March 12, 2024 • 27 mins
Every entrepreneur has faced the gripping fear of what might go wrong. It's the kind of fear that can freeze dreams in their tracks – but not anymore. Today, alongside attorney and business mentor Bob Diamond, we're breaking down the psychological barriers that thwart many from embarking on their business ventures. We tackle the terror of financial loss, the maze of legal complexities, and the dread of social embarrassment head-on, revealing how service businesses might just be your ticket to lowering those risks and stepping confidently into the role of business owner.
The pathway to success isn't just about the destination, it's profoundly intertwined with personal evolution. In our heart-to-heart, we highlight why states like Wyoming could be your golden ticket for business setup, especially if you're fleeing high-tax territories. But it's not all about logistics; the emotional voyage of entrepreneurship demands its own spotlight. We share stories and strategies, including the power of split testing in marketing, to guide you through the highs and lows, ensuring that every step, whether forward or backward, is a leap in learning and self-discovery.
Navigating the choppy waters of success and the undercurrents of sabotage, we unravel the importance of choosing your confidants wisely. Bob Diamond recounts a storytelling gem about a student whose homefront skepticism nearly capsized his business voyage. Wrapping up, we reaffirm the essence of entrepreneurship: it's more than just profit. It's about mastering the art of risk management, learning from every outcome, and embracing the unparalleled freedom that comes with being the captain of your ship. Get ready to disembark from the harbor of hesitation and set sail towards entrepreneurial triumph.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
Hey, it's attorney Bob Diamond and I'm glad
to have you here today on Pathways to
Success, and today I wanted to talk about
things that hold back a new entrepreneur
and might, in fact, make a difference
between an entrepreneur and what I would
call a wish, a printer.
And a wish a printer is someone that
doesn't actually ever become an
entrepreneur, doesn't actually ever start
(00:22):
their business, and an entrepreneur is
someone that says yes and then they execute
and they actually go and do it and they
follow through and they get their business
up and running.
And I started thinking about this and I
thought why is it that so many people are
wish a printers and a few people are
successful entrepreneurs?
(00:42):
And I think that it comes down to three
fears.
One is the fear of losing money.
So all of us going into a new business
venture have some concern about losing
money with this venture, and that's a very
well founded concern, I think, something
worth addressing.
(01:03):
Another fear is fear of being sued.
That's fear that somehow, out of left field,
somebody's going to sue you and you're
going to lose everything you have.
And the third one I would say is just
looking foolish, having your friends and
your family and your no good brother-in-law
who say, oh yeah, you can't do that.
And then when you don't do it, you actually
(01:24):
have to hear it from them.
And I think the fear of failing and looking
like a fool, or even feeling like a fool,
feeling like a fraud, feeling like you're
not enough, can be enough to just push
people into the wish, a printer camp.
They're always talking about what could
have been, what should have been the idea
they had 10 years ago that became a
multi-million dollar idea, and I think
(01:45):
those all come around fear and the good
news is those fears can be managed and made
into the manageable sizes or at least give
you a framework to think about them.
And I wanted to give you some of my
thoughts as a long time entrepreneur and as
an attorney and as a business mentor.
I've been an entrepreneur really rock solid
(02:06):
since I would say 1995 would be the
earliest when you could really say that was
my full time thing.
That was when I graduated from law school
and I set up my own practice rather than
heading out working for a firm, and prior
to that my professional career had been
with large firms, with Anderson consulting,
(02:27):
which is division of Arthur Anderson, and
the Cooper's and Librand.
So you know big, very conservative, very
successful firms, and I wanted to be out
doing my own thing.
So let's talk about how we can manage the
first fear, which is the fear of losing
money, and I think the first thing to do is
(02:49):
pick the right business.
You know, if you pick a business that has a
couple of features Number one, it doesn't
have necessarily a physical location that
you would have to rent and fit out.
It doesn't have inventory that you'd need
to buy.
Instead, it would ideally be a service
business, and a service business is
(03:09):
something simply where you do something for
someone else that they pay you for.
Now, someone else could be a business,
someone else could be an individual
consumer, but you're really getting paid
for completing the work, and service
businesses are just endless.
And I would say that if we're talking about
service businesses, you could think of the
simplest thing, like a dog walking service,
(03:30):
or one I ran into the other day, which is a
service that goes to Costco and does all
your shopping for you.
It's really anything.
It's a personal trainer, a coach you know,
some people take up the coaching business
these days.
For that matter, an attorney is a service
business.
Service businesses are endless.
It's plumbers, it's pipe fitters, it's
electricians, it's dog walkers, anything
(03:52):
where you're doing something for someone
else and that's really your primary thing.
I really like service businesses for
entrepreneurs and I like them because they
don't cost a lot to set up and they tend to
be pretty easy to start because you're
hopefully doing something where you
actually know how to do it and as soon as
you get a client, you become what they
(04:12):
would call in the fancy startup world
revenue positive, meaning you're making
some money and you could build it from
there.
And service businesses do have limitations.
Service business can't scale from a dollar
to hundreds of millions of dollars
instantly because you or someone else has
to provide the service.
So that is the limiter.
(04:33):
But I think as far as losing money, service
businesses are the strongest with that
meaning they're the best defense against
actually losing money Because it just
doesn't cost a lot to start them up.
You don't have to raise capital to buy
inventory.
You don't have to rent warehouse space.
You usually don't even need to run office
space, especially these days.
You could do nothing more complicated than
(04:54):
using your cell phone and an internet site
that you can set up for a couple of bucks
these days with any of many, many providers
who make websites for you or you could do a
do it yourself project all pretty simple.
So I really like service businesses from
that perspective.
I think it limits the amount of money you
could lose.
I also think that when you, when you think
(05:15):
about money and your ability to lose money,
you want to stay away from highly leveraged
businesses, and highly average means that
you're borrowing money in order to start
the business, and when you borrow a lot of
money, that money has to be paid back and
if something goes wrong, then you you know
you've got to pay it back out of personal
funds.
(05:37):
So I think you know think about staying
away from businesses that involve the need
for you to borrow money, like just, for
example, I think highly leveraged real
estate projects are very risky.
You know, if you're buying a piece of real
estate and you have to put down, your
biggest concern is you know that it's no
money down or less than 5% down.
(05:58):
You got to give that some thoughts Like
what if things don't go right?
And we're saying that that problem come
home to roost today, where we have
apartment building owners that have just
recently bought within the past, say, two
or three years and now interest rates have
risen and some of them have adjustable rate
mortgages.
Many of them are facing interest rate
(06:19):
resets in the near future and as those
interest rates reset to higher rates, they
have no way of making those payments.
And they're those buildings are going to be
foreclosed and sold to a new owner and that
can be a large loss to the building owner.
They're losing their down payment, their
closing costs, anything they put into the
building, any work or effort they put in,
(06:41):
and if they are personal guaranteed on the
loans or if they're personal guaranteed
tours on the loans, they could lose more
than that.
So I don't like highly leveraged businesses.
I just I think that, especially for newer
entrepreneurs, a business where you have to
borrow a lot of money, I think that's,
that's the source of a lot of risk and I
think you should really pause and think
(07:01):
carefully before you do that.
So those are the losing money things, how
you can address those.
I also think if you have a fear of being
sued, which is another version of fear of
losing money, then you definitely want to
do business within an entity.
Typically an LLC is a good room for that.
That's called a limited liability company.
(07:21):
Normally people just say by the initials
LLC.
The initials LLC LLCs protect you from
something that happens in the business,
that where the business can't pay the debt
and as long as you haven't personally
guaranteed that debt, the only thing a
creditor would be able to get is whatever's
within the LLC, and often those LLCs have
very little in them.
(07:42):
So that's that's not very appealing for a
creditor.
And you do have to be careful there that
when you sign contracts or agreements
you're signing them in your capacity as a
member of the LLC.
So the signature block at the bottom should
say you know ABC or you know your name, llc
meaning the name of the LLC, and then it
would have a line for a signature and
(08:03):
underneath that it would say by like, by
colon, and then your name and then below
that align with title, which should be
member.
It could be member or manager.
Usually you're going to be a member in LLC.
But the reason that that works is that
that's just you signing your name on behalf
of the LLC when it has the name of the LLC
(08:25):
and then a place for a signature, and then
the word buy means the LLC is signing it by
the person that's a physical living person
that can actually sign it and it gives the
title of that person.
Truly avoid signing those contracts
personally, because if they do, if you do
sign it personally, then there's a chance
for someone to come after you personally to
take the debt, which is not good.
(08:46):
I'd also stay away from situations where a
lender or supplier is asking you to sign
personal guarantees.
Understand that a lot of times those are
just requests and you can say no to them,
and oftentimes you'll get the service or
product you need anyway.
Personal guarantees mean that if the LLC
can't pay its bills, they can look to you
(09:08):
personally, and I think that's not a good
spot to be in.
And if you are contemplating that at all,
then at a minimum, if you're married, do
not have your spouse sign on those personal
guarantees.
There's in most states a really great form
of asset protection which is called tenants
by the entire tease, and what tenants by
(09:29):
the entire tease means is that something is
owned by both husband and wife, and when
something's owned by husband and wife, then
a creditor.
If they only have a judgment against either
the husband or the wife, then they can't
take the thing that's jointly owned by the
husband and wife, and that's a big deal.
If something's jointly owned by husband and
(09:49):
wife, then a creditor is going to be stuck
and not be able to get anything at all.
No-transcript is if the spouse that doesn't
owe the money passes away and then the
remaining spouse who does owe the money is
still alive, then the tenants by and tired
is to be broken and they'd be able to chase
it around.
But that's a really good little trick.
(10:12):
Don't sign Now.
If you and your husband, or you and your
wife, are starting something, I know that's
really nice, but I wouldn't make both of
you officers of the LLC and I would
certainly.
If you're doing personal guarantees, don't
offer the one from the spouse.
I think it's really a big mistake.
And of course, you can use a corporation as
another alternative to LLC.
(10:33):
They both have excellent asset protection.
If you're gonna do a corporation, you'll
make a tax election, most commonly as an S
corporation, which is just a tax election.
You'll hear about S corporations and C
corporations.
It's still the same corporation, it's just
the tax election is different.
Meaning what you say to the IRS hey, I'm
gonna be taxed as a C corporation or I'm
(10:56):
gonna be taxed as an S corporation, and
that's just something you do with IRS.
Really there's nothing to do with your
asset protection.
For most people who are in small businesses,
an S corporation is gonna be the choice.
You can always change it later.
You can change it every year if you wanted
to, and it's.
But generally if you have a business where
it's a small business, less than 35
(11:19):
shareholders just take the tax election of
S election and that way you won't pay taxes
twice.
When things have the tax election of C,
then the corporation pays its own taxes and
then when the money is distributed to
shareholders, they pay taxes a second time.
With an S corporation, then the profit or
(11:40):
loss is passed from the S corporation onto
you personally and you don't have to pay
this twice.
And that's so.
It's gonna save you money and taxes taken
to S election Doesn't change the asset
protection at all.
Generally with entities, if you're
operating your business from your house and
you're not planning on moving, then your
(12:01):
best move is probably just to have the
entity domiciled, which means formed under
the states, under the state where you live
and where you're running the business.
If you're in a high tax state like
California or Illinois or New York and
you're contemplating potentially moving
which lots of people in those states are,
then what I would say is that you would
(12:23):
most likely form your entity in Wyoming.
That would be where it's domiciled, and
domiciled means that's where it's
registered.
So you register with the secretary of state
for whatever state you're forming it in.
And for most people, if you're gonna move
out of the state you're in especially if
it's a high tax state like California,
illinois or New York or New Jersey then you
(12:45):
would just form the entity in Wyoming and
when you move, that old state no longer has
any grip on you tax wise, meaning they
can't make an argument that you should
still be paying taxes to them because your
entity is there.
And make no mistake, states like California,
illinois, new York, new Jersey are headed
towards desperation in their tax revenue.
(13:07):
Now they're losing a lot of their highest
income residents and they're losing a lot
of their tax revenue because of that.
So they will start thinking of all kinds of
crazy things.
You may have heard that California is
talking about a wealth tax and California
is talking about taxing people who spend
any time in the state for the times that
they spend there.
They've also talked about taxing people who
(13:30):
start their business in California and then
leave later.
All I would say is all those things have
lots of issues but you don't wanna be.
You don't have to go to court with the
California taxing authority to litigate
those issues.
Better off just having your entity in a
separate jurisdiction so that when and if
you leave, there's no way that they can
come back at all.
They have no legal basis for it.
(13:51):
Now I wanna address the third thing.
I'm looking or feeling like a fool, and
that can be a very difficult part of the
entrepreneur's journey where you don't
wanna fail.
You don't want your friends to be laughing
at you behind your back, or your cousins or
your brother-in-law is no good anyway.
You don't want that and I understand that.
You also don't wanna feel like you tried
(14:12):
and failed, and what I would say is that
this is a little bit of a harder thing In
business.
It's almost like a sports game.
You know, if you watch, say, a football
game is an easy example.
You know you have four downs to get a first
down and sometimes the first down, maybe a
completed pass might get someone eight
yards out of the 10.
(14:32):
They need to get their first down and that
was a success.
And then maybe they have setbacks, maybe
the quarterback gets sacked the next time
and all of a sudden they're back to second
and 10.
Or now they're now the third and 10.
So you know, business is definitely a game
of victories and setbacks and it's constant
(14:53):
back and forth of victories and setbacks
and you just have to accept.
You're not gonna win every play, you're not
gonna win every promotion.
Everything you do is certainly not going to
work, and you know, just have to wrap your
head around that you're gonna have a
constant stream of successes and a constant
stream of failures.
And the important thing is that at the end
(15:16):
of the year which I would say is sort of
each game is like a year that you've
actually come out ahead.
You scored some points, you made some money
and you're ahead.
And, as far as you know, feeling like a
fool inside, you just have to be nice to
yourself.
You know you're.
You're not gonna Pick a winner every time.
You're gonna make mistakes.
(15:36):
You're gonna take on customers that you
wish you didn't have.
You might start offering a service that
nobody wants.
You may have unhappy clients from time to
time and Setbacks happen, and it's just
part of the game, and I think that a saying
that I've heard and repeated for a long
time, which is you either win or you learn,
(15:57):
is a really good way to to frame it in your
mind.
You either have a win, so something worked,
or you learned, and often for us we have a
win and a learn when we've made some
success.
We had something good happen, made some
money, had some happy customers and, you
know, continued our business forward.
But we also see many things that could be
(16:19):
optimized and improved, and so I think you
both have winning and learning and a
business.
You'll learn about something called split
testing, and Split testing means that you
test this versus that.
Typically it's called either split tests or
an AB test.
And A simple example say that you put
together a flyer that you're gonna send out
by direct mail.
(16:40):
Maybe you design a red flyer and a blue
flyer that are otherwise identical.
Well, the ideal situation is you send half
the people a red flyer, half the people
that people the blue flyer, and see which
one works better.
And how do you do that?
You do that by maybe having different phone
numbers on the flyer so you can tell how
many calls come in on the blue flyer versus
the red flyer.
(17:01):
A different landing page on your website,
so again you can see how many people
visited your website because they saw the
red flyer versus how many because they saw
the blue flyer, and what happens is that
you make sure that you got enough examples
to make it a statistically relevant test
and then you can eliminate the loser of
those two.
You know red versus blue and Enough is
(17:23):
generally 30 Meaning.
If you're talking about getting customers,
when you get your 30th customer out of your
promotions, that's gonna give you a
statistically relevant test you want to
have.
You know n equals 30 in statistics and then
you study statistics may remember that that
once you have 30 samples, then you have a
(17:46):
statistically reliable and valid test.
Anything less than that, it gets less and
less reliable.
Like, just, for example, say that you had
you set out flyers and you got three
responses on your red flyer and Two
responses on your blue flyer and you say,
oh boy, the red flyer is 50% better because
I got three responses instead of two.
You can't say that you really need to wait
(18:07):
till you get to 30 responses on each and
then you'll have a statistically valid test
and maybe what you'll see is that the red
flyer, for whatever reason, pulls 5% better.
Okay, so that means you eliminate the blue
flyer and then either keep the red flyer or
split test the red flyer against something
else.
Maybe you want to do a gold flyer next time.
(18:29):
So you do gold versus red and you keep
repeating those tests and you only want to
test one thing at a time, if, if, possible,
because then you truly see what the
difference is between those two things.
Like I don't want a gold flyer with
completely different words on it versus the
red flyer and they say, oh, the gold flyer
is better because it got more response.
(18:49):
Well, maybe, but maybe your words are
better on that.
So you, you want to test one thing at a
time, to the best, your ability, rather
than multiple things.
I also understand that you cannot please or
impress everybody all the time.
Everybody's going through their own stuff
and there are people literally that if
you're successful with something, want to
(19:10):
tear you down.
They want to because maybe they feel that
you know they're better than you, they're
smarter than you, they have more money than
you, whatever it is, and therefore anything
you do will never please them.
And and they're only work operating on envy.
And when people operate out of envy, I
would say just very like likely to just get
(19:31):
Negative feedback just because that's where
that person is, and and sometimes they'll
hear that call the crabs in the bucket
syndrome, where a little crab tries to
crawl out of the bucket, the other crabs
reach up, grab by the back leg and pull
them back in.
That's very common.
If you have friends who are not Successful
in business, you have people who are just
employees that maybe are wish-trippers.
(19:51):
You know, wish they had done it, wish they
had it followed through with that idea they
had 10 years ago.
They came out to be a multi-million dollar
idea.
Happens all the time, and so what I would
say is you cannot please or look to impress
other people.
The ideal situation when you're starting a
business is to do it quietly and just earn
(20:14):
your money quietly.
The only ones you should be telling about
your starting in the business and your
dream of what you're going to do are those
who truly love and support you, meaning
you're very, very closest family members.
You don't want to tell people who might
secretly wish that you did not succeed,
because they'll feel like it impacts them,
because like, oh well, if Bozo did it, why
(20:35):
can't I do it?
And that will come out not in those exact
words, but it'll come out in anger and
backstabbing and talking behind your back
and I would say, for the most part, I
wouldn't tell anybody about what you're
doing, other than those where you need
their help or their direct involvement, and
someone who really truly loves and supports
(20:57):
you and not someone who wants to see you
fail, because those people will just inject
doubt.
That's funny.
It reminds me of a student that came up to
me at a live event that we did a couple
months back.
So he comes up and he says you know?
He said I'm so glad that I'm here and I'm
finally here.
And I said well, what do you mean?
Finally, when did you find out about
(21:17):
Ovirage?
When did you get started?
He said actually it was about four years
ago.
And he said I got started.
I was all excited and I got a check.
He said it was a $25,000 Ovirage, so I made
about $10,000.
I was so excited.
And then I showed it to my wife and she
said oh, you better stop now Because you
know you got lucky and just keep your money
(21:38):
and move on.
And he said I actually listened to her,
even though I felt it wasn't right in my
heart, but I just listened to her and he
said it's ridiculous.
I could have been far, far ahead now.
I could have made hundreds of thousands of
dollars, because he said it wasn't that
hard to do.
And you know, our best friends and those
closest us can sabotage our success, not
(22:02):
because they mean to.
It's not that the man's wife didn't want
him being successful, it's just she's
someone who doesn't understand business,
doesn't understand how money is made.
And I think business is pretty simple at
its core.
I think essentially, you find a product
that someone wants or a service that they
need and are willing to pay for, and then
you become a provider of that service or
(22:23):
that good.
And so in our business and Ovirages and in
my business many years, but in my business,
the people want the money that I've located,
they want our help in getting it and
they're happy if we get a percentage of it
when we, when we bring back the money,
that's fine with them because they don't
take risk that way.
(22:43):
I would say generally keep quiet about your
plans, keep quiet about the money you're
earning, because, especially if it's the
people that are not successful, not
business owners, all you'll get is bad
ideas and negative feedback and that's not
going to benefit you.
So that's how I would do that.
So that's what I'd say today on being an
(23:05):
entrepreneur that says yes and executes and
succeeds, versus being a worship
entrepreneur.
Oh, the last thing I'd say about this for I
forget, in business you can only be
successful if you actually go out and try
it and the things that I was talking about
today, like choosing a service business,
not one where you have to sign a lease and
(23:25):
rent out of space or we have to buy
inventory and rent a warehouse or anything
like that Service businesses tend to be
very inexpensive to start.
They tend to be cash flow positive very
easily and if they don't work out, they
tend not to cost much money.
And understand that part of your journey is
going to be wins and losses.
So it's losing a little bit of money,
winning some money, losing and winning, and
(23:47):
hopefully winning a lot more than you lose,
and winning certainly much larger amounts
of money than you ever lose.
But I understand that is part of the game
and if you want to be in a game where you
can only have wins I'm not sure that exists,
but certainly being an employee is closer
to that Doesn't mean you can't lose because
you can have an employer that goes out of
business, that fires you, that lays you off.
(24:08):
That can certainly happen, but you're
unlikely as an employee to get sued or
anything like that.
So that's a benefit.
But I think as long as you manage the risk
properly meaning have an LLC enter into the
right kind of business in the first place I
think that your chances of succeeding are
high and your chances of having a
devastating financial loss are low.
(24:30):
I think it's very worthwhile and at the end
of the day, you can gain freedom that other
people just don't have.
When you're an employee, you really don't
have freedom.
You have to be there working the hours the
boss says you have to work.
You have to get the work completed that the
boss says you have to complete.
You have to deal with the frustrations of
dealing with co workers that maybe you
don't want to deal with.
So I don't think there's any true security
(24:51):
as an employee.
I think it can seem that way, but I don't
think it's true security.
So that's what I have to say for today.
I hope this was helpful for you in your
pathway to success.
Oh, and one other thing, because I keep one
more thing, another thing that I would
think about if you're a new entrepreneur is
think about getting a franchise.
(25:12):
You know, when I was young meaning in
college I owned a franchise of something
called college pro painters and that was
great business experience.
That was a wonderful franchise, didn't cost
much to start up because, again, it's a
it's essentially a service business, is the
service of painting houses.
I did have to spend a little bit of
equipment it's about $3,000.
(25:32):
But not much else, not much else and that
became cash flow positive very quickly and
what I would say is it was successful
because college pro painters had the tools
and they did the training that helped us to
be successful.
They told us how to estimate jobs, they
told us what insurance we needed, they had
accounts set up with the paint stores and
(25:53):
and they knew what equipment we needed.
They knew how we had to train our people.
So that was a really good experience and I
would consider, if you're a new
entrepreneur, consider looking into a
franchise.
I would try to stay away from ones where
there's a big startup cost, meaning open up
office space, have the inventory and all
that.
But generally speaking, franchises are
(26:15):
generally repeatable business models where
you can be successful.
Just investigate it closely, go to
franchise conventions, go online, do a lot
of research and narrow it down to a few
that you're interested in and, if possible,
talk to some other franchisees.
Find out what their experience is with with
the franchise, find out what their their,
(26:38):
the benefits they got out of being with the
franchise, and find out about the
detriments.
The detriments or disadvantages can be
things like oh now I'm limited, I can't do
this on my own.
It could be that they, the franchise
company, has so much control of your
business that it's frustrating, can't be?
They don't give you the proper support.
Can be all kinds of things.
(26:59):
So make sure you investigate thoroughly
before you commit to a franchise.
So hopefully this has been useful
information for you so that you can go and
not be a whisper printer, be a successful
entrepreneur.
This is attorney and business mentor Bob
Diamond.
Hope this is useful.
If you liked it, give it a thumbs up,
subscribe if you want more like this, put
(27:20):
any comments in and I'll address comments
as I, as I spot them, and thank you for
being here.
Thank you for being a part of my crew and
my community.
I appreciate you and hope that this is
helpful and serve you in some way.
Hey, it's attorney Bob Diamond and I'm glad
to have you here today on Pathways to
Success, and today I wanted to talk about
things that hold back a new entrepreneur
and might, in fact, make a difference
between an entrepreneur and what I would
call a wish, a printer.
And a wish a printer is someone that
doesn't actually ever become an
entrepreneur, doesn't actually ever start
(00:22):
their business, and an entrepreneur is
someone that says yes and then they execute
and they actually go and do it and they
follow through and they get their business
up and running.
And I started thinking about this and I
thought why is it that so many people are
wish a printers and a few people are
successful entrepreneurs?
(00:42):
And I think that it comes down to three
fears.
One is the fear of losing money.
So all of us going into a new business
venture have some concern about losing
money with this venture, and that's a very
well founded concern, I think, something
worth addressing.
(01:03):
Another fear is fear of being sued.
That's fear that somehow, out of left field,
somebody's going to sue you and you're
going to lose everything you have.
And the third one I would say is just
looking foolish, having your friends and
your family and your no good brother-in-law
who say, oh yeah, you can't do that.
And then when you don't do it, you actually
(01:24):
have to hear it from them.
And I think the fear of failing and looking
like a fool, or even feeling like a fool,
feeling like a fraud, feeling like you're
not enough, can be enough to just push
people into the wish, a printer camp.
They're always talking about what could
have been, what should have been the idea
they had 10 years ago that became a
multi-million dollar idea, and I think
(01:45):
those all come around fear and the good
news is those fears can be managed and made
into the manageable sizes or at least give
you a framework to think about them.
And I wanted to give you some of my
thoughts as a long time entrepreneur and as
an attorney and as a business mentor.
I've been an entrepreneur really rock solid
(02:06):
since I would say 1995 would be the
earliest when you could really say that was
my full time thing.
That was when I graduated from law school
and I set up my own practice rather than
heading out working for a firm, and prior
to that my professional career had been
with large firms, with Anderson consulting,
(02:27):
which is division of Arthur Anderson, and
the Cooper's and Librand.
So you know big, very conservative, very
successful firms, and I wanted to be out
doing my own thing.
So let's talk about how we can manage the
first fear, which is the fear of losing
money, and I think the first thing to do is
(02:49):
pick the right business.
You know, if you pick a business that has a
couple of features Number one, it doesn't
have necessarily a physical location that
you would have to rent and fit out.
It doesn't have inventory that you'd need
to buy.
Instead, it would ideally be a service
business, and a service business is
(03:09):
something simply where you do something for
someone else that they pay you for.
Now, someone else could be a business,
someone else could be an individual
consumer, but you're really getting paid
for completing the work, and service
businesses are just endless.
And I would say that if we're talking about
service businesses, you could think of the
simplest thing, like a dog walking service,
(03:30):
or one I ran into the other day, which is a
service that goes to Costco and does all
your shopping for you.
It's really anything.
It's a personal trainer, a coach you know,
some people take up the coaching business
these days.
For that matter, an attorney is a service
business.
Service businesses are endless.
It's plumbers, it's pipe fitters, it's
electricians, it's dog walkers, anything
(03:52):
where you're doing something for someone
else and that's really your primary thing.
I really like service businesses for
entrepreneurs and I like them because they
don't cost a lot to set up and they tend to
be pretty easy to start because you're
hopefully doing something where you
actually know how to do it and as soon as
you get a client, you become what they
(04:12):
would call in the fancy startup world
revenue positive, meaning you're making
some money and you could build it from
there.
And service businesses do have limitations.
Service business can't scale from a dollar
to hundreds of millions of dollars
instantly because you or someone else has
to provide the service.
So that is the limiter.
(04:33):
But I think as far as losing money, service
businesses are the strongest with that
meaning they're the best defense against
actually losing money Because it just
doesn't cost a lot to start them up.
You don't have to raise capital to buy
inventory.
You don't have to rent warehouse space.
You usually don't even need to run office
space, especially these days.
You could do nothing more complicated than
(04:54):
using your cell phone and an internet site
that you can set up for a couple of bucks
these days with any of many, many providers
who make websites for you or you could do a
do it yourself project all pretty simple.
So I really like service businesses from
that perspective.
I think it limits the amount of money you
could lose.
I also think that when you, when you think
(05:15):
about money and your ability to lose money,
you want to stay away from highly leveraged
businesses, and highly average means that
you're borrowing money in order to start
the business, and when you borrow a lot of
money, that money has to be paid back and
if something goes wrong, then you you know
you've got to pay it back out of personal
funds.
(05:37):
So I think you know think about staying
away from businesses that involve the need
for you to borrow money, like just, for
example, I think highly leveraged real
estate projects are very risky.
You know, if you're buying a piece of real
estate and you have to put down, your
biggest concern is you know that it's no
money down or less than 5% down.
(05:58):
You got to give that some thoughts Like
what if things don't go right?
And we're saying that that problem come
home to roost today, where we have
apartment building owners that have just
recently bought within the past, say, two
or three years and now interest rates have
risen and some of them have adjustable rate
mortgages.
Many of them are facing interest rate
(06:19):
resets in the near future and as those
interest rates reset to higher rates, they
have no way of making those payments.
And they're those buildings are going to be
foreclosed and sold to a new owner and that
can be a large loss to the building owner.
They're losing their down payment, their
closing costs, anything they put into the
building, any work or effort they put in,
(06:41):
and if they are personal guaranteed on the
loans or if they're personal guaranteed
tours on the loans, they could lose more
than that.
So I don't like highly leveraged businesses.
I just I think that, especially for newer
entrepreneurs, a business where you have to
borrow a lot of money, I think that's,
that's the source of a lot of risk and I
think you should really pause and think
(07:01):
carefully before you do that.
So those are the losing money things, how
you can address those.
I also think if you have a fear of being
sued, which is another version of fear of
losing money, then you definitely want to
do business within an entity.
Typically an LLC is a good room for that.
That's called a limited liability company.
(07:21):
Normally people just say by the initials
LLC.
The initials LLC LLCs protect you from
something that happens in the business,
that where the business can't pay the debt
and as long as you haven't personally
guaranteed that debt, the only thing a
creditor would be able to get is whatever's
within the LLC, and often those LLCs have
very little in them.
(07:42):
So that's that's not very appealing for a
creditor.
And you do have to be careful there that
when you sign contracts or agreements
you're signing them in your capacity as a
member of the LLC.
So the signature block at the bottom should
say you know ABC or you know your name, llc
meaning the name of the LLC, and then it
would have a line for a signature and
(08:03):
underneath that it would say by like, by
colon, and then your name and then below
that align with title, which should be
member.
It could be member or manager.
Usually you're going to be a member in LLC.
But the reason that that works is that
that's just you signing your name on behalf
of the LLC when it has the name of the LLC
(08:25):
and then a place for a signature, and then
the word buy means the LLC is signing it by
the person that's a physical living person
that can actually sign it and it gives the
title of that person.
Truly avoid signing those contracts
personally, because if they do, if you do
sign it personally, then there's a chance
for someone to come after you personally to
take the debt, which is not good.
(08:46):
I'd also stay away from situations where a
lender or supplier is asking you to sign
personal guarantees.
Understand that a lot of times those are
just requests and you can say no to them,
and oftentimes you'll get the service or
product you need anyway.
Personal guarantees mean that if the LLC
can't pay its bills, they can look to you
(09:08):
personally, and I think that's not a good
spot to be in.
And if you are contemplating that at all,
then at a minimum, if you're married, do
not have your spouse sign on those personal
guarantees.
There's in most states a really great form
of asset protection which is called tenants
by the entire tease, and what tenants by
(09:29):
the entire tease means is that something is
owned by both husband and wife, and when
something's owned by husband and wife, then
a creditor.
If they only have a judgment against either
the husband or the wife, then they can't
take the thing that's jointly owned by the
husband and wife, and that's a big deal.
If something's jointly owned by husband and
(09:49):
wife, then a creditor is going to be stuck
and not be able to get anything at all.
No-transcript is if the spouse that doesn't
owe the money passes away and then the
remaining spouse who does owe the money is
still alive, then the tenants by and tired
is to be broken and they'd be able to chase
it around.
But that's a really good little trick.
(10:12):
Don't sign Now.
If you and your husband, or you and your
wife, are starting something, I know that's
really nice, but I wouldn't make both of
you officers of the LLC and I would
certainly.
If you're doing personal guarantees, don't
offer the one from the spouse.
I think it's really a big mistake.
And of course, you can use a corporation as
another alternative to LLC.
(10:33):
They both have excellent asset protection.
If you're gonna do a corporation, you'll
make a tax election, most commonly as an S
corporation, which is just a tax election.
You'll hear about S corporations and C
corporations.
It's still the same corporation, it's just
the tax election is different.
Meaning what you say to the IRS hey, I'm
gonna be taxed as a C corporation or I'm
(10:56):
gonna be taxed as an S corporation, and
that's just something you do with IRS.
Really there's nothing to do with your
asset protection.
For most people who are in small businesses,
an S corporation is gonna be the choice.
You can always change it later.
You can change it every year if you wanted
to, and it's.
But generally if you have a business where
it's a small business, less than 35
(11:19):
shareholders just take the tax election of
S election and that way you won't pay taxes
twice.
When things have the tax election of C,
then the corporation pays its own taxes and
then when the money is distributed to
shareholders, they pay taxes a second time.
With an S corporation, then the profit or
(11:40):
loss is passed from the S corporation onto
you personally and you don't have to pay
this twice.
And that's so.
It's gonna save you money and taxes taken
to S election Doesn't change the asset
protection at all.
Generally with entities, if you're
operating your business from your house and
you're not planning on moving, then your
(12:01):
best move is probably just to have the
entity domiciled, which means formed under
the states, under the state where you live
and where you're running the business.
If you're in a high tax state like
California or Illinois or New York and
you're contemplating potentially moving
which lots of people in those states are,
then what I would say is that you would
(12:23):
most likely form your entity in Wyoming.
That would be where it's domiciled, and
domiciled means that's where it's
registered.
So you register with the secretary of state
for whatever state you're forming it in.
And for most people, if you're gonna move
out of the state you're in especially if
it's a high tax state like California,
illinois or New York or New Jersey then you
(12:45):
would just form the entity in Wyoming and
when you move, that old state no longer has
any grip on you tax wise, meaning they
can't make an argument that you should
still be paying taxes to them because your
entity is there.
And make no mistake, states like California,
illinois, new York, new Jersey are headed
towards desperation in their tax revenue.
(13:07):
Now they're losing a lot of their highest
income residents and they're losing a lot
of their tax revenue because of that.
So they will start thinking of all kinds of
crazy things.
You may have heard that California is
talking about a wealth tax and California
is talking about taxing people who spend
any time in the state for the times that
they spend there.
They've also talked about taxing people who
(13:30):
start their business in California and then
leave later.
All I would say is all those things have
lots of issues but you don't wanna be.
You don't have to go to court with the
California taxing authority to litigate
those issues.
Better off just having your entity in a
separate jurisdiction so that when and if
you leave, there's no way that they can
come back at all.
They have no legal basis for it.
(13:51):
Now I wanna address the third thing.
I'm looking or feeling like a fool, and
that can be a very difficult part of the
entrepreneur's journey where you don't
wanna fail.
You don't want your friends to be laughing
at you behind your back, or your cousins or
your brother-in-law is no good anyway.
You don't want that and I understand that.
You also don't wanna feel like you tried
(14:12):
and failed, and what I would say is that
this is a little bit of a harder thing In
business.
It's almost like a sports game.
You know, if you watch, say, a football
game is an easy example.
You know you have four downs to get a first
down and sometimes the first down, maybe a
completed pass might get someone eight
yards out of the 10.
(14:32):
They need to get their first down and that
was a success.
And then maybe they have setbacks, maybe
the quarterback gets sacked the next time
and all of a sudden they're back to second
and 10.
Or now they're now the third and 10.
So you know, business is definitely a game
of victories and setbacks and it's constant
(14:53):
back and forth of victories and setbacks
and you just have to accept.
You're not gonna win every play, you're not
gonna win every promotion.
Everything you do is certainly not going to
work, and you know, just have to wrap your
head around that you're gonna have a
constant stream of successes and a constant
stream of failures.
And the important thing is that at the end
(15:16):
of the year which I would say is sort of
each game is like a year that you've
actually come out ahead.
You scored some points, you made some money
and you're ahead.
And, as far as you know, feeling like a
fool inside, you just have to be nice to
yourself.
You know you're.
You're not gonna Pick a winner every time.
You're gonna make mistakes.
(15:36):
You're gonna take on customers that you
wish you didn't have.
You might start offering a service that
nobody wants.
You may have unhappy clients from time to
time and Setbacks happen, and it's just
part of the game, and I think that a saying
that I've heard and repeated for a long
time, which is you either win or you learn,
(15:57):
is a really good way to to frame it in your
mind.
You either have a win, so something worked,
or you learned, and often for us we have a
win and a learn when we've made some
success.
We had something good happen, made some
money, had some happy customers and, you
know, continued our business forward.
But we also see many things that could be
(16:19):
optimized and improved, and so I think you
both have winning and learning and a
business.
You'll learn about something called split
testing, and Split testing means that you
test this versus that.
Typically it's called either split tests or
an AB test.
And A simple example say that you put
together a flyer that you're gonna send out
by direct mail.
(16:40):
Maybe you design a red flyer and a blue
flyer that are otherwise identical.
Well, the ideal situation is you send half
the people a red flyer, half the people
that people the blue flyer, and see which
one works better.
And how do you do that?
You do that by maybe having different phone
numbers on the flyer so you can tell how
many calls come in on the blue flyer versus
the red flyer.
(17:01):
A different landing page on your website,
so again you can see how many people
visited your website because they saw the
red flyer versus how many because they saw
the blue flyer, and what happens is that
you make sure that you got enough examples
to make it a statistically relevant test
and then you can eliminate the loser of
those two.
You know red versus blue and Enough is
(17:23):
generally 30 Meaning.
If you're talking about getting customers,
when you get your 30th customer out of your
promotions, that's gonna give you a
statistically relevant test you want to
have.
You know n equals 30 in statistics and then
you study statistics may remember that that
once you have 30 samples, then you have a
(17:46):
statistically reliable and valid test.
Anything less than that, it gets less and
less reliable.
Like, just, for example, say that you had
you set out flyers and you got three
responses on your red flyer and Two
responses on your blue flyer and you say,
oh boy, the red flyer is 50% better because
I got three responses instead of two.
You can't say that you really need to wait
(18:07):
till you get to 30 responses on each and
then you'll have a statistically valid test
and maybe what you'll see is that the red
flyer, for whatever reason, pulls 5% better.
Okay, so that means you eliminate the blue
flyer and then either keep the red flyer or
split test the red flyer against something
else.
Maybe you want to do a gold flyer next time.
(18:29):
So you do gold versus red and you keep
repeating those tests and you only want to
test one thing at a time, if, if, possible,
because then you truly see what the
difference is between those two things.
Like I don't want a gold flyer with
completely different words on it versus the
red flyer and they say, oh, the gold flyer
is better because it got more response.
(18:49):
Well, maybe, but maybe your words are
better on that.
So you, you want to test one thing at a
time, to the best, your ability, rather
than multiple things.
I also understand that you cannot please or
impress everybody all the time.
Everybody's going through their own stuff
and there are people literally that if
you're successful with something, want to
(19:10):
tear you down.
They want to because maybe they feel that
you know they're better than you, they're
smarter than you, they have more money than
you, whatever it is, and therefore anything
you do will never please them.
And and they're only work operating on envy.
And when people operate out of envy, I
would say just very like likely to just get
(19:31):
Negative feedback just because that's where
that person is, and and sometimes they'll
hear that call the crabs in the bucket
syndrome, where a little crab tries to
crawl out of the bucket, the other crabs
reach up, grab by the back leg and pull
them back in.
That's very common.
If you have friends who are not Successful
in business, you have people who are just
employees that maybe are wish-trippers.
(19:51):
You know, wish they had done it, wish they
had it followed through with that idea they
had 10 years ago.
They came out to be a multi-million dollar
idea.
Happens all the time, and so what I would
say is you cannot please or look to impress
other people.
The ideal situation when you're starting a
business is to do it quietly and just earn
(20:14):
your money quietly.
The only ones you should be telling about
your starting in the business and your
dream of what you're going to do are those
who truly love and support you, meaning
you're very, very closest family members.
You don't want to tell people who might
secretly wish that you did not succeed,
because they'll feel like it impacts them,
because like, oh well, if Bozo did it, why
(20:35):
can't I do it?
And that will come out not in those exact
words, but it'll come out in anger and
backstabbing and talking behind your back
and I would say, for the most part, I
wouldn't tell anybody about what you're
doing, other than those where you need
their help or their direct involvement, and
someone who really truly loves and supports
(20:57):
you and not someone who wants to see you
fail, because those people will just inject
doubt.
That's funny.
It reminds me of a student that came up to
me at a live event that we did a couple
months back.
So he comes up and he says you know?
He said I'm so glad that I'm here and I'm
finally here.
And I said well, what do you mean?
Finally, when did you find out about
(21:17):
Ovirage?
When did you get started?
He said actually it was about four years
ago.
And he said I got started.
I was all excited and I got a check.
He said it was a $25,000 Ovirage, so I made
about $10,000.
I was so excited.
And then I showed it to my wife and she
said oh, you better stop now Because you
know you got lucky and just keep your money
(21:38):
and move on.
And he said I actually listened to her,
even though I felt it wasn't right in my
heart, but I just listened to her and he
said it's ridiculous.
I could have been far, far ahead now.
I could have made hundreds of thousands of
dollars, because he said it wasn't that
hard to do.
And you know, our best friends and those
closest us can sabotage our success, not
(22:02):
because they mean to.
It's not that the man's wife didn't want
him being successful, it's just she's
someone who doesn't understand business,
doesn't understand how money is made.
And I think business is pretty simple at
its core.
I think essentially, you find a product
that someone wants or a service that they
need and are willing to pay for, and then
you become a provider of that service or
(22:23):
that good.
And so in our business and Ovirages and in
my business many years, but in my business,
the people want the money that I've located,
they want our help in getting it and
they're happy if we get a percentage of it
when we, when we bring back the money,
that's fine with them because they don't
take risk that way.
(22:43):
I would say generally keep quiet about your
plans, keep quiet about the money you're
earning, because, especially if it's the
people that are not successful, not
business owners, all you'll get is bad
ideas and negative feedback and that's not
going to benefit you.
So that's how I would do that.
So that's what I'd say today on being an
(23:05):
entrepreneur that says yes and executes and
succeeds, versus being a worship
entrepreneur.
Oh, the last thing I'd say about this for I
forget, in business you can only be
successful if you actually go out and try
it and the things that I was talking about
today, like choosing a service business,
not one where you have to sign a lease and
(23:25):
rent out of space or we have to buy
inventory and rent a warehouse or anything
like that Service businesses tend to be
very inexpensive to start.
They tend to be cash flow positive very
easily and if they don't work out, they
tend not to cost much money.
And understand that part of your journey is
going to be wins and losses.
So it's losing a little bit of money,
winning some money, losing and winning, and
(23:47):
hopefully winning a lot more than you lose,
and winning certainly much larger amounts
of money than you ever lose.
But I understand that is part of the game
and if you want to be in a game where you
can only have wins I'm not sure that exists,
but certainly being an employee is closer
to that Doesn't mean you can't lose because
you can have an employer that goes out of
business, that fires you, that lays you off.
(24:08):
That can certainly happen, but you're
unlikely as an employee to get sued or
anything like that.
So that's a benefit.
But I think as long as you manage the risk
properly meaning have an LLC enter into the
right kind of business in the first place I
think that your chances of succeeding are
high and your chances of having a
devastating financial loss are low.
(24:30):
I think it's very worthwhile and at the end
of the day, you can gain freedom that other
people just don't have.
When you're an employee, you really don't
have freedom.
You have to be there working the hours the
boss says you have to work.
You have to get the work completed that the
boss says you have to complete.
You have to deal with the frustrations of
dealing with co workers that maybe you
don't want to deal with.
So I don't think there's any true security
(24:51):
as an employee.
I think it can seem that way, but I don't
think it's true security.
So that's what I have to say for today.
I hope this was helpful for you in your
pathway to success.
Oh, and one other thing, because I keep one
more thing, another thing that I would
think about if you're a new entrepreneur is
think about getting a franchise.
(25:12):
You know, when I was young meaning in
college I owned a franchise of something
called college pro painters and that was
great business experience.
That was a wonderful franchise, didn't cost
much to start up because, again, it's a
it's essentially a service business, is the
service of painting houses.
I did have to spend a little bit of
equipment it's about $3,000.
(25:32):
But not much else, not much else and that
became cash flow positive very quickly and
what I would say is it was successful
because college pro painters had the tools
and they did the training that helped us to
be successful.
They told us how to estimate jobs, they
told us what insurance we needed, they had
accounts set up with the paint stores and
(25:53):
and they knew what equipment we needed.
They knew how we had to train our people.
So that was a really good experience and I
would consider, if you're a new
entrepreneur, consider looking into a
franchise.
I would try to stay away from ones where
there's a big startup cost, meaning open up
office space, have the inventory and all
that.
But generally speaking, franchises are
(26:15):
generally repeatable business models where
you can be successful.
Just investigate it closely, go to
franchise conventions, go online, do a lot
of research and narrow it down to a few
that you're interested in and, if possible,
talk to some other franchisees.
Find out what their experience is with with
the franchise, find out what their their,
(26:38):
the benefits they got out of being with the
franchise, and find out about the
detriments.
The detriments or disadvantages can be
things like oh now I'm limited, I can't do
this on my own.
It could be that they, the franchise
company, has so much control of your
business that it's frustrating, can't be?
They don't give you the proper support.
Can be all kinds of things.
(26:59):
So make sure you investigate thoroughly
before you commit to a franchise.
So hopefully this has been useful
information for you so that you can go and
not be a whisper printer, be a successful
entrepreneur.
This is attorney and business mentor Bob
Diamond.
Hope this is useful.
If you liked it, give it a thumbs up,
subscribe if you want more like this, put
(27:20):
any comments in and I'll address comments
as I, as I spot them, and thank you for
being here.
Thank you for being a part of my crew and
my community.
I appreciate you and hope that this is
helpful and serve you in some way.
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