What Are You Doing About Lost Customers?

True story. I just got off the phone after much frustration trying to track down my insurance broker.

As of last Friday we have relocated office and we need a new insurance policy (the insurance was covered in our outgoings at our old Erindale road office). I had a three year old letter which I kept from my insurance broker (it was the last correspondence I had from him). The broker was very experienced with commercial insurance which is why I wanted to use his services again. Now that I need him, I can’t find him. I’ve asked another insurance broker to quote me on a policy. The commission and the sale of the insurance policy will most likely go to this company.

HELP – I’m a ‘lost-customer’ with money to spend!

It just goes to show you that most businesses will spend an extraordinary amount of money to attract new customers and clients, but do very little to keep in touch with past customers. Sales are lost.

The leaky bucket photo above illustrates this problem.

I believe the main reason is that customer marketing is often ‘CLUNKY’. It requires administration effort to send something to a customer.

If the business owner or salesperson don’t ask the staff to organise it – it will never happen.

We understand that the business owner (or salesperson) wants the results (i.e. the sales). That’s why we provide a number of AUTOMATED customer follow-up systems to our clients.

If you would like more information about our AUTOMATED marketing systems, click here to send us an email.

Business Saves $1,177 Annually In 5 Minutes!

One important area of improving your profit margins is to reduce your costs. Sometimes you can reduce your costs without a reduction in the quality of service you receive from a supplier, sometimes you’ll see lower quality – cheaper isn’t always better. However…

I saved a client $1,177 in 5 minutes. Without mentioning the name of the client, I can say the business is located in Perth. For illustration purposes, let’s call my client – Mary.

Area saved #1 : Mary sent me an email saying that she was still paying $77 per month on her Sensis bill for a CitySearch web site.

CitySearch was one of the many online directories that popped up during the dotcom boom in 1997-2000. It was bought out by Sensis. Back in the 1997-2000 period many businesses were called with an offer of a new website for only $77 per month.

What many businesses didn’t realise is that this monthly fee went on forever. Sensis never contacted Mary to say “Hey we’re billing you $924 per annum for a web site we built 10 years ago, we can now update your website for free if you like.”

Mary’s website was replaced over a year ago (not by CitySearch), so I knew that the $77 per month was a totally unnecessary expense. I got Mary to cancel the CitySearch service. I only wish Mary brought it to my attention sooner. She could have saved over $1,000 in the past year.

STRATEGY FOR YOU : Check all your supplier’s invoices and question any unnecessary services.

Area saved #2 : Do you have a website? If you do you’ll be paying an annual fee for domain name renewal. Did you know however that I use Netregistry (an Australian company) – their annual fee for renewal is $44.95. If you’re paying any more than that you are paying too much.

STRATEGY FOR YOU : Check the bill from your domain name supplier.

Area saved #3 : Unnecessary domain name registration. Mary had a website ending with .net.au. DotnetDotau domains are really not needed. If you want to secure another domain for your business, register the Dotcom name as well as your DotcomDotau address.

STRATEGY FOR YOU : Don’t register or renew a DotnetDotau domain (.net.au). Save the money instead.

Mary’s savings per annum : $984 for CitySearch, $140 for (.net.au) and $113 for using Netregistry to renew her DotcomDotau address. Total saving $1,177.

(Actually it took less time for me to save my client $1,177 than to write this email. But I thought you’d appreciate this information.)

The lesson : Charges from suppliers for unnecessary or excessive fees is commmon. It’s worthwhile to periodically check all your invoices and question any charges you don’t know about or feel are overpriced. This is an easy way to improve your profit margins.

Business Mentors Are On Your Team Too

I recently caught up with two of my mentors (from the USA) on their visit to Australia. I was really surprised how tall David Frey is – he’s taller than me and I’m 6 foot 1′.

David Frey is the creator of the Small Business Marketing Best Practices Newsletter. It’s a weekly newsletter that is received by thousands of small business owners in over 43 different countries around the world. David is a business coach to the retail hot tub and pool construction industry and spend a good portion of his time travelling across the USA speaking at seminars. He’s also a sport’s nut and very active with his church and charities.

Jordan Adler has created a seven figure income from his current marketing enterprise and has personally inspired thousands of people to achieve remarkable success through network marketing.

Buy Hummer, Get Free Shotgun – Real ‘Way-out’ Marketing!

Source : The Age, 16 March 2010

An American Hummer dealership is sending the Hummer off with a bang, giving away a free shotgun with every new car.

An American Hummer dealership will give away a Browning Citori White Lightning shotgun, worth $2,000, with every new Hummer they sell. Lynch Hummer in Chesterfield, Missouri is one of the highest selling Hummer dealerships in America, and last year they decided to add guns to their showroom.

With the recent ‘wind-down’ announcement from GM (the makers of Hummer) the dealership’s owner, Jim Lynch, says that he wants his Hummers to go out with a bang. “There is now real reason to believe that the current inventory on hand at dealers may be the last of the new Hummers, we wanted to send them off with something memorable,” he says. “Browning and Hummer are prestigious brands and American Icons – bringing them together is a natural fit. “The guns have been a huge hit with our Hummer customers and now we are taking the ‘Guns and Hummers’ concept one step further,” says Lynch.

What’s this got to do with marketing?

Everything – Not only has Lynch Hummer value adding to their Hummer ‘package’ – they’ve chosen a controversial ‘product’. Being controversial means Lynch Hummer has received tens of thousands of dollars in FREE publicity. Heck, the article got my attention and I’m as far away from Missouri, USA as you can be (Perth, Western Australia). Well done Lynch Hummer – great marketing!

Are Peers On Your Team Too?

In business much can be learnt from peers in your own industry or from related industries.

I found an ‘old’ photo – well, a November 2008 photo of Ari Galper (left), Steve Baker (right) and myself (middle) after we had attended a two-day marketing seminar.

Ari Galper is the creator of Unlock The Game™, a completely different mindset about selling. I actually invested in Ari’s program ‘Unlock The Game™’ back in 2005. The program based on using sincerity to build trust in a sales environment. Highly recommended.

Then there is Steve Baker former business coach to the carpet cleaning industry and now famous for his expertise with fax and voice broadcasts.

Getting Things Done – Bill Glazer Style

As you may know I subscribe to an excellent marketing newsletter from Dan Kennedy and Bill Glazer. It’s posted to my office from the USA and it’s filled with very timely marketing and business information. One article describes how Bill Glazer as an entrepreneur gets so much done. Here is his response :

Bill Glazer

I work. I’m willing to put forth the effort to improve my own marketing education in order to achieve the knowledge I require and I implement what I learn. I IMPLEMENT fast. I create to-do lists. I’m a BIG list guy which keeps me on track for what I need to get done and I like to assign dates next to each task. I delegate. I learned this from my management mentor, Vince Zirpoli, who taught me the definition of management is getting things done through others.

That’s great advice, unfortunately so few follow it. Many small business owners TRY to do everything which means THEY are the business and they are also the GOODWILL – it’s not a recipe for success. Being keen to find out what works and what doesn’t, I took the time to personally meet with dozens of wealthy business owners over the past five years – here’s what they had in common :

• They set business goals and targets. And targets for themselves and their staff.
• They allocate at least 2 – 8 hours per week to work ON their business not IN it.
• They take the time to improve their knowledge of marketing and business.
• They create good business systems so the systems support the staff (not the business owner).

It’s not hard to do. It’s more about mindset than anything else!

What’s Basketball Got To Do With Marketing?

A quote from Michael Jordan : "I have missed more than 9,000 shots in my career. I have lost almost 300 games. On 26 occasions I have been entrusted to take the game winning shot, and I missed. I have failed over and over and over again in my life. And that is precisely why I succeed." What a great attitude and what a great man! Isn’t fascinating that every great person has this type of winning attitude and ‘mindset’. After all, in sports and in business – no game or venture (or even every marketing campaign) succeeds every time.

Even successful business leaders like Steve Jobs, Bill Gates and Donald Trump have failed with certain ventures (read their biographies to find out what they were). But, these successful business people know that one or two ‘home-runs’ can outweigh ten or more failures and make them very rich.

If something doesn’t work, try and try again. If all possible, seek mentors or experts to achieve goals faster. Our expertise here at Kinetic is ‘Great Business Marketing‘. Whether it’s business-to-business marketing (B2B) or business-to-consumer (B2C) we aim to bring in quality leads (enquiries) into a business at the lowest cost possible.

When it comes to business attitude, we found that the wealthiest business owners have a strong ‘marketing mindset’. They understand that they need to ‘invest’ in order to achieve a ROI. For example, a business owner spends $1,000 on advertising, and brings in sales of $5,000 with a profit of $2,000.

Question is – How often would you run that advertisement? I hope you answered – "As often as possible."

Are You a Marketer or a Shop-Keeper?

Everyone who is successful in business has a mentor (or mentors) and a coach – or should have! Even Bill Gates (once the world’s richest man) had Warren Buffett (the world’s second richest man) as his mentor. One of my mentors is Dan Kennedy. I receive his paid newsletter once a month and it’s a great way to improve my business and marketing knowledge. One of the topics in the newsletter was ‘Are You a Marketer or a Shop-Keeper?‘ As I have recently been talking to a number of small retailers I found this topic to be particularly relevant.

Out of 14 retailers who I spoke to in December, only 4 (28%) understood the importance of constant promotion in a retail store. I was dumbfounded! The other 72% held the belief that doing the same things they were doing (very little) was somehow going to lead to sales increasing in their stores.

I heard that Albert Einstein quoted this definition of insanity … "Doing the same thing over and over again and expecting different results."

These retailers were silently praying for a few more people to come into the store, that staff won’t call in sick, suppliers won’t increase their prices, no competitors will open a shop nearby, and that the landlord won’t up the rent this year. Dan Kennedy calls this approach ‘passive marketing’ – which actually is doing nothing at all. He said "This person is a shop-keeper and an order taker, sticking up a sign, putting goods on a table, sitting and waiting."

The only way forward is being a marketer – constantly promoting to attract new customers, get them to spend more, and return more often. That’s how businesses really improve cash-flow and increase their value.

Using The Open Day Marketing Strategy

Improving Local Awareness Of Your Business Using Open Days!

This week I’ve got a good example of how to improve the local awareness of your business.

Bunnings in Balcatta had an open day / weekend to celebrate the completion of their warehouse upgrade. My family and I went along and I would say they had around 500 people there around 8pm (see my photo below).

How you can use the Bunnings idea in your business

The open day marketing strategy doesn’t have to be limited to the first day your business was open to the public. You could use the same idea to celebrate any anniversary (of any year in business), or to launch new products or services, or to show off a store refurbishment (like Bunnings did) or even to celebrate a tie-in event like Easter, Father’s Day, Halloween, Melbourne Cup and so on.

The aim of the open day may not be to generate sales, but rather to improve the branding and awareness of your business in your area or to generate leads which you (or your sales team) could follow-up with later.

Above is the photo I took in the store during the Friday evening celebration party.

Above is a marketing flyer Bunnings used to promote the event.

Free Marketing Strategy: Lead Generation In Public

You are enjoying an alcoholic beverage at a party or a network event and someone asks "What do you do?"

Most business people in this situation will say something like "I’m an accountant", or "I’m a gardener", or "I have a gift shop in …"

A response statement like that will result in a nod of approval from the listener and that’s about it. But, in fact the business person has missed a golden opportunity to create interest and a possible lead. What’s needed is what they call an ‘Elevator speech’ An ‘Elevator speech’ is a short 30-60 second statement – essentially something that could be said in the time period of being in an elevator going from one floor to another – hence the name.

Here’s how you construct your own ‘Elevator speech’…

Say:

1. THE PROBLEM YOU SOLVE – for people or how you benefit them directly.
2. WHO IT IS YOU CATER TO – your target market.
3. THE SOLUTION : WHAT YOU DO – or what your company does.
4. OFFER FREE INFORMATION IN EXCHANGE FOR CONTACT DETAILS

Start with one of these statements

I’m sure you’ve seen…
I’m sure you’ve heard about…
I’m sure you know that…
You know how…

<the problem>

Well… what I do is…
Well… what our company does is…

Example : Accountant

"You know how most businesses frantically try to reduce their tax bill in June each year by spending up on extra business expenses. The problem with that approach is that the business owner is still missing out on even more deductions and rebates from the ATO. Well… what our company does is publish a quarterly report entitled "Free Money – Government rebates that every small business owner know about!"

"If you like I can send you a copy…"

The response you’ll now get is…

"Yes, please"

Then you smile and say …

"Sure, I’ll get my secretary to send you a copy. Is your postal address on your business card?" or,
"I’m happy to send you some information. Is your postal address on your business card?"

Then the listener will hand you their business card – effectively giving you permision to follow-up with them.

Now you’ve generated a warm lead – all in the space of 30-60 seconds. How’s that for effective marketing?

P.S. After the party or function, don’t forget to add that lead to your follow-up system when you get back to your office. If you promised to send them something – do it straight away.

P.P.S. For more information on writing and delivering an effective elevator speech, visit the website of Craig Harrison: www.expressionsofexcellence.com

Getting More Customers – Fast! (part 1)

Often business owners contact me because they need more customers – and more cashflow – today!

So how do we achieve this goal for our clients? The answer : We start with our Kinetic Media & Marketing ‘INSTANT CASHFLOW’ checklist!

One item on the checklist is the break-down of sales process into two components : The enquiry (lead, store browser) and the conversion of that lead into a paying customer. Often most businesses get enough enquiries, but it’s their sales and follow-up processes that are lacking. It’s easy to work out which area is the problem – we ask the business owner (and staff) to record how many enquires turned into sales. This becomes a percentage – sales conversion.

Funnily enough most business owners think their conversion is around 70-80%, but when we measure it, it’s often only around 10-40%.

It’s common for us to review the sales and follow-up systems for a business and make changes to improve sales conversion. I’ll give you an example :

A building material manufacturing company we worked with had a conversion from inbound calls to sales of only 18%. By reviewing ‘what’ they said to potential customers on the phone and then improving their telephone script, the sales conversion increased to 27%. The increase in percentage doesn’t sound like much but when you apply it to a half million dollar ($500,000) turn-over business – it equates to a massive $251,000 increase in sales.

Would you say it was worth it for this business to hire our consulting services? Hmmm, dumb question.

Summary

Improving sales conversion by examining inbound phone calls is one good marketing strategy to get more customers fast. In part two I’ll reveal another – watch this space…

Creating a Vision for Your Business!

“Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion.” Jack Welch, Chairman, General Electric.

Without a strong, defined vision, most businesses usually fail because the challenges got too tough – the business fundamentals outweighed the ‘passion’ and drive. The vision therefore drives the company through good and bad times. The vision is the purpose and ‘soul’ of the business.

Creating a vision for your business

Define the vision…

• What do I see as the key to the future for our organisation?
• What unique contribution should we be making in the future?
• What would make me excited about being a part of this organisation?

A vision statement is a company’s inspiration. A vision asks, “Toward what reality do we want to lead this organisation?”

For example :

Walt Disney’s vision statement :
“To create a new kind of amusement park filled with the accomplishments, joys, and hopes of the world we live in.”

Microsoft’s vision statement :
“Empowering people through great software at any time, and any place, on any device.”

Sony’s vision statement :
“We invite new thinking, so even more fantastic ideas can evolve. We take chances. We exceed expectations. We help dreamers dream.”

IKEA’s vision statement :
"To create a better every day life for the many people."

Use these examples to create an unique vision for your business. How can you do or provide something so good that people cannot stop talking about you?

Marketing Made Simple

Wouldn’t it be great to have dozens (or hundreds) of people with lots of money to spend (your ‘ideal’ customers or clients) contact your business every month or have thousands of people visit your retail store eager to buy? This is what good marketing is all about. But how do you start?

One of the most important lessons I learnt about marketing from my mentors is that marketing is simply maths and psychology.

What does that mean? Answer : Each marketing campaign needs to be analysed using questions that relate to the purpose, goals, actions and results expected. Perhaps some examples are in order…

Marketing psychology :

• What is the readership demographics of the newspaper I wish to advertise in?
• Will someone read my advertisement? Is the headline interesting enough?
• What’s the purpose of the advert? To sell from the page, or to create leads?
• Does the content (body copy) of the advert make sense? Will it be understood by a fifth-grader?
• Have I used ‘power’ words that have been tested and proven to improve response?
• Do I have a strong guarantee?
• Will the reader take action – call, request further information or visit my web site?
• Will the advert attract the ‘right’ type of prospect?

Marketing maths :

• What is the circulation of the newspaper?
• What is the cost of the advert?
• If the advert costs $600, how many leads and sales do I need to make to break-even?
• What is my conversion rate to a sale from leads generated from the advert?
• What is the lifetime value of these customers?

Every marketing campaign whether it’s print or internet advertising, direct mail, fax promotions, etc requires answers to these questions about maths and psychology.

Unfortunately most business people are busy and don’t take the time to use this method to correctly plan a particular marketing strategy. The outcome is either – spending money on something that got no response, OR, a marketing campaign that brought in good leads, good sales and good profit!

What Are Business Image and Brand?

Simply, ‘Image’ is the perception (picture) that consumers have about a particular business at any one point in time.

Whereby, ‘Brand’ is the relationship between the business and the consumer’s values. For example, when a consumer looks to purchase a running shoe they may think of Nike because of it’s alignment with winning and achieving.

Image and branding has everything to do with identifying your target market, identifying the values that are important to your target market and then creating an image and a brand that relates to those values.

Trying to cover all demographics and values is not recommended because it would be very difficult to achieve effective branding economically. The consumer will be disappointed with the product and the business.

For example, promoting luxury airline tickets whilst actually hearding travellers into small seats and delivering poor customer service will upset those consumers and word will get out and damage the ‘Brand’. Conversely, entering the marketplace promoting high levels of service at a cheap price, will hurt margins for the business and will unsustainable in the long-term.

Typically a brand will consist of an unique mix of values, such as :

• Consumer benefits,
• Style,
• Reliability,
• Quality,
• Price,
• Consumer age target (e.g. children, young adults, mature adults, Generation X, etc),
• Image projection (athletic, adverture, wealth),
• Culture,
  and so on.

Branding can also be broken down into ‘external’ and ‘internal’. External branding is prodominately used to create new customers for the business via mass advertising, such as print, internet, radio and television.

Internal branding is reminding existing customers that you value their business of which the aim is to increase repeat sales from those customers. Internal branding will typically use such media as email, SMS, direct mail and the telephone.

Creating an image and a brand for a small to medium size business is not about flashy and slick advertisements. It’s about getting your key customers (target market) to recognise your business as their prefered choice for the products or service you provide.

How Are Businesses Valued?

Business valuation can be a difficult figure to obtain because there are so many variables. Business valuation models (methods) have been developed to make the process easier and more accurate. Some of the methods include :

• Return on Investment (ROI) method
• Market value
• Asset value going concern
• Asset value liquidation
• Net present value

The most appropriate method of valuing the majority of small businesses (up to $1 Million) is through the ROI method. The technique measures the return (i.e. profit before owner’s salary) received from an investment (i.e. purchase price) and is calculated by the following formula:

Price = net annual profit x ROI % (for that industry)

For example: if a business is making $50,000 profit and the accepted ROI for that industry is 30% then the price equals $166,667.

Here are example ROI’s for different industries (information provided by GMO Business Brokers – September 2009):

• Book Stores 20% to 25%
• Boutiques 75% to 80%
• Florists 70% to 100%
• Liquor Stores 22% to 28%
• Lotto Kiosks 22% to 28%
• Newsagencies 25% to 30%
• Restaurants (Fine Dining) 70% to 80%
• Lunch Bars 50% to 75%
• Manufacturing 25% to 38%
• Wholesale 27% to 35%

27 Vital Questions You Should Ask Before Buying A Business

I met the husband and wife owners of a small retail shop recently. The business was running at a $65,000 (approx) annual loss. They had purchased the business over 12 months ago and had been steadily losing money. I looked briefly at their books and realised they had paid too much for the business. On top of that, both of them had no retail business experience and they had decided to cut out all of the advertising that the previous business owner had been running – due to cost reasons only.

I asked them how much research and due diligence had they conducted before buying the business. I was shocked by their response…

"We asked the solicitor who was performing the business settlement service if the business was a good buy."

Talk about throwing $$$ away. Needless to say, they no longer have any available capital to invest in marketing or anything else. The outcome will be to close up shop and accept the loss, and the lesson.

So how do you actually avoid this type of business disaster?

Ask yourself these questions…

1. What do I want from being in business?

• For lifestyle (to work fewer than 40 hours per week, with the freedom to go on holidays whenever you choose)?
• To make a profit by building the business up (increasing sales)?
• To generate more cash-flow than a 9-to-5 job?

If your reasons are not listed above – don’t buy the business. If you want to be involved in what the business does (manufacturing, retail, services, etc) out of personal interest, it’s much less stressful and safer to be an employee.

2. Why am I buying this particular business?

• It’s in a prime location.
• It has a massive customer database which is not being used to its full potential.
• You’ve created a specific plan to massively grow the sales revenue using knowledge you’ve accumulated from being an manager in a similar business, or from a previous business(es) owned.
• The business has ‘something’ (Intellectual property, branding, contracts, etc) that you cannot easily duplicate or purchase.
• You can buy the business at a price much lower than the market value. The vendor is highly motivated to sell.

3. What will be my exit strategy to get out of the business?

• Sell the business for a profit
• Sell the business to a major shareholder(s) and become a silent partner
• Pass the business down to a family member
• Franchise

4. What skills do I have that will make me successful in this business?

Please don’t think that all that is required to ‘improve’ the business is cosmetic – by changing some of the products, re-designing the store interior, etc. These ‘improvements’ won’t double sales.

Only very good marketing, a good sales team and good systems will increase sales significantly. Think MARKETING, SALES and DELIVERY of the product or service (using systems).

5. What skills will I have to "hire in"?

6. What cash flow do I need?

What’s my break-even cash-flow (to cover expenses, wages, etc)?

7. How much working capital do I have access to?

8. Will this business suit me i.e. hours, type of operation?

To ask the vendor who is selling the business…

9. How long has the business been operating?

10. How long have they had the business?

11. Why are they selling?

• Worn out from working long hours for little money?
• Couldn’t make the business work (perhaps in its current location)?
• Actual legitimate reasons such as retiring, moving to another state or country, or looking for another challenge in another business?

12. What is the Cash flow and Profit (Gross and Net) for the business?

13. What is the business owner paying him/herself?

14. What do the last 3 years of financial accounts show?

15. How has the business been valued?

Using the ROI method – based on ‘current’ profit of the business? Certainly not priced on what effort & money the current owner put into the business over the years. Only profit counts.

16. Who are the key customers, suppliers, staff?

17. What are the terms and length of any leases?

18. Will the current owner stay on and assist for a period of time?

Ask them to put this period in WRITING!

19. What areas of the business are systemised?

20. Is there a business plan?

21. How many hours a week does the current owner work in the business?

22. When was the last time the current owner took a holiday?

23. What are the marketing systems like? Do they make money for the business?

Review all advertising material, the customer database, the POS systems (if applicable), any loyalty programs, special promotional material, etc.

24. What facts support the "story" of the business?

25. How secure is future income i.e. contracts with customers and suppliers?

26. How dependent is the business on the current owner?

27. What will it take to grow the business so I can sell it for a profit?

Before you make an offer!

1. Get your accountant to check the financial accounts

Obtain actual lodged tax returns with the government, not the business owner’s printout or handwritten bookkeeping summary.

Your accountant will ensure that the business has cashflow and is not over-capitalised.

2. Hire a solicitor who is experienced in buying businesses like the one you are looking at.

Your solicitor will ensure that the contracts with suppliers, the landlord, etc don’t have any surprises.

3. If you are spending over $250,000 on the business, or even if you want to be extra careful, pay for a business valuation.

Pay a licenced valuer to come in and audit the business. Even if you have to spend $7,000 for the valuation, it’s still much better than paying $50,000, $100,000 or more than you should have to buy the business.

You may even be able to ‘use’ the valuation to negotiate a better price.

The lesson

Homework always pays off in business. Taking shortcuts and buying a business on emotion often lead to regrets. Don’t let this happen to you.

The Business Story Behind Monopoly

Hi Mark Fregnan here. I’ve always been interested in start-up business success stories, so here’s another good one…

The Monopoly Book by Maxine Brady

The Setting

The stock market crash of 1929 caused mass unemployment for millions of Americans. For Charles Darrow, the financial problems grew increasingly difficult. Once a salesman of heating and engineering equipment, he spent the early 1930s looking for a job. He’d been feeding himself, his wife, and their son by taking any odd job he could find. He repaired electric irons, did occasional fix-it jobs, even walked dogs – when he could find someone to pay him for his labors.

It wasn’t enough, though. Now his wife was expecting their second child. He had to find a way to make more money.

To fill his idle hours, and help him forget his worries temporarily, Darrow invented things. Some of them were fun; others were probably devised in hopes that they would become profitable. He made jigsaw puzzles; he created a combination bat-and-ball, which was supposed to be used as a beach toy; he designed an improved pad for recording and scoring bridge games. They were interesting diversions, but nobody was willing to pay for them.

Darrow’s problem, of course, was not unique. Many of his friends and family were out of jobs, and were having trouble affording even such necessities as food and shelter. For them, as for most people, the movies, the theater, and any form of entertainment which cost any money at all was too expensive.

So they got together in the evenings and on weekends, when the offices of the Federal Emergency Relief Administration were closed, and they talked. And after the gloomy recital of that day’s particular troubles, the conversation would usually become nostalgic: remember the good old days?

Darrow did. For him and his wife, thinking back to the more prosperous life they had led only a few years before, some of the pleasant memories were of the vacations they had spent at one of their favorite holiday places, a seaside resort in New Jersey called Atlantic City.

The Game

One evening in 1930, Darrow sat down at his kitchen table in Germantown, Pennsylvania, and sketched out some of the street names of Atlantic City on the round piece of oilcloth that covered the table. The streets he chose were all from the same side of the city: between the Inlet and Park Place, along the Boardwalk. When he finished, Darrow was short one name, so he choose Marven Gardens, a section from nearby Margate. Probably unintentionally, he altered the spelling, and it was penciled onto his board as Marvin Gardens.

He included the three railroads that carried the wealthy vacationers to the resort, and the utility companies that serviced them, as well as the parcels of real estate of varying prices. He wanted a fourth railroad to make his board symmetrical, so he added the Short Line: actually it was a freight-carrying bus company that had a depot in Atlantic City. A local paint store gave him free samples of several colors, and he used them to color his game board. A new game began to take form in his mind.

Darrow cut houses and hotels for his little city, using scraps of wooden molding that a lumber yard had discarded. He rounded up stray pieces of cardboard, and typed out title cards for the different properties. The rest of the equipment was fairly easy to acquire: colored buttons for the tokens, a pair of dice, and a lot of play money.

From then on, in the evenings, the Darrows would sit around the kitchen table buying, renting, developing, and selling real estate. They had little enough real cash on hand, yet The Game, as they all referred to it, permitted them to manipulate large sums of money as they engaged in complex negotiations to acquire valuable blocks of property. The simple, almost crude set exerted a continuing fascination and challenge. As friends dropped in to visit, they were invited to join the game. Soon the “Monopoly evenings” became a standard feature at the Darrow home.

Then the friends wanted to take the game home with them. Each night’s winner, a bit heady with his success in the nether reaches of high finance, asked for a set of his own, so that he could show off his financial wizardry. The runner-up, convinced that he could win the next time if he could only hone his skill with a little practice, generally wanted a set too. Darrow had an overabundance of free time, so he began making copies of his board, property cards, and buildings. His delighted friends supplied their own dice and tokens, and often their own package of play money.

But the demand increased, and Darrow increased his output to two handmade sets a day. Selling them for $4 apiece, each set brought him new customers. People kept talking about the new game and playing it with their friends. Through word-of-mouth advertising alone, Darrow sold about one hundred sets, and had orders for many more. But his one-at-a-time production technique simply couldn’t keep up with the demand.

Encouraged by his friends, Darrow decided to test the game outside his personal sphere of acquaintances and friends of friends. He made up a few sets and offered them to department stores in Philadelphia, the nearest city. They sold.

With the knowledge that his game was marketable, he attempted to increase his rate of production. A friend helped out by printing the Monopoly boards and the title cards. Darrow continued to paint in the colors and assemble the sets by hand. This partial automation enabled him to produce six games a day. It wasn’t enough.

Parker Brothers

By 1934, now fully aware that his interesting diversion had turned into a potentially profitable business, Darrow arranged to have the same friend print and package the complete sets. It looked like they had the problem solved, for a little while. Production was finally keeping pace with sales. But they hadn’t reckoned with the Philadelphia sales. Soon, a department store began ordering sets wholesale, in quantities far greater than anything they could accommodate. It became obvious to Darrow that he had only two choices. He could borrow money and plunge wholeheartedly into the game business, or he could sell Monopoly to an established game company. Darrow wrote to Parker Brothers, then as now one of the world’s major game manufacturers and distributors, to see if the company would be interested in producing and marketing the game on a national basis.

Parker brothers had by then been in business for half a century, and had become accustomed to enthusiastic inventors sending in new game creations. Some of the ideas had even proven marketable, but, by and large, the company’s managers tended to trust the creativity of their own staff far more than they did an unproven novice.

Although Parker Brothers thought the basic framework of the game seemed possibly interesting, they handled the game routinely. Various members of the company sat down at their offices in Salem, Massachusetts, to try it out, as they do all prospective games. They played it several times and found that they all enjoyed it. But the company had evolved a set of inviolable ground rules for “family games,” which they held to be mandatory for any game that could be successfully marketed. According to the Parker precept, a family game should last approximately forty-five minutes. Monopoly could go on for hours. Parker also felt that a game should have a specific end, a goal to be achieved. (In their other board games, the players’ tokens progressed around a track until they reached the end – which might be symbolized by a pot of gold, a home port, a jackpot, or even Heaven – and the first player to reach this goal was the winner.) In Monopoly, the players just kept going round and round the board. The only goal was to bankrupt the other players and emerge still solvent yourself. Furthermore, Monopoly’s rules seemed far too complex to the Parker staff; they thought the general game-playing public would be hopelessly confused trying to learn how to handle mortgages, rents, and interest.

After testing the game for several weeks, Parker Brothers made the unanimous decision to reject it. The company wrote and informed Darrow of this decision, explaining that his game contained “fifty-two fundamental errors.” It would never be accepted by the public.

Darrow, of course, was considerably annoyed. He knew very well how people responded to his game. Despite Parker Brothers’ analysis, Monopoly was decidedly marketable. Unfortunately, however, it was far more marketable than Darrow himself; he was still unemployed. Monopoly, it seemed, was virtually his only asset.

Therefore, he went back to his printer friend, ordered the production of five thousand sets, and continued to sell the game locally. But locally included Philadelphia, and the department stores there were soon aware that Darrow was increasing his output. They began placing massive orders for the Christmas season. Darrow now found himself working fourteen hours a day just trying to keep up with the shipping.

With the game now being ordered in wholesale lots, Parker’s sales representatives soon became acutely aware that the Philadelphia stores were expecting huge sales of Monopoly the following Christmas, the traditional game-buying season. Word was quickly passed back to corporate headquarters in Salem, where the issue was deemed worthy of reconsideration. Then, to top things off, a major New York toy and game store, the prestigious F. A. O. Schwarz, bought two hundred sets out of the original five thousand printing.

Shortly afterwards, a friend telephoned Saly Barton (daughter of Parker Brothers’ founder, George Parker) to rave about a wonderful new game she had purchased at F. A. O. Schwarz. It was called Monopoly, and it was hard to come by and in short supply. The friend suggested that Mrs. Barton tell Parker Brothers about it. Sally did. She told her husband, Robert B. M. Barton, who happened to be the president of the company. Curious about a competitor’s product, he purchased a copy of the game at F. A. O. Schwarz, took it home and wound up playing it until 1 A.M. The next day, Barton wrote to Darrow, and three days later they met at Parker Brothers’ New York sales office in the Flatiron Building.

Parker Brothers offered to buy the game outright and give Darrow royalties on all sets sold. The company insisted, though, on making some revisions which would refine the game and clarify the rules. Some of the staff were still concerned about the indefinite playing time, so they agreed to market the original version as long as Darrow permitted them to develop a variation of the game which could be played in less time. This shorter version was to be printed along with the general rules, to give the public an option.

Darrow agreed and the contract was signed. Later, in explaining why he had decided to sell his brainchild, Darrow related his decision to the monetary commitment he would have otherwise had to make in order to keep producing the game himself. “Taking the precepts of Monopoly to heart,” he said, “I did not care to speculate.” Years afterward, commenting on the final offer from Parker Brothers, he wrote: “I gladly accepted and have never regretted that decision.”

The royalties from sales of Monopoly soon made Darrow a millionaire. He retired at the age of forty-six, to become a gentleman farmer in Bucks County, Pennsylvania, a world traveler with a particular interest in ancient cities, a motion picture photographer, and a collector of exotic orchid species. In 1970, a few years after Darrow’s death, Atlantic City erected a commemorative plaque in his honor. It stands on the Boardwalk, near the juncture of Park Place.

Who’s On Your Team?

Every successful business has a good team.

Notice how before the wealthy people make any decisions, they consult their team of professionals. No one person can be up-to-date with the latest knowledge in all fields. Some team members will be only required for a certain project, others will be needed on a regular basis. This is a way of leveraging your time which is one of our wealth principles.

How do you start?

You build a team slowly, by finding and hiring them as you need them. You might find them by going through the telephone directory, or discovering their advertisement, or by recommendations from an associate. This might take trial and error, as you may find that the professional does not have the knowledge that you require and you will need to find someone else.

You may, in the initial stages of your road to wealth, not be able to afford the services of all the team members. You might have to fill several ‘positions’ on your team. You could take a short course in bookkeeping, computerised design, or in the field of your future employees. This would only be for the short-term until your business is able to provide surplus income. If course, one skill I don’t recommend you short-cut is legal, use a good solicitor before you purchase a business, sign a lease or any other contract of significant value.

Your team members can include :

• Finance
  • Bankers
  • Investors
  • Partners (active / non-active)
  • Shareholders
• Tax
  • Accountants
  • Bookkeepers
  • Computer accounting specialists
• Legal
  • Solicitors
• Settlement (business and real-estate)
  • Conveyancers / settlement agents
• Mentors
  • Coaches
  • Mentors
  • Business specialists
• Workers
  • Employees
  • Skilled specialists
  • Builders
  • Trades people

25 Things You Absolutely Must Do To go From Nothing To Self-Made Millionaire Within The Next 7 Years …

I came across this interesting article by Bob Bly. I have added my comments in italics.

THE 25 PRINCIPLES OF BUSINESS SUCCESS BY BOB BLY:

1. Have a definition of success.
2. Live below your means – with occasional exceptions.

A good book to read about this is the Richest Man In Babylon

3. Learn a money-making skill that will pay you at least twice the national average income.

Currently the national average wage in Australia is $65,000 (March 2010 figures). To earn double this my suggestions for well-paid skills include: Sales, marketing, copywriting, computer programming, public speaking, writing.

4. Improve your level of skill or the demand for your skill until you are paid twice as much — $200,000 a year.
5. Set a financial goal of a liquid net worth of $2 million excluding primary residence by age 50.
6. If you are going to have children, have them young.

Not so sure about this one – I’m 40 now and I enjoy spending time with my young son very much.

7. Assign a dollar value to your time and outsource everything you can, except what you are great at, to people who charge less than your hourly rate.

This is very important! Most small businesses I work with try to do everything themselves and work 60 hours (plus) per week. I usually initiate a program to delegate more low-skill level tasks to other staff (and external contractors).

8. Learn how to negotiate win-win deals.
9. Be a specialist, not a generalist; focus on core skills, markets, areas – three maximum, no more than that.
10. Micro niche
11. Become an information junkie and be sure to read in “adjacent areas”
12. Modelling

Don’t re-invent the wheel. Another word for modelling is mentor. In almost every business situation – someone has been there, done that – find out who they are and learn from them.

13. The Real McCoy Strategy

Not sure what Bob Bly is referring to about ‘The Real McCoy Strategy’ here.

14. Don’t lower price; add value
15. Do things that are important but not urgent
16. Little details count
17. Achieve balance between 4 success factors
18. Attitude of gratitude
19. Understand the best and worst investments you can make
20. Do something you love
21. Stop trading hours for dollars
22. Stop making excuses
23. Understand Robert Gibert’s success formula : SWL + SWL = SW
24. Put it in writing
25. ACTION

Lots of great ideas here – how many of them can you work towards this year?

The Real Reasons Why Small Businesses Fail

Do you know a small business that has failed?

According to a Commonwealth Bank Of Australia survey 80% of new small businesses fail in the first five years. Why is this so?

In his book, Small Business Management, Michael Ames gives the top reasons small businesses fail (in no particular order) :

• Lack of business management experience
• Insufficient capital (money)
• Too much debt in relation to cash-flow
• Poor sales
• Poor location
• Poor inventory management
• Over-investment in fixed assets
• Poor credit arrangements
• Personal use of business funds
• Unexpected growth (sounds like a good problem to have, but too much growth can lead to lower quality product or service, more returns, mistakes, hiring of unsuitable staff, overspending on stock, cash-flow problems, etc)

My thoughts on this that out of the list above ‘Poor Sales’ should be the the top of the list, though I have personally seen business fail for the other reasons too. I would re-arrange and group these reasons for business failure as such :

1) Poor sales. Including poor location.

2) Lack of management experience. Including insufficient capital, too much debt, poor inventory management, over investing in fixed assets, poor credit arrangements, personal use of business funds, unexpected growth.

Both of these two main areas of business failure can be addressed by hiring experts and for the business owner to invest in their own continual business and management training.

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