doors open.

In addition to start-up costs there are the operational costs and, with a slow (but hopefully steady) increase in business, the money to keep things going needs to come from somewhere. Since it’s not coming from customers it has to come from the owner or investors. It’s called the burn rate and needs to be watched closely. There were plenty of weeks and months that I had to add cash to cover payroll, loan payments, or marketing expenses.

I have indeed seen businesses reach profitability in a short period of time but that’s the exception.

Patience and attention to all aspects of the business, revenue, expenses, marketing, and staff are the key things the entrepreneur needs to focus on. If there is progress then profits will come. Owning a business is a long-term prospect and success doesn’t come over night.

So my response to people who ask me these questions is: “If only it were that quick and easy everyone would own a business.”

What’s your response? Add your comment below.


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In This Order

 
In my first post on The RFR Principle there were three words that I think are really important: In This Order. The full quote is: “The RFR Principle says that three elements are necessary for success and they are, in this order, Risk, Failure, and Reward.

Why that order?

First comes the risk because without action, without doing, there is no risk, so risk has to come first.RFR

Failure must be next – it’s the buyer’s remorse that comes from making a decision, the worry and doubt that creeps (and sometimes speeds) in. But it’s so much more than that. Failure is the unanticipated details that come with starting something new, the deflation that follows confidence, the obstacle that from a distance only looked like a bump in the road. Nothing is flawless. No plan, no matter how well thought out and how adeptly executed, is perfect, and that is why failure must be next. The good news is it’s rarely fatal as long as you deal with it quickly and calmly.

Reward comes last and is the most tenuous of the three. It’s often not as great as expected and comes later than anticipated.

Because the RFR Process is perpetual, once the initial cycle completes, all three elements can occur simultaneously. Like electrons speeding around a nucleus, Risk, Failure, and Reward all circle Success and it’s up to you to influence their speed and trajectory.


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