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Build a profitable business- the baby steps part 20


Sell and improve. There are a number of choirs that make up the daily efforts of running a business. But perhaps the most important ones are selling your products or services and constantly improving on them. In the early stages of your enterprise selling should take center stage since you are often in dire need of a solid cash flow. As business gets some firmer footing you should try to adress the issue of improving your offer, and the value that it represents to your customers. But you still need to keep selling. And basically tha´t´s what it´s all about. Sell and improve. Very often we run across entrepreneurs that try to do one or the other. That´s a recipe for failure. You have to have both these skills down pat. You need the selling to bring in the cash flow necessary to maintain and grow you business. Selling is for the short-term mainly. You need the improving to keep customers happy and also to be able to add to your customer base more readily. Improving is for the long-term mainly. Selling and improving is like yin and yang. Having one without the other will put you out of business. It´s like trying to win a ball game by trying to go 100 percent offense. Or 100 percent defense. It may work for a gem or two. But once the season starts to unfold the fawlty nature of your strategy is bound to catch up with you.


Preparations pays. We have always been big about preparing. Most of us anyway. The reason is simple. Preparation pays bigtime dividends. If you fail to prepare you are most definitely preparing to fail. And that´s just the way it is. To tell the truth we don´t prepare as much as we should anymore. But we used to. As a matter of fact we always prepared in an almost religious manner. But once you have prepared something for thousands of times and spent endless hours incorporating it into your knowledge base something happens. It´s not something that happens straight away. it is a gradual process. Your subconscious starts to kick in. You suddenly have skills you never imagined you would ever possess. Mastery truly lies in repetition. But not just any repetition. Every time you repeat something, you should actively try to do it better than the last time. that is how we grow and evolve. So what are the skills we are talking about? What do you need to prepare for? Everything. We have spent countless hours preparing for a number of different things. Perparing for meetings. Preparing for negotiations. Preparing for presentations. Preparing for sales calls. Preparing for anything and everything really. And it has made a world of difference for us.

The best part is that after a while things become second-nature. You aquire skills that make each new presentation or each new negotiation better, and you only need to prepare for it during a fraction of the time it used to take you. Reaching this stage is a great feeling. It sort of grows on you until one day you finally realize that you have reached a completely different level. All of a sudden you start doing presentations that leave the spectators in awe. All of a sudden you can guess what price the other party is bringing to the negotiating table just by taking one quick glance on their body language and facial expression. Sounds a bit weird? We can assure you it is not. If you practice someyting long enough you can become highly skilled at it. That´s just how the world works. You develop your muscle memory. One muscle tissue at a time. Until finally you have reached the highest pinnacle of that skill. And that´s when the real fun begins.

Stay optimistic. Successful entrepreneurs are always trying to see things from a favourable perspective. They know that there is always some light to be found at the end of the tunnel. And they realize that even though bad things tend to happen from time to time these setbacks also represent opportunities or the chance to start over. We have certainly had our fair share of setbacks. But every time something bad has happened we have replaced the initial sad puppy face with a face of determination and willpower. Every time we have been struck down we have started the climb upwards again. It is only ourselves that can make us quit. Nobody else has that power. Sure there are outside circumstances over which you have no control that might catch you unprepared from time to time. But nobodyor nothing  can hold you down for a long period of time unless you allow it. There are some exceptions to this rule of course. If you should experience some health-related issue that might of cause be a large setback which might be difficult to overcome. But in general, most of the stuff that can happen to you can be dealt with.

Your key customer left you? Go get new ones, or get the old ones back. You´ve been sued? Hire a good lawyer and put it all behind you as soon as possible. An employee is causing problems in your business? Talk it through and sort it out. A new government policy has destroyed your business sector? Adapt to it as fast as you can or try to find new revenue streams. The problems are not new. Lots of entrepreneurs have experienced all of them before. If they lived to tell all about it so will you. Don´t forget that you hold the power over your life. Outside forces can keep coming at you time and time again, but it is only you who can allow for them to bring you down. Don´t do it. Be firm. Be confident. Be all you can be. And by the way, try to smile about it. Nothing can keep us down as long as we can smile about it. Your business life is but a portion of this great thing called life. A major setback in your business life can be dealt with but it is important to stay in balance.

Draw strength from your personal life, your friends, famli and loved ones. And we are not saying you should have endless discussions about how bad you are feeling about it all. Just spend time with the ones you love and gain strength from being among them. Your enterprise is your business. It is your responsibility. You should deal with it. Don´t fall for the temptation of using your loved ones as emotional crutches. Instead take charge of the situation. Deal with it by handling the problem head on. The sooner you start being proactive, actually trying to solve the situation, the better. The sooner you stop being reactive, complaining and whining about your ill fortune, the better. Winners do not whine. They handle the situation. And by doing so they move one step closer to winning. And they gain some new self-respect along the way. Oh and by the way, if you feel a sudden urge to cut back on your exercise regime in order to have time to handle the crisis our simple advice is; don´t do it. Now is the time to exercise. In fact we can think of no better way to handle the incredible stress of failure and hardships than by sweating it all out. There is something about

and we are not talking about all that endorphins that helps you out in your moment of defeat. We are talking about your sunbconscious mind


Sleep on it. Being an entrepreneur means you are going to have to make a lot of difficult and tough decisions. While it is important to deal with those decisions swiftly it is equally or sometimes even more important that you reach the right decision. When we have an important decision to make we always do things in a specific manner. In general we start by discussing the problem from every possible manner. If there is additional material that can help us be better informed before we make the decision we go through that as well. After we´ve done that we wait. That´s right. We wait. Depending on how long you´ve been an entrepreneur you are either nodding your head or shaking it in disbelief at the moment. When we say we do nothing, that´s not actually true. We do plenty. It´s just that we always try to give the decision time to grow. We almost never reach an important decision without having slept on it first. So basically we never reach important decisions instantly.

The reason for all this waiting and the reason that we like to sleep on important decisions is that we have noticed that we reach better decisions that way. Also we are more relaxed in reaching those decisions as that extra time has made us in sync with the process around us. The reason that all this works is of course that while we are doing nothing in particular, our subconscious is in full metal gear doing the dirty work on our behalf. While we are sleeping, our subconsious is at work dissecting our problem, formulating a powerful plan to counter it and thinking about what the end result will look like. Have you ever wondered why you get all those brilliant ideas when you are shaving in the morning or taking a shower? Or why you think of something reallyimportant while you are daydreaming? We are sure there have been times when you couldn´t think of the name of a movie you saw or a restaurant you visited? You finally gave up in frustration. The very next day as you were doing something completely different it suddenly struck you. You remembered the name. Congratulations. You are a living proof of the powers of the subconscious mind. Since you now know the vast powers of the subconscious mind why not use it to your benefit? Next time you have a difficult problem you want to solve do as we do. Go through all the details of it. Discuss it thoroughly . Sleep on it. And then decide what you are going to do about it. We know of no better way to reach good decisions in difficult situations.



3 to 1-ratio. The 3 to 1-ratio was initially introduced by a very successful restaurant entrepreneur that we know. He once asked us why we thought there were so many italian restaurants around. And he wasn´t just talking about our particular city or country, he knew that we- like him- had travelled the world. And it was quite appearant to all of us that he had a point. The world is full of italian restaurants, and italian food. Well, actually many of those italian restaurants serve food that wouldn´t be considered as italian food by a chef that has actually been to Italy, but who cares as long as the customers appreciate it right? As long as they insert some italian flags in the menu and insist on greeting everybody with a friendly “ciao”, the customers of the world seem to be quite happy with the arrangement. And besides, who can possibly turn down a great pizza or a tasty pasta meal? We sure can´t. Is that why there is an italian restaurant at so many street corners of this world? The fact that people enjoy the food so much? That is certainly part of the story here. The demand part, that is. But there is a supply part of the equation that largely goes unnoticed. You see, there are precious few international kitchens that offer a higher profit to cost ratio than the italian kitchen. Pasta is cheap (especially at wholesale prices). Yet tasty. It´s the perfect recipe for a restaurant providing value for money. You get fed at a reasonable cost. The restaurant makes a decent profit. It´s win-win.

And the 3 to 1-ratio is what is behind many a successful italian restaurants. The basic rule is simple really. Try to make 3 dollars for every dollar that you spend. Gross. You can sell reasonably priced food with good margin. And that´s what an enterprise ultimately boild down to. Being able to provide value and retain a good margin in the process. If you can accomplish that, the battle is already half won. Anf that goes for any business. We realize not all of you run italian restaurants. But the principles are the same. You want to be able to sell a product at above three times the cost of aquiring it. If you are able to follow that rule you should in general be able to cover the raw materials, pay the salaries, the facilities and also provide a healthy profit when all is said and done. And that´s all there is to it. The 3 to 1 ratio is not set in stone. Different businesses require different strategies. No one rule can be 100 percent exact. And yet we have surprisingly often referred to this one simple rule to estimate how healthy the pricing structure and margins of a business are. While no one rule is prefect and works all the time, some rules have stood the test of time and proved to be easy and fairly accurate ways to get an initial feel for an enterprise. We like the 3 to 1 rule. It is simple and straightforward, and we have always had a soft spot for simlicity. Give it a try and use it on the fly. We think you might like it.


Skip the excuses. You are never too old, too young or too busy to start a business. Not if ask us anyway. Oh, and by the way, you are not too poor to start a business either. Most of the time people come up with all sorts of excuses to be able to avoid taking responsibility for their situation. The truth is that any excuse you might have is basically nonsense. We´ve heard it all before, and only on a precious few occassions did we feel that th complaints were valid. Most of the time it´s just hogwash. You don´t have enough time? Start a business in your spare time. You don´t have enough money? Start a webbased business for 100 bucks or so. All it will cost you is the time to aquire the neccessary skills to get the job done. Too young? That´s the best time to start in business and get some invaluable experience in place. Too old? You must have tons of exoperience in a particular busienss area that you could tap into. Any excuse you throw our way, we´ve heard before. And to tell you the truth we are not overly impressed by them. Everybody is free to make up their own mind, and not everybody is suited to set up their own enterprise. But if that is what you want don´t let some minor excuses stand in your way. get things going and you will be amazed at the way things tend to work out for the single-minded and persistant entrepreneur. And please keep in mind that you don´t have to quit your day-time job, you can always start a business in your spare time. That will give you time to get a feel for things and not get overly stressed about needing to earn a salary. Try it out. You owe it to yourself. If you determine afterwards that it wasn´t for you that´s fine. At least you gave it a try. You spread those wings and tried to fly. Regardless of the outcome you attempted to seize the day. And that´s what a successful and fulfilling life is all about, isn´t it?

Always look for long-term relationships. People in general are a lot less rational than you might think. One of the great “secrets” of the business world, something that one of the best salespeople we know once told us, is that most individuals prefer to do business with someone they like. What´s the big news about that, you might wonder? Well actually that is quite a big deal. Think about it for a second. It doesn´t say that we as individuals will tend to do business with those that make the best product. Rather, if we like somebody, we are likely to turn that into a business relationship. And by the way, we tend to like people that remind us of ourselves. People with the same manners, the same dress code, the same speech, and the same gestures. “If they are like us, they must be fantastic”, the reasoning goes. This all goes on subconsciously of course. After all, nobody wants to be reminded about the fact that perhaps we are not as rational human beings and as smart business man as we have always imagined us to be. We don´t consider this to be a flaw. After all it just shows us that we are human. And that´s a good thing, right? Nevertheless, it´s important that we understand this basic law of of selling and it´s implications. In general people will perceive the different products or services within a category quite similar to each other. The one thing that stands out is how they get along with the people selling those products or services. It makes perfect sense, does it not? As long as you are going to do business with somebody, why not do it with somebody that puts a smile on your face and makes you feel at ease? Somebody you would enjoy spending some time with. That is exactly why it is so important to try to make all your realtionships into longt-term relationships. If you can manage that, doing business will prove a whole lot easier than you might imagine.

Provide value. Always try to provide even more value for money. Each time you manage to provide more value for money, more profit inevitably follows. It is a law of nature, or perhaps we should refer to it as a law of economics and the forces of supply and demand. This one is hard to figure out. It doesn´t have to take much time to learn and understand something. But true wisdom takes time. True wisdom comes after years of experience. It is what is left once you have been doing something for a very long time, and you finally find that moment when everything suddenly fits into place and your eyes are opened to something that has been there all along. The truts shall set you free, they say. And to us nothing has been more of a lesson than understanding the concept of giving more for less. It is simple really. It simply means that you should always push to improve the deal that you are offering your customers. There are a number of ways that you may try to achieve this. You could improve the quality of your product or service. You could add a feature or improve on the design. You could listen to the feedback of your customers and improve what you are offering in line with what your customers are telling you. You could improve customer service and overall customer experience. You could cut costs from your production and use this to lower prices for your customers. Does it sound strange? it certainly did for us when we were starting out. To tell you the truth we find it is hard to comprehend even today. If you suddenly find a way to improve your product or service, you would want to raise prices, right? And if you find a good way to cut production costs, well that just means your profit will soar, so why would you want to lower prices? Are we right? Well, you could do that. And you probably would make more money. For a while. But if you truly desire long-lasting success, if you are in it for the long-term and want to build the company of companies, then you should reconsider.

People are looking for best bang for the buck

Many entrepreneurs make the mistake of assuming that customers are not intelligent. Just because a stupid marketing promotion can make you some unexpected earnings doesn´t mean that you are automatically smarter than the next guy- Customers are quite smart. At least when it comes to their purchasing. Sure, they can be manipulated for short periods of time. But in the end the customer is smart enough to find the best value for money. They may wander around like headless chicken for some time, but in the end they will find the best product at the most reasonable price, and once they do they will not look at anything else. A winner is a winner, and unless there is a change to that specific product or service the love-relationship will stand firm and the profits of that company will soar through the roof. Customers vote with their wallets, and you will find no voter-base that is more sincere or outspoken. Either you win their liking or you don´t. Either way, it is the customer that ultimately decides the future of your company.


Understand your what makes you tick. Are all different. If you go into business with a partner or several parners you fill quickly find that out. We are all in it for different reasons. Some want fame and fortune. Some want money. Some want to follow their dreams and realize their visions. Some want to taste success, and to be recognized as being good at something. We all want different things. And yet nothing is black or white. It´s not like we all only want one of those things. Very often we reach out for several items on that list. But usualy there is a rather distinct order. We all have a primary objective. And no matter what that primary objective is, it is important to understand that it´s there and to adapt to it. There are times when doing this can be very difficult. For instance, what if your partner is primarily interested in becoming famous, while you are in it for the money? While this may not seem like a big deal, we can assure you that it could very well turn out to be. We know of just such a situation. Since each partner always did everything with their primary objective in mind, complicated situations would arise every now and then. One partner focused all his energy on creating a valuable entreprise with a strong cash flow. The other couln´t really find the time to help out. He was too swamped by interviews, and he was loving every minute of it. While the media and press probably was beneficial for the company, the whole situation put a strain on the partnership.

(and find someone to cover your weaknesses) partner or paid help

We all have differenet things that make us “tick”.

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