BACK WHEN I WAS SEVEN, my parents took me to the house of a friend of theirs for a barbecue. I knew him, he was our milkman, but what I didn’t know was that I was about to get the best business lesson of my life from the Milkman.
When we arrived we pulled up to a massive house with really expensive cars and I was really confused. I asked my Dad, “Dad, is the Milkman rich?” He told me to go see his friend and ask him about it.
Being seven years old, I was extremely tactful of course. “You’re our Milkman right? … how does a Milkman get to be rich?” His reply set me up for where I am today.
Now, remember I was seven so this is paraphrasing his response… “Son, you don’t make money selling milk, you make money selling milk runs. I buy a milk run, build it up and sell it on, then I go and buy another run, build it up and sell it on. Each time I sell a milk run, I have another big amount of cash to invest. Most people think that running the same company all their life is the way to go, but it’s not, it’s about making capital every few years and investing it.”
The essence of what he taught me is that you don’t make money running businesses; you make money building them up and selling them. You have to realise a capital gain to be able to use it.
Yes, of course the profit and wages you pay yourself along the way are great, but shouldn’t you at least examine what you might get if you put your business up for sale.
Many business owners we work with are amazed at what capital value their company has. It’s often enough for people to retire on, but they don’t know it yet.
Think of it this way: if every couple of years you bought a rundown house and renovated it and then on sold it, you’d make good money.
But what if you bought a small beach shack and over many years built it into a beachside mansion, what would it be worth today?
I just think you should be looking at business the same way. You have invested a lot of time and effort building an asset, and it may be time to sell it and turn your skills to another business or opportunity to build. The best part here is that, unlike property, business values are solely determined by the revenues and profits.
Buying a run down or — as the Milkman did — a business in a newly developing area and building it up over a year or two adds great capital value. But for many business owners, what if you built it over 10 or 20 years, where would its value be?
Now, here’s the challenge. Some of you have positioned yourselves so tightly into the day-to-day of the business, that it’s a trap. In other words, the business won’t work unless you’re there. So, when you go to find out how much it’s worth, the number will be a lot lower than you expected.
Not only that, if the value is lower than you expected, I’ll bet your not pulling anywhere near the profit you should be out of it month-to-month.
If you’d built it with a view to selling it, I’m certain you would have done a few things differently and made it not so reliant upon your skills, your ability and your work ethic. Every business owner has a choice and possesses the ability to learn how to make their business work without them.
If your plan is to sell it, how can you extract yourself over the next year or two? Who knows, if it runs without you, then maybe you’ll want to keep it.
And the bottom line is: if you value your time in building an asset, then sell the asset and use your time to build another and another.
Let’s say you do find a mentor or hire a consultant. Chances are, a good mentor will guide you, while a consultant will do some specific, task-oriented work for you and leave.
Only a coach (and only a good coach) will hold you accountable to delivering on your own results.
While I sense some of you bristling from the idea of having to report to anyone (after all, isn’t that why you got into business for yourself in the first place – so you could do things on your own?), having an objective third-party person who is focused on helping you actually achieve what you’ve set out to do can have a massive impact on your business in a short amount of time.
For many owners, the idea of being held accountable for producing results hinders them from ever moving forward – because they mistakenly believe they should be free to act and do as they please, even if the business isn’t going anywhere.
The reality is, the freedom of business ownership only happens on the back-end, after the hard work is put in on the frontend. And in most cases, owners work harder if they are kept on track by a good coach looking over their shoulder.
There’s also a harder reality to those who think they shouldn’t be accountable to anyone or anything. While those owners may not feel the need to report to anyone, the market place is always there, and it is the harshest judge of all.
Ask any successful entrepreneur how he or she got to where they are today, and they will say they had someone they could count on to question them, drive them, offer answers and advice, and support them in their vision for success.
Put another way, it’s been decades since any team or individual in any major sport has won a championship without a coach on the sidelines to guide training, strategy and game plans.
Even Bill Gates had a Steve Ballmer. Even Warren Buffet has a Charlie Munger!
Even with all the knowledge possessed by Mr. Gates and Mr. Buffet, they were respectively guided and held accountable by Mr. Ballmer and Mr. Munger.
Knowledge and accountability.
If those two words can work for some of the world’s richest individuals, they can certainly make a big difference for you.
CHANCES ARE THAT you went into business for freedom and lifestyle. Those are what I call the “positive” reasons for getting into business for yourself, as opposed to the “I just got laid-off and need to hire myself because no one else will at this point” reason.
Nevertheless, the time has probably come in your company where freedom is still a dream and the lifestyle you envisioned didn’t include working 90 hour weeks with little time off for yourself or your family.
The hard truth is that your business has probably reached the level of your own incompetence. That’s the bad news.
The good news (if you are willing to accept that uncomfortable fact) is that incompetence, ignorance and just plain old ‘not knowing’ can be cured very simply: by getting, acquiring and applying new knowledge.
Most people think businesses fail due to lack of cashflow or capital. While those certainly are factors, most businesses I’ve seen fail do so because of lack of knowledge.
Had all those owners who had cash flow or capital issues only known more, those issues could have been turned into factors of production, rather than of failure. Simply put, if you have cashflow problems, it’s a matter of you not knowing enough about cashflow. If you have employee issues, it’s because you don’t know enough about people and managing teams.
If you have sales problems, you don’t know enough about sales. If you have profit problems, you don’t know enough about how to get profit. That’s where knowledge comes in.
To cure your cash flow problems, you need to learn more about cashflow. To solve your people problems, you need to learn more about people. To remedy your sales problems, you need to learn more about sales. And to get more profits, you simply need to learn more about how to get profits.
So where can you possibly go to learn?
One thing is certain, you don’t need a university degree to succeed in business. Besides, the bookstores are full of books, CDs and DVDs. The level of information and education that is available nowadays is stunning – and most of it is free for the taking. Why make the same mistakes others have already made and found solutions for? That’s what learning and knowledge is all about. And the application of that knowledge is where true wisdom comes from. Because until you actually do something even the term “action” is only a theory.
Knowledge is both the key and the cure – and the first word you can use today to turn your business around for the better.
In this article we continue to look at developing your niche. So what’s your best-selling product... and what’s the profit margin on that product?
Do you have a “best-seller”? Do you know what it is? What is the margin on that product? Don’t know?
Find out! And, when you do, raise the price on that product by at least 10 per cent.
Then, ask yourself if you could simply focus on that product (and perhaps the accessories for that product or service) to create a more narrow, yet more highly profitable business.
Say you own a full service restaurant, but the morning breakfast crowd is the bulk of your volume... can you become a breakfast-only cafe? Can you focus on great coffee and freshly-squeezed juices? Can you become a “premium” priced café versus a “discount” full service restaurant?
Take a look at your business. Learn your numbers and know what it is you are selling. You just might discover the “gold” you are looking for outside of your business actually exists within it.
How do you get new leads and customers... and how much do you spend to “buy” your customers?
Do your marketing efforts pay for themselves? More importantly, do they make you money? Do you know how much it costs to get a potential customer to your door? Through your door? Or how much it costs to convert that lead into a sale?
If your advertising budget for last year was $100,000 and you can’t tell if it brought in new customers or added new dollars to your bottom-line, you have a serious business issue you need to resolve right away.
Learn as much as you can about how to turn your business into a marketing machine. Get comfortable with the idea of marketing and of “buying” new customers through advertising. If buying a new customer costs you $30, but the lifetime value of that customer is $5000, you have a great business and marketing program. But if those numbers are reversed, you won’t be in business long. As the late management guru Peter Drucker wrote, “the purpose of business is to create and keep a customer.”
I’ve met and known a lot of very successful business owners and entrepreneurs, and there are some in that exclusive club who run extremely profitable businesses with low overheads and very narrow selections of products and services.
Not only should they be envied, they should be copied. And the basic ingredients in their recipe for success are these simple steps.
Just remember simple is not always easy. But it can be very, very profitable.
ONE OF THE BEST ways to make your “small” business big is to make sure you have healthy profit margins, and that you have identified a niche in the market. Once you identify that niche, it’s your job to dominate it.
There are a number of real world “big business” examples to justify this seemingly counterintuitive strategy. But those big companies such as Google, Porsche and Apple... all started out as small companies.
Today, both Porsche and Apple own very little market share compared to other companies, but they own higher profit margins – and they dominate their category’s niche.
Google wasn’t the first player in the search game. But their narrow focus on “search” helped them dominate, while finding huge streams of turnover and margin from ad sales.
One of the keys to finding your niche and a path toward domination is to focus on what you do best.
• What are your company’s strengths?
• How are those strengths reflected in your current product or service mix?
• How can you leverage those strengths across your entire company?
My definition of a properly “niched” business is a business that doesn’t need to compete on price. In fact, a business that properly dominates its niche never competes on price, and yet wins out on the majority of business as others try to cut prices to compete.
Identifying your strengths
So, how do you find your company’s strengths? Here are some simple questions you can ask yourself to help this process:
Are you selling what you want to sell... or what people want to buy?
A lot of owners get comfortable with what they think should sell, rather than what their customers really want to buy. What’s the best way to see what your customers want? Ask them.
Call up your five biggest and best customers and ask them what they like about your business and what else you could offer that they want to buy.
Chances are, they are buying some of those items from another company (or even a competitor) because you don’t carry that product or offer that service Or, worse, you do carry those items, and they simply don’t know about it.
Communicate with your top customers and in most cases they will tell you exactly what they are looking for to make their lives and buying experience easier and better.
I'm often asked how a business mentor or a Business Coach can help a struggling business succeed or make a successful business better.
In my mind, the main value of having a mentor or a coach is in having someone beside you who knows the "ins and outs" of business, and more importantly, knows how to grow profits consistently versus simply cutting expenses as a way to get more money into your pocket.
Generally, there are 7 main questions most people ask about mentoring and coaching, and the answers here can hopefully clarify the benefits for you and your business:
1)How can business mentoring or business coaching help my business? They can guide you to greater success by helping you implement a series of proven systems and strategies designed to help your business grow. By focusing on proven systems and holding you accountable to your results, they may be one of the most important and influential people you could invest in for your business.
2)How do I choose a Business Coach? This is a very personal decision, and the best way to decide on one is to make sure you have a good rapport with your mentor or coach, and that your business mentor or coach has the best interests of your company (and you!) in mind.
3)What format does business mentoring or business coaching take? Coaching differs from conventional business consulting in that the process involves using a series of continuing and on-going questions to arrive at conclusions and answers that work for your business. Depending on the program, they can work with you in a group setting or in specialized one-on-one coaching or business mentoring sessions.
4)How much does business coaching cost? It depends on the program, but having a business mentor is less expensive than you might think. For the cost of a part-time person, a business mentor can work with you to boost your revenues and profits. In fact, it is their goal is to work to "find their fee" and pay for the cost of services within a period of several months.
5)How do I book a business mentor or business coach? Simply contact one in your area, who will then set up a complimentary session with you to review your business, your goals and your objectives.
6)Will a business mentor or Business Coach really work for my business? In a word, yes! Because of proven and systematized set of strategies that have worked for thousands of different types of businesses all over the world, a systemized process can for your company.
7)How can I tell if a business mentor or Business Coach is effective? If your business runs better, earns more profit and attracts better customers and better team, then your business mentor has worked effectively for your business.
Sometimes, they may make you feel uncomfortable, or hold you accountable for your results, or they may push you further than you thought possible. If so, then your business mentor or coach has also done his or her job.
No matter what your goals or objectives, or where your business might be right now, a good business mentor or coach can work wonders for you and your business!
Especially if you are in a very competitive business, pricing is always an issue.
If the price is too high, you give away business to a competitor.
If the price is too low and you cut your own throat.
The easy way out is just to discount and hope you make it up in volume.
However, that is a risky strategy, as many out-of-business companies have discovered. I like to say, there are no secrets in business, there is just information you don't know yet. So when it comes to pricing, here are 5 great ways to get your pricing right:
1)Stop discounting. Never discount. All it does it just takes money out of your pocket and off your bottom-line. Realize you need to profit in order to survive and price your product and service accordingly. You may lose some customers, but that's okay. Your competition will scoop them up and will be forced to figure out how to profit from the "price shoppers" they now own.
2)Use different margins for different products. There is no rule that says all products need the same margin. In reality, slower moving items need higher profit margins. You can afford a smaller margin based on high sales volume. So figure out your margins and volume, then price accordingly.
3) Know the difference between margin and markup. Margin is based on sales price and markup is based on cost. This will save you from discounting a 100% markup with a 50% off sale. Trust me, this is more common than you think.
4)Take all costs into account. Know all your costs. Even "little" things like credit card processing fees typically add 1-2% on every transaction and really add up over time. Know them, account for them, and make sure your prices cover them.
5)Find ways to add value. Instead of discounting, add value. Ask yourself if there is there a way you can add value to your product or service. This "value added" proposition means you can "give away" something that won't come out your profits. Done right, it can also add to the experience your customer has of both the transaction and your company.
Know going in to the pricing war that you won't win every battle.
But in the long-run, the extra profits you'll make from your new pricing strategy will win the war, and will ultimately take your company great success.
No matter where you live in the world right now, the seasons are on the verge of changing. And, just like the seasons, the business cycle is changing as well.
Although the U.S. continues to work its way out of its "economic winter," parts of the Asia Pacific are in full fledged "economic summer."
Nothing lasts forever, however. Just as the season will inevitably change, so will economic fortunes in those regions experiencing either a "winter" or a "summer."
For experienced business people, the ups and downs of the "economic seasons" are just part of the game.
But for those who have not used to the ups and downs of business, the current downturn in the U.S. and in different parts of the world is as unsettling as the current boom is in countries that have only recently begun to experience the "fruits" of development and globalization.
In some countries, "economic winter" has prompted policy makers to put up ever more walls and barriers to business, while in other countries, the promise of "economic spring" and "economic summer" have prompted people who never would have thought about running a business to start their own companies.
I like to say there are no mysteries in life or in business, just information you don't know yet.
And one of the best pieces of business advice is to understand business and economies rise and fall like the seasons.
That information can equip you for the next downturn and the next boom.
How?
By realizing that for every 10-month downturn (at least in the U.S.), the subsequent boom lasts an average of 50-months.
During an "economic fall" and "economic winter," you'll want to know your numbers inside and out, cut the costs you don't need and look to create a leads generation program and marketing program that brings "A" and "B" level customers to your door.
Likewise, in "economic spring" and "economic summer," you'll want to make sure your operations are "lean and mean" and use your profits wisely. In "economic winter," you are preparing to gain in the upcoming spring and summer.
In "economic summer," you are preparing to ride out the downturn that comes with fall and winter.
As sure as the seasons change, the business cycle will, as well.
The market has a way of chasing out those companies, products and services that operate on the margins.
"Economic winter" - while brutal for those in certain categories and industries - nevertheless offers opportunities for companies that have prepared their balance sheets and mindsets for change.
More money has been made in downturns than have ever been made in a boom - and I expect that trend to continue as the U.S. emerges from its current downturn.
As the recovery starts to unfold, watch for signs of the next hot or over-heated summer.
That will mean the cool touch of fall is right around the corner.
It will also mean you'll have the information and resources you'll need to get through the winter, and prepare for the following economic spring.
As a small-to-medium sized company grows, it becomes harder to effectively communicate across the organization. Whether within or between departments communications must be optimized for organizations to execute at their peak. The key is to recognize each employee's preferred style of information exchange.
Modern personality assessment models are very good indicators of a person's preferred communication style. When managers don't recognize those inherent differences, misunderstandings often ensue and lead to project delays or worse, conflict. Acknowledging those differences, and working within their parameters, significantly improves the communication flow.
The most respected assessment tool is the DISC Behavioral Model. DISC is an acronym for Dominance, Influence, Stability, and Conscientiousness, the four core personality styles the tool identifies. Recognizing a person's predominant style provides exceptional insight into his/her communication preferences. Here are the key characteristics of each category:
Dominance:
Employees with personalities that fit into the Dominance category tend to be driven, demanding, aggressive, innovative, and competitive. These people are typically goal-oriented and relish personal challenges. When communicating to a person with a Dominance style, observe the following:
- Speak directly and be brief
- Focus on the task and stay on topic
- Approach the issue logically and discuss the desired results
- Identify opportunities, challenges, and obstacles
- Describe win/win situations
- Maintain space between yourself and the employee
Those who fit the Dominance category can facilitate communications by improving their listening skills, becoming more patient, and elaborating with more details.
Influence:
A common job title for those who rate high in Influence are sales and customer service representatives. These employees are charismatic, inspiring, optimistic, and personable. These are very social people who have a need to verbalize. When communicating to this category, one should:
- Allow initial time for casual conversation
- Have fun and lower the intensity level
- Ask the person to express feelings and opinions
- Seek their creative ideas
Influence personalities may have poor attention to detail and can appear superficial. They have poor follow-through and will often talk "around" a subject. Expect to exercise patience with these employees. Influencers can improve the communication process by becoming more organized and specific in direction and praise.
Stability:
This style will most likely be found among the company's trainers, marketing staff, and administrative assistants. Their indicators are: adaptable, systematic, patient, predictable, and consistent. They are needs driven - both theirs and those of the people they help. When communicating with a person with high Stability, one will want to:
- Be patient
- Draw out the employee's opinion
- Discuss facts logically
- Be relaxed and schedule sufficient time for discussion
- Indicate how the employee will benefit from the solution
Communications from this style may be non-emotional, indecisive, and lack assertiveness. They will often provide too many details. Those people who indicate Stability should work on their assertiveness and embrace change to improve communication.
Conscientiousness:
People with a core style that is Conscientious are often working as accountants or engineers. They follow rules and are very meticulous and quality-conscious, often to the point of being perfectionists. When communicating with the Conscientious style, it is necessary to:
- Cite data and facts
- Examine every option
- Stay on topic and minimize casual conversation
- Focus on quality
- Avoid "new" solutions in favor of proven ideas
- Respect the employee's personal space
Expect excessive communications from someone high in Conscientiousness. Be patient as they must process all information and will be slow to proceed. Conscientious people should consider improving their patience, building rapport, and becoming more accepting of differences.
By keeping these four styles in mind, managers will be able to offer information that the employee can more readily absorb, thus making communications more effective and productive.
Can you afford to build your business on your own set of personal values? Maybe a better question would be, “Can you afford not to?”
When I first started in business, I adopted a personal credo for how I would approach business. In my current company, we use our “14 Points of Culture” as our guiding principles for how we interact with our customers, and with each other in our teams.
Does having these guiding points help me run a better business? I believe so because in the constant push, pull and whip-saw of daily business, it’s easy to get pulled around and to get off course. It’s like the example of the rocket that drifts just a degree off its planned trajectory. Soon, the rocket isn’t in the air – it’s in the ocean!
So how do you start to develop a “values-based” business for yourself? First, you have to define the values that are important to you and the type of company legacy you want your work to create.
Give the company a standard and a guideline of behaviour to measure and judge its activities – and a benchmark to which behaviour can be held accountable.
You see, accountability in business is one of the main factors I see that determines whether or not a company or an owner will succeed in business. Not only do you have to be accountable to the numbers, to your customers and to your employees, you should also be accountable to a set of principles that define the vision, mission and culture of your company.
One of the more interesting CEOs who talks about this in a lot of detail is John Mackey, who heads the US-based Whole Foods Market, a natural and organic market that has experienced tremendous growth over the past decade.
Mackey makes a compelling case that many organisations have either forgotten why they exist or what their higher vision is for their operations. In contrast, those organisations or companies that have identified their values and use them to guide operations are better off in the long-run, and also have a very unique and distinct competitive advantage in the marketplace.
He calls certain higher values our common ‘timeless ideals’ – shared values to which we can all aspire, and appreciate when we see or experience them:
1) The Good: Service to others to improve health, education, communication and the quality of life.
2) The True: Discovery and furthering human knowledge.
3) The Beautiful: Excellence and the creation of beauty.
4) The Heroic: Courage to do what is right to change and improve the world.
Do any of those apply to your business right now? Could they? Or, what if you could organise your existing operations around the higher values we all aspire to, as well as your own personal values?
I know a lot of my friends and associates looked at me in a funny way when I first touted my company’s vision of ‘world abundance through business re-education’.
But I know that showing owners how to run better businesses improves not only the quality of their lives, and also the quality of life in their communities.
Having a set of values for your company and building a culture around those values isn’t easy. Some people may even snicker at your attempts or mock the idea you could actually build a profitable business this way.
But in time, and over time, you, your company, your employees and your customers will benefit from having a set of values and principles to which you can aspire – and to which you and your operations can be held accountable.
I like to think the success of my company and companies has been assisted by a clear vision of serving others in an extremely profitable way, and my own set of entrepreneurial “beliefs”.
While I suggest you work on your own list of ideals, values and beliefs to guide your efforts, here’s my ‘Entrepreneurial Credo’ I’ve used for more than two decades:
1. Be Organised.
2. Be Dedicated.
3. Be Confident.
4. Be Appreciative.
5. Be Optimistic.
6. Get Educated.
7. Be Thrifty.
8. Be Sociable.
9. Be Alert.
10. Be Dependable.
11. Be Decisive.
12. Be Human.
13. Be Tough.
14. Give and You Shall Receive.
And I’m not ashamed to say this list has worked pretty well for me.
BACK WHEN I WAS SEVEN, my parents took me to the house of a friend of theirs for a barbecue. I knew him, he was our milkman, but what I didn’t know was that I was about to get the best business lesson of my life from the Milkman.
