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My best investment ever!

Posted by ethicalbusinessbuilder on August 10, 2008

My best investment ever!

My best investment ever!

In less than 60 days I managed a 28% ROI netting me a quick $1400 in cash with almost no work and minimal risk.

Now of course these deals don’t come along everyday but you have to be ready for them when they do… And it wasn’t luck in the stock market, flipping a property (cause that takes lots of time and risk), or even growing my business. Nope - this investment was a motorcycle. :-) One that I bought, put 1444 miles on and sold for a quick profit.

Ironically, the formula I used to make this deal work has a lot of parallels to buying, building, and selling a business. Here are a few:

  1. The most important part is always the purchase. No matter how hard you work to build a business in a short time, the purchase price is what dictates your ROI.
  2. I knew a good deal when I saw one and acted quickly. Honestly, I know a lot more about motorcycles and engineering then I know about business so even though I knew the price was right, I did my homework and verified that the bike was WAY underpriced.
  3. I was in the right place at the right time. Granted, with business if you’re willing to travel you can always find the right place at the right time. If not, then sometimes you get lucky and find a no-brainer like I did with the bike.
  4. The bike required some minor maintenance and cleaning that I knew how to took care of.
  5. Selling the bike required knowing where to sell (i.e. craigslist), who the target audience was, and how to build value in the bike including negotiating a fair selling price and offering additional valuable services in addition to the bike (i.e a free helmet, thorough review of the bike, explanation, and inspection with an experienced mechanical engineer).
  6. I had to get the buyer and the seller to both like and trust me. The seller wanted cash and all I had was a personal check and a bank statement so he had to feel comfortable enough with me to accept that and let me ride off with his bike. The buyer had to trust that I was accurately representing the bike over the internet (to warrant a 3 hour drive to pick it up) and that my knowledge and experience with bikes was legitimate.

Some of those ideas may be a stretch, however I can’t emphasize enough that the most important part is the purchase price. With that in mind, you better spend time educating yourself on EBITDA and Free Cashflow calculations. EBITDA, as I’ve pointed out, is a bit of a farce, however Free Cashflow times some arbitrary multiplier is more “acceptable” though it’s not without it’s flaws.

Free Cashflow is basically your net income (or profits) with a few allowed add-backs such as 1 owner’s salary, vehicle and other perks. Interest is also an allowed add-back along with depreciation and amortization. At least with free-cashflow we all agree that everyone has to pay taxes regardless of the quality of your accountant. My issues with the free cashflow method (which are important to know when you negotiate the purchase of a business) are:

  1. Only 1 owner’s salary and perks can be an add-back, however what if the owner doesn’t take a salary because he has a great General Manager (Team Leader) in place? Isn’t that “automatic” business worth more then the one that requires the buyer to be the Team Leader?
  2. Very few people buy a business without some sort of financing whether it’s from the seller, bank, or rich uncle so completely discounting interest can be kinda silly.
  3. Depreciation as an add-back again is a bit ridiculous because those numbers represent legitimate expenses that had to occur before and will occur again (though hopefully not in the time it’ll take you to buy, build, and sell).
  4. The multiplier is “arbitrary”. As a business broker informed me a business is worth whatever a ready, willing, and able buyer is willing to pay. Most business owners think their business’ are worth 1 times revenue and, when you go to sell, if you can get somebody to believe that then more power to you. In reality most small businesses are worth 2-3 times free cashflow which means unless your business is making a NET profit margin of 33%-50% it’s probably not worth 1 times revenue.

Granted, my understanding and even experience with all of these is a bit limited, however the most important things I’m trying to stress are:

  1. Educate yourself completely
  2. Everything is negotiable (there are no hard, fast rules)
  3. Be willing to walk away if the seller doesn’t agree with your purchase price and go find another deal

To your success, Bryan

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Is it hard to be an Ethical Business Builder?

Posted by ethicalbusinessbuilder on July 20, 2008

Me on the top of Mt. Washington in Pittsburgh

Me on the top of Mt. Washington in Pittsburgh

Since I’m 26 I often go to meetings with other business owners where I’m the youngest one there and certainly look too young to own a business. At one such meeting someone who was quite a few years older than me and was working for another business asked me if its hard to own a business. “Not really. It’s like anything else. If you take the time to educate yourself anything can become easy.” Here’s why building businesses is “easy” for me. Keep in mind I don’t define easy as working 2 hours per week (though that is the goal). Easy for me is simply sleeping well at night, not feeling overly pressured, and welcoming the day. Nothing I encounter troubles me that much because I feel confident I know how to overcome it.

  1. I LOVE it. When you’re totally, completely, absolutely passionate about something and you know its what you were designed to do even the trials are colored positively.
  2. I picked a great partner. The rule of thumb is you only get a partner if you absolutely need one. Since I can’t service or sell my company’s products I needed to make sure I could rely on someone who could if times got tough. Granted that’s far secondary to finding someone I can easily work with and trust.
  3. I’ve spent a ton of time and money educating myself. If you ask an expert programmer if it was hard to write that last program, chances are they’re going to say no. Ask the plumber about plumbing that house, or the salesman about closing that deal and you get the same. Why? Because they’ve spent the time and energy necessary to become experts to the point that doing what’s best is second-nature.

By far, educating yourself in how to ethically buy, build, and sell businesses is the most important part of making it “easy”. If you want the crash-course in business that will far exceed anything else you could ever learn in 3 days I highly recommend saving up $4k and attending Brad Sugar’s Entrepreneur’s Masters class. He’s the best. Or if you don’t have that money and you prefer to get more hands-on, then join my team and we’ll work through the 6 Levels of a business together.

There are really only 2 paths to getting started down the path of being a successful entrepreneur without having to make all of the common mistakes along the way:

  1. Go work with the absolute best entrepreneur you can find with the potential of buying him or her out. Or just eventually take the knowledge you’ve gathered and go out on your own.
  2. Attend Brad Sugar’s Entrepreneur Master’s Class (if you know of a better 3-day training then I’m all ears), read his and the other books I recommend, find a good lawyer and accountant (which is by far the hardest thing to do), and then go do it.

As a motorcyclist, when I first jumped on a bike with no experience and no friends to ask for advice it was a bit scary. I just never felt completely in control. So my first trip on my brand new bike was to the library where I borrowed every book I could find on motorcycling. A few hours later my eyes were forever open and my riding skill improved 1000% as I learned the concept of “counter-steering”. If you’re not a motorcyclist here’s the simplest definition of what it means: to go left you turn the handlebars to the right and to go right you turn the handlebars to the left. In other words it’s backwards or “counter” to how you would turn a car. What? That doesn’t make sense, right? Well without getting into the Tony Foale (Tony is probably the greatest motorcycle chassis and suspension expert in the world who I’ve had the pleasure of learning from) explanation, if you look at it in a few basic steps it becomes perfectly clear. First, all 2 wheeled vehicles turn by leaning. No lean, no turn. It’s impossible. Second, motorcycle tires are rounded, not flat on the bottom like car tires. That’s important because to get the bike to lean you turn the wheel to the right and the front tire immediately drops down onto the left side of the tire – which causes it to lean, and therefore turn, left. This blog isn’t about motorcycles but if you ask any cyclist to demonstrate how it works with the bike sitting still on flat ground you can see it very quickly.

So now you know how something that seems to go against common sense actually works. Business is much the same way. We as business owners think the more time we spend taking care of customers and putting out fires the happier everyone is going to be and the better business will be. Makes sense, right? The problem is, that if you’re so busy putting out fires and helping each customer, who is making sure the customer is happy when someone else helps them? Who is the fire marshal out teaching your team members how to prevent fires? There are hundreds of “common-sense” business practices that you and I would easily understand if someone just told us. That’s why it’s so important to learn from the best. Guys like Brad Sugars, Marcus Buckingham, Michael Masterson, Dale Carnegie, Warren Buffet, Dave Yoho, Duane Sparks, Dan Kennedy, Michael Gerber, etc. etc. etc.. Read the various books that I reference, look for great business blogs, and make as many contacts with business owners as you can possibly make. They may not all be geniuses, but all they need is to fill you in on one great idea, system, or program to make it worth spending time with them. Plus, we entrepreneurs are all egotistical and think our ideas are great. So we’re generally more than willing to share those lightning bolt ideas with you and after we’re done we like you even more since you let us talk. :-)

To your success, Bryan

P.S. If you really want to know what it’s like to live a hard life then check out American Courage: Remarkable True Stories Exhibiting the Bravery That Has Made Our Country Great and learn about some of the greatest figures in American history who they didn’t teach you about in school. :-)

Posted in Business Books, General Business | Tagged: | No Comments »

Work the system - the WHOLE system

Posted by ethicalbusinessbuilder on July 13, 2008

In the spirit of Dale Carnegie’s How to Win Friends & Influence People I will recommend Sam Carpenter’s book Work the System and I certainly felt reinvigorated about the systems I’m working on in my business. (Dale Carnegie suggested that before you critique someone you always offer a positive so as not to put them on the defensive.) I will recommend the book to people who I don’t need or want to have a big picture of generating wealth - to people who just need to understand the importance of systems, but not everything else that comes along with being able to grow lots of businesses.

For me if I can pull a single good idea out of a book then I consider it worth the $20 and time invested. It wasn’t until the last few chapters that I found that great idea from “Work the System”. It’s a concept Carpenter calls “PTO” or Paid Time Off. The way it works is that with every paycheck your team members accumulate vacation or sick days or both. Well Carpenter found out that caused a problem with people just taking one of those sick or vacation days because “i don’t feel like working today.” So instead of that, he wrapped both into Paid Time Off and paid the employee for that time immediately as an additional line item on each paycheck. That way when the employee takes off a day or week, they don’t get paid for that day or week since they’ve already been paid ahead of time. He claims it reduced absences by 80% and I believe it. I read that last night and this morning I was working with my accountant to get it into our Quickbooks program! Brilliant idea!

Beyond that, let’s call it what it is - Sam Carpenter’s “System” was an effective way for 1 man to take 1 small business (currently $2 million in annual revenue) in 1 area of the world in 1 specific industry to his own personal definition of success. God bless him because he’s living his American dream and I absolutely LOVE to hear how people are able to do that. The thing is, Carpenter tries to convince the world that what has worked in his very limited world and experience is the answer to all business owners’ prayers.

There are a few reasons his systems approach was so effective for him:

  1. He had absolutely none to begin with. I felt really bad for him reading the first few chapters about how his life and business were in such shambles. It was rather depressing.
  2. His business has a recurring revenue business model. In other words if he doesn’t sell another X this month he’ll still make payroll and there are a LOT of businesses that don’t have that luxury.
  3. His business is relatively simple. He mentioned they can take someone off the street with decent typing skills and have them handling calls for his 24/7/365 call answering business within 3 days. There are plenty of small businesses that require much longer then that just to get someone acclimated.
  4. His business is a necessity for its clients. Its not a luxury.

So let’s face it, he misses some VERY important points in growing a business that no business owner should be without. Here’s a quick list of just a few things he doesn’t address that are important to a business:

  1. Unique Selling Proposition and guarantee.
  2. Testing and Measuring particularly with lead tracking.
  3. He grows his customer base mostly through buying other businesses but gives no weight to the value of doing that. I’m curious as to how many new accounts he signs up every year through his marketing and sales system since they’re never mentioned.
  4. His first systems to fix were his operation’s systems not his sales/marketing systems (he had that luxury because he had a recurring revenue business).
  5. He never really reviews team-building other than to find people who buy into his systems mantra
  6. NLP, Proximity, marketing, scripting are all missed.
  7. He doesn’t review any method for maintaining the systems or the business with important financial numbers such as a daily break-even, the cost of “buying” your customers, the 4 ways to grow revenue, lead conversion ratios, lifetime value of each customer, etc. etc. etc. How can you manage what you don’t know?
  8. Back-end Sales, cross-marketing, additional income streams
  9. Commission and employee incentives for productivity. For as much time as he harps on the necessary mechanics of life in that everything is controlled by systems, it seems ironic that he doesn’t have an incentive based pay-structure for his managers. Instead he seems to rely on the “pay my people a good salary and make them feel good and they’ll perform to their full potential” model. Wasn’t his whole hippy-to-reality conversion based on feeling good doesn’t produce results?

You get the point. The list can go on and on. Let’s face it, Sam Carpenter may be the McDonald’s brothers, but he’s no Ray Kroc. The McDonald’s brothers created a fantastic systematized business that made them both millionaires in a relatively short amount of time. However the McDonald’s business didn’t make it big until Ray Kroc bought them out and applied all of these other principles to their beautifully systematized business to become a billionaire.

If his systems are that good, and he’s looking to develop a lot of credibility so he can write books and charge people $3k to attend his workshop in Oregon, I’d recommend spending the next 2 years buying a competitor a month and applying the systems. Or just franchise his systems out to other call center businesses since his systems approach is the way you develop and sell a franchise. Within a few short years his business could grow ten fold into a $20 million operation. I have no doubts he could do that very successfully with the well developed systems he has in place. Then again he is more than twice my age so maybe at that point in my life I’ll be more interested in living comfortably than creating an empire. :-)

Again, his systems approach has its place and is certainly a crucial point for every business - but its not the guiding factor for success and certainly can’t be taken on its own. Maybe it’s because I personally know and have consulted with at least half a dozen people who make a lot more money than him, work when they want, and take vacations wherever they like without his obsession for systems. Especially since many of those business owners I’ve worked with understood that their first priority and most important systems were the ones that generated leads and closed sales (something he never addresses).

Michael Masterson in Ready, Fire, Aim: Zero to $100 Million in No Time Flat probably points out the biggest flaw in Mr. Carpenter’s approach and that is that a Stage 1 business’ main priority is to sell. In Stage 2, once you’ve proven that you have a viable product and a willing market, you focus on systems’ development.

The freedom, comfort, and happiness that Mr. Carpenter has found through HIS approach to HIS business is awesome - this blog is just a fair warning to people who think that by reading his book you know all there is to becoming a successful entrepreneur. His book is excellent for what it is - a book on the importance of systems to small businesses - but that’s about it.

It’s worth the read and a decent book so check it out but only after you read the other 5 books on my list of books that make you wealthy so that you have a picture of the WHOLE system that a business owner needs.

To your success, Bryan

P.S. I can’t stop thinking that Brad Sugar’s is by far the greatest entrepreneur of the last 100 years (maybe longer). Eight years ago when Mr. Carpenter had his epiphany about systems, Brad Sugars was retiring at the ripe age of 26 with $10 million cash in the bank. He has since owned 54 businesses all over the world and is only 34 or 35.

Posted in Business Books, General Business | Tagged: , , , | 1 Comment »

The 5 simple steps to writing the perfect phone script…

Posted by ethicalbusinessbuilder on July 7, 2008

This could be a script for anything. Sales, service, scheduling, answering questions, etc. etc. etc. Keep in mind that just about every script is doing some sort of selling and so we’ll use some basic sales and marketing techniques to effectively write.

Before we review how to write a script, let’s summarize why every business needs scripts for any question or process that occurs on a regular basis.

  1. It’s the only way to ensure consistent, quality responses to all of your customers every time.
  2. It’s the best way to quickly train a new teammate and bring him up to speed on your business.
  3. It’s the only way to be sure that you’re maximizing the chances of a sale, appointment, happy customer etc. with every interaction.
  4. It’s a great way to replicate all of the best, most powerful knowledge in the business and share it with the whole team and even with your other businesses.
  5. It’s required if you ever want to step away from your business because you’ve set it up to run by itself

There are probably a lot more reasons for scripts, however you get the idea. Scripts are a key to successfully growing your business.

So to create a script you need to follow the 4 Basic Rules of Marketing:

  1. Create a need or problem
  2. Provide a solution
  3. Convince them that you’re company is the best one to handle that solution
  4. Entice them into taking action right now

So let’s keep those in mind while we focus on the 5 steps to creating a great script:

  1. Determine your goal or desired outcome from the conversation
  2. List all the benefits the customer/prospect will receive by saying “yes” to your script
  3. Organize the script according to the “4 Basic Rules of Marketing”
  4. Paint a picture and/or sensationalize
  5. Translate into your own words and dialect

Let’s look at an example that we recently tackled at my business. We have a recurring service that we provide for our customers where we change the filters once per year in their drinking water system so that it functions optimally. Originally that script went something like this:

“Good morning, this is Sally from The Water Company. I’m just calling to let you know that your annual filter change is due. The filters should have been changed <date>. We’d really appreciate it if you can call us back at <phone number>.”

So let’s work through our process:

  1. Determine your goal. - Perform a filter change for our customer on or about 12 months after the last one.
  2. List the benefits. Great quality water, lower long-term cost by protecting the much more expensive membrane, the filters are designed to last 12 months to ensure the best water.
  3. Organize the script according to the marketing rules. -
    1. Problem – They haven’t changed filters yet and their water quality is deteriorating
    2. Solution – A low-cost, convenient, in-home filter change.
    3. Why us? - Well since they’re already using our equipment it’s not like they’re going to call a competitor however they may think it’s better if they do it themselves. Our initial script will assume they’re either going to not do a filter change or they are.
    4. Why should I call back to schedule now? - Because we’ll be in your area and you’re already on the schedule.
  4. Paint a picture – Filters take out impurities and over time they lose their effectiveness to do so therefore delivering lower quality water.
  5. Translate - This is done overall by the script-writer but individually by each person using the script

When we put that all together into a full script this was the result:

“Good morning, this is Sally from The Water Company. The filters in your drinking water system are designed to last 12 months and its been 14 months since your last filter change. As you probably know, every day those filters are taking the impurities out of your water so each day beyond 12 months more and more impurities are able to pass through. You are on the schedule for next week when we’ll be in your area so simply call 555.1234 to confirm and we’ll take care of everything for you. We appreciate you being a part of the Water Company team. Have a fantastic day!”

Since we haven’t reviewed NLP (Neuro-Linguistic Programming) in this blog yet, I’ll just briefly point out some things that NLP would have us correct. First, notice in the revised script how “you” and “your” are used more frequently to put more emphasis and focus on the customer.
Secondly, that last sentence jumped out at me - “We’d really appreciate it if…” What message is that sending to the customer? To me that says “you, the customer, are doing us a service by changing your filters” when in reality its a great benefit to them. Again the proper thing to do is to turn the focus to the customer and how it’s a great benefit to them. Notice how we changed that in the revised script - “You are on the schedule next week when we’ll be in your area…” What does that say. Well it assumes that of course they want a filter change and it also gives them a reason to respond almost immediately. If they don’t we might not be in their area for a while or we might show up when they don’t want us to. Either way, it’s much more likely to illicit a response.

As for the problem and benefits, we decided to pick out the points that the filters are only designed to last 12 months and that regular filter changes require good quality water. We put more specific numbers of 12 months and “14 months”, or whatever the time has been since their last change, instead of just spitting out a date. By listing a date they have to do the math and most people either won’t or it just won’t sound as urgent based on the quick math that they do in their heads.

We tried to paint a picture with our words by talking about “impurities being taken out” and “impurities passing thru”. That’s something anyone can easily visualize and we’re hoping most will automatically picture that with their minds’ eye.

Keep in mind, a script is just a starting point. It needs to flow smoothly when its being used so that it doesn’t sound like you’re reading it. In other words, you need to rearrange, add, remove, change transitional words to make it sound like you’re just talking to the customer. Everyone in your business may have a slightly different “script” because of that, so just make sure they know not to change or alter the key points.

Lastly, as with every change in your business, you need to Test and Measure the results of the new script and again Test and Measure when you improve it next time.

A secondary benefit that I derived from working on this script is that it allowed me to spend some time teaching a team member more about NLP, scripting, marketing, and business in general. Obviously it would have been a lot quicker for me to just write it myself – however if I did that, then I’m just guaranteeing myself that I’ll have to write every script forever.

To your success, Bryan

Posted in Ethical Marketing, General Business | Tagged: , , , | No Comments »

Your furniture is talking, but do you know what it’s saying?

Posted by ethicalbusinessbuilder on July 6, 2008

A seldom discussed topic in the business world is one called “Proximity.” Dave Yoho introduced me to the term in Chicago a few years back. Amazingly studies have show that when you’re performing a sales presentation in someone’s home you get a better response when you sit to the right of the homeowner. It’s theorized that because you’re closer in proximity to the right-brain of the person deciding to buy something, you’re more likely to effect an emotional decision.

Proximity teaches us that the most effective way to arrange a classroom or training event is with a “U-shaped” layout where the presenter is in the middle with the open end behind him. Everyone is relatively equidistant to the instructor and can openly communicate with him and each other. How many classrooms have you seen arranged in that manner?

Proximity also teaches us that when selling, you never put a table between yourself and a prospect. The psychological repercussions of that are “you’re on that side and I’m on this side” - that’s both literally and figuratively. So if you’re at a trade show trying to gather leads for your business, the worst thing you can do is put a table between yourself and the aisle. When you’re meeting with a team member, placing a desk between you and the team member again implies that we’re on different sides. For that reason, I recently reorganized my office to get the desk out of the middle of the floor separating me from everyone else. My L-shaped desk is in the corner opposite the doorway with each side up against a wall which means my back is basically facing the door. There is nothing else between the door, the 2 office chairs and me. With a simple swivel of my chair we’re all sitting face-to-face and working together.

You would be amazed when you put these things into action and explain to your team why you’re doing them at how positively they respond. Far too few “employees” ever work with a “manager” who puts so much effort into every detail. Remember the study in In Search of Excellence: Lessons from America’s Best-Run Companies that demonstrated that when your team members see you putting forth effort for them, it doesn’t even matter what you do, productivity will increase just because you took an interest?

This really doesn’t take a lot of work, thought, or effort so why wouldn’t you consider implementing the laws of proximity into your next sales presentation, training seminar, or office?

To your success, Bryan

Posted in Business Psychology, General Business, Team Building | Tagged: , , , | No Comments »

The 3 basic leaders every business needs…

Posted by ethicalbusinessbuilder on June 27, 2008

Imagine in its most basic form that for any business to truly excel it requires 3 main pieces. Picture a triangle with following at each point:

  1. Sales & Marketing
  2. Finance & Administration
  3. Operations & Service

Here’s the basic idea, without marketing you can’t sell and you won’t have any customers. Without effective operations and service you can’t install or service what you’ve sold. Without finance and administration you can’t pay your bills, issue paychecks, track if you’re making money, or if your margins are high enough to cover your overhead.

If your business has excellent leaders taking care of all 3 then you’ll be humming right along. Without even 1 piece, and your business will never reach its full potential.

As a team leader I take a portion of the responsibility for each one. Not necessarily because I have to, but because I enjoy it and like to think I’m good at it. :-) My leadership requires me to control marketing, handle financials and payables, and manage all of the numbers and systems. That means I have a few gaps to fill. My business still requires a Sales Leader and Operations/Service Leader. As a matter of fact, nearly any business that I’ll be involved in in the near future will require leaders with a passion for those areas of business. Eventually the goal is to find leaders for all aspects so I can completely step away or simply work on marketing and reviewing the numbers.

Let me explain more thoroughly. As a mechanical engineer, it’s no secret that I love numbers. Cash flow projections, margin calculations, break-even analyses, closing ratios and ROI evaluations are a few things that get me excited. :-D On nearly a daily basis I’m creating one or more spreadsheets to help me track the proficiency of some area of my business in the hopes of finding areas of improvement. Those (and many other) numbers help me find, address, and then ultimately plug holes. Then as we implement changes the numbers again tell me if we’re going in the right direction or if we need to make a U-turn. Every business owner uses his or her “gut” to make decisions, but completely shooting from the hip will never allow you to make the most educated decisions. Additionally, as my aunt recently pointed out to me “You love to know how things work.” For that reason, designing and implementing systems for my business gets me pumped. Scripts, check lists, flow-charts, training materials and on and on are great fun for me. (As a matter of fact, this blog itself is a system of “indoctrinating” my team leaders without having to repeat myself every time.)

My other talent and passion is marketing. Without getting into too much detail, cross-marketing, up-selling, sales scripting, back-end sales, and the like are all areas where I focus a good deal of my time. As Michael Masterson pointed out in Ready, Fire, Aim: Zero to $100 Million in No Time Flat (Agora Series) a Stage 1 business’ main priority is sales. If your business doesn’t have an efficient system for generating leads and closing sales then you probably have a lot of room to grow. Which probably also means I’d be interested in buying your business. hahaha

So what do the 3 pieces to the business triangle mean?

  1. This is about the most basic way to create an organization chart for your business to make sure you’re taking care of the crucial aspects of leadership.
  2. If you’ve read my last blog and are still a little fuzzy on how you could fit into the picture as one of my team leaders this should narrow down the passions my leaders will need.

For example, if I’m looking to buy an oil services business and you don’t know a thing about sales, marketing, finances, administration, or systems BUT you know how to lead people and are passionate about the service and operations of customers in that field, then you have the potential to be the Service and/or Operations Leader.

If you have the ability to sell and you have the talents and motivation to teach others how to sell, you could be a sales leader for almost any business regardless of what you’ve had experience selling before.

However, that thinking is a bit backwards don’t you think?

Before we delve into why that’s backwards, let me quickly reiterate why I keep saying “Leader” instead of “Manager”. My main goal as a Team Leader is to enable all of my team members to do the absolute best that they can at their jobs. Leaders lead people and managers manage resources. To fire on all cylinders, the main leaders of a business need to not just tell someone they aren’t performing up to standards - they need to be able to lead them into improving themselves. James Rhome, I believe, was the one to say “Work harder on yourself then you do on your business” and the same is true for your team members. A leader is willing to invest in her team and gets excited when someone improves. Leaders with a passion for and ability to positively communicate with their teams are the people I’m constantly searching for.

Since my strengths are Finance and Administration its my contention that with the proper Sales and Operations leaders we could grow any business. Conveniently for me, calculating profit margins, closing ratios, lead sources, or creating systems for phone scripts etc. etc. etc. are almost exactly the same for every business everywhere in the world. So with a little adaptation to a few spreadsheets I can quickly get all of the important numbers from any business. However, without a sales leader and operations leader I can’t effectively make the changes the numbers tell me I need to make.

For that reason, my approach to buying businesses is shifting. My first goal is to find the 3 main leaders I’ll need (usually it will be 2 since I can handle Finance & Admin with a bit of help) and THEN I’ll find the business that would allow all of us to excel at something we’re passionate about. That is why I’m completely vague on what businesses I’m researching, evaluating, and looking to purchase in my blog - If you have the ability to be a top-notch leader of service or sales, I’ll find a business we can excel in together.

“The only failure is the failure to participate.” - Brad Sugars

To your success, Bryan

Posted in General Business | Tagged: , , , | 1 Comment »

The toughest thing in business??? Working for me? :-)

Posted by ethicalbusinessbuilder on June 25, 2008

It’s funny. The question I get asked possibly the most often when I talk about buying great businesses to build and sell is “How do you find them???” Interestingly, that’s probably the easiest part. A few weeks ago I bought a motorcycle and the guy I bought it from had some contacts with business owners. So we start talking business since he’s also a young entrepreneur. I tell him a bit about my business philosophies and he takes off. Less than 6 hours later as I take a brief break from riding my new motorcycle he calls me -

“Hey, were you serious about buying more businesses?”

“Yeah, of course, what do you have?”

“My uncle is selling his and he’s standing next to me. You want to talk to him right now.” As I’m sitting on the side of the road straddling my motorcycle I think for about a split second.

“Yeah sure, put him on.”

So hopefully this week I’ll be evaluating that business. More and more have popped up. Almost every week someone calls, emails, or tells me about another business for sale. They’re all over the place. All you have to do is start asking and telling people what you’re looking for. It really is that simple.

Alright since the Buying part of Buy, Build, Sell is easy and, as of yet, I can’t give you any real world experiences with Selling, what’s the toughest thing? Building the business takes a lot of time and work however for the most part if you follow some basic formulas (all of which can be found in the books by Brad Sugars, Marcus Buckingham, and Michael Masterson) the building part can really be broken down in to small, manageable chunks. Things like developing systems, scripts, a niche, a Unique Selling Propostion, improved marketing, Points of Culture, incentive-based pay, cross-marketing, back-end sales etc. etc. etc. are all pieces to the Ethical Business Building puzzle that are relatively easy - they just take time. If you disagree, ask yourself if you’ve truly made the commitment to work “on” your business every single day instead of just “in” it.

Now, if your goal is to own more than one business or to be able to step away from your current business to experience other adventures in your life, you need a Great Manager - excuse me, I mean Team Leader, for each business. Its been told to me by several millionaires (I’ve met so many I can’t recall which) that wealthy people rarely invest in a great idea or product - they invest in the people behind the idea or product.

The book, In Search of Excellence: Lessons from America’s Best-Run Companies (Collins Business Essentials) repeatedly points out how “excellent” companies like Hewlett-Packard, Texas Instruments, and 3M have learned through years of trial and error that great ideas die. Texas Instruments did a study that found out that EVERY product that management thought was a great idea that died on the vine had one thing in common - they all had team leaders who were appointed by management. Whereas all the great (i.e. profitable) ideas were started and followed through by teams of people who were led by at least one person who either came up with the idea or who had a great passion for it and approached management with it. At 3M their entire business model is designed around the concept of making your idea work against all odds. There are all kinds of stories and tales of Presidents and Vice Presidents of 3M divisions who were told 2 or 3 or more times that their idea wouldn’t work, but they kept persisting - often working after hours and on weekends - to make their idea successful.

So why is all of that important to Building your business? Well, if you can’t find someone who believes as strongly in your business as you, then how can it ever reach its full potential without you? Granted, if your exit strategy is simply to sell the business and go onto another then you won’t need that great Team Leader since that’ll be you. Keep in mind, that each area of your business - Service, Sales, Operations - needs someone to effectively lead. In my business I certainly can’t be the one to do all of that and so I stick to Operations and leave the Sales and Service up to other Team Leaders. Actually at the moment, I’m working to recruit a great Service Leader.

My bigger goal is to ultimately own lots of businesses. Possibly 2 or 3 or 8 at once. To do that, I need great Team Leaders. This blog is my opening for recruitment.

If you want to learn from and with me on how to Buy, Build, and Sell businesses and you’re willing to relocate to somewhere in New Mexico or Colorado here is your opportunity. :-)

To work with me, the most important things are strong moral ethics (reference my Points of Culture), passion, communication skills, and intelligence. If you have those, experience, education, connections, age etc. etc. etc. become secondary.

If you do possess those qualities, I promise you’ll have the opportunity to work in an exciting, ever-changing atmosphere where we’re always learning something new (reference the Team Building portion of my What would someone pay to learn from you blog). You will be challenged and be held responsible for your performance. If you perform well, you will be paid exceedingly well (reference my blog on Never Paying an Hourly Wage).

Consider this for a moment. Right now I have plenty of business buying opportunities and few Team Leaders available to run them. I am acutely aware of that and will NOT buy another business without first having a Team Leader in place. In your current job does your boss, manager, owner or anyone appreciate, trust, and have the willingness to invest in you that much???

Another potential benefit of working as one of my Team Leaders is the opportunity to buy the business that you lead. What better, quicker, low-risk way to enter the world of owning your own business? Just thinking about working with some new Team Leaders gets me pumped. Developing my team members into being the best at what they do is probably the most exciting part of my job! If that also excites you then send me an email at bryan@ethicalbusinessbuilder.com.

To your success with me ;) , Bryan

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Why I decided to buy my first new cell phone of this millenium…

Posted by ethicalbusinessbuilder on June 17, 2008

A few weeks ago after much research and debate I finally decided to fork over the money and buy my first brand new cell phone of the millenium. The only other new phone I have ever owned was the phone I originally bought when I first started cell service in 2000. Since then I had an Ebay phone and a $20 phone that I bought from my bro. So what prompted me to spend $200 on a brand new Blackberry Curve 8830 and renew my contract for 2 years???

  1. The $400 discount was more than the $200 cancellation fee. I absolutely hate phone contracts so I haven’t had one since 2002. The main reason for that is (A) I’m always moving and need to make sure wherever I live the phone service is going to have good reception. (B), and more importantly, on about a yearly basis I would call my phone provider, ask for the cancellation department and get them to give me additional minutes, services, or credits because without a contract they’ll do whatever they can to keep my business. :-) So even if I have to pay the $200 cancellation fee at some point, that’s still better than not signing a contract and forking over an additional $400 up front.
  2. I wanted to know immediately if a sales lead or other important email came in. It’s very important to respond to sales leads right away so if someone emails us an inquiry I want to get them a call back within 20 minutes. The only way I could ensure that was if I was in front of my email all day or I was able to check me email on my Blackberry Curve.
  3. I needed an efficient way to stay in touch with my office. Not everyone has a company cell phone so text messaging isn’t a good option though it’s used at times. Very often talking on the phone while in a meeting (or out on the golf course) isn’t really acceptable. However a quick IM through GoogleTalk allows people in my office to easily ask questions that I can respond to while someone else is teeing off… err… uhhh… I mean presenting. :-)
  4. I moved 1900 miles from home and my sense of direction is lacking… Integrated GPS helps. The GPS has search function to tell you where to find the cheapest gas in your area, how to find businesses and restaurants, or even a friends house. And since it’s all right in my phone it easily moves with me from car to car. It’s even integrated with my calendar so that when my phone texts me to remind me of an appointment, I just click “Drive to” and it tells me how to get there. Time is money so not getting lost is a valuable feature.
  5. It is a legitimate business expense. Since I always worked for someone else, forking over $200 after-tax dollars for a phone always seemed like a lot. Now that my business pays that and the monthly service plan pre-tax, its a much better deal.
  6. Provided the perfect way to always have my schedule. It instantly syncs with Google Calendar thanks to googles free mobile sync options. Within minutes of putting an appointment on my Google Calendar it’s synced up to my phone wirelessly and vice-versa. No sync cables or docking stations or any of that silly stuff.
  7. It has unlimited internet access. So whether I’m checking into a flight while sitting in a car on my way to a wedding, keeping up on the Pens score, looking up the departure gate for my connecting flight, or reviewing the weather forecast at “Current Location” (GPS integration, baby), having the internet at your fingertips never seems to get old.
  8. My goal is to be as mobile as possible so I can run multiple businesses at the same time. When you add all of these things together, it sums up the most complete mobile toolbox since a laptop. Obviously I can’t do everything with it, but I can do most things.

Other technologies that are on my “Must-have” list for a mobile work environment:

  1. Kindle: Amazon’s New Wireless Reading Device - If you’re like me, you read. A LOT. And every time you travel you have 2-4 books to pack away in your bag that you’re working on. Or you’re at the office and need to reference something that’s in a book at home. Well the Kindle gets rid of all of that. Imagine having all of your books (120,000 at last count are available) at your fingertips in a device the size of a single book. Don’t forget you can also have your favorite magazine or newspaper (I prefer The Wall Street Journal) delivered wirelessly to your Kindle. You can even buy new books for $9.95 (less than a paperback version) anywhere you have a cell signal and have it delivered to your Kindle in about 60 seconds. This is by far the coolest thing that has come along in a long time.
  2. Document Scanner - How can you possibly be mobile if your important documents and all of your customer’s information is stuck in filing cabinets??? You can’t. Buy a good document scanner and scan EVERYTHING into your computer. The time you invest to do that will payoff 10 fold in just having access to everything you’ll ever need at the click of a button. You’ll be able to serve your customers better and be more efficient. My personal recommendations are anything with Fujitsu ScanSnap as well as the Fujitsu 5110c. The Canon DR2050c and 2080c are also top-notch units. Don’t ever spend less than $100 on your business scanner. It won’t be worth it. Trust me.
  3. Server with remote access. Along with my receivables, scheduling and lead-tracking software, this allows me to work from almost anywhere I can find internet access. My preference is a Windows 2003 Server with Terminal Services since I can access it with my Linux laptop, a Macintosh, or obviously any windows based computer.

What technologies are allowing you to become more mobile???

To your success, Bryan

P.S. You can access my blog on both the Kindle and the Blackberry. ;-)

Posted in Business Books, General Business | Tagged: , , , , | 3 Comments »

Never pay someone an hourly wage!

Posted by ethicalbusinessbuilder on May 26, 2008

Particularly if they’re full time. A while back I wrote a blog ranting about how lawyers billing by the hour is not at all customer-focused. What’s even worse is encouraging each lawyer in the firm to meet certain targets for billable hours. How in the world does that encourage them to provide the best service for the customer??? I’m aware that “high-end” accounting firms work the same way so I’m not just picking on lawyers cause I don’t agree with how those accountants bill either.

Now the irony of the situation is, I currently have 5 hourly team members. Not only are they hourly, they also all have overtime available. Let’s think about this for a second, what does paying someone by the hour and more for overtime encourage?

  1. To do as little work as possible to fill up the first 40 hours.
  2. To work as many hours of overtime as possible.

So which one of those is beneficial to the customer? Uh, right, neither. And why in the world would I pay someone by the hour? Well, in my own defense, the pay structure was already setup before I became involved. Ok, since I hate to discuss problems without offering solutions let’s look at some other alternatives.

Before determining any pay structure, you first need to determine what will make that person a profitable part of your team. In other words, determine what Key Performance Indicators are most important for that position and then incentivize ALL of them. No matter if that person is a secretary, accountant, engineer, or middle-manager, if you can’t tie there productivity to some form of revenue generation or cost-cutting, at least make them part of a company-wide profit sharing. Keep in mind, you can always bonus people for showing up on time, not taking sick days, finishing projects on schedule, etc. etc.  So even if they “need” a base salary or hourly wage, a significant portion of their income should still be performance based.

When I determine Key Performance Indicators for a position, I start with what would make that team member provide the absolute best service for the customer while still remaining profitable? In other words, even though the customer would love it, providing free service probably isn’t a great plan.

Let’s look at a few possibilities for service technicians/installers. A few ideas that come to mind as great service are the following:

  1. Fix any problem the first time every time.
  2. Show up on time.
  3. Dress professionally and smell pleasant.
  4. Explain the issues to the customer’s satisfaction.
  5. Bill appropriately for top-quality service.
  6. Exceed the customer’s expectations in some way…

And don’t forget that we have to do all of this and remain profitable.

  1. Pay commission based on the revenue he generates instead of by the hour or salary. This encourages him to not dawdle between appointments since he’s not getting paid for that time. In other words, he’s encouraged to get there on time.
  2. Have him handle call-backs himself (since that won’t generate any revenue) or if another technician needs to correct the problem give them credit for the original revenue generated.
  3. Only pay commission when the customer pays. - If they explain the issues appropriately, smell good, and dress professionally they’re much more likely to pay quickly and hopefully at the time of service. Remember the plumbing company that marketed that “all of our plumbers where belts”?
  4. Drop off a candy bar, have someone follow-up with a phone call after service, or something equally “unique” to exceed their expectations. Be creative. I’m still trying to work this out at my business, but I’ll keep you posted.

In other words, encourage each technician to bring in the maximum amount of revenue each day while not creating many mistakes. Doesn’t that sound a LOT better than paying someone by the hour? Since 2 of my technicians are leaving and the girl in the office will be going full-time this summer, I’ll be sure to let you know how the new incentive program works for us.

Keep in mind, to get everyone on your team to commit to such a program, it’s paramount that you show them that as long as they’re doing their job well, they’ll actually be making more money while working less hours. If they can bring in more revenue in a 40 hour work week then they’ll make more money than if they worked for overtime. As the Team Leader, you need to figure out what revenue they’ll need to bring in each day, the average revenue per service call, and the average # of service calls they can complete each day to determine how much money they will make. If you have a great service tracking software then even figuring out exactly how much the technician would have been paid with the commission-based system over the last year should be a cinch. It’s also important that your Service Leader ensures that your technicians have enough work every day as well as efficient directions to get to each service call. Obviously he should get paid a commission on the total service department revenue as well.

My list of great service is purposefully short. Without a doubt, you and I will come up with lots of additonal items that are important such as minimizing workman’s comp, not wrecking trucks, keeping accurate track of truck inventory, etc. etc. etc. My challenge to you (and myself) is to figure out a way to incentivize every possible positive thing whether its on a weekly, monthly, quarterly, or annual basis.

My last thought: Why punish what you don’t want your teammates to do when you can reward what you do want them to do?

To your success, Bryan

Posted in General Business | Tagged: , , | 1 Comment »

What to do the first 2 weeks onsite at a business you’ve just bought…

Posted by ethicalbusinessbuilder on April 21, 2008

Had I written this article 2 weeks ago before I actually lived through 2 weeks onsite in my business then it would have probably been something like observe, gather data, and try not to make too many changes…

Well I would have been partly right. Observe, gather data, prioritize the changes, and start making them immediately would have been more accurate. You really have to act and think quickly.

Here’s what I did when I got to New Mexico…

  1. Make sure all of the details of the business purchase are sealed up. Since my business is 1900 miles away from my home, there had to be a bit of verification, legal work, loan paper signing, etc. that had to be handled. No point in proceeding further without that.
  2. Gather data. When you go into a business that has a great database application that you already know how to manipulate, the job is 10x easier. Since I worked for 5 years for the software company that provided the database for the business I purchased I know it inside and out and can “instantly” figure out what areas we can cross-market to, which technicians were most productive, how many service calls we were doing for free, how many leads have been coming into the business, and what questions those prospects were most interested in. Maybe even more importantly, I could quickly determine what they weren’t tracking that we needed to start tracking immediately. This data also told me what changes we needed to make immediately and which ones we needed to make next week and next month. Without data you can’t possibly make any educated business decisions. Ask Michael Gerber.
  3. Get your team to buy into your philosophy. My business has 10 team members including me. They didn’t know what to expect from a new 26 year old boss. Now instead of just “observing”, almost immediately I started meeting with each of them individually and my first change was a mandatory weekly team meeting. It was important to address outstanding team issues immediately. For instance, one team member had recently had some issues with his driving record and his job required that he be able to drive. He was extremely stressed because he didn’t know what I was going to do about it. I got the story from my partner, who has owned the business for 10 years, and, with my partner’s permission, asked the team member to tell me what was going on. We brainstormed for a while on how he could still help the team, I told him exactly what I thought of the situation including that, in his limited capacity, he couldn’t command the same wage from the business. He immediately agreed and understood that he put me in that position not the other way around. Two days later I cut his pay by 25% which he was completely OK with and he almost instantly was happier and more productive. His physical demeanor literally improved because now he knew what was expected of him and what was going to happen even though he was being paid considerably less. Had I not seen it with my own eyes, I wouldn’t have thought it could have possibly been so “easy”.
  4. Have a solid team-based philosophy and share it with the team. If you have a philosophy on business that includes being the boss so you can intimidate your employees into working hard or you’ll fire them, then you’re probably not going to get a lot of buy-in from the team. Now I tried to evaluate the team as quickly as possible, to determine if everyone is worth keeping and at this point it seems that way. They all just need a bit more direction and motivation. Brad Sugar’s claims that at most businesses he’s bought (53 at last count) he had to fire 50% or more of the people right away. It doesn’t look like I’ll have to do that but I can’t rule it out yet. My team philosophy is best summarized in a few points:
    1. We’re a team working together not me dictating what everyone needs to do. If I can help you be more effective at your job I can be more effective at mine so that’s my goal as the Team Leader.
    2. Honesty is paramount. I’ll always be upfront and honest with you and I expect the same.
    3. Teams must communicate effectively. That means your ideas will be respected even if they’re not followed.
    4. We can all learn something from every single person we encounter.
    5. Everyone (especially me) is accountable for doing quality work that generates the company revenue. I will give my team members the benefit of the doubt, however everything is being tracked and the numbers tell the story in black-and-white.

A couple of things to keep in mind.

First, I did not have an exact plan written out on paper as to what I would do my first week. It just kind of came to me as I went through. Granted, in my head I know exactly what the finished product (meaning the business) looks like and the pieces that would need to come together for that finished product to become a reality. Next time, I’ll take a more structured approach, however.

Second, most of my “team” philosophy sounds real “touchy-feely”. Make no mistake about it, if someone is losing me money, they will not be around long and I made that very clear right from the start. Everyone expects that so me actually saying it really isn’t a negative. However, if I don’t tell them what they need to do to generate profit for the business every single day, then it’s my fault if they don’t produce. As a 26 year old, it was important for me to let the team know that no one bank-rolled me. That it is up to me and only me to make this business work and if I don’t, there is no one to bail me out. I am completely accountable for the success of the business and the team needs to know that.

Third, I don’t know the technical side or the sales side of this business and I don’t care to become an expert at it. Honestly, I don’t know how to sell, service, or install our products. That’s not my job. In reality, those things aren’t my strengths. My goal is to make sure I have the right people in the right positions to excel at those things so I don’t have to. Then it’s my responsibility to keep them motivated and adequately compensate them for their quality work. The idea that you need to be able to do everything in your business so that no one can hold you hostage is not the philosophy of someone whose goal is to massively grow businesses. Let me explain that a bit more clearly. If you own an electrician business, some business owners think they need to be expert electricians so that their electrician employees can’t hoodwink them by doing sub-par work. Those owners also believe that that employee may hold them “hostage” because they can’t possibly fire the employee with all of the specialized knowledge. If your business is THAT specialized and its THAT hard to find a replacement, then it’s probably not the proper business to fit into the buy, build, and sell philosophy. Off the top of my head I really can’t think of any businesses that are that specialized. No one (including me) is irreplaceable.

In 2 years I’ll be working on another business (or 2 or 3) so how can I possibly become an expert at every aspect of each one? As intelligent as I may be, I can’t. However I can become an expert at buying, building, and selling businesses of every sort because they all have the same basic fundamentals.

There are a lot more thoughts and details to cover about my first weeks on the job and since I’m working 7 days a week it may take a while to put them all in the blog… However I will outline all that I can as fast as I can. :-)

To your success, Bryan

P.S. Had I not spent thousands of hours reading books, attending seminars, and asking questions of business owners (most particularly my father), my first few weeks would have been nearly overwhelming with very little progress. Ignorance truly is the most expensive thing in life.

Posted in General Business | Tagged: , , , | 1 Comment »

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