Pile of Money or Creative Platform?

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I’ve had a half-dozen of conversations in the past couple weeks with entrepreneurs who are considering selling their companies… $4 million, $15 million, $20 million, $40 million, $70 million… all at crazy multiples.

My questions go as follows:
Do you NOT enjoy your business?
Do you have partnership issues?
Do you think your core model is flawed and not sustainable?
Is your growth done?
Are you lacking in money to sustain your lifestyle?

In most of the conversations, the answer to ALL of these questions has been NO. The reason for thinking about selling has been solely about MONEY. More of it. More of it in a way that they can feel more secure about their future.

Little thought is given to how they would invest it and usually after talking it through more there’s a realization that they won’t be able to beat the return they are getting from keeping their company. But diversification makes sense.

Little thought is given to what they would do after they sold. Just the thought of hitting a nice beach, buying some cool stuff, and then coasting right into their next “midas-touched” venture (rarely happens twice). Or be more purposeful in helping others through sitting on nonprofit and for-profit boards and helping others. But they’ll figure it out in between margaritas.

Little thought is given to what will really happen with their great cultures and family of great employees. But the acquirers are good people who promise and insist on not changing the magic formula or the great cultures… yah right.

Then I remind them what it took to build the amazing platform they have now. And how they are the masters of their domains. The kings of their happy kingdoms. The painters of their beautifully growing canvases. But all the annoying stuff will be gone. I saw a great quote recently, “Big offers are a good thing, but personal sovereignty matters a whole lot more over the long run”

Having gone through all of the similar thinking, I shared with them that the reality was different for me and many others I know who have “cashed out”. The reality is the money means little in the end in comparison to having a great platform/canvas to continue growing and creating great things with.

In most cases, NO ONE is advising them NOT to sell. It seems to be part of the American dream, the ultimate accomplishment, and the biggest ego stroke for an entrepreneur to “cash out”. What if we changed that dream to having pride in building great companies that our great grandchildren can be proud of?

Three of the six entrepreneurs I spoke with decided NOT to sell. Not because the money wasn’t enough (it was). But because they were excited about continuing to create and grow on THEIR hard-earned platforms.

Got Zing?

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I grew up near and then went to college in Ann Arbor, where there was a deli that had such an incredible level of passionate energy for their food and service that I remember thinking to myself that I hope to one day create a business that could have that great level of energy flowing through it. I also remember thinking, this will probably be the first of many businesses like this that I’ll see. Well, fast forward 20 years, and Zingerman’s STILL optimizes what I strive for.

Last week I spent two days with Ari Weinzweig, the founder of that now-not-so-little deli in Ann Arbor, Zingerman’s. Started in 1982, it now does $40 million in business out of Ann Arbor alone. They’ve expanded into a bakehouse, coffee roasting, mail order, creamery, candy making, roadhouse-style restaurant, and a training business. Ari walked through their secret sauce in this great 2-day seminar.

Their size is not what’s truly amazing about them. What’s amazing about them is the energy and excitement that pours out of every team member I encountered in their businesses. For 30 years they have had these recipes for success (before any of them became trendy):
1. Great service goes beyond service to just customers – it also includes how co-workers are of service to each other, how the owners and managers are of service to their employees, how the company is of service to its suppliers, and how the company is of service to its local community.
I saw how co-workers would lift each other up and how every interaction included a consciousness of “what can I do to help?” And how that lifted everyone’s energy.
2. Great service is defined as Listening, Getting the person what they asked for: Accurately, Politely, and Enthusiastically, and Going the extra mile – it MUST be something above and beyond that the customer didn’t ask for. I saw how co-workers went the extra mile at each interaction, and how empowered they felt as they WOW’ed customers.
3. Empowerment through open book and weekly huddles around numbers.
Every department in every business has a dashboard of numbers they track on a weekly basis from revenues to energy rating of co-workers. Usually about a dozen numbers on each board
At first, I was thinking people probably roll their eyes at all the numbers ever week. But then I asked a random group of five co-workers what they thought of their numbers boards and was surprised to find that they LOVED them. Why? They like having and SEEING the impact they can make and it’s a fun game they can play at work everyday to see how they can positively impact the numbers
4. A passion for the product/food.
At Zingerman’s they aren’t interested in just selling anything. They have a passion for great food products that have a great story behind them. Each person I met was truly passionate about the food and service they were offering.
5. Servant Leadership
Several people commented on how they appreciate how the owners were humble and worked shoulder to shoulder with them a lot of the time. Ari spends most of his evenings filling water for customers at the restaurant. He calls it “management by filling water.” I call it genius. His co-workers love it, customers love it, he gets his ear to the customer where it counts most.
6. Appreciation
A bunch of years back Ari heard about doing “appreciations” at the end of meetings. Where everyone is invited to express appreciation for another co-worker. At first his managers resisted the idea. Then Ari said, “you know what, we are just going to give it try for a while.” That little practice comes through loud and clear with how expressive everyone is of their appreciation for one another. Which adds a ton of positive energy to everyone’s day. They also have a monthly internal newsletter, with 10 pages of “thank you’s” between co-workers. Amazing.
7. Visioning
Two posts ago, I talked about the power of visioning and shared Zingerman’s example. After last week, I have a little more perspective on why this is so powerful. When the vision is expressed as if it has already happened and in a way that has both heart and is tangible then:
a. the team gets excited about a bigger vision to reach for
b. the team has an invitation, permission, and expectation to make it happen on their own
c. the team members get excited knowing that there’s opportunity for growth for themselves within the organization.
8. Training
With over 500 employees, the one thing that the founders of Zingerman’s won’t delegate is their new employee training. It’s where new employees get the Z cool-aid from it’s source. They talk about their history, philosophy, and recipes for success. As Ari was talking about this, I hit myself in the head realizing that it was a subtle piece that I’ve missed in my businesses. We assume that new folks will naturally pick it up from others. But there’s something real powerful about making sure our employees hear direct from the owners what the company is really about.
Thanks Ari and everyone at Zingerman’s for your inspirational example of greatness!!
Want more?… (Ari recently put out a great book and the DVD’s are great for training)

6 Bootstrap Traps

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As I meet with more and more bootstrappers and see their stories play out, here are the most common traps I see themselves getting into:

1. Raising money without really knowing whether the extra spend will generate a return
2. Getting distracted by offshoot ideas rather than focusing on the core
3. Spending more time on raising money than on really listening to customers and prospective customers
4. Spending more time on the big partnerships or bigger customers than on the bread-and-butter business.
5. Believing someone else has the answers (new hires, consultants, partners, etc)
6. Forgetting to focus on what people really want and are willing to pay for
It all comes back to: focus on what core customers want first, and don’t get distracted by the rest.


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I was recently reminded of a powerful visioning technique I’ve used in the past. As I look back now, it’s wild how well it has worked. It’s a little weird and fun at the same time.

Assuming it’s February 2011 today, I would write as if I it was now February 2015 and describe in great detail how everything looks as if it has already happened.

For example, At RegOnline when the support team was just a couple people trying to keep their heads above water, we each wrote out what it would look like a couple years out. We wrote something along the lines of “It’s amazing how we are able to WOW so many customers everyday. And how much our customers love us and how often they comment that we have given them the best support they have EVER received from any company. Our support team is filled with happy, energized, growing people, and we have a line of great people wanting to join our team. Other companies want to learn what our secret is to providing “knock-your-socks-off” customer service so they can do the same at their company.” Sure enough, within a couple years we had a support team at RegOnline that embodied most of what was written!

I’ve done the same with other departments, businesses, and with my personal life over the past 15 years. And have had similar, “holy cow!” moments when I look back on what was written to discover how much has come to fruition.

I don’t tend to do the traditional specific goal setting like, “$5 million in revenue, own a Ferrari, and lose 30 pounds”. I have found that directional, more colorful feelings inspire better results and feel better in the process. For example, “We have become more profitable every quarter which enables us to expand our service to more people and grow our organization. I can now afford to have a nicer car and feel better financially. I have been having a lot of fun improving my physical well being and it gives me more energy in everything I am doing. The abundance I feel and the joy I am able to share with others is amazing.”

Another GREAT example is Zingerman’s 2020 vision (one of the World’s best deli’s based in Ann Arbor)…
Notice how it is all written as if it has already happened. Weird, but it works.

Write yourself from the future and see how great it feels.

Our biggest competitor – Status Quo

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I was talking recently with a telecommunications broker who shops for the best deals for companies. He has a list of prospects he can verifiably save 30% off their phone/internet bills. But only 20% of them have signed the paperwork to make it happen. The rest haven’t moved yet even though every day costs them real $’s. The broker is competing with just “status quo”.
I had another conversation at lunch the other day with the founder/CEO of a medium-size contract development firm that does $200,000 projects for Fortune 500 companies. When I asked what was the #1 reason their bids on projects were not accepted, he said it was because they decided not to do anything at all… “status quo”

In most industries I’ve seen, “status quo” is by far the number #1 factor to compete with. Why hasn’t a prospect bought from us yet? Because it’s easier to keep doing the same-old thing.

Most prospects are just dipping their toes into the water of what it might feel like to make a change or try something new. It is our job to help the water feel warm and inviting to them.
A couple things that help:
1. Easy to try/take the next step (free trial)
2. Being reminded that its never been easier than now
3. A bonus for buying now rather than later (buy now and get something extra)
Bottom line, make it abundantly clear how much better you are than status quo and provide compelling reasons why switching now is a better and easier proposition than having another day of “status quo”.

Being of Service with a Passion

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I just returned from a trip to Queenstown, New Zealand to see my friend’s new gourmet sandwich shop. Yep… committed myself, wife and one-year-old daughter to over 50 hours of airports and planes to eat sandwiches on the opposite side of the world. Why?
Two years ago, we got married in New Zealand and had the single best dining experience of our life there at this tiny restaurant right on the water of Queenstown. When I asked to talk to the chef (which I have never done before anywhere else), out came Ramy Abu-Yousef… a non New Zealand, non chef looking guy who grew up in Iowa, went to Michigan Law School, worked at a big law firm in LA, and THEN decided to put on a backpack with his girlfriend, go to New Zealand, and pursue his real passion – cooking.
So with no formal training, Ramy worked his way from the bottom up to being the head chef and manager of the Bathhouse which we were taking full delight in. Each dish had something about it that made it like nothing we had ever experienced, the atmosphere of the place was uniquely intimate, and the wait staff were joyful. We were so blown away by Ramy that we asked him if he would come to Colorado to cook for our wedding reception a couple months later.
Ramy didn’t cook for our reception, but we did stay in touch, and he started reading this blog. Then last February, after deciding not to buy the Bathhouse, Ramy announced he was going to open a gourmet sandwich shop in town (with a moustache theme for the fun of it)… Johnny Barr’s.
Then in September, I got an email from Ramy saying the shop had been open for just three months and was so well received that it was already profitable. And he asked if I would be interested in getting involved in further growth. I knew nothing about sandwich shops, but there was something unique about Ramy’s passion, that compelled me to go to New Zealand to learn more.
To make a long story longer, what I discovered after spending a week at Johnny Barr’s with Ramy and his lovely girlfriend and business partner Syndey, was an incredibly beautiful passion they both have to share their love for great food with others. Everything about the shop breathed their desire to delight others, from the warm atmosphere of the hand-picked brick walls, to the smiling excited folks working behind the counter, to the constant ongoing food experiments to come up with the best corned beef recipe or homemade granola bars that are a big hit with the 1.5 million backpackers that come through town or the borscht soup made by their Czech cook named “Easy”. Even after working in the shop all day long they would come home to cook even MORE amazing food for us.
It made me realize that having a passion for something is one thing, but using that passion to be of service to and delight others is divine. I have a poster hanging in my study at home that says “The World Needs More Stache”. Thanks Syndey & Ramy for sharing your “stache” with us!

The Magic of Conscious Capitalism

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For as long as I can remember, all I’ve wanted to do is create GREAT companies. Companies where everyone who touches the company – customers, employees, suppliers, owners, and their community – all can say “what a GREAT company!” It has never been about “exiting” or getting rich for me. Growing profitability has been a means to create stability and grow that great connection with more people in more fun ways.

A couple weeks ago I had a chance to spend some time with a couple GREAT leaders and examples of this at the Conscious Capitalism Summit. The founders of Whole Foods, The Container Store, Trader Joe’s, and other really interesting entrepreneurs shared examples of how they have fostered holistic, “conscious” approaches in their businesses.

On the surface, it seems like an obvious, almost hippie, approach to business. But there’s something EXTREMELY powerful about the model by which they all live and grow their companies. Here are a couple examples of differences between our old “shareholder model” vs a more holistic “stakeholder” model:
1. Advertise and “close” customers with gimmicks vs. create real caring relationships
2. Squeeze vendors via costs and terms vs. creating win-win vendor relations
3. Spend more on acquiring new customers vs. creating raving fans of existing customers
4. Have investors focused on maximizing short-term profit vs. greater long term value
5. Look at the company as an asset to be “flipped” vs. a company that exists to bring more and more good value to the world.
6. Treat employees as cogs to accomplish tasks vs. as real people who love customers more because their company loves them.
The differences really boil down to one tenant for me… How can we add more value/appreciation/love to ALL our stakeholder relationships?
“Fill the other guy’s basket to the brim, then making money becomes an easy proposition.” – Kip Tindell, The Container Store

“Long-term profits are maximized by NOT making them the primary goal” – John Mackey, Whole Foods

After coming back from this gathering I decided to try something new with PosterBrain. In October we had our best month ever. So we decided (with the amazing help of my wife, Chelsea) to throw a last-minute party and invite ALL our stakeholders – our tube, ink, and paper suppliers, Fedex rep, Paychex payroll coordinator, HP printer repair man, employees, accountant, and many more. We thanked everyone with hand-written thank you cards and a cool magic trick – thanking them for the specific magic they bring to helping make PosterBrain great.
Our mailing tube vendor, based in Ohio, tried to hop on a plane to be here. Our paper supplier sent cheesecakes from Chicago. Several people sent wonderfully heart-felt emails, including this one from our payroll coordinator yesterday…I received your “Thank you gift”. And I must say I have been laughing all morning. My supervisor read your wonderful note to the whole office and made me stand up in front of them flashing my fingers. It was great fun and thoughtful of you. I appreciate it.”
While pulling everyone a little closer by sharing our appreciation didn’t help the company’s short-term profits, there is a new connection between everyone that makes us all want to share more of our magic to help the company thrive more.

Hitting the Sweet Spot

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At RegOnline one of our biggest epiphanies was that our core business was NOT the bigger events (1,000+ registrations) but the smaller ones (250 regs). At about $5 million in revenue, we discovered that 90% of our revenues were coming from the small guys.

Up until then we spent a lot of time, energy, and money trying to attract the big guys. We had hired a bunch of outbound sales people, spent a lot of time on selling partnerships, and invested significant development resources to try to customize our system to accomodate the “big” guys.

It was liberating to realize the bigger guys were NOT our core. It meant we could simplify and refocus a lot of resources on our sweet spot. Which translates into making an even better product for our “small” guys and be even more profitable doing it.
Finding sweet spots isn’t easy and usually takes a couple million in revenues for it to start to reveal itself (if we are looking). I’ve been exploring the sweet spots with a handful of different companies in the past couple months. And here are a couple questions that have helped us:
1. What group of customers comprise the largest % of our revenues?
2. Which customers are most likely to be repeat/long term customers?
3. How profitable is each group of customers when we factor in marketing, COGS, and servicing costs.
4. What niche do our competitors miss that has a lot of unfulfilled demand?
Unfortunately, it’s rarely an obvious conclusion when looking at all this info. But it does start to facilitate lots of conversations that can eventually answer “How can we be an even better company by focusing on our sweet spot?”
Other examples:
PosterBrain – do we focus on consumers who order just a poster or two once a year or on more business-related customers who place larger orders every couple months?
SurveyGizmo – do we focus on the customers who are looking for more capabilities than SurveyMonkey offers, or on customers who are looking for a lower-priced option to their $100,000/year enterprise systems?
StickerGiant – do we focus on the customers who want cheap custom labels or on the customers who want high-quality custom vinyl stickers… or both because we ARE the StickerGIANT after all.

Minimalist Entrepreneurship

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At RegOnline our revenues were about $150,000 per employee. I used to joke with my partner that we could just hire MORE to increase our revenues. Sometimes it really felt like we doing that. What I REALLY wanted to do was put on a hiring freeze so we would be forced to figure out how to do more with less.
The guys from 37 Signals just wrote a GREAT book about this called Rework. They talk about all the nuances of building a GREAT, but NOT big company. They talk about their minimalist approach and the things that most of us THINK are important to our success, but really are NOT, like: investors, PR, lots of employees, salespeople, meetings, and marketing departments.
Another great minimalist example/article of the guy who built Plenty of Fish. While an extreme example to do $10 million in revenues with 3 people, let it blow your mind into what’s possible.
I like the minimalist approach because it keeps us out of trouble and focused on what really matters without carrying a bunch of extra weight on our shoulders. Which makes it easier to deliver real value to customers in a way that is as sustainable/profitable/fun as possible.

Picking the Right Partner(s)

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I’m still amazed at how great a business partner Attila was for me at RegOnline. I’ve also been involved with and seen many other partnerships that haven’t gone so well. I get asked every so often my thoughts on partnering-up and partnerships. So here’s my experience…

Attila & I didn’t know we were going to be great partners. A friend we both respected suggested we might be good together. We had a short romance of daydreaming together about the future potential of RegOnline. I liked his common sense business approach and his willingness to speak the truth directly and without emotion. But that, in itself, would not make for a great partner.
I’ve seen many people be unhappy with their partners and wish they had done things differently before jumping into bed together so quickly.
Attila & I had a feeling it could work to become partners. So we discussed the terms under which I could buy in AFTER a 4 month trial period.
After 4 months I knew:
1. I loved the business, it’s future, and had a sense I could add real value
2. Attila and I had a similar work ethic (hard when needed, but not non-stop)
3. We had a similar philosophy in growing our team (be direct, compliment sincerely, take action, hire sparingly)
4. We had a similar approach to testing new things, but always staying focused on growing profitability
5. We felt the same about taking care of customers and doing what’s right by them first.
6. A shared sense of humor to laugh with each other every day
After 4 months I don’t think there was a question in either of our minds that we had found great partners in each other, so we did the paperwork and officially became co-owners of RegOnline. 4 years later, we had had a lot of fun building a great company together.
So my advice to people considering partners/partnerships:
1. Have a no-strings-attached trial period with a plan for what happens if both people are delighted to be partners together.
2. Give the founder/controlling partner an easy way to buyout the other partner if things don’t work out in the medium term (up to 2-3 years).
3. Share decision making power, but let the founder/controlling partner pull the trump card every so often.
4. Share/show appreciation for each other a couple times a year.
There’s also another type of “partner”… called investors. If you want to build something great (vs. be pressured into cashing out in 3-5 years) make sure your investor-partners are on the same page as you. Tony from Zappos shares his experience on why he felt forced to sell in this excerpt from his book, Delivering Happiness.