How to Maintain (or Regain) Control of Your Growing Business

Tuesday, February 19, 2019

Delray Beach, FL.- If you are in the fortunate position of seeing your business grow to the point where you have more than 50 employees, there’s a good chance the grip you thought you had on it will begin to slip away.

There is a good reason for this.

It has to do with the human capacity for attention. Experts say it’s basically impossible to manage more than seven or eight people. I can attest to that. There have been times when I’ve had more than a dozen people reporting to me — and it was problematic. I was not able to stay on top of their work, and they knew it.

What you may do is spend more time with some of the people who report directly to you and ignore the others for long periods of time.

If your top people are ignored, you are not doing the best job of managing them. You are not provoking them enough, not keeping a close enough eye on their performance, and not giving them the feedback and support they need to be successful.

But even if you do limit your direct reports to, say, seven, you can still lose control when the payroll exceeds 50. Here’s what happens:

Your seven direct reports understand you and your vision. Their subordinates report to them and not you, but the size of your company is still small enough that they see and hear from you all the time. They know what you want even if their boss has different ideas.

But when your company grows to the point where the subordinates of your top people have their own subordinates, the connection to you is all but lost. So what do you do when you have 50 (or 100 or more) employees and you feel like things are falling apart?

First, you should open your mind to the possibility that you aren’t the manager you think you are. In fact, it’s possible that your business isn’t being managed at all.

As an entrepreneur, your attention has been correctly focused on growth and profitability, not management. Your style of leadership might have been formal or casual. Your frequency of communication might have been regular or impromptu. You might have been a nice boss or a bastard. It hasn’t mattered because the seven that reported directly to you adjusted themselves successfully.

Their subordinates made dual adjustments: to their bosses and to you. But now that there are so many employees, you have to find a way to make sure they all understand your business goals and your expectations of them.

For all you know, they are getting bad ideas and directions from their bosses. You can’t see it, because those managers don’t report to you.

So you were right to focus on growth and profits. But now your business is in a different stage. Now you have to introduce some level of formal management throughout the business… which may mean that you have to become a more formal manager yourself. That would entail focusing on three things:

  1. Controlling growth operations
  2. Managing maintenance operations
  3. Communicating your vision

 Controlling Growth Operations

Every good-sized business is sure to have multiple operating parts – marketing, sales, accounting, customer service, product development and fulfillment, data collection, etc.

When your business was small, you could give short shrift to some of them. Now they are all important. None can be neglected. So which do you take on personally, and which do you trust to someone else?

Read MoreHow to Maintain (or Regain) Control of Your Growing Business

Ego, Inspiration, and Achievement*

Friday, February 15, 2019

Delray Beach, FL.- It’s impossible to see the pyramids of Giza, the Colossus of Rhodes, or the Great Wall of China without thinking about the will it must have taken to build these wonders of human creation. They were built thousands of years ago when the technology for building at that scale didn’t exist.

Even something as “ordinary” as the Palace of Versailles, built in the 17thcentury by Louis XIV, is awe inspiring.

Or how about what it took for Michelangelo to paint the frescoes in the Sistine Chapel… or Mozart’s gargantuan struggle to compose his Requiem… or Thomas Wolfe’s painful work revising Look Homeward Angel

And that’s to say nothing of scientific or business or military accomplishments.

Most of what we think of when we talk about human “achievement” is the result of one part inspiration and nine parts long and sustained effort, often under difficult conditions, focused toward a specific objective.

In fact, this quality of sustained and focused activity towards “making” new and bigger and better things could be said to be distinctly human. Animals are capable of hard and sustained work to create food and shelter, but they do not create new things for the purpose of bigger and better.

Put conversely, if human beings were not capable of such focused effort, civilization would have enjoyed few (if any)  scientific, industrial, social, and even artistic innovations throughout history.

The impulse to fix, improve, enlarge, and beautify seems to be hardwired into our brains. There is no human society that hasn’t produced inventions and art.

But what is the thing that drives people to do these things?

Read MoreEgo, Inspiration, and Achievement*

Are You An Information Addict?

Wednesday, February 13, 2019

Delray Beach, FL.- “Let’s have lunch,” DK said in his email. “There’s something I need to talk to you about.”

Two days later, we were eating chopped chicken salads at City Oyster on Atlantic Avenue. We talked a bit about family news, but it was clear that he wanted to talk about a question that was on his mind.

The question: Should he spend $100,000 on the highest level of an internet marketing program that he had been looking at?

“It looks really good,” he said. “But I’m not sure it makes sense for me to invest that kind of money.”

“A hundred grand is a lot of money,” I said.

“But you get an awful lot for it,” he explained. “They do all the technical stuff for you, which I’m not very good at. All I have to do is come up with the product idea.”

The waitress filled our drinks.

“So if you invest in this marketing program… what kind of products would you sell?” I asked.

“I don’t know,” he said.

“How about this: If you had all the money you could ever need, how would you spend your time? What would you do to give your life purpose?”

“That’s a good question,” he said. “Actually, I like the idea of purposefulness. Maybe I’d do something along those lines.”

Read MoreAre You An Information Addict?

How to Come Up With the Idea That Will Make You Millions

Saturday, February 9, 2019

Delray Beach, FL.- When people start a business for the first time, they often do so with an idea for a particular product that they believe to be both brand-new and also acutely needed – some sort of “better mousetrap” that will put their business on the cover of Inc. magazine.

Having a brand-new product idea may be the most common way to start a business, but it’s not always the best way.

Why?

Because brand-new products usually crash and burn.

They fail for a number of reasons – weak marketing, insufficient cash flow, poor product reviews. But the most common is this: The appetite for them is much smaller than the would-be entrepreneur has imagined.

When some enthusiastic young person comes to me with a “great” new idea, I always ask about the size and variety of competition. When they say “That’s the best part! There is none!” I have to explain why starting a business with a product for which there is no proven market is a big mistake.

You might not think so from everything you see in the business media. Journalists understand the power of a good story, and the best-loved stories about entrepreneurs are those that feature the lone and courageous person with a brand-new idea that he spends all and risks all to bring to the market, against huge doubt and even criticism, only to be proven right in the end with a huge success and the fortune to go with it.

But the reality of a successful start-up business is much more like this:

Read MoreHow to Come Up With the Idea That Will Make You Millions

The Challenge of Charity: My Failure to Help Marcus and Gabriela

Thursday, February 7, 2019

Delray Beach, FL.- First I felt ashamed. Then I was hopeful. Then I was disappointed. Now I’m resigned.

Marcus and Gabriela came to work for us in 1999 after we built a second home in Nicaragua.

Marcus tended the landscaping. Gabriela kept the house. Antonio, my Nicaraguan partner, had recommended them to us. Their parents and siblings had worked for him.

They were very young at the time – in their late teens or early twenties. But they were already burdened with the responsibility of being parents. Gabriela’s husband worked in construction. Marcus’s wife worked part-time cleaning at a local restaurant.

Neither spoke a word of English, so we had to communicate in the very rudimentary Spanish I had at the time. They showed up every morning at 7:30 and worked, not energetically but dutifully, until 3:30. Then they were gone. In those early days, they left without saying goodbye.

They were shy and I did my best to relax them in that American sort of egalitarian way. But Nicaragua, like all countries, lives with its history. And the vestiges of Spanish colonialism still existed. Most upscale households in Nicaragua employ domestic workers, who are, I gathered from observation over the years, treated with respectful condescension.

I asked Antonio what I should pay them. He told me $150 a month.

“A month?”

“That’s the going wage,” Antonio assured me. ”If you pay them much more, it will cause problems in the community – for them now, and for you later on.”

I knew that he was right, but I wasn’t going to accept it…

I sat down with Gabriela and Marcus and told them that if they wanted to earn more money, I could give them jobs that fell outside of their normal duties. Marcus could give a room a new coat of paint. Gabriela could plant flowers along the side of the garden. That sort of thing.

And they could do these extra chores during their regular hours, I told them. (Which would work out just fine for me, because I didn’t really have eight full hours of work a day for them.)

I thought they would be delighted with the opportunity, but they were not. Nestor, a local friend and colleague, explained their lack of enthusiasm.

“They probably think you are trying to take advantage of them by asking them to do extra work,” he explained. “Even for extra money.”

“Huh?”

It was another vestige of the country’s history – in this case, the years it had existed as a Communist state.

But although they were reluctant to do “extra” work, they were not averse to asking for financial “help” with family problems – a sick parent, a leak in the roof, etc. I was more than happy to give them what they needed, but I insisted that they work the “extra” hours for the extra money.

For a few years, it seemed to be working well. They used the extra money they earned to buy themselves bicycles, cell phones, and clothing.

But when I had the opportunity to visit their homes, it was clear that the extra money had bought them all sorts of things that put them in the upper economic ranks of Limon, the hamlet they lived in. Still, like everyone else in the area, they were living in simple mud and wood shacks.

Despite free-market views to the contrary, this huge gap between their homes and mine bothered me. I had to find a way to increase their income yet again so they could at least have proper windows, doors, and floors.

So I came up with a solution that was popular among charity advocates at the time: I’d give them micro-loans to start their own side businesses. My idea was that they would follow the strategy I’ve recommended for years to other would-be entrepreneurs: Start small. Test the product and the pricing and the pitch as quickly and efficiently as possible. And then, if the business starts to take off, expand.

Considering their earlier reluctance to do extra work for pay, they were surprisingly open to the idea of having side businesses, businesses that could be run by an unemployed sibling or relative while they were at their regular jobs.

I told them, stupidly in retrospect, to choose the businesses they wanted to have. (I thought that this would provide them with the extra motivation they might need to succeed.)

Gabriela decided on a children’s clothing store. Marcus decided to open up a pulperia, a rustic version of a mini 7-Eleven, in front of his house.

Two very bad ideas!

Read MoreThe Challenge of Charity: My Failure to Help Marcus and Gabriela

Who’s the Richest Author in the World?

Tuesday, February 5, 2019

Delray Beach, FL.- If your number one goal in life is getting rich, becoming an author is not a great choice of occupation. The average writer in the USA, according to ZipRecruiter, is $39,179.

To put that in perspective, it’s about $5,000 more than the average income of a garbage collector, but about $12,000 less than the average plumber.

But there are exceptions. And, as my brother-in-law George reminds me every time he visits, it’s always the exception that is interesting.

George likes to start his day with a cup of coffee and the morning paper. He has a curious mind, and he likes to share bits of trivia that he picks up from whatever it is that he’s reading at the moment. So when he’s visiting and we are at the breakfast table, it’s not unusual for him to ask a question that might otherwise seem to have come from the blue.

Today, it was this one: “Who is the author who is worth more than a billion dollars even after giving away $170 million in 2012?”

Now before you throw out the obvious answer, tell me this:

Do you know who Paulo Coelho is?

He’s a Brazilian novelist, musician, and theater director. His first book, published in 1982, had only modest success. But then he took a trip around Spain and chronicled it in The Pilgrimage. And he followed that up with The Alchemist, which was not only a huge international bestseller but the most translated book by a living author. With a net worth topping $500 million, Coelho is near the top of the world’s richest authors.

What about Barbara Taylor Bradford? Do you know who she is?

I’m not familiar with anything she’s written, but I understand that A Woman of Substance, her debut novel (at the age of 46)  has sold 35 million copies since it was published in 1979. In addition to 28 additional novels (all bestsellers), Bradford has authored a series of children’s books and a series of interior design books. She’s worth about $300 million.

Or how about Jeffrey Archer?

This English author (and politician) has sold more than 250 million copies of his books internationally. Part of his fame, I have read, came from the fact that he spent 5 years in prison on some charge of “perjury and perverting the court of justice,” which he monetized by writing a series of diaries about the experience. Archer has a net worth of $200 million.

Now – unless you are a student of African literature – I’m almost positive you’ve never heard of David Oyedepo.

A Nigerian author of inspirational books, Oyedepo is his country’s richest cleric. He’s written more than 50 books of his own, and also owns Dominion Publishing House, which publishes faith-based works by other writers. Oyedepo’s net worth is estimated to be about $150 million.

Coelho, Bradford, Archer, and Oyedepo – these super-rich but little known (to the likes of you and me) writers are high up on the net worth totem pole. But most of the spaces at the top are filled by names we know very well:

You know John Grisham…

He has a net worth of $300 million, and he earns an average of $50 million a year – in part because his books are tailor-made to be produced as movies. I’d expect to see him steadily moving up the net-worth list.

And Danielle Steel…

 Steel has, without a doubt, the most colorful marital history of her peers. Following a divorce from her wealthy first husband, she had a short marriage to a man who was later convicted of rape, followed by an equally short marriage to a drug addict. And that wasn’t the end of it. She’s been married and divorced at least two more times. Meanwhile, she has written more than 70 bestselling novels… and has a net worth of $385 million.

And Stephen King…

A specialist in the literary genres of horror, fantasy, and suspense, King has written beautifully and successfully for films, too. (He has also written a great book on writing called On Writing.)He has sold more than 350 million copies of his novels around the globe, and has a net worth of more than $400 million.

And James Patterson (who is almost – but not quite – our winner)…

Patterson has sold more than 300 million copies of his books. Most notable is his series featuring Alex Cross, a fictional psychologist and crime solver. He is also known for his campaign to make reading a national priority, and for his support of colleges and universities, school libraries, and independent bookstores. (He has donated millions in grants and scholarships.) Patterson has a net worth of $750 million, and continues to  earn about $90 million per year.

So who is the richest author in the world? JK Rowling, of course!

Was Rowling your guess? She was mine. How could she not be?

She is the author of the Harry Potter industry, which began with books and then went on to include movies, games, merchandise, endorsements, and even a 2-part Broadway play. With a net worth of more than $1 billion – even after giving away $170 million of it in 2012 – Rowling currently holds the title.

Read MoreWho’s the Richest Author in the World?

Principles of Wealth #25*

Sunday, February 3, 2019

Delray Beach, FL.- “Hard money” advocates and precious metals dealers contend that gold is not only the safest way to store wealth but also a very good way to grow wealth. The truth is, gold is a valid way to protect wealth from certain unlikely economic situations – but for the ordinary wealth builder, owning lots of gold is both risky and unwise.

There is a school of economic theory that puts gold above all other asset classes.

Here’s the argument:

* Stocks can go up but they can also go down. The same can be said for real estate, commodities, and bonds. But over the long haul, gold will preserve an investor’s wealth because of its intrinsic value.

* President Nixon made a huge mistake in 1971 when he took the dollar off the gold standard. When the dollar was tied to US gold reserves, the government could not print more dollars than there was gold to back them up. Now, the government had the freedom to print as many dollars as it wanted, backing them up with Treasury bonds (promises to repay the debt sometime in the future).

* When nothing can stop the printing of dollars, politicians will print them in an effort to speed up economic growth. But as the number of US dollars in circulation increases, the value of the individual dollar goes down. This causes inflation spikes that make virtually every asset other than gold – stocks, real estate, commodities, and bonds – worth less.

* In 1970, before Nixon’s decree, an ounce of gold could be bought for about $35. In 2019, that same ounce of gold would cost about $1,290. Meanwhile, as US debt has skyrocketed, the risk of a massive economic collapse has become more and more likely. Any day now, we could see banks freezing assets, the stock market crashing, bondholders losing everything, and “blood in the streets.” Gold will then be the only currency that anyone will accept. And here’s the silver (gold) lining: When that happens, the value of an ounce of gold will soar to $5,000 and even $10,000. Investors that own gold will become the new rich.

So… is that likely? That’s the million-dollar question.

Read MorePrinciples of Wealth #25*

What You Can Learn About Investing From a Las Vegas Casino

Friday, February 1, 2019

Los Angeles, CA.- The last time I was in Las Vegas for more than a business meeting was when my children, now grown and with children of their own, were in high school. We spent a week there, marveling at the mega-hotels, getting lost in the cavernous casinos, riding the rollicking rides, shopping in the scenic super-malls – generally swept away by the sounds and scintillations of that surreal, synthetic city.

Las Vegas offers a special kind of fun. It won’t give you the expansive fun of trekking the desert or the aesthetic enjoyment of walking through Rome. It’s more like a B movie or a Keno girl cinched up in lace and silk stockings: a type of sensory indulgence that you can’t be proud of but you don’t feel ashamed of either.

I remember the reaction of Son Number Two, who was reading Will & Ariel Durant’s history of ancient Rome at the time. Shaking his head, he kept saying, “This is surely the end of the American Empire.”

One can’t deny that thought. In terms of size, sumptuousness, and spectacle, there is no other place in the world like Las Vegas. (I’ve not been to Dubai.) The vast, opulent malls America pioneered in the early 1990s prepare you for the size of it – and Disney World/Land can give you an idea of how friendly replica environments can be. But they are but cartoons to the masterpiece of marketing and merchandising that is Las Vegas. Las Vegas is a one-and-only and offers a sui generis experience to all who visit.

A World Unto Itself

Take the Bellagio…

The casino is larger than several football fields and jam-packed with roulette tables, poker bars, and one-eyed bandits. It has its own mall… a deluxe promenade that rivals Worth Avenue or Rodeo Drive, featuring the same deluxe stores (Gucci, Armani, etc.) you can now find in every major tourist city around the world.

Walking into the lobby you can’t help but be awed by Dale Chihuly’s Fiori di Como, a glass sculpture composed of 2,200 hand-blown glass flowers and covering 2,000 square feet of the ceiling.

In addition to dozens of casino-side eateries and buffets, the Bellagio offers at least a dozen first-class restaurants, bars, and nightclubs within its buildings, as well as several theaters.

Outside, a water show takes place every 30 minutes. It is a wonder of science – computer engineering and plumbing – that provides a spectacular, three-dimensional representation of show tunes and opera that ranges from charming to breathtaking.

And there is the Bellagio Fine Art Museum, which displays, I was surprised to discover, large (if not great) works by Picasso and other 20thcentury masters.

The first half of the Bellagio cost something like $1.6 billion in the mid-1990s. The second half, built later, cost more.

Defining Our Terms

Three billion dollars is a lot to risk on a new business. But was this a gamble?

Were the people that invested in the Bellagio back then gambling? Were they, like the people sitting at the casino’s blackjack tables and slot machines, risking their money against the odds?

Or would you call it an investment?

Read MoreWhat You Can Learn About Investing From a Las Vegas Casino

Four Proven Ways That Employees Can Get Big Raises and Retire Rich

Monday, January 28, 2019

Los Angeles, CA.- It’s commonly said that you can’t get rich working for someone else. That the only way to achieve financial independence is to own your own business.

This idea feels true when you are stuck in a thankless job, working long hours for mediocre pay. But it’s nonsense.

It’s perfectly possible to become wealthy as an employee. You’ve just got to (a) be working for the right kind of company, (b) chart a course for yourself that takes you from ordinary to valuable and from valuable to invaluable, and (c) make sure you get the compensation you deserve.

I know this to be true for three reasons: I did it myself. I mentored at least a dozen employees that did the same thing. And I looked at a foot-high stack of research on highly paid employees that confirmed my experience.

(In this essay, I’ll outline the principal ideas I’ve developed on this subject. I’ll present them just as I presented them to those I’ve mentored: as observations and advice. Sometime later this year, if I can get someone to help me, I’ll expand this essay into a book. But what you are about to read should get you going and keep you moving in the right direction, if you are interested.)

Nothing I’m about to suggest will be especially difficult. It will take time. And commitment. And the willingness to do some things that you are not doing now. But there will be no big scary leaps required of you. Begin where you are now, with the skills and knowledge you currently have. Then move forward, taking small, sensible steps, acquiring the skills and knowledge you currently lack.

There are 5 stages to this journey:

  1. Make sure you are working for the right company.
  2. Become extraordinary at what you do.
  3. Develop additional, financially valuable skills.
  4. Expand your reach so that your business can’t do without you.
  5. Move from employee to stakeholder.

Work for a Business That’s Right for You

There are basically three kinds of businesses that can provide the environment you are looking for, where you can become rich.

Big corporations

Big corporations will pay you serious money if you are at the top of their food chain. A senior vice president of a billion-dollar business can easily make $350,000-$750,000.

It’s not difficult to accumulate an eight-figure net worth if you get yourself promoted into one of those highly paid jobs quickly. But the competition will be strong. You will be competing with dozens (if not hundreds) of very smart, very hardworking, very ambitious young people. You will have to be not only outstanding at your job and then move yourself strategically towards the money side of the business, you will also have to be politically shrewd. Because all big companies suffer from some amount of corporate politics. And even if you have what it takes to rise to the top, it will likely take 10-20 years.

Financial service businesses

Brokerages, banks, and insurance companies are particularly good places for ambitious people that want to get rich as employees because they are designed to motivate and reward their employees with commissions and bonuses. And if you are with the right company, those commissions and bonuses can be huge.

There are probably a thousand such businesses in the USA that are happy to pay their best people $250,000 to $1 million or more – if they can perform. Career paths at this level include portfolio managers, marketers, and salespeople.

Becoming a high-earning portfolio manager is a matter of knowledge, skill, and luck. If you are highly intelligent, mathematically oriented, and mentally disciplined, this could be an exciting and rewarding path for you. But be prepared for the emotional challenges. It is difficult to keep an investment portfolio’s performance above the pack. When the performance is up there, you are a superstar. When it drops below – and eventually it will – you will be a pariah.

A less demanding (in my view) career path is to become a broker – starting out working under another broker, developing leads and then signing up your own accounts, and then eventually having a team of junior marketers and junior salespeople working for you. Brokering is 80% salesmanship, 10% customer management, and 10% knowing what you are doing. To succeed as a broker, you need to be very good at all three.

Small companies with big potential

The third type of business that offers employees the potential to become rich is the small, entrepreneurial company with big growth potential.

This was my choice as a young man, and I don’t regret it. Starting out with a small company, especially if you are young, gives you a fast track to making big money that you won’t get in a big corporate environment. You are not competing against dozens of hyper-smart and uber-ambitious colleagues. And there is no formal corporate ladder to climb.

With small businesses, it’s generally easier to take on more responsibility. It’s also much more likely that you will be working directly with the founder, who will be very conscious of everything you are doing to make him or her rich.

Plus, working for a small business gives you a much greater ability to shape the corporate culture so that you can become not just wealthy but also proud of what you do.

Becoming a Valuable Employee

Whatever type of company you choose, your journey to wealth begins by establishing yourself as a valuable employee.

Most employees go through their lives working for businesses they care nothing much about, dealing with problems they’d rather not face and getting paid very ordinary wages. They would like to earn more. They may even be willing to do more. But their ambitions are sporadic and fleeting. Most of the time, they are simply showing up.

Such employees are never going to get substantial raises. They can expect their salary to rise very slowly and very gradually. From 1984-2017, for example, the average salary rose by around 3.5%, according to the Average Wage Index.

As an ordinary employee, that’s what you should expect. But getting a 3.5% increase every year will never get you rich. It’s barely enough to keep up with inflation.

Becoming a valuable employee, however, puts you on a different trajectory. Extraordinary employees can – and often do – get raises that begin at twice the 3.5% average and often jump by 10% yearly with periodic leaps of 25% or more.

That sort of arithmetic is why most college-educated employees starting out today can expect to quadruple or quintuple their salaries over a career span of about 20 years, whereas top-performing employees can easily double or triple that.

A valuable employee, earning only a minimum increase of 7% a year, will see his compensation grow from $50,000 to $193,000 in 20 years. At 10%, he will see his compensation break into the quarter-million-dollar range.

There are basically four ways to distinguish yourself as a valuable employee and see your compensation accelerate at a faster pace:

Read MoreFour Proven Ways That Employees Can Get Big Raises and Retire Rich