Premature Diversification

December 12th, 2012 by Rich Christiansen

Rich Christiansen The past several weeks I’ve been preparing for a trip where we will represent several up-and-coming, exciting brands for one of my companies. Through the course of these activities I’ve been exposed to several very creative and very innovative ideas and concepts.

There’s one company in particular that has received an extreme amount of attention. They were featured on the television show Shark Tank and were indeed one of the winners. They won again at a statewide entrepreneurial conference and have received an excessive amount of media and exposure. As I met with these young entrepreneurs I was exhilarated but also dismayed in our very short meeting. Their high-energy level, exuberance of entrepreneurship, and the zeal for which they were attacking opportunity was exhilarating. However I was dismayed as I saw what they were doing. Indeed they had come up with a very novel creative market concept that had been broadly embraced and was getting them a lot of attention. What did they do with it? Rather than dig deeply, rather than fully explore all the channels, rather than totally take advantage and captivate this corner of the market they’ve instantly started to branch out and add all sorts of diverse products. For instance they were scheduled to fly down to meet with a celebrity’s daughter the following day to start a new line of handbags. They’re developing cell phone technologies, literally exploiting the small channel that they’d developed on ancillary things that haven’t yet proven success.

Indeed my one of the entrepreneurs that I really respect is David Norton who will often make the statement that the reason for failure in small businesses is premature diversification. I personally think that the number one reason is cash flow, but I agree with David that the second reason is premature diversification. If I were to wind the clock forward several years I would suspect that these young entrepreneurs would learn this lesson (hopefully not too much the hard way).

In the early stages of our business we need to find something that works and do more of it efficiently and effectively and fully develop the channels and make sure you have adequate conversion before you diversify. It’s not to say that diversification is not appropriate, it’s just doing it at the right time.

Go forward, prosper, and win in your business.

Combo Meal Post

October 23rd, 2012 by Rich Christiansen

Today’s post is a combo meal. You get two for the price of one largely because I couldn’t decide which one to blog on so here goes both.

My first concept is all about working hard and playing hard. I believe that working hard and then playing hard is far more efficient and productive than just working hard all the time. Each year I schedule a hard working day with my sons, particularly my younger sons. I do this to give them the experience of working on a hard project, jumping in, and just tackling something really difficult. I then make sure to always follow that up with a fun play experience.

The past several days I had my wife assemble a list of every nasty, disgusting, difficult assignment that she could come up that needed to be done for our rental properties. I took my two youngest sons, Timmy and Alex, which I affectionately refer to as my “Little Men” and we embarked on chasing down all these projects. Indeed we worked our guts out but actually had a really good time doing it. There’s a great personal reward in seeing a project through to completion.

After we finished our projects we went swimming in a natural spring pool, had a great dinner, and went crawdad catching. Now for those of you who have never tried catching these little critters there are a couple of things you need to know.

You can’t catch these things with your bare hands or even a net. You’ve got to toss a stinky, rotten piece of meat (I prefer bacon) on a string out in the warm water, count to ten, and then pull it in. This year was particularly good. Every pull we were catching anywhere from seven to fifteen of these little crayfish. My sons were absolutely delighted as they pulled in each catch with these little guys hanging on with one pincer and snapping with they other saying, “You give me back my bacon!”

This leads to my second concept: There are important things you have to let go of in your life in order to succeed.??There are a lot of life lessons associated with this. I’ve found myself acting like these little crayfish at times by hanging on too tightly to business ventures and projects. Things that would normally scare me and make me swim upstream to safety will actually grab my attention with a piece of stinky bacon. I hang onto that piece of meat, snapping away until something bigger squashes and kills me.

It is important that you give up bad personal and business habits and recognize when you’re hanging onto a piece of moldy bacon. We have a little business right now with one of my groups where we’ve been snapping away at it for nine months. We’re just not getting any traction. As a matter of fact we’re ignoring some other, more meaningful opportunities and I’m right on the verge of labeling it a bad piece of bacon and giving counsel to let it go. Now there’s a fine balance of being doggedly determined and then there’s pouring all your focus into a rotting piece of bacon. Do NOT be as those crawdads and hanging hang on until your very death when all you have to do is let go and live to swim another day. ??In closing here are the two key important business lessons of today:

Lesson #1: Work Hard. Play Hard. It’s far more productive than just working into oblivion.
Lesson #2: Let go of the caustic things in your life that are actually causing destruction, both in your business and personal life.

Free Teleseminar: Rich Dialoging with Rick Sapio on Value Gatekeeping and Saying No.

October 12th, 2012 by Rich Christiansen

I’m really excited to announce that on Tuesday October 16 at noon (Mountain Standard Time) I will be interviewing and dialoging with Rick Sapio about Value Gatekeeping. In both books I’ve written I’ve discussed the importance of saying no. In Bootstrap Business I say that the number two reason for failure in small businesses is premature diversification. In other words: doing too many things and not being able to effectively say no to the things that are distractive. Rick Sapio is heavily quoted in my book The Zig Zag Principle and indeed a brilliant mind on this topic.

What a rare, unique opportunity for you to attend this free teleseminar and learn from Rick, the direct master of the concept of value gatekeeping. Learning the in’s and out’s of value gatekeeping allows you to set filters that keep the crap out of your life while allowing the important things to get through.

Again, this call will be on October the 16th and will start at noon Mountain Standard Time and will run from an hour to an hour and a half. To sign up for it simply click the link below and register for the free event. You’ll receive an email with the information and the option of attending the seminar via telephone or web.

https://bfs.infusionsoft.com/app/form/valueswebinar

I look forward to seeing you on the call and I’m also looking forward to learning more from Rick about Gatekeeping. See you Monday!

The Pendulum Swings

October 3rd, 2012 by Rich Christiansen

For the last five years I’ve watched with fascination at what is known as the Pendulum Principle. This concept was developed by Roy Williams, the Wizard of Ads, and widely propagated by Michael Drew, my book agent for Zig Zag.

The concept of Pendulum is that every forty years the pendulum swings from a civic society or a group collaboration of everyone working together to the other extreme of an individualistic society then swinging back forty years later. Each time a society reaches a pinnacle the youth rebel and they start bringing the pendulum back.

This book goes through statistically showing that this has happened over and over for hundreds and hundreds of years just exactly how we swing between a civic society and an individualistic society. Interestingly enough we just crossed over into a civic era again and I watch with great fascination in being able to predict and to see the trends that are occurring that wouldn’t have occurred ten years ago. It’s reflected in our media, it’s reflected in our music, and it’s reflected in our social behaviors.

Pendulum released this week and this is a book I can’t wait to get my hands on to re-read. I would suggest that this is also a book that you should be reading if you’re attempting to have a crystal ball that lets you see into the future to understand the behavior patterns that are occurring and trending in our society.

Understanding this helps you dramatically predict what to do in your business to have a higher probability of success. Again, the name of the book is Pendulum and you can click on the link below to get to this book.

Happy Reading.

Check out Pendulum here.

October 1st, 2012 by Rich Christiansen

Good morning, everyone! I’m coming to you live from my office today! It’s been a little while. Today’s topic was important enough that I wanted to go face to face with you. I’m so thrilled with the outcome of what we’ve seen from the Zig Zag Principle. Only one in ten small businesses were succeeding. The people that are using Zig Zag Principle and have read it we’re finding that one in six, and one in seven are finding success. Really a great increase in the odds, but something really troubles me. That’s still too low of odds. The reality is the individuals that I’ve mentored (or there’s been mentoring in some form), the odds for success are one in two to one in three. I like those odds a lot better. ?
This has been a real quandary for me. There’s no way that I can individually mentor everyone. I have no training program. I have no big boot camps or anything like that to get one on one with individuals, but I know that the odds of success are so much higher if you actually engaged in the system and have some type of mentoring and interaction going on. To that end I’m doing something that I haven’t done before. I’m endorsing and I’m encouraging you small business owners who are struggling to go engage with Rick Sapio. He runs a website called “Business Finishing School”. It has high-definition, quality videos that go through many of the processes and discuss many of the topics in detail that I have covered and it also provides you a level of engagement and feedback that quite frankly we haven’t been able to provide you in Zig Zag Principle. ?
As you know, Rick Sapio is probably quoted more in the book than any other individual. There are two specific things that I really drew on from him. First of all is the values as the basis and second of all the concept of dismissing inappropriate things from your life in the form of a gatekeeper. ?I encourage you to click on and go to Business Finishing School as part of this blog post. As I was discussing with Rick he’s going to give you a money-back guarantee here. He’s also going to give you a signed copy of Zig Zag Principle and invite you to the big event that’s coming up and I encourage you to investigate this, to look at this, and sign up for his program. It will definitely increase your probability of success. ?Good luck, go forward, Zig Zag, and find success.

Engage With Us – 12 Books Group

April 26th, 2012 by Rich Christiansen

 

I am excited to be a part of the 12 Books Group this next month as their featured author during the month of May. Please come join us as we dig deeper into The Zigzag Principle. You won’t want to miss the exclusive giveaways, bonus materials, and excellent discussion with me and other readers.

This really is a unique opportunity because you are going to get a chance to glean knowledge from 8 different business authors from May through December. This will load you with great information to add to your zigzag strategy. 

Go to www.12booksgroup.com to sign up for a free account and keep checking in for reader discussion, video tips from me, and a live Q&A webinar at the end of the month. 

 

I hope you will come join us! 

 

 

 

Avoiding the All-Or-Nothing Trap – Zig Zag Principle #68

March 29th, 2012 by Rich Christiansen

I grew up in a rural community.  My father was completely blind.  I am the oldest of four sons, and as long as I can remember I have had entrepreneurial desires.  Despite some lofty ambitions, I was never any kind of a standout kid.  I was one of those boys who was often overlooked, and I spent a lot of time hoping I wasn’t the last kid picked on the basketball team. Nonetheless, I had this incredible and deep desire to do something of significance with my life.

I remember when I was eighteen years old and just finishing up high school, I wrote down some personal goals. I had always been goal-oriented, and my mother encouraged me to write down my goals. One of those goals was to become the CEO of a major company. Even though I wrote it down, I knew that was as far off a goal as I could have set.  I didn’t think that there was any chance or any possibility in the world of actually ever reaching that goal at that time; in fact, I might as well have written that I was going to sprout wings and flap my way to the moon.  But that became a powerful goal. It was my beacon in the fog.

I was very fortunate to have been able to get a good education.  After graduating, I worked hard and had some incredible opportunities.  And I ended up having the opportunity to work as a CEO and a general manager at some large and well-known companies.  Midway through my career in corporate America, I was given a leadership role in a large, international organization.  I was eager and determined to earn my stripes, and I basically committed to do so at all costs. I was a very young general manager of the U.S. division, and I was determined to do anything that was necessary to succeed. My commitment bordered on insane. I had a young family, but I was traveling hundreds of thousands of miles every year.  There were nights I would stay at the office all night long to do what I felt needed to be done.  I was going to succeed, and I didn’t care about the costs.  Then I learned the lesson that it is not worth risking everything of importance in your life to achieve success. The division I was over became very successful.  In the middle of our run, my mentor and boss, Dr. Peter Horne, called my secretary and said, “I need to have a visit with Rich.”  That meant jumping on a plane, flying to Atlanta, then from Atlanta to Amsterdam, and from Amsterdam across the channel to Birmingham, England.  Door-to-door, this was a twenty-hour trip. When I arrived, Dr. Horne pulled me into his office and sat me down.   He then said, “Rich, we’re really delighted with the progress you’ve made in the business. Things are coming along rather nicely.” And then he made this comment, which has stuck with me: “I want you to remember one thing though, Rich. You can replace almost anything in this world. You can replace a car. You can replace a job. You can replace money. But you can’t replace your health, you can’t replace your trust relationships, and, most importantly, you can’t replace your family.” Then he shooed me out of his office, and I began the long journey home. 

Those twenty hours, which I spent alone on a very crowded airplane, gave me plenty of time to think about what Dr. Horne had just said.  Most of my thoughts centered on my wife and children.  For years I had been telling my wife, “This next project is a big one for me.  I am going to give it my all for six months, so don’t plan on seeing much of me.  But once I finish it, things will be different.”   The six months would pass.  I would complete the project, and then a new project would come along and I would start the cycle all over again.  Those six months had turned into years as I kept promising, “If I give my all to this for six months, then we will have it made.” As we crossed the Alantic, I reflected on a trip I had taken to India some months before.  When I got home, all of my sons and I came down with whooping cough, or pertussis.  We had all been immunized, but somehow we contracted this miserable illness.  It was terrible.  I remember coughing so hard one day that I literally vomited, but I lacked the discipline to take some time off from my work to get better and help my wife with our sons.  My youngest son at the time was Nathan.  He was less than a year old when we all got sick, and it was life-threatening for him.  In fact, he ended up in the hospital, where my wife took care of him because I was too busy.

Flying home, I realized I was falling into the “all or nothing trap,” and I resolved that I was going to do better as a father and husband, and when I got home I made it a point to gather my young sons together, give them each a hug, and tell them I love them.  But when I went to pick up Nathan, he hollered and screamed.  As he pushed me away, I realized he did not even know who I was.  At that moment, I realized that achieving my goal of being a CEO was not worth losing the love of my family.  And I began to change both my priorities and how I actually lived my life.

Achieve Goals Through Rewards – Zig Zag Principle #67

March 22nd, 2012 by Rich Christiansen


When you are planning out rewards, you need to very specifically tie each reward to the zig or the zag you are heading toward.  I always establish timeframes, often in the form of quarterly goals.  When we make our quarterly goals, we sit down
as a team and decide what we want to accomplish.  Once we have established the go
al, we spend almost as much time discussing what reward we will get when we achieve the goal.  Then we make signs and post them all over the office, with the goal written out over a picture of the reward.  

One of the signs I used in our office had a picture of people snowmobiling.  We titled it, “Plowing our Way to Victory.”  Around the picture were listed the goals of getting three new clients and having a financial target of monthly recurring profit.  Another goal was to hire one more engineer and to retain another engineering client. 

For the business my son and his friends work on, they helped me develop a very specific goal if we hit certain targets. They then posted pictures of the cruise ship we would all board if they met their goals, and also the ports we would visit.  Sure enough, each of then achieved their goal, and we went for a one-week cruise. 

As you set long-term goals, don’t overlook the need to reward yourself and your team along the way.  These in-between rewards are ones I like to keep random.  Then, when I see a team member doing a particularly good job at something, I will hand them a pair of movie tickets or a gift card. The other day, we sent one of our contract employees a special “thank you” that he was not expecting.  Ever since then, he has gone over and above on the work that he does for us because that little reward meant so much to him.  Sometimes, random rewards will actually mean more than guaranteeing a treat when you push the same button over and over. 

The work you’re doing is challenging and difficult, and as you hit each zig you take a break from the intensity, celebrate, and enjoy the fruits of your labors.  Then you can do a little jump and turn your skis in the other direction toward the next goal.  We humans do have some things in common with my little salivating dog.  When we align our efforts with little treats along the way, our resulting behaviors will lead to the achieving of our goals.  The rewards make all of the effort worthwhile.

A Vegas Getaway – Zig Zag Principle #66

March 15th, 2012 by Rich Christiansen

Eating Own Cooking:

Last year my wife and I went on a little getaway to Las Vegas.  We had booked our hotel online, and we got a great rate on your normal room at one of the nicest hotels in Vegas.  When we checked in, the woman at the front desk took a liking to us.  She saw that we were on a romantic getaway, and she mentioned that most of the regular rooms were booked for a business convention.  As she handed us our key cards, she mentioned she had upgraded our room, adding, “I am not going to tell you about the room now.  You can thank me later when you see it.”

When we opened the door to our room, we gasped.  She had upgraded our $69 room to one of the presidential suites.  It was on the twenty-seventh floor and had a 180-degree view of Las Vegas.  The suite was 2,200 square feet.  It came with an entryway, a formal dining area, a living area, a huge bedroom, and two bathrooms.  My favorite part was the master bath suite.  It had an all-glass shower and a huge hot tub that overlooked the city.  And we did, indeed, thank this very kind front-end manager.

When I came back after this spectacular vacation with my wife, I was describing to Curtis this hotel we stayed in.  At this point in our business, Curtis was still working full time in his other job, and we were not making the progress we wanted in this new partnership.  As we chatted, it hit me that I knew what would motivate Curtis.  He wanted to take his wife on a vacation and stay at the same hotel my wife and I had just enjoyed—and in the same room!

I told him I had a reward in mind, and we made a list of four or five things that needed to happen.  We posted this list in the hall of our office, along with a picture of this fantastic resort.  The goal was that when those five steps were achieved and our business was stabilized, Curtis could quit his job and come into the business full time.  But equally rewarding to him was that he could also take his wife on an all expense paid trip to stay in this same hotel.  I found a picture of this hotel and drew stick figures of Curtis and his wife staying on the twenty-seventh floor and enjoying the view.  I even added a picture of its world-renowned restaurant because I knew his wife likes to dine at exclusive restaurants.  On the bottom of my artwork, I added a deadline of thirty-five days to earn this reward.  Curtis was salivating, even though we were not sure how this was going to happen.  But we did reach each of our goals, and Curtis and his wife did get to have a fantastic vacation.  And my reward was that I now had him working with me in our business full time.  

 

 

Rewards Must Be Earned – Zig Zag Principle #64

March 1st, 2012 by Rich Christiansen

Don’t Give Out Rewards Until They are Actually Earned

Being a fundamentally nice guy, I have made the mistake multiple times of giving a reward when the performance didn’t warrant it.  Every time that I have done this, I have ended up regretting it.  Even though you may feel for a minute that you’ve done the right thing, you’ve likely created a pattern and behavior system that will bite you in the end.  In some cases, being “nice” has been the death knell of my businesses. 

My family and I have traveled to Nepal several times, and I am always overwhelmed by the rampant poverty.  Like anyone who has traveled there, I have been approached countless times by small children who must beg in the streets for what little they have, and I always ponder what I—as one person with limited means—can do to help. 

The last time we were there, several young beggars followed my sons, our two Sherpas, and me everywhere we went.  They were filthy, and their ragged clothes were soaked with urine.  They approached us repeatedly, gesturing to their mouth and then their stomach to show us they were hungry. 

I believe that giving a person a handout does little to change his or her circumstances, but it broke my heart to see these small boys, who were about the ages of my younger boys.  Then I hit upon an idea.

We were in the middle of a central square where countless people gather each day to worship and shop.  While there are numerous trash cans in the square, no one seems to use them, and the area is covered with what looks like years of debris.  I decided I could solve two problems at once, so I offered one of the beggars 100 rupees (about $1.40) for every bag of trash he picked up and put in a trash can.  Given that the daily income for an adult in Nepal is about $2, that seemed like a powerful incentive.

What I was asking would have taken a couple of minutes, but this little boy looked at me like I was nuts and ran off.  Another little boy approached me, and I made the same offer.  He indicated he would do it, but wanted payment up front.  Now, I may be a soft touch, but I’m not stupid, so I told him he would get paid upon completion of the work.  He, too, ran off.

The third boy who approached me was the dirtiest and scrawniest of the bunch.  I really thought my plan had merit, so I upped the offer to 500 rupees.  His initial reaction was to give me a look that said, “No one picks up trash.  Not even beggars.  What kind of crazy American are you?”  But this time, I grabbed a bag and started picking up trash myself.  He soon joined in, and was stuffing trash into his bag as quickly as he could.  There was so much trash that our efforts were like trying to drain a pond using a teaspoon, but we were at least doing something to make a dent.  And soon others were joining in, including a gentleman who runs a humanitarian organization who saw my impetuous project as having some potential.

When we finished working and I paid the boy, he couldn’t have been more proud.  And several shopkeepers around the square began making similar offers to other boys who clearly were in need.

I realize that we made a very small dent in the problems of world hunger and cleaning up the environment that day.  But I also know that those who watched, including my sons, learned that rewards need be based on our efforts, not our wishes—and that the right reward system can provide the motivation to get to work and make a difference.

The Role of Discipline and Rewards – Zig Zag Principle #63

February 23rd, 2012 by Rich Christiansen

The Whip

I’ve had partners who used the whip.  There certainly are times when you have to discipline. However, my contention is that the whip needs to be used very sparingly—and never as an immediate reaction.  If you whip someone (verbally, of course), you may get a burst of incredible performance.  But you will inevitably lose your long-term productivity (and your top performers) if you punish too often. 

I have seen people who use the whip over and over.  Soon the people around them reach the breaking point and basically say,  “I don’t care. Whip me to death. I am done.”  They check out, and apathy sets in.  I know a young, up-and-coming executive who was a master with the whip.  Unfortunately, he was so hungry to prove himself that he burned through all the people around him.  Now, no one in our area will work for him. 

There is a fine balance between knowing when to reward and knowing when to discipline.  When there is an out-of-bounds problem, discipline needs to be meted out.  In our home, we do not have the long lists of rules I have seen some parents enforce.  Instead, the rules we do have are rules that fit with our core values, and we are very strict with these few rules.  I often say to my kids.  “You will make some mistakes.  That is how you learn.  Just don’t make the big mistakes!”  Too many little rules can create confusion and can actually undermine the more important rules. 

Seeing the Value in Failure

In my current company, we have set four sets of quarterly goals this year.  Honestly, I hope we miss one of these goals.  I do not want to miss the first set or the second, but if we miss the third goal it gives me a opportunity to point out that this is what a little failure feels like, and your success is not guaranteed.  I’ve managed teams that developed a bit too much ego.  That can lead to arrogance and missed goals.  If you handle such situations well, it will bring your team back to where they’re hungry and want to win again. 

 

Designing A Good Rewards System – Zig Zag Principle #62

February 16th, 2012 by Rich Christiansen

Keep Your System Simple

It’s important to not overcomplicate your system of goals and rewards.  In one of my early ventures, I created a chart that had eighteen different targets to hit and a simple “REWARD” written across the top.   My employees were unclear as to what the priorities were and what the reward would be.  I have found it’s best to have three or four target goals to hit, with a very specific reward at the end.  The goals we typically fail to achieve are the ones that are complex and unclear.

Employees should also feel free to devise their own systems (within reason, of course).  My son and his friends came up with their own motivating reward.  They had a Burger King crown they kept in the office.  They were all highly competitive, and they would have contests to see which one could create the most web links on a given day.  The winner then got to wear the crown.  The reward didn’t cost me anything, and it was fun to see these seventeen-year-old boys engage in an all-out push to optimize their web sites, just for the reward of wearing a paper crown. 

One of the benefits of having a team set its own goals and rewards is that the members learn to govern their own behavior.  That way I don’t have to micromanage my teams.  

Avoid the Entitlement Mentality

When I was managing Mitsubishi Electric, I was still young and not completely financially stable myself.  I had an awesome killer team that was also young and hungry.  I began the practice of taking them out to lunch every Friday.  I would pay for their lunch myself because I didn’t feel the company should have that expense.  This was my personal way of showing my appreciation.  A few months into this, I ended up in a tough stretch where I was traveling almost nonstop.  As a result, there were a few Fridays where we didn’t make it to lunch.  Soon, there was muttering and complaining.  Morale dropped.  These employees had become so accustomed to going to lunch each Friday that they felt they were entitled to this perk.  What started as a good intention led to my being the bad guy because I did not consistently provide them with their expected lunch.

I had a similar experience with my crew of teenagers.  I would stock the fridge with food and soda pops so they could grab something to eat after they finished school and before they started to work.  A few times we got so busy I failed to replenish the quickly consumed food items.  Almost immediately, some of the boys started murmuring, “I can’t believe it, there aren’t any burritos or Hot Pockets in the fridge.”  If I have erred, it is because sometimes I have rewarded too quickly or too often.

Allow For Some Flexibility

Situations change, and sometimes you need to change with them.  I’ve lived through shifts in markets where even though my team gave an incredible effort, they fell a bit short of the original goal.  In those situations I still gave the reward so the team didn’t lose steam.  However, be careful not to reward when the reward is not merited.

I employ a group of mothers who work for me from their homes.  They are motivated and hard working.  I told them once that if they had ten consecutive days of making $500 in profit, I would give each of them a large bonus.  These women worked their hearts out.  At the end of the period, I saw that while they were only clearing $300 to $400 on the weekdays, on the weekend their profits were $800 to $1,000.  Even though they did not have the ten consecutive days, on an average they were well over the target I had set.  I told them that in this instance, average really does count for something, and they earned their reward.

 

 

Results of Using and Ignoring Guardrails – Zig Zag Principle #59

January 26th, 2012 by Rich Christiansen

 

Results of Using and Ignoring GuardrailsEating Our Own Cooking

In our current test business, Curtis and I received a request from a client that wanted to place a large order for high end, specialty products.  We went to the manufacturer of these products and were able to open an account.  However, when it came time to sign the contract with the vendor, it contained language prohibiting our operating a business model that was identical to our business model.  The order we were trying to fill was worth a large sum of money.  And the likelihood of the vendor ever figuring out we were in violation of the contract was minimal.  In our zeal to land this account, Curtis and I conveniently forgot to pay close attention to this clause in the contract.  However, Koral, who is one of my trusted gatekeepers, reminded us that signing the contract would run counter to our values.  As lucrative as this deal would have been to our company, we passed on the order.  It just seemed that if we were going to lose sleep, it would be better to lose it over the loss of revenue rather than the violation of our code of conduct.

In a previous business Curtis and I founded, we did not follow our own guardrails.  We had put a financial guardrail in place stating that we would always keep a $100,000, three-month buffer in place to protect us if the business took a downturn.  We also agreed that if things went south, we would reduce expenses, rather than dip into our reserve, in order to maintain a positive cash flow.

After several years of mind-blowing success, the business did suffer a downturn.  It wasn’t long before we saw ourselves dipping below the $100,000 threshold.  At the time we had a team we felt loyal to, and we did not want to have to cut back.  So we lowered our threshold to $50,000.  In making that decision, we broke our rule and crashed through our guardrail.  But we felt justified in doing so because of our previous success.  Before we knew it, we had crashed through the guardrail again and spent that last $50,000.  At this point, instead of cutting our losses, we decided to create another business plan.  Unfortunately, our team was not a good match for our new venture.  Ultimately, with no cash left, we had to lay off the entire team we had been trying to protect.  We also had to terminate what had been a very productive partnership and part ways.

We would have all been so much better off if we had reduced our expenses and stayed within that first guardrail.  Yes, we would have had to lay off one or two employees or cut back on expenses in some other way.  As painful as that sounds, it would have been so much better than having to kill the whole business.  We could have saved our most valuable employees and avoided a lot of pain and heartache. 

Our blunder led to Curtis and me parting ways for almost four years.  Now we are working together again and building a successful business.  And we’re hoping we will have the good sense not to forget our need to stay within the guardrails we’ve established. 

Summary

As you are traveling toward your beacon in the fog, you will need guardrails to keep you from heading over a cliff or wandering out into the weeds.  For each of your zigs, you should establish a financial number, an allocation of time, a duration of time, and a financial target to control the resources and energy you are going to put into that particular zig.  You then need to create a list of the other guardrails that will keep you out of the weeds.  Finally, remember the need to establish a network of trusted associates who will keep you from heading out of bounds network or drifting toward the edge of a cliff.  These guardrails will grow out of and be aligned with the values you defined in Chapter 3.  They will then have the power to keep you on target as you zigzag toward your beacon in the fog.

 

Rich’s Guardrails (Part 2) – Zig Zag Principle #58

January 20th, 2012 by Rich Christiansen

 

 

Business GuardrailsI control the finances of my business

I have learned the hard way that every time that I do not keep my finger on the pulse on the finances of my company, it goes into the weeds.  Once, I returned from a vacation in Nepal to find that my partner had obligated us to a bunch of expenses without our having the income to pay for them.  To cover his commitments, he basically sold off our inventory in a fire sale.  He was so proud that he had sold so much product; but he did not bother to look at the bottom line, and we took a huge loss on the items he sold.  He seemed to have forgotten that sales don’t really count for much if they don’t actually make a profit. 

I really do not love doing the finances, but I have learned that no one else is going to manage my money the way I manage it.  I always pay my bills on time, and I always know exactly how much is in my bank account.  I simply do not spend money I do not have, and if I’m not keeping track of my finances I know I could find myself in a position that would force me outside of my guardrails. 

 

I will not make personal guarantees on things that I have no control over

Years ago, I was hired as a young CEO of a small startup company.  I did not have ownership, but I was eager to impress the owners and show that I was in the game.  The company needed a batch of new computers for the employees.  I thought I was demonstrating my commitment by volunteering to sign for the lease on these new computers.  So, I signed a personal guarantee that obligated me to a three-year lease.  Needless to say, the business collapsed along with the rest of the Internet bubble.  Here I was without a job, and I had to pay $800 each month toward these computers.  I brought them home and lined them up in my basement.  They had absolutely no value to me, other than my kids learned great computer skills.  I did fulfill my obligation, but I vowed never to sign a personal guarantee on something over which I do not have complete control.

 

I protect my personal network

One of my guardrails is that I will protect my personal network.  I’ve been offered countless opportunities to get involved in businesses that would have been dependent on tapping into my networks of family and close personal friends.  At times, I would have been looking to them for capital.  At other times, I would have been using them as my primary pool to market to.  For me personally, I’m very protective of my family and friends because I know that they will be very hard to replace if a business goes south.  And, as I consider whether to involve them, I examine the situation by asking a simple question, “What’s the worst that could happen?”

 

I stay focused on my values

I try to always ensure that my business life conforms to my personal beliefs and values.  Obviously, I will not do anything that is illegal or unethical.  For some, that line may be a bit fuzzy, but my guardrail is whether I would ever have to justify or rationalize my actions to my wife or my children (or my mother!). 

Sometimes, my decisions are made by the simple measure of whether an opportunity feels right to me.  Not long ago, I was approached about doing business with an individual who was manufacturing and selling diet products.  The opportunity seemed promising, so I went home and told my wife about it.  Given her experience as a registered nurse, she examined the product and then told me why she felt it was not safe and why she felt this venture wasn’t something I should have my name associated with.  The product was perfectly legal.  But it was not something my wife believed in, so I did not pursue the opportunity.

 

Out-of-Bounds Worksheet

List the people who will be your out of bounds network:

                _________________________________

                _________________________________

                _________________________________

                _________________________________

                _________________________________

 

List the out of bounds markers in your life:

                _________________________________

                _________________________________

                _________________________________

                _________________________________

                _________________________________

 

List four or five things of how you will know when you are out of bounds. Is it a gut feeling, panic, scarcity mindset, etc:

                _________________________________

                _________________________________

                _________________________________

                _________________________________

                _________________________________

 

List the things that you consider to be completely out of bounds in your life:

                _________________________________

                _________________________________

                _________________________________

                _________________________________

                _________________________________

 

Identify exactly where you will change your direction on each zig and zag:

                _________________________________

                _________________________________

                _________________________________

               

Have a direct conversation with each member of your out of bounds network. Make sure they clearly understand what your out of bounds markers are and what their responsibility is to keep you within those bounds.

 

 

Rich’s Guardrails (Part 1) – Zig Zag Principle #57

January 12th, 2012 by Rich Christiansen

 

Rich's GuardrailsThe following are brief elaborations on the rules I have set for myself—the reasons behind each guardrail.  Again, remember that your circumstances and needs are different from mine, just as each ski slope is different.  The key is that you need to define what guardrails you need in your life.

 

I will not risk my family’s financial stability

Before I took the plunge into full-time entrepreneurship, my wife and I had paid off our home. This was a huge milestone for us, and it provided us with some sense of security as I undertook pursuits that involved a much higher degree of risk.  I have committed that I will not jeopardize my home because I do not want to take risks with my family’s financial security. 

 

I keep my teams small

Whether I’ve been working for an organization or running a small business, I have always preferred to keep my teams small.  I know myself well enough to know that this is where I excel.  I have found that if I keep my teams under fifteen employees, then I can know the needs, interests, and desires of each person.  I can get to know what motivates them so I can push the right buttons to keep each person going.  I have run much larger teams, but keeping them small results in the highest output for the amount of input I can give. 

 

I avoid venture capital to start or grow a business

I have a good friend who had the courage to become an entrepreneur fifteen years ago.  He and his family came close to living on wheat and water so he could create his business.  He maxed out credit cards and used whatever he had to become successful.  And, indeed, he did become successful and profitable.  He and his business partner then decided to grow the company even bigger, and they were able to raise a couple million dollars in venture capital.  They continued to work hard and became even more successful.  They were the rave of all of the business magazines in our area.  They won awards and were highly regarded.  However, bit-by-bit, as financial challenges hit, they sought out more venture capital.  But each time, they also signed away a bit more of their lives; to where the venture capitalists had diluted the ownership of a company they had sacrificed so much to build.  Now my friend is at a point where he has minimal ownership in the company, and yet he is contractually obligated to run it for the venture capitalists.  Of course, the venture capitalists demand that he put in the same amount of work and energy as when he started the company.  After years of hard work, he still never gets to spend the time with his family that he was hoping this business would allow.  He is now middle aged, and he is burned out.  If he would have stayed on his initial course and built his business a little more slowly, he could have zigged and zagged his way to permanent success.  He now either has to start all over or continue to work in a company he no longer controls.  There are times and places for venture capital but not as frequently as people think, and it is not my desired funding method.