The other day I was running through a park in Austin with my friend Noah.
As we are looping through some amazing trails we rounded the corner and came across a guy with a very perplexed look on his face.
He had just caught a fish, presumably his first, and he had it out of the water and was just kind of staring at it. Clearly he had no idea what to do once he actually caught the fish, no action plan, no idea how to prepare it even if he wanted to eat it–just letting the poor little guy suffocate on land.
Which got me to thinking…
The biggest problems with most successful entrepreneurs is success.
Getting there is the battle and the struggle, but once you get there what do you do?
You finally got money, a business, freedom, all the things you were hoping for, but somehow still we feel empty, so what do most of us do?
We start another business.
Often times this second business has dire consequences, because we have had our first taste of success and believe we are unbeatable, so we jump head first into another project without having the same mindset that we did before, now our risk tolerance is much higher, our confidence is higher, and our margin for error / cushion is bigger.
And what happens??
Below I am going to show you how to avoid this, by putting yourself back in startup, broke desperation mode, because I truly believe if you set the right constraints on yourself you have a far greater chance of success.
So first off what kind of limits should you set on yourself?
This is really true for people starting out and for people starting second businesses.
Have a super ROI
All of my businesses have a projected ROI of 12-16 months, the longest I feel comfortable is 20 months. Why? This helps me cut down to the core of what I need to get things going and also helps me decide what is absolutely essential to make this business work and more importantly to get my money back as quickly as possible.
Make a tight budget
One the most dangerous things that happens to successful people is they have money and think they cannot fail. They have one success and then they go big and they go all in on their next venture without getting back to the core of what made their first venture successful. Usual symptoms of this are: Huge over investments, buying failed businesses and thinking they can fix them, opening too much too quick, getting too far away from their core.
No one to pull the plug
Next is Concorde Fallacy of Sunk Cost, for years after the British and French governments knew that the Concorde was going to be a complete failure, however they continued to sink money into to it with the logic of “Well we’ve come this far” when in reality there was no economic case for the project.
The most recent example I can think of that defines all of the above to a T is the entrance of the retail store Target in the Canadian market. It was a FUCKING disaster… (full disclosure, my father is a former Target Exec, so I heard a lot of this nightmare first hand)
Probably the biggest mistakes were:
Their- ROI was 12 months on a 133 store chain and they were opening all 133 stores on the same day…. Ok, now I have big balls and do some stupid shit, but this tops any stupid shit I have done to date.
Thinking they couldn’t fail- they went all in on buying out a lease from a failing brand called Zellers for 1.8 billion dollars, they did little research on the stores themselves, and instead focused on the large footprint it would give them all across Canada. This was a huge mistake.
They went too BIG they implemented a completely new inventory management system SAP, I worked on a SAP integration for a company once, it was the worst 6 months of my life. Now imagine having 24 months to do that for 133 stores. In theory it should have been rather easier to replicate, but it’s not and I have never heard of a SAP integration that takes less than 2 years and even then it’s usually buggy as fuck for another 2 years.
Concorde Fallacy, on a number of fronts Target should have pulled them plug, the timeline was too tight they should have stopped there, SAP wasn’t working properly they should have reverted back to their old system, their staff wasn’t trained because they needed more time–the list goes on and on and on…
So how can you apply all these lessons to your first business?
Or to your second business after being successful at your first one?
Be it online or a physical brick and mortar store, no matter where you’re going to be positioned you’ll need to know what customers are around there, what are the positives and negatives of being in that location, and with all this data do you still feel good about this location? Hear the good and the bad, don’t be overly optimistic.
Don’t go too big too quick:
Yes you are a rockstar, and yes I’m sure think you cannot fail, but my friend even the best fail. Be VERY realistic about how you are going to run your operation. Last year a month before high season I decided to implement an entirely new POS, Inventory management and booking system. It was a nightmare, I did not take into account how long it would take to get it running, that high season was just around the corner, and that I had no idea what I was doing. It ended up costing me around $18,000 to fix my mistake
Keep your systems to a minimum:
Yes it’s great to have a tool shed with every tool in the world, but when all you need to do is build a fence you don’t want to have to dig through a 1,000 tools to find a nail and hammer.
Focus on what works: I had a buddy in Thailand a few weeks ago we went through all of my marketing, looked through my business systems and talked a lot about my business here. I talked about new email funnels I was working on, new ad spend I was doing, and new marketing ideas I had, at which point he said “Why are you changing everything? It’s been working for 3 years, why not just focus on what is working?”
Wow that was a very simple but very good point, why wasn’t I focusing on what was working?
Of course I am not saying if things are not working to just abandon ship, but you should have a worst case scenario in mind and if that worst case hits you should be prepared to jump ship. I just recently ran into this issue by taking on two locations at once, and very quickly into it I decided to abandon the one project (even though it cost me a shit ton of money) because I knew I was in over my head and was not prepared to deal with what was coming. It was painful, but it was the right move.
Please learn from my mistakes…
To put all of this simply—in your effort to push forward and make that magic happen, be conscious of each step you make and what you’re getting yourself into.
It’s good to move quickly, just don’t blindly run off of a cliff.
Make yourself a map, a clearly defined outcome for your venture.
Where are you headed–and how will you know when you get there?
Yes, I know you were successful in the past, but each business is different and no one can know it all.
Be honest with yourself, if things aren’t working be willing to change direction or even call it off.
In many ways it’s good to bite off more than you can chew, but you don’t want to choke to death.