Never Get a ”Real„ Job (5 page)

All those years you received gifts and free money have given you a taste for the finer things in life. You’ve come to enjoy spending expensive nights out, purchasing lavish toys, and sipping overpriced lattes. Bill? You’ll deal with that later! After all, you’re not spending real money; you’re spending imaginary plastic money, right?

There’s only one small problem: You haven’t earned it yet!

According to the April 2010
USA TODAY
article, “Generation Y’s steep financial hurdles: Huge debt, no savings,” the average Gen Yer owns
more than
3 credit cards and 20 percent carry more than a $10,000 balance. What the hell do any of us need three interest-accruing credit cards for?

This “pay-for-it-later” mentality needs to stop—right now! Life won’t be paying you an allowance—so stop pissing money away as though you have an unlimited surplus. Credit cards and ATM machines aren’t spitting money out at you because you’re “kind of a big deal.” They can quickly become liabilities, preying on your ignorance and immaturity and bleeding you dry—if you let them.

Smart entrepreneurs use logic and strategy to make purchasing decisions; they don’t rely on ego and vanity. Successful entrepreneurs do what they have to do to sustain their life burn rates (more about this in Chapter 4). If that means eating Top Ramen instead of steak—or living with multiple roommates—then so be it. The key is to adapt your lifestyle to suit your business needs, and prioritizing your long-term goals over short-term luxuries.

Be smart about your finances. Deflate your ego before it deflates your wallet. Stop spending money frivolously and thinking you need to flash some style. Burn down the imaginary money tree that you grew in your head. It’s not growing anything worthwhile, anyway.

3

Darwin + Murphy = Reality

My first start-up was nothing short of a disaster.

In fact, it’s now known among friends and colleagues as
the company that shalt not be named
. What started as a small, scalable, and simple service business quickly became a complex mess. Between rookie mistakes and unforeseen obstacles, my first company forever changed my perspective on business, and set me on a course to be a smarter, well-rounded entrepreneur.

The year was 2005. I had just graduated from NYU and formed a small entertainment production company. As I produced more and more projects I began to notice a trend: Big brands weren’t just producing 30-second commercials, they were also integrating those commercials into multimedia campaigns that included Web sites, radio spots, Internet ads, and viral videos.

I remember thinking that it would be a great idea to get in on the action and add multimedia services to my company. I was already referring my clients to other service providers; I would just do it myself instead.

So I teamed up with a few media production pals to launch a one-stop-shop multimedia agency. It seemed like a logical progression for my entertainment production company to morph into a media production business. I would produce the video projects and my partners would manage the online media and audio projects. I’d now be able to sell my current clients on new media opportunities as well as benefit from my partners’ existing client rosters.

It seemed like a no-brainer to me.

Had I known then what I know now, I’d have stopped myself from transforming my perfectly simple and profitable company into an overcomplicated money pit. But the sexiness of owning a media firm put twinkles in my eyes and blinded me from seeing the real problems that would lead to the company’s eventual unraveling.

The day before our launch, my partners toasted to what a home run our start-up would be. After all, who wouldn’t want low-cost media services?

Well, as it turned out, almost no one.

To put it mildly,
the company that shalt not be named
was far from a dream come true. On the good days it was a full-out nightmare that woke me up with cold sweats and the desire to find high ledges. On the bad days, I felt like I was strapped into the cockpit of a flaming jet plane taking a nosedive toward a mountain. The company folded in a little more than a year; it’s unbelievable how many things went wrong in such a short amount of time:

 

• No one could pronounce the company’s name properly.
  
 

 

• No one could read the contact information on our poor-quality, expensive business cards—and we couldn’t afford new ones.
  
 

 

• Our failure to seek out new clients led to terrible sales cycles.
  
 

 

• I lost existing clients because they thought the new company lacked focus and core competency.
  
 

 

• We hired and fired a four-person workforce in a matter of two weeks because we couldn’t afford them.
  
 

 

• Our first big client never paid us in full and actually left us in debt.
  
 

 

• Advisors threatened us with legal actions forcing us to incur a legal bill that was higher than our combined salaries.
  
 

 

• We invested six figures’ worth of free services into a start-up in exchange for equity that never materialized.
  
 

 

• We lost a client project to a bigger competitor who then turned around and sub-contracted us to do the same work for less money than our original bid.
  
 

 

• We negotiated for months with a potential fourth partner who made big promises and never delivered.
  
 

 

• We nearly went broke pitching for investment money we didn’t need.
  
 

 

• We acted on advice that nearly crippled the company on multiple occasions.
  
 

 

• Our best advisor died of a heart attack the day before he was going to begin introducing us to all of his clients and investor contacts.
  
 

Although my partners and I had the best intentions, we were far from innocent sheep when it came to running
the company that shalt not be named
. However, the major reason we also crashed and burned was because we became victims of our own belief in several start-up myths, entrepreneurial misconceptions, and business falsehoods.

I hope you’re fortunate enough not to experience the same level of failure that I experienced with my first venture. However, you can benefit from my experience by avoiding these pitfalls on your entrepreneurial journey.

YOUR BUSINESS IS NOT THE EXCEPTION TO ANY RULE

I know how excited you are about your business idea. You can’t wait to move mountains and become a captain of industry. I have no doubt you truly believe that your concept is a
guaranteed
winner. However, in reality, your idea is but a small part of the success equation. Besides, most people think they have a winner and the odds apply to you just as much as the next guy. According to the U.S. Small Business Association one-third of small businesses fail by their second year and less than half make it to four years.

Giving status quo the finger isn’t easy and launching a business isn’t a cakewalk. It’s great to be passionate about your idea, but get it out of your head that your business is an exception to any rule.

It’s not going to be easy. Deal with it
. Don’t become an entrepreneur if you’re looking for an easy way to make a living. Running a start-up will push you to the limits; it’s not glamorous and can stress out the calmest of individuals. You may even find yourself wanting to quit three or four times in the first two months and hundreds of times during the first six months—if you make it that long.

It is much harder to be your own boss than to have one. You can’t expect a check to magically appear in your mailbox simply because you pasted a number on your vision board. Sure, if you’re employed or have ever been employed, your boss might not know that he’s paying you 10 hours each week to watch cat videos on YouTube and update your Facebook status, but in a start-up every moment you waste is a moment closer to bankruptcy.

You’re going to fail often. Accept it. For the first time in your life, you will have to truly work your ass off to earn every dollar in your pocket and you will have to work harder than you’ve ever worked before. In the earliest stages of your business, you’ll have to downgrade your lifestyle to absolute bare necessities and make your business your priority—milking it for every dollar of revenue it can provide.

Contrary to popular belief, failure is not such a bad thing. Hard-learned lessons from failures will guide you to successes, where you will reap the financial rewards for your own work. Your life might get harder before it gets easier, but if you want to win big at the risk-reward game now is the time to put the mission before the man—when you’re young, hungry, and contain insurmountable amounts of energy.

Take your perfect plan and shove it
. The right hypothetical team plus hip Google AdWords plus a funky sales presentation may sound like a winning combination on paper, but in reality, you know what it will most likely amount to?

Nada.

There is no magic start-up formula for you in a “Six Minute Start-Up” DVD. And the road less traveled is likely to lead you straight off a cliff.

Any successful entrepreneur will tell you that you can’t predict future sales, revenues, and market acceptance for a start-up. It’s simply impossible. Anyone who tells you otherwise doesn’t know his or her ass from an elbow. Other than what you do and how you do it, you don’t know as much as you think you know about your business or industry. Any idiot can write a business plan that paints a rosy picture about a hypothetical company. Truth be told, there is no such thing as the perfect plan.

Your product or service won’t gain attention in the cluttered marketplace just because you plan everything to the letter. Don’t be sucked into fictitious numbers and creating a business plan any longer than a paragraph (see Chapter 5). Besides, the best business plans are fluid, not set in stone.

Your product will not sell itself
. Remember the riddle about the tree falling in the woods when no one is there to hear it? Does the tree make a sound? The business equivalent is launching a Web site and no one knows the URL. Does the Web site really exist? The answer is no. Buzz and customers will not materialize out of thin air. If you go into your start-up thinking that you’ll be on easy street, the only street you’ll be on is the one outside of your parents’ house.

Great ideas don’t launch and sell out instantly. There are millions of stimuli vying for a consumer’s attention every second of every day and there are many factors that contribute to the success of hot-ticket, must-have products and services. You’ll have to keep up with unpredictable trends, deal with consumer income fluctuating with the economy, effectively respond to market demand rising and falling without warning, and other such challenges that will always seem to hit you at the most inopportune times. This is why planning for your rock-bottom, worst-case scenario is absolutely essential and will help you to understand what might not—and often will not—go according to plan (more on planning for rock bottom later in this chapter).

First doesn’t always mean number one
. Being the first to market a particular product or service isn’t always an advantage. Sometimes being first can actually put you in last place. The execution of your ideas will be the key to your company’s success, not arbitrarily shooting to be the first in the market.

The competition is tough
. If you find yourself with an idea you truly believe has no competitors, you are assessing your market with tunnel vision.

Every viable business has competition. If you delude yourself into thinking that there are no competitors in your target market, you should save your incorporation fees because declaring bankruptcy will cost you more money in legal fees later. Just because your start-up combines a dog-walking service with a lingerie store, doesn’t mean you won’t face competition from individual dog-walking services and lingerie stores. A small town bar is still in competition with restaurants and other nightlife activities. A Web site that sells flower arrangements will still compete with brick-and-mortar flower retailers.

Reality check: You are not alone and competitors will point out the error of your ways as loudly as possible to any potential customers who will listen.

Competitors will try to strike at you from every direction at every opportunity. Like you, they’ll find ways to adapt to shifts in the market and use your own tactics against you. Big companies will try to swallow you, while smaller companies will nibble at your bottom line by undercutting your already low prices. If you come out with a great cost-effective product, a competitor will knock you off and lower the price point.

Business is about survival of the fittest, so if you want to stay in the game, you have to stay fit and on your toes.

Entrepreneurs are not high-risk gamblers out for a fast payday
. TV has warped your perception of entrepreneurs as thrill seekers with a go-big-or-go-home mentality. Entrepreneurs take calculated risks while working to build steady and effective growth. Smart business owners weigh the pros and cons of every decision, spend money with extreme caution, manage the growth of their companies methodically, and play it as safe as possible.

Real entrepreneurs see betting the farm as a suicide mission, not a gamble.

Pushing for overexpansion, multiple services or product lines, or excessive growth will cripple you if you don’t have the infrastructure to meet the demand or if it means that the quality of your product or service has to suffer.

Be cautious and set a reasonable risk threshold. Entertain as many options, potential solutions, and opportunities as possible before coming to a final decision on any matter. However, make sure to perform these exercises in a timely fashion so as not to hinder your revenue-generating momentum. Create a scalability plan for growing your business with demand and the necessary expansion-supporting revenue—not just in the name of the big risk.

Check your preconceived notions at the door
. Building a business in theory and actually building a business are entirely different. Common sense will play a huge role during your start-up journey. For example, theoretically you might hand a prospective client a business card, she’d put the card in her Rolodex, and give you a call when she needs your service. Right?