15 Sep 2014

Always Put Yourself in the Customers Shoes.

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No matter what business you are in you need customers to succeed. I feel as though every now and then we forget this. The customer experience is critical to the ongoing success of your company. This is nothing to be taken lightly. The customer experience should be monitored and you should always thrive to improve upon it.

Being good at this requires one fundamental practice by everyone in your organization, “Always put yourself in your customer’s shoes”. If you do this then you will never lose sight of what needs to happen to make the experience one they will remember for all the right reasons.

When a situation arises or a complication occurs, always think about how you might react if you were the customer. Don’t focus on right and wrong; just think about the customer’s experience. It is so important that they see your business as one that is concerned about them. This will lead to the very best results. Today bad experiences can be magnified on the internet and cause a whole lot of trouble for your business.

Whatever problems occur, deal with them head on right away. Avoiding the problem only makes matters worse. Let the customer know you care and that the fact that they are disappointed matters to you. Do whatever is necessary to resolve the problem for your customers. They will reward you in the end.

We live in a different day and age today where social media can have an immediate and long lasting impact on a business in a positive or negative way. It is important to take the right steps to avoid any negative implications. Most customers who have a bad experience are understanding if their concerns are addressed properly and quickly.

The old adage goes, “The customer is always right”. I’m not sure that this is the case, but we must always put ourselves in the position of our customers. When we do this, we should always be in a position to better our company and to handle any issues as they arise.

01 Sep 2014

A funny thing happened on the way to profitability.

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Businesses, like our lives, take a lot of twists and turns. Nothing is ever how it appears on our spreadsheets or in our business plans. We must be willing to react to changes, make strategic decisions on the fly and be willing to admit that change is necessary.

I have titled this post, “A funny thing happened on the way to profitability”. The reason is that with one of my businesses I realized a lot of important things between the start-up and growth phases. The business I thought I had was quickly morphing into something else. As this was happening I determined that I could either embrace it or fight it. I chose to just embrace it.

I am sharing this with you because I have seen others fight the direction the consumer was taking their businesses. They tried in vain to ignore the signs and to keep their businesses pointed in the direction their business plan told them to go. I believe this is the wrong approach.

Imagine for a moment, the initial hamburger restaurant and the moment when they decided to try selling fries. I suspect (but don’t know for sure) that someone said, “hey, these fries go pretty well with burgers. Let’s try them out on the menu”. Obviously they were a hit. But wait, his business was to sell hamburgers. Why not scrap the fries? Maybe they should just stay focused on the burgers.
I suspect that had they taken fries off the menu that their customers would have had a problem with this. Maybe they would have begun looking for someone to fill the void. Someone down the street may have very well decided to sell burgers and fries and taken a big portion of his business away.

For me it happened that the customer wanted a service that I suspected might be an important part of the business down the line. But each passing month told me that this needed to happen much sooner and to avoid the demand would be business suicide. So we reacted quickly (actually it took longer than it should have) and got focused on the service.

Building a plan and growing a business to profitability are very difficult accomplishments. Along the way funny things may happen. Don’t fight them, embrace them.

18 Aug 2014

Waiting to Access Risk?

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A guy said to me the other day that he wanted to “wait a bit to access his risk before venturing into a new business line.” Now this sounds logical right? But what he was really saying was that he wanted to make sure there was little or no risk before moving forward. My position is that if you do this you should become a banker and not an entrepreneur!

As an entrepreneur you must always do your homework. But, being an entrepreneur means that you understand there is risk with everything that you do. If it wasn’t risky, everyone would be doing it. Your goal is to make logical assumptions and then go!

Bankers want to sit around and figure out ways to minimize their risk. I once had a banker approach me about a loan for my business. He said that if we would deposit $500,000 into a CD in their bank, that the bank would lend us $500,000. Wow, really? Let me get this straight. I put $500,000 of my money into an account at your bank. You will pay me 1% interest on a CD. Then, you will turn around and lend me the money I deposited and charge me 6% interest on it? Do people really do this?

This is the banking world and we are in the world of entrepreneurship. We have to take a leap of faith and get things going. Nothing good in life comes without some risk. Building a business isn’t easy and comes with no guarantees. All we can possibly do is try to minimize the possible exposure we have.  I can’t emphasize enough that being an entrepreneur takes guts. You have to be willing to put it all out there and push very hard to be successful.

I have never had a business where I didn’t wonder whether it was going to work or not. I’ve never had the luxury of starting a business that took off from day one. Those are rare. We need to understand that it takes a lot of hard work, patience and most of all a willingness to believe.

You want to wait and access your risk? Great, you will either miss the market or you should consider being a banker.

04 Aug 2014

Don’t Focus on what others are Making.

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OK, this is a big pet peeve of mine. There are some business people that can’t get over worrying about what other people are making throughout their business chain. My father told me a long time ago to “focus on what I make and not what others make”. What he meant was for me to look at my potential profits in business and determine if they make sense. If they do, that is the ultimate driver. Trying to look at what others are making is a losing proposition.

Why this doesn’t make sense is because you rarely have a realistic look into the other business. So while you may see their gross income potential, you likely don’t have any insight into their operating expenses. So, why beat yourself up about this? Again, either what you stand to make is fair for your efforts or it isn’t. If it’s not, you should rethink your business. If it is, focus on how to grow your portion of it.

In one instance, we had service providers on either end of the transaction. They would provide a service and we had a fee structure in place for providing these services. They were offered an opportunity to decide whether the economics of this made sense for them. If so, they were advised to move forward with the relationship. If not, then they should pass.

This particular person was focused on how much we were “making” to see if the economics were fair. To me this made no sense. First, I was the one who took all the financial risk. I wasn’t actually making anything. For me this was simply gross income. More importantly, why should it matter? Either what they were being paid was fair or it wasn’t.

I promise you will drive yourself crazy if you go down this path. So, stay focused on what you can make and spend the rest of the time growing your business.

21 Jul 2014

Culture Matters

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I can’t really emphasize this point enough, the culture of your company is critical!  It tells as much about who you are and who your business is than anything else. I learned this valuable lesson many years ago while working for a company. This west coast Company (very well known) was just acquired by another company (not well known) on the east coast. Working at the corporate headquarters, most of us were concerned about the transition of the company. What would happen to us?

The new management came in and told us not to worry. We were keeping the corporate office open and in place. Nothing was going to change. What a relief, but to me this made no sense. Why would someone do this? If you buy another company you do so because you inherently think you can utilize the parts more effectively.

About a week later I met with the president of the company. He informed me that we were going to announce that we were shutting down the west coast office and moving people back east into their office. So I asked him why he felt this was important. He told me without hesitation, “it’s all about the culture”. They were trying to build a culture in the company that was very different than the existing one. We had become in his words, “a rather lazy and complacent business, focused on the goal of not losing money”. Their culture was more that of “maximizing shareholder value”.

So, was he right? Yes, he was 100% correct. They took a company that had made $7.5 million in the past year to a company that made over $100 million two years later. Much of this had to do with the right culture. Interestingly, they only hired about 6-8 of us to move from the west coast to the east coast.  They quickly surmised that the culture shock would be too much for most of the existing employees.

We went on to buy many more companies and each time the same thing held true. We would close their corporate locations and relocate certain employees back to our location. It became clear to me the importance of getting the culture right. Whatever that culture is, everyone in your company needs to embrace it. If they don’t, find another employee. Culture matters!

30 Jun 2014

Please Read This!

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I did not write this but I wish I had.  It is worth reading if you are an entrepreneur.

“Never let the fear of striking out get in your way” (Babe Ruth, strike out king, home run king). 

The greatest mistake you can make in life is to continually fear you will make one. We all make mistakes – especially those who do things. Failure is often the first necessary step toward success.

 

Stop trying to be perfect. When you have a serious decision to make, tell yourself firmly that you are going to make it. Don’t expect that it will be the perfect one. The pursuit of excellence is gratifying and healthy; the pursuit of perfection is frustrating, unproductive and a terrible waste of time.

 

The fact is that you’re like a tea bag. You won’t know your own strength until you get into some hot water. Failure is something we can only avoid by saying nothing, doing nothing and being nothing.

 

“Remember there are two benefits to failure. First if you do fail, you learn what doesn’t work; and second, the failure gives you an opportunity to try a new approach” (Roger Van Oech). Some people learn from their mistakes; some never recover from them. Learn how to fail intelligently. Develop success from failure.

 

Discouragement and failure are two of the surest stepping stones to success. No other elements can do so much for a man if he is willing to study them and to make the most out of them. Your season of failure is the best time for sowing your seeds of success. Successful people are not afraid to fail. They go from failure to failure until at last success is theirs.

 

The best way to accelerate your success is to double your failure rate. The law of failure is one of the most powerful of all success laws.

 

– John Mason, from the book, Let Go of Whatever Makes You Stop

16 Jun 2014

Does it drive incremental revenue to the company- If not, don’t do it!

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Sometimes in business people over think things. Why shouldn’t they? We do it all the time in our personal lives.  I’m pretty simple in my thought process around business.  Why do I do new things or try new things?  My simple answer is that because I believe they will drive more revenue and create more value long term to my company.

One example is a brand extension that we created within our business.  People kept telling me that our company was too young to have another brand or brand variation in the market.  To be fair they were marketing professionals trying to offer advice.  This advice seemed to resonate with others in the business.  So, time after time I found myself having to defend the brand extension.

What they failed to see was that this was all about driving incremental revenue to the overall business and ultimately increased the value of the entity.  We see ourselves as a sales company.  We place a high value on selling things.  Whether it is our great service to the consumer or a franchise to an entrepreneur, our goal is to sell.  Without continued sales a company will die.

This brand extension really made sense to people.  In our camp some saw it as a lack of focus away from our core competency.  Still others saw it as a dilution to a start-up brand in the market.  One of my partners and I never wavered.  We knew why it was there.  We understood that it was a brand extension that people “connected” with and that it would catapult the company in a fast meaningful way.

Would the direct revenue from the brand extension make us money?  No, not directly it wouldn’t.  But, indirectly the returns were amazing.  It fulfilled the goal of the business and the expenses vs. the revenue were almost mind-boggling.

Always know where you are going and how you will likely get there.

02 Jun 2014

When Do I Get My Money Back?

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What a great question.  This question does come up a lot.  I think the best way to answer this is through an example.  I will use real estate because most of us have owned or will own real estate in our lifetimes.

Let’s say I decide to buy a home.  Maybe it’s my primary residence or maybe it’s an income producing property.  Either way the analogy works.  So, the home I purchase is on the market for $500,000.  I am required by my lender to put $100,000 into the home and I can finance the balance.  I am about to sign my purchase agreement and then I stop and say, “Wait a minute, when do I get my $100,000 back”?

But wait, nobody asks that question right?  Well, why not?  The reason most likely is that people understand a couple of things.  First, they need a home to live in and second, they are purchasing an asset and are hopeful that over time the asset appreciates in value.  When I sell my home in 10 years I can get back my $100,000 and hopefully more!

So, then why ask this question about your business investment?  If you are building a business, it’s an asset that should have value that upon its sale you can monetize.  The key should be, how quickly can it start producing an income and get you to a desired level of income.  If the business you are starting doesn’t have a clear answer to this question, then I urge you to reconsider the business.

Often times we end up using some amount of financing in conjunction with the business.  This tends to help make our cash-on-cash returns even better.  What do I mean?  Let’s say you have a business that costs $1M to start and grow.  Now let’s say you are required by your lender to put $300,000 into the business and they will finance the remaining $100,000.  With a cash-on-cash return, you measure your return based upon the $300,000 you put into the business and not the $1M that the business cost.

What you ultimately need your business to do is pay all your bills and leave something over for you as income.  So, how quickly can I achieve this in my business is a far better question.  If you build a good business you will get your money back in the end.  Your asset will grow in value.  In the meantime the business will provide you with a great income if operated correctly.

I hope this helps.

19 May 2014

Advice for the Person Starting their First Business

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I know I have already written about a similar topic, but what inspired this post was a letter I received from a college student graduating in May.  In the letter he asks, “Mr. Del Sontro, As I have mentioned in the past I am going to start my own business upon graduation.  I have done all of my homework and believe that I have every opportunity to be successful.  I must ask you one last question.  What is the one thing I have to do that you can’t advise or teach me to do?”  Now that is a great question.

So to Kevin the young entrepreneur from the Washington DC area, here is my best lesson to you and to anyone else that wants to listen.  You have to be willing to work harder than you ever have before with a passion and a vision of where you want to go.  Often times the difference between success and failure is the effort that someone puts forth in their business.

Far too many times I watch entrepreneurs start a business and they just don’t work hard.  Guess what?  You won’t succeed.  Building a business is hard work.  If it were easy than everyone would have their own business and no businesses would fail.  You have to be committed.  And at that point in time when you think, I can’t go any harder, I can’t push through, you have to keep going.

Now, some of you might be thinking, “I want to work smarter, not harder! If I just work hard and not smart I too can fail”. The guys who said people should work smarter should have said, “People need to work harder and smarter”.  Nothing you will do in business is going to replace effort.  It is a must, without it you will likely fail.

Kevin, take the advice for what it is worth.  I believe that if you have done everything else necessary to prove that your business makes sense, and you have minimized the barriers that might keep you from becoming successful, then only being properly capitalized and working hard, will stand in your way.

05 May 2014

Moving The Business Forward – The difference between a partner and an investor

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Quite often I am asked about having a business partner.  In fact, I have actually written about this topic before. Sometimes people are confused about the difference between a business partner and an investor. In fact, sometimes the person who thinks they are a business partner, isn’t one.

What are you talking about?  I know it’s a bit confusing, so let me explain.  In my world, a business partner is someone who helps you advance the company.  That is to say, they are creating value by moving the business forward. Do they need to be working in the business every day to do this?  No, not necessarily.

When you are starting a business or even if yours is already up and running, you might be considering a “partner”.  The most important question to ask about them is how will they help the business?  If someone will not move the company forward, it is better to consider their role in the company as an investor.  If they can help advance your business, consider them a partner.

So what is the difference?  An investor puts money into an investment with the hope that they will get a return on this investment.  They sit back and allow you to run the day-to-day operations and may from time to time get updated on how the investment is doing.  They have every right to know if their money is getting put to good use and if their investment is growing.  Remember, without this money, you wouldn’t have the ability to build the business.

A partner is someone who may invest money or time for ownership.  This person should be expected to move the company forward.  The challenge many partners have is that they can’t figure out or don’t want to figure out how they fit into the company.  In a small business there has to be the attitude that you will all roll up your sleeves and get thing done.

There is no time or room for the person who wants to be asked to do something.  Your partner needs to have the desire and foresight to just get things done.  You want a partner who, without any direction or prodding will take the initiative to do something.  This is how a good working partnership grows and fosters.  With this in mind, you need to be careful of who you “partner” within your business.

I have had great partners and I have had horrible ones!  The ones that were great, were so because they tried.  They took the initiative to get things done or at least try.  The ones that weren’t good partners, never tried to move the business forward.

Choose Wisely!