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Seeds For Thought
Reaching Your Goals
Wendell did everything right in starting his small business. He got into a business he liked, food. He spoke to many people who are currently in the business. He found several old timers who had been in the business. He found two guys who had been in the business but failed. He researched suppliers and vendors. He joined associations. He surfed the Internet. He read and read and asked and asked.In starting his business, he kept to a small, manageable size. He was proud of his product and not afraid to sing its praises. He liked people and he liked people to like his product. Wendell's frankfurters were the best. And, Wendell's Wiener Wagon was a big success from the first day he rolled onto the street. Wendell was smart and hard working. In fact, he found an excellent corner from which to sell. He sold a ton of wieners. Wendell was friendly to everyone. Customers liked Wendell and Wendell's wieners. To show his appreciation, Wendell would throw a little extra chili or cheese or sauerkraut on his wieners. After a few months, Wendell had a regular clientele of wiener aficionados. Wendell was a success. Actually, Wendell did make a comfortable living. He worked very hard and he made more than enough to get by. However, he wasn't going to get rich young or rich middle age or rich old age. Wendell was smart enough to realize that no matter how hard he worked his tail off, he wasn't going to get rich doing what he was doing. He was making $300 a week in salary and another $100 in profit. He saw himself possibly boosting the business to $500 salary and profit a week. But, $500 clear a week was... Wendell wasn't satisfied that he had fulfilled his business potential. He had done everything according to plan and yet financial independence was still a distant dream. Poor Wendell. After all, if you considered the money he was making each week, he could be lounging around working for somebody else without a care in the world. And, he wouldn't be out of business when it rained or snowed. Poor Wendell. He was assuming all the risks of entrepreneurship and yet not enjoying what he felt were the full benefits. Wendell just had to face reality. You aren't going to become a millionaire pushing one wiener wagon, successful or not. Then, one day, things changed. Wendell started listening to his customers. One customer said, "Gee, these wieners are excellent. I wish we had a Wendell's Weenie Wagon over on Oceanside." Another said, "You sell so many wieners, this place is a goldmine. I should buy it from you, Wendell." Another said, "Gee, if you sold hamburgers as well as wieners, I could be your customer every day, Wendell." A fourth said, "These wieners are better than anything in the supermarket. Wendell, you should package them." Now, Wendell started to think about the options he had for turning a small wiener wagon into a serious moneymaker. Taking each option, Wendell thought. Wendell started to think about what the first person had said about other locations. Wendell reasoned, "If I could hire someone to run my wagon and clear $200 a week, I still wouldn't have much. But, if I had six or eight wagons operating around town and made $200 clear from each, then, I'd really have something. What if I had 16 or 18 wagons? With this volume, I could get real volume discounts on my supplies and cut my overhead even further. Maybe, rather than operating the wagons myself, I could lease them out to young entrepreneurs for a set rent. Then? Maybe, I can franchise the concept." The next person had mentioned buying the "wiener goldmine" from Wendell. Actually, Wendell figured that with all the work he'd done and with all the equipment and supplies that he'd bought, that he was into the wiener wagon for just over $4,000. Of course, Wendell was now a genius at buying and setting up these wiener wagons. He'd done the research. Here was another opportunity for Wendell to cash in on a previous investment he had made in time and money. Maybe someone would be willing to pay him for all the time and energy and thought that he had put into starting his business. Maybe, to someone else, the idea of having a "turnkey" ready-to-go business was very appealing. How much would someone pay for a going business? Would they pay $8,000, $10,000, $20,000? Could Wendell make a lot more money selling Wendell's Wiener Wagons than he could selling wieners? Why not consider the concept of selling? Why not list the business with business brokers? Why not put a classified ad in the Sunday paper offering a successful "Ready-To-Go" business for less than $20,000? Even better, why doesn't Wendell offer to finance the business to a new buyer with only $5,000 down? Wendell reasons correctly that a lot more people have $5,000 to invest than $20,000. Wendell will lend the buyer $15,000 at 12% for six years. During the term of the loan to the buyer, Wendell's money will double again. Wendell starts with a $4,000 investment and ends up with a total return of $35,000. Now, Wendell is cooking a lot more than wieners. As his profits come in, he reinvests in other wiener wagons that he establishes and sells and finances. What does Wendell have to lose by offering to sell his business at a premium price? If Wendell doesn't like the offers which prospective buyers make to him, he doesn't have to sell. If he does put the business on the market, the business might sell. But, if Wendell's business is not on the market, he will never know if there were someone willing to pay him a premium. If the business is on the market, it may sell. If the business is not on the market, it will never sell. How about a completely different approach? The next person had said to Wendell that it was too bad that he only sold wieners. Wendell realized that his menu was very limited. After all, how varied a menu can you have selling from a small aluminum push-wagon? Folks loved his wieners but not many people were willing to eat them every day for lunch. Wendell realized that with all the office buildings in the area that he had a solid customer base. People like Wendell's food. He just had to provide them with an opportunity to buy more of it. Wendell's answer was to move from his wagon to a permanent site. Wendell approached an old timer, Gus, who ran a dark and dismal bar and grill near Wendell's corner. Gus had few customers and if Gus weren't the owner of the building, he would probably have been forced to close years ago. Wendell had a win/win/win idea. Wendell offered Gus a new lease on life. He offered Gus a lease with the option to buy. Gus and Wendell would be partners for five years. Wendell brought in Marie Thomas, a successful stockbroker, as a third monied partner. Gus and Wendell and Marie each brought something to the table. Gus owned the location and had all the necessary restaurant and liquor licenses. Gus agreed to a nominal rent for five years to give the business a good chance to catch hold. Gus also agreed to a price for selling the building to the partnership at the end of the five-year lease term. Since Gus was still to remain in the partnership after the sale, his selling price was also advantageous. Marie brought her own investment capital and her strong financial connections to the deal. She would put up $25,000 cash and guarantee loans of $125,000 needed for the renovations and new equipment. Wendell brought his expertise, charisma and determination to the business. Wendell worked as the day-to-day owner-manager. A cleaned-up Gus worked as the resident owner-greeter and gadfly. Marie made sure that all her young professional friends patronized the new in-spot where they sold the "World Famous Steamed-in-Beer Wiener." Named after the first initials of the owners, the "GMW Uptown Bar and Grill" proved to be a huge success. The last customer had jokingly mentioned to Wendell about how nice it would be to buy his wieners in the supermarket. Maybe, Wendell could follow up on this possibility. All it took was research. Wendell spoke with food brokers, supermarket managers, butchers and meat shop owners. He started to read everything he could about people who had food named after them, such as Frank Perdue and Jimmy Dean and Phyllis George and Paul Newman and Orville Redenbacker. Next, Wendell spoke with food packagers about how his chilidogs and sauerkraut dogs and cheese dogs could be packaged both individually and in six packs. For convenience, he also wanted the packages to be microwaveable. Wendell had a friend who was a graphic artist who volunteered to design a logo and a package for the project. Wendell spoke with a regional food distributor about getting his wieners into the regional supermarket and convenience store and bodega network. Of course, Wendell read all that he could about how new products are advertised and promoted. Following several months of research, Wendell knew a great deal about how products go from the design stage to shelf space. Now, he was ready to speak with his wiener supplier. Wendell's supplier, By-products Meats, said to Wendell that they were only wholesalers but they would license Wendell to put his name on a percentage of their wieners if he agreed to purchase a certain minimum poundage of meat by-product per month. Also, Wendell had to agree to pay a gross sales royalty fee for all the "Wendell Famous Wieners - You'll Be Barking For More" that were sold.  Wendell knew that his real challenge was to get meat cooler space in the highly competitive wiener market. To ensure success, Wendell gave 10% in his fledgling company to Carne Products, the largest regional meat distributor. Having an equity position would push Carne products to distribute the wieners in as wide a market as possible and to give Wendell Wieners good shelf space and shelf position. These were all critical success elements that Wendell learned about from his research. In taking Carne Products as a minority interest partner, Wendell gave a little to gain a lot. He was the little guy who was smart enough not to try and fight the big guy but to take the big guy in for protection. Wendell's smiling face on his wiener package can now be seen in supermarkets, on billboards and buses everywhere. Remember, eat a Wendell's and you'll be barking for more. With the Wendell Wiener brand established, Wendell shopped the brand around and found a buyer in Second Choice Meats. Second Choice Meats was a company large enough to take the Wendell Wiener brand national. Wendell received a sizable block of Second Choice stock in exchange for his businesses. Wendell now travels the country and does supermarket demonstrations and works the local talk show circuit as a celebrity spokesperson for Second Choice. Wendell sold much of his Second Choice stock so that he could diversify his portfolio. But, Wendell was smart. He stuck to what he knew best, wieners. Why should Wendell invest in airline companies, or mining companies or electronics companies? He knew nothing about these companies. Wendell knew wieners. He followed the wiener industry and he knew wiener companies that were making good decisions and those that were making bad decisions. For the bad companies, he shorted the stock and made money. Wendell knew that, by shorting, it was also possible to make money when you know that a company stock was going to fall. For the good companies, he bought the stock on margin. Wendell knew wieners. Wendell made a lot of money from that little tube of meat by-product. In most small businesses, there is a finite amount of business that you can do. If you're a hairdresser, there are only so many haircuts that you can do in a day. Therefore, there are only so many opportunities to get rich. You could raise your prices but how much can you raise your prices in a small town? People in a suburban location may pay $20 for a haircut, but probably aren't going to pay $200. What can you do? Like Wendell, you can do a lot of things. You can move to an area where people will pay $200 for a haircut. With the right promotion and advertising, who knows? You could expand your business and hire more people. You could open multiple locations. You could set your shop up as a model store and franchise your hair salon concept. You could try and promote a line of hair care products with your haircutting experience and promotional expertise. You could sell your business at a premium price to someone else and set up another shop. When you have a small business established, the business itself may or may not be capable of making you wealthy. But, having a business may serve as a vehicle from which you can launch yourself into a position of prosperity. A given number of people are only going to purchase a given number of pairs of shoes, no matter how good or how cheap the shoes may be. You have to know the reasonable limits of your market. Only your research and your common sense will give you the answers. As you move your small business from the level of "making a living" to making you rich, you may well be assuming considerable additional risks. You must proceed with reasoned patience. This is important. Just because you are successful at making and selling birdhouses, it doesn't mean that you know or can do anything else. Repeat. Just because you are successful at making and selling birdhouses, it doesn't mean that you know or can do anything else. There is a danger that when people reach a certain level of success they begin to feel a false sense of invulnerability. They think that because things have been going right that nothing can go wrong. This is a mistake. Because you can build and sell birdhouses, you are not an expert at all other businesses. As you make money, people will begin to treat you as if you know more than you actually do. Don't be fooled by your own press. Don't be fooled by Cousin Clarence who tells you how great you are and then asks you to go into a partnership with him in the bicycle business. You know birdhouses. You do not know bicycles. The best thing you can do for Cousin Clarence is to show him how to research a business. Then, when Cousin Clarence tells you that he doesn't need research, that he just needs money, you'll know all that you need to know about Cousin Clarence. Unfortunately, many people will work hard and make money in one business only to lose that money thinking that there is easy money to be made in another business. There usually isn't. It is difficult but possible to get rich in the bird house business. It is difficult but possible to get rich in the bicycle business. You will be tempted to stray. You will be flattered to stray. So, put that sign near your desk where you can see it. "It's The Bird Houses, Stupid." Lesson 29 ResourcesGo to Lesson Thirty
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