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  #1  
Old October 12, 2002, 11:27 PM
Dien Rice
 
Posts: n/a
Default How to succeed in business - by making lots of mistakes!

One of my physics "heroes" is a guy not too well-known to the general public, though he's well-known in physics circles. His name is John Wheeler....

He helped develop theories of nuclear fission in his younger days in the 1930s, and also developed the theory of Black Holes in the 1960s.... He's still around (though I think John Wheeler is now in his 90s)....

John Wheeler's approach to solving problems is this.... He's said:
"Our whole problem is to make the mistakes as fast as possible."

The idea is that, once you have made all the mistakes, you'll inevitably find the correct solution.

If you are going to progress, you HAVE to make mistakes! In my study of successful entrepreneurs, I've found that this is just as true in business - with one condition.

In physics, if you make a mistake, all you've lost is a little time. You can go back, and try it again.

In business, however, if you make a mistake, you could potentially lose thousands of dollars. So many entrepreneurs I have studied have ways to make sure this doesn't happen.

Donald Trump says - "Take care of the downside, and the upside will take care of itself." He makes sure that, even if a deal goes bad, he generally won't lose too much.

Richard Branson uses his negotiation skills to the same effect. When he started Virgin Atlantic Airways, his biggest cost was purchasing the plane from Boeing. He negotiated a "way out" for himself in the purchase contract: Boeing agreed that if Virgin Atlantic Airways didn't work out, they would buy back the plane at the price he paid. By doing this, Richard Branson ensured that even if his airline failed, he could still survive largely unscathed.

Many of the most successful entrepreneurs make sure they have a "backup plan".... If something doesn't work out, they have a way to "get out" of their venture with minimal losses. Others have multiple ways of profiting, so that if they don't make money one way, they have a few other ways they think they can make money as well.... These "backup" plans aren't afterthoughts - they are planned from the beginning.

Some entrepreneurs also make sure that they'll make their money back on a venture after just a few sales.... This reduces their risk. By having low product development costs and high profits, some entrepreneurs can break even after just a handful of sales. Any sales after that are pure profit.

Some entrepreneurs also use other people's resources to reduce their risk as well. Nowadays, Richard Branson's new ventures are usually joint ventures. His partner puts up all the money, and Richard Branson provides the Virgin brand name and the free promotional publicity (something he's very good at). If the venture doesn't work, he's virtually risked nothing. Michael Ross's Art of Leverage is a great report on how to leverage other people's resources, if you want to learn how to profit by using leverage in a small business....

So, the point of this is - you have to make mistakes if you want to progress. Don't be afraid of making mistakes! But - be sure you've taken care of the downside before you start... That's the conclusion I've come to from having studied the ventures of many of the world's great entrepreneurs.

- Dien Rice
  #2  
Old October 13, 2002, 06:47 PM
Dien Rice
 
Posts: n/a
Default To add to my earlier post...

Does anyone have any examples they know about of how some people have "reduced their risk" in business? I know there are MANY ways, and each successful entrepreneur I've studied seems to have a different way to do this....

I think this is a pretty important topic, since if you've reduced your risk, you can afford to "experiment" and find out new things which work. That is, one "failure" won't bankrupt you! I believe this is one of the most important topics in business - but almost nobody talks about it! I'd love to hear of any other ways of reducing risk you may know of (to add to the examples in my earlier post)....

I hope you received something of value from this and my earlier post. Now, time to make myself some coffee.... :)

- Dien Rice
  #3  
Old October 13, 2002, 10:14 PM
Michael Ross
 
Posts: n/a
Default Risk Reducing

> Does anyone have any examples they know
> about of how some people have "reduced
> their risk" in business?

Guy A: Would buy a sample product from overseas. He would then go around and generate sales - based on the sample. When he had sold enough for a container load, he would buy the container load. He only bought contain loads of goods he had already pre-sold.

Joe Karbo: Found a buyer for surplus items BEFORE buying the surplus items.

Firm B: Instead of buying land and building a new building, they contact a developer. The agreement was, the developer would buy the land and build the building and Firm B would lease it back. Firm B didn't have to outlay huge sums of money, or borrow money, to build a building. And the developer had an instant and assured tenant for their commercial building BEFORE they spent a single penny.

Cossman (correct me if I am wrong) sold railway parts without buying in stock. They took the orders and then had others supply what they needed. In effect, he was a commission salesman.

Any Business that uses commission salemen and saleswomen. They do not have to pay unless a sale is made. Thus, the money they pay to the saleman comes out of the profits of the product.

The commission salesman does not have to buy stock or hold stock. They sell stock they don't own.

Michael Ross
  #4  
Old October 14, 2002, 12:05 AM
Dennis Bevers
 
Posts: n/a
Default Re: Reducing entrepreneurial risk

Everyone's heard about using OPM (Other People's Money) to leverage their profit margin.

But have you ever heard of a business opportunity that let's the individual dealer take advantage of OPM to reduce the dealer's overhead and risk?

The company I sell for, represents over 3800 manuafacturers, printers, and miscellaneous suppliers of promotional advertising. The advance the commissions to the dealer at the time the order is placed on all pre-paid or open-account orders. So I can sell a 2003 calendar in January of 2002, receive my commissions in January, with the customer taking delivery 7 to 11 months later, but paying me up front.

On the occasion where the buyer fails to pay for their order after delivery, K & B charges the dealer back their commision, but covers all of the remaining loss on the order. Just one bad account can cost the independent thousands of dollars in lost commissions and the supplier's in

They also handle all the credit, billing, sales tax and collections duties for their dealers, leaving us more time free to market the products and opportunity.

K & B also provides order forms and pre-addressed envelopes "Free" of charge to every independent agent/dealer. In addition, every call or fax to K & B for whatever department is via toll-free numbers.

Another way to consider the value of the opportunity is to compare it to the independent distributor in the specialty advertising field.

The independent member earns 100% of the gross profit on every sale, but also bears all the credit costs and other overhead for their orders. They also carry all the risk for every order they write.

K & B pays the highest commissions in the industry of any national distributor.

Their plan is the reason why as a 108-year-old company, they were able to more than triple their sales volume in the past 10 years, from $18 Million in '92 to over $61 Million in 2002.

And, this is partly because every dealer owns their own accounts. They work as 'free agents', able to take their accounts with them if they ever find a better opportunity. With such a policy in place, K & B has to deliver for the dealers, or see their revenues decline if they don't.

Several of K & B's Top 1% dealers, were either independent agents, or selling for their competitor, before switching to K & B. Having experienced this business from another viewpoint, once they switch to K & B, there's no going back. The enhanced "bottom-line and increased respect they experience by affiliating with K & B tends to make them associates for life.

It's almost a parallel of emigration/immigration to the United States. Freedom loving people with the desire to have a better life (via capitalism and democracy) pour in to the US at a faster rate than those who choose to leave.

So, this is how K & B has used the concept of "shared risk" to grow their business at a fantastic rate.

Dennis Bevers


For advertising that produces results!
  #5  
Old October 14, 2002, 12:43 PM
sandy
 
Posts: n/a
Default Re: Reducing entrepreneurial risk

sounds like a good business model; interested
in knowing, if you don't mind sharing, how
do you find new accounts? and if for example
a store owner has more than one k&b dealer
or do you have to find your own accounts and
keep them from being served by someone else?

Everyone's heard about using OPM (Other
> People's Money) to leverage their profit
> margin.

> But have you ever heard of a business
> opportunity that let's the individual dealer
> take advantage of OPM to reduce the dealer's
> overhead and risk?

> The company I sell for, represents over 3800
> manuafacturers, printers, and miscellaneous
> suppliers of promotional advertising. The
> advance the commissions to the dealer at the
> time the order is placed on all pre-paid or
> open-account orders. So I can sell a 2003
> calendar in January of 2002, receive my
> commissions in January, with the customer
> taking delivery 7 to 11 months later, but
> paying me up front.

> On the occasion where the buyer fails to pay
> for their order after delivery, K & B
> charges the dealer back their commision, but
> covers all of the remaining loss on the
> order. Just one bad account can cost the
> independent thousands of dollars in lost
> commissions and the supplier's in

> They also handle all the credit, billing,
> sales tax and collections duties for their
> dealers, leaving us more time free to market
> the products and opportunity.

> K & B also provides order forms and
> pre-addressed envelopes "Free" of
> charge to every independent agent/dealer. In
> addition, every call or fax to K & B for
> whatever department is via toll-free
> numbers.

> Another way to consider the value of the
> opportunity is to compare it to the
> independent distributor in the specialty
> advertising field.

> The independent member earns 100% of the
> gross profit on every sale, but also bears
> all the credit costs and other overhead for
> their orders. They also carry all the risk
> for every order they write.

> K & B pays the highest commissions in
> the industry of any national distributor.

> Their plan is the reason why as a
> 108-year-old company, they were able to more
> than triple their sales volume in the past
> 10 years, from $18 Million in '92 to over
> $61 Million in 2002.

> And, this is partly because every dealer
> owns their own accounts. They work as 'free
> agents', able to take their accounts with
> them if they ever find a better opportunity.
> With such a policy in place, K & B has
> to deliver for the dealers, or see their
> revenues decline if they don't.

> Several of K & B's Top 1% dealers, were
> either independent agents, or selling for
> their competitor, before switching to K
> & B. Having experienced this business
> from another viewpoint, once they switch to
> K & B, there's no going back. The
> enhanced "bottom-line and increased
> respect they experience by affiliating with
> K & B tends to make them associates for
> life.

> It's almost a parallel of
> emigration/immigration to the United States.
> Freedom loving people with the desire to
> have a better life (via capitalism and
> democracy) pour in to the US at a faster
> rate than those who choose to leave.

> So, this is how K & B has used the
> concept of "shared risk" to grow
> their business at a fantastic rate.

> Dennis Bevers
  #6  
Old October 14, 2002, 11:55 PM
Dennis Bevers
 
Posts: n/a
Default Re: Reducing entrepreneurial risk

> if you don't mind sharing, how do you find new
> accounts?

I'm down to less than 1 cold call per quarter. Sometimes, I'll go out of my way to make a cold call, just for a change of pace, or on a whim. But, most of my new customers this year came from 3 regular sources.

#1 Networking: I get lots of customers through contacts I make at the Chambers of Commerce. (I have memberships in 3 different cities.) Most of these Chamber events are perfect for soft selling. When I call on a client in their location, their time is limited and the attention is divided. At a Chamber function, whether breakfast, luncheon, committee meeting, business card exchange, open house for a member, etc, the pace is more relaxed and the meeting isn't as confrontational. And before cell phones, I didn't get interupted during my introduction.

In addition to Chambers of Commerce, I network through memberships in a Chemical Association which includes both the producers and their vendors. The same type events exist for business card exchanges. (Note: I rarely exchange cards. I take their card and give them one of my imprinted handouts. In addition to having some functional use that increases their desire to hang on to it, my presenting it as a card demonstrates my belief in the products I sell. I generally use ink pens, letter openers, monitor dusters (for sweeping the dust of their computer screen), pocket memo books, or band-aid dispensers. These rarely get thrown away.

#2. Directed referrals: Prospective customers contact me, indicating they got my name from "so & so", who orders from me. Or, sometimes, I receive the referrals to the prospect with instructions as to what they are looking for, or an event they need to have something in hands for. These leads are far more productive than cold calls. My existing clients are rewarding me with a vote of confidence that influences the prospect's buying decision.

#3. Internet marketing: Between my existing website which is highly ranked in several search engines for a variety of key words, I also get visitors through "pay per clicks" and from postings on some forums. I also receive some traffic from total strangers and some internet friends putting links from their site to mine.

> and if for example
> a store owner has more than one k&b dealer
> or do you have to find your own accounts and
> keep them from being served by someone else?

Kaeser and Blair is very careful to follow all the rules regarding independent agents. Because of our status, K & B cannot offer protected accounts. It is not all that uncommon for a company to buy from 2 different K & B dealers. In my local market (population under 200,000) there are 5 established K & B dealers(sales volume of $75,000 to $500,000), and I know of at least 4 clients that I serve, who also purchase from one of the other dealers.

It doesn't make any difference to K & B, as each dealer is paid commission on the orders they submit. One dealer may sell screen printed or embroidered clothing almost exclusively, while another focuses on calendars or specialty products. It wouldn't make sense to deny one dealer their commission, simply because the other dealer had sold them something different in the past year.

If I want a customer to buy exclusively from me, I had better work to be the absolute best salesman they ever used as a vendor. But, even then, a company may have 2 to 10 or more buyers who have purchasing authority during a year's time.

I have at least two local customers where I sell to 5 of more people in different departments. There may be other buyers who are also purchasing from K & B, but ordering from another dealer. I know K & B would rather have the company buying from two salespeople, rather than one K & B dealer, as well as a competitor.

And I'd rather have some of the client's business, rather than being frozen out, simply because they purchased one time from another dealer.

Even in this small market, there is more business than I can handle. So, by having multiple dealers in the market, K & B is not only following the law, but they are reaping a larger percentage of the total market.

In addition, some buyers are under orders to distribute the business around to different vendors. Even though the payments go the K & B, the commissions are going to different salespeople. It makes a difference to some.

On a side note, in '93, I became the first Century Club dealer that K & B had in Southwest Louisiana. One of the other heavy hitter is my associate, while two of the others are his associates. The fifth Century Clubber is a third generation associate. The best way to sum it up is that K & B operates on a 1 by X matrix formula. I receive over-ride commissions on all my immediate associates, and they receive the over-rides on theirs, while I get nothing.

It is a fair system as every dealer has the same right to recruit, but the overrides are paid on actual performance of the dealers each has brought on board. I had nothing to do with the recruits who my associates brought in, so I haven't earned any over-rides. It works for me.

Dennis Bevers




The products, opportunity, and company that work for me!
  #7  
Old October 15, 2002, 11:02 AM
Dien Rice
 
Posts: n/a
Default Thanks Michael - excellent ideas!

Hi Michael,

Thanks for these examples.... They're really good. :)

> Guy A: Would buy a sample product from
> overseas. He would then go around and
> generate sales - based on the sample. When
> he had sold enough for a container load, he
> would buy the container load. He only bought
> contain loads of goods he had already
> pre-sold.

This is great - a very simple technique, yet the "down side" is very small - just the cost of a sample. And the "up side" is potentially very large - large scale sales!

Wow.... It makes you want to go into importing. :)

> Joe Karbo: Found a buyer for surplus items
> BEFORE buying the surplus items.

Yes, a good technique. :)

> Firm B: Instead of buying land and building
> a new building, they contact a developer.
> The agreement was, the developer would buy
> the land and build the building and Firm B
> would lease it back. Firm B didn't have to
> outlay huge sums of money, or borrow money,
> to build a building. And the developer had
> an instant and assured tenant for their
> commercial building BEFORE they spent a
> single penny.

Sounds like a good win/win solution!

> Cossman (correct me if I am wrong) sold
> railway parts without buying in stock. They
> took the orders and then had others supply
> what they needed. In effect, he was a
> commission salesman.

Yes, I think that's right too. While he was working, his company "pre-sold" these items to overseas companies, then went about fulfilling the order.

Joe Cossman did the same thing with soap, in his first deal when he struck out on his own. It was after WWII, and in his spare time at home, he was sending away letters, trying to get buyers for soap. He managed to get a very big buyer who sent him a letter of credit, then he worked like crazy to fulfil the order! (And made a ton of money for the time in the process.)

> Any Business that uses commission salemen
> and saleswomen. They do not have to pay
> unless a sale is made. Thus, the money they
> pay to the saleman comes out of the profits
> of the product.

> The commission salesman does not have to buy
> stock or hold stock. They sell stock they
> don't own.

Yes, commissioned sales can be win/win for both the business and the salespeople. :)

Thanks Michael - excellent examples (and very mind-stimulating too)!

I really like the idea of "pre-selling".... I'm going to have to do more of that in my own biz.

- Dien
  #8  
Old October 15, 2002, 11:12 AM
Dien Rice
 
Posts: n/a
Default Re: Reducing entrepreneurial risk

Hi Dennis,

Thanks for sharing that info. There's clearly a lot of potential, especially if you own your own accounts....

I think it's the same with stock brokers - they tend to own their client lists. So although a stock broker tends to work for a company, if they move companies they tend to take their client lists with them. It means that a stock broker's "value" to a company is BOTH his skill at getting accounts, and ALSO his "list" that he brings with him.

My stock broker moved companies a few months ago - and I dutifully followed him to the new company, and transferred over my accounts. It's just nice to keep dealing with someone you like and trust. :)

Thanks Dennis. :)

- Dien Rice
  #9  
Old October 15, 2002, 03:29 PM
Dennis Bevers
 
Posts: n/a
Default Re: While stockbrokers may

own their accounts, it isn't that way in the advertising industry.

In fact many companies has account execs sign a non-compete clause before hiring them. In some cases, the non-compete may apply to an entire industry or state.

I'm not certain about the stock brokers as my only connection is when I sell to one.

Even when you get into specifics within the promotional advertising industry, it is extremely rare for the dealer to have 100% ownership rights.

So, K & B is guaranteeing the dealers that they can take their client list with them, or sell them to a competitor. K & B will even sign-off on the contract to guarantee the buyer's ownership.

In addition, K & B will not accept phone orders from those customers or refer them to another K & B dealer. They literally close the accounts when a dealer notifies them of their departure.

If one of my clients calls K & B with a phone order, they will take the order if they can complete it, and then they pay me the same commission as if I had written the order myself.

This is a company thats strives for consistency.

In addition to owning the customer accounts, every dealer has the right to build their own sales organization. Every recruit is a full fledged dealer, with the same contract and commissions. The recruiting/sponsoring dealer earns over-ride commissions on the associates sales volume. The new dealer earns the same full commissions, so the over-ride is from K & B's profits, not the dealers commissions. The recruit has benefit of an experienced dealer who has current experience selling in this industry.

The sponsoring dealer own the associate's over-rides and has the right to sell or transfer those as well. That can amount to a sizeable nestegg, if the dealer ever chooses to retire or leave the industry.

In an industry that is represented by 17,000+ distributors, I found a true diamond.

Dennis Bevers
BASSCO, Inc.
 


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