1. Products/Service. On financing from debt or loans. Meet your bankers. Then consider your equity. Click here.
2. People. There are special shows and many discussions. Here are Hattie's reflections about the people part. Click here.
3. Processes (Systems). Click here.

I. On financing your Product and Service.

Prepare to meet with a banker, and then know what to do when the banker says "No." There are at least twelve alternatives. Here are just a few.

Jim Coane was looking for 4 million dollars. The banks turned him down. This is no surprise -- research has shown that we small business owners are only getting $7 to 8 out of every $100 loaned by banks. Though we are employing 54% of all America's workers, banks have had little confidence in us.

Next, Jim went to venture capitalists. The downside of this strategy is you have to give up equity -- a large part of ownership -- but Jim was willing.

Still no success. He was turned down by several.

If you try venture capital, do your research. It can be exhaustive because there is so much on the web. But it is a very good place to start. Ultimately though, be prepared to spend some dollars, too, as much as $30,000 to find the right people to get a deal consummated. Here are a few places to go (in alphabetical order):

• America's Business Funding Directory: http://www.businessfinance.com
• American Venture Capital Exchange: http://www.avce.com
• Finance Hub   http://www.financehub.com
• Small Business Administration (SBA): http://www.sba.gov/financing
• Venture Capital Marketplace: http://www.v-capital.com.au

Although some people say $500,000, we believe you should be looking for at least $10,000,000 before you consider venture capital because anything less is not worth the effort of the venture capital firms and its not worth percentage of dilution of your equity.

Finally, Jim came up with a creative solution which may be an option for you. He borrowed from his customers. The companies who are dependent on his service wanted him to succeed.

IBM did this with a young programmer named Bill Gates.

Another typical way small business owners raise money is from their family. Jim's family didn't have any money for him to borrow so that wasn't an option for him.

When Hattie bought her franchise the loans came from her family. She made monthly payments just as if they were bankers, with 18% interest because that was what the money market was paying in 1979. Although they weren't holding their breath, her two "bankers" were thrilled when her business thrived and she was able to make every payment on time.

If you can hold on to profits you can gradually self-fund your growth, often called bootstrapping your business. This is the advice of Neal Patterson of Cerner Corporation.

Why? You don't have to give up ownership or carry the burden of interest. Yvonne LeFleur has owned her boutique in New Orleans since 1970 and holds this philosophy dear. She says, "In retail every dollar invested in inventory creates more profit. If I buy a Mercedes, I can certainly drive it but it doesn't make me the profit that $75,000 would earn if it were invested in inventory."

You can franchise your idea. If you have a thriving laundry, you can add locations by using the franchise fees. To make this work, your present business must be running like a Porsche engine. People will not buy into your idea if it has any major flaws. You must also be able to duplicate the system perfectly and it can not be dependent on your personality.

Tony Robbins, the motivational speaker, has been sued now by a group of people who bought his franchise. Let's face it. There's only one Tony, whether you like him or not.

And, you can go to the stock market. An IPO, initial public offering, is a complicated, expensive process yet it is a good fit for some ideas. You need an investment banker, attorneys, and accountants; and then once you succeed, you will have stockholders to futz with. Once you do an IPO, you may not be the "owner" or even the president for long. They'll give you 18 months to show some results and your gone if you are not on track within 24 months.

If you have a very spectacular idea that every investment group would have fun selling, there is an ego rush and huge net worth gain potential with an IPO. Along with the personal satisfaction of being the founder and major sotckholder of a publicly traded company, you inherit legal responsibilities that can blow your hair back.

So, there's more than one way to raise funds. You may need to try them all. To go deeper, read through each section of the Steps with the link from ther $$$. Also, be sure to spend some time with the study guides of those shows about money.

Jim Coane knew he needed a CFO, chief financial officer, to achieve his goals. Asked him how he found the right person, he said, "I used every method. I used executive search, my own network of friends, and the friends of my employees." You notice, he did not use the newspaper.

To hire an executive, the fees you will pay to a search firm are probably worth it. They will take time to discover exactly what is going to be best for you, then they do a full court press to find the right person. One of the world's largest executive search firms is based in Fort Worth, Texas and Hattie knows the son of the founder, Paul R. Ray, Jr. He may have brainwashed her to have confidence in the search firm concept, however, we keep hearing from the fast-growing company CEOs that they use them effectively.

Your own network of colleagues is probably the most cost-effective and risk-free method to find the right people. The people you worked with in the past are a great resource. Because you know their work habits, values, and talents it is comforting to bring them into your organization.

Hire the friends of your employees. If you have a great employee, chances are they they have friends you would like to hire. Like attracts like. When you need to fill a job, ask your employees to tell their friends to apply.

Good people run in good families. If you have an outstanding employee, hire their siblings.

Become the company people want to work for -- you can have people lined up waiting for an opening.

Ekkwill Waterlife Resources raises over 1,000 types of tropical fish. The business is labor intensive and not your clean, neat, air-conditioned office either. Employees wade in mud puddles, have their hands in tanks of fish all day, and haul heavy equipment. One of the owners, Mike Hennessey, says they have a good benefits package, they treat people fairly, and try to have fun. They have no problems finding people who want to work for them.

Once you have hired a person, you must teach them.Any small business owner who has grown their company is a teacher. No one wants a boss, everyone wants a teacher. Jim Coane is teaching people the value of reading. He buys the latest business books, passes them out, then everyone discusses how the ideas in the book can be applied to their company. He also has regular pizza luncheons with all of his non-management people. They discuss anything and everything.

Teaching is a constant process: start with orientation; bring in outside trainers; send employees to seminars; fund tuition for college courses; and, be a mentor.

Curt Rutsky and Stu Ganslaw own Coating Sciences, Inc. They will pay for any seminar or college course any employee wants to take. Before they started their business, both Curt and Stu worked for big companies which provided on-going training. That experience was so positive they certainly wanted to give it to their employees. The difference is, in a small company you won't have as much "in-house" training as would a large company. However, there are many opportunities for learning available through local Chambers of Commerce, universities, junior colleges, and nationwide companies which provide seminars "on tour."

Challenge employees to think. One of our favorite people is Marty Edelston. He is the CEO of Boardroom, Inc. which he founded back in the '70s. Located in Greenwich, Connecticut, it produces newsletters, periodicals, and books, and today is one of the most productive and effective companies in the nation.

Marty is proud to tell anyone that his staff of 80 employees produces $110 million in sales which amounts to almost $1.5 million in sales per person. Among the Fortune 500 the average sales per person is usually around $300,000 per year.

How does Marty make his magic? He asks every employee to give him two ideas in writing per week. The ideas are about how an employee can be more efficient at her own job, or, how her department can be more efficient. One of the first ideas he implemented came from a mail room employee who suggested that Boardroom's books always weigh under four pounds. By simply trimming 1/8th of an inch off the cover size of their books, Boardroom saves over $50,000 per year in shipping costs.

Reward employees constantly. Michael LeBoeuf, wrote a book called, The Greatest Management Principle. It is very Pavlovian (though some might think of Skinner). It is: "What gets rewarded gets done."

Hattie: When I was growing up, every Saturday my Mom would say, "As soon as we have the house cleaned up, we'll go shopping." Well, my sister and I would dive in and it seemed as if, in no time at all, we were on our way to the shopping center. Not only was the work without complaint, by rewarding us for a job completed, my Mom created in both of us a very positive attitude about cleaning.

If you can possibly tie compensation to contribution, your employees will increase their productivity. When there doesn't seem to be a "reward-for-effort" system in place, employees will take their paycheck for granted and find ways to do as little as possible. Why do more if no one notices, or, if no one cares?

Each year, Marty Edelston gives away over $100,000, in cash, to employees for their ideas. Marty calls his idea generating process, "I-Power." He rewards ideas with dollar bills, candy, pats on the back and handwritten notes. Everyone who makes a suggestion gets a quick response--within seven days at the most. Once a week the ideas are evaluated, rewarded, categorized and acted on if possible. Good ideas are rapidly implemented. In 1994 over 3,000 ideas were acted upon out of the 7,000 ideas presented.

"I-Power" is based upon the ideas of Peter Drucker and W. Edwards Deming. Deming, the father of Total Quality Management, coined the phrase, "continuous improvement." Marty has discovered "I-Power" is the process which literally forces continuous improvement to take place every day at Boardroom.

Marty says, "Tapping into the skills and knowledge of workers who, day in and day out, handle the actual work in offices and factories is the most powerful -- and under-utilized -- engine of growth, ideas, strength and opportunity available to every American company."

Delegate. It's the only way for you to grow. Everyone who owns a business that is growing will tell you, "I have good people and I let them do their job." Letting go is hard and some never really do.

The reason owners don't delegate is lack of trust. It's not usually overt. If you didn't trust someone on the surface, they wouldn't really be working anywhere near their capacity and they probably shouldn't be working for you. Examine your relation and your feelings about every employee. If somewhere deep down inside, you don't believe in the other person's capabilities to do the difficult, then it is you who needs to do the difficult. There are many sites on the web about terminating employees. But, then, it may be you who needs to see something different within the person. In either direction, you have special work to do.

Tom Velez has three degrees in mathematics including a Ph.D. On top of that, he has a law degree. And, he is a virtuoso with the violin. Yet, he really believes that many of the people who work for him are smarter than he is. That's hard for me to grasp, but look what it does for the psyche of his employees. They "feel" his approval which is extraordinarily motivating. Also, Tom is able to run the business with very loose reins on people because he trusts them to do their very best.

After over 15 years in business, Tom is convinced people are not motivated by money as much as they are by freedom and challenge. "You have to let people solve problems on their own. This builds their confidence and the excellent employee will simply keep improving. These high quality people will then build your company for you."

If you have to terminate an employee, do it sooner than later. Laying people off or firing them (be sure you have cause) is no fun. In fact, in all our years of working with business owners, we find that letting a non-productive employee go is the thing about which business owners procrastinate most.

"If I ignore them, they'll quit on their own."

"If I refuse to give them a raise, they'll get mad and leave."

"I'll just pile on so much work, they'll throw up their hands in despair."

The most fair thing to do is take action. As soon as you know a person is not a fit for you, sit down with them and say: "I want you to achieve your goals in life. It's clear to me we are not the right place for you. I need to let you go so that you can find a place where you can succeed."

To go further, read the Case Study Guide for the People Part.

Jim Coane observes, "Many entrepreneurs try to keep all of the numbers in their head." They run the business with a "cash register" mentality. This is OK when you're under $2 million in sales, however, as you grow, this technique will become a problem.

Heliodoro Valadez has his assistant, his daughter, prepare a simple monthly report of expenses and sales. He says, "I look most carefully at cost of materials and cost of labor. I know what my ratios have to be for me to make profits."

Know what your overhead really is. Many entrepreneurs are optimists. They assume things are going well and perhaps don't want to know the truth. What some might consider "tight cash control" is probably the system you should have as you grow. This advice is from business owner and author, Lawrence Tuller:

• Do daily cash reports showing total receipts and expenditures.
• Do weekly cash reports showing actual expenditures against the current week's forecast and planned expenditures for the following week.
• Do projected sales, collections and expenditures monthly.

Reports other than those oriented to cash control are also valuable.

• Number of employees by department -- weekly.
• Customer orders received and order backlog -- weekly.
• Shipments by product grouping -- daily and weekly.
• Customer delivery promises kept -- monthly.
• Customer complaints and returned goods -- monthly.
• Purchase orders placed and open purchase orders -- monthly.
• Customer orders and shipments by sales territory or region -- monthly.
• Gross profit analysis by product line -- monthly.

One of Hattie's mentors, Paul Meyer, used to say, "If you can't measure it, you can't manage it."

If you want to grow a business, you must discipline yourself to face the truth. Of course, you don't do these reports yourself because you have smart people working for you.

Starting a business is one thing and growing it is another. To grow a business you need money, people and systems. Why take Jim Coane's advice? Because, he's already done it. Good luck!

Do you find yourself in a rut? Find a mentor. If you have ever had one, call that person. Whatever you do, keep surfing the web and come back and visit with us often.

If we are ever in your area on location, give us a call and let's arrange a time to visit.

- Hattie Bryant (and Bruce Camber)

PS. There are entire shows about people and how to position yourself for growth. Of course, we have turned to IBM for advice on developing systems for growing your business.

PPS. If you would like your own copy of Beating the Odds, order it here, and you may request that Hattie personally inscribe it with a message so you can give it as a gift. Jim Schell, our veteran entrepreneur, also has several good books you can read.