Growthink Blog

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."


Raising Capital Through Lobbying: An Interview with Jack Burkman


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I recently had the opportunity to interview Jack Burkman, the founder and president of Burkman Associates LLC.

You may have heard of Burkman since he appears frequently on ABC, CNBC, MSNBC, ESPN, and many other networks. He was also a former FOX News political analyst.

Jack Burkman has been raising capital for companies using an extremely rare technique - government lobbying.

According to Burkman, money for many types of companies can be raised from congress and government agencies (e.g., Department of Energy, Department of Homeland Security, etc.).

An Interview with Renaud Laplanche, Founder & CEO, Lending Club


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I recently had the opportunity to speak with expert entrepreneur and founder/CEO of Lending Club, Renaud Laplanche.

Renaud is an expert in raising capital, as he has successfully raised multiple rounds of venture and other capital -- totaling over $50 million for both Lending Club and Triple Hop Technologies, of which he was also the founder.

So I was excited to ask him questions about raising capital for one's business and how LendingClub can help individuals and entrepreneurs. In the interview we covered:

  • How LendingClub works
  • The importance of your FICO score in getting a peer to peer loan
  • How your track record of success factors into a successful capital raise
  • That factor matters the most in selecting a VC
  • Renaud's single most important tip for those looking to raise funding


Click below to hear excerpts from the interview:

 

 

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


Keys To Hiring & Retaining The Best Employees


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If you are managing an early stage or growing company, it typically means that you are cash restrained.

And, as a result, you are often unable to pay employees salaries commensurate with what they would earn at larger organizations.

So, how do you manage this and hire and retain the best staff?

In order to do this, you need to understand and manage the four core factors that effect an employee's satisfaction and thus willingness to join your company and/or stay with you.

The first key factor is financial compensation, which includes the employee's salary plus benefits such as healthcare, and any significant perks. For the most part, early stage companies can't compete with larger entities when it comes to these salaries.

However, with stock options and/or profit sharing, smaller companies can better motivate employees and give them the potential to earn even more money then their large organization counterparts should the company succeed.

The second key factor effecting employee satisfaction is lifestyle. Specifically, how does your organization accommodate the employee's lifestyle? Do you offer daycare? Flexible schedules? For some employees, the ability of the employer to accommodate their lifestyle is of critical importance.

The third key factor that employees consider when assessing whether to stay with a company is how much they enjoy their jobs and coming to work every day. Clearly there are millions of workers that hate their jobs. But, for the most part, these aren't the best workers. If they were, they would have lots of other job opportunities.

It is up to the small business owner to create an environment whereby employees enjoy their work. They must enjoy working with the other members of the company, the types of work they are doing, and their work conditions. They must feel that they are a part of the overall company culture. They must get along with their co-workers, and feel their boss appreciates them and treats all employees equally and fairly. And they must receive adequate communications as to company policies and decision-making.

The final factor with regards to satisfying your employees is to ensure that they are learning and developing skills that will further their careers, whether or not their futures lie with your organization or with another organization (preferably they see advancement opportunities within your organization).

Employees need to be continuously trained and have the ability to continually learn so that they become more valuable assets. This training can be formal, and/or it can include learning from trying new tasks and projects.

It is up to the business owner to ensure that employees are given training and projects that expand and improve their skills.

As an entrepreneur and/or business owner, it is your duty to hire and retain the best staff. Since, no one person has the ability to grow a massive empire with the help of others. In building your teams, consider and constantly revisit these four key factors and make sure you create and foster and environment that gives your firm a competitive advantage in each of these areas. In doing so, you will maximize your chances of building a truly superstar company.

How Seeking Out Failure Can Lead to Your Success


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I read a very interesting blog post the other day about "survivor bias," an important statistical principle that could greatly affect your future success.

In brief, survivor bias occurs when an analysis excludes information since that information no longer exists.

Let me give you an example...

The English forces, during World War II, sent planes each day to bomb the Germans. As you might expect, several of these planes were shot down. And, the ones that did come back typically returned with multiple bullet holes.

Now, the English obviously wanted to maximize the chances of its planes and soldiers returning home. So English engineers studied the planes that returned. In doing so, they found patterns among the bullet holes. Specifically they found lots of holes on the wings and tail of the plan, but few in the cockpit or fuel tanks.

As a result, the English added armored plating to the wings and tail.

As you might have already concluded, this was the wrong thing to do. The better decision would have been to add armored plating to the cockpit and fuel tanks. For, the planes that were shot in those places were the planes that were shot down and never returned.

The English engineers' analysis missed this data because these were the planes that they were unable to examine. This is "survivor bias"-- their inability to include this critical data in their analysis since it was unavailable or didn't "survive."

So why does this matter to you?

It matters because as you start and/or grow your businesses, you will have to hire service providers and staff. And naturally, you will want to hire those with a track record of success.

But, when you hire staff who have only worked at successful companies, you may fall victim to survivor bias. That is, they have not learned many of the lessons that individuals and companies learn when they fail.

Likewise, when you hire a service provider that claims that every one of their clients has been successful, maybe they haven't learned from client failures.

They say that you learn more from failure than from success.

While that can be debated, from personal experience I can say that I've learned a ton from both failure and success. From successes, I have learned principles and formulas that worked. The ones I strive to replicate on a daily basis.

And from failures, I have learned things to avoid. I have learned flaws in my thinking. But importantly, many of my successes have come out of failure. From tinkering ideas and plans that weren't quite working. And making them work. And, these new ideas would never have come to me had I not failed first.

Now, clearly my advice is not to hire failures or those with a habit of failure. But, likewise, it's not to hire staff or service providers who claim to always succeed. Since a balance between success and failure often provides that winning combination of wisdom.

So, the next time you are interviewing a key hire or service provider, make sure to ask about their failures. Ask about tasks and jobs that they or their companies failed at. And find out what they learned from that failure.

Ideally they are the types of candidates that learned a lot from their failures and were able to overcome them. This is because the vast majority of growing companies fail at things over and over again. It is their ability to constantly modify and improve their businesses that enables them to excel. Surround yourself with people that have this ability.

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