Growthink Blog

Referral Marketing Programs: My Interview With eWORDofMOUTH's Founder


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Do you remember the Faberge Shampoo television commercial from the 1980s?

The one in which the woman says, "I told two friends about Faberge Shampoo, and they told two friends, and they told two friends and so on, and so on..."

Now imagine this happened to your product or service....that one buyer told two more buyers, who told two more buyers, and so on, and so on. Your revenues would go through the roof, and with virtually no marketing expense.

Ah, the entrepreneur's dream.

Unfortunately, I actually categorize this as a "dream" because I don't think any company can count on this type of viral marketing. Even if your product or service is that great, there's no guarantee that people will refer it to their friends.

But you CAN change that.

You can maximize the chance that people will refer your product or service if 1) you make it really easy for them, and 2) you give them the right incentives. In fact, employing a proven referral marketing program can be your most cost-effective marketing tool.

To learn more about referral marketing programs and other cool, cutting-edge marketing techniques, I interviewed Trevor Shanski, the founder of eWORDofMOUTH Inc.

I was not only interested in interviewing Trevor because eWORDofMOUTH seemed so cool, but because I knew Trevor was such a great executor. Specifically, in his previous position as COO of Warehouse One Ltd., he helped grow the company from 13 local stores to 108 national stores, and grew revenues to nearly $100 million in sales.

In the interview, Trevor provided some great tips on referral marketing including:

- What you need before you generate referrals: all you need are current customer and/or prospects

-  The key requirement to get people to refer your business to them: they must be satisfied with you or they will not refer you

- How to reward people for giving you referrals: give them something of value; but that something doesn't necessarily have to cost you anything

- Tips to generate the most possible revenues via referrals: give rewards that encourage them to buy even more from you; for example, if you give them discount coupons, redeeming them would increase your sales

Trevor also gave some great tips on improving your email marketing success including citing the importance of personalizing your emails to recipients and to keep an eye on your open rates in order to determine the right frequency of your emails.

Importantly, Trevor gave me a private demo of the eWORDofMOUTH platform which combines email marketing with referral marketing into one, simple-to-use system. The system also allows for text messaging and multi-location emailing (i.e., if you have multiple business locations, you can centrally manage and customize emails to customers of each location) making it extremely powerful.

As  you can imagine, by using eWORDofMOUTH, you can generate a significantly higher ROI on your marketing dollars than traditional marketing methods.

To see a demonstration of eWORDofMOUTH's system for yourself, click here.

Growthink University members can listen to the full interview with Trevor Shanski and/or download the transcript here: http://www.growthinkuniversity.com/members/356.cfm.

Not only does the interview cover referral marketing, email marketing and mobile media marketing, but I got Trevor to reveal his secrets to operational success (as mentioned, as COO of his last company, he grew it to nearly $100 million in revenues) and how he developed a highly-impressive, nine-person Board of Advisors.

To hear a short clip of the interview, click the blue triangle in the player below:


How To Be An Entrepreneur


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I just finished conducting an interview on how to be an entrepreneur.

And near the end of the interview I asked an interesting question.

I wasn't sure regarding the response I would get, but I was pleasantly surprised.

The question I asked was, "What do you think makes the difference between a good and a great entrepreneur?"

I was expecting a list of qualities that the great entrepreneurs have.

But instead, entrepreneurship expert Dr. Bruce Barringer, gave a really great answer.

He said, "A great entrepreneur makes a difference in your life."

He went on to explain that the founders of Google have changed his life as he spends so much time on Google these days. But you don't have to be the next Google to be a great entrepreneur.

The founders of the local coffee shop have also changed his life. As have the companies that created the podcasting technologies that he employs every day.

The point is that great entrepreneurs are those that create products and services that truly benefit their customers in such a way that the customers integrate them into their lives.

When I think about my life, I can concur. The entrepreneurs who started the gym I go to, the gasoline station I frequent, and the supermarket where I buy my lunch have done a great job creating products and services that meet my needs. If they didn't, I'd patronize their competitors.

So, as you start and/or grow your business, you should make all of your key decisions with this question in mind: "will this decision allow my company to better serve customers and make a bigger difference in their lives?" As Dr. Barringer pointed out, if you solve the customer need, the money will follow.

To hear Dr. Barringer's answers to all of my questions on how to be a more successful entrepreneur, listen to the full interview on Growthink University here:

http://www.growthinkuniversity.com/members/361.cfm


Entrepreneurial Success: The One Thing You Need


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The other day, a BusinessWeek reporter contacted me with a question about entrepreneurial success.

She wanted my thoughts on a new business opportunity that one of their readers was considering.

The opportunity was "to open a sports store to sell products just from the four major sports teams in my city."

I hated the concept.

I immediately wrote back to the reporter:

"Is there really a need for this store? Who else is currently selling these items (stadiums? national retailer like Champs?) If there is no directly competing store, maybe there is no market? Is it hard to purchase these items online? I would think most of these items are easily found online at decent prices.

Will you offer anything that a national chain (http://www.champssports.com/) doesn't. Even a formerly local store (http://www.cosbysports.com/ in NY) now sells all teams' stuff online. And Cosby has a lot of unique items (e.g., autographed equipment and pictures that you can't find elsewhere).

The only thing that I think could work is offering unique items that you can't find elsewhere, mainly stuff like autographed pictures/equipment and collector's items. This stuff is available on eBay, but many people still like seeing/touching used stuff over buying online. With new items, I can't see this concept working since there's too much competition.

Finally, note that with the new items, the online stores have so many items. A physical store can only have so many SKUs or the inventory cost will go through the roof.

Once again, the concept only seems to work if the store offers items not available elsewhere (which will also make it more authentic - which is GOOD)."

So, why I am telling you all this?

The point that I want you to get is that your success in business is predicated on just one thing - your ability to solve the needs of your customers better than alternative methods.

In this case, unless the store carried merchandise that others didn't, it simply didn't solve customer needs any better.

So even if this entrepreneur quit their job, raised money and worked 24 hours a day, they probably would fail.

You need to worker smarter and not harder. And working smarter means that you are always looking to better satisfy customer needs; since that is the key.

Whether you are a detergent company looking to get clothes even cleaner, or a chair manufacturer looking to make chairs even more comfortable at a lower price, you must constantly be thinking about solving your current and potential customers' needs.


Successful Exit Strategy Planning: 5 Insider Tips


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Why do entrepreneurs start new businesses?

Well, for some, they simply love the thrill of starting a new business. For others, they have a great idea that they think will help people, and are eager to fulfill this unmet customer need. For some, they want to create a paying job for themselves and/or not have to answer to a boss. And for still others, they have grandiose plans to "change the world."

While the individual goals for each entrepreneur may vary, most sophisticated entrepreneurs share one common goal when starting a business - to eventually exit the business for a large sum of money.

Savvy entrepreneurs know that they can make money day-to-day running a successful business. But, they know that the real money comes when they "exit"; that is, when they take the company public, or more likely, sell the business. That is when the million-dollar windfall comes that most entrepreneurs dream about.

Having successfully bought and sold businesses in the past, I have my own views on the topic of "exit strategy planning" or how to prepare a business to maximize the likelihood of 1) selling it and 2) the price at which it eventually sells. (Note that I tend to equate "exit" with "selling a business" since this is the most likely form of a successful exit.)

But, in order to provide more expertise on this subject, I recently interviewed John Davies.

Not only is John the co-author of "Selling Your Business For Dummies," but he has significant experience buying and selling businesses as the CEO of Merrymeeting, Inc.  

In fact, not only does Merrymeeting own Sunbelt, the world's largest business brokerage firm, but Merrymeeting owns and/or has a majority interest in numerous national and international service franchise businesses.

In my interview, John conveyed his five insider tips for successful exit strategy planning.

The first is to make yourself replaceable. That is, if you as the business owner are too critical to the business' success, no one will want to buy it. You need to make sure that you have trained others that can run the business successfully in your absence.

The second tip is to make sure that your business has "predictable future revenues." The predictability of revenues has to do with how many new customers you get and the number of times your customers buy from you over time.

Clearly, a business that has repeat customers is more valuable than a business that has to constantly search for new customers. If your business is the latter, you need to figure out how to extend the lifetime value of your customers.

To learn more about these two insider secrets, get three more great secrets, and to learn John's personal 3-point plan that he's used to start, grow and run numerous multi-million dollar empires, listen to the full interview on Growthink University here.

To hear a short clip of the interview, click the blue triangle in the player below:

 


Can You Believe This Guy?


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The more I learn about this guy, the more impressed I am.

And if you've been reading my emails, you've heard me talk about him. In fact, he's mentioned in Growthink's Definitive Guide to Creative & Alternative Financing Sources because he initially financed his business via credit cards (in the Guide, I present the best way to do this in addition to 27 other overlooked funding sources).

I'll tell you who he is in a second. But first, let me tell you why I thought of him again. Well, next week, we are celebrating Growthink's 10 year anniversary with a party at the Los Angeles Sheraton. And at the anniversary event, I will be giving a presentation on the key entrepreneurial lessons that we've learned over the past 10 years.

In putting together this presentation, I started assembling a timeline of interesting business events that have occurred over the past decade; like the formation of Napster in 1999 and the founding of Facebook in 2004.

And in doing this research, I thought it would be interesting to see how this guy's company has fared since Growthink launched in 1999.

Well, the guy's company, which he founded in 1996, reached the $1 million sales mark for the first time in 1999. And, when I searched to find his company's revenues today, I learned that last year (they haven't reported revenues to date in 2009 yet) their revenues reached $725 million.

That's right -- $725 MILLION!

Now, that's not even what got me so pumped up. What got me excited was that in 2008, the company's founder's goal was to reach revenues of $775 million.

And, when he didn't achieve that, he cut his $500,000 annual salary to just $26,000.

Yes, even though he generated $725 million in revenues, since it didn't meet his expectations, he cut his salary to a mere $26,000.

The "guy" that I'm talking about is Kevin Plank, founder and CEO of sports apparel company Under Armour.

This is a guy who maxed out his credit cards when he was starting a company in his mid-20s. Not to mention that he was launching a company in a very crowded space with massive competitors. Not many other people I know would have the nerve to compete head-to-head with Nike, Adidas and Reebok to name just a few.

Kevin Plank is the true entrepreneur. He had undying faith in his vision and put his money (and his credit) in his belief. And when he didn't meet his goals (like generating $725 million instead of $775 million in revenues) he accepted the blame himself. He didn't blame others. No, he took a massive pay cut to improve the company's financial performance in challenging economic conditions.

I hope that Kevin Plank inspires you like he does me. I'm sure he has many faults like the rest of us, but his faith in his business seems unparalleled. This happens when you truly love your company and truly believe in it.

I am fortunate that I truly love Growthink and truly believe in our mission. The result has been 10 years of success and ambitious plans to grow in the future. I hope that each of you are as passionate about your own businesses. For this passion is essential to your success.

Who Has a Vested Interest In Your Business?


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Imagine a business opportunity that had a 95% chance of success.

Would that interest you?

Now, what if I further told you that not only was there a 95% chance that you would make money year after year from this opportunity. But that you would also continually be building equity in a business that you could sell in the future and retire.

Sound good?

Well, I'm not here to tell you about a specific business opportunity like this. But I am here to tell you about an interview with someone I did who has experienced over 1,000 opportunities like these.

That person is Ed Pendarvis.

Around 30 years ago, Ed founded Sunbelt Business Brokers Network, LLC. He has since grown Sunbelt into the world's largest business brokerage firm with approximately 300 licensed offices. Also, Ed has personally managed the sale of more than 1,000 businesses.

Few, if any, people have this level of experience and expertise. So, I was fortunate to get Ed on the line to get answers from him on key areas to help you grow a successful business.

And one of the incredible things that Ed told me was the approximately 95% of businesses which are purchased succeed.

Now, after digging a little, the reason we concluded that this happens is because there is a serious vested interest in these business.

To begin, typically with these businesses, the buyer invests all or a substantial portion of their life's savings in buying the business. As such, they have a serious vested interest in the business' success.

And, Pendarvis goes as far as stating that he would not buy a business if the seller didn't provide seller financing. The result of seller financing? The seller doesn't get paid if the business doesn't succeed.

As a result, the seller has a vested interest in the business' success and works to train the new owner how to expertly run the business.

Which leads to the question of "who has a serious vested interested in your business?" Obviously the more and better qualified the individuals and companies which have a vested interest in your business, the better the chance of your success.

So, if you have not done so already, get qualified personnel, advisors, joint venture partners, investors, and others who can take a vested interest in your company, and your success should skyrocket.



--------------------------------------------

Growthink University members can download the full audio of the interview I conducted with Ed Pendarvis here:

http://www.growthinkuniversity.com/members/357.cfm

In the interview, Ed revealed tons of great tips and information regarding buying a business, including:

* Why the success rates of buying a business or buying a franchise are over 10 times greater than starting a business from scratch
* The key things you should look for when buying a business, and the first thing you must do
* The most qualified person in the world to teach you how to run the business you bought
* The easiest place to find ideas to grow your new business
* How to maximize the productivity of your workforce once your acquisition is complete
* The 3 places to get financing for the business you buy
* Why buying a business is so much different than buying a house

In addition to great information on buying a business, I got Ed to reveal tons of useful information for those starting a new or growing an existing business, including:

* How to build a business that makes others want to buy it at the highest price
* The common traits he has found in over 1,000 successful business owners
* The technique he used to ensure quality control as he grew Sunbelt from just one to over 300 offices
* How Ed ensures that he is as productive as possible every day

If you are looking to start, buy and/or eventually sell your business for a lot of money (which I hope applies ALL of you), this is an interview you want to check out!

Listen to the full interview here: http://www.growthinkuniversity.com/members/357.cfm

Non-members can listen to a brief clip of the interview by clicking on the blue triangle in the player below:


How Could This Possibly Happen to A Rock-Solid Company?


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The conversation I had the other day started like many others I have with entrepreneurs.

"How can I help you?" I asked.

"I need money to grow my business," he said.

"So how far along is your business right now?" I replied.

Now, here is where things got a little strange.

In most cases, the entrepreneur says that they are just starting out. Or that they have been around for a year or two and have some customers and a nice revenue base.

But this entrepreneur responded, "Well, we're 7 years old and projected to do $120 million in revenue this year."

???  No, this was not the response I was expecting.

So, why does a company that's doing over $100 million in revenue need capital? To buy a competitor? To build market share since it's selling products at a loss?

While these are two valid reasons why more established companies constantly need capital, this company was actually very profitable and not looking for acquisitions.

So, why then did this company require capital?

Because it was growing too quickly and hadn't financially planned for that. You see, the company was manufacturing and selling products at a nice profit, but it needed to pay its manufacturing costs 90 to 120 days prior to when it received payment from its customers.

The result is a cash crunch.

The company has lots of outstanding orders. But it can't fulfill them since it can't lay out the cash to manufacture the goods. This is extremely frustrating for the entrepreneur, and potentially lethal (if customers decide to switch to a competitor).

Now, there are two key ways around this problem.

One, as discussed in Growthink's Definitive Guide to Creative & Alternative Financing Sources, is customer financing, whereby the customer pays for the product upfront or more quickly in return for some benefit (equity or price discounts).

The other is getting outside capital to solve the cash crunch.

The underlying issue here that you must understand is that "cash flow" is very different than "profitability."

Profitability compares your revenues to your costs. 

On the other hand, cash flow determines when, where and at what times cash is coming into and cash is leaving your company. And without proper cash flow projections, a fast growing company can find itself in big trouble. 

That's why it's critical that all companies, as part of their business planning process, prepare a Cash Flow Statement or forecast. And in fact, companies should prepare cash flow forecasts every month if not every quarter.

This is particularly important for companies who expect significant growth or those with seasonal sales fluctuations.

Your cash flow statement is roughly calculated as follows: Cash Flow From Operations minus Cash Invested in Equipment plus Cash Received from Outside Financing.

It gets a little more complicated than this, since Cash Flow From Operations includes things such as whether your accounts receivable (how much money you are owed from customers) is going up or down, etc.

So, the key takeaway is this - do NOT risk bankrupting or slowing the growth of your business because you don't forecast your cash flow statement every quarter or month.

If you need help, the financial model portion of Growthink's Ultimate Business Plan Template has a full, plug & play, financial model which includes your Income Statement, Balance Sheet and Cash Flow Statement, so you can accurately project what your monthly cash flow will be. 

Importantly, this will ensure that you can get financing, as needed, well BEFORE the months when you need it (and not risk your company's future).

Here's the link to Growthink's Ultimate Business Plan Template -  http://www.growthink.com/products/business-plan-template.

Business Insurance Information for Emerging Growth Companies


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The other day I was given a badly-needed, private webinar by John Moccia, Technology & Venture Capital Practice Leader at Rollins Insurance, which is a member of TechAssure.

John has been working with venture capital firms and emerging ventures for many years to make sure they are properly protected. And he was gracious enough to give me a private presentation (which we recorded as a video) regarding the insurance needs at the four key stages of an emerging company's lifecycle:

Stage 1 - Formation/R&D
Stage 2 - Growth Phase
Stage 3 - Mature Company/IPO
Stage 4 - Public/Fully Developed Company

I think all of you will find tons of value in this presentation, particularly as it relates to Stage 1 and Stage 2, where most of you currently are.

John went through each of the key types of insurance that entrepreneurs need during these phases. He discussed numerous types of insurance that you must be aware of, including:

• General Liability
• Property Coverage
• Business Interruption Coverage
• Workers Compensation & Disability
• Errors & Omissions
• Directors and Officers Liability
• Crime Coverage
• Global Companion Policy
• Employee Benefits including medical, dental, 401k, life and disability coverages
• Key Man Life Insurance

Importantly, John not only talked about what each of these insurance policies are, but he explained when you need them and when you don't, and gave great tips regarding finding the right insurance policies for your company (and what to look out for).

Now, I'll be the first to admit that buying insurance for your company is not the most important part of being an entrepreneur. But getting the right insurance is part of being a sophisticated entrepreneur.

And in fact, several types of insurance are required when reaching key milestones such as getting your first office, raising capital, and expanding geographically. So, it's important to understand the key insurance issues and plan accordingly.

You can watch the video below:



If you need to contact John or Rollins, his contact information is on the last slide of the video.

An Entrepreneur's Most Controllable Success Factor: An Interview with Dr. Basil Peters


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The other day I had the pleasure of interviewing someone who I really admire - Dr. Basil Peters.

What I really like about Basil is that he's had success in so many positions. As an entrepreneur, he co-founded Nexus Engineering, which he grew to over 300 employees and sold to Scientific Atlanta.

He's also had success as a venture capitalist as CEO of the venture capital fund, BC Advantage Funds. And he is a successful angel investor, and co-founder and CEO of an angel fund called Fundamental Technologies II.

Basil also writes a blog on best practices for angel investors and entrepreneurs at www.AngelBlog.net and he is an Entrepreneur in Residence at Simon Fraser University where he spent 15 years as an Adjunct Professor of Engineering Sciences.

And finally, Basil is the author of a great book on exit strategies called Early Exits: Exit Strategies for Entrepreneurs and Angel Investors.

So, with this wealth of experience, I knew that I would learn a ton from the interview, and more importantly, be able to pass on several nuggets of wisdom to other entrepreneurs.

And he delivered.

In fact, Basil made one statement during the interview that I've thought about nearly every day since we spoke. Here's what he said:

"...So I've come to believe that it's a law. I believe that successful entrepreneurs have mentors, and I also believe that it's the most controllable success factor - it's the single thing entrepreneurs can do that would dramatically improve their chances of success that they can control."

An entrepreneur's most controllable success factor. Those are pretty strong and pretty wise words. Let's think about this. From the perspective of a proven entrepreneur and investor, having a mentor is one of the smartest thing an entrepreneur can do to improve their chances of success.

And Basil told me that virtually every successful entrepreneur that he has met has had either a formal or informal mentor.

So, why wouldn't every entrepreneur have a mentor?

Let's start with me. I don't have a formal person that I call my mentor and who considers me their mentee.  But I have had several informal mentors. An uncle who's a successful business man. Mega successful Growthink clients (I define "mega successful" as having exited companies for $100 million or more) who I've worked very closely with for years. And professors who have taught me and answered my numerous questions over time.

Now for those of you entrepreneurs who do not have mentors, I'm going to give you a hard time....Let's go over some excuses you might have:

  • I don't have enough time
  • I'm afraid to ask a potential mentor for fear I might get rejected
  • I don't know who to ask to be a mentor

Unfortunately, none of these excuses are valid.

Finding a mentor shouldn't take all that much time, and this time will possibly have the greatest ROI of all your time investments.

Regarding fear of getting rejected, you'll simply have to overcome this. The fact is that you probably will get rejected by some potential mentors. That's ok. But you can't be afraid to ask. And to persevere until you find a great mentor.

Like everything else in entrepreneurship, rarely does your first effort work as planned. You need to persevere and keep trying.

Now finally, with regards to not knowing who to ask, I believe that any business person who has achieved success and who you respect and admire can make a great mentor.

Wow, 500 words so far, and I've only touched on one of Basil's great points. To get many other great insights from Dr. Basil Peters, listen to the interview.

Click below to hear excerpts from the interview:



To download the full interview and/or transcript click here.

Creative Business Financing: CNN Money Identifies Creative Financing Loophole


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As a reader of my blog, I'm sure you're aware of my "Definitive Guide to Creative & Alternative Financing Sources."  The Guide presents 28 unique ways to raise money to start or grow your business.

I knew the Guide was really good (since it took me so long to create and since buyers have continually praised it), but I didn't know just how impactful it would be.

Well, a month ago, CNN found out about the Guide, and a CNN Money Reporter contacted me.

What resulted was a full story on ONE of my creative and alternative financing sources: customer financing.

You can read the article here: http://money.cnn.com/2009/09/08/smallbusiness/barnraising_a_business.fsb/

What I liked most about the article is that Helaine (the reporter) gave numerous examples of customer financings. This will hopefully give you more ideas on how customer financing might be right for your business.

If customer financing is not right for you, or if you want to tap 27 more unique and proven alternative and creative financing sources, download Growthink's "Definitive Guide to Creative & Alternative Financing Sources."


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