For years I have proudly proclaimed the strategy of sitting underneath the table of feasting giants and eating the scraps and crumbs that fall from the table. A bootstrapper’s dream is to get into that little market segment that isn’t being addressed by several large players, exactly.

In Bootstrap Business I go so far as to outline a landscape matrix that actually shows how to very deliberately get between several large companies and make sure you don’t infringe on their territory, while still eking out that little crack of opportunity.

I have deployed this countless times. There is; however, one danger. When the market starts to mature, sometimes the giants reaches down and pick up the scrap, and in the process–squish you like an ant.

Indeed, this happened to my team this week. Google released a new algorithm update and indeed it dramatically changed our channel. Simultaneously, another giant that we work with got up from the table. When the two big fat giant bellies hit each other we got squished in between. Needless to say, it’s very painful when that occurs, and it can actually be life threatening to the business.

In this situation, I believe we will recover, but it’s caused me to outline three distinct things that you need to do when deploying this type of opportunistic strategy.

1. Understand the giants eating patterns. How long do they eat? When is it time for them to move? In the case of Google, they release algorithm updates every so often. So, when you see the signs of movement you better get out from underneath their feet as they get up from the table.

2. Give yourself cushion either to the left or to the right. This means, have the ability to either push to your supply side or push to the customer side. If you get squished right between two giants with no place to move, you end up getting your margin squeezed, squeezed, squeezed.

Transactional businesses are wonderful, because they provide a repetitive income flow, but if you are not careful you can end up getting squeezed right to death. Either own the customer and control it, or make sure that you can control the supply cycle. I have discussed this principle many times and I have always stated:
-    Never maintain only one supplier.
-    Never rely on only one customer.

Well now I need to kick myself in the pants, because in the businesses currently getting squished, we basically have one supplier and one customer. That is always a precarious situation to be in.

3. Move from the table as quickly as you can. Once you get profitable, make sure you can then quickly move and transition to a place or a pocket where the giants aren’t quite as likely to rumble over the top of you. Once you’ve filled your belly, look for the exit door as quickly as you can.

I still contend that finding a really hot sector that is on a wave, where there are giants pounding the table, and where money and scraps are falling onto the floor–is a great strategy. Just beware there is a downside. I’m personally committed to using these opportunistic businesses to leverage and become viable quickly. Then I rapidly move in to more value transactional, longer-term engagement types of businesses. I encourage you to try it too.

The moral of the story is…keep your head up and your eyes open when you are sitting next to giants.

Last night my wife and I had a rotten guacamole, terrible night. I had been traveling all week long doing lectures and I was dead tired. I got home at 9:30 or 10:00 p.m., spent a little time with the family, and finally made it to bed about 11:30 p.m. At midnight someone began banging at our door, the dogs started yipping, and come to find out our second son had forgotten his key and was banging on the door to get in. We painted smiles on our faces, went out to let him in, spent a few minutes talking with him, and then crawled back into bed.

At 1:00 in the morning we heard the shower running and couldn’t figure out what was going on. The dogs start barking again, and at this point I almost didn’t dare go back to sleep.

We were again woken up at 4:30 a.m. when in stomped our 3rd son, ready to go to Drivers Ed at 5:00 in the morning. Again at 7:00 a.m. the 4th son headed to school and finally at 8:00 a.m. our final son departed. By the time we get him to school, needless to say, very little sleep had actually taken place.

My wife and I did eventually get a hearty laugh out of it when we figured out who had been showering in the middle of the night. We discovered that Nathan (Drivers Ed son) had looked at the clock wrong, got up at 1:00 a.m., showered, got dressed and completely ready, and then realized that the clock had said 1:00 a.m., not 4:00 a.m. I still chuckle thinking of it now.

This pretty much sums up the counsel that I gave in three of the lectures this week. The sequence of Zigging and Zagging is critically important. There is a reason why Zig #1 is Drive to Profitability, Zag #2 is Add Resources, and Zig #3 is Add a Scale Element.

Indeed the timing is critical.

So frequently people attempt to jump directly to Zig #3, which is a scale element. This is exactly what Nathan did this morning—causing havoc to our entire family. It of course is the perfect thing to do…have a shower and get dressed…but 1:00 in the morning is not the perfect time to take the action. The same thing is true with scale and so many other aspects of your business.

You see, when you are making cookies–how you put the ingredients in, and the order in which you put them in, is as important as the ingredients themselves. The sequencing and timing of how we build our businesses and how we take action is actually the trickiest part of making a perfect batch of business cookies…or getting a good nights sleep…or getting dressed properly and appropriately.

Remember when you are zigging and zagging: Zig #1 Drive to Profitability, Zag #2 Add Resources, followed by Zig #3 which is a Scale Element. Don’t get tempted to jump directly to Zig #3. Always nail it before you scale it.

This morning I had a delightful conversation with an individual named William Hackett Jones. For the last three or four years I watched with great respect for William as he carved himself out of an almost impossible situation.

Several years back I taught a course on Bootstrap Business. William was there. He runs a translation service, and he was actually on the verge of declaring bankruptcy over in Russia. Then he learned about the principles I follow and changed his course. He came to the firm conclusion that indeed Bootstrapping and Zig Zagging was the methodology that he wanted to follow.

So now without any venture capital and without any funding, William has truly subscribed to the Value Equation. It goes something like this:

Value Equation

Intellectual Capital (value of being smart)

+

Relationships Capital (value of those great relationships that he had developed)

+

Not Taking Funding

=

Adding Value that indeed helped build his business

I am thrilled to state that although it took William several years he has grown that business. He’s taken it from being on the very cusp of bankruptcy to thriving business (one that is also projected to be a million-dollar business this year).

William is now preparing to hire his first executive admin, which means he is now at the critical phase of adding resources and processes. It is all very exciting for me.

I must admit it was really fun to listen to the lightness in William’s as we talked, compared to the conversation that we had a year or so ago.

It is really fun to see the fruits of the labors of those around me. It’s always fun and exciting to have a business succeed. But it is even more exciting to see others applying these powerful Zig Zag Principles from the book, as well as those from Bootstrap Business. The success stories that are now starting to flow back to me are absolutely thrilling.

I respect you William. I look for great things. You have a great bright future in front of you. You are definitively making this zig zag turn. Hold strong. We will be watching you carefully. And I will give everyone an update on the success that William has going forward. Keep Zig Zagging in Russia.

This past week I was invited to an early morning meeting. As I was making my way up the freeway, traffic came to an abrupt stop at a point where there shouldn’t have been any slowing at all.

Frustration set in as I spent the next 20 minutes crawling, stopping, creeping along, and barely moving. When we finally got to the point of the slowdown, I was a little surprised, but still slightly amused by the ordeal.

Right there in the middle of the road, I observed that a garbage truck had dumped its entire load and the fire department was squirting out a fire that had erupted inside the heap of trash .I know it’s not funny, but the scene did cause me to chuckle a bit.

I’ve seen the same thing multiple times in my career—even in companies that I have created. I have indeed caused fires by picking up other peoples garbage.

You see, if you create an organization and then run around rescuing, picking up everyone’s garbage, and picking up their problems–then in essence you quit being the leader and you begin being the garbage man. (This same thing can happen in your own family or in your personal life.)

This garbage service does no one any good. Indeed, it creates a co-dependency in the organization and it actually robs people of accountability. In the end, you have a very non-productive environment.

I have created businesses and made the mistake of attempting to be kind and supportive of people. Every time my misplaced generosity, actually ended up destroying productivity and fostering an environment where employees are too dependent on me. I make myself a rescue agent rather than a support agent. 

The fact is, everyone needs to take out his or her own garbage. Anytime you begin mixing really awkward chemicals, like that garbage truck, you end up having to call in the fire department to put out the flames. It causes a big yucky, nasty mess. Plus you end up having to clean it up again, after the fact, which ain’t fun. 

Require everyone in the organization to clean up and take care of his or her own garbage while simulations providing support. Overall–don’t become the garbage collector, remain the leader.

A young man named Tanner Greenwood currently works for me. He’s a fine young man—a hard worker with bright eyes and good intent. This week Tanner has had a hard, rotten, no good, very bad, good-for-nothing week.

It seemed like everything was going wrong for him. He had some car problems, and then some more car problems. The car locked up on the freeway. He had a couple personal issues that didn’t go well. He got a severe case of the flu. Just about everything this week seemed not to be going very well for Tanner. On top of all of that he wasn’t able to come into work this week, and I felt real concern for him.

Then today I pulled up in the parking lot just as Tanner arrived. I could tell from his swagger that he was down just a little bit. I also happened to know that Tanner is really a hard-core rock climber. I whimsically thought, “You know Tanner, we’re going to go up to the Outdoor Retailer Show.”

Then without much more thought, I had him jump in the car and we went up to the show. We got in and he just kind of hung out. It was a fairly good day, and then at the end of the day we went into The North Face booth, and low and behold, who was there, but Conrad Anker.

For those of you who don’t know him, he’s a world premier, high altitude, vertical-face climber. Anker is the individual who discovered Mallory’s body on Everest. He’s also the one who climbed the third step without the ladder. He’s the only one in the history of the world who has ever done that. He also just got done doing an epic climb in the Himalayas that was previously deemed impossible.

So there was Conrad. I recognized him, and went up and talked to him for a little bit and I told him about Tanner. He was so generous. He sat down and talked with Tanner, took a picture, and signed a poster. We were able to hear a couple stories, and ask him if he thought Mallory was able to make it up and over that third step on Everest before he died. (He said he didn’t believe so.)

We just talked and had a couple really delightful moments, and then as we were walking out of The North Face booth, up walks a few other very well-known climbers, including Russell Brice, the very well-known coordinator who is very good at coordinating and helping get people up Everest.

Tanner really enjoying the day and as we were driving back to the office, I heard him mumble under his breath—“The week was worth it!”

I’ve thought a lot about that statement.

I think we all get in these situations where there are horrible, miserable, rotten, good for nothing, hard days (and sometimes weeks). Often just when we get to the point of totally despair, we get these little wonderful cherry-on-top-of-the-dessert moments that end up making all of it worthwhile. Thank heavens for those little cherries that make the pain the misery that we have to go through, worth it.

The reality is that most of our business dealings and most of our day-to-day lives are somewhat mundane. There’s a lot of grinding it out.

Some people think being an entrepreneur is all sexy and hot and flashy all the time. The reality is that more often than not, it’s about slogging it out and just punching it out. Many times it’s just about enduring to those occasions where you get to have your picture taken with Conrad Anker.

My hat is off to you Tanner Greenwood. You’re a fine young man and I expect wonderful things for you in the future. I’m happy you had a wonderful day and that you had this experience. 

In the conclusion of Bootstrap Business, I told a story of a young man named Jonathon. I was deeply touched with his story because he had the support of his wife and was willing to make the sacrifice to become an entrepreneur.

This past week, I was delighted when Jonathon called and asked to come visit me. There’s no way I’m going to turn down a visit from Jonathon because he’s taken the enduring path of entrepreneurship. In deed the last three or four years have been difficult for this man.

I talk about how in the early days; my wife and I lived on potatoes and love. Jonathon had been in that phase too, where his wife had to cut out makeup and their family had reduced the budget dramatically in order to keep the entrepreneurial dream alive.

I was so delighted as I looked at a very weary, very battle haggard, very tired Jonathon. It was very evident as he walked into my office that he had arrived at the first phase of Profitability and was well on the path of a successful venture. He knew it, and I knew it!

Jonathon has turned the corner and is now in the Process Phase where he is developing processes and adding resources. He just wanted a few clarifying pointers.

During our meeting he had made the comment to me, “Rich, I didn’t have any idea that it was this hard.” Then we shared one of those moments that I call an “earning your stripes moments”.

I want to say boldly that it is hard, but that anything in life that is worth having is hard. I still stick to the statement that I know of no better way to control your emotional, your personal, and your financial life and control your destiny, than by becoming an entrepreneur.

Of course I will tell you that figuring out what it takes and figuring out those first few models is hard—even if you have and The Zig Zag Principle or even if you’ve read Bootstrap Business. It takes going into the unknown and it will make you weary, but it is worth it.

And it does become easier.

Well, maybe not easier—but you do acclimate to it, and you will learn to get through the sequences more quickly.

I’m proud of you Jonathon, and I Look forward to seeing incredible thing from you in the future. You’ve earned your stripes.

Now, the rest of you…get with it! Go start something you’re passion about. Maybe even have a couple grand-little failures. Just make sure you follow my advice and fail efficiently. And as you work toward your goal, I’d love to hear about it.

Congratulations Jonathon!

One of the traditions that I have began with my children is a sheer delight. Just before they get ready to permanently leave the home I take them on a surprise “work trip”. So far they haven’t really figured out exactly what this will entail.

This weekend I was able to continue this tradition with my second son Matthew—who is simply an amazing young man, and someone that I thoroughly enjoy being with.

Two weeks ago I made arrangements and then told Matthew, “I have a really nasty project I need to have you help me with.” Being a very dutiful and good son, he said, “Dad, I’ll be delighted to help.” I had him block out Friday at about 9:00 p.m. and all day Saturday. When he showed up I told him to make sure he brought his warm jacket and tennis shoes, because we would be pretty active. However, I had secretly loaded our golf clubs in the trunk. We got in the car and I headed south for a surprise golf trip.

About halfway to St. George, Utah, the destination of our gold expedition Matthew still had no idea where we were going and he finally asked, “So Dad, what are we going to do?” Then I sprung it on him and he was ecstatically excited!

We had the most delightful day bonding and spending time together.

I remember when I started this tradition with my oldest son John. He really loved musicals, so we loaded into the car and headed north. I played the music to Wicked as we drove. It wasn’t until we got all the way to Salt Lake City and pulled into the airport parking lot, that he realized that I was taking him on a trip. We flew out to Los Angeles to see Wicked.

This tradition has created surprise and delightful memories that the boys will continue to talk about. It is important that you also do this in your work environment and for yourself too.

I often comment that we are nothing more than Pavlov’s Salivating Dogs. Indeed we have to give rewards and feed that inner animal. Surprise and delight go a long way in helping to get yourself loose, fluid, happy, and in the right, positive mindset. Not to mention—it’s just plain fun.

There is nothing better than the delightful surprise that feeds a life full of good memories and passion. Far more powerful than handing someone a stack of dollars is helping to make a meaningful memory.

Please make sure that you do that in your business, because it really is about the memories. It really is about the experiences that make it meaningful and lasting. Go forward and motivate yourself and your team and have a blast doing it!

Rich:

I’m so excited to be here today with my first mentor Alan Hall from back in the Netline days. You’ve heard me talk about Alan. Alan is an amazing individual. I’m so grateful to have him in my life. He is indeed an amazing individual and an example of what I hope to be in twenty years.

Alan you are now giving away everything you make! You’re promoting entrepreneurship and helping people’s lives. Will you talk a little bit about your work?

Alan: Well, it’s important for everybody to understand this is about stewardship—we’re stewards of resources. Somehow we accumulate wealth, but then wealth is really for us to give it away. To give to those who are of need. We all get enough to take care of our basic needs and then the rest outta be given away. That’s what we’re all about.

Rich: One of the philosophies that Alan has, is that the best way to take control of your life, and I agree, is to create a business. Not only does it impact yourself, but it impacts many people around you too.

Alan: Oh yeah. We’re looking for people all over the United States who are ready to start a business, and we’re here to support them! Obviously with Rich’s great knowledge, together we have teamed up to help make people successful. So go start a business! America needs you now.

Rich: That’s wonderful advice from a wonderful man. Look for more to come! I’m going to start highlighting Alan in future posts and tweets. Watch for Alan’s example. He’s done it the proper way. There are a lot of individuals that live and “it’s all about me”. But, Alan is the example to me; what I want to become like. Go forward and do good in this world. Please look forward for more to come from Alan.

When I am planning new ideas for my business or for my life I like to use a tool I created called The Decision Matrix.  It helps me decide which ideas or options fit into my value plan.  This decision matrix can be used for any kind of decision you need to make in your life.  I have used it to help me decide which jobs I should take, where I would like to live, and, yes, what businesses and scale ideas I should pursue.  I love to use this model to appease the left hemisphere of my brain, which is the logical side.  It does not always tell me exactly which option that I want to take, but it does help me weed out the options that are best not to take.  It is really straightforward and simple.  Here is how it works:

Across the top of the paper, spreadsheet or whiteboard, I compose a list of the top ten or fifteen (maximum) things that are important to me for the particular decision I am trying to make.  For example, in a business some of the things I might want that business to do would include making me a lot of money, flexibility of lifestyle, giving back to society, or international travel.  If I were making a decision on where to buy a new home, I may list across the top things like location, quality of schools, safety, friendliness of neighbors, quality of the construction, yard for the dog, a good view, etc.

Once I have made my list across the top of the things that are most important to me in this decision, then I rate them in order of priority as to how important they are to me.  The most important item would have a rating of 2.  The next item would be ranked a 1.9, then 1.8, all the way down to the least important item.

In the business example, I may give “flexibility of  lifestyle” a 1.8 rating and the “international travel,” which I love but which may not be as important to me as my lifestyle, a 1.5 rating.  If I were moving to a new house, I would rate the quality of schools a 2, where I might rate the view I desire a 1.2.

Once I have my values of what I desire listed across the top and weighted in order of priority, then I list down the left side all of the options I am considering.  If I am thinking of ideas that would scale my business, I would list all of those down the left side.  If I were purchasing a house I would list all of the different property options down that left side.  If I were deciding which job opportunity I wanted to pursue or which college to attend, whatever it is I am deciding I list the options down the left side.

After my chart is complete, I ignore the weight factor of those important items and I fill in the blanks. I just go through really quickly and assess to the best of my judgment how my idea or decision would rank with my important item. I use a score of 1 to 10, with 10 being the highest.  After I have filled out the chart, then I simply take the score of the idea to the important item and multiply it by the weighted factor of that idea.  I then sum all of the important items together for a score of each idea.

If there are several people involved, then I have each person do their own weight factor.  We add up the weight factors and then use that number to score the spreadsheet.  Together we decide the score between 1 -10 of how well that idea would fit our needs.  If my wife wants a good view and I want a shorter commute to work, we would weigh those items differently.

I like to do this exercise when I am relaxed and calm.  It takes about an hour or so, but it is a really precise and fun way to sort out my ideas.  Oftentimes, I’ll get the top four of five scoring ideas.  These scores are not the only factors in my decisions, but they do usually tell me which of the options are not the ones that I want to pursue.  It helps me to hone in a little bit to where I want to take my next zig or zag.

Decision Matrix

Eating Our Own Cooking

We are currently trying to figure out the scale phase in our Froghair business. When we initially defined our three zigs and zags, we defined our scale as making three sales into our direct channel each day.  As we progressed, we hit profitability and were able to add resources, but we realized that our plan for scaling business was not viable. So, we had to adjust our strategy and go after a second option.  This time our plan was to sell items to large companies to use as their corporate gifts.  This has had some success, but we are still exploring other options.  Specifically, we are looking at generating Internet leads in our area of the market.  Almost everyday we’re using the zig zag principle because it gives us the flexibility to adjust and change course within the boundaries that we have set.  As we’ve seen obstacles, we’ve skied around them.  And we’ve been prepared to do so because we know they’re going to come.  My experience has taught me there is a much higher probability of success when you use this principle.

Summary

      Zig number 3 involvesa major shift in mindset.  You are no longer working in your business; you are working on your business.  Your are becoming deliberate and you have structures in place.  You’ve survived the determination phase.  You’ve survived the discipline phase.  Now you can leverage yourself, leverage the value of the market you’re in, and start to really see some success.

Last weekend I was in Dallas Texas lecturing on the book. As I was racing home I was very excited to see my family–most specifically I was looking forward to spending some time with my beautiful wife.

As we frequently do when I’m traveling, my wife and I exchange texts back and forth. Just as I was getting on the airplane and the stewardess was scurrying us along and rushing us to shut down our cell phones so we could have an on-time departure, I quickly sent this final text to my wife, “Loving my wife.”

I thought, what a fitting way to send a message before I departed for home. I pressed send and didn’t think anything about it. I sent the message, shut down my phone, buckled up, had a productive flight working on some things, read a little bit of a book—it was great.

When we landed back in Salt Lake City, I turned my phone back on and…bop, bop, bop, bop, goes the phone. It delivered a whole sequence of text messages from my wife. I looked down in dismay to see that my wife was slightly ruffled.

When I had sent the text, “loving my wife”. The autocorrect had interpreted it to say, “leaving my wife”, not loving my wife.

Of course my wife knows I’m totally committed and I’d never leave her so we got a bit of a chuckle out of it. But I thought, how frequently in our businesses we have good intent, but we’re very sloppy on the communication and the delivery of our messages–specifically on our elevator pitch, or what we call our catalyzing statements, or the emotional fuel for our businesses.

In the elevator pitch, you only get one chance to tell someone about your business. You have just one sentence to get their interest. Anytime someone asks what you do, and you go on for 5-minutes, you’ve lost them. You’ve got to able to quickly and concisely drop them a snippet and capture their attention.
My experience is that more often than not we have very good intent, but very poor delivery. If there’s one place that you could use a marketing expert or someone to really craft your message–it’s on that elevator pitch, or in those really critical communication deliveries. Certainly you don’t want to convey a missed message, as I did.

Zig Zag, communicate effectively, and have a great life.

Here is a common story for entrepreneurs: You’re building your business. You’re zigging, you’re zagging. Then suddenly you’re stopped cold by a lack of financial resources.

But what if you actually have a lot more resources than you think?

Financial Advocate Garrett Gunderson is an expert at helping entrepreneurs and professionals uncover and leverage hidden financial assets.

I’ve asked Garrett to join me on a free teleseminar on November 3, 2011 at 6:00 pm PST, 7:00 pm MST, or 9:00 pm Eastern to expose the most common financial mistakes that stop business owners from progressing and rob their cash flow.

Furthermore, all attendees will receive a free, signed hardcover copy of Garrett’s New York Times bestseller, Killing Sacred Cows: Overcoming the Financial Myths that are Destroying Your Prosperity.

Access the call by dialing 801-656-2240 and insert the following number code: 021334#.

Garrett will reveal practical techniques that he uses to save his average client $11,700 per year in taxes and increase their monthly cash flow by $1,600.

Join the call to learn:

•    The monumental mistake most business owners make that creates stress and headaches and imposes frustrating limitations on your business growth.
•    The “Terrible 3” financial blind spots where entrepreneurs routinely lose cash without even being aware they’re losing it.
•    The 7 specific financial areas you can fine-tune to recover and maximize lost and inefficient dollars.
•    Why Dave Ramsey-style extreme budgeting is misguided and completely unnecessary.
•    How to optimize your current cash flow to be more profitable in the long-term while still enjoying your money immediately.
•    Why increasing production is far superior to decreasing expenses.
•    Why traditional financial advice robs your dreams, makes you lose control of your assets, and costs you hundreds of thousands of dollars over time.
•    How to turn your business wealth into personal wealth.

I want to help you zig zag your way to success. Join Garrett Gunderson and me for a free teleseminar to learn the most common financial mistakes business owners make that impede their progress and rob their cash flow.

All attendees will receive a free hardcover copy of Garrett’s New York Times bestseller, Killing Sacred Cows: Overcoming the Financial Myths that are Destroying Your Prosperity.

Access the call by dialing 801-656-2240 and insert the following number code: 021334#.

Won’t you join us?

November 3, 2011 at 6:00 pm PST, 7:00 pm MST, or 9:00 pm Eastern

What an amazing journey The Zig Zag Principle has been!

I want to so publicly acknowledge and thank all of you that have been involved in this great endeavor. 

There are two types of victory.  There is the private victory and there’s the public victory.  I am so thrilled about the public victory! We hit the bestselling lists!

- We were #3 overall on Amazon the day the book was released. On Amazon we also hit:
- #1 on the Movers and Shakers list
- #1 in Business Management
- #1 in the Motivational category
- #1 in Entrepreneurship
- #1 in Psychology and Counseling
- #1 in the category Life

We are #5 overall on the USA Today list.

And the public victory I am really excited about is that The Zig Zag Principle is the #6 bestselling book in Inc. Magazine. 

These listings stand for great public successes and victories. But the successes that I am the most excited about, is you.  I love the private successes. 

I get to hear the stories from individuals who are wresting control of their life. I love the stories of people take back their life—both emotionally and financially. These are the success stories that I am the most excited about. 

I thank you again so much for your support in The Zig Zag Principle and I hope that you will join me in having a zig zag, joyful, amazing, successful life.  Thanks again so much for supporting me on The Zig Zag Principle. Go forward and have a great prosperous life.

 I do have some businesses that do not fit into these last two categories but have been very stable businesses that have scaled well.  My wife and I started purchasing rental properties many years ago.  We bought our first fourplex at a fire sale after the owners went bankrupt.  We put enough money down that the cash started flowing from the moment we bought it.  As we obtained more cash, we paid off this property.  Through trial and error, we have been through the learning curve to know how to manage these rentals.  With the money we made from that first rental, we bought another rental property.  We added resources by hiring a repairman and other people to help manage the properties.  We hired our sons to work on these rentals, as this was a great way to teach them how to work hard. (I’d hire my daughters, but we don’t have any.)  One by one, we purchased rental properties that got us to cash, paid them off, and then purchased more.  The great thing about these properties is that they are income-producing assets.  Even as the housing market took a nosedive, our rentals remained full.  Those people who no longer qualified for mortgages needed places to live and were happy to live in our rentals. 

      When my partners and I started CastleWave, we first got our initial SEO contracts to drive us to profitability, and then we hired the engineers we needed to build our resources. Then it was time to add scale.  The scale component in CastleWave was our link-building component—the ability to get other authoritative web sites to direct traffic to the sites for which we were consulting.  Our expertise in this area was our number-one value asset.  We put together a pragmatic system—aset of processes and approaches that were bundles—that we could then have our employees replicate and follow, allowing my partners and me to focus on other issues. 

      If done properly, scale allows you to develop a system and train other people in how to use that system. Put together an entire system and process using all your rules of engagement, and then flip the switch and start cranking out the cookies.  A cookie-cutter system is what will get you to scale.

      Microsoft Windows is a great example of scale.  How many times did Microsoft build Windows?  Yes, Bill Gates and company have released updates and improvements (well, most of the time), but they really only built the program once!  And they have been able to sell it millions and millions of times over.  Virtually every PC sold has Microsoft Windows already installed, and Microsoft gets a royalty each time a person opens their box.  Now that is scale—and the reason why Bill Gates is one of the richest men in the world!

I have developed four rules I follow whenever I create a business.  There are times I violate them, but I do so deliberately.  Keep in mind that these are my rules that fit into my skill set and values.  You will need to look at your own situation and determine the rules that work for you. 

Rule # 1 – Ride a Wave:  I like businesses that are on a wave.  Just like a surfer who gets in front of a wave and rides it to the shore, I want the environment to be right before I get on a wave in my business or my life.  If the wave is big enough, then just being in its vicinity will generate enough power to propel you toward your destination.  But if you catch that wave wrong, life can come crashing down around you.  The key is to get on and off the wave at the right time.  September 12, 2001, would have been a terrible time to start an airline.  This same day would have been the perfect time to start an anti-terrorist airline security business.  Purchasing a row of new condos in 2006, when housing prices were at a point where experts were beginning to see they were unsustainable, would have been a bad move.  Purchasing those same condos after the housing bubble burst and prices were slashed in half would have been the right time to add scale.  You need to assess your environment and pick the right waves to ride.

Rule #2  – Transaction Businesses:  I like businesses that sit in the middle of a transaction.  A well-known example is credit card companies, which make 2-5 percent every time one of us slides our credit card through a reader.  None of us give what we’re paying a thought (and if you think we’re not paying, think again).  Merchants are happy to pass along the fee because the convenience brings more people to their business.  Customers love the convenience of not having to carry cash or write a check, so they willingly pay their annual fee (and high interest rates) as well.  Positioning yourself in the middle of a transaction puts you in a great place to make money.

Rule #3 – Own the Customer:  I like to own the customer.  I don’t like being in a business where I can’t look into the eyeballs of the customer and resolve the issue.  I like to be in the middle of the transaction, but I do not like being sandwiched between brokers.

During the rise in the housing market, I was riding a great wave with a company called Mortgage Saver 101.  We had an awesome web site that generated leads of people looking to obtain mortgages.  The company was riding a wave and was a transactional and a digital business.  The only problem was that we did not sell our leads directly to the banks or the people who were coming to refinance their loans.  We sold our leads to a broker who would then sell them to multiple vendors.  Many times the broker would come back to us and say he did not like some of our leads.  We would ask what he didn’t like and he would simply say, “It wasn’t a quality lead.”  Without being able to talk to the bank or the customer, we were left to guess at what they really wanted.  This left us very vulnerable, giving all of the power to the broker.  If there was a problem, we had no way to solve it.  On the other hand, credit card companies are good examples of being able to own the customer.  The credit card company can communicate directly with the merchant that is selling the product or the customer that has signed up for the credit card.  They own the customer.  They can manage the relationship on both sides of the transaction.

      Rule #4 – I Like Digital Assets:  This is my very personal preference, but I love digital assets.  I really do not like retail.  Why?  Because I stink at retail.  I don’t have enough discipline and I am not patient enough to succeed in retail.  It doesn’t scale as well for me.  I know many other people who have been highly successful in retail, but it is just not my preference.  Once I make a website or an application, I have made it once and as many people as want to come will fit into that store.  That’s the primary reason I like digital assets. 

At one point or another in our personal lives and our careers we get into a desperate mindset or a desperate mode of operation. I found this to be incredibly destructive, and actually counter productive.

As we slip into this mode you can typically tell because the volume and intensity with how we approach our customers, our clients, our employees, and everyone else is just notched a little bit too loud. At what point you want something so badly that you can’t do without, you know you are doing desperation.

My wife tells the story of driving through our little town and seeing a big poster on one of the little mom and pop clothing stores. The sign said, “Please shop here. I need to feed my children!”

That’s doing desperation. A person’s first thought is, “Oh, I’ll help out that shop owner.” But then that thought is quickly followed by another, “Oh, I don’t want to fall into that trap.”

Here are three things that I’ve found will help you avoid desperation not only in your business life, but also in your personal life.

Number one, put a buffer in place. Inevitably you’ll hit bumps in your personal life and in your business life. I put a three-month minimum savings buffer in the business. And I maintain more than that in my personal life.

Next, don’t risk what you can’t afford to lose. If you’re not in the position to risk at the level that you’re risking, that causes an extreme amount of desperation. So don’t risk what you can’t afford to lose. Before hand make a conscious decision and determine your level of risk.

Finally, if you do get into the desperate mode of operation…back off. Take three deep breathes. Consult those around you. Take a backdoor approach to it. If it is just simply beyond recovery—punctuate it. Don’t go deeper down the rat hole.

I frequently talk about my philosophy of failing efficiently. If you’re going to have a failure and you’re chasing it down the rat hole. Don’t keep following after it, to an even worse death. End it. Put that one to bed. Move onto the next thing.

I know this is an easy topic to discuss intellectually. But emotionally it’s a very difficult topic. I still find myself in modes where I’m doing desperation. I experience this particularly when it’s beyond my realm of control. When I put everything out there and it’s out of my hands, I often struggle with desperation.

I do strongly suggest that we stay in a positive non-desperate, non-threatening mode. Things just go much better in that mode. The putts fall better. The business comes together. Everything flows better and it is much simpler when you’re not in desperation mode.

Go forward, zig zag to success, and have a wonderful week.