ONE MAN'S SUCCESS SECRET
By Rod Alan Richardson
Several years ago, an associate I had just met requested that I come to his home to attend a meeting. “You seem like someone I would like to be in business with,” he said. Rather than a network marketing presentation, as one may have suspected with such an invitation, I found myself involved in a brain storming session with a handful of people that wanted to start a business together. Everyone in the room had specific skills, and each of us had a network that would contribute greatly to any viable idea we might come up with.
We went around the room and discussed each others’ experiences and proposed industries that we personally thought would be most advantageous for a successful new business venture. As ideas were selected, assignments were given and a second meeting was scheduled.
During the second meeting, a man who had created a successful business that was now selling products all over the world shared with us his three key points to success. His points may challenge traditional thinking; however, I had to remember that he was successful by living this formula. These are his three key points to success:
- Those that do the work get the reward
- Keep everything in-house
- Focus on the income
Here are some of my thoughts on his points:
1. Those that do the work get the reward. What a novel concept! When most of us start a business, we divide up the stock and rest on our laurels! The partners get frustrated and rather than fighting over stock allocations, they dissolve the business to get rid of the baggage. This man was in favor of seeing who the players were going to be and measure the ownership based on the amount of value the individuals contributed. Though this strategy may be fine if you are self-funding your company, there are dangers in this approach that you will want to be aware of. You will want to make sure you have a strong relationship with those whom you’re in business with. There’s nothing like someone else interpreting your value. You run a large risk of not seeing eye-to-eye when it actually comes to assigning equity. I’ve used this principle myself to some degree. I like to let a business come together before ownership is divided up. I’ve had too many partners fall by the wayside prematurely or not exhibit the skills, contacts and drive they claimed to have.
2. Keep everything in-house. Generally, I recommend outsourcing as much of the manufacturing, distribution, and operations as possible. It allows for greater flexibility and allows entrepreneurs to scale quickly both forward and backward. This man’s thinking was that you should make profit on as many points as possible—especially in the early stages. If you outsource, you are outsourcing the profit. I see a lot of wisdom in his thinking. He exemplified the principle well. He had a small manufacturing plant and even screen printed his own T-shirts. He told our group that he was getting tired of his current company and wanted to do something else, but that the pay was good. And good it was—at $20,000 personal income per month.
3. Focus on the income. This point is the real gem. Most emerging businesses get lost in the product development phase and lose sight of generating cash flow and creating profitable transactions. This man’s view was to build the product, in your garage if you have to, and sell it for more than it cost you to build. His business successfully operated out of his garage for a long time before he moved to commercial facilities. I’ve noticed personally that the businesses that I’ve launched this way grew without risk to levels of profitable income. Two of my companies, with ‘larger than life’ visions, I pushed to commercial locations prematurely. One, I had to negotiate out of the lease contract early, and the other one failed outright—there is nothing like negative cash flow to kill a business! I have a different philosophy now. It is simple: allow demand to build your infrastructure. I have three small companies that I’ve used this philosophy with that are operating profitably. I’ve refrained from applying any infrastructure that is not easily met with current revenue. My partners and I started these companies by asking—when and where is our first sale, and what is the minimum infrastructure we need in place to create that sale? We add the capital and infrastructure when we have proven that we have a market.
At the end of my meeting, I folded up the paper and stuffed it in my pocket. I had concluded that this man’s success formula, even though I may not agree with the whole philosophy, was certainly working for him.
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