About the author
Bo Burlingham is the editor of Inc. magazine. (America); is the founder of Small Giant Community; is the author of The Great Game of Business, A Stake in the Outcome, Little Giants.
Norm Brodsky is the founder of Perfect Courier and Citistorage, Editor of Inc. magazine.
From real-life stories, the authors "reveal" tips to develop businesses in their "smart pocket".
Chapter 1 – How to have a successful business
The first important thing for a successful business is to define goals. When setting goals, don't let emotions rule. Then make a business plan, that is, reasonably predict the level of revenue, profit and cost. Don't confuse cash flow with revenue or money in the bank. Determine gross profit or gross profit margin, this is a very important issue, a determining factor in the business, because we must use gross profit to pay expenses such as wages. , rent, bills and risk provisions.
Creating a business plan helps you know the amount of capital needed to start a business. Expected numbers are always different from reality as costs are often higher and profits are lower, so provision is required.
We also do not let the revenue obsess, then focus only on generating revenue. Don't fool yourself with a string of months of high sales but low margins. Customers that generate high margins are usually customers who buy in small quantities. Low margin customers buy high value, what happens when they pay late? Don't go after any deals with low margins. If your gross profit is not enough to cover your expenses, you have to take capital to cover the difference, the capital will dry up, you will go bankrupt.
Learn to anticipate and recognize changes in business by improving your numerical acumen. Numbers help you to balance your emotions, you should learn to stay away from decisions based on emotions, but to be really objective. The numbers will remind you your cash can be self-generating, but it also has a limit and it can be depleted.
Chapter 2 – The Important Factor
The most important quality of an entrepreneur is resilience, that is, the ability to recover from failure, to know how to turn the situation around, to learn from mistakes. In business, you can't stop making mistakes, but the new mistake is not the same as the old one and always gives us new lessons to make us smarter.
A good example from my company, after finding out that a customer is not satisfied with us but we don't know, the real lesson we get is not that we made a mistake, but that we have to It took me a long time to realize that mistake. Resilience won't do you any good if you don't learn from your mistakes.
The most valuable business lesson we can learn comes from being able to face our own weakness. However, it is difficult to admit your own mistakes. So I practice listening to make sure I at least understand other people's advice, whether I accept it or not.
Besides resilience, what entrepreneurs need is the ability to be disciplined and focused. Some people think that successful businesses often have a magic hit. All they need is a good chance and “boo ba la!” turned it into a thriving business. It's a "legend" in business. The world is filled with great business opportunities, but none of them guarantee success. Must develop the discipline and ability to focus on a single opportunity, choose one from the available, a single idea, more appealing than the rest, and then do real research. carefully then persevere and endure until it turns into a solid business.
Another quality that you must have in order to be successful is “peripheral vision”. The solution is never right in front of you. You need to learn to find them from outside your own perspective, so you can find solutions to problems that others consider unsolvable.
To be successful, you need something else, it's instinct, it's deep inside of you, this quality is real, and it can help some people achieve things that others can't. .
Chapter 3 – Why do startups fail?
Startups fail because they follow bad advice like create a product or service that no one else has, or a business with few competitors or create a niche for themselves. But in my opinion, we should do the opposite: choose an industry with many competitors, this shows that many people have made money, we just need to make a difference with them. Choose an idea that's been around for at least 100 years that people already understand, have instilled because it's expensive to create a new concept, and at the same time pay attention to the customer. Next is creating a niche, winning customers by providing them with value added to prevailing prices without increasing direct fees, without reducing gross margin.
You do not think that buying an existing company will reduce risk, save money, quickly achieve goals, that is not true for startups. You should build a new business of your own, because through it, you will gain very useful and necessary lessons and experiences in business.
Next, you have to develop a business plan, many people mistakenly think that the plan is only for raising capital, but money is not the first thing you need. The plan is written for you, including the very important issues of business idea, how to, price, customers, revenue. Please check and think carefully before raising capital. Study hard, and more importantly you will know how to use capital better, greatly increase the ability to maintain capital until it is no longer needed, the business can support itself in its own cash flow, that is your goal.
You should remember, there is another great resource that once you lose it, you will never get it back. It's even more important than money. Losing it costs you the chance to realize your dream. That resource is time. You should be careful not to waste it. Not in a hurry but you have to find a way to get the job done in the shortest time. You can't just sit and pray to get the required amount of revenue, it will take a long time for you to give up before you use up your capital.
Chapter 4 – Where is the money?
Before raising capital from others, you need to carefully plan an investment strategy such as a business plan, do market research, and need to research investors' investment limits and what they are looking for. . It is useless to approach them knowing that their standards do not match your needs.
Once the company is up and running, you need to build another financial relationship – the one with the bank. Only use a mortgage lender when you can't get the money you need from the bank. As banks look for good companies to invest in, mortgage lenders, in contrast, look for good debtors to acquire.
The bank may decide to give up on you one day because of one of your mistakes like: submitting your financial statements late, your records are incomplete, you will cause problems for the bank, transport Operates on uncollected budgets, without a cooperative attitude – instead of giving the bank the necessary information, you evade and give off-the-cuff feedback. When you don't need help, you distract the relationship, when you need their help, it's too late.
There are times when getting a loan becomes difficult, you are lucky if you have a close bank.
Chapter 5 – Magical Numbers
When starting out, calculate your monthly sales and gross profit margin by hand. Looking up numbers by hand is the best way to learn and understand their language. Only when you have mastered this can you process data with a computer.
There are many companies, although business is going well with some products as well as some customers, the revenue is increasing steadily, but they still have problems paying their bills every month, often running short of cash without understanding why. The cause of that problem could be that despite the increase in sales, not enough gross profit was earned to cover the expenses, or the cash did not go directly to the bank account but went elsewhere.
The numbers will help you to answer the above question specifically. They have the ability to help you alert you to adjustments as well as potential problems, so you can make timely decisions. When starting a business, you must be flexible, having to assemble each segment of revenue, profit margin, and cost of each business, each product. This whole exercise doesn't take much, but it immediately becomes clear to you how much money you're making, where it's coming from, and where it's going.
In fact, good entrepreneurs all have certain key numbers, they monitor daily, weekly and know right away how their business is going before the business report.
Chapter 6 – The Art of Negotiation
Much of the business is about negotiating issues, so you have to understand the process.
First of all, in a bargaining situation, you must keep your preferences from being guessed by others, or you will have to accept a less favorable deal.
The next rule is to negotiate the number two priority first, your initial concession on this bargaining point will give you the extra strength to put the number one priority on the table.
An important principle in the negotiation process is to meet the head of the team face-to-face. To get what you want, you must first know what your partner wants. Therefore, you must listen, listen by following two rules: don't be prejudiced and assume everyone in the room is smarter than you. Getting into the habit of thinking is about questioning what you see, assessing what's underneath, and figuring out what's really going on.
However, all negotiations do not always end in the happiness of both sides, but sometimes turn into confrontation. But, the best deal in the world is when people walk away with a little bit of displeasure. In this case, you must prevent emotions from influencing business decisions. You must not get angry or intend to take revenge. You have to find solutions, not create problems. Doing so will save you a lot of money: court costs, attorneys, time, frustration and distractions at work.
Chapter 7 – Starting a Deal
"If you don't ask, you don't have". This quote holds a secret to being a good salesperson. My point is to just give it a try and see what happens. If I get what I want that's great, but if I don't then I smile and walk away. Salespeople must overcome their fear of rejection. But I've always been unafraid of getting a "no" answer. The answer "no" is merely an improbable chance, I don't care and don't mind.
You are polite, listen attentively, do not back down. You continue to negotiate until the partner agrees.
You have to figure out exactly what you have that other people want to buy. That means finding your true industry. For example, Fred is the owner of a company that supplies fish to restaurants. At first glance, Fred says, "Actually, I run a banking business, I give loans to restaurants in the form of personal loans. , they will pay late, then they not only pay me for the fish but also the credit I extend. I included the cost of that credit in the selling price.” Usually you will discover a niche after going into business, you will find that your real business is not the one you are running.
Besides, a good reputation has the ability to attract customers, find financial support, trade, and help the company succeed. To gain a reputation, it is necessary to adhere to the principles: never speak ill of competitors. You should also not be a bitter loser when you lose customers, but should always be easygoing. Earning the respect of your opponent is extremely important, and sometimes kindness is rewarded.
Chapter 8 – Good deals, bad deals, and deals that should be abandoned
When you are obsessed with revenue, you often think that every brand is good, the bigger the better. In fact, size is not as important as gross profit. Too many deals with low gross margins can make you bankrupt.
Many people think, they should focus on big customers. But, small customers are the mainstay of a solid, stable and profitable business. Because: they pay higher prices, they don't have a choice, they don't have the bargaining power of big customers. If you treat them well they will stay with you forever because they have little mentality to change. On the contrary, with a large customer, you will depend on them, you will be worried when renewing the contract, they will dominate you on price, when they leave you will be in many troubles.
However, when you are not ready to start with many small customers, you build your business on revenue from a few large customers, which is not wrong. But you must immediately expand and diversify with small customers.
You have to win customer loyalty, if you just state why the product or service is better than the competition, it is not enough. You have to prove it to them. You have to listen to the customer, focus on finding what the customer wants. You're not worried about winning deals, you're only concerned with making your customers feel like they're being heard. The information should always be true and accurate, but you can highlight the parts that customers are most interested in. When they leave feeling happy and comfortable, the revenue will come on its own.
When there's an opportunity to sell excess capacity at a discount, it's hard for most people to turn it down. But that's really a serious mistake, a fatal mistake, and you're on the way to bankruptcy. Because, you have created another competitor, which is yourself, and the cheaper price will win it's only a matter of time. Obviously, some excess capacity sales work well, as long as you and the customer agree on a discount period and you have to be able to explain the arrangement to other customers. In this world, there are people who want more than you can give with their money, the negotiation is difficult, there is only one word you use: “no”!
Chapter 9 – Customers need to keep
It will be very difficult to grow your business if you have to constantly replace customers. If you lose a few old customers, then the amount of time, energy, and money spent acquiring new customers will be twice as much as it costs to retain those old customers.
In addition to learning what you need to know about your client, you must show a sincere willingness to do whatever is necessary to ensure that the client is happy with the deal. That relationship will fade if not nurtured on a regular basis. The way to do it is to educate your customers about your industry, save them money by changing the way you operate, helping them to become wiser and smarter shoppers. Old customers should be treated like new customers. We tend to change our behavior after a while, which is the fastest way to lose customers.
The market changes, technology changes, the needs and wants of customers also change, if you keep up-to-date information, you will advance faster than your competitors. With that in mind, in building customer relationships, it's important to keep in mind the decisive role you play as a business owner. You can have direct contact with your customers to build your company's special trust, respect, and goodwill.
Chapter 10 – Actions that make customers leave the company
Price has always played an important role in customer relationships. There's no easier way to lose customers than to suddenly raise prices.
Your costs are going up, some of them are always increasing over time, your gross margin is shrinking, otherwise raising your prices will be left with no other option. However, you will encounter a reaction from the customer, which puts your most important relationship at risk. Faced with opposition, many business owners feel they should cancel the price increase, or at least delay it for as long as possible. Both solutions are wrong, as you won't be able to keep the business going, pay your bills, and the company will go bankrupt.
Some fees have a life of their own, you should keep an eye on them to increase the price periodically in a reasonable way, the price increase does not have to be high, so that the customer feels acceptable.
Usually, your company sets some rules, purposes to limit risks, prevent mistakes, maintain standards or set up when mistakes are made. When it comes to establishing a rule, the company has good intentions, but the rules don't hurt the business. Maybe it's just because of one bad customer that we put rules in place to limit other customers, resulting in poor customer service. Therefore, it is necessary to promptly cancel the bad laws, mistakes can lead to the consequences that customers will turn away from you.
Chapter 11 – Deciding to grow
The life plan must be considered before focusing on the business plan, because business is only a means to an end. Some people are focused on growing their company as quickly as possible, and are willing to sacrifice a lot in the process, even their families. The desire for growth often leads people to make mistakes. There are no shortcuts in business.
If you have a successful business, the desire to expand it is completely natural. When you encounter a business failure, you can look back and draw lessons from the experience. But figuring out why a certain business idea is successful is difficult, if not impossible. If you don't really know what makes you successful, you have to be careful with the strategy you're using. There are times when you will lose the values that you have worked so hard to build.
In fact, sometimes the small companies actually have a distinct advantage over the big ones. It's easier to compete with a large company than with a well-run small company. Small company advantages are more flexible, highly concentrated, closely linked, the owner is always present and active.
My top competitors are not giants but professionals who run businesses just like me. And they lost that competitive advantage when they merged into a larger company.
Chapter 12 – Becoming a Boss
As an employer, after all, you and your employees work together in a harsh environment, struggle to survive, adventure together, and rely on each other to survive. That is the wonderful feeling of camaraderie. So can they become social friends?
People often make the mistake of taking on an ownership role: one is related to the relationship with the employee, the other is related to the job they are performing.
In my opinion, to be a good boss you need to create a certain distance with employees, don't let emotions affect your work. Employees should not be your social friends or your non-employee social friends. You must respect the staff. You can laugh, cry, be happy, sad with them, but never forget it's a business relationship.
From personal experience, I once promoted a very close employee, he was a friend of mine, only he did not have the necessary skills to be successful in that role. I bitterly realized that I had made a big mistake. Another time, regarding my main dispatcher, he was like a family member, later I met him stealing from the company, before facing him, I went home crying. Since then I take the risk of being too close to the staff.
Feeling betrayed is always destructive, these situations make you feel alone, no longer trust others, leading to bad business decisions. That is the wrong response.
The above problems can come from your business process, you have to find it to fix it, you have to improve your system. Most people are honest, you will destroy yourself and those honest people if you start running the company like you don't trust anyone anymore then you go to the second mistake. Just hand over the running of the company to managers you trust and you find other ways you can contribute to the company.
Chapter 13 – The Only Job That Can't Be Entrusted
To have a good team for the company is not only to hire good people, good salary, good benefits, but also try to predict the best when hiring and give them the opportunity to show off. But your most powerful recruiting tool is your company culture, against which you will have the best control. Money and benefits play a big part, but you can't keep good people for financial gain alone, as someone else will make a better offer. No one is loyal to a paycheck, but they will be extremely loyal to the company they are proud of.
So how to build company culture? First of all, mutual trust, transparency in the law, employees need to know what you expect from them and vice versa what they expect. The second factor is to appreciate employees' contributions and you need to show them gratitude. The third factor is to make them believe that they belong to a community and that their community is doing good for society, for the world.
We do it in a variety of ways: providing bonuses when the company reaches a certain milestone, organizing movie nights, entertaining employees and their families, subsidizing car fees subway, collective organizations participating in charity work, giving gifts to schools for children with autism, disabilities, etc.
A small community is formed and has its own unique customs, traditions, ways of dressing and talking, as well as unwritten rules of behavior. Such a culture not only helps employees stick together, but outsiders will also recognize the quality of the company's operations, and that is the pride of its members in their common roof.
A company should not have more than one culture. If you allow departments to have their own culture, you will create chaos and factions within the company. In any situation, culture has a direct impact on a company's growth as well as its finances.
Chapter 14 – Selling is a team sport
There are four principles for recruiting salespeople. One is based on the candidate's wishes. There are two types of salespeople, one is self-employed, meaning they do this with the dream of having their own business. The other type is that they do this just for the sake of work. What I want is a steady sales force, so I'm looking for the former, because I hire salespeople, not entrepreneurs.
The second rule is not to hire a competitor's salesperson. Although this type of recruitment is like taking a shortcut, saving a lot of things, but from experience I have found that they cause a lot of trouble. They think they are talented, know more than me, always get good results, they have many tricks to find quick deals in their favor. Perhaps the competitor has a reason to let them go. Buying market share by recruiting these audiences is not good for your reputation.
The third rule is that we don't hire people who are fresh out of college, something is wrong with their first real job, almost no one is satisfied with their jobs, so they are just in the middle of nowhere. a short time and then change jobs.
Rule number four is never, ever, ever hire a sales superstar aka a vending machine. They do everything to get customers and then bring debt problems, make false promises and don't keep their commitments to customers, customers feel cheated and we have to take responsibility.
Most businesses adopt a formula that pays salespeople by sales commission, which is a hassle. This results in salespeople being a separate team. Internal sales conflicts also arise about customers, areas, and responsibilities. Unable to create connection. I abandoned the commission-based system that only paid salaries and bonuses every year. Salespeople must support each other. I want the entire salesperson to be a team. Even accountants, logistics staff are also responsible for sales work, they have an indirect impact on finding new customers. Selling is a collective and team-based activity, although doing so is a huge effort and process.
Chapter 15 – Someone save me
Each of us has times when we desperately need someone to talk to, listen to and offer an opinion from a different perspective because many factors will prevent us from seeing clearly what we have to do. If you don't have that need, it's better to add a point of view.
You can have a mistake and you can see it in one area, but not relate it to what happens in the other, thereby ignoring other solutions. You tend to find the solution that you feel most comfortable with, that suits your personality and skills. So, sometimes the solution is not really right to solve the problem.
So you need to find an advice. Accountants are very good at explaining things that have happened in the past, they are good at calculating taxes. But don't ask for business advice from them. Skilled attorneys discuss the work-related, legal, potential consequences of a decision or action. Lawyers cannot give you business advice.
There are many business owners who have just sold their company and are not ready to retire, talented and experienced entrepreneurs who will give you valuable business advice or they will guide and advise you when you have a need.
Chapter 16 – When the student is ready, the teacher will appear
I have had countless teachers in my career. They all taught me lessons that helped me improve myself and my business.
In the mid-1990s, on a trip to Jordan arranged by the Simon Wiesenthal Foundation, I was part of a delegation that received an audience with King Hussein and Queen Noor. The seven of us were seated in order at a long waiting table. A few minutes later, the king and queen entered, he walked along the audience line, greeted each one, when he came to me, he said: “Oh! Mr. Brodsky, I know you are a businessman in New York." He does the same with everyone. I am extremely proud and happy to think that the king knows who I am and what I do. He has almost 30 such meetings a week, he prepares just like what he is doing with us. After talking with us for a while, the king finally said, “I'm sorry, but I have another appointment to go. Thank you all for coming here. Let me see you out to the car."The king sent us to the car. Thank you King Hussein, you taught me a lesson. Why can't I do this with my visitors?
The other time I went to the Princeton store, I hated shopping, just loved to observe. The salesman is not in a hurry, he is friendly and comfortable, making me feel like he really wants to help me choose the most suitable outfit. I bought two suits, a sports jacket and ordered it delivered to the office. We thanked each other and I left. Three days later I received a small letter from the salesman, handwritten, thanking him and expressing his pleasure in helping me. I showed the letter to my wife: “This is great!”, and she said, “Good lesson, let's get this started.” Since then my wife has written personal letters by hand, to all new clients.
To have a long-term relationship, you need to do little things like that to build loyalty, trust, which goes beyond the basics based on price, service, and benefits.
Chapter 17 – Accompanying the Stone Family
Four and a half years after starting the business, the Stone family took a new turn: They decided to hire a salesperson to help them out because they couldn't handle all the work.
Hiring more salespeople – especially the first one poses many challenges: You need to make sure he has enough time to succeed. You have to accumulate enough money to pay the new employee within a year before you intend to hire, to ensure your survival if the unexpected happens, and to train them properly. Hiring a salesperson means you're investing and you can reasonably expect a return on that investment, training is the best way to deal with that. Then keep them focused and motivated. So after seven years, the Stone family reached a stage of maturity when they successfully recruited a salesperson to meet such requirements.
When the business environment suddenly changes, especially the internet has created a series of new challenges and opportunities. The Stone family developed their skills in selling over the internet, they had better access to prospective customers, they had more time to sell, reached customers in a cheaper, faster and easier way, more open. market wide. The Stone family company grows stronger and stronger because of their enthusiasm and passion.
Life is too short, don't waste your time, if you have passion, you will see business as a magical and exciting journey to experience life.