by Norm Brodsky
That kind of enthusiasm is worth al the headaches and heartaches that go into building a company. If you don’t have it, you probably should find some other pursuit. Life is too short to waste your time—and everybody else’s—on things you don’t believe in. Then again, if you do have the passion, you’l look at entrepreneurship the way I do: as a fantastic journey and a truly fabulous way to spend a life.
The Bottom Line
Point One: Be prepared to carry new salespeople for up to a year before getting the kind of production that wil justify what it costs to hire them.
Point Two: If you want salespeople to make good sales, teach them how your business makes money.
Point Three: Watch your numbers careful y, and—when they change—find out why. There’s always a reason.
Point Four: Enthusiasm is the lifeblood of a business. Be generous with it.
Acknowledgments
Before The Knack, there was “Street Smarts,” the monthly column in Inc. magazine that we began writing in 1995. Those articles, and the research behind them, provided much of the material for this book, and we would like to begin by thanking the people we’ve written about for their wil ingness to share their stories with a wider audience. Judging by the feedback we’ve received from readers, you have helped a lot of other people in their entrepreneurial journeys. For that matter, we also want to thank those readers (and especial y you, Dr. Philip Leopold). You have kept us going with your observations, comments, questions, stories, words of encouragement, and thoughtful criticisms. Unfortunately, we could not answer every e-mail you sent us, but rest assured that we read and appreciated each one.
Our col eagues at Inc. have been tremendously supportive over the past fourteen years, and we are indebted to them al . We would particularly like to thank the magazine’s three editors in chief during that time: George Gendron, who guided us during the first seven years; John Koten, who led us through trying times thereafter; and Jane Berentson, who has encouraged and inspired us ever since. Jeff Seglin helped to get the column going. Nancy Lyons, Michael Hop-kins, Evelyn Roth, and Karen Dil on al played a role in its development. During the past seven years, we have benefited greatly from the extraordinary editorial talents of Loren Feldman. Some of the best work we’ve done has come as a direct result of his observations, insights, and suggestions. Of course, we owe special thanks to Inc.’s founder, the late Bernie Goldhirsh, for giving us a platform to stand on, and to its current owner, Joe Mansueto, for making sure the platform has remained as solid as ever.
In addition, we are grateful to the many others at Inc. who have done—and who continue to do—so much for the magazine in general and for our column in particular. We have enjoyed the support of dozens of people, including creative directors, photography editors, publishers, deputy and senior editors, managing editors, production managers, researchers, fact-checkers, copyeditors, editorial assistants, advertising salespeople, circulation directors, events managers, marketing directors, and on and on. We would love to recognize each of you by name, but that would essential y involve reprinting every Inc. masthead for the past fourteen years—and even then we might inadvertently leave some people out. Failing that, please accept our thanks and know that you have our deep appreciation.
We’d also like to acknowledge al the people at CitiStorage and U.S. Document Security who have played such a big role in this book and in our lives. We especial y want to thank Brad Clinton, Peter Gunderson, Mike Harper, Bruce Howard, Sherry James, Manny Jiminez, Sam Kaplan, Noel e Keating, Patty Lightfoot, Patti Kanner Post, Louis Weiner, and—of course—Elaine Brodsky.
Thanks as wel to Adrian Zackheim, the founder and publisher of the Portfolio division of Penguin, who proposed we write Street Smarts.
Penguin’s Wil Weisser used his tremendous marketing talents to help us refine the concept. The team at Penguin Portfolio—including Francesca Belanger, Courtney Nobile, Joe Perez, and Courtney Young—did their usual fabulous job. We also received invaluable editorial advice from Chip Conley, founder of Joie de Vivre Hospitality and author of Peak: How Great Companies Get Their Mojo from Maslow, a book we highly recommand.
And where would we ever be without Jil Kneerim, our literary agent? She is simply the best. Ever since we first showed up in her office almost ten years ago, she has been unstinting in her support, dead-on in her advice, and indefatigable in her efforts on our behalf. Through her, we have also enjoyed the support of the great team at her Boston agency, Kneerim & Wil iams at Fish & Richardson, including Hope Denekamp, Cara Krenn, and Julie Sayre.
As readers of this book wil surmise, we are both strong believers in putting the life plan before the business plan. Our life plans have been centered around our families. We’d be lost without them. So to Elaine and Beth Brodsky; Rachel, Adam Luna, and Ava Rose Luna; Lisa, Jake, Maria, Owen, and Scarlett Burlingham; and Kate Burlingham Knightly and Matt Knightly, this one’s for you.
—Norm Brodsky and Bo Burlingham
Index
accountants
accounts receivable
borrowing against
growth and
acquisitions
by Brodsky
profit margins and
advertisers
advice
from accountants
from consultants
from experienced businesspeople
from lawyers
advisers, board of
Al ied Capital
Anisa International
antiquated industries
archive retrieval business
Arnold
asset-based lenders
assets, buying
bad debt
Baicher, Mike
balance sheet
bankruptcy
Brodsky’s experience with
banks
bed-and-breakfast businesses
Bert
bidding situations
boss:
becoming
managing and
brand:
building of
devaluing of
break-even point
Brodsky, Elaine
in CitiStorage management
employee training program and
hair salon and
Malki and
at seafood restaurant
Brodsky, Norm:
bankruptcy of
company acquired by
delivery company of, see Perfect Courier
father of
records storage company of, see CitiStorage
Burlingham, Bo
business background, lack of
business lessons
business plan
four questions to answer in
business plan (cont.)
life plan and
mistakes with
software for drawing up
business relationships
buying a business, see acquisitions
capacity trap
capital
from investors
low-margin sales and
niche and
protecting
raising
capital expenditures (CAPEX)
cash
cash flow
free
layoffs and
predicting
sales and
seasonal businesses and
self-sustaining business and
cash flow statement
changes
charity work
CitiPostal
CitiStorage (records storage business)
Brodsky’s enthusiasm for
competitors of
computerized customer services at
culture at
destroy dates for boxes at
help from experienced businesspeople at
land purchased for
loss of customer at
management team at
missing boxes at
niche of
re
ceivables of
rules at
sel ing cycle in
tracking the numbers for
Clinton, Brad
commissions
competitors
bad-mouthing
ex-employees as
hiring salespeople from
losing customers to
non-compete agreements and
niche and
reputation and
rules for dealing with
unethical
computers:
doing calculations by hand vs.
software for
consultants
contracts, rereading
control ers
cookie business
cosmetics accessories business
cost of goods sold (COGS)
cost of sales
costs, see expenses
critical mass
culture, company
customer base
customers
bad service to
big
bil -paying policies of
company rules and
and dealing with problems
differentiating yourself with
direct contact with
educating
established, treating like new prospects
lifestyle of service providers maintained by
listening to
losing to competitor
loyalty of
new, signing up
offering discounts to
raising prices and
relationships with
retaining
salespeople and
smal
unhappy
see also sales
Data-Link Associates (Bobby and Helene Stone’s company)
day care centers
dealers, independent
decision-making
taking time in
delegating responsibilities
dentist
discipline and focus
disputes
diversification
doctors
document destruction business
earnings before interest, taxes, depreciation, and amortization (EBITDA)
educational facility business
ego
Elsa the cat
emotions
employee relationships and
employee theft and
employee, being
employees
caring about
company culture and
company growth and
company rules and
creeping expenses and
firing of
former, becoming competitors
hiring of, see hiring employees
layoffs of
relationships with
in sales process
theft by
training programs for
see also salespeople
enthusiasm
Erwin
excuses, making
expenses
and conversion of luxuries into necessities
creeping
growth and
and hiring an employee
experimentation
failure, see mistakes and failure
Feinstein, Bob and Trace
financial statements, submitting to bank
flexibility
in negotiating
focus and discipline
Fred
goals
and buying a business
life
Gore, Al
gross margin
gross profit
gross-profit margin
costs and
and hiring an employee
niche and
smal customers and
tracking of
and value of business
Groundhog Day syndrome
growth
and advantages of smal companies
deciding on
life plan and
planning for
success factors and
herbal-lotions company
Hier, Marvin
hiring employees
salespeople
Hot Pants
Howard
Hussein, King
Inc.
Inc. 100 list
Inc. 500 list
income statement
independent contractor
information processing business
insurance rates
Internet development services
Internet sales
investing:
profits back into business
in risky ventures
investors
threshold of
Iron Mountain
Jack
Janice
Jerry
JetBlue
job fairs
Jordan and Seth
Josh
Judy
Kaplan, Sam
Ken
lawsuits
lawyers
layoffs
leverage
Levin, Rob
liabilities
life plan
Lightfoot, Patty
loans
magazine business
Malki
management
company culture and
Marvin
Mike
mistakes and failures
business plan and
and buying a business
repeating
Naomi
Neeleman, Dave
negotiating
and assuming other side is smarter
in disputes
listening in
preconceived notions and
and questioning what you see
net profit
New York Enterprise Report
Nextel
niches
non-compete agreements
Noor, Queen
numbers:
key
tracking of
opportunities
putting core business before
taking time with decisions about
optimism
overoptimism
overhead, see expenses
payables
payrol increases
Perfect Courier (delivery company)
culture of
customer size and
customers lost at
dispute with supplier of
hotshot salespeople at
management of
pens at
peripheral vision
Pierce Leahy
Pol y
Post, Patti Kanner
preparation
prices:
capacity trap and
competing on
cutting
quality linked to
raising
problems
advice and help with, see advice
bad rules and
solving, two-step process in
taking time with decisions about
tracking numbers and
profits
company valuation and
gross; see also gross-profit margin
investing back into business
net
raises
receivables
borrowing against
growth and
recklessness
records storage business
capacity trap and
length of storage times in
rates in
see also CitiStorage
reputation
research
reserve
resilience
risk
in borrowing money from in-laws
in buying a company
in extending credit to a customer
sales
capacity trap and
cash flow and
company valuations and
cycle of
and hiring an employee
Internet
low-margin
preparation for
projections of
sales (cont. )
size of
tracking
volume of
see also customers
sales mentality
salespeople
commissions for
compensation systems for
customers and
entrepreneurial
fear of asking and
hiring of
hotshot
mindset of
raises for
return on investment in
teaching about business
Scali McCabe Sloves
seafood restaurant
seasonal businesses
secure document destruction business
security
sel ing cycle
Seth and Jordan
Seymour
shortcuts
Simon Wiesenthal Foundation
Sky Courier
spouse, working with
SRC Holdings Corp.
Stack, Jack
steady-income rule
Stone, Bobby
Stone, Helene
Stone, Jennifer
Stone, Rebecca
Stone, Steven
“Street Smarts” column (Brodsky and Burlingham)
success
company culture and
factors in
suppliers
supply costs
Target Corp.
Telwar, Anisa
theft, by employees
time
trade directory for restaurants
trucking and warehouse business
trust:
company culture and
of customers
employee theft and
management and
uncol ected funds, spending
unique product or service
utilities
value, price and
value of business
profit margins and
venture capitalists
viability
niche and
volunteering in a startup
Weiner, Louis
X factor
“You don’t ask, you don’t get,”