The point is to protect and expand the gross margins of your business. Another way to widen margins is to keep your manufacturing plants ahead of the state of the art by inventing your own machinery or modifying standard equipment to be faster and more reliable. This can help keep labor costs and fringe benefits down. We have all seen businesses that do a lot of volume but are left with no profit or with a loss, but by keeping your gross margin solid and tightly controlling your expenses below gross margin, you’ll come out on top in any industry.
Buy low and sell high
Mark GRANATA, Jr.
President of RFR Realty, LLC
Be careful what you wish for, as you just may get it!
Know what you want
Earl G. GRAVES, Sr.
Chairman and CEO of Earl G. Graves Limited and Publisher of Black Enterprise Magazine
Advice doesn’t always come to you verbally. After a lifetime in business, I still learn less from what people say than from what they do. By that yardstick—or any other you could name—the best business advice I ever received came from my father.
His name was Earl Godwyn Graves, a child of immigrants from Barbados who was orphaned in America at age fourteen. He was a hard man in many ways, a strict father who believed in discipline. Growing up with him wasn’t exactly fun, but he taught me from a young age how to make money—and how to keep it.
At fourteen, I landed my first salary job as a Western Union messenger. I made sixty-five cents an hour. Dad would take a cut for the household, put some away for my savings, and then give the rest of it to me. Without “telling” me, he showed me that earning money was not the same as having it. If I was going to have money, I was going to need the discipline to save, the sense to invest, and the willpower to put my personal and material needs last.
But I honed the courage, tenacity, and confidence it takes to develop a business after following some advice from the Army. When I was discharged from the Army as a first lieutenant—having attended airborne and ranger schools—a senior officer suggested that I do three things that would favorably impact my civilian life. He said that I should join the National Guard, continue my involvement with the Boy Scouts of America, and get involved in politics. I followed those directives. As an infantry officer, I commanded a company in my local National Guard. The Guard was then forming an elite unit of Special Forces, and in that unit, I ended up as a captain and a team leader in the Green Berets. I continued my service in the Boy Scouts of America, advancing from the local to the regional level. Eventually, I served as a member of the national board for more than twenty years. I still serve as its Vice President. In 1964, I made contact with the national office of the Democratic Party, where I volunteered in Robert Kennedy’s campaign bid to become senator of New York. Pleased with my efforts, the newly elected senator invited me to join his staff in 1965. I served as an administrative assistant to Senator Kennedy from 1965 until his tragic death in 1968.
The success that I’ve had in business started from childhood, extended through my developing years, and was sharpened by these two blocks of advice and my broad cumulative experience.
Experience is a good teacher
Alan C. GREENBERG
Chairman of The Bear Stearns Companies, Inc.
My father owned some retail stores in Oklahoma and he taught me many things about running a successful business. Two of his principles made a tremendous impression on me. First, a great deal of his sales were based on credit. When a customer without a charge account came in and wanted to buy some small item, my father would walk up to the credit department and say, “Open a charge account for this young lady.” The customer was amazed and flattered. My father said, “That lady will be a customer forever, and if she doesn’t pay for this small item, she can only beat me once.” He had the credit department in all the stores act accordingly. I use this theory of “The person can only beat me once” all the time.
The second commonsense rule drummed in my head was “If you have stale merchandise, sell it today regardless of price, because tomorrow it will be worth less.” This theory of getting out of stale merchandise and into fresh positions certainly can be applied to the stock market. If you study the stocks on your own, you will see how much better off you would be if you sold the poor performers and moved your money into well-managed companies. Not every industry has the liquidity of the stock market or the retail business, but even where there is less liquidity, the theory works. Few people want stale bread today, and nobody will want it tomorrow.
Keep it fresh
Paul R. GUDONIS
Chairman and CEO of Genuity Inc.
The man with the plan leads the way.
Know where you’re going, and others will follow
Christie HEFNER
Chairman and CEO of Playboy Enterprises, Inc.
While it is difficult to distill lessons learned down to “the best,” I do believe that among the most important advice I ever received was the need to think like a good journalist. In other words, before you take a position or make a decision, gather information and different perspectives. Don’t be afraid to ask questions or say you don’t know. Run meetings in a way in which you ask each person to offer her or his point of view. Try to get everybody to think about and articulate the advantages and disadvantages of a course of action. I find that doing things that way has greatly improved the quality of my decision making.
Think like a reporter
Mark HELLERSTEIN
Chairman, CEO, and President of St. Mary’s Land & Exploration Company
In Good to Great, Jim Collins shows that all great companies define and pursue a hedgehog strategy. That’s the intersection between what the company can be best at in the world, what it’s passionate about, and what makes money.
What is good for a company is equally good for the individual. Many years ago, I discovered my own hedgehog, allowing me to springboard my career from an independent public accountant, to treasurer, to CFO, to President and CEO of one of the most successful independent exploration and production companies in the United States.
Talent is the seed for passion, since you tend to like the things you are good at. Once that seed is nurtured with some success and positive feedback, you are motivated to practice or learn more about your field of endeavor. With effort, your talent grows, as does the reward and motivation, and soon you find that you are extremely passionate as well as motivated to the point where someday you believe you may become the best in the world at it. If the talent and passion can be used to make money, it is a hedgehog. If not, it is a hobby.
After taking a bookkeeping class in high school, I entered an intern program and worked for a small non-CPA accountant. I built a foundation of knowledge that gave me an edge when I took accounting classes in college. I was always good at understanding numbers and mathematical relationships. Once I had a base of experience and knowledge it moved me to the top of my classes. Because I understood the material so well, I became passionate about it and worked that much harder and received significant recognition. I graduated top of my college class in business and accounting. When it was time to prepare for the CPA exam, others in the review class studied the practice problems once. But I did them multiple times and began to understand that my depth of knowledge was far greater than others in the class and began to think that I could be the best in the world at this. I continued to study three times as hard as everyone else and when the time of the CPA exam came, I was ready to be the best in the world. And sure enough, I got the highest grade in the U.S.A. out of 38,000 participants.
Although I was working as an auditor for Arthur Andersen, then one of the top national CPA firms in the country, I found the work to be routine and uncreative. My passion was to have an impact on companies. After three years I went to work for an oil and gas client where I began to develop a special talent to pull massive amounts of detail together and in a simple, straightforward manner paint a picture of where we made and lost money
and why. This ability allowed me to advance in the corporate world from looking at historical performance to helping plan strategy to structuring and negotiating deals. Ultimately, I have risen to CEO by using this same talent to create economic discipline within a creative and highly technical business, together with deal structures that create value and incentive programs that align shareholder and management /employee objectives to create superior performance. For me, this hedgehog has allowed me to create wealth for myself while creating value for the company.
Find your hedgehog
Lloyd L. HILL
Chairman and CEO of Applebee’s International, Inc.
Honesty. Integrity. First, Last, Always.
“Life is not easy; least of all is it easy for either the man [woman] or the nation that aspires to great deeds.”
—Theodore Roosevelt
Be truthful
Henry R. HILLENMEYER
Chairman and CEO of Cooker Restaurant Corporation
When I was still in my twenties, I was tapped to be president and CEO of a computer company. In a Board of Directors meeting one day, I was defending one of my officers who was under criticism from some of the board members. A gruff old Italian gentleman on the board maintained silence during the meeting (I think in order to avoid embarrassing me), but he came up to me after the meeting, put his arm around my shoulders, and said, “Henry, my boy, just remember one thing: if you walk with the lame, you will learn to limp.” I never forgot it.
If you walk with the lame, you will learn to limp
Gary HIRSHBERG
President and CEO of Stonyfield Farm, Inc.
Shortly after the crash of 1987, my then little and struggling yogurt company took a severe nosedive. A contract packer had gone bankrupt and we were left with all the bills but none of the manufacturing capacity. So we moved all of the production back to our little hilltop farm, back to our long-since-outgrown prototype yogurt “plant,” dusted off the cobwebs, and proceeded to meet orders, albeit unprofitably for the next fifteen months. This location had about eleven months of winter and one month of poor sledding, so our employees were busier plowing, shoveling, and otherwise plugging leaks than making yogurt. As a consequence, I went into a severe and pitched search for funds. Every week that passed would be a week when I had yet another $8,500 payroll to meet and $25,000 in milk, fruit, and packaging to purchase. Ultimately, we lost about $20,000 per week, looking like a pretty ugly duckling when it came to impressing the investors.
I met dozens of venture capitalists in this era and all of them left me pretty disheartened. Many saw through the chaos and recognized a potentially valuable brand, but all tried to steal us blind. During one especially dark period, a friend sent me an L.L. Bean walking stick that contained a flashlight and a compass neatly screwed inside. Attached was a note that I immediately tacked on my wall and have looked at every day of the sixteen years that have elapsed since. His note read: “Dear Gary, Use this to walk tall, find your way out of the wilderness, and pierce the darkness of despair.”
Today, as I sit at the helm of the nation’s third largest and fastest growing yogurt company, I now know that determination is probably the most undervalued and underappreciated prerequisite to success, and this little note did a lot to get me pointed in the right direction. By the way, I never did take any money from those slimy venture vultures and found my own way instead.
Another guiding principle came to me when I was just starting out in the yogurt business. Then we were milking cows and putting our thumbs in countless dykes as we tried to stay afloat, and I had no idea what I was doing and could not distinguish which among the countless tasks that lay before me should be the highest priority. I knew that we needed to keep our quality high, manufacturing and transportation costs under control, sales pitches sharp, marketing materials magnificent, employees satisfied and growing, cash flowing, and all the while ensuring that our mission and core values were not compromised. But in the inevitable pressure cooker of rough times, particularly in start-up, it was clear that something had to give. As a pathological optimist, I had no clue which of these fundamental requirements could possibly be allowed to slip a bit.
So I cold-called the CEO of Veryfine Juices, another local brand that I admired enormously, and which had been owned by the same family for over a century. I weaseled an invitation to go down to the Veryfine plant for lunch. After sizing me up for about an hour, the CEO offered this poignant, terse, and very Yankee summary that has been among my guiding principles ever since: “Keep it tight,” he offered. In other words, keep your expectations for income conservative, and ruthlessly watch expenses. I have run things pretty tight ever since, and today we’ve grown from five cows and about $50,000 in local sales to a national firm with over $150 million in sales—the largest organic yogurt company in the world.
Stay determined (but keep it tight)
Stanley S. HUBBARD
Chairman and CEO of Hubbard Broadcasting, Inc.
My dear dad uttered valuable advice on integrity, hard work, and loyalty, but this one on communication stood out: “Flies never enter mouths that are kept closed.”
Sometimes nothing needs to be said
Dawn HUDSON
North America President of Pepsi-Cola, Inc.
Keith Reinhard, Chairman of DDB, once advised: “If you can’t write your strategy or idea on the back of a business card, it’s too complex to execute.”
Keep it simple
Susan M. IVEY
President and CEO of Brown & Williamson Tobacco Corporation
As a senior manager once said to me, “As you move up in an organization, there is an increasing importance on ‘how you get things done’ and a decreasing importance on ‘what you get done.’ It’s all about leadership and a focus on the ‘how.’”
How, not what
Bradley S. JACOBS
Chairman and CEO of United Rentals, Inc.
Ludwig Jesselson, chairman of Philipp Brothers, which later merged with Salomon Brothers, gave me a lot of helpful words of wisdom during my early years in business. Although he died in 1993, Mr. Jesselson’s words still serve me well, and I think they would be of use to anyone in business.
1. Don’t try to convince anyone of anything. Instead, find something of which you’re really convinced. If you believe deeply in something, your enthusiasm will be contagious.
2. Find your spiritual center—whatever that means for you—and don’t lose it.
3. When someone you trust betrays you, don’t seek revenge, and don’t wish that person ill. Adopt a detached state of mind and just consider him gone from your life.
4. Understanding what drives another person—what wakes him up in the morning, what he’s after in life—is critical to forming a mutually productive relationship. You have to understand the needs and goals of your partner before you can fulfill them.
5. Be discreet. Indiscretion sends all the wrong signals and lets others know that you can’t be trusted. Someone who knows that he can count on you is more likely to do business with you.
6. Build and maintain a good reputation. Ultimately, business is about trust. If you want to be in the game for the long term, what people think and say about you matters a lot. This is particularly true when people invest money with you—they are taking a risk and they want to know that they can trust you.
7. Fortunes come and fortunes go. You are only really financially self-sufficient if you can make it again from scratch. The self-confidence that comes from knowing you can repeat your success gives you a terrific mental edge.
Know who you are and what you believe in
Thomas S. JOHNSON
Chairman and CEO of GreenPoint Bank
My father gave me this true and wise advice: “You’re not a man until you have had to fire someone and you’re not a good man unless every time you do it you hate it.”
On growing up
Curt JONES
President and Founder of Dippin’ Dots, Inc.
During a particularly trying time, when a competitor was zeroing in on our existing customer base, my former boss, Dr. Pearse Lyons of Alltech Biotechnology Center (now Alltech, Inc.) in Lexington, Kentucky, reminded me that “people buy from people.” He told me to not worry about the attacks and price undercuts on our product but to continue to forge the relationships and trust that got us where we were.
At an earlier stage in our company’s history, my sister, Connie Ulrich, who received her MBA from the University of Illinois, always reminded me to “focus on the present” and to not worry about what happened yesterday. In the early days of a fledgling business, this was very instrumental.
Trust, let go, and focus on the present
Jerry JONES
Owner and General Manager of Dallas Cowboys Football Club
My father, Pat Jones, who was blessed with more natural business instincts than any man I have ever known, gave me three very important guidelines.
1. As a young person, hang out with older people. It is important to associate with older people who have a track record of accomplishment in their professional careers. Interaction with those people allows you to benefit and grow from their knowledge, experience, and wisdom. Never pass up an opportunity to develop relationships with those who have gone before you and achieved, in any field. Ask questions of them and learn to be a good listener.
2. Philosophically, have a big front door and a small back door. This involves bringing a lot of opportunities for revenue and growth into your operation, while allowing a very small number of those prospects to go unexplored. It is an attitude of being open and available to aggressively pursue and develop as many opportunities as you can. You reel in your fish nets, but you don’t let much leave the boat.
The Way to the Top Page 6