The Pillars Of Our Automated Business Philosophy

Back to basics… Matt and Brandon revisit the most important areas of business automation and building a successful company. In this episode, they cover the Pillars of AMSB, and how to get started. Once you build a foundation, your business is ready to go the next step; automating that business to become more effective and require less time on your part. This episode is a must for budding entrepreneurs, or business owners that feel they need to get out from under the day to day operations of “running” a business.

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Links from the show:

• Rostter.com
• Kickstarter.com
• The Snuggie
• HotOrNot.com

Transcript:

Welcome to Automate My Small Business where we show you how to set up and run your own automated business on the cheap. So get ready to take back your life and add a little spice. It’s time to build something automated.

MATT: Hello and welcome to episode #18 of Automate My Small Business. I’m Matt.

BRANDON: And this is Brandon.

MATT: And today we’re going to take a step back and look at the core philosophy of Automate My Small Business, teach you how to build an automated business and all the principles that we’re applying in doing that. But before we get into that, Brandon, what have you been up to?

BRANDON: Well, actually today is kind of my wife’s due date for us having a baby and so I drop off here quickly to go run out the door and run to the hospital, you all know why.

MATT: Yeah, if we don’t have an episode for a couple weeks, maybe we’ll know why as well.

BRANDON: Yeah, so it’s kind of exciting. It keeps me on my toes, that’s for sure. So it’s been kind of out of my mind lately and you know the usual with the business expansion and really starting to lean on my virtual assistants a lot more. I had a little aha moment the other day and this is probably something that I think a lot of us do. I realized I was becoming a bottleneck in my own business being that middleman and that we all try to keep from being and I realized that no matter how many times I get myself out of that situation, I slowly slip back into it by you know just the growth of the business or whatever.

MATT: Just a little bit at a time, right. It’s like, oh it’s just one thing and it’ll only take five minutes and …

BRANDON: Right.

MATT: … not a big deal and eventually it just adds up.

BRANDON: It does and so you know all of the listeners out there who feel like, god, I can’t get out of the middle or can’t get out from underneath the daily minutia. Know that it’s a constant struggle and it’s always something you need to continue working on and I think the tools that we keep on discussing here always help but …

MATT: I think one of the best tools you can have for that is just someone to talk with like a mastermind group or mentor or just a friend that’s doing the same thing. I know like whenever we meet and we talk about what’s going on our businesses, one of us was looking and we go, “Why are you doing that? Why don’t you outsource that or why don’t you automate that?”

BRANDON: Right. Yeah.

MATT: So just having someone from the outside with a different perspective that just can see with clear eyes what you’re doing is a great tool to have.

BRANDON: Right. That’s absolutely true and there’s been a number of times where you’ve said that to me and I thought, “You know you’re absolutely right. What am I doing?” I can be saving myself not only the time it takes to do certain things but the preparation and the mind, you know…

MATT: And the stress of dealing with it.

BRANDON: That reminds me of our GTD episode that we talked about David Allen talks about the Getting Things Done methodology is more importantly a method of stress relief because as you juggle things in your mind, oh I got to do that, oh that’s right I got to do this and you’d have this backlog of stress points in your head that you don’t even know you’re juggling you know and that’s another reason why you know continue to work on these principles that we’re going to be talking about especially tonight and know that even you know us we still on a daily basis continually have to remind ourselves to keep working on this. So it’s a process, it’s a journey for sure. Keep it up. How are you? What have you been doing?

MATT: I spent last week just trying to get Rostter out the door which is r-o-s-t-t-e-r.com. Basically we’re going to use this to let everyone join a Twitter list that we have on automsb Twitter handle but I put this out there so that anyone could use it. If you have a community you want to get to join at Twitter list that you have, you can just sign up at Rostter and you know you can enable that Twitter list so that anyone join it so you don’t have to manually approve everyone. So we’ll see how these goes.

BRANDON: Yeah.

MATT: It took me about a week to develop it and now it’s out there in the open.

BRANDON: And it’s working no bugs that you know of?

MATT: I don’t know if there’s no bugs yet. No bugs I know of. It’s not pretty yet but it’s functional.

BRANDON: Right. I like the idea. We talked about this before we’re trying to think of a way to have our listeners kind of follow each other on Twitter and this was our answer was you know you start a list on Twitter then anybody who wants to be on that list can apply but we realized there’s nothing out there that does that. So Matt designed it himself and figured out a way to do it and I guess that’s what a degree in Computer Science does for you.

MATT: It was interesting. I used it as an excuse to learn some new technologies and stuff so that was good.

BRANDON: Right. Good. So we’re talking about our principles and pillars of Automate My Small Business today and I’ve been dying to come around to this episode for a long time now really because I felt like in our original kind of overview podcast, I think it was in podcast one, episode on, we kind of covered some basic ideas but I knew there so much more meat on that bone that we still haven’t been able to offer, show you more of and I’m excited about this episode because this is really going to kind of open up Pandora’s box so to speak. So I think there’s going to be a lot here that you’ll be able to take advantage of.

MATT: So let’s first start of by talking about the difference between an automated business versus kind of the traditional business. How’s that?

BRANDON: Yeah, I mean traditionally let’s take a look at that. I mean because traditional businesses up till now have been oh you know the ones that you know you got a big business plan together. You got a VP of such and such, a VP of this and that. Maybe you got a team of five or six people then you got to go out and raise investment capital and there’s a lot of risk associated with a traditional business model you know. Maybe you’ll get an office to work out of and…

MATT: Or store to open.

BRANDON: … or store to open and then you’re signing up on leases what you need to personally guarantee and if the store doesn’t work, then you’re pretty much personally guaranteed for the let’s say one year if you’re lucky to get a one year lease, more likely a five year lease on stores like that. In some cases, 10-year leases so you really are betting the whole barn on one idea that this product or this business idea is going to fly and you know let’s face it, the chance of you succeeding in a traditional business model is very low. In fact the SPA say’s that 50 percent of the businesses fail in the first year and 95 percent of them fail in the first 5 years.

MATT: That’s even worse than I thought it was going to be. I thought maybe 50 percent in the first year but I thought after that it wouldn’t go down to 95 percent.

BRANDON: Yeah. I knew it was pretty high than we recently verified that statistic that there’s such a failure rate. I mean it’s commonly known that being the entrepreneur is a risky business but it doesn’t have to be and I think that’s kind of where I want to focus in this episode because there’s a lot of opportunity as an entrepreneur I feel in this day and age because what traditionally used to be very risky and capital intensive is now kind of if you take it in a smarter direction, you’ll be able to be a lot more effective, lower cost and you can test your ideas before you ever even put your first diamond to it which dramatically lowers the risk. You know, let’s take for example the retail store idea, you know, this is a different game we’re playing because traditionally let’s say you have a retail store, you would have to have products in that store that would appeal to a large, broad bandwidth of people. Let’s say you have a store on the Boardwalk on the beach and you had all sorts of tourist coming in and you’re thinking well, you know let’s say I have a toy store, I have to have toys in that toy store that’s going to appeal to a lot of different people because I have to have sales and anybody could walk in that door. You don’t know who it’s going to be, what their interest are. So you’re just going to have to buy toys to stock your store that are mass appeal. And so…

MATT: It’s really hard to deliver in that niche idea.

BRANDON: Right. And so what the difference here now is we’re talking about an internet business where your niche business is going to directly market to a specific customer that has one thing in mind and that’s what they’re searching for. And because of that you’re marketing cost go down dramatically. And because it’s internet based, you’re a global business and you’re selling to the whole word instead of just the passers-by on the beach Boardwalk. And so it’s a completely different model from the beginning and I think that’s kind of where we want to focus on because by leveraging those points in the business model, there’s opportunity for you to realize and it’s the big opportunity and it’s continuing to grow every day.

MATT: Okay, so you mentioned the beginning, let’s start with the beginning. So one of the first core principles of Automate My Small Business is to start before you’re ready and what we mean by that is that we all kind of have some inertia to get started when we’re trying to start all these businesses like we weighed and we have this idea and we’re just waiting for it and we’re not quite sure that‘s the right thing to do or whatever and we just say you know get started, do something, do the first step. Plan to try something out for a week or two weeks and do that first step of proving the idea and you know don’t wait until it’s the perfect moment because it will never be the perfect moment.

BRANDON: Yeah, I think that’s important because if you wait around and think you got to get the perfect product or you got to get the perfect business, it will never just come. What happens though is through my experience and I know through reading experiences of others is that the plan actually ends up being completely different or the business model comes out to be completely different after you start working on it. So you might as well just go ahead and start working on it right now because it’s only after that point that you end up with what you want to get in the end, if that makes sense. They call that the corridor theory. Imagine yourself walking down the hallway or a corridor and you see at the end of the hall what you want but you’re on your way there and as you’re walking towards the end of the hall, you see doors that are open and some that are closed on both sides of you and then you decide you know what, I knew I wanted to go there at the end of the hall from the beginning but now that I looked down this hallway, I’m going to take a left and go down that one. And all of a sudden you’re taking a whole different attitude or different direction and you’re going for a whole new goal and then you realize after six or seven times of this you end up with the whole business that you never anticipated from the beginning but ends up being much better at the end.

MATT: Yeah, I like the way that Eric Reese puts that from the LEAN start out. He calls it a pivot where you know you’re going one direction and all of a sudden you recognize any information that is going to change the way you do business, the businesses that failed just stick to their original idea and don’t change and don’t recognize that the customers want something actually different. They fail whereas the successful start ups will pivot and go on into a new direction. I kind of like that term.

BRANDON: Yeah.

MATT: Another thing that I think people get bogged down is trying to write up that business plan and build that whole thing out. I mean we talked about the financial forecasts that are part of business plans being complete joke in the last episode, right. I mean it’s kind of a good exercise but at the same time you know plans are inaccurate and the further you’re planning out is even more inaccurate so when you’re starting out and we try to do this with less, we try to work in sprints and you know a couple of weeks or month, plan to make that first $100.

BRANDON: Right. I think even when we’re discussing product iterations, product development, you know it kind of goes the same for business models and business planning. I think you get more effectiveness out of going in and applying something quickly and then testing whether it would work or even if it was on paper that’s fine too but you’re not necessarily planning and you’re not putting a whole business plan that’s you know 120 pages long and you know you got this big spread sheet that says in 10 years I’m going to be making this. I mean come on, who are you trying to feed?

MATT: The bank. We used to try to get a loan, right, or investors.

BRANDON: Yeah, the bank, right, and that’s exactly what used to be used for. But now if you take an approach where look I’m not going to go out and get good investors. I’m going to build this business to cash flow itself which you can do now because you can build a smaller company that can reach globally and you’re going to have less start up cost because you’re not going to have an office and a store that you would have had traditionally. You now have stores online and you’re going to have a lot of these automated processes in place that we talked about which eliminates a lot of the cost to begin with. So in general you have a whole different mindset about going about your business and starting your business and because of that the planning process is different. It’s more of a sprint to let’s get stage one done just so that we can see if it’s successful and that would take us two weeks and if that’s not successful, we’ll try plan B, we’ll analyze how that worked and then maybe we’ll take the two and go with the one that work out best and continue to iterate, continue to test and you continue to optimize and you continue to automate and you continue to drive cost down and you continue to reach out further throughout the globe and you’re doing that again and again and again instead of okay, let’s sit down and write a 120 page business plan and maybe in 10 years we’ll know if it actually worked.

MATT: Yeah. To sum this all up, I always like the quote that a journey of a thousand miles starts with a single step. So just do the first thing. Spend a day working on your idea or your business if you’re just getting started.

BRANDON: Right.

MATT: Just do the first thing.

BRANDON: So here’s the plan. I think if you’re going to put a plan together and you want to have a few first steps here, I would say step one learn as many of these tools as possible and you’re doing that by listening to us and reaching out to the blogs and find out what’s going on in the web 2.0 space and where can I get LEAN and what just get ideas is basically what you’re doing. You’re getting ideas so that when you see an opportunity you know how to act on it right then. It’s like you continue to put all these tools in you tool box so that you know when somebody says to you hey, I have this business idea but I don’t know how it works and you’re going to be the guy that says, you know what, that’s a good business idea and you know the only way it could work or maybe the best way it could work is by using this tool that I just happened to find two weeks ago online that would completely cut the cost in half and make it you know finished in a week and a half instead of a two year period or something like that. So I think that’s your first step.

MATT: I think you’re kind of getting into how do you identify opportunities, right.

BRANDON: Exactly.

MATT: Okay. So let’s go through some of the types of opportunities that you have. I think a lot people just think you know how I beat the competitor as I have a better product. That’s how you beat the competitor. That’s certainly one way and it’s nice to have a better product but there’s so many other ways you can be better than your competitor or create a better solution overall a business, right, and let’s go into some of that.

BRANDON: Right. I mean it’s not necessarily going to be a better product but maybe a better business model. In fact, I think there’s much bigger opportunity to find a better business model. For example, can it be cheaper? Can it be faster? Could you do it globally? I mean maybe there’s a store down the road that you think is great but you figured out a way that you could provide that same product around the world by using the internet or you figured out you know like Vistaprint. I use Vistaprint all the time to do printing. They took a traditional business, put it online and now the entire globe is their customer base and they are doing it faster and cheaper than anyone because of the volume.

MATT: I think you see a competitor that’s not marketing their product well or not marketing to the correct niche, that’s another great place that you can step in there and take that market share away from them.

BRANDON: Yeah, that’s a big indicator. You know it could be a new delivery method. I mean look at Dell computers. You know they kind of rock the boat when they started selling computers online and custom computers only. And you know the retail stores were going hey, wait a minute. I thought the only game in town was that we sold computers at your local Circuit City or wherever.

MATT: Yeah, or even the way that you buy something, the way that something finance, I mean you look at car dealerships a while ago, you had to pay for the whole car before you could drive off the lot and I bet the first guy that came up with the idea of hey, we’ll finance the car for you and you only get to pay a couple of hundreds a month and you can have this car now for $200 and you know they probably sold a ton of cars more than their competitors where you had to show up with $15,000, right?

BRANDON: Right. Yeah, so you know there’s lots of opportunity out there and I believe that the successful entrepreneurs are going to be those that know the tools that are available to them that not others know of and so that you have that competitive advantage over other businesses and even your competitors in some cases and then applying those tools or those business models to traditional businesses that aren’t in the game yet, aren’t cutting their cost, aren’t cutting their delivery times in half or are using an old style of delivering their product to their customer. So look for those gaps. Look for those opportunities and that’s where you’re going to be successful.

MATT: I think sometimes it’s easier to see these opportunities and fields that you’re maybe not a specialist in, right. You don’t have a history and where you can take a fresh approach to an industry where everyone thinks the status quo is just the way it is and that’s the way it’s done. If you’re going in and look at it with a different mindset, maybe you’ll see some opportunities that most people wouldn’t see.

BRANDON: Right. Okay so step one was learn about all those tools that you know are out there and continue to just absorb those because eventually you’re going to use those tools to make an opportunity become a reality. Step two is practice finding those opportunity gaps by applying them to traditional business models and then creating them into an automated business for a lack of a better term. And step three is go test those opportunities. Go test those ideas and if you wanted to continue to be an entrepreneur after your first few failures, you’re going to have to keep your cost low so that you don’t go spend all your life savings. You know you don’t want to go get a business that’s going to require half million dollars just to see if it’s going to work This is a lean test opportunity to get your business model up off the ground just to know if it’s going to be successful so that you can know you can move on to the next if you have to. So here’s how I like to look at keeping my cost low. Try to shift all of your cost to variable cost instead of fixed cost.

MATT: At least while you’re starting out, right?

BRANDON: At least at the beginning stages and you can shift it back once you get going and you’re profitable and you got a lot of momentum but when I say shift your cost to variable, going back to Economics 101 if you remember variable cost are those costs that are kind of built into the sales of the product. So your variable costs go up and down with your sales. Fixed costs stay the same whether your sales go up or down. So if you have zero sales and you have all your costs into variable costs, you have zero cost. So that’s kind of where you want to be.

MATT: To give an example of that is if I have a fulfillment company where I pay you know $5 per package for them to ship it out and fulfill it versus paying $250 a month regardless if they ship anything or not, right?

BRANDON: Exactly. So you know we talked about our fulfillment houses, those that we can outsource to. You know it may cost you a dollar or two or maybe more per unit to get out the door but you don’t have a warehouse now. You don’t have a rent check to pay for that warehouse so you don’t have employees that you have to employ to get those units out the door. You’re paying a couple of bucks per unit and that’s a 100 percent variable whereas if you went to traditional route and bought yourself a warehouse, went bought yourself a couple of employees to run that warehouse, you know, and then you got utilities to pay for, that’s all fixed cost. That’s the stuff you want to stay away from at the beginning. And so keep your operating cost low and all the cost that go up or down with sales is okay. So go heavy on that level of cost but not on the fixed cost. And then once you want to test that idea, you can adjust when necessary and then retest and adjust and then retest. It’s very iterative. So as you test your opportunity, keep in mind we just want to keep our cost low and I just want to see if this idea will stay above water and then go from there.

MATT: Okay.

BRANDON: You know if you’re focused on building success through a great business model instead of building the success through the great product you can find a lot of examples of that. I mean look at the Snuggie, right? Huge success. Was that a great product? I think we can all agree that’s not a great product. I think it’s clever but it’s a blanket with holes in it for your arms. But they did a fantastic job or marketing it. I just remembered the website hot or not where people would vote whether somebody is hot or not with the pictures that others upload and that only comes to mind because I just heard it on one of my audio books but is that a great product? No, but they did a fantastic job of implementing it. It’s a great business model and that it drives a lot of traffic and it’s viral and such. So look for the business model as your opportunity and not necessarily the product.

MATT: Okay. So I think the next pillar that we’re going to cover is fail small, fail fast and fail forward. Now, we talked about the failure, right, when we opened up the show. But we’re not hoping you fail but we know that as an entrepreneurs, there’s a high likely that we’re going to fail. In fact, we can almost guarantee that you’re going to fail in something you do as you’re starting up. So this is really more about how do you deal with these failures and how do you learn from them and how do you manage them, right.

BRANDON: Yes, exactly. I mean like we said, 95 percent of start-ups fail in the first five years so if it’s inevitable that you’re going to fail and you have a very small chance of succeeding, you better learn how to fail correctly, right?

MATT: And stay alive.

BRANDON: And stay alive so the name of the game is to fail fast and fail small. So do that test. Do it with very little cost and find out if this is a good idea. You know the chances are it may not fly but at least you got that done and didn’t spend five years of your life figuring that out.

MATT: Yeah. So when we say fail small, we mean don’t spend a lot of money or a lot of effort before you can realize if your product is going to be successful or not successful.

BRANDON: And you know you’ll get to this point and have done it many times where I say to myself, okay I know I need to fail small here so I can’t spend money on this but how am I suppose to test this without going and making it or how am I suppose to test this without spending all this money on what seems to be the most critical part of the business.

MATT: And really I mean you got to identify what the minimum amount of work is to get that answer, right. And sometimes that may not even mean building the business yet, right. Sometimes it means building a muse website where you can just kind of test and see what particular buyers would do.

BRANDON: Right. Exactly. So that’s the point so again absorb all these areas where you can see ways of testing that would not cost you to spend too much. We talked about the adwords idea of putting up an ad with the single website. We drive traffic to that website and you drive people to choose whether they would want to purchase the product or not with a single click of a button you know or a purchase button. I mean that’s one example but there’s a lot of examples in fact, we’re dedicating our next episode on it, how to analyze those ideas and get those ideas tested.

MATT: Yeah, so after fail small, it’s fail fast, right? So don’t spend a lot of time especially in the project management episode, we talked a lot about working in small sprints and using kind of SCRUM like ideas and Agile ideas within the business to iterate quickly. And so if you’re testing every iteration, you’re seeing what’s working and you’re not spending a year building that, right.

BRANDON: Right. And so again you’re getting through what you need to know if the opportunity is successful.

MATT: And then the last piece is to fail forward. And what we mean by fail forward is once you fail, learn something from it. You know if you had an idea that customers were going to like your product because of this and they came and they said well, it’s not a really good red widget but it does this other thing that I really wanted. Okay, learn that hey you know your product is going to have to change to, adapt to what the other who would like about it and learn from that and go forward with that.

BRANDON: Right. And I think if you get to that point where you say you know there’s just nothing I can do that would be cheap or fast to make this test a reality, you can sometimes have to shelf it and say, you know what, maybe there’s a tool out there that will allow me to know whether this is a good idea or not so you could either learn from your failures as you go or shelf it and say hey, you know what it would be too expensive to test this at this time without having a different tool in my tool box to know how to do it. So don’t be afraid to sometimes just put ideas on the back burner until sometimes you can across an idea that would allow you to test it properly.

MATT: Yeah, Thomas Edison had a good quote about the light bulb. You know I think he failed like some 10,000 times or something or thousand times, whatever, trying to build the first light bulb and you know he had a quote that essentially basically said you know I didn’t fail when I made 10,000 light bulbs that didn’t work, I just learned 10,000 ways the light bulb wouldn’t work and he moved forward after that. Hopefully we don’t fail 10,000 times but that’s the same mentality that we want to have is that you know we have a failure, we learn something about our failure and then it helps us do better the next time.

BRANDON: Right. We’re going to talk a little bit about the mindset of an entrepreneur and what it means to be a professional entrepreneur because that is your job is to go and test these ideas and fail and then learn from it and then become better at it and succeed eventually. So know that there is a succeed part to it at the end, and it’s not all failure.

MATT: Yeah. And really I mean if you’re failing small fast and forward, you can fail a bunch of times and still succeed at the end of that whereas if you spend a lot of money and a lot of time, when you fail, you’re going to fail huge and it’s going to kill the business. It’s going to be over.

BRANDON: Right.

MATT: You’re not going to get a second chance. You’re not going to get a chance to learn from that failure within that company.

BRANDON: Exactly, so our next pillar of the Automate My Small Business is the financing and how to finance your business through your customer’s cash and not your own. Matt, you have some ideas on that?

MATT: Yeah, I mean there’s a lot of people that think you have to go get a loan from a bank or you have to find investors and when you’re starting up, maybe a loan is okay but getting cash from your customers just seems like the most logical way to build this business, right. So why not start from day one trying to be profitable. Figure out a way to get your customers to buy something from you so that you start building the business with their money. And even if you’re not profitable you have cash flow coming in, you’re at least slowing the bleeding so you’re not just burning cash when you’re starting out by having nothing coming in, right. So if you can do the minimum to get some cash coming in, whatever that is, even if it’s not for your vision of your ultimate product.

BRANDON: Right. And you know I’ve told my story a number of times how is started selling my prototypes of the Porch Potty online back on its early stages and you know sometimes that’s what you need to do is you don’t have a finished product but you know sometimes if you just are honest with your customers and say, hey this is kind of a beta and software companies do this all the time. They say hey this is our beta you know maybe I can’t charge you for it now but could I get a pledge from you or could I get a donation if you do like it or if it works for you, can you upgrade later and you know there’s all sorts of different ways of structuring a beta product to work. You know a lot of companies are doing it with what they call the freemium where you have maybe a free version and then you have a premium version. And so you’re working on the premium version while you give away the free version and you know I guess this is an area where you just got to get creative and say how can I trickle money in through customers that maybe are early adapters. You know there’s a website called Kickstarter.com which is a listing of start-ups that only asks for pledges not necessarily money.

MATT: I really like the idea of the pledges because I mean pledges are money, right? But basically the customers are pledging money to the company in return for something in the future.

BRANDON: Right.

MATT: So you’re basically selling options on getting your product. You don’t have to give up any equity for it. Really when you’re starting up, you want to give up the least amount of equity you can and so selling a product or selling promises of a product is a great way to give that cash. I mean I know that there’s from aircraft manufacturers and independent car builders that do this all the time with like really high end cars. They say, we want to build this plane. It’s going to cost us $10 million to build these planes so you know if you want to be a customer, plop down a $100,000 and three years we’ll be done with your plane. Tesla did that when they were starting up. You can put down $50,000 for your spot on line to get that first Tesla road trip that was all electric.

BRANDON: Right. You know speaking of finances, we recently have an email come in for Automate My Small Business that ask when is the right time to leave my full time job to go start my automated businesses and do I just leave because I have an idea or do I wait until it’s profitable?

MATT: I’d say your employer is a great financer of your small business.

BRANDON: Yeah. I think Matt and I both agree. I think it’s a great strategy to keep your job hopefully if you have one. But to keep your full time job and start these automated businesses kind of on the side or you know moonlight a little bit if you have to. Because again, with the strategy here is to test ideas, to fail quickly, to fail small but in the end it will work out and when it does start to cash flow and because you’re keeping your cost low, the fortunate part is that it will cash flow very quickly eventually. I mean it may not be extremely profitable, you may only be making you know let’s say $500 a month in the first few months but you’re making $500 a month. I mean that’s cash flow positive.

MATT: That first $100 is the hardest $100 to make.

BRANDON: Yeah. But you may spend $400 in the first month and be making $500 so you know it’s not enough to go quit your job over but it’s unheard of in the traditional business entrepreneur days to have a cash flow positive business in the first month of two. And we see it all the time. It’s actually very easy to do. I don’t want to make it sound easy. There are ways that if you follow these tools and tricks and tips, it is possible to do so remember that and then you know keep your job while you’re doing this because if it doesn’t start up and it doesn’t cash flow quickly, even if it does turn cash flow positive in the first few months, you may want to keep your job because you’ve automated it so well and you may like your job that you do. So you know there’s a lot of reasons why you want to keep that job and it will help finance your automated businesses.

MATT: And they were against getting investors and things like that in the very beginning. You know there maybe come a time where you want to get those investors but the whole point in doing this without investors at the beginning is that you don’t have anything proven, you have no revenues and so to get an investor you’re going to have to give up so much equity of your business that you’re not going to have anything later to sell when the business is actually worth something. So save that equity now and if you want to get rid of it later and you want to maybe diversify out of holding hundred percent of your business, you know, once your business is making lots of money, it’s going to be easier to get those investors and they’re going to give you more money for less equity which is what you want.

BRANDON: Right. And I’m going to say also with a grain of salt, I haven’t really try to consider keeping partners out of it too. If you don’t have the necessary skills, you might be very tempted to bring on a partner that somehow has the special skills you don’t possess and you think that well I guess I need to have to have a partner so I’ll give away 50 percent of the business to a partner that is let’s say a programmer because you have an idea for a software business and you’re going to go do an iPhone app or something like that. We actually did recently get an email from somebody who has an iPhone app idea and did partner with a programmer which at first blush I would probably say is not the best to do but he might have very good reasons for it that we’re unaware of. But I also have another friend who started a company. It’s also a software company, not an iPhone app that brought on a programmer and she gave away 50 percent of the company just to have somebody do the software and I can tell you there’s plenty of people out there that would love to do software development for you for a lot less money than 50 percent equity in it. Even though I understand that it’s free or at least it seems to be free at the beginning…

MATT: I think it’s the biggest trap is that it really seems free. It’s like its equity. It’s not worth anything right now and what’s 20 percent and that’s a lot to put up than you know $500 to have someone develop something but in the long run I mean I hope your company is going to be worth more than a thousand bucks.

BRANDON: Right. So if you can avoid the temptation to go and partner with the first person that comes around that says they can help you get your business off the ground and in some cases you know you can easily prove me wrong and there’s many examples of that but I’d say on the whole if I have to give advice to any good friend of mine in that position, I’d say, really work at your business plan, really try to find ways to get the same thing done for very little cost and there are ways to do it.

MATT: I don’t think it’s bad to have a partner. I just think you got to have a partner for the right reasons and just not having a skill set is not the right reason to have the partner.

BRANDON: Well, here’s one other thing about partnerships that I think a lot of us don’t think of is by having your own business, you enter into a new category that the rest of the world who are not business owners get to take advantage of and when I say that I mean there are a lot of tax issues and financial tax deductions and ways to save money and to control your money more in ways that somebody who’s not a business owner would never have that opportunity. And when it comes to having a partner that gets a lot more complicated and it does kind of tie your hands down to some of those opportunities and without getting into a lot of the details and you can talk to your accountant about some of these if you have one but the bottom line is that you know there’s a lot of leverage you can use your business for especially if you own 100 percent of it. And I think I have mentioned this before you know you guys are probably out there saying, well aren’t you and Matt a bit of partners and why do this with your partner while you’re doing it yourself. Well, I think the very distinct difference is that Matt and I both have our own businesses that we own a 100 percent in so we can take advantages of those opportunities that being a business owner offers you in our own way that we’d choose. So if you know if I like to deducting meals and entertainment in a certain way that he’s chooses not to, I don’t have to have that conversation with him because I have my own business and he owns his own so it’s a win-win.

MATT: Yeah and I don’t have you to tell me that I can’t buy a $3,000 cameras.

BRANDON: Right. Or there are certain decisions that I have to you know and I think you guys can get the point where there is always going to be rift between partners and there’s always going to be different ways running up company especially when it comes to personal finances and how that interacts with your business. So that’s another reason why I’m kind of against partnerships but like you said Matt, there’s always some good reasons to do it and everybody has their own reason.

MATT: Well, I think that wraps up part one of this episode. Next week, we’re going to continue on the same topic and we’re going to cover part two which is going to eliminate, automate, outsource and replicate and make your operations repeatable and replaceable. The world is your customer and becoming a professional entrepreneur but for this episode, we’re going to wrap this up right now.

BRANDON: Yup. And remember if you want to send us any questions, email us. We’re getting more and more emails and we love getting them. I like to see people trying new ideas and better yet if you have any questions…

MATT: Put them on the community site, right.

BRANDON: … put them on the community site. Let everybody have a hack at it. I think you’ll be pleasantly surprised of what kind of feedback you get and of course we’ll be on there too to answer all your questions as they come in. So make sure you vote for us on our podcast the iTunes rating scale. We love to hear feedback on that too because it seems to be all good. So I’m happy to report that.

MATT: And even more, tell a friend about us. Share the podcast with somebody else that you haven’t talked to about it yet.

BRANDON: Yeah. So thanks for listening and we will see you on episode 18 part two next time.

You’ve been listening to Automate My Small Business. We hope you enjoyed this episode. To get a list of the links we’ve just talked about or download more episodes and How To videos, go to automatemysmallbusiness.com. Thanks for being with us and catch us next time on Automate My Small Business Podcast.

Podcast music features, “Nothing’s Got Me” by Big Bad Sun, distributed by Magnatune and licensed under Creative Commons. The Automate My Small Business podcast is engineered by Vincent Furlong and transcribed by Flo Umali. And licensed under Creative Commons Attribution No Derivative Works license and may be freely distributed to share with friends, co-workers and strangers.