you envision yourself and your home-based business succeeding is when the blinders really kick in.
So, what do these blinders do (besides giving me a clever metaphor to write about)? Well, they do exactly what you think they do — they blind you to the obvious. Fueled by your motivation, hopes, dreams, and ambitions, your shiny New Business Blinders completely shut you off from logic and reason. And they do it without you noticing.
You may not be old enough to remember I Love Lucy — well, neither am I really, but during the ’70s, it was on every weekday afternoon, which meant a child staying home from school could catch an episode. Since missing school was a popular pastime of mine, I am fairly familiar with the adventures of Lucy and Ethel. In one episode, Lucy and Ethel make and sell salad dressing. Hilarity ensues until Ricky does some basic math and finds out the girls are actually losing money on each jar. This is funny not only because of Lucy and Ethel’s solution (pretend the dressing is poison so people cancel their orders), but because their experience is so common. Not the poison part (even pretending to poison your customers is really bad for public relations, and not recommended), but the losing money part.
It happens all the time — people start home-based businesses that actually lose money. They do this because they fail to take into account many of the expenses involved. The New Business Blinders are responsible for this.
For example, in my first business, I sold a direct-mail coupon package. My “blinder moment” was when I failed to get an exact price for postage based on a prototype. My printer used a fairly heavy paper stock for the coupons (I didn’t even think of paper stock and weight, which was a huge error on my part). This doubled my postage cost over what I had anticipated. On 10,000 pieces, this cost turned out to be very, very high.
My New Business Blinders were working quite well.
I thought I was doing everything right — I was concerned about printing costs, first-class versus third-class postage, envelope stuffing costs, getting a shiny new computer (which was a big deal in 1992), making the coupons, selling them, etc. I even thought about the future, how my partner Jim and I would franchise our business model to other entrepreneurs and rule over a vast empire of direct-mail coupon businesses, which, now that I think about it, is almost absurd. Essentially, my goal was to be “King of the Free Pizza Coupons,” which sounds like something you’d dream about after eating too much candy.
But in my zeal to storm the gates and crush the direct-mail competition, I neglected to make a real prototype out of actual materials and see what the costs would be. I just didn’t see the point in doing so. Dumb. And all too common.
And, unlike Lucy, this wasn’t a hijinks jam that could be worked out in a half an hour. This was real, and I was in trouble. I essentially had to raise my price substantially in midcampaign. This meant that some people got my product at one price; others paid more. This angered some people when they found out. Oops.
New Business Blinders do this. They cause you to ignore the obvious and see past the unpleasant.
The blinders are not just cost related, either. Suppose you want to build a product and sell it. It’s not fun to think about “where will I get my materials, and what happens if that source dries up?” It’s much more fun to fantasize about shaking hands on a million dollar deal and getting fitted for a beach chair in Aruba.
Or if you want to have a pet-sitting service, it’s no fun to think about what you will do if you show up and the dog is ill (or is menacing toward you). Or if the puppy bursts out and runs away when you first open the door. These are things that could drastically affect your business, and you have to think about (and prepare for) them.
Sometimes, our overwhelming desire to succeed makes us ignore the pitfalls that could occur.
New Business Blinders come standard with every single business; however, their power fades over time. They are easily the strongest with your first business. In subsequent businesses (or with time spent in your first business), they are less and less powerful, eventually reaching the level of effectiveness of Dollar Store sunglasses. But you always have to be aware of them. They feed on your ambition and your desire to succeed, and they will always be present.
Parts of this book (especially the “Mind” section) are spent pointing out the things that your New Business Blinders will prevent you from seeing. So if something seems obvious to you, I mention it because of my experience with the New Business Blinders.
3
Starting And Naming Your Business
The first thing I’m going to tell you is to go start your home-based business. Really — if you don’t go out and actually start a business, nothing further will happen. If you have already started a business, read this part anyway, as it’ll probably be helpful.
What Type of Business to Start?
For the purposes of this book, I am going to assume you will be starting a simple sole-proprietor business.
There are several different business structures, such as corporations, LLCs, and partnerships, but your typical small, home-based business will likely start as a sole proprietorship (or DBA, which means “Doing Business As”).
You can start a corporation or LLC if you want to, but for most people, it’s a daunting thing to do, and usually a roadblock to progress. Although I myself am now incorporated, I did not do so until 2004, several years into my current business. I know if I had tried to form a corporation right out of the gate, I likely never would have done it. There are boring legalities to investigate, forms to complete, searches for similar names, lawyers to hire, etc. Compare this to starting a sole proprietorship: one quick form to fill out, a few bucks to pay, and I was done. Elapsed time: 15 minutes.
The choice was pretty easy for me. And when the time did come to incorporate, my wife volunteered to do it, much to my relief. (All I had to do was sign what she put in front of me, which I always immediately do. She could put a document that ruins my life in front of me, and I’ll happily sign it.)
So if forming a corporation seems daunting to you, forget about it for now and just start a sole proprietorship. You can worry about incorporating later when you actually make money. If you are concerned about the liability protection a corporation gives, you can always ask a lawyer for advice.
Some of you may want to start a partnership — which is the same as a DBA except there are two or more people — but I do not recommend that. (Read more on partnerships in Chapter 4.)
Avoid Meaningless Roadblocks
I’m also going to advise you to avoid meaningless roadblocks and not get caught up in things that don’t really matter. Let me illustrate this point with a brief story. I have a friend who recently wanted some advice about starting a business. She wanted to actually run two companies that were intertwined, with one being a nonprofit entity donating money to a particular cause.
She was concerned about how to set this all up: What are the rules regarding a nonprofit? How would it be structured? How should she put the donation aspect in her marketing? How would she determine which entity would get the lion’s share of the money? How much should she donate?
Essentially, my one comment was: “Why don’t you go make some money first, then worry about how to divvy it up?”
Really, it was that simple. Why worry about how you are going to donate the profits before you even make one sale? She hadn’t even made a prototype of her product yet, and she was worrying about how to donate the nonexistent profits.
I tell this story not to make my friend feel bad, but to illustrate something that is very common with people who are starting a business. I did the same thing years ago in my first business. I was worried about how much commission I was going to pay my salespeople and how I would word a non-compete agreement.