The Blueprint to $1M: How Small Business Owners Actually Scale

Hello, course members, it's Mike Andes and.

I want to say welcome to the MBA for Entrepreneurs course. I really look forward to sharing many hours, many, many videos, and just as much knowledge and learning as I possibly can with you over the course the next few days, months or years as we continue to add to the course.

Before we get started though, I want.

To share really my story, give you a little bit of background and talk about why went to get my MBA and really why I'm now creating a version of my own MBA for you online.

So for most of you, you kind.

Of know my story. I started out when I was young, mowing lawns when I was 11 years old. But even before that had done all sorts of entrepreneurial things. I was the kid in school selling snacks to my peers. I would set up a little snack shop next to the golf course that we lived close by. I did waxing of snowboards and skis. Because we live in the Pacific Northwest. In the winter we have a lot of skiing going, so just always really busy, trying to make a buck. When I was 11 years old, started mowing lawns, you know, walking around our neighborhood mowing lawns. My brother and I and went to school, went to college at 13 years old and was able to pay my way through undergrad studies using my money from mowing and from mowing lawns. When I was 18, I finished my undergrad degree and I thought I was going to go to medical school. And so before I went to my md, my master's in getting my doctorate for medical science, before I did that, I went away to Africa for six weeks. And in Africa, I did all sorts of surgeries and just crazy amounts of stuff in the medical field. Lots and lots of fun. Did everything from birthing to the burn unit. Just a whole bunch of different stuff. I just loved every minute of it. With orphanages as well as clinics over there and really kind of just outside Nairobi and Kalangwari, Tigoni, a couple other places. Just really, really enjoyed my time there. However, when I came back to the US and began to shadow other physicians and really seeing what the medical system looked like here, it definitely just was not appealing to me. I knew it was something I couldn't do for the rest of my life. And I didn't want to go to school for the next eight years. By the time I got my doctorate and then my fellowship and all of that to become a surgeon and literally be stuck in that one specialty the rest of my life, I guess you could kind of say I was an entrepreneur from the very beginning, and most entrepreneurs aren't okay with doing the same thing all the time for the next 40 years. When I was really young, I actually wanted to be a financial advisor. And I think that's part of why I love even teaching so much, whether it be the podcast or courses like this. Try to teach other people about business, something I just love to do. When I was about 8 or 9, I thought I'd wanted to become a financial advisor. And I would read books on personal finance and the stock market and real estate and just a whole bunch of different stuff. I knew more about bonds and the treasury and all of that sort of thing probably when I was 8 or 9 years old than most people do throughout their life, just because I loved it. I was so fascinated by it. And I would just read books, listen to DVDs at the time when I was younger, and I just really, really absorbed it as much as I possibly could. When I was 18 years old, though, after realizing that, hey, the medical system was not something I wanted to be in, with all the bureaucracy, the paperwork, I just wanted to help people. And in Africa, that was the love, why I loved it so much. But when I came here, just back to the U.S. it was just unsatisfying. And so I decided, you know what? I'm not going to go to medical school. I canceled my medical school application. I decided I was going to do this mowing lawns thing more seriously full time. So that's when I started Augusta Lawn Care Services. That's about six, seven years ago now. Augusta Lawn Care is a franchise, and we've been franchising for about a year now, and we now have 20 locations across North America and Canada and the United States. And I also own Anytime Fitness, which is a gym. I bought that a couple years before franchising Augusta Lawn Care simply to learn the system. Anytime Fitness was ranked as a number one franchise by Entrepreneur magazine about five years ago. And so they're very, really, really well known. They have 4,500 LOC around the world. And so I really wanted to learn from an established franchisor how to do it. And so I learned so much from them and was able to apply a lot of those same techniques and ways of communication and fee structure to Augusta Lawn Care when we begin to expand across North America. And so that really leads me up to today. You know, right now I, as most of you know, I have business bootcamp, podcast, landscape business course. I have landscape businesscourse.com where I have an online course Just for landscapers. We also do a lot of media and different things and training and books and things like that. We have a conference, Landscape Summit. But really this is really my first foray into sharing general business topics about things outside of the landscaping industry because I really feel like so many elements of business are universal. And when I was 18 and I decided to not go to medical school and decided to start my mowing company, you know, Augusta Lawn Care, really my backup plan was, hey, you know, I'm so young, I should go get my master's in business because I'm still so young. I was 18 at the time and I just paid out of pocket. And I didn't, I did it in the evenings. And so what would happen is I would mow lawns, you know, from, you know, early morning until 5:30 o', clock, 5:30 in the evening. And then I would go to school from 6pm till 10pm and then after school I'd stay there for projects. I would get caught up on homework, I'd send estimates out at night, I would do invoicing at night.

Just really, really busy.

And all throughout the day I listened to audiobooks and business like literally it.

Was just two years while I was.

Getting my MBA of just saturation in business, both my own business as well as more. The theory of the business education I was getting from Western Washington University. So it was an evening program. It was a pool of a lot of professionals and other corporate executives. A few other business owners were in that class as well. And lots of pieces of it I enjoyed. It was a really expensive program. It was probably about 20 times as much as what you paid for this course, if not more. And so it was very expensive for me to go. Actually it was quite a bit more than that. It was probably 50 times more expensive. But during that time I realized that.

Probably about 5 to 10% of what.

I learned there was really valuable for small business owners. And especially towards the end of the MBA program, the two year program, I just began to realize that I do not need to know a lot of these things for my future. I'm never going to need to know a lot of these really sophisticated accounting methods because I'm going to hire accountants, I'm not going to do the accounting myself. I just need a basic understanding, which I felt like I had. And so I actually dropped out one quarter before I finished my program because Augusta Longer was starting to really take off. And I just could not calibrate the return on investment of spending my evenings going to this getting A piece of paper that I felt like I got the value out of the degree and I did not need the one more quarter to finish up. And so I dropped out one quarter before graduating, which some people thought was crazy, but I really learned so much from there. And I really, my goal in this course is to consolidate all that for you. Where my MBA really let me down was the fact that it didn't set me up to start a small business. And then maybe you've gone and done a business class or an entrepreneurship class or something like that and it's been disappointed by the fact like when you're done at the end of it. A lot of it didn't have anything to do with starting a small business. It had to do with managing millions of dollars on a profit and loss statement, or it had to do with managing dozens of people on teams when all I was looking for was how do I start, how do I grow this business, how do I market, how do I actually get my first employee? All the small things that go into starting the business just were not there Then we were talking about corporate bonds and they're talking about mergers and acquisitions of billions and billions of dollars and debt structures, incredible proportions that were just not applicable to small businesses. And I hope that this course, the MBA for Entrepreneurs, is really the exact opposite of what I got from the formal educational system and the MBA program that I received.

So there's a lot of reasons why.

I decided to start the MBA for Entrepreneurs in this course, but I want to go over a couple of those right now and really just can understand what you can expect as we go forward. So number one is I really wanted to consolidate a lot of the information. I don't even know if this is how you spell it. Consolidate. Just get used to me misspelling things on the whiteboard. But as we go forward in the course, my goal is really to consolidate everything that I've learned in my MBA program, which is a Master's in Business Administration. It's a two year program that I went to. I want to consolidate all of that, all that knowledge and learning into this program along with the real world applications that I've learned through consulting with hundreds, possibly even thousands of businesses across a whole bunch of different industries. Everything from service, product based, online, retail, you name it, and I wanted to consolidate all of that along with all the real world applications that I've had in my own businesses, whether it be Augusta Lawn Care or Anytime Fitness, Ketosis Cups, the online business Boot Camp podcast and the books and the Conferences, all of that stuff. I just wanted to kind of consolidate all of that learning into one easy to learn course.

The second thing is I really wanted.

To do it on your time because when I got my mba on your time, When I got my mba, I had to do it in the evening. And it was very hard for me to work 12, 14 hours in my own business, starting a company, really trying to get it going, and then go and sit and listen to a professor for four hours that was sometimes very boring about topics that were very dry. And we're gonna have some very dry topics that you know aren't the most exciting thing in the world. When we come to accounting principles or we start talking about gaap, generally accepted accounting principles, like those are not things that get super. Everyone's super exc. However, they're really necessary for you to know. It's just that I could not spend four hours listening in the evening without falling asleep, being distracted, being annoyed that I didn't understand or that I was late and now I'm not understanding where everyone's at. I want you to be able to do this on your time. Whether you watch two minutes or five minutes a day, whether you watch one course a day, one little segment, one video, want you to do this on your time. And so whether you're sitting at the bus stop or whether you're in between classes, whether you're driving down the road, working out whatever it is, you can do this when you need it and take little digestible nuggets that I've consolidated an hour's worth of lecture or two classes worth a lecture that I had in my MBA down to a 10, 15 minute video that you can actually understand and get the principles of what is needed. Third reason or third goal that I'm trying to really have in this course is that regardless of whether or not you're starting all the way to when you are scaling and everything in between, regardless of where you are at in this continuum, there's gonna be something here for you in the course. And so the first couple modules you're.

Just starting out, how do you actually.

Even come up with an idea? How do you know there's a viable idea? How do you test that and have market research? So we're going to talk about starting, but we're also going to talk about all this other stuff in between. In between here is marketing and how do you figure out your hiring systems and how do you scale the business and how do you grow and how do you actually make sure that you do have accounting incorrectly. And you do have certain legal things set up when you started so that it continues to allow you to grow the business, whether it be through your entity structure, your insurance, etc. So everything from when you start, when you scale, and everything in between is what we're going to cover. And even if you're accomplished and really have done a lot, there's going to.

Be a lot of principles that are.

Really, really good for you to know as you grow your business. Even if you hire an accountant, even if you hire marketing agency, and even if you hire an HR person, there's always going to be elements of those subjects that you, as the owner should know about. At least you can walk into a room, know what they're talking about when they start talking about certain principles or verbiage in those categories and subjects that you know what they're talking about, and you can have a really good discussion with your executives. Now, the other thing that it's going to cover is saving your business. During times of economic recession, you're struggling, industry is doing poorly. So maybe you're coming to this course and your business is not doing well. There's going to be a lot of information that are going to help you in this course to actually save your business. You're going to realize that there's certain ratios that you have not been calculating when we start talking about the financials of your business, knowing your numbers. And so this will definitely help you save your business if you're in that scenario. Fourth thing, fourth goal, when I really wanted to create this course is that it's for small businesses. So much of what I learned in my MBA at Western Washington University was for corporate. The corporate world. It was for, you know, big executives and for people that wanted to climb the corporate ladder. I was not interested in getting a job. I was not interested in just becoming a better employer, better manager, even those things, pieces and elements of those things were really helpful for me. I was just not interested in learning anything that was not going to allow me to become a better small business owner. And when I say small business owner, that's under 500 employees for all I care. And so if you're over 500 employees, you're probably not watching this video. The vast majority of us, we need information that's going to get us to that point. We don't need information once we're on the stock market and all the rest of it. Right now we need to figure out how to get to that point. Once we get on the stock market, you Give me a call and we'll take some royalties off of that deal. But the fifth goal in doing all of this and the reason why I think people this is so valuable is confidence. For a lot of you, you did.

Not get your mba.

You knock your master's in business, you didn't go to business school. And honestly, it's a handicap for you only because you just don't have the confidence because you don't know some of the verbiage. You don't know some of the things that people might throw at you in terms of marketing terms or in terms of legal aspects or accounting. And so you just don't have the confidence to grow your business because you don't know what you know. And therefore, when someone starts talking to you, you feel like you're at a handicap. I want to take that handicap away by giving you the tools, giving you the knowledge to be able to have those discussions in a really educated manner and know what you're doing. A lot of times I just see so many small business owners, they don't. They don't. Since they don't know something in a certain subject area, they just either ignore it and it does poorly, like accounting, for example, or they relegate it without any sort of oversight to some other party. And that person can really mess things up for them. They can charge them too much. And really, at the end of the day, that area of the business is not going to be managed well when the owner doesn't have some sort of context to how that should be run to the overall health of the business. So I want to make sure you have confidence that you know some of this verbiage. You can walk in, talk to your CPA and know what they're talking about when they talk about talking about discounted cash flow and cash on cash returns and other little things that they might throw out that make you usually step back. That's the time for you to step forward as a business owner, know exactly what they're talking about, have an educated discussion around that topic. You need to have the confidence to be able to dabble in different areas of the business world. You know, some people take an entire five years or 10 years studying marketing. Some people take five years studying tax stuff. Some people spend five years figuring out the entity structures and LLCs and all the rest of it not trying to give you all the depth of their knowledge. But you as a small business owner need to know enough about all those things to give you the confidence to talk to those people have spent that much time that you, maybe you're hiring and using their services, but you need to keep them accountable. You need to be able to manage them when they're working for you.

Now before we get started, I have to say this because my attorney wants.

Me to say that. And that is this is not accounting advice. This is not legal advice. You should hire a cpa, you should hire an attorney, should do all that correctly. But this is really for educational and entertainment purposes only. So don't sue me. If you try to do something and it goes wrong, I am not able to come and see your business and give you one on one advice. The concepts we talk about are universal concepts, a little more general, because it's all about business. The same way that when you go to business school you get general concepts that are universal. They work in every industry regardless of size of business. They're just generally universal concepts of business.

Another thing is that if you are.

Anywhere in the world, these concepts will apply.

Now there's probably about 5% of the.

Course that is going to be specifically for people that live in the United States. For example, the irs, then they're the.

Place where we, in the United States.

We have to pay taxes. But guess what, Canada doesn't have it. Other places around Europe and Africa and Asia, they don't have the irs. So there's a few things in this course that might be specifically for the United States, but like I said, 99% of business concepts, how you manage people, how you hire them, how you interview them, how you market your services, how you do your accounting in your books. These things are universal. Doesn't matter where you're at, that's the bulk of what's included in the course.

Now before we get started and dig into the meat of the course, I want to go over five things that.

Are going to allow you to get the most out of this course. And you've paid money, you've invested skin in the game, you're going to invest time and energy and I want you to get the most out of it.

So let's go over five things that.

Are going to allow you to really get everything you possibly can. Really squeeze out every bit of information and every piece of value that you can from this course. Number one, take notes. Alright, now most people are just right now like, oh my goodness, I have to take notes here, we're back in school. No, no, no, take notes on your phone. Okay? So for most of you, you're not watching this sitting down in a big 36 inch screen and just watching and taking notes on a line, piece of paper and a pen. I don't expect that to be the case. For most of you. You're probably driving, working out in between something that you're doing around the house and you' to have a lined piece of paper or a binder that you carry around with you all the time. Now you do carry your phone though. So open up a Google Doc, open up your notes app, whatever that might be and take notes on your phone. Just bullet points, that's totally fine. And if you want, you can use the section numbers for every single video, 1.1, 1.2, 5.6, whatever it is, to make a quick notation of what video you were watching when you made that note. So you could always go back and watch that video again. Alright, so make notes on your phone using something like Google Docs or your notes app and as you're listening, jot that note down real quick and you can go back to watching the video. Make a notation of the video, which number, section it is. You can always go back and reference it. Alright, Next thing is listen to this sequentially. Alright, so listen to it in order. What I mean by that is right now if you've skipped this and you're like, oh, I'm going to jump to the marketing section, don't do that. It all builds on itself. When getting to marketing, we're going to reference back to your ideation process and your market segmentation process. We're going to reference back to when you were thinking about collecting market data. So please listen to this in order. Otherwise you're going to get into some concept and I'm going to assume that you know something from a previous lecture and you're not going to have any idea what's going on and you're going to get lost. And especially when you start getting into some denser topics, you do not want to be lost on one concept or one word or verbiage. So please listen to it in order. It might seem like a repeat. Especially if you're already a seasoned entrepreneur and you know your numbers or you know, certain elements, just listen to it again. It's a great refresher. Trust me. There's parts of my MBA where I felt like I was, you know, I'd done that before too. But like, listen, it's great, it's a great refresher. You'll learn something new and I promise you, you'll need it down later in the course. All right? Number three is don't binge watch, alright?

Don't sit down and think that you're going to listen to this entire course in the next couple days. Don't binge out on it. Like there's lots and lots, dozens probably, eventually, as I added the course, hundreds of videos here. Don't just watch this all in the next 10 hours and just sit down and watch the whole thing. You're not going to be able to absorb it and you're not going to take good notes. And it's very likely that you're not going to get everything you possibly could out of it because things do build on themselves and you can't absorb it all in your mind. Like your brain just not able to process it. You listen to one video, one of these videos contains more information compacted than sometimes I would have learned in one or two weeks at my MBA course. Literally, like what you're learning here is literally the notes that I took in my MBA course, the exact textbooks, all the information that I was getting from that course is in these lectures. And so this lecture might be five minutes. And that was what I learned over the course of two weeks, my MBA course. So please don't binge watch. You're not going to retain the information if it's just dumped on you. You'd rather get a little drip, A little drip, A little drip. That's going to be much better for a plant than if you just go take 500 gallons, just douse it with water, it's not going to retain it. The soil doesn't retain the moisture, just runs off. And if you binge watch these videos, it's just going to be run off, it's going to become noise, you're going to get annoyed with my voice, you're going to get annoyed with this set. But if you just take it little by little, one lecture at a time, you know, 10 minutes here, 15 minutes there, five minutes here, you're going to retain a lot more. Maybe listen to five minutes and the rest of the day you're thinking about that, that concept. You're starting to see it in the real world. You're seeing it when you go to a restaurant, you're seeing it when you're using a different service. That's what you want to do. That's how you're going to learn the most from the course. Next thing is test it yourself. But more importantly, go do it. Alright? For most of you right now, you are either starting a small business, about to start a small business, or you're already running and operating your small business. Go implement the principles that we're talking about here, this is the massive advantage that I had when I was in my MBA course. I was starting, literally starting Augusta Lawn Care the same month that I started my MBA program. And so what it allowed me to do is learn something and literally go apply it. You know, learn about something in marketing and go apply it. Learn about something in management and go apply it. Super valuable. And so if you have a small business right now, or if you're literally in the process of thinking about beginning your own venture, just do it. Just do like implement it and test it out for yourself. See if it works. When we start talking about the ideation process for your idea of your business.

Do the actual thing that I'm doing on this board.

The reason I have this whiteboard and I'm not just sitting in a desk is because I want you to see it, visualize it for some of you, a little more visual to see the things being written out, and I want you to go do them. Do some of the exercises that I write up on this board yourself. But most importantly, go implement the principles we talk about. You didn't pay for this course for just to become background noise while you're driving or when you're working out. Go implement these things. I promise you, listening to one course and then asking yourself, how can I go do this in my business? How can I do this for in the future in my business? And actually implementing these principles, that's where you're going to get the return on your investment that you've made for this course. Last thing number five, kind of mentioned it already. One thing now, when you look at this whole course, I hope you get more than one thing out of this whole course. But at the end of the day, there's probably one thing you're going to learn from this entire course. They'll make you a lot of money down the road. Now, does that mean everything else is completely negligible or not unimportant? No. All very important elements to support that one thing. But there's a very good chance that there's one, two or three things in this entire course. That, that one principle, that one characteristic or piece of learning that you're going.

To get is what allows you to.

Unlock a great business venture down the road.

Hire the right person.

Great. A marketing campaign that just completely blows your business out of the water. Like, there's probably one or two things that's an entire course that's going to change the trajectory of your career and your business. Now, what I want you to think about is in every single video that you watch, what's the one thing you're taking away?

Because if you do that for every.

Single video, I promise you, you're going to find the one thing in this entire course. Don't again, don't skip forward, don't try to find the one thing. Just keep mining, keep digging slowly but surely, shovelful by shovel full, and you're going to find that nugget of gold. Alright, so I know there's probably two.

To five things in this entire course.

That will stick with you for the rest of your life and change your business. But if you look at every single video and ask yourself, what's the one thing I can take away? And then go actually do it without binge watching, listening in order and taking notes on my phone, how can I grow my business and change it for years to come?

Now, you might think I'm biased when I say this, but small business is extremely important to our economy and our livelihood in the United States and around the world. I want to give you a few different stats though about the United States just to kind of emphasize how important small business is to our economy and to our lives. First off, half this is the number of adults that will work for a small business at some point in their career.

Alright?

So if someone works 40, 50 years jump around several different jobs, half of adults that work throughout their career will work at some point for small business. The next number is 27.8 million is the amount of small business is in the United States with less than 500 employees. So 500 employees is kind of the definition of a small business. Anything under 500 employees is considered a small business by the SBA, the Small Business Administration. So there are 27.8 million of the enterprises in the United States. Now small businesses also make up for 43% of high tech jobs. Engineers, scientists, computer programmers, 43% of those jobs, high paying jobs are made up from small businesses. Now the thing that I think is really the most incredible is that of this 27.8 million small businesses in America, 99.7% of these have less than 20 employees. So you might be thinking to yourself, oh man, I only have one employee or I have, you know, just a few employees. Guess what? 99.7% of the 27.8 million small businesses in America have less than 20 employees. You can do the math on that yourself. And that is that if that means that only 0.3% of small businesses have between 20 and 500 employees. So a lot of small operations that have less than 20 employees. The last number I want to talk about is one fourth and that is the amount of veterans, one fourth of the veterans that come home back to the United States from the military. There's 23.5 million of them. One quarter of them want to or are interested in starting a business or buying a business when they come back from the military. These are just a few stats that I hope, kind of emphasize the fact that, hey, small business is very important. And whether you're looking at political, economic or just our livelihoods, and the way that we communicate with each other in our communities on a micro level, not just macro, not just geopolitical or across massive commerce, you know, just interacting with our families and with people in our local community, small business is absolutely imperative. Alright, so in this lecture I want to talk about why small businesses can even compete or win and beat larger companies. You look at the stock market, you look at these massive conglomerates like Apple and Amazon and Google, and you ask yourself like, how can I even compete? Or maybe in your specific sector, if you're a restaurateur, you look at massive chains around you that have thousands and thousands of restaurants, or if you have a mowing company, you look at thousands of different landscaping companies, big companies, publicly traded companies with millions and millions of dollars and investors and all the rest of it. How can a small business beat a big business? We've seen it time and time again where these small startups, small businesses begin and end up taking down the Goliath in their industry, the established person that's been there for a long time, the company that's kind of gotten bloated on their success, they just take it for granted. How can they win? It comes down to this. A startup or a small business that has high growth potential, they actually have a name for that. It's called gazelles. And there's certain books you might read that actually refer to small businesses as gazelles. And the reason for that is because a gazelle, if you just think about the analogy, sometimes a gazelle can actually get away from or actually beat up like a lion or a tiger or a cheetah. Not necessarily because they're stronger, they have bigger teeth or stronger claws or anything like that. It's simply due to the fact that they're two things fast and they can change quickly. And really both of it comes down to one thing and that's speed.

Right? If you take both of these things.

It just comes down to speed. And the game of business Comes a lot of it comes down to speed when you talk about competition, how fast people get to market, how fast people get they pivot. If a lion is coming after a cheetah or sorry, if a lion is coming after a gazelle or a cheetah is coming after a gazelle, that cheetah might be faster, that lion might be stronger. But that gazelle has one massive advantage. It can go super fast, it can jump high, it can go 50 miles an hour this direction and then on a dime switch to a different direction. That constant change might end up leading the cheetah to stumbling if they're trying to change direction or the lion to get confused and end up just giving up. And the reason a small business is like a gazelle is because we can pivot quickly. We don't have a massive, we don't have a board, we don't have to have a board meeting to make a decision. We don't have to have all of the bureaucracy. We don't have to worry about investors, we don't have to worry about reporting quarterly reports to the stock market and to Wall Street. We can be fast, we can change quickly. We can be very nimble, like a gazelle is. And so one of the things I want to inspire you to be as we get started with the course is to be an uncommon company. And a lot of times when people think about uncommon companies, they think about companies that are game changers, have new technology, groundbreaking technology, especially high tech stuff. But I don't think, I don't think the majority of you watching are going to start the next Google. I don't think the majority of you are going to even start a tech startup. Most of us are local businesses, industries that have been around for a very long time. And so you ask yourself, how am I going to build an uncommon company when what I've been doing, baking pies, has been done for generations and hundreds of years. How am I going to do anything uncommon? What I would recommend, what I encourage you, and I hope that this course allows you to do, is to build an uncommon company in a common industry.

This is what my goal is in making this whole course so that everyday business owners, not high tech, Silicon Valley, San Francisco, New York, most of us don't live there. Most of us are starting businesses that have been around for a long time. It seems like there's lots of, lots of competition. It's not new. You're not getting startup funding or VC funding. Even though we're going to talk about those things in the Future, I want you to build an uncommon company in a common industry. Your industry might be dry cleaning, it might be making food, or doing something very common, everyday service or product, selling shirts online, whatever, it might be nothing new. Groundbreaking high technology. And honestly, these are the companies who have the highest success rate. Companies that build uncommon companies in common industries have a higher success rate than people that are always trying to break the entire like new, completely different, never seen before. Startups that get funded from angel investing, a lot of them, just 9 out of 10 of them don't even work out. 8 out of 10 of them never make a single dollar. But you can make a common company every day that everyone needs. Mowing lawns, doing roofing, doing fences, doing someone's groceries, making food. As a restaurateur, whatever it might be, do something common, but do it in an uncommon way. I hope that whether it be the hiring processes or how we talk about systems and procedures throughout the course is going to give you the tools required to make an uncommon business an uncommon company in a common industry. In this lecture I want to talk about the five reasons that as a small business you actually have a competitive edge over the big guys. So the incumbent that's in your industry, whether it be locally or a national or multinational company, that is the big name, the big guy in your industry or in your market, how can you actually have a competitive edge over them? There's five different reasons. The first one is integrity and responsibility. Integrity and responsibility. Alright, so I'm just gonna say integrity up here on the board so you can really create a solid reputation for the honesty and dependability of customer service and quality of product. So first of all, you think about.

Like a local hardware store, that's what.

We'Re gonna use for this kind of versus say Home Depot. Like how in the world are they gonna get the same pricing? How in the world are they gonna have all of the distribution and the marketing power that Home Depot does? How can they topple them? This small business? How are they going to topple them? Number one thing is they have a solid reputation for honesty and dependability. When you go there, you know that they're gonna honestly tell you what products you should have on your home improvement job. They're going to be honest about the products that aren't so good, or they're gonna be honest about when they can actually deliver. And they're also going to be honest about the dependability and quality of that product. Another big thing is those big companies, your big competitors that you're trying to topple. A lot of them deal with a bunch of issues that are not so integrity based. Things like antitrust laws. And you see these data breaches on Twitter and things like that. That doesn't cause a lot of feelings of trust or integrity for the consumer. You also see corporate greed in these big companies with stock buybacks and people taking advantage of the government bailouts and things like that. That is not a good feeling for a customer to have towards these massive companies. So it's created kind of a clout around them that people do not trust them, they don't think they have much integrity. And the bottom line is that consumers, customers, they want to do business with people they know, like and trust. Under this, I'm going to say integrity, know, like and trust. This is something you always want to remember when it comes to business, when it comes down to marketing, people do business with people they know, people they like and people they trust. The know part, we're going to talk about marketing, you got to get people to know about you, but the like and the trust directly correlate with your integrity. People tend to like and trust people a lot more when they have integrity, when they can trust them, when they're honest, when they're responsible. And so really trust is really the foundation of all relationships, business or personal. But when it comes to business, people got to trust you in order to do business with you. And these massive companies with scandals and very public issues of corporate greed, a lot of times those big companies, we consumers, have a big question mark over this integrity issue. So you have an advantage there, you definitely have an advantage there. Number two way that you can have an advantage over these massive players is your customer focus. Alright? And a lot of times we think about someone like Amazon, he started from nothing and became this massive behemoth that is today. And all the while they would say the reason they did that and the reason they were so successful is because they had a customer obsession with making sure that their service was perfect. And the customer always was the winner and they were constantly customer focused. Now of course we begin to kind of question their integrity.

Why?

Because they're big. And we start to wonder if they are having a monopoly or mistreating their third party sellers and all the rest of it. But in the original when they were small, they had such a massive customer focus and the reason that helps helps the consumer is a lot of times as a small business we can have direct customer service. So when we're focusing on the customer, it's not like there's a massive chain of command or a massive amount of bureaucracy that the person has to get through. When you call Verizon a massive player, you don't expect to talk to one of a small group of people like 10 people in the whole business. You expect to be passed along to one of thousands of phone ranks that might not even speak your language and you don't feel that same connection. It's not personal, it's not local, it's not like they have all the information. An owner or a small business would be able to pass that information very easily. And same thing with customer focus is like when you have a small number of customers, you can have a more personalized service. Like who do you think has a more personalized service? Home Depot, where every single day they have 10,000 customers walk through their door. Or a small hometown hardware store where they might get a couple hundred customers, but they know them all by name. They know exactly where they live, what they like, their preferences, their family. I promise you, the customer focus can.

Be a lot better.

Can be is the really the big change here, right? Like if you don't want to be an uncommon business in a common industry like hardware, you're not going to stay focused on the customer, you're not going to take advantage of these ways that you can have an advantage over these massive incumbents. But the number two way, the second way that you can actually have a competitive edge over those big players is by having a better customer focus. The third thing is quality. Quality performance here very, very important. And the reason a lot of times quality is better in a small business versus a massive company is because your supply chain, you can fix things a lot faster in your supply chain. Now, regardless of whether or not you actually make a product and have a manufacturing supply chain or whether you have a service based business where things are passed along from person to person, I would look at that as your supply chain. But regardless, quality is traditionally much easier to manage and refine fine when you have a smaller business. Because if I have five people working in my workshop and I'm building bird feeders and there's an issue, there's a quality defect with the bird feeder. I can literally walk across the workshop and talk to the person that is installing that piece of the bird feeder. Whereas if I'm in a massive, massive company that's making 100,000 of these in China, I might not catch that until, until three months later when a whole shipment of them arrive and I have to ship them out with poor quality because I wasn't able to catch it fast enough in my supply chain. Same thing with a service based business. You figure out where the weak spots are a lot faster when you have a smaller group of people, smaller number of people dealing with the customers. And another thing is that when you have a small team when it comes to quality, you have a smaller team and, and you have less layers in the chain of command. Therefore, if someone that's entry level sees a way to increase quality, if they're like, hey, you know what, if we just change how we cut out the holes on the bird feeder, we can improve the quality and the structural integrity of the product. Well, guess what? In a small company, again, you can just make that change very quickly. In a large company, that might require meetings, that might require dream drafting up documents and presentations and then having a vote and then sending off designers and getting a whole bunch of people involved. Or in a small business, you can quickly change the quality of the product and the service. All right. Now the fourth way that you can have an advantage over the big players is innovation. Now when we think about innovation, a lot of times we think about high tech, groundbreaking technologies out of Silicon Valley and all these great startups. But did you know that small businesses produce 16.5 times more patents per capita than large businesses? That means if I have 10 employees at a small business, I would produce 165 patents per.165 patents, you know, 16.5 if the larger company was simply doing 10. So if a big business doing, you know, with way more employees, all the rest of it, the average employee in a small business produces 16.5 times more patents. So patents are, we're going to talk about patents a lot more in the course, but basically it really shows the innovation level of business because they're actually trying to put protect something that's new that they've created. And the reason for this is a lot of times in big businesses innovation really comes in the form of their design, their design crews or their research and development teams really trying to just refine existing products instead of creating new products. And so smaller businesses, they tend to focus on creation, creating new, innovative of things. Whereas large businesses with bigger budgets and bigger teams tend to focus on really just trying to make their existing products better. So innovation is definitely a way that you can really take over or have a leg up on those big incumbents. So next thing number five, the fifth way you can have an advantage over your competitors that are bigger than you is you can tap into a niche market so you can call it niche, niche, whatever you want to call it. But niche markets are really cool because if you're going after your customer segment is a niche or it's a small market that you're going after, it's a lot easier to market to them and a whole lot more cost effective. Because if I'm trying to sell, if I'm trying to sell nails to people who need nails, it's a whole lot easier to sell to people who need nails than Home Depot who's trying to sell 100,000 different types of products. I can go after just people I can target. I have a smaller customer segment of people who just need nails. Now that's just an example. But at the end of the day, you have a smaller customer segment. It's easier to target them on social media, on your marketing, whether it be like, for example, if your niche market might be just the fact that you can only serve the 1 mile radius around your shop. Whereas the big player that is competing against you is trying to market the entire United States or the entire world to get customers. By having a niche market, you're able to target them a lot more effectively. Also with niche markets, you're able to tap into a smaller group of people that become very loyal because the big incumbent doesn't have the time or attention to them. You can cut, customize products just a little bit to really customize it to what that niche market wants. Whereas the big player who's focused on millions of dollars in revenue or millions of units, they can't actually customize their product or service offering to follow and actually customize it to that niche market. So for example, if you're doing mowing, I'm going to try to give as many examples as possible. And if you're doing mowing, search, for example, you could be doing mowing and property cleanups and mulch insulation and trimming bushes and doing landscaping and installing paver patios and all the rest of it. But if you wanted to really niche down, if you really wanted to focus on one market, you know, you could say, look, I'm going to go after the high net worth individual that wants us to do mowing, bed maintenance and bush trimming. And that's all I'm going to focus on. And it's got to be someone that a high net worth, big house, big property, estate, well, guess what, you've created a niche market. You can target them more effectively and you can make sure that your services actually align with what they want a whole lot better than someone just trying to Be a jack of all trades, master of none, a whole bunch of different types of services and product offerings and trying to market to everybody. The last thing about niche markets is you're able to to tailor not only your customers what they want, the customer offering what you're offering to them. You're able to really get down and tap into a workforce or a labor force that doesn't want to go work for those big guys. Having a niche market, if you're trying to customize it to a specific type of customer, that profile of person would probably like to work for you. And you'll be able to take tailor your compensation package, your benefits, make the place where your company more entrepreneurial. These are all things that you can tap into. So we could talk about niche markets in the customer side, but you can also tap into niche labor markets as a small business because you're able to tailor their compensation package. Make it maybe it's all about flexibility. If you're trying to tap into a niche market of labor and like, hey, I want stay at home moms and that's my niche that I'm going after. Guess what? You don't have to worry about some massive national conglomerate because they're not going to be willing to customize their pay package or their benefit package to meet the requirements of the niche market that you're going after, which in this case is stay at home moms. You might be willing to have a more flexible schedule where they can't. They have very rigid rules and regulations. So these are all the five different things that you can use to have an advantage over the big players in your market. Alright, so now we're going to talk about the five most common ways and reasons why businesses fail. These are the things that I've kind of seen over the course of talking to a lot of business owners and talking to ones that do really well and the ones that fail. So five things you definitely want to avoid.

So you do not go out of business. First thing is to overestimate. Overestimate can hardly spell estimate what you can do. This comes in a couple forms. Number one, overestimating what you can do in a day, like literally what you're physically capable of doing and then also what the business is able to do. For example, I could overestimate my demographical reach of my business. If I'm a little bakery in town and I say, well, my whole county is my market, I'm gonna go after all of them. I'm gonna go after the rich, the poor. I'm Gonna go after all people and wherever they live. Like overestimating how big of a market you're going after, how big of a business you can even build. And overestimating how popular your product or service is going to be. Oh yes, we're gonna be 5 million within the first few months of business. A lot of times the reason people fail is because they overestimate and then they get discouraged because, well, guess what? You didn't get to 5 million in a few months. So number one thing, overestimating yourself. And then it also has to do with overestimating what you can do. For example, you might think, oh yeah, I can do this and I can work 12 hours and then I'll work four hours doing this and three and I'll sleep for 30 minutes at the end of the day. Like you're overestimating what you can do. You're going to lead to burnout and you overestimate what you physically can do in the business. Second thing is a lack of understanding the market, alright? And this, we're going to talk more about marketing and all that down the road. But knowing your market is very important. Knowing what your customer and your target market is wanting. Understanding what the demographics, the psychographics, the income levels of your market are. Because guess what, guess what? Your market is not everybody. A lot of times when you get started like, oh yeah, I'm gonna sell my services and my product to everybody who would buy your product. Everybody. No, you need to understand who your target market is, who you're gonna be selling to. And then understand what makes them tick, what makes them buy things, what makes them happy, what makes them open up their pocketbook and pay for whatever and pay a premium price. You gotta understand your market. Because guess what? If you're selling to retirees, they're going to be completely different. The way you market to them, the way you interact with them, the way you set up your customer service. If you're selling to retirees versus 14 and 15 year olds and you're selling T shirts, very different marketing, very different branding, very different messaging, very different methods of technology to access that market. So you've got to understand the market. Not only identify with them, actually understand them, know what they want, know what they like and know what makes them open up their pocketbook. Number three, the third reason why companies fail is they hire mediocrity. Mediocrity. Mediocre. There you go. Hire mediocre people. This is a third reason. Like, hey, you know what, we're growing, we're Busy. I'll just hire my cousin or I'll hire.

My son or my daughter, or you know what, my brother and sister, they need a job and they just hire mediocre people. A lot of times has to do with because they just know them, not because they're the most capable person for the job. Hiring mediocre people. The third reason why businesses fail. A lot of times you might have heard the saying that if you're the smartest person in the room, you're in the wrong room. So if you're hiring mediocre people and you claim to be so great and awesome, guess what? That business isn't going to go very far. If you're the best at everything you do and you're just hiring mediocre people, just follow you along, eventually that business falls apart. Number four, gonna be a dominating or domineering manager. Alright, so this has to do with you, the business owner. If you are dominating everything in the business. Some people would call this micromanagement, some people would call this just bad work ethics or bad workplace mannerisms. And you just dominate. You dominate everyone. And when they try to talk, you talk over them. When they give an idea, you give a better idea. In your mind. When you hand something off to them, you're always looking over their shoulder, you're always double checking, you're always going late at night and checking what's going on in their office. And you have a security camera to.

Watch them all day long.

And you don't trust them and you don't make a place where they feel like they can thrive and contribute. And you're so dominating. That's another reason why businesses fail. The last reason is some people probably disagree with on this point, but something we'll get into a lot down the road and that is failure fail to. Basically they fail to really share in what's going on in the business and share in the ownership of the business. Now when I say you fail to share in the ownership, I should write that down actually. So they fail to share ownership. Now some of you are like, well, does that mean I always have to have a partner or investors or someone that I can split equity with? Not necessarily, but a lot of times the reason businesses fail is because the owner doesn't share any ownership. Even just like any ownership in the business in terms of what the future is, what the goals, the mission of that company. The employees have no sense of ownership. They don't actually feel like they're part of anything because the owner is not sharing. They're not sharing financial information, they're not sharing their goals, their aspirations, what they want the business to do. They don't have open book management. The employees are in the dark. How can you expect them to have any sense of ownership if you don't give them the information that an owner needs? And so another reason I see companies fail is because the owner fails to share ownership, whether it be equity, getting a good partner, getting people that will buy in, or just a sense of ownership for the employees, for people that actually care about the mission, care about why the business exists, and go to work every day jazzed and excited because they feel part of the business. In ancient Greece there was a saying called know thyself. And it's something that I think is really important for entrepreneurs to do before they get into business. And that is to really know what's motivating you to start your business. And a lot of that has to do with self awareness. And I think it's very important to know what motivates you, what makes you tick, and also being aware of certain things that trigger you to react to certain things. That's especially helpful when you start having stresses and situations that come up with employees, financial pressure, etc. And it's going to happen at some point, point in your entrepreneurial journey. So knowing why you start your business is really important because like we've talked, we'll talk about it in the future, but really there is three different. Simon Sinek talks about this in a book called Know your why and he talks about the why being here, the how and the what. And I'll let you listen to his book and he can explain that more. We're not going to go into detail, but knowing the why is the most important part about starting your business because it's going to really allow you to understand.

What motivates you. What is it that motivates you? Because if you don't know that, you're not going to know what a successful business that fulfills you actually looks like. If you don't know what the end goal is, you don't know whenever you actually succeed and win and have achieved what you're trying to do. And so if you're trying to go after financial success or financial freedom or financial independence and it's about the money, knowing that up front is very important so you can track towards that goal. Maybe it's having more personal time, having some flexibility with your schedule, maybe you're a parent and now you need to have some flexibility or you want some time to Travel, all of those things are different motivations. And knowing that before you start the business is really important. And knowing why you started the business will allow you to be able to know when you've succeeded. Alright, so first off, I want to go over a couple different types of entrepreneurs that things that happen or what causes people to become small business owners. The first one is the reluctant entrepreneur. So the reluctant entrepreneur becomes an entrepreneur because some massive catastrophe or some sort of extreme hardship. So maybe there's an economic recession, maybe they lose their house, maybe they lose family members in a death and something massive, a tragedy, a hardship happens and it triggers them to become an entrepreneur. And that's why a lot of times after economic downturns, like we had in 2008 and in 2020, we have a lot of small business owners start their venture because that extreme hardship pushes them to become a reluctant entrepreneur. And the reason they're called reluctant is because they're kind of forced into it. It's like, hey, I lost my job, I got to go do I got to go start my own business or I had to move across the country for health reasons. So I got to start my own thing because there's no more of my industry in this new area. Some sort of extreme hardship pushes a reluctant entrepreneur to start their business. Now there's also called a second stage entrepreneur. And a second stage entrepreneur can come in two different forms. One, they can be a second generation. So a parent passes down the business ownership to their.

Daughter or son and their offspring and then maybe it's passed down to another generation. But basically a second stage entrepreneur can be someone who the business has been passed down to. But it can also be when an entrepreneur has started a business and then they pass that business to someone else that works for them, kind of like a manager. But really they're given the role of really being an entrepreneur. They hire people, they determine the marketing strategy, they do all, everything that an entrepreneur would do. But they're not the founder. So maybe like second in command, maybe they run day to day operations, but the founder, they were the one who kind of got it started and then they left and put someone else in charge. That's kind of also a second stage founder. Second stage entrepreneur, I should say. Next one is a corporate refugee. A corporate refugee will also a lot of times around the time of a downturn or when unemployment, it spikes. This is also when a corporate refugee, a lot of businesses are started because of them. A corporate refugee is just basically someone that's wanting to escape from an undesirable job. They're not happy with their 9 to 5, they're not happy with their boss, they're not happy with being told what to do. They're not happy with their long commute every day and they want something better. And so they start their own business and they're a corporate refugee. At the end of the day, it's very important to know what motivates you. And in order to know what motivates you, you can look back and see like what made you start, for example. Corporate refugee. There's a really good chance that this person's motivation is going to be they want some more time with their family or they want to set their own schedule, or they don't want to be told what to do all the time by their boss. Or maybe if it's a reluctant entrepreneur, this is their only option. And they what motivates them is to provide for their family. And they want to see financial security and they want to see some financial independence. They want to be able to put money aside for their children. And after such a hardship that they've gone through, whether it be economic, maybe they lost their job, a family member, maybe they want some more money. The second stage entrepreneur. They're going to have motivations, they're going to want things that they want in the business. And you need to know those things because there's going to be times when your business, business, it's tough, it's rough, it's very difficult to be an entrepreneur. There's going to be times where financially it doesn't make sense. There's going to be times when there's people problems and hiring someone that doesn't work out or drama inside of the business. And these are all things we can try to avoid, but they're going to happen. Part of being an entrepreneur is dealing with all these situations and if you know what motivates you and you know what the goal is, it's easier to get through those times. So in the last lecture we talked about how important it is to know the motivations that you have for starting your business. And maybe after the last lecture you're like, well, I don't really know why I want to start a business. I'm just going to do it. Well, we need to make sure you have got this far to know what motivates you. So that way in the future, when you do have those tough times and you kind of start second guessing yourself, you can keep that motivation in mind. And when you start asking yourself like why in the world. Did I start this? We need to go back to this answer right here. And that's knowing what your motivation is. So really I break down the four different reasons why people go into business for themselves into four different categories and I want to break those down a little further. So first one is personal fulfillment. So underneath this there's kind of two different sectors that I see people, you know, one just from a personal fulfillment standpoint of starting their own business. The first one is they want to make a difference. And a lot of times this will have to do with what we'll talk about later, which is social entrepreneurship. I can spell difference. Look at that there. So making a difference. And they want to make a difference maybe in a certain social cause, changing poverty. Tom's. Tom's shoes for example, we'll talk about them later. Buy one, get one. Where if you buy a shoe from Toms, they give a pair of shoes to a child over in Africa. And so maybe the reason you start a business is for personal fulfillment and that can be broken down into making a difference. That also might be making a difference in your local community by offering jobs or making a difference in your employees lives. All of that breaks personal fulfillment. And another part of personal fulfillment that can come from owning a business is a sense of belonging or working together. So I'm just going to put belonging. And so a lot of times we lack that working a 9 to 5 if we're not fully invested or if there's not good team culture. And we really want a sense of belonging. Like hey, where do you work? Oh, like you're excited about. You identify with the people, you, you enjoy working with those people and you have some sort of sense of working together towards something. Like it's personal fulfilling. It's very fulfilling to be able to go to work and feel like you're working with a team of people on a project or on a mission, trying to make a difference. At the end of the day really it's a personal fulfillment. So that's one reason why some people would start their own business. Alright, so another reason that someone might start their own business. Go here is for personal satisfaction. And this is something like intellectually challenging. So they want to be challenged. Maybe they were at a job before and didn't really challenge them. They feel like they had a lot more abilities and it was not really being tapped into. And they really like to be intellectually challenged. A lot of times they're like, hey, I want a hard problem to solve. I want something big, something hairy, something I can really dig my teeth in to figure out and.

Stress out about and when I make it work, that it's stimulating and they want to be challenged and they want to really test their skills. So intellectually stimulating, intellectually challenging is really important. Personal satisfaction can also be if someone is really passion for the firm's product or service. So product or service passion. So this would be, for example, someone really, really excited about Nike. They really love that brand. So as a passionate user of that product or service, they want to work there. And so same thing goes for starting your own business. Maybe you really are passionate about working out, maybe you're really passionate about exercise and using the gym. So maybe you start a product or service that you're passionate about, brings you personal satisfaction because you saw results, maybe in your body, you lost a bunch of weight and now you want to start a business that gives you personal satisfaction because you love the product or service and you're passionate about it. The next thing is recognition or respect. This is the third personal satisfaction. So this is respect. And sometimes this can be from the fact that you feel like a certain role model is in your life and you really respected them as a business owner, entrepreneurs, and a lot of times that's what leads to someone wanting the respect and recognition of owning your own business. There's a certain level of status and especially in our generation now with startups being so popular and social media and things, it is kind of glamorized and so there's a certain level of recognition. Not to say that those things are all positive, but there's definitely a sense of respect and recognition to someone who has started a business, been successful and that can be sad in terms of why they would start their business. Alright, so the next one is independence. So there's a couple different reasons why someone might start their own business. Because they want to be more independent. For example, they want to be their own boss. They want to be their own boss. That's one reason why they're tired of dealing with a boss at work. They're tired of dealing with a manager they don't like. Most of the reason why people leave their job is not because they don't like the business, not not because they don't like their job, but because they don't like the manager they report to. So maybe you're just sick and tired of having a boss and you want to do it yourself. Now the next reason underneath independence is they really want to control their own future. So future, you really want to control it like that's. The motive here is you want to control your future. You don't want someone else deciding where you're going to move if you're in a big company, or deciding if you're going to get a raise, or deciding how much money you're going to make. You want to be independent of any other organization, start your own business so you can control your future. The next independence that some people seek is going to be discretionary time and flexibility. I'm just going to put flexible here, flexible time. Maybe you work longer hours running your business and you come into this knowing you're going to run longer hours. But now if you, you need to be out of the office at 11:30 to 12:00', clock, you're the boss, you can do whatever you want. And maybe that means you work later or something like that, but you can carve out the times that work for you. Maybe you can only work in the evenings and you want to start your own business. So that way you're flexible time to only work in the evenings or around a certain holiday or if you enjoy a certain sport that requires you to be really kind of clocked out for two or three months out of the year, you can do that by having the flexible time, the independence. Start your own business, not be tied down to a job where you have to punch the clock. Financial rewards are pretty self explanatory. Basically personal financial wealth. Personal wealth, I'll put that here. And a lot of people will get attracted originally to small business ownership because there's a big one. Even though we're not going to talk about it a whole lot, I truly believe that this one will get people started. But when times really get tough, there's some other motivation that usually holds them to continue the fight and not give up. And so if you're attracted just to the financial rewards, ask yourself why. Because a lot of times it'll tie into something else. Like maybe you want the personal wealth because you want to make a difference or you want personal wealth so that way you can do your business around a product or service that you're passionate about. These are all things that a lot of times personal wealth leads to. So if you feel like respect and all that, a lot of times it's tied to this. So a lot of times I say this one gets people started in the game, attracted to entrepreneurship and starting their own business. But really something that goes deeper than just money will keep you going. Because eventually personal wealth might be $500,000 for you. Well, once you hit that, what Keeps you going.

Is there something else that keeps you motivated, keeps you driving forward? And if someone gave you a million dollars in cash, would you keep going? If the answer's yes, my next question is why? It's probably one of these things. So these are some of the motivations that can get your wheels turning in terms of asking yourself the question, why am I going into business? You need to know these things and you need to ingrain them in your mind, emblaze them on your way wall. Because when times get tough, you gotta know these things. You gotta remember why you got into business for yourself. Alright? So a perfect candidate for a small business owner or a trait that they have to really master is the fact that there's really three personalities that make a great small business owner. And Michael Gerber talks a lot about this in a book called the E Myth. But I want to break it down here very quickly to show you that you might have a little bit of each of these personalities at certain given times. And if you're really self aware, you'll be able to pick up on when you're manifesting too much of one of these personalities. So these are the three different personalities. The first one is the technician.