Feeding An Anorexic Business

When Janel and I went to a restaurant where we regularly eat, we were informed that the buffet salad bar was no longer available, yet the prices were still the same. What was once a busy place located in a tourist district, now has only one worker in the front and very few customers when we’ve visited. It is just another example of how many businesses are dealing with shrinking sales by slashing their costs and at the same time reducing the value their customers receive.

It’s amazing how many organizations practice “business anorexia” as their primary strategy to deal with the downturn in the economy. This describes the extreme financial “starvation” that organizations put themselves through, and that weakens their ability to compete. If continued, it creates a downward spiral that causes a business to go through these steps: 1) Rising prices and a weakened economy prompts cost-cutting measures because it provides immediate relief on the bottom line; 2) lowering costs means stretching out the resources and cutting investment for long-term growth, and possibly laying off employees; 3) this leads to a demoralized workforce that spends more time worrying about their jobs rather than focusing on the customers; 4) the organization develops an internal focus and disconnection with the customer; 5) which impacts the customer’s experience negatively and causes them to shop around for other options; 6) which reduces sales, and 7) and causes the organization to operate on paper-thin margins or at a loss; 8) which leads to further cost cutting… and so the cycle continues until the business eventually collapses.

To avoid this sickly cycle, it’s best to interrupt the pattern by starting at the earliest point in the process, which is using knee-jerk, tactical cost-cutting measures. All costs can be divided into two major categories: tactical and strategic. Tactical costs are useful to operate a business, but they don’t clearly bring in more revenue. This would include all assets and activities that maintain the status quo, such as administrative costs of all types, and some costs associated with manufacturing or service operations. It also includes discretionary costs, which cannot be traced to a specific increase in profitability on the bottom line.

Strategic costs, on the other hand, are those assets and activities that grow the business and directly create greater value for the customer and business. Focusing on those costs will yield a greater return on costs over time with an ultimate outcome of profit improvement versus just cost cutting. The businesses that survive and prosper during tough economic times are those that actually outspend their competition on strategic costs, as a percentage of revenue; while reducing their tactical costs as much as possible.

For example, if you have a lead generation program that has proven to bring in $1,000 of profit for every $500 you spend; it would be ludicrous to cut your costs for this program because you’ll realize an equivalent reduction in profits. Instead, you should increase your spending for this cost if you continue to see the same percentage improvement in profits, even if it means you have to borrow the money.

Before cutting a single penny, your business should be able to answer these questions: What business are you in? What are your prioritized and agreed upon goals and objectives to maximize your purpose? What are the criteria that will be used to measure each asset and activity and guide you in your decisions to improve your profit?

Your company must analyze and justify all of your costs and develop an overall strategy that outlines your profit improvement philosophy and practices. You should understand these three best practices in order to reverse the downward spiral: First, you must know what you do best or better than any other business; second, your business must hire the best people who love doing what they do best; and third, you must thoroughly understand and deliver what your best customers value. The intersection of these three areas will create a significant differentiating factor for your business and cause it to become the obvious choice. Let’s look at these three dynamic aspects in more detail.

First, know what you do best – and become even better at doing it. Be creative and innovative so that you can continue to improve. Monitor your competition to know what they offer to their customers. Do some research or visit businesses similar to yours when you travel, and take notes from your visits. Sam Walton of Wal-Mart was constantly looking for better ways to do what Wal-Mart did best. He would visit his numerous stores and take notes; visit the competition and take notes, then implement the best ideas throughout the stores. It can sometimes be a mistake to expand your product or service offering too far, and thus dilute your core competencies.

When you fully understand what you do best, it’s important to find and hire people who love doing what you do best. The Container Store has been ranked the number one business to work for, and their philosophy is that one great employee is worth three good employees, three good employees are worth three average employees, and one average employee is worth three lousy employees. Therefore one great employee is worth 27 lousy employees – and they’ll be a profit center for your business.

Nordstrom’s number one customer service strategy was to be meticulous about hiring the right people and then training them to sell – not hiring good salespeople and training them to be nice. You need to find people who genuinely like working and serving your customers, and who make customers feel important and valued. Nordstrom’s philosophy is to “hire the smile, train the skill.”

I’ve worked with several organizations that are very careful about who they hire. Whenever they meet someone working at another business who has great customer service skills, they will make a note about that person and if a position opens up, they will invite him or her to apply. What do you do if you have people who don’t appear to love doing what you do best and are not good working with your customers? If you’ve tried to coach and train them to become better customer service reps, then you might need to find other work for them, possibly in a support role.

The third factor is to perhaps the most important. You have to identify your best customers and deliver what they truly value. This process requires a mental shift from being transaction-oriented to becoming more customer outcome focused. Customers don’t just buy goods and services; they buy what those products do for them, or the outcome they expect. If you can understand that outcome and exceed their expectations, then you will be able to deliver greater value to them, which will develop greater customer loyalty.

Once these three factors are operating within your business, you will be able to reverse the downward spiral and instead of cutting costs, you’ll have the additional revenue to train your staff, create greater job security and allow them to focus on your customers by providing the resources they need to fully serve them. When your customers feel like they are getting greater value from your business, it will differentiate your business from the numerous competitors who sell similar goods or services, and it will cure business anorexia by allowing you to have an organization that is well-fed from the growing sales of customers.

Your Crystal Ball

You’ve probably seen a movie where someone visits a Gypsy woman to have their future foretold. She gazes intently into a large crystal ball and then begins to predict impending doom or untold riches with the words, “I see your future, and…”

What can you do if you want to know your future, and particularly the future of your company? Well, you could start searching on eBay for a used crystal ball, or you can foretell your own future by developing a vision statement that puts you in control of your destiny – instead of relying on the stars, Karma, or luck.

I’m not taking about a vision statement that is typically short and nondescript, and would make a better slogan than a detailed picture of your future. I’m talking about a detailed word picture that Cameron Herold, in his book, “Double Double: How to Double Your Revenue and Profits in 3 Years or Less,” calls a “painted picture.” This type of vision specifically describes what your business and life will look and be like in the next three years. He uses this timeline because it is short enough to create a strategic plan that is realistic and achievable, but long enough to implement innovative solutions and see their results within the three years.

The vision you create should be compelling and visual so it creates “buy-in” for your entire staff, and allows them to see the same vision that is in your mind. Many vision statements are too simple and vague, and therefore fall short of their mark to create a compelling word picture.

When it’s complete, you will have a detailed document that is between three to four pages. The contents of your painted picture should be a multi-sensory description of what you would see, hear, and feel as you walked around your workplace in the future. It should say what the media, community, and your customers will say about you. You’ll want to state how much your company earns in sales and profits, and you could include the type of employees who work for you and the core values you’ve instilled, that allow them to make good decisions.

You can include as many more categories as you need or want. Some categories could include customer service, marketing, technology, and your ideal work-life balance. Ultimately, your future business should provide you the resources and time to create your ideal lifestyle.

An important distinction is to focus on what you want and where you’re going, rather than how you plan to get there. That will happen when you dig into the details to create a strategic plan. Your painted picture should be a big picture look at your business from 30,000-foot, and the end results you’ll realize toward the end of your journey.

Herold’s own painted picture includes a short, but descriptive paragraph written in 16 different categories of his business and personal life. You can read a copy of it on his website at www.backpocketcoo.com. He encourages people to share their vision with employees, suppliers, bankers, and even customers. The reason for this is it gets your stakeholders to align with your vision and goals so that they understand their role in the grand scheme of things and how they will benefit. Some of them may even play a critical role in its realization.

You could even take it to another level by having an artist or graphic designer make it more engaging with visual imagery. Or, you could create a PowerPoint slideshow with photos and graphics to illustrate your word picture with real pictures.

Review it periodically, both individually and with your employees. Herold suggests reviewing the vision at a quarterly retreat where each person circles the words that mean the most to them before brainstorming ways to make it happen. One executive reads a section of the painted picture at the start of every meeting where more than two people are in attendance. Six months before the three year period ends, you should start crafting your next painted picture.

If you don’t have a vision statement, or one of those vague one-to-three sentence statements that doesn’t inspire anyone, you may want to consider putting together your own painted picture. When it’s complete, you could hold a company event, and if you have a dramatic flair, you could have someone, dressed as a Gypsy, gaze intently into a large crystal ball as she begins reciting your vision with the worlds, “I see your future, and…”

Pessemistic Optimism

“Pray as though everything depended on God. Work as though everything depended on you.” – Saint Augustine

Students in my business class prepare the entire semester for a major presentation that they make to “investors” who evaluate each presentation using specific criteria. It goes pretty fast with only 12 minutes given for each group to cover all the details, so I encourage them to have some printed material, diagrams, and product examples for the investors to view.

This semester, there was a glitch with a couple of the student’s presentations because about halfway through, their computer failed to display their PowerPoint presentation on the large screen. Without any printed materials, they were left to just talk about their business concept with no visual backup.

Murphy’s Law states that if anything can go wrong, it will. A corollary to this law is that it will happen at the worst possible time. I had my own chance to see Murphy’s Law in action during finals week when I came into the office on Monday morning and turned my computer on and learned that it had crashed. With all my grades, tests and projects on the computer, I was devastated for a moment. Then I remembered I had backed up the data on my computer, but it was a couple of months ago. Thanks to Jovian in the IT department at the college, he was able to recover most of the files by the next day.

These various incidents in the last few days made me think about some sharp entrepreneur’s I’ve worked with who exhibited the quality of pessimistic optimism. They were highly optimistic, had a big vision, and were confident that they would achieve their objectives; however, they also had a thin slice of pessimism that caused them to over prepare by examining any worst case scenarios and being ready to deal with them. In other words, they had backups and contingency plans in place, and they were ready to implement them, if needed, so they could quickly switch gears and get back on track.

Jeffrey Bussgang tells the story in his book, Mastering the VC Game, of how Christoph Westphal left a venture capital firm to become a founding CEO of a company developing a drug that would allow people to live substantially longer. Christoph had an extraordinary vision and went on the road to present his plan with boundless optimism to several venture capital firms. However, he tempered his optimism with a dash of paranoia, and explained: “I assume that everything is going to go wrong. Paranoia is part of what drives a lot of entrepreneurs in a positive direction, just worrying that everything is going to go wrong and trying to mitigate every possible risk. As Intel’s Andrew Grove said, ‘only the paranoid survive.’”

Many individuals seem to operate under the belief of optimistic pessimism. They know that things are bad and getting worse, but they take little action and instead hope that someone will have mercy or something will change at the last minute to make everything better. They take one half of Saint Augustine’s quote and pray that everything will turn out for their good – and sometimes it does. However, they seem to ignore the other half of the quote that requires them to work as if everything depended on them.

We are living in tough times that have many people stressed out. There is plenty of room for pessimism and evidence that things will go from bad to worst. In this dismal situation, some still hope that something good will happen, and relying on someone else to make it happen.

By contrast, I was talking to a prominent entrepreneur last week who spoke as if we were going through good times. He talked about his business ventures and real estate holdings with a 95 percent occupancy rate. His optimism was contagious, and one would think that he was just blessed by providence or good luck. In reality, he had carefully planned for any contingencies and created an environment that attracted customers and tenants because of the careful attention to detail he places in all his work.

Optimists see the good there is in the world, and take action as if everything depended on them, and the smart ones also pray as if everything depended on God. Thanksgiving is a time to consider all those things we are grateful for in our lives. We have been blessed by God with life and the energy to pursue the abundant opportunities that surround us – even during tough economic times. It is up to us to become a pessimistic optimist and make things happen.

Tools

My wife, Janel, decided that “we” were going to carve a pumpkin this year for Halloween. I knew that “we” meant that I was going to have a major role in the activity. She bought a large pumpkin, researched designs on the Internet and showed me some YouTube videos to help me get started.

One of the experts showed how to tape the design to the pumpkin, and then he spent two hours pushing a pin carefully through the lines of the pattern so that when the paper was pulled away, the small holes could be faintly seen. The next seven hours were spent cutting and scooping pieces of the pumpkin with an x-acto knife to reveal an intricate design.

The pumpkin sat for several days because I knew I didn’t have nine spare hours to spend carving a pumpkin. Finally the Friday night before Halloween, I decided to work smart by employing tools that we had in the house. Rather than spend two hours pushing a pin through a paper, I used an old pounce wheel I had purchased when I was in high school. It has a handle with a small wheel at the end that looks like a cowboy’s spur. It’s used by sign painters to make a series of small holes in a paper pattern so that a bag of charcoal could be pounced on the holes to leave a faint pattern when the paper is removed. That took about 20 minutes to complete instead of two hours.

I used some wood carving tools, instead of an x-acto knife to quickly scoop large pieces of the pumpkin to reveal a tiger’s head. That took only about an hour to complete. Another 20 minutes was spent cutting out the top and cleaning the inside. I was more excited that I shaved seven hours off the time, than what the final product revealed.

With the right tools, you can accomplish something in much less time, or with greater ease and higher quality. I’m very frugal, but when it comes to purchasing tools for my profession, I am willing to pay for the best because I know that it will pay for itself over and over again. When I was studying art, I learned that the cheap brushes cost less initially, but they quickly wore out or did not produce the desired result. A brush that cost twice as much would often last four times as long and create an effect that was not possible with the cheaper brushes.

Having the right tools in business is essential if you are serious about your work. This can be the specific equipment you need for your particular profession, the right phone system to take messages and provide quality reception, or the proper vehicles that can improve your productivity.

Technology is constantly evolving to improve the productivity and performance of entrepreneurs. The Internet and social media sites have allowed a business to expand its influence beyond what was possible on a limited budget only a decade ago. In fact, a small company in Winnemucca, Nevada can now be a global business competing with larger corporations, if it has the right tools.

I recently made an inventory of some inexpensive tools available on the Internet that can save a businessperson many hours. They won’t carve a pumpkin, but they can sure make you more productive. Here they are:

Enounce.com has a tool that can speed videos and audio recordings up to three times as fast, without it sounding like Alvin and the Chipmunks. I use it all the time to listen to material at 1.5 times faster than normal, and if I pay careful attention, I’ll kick it up to twice the speed without sacrificing clarity.

BaseCampHQ.com allows a business to easily keep track of all projects within a company, or assignments given to clients. I’ve used project management software, but it can sometimes be complicated. This site has simplified the process so it can be used with 95 percent of the projects a company tackles. Another tool at Teamly.com allows you to list the top five things to accomplish each day, week, and month.

One of my favorite tools is Snagit, which can be found at Techsmith.com. This allows me to not only do screen captures of an entire website, or just a small portion, but to also edit them and easily export them to Word or PowerPoint.

I’m sure you have your own “bag” of tools that allows you to save time and produce better results. Owning the right tool is an investment and not an expense over time. It separates the professionals from the hobbyists, and the right tools can make you look good in record time. Next Halloween I’ll be ready for whatever Janel decides “we” are going to carve.

The Walking Dead

Point One: As reported in last Saturday’s issue of the Saipan Tribune, only 7 percent of voters turned out for the survey on casino gambling on Saipan. Current issues instructor, Sam McPhetres, said it's “frustrating” that “a lot of people are not paying attention. They are the ones who need to decide the pros and cons on this issue. They have been spoon-fed for so long.”

Point Two: The job fair drew a good number of individuals to meet with prospective employers. One of the businesses talked to over 300 people and gave applications, but said that most don’t seem motivated about getting a job.

Point Three: I offered to do a training session for businesses on how to create a strategic plan that could help a company get focused and see better results in the coming year. I requested people to email me to determine their interest. There was no response.

Point Four: I was talking to an associate who attended a meeting about the retirement program’s performance. He stated that with all the issues surrounding the eventual demise of the program, there should have been a large group of interested people, but instead only a handful of people attended.

These are just a few points from many others I’ve observed over the past few years that indicate the general public has basically “thrown in the towel.” There appears to be a stupor that keeps people from caring about the many issues we’re facing. I’m sure there’s some psychiatric term that can describe this situation, but my unscientific explanation is that we are “zombified” by the malaise that permeates this small community. Rather than deal with the issues and take advantage of the numerous job opportunities that are available, take a stand against the bullying of some politicians to push casinos, or take action to create a plan, many have become part of the walking dead who accept the status quo and continue to embrace an entitlement mentality.

They haven’t lost all hope, because they still believe that the federal or local government will come to the rescue at the last moment and take care of them. This is based mostly on past experience. Even when it’s apparent that things are going down the drain fast, they still believe something or someone will provide a solution, instead of accepting full responsibility and taking action.

What’s the remedy for this apathetic state? One solution is to believe that you as an individual can make a difference. The old saying “if it is to be, it is up to me” applies here. When combined with the thoughts and will of enough people who are willing to step up to the plate, it can become a force for action to take back their lives and be in charge of their future.

It requires enough people who are fed up with their current situation, and who are willing to take full responsibility to make things better. These are individuals who wake up from a deep sleep and choose to join with the living. They are motivated, study the issues to become informed, make plans, and then take focused action to make it happen.

To get this movement going, however, requires a vision that is so compelling that it awakens the zombified populace from their deep trance, and enlists them in a cause for the greater good. In other words, it requires a type of leadership that does not currently exist. It can start with only one person with one great idea to bring people together as one.

These leaders will have to overcome the current way of doing things, the stalled mindset that has kept things as they are, and the general apathy that causes people to lose hope on themselves and the community. We have had some in the past who were willing to go against cultural norms and speak up for the right thing to do, but the incessant browbeating from the prevailing powers that be achieved their goal to squelch any opposition.

There are numerous examples of companies and countries that have, like the phoenix, restored themselves from the ashes of despair, to revive and transform themselves. Will the story of the CNMI include such a transformation? Are there enough people who care deeply enough and are motivated enough to make a difference? Or will it continue on its downward spiral into insolvency and dependency on others? Time will tell.

Can You Afford Another Year Like This Year?

We’re already into the last two months of the year, and individuals will soon be evaluating what they have and have not accomplished, and what they hope to accomplish next year? There’s still time to get everything done that you promised yourself at the start of the year. Ninety percent of things tend to be accomplished in the last 10 percent of the time remaining.

The big problem why most people don’t get much done is because they don’t have definite goals or a specific plan to achieve those goals. By not having a definite aim in life, a person or business ends up becoming part of the goals and plans of others. If those plans and aspirations are good, then that person becomes the beneficiaries of that goodness; however, if the plan is self-serving and aimed to benefit a small, inner circle of people, then an individual becomes collateral damage or a victim of those plans.

We’re seeing a lot of the collateral damage from the poor planning and follow-through with the retirement program. Government employees are the victims of basing their hopes on the goals and plans of other people they trusted to take care of them, rather than taking charge and working on a plan that they have more control over.

As a business owner, there is no reason why you shouldn’t have a specific plan to take charge of your situation to create a better year next year than what you experienced this year. Yet, few businesses actually plan. In a survey I conducted in June 2009, I asked 21 business owners to list their three greatest internal business frustrations or obstacles that if they were able to resolve, would allow them to grow and prosper. Many frustrations were listed, but only one responded with “lack of a plan to follow.”

I then asked all of the respondents: “Do you have a written plan or strategy that you and your staff are successfully following to resolve any or all of the frustrations you mentioned, within the next 6 to 12 months?”

Only two said “yes” and 19 responded that they did not have a written plan. In other words, nine out of ten businesses did not have a plan to help them overcome their biggest frustrations or obstacles. Most of them have probably thought about how to improve their situation, but without writing it down and consistently communicating it to staff, there is a slim chance that it will be accomplished. The typical demands on time and the turbulence occurring in the external environment are causing many to be at the mercy of the economic winds of change.

Your plan does not have to be complex, and in fact, it should follow the KISS formula to Keep It Short & Simple so that it is easily understood by everyone and readily implemented. One of the problems with planning is that it is too complex or elaborate to easily follow. Most large companies have a planning process, but one estimate is that only about 10 percent of them are followed through to completion. In academics, the estimate is higher at about 30 percent. That means a vast majority of plans lay lifeless on someone’s shelf.

A plan allows you to look forward while others tend to focus backward. When your business has a plan, you are better able to deal with disruptive situations and can focus the energies of your people in a more productive manner. If things don’t go as planned (which is often the case) you will have a basis to evaluate why there was a deviation, and then regroup to get quickly back on course. This is because you know your final destination, and can then take the necessary actions to get your business back on track. Without a plan, there is nothing to use as a basis for evaluation, and therefore less of a chance that you will recover from a setback.

If you would like to learn a simple method to create a strategic plan for your organization, I am thinking about offering a short training session, but it will be based on if enough people plan to attend. If you would like to join the ranks of those individuals who are in control of their business, regardless of what is happening with the economy or the dubious plans of others, then email me.

The question that is the title of this article is a good one to end with. Can you afford another year like this year? If the answer is no, then you definitely need to create a plan that will propel you toward your goals and the vision you have for your organization. Even if you are an employee, this question is a good one to ask yourself. If life isn’t turning out like you hoped it would, then it’s time you made a plan to get better results in your various dimensions, such your physical, emotional, intellectual, financial, or spiritual self.

Make next year your best year, and start early by making a plan that will take you there. Remember to email me at RikVillegas@gmail.com if you’re interested in attending a planning session to help you get focused.

Rules of Engagement

When I started my first semester of college, I was fortunate to have Calvin as my roommate. He was the valedictorian graduate at his high school and knew not only what it took to get good grades, but how to succeed in other areas of life. After a date, I noticed he would grab a sheet of paper with a list of all the qualities he was looking for in a future wife, and he would rate the girl he just took out. There were about 10 qualities and the last one was “Zing!” This represented the non-quantifiable qualities that caused his heart to race, and made the relationship exciting.

I borrowed from Cal’s list and added a dozen more qualities over time. Whenever I considered getting serious with a gal, I would pull out my “rules of engagement” to rate her. Needless to say, it was nearly impossible to find someone that could meet all the qualities on my list – including me – but it didn’t stop me from trying.

I was recently looking at a website of Greg Habstritt, and he had a set of rules he shares with people who want to work with him as a partner or in a joint venture. Looking over the list reminded me of Cal’s list, except this one was for a long-term business relationship. Most people don’t have written criteria to rate someone they want to have an ongoing business relationship with, but almost everyone has some general idea of the type of people they would like to work with or for.

It made perfect sense to me to have a list of rules to determine who to establish a long-term business relationship, and also to have rules to evaluate what projects to work on. The opposite is to just “go with the flow” and possibly get burned, find yourself in a compromising situation, or waste a lot of time doing something with someone you wish you would have never even started.

As a college instructor, I have a semester-long relationship with my students. On the first day of the semester in each of the business classes I teach, I review a list of rules with my students to let them know my expectations up front. They also learn what will happen in case some of the expectations are not met; for instance, if someone cheats on a test. I also go over the schedule, share the student learning outcomes, and the major purpose and outcome they can expect by the end of the semester. This helps set the tone for our semester-long relationship, lets the students know exactly what I expect from them, and how they can get a good grade in my class.

Would it be beneficial to have written rules of engagement that possible joint venture partners could review to determine if they are suitable to work with you and your company? These could be very specific, or they might be some generalized factors that act as guidelines to establish a working relationship. Here are some of what Greg refers to as the factors he uses to determine whether he’ll get involved with a business project with someone: A solid reputation, alignment with his current clients and their needs, economic benefit to everyone involved, and a focus on developing greater lifetime value for all the partners.

He also lists his core values and a set of three rules to help prospective partners determine if they are a good fit with his company. Reviewing the values and rules saves time for both him and anyone who doesn’t measure up to his values and rules.
You could come up with your own list of criteria or rules to determine who you will engage with on a business project. The least it will do is to save you a lot of time by screening the undesirable individuals or projects that you should avoid. Your rules of engagement will allow you to evaluate the “cream of the crop” and make better long-term decisions. They could reduce the stress you might currently face because of poorly chosen relationships or less-than-ethical partners.

Now, fast forward eight years from the time I started using Cal’s list and I’m still having difficulty finding the “perfect” companion. The Air Force sent me to Abilene, Texas and I met a young southern belle who had a lot of Zing! When I pulled my worn list out to rate her, I was disappointed to find that she couldn’t meet all the qualities so I uncharacteristically threw out the list, went with the Zing, and 26 years later I can look back and say it was the best decision I ever made to marry Janel.

So what’s the lesson? It’s important to have a list of criteria and set of rules to follow, but be flexible to go with your gut feeling sometimes when the right opportunity comes along. The critical thing to remember is to always stay aligned with your core values and work with people who have similar values.

Your 3/3/33 Solution

Pythagoras, the Greek mathematician, wrote about the personality of numbers, and claimed to have learned about it from the Egyptians. Mystical qualities have been associated with numbers from ancient times, and the number “3” has a particular fascination. The three primary colors of red, blue, and yellow can be combined to produce all other colors, including white.

The triad or trinity is a symbol of the unity of body, mind and spirit, and it is found throughout the world and history. The triangle is associated with the divine number of three, it is a symbol for power, and it also represents success, prosperity, and safety. The two interlaced triangles known as King Solomon’s seal, or more commonly as the Star of David, is called in India the seal of Vishnu. It signifies the bipolarity in nature of spirit and matter. The upward triangle represents spirit, consciousness, and concealed wisdom, while the mirrored downward pointing triangle represents matter, manifestation, or wisdom revealed.

What would happen if you could harness the number “3” to realize greater success and prosperity in your business? Now imagine your business developing to a point where you eventually had no weaknesses, and your combined strengths in each of the seven dimensions would allow you to minimize any challenges and aggressively take advantage of every opportunity available to your business so you could realize continuous breakthroughs in productivity, performance, and profits?

That’s what your 3/3/33 solution can do for you. You complete this exercise by simply stating your biggest challenge in a sentence that you and others can focus their thoughts on, and then brainstorm all the possible ideas you can think of to meet the challenge. From that list, choose the top 3 solutions, that when accomplished in 3 months would result in at least a 33 percent improvement.

The good news is that it’s not necessary to take massive action each day to achieve massive results – although it may take a lot of effort to get the momentum moving in the beginning. In order to realize the 33 percent improvement in the next 90 days, you only need to improve 0.33 percent each day. Is it possible for you to improve your productivity, performance, or profitability by 1/300th in a 24-hour period?

If you planned your day to accomplish this improvement, you could increase your results much more than 1/3 of 1 percent – probably more like 33 percent in a single day if you really focused your efforts. This would get you off to a great start, but it would be difficult to sustain over a longer period of time; therefore, it’s scaled down to an average daily 1/300th improvement.

By setting an easy-to-reach goal each day, and aiming to be consistent in your results over time, you should reap the 33 percent target within 3 months. By continuing at this pace, the compounding effects will double your results by the end of the third quarter, and it will produce three times more than where you started 12 months earlier!

For example, if you had a starting profit of $100,000 and you increased by 33 percent the first quarter, you would end up with $133,000. As your improvements compounded, the second quarter would yield $176,890 in profits; third quarter $235,264; and by the end of the year your profit would be $312,900. If you could continue that pace you could almost add another zero to your bottom line by the end of the second year, as compared to your starting profits, and after three years, an incredible 3,064 percent or 30 times more!

This may seem unbelievable, and if you continue to operate your business as you’ve always done, it may very well be impossible. However, by thinking outside the box and setting up the proper strategy, systems and support to think and act much bigger, you could realize jumps in profitability, productivity, and performance that were once unimagined. In last weeks article, you learned how it could be possible to achieve a 33 percent profit improvement with as little as a 1 percent improvement in five areas of your business.

Even if you cut the improvement by one-third to a consistent 10 percent per quarter improvement in profits (which is about 3 percent compounded per month), you would more than double your profits within two years and triple it by the end of the third year.

Applying the principle of continuous and never-ending improvement in one dimension of your business will also lead to improvements in your other dimensions. For example, as you constantly aim to improve the service you offer to your customes, it will increase the number of referrals and sales you enjoy. As you consistently get better in some areas, it will lead to growth in other areas also.

Completing the 3/3/33 solution will help you realize the potential your business has to grow beyond what you might have imagined. This is the step that separates the leaders from just the readers. The power of “3” will allow you to gain more control of the future of your business and all that it can do for you, your employees and your customers. So, what are the top 3 things you can do in the next 3 months to produce a 33 percent improvement?

The 100-Day Challenge: Grow 100% in 100 Days

About three months ago, I started compiling some of my best articles into a book called “Your BizGrowth Challenge: Solutions to Move Your Business to the Next Level of Growth.” It includes numerous stories of how businesses have overcome challenges, and the book uses the 7 Strategic Dimensions of every organization as a framework. Each of the stories and concepts are designed to help you and your staff to discover solutions to specific challenges in each of the dimensions and realize massive breakthroughs, as well as incremental improvements.

The 7 Strategic Dimensions identifies important areas to maintain a balanced business, and they include: 1) How to remain innovative and plan for growth, 2) train employees and offer opportunities for professional development, 3) develop systems for smooth operations, 4) manage stakeholder relationships, 5) identify appealing products and develop effective marketing strategies, 6) choose measurable metrics, and manage costs, and 7) develop a customer-focused culture that creates loyal customers and dedicated employees. In the end; however, the results of all those activities must produce a profit on the bottom line so your business can continue to grow and remain viable.

To prove the viability of the concepts, I am issuing a challenge to invite a few businesses to participate in what I’m calling the 100% BizGrowth Challenge. The goal of this challenge is to grow participating businesses by 100% in sales or profits in 100 days. Many of the principles have been proven in the field with clients I’ve worked with over the last 20 years, but I haven’t combined all of them into a comprehensive program that specifically identifies the greatest opportunities for growth and creates a plan to achieve rapid growth.

This may sound ambitious, especially in this economic climate; however, let me demonstrate how small changes in just a few key areas could dramatically change your bottom line. If a business is operating with a 10% return on sales, you only need to improve 3% in the next 100 days in 5 key areas to double your profits.

Let me go through this step-by-step to demonstrate how this can be accomplished in the five areas. If you have: 1) 2,000 prospects who visit your business in a month (about 70/day), and 2) 50% of them become customers (1,000), 3) who make an average purchase of $100, and 4) return to your business 10 times in a period of time, your sales would be $1,000,000; 5) subtracting variable costs (VC) of 50% and $400,000 in fixed costs (FC) would produce $100,000 (I’ll leave taxes out to simplify the example).

A 3% improvement in just one area, the average purchase amount ($103), will increase your sales by 3% to $1,030,000, without doing anything else in the other areas. When you subtract your variable costs (VC) of 50% of gross sales, and $400,000 in fixed costs (FC), the result is a 15% increase in profit. The percentage will be more or less depending on your profit margin. The main point is that it doesn’t take much to increase your profits with minor improvement in just one of the three areas. How difficult is it for you to increase the average purchase amount by just 3%? You can provide better customer service, offer an extended warranty, up-sell, bundle products together, offer a deluxe alternative, or dozens of other methods.

Let’s look at what happens if you follow a plan, that you’ll follow as part of the 100% BizGrowth Challenge, to improve in all five areas by just 3%. These aren’t huge jumps in the number of new customers, their average purchase amount, or the number of times that they return. Your sales would increase by 15.8%. In addition, if you make a 3% improvement in your variable costs by examining all the waste and inefficiencies within your business, this would produce an additional $113,894 to the bottom line. The combined results in this example would more than double your profits. My goal is to help you realize at least a 3 to 6% improvement in each of the areas in the next 100 days, and much larger jumps in some of the areas by implementing a strategy and following-through on a plan that is tailored to your business.

To break this down to the ridiculous, the plan requires you to just realize a 1 to 2% improvement per month in five key areas, and I’ll show you how it can easily be achieved if you know what to work on. Again, the results you’ll realize will be different because of the differing variable but it illustrates how incremental improvements can compound over time in key areas to produce impressive results.

Reconnecting with Key Stakeholders

It’s easy to focus on the immediate stakeholders of your business, such as your customers and employees, and ensure that their needs are being met. However, there are some stakeholders that tend to be neglected because they don’t appear to be as important or don’t bring attention to themselves. This is a common mistake made by many business owners, but it can come around to bite them in the future. If those relationships deteriorate, it becomes essential to rebuild them and repair the damage that might have been done. But just like any other relationship, it is often more costly in time and resources than just taking the time to maintain those associations in the first place.

I had the challenge of mending broken stakeholder relationships over ten years ago when the Small Business Development Center (SBDC) was under Northern Marianas College. The college was undergoing budget constraints and evaluating which programs should be cut, and the SBDC was on the chopping block. This was because the former director had treated it as an autonomous organization, neglecting the link it had with the college, and therefore the relationship with college personnel deteriorated. At the same time the Center was being pushed away from the college, it was also being pulled by another agency to move the Center under the Commonwealth Development Authority, and in all likelihood, the move was going to happen.

With the position vacant, I was asked to apply for the director’s position in order to help unite the college community with the Center. I was the faculty senate president at the time and worked closely with upper management. When I was hired, my first task was to align the SBDC with the college and demonstrate the vital link it had with the mission and goals of the institution. This was accomplished by creating a strategic plan and creating programs that would immediately benefit the community and reinforce the value we provided to local businesses.

Ironically, the Center had helped numerous business owners develop mission statements and business plans, yet it did not have a plan or a statement of its mission. I worked with the other consultants to create a comprehensive plan that would tie our efforts with the college and community. My purpose was to have a written document outlining how we intended to accomplish certain actions that would create a stronger role with our stakeholder relationships. After several weeks, the plan was finished, presented to the Board of Regents, and given their endorsement.

The next step was to implement the plan. All the consultants worked to develop a six-week program called Business Plan for Success, with the goal to break the planning process into six weekly steps. Each session was taught by the consultants using computers so participants could immediately start working on their business plan. The outcome would be a workable business plan that could serve as the map for growth and success, or to attract capital. We also looked at other programs already scheduled and determined how we could make them more effective.

The end result is that we saved the Center and it remained under the college where it would continue to serve the needs of hundreds of entrepreneurs and established businesses. We were able to strengthen the ties with the college, provide beneficial programs for the community, and continue to work with lending sources and other partners to benefit entrepreneurs. This continued for many years until ongoing budget constraints over the years eventually made the Department of Commerce a more logical home for the Center.

One stakeholder that is often ignored is the government. They definitely have a stake in the success of your business through the collection of taxes and fees. They can either be an advocate or adversary for your business depending on the relationship you’ve developed with local politicians. There are numerous instances when the owner of an organization supported the losing candidate and the consequences were dire.

All healthy relationships rely on open communication, trust, and a willingness to work together to find solutions to a disagreement. Make a list of all your stakeholders and develop a plan to maintain strong ties or reconnect with your key stakeholders.

The Accelerated Marketing Process

In the mid-90s, I held monthly brainstorming sessions with my business clients where we discussed hot topics to help their business move to the next level of growth. The synergy from the group spawned a series of epiphanies that allowed me to formulate a unique marketing process that identifies the specific steps it takes to develop customer loyalty and achieve sustainable growth for any business.

I tested my hypothesis and shared it with the group to fine-tune the process before putting it into practice. I realized that I had stumbled onto something that could make a profound difference for those businesses that implemented what I called “The Villegas Accelerated Marketing Process.”

I’m going to share with you something that is usually reserved for clients I work with on a long-term basis. The process of finding and attracting prospects (marketing), getting them to buy (sales), and keeping customers so they return (customer service) is usually a fragmented process. However, it should be a seamless progression to move a prospect to become a loyal, long-term customer. My definition of marketing differs from the typical textbook description. I believe that marketing is a total process involving all business activities to profitably create and nurture a lifetime customer.

In my definition, marketing can be segmented into two broad areas: customer acquisition and customer nurturing. Everything in your business either helps or hurts those two functions. Almost every business focuses their efforts on customer acquisition; however, customer nurturing is often neglected, which focuses on encouraging customers to return, developing stronger relationships with them, and cultivating more referrals.

The Accelerated Marketing Process, or AMP for short, is broken down into eight steps, and it’s a process because what you should do is progress a likely Suspect into becoming an interested Prospect, then getting them to become a Shopper, who eventually becomes a Consumer of your goods or services. These first four stages advance a person into making a transaction with your business. Most of the time, this is where the customer is inadvertently dropped by a business and expected to return on their own volition.

The AMP moves the customer beyond the transaction through effective interaction by moving the customer to become a Client where a relationship is developed, then a Patron who is a regular purchaser, next to an Advocate that spreads the message of your business to others, and ultimately to a Partner who feels connected to your business and committed to your future success.

The power of the AMP is that it doesn’t drop customers after the transaction, but continues to nurture them through four more stages of the process using strategic activities designed to create lifetime customers. Employing all eight steps of the process is akin to developing a “greased chute” for your business, because once a person starts through the process, they should effortlessly move through each successive step. The entire process is repeated as your loyal customers continue to feed the process with new contacts they’ve referred to your business.

Imagine each of these customer levels circling a conch shell that has a series of sections that diminish into a spiral. In this instance, there would be eight sections corresponding to the eight customer levels starting at the large end with suspects. As they progress through each level, there are less individuals because of attrition. All your suspects will not transfer as suspect, and all suspects do not become prospects, etc.

Each of these eight sections should employ measurable strategies that pull individuals to the next level. The first strategy is to increase the number of possible Contacts for your business, then to Communicate through various media in order to make a Connection. Once the individuals have connected with your business, the next strategy is Conversion, or making the sale. Capitalize means you utilize strategies to increase the average purchase amount through up selling or other methods, then your efforts are to create a Constant customer who is Continuous in their repeat visits for the rest of their life. The final strategy is to Cultivate your relationships by having loyal customers share the positive experiences they have with your business to their friends and family, who then become the next crop of Suspects that continue through the process.

Ask yourself: How far in the process do I continue to work with my customers? What strategies do I have in place to help my customers advance to the next step of the process? What strategies should I implement right away to pull my customers to the highest level I’d like to realize for each customer?

In summary, the AMP is a model to help you identify your best target customers and improve both your transactions and interactions with them so you can develop them into lifetime customers who refer more qualified people to your business. As you advance more of your customers through the process, you’ll realize greater customer loyalty, which will translate into increasing sales and profits.

Setting the Stage for a Great Performance

In a dramatic play, the director ensures that all the actors know their roles and that all the parts are working well for the desired outcome of the production. If meticulous care is taken to set the stage, the end result will be realized. Similar to a play production, all companies, firms, businesses, or organizations have three common elements: 1) A specific purpose, 2) that is accomplished by people, and 3) using a deliberate structure.

The alignment and interrelationship among your purpose, people, and structure distinguishes you from the competition, and can make the difference between your organization operating as a well-oiled, lean machine that performs as planned, or a squeaky, rust-bucket that falls apart at each challenge. Let me share an example of how these three elements can work together to create greater results.

When Mobil launched the Smiles customer rewards program on Guam several years ago, they employed an international advertising firm to help with the promotion. Even though they’d spent millions developing the software and point-of-sales system that would integrate the program with other stations, the success of it depended on the ability to get people to sign-up for the program and start using it regularly.

The promotion included full-page ads in the local paper, radio advertising, and other media support which the ad agency could fulfill well. However, the advertising firm failed to adequately set the stage for people to actually perform by signing customers up for the program at the service stations. People were hired to greet the customers and encourage them to complete the forms during their massive media promotion, but the results were less than stellar, considering the population and amount of money spent to create public awareness.

So when Mobil decided to launch the Smiles program on Saipan, they didn’t want to use the same company to organize the effort to recruit and train the people who would greet and sign up customers. My company had done some work for Mobil in the past and I was approached about heading up the effort locally. I was too busy with some other commitments, so declined their first offer, but subsequently decided to work with them after negotiating the terms, and determining what should be done to improve the sign-up rate.

The first step was to determine the purpose of the promotion and what metrics would be used to measure success. In your business, do your employees know the purpose and goals that need to be achieved? Do you have a shared vision of what success will look like when it’s achieved?

About 25 people were needed to adequately man the service stations, but instead of just hiring warm bodies, we had criteria that helped us determine who we were looking for. After interviewing prospects we chose our candidates and then put them through a half-day training session to ensure they understood the purpose and the importance of their role to display the proper attitude when interacting with customers.

We structured the group to arrive at a specific time and sign-in with the attendant on duty each morning. I also made the rounds at each station in the morning to make sure at least two people were at each station. Individuals rode in the car with me each morning so they could step in if someone didn’t show up for work that day. It was grueling work standing all day for 12 hours, but I was pleasantly surprised to find that almost everyone showed up for work on time and only two people couldn’t work the entire time, due to legitimate reasons.

There was also an incentive to not miss a day. Mobil was going to pay them a specific rate per hour for the 100 hours they would be working, but I lessened it by $1 and gave a $100 bonus if they weren’t late nor missed a day of work. Only one missed a day during the entire promotion because of a funeral.

We also had a mystery shopper that would go around to the stations periodically and rate the performance of each worker to ensure that the standards we set during training were being met. One of the talented workers wrote a song about the promotion, and I paid for her to go into a professional studio to record it.

When the event was over, we invited all of the workers to a breakfast where we praised them for what they accomplished, played the song written by one of the workers, gave certificates of their involvement and paid them for their fantastic work. Several told us they had fun and asked if they could participate in future promotions.

Even though Guam has twice the number of gas stations and almost three times the population of Saipan, we were able to sign up significantly more Smiles card holders in the same promotional period. The success of the program was based on setting up a well-defined program, training the individuals, having consistent follow-through, and having closure at the end so people felt good about their role and involvement.

Does your business have a deliberate structure that effectively utilizes people to achieve a clearly defined purpose? If your employees aren’t performing at a level that would cause a standing ovation, you might want to step in as the director and set the stage so that everyone understands the overall purpose and their specific role to cause the audience to return for future performances.

The Four Key Business Multipliers

I previously discussed the importance of the four multipliers and why it’s important for every business to understand how to improve them, and now I’d like to go into more detail on each one. These multipliers all start with the letter “P”, and they are measures to determine the efficiency and effectiveness of your business. They include: 1) Being purpose driven, striving for productivity, maintaining high performance, and achieving profitability.

1. Purpose Driven. Although profitability is the prize that every business wants to increase, it is listed last because it is the outcome from doing the other three multipliers well. The first thing that needs to be understood is the general and specific purpose of your business. The ultimate purpose of all businesses is to create and keep customers, so your general purpose should be to create a customer-focused organization that strives to improve your customers’ experience and the value you exchange with them.

Your specific business purpose is personal to you. It is the reason you started the business, and why you continue to operate it. This purpose should be found in your vision and mission statement, as well as in the guiding values of your organization. This requires much more than having an impressive vision, mission and values statement written by a consultant or top management. It should be a philosophy that is ingrained in the living culture of your business and shared through the actions of everyone in the organization. When your purpose drives your business, it will have more meaning for you, your employees and the customers you serve. Aligning your purpose with the highest values of your employees and customers will allow you to create a strong bond of loyalty and a shared purpose.

2. Productivity. This looks at the efficiencies within your business by examining your Results to Resources Ratio, or RRR. Results can be measured in many ways other than financial, and you can identify them by tracing the activities that lead up to a financial transaction. For example, look at your lead generation percentages and the costs to generate those leads. Monitor your training costs and the resulting revenue increases that occur after training sessions. You can also set service delivery standards that are monitored to ensure compliance. There are numerous measures that you can use to ensure your business is on track toward achieving its goals and mission.

3. Performance. With productivity, the focus is on the efficient use of resources to produce a result; whereas, performance looks specifically at the results being achieved. It relies on performance standards that can be used to measure and monitor the outputs of a business to determine if they are within the standards.
An important aspect of growth is to identify your key performance indicators, or KPIs, in the important areas of your business, and then focus on those activities to ensure you get the best results possible. It also means you should identify the activities that do not contribute to better performance, and either eliminate them or do less of them.

4. Profitability. How much you get to keep from your business activities is a result of your revenue minus your expenses. The resources required to operate your business will be your biggest expense, and they can be categorized into two categories: the variable and fixed costs of doing business. As you examine your costs and become more efficient in your operations, you will be able to add more to the bottom line. The key is to reduce your costs as a percentage of total revenue without sacrificing quality or service to your customers.

Another “P” that’s not mentioned here is predictability. It should be considered in each of the multipliers, though. By having a clearly defined purpose, you should be able to create a plan and set goals to predictably advance in the direction of your vision and mission. Your productivity and performance will improve if you apply predictability through systems, policies and procedures that enhance these two multipliers.

Lastly, by measuring and testing each of your revenue generating activities, you will be able to identify the activities that create predictable profits in your business. These four multipliers offer you the chance to monitor your activities against your goals or KPIs so that you can continuously improve in each of the dimensions. Ultimately, if you are doing everything right, you should realize your KPI goals, and this will reflect on your bottom line. As you improve in the four multipliers, it will give you greater clarity, focus, and confidence to conquer each business transition challenge, and allow you to achieve sustainable growth toward your vision.

Saipan: The Movie?

A few months ago, I was asked to become part of a group to develop a vision for Saipan. We decided that it would be difficult to create a shared vision without first defining a shared set of values. The group was a private effort, and we felt it was necessary because of the lack of a cohesive vision from any other government or business entity. I was recently reading that the city of San Marcos, Texas is conducting their own visioning process to update their 1996 comprehensive plan. The project is being called “Dream San Marcos.”

The city is trying to make the most of the opportunities they can see ahead of them, and they’ve enlisted the community to share their ideas through emails, comment cards, and online software at IdeaScale.com. They also plan to meet with citizens, businesses, students, and civic groups at community events. The purpose is to get the input from as many people in the community. Matthew Lewis, Director of Development Services stated: “We’ve got questions. Our citizens have the answers.”

The community vision will be part of a comprehensive plan, which in turn will help determine infrastructure planning to meet the community’s needs and desires. To encourage input, the city staff is posing questions to encourage people to share their ideas and dreams for San Marcos. Some of the questions being posed include: What do we want San Marcos to be when it “grows up?” What kind of jobs do you think people will want to have in the San Marcos of your dream? What are the five most important things that can contribute to our future quality of life?

It takes real leadership to not only come up with a truly shared vision for the future, but to also have the drive and determination to make that vision become a reality. A shared vision is essential before a city, organization, or person can really set goals and move in a specific direction because they should know the end before they begin. The vision I’m talking about is not the succinct phrase that’s conjured up by a committee and usually offers some platitudinous or generic statement that begins with “we strive to be the best…”

Instead, your vision should be a descriptive word picture that clearly paints a canvas in the mind when heard by employees and all who will take part in the finished creation. This is important because if everyone in the organization is not seeing the exact same vision, then there is little chance that you will see it in the future. The vision may take several pages to articulate and it should include all major areas within the organization, as well as its role in the community.

When you step into the future, you should focus on the “what” and not the “how” because too much focus on the how may hinder or stifle creative expression and dream-sharing. You want to encourage individuals to get out of their comfort zone. Describe what you see and what it will feel like when you realize what it is that you want to realize.

It might help to imagine that you’re going to make a movie of your vision project. This will require you to identify the key actors, their roles, who you serve, and how your company will play a major part to transform their lives. You will also need to know the plot, and how the story will unfold as you come to the triumphant end of the movie.

Imagine what will happen when the movie comes to an end and how everyone feels at the climax when you overcome obstacles and achieve your moment of glory. Here are some questions you might want to ask as you construct your movie: What do you see? What do you hear? What are customers saying about you? What comments are employees sharing around the water cooler? What is the community saying about your company? What are the organization’s core values, and how have they influenced the decisions that were made?

Once you have the details determined, you can begin to play the movie in your mind. You may want to do some editing as you get further input from others. When it’s time to have your premiere showing, you can share your story with others in a way that allows them to upload the film in their mind. Make the movie vivid, in grand colors, with a full symphony playing in the background as you overcome your challenges to move the company to victory. Make it an award-winning production that gets people playing it over in their minds. If it’s exciting enough, you’ll have a fan base of energized employees and raving customers who will be excited to be a part of the story. All you’ll need now is some popcorn.

If you can conceive it and believe it; then you will achieve it.

Miracle on Your Street

In any survey of the least trusted professions, lawyers and politicians are usually ranked near the bottom, but there is one group that has consistently beat them to earn the dubious distinction of being the least trusted: used car salesmen. You’ve seen the stereotypical salesman who waits like a vulture for the next unsuspecting victim and then pounces with a smile showing his gold tooth and wearing a plaid jacket and tie with the mustard stain from the cheeseburger he had for lunch.

Society tends to view these individuals as sleazy shysters who will say and do anything to offload a hunk of junk vehicle, so when I was contacted by the owner of a used car dealership in Smithfield, Utah to help him improve his sales, I was somewhat hesitant. Cal had been in business for over 30 years and his older son was being groomed to take over. Sales were steady, but he wanted to know what he should do to bring in more business.

Across town, he competed with another used car dealership that used some panache to drum up business. The owner did his best to create an amusement park atmosphere with a duck pond, petting zoo, an inflatable character, and lots of colored flags and whirling things that screamed for attention. He regularly advertised on TV, radio, and newspaper announcing his super low prices.

Cal, on the other hand, never advertised in the newspaper and his car lot seemed bland by comparison with only a sign and some simple triangular flags hanging to capture attention. When I asked where most of his business came from, he told me that most of them came from his regular customers who bought from him in the past. Many had been buying from him since he opened and now their children and some of their grandchildren were now buying used cars from him.

I was curious as to how he was able to keep such a loyal base of customers, so I asked why they trusted him so much and would even travel hundreds of miles after they moved from the area to continue buying from him. He told me that he wouldn’t sell a car to one of his customers that he wouldn’t sell to his own mother. Cal and his son would go to the same major car sales that other used car dealers went to buy their inventory, but they used a 30-point checklist to evaluate each vehicle. He said that if a car had ever been in a wreck, he would not even consider buying it, even if it was fixed and looked mint-new. The reason was that the frame could still be bent and it might cause problems later with an unsuspecting owner.

When I asked Cal what he would do if he accidentally sold a “lemon” to a customer, he didn’t hesitate telling me that he would trade it for a car of similar value or refund their money. As he talked, I found myself wanting to buy my next car from him. I asked if he wrote or communicated any of what he was telling me, such as his meticulous 30-point checklist and iron-clad guarantee, to new prospects and customers and he said “no” because most of them already knew it because they were referrals from his loyal customers.

You can see that the solution to his “problem” was simple. He just needed to tell his story to others who weren’t fortunate to know that there was a used car salesman who was totally honest. While many people won’t even go near a used car lot because of the fear of being ripped off, his customers would travel from great distances to buy from him because they knew he had their best interests at heart and would always do the right thing.

Most businesspeople would love to have the reputation and loyal following that Cal and his son enjoyed. How much is your reputation worth and how loyal are you customers? Looking out for the best interests of your customers may not be a quick-fix for improving sales, especially when you realize that a customer may need something that you’re not currently selling. However, it will make an impression, and possibly bring back a person for future sales. If you’ve seen the movie “Miracle on 34th Street” then you know what I mean. The new Macy’s Santa creates a stir with management when they find out that he’s referring customers to competitor’s stores because Macy’s doesn’t have what they want. They’re ready to fire him until they realize that Santa’s honesty is actually bringing more customers to shop at their store.

Create a miracle on your street by sincerely looking out for the best interests of your customers. Promise to only make promises you intend to keep. Make sure each of your employees understands your expectations by creating a set of core values that you expect everyone to live by and use to make decisions. Look at each sale as the first step in a long-term relationship where people will gladly return and refer their friends, children and grandchildren to your business.

Browner Pastures

It’s reported that the CNMI population has dropped from 65,927 people in 2006 to an estimated 46,000. Most of those are probably associated with the demise of the garment industry, but there are also many U.S. citizens who are seeking browner pastures elsewhere – you can’t get much greener than Saipan with all the rain we’ve been having.

The biggest factor why individuals leave is to improve their economic standing. It’s no surprise that the CNMI revenue has been in freefall for the last few years. We’re seeing the impact with ongoing salary cuts, and budget cuts. The retirement fund was hosed for several years by the government and now it’s predicted to last only another three years. So it won’t be surprising when the estimated revenue for the next fiscal year is announced that more individuals will be packing for the mainland.

Oh, I forgot, we’ve been told that casinos will be our saving grace. “If you build it, they will come” is the popular line from The Field of Dreams movie. Well, if our field of dreams are tied up in casinos, we’ll probably strike out because the mecca of gambling in the U.S. has been hard-hit lately. In fact, Las Vegas has been named as the nation’s foreclosure capital with one in every 99 homes receiving a foreclosure notice in July, according to residential data tracking firm RealtyTrac. One in every seven Nevada homes is currently vacant and nearly two-thirds of existing Vegas homes sold for a loss to owners between April and June. In addition, they’re suffering from a 13.8 percent unemployment rate, as of June this year, and the jobless number is likely to worsen.

What happens in Vegas isn’t staying in Vegas as other cities and states are feeling the pinch. That won’t stop many from trying their luck elsewhere as budgets are cut further, salaries are squeezed more, and businesses are forced to shut their doors. With the federal debt becoming a major issue and ARRA funds drying up next month, we’re not going to see more federal dollars flowing into the Commonwealth. “We accept food stamp” banners will become even more prevalent as more and more people are in need of a limited amount of federal assistance.

This is a depressing scenario, but one that has been foretold numerous times by myself and other columnists. The sky has fallen and most of us are lost in the fog. What can we do? Even though too little has been done too late, there’s never a better time than now to take action.

For business owners, you need to go where there is a market for your products. Examine the potential customers that still exist on Saipan, and determine if it is enough to sustain your business. There are numerous other ways to get your products to those who need and can afford them. The Internet has allowed many companies to sell globally. Going global expands your offering to a larger target market. This can be done through exporting to foreign countries, foreign licensing, and joint ventures. It also involves developing a global strategy. If you have a product that is unique, you may be able to form a strategic alliance with a well-established distributor in another country.

Location is an important factor to consider when deciding where to locate your business. When I lived in Logan, Utah, one of my clients was a videographer, specializing in wedding videos. His top end video cost about $600 and he was only making enough to pay for his expenses. After a few months of working with him, he doubled his sales, but I told him that if he wanted to make more money he was going to have to move to a larger city. I was thinking of Salt Lake City, but he was even thinking bigger and moved to a retirement community in southern Florida. There he was able to sell similar videos he made in Logan, but he charged $3,000 or more for them. That’s five times the amount for the same product. Not only was he able to earn more per client, but there were more clients willing to pay his fees.

Before you decide to move, realize that Saipan still has untapped potential. There are opportunities in every challenge. It takes some innovative thinkers to help uncover them, and leaders to make those ideas become a reality. The grass may be greener on the other side of the world, but you need to do your homework before you move so you won’t be moving to browner pastures.

Stakeholder Management

Can you identify the key individuals whose support is essential for your organization to exist?

These individuals or groups are known as stakeholders because they hold a valuable stake in your business. The origin of a business stakeholder can be traced back to 1963, when the term appeared in an international memorandum at the Stanford Research Institute and was defined as “those groups without whose support the organization would cease to exist.”

Supporting your stakeholders and receiving their ongoing support creates a symbiotic relationship that ideally benefits all parties. Therefore, it makes sense to identify them, understand their needs, and then determine how you can best manage the various relationships for maximum reciprocal benefit.

Broadly speaking, your stakeholders include all the people affected by your organization’s actions, and in turn have some impact on your company. You have both internal and external stakeholders. The internal stakeholders are all of the people on your payroll who depend on your company for their livelihood, which includes executive managers, supervisors, and employees. Those groups and individuals that are external to your organization include your suppliers, stockholders, community, bankers/lenders, government leaders, customers, and competitors.

Yes, your competitors are impacted by your business, just as they can affect your margins and sustainability. It is possible to manage the relationship you have with your competitors so you work collaboratively instead the competitive, cost-cutting relationship that most develop.

Let’s look at the specific individuals or groups that can have the biggest impact on your organization. The most obvious are your customers. Without their support through purchases, your company could not exist. Even though it’s obvious that they are important stakeholders, it’s surprising how many businesses do not have a plan to effectively manage their customers for maximum value. They can’t tell you basic metrics such as how many prospects, on average, visit their store, what percentage of those convert into paying customers, the average purchase value, or how many return and how often. They often lack policies, procedures, and practices that create greater customer satisfaction and loyalty. Going deeper, most business owners haven’t taken the time to delve into the psyche of their customers to better understand what makes them tick, why they buy, or what specific benefits will keep them coming back.

The same could be said about your other important stakeholder – your employees. These individuals have chosen your company as the place to spend much of their waking hours to earn a living. They expect a safe working environment, reasonable compensation, and they want to be treated with respect. They can be managed to earn greater profits for the company, but have you considered managing them so they have greater life fulfillment working with your firm? This again requires you to delve into the psychological factors that motivate them to perform at their best and want to remain with your company. Their overall satisfaction as an employ has a direct impact on the satisfaction of your customers, and lowered costs due to turnover and waste.

Focusing on and taking care of your customers and employees will help overcome the majority of challenges your business faces now and in the future. Other important stakeholders include your suppliers, those people who provide the goods and services that allow you to operate your business efficiently and effectively. Often, price is the major consideration in choosing a vendor, but other factors should be considered to develop and manage long-term relationships with vendors who work well with your company. If you walk into any McDonald’s restaurant in the world you will never see Pepsi products sold. The reason why is because when Ray Kroc was cash poor trying to expand the franchise, Coke offered him generous credit terms that allowed the company to remain solvent. Because of this, the company made a lifetime commitment to the vendor. Many other major corporations have strong ties with their suppliers that help them maintain a competitive advantage.

It’s possible to create a win-win situation with all of your stakeholders so that your organization continues to prosper. Your challenge as a business owner is to learn how to identify your most important stakeholders and to balance, as much as possible, their needs for mutual benefit. For example, the need for your business to earn a profit needs to be balanced against the needs of your employees to earn a sufficient income, and the needs of your customers to gain as much value as possible from your company. Managing and balancing all the stakeholder relationships within and without your organization will go a long ways to enable your organization to remain profitable and to create greater fulfillment in the lives of all those you touch.

Cluster Alliances

Many business owners tend to spend less money and effort on marketing in a tough economy, which only exacerbates an already difficult situation. There are many ways to market your business more effectively without spending more money and one of the most effective methods is to develop a strategic alliance.

Strategic alliances follow the principle of using other people’s assets, in a mutually beneficial way. The two companies that work together are not competitive, but complimentary. These companies can be at a different stage in the purchasing process, as in the case with someone remodeling a home. They may need a plumber and carpenter to complete their project so the two businesses can work together by sharing their leads or customers.

Other companies may have an advanced distribution system, products, or manufacturing methods that they can leverage to work with other companies. You see these partnerships all the time. For example, when you go to a McDonald’s restaurant, it is common for them to have decorations or Happy Meal toys that are from a newly released movie. McDonald’s benefits by having popular toys that attract young customers, and the movie benefits by getting more publicity and word-of-mouth exposure when the child takes the toy over to a friend’s house. By working together, these companies are able to save time and money, as well as increase sales.

Rick was a client who owned a jewelry store and much of his business came from engaged couples, particularly the soon-to-be groom who purchased an engagement ring. His challenge was to effectively market to couples who were in the market for a ring. He felt his only solution was to spend a lot of money on mass media to keep the name of his store on the minds of couples. This was not only expensive, but it was difficult to track and know which of the media was more effective.

As I brainstormed with him, I realized that a lot of my other clients also had engaged couples as their target market. These were businesses such as photographers, caterers, a bridal gown store, and a cake decorator. My solution for him was to form multiple strategic alliances with other businesses that clustered around the specific target market of engaged couples. I call this model a cluster alliance. I approached many of my clients as well as new businesses that would form a good fit for the concept. The initial project worked okay, but it needed to be fine-tuned to make it more effective.

It took several months, but I finally perfected a method that easily and effectively captured the leads of couples and then those leads were shared with my clients. Initially, there were over 20 businesses in the cluster alliance, and they each paid a monthly fee to be a part of the group. It was so effective that practically no one left. The concept was eventually expanded in two other areas with more than 50 businesses participating.

People create informal cluster alliances through networking groups or because they’ve formed friendships with other business owners who can benefit from some asset they control. What if you could purposefully create a cluster alliance that was mutually beneficial to all who participated? The group could meet regularly to share leads, or there could be a formal agreement to pay a commission on any sale from the lead of one of the alliance members.

Think of your different customer groups and what they have in common. Next, think about other businesses that are complimentary to your own, and that have the same target market. Get together for lunch and explain the cluster alliance concept and brainstorm some ideas about the best way to share your leads with each other. You may also want to discuss the best method of compensation if a lead results in a sale. Be sure to treat each business as an equal and make the compensation fair to everyone.

Encourage each participating business to recommend participating businesses to each other. If you want to keep it simple, you can purchase a rack that displays several business cards, collect the business cards from each participant, and then display the cards of each business at the point of sale.

I can tell you that a cluster alliance, whether it’s formal or informal, will be the most cost-effective marketing strategies you can use to effectively attract your customers to your business. It can be ongoing and provide leads for many years if you set it up right from the beginning.

Turning Lemons into Lemonade

A prominent businessman had developed agriculturally related businesses and was doing well locally. He was located on an island in the Pacific that didn’t have a lot of air traffic, and he planned to expand his distribution outside his small geographic area for more sales. However, the cost of shipping was prohibitively high and forced his marked up prices to not be as competitive as some suppliers.

At this point, the average person would just give up and consign themselves to sell their goods locally, and keep their current operations small to save on overhead. However, Tony Pellegrino is anything but average and he has demonstrated his willingness to take bold steps to overcome obstacles that have stopped others in their tracks. His Cargo Air Bridge, or CAB, is an innovative project that has the goal to reduce shipping cost both to other places, and also back to Saipan. In other words, it will not only benefit farmers, but it will also help reduce the costs of numerous other products that are priced higher on Saipan due to high shipping costs.

When Tony introduced his concept at a lunch meeting I held with several leaders in the community, I could immediately see the benefit and decided to split the BizGrowth Challenge seminar into two days so that one day could be focused for farmers, and Tony could publicly announce his concept at the event.

CAB will benefit not only Saipan, but also Tinian, and Rota farmers, and it will hopefully spur more people to farm their land, as well as get current farmers to expand their operations. If it goes as well as some predict, it could create the second industry that Saipan desperately needs. There is already a local base of farmers that can provide produce to satisfy the growing demand on Guam, and it should encourage more people to start farming their land to reap the benefits offered by the CAB. This means it is a sustainable business with great future potential, and best of all, it is not as susceptible to external factors, such as tourism, garment factories, and the newly resurrected casino initiative.

Business owners face many challenges that stand as obstacles between them and their goals to grow their business. Some see these obstacles as “lemons” that leaves them sour. Those with the right mindset and strategy know how to turn those lemons into lemonade, or take a challenge and turn it into an opportunity.

The first step is to be clear about the challenge and what’s holding you back. Without that clarity, it is difficult to focus on solutions because you will tend to pursue various problems and apply whatever tactics that look good at the moment. Having a fixed challenge in your mind allows you to stay focused and then direct your resources more effectively.

Once you identify your biggest challenge, turn it into a statement or question that will allow you and your brainstorming group to focus on the minor obstacles you face to overcome the biggest challenge. Using the above example, if you grow vegetables and want to sell to another location, but your are unable to sell them competitively because the shipping costs puts your produce at a higher price than the competition, you could turn your challenge into this question: How can I gain a competitive advantage and sell more of my products in a larger market?

Now you can list the obstacles that are in your way. These might include: I don’t have enough goods to get lower bulk shipping rates, there is no union or group effort to negotiate better prices and solve major concerns, shipping costs are too high, I don’t have equipment to improve the efficiency of my operations, etc.

The next step is to turn each obstacle into a goal by restating the obstacles as if you’ve already achieved them. In the above example, the obstacles would be restated as follows: I grow a large enough amount of produce that allows me to get lower shipping rates, I work with a group of other farmers to negotiate better prices and solve major concerns, shipping costs have been lowered, and I have access to the equipment that allows me to improve the efficiency of my operations.

Now you need to rearrange the list in the right order, and ask questions such as: What if my goals were three times bigger, what if I had to accomplish this in half the time, what would need to change? By asking questions that cause you to think outside of the box, you’ll find shortcuts that will allow you to find solutions that are much better and possibly take care of several obstacles/goals at once.

It’s obvious that Tony came up with one solution by securing an aircraft that is dedicated to shipping cargo back and forth at a much reduced costs. However, the next challenge will be for the farmers to step up and grow more produce to improve the efficiency of operations so the aircraft is filled to capacity on each flight. The solutions to achieve the other goals could be: Create a farmer’s coop that coordinates the efforts of the major producers, and get a grant or have farmers pool their money to collectively purchase a tractor with other equipment that can be shared through the coop. These may still be in the works, and once they are resolved, it will hopefully mark an initial turning point in the economy.

Become the Instrument of Change

Living on Saipan has been a dream for me and my family. What started out as a possible two-year contract with the college has extended to 14 years. During those years, starting in 1997, we have seen many changes that have taken a toll on the individuals, businesses, and other organizations. We are currently in the midst of a transition that will make or break this place.

This wasn’t unforeseen; in fact, it was predicted by numerous other writers in the paper and individuals who are concerned about the future of the CNMI. One of the difficult things for me to witness is the disregard of undeveloped potential, and how many of our resources are wasted. Tony Pellegrino has written about the “acres of diamonds” that lie under our feet, but people ignore them to search elsewhere for solutions.

A couple of months ago, I promoted a concept called the BizGrowth Challenge that had the goal of gathering the various resources to assist business owners to be as successful as possible. Many agencies and individuals supported me in this effort, but for whatever reason, there was a lack of interest on the part of those we were trying to assist.

Let me step back and share some of my history and why I know there is huge potential, but one must be willing to start digging underneath their feet to discover the diamonds they are standing on. My first business was an advertising agency that I started while I was in graduate school in 1982. One of my clients was a small exercise equipment manufacture called Weslo, and I worked closely with one of the owners, Gary Stevenson, to develop marketing materials to promote their fitness equipment.

I eventually graduated with a master’s degree and joined the Air Force to fly as a navigator on the KC-135 aircraft, and Weslo went on to acquire the rights to name brand companies in the fitness industry such as ProForm, Gold’s Gym, and NordicTrack, and become a billion-dollar corporation under the name ICON Health & Fitness.

In the ensuing years, my experience with Weslo and their ultimate success caused me to pursue the answer to this question: “Why do some businesses experience spectacular success and create an ideal lifestyle for their owners, while the majority of business owners seem to create a “job” for themselves that makes it more difficult to live their ideal lifestyle?”

In pursuit to answer that question, I earned a second master’s degree in management, and spent countless hours and thousands of dollars devoted toward learning the business principles and strategies from the books, tapes and seminars of individuals who are considered the best in their field. I learned and applied effective business marketing and management concepts that could produce dramatic results over time, and free business owners to either pursue more opportunities or create a more balanced lifestyle as their business continued to grow.

In addition, I was told that the Air Force spent over $600,000 training me to create a flight plan and successfully navigate a multi-million dollar aircraft to complete its mission to get from point A to point B. Because of my previous business background and work with clients, I could see a lot of similarities in what I was doing as a navigator and what it takes to develop an effective strategy for a company to take their business as high as they want to go with it.

But here’s the rub, they must be willing to get on the runway and give it a full-throttle effort to take their business off the ground. If they don’t believe they can take off, they won’t even try. My biggest concern is that many business owners have given up and are thinking about their exit strategy (how they can get their business off the runway) instead of their takeoff strategy.

Yes, it has become extremely difficult for some to operate a business and turn a profit, but there are still many opportunities for those who are willing to try. Once an individual gives up, there is a 90 percent chance of failure. However, if a business owner maintains an open mind to examine the possibilities, and then gives it a full-throttle effort to tackle their biggest challenges and opportunities then they have a 90 percent chance of success.

Just like in my old navigation days, it requires you to know your destination, then create a plan, identify the needed resources, and then keep the image of your ultimate outcome constantly before you as you make the effort to accomplish critical goals that will allow you to achieve the vision you have for your business and personal life. Don’t remain stuck on the runway of life, hoping that the weather changes. Become the instrument of change.