Issue No. 65 - $1.91
Saturday, October 23, 2010
"A leader is one who knows the way, goes the way, and shows the way."
John C. Maxwell
Some Things You Must Do Yourself
It's a cruel but wonderful fact: The most important things in business cannot be automated or delegated. You must do them yourself.
You cannot, for example, start a successful entrepreneurial business by hiring or "outsourcing" the job of selling the product.
Yes, you might have heard some gurus suggest that this is possible. But it is not.
You can hire people to write advertising copy for you and give you advice about media placement and even to place those ads.
But none of their expert advice is the least bit useful unless it works.
If it works the first time, you are in luck. You have discovered the most important thing you need to know about your business at this (the first) stage of its growth: your optimal selling strategy.
But if your first marketing effort doesn't work, all those experts still get paid and you have to dig into your pocket again.
Remember this: Nobody (not now and not ever) will care more about discovering your optimal selling strategy than you do. And if one day you stop caring about it, your business is in trouble. Serious trouble.
This is a lesson I teach my clients continuously. The up-and-comers always get it. But when they become big (by "big" I mean when their business reaches Stage 4, with revenues in excess of $50 million), they often forget it.
The entrepreneur cannot abandon this fundamental responsibility. He cannot become ignorant of this vital knowledge.
Another thing: While you are actively running the business, you cannot leave it to others to hire the key people who will report to you -- the superstars who will make your business grow.
Nor can you leave it to others to motivate your superstars. The motivation must always come from you.
And most important of all, you cannot leave it to others to produce a profit.
These four jobs (which I discuss in detail in my book Ready, Fire, Aim) are the primary jobs of every CEO. They are also the most challenging and stressful.
I've often said that you must hire the brightest, most talented, and most ambitious people possible to fill the four key roles in your business: product innovation, marketing, productivity, and profit management.
I've also said that, at every point along the way, you should be training someone to do your job for you.
What I'm saying now does not contradict this.
When you begin a new business, you have to do just about everything yourself. But as your business grows, there is no way that you can continue to do that.
So you must hire and train superstars to do those four key jobs for you. But that doesn't mean you can abandon your responsibility to understand your business's optimal selling strategy and current method of producing profits. However good your superstars are, they will never care about the long-term health of the business more than you. It also doesn't mean that you can abandon the job of motivating and keeping tabs on your superstars.
The most important of the key entrepreneurial jobs that you will be passing on to a superstar is profit management.
Making a profit is stressful because everything works against it. Your vendors, who want to charge you more than you can afford. Your customers, who want to pay you less than you deserve. Your employees, who often want to get paid more than they are worth.
To make a profit, you must pressure your vendors to give you good prices. You must do this in the beginning and you must do it forever. If you don't, the prices will gradually rise. And that will decrease your profit margin. Eventually, you will have no profit margin at all. Your vendors will be happy, at least temporarily, until you close shop.
To make a profit, you must satisfy your customers. You must continuously offer them new and better products. You must always make the value proposition of your sales seem good to them. If you neglect this essential responsibility, your competitors will gradually take your customers from you. And if they don't, the new kids on the block will.
And finally, to make a profit you must manage your key employees -- the people who report to you and whom you will charge with growing your business.
Remember this: Every aspect of creating a profit involves people -- persuading people to do more for you than they really want to.
Your vendors, for example, want to keep your business. But they want your business to be as profitable for them as possible. So they want to charge you more and give you less. This is not immoral. It is a natural impulse. If you don't recognize that, you are dangerously naive.
I learned this lesson about 30 years ago. My partner and I were running a $100 million direct-marketing business. We mailed millions of sales letters every month. As a gesture of friendship, I put the son of an acquaintance into business handling the letter shop operations for some of our products. Because I trusted him, I never pushed him to give us better prices. Nor did I monitor the work he was doing.
One bright day I discovered that he was dumping a portion of the mail he was supposed to be metering and sending out. He started dumping it simply to catch up when he got behind. But when he discovered he had to pocket the unused postage (because if he didn't our accountant would have noticed it), he began to dump mail as a habit. The result was that all the promotions we sent through him performed more poorly than the promotions we sent through other vendors. Had I not wised up in time, I could have seriously screwed up our business.
These days, I insist that the key operating officers of all my client companies deal with vendors on a very personal basis. They are required to make spot checks and haggle over pricing -- not viciously but just enough to keep the vendors honest. The purpose is not to squeeze the vendors. I want them to make a great living from my clients. But I know that some pressure must be applied. That means personal intervention. And that is always at least a little bit stressful.
Most of my clients are direct-response publishers. In the past 10 years, their industry has experienced a sea change. Whereas once it was based on direct-mail promotions and printed products, now more than 70% of the marketing and fulfillment is done online.
Online marketing, while fundamentally similar to direct-mail marketing, is significantly different in many respects. One big difference is that it is illegal to rent your customer names out to other publishers for promotional purposes, the way we always did with direct mail. The effect of this difference is an entirely different way of attracting prospective customers. We do that today with pay-per-click advertising, SEO strategies, and" lead swaps" between publishers.
Several of my clients don't want to bother to learn these new strategies. They are happy, they say, to leave it to the young bucks who do their marketing to "figure all that out."
But this is a mistake in my view. You can never, ever delegate the essential marketing task of your business -- which is knowing how to bring in new customers efficiently -- to anyone else. If you don't know that, it will be very difficult to understand how your marketing dollars should be allocated.
Your key employees -- the truly remarkable people you hire who will allow you to benefit from your business without working 24/7 -- are the most important resource you have. They are more important than your products, your profits, or even your customers. Because they are the ones who create the new products and profits and customers that your business needs.
But if you think you can wind them up and let them go, you are in for a big disappointment. These people, however great they are, are also human. And being human, they are intelligently programmed to do what is in their -- not your -- best interest.
I don't mean they can't be devoted to you. I am surrounded by the most loyal, caring, giving superstars any entrepreneur could hope for. But in celebrating that, I don't lose sight of the fact that they are fundamentally working for their own benefit. To keep them happy and productive, I must devote my highest and best energy to keeping them at their best.
That means nothing less than lots of personal interaction. I must talk to them continuously. I must know what they are doing, what their priorities are. I must look at their performance and give them my thoughts on it. I cannot simply cheer them on. Sometimes, I must also be critical. And I must be prepared to give them the tools and other resources they need to do their jobs.
I must also care about them. And not in a bullshit way. I must be happy with the fact that they are working fundamentally for themselves. And I must make sure that I give them what they need to meet their goals.
For superstars, that means (most of all) giving them the opportunity to do a great job, to improve and grow the business in every way they can. In working with them, I must constantly remind myself that their careers are not about me. I must understand their challenges and anticipate their needs. I must pay attention.
All this requires personal interaction -- and personal interaction, as I said, can cause stress.
Who can fix these problems?
Answer: There is only one person... and that person is you.
How can you fix these problems?
Answer: You can't do it by sending them e-mails. You can't ask someone else to speak to them. You must schedule lots of personal time and do the "fixing" work yourself.
Because personal interaction -- with employees, vendors, and customers -- can be stressful, we are often tempted to delegate it to others or create automated systems to avoid it. We might, for example, delegate interacting with our key employees to a once-a-year review and then pre-set their compensation rates. This does not work. We have to be in contact with them every day.
I tell this to all my clients. But some of them, being human, accept the idea of personal interaction only in theory. In practice, they shy away from this crucial obligation.
One of them recently wrote to thank me for this advice. She said:
"Once a year, because you urged me to many years ago, I invite our best customers to a meeting where we talk about their experiences with us.
"I often dread these meetings for some reason... I'm not sure why. It seems like a petty annoyance to put aside deadlines to hear what we're doing right and wrong. Which is silly! Because every time I do it, I am so inspired by their ideas, loyalty, and participation.
"But it takes discipline to keep it going, and I have to follow through and show them I was listening and acting on their ideas. Admittedly, that is the hard part."
Yes, it takes discipline. But it is a discipline that will ensure that your business will always thrive.
Answer the following questions:
1. Do you know exactly how to bring in new customers at an allowable acquisition rate? Could you do it yourself if your top marketer left you?
2. Do you know how resources are allocated to produce an acceptable profit? Do you know how much you must spend on what sorts of marketing campaigns? Do you know what the cost of goods should be relative to revenues?
3. Do your key people look to you for leadership and motivation?
You must be able to answer yes to all three questions. If not, get to work.
Follow-Up on my Charity Essay
My essay on charity earlier this month generated a lot of letters. Many people found my 10 rules helpful. In fact, one person said that after reading the article he put in place more "strings" for receiving help from his group, with some of the conditions coming straight from the rules I'd laid down.
To avoid this potential problem, ETR readers had quite a few good suggestions. Among them:
Thanks to all those who wrote in. I plan to incorporate several of the suggestions in my plans. I'll keep you posted.
Don't Be Fooled by This Ploy From the Corn Industry...
The corn industry has spent the last four years trying to resurrect the positive image of High Fructose Corn Syrup. But it seems they've finally given up. Instead, they're trying to change the name of the stuff all together... to corn sugar.
And they've found scientists who are saying that it is no different from regular sugar.
But that's not true... Corn syrup is a chemically created product... often made from genetically modified corn. The corn kernels are soaked to extract corn starch. Then chemical enzymes are used to turn the glucose in the starch into fructose.
And because of this process, corn syrup metabolizes to stored fat much quicker than regular sugar. It also wreaks havoc with your hormones... interfering with critical hormonal signals. And that ultimately leads to insulin resistance, a key factor in diabetes.
On top of that, there are plenty of studies that show corn syrup produces high levels of triglycerides in your blood. And increases your risk of heart disease.
The truth is... corn syrup is a poison that's been sold to us by the corn industry -- and it is one of the main reasons for American obesity...
It's arguably worse for us than cigarettes... and, like cigarettes, it's fighting for its life.
I'll keep you updated on the name change.
Meanwhile, the folks over at Natural Health Dossier just put out an interesting article on the subject. You can read that article here.
If you like what you see, check out NHD's premium newsletter for even more great natural health advice.
[Ed. Note: Michael Masterson welcomes your questions and comments. Send him a message at AskMichael@ETRFeedback.com.]
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