Bill Flagg

Investment Requests

noreply@blogger.com (Bill Flagg) — Mon, 16 Jun 2014 20:19:00 +0000

At our last bi-weekly partner meeting, Jerome, co-founder/CEO of SnapEngage, mentioned that several investors had emailed him to see if he'd be interested in talking. When I asked how he responded, his reply was beautiful...

"Thanks you for your message. SnapEngage is completely customer funded and we are not looking for additional investment. In order to focus on our main investors (our customers), I've decided to not take calls from investment companies."

I've watched myself and too many entrepreneurs waste a lot of time and energy talking to potential investors and/or acquirers. It's usually curiosity and ego driven to be able to put a price on what we own. It also tends to be a huge distraction to serving our most important investors - our customers. I wish I had this good of a response (and realization) twenty years ago! Thanks Jerome.

Brain Trusts

noreply@blogger.com (Bill Flagg) — Mon, 09 Jun 2014 20:24:00 +0000

Every other Thursday my operating partners/founders and I meet to share challenges and best practices across our different businesses. It's a cool little peer brain trust that helps us over businesses' little challenges. We celebrate and remind ourselves we've accomplished good things. We offload emotional burdens and remind each other we are human. We help each other with best practices. We share experiences of how we overcame similar challenges. It's a pressure release valve, gas tank filler, and route map all-in-one many weeks.

I've been involved with a handful of different brain trusts throughout my life with business peers, mens groups, and leadership teams within my businesses. The format is simple, give updates of the good and the bad, be candid with each other, and then share experiences that may be of help to each other (vs. giving advice). Then let the magic happen.

I first read about the idea in Think & Grow Rich by Napoleon Hill which I read just out of college. As a result I assembled an advisory team of folks much more experienced/successful than me. It was great, but missing the peer component. I then found YEO (now EO) and got my peer group of other young entrepreneurs who were running their heads through walls just like me.

I've recently joined a peer group of entrepreneurial parents raising young kids. We meet by phone at 5am MT once a month to share our updates and best practices. Inspiration for raising great kids pops out of this meeting like popcorn.

I'm in the middle of reading the founder/leader of Pixar, Ed Catmull's book Creativity Inc. Which prompted this post. He says their internal peer brain trust has helped them turn crap movies into great movies. A small group of their movie directors and creative talent meet every couple months to preview films in progress. They provide candid feedback to each other as peers that help the director see blind spots in their plots, and scenes. They don't prescribe how to fix anything. They just share their observations so the director can find their own way to improve the films.

I remember creating my first braintrust seemed like a hard task. But it was actually easy once I identified the folks I would want around a table with me. Inviting them seemed awkward. But with how quickly they said yes, it was easy. Creating a format seemed hard, but the conversation and wisdom flowed really easily with basic conversation starters. If we share a similar vision, the rest tends to flow.

In the case of my current business partners meeting, we all share a passion for building great long-lasting organizations. We also share a philosophy of being customer-funded, and as a result, organically grown. With the intent to help other like-minded entrepreneurs, we've decided to share some of the topics that come up at our meetings. Which I will blog about next.

So, want more brain, more heart, more soul to help you prosper? Start or join a brain trust.

Free Your Teams from Bureaucracy

noreply@blogger.com (Bill Flagg) — Thu, 23 Jan 2014 00:23:00 +0000

I describe "bureaucracy" as any system that doesn't add value and as a result wastes and sometimes enslaves people's time. The word itself is overly complicated to spell and therefore use. It's actually a perfect name for itself. Unfortunately there's a lot of it in the World. One of my personal missions in life is to help eliminate as much of it as possible. Why? Because we are here for a short time, and who wants to waste it on stuff that doesn't make a difference?

In business, here's what it looks like. Two of my companies' support teams were documenting every customer support request. Sometimes in several systems. Using up 70% of their time. Leaving only 30% of their time to actually help customers. As we weren't able to respond to customers fast enough, we kept hiring more people, which required even more systems to keep track of everything and all the people we were hiring. We lost track of the end goal... happy well-served customers.

At RegOnline, we discovered we could eliminate the need for support if we just simplified the systems our customers interacted with... clearer wording, hide advanced options, better self-service online help. We then simplified the tracking systems our support team dealt with to free up their time. The result... less confusion, less busy work, more free time and value for everyone. The best part was how much easier we made it for customers.

This month at SurveyGizmo, SnapEngage, and PosterBrain we added something new to discuss at our weekly all-company meetings... "What are the most common questions our prospects and customers have asked us in the past week?" We started doing this because we realized that our weekly meetings were focusing on US (revenue, customer count, expenses, profit) and not enough on our CUSTOMERS.

At PosterBrain today, the most common questions customers asked in the past week were.... How will my picture look?, Where are you located/shipping from?, Do you dry mount?, etc.. I suggested rather than making people contact us to get those answers, how about we put a FAQ on our homepage? Our customer service superstar laughed and said "Then what will I do with all my time?!" :-) I said how about those outreach emails you've been wanting to make for weeks to attract new customers!

Let Your Customers Fund Your Software Startup

noreply@blogger.com (Bill Flagg) — Thu, 12 Dec 2013 14:58:00 +0000

“Anything that won’t sell, I don’t want to invent.
Its sale is proof of utility, and utility is success.”
- Thomas Edison

I've seen hundreds of entrepreneurs spend more of their valuable time raising money than they do focusing on the true reality of what customers REALLY want to pay for. No matter how much funding goes into an organization, it's not a truly sustainable business until the revenues from it's customers cover all the expenses of the business. The only way I know of generating sustainable revenue FROM customers is to generate real value FOR them. Customer proof is the ultimate product proof.

Which is why I decided to get behind a new crowd-funding/pre-tailing site for software startups called Ramen. Where the "crowd" FUNDING the software are the potential users OF the software... they help fund (no equity involved) the software they would want and use. I love the idea of getting real customers to fund our businesses.

Thank you Niel & Ryan for making Ramen an option for startups! Which by the way, they are crowd-funding their own startup with their own potential customers (it's kind of like Being John Malkovich). I'm doing a matching sponsorship, so if you have a software idea that you'd like to test your CUSTOMER traction on as you build/design it and would like their help, well then help back Ramen too!... ANNOUNCING PROJECT MATCHING SPONSORS IN RAMEN TO THE TUNE OF $5000

1/22/14 PS - In full disclosure, Niel and Ryan choose to do an angel round prior to launching. Stay tuned for their follow-on "customer-funding" round.

Successful Turnarounds

noreply@blogger.com (Bill Flagg) — Mon, 09 Dec 2013 12:37:00 +0000

I've been fascinated by business turnarounds since college... take an ailing company that's losing money and turn it into a profitable, sustainable company. I've been fortunate to help a few companies turn around and also love hearing other's stories. They all share these themes:

Revenue is flat or declining
Expenses exceed revenues
Additional capital is either non-existent or extremely expensive
Management and employees are scared or checking out

The key steps to turnarounds are:
1. Cut everything that isn't producing revenue/real value for the customer - until expenses are below revenues, including: expensive executive management, excessive product development, unprofitable biz dev or sales teams, product lines, office space, discounting, unprofitable marketing and advertising, commissions, ceremonial account managers, employee perks, charitable contributions, etc.

2. Focus intensely on the real value/products that customers want to buy by eliminating distracting non-core products and services

3. Renegotiate debt/payables to pay-out over time. Show an ongoing commitment to lenders and vendors by paying something every month. But, don't pay more than what the company can reasonably afford.

4. Go Open Book with employees and management. Show everyone exactly where the company was, is, and will be. Let them be a part of the turnaround. Meet weekly to review progress.

5. Bootstrap exciting new products that customers really want (Ford Mustang revival, Apple Ipod)

6. Enjoy the profitable fruits of having a leaner organization that delivers more value to customers.

Turnarounds are really hard for most to envision/lead because it takes a fairly rare leader who can see through to where the waste is in the organization (i.e. not delivering value to the customer), has the courage to actually trim to the core, the ability to instill confidence and ownership in those remaining, and the awareness to listen and drive the leaner organization to what their market/customers really want next.

I find it thrilling to uncover value and add life to old things, unlike most of my entrepreneur friends who get more excited about starting things from scratch.

Two turnaround books/stories that I LOVE are: The Second Coming of Steve Jobs (turnaround of Apple) and American Icon (turnaround of Ford)

Minimum Viable Partnerships

noreply@blogger.com (Bill Flagg) — Mon, 02 Dec 2013 19:12:00 +0000

Over the years I have seen over a hundred sales/reseller/biz dev partnerships come and go. Some were seemingly huge, with big brands behind them. Most were small-to-medium. But ALL felt like very promising ways to grow the business. I've spent and watched gobs of money and energy on customizing our products, taking valuable time away from core products, and even hiring extra folks to staff the waves of new customers that would soon come.

Some examples:

Adding a product link on every page of a partner's site with millions of visitors a month.

Partnering with an event directory site that listed hundreds of thousands of events that could send event organizers to our event registration software.

Partnering with the largest seller of college newspaper advertising to resell our college advertising product

Partnering with the largest financial services company in the world to offer an easier way for their business customers to collect from their customers

Partnering with a huge consumer publishing site with millions of visitors to run a contest to use the product.

"If you build it, they will come" kept ringing in my ears... stealing millions of dollars of resources away from my core product and towards this vision of a more fruitful EASIER future via these partnerships.

Not ONE out of one hundred of these partnerships can I point to and say it produced a positive return on resources invested. But I still hold hope, year after year, partnership after partnership, as I wait for the one. We can't give up hope, because partnerships are too much fun and there ARE plenty of examples out there where they have made the company a huge success. Like Microsoft & IBM, Apple & AT&T, in the early days.

So what to do? A little partnership-worn and hopefully wiser, I NOW say let's walk before we run. What's the minimum viable partnership (MVP) we can test to see if teaming up actually produces any fruit for us? How quickly can we test the power of our relationship and how that translates with our customers.

For example I recently heard about one startup looking to partner with another, even trade some equity, because they both imagined that the partnership of millions of emails of one partner would be a perfect fit for launching the other startup. I suggested that before spending days together charting out a master deal why don't they email a small subset of the group to see what kind of impact they might be able to extrapolate. When they approached the partner about it, it turned out they only had 20,000 permissible emails, not millions. Certainly not worthy of spending days talking more about it or trading equity.

Two of the most common push-backs I hear from potential partners on MVPartnerships are when partners want white-labeling, customizations, integrations, complicated rev-share agreements, and sometimes real capital before getting started. While it's not optimal, most partnerships can be tested without having to have those. By putting an emphasis on doing a quick test to see if there's any real demand/value, and THEN we'll ALL know better how to design the partnership going forward. It usually puts them at ease, reduces the upfront workload, and more importantly causes everyone to be more realistic by testing our field-of-dreams assumptions first. Saves lots of money, resources, and broken hearts that way.

Small Giants

noreply@blogger.com (Bill Flagg) — Fri, 02 Aug 2013 23:02:00 +0000

I had the pleasure recently of spending a couple hours with Bo Burlingham, the former editor of Inc. Magazine and author of Small Giants (amongst several other great books). This book shows how some very unique and successful companies have found something much more fulfilling in being great rather than big. It's a wonderful collection of stories about a handful of entrepreneurs who created meaningful companies that deeply care about their customers and employees.

One of my favorite stories is about Danny Myers, the New York restauranteur... "He doesn't deny the importance of traditional customer service, but he regards it as a set of technical skills. In a restaurant, he says, service involves such practices as taking the order promptly; having food arrive while while it's still hot; and yes, cleaning up quickly when a tray of water glasses spills. You can teach people to do all of those things, and do them well. Enlightened hospitality on the other hand, is an emotional skill involving the ability to make customers feel that you're on their side. That's the mantra of Meyer's restaurant staff: Let them know you're on their side." Danny wrote a great book, Setting the Table, that I talked about in this post.

In a World where most of us entrepreneurs are motivated by a more-is-more mentality, I always find it invigorating to hear stories about folks who are going for something different. Some deeper connection. Great read for those entrepreneurs who are building for life rather than building to flip.

Bo is finishing up a book about having graceful exists. Which addresses what life-long entrepreneurs are doing to exit their companies so what they created can be preserved/sustained. Some do it too soon, thinking they would like retirement, others don't hand it off to the wrong new owners, and many figure out elegant ESOP options. Regardless, I love the thinking... beyond the life of the entrepreneur.

In fact, Bo taught me a new word and a new way of thinking as a result. In Europe there are still companies that have stayed in the same family for hundreds of years. Bo says its because of "primogeniture", which is the passing of businesses to the first born (usually son) in each family. I find it fascinating that it has worked so well in preserving companies.

Being of Value

noreply@blogger.com (Bill Flagg) — Wed, 13 Feb 2013 00:06:00 +0000

The only reason businesses exist is to be of value to its customers. The more value we can deliver, the more successful we will be.

How can we deliver MORE value to customers? Since most companies spend less than 1% of time and resources on that question, we can start by asking that question more often, like once a day.

Here are some of the areas that I've seen the most value added:

Over-the-top customer service
Removing things that customers don't care about - (i.e. old-school holiday cards, pet projects that customers haven't used)
Eliminating positions that don't really pay for themselves that frees up resources to spend on things that really DO matter to customers (like great customer service)
Adding those little features that customers keep asking for
Eliminating confusion on our websites
Eliminating confusion within our products and pricing
Eliminating confusion in our pricing
Picking up the phone and talking to real customers regularly
Adding random acts of kindness to customer experiences
Doing meaningful things to take better care of employees (which translates into them wanting to deliver more care/value to customers)
Fixing customer issues really fast for them

Here's a list of things that suck our attention away from adding more value to our customers:

Raising money, updating investors, and pouring over financial projections and spreadsheets
Talking to potential suitors about selling all or part of our companies
Woo'ing pedigree mid-level management (who mostly, in the end, don't add value)
Figuring out which pens, hats, and t-shirts to put our logo on next
Moving offices every year and putting too many time-wasting devices into our offices (big spaces, foosball & ping pong tables, cafe's, etc)
Sending generic holiday cards, preprinted thank you cards, and anything else that smacks of generic "Thanks for being our customer" crap
Continuing to employ people who don't go the extra mile for/exude enthusiasm for customers or co-workers
Continuing to invent new roles for people who don't do well at their old roles.

Ownership Thinking

noreply@blogger.com (Bill Flagg) — Tue, 24 Jul 2012 23:09:00 +0000

Over past couple months, I've had some MAJOR changes in my thinking about empowering and compensating employees. It's based in Open Book Management but with a lot of important twists to it.

My first inspiration, came from reading Ownership Thinking by Brad Hams (published last Fall). He worked with Jack Stack of The Great Game of Business and now has a consulting group that helps companies shift their whole organization with great results. I also heard Brad speak in Boston and then had lunch with him and my partners.

My next inspiration came from Zingerman's (again). While dropping Ari (co-founder) off at the Denver Airport I asked him where he thought my biggest opportunity for growth was, and he said open book management. A couple months later, me and my partners hopped on a plan back to Ann Arbor to spend two full days learning everything we could about how they do open book management and why it makes such a huge difference with employees, bottom-line results, and constantly delivering more value to customers (www.zingtrain.com).

In a nutshell (which will do no one any good, unless they really dive into each further):
1. Weekly meetings with dashboards (see above example)
2. 20% of meeting time spent talking about what happened, 80% on brainstorming improvement
3. Front-line employees "own" the lines on the dashboards - creating more involvement/engagement
4. Plan & Forecast the numbers as a group
5. If team exceeds plan, then a "gain share" on what's made above the plan is shared
6. Everyone learns about revenue, expenses, profits, inventory, and receivables.

Brad Ham's Ownership thinking takes it one step further with having Rapid Improvement Plans running every quarter, whereby the team picks something to improve. Calculates what the improvement is worth to the company and then financially shares part of those improvements with the employees. For example, if a $100k reduction of receivables or inventory is worth a $10k increase in profitability to the company, the employees will share 20% of that improvement or $2k. From a bonus compensation standpoint, what I like is that it is an EARNED bonus and NOT an entitlement that typical profit share or end-of-year bonuses tend to be.

Having spent a couple months now across four different companies, the first benefit I've seen from this is it's a lot more fun for employees to be more involved and have more visibility into the details of how the business operates. Many comment on how they feel they are getting a free MBA. The second benefit is seeing employees start thinking/feeling like owners and operating with more can-do-it-ness. It takes the pressure off of management and is actually more effective at getting results than being a management dictated organization. The third benefit I've seen is seeing an increase in the level of value/satisfaction being delivered to customers. And lastly, seeing real results in the organizations operating more profitably (lower expenses AND higher revenues).

It's a deep lake that will take years to learn how to swim really well in. But for now, being waist deep and going deeper feels really good.

SnapEngage Joins The Felix Fun!

noreply@blogger.com (Bill Flagg) — Tue, 24 Apr 2012 05:00:00 +0000

I'm excited to announce that SnapEngage, enterprise-level live chat, has joined The Felix Fun family of companies. Jerome Breche & Jerome Mouton bootstrapped their company out of the TechStars program in Boulder (where I originally met them). With no additional outside funding, they have grown to thousands of paid clients/raving fans and a great team of people with a lot of growth ahead of them.

What I love about the Jeromes is that when funding was not readily available to them, they rolled up their sleeves and scrambled like hell to create a product that companies were willing/wanting to pay for. From there, they've asked AND listened to ALL their customers and have iterated like crazy as they got feedback on how to improve. They've hired only as revenues could support, have kept overhead low, and openly share their (cupcake) love with their customers.

They've done an ingenius job of building SnapEngage so it serves the unmet needs of middle-market companies. It has more integrations and better API's than any enterprise-level system out there. It is more stable and reliable. And it's more customizable and easier to use than other enterprise-level systems. They've priced right as well in delivering WAY more bang for the buck too. All-in-all a winning combo in the SaaS world!

I look forward to being a part of their team and helping to grow a great "built-for-life" company with them!

Swimming in the Middle Market

noreply@blogger.com (Bill Flagg) — Thu, 05 Apr 2012 04:33:00 +0000

I've had conversations with several different companies recently about expending resources to try to attract larger enterprise clients. What I've discovered (too many times) through experience is that it's a very expensive, time consuming, and extremely hard way to be profitable. It usual takes investment in more expensive outbound salespeople, MUCH longer sales cycle, and much lower probability of doing business together, along with a lot more internal resources to jump through the hoops that larger enterprise clients require. And seems to be a more cut-throat space amongst highly paid sales people.

But, that's also why I get so excited about the middle market business customers. Historically, they have been underserved by traditional services and software. Usually it's where the lion's share of the market actually exists. And they can now easily (and low cost to you) find you via the internet. They can self-serve (without needing full-service implementation teams to support them). AND the margins tend to be much better in the end because they don't demand volume discounts either. They also tend to be MUCH more appreciative of your service.

Middle market is really where all the fun is at. Which is why I love to swim there.

Built for Life

noreply@blogger.com (Bill Flagg) — Fri, 03 Feb 2012 17:45:00 +0000

I believe we can bring a LOT more value to the world by building GREAT companies (for life) vs. being an investor or entrepreneur who aims to flip.

A couple things overlapped in the past month that made me think more about this.

1. A VC fund announced it raised $600 million and would have raised more but wanted to get its investment cycle down from 4 years to 3 years.

2. While washing my 13 year old golden retriever, a thought crossed my mind... the trend is to own companies for a third the time people would own a pet.

3. 60 Minutes did a segment on a 600 year-old family-owned wine business in Italy (view). Now run by the 26th generation!!

4. Mark Cuban's Rule's for Startups: 1. Don’t start a company unless its an obsession and something you love, 2. If you have an exit strategy, its not an obsession.

5. Jim Collins most recent book, Great by Choice, that profiles the incredible 10x success of longer-term-thinking, built-for-life companies like Southwest Airlines.

6. A book about Hobby Lobby, More than a Hobby (that my amazing wife, who is truly addicted to the place, bought me). It tells a story of organic, built-for-life growth, that's a similar story to how In-N-Out Burger, Trader Joes, Zingerman's, & Southwest airlines grew... one profitable store/business/route at a time.

7. This last one is the most disturbing, but makes a point. If we wouldn't sell our children, then why would we sell our companies, that we put just as much if not more of our care and energy into.

I'm gathering an exclusive group of successful entrepreneurs who are passionate about building their companies for life. If that is you, drop me a line.

Bonuses

noreply@blogger.com (Bill Flagg) — Mon, 12 Dec 2011 13:16:00 +0000

Last week I had couple conversations about bonus structures. I've experimented with a lot of things over the years and here's what I've come to believe. I think of bonuses in two categories:

1. Incentive

2. Appreciation

I think they have more impact when kept separate. Let me explain...

Incentive Bonuses

I believe we all have an instinct to want to play games. I call it "the gaming gene", and we all tend to get excited to have games to play, keep score, and win. I also believe this instinct is the basis for why some, albeit a small % of people, are truly motivated by money. It's a score to keep track of their progress in the game of life.

The incentive bonus is really more about a "prize" that individuals and teams can look forward to as a result of hitting their goals or playing the game well. I've seen more motivation come from offering $100 worth of movie tickets than receiving $100 cash. So the "prize" or bonus does not need to be a cash, in fact it may be more effective if it isn't. But, what's really important and motivating is setting up the "game" well. For example at RegOnline, we would have quarterly departmental goals that were focused on moving the needle above and beyond where we were. Sales may be looking to increase conversion on their demo's by 10%, or development would be pushing to get an extra project released, or marketing would be focused on getting a few more top search engine rankings for a couple more keywords. Goals seem to work best when they:

1. Move the needle/important to where the company wants to head

2. Achievable - aim low, make progress

3. Short term - no longer than 3 months

4. Team oriented - the team agrees and is excited

5. Fun/motivating bonuses (i.e. everyone gets massages, we all go to Mexico, Fridays off for the next quarter)

Appreciation Bonuses

I believe that unexpected bonuses go a LONG way with sending a caring message. Much more so than giving regular expected bonuses that are really just a way to true-up below-market pay. Pay market rate and then do the UNEXPECTED. I try to make them random both in timing (3-4 times a year) and in format (ipads, cash, airline miles, spa treatments, trips to mexico, etc.). I love how excited my co-workers are when they receive a bonus/gift they weren't expecting. It makes it SO much more fun for everyone.

I've never been a huge fan of holiday bonuses because they are expected. But, I also know that it helps people who aren't as good at saving for the holiday gifts. So, I tend to give cash/gift cards in the 4th quarter to help.

I also believe in splitting my bonus budget EQUALLY amongst full-time employees. Doesn't matter if someone makes double the salary of another. I believe differences in salary has little to do with ability to be of value to the company. I've seen $35,000 support team members win customers for life with their care and responsiveness and $80,000 developers cause customers to head for the door because of poorly written code. I also like sending a signal to EVERYONE in the company that everyone CAN (and does) make a big difference regardless of pay.

Motivate and Appreciate SEPARATELY.

Engender team work.

Have fun with it (with prizes instead of cash)

Expansiveness

noreply@blogger.com (Bill Flagg) — Mon, 28 Nov 2011 20:14:00 +0000

In the past couple months I've participated in three intensive, mind-blowing workshops/gatherings. All three helped me grow and expand my view of what's possible in my businesses and personal life.

The first was a 4-day Lifebook workshop I did with my amazingly-supportive wife, Chelsea. Where we went through 12 categories of our lives and created visions for what the next level of growth looked like. While 4 days seems like a long time to lock ourselves in a room with 10 other couples, we found some real nuggets for growth in our lives.

Then came another two days with the genius-founder of Zingerman's (see last March's trip description here). I went with my partners from StickerGiant & SurveyGizmo, and manager from PosterBrain. We pealed back the layers of our businesses and created new enhanced visions for our companies and teams that gave us all a TON of new energy and excitement for growth. That gave our teams a whole new energy as well.

Then I spent three days at the Conscious Capitalism Summit (see last year's notes) with incredibly conscious leaders/founders of some GREAT companies like Whole Foods, Panera Bread, Starbucks, Dansk shoes, Southwest Airlines, Nordstroms, and more. They each spoke of the visions/consciousness by which they have built and are building their companies. When I asked John Mackey, the founder of Whole Foods, what is the bottleneck for more companies to grow in a more holistic way, his answer was simply "the consciousness of the leader". Each time a leader expands their consciousness, or more simply grows, the company will naturally follow.

All three of these gatherings were great reminders of:

1. The joy I get out of engaging in things that help me grow and expand my view of what's possible.

2. The HUGE benefits to me, my family, and my businesses from growing

3. The desire to find more opportunities for growth

4. The incredibly HUGE power of VISIONING (or expanding my view of what's possible)

I have always gravitated towards a handful of "growth" trips each year. A lot of times as the trips get closer, I don't feel like going. But I'm always glad I did because I attribute a lot of my success and happiness to those opportunity to expand my view on things.

Other trips I do/have done...

Annual trip to Berkshire Hathaway to hear Warren Buffet and Charlie Munger talk for 4 hours

Annual trip to Endicott House in Boston where 50 entrepreneurs gather to engage with top-of-their-fields people for 4 days (a more intimate version of TED)

Field trips to see the inner workings of different businesses (Zappos)

Personal growth workshops (Tony Robbins, DreamWork, Mankind Project)

Please share if you have growth experiences that have expanded your views on life and business that you'd recommend.

Own it

noreply@blogger.com (Bill Flagg) — Tue, 16 Aug 2011 12:00:00 +0000

I've had a couple experiences as a consumer this summer that have made me want to scream. Things go wrong all the time. Thats ok. It's when an organization doesn't own it and communicate quickly about it that erodes trust and desire to do business with them.

I also believe OWNing IT is a MAJOR trust builder and the more we do it, in a timely and personalized way, the more people will LOVE to do business with us.

One of the most basic tactics I have used in my businesses is to automatically send a follow-up email immediately after their first use... so we could own any problems that may have come up. For example, at PosterBrain we send this email the day after someone receives their order...

"subject: How's your poster order?

Hi Jim,

Did your poster order get to you ok? What did you think of the quality (and your experience with us)?

On a scale of 0-10, how likely are you to recommend PosterBrain to a friend or colleague? Can't wait to hear."

90% of replies are a "GREAT!"

10% of replies are about things that went wrong that we then have the opportunity to WOW them with our customer service.

If we didn't ask directly, most people won't give unsolicited negative feedback. Then we would lose a customer without even knowing it.

At RegOnline we periodically had glitches in our system. We would move as quickly as possible to email those that were affected, be specific about what happened, and explain how we were solving the problem so it wouldn't inconvenience the customer again. I was always amazed by how many people would reply back and say that's why they loved doing business with us, because we were quick to own and communicate our problems.

Are we asking for enough direct timely feedback? Are we owning the problems before our customers need to mention them?

Little Bets

noreply@blogger.com (Bill Flagg) — Mon, 13 Jun 2011 11:04:00 +0000

A friend recently gave me this great book... Little Bets. The basic theme is about how the most successful folks around also ITERATE the most. They try lots of little new things and then amplify what resonates for their audience/customers. One great example is how the comedian, Chris Rock, shows up at a small comedy bar in New Jersey to test out new content. Most of what he does flops there, but he makes note of the ones that get the laughs and keeps iterating until he gets the best content for his HBO specials and tours.

I'm a big fan of iterating in every business I'm involved with. Here are a couple examples of how we've iterated recently and discovered things that resonate:

1. PosterBrain adding Wurther's candy to every order - customers now regularly email us about how much they love the little surprise inside.

2. StickerGiant sending follow-up emails to every customer to see how their stickers turned out - we now get both rave reviews and know right away of any issues

3. PaySimple simplifying their online application to take half the time to complete - drastically improving conversion rates

4. SurveyGizmo promoting "Enterprise Survey Software" on the homepage - increased conversion rates of our core business

Sounds easy, right? Well, for every success there's probably 10 things we try that fall totally flat and one that actually has a negative impact. The key is to test without shame and as nimbly as possible. My mantra has always been "how quickly can we test this?"

I find that it's real easy to over-engineer projects and as a result they can take way too long to see the light of day. An example of an idea that I was involved with at RegOnline four years ago, has finally launched with tremendous impact... a one-page homepage (no navigation bar) has seen a 90% lift in conversion! What was our opportunity cost of not having tested this four years ago?

How many little bets can we make this week to see what happens?

Are sales teams adding value?

noreply@blogger.com (Bill Flagg) — Fri, 20 May 2011 12:24:00 +0000

For years, a good friend of mine (who owns Finished Basement Company) and I have debated the real value of commissioned inbound sales teams. He claimed his $10 million+ revenue company couldn't survive without his coin-operated sales guys. Then about three months ago, after being sick of feeling like he was being held hostage by his 6-person sales team, he decided to let them all go and see what happened.

Instead of prospective customers going through a salesperson and being "closed" by them, they now speak directly with the basement design team. The designer asks the customer what they envision, what their budget range is, and then gives the customer a design. The customer then chooses to buy.

The process runs far smoother. There is much better service with all the communication going directly to the “technician” (the designer) vs through the sales person. Budget conversations are a straight forward matter of the design process vs. a chess match between seller and buyer. At the end of the day the client wins with a better design, better communication and better service.

What's the difference in sales so far? Close rates and profitability have nearly doubled. Overhead is down, cost to the client is down and frustration with a pain-in-the-butt sales team is down to zero.

P.S. (added 5/26/11)

I'll also add that the reason we had these conversations to start was because RegOnline started with a similar commissioned inbound sales team. I didn't have the guts to amputate the whole team, but I did convert the team to a no-commission "Client Services" team and found better results at half the cost and none of the hassles of a commissioned team environment. We did experiment recently with SurveyGizmo leaving some of the inbound leads untouched by a human (and just get automated emails) and found that human interaction DID have a significant impact on sales and justified their non-commissioned compensation.

Berkshire Hathaway 2011

noreply@blogger.com (Bill Flagg) — Tue, 17 May 2011 11:16:00 +0000

This year's trip to Omaha to listen to Warren Buffett & Charlie Munger answer questions for five hours was the same as previous years... a great cleaning of my investing windshield, an epiphany (or two), and a good time connecting with my 77 year-old father (and brother-in-law and nephew this time too).

This year's epiphany was about cyclicality. Buffett & Munger talked about how their residential businesses are not doing well right now and how they are perfectly comfortable with "lumpy" profits and cyclicality. They made a comment about how most people understand and are comfortable with seasonality in businesses, but few have a comfort level and understanding of cyclicality. Most overreact both on the ups and downs of cyclical industries like real estate. A great read that talks about how much opportunity there is in understanding cycles is Howard Mark's book The Most Important Thing (chapters 8 & 9).

Eight more nuggets:

1. Munger prefers to have permanent partners in acquiring companies vs. pushing paper in out-smarting others in marketable securities (although Buffett disagreed).

2. Biggest mistake - going into smaller business that could never be bigger

3. Raising rich kids - don't let them think they are special because of being rich and give incentive to work.

4. Fancy projections do more damage than good because people start believing they will be true. Don't ask the barber if you need a haircut - investment bankers love projections... Reduced expectations are best defense for investing.

5. All $35 billion of BRK's cash is in treasuries because they want a parking place where we know we'll get our car back.

6. "Serving on boards is for the birds." - CM

7. Buffet's replacement? Get the right person with the right values, comp structure secondary.

8. “I wish I could read faster. It’s a huge advantage to read fast. There’s hardly anything more pleasurable then reading, and reading, and reading and reading. Charlie and I do a lot of it, and we continue to do a lot of it, but I don’t do it as fast as I would like to.”

And 53 more...

1. All businesses are doing better, except those related to residential real estate.

2. Sokol affair was "inexplicable & inexcusable". "It's a mistake to assume perfect rationality in very able people" - CM (Charlie Munger).

2.b. "You can always tell a man to go to hell tomorrow." in response to their congenial press release about Sokol

3. Separating the Chairman & CEO roles enables better management/change of management.

4. If were to develop new expertise would want it to be in the tech or energy field.

5. Difficult to identify people with competence in areas we don't have competence.

6. Ease of entry - always 1st question in determining durability.

7. Standard of living in the past century increased six fold. How can anyone NOT be enthused about this country. Power of capitalism is incredible. Resusitive growth pattern will continue. Our system works incredibly well.

8. Best companies require little capital to grow and can price adjust with inflation (vs. businesses with tons of inventory or receivables)

9. Continuous learning important to success

10. Ideal asset - royalty on sales on inflation adjusted products

11. We don't view BRK as over-priced. Would use BRK stock unless fairly valued (which isn't now)

12. Doesn't like the CAPEX on utilities with inflation

13. Dividends - if can't reinvest internally, then dividend out. Stock price would go down as an admission of inability to create greater returns.

14. Outlook on banks - returns will be considerably less because of reduced leverage. Have added to their WellsFargo position.

15. M&T bank wonderful company and annual report. Same with Jamie Dimon's (JPMorgan) letter to shareholders.

16. When BRK started a share was worth $1 of gold, now worth $1,500 of gold today (vs. $120,000 stock price)

17. ALL currencies have declined in value over time.

18. Gold 67 foot cube = all world supply

19. Value is based on what asset will deliver/produce. Invest in good PRODUCING businesses.

20. Rising prices creates excitement. Over time, not way to get rich though.

21. "Doesn't seem rational to buy an asset that goes up if the World goes to hell" - CM

22. How'd you attract investors? "It helps if you conduct yourself so that others trust and you deserve that trust."

23. We ARE a conglomerate, but ok if not a stock issuance machine to do it.

24. Legacy? "Fortune fairly won and wisely used" - CM, "Teacher" - WB, "At last I sleep alone" - Wilt Chamberlain

25. No question that purchasing power of all currencies will decline over time (hard to tell which relative to each other). $1 in 1930 worth 16 cents today. "A great civilization has a lot of ruin in it" - Adam Smith

26. Index fund is best if not actively managing. Like BRK at current prices

27. Reduced expectations are best defense for investing.

28. General culture of trust in organization better than big compliance department

29. US has had foot to the floor with both monetary and fiscal policy

30. Residential construction flat-lined - when excess inventory bought up, economy will take off again.

31. Rail shipments (gauge of economy) 1Q06 = 219, 09=150, 11=190

32. Haven't learned from our recent excesses. Need to more heavily tax undesirable financial activity

33. Oil? 88m barrels/day - finite supply. $ price of most things will go up. Think about productive assets rather than speculating in commodities.

34. "Go to bed every night a little wiser than you woke up." - CM

35. Need to at least make CEO's of failed institutions dead broke. Expect more messes in lifetime. Failure due to stupidity not evil.

36. Goodwill should not be used in valuing. Amortization of GW doesn't make sense.

37. Costco extreme meritocracy that created extreme loyalty. GM - worst - wiped out common shareholders

38. Will not participate in auctions and would pay less if came back afterwards.

39. Make different deals at different times because of different opportunity costs

40. “I wish I could read faster. It’s a huge advantage to read fast. There’s hardly anything more pleasurable then reading, and reading, and reading and reading. Charlie and I do a lot of it, and we continue to do a lot of it, but I don’t do it as fast as I would like to.”

41. Views job as CEO as Chief Risk Manager

42. Shareholder charitable giving program - $/share allocated to 3 charities. Stopped because didn't want the parent company to be a distraction b/c of social issues they were contributing to.

43. China? - tax laws, customs, shareholder sentiment. Make allowances for lack of understanding. Absurd discounts to cover the risk.

44. Windpower - doesn't work without subsidies.

45. BRK share of taxes = 2% of all corp taxes in US

46. Improve your own skills - only diploma WB has hanging in office is Dale Carnegie - communication skills.

47. Find what you're passionate about and then improve your skills there. Didn't succeed in re-insurance business for 15 years.

48. Beware of the salesman selling a derivative product.

49. Won't take the risk of going after a really big elephant.

50. Companies issue stock to trade confetti for real assets.

51. Wants to continue buying businesses they know and management they like.

52. "What do we care if we buy a good business that's lumpy in its profits?" - CM

53. Look at cyclical business the same as would seasonal.

Lessons from Trader Joe's

noreply@blogger.com (Bill Flagg) — Mon, 09 May 2011 13:13:00 +0000

I had the opportunity to spend some time with the former president, Doug Rauch, who helped build Trader Joe's over the past 30 years.

A little background on Trader Joe's first. They started as a private label wine seller because of a little loophole in California wine retailer laws that enabled them to resell good wine for really cheap prices. 70% of their revenue was wine. Then Doug came in to apply a similar private-label concept to food products. Then they created a great customer service model. And then they had the discipline to stick to their great formula... and voila, 30 years later they are one of the most admired grocers and companies in the country.

Ok, so what was so unique about Trader Joe's? And why did it work in the face of big-box-stores-are-better and branded-products-are-king? One word - they made grocery shopping fun and easy. When most stores carry 40 types of peanut butter, TJ sells 10. 4,000 products vs. 50,000 products. 80% private label (lower prices). Less selection makes it easier. And then they have fun with the limited selection they have (example).

What else?...

+ Change 1/4 of the selection each year creates surprise and discovery (difficult to do when thousands of shoppers complain about their favorite products being discontinued)

+ Put managers in front of the store (instead of in back office) to create greater team leadership/engagement.

+ Have all employees do a little of everything (register, stocking, cleaning, etc) to create a more consistent experience overall. This is a theme I recognize in other great companies like Southwest Airlines.

+ Create fun, caring culture for employees (and they'll do the same for customers)

What I love about TJ's is that there's nothing "me-too" about them. They took a unique approach in the face of what everyone else was doing. And people love them for it because it's refreshing and fun.

4-minute video interview with Doug Rauch - love "a store of stories... that was the fun" and "context that transcends the content" and "a customer experience company that happens to sell food"

Good article in Fortune

Great interview in LA Times with Joe

I made two killer recipes out of a wonderful wonderful Trader Joe's cookbook for Mother's Day. This cookbook isn't by Trader Joe's, it's by a customer who loves TJ's so much she made a cookbook based off all the great quirky things you can buy there.

Hilarious video another customer made with his phone.

What can we do with our organizations that'll inspire raving fans?

Setting the Table

noreply@blogger.com (Bill Flagg) — Sun, 01 May 2011 12:00:00 +0000

I read this AMAZING business book a couple months back by a great New York restauranteur, Setting the Table by Danny Meyers. He had the courage to be revealing about the in's and outs of his very successful restaurants. I loved a couple of his themes that apply to most businesses (not just restaurants):
1. Start by bringing unique value to the community/customer base - he only opens restaurants that can bring something new and exciting to the NYC restaurant scene (no me-too's)

2. Find a soulful source to draw inspiration and ideas from - he would travel with his partner-chefs to understand and encourage their cooking heritage

3. Plan to start with some flailing around before finding the sweet spot and working out the operational kinks - EVERY restaurant was a train-wreck to start with.

4. Being of service and connecting your community of customers is HUGELY valuable and fulfilling and still extremely rare - he fully engages in the local community on many levels

5. As success grows, stay focused on what is meaningful versus going big - with lots of offers to expand nationally, he chose to stay locally focused and great.

6. The more successful you are, the more people expect of you and the bigger the example you become (good or bad) for the press. - he learned to embrace the publicity rather than fight with it.

7. Connecting the dots between customers creates community (and value for customers). - he gets to know customers in his restaurants so he can make introductions to other customers and "connect the dots" of that local community. One of his restaurants became known as the place for publishers to eat and hang out as a result.

So as the title suggests, how are we "setting the table" of our businesses to engage more fully and authentically in the community they are creating?

Pile of Money or Creative Platform?

noreply@blogger.com (Bill Flagg) — Tue, 26 Apr 2011 12:30:00 +0000

I've had a half-dozen of conversations in the past couple weeks with entrepreneurs who are considering selling their companies... $4 million, $15 million, $20 million, $40 million, $70 million... all at crazy multiples.

My questions go as follows:
Do you NOT enjoy your business?
Do you have partnership issues?
Do you think your core model is flawed and not sustainable?
Is your growth done?
Are you lacking in money to sustain your lifestyle?

In most of the conversations, the answer to ALL of these questions has been NO. The reason for thinking about selling has been solely about MONEY. More of it. More of it in a way that they can feel more secure about their future.

Little thought is given to how they would invest it and usually after talking it through more there's a realization that they won't be able to beat the return they are getting from keeping their company. But diversification makes sense.

Little thought is given to what they would do after they sold. Just the thought of hitting a nice beach, buying some cool stuff, and then coasting right into their next "midas-touched" venture (rarely happens twice). Or be more purposeful in helping others through sitting on nonprofit and for-profit boards and helping others. But they'll figure it out in between margaritas.

Little thought is given to what will really happen with their great cultures and family of great employees. But the acquirers are good people who promise and insist on not changing the magic formula or the great cultures... yah right.

Then I remind them what it took to build the amazing platform they have now. And how they are the masters of their domains. The kings of their happy kingdoms. The painters of their beautifully growing canvases. But all the annoying stuff will be gone. I saw a great quote recently, "Big offers are a good thing, but personal sovereignty matters a whole lot more over the long run"

Having gone through all of the similar thinking, I shared with them that the reality was different for me and many others I know who have "cashed out". The reality is the money means little in the end in comparison to having a great platform/canvas to continue growing and creating great things with.

In most cases, NO ONE is advising them NOT to sell. It seems to be part of the American dream, the ultimate accomplishment, and the biggest ego stroke for an entrepreneur to "cash out". What if we changed that dream to having pride in building great companies that our great grandchildren can be proud of?

Three of the six entrepreneurs I spoke with decided NOT to sell. Not because the money wasn't enough (it was). But because they were excited about continuing to create and grow on THEIR hard-earned platforms.

Got Zing?

noreply@blogger.com (Bill Flagg) — Wed, 30 Mar 2011 16:25:00 +0000

I grew up near and then went to college in Ann Arbor, where there was a deli that had such an incredible level of passionate energy for their food and service that I remember thinking to myself that I hope to one day create a business that could have that great level of energy flowing through it. I also remember thinking, this will probably be the first of many businesses like this that I'll see. Well, fast forward 20 years, and Zingerman's STILL optimizes what I strive for.

Last week I spent two days with Ari Weinzweig, the founder of that now-not-so-little deli in Ann Arbor, Zingerman's. Started in 1982, it now does $40 million in business out of Ann Arbor alone. They've expanded into a bakehouse, coffee roasting, mail order, creamery, candy making, roadhouse-style restaurant, and a training business. Ari walked through their secret sauce in this great 2-day seminar.

Their size is not what's truly amazing about them. What's amazing about them is the energy and excitement that pours out of every team member I encountered in their businesses. For 30 years they have had these recipes for success (before any of them became trendy):

1. Great service goes beyond service to just customers - it also includes how co-workers are of service to each other, how the owners and managers are of service to their employees, how the company is of service to its suppliers, and how the company is of service to its local community.

I saw how co-workers would lift each other up and how every interaction included a consciousness of "what can I do to help?" And how that lifted everyone's energy.

2. Great service is defined as Listening, Getting the person what they asked for: Accurately, Politely, and Enthusiastically, and Going the extra mile - it MUST be something above and beyond that the customer didn't ask for. I saw how co-workers went the extra mile at each interaction, and how empowered they felt as they WOW'ed customers.

3. Empowerment through open book and weekly huddles around numbers.

Every department in every business has a dashboard of numbers they track on a weekly basis from revenues to energy rating of co-workers. Usually about a dozen numbers on each board

At first, I was thinking people probably roll their eyes at all the numbers ever week. But then I asked a random group of five co-workers what they thought of their numbers boards and was surprised to find that they LOVED them. Why? They like having and SEEING the impact they can make and it's a fun game they can play at work everyday to see how they can positively impact the numbers

4. A passion for the product/food.

At Zingerman's they aren't interested in just selling anything. They have a passion for great food products that have a great story behind them. Each person I met was truly passionate about the food and service they were offering.

5. Servant Leadership

Several people commented on how they appreciate how the owners were humble and worked shoulder to shoulder with them a lot of the time. Ari spends most of his evenings filling water for customers at the restaurant. He calls it "management by filling water." I call it genius. His co-workers love it, customers love it, he gets his ear to the customer where it counts most.

6. Appreciation

A bunch of years back Ari heard about doing "appreciations" at the end of meetings. Where everyone is invited to express appreciation for another co-worker. At first his managers resisted the idea. Then Ari said, "you know what, we are just going to give it try for a while." That little practice comes through loud and clear with how expressive everyone is of their appreciation for one another. Which adds a ton of positive energy to everyone's day. They also have a monthly internal newsletter, with 10 pages of "thank you's" between co-workers. Amazing.

7. Visioning

Two posts ago, I talked about the power of visioning and shared Zingerman's example. After last week, I have a little more perspective on why this is so powerful. When the vision is expressed as if it has already happened and in a way that has both heart and is tangible then:

a. the team gets excited about a bigger vision to reach for

b. the team has an invitation, permission, and expectation to make it happen on their own

c. the team members get excited knowing that there's opportunity for growth for themselves within the organization.

8. Training

With over 500 employees, the one thing that the founders of Zingerman's won't delegate is their new employee training. It's where new employees get the Z cool-aid from it's source. They talk about their history, philosophy, and recipes for success. As Ari was talking about this, I hit myself in the head realizing that it was a subtle piece that I've missed in my businesses. We assume that new folks will naturally pick it up from others. But there's something real powerful about making sure our employees hear direct from the owners what the company is really about.

Thanks Ari and everyone at Zingerman's for your inspirational example of greatness!!

Want more?...

http://www.inc.com/magazine/20030101/25036.html (old article)

http://shop.zingtrain.com/ (Ari recently put out a great book and the DVD's are great for training)

http://www.inc.com/magazine/20110201/creating-a-company-vision.html (new article on visioning)

6 Bootstrap Traps

noreply@blogger.com (Bill Flagg) — Thu, 03 Mar 2011 11:24:00 +0000

As I meet with more and more bootstrappers and see their stories play out, here are the most common traps I see themselves getting into:

1. Raising money without really knowing whether the extra spend will generate a return

2. Getting distracted by offshoot ideas rather than focusing on the core

3. Spending more time on raising money than on really listening to customers and prospective customers

4. Spending more time on the big partnerships or bigger customers than on the bread-and-butter business.

5. Believing someone else has the answers (new hires, consultants, partners, etc)

6. Forgetting to focus on what people really want and are willing to pay for

It all comes back to: focus on what core customers want first, and don't get distracted by the rest.

Visioning

noreply@blogger.com (Bill Flagg) — Mon, 21 Feb 2011 12:30:00 +0000

I was recently reminded of a powerful visioning technique I've used in the past. As I look back now, it's wild how well it has worked. It's a little weird and fun at the same time.

Assuming it's February 2011 today, I would write as if I it was now February 2015 and describe in great detail how everything looks as if it has already happened.

For example, At RegOnline when the support team was just a couple people trying to keep their heads above water, we each wrote out what it would look like a couple years out. We wrote something along the lines of "It's amazing how we are able to WOW so many customers everyday. And how much our customers love us and how often they comment that we have given them the best support they have EVER received from any company. Our support team is filled with happy, energized, growing people, and we have a line of great people wanting to join our team. Other companies want to learn what our secret is to providing "knock-your-socks-off" customer service so they can do the same at their company." Sure enough, within a couple years we had a support team at RegOnline that embodied most of what was written!

I've done the same with other departments, businesses, and with my personal life over the past 15 years. And have had similar, "holy cow!" moments when I look back on what was written to discover how much has come to fruition.

I don't tend to do the traditional specific goal setting like, "$5 million in revenue, own a Ferrari, and lose 30 pounds". I have found that directional, more colorful feelings inspire better results and feel better in the process. For example, "We have become more profitable every quarter which enables us to expand our service to more people and grow our organization. I can now afford to have a nicer car and feel better financially. I have been having a lot of fun improving my physical well being and it gives me more energy in everything I am doing. The abundance I feel and the joy I am able to share with others is amazing."

Another GREAT example is Zingerman's 2020 vision (one of the World's best deli's based in Ann Arbor)... http://www.zingermans.com/zingtrainfiles/2020vision.pdf
Notice how it is all written as if it has already happened. Weird, but it works.

Write yourself from the future and see how great it feels.

Our biggest competitor - Status Quo

noreply@blogger.com (Bill Flagg) — Thu, 20 Jan 2011 13:00:00 +0000

I was talking recently with a telecommunications broker who shops for the best deals for companies. He has a list of prospects he can verifiably save 30% off their phone/internet bills. But only 20% of them have signed the paperwork to make it happen. The rest haven't moved yet even though every day costs them real $'s. The broker is competing with just "status quo".

I had another conversation at lunch the other day with the founder/CEO of a medium-size contract development firm that does $200,000 projects for Fortune 500 companies. When I asked what was the #1 reason their bids on projects were not accepted, he said it was because they decided not to do anything at all... "status quo"

In most industries I've seen, "status quo" is by far the number #1 factor to compete with. Why hasn't a prospect bought from us yet? Because it's easier to keep doing the same-old thing.

Most prospects are just dipping their toes into the water of what it might feel like to make a change or try something new. It is our job to help the water feel warm and inviting to them.

A couple things that help:

1. Easy to try/take the next step (free trial)

2. Being reminded that its never been easier than now

3. A bonus for buying now rather than later (buy now and get something extra)

Bottom line, make it abundantly clear how much better you are than status quo and provide compelling reasons why switching now is a better and easier proposition than having another day of "status quo".