How To Develop An Entrepreneur Mindset
After the third attempt and failure at starting a business I said, “That’s it. I’m never doing this again! This is clearly for other people.”
I hated it.
But I tried again.
I HAD ZERO BUSINESS SENSE.
All I knew about business was this: if you do work for someone, you get paid, and then you pay bills.
That’s the entire knowledge I had about running a business. It was very incomplete. But it worked.
In what follows, I am mostly focused on my first business.
How come? Because like most people who start their first business, I had almost zero knowledge of what an entrepreneur was.
I had to figure it out while it happened, I had to survive, and then I had to cash out.
After that first time, you know a lot more. So it gets easier.
I also assume: you need to be profitable.
99% of businesses don’t live off of “VC welfare” (i.e. they don’t have investors who will subsidize their many failures) .
So I had to start a business that was profitable right away.
Which meant I had to provide a service that people paid for. In my case: a business that made websites for the many companies that did not have one in the mid-90s.
(one of our first websites we (Reset, inc.) created: HBO.com)
A) BIG VISION, BUT SMALL IMPLEMENTATION
Have a big vision (“every company will need a website”) but know every subtlety in the business (I could program a database, design a graphic, knew how to optimize the website. Knew how to market it, etc).
Keep up with all the small in the industry, but make sure the BIG still holds.
B) WORK HARD BUT DELEGATE WORK
The biggest day for me was when I realized I didn’t have to do everything. I could hire someone to do some of the work.
Then I was able to work 90 hours a week but get 300 hours a week worth of work done.
Thanks Chet for being the first person I hired!
C) OVER PROMISE AND THEN OVER DELIVER
You have to get the job. So you have to promise the world.
Yes, we can get it done in less than two weeks. Yes, we will be on call all the time. Yes, we will solve your personal problems and show up at your charities. Yes, we will put our best designer on the project and our best programmer.
And then we always did more than we promised.
We always had extra features that they didn’t ask for but we knew they would need. We would provide those for free.
Eventually, when you are an agency, all (most) client relationships go bad over time.
But when you overdeliver you instantly crush all competition for a long time. They can’t even think about competition.
Trust me, they will think about your enemies later. It’s not a marriage and even many marriages disintegrate into first boredom and then contempt
But first, overpromise and then over-deliver.
D) DIVERSIFY, DIVERSIFY, DIVERSIFY
The first 18 months after I started the business, I kept my full-time job.
I HAD to make sure I would pay my bills or I would die. I couldn’t risk that.
So I diversified in many ways to reduce personal risk. When you reduce personal risk, you can focus on what’s important.
What is important? Doing something that you love that will make you more money than your bills.
If this sounds brutish, so what. It’s true.
You can’t be scared about what’s in your bank account.
I diversified by having a job and a business.
I also diversified at my job. I was a computer programmer but I was also pitching TV shows and even got an agent to shop a collection of short stories. And I considered other job offers all the time.
I diversified my business by having as many clients as possible. We’d do anything to get a new client.
And we diversified the business by trying to think of new products to offer.
But, honestly, we weren’t smart enough or business savvy enough to figure anything out.
IF WE HAD MORE BUSINESS SENSE, we would have also diversified by raising moneyand making a scalable product and going public like many of our competitors.
But we weren’t that smart.
So we stuck to what we knew: people needed websites, we charged a lot of money for them, and we paid less for rent and people than we charged.
I didn’t know anything about sales. I probably looked down on it. Like in a “Death of a Salesman” sort of way.
But I had a natural skill for it when I cared about what I was selling.
There’s a million books on sales and persuasion. I had read ZERO of them. Now I’ve read them and I think they are useful.
But I think there are basics that every entrepreneur has to have.
- Likability. Don’t be a “sales guy”. Do “the 3Ls” (I am making that up). Love their product. Like the client (find common ground). Listen to them.
- Solve their BIG problem and their SMALL problem. When I was pitching companies that I could do their website I knew they had one big problem and one small problem.
The BIG problem is the Vision — e.g. if you don’t get a website, then all of your competitors will get a better one faster and you’ll miss out on an enormous audience.
The SMALL problem was their budget. Even big companies had none. So undercharge the competition and meanwhile help the client figure out how to impress the budget-makers enough to increase the budget for this.
- Recommend the competition. There’s nothing wrong with analyzing the landscape of “the competition”.
I never see a sales book talk about this. But when you analyze the competition for a potential customer you create “choice ambiguity bias”.
It puts this fog-like feeling in their heads whenever they think about “the other companies” versus YOU.
And you also appear to be on their side helping them evaluate all their choices in an unbiased way, even though you are obviously biased (and everyone rationally knows you are biased)
- Have a champion. You can’t get a deal done if the decision maker, or someone close to the decision maker, is not your champion.If someone low-level is your champion then give up immediately and don’t waste time. You won’t get the deal.
How do you get a high-level champion? Find as a many touch-points as possible. People in common, agendas in common, etc. Make sure they understand your ENTIRE goal is to make their lives much better. This is even more important than making their companies better.
- Sales is all the time. Every second. You are never doing anything at all without thinking of the sales aspect of it.
F) Love your business AND Hate it
With my first successful business, I was excited every day to solve problems, and deal with all the issues.
You have to have a problem-solving mindset and get-new-clients mindset every day.
BUT I badly wanted to sell the business. And sell it as fast as possible for a lot of money.
Cash later is never as a good as cash now.
And for me, this was my first successful business. I had no money in the bank. Money doesn’t solve all of your problems but it solves your money problems.
At least at first.
Sometimes people tell me, “if I sell my business I’ll just end up starting another business like this and doing the same thing”.
That’s ok. Do that. But even if I did the exact same thing, I still wanted more cash in the bank.
So love your business every day, but make sure you are building value (i.e. the business can survive without you) and always have a “for sale” sign up.
By the way, I didn’t know this then, but this is a common strategy on the path to billions. Look at Mark Cuban (sold his first software company before starting Audionet / Broadcast.com), or Elon Musk (sold Zip2, then Paypal, before starting Tesla, SpaceX, etc).
Don’t fall in love with a company.
G) NEVER GET ANGRY
Here’s the people who angered me in my first business:
customers, partners, employees, landlords, buyers of my business, competitors — in that order.
In later companies add in shareholders.
But you can never get angry.
Life + Anger < Life.
So how do you get rid of the anger?
Remember this other equation:
Anger = Fear clothed.
Ask: what is it I am afraid of? Am I afraid the client will quit? Am I afraid the employee will damage a project? Am I afraid the partner will refuse to go along with my very personal idea for how the company can grow?
Solve the fear. Look at the worst case scenario. Is it that bad?
For instance, make a plan for WHEN the client will leave you. And try to compromise with the partner (something you can’t do if you are yelling at each other).
And if the project is not so good because of what the employee does, maybe that’s not the worst thing either. Maybe don’t have expectations so high all the time.
H) SAY YES AND SAY NO
First, Say “Yes” to everything. Can you do X? Yes. Can you do Y? Yes. Can you do it for less than $Z? “Yes!”
You have to get the deal.
And the client is always right!
But then the client is often wrong.
So that’s when you can either say “No” or negotiate or fire the client.
Negotiation was rare for me in my first business. I simply did everything every client asked for whatever price.
The only times I said “No” was when startups wanted me to work for equity. Then I said “No”. Because equity is worth nothing ALL OF THE TIME.
But I did the Miramax website for $1000 even though I did the website for “The Matrix” for $250,000.
I just said “yes” to everything and soon our company was “THE company that did ALL of the entertainment websites”.
That brand value was worth millions during the small window that opened up when agencies like mine were being bought by public companies.
I) DON’T SPEND MONEY
Above I said, “delegate”. But now I’m saying “don’t spend money”.
Real businesses have cycles. If you are as lean as possible then you can handle a downturn. I never hired a secretary, for instance. And we only moved offices when we were 40 people in a three room office.
If your business lives on “VC welfare” (i.e. you are funded by big-pocketed investors who will put in more) then ignore all of this.
If you live in the real world and not on welfare then you need to spend less than you charge.
We didn’t know what we were doing. We had no sense of accounting or what a P&L was. Knowing accounting is the froth on top of a good business. It makes the business better.
But it’s not a startup entrepreneurial mindset.
The startup mindset is: “Do I have more cash in the bank at the end of the month (when bills are due) than I had at the beginning of the month”.
Note that accounting often ignores that (“money owed by clients” is an “asset” on paper but not in real life).
J) DON’T SMOKE CRACK
Everyone thinks their business is the best ever and their employees are “the top 1% of what they do”.
There’s a cognitive bias that describes this but I forget what it is.
And it’s really hard not to think this way. Even if you know something is a cognitive bias, even if you know that you are probably irrational, you will still smoke your own crack.
When I look back at some of the websites my first company made, I can see how bad they are in retrospect.
So we got a little lucky but that’s what hard work, and being good at sales, and selling the company are for.
It’s really important to take a step back, constantly look at the landscape, and try to objectively see where you and your company fit in.
Have a mindset of constantly trying to get better and offer more and more instead of resting on, “we’re the best”.
[ RELATED: The 100 Rules for Being an Entrepreneur ]
K) HAVE FUN
I started my first successful business with my sister.
It was such a roller coaster. My sister was an aspiring novelist. I worked for a TV company. And her husband was a painter by training. And we had another partner who was a photographer.
We knew absolutely nothing other than: Sell, Work, Charge, Repeat.
We had to learn so much while we built up to millions in revenues and ultimately selling the business.
It was really brutal. Almost all of the time we were either working hard, or running around scared. And we argued with each other A LOT.
But we did it and built it and sold it and got out alive. Many of our competitors didn’t. Because that entire sector imploded within months in 2000.
We traveled together, we ate all of our meals together, we spent so much time together. We had to make it fun. We threw parties. We made fun side projects. My brother-in-law was best man at my wedding.
We supported each other’s lives.
But an “entrepreneurial mindset” is really brutal and is a raging fire that often scorches the Earth until there are no survivors.
So now we don’t speak to each other at all. And I miss them.