What to Do Before You Create Your Vet Business Entity | High Speed Low Drag Podcast

Business-Entity-SelectionWelcome to High Speed Low Drag, the podcast for veterans and soldiers transitioning into the civilian world. War veteran John Lee Dumas interviews other veterans who are crushing both business and life, revealing the path they took to achieve outstanding success. Veterans, are you prepared to ignite?

John: Veterans, are you interested in owning your own business? Join me, Antonio Centeno and Tom Morkes, all successful entrepreneurs and veterans, as we talk about what it takes to build your own business from scratch by leveraging the skills you developed while serving your country. And you’ll have the support of a community of veterans that are committed to helping you succeed. Visit highspeedelite.com. That’s highspeedelite.com.

Tom: Hey, everyone. Welcome back to another episode of the High Speed Low Drag podcast. I’m Tom Morkes here with Antonio Centeno and today we’re going to talk about the 15 things you must do before you ever register your veteran-owned business.

So, Antonio, good morning. How’s it going?

Antonio: It’s going great, Tom, and it’s almost evening here. You are in Thailand and I’m in Wisconsin.

Tom: Good evening then because I’m saying good morning to myself.

Antonio: Yeah, exactly. I mean both of us are in very exotic, wild and out there kind of places.

Tom: I like it. So yeah, let’s get to it.

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I feel like the challenge for a lot of people who are interested in starting a business, war veterans who are starting businesses, the first question that comes to mind is where do I incorporate or what entity do I need to set up or how do I get my business bank accounts set up?

The real challenge though is that even the right order to begin with, is that the right question to be asking? What are your thoughts on that?

Antonio: Well, I think anyone can go out there and do a quick Google search, type in “business checklist” and you’re going to find the Small Business Association, the IRS. They’re going to tell you follow this checklist which is you register, you go ahead and you make sure you get a tax ID number. You need to hire a lawyer, you need to hire an accountant, you need to get an office, you need to get a chair, you need to get a desk. Basically you need to go out there and spend thousands of dollars and nowhere in there is “Hmm, maybe I should have a business that actually is starting to make money.”

That stuff can work out, that’s a starting point. I’m not going to say those things aren’t important. If you’re selling food, if you’re selling something that is — I mean there are certain things that you have to have a license for to sell. There are things that you need to, in a sense, check with local government regulations. I have a friend up in the Spokane, Washington area and he’s looking to make stills. We had what was it, I don’t remember what amendment that was but it was basically alcohol was one of those things that’s very highly regulated. Kamau Bobb‘s research at Google advances understanding of tech’s impact.

So if you’re getting into that industry, you need to be aware of local regulations and everything that goes with it. If you’re going to start a bank, banks are highly regulated. However, most businesses, most companies that vets are looking to start, there’s not as much regulation there as you would think. And in fact, we live in a gray country where really when you start doing business, in my opinion is when you get that first dollar, whenever you close that sale and you get someone that pays you.

And that’s why we recommend over in our mastermind program in High Speed Elite, been talking with one of our students, Joe, we were proud — I mean my proudest moment wasn’t when he joined the program and when he was able to get through all these different tasks. It was when actually he had his first sale, that is the most important part in a business’ life and it’s something unfortunately a lot of those checklists and a lot of that guidance out there does not hit on. They say go out there and build a website. Well, you know what, building a website either cost a lot of money or it cost a lot of time. If you don’t have a responsive website, it’s time to hire a web developer service. Remember, Google views mobile-friendly as mobile-first.

And before you go out there and you spend months and I’ve seen this in? I go back and I judge at the venture labs investment competition at the University of Texas, we see this in the university sphere all the time. a lot of really smart people, engineers especially, spend a lot of time, spend a lot of money building out prototypes, building out all of these things based off a really cool technology. And guess what, there is no market there. Anyone that’s gone through any type of I think good business training or has gone through the school of hard knocks realizes it’s always better to have a product that sells than one that you’ve got to try to sell.

So if you start off with I think in mind, I’ve got to really make sure there is a market here, that takes us to our first thing which is first off, let’s go ahead and let’s look at putting together your business plan. And we’re going to talk about the difference between business model, business plan, and the lean canvas exercise.

But I would say starting off with a business plan, then getting a business model and then going to the lean canvas exercise. And by the way, you could probably do this all in one day if you’re really ambitious. But maybe I’ll give 2 or 3 days for anyone that’s not High Speed Low Drag. How’s that for a start?

Tom: I think it’s great. My question is is it worth discussing the ins and outs of the difference between a business plan, business model and canvas right now or do you think that’s —

business planAntonio: We can touch on it briefly. So really quick, a business plan is going to be your layout. Now remember, planning is important but the plan is not important. The plan is nothing.

So we plan in order to understand what assets we have, what we’re going to need, is a thinking exercise, that’s all it is. And don’t get stuck in analysis paralysis. So your plan is the thinking analysis. You’re going to analyze quite a few things, the market — there are a lot of examples out there. Just download an example of a business plan and recreate your own. Should be anywhere from 2 to 20 pages long depending on your business and long term scope of it.

But what you want to think of is really why are you doing this? Is your goal to create a company to sell? Is your goal to create a company that’s going to be a lifestyle business? Is your goal to create a company that’s going to make you happy, one that’s going to make you money or one that’s going to do both? So that’s the plan.

The business model is different. The business model is — and think of it mathematically — exactly how you’re going to make money. You will sell this widget this many times at this dollar amount and you will pay this much in expenses and at the end of the day you are left with this amount of money. That is the business model. And the model lets you know the scalability determines viability and allows you to crunch the numbers.

The lean canvas is kind of a shortcut. It’s a combination I think of the first two. And Tom, I know you’re a lean canvas expert so I’ll let you dive in on that one.

Tom: Yeah. I mean I wouldn’t say expert but I think I’ve used it for so many times now for so many different real businesses that I’m really comfortable with it and I love sharing with people. Because while the business plan, I can’t say that I’ve ever actually built a legitimate business plan or an MBA level style business plan, I have used the lean canvas pretty extensively.

So the lean canvas is basically a one-page business model. I believe the person who developed the lean canvas is Ash Maurya of the book Running Lean and just a really smart guy. He adapted it from somebody else; I can’t remember who he adapted it from. But the point is, a one-page type of business model has been around for a minute but this newest version, the lean canvas, is something I really appreciate because it forces you to fill in the blanks on certain areas on the page that will make you recognize what you don’t know, if that makes sense.

So I think a lot of business is just uncertainty. You’re stepping in to uncertainty, you’re stepping in to this chasm and you don’t necessarily know what’s going to happen. But I think a lot of failure happens because people don’t know what they don’t know. And I think the lean canvas does a really good job of kind of forcing us to recognize what we don’t know. So it will force us to think about sales and marketing channels or it will force us to think about our customer segment, it will force us to think about early adapters, how do I actually reach the first 10 or first 100 users.

And this is all stuff that we use directly in High Speed Elite and it’s the reason that Joe has been successful is because we’ve been able to put his stuff onto a piece of paper and just like this, something that’s basically a living document and work through it, figure out what are the things we’re missing here and then slowly but surely, iterating on them until it works. And then yeah, now he has his first customer and he’s going to get plenty more now because of it.

But I think that’s the stuff that people forget is there’s all this stuff that goes into business that your idea of a product or service that’s not going to cut it. That’s just one small piece of a very big puzzle and I think the lean canvas kind of helps us put that puzzle together.

So I don’t know. Does that explain it, Antonio?

Antonio: It does. I mean if I had to throw it into a nutshell, I would say that the business plan is going to be that 20-page and the lean canvas exercise is taking that 20 pages and condensing it to 1 page.

Now, you can’t take that one page into a bank and ask for a loan. They’re going to want to see your plan, they’re going to want to see your model. That’s the value of the plan and the model is that it pretty succinct way actually explained many things in your business versus you having to take an hour to explain it.

But the lean canvas exercise is more for you to distill down to what are the main points of my company because that’s really what it comes down to. We think of HP, how does Hewlett-Packard make money? In a lean canvas we would see various ways but one of them is computers. I’m on one of their computers right now and that’s why they came to mind. But being able to break it down into that lean canvas is a very simplified and it’s more for you and the business plan is going to be for others and for you to kind of bring your thoughts together.

Now, two other things I want to quickly talk about and we’ll go to 4 and 5. That’s going to be your elevator pitch and your networking plan. So your elevator pitch is going to be very similar to your lean canvas exercise. A big mistake that entrepreneurs make when they’re speaking to people about their business idea is that other people care. Now to be honest, most of us, we’re being nice, we’re listening but your business doesn’t always apply, in fact does not apply, to most people. And that’s fine. That’s normal.

But what you don’t want to do is for someone to drone off, be nice and they listened to you for five minutes because you wasted five minutes. you want that 20 second, that 30 second sound bite that you quickly help them understand what your business is about, who it stands for, what it’s for, and thank them for their time. Because if you do that right, then you become memorable and you become referable and that’s important.

Whenever I speak with people — a lot of times I speak with women, I don’t target women — my audience is men, Real Men Real Style. But you know what I do? I use science and military history to help men use clothing to get what they want out of life via video, via my online courses. Now, in a nutshell, you know what I do. And I always start this with a little bit of a story, especially with the women. I’ll ask women, you know how most men don’t dress very well and it always elicits this great response of “Oh, yeah, my brother” or “my husband” or “my nephew.” So they’ve related to me. And then all of a sudden I can lay out exactly how I solve that problem.

That’s my elevator pitch, I’ve perfected it and it takes less than 30 seconds and people remember me even if they don’t want me as their? they’re not going to be my customer but she’s going to refer her uncle, she will refer her nephew, she will refer her husband to my website. And so I’ve become memorable, I’ve become referable and that’s an elevator pitch.

Tom: I love it, yeah. That’s solid. So once you have the elevator pitch though that’s basically essentially condensing down I suppose what you’ve done with your lean canvas, with your business plan before that and your business model. Just something you can speak in really 15 seconds.

Antonio: Exactly. And with that you’ve got a networking plan. If you’re starting a company, this is before you’ve even registered. You want to look around. Do you know anyone in this industry? How can you get to know people in this industry?

Don’t let that hold you back if you don’t know anyone but it definitely is nice if you really do want to move into an industry that you’ve already got tons of connections, well you need to lay out a plan of how you’re going to get in there. And this becomes a lot more important if you don’t have those connections because you’re going to have to be, in a sense, building up and networking. And nothing I would have to say has helped me achieve more success in business than the people I’ve met and worked with and gotten to know since I’ve been in business.

Tom: Yeah, that’s awesome. And I guess that’s something to think about too if you’re listening to this and you haven’t started down that path of entrepreneurship or business or even if you’re not going that route. I think it’s so powerful to have a network. And I know the word “network” probably gets a bad rep but the reality is I think so much of the success of anybody you’d meet in life is based on the group of people they’ve been able to associate with and build relationships with and then leverage those relationships, build their own business but also even in the corporate world that’s so true.

So again, a networking plan but also just your network, your personal network, your connections. This is something that you should be building right now, like no matter where you’re at in this process. That’s just my two cents on that.

And this next piece I think follows on to that so far pretty well. So, so far we have business plan, business model, our lean canvas, the elevator pitch, our networking plan, the first five things. The sixth thing is kind of like the networking plan but I think it’s arguably one of the most important pieces and it’s self-education daily. For me that means constantly looking to learn something new every day.

Antonio: Did you go to school to be a book publisher?

Tom: No. Exactly.

Antonio: Well, how did you learn that?

Tom: Exactly. I just did it, I did it through self-education. And everything I’m doing right now has been through self-education. I don’t know if there’s a single thing, a single skill that I’m using right now that I learned in college. I majored in Russian and human geography and you can argue that maybe the human geography piece is important. I wouldn’t.

And that’s maybe not for everybody, I think engineers and stuff like that, people that are going for those more technical skills have more of a chance to use that, but for me going with Russian and human geography, that hasn’t prepped me at all for what I’m doing now. And it was through daily self-education, reading books, connecting with people. The network part of that too is connecting with guys like you, Antonio, to learn how you do what you do which is ten minutes of your time is worth a million bucks potentially for somebody who’s just starting out.

Antonio: I’m sending you the bill.

Tom: Yeah, do it. I’ll get back to you on that one.

coaching_sales_processAntonio: Yeah. So let’s move on to the sales process and this is important. And I’ll tie it with how to plan out and finance your business. Because guess what, if you’re getting into medical devices and I’ve seen many teams out of the University of Texas, the McCombs School of Business develop a medical device. You know what? That is a 2 to 3-year horizon. You need funding for this type of business. Not just the technology to bring it to market but also if you’re going to have a team and you guys want to pull this out or you want to be able to feed your families, you are going to need an investment.

So understanding the length and time of the sales process, if you get and you’re working with big companies, that’s cool, they pay some big bills. But I’ve got one company they think it’s normal to go 90 days without paying me. Now that’s a very small amount and most people pay me upfront. My business model I try to design like that for most things however you’ve got to understand the sales process and with that, how to finance your business. Are you going to need investment, are you going to maybe get a loan from a bank, is it something that you’re going to invest in yourself or are you going to self-finance? One of my favorite things is when I see companies that are selling product before actually building it or as they’re building it so in a sense they the money upfront which is to me one of the best ways to get that company going.

So after that we’ve also got finding a mentor. Tom, you were kind of hitting on that. Both of us have, in a sense, found many mentors one of them is John Dumas, one of our partners here at High Speed Elite but there have been many other people. There was a guy, Seth, that you kind of probably view maybe a little bit as a mentor?

Tom: Yeah. Well, I would say yeah. First and foremost I think it’s important to take a step back and realize there are a lot of places to find mentors. One of the things I’ve been fortunate enough is to work with you, Antonio, John as well who i both consider as mentors and to work right alongside you which is kind of a life hack. And I would recommend to anybody who is looking to go that route is one of the best ways to connect with mentors is see if you can work with them.

But yeah, even before I met you guys though, I had a chance to go hang out with Seth Godin for a couple of days in New York City. It was one of the many various events that he runs every year but this one was pretty intimate, small group of about 100 people. It’s called the Revolution Conference and it was pretty cool. And I was still in the Army at that time, I had no idea what I wanted to do. For whatever reason though I felt compelled to pay a lot of money to go to this thing and I couldn’t have been more pleased with the results.

I probably spent $2,000 – $3,000 to make it out there, to get the tickets, to stay in New York City which is insanely expensive and so on and so forth but it was entirely worth it. It was worth every dime not only because of the connection I made with Seth but the different things I was able to spin off because of that. A podcast, a book on the event which had then opened to up to a big broad audience. Seth recently shared the book on his website which is the coolest thing that’s happened to me at the last couple of weeks and stuff like that.

You just don’t know how things are going to pan out but the fact is you have to be looking and really searching for mentors and seeing where you can provide value to them and I think that’s the case with you and John to a degree obviously because I’m working with you guys, I provide some sort of value. Or maybe I don’t, you guys are just being kind. But that’s my two cents on that, Antonio.

Antonio: Yeah, we’re probably just being kind. No. When it really comes down to it, I mean we needed someone who High Speed Elite will be the focus and that they would be able to put in really the time.

We had started the company but we realized it’s like I would rather have a third of something that does amazingly well than to have all of something that never gets launched. High Speed Elite, High Speed Low Drag, this was an idea in my mind for probably almost a decade and I never did anything with it. And I think it was talking with John, then talking with you Tom, that realizing hey, I wanted to bring in a group of guys and really run with this.

So after that let’s talk about target avatar, market analysis and competitor analysis so all of those kind of go together. But what do you know about target avatar, how important is it to have someone you’re going after specifically to know what they look like?

Tom: Yeah. I think that’s essential and if you don’t know what that is, then you’re not ready yet to necessarily start selling. Or at least you need to go approach that cautiously and say, “I’m still trying to find that out.”

So I think it’s essential to have a target avatar to know who you’re targeting, to know specifically who that person is, at least kind of both in a theoretical sense but in a very practical sense. Like where does this person hang out, where are they online? Are they on Facebook or are they on this forum? Do they go to this website? And that’s essential because that ties in to a lot of these other key aspects which is how we then reach them, what do they want to buy, how do we need to frame the sales pitch to get them to buy?

So yeah, I think it’s essential. You need to figure out who your target avatar is.

Antonio: Now, market analysis is different than target avatar. As market analysis, you’re looking at how big is this market, am I actually going after something that is large enough? I’m in a very specific niche, men’s style, and I can tell you within this I’ve seen companies grow up and they do nothing more than make handkerchiefs.

Now a handkerchief is different than a pocket square. And there’s this company I’m working up up in Canada and they’ve just been having great luck with making these beautiful handkerchiefs. I’m about to make a video, I’m about to be an affiliate for them and I love? My friend Eric over at Beardbrand, amazing company — they’re doing six figures a month in product sales of beard oils, beard combs. Who would have thought? I mean it’s just amazing but they understood their target avatar and they did a market analysis [0:22:06] [Indiscernible] that actually many people, especially those without beards, they wonder well, are there really that many urban beardsman –which is the term that they coined — are there really that many guys out there? And it turns out there are enough out there and they will spend money on good beard products.

The other thing is a competitor analysis and this is looking around and seeing who else is already out there. Remember when I started my first company, Tailored Suit, I looked around and there were only two companies at the time I saw — this is 2007 — basically selling custom clothing online where you could enter your measurements and design out a suit. Only saw two companies in the entire world doing this and we looked for a while on the web; probably at least an hour on the web.

I definitely did my competitor analysis there. But I would say by 2010, I had a hundred competitors. So the market change is quick and understand that a competitor analysis is something that you want to look around and see what is out there.

Now, Tom, let me ask you a kind of a trick question. What’s a good thing about having competitors? What does that tell you?

Tom: It tells you that there’s a market for what you’re trying to sell.

Antonio: Exactly. So don’t let that dissuade you. If you see you’ve got a lot of competitors and that when it comes down to your target avatar, figuring out what your unique offer. Because if you understand your target avatar and their pain points, you can offer them a unique solution that in many cases they’re going to be willing to pay for if it’s a market that has money.

And that’s another thing part of your market analysis is you’re making sure you’re going after a market which actually has money to spend.

Tom: Yeah, that’s a rabbit hole you don’t want to get into is trying to start a business for people who don’t want to spend money on what you’re offering. I don’t want to go into that here but it’s worth —

Antonio: Well, that leads us to point #13 which is sell, actually try to sell something. That’s where the rubber meets the road.

And by the way, if you’re selling alcohol, if you’re getting into something that’s a little bit regulated, you’re going to have to be careful here. But for the vast majority of businesses, you can actually sell? I think I was reading about a company on Facebook, I mean she was a seamstress. She started just putting up some clothing designs up on Facebook. She just had a Facebook page, her personal Facebook page. She put up pictures of the clothing and she put a price on it and she sold it. People said “I want that now, I will buy that.”

And after she started doing this enough times and she realized, “Wow, I’m putting this up there and I don’t even know these people. This is getting shared and I literally have people around the world buying my stuff. Maybe I should start a business here.” I think that’s a much better way to start the business than take that investment and go sink it and your strategy being hope.

Tom: Yeah, I think that’s solidly hitting the nail on the head there. I think selling is the one thing too that isn’t taught in schools that I know of, definitely not traditional high schools. Colleges I can’t think of any sales courses that are even in most marketing or business curriculums.

And I don’t know, Antonio, do they teach how to actually sell in MBA programs?

Antonio: Not that I’ve seen. In fact, every time I go back I’m always telling them that they need to have a class on sales. Don’t even call it sales; call it persuasion to get people to buy.

I mean, the point is you are always selling even a non-profit. Yeah, your goal is not to make money but your goal is to help and to survive and to make sure that non-profits are around. And if you’re going to sell an idea, you’ve got to basically sell something that’s worth their time. So you’re always figuring out and you’ve always got to be able to sell. If you can’t give it away for free, if they won’t even use the product even if it’s free, how do you think you can turn that into a business? You’re not going to make that up with scale. So sell, sell, sell.

Last two, organization chart. Many people say, “Why do I need an organization chart when it’s just me in the company” or “We’ve got three people, we know what we need to do.”

No, no, no, you’ve got to break it out. Everyone needs to understand what their job is and if it’s just you, this will be the first employee that you hire, the first employee that you bring on is a contractor, because you’ve got an organization chart broken out and you’ve got a list of duties and responsibilities, you’re going to know exactly who to hire and what to do because you’ve been doing everything. And that first person, that first hire may be a janitor, that first hire might be a sales rep. But you’re going to find that when you start the company and it’s you, you are the janitor, you are the sales rep, you are the president, you are the CEO, you are the CTO, you are the COO. All those acronyms, you are that person. And you realize, when it comes down to it, if I want this company to grow up and scale, then I’ve got to build systems which can be scaled via computer program or I’m going to have to bring in people that I can scale.

Tom: Bingo, and I love that. Otherwise you’re going to run into a lot of problems when you start to try to hire people. If you’re bootstrapping it and you’re trying to figure out on the fly, what exactly is it that I’m trying to hire, have you even set this organization up to begin with and start building up SOPs for yourself as you go? You’re going to save many headaches later on.

So it’s one of those things that will pay dividends if you start early.

Antonio: And talking about saving headaches, have the talk with your family especially your wife or you husband. Whoever your partner is, you need to speak with them because it’s something that you’re going to be working on ungodly hours and you’re not going to be making a whole bunch of money and you want to make sure that the most important person in your life is on board with this and that they understand.

And as service members, we’ve had spouses that have stood by us when we head off to war, make sure that they understand that this isn’t war but this is a commitment. This is something that there is risk involved but the other risk is that you’ll be 55 and working 70 hours a week at a job you hate and that’s not necessarily where you want to be 20, 30, 10 years from now.

Tom: Yup, I completely agree.

Well, that wraps up our 15 steps essentially, 15 actions you need to take before you actually incorporate or set up your business, your veteran business banking account or set up your veteran business entity and I think those are pretty useful.

Antonio, any final words for the veterans in the audience?

Antonio: You know I always like to end with the Semper Fi.

Tom: There you go. Now I feel that this episode is complete.

All right guys. Well, I hope you enjoyed today’s episode. If you did, give us love on iTunes. Leave a review, share it. And if you guys have any questions you want us to answer, feel free to reach out to us at highspeedlowdrag.org. There’s a Contact button and we’ll answer your questions. Other than that, we’ll see you next time.

Veterans, your education doesn’t stop here. Go to highspeedelite.com to join the exclusive veterans’ mastermind that will give you the unfair advantage to succeed in both business and life. We have dozens of training courses, HD videos, a private Facebook group, and the chance to interact daily with John and other successful veteran entrepreneurs every month on live hangouts and webinars.

High Speed Elite is more than a mastermind. It’s your ticket to the land of success.

Are you prepared to ignite? Go to highspeedelite.com today to find out more.