Two pieces of startling news to consider when thinking about how money is really made in our brand-driven 21st century economy:
1. James Cameron's 3-D beyond blockbuster "Avatar" - reported by the New York Times' Michael Cieply to have a total budget - production and marketing - in excess of $500 million!
Director Cameron, of Titanic, is blowing away ALL movie cost records here. To give a feel of the size of the bet that Cameron, Fox, and private equity partners Dune Entertainment and Ingenious Media, are taking on the film, Avatar may have to become one of the top-twenty grossing movies of ALL time just to break-even!
2. Ms. Kim Kardashian, kindly described by Wikipedia as "an American celebutante, socialite, model, actress, businesswoman, and television personality" is the 8th most followed person on Twitter. She trails only Ashton Kutcher, Britney Spears, Ellen Degeneres, Oprah Winfrey, and oh yes, the President of the United States.
This is relevant only because, whatever you think about the quality/lines of work and political leanings of others on the list, at least they have actually DONE SOMETHING to become famous.
Ms. Kardashian, for all of her obvious charms, is that particular modern phenomenon of seemingly being famous because she is, well, famous.
So You Say - So What?
Well, as any regular followers of mine can attest, at the core of my belief system and the Growthink investment strategy is the The Black Swan.
Popularized by the great Lebanese thinker and writer Nicholas Taleb in his New York Times bestseller of the same name, the idea of the black swan comes from the Enlightenment in Europe to describe a logical fallacy. In the 17th century, Europeans assumed that 'All swans must be white," because they had never seen a Black Swan. In the 18th Century, black swans were discovered in Australia.
The logicians of the time - most prominently John Stuart Mill- associated the term "Black Swan" to the concept that a "previously perceived impossibility may actually come to pass."
Taleb describes it best:
"What we call here a Black Swan (and capitalize it) is an event with the following three attributes. First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable."
Taleb continues, "I stop and summarize the triplet: rarity, extreme impact, and retrospective (though not prospective) predictability. A small number of Black Swans explain almost everything in our world, from the success of ideas and religions, to the dynamics of historical events, to elements of our own personal lives."
1) Everybody loves to place on a pedestal (and I put myself in this category for sure) the "pure" paths to entrepreneurial riches. It goes like this: Have a great idea, start a company, have venture capitalists back you, build the business with blood, sweat, tears, and brilliance, go IPO, be featured on the cover of Fortune, and everyone lives happily ever after.
It is what getting rich in America SHOULD be about. But the statistics tell a far different story.
Think about the size of Avatar's reach - a $300 million production budget? $200 million for marketing? There probably aren't 10 technology startups in the whole world with these kinds of numbers behind them.
And the nice thing about a movie versus a startup is that you can usually find out in real-time if you have something. Don't you think the VC's with their full portfolios of "waking dead" startups would like to find out as Fox will with Avatar, in like 2 weeks, if they have something?
2) "Vanilla" investment in business models, in corporations, LLCs and the like, are almost passing into the realm of quaintness. I come back to my good friend Rafe Furst and his brilliant idea of the personal investment contract.
Investing in any one of Ms. Kardashian's various companies (perfume, clothing, DVD projects) is highly risky and on the surface, not all that attractive. But being able to invest in the Kim Khardasian personality brand itself - with her top 1,000 website and 2.8 million Twitter followers (put this in perspective - Jim Kramer's Mad Money gets about 300,000 viewers/day) - is a sure-fire moneymaker.
3) Bet on the Unexpected. Check your ego firmly at the door when evaluating business models and investment strategies. Accept that you (and everyone) for that matter KNOWS NOTHING about what the future will hold other than the fact that we don't know what the future will hold.
That is philosophy - here is money-making: The big, big outlier events - the 1,000 to 1 shots and beyond - are always, always, always, UNDER-PRICED in the marketplace.
Bet on them.
I look forward to your attendance and feedback.
One of the absolute keys to a successful business plan is to create the right business plan milestones. Doing so is essential to securing investors and making real progress towards achieving your goals.
The story below illustrates the importance of business plan milestones, after which is some guidance regarding how you can create the right business plan milestones for your company.
There are lots of things that all of us do, and do as well as we have to, without thinking.
Like pumping gas.
I just pumped gas this morning. And thought nothing of it. Until now.
The fact is that I didn't just pump gas. Sure, the entire process of what I did was called pumping gas. But I did a lot of things that made up that process.
1. I pulled into the gas station.
2. I pulled next to a pump.
3. I put the car in park.
4. I turned off my engine.
5. I got out of the car.
6. I popped open the gas flap.
7. I swiped my credit card into the machine.
8. I typed in my zip code.
9. I pressed the button for the type of gas I wanted.
10. I unscrewed the gas cap.
11. I took the gas nozzle out of the machine and stuck it into my gas tank.
12. I squeezed the lever.
13. I waited while the tank filled up.
14. I put the gas nozzle back into the machine.
15. I pressed "no" I don't want a receipt.
16. I screwed my gas cap back on.
17. I shut the gas flap.
18. I got back in my car.
19. I turned on the engine.
20. I put the car in drive.
21. I drove off.
Wow. I did 21 things just to pump gas?
So who cares? Well, investors care. And partners care. And the success of your business cares.
Let me explain.
Your business is currently at point A. Where you want to go is to point B. Now getting from point A to point B requires you to complete milestones.
And the most important milestones are what I call "risk mitigating milestones." These are the milestones the help eliminate the risk of your company failing.
Let me give you some examples. For Google in its early days, risk milestones included completing their initial result ranking algorithms, getting customer to start using its search engine, and generating revenues.
Obviously once Google was generating a lot of revenues, it was not a very risky investment. But before customers starting using Google.com, it was very risky. And before its initial algorithms were developed, it was even riskier.
Every business has risk mitigating milestones. Investors obviously prefer to back businesses where more risk milestones have been removed. I know I do.
Would you prefer to back a restauranteur who just has a vision for a new restaurant; or would you rather back that same restauranteur after the ideal location has been determined, the restaurant has been built, the staff has been hired and trained, the local newspapers have given it a great review, and the restaurant now has 250 loyal patrons and is booming every night?
It is your job as an entrepreneur to identify your risk mitigating milestones. And not only do you have to identify them, but you need to prioritize them. So that every day you are spending quality time working to accomplish them (and not spending time doing things like replying to emails that seem to be adding value; but which don't actually put you closer to accomplishing your risk milestones).
But, actually, you can't work on completing your risk mitigating milestones each day until you break up each of these milestones into much smaller projects. For example, Google creating its initial algorithm and a restauranteur finding an ideal location are great milestones, but way too large to accomplish on a daily basis.
Each milestone needs to be broken down into numerous chunks; chunks that can be completed every day, and progress made. It's like writing a book. If you write one page every day, by the end of the year, you'll have a 365 page book.
And it's like pumping gas. You need to do a ton of smaller things in order to accomplish the big thing. And like with pumping gas, when you spend the time breaking the task into pieces, you often see how easy each piece is to accomplish.
Developing risk mitigating milestones is an absolutely essential component of your business plan, and belongs in your Operations Plan section. Investors need to understand these milestones and your projected timeline for accomplishing them. You need to understand them to prioritize your time and hire the right people at the right time.
If you still need to complete your business plan, let me send you my CD with seven more essential business plan secrets. I explain why I'm doing this and how you can get it now, on this page right here:
I recently recorded a CD with my 7 best business plan secrets.
This new 54-minute CD reveals my 7 best-kept secrets for how you can create a successful business plan that attracts capital and positions your company for success.
After listening to my CD, you'll be far ahead of your competition because you'll have critical knowledge and skills, such as:
- How to make sure your business plan actually gets read
- Why having lots of competitors can be a GOOD thing
- What investors really look for in your business plan
...and more time-tested strategies that I've used to help Growthink clients raise millions of dollars in capital, build ultra-successful businesses, and achieve multi-million dollar exits.
You can get all the details, here: http://www.growthink.com/seven-secrets
Watch my video review of the book below:
Entrepreneurs must have many skills. They must be able to spot opportunities. They must be able to create plans to seize those opportunities. And they must execute on those plans.
And, for most opportunities, and clearly for those opportunities that are really big, execution involves hiring and managing employees. Because no single entrepreneur can do everything themselves.
But you just can't have any employees. Companies that succeed have employees that are highly motivated.
So how do you ensure that your employees are motivated to succeed?
Clearly, giving them fair salaries helps. And clearly, stock options that allow employees to benefit when the company benefits are good practice.
But, there is an even better way. In fact, authors Adrian Gostick and Chester Elton in their book, The Carrot Principle, found a better way.
Where did they come up with this better way? Well, they conducted a study involving 200,000 people over a ten-year period.
Importantly, their study showed that the key characteristic of the most successful entrepreneurial managers is that they provide their employees with frequent and effective recognition.
That's right, significantly better business results were realized when managers offered recognition in the form of constructive praise and meaningful rewards (typically non-monetary).
The authors found that recognition is most effective when it is:
Carrots are needed to motivate employees. But what I found most interesting about the author's findings was that recognition is more effective than monetary rewards. This is a critical finding for all managers, and particularly entrepreneurial managers who typically operate in cash-restrained environments.
The authors created a "Recognition Frequency Log" that you can use to keep track of how you recognize your employees and for what. You can download it here: http://carrots.com/managers_tools/downloads/recognition_frequency_log
Knowing how to motivate your employees will allow you to build a team that is as passionate about success as you are. And this will ultimately lead to your company achieving its goals. So, while it may not seem like a mission-critical focus today, it's definitely worth your time and effort. So don't delay...