Build a profitable business- the baby steps part 17

The following list is the result of a brainstorming session between a number of successful and experienced entrepreneurs. While we first intended to keep the items on the list down to an even 10, we soon discovered that would be a difficult task. We leave you with a somewhat prolonged version of what we initially intended. On the other hand you should know that even this lengthy version has been shortened more than once. We had to be ruthless. Some things seemed to obvious. Some seemed a little bit too complicated or specific to be on a short list. And some of the stuff was just lost in all the discussions that followed. There was simply too much to being said. Too many aspects covered. Too much experience to extract it all from. In the end we did our best in providing a “short” but sweet list of the most important stuff you want to keep in mind in order for your entrepreneurial journey to be a successful one. We hope you will find it helpful. Here goes:

Take responsibility. You are responsible.

You are in control. You call the shots. Ultimately you are responsible for your life. By taking responsibility you are allowing youself to learn from your mistakes and grow as a person. Losers play the blame game and end up not learning anything from their failures. It was somebody else´s fault. “They screwed me. I was the victim. I had terribly bad luck. If only…” Winners determine where they want to go, put a plan in place to get there and start their journey by taking a small first step in the right direction. Losers blame circumstances for ending up nowhere in particular.

 

Words are cheap, action is what matters. Do not listen to what is being said, look at what is being done. There is however one circumstance when we do pay attention to what is being said. When somebody keeps repeating something over and over we seriously start to doubt it. This may sound very cynical, but we have been doing business for a long time and this simple rule has stood the test of time surprisingly well. More than 4 times means it ain´t true (I´m not out ot make money from this)

Always negotiate. Always. When somebody quotes a price for something we always consider that to be a starting point for a negotiation. And we quickly reframe the situation in a manner that makes the other person realize that we consider a discount to be a natural part of a potential deal. The best way to do that, we have found is by using humour. Not the kind of humour that carries a message of “I´m joking about this”, but rather the kind of humour that states “We both know there is room for a discount, so let´s have a friendly chat about how big that discount should be”.Many individuals feel uncomfortable about negotiating. This is not a good standpoint to be coming from. Our experience is that negotiating in itself is not the culprit. The problem is that many people don´t know how to negotiate. They approach the negotiation in an awkvard manner, this is reflected during the talks and they create a negative wibe surrounding the negotiations. The negotiations suddenly have an air of prestige and conflict surrounding them. They see negotiating as something of a battle, where one party leaves as winners and the other party walks away as losers. This is a sure way to unsuccessful negotiations, irritation and a waste of time for both parties. When we negotiate we always look for two winners. In general this is not how the business world works. Most people try to max their own piece of the pie completely and pay little or no attention to the interests of those sitting at the opposite side of the table. This is a stupid approach for a number of reasons. It may be a good way to do business if you are not really looking for repeat business. But if you are building a business and you are in it for the long-term as we are, youmust always try to see both sides of the equation and try to make the best possible deal for both parties. In the end this will give you lots of long-term clients, long-term suppliers and long-term employees. This will save you tons of hassle over the years, as you will probably end up doing business with the same contacts over a number of years. The other benefit is that you will gain a reputation of being honest, straightforward and easy to do business with. You will be approached a lot by people, and while most of the stuff that comes your way is likely o be garbage, you will come across a gem or two in this way.

try to give them as much as possible that costs you little. Oh and by the way, always look to improve on your deal. Even after they believe that you are done. As a rule we always try to get something extra right at the end of the negotiating process. Since we have already negotiated down the price of the goods or service we are interested in buying, most times we will ask for something extra to be added to sweeten the deal. This is actually more important than it may seem. You see, what you want to focus on is getting something that is of value to you, but that has little meaning or cost to the person across the table. You can often just add this one in a “by-the-way” kind of manner. Frame it in such a way that they understand that what you are after is not costing them much and that you would just appreciate it a lot. A motivated seller will in most cases accept this and offer you that little extra just to hear the cash register ring. Be sure to be thankful and make them understand that you will be coming back for more business in the future. In general, good behaviour should be rewarded. If somebody is looking to throw us some extras, we will always try to swing more business their way. Apart from concentrating more of our own business with good suppliers, we always recommend them to our other business contacts if they do well. Thus, we are also adding value to the deal, in a way that is not costing us anything.

Always look to avoid any prestige in your negotiations. Avoid any personal emotions, except for happiness. In general you want to exude happiness, playfullness and humour. Naturally you want to come across as professional and skillful as well, but the point of taking the drama out of the equation cannot be stressed enough. Sometimes this can be difficult to achieve. If the person across the table has personal issues, is highly prestigeous or has problem separating emotions from the negotiating process one must tread carefully. The goal is to get what you are after, but to leave a smile on the faces of those you leave behind. Be tough and goal-oriented when negotiating, but when the deal is done honour it completely and be a perfect gentleman about it. Once you shake hands on it (and sign the necessary papers), smile and look to establish a long-term relationship that will be mutually beneficial to both partners. Always try to involve lawyers as late as possible in the process if you are keen to get a deal done. There is no way more certain to crash a deal than by letting lawyers slice and dice it. We have experienced so many deals go bust simply because the lawyers tried to be too smart, were too timid and riskaverse, and in generally were caught up in the legal details they forgot the business side of it. Conversely, if you want to kill a deal try to involve a lawyer or two in the process. They have ways of killing deals that are so uniquely stupid and creative, that they are at times stunned themselves. Of course, this is only true if the lawyers aren´t paid in an incentive-kind of fashion. Should the lawyers have a vested interest in the deal happening (like some kind of by-the-side-signing-bonus) the deal will be realized most of the times. Not always in the best interest of the client. But it will be realized.

Fixed price contractors. This is a big one. There isn´t an entrepreneur worth his salt who hasn´t come to the conclusion that fixed price contracts are the way to go. Years of experience paying over-inflated prices will eventually make this a part of every entrepreneur´s aresenal. It might sound as a trivial matter. We can assure you it is not. The numbers will add up quickly. We have told you before that an experienced entreperneur always negotiates. Well, here is an item you should add to that “always”-list. Always do fixed price contracts. Don´t accept the ridiculous explenations like “it is customary to go by the hour in our business” or “I only work by the hour”. There is a reason contractors are so keen to keep the hourly rates, and it´s not a reason that is in line with your best interest. Also, we find it silly that contractors get paid in a way that makes them have the opposite invcentive to ours. Think about it. The longer it takes a contractor to finish a job, the more he gets paid. That´s just plain stupid. We want the job to be done fast, efficiently and at the lowest possibly cost. The contractors get paid more if they go slow, are unefficient and thus make the cost to you as high as it could be.

We have so many war stories about this particular item, we get pissed off just thinking about some of them. So let´s save ourselves from the pain of looking back, and let´s save yourself some money going forward. Let´s just plainly state the rule: Always go for fixed price. If the contractor tries to talk you out of it be stubborn. In the end walk away. Hourly rates are nearly always exploited by the contractors. Without exception they will sneak in some mystery hours on the final bill, and there is little you can do about it. When we were new to the business, we used to protest, renegotiate and ended up paying less than what the bill stated but more than what the job should have cost in the first place. You are better off doing business with somebody who will acommodate your wishes from the very onset. You are the customer. Use that to your advantage. When I personally started insisting on fixed prices from contractors I couldn´t believe the difference it made to my bottom line. I think there are two reasons for this. First, I didn´t get the shameless 30 percent markup most hourly-rate contractors used to sneak onto the final price. Second, you can easily compare prices between contractors and a get a bidding war going if you have a fixed price to relate to. We always do. On top of this, a fixed price allows for some additional things to be included in the contract.Why not include a clause that sets a deadline for the job, with a penalty fee to be payed by the contractor if they are unable to make good on their promises in the alloted time. I know what you are thinking. Your contractor would never agree with that. Neither did ours. So we changed them. When you are going for the hourly rate, a bidding war is pointless as the winning party can always sneek in some additional hours on the final bill. There isn´t a lawyer, accountant, internet consultant, or builder that won´t fight tooth and nail to keep the hourly rate price structure. Don´t do it. Find someone willing to do an honest day´s work and if he/she delivers, make a long-term relationship out of it.

Be a man of integrity. Telling the truth may hurt you at times, but telling lies will hurt you even more. Tell it like it is. Be known for being a frank person that don´t do bs.

Be opportunistic. We believe that a good entrepreneur needs to be a bit predatory in their behaviour. As long as you are not hurting others, you need to be able to push the boundaries a little. A good entrepreneur should be honest, with a big heart and of high integrity at all times. But at the same time, you can´t go around behaving like a puppy. You need to be able to claim your destiny. Almost all of the succesful entrepreneurs we know of have pushed the limits on more than one ocassion. That doesn´t mean they´ve broken the law or done something illegal. It simply means that they have at times done stuff they are not particularly proud of or simply stuff that can appear to be a bit predatory. Most of the time, this kind of information is not easily obtained as they are reluctant to tell you about it. And if they do tell you you are often presented with a more “polished and refined” version. After a couple of drinks together some of them will let their gard down long enough for you to be able to put the pieces of the puzzle together. And while the puzzle may often appear to be more amusing than tainting, there seems to be a secrecy surrounding it all. We believe it has to do with what people might think of it all, rather than with what actually did happen. Successful people are always being targeted by lesser men and these lesser men are always on the outlook for fresh ammunition. Why provide it to them willingly?  Nevertheless, empirical evidence suggests that successful entrepreneurs are always looking for ways to improve their odds of success. And because of this deep desire to win, they are surprisingly willing to go that extra mile and to look for that not-so-obvious angle. Sometimes that angle is a bit provocative or cheeky, but that will not stop them. Want examples? We bet you do.

There are many examples. There are not so many that we have been allowed to put in printing. Despite the fact they were offered to stay anonymous, let´s just say they don´t exactly seem to be tripping over themselves in order to tell their stories. But just to give you an idea of what we mean, we will provide you with an excellent example which includes a celebrity. The best example we know of (and that we can share with you) is from a famous man that is now rich enough and brave enough to talk openly about it. When Scottish serial super-entrepreneur Duncan Bannatyne of Dragon´s Den fame (the highly popular Brittish equivalent to american TV show Shark Tank) needed a bank loan to expand his homes for elderly people the bank wanted to see proof that his business was in good shape and that the occupancy rate was satisfactory. Mr Bannatyne shipped in his mother and her friends on the day the bank arrived to evaluate his progress. While he didin´t actually tell the bank they were staying at the elderly home, it was what the bank representatives perceived to be the truth. They saw a number of rooms and the corresponding number of old people. Their conclusion that the elderly home was completely full resulted in them granting a loan to mr Bannatyne, and the rest is history. He went on to build a very large number of highly successful and profitable elderly homes over the coming years. Note that mr Bannatyne didn´t actually lie. He merely operated in an opportunistic and perhaps a bit cheeky manner. The annals are full of entrepreneurs behaving in a similar manner. Strecthing boundaries, pushing your luck and behaving just a tiny bit like a pirate seems to be a tell-tale sign of the successful entrepreneur.

Take Bill Gates for example. One of the founders of Microsoft and one of the richest people in the world, has he really alway played it all by the book? One of the most interesting and defining moments of the Microsoft saga is when Bill Gates sold what has later been known as the PC-DOS operating system to IBM for $ 50.000. What´s so interesting about that you might ask youself? Well, first of all Bill Gates didn´t really own the program at the time. Tim Paterson of Seattle Computer Products was the man behind the program. Nonetheless Microsoft sold the program to IBM and only then made a move to aquire it (they got an exclusive license at first and after a while they bought it). Secondly, Bill Gates managed to convince IBM to let him hold onto the copyright of the operating system in what has to be one of the most brilliant negotiating moves of all time. And the rest is history. Microsoft products are now on most personal computers. IBM had the future of the software business in it´s hands, but let it slip away. Or rather they signed it away with a stroke of a pen. And Bill Gates has been a house-hold name on the “richest people of the world”-list ever since. So, did he do anything wrong? We don´t think so. As far as we are concerned he only pushed his luck a little and behaved highly opportunistic when his moment presented itself. And that´s really all there is to it.

Because in the end, you will need some special ingredient to make your dreams come true. Whether you call it being daring, audacious, cheeky, brash or provocative you need that extra spice- that game-winning ability. So we challenge you to go out there and claim what is rightfully yours. One of the oldest (and perhaps wisest entrepreneurs we have ever come across) once told us (with a wry smile attached to his face) that “It´s not about whether or not you should break the rules. It´s when you should do it and if you think you could get away with it”. And we can tell you that he wasn´t talking about breaking the law. He was a lawabiding citicen all his life for all that we know. But he knew when the time had come to do something different, unexpected, crazy, opportunistic, risky and highly profitable. The world will always open their doors for the able and courageous man. You can have all that you are after. But you will have to grab it yourself. Nobody will be able to help you unless you are first willing to help yourself. As long as you are not hurting others, you are always allowed to help yourself. Hell, not only are you allowed to help yourself, we believe it to be your obligation to yourself and to your family. Perhaps Paul J Getty put it best: “The meek shall inherit the world, but not it´s mineral rights”. Make sure you get hold of some of those mineral rights. Seriously. Go get some. Right now.

Stay true to yourself. Dare to walk away from the herd. Dare to be a rebel. Dare to question the majority views. Only by thinking for yourself can you truly shape your own destiny and be a master of your own future. Stand firmly when facing peer pressure, and rest assured that those who do everything in the same manner as everybody else also will get the same results as everybody else. And if you haven´t figured it out by now, the results of the majority are less than spectacular to put it mildly.

Show that you care. Don´t just go for the customers, go for the gatekeepers and key individuals that have influence over the decision process as well. Send present to key accountants, economy directors, and other key individuals. Take excellent care of your customers but also help their children out if possible. Do stuff for them that is not profitable to you. We always include gifts to key gatekeepers as we compile our present lists. As a matter of fact we always include potential clients as well. There are individuals that we have been sending gifts to for the last 8 years without any business being generated. Still keeping a good relationship is crucial and we are always hoping that one day some of those customers will try us out. The gifts are just a way of showing them we are still out there making those rounds. We are available should they require our particular set of services or products. Also, there is a strong framing taking place. By being both highly personal and long-term we are sending a powerful message across to potential and current business partners: “we value you and we value long-term relationships”. The importance of this cannot be overstated.

We always sign everything and try to make the gifts and letters as personal as possible. This takes time, but we feel it is important. There are several reasons for this. First of all, we like them, and if you like somebody doing business is that much easier. But we also hope that if we keep doing a good job they will keep directing business our way. Naturally, we realize we need to do a good job. If you are doing poorly, the best gifts in the world are not going to save you. But we also know the importance of showing your appreciation for your business partners. It might not seem a big thing but the impact can be huge. Showing that you care is not a commonplace occurence these days. Being genuine and personal is even less common in the business community. Make the extra effort of letting people know that you appreciate them. It will make your professional life that much easier and it will have a huge positive impact on the number of longer-term relationships you keep around. And to us long-term relationships is not only the name of the game, it actually is the game.

Say what you do and do what you say. This one is pretty self-evident. Yet there were those of us who insisted we included it in our list. Apparently, they feel it isn´t as natural to everybody as it should be. You must make it an obvious signum of the way in which you conduct your business. If you promise you will call, do it. If you agree to a meeting go out of your way trying to be on time. If you agree on a dead-line, make sure you honour it. They may seem like petty, unimportant things, but they add up to one massive statement: you are to be trusted and relied upon. You are professional. Doing business with you in a structured manner is effortless. All those things add up to an excellent environment for establishing long-term business relationships, which as far as we are concerned are one of the most important assets of any business venture. Keep the current ones happy. And look to add new ones all the time.

Always get it in writing. Although this one is obvious, we had to include it. We simply know of too many horror stories. You might be surpried that some of those stories include very experienced entrepreneurs. Do you think people are to be trusted? No matter what your answer is to that question wouldn´t it feel a lot better to have it all in writing? We have seen and experienced to much to believe in even the firmest of handshakes. Money makes people do some pretty nasty things.  If you are an experienced entrepreneur you arre nodding along as you read this. You would have to see it to believe it. In fact, we barely believe half of it ourselves even though we´ve had front row seats to the action. Money brings out the worst in people. Simple as that. The best way to go about things is to get it in writing. Write a friendly contarct even if you are the best of friends. It´s the best way to ensure that you stay friends and that the temptations of coin are not given any more leeway than is absolutely neccessary.

People and money make up a potentially disastrous coctail. We could tell you some stories that you wouldn´t believe. More people have been robbed by the ignorance of not having a contract than by any other mistake out there. We have seen individuals (who thought they were partners) work for free for a number of years, only to get nothing once the business was being sold. We have listened to people giving the “my word is stronger than oak”-speech only to see them forget about it the next day as they got sight of that pile of money. We have seen some thing that we sincerely hope you won´t have to. Learn from our mistakes, and the mistakes of those poor souls before you. By keeping everything on paper and making sure the worst temptations are not easily available, you can save yourself a world of trouble. Maybe, if you follow our advice,  you will not grow as cynical as we have become over the years. Maybe you will find that all people are to be trusted and doing business is always easy. Nothing would make us happier. We for one, always try to get everything down on paper. Exposing people to piles of money is like sticking a fuse into a big chunk of dynamite. You know you are perfectly safe at the moment, but you will feel a bit uneasy at times. Now imagine giving some matches to a five-year old and let him play around with that dynamite. Sounds stupid doesn´t it? Well, that´s basically what you are doing as long as you don´t have it in writing. You are inviting disaster and we have seen too much disaster