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.

 

Which Business is the Right One when they All Look Delicious?

The single most important success factor for entrepreneurs is choosing the right business. Many entrepreneurs make their choice based on what they have done successfully in the past or what they are naturally good at. Those are important considerations but there’s one thing that’s much more critical—and easy to overlook: the lifestyle you want. I know–how un-American! We’re supposed to pick a business by the scale of the opportunity, the size of the payoff, the hockey-stick curve of the spreadsheet, the number of toys!

Try putting lifestyle first as a filter for possibilities you will consider. Say you love the excitement of a retail environment, and you also love gourmet coffee. So, perhaps you want to open a café. Except….the hours are 6 am to 10 pm weekdays and 6 am to midnight weekends. Are you up for that lifestyle? You think you’ll hire a manager to work the non-lifestyle hours? Nah. You gotta make the donuts! You won’t manage yourself out of the underlying lifestyle, not for a few years, if all goes well.

Another example: you are a superstar salesman but got fed up with all the travel so you left your corporate job. You’re thinking of launching your own media rep firm. Wait a sec! Didn’t like travel then? It’s going to be worse now, because you’re paying. No more favorite airline. (Does anyone still have a favorite airline? Not to mention the only flying perk left is a free can of soda and a big helping of attitude from your flight attendant.) If you really were sick of business travel, no matter how many clients you might have on Day One of your new startup, you are getting into the wrong business.

How do you identify lifestyle considerations first? Honestly answer these questions for yourself and then use your responses as an absolute, totally fortified boundary for what you will or won’t do:

1. How many hours a week do I want to work?
2. What kind of people (customers, employees, co-workers) do I want/not want to have around me all day?
3. Do I want to travel for business and if so, how much?
4. What are five family events I missed because of a current or previous job that I will make a commitment not to miss again? And how will I choose a business that ensures this?
5. What kind of person am I?

On the last point, it’s a good idea to take an assessment test like DISC or Myers-Briggs. They are inexpensive and interesting. I’ve taken DISC many times and my independence score comes up aberrantly high every time—which means I have a big problem with authority, as most of my former employers will attest. It helps to know yourself and seek out business opportunities that fit well into your personality type. For example, if you’re super-independent, franchises may be a bad idea because you may have trouble following a system–and that’s what you are buying with a franchise.

Have I missed important questions to ask yourself to figure out the right business for you? Do tell!

 

What to do When the Customer Threatens to Fire You

Has this happened to you? You have a client who has been doing business with you for years. One day she calls up and says she’s been told by another business partner that your prices are too high. She wants to meet soon to discuss the future of the relationship. What range of emotions do you feel when you get a call like that? How about: anger, betrayal, shock, anxiety? After a while you regain your composure and prepare for the meeting to come. You compile stacks of reports detailing all the work you’ve done for her over the years and the great results you’ve produced. You research industry average pricing to show her that your prices are in line with competition. You get ready to do battle and keep the business.

If this sounds like you, you are far from alone. When we feel attacked, we get defensive—that’s human nature. But if you want to be successful and happy as an entrepreneur, you can start thinking about situations like in a non-toxic way. Here are some alternative ways of thinking and dealing with Yipes-The-Customer-Might-Fire-Me issues.

Hey, It’s Good She Called! She could have just fired you and given her business to someone else. But instead she called and asked for a meeting. That means she acknowledges the investment you both have in the relationship and understands there is a cost to switching vendors.

Keep the Paper in the Briefcase: While it’s fine to have all the research and reports ready to go for the meeting, my advice is to keep your ammo off the table unless she asks specific questions that can be answered by your documentation. What she really wants is to talk and be listened to. Which leads to the next suggestion.

Ask Lots of Open-Ended Questions: Don’t ask, “Are you happy/unhappy with the service we’ve been providing?” A better question is, “Tell me how you feel about the service we’ve been providing. Where have we been the most on target with your needs? Where can we improve?”

Listen, and Listen Good: Really hear what your customer has to say. Rephrase and repeat back the most important points to make sure you heard it right.

Stop Caring So Much about the Outcome: You know what’s really unattractive? When you plead to keep someone’s business because they’re a really important customer. When you offer to do anything it takes. Reduce prices? No problem! Better payment terms? OK! Can I do your grocery shopping and wash your car, too? If you are less attached to the outcome of this one meeting and more secure in yourself, you are so much more attractive and more likely to have the result you want and deserve.

Focus on the Relationship: If you have been listening to your customer all along, if you have been true to your business values and those of your customer, if you focus on building the integrity of the relationship—you will keep the business. If you don’t keep it, something fundamental was out of alignment and you can learn from it.

Learn to Lose Gracefully and Come Back Another Day: When you go down swinging, learn how to be a graceful loser. Yeah, it’s okay to lose sometimes. In fact losing can be good for the soul. Just don’t tell my former employers I said that—not much tolerance in corporate America for people who tolerate losing! But you are an entrepreneur, so reality doesn’t bother you. We’ll keep this our little secret.

 

Living La Vida E-Myth

As my blog title suggests, I coach executives who want to become, or are already becoming, entrepreneurs. I focus on this market because I know it so well–I am one of them. That doesn’t mean I have done it perfectly or that I don’t struggle with entrepreneurship. I sure do struggle. My sales are up more than 400% YTD over last year. The market segment that I started addressing three years ago for my special events catering business has mushroomed so that I now routinely have multiple jobs a day. As I look at the work schedule for the upcoming 30 days, I just pray I stay healthy.

Thinking about my situation, which I hesitate to call a problem because, after all, 400% is 400%, I signed on for a webinar/teleconference from the folks at E-Myth. I remembered from reading the book by Michael Gerber a few years ago that the core message revolves around learning how to work on, rather than in, your business. The idea is worth repeating here, from the E-Myth website:

“The ‘E-Myth,’ or Entrepreneurial Myth, is the flawed assumption that people who are expert at a certain technical skill will therefore be successful running a business of that kind.

• “I want to be my own boss”
• “I want to make more money”
• “I want to have have more time to enjoy my life”

Most small business owners assume that owning their own business will deliver on these goals.

It’s a common misconception that because someone understands the nuts-and-bolts technical work, they will similarly understand how a business providing that sort of product or service should function.

From the E-Myth point of view, small business owners struggle to achieve success because they are working in their business when they need to be working on their business.”

So simple and yet…

I had an E-Myth coach, Susan, all to myself for yesterday’s call and she was very helpful at diagnosing the difference between my vision of what I want from my business and the impediments to getting to the vision. Susan was surprised that I am generating as much revenue and profit as I do with no full-time employees. I explained that I intentionally do not have employees on payroll because part of my vision is for a simple business. For the most part, I have opted to have referral partners to whom I can parcel out jobs. The downside is that partners have their own agenda and schedules and may not be available when I need them. So maybe I need to rethink whether it would be best for me to employ someone to handle all aspects of marketing and lead-generation and another person to handle operations, while I focus on on something called “strategy” and “the big picture” as well as doing the financial and business planning to get the business from here to there. Maybe I want to avoid that really hard work and I kid myself that being the ultimate technician, in Gerber’s parlance, is what I should be doing. Entrepreneurs, if you are listening, advice and war stories are welcomed.

 

If you Want to Become an Entrepreneur, Check your Ego at the Door

If you are a newly minted entrepreneur, you will need to stop caring what your former work colleagues and your friends think about what you are doing. When I started my business in 2002, my friends and ex-work associates thought I had gone completely nuts. I began as a franchisee of a company with the unusual but catchy name Maui Wowi. To go from being a bigwig at the likes of Ziff Davis, LendingTree and other respectable employers and plunk down a big hunk of cash to wear a Hawaiian shirt and sell smoothies for $5 apiece at events is rather a change of professional pace. Hey, no wonder my friends thought I was nuts!

Within weeks of completing franchise training in June 2002, I convinced the New York Yankees to allow me to run a concession in the Stadium. By early August, I was at Gate 4, right at the entrance, dressed in my wacky shirt, selling smoothies (with rum, lots and lots of rum) from my tiki hut to the well-heeled season ticket holders who sit in the good seats. I was so busy getting my business up and running that I hadn’t gotten around to telling a lot of my friends what I was up to. I will never forget the day my buddy Scott showed up at the stadium. The astonished look on his face when he saw his former publishing industry colleague slinging smoothies to hordes of rowdy Yankee fans was, well, astonishing!  Not only that, but I had also recently memorialized my break from the corporate world by getting a tattoo on my left forearm. When he saw that on top of the tiki hut, blenders, and me in my shirt, well, I don’t think his eyes could have widened any further. I was immensely entertained by the look on his face as my one employee and I frantically made drinks, hundreds and hundreds of them, for $8 apiece ($3 extra for rum). For me, this business was the perfect rejection of corporate life. Rather than selling advertising programs for $100,000 or $1 million, here I was selling instant gratification in a cup. I felt not the least embarrassment for trading in my suit for jeans and an Aloha shirt.

The business has morphed almost entirely since then. I have shifted it from a high labor content/moderate margin to much lower labor and very high margin by dealing only with catered events and getting out of retail completely. I have hundreds of customers, including over 50 colleges, dozens of event planning firms and corporate clients, and countless individuals who book our services for parties.

It’s a perfect business for me. It offers nothing in the way of status, though. For many corporate executives looking to do something else, status is still important. In many businesses you might get into, after corporate life, you can count on your friends not “getting it” and wondering what’s up with you. If you care even slightly what other people think, my advice is not to go down the entrepreneurial road.

 

3 Entrepreneurial Secrets from the World’s Best Deli Man

I wrote a few weeks ago about my favorite entrepreneurial role model, my dad. He’s 87 now and retired. I think about his business every single day of my life because I grew up with it. We had a gourmet food store on Lexington Avenue and 73rd Street called Service Delicacies. (It’s now a restaurant and bakery that I sometimes walk into, stand in the middle of, and just breathe.) It started out as my mother’s father’s deli, then my dad took it over. He had a thing for fancy foods. He was passionate about customer service. He was always in motion. He was almost all business. The only time I would see him smile was when I looked at him and smiled at him during the busy Saturdays I spent at the store from the age of 12 until I went to college, and even after. So, some lessons from my observations of Jerry York, one of the best entrepreneurs I’ve known:

1. Have an eye for the new. When we went on rare family vacations (usually the Catskills, Poconos or somewhere driveable from Queens) we inevitably wandered into food and farmers’ markets. While my brother and I squirmed, dad pored over the merchandise. Often he would find products being test marketed out of the city. He was the first in New York to offer Maxim Freeze Dried Coffee, around 1963. He found it somewhere in East Nowheresville, PA. He asked the store manager how much he had in stock, and my dad cleaned him out. He paid something like 25 cents a jar for a few dozen jars. The following week the window display of our store featured this revolutionary product in a pyramid display, selling for something like $2.50 a jar. Sold out immediately. Another time it was a salty snack called Bugles and Whistles (same snack, different shape). Same out-of-town trial. Same bazillion percent markup. Those corn chips paid for summer camp for my brother and me for years. Jerry was the first to have sourdough bread flown into from San Francisco. The first to have pre-prepared frozen gourmet entrees and hors d’oeuvres. He could see a trend or a fad, and he didn’t care which it was. It was a thick roll of Twenties in his pocket every day.

2. Packaging, environment and attitude are everything, no matter what the business. Every day the Fink bakery truck delivered loaves of pumpernickel, rye, wheat and white bread which were left by the front door. When the clerks arrived at 7AM they would slice the pumpernickel bread into 1/4-inch stacks and wrap the slices 10 to a pack in cellophane, which they would heat-seal closed with a blow-dryer. The bread went on the counter for sale. The loaf of Fink bread cost dad 50 cents, and he sliced it into about 100 slices, or 10 packages, and sold each package for $1. A 20-bagger in each loaf! Enough to make a venture capitalist proud! How come it worked? Everything in the store was gourmet. When you picked up that package of sliced bread, which set my dad back 5 cents, it was viewed against a backdrop of gourmet foods from around the world. The store was gleaming. Everything was dusted and in order. The clerks’ aprons were gleaming white and pressed. He could have charged $2 for the bread.

3. Let your customers drive your new product development strategy. Phone rings one day and dad answers. “Yes, Mrs. Smith, tomorrow 5 o’clock. Sandwich trays for 30 people. Salmon and cream cheese canapes. Uh hmm. Yes. 900 Park, PH 1, yes, yes. … (pause)….wooden folding chairs…(pause). Of course. Good night, Mrs. Smith, see you tomorrow.” Wooden folding chairs. We don’t carry chairs. Yellow Pages….here we go. Dial. “Deliver two dozen wood folding chairs to Mrs. Smith at 900 Park, Penthouse 1, tomorrow and send me a bill.” Done. Two days later the phone rings. It is Mrs. Smith. “Jerry, you almost ruined my party. Those chairs were disgusting. Broken down and awful looking. If I didn’t know you so well….” It was that call from Mrs. Smith that got my dad into the highly profitable party equipment rental business and eventually out of the food business. The party rental business that my brother took over, grew 10-fold and sold to the largest company in the industry late last year. All because of a Park Avenue lady who needed some folding chairs. The one downside of all this: it hasn’t been possible, in all of Manhattan, to get a really great rare roast beef sandwich on wheat bread, sliced paper-thin, with just a little butter, salt and paper, since 1975.

 

Thinking about Buying a Franchised Business?

Many people look at franchises when they are cut loose from the corporate world or contemplate a life apart from the mothership. I have been a franchise owner for six years and have learned a lot about how to be successful in a franchised business. I coach many of my fellow franchisees on critical success factors. I receive frequent phone calls from people considering buying into the franchise. They always ask the same question: If you could go back, would you choose it again? The answer is yes, I would, but many franchisees in my system would not. Most people are ill-prepared to succeed in a business of their own. Even though the pitch of virtually every franchisor is that you will be in business “for yourself but not by yourself,” the truth is: success is all up to the franchise owner. Even though the statistics say franchised businesses are less likely to fail, if the franchisee doesn’t execute a well-conceived plan to make the franchise work for her, she still has a high risk of failure.

If you are thinking of buying a franchise, get some advice (but not from the franchisor) on evaluating and increasing your probability of success. There are lots of franchise “consultants” out there, like FranChoice, Entrepreneur’s Source and others. They are perfectly good firms with a great base of knowledge–but they are paid by the franchisor when you buy one of the franchises they represent. So they are not exactly objective. You may be better off finding a consultant or coach who is fee-based and not on any franchisor’s payroll.

A few things I think are important to consider when you are thinking about a franchise are:

• Have you really reached the end of the line with regular employment? It’s so much easier to have a job than a business. Regular paycheck, health coverage, vacation…not so bad! Unless you absolutely, positively can’t tolerate the idea of working for anyone but yourself from now on. If you don’t pass that test, you probably should go get another job.
• Are you falling in love with a franchise concept? Are you thinking that this pig looks really nice with that shade of lipstick? Love clouds your judgment when buying a franchise. The process is a lot like buying a house (and it could cost you as much). There’s a big emotional component to it–and franchisors know this. They will play on your psychological investment in learning about the franchise and yearning for a different life. It may not be possible, or even desirable, to make a decision like this without emotion. But recognize that you are not being totally objective, either. You are being sold, you are selling yourself, and buying into a dream. Dreaming is good, if you can live the dream.
• Do you have the skills to be in business? I’ve seen a lot of IT managers, engineers and other non-sales professionals start businesses and struggle. Not a knock against those folks, but I know of no franchise in which you do not have to be competent at sales and marketing to be successful. A transmission franchise doesn’t require you to know how to fix cars–you just need to know how to get people into your store. That requires outreach, community participation, guerrilla marketing, networking, referral business, and a heavy dose of operating excellence (which the non-sales types often excel at). If you don’t have the skills yourself, do you have a partner or someone who can fill in your gaps? Don’t think the franchisor is going to drive people into your store and all you will have to do is serve them well. Remember, it’s your business, not theirs.

 

The Catch-22 for Entrepreneur Do-It-Yourselfers

Here’s a brief story about an age-old entrepreneurial conundrum brought to my attention by Coach Leah. I started using WordPress a few weeks ago and have been messing around and tweaking this blog. I plan to integrate the blog and my coaching website into one in the next few months. I am thinking about how best to do it. Do I do it myself, using a WordPress Revolution template recommended by my friend Newt? Do I hire someone to do it for me from scratch? Leah says: Don’t spend time doing/learning things that are not going to become a repeatable skill that you can resell to your clients and customers. Makes perfect sense. So I go about getting a proposal from a great web developer that will cost $4000-$8000. This makes me perspire and have trouble swallowing. I continue messing around and tweaking with WordPress tools on my own and another few hours go by but I kind of like the results and the experience. I talk to Newt again and he recommends another developer who helped with his blog/site, which is really excellent. So should an entrepreneur work on activities that are potentially “low value” and not marketable to other clients? The pro argument is that entrepreneurs need to develop a wide range of skills, and technology is so interwoven into small business today that learning more about blogging technology, as an example, is hardly a waste of time. At this very moment I’m more inclined to heed Leah’s advice…but it’s still early in the day; talk to me after lunch, the answer could be different.