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I was listening to a podcast with a well known business man several years ago.
He had a bunch of advice that’s been popularized and repeated by many others in this game.
A lot of this “startup wisdom” is what you hear over and over again online. The problem is, for 99% of people (especially early stage founders) this advice doesn’t work.
These are things like:
- No matter what, you can never give up.
- You have to LOVE what you do if you want to succeed.
- Don’t listen to the little man (as in, only seek advice from people you look up to, not folks who aren’t as successful as you)
- Take extreme risk and shoot for the moon with something BIG.
- Strive to make an impact (as in, your business is only worth it if it eventually helps a ton of people)
- Only hire top talent
- Have a great product (“It’s not enough to have a better product. It has to be 10X better”)
- Work super hard! Prioritize grinding over everything else.
Now my words:
I love the business man in question actually.
People like him are going to take our economy and our world to the next level. His story is incredible. The fact that he continues to take extreme risk to do big things is fascinating and we need more of our wealthy people and big companies to adopt this mindset.
But let me play devils advocate here. I’m not saying I’m smarter than anyone. I just believe this is misinterpreted and ends us hindering the smaller players in this game.
Our entrepreneurial culture idolizing this rhetoric is why so many young brilliant minds end up failing when they try to start a business and then end up being crushed and demotivated trying to get jobs.
Once you have had massive success like this person you can adopt this kind of attitude.
For the average beginner only one or two of these principles should be adopted.
Here’s my take instead.
On giving up:
Giving up and pivoting to something else is 100% necessary in the early days. If I didn’t ever give up I’d still be trying to launch one of the 10 business ideas I had in high school or college that didn’t have real potential.
Never throw good money after bad money. The sunk cost fallacy sends so many business owners into total financial ruin trying to make a bad business work.
If you have made an honest effort and your business isn’t working or you’ve learned things about your business that means it’s unlikely to help you reach your goals, it’s time to move on.
Pivoting, giving up, or starting over can be a huge advantage if you let it, especially in the early days.
Passion doesn’t equal profit:
Doing what you love to do is not at all correlated with what the market wants.
Most people like art, music, sports, food, cocktails, beer, cars, crypto, traveling, and video games. Those make up less than 5% of all jobs.
This is why businesses fail. People start them for selfish reasons.
Instead, you need to look unemotionally at the market for a problem to solve. You want to find an area where the competition is weak, the risk is low, and the odds are in your favor.
You only want to work on something with a proven business model that can make money today. No new ideas. No apps or tech. No venture capital funding needed.
Focus on cash flow and getting to profitability above all else.
Take advice from everyone, but only apply what makes sense for you:
I’ve learned a lot by taking advice from all people – especially the little man – and sifting through what advice I turn into action. Having an unbiased perspective is critical.
The issue with advice is that everyone has an opinion but few have context.
You need to figure out what advice actually makes sense and applies to your situation. For example, I like taking advice from junior employees in my org because they have context.
Yes, they aren’t as far along in their journey but they are working on the business day in and day out with me and often have valuable points to add.
This is better than trying to take advice from a random tweet you see online. Some of that can definitely be valuable, but you need to figure out what applies to you.
Mitigate risk:
Risk some of your time? Yes. Risk a little bit of money? Yes. But make a gamble that could restart you to level zero? Like a long shot? Like a tech company with VC funding where you need to build it into a $50M valuation and then sell for you to have a win?
But I have a family to feed… I have kids. I say no to all of this.
I think you should try to minimize risk. Play the odds that are the best for you.
If your goal is to make $20K/month in profit for yourself, you don’t need VC funding. You don’t need a new idea. You don’t need to reinvent the wheel.
Only invest when you are pretty sure your $1 investment will be worth $1+ in the future.
Don’t ever bet the house when you can’t afford to lose.
Make money, then impact:
Trying to make an impact and reach millions right off the bat is a huge mistake.
Less than 1% of successful entrepreneurs get started this way. Even Zuck started with just Harvard kids.
The most successful people I know all had a very specific target customer who needed one thing and they did that one thing very well.
They ignored everyone else. They started very small. Now that they have made it they give away a lot of money and devote energy to doing important things.
For the first 5 years of your business career, the focus should be on making money, not an impact.
Build a business where normal people can thrive:
How is an average joe going to attract great people and only hire top talent? Especially when their business isn’t making any money?
While they are waiting for saviors and unicorns to arrive I’ll be out working with average people doing normal, manageable things.
You can’t attract top talent when you have no cash. You have to build a business that can thrive with normal people instead.
Think about upgrading your talent after you’ve passed $1M in revenue per year.
Don’t make the excuse of “I don’t have top talent!” be the roadblock that stops you from getting started and making money today.
You don’t need to be 10X better:
Your product or service doesn’t need to be 10X better if you pick the right growing market in an underserved area.
If you think you need to be A LOT BETTER you will never end up trying anything and you’ll sit idle waiting on the perfect idea or circumstances to magically appear.
Also, you don’t have the cash to make things a lot better at the beginning. How do you plan to compete with the company 10 years ahead of you who actually has the talent and cash?
Thinking about this is irrelevant.
You just need to get started, make some sales, operate, build good relationships with your customers and grow from there.
If you can compete by being 10% better (not 10X) on quality, speed, or price, you can start to win.
Working smart is more important than working hard:
Working smart and finding the 20% of your efforts that get you 80% of the results is more important than hard work.
Burning yourself out (especially when you’re small and the reward is you making $10K/month) makes no sense at all.
99% of business owners work hard but still 95% of them fail.
Working efficiently and taking a step back and deciding where to work is much more important.
By the way, take these critiques with a grain of salt.
I simply want to share an alternative path.
Not every business needs to be a major success, impact millions of people, have a groundbreaking product, or hire top talent.
There are millions of small businesses in America and globally that don’t have these things but still provide economic security for the owners, their employees, and their families.
Our economy would be completely broken if these small businesses we’re too afraid to get started or too bogged down by the common business advice they see other wealthy people preach online.
Success in business is so much simpler than people like to let on.
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I’m an investor in an insurance brokerage called Titan Risk. They’re focused on helping SMBs get insurance policies including general liability, errors and omissions, cyber insurance, directors and officers liability and more.
The insurance guru at Titan, Jon, has helped over 1,500 clients get policies throughout his career.
He’s offering 5 free consulting calls to review your current insurance and risk management program.
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A few tweets from this week.
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Onward and upward,
Nick Huber