Order of Magnitude CEOs

It's the Relationship that Matters - Sometimes there is no Wrong or Right Answer other than Having the Conversation

Jeff Silbert — Mon, 19 Dec 2011 19:51:45 -0500

“I don’t understand why Allison is so upset.”

I was catching up with Earl in his office, a business owner who recently got into a disagreement with a long-term partner of his, Allison, who I happened to know as well, regarding a relatively small item.

(As an aside, I have noticed that almost all items are small in the long run but not so small in the short run)

Earl explained to me what happened and as he told me his version, I completely sided with Earl.

“You’re right Earl; I don’t know why Allison is so upset.”

But then I paused and asked Earl,

“What do you think would happen if Allison called me up and explained that same incident to me?”

Earl thought about it for a moment and then chuckled as he responded, “Knowing you Jeff, I guess if I wasn’t in on the conversation you would probably take Allison’s side.”

“Well, I don’t think I would be taking her side Earl, I just would have an understanding of why Allison felt the way she did and of course she is entitled to feel that way.”

“That wouldn’t make her right Jeff; it would just explain things from her point of view.”

“I completely agree Earl, but at least you would understand Allison’s issue and why she feels the way she does and she would understand what happened from your point of view.”

As I was talking with Earl, he immediately picked up his cell phone and started dialing.

“We are in the middle of a conversation Earl; don’t you think it’s a bit rude to be making a phone call?” I said in a mock serious tone as I knew exactly who Earl was calling.

Earl glared at me and said, “Hey Allison, its Earl, got a minute?”

I walked out of Earl’s office to get some water and chat with some of Earl’s staff that I knew.

After a few minutes as Earl approached me I heard him wrapping up his call with Allison.

“Great Allison, I’ll see you Wednesday.”

“How did it go with Allison discussing the incident?” I immediately asked Earl.

“Oh yes Jeff, I forgot that was the original reason I called Allison. I got to hear her perspective and understand why she was upset. I also got to share with Allison things from my perspective, acknowledge her issue and actually agree that I would have felt the same way if I was her.”

“Of course Allison and I didn’t agree on everything but at least we discussed it and now we could move on. It really wasn’t a big deal for Allison, but I’m glad we talked it through and Allison was very glad that I reached out. You know Jeff; I think this incident and conversation actually strengthened the relationship I have with Allison. We are actually meeting Wednesday to discuss an opportunity that stemmed from this incident.”

Make sure you are not too busy running your company, sending texts, emails and preparing for that next meeting that you forget to have candid conversations with your staff, clients partners, and of course your family that are taking the journey with you. Some of these candid conversations might be more important than others but almost all of these conversations will enhance the journey which is the point isn’t it?

Enjoy the Holidays!

Sometimes Word of Mouth About Your Great Offer is Not Enough - Where's Your New Business Coming From in 2012?

Jeff Silbert — Mon, 12 Dec 2011 16:51:51 -0500

“Jeff, Do you know of anybody who may want to become a customer of mine?”

I was picking up my children from a local business owner’s retail establishment, who provides a service that I had originally signed up for just my older daughter, but now both my daughters attend on a weekly basis, if not more.

“Not off the top of my head Susan, but I will keep it in mind, what’s going on?”

Susan knew I really valued her offer as I had just committed to triple my monthly payment to her, so she let me know what was going on.

“Jeff, my business is struggling, I am having a hard time getting new clients. In fact, your younger daughter Grace is my only new customer since October.”

“That’s rough Susan, as you know I really like what you are doing for my older daughter Sarah and I have high hopes for Grace.”

“Great Jeff, that’s nice to hear. Most of the parents and their children really value the service I provide and I love what I do, just not enough families know about me. How did you find out about me Jeff?”

“Through a family friend who has a child, Maria, who is a few years older than Sarah.”

“Oh yes Maria, she is doing great, without bragging we’ve had a huge impact on her performance, after a rough initial start.”

“Oh yes, Susan, my wife and I know, Maria’s Mom wholeheartedly agrees that your offer has made a big difference in Maria’s performance. As you know we are very pleased with Sarah’s improvement as well which is exactly why Grace is attending now.”

“But Jeff, then why am I not getting any other new customers?”

“I have to get going Susan, but do you mind if I ask you a few questions that might trigger some thoughts?”

“Sure Jeff.”

“How many clients try you out because they see your store?”

“I don’t track that, but I’m sure it’s close to zero, as we are not on a main road, as you know.”

“How much time do you spend networking and marketing with other complementary for profit or not for profit businesses in the area?”

“Not much Jeff, do you think that would help?”

“Perhaps Susan, how much do you spend on advertising, do you know which advertising works and which ones don’t.”

“I don’t like to advertise Jeff, it’s so expensive.”

“Susan - Do you have introductory offers for the first month to make it easy for families to try your service and make it a part of their life?”

“Not really, I’m afraid, customers would sign up just for the introductory period and then quit.”

“OK, last question Susan; do you know any other business owners in different locations that have a similar business as yours?”

“Sure do Jeff, I know a bunch of owners in different towns and some are doing really fantastic and others not too well.”

“The ones that are doing well, do you know what they are doing.”

“Oh Jeff, that’s not a fair comparison, they have visible locations from a major road, they advertise regularly and even get in the press, and they are friends with other business owners in town who help get the word out.”

“Anything else, Susan?” I couldn’t keep from wincing.

“Some even let people try the service for a month at a reduced rate and one even has a big spreadsheet where she tracks where her new business is coming from. She is anal about tracking that stuff the way I am anal about providing a great service for my clients, like Sarah.”

“Interesting Susan, I got to get going but if I know of anybody who is a great fit I will send them your way.”

“Thanks for listening Jeff, but before you go, any suggestions on how I get more customers for my business?”

Don’t be like Susan, make sure you are investing in resources, staff and budget to market and get new clients for 2012 and beyond.

You know what you need to do, you just have to make it happen! And if you don’t know what to do, get some help.

How the Economy Tanking in 2009 Helped One Ambitious Business Owner Find His Way - Is Your Sales Team Selling What Your Firm is Best Designed to Fulfill?

Jeff Silbert — Mon, 05 Dec 2011 17:31:34 -0500

“2011 will be my firm’s best year ever even though we signed up the least amount of new customers in years and stopped providing service to a bunch of our existing customers this year.”

I was talking with Walter this past Friday afternoon, a long-time New York business owner who appeared amazed as the words were coming out of his mouth, so I called him on it.

“Walter, you almost don’t believe it yourself?”

“I double checked it Jeff, and 2011 is our best year ever in terms of revenue and profitability, and I expect the growth in 2012 to be even better than 2011. We are in great shape, the staff is motivated and I’m so excited about the future.”

“I don’t get it Walter, less customers signing up, higher churn of existing customers, and 2011 is better than ever, you better triple check those numbers or perhaps get a different accountant,” I joked.

“It all makes sense Jeff, this was all a conscious choice that I put in motion a few years back – you got time for me to explain?”

“Sure Walter.”

“Well Jeff, when I first launched my business about nine or ten years back, I focused on getting clients both large and small. Since I was a startup without a track record, most of my clients were on the smaller side - paying the minimum fee or close to it. This worked well for the first couple of years as I worked out protocols on fulfillment and hired staff to take care of selling and fulfilling my firm’s offer.”

“Things started to break down for me about four years ago, when I was no longer able to move the needle in my business.”

“Move the needle Walter? I think I know what you mean, but, can you be more specific?”

“Sure Jeff, although my firm was a much different company than when we first started, for the most part we were still signing up the same type of customer. Also, for the most part my sales team was focused on bringing in these clients because it was what we had always done. Unfortunately, these small, unsophisticated clients were the most difficult for the operations team to service. So, for a couple years in a row, I was growing my firm into a less viable position each year and I had no clue other than I had a certain uneasiness in my stomach when reviewing the books each year until the economy tanked in 2009.”

“How did the economy tanking in 2009 help you Walter?”

“Don’t get me wrong, Jeff, the economy tanking was terrible for business. Companies downsizing, cutting expenses, and going out of business was a daily occurrence. We lost lots of customers but the turmoil enabled me to take a look at our offer and realize which clients were more valuable for my company and also which companies we help the most. It turned out that based on the evolution of our offer, we were no longer setup to profitably handle a significant portion of our existing customer base. The customers that were the most profitable for us were the customers that valued us the most and considered us “cheap” while the customers who were unprofitable for us thought of us as “expensive.” Over the course of my first six or seven years in business I had designed, built, and trained my staff to handle customers that considered us “cheap” or to say it better, a great value, yet, my sales team, including me were signing up clients that had to stretch to afford us, which made it painful for them and even more painful for my fulfillment staff.

“So what did you do differently?”

“Starting in early 2010, I made two huge changes. First, I started to purposely quit the clients who were expensive for us to fulfill and who considered us expensive. Second, I reoriented the sales team to focus on customers that were a great fit for our fulfillment team. The customers we now focus on gladly pay more than competitive offers, because our offer is a much better fit for what is important to them. Since implementing those two fundamental changes and rippling it throughout my company, we have shed a number of unprofitable clients and gained a number of the right kind of clients who have been enthusiastic supporters of us. And the best part is…”

“Higher revenue and profitability?” I excitedly jumped in.

“Not quite Jeff, though great guess. The best part is my staff is thrilled AND our Net Promoter Score (NPS) score, which as you know is focused on measuring clients recommending us to colleagues has gone up twenty points in the last two years. ”

“That’s awesome Walter, love it. I am sure the improved NPS score will contribute to a great 2012 as well.”

If you haven’t done so recently, review your current offer and business model compared to your existing client base as well as the goals and incentives of your sales team and then make adjustments so that what you sell is what you are designed to fulfill.

How an Ambitious Owner Learned to Embrace Obligations from an Investment Banker

Jeff Silbert — Sun, 27 Nov 2011 20:33:10 -0500

Last week I bumped into Earl, who I hadn't seen in about four or five years.

Last time I saw Earl he was contemplating selling his firm.

Last time I saw Early he was not a happy man.

This time Earl was grinning from ear to ear as he recognized me.

After exchanging the perfunctory pleasantries of people who hadn't seen each other in years I blurted out,

"Hey Earl, why the big stupid smile when I first saw you?"

"Well Jeff, I just came from my banker's office where I sold my company for more than 8 figures."

"Wow and Congrats," was all I could initially muster before continuing after a brief pause and a clumsy fist bump maneuver.

"When we last met Earl you were hoping to get a million or two at most, what changed?"

"Simple, one thing Jeff, I embraced obligations."

"Embracing obligations, I think I am going to like it Earl but just to be sure what does that mean?"

"Well, for the first 6 years or so of running my firm, I was very cautious. For example, I nickel and dimed when selecting professional service providers - for instance hiring an accountant that did a good job of helping me with the past but not with the future. I had opportunities to increase margins, but would have had to make long-term commitments for additional staff and infrastructure. The offers I made to clients weren't much different than other offers in the marketplace. I spent very little money on marketing and building the identity of the firm. I was practically saving myself out of business which is why I was eager to sell. The firm was profitable, but was going nowhere."

"Anything else Earl?" I replied half joking as I intently listened.

"Sure, I tried to do too much myself, so I always ended up hiring people that weren't that ambitious or when I hired somebody ambitious they would end up leaving because I wouldn't give them any real incentive or accountability to stay. My most valuable clients and staff realized that way before I did."

"Interesting Earl, so what obligations did you start to embrace?"

"All areas Jeff. For instance in staffing, the biggest move I made was bringing on a President three years back to focus on new sales. He was a real firecracker, completely driven by money with a great prior track record. I gave him a piece of the company tied to increasing firm value. He was very expensive but I embraced the obligation, knowing it was more expensive in terms of creating firm value to not have him on board. I embraced additional expenses that enabled us to make more valuable offers to my customers and at the same time reduced our variable costs by taking on significant obligations in terms of increased infrastructure and staff costs."

"Fascinating Earl, how did you decide to embrace those obligations, I would think it would be pretty tough to do that after around 6 years running your business."

"Funny enough Jeff, it was the advice I got when I was interviewing investment bankers when I was originally looking to sell. All the bankers except one were pitching me on how they would market my business. The one banker basically said, I can sell your business now or you can take it off the market and you can make it worth a heckuva lot more. He was the only one thinking long-term for me. He was the only one that said I should invest in my business and that I could make it worth 10x more. I just had to embrace obligations. The very next day I put an ad in The New York Times looking for a senior sales executive and also started to take on the additional obligations with my staff and with the offers I made to my clients. By embracing obligations, I was able to charge more and significantly increase the rate of acquiring new clients."

Earl continued.

"If I hadn't met that particular banker and embraced obligations I would have sold my firm way too early and would never have known it and that banker would have lost out on a payday about 10 times bigger than what he originally expected.” Earl gave me another of his ear to ear grins much larger than the first one and then concluded, "a much larger obligation I was more than happy to pay."

"Good to catch up with you Jeff, but I got to run in order to make a board meeting of a firm I just invested in, isn't life fun." And Earl was off again.

If you plan to significantly step up the value of your firm, be prepared to significantly increase the obligations of your firm.

If It's Important Then Write it Down - The Very Brief Story of How One Business Owner Found Out 2011 was a Good Year for his Firm (Hint: it started in 2010)

Jeff Silbert — Sun, 20 Nov 2011 21:50:00 -0500

“Jeff, I am afraid I won’t be good company for coffee later on today as I am feeling a bit down.”

“What’s going on Derrick?”

I was speaking with Derrick in early October, an ambitious New York City business owner, who was not his usual optimistic self, who was cancelling our coffee scheduled for later in the day.

“Our team did not have a good 3^rd quarter - we missed our revenue numbers and some of my staff did not get as much done as I expected with their projects. There were other things that didn’t happen as well, but I can’t remember them all. It got me pissed off and now I’m in a bad mood. ”

“That isn’t good Derrick, but that will happen, some quarters will be better than others.” I was struggling what to say next to Derrick when I suddenly remembered something that I thought might help.

“Derrick, when we met at the beginning of this year, you told me you were excited that you had written down the outcomes you wanted for 2011. Do you remember those outcomes?”

“Wow Jeff, thanks for reminding me, I forgot all about those outcomes and probably haven’t looked at those outcomes in a couple of months. Good thing I wrote them down. If you got a second, I can pull them up.”

“Sounds good Derrick.” Within a minute or two Derrick had his firm’s 2011 outcomes that he had written down late in 2010 on his computer screen.

As Derrick quickly scanned his 2011 outcomes he started talking, “Jeff, I don’t know if you remember but I grouped my expected 2011 outcomes into four areas – Sales, Marketing, Staffing, and Operations,” I could a hear a sudden change in Derrick’s voice, he was now excited.

“Why so excited Derrick?”

“So far, we have hit 8 of the 12 outcomes I had written down, like having three additional sales people hitting their quota and making a key senior operational hire which is going to give us a much stronger offer in 2012. We also surpassed our qualified lead outcome for this past quarter which means we should be set up for a very good 4^th quarter.”

“What about the items you just mentioned that you didn’t accomplish in the 3^rd quarter?”

“Those items are not nearly as important as the outcomes I wrote down last year,” Derrick quickly replied.

“That’s neat Derrick, so I guess we can meet for coffee after all?”

“Are you crazy Jeff, I got to get ready for tomorrow, with a little effort and focus we can end up surpassing 10 out of the 12 outcomes.”

“Ok, we can postpone our coffee Derrick, but I got to ask, what about the two outcomes you won’t make?”

“Well, one just doesn’t make sense anymore, I should have replaced it earlier in the year and one we just won’t hit, it’s too late now. Although, if I had been reviewing these outcomes, I could have made some different moves and made this outcome as well, so that’s a bit frustrating, but I’ll take surpassing 10 out of 11 outcomes.”

“That’s great Derrick, the only bad news is we won’t get to see each other for coffee.”

Derrick laughed, and said, “let’s put something in the calendar for next week, it will work better anyway for me.”

“Why’s that Derrick?”

“Because I just assigned myself the task to write down my 2012 outcomes ahead of our coffee next week.”

“Glad I can be your deadline Derrick for creating your 2012 outcomes, see you next week, same time.”

If you are not writing down what’s important for yourself and your firm in 2012, don’t be surprised if you don’t know if 2012 was a good year or not.