Create a Winning Recipe

After some trial and error in your business, you will figure out what works best. Once that happens, you will want to do the same thing over and over again. This is your recipe for success. Just like a food recipe, a business recipe can be followed time and again to achieve the same result. In fact, some believe that that’s why money is called dough; you make your dough by using a recipe. In your business, your business dough recipe could be:

• An ad that works
• A monthly mailer
• A sale that brings in customers
• A monthly seminar
• A stall at the Saturday public market
• A billboard
• Great locations
• Almost anything that works and can be duplicated

If you think about it, repeating a successful formula is the hallmark of any wellrun business. Budweiser sponsors sporting events because it knows that it will sell more beer if it does. Sponsoring sporting events is a tried and true business recipe. It works time and time again. Microsoft too has a recipe. We might call it “tweak and put out a new edition of Windows every few years.” Microsoft knows that if it does so, it will be able to predictably count on those sales. Hollywood does the same thing. Whereas no one knows for sure what movie people will like, Hollywood knows that it reduces the risk of failure if, for example, Tom Cruise or Julia Roberts stars in it. Getting a big name to star in a movie is a business recipe.

If your business is going to be a longterm success, you will need to do the same thing. What will your recipe be? You need to experiment and figure out what works best. After you do, longterm success will be much more likely if you reduce that thing, whatever it is, to a formula that you can repeat over and over again.

In his great book The EMyth: Why Most Small Businesses Don’t Work and What to Do About It, author Michael Gerber explains that many people go into business because they love something and want to make a living at it, a baker who loves to bake, for example. Gerber makes clear that what trips up the baker is that, while what he wants is to bake, being a business owner

■ Creating a Winning Recipe

1. 1. Experiment. Try several different ways to bring in business and quantifiably measure the success of each.
2. 2. Which one can be reduced to a triedandtrue formula? Pick that one and write down the recipe.
3. 3. Try the recipe to see if the results are consistent.
4. 4. If so, stick with it; if not, go back to Step 1.

Creating a winning recipe is an extension of this philosophy. Finding and creating a business success formula, the essence of your recipe, reduces your risk, makes the business far more predictable, allows you to concentrate on finding new recipes, frees you up to do what you love, and altogether makes being an entrepreneur a more fun, less scary, endeavor.

Create Multiple Profit Centers

The problem for most small businesses is that they learn one good recipe, stick with it, run it into the ground, and never bother to figure out another one. The owner has learned only one method of making a buck. The problem with having just a single moneymaking formula is that it will inevitably be hit when the dreaded business cycle turns south.

Just like the economy, all businesses have a business cycle. The ice cream store sees sales spike in the summer and drop in the winter. Starbucks sees sales rise in the winter and drop in the summer. While experience will teach you, often the hard way, what your business cycle is, you can learn it much easier by speaking with people in your own line of work who have been around for a while.

Once you know what your business cycle is, either through research or the school of hard knocks, you will want to minimize its effects on your business. One of the best ways to do that is to create multiple profit centers, a term coined by Barbara Winter in her book, Making a Living Without a Job. The theory is essentially this: To succeed long term in business, you need several recipes. You need to diversify your income.

A smart stock investor does just that. He knows not to buy just one stock. That stock may go up, but it may go down. Having more than one stock ensures that when one stock does go down, the likelihood of taking a big financial hit is remote. His income is diversified. Your business must diversify as well if you are going to last.

Your new profit center could either be another “division” of your business or simply a new product:

• Amazon.com took the new division route. Amazon.com began by selling books online. Now it sells everything. Why? When one of its businesses is slow, it is unlikely that another will be as well. Instead of the business suffering a cash crunch, the money continues to roll in.
• Starbucks introduced new products. Knowing that its business slumped in the summer, Starbucks began to sell slushy type iced coffee drinks. That’s a different profit center than hot coffee and reduces the impact of the company’s seasonal business cycle.

A lawyer may want to add a divorce practice to her wills and estates practice. A car rental agency might want to sell cars in addition to renting them. A photographer can add portraits to his wedding portfolio. The important hing is that you create several recipes so that you have a few different ways to bring in money.

1. What is your main profit center?

2. Name ten possible offshoots E from that profit center that you could start:

4. Which of those would be the easiest to start?

5. Implement the best idea and then go on to the next. Create several recipes, several profit centers.

“Ask them what they want and then give them what they want” is a philosophy mentioned earlier that bears repeating. Think about the best businesses around—those businesses that provide a great service, where people want to work, and that make money for the owners, investors, and employees—and you will find one thing they share: They serve the market.

A business that does not fulfill a market need is a business that will not succeed. Whether yours is a small momandpop operation or a large company with many employees, the lesson is the same. You must know to whom you are selling and what it is they want. Finding that out can be as simple as chatting with the people who come in your store or as complicated as hiring a market research firm to survey potential customers. Whatever your method, you must know what it is your customers are looking for and then give it to them. It’s almost too simple, and that’s the beauty of it.

■ Real Life Example

Of all ecommerce merchants, Amazon.com is the one that does it right. Amazon.com’s founder and CEO Jeff Bezos has repeatedly stated that he endeavors to make Amazon.com the most customercentric business in the world. What is it book buyers want? They want to look at the book, get recommendations, and get a good deal. Well, that’s exactly what Amazon.com offers.

At Amazon.com, not only can you now see sample pages of books you are browsing, but the site offers recommendations of other books you might like based on what you are looking at, and it offers consistent discounts and free shipping. On every product page, Amazon.com tells you whether the item is in stock and when shipment can be expected. When you do make a purchase, its system immediately sends you an email confirming your order and telling you when it expects to ship it. Then, when your order does ship, it sends you another email with your tracking number. Amazon.com gives its customer exactly what the customer wants, and has made a lot of money doing so. It’s a valuable lesson.

Get Help

Franchisors like to say that while a franchisee might be in business for himself, he is not in business by himself; the franchisor is behind him, helping him succeed. But in reality, that is true for anyone starting a business. There are many people who are ready and willing to help you grow your business.

The Small Business Administration

The U.S. Small Business Administration (SBA), established in 1953, provides assistance to help Americans start, run, and grow their businesses. Each year, the SBA offers financial, technical, and management assistance to more than one million business owners. Its site, <www.sba.gov>, is a wealth of information.

The SBA also funds several nonprofit organizations, one of which is called Small Business Development Centers. SBDCs are found in most communities. They offer individual counseling, conduct seminars and training sessions, sponsor conferences, and, in general, assist anyone seeking advice about operating a business. You can find your local SBDC at <www.sba.gov/gopher/LocalInformatio/SmallBusinessDevelopmentCenters/>.

The Service Corps of Retired Executives (SCORE)

The Service Corps of Retired Executives is another nonprofit association funded by the SBA. It is dedicated to entrepreneur education, as well as assisting in the formation, growth, and success of businesses nationwide. In partnership with the SBA, SCORE volunteers call themselves “Counselors to America’s Small Business.” The group consists of both working and retired executives and business owners who donate their time and expertise as volunteer business counselors. Their mentoring is free of charge. Check it out at <www.score.org>.

Women’s Business Center (WBC)

Staterun WBCs are nonprofit organizations funded by the SBA. According to the WBC:

OWBO promotes the growth of womenowned businesses through programs that address business training and technical assistance, and provide access to credit and capital, federal contracts, and international trade opportunities. With a women’s business ownership representative in every SBA district office, a nationwide network of mentoring roundtables, women’s business centers in nearly every state and territory, womenowned venture capital companies, and the Online Women’s BusinessCenter, OWBO is helping unprecedented numbers of women start and build successful businesses. At every stage of developing and expanding a successful business, the Office of Women’s Business Ownership is here to counsel, teach, encourage, and inspire.

You can find out more by going to <www.onlinewbc.gov>.

Web Sites

There are numerous Web sites dedicated to helping entrepreneurs succeed. Among the best are Entrepreneur.com, Inc.com, Workz.com, and bCentral.com.

What this means is that you are not alone. When you have a question, when you need a friend, when times are tough, when you want to expand, there are people around ready to help you. You might be in business for yourself, but you need not be in business by yourself. Assistance awaits.

Seven Secrets of the Great Entrepreneurs

While the idea of being an entrepreneur may start with a flicker, it often grows very bright. Even so, the question remains: Why are some entrepreneurs more successful than others? Usually, it is because they know some things other entrepreneurs do not. Here are the seven secrets of the great entrepreneurs.

1. Be Willing to Take a Big Risk

If you are going to succeed wildly in your own business (and that is the idea), you too will need to take a risk. An intelligent, calculated gamble has the chance to hit big. Of course, it can also backfire, but that’s why we play the game.

2. Dream Big Dreams

In the early 1950s, a young engineer named Douglas Englebart decided that rather than work for 5¹/2 million minutes for someone else (the amount of time that would elapse before he would turn 65), he would rather use his career to benefit mankind. He wanted to help people solve problems; that was the need he thought he could fill.

Englebart had an epiphany. At a time when computers were machines the size of a room that were used primarily for number crunching and had no screens at all, and despite the fact that he knew next to nothing about them, Englebart saw a future where the computer could be an interactive tool, operated by “any kind of a lever or knob, or buttons, or switches you wanted.” That vision so engrossed Douglas Englebart that he spent the next decade chasing that dream, before eventually becoming known as the father of the computer mouse.

No one will give you permission to be bold, but boldness is a requirement. As W.H. Murray wrote in The Scottish Himalayan Expedition:

Until one is committed, there is hesitancy, the chance to draw back, always ineffectiveness. Concerning all acts of initiative (and creation) there is one elementary truth, the ignorance that kills countless ideas and splendid plans: that the moment one definitely commits oneself, then Providence moves too. All sorts of things occur to help one that would never otherwise have occurred. A whole stream of events issues from the decision, raising in one’s favor all manner of unforeseen incidents and meetings and material assistance, which no man could have dreamed would have come his way. I have learned a deep respect for one of Goethe’s couplets: “Whatever you can do, or dream you can, begin it. Boldness has genius, power, and magic in it.”

For Richard Branson, founder of the Virgin Group, the customer is king. For instance, he believed that many record stores suffered because the shopping experience was boring and the staff needed to enjoy their jobs more. Voilà! Virgin Megastore was born—a place stocked to the brim that has a great vibe where you can usually listen to the music you want before you buy it. It might help to know too that Branson started out not much different than the rest of us. His first business was a record store above a shoe shop in London, and he bartered for his rent.

As Sam Walton put it: To succeed you need to exceed your customers’ expectations. “Let them know you appreciate them. Make good on all your mistakes, and don’t make excuses—apologize. Stand behind everything you do. The two most important words I ever wrote were on that first WalMart sign, ‘Satisfaction Guaranteed.’ They’re still up there, and they have made all the difference.”

4. Take Care of Your People

This includes your employees, your investors, and your stockholders. In 1913, Henry Ford said, “The wages we pay are too small in comparison with our profits. I think we should raise our minimum pay rate.” Moreover, eight years later Ford introduced the first fiveday work week, stating, “Every man needs more than one day for rest and recreation.” And if ever there was an entrepreneur who knew how to succeed, it was Ford.

5. Persevere

As I said, entrepreneurship is a risk and, as such, entrepreneurs often fail. Many successful entrepreneurs go bankrupt before they hit it big, but they stick with it anyway. In 1975, Microsoft’s revenues were $16,000 and it had three employees. In 1976, revenues were $22,000 with seven employees. In both years, the company posted losses. Many companies would have quit after two such years, but most companies are not Microsoft.

6. Believe in Yourself