The Biznik Blog - where business networking meets the future

In just a few moments, we will be talking with Norm Brodsky, author of “The Knack: How Street-Smart Entrepreneurs Learn to Handle Whatever Comes Up”. But first a bit of background about Mr. Brodsky, for those of you who aren’t familiar with his excellent work. Norm Brodsky had already launched seven successful businesses, including a three-time Inc. 500 company, by the time he began writing the “Street Smarts” column in Inc. magazine with Bo Burlingham in 1995.

Norm Brodsky: I am, Leif. Thank you very much. I’m in New York and we have a gray day too, but not quite as green as in Seattle.

Leif Hansen: Yeah. You’ve got the gray of pavement down below also.

Norm Brodsky: We do, yes.

Leif Hansen: Have you been out to the northwest area much?

Norm Brodsky: I’ve been out to the northwest area but not as much as I’d like to be.

Leif Hansen: Great. Well if you come out here, we’ll set you up with a live meeting at Biznik, which is part of what we do, get people face to face for networking and learning about business.

Norm Brodsky: That’s a hard invitation to turn down.

But this book is like sitting down with an experienced business coach who’s been doing this for years. And is trying to save you time, save you money, save you getting a lot of hard docks by giving you all the best secrets and just really, really have liked the book. I want to thank you for that.

Norm Brodsky: You know they say that a wise person learns from his or her own mistakes. And unfortunately through most of my business life I’ve been wise but smart people learn from the mistake of others. So the reason for this book is to try to make everybody wise instead of smart.

Leif Hansen: Very good! And those of us who are slow to learn from our own mistakes, or other mistakes, I guess we would be the stupid people.

Leif Hansen: That’s true. That’s good. Well we’ve been starting off asking people to give a summary of their book but you know, your book has so many different points so I’m going to skip that and we’ll get into some more specific questions later on. But I would also like to ask you our traditional question we’ve been asking authors. And that is, with these current economic uncertain times, your audience right now are people who are a little nervous about having their own business. They’re either just getting started or they’re on their way but they’re wondering what they had. What are some of the top pieces of advice that you would suggest right now?

Norm Brodsky: Right now, everybody is very nervous and we are at a very critical stage of our economy but this time can be the best time particularly for start up entrepreneurs. Because when you start a new business, there are so many more opportunities now. You’re competing against people with fixed overheads and so you have a great advantage.

And then there’s your customers. You got to think differently. And I’ll give you an example, about six months ago, not that long ago, the price of oil was $150 or $147 a barrel and gasoline was well into the $4 a gallon range. So most people, what they did, is they went out and they gave gasoline surcharges if they were in the delivery business or if some part of their thing had to do with trucking or things like that. What we did instead was sent a letter out to each of our clients saying, “During these tough economic times, we know it’s difficult for you. So we’re absorbing the increase in gasoline charges and you will not get a gasoline surcharge from us.”

Leif Hansen: Wow, that’s great! Any other specific advice that meets these times?

Norm Brodsky: Yes, absolutely! One of the things is that cash is king and it always is king. So you have to be very vigilant with your accounts receivable. Most people bill and they collect later. So when you make that sale it’s important that you identify the terms of payment. Most salespeople are really terrific. They make a sale and I usually ask them, “When are we getting paid?” And they say, “I didn’t ask.” You have to ask. What’s the company’s terms and what are their policies. So the receivable process starts at the beginning.

Leif Hansen: Well that’s great. That reminds me of a question that we had emailed in but I’m going to get to that a little bit later. I’m curious, Norm, do you have any children?

Norm Brodsky: I do! I have two women — girls.

Leif Hansen: OK. And how old are they?

Norm Brodsky: They’re 33 and 22.

Leif Hansen: 33 and 22, OK. I want us to imagine that you’re sitting down and one of them is about to start off on a business venture. And you know that the majority — what is it statistically now? Something like 95% business, I don’t know, fail. How many fail within five years?

There’s a story that I tell about how the software company were going into business. They were in California. They wanted to solicit me. They sent me beautiful stationary. And I called them up and I said, “This is beautiful stationary.” He said, “Oh, yeah!” He says, “We hired a consultant who matched our stationary with our office drapes and our carpeting. And we’re having this wonderful party.”

Now who’s going to go to a software party in California in the middle of the week from New York? And their customers, their prospects were all over the country. They wasted tens of thousands of dollars. And when they failed, they said, “We would have succeeded. We just didn’t have enough operating capital.” So one thing is watch your dollars.

Leif Hansen: You knew where I was going.

Norm Brodsky: Yes. The second thing that I’d advise my daughters is don’t be overly optimistic when it comes to projecting sales. Because a lot of people they project a tremendous amount of sales and they don’t give themselves enough time to get to critical mass. And I define critical mass as living off your own cashflow where you don’t have to borrow money from banks, friends, relatives or wherever. And that’s the first important step in business, getting to the critical mass.

An example of that is, and it’s in the book, a couple came to me, Bobby and Helene Stone. And they wanted to start this business, a computer cleaning supply business. And I said, “You’ve got to come back with some projections for me.” And they did. And it showed their first month’s sales were $20,000. And I said to them, “How do you get sales?” They said, “We do telephone soliciting.” I said, “That’s fine. How many people do you sell out of every 10 people you call?” They said, “One.” I said, “How long does each phone call take and how much is each sale that you make the first sale you make?” And we figured out in order to get to $20,000 in the first month they had to work 32 hours a day, 7 days a week. So they were overly optimistic. So you can’t be overly optimistic.

And when they do this business plan, it shows they need $100,000, I say to them, “For safety reasons, whatever you think you need, raise an additional 25% or start your business in a different way.” Because sometimes people can’t raise $125,000, maybe they can only raise $50,000 or $60,000. So maybe there’s another way to start their business. And that would be the opening advice that I’d give my daughters.

Norm Brodsky: Yeah. I’ll give an example and part of it is in the book. A guy named Michael came to me and he was doing $1.2 million in business. And I said to him, “Why are you here, Michael?” — I do a lot of pro bono advising. And he said, “Because I want to take my business to $20 million in five years.”

And so the first question I ask is, “Why do you want to do that, Michael?” He says, “That’s really simple. The reason why I want to do it, there’s three reasons. One,” he says that, “I earn $60,000. I want to earn $120,000. Two, last year I only took three days off, I have three young kids, and I want to watch them grow up. And three, I want a house twice the size that I have it before.” And so I said, “Well that’s really interesting, Michael. Talk to your wife, see what she wants and come back in a week.”

And I looked at Mike’s proposed business plan from going from $1.2 million to $20 million and his life plan of going from where he was to taking a few weeks off, to increasing the salary and building this house up. And I saw that they were destined to fail, both of them because if he took off another two weeks or three weeks, he wasn’t paying attention to the business. And so, the business plan and the life plan were going in two different directions.

So I decided that, “Michael, what’s the important thing to you? Is it your family?” And he said, “Yes.” I said, “So let’s head towards your life plan and see how you can get there and fit your business plan into that.” And when we took a look at it he wanted to take more time off. He wanted to double his salary. He wanted to have a bigger house. So we wanted to understand what he needed to accomplish there. And you know what he needed? He needed to take his business from $1.2 million to $3 million, that’s all.

So the life plan is so important and I, too, went through that. I built a business up from zero to $120 million in eight years. And of course I took that business from $120 million to zero in eight months. And I learned a lot of lessons from that. And the one thing I learned from that is I missed my first child growing up. You notice that my daughters are 11 years apart. And when I looked at what I did wrong, the first thing that came to mind is I missed the childhood of that one daughter. And I swore if I had another child I’d never do that again. So I had my life plan.

So my comment, just to bring home what you just said. On my iPhone is a picture of a drawing that my daughter made and she said — five years old. It’s in this broken handwriting. It’s says, “Jobs are not the only thing in your life.” Oh, man! Talk about a heartbreaker.

Norm Brodsky: What powerful words.

Leif Hansen: Yes and it really brought it home. Now there are authors and there’s a movement, I’m curious what you think about a book like Timothy Ferriss’ “4-Hour Workweek”. That takes this concept of life plan and really turning things inside out and not postponing your life until retirement to a pretty radical degree. Have you read that or what do you think about that?

We do set up life plans and we’re a little older now so our life plans are only five years at a time, and we look at them every year. And one of our life plans was to take off 16 weeks a year. And this December, I will take off the last week of the year, which will be my 16th week. But we started this life plan, even tough it’s renewed every year for five years, we started it 12 years ago.

I’ll give you an example. Writing the book, I had that on my yearly plan for the last eight years and I finally succeeded this year in doing it. So I guess I can cross that off my list.

Leif Hansen: Congratulations.

Norm Brodsky: Thank you very much, but you know it takes planning to do that.

Leif Hansen: Yeah. That’s very true. Well I’m going to start asking some questions coming in here. From Life Remixed Radio, they ask you the question, “I own a speakers bureau and I’m struggling getting paying customers. Do you have any advice?”

Leif Hansen: Yes. Basically, from a speakers bureau perspective business, they’re struggling to get paying customers.

Norm Brodsky: To get paying customers. Well it’s hard to answer the question in a vacuum but what I would do, I’d be looking at what am I doing to get the customers themselves. And maybe one of the ways — most of the speakers bureaus have contacts with people. So if it was me, networking is a very, very powerful thing. I’m sure there are organizations throughout the country who has groups that meet together to hire speakers. I would go to one of those things because it’s nice to send emails, it’s nice to send mailers out, it’s nice to talk to people on the phone. But I find face to face meetings are so powerful. They see what you can do. You can look people in the eye. So get off your chair and go to some of these networking groups and meetings that do hire speakers. That’s what I would do.

Norm Brodsky: You know that’s really an interesting question and that’s exactly why it’s the first chapter in the book. Most entrepreneurs don’t understand this but sales don’t run the business, employees don’t run the business, numbers run your business. And most people are afraid of them. I’d say 75% of everybody who starts a business usually comes from the sales side of things and that’s what I am. I’m a salesman.

And so we never — and remember what I told you about the first company went zero to $120 million to zero, right? And why did that happen? The first thing I did every morning is I asked one question. And you know what the question was, Leif?

Norm Brodsky: It was what did we do in sales yesterday? And so I was a top line guy and that was very important. It wasn’t after that business failed that I understood it wasn’t the top line, it was the gross margin line and the bottom line.

So learning certain numbers are not very difficult. And Wendy, you don’t need an MBA and you don’t need a college degree to do that and your accountant is helpless to help you do that. What you have to do is you have to find other people who run small businesses, not necessarily in your business, and you have to learn from them.

And it’s not a whole bunch of numbers that you have to follow. I get reports every Monday what I call “critical numbers” and they’re different in every business. And in my business, the archival/retrieval business, that number is sales, important; gross margins, important; and number of new boxes. And there’s a few two or three other numbers that I get. Real easy to get. Doesn’t take a CPA to get them for me, I can do it myself or have the people who are handling some of our accounting work do it themselves, but you must learn numbers.

Leif Hansen: What’s your personal opinion of why people are so number phobic? What’s the deep thing going down?

Norm Brodsky: They’re frightened because they think there’s mystery in the numbers and they think they need accountants. Now, accountants are historians. Not that history doesn’t play an important part in your business but the time an accountant reports to you what you’re doing, it’s too late to see the changes that are coming.

In the book there too, you’ll see about Bobby and Helene Stone, one of the people that I work with pro bono, is that they track their numbers on a weekly basis. And what it showed them, it showed them a shift, a paradigm shift in their business because they saw the products they were selling and they saw the gross margins and they saw the shift coming. So they were able to take advantage of that.

Leif Hansen: I wonder, Norm, I don’t mean to be pessimistic. But do you think it’s not just a fear of learning the numbers but is there something also in us that really is just starting a business because it’s a lot more fun and freer than working for someone? And is there something in us that resists the reality check that numbers give?

Norm Brodsky: That’s absolutely true. It’s easy to stick your head in the stand, especially on what you conceive as a weakness in yourself. And it’s true, you don’t want to know sometimes what’s going on but the only way to solve a problem — it’s too late when the problem explodes. You have to solve a problem as it’s happening. And if you don’t know it’s happening, you know what happens? You have choices as a problem’s happening. Once it’s done with and it explodes within your business, you have no choices. They’re made for you.

Leif Hansen: Humbling but true. I’ve got a question for you about showing versus telling. There’s an excellent part in your book about that, that when it comes to selling it’s just a lot better to actually to show. Now that’s easier when you have a product. If you’re a service industry, say you run a retreat center, do you have any advice for us on how you do showing versus telling?

So there’s a lot of things that you can do that are not that innovative. Most people who start businesses, entrepreneurs, they think differently than everybody else. So if you sit down and you think about ways of doing it, you can come up with something that you can do. I’m not a big believer in giving stuff away for nothing but I’m a big believer in being able to show what you can do. And you have an ability to do that even with a service.

Leif Hansen: So probably to the degree that it’s harder to communicate what you do. You would need to be a bit more compromising on the giveaway to be able to give someone an experience

Leif Hansen: That’s great. I’m going to ask you one last question, and remember we can take one more after that. Call in (347) 884-8009. I’m curious, Norm, what is it that surprises you time after time? I mean you get these questions emailed into you; you have people talking to you. What is it that just kind of almost drives crazy and surprises you time after time when you’re talking with businesses?

Leif Hansen: I did, yes.

Norm Brodsky: But he had a chance the next day to make it better. And so, if you don’t sit down and take responsibility for the mistake you made, if you’re always blaming them on somebody else, you’re never going to change that method that you do. And you’re destined to repeat that over and over again. And I see this every day. People not taking responsibilities, blaming somebody else instead of, “Listen, I’m the person in charge and I made a mistake, what is it?” And if you search that out and take the responsibility, you say, “I get what we did wrong. We did wrong,” and change that, then you don’t fall into the Groundhog’s Day syndrome.

Norm Brodsky: What’s that?

Leif Hansen: It’s exactly what he says, “Doing the same thing over and over and expecting different results.”

Norm Brodsky: Different results, right. That’s what happens and that happens more times than you realize it.

Leif Hansen: Yeah. Well Norm, I want to thank you so much for giving us your time. This has been really good. I think what we all appreciate about you and your columns and just hearing you now and this book is that you’re just no nonsense, really straight, practical, in your face advice.

Norm Brodsky: I’d like to say one thing, Leif, if I can to sum up. We have a website. It’s called www.theknack.info. That’s theknack.info, not theknack.com. And we are running a contest where three winners will get three separate trips, all expense paid to New York to spend a day with me. Ask me any questions they like, help them with their business that’s ongoing or help them start a new business. So if they go to that website and take a small contest, then they can get to the next level.

Norm Brodsky: Hopefully one of your listeners will be the winners.

Leif Hansen: Yeah! So I suggest you guys do that. That was theknack.info, so definitely show up there. Anything else that you would like to promote and how can we find out information about you? What’s the best way?

Norm Brodsky: If they go to theknack.info, which is the website, they can see upcoming events and what we’re doing. And if they haven’t read the book yet, it’s a must read for all people who are about to start their business or all people who are in small business for themselves. It’s chock-full of good tips and it shows you mistakes that I’ve made and other people have made and hopefully you won’t be the groundhog.

Leif Hansen: Thank you, Norm. We really appreciate you giving us our time and listeners, we appreciate you giving us your ear today. You can find out more about Norm at the website we just mentioned. You can find more about Biznik at biznik.com and hook up with other authors there. And just everybody else, have an excellent weekend. Thanks so much, Norm.

Norm Brodsky: Thank you!

Leif Hansen: Take care.

Norm Brodsky: Bye-bye.

Leif Hansen: Bye-bye.