When Franchising Goes Wrong

I like to think I walk the entrepreneurial talk. In addition to writing about entrepreneurship, I do it. I’ve been doing it for over six years in a national franchise. It’s been a long, sometimes painful, but now increasingly rewarding experience.

The franchisee base of which I am a part is a bell-curve of success–some people are killing it, some are getting killed by it, and most are somewhere in the middle. In the past week there has been an email thread going around from some of the people who are on the left side of the curve. One asks if anyone is interested in initiating a class-action lawsuit against the franchisor for selling them “a bill of goods,” for “disclosure issues,” for lack of support.

Over the years, many prospective franchisees have called me and asked my opinion of the franchise. They want me to tell them whether it’s a good idea for them to become a franchisee. My answer is always the same. I try to discourage people from buying this or any franchise. Not because I don’t like the business–I love it and it’s a big success for me. But people who seek affirmation from strangers to make the biggest financial investment of their lives are getting themselves in too deep. So it’s easier for me to tell people who are interested in this franchise (or others), one or more of the following things:

• Why do you want to buy this franchise? Are you running away from something?
• You’re going to invest $300,000 or more (for those who decide to open a retail store). How long will it take you to make that back, and what percentage return on that investment do you expect? How does that compare to taking the same money and buying a no-risk Treasury bill? Are you just bored? How about getting a job you like better than the one you just took a buyout from?
• Have you ever in your life done anything entrepreneurial? If not, what makes you think you will be successful with a franchise? And if you fail, what happens then? Will you lose your house? Your 401(k)? Your marriage?

One franchisee, who has become a valued business partner of mine doing profitable projects together, saw the email exchange and asked me, “What the hell is going on!?” I told her this: “Ignore stuff like this. Negativity = Failure. Positive attitude + action = Success.”

It is incredibly easy to psych yourself into a tailspin when you own a business. Or to raise yourself up and keep going until you find the formula, the business model, the customer set that works.

I’m a collector of franchising stories, so if you have one, good or bad, feel free to share.

 

Succcessful Delegation Starts with Small Steps

One of my clients, Ken, runs a very successful service business. He has two employees who do administrative tasks. His problem: he hasn’t been able to free up enough time to pursue projects that capture his imagination and will propel the business forward — largely because he is not comfortable with delegating. By inventorying his work habits and style, we found that:

• His default work style is to do things himself rather than delegate to his staff. (For example, he opens his own mail, although his staff does put it in a separate stack for him.)
• He listens to dozens of voicemails every day, of which a third to half are solicitations from salespeople he does not know for items he does not need. Also, he listens to them as soon as the red message light flashes on the phone, which makes it difficult to have uninterrupted time to concentrate.
• He has not trained his staff to handle clients as well as they could. They answer the phone for him and take messages but don’t try to resolve the caller’s issue themselves.

Given that Ken is an ambitious entrepreneur who is eager to launch many more business ventures, he wanted to address these issues as soon as possible. Ken agreed to make some critical changes to the way he does business. Here’s what he has done so far:

• Started a weekly staff meeting to delegate projects and get the staff’s feedback on how they can do more substantive work. His employees were thrilled and look forward to bringing their ideas to the meeting. They are being challenged like never before and have more job satisfaction.
• His staff now screen all voicemails and handle everything that does not absolutely require his attention. Ken has given them a list of clients who are priority and must get a call back from him immediately, but most calls can be handled without his intervention.

These changes seem easy, don’t they? For some they are, for many they are not. I almost didn’t write this post, thinking these points were too basic. Then I thought of a time about 20 years ago when I got into a lot of trouble because I was a miserable delegator. Here’s what happened:

I was editor of weekly business newspaper and one of my functions was writing the headlines for page one. Little did I know I was about to have my own “Dewey Beats Truman” moment. I wrote a particular headline that was really exciting and a bit shocking. Problem was, it had little to do with the story that followed it. Our process for putting out the paper was that every reporter and editor in the newsroom read a copy of page one to look for mistakes. They all saw my headline. They all knew it was wrong. But no one said anything!

Why?

They assumed that since I wrote it, it was the headline I wanted. And since I did so many other things myself in my (then) autocractic style, they didn’t think I’d want my authority questioned. Well, I wish they had challenged me. When the paper came out on Monday I was covering a convention and the CEO of the company I’d written the headline about was the keynote speaker. He held up the paper and railed against the false headline. I wanted to sink into the floor.

It’s not easy to trust other people with your business. When you know you can do it better and faster yourself, it’s so tempting to take that shortcut. Entrepreneurs who learn managed delegation (as opposed to delegating without giving clear direction) gain efficiency and have time to create new opportunities. And avoid potentially embarrassing (or worse) mistakes.

 

Insights from an Entrepreneur’s Entrepreneur

One of my favorite entrepreneurs is Jamey Bennett, founder and CEO of LightWedge. If you read, you know what a LightWedge is. If you read a lot, you have more than one and have one for everyone in your household. I’ve known Jamey for many years. We worked together at LendingTree Inc., where he was the co-founder and head of strategy and I was president in the very early days of the company. Jamey is an entrepreneur’s entrepreneur. LightWedge is just the latest of the companies he’s launched out of an idea in his head. He’s remarkable for his drive, intensity and also his great sense of humor and humanity. Several months ago, I asked him to answer a few questions for this blog. It took him a while (you’ll see why momentarily) and he just emailed his responses to me a few minutes ago. His insights are so good, I wanted to put them up right away.

***

What does being an entrepreneur mean to you?

For me, being an entrepreneur is about the challenge of turning ideas (abstract potential value) into reality (actual tangible value). I have the world’s greatest job.

With Lightwedge, what was the darkest moment (forgive the sort-of pun) and why didn’t the lights go out?

The dark moments are always about cash. In the darkest of dark moments, my core group of enthusiastic investors stood ready to support the company. One of my board members has persistently coached me to ALWAYS have a backup plan. Like most entrepreneurs I am a pathological optimist, so this has been a hard behavior to learn. I am still learning.

How many hours a week do you:

Work ___ 60
Think about work___ 40
Spend w/family___18
Read____8
Sleep ___42

This is scary. I am not sure I am happy about having done that breakdown.

What support systems have you developed that help you be effective in your business?

I work closely with my wife. [That is Debbie in the photo above, she's head of marketing and sales for LightWedge.] She is a critical part of our team. This means we have an even tougher time getting some distance from the business. Truthfully, we have mostly handled this badly. Recently we became much more disciplined about having some times, and places, where work talk is not allowed. That makes work time and non-work time more productive and healthier. I couldn’t do any of this without being in synch with my wife on priorities for work and life.

What is the biggest misconception people have about the idea of being in business for themselves?

I think people fall in love with their ideas. I believe entrepreneurship is the process of creating value out of the idea – it isn’t about the idea itself. To put it another way, the name for the job of developing your idea is “professor”. The name for the job of creating value from your idea is “entrepreneur”. Both jobs are important and can be very fulfilling, but you really need to know which one you are doing. If you have accepted investments in your business from others, you ABSOLUTELY must know which one you are doing.

What’s your best work-related habit?

I delegate. I make sure people understand that they will be accountable for the results they produce in their defined area of responsibility. I make sure they have what they need (or, at a minimum, they have all that is available) to do the job. And I make sure that people understand how the results will be measured. I think I do a good job letting people know how success is defined.

What’s your worst work-related habit?

I don’t do a good job helping people figure out what tasks to do on a day to day basis. I tend to define the destination and expect people to figure out all of the steps to get there. I have an unrealistic expectation that everyone thinks like I do, so they will figure out how to get to the destination on their own. Lately I have discovered that this approach has its limits.

The thought of having to say, “first, turn on the fryer, next put one bag of frozen fries in the wire basket, next drop the basket into the hot oil, next wait 3 minutes for the beep, etc.” really makes me impatient. I know I need to draw a few dots for people to connect, but I am really bad at it. This pattern of mine isn’t fair to people and isn’t particularly good for business. I am learning to change it.

What are you reading now and why?

I read fiction to non-fiction in about a four to one ratio. The fiction is all over the place: crime novels, historical novels, espionage thrillers, etc. I read it to escape. The non-fiction is mostly biography and science with the occasional business book in the mix. The most useful business book I have read recently is Verne Harnish’s “Mastering the Rockefeller Habits”.

Describe the Lightwedge journey: past, present, future.

I started LightWedge in 2001 with one product, the LightWedge Original. Since then we have developed over 200 SKUs (including color and package variations) within the footprint of “products that help people see better”. In 2002 we did less than $1m in revenue. In 2007 we did more than $11m. We have a plan to get to $50m over the next several years. We work off of a set of clear objectives that keep us focused on the activities that we believe will create the most value for investors.

How many of these suckers have been sold?

Well, quite a few.

***

Here’s a great video interview just published on the Boston Globe’s website about Jamey, Debbie and the LightWedge story.

 

A Mysterious Syndrome that Affects Entrepreneurs

Have you read the latest issue of the New England Medical Journal? If you’re an executive who is thinking of going entrepreneur, you need to check it out. Turns out there’s a newly discovered condition affecting entrepreneurs, and it’s called ABF. Unlike Restless Leg Syndrome and E.D., there’s no drug yet to treat it, so you will have to manage this condition without a prescription.

Oh, ABF stands for Accumulated Boss Fatigue. I first noticed I was developing ABF around five years before I left corporate America. I am glad to be able to share the details of my condition so that others may find relief.

Stage One – Independence Day: How do you know you may have ABF? For me, it happened like this: After years of dutiful service to various employers, I found myself forgetting I had a boss. I was routinely making decisions and taking actions that were contrary to what the boss asked me to do. Even worse, I often didn’t bother letting the boss know I had absolutely no intention of following through on the ridiculous stuff she asked of me. This early onset stage is called RIS – Raging Independence Syndrome. It’s curable at this stage if you get back in line, apologize, maybe take some time off to clear your head, and remember that in most companies, the nail that stands out gets hammered down. If that doesn’t work, you’re on your way to Stage Two.

Stage Two – Craving the Movie “Office Space”: When it came out in 1999, I felt I was watching my autobiography. My job may have been bigger and less cubicle-bound than the characters in the movie, but I could relate. I must have watched it a dozen times that year. And whenever I had a meeting with my boss, I saw the face of Lumbergh in my mind and heard “Yeahhhhhh. Thannnkssss.” That’s stage two, and from there, you’re pretty much a goner.

Stage Three – Anything but This Job: You know you’ve reached doneness if your juices run clear when you are poked with a fork; when any other type of work appeals to you more than what you are currently doing, like for instance, being a concessionaire at Yankee Stadium; and any face would be a refreshing change from your Lumberghian boss’s. There’s a danger here, though: when you decide to go it alone in business, make sure you’re doing it for the right reasons, at the right time, and with the right support–and not just to run away from your battle with ABF.

 

Enterpreneurs: Don’t Take the Call from the Office Copier Guy

I do most of my entrepreneur coaching by phone and often I never meet my clients. When they’re located in the New York metro area though, I like to get together at least once to put a face to a name. Yesterday I had the pleasure of doing that with one of my terrific clients who heads up a fast-growing consulting firm with a staff of about eight people. As we were talking she was interrupted when her assistant buzzed her on the phone. The office copier rep wanted to talk to her. She declined the call and we resume talking. Our conversation went something like this:

ME: Why was the office copier guy calling you?

HER:We need a better machine with more capacity.

ME: Who’s the heaviest user of the machine in the office?

HER: My assistant, Sheila.

ME: Why isn’t Sheila responsible for working with the copier rep on finding the right machine?

(Long pause)

HER: I guess it’s question of trust. Sheila’s great within her skill set, but I’m not sure she can do some things outside of it.

ME: Well, let’s assume she can, under your guidance, get all the information needed to make a decision, and then together you and she decide what to do? Wouldn’t that be a better use of your time? And wouldn’t Sheila feel more empowered with some extra responsibility?

And that’s the course of action my client decided to pursue. We spent about 15 minutes of our hour talking about the copier machine, which may seem silly. But it turned out to be a metaphor for where the business tends to get stuck. The CEO of a really fast-growing eight-person company just cannot evaluate copiers. Or peel stamps for correspondence. Or make lunch reservations. Or file documents. Every action that is not moving the business forward strategically is wasted motion and is the enemy!

One of my favorite extreme examples of delegation was my old boss, the president of a $500 million publishing company. He delegated everything. He didn’t even read or respond to his own email. He had a special assistant who would print out a stack of emails, get on a plane with him, read him the emails, and he would tell her how to respond. I always chuckled at his extreme-delegation techniques, but he was smart. Any activity that wasn’t about increasing the value of the company was forbidden work for him. And so it should be for any entrepreneur, even if your company’s sales are $5 million or $500,000.

 

Entrepreneurial Keys to Success

Last week I got together with a group of executives from a company based here on Long Island to discuss entrepreneurship. A number of them already have side businesses going on and therefore I won’t name the company. These are people really itching to bust out and succeed on their own. I took some notes from our flip-chart sheets that I thought would be interesting for any entrepreneurs in the making. Here they are:

What is Entrepreneurship?

We wrote down some ideas about what entrepreneurship means to us, including:

· Freedom
· Making our own rules
· Having courage and determination to see our plans through to success
· Being able to exercise creativity in a way that is not possible in the traditional workplace
· Having an unlimited potential for income (and other things)

What are some of the negatives of business ownership?

Interesting that all of our initial ideas were idealistic – that’s the way it should be. But we also discussed the less rosy side of business ownership:

· Uneven income streams
· Lots of hours per day, and a long time to reach goals
· Lots of stress
· Difficult to manage family concerns
· Feelings of isolation

Key Success Factors

We then discussed the key factors for success of our entrepreneurial ambitions. They included:

· Getting Started: This part is hard, especially when you are fuzzy about what it is that you are starting, or your business starts by itself with you along in the passenger seat. How to address that: see next item.

· Having a plan: several of us have started businesses and aren’t sure where to take them. Coincidentally (NOT!) we generally had no written plan and vision for our destination. As the saying goes, when you don’t know where you’re going, any road will take you there. We therefore agreed that a plan – which does not have to be elaborate and can in fact be a page or two, at least to begin – is a precondition to success.

· Having courage: If entrepreneurship were easy, everyone would do it. It’s not easy. It takes courage and determination to ignore the forces of gravity and nature which want you to fail; to keep your Gremlin (i.e. the negative voice in your head) in check, and to realize that even when things are dire you can push on.
· Failing Forward: Speaking of courage, you have to be able to embrace failure and keep going. Without failure we’d have none of the medicines that immunize and cure most of the diseases that used to kill most people before the age of 40. If you’re not failing, you’re doing entrepreneurship wrong.

· Running toward vs. running away: Many people are running away from something when they decide to start a business. If you are running away from difficulty at work, from midlife anxiety, from personal/family issues or other factors that are left unresolved, you create weakness in your Personal Foundation. You have to go into business looking forward, with a vision and a plan (see earlier item). It’s important to look inside yourself for what may need shoring up before you launch too far into entrepreneurship.

· Liquidity: Most businesses fail because they run out of money. It’s very tempting when you start a business to fall victim to the Law of Big Checks. (I made up this law but it’s true.) You make the decision to invest in your startup and write a big check to get started. After the dry heaves subside, you find it’s easier than you thought to write other and more checks (or more likely, credit card charges). You may well need a Money Buddy: someone who you call every time you are about to make a purchase of $500 (pick a number) or more to decide if that expense is one you absolutely must do now, or can possibly be deferred without negative consequence.

· Standards, Values, Personal Foundation: We agreed that if you are going to start a business, it has to be one that reinforces the things that are important in your life. You need to be conscious of what types of clients, business partners and employees you want to have and make sure you create an environment in which you aren’t creating new conflict within yourself through a mismatch of business strategy and who you are as a person.

· Support: Sooooooo important. Your self-organized group is a fantastic element of the support every entrepreneur needs so you don’t feel you are walking the factory floor alone. You also need the support of your family. If your spouse/significant other isn’t on the bus, either you will not be successful or you stand a good chance of hurting your relationship(s).

 

To Communicate Effectively Takes Emotional Intelligence

Reading an article in the New York Times the other day, I was struck by a problem I see all the time in business (and in life in general): our difficulty communicating clearly with others. The article was about an American baseball manager who’s training the Chinese Olympic baseball team. He tells them:

“If you hit it here,”… acting as if he were hitting a ball after it passed his body, “you drive a Chevy. If you hit it here,” he said, pretending to hit the ball as it crossed the middle of the plate, “you drive a Cadillac. But if you hit it here,” he said, pretending to connect a smidgen earlier, “you’re in a Rolls-Royce with a chauffeur! Get it? That’s how much money they have. They don’t count it, they weigh it!”

They had absolutely no idea what he was talking about. Despite the interpreter.

The article reminded me of two other communications-gap stories. One was another language/culture problem, the other just corporate comedy. In the first example, a respected publisher of one of the largest electronics newspaper in the United States was addressing a group of Japanese executives. He told them an anecdote about the U.S. semiconductor market and ended it by saying, “…but what do I know?” The audience was puzzled. If he didn’t know the electronics market, why was he addressing them? His intention was to be humble and self-deprecating. But it came across as awkward ignorance.

In my favorite example, a former employer of mine brought in a new senior executive to “fix” what was wrong with our corporate sales effort. This fella came into a meeting with a half dozen senior VPs heading our various business units. He was toting a well-worn copy of a magazine he had been publisher of….a decade-and-a-half earlier. He plopped it down on the table and it landed with a thud that made the room shake. His message: he knows a thing or two about selling advertising. What we heard: as long as we’re selling it 15 years ago!

And then his well rehearsed speech began. “There are three kinds of people in the world,” he started, with great import and seriousness. I looked out of my peripheral vision to see one of my colleagues in the room starting to stifle a laugh.

“There are people who watch things happen.” Now where is he going with this? He seems like he knows what the next line is, so I’ll be patient.

“Then there are people who make things happen. “ Ah, that must be himself he’s talking about.

“And there are people who say, ‘What just happened?’ ” Wow! Where did those lines come from? There was no Google at the time so I just had to sit and wonder. This is my boss’s new boss talking! C’mon, there must be a hidden camera in this room. This is a joke, right?

We then went around the room introducing ourselves to this brilliant executive. I took my turn and then my boss said, “What just happened?” I had to excuse myself briefly from the room.

Entrepreneurs take note: Whether you are talking to a group of people from another country or another company, or in the case of “What-just-happened-man” perhaps people from another planet, you had best have some insight into what those people are thinking, believing and needing to hear at that moment. You better have some emotional intelligence to get your message across, or you will be laughed out of the room.

 

Recession Causes Rethinking of Entrepreneur’s Strategy

Here’s a situation that may sound familiar to many small-business entrepreneurs. A very bright woman, let’s call her Betsy, has a business providing ESL (English as a Second Language) instruction to corporations in a Spanish-speaking country where she lives. She works for some big firms in her market area and has a great reputation. Historically, her students have been engineers and other middle managers, and her client has been the HR department. Now, with the economy in recession, her pipeline is not as full as it once was. Training budgets–at least for middle-level employees, are being slashed. She feels nervous about the future of her business. If this trend continues, she will have difficulty making ends meet.

Here’s what our coaching led her to consider as she navigates the current turbulence with a view toward turning a problem into an opportunity:

• Plan your future market strategy. Are middle-managers your ideal clients? While they have been your bread-and-butter up until now, what about C-level executives? With business becoming increasingly global and more competitive, the advantage of being completely comfortable with English is no small issue to CEOs, COOs and others in the corner office. While Betsy’s business model up until now has been teaching classes of a dozen mid-level people at a time, she could reposition herself as an ESL coach working one-on-one with senior management–and charging a multiple of her current fees.
• When business contracts, go broader and deeper. She has identified a market of 20 companies in her area, mostly Fortune 500 technology firms. That’s a great start, but what about the hundreds of companies just under those big ones? Would their top-level executives perhaps have even a greater need for ESL coaching? And what about other-than-tech sectors–tourism, for example. Wouldn’t an up-and-coming hotel general manager need excellent English to advance in her company?
• Get in the business networking mix. How will Betsy get in front of these new prospects? She hasn’t spent a lot of time thinking about (or engaging in) business networking. But she’s smart, attractive and engaging and should have no trouble building a referral network through attending Chamber of Commerce events, joining a business referral group and making sure everyone she knows is aware of what she does.
• Craft a new message. When Betsy does get in front of these high-level prospects, what will she say? We talked about imagining meeting a potential client at an event. What would you say to introduce yourself? How would you find a way to ask, “Are you less competent in English than you want to be? Is that holding you back? Why do you tolerate it? Do you want to do something about it? What would it be worth to you to leave your insecurity about communicating in English behind you forever?”

Many small-business owners cling to their original business model, whether it was a model they intentionally conceived or one that evolved on its own. Entrepreneurial business has to evolve to survive. Betsy’s business teaches some valuable lessons about identifying new market segments, repositioning existing services (perhaps only slightly) to appeal to new customers, and evaluating pricing structures to be in line with customers’ expectations.

What else would you have advised Betsy to do or think about?

 

Create a Sense of Urgency with a Big Reward

A great inspiration came today, as it so often does, from one of my entrepreneur coaching clients: How do you make sure you reach an important goal–in this case doubling sales in the second half of the year vs. the first half?

If you are moving up in the world, getting higher-value clients all the time, but still driving a six-year-old Honda Civic, the answer may be the one he came up with: Reach the goal and give yourself a reward that fits the accomplishment and where it takes you and your business.

My client’s reward: the 4.0-liter, V-8, 414 horsepower BMW M3 Convertible above. This goal and the car are not an abstraction. I am completely convinced he as good as owns this car right now. He regularly calls his dealer salesperson to ask him, “How’s my new car doing?” even though he won’t be “picking it up” until January. I’ve already reserved a cruise on the first sunny day after he’s got it.

This is the same client who recently needed to reach a particular business objective and wrote a check for $1500 to a political candidate he detested; gave the check to his best friend and told him to mail it if he didn’t reach his goal within a specified time period. He reached the goal and the money went to buy a new wardrobe.

A great by-product of setting an ambitious sales goal is that is forces the entrepreneur to evaluate all aspects of the business. Driving top-line sales is obviously the most important objective. But speeding up accounts receivable, building an active and efficient referral network, engaging in new business development activities that will spur revenue growth, getting clients to use new automated systems and tools to manage projects–all go a long way to making it possible to reach a stretch sales goal.

Have any other creative ideas for entrepreneurial self-rewards? Send them my way.

 

Three Quick Hits for Improving Entrepreneurial Business

Sometimes entrepreneurs can be the victims of their own success. Here’s a situation that may sound familiar: your own a service-oriented business with one full-time employee—you. You have had hundreds of clients over the years. You use subcontractors to do certain jobs that you don’t have time for. You are really busy and business is very good. But you feel overwhelmed. There are a couple of problems you’ve identified.

1. The Tail Wagging the Dog: Your have a subcontractor to whom you give a great deal of work. But he’s mercurial. Sometimes he’s prompt and communicative, other times he vanishes. Sometimes he makes you feel like you work for him. Every time you take on a job he’s your go-to guy and it makes you queasy.
2. This Business Would Be Great if It Weren’t for the Customers: You have clients who love you and come back to you again and again. But they are constantly late meeting deadlines for feedback that will enable you to get to the next stage of the project. This costs you money and adds to your stress level.
3. Small Potatoes: To paraphrase one of my least favorite figures from American history, you go to war with the customers you have, not the customers you wish you had. You have lots of smallish customers who are price sensitive. You wish you had big customers who were less penny-pinching.

Despite the problems, business is good. You feel successful. Just not as successful as you’d like to be. And the level of success you have creates inertia: You don’t want to rock the boat for fear of capsizing. Well, to paraphrase that dreadful American once more, small business is messy. But it can be cleaned up! Corresponding to each problem above, do these things and your effectiveness in, and enjoyment of, your business will soar:

1. Show ‘Em Who’s Boss: If you use subs, you must have a locked-down, no-nonsense, no-exception, written and iron-clad contract they sign and live up to. Sounds complex but isn’t. Write down in plain English exactly what you want and expect from your subs, and give that document to a lawyer. She will turn it into a contract. Best $750 you ever spent. (If it costs more than that, get another lawyer.)
2. Be a Client-Whisperer. Clients will stop bucking you in the head if you train them! Give them a process for working with you and lay it out at the start of a project. Make sure they understand their responsibility and accountability to the project and its outcomes. Create deadlines that are real. Think about building in incentives for meeting deadlines, or disincentives for failing to meet them (a rebate or a penalty). They will respect your taking a disciplined approach.
3. Go Big-Game Hunting: It’s as difficult to service a small account as a big one, so you may as well have the big ones. If you don’t have them right now, is it because you feel unqualified to handle them, or just fearful? Do you honestly believe you can handle bigger clients and service them better than anyone else? If so, the only thing stopping you is, perhaps, not having a locked-down, bolted-in process for managing your business. Get that done and the rest will follow.