EP 178 - The Challenges of Entrepreneurship and Business Ownership with Peter Bronstein and Alex Grossman

Ask-Brien-Podcast-EP-178

Narrator: [: 00:00:00

Peter Bronstein: Welcome, welcome, welcome. You listen to the ask Brian radio show on KHS 1220. And 98. 1. It's in! Alright. Well, we're getting very, very close to our 8th year anniversary. That'll be on January 3rd. Or technically, 2nd, because that's when the shows are on a Thursday. So, 8 years. That's a long time.

g this for eight years is we [: 00:01:00

We try to teach something about business every week. And the show is spelled B R I E N. And Alex is going to go with the first reason why Brian is spelled with an E and then I'm going to help out afterwards.

Alex Grossman: Well, you know, I don't really understand this. Eight years and I still don't understand. Why it's spelled with an E, but my best guess is that it's spelled with an E Because it's an excellent show.

rt our show off with it this [: 00:02:00

Jenn: Well, there's ways around that, but yes, thank you for the acknowledgement.

Don't worry,

Peter Bronstein: AI will be

Jenn: taking, AI

Peter Bronstein: and robots will be taking over pretty soon. Correct. Yes, that's very true. To the back of the room, to the back of the room. Alright, now. Thank you guys. It's a pleasure. An excellent, was an excellent choice, had you not said, had you, had said the engineer. Now, one of the things we've been discussing, Alex, and I cannot believe you haven't picked this one up, is what did we say about the show?

What do we try to do each week?

Alex Grossman: Well, we try to educate, or is that edumacate? I'm not sure.

arn something from our show, [: 00:03:00

Now, some other things we talk about is, we like to have experts. Those are people that have a certain background, a certain time limit, where they've spent a certain amount of hours on something. So, our show has a logarithm. Much like Google, actually not like Google, but it is, it is a formula at least, right?

And that formula is if you work 40 hours a week, which is nobody works 40 hours a week unless they're working for somebody as an employee. If you work 40 hours a week, 50 weeks a year, that's 2, 000 hours, if you multiply that by five years, that's 10, 000. The standard is that if you've worked in one subject area for five years, 10, 000 hours, that you have developed a skill called an expert in your field.

nd what do entrepreneurs do? [: 00:04:00

You've worked your 40 hours. Now, having said that, there are other areas of ease, right? So one is you have to be very, very. In order to be successful, you have to have a lot of enthusiasm, and you also have to be EXCITED!

Jenn: Are you excited, Jen? I pushed that button against my will. I don't want to encourage you, but here I am. I

Alex Grossman: think that E stands for eardrum. I need a new one of those, just so you know.

e that we should talk about. [: 00:05:00

Jenn: It balances out the next E, which is ego.

Peter Bronstein: What is that? I never heard of that one before. I also never heard of that other one. Tracy always brings this up. I have never heard of this word before. She tries to say something about, I don't know what she's talking about. Can you wear my shoes? I say, I don't wear that size shoes. I don't know what she's talking about, but someone told me it's called empathy.

I don't know what that means. Skip past that. What empathy? I don't know. Well, I, is that like that song of Stevie Wonder and Paul McCartney and ivory? No, that's not the same thing as empathy. Not the same. Great song, but no. Yeah. And with a little better tune than I can sing it. That's quite enough from

Jenn: you.

The screaming is bad enough. We don't need the singing too. Even though,

ter Bronstein: well, my body [: 00:06:00

Alex, are you ready? I'm on the hot seat. I'm ready. All right. All right, so first question. You've had a lot, a lot of different businesses. We could go over each one of them, but I want to know in all the businesses that you've had. And when I say you've had, in other words, you were the owner or an officer or director of those companies.

So not your work history. What was the biggest challenge you've had to face?

it has to be a challenge. So [: 00:07:00

And it was always the unknown. You're in your own business. Are you going to make it or are you not? That's the question. Do you know everything about your business or do you not? That's the hardest thing to know.

Peter Bronstein: And so can you give us a list of things that you would, do you think every entrepreneur should have to make, to help them be successful?

Give a list of the top five at least.

Alex Grossman: Oh, five. That's hard. I have to, I can give you 40, but I think, I think the key really is it's entrepreneurship and it embodies every bit of what entrepreneurs are about drive. You have to have the drive. You have to believe in yourself and you have to be able to.

you're sitting there going, [: 00:08:00

I mean, everybody. Who's an entrepreneur starting their own business. I would say the vast majority of them look at what other people have done and said, I can do that. Look, you know, if they got in and they're successful, I can do the same thing and be more successful. And that's usually not the place to start.

The place to start is look at where your passion is, look at what you love, and then justify that with reason. Go out and look and get the statistics, get the information, know what you're getting into. That's kind of number one. Number two is, I hate to say it, it's always about finance. It's about money.

our own boss. You know, make [: 00:09:00

And you'll probably be still shy of where your expense level is going to be in the first year and just know your finance. So if you can't do it yourself, ask for help. Third thing is business structure. This is probably one of the most important things that people usually miss, is the idea of what type of business do I want?

Know up front where it is. Is it going to be a sole proprietorship? Is it going to be a partnership? And partnerships are always very interesting. Is it going to be an LLC? You know, a limited liability company? Is it going to be a corporation? And get some advice on that because you need to know what you're going to do.

that's extremely important. [: 00:10:00

Do the research. Is the market in a transition? Is it a new growing market? Is it an able market? So if I were to take a note from vast VCs I've worked with, and I've worked with a lot of them over the years, they would say the golden opportunities fall into two categories. One is an emerging market. A market that has been literally untouched.

You have an idea. Maybe it's a little different than others. Maybe it follows some others But it's early in the market you get in early you make your mark and you win The second is a market in transition. So you have a market where? There's something changing in the market. There's a transition in the market, and we can point to many things on that.

market that's in transition. [: 00:11:00

You have to be committed. You know, like I said, you know, it's something you're going to have the good times. You're going to have the down times and you can't throw in the towel. If you did the research and you did it right. You got to live through the hard times to get to the good times. And there'll be those days when you just sit there and you, you know, you talk to a friend or a relative.

re you are, you know, you're [: 00:12:00

My relatives have a life and I live for the business. And, you know, we always have that saying. Are you working, you know, you're working to live or you're living to work and if you're going to be an entrepreneur and you're going to be successful, guess what you're going to put in the hours and in the end, hopefully you're going to make a lot more money and you will come around and get that freedom after a period of time.

So you got to put in the work in the beginning to get the work at the end. Those are the, the top five. There's probably five more that are really important, but I know, I know you've also, Peter, you've also had a lot of experience with this. Do you want to add any to that?

Peter Bronstein: So, yeah, I mean, let's go over a couple of things, right?

right? So one of the things [: 00:13:00

You don't want to go through the formalities. I don't know if it's going to work, so let me just do a DBA, or I'll just operate under my own name, and I'm just going to do that. Well, then what happens is, along the way, oh, you need to buy a copier machine. That's 10, 000. You need to buy a subscription to Westlaw.

That's 3, 000 a month, or this and that and this and that, and you're signing away all these agreements, and then Something happens. You know what? I was making more money working for a law firm or make, or I have another opportunity. I just want to walk away. Well, you can, but you have to understand if you sign a five year agreement on a copier machine and it's 15, 000 and you're a sole proprietor, you can't just walk away.

y you can negotiate with the [: 00:14:00

You're never going to get anywhere near the value you paid for it. Houses are probably the only exception real estate, but otherwise you buy a car, you buy a copier, you know, it's like what, 10 cents, 20 cents on the dollar. So. You've got that, that issue. And so you're either going to get stuck. So maybe, maybe, you know, a car is probably an exception, but maybe you have a truck and you bought it for 30, 000 for the business.

Maybe either, A, you can still drive that truck or B, maybe you can find someone to sell it to for 15 and 20, but you're still going to have a loss. So that's the reason why. And, and there are other reasons why you want to consider not being a sole proprietor, but the main reason is that you're personally liable for everything that goes wrong.

an hide behind something. So [: 00:15:00

Now you're liable for the debts of your partner. So if Alex and Peter started a business called AP, Alex, Peter, okay. And we're partners, right? And Alex goes in and says, I'm going to buy a 55, 000 water heater for the business. Peter didn't even know about it. Well, guess what? In a partnership there's something called joint and several liability.

What does that mean? That means that one partner can be held liable for all the debts of the partnership. So, you know, and you have to be very careful. And there's so many disputes, unfortunately, with partners. Why? Because no matter who, even, even if husbands and wives do this together, okay, the fact is not everybody's exactly the same, and people have different visions.

And when you have a [: 00:16:00

Communication. And that's the key to business. When you have more than one person, when you're so proprietor, you can do it all because it's all you and you make your own decision. Once you have a partner, you really need to discuss it. Because if you don't communicate with that partner, you may not be on the same path.

You may not be on the same page. One person may want to spend 50, 000 advertising. One person may say, I want to grow up by referrals. There's no way that every single thing you're going to agree to. And the consequences of somebody going out, as I said, what if I signed a contract? With Google, I'm going to pay 10, 000 a month and I got a special deal.

Peter? I don't want to spend [: 00:17:00

Okay, or I should say a sole person, you can form a one person LLC or corporation. So corporation people know about LLC is called a limited liability company and you certainly can form an LLC. Now the benefits of both of those are what's the doctrine as limited liability because a corporation or an LLC is a separate.

legal entity, you are not personally liable for the debts of the entity, except for certain exclusions and exceptions, right? I mean, you can't buy a corporation and say, I'm a corporation, and somebody comes into my store and I hit them over the head with a crowbar, you know, sorry, that's not going to work.

t's a personal, so if you do [: 00:18:00

So I need you to sign a personal guarantee. So that actually takes you out of the limited liability protection. Once you sign that personal guarantee, that's a very, very big thing that people do. And they don't realize the consequences of signing the personal guarantee. And everybody on day one, when they form a business, what do they think?

I'm going to be successful. Nobody's forming a business saying I'm going to fail. I mean, if you have that attitude, don't even form the business, but once you form a business, then you have to realize that, Oh my God, you could become personal and viable. And even with an LLC or a corporation, you also could be viable.

So you have to be very, very careful about that.

a business, but that's okay. [: 00:19:00

Peter Bronstein: I'm going to say something about that. Okay. We'll address that now. We have about another 50 seconds. So the reality is when you work for somebody, they can fire you.

Okay. When you, after 30 years, okay. When you work for somebody and you leave, it's kind of like renting. You rented your house. What value do you have when you, when you leave a rented property? 30 years, nothing. What happens when you own a house? Okay. When you own the house, you're making mortgage payment, but guess what?

You're getting equity in the house. A, the house could go up in value, but even, even if it doesn't go up in value, you're paying down the debt. And so you have an asset, right? So that's the same thing with a business. You may be working 80 hours a week, but you're going to be saving long term by having an asset that you can sell to other people.

So Alex, Jen has a question for you. Well, hold

l? I don't have a drum roll. [: 00:20:00

Peter Bronstein: This is unnecessary. Alex, you better be ready now. I'm getting a jump right now.

Alex Grossman: Oh my gosh, I'm a little worried now.

This is

Jenn: the second time in this show that I am pushing buttons against my will that don't apply to you. Not that deep. I'm just listening to you guys talk and I've, I've told you. Before that, obviously I am not an entrepreneur. I have, you know, no, no vested interest one way or the other. So I'm just listening to you guys talk.

And I know a lot of small business owners and I always, I always think like, gosh, what, like what sets them apart, right? There's a friend of mine down the street who owns and operates a lovely women's boutique and t shirts and collectibles and home goods and that kind of thing. And. Right down the road, the opposite direction is another woman, another friend of mine who also operates a women's clothing store.

They're still targeting me. [: 00:21:00

What is the one thing that would. Grab someone's attention. Like why, why this shop over that shop, what differentiates and, and how do you do that as a small business owner?

Alex Grossman: Well, that is an absolutely fantastic question and a really deep one. And that was one of the things I really wanted to get into it.

aphic and how to get to your [: 00:22:00

And, and understanding your demographics is even harder. And so you have to do a certain amount of marketing. And this is usually what separates small businesses success from failure. And marketing in a lot of cases is simple as word of mouth. If you take both of these women who have these, these boutiques, they know you and, and you know other people and you went from a word of mouth standpoint, you shop at both of their, of their establishments and the people ask you, where did you get this?

people and This is a lot of [: 00:23:00

You can't be an introvert and be an entrepreneur. You have to be an extrovert. You have to be able to get out there and do it. You can't be afraid of asking those questions and asking people. I mean, it's sometimes in local business, it's, you know, we put out the shingles, so to speak. If you're on a. Rick and Mortar store, it's the three magic words in real estate, location, location, location, and then getting signage.

And just as simple as that, a new business pops up, someone sees the sign, they go, this looks appealing. Let me stop in. Let me see what they have. Where do they go? You know, it used to be in the good old days with a local business, you could just get in the yellow pages, right? And everybody used those yellow pages today, you're, you know, you might have to use Google.

You might have to use Yelp, you know? All those pieces.

Jenn: Yeah, it's obviously risky. It seems like lightning in a bottle almost, you know. Yeah, it's, you

of how many small businesses [: 00:24:00

Every single year when I think about it, I shudder a little bit and say, what am I an idiot for doing this? But for the most part, it really is. It really comes down to you. I mean, you know, we always used to have this saying that the best mousetrap in the world is probably on the bottom shelf of a store.

And it gets no attention because they spent so much money in the engineering of that mousetrap. They didn't have any money left in the bargaining. And that unfortunately is very, very true. And that's what happens with a lot of small businesses. They spend. People spend a lot of money working on their products or working on where they are and no one shows up.

ll the time. We all do this, [: 00:25:00

Oh, did you try X, Y, Z? The food's incredible. The service is incredible. The atmosphere is incredible. And all of a sudden the thing just blows up, right? Becomes an overnight sensation. Or did you try XYZ? Oh my God, I waited an hour for my food and it was, it was cold. That place is dead. They might as well just close the door tomorrow.

Jenn: Yeah. And that's unfortunate because I've thought about that too. Like you have, maybe they just have a bad day. They had one too many people calling sick or, you know, somebody just wasn't on, on top of their game and then that's it. That sets the stage of, you know, I had a bad meal, you know, and you can't really come back from that.

Alex Grossman: Absolutely. And it's the same. It's the same thing. You know, you think of the boutique and I'm not going to, I'm not going to say I understand anything about women's clothes except for I hand my wife money and she buys them. But I would say that if you go in there and you see something that you like and it's not your size and you, you know, you're probably.

here you sell it. That's the [: 00:26:00

And that's why a lot of people lead to, again, same thing is true with any type of, it has to be something unique. And if you can offer something unique that not everybody else has, then you have a better chance of being able to take your clientele. And, and maintain them and keep them because you have a unique product or service that they can't just get off of Amazon or they can't get down the street or one of what we call the big box stores, you know, that's, that's what used to be Sears and Target and Kmart, but those are all dead right now, aren't they?

Just about, so would be the other big box stores.

Peter Bronstein: Target's still

And even the big box stores, [: 00:27:00

Now it's Kohl's and whoever else some of the other ones are. Same thing is true with electronics stores. Peter's old enough. He remembers Skid City, right? Where are they today? Yeah, exactly.

Peter Bronstein: Actually, and now you Alex, it was Lafayette.

Alex Grossman: There you go. I know you're, I know you're a radio shack shopper in your day.

I, I know you did that.

Peter Bronstein: Well, that's where you can buy the little things that you can't get anywhere else, like at Fry's. So Alex, I don't know if you were still continuing. I mean, you were talking about how you dreamt of the days of going to Lafayette and Tandy, but I don't know what else you want.

Alex Grossman: Well, I, yeah, no, I mean, you know, even looking at the legal steps piece of it, you'll never know unless you try.

one of those things that's, [: 00:28:00

What, what would you, what would you need? Well, one thing is, of course, you need that legal advice. I think that's really important. What's, what formation do I do? And then also, you know, any business you start, it's time to start asking questions. It's time to look at who your potential customer, your competitors are, and go around and look at the customers that shop there, learn the demographics, and, and I hate to say that intelligence.

s a retail business Start by [: 00:29:00

You know, things don't look good. You might want to reconsider what you're doing if they tell you things are fantastic and it's awesome And you look in their inventories about 20 percent of what it should be Well, you might want to look somewhere else as well. But if you if you get there and You know, people are 10 deep at the counter and they're just looking really busy.

Well, you might've hit on something. And then there are a lot of services that entrepreneurs can use in order to find out more about the demographics and about their business. And a lot of those services are somewhat free. And in fact, what you can do is you can contact. Google and Yelp and they'll tell you more about the business you're actually going in because they want to sell you their services for advertising.

ople who are experts in this [: 00:30:00

And in some cases that's true. And in a lot of cases, well, you haven't considered all the aspects and all the pieces that are there, but I think those are usually important things to look at and it's probably where you start before you even get going.

Peter Bronstein: Well, so I'm going to hit you on that last question.

You're not going to know the answer, but, so where do you get that checklist to find out? You know, how, how are you going to know what, what things, you know, if you don't know, you don't know. Right. I mean, I guess you go to school, but I mean, where do you find that information out?

Alex Grossman: Yeah. That's, that's, that's a, a, a really good question.

The good old days, we used to go to entrepreneur magazine, remember that a magazine there, Peter?

Peter Bronstein: It was really

Alex Grossman: good.

Peter Bronstein: I've written for them. Yeah.

re are a lot of, there are a [: 00:31:00

Now, that may seem a little sneaky because you say, okay, well, I'm going to go work for the competitor. I'm going to learn what they do, learn all their secrets, learn everything. Then I'm going to take it off and do my own. Well, okay. You know, truth, truthfully. As long as you do a job while you're there, and you give them the best of what you can do, and you're not just there biding your time.

disingenuous, but if you're [: 00:32:00

It's horrible. Or you may, you may find that that glamor and that shine you thought was there just isn't there, but you may find you really love it. And you may find that you can see things that they don't see. And, and I will tell you, a lot of small businesses, the owners that are in there have done things the same way for a long period of time.

They're not very innovative. They're just, you know, living off the reputation or the dream that they had before. And sometimes you have to add some innovation into it. And you can usually get a pretty good idea what it takes to take it to the next level. And then you can also look at their finances. No, not the, not, you're not going to go look and say, well, how much money do you make?

t jump in anything until you [: 00:33:00

And once you understand it a little bit. Understand that you only understand a little bit So, you know the whole thing and peter you've said this to me before many times. You don't know what you don't know,

Peter Bronstein: right? Well, well, well, so we're getting close to the end here I just want to let everybody know if you've missed any part of this show or you want to Re replay the show because you want to find out something that came out that you didn't take notes on Well, the aspirin radio show is available on youtube.

It's available on facebook live But also also there's a podcast version that podcast version is where pretty much wherever you look you can go to Apple and itunes you can go to spotify anyone that has Amazon, anywhere that you can find a local podcast, you can find Ask Brian. Remember, Ask Brian is spelled A S K B R I E N, not A N, not Y A N, E N.

odcast version, you can. Our [: 00:34:00

Okay. I don't, you may have a special field, like somebody may be good in HR or computer security or it or, or a lawyer or an accountant, whatever. What, what people do you think you need to have surrounding yourself as consultants to help your business be successful?

Alex Grossman: That's a really good question. I think it's pretty simple once you've done it a few times and not so simple when you're thinking about it.

in the sales side, I have a [: 00:35:00

So, I, you know, I, I start a business if I'm good at sales and good at marketing. I don't need someone in there. But where are the weaknesses? Well, I know my weaknesses. My first weakness is, is finance. And do I understand it? Yeah, you know, engineer. I understand math, but I'm not an accountant. So the first first hire that I make is someone who understands accounting because running out of money is the number one reason most businesses fail.

Lack of capital. Working capital is the key. It's not necessarily how much money you have, it's how much money you have while running the business. Working capital. Lack of working capital stops you from buying inventory, stops you from doing the things you need to do, paying salaries, paying your rent, all that little stuff you have to care about.

can stop you from You know, [: 00:36:00

Well, you know, a simple thing like a lease could be, well, my particular lease on my building was 84 pages. And if I didn't have that reviewed by an attorney who caught, I had a really competent attorney. I was very fortunate, but my attorney reviewed that and caught a few things that would have got me in trouble.

For instance, this. Particular building that I'm in, they want to inspect the heating and air conditioning every three months. Well, the building doesn't have heating and air conditioning. If I left that in the lease, it would have possibly been a problem. And there's a lot of other things like that. So.

of people who have already, [: 00:37:00

So, that's usually the first hires you do and then you fill in from there. If you've worked in, in large companies or even medium sized companies, you're going to go, well, I need admin assistance. I need that. Forget about that. You can't afford it. The first thing that that account is going to tell you is they're going to look at those numbers and go, here's what you think you need.

Here's what you really need. And that's why I always say the accountants the first one to hire. So know your strengths, know your weaknesses. Know who compliments you in your, in your, in your strengths and weaknesses and hire against them. Also, don't overestimate your own strength. If you, if you feel like, I think I know what I'm doing here and you get in and you're three months in, you go, I'm overwhelmed.

road and everything that you [: 00:38:00

They don't have a business plan And, and let me just add that the other thing is I have a strong business plan, know your goals and I have a, you know, VC advice comes in very handy here. We always build a business plan that has what we call blue sky. This is what I believe it's going to do because I'm me and I'm surrounding myself with the right people.

It's going to be blue sky. Blue sky is everything goes well. It matches your plan. Then you do a gray sky one. What if, what if, like Jen mentioned before, what if someone comes in, they have a bad day and. You know, the soup was cold. Well, that's gray sky. Things aren't going to be great. I have to put more money into it to keep it going.

hen, of course, have a black [: 00:39:00

Black sky always comes with an exit plan. Unicorn sky, everything goes great and it's fantastic and that's what we want. And we all get rich and we retire

es, Brian? Rachel. Okay. Just: 1229

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