Survivor’s Bias and Entrepreneurial Advice

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We talked about survivor’s bias in Episode #43 of the Lifestyle Business Podcast. It goes like this: we do something, or something happens to us depending on your Philosophical lean. In this case we receive a big purchase order. We then turn around and say “here’s how you can get a big purchase order.”

Survivors of the big deal or any deal, especially business people looking to dole out advice, tend to present their stories as if what they did is what it takes to accomplish a particular feat. If we could run a science experiment on this stuff I’d suspect countless outcomes: some million dollar deals and a lot of people falling flat on their faces.

The internet’s incredible power to expose us to possibilities we could not have imagined on our own is tempered by the insensativity it can inspire in regards to our own unique position. Its true to say that publishing that first video post for some people is just as challenging as getting a large deal is for my company.

Having a great deal of sensitivity to your local situation– where Gary Vee might say “DNA” (what’s more local than that?)– combined with the power of the internet seems to be a potent combination.

Even though I can’t give you a roadmap to a 200K (and by the time you are finished reading this, you might not want one) I hope you’ll find some value in a little bit of the story.

Our First Big Hit, It Has Been Framed, For Good or Worse :)

It can be mysterious to witness things happen for the first time in your own company that you aren’t directly responsible for.

When businesses start to do things that are bigger than you, it can become disorienting. Three years ago I labored for hours perfecting our logo design and arranging it on our quotation form. I hired someone on a logo contest site for $150 bucks, proofed final versions after signing a contract and integrated it into the layout. The process took longer than a week.

Fast forward a few years and I haven’t laid eyes on that form in months and it’s issued 4 to 5 times a week by employees I rarely talk to. It was one of those forms that contained the winning bid.

One of the toughest transitions to make in a small business, and one that is generally required in order to make big deals like this happen, is getting very good at assuming responsibility for stuff you aren’t directly responsible for.  Revenues. Attitudes. Cultures. Order volumes. Dip-shits-who-work-for-you. How clean the bathrooms are. Etc.

Here’s something that most people suck at (including me, depending on the day): making effective judgment calls on limited information, and then inspiring people to follow them. It’s as scarce a quality as it gets.

They’ve got a word for these unique humans: “entrepreneur.” n. “Individuals who are motivated to repeatedly make judgements on incomplete information and inspire others to act on their behalf.”

Is that you?

Well it certainly isn’t me this time around.

I’m not really a pure entrepreneur– the proverbial kid who’s been hustling lemonade since age 3. This time the crown goes to @AnythingIan, one of my two exceptional business partners. Without Ian, it’s possible I would have just burnt out of my corporate career and become a travel blogger. Given the number of headaches we have encountered so far in our product business, that might have been a better way to go.

This post is in large part an ode to Ian, an absolutely relentless business person who’s learned how to be CEO on the job, which is the only way to learn it. He’s lost a lot of sleep, exhibited plenty of unhealthy obsession, and given up on a lot of personal income to make our little company work.

He’s damn good at what he does.

I’ve often observed that businesses don’t seem to get off the ground unless their owners bend over backwards to get them there. Ian has certainly done that.

This deal wouldn’t exist without his months and months and months of tough phone calls, negotiations, 160+ hours in the design trenches, more than enough conference calls (one from Thailand!), and ridiculous amounts of confidence to assume expertise and responsibility in the moments our clients needed it.

You can look at business as taking responsibility for things when other people or companies are unwilling or unable to do so.

As most of you know, I don’t like to put in writing our niches that my company plays in, but if you want to visualize this type of product, here’s something parallel and similar: imagine a semi-permenent cappuccino bar and everything associate including the furniture, awnings, ice bins, etc. Our company provides the individual products (either sourced or custom designed and manufactured) the custom architectural renderings (cappuccino bar photoshopped in context outside of a shopping mall), and makes sure everything gets done well and on time.

We started out making those cappucino bars. Ian thought the market could use better ones and he was right. It’s not a huge market, but it got our lifestyle business off the ground.

If you hustle cappucino bars long enough eventually folks that run facilities that are larger might look your way. Let’s say a buyer at Hilton sees your site in a Google search, or gets an intelligently crafted and just a tad bit naughty cold call from you or one of your sales reps.

Hilton is rumored to have a need for cappucino bars.

Once Hilton finds out you make cappuccino bars, they’ll call you and ask for information. Then they’ll ask for a quote, maybe a sample. Then they’ll forget about you for 6 months. You’ll keep calling. Ask questions. You’ll proactivly offer to solve their problems. In fact, when you wake up on Saturday mornings, you’ll just go ahead and start solving them for free.

You are a hustler. :)

Repeat this process 2-3 more times and you might get lucky.

Keep calling. It can take these guys years.

As we said in Episode #43 of the Lifestyle Business Podcast, that 200k number looks big but its not nearly baller baller territory. We take only small salaries and pay a ton of people and expenses to make this stuff happen (not even to mention we must deliver the product!)

We’ve got employees, vendors, contractors, leasors, service providers, lights, internet, that one space that one time, that piece of software we totally needed. We are insanely optimistic so we invest. Why not? :)

And then, of course, there are the taxes.

Lesson learned #2: Doing business and making money are two different things.

We have no idea how much money we are going to make off this deal. Might not be much. Could be good. Now its time to execute.

So no baller baller stuff just yet.

Same line: no champagne, you’ve got a business to run.

Cheers,
Dan

I’m not a hustla, I just tweet a lot: @TropicalMBA

If you want a hustla, check out @AnythingIan

PS, If you want to hear about a niche we tried at and failed, check out Biz Failures: Crashed Crotch Rockets, Blowing $6K, and 30 Days in China.

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Published on 10.27.10
  • http://blog.hubze.com Troy

    Congrats on the 200K deal! Always appreciate insight on the back end work that makes things like that possible.
    On the Lesson Learned #2… Would be interested to hear more on taking clients/jobs to build credibility/reputation even though they might not be at optimal margins. What factors do you weigh to determine if doing a particular deal will bring profit in other ways to the business in the future?

  • http://www.buddhacentric.com Richard Riley

    Congrats on the deal! Hopefully it will be the first of many to follow. I also like your last line, “…no time for champagne, you’ve got a business to run.” its important to realized your successes, but don’t get too hung up on them when there is still much work/business to be done. Also, I might be going out on a limb on this one, but judging by this line, “that one space that one time” is it safe to say that you are a fan of the movie, “Hackers”?

    Keep up the great work!

  • http://twitter.com/josh_crocker Josh Crocker

    I think I’m gonna owe you way more than just $50. This is balla balla for realzzzz! Your transparency is what makes you better than anybody else out there. Seriously, why did I bother going to college? I learn more about business from the two of you than from anywhere (or anybody) else out there!

  • http://www.tropicalmba.com Dan

    Hey Josh thanks, since you are primarily learning from Ian and I I’m worried about your future prospects ! :D Have you checked out “Good to Great” by Jim Collins, “Maverick” by Ricardo Semler, and hell, a couple Dan Kennedy books? Thanks for stopping by the blogski !

  • http://www.tropicalmba.com Dan

    Fan of the movie? Ahem. yes. :D Thanks for the encouragement :)

  • http://www.tropicalmba.com Dan

    Troy, great question RE: profit. Ian and I talked for hours about how to approach that issue. I’m not quite sure how to present those ideas publicly except to say “its a bitch and we have no idea what we are doing!” :P Will think about it…

  • http://twitter.com/josh_crocker Josh Crocker

    Jim Collins is also the freakin man! I have not heard of Semler or Dan Kennedy. Yikes! Looks like I’ve got some reading to do!

  • http://www.tropicalmba.com Dan

    Collins/Semler more organizational stuff, Kennedy is all about the solopreneur hustle so that’s a great place to get pumped up and realize what you are up against.

  • http://www.lifestylebusinesspodcast.com/ Ian

    Branson, Business Stripped Bare is a fun read.

  • http://twitter.com/josh_crocker Josh Crocker

    …and thanks to my library’s “reserve a book” online program, I’ve got all those books headed my way in the next 2 weeks :)

    (I have yet to Kindle-ify my life…soon my friend…soon!)

    :)

  • http://tylertervooren.com/advancedriskology Tyler Tervooren

    As a reformed construction manager, this was a lot of fun to read, Dan. I remember the late nights, the tense phone calls, the huge contracts and all the freakin’ work it takes to make an incredibly complex and chaotic project look like you actually know what you’re doing.

    Congrats on the big PO. You earned it.

  • http://www.tropicalmba.com Dan

    Thanks man, sounds like we both went the way of the internet after one too many insane contracts… these things can really give you the “palps” or heart palpitations as Ian and I often say. It’s weird just pushing all in even though you really can’t see your way through it… you just gotta believe your company can solve the problems. That’s how this shit happens. Just subscribed to your blog BTW, talk about late to the party!

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