Building a moat

I just completed reading I like big moats and I cannot lie over at Fool.comand was really impressed with the idea. This is a concept I have understood and practices without every putting a term to it. I have been a part of networking groups which discuss this concept, and barely scratch the surface. In this article Rich Greifner quotes Warren Buffet regarding a term Buffet himself coined: the economic moat.

In other words, what distinguishes you from your competition. What sets you apart? If you cannot describe why you’re business, product, idea, etc., is different from the next hot-shot product, idea, business, service – then you’re just another face. What makes businesses successful is that they can provide something significantly different. Not just another marketing hype of better, faster, cheaper – or perhaps smaller, intimate, personal attention. Those are nothing new. I have a great deal of friends who have their own bookkeeping business. They do a great job at distinguishing themselves apart from larger firms, yet they really have nothing compelling between other small 1 or 2 person firms. They play the, small, agile, personal, flexible card — typically of small start-ups. Yet they really bring nothing new to the table. If they have good references, resume and experience, then I would choose on price alone — and that is a very bad place to be. Small businesses cannot afford to be in the commodity business.

Back to Buffet, he says that when he is evaluating a business to invest in, the key is a large sustainable moat. They key is sustainable. Is what sets you appart something that will fade? Can it be trumpped by a competitor? What are you doing about it? I may be selling a high rise appartment complex and if my speil is that it is the highet, with 360 degree views around Silicon Valley. That is a nice selling point, however it is not sustainable. It will eventually be trumped by a larger building or something that obstructs the view.

As you evaluate your small business – there needs to be something unique about your business that sets you appart from both your competitors, and your peers — as well as a sustainable plan to ensure that remains the case. A drug company can release the next miracle drug and then be off-the-market when the generic form is released, or you can be the next Merck which is constantly investing more in R&D and has one of the largest portfolios of patents. That would show sustainability in innovations.

What is your sustainable moat?

Corporate Paperwork

Probably the largest signficance,for a very small business owner, between a Corporation and a sole-properitorship, is the liability protection afforded by the corporation. However, in order to keep this liability protection solid, the most important piece to maintain is proper paperwork. Without maintaining the proper corporate stucture, backed-up my minutes, annual meetingss, etc., Failure to do this may permit a entity to “pierce the corporate viel” and go after you personally. Attemtpting to play catch up with your required paperwork is not only illegal, but very diificult after the fact. It is first, and foremost important to setup a structure to ensure your compliance going forward – mark it on your calendar, use an Outlook reminder, whatever it takes to ensure that you are providing a minimum of Director and Shareholder meetings at least annually. Also be sure to keep your finances in line and major descisions should be placed in the minutes. Paperwork is the number one killer of the “corporate veil”… You can try to run the best business, by the book, however you will either invariabily not know something and screw up, or you’ll have someone else attempt to sue you over something frivelous, yet still that protection will be required. You cannot control other people, so you need to ensure you are taking the correct actions to protect yourself and the corporation from libaility at all times.

If it sounds too good to be true…

A new business associate of ours was recently presented the opportunity to partner with one of the largest green-tech companies in Silicon Valley, or so he thought. The closing of this deal would mean an immediate doubling of his company staff in less than one month. However, on the day before the deal closes, the other party started to get pushy and their demands sounded odd. Wisely, he contacted his business lawyer who reviewed the paperwork and found some strange elements. Then he decided, at the eleventh hour to do a due diligence check of this new business partner. Upon closer review he discovered that this person was  scam artist, with a trail of collateral damage in his wake, and this guy was about to become his next victim.

It was a great fortune that he decided to go with his gut and look into it a bit more before the contract was signed. The same principle slow to hire, quick to fire applies to new business relationships – take your time, if the other party isn’t patent, then that may be a big red flag – perform your due diligence, always, and when things go unexpectedly, be sure to act quickly to “fire” the other person.

Don’t forget the person

This will be a bit different than you first might expect. This is about lessons learned about not forgetting the people in your life…away from the office. As I read more and more about successful people they have managed to hold together their personal lives in various forms, and despite what the media appears to focus on, more successful people are happily married with children, then the multi-marriage-disaster we’ve come to expect.

While growing and forming your business is very, very critical — and is one of those: do what you have to do, so you can do what you want to do – sort of things. On the same part, sometimes we “want” to do work, and what we need to do is pour value and significance onto our families and friends. We will all pour so much into the office and our employees, who may betray us at some point — our families are forever, and we need to remember and treat them as such.

For each person, that attention and value can and will be expressed differently. For some it is coming home always at 4pm, for others if was when they got home (whatever hour) they were automatically, fully 100% devoted to their family, virtually ignoring the world; yet others it would take the form of occasional (but frequent) holidays and vacations – or perhaps “weekends with dad”. Whatever form suits you and your family, find it, and then live it — commit to it. Whatever it takes for you, if that is placing it on the calendar, or having your spouse “hound you” or having your secretary keep you on-top. Whatever it takes, it is vital. Your homelife will have a greater impact on your work, far beyond what you could ever imagine.

Bob Parson’s 16 Rules

While I am not a big fan of Bob Parson, I ran across this list of 16 Rules which make a whole lot of sense. Here they are by title, but for a description, checkout the link: Bob Parsons 16 Rules Poster

1. Get and stay out of your comfort zone.
2. Never give up. 
3. When you’re ready to quit, you’re closer than you think. 
4. With regard to whatever worries you, not only accept the worst thing that could happen, but make it a point to quantify what the worst thing could be. 
5. Focus on what you want to have happen. 
6. Take things a day at a time.
7. Always be moving forward. 
8. Be quick to decide. 
9. Measure everything of significance. 
10. Anything that is not managed will deteriorate.
11. Pay attention to your competitors, but pay more attention to what you’re doing. 
12. Never let anybody push you around. 
13. Never expect life to be fair. 
14. Solve your own problems. 
15. Don’t take yourself too seriously. 
16. There’s always a reason to smile. 
Copyright © 2005-2007 Bob Parsons. All rights reserved.

Building your legal team

Going hand-and-hand with spending money to save time, it is important to begin building your legal team before you find yourself in any specific need for them. That way, when a crisis or any other urgent need for a legal consult is needed, you already know who and how much it is going to cost. There is nothing worse then needing to terminate an employee ASAP, surrounding a sticky situation, and then turning to the phone book to sort through a bunch of people. By deciding to build you team in advance, you can perform you due diligence now with the luxury of time.

The business plan (part 1)

I made a new network connection yesterday with a sales agent at a housing development who was thinking about starting his own business. He had tried before but it failed quickly. As a result, he ended up among the class of working employees instead of Entrepreneur! One of the biggest keys I shared with him is the elementary concept of a business plan. It is amazing how many people know that they shouldhave a business plan, yet neglect to make one. The value I find in it, is that when the going gets rough, and things come up which makes business difficult, either by mistakes or other events such as customer lawsuits or tax issues or whatever, you can always fall back on your business plan as an established baseline. It is the foundation that a business is built on top of, which is not subject to the emotions and feelings of the moment.

Building Relationship

As we’ve gone through the years of building our small business, it has become abundantly clear that meeting and knowing the right people is the cause of many successes in business. You may have all of the knowledge, and do the right thing; provide excellent service and be great at what you do. However, more often then not, it is meeting the right person at the right time, and knowing it – and then leveraging it for all it’s worth! We can look at Bill Gates who happened upon the creator of DOS and brought it to new heights – and it was a real win-win for both; and while Gates really made out in the end, the poor developer still made far more than he probably would have without Bill. So many it is the strategic relationship. Or it is the introduction which is made to open up all new markets and customer bases. Knowing your stuff is critical, however it will not take you very far. It is making the right relationships, taking the time to network and really build those partnerships. And it really help to “network” by showing how you can see yourself helping them, providing to them, to grow their network, businesses, impact — not how you can use them to see your services, exploit them to grow your business. There is an old adage of givers-gain, or paying-forward. See what you can bring to the table for the other person, and it can return huge dividends. Two of the greatest sources of businesses for our company has resulted from meeting key individuals after we took the effort to go out of our way to help other people succeed.

Spend money to save time

There is an adage which many company’s continually contend with: at points we will spend time to save money, at others spending money to save time… During various stages, typically during the early growth stage, we spend a lot of time, 60-70-80 hours per week, in order to save every penny possible. Later on, we learn and have the financial resources to spend money to save our valuable time. This goes back and fourth throughout every stage of a company’s existence.

The big lesson hear is to first acknowledge this principle and then decide how to best leverage this for your own business. Sometimes the right knowledge and expertise provided by a professional is worth more than 100 hours of personal research. So, spending money may actually be priceless.

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