The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It
Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant
The Know-It-All: One Man’s Humble Quest to Become the Smartest Person in the World
Lately, my friends have been subject to my long and rambling diatribes about the health care situation in our country. I felt that it was time that my readers also got to sample some of my ideas on this critical topic. Other posts I have written on this topic are here and here.
Today’s ramble is on FUD. In sales, if you don’t have the superior product or service, you might likely resort to spreading FUD – it stands for Fear, Uncertainty and Doubt. It is a highly effective, although morally bankrupt way to try to sell your product or idea. The idea is to make the status quo something that is so unpalatable that your customer must buy your product, no matter its qualities. The Right has been making hay with the concept for a while and has now driven the volume of the rhetoric on the health care debate to new levels.
If you have not been personally affected by the health care issues then it is only natural that you will pay attention to the loudest voices. But, if you have tried to get personal insurance only to be denied for no good reason or for a pre-existing condition or have been denied coverage for a needed procedure or your COBRA ran out or you were otherwise affected, you have a stake in knowing the truth.
This is a critical time for us as a nation and it behooves us to take a little time to really understand what our elected officials are trying to do. I found this article compelling to help separate the wheat from the Rush Limbaugh (and others) chaff and FUD.
A couple of conversations I had lately came together for me.
I had a discussion this week with a friend about baseball. Actually, I was doing a lot of carping about how the best paid players for the Chicago Cubs, were having awful years. From Alfanso Soriano to Carlos Zambrano to Milton Bradley, those big contracts haven’t been working out as incentives. This week we heard about Carlos Zambrano admit to being too lazy to do the abdominal exercises to strengthen his back. Alfanso Soriano is having problems catching balls in the outfield, is hitting below .245 and can’t seem to run out a ground ball to first, yet is still collecting on his 8 year $136 million dollar contract.
Now I am not the fastest runner in the world, but if you were to pay me almost $105,ooo per game, I would happily run my hardest to the first base bag. Yet on the same team, we have Ryan Theriot, a shortstop who makes $500,000 for the year, leading the team in hitting right around .300 and doing whatever the team needs him to do; sacrifice, steal a base or hit and run.
The second conversation with another friend had to do with a mutual friend who was offered a job that included base pay plus an incentive bonus program based upon the work done by his team. Executive level job, tough job market, sexy company. But our friend was upset that his base pay was the same as the base pay of those that reported to him.
It seems that some of the folks caught up in these conflicts are laboring under the idea that they have paid their dues and are now somehow above performance evaluation. Baseball in general has long paid for past performance with no review. Remember Mike Hampton, hailed as the second coming of Cy Young, who was awarded an 8 year $121,000,000 contract in 2001 and has had a record of 56 wins and 52 losses over the 8 years. Not a real good investment, if you ask me.
If you get a chance, go see a minor league baseball game. Sure the skillsets of the players are not at major league levels, but watch them hustle. Watch them listen to the coaches. Strangely, you don’t see as many baserunning mistakes as you do in the majors. The key fact is that the players are looking for any way to get noticed and perhaps find themselves playing with a major league club. The best way to do that is to perform, listen to the coaches and improve.
My friend needs to not worry about base salary. If his team does well and the incentives are created with care, he will be remunerated well.
My advice to everyone is not to rest on their laurels. Play every day as if it counted in the standings and worry less about having paid your dues. You will do a better job every time by concentrating on the job ahead of you rather than the dues behind you.
I haven’t done a good listing of links lately, so here you go…
Fun: Gotta love this picture…
Video: Regular readers know that I love Seth Godin. If you have never heard him speak, take an opportunity to view this video of a speech he gave last year to a software developer’s conference.
Management: Netflix, a company that I admire for a lot of really great things, has posted a slide deck of how their corporate culture works. It is long (128 slides), but it reads quickly. It is a must read for any entrepreneur trying to establish a coherent and successful culture.
Time: I read this article a couple of weeks back and it keeps coming back to me with a simplicity of the content and yet the relevance. Paul Graham writes about Maker’s Schedule and Manager’s Schedule.
A couple of weeks ago, I wrote about a Perfect Experience. While the memory still remains and my wife and I are still telling the story (talk about word of mouth marketing), I got to thinking how was that perfection made possible. Really, wouldn’t every business want to deliver a perfect experience? And the reality of it was that this is the first time that I can remember ever having a perfect experience.
In the comments to the story post, Cindy remarked that she believed that trust was a key component. I think that Cindy hit the nail on the head. Charlie trusted his team to attempt perfection each and every time. If the team felt that they needed olive oil from the farm in Australia or wanted to try to make a new sorbet out of onions, it was no problem. There was no expense spared to ensure that the team had the right tools to allow for perfection.
Even the team that prepared the food was trusted. Contrary to what you might expect, the kitchen was not filled with culinary experts. Sure there were some unbelievably talented chefs, but there were also a significant number of students and less experienced chefs. They trusted in one another to do a great job. The experienced chefs were always available to show a student how to use a new tool or perform a specific step in a recipe. Each plate that was served was inspected by a pro to ensure that the guest’s experience was spectacular.
The front of the house staff was no less focused on the perfection of service than the chefs. They made sure that every guest was able to enjoy their meals, from wine suggestions (a difficult chore when there are over 20,000 bottles of wine on hand) to explanations of the menu choices and ingredients used. They were able to take guests on a tour of the kitchen and really bring the experience to life. They made sure that all aspects of the dining experience that guests see were perfect.
The trust extended to allowing us to sit in the kitchen while the meal service was being performed around us. How many businesses would be able to feel comfortable allowing their customers to watch every step in the creation process? I have posted about living your life in public (like baseball players), but this is even a step beyond that.
Charlie makes no bones about the mission for his restaurant. He wants to deliver excellence in everything he does. And he does it in an entirely unconventional way — by trusting in his team to do the right thing. Yes, you have to have the right experts. Yes, you have to have the right tools. But the key is to make sure that you have a clear vision of what perfection is for you and then communicate that to your team. If you have the team, the tools and the vision, then trust is what will allow it all to come together.
Banks have gotten a bad rap over the past year or so. But in truth, they are the linchpin of our financial livelihood as entrepreneurs. If you accept credit cards, you need a bank. If you pay payroll taxes, you need a bank. If you want to pay your employees using direct deposit (or even the quaint paycheck), you need a bank. Most vendors still require that you pay them using a check.
Banks also can provide loans for businesses. These can be asset based loans, lines of credit, mortgages, long and short term. And this is where businesses can get into trouble.
While most business owners think of their checking accounts and loan accounts as separate entities, the banks do not. So if you have missed a couple of payments or have just exceeded your loan covenants, the bank can, without warning, clear out your accounts to fulfill the terms of your loan agreements. And if you have a personal guarantee, they can tap into any personal accounts you might have at the same institution. Talk about a kick to the head…
I have a few suggestions to try to make this less of a potential issue for you:
- Build a good relationship with your banker. Meet quarterly with him or her. Take them into your business and explain what goes on. For sure, tell them the good news when you sign a big deal, but just as critically, let them know when things aren’t going so well. The more you communicate with them the better you will be.
- Don’t put all your eggs in one basket. Keep your personal accounts at a separate bank. Keep transactional money at the primary bank, but keep other long term cash somewhere else.
- Understand your loan covenants.
- If you don’t hear from your banker, or they don’t return your calls, don’t consider this a good thing. The last time I heard about the money transferring process was 2 weeks after hearing “Oh yeah, I haven’t heard from my banker at BigBank in 6 months. I’m guessing that they have forgotten about us. They must have bigger fish to fry.”
When this happens, everyone gets upset at the bank. How could they do this? In reality, the bank is just trying to forestall the worst outcome for the bank, a complete loss of the capital that they have provided to the customer. They figure something is better than nothing. And the entrepreneur needs to understand that that is a potential outcome of the deal that they made when they accepted the cash.
Sorry for the time between posts, but summer intruded and must take precedence. I will try to get back on a better schedule, but can make no promises since I still have another month or so of summer. But on to more meaty topics…
So many entrepreneurs (me included sometimes) have said that they would love to start up a new venture if only they had a great idea. But is that really the case?
While I was researching a new venture idea, I came upon the thought that there were really two kinds of risk in the entrepreneurial world. The first is Idea Risk. That is, is the idea good enough to base a viable business upon? The second is Management Risk, or can the team that the entrepreneur has assembled pull it off? Of these, Management Risk seemed to be the most likely to be able to be ameliorated through judicious use of mentors, incubators and trusted service providers. The Idea Risk seemed to be a binary decision – either it was a good idea or not. But the more that I have thought about it, the more that I find that Idea Risk has more facets.
I have a friend who, over the past year, has met with various people and has generated at least 7 or 8 actionable ideas. Not just “Oh you should start up a new-age car dealership” kind of wacky ideas. But full blown creative ideas, ideally suited to the person that he was talking with, with some sense of market potential, revenue sources… the real deal. In only one of those cases, has the person taken the idea and run with it. And she didn’t do it until she was goaded into it and provided some incentives that reduced her risk.
And therein lies the real rub. It is not the lack of ideas. There are tons of ideas out there. If you are looking for a great idea, check out this list of 999. It may not even be the quality of the idea, although the new age car dealership doesn’t rock my boat. The real reason that people don’t start ventures is the risk factor. They are worried that they will not make enough money. They are worried that their mother-in-law will not like them. They are worried that they will lose the house. They are worried that their friends will think them crazy for leaving a perfectly good job as a manager at IBM.
My advice to you is that if you want to be an entrepreneur, you have to get over the fear of what everyone else has to say. If you find an idea that you are passionate about, think Bill Gates “A computer on every desktop running Windows” or Anita Roddick‘s “To dedicate our business to the pursuit of social and environmental change.” at the Body Shop, go for it with all your heart and all your soul.
I truly believe that the key word in Idea Risk is Risk, not Idea.