Archive for March, 2007
Modeling Masters - Richard Branson - Virgin
“I don’t go into ventures to make a fortune. I do it because I’m not satisfied with the way others are doing business.”
Growing Up
Branson dropped out of school in 1967 at the age of 16 and started a magazine called Student. He hoped it would be a forum for politically-minded youth. He soon was publishing essays and interviews from such figures as Jean-Paul Sartre, James Baldwin, Alice Walker, and Robert Graves. Despite such a roster of great minds and literary figures, the magazine never made money and seemed bound to fail.
Starting the Business
Branson began marketing his next idea in the pages of Student; selling albums at a reduced rate through the mail. It rapidly became a more profitable business than the magazine itself. The staff of Student suddenly found themselves the employees of the Virgin discount record store.
“Virgin” because no one had been in business before. Virgin had been going strongly but it was discovered Branson was dodging his tax payments. He was arrested and jailed.
Building an Empire
An out-of-court settlement was reached and, determined to keep the balance sheets carefully, Virgin Records was founded in 1973. Mike Oldfield’s progressive “Tubular Bells” was the first record released through Virgin and became an international success. But, it was the signing of the Sex Pistols to his label in 1977 that truly established Virgin Records.
Though the Pistols broke up soon after, Virgin became the largest indie label in the world. Bands like the Rolling Stone, Peter Gabriel and UB40 were signed to Virgin. Over the next six years, Branson started over fifty different companies encompassing everything from filmmaking to air conditioner cleaning. Though he was making more than $17 million dollars from his various companies collectively, Branson insists that money is not the motivation behind his involvement in so many ventures.
Rather, he enjoys attempting to do something more effectively than those who have tried before him. In 1984, Branson started Virgin Atlantic Airlines - a company that would prove to be a great challenge as well as the cause of financial distress. Branson ignored discouraging comments that told him he could never compete with British Airways, and to look to the example of those who had failed before.
The reason being that he had observed how airline companies did not look after their customers adequately enough – so he would be the one to bring affordable and enjoyable flights to the public. Virgin Air was immediately recognized for its service and luxury. In-flight massages, hydrotherapy baths and seat-back video screens were all part of the experience on-board a Virgin aircraft.
With fuel prices having doubled in the early ’90s, terrorist attacks making people afraid to fly, and BA launching a campaign to put Branson out of the airline business, Virgin Atlantic struggled to stay afloat. Branson was forced to sell Virgin Records in order to raise enough money to keep Virgin Atlantic and pay off his creditors.
The sale of the company that gave him his start was a crushing blow. From this point on, Branson developed a new approach to business called “branded venture capital”. Through this method, Branson licenses the well-known Virgin name and logo in exchange for a controlling interest in the venture.
Consequently, Branson has his company’s name fixed to more than 200 different companies, among which are Virgin Bridal, Virgin Publishing, a blimp company and a modeling agency.
Branson is known for his unusual business practices (no central headquarters, no board meetings, and he can’t operate a computer), his showy publicity stunts (like driving a tank into Times Square and buzzing over Big Ben in an Airbus jet), and his adventurous exploits (he was the first person to cross the Atlantic in a hot air balloon and has attempted three times to fly it around the world).
It might be thought that such an approach to business could have ruined him, but Virgin is a towering $5 billion dollar giant. And Branson keeps dreaming for the future. In discussing the prospect of starting a shuttle service into space, Branson has said, “Why not? It’s virgin territory.”
Evan Carmichael
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Modeling Masters - Ross Perot - Perot Systems
“My role in life is that of the grain of sand to the oyster - it irritates the oyster and out comes a pearl.”
Growing Up
Ross Perot was born in 1930 in Texarkana, Texas. He started his working life early at the age of 7 and held a number of positions from selling garden seeds to bronco busting. He also joined the Eagle Scouts, which he credited as being a critical life changing experience. At 12, he wanted to have his own paper route but the local paper did not have any openings. He convinced the manager that he would open a new route in one of the most dangerous parts of town in return for a higher commission rate. The manager agreed and Perot delivered the papers by horseback to avoid dangerous people.
When he graduated high school, Perot joined the United States Naval Academy. He became a commander and spent four years there. At 27, he returned to civilian life and began working at IBM. At Big Blue, Perot quickly excelled as a salesman. He once passed his annual sales quota by January 19th.
Seeing an opportunity to sell more than just hardware, Perot thought IBM could profit by expanding into software and technical support. After hearing his pitch, the decision makers at IBM didn’t think it was an idea worth pursuing. Still upset at the decision, Perot went to his barber for a haircut. There he was reading Reader’s Digest and happened upon a quote which would impact the rest of his life. It was from Henry Thoreau’s Walden: ‘The mass of men lead lives of quiet desperation.’ Perot was resolute to do something more meaningful with his life.
Starting The Business
Determined not to lead the life of quiet desperation, Perot decided to go into business for himself. On June 27, 1962, Perot turned 32 years old. With a $1,000 loan from his wife he started his first company, Electronic Systems Corp, or EDS.
With Perot’s great salesmanship, EDS quickly acquired clients. One of his first big deals was Frito-Lay. However, the real opportunity for EDS came in 1965 when the Medicare and Medicaid programs were first implemented. The sheer size of the operation led to a massive demand for the processing of medical-claims. Perot worked with Blue Cross / Blue Shield and individual states to help them get their medical billing systems from pen and paper to automated computerized functions.
In 1968, Perot focused his efforts on the insurance industry and some private sector clients. His business was worth $2.4 million. Later that year, EDS went public, making Perot a billionaire. Fortune magazine dubbed it ‘the greatest personal coup in the history of American finance.’
With his newfound wealth, Perot decided to focus on social issues and try to improve the country that had provided him with the opportunity to succeed.
Building An Empire
Perot’s efforts focused on the war on drugs in Texas and helping find American soldiers who went missing in action. He was also actively engaged in providing support food and medicine for POWs during the Vietnam War.
On his 54th birthday, EDS was acquired by General Motors for a grand sum of $2.5 billion. As part of the deal, Perot agreed to serve on GM’s board of directors. GM bought EDS to continue operating the successful business but also help its own internal information systems. The company had over 100 data centers, none of which talked to each other in an organized way.
The cumbersome bureaucracy at GM, which made it challenging for him to put in place the changes that were required, quickly aggravated Perot. Perot began to openly criticize the company and its Chairman roger Smith. Only two years after the initial agreement had been made, GM bought out Perot’s remaining shares for roughly $700 million.
Not content with sitting still for too long, Perot soon started another company, Perot Systems. Among his first clients was none other than IBM. The company that rejected his ideas was now asking him for help to improve in the systems-management market.
In 1992, while on Larry King Live, host Larry King asked Perot if he would consider running for the Presidency of the United States. Perot’s answer was ‘If you, the people, will on your own register me in 50 states, I’ll promise you this: Between now and the convention, we’ll get both parties’ heads straight!’ The audience responded and gave him the support he needed. In the election he won 16 percent of the popular vote.
After the election loss, Perot went back to building Perot Systems, which had slipped into a loss position while he was away. He immediately brought the company back to profitability and in 1999 took the company into an IPO. Perot’s drive and perseverance showed the nation that one person can achieve almost anything when he or she is fully committed to making it happen.
Evan Carmichael
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Modeling Masters - Ray Kroc - McDonald’s
“The definition of salesmanship is the gentle art of letting the customer have it your way.”
Growing Up
As a young child, Ray Kroc went with his father to visit a phrenologist - someone who predicts someone’s future based on the shape of a person’s head. Kroc was told that he would end up in the food-service industry. Coincidence or not, Kroc would design the blueprint for the fast-food industry and lead the largest fast-food company in the world.
Kroc was hard working as a young child. He learned his salesmanship skills through his lemonade stand ventures and by taking jobs at a grocery store and his uncle’s soda fountain.
Kroc quickly grew tired with school and wanted to get into sales. As a teenager, he dropped out to work as a salesperson for the Lily-Tulip Cup Company. Working long hours and using his natural charisma, Kroc rapidly rose to become the top salesperson at the company.
While working at the Lily-Tulip Cup Company, one of Kroc’s clients was Earl Prince. Prince’s latest venture was trying to sell a new machine he invented called the Multimixer - a milkshake making machine. Immediately captivated by the invention, the 37 year old Kroc negotiated an agreement for the exclusive marketing rights and left Lily. Over the 15 years he then sold the Multimixer across the United States to soda fountain and restaurant owners.
Nearing 50 years of age a new trend began occurring in America - people were leaving the big cities and headed for the suburbs. As a result, many of the soda fountains and restaurants that Kroc targeted were closing down operations. With the future looking bleak, there was one small restaurant, in San Bernardino, California, that placed an order for eight Multimixers. The hamburger stand was run by brothers Dick and Mac McDonald.
Starting The Business
The McDonald brothers were of particular interest to Kroc not only because they were buying his Multimixers when everyone else was shutting down but because they had ordered eight Multimixers. This would allow them the capacity to make 40 milk shakes at the same time. Curious as to why a restaurant would need to make so many milk shakes simultaneously, Kroc decided to go to California and pay them a personal visit.
The restaurant was very different from the typical American fast-food drive-in at the time. It has no indoor seating, was self-service, and offered a very limited menu of hamburgers, cheeseburgers, french fries, sodas, and, of course, milk shakes. The McDonald brothers had perfected a system whereby each order would be put together in an assembly-line and would take less than a minute before the customer had their order in their hands.
Kroc’s entrepreneurial mind immediately went to work and he showed the McDonald brothers how they could expand their restaurant across the country. Kroc would be the obvious beneficiary by supplying them with all the Multimixers they would need. After presenting the brothers with his idea, they expressed that they did not have an interest in growing so large. As he had previously done with the Multimixers, Kroc offered to be their marketing expert and obtained the exclusive rights to sell the McDonald system.
Kroc’s first McDonald’s was opened in Des Plaines, Chicago in the spring of 1955. He ensured that the restaurant was kept spotlessly clean and used it as a show model to sell franchises across the country. Kroc’s model was to collect 1.9% of gross sales, 0.5% of which would go to the McDonald brothers.
After his first year in operation, he sold 18 McDonald’s franchises. He realized, however, that he was just breaking even after looking over his financials. The 0.5% he was giving the McDonald brothers was making it nearly impossible for him to turn a profit off of the remaining 1.4%. Kroc’s luck was about to change, however, as he met Harry Sonnenborne, the man who would show him the secret to making money in this industry.
Building An Empire
The brilliance behind Harry Sonnenborne’s model was to sell real estate and not hamburgers. His suggestion was to purchase or lease the land on which all the McDonald’s restaurants were built on. Franchisees would then pay the company either a monthly rent amount or a percentage of their gross sales, whichever amount was greater. Under this model, Kroc has assured himself of a profitable minimum baseline revenue stream from each franchisee. With the new profitable business model established, Kroc could now aggressively grow his new company.
Kroc believed very strongly that customers should have the same experience in every McDonald’s from coast to coast. He created ‘the McDonald’s Method’ and a 75-page manual that explained how the restaurant should be run - from how much meat to include in a hamburger to how to cut the french fries to how often to clean the restaurant. He would later open a Hamburger University where new franchisees went to learn how to operate a McDonald’s restaurant. Students earned a degree in ‘Hamburgerology.’
With rapid growth came excellent feedback from franchisees on how to make the system even more successful. The McDonald brothers, however, were against making any changes to the formula they created. After repeated arguments with the brothers, Kroc decided it would be best to buy them out and remove the conflict. In 1961, Kroc paid $2.7 million in cash to the brothers for complete ownership.
Having no further obstacles in his way, Kroc continued his aggressive expansion. He set a goal to establish 1,000 restaurants. By 1965, he had over 700 restaurants opened across America and McDonald’s was the first company in the fast-food industry to go public on the stock market. The share price quickly rose, making Kroc a millionaire. By 1970, over 1,500 McDonald’s were running around the world.
Part of Kroc’s true genius was his ability not to invent something new, but to take an existing product and refine the business model to the point where it could be immensely profitable. By the time of his death, the McDonald’s golden arches were more recognizable around the world than the Christian cross.
Evan Carmichael
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Modeling Masters - Sam Walton - Wal-Mart
“There is only one boss - the customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”
Growing Up
Sam Walton’s career in retail began in 1940 when he become a sales trainee in Des Moines, Iowa at a J.C. Penney store. Despite his enthusiasm to serve the customers, Walton was not a model employee. His desire to make his customers happy was so great that he often let other responsibilities like paperwork and keeping the books fall by the wayside. He was almost fired by his boss who told him that he was not cut out for a career in retail. Walton kept his job, however, because of his ability as a great salesman. In 1942, Walton was drafted into the United States army. He worked in the communications division of the Army Intelligence Corps and remained on home soil throughout the Second World War. When he left the army three years later, Walton was married, had a child, and decided to start his own business to support his new family. With the $5,000 that he had saved along with a $20,000 loan from his wife’s father, he purchased a Ben Franklin variety store in Newport, Arkansas. Walton was 27 years old.
Starting The Business
By putting in many hours at the store and implementing a pricing strategy far below what his competitors were charging, Walton’s new business took off. By 1950 he had the top performing Ben Franklin store in the area. Walton’s landlord, seeing his success, decided that he wanted Walton to sell the store to his son. When Walton refused, the landlord decided not to renew Walton’s lease and he was forced to shut down.Walton’s 10 commandments for business success were:
- Commit to your business.
- Share your profits with your associates and treat them like your partners.
- Energize your colleagues.
- Communicate everything you possibly can to your partners.
- Appreciate everything your associates do for the business.
- Celebrate your success.
- Listen to everyone in your company.
- Exceed your customers’ expectations.
- Control your expenses better than your competition.
- Blaze your own path.
Determined as ever to succeed in his venture, Walton looked for other rural Arkansas towns for a new place to set up shop. He came across a small village called Bentonville and opened the Walton’s Five and Dime in 1950. He made sure to get a 99-year lease this time on the property.
The two local competitors in Bentonville did not want to discount their prices and Walton’s business began to flourish. Realizing he had a recipe for success, Walton began looking for other areas of expansion. He borrowed money and used the profits from his first stores to acquire more. By 1960, he owned 15 stores but he was not getting the kind of return on investment that he thought he would be making. He then made the decision to follow a heavy price cutting strategy and hope to get much higher volume to turn a larger profit.
This was not a new idea. The problem at the time was that most discount stores were small, located in urban areas, and focused on specialty items. Walton’s plan was to change the way retailing was done across the country.
Building An Empire
Walton’s revolutionary plan was to have large superstores in rural towns that discounted a wide variety of products. His initial approach was to Ben Franklin. They turned him down as they did not like the idea of operating with lower margins. Without a large company behind him, Walton opted to go it alone. In 1962, he mortgaged his home and borrowed against everything he owned to open his first Wal-Mart in Rogers, Arkansas, a neighboring town of Bentonville.
Excited about the prospects of getting discounts and selection that were previously only obtainable in the cities, rural customers came out in droves to his store. The success of his first store allowed him to expand and by 1969 he had 18 Wal-Marts in Arkansas and Missouri.Funded solely through debt and reinvested profits, Walton decided that in 1970 he would take the company public. The IPO raised $5 million and Walton retained 61 percent of the company. The money was used to settle the company’s debts and fuel further expansion. By 1980, 276 Wal-Marts were operating. An integral component of Wal-Mart’s success was its leveraging of new technologies to improve efficiencies and save costs. Walton knew that the key to success in a low margin business was to rigidly control his costs. Wal-Mart was, for example, one of the first major retailers to use electronic scanners at the registers which tied to an inventory control system so they could know immediately which items were selling well and needed to be re-ordered.The success of his Wal-Mart stores led Sam to another idea - Sam’s Wholesale Clubs. These would be discount stores that sold to small business owners in bulk. The idea was another big hit for Walton and by 1985 he was considered by Forbes magazine to be the richest man in America with an estimated net worth of $2.8 billion. Similar to Ray Kroc, Sam Walton did not invent retailing, he simply changed the business model and way of doing business to make it a much more profitable venture.
Evan Carmichael
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Modeling Masters
Entrepreneurs are typically full of ideas, energy, and are generally very good at producing their product or service. You know more about your area of expertise than anyone else around you. You are an authority. So why aren’t you making the money you deserve?
The key to success is modeling the strategies that other people have used to accomplish their success. Starbucks was created when Howard Schultz went to Italy for a vacation and saw how the Italians socialized and drank at their cafés. He simply modeled a strategy the Italians had been using for decades and brought it to the North American market. Today, Starbucks is one of the most recognized brands in the world. By modeling success you can take strategies that have been proven to work and implement them immediately into your business!
Over the next 5 days I will be profiling 5 of North America’s most successful entrepreneurs and will be sharing their secrets to success. We’re also going to be adding a famous entrepreneur profile to our newsletter and have some articles on the YE website so these next blog posts are a preview of what is to come!
I hope you enjoy - which successful entrepreneurs have you modeled while building your company?
Evan Carmichael.
No commentsYou Need More Than An Idea
I’ve come across so many young entrepreneurs who have a new idea for a business every day. They get excited about an opportunity, tell their friends, start doing research and then drop the project to start another new business idea. A post in Scott Young’s blog yesterday got me thinking about how many of us get going on our ideas and never finish.
The difference between the successful business owners from the ones just scraping by is not ideas but execution. Successful entrepreneurs a) get started and b) keep going. The idea is the foundation on which to build but you need to actually build it! Many people give up at the first sign of trouble or hard work and come up with a new business idea thiking that the grass is greener on the other side.
As Scott points out:
The true ingredients of success are often hidden from a shallow observation. Flawless execution cannot be replicated through just one big idea or technique. Trying to figure out why a skyscraper is taller than a shack without looking at all the bricks and steel is foolhardy. Excellence is a skill, not a concept. Not something to be studied but something to be practiced.
One of the goals of our YE blog is not only to expose you to new ideas and strategies that will help you grow your business but to also help you execute on those ideas. Thinking alone does not generate results - you need to put your ideas into practice.
On Monday we’ll begin a 5 part series profiling the success factors of famous North American entrepreneurs. It will highlight how some of the world’s most well known business owners turned their ideas into results and hopefully inspire you to take your company to the next level as well.
Evan Carmichael
6 commentsYoung Entrepreneur Profile - Garage Galore
I came across an interesting story of a young entrepreneur featured in the Worcester Telegram. The business is Garage Galore and the owner is 22 year old college student Michael Matros.
Michael, who builds hot rods as a hobby, found his garage too cluttered to work in so he renovated it and realized that others could benefit from the same service.
Company Background
The company was started in May of 2006 and has yet to hire its first full time employee but Michael does have 3 roommates who help with the installations. He started of with $11,000 in capital from his family and friends, is currently working from home and is looking for commercial space to get into after he graduates. After almost a year in business, Garage Galore is cash flow positive and is paying off its expenses.
How does he sell?
Customers like to see their design options so Michael invested his startup capital into creating a custom-designed trailer that he can take to the client’s site as well as trade shows. The trailer itself looks like a nicely designed garage interior and Michael has a TV screen which shows highlights of the various garages he has completed. On top of the 5 college classes he is taking, Michael will spend over 50 hours per week selling and delivering his service.
Michael’s Advice for Young Entrepreneurs?
“All new business is challenging. Early cash-flow needs and finding reliable, quality employees have been some of the early challenges I have faced. It’s a hands-on managing style, where for the most part I work directly with my employees out on the jobs, overseeing quality, and training the employees in professional installation techniques.”
“Being a student entrepreneur has been a very rewarding experience. Rather then just reading about how to do something, I can just go out and do it. My suggestion to any young entrepreneur is don’t give up. It is very challenging, however extremely rewarding, to run and own your own company.”
Is there a young entrepreneur you feel deserves to be profiled in our blog?
Evan Carmichael
1 commentAre you a good listener?
As young entrepreneurs we tend to love our product or service and can talk to no end about our creations because we are so passionate about it. One of the comments I repeatedly hear from top selling business owners is that the best tools they have are their ears - in order to sell you need to be a good listener and understand what your potential customer, partner, investor really wants.
David Askaripour highlighted this point in a recent post in his Mind Petals blog:
Too many people nowadays simply do more talking and interrupting than listening. It’s a shame, because so much vital information is lost when that happens — when someone feels the uncontrollable need to interrupt, argue, and ask a million questions when someone is trying to teach or explain something to you.
I think that some entrepreneurs need to start practicing the art of listening. To be able to really sit back and absorb, consider, and register everything that a person is saying. Because when you do that, you are able to get a better understanding and become a more enlightened person.
You’ll find that most of the questions that you had the urge to ask about will be answered over the course of the conversation if you do more listening than talking.
The next time you meet with a prospect, take the effort to listen and learn about their business and what challenges they are going through.
Do you have any examples of how listening has helped you close a deal?
Evan Carmichael
1 commentHow Young Entrepreneurs Can Bootstrap Their Business
I came across the Kwiqq blog this morning and a post on how young entrepreneurs in the technology sector can bootstrap their business to success. Finding capital is always one of the biggest challenges new business owners face and I thought it was an interesting list to share. The top 7 tips are:
- Be Stingy: From university and partying every other day I went to no partying and cooking at home.
- Incentives your team: Give them other incentives, I used food.
- Team: You need experts in different fields.
- Friends are gold dust: While you have just jumped into this amazing experience of entrepreneurship you need a support group.
- Work like no tomorrow: For the last 1.5 years I’ve put in around 12-15 hours a day working.
- Learn, learn, learn: The best thing which happened to me was learning from courses, seminars and simply talking to people.
- Share with people: Don’t be possessive about your business.
You can read the full details of the post here.
Evan Carmichael
1 commentYE Founders Share Their Secrets To Success
One of the things I really enjoy doing on my new website is telling the stories of successful entrepreneurs - from the rich and famous to the up and coming entrepreneurial stars.
Well I am pleased to announce that the most recent profile we just added is of the YE founders, Adam and Matthew Toren. If you ever wanted to learn about their story and how they grew their company from $200,000 to $3,400,000 in revenues in just 3 years, now is your opportunity.
Their top tips for startup entrepreneurs are:
- Be passionate
- Stay committed
- Find a mentor
- Do not be afraid to seek help
- Get started - what are you waiting for?
Read the full article on Adam and Matthew Toren.
Evan Carmichael
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