Money Follows Management

Robert Kiyosaki, in his book Rich Dad’s Guide to Investing, points out on the opening page, his rich dad’s advice on investing, “Don’t be average.” The same advice can be given to every entrepreneur who dreams of striking it rich by starting a company. They think that because they have dreamed up a snappy new product, it will be easy to raise some money and then even easier to parlay the great idea and financial backing into the “next big thing.” It takes more than an average person to successfully turn an idea into millions of sales and thus millions of profits.

Most new entrepreneurs make two common mistakes in raising money. First, they believe that since investors are numbers guys, the projections are the most important thing. Nothing could be further from the truth! Any fool with Excel can string together a set of projections. The numbers are a reflection of management decisions. Good decisions = good numbers. The people making the decisions are the management team.

All deals hit bumps, detours, and roadblocks. No business plan has ever been perfectly executed. The unforeseen and the unknown always arise. Who deals with these problems? Management. People make the deal work. MONEY FOLLOWS MANAGEMENT, and money loves a track record. To give you an idea of the power of this, would you be willing to invest in one of Bill Gates’ new ventures? I know I would love to be a partner with Bill because he has demonstrated that he knows how to successfully start and run a company. Successful companies are not built and run by the average person. It requires a skill set and level of experience that is key to unlocking the potential and the profits of the company.

The second biggest mistake that most people make in raising capital is they are product fixated. They fall in love with the idea or the gizmo. Investors know that a great product is not necessary, and it does not insure success.

Apple Computer is generally acknowledged to have a better operating system than Microsoft, and yet Microsoft is worth 50 times more than Apple. All of us can think of places we would rather eat than McDonalds, but you can not name a restaurant that makes more money than McDonalds. Timex makes a lot more money than Rolex even though Rolex makes a better watch.

You must have a strategy to tell your customers what your value-add is or what problem you solve. This is called Marketing. It is differentiating you from the competition, and it is filling a need. It is finding your niche. McDonalds’ niche is not hamburgers but rather cheap, fast, consistent, clean. Nike’s niche is not tennis shoes but rather attitude. Eastman Kodak is not film but rather memories. Federal Express is not delivery but rather absolutely, positively dependability. In each of the instances above, the niche that these companies have found is not necessarily the product but rather is something intangible and emotional related to the owning of the product. It is this intangible that has differentiated them from the pack and made them outstandingly successful companies.

Not one of these companies is average. They all have developed a niche, a message, a value-add that separates them from the pack. In your business, choose not to be average.