What is the Big Idea?

by Kyle on September 2, 2010

A key component of the Art of Business is recognizing and evaluating big ideas as good opportunities. Notice that big idea ≠ good opportunity. There are many factors influencing the big idea-good opportunity diagnosis, including market readiness, growth potential, gross margins and many others. Ideas interact with real-world conditions and entrepreneurial creativity to determine opportunity potential.

A good idea is just a tool in the hands of a creative entrepreneur. Finding a good idea is the first step. Turning that idea into an opportunity is part of your challenge as an entrepreneur. Opportunities do not step up to you and present themselves with a clear price tag and a value. Rather, it is up to you to use your creativity, do the proper research and figure out if an opportunity can be built on the big idea. And, you need to do it quickly.

The paradox

Entrepreneurship requires a significant amount of careful preparation and planning but is, at its core, fundamentally something for which you can’t plan. The highly dynamic character of markets and technology make it virtually impossible to model and envision the future. You can spend a ton of time examining the competition, conducting customer research, and building financial models to produce a comprehensive and carefully prepared business plan that is obsolete by the time it hits the streets.

Should I just wing it?

No way. You need to invest in thorough research and evaluation to shape an idea into an opportunity. All of the hard preparative work in researching the market, figuring out how much it will cost to implement the big idea and adding up the potential payoff will shape the opportunity. Very, very few ideas make it through this process and turn into opportunities without being modified by the process. Research and evaluation is all part of the creative process. Like an artist shaping a lump of clay into a piece of ceramic art, you will constantly shape the big idea and reevaluate your options in light of the information you gather.

The importance of decisive action

Timing and decisive action are just as important as the opportunity analysis process. Decisiveness in recognizing and seizing an opportunity can make the difference in the successful implementation of an opportunity. Because the big idea-good opportunity analysis is not a straightforward calculation, you will never have an iron-clad promise of success. Don’t wait for the perfect time, because there will never be a perfect time to take action. Opportunity is a moving target, so when you have enough information to tip the odds in your favor, take decisive action before the opportunity passes you by.

Predicting the unpredictable

Evaluating and executing on a big idea is not neat, tidy, linear, or consistent, regardless of how much time or effort you put into the process. To be successful as an entrepreneur, you need a bias towards action founded on considerable thought and planning. So, to turn a big idea into a good opportunity, do your homework, prepare to execute and hold on for the ride of your life.

“If everything’s under control, you’re going too slow.” – Mario Andretti

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Are You Focusing on the Obstacles?

by Kyle on August 30, 2010

Anyone who has ever taken a motorcycle safety class has been admonished not to focus on obstacles in the road. Why? Because wherever you look, that’s where the motorcycle will go. If you want to avoid the obstacles that lay in your path, the better course of action is to focus on where you want to go instead. This adage applies equally to business and life.

My Motorcycling Lesson

About 10 years ago, I decided to try something new and learn how to ride a motorcycle. Having never ridden one on the road before, I signed up for a multi-week motorcycle safety class to learn in detail how to prevent becoming a safety anecdote for future generations of motorcyclists. My instructor was a woman in her mid-forties and an avid rider for over 20 years. Over the term of the course, we learned all of the standard lessons — how to start the bike, what to wear, where to ride in the lane, etc. But, one lesson in particular stuck with me and has withstood the test of time. That lesson was on how to avoid obstacles.

The lesson started off with a slow cone weave, consisting of a series of orange safety cones lined up about 10 feet apart. We were told that navigating the course without touching any of the cones or missing any of the turns would simulate obstacle avoidance and teach us where our focus needed to be, which was on the very last cone in the line. Almost every one of us started off by focusing on the next cone in our path, and every rider ended up hitting at least one cone over the length of the obstacle course.

After each of us failed miserably at making it through the entire cone weave without hitting an obstacle, our instructor stood at the end of the course and told each of us to focus on her eyes and not to look down at the cones. While riding through the cone weave, every glance away from the instructor was met with a stern reminder on where our focus was supposed to be set. I distinctly remember thinking that it was crazy to have us look away from the obstacles in our path, thinking that I would surely end up on top of the cones if I didn’t concentrate on them.

Boy, was I ever wrong. All of us quickly learned that if we focused on the instructor, we could navigate the obstacle course with ease. It was a real eye-opening experience, and I will never forget her final words of the lesson: “Be careful of what you concentrate on. Don’t focus on the obstacles; focus on a where you want to go.”

You Go Where You Focus

In challenging times, it’s easy to focus on the obstacles. The traditional news outlets constantly inundate us with sensational stories of economic and personal disaster. We all have co-workers or acquaintances that never seem to get tired of complaining about how bad life is now that the “good ‘ole days” are over.

That is a crock. Opportunities exist in abundance today, as they did yesterday, last year and 10 years ago. The key is to focus on where to go and developing creative solutions for getting there.

If you’re out riding a motorcycle and fixate on the pot hole that suddenly appears in front of you, prepare to become intimately familiar with the pavement. If you’re sitting in your cubicle at work and constantly focus on the incessant recession news or stories of job losses, stand-by to become a layoff statistic. You go where you focus.

If, instead you focus on where you want the bike to go or what your next creative business move will be, you’ll make it around those obstacles and will be zooming down the road of success.

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What is the Lizard Brain?

by Kyle on August 26, 2010

Check out this engaging and memorable video from Blazonfire for a quick explanation on how your amigdala, or “lizard brain” as it is more commonly known, may be sabotaging you:

Now that you know more about the lizard brain, what are you going to do about it?

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Write Your Life Story

by Kyle on August 24, 2010

Every day you wake up and are presented with the opportunity to write another chapter of your life. You can either make it a rip-snorting, page turning, blockbuster or you can copy and paste the same crap from yesterday.

The choice is yours.

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Elements of a Good Professional Services Contract

by Kyle on August 12, 2010

Written Agreement

As I’ve mentioned before, I believe that a well-thought-out written contract is a crucial component to building a successful professional service business. The contract serves a number of important purposes, the primary being the clear establishment of everyone’s expectations. A common mistake made by new professional service providers is to jump into a project without having a written agreement in place. Most people who do this learn the hard way what can happen when all parties’ expectations and obligations are not laid out ahead of time.

A good written agreement protects both you and your clients by explicitly spelling out what you will do for them, what they will do for you, and what happens if something does not go according to plan.  So, when designing your professional service contract, here area few basic elements to consider including:

  • The parties: Who you are (type of entity and state of establishment), who the client is (same information).
  • Scope of work: Aim to make this part of the contract include as much detail as possible. Include a specific list of deliverables for the project and a process for expanding the scope of work, should the client want you to provide additional services. If you are a designer of any type, make sure to specify how many concept revisions are included in the deal and consider including the charge for any revisions thereafter.
  • Term and timeline: It is very important to include important milestone dates and a timeline for the entire project.  This serves to manage expectations and to promote timely deliverables from everyone – you, your client and any third parties.
  • Payment details: Make sure to include specific information on deposits or retainers; payment amounts and due dates; how payments are to be made; and late fee assessments.
  • Intellectual property ownership: Your contract should clearly state who will own the copyright, trademark or patent rights to any information used in or created for the project. Be very specific and include ownership provisions related to any schematics, programs, code, multimedia, graphics, design elements, or any other tangible or intangible resources used in or created during the project.
  • Contract termination: Lay out all of the ways your contract will terminate. Options include: the end of the contract term, delivery of the final payment and deliverables, termination by written notice, and termination for cause if someone does not live up to his or her obligations.
  • Other legal considerations: There are a number of other legal clauses to consider, including warranties, limitations on liability, damages, indemnification, arbitration, and choice of law. Talk to a legal professional for details on these contract provisions.

In designing a contract, your mission should be to make the written agreement comprehensive, ensure it is as easy to understand as possible, and that it serves both your interests and those of your client.  Ultimately, the goal in creating a written agreement is to clarify expectations and obligations and to make sure your most valuable asset – the relationship with your clients – is protected and maintained.

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The Nitty-Gritty Bookkeeping Checklist

by Kyle on August 4, 2010

Bookkeeping. This single word has the ability conjure primal fear and anxiety in even the most hardened of entrepreneurs. It doesn’t have to be that way, though. Just a few, easy steps, taken on a regular and scheduled basis will tame the bookkeeping beast.

So, without further delay, here is the first in a series of Art of Business checklists for you to download and use:

Art of Business Bookkeeping

Do you have questions or concerns about bookkeeping? Leave a comment to discuss them.

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Do I Need A New Business Entity?

by Kyle on July 20, 2010

A reader asks:

I am an independent freelancer and have a question about whether I need another business entity for a new line of business.

Over the last few years, I have operated two websites focused on environmental issues. Through these sites, I provide resources and tips on sustainable living and make money through advertising, affiliate sales and and e-books. I created an LLC to own and operate the websites and set up a separate checking account for the business. Recently, I decided to provide freelance writing services in addition to running my two websites. I set up another website using my personal name and have attracted a few paying customers. My question is: Can I provide freelance writing services under my existing LLC or do I need to create a new entity?

My take:

It is good to hear you have been thinking ahead and doing some proactive planning. Your situation is actually quite simple, because you have already taken the right steps of setting up an LLC and a business bank account for your other business ventures.

If you wanted to, you could set up another business entity for your freelance writing services. The benefit would be a separation of the assets and liabilities of each business. The drawbacks, though, would include the extra administrative requirements to set up and operate a separate company, setting up and maintaining a separate bank account, and additional tax reporting complexity.

I am a fan of taking the simplest approach, and the extra administrative and financial burdens are probably not necessary in your situation. I recommend that you use your existing LLC to provide writing services to your customers. You would just need to bill your customers using the LLC’s name and make it clear in any contracts and/or negotiations that you are providing services as a member of the LLC. For instance, if you are hired by XYZ to provide services, the contract would be between your LLC and XYZ, and you would sign the contact as a member of the LLC.

I hope this helps, and good luck with your new business!

Do you have a question? Send it my way using the Contact form.

Disclaimer: The information presented on this site should not be construed to be formal legal advice nor the formation of an attorney-client relationship. Please contact a legal or tax professional to discuss the specifics of your situation.

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Regular Visits by the Tax Man

by Kyle on July 15, 2010

For most individual taxpayers, tax day comes just once a year — on April 15.  But, for many businesses and self-employed taxpayers, Uncle Sam expects a check four times a year.

Who pays

Unfortunately, you are one of those poor quarterly taxpayers if you are a sole proprietor, partnership or S corporation and any of the following applies to your situation:

  • You expect to owe at least $1,000 in tax at the end of the tax year; or
  • You expect your withholding to be less than:
    1. 90% of your tax this year, or
    2. 100% of your tax last year

Huh?

Essentially, if you think you will owe over $1,000 in tax, be prepared to calculate and make estimated tax payments.

But, if your business is a C corporation, you must make estimated tax payments if you expect to owe more than $500 in tax at the end of the year.

When payments are due

Estimated tax payments are due on April 15, June 15, September 15 and January 15. If you underpay one or more installments, you get charged interest until the day you catch up.

How much to pay

Unfortunately, there isn’t an easy answer to this question. The official answer is you must calculate your expected AGI, taxable income, taxes, deductions, and credits for the year, then use Form 1040-ES to figure your estimated tax.

To simplify things, you can withhold 100% of the tax you paid last year and make payments of 1/4 of that amount each quarter, instead of trying to estimate how much your tax burden will be this year.

The Tip

I have tried to be brief, but the rules are complex. So, anyone wanting more information should download IRS Publication 505 or IRS Publication 542 for corporations from the IRS website or talk to your tax advisor.

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5 Business Lessons From My Dogs

by Kyle on July 13, 2010

My wife, Cynthia, and I have two Chihuahuas who have shared our lives for the past eight years. I never expected that two little dogs could me so much about business and living my life to the fullest, but that is exactly what they have done. These are some of the lessons I learned from watching them over the years.

1. The best time to act is now.

Dogs don’t sit around and ponder all of the possible outcomes of taking action. Instead, when they see an opportunity, they jump on it. If a piece of food hits the floor of the kitchen, our dogs waste no time pouncing on it. If it turns out to be something they don’t want, they will simply drop it after a brief investigation

We can implement this action habit into our own lives by taking advantage of favorable circumstances that present themselves. Sure, the economic news is full of stories of doom and gloom. But, don’t let that stop you if you discover a great business opportunity. Seize the circumstance by acting on it. If, after investigation, it turns out the opportunity isn’t what you expected, you can always drop it and move on. You never know if one of those situations might turn into the pure gold.

The key is to have the courage to act.

2. Trust your instincts.

It never ceases to amaze me how dogs will immediately get out of situations they don’t feel comfortable with. I was on an evening walk around the neighborhood with the dogs a few days ago when Mandy suddenly stopped in her tracks. I tugged at the leash, but she refused to budge. Instead, she stared intently up the street into the darkness. A few seconds later, the dark silhouette of an animal emerged from an alley ahead of us and crossed the street into the woods. Trusting a feeling that something was wrong, she prevented a potentially dangerous situation for both of us.

We too would be well-served by trusting our instincts more and relying less on rationalizations. If a business opportunity doesn’t feel right, you are likely picking up on an irregularity on a subconscious level. If a potential client or business partner appears to have all of the right qualifications but something feels wrong, trust your instincts and pass on the engagement. More likely than not, you will be happy that you did in the long run.

3. Enjoy the ride.

Every time I ask the dogs if they want to go for a ride, the response is always the same — sheer joy. They don’t care what the destination is. Wherever the trip takes them, they intend on simply enjoying the journey.

Too often, we become mired in focusing solely on a goal and miss out on the joys and opportunities that the journey provides. We spend much more of our time on the way to a goal rather than at the goal. Passing up the joys that the trip provides results in spending most of our time unhappy and relying on an anticipated result to fulfill us.

To make matters worse, when we achieve the goal, we usually just move on to the next target without savoring the satisfaction of that achievement. Taking time to enjoy the journey to a goal and celebrating the achievement of that goal will result in a much more fulfilling experience.

As Leo Babauta of Zen Habits regularly advocates, “Stop waiting for happiness. Happiness is right here, right now.”

4. Express your gratitude.

Dogs don’t complain about the quality of their food, that they don’t have the latest technology in dog beds or that they don’t have the right friends or contacts. Instead, they are grateful for what they have and for the people in their lives. A delightful aspect of having the dogs around is that they regularly express gratitude to us, whether it is via a wagging tail or curling up next to us on the couch.

It’s easy to feel sorry for ourselves because we don’t make as much as our neighbors or we don’t have the dream house that our peers may own. But, there are billions of individuals who would trade places with us in a heartbeat. So, take some time to think about the things you are grateful for in your own life.  Simply giving thanks for all that you have and for the people in your life will help make you a happier and more positive person.

5. Engage in pack activities.

Dogs are happiest when the whole family is involved in an activity. Our group outings to the park are the liveliest when all four of us are involved. Always wanting to be part of the action, there is rarely a time when I can walk around the house without a canine shadow following me. When I work from home, I usually do so with a dog in my lap or at my feet. The dogs understand the value of community and the power of interaction with others.

Owning a business can be an isolating and stressful experience at times. Many entrepreneurs struggle with believing that no one else shares their vision or their passion for building a business. Pack activities are essential in helping to manage the day-to-day demands and their effects on us. Uniting and connecting with other similarly-situated people provides a measure of perspective and can be extremely insightful. Find people who are ambitious, smart, hard working, full of ideas and highly passionate about their business. Hanging out with these like minds will not only have you feeling more at peace, but will also inspire you to push for more in your life and business.

So, get out there and find your own pack.

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Down But Not Out

by Kyle on July 9, 2010

“This is the lesson: never give in, never give in, never, never, never, never—in nothing, great or small, large or petty—never give in except to convictions of honour and good sense. Never yield to force; never yield to the apparently overwhelming might of the enemy.”
— Winston Churchill

Have you ever given your all to something only to have someone else come in and crush the results of all that work? Do you get frustrated because the outcomes you want aren’t coming to you as quickly as you’d like, despite the fact that you bust your butt day in and day out? Do you start to doubt yourself, your skills and talent, and your ability to succeed? YOU ARE NOT ALONE. As small business owners, we have all been there.

There are a number of ways for us as business owners to handle these types of devastating set-backs. Here are three of the most common:

  1. Do nothing and just keep absorbing the abuse;
  2. Quit;
  3. Make a change.

Option Number One – Do nothing.
If this tactic appeals to you, you probably shouldn’t be an entrepreneur. Most of us started down this road because we weren’t willing to slog along in mediocre jobs just taking indiscriminate abuse meted out by others. If we wanted to suck it up and slide along the path of apathy, we could have stayed in our corporate positions and let circumstances and other people dictate the direction of our lives.

Option Number Two – Quit.
This choice is a bit more problematic. Throughout our lives, we are reminded that you should never quit something you started. Cliches like, “quitters never win and winners never quit” (Vince Lombardi) or “success is 99% failure” (Thomas Edison) are pointed to as evidence of the viability of this notion. I think that point-of-view is far too over-broad, though.

If an objective is worthwhile, I urge you to stay on course, even though you may have to endure a significant amount of pain. But, if you start down a path and find that the result at the end of the road is either 1) not what you thought it was or 2) not obtainable, then it’s time to re-evaluate whether you should continue with the endeavor. In The Dip, Seth Godin, proposes that Americans have been brainwashed by Vince Lombardi. “Winners quit all the time,” says Godin. “They just quit the right stuff at the right time.” The million-dollar question, though, is when to walk away from something. The key is to step back, gain some perspective on the situation, and try to objectively determine whether you should continue.

Option Number Three – Make a change.
If you’re unwilling to keep your mouth shut and are convinced the goal is worth pursuing, it’s time to do things differently. Einstein is credited with defining insanity as “doing the same thing over and over again and expecting different results.” If you keep running into roadblocks in your business, maybe it is time to stop the insanity and make a change. The only way to produce different results with the same set of circumstances is to do things differently than before.

Instead of reacting to circumstances, take a step back and assess what you need to change to obtain a different result. Be proactive by taking the first step and being the person who gets the ball rolling towards change. Successful small business owners embrace change and make it happen. Change usually starts with disruptive innovation, so you must also be willing to break a few paradigms to create any real transformation.

So, my question for you is:

If you are not happy with what you’ve got, what changes are you willing to make to get something different?

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