Ok, so maybe that’s not the most professional way to title a blog… We can discuss that another time.

In the last blog we discussed the 2 main criteria a bank looks at for approving a commercial (and theoretically personal) loan.

1. Cash Flow – do you make enough money to afford the payments?
2. Tangible Assets – if you don’t make enough money what can we sell to pay off what you owe us?

Since that blog was written a banker educated me concerning listing revenue and a customer list as an asset “There is no way to assign a value because that customer base can decide to go away on a moment’s notice. They are not required to do business with you. So that value in the business is actually a part of the “blue sky.”” So you know I’m not making this stuff up. To think that customers are just going to disappear when, on average, each one has been with you over 8 years AND new customers are going to stop buying from you when you’ve had a successful revenue generating strategy in place for nearly 40 years is kinda silly. For most people their business’ are their lives. With that kind of track record how/why in the world would they all of a sudden sabotage it. That just seems like a ridiculously minor risk.

Does anyone know if banks are “forced” to not consider revenue or customer base as an asset because of some strange banking or FDIC regulations?

At any rate, we’ve spent enough time on valuing a business based on tangible assets so let’s consider valuing a business based on EBITDA. Firstly, EBITDA and cashflow are NOT the same thing. If you’re buying a business, you should always value it by looking at profits. Secondly, EBITDA in no way approximates or represents profits. I only point that out because if you’re trying to buy a business and someone tells you that it’s worth $1 million because EBITDA is $200k and the standard multiplier is 5 then you should indicate that EBITDA doesn’t tell you anything about the business and you need to look at profits instead. Let’s look at each piece piece of EBITDA so we can see why its only helpful when you sell your business (because it’ll drastically inflate the business’ value).

1. Earnings – depending on who’s doing the evaluation this can be either Net Operating Income or Net Income. In essence, this is your “book” profits. Except there’s one problem. If your business is based on Accrual accounting (which over 95% are) then earnings are based on sales, not on deposits. Just because I made a $1000 sale, doesn’t mean I’ve actually collected $1000 and have that cash in my bank account to spend. In other words, this tells me what earnings should be but not how much of that is cash in my pocket.
2. Interest – The theory goes that when you buy a business you’re not buying the business’ debt so you have to pull out its interest. That makes sense as long as you add back in the interest you’ll now be paying for whatever loan you need. If you’re just using EBITDA to measure “free cashflow” in a public company, you definitely don’t want to pull out interest because they have to pay that every month and that certainly affects their cashflow.
3. Depreciation – The basic idea is that if you buy a truck, car, building, computer, or office equipment for your business, you can’t write-off that expense all at once and so have to depreciate it over 3,5,7, or 21 years depending on what it is. Well you had to pay for it upfront, so now you have a non-cash expense (i.e. an expense that shows up on your income statement that isn’t a part of payables) and more cash in your pocket every month, right? There are 2 problems with that.
   1. You generally still have mortgage or car payments to make that don’t show up on your Income Statement. So in this instance some portion of that depreciation IS actually decreasing your cash flow every month.
   2. Depreciation is designed to expense an item over it’s lifetime. However, at some point you’ll have to replace that item again. If its your habit to pay for everything up front without a loan then every month you’ll have to be setting some cash aside to replace that item when its useful life expires.
4. Taxes – This one is similar to Interest in that when you buy the business you’ll have a new accountant and and so the amount you pay in taxes is going to be different. That sounds reasonable to me. So figure out how much in taxes your super-accountant will be able to save you and subtract that. Don’t just assume taxes are going to disappear and base your business valuation on that assumption. One way or another you will pay taxes – or end up like Al Capone.
5. Amortization – The whole concept of amortization is probably the one I understand the least but here’s my explanation anyway. Admittedly, this one can be a very legitimate non-cash expense. I’ve discussed this one with business owners, accountants, lawyers, and bankers and, though they all seem to have a slightly different explanation, from what I can tell, it’s a GREAT accounting gimmick. Here’s how it works, it’s basically the same as depreciation except for non-tangible assets. For instance, let’s say you pay $1 million for a business but through certain accounting practices you can show the business is worth $600k. You now may have the ability to amortize that $400k “blue sky” asset, that has no “tangible” value, over the next 15-20 years. Now, if you are the one who is making payments on a $1 million loan then the amortization is just like the depreciation. It’s not really a non-cash expense since you’re making loan payments against it. However, if you buy a business where the previous owner was amortizing from his purchase, now you could potentially have 10-15 years left of that non-cash expense to write-off. This is most common when the previous owner bought the business when it was losing money (if you pay any money for a business that is losing money you should have some “blue sky” to amortize) and then made it profitable and sold it to you.

The Bottom Line

EBITDA has it’s place. In fact, it’s great when you want to sell your business. Most people in the business and banking world use EBITDA multiplied by some arbitrary number (generaly 3-9) to come up with the value of a business. Since that value will always be higher than valuing the business based on profitability, then why wouldn’t you try to sell your business based on that?

On the other hand, I’m not sure I can think of one solid business reason to evaluate a business based on an EBITDA, EBITA, or EBIT number. Maybe that’s why EBITDA is not a GAAP (generally approved accounting practice) calculation.

Nonetheless, you have to give it to the first guy who invented EBITDA by highlighting it in a corporate report to show how well his business was doing. We all bought into it and now he even has the banks and accountants using his inventive, creative, and pointless calculation.

Just make sure the next time you’re looking to buy a business or just some stocks, you’re not spending too much time on EBITDA.

To your success, Bryan

Ask nearly any business owner, “What’s your business’ most valuable asset?” and most likely you’ll hear, “my customer base”. (Every once in a while you may hear, my employees.)

Microsoft obviously agrees with that as they recently injected $240 million into Facebook in exchange for a very minor stake in the business (~5%). That projects a value for Facebook of around $15 billion dollars with between $150-200 million in revenue in 2007. You heard that right, Microsoft values Facebook at around 100 times revenue! Why? – Because they have a loyal customer base of over 65 million users with 250,000 more added everyday and over 50% of whom log into their Facebook account every day. Granted, this $15 billion dollar company does everything out of a few offices in California and New York. They have very few tangible assets.

Since few of us are looking to buy, build, or sell a Facebook style business any time soon, what does this have to do with those of us involved in small business?

Well if you’ve ever tried to get a business loan from a standard bank, contrary to the “real world”, you learn quickly that they don’t consider “customer base” an asset at all. As a matter of fact, it’s not worth anything. A bank looks at 2 things:

1. EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) multiplied by some arbitrary multiplier OR Indirect Cashflow (both are poor measurements for available cash if your business is based on accrual accounting, but we’ll address that in another blog).
2. Liquidated Assets – If they sold everything your business owns EXCEPT for the customer list, what’s that worth?

If one of those 2 things isn’t up to par, no loan. That means if your business has revenue of $1 million and EBITDA times their arbitrary multiplier (generally 3 to 5) is $500,000 and your building and other tangible assets are worth $150,000, the bank will only loan you about $120,000 (80% of the “assets”). After all, they’re not in the business of selling businesses so they HAVE to do it that way.

Let’s consider a bit of irony in the system. If you have ever learned about how banks handle foreclosures you’ll understand that most banks have a department called Real Estate Owned (REO) to help resell properties that they have foreclosed on. In theory, they are trying to resell these homes as soon as possible because as all banks will tell you “we’re not in the real estate business.” In essence all REO properties in their portfolio are liabilities because of that. That seems to make sense. They’re in the money business not the real estate business so if they don’t have a mortgage against the property they’re not making any money.

So then why, when they look at my business (or any other business), do they insist that I am in the real estate business? After all the only “asset” they claim I have are my buildings and tangible property. What kind of business owner with a healthy, well-established business, would break it into pieces to sell it asset by asset? None (unless they somehow alienated their customer base).

That’s literally the same thing as if the REO departments of banks sold foreclosed homes piece by piece. First they send someone over to value the doors, windows, and carpet. Then they get a value on the cabinetry, kitchen items, toilets, sinks, bathtubs, etc. And then piece by piece, sell it off. After all, they’re not in the real estate business so how could they possibly try to sell real estate?

Business works the same way, it makes absolutely no sense to value a business as a sum of its tangible assets because no business is in the asset gaining business. Just like banks will often enlist the help of real estate brokers, business brokers can also be utilized. Heck, as a requirement to secure the loan you could ask the business to indicate 3 ways, places, or people who they would sell the business to if they had to.

Now here’s the worst part of all of this. A banker has recently told me they are tightening up their criteria for commercial loans because of the sub-prime loan fiasco.

Come again? You’re punishing commercial loan seekers because you didn’t have the foresight to realize sub-prime loans were a bad idea?

If you’re not familiar with sub-prime loans, here’s a quick review. You want to buy a $200,000 home and can’t afford the $1200 a month payment at the current interest rate. So the bank says, no problem. Just pay $900/month for the next 3-5 years (the time frame is set forth up front). By then you’ll have been promoted, got a better job, won the lottery, etc. and can afford a $1200 payment for a few years and then eventually you’ll have no problems with a $1500 payment waaaaay down the road when you’ll obviously be making tons more money than you are now because that’s what happens in everyone’s life. Now the bankers get together and think

A. we’re going to make a killing on all of these new loans and all of the interest from them AND

B. worst case scenario 3-5 years down the road the properties will have gone up in value and have plenty of equity in case this person can’t make the payment and we foreclose.

That appears to meet the 2 heralded criteria every banker reviews for a loan mentioned above. Does the person have the cashflow (uh, well, sorta… I mean, I’m sure they eventually will…)? Is the loan secured by a tangible asset that we can sell if necessary? As it turned out, not everyone got that extra promotion to afford the higher payment. To make matters worse, real estate values in most of the country actually went down. So why does this annoy me? Because I thought banks weren’t in the real estate business… If that was the case, why were they “investing” in the real estate appreciation? The ONLY way the sub-prime loans could have worked based on the 2 criteria that banks developed for themselves, was if real estate steadily went up in value. So, yes, the banks got themselves into the real estate business in a big way.

So now, a business I’d like to buy with a bank loan has a nice net profit margin (enough to easily pay back the loan), has been around for 40 years, has had substantial growth for at least the past 3 years, and continually grows its most important and valuable asset (i.e. it gets new, loyal customers on a daily basis) and yet the banks can’t see past the “tangible assets” of the business to secure a loan… Partially because they thought it was a good idea to give money to people who couldn’t afford to pay it back…

Now what? Do I give up? Of course not. I’m not one to present a problem with no solution because where there’s a will there’s a way. This snag, like most any other business challenges, can be overcome.

Here are 3 potential ways to still buy a business without a standard bank loan:

1. The majority of business purchases are vendor financed so that may be an option.
2. Friends and family can always be an option (either to loan you the money or to loan you their signature to get the financing you need).
3. As nearly every software and internet company in the Silicon Valley has found out, Venture Capitalists are alive and well.

If you’re in the process of securing a commercial loan, hopefully this blog gives you a few negotiating points you may want to use with your banker. Otherwise, you can’t get too worked up about things you can’t change – no matter how ridiculous they are. If you’re in the business buying mode, start with a business that would require a smaller loan. Or keep looking for one where the owner is willing to finance it for you.

To your success, Bryan

Have you ever been to a real auction? It gets kinda competitive… People get caught up in the moment… They start bidding and want to win… People on ebay can work the same way… Especially when they’re bidding on cars or motorcycles… it gets emotional…

So the question is, how do you get them emotionally involved, particularly on high price items like cars, motorcycles, boats, airplanes, etc., etc., etc? You get them involved with a low starting bid and a high reserve. The reserve price is the minimum price you’re willing to sell an item for. So if your reserve is set at $100 and the highest bid is $99, no one has won the auction and you don’t have to sell the item.

So here are the 5 basic rules to get the highest price for your item:

1. Only use a reserve auction.
2. Don’t tell anyone your reserve price and in your ad say “I will not disclose the reserve price”.
3. Set the starting bid low. $200, $500, $1000 – it doesn’t really matter the idea is to get as many people as possible to check it out and consider bidding.
4. Set the reserve $500-$1000 higher than you’re willing to accept
5. Lower the reserve 1-2 times within 48 hours of auction close (Ebay will send all the bidders an email announcing that the reserve has been lowered)

So let’s look at a few examples of why this works.

No Reserve Low Price You have a motorcycle you want to sell for $4,000. You decide to put it online with a no reserve auction at $3700 figuring that’s a great deal and a few people will bid it up. Someone sees your auction, realizes that’s a great deal and bids $4200. E-bay places a bid for him at $3700. No one else bids and you sell the bike for $3700.

No Reserve High Price Ok, after that fiasco with your motorcycle you figure now I have to sell my car. I want $6500 for it so I’m going to list it for $6500 and the first taker gets it. So a few people look at your auction. They’ve done their homework and realize the car is probably worth a few hundred more then that, but that’s not a great deal. So they decide to email you about it ask some questions and maybe even offer you a few hundred less through the messaging system (which is against Ebay policy). Ultimately the car doesn’t sell or at best you get exactly $6500 for it.

Reserve Low Price Now you have to sell your boat. And hot dang, she’s a looker. There’s no way you want to part with her for a penny lower than you can possibly get. So you decide you want at least $15,000 and after those less than stellar results with the car and motorcycle you decide to start the auction at $200 with a reserve of $16,000. You make sure to indicate in your post that you’re not disclosing the reserve. After the end of the first day your boat is already up to $5,000 with 2 bidders. You would never sell it for that, but none of my other auctions had that much interest so quickly. Within 48 hours of closing the auction us up to $12,500 with 6 bidders. You lower the reserve to $15,900. All 6 bidders receive an email. They really want the boat and they know they’re getting close to that reserve price so within 24 hours the price is up to $14,600. You lower your reserve again to $15,800. All the bidders are emailed once more. The auction ends with a total of 8 bidders and the high bid at $15,325. But no one won the auction. Not too worry. Ebay wants to make their commission anyway they can so they give you the option for a Second Chance offer. You can now complete the transaction with the high bidder at $15,325. A price that’s higher than you were willing to take and the absolute highest the market was willing to pay.

Just to further clarify the point, if the high bidder on your boat put in a bid of $15,325 when the auction price was still $14,600 1 of 3 things could have happened:

1. Without a reserve his bid would have been $14,600 and if no one else bid him up that would have been the selling price.
2. With a reserve set exactly at the lowest you’re willing to take, the $15,325 bid would have bid $15,000 and if no one else bids him up that would have been the sale price.
3. Since you were smart and put in a reserve a bit higher than you were willing to let the boat go for, his $15,325 bid registered at $15,325 since it was still below the reserve. Now you KNOW you got the highest price he was willing to pay.

The key is getting the bidders emotionally involved and making sure you get the absolute most you can for your item.

To your succes, Bryan

A few days ago I was reading Michael Corbett’s The 33 Ruthless Rules of Local Advertising. In his book, he points out one of the biggest flaws I’ve seen in businesses – you cannot rely on a prospect to accurately inform you where they hear about you. In other words, a customer cannot provide you with accurate information on which of your lead sources are producing the most profit. Here’s why:

As Michael tells the story, he was working for a business that was having a big sale one Saturday. Prior to the sale they did a lot of advertising in the local market and wanted to determine which marketing project paid off. To do that Mike and his boss stood at the door all day and asked every customer where they heard about the sale. 30% said TV, 20% said Newspaper, and 50% said Radio – Good to know, right? Except they never had a TV ad. When they asked people if they were sure they heard about it on TV everyone assured them that they had.

Your prospects don’t know and don’t care where they heard about you.

So now what? To wisely invest your marketing dollars, you NEED to know where your leads are coming from. Michael suggests just watching sales to determine if the marketing worked. However, what if you’re running multiple marketing promotions at once? After all, who isn’t? You may have a direct mail piece, yellow page ad, website, a radio slot, and be sponsoring your local high school sports events all at the same time.

The internet marketing guru’s have this one figured out. They may have 100 different ways that they are marketing their products, but they always know exactly where the leads are coming from by tracking the “referral sites” to their website. (If you’re not familiar with “referral sites” your webpage can be setup to track which other webpage people visited that lead them to your site.)

In the “physical” world if you’re running multiple advertisements you have 2 options:

1. For print ads (i.e. yellow pages, direct mail, newspaper, magazine, website etc.) provide a coupon. Have each coupon be unique (preferably a different color) with a unique promotion ONLY available with the coupon (and obviously void with any other offer). The different color is useful because even if they forget the ad at home, they can generally remember the color so you’ll know exactly which one they’re talking about.
2. Simply offer a unique promotion. Your radio ad, TV ad, announcement at the high school event etc. should all include a different promotion when they go to your business and mention it.

Note: Make the yellow page ad your “weakest” promotion. In other words, if they hear you on the radio and pick up the yellow pages to find you, you want them to tell you about the radio promotion, NOT the yellow pages promotion.

What about referrals? – Well you need to incentivize (I’m aware that I just made up that word) your referrals. You need to offer something to the referrer for providing the referral. If you do that, the referrer will be sure to tell you about it.

Also, make sure your promotions provide some sort of exclusivity. Generally items are made exclusive by offering a time limit, quantity limit, or “previous customer” discount. If you look at any good online information marketers, the good ones (i.e. Yanik Silver, Perry Marshall, Jim Edwards) ALWAYS make their materials “exclusive”.

Here’s the other “excuse” I hear from business owners all the time about why tracking lead sources is a waste of time. They claim that you can’t really ever know which lead source brought them in. Maybe they did hear your TV ad and radio ad and saw your newspaper ad and finally one day decided to call. I agree that in your market, having your name synonymous with your product is very important and to some extent all of your marketing projects should be helping to do that (if they’re structured properly with your Unique Selling Proposition). But here’s the thing. Who cares if everyone in the world knows that you make widgets if no one is buying your widgets??? The reason you offer promotions is because even though your prospects may have heard your name in 10 different ads, the ad that brings them in to buy something is the one you need to know about.

Do not confuse “activity” – people calling or stopping by because they heard your ad – with “profitability” – people actually BUYING something because they heard your ad. Online affiliate marketers are great at distinguishing between the 2. They don’t pay a dime to anyone for any marketing UNTIL someone buys a product! Don’t you wish you could do that in your business? Imagine setting up a deal with your local newspaper, radio station, or TV channel where you paid for the ad by giving them a percentage of sales that came directly from that ad. If you ever manage to negotiate a deal like that please let me know about it.

To your success, Bryan

P.S. The “other” way to track all of your lead sources is to offer unique phone numbers, email addresses, or web addresses with each ad and promotion. That can get a little more inconvenient for the consumer to try to remember that information however with the proliferation of the internet, VOIP phone services, and email, at some point I imagine you’ll see this happening more often. It’s already becoming popular in direct mail marketing.

My business building opportunities have been quite crazy since Friday. In that time I’ve finished my 1040c and taxes for my Sole Proprietorship and discussed my planned new business purchase with the seller (just waiting on the bankers right now). So those are 2 businesses already in the works…

Now for the fun part… Since then I’ve had 4 more business opportunities materialize!

1. In the weeee hours of Friday morning I launched this blog and the “business plan” that goes along with it.
2. Friday afternoon my boss at the software company called to let me know about an opportunity he’d love to make me a partner in if I don’t go buy another business on my own.
3. Friday night, my brother tells me about an “underground” website he developed that is not listed anywhere on the internet. It can’t be found through a search engine, or social networking site, and has a very non-common (i.e. not-easy-to-remember) name. Yet he managed to grow it without even trying from less than 5,000 hits last February to more than 51,000 hits in the month of January 2008. All completely from word-of-mouth and personal referrals that he didn’t even ask for. Obviously we’re now looking into how to turn that into a business.
4. Sunday I get a phone call from a lady I met with a few months ago who is selling a tanning salon. She desperately needs out because of health challenges with her and her daughter. The business has been established for quite a few years, has a loyal customer base, and as she told me “I don’t even care about the money anymore, I just need to take care of my family.” She’ll even vendor finance it. In other words, I can get a decent business at a great price. (No, I’m not taking advantage of her because of her misfortune. On the contrary, without myself or someone like me buying her business she will be in a much more difficult situation.) Unfortunately with my other business purchase in the works I’ll probably have to pass this up.

So you probably have 2 questions:

1. Why work on so many businesses at once?

2. How did you manage to get that many people to come to you with business building opportunities?

The best answer to #1 is found in Michael Masterson’s Ready, Fire, Aim: Zero to $100 Million in No Time Flat. In a nutshell, the philosophy of “Ready, Fire, Aim” vs “Ready, Aim, Fire” is that you and I can NEVER know what’s going to make a great idea. Only the market knows that. And the only way to find out which idea the market likes best is by asking them through trying to sell something. In other words, until I make it “big” I’ll keep working on whatever business opportunities present themselves. The market will tell me when I have a good one.

#2 takes a little bit of time. First off, everyone I know knows me to be of the “entrepreneurial spirit.” They know I’m always looking for business opportunities. They also respect my business acumen. So when they have an opportunity they need help with, they bring it to me. That’s what happened with my brother and boss.

Beyond that, EthicalBusinessBuilder.com is a business idea I’ve had for years. It just wasn’t until last week that I realized how to make it a reality (reference my blog on affiliate marketing from yesterday). So that opportunity I created for myself.

The tanning salon I found out about the old fashioned way. I got online, found businesses for sale, chose some that looked interested, called them, visited them, and did my best to get the seller to like me (that last part is very important). I visited and researched a few other businesses besides that tanning salon, but that just happened to be the one that came back to me. Brad Sugar’s claims that you look at about 50 businesses before you actually find a deal worth taking. My luck on this one appears to be a bit better (though I haven’t done any due diligence yet). Too bad I’ll probably have to pass it up (unless my other business acquisition doesn’t work out).

So if you’re interested in building businesses (the fastest way to create wealth) then get started now! You never know what opportunities might present themselves until you start looking.

To your success, Bryan

Here’s a little irony for you. I’ve been subscribed to mailing lists for Perry Marshall and Jim Edwards for years. I’d listened in on free webinars, I downloaded free e-books, I had Perry send me his “Biggest Myths in Sales” CD and I listened to that. I had even watched a few online videos by the great Yanik Silver. Yet until last week (precisely 3 days ago) I just didn’t get it. I still thought that unless I had a book, CD, DVD, video or something else to sell, I couldn’t do anything. So I just kept listening to these experts to glean information so that when I did have my first e-book I’d be ready.

The reality of it is, any website where you have visitors (or you take the time to learn how to get visitors) can make money by referring your visitors to other sites. Here’s the easiest way to think about it. In this blog and many others that I’ve read online people recommend books. I looooooove to read and so do so often. Since few people enjoy reading non-fiction as much as I do I’m often recommending resources to people and this blog will do a lot of that. So here’s where affiliate marketing comes in – If instead of just telling people to go check out “Billionaire in Training” by Brad Sugars because it rocks, I sign up FOR FREE as an affiliate to Amazon and offer a nice convenient link to Billionaire In Trainingby Brad Sugars, if someone follows that link and buys the book I get a commission (between 4-10% with Amazon).

The customer pays the EXACT same amount and it’s a lot cheaper for Amazon than most forms of marketing so it’s a win-win-win. Customer gets the book at the best price, I get a commission, Amazon generated a sale with “cheap” marketing.

The beauty of affiliates, is you can do this with almost anything on the internet these days. If you’re a guy and need some help picking up chicks, check out Learn The Secrets Of Women And Dating by David DeAngelo. If you’re a woman and need to Save Your Relationship then go there. I’ve seen this information for basketball coaching and ball-handling videos (I signed up for both since I’m a basketball coach and ball-handling nut), job-interview secrets (great e-book), car wheels and parts, and basically anything else you can think of. I sign up for free lists with my Hotmail account all the time (I would never use a “real” email address) because even the free information most of these experts give away is valuable (and since I’m of the impression I can learn something from everyone I encounter why wouldn’t I?).

Here’s the point. If you have a blog or any website online and you have consistent traffic, why wouldn’t you try a little affiliate marketing?

Let’s make it simple. If you have a blog and you EVER recommend books, consider this:
1. Go to Amazon’s Affiliate Website
2. Sign up for a free account.
3. Put in convenient links for your readers to Amazon for any books you mention.

You’re now an affiliate marketer and have actually provided a great free service to all of your readers. Are there really any negatives to that?

To your success, Bryan

At my job I get to talk to all kinds of interesting people from all over North America and on Tuesday (2/5/08) I spoke with a gentleman in NY who used to be a consultant with 300 clients in NYC.

At one point I made the comment that, “one of the problems I see in businesses is that people who can install water softeners think that means they’re going to be good at running a water softening business – and that’s just not true.”

The consultant said “That’s exactly right!”

Me: “It’s just like Michael Gerber talks about in the The E-Myth”

Consultant: “What book? by who?”

After giving him a brief explanation of the book, the author, and emailing him a list of 12 books I recommend for improving profits, he begins to tell me a story.

He said that he had a consulting business in New York City with 300 clients who all eventually failed because not one of them would take the time to make a simple business plan. He talked about one client in particular who had a great business of singing telegrams (I believe that’s what he said) that was growing fast and she wanted to expand to other cities. However she refused to make a business plan so the consultant did for her. He showed her that she would never make money at her current prices and needed to increase them. She claimed she knew her costs and could make money and stayed in business for quite a while out of sheer determination. She eventually folded, has a “normal” job, and is in a huge amount of debt because of that business venture.

The fact that 300 out of 300 business owners were “technicians” in their start-up businesses and they all failed because they didn’t know how to work on their businesses instead of just in them is no real surprise. After all, Gerber told us all about that.

What shocked me was that a business consultant hadn’t read a single book out of my varied list of 12 recommended business books. The list included at least 4 best sellers and the The E-Myth Revisited in particular was rated as the #1 business book by Inc. 500 CEOs.

Granted, this consultant turned businessman seems to be doing very well with his current venture and must have an amazing sales presentation as he sells his equipment for at least 50% more than any other similar business that I’ve encountered in all of North America. That takes at least a little skill.

The other thing that strikes me as funny is that a good mechanical engineer friend from college decided to get a MBA. I obviously chose to dive head-first into the business world to learn instead. He claims that the primary goal of a business is to acquire customers – I argued that the primary goal of a business is to make a profit. Sounds like that lady might have gone through the same business classes since she had plenty of customers – and seemed to forget about profit…

What do you think about the consultant? About MBA programs teaching that customers are the primary goal of every business? Of my crazy affinity for books? lol

To your success, Bryan

BTW – I’ve since changed my opinion on the primary goals of a business with some insights from Built to Last.

I know, that sounds ridiculous… But take a few minutes, learn the basic concepts, and if you haven’t heard this before, you’ll be amazed at the clarity this can bring to almost anything you do in life. I find myself teaching this lesson to more of my friends and family than probably anything else I’ve EVER learned so LEARN IT!

Here’s the basic formula:

Do x Be = Have

Now I originally learned this formula through Brad Sugar’s Entrepreneur Masters Class however I’m pretty sure he got it from someone else… If you know who originally came up with this, let me know.

The unique thing about this formula is you have to start on the right and work left – the opposite of how you normally read – to make it work.

Have

Make a list of what you want to Have in life, at your job, at school, in your mate, etc. etc. etc.

How much money? What kind of house(s)? Any boats or nice cars? Family? What will your job be like? How often will you vacation and where? You get the idea. WRITE DOWN what you want to Have in your life.

Writing this down is essential. A few years back I recall reading about a survey that was conducted on Harvard business graduates at their 20 year anniversary. They asked the graduates, who had written down their goals when they graduated from school – 3% had written goals and 97% did not. They then found out that the 3% who had specific written goals had amassed more wealth than the other 97% combined. And it wasn’t like those 97% were slackers. They were all Harvard graduates so they had to have at least a little talent. Honestly I read so much I can’t recall where I learned this story, so if you know, please let me know.

Be

Now, look around you and determine who has what you want to Have. What kind of job do they have? Do they have their own business? Do they have a college degree? What kind of degree? How many hours per week do they work? What do they attribute to their success?

Now you have to figure out who you have to Be to get what you want to Have. In other words, if you love children and want to be a teacher, but your list also includes a summer home in the Outer Banks, can Being a teacher allow you to Have that house? If there are any other teachers who have vacation homes down there, learn what else they had to Become (besides a teacher) to afford it.

This is the most often overlooked step. Everyone knows what they want to Have and think they know what they have to Do to get there. But they never figure out who they have to Be. Without Being the person who can Have what you want, NO amount of Doing will get you there. More than likely, you’ll just be Doing the wrong things.

If you have no idea who you have to Be to become a millionaire, check out The Millionaire Mindby Thomas Stanley. It’s a book based on lengthy surveys filled out by over 1300 millionaires. If you want to learn what kind of people Become millionaires, this is the book for you.

Do

The last piece to our equation is figuring out what you have to Do to be who you need to Be.

Where do you need to go to school? (if at all) Who do you need to associate with? Where do you need to live? When do you need to start planning or saving?

What do you need to Do, to become who you need to Be, to get what you want to Have.

Keep in mind that if you make a list of want you want to Have in a spouse, you better figure out who you need to Be so that when you meet that person you’ve already done what you need to Do to hit it off with them. Think about it. That makes sense, right? You better be a perfect person yourself if your list describes the perfect person. hahaha

In my life, this became very clear to me almost immediately after learning it. I went to a top 10 engineering school and became a mechanical engineer because I love cars, motorcycles, and engineering in general. However, I also want an island. A nice little private island with a place to land a plane and helicopter. Maybe a 9 hole golf course and a nice comfortable villa to relax in. After looking around at all the engineers I knew, it became very apparent that Being an engineer was not going to get me what I wanted to Have. Being a successful business man will, however. Not only will it allow me to engineer new designs for automotive and motorcycle applications at my leisure, it will also allow me the possibility of an island. Something being an engineer alone could never do.

Are you doing what you need to Do, to become who you need to Be, to enjoy what you want to Have?

To your success, Bryan

When I started business “consulting” at the ripe old age of 20 with no actual business ownership and management experience, I ran into a few problems. My job was to implement a new software system that would significantly change the work flow of a business. In that process I would have to recommend ways to handle leads, in-bound and out-bound calls, inventory, receivables, and offer suggestions on what management reports to run. I learned that to get buy-in it was necessary to explain WHY they needed to do all of this. No matter how much I knew or how many businesses I helped, a 21 year old wasn’t ever going to get much respect right away. So I learned a quick way to build rapport is to use “experts” to make some suggestions instead of me just making them. In other words I learned to use books to backup my expertise and build instant credibility. I furthered that credibility by publishing articles in trade magazines when I was 22… But that’s a different story.

So after years of reading books on real estate, investing, business building, sales, marketing, and psychology here are the ones that offer the BEST advice for wealth building in the order of importance.

1. Billionaire In Trainingby Brad Sugars: If you don’t know this guy then you need to. He retired with $10 million in the bank at age 26 for a few years. Then got bored and launched what is now the largest business coaching business in the world, Action Coach International. Now at age 34 he’s been involved in over 50 businesses and is using the formula in this book to become a very young billionaire. The best book of its kind.
2. Ready, Fire, Aim: Zero to $100 Million in No Time Flatby Michael Masterson: Masterson’s approach is a bit different than Sugar’s which is why I liked it. Masterson talks in detail about starting and growing a business step-by-step, whereas Brad says don’t waste your time starting one, just buy one. Regardless, Masterson has turned himself into a hundred millionaire and retired for the first time at age 39. He provides some excellent tools particularly his insights into marketing and back-end sales.
3. The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About Itby Michael Gerber: One of the best business books ever according to Inc. magazine. Gerber breaks down the reason most businesses fail to the owners misunderstandings about business. The greatest misunderstanding – that because I’m a good plumber, electrician, accountant, lawyer, etc. I’m gonna be great at running a business that will allow me to use my sweet skills.
4. First, Break All the Rules: What the World’s Greatest Managers Do Differentlyby Marcus Buckingham: After interviewing 80,000 managers in 20,000 different organizations over 20 years Buckingham has broken down the best way to measure employee productivity and happiness to 12 simple questions. If 12 is too many he even gives you ways to shorten that list depending on your goals. If you EVER plan on doing a performance review or have employees, read this book.
5. Built to Last: Successful Habits of Visionary Companiesby Jim Collins and Jerry Porras: The greatest lesson I took away from this book was that Gerber and Sugars are right. Even the greatest businesses over the last 100 years were founded to be great businesses from the start NOT to provide a great product. That’s a VERY important distinction. Sorry to dissapoint all those high-ranked business schools that say you need the product first.
6. The Millionaire Mindby Thomas Stanley: This book is a compilation of data from survey’s answered by over 1300 millionaire’s. Some of his findings are quite interesting. The most important 2 were that the number 1 thing millionaire’s attribute to their success is “Being honest with all people.” The second is that most millionaires were at or below average according to our fine education system. They were mostly college dropouts , C students, and averaged less than 1000 on their SAT’s.

Though I’ve read Robert Allen’s Nothing Down for the 90sand Hagstrom’s The Warren Buffett Way and Peter Lynch’s Beating the Street along with dozens of other books and online services related to real estate and investing, I have very purposely left those out. I’m not saying they’re poor books, because they are all VERY good (Robert Allen inspired me to buy my first rental property at 21) – however, as Brad Sugars points out in “Billionaire in Training” you don’t climb the capital ladder (i.e. real estate and stocks/securities) until you’ve climbed the cash flow ladder. In other words, until you have cashflow to backup your real estate investments and securities in case of trouble, you’re wasting your time with those. I know in the instance of both my real estate investments and stocks/mutual funds I NEEDED cashflow (from my job) to cover them.

To your success, Bryan

The inspiration for this site was a research paper I wrote in December 2004 for Professor Redekop’s Senior Seminar “Business Ethics” class at Kettering University. I was going to break up the paper into 2 separate sections but decided it flows better as a single piece and you can easily jump to the bold headers in the sections that most interest you. I make no claims of perfect grammar or APA approved references.

All of the books that are referenced in the paper can be found at the bottom of the blog.

Introduction

Kettering/GMI has a long history of successful alumni. Kettering claims that 1 in 6 Kettering/GMI graduates are CEO’s or President’s and that Kettering sends a higher percentage of students to the University of Harvard’s MBA program than any other undergraduate school in the country. This essay analyzes the leadership and ethical underpinnings of several of these CEOs and corporate executives to get a better understanding of the skills employed by Kettering/GMI’s alumni to achieve such high levels of success.

Much of the research performed for this essay was centered on eight personal interviews with very successful leaders in corporate America who have graduated from GMI or the General Motors Institute. These individuals oversee hundreds of thousands of jobs and account for billions of dollars in sales around the world. They were presented with several questions on business ethics and leadership and their responses are compared with additional research to provide a more complete understanding of Kettering/GMI alumni. The questions are listed at the beginning of the sections where they will be addressed. They were purposely designed to be vague and broad-reaching. This vagueness was necessary to determine these leaders’ initial reactions and allow them to very subjectively state the items of most importance to them for each topic. The questions were also structured in a manner to allow for email interviews to be conducted where responses back and forth for clarification would not be necessary. The alumni’s answers to questions about leadership were extremely varied however all the questions dealing with ethics were met with similar responses. The reasons for the resounding successes of these individuals are excellent leadership qualities such as hard work, adroit communication skills, consistency, and the ability to command respect. A foundation based upon high ethical and moral standards is also essential to their success. Not surprisingly, this formula for success is also common for independently wealthy individuals in general, not simply within Kettering/GMI alumni.

Defining Leadership

Before embarking on an understanding of what makes a good leader, leadership must be defined. Bob Reiss, an entrepreneur and the first Bio-Medical Engineer, who sold his third privately owned company for $650 million, provides a definition that will be used in this essay to define leadership. He states, “Leadership is the ability to have a meaningful vision of what the future could be and concurrently being able to define a pathway to the fulfillment of that vision” (Reiss 2004). A leader should provide a very clear and vivid image for what an organization can accomplish and be a person everyone can rally around and understand (Coventry 2004). Unfortunately, this is one of the most elusive qualities found in corporate executives today and therefore is being adamantly pursued and even tested for when looking for people to fill executive positions (Coventry 2004). Baltasar Gracian, a 17^th century Jesuit monk and philosopher, provides an even more eloquent definition of what he calls a “Natural Leader.”

Natural leadership. It is a secret force of superiority not to have to get by artful trickery but by an inborn power of rule. All submit to it without knowing why, recognizing the secret vigor of natural authority. Such magisterial spirits are kings by merit and lions by innate privilege. By the esteem that they inspire, they hold the hearts and minds of those around them. If their other qualities permit, such people are born to be the prime movers of the state. They perform more by a gesture than others by a long harangue. (Gracian 1653)

Gracian may attribute these unique traits of character to an “inborn power,” however it becomes quite apparent that, though leaders may possess certain natural abilities, they tend to follow a common formula. It is important to note, the alumni unanimously agree poor advice for leading was given by Machiavelli when stating, “It is essential, therefore, for a Prince who desires to maintain his position, to have learned how to be other than good, and to use or not to use his goodness as necessity requires” (Ciulla 2003: p 39). Therefore, the definition of leadership as described in this paper will focus on leading others in a healthy and moral manner.

Defining Business Ethics

Ethics can be interpreted and understood in a variety of ways and therefore needs clarification. Often when faced with the idea of business ethics, the classic John Mill interpretation of utilitarianism is brought to mind.

The creed which accepts as the foundation of morals, Utility, or the Greatest happiness Principle, holds that actions are right in proportion as they tend to promote happiness, wrong as the tend to produce the reverse of happiness. By happiness is intended pleasure, and the absence of pain; by unhappiness, pain and the privation of pleasure. (Ciulla 2003: p 143)

It is essential to note, in this definition Mill points out that unhappiness is not only pain, but “the privation of pleasure.” More succinctly, utilitarianism teaches one to take a course of action to promote the greater good of society and over one’s own personal benefits. Though this may be a great point often contemplated by corporate executives, it may be possible with this understanding to justify short-term behaviors to promote a greater good that would otherwise be unacceptable in the long-term. As Dr. James John, President of Kettering University for the past 14 years and the only person interviewed without a GMI/Kettering degree, points out, the utilitarian teaching leaves too much room for justification of poor actions for the greater good (John 2004). All of the respondents felt very strongly that one should only follow a course of action that would never violate their personal moral convictions.

Interestingly, the high moral principles of the alumni followed a distinct pattern. All three of the entrepreneurs interviewed, Mr. Barefoot, Mr. Reiss, and Mr. Schickler, felt very strongly that Judeo-Christian values were the necessary basis for moral actions. For instance, Mr. Reiss has always kept a copy of the Ten Commandments on his desk (Reiss 2004). John “Jack” Schickler, founder and CEO of Fleetcross, indicates that, “I’m firmly in the belief that [Christian] principles are the key to leading a balanced and wholesome existence while being surrounded by an array of unwholesome forces” (Schickler 2004). Don Barefoot who is currently the President of Covenant Partners Consultancy (Don Barefoot 2004), goes on to further explain this view of ethics,

Ethics need to be clearer and of a higher plane than just meeting the current prevailing legal standards of the land…these standards are too variable across the judicial/geographic landscape. Of course, you must also perform financially. But financial performance without trustworthy, sustainable practices is just fool’s gold. We are accountable before God, and His standards are clear for those who care to understand them (Barefoot 2004).

The other five alumni, who currently work in corporate America or academia, feel very strongly about adhering to the highest moral principles but they do not directly attribute this to Christian teachings. Religious views were never questioned during the interviews so it is difficult to determine if their ethical views were influenced by a particular religious persuasion or if the politically correct atmosphere of corporate America prevents these details from being relinquished. Steve Dickerson points out that he often tells people, “I have learned almost as much in Harvard’s MBA program as I did in Sunday school” (Dickerson 2004). Joe Spielman, who will be assuming the position of General Motors’ vice president and general manager of manufacturing for North America on January 1, 2005, offers several litmus tests for evaluating ethical decisions (GM to streamline… 2004). Before making a decision with ethical implications Mr. Spielman will consider what a lawyer trying to prosecute him could say about the situation, whether he would be proud to tell his father, assuming he was a minister of any faith, about his actions, and whether he can look at the man he’s shaving every morning and be happy with what he sees (Spielman 2004).

It appears the most simplistic understanding of ethics in life as well as business was taught by Jesus when informing his disciples that, “You shall love your neighbor as yourself” (New American Standard Bible Matt 22:39). Mr. Reiss points out, in reference to another religious teaching, “whether one chooses to view [the Ten] commandments as divine revelation or a statement of ancient wisdom is irrelevant” (Reiss 2004). So it is in this context, of ancient wisdom, upon which this essay will construct a reference foundation for ethics and ethical decisions. In other words, if a decision is made counter to the above teaching of Jesus, it can be interpreted as an unethical choice. The reason for this is because of its broad-reaching applications and the inclination of those interviewed to view ethics in a manner that is very simplistic and definitive.

Traits of a Leader

The following leadership questions were presented to the interviewees: What characterizes leadership for you? In other words, what are the most important or crucial aspects/traits/habits of a good leader?

It is first, important to understand that leadership is a very elusive subject because of changing business climates, individual styles, and a leader’s necessity to always be learning from those both above and below him (Coventry 2004). With that in mind, it’s of little surprise that no two people provided the same answer. Steve Dickerson, a Vice President at Metaldyne, a manufacturing supplier for the automotive industry with annual sales of approximately $2 billion (Leuliette 2004), believes proper motivation, character, integrity, high ethical standards, hard work, respecting individuals, facilitating communication and commanding respect are all traits found in good leaders (Dickerson 2004). Bob Reiss indicates that, “Some very important traits for a person who aspires to a leadership position include humility, trustworthiness, honesty, constancy, discernment, dependability, problem identification and problem solving skills and hard work” (Reiss 2004). Bruce Coventry presented a bit different approach. For him, these traits can all be summed up in a person who can provide a very clear and vivid image for what the organization is trying to accomplish and then articulate that image well enough to have people follow him or her with enthusiasm (Coventry 2004). Mr. Barefoot is also a proponent of visionary leadership and believes leadership involves:

Defining ‘reality’ for your organization by integrating/promoting/reinforcing a vision for the enterprise; building unity, transparency and teamwork around the pursuit of that vision; ensuring company-wide adoption of sound core values which build trust and predictability in relationships; developing a highly competitive sustainable enterprise; being an effective steward of the potential/opportunity/resources that the Lord has provided you; diligence (i.e. vision without execution is ‘just talk’); setting up sound metrics, delegation/authority/accountability, and compensation methods (with ‘pay for performance’ elements built-in); and serving others by modeling what you promote and equipping them to succeed (i.e. enabling committed ordinary
folks to achieve extraordinary results as a team) (Barefoot 2004).

Dr. John leads Kettering University with a definite vision and believes firmly that a leader needs confidence. People are resistant to change and a leader will be met with adversity, detractors, and other negative influences. Therefore, the leader must always have a plan and enough confidence in himself and the plan to follow it through to the end (John 2004). Mr. Reiss tempers this need for confidence:

A big ego, or a sense of over-inflated self importance, are the most common defects in people who never make good and effective leaders because nobody wants to follow them. In a large company people will tolerate these kinds of people just to have a job but nobody willingly joins their team and proclaims these types of people as their leaders, boss maybe but not leader (Reiss 2004).

Millionaires attribute some similar factors to their financial success. Their top ten factors, in order of importance, are:

1. being honest with all people
2. being well disciplined
3. getting along with people
4. having a supportive spouse
5. working harder than most people
6. loving [their] career/business
7. having strong leadership qualities
8. having a very competitive spirit/personality
9. being very well organized
10. having an ability to sell [their] ideas/products and making wise investments (tied for tenth) (Stanley 2000)

At first glance it appears that not only is leadership very elusive, it’s unique to each individual. Certainly leaders carry out and express there leadership styles through their own personalities and personal strengths, however several factors seem to permeate all of the alumni’s definitions. These traits are high ethical standards, hard work, consistency, superb communication skills, the ability to define a goal, the skills to confidently inspire others to achieve a common goal and the ability to command respect. More importantly, it has to be a life-long process where you are continually learning from those all around you. Larry Burns, a General Motors’ executive who leads the GM Research and Development Center, located in Warren, Michigan, and oversees GM’s global research programs, indicates, you should also do your best to surround yourself with excellent leaders from whom you can learn. Particularly as you are beginning your career it is extremely important to put yourself in a position to learn from great leaders (Burns 2004). Amazingly, all of these traits and characteristics can be learned and not one respondent claimed superior intellect or an excellent college education was a necessary requirement for leadership. This is not to imply that it is not beneficial, but it appears to be of little real importance. Two of the greatest businessmen in present day corporate America, Michael Dell and Bill Gates are both college drop-outs. It is also interesting to note that there is no significant statistical correlation between SAT scores, class rank in college, or GPA in college and net worth for individuals between 45 and 64 years of age (Stanley 2000: 120).

Importance of Ethics

The ethical questions posed to the interviewees are as follows: What role, if any, does business ethics play in your organization or for you personally? Have you witnessed poor ethical behavior in competitors, or in your industry? Do you think that proper ethical behavior pays off for businesses? Are the short or long-term effects of ethical choices different?

Every person in business will be confronted with ethical choices. According to my interviewees, these choices should be met with a single solution. Always choose the ethical solution. The ethical solution will ALWAYS be more profitable personally, for the company, for the employees of the company, for the customers and for the community. Everyone interviewed has certainly viewed unethical actions in their workplace or industry and yet their reactions were much the same. Bruce Coventry and Steve Dickerson firmly indicated that, as an employee, if asked to perform an unethical act, you address the issue with your superiors in as adroit a manner as possible and let them understand your feelings. If still asked to carry-out the unethical action, there is no other recourse but to leave the job (Coventry 2004; Dickerson 2004). Mr. Schickler also agrees and goes on to explain the benefits of such actions:

It has been my experience that unethical business practices always catch up with the offender in a very unpleasant manner and usually from a least expected direction. Sometimes it might be years later. I can say that all of the experiences I can remember wherein I was initially harmed by unethical practices ended up as wonderful blessings and opportunities for my business. It takes a lot of faith to believe that those results will be forthcoming, but it happens to work out that way (Schickler 2004).

Larry Burns feels, “Things that are not consistent with high integrity should never be done. When an ethical issue arises, you must step up to it, deal with it and stop it or it will spread like a cancer” (Burns 2004). He goes on to reference the tragedy at Enron that seems so unbelievable. Enron was, “Lead by a group of people who walked a pretty fine line between what’s right and wrong and you must have ethics that don’t allow you to even get close to the line” (Burns 2004). Mr. Reiss indicates that, “Proper ethical behavior not only pays big dividends in the business world it is the only path to enduring success. Short term and long term success is, in the end, the same thing” (Reiss 2004). “For those truly pursuing God’s standards for living and leadership, there can be no difference between how short-term and long-term decisions are considered with regard to making ‘right’ decisions” (Barefoot 2004).

Often when considering business ethics, stories of Enron, Global-Crossing, Tyco or Conrad Black come to mind. Fortunately these stories come to mind more likely because of the media’s sensational view of them, and not because they are the accepted norm in corporate America. Every person interviewed was very adamant about pursuing, teaching and setting an example of high ethical standards and moral conduct. This view on ethics is certainly not the exception with millionaires stating the MOST important factor of success is “being honest with all people,” with 90% of millionaire respondents considering it either important or very important (Stanley 2000: 43).

Addressing Machiavelli

Machiavelli has proposed a rather unethical view of leadership and the following question was presented to better understand the applications of his ideas. Do you agree with Machiavelli that sometimes leaders need to do “bad” things for the good of the company?

As seemingly elusive as leadership may seem, the lessons purported by Machiavelli are almost unequivocally met with the same response. “There is no justification for ever doing bad things, the end never justifies the means. PERIOD!” (Reiss 2004). This sentiment was echoed by everyone interviewed and, though it is certainly not unanimous throughout the corporate world, it appears to be the prevailing wisdom. Mr. Coventry and Mr. Burns point out that it depends on how you define “bad”, but if you are doing something that is morally or ethically wrong you HAVE to change that situation (Coventry 2004; Burns 2004). Dickerson also feels very strongly about this issue and points out that:

Leaders should always do good things in the best long-term interests of the company and its stakeholders (not just shareholders). Sometimes these necessary things, such as reduction in work force due to loss of business or canceling the Christmas party because there is no money, are not popular. As a manager you must take thousands of actions, some easy and some difficult. I believe it’s the way that you communicate and execute difficult things that makes them either “good” or “bad” (Dickerson 2004).

Mr. Spielman doesn’t adhere to Machiavelli’s teaching at all. For him leading through ethical behavior encompasses the very essence of his leadership. Bill Reno, a union official, illustrates Mr. Spielman’s motivations in the following manner:

If you have an issue or problem about work or your personal life and you lay it out straight to Joe he will do everything he can do to help you. Now if you come back, on the other hand, and you are playing games and telling half-truths or lying, Joe will tear your heart right out from your body (Spielman 2004).

Mr. Spielman knows that ethics in a corporation are transparent and even the look of impropriety such as going to a baseball game with a supplier is not acceptable. He will help his employees, provide resources, give advice, talk with them, support them and protect those valuable employees who may once in a while stumble and make a mistake.

All good leaders seem to be in agreement on this subject. Machiavelli has no practical applications in the real world. Moreover, adherence to Machiavelli’s teachings is foolish, unproductive and unprofitable and a good way to ensure a very short-lived, if any, success.

Live It!

Summarizing all the bits and wisdom of some of the top businessmen in the world is certainly not an easy task. Over 2 hours of phone or personal interviews, 23 pages of notes and collectively hundreds of years of experience cannot be taught in a short research paper or in a lengthy book. The alumni and, in particular, the only person interviewed employed by an institute of higher learning, Dr. John, emphasizes the necessity of life-long learning. Learn from all of those around you and learn from life experiences. Dr. John points out that GMI has had a long history of ethical leadership and Albert Sobey, the first president of the General Motors Institute, was a major proponent for ethical teaching (John 2004).

The reasons for the success of Kettering/GMI alumni are many. Their abilities to lead, inspire others, and their incessant, almost relentless, pursuit of high ethical standards in their lives and businesses are major contributors to their long-term and continued success. Probably more important, is the willingness of these individuals to give back to their communities and the numerous benefits one can reap from this style of servant leadership. Many of them are on Boards of Trustees, involved in church activities and other voluntary work. Obviously all of them have taken time out of their extremely busy schedules to provide some invaluable bits of wisdom to help students through this paper. Giving up their time speaks volumes about the character, work-ethic and dedication these individuals have to both their businesses and livelihoods, but also to their communities. Enduring success appears not to be the ability to make money, but the ability to enjoy one’s job while being a productive part of a community and living a balanced life with God, family, and friends. All of these individuals possess that balance and have made an indelible mark on me. I have every belief that they will not only continue to succeed, but that they will inspire others to do the same.

In conclusion, Bob Reiss, who has spent much of his business life studying leadership and the best ways to motivate a work force, offers sage advice that should be learned by everyone hoping to achieve success:

You are advised never to forgo your principles for a short term gain while promising yourself that over the long haul you would not in fact give in to unprincipled behavior. Once you act unethically you have begun the long slide to infamy. When you are desperate you must know that these temptations will rise to the surface. That is the time to vow that you would rather go down to short term defeat than violate your principles. When you violate them they are lost forever! (Reiss 2004).

Referenced Books
The Millionaire Mindby Thomas Stanley
Gracian’s Manual: A Truth-Telling Manual & the Art of Worldly Wisdom by Baltasar Gracian, translated by Martin Fischer
The Ethics of Leadership by Joanne B. Ciulla