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The Dirty Truth About Being an Entrepreneur

tpentrepreneur We were joined today by Mike Michalowicz. Mike is a serial entrepreneur and author of the just released book, The Toilet Paper Entrepreneur. He has been featured in Inc. magazine, The New York Times, and is a frequent guest on one of our favorite television shows, The Big Idea with Donny Deutsch.

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marylynn
The first thing we have to ask is … what the heck is a “toilet paper entrepreneur”?

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mikeA toilet paper entrepreneur sheds insight on what entrepreneurialism is all about. What a lot of us read in Inc., Fortune Small Business, and Fast Company is what Google, Facebook, and YouTube did. They’re overnight successes. The dirty truth is that “overnight success” is ten to fifteen years of hard work for most entrepreneurs. Just like with entrepreneurship, there’s the stuff that happens in the bathroom that no one talks about. So the title came from an experience we’ve all had. We’re in the restroom and we’ve done what we came to do. We look over and, sure enough, there’s only three sheets dangling there. It’s in that moment where true entrepreneurialism kicks in. We do the incredible – we grab the toilet seat like a pommel horse, stretch the foot out, hook the garbage can, root through it and find three sheets and the torn up cardboard roll. With that, we’re able to complete the job!

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georgeMaybe Sheryl Crow is the quintessential Toilet Paper Entrepreneur because she can get by with one sheet! Seriously, that’s a great analogy – entrepreneurs find a way to get the job done, no matter what.

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mike
No matter what. A true entrepreneur will dig deep and use things no one would ever consider.

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marylynnDon’t you think that the Facebook guys and the Google guys did that at some point? We often hear that some of these overnight successes are created in a garage. They do the same thing too, don’t they?

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mikeThey do in the sense that that’s how they all started. The only difference is Google received funding within a year. That’s what I call the “full roll” of cash. Most entrepreneurs don’t ever receive funding. There’s a path when you don’t get that money; there’s other ways of doing it, sometimes just as quickly.

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marylynn
In your book, you say that sometimes money is actually a detriment to entrepreneurs.

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mikeI totally believe that money is a detriment. Money amplifies the habits we have. In my own life experience, I was 25 the first time I received a good chunk of change – a $250,000 investment. I bought nice furniture. I hired employees. I got a good car to impress people on sales calls. I wasted the money. When I didn’t have the money, I learned how to leverage it appropriately. Then as the business grew, and more money came in, I was able to use it as a vehicle for growth.

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george
Another thing that I found interesting is that you’re not a bigg believer in business plans.

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mikeI’m the antithesis of it. I just received some hate mail from a university professor saying that he couldn’t believe I said that.

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georgeHey, today was my business plan lecture by the way! I’m kidding – we actually don’t talk about business plans in my class.

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mikeIn my experience, business plans are wonderful dust collectors. If someone can project their own financials four or five years out, they should invest in stocks because, if you could do that only ninety days out, you could become a millionaire overnight.

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georgeI’m not an advocate of “ready, fire”; you do need to “ready, aim, fire”. But at the same time, it’s amazing how many times someone writes a full-fledged business plan and then, within a few months, they end up in a completely different business. And that business takes them to their success.

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mikeYes. So I think, in the early stages of a business, you have to be very cognizant of everything that’s going on, watch the consumers’ behavior, and then flow with the river and adjust the business, sometimes 180 degrees, to match what they want to buy.

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george
I thought you were going to say “flow with the toilet”!

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marylynnSince we’re back to toilet humor, tell us about one of the crappiest resources you used when you had nothing.

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mikeHere’s one little trick I’ve used – the most expensive cost, besides rent and your employees, is professional services … your attorneys, accountants and so forth. I go to the local colleges. They have CPAs and attorneys working there that are now professors. They are more than willing to give free advice and work up the documents with you. Sometimes the exchange is simply being a case study for their class. It saves me thousands and thousands of dollars. I still use it today.

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You can get a free chapter of The Toilet Paper Entrepreneur on Mike’s site. It’s a great book that we highly recommend to you. You’ll find it to be great bathroom reading!

Thanks, Mike, for sharing your time and wisdom with us. We wish you bigg success with this wonderful book.

Next time, we’ll talk about lovin’, touchin, and squeezin’. Until then, here’s to your bigg success!

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The Entrepreneurial Roller Coaster Ride

Turn Misfortune Into Fortune: Tips for Starting Over

Last time, we talked about Todd, a young real estate entrepreneur, whose triumph turned to tragedy. Todd’s story comes from an article, in the New York Times, by John Leland, entitled A Real Estate Speculator Goes From Boom To Bust. We discussed some lessons you can learn from Todd’s misfortune.

Today, we want to go beyond the lessons and offer some advice on how to recover from a devastating turn of events.

Keep your dream alive.
Stay positive. Reach out to people close to you. People love helping people. Let them.

You should also be thankful for your misfortune. Yes, we do mean that. It means you’re one step closer to success! History is ripe with examples of people who failed before they succeeded bigg. Plan on your name being added to that list!

Here’s the first step to starting over:
Assess your strengths and weaknesses. If you’re not going to repeat the past, you have to learn from it. That’s how you fail forward. Learn from it and then forget about it – move on.

In Todd’s case, it’s obvious he is a dynamic young man. His banker said he performs. That’s a striking compliment coming from a banker who has foreclosed on him. It appears that Todd is good with Operations and Sales. Management, particularly financial management, is his weakness. This is common among entrepreneurs.

You want to build on your strengths and get around your weaknesses. For example, Todd may take in a partner with strong financial skills to complement his abilities.

What if you’ve declared bankruptcy (or are deep in debt)?
We’re not attorneys, or financial planners, or anything else worthy of giving you information for your specific situation. Keep that in mind.

A successful business person referred a friend, who had just declared bankruptcy, to a banker. The bank turned him down. The business person called the banker and explained that his friend was a better risk than he was.

“How can that be?” the banker asked. “You have stellar credit.”

The business person replied, “Because if you lend me the money, I can declare bankruptcy tomorrow. My friend can’t do that for seven years.”

We’re not sure if that’s still the case, but the point is to find ways of turning your liabilities into assets. Todd has changed from a merchant-model (i.e. he buys it, then sells it), to a broker-model. Now he makes money without having to invest any capital. Brilliant!

Our quote today comes from the great Dig Hammarskjöld.

“Never measure the height of a mountain until you have reached the top.
Then you will see how low it was.”

Keep climbing. You’ll find that many of your mountains were really just mole hills.

Tune in next time to see what people regret the most, according to a recent study. Until then, here’s to your big success!

Lessons Learned From A Bankrupt Business Owner

Last time, we talked about jump starting your passive income by investing in rental real estate. Today we’ll look at what we can learn from a bankrupt business owner.

We came across an interesting article a little bit ago in the New York Times. It was about a young real estate speculator named Todd.

Back in 1994, after attending a seminar on buying real estate, 20-year old Todd found a property which he bought, fixed up, and sold for a $4,000 profit.

By the year 2000, Todd, now 26, was holding as many as 25 houses at a time. He had perfected his system – making up to $15,000 on every house. Eight banks were in line to provide him money when he needed it. Todd decided to start building new homes because prices had gone up so much on the houses he was buying.

Fast forwarding to May of 2006, Todd was living the American dream at 33. He had a 5,000 square foot house that cost $1.2 million. He had a BMW and a Corvette. An inventory of 89 lots was waiting for buyers. He owned an office building. Life was good!

Now, his marriage has collapsed. Banks have taken back his lovely house; he now rents a small one. His beautiful cars are gone. He’s driving a pick up truck. He’s lost everything else. He sells beverages full-time, and brokers deals to other speculators part-time.

We applaud Todd for sharing his story. And a big salute to John Leland for this excellent article – A Real Estate Speculator Goes From Boom to Bust.

So what can we learn from Todd’s experience? Here are some lessons:

Just because a bank will give you $$$, that doesn’t mean you should take it!
Todd had a banker who did him a favor, if he would have only recognized it. She told him “no”. So Todd went to another banker who kept the funds coming. If Todd had only paused to consider why his first banker said no, he may be in less of a mess now.

When you’re living on borrowed money, you may be living on borrowed time.
Todd was highly leveraged, in business and at home. Being levered in business may be fine. Piling on to that with personal debt is a bad idea. Borrowing money is a two-edged sword – it will make you rich, or poor, more quickly.

When it comes to your standard of living, keep your standards low.
Todd had the best of everything – the house, the cars, and more. Which is fine, if you have assets that will produce the income to pay for everything. But when you’re borrowing to buy status symbols, you’re bound to wind up in trouble.

Know how you’re getting out before you get in.
If Todd had done this, he might have noticed that it was getting more expensive for his customers to buy houses. He could have shifted his business model once – find a customer, then build it. That would mean he was “out” without getting “in”.

Fully analyze your situation by considering a number of situations.
Todd did this once – he shifted from flipping houses to building new ones. He didn’t contemplate how rising prices were affecting his customer’s ability to buy his product. He failed to consider how long it would take him to sell his inventory of lots. Had he done so, he may have prevented the major disaster that happened.

Todd learned the hard way – by making the mistakes himself. Hopefully, you can learn from his mistakes so you don’t make the same ones.

Our quote today comes from Jonas Salk, the developer of the polio vaccine.

“I have had dreams and I have had nightmares,
but I have conquered my nightmares because of my dreams.”

So shake off the nightmare and rest assured, your sweet dreams will come true.

Next time, we’ll offer some tips for starting over, for turning misfortune into fortune. Until then, here’s to your bigg success!

Get Real Estate

Last time, we talked about how to get started in your own business or franchise. Today we want to discuss how to jump start your passive income by investing in rental property.

You may ask why you should think about investing in real estate now. The daily news is ripe with horror stories of houses in foreclosure, people getting slammed by increases in their adjustable-rate mortgages, and others struggling to sell their houses in this down market.

Believe it or not, that’s why we think now is a great time to buy! Relative to historical norms, things are not as bad now as they were good a little while ago. We’re comparing now to one of the most lucrative markets for sellers in history! Take time to note the word “sellers” in the prior sentence.

There’s less competition for property today. It’s a buyer’s market.
That’s why we think you should buy now.

We’ll assume you’re convinced – where should you start?

Start by buying your own home.
In the past, financial planners often recommended renting and investing in other assets, such as stocks. Historically, stocks have outperformed real estate. The problem – the investing part was voluntary.

Buying a home is a commitment. It forces you to save. And if you’re like most of us, you need that “forced” part. So as you pay your mortgage, month after month, you’re reducing your outstanding debt. That’s why, on average …

… homeowners are significantly wealthier than renters.

So owning your own home is the foundation for creating wealth. Now you’re almost ready for the next big step. Remember our discussion of getting aggressively passive? You’ve found money from watching your spending and paying off debt. Keep piling that money up to prepare for your next move.

Buy your first investment property.
Your next real estate purchase may be your first rental property. Or it may be your next home. Consider moving up to a nicer place and renting out your first one.

Either way, be sure you have more money coming in than going out. Hook up with a good realtor who can help you determine what your rent should be. Now, estimate your bills – property taxes, insurance, mortgage payment, and all the others. If you don’t project having money left over, don’t buy that property – find another one!

Don’t start without a cash stash.
Owning real estate comes with its risks. For example, what if your property suddenly requires major repairs? As with any business, don’t invest in real estate unless you have a cash stash. If you don’t have one, find a partner who does. Otherwise, you may lose everything.

Our quote today comes from the Australian author, Noel Whittaker.

“Becoming wealthy is like playing Monopoly …
… the person who can accumulate the most assets wins the game.”

So roll the dice, take a chance, pass GO, and collect more than $200! It’s not just play money!

Next time, we’ll look at some of the things that can go wrong – lessons from a bankrupt business owner, who happened to be a real estate speculator. Until then, here’s to your bigg success!

Start a Franchise or Business to Create Passive Income

Today we want to look at two ways you can jump start your passive income by starting your own business.

Let’s not kid ourselves. Starting a business can be risky. You’ve worked hard to build a nest egg. You have bills to pay. Kids to put through college. A retirement to fund. You don’t want to lose what you’ve worked so hard to gain.

If we can talk you out of starting your own business – so you avoid the financial and emotional turmoil that comes with it – we’ve done a good deed. Alternatively, if after reading this, you’re more determined than ever to go for it – you’ve got a big knot in the pit of your stomach – we’ve served you well. Either way, we want to get you off the fence.

Owning a business is not for everyone. You have to be willing and able to take risk. Numerous studies show that wealthy people accept more risk than the average person. You either have to accept some risk or accept a lower net worth.

Let’s look at two scenarios that allow you to start your own franchise or business, yet minimize your risk:

  • You have the money, but no time.
  • You have a job you love. You want to keep it. That doesn’t mean you can’t enjoy the benefits of passive income from business ownership. Find someone with talent to manage the business for you. But you want to be sure they are careful with your money. How do you do that? Structure your deal so they have more to lose than you do. Keep them up at night, so you can sleep. By aligning their interest with yours, you’ll be likely to develop that passive income you want..

  • You have the time, but no money.
  • You have that burning desire to own your own franchise or business, but you’re missing one key piece – money. Find a partner with money. But beware – you’ll be the one staying up at night! If you can replace your current salary and share in some of the profit, you’ll be jump starting your net worth.

Accepting risk is one thing. Learning to manage it is another. Successful business owners are good at controlling their risk. You need to develop this ability before you start out on your own, no matter which scenario you choose.

We encourage you to sign up for our free newsletter, “Bigg Success Weekly.” It’s published every Friday. This coming Friday, in our Home Office article, you’ll learn about a solopreneur who has built a business worth over $3 million in sales. Check it out!

Our quote today is by Dale Carnegie.

“The person who gets the furthest is generally the one who is willing
to do and dare. The sure-thing boat never gets far from shore.”

Next time, we’ll look at how to build a passive income through income-producing real estate. Until then, here’s to your bigg success!

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