We don’t know HOW to get where we’re going.

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Neither do you.

A few years ago the Fortune 500 CEOs were all surveyed and ask this question:

“What is your greatest fear?”

The #1 answer – “I’m afraid I will be found out to not know what I’m doing.”

I’ve started seven businesses. None of them have crashed and burned (yet), but I got out of a few because they were bad ideas that weren’t going anywhere, and in some cases barely breaking even. A couple made decent money and grew well, and we sold one to the largest company in that particular industry. Right now we have two businesses growing internationally, one of them on four continents that has the potential of changing the game for small and local business owners worldwide. It grew 392% in the last four years.

But…
So it’s nice to be able to claim a decent track record: to date – so far. And yet I have to be honest and say that when it comes to getting where we want to end up, I have no idea what I’m doing. But I’m pretty comfortable with that, because I’m just as sure you don’t, either.

Utter Clarity by Groping Our Way to the Light
I do have a pretty sane assessment of where we are (most business owners don’t), and I know with Utter Clarity where we want to end up, but I have no grand plan to get from where we are to where we want to end up a few years from now. The journey is not mapped out and the path ahead is full of Intuitive Guesses yet to be made. It’s not going to be easy, and there is no such thing as going on auto-pilot and watching this business fly itself.

Just like the Fortune 500 CEOs, I’m making this up as I go along. But since I don’t have nervous investors, unlike them, I don’t have to pretend I know what I’m doing. I can say, “I don’t know” out loud.

It’s okay to not know how we’re going to get all the way from where we are to where we want to be. In the real world, business owners don’t become successful by a grand vision, a genius scheme, a fail-safe product, or a five-year business plan (also known as voodoo & fortune telling). As Bill Hewlett of HP said, they had no business plan in the early days when they got moving, they were just being opportunistic and doing whatever they could to grope their way to the light.

As We Go, Not Before – The Intuitive Guess
We will grow this business not by having it figured out, but by figuring it out as we go. We will not get to Utter Clarity by digging a canal, lining it with concrete and floating to our reward, but by a thousand changes in a thousand directions, relentlessly doing whatever we have to, adapting however we must in order to get to our ocean.

All we get to know along the way is where we are, where we want to end up (Utter Clarity), and an Intuitive Guess at what we should do next to get there. And we’ll be “wrong” a lot (we already have been)– that’s how we’ll find out what we should really be doing. We’ll get our maps when we’re done, just like any explorer.

You’re going to do it the same way. Welcome to building a business. Stop trying to figure out HOW to get all the way from where you are to where you want to be. Know exactly where you are, and get Utter Clarity about where you intend to end up, then make one short-range decision that you think might help you get to the end game. Take the feedback the world will give you from making that decision, and do it all over again.

A Thousand Little Hows, Not One Big How
Don’t waste time trying to figure out how you’ll get all the way from where you are to where you want to be – as if there is one big “how” that would answer that. Get Utter Clarity about where you want to go, then be comfortable asking a thousand little “hows” along the way to get there. You don’t have to know what you’re doing. You just have to know where you’re going. That’s enough. Anything more would spoil the adventure anyway.

Three magic words: “I don’t know”.
Use them often. They will guide you to the next little “how”, and all the way to where you want to be.

Why we’re excited to make less money right now.

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Less Can Be More!

In 2006, we worked hard to become profitable within the first 18 months of building Crankset Group. And the profits went up each year until 2010. Then they started going down and that’s when we got excited. It was a very good sign.

In every business there are cycles of numbers that we should focus on. It’s never neat and tidy, but in general, we followed different numbers at different stages in our business.

The Cycle of Numbers:

Startup? Watch Revenue most.
Don’t bother going through a lot of profitability scenarios until you find out if you can actually sell your widget. Nothing else matters at startup except revenue. Everything else is voodoo and fortune telling. Go sell something. If it doesn’t sell, forget all the rest of the numbers. Our services started selling regularly, so we moved to a new focus:

Early Stage Business? Watch Profitability most.
As soon as you figure out you can sell something, figure out if you can actually be profitable selling it at that price. The polish sausage vendor buys them for $1.00 and sells them for $.95, but thinks he’ll make it up in volume. He’ll just lose more money. Get a good accountant at this stage who can tell you how many widgets you will have to sell per month to be profitable. Then focus on getting there.

Finding Break Even? Focus on Profit
Profitability is theoretical. You’re just making sure you aren’t wasting your time building a business that won’t make it. But Profit is “real”. Figure out your profitability, then focus on nothing but getting to real profit. A good accountant should be able to tell you how long it will take based on selling x widgets/mth at $x per month. Once you break even and start making a profit, the fun begins.

Growing a real business? Focus on Cashflow.
When you finally start making a regular profit, that is a very dangerous stage. Why? Because it is the first time you have something to protect – profit – and you will tend to hunker down and protect it.

Don’t.

If you stop at simple profit based on your own production, you will never grow a real business. Instead of siphoning off the profits and buying a hot tub, it’s time to reinvest them in growing the business to where it can make money while you’re regularly on vacation, or bigger if that is your preference. The problem is that when you decide to grow your business, the profits you worked so hard to realize, will go down or even disappear for a time.

Growth will kill your profit – for a short time
Even though our business has grown 392% in the last four years, our personal income has gone down every year for the last three years. But rather than be concerned, we’re very excited because we understand the principle of growth: growth decreases profit and cash flow. The faster you grow, the less profit you will have right now, but a lot more later.

If you are making less profit because your revenues are bad or your margins are too low, that’s a big problem. But if your profits are low because you are growing quickly, get happy about it. Just watch your cash flow – fast growth can put you out of business if you don’t have enough cash on hand to pay your bills.

Growth slowing down? Watch your expenses
The final cycle – If you decide to stop growing (we plan to keep growing internationally), your profit and your cash flow will return, and if you’ve done it right, you’ll have a lot more of both than when you first starting seeing profit. At this stage, tweaking your expenses will only make you more money.

Make decisions based on where you want to be, not on where you are
Too many business owners focus on expenses early in their business and say this to themselves, “I can’t afford to hire that sales person, buy that truck, install that software, etc.” The problem is that you are looking at an investment (money that comes back in spades) vs. an expense (money that never comes back). When you make decisions based on where you are, you shouldn’t be surprised that you’ll be there again next year.

One final thought – watch cash flow during every number cycle – it can put you out of business at any time.

So don’t be afraid of the growth stage! Give up the profit for a time and grow. You’ll have a lot more of it later.

Employees will hate where the world is going.

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Hire Stakeholders (they’ll love it)

We’ve talked a lot about the cultural damage of the Industrial Age. New studies are jumping on board suggesting that the workplace is headed in directions that will make “employees” and Industrial Age companies very unhappy.

The Evolving Workplace: Expert Insights is one such study. It has a technology bent to it, but does a great job of identifying where “work” and the “workplace” are headed. Some thoughts from, and about, the study:

Trend #1: Crowdsourcing and Crowdsource service – people will work from all over and some will never meet. Just-in-time labor will reduce the number of permanent employees. Productivity will become more important than hanging around the boss. 30% of Japan’s workforce is already crowd-sourced. The big elephant in the room is that kissing up to cover up for lousy productivity will be much harder for employees to do. The lazy guy w/ a great personality might actually have to start working.

Trend #2: Productivity measured in outputs, not hours – we call this a Results-based culture vs. Time-based culture. In our company we have no office hours, and no vacation or sick time. We expect people to produce, and then go play with their dog (or vice versa). This study says the whole world is moving in that direction. We believe it is because the Industrial Age taught us to trade time for money, but that in the post-modern economy, time is the new money. People want freedom from the 9-5 and will produce more if treated like adults who are in charge of their productivity.

Trend #5: Values versus rules – this trend highlights the importance of hiring people who reflect your values and who you can trust (since you’re no longer measuring time, but results). Stephen Covey conducted research which showed that employer/employee trust is one of the most valuable factors in someone being productive. Values, which guide and encourage personal initiative, will be more prevalent than Rules, which box people in, dull their thinking and keep them from innovating.

Trend #7: Employee-led innovation – when we lead with values and not rules, we turn employees (children who need to be told what to do, when, and where) into Stakeholders (adults). Stakeholders will take responsiblity for their time and will produce results without being monitored, and more importantly, will take responsibility for helping the company improve. They will come up with great ideas on how to move the company forward. Management won’t be telling employees what to do, the Stakeholders will be the innovators that move the company forward.

My favorite funny line from the report: “Strong resistance is expected from many parts of the labor force [to measuring output instead of hours]…. The gap will widen between the best workers and the worst in terms of opportunities and earnings, contributing to greater income inequality and therefore potential social unrest.”

In other words, a time-based culture lets people appear productive by simply having a car in the parking lot, and they will protest having been exposed as a drain on the company.

Going to work vs. working; Time-based vs. Results-based
The future doesn’t bode well for Industrial Age employees who don’t mind going to work (time-based), but don’t want to actually work while they are there (results-based). But it looks very bright for Stakeholders who want to “make meaning”, not just money, to take ownership, and get a life at the same time.

The world continues to shift in favor of those who want to do something, contribute, create, innovate, make meaning not money, and own their lives. It will encourage all of us to move from being employees to Stakeholders.

The Purpose of Marketing

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Is NOT to make your product sellable.

Most of us have the idea that marketing should make our product sellable; that we need logos, branding, great website design, and tight messaging in order to make our product sell. If that is why you are doing marketing, you’re in trouble.

Bad marketing works really hard to sell the product. It has too, because the product won’t sell itself. A lot of people can’t sell anything until their marketing is in full swing. That should be a red light.

Good marketing works really hard to inform people of the product and more importantly, expand the reach of people who are hearing about what is already a great product. The product doesn’t need cheap parlor tricks to sell it, it would sell itself. It simply needs more exposure.

The best marketing simply makes more people aware of a product that would sell without any marketing at all.

Not All It’s Cracked Up to Be
People buy great marketing once. If your marketing is what is selling your product, you’re in trouble. The overwhelming majority of sales are to existing customers and referrals from existing customers. Great marketing can actually make a nominal product even less referrable. When someone buys based on a very high expectation created by the marketing and it doesn’t deliver, they’re not going to refer it.

Is your marketing trying to sell your product, or make more people aware of the great product you have?

How to Know Your Marketing Sucks
1) The “marketing is the key” approach – You’re hoping your marketing will convince people to buy your product who wouldn’t buy it by just being presented with the product itself.

2) The delayed “magic” info – You make people listen to or read a bunch of hype, hyperbole, history, and hooks before you get to the “three things that will change your life”, or “the thing we’re selling that will transform your business”. Blechh.

3) The bait and switch – You pretend you are presenting an article, news, research, etc., when you’re just using these cheap parlor tricks to suck people in to your marketing. The Motley Fool does this all the time – I unsubscribed.

4) The free lure – it’s not really free.

5) The offer maze, or Pied Piper – start with the free lure, then talk some more, make a slightly bigger offer, talk, bigger offer, talk, the big offer. The 50’ long website that gives the big pitch after scrolling to the bottom. Cheap parlor trick. Real products don’t need this kind of marketing.

6) Focus on new clients – This is the big one. If your marketing is focused largely on getting new clients, you’ve got the wrong focus. It should be aimed at people who already know and love you, and it should give them tools and reasons for getting others on board.

Great marketing gets people to buy a great product who then carry the lion’s share of the marketing for you as Raving Fans.

Don’t use marketing to make your product sellable. That approach is sleazy, inauthentic and lacks any staying power. You’ll have to keep up the marketing assault on new customers in order to stay in business, and everyone will tire of you quickly.

Focus on Your Raving Fans
Use your marketing to give your existing customers (Raving Fans) simple ways to sell for you, and to expand the reach beyond your existing market, who will then carry the ball for you as well.

Use your marketing to build relationships with your existing clients. It’s much more powerful.

Hey, United, People Are More Important Than Stuff

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That goes for the rest of us, too.

I was flying back from Ireland yesterday and United forced us once again to listen to Jeff Smisek sell his $500 million fleet upgrades and new website forms before the safety video. What the video didn’t say was more important than what it said, to your business and to mine.

The conspicuous and flagrant foul being committed against the customer in this video is that United has no plans to spend any of the $500 million on their people or their customers, just their stuff. They are hoping fancy cup holders and more website forms will cover for core customer service issues that have reached epic proportions. There are two very serious lesson in this approach for all of us who own businesses:

1) People buy great marketing once. New seat cushions and website forms will maybe get some people to buy one more flight, but if nothing has changed at the airport or on the airplane, it will be a wasted $500 million.
2) People, both employees and customers, are more important than stuff. United is quite confident they aren’t.

Epically Bad Customer Service
Since March, United has struggled with customer complaints at a level never seen before in the airline industry. United now accounts for more than half of all of the complaints filed by passengers against the entire airline industry, a staggering statistic. And yet Smisek wants us to be impressed with his new stuff.

In July, for example, just 64 percent of his flights operated on time, and United ran dead last among major carriers in baggage handling. New TVs on the planes won’t fix that. To no surprise, it’s hurt their bottom line – passenger traffic on United fell about 2 percent in the quarter that ended yesterday.

Jon Taylor, a frequent flier and chairman of the University of St. Thomas political science department, said he’s noticed “a marked decrease in customer service and employee motivation”. Smisek’s response? Buy new airplane seats and create some more blind communication website forms.

Do the Hard Thing – Fix Your People Problems
Dealing with people is hard. United has a lot of problems in that area, both internally and externally. After an epically bad experience with them in February, their Director of Baggage Services offered a cash settlement. I asked if I could instead do a seminar with his people in Houston on customer service. He agreed and was talking with my Chief Relationship Officer about dates, then ran it up the flag pole and a month later it was reversed out.

The “VP of Customer Experience” didn’t help, either. I love the ironic title – he gets paid for just ensuring we all have a customer experience. He should get paid a lot – we’re all having a lot of customer experiences.

What’s the lesson for us?
1) Don’t hide behind your stuff, your cool product, your snazzy website, your pretty mailer or your presentation skills. Fix your people problems. Create a culture that attracts the right people, then figure out how you all can create the best customer service for your clients.

2) Stop sinking all your money into clever marketing. Instead deliver a better product with the best customer experience. If you do, people will seek you out again and again to do business with them. It’s not your stuff they love – with almost no exceptions, they can get comparable stuff (or airline tickets) somewhere else. What they want is for human beings to treat them like human beings.

Jack Stelzer, a Houston-based independent airline consultant recently commented about United, “In the long term if they continue to abuse the customer, the customer will go away.”

Your Real Assets Aren’t Stuff
Don’t fool yourself. The only real assets you have is your culture, the people it attracts or repels, and the customers who love you. The rest of it is just noise and distraction. Don’t put out a noise and distraction video about your great stuff like Smisek did. Put one out about your great people and how they treat their customers.

Then go do it. It’s not easy, but it’s simple. And it will ensure you will have a great business for a long time to come.