Be an Ethical Entrepreneur, Marketer, and Business Builder

4 steps to increasing the value of your business 33%

How to prepare for the death of a small business owner with a “Bus Plan”

When I was a sophomore in college my dad woke me up one morning with a phone call.

“Did you hear?”
“I’m not even awake, hear what?”
“Well… uh…”
My dad never stammers.
I have no idea what I said after that. My body was overwhelmed with confusion, denial and emotion.

It didn’t make any sense.

My best friend since kindergarten’s dad had died. He was in his early 50’s.

He walked outside to get the dog and fell over. His wife was a nurse anesthetis and there was nothing to be done.

My friend called a bit later.
“Did you hear.”
“Yeah, I’m on my way home”
“Ok. Thanks”

I was at college 6 hours from where he and I grew up in the same neighborhood.

My friend’s dad had sold his business a few years prior so his wife, 2 sons in college, and daughter in high school didn’t have to upset their lives to step in to help with it.

Over the last 5 years my business has helped about 70 small businesses scientifically improve their online lead generation with PPC, CRO, and websites. One of our very first customers died unexpectedly a few years ago. His wife had to step in, take over, learn the business, and she eventually sold it.

On a daily basis, small business owners die or get hurt and can’t work.

Ben Feldman, who at his peak sold more insurance by himself than 1500 of the 1800 insurance agencies in America, used to say,

“When you walk out of life, your insurance money walks in for your family.”

His carefully chosen wording helps illustrate how a small business owner can’t shirk his responsibilities to his family, the families of his team, or his customers when he unexpectedly “walks out on life.”

If you’re a small business owner with at least 5 team members, you NEED a “What-if-I-get-hit-by-a-bus-tomorrow” Plan. (Smaller businesses are likely going to dissolve without the owner but one once you have a stable, profitable enterprise, create your plan.)

There are 4 huge benefits to a Bus Plan:

  1. It ensures all the stakeholders in your business are taken care of when you wake up dead one morning.
  2. It increases the value of your business by about 1x multiple.
  3. It frees you up to focus on growth and acquisitions or, if you enjoy working IN your business, it helps you to become more profitable.
  4. It allows you to take a real, I-don’t-have-to-put-out-any-fires-while-out-of-the-office, vacation.

Brad Sugars defines a business as,

“A commercial, profitable enterprise that runs without me.”

Unless you have a “Bus Plan” in place, the business can’t run without you.

Additionally, if you ever need to sell your business, show a broker your bus plan and often the multiple for your business will increase by 1 fold.

In real numbers, if your business generates $150k in cashflow and the industry norm is 2-4x cashflow, you’ll often end up around 3x or $450k for a sale price. However, a bus plan will help push your valuation to the higher end of 4x or $600k.

In other words, executing a solid plan for your business to keep running after you wake up dead can increase its value by 33%.

This is because a bus plan proves that your business isn’t dependent on you which reduces the risk for the buyer and helps her get a more predictable return on her investment in your business.

That, of course, assumes you can even sell your business without a bus plan. Up to 4 out of 5 businesses that go on the market never sell.

It also has the hidden benefit of forcing you to systematize your business like Michael Gerber teaches you how to do in The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It and Sam Carpenter obsesses over in Work the System.

A systematized business allows a new owner to easily learn to run it and then frees him up to focus on growth to get a faster ROI – which makes the business more attractive and valuable.

How to create your Bus Plan

  1. List out everything you do as an owner.
  2. Indicate who can take over each responsibility and what software, tools, or outside vendors they will need to work with for each one.
  3. Prepare emails to each of the following:
    1. Your customers to explain what will happen now.
    2. Your team members to explain that you prepared for this because you wanted to make sure they can continue to support their families and customers.
    3. Your family because they need to understand you prepared for this plan.
  4. Go through a test run.

To save you the hours it took me, add a comment at the bottom and, once I get a few comments, I’ll make my Bus Plan cheat sheet available for you.

Step 3 is the hardest.
There’s something a bit unsettling about writing emails to people as your dead self.

But it’s absolutely necessary because, it forces you to think through what you will want to say to assure them their livelihood and families will continue to be taken care of.

Obviously, to take the time to write out these letters ahead of time demonstrates to your team and customers how much you truly appreciate them.

Your test run will look like this:

  1. Review with your team exactly what their new responsibilities will be. Create the necessary How To’s and instructional videos to train them.
  2. Go off the grid for a week. Let someone else check your emails and voicemail (and hand over your cell phone if it’s business only.) You certainly can’t tell your clients you’re pretending the owner is dead, so allow your team to contact you via your personal cell if there is a true emergency.
  3. Have your team keep track of things they couldn’t do or had a hard time completing and send you a list at the end of the week. Address all of those issues.
  4. Go off the grid for a second week.
  5. Rinse and repeat annually.

Don’t forget to update your Bus Plan annually.
Set a reminder on your calendar or have your annual update coincide with your insurance renewals.

A few quick tips:

  • Review your plan with your accountant and lawyer. Often it may require a buy-sell agreement where a partner, key team members, or a family member will buy your business from your spouse at your death. This requires professional legal and tax planning help.
  • Have adequate insurance. If your family isn’t going to have your income ever again, an insurance policy is crucial. You have car insurance, fire insurance, and health insurance even though you may never total your car, have your house burn down, or get cancer. You will “walk out on life” and you can’t predict when. Get life insurance.
  • Review the plan with your spouse and adult children. No one wants to talk about what will happen when you die, but it’s necessary. You don’t have to like it. You do have to do it.

Creating your Bus Plan may be the quickest way to increase the value of your business, ensure a great vacation, and show your team members and customers how much they mean to you.

To your long and prosperous life,
Bryan

This 1 thing would have made the $70k minimum wage successful

The Gravity Payments announcement that the CEO, Dan Price, was taking a $930,000 pay cut to pay his team a minimum wage of $70,000 has recently caught headlines again because it doesn’t seem to be working.

It would be easy to point out the obvious problem with this approach, the same one Walmart is experiencing when they raised their minimum wage, that when you pay people for just showing up, you violate the social contract that employers and employees have that more talented, hard-working employees should earn more.

In other words, when people don’t earn a raise, (i.e. it’s just given to you as a minimum) it upsets those who have earned a similar raise or a very close amount.

However, that’s not the biggest problem with the Gravity Payments minimum wage.

The biggest problem, as-is generally the case, was Price’s ego.

If Mr. Price’s primary motivation was improving the way of life for his team members and he was happy to redistribute his wealth to do so, that would truly be a noble and generous act.

To ensure it’s success he only had to do 1 thing:

NOT TELL ANYONE

That’s it.

Had Price met with each person individually on his staff who was making less than $70k/year and told them, “Hey, I think you deserve an increase in pay and we can’t afford to do it all at once but over the next few years, we’re going to work hard to bump you up to $70,000/year,” it would have likely been an extremely successful adjustment.

  • The longer term employees would not have felt unfairly treated because other, less-effective team members were now making as much as them.
  • The people who received the raises would have actually worked harder (particularly if he gave them specific, actionable feedback as to WHY they received the raise).
  • The public, political pundits and the press would have not ever known about it to debate it and his customers wouldn’t have left because of his perceived socialist experiment.

Price, unfortunately decided to take a different approach.

He setup a video camera, held a company-wide meeting, recorded himself announcing the minimum wage to his team and then shared that video with the media heralding himself as a generous and benevolent leader.

His actions fall under a simple concept I try to live by, “If you have to tell people you’re smart, funny or nice, you’re not.”

In other words, because he had to prove to the world that he is such a great guy and an example to be modeled by CEO’s everywhere, his plan backfired.

If he was a looking only to improve the lives of his team and never told anyone that he took a $930,000/year pay cut to help them, he would have been a great leader because his concern would have been solely for others.

So the question is, if it was that simple to execute properly, and it was, why didn’t he do that?

Since I don’t know Price, my insights about him come mostly from his actions however these 4 explanations are more of a reflection on shortcomings all successful entrepreneurs will struggle with at some point in our growth.

  1. Ego – “Pride comes before the fall”, are words that ring true for all of us and who wouldn’t want to become the national face of such a hot topic?
  2. Greed – Let’s face it, when you stage something like this along with video recording the meeting and interviews on national TV, you are trying to get free exposure to your business. There’s nothing at all wrong with free publicity. Unless you do it at the expense of your team while claiming it’s for their benefit. My guess is Price took a calculated risk to temporarily reduce his pay and then increase his income again (through a salary increase, dividends, a stock sale or sale of the entire business) as a result of increased sales coming from the low-cost PR.
  3. Political Agenda – Being a 31 year old with a 7-figure salary tends to inflate your self-worth so potentially he thought he could be the first person to prove socialism works. Or maybe he just thought of it as charity since he was donating his own salary and profits. (And by me mentioning this am I hypocritically pushing my political agenda? Sorry, it’s hard not to do.)
  4. Lack of leadership – As Simon Sinek reminds us, great leaders eat last. It doesn’t work the same way when you do something good so you can get personal media attention to show everyone how great you are.

This may look like I’m picking on Price…

Ok, I am.

But, unfortunately, this would be an instance of the pot calling the kettle black as I’m surely guilty of ego-driven mistakes in business.

However, when a situation this unique and popular comes to the forefront due to national media attention, it gives us the opportunity to learn.

And that’s my goal. To articulate both the good intentions and poor execution of this strategy, and separate the 2.

Dan Price appears to be a sincere, hard-working, intelligent and successful guy and his mistakes in executing a $70,000 minimum wage don’t change that.

Hopefully, this will help him, and other business leaders, consider that you CAN achieve seemingly impossible things (like a $70k minimum wage) when you become a servant leader and put the needs of your team ahead of your own ego.

Dan, if you read this, I truly appreciate your good intentions and hope my advice can help you execute better servant leadership going forward since that appears to be your goal.

To humble, servant leadership, Bryan

15 Must-Follow Rules for Retiring Wealthy

retirementAs someone who has owned 4 businesses before my 30th birthday, family and friends regularly ask me about investing, retirement planning and overall, what are the best ways to have more financial security.

Follow these simple rules and you’ll be well on your way.

Top 15 Rules for Retiring Wealthy:

  1. Always spend at least 10% less than you make. Always have a savings plan and understand that most people who “look” wealthy are just in a bunch of debt. Don’t be that family. Look comfortable and BE wealthy.
  2. Spending, Saving and Giving are all habits. If you spend every dime when you make $2,000/month, you’ll spend all that you have when you make $20k/month. Develop spending, saving and donating habits immediately!
  3. The quickest way to “make” money is to pay off debt starting with the highest interest credit cards and loans first. It’s a guaranteed Return on Investment (ROI).
  4. Never put more on a credit card than you can pay off each month. If you can’t pay it off each month, shred the credit card and pay with cash or debit cards for everything.
  5. Once the high-interest debt is paid off, save up 3-6 months in savings for a rainy day.
  6. Know your budget and don’t break it. How much are your housing costs? gas, grocery bills, Starbucks purchases, gym memberships, car payments, insurance, cell phones, internet, cable TV? Track your purchases every month (Mint.com is a decent way to do this) and make sure they are under budget. Reward yourself with a dinner out or other fun activity for each month the budget is met. Just make sure the reward is also budgeted. 😉
  7. Compound interest is the most amazing invention in the world so invest early and often.
  8. Max out any employer matching 401k’s or IRA’s. It’s like getting a guaranteed 100% ROI.
  9. Never consider your primary home an investment. By the time you pay utilities, taxes, maintenance, interest, and insurance a home is nearly always a loss. However, that’s not the goal of a home anyway.
  10. Short-term investing is extremely hard to do well. Long-term investing is extremely easy to do well.
  11. Learn how to minimize taxes legally. Taxes are your biggest individual expense BY FAR.
  12. Statistically speaking, money managers don’t know jack. Very, very few are accurate over the long-term.
  13. The most expensive thing in life is ignorance. Investing, like everything else, takes some homework and a commitment to learn.
  14. Never buy toys with debt. If you can’t afford to pay cash for motorcycles, quads, dirtbikes, jet-skis, razors, boats, vacations or anything else non-essential, then you can’t afford to have them. In other words, ONLY consider debt to buy a home, business, primary vehicle and some college degrees.
  15. Delayed gratification is the number one predictor of long-term success. It’s more accurate than IQ, EQ, SAT’s, ACT’s or any other tests ever administered. In other words, spending an extra $10k to get a nicer car today can mean having $50k less when you go to retire. Discipline yourself to be an expert at delayed gratification.

Here is one of the best articles I’ve come across for a nearly foolproof plan for a healthy retirement. It lists out exactly where to invest your IRA and 401k dollars each year.

Start with the book that is referenced, If You Can: How Millenials Can Get Rich Slowly, as it is only about 35 pages long, costs less than $6 and is available for Kindle.

Warren Buffet (one of the top 3 richest men in the world for several decades) told us 30 years ago the simple secret to investing and he predicted, quite accurately, that almost no one would listen.

Do you think there are any other investing or money-management rules that are missing?

To your healthy and secure retirement,
Bryan

photo by:

Why WhatsApp is NOT everything that’s wrong with the economy

By WhatsApp Inc. (http://media.whatsapp.com/) [Public Domain], via Wikimedia CommonsFacebook recently purchased a startup with no profits for $19 billion dollars in the largest tech acquisition in history.

The venture capital-backed, tech startup world is rife with problems as I’ve blogged about before.

However, Robert Reich has brought up one of the more popularly alleged economic problems.

He claims the problem is that tech companies like WhatsApp are hurting the economy by not creating enough jobs.

In Reich’s words:

Productivity keeps growing, as do corporate profits. But jobs and wages are not growing. Unless we figure out how to bring all of them back into line – or spread the gains more widely – our economy cannot generate enough demand to sustain itself, and our society cannot maintain enough cohesion to keep us together.

In other words, Mr. Reich is saying, “55 employees were able to make a business worth $19 billion dollars serving 450 million people and that’s not fair. Why do such a small group of people deserve so much?”

Of course, he offers no solutions other than to mention income inequality implying that it’s the fault of successful companies like WhatsApp for being successful.

Venture backed start-ups with insanely high valuations, minimal revenue and no profit have all sorts of issues.

But not creating enough jobs is not one of them.

Remember the Luddites rioting to destroy new machines that made the textile industry more efficient back in the 18th century?

Richard Arkwright invented his cotton-spinning machine in 1760 which became one of the main instigators of the Luddite riots.

After all, the cotton-spinning machine would displace the jobs of all of the seamstresses who used to make the clothes by hand, right?

In 1760, there were about 7,900 persons in England engaged in production in the textile industry. In 1787, 27 years after Arkwright’s invention and only 8 years after Ed Ludd destroyed 2 stocking frames allowing his name to become synonymous with all the machine destroyers, there were 320,000 people employed in textile production in England.

Why did more efficiency results in a 4400% increase in jobs?

Because with increased efficiency came lower prices so, instead of having 2 sets of clothes, people could afford to have dozens.

The same complaints have been lodged against every major technological advancement.

Every time we progress, the Luddites come out claiming this time the new increase in efficiency is going to hurt the public by reducing jobs.

The exact opposite is true.

About two centuries ago, the majority of America was an agrarian (i.e. farming) society.

However, the invention of farm machinery didn’t result in the majority of Americans starving because they were no longer needed on the farm. In contrast, less people on the farm meant more people inventing, building, and creating other things.

At its core, economics is very simple.

If something increases efficiency it’s good for the economy. If it decreases efficiency it’s bad.

WhatsApp figured out how to connect 450 million people with only 55 employees. That sounds hyper-efficient to me.

Our knowledge-based economy has seen the fastest and greatest improvements in efficiency and leverage the world has ever known.

The end result of that increased efficiency is always an improvement for society.

Massive fortunes were made by Rockefeller, Ford and Carnegie when we transitioned from an agrarian to an industrial economy.

More recently, Gates, Zuckerberg, Page and Brin have been richly rewarded in our transition from an industrial to a knowledge economy.

Would we all be better off if none of them were allowed to reap the rewards of their creations?

You have 2 options

Become a Luddite, slow down technological innovation, and reduce the reward for being an innovator by asking the government to intervene.

OR

Learn what it takes to excel in the knowledge-based economy and join the successful companies that are improving our lives.

Time will prove, once again, that Robert Reich, despite all of his experience, power, and prestige, is no different than Ned Ludd whose name became synonymous with the machine destroyers’ failed attempt to halt progress.

The problem is education

The problem is not our exponential increases in efficiency.

The problem is an education system that was built at the beginning of the industrial revolution and is still designed to teach students to be good “workers” instead of great thinkers.

As the owner of a marketing tech company who has been almost steadily hiring for 2 years, I can assure you that the education or degree of people who succeed on my team is irrelevant.

A particular degree, or college education at all, cannot predict job success as well as cognitive reasoning abilities, emergent leadership, the ability to learn quickly, a passion for your expertise and a willingness to make mistakes while admitting when you are wrong.

Google recently revealed their top 5 hiring attributes and indicated that the number of people at Google without degrees is increasing.

So whether it’s Twitter, Google, Facebook, WhatsApp or my company, Optimized Marketing, fast growing companies that understand how to leverage technology are coming to realize that relying on someone’s particular degree or level of education is not a good predictor of future job performance.

In other words, our education system isn’t reliably producing people with the skills we need.

The problem isn’t successful companies.

The problem is we haven’t yet learned how to educate students for the knowledge economy.
Don’t blame successful entrepreneurs for not making more jobs.

Celebrate their success and start teaching more people how to do the same thing.

There’s a reason Ken Robinson’s below TED talk explaining how schools kill creativity is the most popular TED video ever with over 25 million views.

Mr. Robinson’s talk is popular because he’s right.

Whether creativity comes in the form of becoming the dance choreographer who wrote Cats or the founders of a successful startup company that sells for billions, creativity is the solution.

Taking away the rewards of creativity, as Mr. Reich seems to be implying, would further hinder creative pursuits and not help anyone.

Imagine what the next 100 years will look like if we are all allowed to “come up with original ideas that present value”, as Mr. Robinson defines creativity.

To your passionate, creative success,
Bryan

P.S. For more examples of technology increasing employment in various industries, check out Henry Hazlitt’s Economics in One Lesson.

Avoid Venture Capital and Outside Investors for your Startup

One of the most exciting days for a startup company is the day they receive money from an investor. The day someone believes in your idea so much they show up with their checkbook. The TV show Shark Tank unabashedly captures the exuberance that comes with that financial backing.

This guy is not your friend.

This guy is not your friend.

However, the opposite should be true…

Instead of popping open champagne in celebration, a lonely evening with a bottle of scotch would be more appropriate. Getting VC money, particularly if your business is pre-profit, is practically a kiss of death.

You have a better chance of winning at craps in Vegas than your company does of succeeding and becoming profitable after your VC check.

Let me clarify that VC money and outside investors, are the same thing. Whether money comes from a major VC company or your father-in-law, outside investment too early is the real problem.

The facts are simple, 75% of venture backed businesses fail according to research by Shikhar Ghosh, a Harvard Business School lecturer.

By comparison, overall only 55% of business startups fail after 5 years. In other words, venture backed businesses are 36% more likely to fail than startups overall in the first 5 years.

So if you’re spending most of your time as a startup seeking out VC funding, you are, statistically speaking, setting yourself up for failure.

Why are so many startups obsessed with outside investments?

The answer is pretty simple. The VC’s want you to be.

Anyone familiar with silicon valley knows of Peter Thiel and how he made his billions on Paypal (a company he co-founded) and Facebook which he bought into in 2004 for $500k in exchange for more than 10% of ownership.

What most people don’t realize is that he’s also invested in over 40 other companies of which you’ve probably never heard of any of them.

This is how venture capitalists work. Even if only 1 out of 4 businesses last, they can still be way ahead of the game. More importantly, they can still win big with an IPO even if the business fails shortly thereafter.

In other words, they don’t much care if your business succeeds.

Why do VC-backed businesses fail at such a high rate?

The Business Genome Project studied over 3200 startups to find out why they fail and their results should be common sense…

The #1 reason 74% of startups fail is premature scaling.

In other words, pre-profit, pre-revenue, or sometimes pre-customer start-ups start hiring and investing in infrastructure.

This is, quite frankly, insane!

Until you can get a sale and a customer, you have no business whatsoever trying to “grow” your business through hiring.

The reason these VC-backed businesses fail is the same reason government is so inefficient. The startup is now playing with someone else’s money.

The founder now no longer feels the pain of losing everything or the need to scrape by on table-scraps when he has $1,000,000 in the bank today after having $0 yesterday.

In the 2 years since my internet lead-generation business started, I’ve had numerous offers from investors that I’ve never accepted for one main reason:

The only thing more money would do for us now is make us less efficient more quickly.

This is true of every business in the early stages.
Even the 25% of VC-backed businesses that succeed are made less efficient with large checks.

As a start-up, you lose either way.

If you get VC money, most likely you’re going to fail. If you don’t fail, then you just gave up a very sizable chunk of your business and control.

The whole concept that to be successful at business you must take risks is ridiculous. The greatest entrepreneurs rarely take major risks and any risks they take are painstakingly calculated. The Heath brothers discuss this in their free Kindle book, The Myth of the Garage.

High risk examples of VC-backed businesses

If you’re still looking forward to that first VC check, let me give you a few examples of businesses that went that route.

  • SnapChat – Valued at $4 billion dollars with $0 in revenue and no plans for generating any revenue.
  • 4Square – Valued at $600 million dollars with $2 million in revenue.
  • Living Social – After being one of the hottest tech startups in the country, it posted a $566 million 3rd quarter loss in October 2012 and I wouldn’t bet on it being around in 10 years.
  • Groupon – Which IPOed at over $26 to drop all the way to $2.60 only to now start rebounding back to $10.65 while still losing $.15/share.
  • Yodle – Though this business is currently profitable and will probably stay that way, they took a major gamble when they took a profitable start-up with $700k in revenue and leveraged it until it wasn’t profitable again until they had over $100 million in revenue. That’s an extremely large risk to take. I do commend them, however, for proving the business model first.
  • Zynga – IPOed in December 2011 around $9.50 before being hyped up to $14.69/share and since tanking to $2.09 and hovering between $2.60 and $4 for the last 52 weeks. Not surprisingly, it’s still not profitable.

Even when you take a group of industry veterans who should know better and put them together to make a “super team”, the injection of too much money too quickly inevitably causes inefficiency and often failure as we saw in the case of BlueGlass SEO.

This list could go on all day. The number of great business ideas and innovations that have been harmed by too much money too early is far larger than those helped.

The concept of riding your idea to change the world a la Mark Zuckerberg is so strong, here’s a list of companies who turned down $100 million dollar buyout offers including Viddy, 4Square, Qwiki and Path.

Keep in mind, many of the VC’s who invested early in the businesses above made a killing when those companies went public or simply sought additional rounds of funding. They made their money on the hype of the IPOs not on the profits of the businesses.

The point is, it’s good business for the VC’s but rarely good business for the businesses themselves.

Private Companies with Higher Profit than their Peers

Here are a few examples of how growing profitably has created great companies.

  • Chick Fil-A – $400 million in revenue with no outside capital investments (privately owned)
  • Leo Burnett – $600 million in revenue with no outside capital investments (privately owned)
  • State Farm – no outside capital investments and now has over 18,000 agents.
  • Northwestern Mutual – privately owned and the largest provider of individual direct life insurance in the US

All of these businesses were case studies from the book The Loyalty Effect.

What’s most impressive is that the author didn’t seek out privately owned companies with no outside investments when searching for the most profitable businesses within an industry.

Instead, once he found the most profitable businesses in an industry he realized those were a few things they had in common.

He then examined these businesses and their industries and learned that avoiding outside investments was a major factor in their successes.

Lessons from VC’s

As of the end of 2012:
Apple’s Market Cap was $392BN on Revenue of $156.5 BN for a multiple of 2.5x revenue
Amazon’s Market Cap was $115BN on Revenue of $61BN for a multiple of 1.88x revenue
Netflix’s Market Cap was $12BN on Revenue of $3.6BN for a multiple of 3.33x revenue
Facebook’s Market Cap was $64BN on Revenue of $5.1BN for a multiple of 12.5x revenue
Recently 4Square’s Market Valuation was $600 million on Revenue of $2M for a multiple of 300x revenue

In other words, to match the revenue multiplier of Facebook, 4Square will have to grow its revenue by 2,400% to $48 million.

Maybe 4Square has something up its sleeve to grow revenues 24 fold in the next few years… After all, these VC guys have made billions so they know what they are doing.

Not exactly.

It’s a gamble. A big one. One that’s reliant on public opinion more than actual business fundamentals. That’s what VCs bank on. That’s why Thiel quickly sold the majority of his shares when Facebook went public while making $1 billion dollars.

In other words, early-stage VC’s couldn’t care less if most companies they’ve invested in fail. All they need is for the company to go public to cash out. Even then they only need a small percentage of their investments to go public to make money.

Take the story Tony Hsieh told in his book Delivering Happiness.

After making $30 million on his first web venture, he became a VC and lost almost all of his money by investing in around 30 different ideas. He finally decided to take Zappos over himself and pour in everything he had left in terms of time, money, and passion.

Considering he grew Zappos to over $1 billion in revenue before selling to Amazon, you could say that one paid off. But he was extremely close to losing everything.

He didn’t have to drive himself to the brink of bankruptcy (something he seemed to learn as well) to build a profitable business.

Most ideas don’t need millions of dollars prior to turning a profit to prove a concept. That’s one thing that made Zappos unique. The founder who came to Hsieh with the idea actually proved that it worked by creating his own crude website, selling shoes, and then going down to local shoe retailers to buy the shoes and ship them off.

That method wasn’t profitable but it did PROVE that people would indeed buy shoes online. Once you know that, it’s a lot easier to determine how buying shoes at wholesale, eliminating expensive store fronts, and utilizing an efficient nationwide delivery system can make internet sales of shoes highly profitable.

Considering Hsieh seems to have forced out the original founder (a topic he doesn’t explain in his book) that’s also more proof that VC’s are rarely your friend.

Unfortunately, the rare stories of companies like Instagram and 4Square, along with Shark Tank and the Inc 500, do not put the focus on how to grow a business profitably. They put the focus on securing funding, top-line growth, and cashing out.

That’s how the VC and early-stage outside investors like it.

Unfortunately, that’s very rarely what’s best for your startup.

To your startup success, Bryan

P.S. People who point out problems without providing solutions rarely fully understand the issue. Hopefully my next blog on funding your startup will provide you ideas on some better alternatives to venture capital.

The #1 secret to being an effective business coach or consultant

There are things you need to have to be successful no matter what:

  1. Knowledge
  2. Experience
  3. Access to powerful resources
  4. A Plan or System to quickly evaluate businesses
  5. Strong Value Proposition and USP

But none of these are the most important thing…

[Read more…]

Only the top 1% of small business owners do this every week…

They look at a Weekly Action Snapshot of their entire business.

In 1 single page of information, they can see a quick Snapshot that tells them, with military precision, where they need to take Action.

As an avid runner, I’ve become somewhat obsessed with a website called RunKeeper.com. It tracks your running time, distance, and even your route on Google maps. Heck it can even be tied into your GPS-enabled, heart-rate-monitoring, super-spy watch to help you track your performance. In other words, it helps me track, and therefore improve, my vital numbers for running:

  1. Distance
  2. Pace
  3. Elevation Changes
  4. Heart Rate

If only it could track temperature, humidity, and my diet I’m pretty sure it would be the ultimate training tool.

In business we also have crucial numbers. No matter if you’re training for a marathon or a 5k, the numbers you watch don’t change but the values of the numbers certainly do. Business works the same way. For the most part, we all need to track the same numbers… However, the actual value of those numbers can vary significantly.

Let’s get this out of the way right now, when you’re bragging to your buddies or when it’s time to actually sell your business, the revenue and profits are important numbers… While you’re actively improving your business, they are secondary.

However there are numbers that every business needs to include as part of your Weekly Action Snapshot report (WacSnap).

Keep in mind, if you’re not looking at the right numbers, everything you do in your business from marketing, to incentive plans, to scheduling, to hiring a new employee is a BIG guess. Imagine training for a marathon without ever tracking how far you ran or how long it took you. On race day, how would you even know if you could finish?

To make it simple, categorize your numbers based on department:

  1. Sales – # of new leads, # of outstanding leads, conversion rate (i.e. # of new customers divided by the # of new leads)
  2. Marketing – # of leads per marketing project, $$ in revenue generated per $$ in marketing spent
  3. Service/Operations – completed work orders, unfinished work orders, on a monthly basis track your profit per person (or per sq. ft. for a retail environment)
  4. Finance/Administration – past due invoices, accounts receivable aging, total payables, cash in the bank
  5. Big Picture – YTD Revenue compared with previous year, your P&L should be reviewed monthly; depending on your overall goals, there can be completely different Big Picture numbers. For instant a cell phone retailer might look at the number of service contracts compared with last year or the number of cancellations you saved in the last week.

That’s a lot of numbers; 14 to be precise.

Don’t start tracking all of them at once. If you’re having cashflow issues start with #4. Otherwise, start with #1 and work your way down.

The number of new leads, where those leads are coming from, and the % of leads you convert to customers are your MOST IMPORTANT numbers.

When you go to sell your business, if you can tell people those 3 numbers, the buyer will be extremely impressed and pay more because of it.

The simplest way to have these numbers available each week is by utilizing some industry-specific software.

Brad Sugars developed a Business Chassis, that you can read about on his blog to point out exactly which numbers are key to your sales performance.

You can also read more about tracking the important numbers of your business and the crucial numbers you need to hold your Ad Agency accountable.

To your success,
Bryan Trilli

P.S. If you’re a runner, cyclist, skier or enjoy some other form of aerobic activity, join my Street Team on RunKeeper.com. I find it’s a great motivating factor knowing others are “tracking” my performance. The same is true in business. The only thing better than reviewing your WacSnap each week is sharing it with peers to help you see areas for improvement that you might otherwise miss.

Stop Reading a Book a Week

At a seminar a few years ago the speaker said that the body of knowledge we have for any given industry DOUBLES every 6-months… That sounds ridiculously high to me and begs the question, How exactly would you even measure a “body of knowledge”…  To explain the idea more thoroughly, the presenter said that in a field of study such as marketing or sales or recruiting, the amount of information (books, websites, blogs, articles, seminars) doubles every 6-months. Though I can’t say I completely accept that number it’s easy to see that new information is coming out at an overwhelming rate.

A few years ago the US Department of Labor published a study indicating that people who read at least 7 business books per year make 2.3x more money than people who don’t. The study claims that part of the reason is that they always have new ideas. Both of those claims make sense to me…

So how in the world can you stay up on the latest studies, lessons, and technologies to make sure you don’t get left behind? Here’s what I do.

  1. Read 1-2 Books per Month – We have all heard the recommendation to read a book a week and, though I can’t say that’s bad advice, it’s just not efficient. I’ve dropped to about 1-2 books per month and replaced the additional time with the items below. Dollar for dollar, though, there’s nothing better than a good book. People will pour out their life’s work, knowledge, research, and expertise for $15 ($10 on your Kindle). That’s almost offensively cheap.
  2. Participate in 1-2 Webinars per Month – The trend these days for information marketers (i.e. the guys who are replacing professors and authors) is to leverage their time with free, informative webinars that take 45-120 minutes. Some are not worth the time. Others are well worth it and in 2 hours you can glean a lot more information than 2 hours reading a book. You will have to deal with the sales pitch at the end but you can always hang-up or disconnect at that point. However, you may even find it’s well worth the investment in their product.
  3. Sign-up for free E-books and email training courses – Firstly, setup a separate email account just for this purpose so your smartphone isn’t constantly buzzing with these emails. If you receive the free E-book or email course and it’s low quality, immediately unsubscribe so you won’t waste your time any more. If it’s high-quality and remains that way, never unsubscribe. I’ve stayed on great email lists for years. If it’s in-between, I’ll usually get a few weeks to months of content and then unsubscribe once I determine it’s not worth my time. Don’t ever delete an email since you may be searching for that information again in the future.
  4. Follow great blogs – Whether you follow their RSS feed or sign-up for their email list, if a blog writer regularly provides quality content in an area of your interest, there’s hardly a better way to get information these days. Since blogs are generally short and to-the-point, you can get great information quickly and efficiently without disrupting your day or scheduling hours of time to sort through a book. Every day I spend time reading the emails from my favorite bloggers.
  5. Like great Media Sources on Facebook – For entrepreneurs, consider liking Inc Magazine, Entrepreneur Magazine, The Wall Street Journal, Brad Sugars and of course, the Ethical Business Builder. It’ll keep your feed populated with the latest articles and blogs from these top resources.
  6. Write your own blog or record videos – Everything above provides you with knowledge. However, if you’re keeping up with the above 4 points, you’re gaining knowledge more quickly than you can implement. So to make sure you don’t lose the energy or excitement of this added knowledge, record it somewhere. Write down all the great ideas that come to mind and blog or vlog (video blog) your thoughts and ideas. You’ll find that when you are ready to implement, re-reading or watching your own interpretation on the original concept will get you up to speed much more quickly. At the very least, make lists or notes for every book or webinar so you can quickly get back up-to-speed when the time is right.

As a business owner and leader, it’s imperative that you’re constantly educating and re-educating. Your mind, just like your body, can always benefit from a good workout.

To your knowledgeable success, Bryan

P.S. Another way to get great information and new ideas on a regular basis is to hire a business coach who keeps up with the 6 items above. Contact me to learn how I can help you grow your business to run without you.

The Top 11 Free Applications for Small Business

In the new post-recession economy (yes, I’m optimistic about the post) the name of the game is leverage… In other words, doing ever more with ever less. Here are the top 11 ways any brick-and-mortar business can have top-notch IT without spending a penny.

  1. Google Apps – Get rid of your small business server and get on Google Apps right away before they start limiting you to 10 users. Read my previous blog about how my small business has used Google Apps for some ideas.
  2. MailChimp.com – Don’t even bother considering another service (unless you’re big into auto-responders then I’d say check out Aweber.com). For sending out mass emails this is your best choice by far and it’s amazingly simple. If you’re still sending out mass emails via Outlook, then go to Mailchimp.com right away. Please.
  3. DropBox.com – This product allows you to sync documents across multiple computers, your smart phone, and even multiple operating systems with ease. Initially it even includes 2 free GB. Learn more about it in my previous blog about DropBox.
  4. OpenOffice.org – Why do you keep paying to upgrade MS Office every year? And if you’ve been thinking about using Google Docs or some other web-based service, they’re still not fast or reliable enough for the real world. OpenOffice is an open source alternative to Microsoft Office that actually has more features and near-seamless integration with the Microsoft products.
  5. Google Analytics – Yes there are other website analytic tools out there but for the standard web data this free service is still the best and easiest to use. Make sure your web developer gives you access to your Google Analytics because it’s free for him to do that. If you want to get more advanced (and start paying) consider adding CrazyEgg.com to your bag of internet tricks.
  6. SurveyMonkey.com – Just as it sounds this is a free service for creating polls and surveys for your customers, or suppliers, or even your Team Members. It can be posted on your website or on your Facebook page or emailed to the interested parties. It’s a marketers dream-come-true to so easily get valuable feedback from existing and potential clients.
  7. WordPress.com / Joomla / Drupal – These are all grouped together because they’re all providing similar power and options and they’re all free. WordPress is a free blogging program (the one I use for this blog) but more importantly can also be used as a powerful Content Management System to help you create and easily maintain high-quality, professional websites.
  8. FreeConferenceCall.com – And it’s new brother, FreeScreenSharing.com, are completely Free and don’t even appear to have a paid option if you wanted to pay them. They’re a great cost-effective option for phone conference calls and web meetings.
  9. Skype.com – By now you hopefully know about this free video conferencing tool. Last week I did my first Skype call with my new HTC Evo 4G Android-based phone. I’ve also used it on my Linux laptop, and Windows 7 netbook. No matter where you are it’s hard to beat Skype for free video conferencing.
  10. Crashplan.com – It’s like Carbonite.com or Mozy.com except it’s free if you’re backing up to a friend or to another computer. In other words, if you backup you work computer to your home computer and vice versa, then it doesn’t cost a cent. What are the chances that your house and your office are going to burn down the same day? I recommend partnering with a friend in another state just in case a major disaster does hit your local area, though.
  11. Google Voice – With an Android based phone, you are finally able to seamlessly have 2 phone lines, a business and personal, ring to and call from the same phone. You can even utilize the Google Voicemail that transcribes the message and texts it to your phone.

As a final note, I really wish I could recommend Linux (particularly Ubuntu) since it’s my preferred operating system 90% of the time. However 10% of the time it can’t do what I need… For instance, certain web applications like GoToMeeting.com and USAA‘s online check deposit feature won’t work in Linux. My Xerox scanner and NeatReceipts software won’t work in Linux. The software I use for engine tuning from Motec and EvoScan won’t work in Linux. Streaming Netflix requires you to install Windows inside of Linux… So though Linux is 90% the best free product for small business, I can’t just give up that other 10% and neither can you.

To your success with keeping costs down and services up, Bryan

The best way to share and sync files between all of your computers

If you’re like me you have several computers… One at work, another at home, a netbook and/or laptop for travelling… And it’s a pain to make sure you have the files you need available at all times no matter which computer you are on. Until now…

Over the years I’ve tested online document management editors such as Google Docs, Google Wave (which has since been retired), and Zoho Docs; but you need internet access to make them work, you have to use the rudimentary web-based office applications they provide, and you can’t open common file types such as audio files or OpenOffice documents.

In the real world, we don’t always have high-speed internet access, web browsers crash, and our desktop office suite (such as Microsoft Office or OpenOffice) are a lot more powerful and easier to work with.

Now there is a better way and it’s called DropBox. Here’s how it works

  1. You install DropBox on all of your computers and create a login.
  2. It then creates a DropBox folder on each computer.
  3. Move your important files that you want to access from anywhere into your DropBox folder. Don’t copy because then you’ll have different versions and you’ll never know which is the “right” one.
  4. Save all of your important new files into your DropBox folder.
  5. Invite your friends to DropBox and create folders to share with them for work you’re both collaborating on.

You can drop in files from any of your computers and, no matter what type of file you put in DropBox, it syncs each DropBox folder to have the exact same documents all the time. It’s so fast that it will actually sync between computers every time Word does an auto-save. DropBox doesn’t even wait until you’ve closed the file. Even more impressive, it will sync documents simultaneously across Linux, Windows and Macintosh. I regularly switch between Windows and Linux computers and DropBox keeps all of my documents synced.

Even better, you can access your DropBox files from your iPhone or Droid device or from a web browser on any computer. If your laptop dies, just login to your account from any computer and your files are there.

It’s also extremely helpful when sharing documents with colleagues. You can create folders that can be shared with any DropBox user. Currently I have 4 different DropBox folders synced between 3 computers. Two of the folders are shared with clients. One of the folders is shared with my business partner, and the last one is just for my personal information.

If you’re a die-hard Linux fan, Ubuntu One is a great option as well that offers much of the same technology with 2 glaring exceptions. The beta Windows client doesn’t seem to work at all in Windows 7 starter and you don’t get additional free space by referring friends.

The best part of both options? It’s FREE for your first 2GB of space.

Download DropBox and get your documents organized today.

To your success, Bryan