Three Secret Ingredients to $30 Million vs. $3 Million

February 24th, 2014 by Rich Christiansen

The past week I had the opportunity to look closely at two different businesses. These two different companies are actually equal in terms of potential and technology. However, as I consulted and carefully examined both I found that there were three major differences that separated the businesses. The question I have for you today is do you want a $30 million business or a $3 million business? Let me outline the three key factors that make the difference for these companies and confidently will make the difference for your company.

The first business actually is a fun, exciting, exuberant, really good little $3 million dollar business that’s been around for about seven years. The 2nd business was established three years ago and has grown rapidly to $30 million dollars. What’s the difference? Well, here it is:

Number One: Cash Flow and Access to Capital
In all of my books I state that cash flow is the number one reason small business fail. Now let me boldly add to that statement and say that access to capital is the number one enabler for growth. It sounds like I’m contradicting myself because everyone knows that I’m a big fan of bootstrapping and largely hesitant to seek out Venture Capital funding. The reality however is that if you can get cash in the bank, avoid taking exorbitant salaries, and control your expenses early on then when you are ready to grow your business you are in a good financial position to scale aggressively with capital. This does require at times taking loans and, depending on your business’ individual circumstances, taking appropriate financial partners. The number one difference I saw between the $3 million company and the $30 million dollar company was access to capital.

Number Two: Escalation
You say, “Escalation? What do you mean?” The $3 million dollar company CEO was the ultimate decision maker and mover and shaker on every decision. If he got into a negotiation he could make a decision in a snap. You may think that’s a good thing, but it is not. If there is a problem and you as the CEO are not getting any results you have no one else to step in and add to the conversation. However, if you can separate yourself a biy then you are then in a position so others can escalate important problems to you and can get more direct results by bringing in the CEO to the conversation.

Escalation indeed is the second most important factor in being able to rapidly grow a big company. Through all my years of bootstrapping and creating businesses I’ve never seen a large and significant company that did not properly escalate and have delineation of roles in place. If you find yourself as the jack-of-all-trades and are the main decision maker then FIX IT. If you want more information on this read Chapter 14 Act Big Play Small in Bootstrap Business. I give some really good tips on how to do this.

Number Three: Defining the Hunters vs. Gatherers
My blog post last week was all about Hunters vs. Gatherers. Since I already covered this thoroughly last week I won’t delve into it again, but I can guarantee that $30 million companies know who are the Hunters and who are the Gatherers. You will also find that they each play their roles well. Identify who in your organization are the Hunters and who are the Gatherers and have them play those roles properly.

You want a $30 million business, rather than a $3 million business? These three principles can quickly get you on the way to that growth. Good luck, Zigzaggers.

 

Image from http://hbcumoney.com/

Three Secret Ingredients to $30 Million vs. $3 Million

February 24th, 2014 by Rich Christiansen

The past week I had the opportunity to look closely at two different businesses. These two different companies are actually equal in terms of potential and technology. However, as I consulted and carefully examined both I found that there were three major differences that separated the businesses. The question I have for you today is do you want a $30 million business or a $3 million business? Let me outline the three key factors that make the difference for these companies and confidently will make the difference for your company.

The first business actually is a fun, exciting, exuberant, really good little $3 million dollar business that’s been around for about seven years. The 2nd business was established three years ago and has grown rapidly to $30 million dollars. What’s the difference? Well, here it is:

Number One: Cash Flow and Access to Capital
In all of my books I state that cash flow is the number one reason small business fail. Now let me boldly add to that statement and say that access to capital is the number one enabler for growth. It sounds like I’m contradicting myself because everyone knows that I’m a big fan of bootstrapping and largely hesitant to seek out Venture Capital funding. The reality however is that if you can get cash in the bank, avoid taking exorbitant salaries, and control your expenses early on then when you are ready to grow your business you are in a good financial position to scale aggressively with capital. This does require at times taking loans and, depending on your business’ individual circumstances, taking appropriate financial partners. The number one difference I saw between the $3 million company and the $30 million dollar company was access to capital.

Number Two: Escalation
You say, “Escalation? What do you mean?” The $3 million dollar company CEO was the ultimate decision maker and mover and shaker on every decision. If he got into a negotiation he could make a decision in a snap. You may think that’s a good thing, but it is not. If there is a problem and you as the CEO are not getting any results you have no one else to step in and add to the conversation. However, if you can separate yourself a biy then you are then in a position so others can escalate important problems to you and can get more direct results by bringing in the CEO to the conversation.

Escalation indeed is the second most important factor in being able to rapidly grow a big company. Through all my years of bootstrapping and creating businesses I’ve never seen a large and significant company that did not properly escalate and have delineation of roles in place. If you find yourself as the jack-of-all-trades and are the main decision maker then FIX IT. If you want more information on this read Chapter 14 Act Big Play Small in Bootstrap Business. I give some really good tips on how to do this.

Number Three: Defining the Hunters vs. Gatherers
My blog post last week was all about Hunters vs. Gatherers. Since I already covered this thoroughly last week I won’t delve into it again, but I can guarantee that $30 million companies know who are the Hunters and who are the Gatherers. You will also find that they each play their roles well. Identify who in your organization are the Hunters and who are the Gatherers and have them play those roles properly.

You want a $30 million business, rather than a $3 million business? These three principles can quickly get you on the way to that growth. Good luck, Zigzaggers.

 

Image from http://hbcumoney.com/

Hunting vs. Gathering

February 18th, 2014 by Rich Christiansen

This past week I found myself working with a small company that has great product, great technology, and is really a fun company. However, even with all of that on their side they have stalled the last few years and are stuck at the $3 to $4 million-dollar mark.

 

As I observed the CEO and founder of this company in action I was both mesmerized and dismayed. I watched him engage new customers at the trade show, actively pitch sales, and close each deal. Five minutes later he was working on the company’s operations, logistics, as well as the cleanup. He bounced from task to task, from sales to finances, to warehouse management, to pickups and delivery. Seeing him do everything at once was nothing short of a wonder. The entire ordeal was one of the most complex working events I’ve ever seen in my life.

 

I could see at that moment, even as hard as he worked and as fun as that company was, if things didn’t change then this company would never grow beyond the $3 to $4 million-dollar mark.

 

The key reason for that remark is that it is vital to clearly define and distinguish the roles of each individual in the company. It organizes the members of a company into two groups: Hunters and Gatherers. Every organization needs delineated roles. Those that go out and track down the big beast, shoot it, and slay it should not be the ones who prepare the carcass, package it up, and put it in the freezer. The Hunters should also avoid playing the part of the Farmer who tills and prepares the ground.

 

Each role is very different and distinct. So the question that I ask you is this: Are your talents best used as a Hunter or a Gatherer? Every business needs both.  In my experience I’ve found it best if the CEO and the sales team are the Hunters while the roles of operations such as accounting, your general manager, and customer service plays more of the Gathering or Farming roles.

 

Take a look at your organization. If you see yourself bouncing back and fort between being a Hunter and a Gatherer I guarantee you that you are losing significant efficiency and limiting the growth, potential, profitability, and the viability of your company.

 

Today’s Challenge: Assign the role of Hunter or Gatherer to each individual and department in your company and make sure you play your roles well. Doing that alone, I guarantee that you will see a significant uptake in your business and reduction of stress levels.

One-Degree Difference

February 11th, 2014 by Rich Christiansen

What kind of difference does one degree make? Well, changing the temperature by one degree means the difference between very cold water and frozen water. One degree of temperature difference is the line between hot and boiling water. That crossover line in physics, business, and our personal life makes all the difference in the world.

One of the market segments I’m actively involved in negotiates large orders for high-end luxury items. These are meaningful, significant orders that with or without warning can flip on or flip off. One degree of price difference or one percentage point can literally make the difference between landing the order or not. The trick is discovering what that very fine and sensitive line is. The key to do that is to have very good and open dialog, relationships, and true salemanship with our customers.

Now, the big mistake that is pushed to the other direction is to shift five degrees. Going down five degrees when the water is already frozen still results in frozen water. Add five degrees to boiling water and it will keep boiling. Rather than one percent discount given giving five percent discount still ensures the order, but at much less profit.

As you’re looking at potential business opportunities or to win over a customer or client make sure you find out what that one degree shift is that can be made that will guarantee to flip on the opportunity.  If you want to see more on this theory check out the video below.

Go forward, zigzag, and prosper.

One-Degree Difference

February 11th, 2014 by Rich Christiansen

What kind of difference does one degree make? Well, changing the temperature by one degree means the difference between very cold water and frozen water. One degree of temperature difference is the line between hot and boiling water. That crossover line in physics, business, and our personal life makes all the difference in the world.

One of the market segments I’m actively involved in negotiates large orders for high-end luxury items. These are meaningful, significant orders that with or without warning can flip on or flip off. One degree of price difference or one percentage point can literally make the difference between landing the order or not. The trick is discovering what that very fine and sensitive line is. The key to do that is to have very good and open dialog, relationships, and true salemanship with our customers.

Now, the big mistake that is pushed to the other direction is to shift five degrees. Going down five degrees when the water is already frozen still results in frozen water. Add five degrees to boiling water and it will keep boiling. Rather than one percent discount given giving five percent discount still ensures the order, but at much less profit.

As you’re looking at potential business opportunities or to win over a customer or client make sure you find out what that one degree shift is that can be made that will guarantee to flip on the opportunity.  If you want to see more on this theory check out the video below.

Go forward, zigzag, and prosper.

Zigzagging at 2014 Outdoor Retailer

February 4th, 2014 by Rich Christiansen

Rich: I’m here today with my good friend Scott McQuade at Outdoor Retailer and I just heard his story. For all you Zigzagers you’ve just got to hear this. Scott, would you mind sharing with us how your wife got into the wholesale off-price business please?

Scott: Absolutely. I’d be thrilled to. I was a third generation retailer and president of a family chain in the northeast. My wife wanted her own business so I bought all the off-price goods from the company. When I began a factory I’d be using a small portion of the off-price goods so I said to her, “Why don’t you see if you can find a buyer for the goods and then you can purchase the goods and just flip the deal and not even touch the goods?”

So she said great and I told her about a deal, it actually was in Manchester, New Hampshire and they had a flannel line and denim skirts for L.L. Bean and her first customer was Sierra Trading Goods and her first order was 10,000 pieces. She called Sierra and found out who the buyer was, talked to the buyer, negotiated the price, and went back and bought the goods. Now the hard part for her was that we had no capital at the time. We were newly married, we had kids, and we had no savings so she had to go into a bank to get a loan. We were from a small town of about 100,000 people. She spoke to the banker and presented her purchase order and told them that if she could borrow the money from them then she could make the deal happen and make $20,000 profit off this deal. The banker knew our family and told her he would loan her the money. So she bought the deal and that was the beginning of her career.

Rich: Ok. Now a couple of really fun, key things you left out of there was, I don’t think you had a bank account at the time and they said “Show us your PL” when there was no P&L. So frequently we think you have to have a whole bunch of money to create money. When Scott told me this story I couldn’t help but chuckle, would you like to tell us how value was created?

Scott: Yes actually, that’s true, Rich. We didn’t have a P&L, we didn’t even have a business. She actually had to call me during her meeting with the banker to ask me what our business name was. I told her, “Tell him it’s White Mountain Dry Goods,” because we lived in the northeast where the White Mountains were and he said, “Yeah that name sounds familiar, that name has been around.”

Rich: And that was the vendor, so in real time you made up the name of the supplier and they checked it, gave their approval and got it in their system which, had you done it any other way, would have taken five or ten years.

Scott: That’s correct. That came to factor as we were taking the loan. The banker said, “That sounds familiar. I just can’t find the file but I’ll approve it.”

Rich: Needless to say this went on to become a very successful company and has done really well.

Scott: Yes. For sixteen years.

Rich: Sixteen years!

Scott: And we started with zero capital.

Rich: Started with zero capital. So how did that work? What is that all about? Did you need a whole bunch of money to start out? No. The answer is simply this. You start with intellectual capital, or being smart. In this case it was Scott having the connections and understanding how the wholesale market connected plus relationship capital. The vendors knew them, the bankers knew them, and there was a level of trust. If you do that in the form of a business it always ends up making financial capital. From $0 to $20,000 in profit you can launch a business in really one simple transaction.

Don’t tell me it can’t be done. You can zigzag and go do it. You can create your business and quit getting all hung up on having a bunch of money.

Zigzagging at 2014 Outdoor Retailer

February 4th, 2014 by Rich Christiansen

Rich: I’m here today with my good friend Scott McQuade at Outdoor Retailer and I just heard his story. For all you Zigzagers you’ve just got to hear this. Scott, would you mind sharing with us how your wife got into the wholesale off-price business please?

Scott: Absolutely. I’d be thrilled to. I was a third generation retailer and president of a family chain in the northeast. My wife wanted her own business so I bought all the off-price goods from the company. When I began a factory I’d be using a small portion of the off-price goods so I said to her, “Why don’t you see if you can find a buyer for the goods and then you can purchase the goods and just flip the deal and not even touch the goods?”

So she said great and I told her about a deal, it actually was in Manchester, New Hampshire and they had a flannel line and denim skirts for L.L. Bean and her first customer was Sierra Trading Goods and her first order was 10,000 pieces. She called Sierra and found out who the buyer was, talked to the buyer, negotiated the price, and went back and bought the goods. Now the hard part for her was that we had no capital at the time. We were newly married, we had kids, and we had no savings so she had to go into a bank to get a loan. We were from a small town of about 100,000 people. She spoke to the banker and presented her purchase order and told them that if she could borrow the money from them then she could make the deal happen and make $20,000 profit off this deal. The banker knew our family and told her he would loan her the money. So she bought the deal and that was the beginning of her career.

Rich: Ok. Now a couple of really fun, key things you left out of there was, I don’t think you had a bank account at the time and they said “Show us your PL” when there was no P&L. So frequently we think you have to have a whole bunch of money to create money. When Scott told me this story I couldn’t help but chuckle, would you like to tell us how value was created?

Scott: Yes actually, that’s true, Rich. We didn’t have a P&L, we didn’t even have a business. She actually had to call me during her meeting with the banker to ask me what our business name was. I told her, “Tell him it’s White Mountain Dry Goods,” because we lived in the northeast where the White Mountains were and he said, “Yeah that name sounds familiar, that name has been around.”

Rich: And that was the vendor, so in real time you made up the name of the supplier and they checked it, gave their approval and got it in their system which, had you done it any other way, would have taken five or ten years.

Scott: That’s correct. That came to factor as we were taking the loan. The banker said, “That sounds familiar. I just can’t find the file but I’ll approve it.”

Rich: Needless to say this went on to become a very successful company and has done really well.

Scott: Yes. For sixteen years.

Rich: Sixteen years!

Scott: And we started with zero capital.

Rich: Started with zero capital. So how did that work? What is that all about? Did you need a whole bunch of money to start out? No. The answer is simply this. You start with intellectual capital, or being smart. In this case it was Scott having the connections and understanding how the wholesale market connected plus relationship capital. The vendors knew them, the bankers knew them, and there was a level of trust. If you do that in the form of a business it always ends up making financial capital. From $0 to $20,000 in profit you can launch a business in really one simple transaction.

Don’t tell me it can’t be done. You can zigzag and go do it. You can create your business and quit getting all hung up on having a bunch of money.