The 6 Skills Every Billionaire Has Used To Become Super Rich

“Millionaire isn’t cool.  Do you know what is cool?  Billionaire” – The Social Network Let’s face it in a world robbed of royalty billionaires and celebrities are all we have left and billionaires literally can buy celebrity or the presence of celebrities.  It’s like the gold medal of business so how did they get there? […]

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The Importance of the Rules and Dangers of Breaking Them

There’s a harmful statement many entrepreneurs are fond of listening to “rules are made to be broken”.  If that’s the case you’re following the wrong set of rules.  Effective rules are designed to give you the best results.  Consider traffic laws if you started driving on the opposite side of the street what would happen?  It would create chaos and slow everyone down, it might work in a small situation but on average respecting and following the traffic rules helps traffic to flow better for everyone.  The same is true for business and investing.

At Richucation we make a point of teaching the universal rules.  Lots of sources preach rules that are a bit like “don’t put your elbows on the table”, they might be conventionally accepted by they aren’t truly important in the modern age at least not in most situations.  But there are essential rules in business and investing, rules designed to ensure you are consistently growing and making money, you can break them now and again and get away with it but it’s unwise because in the aggregate you’ll end up losing out.

All too often I’ve made this mistake, allowing an employee to do something that breaks the rules to encourage them to take risks, unfortunately they were risking my money not their own, we lost money and I should have intervened.  Getting involved in a business whose foundation wasn’t solid, at first it seemed great, the lie I’d allowed myself to believe, and ultimately it lost money.  Skipping the process of acquiring security on an investment relying on the integrity of the participants and strength of the venture to move forward.  Or failing to put something in writing for mutual agreement, or proceeding without getting an agreement signed and then discovering the terms I expected weren’t honored.  The list goes on, the point is rules such as these, unwritten and even unknown though they might be for most are designed to facilitate success and it’s unwise to violate them.

What are some examples of these rules?

  • Buy/engage with a margin of safety
  • Don’t get involved in something you don’t understand, increase expertise to expand where you operate
  • Test small then scale
  • Get great quality data and use it to make your decisions

As you explore business and investing, wealth building, you’ll learn there are certain foundational essentials and that you shouldn’t avoid these.  Don’t get involved in a non-repeat business.  Get involved in businesses based on growth first, only then consider price, people with high integrity have no problems putting agreements in writing.  The list goes on, suffice to say there are rules, but more importantly you must stick to these rules, at times there will be emotional pressure or perhaps a sense of rebellion to break them but don’t, they are meant to be followed not to restrict you, but to enhance your success.  When you don’t follow them, the tendency is to lose time, opportunity, and money, you might gain a little in some way that’s easy to rationalize, but it’s nothing compared to what could have been gained if you’d just followed them.

Have a question about the fundamental rules of business and wealth building?  Want to run a question, thought or idea by us?  Feel free to contact us by clicking “Ask a Business Question” in the lower right corner of the screen.

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Hiring Case Study: Resumes are a waste here’s what’s better

As crass as the above image is it hits the nail right on the head. At the end of the day as business owners we must take responsibility for everything that happens within our business. I personally was sick and tired of hiring the wrong people for mine. What I’m about to show you has saved me thousands of dollars in outsourcing to the wrong outsourcers or hiring the wrong employees as well as countless hours of frustration, resentment and basically everything that makes me procrastinate and hate what I do.

Have you ever hired someone to build you a landing page or a website? And instead of making your life easier it just made it harder? and instead of saving you time and money it made things more expensive and consumed more of your valuable time? This used to happen to me all the time. Keep reading on as I show you the EXACT processes and systems I developed for screening and hiring employees till it reached the point of minimum effort and maximum gain (Typically called the Pareto principle but you get the idea).

The most commonly used methods to screen applicants when recruiting and hiring are also the most useless yet somehow most companies persist in this idiotic behavior.

You don’t need to be like them, you can improve your hiring results and decrease your time spent extremely easily through some simple changes to your process.

Today we’ll explore one of them – the alternative to resumes.

I should mention in advance this particular technique is designed for low and medium skilled positions.  Although it can in theory be applied to high skill and executive positions the application there serves a different purpose.

We’ve used this method successfully to screen:

  • Labourers
  • Sales people
  • Engineers (electrical, mechanical, geotechnical, etc.)
  • Trades people (welders, machinists, mechanics, etc.)
  • Technical people (computer programmers, technicians, etc.)
  • Many others

 

You can grab our whole step by step process with examples by downloading our recruiting process templates

 

Background – The Screening Problem

bad hire

I owned a recruiting company for 7 years we screened tens of thousands of applicants, often we’d get literally hundreds applying for a single job.  There’d also be times where we wanted to go back into our database to find someone who fit what we were looking for…how do you do that when you’ve got literally tens of thousands to weed through?

This was an exhausting process to say the least.

Let me do some quick math for you.

If you sit down and review resumes thoroughly say they are on average 2 pages and you read 1 page per minute that’s 2 minutes per resume to read it over.  Frankly, some are longer and you probably won’t be giving much attention to detail but consider what this does to your hiring costs.

2 minutes per resume multiplied by say 200 resumes is 400 minutes of time…just screening resumes.  That’s over 6 hours!  And that’s without accounting for distractions, etc.

If your time or the time of the person screening is worth $50/hr (it’s almost certainly more by the time you consider operational overhead, etc.) that’s over $300 you’ve spent and for what?  You’re not going to remember most of those, at best you’ve got a very long short list.

What’s the alternative?

Most people develop biases that allow them to screen resumes faster.  I’d train our staff to screen a resume in about 20 seconds each looking for very specific things based on the position.

What’s the problem?

The biases are almost always at least partially wrong, things like “do they have a university degree” becomes a way to screen because you’ve got to do something to narrow the candidate list even if a degree has absolutely nothing to do with whether they’ll make a good hire.

The other solution involves technology.

Software can parse the resumes and make them searchable, decreasing how much time you spend opening files and reading through information.

The problem?  The resume itself is the problem!  It doesn’t matter if you can parse it, it rarely includes the information necessary to properly screen the person for the next step.  Search works based on keywords and a great applicant might through no fault of their own not use the keyword you’re searching for.

Why?  Because they don’t know what you’re looking for.  The candidate has created a form resume designed to be submitted to dozens of possible jobs so it’s generally generic and often includes irrelevant information while missing key points that matter to you.

What often ends up happening is whoever is screening the resumes doesn’t look through all the applicants but just settles for one near the top meaning they could be missing someone way better but because they don’t have the time to go through them all they’ll never know.

I’m as guilty of this as anyone and it felt bad to know that the squeaky wheel would get the grease or someone really good was missing out because they weren’t as aggressive in following up.

 

Resumes are Irrelevant

resume fear

There are some voodoo consultants who claim to have magical powers to determine candidate fit from resumes.  It’s rubbish.  Complete and utter nonsense.  Here’s why:

  1. Often resumes aren’t even written by the person applying for a job they might have used a template or gone to a third party resume writing service so what you think you’re gleaning from that resume might have little to do with them.

 

  1. Often the best candidates have poor resumes because they aren’t used to having to write resumes because they are busy doing great work, they are throwing one together quickly to apply when they are otherwise busy. By contrast some of the worst candidates are professional job seekers who might have great resumes.

 

  1. A good resume is designed to sell you not give you objective information about whether the candidate is a good hire so it’s at worst lies and at best highly filtered data, neither of which tells you accurately whether the person is a good candidate or not.

We tried all kinds of fancy voodoo, language profiling, NLP writing analysis, learning for different personality patterns in the writing, etc.  We consistently got the same result…frustration as what the resume said or how it was written failed to correspond to on the job performance.

Think a spelling mistake or grammatical error means the person is a poor candidate?  First, in the real world a spelling or grammatical error is rarely high impact, second, anyone can make a mistake and it doesn’t prove anything as much as you’d like to think it does or should.

These are the kinds of biases people form reading resumes.

Bottom line isn’t to bash on resumes it’s to point out that they are a waste of time…quit wasting your time.  You’re literally throwing money down the drain unnecessarily.

 

The Disqualification Process

The goal of the resume or what we’ll call the application process isn’t to select someone to hire it’s to decide who not to move to the next step in the process.

Ideally, this step helps you build an easy to reference database and gather some market data.

The way to do this is to determine your “disqualifiers”, which are objective in nature and then screen out anyone who doesn’t meet them as quickly as possible.

Please note, these disqualifiers should be data driven, meaning there’s no interpretation involved.  A huge part of the problem with resumes is they are so open to interpretation that you can out think yourself.  You want to eliminate thought from the process and make it robotic.

What does this accomplish?

It means you can outsource this step for $2/hr. saving thousands.  It means it can be done extremely quickly saving thousands.  And it means you can make better quality decisions, which will likewise save you thousands.

 

If you’d like you can download our disqualification templates here.

 

The Resume Alternative

We generally refer to the resume alternative as a disqualification email simply because we deliver it by email but it could just as easily be an application form you have applicants fill out on your website or in person when applying (less practical today).

What you’re aiming to do here is to reduce your cost per hire and decreasing the time to hire while simultaneously increasing your quality of hire.

Bottom line your objective here is to improve your hiring ROI.  Remember everyone you hire should be making you money not costing you money and the less they cost you including the cost to hire and manage them the better off you are.  Literally, hiring can be a huge competitive advantage.

When we started doing this it felt so much better.  It’s more efficient, it’s clearer, and more organized for the future.

Process wise what you’ll do is have everyone who applies fill out this form you’ll create for them.  Literally you’ll never read an email they send or look at a resume those are both a waste of time.  On your website or in your ads you’ll encourage them to fill out the appropriate form and if they send you a resume you’ll reply with this instead.

It’s highly efficient and actually will allow you to give better service to the candidates, which they appreciate.

Literally, for the initial point of contact you can use an auto-responder or templated email.

Download a sample in our copy and paste recruiting template pack here.

 

Disqualification Form

Really it’s very simple.  You’re going to ask them for every objective piece of information you’re looking for rather than relying on them to guess what you need to know.

You’re going to remove emotion from the screening process by standardizing how you gather the information.

The key here is to ask for OBJECTIVE information.

In other words, you’ll never ask something like “are you a hard worker?” or “are you a team player?”

You’ll ask about whether they have particular certifications and ask them to provide a copy or a certification #.

You’ll ask logistical questions like what schedule they are available to work.

You’ll ask about experience only in an objective manner like “please name 3 projects of such and such type that you’ve worked on” or “please list the heavy equipment you’ve operated”.

The idea here isn’t to provide perfect screening on the quality of how well they’ve done it only to establish with relative accuracy that they have done it so it’s worth your time to screen further.

These questions should be tailored to the individual position you’re hiring for and not be generic though of course you’ll have some overlap between positions.  What this should also do is match

What you’ll end up with is a form you can fill out that corresponds to the position profile you created so you can see at a glance the quality of match.  It all works perfectly together.

To get a copy of the position profile, disqualification form template, etc. download our copy & paste recruiting template swipe file here.

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3 Ways To Save More On Every Purchase

The quickest easiest way to have more money is to spend less.  The quickest easiest way to get ahead is to get more value for every dollar you spend.  Usually, when working with people a typical person can save 10%-20% of what they make over what they are saving already just through some simple strategies.

Today we’re going to go through the master toolset for increasing value for your money.  It is the universal that if you master it you can apply to absolutely any expense in any field.  You can save yourself and businesses thousands or millions of dollars each year and you can imagine what that’s worth.

It also has the advantage of helping you to identify hidden opportunities in the assets you’ve already got to increase your income and help those around you.

It’s what we call the 3 dimensions of value.

When you make any purchase of any kind there are three components that go into that purchase determining how much value you got:

  1. What you paid for it – bigger discount or bargain = better value, in other words you’re spending more for the same thing. This is what most people are used to focusing on and by paying close attention you can usually create some savings here.

 

  1. How much output it provides – this is a measure of quality in other words higher quality for the same price = better value. People are pretty aware of this but often forget to measure it and definitely have opportunities where they can get ahead by getting better quality for their money.

 

  1. How much you use it – this is the most overlooked aspect of value…utilization. Increase the utilization of anything you purchase = increase the value for the money.  In most cases this offers the largest opportunity for improvement.

 

First Step = Measure Everything You Spend

Most people tend not to measure all their expenses accurately.  Either they think they spend less than they do or they are missing expenses especially non-recurring expenses like annual renewals or purchases you make every few years.  For example, a budget for a new car if you’re paying cash, a budget for furniture, a budget for clothing, etc.  The fact is this money has to come from somewhere and you’re spending it so…

Non-recurring expenses tend to be what kills people’s sense of what they’re really spending.

Bottom line before you get started on anything else make a very thorough list of everything you’re spending and review your spending on a monthly basis if not more frequently.  Know what expenses are coming up and budget for them on a monthly basis even though the money isn’t actually going out.

 

Getting Bargains

The first dimension of value is bargain, the larger the bargain the greater the value.  Your goal should be to always buy everything for substantially below retail.  Think about it this way.  If you and a friend make an identical amount and live identical lifestyles the one who spends less will end up ahead.  The same is true for a business.  The business that spends less to achieve the same result is going to have more profit.  This in turn means they can cut their prices and get more business and the competitors can’t compete so will eventually die out creating a compounding effect on growth.

How do you get bargains?

  • Shop on sale – being able to plan your purchases for when things are on sale will help you
  • Buy used – buying used allows you to avoid tax and to find things cheaper than they should be
  • Buy wholesale – when possible this will allow you to get lower prices
  • Negotiate on EVERYTHING – even when you think you can’t you can often save
  • Collect points – just by using credit cards I average a 2% saving across the board

One of the best things you can do is understand where the costs are that drive the price and buy in ways that eliminate the costs so the seller can offer you a better price.  A good example of this is marketing costs businesses have but are lower when selling wholesale or buying from private individuals.

For every expense you’ve listed go through and see how you can apply each of those 5 strategies.

 

Buy Quality

You can radically increase your value by paying attention to a quality metric rather than just the price.  For example, say you’re buying food.  The metric might be nutritional value.  In other words, one item of food might cost more or the same in pure dollar terms but be much better value on a per nutritional content basis.

Virtually anything you buy you’re buying for a specific reason and if you understand that reason you can often get that same value for less money.  For example, say you’re buying a luxury car and your objective is to get prestige.  You could buy a new Mercedes for $40k, on for $120k or a used Bentley for $60k.  Which has the best and worst value?  Arguably dollars per prestige the Bentley will give you better value because even though it’s a used vehicle people just see “Bentley” and don’t worry much about the rest.

Likewise, the prestige value of an expensive Lamborghini vs an inexpensive one is minimal in most cases unless you’re appealing to car enthusiasts who have a lot of similar cars in which case a classic might offer better value for the money.

You also might find something that’s better quality retains its value better (sometimes and you should verify each time).  For example, an expensive Chanel purse might cost $8000 but you might be able to sell it for close to that 5 years later vs an inexpensive purse you might not be able to sell at all after 5 years.  When examining your expenses consider how well the things you’re buying will retain their value.

When you’re hiring staff for your business if you pay attention to output you’ll find an employee who costs less per hour might not be nearly as cost effective due to the quality of work.  This is especially true for revenue producing roles such as sales or marketing but could also apply for project managers, programmers, engineers, web designers, etc.

Generally speaking in any case where you can get a lot of upside the quality you’re getting is far more important than the price you’re paying.

Go through the list of all your expenses and determine a quality metric and find ways to improve the quality you’re getting per dollar.

 

Increase Utilization

Say you buy food in bulk then half of it goes bad and you have to throw it out.  This was poor utilization.  Or you’ve got a big car or truck with a lot of seats but it’s mostly being driven around empty, this is poor utilization.  Short term rentals vs purchase or a longer term lease is often a poor use of money.  Consider that if you were going to rent a car for a month you might be better able to buy something for a good deal, drive it for the month then sell it…maybe.

The point is anytime you under utilize something you’ve got an opportunity either to potentially split the utilization with someone else to drive down your cost per utilization.

Utilization ties in closely with quality because something quality tends to allow for higher utilization.  For example, I might buy a shirt for $20 that lasts me 2 washes vs a shirt for $50 that lasts 20 washes, which was cheaper?  The $50 shirt was cheaper on a per utilization basis ($2.50/wash vs $10/wash for the supposedly cheaper shirt).

You might also wear something more or use something more because the experience is better.  For example, I might buy a nice shirt and get compliments on it so wear it regularly whereas another shirt that might not fit as well, etc. goes unused and therefore drives up the cost per utilization.

In business I might be better off to utilize an external contractor rather than hiring someone internal if I won’t use them much.  Or maybe I can split an employee with another business in order to avoid the higher contractor rates.

You could also find ways of splitting marketing costs or joint venture with another company to gain extra leverage out of each client.

The ways to increase utilization or decrease wasted utilization are nearly endless.

Go through your list and for each expense determine whether you’ve got excess capacity or perhaps the ability to drive down your costs based on higher utilization.

 

How Much Can You Save?

Based on applying these three dimensions to each of your listed expenses in the year how much are you able to save?  How much additional value are you able to extract?  It’s very normal for an individual to save $5000/yr. or more.  Businesses are obviously much larger numbers because the spending is higher.

 

Want Assistance?

Our team is happy to coach you through the process of reducing your expenses and increasing the value per dollar spent.  Usually the simple process will save you thousands without even counting what you might save on taxes.

Or alternatively can recommend someone for you to hire to do it for you.

Contact us today.

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Case Study: How We Grew One $2 Million Company 72% Year Over Year in 3.5 Months

A few years back I formed a company with a partner where we’d go into companies, roll up our sleeves and actually do the work of growing them fast in trade for a piece of the upside.

One of our first clients was a trucking company that wasn’t doing badly in fact they were doing well about $2 million/yr. in sales with just under 20% margins but they’d been stuck at that level for a while and were looking to go to the next level.  This is the story of what actions worked and which didn’t, resulting in a 72% year over year growth in 3.5 months…pretty good for any business.

 

Starting Point

Initially the company was primarily relying on owner operators, people who owned their own vehicles and would do the trucking work involved.  These drivers were each paid 80% of the gross earned for each job.  The company owned a few of their own vehicles and had both the cash and cashflow to purchase others if necessary.  Most of the owner operators were Class 1 drivers meaning they could drive larger trucks but a fairly large percentage of the jobs didn’t require larger trucks being direct point A to B trucking within a 6 or so hour radius though some were multi-day trips.

Scalability in terms of trucks and drivers was relatively easy and dispatch could handle considerably more capacity so the primary goal was to increase sales and grow margins.

The industry was full of a fair number of smaller and similar sized competitors with a difficulty etching out a competitive advantage due to the low barrier to entry nature of the work.  The primary defense was the requirement of various safety programs to work for various large and lucrative clients.

 

What Didn’t Work

The owner had previously been sold on a call service to businesses within the surrounding area to generate leads and had this supposed leads list untapped.  We had a sales person call the leads to little success noticing most of them weren’t very targeted and not particularly high value.

One of the administrative operations people wanted to streamline office procedures, buy new equipment, etc.  Although we did replace the office administrator and implement the documentation of various systems, which made life somewhat easier for the owner the cost savings were minimal because the administrator needed to be around regardless so streamlined procedures didn’t reduce working hours.

Part of the graphics team wanted to implement a rebranding effort (new name, logo, and website).  This had relatively little effect in large part because it wasn’t embraced by the owner who wanted to stick to the older brand, which was recognized by existing customers.  Although the branding could have been leveraged to greater effect it’s questionable whether it was or would have ultimately been the driving force in dramatically increasing sales even if it was embraced given the relationship nature of the business.

 

What Got the Results

The real breakthroughs occurred as a result of 4 inter-related changes:

  1. We sat down and identified the 4 most profitable types of customers and created a list of the specific companies that fit within each of those 4 categories to target with direct calls and visits

 

  1. We knew we had to differentiate the question was how? The service itself is pretty commoditized and guarantees only go so far.  Knowing the clients were typically men in remote work areas for weeks at a time we hired hot girls to drive the low end trucks and branded them

 

  1. We applied a visitation rhythm of regular visits and calls (PR trips) where the girls would for example bring donuts by the target customer locations and hand out information

 

  1. By hiring the girls to drive company owned trucks we were able to reduce the cost on those loads from 80% to 65% of gross resulting in a massive boost in margins

 

Even gaining one large customer within the target categories had the potential to significantly boost sales.  Hiring the girls created industry virality where companies we hadn’t even heard of were calling.  The regular rhythm helped encourage repeat business and keep the company top of mind for when services were needed.  Finally, the boost in margins as you can imagine was significant from a profit standpoint.

 

Lessons You Can Learn

Focusing on the right target market is EVERYTHING.  It is by far the largest marketing mistake I see people make and the biggest opportunity for improvement.

All customers have a buying window and go through buying cycles.  If you don’t hit the window at the right time you won’t get the sale because they simply aren’t in the market.  There are things you can do to improve your timing and consequently your efficiency but baring this applying a regular rhythm of follow up is the best thing you can do.

Differentiation is one of the most powerful ways to increase conversions but you need to be able to do it in a compelling way.  If your customers aren’t emotional about how you’re different then you need to look to a different strategy.  This is also where knowing your target customer is very helpful and in this case allowed us to set ourselves apart when others hadn’t previously.  Also note the fundamental service remained the same the differentiator was in the form of the packaging, which is something else you should consider if you can’t improve or differentiate the core offer.

Finally, when it comes to cutting costs not all efficiencies are necessarily better and some carry risks (for example owning too many trucks would have created risks that having owner operators didn’t create) so you need to be sure to measure the net effect of supposed improvements to make sure there will be cost savings and these aren’t counter balanced by increased risk.

If you’re looking for assistance growing your business, please contact us.

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What Should You Do When You’ve Got a Cash Crunch? A Proven Method to Deconstruct and Solve Your Cashflow Issues

One of the most common challenges I hear from business owners is having cashflow issues.  The good news is often this comes from growing rapidly where you’ve got to put out money for inventory or services and are waiting to be paid but because of how fast you’re growing there’s a shortfall.  So long as you’re really profitable that’s a short term problem though it can still sink you.

Worse is when you’re struggling from a temporary downturn in your finances.

In either case it can be incredibly stressful, sometimes scary and overwhelming and in either case you need to take action.

The question becomes what do you do when you’ve tapped all the accounts and the well has run dry?

As with most problems in business and in life it becomes a lot easier not to mention less overwhelming if you can deconstruct it into small actionable pieces so here’s the formula I’ve used successfully again and again in my own life, with my own businesses and with clients and friends.

 

Step #1 – Separate Incoming and Outgoing

You have two parts of this equation what’s going out or supposed to go out and what’s coming in or what you can bring in.  In other words

  1. What can be done to lower your obligations?
  2. What can be done to bring in funds?

These are really two separate issues either one of which could solve your problem but most likely you’ll solve it through a combination of the two.

Your goal here is going to be to brainstorm and then apply solutions in each area and breaking it down helps you to brainstorm more options.

With that in mind you’ve separated out the outgoing from incoming but it helps to break it down further to determine possible solutions for each area.

Richucation Tip – Start by making a detailed list of all your obligations how much they are and when they are payable

 

Step #2 – Deconstruct Possible Solutions to Your Obligations

Though it might not seem immediately obvious…or maybe it is there’s a few different options in terms of how you can deal with your obligations in these circumstances.  You can deconstruct these into essentially two things that can be done:

  1. Reduce Expenses – in other words find ways so you don’t have as much you’ll have to pay out
  2. Push Back Expenses – in other words find ways so you can pay expenses that you can’t eliminate later than they are normally due in order to buy yourself breathing room and time to bring in more cash to cover those obligations

This is fairly obvious right?  You can address some of your cash shortfall by not having to put so much out at all.  Or you can push back those obligations until you’ve had time to bring in more money.  This later only works assuming you’re profitable in the long run, that you’ll be bringing in more money than you’re spending on a regular basis though sometimes it buys you the time to make more money.

 

We’re off to a good start but we can deconstruct the problem and brainstorm solutions even further.

There are basically three ways you can reduce your expenses:

  1. Finding unnecessary expenses and removing them – this should be a monthly practice in your business for you and all your managers to help keep expense from becoming bloated
  2. Negotiating to make expenses go away – this might look like calling up a creditor and saying “look I’m not going to be able to pay and going to have to default at which point you’ll get nothing, I can offer you 50% if you’ll take that instead”. Alternatively, you can call active suppliers and say “hey we’re shopping for better pricing if you want to keep our business I need you to come down on these numbers.  Often this can get you a 5%-10% discount if you’re a good long term customer who’s valuable to them and assuming you haven’t done this in the past.  Again, this is a practice you should be doing regularly in your business.
  3. Finding another place to meet the need without the cost – this is essentially a case of moving an expense from you to someone else. For example, maybe rather than providing employees with cell phones and computers they use their own along with their home internet connection and perhaps you reimburse them for any extra costs or help subsidize their cost so it’s a win – win.  Often, there’s someone else who already has the resource you need and you can use it without any real excess expense to them or split it with them for a win-win.  This can be particularly useful for women who are suffering from personal cash crunches as often guys will take them for dinner, give them rides, etc.

For a very personal example of this when I was at my brokest all my credit cards were maxed and had been frozen except one and I remember buying just over $19 of groceries and shaking as I scanned my last credit card not sure if it would go through.  During that time, I had to resort to eating my roommate’s Kraft dinner because I couldn’t afford my own thinking “I’ll buy him some when I’ve got money”.  I got packets to ketchup from McDonald’s and toilet paper from public washrooms, rides from friends to save on gas, etc.  Chances are you aren’t in that desperate a situation and hopefully never will be but it’s an example of how sometimes people have resources that you can get from them to temporarily decrease what you need to put out.

Richucation Tip – Refer to Richucation resources on the “3 Dimensions of Value”, “The Cost Halo”, “The 6 Resources”, and “The 5 Ways to Get Great Deals”.

We can also put you in touch with financial experts to analyze your expenses and help you cut costs.

 

In terms of pushing back expenses a lot of bills are due but you can get away without paying them on time if you’re desperate.  In my case because I couldn’t pay most of them when I was at my worst I’d figure out which ones I couldn’t avoid paying because they were going to cut off the services and I’d pay those while leaving the others.

One thing to note is often if you’re a good customer and call whoever you owe the money to they are happy to extend you terms so you can avoid paying for 90 or 120 days.  Not always possible but it’s often an option again to help buy some breathing room.  Costco literally builds part of their business model off of these terms because they’ll buy inventory on payment terms, sell it then invest the money to get a return before they have to repay.

This is very common when you take over a struggling or failing business.  For example, when I purchased a spa I met with the landlord and said “hey, the spa isn’t doing well, they’ll default on the rent unless I do something about it and you’ll lose out.  I need you to work with me here.”  It’s much better than the alternative for them so they’ll usually work with you.

Obviously, not all expenses can be eliminated or even pushed back but usually across all your expenses it can provide extra breathing room.

 

Step 3 – Breakdown Possible Options For Bringing In Funds

When you’ve exhausted all your options to cut expenses and push back expenses you’re left with bringing money in.  Once again there are lots of ways to bring money in and most people having dug deep enough into all the available options so breaking those down will help you become more resourceful.

 

Option #1 – Make Money

The first place to start when you need to bring in extra money is to ask yourself is there any quick cash I can generate?  In other words, can I make some quick sales and get paid right away?

When I was at my lowest for example I made a deal with a friend to sell some of his services and sold to someone I knew (close network so easy sale) then got the client to write a check to me.  I’d negotiated a 50% commission but needed to keep every penny because I needed it all and it was only after a few months that I’d regained enough to my friend his 50% share.  It wasn’t ideal but it helped me.

The important thing being “is there someone who needs something where I can provide a referral and get compensated for it for some quick money” (some kind of affiliate arrangement).  Can you do some sort of discount or promotion to generate rapid sales?  Or do you have a list of existing customers who you could offer something additional to?  I’ve done this with raising money for investments on a few occasions, as well as numerous other things.  I don’t believe it makes a good long term business model but for short term cash it’s useful.

This can actually help generate another revenue stream for your business if done well.

 

Option #2 – Sell Assets

I hate to do this one because whereas #1 is adding to your wealth to cover expenses after selling assets you’re impoverished.  That being said it’s a method of getting some quick cash in some circumstances.  For example, maybe you’ve got excess inventory or equipment you can sell off, maybe you’ve got investments that can be liquidated.  Maybe it’s possible to sell some things you own and rent instead (for example selling vehicles to generate cash and then leasing to replace them).

This is the least favourable and in fact the main danger of short term cashflow issues is that you need to sell assets at a loss in order to cover obligations, which is the reason for bank reserve requirements.  On the other hand, it beats being forced into bankruptcy, taken to court for obligations, etc.

In business perhaps the most common asset to sell is part of the business in trade for an equity investment.  This is sometimes a great way to go but also be careful it’s a long term obligation to a short term problem.  You want to ensure you’re getting long term value out of the investment.

 

Option #3 – Borrow Money

I’d rather not do this but sometimes it’s the only option and it’s worth exploring the options here.

The question of course is “from who and on what basis will they make the loan?”  Goodwill or unsecured credit only go so far where loans are concerned.

I’ve lent enough people money over the years to know that if it’s being lent based on goodwill unsecured I’m often at risk of not recouping my investment so if they are personal loans I’ll generally consider it a gift to help a friend and simply be grateful if I do get paid back or else make sure I’ve got some sort of security.

Richucation Tip – Contact us on advice for loan structuring to make sure you get paid back

This being said most people aren’t sufficiently creative here.  We’ve worked with clients who have cashflow issues and have credit that’s been destroyed or other outstanding issues that mean they can’t get money from a bank but we’ve been able to facilitate loans internally through the Richucation network.

The key here becomes “what can you offer as collateral?”

Very often people have latent assets they can borrow against in one form or another that protect the lender while allowing you to get the money you need.

Remember we were talking earlier about assets and not wanting to sell them?  Often, if you’ve got short term cashflow needs you can borrow against them instead.  Or you can sell them to someone at a discount with a lease to buy option in place so you’re both protected.  You get your cash short term; they get a rate of return but also an asset they can sell if you default and recoup their money.

Another example is the pre-sale of services.  A Richucation client early in his career approached a client and convinced them to lend him money for a venture based on providing services for the coming year.  I’ll do this in some cases where I’m extending private loans and concerned about repayment specifying that I can take repayment either as cash or services at my option.  I’m somewhat protected and the person gets the money they need, win-win.

You can also factor accounts receivables if you’ve got some steady or committed income.

Most of the time people who are looking for money don’t think enough from the perspective of the lender and the lender’s desire to protect their investment and earn a return.  They’ll make promises that aren’t necessarily realistic while at the same time failing to offer protection.  If you can offer protection to the lender that more than covers them, you can usually get someone to extend the loan.

Richucation Tip – Contact us if you need assistance determining how to borrow money

You’ll want to identify who might lend to you and what you can offer to help make the loan a no brainer for them.

 

Option 4 – Receive Gifts

This really applies primarily to personal cashflow issues as opposed to corporate ones but is still worth mentioning.  Although it’s usually not an option sometimes you’ve got people who are willing to help you out and ask nothing in return.

If you’re in a personal cashflow crunch brainstorm who all might fit in this category for you to help you get over the hump.  Sometimes it’s a bunch of people each making a small contribution, the movie “Cinderella Man” is a great example of this.

 

Step 4 – Use All These Strategies Together

Generally, if cashflow issues are serious no one strategy will work on its own so brainstorm solutions in all of them and then start implementing if nothing else you’ve got backup plans if one or two options fail.

As a basic rule prioritize making money and reducing expenses first, then pushing back obligations, then borrowing and only as a last resort selling assets.

Contact us for personalized assistance.

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3 Critical Lessons No One Will Tell You About What to Start For Your First Business

I’m often asked by people about what business to get in to.  “I want to start a business but I don’t know what business to start”.  It’s worth taking a lesson from Richard Branson’s book here, businesses are disposable you’ll let them go when they no longer serve you the focus is about the people and in this case investing in yourself.

See if you go into business not concerned so much about that particular business but taking a long term view of learning to make business successful then you’ll buy yourself the freedom to go into all the businesses you want in the future.

It’s not glamourous, it’s not get rich quick, but it’s real taking a long term view will give you a better life than you ever imagined, you’ll be far less likely to be disappointed when you struggle, and you’ll be able to dramatically reduce the risk of starting something of your own.

“Who’s going to pay for the learning curve” – very wealthy businessman and investor to his ex-girlfriend when she announced she wanted to start a juice bar business.

To her the statement came across as cold but the cold hard fact is we all have a learning curve when we get into something new and there’s a cost, usually a very major one to that learning curve.  If you think college, university, or some paid training are expensive try making mistakes in real life and measure what they cost.

With that in mind I’ve learned some very critical lessons I wish I’d followed when I was getting into business that would have saved me tens or hundreds of thousands of dollars and accelerated my success DRAMATICALLY!

 

Lesson #1 – Business consists of two parts you need to learn both to succeed

What is business all about?  It’s about selling something and then delivering on it.

Most people who are getting started in business think of the business in terms of what you are delivering.  For example, it’s a yoga business, a book business, a shoe company, a supplement company, an engineering firm, etc.  Because that’s the part we mostly see and care most about as customers we tend to think of business as being the product or service being sold and this is a great detriment to the success of a new small business owner.

Pop quiz in most cases is it harder to sell something or deliver on what you sell?  For most small businesses the answer is selling.  Don’t believe me?  Go ask virtually any small business owner what do they have a shortage of?  Customers or ability to deliver to those customers?  Most of the time you’ll find their struggle is to get more customers if they had more they could provide for them.

There are exceptions of course, those who have figured out the sales and marketing equation and those are the businesses that are successful.

Statistically, something like 80% of small businesses fail mostly because they go into it thinking only about the delivery and not about the selling.

By contrast you could start a business that is identical to another in terms of what it delivers but different in terms of how it sells it and have that business thrive.

Richucation Hint – When looking to start a business pay attention to how you’re going to sell the product/service

 

 

Lesson #2 – Starting a business is going to be a learning experience your first goal should be to decrease the cost of that learning experience.

Here’s another stat the typical small business doesn’t make money for the first 3 years.  Crazy right?  That’s mostly because they haven’t figured out the sales and marketing equation.

But let’s take that information and backtrack for a minute.

Let’s assume it will take you 3 years to learn enough to actually make money in the small business…or let’s say it takes a year to build momentum regardless so it will take 2 years to learn what you need to know.  This is fairly reasonable.

What does this mean?

It means you’re paying whatever your expenses are each money for 2 years!  This is the cost of your learning curve.  Your monthly expenses multiplied by 24 months.  Possibly longer.

So if that’s the case do you want to start a business where you’ve got expensive retail space and a lease costing you $20,000/mo.?  Or do you want to start a business based from home where you’ve got no lease?  Do you want 10 staff on payroll from day 1 costing you $30,000/mo.?  Or do you want to be a sole operator maybe with one other person?  Do you want to be paying interest on a $250,000 loan or do you want to start debt free?

Consider that cost of your education.  If your monthly expenses are $50,000 vs $5000 then the cost of your education (how much you lose before you start to make money and consequently how much of a hole you have to dig yourself out of is $1.2 million vs $120,000).

In other words, when you’re starting your first business you want to minimize your monthly expenses or what are called your “burn rate” as much as possible.  Later, once you’ve learned what you’re doing you’ll probably end up with a high burn rate and a fair amount of staff in order to scale and make a lot more money but at this stage you want to keep lean…you don’t want 5 or 10 people sitting around while you’re learning…you and your mentors or coaches are the only people you want sitting during that stage.

What’s worse and partially takes people out in business is as we mentioned 80% of businesses fail.  So imagine you put in that time with that expensive learning curve only to have the business fail and then what was all that expense for?

It goes further do you think a business losing $50,000/mo. is more or less likely than a business losing $5000/mo. to fail?

Richucation Hint – consider your first business your education for your second and stay lean while learning

 

Lesson #3 – You can get away without learning delivery but not without learning sales and marketing

Remember how I said earlier that you needed to learn both sides?  That’s not entirely true, to go to the highest level it’s true but when getting started you can get by without knowing much about the delivery side.

Remember how I said most businesses are starved for customers but have no problems delivering to those customers?  Well if you got to virtually any company and offer to send them customers they will pay you for this.  You should make sure you negotiate a good deal for each customer but the point is they’ll pay you.  Literally, businesses will line up for you to send them customers.

By contrast if you’ve got some product or service you can deliver are there people lining up to sell it for you?  No!  Not a chance.  Why?  Because people who know how to sell are mostly selling their own stuff or selling the premiere providers on the market, which is why if you focus on delivery you’ve still got to learn sales and marketing but if you learn sales and marketing you don’t necessarily have to learn delivery.

Now let’s put this in the context of lesson #2 about minimizing the learning cost.

How long will the learning curve be if you have to learn 2 things vs 1 thing?  Theoretically twice as long.  So let’s say of that 2 year learning curve 1 year is spent learning delivery and another is spent learning sales and marketing…now imagine you only had to learn sales and marketing…your learning curve (the amount of time you spend losing money) just dropped from 2-3 years to 1 year.

If you’re spending $5000/mo. that means your cost of learning (the hole you need to dig yourself out of once you start making money) just went from $120k-$180k down to $60k maybe less.  Is that a good thing?  You bet it is!

In other words, yes at some point you’d like to start all your dream businesses maybe you imagine one in gardening and one in architecture and one in fashion and one in media but none of those will succeed without good sales and marketing whereas virtually any of them can succeed with really good sales and marketing.  So learning sales and marketing first is your ticket to freedom.

So how do you do this?

Think of a product or service you already use and already love…ideally one that isn’t already incredibly well marketed.  Now, approach the company that provides they product or service to sell on their behalf.  Almost any company will take you that’s the great part.

Think of how wonderful this is.  You get to promote something you already know is good because you use it, vs having to worry about mastering creating and delivering the product, hiring and managing staff, providing customer service, dealing with warrantees and returns, inventory, theft, etc.  All of those problems are out of your mind and you’re free just to learn to promote something you love and the moment you make your first sale you’ll make money.  It might not be enough initially to cover your costs but you’re already ahead of the game whereas if you were delivering your own product or service you’d still be busy figuring out what to call it, how to design the logo, hiring the customer service staff, figuring out how to train them, getting the phone lines and website set up, etc.

I’m not a huge fan of MLM or network marketing but this is the advantage of those business models.  You don’t have to worry about product development, manufacturing, quality control, inventory, shipping, returns, customer service, invoicing, etc.  All of that is taken care of for you and you just focus on selling, building a team, and training to replicate.  What we’re suggesting you do here is similar but with much higher margins, which makes making money faster much easier.  In other words, instead of getting $5 for every $100 sale you get $30 for every $100 sale.

Be sure you don’t just accept the first offer of what they want to give you to sell their product they’ll be inclined to throw out a number like 10% or something like that.  Generally, you want much higher and you ideally want a residual on the value of the customer as well or some way to get the customer’s repeat orders to come through you but that isn’t always possible.  If you can get it you’ll start to build a residual income that will buy you long term freedom of your time even without needing a team because the company with the product or the service is your team and they’ve got a vested interest in your success.

Richucation Hint – find a product or service you love and sell it as your first business

 

Can you do otherwise?  Certainly, you can start something from scratch inventing a product, you can build your own store, try to do it all from the beginning, etc.  But that’s a short sited approach and will give you a lot more risk and cost you a lot more money.  If you take this approach then once you’re selling one thing successfully you can expand to sell another, then another and so on and eventually add your own products or sell it all under your own brand.  Think about a company like Amazon.  They make very few of their own products mostly they are just a great brand selling the products of others.

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5 Essential Steps to Automating Your Business.

Can you make money while you sleep?

Why did you get into business in the first place?

There’s one answer I hear more than any other…freedom

And yet a lot of entrepreneurs end up working more than if they had a regular job.  Working longer hours, it destroys marriages, limits vacations and time with friends.

We tell ourselves these are temporary sacrifices for long term gain but when does it end?  When does this long term gain start?

I look around me and see people who have been in business for 20 or 30 years and still the end doesn’t seem anywhere in sight.

But it doesn’t have to be that hard, it doesn’t have to take that long once you know the formula.

Here are the 5 essentials that were laid down for me by a friend who did it and that I’ve used since then:

accountable

Profitable Systems that WORK

Lots of people talk systems but the key is having profitable systems that work.  If you systemize a bad process you’re just repeating inefficiency within the company so the idea is to refine the process first then systemize it.

Systemizing means three things:

  1. Lay Out the Workflow – all work proceeds in a series of sequential steps so you want to lay out what things happen in what order in order to get the result

 

  1. Build Templates – you want to eliminate as much repeat work as possible and make as much “fill in the blank” as possible so it’s done the same way. This will include checklists

 

  1. Document the Process – here is where you record (written, audio, video, or images, whatever works best) how to actually apply the process. It should be laid out so a 10 year old could follow it but be careful if it’s too cumbersome people won’t follow it so aim to make it simple

My initial mistake was systemizing too early, my second mistake was systemizing in too much detail (long manuals that were supposed to be helpful but just overwhelmed people and they wouldn’t follow them).  When I chopped out the unnecessary and made it paint by numbers I got the best results.

Make sure systems include where to put things and where to find them so everyone is on the same page.

profitable system

Technology that Accelerates

People misuse technology all the time trying to pursue the technology then build around it instead of the other way around, building a great process and then using technology to accelerate and streamline.  This is critical because the right technology will increase what your team can do several times over, make it easy to gather good data, and frankly just eliminate a lot of work.

Note, technology fits into your systems so those systems should include how you use the technology.

Each industry has its own technology but some really useful things pretty much everyone should take advantage of are:

  1. Cloud storage software – typically this means Google Drive or Microsoft Onedrive because they allow for real time collaboration, make sure everything is always sync’d so no information gets lost not doing so in this day and age is inexcusable

 

  1. Task or project management software – two free tools I often recommend to people and use a lot myself are asana.com or www.trello.com they don’t fit every business but they are highly flexible and allow you to keep track of things that need to get done, comment, get updates, share internally with the team as well as externally to clients, etc. Bottom line you need some way of knowing what needs to be done, by when, etc.

 

  1. Cloud accounting software – in this day and age you should be able to access real time financial data from anywhere and have it shared between yourself, your book keeper, and your accountant as well as anyone else who needs it. Modern software also reduces data entry a lot by pulling your bank and credit card statements directly into the software.  There are several that you can use but some of the better options are: waveaccounting.com ; www.freshbooks.com ; www.xero.com ; www.quickbooks.com

 

  1. Contact management software – this comes in a lot of different forms at the least you’ll want contacts sync’d to your phone and the cloud but typically you want an organizational contact list, which is in a lot of software it might be marketing automation software or a CRM or your point of sale software but having the availability of contacts and contact details is critical. Also consider auto-responder software in here.

 

  1. Scheduling software – you need some way of creating reminders, scheduling time for clients with location details, sharing those details, syncing them, etc. and this should all be available on the cloud

 

  1. Messaging software – you’re going to have to communicate with people so how will you do it? It might be email but today it’s more common to have other methods such as slack, Whatsapp, Google Hangouts, Skype, or maybe something internal.  Whatever it is you need a way to easily communicate with the team and keep everyone on the same page.  For email I recommend Google Apps for Business or Microsoft Exchange (I use the later in all my businesses)

 

There are a million ways you can use technology and it’s ideal if you can find technology solutions to problems rather than people solutions because the technology will scale.

metrics

Meaningful Metrics

In order for you not to be there you need metrics that will tell you what’s going on while you’re away and the sooner the better.  You want to measure two things here: activity and results.

There’s a risk that people will lie about these metrics so you want some controls in place to prevent this or at least some checks in place to make sure even if they are that performance doesn’t slip without you knowing fairly quickly.  For example, in my recruiting company there were signed agreements from clients.  This isn’t something they can easily fake so if they claim to be making sales but the signed agreements aren’t coming in then I know there’s a problem.

This is where technology can be very helpful for example you can see the date modified of documents within the cloud storage to see if there’s activity taking place, you can see emails sent and received, etc.

The bottom line is of course always the bottom line “what are you paying them for and what are they getting done?”  Each member of the team needs to be contributing profitably and that’s what you’re measuring.  You need to know you’re getting a return on your investment.

I recommend avoiding too many metrics but have ways of digging into the details.  What these metrics are might vary with the role some cases you might be paying piece work or commission (there’s a tendency of entrepreneurs to think commission is better, generally I prefer to avoid commission where the task is critical when you pay for someone’s time they need to do what you tell them whereas on commission this relationship is distorted).

Try to choose 1-2 activity metrics and 1 result metric you can look at for each employee and make it easy to record the metrics.

people

Accountable People

Ultimately nothing gets done unless someone does it and if you’re not going to do it someone else needs to.  If we have to boil the type of person we want down to just one criteria (frequently there are many) it’s accountable.  Someone who won’t place blame, who will take ownership for what they are doing and follow through.  To have freedom you don’t want to be chasing people.

The key here is delegate jobs not tasks.

If you’re constantly assigning tasks then you’ll have to keep delegating over and over which will take you time.  Instead delegate a fixed repeatable task with a result assigned to it.  For example, enter all the expenses into the computer and send out all the invoices.  This means if a new expense shows up they enter it if a customer needs to be billed they send the invoice.

By breaking complex tasks into smaller pieces you can hire lower skilled people for less and get better results.

The key here is training, which requires patience.  Training should happen as follows:

  1. Give them the procedure to read and have them read it

 

  1. Do it showing them how

 

  1. Have them do it and correct when they get it wrong…repeat this process over and over until it’s perfect, don’t fix it for them redirect them back to the procedure

Expect to spend a couple weeks training and getting zero results it’s a mistake to throw people into the deep end to see if they can swim.  Not only will you lose a lot more people but it will actually taken them longer to get up to speed.

trust

Trust but Verify

Everything is now in place to step away so you need to trust others will do it and not be too concerned about the quality of their results they might be slightly worse than yours or might be slightly better but trust them.

Trust doesn’t mean ignore though keep your finger on the pulse of what is going on and check in with them regularly.  Even though you might only be looking at it 15 minutes a day they should feel like you’re present.  Be sure to give encouragement regularly and reprimand where things are slipping.

 

That’s literally it if you can do those things you can step away.  What this assumes though is that you’ve got a solid foundation of something that actually works in your business.  It should take a few hours per week to manage.  You can get away without managing at all for a few weeks or even months but every small business will gradually decline if not given some attention.  There’s a strategy to remove yourself entirely but that’s for another day.

Need help with specifics of how to apply this?  Contact us or join one of our communities.

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Grinders and Growers

When deciding to go into a business or launch a new product, service, or business area there’s essentially 4 things to ask:

 

  1. Is there demand and if so how much?
  2. Can I buy it for substantially below the market value and how much?
  3. How much and easily does it scale?
  4. How much durability does it have?
It’s usually easy to find things for which there is a market demand and you can buy for below market price.  Virtually any reasonable business has a marketing budget that is sufficient to earn a profitable income.  However, for the most part these are difficult to get big with because there’s a lot of competition and effort unless you catch a short term wave.  These businesses are what we call “grinders” meaning to grow them you’ve got to grind it out day after day.

 

The grind is required in any business but a business that’s a grinder won’t have rapid organic growth.  The #1 thing that’s required to make a grinder business successful, the differentiator is marketing.  You can 100% grow these businesses large and successful but it’s usually a fairly long path.  In the right industries you can sometimes accelerate this path through aggressive acquisitions but then you get into playing a different game, which is applying the above criteria to buying companies rather than just products.

 

The reverse type of business are growers.  Growers are defined by compelling differentiation.  Because they are differentiated they have low competition and if they are compelling can benefit from rapid organic growth as word spreads about them and inbound customers are very substantial as compared with grinders that tend to benefit most from a lot more outbound marketing relative to growers.

 

This is in the DNA of the company if you’ve got a grinder your fate is to grind, these can be great companies but you need to be aware of the importance of the constant push.  If you’ve got a grower you’ll still have to grind, you’ll face other challenges but the push for the market will be less intense making it easier to scale faster provided all other variables hold true.  Essentially, Silicon Valley is largely an environment where entrepreneurs are constantly starting new companies in search for growers and VC firms are investing little bits looking for one that will take off and they can run with it to make all the other work worthwhile. This in contrast to the general business formation environment where most people create grinders to provide them with a living and a lifestyle but without the intention of scaling rapidly into something huge.

 

If you’d like assistance in evaluating an opportunity please contact us.  Click “ask a question” in the lower right corner of the screen and we’ll be happy to assist however we can.