 |
  |
|
Making the Right Move for You
Kevin has a pretty good life that many would envy; however, for Kevin, it isn't enough. He has to go for more.He could work in the department store as an assistant department manager and in ten or twenty years he might be a department manager. This could be Kevin's career path. No matter how hard he worked or didn't work at the store, no matter how good his ideas could be for the company, it won't make much difference. He would still be working for wages. There would be little job incentive. No one is going to say, “Kevin, you're such a hard worker that we're going to pay you $150,000 a year instead of $30,000 to be the assistant hardware manager.” Or, “Kevin, that was such a good idea you had for reorganizing the hardware department that the profits for your department should be up $100,000, so, here's $25,000 for your efforts.” No way. Kevin's department store and many large companies are organized along a dual career tracking system similar to the enlisted man - officer system in the armed forces. If you are a corporal, you will never be promoted to general, never. Kevin didn't go to college. He went directly into the Marines. This means that the chances are slim that he will ever be the store's general manager or operating manager or merchandising manager or credit manager, etc. These are executive positions reserved for college graduates. Should Kevin go back to college? He could get a college degree in six years at night. If he really wanted an executive's career in the “big picture” retail business, he would probably want to continue another three years nights and earn a Master in Business Administration (MBA). In nine years, Kevin would still be in his early thirties, and, then, he might be considered for a low ranking executive's job, say, the front desk manager's job. There's nothing wrong with that.  Might be. Might be, because the corporate ladder is shaped like a triangle with a wide base and a very narrow top. There are many jobs at the bottom with fewer and fewer as you ride up. There are lots of lieutenants but very, very few generals. The answer for Kevin is to get out. He doesn't need what he considers the arbitrary certification of a college degree to be a retailer in his own business. He doesn't have to worry about not offending one boss and playing up to another, if he starts his own business. He doesn't have to worry about people stealing his improvement ideas. He doesn't have to worry about working overtime for someone else's benefit. He can be free to make money, all the money his ability can muster. Kevin is a free man. Life is exciting. It is filled with possibilities. How far can his entrepreneurial drive take him? The Interview
Eighteen months after opening his restaurant, Kevin was interviewed by Alex Darby who writes Darby's Business Journal for the local Newton newspaper. To prepare for the interview, Mr. Darby has read Kevin's story.AD: “Kevin, the people of Newton seem to have taken a liking to your new restaurant. Are you satisfied that you made the right decision in leaving your secure department store job to start a small business? I think that your story would be an inspiration to many young entrepreneurs and I'm sure that they'd be interested in hearing your plans and secrets.” Kevin: “Yes, Mr. Darby, my first store has done very well and I'm about to embark on the second phase of my business plan.” AD: “By your second phase, you mean a second shop?” Kevin: “Well, actually, my second phase plans are more ambitious than that.” AD: “How do you mean?” Kevin: “Well, my first year's gross was $160,000 or over $60,000 over my projections. Mr. Domasi, a restaurant broker I work with, has a buyer for the store who has offered $125,000 with a $50,000 downpayment and my taking back a note for $75,000. I've countered at $150,000 cash.” AD: “So, on paper anyway, you have made over $100,000 in the last year and a half?” Kevin: “Yes, at least that much. My other option is that the fellow who has been working with me from the start, Bob Dias, whom I hired from the department store also wants to buy the shop, but he hasn't got the cash. I could finance him but I'll have to see.” AD: “In any event, you're going to sell?” Kevin: “Right now, I presume so, yes. I am netting about $800 a week but Mr. Domasi was right. To move ahead, I need my capital from this store if I want to expand rapidly, which I do.”
AD: “How will you expand?” Kevin: “Well, actually, one of the other properties which I looked at before I opened this store, the one in the poor neighborhood that had the lease with the option to buy has seen another retail tenant come and go and that property is still on the market. But, I have a feeling that that neighborhood is beginning to come back. Conditional on the sale of this shop, I have spoken with that owner and made an offer to him. I presume that even if Mr. Domasi's buyer for this shop raises his offer to $150,000, a large part of that $150,000 will be in a note to me. As part of my offer to buy the other property, the store and two apartments, I have asked the owner of that property to assume whatever note I take back on the pizza shop.” AD: “So, Kevin, if I can follow you, let's say that the buyer of this shop puts down $50,000 and you take a note for the other $100,000, that the owner of the building that you want to purchase will take this $100,000 as partial payment for his property.” Kevin: “That's right.” AD: “What's your offer on the other property?” Kevin: “$140,000.” AD: “So, you would get a mortgage for $40,000 and use the pizza shop note for the balance.” Kevin: “Well, actually, I've already talked with First Cooperative about buying the other building and they will give me a mortgage of $120,000.”  Kevin: “Yes, plus I would have about $28,000 in cash from the sale of this shop. Remember, the buyer is putting $50,000 down and the principal balance on my note is now $22,000, which would leave me about $28,000. Of course, most of this I'll need for the capital gains tax on my profit from the restaurant sale.” AD: “You've learned a lot in eighteen months. And you don't seem to mind starting over.” Kevin: “Absolutely not. Most of the experience I've gained is in making the right contacts in the restaurant business with the help of my mentors, Mr. Kozopolus, Mr. Domasi and Uncle Giro. I know how to start a pizza business. And, I know how to build pizza business volume.”
AD: “I heard that you were passing out free books at your store. What's that about?” Kevin: “I've handed out several hundred copies of The Military Action Principles™to my regular customers. The Military Action Principles™is a motivational book. I wanted my customers to know who I am and what I stand for and this book does a good job of that. The books are only a few dollars each and it's an inexpensive way to establish my credibility as a businessperson and help people at the same time.” 
Kevin: “Well, I took Uncle Giro's advice about promotion, promotion, promotion. I have the logo on my boxes; I had a friend design it for the shop. You see a little Italian chef holding balloons in one hand and a pizza in the other. Balloons have become the trademark of this shop. I had balloons made with the restaurant name on one side and the address and phone number of the shop on the back. I blew up the balloons with helium and, every off-hour, I've stood outside the shop and handed out the balloons. Everybody is anxious to take a balloon home to their kids. People will buy balloons for fifty cents or a dollar each. I give them away and they cost me about $.05 each with printing, the string and the helium. I've stood at the bus stop and handed out balloons. My helpers and I have handed out balloons in the mall parking lot. Customers take them home for their parties. I watch the paper and any big event in town, say a Boy Scout exhibition, I'll send over a couple of free pizzas and 20 or 30 balloons. Look at your print advertising costs. The other shops might put an ad in the paper and pay $100, easy. And, what is the pay back from that ad? Maybe, nothing. For that same $100, I can hand out 1,000 balloons for $50 and give away 25 free pizzas, which cost me about $2.00 each. I look for opportunities to give away my pizza as promotions. Newton has a senior citizens club. I send over 5 free pizzas to them every Wednesday night. The Newton City Council meets and I send over pizza. I give away on average 25 pizzas a week and 1,000 balloons. And, I've gotten more free press from articles written about my shop than I would ever have gotten by simple newspaper ads.” AD: “So, the balloons have made your business.” Kevin: “I thank Uncle Giro. Yes, they have. The balloons have been such a success that I had planned to run specials every night like Uncle Giro but, as it is, I can't keep up with the business as it is now.” AD: “And, you're willing to walk away from all of this? Kevin: “To follow Mr. Domasi's advice, yes. What will probably happen is that I will sell this business, buy the other building, set up a new shop there and let my manager here run that business under a master lease.” AD: “A master lease means what?” Kevin: “I'm going to buy and rehab the other building and open up a pizza shop in the retail space. The rent for that store, vacant might be $1,000 a month. But, the store won't be vacant because I'll have a pizza shop ready to open. So, let's say that the value of the space with a ready to open pizza business is $2,000 a month. My manager under the master lease, leases both the space and the business for $2,000 a month net. He pays all expenses and pays me $2,000 a month for the master lease. Any and all profits go to him. So he has a business of his own under the master lease and the incentive to make the business grow. Also, I'll probably negotiate an option for him to buy the business at a later date.” AD: “Where did you learn all of this?” Kevin: “I ask questions and I listen. I find people who have already done what I want to do and I ask them questions. Most people want to talk about their success and help you. All you have to do is ask. I ask and I listen. The Pizza Shop Operators Division of the National Restaurant Association has been a great networking place. I leave every meeting filled with new ideas.” AD: “So, you aren't worried about leaving your balloon idea with the sale of this shop?” Kevin: “No, I'm not. Probably, the new buyer is going to scrap the balloons because he'd rather save the $100. If he keeps the balloon idea, fine; I wish him luck. I'll have plenty of other promotion ideas. For instance, very few pizza shops have a breakfast business and I'm exploring those avenues, as a "for instance.” AD: “Kevin, you certainly exude confidence.” Kevin: “Well, I don't mean to sound cocky. I've just gotten very enthusiastic about business.”  Kevin: “Yes, I would. And, I would say that I've found the right people to help me and I've listened to them. I would also say that I've worked my tail off six and a half days a week for the last year and a half. I haven't taken a vacation. And, I haven't been tempted to spend the $800 a week I net on clothes, cars and nightlife. I'm still young and ready to keep re-investing the money I make. “My phase two is to own another pizza business and to own some real estate. Within six months, I should be at phase two. Then, on to phase three.” AD: “And, phase three is...?” Kevin: “Well, it's ‘Little Giro's.' I have met an excellent franchising agent and with Uncle Giro and with the backing of The First Cooperative Bank, we're in the very early stages of putting a chain together of ‘Little Giro's' restaurants, probably aimed at shopping malls. But, again, this is all very preliminary. Anyway, Uncle Giro and I are looking at joint ventures for the Italian food business. Also, made-to-order on-site pasta shops are really starting to boom now. But I don't want to bore you with the Italian food business." AD: “Kevin, eighteen months ago, you were selling hammers in a department store and now you're on your way. Way to go, Marine!” Kevin: “Yes, Sir, now I'm on my way.”
Downpayment - The amount a person pays in cash, besides a loan, to buy a business or property. Mortgage - A temporary pledge of property to a creditor as security against a debt. Principal balance - The amount of money owed on a loan. Note - A lending obligation, a loan. Capital gains tax- The tax on a profit made from the sale of an investment. Trademark - A symbol, word or design, etc., to distinguish one person's product from another's. Logo - A unique design or symbol representing a company's name. Network - An interrelated chain or group.
My Navy rating was as an STG, Sonar Technician. I'll be leaving the Navy next spring and I've been looking at starting or buying a related business. I've come across two brothers who want to sell their electronics company. One says he's sick and needs to retire. The other says that he's old and doesn't want to work alone. These reasons sound a little sketchy to me. Are these good reasons for them to sell? There can be many valid reasons for an owner to sell. The owners may be relocating, retiring, or ready to move on to other challenges. There could be illness or a disagreement among partners. There could also be disappointing sales and unfulfilled expectations. Training gives us an outlet for suppressed energies created by stress and thus tones the spirit just as exercise conditions the body. After completing the Master Small Business Course and doing your research, you should be concentrating more on why you want to buy rather than why the seller may want to sell. The present owner may be a great owner and you will have big shoes to fill just to stay even. On the other hand, the present owner may be burned out and undermotivated and you can boost income immediately. Before you buy a particular business, you should have researched comparable sales figures so that you know that a good deal is a good deal. Or, that there is enough common ground that you can negotiate to make the deal work for you. Would the brothers let you work for them for a month or two to get a feel for the business? Will they let you talk to suppliers or customers? Will they allow your attorney and accountant access to their tax returns? Are they open, fair and honest? The bottom line is do you feel comfortable that you can make this business work? Otherwise, you go on to the next opportunity.  Yes, people will fail. Some business ideas are flawed. For example, you can't sell refrigerators at the North Pole. Some business expectations are unrealistic. You can't make $100,000 a year selling hot dogs from one hot dog cart. Some business owners think that the business is about doing for them rather than doing for the customer. You can't be a residential real estate agent and not agree to give clients your home telephone number or work some nights and weekends. Some businesses are underfinanced. You can't open a McDonald's with $10,000. Some business owners are lazy. You can't be a landscape architect if you're afraid to visit a job site and get your shoes dirty. Some business owners refuse to change. Most people don't want to eat chicken-fried steak or pork rinds anymore. However, entrepreneurs who follow the Military Action Principles™ can and should be optimistic. My cousin owns a small business and he is always griping about the fees that credit card companies charge merchants. To avoid these hassles, when I start my business, should I be thinking about a cash and check only policy? If consumers want to use plastic, which they do, then you'll just have to grin and bear it. These days even donut shops are accepting plastic for payment. Yes, merchant fees of 2% - 6% are high. If it makes you feel better, you can send a letter and maybe get your trade association involved, but good luck. Your only consolation may be that your competitors face the same fees that you do. Smart small business owners make their products and services easy to buy. You need credit cards. You need Paypal and other ways for your customers to buy from you online. You might want to consider an 800 number. Rather than thinking about dropping a convenience, you should be thinking the opposite. Build your business and love those who help you to build your business – the credit card companies! Can you distinguish your business by offering samples or coupons? How about consulting services or lay-aways and gift wrapping? Are you offering a free delivery or rush delivery service? Can you offer a store charge or other types of financing? Keep thinking “Easy to buy.” Keep saying, “Thank you.”
Go to Mission 10
|
|
 |
© Copyright 1994-2008, American Success Institute. The Action Principles® is a registered trademark of the American Success Institute. We are a nonprofit research, publishing, and educational corporation headquartered in Natick, Massachusetts. |
 |