Historically, I’ve just kept my emergency fund in a high yield savings account, kept it super liquid, not really looking at it as an investment, not really trying to make any returns on it really just keeping that there as safety. As of right now, that’s currently what I’m still doing.

I might look into investing a piece of it, but with as much uncertainty that we have going on, both in the markets and in the economy and just in the world in general. I think I might keep that a little bit more liquid and safe for now. But we’ll see what happens in the future.

I wanted to talk about another component of my emergency fund that I do that I think is really interesting. I think it could help you guys. So you often hear money experts, financial experts, and personal finance guys talk about how you need to have three to 6 to 12 months of cash saved in a savings account as your emergency fund. I do agree with that and I do that myself.

Though on top of that, I also pay ahead my loans as part of my emergency fund. The reason I do this is because money is super psychological, at least for me. I think for a lot of other people, the rise of behavioral finance is becoming very popular. And so, by seeing that money sitting in your savings account it you’re almost you almost want to spend it… I know when I look at the money in my emergency fund, I want to spend it when I see it there.

So what I’ve done is pay ahead my loan. For example, on my mortgage, I pay ahead my mortgage two months or three months or something like that. So say your mortgage is $2,000 a month or even $1,000 a month, you pay that ahead. Now if you ever come into financial trouble, your mortgage has already paid ahead by a month or two months or three months. Now you have that runway where you don’t have to worry about making a mortgage payment. You don’t have to come up with $1,000 or $2,000 for a month or two or three. So that can be super helpful. I do that with any debt that I have.

Not all financial institutions will allow you to do it, but if they do, I always pay them ahead. So I have my car paid ahead by three months or so. I also have my mortgage paid ahead by two or three months. And so, you pay them ahead and then you just keep making the payment each month. As you continue to make the payment each month, it just stays pay ahead by two or three months, you just continually make the payment when things are good. That’ll keep you ahead by two or three months. Then if you ever run into financial trouble, you’re already paid ahead. You have that built in as well as your emergency fund set aside for you. So that’s just a little tip or trick that I do with my emergency fund.

The reason I do that, again, is to get that money out of my emergency fund account because if I see that money there, I want to spend it. It’s kind of a psychological thing. So if I pay it ahead on my loans, I don’t see that money sitting in my account. For me, that helps a lot. It makes me think that I don’t have as much money as I might otherwise have. That’s been super helpful. I just wanted to share that with you guys, when we’re talking about this concept of an emergency fund.

I know that the question about an emergency fund isn’t necessarily related to the topic of today’s episode but we do talk about personal finance quite a bit here on the show. I think an emergency fund can be related to entrepreneurship and side hustles because if you’re able to have your emergency funds set up appropriately and saved, set aside, ready to go in case you need it, then you’re able to take more risks and you’re able to start side hustles, start businesses and become an entrepreneur.

So I think by getting that personal finance base, getting that emergency fund set up and ready to go, I think that can help you with a lot of the things that we’re going to talk about today and can allow you to take more risks. That’s kind of how I think those two things are connected.

I also think it’s always good to talk about emergency funds and personal finance when we’re in times of volatility like we are right now. A lot of people have lost their jobs because of the pandemic and things of that nature. I think always touching on personal finance topics and strategies are helpful.

Now I want to talk about another question. The second question is: could you ever see yourself starting a hedge fund or property investment company? I wanted to include this today because this is related to entrepreneurship, which we’re going to talk about in this episode, also because this is a very great question. I love this question. It’s something I like talking about.

The reason I like talking about it is because when I was in high school, even through college, I was studying and my goal was to work at a hedge fund. That was my goal was to graduate and then go work at a hedge fund. Unfortunately, it’s very difficult to get a job at a hedge fund or an investment company doing what I wanted to do, be an equity analyst or something along those lines.

I just went to a small state school in Massachusetts, so it was difficult to be able to get a job. I applied to I believe it was 800 or 900 hedge fund jobs across the US. I haven’t got any calls since I started my corporate career in the corporate finance world. Then a few months after that, I started to apply to hedge fund jobs again. I actually made it pretty far at a value investing hedge fund down in Florida. I made it to the final round, and ultimately ended up going out with a different candidate. So I was a little bit crushed, then.

I actually made it out pretty far in the interview process at Howard Marks’ The Oak Tree, not really a hedge fund, but the fund out in Los Angeles. I made it pretty far through that interview process as well. U ultimately didn’t get chosen for that either. So I was super crushed. That was kind of the final blow for me.

I said maybe I should give up on this, this dream of working at a hedge fund. And so, I did and I went back to my corporate finance job. I just told myself, “Hey, I’ll start my own hedge fund some day. If nobody’s going to hire me, I’m going to start my own.”

I’ve always been super entrepreneurial and I’ve always been interested in that type of idea. For me, I just said I’ll do it myself. I’ll start a hedge fund.

The second part of the question, would you start a property investment company? I kind of see it the same way you could do private equity, you could do a couple different structures, if you will. But yes, I could see myself doing that. I’m not sure if I’m going to. There’s a lot that goes into it. The more I learned about it, the more I talked to hedge fund managers and people who have started their own hedge funds or just other types of investment funds. There’s a lot that goes into it. I’m not sure if that’s necessarily the lifestyle that I want to live.

I think I’m looking for more time freedom than I am for creating the next massive hedge fund. So we’ll see what happens in the future. I wouldn’t be surprised if I did start a hedge fund or an investment company of some sorts in the future. Not necessarily on my radar right now, but it’s definitely possible.

It’s interesting for me to talk about that because if you had asked me that five years ago, there would be no doubt in my mind that I would start a hedge fund. As I get older, I  value simplicity and I value having time more.

The last question I want to answer today is short and sweet to the point. I was asked on Instagram what are the best books? And so, I’m just going to quickly run through three of my personal favorite books: “The Richest Man in Babylon,” “The Millionaire Real Estate Investor,” and “The Intelligent Investor.”

These three books cover three different topics. “The Richest Man in Babylon” is more focused on personal finance which is the main topic that I like to talk about. “The Millionaire Real Estate Investor” is, of course, about real estate. Another topic that I like to talk about. Then “The Intelligent Investor” is, of course, the bible of value investing, if you will, by Benjamin Graham, and with a foreword by Warren Buffett from the newer editions. That’s probably my favorite stock investing book.

All right. So that’s it for the Q&A section. I hope you guys enjoyed that. Typically when I interview guests, I don’t tend to add a ton of commentary myself. I tend to let the guests speak. So I hope you guys are enjoying hearing a little bit more from me.

If you have any questions that you want me to answer here on the show, be sure to reach out to me on Twitter or DM them to me on Instagram. My username on both is @TheRobertLeonard.

Now let’s bring in Sean Castrina. Welcome to the show, Sean.

Sean Castrina  12:34

It’s great to be on the show.

Robert Leonard  12:36

Before we get into the main part of today’s episode, tell the audience a bit about yourself and how you got to where you are today.

Sean Castrina  12:41

I started my first company in my mid-20s because I got let go of my dream job that I thought I’d have forever. I had a college degree and one class away from a master’s degree. From that point on, I started starting companies. I’ve been doing that for the last 25 years.

Robert Leonard  12:50

When I talked to Gino Wickman who wrote some of the most popular entrepreneurship books, we talked about how he felt that entrepreneurship can’t be taught. It’s either something that you have or you don’t. Do you agree with this or do you think entrepreneurship can be taught?

Sean Castrina  13:19

I think it can be taught. I think that you have personality types that come easier to you, like Elon Musk, Jeff Bezos, and Bill Gates. They are all very three very different types of people.

In other words, some are much more thoughtful or slower. I think that there’s personality traits that make it easier for some people, but I think any person has a good idea and takes action on it. The end result can be an entrepreneur.

In other words, an example of that is that some people just have what I call an entrepreneurial spirit. It’s almost like they have a phase. For example, the person who starts at one business 20 years ago, they’ve never started anything since they’ve held on to that one business for dear life.

I would say they had an entrepreneurial moment and they’ve kind of held on to it. They have this three person business that does Okay, do I think they’re a great entrepreneur? No. Do I think there may be even an entrepreneur? No, they’re like business owners. They had an entrepreneurial moment that birthed a business and they’ve hung on to it for dear life.

I think like in talking to Gino, I think to be a great entrepreneur, you’re much more understanding of risks, so you’re more comfortable taking risks. You typically have high level energy. You can attract people really well you typically communicate really well. I mean, you have qualities that I think makes it easier for you, but I think a quiet person can still birth a great business if they take action on a great idea.

Robert Leonard  14:50

You mentioned that business that somebody held on to for say 20 years with two to four employees. I think a good way of explaining that is self employed. Maybe not an entrepreneur but self employed?

Sean Castrina  15:00

Exactly. They were an accountant. They work for a firm and they just move it over. They have their own little law firm or their own accounting. They just create their own little comfortable environment. That’s okay. I think that’s amazing. But I’m not an entrepreneur.

An entrepreneur is always looking for opportunities. It’s like feeding a dragon. I look at opportunities all the time, I can’t get enough of them. I’m always looking for something more. So I think you can have an entrepreneurial phase, and it bursts with business, but then there’s nothing entrepreneurial that goes forward. In other words, you don’t take any more risks. You don’t start any more business, you don’t expand that business, you don’t look for additional opportunities. You just are kind of happy with what it’s birth and you’re okay with that. That’s not a criticism. That’s just a reality.

Robert Leonard  15:45

I wanted to say that is an amazing feat, because I think that’s awesome.

Sean Castrina  15:50

Absolutely, think about it, if you can create something that you control, you control your income, your schedule, you’ve one employment as one objective. I think people forget this. Employment creates money so you can live. That’s it. We can make it holistic and all the rest.

However, at the end of the day, we go to work to make money to survive and to live and to provide. Well by golly, if you could create your own business and provide that for yourself, have more job security, because you’re at least in control of that business. You can control what you get paid because you can generate a little bit more business or adjust expenses. That’s the American way. I have people that are out in my orbit all wrapped.. My accountant is like that. He has a great solopreneur business.

Robert Leonard  16:32

I think another way to think about it is entrepreneurship would have massive innovation.

Sean Castrina  16:38

I have never started a business with a great innovative idea. I’m not Elon Musk, I’m not missing any meals in my house that would make you go wow. I’ve started businesses that were very basic needs. There was a need for what?  I saw a need and filled it and had been rinsing, repeating that for 25 years.

Where you have some people that are crazy, innovative like Uber and you look at apps like Grubhub. You look at Amazon and you look at some businesses where I say to myself, “Mark Zuckerberg, you deserve to be a billionaire.

I mean, there are ideas for FedEx, when I think of what it would take to take a company like that to scale in the 80s. You basically have to create an airline, a delivery truck business, a logistics business. It’s incredible. So there are some businesses where people have innovated, acted and put together something that makes my head explode. It’s so complicated.

Robert Leonard  17:32

You mentioned Warren Buffett before, do you consider him an entrepreneur?

Sean Castrina  17:36

Well, he started his own business. I mean, so by definition, he doesn’t work for anybody but himself. He created Berkshire Hathaway and he’s a very entrepreneur and he buys companies like crazy.

At the end of the day, even at its smallest firm, Charlie Munger started Berkshire Hathaway. So that’s where you’d say there was an entrepreneurial moment, but I don’t know enough about Berkshire Hathaway.

Robert Leonard  17:57

Buffett actually didn’t start Berkshire Hathaway.

Sean Castrina  18:00

Exactly. It was a textile. But because it had the stock *inaudible* and all that, but it kind of just ran everything through it. I think Warren Buffett is an entrepreneur, but to what level? I don’t know enough about what they personally do. At one point, there was definitely an entrepreneurial moment that basically made him worth about $60 billion.

Robert Leonard  18:19

Yeah, he’s definitely done something right. That’s for sure.

Sean Castrina  18:21

Absolutely.

Robert Leonard  18:23

Do you think having an advanced business degree, say an MBA helped someone become a successful entrepreneur or it could actually hinder them?

Sean Castrina  18:30

I don’t think it helps. I don’t think it hinders. Typically, somebody in an MBA a lot of times, they typically work for big companies. I have a friend who’s a professor at UVA, and I asked him about it because I teach guest lecture colleges. I asked, “If you’d like I’ll do one of your entrepreneurship classes…”

And this is at UVA Darden Business School, a very famous Business School. He said, “We don’t even have entrepreneurship anymore. All our students with MBAs justgo work in New York.”

I don’t think it’s required. My son is 19 and we chose not to send him to college. My daughter went to college and she is finishing up a master’s degree. She’s a school teacher.

To start a business for me personally, I don’t think it’s necessary. I do think it’s a waste of time. When people say, “Well, you create an ecosystem.” It’s a very expensive ecosystem that if you have to pay $180,000 to get two friends that do something similar to you, you can meet somebody online, you can join a mastermind group. There’s a lot of ways you can create an ecosystem within entrepreneurial space.

I went to college, other than psychology, there’s nothing I took in college that has helped me in business. So I don’t think it’s necessary. I think you even need any post secondary education. You go to college for different reasons.

So I want to be careful. Is there a downside of getting more education being smarter? Now, there’s no downside. I think it’s a waste of money but what I’ll say about college, there’s one thing it doesn’t… Some people need this, “Hey, maybe you can go into the military or Peace Corps.”

I would tell you 99 out of 100 people at 18 are not ready to have employees and be a leader to run a company. They may have an online business. But I’m saying realistically, I wasn’t ready at 18 through 22 to oversee employees to make critical decisions that are typically required in a business. I wasn’t at that maturity level.

So going to college, is there any downside of getting a little bit more mature? No. But again, the example is my son, my wife and I could have sent him anywhere. We didn’t think so…

To be an entrepreneur, I thought he needed to bounce some ideas around, let’s get something out into the marketplace, which is what he’s done. He and his friend have a great business and it’s going to do well. That’s what I did. I think that’s a better road than creating debt.

I would tell somebody, I actually think it’s better to get a job. In other words, what business do you want to do? Why don’t you go work for somebody for a year and get an idea, if you really like it, learn the ins and outs of it a little bit, get a better understanding of the industry?

I think the problem is we try to do everything so fast. We think everything’s so easy, and there is a price to pay for success. Nobody wants to talk about that. We get all caught up in all the easy things. But sometimes, an example is I learned more working for somebody at a college that I needed. I learned how to run a staff meeting. I learned how to have high level interactions and debates. I learned how you terminate an employee. There are things I naturally saw working.

So I don’t think at 18 you necessarily go start a business per se. My son did an internship. I’d rather you work for three months for free then go to college. Actually, I think there’s a discipline that you need to run a business. If that’s going to work every day and having a boss over you and being able to take a little bit of a tongue lashing, being able to be criticized, figure out whether you work well with other people… Do you solve problems well?

I don’t think there’s a race to be an entrepreneur dating. However, I think there are things that you could do to better prepare yourself without going to college. I would go work for free before I go to college.

Knowing what I now know, I’d go work for free for a year underneath somebody that I really respected in any way I could get in that organization. I will work for free before I go to college.

Robert Leonard  22:16

I have an MBA, I have an advanced degree. But when I think about it, if I could go back and do it again, I don’t think I would.

Sean Castrina  22:21

I would have gotten into sales.

Robert Leonard  22:23

Yeah, I think I probably would have gone into sales. I would have even worked for somebody. I probably would have gone into a trade and started my own business that way.

When I’m trying to think about it, I think about the silver lining, I already did it right. There’s nothing I can do about it. So what was the silver lining?

For me, I look back on it and I think I did learn some organization skills. I learned some soft skills. I did take a professional communications class that has really helped me. I’m an accountant by trade so that allowed me to get a lot of good skills that I needed to be able to talk to people.

There are some soft skills and some organization and time management skills that I’ve been able to develop through college. But overall, I think I tend to agree I don’t think there’s hard skills that I learned that…

I have a bookshelf behind me and I have 200 books on them. I’ve learned way more about business and everything investing from those books than I did in college, but the time management, being on time getting passed on when they needed to be done things like that, I think there is value to that.

Sean Castrina  23:09

Absolutely. In college, you have deadlines, you have assignments and things like that. The reality is just like everything you mentioned, you could have learned outside of college. You could have taken classes [even outside college.]

I sent my son to an improv class to learn how to make you know spontaneous conversation, uncomfortable conversation. I got him in salesso that he could take rejection and learn how to communicate.

The fact is I could sit down on a legal pad and write down I think everything you need to know to be a great entrepreneur skill wise, and none of it will require you to go to college. Maybe go to a junior college, maybe take an accounting class, or maybe a basic marketing class just to get a general understanding of it. You could maybe take one semester at a junior college and you’d have everything you need.

Robert Leonard  23:57

In reality, you can take those courses online.

Sean Castrina  23:59

Absolutely, for 100 bucks you can take courses. The most valuable class I’ve ever taken other than learning how to add and subtract and speak English and writing English was typing. Typing in ninth grade is the most valuable class. If I had to do it all over again, I’d have taken more typing classes because I find myself typing more than next to speaking. We type like crazy, but we don’t type in classes and something they really push at you. It’s those ancillary skills that you really need sometimes.

Robert Leonard  24:29

Thankfully, my generation was practically born with a keyboard in our hands. So we’re pretty good from that perspective. But yeah, for sure, I do type a lot and it does help me.

So how does a new entrepreneur say maybe your son, somebody listening to the show is going to start their own business… How do they stay motivated when they’re faced with all of the volatility that comes with being an entrepreneur? How can a new entrepreneur really channel their inner ‘why’ to grow?

Sean Castrina  24:51

You got to remind yourself of your ‘why’. I always had pictures of something I was working towards in front of me whether it was a car or a house. I had reminders of why I wanted to do it.

Then you also got to know all the intangibles. I know that I didn’t want to work for anybody again, because they want to be let go again. I wanted to control my own schedule. I think it’s important to write down why you want to be an entrepreneur and read it really every morning, just kind of read it over. I know why.

It’s the same thing in sports. You pay a price in sports, because you want to win one business, there are winners and losers. Winning is pretty good. I always joke like 32 owners of the NFL football team franchises, they either were an entrepreneur or they were a family member or an heir of an entrepreneur.

It creates a pretty exclusive club. If you’re successful at it, the Forbes 400 list. Every single person on it is an entrepreneur and or the heir of an entrepreneur. If there’s a doctor on it’s because they started a pharmaceutical company and actually researched it. In other words, everyone on it is an entrepreneur who started a business.

I joke as an entrepreneur, the number one skill you could have is sales. In other words, if I had to do it all over again, I would have gotten to sales right out of high school, I would have been selling cars, something right away, because you learn rejection. You learn how to communicate and be motivated by getting that yes, which is important in business.

Getting the first customer and all that, I think sales is the most important thing, that if you could do something right, if you didn’t know what to do, you could never go wrong with just getting into some type of sales right out of high school. If you’re even in college, I wish I would have sold cars while I was in college, like just even if it would have been like a weekend gig, it would have been perfect.

Robert Leonard  27:14

For someone who’s aspiring to be an entrepreneur, or even just start their own side hustle, but they don’t have a lot of money. That tends to be a lot of millennials or even beginning entrepreneurs. How can they find their idea? How can they get started?

Sean Castrina  27:27

I will tell you, so this is what I did. Number one is that partnering is the superpower of business, it’s created some of our greatest companies. But if you have a good idea, you’re 20 years old, and you have a really good idea, assuming it’s realistic. If you bring that to somebody and another adult, just a decent middle class adult, and you pare it down to reality of what you think you get it started for you get that number under 10,000.

You shouldn’t be spending more than 10,000 to start a business. I will tell you that if you present it to enough people $10,000 to an adult over the age of 40. That’s not a lot of money. So yeah, maybe they become an investor in your company, you got to give them a crazy return on their money. They put up 10,000. After two years, you agree to pay him back four times. Maybe you pay him back 10,000 a year for four straight years. You got to make it worth somebody investing in you.

I always tell people, “Oh, that’s so much money.” Yeah, but zero times zero is 0. One of my biggest companies that I started and I have now it’s worth millions. I borrowed 10,000 to start it. I ended up paying the guy 70,000 by the end of the year just to buy him out, just because I knew it was going to do great. I knew I needed to bring on a partner that was actually in the business. Did he get a great return on his money? Absolutely. I paid him seven times what he put in, but without it, I would have never started the business.

I think sometimes that if you have a good idea that you have really flushed out with a business plan, and you have the qualities that somebody looks at you and you respect them, at the end of the day the startup they invest in you. So if you’re halfway sharp, you present a good idea.

I’m just telling you, if you pair that idea back to reality, you can get an investor. If ever I had money, I always had people partner with me in business and they always put up the money. But it was never a crazy amount of money. It was typically $10,000. I did 5050 and through my 20s.

Then I get into my 30s and I don’t have to do that. I had to buy a few people at it, but maybe more than I wanted to. But my point is: it is a good idea in the hands of somebody with some ambition, you can find a partner. If you look at everybody in your world that has a little bit above average income and if they don’t, let’s say that they don’t, they don’t have anything…

What you need to do is that you need to maybe interview people that can help the company and you try to get a partnership route to come in with you on the company and you have three people under the age of 25 each put in $3,000. Almost anybody get a credit card these days.

So you got to get creatives. I mean I took an education loan to Start one of my companies. If you take a class, you could loan you up to $10,000. And I’ve done it a million different ways. I’ve used credit cards, I have these partnerships, I think that you gotta start a micro business first. That started at the smallest scale, got some proof of traction, then took that to an investor, just so they know they got something.

In the first 30 days, we attracted this many people that have interest in this, we beta tested it. We did a landing page, whatever the case may be. I can’t explain it. But good ideas always find money, if it’s in the hands of the right person.

Then you look at all these businesses we have around who all got investors, if you really think about. You had an investor in light, this cable company, all these are businesses. Everywhere we look around, there’s a business, as far as I can see, from the humidifier to the carpet company, they all figured out how to get off the ground.

Robert Leonard  30:53

Let’s talk about gaining traction getting off the ground, that’s probably the hardest part when somebody starts a business. Walk us through the most important part of a marketing plan and how we can attract new customers.

Sean Castrina  31:03

The most important thing is you need to find out who your target customer is. You got to be like an FBI profiler. So let me kind of take you through really quickly how I would do it. Let’s say you have a product. You sell Dixie cups, it really doesn’t matter what but let’s just say you sell a cup with something very generic.

If you are going to make a cup, why would anybody be interested in this cup? I mean, it’s a very boring thing. It’s just a cup. Well, maybe you make it so that it doesn’t ever get hot so you can never burn your hand on it. Let’s say it’s got this incredible grip on it, or you can put all your favorite college teams on it. The point is that you have to make the product unique. That’s what I’m trying to get at.

You just can’t be average. There’s got to be something about what you’re selling that’s different from your competition, that customers will say I want that.

The first thing is don’t bring something pathetic to the marketplace, you got to bring something that stands out, solves a problem, meets a need that is unique that nobody else is doing or it’s unique. Then you got to find out who’s most likely to buy it at your target customer. Then you got to find a message and or an ad that appeals to them that gets their attention.

That’s how you beta test it. You beta test your social media ads or it can be traditional media, it can be direct mail, but you beta test it to make sure that you have a product and a message that resonates and you don’t bring something to the marketplace until you’ve tested that.

I think that’s the biggest problem people make is they think the business will work but they never test it. Then they go full flight with it with no beta testing. Ten they get upset because nobody was interested in what they thought was a great idea.

Robert Leonard  32:37

So let’s zoom out from a marketing plan for a minute and talk about a broader plan and that’s a business plan. What makes for the world’s greatest business plan?

Sean Castrina  32:44

Well, what makes it work is simple because I looked at all the business plan books when my son was starting his company. I was wanting him to do some type of business plan. I was going to take him through it without him kind of knowing that he was going through a business plan.

However,  I do think people need some type of plan. I always say if I gave you a free vacation right now, you probably wouldn’t get in your car and leave somewhere. You probably wake up the next day and go okay, do I want a summer vacation or winter vacation?

But if you want to go to another country, do you plan a little bit? Am I gonna fly there, drive there, take a Winnebago or RV? I say just spend that much time on your business plan.

Find out what makes you think this idea is going to work. I will give you some simple questions like just a generic word: dinner. You have this business idea, pitch it to me why I think this is going to work because it’s such and such. Okay, that’s fine. Is there any competition in that space? Who else is offering what you’re offering? What about your product is different? How are you going to sell it? Is it an affiliate? Are you going to do retail? Are you going to do it online? How are you going to sell it? What’s going to be your pricing? What are your costs? Who do you need to get the team on the field to offer what you’re offering?

You can see where it just leads down this rabbit trail. You can see I always when people say, “I don’t need a business plan.” They need to answer all those questions. Do you need licensing? Okay, where are you going to put your business? Do you even need a location for it? Does your business need insurance, even if it’s something like errors and omissions insurance on copyrights or whatever the case may be? Do you have patents, trademarks, copyrights that are important?

Again, I keep going all the way down the line? How are you going to do payroll? Even if it’s just yourself? How are you going to do your taxes? Are you going to be an LLC or a corporation?

My point is that just going through that is that there’s a variety of things that to set up a business and to go into a business plan gives you confidence that it’s going to work. You do a business plan so that you can kind of look at this business from 10,000 feet and then kind of zoom down on it.

For example, if you go to a business and you’re like oh my gosh, we got 1000 competitors. We’re all offering the same thing. I don’t think I’d go into a business with a great deal of confidence. Those of them going into a business, I really feel like I have something unique or I feel like I have a pricing advantage for that. I do some test marketing. I really find that my message is resonating. I found a way to communicate this and attract customers.

Now you got some. feedback and that’s what your business plan does. It flushes all that stuff out. How long should somebody spend on a business plan? So you can do a business plan in a weekend, it should never take more than 30 days, but I’m going to zip through how easy a business plan is, just so that you get an idea.

I always say why do you want to be a business owner in the first place? Because I want to know your “why.” Because if that doesn’t motivate you, then you’re going to never do well.Why do you believe this business will succeed? What resources do you lack? And you need to launch and grow this company? What are you selling? And why? Who’s your competition? Why will your customers buy from you over your competition? What will your cost be to produce what you’re selling? What are your profit margins? Describe your target customer? Choose a business name, what will I need to get this company off the ground?

These are simple things. But if you don’t do these, there’s going to be a mistake because every one of these are important. What’s your company name? Can you get the domain for it? That’s a huge thing. I’ve had people present to me pitch me a business and I have a great name. I go on GoDaddy right in front of them. You have to be able to get the domain for it. Then are you going to have a tagline?

In other words, what’s your branding position a bit as you’re selling your business? What is going to be your one thing that’s maybe you’re going to create a logo around it that can keep going down and down?

I tell people just take a weekend, just take two days, and your business will be better off because it and statistically businesses that have a business plan statistically do better. I think it’s nothing more than preparation. It shows a little bit of discipline.

Robert Leonard  36:42

Yeah, it doesn’t have to be a 30 or 100 page document that you would do for college like a college research paper for your business plan.

Sean Castrina  36:49

I’ve done my business plans on like three pages of a legal pad. I typically take a legal pad that never gets more than 10 pages in. It’s never anything less than I’ve done them in one page, front and back of it. It just depends. But you got to do something if you just think about it, just common sense. Don’t you think you should know who your two biggest competitors are? Don’t you think you should know what their pricing is? Like what their prices are?

Don’t you think it’d be smart to know who’s most likely to buy your product or service? Like how can you run an ad effectively if you don’t know your target? How you market somebody over 60 is different than how you market somebody between 30 and 50. How you market a millennial is completely different.

So my point is, until you know the typical person that’s going to want what it is you’re selling, you’re never going to have effective advertising. I’ve only gone very little but I only asked 25 questions in my book and that I drilled down a little bit on him.

Robert Leonard  37:48

In your most recent book, you wrote that there are five golden rules for successful startups. Walk us through those five golden rules and explain to us why each of them are important.

Sean Castrina  37:59

The key thing in regarding startups in a halftime I don’t know what I get all excited about an idea. The most important thing when you’re getting a startup is I think you got to vet your idea.

I think the one thing that most startup founders do, they get the idea. They swear it’s good. They don’t vet it. They don’t expose it to anybody. You got to vet your idea, you got to put it up against some criticism.

Next is you got to know why people are going to buy from you got to have a unique selling proposition. You got to have something that makes you different. Then you got to market like crazy.

The biggest problem with startups is they don’t put enough money into marketing. The first thing that gets cut in a startup budget is advertising. You got to put money in advertising.

Next is staffing. Our tendency is to staff a business, we go get a family member somebody and they’re cheap. We get them because they’re on the cheap, and they don’t move the needle in your business. They just don’t move the needle.

Ten sales is the most critical thing. If you can’t sell your product, you’ll be out of business. If you’re not a good salesperson, you better bring a better partner with somebody who really understands sales.

These are five really quick things, but at the end of the day, business is so simple. If you really think about it, you have to attract customers and sell them and forget everything else. You must have something that somebody wants, you have to attract them and sell them. If you accomplish that you will have a successful business. If you fail at that you will be out of business.

You look at Blockbuster Video, Sears, and JC Penney, what happened? They stopped attracting customers to buy their product. They could no longer pay their expenses and they closed their doors. That’s what kills every great business. It kills every great startup that thinks they’re going to be a good startup.

If you attract customers, and they’re buying from you and you’re selling it at a price where there’s a nice margin, you’re going to be in business forever, but you stop any of those three things and you’re out of business.

If you stop attracting, stop selling or you can’t sell it for price to meet, you know, profitable margin. You keep lowering your prices, keep trying to be cheap. You do those three things when you’re out of business.

Robert Leonard  40:05

You also wrote in that book about the seven biggest mistakes that startup founders make. Walk us through those seven mistakes and how the listeners of the show can avoid them

Sean Castrina  40:14

Narrowed down to like the three. So I’ll make it really easy for them. I kind of went over them a little bit. But the biggest problem startup founders make and I go back to it, I said it before is that you are pleased with your idea. Don’t just assume it’s a good idea. Bounce it off an older businessman or somebody within the industry.

The biggest problem startup people make is they take this baby, they drop it into the marketplace, and it’s cotton picking incinerated. The marketplace doesn’t care. It only rewards good ideas, where there’s a need for it solves a problem you bring a bad idea to the marketplace is going to get hammered.

Second biggest problem founders making is they have no idea how they’re going to attract customers. They think they do, but it’s not a test. Again, if you can’t attract customers, if you haven’t figured out how you’re going to attract customers, how are you going to market if you can’t do the loop of attracting and selling customers? You’re done.

I think the third thing that I’ve seen that startup founders struggle with the biggest thing is that they don’t surround themselves with enough talent in the critical positions that you need in a company. There’s always something you need and you do it cheaply. I would encourage you to partner with somebody who’s great at it, you gotta have somebody who’s great at sales. If you have an internet business, you need to have somebody who understands that space.

You go into a business, and there’s just not enough talent around you to make it into a great company to scale it. I find they’re the really the three biggest mistakes that startups make and why they fail so quickly: untested idea, they have no idea how they’re going to market it, they don’t know how they’re going to attract customers, and they just don’t attract enough talent on their team to scale the business and to take it somewhere.

Robert Leonard  41:54

What has been the most influential piece of advice that you’ve ever received? It can be about business, we want entrepreneurship, or even just life in general, what piece of advice has had the biggest impact on you?

Sean Castrina  42:06

I remember just three things that stand out as advice I got working with people. Number one, that I was being extremely hard on somebody that I thought should be fired. A guy pulled me aside, because I remember, as a human being I was just going to tear this person apart. He just kind of looked at me and said, “Remember, it’s a human being.”

I didn’t even think about that. You’re getting ready to just blister somebody, you don’t need to do that. So I thought that was really good advice.

Another time, I was in a staff meeting. I’m a pretty energetic person. I’m throwing out all these ideas. At the end of the meeting, when everybody’s gone, the CEO says, “Plant an idea like a seed, not like a bullet.” You want to plan it so quietly,sometimes the people in the room will actually think it’s their idea three months from now. I love that.

The final one, I remember going into a big meeting with a CEO in my first company. It was great working for him. I was an intern, I was kind of like, “What’s going to happen?” He said, “I know what’s going to happen.” I go, “How do you know? We haven’t had the meeting yet?” “Because Sean, I don’t go into any meeting that I haven’t already determined the outcome.  I’ve had five meetings to make sure this meeting goes the way I want it to go.”

Sure enough, we went in there and everything went perfectly as he told me. It is the meetings before the meetings that make the meeting good. There are just three things that over the years I’ve had the opportunity to learn and plant ideas like seeds.

Remember, when you get ready to eviscerate somebody, they are a human being. It’s the meeting before the meeting that really makes that meeting go well.

Robert Leonard  43:41

Sean, thanks so much for joining me today. I know this conversation for me as an entrepreneur has taught me a lot. I’m just at the beginning stages of becoming an entrepreneur. It taught me a lot. I know we have a lot of entrepreneurs that listen to the show, or who are just interested in entrepreneurship. I know they’re going to get a lot of value out of it, too.

Sean Castrina  45:27

I really appreciate it. Thank you.

Outro  45:36

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