The Power of Broke: Avoid Cash Burn and other Business Blunders

I know Niggas who never been to a college. They just tryna whip a Benz outta Pyrex. – Waka Flocka “Real Quick” (0 to 100 Remix)

Business. The richest game in town right?

We’ve heard the excuse repeatedly “I don’t have enough money to start a business.” #shitbrokepeoplesay

Lo and behold! This person is in the best positioned person to start up (once he/she overcomes their self-limiting beliefs).

Unless you’re in high barrier-high marketing budget industries like Fashion and Industrial Design (but even in this Ad-crazed business there are ways to run a profitable and operationally sound enterprise.)The power of having no money is your advantage, not your inhibition.

When were you the most industrious?

When you were a kid of course! You had no money, just pure curiosity and drive to make ordinary things fun.

I have extremely fond memories of turning the couches over and building forts and cars. Making beats on pots and pans. I even designed my first bed with my dad.

It’s the idiots who go to business school to spend 5 to 6 figures for 5 years on what the internet and experience can teach a broke person in 6 months.

The Unemployed Entrepreneur vs. An Ivy League MBA.

The untrained eye would pick the Harvard MBA nine times outta ten.

But anyone with any business sense would see that the Power of Broke makes you immune to things that would naturally give an Ivy Leaguer cold sweats at night.

I could play the blame game in each department from Accounting to Marketing/Sales but when you’re in it to win it. It’s tough not to copy what your competitor is doing and try to outspend them.

The Power of Broke once you’ve become comfortable in your own skin… You simply hack things that a wealthy person could simply afford without thinking twice about. These tiny he/she purchases make and break his/her business.

There is always a better, cheaper, and more valuable way to do anything. You just haven’t thought of it yet.

When operating your business while you’re broke. You are actually less likely to cut corners and more likely to look around them and capitalize what cash cows are blind to (and sell it back to them ūüėČ ) Rich companies cut corners ALL THE TIME! Being a Broke and in business and a Broke Business are two extremely different things. We as a society deem wealthy people with expensive degrees as the all knowing, all powerful who can do no wrong. Having a piece of paper earned in a controlled environment and theories is not an indicator of if you can run a business or be a successful entrepreneur.

I’m sure you got rich friends. They spend their money on the darndest things. Expensive clothes, cars, luxury items. Ask them where they get this money. They say 1 of 2 things. “I paid for it.” or “My parents paid for it.” Upon further investigation, The “I paid for it.” camp, is deceiving you, unless you ask, “Who pays for the rest of your life?” Then they revert to answer 2 camp.

Personally, I’ve never been on a vacation or anything of the sort, I put my self through school, pay for my clothes, don’t have a car, and pay rent and bills by myself, and run a business, while being hella broke!

I am confident, that I run a tighter ship, than many of my wealthier and successful compadres. Especially in the long run.

Hey, no rich person is gonna title their blog the Power of Broke, unless they wish they were broke when they started in the first place. Most successful businesses have to earn their value by sweat equity and hackability. Which money can buy and wealthy people avoid. They can simply buy the hack. This is an interesting topic that I’ll keep short so I can explain more in upcoming posts.

I warn you, that rich people will sneer at you and berate you. Pay them no mind, being broke and persistence is the best remedy to develop thick skin.

Broke? You now have no excuses, You’re actually hold destiny in your pockets. Where the money was supposed to be.¬†

Making a Billion and Being a Billion are two different things

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To Be or Not To Be? Why Does Your Business Exist?

In the ideal world, businesses think like artists and artists think like business people. When differentiating yourself from the pack. Jamming or experimenting and stealing/swiping ideas is the best way to create a USP: A Unique Selling Proposition: Justifying your Reason To Exist in the World…

1. Narrowly Defined Positioning (An Oriental Rug Cleaning Service)

2. Meaningful Specifics ( An Oriental Rug Cleaning Service that makes stains vanish in 15 minutes or less)

3. Guarantee ( An Oriental Rug Cleaning Service that makes stains vanish in 15 minutes or less or your money back)

Case Study:

Travelocity.ca’s USP is simple, to the point and shows responsibility for your worries.¬†

Expedia.ca is big, dumb, slogany and more worried about making you laugh or creating a piece of art than the actual service.

Which company do you think will take more care of you when things go wrong? Where are their values aligned

Next blog post will be about utilizing the USP to gain value on your mishandled purchases.

I’ll show you how.¬†

in the next post.

Not only for a couple weeks, or years but for decades and beyond. The Durability Question… It’s a splash of cold water. Or being front row of a philosophy class. Why do you exist?¬†Descartes was a great philosopher but terrible businessperson.¬†“I think therefore I am.”¬†Most businesses think this way! They produce something therefore they’re a successful business. They think because they are operate from Monday to Friday they are doing fine. Get real! 20 percent of the businesses generate 80 percent of the profits of the world. Why? They have found from an early stage how to uniquely exist and sustain existence. This is more than having a hairy audacious goal or consultant speak. Values and Vision are critical, but narrowing and positioning the values and vision are much more important. Starting a business is easy. If you think traditionally. Make a product, advertise the product, make a website, do interviews about your product, and cash will roll in… You’ll be wiped out in 5 years… or even worse cash poor, burning through capital thinking you’re unique when you’re actually in no man’s land in a large industry that doesn’t give a shit about you. That’s not where you want to be. Neither do I. But most people think this way. They don’t fight for their existence. They become entitled to the freedoms of the world and even worse, the freedom in their world. Most companies allocate significant loans and go to zero with a bullet very quickly due to this entitlement. So Carmichael? How do you create one of those Zero to One businesses that everyone is talking about… Read the book. Then come here for a few ideas that I’m trying and in the middle of. First things first, Survey Pains and strains in the industry of your choice (I’ve covered this). Then you can take two strategies to the bank. Plan and Jam…

From Startup Leadership by Derek Lidow

Planning is to work the Business Model Canvas and visualize how your business can add 10X value immediately to the market place. If it can’t it’s not an idea or pain killer worth pursuing and wasting your time… Which is called Causal Strategy. The second is called Effectual Strategy, having a general direction and jamming (experimenting) along the way. Steve Blank says the first business plan fails. With this strategy, you form a hypothesis:

1. Do people like vegan food at shopping malls?

2. Do people ask me where to buy my food without being prompted?

3. If I get at least 200 people over 4 days, people tell me unprompted to open a store that I can rent

Mark Zuckerberg’s Facemash (jamming) to Facebook

The Demand has to outweigh the supply. Supply can always be created. Demand and Desire are elusive *more about this in future posts*

1 = A vegan farm service

2 = A vegan farm that makes by planting their own organic products and sells them from their store

3 = 100% Organically Grown and sold from Vegan Farmers on a Vegan Farm

You want to be in two businesses. Customer Attraction and Painkilling business. You create customers by killing their pains. Jam then plan, or plan then jam. Plain and simple.

Customers! Part 2: Ideas are For Idiots: Market the occupation for Revenue Celebration

From the Streets, Silicon Valley,Madison Avenue, Wall Street, and Hollywood are all major hubs around the world that people flock to, to make millions and sometimes billions and all carry timeless lessons in how to achieve customer success in your given marketplace. They are not hot spots by accident and they are all affected by your activity during the holidays.

In the persuasion masterpiece¬†Influence¬†by Robert Cialdini, he illustrates in short on how companies manipulate the customer’s behavior without them even knowing it with a simple change in operational activity. In the situation, he describes meeting his neighbor at a toy store as he is purchasing a highly sought after present for his son. Something strikes him, that the last time he saw his neighbor was at the exact same store, at around the exact same time… last year! He goes what gives? They mark it as coincidence and move on. But with Robert’s curiosity piqued, he asks a friend who was in the toy marketing business. His friend laughs and explains that it isn’t a coincidence, that toy companies’ bottom line lagged in January after everyone bought up the hallmark toy during the holiday season in December, so they came up with a tactic you may not know as scarcity.

The toy companies deliberately under stock the stores that carry the hallmark toy and overstock their complementary toys. Parents who cannot withstand the mauling and mob mentality settle for the complementary toy and leave their child disappointed. But in January, when all craze has gone away, the companies store the hallmark toy to keep the momentum of their cornerstone product.

Smart tactic, but what is even more impressive is the company’s understanding of their customer’s nature. Which was discussed in last week’s post.

Understanding the human condition is a prerequisite of successful customer discovery, and lasting enterprise success. Everyone knows that a company cannot exist without customers.

That’s why I don’t have a company. Yet. If it is a business. I’m in the customer development business and I recommend you be in the same biz.

Many entrepreneurs have ideas, or even better, their own products. Inventory full of their product. Believing if they build it customers will automatically come. Maybe the primary reason of business failure is the chicken before the egg thinking that puts you and your business behind the 8 ball, or in a rear naked chokehold before the match even started. Talk about screwing yourself over.

Customer Development is rarely talked about, I even have to come at Dan Kennedy as his writing assumes you have a service or product already in the marketplace. But what if you’re smart and think like a business person and study customer profiling before you invest capital into a product.

Here’s Steve Blank’s Customer Dev Funnel.

Steve Blank's Customer Dev Funnel
Steve Blank’s Customer Dev Funnel

From now on, because it makes sense, I’m going to assume you don’t have an idea or a product/service yet and good for you.¬†Find your customer first then tailor the idea of a product/service to that customer.¬†It will save you hella time and money and you will gain valuable people skills by gaining the¬†hustler’s eye and ear¬†in the process.

Observance:¬†Michael Bloomberg, billionaire and philanthropist credits working in the financial markets by finding that¬†his customer/occupation didn’t have a life, because of the old school and time-consuming method of analyzing markets digitally. He developed an idea after finding customer and created the Bloomberg Terminal and software that provided massive value for financial analysts’ careers and free time for a social life with more efficient digital analytic products. In turn, made Bloomberg one of the richest people in the world. I’m not saying the same result will happen with you or I, (hopefully)… But success is much smoother than creating a product, borrowing money (that you have to pay back), market the product, find out the market doesn’t like some things, alter it, spend more money, and hope that it works out, which 9 times out of 10 doesn’t work.

Businesses fail because they follow the failing businesses protocol without even knowing it, because it worked for the 1 out 10 business. A lot of businesses would succeed if they learned this easy marketing play. It could save your job that you don’t have to quit that you may find a struggling and out dated way the business is doing things and Bloomberg your way to the bank!

Most of you reading this may be like there are plenty of businesses that start with a product before the customer! Look at Bill Bowerman, co-founder of Nike created the innovative waffle grip for runners that added tremendous value to their times. Product before customer right? Nope, do you think Mr. Bowerman ever spent a day away from the track? He understood the runner’s ambitions: Faster track times, comfort, grip to the track. Customer or occupation before the product leads to more experimentation and chance of accidental breakthroughs that led to the waffle grip trainer. Action:¬†Conceptual playing with two or more unrelated ideas and combining them.

¬†¬†¬†If you’re patiently waiting to make it through all the hating
Debating whether or not you can even weather the storm
As you lay on the table they operating to save you
It’s like an angel came to you sent from the heavens above

Eminem – Patiently Waiting – 50 Cent, Get Rich Or Die Tryin’

That’s the feeling of Customer Development, it may suck in the beginning. But all the hard work and persistence will give you better options and mitigate the risk that you take. You may be able to fund the idea yourself. win/win!

¬†50th Law: Know Your Environment –¬†Wherever your market is, there are the outsiders and the insiders. The insiders not only understand the inside, but the outsiders as well. In short form it’s empathy for all humans in your market. Because they are customers. Hawk’s do not see more, they see more detail. The closer you are to your market, the better you get to know their needs, ignore your primal need for superiority and become a man of the people, camouflage/chameleon. Then you iterate your product around their needs…

I just listened to this.

I guess hustlers think alike.

Books to read: The Startup Owner’s Manual by Steve Blank

The 50th Law by 50 Cent and Robert Greene

Crossing the Chasm by Geoffrey Moore

Sketches: As a form of Visual Thinking

It had nothing to do with using [programs] for practical things, it had more to do with using them as a mirror of your thought process. To actually learn how to think. I think everyone in this country should learn to program a computer. Everyone should learn a computer language because it teaches you how to think. I think of computer science as a liberal art.- Steve Jobs

gehry_sketches_9frankgehrydraw

If your have been following the blog, I have quoted Frank Gehry a bit. He just pops up everywhere I go searching for fine content! But here’s some of his sketches. (above)

By contrast, I’ll show the calm of the chaos. Dieter Rams, industrial designer for Braun, and more famously the inspiration for Jony Ive, Apple’s Chief Industrial Designer.

dieter-rams

Different Styles, but similar in thinking. They project a direct entrance into the mind of the artist. This is why sketching may be the best way not to teach, not to preach, but to reach in its rawest form. Reaching maybe scaling back, or over designing.

Over the weekend I have been scanning the web for inspirations and sites about design. It’s a popular deal. But rarely, do you actually see the beginning, the seed of an idea which produces the final product. Many architects and designers have been interviewed as having post-partum depression or disliking the actual finished form of the product or building as the fun was in the exploration, the sketching and actual play of finding the right inspiration.

When I was in school for Environmental Design, it was very process and inspiration heavy, and in the results-oriented world we live in, it’s easy to get get lost in the one trick pony, or believing that world-class brands paint with ink and ship out the door in a flash

Fail Fast and Break Things – Mark Zuckerberg, co-founder of Facebook

Sketching in designing is what improv is in theatre productions is what ab-libbing is to rap, it’s the work under the work, that is before practice actually begins. Practice needs structure. You’ve heard Perfect Practice makes Perfect. I’m talking about the Free-Play that occurs before practice.

As much as pros put on a professional and serious image, check any architect’s website. Do they ever smile?

Rem Koolhaas

But I guarantee they let their hair down when a project is first enters the pipeline. Well the good ones do.

Let me reiterate, sketching breeds originality and repels repetition.

Currently I’m reading a pretty good book¬†Drawing For Product Designers¬†and once I pick up the book¬†Sketching,¬†I’ll post another entry, but for the prior, there is a blurb about the title of this blog,¬†Sketches: As a Form of Visual Thinking. A child is better sketcher than you and I. Why? Children throw logic out of the window, if they had it in the first place. They are free.

Betty Edwards writes – the need for artists to move away from the logical language side of the brain towards the more visually intuitive. However, the issue for designers is how to leverage both the visual and verbal skills since each has its own powers as well as its own shortcomings. – Drawing on the Right Side of the Brain.

Even in business, Alex Osterwalder who has been mentioned in this blog who wrote a very influential book, ¬†Business Model Generation, and another one on the way, Value Proposition Design promotes visual description to stimulate and organize the mind of a business owner and his/her thinking of how to become a ‘game-changer’ and/or ‘innovator.’

bmcanvas-basic-model3

Did you know JK Rowling sketched Harry Potter’s World before she wrote it?harrypotter

Not hers, but a great resource to find beginning sketches and finished artworks is www.deviantart.com

If that doesn’t get you to think about the power of sketching. I don’t know what will.

The film industry with storyboards, and comics etc, the world was born on sketching, the Hieroglyphics and Phonetics. Thanks to my former Prof, Rob Kovitz (more about him later).

Ever wonder why psychiatrists ask people to draw? The eye is the window into the soul and perception so it only has a couple ways of coming out…Visually and or Physically and chances are if you’re seeing a shrink, it’s come out physically.

Sketching is Calming.

flyknit

I’ll be sharing my sketches and notes throughout the blog.

Act Simple. Be Chaotic. Dream Relentlessly.

The problems of the world cannot possibly be solved by skeptics or cynics whose¬†horizons are limited by the obvious realities. We need men who can dream of things¬†that never were and ask “why not? – John F. Kennedy Jr

Your Small Business will Fail in 10 years or less

The man I worked for,

he had one of the biggest companies in New York City.

He ran it for more than 50 years.

Fifteen years, eight months and nine days,

I was with him every day. I worked for him,

I protected him, I looked after him, I learnt from him.

Bumpy was rich, but he wasn’t white man rich, you see?

He wasn’t wealthy.

He didn’t own his own company. He thought he did, but he didn’t,

he just managed it.

The white man owned it, so they owned him.

Nobody owns me, though.

That’s ’cause I own my own company, and my company sells a product

that’s better than the competition,

at a price that’s lower than the competition.”

-Frank Lucas American Gangster (2007) dir. Ridley Scott

See Price Strategy for more info.

According to author, Robert T. Kiyosaki in CASHFLOW QUADRANT, in the US 9 out of 10 small businesses fail in five years. Out of the one remaining, nine out of 10 of the fail in the next five years. In other words, 99 out of 100 small businesses ultimately disappear in 10 years. He writes, that it due to lack of capital, lack of experience and burn out by wearing all of the hats.

What’s a Cash Flow Quadrant? Mr. Kiyosaki breaks it down like this:

cashflow-quadrant

Small Business the Backbone of Canada? Lies.

Out of 115,000 small businesses in Canada that start up, 100,000 disappear.

How many small businesses have failed to put it on the net 15%. How many big businesses have failed to put it on the net: Less than 1%

 http://www.cbc.ca/news/business/10-surprising-stats-about-small-business-in-canada-1.1083238

A small business is ¬†what most trades people, artists, accountants, dentists, consultants who work for themselves¬†to make a sole income.¬†When I worked in film in Vancouver, the visual effects industry is a good example. There are employees or staff jobs that most people (in general) hold onto like their balls, they are involved with most projects. To obtain a staff job in the VFX industry has its own politics no different than any industry. Seniority, who you know and talent are what lands you a “coveted and secure” staff job. The contractors like some of my friends who contract out the work project to project. Then there’s the business owner, the (wo)man with the plan, the system in place that who owns the production house and pays the employees (HR, Accounting, IT, etc) and contractors their money for their services, and lastly and more importantly, the investors who obviously have more investments in other areas of business making money work for them.

Think your out of the woods being an educated employee? Think again.  More on this in later posts. Kiyosaki goes into this in detail in Rich Dad, Poor Dad, another highly recommended read.

The tricky part that Kiyosaki does not explain fully, but does go on to explain “that few that attempt to go from Small Business to Business owner actually make it. Because of the technical and human skills to be successful in each quadrant are different.” Grow Locally, Think Globally comes to mind. Name a business that have put it on the net and ¬†they started out as a one or two (wo)man operation. I agree that all the human and technical skills are necessary, but it’s the vision of small businesses or maybe the blindness of small businesses to behave as a big business that leads to their own demise. Paradoxical, but I think it’s valid. ¬†Start up culture is like this. Co-Founder of the Y Combinator, Paul Graham, author of Hackers and Painters, goes on to say that start ups are like mosquitoes, designed for one thing. A single score. Get in and get out. Conversely, Amazon, Apple, Microsoft, Google, Netflix, and others started with big business mentality as a start up and exploited an entire industry, not just a market problem. ¬†As these companies become dumber and larger by the second, ironically getting lost in big business thinking. The small businesses try to exploit what these giants can’t see (High Risk, High Uncertainty, which start ups are built to thrive on). Refer to¬†Innovator’s Dilemma.¬†Hence the score, some continue on, and fizzle out. Some like Graham sell when it’s time to and fund one of the biggest, most reputable start up sponsor companies in the world. Y Combinator. He became a small business owner to selling to big business and taking his money to invest in small businesses. A niche that seems rewarding. Many successful people go from small business and developing the system into a big company and becoming an investor.

Here’s a link of corporate following in small businesses’ shoes¬†http://business.financialpost.com/2014/07/20/corporate-ceos-could-take-a-page-from-small-firms-playbook/?utm_source=dlvr.it&utm_medium=twitter

 

Mixing it up: If you’re an Employee learn how to become a professional investor. There are some books I’ve read and currently reading that will be referenced in these blogs: Mary Buffett’s¬†Buffettology,¬†Benjamin Graham’s¬†Intelligent Investor,¬†I’m currently reading The Intelligent Asset Allocator by William Bernstein. More on that later aswell.

Kiyosaki’s Advice to becoming a business owner: 1. Find a Mentor and 2. Buy a franchise.

Remember, Wealth is the amount of days you can leave your job and still live the lifestyle you have.