Ethical Business Builder's Weblog

Learn to ethically buy, build, and sell businesses by following my journey.

Employee Motivation – It’s about winning!

Posted by ethicalbusinessbuilder on November 21, 2009

Have you ever hit a game-winning shot, scored the game-winning goal, or converted the game-winning touchdown?

How about setting a new Personal Record for swimming, running, biking, car, quad, or motorcycle racing while taking first place?

It feels good, doesn’t it? As a matter of fact, there are few things in life that will ever rival those feelings of accomplishment and the adrenaline rush that ensues. For the rest of your life, those moments will be remembered and often relived as you just love to tell those stories. Athletics have the power to evoke such an amazing feeling because they bring together a few main things in one place:

  1. Competition – No one is letting you win or succeed. Actually there are plenty of people hoping you fail so that they can win instead.
  2. Recognition – When you have the ball, or the wheel, or are on the track, it’s up to you. All eyes are on you whether it’s because you’re doing well or failing. When you succeed, they’re all cheering for you!
  3. Public Pressure – You are not behind closed doors. As I pointed out in my blog asking Are you putting yourself out there for criticism? public pressure forces us to be good or embarrass ourselves trying.
  4. It’s not easy – By definition, if everyone could (or even wanted to do it) there would be no competition. You worked hard to acquire the skills and talents you have, that brought you to that moment of victory. In other words, you’re doing something you are good at.
  5. Exclusivity – You’re in front. Everyone else is behind you. Only 1 person can be in that position.

So what does that have to do with employee motivation and business building? Everything. If you can understand and appreciate that feeling and those emotions, you understand what motivates people.

Though I used sports as an analogy there are parallels to this feeling of accomplishment throughout our lives. Here are just a few other ones so you can see the universal appeal of accomplishment:

  1. Getting the girl (or guy) – Especially if you had to take a risk to do so by approaching a stranger and your buddies were watching.
  2. Closing the sale – Especially if you’re paid on commission and you’re in competition with either yourself to do better or to be the best in your group.
  3. Buying a house or car or something of great value – Generally this provides a major sense of accomplishment as not everyone has the ability to do this (except for a few years during the mid 2000’s when anyone could get financed).
  4. Winning a competitive bid – You proved that you are the best and it felt good.
  5. Making a profitable stock transaction – You bought low, sold high, beat the market odds and beat all the “experts” while doing it.
  6. Getting recruited – Instead of being “hired”, someone actively and aggressively sought you out because of your talents.

The list can go on and on… My underlying point is simply this – If you, as a leader and manager, can find a way to bring Competition, Recognition, Publicity, Exclusivity and a Challenge to your business, most people will rise to the occasion and LOVE their jobs because of it.

If you can remember back to those 2 hour practices, or twice a day camps in the summer (3 runs/day at cross-country camp), it was not always easy, fun, or painless. As a matter of fact, the majority of the time it wasn’t fun at all. However, human beings are generally willing to sacrifice and struggle through all of those obstacles because the rewards of success, particularly the feelings that come along with it, are worth it.

Again, though I use sports as my analogy, this lesson certainly isn’t limited to the sports arena so don’t let that prevent you from getting the point.

The other day in my office, I started to ask some of my team about their experiences with sports. Even the ones who “sat the bench” understood what I meant by that great feeling of accomplishment at hitting the game-winning home-run. Ironically, the one who admitted to being the bench-warmer instantly latched on to our current inter-office competition. Every day she gets so excited about it she tells me about every single customer she signs up for this program and then “trash-talks” me for not getting as many as her. She’ll even walk into my office to receive a high-five to commemorate her latest score. Talk about fun and excitement at work! What may be most impressive, is that for all intents and purposes, her job is “secretarial.” Something most of us would never consider to be competitive or exciting.

Let’s take this concept one step further. According to Marcus Buckingham in his book “First, Break All the Rules: What the World’s Greatest Managers Do Differently,” the primary motivator for most people at their job is not how much they make. The primary reason for someone leaving or staying at a job is their relationship with their direct superior (remember that coach you hated or loved?). Take a moment and recall some of your favorite stories about your life. How many of those were directly related to your income at that time? Even your stories of accomplishment at work are rarely simply “I got a raise.” The accomplishments you made to get that raise are what makes for a great story and the true sense of accomplishment. The raise was simply the reward (i.e. winning the game) for showcasing your talents.

So to take this concept full-circle, compensation should be tied to these competitions and other measures of success. This is why I’m not a fan of an hourly wage. An hourly wage does not incorporate a single one of the 5 items that motivate people to make sacrifices for success. Admittedly, several of my team members are at least partially compensated hourly. The biggest problem with this is obviously that it breeds complacency. Once you’re used to getting that $10/hour, you are no longer motivated to keep working hard to get it. It’s a given; it’s guaranteed; all you have to do is show up.  What kind of motivator is that???

Great coaches, great leaders, and great managers find ways to motivate their team members to do their best by rewarding them for their talents.

To your “motivational” success, Bryan

P.S. Since you’re the coach of your team, make sure your competitions and motivators encourage both individual and team performance. ER9Y2V4W6YK5

Posted in Business Books, Business Psychology, Leadership, Team Building | Tagged: , , , , , , | Leave a Comment »

How to fix your business FAST – Part 5 – Build Recurring Revenue and Prioritize

Posted by ethicalbusinessbuilder on November 17, 2009

There are 3 reasons to build recurring revenue to fix your business:

  1. It can generate immediate cash.
  2. It will generate consistent cash over time.
  3. It will increase the value of your business if you’re looking to sell.

Since your business is struggling, building recurring revenue by offering payment plans for your equipment and services is not what we’re focusing on right now. At the moment, we need to generate cash today with little up-front investment, which I covered in detail in my blog on this topic. For that reason I won’t spend any more time on it again. Since August 2009, my business has created an additional $314/month in recurring revenue. That doesn’t sound like a lot (and it certainly isn’t considering our potential), however we’re just starting this program, everyone is still learning how to sell it, and our up-front costs, for a predictable $3768/year, are very close to nothing. Our goal is to have $500/month by 2010 and $3000/month by 2011.

In reality, the idea behind building recurring revenue and improving your sales and marketing is the same. Your goal at these last 2 steps is to develop a way to create consistent cashflow. Whether that means you need to sell something new to your customer again and again, or you need to bring in new customers regularly, a great sales and marketing system will generate predictable income for your business. I would venture to suggest that if you had a sales system in place during boom times, you wouldn’t have nearly the problems you do now in a slow economy.

So let’s summarize once again what it takes to fix any business in trouble (and though I write passionately for small businesses, nearly everything can be applied to Fortune 500 companies):

  1. Change yourself - By making a commitment to do so, particularly by working ON your business instead of IN it, and making by making lists.
  2. Know your numbers – If you don’t know where you are, you have know idea where your problems lie and can’t develop a plan of attack to fix them.
  3. Cut Costs – As drastically as necessary based on your current circumstances.
  4. Improve Efficiency and Productivity – Since your business is not doing well, your profit per person is obviously lower than it needs to be for you to succeed.
  5. Improve Marketing and Sales – Though this is number 5, you need to work on it along with the rest to make sure you always have money coming in.
  6. Build Recurring Revenue – Make this a priority. It can help you through the next tough time.

Several times I’ve mentioned the importance of lists, systems, and procedures. These items are not just for your team members, they’re for you (and me). You need your checklist to fix the weak links in your business systematically without losing focus. You also need a daily schedule to block off your time for each of the 6 items above. You literally need to block off time for each one without any phone calls, emails, door knocks or other interruptions.

My final bit of advice is 3-part:

  1. Steal the best ideas you can. This can be from your competitors, other similar business, businesses you see on TV, from reading books, asking people who are doing well, taking classes, or almost any other business related source. Granted, there are a lot of people who don’t provide much “meat and potatoes” advice, however when you find a source that does, learn as much as you can. As I like to say, “It’s always better to learn from others’ successes than your own mistakes.”
  2. Apply the pareto principle. 20% of what I’ve covered in the last 5 blogs will give you 80% of the results. The trick is determining which 20%, right? Well if you know your numbers this isn’t that tricky. Your numbers will tell you where you have the greatest potential for improvement. This is how you will prioritize everything.
  3. Know when to cut your losses and move on. If you’ve legitimately done almost everything we’ve reviewed over the last 5 blogs and you’re seeing little to no improvement, you need to move on. Don’t be the guy who holds onto GM’s stock thinking “they’ll never go bankrupt.” Salvage what you can and sell either the whole business or the assets and move to the next project. No amount of money can ever buy you more time, so if your time isn’t being invested in a business that’s moving forward and making your life better, you need to get out of that business.

In less than 5,000 words we’ve reviewed literally dozens of directly applicable things you can work on today to improve your business. Take action and make the improvements.

To your success, Bryan

P.S. If you’re looking for a business to buy, find one that does very few of the things reviewed in the last 5 blogs yet is still making money.

Posted in Business Buying/Selling, General Business | Tagged: , , , , , | Leave a Comment »

How to fix your business FAST – Part 4 – Improve Marketing and Sales

Posted by ethicalbusinessbuilder on November 16, 2009

For most businesses I’ve encountered, the greatest improvement in marketing would simply be to start tracking your ROI. In other words, you need to know your cost/lead and cost/sale for each marketing project. I address this concept in detail in my blog on Scientific Advertising.  Keep in mind that simply asking your customers “how did you hear about us?” can be somewhat futile (though it’s better than nothing). Michael Corbett suggests simply watching your sales to see if they go up with your current marketing or stay flat. To me that seems like a rather unscientific approach since that doesn’t tell you which marketing produced the results and there are  more factors than marketing alone that can affect sales.

There are a handful of marketing books in my Recommended Reading section, in addition to My Life in Advertising and Scientific Advertising by Claude Hopkins, so I’m not going to directly address the difference between good and bad marketing. After all, no one knows exactly what will generate the best response until it’s tested and measured.

That being said, here are a few marketing pointers in addition to knowing your numbers:

  1. Have a Unique Selling Proposition that sets you apart from all of your competitors. In other words, create a niche only you can fill.
  2. Know and understand your target audience. You can have the best offer, and the best advertisement in the world, but if it’s directed to the wrong audience you’ll get zero results. Spend the most marketing time on getting your message to the right people!
  3. Keep a detailed customer database so you can cross-market constantly. If someone has bought from you once before, they are MUCH more likely to buy from you again. If you don’t have a database (or your not using the one you have) change that immediately!
  4. Offer a guarantee. If your products are either more expensive than most, or can’t be touched by the consumer prior to purchasing (such as with internet sales) you MUST have an iron-clad guarantee to assuage their fears. This must demonstrate that you’re the best and the customer has nothing to risk.

Since we’re looking for quick fixes, I’m going to stop the list there. If you do those things, you’ll notice results almost instantly.

On the sales side, you need to again, learn your numbers. Am I getting that point across fully yet? :-) Whether you realize it or not, in your sales cycle, there are many steps. Let’s take a retail clothing store for example. What are the steps a shopper takes?

  1. Window browsing – How do we get them to actually walk into the store? A lot of retailers put up blinds behind the window manequins so people have to actually walk in to see what else is available.
  2. Entering the store – How do we get them to spend time looking around? Depending on your clientelle, music can make a huge difference as to whether they hang around a while or not.
  3. Perusing certain racks or aisles – How do we get them to see the most we have to offer? Most retail stores put the clearance and discounted rack at the back so you have to walk all the way through to find the great deals.
  4. Trying clothes on – How do we get them to go to the dressing room? Keep in mind, people can only try on or buy as much as they can physically carry. Make it easy for customers to carry more with helpful sales associates and people will buy more. Paco Underhill addresses this in magnificent detail in Why We Buy: The Science of Shopping.
  5. Buying – How do we get them to come back? Are we getting their name and email address for our database?

So why do we break that up into so many steps? Because if you don’t, you have no idea which steps you need to improve. I’ve heard of a retail store that learned that around 80% of people who try something on will buy it. So they didn’t work on directing people to the cash register, they worked on getting potential customers to the changing rooms.

Every business has a series of steps in their sales cycle. You need to learn and track each of those steps for your business and then systematically improve the conversion rate for each one.

That was  a retail environment, so let’s consider a service based business. What possible steps do we have for them?

  1. Inquiry – via phone, web, or walk-in
  2. Service Pitch/Presentation – Are you skipping this step? If people call your plumbing business and ask what it costs to unclog a toilet, do you just tell them or do you first tell them why you are their best option with your guaranteed time, flat-rate billing, and professional staff?
  3. Price Quote/Estimate - Are you building value along with this quote (particularly if it’s in writing) to back up your pricing?
  4. Commitment to Purchase – If the commitment isn’t made immediately are you leaving them PLENTY of information to convince them you’re their best option? My business has a 24 page “leave-behind” packet for just such instances.
  5. Delivery of Service – Are you delivering exactly what you said? Particularly if you only get paid once your service is complete.
  6. Payment – Do you have simple payment options and are you asking for payment immediately upon completion so as not to tie up your office staff trying to collect money?
  7. Follow-up – Did you get their name, phone, address, and email for your database? Did you call or visit them again after completion to make sure they were completely satisfied? Did you ask for testimonials or referrals?

As you can see, there are a lot of steps in this process as well and at any step along the way you can lose potential clients. That’s obviously why tracking the number of customers who make it to each step is so important!

A couple of things you can do to help improve each step in the process:

  1. Have excellent training for each person involved in sales including detailed scripts, role-playing, and NLP training.
  2. Incentivize and develop some competition. People like to know someone else notices that they are the best at what they’re doing.
  3. Have an outside company shop your business and report back what they find.
  4. Record phone calls, conversations, and customer interactions (after checking with your lawyer of course) to look for opportunities for improvement.
  5. Provide on-hold and/or in-store marketing over the speaker system. I know the “blue-light” specials weren’t enough to save Kmart, but I’m not claiming that’s all you need to do for your business either. ;-)
  6. Create your story portraying your commitment to customer service, quality, community involvement, and excellence. Make it available in your store, restaurant, business, and on your website. People love buying from places where they feel a part of something.
  7. Include testimonials everywhere! Put them in your store, on your website, in your marketing, on your thank you cards… heck, you can even put them on your receipts.

In my experience with over 100 small businesses, I don’t know of anyone, myself included, who is doing all of these things well. In my defense, I do know what I have to do and one-by-one I’m crossing them off of my list.

We’re on Part 4 right now so you should have quite a long To-Do list written down, right? If not, go get a piece of paper and a pen, review my last 4 blogs and start writing. After I post my last blog on this topice (Part 5) you’ll now have a complete list that you can prioritize and start addressing.

To your sales and marketing success, Bryan

Posted in Business Books, Ethical Marketing, Team Building | Tagged: , , , , , | 1 Comment »

How to fix your business FAST – Part 3 – Cut Costs and Improve Productivity

Posted by ethicalbusinessbuilder on November 14, 2009

On the face of it, cutting costs sounds pretty simple. In reality, if you know your numbers, it is rather simple.

Here are some ideas to evaluate for potential cost-savings in any business:

  1. Insurance – whether it’s commercial, auto, or health insurance, if you haven’t shopped around in a few years, you need to. This area alone has saved my small business $9,000 over the past 2 premiums with slightly better coverage. Granted, it took a lot of time and energy to get to that point, but how can you argure with that level of savings?
  2. Telephones – cell phones and land lines can both be EXTREMELY over-priced if you don’t shop around. Make sure you have the best group or individual or combination of the 2 for all of your cell phones. For land lines, if your internet is reliable enough, you seriously need to consider VOIP. VOIP stands for Voice Over Internet Protocol and simply means using internet data lines instead of phone lines for your phones. In my business this would save us about $250/month IF we had reliable internet. Our internet is very spotty, has little competition, and relatively slow so we’ve tested with VOIP several times and just can’t make it work. :-/
  3. Vendors – When was the last time you renegotiated with current vendors OR shopped around to make sure you’re getting the best rates? Through buying in bulk, group purchases (with similar businesses), shopping around, and good old fashioned renegotiating (particularly on things like fuel charges and freight expenses) you should shoot to save 5-10% on all of your purchases. While your at it, double-check your retail price list and make sure your mark-ups are sufficient. We found a handful of items on our price list going for little to no mark-up as we performed this exercise.
  4. Pre-payment discounts – While you’re calling to renegotiate prices with your vendors, be sure to find out if they offer pre-payment discounts. Those are simply discounts for paying early which could be within 10 days, or 10 days after the end of the month, or whatever their terms are. If you consider those discounts can range from 1% to 5% this can be VERY significant. If your business buys $200,000 in products each year, at 1% you would save $2,000 year or$167/month just by paying a few days earlier!
  5. Meals & Entertainment – and all other “discretionary” spending. Are those meals, trips, expensive hotels, etc. etc. etc. really necessary? If they’re an integral part of your business recruitment strategy then fine. But make sure your deducted-meals are actually legit. Meals are only allowed for documented business purposes (i.e. names, place, and business discussed all have to be available to the IRS) and overnight travel. Even then, only a portion of those meals can be deducted. The upper-management of Walmart and Sam’s Club are still required to fly coach and book modest rental cars when traveling just like their founder always did.
  6. Shop around for cheaper services – Every business needs the help of other businesses to get things done. This could be your IT firm, your accountant, lawyer, bottled water delivery company, tire and oil change business, uniform company, or even your payroll company. I’m well aware that it’s very hard and expensive to find a lawyer you trust, so if that’s something you already have, I’d leave that one alone, however the others can be done with relative simplicity. Just changing our payroll from Paychex to Quickbooks has saved us over $100/month (though QB prices have just gone up slightly so the gap is lessening).
  7. Improve Efficiency and Productivity – This is probably the most important of all of them which is why I put them as a separate step in a separate category for fixing your business. This all boils down to basically 1 thing: Paying people for the results they deliver.

In a nutshell, that’s what an efficient, productive business will consistently do. It will pay people for their work. What a novel concept, huh? Now you need to determine if your business is a better model for a Results Oriented Working Environment (ROWE) like I discuss in my blog on Intrapreneurship and Entrepreneurship or whether your business simply needs to get away from paying everyone an hourly wage with no incentives.

Here are the steps to take to increase productivity for every employee in your business:

  1. Make job descriptions – If your people don’t know exactly what their duties are, you as a leader aren’t even giving them a chance to succeed. Everyone needs a job description and possibly even a daily, weekly, and/or monthly checklist to make sure they’re taking care of all of their responsibilities.
  2. Create processes, procedures, scripts, and checklists – This goes hand-in-hand with a job description. If you don’t have scripts to teach people how to handle customer inquiries, procedures for how to track those inquiries, and checklists to make sure nothing has gotten missed you will never ensure a consistent customer experience. Making this fundamental throughout your business is the key to successful franchising. If you want a successful, universally applicable, consistent business, this is your foundation. This will also help you determine who on the team needs to stay and who needs to go.
  3. Know your numbers – My last blog dealt with this in detail so to just make the point quickly… If you don’t know the income and profit per person on your team it’s very hard to develop benchmarks, set goals, and recruit new people who you believe can achieve those goals.
  4. Remove temptations to “cheat the system” – In my business this comes in 2 major forms. No temptation to play on the internet for the office people, and no temptation to take extra long lunches or sneak home early for our service guys. The first is temptation is removed but letting everyone know their internet usage is tracked and will result in dismissal if internet use is inappropriate. GPS systems on our service trucks take care of the latter temptation. Very rarely do I ever analyze either item. Basically it’s just there in case a problem develops.
  5. Incentivize and create healthy competition – I still credit the doubling of our profit/day/technician in large part to converting a portion of technicians’ income to commissions. Find ways to incentivize everyone on your team to do their best.
  6. Get rid of those who don’t stack up – If you’re the kind of guy who hates to let people go and so cuts everyone’s pay instead of just letting the weakest link go, you need to change your practice immediately! There is nothing worse for morale then to have everyone “punished” with lower pay when the low-hanging fruit needs to go (and everyone but you knows that). If you really feel that bad about letting an unproductive employee go, cut your income first before any one else’. To keep costs down, review my blog on how to let someone go without paying unemployment.

Keep in mind, that the more drastic the situation the more drastic the cost-cutting measures required. Act quickly and decisively and move on. If you make a mistake in that process, learn from it.

To your cost-cutting success, Bryan

Posted in General Business, Team Building | Tagged: , , , , , , | Leave a Comment »

How to fix your business FAST – Part 2 – Know your numbers!

Posted by ethicalbusinessbuilder on November 11, 2009

The world lives and dies by numbers. Granted I am an engineer by education so I may be a little bias…

Even more importantly, the world gets answers to questions by the correct numbers. If you’re looking at the wrong numbers, you’re never getting answers to your questions. Let me give you a quick analogy. In the world of internal combustion engine building we’re all looking for a few major numbers – namely horsepower and torque. So we hook an engine up to a dynamometer (a device that measures the power output of an engine) and now we know the horsepower and torque numbers. So what? How do I improve those? Well to do that you have to look at a lot of other numbers such as bore and stroke, number of cylinders, 2 or 4-strokes per cycle, manifold pressure, air-to-fuel ratios, cam lift and duration, ignition timing… And the list goes on and on and on… Without knowing how that engine is currently configured, I can’t possibly tell you what to “fix” to help it make more power.

Your business has 3 “big” numbers, they are # of customers, revenue and profit.  Those are your horsepower and torque. All they tell you is where you’re at right at this moment. They don’t tell me how we got there or how we’re going to make more power (profit) the next time around. Even if you don’t know a single thing about engines, I’m hoping that analogy makes sense. The bottom line is, you have to know your numbers and they have to be the CORRECT numbers.

Let’s break your numbers down into a few basic categories (you’ll notice these are the same as I reference when talking about the 3 leaders every business needs):

  1. Finance/Accounting
  2. Sales/Marketing
  3. Service/Operations

Finance/Accounting – These are the numbers you get from your bookkeeper.

  1. Profit & Loss
  2. Balance Sheet
  3. Current Receivables (along with the aging)
  4. Current Payables (along with the aging)
  5. Cash in the bank

These are the numbers that provide questions, but no answers. Your bookkeeper only knows enough to start asking a few questions. Things like,

  • “I see you spent $40,000 last year on marketing, what was your return on that?”
  • “Your cell phone bills average $115/person, have you shopped around for a cheaper plan?”
  • “You have $6,000/year in Meals & Entertainment, is that necessary or can that be cut back?”
  • “It appears that sales are down 20% but costs are only down 10%, why is that?”
  • “15% of your receivables are more than 60 days past due, what are you doing to collect money?”

As you can see, none of the reports under Finance/Accounting provide any answers except maybe to the question, “Do we have enough money to cover next payroll?” That doesn’t mean we don’t look at these numbers because this is where we measure the results. If we add a turbocharger to an engine, ultimately we want to see that reflected in higher horsepower and torque. The same is true for your business.

To start answering the questions about why your business has less customers, less revenues, and less profits, you need to use Brad Sugar’s business chassis. Buy his book Instant Cashflow, learn the chassis, and use it.

Sales/Marketing – Now we’re getting into the fun stuff. Here’s a quick list of the numbers you should know in this realm:

  1. Number of New Leads (daily or weekly, though some establishments will even look at this by the hour of day)
  2. Conversion Rate (i.e. the % of leads who become customers)
  3. Number of New Customers (how many people have bought from you?)
  4. Average Dollar Sale (revenue/total # of transactions)
  5. Average # of Times a Customer Purchases from you Each Year (total # of transactions/total number of customers)
  6. Cost per Lead (for each marketing project)
  7. Cost per Sale (for each marketing project)

Do you see where we’re going with this? If our sales are down, now I can pinpoint if it’s because we’re getting less leads, converting less leads to customers, selling a lower dollar amount per transaction, and/or because our customers aren’t coming back as often. Now we’re getting somewhere! With these numbers you’ll even be able to pinpoint that you’re getting less leads because that radio ad you started 6 months ago is no longer making the phone ring. In the next few blogs, when I get to the step about Improving Marketing and Sales, we’ll look at specific ways to improve each of the numbers above.

Service/Operations – This is your back-end. Once you’ve sold a product, this is how you deliver it, service it, restock inventory, order more inventory, schedule service, and everything else that’s in essence “behind the scenes”. The important numbers for Service/Operations can vary quite a bit from industry to industry however the concepts are the same so make the proper adjustments for your industry.

  1. Profit per income generating person – this could be per plumber, electrician, waitress, sales associate, barista or anything else. If a person on your team has the ability to generate income, you need to know this number.
  2. Income per income generating person – this is important because often these individuals have more control over the income they generate than the costs they incur. That doesn’t mean their choices don’t affect the costs of the business, I’m just saying that a plumber can’t much affect the cost of gas or the distance to his job or the markup for parts or the hourly rate.
  3. Turn-over – how long does it take between buying something for inventory and selling it. Car dealerships look at “average days on lot”, retail stores look at “average day on shelves”, service-based businesses might look at “number of days from inquiry to finished service.”
  4. Profit-margins – In other words, the mark-up of each product or service. If you’re a service-based business you need to determine the cost/hour for your billable people to determine your profit-margins.
  5. Customer Complaints – You might be surprised how close your customer complaints as a % of customers served mimics your net profits.
  6. Uncompleted Work – For retail or restaurant style businesses you don’t really have an equivalent for this. People walk into your business, they buy something, you provide it immediately, and your work is done. For service-based businesses, however, this information is crucial. If work isn’t getting done, or you’re getting behind, or customers aren’t being notified of delays, you’re going to have problems. You need to know how many outstanding work orders, quotes, and return phone calls are out there so they don’t ever slip through the cracks.
  7. Free Work – This means you screwed up an order and gave someone a free meal, or a free hour of labor, or a free part, or a free legal consultation, or you had to go back to their home or business to fix a problem you didn’t fix the first time. You screwed up and had to make amends and the cheapest way to do so was to do it for free.
  8. Daily, Weekly, and Monthly Break-Even – In other words, do you know exactly how much you need to sell today, this week, and this month to break-even. Some businesses will even break this down to per shift if there are multiple shifts within a day.
  9. Lost Customers – Since my blogs have talked quite a bit about recurring revenue, you need to have a very close watch over your recurring revenue customers. If one of them calls to cancel services, you better have someone trained to try and save that account. This is almost impossible to track if you have a retail style business.

Those are your numbers. Obviously there can be more, however those are the most universal and the ones I’d look at for just about every business from a law firm to a candy store to a hospital.

To you “number-knowing” success, Bryan

P.S. If you’re wondering how you track all of these numbers, the simple answer is with industry-specific software. If you don’t have any, make it a priority to purchase or lease some right away.

Posted in Business Accounting, Business Books, Business Buying/Selling | Tagged: , , , , , , | 1 Comment »

How to fix your business FAST – Part 1

Posted by ethicalbusinessbuilder on November 10, 2009

A friend of mine asked me today about what I would do with a business that isn’t doing very well in this economy. Actually with 5 different businesses in 5 different industries… So I told her. My blog about how I doubled the profits in my business in the first year covers much of what this and the succeeding blogs will, however these will have much more detail and be much more specific.

Firstly, by “fixing” I simply mean increasing profits and cashflow (yes, they’re different). The bottom line is that the number one goal of business, and its reason for existing, is to make a profit (and a healthy one at that).

Secondly, you need to determine the time frame for your fixing. In other words, do you need cash by next week or month to make payroll and pay bills OR are you simply looking to increase the value of your business to sell in a year OR are you looking for a way to have your business provide the income and freedom that you desire for the next 40? Granted, some solutions will overlap but the plan of attack may be different. Since she was looking for IMMEDIATE solutions to improve the business we’ll look at that first.

Before we go any farther, though, as a business owner and/or leader you need to get 2 things situated right away

  1. Work on the Business – If you’re a plumber and you’re out plumbing while your business is going down the tubes, it’s a lost cause. Of course I’m assuming you have a team and aren’t a one-man operation. The point is, if you have a team to take care of the work of the business, your work needs to BE the business. If it’s not, then the business will never improve. Make the commitment to spend time daily on improving your business.
  2. Make a list – Actually, lots of them. I’ve done enough consulting to know that if your goals aren’t in writing, they get forgotten and pushed into oblivion. Don’t fall into that rut. If your business needs to change, you need to change. As we go through these blogs, make a prioritized list of the improvements you’re going to start and don’t stop working on the list until it’s done! Personally, I’m still working on a list of 10 things that I made at a conference in February 2009. Currently, 7 out of 10 are checked off, but the list won’t be thrown away until 10 of 10 are taken care of.

Again, our goal is near immediate improvement so here’s what you can do:

  1. Know your numbers – In my experience this is the biggest mistake business owners make. They know things like their gross and net profit margins, number of customers, and total revenue, but have no idea how or why those things are down. Customers, revenue, and profits are not answers to problems, they’re simply questions. All they can do is tell you what question to ask but you have to dig deeper to find the answer. If you stop digging there, you’ll never locate the problem or come up with a way to devise a fix. Some of these numbers were covered in my blog on weathering the economy.
  2. Cut Costs – If a business exists to make a profit, it’s breath of life is cashflow. Assuming you have sales and customers already, the quickest way to increase profits and put cash in the bank is to cut costs. You cut $1,000 in costs and you add $1,000 to the bottom line. Don’t ever forget that.
  3. Improve Efficiency and Productivity – You already have a team, though if money is tight you may have to start cutting. Before you do that, you need to do some simple analysis to determine the effectiveness and productivity of each person in your organization. Again, you need to know your numbers. If you don’t know your daily break-even per income-generating job position AND for the entire business, you’re shooting in the dark. If you can go back to the “good old days” and compare your profit per person back then to now, you’ll quickly know if you have to cut positions.
  4. Improve Marketing and Sales – There is a reason this is so far down. If you need immediate cash, this is often the slowest response. You have to develop marketing, you have to get your marketing out and wait for a response. You then have to review your process for acquiring, handling, and converting leads to customers. You need to track the effectiveness of each marketing campaign because the first one might not be successful and determine, through testing and measuring, what marketing provides the best Return On Investment. This is obviously important long-term, but generally can not immediately get you cash. That being said, this should be done concurrently with the items above.
  5. Build recurring revenue – This one is often most challenging because it can require a cash investment up-front.  Cash that you obviously don’t have if you’re business is not doing well. Then again, there are ways to generate immediate and recurring cash with no up-front investment and you’d do well to develop some of these in your business.

That’s the 5-step process for fixing a business quickly. Now that I’ve reviewed this list, there are only a few things I would change if you’re looking long-term versus short-term.

  1. If you’re making money and not looking to sell any time soon, the costs are less important. Obviously $1,000 saved is a $1,000 more in profit. However, if you’re happy with your income and perks and those provided for your team, then this doesn’t become an IMMEDIATE necessity even though it’s ALWAYS beneficial.
  2. If you’re looking to sell soon, cutting costs to increase profits is extremely beneficial as it will increase the value of your business. Any “perk” you can’t reasonably classify as an ownership perk, and therefore a seller add-back, should be cut immediately. For instance, if you have a lot of meals and entertainment expenses and tried to do a seller add-back on those and I’m buying your business, I’d argue all day long that if they weren’t necessary for business you wouldn’t have them on your books and I won’t accept them as an add-back.
  3. Knowing your numbers, efficiency, productivity, sales, and marketing are as important today as they will be in 40 years so work on them constantly. For the long-term owner, these systems and numbers are what will allow you to manage your business remotely and with minimal input.
  4. Recurring revenue can either require up-front cash or not. Recurring revenue that costs nothing up-front (or is break-even very quickly) is well worth the investment short-term as it will produce cash and increase your business’ value. Recurring revenue that requires an up-front investment in sales, marketing, equipment, and installation/service is not a good short-term plan but can be an amazing long-term one so don’t neglect it.

So there’s the quick and dirty overview… In the next few parts to fixing your business I’ll dissect each of the 5 pieces and provide real-world examples, suggestions, and solutions for each.

To your business-fixing success, Bryan

Posted in Business Buying/Selling, General Business | Tagged: , , , | Leave a Comment »

The fundamentals of Buying, Building, and Selling a business

Posted by ethicalbusinessbuilder on October 30, 2009

To my knowledge, there is no other blog or book or lesson or presenter who shows someone the basic pieces necessary to generate wealth with real world experience as I will. It’s the nuts and bolts of the whole buy, build, sell process.

There are basically 4 steps:

  1. Preparing – What you need to know prior to getting started.
  2. Buying – How to find, value, negotiate, and purchase a business.
  3. Building – What you can do quickly to increase the value of the business.
  4. Selling – The ins and outs of selling your business.

Preparing

Ironically, as my most recent blog has pointed out (it’s ironic because it took me 18 months to write the blog that I should have written first), the most important part is your mindset and your attitude. Next, you’ll also need to take the first 3 steps to becoming wealthy including, always spending less than you earn, understanding the difference between where you are and where you want to be is education, and framing your goals into  Do x Be = Have context. Possibly most importantly, you need to have a clear motivation for being an entrepreneur (even if it’s different than mine) and you need to appreciate that the ethical route is always the most profitable. And make sure you’re able to get over your fear of failure in trying new things.

It’s important to understand that there’s no better, quicker way to go from very little money (let’s say less than $5,000) to a lot of money. You can even take it to the next level and setup a business to generate $1,000,000 per year if that’s your desire. Recently, as part of another blog, I’ve outlined a basic plan for how someone can go from $5,000 or less to $1,000,000 primarily through business. To stress the point even further that buy, build, sell is the best way to generate wealth for the average individual, review my suggestion to skip getting your MBA and just buy a small business for your business education.

Buying

In the buy, build, sell strategy, the part that will have the greatest influence on your profit is the purchase price so learn as much as you can for this stage.

First, you’ll want to know some basic questions to ask the seller about their business and maybe even what questions to ask about any given business idea. Then you’ll have to understand how banks value a business in case you need to go to them for financing and also how EBIDTA can tie into business values (since sellers and business brokers may reference it). As you start looking for businesses, you need to have some ideas of where to find businesses for sale for little money down and how to deal with the business brokers once you find one you’re interested in.

Before you start making any offers, it’s very important that you get the seller (or broker) to like you since then they’ll be more likely to accept your business valuation. It’s very simple to turn someone down you don’t like anyway. Once you’re ready to make an offer, make sure you only purchase the assets and then put them into an LLC filing as an S-corp. If you do that, you won’t have to spend nearly as much time fighting with lawyers. But since you may need one anyway here are a few tips for getting the best rates from your lawyer.

When you’re just starting out you may be considering a partner but make sure you don’t take on a business partner unless absolutely necessary.

Building

In the building stage you’re going to need to know what to do your first 2 weeks onsite at a business you’ve just purchased. If you don’t already know the difference between profits and cashflow, I’m sure you’ll learn very quickly.

Immediately you need to work on polarizing your company’s culture, improving teamwork, and communicating effectively. Right out of the gate you need to start setting up your business for running without you through the effective use of technology, incentives, and empowering your team. If you don’t do that immediately, you’ll soon be asked to do lots of things “in” the business that will take away from you working “on” the business. This is vitally important because if you’re not working on the business you’re not taking the time necessary to double profits, improve marketing, teach your team the importance of NLP, create systems, processes and scripts, or improve closing ratios. In other words, your primary focus for building value in your business is going to entail 3 parts:

  1. Increasing Sales – through new and improved marketing and better conversion rates. In other words you have to make sure your system for taking a lead and converting it to a customer is top-notch. Don’t forget that your back-end sales (sales to existing customers) will always be your most profitable business. With that in mind, if you can buy an already profitable business that’s horrible at back-end sales you can quickly increase its value.
  2. Cutting Costs – look at all of your expenses and simply cut those that aren’t needed. We reworked our accounting and phone costs alone to save thousands of dollars per year.
  3. Improving Efficiencies – this is primarily about scripts, systems, and processes for every aspect of your business.

Don’t make the mistake I did and wait until cash gets tight to realize that cashflow is king and then start building recurring revenue while looking for quick, easy, cheap ways to generate immediate cashflow.

Chances are you’re going to run into some issues with team members so it’s helpful to know the proper way to fire someone without having to pay unemployment and effective ways to get your team members to do what they do best.

As you’re building your business you need to work on getting it to achieve critical mass by, in particular, hiring or training the 3 leaders every business needs to succeed.

In summary, you need to have a game plan from day one including an exit strategy or else you might end up like one of the 300 businesses in NYC who failed because they failed to plan for success.

Selling

Since this blog is getting long and selling isn’t much different than buying I’ll keep this short. You need to basically understand 3 things:

  1. How to value your business just the same as discussed in buying so you can justify your price.
  2. Where to list your business which is again the same places where you’d go to find a business for sale (such as bizbuysell.com)
  3. How to foster relationships so that when it’s time to sell, you have a few personal contacts in mind.

With regards to the 3rd, you may want to get to know other business owners in your area who have complimentary (or even competing businesses). You may also consider hiring a leader who would like to take over and own their own business some day. If you have a franchise like mine, you will also want to stay in touch with owners in other areas as they might want to expand their operations.

The goal with this post is to organize and direct the many varied posts I’ve written about my adventure buying, building, and now selling my business over the last 18 months. As I add more posts I’ll try to keep this summary updated so you can always reference it for new material.

To your generating-wealth-through-business success, Bryan

Posted in Business Buying/Selling | Tagged: , , , , , , , , , , , | Leave a Comment »

The most important life lesson… and the key to success

Posted by ethicalbusinessbuilder on October 27, 2009

For as long as I can remember my father was always imparting axioms and witty sayings on me such as, “your life is what you make of it”, and “you can’t control what other people may do to you but you can control how you respond”, and “you’re the only one who can choose what your day is going to be like every morning when you wake up.” Obviously those were all paraphrased and there were certainly dozens more.

He continued my education with tapes and stories from Zig Ziglar, and Dave Yoho, and Tony Robbins and eventually Brad Sugars. Somehow he would come in contact with stories of people overcoming impossible odds to better themselves. Quite literally this started in early elementary school for me.

There’s a reason books like Think and Grow Rich (#1466 on Amazon.com) by Napoleon Hill, The Richest Man in Babylon (currently ranked #5094 on Amazon.com) by George S. Clason, and How to Win Friends & Influence People (currently #151 on Amazon.com) by Dale Carnegie are timeless classics.
There’s a reason why movies like The Secret (Extended Edition) (#92 in DVD’s on Amazon.com) are so popular; creating an almost cult following. (Granted I did laugh out loud when the older gentleman said we don’t know how electricity works.)
There’s a reason why Brad Sugar’s spent more than 1/4 of his training on how to Buy, Build, and Sell businesses at his Entrepreneur’s Masters Class simply on having the right mindset.

And the reason is simple: The difference between those who are successful and those who aren’t is first and foremost their mindset. As one guy from The Secret pointed out, “Thoughts become things.”

“If you think you can or you think you can’t, you’re probably right”, is in fact, a cliche’ and yet it’s still true.

As I talk to friends and family about success, making money, building businesses and living an adventurous life, I make sure they know the most important part in their success is their mindset. If you truly believe you have the ability to do something you will do it.

This mindset has created 2 personality traits in me that everyone who knows me are abundantly aware of:

  1. Confidence – some might even mistake it for arrogance
  2. Fearlessness – or in other words, they believe I’m completely averse to risk

It’s important to understand that I was not born with either trait. In fact, as a child I was very cautious and always calculating before attempting anything new. If I wasn’t certain I could do it without getting hurt (physically, emotionally, or intellectually), I wasn’t going to do it. Though I always did well in school I rarely raised my hand and even if I was the best athlete on my sports team I would always feel as if I wasn’t good enough. Actually, high school athletics are what taught me that my biggest weakness wasn’t lack of talent or skill, but simply lack of confidence in my abilities. My point is these traits can be learned.

Every successful person has incorporated these 2 traits into their lives.

Confidence – At some point it occurred to me that absolutely no one will believe in me if I don’t. More importantly, if I believe in myself, others will as well. That’s what confidence is. Having the guts to take on something you’ve never done before, but know you can learn. Taking that risk of getting ridiculed, embarrassed or harassed by leading instead of sitting back and waiting for the safe move. If you’re going to be successful in business, in your family, as a teacher, or doctor, or builder, you have to lead someone somewhere and no one follows a person without confidence. As a coach of 5 year olds, I can assure you that even children won’t follow someone who isn’t confident in what they’re doing.

Fearlessness – This is simply a byproduct of confidence. School trains you to do what you’re told. Sports teach you the same thing (I can still remember getting yelled at for putting the basketball behind my back in a high school game). Your parents teach you to listen to authority. Throughout our lives, we are taught first how to obey and then, if we’re lucky, how to think and use our imaginations. Not being afraid to leave home, or move across the country, or buy your first rental property, or invest in the stock market, or buy a business (when you’ve never run one before), or write a book, or race a motorcycle, or stand up in front of an older group individuals and have the audacity to claim you can teach them something new is not done out of a lack of fear. It’s done because of confidence in one’s ability to succeed. Though I’ve told many people (inaccurately) that I don’t fear anything, what’s most important is that I don’t fear failure. No successful person does.

The very first step to being successful at anything you choose, is having confidence that you can succeed and getting over the fear of what might happen if you don’t.

Confidence and fearlessness are not natural traits for most people. Unfortunately, our youth teaches us to trust in authority more than ourselves and to fear the repercussions of what will happen if we don’t coalesce with the rest of the group. However, don’t use that as an excuse not to be confident and fearless. Use it as motivation to prove those people wrong.

My father knew that no matter what I decided to be in life (astronaut, paleontologist, NBA player, engineer and businessman were all on my list), my mindset and attitude were going to define whether I was truly great at my profession. What my father did not know, was that the foundation he was building for my mind would be echoed by my oncologist when I came home from college before the beginning of my sophomore year. Seven years ago Dr. Earle told me that the most important thing in determining my success in overcoming cancer was my attitude.

To your success in becoming confident and fearless, Bryan

Posted in Business Psychology, Leadership | Tagged: , , , , , | 1 Comment »

Intrapreneur and Entrepreneur – The common ground

Posted by ethicalbusinessbuilder on October 26, 2009

In my last blog, we reviewed the 2 most basic types of people in any organization. Of course there are more specific and scientific personality tests and reviews along with detailed methods of how to best communicate with the 27 personality types, however who is ever going to remember 27 personality types let alone how they best interact with your own type? Moreover how are you going to remember exactly which person fits which type?

In contrast to that, my idea is simple, quick, and easy and though it won’t get you a perfect result every time, it’s certainly better than lumping everyone (including yourself) into one category.

That being said, in Marcus Buckingham’s book First, Break All the Rules: What the World’s Greatest Managers Do Differently, he lays out the exact 12 things that every person requires to be effective at their job. I have probably recommended that book half a dozen times in my blog and if you’re a leader or manager for any business you need to read it. So let’s get a quick and simple review of what Buckingham’s exhaustive research points out. All team members require the following:

  1. Vision, Mission, Culture guidelines – What’s the big picture?
  2. Job Description – Obviously this will be very detailed for intrapreneurs and more flexible for entrepreneurs. Absolutely no one can
  3. Positive Reinforcement – Do not underestimate this power.
  4. The right tools to get the job done – Nothing can be more frustrating. Intrapreneurs will have more tactile tools while the tools of an entrepreneur may just be pointing them in the right direction.
  5. Someone at work they can trust – this is universal
  6. Progress reports – everyone wants to know how they’re doing and how they can do better. No one wants to suck at their job.

He has 12 items on his list. I cut it down to 6 overall so read the book to learn how to determine if your business is setup for maximum profit and productivity. The point of this exercise is to point out that no one can manage themselves. No matter how entrepreneurial someone is, if they have a boss, they need direction. Period.

Another commonality is goal-setting, though the way that goals are set can be different. According to a Yale study from 1953, the 3% of graduates who had written goals had amassed more wealth than the other 97% of classmates years after graduation. So regardless of your personality, written goals are extremely valuable.

Everyone should have written, measurable, time-sensitive goals. Those goals should include levels of education, income, savings, type of work, family matters, travel ambitions and everything in between. I’ve gone as far as to make a list of all of the motorcycles I’d like to own in my lifetime. Several are already checked off however the list seems to be growing faster than I can control at the moment. :-)

Now most people have a general “big picture” idea of what they want. Things like, I want a family, I want a job that I love, I want my kids to respect me, I want to retire at 65 with $2 million dollars, I want to see Paris, etc. etc. etc.  Now if you have all of that written down and you reference it often that’s a BIG step in the right direction. However you can do better. Here’s a quick 3 step process to setting goals:

  1. You need to put everything into Do x Be = Have perspective.
  2. You need to assign time frames.
  3. You need to take into account your entrepreneurial or intrapreneurial tendencies.

The 3rd item is what we’ll address right now. As an extreme entrepreneur, my goals have time frames, but they are honestly relatively vague. For instance, in my lifetime I want to own at least 5 businesses, become a “young millionaire”, and write at least one book (though I have 4 in mind at the moment). As an entrepreneur, my immediate goal is to always find the best opportunity right now. That means in the next 12 months, I may write the book, buy another business, or get more schooling to help me learn more of the things that millionaires might know that I don’t. My point is, that my personality thrives on making the most of the moment. So instead of saying “I want to write a book by 2011″, I work on all of my goals at once and then go after the opportunity that’s best today, this month, or this year. In 2010 that may be writing that first book, or it may be visiting all the countries on my goal list, or it may be the next business. I’ll be working on all 3 and choose the path that is best at the time.

So how is that different than an intrapreneur? Intrapreneurs are more of the details individuals. They need specifics and they need specific time frames and they need a specific way to get there. Whereas I just need a “big picture”, an intrapreneur needs smaller goals to help achieve the larger ones. So if we take the same example of becoming a “young millionaire”, the successful intrapreneur will have a more specific goal list to achieve those goals.

For instance, their sub-goals to achieve the goal of becoming a millionaire might look more like this:

  1. Buy a business with vendor financing in the next 12 months that has the potential to double in profits within a year with only the $5,000 I can drum up from selling my stuff and from savings. I must pay no more than annual cashflow plus assets for the business. It must have the possibility of paying me enough to live on while I’m growing it.
  2. Build the business for less than 12 months and relist it on the market. It must have the potential to make me $100,000 profit when sold.
  3. Reinvest the $100,000 in another business under the same criteria but with the ability to potentially sell for $300,000 profit within a year.
  4. Of the $300,000, put $50,000 into down payments on cash producing real estate, $50,000 into the stock market and the other $200,000 into another business with the potential to be sold for $500,000 profit within 1 year.
  5. Reinvest as much as necessary into a business that can either produce sufficient cashflow to make me a millionaire within 2 years of can be sold for $1 million in profit. The rest will be split between additional real estate and securities.

Why does the intrapreneur need so many sub-goals? Because something vague like “become a millionaire” seems so daunting an unattainable however when you break it down into small steps with specific time frames and details it becomes a whole lot easier for them to accept. Entrepreneurs can often feel much more comfortable and in-their-element with goals that are more vague. The exact details can at times make us feel trapped. That being the case is a detailed list bad for an entrepreneur? Of course not. As long as he can appreciate that it’s a guideline and the numbers and time frames will never be exact.

So my last question is, how does this help leaders better lead their teams?

As leaders, it’s our responsibility to provide progress reports, to develop job descriptions, and to help develop goals for team members within your organization. By now, I hope that it makes sense that those job descriptions, review sessions, and goal-setting meetings might be quite different for the 2 basic personality types.

To you success in providing the foundations of the common ground, Bryan

P.S. If you’re curious why my steps to becoming a young millionaire are primarily contingent upon buying, building, and selling businesses check out my blog on the topic.

Posted in Business Books, Business Psychology, Leadership, Team Building | Tagged: , , , , | Leave a Comment »

Intrapreneur vs Entrepreneur… The 2 types of people every business has…

Posted by ethicalbusinessbuilder on October 24, 2009

Every business is comprised of 2 basic types of people.

Entrepreneurs and Intrapreneurs… Those who want risk, reward, challenges, and the excitement that comes with that and those who want stability, direction, consistency and the security that may come with that. Of course there are also those who just want a free ride and try to skirt responsibility, cut every corner, and get away with the highest pay for the least amount of effort, responsibility, or risk – but we’re going to skip over that lesser type and focus on the positive parts of an organization.

Before we delve into these 2 types, keep in mind this is an exercise in simplicity. It’s helped me determine and target which individuals I need to hire for which positions and it’s also helped me tailor, structure, and respond to those already on my team. Probably more importantly, it’s given me a greater understanding of my own requirements, desires, and motivations so that I can keep myself passionate and effective.

So which are you and how do you identify those around you?

Intrapreneur - These are the 9-5ers. The team members who don’t want to come earlier than starting time or stay late (though sometimes they may). They want to know exactly what they’re going to do that day, and know that next week, next month, and next year their paycheck will be there. For these types of individuals it’s very important that your leadership is consistent, fair, and direct. They want detailed, specific training. They want all the right tools and they want to know how to address any situation. These individuals are risk-averse and generally prefer repetition in their tasks so they know they’re doing what they do best constantly.

Entreprenuer – According to dictionary.com, entrepreneur is “a person who organizes and manages any enterprise, esp. a business, usually with considerable initiative and risk.” Within your team, whether they are leaders or not isn’t significant. They’ll naturally gravitate to the leadership positions and get people to follow their lead whether they’re given the title or not. They want excitement and a challenge. They are proud of their creative talents and want a forum to showcase them. Responsibility and appropriate reward for their risk-taking is very important. They hate being stagnant. If you aren’t helping them get better, faster, and smarter constantly, they won’t stay. Appropriately these are the traits of entreprenuers who venture into their own businesses, however with an environment that provides them the benefits of self-employment these individuals can thrive within an organization owned by someone else.

So why understand these classifications? As I mentioned above there are 2 main reasons:

  1. To identify for yourself which one you are so you can understand your own strengths and weaknesses.
  2. To identify which your other team members are so you can structure your communications with them to meet them on their level.

Let’s look at #2 first. What would be the difference between an Intrapreneur and Entrepreneur as far as appropriate compensation? The following video discusses some science that helps us better understand how to answer that:

The ROWE work environment is GREAT for entrepreneurial individuals. The studies he mentioned demonstrated that with those type of individuals working in complex, changing, challenging environments where “thought” is the primary value of the team members, compensating based on performance is counter-productive. However, intrapreneurs, who value consistency, will respond much better to simple tasks with compensation tied directly to their performance. Which is why in my organization, I work hard to incentivize those simple tasks.

So let’s jump back to #1 so we can better understand how introspection and clarification can help us perform at our peak. This is broken down into 2 sub-categories:

  1. Our interactions with other team members.
  2. Our goals for ourselves.

Let’s take a scenario and see how it might differ based on the circumstances. Let’s say you’re the leader and you’re implementing a new, exciting product in your business. Since your team members are in front of customers all day every day you have to get buy-in from all of them so how do you present it to an intrapreneur and an entrepreneur?

The intrapreneur will require a LOT of hand-holding. They want instructions, scripts of what to say, Frequently Asked Questions with the appropriate responses and all the benefits listed out so they can reference and recite them.

Entrepreneurs, on the other hand, need excitement. If they believe in the product and are excited about how it can help them and the customers whom they interact with, they’ll figure out the rest. They’ll learn how to answer the tough questions and the best way to present it in a way that’s comfortable and yet effective.

How do I know this is true? As one example, in my business we just started Platinum Care Plans which are simply extended warranties including all necessary maintenance. My entreprenurial individuals ran with it. My intrapreneurial individuals, at best, have started mentioning it to customers but have not sold one Platinum Care plan. Why? Because I didn’t present the information that they needed in the way that they appreciated so that they were comfortable enough to sell it.

Now here’s the real kicker, considering that I’m the entrepreneurial type (squared), is it any wonder that I presented the information in a way that was more digestible for the entrepreneurial team members??? Of course not. Which is exactly why we must understand how we fit into this scope. Next time I’ll do a better job of helping my intrapreneurs right from the start of a new product.

More importantly, understanding our own basic tendencies can help us more fully understand how to structure our business and personal goals. For instance, if you’re exceedingly entrepreneurial, at some point you’re going to want to go out on your own. You’re going to want your own business or be in charge of your own team with minimal oversight and you’re going to structure your education, contacts, and career choices to get you closer to that goal. If you’re exceedingly intrapreneurial, you’re going to generally look for a skilled trade and a reliable, predictable business where you can work. Now that skilled trade can be computer programming, accounting, or plumbing. It doesn’t matter much, you just want stability and the comfort that comes along with that.

Since this post is getting long, I’ll continue my next blog with more clarifications on what BOTH intrapreneurs and entrepreneurs have in common and require from their leaders.

To your success, Bryan

Posted in Business Psychology, Leadership, Team Building | Tagged: , , , , , , , | 2 Comments »

« Previous Entries