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Think Like an Entrepreneur

a chess game which has similarities to having to think like an entrepreneur“Failing to plan is planning to fail.” ~ Ancient Proverb.

“Begin with the end in mind. Then put first things first.” Stephen Covey, The 7 Habits of Highly Effective People*.

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In business school, we’re taught to define our goals, given our available resources, and then find the critical path to reach them. This is called causal or predictive reasoning, according to Saras Sarasvathy.

She teaches entrepreneurship at the University of Virginia and is the author of Effectuation: Elements of Entrepreneurial Expertise and recently released an updated version of this book in paperback.

She says that successful entrepreneurs don’t think like MBAs. In fact, they do the opposite. They use effectual reasoning. Entrepreneurs who reach bigg success use the resources available to them. They let goals manifest themselves over time given their creativity, direction and connections.

Entrepreneurs think differently than MBAs

There’s a great article on Harvard Business  site about Dr. Sarasvathy’s research. It asks if MBAs or entrepreneurs are better suited for today’s business realities. Bill Taylor, the author, says it simply:

  • MBAs focus on the upside; entrepreneurs focus on the downside.
  • MBAs assume it’s a zero-sum game; entrepreneurs think win – win.
  • MBAs thrive on certainty; entrepreneurs thrive on uncertainty.

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george I’m even more confused than usual. I just don’t know what to think since I sort of fit into both categories!

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marylynn
Do you feel like you’re getting pulled in both directions at once, George?

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george
I feel like I’m getting stretched like Stretch Armstrong!

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marylynnWell, there is an answer. You just have to know when to use causal reasoning and when to think effectually.

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We define bigg success as life on your own terms. You are the entrepreneur of an incredible enterprise – your life – whether or not you’re an entrepreneur in the traditional definition of the word.

That’s why we think this research is so fitting not just for business owners, but for everyone:

When things are uncertain, think like an entrepreneur.

It appears that, in the years ahead, we need to expect more of the unexpected. Entrepreneurs don’t bother trying to predict the future; they create it.

How do they do that?

They act and adapt.

They use the resources they have to try something. If it doesn’t work, they take the knowledge they gained and try something else.

If it does work, they keep pushing it. As their enterprise grows, when there is more at stake, they may switch to more causal reasoning. Or they may jump ship and start the whole thing over!

Because to many entrepreneurs, the journey is the reward. That mindset often leads to bigg success.

Thanks so much for reading our post today. Please join us next time as we discuss when the dream becomes a nightmare. Until then, here’s to your bigg success!

Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00447-072809.mp3

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If Elvis was an Entrepreneur

exitThe final chord was sung. The noise from the crowd became a roar. The lights came on. But there was still hope … still a chance that he might appear again. And then there was the voice, saying …

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Elvis has left the building.

You’re probably familiar with those famous words. It made us think:

Elvis always knew how he was leaving the building. If he was an entrepreneur, he would surely know how he was leaving the business.

Learning from the pros

Bankers and venture capitalists know at least two ways that they’re going to get their money back (plus the return they need) before they invest in our business. Shouldn’t we know at least one? It’s one of the lessons we can learn from these professionals.

Why you should know how you’ll exit

In 7 Habits of Highly Effective People, Stephen Covey taught us to begin with the end in mind. We should know how we’re getting out of our business before we get into it.

Know your exit. Elvis did. Professional investors do. Yet many entrepreneurs never think about it.

That may be a reason why studies show that a majority of entrepreneurs don’t expect their business to kick in any money for their retirement.

It’s crucial to consider your exit because small businesses are highly illiquid by nature. Unlike shares in a public company, there is no marketplace where you can go to sell it immediately.

Another reason to know your exit – perhaps a more important reason – is that it your exit should be one of the drivers of your business strategy. How you plan to get out affects everything from how you structure your business, where you get money from as well as a number of other things.

3 common exit strategies

  • Sell your business outright
    Just like selling a house or any other asset, you exit the business by giving up any claims to ownership in exchange for an agreed-upon price. On your way out, just say, “Thank you … thank you very much!”                   
  • Redirect cash flows
    Let’s say you invest $25,000 to start a business. Let’s also assume that you make $25,000 after-taxes in your first year in business (after fully compensating yourself for your time).

    Further, let’s stipulate that you don’t need that money for your existing business. Take that $25,000 out and invest it somewhere else.

    You invested $25,000 and you took out $25,000. Essentially, you have no money invested in the business. Yet you still own the business! Get your money out and say, “Thank you … thank you very much!”                     

  • Recapitalize
    You still own the business with this strategy as well. Let’s say that you invested $25,000 to start your business. You got your business started, built it up and are making money.

    You may be able to go to your banker and borrow against your business. Let’s say your banker agrees to a $25,000 loan which you can pay back from the cash flows of your business.

    It’s likely that you’ll need a good use for the money to get your banker’s okay. For example, maybe you have an opportunity to buy a piece of real estate that will house your company.

    In essence, you’ve cashed out of your business because you now have that original $25,000 invested somewhere else. Repeat this strategy over and over until you have enough money to fund the life of your dreams. That’s bigg success!

Thank you … thank you very much for reading our post today.

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Please join us next time when we ask some questions about work – life balance. Until then, here’s to your bigg success!

Subscribe to The Bigg Success Show in iTunes. 

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Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00424-062509.mp3

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These Forgotten Costs Often Sink Us

sunken_boat We try not to make financial decisions in a vacuum. We strive to factor in all the relevant pieces before making a major purchase. But there are some costs that we often fail to factor in that can make a significant difference.

We often fail to factor in future flows of money.

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We expect a certain percentage pay raise. So we spend money as if it has already happened. It’s especially important in times like these that we don’t spend money before we know we have it.

Another thing we often do is count on a bonus. If it doesn’t materialize, we’re in trouble as we learned from Clark Griswold in Christmas Vacation. We sure don’t want our brother tying up our boss!

What about increased insurance costs? Is it likely that you’ll pay more for health insurance next year? How about insurance for your house or car? Insurance costs can rise significantly from year to year.

Do you have a variable rate mortgage? Have you considered a projected increase in the rate and the associated increase in your mortgage payment?

Have you thought about what might happen with recurring expenses? Cable bills, power bills, and water bills all seem to rise from year to year.

Affording it now isn’t good enough

You may finance a major purchase. Sure it’s only $100 a month. You can cover it now. But if it stretches your budget to its limit, it’s likely you won’t be able to cover it next year. You’ll start sinking and soon end up underwater, in a financial sense. You’ll run out of money before you run out of month!

It’s important to have a safety net – spending less than what you make each month.

A tool businesses use

We often don’t think about it this way, but we all run an organization – our households. Just like any organization, we have inflows and outflows of money.

Reasonably sophisticated business people work from a budget. Yes, the “b” word. Many people do treat budgets like a dirty word. But they’re a great tool.

And they’re especially important if you don’t have any money left over at the end of the month. It’s important to understand why. You can use Quicken, Excel or any number of ways to create your budget.

Many business people don’t just budget for one year. They look at projections over three years or more. These budgets don’t have to be elaborate – just plot out your main sources of inflows and outflows.

The power of the tool

Once you have a budget set up, you can look at “what if” scenarios. For example, what if:

  • you don’t get a pay raise
  • you (or your spouse) lose a job
  • the cost of health insurance (or any other cost) rises more than you expect?
  • you make this major purchase?

When you create a budget, you’re applying Stephen Covey’s “begin with the end in mind” and “put first things first” (from The 7 Habits of Highly Effective People) to your finances. You’re considering all your costs – both now and in the future. Then you can see the impact of major purchases on your overall finances so you make the best decision going forward.

You can run your finances intentionally, rather than ad hoc. You can prepare for contingencies so you survive no matter what. Then you can shift your focus to thriving!

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Thanks for stopping by today. Next time, we’ll discuss how assumptions we make about time leave us overextended. Until then, here’s to your bigg success!

Subscribe to The Bigg Success Show in iTunes. 

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Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00266-111708.mp3

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Moving Beyond Personal Productivity

personal A bigg salute to Stowe Boyd for his recent post called Overload, Shoverload. He argues that personal productivity isn’t important anymore. It’s the productivity of your network that matters.

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Listen to podcast this blog post! Click PLAY to hear George & Mary-Lynn on The BIGG Success Show Podcast.

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That made us think of Stephen Covey. As he says in 7 Habits of Highly Effective People, we have to move from independence to interdependence in order to achieve maximum effectiveness.

In the higher order of things, personal productivity is important, but interpersonal productivity is most important.

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marylynn Producing The Bigg Success Show takes a lot of work. We have five deadlines every week. We’ve divided up our duties pretty evenly. But sometimes I get done and George is still working. Sure I could move on to something else I need to do. But in some cases, it’s better if I help him catch up.

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georgeWe’re programmed to think that it’s our individual effort that matters. However, in the end it’s the team that wins or loses – helping your team, by helping your team mate, helps you. Mary-Lynn helps me when I need it, so I help her when she needs it.

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Interdependence leads us to a new business venture

It’s the network, stupid! That’s the paradigm for the 21st century – for us as individuals and for businesses and other organizations. It’s the end result that matters so we must focus on being effective, not just efficient. Our network can produce results that we couldn’t produce on our own.

Recently, we had an idea for a business. We talked a friend whose business is in the market we were targeting. After our conversation, we had a different idea so we started working on it!

Interdependence got us a better idea!

Now, we could do this whole thing ourselves. However, we have another friend who has a business that dovetails nicely with our expertise. We believe that we can grow the business much faster by working with him.

We’re a couple of months away from launching this national business. So far, it’s taken us two meetings and three series of e-mails.

Interdependence got us further faster!

Perhaps even more importantly, we think we’ll make more money by letting him do what he does best and sticking to what we do best.

Interdependence will make us more productive!

Developing a business at that speed couldn’t have happened if the relationship didn’t exist already. Trust has been built up over time and it’s taken a lot of trust to get to the point we are, especially at the speed we’ve been traveling!

If you’re willing to be truly interdependent, you can enjoy the power of interpersonal productivity. That’s what it takes today to be a bigg success!

Next time, we talk with two experts in leadership about engaging your employees. Until then, here’s to your bigg success!

Subscribe to The Bigg Success Show in iTunes. 

Subscribe to the Bigg Success feed.

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Effective Communication Across Department Lines

Communicating is easy, right? The person doing the talking thinks it is! They state their message. Done! The problem is on the other side … how is that message interpreted?

This is especially true when communicating across departments. People with differences – in skill sets, backgrounds, education, and vocabulary – often have difficulty understanding each other.

The book, The Geek Gap, provides a great example. It illustrates the differences between techies (geeks as the authors say) and managers (suits to use the authors’ term).

Knowing how to close the gap is a critical skill for your company’s sake, but also for your own professional advantage. So how do you do it?

First, seek to understand.
We’re borrowing this term from Stephen Covey’s great book,  The 7 Habits of Highly Effective People. Different departments tend to attract different personalities.
Think about your stereotypical geek. They like to solve problems, to fix things. They’re intelligent, but often introverted. They like to work on projects. They’re detail-oriented.

Now think about your stereotypical manager. They rely on their ability to influence people. They’re also intelligent, but more likely extroverted. They bring projects in for others to do. They’re bigg picture people.

Obviously, we are grossly oversimplifying here. And we’re purposefully stereotyping to make a point. We can all think of all kinds of people who don’t fit these traits.

But let’s continue stereotyping to keep making the point!

Geeks see technology as an end unto itself. Suits see technology as a tool to accomplish their goals. Geeks are the craftsmen, suits are managers.

To geeks, the goal is to build that perfect product or system that functions just the way it was designed. To management, the purpose of that perfect product or system is solely to meet larger business objectives.

Each side needs to learn to respect the point-of-view of the other. Suits respecting the craftsmanship and geeks seeing how their work contributes to the mission of the organization.

Second, come to value each other.

These diverse points-of-view strengthen the organization. If we’re both exactly alike, one of us isn’t needed!

The craftsman won’t quit until the end product is virtually perfect. There’s a pride of workmanship. The joy is in the creation. It’s about bringing an idea to life.

The manager won’t quit until the goal is met. He or she takes pride in getting things done efficiently and achieving results. The joy is in creating opportunities for people. It’s about moving the organization forward.

Geeks need the suits or they wouldn’t have any projects to work on. Suits need the geeks or the projects wouldn’t get done. It’s the two working together that creates something greater than they could do on their own.

Our bigg quote today is by George Bernard Shaw, who said:

“The single biggest problem in communication
is the illusion that it has taken place.”

Magical things happen when you communicate effectively. Learn the tricks of the trade so you can pull the rabbit out of the hat when you need it.   

Next time, we’ll answer a question from a listener who just lost her job unexpectedly. Until then, here’s to your bigg success!

Subscribe to the Bigg Success feed.

Subscribe to The Bigg Success Show in iTunes. 

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(Image by happyeclair, CC 2.0)