The Up and to the Right Entrepreneur

Damon is an entrepreneur. He runs a small but growing company that recycles old computer equipment. Damon is very frustrated right now. Stephanie is a stay-at-home mom. She has two small children under the age of five and produces marketing materials for three companies, working from a spare bedroom. Stephanie is very frustrated right now. Why are Damon and Stephanie so frustrated?

Damon’s company has been growing at a rate of 25% a year for the past three years. He’s doubled the size of his team and his margins are increasing. If you looked at a graph depicting his business, the line would be up and to the right.

Stephanie has two beautiful and healthy children. Her husband is a physician, and the family is financially secure. Her marketing venture is flourishing. She’s landed a new client each of the last three years and the type of work has become much more substantive. By all measures, Stephanie’s graph looks the same as Damon’s – up and to the right.

Why in the world would these two individuals be so frustrated? Damon has chosen to reinvest a major portion of his profits back into his company. As a result, he hasn’t seen his personal cash flow increase in any meaningful way. Intellectually he knows he’s doing fine, but it still rankles him that his bank balance has remained fairly static.

Stephanie loves her marketing business, and she is ecstatic over motherhood. She worries that her two primary roles may someday collide (at times they already do) and she feels guilty that she may fail to do justice with either. Stephanie wonders how she can possibly achieve her personal and professional goals with the juggling act that she is managing. 

Here’s a simple but powerful truth. Damon and Stephanie have not yet learned how to celebrate their success. To those of us looking in from the outside these two are ideally situated. Everything seems “up and to the right” for them and yet they are frustrated. Damon and Stephanie are trapped in the tunnel of limited thinking. They have set lofty expectations for themselves – both in terms of what they want to achieve and how quickly this will happen. How many entrepreneurs and non-entrepreneurs do you know who are suffering the same plight? What can be done to break this negative-mind cycle?

If we were coaching Damon and Stephanie, we would tell them to become quiet for a few minutes and clear their minds. Then we would suggest that they “go to gratitude.” That would involve creating an inventory of all that in their lives for which they are grateful. Going to gratitude helps them get out of themselves and see beyond the tunnel walls of their frustration. And it’s a way to re-set the mind in a positive manner. In fact, we would advise Damon and Stephanie to use the gratitude exercise in the future whenever they feel frustration welling up.

As armchair coaches we would next encourage Tyler and Stephanie to discover how to celebrate their successes – no matter how large or small. Sometimes we tend to singularly focus only on the BHAGs – Big Hairy Audacious Goals – that we have set, and we fail to see the progress we are making along the way. Damon and Stephanie need to re-pattern their thinking to be able to see the smaller achievements that occur every day and intentionally celebrate them. One of Damon’s team members earned a difficult industry certification. Damon celebrated this success with a pizza party and some congratulatory remarks. When his company recycled its 10,000th CPU, he walked into the middle of the warehouse and rang a big brass bell. He left the bell there to be used as future milestones are realized.

When Stephanie’s four-year-old daughter read her first book Stephanie took her out for a special lunch and lavished her daughter with praise and encouragement. One of Stephanie’s clients entered her brochure in a regional marketing contest, and it won first place. Stephanie celebrated her accomplishment by laminating the brochure cover onto a plaque along with her award. She hung it in her home office to remind her that she does really fine work.

We all need to learn to celebrate our successes no matter the size. And going to gratitude helps us to break out of the tunnel of limited thinking. This puts us on the path to appreciate each and every day as one filled with joy and promise.

This blog is being written in tandem with my book, “An Entrepreneur’s Words to Live By,” available on Amazon.com in paperback and Kindle (My Book), as well as being available in all of the other major eBook formats.

The Whale-Chasing Entrepreneur

I recently was at the beach and watched seagulls flying across the water with large objects hanging from their mouths. Upon closer examination I realized that they had plucked seahorses from the waves. But they were struggling to eat them. To begin with, the seahorses were way too large to swallow. And there was no way for the gulls to tear them apart because seahorses have a tough armor-like skin. A few weeks later I watched another seagull flying with a large fish in its mouth while being chased by two more seagulls. Finally, one of them stole the fish from the first (in mid-air!) but ended up dropping it in the water. The third retrieved it, landed on the beach and tried to swallow it – but the fish was too big.

All this seagull activity got me thinking about an interesting issue that we entrepreneurs face from time to time. We often chase a piece of business that we very much want to win. Sometimes it’s a really, really big piece of business and we think to ourselves, “This may be way out of our league but why not give it a whirl? Maybe we actually could win!” Our pursuit of this business may be somewhat fanciful, but stranger things have happened and lo and behold we do win. OK, now what?

A number of years ago our apartment management business unit was pursuing a very large property management assignment. We had not previously done business with the prospective client, but the firm was well-respected in the industry. Months and months of relationship-building culminated in a “mystery” dinner with the client representative where we were told we were going to be awarded a large management contract. The client explained that a portfolio of apartments was going to be assigned to us, but we couldn’t be told where the properties were located until right before we assumed management. The reason – the client was self-managing the properties and didn’t want the on-site or corporate office teams to know about the management change until the day the company-wide announcement was to be made. We had also been told that the property assumptions would occur over a phased period of time – two or three months. When all was revealed we ended up with more than 3,000 units in 52 apartment properties scattered across the country. Oh, and they were dumped in our lap all at once with no phase-in. We were literally the dog that chased and caught the bus!

Needless to say, this assignment did not work well for us. It turns out that this client gave us all the “dogs and cats” (tough properties) in its portfolio – so we were behind the eight ball from the beginning. Client expectations were unrealistic; our compensation did not begin to cover our costs, and our team was running ragged. After 18 frustrating months, we resigned the account at a loss of approximately $250,000.

What did I learn from watching the seagulls and my own experience? It’s very simple. It’s great to plan to catch a whale, but we must have a plan for what to do with the whale once it’s caught. There’s no question that the property management assignment I described overtaxed our resources. Unfortunately, we had no idea how large the portfolio was going to be in the first place – we never should have put ourselves in that position. But as a quintessential entrepreneur I’ve often had the attitude, “Let’s just get the business and then we’ll figure out how to deal with it.” I’ve found that this approach is a great way to crash and burn. Pulling together the entire team for a series of planning sessions is paramount. Understanding how to scale our human and capital resources is vital. And sometimes we just have to say “no.” That’s pretty tough for an entrepreneur to do but saying “yes” to the wrong opportunity could be extraordinarily costly.

Thinking big and pursuing big opportunities are part of our DNA as entrepreneurs. Comprehensive precision planning for the big wins paves the way for long-term success.

This blog is being written in tandem with my book, “An Entrepreneur’s Words to Live By,” available on Amazon.com in paperback and Kindle (My Book), as well as being available in all of the other major eBook formats.

Five Reasons Exponential Growth Can Be Elusive

Toby founded a small construction company that does quality commercial work. While his company’s growth has been extraordinary, he is concerned that it doesn’t feel like he’s “broken out” yet. And his biggest worry is that he doesn’t see how he’s going to achieve the scale that he desires. In fact, there are signs that his growth is starting to flatten out. Toby is struggling to understand what is lacking in his approach to building his business. This is a very common problem for many small businesses where the founder has lofty aspirations . . . and even loftier expectations. Let’s look at some of the more common reasons that growing to scale is such a challenge.

  1. Lack of Differentiation – We win when we are able to offer a product or service that is materially different than our competition. Toby thinks his services are differentiated, but in reality they aren’t in a substantive way. He insists that he offers the best customer service of anyone in the market – but that’s a claim that all of his competitors make as well. What should Toby do to tweak his products and services so that they are in much greater demand? He should start by gaining a better understanding of his customers and prospective customers. Exactly what are the problems they are encountering with their construction projects? What are the most important things they want from their contractor? Toby needs to spend time interviewing as many people as he can to identify what the customer wants in the most granular fashion possible. Then he needs to refine his product/service suite to deliver what he has been told. Too often, we think we know what the customer wants – or what we think is best for the customer – rather than actually asking them over and over.
  2. Deficient Strategy – A Strategy Cascade starts with Winning Aspirations that leads to Where to Play, then How to Win, then Capabilities Needed and ends with Management Systems. Many small businesses have a poor to no strategy at all. Many entrepreneurs think tactically rather than strategically. Toby has this affliction. When asked, he says his strategy is to regularly attend various networking functions and try to identify business people who may be undertaking a construction project. Then he intends to do his best to convince them to use his firm. Unfortunately he has no real plan to get from Point A to Point B.
  3. Small Thinking – Toby says within seven years he wants to build a business with $10 million in annual sales. He’s already at $3.5 million. My question is – why only $10 million? Why not $100 million? I’ve met very few entrepreneurs that have BHAG – Big Hairy Audacious Goals. Look, there’s nothing wrong with growing a business to a respectable level. But if one of the objectives is to scale-up in a major way, thinking really big is requisite. Toby should start by dreaming as big as he possibly can, then work backward to see what will be needed in the way of resources to realize his massive dream.
  4. Working “In” Instead of “On” the Business – In addition to small thinking, entrepreneurs often spend too much time working “in” their business instead of “on” it. Toby is involved with every cost estimate. He spends a lot of time on job sites and performs the final interview of every employee that is hired. There’s no question that he’s a “hands-on” business person – and he’s very proud of this fact. In this case, Toby is his own worst enemy. He hasn’t yet learned that it’s imperative to delegate if he wants to scale his company. When a company is very small, the founder must spend a great deal of time as a jack-of-all-trades out of necessity. But this isn’t sustainable if real growth is to be achieved. The entrepreneur who can scale his or her company in a serious way has figured out how to stay focused on the big picture and leave the smaller details to others.
  5. A Lack of Patience – I’ve said many times that it’s difficult for fast-moving, hard-charging entrepreneurs to be patient people. I have had this problem my entire career. Nothing ever happens as quickly as I want. Toby gets antsy when his business isn’t performing to his expectations. Part of the problem is the lack of a Big Vision and a coherent Strategy Cascade. When a comprehensive business plan is created, it includes a timeline that can be monitored allowing for refinement of the plan to stay on track. Toby will become much more patient when he’s working his plan and can see how his performance is matched with his timeline.

There are other reasons that a business fails to grow and scale. But meaningful differentiation of products/services; a well-designed strategy; thinking big; spending enough time working “on” the business, and maintaining patience, are critical elements to the scaling equation.

You can also listen to a weekly audio podcast of my blog. What you hear will be different than what you read in this blog. Subscribe on iTunes or wherever you get your podcasts. You can also click on this link – Click here to listen to Audio Episode 93 – Chicken Feed.

This blog is being written in tandem with my book, “An Entrepreneur’s Words to Live By,” available on Amazon.com in paperback and Kindle (My Book), as well as being available in all of the other major eBook formats.

It’s Bigger Than a Paperclip

Question: Some entrepreneurs create truly amazing products and concepts. What is their secret?

Answer: Would you believe that mindset has a lot to do with answering this question? When interviewing people seeking a sales position with our firm I used to administer what I called the “paperclip test.” I would toss a paperclip to the interviewee and ask him or her to spend a moment in thought and then sell me the paperclip. Some people would first try to determine my needs – obviously an excellent practice. Most would then launch into selling me on the virtues of the paperclip. They would tell me that it was made of the finest quality metal. They would tell me that it would grab like a vise and that it was guaranteed not to tear my papers in the process. A few prospective salespeople even did a very nice job of explaining the benefits of the features they were describing. But every once in a while, there was that rare individual who went in a totally different direction.

The rare person I’m talking about performed the need determination. But he or she ignored the practical reality that the object was a paperclip. I remember one individual who asked me what I was encountering that was my biggest challenge at the time. He heard me say that I needed to solve a property financing issue of some sort. He then twisted the paperclip into an abstract shape and explained that it was a unique financing tool and suggested how it was the answer I was seeking.

You can see why I thought this person was a rare individual indeed. His ability to think bigger led to the discovery of a solution to my problem. And that is the differentiator. Thinking big and then thinking bigger. So here’s the challenge for each of us. When we have an idea, write it down in all its glory. Then go to the next level with it and think about all the ways you can turn it into an even bigger idea. Don’t worry if some of the things you come up with are a bit off-the-wall – that’s part of the process. The whole point is not to be satisfied with the result of your initial efforts. Push yourself to go beyond the obvious. Collaborating with your colleagues may help. The more you practice the more you can create a new mindset that will push you and your ideas into the stratosphere.