How to Start a Business Ep 514

Summary Notes


In this informative episode, the host of the show discusses the practical steps to starting a business, aiming to demystify the process for the 76% of his audience who aspire to become entrepreneurs. He emphasizes the importance of taking action to enhance intelligence, suggesting that learning and intelligence are defined by the ability to change behavior swiftly. The host outlines a straightforward approach to launching a business: setting up an LLC, opening a bank account, registering with a payment processor, and identifying a marketable skill or product. He advises starting by offering services for free to gain experience, testimonials, and referrals. Additionally, the host touches on overcoming the fear of judgment and impulse control as key psychological hurdles in entrepreneurship. He concludes by highlighting the value of hands-on experience over theoretical knowledge and encourages listeners to embrace entrepreneurship as a form of art, whether in crafting a product or mastering the business itself.

Summary Notes

Intelligence and Behavioral Change

  • Intelligence can be increased through active behavioral changes.
  • Speed of change is directly correlated to intelligence.
  • Taking action is crucial to becoming smarter.

"If you want to be smarter, you can actually make yourself smarter by simply doing things differently, by taking action, by changing your behavior. And so the faster you change your behavior, speed of change, the smarter you are."

The quote emphasizes that intelligence is not static and can be improved through proactive behavior modification. The quicker one adapts and changes, the more intelligent they become.

Building Businesses and Documenting Journeys

  • The host is working on building a billion-dollar business with
  • There's a desire for successful entrepreneurs like Bezos, Musk, and Buffett to have documented their journeys.
  • The host is documenting their journey for others to learn from.

"I always wish Bezos, Musk, and Buffett had documented their journey. So I'm doing it for the rest of us."

This quote reveals the host's motivation to provide a documented roadmap for others by sharing their own experiences in business development, which is often lacking from leading entrepreneurs.

Starting a Business: Audience Engagement

  • The host's audience primarily consists of individuals who want to start businesses but haven't yet.
  • Content is usually aimed at helping existing businesses grow.
  • The episode is dedicated to beginners in the business world.

"I pulled my audience, and 76% of you want to start a business, but haven't."

The quote indicates that a significant portion of the audience is interested in entrepreneurship but has not taken the first steps, highlighting a gap that the host aims to address.

Overcoming Inaction

  • Aspiring entrepreneurs often do not take concrete steps towards starting their business.
  • Setting up an LLC is often mistaken as a significant step but is actually quite simple.
  • The host encountered college students who expressed a desire to start businesses but had not progressed.

"And six months later, I had dinner with them, and I was like, hey, where are we at with those businesses? And they're like, oh, I'm getting my llc set up. And I was like, that's not a step that takes 5 seconds. And $100 on legal zoom."

This quote illustrates the host's frustration with the inaction of potential entrepreneurs who overestimate the complexity of initial business setup steps.

Basic Steps to Starting a Business

  • Setting up an entity is easy and can be done through services like LegalZoom.
  • Opening a bank account and getting a payment processor are essential steps to transact.
  • The real challenge is figuring out what to sell and to whom.

"So if you boil everything down to first principles of, what do I have to do to make money? One, you have to have an entity set up, which you can do on legal zoom for $100."

The quote breaks down the fundamental steps required to start a business and begin making money, emphasizing the simplicity of the initial setup process.

Types of Products and Services to Sell

  • There are six categories of things that can be sold: products, services, access, risk, money, and media.
  • Each category has both digital and physical versions.
  • Selling involves understanding what you can offer and identifying the target market.

"So there are only six things that you can sell anyone. Number one is a product... The second thing you do is sell services... The third thing you can sell is access... The next thing you can sell is risk... You can buy and sell money... You can also buy and sell media..."

This quote lists the six fundamental categories of goods and services that can be sold, providing a framework for potential entrepreneurs to consider what they can offer in the marketplace.

Leveraging Personal Background

  • Personal background and experiences can guide what industry or product one should sell.
  • Friends, family, and personal history can provide insights into industries with which one is already familiar.

"My easiest piece of advice is to look at your past and figure out the things that you know a little bit more about. So because of the people that you are friends with, because of what your parents do, there are some industries that you may know a little bit more about."

The quote suggests using personal history as a starting point for deciding on a business idea, leveraging existing knowledge and networks to gain an advantage.

Personal Background Influence on Knowledge

  • Exposure to certain environments or professions from an early age can lead to an inherent understanding of that field.
  • Knowledge can be absorbed passively through "osmosis" from one's surroundings and family.
  • This inherent knowledge can be leveraged to identify and solve problems that others face in related areas.

"If your dad was a mechanic, you probably know more about cars than I do, right? Both of my parents were eye doctors, so I know all the parts of the eye and a bunch of stuff about eyes that no one really care about."

This quote exemplifies how one's family background and environment can lead to a deeper understanding of a particular subject, which might not be consciously recognized.

Value Creation Through Problem Solving

  • Value is defined as the ability to solve a problem for someone else.
  • Identifying problems that others face and offering solutions is the first step in creating value.
  • Knowledge gained through personal experience or background can be utilized to solve these problems.

"So there are things that you know that you don't even know that you know. And I could probably tell you problems that people around me are experiencing every day, and I'll bet you if you took some time, you could solve it for them."

This quote highlights the potential to solve problems based on the knowledge we may have acquired passively, emphasizing the importance of recognizing this untapped resource.

Starting with Free Solutions

  • Offering services for free initially can be beneficial for several reasons.
  • Working for free allows one to practice and improve without the pressure of financial transactions.
  • Free work can lead to testimonials and referrals, which are valuable for future business growth.
  • Identifying and addressing "hidden costs" is crucial to overcoming barriers that prevent people from accepting free services.

"Solve the first 5-10 even 20 people for free."

This quote suggests a strategy for building experience and credibility by providing free services to a number of people initially.

Learning and Feedback

  • Offering free services provides an opportunity to receive feedback, which is essential for improvement.
  • Through practice and feedback, one can develop the necessary skills to excel in their service offering.
  • Free work can lead to testimonials or even converting free clients into paying ones.

"So once you start working with these people to solve their problems, you'll start getting feedback from them about what to do to make it better."

This quote emphasizes the value of feedback in refining one's skills and services.

Creating Demand and Pricing

  • By accumulating a base of people who value your free services, you can create demand for your time.
  • Once demand exceeds the supply of your time, you can justify transitioning from free to paid services.
  • The transition to charging for services is a natural progression once one has established value and demand.

"And at some point you can say, hey, I actually have too many free customers. Like I have to start charging because I don't have enough time."

This quote illustrates the point at which it becomes reasonable to start charging for services due to increased demand and limited time.

Leveraging Experience in the Industry

  • Startups and businesses are more likely to succeed if the founders have experience in the relevant industry.
  • Y Combinator prefers to invest in founders with direct or adjacent industry experience.
  • Personal experience in a field can provide a solid foundation for understanding customer needs and creating a solution.

"Because just as a side note, YC has already done research on this. They prefer to invest in founders who have experience in the industry that they're trying to solve, either directly or adjacent."

This quote reinforces the idea that industry experience is a valuable asset when starting a business or seeking investment.

Entrepreneurial Mindset and Starting a Business

  • Understanding the process of growing a business involves overcoming a lack of knowledge, referred to as "ignorance debt."
  • Entrepreneurs are likely to start multiple businesses throughout their careers, learning from each to improve the next.
  • The recommended initial steps to starting a business include establishing an LLC, opening a bank account, setting up a payment processor, and offering free products or services until demand exceeds supply.
  • Charging for products or services should begin when the demand for the entrepreneur's time surpasses their ability to provide it for free.
  • Earning the first dollar in business is the most challenging, but it paves the way for future earnings and business growth.

And so the idea is, how much can I pay down ahead of time so I can start getting ahead?

This quote emphasizes the importance of reducing ignorance debt before it hinders business progress.

Get LLC, take LLC to bank. Get account. Go to processor, get way to process money. Give away stuff for free.

This quote outlines the initial practical steps to take when starting a business, focusing on legal establishment, financial setup, and initial market penetration strategies.

And then once you do that, you start making the first dollar. And the first dollar is the hardest one to make.

The quote highlights the challenge of making the first sale, which is a significant milestone for any new business.

Leveraging Multimedia Platforms for Learning

  • The speaker suggests using different formats, such as video with visual effects and graphs, to learn about business concepts in varied ways that might be more effective for some people.
  • The speaker has a YouTube channel that offers visual content to complement the podcast for those who prefer visual learning.

If you ever want to have the video version of this, which usually has more effects, more visuals, more graphs, drawn out stuff, sometimes it can help hit the brain centers in different ways.

This quote indicates that the speaker provides additional learning resources through video content, which can cater to different learning preferences.

Overcoming Fear and Self-Doubt in Entrepreneurship

  • Fear of judgment, particularly from close family members, can prevent individuals from starting a business.
  • Entrepreneurs must choose between living out someone else's dream for them or pursuing their own path, which may involve shedding a preconceived identity.
  • Impulse control issues can distract potential entrepreneurs from focusing on the necessary tasks to start a business.

And so you have to identify what voice or what person you extrapolate in your head who you think is going to judge you for doing this thing, or rather, who's going to judge you if you fail.

This quote discusses the mental barriers of fear and judgment that can impede entrepreneurial action.

Because you can either just die for the rest of your life living their dream, or you can die to their dream to live yours.

The quote conveys the choice between conforming to others' expectations or pursuing personal aspirations in entrepreneurship.

The Difference Between Wantrepreneurs and Entrepreneurs

  • Many people enjoy the idea of being an entrepreneur without taking concrete actions to become one.
  • The speaker emphasizes that real learning and intelligence come from changing behavior and adapting quickly to new conditions.
  • Intelligence is defined by the speaker as the rate of learning, and learning is characterized by changing behavior in response to the same conditions.

And I remember the book that changed it for me was that they used this word called entrepreneur and said, oh, yeah, there's all these people who are entrepreneurs.

This quote introduces the concept of 'wantrepreneurs,' individuals who are attracted to the idea of entrepreneurship without engaging in it.

Learning comes from changing behavior. And so there's two definitions that you should know in order to understand how to start your business and be intelligent about it.

The quote defines learning and intelligence in the context of entrepreneurship, highlighting the importance of practical action and adaptability.

Intelligence and Behavior Change

  • Intelligence is not just about content consumption, but about changing behavior.
  • Taking action and doing things differently is a sign of intelligence.
  • Speed of behavioral change correlates with perceived intelligence.
  • Actions rather than judgments of others should drive behavior.
  • Consistent action over time leads to success.

"w if up to this point, you've consumed lots of content, but you have not changed your behavior. Same condition, same behavior, you have not learned, you are not intelligent."

This quote emphasizes the idea that intelligence is demonstrated through behavioral changes rather than just content consumption.

"And so the faster you change your behavior, speed of change, the smarter you are."

The speaker implies that the rapidity with which one can modify their behavior is an indicator of their intelligence.

"And so if you can disconnect your judgment from other people worried about not starting because you're going to live out their dreams rather than your own, you can control your impulses, so you can actually stick with it for a longer period of time."

This quote suggests that by not allowing the opinions of others to influence one's decisions, one can maintain focus and persist in their actions.

"And the nice thing is that if you continue to take action over a long enough period of time, you will win and you will be successful."

Consistent action is highlighted as a key to achieving success.

Learning Through Action

  • Real-world experience is more valuable than theoretical knowledge.
  • Sales skills are best learned through practice, not just reading.
  • Direct experience provides a framework to contextualize and understand theoretical knowledge.
  • Acting on ideas quickly enhances learning and intelligence.

"But the reality is you will learn more in your first hundred sales conversations than you will learn from 100 books on sales."

This quote indicates that practical experience is more educational than theoretical study in the context of sales.

"And the crazy thing is, most of the books that are written about business really only make sense once you've started doing business, because you actually have a latice work of experiences to hang the learnings on."

The speaker points out that theoretical business knowledge is best understood when it can be related to practical experience.

"So I actually didn't read a book about sales until I'd already closed 4000 deals."

The speaker shares a personal anecdote to illustrate the value of learning through doing.

"To quote Confucius, I hear and I forget. I see and I remember, I do and I understand."

This quote from Confucius is used to reinforce the idea that true understanding comes from the experience of doing.

Entrepreneurship as Art

  • Entrepreneurship is an expression of art.
  • Entrepreneurs must decide whether their art is in the product or in the business itself.
  • Choices in entrepreneurship reflect personal enjoyment and passion.
  • Starting with the least costly option can help determine preferences over time.

"A big decision that every entrepreneur has to make is you have to decide what type of artist you are, because entrepreneurship, in my opinion, is just another expression of art."

The speaker equates entrepreneurship to art, suggesting that entrepreneurs must understand their personal creative drive.

"The artist who, for example, makes really nice wallets, right? They make really high quality leather wallets. That person, if they continue to make better and better wallets, will eventually have a point where they will have more people want their wallets than they will have time to deliver it."

This quote illustrates the decision an entrepreneur faces when their product becomes highly desired and they must choose how to scale.

"The other version of that is that they create a wallet business, which is then they start looking into machinery. They look into hiring and training people to replicate the same skills that they have in the wallets that they make."

The speaker contrasts the artisan approach with the business approach, where scaling involves replicating the entrepreneur's skills through others.

"Because you know what? You might like making wallets today. And in two years, you might be sick of making wallets. And at that point, you can learn the new art form. It's."

This quote suggests that preferences and passions can change, and entrepreneurs should be open to evolving their art form.

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