The Foundations for Financial Friday

In various episodes over the years the focus has been on financial statements, key critical ratios, business valuations, intangibles and exit strategies. Each is a key element in the weekly-monthly-annual physical exam of your business.

Where the first blog is the foundation for all these that have followed, today's blog simply called, Financial Friday, will be the foundation for further study. And, these are the key resources and episodes, with their case studies, video clip and transcript that will be explored as deeply as possible.

In part, today's blog shall become a dialogue with you about the very nature of value, the process of creating value, the accumulation of value, the storage of value, and the ways you leverage that value throughout a lifetime.

Episode: Business Owner(s) - Brief explanation

1. Financial statements: Jim Schell - Jim walks us through his Financial Statement University. He believes every employee should be tracking key ratios. Every employee should have bottomline accountability. There are many other key case studies to be explored as well.

2. Business valuations and intangibles: This study began many years ago and it will continue for many more years. If 87% of your business valuation is tied up within your intangibles, we all have to understand what it takes to make those intangibles as part of your business valuation.

3. Exit Strategies: When do you begin thinking about an exit strategy? Today, many recommend that it being in the founding business plan. Before you begin, know how you'll exit. This episode is looks at eight exit strategies and from each, you can examine an entire episode for even more. Particularly, there are four special episodes to explore further:

• Sell to someone like yourself, first focusing on the work of Jim Schell, Peter Schenck & Lorraine Miller, and then focusing on evolution of episodes over time with the founder of the business.
  
• Sell to your employees through Employee-Stock Ownership ( ESOP)
  
• Sell to publicly-traded companies
• Sell to private equity capital through Reg D, Rule 504, 505, or 506

4. Financial Independence: Michael Novak opens the discussion to the largest issues within our life; that is how does a value creation reflect our belief statements and cultural systems.

It's Wednesday! "What's working for you?"

We all too easily get bogged down in our day-to-day tasks. The status quo becomes a comfort zone. To break it open, shake it up a little, requires somebody asking the question, "What's working? How could all this work better?"

One way to shake it up, is to look into the world of people who are trying to shake it up all the time. That is their M.O. (modus operandi or mode of operation). It is a mind set that is worth adopting. Millionaires have it some of the time. Billionaires have it more often.

So, if you will, stop today for a few moments and look into the life of a new billionaire whose business is churning a billion or more in revenue this year.

Key links to go further (Homepage: Video):
1. Bob Simpson and Louis Baldwin of XTO Energy:
Go get other people's money to grow
2. Ebby Halliday of Ebby Halliday Realtors:
Jump to the head of the class
3. Frank Jao of Bridgecreek Development:
Learn to see what is not there
4. Dr. Neil Clark Warren of eHarmony:
Turn a small idea into a big one

More thoughts and references to billion-dollar ideas.
One of the goals is to have 100 billion-dollar ideas listed. All are free for the picking.

Thursday: Reduce theory to practice

Theoria and Praxis. Put the words in quotes and look at a few references on the web.

Also, try "Theoria & Praxis" and "Theory and the Practical." You could spend a lifetime contemplating all the entries. I will assure you that many monks and recluses have done just that. There is something profoundly informative about theory. It is not idle speculation, "Oh, that's just a theory."

Theory opens one to the world of perfections... in business it is also called continuous improvement, kaizen, Six Sigma, the theory of constraints (TOC), Total Quality Management (TQM) and more.

It pushes us into a powerful domain of thinking and business is becoming increasing good at it, doing even better than the universities where you would expect to find "theoria thinking" in abundance. It is this type of thinking that is causing today's business revolution to succeed beyond any political or religious ideological movement. Thinking about the many sides and faces of perfection has opened hundreds of doors in every business and in every application and within every detail.

In our vision and mission statement for Small Business School, we open the way to an even more basic document, our first principles. In that statement I say this about perfection:
"This is also the basis of the value chain. The more perfect a moment or an experience is, OR the more perfected a thing or system is, the more valuable it becomes. Thus, we have the beginnings of business. Any assertion that counters life's evolving perfections is not religion (at best, it's a cult); it is also not business (it's exploitation or a bad company); certainly it is not good government; and most often, it is not even good science."

This is the new revolution that changes everything forever.

Key links to go further:
1. Continuous Improvement: Visit with Ziba Design
2. Kaizen: Visit with Modern Postcard
3. Theory of Constraints: Visit with Steve Hoffman
3. Six Sigma: Visit Time Technology with Nigel Skeffington
4. Total Quality Management: Visit with Diversified Chemicals
5. Inculcate quality: Visit with Arnold Joseff

Wednesday Works! So, what is working? And, what's not working?

There are many billion-dollar ideas for a business, actually low-hanging fruit right there on our family tree, and nobody seems to want to pick it!?! I guess most people do not see the opportunity or they're scared to engage when they do see it.

Would you like to see a multi-billion-dollar idea, quite a simple concept, but a difficult idea to implement? On Wednesdays I'll begin here with a blog. Then, I'll go further out on a limb to explore some of those ideas over on our website. There will always be links between the two.

Initially, some of these ideas will appear ridiculous. With others, you might ask, "Why didn't I think of that?"

If you want to come up with your own unique ideas, just ask the question, what works? Come up with a list. Then look at that list again, and with each entry ask, "What doesn't work there?"

Sounds too simple, doesn't it? Well, try it. Begin with the start of your day. List everything that works. Before you walk out your door, you could easily have listed 100 things that just worked for you. Now, what could have worked better?

Those are practical, practice ideas. Your best ideas will come from deep within your thinking about those things that are real concerns and thoughts that you have had over time. Your very best ideas you have been thinking about for years. Those are your nagging thoughts.

I have a had a few of those, yet this one for this story is somewhat whimsical. It is about creating an uninterrupted walking path from the Atlantic to the Pacific.

Click here to read the rest of the story...

Transactional Tuesday:

Why does somebody buy from you?

I would like to turn back the pages to a very early episode of the show and introduce you to Ron Willingham. He is the founder of Integrity Selling and LifeScript Learning, and the author of "The Ten Laws of Wealth and Abundance" and "The Inner Game of Selling."

Ron gave us good advice when he said, "People have got to like you, trust you, believe you and understand you." These are four keys to a transaction.

Obviously, it is true for the biggest sales. Yet, when you think about it, these keys to a transaction hold true in most everything we buy.

To like you, trust you, believe you, and understand you... each are reflected within our own first principles for business.

Do I like you? Thinking back, have you ever gone back to buy something from a person you do not like? It is rare, perhaps only in a one-of-a-kind situation. The first principle of business, creating order so there is continuity, opens a path so people can know you and your products and services and begin to like you. Consistent hours, consistent quality...

Do I trust you? Once you have purchased something because you need it from a business that you are just getting to know, the results of that purchase exercise a relational muscle. The second principle of business, creating a relation that has symmetry, means my sense of the value for the product or service was balanced with the money transacted. The more symmetry there is in a relation, a de facto agreement, the deeper one's trust grows and the more we are encouraged to buy those products and services again.

Do I believe you? Belief is yet deeper still. Trust gets extended through time and here those products and services begin to be among the stories that you tell. These products and services become integrated within the dynamics of your life and help to create a certain sense of harmony. Here you become a referenceable account... a believer!

Do I understand you? Wrap together knowing, liking, trusting and believing, and we emerge with understanding. The more we understand, the more forgiving and open we are when we invariably bump into one another's shortcomings, and believe me, we all have shortcomings.

So, let us learn what Hattie learned from Ron Willingham many, many years ago. People have got to like you, trust you, believe you and understand you before they'll consistently buy from you.

Thank you, Ron, for your insights. And, thank you, Hattie for the introduction.

If it's Monday, let's think about making money.

Many small business owners really know how to make money. The people on whom we focus in the television show also know how to be generous, to have integrity, and to empower others.

Now, that is a powerful and bold combination in these selfish days and times.

Just based on that fact alone, I believe all these are already people worth getting to know. Yet, some of these people really know how to generate a lot of money... billions in revenues each year.

And, they empower the people who work with them to generate a lot of revenues, too. Where the average person in a Fortune 500 company will generate somewhere around $250,000 a year, some of our small businesses are generating well over $1.2 million per person.

That's a lot of money. So, this Monday, let us look at how this possibly can be so.

First, consider the work of Marty Edelston, Inc, the founder of Boardroom. He is in the Direct Marketing Association's Hall of Fame. The key component to learn is his simple formula called I-Power.

Second, consider the work of Frank Jao, the founder of Bridgecreek Development. He is the Honorary Mayor of Little Saigon in Westminster, California. He invests; he doesn't spend.

And, third, consider the work of Ebby Halliday. Sheer tenacity, just as boldly as possible moving forward through the tough times, constantly trying to improve one's industry, is enough.

It is Sunday. Let us search for the source files of life, the first principles.

Source files of life? Nobody uses those terms. Do a web search on it. "Source files of life" renders zip. Nothing. Yet, there are about 5 million references to "source files." These are the deepest programs that make computers and software work. Back in the old days, such files were often written in Assembly language.

I like that thought. Assembly language is simple, just "0" and "1" arranged in groups of eight yet it opened up a new world for us all. It made computers work and work well.

In this column on Sundays, I'll dig deeper and deeper into the thought that there are source files for life. Assuredly they won't be written in Assembly language, but that language does give us some clues about the very basic structure of language and a relation. Just think what it means to create a language with just two numbers, the "0" and "1" arranged in groups of eight.

Many people will instantly disagree with me, however, I believe we have barely scratched the surface of understanding the deepest functionality of both numbers!

If you can take that as a given, one of my conclusions is that we have barely scratched the surface of those computer programs. Though considered a mature industry, I think both software and hardware are more like really smart teenagers still getting their act together. The next generation that is due to emerge, and I think it'll be sooner than later, will open us all up to a deeper dimensionality. And now with the worldwide web, that emergence will happen virtually overnight, within an instant -- virtually everywhere in the world at the same time.

Ubiquitous or omnipresent and rather omniscient. Hmmm...

The web does not have those source files for life...yet. Such files are coming. And then when we all begin to adopt them, we'll all emerge with a deeper understanding of who we are, where we came from, where we are going, and the meaning and value of our life (thank you, Immanuel Kant).

The focus of Small Business School is on those people who answer Kant's questions in such a way that they add real value to this world. I believe if you are not adding value, then you are dying. Value creation is one of the source files of life. And, when we create an excess of value, we have the beginning of a business. Those who create a lot of value and do it well should be studied. That is what is known as best practices and that is the singular purpose of Small Business School.

Let us tell the stories of those people who are reaching deep within themselves to understand the meaning and value of their own source files of life. None of us are perfect, but there are some of us who can inspire all of us to reach for a higher perfection.

Let us learn their names and know their stories.

Saturday's focus on systems is a focus on the path to wealth -- monetary, physical, psychological, and spiritual wealth.

Hattie and I just met a long-time viewer of the show, Dan Swiger, the founder of Mentor Capitalist. He's been watching the show since 1994. He is a de facto systems thinker. Most of us are, but Dan is particularly good. He is constantly thinking about how people and ideas are connected.

That is the beginning of systems thinking: 1) How do things relate? 2) What makes things cohere? 3) How is value created? As you might expect, the answer is a simple-but-deep word: Systems.

The web is a great place to explore systems and ask those three questions. Each defines the heart of business. The best business people constantly think like a World Wide Web. The billionaires and multi-millionaires are very good at it.

On this Presidents' Weekend, we should all think more presidentially by learning how capital and systems cohere and how more value is created. I recommend the following:
1. Spend some time with Michael Novak to grasp the inherent systems within capital.
2. Grasp the power of your financials, as ratios. You'll begin seeing your business is one big system.
3. Protect your systems. Simple stuff. We all have to do it.
4. Teach everybody to respect each others Intellectual Property

How do you cultivate ideas?

There is very little theory in the work of Marty Edelston. He is a pragmatist, a realist, an idealist and a dreamer all rolled into one. He is also one of the most successful business owners we have had the pleasure to meet.

Marty recognizes and appreciates that we are each insightful and creative. We have ideas. We know what can work. So, he does something quite simple. He asks people questions.

He has formulated a question process he calls it I-power.

If you want to cultivate ideas, follow Marty's simple example. Perhaps your people will begin performing like his people do. Take your gross sales and divide by your total number of employees. The national average of the top 500 publicly-traded businesses is about $250,000 per employee. At Marty's place it is over $1.5 million. Enough said?

Wednesday is about what works

Work is about creating something of value. It is creativity. It is an essential energy of life. There is a value chain; and the more we understand it, the more we act on it.

Business is creating an abundance of value such that the excess goods or services can be sold for a reasonable margin.

All else is exploitation. It is not business.

There are too many people who are exploitive and their company is as well. We do not consider them to be businesses but call them a company of brutes and thieves, the corrupt, a company of fools, selfish people and otherwise short-term thinkers.

Most of the media focuses their attention on these short-term thinkers. The media is fascinated with the underbelly and dark side of the human equation.

This television show is different. Here we visit with people who think only about improving on what works. In several episodes of the show, that process took on a name and form. You see it come alive through the owner of the business.

Consider the work of Steve Hoffman, founder of Modern Postcard and what happens when a business focuses on Kaizen and the Theory of Constraints.

Consider the work of Sohrab Vossoughi, founder of Ziba Design. The entire workforce of this business is focused on Continuous Improvement and Total Quality Management.

Work is good. Jobs?!? Well, that is another story...

A Projective Table of Contents

Sunday: Let us all look at the first principles that guide us. Are there core beliefs that all people might affirm, "This is true for all time and all people." Impossible? Maybe. But, then again, "maybe not." Can we afford to stop trying to find universals upon which we can agree?

How about the gravitational constant? How about periodic table of elements? Perhaps something simple should be considered, such as "Water is needed to support human life."

At this point, my starting point for Small Business School is here.

Monday: Let's look at Marketing and Money. So many people try to start a business with just a good idea and no money at all. Most of them are destined to go back to work within a job.

Tuesday: It is a day for Transactions. How is this site serving you? It is a day to sign up and to sell something of value. What can you sell from this website? First answer -- Your business. Next answer - your products and services.

Wednesday: What works? Why? What is not working? Where are the next billion-dollar ideas? What new products and services are needed to make our society and our world work? Let's examine the nature of very nature of work.

Work is good; jobs often are not. We'll examine work in light of ethics, leadership, integrity and the meaning and value of life.

Thursday: It is a day for testing. It is theory and praxis (the practical), for new ideas, for creativity, for insights... How do you cultivate ideas? How do you cultivate your own and cultivate those of people around you?

Friday: A day for Finances -- Balance Statements and Profit/Loss -- in light of your Exit Strategy. Such a study necessarily involves business valuation, P/E for private businesses, your deeper fiscal policy, ownership, and key critical ratios from your Financial Statements.

Saturday: A day to study Systems because systems open up the study of first principles. The television show, the website and this blog are all about Continuous Improvement, always seeking a higher perfection. We will discover how such a commitment yields results.