Finances | September 5, 2008

Rich vs. Poor

Posted by Clint Greenleaf at 4:40 PM

Much of the rhetoric we’re hearing in the media today talks about the huge gap between rich and poor. Politicians on both sides (including the presidential candidates) discuss this issue, but neither gets to the root of the problem. It’s true that the gap between the richest 10 percent of the country and the remaining 90 percent is growing, but from that point on, most politicians get it wrong.

The issue isn’t a matter of redistribution, nor is it about protecting current tax rates. (Please note that I’m a big fan of lowering taxes -- but that’s a separate issue.) The real issue at hand is that most Americans just don’t understand the rules of personal finance. They believe what they hear from friends or people selling them products. It comes down to a lack of financial education.

Schools are turning out students who are not fully prepared for the real world. They might know the basics of history, science, math, and English, but there is no real teaching of money in school. I majored in economics and accounting, so I know first hand how boring the topics can be. But I’m not talking about the heavy theory or detailed rules. I’m talking about simple personal finance -- the money issues that will come up for people in the real world.

Students do not learn about debt or savings, and when they break out on their own, they are left unarmed when sellers of credit come calling. To be clear, it’s not that people are dumb -- the sly and ingenious credit card companies make handling credit seem easy. But either way, the new consumers don’t see or know that taking on debt at a young age is killing their financial security. Saving at a young age is critical. Simple facts about personal finance are not taught and thus bright people are caught making financial mistakes.

Plans to redistribute wealth take money from those who know what they’re doing financially and give it to people who don’t know basic financial principles. The current subprime mortgage crisis is a perfect example of that. Hardworking taxpayers are paying to bail out banks and individuals who made negligent transactions. People who were financially ignorant were allowed to take big loans from equally ignorant (or in some cases, criminal) mortgage brokers. Greed from Wall Street made it worse. Had more people known about simple financial principles, this would not have happened, nor would we be arguing about how to pay for it.

Both the Obama and McCain campaigns are talking about ways to solve the problem, but neither understands the issue. It’s not a matter of fiscal theory or taxation. It’s all about education. I’m not a fan of big government, but this is one place the government can step in and help. If there were mandatory programs for graduation that included personal finance, our economy could be on the right track in a generation or two.

While neither candidate is doing much to solve the real issue here, I think that we as entrepreneurs can begin to fix this problem. Have a brown bag lunch with your staff (even better -- buy pizza to encourage more to come) and teach them about personal finance. If you’re not up to teaching the class, bring in an expert. Make sure the expert isn’t selling something or else you could be adding to the confusion.

If we start by educating our staffs, we can work to build a financially intelligent country and get back on track at the same time. Plus, isn’t this a great benefit to give to the people who make your company work? If you invest in their financial knowledge, I’m sure it will help your bottom line. (For more on this, read Jack Stack’s books.)

If any of you want to see an example of a lesson plan for such a class, send me an e-mail and I’ll happily forward the one I use to you.

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Networking | August 15, 2008

The Power of Forgiveness

Posted by Clint Greenleaf at 5:14 PM

I recently received a phone call from Tony Alessandra, the author of The Platinum Rule. Tony is a hall of fame professional speaker, a bestselling author, and is close friends with many of my friends. The first time we met was over the phone, when he called to let me know that I had quoted his book without his permission. Yikes. I own a publishing company -- I should know better.

A bit of history. In 2000, I wrote a book called A Gentleman’s Guide to Etiquette. The book was published by Adams Media in Boston, and it was a moderate success. Since the book went out of print in 2005, I have reacquired the rights and plan to republish the book on my own next year. Anyway, in the book I mentioned “The Platinum Rule,” which is a smarter take on the Golden Rule. While the Golden Rule has us treating others how we want to be treated, “The Platinum Rule” gets us past our own ego and taste and has us “do unto others as they would have you do unto them.” It’s a brilliant concept that works.

So, Tony calls me and says that I’ve made a mistake. But the way that Tony told me about it was wonderful. He started by introducing himself and saying that he needed some of my help. He was aware of my book and that it made no mention of him or his book, website, etc. He then asked me how we could best solve this error.

Now let’s be clear -- I’m in the wrong here. No question. Tony had a ton of options at his disposal. He could have sent a harsh letter or had a lawyer send a harsher letter. He could have called and shouted at me. But his choice was not to cause drama and stress, but to find a winning solution. He was sure that there was a way we could fix this omission without too much trouble.

After a few minutes of discussing our options, we came to the conclusion that since the book was out of print, and that I wasn’t currently promoting the book, we didn’t have many options. I admitted my fault and Tony was very forgiving. That Tony was content with that was incredible -- I made a mistake and he was willing to let it go. And his great attitude made it that much easier for me to find a way to make it right. That day, I decided to re-release the book and give him the credit he deserves in the new printing. I think he’ll find out about my plan when he reads this. Thanks, Tony, for being so understanding.

So, when you have an opportunity to call someone on a mistake, remember Tony’s method. He didn’t pound his chest and tell me how great he is -- he worked with me to find a good solution. Now I’m spending my time telling everyone how great he is. If you can do the same when you’re right, you’ll probably find that people will bend over backwards to do right by you.

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Business Planning | August 1, 2008

The Next President and Your Business

Posted by Clint Greenleaf at 6:49 PM

It's been about two years of really annoying ads and political commentary on TV, radio and the Web. The bad news is that we have three more months of it. If you're still enjoying the soap opera between Barack Obama and John McCain, give it a few days, and no matter who you want to win, you'll be going crazy.

Other than complain about the non-stop campaigning, what can you do for the next three months? I like to take this time to plan for the implications of the election on the next four years of my business life.

For many business owners, there are a few hot-button issues that will direct where their vote goes. But this exercise goes beyond just deciding whom you want to win. It's a good idea to look at both candidates and see their positions on the issues that matter to you and your business.

Some of the political issues that might affect your business are: taxes, health care, free trade agreements, immigration, energy policy, and Social Security. (This list varies for every industry and business, of course, but these are some of the big ones.) It's worth an hour or so of your time to evaluate how Obama or McCain's policies would change the way you do business. In some cases, there isn't much difference between the two. In others, you might realize that your vote needs to change in order to be correctly aligned with your interests.

For example, if your business would stand to gain from drilling in the Arctic National Wildlife Refuge, neither candidate will help you, since both of them oppose it. If your business has many minimum wage employees, you might support McCain because he favors keeping the wage where it is, while Obama wants to raise it. If your business would make money if universal health care was instituted, Obama could be your man, because McCain is against it.

Once you have a working plan of what you want from the next president, it's important to consider a plan of what you would do if either candidate were elected. You need to recognize that one candidate's victory might spell an end to your business as you know it. If that's the case, how would you handle it? What would you start doing now to protect yourself? If one candidate's victory would open a whole new avenue for you, how would you best profit from it next year? What could you start doing right now to sow the seeds of success come January 20?

By looking ahead and considering a plan of action, you can avoid being blindsided in November and either being forced into a bad business situation or missing a possible boom time for your company. Have you started yet?

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Success | July 24, 2008

The Vision Myth

Posted by Clint Greenleaf at 4:58 PM

I spend a lot of time with entrepreneurs -- some would say too much time -- and invariably the conversation flows into the first few years of our businesses. In small, intimate groups, almost every entrepreneur admits that there wasn't a grand vision for their businesses. It was more like a random series of events that led to their now-growing and successful business.

However, for some reason, many entrepreneurs want to whitewash their early years and retell the story with a different beginning. These entrepreneurs feel some sort of need to have had a brilliant vision for their business from day one. I call this the Vision Myth. I've felt this pressure to tell the story of how my company got started with some sort of intelligent vision in place.

Many entrepreneurs make up a story whereby they had this brilliant vision right out of the gate, rather than tell the truth -- that the first few years were not perfectly planned. But this is a dumb idea. Not just because it's silly to lie about it, but also that it serves to add complexity to running a business that doesn't need to be there. In a down economy, many people ponder starting businesses and study other entrepreneurs. The Vision Myth keeps some of these people on the sideline for the wrong reason.

Sure, there were many brilliant entrepreneurs who had vision on day one, but that list is much smaller than is reported. The problem is that when an aspiring entrepreneur looks at starting a business, they often spend more time on vision and mission than on their primary goal -- to go out and make money.

When I left Deloitte to start Greenleaf Book Group in 1998, I knew that I was starting a publishing company. But to say that back then I had a vision of the company that I now am lucky enough to run would be a bold-faced lie. I didn't know how successful we'd become. I didn't know we'd have New York Times bestsellers and make the Inc 500. I didn't know we'd hire some of the best talent away from top companies. I didn't know we'd take jobs away from Random House and Harper Collins. My goal was simple -- to make money and hopefully do most of my work with books.

But we did a lot of different things. We sold shoe-trees (the cedar pieces that help dry shoes and keep their shape). We had a newsletter, we sold a video, and I started doing speaking engagements. At the time, any of those revenue centers would have been viable businesses for me. The reason I went with publishing is that it was the most viable -- not because I had the vision.

So I'd like to call out to all entrepreneurs to be honest when you tell the story of your first few years. Not just because whitewashing it is a silly waste of your time, but also because being honest might just encourage someone else to remove the shackles of a 9-to-5 job and go out to start a business. Is there any better gift you could give someone?

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Business Planning | July 7, 2008

Do You Have a Meteorite Plan?

Posted by Clint Greenleaf at 10:41 AM

Some of the best innovations we've had in business come from what I call the
Meteorite Plan. The premise is, what would you do if a huge meteorite
crashed directly into your problem, destroying it and the framework for it
in one fell swoop? Your visualization of this scenario may vary (you can
replace the meteorite with any sort of disaster) but the results will
provide you with a new perspective based on needs, not limitations.

The Meteorite Plan works best with a problem that has many layers of
complexity with few signs of planning or logic. Think of the cables behind
your TV, DVD, TiVo, PlayStation, and stereo systems. They're a mess --
interconnected, overlapping, many are not connected to anything, and you
might even have a few that are relics from your old 8-track or record
player. The very idea of adding or changing one component frightens you and
makes you crazy. You want to solve the mess and get a useful system
working.

Sure, you could go through the wires and try to organize them, but that's a
flawed plan. You will end up using only the tools at your disposal -- your
current equipment -- to try to remedy the situation. And although it may
solve the problem for a little while, your solution isn't bringing you much
new value, and it's most certainly not the best plan for you in the long
run. So all the time you spend on it would bring you a marginal benefit at
best.

Think now about working the Meteorite Plan. If a meteorite came through
your house and destroyed your whole living room, how would you rebuild?
While you'd have to start from scratch, you would be free from the burdens
of the wires, old components and archaic structure. You could start anew
with an integrated system. You might consider the whole house server or a
few HDMI cables to cut the clutter. Or, you might realize that you don't
use half of the products and replacing them is not worth it.

The clarity that comes from this exercise is that you see what you would do
if you were not encumbered by any of your current limitations. The answers
you come up with often guide your decision-making process by showing you
what you really need and not how to work with what you have. It often
produces what seems at surface level to be drastic plans for change, but in
almost every case, the improvement is exponentially better and long overdue.

So before you pour more money down the drain of your proprietary software
system or 100-year-old manufacturing process, think of what would happen if
it were gone. What would you do if you didn't have the system? How would
you get by without it? By shifting your focus and imagining your life
without it, you just might get rid of the headaches that go along with it
too.

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Finances | June 3, 2008

Why We Need to Raise the Gas Tax

Posted by Clint Greenleaf at 11:00 PM

You knew it was going to happen eventually. Every four years a bunch of politicians come up with plans that they think will save the country. Some plans are brilliant, some benign, and some are just plain idiotic. The gas tax holiday, which now appears to be a nonstarter and has even been billed by Dick Cheney as a "false notion," certainly falls into the idiotic category.

The theory behind the holiday is that the government should repeal the federal tax of about 18.5 cents per gallon of gas to help Americans get through the tough summer driving months. On the surface, this plan -- championed by Sen. John McCain and Sen. Hillary Clinton and panned by Sen. Barack Obama on the campaign trail -- isn't that bad. Of course, on the surface, asbestos seemed like great insulation.

The first problem is that the money generated from this tax pays for the Highway Trust Fund. This is the fund that pays for things like maintaining roads and bridges, and building new ones. Everyone remembers the tragedy that took place last year on I-35W in Minneapolis when a bridge over the Mississippi River collapsed. The general consensus is that there are thousands of other bridges in the United States that are in dire need of repairs. Pulling billions from the fund that needs to fix these bridges isn't the right plan.

Second, the savings of less than a quarter per gallon, if it were all passed on to the consumer, doesn't amount to much. The average consumer would save about $30 during the length of the holiday. Not much in savings when you figure the loss to the Highway Trust Fund. Add to it that simply lowering the tax on gas doesn't mean that every filling station would drop their prices by that amount immediately. There are a lot of middlemen who might absorb some of the "savings" and pass a smaller discount on to the consumer.

Third, the holiday amounts to a subsidy by the government to purchase foreign oil. I'll save you from a long discussion on strained relations with the places that sell us oil. Cheaper gas encourages big SUVs and inefficient cars and trucks, and discourages research to find new ways to generate power.

There aren't many times you're going to read me saying this, but Obama has it right: the gas tax holiday is a dumb idea. Even more surprising coming from me, I think the tax is too low and we should raise it. But more on that in a bit.

Clinton and McCain are both fans of the tax holiday, giving great concern on whether anyone in Washington has any sense left. Clinton's plan says this could all be paid for by a "windfall profits tax." Don't even get me started on the lunacy of that plan.

I should explain that I hate taxes; I don't believe in big government in the least. But I do see some needs for it -- police and fire, courts, schools, military and ROADS. It's not possible to privatize every road out there (although I do support the theory) and we need the government to do something about the roads. A gas tax holiday would strip money from one of the (very few) vital roles of government.

So, what's the solution? Raise the gas tax by $1.00. Yep, a whole buck. For those of you who say that it would be a regressive tax hurting the poorest Americans, not to worry. We could give a rebate to every American on their payroll taxes (or similar benefit to those on Social Security) to even the amount out and keep from hurting the people who are forced to drive. There becomes an incentive to drive less, which is good for their pocket books, the environment and international relations.

The results of this higher tax would be: 1) fewer people will drive long distances in gas guzzlers; 2) the oil companies will have to lower their profit margins if they want people to drive; 3) entrepreneurial-minded people will start thinking of ways to generate power without oil. Many are already. The simple act of raising the gas tax begins to take us off foreign oil, will normalize oil company profits through the free markets, and will actually begin to stimulate our economy.

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Business Planning | May 21, 2008

Ditch Your Elevator Pitch

Posted by Clint Greenleaf at 1:07 PM

Elevator pitches are good in theory -- take a complicated concept and distill it into a short message. Most of the time, however, they don't make sense, and all too often they include trite buzzwords like "synergy," "maximize," or "Web 3.0." Problem is, most pitches are very forgettable and don't encourage further discussion.

Most things can -- and need to be -- boiled down to short, concise comments. But how do you keep them short, make them memorable, and open the door to potential business? You need all three to turn a short discussion into a hot lead. Even if you have the best elevator pitch, if you tell someone exactly what you do and they can't see how they can benefit from it, the discussion is over.

There are two great books that you can use to help guide you in the process of creating a short, compelling message that resonates with the listener and speaks to his or her needs. Both of these are built to help you communicate better, and who among us couldn't benefit from that?

Made to Stick is a funny yet brilliant book on why some ideas stick in your mind and others don't stop as they pass from one ear to the other. Chip and Dan Heath explain how some ideas and stories are very catchy (sticky) without any marketing budgets, yet most ad campaigns are very forgettable. They built a framework of six principles that sticky ideas have: Simplicity, Unexpectedness, Concreteness, Credibility, Emotions and Stories (or "success" without the last S).

The case studies in Made to Stick are as interesting as Blink and Freakonomics, but you get tangible benefits instead of just fun reads. I had to take a number of breaks while reading to jot down ideas that I could apply to my business. I challenge anyone to read this book -- including the non-business people out there -- and not think of new ways to improve your communications.

Good in a Room is a brand new book that understands successful communication and teaches actual tactics. Stephanie Palmer (a former movie executive) consolidated her experience listening to thousands of pitches and developed a plan on how to convey a simple, clear message. Much of her direction is counterintuitive, but it's dead-on accurate.

The advice in Good in a Room is not just for Hollywood types, or even just for business types. I love the secret deal breakers -- things you don't know you're doing but that kill you before you even get started. (This is also a great book for singles -- you'll learn how to use a teaser to garner interest.) Consider it a great guide to a stellar first impression.

Read both of these books, and you'll find that creating a memorable first impression is not impossible. It's certainly not easy, but you'll have the tools you need to hone your pitch. Just don't call it an elevator pitch.

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Finances | April 21, 2008

How Well Do You Know Your Cash Situation?

Posted by Clint Greenleaf at 12:52 PM

There is no single aspect of any business more important than cash. In fact, it's the only really unifying element of all businesses -- cash is the lifeblood. It's the reason you're in business, it's what you're trying to get, and it's how you can measure your success.

I've heard countless CEOs say that they don't have time to worry about cash. "That's why I have a CFO/Controller/accounting department," they argue. I can't think of a more ignorant comment for someone to make. It's a copout. Any CEO who is not intimately involved with his cash is not paying attention. The good news is that this mistake can be fixed.

The first step to knowing cash is to know your own cash balance -- this is imperative. Next, you need to learn your Acid Test Ratio ((Cash + AR)/Current Liabilities) and monitor it closely. Make sure to watch your inflows and outflows on a daily basis. If your ATR is above 1, you're in a pretty safe place. If you're over 2, you can feel comfortable with your number. If you're below 1, you are probably in some trouble.

Your next job is to find ways to improve your cash position -- and just about every business out there can improve it. If you allow your customers to pay over time, you're basically granting a loan to them. Is that good business? Sometimes it is, if you can't make the sale without it. But how long is it taking people to pay you back? "AR creep" is an ugly game whereby customers try to stretch out the time for payment. 30 days goes to 35, and if there is no follow-up on your part, it may go to 40 or 45 or more in no time. Be sure to keep on customers if they go late. You don't need to show up at their office with a lead pipe, but make sure they know you're watching it carefully.

The flip side of this is your purchasing. Get every employee who does any buying for your company to follow strict procedures, and make sure that one of them is to check for discounts for early pay. This is one of the best deals in business. Some companies are strapped for cash and would happily give you some savings on the order if you pay quickly. You've no doubt seen "2-10, Net 30" before on some invoices. This is a great deal, because it means that if you pay in the first 10 days, you get a 2% discount, if not, the net amount is due in 30 days. If you have the cash, pay that bill within the first 10 days. You're making about 40% on your money at this point -- and in this economy, that's incredible.

It's also really important to take a higher level view of how your business deals with cash. How do you generate it? How long does it take to turn a sale into cash? Where do you spend money? Everyone can benefit from spending some time learning more about cash and in finding a better ways to manage it. It's one of the easiest and most rewarding things you can do for your business.

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| March 3, 2008

You Need Help

Posted by Clint Greenleaf at 2:56 PM

It's hard to ask for help. Pride isn't necessarily admirable, but our smarts and hard work helped us get here... and admitting that we need help might make us look weak, right? Wrong -- in fact, just the opposite is true.

Continue reading "You Need Help"

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| February 11, 2008

Thank God for This Economic Downturn!

Posted by Clint Greenleaf at 3:14 PM

I have been waiting for this for a while, and I'm really glad it's here. The markets are dropping, interest rates are falling, and some weak companies will go out of business. To be clear, I'm not some sort of masochistic freak who wants to see a long and painful bear market. I just want to thin the herd and clear out the excesses.

Continue reading "Thank God for This Economic Downturn!"

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