10 Steps to Starting a Successful Business

my name is cliff eneko and I do a number of things let's get the bad one out of the way first I am by profession and training a lawyer everybody the room is sealed they just closed the doors you cannot escape okay but I consider myself one of the good guys I I don't do wills I don't do divorces I don't do fender benders you will never see my face plastered on the side of a Bridgeport city bus i base all I do is help people start and run businesses that is all I do I've been a lawyer for 30 years and for 20 of those years now I have been doing this here in southern Connecticut parts of New York City metropolitan area in that time I have helped somewhere in the neighborhood of 15,000 people start businesses from scratch everything from you know one person consulting firms to a couple of companies that are on the Inc 500 today and I'm very very proud of that I've been around and boy do I wish I'd taken stock when they went public I wouldn't be doing this today but but I am NOT just a lawyer I'm also a successful entrepreneur I have 14 books in print various kinds on small business law and management I write for Entrepreneur Magazine I have a nationally syndicated newspaper column that's in about 200 newspapers around the country including some papers here in the Lower Fairfield County for the most part I'm not in any of the Bridgeport area papers unfortunately if you really want to know more about me and what I do I got a brand new website which even has some nice video on it at w w6 seeding in your business comm which is the name of my column succeeding in your business comm and everything on there is free I got a lot of free resources for people who are thinking about starting small business so with that out of the way you know when you when people are starting a business from scratch they tend to get confused I find that most people that I deal with when I when I start dealing with a client for the first time they're asking the right questions but they're asking them in a very confused and jumbled order and that I think just adds to the confusion and stress of starting up a successful business from scratch if you go to your local bookstore and you go to the small business section of that bookstore I don't care which one it is you will see at least 100 different books on how to write a business plan for a successful small business that's a topic that's been pretty much written to death I can save you some money in my opinion you should not buy any of them because they're no good I shouldn't say that they're not wrong it's just that they're meant for a different type of entrepreneur than what most of you here in this room are those books are written primarily for people who are starting technology companies software media web-based applications that kind of thing companies that are going to be looking at some point for outside capital venture capital that kind of thing institutional investments and you have to put together a business plan that has to look a very very specific way because that's what investors want to see that's what most of those books are all about most of those books will not be too helpful to most of you in doing basic retail businesses basic service businesses which is what most of the clients who come my way are looking to accomplish however having said that you do need a business plan but the business plan you need does not have to be a hundred page book with index tabs and charts and projections of cash flow and all the stuff that these books are talking about for the more technology oriented companies what you need as a business plan is the answer to ten questions and the questions themselves are pretty basic in fact if I if I went around the room and asked you what do you think the ten questions are I think most of you would get most of them right it really isn't rocket science what I'm going to be talking about here today what is different and what I stress in my presentations is the order in which those questions are asked when you're looking to start small business is a very specific order in which these ten questions must be asked most people when they start businesses they ask the right questions but they get the order all balled up which is what leads to confusion in which what leads them to make bad business decisions so what I'm really going to be teaching you tonight is the order in which you ask these 10 questions and when you do these questions when you when you tackle these questions it's very important number one you must do them one at a time and number two this is not the SATs now what do I mean by that well most of you when you went deals with you went to college you took the SATs the College Board's probably your third or fourth year of high school and you're then some poor teacher who took pity on you give you a little class on how to take the test and what was the big piece of advice they gave you what do they tell you to do when you're taking the SATs or any other time tests what do they tell you to do if you get stuck on a question they said don't waste your time go on to the next question a circle idiom try to get through the test then go back and spend more time on the questions you got stuck on that's the worst advice anyone will ever give you for starting a small business if you are doing these 10 questions and you get stuck on a question the very worst thing you could do is to move on to the next question if you get stuck on a question you've got to stay with that question you've got to obsess about it analyze it research it Network true everything you can to try to find the answer to that question until one of two things happens either you get the answer to your question which enables you then to move on to the next one or and this happens about 50% of the time you realize after a while that the question has no answer the question cannot be answered at all and that is why the business won't work that is why the business will fail if this happens to you is not because of you is that because you're dumb or uneducated or inexperienced I didn't know what you were doing a lot of times it's because the business has a fatal flaw in it and the fatal flaw is that no one can answer question 7 that's the problem this is what and that is why the business is not going to work for you and why it probably won't work for a lot of other people as well so you know as we go through these questions think of these questions as a ways of screening out bad ideas you start with an idea you subject them to the 10 question analysis and at the end of the day if you survive if the idea survives through all 10 questions then it's probably one you should pursue okay so what that is sort of my background let's talk about these 10 questions just you know when I when I do this I normally do this I teach a class at Norwalk Community College three times a year in their evening program it's called starting a small business we actually take fifteen hours to get through these ten questions just so you know what you're going to get is the one hour executive summary of these ten questions that's what you're going to get I'm going to try to cover as much as I can in the one hour it's like those guys with other guys the comedians that do the complete works of Shakespeare in one hour and I can't remember their names but they travel in on the country acts you can do all the complete works of Shakespeare in one hour that's what we're going to be doing in the next 60 in the next 60 minutes so without any further ado let's go through the ten questions okay question number one which we will put on the board as soon as we get a pattern yeah question one who are my customers okay now some of you are looking at me kind of weird now I can see what's going on in your mind you're saying well alright hold on a second I get what cliffs saying here and yes you got to know your customers the customers King this is important I get it but wait a minute you're saying this is the very first thing you think about when you're starting any kind of a business I mean isn't there a question cliff it comes before this which is what is the product or service I mean don't you kind of have to know what the product or service is before you know the customers are the answer to that believe it or not is no you do not need to have a specific product or service in mind to know who your customers are going to be I know that sounds a little radical well let me see if I can explain it you're going to find out when you're in business for yourself but not everybody buys from you your market is not the universe there are some people in this world who will buy anything at all from you because they know you they like you they get you I mean these are the people that have always gravitated toward you since you were a kid these are the people you hung out with in grade school these are the people you dated in high school in college or possibly married these are the people you have always been attracted to and that have been a trend that are simultaneously attracted to you in return that we call those natural customers at the other end of the spectrum we get there are certain people who will never buy a thing from you in a million years no matter even if you had a cure for cancer and they were dying of cancer they would still not buy because they just don't buy from you you're going to and everybody else while your other customers fall somewhere you know in between these two radical extremes I'll give you an example from my own law practice I do a lot of work with dentists I'm not a healthcare lawyer I help them with I do their business type stuff so when a dentist wants to hire like a young young colleague fresh out of dental school I do the employment agreement when an older dentist tries to sell to a younger dentists and sell the practice he's retiring I do the purchase and sale documents and I'm fairly well known for this now I'm working with about 42 dentists here in the state of Connecticut very nice everything a root canal anywhere in the state give me a call probably get you the best deal anywhere you want to know dentists love me I get dental conventions they don't laugh at my jokes I get the whole audience as clients without any effort whatsoever dentist by Clif etiqa as an attorney but here's an amazing thing right now and in my practice and this is fairly typical I am NOT currently working with any other types of physicians I don't represent a single podiatrist a single optometrist a single orthopedic surgeon or internist I don't do it it's not for what I'm trying I speak at Medical conventions I tell the same jokes I tell the dentists they all laugh I get business cards I never hear from them ever again it's amazing and let me tell you something there's there's not much of a learning curve here if an older podiatrist is required as retiring and selling his practice to a younger podiatrist all I got to do is take my dental documents take the DDS out put a DPM in there and boom I'm done it's exactly the same paperwork it's exactly the same transaction it's not like it's a different area of the law or anything like that it's that for some reason dentist by clinic oh and doctors don't now that's interesting and you might ask yourself gee why answer I haven't a clue I don't know honestly I'm not just saying that to be cute or funny I really don't know why it is the dentist's bite me exact same kind of service other services other doctors this is one of the mysteries of the marketplace and you'll find that it's and it's true in your case too you know even though you have any good reasons why people should buy things for if they're not otherwise motivated they're not going to buy from you and you got to find out before you do anything in terms of building a business it's a good idea to sit down and ask yourself who are my natural customers who are the people who more likely than not will buy anything that I have to offer whether it's antiques insurance or legal services you know whatever it is you're looking to sell who are the people in my life that have always gotten me that I always gravitate toward that who gravitate toward me it can be something as silly as the that you always dated people that are taller than you you know and sometimes these get very silly and you're going to find by the way and it's not about not to digress it's the silly little things in life that have made you who you are you know little little things that happen to you when you were a teenager or a kid have shaped your character in ways that you probably have forgotten as getting it in touch with those things before you start building a business because those are the things that will help you identify who these people are that are more likely than not to buy anything at all that you have from you so let's say here's an exercise me sent to a cliff I mean I get this this all sounds great but how do you do it well here's my little exercise when you go home tonight if this were my normal college class I'd ask you to do this as a homework assignment I want you to go home take the same pad that's in front of you right now get a make yourself a strong pot of coffee or my preference of VSOP brandy you'll need it and I want you to do this I want it to the phone I want you to make a list of ten groups of people that you feel you know so well you can crawl inside their head and look at the world the way they do sounds easy doesn't it make a list of ten groups of people that you know so well you have hung out with these people so much in your life that you can actually crawl inside their head and look at the world through their eyes now I'm not asking you to make a list of people that you strongly identify with or that you like that's actually not a good thing in business because when you when you would strongly identify with a certain group of people you tend to see only the positive side of them you only you tend to romanticize them or stereotype them a little bit you don't see when between two people you're going to learn the only real people buy things stereotypes don't buy anything idealized human beings do not buy anything only human beings with false and good things both in equal measure buy things in this world any people when you're looking at potential markets you've got to see these people with way they really are what really motivates them to buy things you know not what they say they're going to buy not what you think they're going to buy what really is these people you have to know lots and lots about them and the only way that you can really know lots about certain types of people is to spend lots of time with them so that's what I'm asking you to do so let's think it was si with me if I were doing this 10 extras 10-point exercise who would be on my list well lawyers okay us think Canadian lawyers not German or Italian lawyers I haven't done a lot of international work in my career so I really can't tell you what an Italian lawyer is all about US and Canadian lawyers yes I've been a lawyer for thirty years of my life for 15 of those years I actually ran a company selling books and information products to the legal community I still do it today you know I have met literally hundreds of thousands of lawyers in the US and Canada more than any of all of you together we'll never meet in your entire lifetime I feel I can definitely know what u.s. and Canadian lawyers are all about I know what makes those people to book publishers I read a publishing company for 15 years of my life I know what it's like to lie awake at nights worrying whether or not I picked the right shrink-wrap from my latest paperback book you may not realize this but there's four different kinds of shrink-wrap and if you put the wrong one on the books fine if it's too tight the books fine kind of does a backwards S it's never see a book like that at the book store you never buy that book it looks ugly you know the information is perfectly good but it just looks weird you know when it's doing that snake thing so interesting publishers if you've never published a book you have no idea what I'm talking about but publishers obsess about those kinds of details but don't just limit this to business stuff get a little personal here so for example middle-aged men I'm 55 years old I'll volunteer that to you it means I think I qualify people who cannot wear contact lenses because of a childhood accident that I won't bore you with I have tiny microscopic particles of metal in both my eyes now you know they don't affect my vision at all but it means I can't wear contacts you know I did there - scratching they irritate my eyes too much now you say to yourself big fat hairy vo who cares whether this guy can wear contacts or not seriously it affects your life so for example last year I had I had a knee injury how to have some surgery on my knee and I had to go in for an MRI okay what is the M in MRI stand for what do magnets do when they get too close to little microscopic particles of metal in both your by the way they say in public speaking classes you should always paint a vivid portrait for your audit does this do it for you okay surgery if you ever go for an MRI surgery they're gonna have a big sign outside the door that says if you have any metal parts in your body please tell the technician or you cuz you're not going to have them very long otherwise that's big it doesn't say that of course but and seriously and of course I'm a lawyer walking in right off the bat every wrestler that's one strike against me right off the bat for the MRI right but then I tell him I got these things in my eyes I mean even though I was only it was my knee that was affected it was only in the machine from like here down but I had this leg pillow on my face was the technician was terrified you know I mean having a lawyer walking in with metal body parts is like a serial killer walking into a do an MRI office and it doesn't get much worse than that for for an MRI technician say I need a blicker at the end of the day I think almost guarantee that certain people have issues what was my point it's these stupid little things you don't even think about but the action is should I do a lot of TV work I can't wear my glasses on a TV set we don't like to see people with glasses on TV because it looks geeky so that means I can't be a teleprompter I have to memorize everything I'm going to say on television because I can't see them is there any people who can wear contact lenses have issues you know if you're not in that Club you have no idea what they are but they do have issues that's my point but now here's your biggest kid sometimes your best customers your best natural customers are people that don't look anything at all like you they are a group that you yourself will never be a member of so here's my example if I were doing this exercise of why we're listing you know 10 groups of people that I know a lot about I would put down without any hesitation or irony whatsoever women in their 70s women a 70 to 80 something you're looking at me and you're saying this is more about this guy that I want to know I go to the bathroom you know but seriously a difficult I'm sorry I'm not buying this cliff I mean you know you're a guy you know you're never going to be a woman you know you don't mean forgive me this is this is too much of a stretch I'm sorry how can you say with a straight face that limited is the answer because of something you would never know in a million years unless I told you which of course I will which is that when I was a boy in grade school like second third fourth grade when I was a latchkey kid my mom took a job with a PR firm in Manhattan actually she was secretary for a PR firm that's still in existence the ABC TV series Mad Men right she lived that life she was actually a secretary for one of the big PR firms of that era of the early 1960s and she we lived in Yonkers New York in suburbs of Westchester and she took the train into New York you know and basically there was nobody to meet me at the school bus when I when I got off from school of course she was a good mom of course and she wasn't about to let a second-grade kid run around the house alone so she called in reinforcements in the form of two women who were then in their 70s they've since long since passed on and I can't tell you who they are my nated my maternal grandmother her mother whose real name was Matilda Bertha believe last names out of this and her sister with whom she lived my maiden great Aunt Edna Fredrika do you have a picture of these two little ladies in your mind Arsenic and Old Lace right that's exactly what they look like you're exactly right when they took the BAI the living Yonkers they took the bus over and they basically babysat me until mom got home from work well this got a little boring for them from time to time because I was kind of a boring kid so they they started inviting over with my mom's permission they started inviting over some of their friends from the neighborhood who are all women in their 70s and it got a little out of hand at its peak we had the biggest illegal casino in the history of Westchester County New York going on in our house every day now seriously I would come home from school I'd open the door it was this big cloud of smoke over the dining-room table cause they all smoked like chimneys and these definitely 20 women in their 70s all sitting around playing card games a cliff is that you okay yes that's the refrigerator do your homework okay hermano any of your behind the police'll green eyeshades this is what I came home to for like I said to make you laugh it's a funny story right it's accused or I could think about it for five hours every day five days a week do you ever do the math here for about four or five years of my life you know until I was old enough to you know go out a month to take care of myself I was in high school I didn't need these people anymore I was exposed ladies and gentlemen to probably the best focused group of women in their 70s at least of that generation ever assembled because while these women were paying their card games what were they doing about about what it's like to be a woman in your 70s that's what they were talking about and there's this little kid too short plans playing with his Tonka trucks being besieged with wave after wave of this information about women in their 70s now ladies and gentlemen I didn't give a rat's patootie about women in their 70s as they get the ripe old age of 8 years old I didn't want this information I didn't ask for this information I truly did not care what women of their 70s care about but just by sheer osmosis for hundreds and hundreds of hours ladies I can tell you things about women in their 70s that'll make your hair stand by that I truly honestly can tell you that I can do that ok again it's these little stupid things that make you who you are it really super little things like that ok so you get so seriously before you even think about doing a business or thinking about specific products or services do a little homework about who or who am I in the business of serving Bob Dylan has that song you got to serve somebody remember that song you have to serve somebody every business when you get down to it is a service business who are you who do you want to serve who do you care enough about who do you know enough about that you want to spend the rest of your life the rest of your career serving people I made up my mind very early on that I want to serve I want to serve lawyers young lawyers who don't know how to manage their careers you don't know what the heck they're doing I want to serve entrepreneurs I want to serve people that are starting businesses and you really don't know what they're doing that's that was something I'm a decision I made very early on it's a good decision for you to make - this is where you begin the process now why is it so important that we know so much about customers when we put this at the top because now we get to question two and question two is now I've got this great list of 35 groups of people that you know I know a lot about why will these people buy anything at all from me keep in mind you haven't even discussed a single product or service yet a specific product or service why will these people buy anything at all from me in the world antiques guns you know whatever okay now that's not what I wrote up on the board I wrote up these two blank spaces with s's at the end now why did I do that because of something it has taken me 25 years to learn and I'm going to share this with you this is something that is one of the deepest darkest secrets of running a business it is something you will not see in any book in any article in any CD or dvd information product unless it's one that I myself have written it's something that I've actually I've written about it's my mind boats but you won't see it anywhere else it's one of the dirtiest secrets in the world it's called a build-up by the way this is very prideful when you're doing so if you just please spit this thing out okay there are two reasons and only two why anyone in this world buys anything there's only two reasons in this world why you have ever bought anything there's only two reasons in this world why I have ever bought any things as a consumer I'm no smarter than anybody anybody in this room I don't claim to be and if you if you read a little bit about business you think you know what these two things aren't right a lot of very sophisticated business people think they know what these two things are but you would be wrong as to one of them you would be deadly wrong the two things if you read any book on marketing or small business or anything else they say oh the two reasons why people buy anything are needs and wants that's what you will read about in the books it's wrong prophetic Oh says it is wrong especially the needs part people one of the dirtiest little secrets in the world of business is that people seldom if ever buy things because they need them one of the dumbest things you can do when starting a business is to base your business plan on what people need or what you think they need because it's seldom if ever works I could give you the reasons for that but in one hour I don't really have a whole lot of time let me tell you what the real two motivators are because this is the this is the dirty little secret about this people sell you can think of 50 good logical reasons why people should buy your stuff all good reasons and logical makes a lot of sense everybody goes up and down like this and they nod their head and they do stuff like that but unless they are otherwise motivated to buy they will not buy even though you persuaded them even though they know they need it even though they buy in today yes I know I need this I need this but I'm still not buying it I'll give you a very simple example up until a few years ago I did not have a will that kind of surprised you a little bit man look I mean let me ask you why didn't I have a well is it because I didn't know I needed one I'm a lawyer for crying out loud if anybody knows he needs a will it's made right how many the episode a curiosity so every other men people here do not have a little I don't do eels by the way I'm not trying to handle Gator okay but two or three it's very very typical and by the way I don't blame you at all there's a lot of good reasons why people don't have well I'll tell you it gets even worse because I myself do not do wills in my law practice when someone one of my clients needs a will what do I do I refer it I refer to a local attorney who does wills I got four or five attorneys here in Fairfield County or very grateful for all this business that I send them and for years they've been telling me hey cliff when it comes time to do your will call me I'll do it for nothing you know as a professional courtesy is a way of saying thank you for all this wonderful business so here's a situation ladies and gentle in which I a relatively intelligent human being not only know I need something I've got people offering to do it for me for nothing and I'm still saying no I'm still resisting it is that dumb is that stupid let me tell you something at your market you know we all know the saying you can't you can lead a horse to water but you can't make them in drink well most of us were not raised on farms I don't know much about horses but I'll tell you it's really true about customers you know you have to find out what really motivates people logic does not work here the rational brain does not work in order to get sales out of customers you got to hit them a little further down in the anatomy okay now so what does so I told you what this will forget needs and wants here's what does work number one passions if you've got a product or service that turns people on that gets them excited in some way that gets the saliva flowing in their mouths they will buy from you even in bad economies give me examples entire industries that are based on people's passions yeah music I couldn't agree with you more iPods you know any kind of music anybody else sports absolutely right who needs sports who needs baseball or football or basketball right but we're passionate about badly some people are anyway by the way if you're having trouble thinking of passions okay think this may sound stupid think of the seven deadly sins I don't believe first of all I don't believe these are sin I don't believe these are bad things these the seven deadly sins are common emotions that most people on planet earth have in one varying degree or another and if you don't believe me I'll walk you through the seven number one pride anything that makes me feel good about myself as a professional or a human being self-help you know that kind of stuff the whole self-help industry is based on people's pride that's number one number two lust no explanation necessary sex sells we all know that greed got this hot new mutual fund it will generate twelve percent per annum no matter what the economy is isn't that Bernie Madoff dead right exactly how you sold all those people all right and I got this hot new mutual fund greed works I'll make you rich in ten days you know start a small business be rich in no time at all you know come step right up folks all right number four Envy I've got something you don't have if you're driving a Lamborghini to went from work you say ladies and gentlemen there's something more than a need for basic transportation that's going on here okay let's just say that anger negative political ads you know we don't know much about our candidate but the other candidate is such a blithering idiot he's going to destroy this country so much please when you're sitting in the voting booth please do not think about our 10:00 today they're all think about how much you hate the other guy in your vote for our candidate by default by the way there are reams of political behavioral data studies that support what I've just said here when you're in a voting booth you tend to vote against more than you do for things so my job is a political operative it's not so much to get you to love my guy but to hate the other one that's a let me look like I hate those ads as much as anybody else does but there's reams of statistics that say that they work which is why people still build convenience re um sloth which is laziness think convenience anything that makes my life easier that means I don't have to get out I can make myself coffee about having to get up out of bed in the morning anything that makes my life easier and enables me not to use my muscles or any of my body parts is something I probably will pay a lot of money for and then lastly lot least gluttony which is eating and drinking too much can help you too much there I don't know much about that word okay are you laughing okay maybe people weighs less when I say that never figured out mine anyway it's a good place to start with thinking about people's passions but that's not the only thing that motivates people to buy the other great motivator fear fears and anxieties show me people with disposable income with lots of anxieties and I'll show you market for lots and lots of stuff give me examples entire industries that are pasted on people's anxieties or fears insurance yeah you better believe it anybody else home security systems burglar alarms that's right hey come on me how about lawyers right now seriously I'm kind of in the fear business right yes sir you don't believe that when was the last time you called your attorney when you were having a nice day think about this you don't do that yep alone on that phone rings and I pick it up the first thing I hear clothes by God you picked up crap I was going to go on for lunch alright that's only by the tell me your story what's going on how bad is it how much of your body is the wolf eating by the way it's exactly 7:30 okay seriously this is what this way I know is this the way it is nothing should love attorney but you got a feel for people who are in an environment where everything's a crisis everything's a problem that act you know sir but my doctors is the same thing there are two people you never call when you're having a life a nice day your attorney and your orthopedist think about that it's really true you know listen to people you never call narragansett these are the true reasons right but aren't these very intimate questions these are very personal questions aren't they that's what you have to know a lot about people if you really don't know what people's fears and passions are I strongly submit my humbly submit to you but you really don't know them at all you don't really know what makes those people tick if you really think you know a group of people you really know what makes them tick what motivates them to buy ask him what keeps them awake at nights what turns them on if you cannot answer those questions you probably do not know those people as well as you think you do and you probably should not be selling to them okay well those are questions one and two okay now write out now up to this point we have not even spoken about a specific product or service we've just been talking about people and there are different kinds of people and their fears and passions why do we do this because this is where successful businesses come from they do not come from your brain they do not come from your ideas where do successful businesses come from they come from your observation of the people around you and their fears and passions and specifically fears and passions that are not being satisfied in the current marketplace you're looking for holes you're looking for areas where certain people's fears and passions are not being addressed by other businesses those are the entrepreneurial opportunities that lead to successful businesses and can possibly make you rich that's how that's how it's done that's why we spend so much time on this question number three now now it's time though to start picking products and services and here how we do it here's question 3 what products the services can I come up with what products and services can I come up with that will have a direct and immediate appeal that's what those words say it really in a hurry what products the services can I develop can I dream up that will have a direct and immediate appeal to the fears and passions of my target customers the people I'm going after what products the services can I dream up that will have a direct and immediate appeal you do not want your customers thinking too hard about why they need your products and services you want the appeal to be direct and immediate the minute they see it it should hit them between the eyes oh god I need that now keep in mind listen what I just said when we see something in a store that we really want the words that come out of our mouth are oh I need that but it's not really need that's going on what's happened here is that I have made my product or service has made a direct and immediate appeal to a fear or a passion that you are feeling and you're reaching for your wallet or your credit cards right now that's what's going on here because by the way this is this data to support this I do a lot of talking at sales organizations around the country and sales managers tell me this true the average person takes only 15 seconds to make up their mind whether or not they're going to buy something the average person takes 10 to 15 seconds to make up their mind and I've had sales people tell me you know if I'm going to sales meeting if I'm going to sales page and I can see within 15 seconds I haven't reached these people I stopped I showed up and I go on to the next prospect you know because the longer people time you know more time people think need to think about whether or not they're going to buy something they tend to talk themselves out of it more time you have to think about a purchasing decision you tend to talk yourself out of things you don't talk yourself into things that's just human nature that's how it is so if I'm trying to sell you something and I don't get it I don't hit you within 10 or 15 seconds I'm probably wasting my breath after that and by the way this works in job interviews too if you're interviewing for a job if you're between jobs or whatever right now you know don't get me wrong but when you're in a job I'm not saying takes a person 15 minutes 15 seconds to decide if you're a good fit for a job I am NOT saying that it takes a lot longer than that but it only takes 10 to 15 seconds for a person decide what to decide whether or not they like you right when you meet somebody for the first time how long does it take you to make up your mind whether you like this person that only takes a few seconds does it that's it and we all know that when you're interviewing for a job if the interviewer does not like you it doesn't matter how perfect your credentials are or what a great fit you are for that job you're out of there okay so keep this in mind it works even in job interviews as well when you're selling anything to anybody you got to do you only have 10 or 15 seconds to make an impression on that person it's is that it's that simple and it's the same when selling products and services your products and services whatever they are should sell themselves people shouldn't have to ask why do I need these things the appeal should be obvious and immediate and that's what you're that's what you're going for it here those are the products and services you want to focus on the longer it takes you to explain more time it takes you to explain what it is you're selling the less likely you are to generate sales and lots of revenue okay question number 4 the last of our marketing questions how do I reach my customers how god bless you how do I get my message across to people okay now this question in a way dovetails all the way back to question number one if you truly know your customers well enough you not only know what why they buy and what they'll buy you also know how do they process information are they leaders are they TV people are they people that you have to speak to in person to sell if you really truly know your customers well enough you'll know how to get your message across let me give you two silly examples lawyers how many people here have had experience selling to lawyers okay I'll give you the key to selling lawyers lawyers are creatures of the written word we don't like well long-winded sales pitches we want things we can take away and read and study we're readers we are we are creatures of the book and the written word that's what lawyers are that's what lawyers are so if I were giving a seminar for a bunch of lawyers I would never get away just getting out these two can be handouts I would have to give you like a book like this a 500 page book with all kinds of copies of statutes and regulations and articles and all this kind of stuff cuz that's what lawyers want when I go to a seminar in New York I wish I have to do a couple of times a year to keep my license down there I don't really feel the seminar is a good one unless I have our get a hernia walking back to Grand Central Station with a what they end outside really Destry sure is they talk to lawyers and you'll see them speaking truth here okay lawyers like that you know whenever you're talking to lawyers like when I used to climb at my publishing company whenever we came up with a new book I would always send people a five a six page glossy brochure with the photo of the author the author's biography the table of contents a sample chapter a list of all the forms because lawyers want that kind of detail before they'll buy a new law book all right lawyers are detailed people and you got to hit them with detail if you're going to try to sell them now that's lawyers now let's say we're selling instead to teenagers if you're trying to sell something to a teenager you're going to get them a six-page glossy brochure he'll know you'll smoke it that's what they'll do all right that doesn't work how do you sell the teenagers what works let me ask you let me ask of course a different way who'da teenagers listen to google says ludos suit isn't they listen that their peers other teenagers so what you've got to do is you got to get some buzz going you know teenagers aren't going to buy from a guy like me let's be very frank about this okay no teenager in the world is going to buy from somebody who looks like this right so what I got to do is I got to go on secondlife.com and I got to create an avatar that looks like Zac Efron and he's going to go around saying hey this is new metal band man it's called you know leering a lawyer's man they're really great they're really cool that's what I got to do I got to get you know buzz going in the teen community because that's what's going to get me sales from that kind of market you guys get it okay by the way always spoken to first for questions deal with marketing which is the most important thing by the way that's why we put these four questions first if you have a business and you have no customers we call that a hobby that's what we call it a business without customers is a hobby now the IRS has a whole thing set of definitions about what's a hobby what's a business it really boils down to do you have customers or not a business without custom if you do not have custom do not spend a minute worrying about whether you should be a corporation or an LLC it doesn't matter you have no money to pay anyway for legal fees so it doesn't really matter you know no one's going to sue you we have no one's buying from you let me give you some free legal advice here no one if you're worried about getting sued losing your house right if you don't have any customers no one's going to see you anyway so what cares okay you don't have to be a corporation or an LLC that's when you put the emphasis on getting customers that's course is one of you for it but now we don't see there come along now we don't talk about competitors okay I got all this stuff I got a zillion customers I got a product that sells okay okay I know the customers are going to be there I'm not worried about people buying I know exactly what they're free where they are with their fears and passions or I know exactly how I'm going to target that I'm not worried about customers but there's somebody else out there there's making a ton of money doing this already I got some tough competition I don't know if I can beat that competition or not and that's what questions 5 & 6 are all about question 5 who are my competitors who are they well believe it or not this is a tough question a lot of people out there people out there thinking that they don't have any competitors at all that's not true you always have competitors whatever business you're doing you always have competition of one con out of one kind or another but there are four different kinds of competitors and some of them aren't so obvious some of them kind of high they're a little stinky some of them are easy to spot some of them are hard to spot but you've always got competitors and you got four kinds of competitors I like to use this little leak hole as a two by two matrix you can just call it a box of four squares if your life is perfectly fine okay here are your four types of competitors okay first of all your competition can be either direct or indirect okay a direct competitor is somebody who's doing exactly the same thing that you are for the same people okay by the way this is a trick question true or false your competitors are always the people that are doing the same things you're doing well that's right if they're doing them for other people they're not your competitors at all even though they're doing exactly the same stuff you know so if I have a book on how to interview for a legal job and one of you guys write a book about how to write how to interview for a medical job even though you follow my table of contents and my content you know almost to the letter of course you gotta watch out for copyright there we are not competitors in any way even though we've got virtually identical products is we're targeting different markets it's your markets that determine who your competitors are not your products or services okay a direct competitor is somebody who's targeting the same markets that you're going after and they're using the same type of product or service so if I have a pizza parlor on Black Rock Turnpike here in Fairfield around 58 and you've got a pizza parlor right across the street we are direct competitors we're both were all going after the same people and pizza is our product that's what we're doing but a competitor can also be indirect as well and in your read competitor is somebody who's trying to reach the same people that you're trying to reach the same customers using a different type of product or service to address the same fears and passions so if I've got a pizza parlor on Black Rock Turnpike and you've got a Chinese takeout place across the street from me even though we are not doing the same menu where we are not direct competitors we could very well be indirect competitors because if someone's hungry for a quick lunch they can get a slice of pizza or they can get an egg roll they have those they have that choice so even though our menus with nothing like each other we could very well be competitors in direct competitors though because our products are different but we're still going after the same customers and we're trying to deal with the same fears and passions that they have you know the hunger for a quick lunch the passion for a quick bite to eat that has a lot of fat assault and trans fats and all that so that's going to give you cancer and make you die yeah but that's okay yeah hey a lot of money doing that remember you know pride lust greed and think about that okay but that's not the end of the game competitors can also be actual or potential actual or potential is with the a and the staff or my little chart an actual competitor is somebody who is in the marketplace already they're already in the marketplace doing whatever it is you're doing it so for example if I were to open up a pizza parlor on Black Rock Turnpike in Fairfield right now the 17 pizza parlors that are already there on Black Rock Turnpike are my actual competitors they're already in business they're here they're now they're selling pizza okay but you can't just look at those people you also have to look at potential competitors as well a potential competitor is somebody who's not in the marketplace today but who could easily get into the marketplace if they try and here's the key could wipe you out if they did okay so if I have a pizza parlor in Black Rock Turnpike in Fairfield and I hear that one of you is thinking about opening up another mom-and-pop pizza parlor I'm not I'm not too worried about that you know because you're you got the same issues that I had starting up I've been in town longer I've been selling pizza longer I've already gotten all the in all the Valpak things that go out to people you're going to have a tough time getting in there so I'm not really worried about you too much you know I mean I'm gonna bring it on that's going to be my attitude you know you're a little good I like me let's go live let's Duke it out mano a mano here I'll call you out all right but let's say that I have a pizza parlor on Black Rock Turnpike and I hear that Olive Garden is thinking of moving in across the street or / - cheese one of those for one of those because John's predominant right now a little bit more worried about that why because they're big restaurants they have hundred or more seats they have a full liquor license they're serving a lot of different kind of stuff which I can't offer because I've only got you know 1,200 square feet in my pizza parlor which barely fits the big enough for the brick of it that's a more serious competitor and I'm going to be a lot more worried about that if I'm looking to locate a pizza parlor I kind of want to know where's Bertucci's going to go you know where I want to stay as far away from those guys as I possibly can or Olive Garden or one of those I always use food examples by the way if people leave here starving I tend to do this to people some of the things I'm known for but that's alright so now let's put some names in these boxes okay I said there were four kinds of competitors here they are direct competitors people that are doing exactly the same thing you're doing that are actually in the marketplace right now we call these people the enemy and what do you do with enemies vanquish you vanquish them you destroy them you wipe them they're miserable butts off the face of the planet that is part of them this is part of the world of business okay in a very competitive market some of your success is going to have to come at the expense of their failure and you have to expect that you know one of your missions in business is to try to drive your competition out of business as much as you possibly can you should not be ashamed of doing it especially the people that live in these box in this box okay indirect the indirect competitor who is actually in the marketplace today think pizza parlor versus Chinese takeout place okay we call those substitutes because people can substitute one or the other butter versus margery pizza slice versus egg roll that's what anything people have choices and they can substitute if people are selling products that are normally substituted one for the other those are considered indirect actual competitors okay a potential competitor who if they ever got into your market fit a place into your face would be a direct competitor I just want to put the word big-box in here to emphasize the fact that we're really worried here about people that are much bigger than you getting in your face you're not really so much worried about little people getting in your face but you should worry about big people so if you're starting up a software product or something like that one question you have to ask yourself is is Microsoft or Apple going to be interested in this at some point because if they do Lord knows I can't compete with those people to be you know if I'm thinking of buying a family-owned hardware store in Canterbury Connecticut that the quiet corner how close is the nearest Lowe's or Home Depot and what are those column is it going to be before those guys open up in my the face of the planet that's my point you're not worried about anybody getting into your marketplace you're worried about people specifically who could wipe you out if they ever did and how likely is that here's a question for you are there any franchises out there doing what I'm doing and if so how long is it going to be before one of those franchises get in my face you know some local out-of-work corporate executive buys the local if I have a local bagel shop for example what's the likelihood that some out-of-work corporate executive is going to buy the local rights for the Einstein brothers bagels franchise which you've remember I'm talking about here there's a one in Fairfield I don't know much about up here but I know there's a couple of them here in Connecticut actually quite good if I was a local bagel shop I think I'd be worried about that I'll be honest with you so when you think about franchises don't just think of them as you signing on for a franchise think about them too as potential competitors because they may well be now this last box over here the indirect competitors of the future now is this getting a little too philosophical or are we starting to getting our we're kind of now getting outside the the via the interior planets aren't we now we're going through the asteroid belt and we're sort of hovering around the rings of Uranus somewhere right it's a planet seriously but the answer is no these may be your most compelling competitors of all these are the people who are doing things out there somewhere that are going to make your products and services obsolete somewhere out there there's somebody out there inventing some kind of technology that's going to change the whole paradigm of what it is you're doing and people won't need your stuff anymore because they now have this and if you don't believe that I can speak from experience I sold my publishing company in 2002 because I realized that 10 years from now people aren't going to be buying books on what I was writing about people are going to be using Internet the internet and web-based solutions I realized that I couldn't compete with that so I sold my company before that competition even exist in fact I sign I sold it to a company that specifically was looking to develop web-based products in that area and I signed on as part of the deal signed on with them as a consultant so I am actually helping them today put people like me out of business is that weird is that really where it's it but this is sometimes what you got to do right if you were a small town bookseller and you thought about the borders or barnes and noble was going to move into your town what would you do would you try to fight or would you call them up in the middle of the night and say hey I hear you're opening up in town hire me as your manager I've been running a bush store here for thirty years I know everybody in town you'll do a lot better with me on board than you will be fighting me that would be the smartest thing you ever do if you can't beat him join him maybe that's the motherís the smartest thing he can do a business sometimes ok so this is how you figure out when people say they don't have competition ok which they sometimes do what they're really saying I feel sorry for them they're not they're not lying and they're not lazy what they're saying is I've looked in this box here and I don't see anybody and that could be true there are some businesses where you don't have a whole lot of enemies but I guarantee you've got somebody in one of these other three boxes you better look for them before you before they surprise you because these these people sometimes hard to spot especially these people over here you really got to use your imagination to find those people sometimes but you have a look for them being a little neurotic by the way is a good thing in business a neurotic people tend to do very well as entrepreneurs I have to tell you because they miss nothing ok question six ok ok I know who my competitors are what is my competitive advantage you can't just stop and say hey I got gazillion competitors what makes you better faster cheaper sexier more convenient what is the biggest reason why people are going to buy from you ok and here's the dirty little secret sometimes your competitive advantage has nothing to do with your product or service the product competitive advantage doesn't you don't need to have a better product or service your product can be the same old same old thing that everybody else is doing but because you're doing something else that's a little bit different you will get set you'll conquer the marketplace classic example distribution there are a gazillion that three or four years ago there were a gazillion pizza parlors in our area I can't mention names because this is being videotaped but some of you may know that there is a pizza parlor that has developed in the last couple of years who is marketing measures and I've had their pizza I will tell you perfectly honestly it's no better no worse than a lot of other pizza I've had in my life and believe me I am a connoisseur of pizza so I can tell you that it's not the thing that's super pizza but here's their gimmick we deliver all orders you don't have the $20 minimum you know that most piece of parlors have they will deliver a $5 pizza and a coke to you no matter where you live as long as you within a certain radius of their place that's their gimmick and believe me it's work it's working extremely well they are crushing their competition because let's face it Friday night pouring rain you want to order a pizza you know a pizza are you going to pack the kids the screaming kids into the SUV drive through the pouring rain 25 minutes to the pizza parlor the pizzas already cold by the time you get there you wait in line you pick it up you bring the it's already soaked and white you bring it home you got a microwave the bloody thing before you can eat it these people will deliver any pizza to you trust me you'll pay a couple of bucks extra for that for that delivery service and believe me it's working very very well for that piece of parlor another example lawyers hey go my competition I got competition hey guy there's hundreds of lawyers here in Southern Connecticut and you got no shortage of lawyers in this part of the world okay and let me tell you something there LLC's in their corporations are pretty much the same as mine I gotta tell you that I can't really look you straight in the face and say that I got better oil season those people do I can't do that like I'd be lying to you because we all use the same template there's only one way you can really put an LLC together under Connecticut law and we all know how to do it you know so what's my competitive advantage what do you think why do people buy pathetic Oh as opposed to somebody else well partly its pricing I do flat fees was a lot of attorneys don't do that's part of it but also I think it's my personality you know people aren't afraid of me I'm not one of these pompous guys that looks on that as nose at you know I charge $1,000 a heartbeat I don't do that to people I'm not boring you when I'm more friendly hold off the please until we're done I want to get to the 10th that could be my advantage - it's just who I am the fact that I'm willing to give these kind of talks and talk about something besides law a lot of lawyers won't do that you know the only ones talking about war taxes I don't do that I don't talk about how to succeed I want you guys how to succeed I work with 15,000 people I should be able to tell you something about that okay so you prepared an advantage sometimes doesn't have anything to do with your processor because it can be who you are it can be your location it can be the fact that you've got a better chef than somebody else does if you're a restaurant or a fast food place it can be the fact that you're more conveniently located we have a hardware store in Fairfield a little mom-and-pop of a hardware store it's been around for 50 years home depot moved in about a dozen or so years ago but this hardware store is doing extremely well and why is it doing extremely well because it's located right in the middle of where people live whereas the Home Depot is way down you know by the railroad tracks down on Long Island Sound now don't get me wrong if I'm looking to buy a ton of lumber I will make the trip to Home Depot to say the 10 or 15 bucks on the ton of lumber but if all I want is one light bulb because one of my track light bulbs burn out I'm going to be damned if I'm going to go all the way to Home Depot 25 minutes each way for one freaking light bulb just to save two bucks I'm going to go to the local place and I'll pay the extra buck for the 50 cents or whatever it is and this hardware store has done very very well with that strategy you know you always see people in there and when they come out they only got little bags but lots of little bags and lots of little bags add up so they can do very well okay end of competition questions and now I got to turn to people do you have the people on board that are going to make this business a success now some of you were saying well yeah yeah you're looking at them it's me myself and I that is the partnership okay which is perfectly fine but you cannot be a loner when you are in business okay I'm just going to write down who should be on my management team okay now to answer this question I got it I got it to dress a little bit but only for a second I promise you before you can answer this question you have to answer another question the other question the first question you have to ask here is what are the essential functions of this business and can I do them all that's those are really two questions I guess but it's a two-part question what are the essential functions of this business and can I do them all okay you're going to find out when you're in business that it only there are only about for a handful of things four five six of the most that must be done extremely well for the business to survive and grow you don't have to do everything well it's only a handful of things maybe four or five six things on average that you have to do well in order to ensure that the business will survive and grow and it varies from business to business it's not the same for any two businesses so for example in my business believe it or not one of my essential activities my essential functions I got to get my bills out every night you see yourself well wait a minute yeah every business kind of has to do that but wait why is that essential it's essential because I bill by the hour you ask me to draft to review a lease for you I review a lease for you how much how much is it how much time did I spend you don't know you need a bill from me to tell you how much time I spend so you know how much to pay me right so if I don't send out my bills on time you don't know how much to pay me therefore you're not going to pay me and I'm going to end up a lot of people owe me a lot of money so I got to get my bills out the last day of every month in the morning you cannot get ahold of me I do not answer phones I do not answer emails what I'm doing is I'm doing my freakin bills that's what I am doing because I know that if I don't get those out by the end of the month I'm not going to get paid by the end of the following want people are going to drag those out if I'm late getting my bill out and they're going to drag their heels getting the money in big money back to me so that's one of my essential every business has a core of maybe four or five six essential things and these are the things ladies and gentlemen that you must do yourself you do not delegate these to anybody else not to partners that well maybe the partners but not to employees not to your spouse not to a bookkeeper not to a lawyer you do those things yourself because no one they must be done extremely well if not perfectly and no one else is going to do them as well as you will do them that's why you must do these activities yourself so going back to my basic question what are the essential activity of function whispers are the things that must be done perfectly okay I got my list I know what the five things are can I do all of them myself if the answer is yes you do not need a partner you do not need a partner if you can do all the essential functions yourself you do not need a partner if you cannot do all the essential functions yourself that's when you need a partner to do the things you cannot do this is how you decide by the way whether you need partners are not a lot of people go into partnerships we both do and I are old buddies and we like each other and this is why we do this stuff that's the worst reason to go into partnership with someone the only reason to go into partnership with anybody is because you cannot do all the essential things yourself you need help with some of them and that's what this person is good at okay and you know I'll give you a classic example let's say you come up with a great idea for a business okay and you need a million dollars in start-up capital to get this business off the ground how many of you hear of a million dollars in your checking account I'm just going to say I didn't think I see too many takers here all right so that means that you're going to get this business off the ground need a partner who has a million dollars in his checking account and is willing to shell out some of that money to help you get your business off the ground you need a financial partner that's what that's us that's an example of what I mean by the essential functions what are your essential functions is raising that million dollars to build whatever it is you're building you don't have it so you got to have a partner who does or else the business is not going to get off the ground okay now what about the non-essential activities okay the essential activities of the business those four five six things must be done by you or your partners okay what about the non-essential activities those are things you should never do yourself or seldom if ever the non-essential just like you never delegate the essential activities you should always delegate the non-essential activities one of the biggest mistakes people make when they start businesses they get so caught up doing non-essential things if they let the essential things slide and that's when the business starts having problems and starts suffering once you identify the essential activities those are the things you sweat those are the things that you obsess about that keep you awake at nights but anything else you delegate to other people to your lawyer your bookkeeper employees you know you know staff people this is what you do you delegate even if they make a couple of mistakes every once in a while it's always better and more cost-effective in the long run to delegate the non-essential activities because what those things do they can be time vampires sometime and they take you away from those four or five or six things that must be done perfectly for the business in order to survive okay I can give you examples of that if we had more time okay so that's it so who should be on your management team what answer number one you know if you if you cannot do all the essential activities yourself you have to get one or more partners and you must have enough people around you they don't have to be employees they can be contractors they can be professionals whatever but you have to have enough people on board who can handle the non-essential things and I'll give you five examples okay when you're thinking about the non-essential activities and who you should delegate to there are five people types of people who should be on your team okay they won't live in the office with you but that you should definitely have them number one most importantly a good accountant absolutely essential especially for your first couple of years and visit unless you yourself have an accounting background you probably shouldn't be keeping your own books it's better to have somebody else do it for you because not only do they know how to do it and they'll set you up right but they'll also because they're not living with you every day they'll see things that you won't see you know hey cliff I'm just out of curiosity you're a no lawyers do a lot of things with paper but you realize you're spending over $300 a month on paperclips really yeah you maybe if you knows whether beauty I'm seeing all kinds of Office Depot and Home Depot bills at forgiveness know what they're doing well I don't know you know I hate Joe hey Joe Oh the guy buys all our supplies why are we doing why are we buying $3 a month with paper clips by the way why is your eBay store called paper clips are us seriously this is how you can find out if employees are stealing from you this is one of the things you you won't see that because you're so busy with all the essential stuff but your bookkeeper will say but this looks weird your ural office then before they become too big disability insurance especially if you're working for yourself if you are a one-person business and you slip while skiing and you break your ankle you may be out of commission for a couple of months disability coverage I don't think is a luxury for a small one-person business I carry a lot of disability insurance and a couple of times it's saved my life I've been injured for a while I can't practice law for a month or two because both my hands are in a cast I've been in that situation believing having disability coverage is a very good thing don't leave home without it number four a good mentor someone who has walked the walk before who's been in this business before who can help you may at least avoid some of the dumb mistakes that people make obviously this is a pitch for score score is an excellent place to look for these kinds of people I mean just looking around the room here we've got about two hundred and fifty years here worth of experience and putting myself in that you know I got to believe I mean they may not understand all the nuances of what it is you're looking to do but they've been around long enough that they can prevent you from making the dumbass mistakes that kill most people who start off with businesses score is an excellent place to look another great place to look by the way trade associations every trade show that I go to there's always a few gray heads people walking around you know the aisles who know everybody and everything a lot of contacts and who've been in the industry for a while get some of these people on your side take a lot to lunch a lot of experience we live in one of the best areas in the country when it comes to finding talent there's a lot of people right now out of work we've had a lot of experience in business right now you know seriously if you're looking for a mentor I would almost suggest pull some of the out placement centers believe me they got a lot of people sitting around with 20 30 40 years of experience doing exactly what it is you want to get into and therefore something to do to get out of the house every once in a while we live in a great area to find talent because there's a lot of out-of-work talent floating around Fairfield County right now take advantage of that if you can you can benefit from that and also you can help them to which is also a really good thing last but not least your spouse or significant other now I am NOT saying that you should make your spouse your business partner okay I could give a whole class on that okay but your spouse or significant other your loved one your companion should know at least enough about your business that they can help you deal with the personal side of this here's a very little secret ladies and gentlemen when you start a business of your own you are not going to be five years from now the same person you are today this will change you it's like having a baby those of you know when you had your first baby did it change your life sure it did right well this is just like that you're going to be a different person five years from now and you're going to need somebody to sort of help you manage that transition to whatever it is you are becoming here's a silly example of what I mean let's say for example that you are an avid golfer Golf is the biggest thing for your life every Saturday you've had this golf foursome you've been doing it now for the last 20 years with these three other people these two people are like your best friends in life every Saturday you go golfing one morning you wake up and you get a brilliant idea for a retail business it's something you're just I passed or your town needs it nope there's nobody else is doing it you know it's a once in a lifetime opportunity you will get filthy rich doing it everybody loves this idea your accountant looks like your lawyer loves that all the numbers are adding up you got some chief real estate too in a good part of town all the numbers are pointing up all the air are pointing up this business is going to be a success what's one problem though you're going to have what's the busiest day in retail Saturday there goes your foursome there goes possibly the game of golf now maybe these people can play golf take time off in the middle of the week to join you but they probably won't you might be losing these three friends these maybe remember these two three the closest friends you have but now that you no longer have your golf game to hold you together you may be giving up these friendships and don't coming you're on I'm not saying you shouldn't do the business you know to keep your golf foursome but but my point is your accountant your lawyer your insurance person and your mentor won't pick up on that your spouse or significant other will you know what about this golf game what about your golf foursome but you realize you're going to have to give that up wait a minute didn't think of that that's what I'm buying managing the transition also too you're going to find yourself a different person five years from now make sure your spouse or significant other is on board when I left the permanent way looking for a law firm to you know work out of my home my wife and I took a little retreat we took a three or four day retreat we went to a place up in New Hampshire all we did was talk about how our life was going to be different you know up to that point she was married to a guy who wore a thousand dollar suits took the metro-north train into new york and was working on deals that she read about in the Wall Street Journal every day now she's going to be married to a guy you know who works in his bathrobe and pajamas doesn't always shave every day and is helping people buy liquor stores and gas stations how does she feel about that Amelia you have to have these kind of conversations people get wedded to a certain image of who you are and when that image changes their image of you may change as well do a reality check with your spouse or significant other and find out if they're willing to go along with you for the right they may they may not they may say they do but that doesn't mean it's going to happen you know think nothing would mine my suit my style certainly went along for me with me for the ride and I think she's very happy she did make sure the same thing happens to you okay number eight how am I going to pay these people I'm not going to pay these people okay only one thing I'm going to tell you here don't give stock away to your employees unless they are truly people that are going to hang around for the long term the only people who should get stock and buy stock I mean a percentage of your ownership a percentage of your profit or a loss if you're a partnership we call it a partnership different if you're an LLC we call it a membership interest if you're a corporation we call it stop do not give people a percentage of your company if they're only going to be around for the short term the only people who should get equity in your company a piece of the action are your partner's the people that are performing the essential functions of the business and they will going to be around for the long haul a big mistake that many many startup businesses make they give too much of the company away early on to people who aren't going to hang around for the long term so that when it comes time to bring on the really serious investors like the venture capitalists and the banks and those people there's no more money to give this and more stock to give those people they end up working as employees for the companies that they found it because they only have 2% of the stock left for themselves that's a very dumb thing not those of you who watch movie the producers remember that the Broadway show you cannot give away more than a hundred percent of your company you can't do that it's illegal you can't do what the producers are all about the guy sells ten thousand percent of a Broadway show do you think it's going to flop and it becomes a success and the ends up getting put they can clobber like Bernie Madoff so that movie is all about right you can't stop one percent of your company if you give all stock away to your secretaries and you know people that do nice things for you just keep in mind that every time you give away a percentage of your company that's a percent that you yourself no longer have this is a zero-sum game folks and you only got 100 percent of your company to give away make sure that that stock is going to the right people who are going to be around five ten fifteen years from now to help you get this business off the ground slowly lesson on compensation I do you have a whole class on that obviously okay question nine where am I going to get the money for this okay okay folks here I'm going to blow a lot of myths here there are two places and only two where money comes from for a startup business for a business that's just getting off the ground once you get a little bit bigger there's some other places you can look but there are two places and only two where you get money for a startup business here is your business this is your business on drugs now that famous PSA okay okay the first place the money comes from it comes from your customers in the form of revenue this is basically what people are paying for the products and services that you're offering it comes from your customers I go out I sell a will for 500 bucks I don't do wills but let's say I sell an LLC for 500 bucks I have five dollars worth of revenue okay your customers give you your income in the form of revenue this one place where money comes from for start-up business the other place the money comes from for a startup business it comes from the owners that's you in the form of capital this is the money that you put into the business to make it run from your your from your credit cards your savings your 401k if you can do that legally um I sent credit cards your third mortgage on your house or the home equity line that you took out to fund the business this is where this other money comes from we're a startup business the only two types of money are revenue from customers and capital and there's an inverse relationship between these two things okay every month or every week this business has to shell out money in the form of expenses if you're a retail store and you've got rent to pay each month if you've got employees you've got payroll you got to meet every month every business has money as expenses that have to be made on a monthly if not a weekly basis if the customers are not generating enough revenue to pay those bills where's the money going to come from to meet the shortfall it's got to come out of your pocket you've got to keep the business on life support because those bills have to get paid every month you can when customers are generating enough revenue that the bills can be paid on a monthly basis we have a magical name for this we call it breakeven or the break-even point that's what breakeven mate's breakeven simply means that the business whatever it is is generating enough revenue from its customers that it can pay the bills each month without having to hit up the owners for love for loans or for capital they see how this works there's an inverse relationship the longer it takes for you to achieve breakeven the longer it takes for you to reach the point that your customers are paying all the bills on time the harder it's going to be for these people to keep putting money into the organization how many of you here would continue your credit cards for three years two or more to keep a business on life support how many of you would willingly do this I don't think I'm messing too many hands right so what does that mean it means when you're in business for yourself what are your primary goals is to break-even as soon as possible because once you break even two magical things happen you'll start first of all you will breathe a sigh of relief because you're no longer promoting money more of your hard-earned savings into the business to keep it on life support but also to you'll attract other owners and investors who will want to buy into this business because as the Chinese say success has a thousand fathers failure is an orphan okay it wants to invest in a successful business is taking off know what buddy wants to invest in the business that struggling and hasn't proven itself yet I mean it should be obvious should be I'm not speaking anything that I think isn't obvious here but it's something you have to think about I mean I work with investors I work with venture capitalists and they all tell me the same thing cliff if a business is successful and it needs money to grow we can find that even in this environment if the business is exciting enough but please do not come to me and ask me to pay one of your clients light bills or one of your clients pay or to fund one of your clients payroll expenses because I'm not doing that if the business isn't isn't isn't surviving from rent from its own revenues what we call bootstrapping I don't want to hear about it come back when you grow up and you will actually have investors tell you that they will actually say come back if you going to not go to an investor an angel investor or somebody like that and try to get him to invest in a business that hasn't proven itself yet by breaking even one of your first challenge is Lenny business is to break even and to do it as quickly as possible so that you can start attracting other investors to your business okay last but not least so now you've gone through it by the way you've asked all these questions in order you see by the way you're really worried about where the money is going to come from so you know you're going to have customers you see why that is down because the customers are the ones that are going to help you to get to the break-even point if there are no customers why are you even worried about about where the money's going to come from you don't have your answer that's why the order of these questions is very important now we're up to push number 10 which is what are the risks involved in this business and how am I going to deal with those okay and there are now I'm going to I'm going to know this is the legal stuff by the way is it surprise you this is question 10 it's the very last question you asked you'd be amazed how many people call me up where this is question number one you know hey cliff we're out of business I'll say okay what's the business don't know yet but I know I need an LLC well why do you LLC because I'm afraid of getting sued or Freddy won't lose my house all right but you don't know what you're doing yet you know no one's gonna sue you so I worry about this what if you figure out what the business is going to be maybe make a little money first then we have uniform animals see for you I'm happy to take your money but why are you doing this now you know wait thing you have a business then you know we'll figure out how to protect it right now you got nothing to protect right hit but people do this all the time they want to put this rich because they're so scared of getting soup okay now here are the things you need to think about okay number one should you form an LLC or corporation okay a lot of businesses you don't have to believe it or not there are still even though we're a very litigious society and people love to sue in this country there are still lots of businesses that you can get away with without anything at all so let's say for example you're selling bobblehead dolls on eBay you know bubblehead dolls of baseball players or something like that and let's say that somebody buys from you an eBay you ship it the thing arrives broken the customer complaints is there going to be a lawsuit over this are you going to get sued over a ten dollar bobblehead doll especially if the buyers in another state let me tell you that's not going to happen what's going to happen is he's going to complain you're going to give them another one or if you don't have another one you'll give them his money back or if you're really a jerk and an sob you'll blow them off and they'll post a negative feedback on eBay's feedback form telling of the world what an idiot you are that's what's going to happen you're not going to get sued over a ten dollar bobblehead doll all right but now let's say you're selling used cars on eBay and you're selling you sell a used car to someone and he gets in the car and the car breaks down on the way home he crashes and so his whole family are burned alive in the crash is going to be a lawsuit over that oh yeah you better believe that so even on eBay and online depending on what you're selling at but each business has what we call a risk profile and sometimes that risk profile is very low like with the bobblehead dolls or it's very high as in the case of used cars what somebody has to do like your lawyer or your accountant is to figure out what the risk profile of your business is the higher your risk profile the more likely it is that you're going to want to form an LLC or a corporation but keep in mind what this does the LLC or a corporation is not a panacea all the LLC or corporation does and don't get me wrong it's a very good thing to do it puts a wall up between your business assets and your personal assets that's what the LLC or corporation does when you form an LLC your corporation you're putting a wall up and what you're basically saying is these assets over here are my business assets if God forbid I do something bad you can sue me but you can only get these the business assets are still at risk what the LLC or corporation does it protects your personal assets my house my jewelry my cars you know my personally autographed photograph of Elvis my stamp collection all of that is behind the LLC corporate wall you can't get that mr. plaintiff that's all it does your business are still at risk which is why you still need insurance for the business assets that's all it's doing it doesn't protect all of your assets it only puts a wall up between your business and your core your personal assets saying that the personal assets are safe from attack you still need liability insurance of some kind to protect your business assets especially when you start having them you know what most businesses do is something called commercial general liability insurance always get here you get liability insurance always get at least a million dollars because you're going to find that when people sue that's what they sue for people don't sue for $50,000 they sue they tend to sue for bigger numbers so if you get insurance for your business assets get at least them I'll close with this how do you keep from getting sued let's face it I'm a lawyer I think I'm qualified to answer this question if nothing else here's how you protect yourself from getting sued first of all the thing you have to recognize is that there's no way to totally prevent yourself from being sued years ago before I was a lawyer before I went to law school I was a newspaper reporter I was a crime reporter for a daily newspaper in Yonkers New York my hometown and every year I had to interview this grizzled old police sergeant games like 80 years old on the Yonkers police force I'm usually in the early springtime on how to keep your home from being burglarized right and this last year he was is last year on the force he was retiring so when I went to do the story he said you know cliff head it's my last year I'm out of here in a month let me tell your readers the truth for a change you really can't prevent your home from being burglarized there's no foolproof way to keep your home from being burglarized the burglars today have incredible tools they got better stuff than we have and if they aren't really motivated to get into your house trust me they'll find a way to do it so if you look if you're worried about being burglarized there's really no perfect way to protect yourself against being burglarized however there's one thing you can do you can make yourself a very unattractive target that's what you can do because burglars are just like anybody else they want the easy jobs they want the low-hanging fruit you know if they see your house is Fort Knox and you've got all kinds of protections and stuff around there they're going to have to be very highly motivated to break through all that to get to whatever it is it they want to steal they're not going to do that for a couple of TV sets in a stereo that's not going to happen all right so you know by all me a bird lers biggest enemy is time when a burglar is in your house he knows that every minute he's in your house his chances of getting caught doubles so all you got to do is slow the burglar down and he probably won't want to hit your house in the first place because you're too heavy your risk anything you can do to slow up are going down so put three locks on all your doors put bars on your windows get a vicious barking dog cut away all the shrubs around your house of the guy's got nowhere to hide do all this stuff but realize that none of this is foolproof if you've got the original Mona Lisa in your in your family room a burglar will be highly motivated to break through all that stuff and get through but if all you got is regular household stuff most burglars will say the hell with that I'm not going to tackle that house that's too risky I'll hit the house across the street you know when they leave the doors and windows open during the day when nobody's home everybody on this it's the same with lawsuits you cannot protect there is nothing there is no foolproof way to protect yourself from getting sued if someone has lots of money and it's crazy and does nothing with their spare time but sue people chance it and those are people you deal with chances are you're going to get sued at some point you know when you run a business but you can prevent yourself from being sued but you can make yourself an awfully unattractive target so that somebody would truly have to be crazy to to sue you and the four things you got to do number one by all means form an LLC or corporation make sure you use it okay if i form cliff and co inc i am no longer cliff any co whenever i go out and do business on cliff any co inc and make sure that you stick that in people's faces it's very very important that you do that people don't know you have a corporation or LLC the LLC won't protect you you've got to make sure that they see that and there's a number of things you do there form an LLC or corporation get as much insurance as you can afford if anybody Sue's you you want them going after your insurance policy you don't want them after your house as much insurance as you can afford number three consider transferring assets out of your name into family members names if your wife if your spouse is not going to be participating in the business by all means deed your house over to her do it now do it before you begin that's the best time to do it don't wait until after your suit then it's too late you can't do with them but do it now just keep in mind that if you do this you are making a legal transfer to your spouse okay you're putting a lot of stress on this relationship if you are not a hundred percent sure of your relationship with your spouse you do not do this because you are making a legal transfer into her name so if you ever get divorced at some point you will not only be without a spouse you will be homeless okay I will see you on the nine ninety five with a sign saying will do whatever for food I mean I don't want to see any of my clients in that position all right so be very careful about this if you're going to do it do it but do it at the very beginning before before you do business with anybody and make sure have a lawyer do it actually file a deed recorded deed it's called a quitclaim deed with the town land dog records make sure you do this officially so that anybody who looks to see who owns the house will see her name they won't see yours and then make sure that she doesn't do anything in the business make sure that she doesn't participate in the business anyway because otherwise they'll try to argue that you're partners and that brings the house back into the into the game you don't want that then last but not least this may sound silly but it's probably the best defense you will ever have against lawsuit lawsuits do not do business with crazy people do not do creases really this sounds so silly but seriously every time a client of mine gets sued by somebody the very foam is the very first words out of their mouth is I knew it I knew this guy was going to be a problem I knew he was going to be trouble from the moment I took it on it's amazing how good your gut is even though you've never been in business before you can spot crazy people they usually are very very obvious you know who's going to be there one of the best defenses you can ever have if you really says that someone is a walking lawsuit do not do business with them trust me there are plenty of other business out there you know I do this to me forgive me please don't hate me but every once in a while I get a call from somebody who I just know it has the word malpractice lawsuit stamped on their forehead okay I don't want that person in my client base I don't care how much money they have if this person is a potential lawsuit if I really if my if my gut if my antennae are telling me that this is a bad person I don't want that person in my in mine says here's what I do with those people always I never I don't hang up on them here's what I do I say you know mr. so-and-so this is really great I'd love to work with you this is a very interesting matter you seem like an awfully nice guy the problem is I'm in the middle of writing my next book right now and that manuscript is due in February I'm probably going to be taking on a whole new lot of new clients in between now and then if you can wait that long you know of course nobody can do call me back then I'll see what I can do for you but in the meantime if you can't wait that long please call my good friend attorney Joe Blow while he's here in town I've known him for years I know you'll have a very good experience for the turn to joke low and who am i sending you to do you think my worst enemy the guy I hate worse than anybody else in the local bar association I want him have you fertilized I want him to have the malpractice suit not you please don't hate me for that that's just human nature you know so those are the 10 steps to starting a successful business do you see how the order is very important you don't really worry too much about the legal and the tax and the financial stuff until you know the customers are there and you know you can deal with the competition and you know you got the people and so you've done those three things the money the legal the tax just hoping one hold for a bit you're going to go get to them eventually but just put it on hold focuses none of the things that are important if you don't really know where your customers are coming from don't worry about whether you should be an LLC or a corporation an attorney can spend 15 20 minutes with you and tell you what you should do you don't have to do that right now I gave you a wonderful little outline by the way if you're really interested in this it's called demystifying the business organization you can also download it free from my website cliff any cocom which is my legal website seriously it's seven pages long sit down tonight after you do your tenure your exercise the ten different types of people sit down tonight with that strong VSOP brandy read this cover to cover and I guarantee you no I guarantee you you will come away knowing as much as most attorneys know about the difference between corporations and LLC's and subchapter S corporations have really packed a lot of information into this seven pages okay so with that I'm one of them i have finished my ten steps to starting a small business let me open the floor for questions but first of all thank you very much you guys been terrific questions people anybody what yes when you say about transferring your own personal assets to this class or family member if that family member is just an employee of the business that does not that doesn't work it doesn't work you the person has to be someone who's not involved in the business at all yeah I mean I know what you're trying to do but what's going to happen is the plaintiff's attorney when they sue is going to try to show that the person was really your partner and not an employee and they might be able to play that game so people do this they hire their spouse you know it's w-2 if she's really working in the business 24/7 with you and your you know and and your sharing responsibilities equally there's no way of courts going to buy that they're going to say that you're really a partnership you know that you were trying to hide assets oh so do it with your mom you know unless of course you gotta watch out for this though if you're going to transfer assets to a parent make sure that you change the will so that when the parent dies you get the asset back there's otherwise what happens is when they die they go to your brothers and sisters what's going to happen is if she dies all the brothers and sisters get to get the assets equally that's what happens at least in Connecticut that's what happens so if you do that make sure your mom changes the will so that when she dies that asset comes back to you that that will work but just make sure you do it but this happens you don't transfer an asset to somebody who's 94 years old you got you got a little risk there okay well God knows I mean I know people that are like 100 and 203 it's amazing I mean we all know the story about the person who you know marry the eighty two-year-old person you know because they thought that they dropped in and then it would not live or something like that I mean you know it's kind of the same it's kind of the same thing okay any other questions sir don't worry about the structure of the organization and so you're actually operating we're renting the business but by then you've got your stationery printed you've got maybe the lease is done yeah but marketing then yeah I guess if a person is you mean how soon is early enough I mean don't get me wrong nothing you should wait five years you know when you're sure when you know in your gut that the business is real that's when you should form the corporation your LLC that's really what I would say you're not not after you been in business for a while but when you know the business is a real thing it's not just some like

Channel: Cliff Ennico

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Keywords: Business (TV Genre), Small Business, Startup, Cliff Ennico, Business Law, Training, Success, Coach, Coaching (Industry), business startup, start a business, Entrepreneurship (Field Of Study), business success, small business markeitng, small business management, small business law, small business tax

Id: QQHS85NIK3w

Length: 89min 41sec (5381 seconds)

Published: Tue Mar 24 2015