“An entrepreneur tends to bite off a little more than he can chew hoping he’ll quickly learn how to chew it.” – Roy Ash
Colin Morris, like so many entrepreneurs I have met, is in the middle of a whirlwind of his own creation. He has plenty of ideas about how to get himself out of his current troubles and on to a new, better path. But I wonder if he will.
His natural talents (ambition, imagination, passion) are all working at full speed, but not all in the same direction. As a result, his career has seen a big rise and fall and, if I’m right about him, it will continue to be characterized by exhilarating ups and downs for the rest of his life … unless he makes a change now.
Colin may be a type of entrepreneur that I’ve been thinking about lately – the type of person who is always recovering from some financial wreckage and busily and hopefully moving on to his next fortune. You know that his natural talents may well get him to the top again, but you are equally sure he won’t stay there long – that some time after he reaches the crest, some “unforeseen” problem will surprise him and send him crashing back down again.
For the moment, let’s call these folks “serial entrepreneurs,” because that is what they call themselves. Serial entrepreneurs – they will tell you – go from one business success to another. Listen to them at a business seminar and you will hear engaging stories of brilliant business triumphs. What they don’t tell you – but what you need to know – is that in between all those great successes there are even bigger failures. And those failures usually take away everything that was gained by the prior successes and leave them financially and spiritually broken.
But just for a while. These entrepreneurs somehow gather their mental and emotional resources and bounce back to take on yet another business challenge. So instead of serial entrepreneurs, let us call them Bounce-Back Entrepreneurs (BBEs).
I have known many BBEs who are famous business-opportunity gurus. They make a lot of money – usually by telling other entrepreneurs how they got rich the first time. But the dirty truth is that they have never been able to acquire any substantial wealth for themselves, because their businesses keep rising and falling and their savings get eaten up by the cost of the crashes.
In building wealth, it’s not so much how much money you make when you make the money, but how little you lose when you lose it.
I can conjure up at least a half-dozen BBEs who fit nicely into this category. They have great talents and charisma, but when it comes to the nitty-gritty, they end up making poor choices and their businesses can’t sustain themselves. I remember saying to one of the people I am thinking about – one of the best-known business gurus in the world, in fact – “You will always be able to make a high income, but you will never grow rich unless you change your habits.”
“Twenty years from now,” I told him, “you will have to work just as hard to make the million or two million you spend every year, because you won’t have accumulated 20 or 30 million dollars in savings.”
I said that to him about 20 years ago. He is, as I predicted, still working his butt off to pay for his lifestyle.
Is Colin on his way to becoming a BBE? I hope not. But you be the judge. Here is what he wrote to me in a recent letter:
“I have been a self-made, self-employed business owner for about 15 years now. I am now involved in a legal battle involving one of my companies, and it is sucking all of my savings and nearly most of my life-blood. We are talking about millions at stake here (my ex sold the business fraudulently to a public company behind my back after I moved to NYC) and, well, at the ripe old age of 38 I am finding myself having to start over from scratch to make ends meet until this case resolves.
“One of my numerous ‘jobs’ as president and CEO was to write the marketing copy. It is something I enjoy and have a real passion for. Branding, designing ads, writing ad copy, etc. After reading your latest issue of ETR, something just whispered to me to shoot you an e-mail to ask if you know of the fastest route to secure a position in that field. Is there a database for companies searching for copywriters? Or a headhunter that you know of?
“I always wrote copy for my various companies, but never thought of doing it for another company. What a marvelous idea! Any advice would be appreciated!”
My reaction his letter is: Whoa! Slow down there, Colin! You are in the middle of paying lawyers gobs of money to settle what sounds like a marriage-inspired business-destruction lawsuit. You are also in the middle of developing your next business. In starting that business, you are doing everything yourself. And despite this, or perhaps because of it, you’ve begun to think about hiring yourself out to be a freelance copywriter.
Let’s start with the basics.
First of all, freelance copywriting isn’t a business. It’s a self-employment opportunity. It is like being a doctor or a lawyer. You can make a high income doing it, but the job itself doesn’t create any equity. To create equity, you need to build a good business that doesn’t need you to run it. Self-employment companies, which include most freelance professions, just won’t do that for you.
Equity is how you cash out in the end – how you get the big bucks. A high income is good, but the trouble with a high income is that an expensive lifestyle usually goes with it. (I’ve explained most of this stuff in Automatic Wealth and Automatic Wealth for Grads.)
To get a business past the threshold where you are doing everything yourself, as Colin is doing right now, you have to pay attention to three fundamental elements:
- Marketing and sales
- Product development
Most BBEs are good at marketing and sales. Some are good at product development too, though for most of them product development means getting lots of half-assed products sold, not creating a line – or several lines – of quality, integrated products that exceed customers’ expectations. Most BBEs are also bad at operations, probably because operations are on the expense side of the ledger… and because they are just plain boring.
If any of this sounds familiar to Colin – or to you, if you’re in a similar situation – here are my recommendations:
- Recognize that you can’t do everything yourself, that you need people who are better than you at certain things to help you run your business.
- Step back and examine your personal strengths and weaknesses, and match those with the three fundamental elements of every business: marketing/sales, product development, and operations.
- In each of these areas, you need to have a genuine superstar at the helm. You can be the superstar in one, probably marketing/sales, but get someone else – a true superstar-in-training – to head up product development and operations.
- Give those people the authority to do their jobs the right way. Don’t insist – directly or indirectly – that they always subsume their objectives to your marketing plans.
Sales and marketing are always the number one priority of a business builder. They should consume 80 percent of your intellectual resources. But your product-development superstar must spend 80 percent of his time trying to figure out what new product will capture the imagination of your marketplace. And your operations superstar must spend 80 percent of his time making sure that everything runs smoothly.
Hire the best people you can find. Make sure they are better at what they do than you are. And give them the respect they need to build your business.
And finally – and this is probably the most important point – understand that building a truly valuable business will take you at least five to seven years. Make a mental commitment now to be fully engaged for that length of time. Any impulse you have to do something else along the way must be rejected.
Stick to your knitting. Surround yourself with superstars. Good luck![Ed. Note: Michael’s “Automatic Wealth” system can help you retire early and enjoy the freedom of financial independence. Learn how to do it with his best-selling book Automatic Wealth: The Six Steps to Financial Independence.] [Ed. Note: Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]