On December 10th 2010, I traveled to New York City, went to 1221 Avenue of the Americas in Midtown Manhattan, took an elevator to the 51st floor, and at 10:02 AM I signed a contract to write The Zigzag Principle with McGraw Hill.
What an amazing ride this has been.
Last Friday was 1,189 days since the initial signing. I was invited this past week to do a keynote at Harvard University in Cambridge Massachusetts. With me was my 17 year-old son Nathan. As I put on my portable microphone and approached the stage I found myself a bit emotional. I often refer to Nathan as a new and improved version of his old dad. As the professors learned about Nathan and that I intended this lecture to be my final, formal Zig Zag lecture they offered to have Nathan indroduce me at the keynote. Is there anything more cool than having your son introducing you at Harvard? Particularly on your final presentation? Let me share with you very quickly what he said.
This is particularly symbolic to me due to the fact that the final chapter of Zigzag (Firm Foundations) tells of my decision to leave the corporate world. Those of you who have listened to me lecture know that the driving reason for leaving the corporate world was mainly the toll that it took on my family. In that chapter I reference a story of when I returned home from a long trip and my beautiful son Nathan, who was approximately a year and a half old then, cried and pushed me away because he did not know who I was. This was the moment that I knew I had to leave the corporate world and jump into the deep waters of entrepreneurship.
How fitting that Nathan was able to accompany me for this lecture. How fitting and joyful, even more joyful and meaningful to me than the success of The Zigzag Principle, and more important than any business that I have built. My son Nathan considers me his hero.
Some eight years ago Roy H. Williams from The Wizard of Ads asked me a very pointed and probing question. He asked me, “Rich are you an author, or are you just scratching an itch?” I have thought a lot about this over the past years and here is what I have concluded: Roy, indeed I am an author! From the time I began my career I have complied short stories and life lessons. I have written hundreds of these privately. I named them Management Metaphors. This being said, I am a private author. I value my anonymity and I don’t need the main stage. I shared the messages of The Zigzag Principle and Bootstrap Business because they were so boiling hot for me, I simply could not contain them.
With this final lecture, I also look forward and plan to return to a more private life. The next chapter of my life is filled with excitement, new challenges, and a very exciting new model that I look forward to discovering.
I want to wish each of you who have followed The Zigzag Principle success and happiness. Don’t follow the straight line. Don’t fear failure. Make sure you enjoy the ride. The ride is what really matters the most.
I now close this chapter of Zigzag and wish you God Speed!
I’ve been working on developing a brand-new business these past six months and I can confidently state that it is far more significant in terms of potential than anything I’ve seen in the past twenty years. This wonderful opportunity has made me grow, stretch, and develop muscles (and feel discomfort) that I have not experienced since I was a part of Corporate America some fifteen years ago.
My partners and I have been aggressively and effectively working the past few weeks to engage some of the largest names in our industry and sector for exposure for this technology. This effort was followed by four high-profile, well-know billionaires flying out in their Lear Jets to meet us for a day of discussion regarding investment in our new technology.
The thing that I have learned through the years is that quite frequently extremely successful individuals are extremely eccentric. I pride myself and at the same time hang my head a little at being sometimes guilty of this. I can wind up saying some of the darndest things. The day that these associates flew in for this discussion we toured the facility, exchanged some really positive dialogue, and felt exuberant. I was especially animated at the end and made the comment on how it felt like we were on top of the whale Moby Dick having shoved a pitchfork down the blowhole and were now hanging on for dear life.
At first everyone looked at me in complete shock and horror at the image of shoving a pitchfork in a whale. My business partners weren’t initially sure how this latest quip would go over and looked on nervously. Then all these eccentric billionaires chuckled, laughed, and smiled. My partners were able to relax and laugh too. That evening as we were discussing the day’s events I got harassed and harangued nonstop over the imagery us on the back of a large whale trying to hang on to a pitchfork. At first I was a little ashamed of the analogy but am now quite proud of it.
The next week as I was conducting our board meeting I got about twenty minutes into the discussion and happened to look up at a picture hanging on the library conference room wall. It was a picture of Moby Dick. Upon closer inspection there was someone standing on his back. I thought it was a strange and serendipitous event, until I noticed that the person on the whale’s back was holding onto a pitchfork! I realized at that moment that this was more than a mere coincidence. Come to find out, one of my business partners had commissioned a drawing of my analogy and put it up to memorialize the signing of a term sheet.
The conclusion, in addition to a fun story, is that we are all a little eccentric and we sometimes say crazy things whether we mean to or not. The first reaction that I had was to be a little ashamed, embarrassed, and tried to whitewash it away. The conclusion that I’ve come to after several days is to embrace it. If you do something quirky, if you do something weird, if you say something a little bit funny then own it. Stand up and live with it and be proud. Trying to be sterile and just like everyone else is boring and forgettable. You will find that those key little funny differences are what endear you to other people and I think actually they are what gets you noticed. Just like the successful new partners that we’ve engaged with you have to be a little unique and eccentric to actually stand out and make a difference.
So, yes. Be a Zigzagger, but don’t be afraid to be a little goofy. Go forward and prosper.
The past week I had the opportunity to look closely at two different businesses. These two different companies are actually equal in terms of potential and technology. However, as I consulted and carefully examined both I found that there were three major differences that separated the businesses. The question I have for you today is do you want a $30 million business or a $3 million business? Let me outline the three key factors that make the difference for these companies and confidently will make the difference for your company.
The first business actually is a fun, exciting, exuberant, really good little $3 million dollar business that’s been around for about seven years. The 2nd business was established three years ago and has grown rapidly to $30 million dollars. What’s the difference? Well, here it is:
Number One: Cash Flow and Access to Capital
In all of my books I state that cash flow is the number one reason small business fail. Now let me boldly add to that statement and say that access to capital is the number one enabler for growth. It sounds like I’m contradicting myself because everyone knows that I’m a big fan of bootstrapping and largely hesitant to seek out Venture Capital funding. The reality however is that if you can get cash in the bank, avoid taking exorbitant salaries, and control your expenses early on then when you are ready to grow your business you are in a good financial position to scale aggressively with capital. This does require at times taking loans and, depending on your business’ individual circumstances, taking appropriate financial partners. The number one difference I saw between the $3 million company and the $30 million dollar company was access to capital.
Number Two: Escalation
You say, “Escalation? What do you mean?” The $3 million dollar company CEO was the ultimate decision maker and mover and shaker on every decision. If he got into a negotiation he could make a decision in a snap. You may think that’s a good thing, but it is not. If there is a problem and you as the CEO are not getting any results you have no one else to step in and add to the conversation. However, if you can separate yourself a biy then you are then in a position so others can escalate important problems to you and can get more direct results by bringing in the CEO to the conversation.
Escalation indeed is the second most important factor in being able to rapidly grow a big company. Through all my years of bootstrapping and creating businesses I’ve never seen a large and significant company that did not properly escalate and have delineation of roles in place. If you find yourself as the jack-of-all-trades and are the main decision maker then FIX IT. If you want more information on this read Chapter 14 Act Big Play Small in Bootstrap Business. I give some really good tips on how to do this.
Number Three: Defining the Hunters vs. Gatherers
My blog post last week was all about Hunters vs. Gatherers. Since I already covered this thoroughly last week I won’t delve into it again, but I can guarantee that $30 million companies know who are the Hunters and who are the Gatherers. You will also find that they each play their roles well. Identify who in your organization are the Hunters and who are the Gatherers and have them play those roles properly.
You want a $30 million business, rather than a $3 million business? These three principles can quickly get you on the way to that growth. Good luck, Zigzaggers.
Image from http://hbcumoney.com/
This past week I found myself working with a small company that has great product, great technology, and is really a fun company. However, even with all of that on their side they have stalled the last few years and are stuck at the $3 to $4 million-dollar mark.
As I observed the CEO and founder of this company in action I was both mesmerized and dismayed. I watched him engage new customers at the trade show, actively pitch sales, and close each deal. Five minutes later he was working on the company’s operations, logistics, as well as the cleanup. He bounced from task to task, from sales to finances, to warehouse management, to pickups and delivery. Seeing him do everything at once was nothing short of a wonder. The entire ordeal was one of the most complex working events I’ve ever seen in my life.
I could see at that moment, even as hard as he worked and as fun as that company was, if things didn’t change then this company would never grow beyond the $3 to $4 million-dollar mark.
The key reason for that remark is that it is vital to clearly define and distinguish the roles of each individual in the company. It organizes the members of a company into two groups: Hunters and Gatherers. Every organization needs delineated roles. Those that go out and track down the big beast, shoot it, and slay it should not be the ones who prepare the carcass, package it up, and put it in the freezer. The Hunters should also avoid playing the part of the Farmer who tills and prepares the ground.
Each role is very different and distinct. So the question that I ask you is this: Are your talents best used as a Hunter or a Gatherer? Every business needs both. In my experience I’ve found it best if the CEO and the sales team are the Hunters while the roles of operations such as accounting, your general manager, and customer service plays more of the Gathering or Farming roles.
Take a look at your organization. If you see yourself bouncing back and fort between being a Hunter and a Gatherer I guarantee you that you are losing significant efficiency and limiting the growth, potential, profitability, and the viability of your company.
Today’s Challenge: Assign the role of Hunter or Gatherer to each individual and department in your company and make sure you play your roles well. Doing that alone, I guarantee that you will see a significant uptake in your business and reduction of stress levels.
What kind of difference does one degree make? Well, changing the temperature by one degree means the difference between very cold water and frozen water. One degree of temperature difference is the line between hot and boiling water. That crossover line in physics, business, and our personal life makes all the difference in the world.
One of the market segments I’m actively involved in negotiates large orders for high-end luxury items. These are meaningful, significant orders that with or without warning can flip on or flip off. One degree of price difference or one percentage point can literally make the difference between landing the order or not. The trick is discovering what that very fine and sensitive line is. The key to do that is to have very good and open dialog, relationships, and true salemanship with our customers.
Now, the big mistake that is pushed to the other direction is to shift five degrees. Going down five degrees when the water is already frozen still results in frozen water. Add five degrees to boiling water and it will keep boiling. Rather than one percent discount given giving five percent discount still ensures the order, but at much less profit.
As you’re looking at potential business opportunities or to win over a customer or client make sure you find out what that one degree shift is that can be made that will guarantee to flip on the opportunity. If you want to see more on this theory check out the video below.
Go forward, zigzag, and prosper.
Rich: I’m here today with my good friend Scott McQuade at Outdoor Retailer and I just heard his story. For all you Zigzagers you’ve just got to hear this. Scott, would you mind sharing with us how your wife got into the wholesale off-price business please?
Scott: Absolutely. I’d be thrilled to. I was a third generation retailer and president of a family chain in the northeast. My wife wanted her own business so I bought all the off-price goods from the company. When I began a factory I’d be using a small portion of the off-price goods so I said to her, “Why don’t you see if you can find a buyer for the goods and then you can purchase the goods and just flip the deal and not even touch the goods?”
So she said great and I told her about a deal, it actually was in Manchester, New Hampshire and they had a flannel line and denim skirts for L.L. Bean and her first customer was Sierra Trading Goods and her first order was 10,000 pieces. She called Sierra and found out who the buyer was, talked to the buyer, negotiated the price, and went back and bought the goods. Now the hard part for her was that we had no capital at the time. We were newly married, we had kids, and we had no savings so she had to go into a bank to get a loan. We were from a small town of about 100,000 people. She spoke to the banker and presented her purchase order and told them that if she could borrow the money from them then she could make the deal happen and make $20,000 profit off this deal. The banker knew our family and told her he would loan her the money. So she bought the deal and that was the beginning of her career.
Rich: Ok. Now a couple of really fun, key things you left out of there was, I don’t think you had a bank account at the time and they said “Show us your PL” when there was no P&L. So frequently we think you have to have a whole bunch of money to create money. When Scott told me this story I couldn’t help but chuckle, would you like to tell us how value was created?
Scott: Yes actually, that’s true, Rich. We didn’t have a P&L, we didn’t even have a business. She actually had to call me during her meeting with the banker to ask me what our business name was. I told her, “Tell him it’s White Mountain Dry Goods,” because we lived in the northeast where the White Mountains were and he said, “Yeah that name sounds familiar, that name has been around.”
Rich: And that was the vendor, so in real time you made up the name of the supplier and they checked it, gave their approval and got it in their system which, had you done it any other way, would have taken five or ten years.
Scott: That’s correct. That came to factor as we were taking the loan. The banker said, “That sounds familiar. I just can’t find the file but I’ll approve it.”
Rich: Needless to say this went on to become a very successful company and has done really well.
Scott: Yes. For sixteen years.
Rich: Sixteen years!
Scott: And we started with zero capital.
Rich: Started with zero capital. So how did that work? What is that all about? Did you need a whole bunch of money to start out? No. The answer is simply this. You start with intellectual capital, or being smart. In this case it was Scott having the connections and understanding how the wholesale market connected plus relationship capital. The vendors knew them, the bankers knew them, and there was a level of trust. If you do that in the form of a business it always ends up making financial capital. From $0 to $20,000 in profit you can launch a business in really one simple transaction.
Don’t tell me it can’t be done. You can zigzag and go do it. You can create your business and quit getting all hung up on having a bunch of money.
Rich: Good morning everyone! I’m really excited today. I’m at my favorite trade show of the entire year. Of course every high-altitude climber has to say that, but this is Outdoor Retailer. I’m here with Mike Pfotenhauer. Did I say that right?
Mike: Yes, that’s how you say it.
Rich: This is one of my favorite backpack brands and one that I’ve been watching for a long period of time. It’s Osprey. I’m not sure how many of you know Osprey, but Mike is the founder and owner of Osprey. I love this story and so for today’s post I’ve asked Mike to spend a couple of minutes to share with my group, if you would, of how the brand came to be and the transition from Vietnam to Colorado, and just what is happening with the brand now.
Mike: Sure. Well, our brand is now forty years old, so back in 1974 I started a company back in Santa Cruz, California. I was fresh out of the University of California at Santa Cruz. I didn’t really want to work for anyone else so I started building backpacks. It was mostly bicycle packs and backpacks and customers would come in and I would do a custom fit. They would have to wait about five or six weeks before the product was ready, but they were happy to wait because it was custom made for them. I did that for about ten or twelve years. When I got married and my wife said, “I think you need to move up to the next level” we started wholesaling. We tried to wholesale and build product in Santa Cruz, but everybody wanted to surf so we moved our company to Colorado. In 1990 we moved our company to the Four Corners of Colorado, built our production up pretty quickly there, and we grew to about a hundred employees, mostly Navajo, local people who really knew how to sew well.
Of course at that time we were having to deal with the fact that all our competition had moved offshore. We did everything we could to keep the production in the U.S. but it was a losing battle so we moved production to Vietman. I loved building product. I was a little jealous to see people doing it besides myself so I told my wife, “Let’s move to Vietnam.” She agreed. The family (two kids, my wife, and I) moved to Ho Chi Minh Saigon. We lived there for four years and set up an operation, and introduced our product into the factories there. It was very successful. I think it’s a great model for how to build product because you can be hands-on and transfer your design concepts. I still do all the design with a bit of help from other designers in our company and moving it into production is the key where it can really go wrong. So we’ve got thirty-five people in Vietnam to make sure the final product is dialed and done correctly. I travel there often.
Headquarters still remain in south-west Colorado. I have a design office in the Bay Area of California so I’m traveling back and forth from Vietnam to Colorado and it’s still fun. I still love designing product, watching it being built, making sure it comes out right, and seeing it on the backs of people going all over the world doing all sorts of crazy things.
Rich: That’s awesome. I love that story. Curtis, would you turn around and show off some of this beautiful product for one minute? Wonderful. Alright, here is the closing statement. We’ve been talking a lot the last couple of weeks about the value equation. Intellectual Capital plus Relationship Capital equals Financial Capital. This is the key example of that. Again, smart Intellectual Capital done in a proper way created a very successful business. I’d really like to point out that it’s key when you really start scaling out in the business and you shift your distribution or you shift your manufacturing that’s a real sensitive spot to watch carefully.
I’m so impressed by what you’ve done here. You have a beautiful company and we’re making a deeper commitment to Osprey at this point and look forward to the great things that are to come. Congratulations to you.
Mike: Thank you very much, Good to meet you.
Today I give you my favorite post of the entire year! It’s so chill and I’m doing what is probably the single most productive activity for the entire year when it comes to having a successful business.
My notepad, as you can see, is here on the sand. I am in sunny Los Cabos. If you’ll look back around here you’ll see we’re at the Westin Resort and here we come all the way back around to me. Every morning and every night we walk this beach. It’s about three and a half miles round-trip and if we’re lucky we see maybe five or six people. Every morning I get up and have a massage and on top of that I’ve eaten the most delicious tacos in the entire world.
So what does this have to do with business? Well, this is one of the most important events in my life for the year. Entrepreneurs live the most intense, crazy, and brain-dead life that is possible to live. Today I have five really important tips for you about decompressing. Stephen Covey talks about unstringing the bow and getting into Quadrant Two and I tell you it’s the reason I’m going to flourish.
Ok, there’s my note board in the sand, and look at that beautiful ocean and the surf! It’s unbelievable. I feel like I could take on an army right now.
Number One: You getaway must be longer than one or two days. Schedule five days, preferably twice a year, but if you can’t do it twice make sure you schedule at least one getaway a year. Taking five days is very important. You’re still really wound up at the end of two or three days and it takes until the fourth or fifth day that you get to calm down. Point number one is that it has got to be five days.
Number Two: Back to my board here, the second one is calm. Go someplace that is calm. Don’t go to New York City and don’t go to the heart of Singapore. Go somewhere that’s naturally calm where your soul can decompress and you can chill. Alright, what’s my next one?
Number Three: Unplug. Disconnect your cell phone and your Internet and take time where you’re not jittery or have to check in every five minutes.
Number Four: Dream. Go to a place that is calm and that you can let yourself go and just dream of what to be and what is possible. It is amazing how in those calm, dream-filled moments the real clarity comes and you see what is possible.
Number Five: This last one is actually really counter-intuitive and it is this: Inevitably through your vacation you will have some moments of “Ahh! Anxiety!” Or “Oh! What about my work?” Allocate yourself some time and say, “For the next ten minutes acknowledge that I am stressed about that contract not coming through or that vendor not getting paid.” Ok, ready, set, go and go as deep as you can on that for five minutes and for that time you’re going to give your worries an audience and after those five or ten minutes I’m going to toss it in the ocean just like a seashell and just let it go.
So if and when you have any anxiety or stress moments acknowledge it, sit with it, live with it, give it an audience, and that will keep the bogey in the back closet.
Again, I encourage everyone to find your own Los Cabos. My favorite place is this little remote beach here with San Juan on one side and Los Cabos on the other with highly delicious tacos and lots of calm. Find your calm place, find your peaceful place, and go there. I promise you that your productivity and your effectiveness in your business will exponentially go through the roof.
Happy Zigzagging to everyone!
Each January when my family takes down our Christmas decorations my boys, without fail, will take all of the cords and connectors and toss them into one big bin. This of course leads to a tangled mess which inevitably creates a dilemma the following November for the one in charge of untangling the electric cords. What we’ve discovered is that if you yank on the cord you only further compound and complicate your problem. What it takes to untangle the cords is to carefully jiggle, wiggle, and follow each cord one by one all the way through the knot.
This past week I had a particularly nasty knot brought to me at Froghair. It was an incredibly complex problem where multiple mistakes had been made, multiple individuals were involved, and no proper documentation had been done on either side. What was occurring here was everyone was running around yanking on the ‘electric cords’, which made the knots even worse. I was able to sit down with our entire team and outline a solution using a process I have used whenever I need to unstick a sticky wicket. Let me share this with you in the hope that it can also help you grow your business.
1. Write down the names of all the decision makers and those involved with the problem. And I mean everyone from the very top of the corporate ladder to the bottom. Next you’ll need to identify what department they work in and where they fall on the corporate ladder. Too frequently I’ve seen a CEO insert him or herself into a conversation with the other side’s shipping manager or the Sales Vice President reach out to communicate with the Finance Coordinator. Match equal to equal on communication and make sure you follow the levels of structure. Find out who are the players on your side and who are the players on the other side.
2. Categorize the problems. List all the problems, including pre, current, and post problems. I like putting them down the left side of the whiteboard. Next list the cause of the error in the middle of the board. For example you could list what caused the error or what happened because of the problem.
3. Identify each problem’s level of seriousness and urgency. Which are the biggest knots in the cord causing this big tangle? Focus on the great big, hairy problems and make sure you take all the motion out of it before you tackle the smaller ones. Too frequently businesses reach out to a vendor or customer about one problem and then bring out all the problems on the list at once. Pretty soon it’s so tangled up that you completely ignore or miss the key one to solve. The trick to solving the big ones is to focus on it and only it and go through the proper channels. Avoid blending all the problems together. Pull them apart and separate them.
As I sat down with my team we listed seven or eight problems and found what it really boiled down to was one or two key things. I advised them to let go of the small things while they untangled the one or two big problems. Once the giant knots were untangled the little tangles basically took care of themselves.
If your team follows these simple steps then the 80/20 Rule will come to light. The twenty percent effort will achieve eighty percent of the work and everything will instantly untangle. That’s what happened with our Froghair team this week.
Sticky wickets are more an emotional problem than a logistic or physical problem and once you are able to put a plan of action in place and clearly understand what went wrong and where and who needs information you will then untangle the web one problem at a time. Although I wish you luck I know everyone runs into sticky wickets occasionally. Following these steps will help you unravel them quickly when they occur.
Over the Christmas holidays I did something that not only shocked myself, but will shock anyone who knows me. For the past eight or nine years we have enforced a strict rule of using only Apple products in many of my companies. PC’s are not allowed in any of my offices. I have largely done this because of efficiency, consistency of platform, and ease of use. As I walked into the AT&T store last week and asked to see the latest iPhone (as I was considering upgrading) the salesperson, knowing me said, “Rich, you’re not really going to like what I’m going to say, but I’ve got to say it anyways. Apple is falling behind.”
Hearing these words just added salt in my wound because the week prior I’d been in BestBuy looking at tablets and in looking at the specifications and usability I realized that not only was the iPad tablet falling behind but it was inferior to the competition.
As the sales rep pulled out his new Moto X phone and began showing me the crazy, unbelievable set of features I had to hang my head and admit that Apple had indeed resisted change. I’m not certain if Steve Job’s death was the cause of it or if Apple had become complacent through the years, but what I realized was this: If you resist change and ignore it all together you die. If you do as Apple has done and rely exclusively on marketing and only react to change you can survive, but in order to actually thrive you have to dramatically and aggressively enact change.
After seeing the differences I am now the proud new owner of a Moto X phone. This phone has built-in characteristics and features I’m not sure Apple has even thought about yet. If I twist my hand from side to side, a camera app pops up. I can actually talk to my phone and give commands and instructions without being anywhere near the phone. The usability and interface is cleaner. The power is far superior, and although there are some user adjustment issue’s making me adapt I have to say the technology is superior as much as it pains my heart to say so. I think that the very thing that brought Apple its success was its non-assuming feature set that allowed users to know it, use it, and love it. Apple falling away from that and resting on their laurels and relying instead on their big marketing niches and campaigns turned to be their demise. Apple is no longer enacting change. I hope they can correct it.
What lesson can we learn from this as business owners? Here are five:
1. Don’t get too comfortable
2. Be Steve Jobs and always demand and enact more change
3. Look for simple ways to add value and delight your customers
4. Always be the change agent, explore your options, and listen to your customers
5. Don’t become a marketing engine resting solely and totally on one brand or you will eventually fall off the map
This was an incredible shift for me to even be able to admit this and a powerful lesson on how technology and business in general can be disrupted and even the most loyal of loyal subjects can be shifted over as more value is presented. Again to quote my mentor, Ray Noorda, “Resist change and die. Adapt to change and survive. Create change and thrive.”