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 It's important to know which category you fall into. If you are going to be working in the business fulltime, you will be happier buying a franchise whose products you actually like. If you are going to be a handsoff owner, that is not as important.
-**Find the Franchise That's Righst,
+Find the Franchise That's Right,
 Bob Bly
+====== How to Start a Million-Dollar Business for $25,000 #15: The Myth of Branding: Why Entrepreneurs Should Focus on the USP ======
+ recently got an interesting e-mail from reader Brian O. He said, "As a direct-response copywriter, I'm skeptical about the number of marketing people who are enamored with the need for 'branding' or to 'build their brand' to effectively market their business.
+"I know that brands such as Nike and Coca-Cola have power and influence with people, but I'm not sure 'branding' has much of a place with most small- to medium-sized business marketing."
+He posed three questions:
+What, exactly, is "branding"?
+Can it be an effective type of business marketing?
+Can it work effectively together with direct-response marketing?
+Brian's hunch is exactly right. Branding is perhaps the most commonly touted and least understood aspect of marketing. If you believed all the hype, you'd think that you should spend 80 percent of your time and money "building" a brand.
+As I have said in past articles, nothing could be further from the truth.
+Branding makes sense for Coca-Cola, Nike, and Sony. Huge consumer companies have to spend money on that kind of advertising to keep their names out there in the commercial world. The idea is that when people make buying decisions, they will favor products whose names they know.
+Brand-name consumer products almost always outsell generic products. And the reason brand-name products come out on top is not quality. (Many generic products are just as good.) The reason is consumer trust.
+Trust comes from familiarity, and familiarity increases sales. But it is very, very expensive to create a household name. We are talking about tens of millions or even hundreds of millions of dollars here - which puts branding entirely out of the reach of any fiscally intelligent entrepreneur, even if he is working with a big budget.
+Prior to the Internet boom, small-business owners understood that they couldn't afford to spend money on branding. To break into new markets, they relied on traditional techniques: big discounts and bigger headlines. But when billions of dollars started pouring into start-up Internet ventures, the idiot-savant CEOs running those operations had to put the money somewhere - so they put it into advertising their brands.
+To justify this enormous waste of money, they invented theories to substantiate their foolishness. Most of those theories were versions of the same, stupid strategy: Spend whatever it takes to get the most eyeballs to your website. And after you've established first position in the "look-who's-looking-at-me" contest, figure out some way to profit from it. Profiting from something so nebulous needed its own magical name too. They called it "monetizing."
+Create traffic first by selling the brand... then monetize the traffic... and then go public. That was the program. And dozens of Internet entrepreneurs did just that. Most of that brand building went to naught, of course. Sports stadiums were renamed for unpronounceable URLs, and then they were changed to something else again as the Internet businesses behind them went bust.
+It was during that period of chicanery that the modern myth about branding was formed - the myth that the first course of action for any small business should be to build a nationally (or internationally) recognized brand. This myth persists today in books and at conferences and seminars about Internet marketing. But smart would-be entrepreneurs like you have the sense to smell rats when they are rotting beneath the floorboards.
+The fact is, most of the profitable business in the world is done without the benefit of brand recognition - and 99 percent of new businesses develop without any money or time spent on general advertising.
+The branding myth persists today, even among experts who witnessed the debacle of the Internet advertising implosion. According to a 2005 PointRoll Inc. survey, 70 percent of online advertising professionals cited "branding" as the most important or second most important goal of online advertising. Interaction rate was viewed as the most important measurement of an online ad's performance, with 53 percent of those responding indicating that the best way to judge an ad's effectiveness is to measure the percentage of users who interact with it.
+What's missing from that picture?
+Profits, of course. As a future entrepreneur, you want to create sales immediately. But they have to be profitable sales - or at least near-profitable sales - or you'll go broke before your second year of business. There are as many ways to create profitable sales as there are businesses. When you get into your own business, you will have to figure out which way works for you. (I explain how to do this in my book Ready, Fire, Aim.)
+Direct-response marketing of a hot product is probably the most effective way to create profitable sales. Promoting your brand through branding is probably the least effective way.
+So now, to Brian's three questions:
+What is branding? It's selling the name of a company or product through general advertising - so that later on, when the customer is faced with buying your product versus another one, he chooses the brand he is familiar with.
+Can it be effective? Not for small businesses.
+Can it be combined with direct marketing? Not really. Branding is meant to make selling (either direct selling or retail selling) easier. It is not meant to be used simultaneously.
+Those questions answered, let me say a few words about where and how branding can work for entrepreneurial enterprises.
+First, understand that establishing a unique selling proposition (USP) is not the same thing as branding.
+Many, if not most, products and product lines will benefit from marketing that stresses the USP. If, for example, you are launching a business that sells organic food, your USP should emphasize the fact that all your products are green. Your company's name might express that benefit, as should the product names, the packaging you choose, and the layout and design of your marketing materials. And your USP should be a major component in the design of and sales copy on your website, as well as your Internet ads and landing pages.
+Doing all of that to promote your USP will have the effect of creating an idea in a potential customer's mind that will have the same effect that branding has for large businesses. And that effect - which is a higher-than-average initial response rate to your marketing due to consumer familiarity - will also work with your existing customers on the back end.
+Thus branding in this limited sense (consistently promoting your USP) works in conjunction with direct marketing as a back-end mechanism - to sell more products to people who have already bought from you. And that's how people with small- and medium-sized businesses should think of it.
+I have plenty more thoughts on this subject, but these are the most important for someone in the early stages of starting and growing a business.
+Best,
+Mark
+====== How to Start a Million-Dollar Business for $25,000 #16: Match the Business to the Market ======
+"Desperate to escape her hand-to-mouth existence in one of the poorest regions of Brazil, Maria Benedita Sousa used a small loan five years ago to buy two sewing machines and start her own business making women's underwear," The New York Times reported.
+Today, her business is thriving. She employs 25 people and produces 55,000 pairs of cotton panties a month. With the income she's earning, she has bought and renovated a house for her family and a car. Her daughter, who is studying nursing, will be the first family member to finish college.
+Sousa is living the entrepreneurial dream. "You can't imagine the happiness I am feeling," she said. "I am someone who came from the countryside to the city. I battled and battled and today my children are studying with one in college and two others already in school. It was a gift from God."
+A gift from God? I don't know about that. But I do know that it was partly due to a loan she got from a private bank - that and her gumption, her persistence, and her instinct to start a business she already understood.
+If you want to have the best possible chance of making your new business work, learn about it from the inside before you start. Sousa did exactly that. Before creating her own clothing business, she worked for minimum wage sewing clothes for someone else's clothing business.
+By the way, Sousa doesn't begrudge the years she worked for a dollar an hour. She was happy to get the work when she had none, happy to earn the money so she could help pay the family's bills and - most important - she is grateful she had the chance to acquire the skills she uses today to run her business.
+Sousa's story is a life lesson in Ready, Fire, Aim, too. She didn't wait till everything was ready before she set up shop. She didn't have any training in business. She didn't have a facility to work in or any sewing equipment. All she had were the skills she'd developed from working and the money she got from a micro lending institution.
+And she had one more thing: She got into the right business at the right time.
+This is the aspect of the story I want to highlight.
+Sousa was successful because she did all the things we talk about all the time in WBC: She set and pursued goals. She acquired financially valuable skills. She took a Ready, Fire, Aim approach to her business. But the reason her business did so well - grew so quickly from a one-women operation to employ 25 people - is because she went into the right business at the right time.
+Business gurus like to tell you that you can be successful at any business, so long as you do A or B or C. But the hard truth is that some businesses will do much better than others. It's not just your personal qualities that count. And it's not how much capital or human resources you have either. It's picking the right business for the market you are in.
+Let me illustrate this point by telling you about Y, the woman who takes care of our house in Nicaragua. Like Sousa, Y was dirt poor until she got a job earning $5 a day cleaning one of the upscale homes in our development. She didn't know much about cleaning fancy houses at first, but she was a quick learner. And when my place was finished, she applied for the job and I was happy to give it to her.
+It was a good deal for Y, because, with two houses to take care of, she doubled her income. It was a good deal for me, because I got a very good and reliable person at a fraction of what I'd have to pay in the States.
+Because I can't help but preach entrepreneurship, I several times suggested to Y that she should start her own business. To help her along, I offered her a loan that could be repaid by doing extra jobs for me on the side.
+Y used the money I loaned her to build a little store on the side of her house and open a children's clothing shop. She buys cute outfits in the capital city, hauls them to her shop, and sells them to the locals. Her store is busy once a month - on the first (payday for most of the workers).
+Y is learning to be a good businesswoman. She runs her store profitably and has reinvested those profits in a small truck (to save money on transporting the clothes) and an expanded inventory. At the end of every month, she also takes cash out and puts it in the bank for her children's education.
+So she is doing well. But she is not doing nearly as well as Maria Sousa. And she is not likely to do much better.
+The reason is simple. Y chose a business that could not possibly grow quickly in her little corner of Nicaragua. Selling children's clothing was and is a fine idea. It fills a need. But no matter how hard she works, how much advertising she does, or how much money she reinvests in her business, her market is limited by the number of local people who can afford her wares.
+When you decide to become wealthy, you should take some time to consider your goals and ambitions before you select the business you will start. Don't believe the gurus who tell you any business will do.
+Yes, you can start a children's clothing business if it suits your fancy, but don't expect it to become a big money-maker if you don't have the customers to support it.
+For fast growth, choose a hot business in a hot market in an economy that is expanding. Manufacturing cheap clothing in Brazil fits the bill. Selling children's clothing in Nicaragua doesn't.
+Now if you plan to take your business to the Internet - and I highly recommend that you do - you have a little more wiggle room. Because then your market expands to include the entire world.
+But you must still be in the right business at the right time.
+For example, there are thousands of options for getting into the information publishing business. But if you decide to sell information online about some obscure interest/hobby, such as bookbinding, you are going to have a smaller market than if you choose a more popular interest/hobby, like tennis or golf. And if you get into a market that is in a growth stage, such as yoga or Pilates, you'll do better than if you choose a market that is shrinking, such as aerobics.
+How do you determine the size of your market?
+Keyword research should be your first step. The first thing to do to determine the potential for a business is research the keywords for that industry - the words that are being searched for on the major search engines. Each search engine has its own set of keyword tools that will tell you how many people have searched for any given keyword phrase (and any combination of words in the phrase). You get to ‘see' what people are looking for online instead of guessing.
+If your keyword research indicates that there's a big pool of potential customers for the product or service you intend to sell online, you can take the next step and start testing your idea. Because there's a good chance you're about to enter into the right business at the right time.
+Best,
+Mark
+====== How to Start a Million-Dollar Business for $25,000 #17: How to Set Realistic Goals ======
+Aim high! Reach for the stars! Shoot for the moon! In other words, Think Big!
+Thats the message we get time and time again from motivational speakers. And I get it.
+In business, it certainly makes sense when you are in the very first stages of developing a new product or project. It makes sense because it helps you rally the troops and put the heavy machinery of your idea into motion. ("Wouldn't it be cool if we could...?")
+But thinking big is a serious mistake when it comes to setting specific goals (in business and in investing).
+In today's essay, I want to help you avoid making that mistake. I will explain why setting big goals doesn't work... and I will give you an alternative strategy that does work.
+How Setting Lofty Goals Can Backfire
+I used to believe in setting ambitious goals. I recommended it to every business I consulted for. But about 15 years ago, I realized that I was wrong.
+My main client at the time was in the information-publishing business. The company was broken up into seven or eight units, each of which published a dozen or so newsletters. Once per year the owner and I would meet with each of the publishers to review what they had accomplished that year and to set goals for the upcoming year.
+I would challenge them to think big. And they did. They delivered projections that showed enormous growth and profitability. In nearly every case - regardless of how mature the business was or what problems it was facing - we were given spreadsheets that promised 50%-plus growth - and even higher profits.
+Needless to say, this made us all feel great.
+There was only one problem: Aside from the rare exception, those numbers were never achieved.
+Year after year, we played the same game. Set big goals. Fail to meet them. Set big goals again.
+The elation we enjoyed when we set the goals was counterbalanced by the frustration and embarrassment we felt when results fell far short of our expectations.
+I finally had to accept that what we were doing was not only a waste of time, but also a detriment to our business.
+The crazy goals the publishers set allowed them to jump into the year pursuing a business plan that was big and bold, but ultimately unrealistic. The very "bigness" of it kept them from coming up with new products and projects that could have helped the business grow.
+A Better Idea
+We brought the publishers together and told them that we were going to try something new: a two-part approach to setting goals.
+Step 1: Map Out Current Projections
+The idea here is to study the results of your past marketing efforts. Based on those numbers, and assuming everything continues to go as it has been going, you then come up with realistic expectations for the coming year.
+There is no room in this process for hopes and dreams about better products and promotions. You simply extrapolate the numbers. And in doing that, you have to be conservative.
+If, for example, a particular product achieved 25% growth in the prior year, you cannot automatically anticipate an additional 25% growth in the future. You have to first look at your most recent sales and determine whether they have been trending up or down.
+The point of this step is to force you to look at your business in the harsh (and sometimes grim) light of reality.
+Which brings us to...
+Step 2: Set Realistic Goals
+The first time the publishers mapped out their current projections, it was, as you might expect, sobering. Some of them were able to project growth. But often it was less than what they wanted to believe. And sometimes their projections were negative.
+None of them were happy with their numbers. And this was actually a blessing. By facing what would happen if they kept on doing what they had been doing, the publishers were forced to come up with new ways to stimulate growth.
+At this point, they were ready to set realistic goals - goals tethered to their current projections. They could not, for example, set a sales or profit goal simply because they were "determined" to achieve it. They had to have a detailed plan showing how that goal would be achieved.
+It was hard work. Work that we had been neglecting. But it paid off.
+Twelve months later, every set of projections had been exceeded. More importantly, nearly all of the publishers' goals had been achieved.
+Before we implemented this two-step approach, my client had been stuck for several years at about $90 million in total revenues. After we made the change, revenues rose sharply. First, to $150 million. And then to $200 million. Today, gross revenues are in excess of $400 million.
+How This Applies to Investing
+As I said at the beginning of this essay, thinking big makes sense in business when you are developing a new product or project. Imagining all the "what ifs" is exciting and motivating and can sometimes inspire surprising and profitable possibilities.
+But when it comes to the nitty-gritty of putting together a yearly business plan, you will be much more successful if you set goals based on realistic expectations.
+When we created the WBC, we agreed to use the same conservative approach. We believed it would help us set better for the ideas we would be recommending to our readers.
+I have a good deal of experience investing in real estate. My first investment was an unmitigated disaster. But I learned quickly and my results improved considerably. Several times, I've made more than 100% on my money within a year or two. I once made 10-times my initial investment in less than seven years.
+But when I wrote about real estate and developed the Real Estate Investment Series for the Wealth Builders Club, I talked about much lower returns: 8-15% per year.
+I did so because, though I knew higher returns were possible, I didn't want to sell the program by giving subscribers unrealistic expectations. Our business, after all, is a business built on long-term relationships with our readers. Making promises we may not be able to keep is not the way to do that.
+Returns of 8-15%, however, was a promise I knew we could keep. I came to that by reviewing my three primary rental real-estate investments. One is based in Baltimore, Md., one is in Lake Worth, Fla., and is one in my hometown of Delray Beach, Fla. I won't tell you specifically how each investment did (for fear of embarrassing my partners), but one has returned about 8%, another about 12%, and the third returned more than 15%.
+The Smart Way to Grow a Business... or Your Investments
+Right about now, you might be thinking: "I'm not interested in making a mere 8-15%. I'm looking for 25% returns... Even higher!"
+If that's the case, I am quite sure you will find someone out there who will offer you programs promising those big returns. But my guess is that you will be lucky to end up breaking even. The more probable outcome is that you will lose money.
+That's the result of "Thinking Big!" instead of setting goals based on realistic expectations. You don't have a clear picture of what is likely to happen, so you don't understand where and when you have to make adjustments.
+This is why I recommend that businesses should set yearly goals. They can intend to accomplish certain things in the future. But their budgets should be based on current projections. They should start with actualities and then make adjustments as needed. And their businesses will then grow.
+====== How to Start a Million-Dollar Business for $25,000 #18: Method Marketing ======
+Mark Ford
+If you know anything about acting, you've probably heard of Lee Strasberg and Konstantin Stanislavski. Strasberg was head of the famous Actor's Studio in New York. Stanislavski, a founder and teacher at the Moscow Art Theatre, was the man who gave Strasberg his ideas about what came to be known as "method acting".
+In method acting, an actor prepares for his role by getting deep into the skin of the character he is playing. He tries to understand his character by becoming him. Robert DeNiro, Sean Penn, and Marlon Brando are all method actors. Closer to home, Aamir Khan has gained considerable fame for his method acting prowess as well.
+Stanislavski said that great acting makes the audience forget it is seeing something artificial. Strasberg used a literary expression borrowed from poet T.S. Eliot to describe this experience: "the willing suspension of disbelief."
+It's an apt description of what actually happens when you read a good novel, watch an arresting movie, or see a captivating play. In each case, you forget that you are seeing something fictional. You aren't fooled. You haven't lost your mind. You have willingly stopped disbelieving in the fiction.
+This is very similar to what we do when we read a good marketing piece. We start off (usually) fully aware that we are being sold and suddenly forget about it. Something is said or shown that triggers an emotional response in us that makes us want to forget about the selling process and focus on the story - the sales message.
+The legendary copywriter Bill Jayme recognized this when he said that it is not only "in the theatre but in the marketplace too that there is a factor at work called ‘the willing suspension of disbelief.'"
+How often has it happened to you?
+Somebody's trying to sell you something - a product, an idea. Maybe it's a restaurant or a travel destination. You are listening, but skeptically. "I'm not going to get pulled into this," you are thinking. Then, bit by bit, detail by detail, you find yourself being drawn into the dream.
+At some point in the process, and usually without your noticing it, you are carried over. Your pulse quickens. Your senses glow. Your logical mind stops resisting and starts racing ahead - imagining how good your life will be once you own the product/service.
+You have "suspended disbelief" - not because you truly believe all the promises being made but because you want to believe them.
+"Method Marketing" is the title and theme of a very good new book by Denny Hatch, an old pro direct mail guy. The purpose of marketing, Hatch points out, is to get your customer to suspend his disbelief and start dreaming about your product.
+Take a look at your marketing materials. Try to identify how well you are able to achieve that goal. If you believe you are falling short, consider whether a method approach to marketing might work better.
+A method marketing approach would demand that you:
+Understand the deepest needs/desires/feelings of your prospect
+Ignore just about everything else and focus on persuading your prospect that those needs are going to be met
+Unless you get to the core - your customer's most heartfelt needs, hopes, desires, etc. - you may never achieve the breakthrough marketing success you are after.
+Best,
+Mark
+====== How to Start a Million-Dollar Business for $25,000 #19: Simple Internet Marketing Ideas that Can Boost Sales ======
+Recently, I participated in a seminar on Internet marketing. I went to listen and learn, but I did make a small presentation. One of the most important points I made about the Internet is that it is not one thing but many things. It is not only a market but also an industry and a medium.
+Strike that. It is not just one medium but many media.
+Websites are the medium people most talk about when they talk about the Internet. Websites come in many forms and have many functions. There are sites that are nothing more than data-storage centers. You go to them to find something. There are websites for shopping. Websites for news. Websites for advice (like ours). Websites for auctions. Websites to watch sex. Websites to plan travel. Websites to register your opinion. Classified websites. The list goes on and on.
+Each kind of website is unique. Yet so much of the advice you read about websites is singular. It makes as much sense to make blanket marketing rules for all websites as it does to apply shopping-center selling strategies to daily newspapers.
+And websites are only one group of Internet Media. In addition to websites, we have e-mail, banner ads, insert ads, e-zine advertorials, and much more. Each of these Internet business venues has a unique nature and purpose, But, again, so much professional Internet marketing advice lumps all these things together.
+How to Sort It All Out
+It's no wonder so many businesses have lost so much money on brainless Internet marketing schemes. In a market where money is abundant and good sense is rare, large losses are bound to occur. And they have. A quick tally of the marketing follies that have already crashed and burned would total in the billions of dollars.
+Of the marketers attending the seminar, some had made money on the Internet and some had not. But all expressed some confusion about what exactly they were doing. When I asked them, ‘What is the primary purpose of your website', none had a clear and certain answer.
+Yet when I polled those who had been successful, an interesting thing came up. Although they had all toyed with elaborate and fanciful plans about marketing (many of which were based on popular ideas), all had, when it came down to brass tacks, abandoned those ideas in favour of simple direct-marketing techniques.
+Rather than lose a bunch of money following somebody's idea of how to use a website or write an e-mail ad, they fell back on their old ways. And guess what? It worked! It turned out that, contrary to what the self-appointed Internet experts had predicted, the old rules of selling are still effective and these marketers instinctively knew so.
+The Internet Has Changed Business In Many Ways, But One Thing It Hasn't Changed Is Human Nature.
+Most of the early claims about New Economy marketing were based on the (wishful?) proposition that the Internet was going to change human nature. It didn't.
+Thank God it didn't. Those of us who have built businesses by understanding human nature are happy to be able to apply the same old principles to the new media. And that gives us a very valuable clue. If you accept the idea that the old rules apply, you can be successful on the Internet by figuring out which rules apply to what situations.
+The secret to doing that is to look for resemblances. What does e-mail resemble? Direct mail, of course. And if my theory is true, that would make it possible to make good money by sending e-mail solicitations to a list of people with common interests. Of course, that is exactly what porn e-mailers do (with great success) and it is what one of my colleagues has been doing for about a year. (During that time, a list of 30,000 names has yielded over a million dollars.)
+What else? Internet insert ads resemble fractional space ads in magazines. And guess what? They work like them too.
+Banner ads look like billboards to me. If you know how to make billboards work, you might be able to do wonders with banner ads. (Instead, thousands of companies have spent billions of dollars treating banner ads like I don't know what maybe silly business cards and they haven't worked.)
+Internet classified ads and advertorials look like, and work like, classified ads in newspapers. Websites that act as magazines should use the layout and advertising approach that magazines use. The same holds true for websites that resemble department stores. Or websites that are, essentially, daily newspapers.
+Figure out what an Internet medium resembles and apply the rules that have always worked on its corollary. Chances are you will be very close to right on.
+About two years, ago I created a little website to sell weekly leases for a beach cottage I own. Since I didn't know any better, I ignored all the rules about what I should have done and followed the rules I knew for selling real estate in classified space. It was a good instinct. A $200 investment has returned almost $80,000 so far.
+To sum it up, this is what you should think about when you decide to market your business on the Internet: (1) the method you have traditionally used to sell your product/service, (2) what Internet form it resembles, and (3) how that might someday make you rich.
+====== How to Start a Million-Dollar Business for $25,000 #20: Keep Your Risks Low, and Hold Your Dreams High... ======
+Earlier this year, I talked about grappling with fear and contending with negative thoughts. Today, I'll deal with a particularly important financial fear: the fear of starting a business.
+When business writers talk about why so few people become entrepreneurs, they cite 'fear of failure' as the number one challenge.
+I agree. Fear of failing is a real factor. But to overcome it, you need to figure out what it means in more specific terms.
+When I feel trepidation about starting a venture, I'm not worried about something as abstract as 'failure'.
+I worry mainly about three things:
+I sometimes worry I don't have the knowledge or skills to make the idea successful.
+I worry I might lose all the time and money I'm about to invest in the idea.
+And I worry if word gets out I've had to close, businesspeople will think I'm a fool. (Especially the people who doubted my idea in the first place.)
+Best-selling author Seth Godin talks about that first fear. He says most people who buy books on entrepreneurship never get beyond the dreaming stage because deep down inside, they don't think they have what it takes to succeed.
+I don't know if that's the most common fear of starting a business. I wish it were. But I'm afraid too many entrepreneurs have the opposite problem.
+They don't realise they don't have what they need to succeed.
+If you have that fear, you should respect it...because nine times out of 10 it's valid.
+My number one rule of wealth building is to invest only in what you know. If you think you might not know enough or have the right resources, you probably don't.
+The solution to that fear is to put your plan on hold and acquire the experience to know what you need to know.
+If your fear is being shamed by a failure, you can - and should - move forward. You can overcome this kind of fear by doing what I talked about in that previous essay: imagine the worst possible outcome and visualise being emotionally okay with that.
+Another thing you can do is be a bit humble when you're announcing your venture.
+Rather than bragging about all the money you'll be making, keep the claims small and try a little self-deprecating humour. This is probably a terrible idea, but I'm going to try it.
+If your fear is losing your time and money, you should follow this protocol...
+Keep your current job and all your current income.
+Start the business in your spare time at home.
+Spend the first few days creating a short business plan. Identify your product and why you believe you can sell it. List the media where you can advertise. Do a quick and dirty cost/benefit analysis. The entire plan should be no more than four pages.
+Over the next few weeks or months, spend as little money as you can, testing your 'optimal selling strategy' - your plan for selling your product: how you'll position it, how much you'll charge for it, what media you'll use to advertise it, and what sort of advertising copy you'll use.
+Find a corner of the overall marketplace where you can test your selling strategy cheaply. If your ultimate market is retail, for example, you could consider selling your product on Sundays at a market.
+Create a cash flow projection that'll allow you to ramp up your marketing if the initial testing is positive.
+If possible, get someone to act as your mentor - a retired business owner who's willing to teach you what you need to know and encourage you to take the steps you have to take.
+When the business starts growing, read Ready, Fire, Aim, my book on the subject. That will give you the details of what you need to do to take your business from inception to $100 million in annual revenues and beyond.
+Fear is a good and useful emotion. Successful entrepreneurs don't deny it. They overcome it sensibly and cautiously by taking baby steps and proving the optimal selling strategy before going big.
+If you have what it takes, don't let either the fear of embarrassment or the fear of losing time and money get in your way. Keep your risk low and your dreams high.
+====== How to Start a Million Dollar Business for $25,000 #21: How Mentors Can Help You Reap More Profits ======
+A man looks at his youth and says, 'I wish I knew then what I know now.' That's what 'Eric,' a pot dealer who spent four years in jail, said to me after he had become a multimillionaire.
+Eric was talking about what he had learned about direct marketing. I gave him a job after he got out of jail. He was bright and hardworking and honest. (Honesty is an essential quality for a pot dealer.) And so I taught him what I knew.
+It took Eric 10 years to accumulate a fortune dealing drugs. And all that money disappeared to lawyers and the government when he got busted. It took him only two years to become an expert at marketing. Two years later, he had his own multimillion-dollar business. He would have been much, much richer if he had learned what he learned from me earlier on.
+This is not an essay about legal vs. illegal businesses. My purpose is to point out how valuable it is to have someone help you, like I helped Eric.
+It can take a decade or more to become the successful person you want to be. But you can shorten your learning curve - even drastically curtail it - by using a mentor.
+With the advice and support of an experienced person in your field, you can avoid the most common mistakes you are likely to make. You overcome the stickiest problems and find shortcuts to success.
+Let me give you another example. This one comes from Business Week.
+Russell and Gayla Bentley wanted to start an apparel company, specialising in upscale, 'extended-size' women's clothing. The idea was solid. And they had experience. (Gayla had been a fashion consultant for 25 years. Russell had an MBA.)
+Russell wrote a detailed 100-page business plan. The plan had them investing their life savings, $250,000, along with loans, into a catalogue showcasing their original designs.
+Luckily, their bank suggested they have their business plan vetted. That's how they met Allen Shapiro, a retired executive with more than 30 years of retail experience.
+Shapiro told them - at their very first meeting - that their marketing plan was way off base. 'He answered questions I never thought to ask,' said Russell. 'He made us see the pitfalls of starting too big too soon.'
+Shapiro guided them to 'a more realistic approach.' Instead of starting with a catalogue, he suggested they open a showroom and sell directly to retailers.
+Shapiro's advice worked. Before long, NeimanMarcus.com and Nordstrom stores began stocking the Gayla Bentley Collection. Two and a half years later, they were selling into moderately priced lines for outlets like Dillard's and QVC.
+Talking things through with Shapiro, Russell admitted, saved them from disaster.
+We probably would have gone broke pretty fast if we'd have gone forward with the big-scale plan,' he said.
+I've had similar experiences many times in my career, both as a mentor and a protege.
+In the past, I've often talked about my mentors.
+From Leo, my first post-college boss, I learned the importance of persistence and dogged determination.
+Leo once had me call Honda Motors more than 100 times to convince them to give us a new engine after the one we had died (from lack of oil). We didn't have a single, sensible argument in our favour, but that didn't stop Leo from pushing me. Finally, after I got all the way to the top, the Honda execs decided they had wasted too much time on us and gave in.
+I didn't feel good about getting something we didn't deserve, but I never forgot Leo's lesson.
+From Joel, my second major mentor, I learned a great deal.
+The first lesson he taught me - by firing the lady who wanted to get me fired - was that a good leader needs to surround himself with the strongest people he can find. Another lesson I learned soon thereafter had to do with the fundamental nature of business. 'Until you make a sale,' Joel explained patiently, 'nothing else happens.'
+From Bill, a client, partner, and part-time mentor, I discovered - relatively late in my career - two important business secrets that have made me a better leader.
+For one thing, I no longer feel compelled to solve every problem put at my feet. I've watched Bill ignore countless squabbles and come out much the better for it. Before getting involved in a dispute these days, I ask myself, 'Can these people eventually come up with a satisfactory solution themselves?' If the answer is affirmative, I do nothing.
+Thanks to Bill, I'm also now a big believer in product quality. Having mastered the secrets of selling through my relationship with Joel, I tended to underestimate the importance of the product. I was one of those marketers who actually wanted to sell snow to Eskimos. In working with Bill, whose focus is always on quality, I've seen how much better a business becomes when that's what you stress.
+Don't Fall Into This Trap
+The popular view of the entrepreneur is a maverick who strikes out all on his own. The truth is, the great majority of successful businesspeople were proteges at one time. And those who did it on their own wish they had been lucky enough to have had a mentor.
+But don't be seduced by the promise of 'free' advice.
+If you believe the popular books on the subject, you have no doubt come across the idea that you can get great free advice from retirees. They recommend contacting your local Chamber of Commerce or taking advantage of an industry forum.
+Indeed, you can locate lots of formerly successful businesspeople that way. But I'm sceptical about this approach ... for two reasons.
+Volunteers for such programs are usually long retired. And businesspeople who are out of their industry for more than five years no longer know its most important secrets.
+Any advice you get for free is ultimately worth nothing. Not because the advice is bad, but because people don't value anything they get for free. If you want the right kind of mentors in your life, you have to be prepared to pay for them. You must pay for what you get in dollars. And you must pay for it in gratitude too. (More on that in a minute.)
+What You Can Expect From Your Mentor
+It doesn't matter where you are along your career path. Getting yourself a good mentor will be enormously helpful.
+A study commissioned by the Elliot Leadership Institute at Johnson & Wales University confirms this. Researchers surveyed senior executives and middle managers in the food service and hospitality industry about leadership competencies. Those who had been mentored reported that the experience was invaluable. They said their mentors helped them build all kinds of leadership skills, including decision-making, strategic thinking, planning, coaching, and effectively managing others.
+You may have no idea what you need to learn to make the next leap forward in your career. But someone who's been there and done it before does know. Getting the help of that person will speed up your success by light years. It will save you a lot of money too.
+But those advantages of mentorship are just the beginning.Another study I read recently - a detailed and comprehensive study from the University of Georgia - found that people who had been mentored enjoyed their jobs and felt less stress than those who hadn't.
+That makes sense to me. Because the right mentor will do more than simply tell you trade secrets.
+Your mentor will be your learning coach - someone you can talk to and trust. He will provide you with guidance, feedback, and support. He will help you focus on your goals and give you direction.
+He will offer advice on skills he's found valuable. He will counsel you on opportunities in your industry and different paths to success. He will share his personal experiences, but he won't inundate you with unsolicited advice.
+An article I read in Black Enterprise magazine put it this way: 'Your mentor is not a saviour.' He's there to help you help yourself.
+Or as leadership consultant Ron Yudd put it: '[Mentors] hold the flashlight so others can see the path.'
+Getting Started with Your Mentor
+Before I tell you how to find a mentor, let's talk about how to handle your first few meetings with them.
+For your first meeting, come prepared with a list of your business goals. And a list of questions too.
+What do you want out of the relationship?
+What do you feel you need to learn?
+What do you want this person to teach you?
+Prior to each succeeding conversation, outline what you want to get out of your time together. And keep track of your progress.
+It's important for you to set specific goals and monitor your own progress. That's not his job. And if you don't do it, he won't be able to help you continue to achieve.
+Respect the Mentor-Protege Relationship
+To maintain the relationship with your mentor, you must recognise his value and reward him for it. Keep in mind that the advice he is giving you is likely to have a profound effect on your career. Although you can't measure the financial value of any specific suggestion (i.e., 'Stop spending so much time on this fulfilment project. Get to work on improving your advertising.'), you can bet that, in the long run, the effect will be significant.
+Show him you appreciate what he is doing for you. Tell him, in specific terms, what you have learned from him, and thank him every time you meet.
+The psychological reward of knowing he is helping you succeed is his primary reward. That said, once the relationship has been established, it's time to offer to compensate him for his time with money. (It doesn't have to be with cash, if you don't have it. You can offer him a cut of the profits he's helping you make instead.)
+One of my current mentors, Sid, gets a check for several thousand dollars whenever I spend time with him. On a per-hour basis, he's extremely well paid. But for the help he gives me in making key leadership and wealth-building decisions, the $30,000 to $40,000 a year I invest in him is a bargain.
+How to Find Your Mentor(s)
+There are many ways to find mentors. I'll begin with the best but most difficult.
+Look around your industry for five successful business leaders who retired within the past five years. This five-year timeframe, as I've said, is important. If they've been retired any longer, they will almost certainly be out of touch. That is especially true today. The Internet has changed marketing hugely and forever. Anyone who hasn't done business since 2004 can't possibly give you anything but general advice.
+Write each of these five people a short letter expressing genuine admiration. Compliment them on specific achievements. Then ask for advice on your own career.
+Offer an invitation to go to lunch. Or, if they're located out of your local area, ask for a 15-minute phone call.
+If you make five personal contacts, odds are that one of them will grant you an interview. If not, pick another five and repeat the process.
+Spend most of your time asking questions and thanking your prospective mentor for his answers. You must show him right away that you are someone who (a) pays attention to good advice and (b) appreciates it.
+If you find that you hit it off...you've got yourself a mentor.
+The other, faster and easier, way to get a mentor is to invest in one of the many good mentorship programs available. You can find dozens of them through the Internet.
+Don't Let This Moment Pass
+We all make mistakes. We all waste valuable time. But we are all capable of changing our lives for the better. And that change can happen much more quickly with a mentor.
+If you don't have a mentor now, you should get one. If you have one, consider using multiple mentors. This makes enormous sense when you think about it. It gives you not only the wisdom of one person, but also the perspective you get by comparing the ideas and judgments of several experts.
+Don't wait another year. Don't wait another day. Now is the best time to jumpstart your success. Seize the day.
+Adopting a mentor or mentors requires a temporary abnegation of pride. Or perhaps something beyond that - the wisdom to understand that one's own ideas are not always the best ideas.
+I consider this to be a truly great secret of success.
+====== How to Start a Million Dollar Business for $25,000 #22: Is Your Business a Growth Machine or a One-Hit Wonder? ======
+In 1982, members of the pop band Tommy Tutone wrote '5309/Jenny,' a song about a guy desperately trying to get in touch with a girl named, of course, Jenny. It was at the top of the music charts for 40 weeks and made the band members rich and famous.
+At least for a while.
+A couple of years - and a failed follow-up album - later, the lead singer was making a living as a software engineer, while his band mates were relegated to playing in bars. The band's problem? They never wrote another hit song - not even a reasonably popular one. In musical history terms, Tommy Tutone was a one-hit wonder.
+In the world of entrepreneurship, we have one-hit wonders, too. In fact, they are probably more common among entrepreneurs than they are in the music industry. Tomima Edmark, a Dallas entrepreneur, released the Topsy Tail hairstyling gadget to widespread acclaim in 1992 but never produced another hit product (despite several attempts).
+Steven Wozniak cofounded Apple but failed to make a mark (except in techie circles) with other ventures after leaving the company. Roy Raymond made millions with Victoria's Secret, but when he sold it and tried his hand at children's fashions, the business went bankrupt within a couple years.
+What Causes One-Hit Wonders?
+The thing about being a one-hit wonder is that you don't feel like you are one while it's happening. You feel like a big success. You've created or sold a product, and it's doing really well. Your business is growing. You are making plenty of money. It feels like you are living the ultimate dream.
+But then, suddenly, sales start to decline. You try all sorts of new marketing strategies, but none of them do the trick. Meanwhile, you notice, expenses have been rising. When your sales drop to 50% of the peak, your profit is down by two-thirds because your costs have risen.
+One-hit wonders fail because they put all their eggs in one basket. They develop (or often stumble upon) a product that happens to be in the right place at the right time. It becomes a best-seller, and the business grows quickly. They hire marketers, managers, and salespeople, and everything is going well. So, they believe they have become successful business people. They believe they understand how businesses work and grow, but they actually have little or no idea.
+I like to tell my proteges that there are three great dangers in being successful at anything - and that includes writing, teaching, and building wealth. Those dangers are not outside threats but faults of characters. Having been educated in a Catholic grammar school, I call those faults the Mortal Sins of Success.
+These mortal sins are Sloth (laziness), Pride (arrogance) and Ignorance (lacking the knowledge or skill required of the goal).
+Building a good and sustainable business requires the contrary virtues: hard work, humility, and knowledge (both of industry secrets and financially invaluable skills).
+Three Virtues of Effective Business Building
+To develop a business that will thrive, you have to create a machine that will produce new products and advertising campaigns all the time. You have to put the people and processes in place to continuously produce more and better products all the time. You can't stop or even rest just because you've had a single success. You have to be willing to do the work, the relentless work, of making your business grow.
+If you believe your first big seller will sell forever, you are guilty of pride - the belief that your product is better than it probably is. Some products (Coke, Johnny Walker, etc.) may last for ages. But most (typewriters, taxi services, etc.) lose their market share over time.
+And if you think the marketing strategy that worked for that first product will work for the second and the third, then you are guilty of ignorance. As anyone who has been in business for several decades will tell you, new media change marketing methods, and sales campaigns ebb and flow. To transform a one-hit wonder enterprise into a lasting business, you have to be committed to learning new secrets and developing new skills almost every day.
+And you have to demand that your key employees develop those same virtues: that they are willing to work hard, to stay humble, and to learn for as long as they are in your employ.
+I can think of a half-dozen people I know - including a few friends of mine - who are running one-hit-wonder enterprises right now.
+They are happy now because they are making money and keeping busy. But when I look at their businesses, even from the outside, I can see the writing on the wall: Sooner or later, their one product (or advertising scheme or the nature of their market) will change, and their businesses will shrink or even die.
+When sales begin to dip, they will think, hopefully, that 'things will turn around.' But because they have been too proud, have gotten lazy, or have failed to learn, the decline will continue, and their profits, along with their faith in themselves, will disappear.
+Are You a One-Hit Wonder?
+Your business may be working fine right now. And you may feel (in response to my comments above) that it is in good shape for the future because you are not lazy, arrogant, or dumb.
+I grant you that. But are you practicing the virtues of business building? Every day? Are your key employees doing the same?
+Here is a quick quiz that will help you assess the danger of becoming a one-hit wonder.
+How many 'front-end' products are you currently selling? (By front-end products, I mean those that are sold to new customers.)
+What percentage of those front-end sales comes from a single marketing campaign?
+How many back-end products do you sell? (By back-end product, I mean one that is designed to sell to existing customers - usually, these carry higher prices than front-end products.)
+How often do you develop new products?
+When was the last time you successfully sold a new product?
+What percentage of your overall sales comes from front-end products?
+How much are you spending now on developing new products compared to previous years?
+How much are you spending now on new marketing strategies or finding new markets compared to previous years?
+How many active customers did you have three years ago compared to today?
+The 'right' answers to these questions are self-explanatory. Spend some time thinking about them, and you will be able to assess your company's profile in terms of the one-hit-wonder risk.
+How to Change Your Business Into a Growth Machine
+If you think your business is at risk, you should act quickly and decisively to change the way you and your key people think about how businesses grow.
+One way to do that is to become familiar with the stages of business growth from infancy to maturity. You must determine what stage your business is going through right now and understand the particular challenges and opportunities that exist.
+You must accept that there are serious challenges ahead, even if you can't see them right now. And you must take it on faith that there are problems right now within and without your business that need to be solved, even if they are not apparent.
+You must recognize and accept the universal principle of entropy - which tells us that everything naturally disintegrates over time.
+And finally and most importantly, you must work hard to embody and teach the virtues of hard work, humility, and knowledge - understanding that you and all your employees must practice these virtues constantly and continually.
+A Shortcut That Has Worked Well for Others
+To accelerate your progress in changing your business you should read (or reread) Ready, Fire, Aim. It is a book that sold very well and also (most importantly) helped lots of people build successful businesses. I am happy to say I have heard from many of those people. Some of them built good but modestly sized businesses, and some grew multimillion-dollar growth machines.
+In Ready, Fire, Aim I explain my thesis on business growth: that most entrepreneurial businesses go through four distinct stages, from infancy to maturity.
+If you are at risk of being a one-hit wonder, it is probably because you have had great success in Stage One of your business but never advanced to Stage Two.
+To become a Stage Two growth machine, you must change the primary objectives of your business. In Stage One, the primary objective a business is to find the optimal selling strategy for product one. In Stage Two, the primary objectives are two: to develop a culture of innovation and speed.
+As I say in Ready, Fire, Aim:
+It probably took you several years to produce and market your first product. To take your company to the next level, you will have to move much faster-at least twice as fast as you are comfortable moving right now.
+I'm talking about increasing the velocity of innovation. This includes the time it takes to brainstorm, develop, test, and produce new products. In Chapter 10, I talked about how you can get better at coming up with good ideas. But I also pointed out that if you don't execute good ideas quickly, they will degenerate over time.
+Innovation matters. And so does speed. Combined, they give your business extraordinary growing power. But to change your business from a Stage One enterprise to a sustainable growth machine, you must practice and teach the virtues of hard work, humility, and learning.
+====== How to Start a Million Dollar Business for $25,000 #23: Aim To Grow One Decimal Point At A Time ======
+What follows is only for some readers: those who want to become really, really rich. Billionaire rich.
+Be forewarned. If you are in that category, you may be disappointed by what I'm about to say.
+But read it with an open mind. Because it is the only possible way to increase your wealth in any serious way.
+I've had the following conversation more times than I would care to remember:
+Aspiring Billionaire: I need you to help me.
+Me:
+What can I do?
+Aspiring Billionaire:
+I want to grow rich!
+Me:
+Okay. Have you read any of my books?
+Aspiring Billionaire:
+Yes, but they're about becoming a millionaire. I want to become a billionaire!
+Me:
+You do? That's too bad.
+Aspiring Billionaire:
+Why do you say that?
+Me:
+For one thing, it's a very silly goal.
+Aspiring Billionaire:
+Anything the mind can conceive and believe, it can achieve!
+Me:
+I can conceive being an IPL player, but I know I can't achieve it.
+Aspiring Billionaire:
+That's because you don't believe it!
+Me:
+You are so silly. And would you stop ending your sentences with exclamation points?
+Aspiring Billionaire:
+You are making fun of me.
+Me:
+Yes
+The truth is that even if I took these guys seriously, I couldn't help them. You see, I don't know how to make billions. I'm not sure anyone does.
+Every year, we read stories about clever young people who create online businesses that they sell for a billion dollars or more. There aren't many such stories, but they are so dramatic that they seem to be omnipresent.
+When I was starting out, my wealthy role models were people like John D. Rockefeller, Henry Ford, and Jean Paul Getty. These guys became very wealthy by working long and hard for decades, building huge companies that dominated their markets.
+I consider myself fortunate to have had those people as role models. Why? Because the chances of becoming a billionaire the 'new' way are about the same as the chances of becoming a professional sports star. One in a million.
+The truth is this: It takes a lot of effort to become rich. And it takes time.
+It took me about four years of concentrated effort to become a millionaire...and another several years to acquire a net worth 10 times that.
+But even then, I didn't know how to make millions. I just knew how to make more money one decimal point at a time.
+I worked my way through college by starting and running small service businesses. And almost all of them billed in increments of hundreds or thousands of dollars. As a result, I could only conceive of and believe in finding ways to add to my income a few thousand dollars at a time.
+With, for example, my business constructing above-ground pools, I could (and did) develop an automated procedure for building such pools that any unskilled laborer could follow. This could (and did) allow me to increase the number of construction crews working for me. And it amounted to thousands of extra dollars in profits...not millions.
+was the year I decided to get rich. Having graduated from college and returned from a stint in Africa as a Peace Corps volunteer, I was working as an employee of a publishing company. As an employee, I could imagine getting big raises. But since my base salary was only $35,000, I couldn't imagine how I could increase that sum by more than about 10% per year. Ten percent was $3,500. In other words, I still just knew how to increase my income by thousands of dollars at a time.
+Then, after my big decision to become rich, I knew I would have to do something to increase my income by more than $1,000 at a time. I realized that I would have to change the way I worked for money. So I learned to write advertising copy, and I became my boss's most valuable employee. Several months later, he gave me a 100%-plus raise.
+I had learned to increase my income by $10,000 increments. What was the next step? To learn how to get richer, $100,000 at a time.
+I achieved this by becoming a business owner - by inventing a new product and convincing my boss to give me a 25% stake in it. This new product made more than $200,000 in profits within months.
+I spent the next 10 years learning how to build a serious business with the man who was now my partner. Our business went from $1 million to over $100 million in revenue...$1 million at a time.
+Over the following 10 years, I started many other businesses and I invested in real estate. My wealth grew by tens of millions. But, for the most part, it was with a series of $1 million deals. And though the main business I worked with at the time grew in $10 million increments, my compensation was always a smaller portion of that. So I can't say that my knowledge of getting rich has ever gone beyond earning $1 million at a time.
+By diversifying, I was able to increase my overall income by $3 million-5 million per year. (Uncle Sam always took his 40%.) That was (and is) a lot of money. I realized that I was earning enough to fulfill any need I could possibly have. So I turned my attention from increasing my income to building sustainable wealth. Looking back, I know I made the right choice.
+Getting rich $1 million at a time was and is enough for me. And it should be enough for anyone.
+So even if you have the billionaire bug, you should follow the process I've been describing: getting rich one decimal point at a time. You should do that because it's the only practical and reliable way of becoming wealthy.
+You do it step by step - first getting richer by thousands, then by tens of thousands, then by hundreds of thousands, and then by millions.
+The process might mean taking steps like these...
+If you are a salaried employee, you can increase your income by becoming the most valuable employee in your business. This will increase your wealth by tens or even hundreds of thousands of dollars at a time - though it may mean switching employers as you go.
+If you are a professional or small business owner earning six figures, you can increase your income in $100,000 increments by replicating your business.
+If you own a business that is making millions of dollars per year, you can keep growing your business and your revenues.
+I go into detail on all of these in my books Automatic Wealth, The Reluctant Entrepreneur, and Ready, Fire, Aim. And I cover them further in other essays as well.
+Meanwhile, there is one piece of advice that I have for everyone who wants to become rich - millionaire rich or billionaire rich: Develop a financially valuable skill.
+A financially valuable skill is a skill that will help you climb the wealth ladder one step at a time. It is a skill that will put you in the mix whenever the opportunity to acquire wealth appears.
+There are not many financially valuable skills. In fact, there are basically only four: marketing, selling, coming up with profitable ideas, and managing profits.
+Learning how to sell is probably the most important of these skills, because it will allow you to sell your ideas, as well as the idea that your ideas are valuable. You will need this skill in just about every possible business situation.
+Marketing is also a very important skill. It will allow you to sell your company's products and services to an ever-expanding market. It will also allow you to generate more income from the customers you have.
+Learning how to come up with profitable ideas is the most difficult skill to acquire. Many wealth builders never learn this skill. They simply use their sales and marketing skills to convince idea generators to sell them their ideas or work for them. If you don't feel you have this skill, don't worry. You can still become wealthy if you have some combination of the other three skills.
+The final skill is managing profits. This is essential for building wealth. Many people develop businesses that bring in significant revenues. But because they lack the skill to create profits, they never get beyond earning a decent living. They never get rich.
+The good news is that learning how to manage profits is the easiest skill to acquire. You simply must commit yourself to it and pay attention to your business. The opportunities to increase cash flow and cut costs are always present.
+So there you have it: several more tools for becoming as rich as you possibly can. Learn one or several of these financially valuable skills and then learn from them how to increase your wealth one decimal point at a time.
+====== How to Start a Million Dollar Business for $25,000 #24: Become a Foodpreneur ======
+In this report we will help you start your own food service business, which is one of the most popular branches of entrepreneurship. The food sector could seem deceivingly simple, but don't be fooled.
+In the sixth essay of How to Start a Million-Dollar Business, Mark Ford says:
+One of the most common mistakes made when choosing a business venture is thinking you know things you don't.
+For instance, you might enjoy dining out. You eat at restaurants several times per week. In fact, you've dined at some of the finest eateries in the world on your travels. It seems only natural that your passion for great dining experiences and all the time you've spent in restaurants would lead to opening a restaurant of your own...
+The problem with this thinking is that you are going on 'outside knowledge.' Your experience, vast though it may be, has been as a customer, not as a business manager or owner. Your experience feels deep and certain. But it isn't. It's specious. And rather conceited.
+I am not immune to this mistake myself. I once partnered in a restaurant because I had the hubris to think that my own dining history qualified me to run one. And a colleague, George, an architectural designer, almost helped me make it worse.
+Like me, George thought he knew the restaurant business because he had spent many years frequenting fine dining establishments. When I gave George a tour of my place, he suggested doubling the size of the kitchen. My partners and I were keen on the idea because we also thought the kitchen was too small.
+Fortunately, I got a couple of expert opinions. I hired two friends who had been running restaurants for years to do an analysis. Imagine my shock when their report showed that the present kitchen was fully capable of handling three times the traffic we expected to have!
+If Mark Ford himself faced difficulties with the food service business, you can imagine how deceptive it is. Here we provide useful tips to help you understand what you need to know to be successful in the food sector...especially if you have no experience.
+The food service industry
+The food service industry is one of the strongest and most popular among entrepreneurs. Franchises like Dominos, McDonald's, Cafe Coffee Day have penetrated into almost every town of the country.
+According to a report by the National Restaurant Association of India, the growing trends of eating out have propelled the food industry to more than $50 billion.
+Risks
+The food segment is always one of the first choices for entrepreneurs, because there are many business models and opportunities to explore. However, they do not take into account that there is a lot of competition; neither do they plan how to operate their business.
+Also there's a great risk of dealing with people's lives. Food poisoning is a serious matter. When opening a food business, you have to keep in mind the local, state, and country regulations. Check out the rules and regulations of The Food Safety and Standards Authority of India.
+The economy is also a key factor. People love to eat, but in times of crisis they choose to eat at home more often. Layoffs in the times of recession also affect the restaurant industry. Another important thing to consider is the effect of inflation in the cost of products. And, frankly, it is not feasible to increase the prices to the consumer with the frequency and fluctuation of inflation.
+Getting the job done
+Here are some recommendations from experts:
+Before you begin you should understand each aspect of the food business (management, hygiene, shopping, etc.) or look for a partner who has experience in the industry. You can also take some course to understand the specifics of this industry.
+Focus on your target audience and value proposition. In this way, you will develop the appropriate menu and know how to meet consumer needs. Beware of fads and assess the size of the consumer market.
+Now you can choose a location for business and build the necessary structure. Too often people choose a space only to realize that there municipal zoning rules that forbid restaurants in the area or that the infrastructure is inadequate (water, energy, etc.).
+It is necessary to think about the route of the food from your supplier to the customer's plate. Does the supplier maintain proper hygiene in producing and storing food? Where else does he supply products? It is always
+Experts suggest to have at least three suppliers and visit them to know the production and processing of the products. When you receive the food, you need to check it and make sure you have received what you paid for.
+Scout for good employees and train them well. You must realise that having good workforce in a food service business is as important as the meal you are going to serve. They can make or break your business.
+Know exactly what your costs are and price food accordingly.
+Have an electronic management system to control expenses and cash flow.
+Trends
+There are three strong trends for you to keep an eye on.
+Health: These days more and more people are getting concerned about health. Organic and vegan are common words that people utter and include in daily lifestyle. Serving healthy meal is a strong trend that is getting popular nowadays...and it will not go away soon.
+Experience: Do pay attention to your ambience and how the customer is being treated. Remember that food is only a part of the experience the customer is paying you for - ambience, service, and hospitality are equally important.
+Convenience: Provide home delivery, proper packaging, online ordering services, and everything that would add to customer's convenience.
+Expectation and expansion
+Do not expect short-term results and try to keep a cash reserve for setbacks. If after six months you keep losing money...if you've tried everything you could...and if you've used up all your cash reserves - do not put your personal reserve into your business.
+It's important to plan everything really well so you know how much money you need. When you set goals you can track results. If the situation is bad you will be able to identify the problem and try to find a solution.
+But what if the business is a success?
+Then you need to understand what is your differential advantage. Your strengths will be the foundation for establishing the business model for expansion.
+An inspiring case
+In 2000, RP and her three business partners had an electronics import company. However, the unfavorable exchange rates began to derail their business. But the partners found an alternative. 'We believed that the food industry is less susceptible to periods of crisis so we decided to bet on it,' says RP.
+However, none of the them had any experience in the industry. 'This forced us to do a lot of research. But our knowledge of entrepreneurship helped us think about how to develop products,' RP explains.
+They used their own investment to create the first unit of a diner and only closed the electronics import company when the diner was already functioning.
+The first store was near McDonald's. But never competed because the concepts were different: The American franchise is a fast food chain, they made sandwiches.
+But what went right and what when wrong in the beginning?
+Hits: the product idea was very good and innovative and had full acceptance from the public.
+Misses: the product was advertised to low income audiences when it should be aimed at higher income audiences.
+The business was going well (the restaurant had over a thousand customers per weekend) and soon opened a second unit. 'We expanded because we realized that we had many customers and could no longer could meet the demand,' she says. Over the next seven years, they opened seven more units.
+In the eighth year, they decided to franchise the business. 'I had no knowledge of how the franchise system worked, but we were approached by people interested - it was an option to continue growing, because we had no more capital for expansion.'
+'Even in a standardized way, working with food is different. Each business unit is a unique challenge, because of the local spot and qualification of the franchisee. That is why it is so important to understand all aspects of the operation,' RP further adds.
+A few tips from RP:
+'The challenges of working with food are huge, because in addition to all the difficulties that any business faces (such as major competition, inflation, labor costs, etc.), there are also the very serious issues of health surveillance and food safety. A poorly run restaurant without well-trained employees can lead to the death of a costumer.
+'Having a good team is critical, because you depend on your employees to make the perfect dish for customers. Unlike a shoe store, where you can just replace the product, a restaurant doesn't usually give you a second chance. Be prepared to work on Fridays, Saturdays, and Sundays...when everybody is having fun.
+'The advice I would give someone who wants to invest in this industry is to first look for a good location, in line with the objectives of the restaurant and its target audience; to invest in a good team and to keep in mind that you need to have a lot of passion for the business. You will only make progress after a lot of hard work and many, many weekends spent in the kitchen.'
+Conclusion
+As we have seen, the food market has risks and benefits. But now that you know the basics, you can build your success story.
+Get to work!
+====== How to Start a Million Dollar Business for $25,000 #25: Best Way to Get Funding for Your Business ======
+When it comes to attracting potential investors, it takes more than an idea - even if it's a really fantastic idea. You also need to prove that your idea has legs by turning it into a working model.
+But then what? Once you've got a working model, where do you go for the money you need to turn it into a business?
+In general, there are four sources of capital: venture capital firms, government schemes like the Startup India Standup India one, commercial banks, and private - nowadays also known as angel investors - or partners.
+For the average entrepreneur, venture capital isn't a possibility. Paul Lawrence explains in an article 'Raising Capital for Small Business Ventures':
+Yes, some venture capital firms will invest in new businesses, but such businesses are usually involved in technology or some other high-growth area. Frankly, for most small businesses, venture capital isn't even an option. It's rare for a small-business concept to have the kind of mammoth payoff venture capitalists look for.
+Plus, the cost of doing business with these companies is high. It's basic economics. Their risk is high, so their reward must also be high. Even if you were to interest a venture capital company in your business, you'd be aghast at what they'd want in terms of their ownership position.
+What about government schemes supporting startups? Well, the Indipreneur Launchpad Course, that you have access to as a WBC member, talks about this in detail in two of its reports in the resources section titled: The 11 Ways to Fund Your Venture and What Kind of Legal Entity Will Your Startup Be?
+You can also find out if your business idea might be a candidate for government money by checking out its website (http://startupindia.gov.in/) and understanding the requirements your business needs to have before you apply for funding.
+As for getting money from a commercial bank, I can make this short: Forget about it. The only way a bank will lend you money these days is if (a) you have excellent credit and (b) you can collateralize your loan with assets. If you have good credit and tons of money, you don't need a bank loan. You can loan yourself the money.
+This brings us to the fourth and final option...
+Finding a Private (Angel) Investor or Partner
+At first blush, private funding seems like the least likely way to go. You may not know anybody who has money. Or if you do, you may not be willing to risk damaging the relationship by mixing it with business.
+Some business experts advocate hitting up friends and family. I never did that because my personal relationships were always more valuable than my desire for money. But I did ask business acquaintances to invest with me. My relationships with them were based on money, so I didn't think it was inappropriate.
+One of my first businesses, a house-painting service I started with a buddy when we were still in high school, required a very modest investment. About $400 to pay for ladders and tools. We didn't have the money, so we got a job with a painting contractor and saved up to buy what we needed. It took six months - and during that time, we were making all sorts of good contacts. We were getting to know paint wholesalers, equipment rental providers, and even future customers.
+When we were ready to go off on our own, we spent a few weeks knocking on doors and offering discounted service. Before we knew it, we had all the work we could handle.
+Years later, I funded an idea I had for a new publication by asking my boss if he wanted to invest in it. When he found out I had no money of my own, he took 75%of the deal and made me sign notes to repay him the 25% that I was liable for. I was a little unhappy with the arrangement at the time - but eventually, I realized he was being very generous.
+Once I recognized that when it comes to funding 'good ideas,' money talks, I switched strategies. I decided I'd never attempt to sell an idea again. Instead, I'd sell a working model. Nowadays, when I'm looking for capital, I wait until some version of my idea has already proven itself to be profitable. At that point, I can go to any good businessperson and show him the numbers. Sales and cash flow can persuade in a way that market research and computer charts can't.
+The Difference Between Getting a Loan and Taking on a Partner
+Let's say you have proven your idea in the marketplace with a working model. The next step is to figure out whether you want an investor or a partner.
+The advantage of taking on debt (getting a loan from an investor) is that you do not give up equity in your business. It can still be 100% yours. The disadvantage is that you will owe the money even if the business fails.
+The advantage of accepting investment capital (taking on a partner) is that you don't have to pay the investor if your model doesn't work out in the bigger world. A second advantage is that you will have someone to bounce ideas off. (The best investors are successful people in the industry you are entering.)
+In between getting a loan and taking on a partner, there's room to play. You might be able to structure a deal that has the best of both worlds - a loan that gives the lender a limited (though significant) upside if the business takes off. To get that, you would have to make some concessions. You may have to pay back some of the loan if the business fails, for example. Or you might take, say, 50% of the salary the business intends to pay you and use that to pay down the loan over time.
+Ultimately, the guy with the money decides what the deal is. You'll do better negotiating your stake if you present a very exciting and trustworthy picture of the business's potential. And that will depend on having detailed financial reports on costs and cash flow and profits, if there are any.
+Prepare to Make the Pitch
+Before you can contact prospective investors or partners, you need to figure out how much money you need. Come up with three scenarios: ideal, less ideal, and minimum. Of course, there will be advantages in having the ideal amount of capital - but don't get your heart set on that. Chances are you will get option two or three. Be prepared to work with either.
+In making the pitch, follow Paul Lawrence's SIPE process - Solicit, Interest, Persuade, Execute:
+Solicit
+Begin informally. Casually ask your prospect, 'If I happened to come across an interesting business opportunity, would you like to hear about it?'
+It's important to note that you're not asking him if he would invest in a business, but if he'd like to hear about potential opportunities. Since he won't feel that he's being pressured, it's more likely that he will give you a positive response.
+You also immediately rule out people who have no interest in any business proposals... without putting them (or you) in an uncomfortable position.
+Interest
+Give your prospect a one-sentence description of your business. A long-winded explanation can sound like you don't have confidence in your business idea or that you don't really know what you're talking about. You then follow up with an estimate of the business's profit potential and a couple of supporting statements that provide strong reasons to believe it is viable.
+Persuade
+If the person you are pitching seems interested, set up a second meeting to present him with a written proposal.
+Make it short and to the point, no more than eight pages. If you are presenting it to the right person - someone already successful in the industry - he will not need more than that.
+The proposal should have two goals:
+First, to prove the substantial profit potential of the business. Rely heavily on actual numbers. (If possible, have the numbers prepared by a neutral accountant.) Based on your working model, estimate your gross revenues, expenses, and profits over a three- to five-year period. If it adds up to a healthy estimated net profit, you're off to a good start.
+Second, to demonstrate the low-risk nature of the investment. Although you can't ethically or legally guarantee that an investor won't lose his money, you can explain why there is a good chance he won't lose it. Since much of your evidence is coming from a working model, this should be easy to do.
+Although Paul doesn't include this in his SIPE formula, I'd add this: Put some of your own money into the deal. Even if you haven't got a lot, you should have something in it. As a rule, I never invest in a deal unless my partner has some 'skin in the game.' The money you put into making the working model counts. But pledge some more money, too.
+Execute
+Once your prospect agrees to the terms you've negotiated, arrange for a third meeting to sign a 'deal memo' (or in India - the MOU-Memorandum of Understanding) - a basic outline of your understanding. The main reason to have a deal memo is so that, in the future, there will be no debate as to what was originally agreed to. If your deal is large or complicated, you may want to have a formal contract. But in many cases, a deal memo is strong enough to be legally enforceable.
+If none of the above works, don't beat yourself up about it.
+Face the possibility that your idea might not be as good as you think. Or it might be good, but not designed or formulated properly. Or it might be good and well-designed, but too advanced for the current market. Or perhaps the terms of the deal you wanted were not perceived as being fair. Resist the temptation to view the people who said no to your idea as fools. See them, rather, as helpers.
+If you still feel strongly about your idea, don't give it up. But do go back to the drawing board - back to the basic questions, such as:
+Is there really a proven market for this product?
+If so, is it growing, flat, or receding?
+Does my product idea add something new/better/less expensive?
+Is it priced competitively?
+Do I understand how to reach customers cost effectively?
+And so on. Go back to spending 80% of your time making money, as you've always done, and spend the other 20% rebuilding your idea until you feel confident that this time around, you'll get your money.
+====== The Virtue of Laziness, Part 1 ======
+"What the Hell, I Might as Well Get Rich"
+The desire to work less is not a vice but a fundamental aspect of emotional intelligence. When combined with commitment, persistence, and common sense, it creates economic efficiency, an essential component of building great wealth. - From Principles of Wealth by Mark Ford
+The unpaid bills are stacked next to the unwashed dishes. You've been short about Rs 30,000 per month since retirement. You need something to fill that income gap - some sort of moneymaking scheme that's feasible, flexible, and profitable. It can't be a financial investment because you've got no more savings. What to do?
+Before going to sleep, you check your email. You see an advertisement, but before you delete it you notice something in the message about extra income. "What the hell," you say; you decide to give it a try.
+So you join something called the Extra Income Project (EIP). The author of one of the reports, a braggart rich entrepreneur named Mark Ford, makes the case that someone like you should start a part-time "service business."
+"Compared to other side businesses, a service business has the lowest barrier of entry," he writes. "It can be grown with minimal marketing and the simple application of quality work." You like planting flowers and trimming bushes and just hanging around plants. You have a thriving balcony garden, and some gardening tools too. So you choose to try becoming a home gardening consultant.
+Following the EIP report, you spend Rs 150 to print 500 colourful flyers advertising your new business. You alter one of the suggested pitches:
+Landscaping With Love! I'll Make Your Home Come Alive with the Best Plants For Your Health and Serenity, Guaranteed First Service Only Rs 500!
+The Rs 500 offer is an advertising trick - a "loss leader," to prove what you can do. It works. You get six responses on week one and land two gigs. By week four, you have Rs 15,000 worth of weekly contracts. Because you are good, you get your work done in seven hours. Your Saturday is now a workday, but you're making an extra Rs 60,000 per month.
+Your work is good, so you start getting referrals. You can, if you want, make another Rs 20 or 30,000 working Sundays. That's money you could use towards a new car. You'd have some left over for saving.
+But do you want to work seven days per week? Hell no. You're 52, not 22. You want the money but not the work. You hatch a plan...
+To Hire or Not to Hire, That Is the Question: Do Less Work, Make More Money
+You're making an extra Rs 60,000 per month running your own part-time home garden consulting business on Saturdays. You're tempted to expand it, but you aren't willing to work seven days per week.
+There is one obvious solution: Hire help. But is it worth the hassle? You sit down with a pen and a sheet of paper and make two lists, one marked plus and one marked minus. On the minus side you add things like "the trouble of finding someone" and "managing people" and "figuring out the right compensation" and so on. The more you think about it, the longer the "minus" list grows. And yet you can't think of anything to add to the "plus" aside from "do less work" and "maybe make more money."
+You think, "This is exactly why I never wanted to have my own business. It's just one long list of worries and concerns. Why is that Mark Ford idiot so hot on side businesses?"
+For now, you decide against hiring someone else. Instead, you accept a few more jobs to do on Sunday mornings. You'll make another couple thousand per week, and still have Sunday afternoon to rest. A month later you realize that you didn't take into account rainy days and the occasional "Can you come back tomorrow?" You are making more, but working every sunlit hour of every weekend. It is wearing you down quickly. It's even affecting your weekday work performance.
+You think about the math. Doing everything yourself, you're making about Rs 1,000 per hour. You can hire someone to do the grunt work and pay him/her Rs 150-200 per hour. That difference, that Rs 800, would be your company's gross profit. There would be some additional costs you know, like accounting. But on an hourly basis, that couldn't be more than a couple hundred.
+That leaves you with a gross profit of around Rs 600 for each hour's work. That's Rs 400 less than you are making now, but overall you'd be making about more per month while personally working the same number of hours.
+"This doesn't feel like laziness," you think. "This feels like common sense. Maybe that Ford guy is right."
+But how do you make this work? Where can you find a good worker?
+====== The Virtue of Laziness, Part 2 ======
+**By Hell or High Water, You're Going to Work Less**
+In your home gardening business, you've moved beyond what Mark Ford calls the "self-employment business" stage. You are ready to make more money by working less. In other words, you are ready to hire, train, and manage employees.
+You know from one of my essays in the Extra Income Project that the quality of person you hire is one of the most important factors in making your growing business successful. Since you're gardening, not curing cancer, you figure you don't need an educated person. You need a hard worker, someone willing to do manual labour 8-10 hours per day. You also need someone who will be pleasant to work with and treat your clients respectfully.
+You ask around at your job and your building. Someone has a brother looking for a part time job after college - maybe he would like to try. You call him in, but he doesn't want to work in some neighbourhoods, at some hours, in some buildings... his list goes on. You forget about it. Sounds like he doesn't want to work at all.
+Then you see someone working in a garden. He's not young but looks strong and happy. He knows plants, he looks like a hard worker, and has a pleasant manner. You take a chance. His name is Ramesh and he asks for Rs 6,000 a month for part time work. You offer him Rs 10,000 and he works hard and never misses work.
+A month later your little weekend landscaping business is getting you an extra Rs 100,000 per month - after Ramesh and expenses. You have that new car. You've moved into a nicer apartment, and you're banking money for the future. But somehow you are still too busy. Between working manually, drumming up business, and managing Ramesh, you have no time on the weekends for enjoyment.
+"I want to work less because I'm smart, not lazy," you say, looking at your tired reflection in the mirror on Sunday night. And then you make a pledge: By hell or high water, you will find a way to work no more than eight hours next weekend.
+The next morning you wake up excited. You think you know just what to do...
+**Crunching Numbers, Hiring Brothers**
+It's breakfast when you put pencil to paper to crunch some numbers. Starting your own home gardening business and working for yourself was lucrative. By "hiring" affluent customers and being efficient, you were making over Rs 1,000 per hour.
+Employing Ramesh was a great idea, although it added to your expenses, but not by that much. Your idea was simple: Instead of working alongside Ramesh, you would hire a second employee to work with you. You'd still make about the same - minus the labour charges - but you'd have the weekend mostly free!
+And what if you hired two more people? You could start accepting the new clients you've been turning down, covering more ground in the same span of hours. The numbers in your calculation start going up. Though of course there would be some more work on your part at first: posting more fliers, making appointments, initial consulting sessions... You ask Ramesh if he knows two people who are good and reliable workers. "Yes," he answers. "Sandesh and Sunil - my brothers."
+Nine months later your weekend business is no longer a weekend business. You have three two-man crews, each working six days per week. Your gross revenue is now Rs 5 to 6 lakh per month. Expenses are up. You've had to rent two trucks, more gardening equipment, and you're renting a small warehouse outside of town to store all the equipment. Ramesh is now making Rs 12,000 per month and his brothers Rs 10,000. The good news is that you are personally netting over Rs 300,000, which means you are living well and saving serious money. You can see how, if this continues, you are going to be "sort of rich."
+The bad news is that running a growing business is more complicated than you ever imagined. There are bills to process, forms to file, legal and tax issues to deal with. Then there are the people problems: problem employees and difficult customers.
+Once again, you are working too hard. But you have a solution, something you've been dying to do for a long time...
+**The Beginning of the Rest of Your Wealth-Building Career**
+Your landscaping business is growing bigger and faster than you ever thought it would, and the amount of work and attention it requires is eating up more and more of your day. So you make a decision to finally do something you've been wanting to do for a long time. You go into the 9-5 job you've kept this whole time and step into your boss's office. You give him the good news. "I'm firing you," you say.
+"Huh?" he replies. You leave the office with a big smile on your face, as big as Ramesh's smile was when you increased his compensation to Rs 15,000. Your newfound extra time means you won't have to work weekends any more. In fact, you can't imagine having to work past noon during the week either.
+Yes, you are giving up the steady paycheque that your cranky old boss used to pay you. But you are still making more than twice that with your gardening business, which is still growing!
+A year later the business is considerably larger. You now have six three-man crews, are doing building gardens and community gardens and not just home gardens, and the gross billings are approaching a crore per year. You hired an assistant at Rs 30,000 to do most of the office work and your niece as an intern on a part-time basis to help with the sales, and listing your business online. (She's thrilled to be getting the real business experience while she gets her commerce degree, and getting paid for it). Other expenses - legal and accounting mostly - have also grown. Still, your net profit is more than double your salary and you are working less - only four hours per day, five days per week, with your weekends free and clear.
+While on a family holiday in Paris one summer evening, you can hardly believe it's been less than four years since you read that Extra Income Project report and decided to spend Rs 150 on those flyers. Your success, you realize, came not so much from the courage to take a risk, because you never risked anything more than Rs 150 and some extra time. Your success came from persistently figuring out how to do less work than you were doing!
+You suppose Mark Ford was right when he wrote, "The desire to work less is not a vice but a fundamental aspect of emotional intelligence. When combined with commitment, persistence, and common sense, it creates economic efficiency, an essential component of building great wealth." The only thing left to do, then, is decide what you want to do with the wealth you've earned.
+====== How to Start a Million Dollar Business Series for $25,000 #26: How to Make Business Deals That Last ======
+If you think making good business deals is all about driving hard bargains and writing binding contracts, you are thinking with half your brain.
+There are times when being tough and tenacious is necessary. But there are also times when you have to be soft and flexible, too.
+Like everything in life, being a good dealmaker requires both the yin and the yang.
+Yes, you may be able to get what you want by acting the bully or by strategically backing the other person into a corner. But that sort of approach to dealmaking can and probably will backfire on you - if not immediately, then almost certainly over time.
+JSN, the man who first taught me (and helped me) get rich, was a ruthlessly 'successful' negotiator and was widely known for his ability to get business associates to agree to his terms. And he was quick to follow up on those agreements with iron-clad contracts that bound them to those deals. The combination of the two almost always resulted in an advantageous position. Later on, after the ink had dried, people often regretted what they had agreed to. JSN felt that was "on them." It never felt right to me.
+By watching what he did, I came to understand how he was so effective in negotiating deals. It was a combination of being prepared and employing negotiating "tricks" and sheer force of will. But when it came time to make my own deals, I rarely followed his example. Partly, as I said, because it didn't feel right, but also because I saw the long-term effect of his approach, which was generally bad.
+What happened was this: In four cases out of five, the deals fell apart after it became clear that the other person had gotten the short end of the stick. This was true even though the contracts were very clear.
+Business partners who felt outmaneuvered found ways to circumvent the agreed-upon terms. Or they simply reneged. Battling it out in court? JSN tried that once or twice. It was very expensive and ultimately fruitless.
+Meanwhile, with each dispute, his reputation as someone 'you don't want to do business with' widened. Eventually, his window of opportunities got very narrow.
+I'm not against preparation and strategy when it comes to negotiating deals. But the goal should always be to make win-win deals, not to 'take care of number one.'
+And that is not even enough. If you want to have the best success at making great business deals, you have to be able to change the deals you make if and when, for whatever reason, they become unfair to your partners.
+I've done that many times. I've taken less and given more when it was clear to me that the original deal was no longer fair. In most cases I made those adjustments before they were asked for. My reasoning was simple: If I wanted the deal to last, then I had to demonstrate at all times that I could be fair.
+What I'm saying, in short, is this: Negotiate only win-win business deals and be prepared to change them if and when they become unfair to your partners.
+You would be right to wonder whether, given my views on making deals, there is any reason at all for written contracts. You may think, 'Wouldn't it just be better to make all relationships oral, non-obligatory, and temporary?'
+The answer is no.
+I do believe in using contracts. But their purpose should be primarily to define expectations and anticipate change, not enforce whatever decisions seem right at the time.
+Here's an example:
+You and I come together to start a business. I have the money and the knowledge to get the business going, but I don't have the time. You have the time, but neither the money nor the knowledge.
+The natural course of this sort of business relationship is going to be one-sided one way for several years...and then one-sided the other way for many years thereafter.
+In the beginning, I'm going to be providing most of the value - in terms of money and knowledge. Once the business has matured, you are going to be providing most of the value. In fact, I'll be providing little if anything at all.
+Still, we might say that a fair deal for such a situation, assuming you are going to be paid a salary from the business, is that we are going to be partners for life. I couldn't get the business going without you, and you would never be in the business without me. I am giving you the chance of a lifetime, and you are giving me the means to add to my wealth.
+In such a case, we might have a contract that lays out the framework for a 'fair' deal. We might, for example, allocate a salary to you from the beginning that increases, according to some arms-length parameter, as your skills improve. In addition, we could include a bonus based on the company's profits. The equity and profit distribution could be 50/50.
+This is a deal that will seem generous to me and fine to you when we first make it. But years later, when you are doing all the work and the business doesn't need my money or knowledge anymore (when, in fact, your knowledge will have exceeded mine), the 50/50 part may no longer seem fair.
+That's why you have a written contract instead of just a handshake agreement. You negotiate for fairness in the beginning - and you use the contract later to remind you of why you thought the deal was fair.
+Memorials, Not Guns
+MT has written more contracts for me than anyone else. He's not only one of the most capable attorneys I know, he's also a great natural businessman. Here's what he has to say about contracts:
+Contract law is more esoteric than you might imagine. Judges first must ask (and this is the standard contract question), "Did the parties have a meeting of the minds?" In my law school days, I thought to myself that this sounded more like Star Trek than what I thought law would sound like. But it's true: For a contract to be valid, it must first show that there was a "meeting of the minds." And this means your language cannot be ambiguous. The terms must be clear. The exit strategies must be straightforward. The payment terms cannot be based on conditions that are unclear. In short, clarity is the key. If not, the other side says, "Well, Your Honor, I understood the language to mean this and not what he said." And if the language is unclear, your contract may not be a contract after all. The judge may say, "Well, there was no meeting of the minds here, and I can see why - because the language was ambiguous. I hereby rule the contract null and void, since it was never truly formed."
+As for creating one-sided contracts and thinking you're getting away with something, I could not agree more with Mark Ford. Legally, a one-sided contract only leads to breaches and litigation. Make a contract clear and fair, and you've got yourself a good deal. In the end, the process of signing a contract is really just a way to ensure that each party understands the deal. It's a 'memorial,' not a future gun. Memorials make money. Guns kill.
+Three Things a Good Contract Must Have
+What I said about formal business contracts applies to informal contracts, too.
+Say you make a deal with your employees: Sell 100 tickets to the conference and we'll take you to Las Vegas.
+It's a great promise. And it serves its initial purpose of motivating them. But you have to clearly articulate the deal - and put it in writing. (Are those fully paid tickets? What about cancelations? How many days? What kind of hotel? Who pays the mini-bar? And so on.)
+If you don't do that, the original incentive, which was meant to produce sales and increase morale, could actually backfire.
+So when it comes time to make an agreement, here are four things a good contract should include:
+A clear explanation as to why the deal, as agreed to, is fair, along with the principles of fairness that govern the deal.
+Clear and detailed examples of who gets how much for doing what.
+Contingencies for when things change - as they inevitably will. A well-written contract should serve as a very useful tool to make any adjustments that are necessary. (Assuming, that is, both parties are still operating in good faith.)
+A clear description of what would terminate the agreement.
+Make fair deals - and document them in writing. And remember that the purpose of a contract should never be to enforce an unfair deal...but to remind you of how and in what specific ways you thought the deal was fair in the beginning.
+====== How to Start a Million Dollar Business Series for $25,000 #27: The Most Powerful Way to Break Into a New Market ======
+Let me tell you a business principle that is behind many - if not most - of the world's America's greatest business fortunes.
+It is amazingly obvious but often ignored. Yet it is the most powerful and reliable way to break into an existing market and make your small business grow.
+Here's the secret I'm talking about: In an established market, nothing sells better than price.
+If you have a relatively good (or better) product and you want to sell into a strong, competitive market, then you would be wise to sell your product at a much better (i.e., cheaper) price than the competition...
+Let's look at history. Consider how many billion-dollar fortunes were created by cheap pricing.
+Rockefeller dominated the oil industry by buying up production and delivery. Doing this allowed him to offer oil and gas at prices his competitors couldn't touch. By keeping the prices of these fuels relatively low during his reign, Standard Oil increased the size of the fuels market in a huge way. Because oil and gas were cheap, people used more of them.
+Likewise, Andrew Carnegie made a fortune by producing inexpensive steel. Sam Walton is known for his discount stores (Walmart). Henry Ford for making autos within financial reach of the average person.
+To break into a competitive market, you need either (a) a big advertising budget (to establish demand for your product/service) combined with a superior-in-some-way product... Or (b) a way to sell your product/service CHEAP so word will spread on its own.
+While the Tatas and Reliances can use the first strategy, for most small businesses, (b) makes more sense.
+This may seem too obvious to mention, yet you're not likely to find it in business seminars, audiotapes, or marketing books. I simply don't remember reading or hearing advice of this sort - ever.
+I remember when I first got into the newsletter business. I was hired to improve the quality of the newsletters themselves - as editorial director.
+The marketing director had created a growth strategy based on the one used by the large company she came from. She favoured expensive products and high prices. We were going nowhere.
+One day, my boss came into my office to tell me he had fired this woman. I had already decided I wanted to be his most valuable employee, so I was eager to offer to help him do what she did not do: grow the business in leaps and bounds.
+We spent a month studying the market and determined that the fastest-growing area was publishing investment advice. We spent the next few months closing and selling our business newsletters. We replaced them with ones that analyzed and recommended stocks and bonds.
+Since I was new to that world, I couldn't help my boss make better products. But I did conspire with him to make facsimiles of the best-selling investment newsletters at the time and embraced his idea of selling them at a steeply lower price.
+At that time, investment newsletters were selling for between $99 and $198. We came out asking for only $39.
+Our competitors were not happy. But it worked wonders for us. We were profitable almost immediately.
+Within 12 months, the business went from less than $500,000 in revenues to more than $5 million. Five years later, we were one of the largest newsletter publishers in our industry. Our sales topped $50 million.
+Those early newsletters were, frankly, not all that great. I did my best to make them as good as the competition, but looking back now I can see how far from the mark they were.
+Nevertheless, our marketing, which emphasized our low price, won the day.
+How does this apply to you?
+If you are starting a new business or thinking of starting one in a competitive market, you'd be crazy not to make this concept a core part of your marketing strategy.
+Or if your business is mature but flagging, coming out with a super-cheap version of what you sell now (but under a different brand, of course) could be the Gravy Train ticket you are looking for.
+Take a look at your lead product(s) - the one or ones that bring in most of your new customers. Ask how are they priced in relation to the rest of the market.
+If you don't have at least one product that is super cheap, think about developing and selling one. There are problems and pitfalls with selling price, but when it comes to breaking into (or breaking back into) a competitive market, price almost always wins the race.
+====== How to Start a Million Dollar Business Series for $25,000 #28: The Second Most Powerful Way to Break Into a Competitive Market ======
+In a previous essay, I talked about price competition - and why in some situations nothing else is more powerful to the success of a new business. When the market is sizable and competitive, underpricing the competition with a new product is simply the best (if not the most obvious) way of getting the attention (and buyers) you want.
+Today, let's talk about another related business-building secret - one that's nearly as important, yet sometimes overlooked. It is a secret you can use in conjunction with 'selling price.'
+I was reminded of this secret while shopping with my wife in New York City some years ago. She took me to H&M, a very hot European department store that had recently opened in America.
+From the outside, it could have been any one of a dozen upscale stores on Fifth Avenue. Inside, the place was jamming. There were literally thousands of shoppers on the first floor alone. The cash registers were smoking.
+If you have been inside an H&M store in India you will be familiar with this scene.
+Since none of the stores we had previously visited that day were doing much business, I wanted to know why H&M was so packed. It was more than just the novelty of a new store.
+I bumped into the answer almost immediately. Someone brushed by me and knocked me into a mannequin on a pedestal. It was a male figure outfitted in a lemon-yellow papier-mâche-type shirt and lime-green, calf-length parachute pants. Very trendy.
+The styles I was looking at - the materials, the colors, the cuts - were just what you'd expect to see at Gucci, Fendi, or Versace. But when I looked at the price tags, I was shocked.
+Instead of $250 or $300 for the shirt, the ticket said $18! And instead of $150 to $250 for the pants, the price was $13!
+It was one of those wonderful moments of dumb epiphany - realizing in a profound way something that is profoundly simple. H&M entered America the right way: with steep discounts. But they are also selling into a large and growing demand.
+H&M does not feature standard brands. The stylish clothes I saw on the first floor were all trendy knock-offs manufactured in Indonesia. In place of name brands, they sell style - the look of famous designers for a fraction of the price.
+This is an entirely different tactic than that employed by many discount department stores that sell off-brand and out-of-date clothing at discounts. (How many near-empty discount department stores have you wandered through where the clothing is so unappealing, you wouldn't be paid to wear it?)
+H&M took a double-barreled approach: hot and trendy, in-demand products sold for amazingly cheap prices.
+This is not an easy combination to achieve. But it can be done. If you are observant, you can easily identify what products are hot and, if you are clever, you can figure out how to make and sell them cheap.
+H&M's strategy was a bit like what the Japanese carmakers did when they decided to enter the luxury car market. Rather than creating styles of their own or coming up with something mundane like a Japanese Cadillac, the Japanese went right after the world's hottest luxury car manufacturers-BMW, Jaguar, and Mercedes. They knocked them off (both in terms of style and performance) and introduced the Lexus, Infiniti, and the Acura NSX.
+Now Americans could drive the cars they had always wanted but for half price. It was an irresistible offer. The Japanese quickly dominated the market.
+So if you have decided to use price as your entry into a vibrant, competitive market, give yourself a huge additional advantage by shaping your product into something that is currently in strong demand.
+Put differently, resist the egoistic urge to sell something that is 'the best' or 'unique and different.' Instead, figure out exactly what people currently want most... and give it to them... cheap.
+If you can do that, then your marketing will be stronger and cheaper. And when word gets out - and it will - that people can get what they want most for an affordable price, they will come knocking down your doors, like they were doing every day at H&M.
+(I need to clarify one point. By selling into the trend, I don't mean selling things that are ultra trendy. The appeal of far-out, avant-garde stuff is very restricted. If you want to gain market share in a big market, you need to select the big, long-term trends.)
+It seems to me that this strategy applies to most markets at most times. If, for example, you are starting a restaurant on a street where there are four steakhouses, you wouldn't specialize in Turkish cuisine. You'd sell steak, but cheaper.
+If you are starting a travel, tour, or conference business, you wouldn't feature discounted trips to Albania and Pretoria. You'd sell London and Paris and Orlando.
+In every business, no matter how mundane, there are trends. If you are naturally contrary, as I am, you might be tempted to swim against the stream. Don't. Find out what's hot. Figure out how you can sell it cheaper than anybody else. Later on, when you have a strong foothold and solid profits, you can develop higher-priced, specialized back-end products - even lines of products.
+In business, as in the stock market, the trend is definitely your friend.
+====== How to Start a Million Dollar Business Series for $25,000 #29: How to Knock Off Your Employer and Start Your Own Business ======
+Two engineers, Fahri Diner and Xiang-Dong Cao, were the 'brains behind [a] Billion Dollar Deal.'
+They were sitting around after work having tea (I'm making up the details) and complaining about their employer, Siemens Information and Communication Networks in Boca Raton, Florida.
+Cao was saying that their bosses did not properly appreciate them. Diner replied, 'Hell, we should start our own business.''
+'You're damn right,' Cao replied.
+Several months later, they said goodbye to their employer and moved into a dusty warehouse. They telephoned former colleagues until they found two willing to work for them for stock.
+With this meager core of four, they started their own fiber optics transmission company, doing essentially the same thing they were doing before but with a few of their own improvements.
+In a few short months, they had gone from wage-earning employees to brave new entrepreneurs.
+How I Became an Entrepreneur
+My first real job was 'backseat wiper man' at the Rockville Centre Car Wash on Long Island. I was 14 and happy with the $1.25/hr they paid me.
+A couple years later, when I was working as a house painter's assistant in swank Hewlett Harbor, a 20-minute drive from my home (a ramshackle house literally on the other side of the tracks), I became an entrepreneur.
+Well... a chicken entrepreneur.
+What happened was this: My friend Peter and I were scraping the shingles of a big yellow mansion - I can still remember the details - when the lady of the house, a Mrs Bernstein, came out asking for Armando, our boss. Armando's routine was to drop us off at the work site at 7:00 a.m. and disappear until 5 or 6 in the evening.
+We were left to do the work, with virtually no experience and only Armando's advice on watering down paint and 'dry rolling' the second coat to guide us.
+(In case you're about to get your house painted...dry rolling is when your painters pretend to be giving you a second coat when in fact the rollers are dry. This allows them to get the job done twice as fast and save a bundle on the cost of paint.)
+'I'm onto your boss,' Mrs. Bernstein said. 'How much does that cheap bastard pay you?' We told her. She harrumphed and disappeared inside. When she came out a half-hour later, she announced, 'I just fired that good-for-nothing. And if you know what's good for you, you'll be here Monday morning. I'll pay you an extra dollar an hour to finish this job properly.'
+Some other time, I'll tell you what happened when Armando discovered our duplicity.
+But the point of this little memoir is to illustrate how I accidentally started working for myself...and to highlight an important principle of wealth building.
+Starting your own business is a scary process. You give up a steady income and go without any assurances for an unknown period of time. You risk embarrassment and failure. Most people - and I mean 99 out of 100 - don't have the brass for it.
+I didn't. But I was lucky. Mrs. Bernstein gave me the impetus I needed. Had it not been for her, I might be a college teacher today, earning a modest living and complaining about the administration.
+New Shoots From an Old Vine
+I wonder how many new businesses start this way - as new shoots from an existing vine. Many, I'd guess. Even most.
+The advantage of doing this is clear. Spinning off from an existing enterprise gets you past two of the biggest hurdles facing new ventures: knowledge and contacts.
+Having the right contacts - vendors, marketers, and consultants - is equally as important as having knowledge.
+The great thing about starting a business you're already in is that you can gain the knowledge and make the contacts while you're still an employee.
+Start by 'promoting' yourself. Do the job you want, not the job you have. Learn everything about it. Find out what makes your business grow, how your sales are made, and what, if anything, makes your product or service special.
+Also very important:
+Figure out what is less than perfect about the business you are in.
+Get friendly with the key suppliers, bankers, and consultants your business uses.
+After doing these things, you are only one decision away from going off on your own.
+This is basically what Diner and Cao did. Within days after jumping ship, they had an ongoing business competing with their former employer.
+Two years later, their company, a developer of high-speed fiber optics transmission equipment, was acquired by Nortel for $3.25 billion.
+Steps to Knocking Off a Business
+No, you don't have to be a self-starter to have your own business. You can start as a wage coolie, just as Diner and Cao did, and take advantage of what you have to create an opportunity for yourself later.
+Interested? Here's what you need to do:
+Learn everything you can about your business, especially how sales are made and what, if anything, is unique about the product or service you provide. Read about business. Take seminars. Educate yourself.
+Become known as a 'can-do' employee. You will attract good people, individuals you may want to team up with later.
+Figure out how to make your company's products or services better. This will become the key to your eventual success. When you go out on your own, you want what MBAs call a 'competitive advantage,' something you do better than your former employer can.
+Start saving. You are going to need a bank account to get you by, even if you find a venture capital partner. Try to stash at least 10% of your take-home pay. Twenty percent would be better. If this is not possible, consider - seriously - a weekend or evening job.
+====== How to Start a Million Dollar Business Series for $25,000 #30: The One Sales Strategy That You Can't Avoid ======
+An "urgent" email I got I from the CEO of small movie production company I have a small stake in:
+...Growth is so good that we're struggling to keep up. We find ourselves in a cash-strapped position created by cash flow issues (specifically, the production and printing of books required to meet our growth), so we're exploring our options to ensure we do the right thing for our authors and community.
+There's a strong probability that a pool of Hollywood executives will invest about $500,000 in our business within the next few weeks.
+$500,000 creates the working capital we need to bridge our cash flow gap and then some. By using this cash to grow, we'll be able to pay back these investors - with a nice return on top.
+We've been doing this already for our early investors - in fact, last year, we returned 47% of profits to our funders.
+That's why this opportunity is closing very soon. There is huge interest in it, and we definitely won't need this money forever.
+If you want to become a shareholder in an amazing and growing business... you need to respond immediately - like today. I'm sending this to you because you are a friend and colleague, and I wanted you to have first shot at it.
+As a teacher of sales and marketing, I was impressed with the pitch. It had all the required components. A big promise, a story to make it more real, several relevant "facts" to back up the promise, a "velvet rope" invitation, and a sense of urgency.
+As an investor, I had a different response. I responded immediately. I said no.
+There were a number of small indicators in the email that made me doubt the promise and the proof. But the no-brainer no-thank-you for me was the requirement to act "today."
+When someone tells me I have to make an investment decision quickly, alarm bells ring in the planes of my limbic brain.
+I've fallen for urgent investment deals in the past. None that I can remember worked out well.
+Creating a sense of urgency is a time-honoured selling technique. It is used by marketing and sales pros from top (private jets) to bottom (used cars).
+It's also a very common technique used by the investment industry.
+I'm not saying there aren't good deals that require an urgent response. I'm saying, in my experience, nine out of 10 of them are bogus.
+So my default position when "given an investment opportunity" with an urgent deadline is to ignore the call for action and politely explain how much time it would take me to analyze such a deal. Most of the time, that's all I need to say.
+Saying no to all act-now opportunities might mean I'll miss out on a good deal from time to time. But my goal as a wealth builder is not to get in on every good deal. My goal, as always, is to invest in deals where there is little or no chance of losing my money!
+When you first say no to a great but urgent moneymaking opportunity, you may feel conflicted. You may fear missing out on something that could be a once-in-a-decade deal. But after you've done it a few times, that anxiety will diminish or disappear. You will look at deals like passing trains. If you miss one, another will soon be coming by.
+Okay, that's the most important takeaway you should have gotten from this message.
+But let's take this a step further. Let's look at the techniques he used to make his pitch so enticing. Let's take a look at them so you will be alert to them the next time someone comes to you with an urgent opportunity.
+The Anatomy of a Sale
+In his email, my CEO "friend" and colleague used a thinly veiled suite of marketing tactics that - however impervious I was to them - will work on most prospects.
+So if you are interested in becoming a better marketer, here's a chance to learn something (new or already learned) that can improve your game.
+Let's look at five of the sales tactics used here: promise, specificity, proof, scarcity, and urgency.
+Let's begin with the promise.
+We've been doing this already for our early investors - in fact, last year, we returned 47% of profits to our funders.
+The CEO, here, is conveying an indirect promise: that my investment might give me a return as high as 47%.
+That's a big promise. Generally speaking, big promises outsell small ones.
+And notice: The promise isn't 50%... It's 47%. That precise number, not rounded, makes the promise more believable. It doesn't sound made up. It sounds like it came from a spreadsheet - perhaps even an audited spreadsheet. That's the power of specificity.
+That sort of specificity feels like proof.
+And finally, scarcity and urgency are created very efficiently with this:
+There's a strong probability that a pool of Hollywood executives will invest about $500,000 in our business within the next few weeks.
+My friend the CEO is giving me a big opportunity that I'm very lucky to be offered, because the last time this was done, investors made a huge return. Of course, the insiders already know about this and are begging to get in. So I must act now!
+Since I've long ago learned never to "act" when they say, I don't have to worry about what I should do.
+But after spending a few more minutes looking at the email, I find some problems with the pitch.
+The promise is definitely big. And it is also specific. But is it believable?
+It's impossible to say for sure, but you have to ask: If this business has been doing as well as the CEO says in the beginning of the pitch, why are they running out of money now?
+He doesn't answer that question. That's disturbing.
+Then you have the story about "the Hollywood executives" clamoring for this deal. He doesn't give you names. But it would be nice if he did. You could call them and see what they think.
+As far as scarcity and urgency are concerned, his proof is vague at best. Again, it is this unnamed group of Hollywood executives and their commitment isn't certain. It's a "strong probability."
+This is the language of a certain type of selling. In common parlance, it is called bullshit.
+I'm not knocking these techniques. Salespeople - whether working for the biggest companies or slinging watches on a street corner - have been using these tactics for centuries.
+Most do it to bring in new customers. When done honestly and well, it spurs commerce and leaves everyone richer and happier. But make no mistake-all the wealth stealers out there who want to separate you from your hard-won money use these same techniques.
+Some of these techniques were identified and explained in Robert Cialdini's best-selling book, Influence.
+It's not by any means the final word on sales and marketing (although many journeymen think so). But it is good.
+In Influence, Cialdini breaks down six core psychological "Weapons of Influence" that marketers and salespeople use:
+Exchange of Value - This one's simple. People are more inclined to return favors than make them outright. Framing a pitch as a "favor" will generally cause the target to reciprocate it. Offering you something lets the salesman get a foot in the door.
+Making and Keeping Promises - People almost always hate to back out on a promise. Getting a customer to commit to something, even something free, can feed their interest in a product.
+Crowdsourced Verification - If others are doing it, it must be worthwhile. This is why sitcoms have laugh tracks: Hearing laughter and applause makes you want to do the same, so you fit in with the crowd. People need social proof to verify a common value. A good example is user reviews and testimonials. Seeing other people enjoying something will make you regard it more highly.
+Silver-Tongued Devilry - Anything a salesperson can do to make the customer like them is sure to amplify their chance of success. Flattery goes a long way here, and it can be seen quite clearly in the last line of the CEO's email above.
+The Allure of Expertise - No potential customer is going to buy in to an opportunity if they suspect the salesperson doesn't know their stuff. Credentials and an impressive backstory are often enough to reel someone in. To avoid getting taken advantage of here, always do your research before committing to something, and stick to things you understand.
+Constricted Demand - This is the key tactic used in the CEO's message above. People place more value on things that are scarce, in short supply, or only available for a short time. Salespeople use this to make a product seem special, even if it's readily available to anyone.
+Becoming familiar with these six marketing tools (as well as others mentioned above) will make you a better entrepreneur and marketer. But more important to me today is that they could make you a much better investor.
+Wealth seekers who swing for the fences sometimes get lucky. But most of the time, they strike out.
+If you want to get wealthy the way I did - very, very safely - you will learn to recognize sales techniques and resist them... most especially the trick of creating a false sense of urgency.
+====== How to Start a Million Dollar Business Series for $25,000 #31: Match the Business to the Market with Keyword Research ======
+"Desperate to escape her hand-to-mouth existence in one of the poorest regions of Brazil, Maria Benedita Sousa used a small loan five years ago to buy two sewing machines and start her own business making women's underwear," The New York Times reported.
+Today, her business is thriving. She employs 25 people and produces 55,000 pairs of cotton panties a month. With the income she's earning, she has bought and renovated a house for her family and a car. Her daughter, who is studying nursing, will be the first family member to finish college.
+Sousa is living the entrepreneurial dream. "You can't imagine the happiness I am feeling," she said. "I am someone who came from the countryside to the city. I battled and battled and today my children are studying with one in college and two others already in school. It was a gift from God."
+A gift from God? I don't know about that. But I do know that it was partly due to a loan she got from a private bank - that and her ambition, her persistence, and her instinct to start a business she already understood. We've talked about that many times in WBC. I've written about it in almost every one of my books.
+If you want to have the best possible chance of making your new business work, learn about it from the inside before you start. Sousa did exactly that. Before creating her own clothing business, she worked for minimum wage sewing clothes for someone else's clothing business.
+By the way, Sousa doesn't begrudge the years she worked for a dollar an hour. She was happy to get the work when she had none, happy to earn the money so she could help pay the family's bills and - most important - she is grateful she had the chance to acquire the skills she uses today to run her business.
+Sousa's story is a life lesson in Ready, Fire, Aim too. She didn't wait till everything was ready before she set up shop. She didn't have any training in business. She didn't have a facility to work in or any sewing equipment. All she had were the skills she'd developed from working and the money she got from a micro lending institution.
+And she had one more thing: She got into the right business at the right time.
+This is the aspect of the story I want to highlight.
+Sousa was successful because she did all the things we talk about all the time in WBC: She set and pursued goals. She acquired financially valuable skills. She took a Ready, Fire, Aim approach to her business. But the reason her business did so well - grew so quickly from a one-women operation to employ 25 people - is because she went into the right business at the right time.
+Business gurus like to tell people that you can be successful at any business, so long as you do X or Y or Z. But the hard truth is that some businesses will do much better than others. It's not just your personal qualities that count. And it's not how much capital or human resources you have either. It's picking the right business for the market you are in.
+I can illustrate this point by telling you about Y, the woman who takes care of our house in Nicaragua. Like Sousa, Y was very poor until she got a job earning $5 a day cleaning one of the upscale homes in our development. She didn't know much about cleaning fancy houses at first, but she was a quick learner. And when my place was finished, she applied for the job and I was happy to give it to her.
+It was a good deal for Y, because, with two houses to take care of, she doubled her income. It was a good deal for me, because I got a very good and reliable person at a fraction of what I'd have to pay in the States.
+Because I can't help but preach entrepreneurship, I several times suggested to Y and E (the young man who takes care of the outside of my property) that they should start their own businesses. To help them along, I offered them loans that could be repaid by doing little extra jobs for me on the side or even during their regular working hours.
+E started a little sundries business. He built a shack in front of his house on the main road that runs by the development. And his wife and kids sell snacks and drinks and batteries and soap and other odds and ends that he somehow manages to get his hands on.
+Y built a little store on the side of her house and opened a children's clothing shop. She buys cute little outfits in the capital city, hauls them to her shop, and sells them to the locals. Her store is busy once a month - on the first (pay day for most of the workers). Otherwise, she has little traffic.
+Y is learning to be a good businesswoman. She runs her store profitably and has reinvested those profits in a small truck (to save money on transporting the clothes) and an expanded inventory. At the end of every month, she also takes cash out and puts it in the bank for her children's education.
+So she is doing well. But she is not doing nearly as well as Maria Sousa. And she is not likely to do much better.
+The reason is simple. Y chose a business that could not possibly grow quickly in her little corner of Nicaragua. Selling children's clothing was and is a fine idea. It filled a need and it works. But no matter how hard she works, how much advertising she does, or how much money she reinvests in her business, her market is limited by the number of local people who can afford her wares.
+When you decide to become wealthy, you should take some time to consider your goals and ambitions before you select the business you will start. Don't believe the gurus who tell you any business will do. Yes, you can start a children's clothing business if it suits your fancy, but don't expect it to become a big moneymaker if the marketplace can't give you the support.
+For fast growth, choose a hot business in a hot market in an economy that is expanding. Manufacturing cheap clothing in Brazil fits the bill. Selling children's clothing in Nicaragua doesn't.
+Now if you plan to take your business to the Internet - and I highly recommend that you do - you have a little more wiggle room. Because then your market expands to include not only India, but the entire world.
+But you must still be in the right business at the right time.
+For example, there are thousands of options for getting into the Internet information publishing business. But if you decide to sell information about some obscure interest/hobby, such as bookbinding, you are going to have a smaller market than if you choose a more popular interest/hobby, like fencing or golf. And if you get into a market that is in a growth stage, such as yoga or Pilates, you'll do better than if you choose a market that is shrinking, such as aerobics.
+How do you determine the size of your market?
+According to Edwin Huertas, a Search Engine Optimization specialist, keyword research should be your first step. "The first thing I do to show a client the potential for their business," says Edwin, "is research the keywords for that industry - the words that are being searched for on the major search engines. Each search engine has its own set of keyword tools that will tell you how many people have searched for any given keyword phrase (and any combination of words in the phrase). I like to 'see' what people are looking for online instead of guessing."
+If your keyword research indicates that there's a big pool of potential customers for the product or service you intend to sell online, you can start testing. Because there's a good chance you're about to enter into the right business at the right time.
+====== How to Start a Million Dollar Business for $25,000 #32: Stuck on an Idea? 5 Steps for Turning Your Idea Into Money ======
+Sometimes you will have an idea that you know is the one. What Mark Ford calls the 'big-money idea'. These ideas can be nerve racking - usually you end up with a vague impression of what it should be, but the enormity of it befuddles you - and you either give up, sit on it till someone else makes it happen, or implement it without a plan, which often leads to too many insurmountable challenges and leads to abandoning the idea in distress.
+Which is why, you need a plan - you need a vision, clearly defined goals and objectives, and timelines. Most importantly, you need persistence. Because, however much excruciating detail you put into a plan, however much thought goes into it, there will be obstacles - and you must be ready to stick it out - mentally, physically and emotionally.
+I am in the process of creating my first complete, independent project. Here are some things I have learned from Mark Ford that I must do along the way...
+Step 1: Articulate a clear and complete statement of your objective
+A statement will help you not only define and document your idea, but give you a way to share the idea and get constructive feedback.
+Start by writing a one-page statement that clearly lays out the big idea and defines the business objective, eg, bringing in 10,000 new customers. Add some timelines, eg, in the next 6 months, and specific strategies you will use to reach the objective eg, through an online marketing campaign. Make sure to include a budget eg in under Rs 500,000. And finally, the customer-value objective eg, to offer customers your new product.
+This statement presents your idea to the world. By sharing this one-page document to all possible partners and any trusted advisors, you can solicit feedback. Use the constructive feedback to rework your document - and you have a plan.
+Step 2: Follow up with a 'Workflow document'
+Armed with a plan, you now need a breakdown of tasks that you can start working on. The best way to do this is create an Excel sheet and list out the specific tasks that have to be completed to get the show on the road. This will become your workflow document (there are some great apps to create these as well such as Workflowy).
+Add to this list the deadlines by which they need to be completed, and the names of the people responsible for the task. Make sure the person responsible is comfortable with the responsibility and the deadline - or the process could be disrupted, or the project completely derailed.
+Step 3: Manage. Manage. Manage some more.
+Often, people begrudge management because they think managers are those who tell people what to do, but don't do anything themselves. The fact is, it is much harder to manage a process, and especially people, than to just sit down to a task and do it yourself. It is probably one of the main reasons people hesitate to start a business - because then it's not just using your skills of working, but your skills of managing that are tested.
+To manage well, you have got to track what everyone is doing at all times. Your calendar should be marked with all tasks - and following up with the people in charge becomes your responsibility. Make sure things go as planned, so your idea and your business to not spiral out of your control and die an untimely death.
+Step 4: Be flexible and ready to change the plan
+Implementing a big idea is not a straightforward process. Anticipate that things will go wrong, little things and big things. Be ready to make some changes, adjust the process, revise the plan, extend deadlines. Be open to some 'jugaad' solutions - innovate as you go.
+Step 5: Recognise 'wins' and reward
+Achieving a big-money idea calls for celebration. You and your team has achieved something significant, and of value, hopefully both to the business and to its customers. If the idea is big enough, remember to reward the key players by thanking them personally and, where required, financially.
+Follow this process and soon you will easily overcome the hesitancy that make implementing these ideas so challenging. The more big ideas you put into action, the easier it gets. Soon many of your outstanding ideas that will continue to make you and your customers richer and happier.
+====== How to Start a Million Dollar Business for $25,000 #33: Six Employee-Motivating Myths ======
+Myth #1: Employees need job descriptions in order to know the scope of their responsibilities.
+This is a popular belief among corporate types - even the best of them. They are usually operations people accustomed to working with formal standards and complicated processes where precision matters and mistakes can be costly.
+Reality: Job descriptions aren't necessary. For entry-level operational jobs, it makes sense to spell out responsibilities and procedures. But for operations managers and almost everyone on the innovation and marketing side of your business, job descriptions are unneeded and can be counterproductive because they are, by their very nature, limiting.
+My philosophy is simple: If you are responsible for growth or the management of operations, there is nothing you shouldn't be willing to do. Saying "That's not my job" is equivalent to saying "I don't want to work here."
+Great people see limits as boundaries. The most motivating thing you can tell a future star or superstar employee is this: "You can do anything you want to do here, so long as it contributes to our goals and objectives."
+Myth #2: Employees are always motivated by money. It's naive to think differently.
+This oft-refuted myth is still common among CEOs and entrepreneurs, especially younger ones who have limited experience leading people. Just yesterday, I heard it from a young man who had taken his business to Stage Three in less than six years.
+He was looking to hit the $50 million mark, and felt he could do so only by locking in his best employees. But he mistakenly felt that the way to do that was to throw more money at them.
+Reality: Money is not even the second-most-important motivating force for very good people. Sleazy salespeople and officious managers are motivated by money. But very good and great employees are motivated primarily by the opportunity to become more than they are. Next on their list is recognition. Very good people thrive on being appreciated.
+There have been countless studies on what motivates employees, and money is never among the top three. That doesn't mean money doesn't count. You can't expect to underpay good people and get away with it. Pay your employees just a little bit more than the going rate so they don't ever feel like you're taking advantage of them - but keep in mind that the main reason they'll stay with you is because of the challenge of their jobs.
+Myth #3: To win your employees' loyalty, make them all owners.
+This, I admit, was a myth that I held near and dear for many years. It seemed to me that if we could make our employees feel like they had a stake in the future of the business, they would work harder and smarter and stay longer.
+Reality: Most employees don't want to be business owners. That's why they are employees. In my younger days, I tried various ways to motivate employees through stock incentive plans - even creating a cooperative-like structure where every employee had actual stock in the company.
+None of those strategies ever made a positive difference. The good employees worked no harder. The superstars were no more common. The bad employees were just as bad, and they groused because they felt their stock shares were too few.
+The only substantial difference was that because the people at the top owned only a small percentage of the business, they lacked the motivation needed to grow it. That was bad for everybody. I learned my lesson and promised myself I'd never make that mistake again.
+Myth #4: Flat organizations create more efficient employees.
+The idea here is that employees work more effectively when you eliminate tiers of management. The ideal is to run a business of peers, where every employee can go directly to the CEO to ask questions or get directions.
+Reality: Employees like hierarchy. Hierarchy gives employees a sense of structure. They know who they report to and who reports to them. Our working lives are confusing enough. It makes it worse, not better, to seek some phony egalitarian flatness by demolishing hierarchy, which is entirely natural and ubiquitous in any form of human enterprise.
+Myth #5: Employees should have lots of amusement in the workplace.
+This was a popular myth during the Internet boom. Every company featured in Inc. magazine boasted about its basketball court or Frisbee field or pinball arcade. The idea was that if you allow employees to have fun at work, they will be happier and work longer and harder.
+Reality: Happiness comes from doing good work, not from distractions. Turning your office into an amusement park is foolish and counterproductive. Your stars and superstars will not bother with the toys, because they find happiness in their work.
+Your laggards and goof-offs will use the toys - but those people should be working for someone else, not you. I have seen good results from sponsoring workout classes for employees during lunch hours. Other than that, the only "toys" that are helpful are new tools that help people work better and faster.
+Myth #6: A good boss is a sensitive boss, one who is willing to respond to employees' personal problems.
+This is the management philosophy of Michael Scott in the TV sitcom The Office. The concept, in a nutshell, is that a boss who is also your friend is a boss you will work harder for.
+Reality: Mixing business with friendship is always a bad idea. You shouldn't do it as an employee. And you shouldn't do it as a boss. When you treat an employee like a friend, you are giving him the wrong message: that in the business environment, his personal life comes first.
+Every enterprise can have only one primary purpose, and your purpose should be to make your customers happy. When you put your employees' interests above those of your customers it is a violation of your primary reason for being in business.
+The bottom line is this: The best and easiest way to grow your business from $1 million to $10 million to $50 million to $100 million and beyond is to fill it with very good and great employees and to turn those very good and great employees into stars and superstars.
+The way to create stars and superstars is to create as much upward mobility as possible in your business so that your employees can do what all good employees really want to do: exercise their talents as fully as they can, doing something that matters.
+Happiness comes from working hard and well at something we care about. If you want your employees to work happily (and you should), you have to communicate your vision for the business, and then give them the chance to realize that vision by working hard and well in an environment of limitless responsibility.
+====== How to Start a Million Dollar Business for $25,000 #34: Innovation - The Secret to One Superstore's Success ======
+There's an old axiom about business that every successful entrepreneur comes to appreciate: "If it ain't broke, don't fix it."
+Why, then, is Brad Anderson, CEO of Best Buy, fiddling with his $30 billion a year machine?
+Anderson believes that if your company ain't broke, you should fix it anyway. Despite the fact that Best Buy is the most successful consumer electronics retailer in history, he believes that unless it is constantly getting better, it is going to get worse.
+Anderson joined the business as a salesman in 1973, and worked his way up to being founder Dick Schulze's right-hand man in 1981. In the decade that followed, Schulze and Anderson built Best Buy into a regional retail success story...while continuously tinkering with its working model.
+Best Buy's innovation strategy has been a combination of doing the obvious things (like aggressively opening up new stores), thinking ahead (getting into the computer service business), and challenging convention (getting rid of employee commissions).
+Today, they continue to innovate by opening up superstores in China, peppering U.S. cities with technology boutiques, and radically expanding their "Geek Squad" computer service business. In addition, Anderson is challenging the company's traditional marketing program by implementing a new business model popularized by Columbia Business School professor Larry Selden: "centricity."
+In a nutshell, "customer-centric marketing" goes like this: Not all customers are alike. Some cost a lot to acquire and then spend very little. (Selden calls them "demon" customers.) Then there are those who, however expensive they are to acquire, end up spending a lot. If you can segment your buyers, and cater to the big spenders, you will increase your profits considerably.
+When Anderson applied this model to Best Buy, he realized that the company had five kinds of buyers: the busy suburban mom, the price-conscious family guy, the gadget fiend, the affluent tech enthusiast, and the small-business owner.
+So he asks his stores to figure out which type of customer is delivering more to their bottom line. Once it figures that out, the store changes itself. It changes its inventory, its advertising, even the way it stocks its shelves - all to focus on that key demographic.
+Anderson tested the idea on about 50 stores, and it seemed to make a big difference. He then pushed to have another 154 stores quickly centricize - but, with those, saw little return on the investment. (A typical conversion can cost a store $600,000.)
+He and Schulze are not giving up on the new model. The company has billions in cash, so they're not worried about temporary setbacks. They are convinced that the long-term success of the company depends on centricizing and on other innovations that they haven't yet thought of.
+I think there is a great deal of good sense in the old "If it ain't broke, don't fix it" approach. But it's the kind of business truth that is best followed in some circumstances and ignored in others. In my own business career, I can recall several times when I changed something - some product or pricing or marketing formula - only to see results go south. But most of the time, the great businesses I've been involved in have succeeded due to constant evolution. Point is, you can't be afraid to change things just because they are working. All businesses operate in vital, ever-changing markets. Competitors change. Circumstances change. And the needs and interests of customers change too. If you don't keep up with the changes your market is going through, you will gradually lose your share of it. If you maintain a consistency in what you do, the decline will be so gradual that you will likely attribute it to a weakening of the market.
+And that's the problem with the "Don't fix it" philosophy: If you keep doing everything like you used to, your business will slowly but surely deteriorate. And you'll never understand how and why it is falling apart. (I've warned about this process of "incremental degradation" several times in past issues of WBC.)
+If you have a growing business - and you want it to keep growing - change it. Don't change it radically (if it's not broken). Change it in small degrees. Push it. Prod it. Ask challenging questions. Work always with this mantra: "If it's good, then good. But how can we make it better?"
+These are the three key areas to focus on:
+**Management Structure**
+Your business won't grow quickly if your key employees aren't willing to change their roles on a regular basis. Everyone should understand that flexibility and speed are essential components of success. If the business as a whole is to grow, the important people involved in that business must be willing to change their roles as often as is needed.
+**Marketing**
+What worked last year might not work this year. Growing companies need to be alert to new marketing practices, both within their industry and without, and to test out those new practices whenever possible. By testing new product concepts, marketing schemes, pricing structures, and media, advertising departments can keep up with (and possibly jump ahead of) the market.
+**Operations and Customer Service**
+The objective here is simple: to always, always improve. Company growth naturally and inevitably creates problems that reduce the quality of the customer experience. Only by having a staff of people who are dedicated to making things better can you hope to at least keep them as good as theywere. Smaller businesses move faster and must change more. In the start-to-$20 million phase of business development, you must be prepared to "re-invent" your business frequently - maybe as often as twice a year. Everything needn't change at once and not all changes will take place quickly. But if you want to keep pace with your growing company's potential and keep it growing, you will have to teach your management team to accept (more than that, to desire) change.
+Today's Action Plan
+The natural process of "incremental degradation" isn't limited to business. It can affect your personal life too. So take a few minutes today to think about how much change you allow yourself. Are you always tinkering with "good," trying to make it better? Or are you afraid to make adjustments, worried that you'll damage what you already have?
+====== How to Start a Million Dollar Business for $25,000 #35: Marketing the Man in the Hathaway Shirt ======
+Have you seen The Most Interesting Man in the World?
+I'm referring to the TV commercials for Dos Equis beer. They star a rugged-looking, silver-haired man who is always surrounded by beautiful women.
+In one version of the commercial, he arm-wrestles a Third World general and releases a grizzly bear from a trap. In another, the narrator relates that even his enemies list him as their emergency contact and that the police often question him just because they find him interesting.
+If you are a student of advertising, you know this is a knockoff of David Ogilvy's famous ad campaign: The Man in the Hathaway Shirt.
+If you don't know the history of this ad, you should.
+In Brief: It was 1951. Ellerton Jette, a shirt maker from Waterville, Maine wanted to grow his little business into a national brand, but he didn't have much money. He had heard about the advertising prowess of David Ogilvy. So he booked a meeting with him.
+"I have an advertising budget of only $30,000," he told Ogilvy. "And I know that's much less than you normally work with. But I believe you can make me into a big client of yours if you take on the job."
+If he'd stopped there, Ogilvy would have thrown him out of the office. But then he said something that sold the great salesman.
+He said, "If you do take on the job, Mr. Ogilvy, I promise you this. No matter how big my company gets, I will never fire you. And I will never change a word of your copy."
+There is a big lesson here. So let's stop for a moment and talk about it.
+What Ellerton Jette did was a little bit of genius, in my opinion. In two short sentences, he changed the mind of one of the most powerful men in the world of advertising. At the same moment, he made himself a very rich man.
+Not a week goes by when I don't get a letter from a complete stranger who sees me as his David Ogilvy. They are direct and to the point. "I know I can get rich if you help me, Mr Ford," they say. "So how about it?"
+What makes them think I have the time, if not the inclination, to help them? It never even occurs to them to offer me something in return for what they are asking.
+Jette's $30,000 budget might have put $3,000 in Ogilvy's pocket. Though it was a paltry sum then and a mere pittance now, at least it was something. But what really cinched the deal was the two promises Jette made.
+Going into the meeting, Jette knew he had one chance to forge a relationship with Ogilvy. He somehow understood that Ogilvy, as successful as he was, had two big problems. He worried that his biggest clients would walk away from him. And he hated it when his clients screwed with his copy. So, instead of thinking only of his own goals, Jette took the time to figure out how he could offer Ogilvy something that would be of immense value to him. (This, by the way, is one of many lessons you will learn when you read my Automatic Wealth.)
+When Jette made his two promises, Ogilvy realized that he was talking to a businessman who would eventually become a partner. He could see that Jette was a man of good faith who would let Ogilvy be in charge of his marketing. And that he would reward Ogilvy with a lifetime of loyalty.
+Now, let's get back to the story of the Hathaway shirt ad...
+After accepting Jette's offer, Ogilvy spent days doing in-depth research on Jette's client base. He came up with dozens of ideas. The one he settled on was a campaign built around the image of a distinguished man in a romantic location dressed in a Hathaway shirt. He selected a model that looked like William Faulkner and booked the first photo shoot.
+On the way to the shoot, he passed a five and ten cent store where he bought a few cheap eye patches. At the shoot, he asked the model to wear an eye patch for a few shots.
+The moment he saw the photos with the eye patch, he knew.
+The Man in the Hathaway Shirt campaign was an instant success. The ads were carried in papers around the country, and were mentioned editorially in Time, Life, and Fortune. Before long, hosts of imitators appeared. Other companies ran ads featuring eye patches on babies, dogs... ven cows. A cartoon in The New Yorker shows three men looking into the display window of a shirt store. In the second panel, they are coming out of the store, with eye patches on.
+Ogilvy got the idea for the patch, he said, from a photo of Ambassador Lewis Douglas, who had injured his eye while fishing in England. But he got the idea itself - the idea of this aristocratic man with a romantic life - from the James Thurber story "The Secret Life of Walter Mitty." (Actually, Kenneth Roman pointed out in The King of Madison Avenue, it could have been from the secret life of David Ogilvy. As a young executive, Ogilvy was prone to wearing capes and bowties while everyone else was in grey flannel suits.)
+Of course, it wasn't just the eye patch that made the ads work. It was the combination of the model, the situation he was in, and the copy itself.
+And the copy was brilliant. Here's the first line of the first ad:
+"The melancholy disciples of Thorstein Veblen would have despised this shirt."
+Most readers of the ad had no idea who Thorstein Veblen was. But they got the idea. Veblen was some sort of snobby aristocratic. By posing a handsome, silver-haired model with an eye patch in a Hathaway shirt and putting that line underneath the photo, Ogilvy struck a chord in the American imagination. We all hate aristocrats, but we would like to be one.
+There was another brilliant thing about the ad. Putting the model in a romantic location gave the pitch a fictional element. It had "story appeal," as Ogilvy put it.
+Ogilvy said he discovered the concept of story appeal in a book by Harold Rudolph, a former ad agency research director. This was the first time, Roman says in his book, "that shirt advertising focused as much on the man wearing the shirt as on the shirt itself."
+And now, back to The Most Interesting Man in the World...
+I am a fan of these Dos Equis commercials. I like them both because they are a salute to David Ogilvy and also because they successfully replicate the key elements in Ogilvy's ads for the Hathaway shirt. They have the handsome, silver-haired model. They have the eye patch. And they have the anti-aristocrat touch. (The product is beer, after all.)
+They also have the romance and the story. Each new edition of the commercial is another episode in this most interesting man's life.
+They fall short only in one respect. They don't do a great job of equating the product with the concept.
+When I remember a Dos Equis ad, I remember the actor's face. I remember the pretty girls in the background. I'm aware that he is a man that women find irresistible. And that when he drinks he drinks... Wait a minute. What does he drink?
+There's the rub.
+We find out that The Most Interesting Man in the World drinks Dos Equis. But he could just as well drink Pabst Blue Ribbon. The creative people behind this very good ad campaign get a big demerit for that. Ogilvy, on the other hand, put the name of the product in the headline. The fact that his man was wearing a Hathaway shirt was integral to the story.
+Grabbing the prospect's attention with an entertaining story or idea or photo is essential for any sort of advertising campaign. But you have to do more than that. You have to sell the product. And to do that, you must link the initial sentiment created in the headline with the final emotion needed to close the sale at the end.
+In AWAI's copywriting program, I call this "the Golden Thread." It's pretty simple. The product is at one end of the thread. The prospect's heart is at the other end. Every element of the copy must be connected to the product as well as to the prospect. And the connection must be taut. If the thread goes slack, even for a second, you lose the sale.
+I will end this essay by saying this: You have just read about half a dozen of the most powerful marketing secrets I know. If you put this essay down and forget about it, you will be making a terrible mistake. Read it at least half a dozen times and think about it. If it doesn't make you a multi-millionaire, I'll eat my shirt. Hathaway, of course.
 ====== How to Start a Million Dollar Business for $25,000 #36:10 Dumb Ways to Start a Business (and Waste a Ton of Money at the Same Time) ======

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