If you are an entrepreneur, and you see what you think is a growth opportunity, you may be tempted to take the advice that’s been offered many times: risk all you can and jump in head first.
But if you catch your breath, the proper decision at that time is not really what to do. Your analysis lies more with if you think the opportunity is one for growth.
With that in mind, Smart Business interviewed some of the world’s greatest entrepreneurs and the leadership at EY about growth opportunities. These business leaders come from the more than 60 countries at the recent EY World Entrepreneur Of The Year conference in Monte Carlo.
“We’re looking at China and other Asian countries. The key to that market is to have big internationals that are creating value for their communities where we can sell our products. These are the kind of countries, those that can generate big internationals, that we are looking at.”
Martin Migoya, CEO, Globant
Entrepreneur Of The Year 2012 Argentina
“I have been tracking where I see money going. Where is the most foreign direct investment happening? Africa is clearly one. In South America, Colombia has been coming much more into its own, as have Indonesia and parts of Southeast Asia. Those are some of the markets you’ll start to see. Mexico is another one you have to watch because it’s close to the U.S. and its leaders have had change in their political landscape to be more pro-business.”
Herb Engert, Americas Strategic Growth Markets Leader, EY
“One of the ways that we encourage innovation is we partner with a lot of technology startup companies. We look for alliances and what’s next in technology that can drive improvements and enhancements in our industry.
When we see a technology that’s promising we’ll start working with them and provide them with real-world market feedback. That gives us the data and confidence to help them get to commercial deployment.
Our people are always looking for innovative ways to do things with the discipline of knowing that at Chevron we have to represent our brand and stand behind everything that we do and our customers expect us to keep them on that proven level of technology.”
Jim Davis, President, Chevron Energy Solutions
“I am in one of the newest economic blocs to emerge from Latin America, the Pacific Alliance, which seeks to create a Latin American gateway to Asian markets. Chile, Colombia, Mexico and Peru are members. The bloc hopes to make the commercial, economic and political forces among the members work more closely together.
The entrepreneurs representing Colombia chose me to be in that alliance two years after it was founded. What it is going to do is to join the market of those five countries — it is one market for everyone.”
Mario Hernandez, founder and president, Marroquinera
Entrepreneur Of The Year 2012 Colombia
“There continue to be tremendous opportunities in Brazil; it’s a big country, a big market. It will be back on the world stage even more with the 2014 World Cup and ultimately the Summer Olympics in 2016.
But when you look at Spanish-speaking countries, certainly Mexico is attracting a lot of direct foreign investment. The new administration, the federal government there, has definitely got a strong commitment to entrepreneurship.
We are seeing that as being important to them, and we are working with them on a number of different initiatives as the U.S. State Department and others try to help foster more entrepreneurial startups and more entrepreneurial growth in Mexico, both big and small.”
Bryan Pearce, Americas Director, Entrepreneur Of The Year and Venture Capital Advisory Group, EY
“There are always things you can do to improve and grow your business. You should be rethinking and retooling it every chance you get. The key thing is making sure everybody in the organization understands the story, where you’re going, are you going to get there in the belief that you are doing the right thing. People want to know their purpose, so that’s for me the biggest area to keep the energy going — keep a sense of purpose very strong.”
Dr. Alan Ulsifer, CEO, president and chair, FYidoctors
Entrepreneur Of The Year 2012 Canada
“Always be seeking new opportunity. Always be looking for new technologies, innovation and creativity within your people. The best ideas within our business have come from the people inside our company. You have to give opportunity to your people. Tell them it’s OK to be wrong and make mistakes. That’s important so people will learn from those mistakes and come up with better ideas.”
Lorenzo Barrera Segovia, founder and CEO, Banco BASE
Entrepreneur Of The Year 2012 Mexico
“The growth driver in the world is coming from entrepreneurs. They are the ones driving economic growth and driving job growth. If you look at leading indices of companies, they churn much more rapidly than they ever did before.
“It used to take 20 years to have a half of a churn in some of these indices. Now it takes four or five years. It’s because the entrepreneurs are building businesses so quickly. We have to keep investing and keep recognizing their strengths.”
Jim Turley, retired global chairman and CEO, EY
“It’s important to understand where the trends are going. So communication and information is important. I fully support the free market system. It’s a great way to understand where the best new ideas are coming from and where the value lies. We keep an eye on our competitors on technology and on alternative learning aspects. So to the extent that the web provides a better way to educate more students more efficiently, we’ll be using that.”
J.C. Huizenga, founder, National Heritage Academies
“I built the company based on people, not with experience from before, but willing to learn and try anything. We had a bunch of people that had never done this before. None of us had run companies. None of us had worked in high levels of companies. None of us were from Fortune 500s.
“Whatever you look for in people to bring them into a company — none of us had it. Most of the people came in from an entry-level position and now they’re leading departments. Chobani not only became a business that grew, but Chobani was like a school to us, including myself.”
Hamdi Ulukaya, founder, president and CEO, Chobani Inc.
Entrepreneur Of The Year 2012 United States and 2013 World Entrepreneur Of The Year
“Companies attracted by the Latin American market have to decide where to establish the operations in Latin America. They have many opportunities: Sao Paulo; Buenos Aires; Santiago, Chile; or maybe in Peru. But in Uruguay, there is a very small market. You have to operate with a different concept, much like an offshore company, to operate in Latin America.”
Orlando Dovat, founder and CEO, Zonamerica
Entrepreneur Of The Year 2012 Uruguay
Another year of EY’s Entrepreneur Of The Year Awards has come and gone, but the stories told and the lessons learned are far from over. Each year EY’s entrepreneurial programs get bigger and better and the entrepreneurs involved are getting more creative and leading more impressive companies than in prior years.
For instance, Hamdi Ulukaya, the founder and CEO of Chobani Inc., was named Entrepreneur Of The Year 2012 U.S. He went on to win 2013 World Entrepreneur Of The Year, making him only the second entrepreneur from the U.S. to win the world award.
This summer Smart Business caught up with a few of EY’s leaders, Herb Engert, Americas Strategic Growth Markets Leader, and Bryan Pearce, Americas Director of the Entrepreneur Of The Year Program, to discuss how these programs have evolved and talk about some new ones that are being developed.
It should be noted that EY itself is going through a leadership transition with the retirement of Jim Turley, global chairman and CEO. Smart Business spoke with him as well to understand the future direction of the company.
Here’s what we learned.
How are you effectively developing a seamless global leadership transition?
Turley: We announced Mark Weinberger was going to be my successor well over a year ago, probably 14 or 15 months ago. It was interesting because unlike many of our competitors who do this very quickly, we realize this is a really important transition.
The reason we gave ourselves 15 months of transition is because we’ve got 170,000-plus people around the world. So we take our time; we do this well.
How do you see your legacy?
Turley: If there is a legacy it’s our people culture. We’re a special place. More experienced folks join EY from our competitors than ever leave us to join the competitors. They come and they say it’s because of the culture we have.
What is one of the greatest marketing challenges moving forward?
Turley: Everybody has realized now, much later than we realized some 34 years ago, that the growth driver in the world is coming from entrepreneurs. They are the ones driving economic growth. They are the ones driving job growth.
I think we have to keep investing in and keep recognizing their strengths. But we don’t do this for our own marketing. We do this because of the impact entrepreneurs are having in the communities where they live, and they weren’t getting the attention in the press when we started the program some 27 years ago. Increasingly they are getting the visibility they need.
How did the issues discussed at the WEOY program relate to what’s going on in the U.S.?
Engert: They’re directly correlated. Everybody is talking around the issues and challenges in the world economy, which is growth, jobs, investment and innovation.
When I think about innovators and some of the companies that have come through the EY programs, they are companies that are disrupting, or said in another way, addressing a need, demand or service. In some cases in emerging markets they are replicating what might have already been met in another developed market.
That whole concept of replication and foreign direct investment, at the root of it, is what entrepreneurs are all about and it’s going to bring parody to the global world. A stage like WEOY puts it in perspective and how it’s all tied together.
Pearce: The companies that are here have been successful in growing their companies perhaps in their domestic or regional markets and this gives them a great opportunity to meet counterparts that are operating in other parts of the world. At a minimum, they may learn a little bit more about those markets. Ideally, they may meet people who are potential partners, strategic relationship candidates or people who could help them in some way to expand their own business into expanding foreign markets.
How do you plan to apply the information gained in the WEOY program into the Strategic Growth Forum this fall?
Pearce: The WEOY and the series of strategic growth forums that we do around the world are definitely part of getting knowledge to entrepreneurs as well as networks to entrepreneurs. When you bring those two things together, they learn more about how they can grow their business, run a better business, access capital and develop their people.
It’s a focus on the five important pillars around customers and growth: people, operating effectively, capital and managing risk. You get insights into that here and you’ll get insights into them at strategic growth forums.
How has the program content developed with WEOY?
Pearce: We have added a lot of content to what has historically been a program only focused on awards. That knowledge and greater focus on networking with each other obviously has been well received by the entrepreneurs. They came to WEOY to meet their colleagues, but also to learn and so we had people coming in as keynote speakers and panelists.
We have also created a series we are calling E exchanges, which are groups of 10 to 15 people sitting around the table with common issues. These E exchanges will be very helpful for people to get to know each other and to really get into some of the down and dirty, nitty-gritty of what they are doing to tackle problems in their own business.
Are there any particular countries where you see big opportunity?
Engert: I have been tracking where I see money going. Where is the most foreign direct investment happening? Africa is clearly one. In South America, Colombia has been coming much more into its own, as have Indonesia and parts of Southeast Asia. Those are some of the markets you’ll start to see. Mexico is another one you have to watch because it’s close to the U.S. and its leaders have had change in their political landscape to be more pro-business. It’s the No. 7 GDP nation in the world.
What does the Entrepreneurial Winning Women Program mean to EY and how is it developing?
Engert: The Winning Women Program is a recognition program, but it is so much more. It really is a development program. We really focus on recognizing the women and giving them an award, but we’re putting them into an EY incubator where we give them the opportunity to participate in a lot of different aspects of thinking about the strategy of their business, their financial plans, how they approach media, branding, PR and investors.
We’ve learned a lot in the last five years of this program, and I’m proud to say we are expanding that around the globe.
Pearce: One of the recognitions that we had was that women are 48 percent of business owners in the world. They’re starting up businesses at a rate more rapid than men right now. But part of the challenge is scaling. You don’t tend to see the women-led businesses scaling as rapidly as others do.
What I think has really been the strength of the program is that there is more than just an award. There is ongoing education. They are recognized through the awards program, but also get mentoring and other skills to help them build better businesses. And then we bring them to events like WEOY.
We will have virtually all of them at the Palm Springs event in November. So they have that opportunity to get integrated in with our EOY award winners and other great entrepreneurs and find partnerships and boards of advisors and directors and various other things that can help them to scale their business.
So we began that in the U.S. We are now rolling that out to Canada and Brazil this year and looking at more rapid rollout into other countries because it is certainly a great opportunity to help support these women as they grow these businesses around the world.
What about the addition of a family business component?
Engert: The Family Business Award was put in place because family businesses are the bedrock of communities. They’re the unsung heroes.
Most private companies are family-owned businesses and a lot of public companies are actually family-owned businesses as well. A significant amount of them are multi-generation family businesses and it creates a focus on that market segment.
It’s a totally different class of business with different needs and attentions. So we are trying to celebrate family business, which will provide a lot of great learning and perspective for us.
Pearce: Our definition is that families are those at least in the second generation or beyond. Not only do you have all the same challenges that another company, private or public, would have in growing the business, but now you have this added dimension wrapped around it of family dynamics.
We try to bring them together with each other so they can learn from other families how they are handling those same kinds of challenges around family integration, succession, fundraising, liquidity, and all of those kinds of things, and then we are able to provide services to them as we look at managing through those same issues.
Across the 25 programs regionally in the U.S. we had more than 200 nominees this year that want to be considered for the family business award, which was a great start.
Can you explain a little bit about Endeavor?
Engert: We have a partnership with Endeavor. They are focused on building a better working world themselves and investing in and promoting entrepreneurs in emerging markets around the globe. The Endeavor model is wonderful because it’s entrepreneurs who are opening a local chapter, but have strong ties to the global connections of Endeavor that help bring entrepreneurs and perspectives to bear.
Endeavor is a great program and we’re proud to be partners with them. I look forward to Endeavor expanding further around the globe because they are a key difference in some of those emerging markets.
Pearce: In many of the countries that they operate in, particularly in the Americas and in Latin America, we’ve got strong relationships with our EOY program.
For example, this year is the first year that we’ve had EOY in Uruguay, and that really began as a partnership between Endeavor Uruguay and one of our former partners who is on the board. We were able to team together and the initial EOY gala was combined with the Endeavor gala. We had more than 800 people attend in year one. So it shows you the power of entrepreneurship and certainly the power of the partnership between Endeavor and EY.
Nothing is more frustrating than missed opportunities — except when those missed opportunities were completely avoidable. For example, you and your organization put in the time and effort to drive prospects through the marketing funnel toward conversion. And then, when the prospect is engaged and reaches out to you, you’re not equipped to provide a timely follow-up response.
This happens entirely too often. But basic prep work on the front-end can help you avoid becoming one of those organizations whose well-planned marketing strategy is wasted.
Conversion means different things to different people. In retail, it may mean going to find a product — either online or in person. But in a different industry, it may mean that someone just wants to talk to you about helping to solve a specific problem.
Regardless of your conversion definition, the singular commonality is your ability to immediately follow up and act on the potential conversion. This is because when someone reaches out to buy a product or for help with a service, it is an emotional decision. He or she is claiming that they either need something (a product) or help with an area they do not have the expertise in.
The importance of this step in the marketing funnel is critical. Like it or not, we live in a world of instant gratification — both personally and professionally — and you must tailor your marketing efforts to accommodate it. When someone winds their way through that funnel by becoming aware of your services, having interest, and then being willing to engage and dig deeper to learn who you are, nothing kills those marketing efforts faster than failure to respond to that person.
Too often, we see conversion points that consist of a basic “email us” link on a website. It sends a note to a general email address that nobody regularly checks. Or, the company lists a phone number that reaches a general voice mail account that is rarely checked. In both scenarios, all the work required to lead a prospect to conversion is rendered moot.
Take steps to ensure conversion
So what can you do to reverse the trend and build systems that allow for more immediate conversion? Among the easiest to implement are
■ A phone number that connects with somebody who is dedicated to following up.
■ Online chat capabilities in real time
■ Marketing, through a website or other sales materials, that guarantee a 15-minute response time.
■ A well-designed form on your website that asks for four components: name, email, phone number and reason for the inquiry (any more information than that may cause prospects not to convert).
Keep it simple and swift
Many organizations simply fail to take the direct route, and as a result, they swing and miss.
Initiatives such as putting a map that points to your location as your prominent website “contact us” looks great, but how many people will actually get in their vehicle and drive over to see you?
Also, don’t underestimate the importance of offering multiple ways for people to reach you for a swift response. When it comes to today’s marketing funnel, there is no effective one-size-fits-all approach.
For example, let’s say you’re looking to refinance your house or buy a new one. This is an emotional decision. You do your research and find a company that you believe will offer the best possible rates. You reach out to them. And then, you don’t hear back for days. What happens? You lose interest.
But now, consider the result when you reach out to a company and get a return response within 10 to 15 minutes.
First, you get the information you need to make a decision. More importantly, though, that company has forged an emotional connection with you because they were responsive to your needs.
It is this emotional connection that can be highly effective in closing the final piece of the marketing funnel — conversion. And, if your organization’s marketing strategy includes optimizing your marketing spend, why would you ever overtly waste money by failing to have an effective — and immediate — follow-up process in place?
David Fazekas is vice president of digital marketing for Smart Business Network. Reach him at email@example.com or (440) 250-7056.
Calm down … those two letters in the headline are not what you might be thinking. However, it got your attention, for this leads to an important subject.
When you, or those with whom you work, don’t follow the principles of these two letters, problems occur. Not doing what these initials represent can be the difference between success and failure, cost big money, create disappointment and actually ruin relationships.
Hopefully by now you’ve figured out that F.U. stands for Follow Up. This skill is central to achieving objectives, supporting your people or customers, and maintaining your credibility. Too many people just don’t get it and consistently fail to make F.U. a part of their business regimen.
Words are cheap, but it’s action that makes the difference. Many promises are made every day such as: “I’ll get the answer and return your call soon,” or “My person will call your person so that we can get together.” Good intentions aside, if one does not make note of it, the call just might never happen.
Fortunately, only a relatively few get hit by locomotives because trains are big and people see them coming, but many are stung by bees. That’s the same with following up. Virtually no one would forget to pick up the big order, or neglect to attend a huge meeting, but too many let the smaller, yet important, matters slip through the cracks. This not only affects the person who didn’t receive what was promised, but also could significantly impede productivity.
As an example, an associate is to provide needed information first thing in the morning. Breakfast comes and goes and as the lunch hour approaches people along the line are sitting on their hands waiting. Do the math; count up what that could cost your business day in and day out. Frantically, and with a high degree of disgust, you track down the tardy offender and are appalled by the response, “Oh, sorry, it just slipped my mind. I forgot to write it down.” Sure, this can happen once but by the second or third time it becomes a pattern and the credibility of the perpetrator can be lost.
Following up is a reflection of respect. When people don’t have the courtesy of doing what they say, you begin to wonder if they can ever do it. In my companies, all those with whom I work quickly become aware of my sacrosanct F.U. policy.
Essentially after every meeting, whether a one-on-one or with a group, I assign a date for my own purposes of when what was discussed is to take place. If it was a task of significance, the date would be agreed upon with those who had to do the work.
When new employees receive a memo from me, with the unexpected “F.U.” initials in the bottom left-hand corner, many are initially stunned, thinking I’m giving them a crude ultimatum or don’t think much of their work. Fortunately, those with a modicum of common sense quickly realize that these two letters are not a pejorative as they are always followed by a numeric string that even a newbie can figure out represents a date.
I remind my team that I do not want to be their father or their baby sitter. Instead, when I ask that something be done by a certain date, and everyone involved agrees, it must happen.
Alternatively, the person assigned the task could always come back and say he or she can’t meet the deadline, don’t know how to do what was being asked, need help with the issue, or had figured out a better alternative. What could not happen is for the person assigned the task to pretend that no follow-up was required, or worse, that the covenant was never agreed upon.
Because so few follow up as promised, this presents your business with an outstanding opportunity to rise above others and create a rock-solid reputation for saying what you’ll do and then doing what you say. All it takes is a little discipline and respect for those with whom you work. It’s better to carry around a little string for your finger than run the risk of finding the proverbial rope around your neck as a result of errors of omission.
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. “The Benevolent Dictator,” a book by Feuer that chronicles his step-by-step strategy to build business and create wealth, published by John Wiley & Sons, is now available. Reach him with comments at firstname.lastname@example.org.
Thinkers solve problems.
Mark Zuckerberg found a better way to connect people with friends and family through Facebook. Larry Page and Sergey Brin invented a better way to search the Internet by creating Google. Steve Jobs showed us a better way to obtain and listen to music through the invention of the iPod.
None of these examples happened by luck. Each of these great thinkers spent a lot of time working to perfect their ideas. Great thinkers are not born, they are made.
To create great products and services, you have to develop the habit of expanding your thought processes and critical thinking skills. Why? Because the human mind tends to be lazy. It tends to repeat the same thoughts unless it’s trained to explore new ideas. Great thinkers put in the effort to analyze things in new ways and not accept the norm.
We live in a negative society where bad news trumps good news and the potential downsides of an idea outshine the potential rewards. It takes a lot of effort to retrain our minds to focus on the positives and the solutions rather than the ramifications of a failed idea.
Becoming a great thinker requires an investment of time; there are no shortcuts. You have to be organized and plan for it. Take time to think about the problems unique to your business or industry. Work through the pros and cons of any idea, looking for a way to make it work. Study competing companies and leaders and gain an understanding of how they think. It’s also helpful if you always do your heavy thinking in the same location, and it doesn’t have to be anything fancy. Some people do their best thinking in the shower or over a cup of coffee at a cafe.
But there is one major pitfall to avoid: Don’t equate change with new thinking. Just because you are changing something does not mean you are being a creative thinker. There might be several “accepted” ways of doing something within your industry, and changing from one of the accepted ways to the other isn’t doing anything different. The goal is to identify new ways of thinking and as a result, find a new solution to a problem that no one has thought of before.
Finding these unique solutions won’t be easy, but success never is.
If your company is sold in part or whole, there will be change. It is inevitable and generally sought. It is hard, particularly if the company was yours.
If the new investor is a strategic one, the change will be easier to predict. Typically strategic buyers, particularly the large ones, have well-developed systems and processes that they will implement in the newly added company.
These include reporting chains, standardized employment and compensation structures, and other authority systems. It generally is difficult for entrepreneurs and family business owners to adjust to these regimes — they typically don’t last long. As such, success in these situations comes from recognizing this from the beginning, and structuring the transaction and transition accordingly.
“Partnering” investments, however, have a much different dynamic. In these investments, the investor often is betting on one or more of the existing managers to lead the company going forward, even if they are selling some or most of their ownership. The investor views its role as partnering with these leaders to assist them in realizing their strategic vision and the company’s potential. Partnering is how our firm invests.
If you are contemplating a partnering transaction, the following are some thoughts regarding how to maximize your success in working with your new investor/partner:
Openness in the process
The clearer your post-transaction aspirations, the better your ability to communicate these to your future partner. If these are communicated, your future partner has the ability to accept them, or not, and then structure accordingly.
The future partner has a similar imperative of openness regarding objectives and timing. This fosters the most critical component of a successful partnering — alignment.
For us, the strategic plan is the cornerstone of communication. It sets forth the vision, goals, path, responsibilities and budget of the organization. It sets expectations. You will be highly successful with an investor/partner if you present acceptable plans for growth and improvement, and then consistently meet or exceed them.
If choosing between a high-growth plan with high risk, or an acceptable plan with very low risk and potential to exceed it, I suggest the latter.
Willingness to let go
Change can be uncomfortable. This is particularly true for most successful business owners. This includes the very difficult, but necessary, process of letting go of employees and managers — no matter their tenure or relationship — who can’t keep pace or aren’t embracing the company’s new direction.
This also includes letting go of the notion that it is right merely because it is “how it’s always been done.”
Accountability can be difficult for those who aren’t accustomed to it (i.e., most entrepreneurs — which usually is why they are entrepreneurs). As such, success with a future partner will depend in part on how, and how often, the leader and team agree they will communicate.
Ideally, this communication and accountability can be accomplished without creating new tools (and more work) for the team. The goal is to keep the partner apprised of key issues and challenges. In doing so, the partner is able to bring assistance and potential solutions. In not doing so, you and the company are deprived of that opportunity for support.
It takes considerable effort to bring on an investor/partner. If done well, however, the benefits greatly outweigh the costs. You gain a skilled sounding board, a provider of resources and capital, a vastly greater network, asset diversification and a risk sharer.
Your ability to execute in the four areas described above can greatly impact your success. The onus is on you.
Dan Lubeck is founder and managing director of Solis Capital Partners, a private equity firm headquartered in Newport Beach, Calif. Solis focuses on investment in lower-middle market companies, typically located in the Western U.S. Lubeck was a transactional attorney and has lectured at prominent universities and business schools around the world. For more information about the company, visit www.soliscapital.com.
Jon Congdon and Carl Daikeler found a captive audience of people eager to get in shape and lead healthier lives when they launched Beachbody LLC in 1998. The business began as a marketing company producing fitness programs for TV, but soon started creating its own fitness products.
“At the same time, we were building out our website and getting more traffic there,” says Congdon, the company’s president. “We got pretty good at marketing our own products on the Internet.”
But in the mid 2000s, Congdon and Daikeler began to grow more skeptical of their continued reliance on TV.
“There was always going to be a demand for fitness and weight-loss products,” Congdon says. “But the television marketing business was tempestuous … you had to keep creating new ads. We wanted to stabilize the business by creating a new distribution model, a new way to distribute our products.”
That new model was going to be called Team Beachbody, a multi-level marketing company where customers could become representatives of Beachbody and sell products while earning a percentage from the sales.
“They can also find other people who would also like to do that and have them join as part of the organization,” Congdon says. “So some of them make very good money. They make money by selling and they make money by finding other people who understand the business opportunity and sign on as a Beachbody coach. A lot of other companies call them distributors. We call them coaches.”
It seemed like a sensible venture, but it took more time to get it up and running than Congdon and Daikeler expected.
“When you announce the idea, it all sounds great,” Congdon says. “It was when it was taking a while to get things going that some of the leaders in the company were concerned. It wasn’t profitable as quickly as we wanted it to be.
“One side of the company was generating tens of millions of dollars in profit and the other was taking a fifth of that profit and absorbing it. When that goes on two years longer than you anticipated it to, there are some people who will say, ‘Hey, do we really want to be in this thing? Is it worth it?’”
The response from Congdon was blunt: It has to work.
“We benefit by having a network of people who are helping other people succeed using our product,” Congdon says. “So if we’re going to give people these products and help people get fit, if we don’t generate a network that helps them get fit, we’re not going to achieve our core mission, which is to help people achieve their goals and lead healthy and fulfilling lives.”
Make sure you get it right
As Team Beachbody was being developed, Congdon and Daikeler knew the platform needed a “hero product,” something that would lure people to want to be part of the community that they couldn’t get anywhere else.
That hero product ultimately became Shakeology, a line of nutritious shakes in different flavors that would help users achieve a variety of fitness goals.
“The network markets that product and gets people on that as one of the core tenets of what it means to get healthy as a member of that network,” Congdon says.
The problem is the time it took to identify Shakeology as the hero product that Team Beachbody needed.
“You’re not going to find many entrepreneurial people who are pessimists,” Congdon says. “But it always serves you well to understand what the pitfalls might be. In all honesty, one of the pitfalls that we probably underestimated was our in-depth understanding of what it took to run a successful network marketing company.
“We did the analysis and we knew where we wanted to go and we knew we needed a hero product. But it took us longer to get that hero product ready for market than we thought. So in hindsight, we might have started that network a year later than we did, when we knew we had the hero product lined up. We certainly didn’t make it easy on ourselves not having an immediate source of sales for our coaches.”
All the while, as Congdon and Daikeler were working hard to get Team Beachbody on its feet, they still had the direct side of the business that required their attention.
“We needed, as one of our core initiatives, to maintain our excellence on the direct side of the business and to continue investing there,” Congdon says. “But that also meant we needed to almost incrementally grow another business, so the investment was large.”
The key goal to keep in mind, whether you’re launching a new product for a new business or a new product for an existing business, is the importance of building a product that you can proudly stand behind.
“You need to make sure you’ve created a product that does what you say it does,” Congdon says. “Have a brand that you can stand by. If you have any doubt, if it’s not the best it can be, you’re going to have trouble. You’re going to have trouble anyway, every business does. But if your product isn’t everything it’s supposed to be and more, then when you hit those rough times, you’re really dead because you can’t stand by your product.”
Keep the future in view
One way that Congdon and Daikeler try to stay ahead of the curve when it comes to dealing with challenges is their approach to strategic planning.
“We basically go in and create a new three- to five-year plan in the last cycle of every plan,” Congdon says. “So we’re always rolling into a new plan. We don’t wait for the current plan to end. We’re always working on the next plan during the last phase of the current plan.”
The key thing with any strategic plan is to understand your resources, both human and financial, to execute on that plan and to make sure you are ready to move forward.
“Luckily, we were the kind of company that was doing well enough, we have always been able to finance our growth and investments out of our own profits, which is a luxury a lot of companies don’t have,” Congdon says. “As part of the plan, it should also be within your reach strategically and financially.”
A consultant can be an effective resource in helping you make an honest appraisal of your company’s ability to tackle a new initiative.
“I’m not always a huge advocate for consultants,” Congdon says. “But in this case, it was very helpful to have somebody who was very smart and who took the time to research what our company was so they didn’t come in completely cold. They can come in and with a fresh set of eyes, walk us through the process of creating a strategic plan that actually makes sense for the company creating it.”
A consultant can take that objective approach and make sure the organization agrees on what it does well and what good opportunities out there it could pursue.
“That’s not something a couple of co-founders can just take on and do in their spare time because co-founders who are running a company don’t have spare time,” Congdon says.
One thing that a consultant should not be doing is critiquing your idea.
“It’s not their job to tell you the idea is stupid,” Congdon says. “It’s their job to help you get agreement on what the company’s strengths and weaknesses are so that you realize that an idea is stupid.”
Stay focused on goals
As the effort to build Team Beachbody continued to move forward, Congdon and Daikeler relied on weekly team meetings to make sure they were still filling in the gaps that needed to be filled.
“Everybody always includes a list of things that are concerning them or that are in the way of them achieving their objectives,” Congdon says. “Until those things are cleared out of the way, we call those blockers. They remain on the list so we have to talk about them every Monday morning. As they get cleared off, we know we’ve eliminated another blocker.”
Today, Team Beachbody is a network of thousands of independent distributors that have helped grow the Beachbody brand. The company’s other products also continue to thrive, including such well-known brand names as P90X, Insanity, Hip Hop Abs and Brazil Butt Lift.
But the multi-level marketing business that launched in 2007 now has a database of 14 million people, has recruited more than 100,000 distributors and leverages $100 million a year in advertising.
Even with that success, both Congdon and Daikeler still see room to grow.
“The idea of having an army of brand evangelists out there was Carl’s way to hedge against what might be at some point a fading TV audience that really only wants to buy on the recommendation of a friend or a neighbor,” Congdon says.
“We’re still looking to nail that. We’re doing well with it, but if we were really nailing it, the coach network would be growing even more quickly than it is.”
How to reach: Beachbody LLC, (800) 998-1681 or www.beachbody.com
The Beachbody File
Names: Jon Congdon, Carl Daikeler
Titles: President, chairman and CEO
Company: Beachbody LLC
Congdon on Daikeler’s belief in the network plan:
Carl was the champion of the network being the thing that needed to change the company. The real key was that at the end of the day, we both truly believed that the way to grow our business was to stabilize our revenue base in a way that would generate value for the company and make sure we were around for a long time to help our customers. While we had doubts in how fast it was going and doubts in certain aspects of the model, we never doubted it was the right thing for us to try to do.
Why the network system works:
We had customers who were champions of our product that were out there telling everybody that they knew that they lost weight using our products and were getting 20, 30 and 40 people to buy the product for us.
Carl really wanted to create a way for them to be rewarded for doing that. He also remembered that when we first started, we had both done one of our first products and had used our own testimonials very effectively to sell that product.
So he thought there could be hundreds of thousands of micro-versions of that around the country. If people were using our product and succeeding, they could use their own success as the reason to get their friend or neighbor to buy something from us.
Don’t skimp on your product.
Test your plan.
Keep issues in sight.
You need operating cash to grow your business, but securing a traditional commercial loan isn’t always easy for small and midsize business owners. Fortunately, Small Business Administration (SBA) loans are a worthwhile financing option. An SBA loan typically offers longer terms, more competitive interest rates and, best of all, bankers can be more lenient because the government guarantees up to 75 percent of the loan amount.
“An SBA loan is a sensible option for businesses that experienced a decline in sales and profits during the recession,” says Santiago “Chico” Perez, SBA sales manager for California Bank & Trust. “Bankers can consider your financial projections, along with historical data, when evaluating your loan application.”
Smart Business spoke with Perez about the growth opportunities through an SBA loan.
When should business owners consider an SBA loan, and how do these loans differ?
New ventures traditionally have a hard time securing working capital, but you may get $100,000 to $5 million through a SBA loan, as long as you’ve run a similar enterprise and propose a viable business strategy. You also can use SBA funding to purchase another company or procure equipment or inventory to fulfill a new contract.
Generally, SBA loans can offer more favorable terms. For example, you only need 10 percent down to purchase real estate, and you can roll fees into the loan balance. SBA loans feature higher loan-to-value ratios, longer repayment periods and no balloon payments. Companies often qualify for higher loan amounts because they can amortize the purchase of buildings over 25 years or equipment over the remaining economic life, and need less cash flow to service the debt. Owners also can use funds to buy raw materials, finished goods or equipment to expand into new markets.
How does the SBA’s underwriting criteria differ from traditional commercial loans?
Bankers will review standard requirements such as financial statements and credit reports, but some criteria differ:
- Projections. Bankers consider future sales and historical data when evaluating loan applications. Ensure your projections are realistic and correlate with current financials and forecasts. For example, earnings won’t automatically double with a larger facility or new equipment. Instead, explain how the equipment lowers operating costs or how you’ll use the extra space to add a new production line. Substantiate claims with copies of customer agreements and contracts.
- Resumes. Tout your management team’s industry experience and track record.
- Ownership. Owners with more than a 20 percent stake must submit signed personal financial statements and tax returns.
- Down payment. Lenders must determine the source of a borrower’s down payment, even if the funds are in an escrow account.
- Collateral. The need for collateral hinges on the loan purpose and program so review underwriting criteria at SBA.gov, and state both in your proposal.
- Tax returns. Owners must supply three years of tax returns, financial statements and balance sheets to qualify.
Does the SBA offer other support to small business owners?
The SBA provides myriad tools and support to help owners create a loan proposal and navigate the underwriting process. Small Business Development Centers offer free assistance with financial, marketing, production and feasibility studies, and many centers engage local experts.
The SBA also provides mentorships, free counseling and business plan expertise through the national nonprofit SCORE.
What else can owners do to successfully navigate the lending process?
Loan approval hinges on an accurate, thorough proposal, so take your time and seek expert advice. Bankers want to hear the story behind your numbers; be ready to explain how you overcame adversity and how you’ll use the SBA loan to take your business to the next level. Help your banker understand your customers by including links to your company’s website, LinkedIn page or Facebook page in your proposal. Finally, you can accelerate the process by selecting an approved Preferred Lender who can approve loans without submitting the entire package to the SBA.
Santiago “Chico” Perez is SBA sales manager at California Bank & Trust. Reach him at email@example.com.
Website: California Bank & Trust is an SBA Preferred Lender. Learn more at www.calbanktrust.com/smallbusiness/loans/small-business-loans.html.
Insights Banking & Finance is brought to you by California Bank & Trust
No matter what type or size of a business, health care tends to be one of the leading employer costs. Although the Affordable Care Act (ACA) was intended to reduce costs, businesses are finding themselves on the receiving end of double-digit rate increases each year.
“Because of these hefty increases, employers are searching for more creative ways to reduce costs, while ensuring their benefits package remains competitive in the employment sector,” says Mary Policky, assistant vice president at Momentous Insurance Brokerage, Inc.
Smart Business spoke with Policky about how to reduce or restructure health benefits offerings in tough times.
When should a company consider reducing or restructuring benefits?
First, they should review their policies at the beginning of each fiscal year to determine a budget dedicated to the employee benefit package.
Then, they should do a mid-year plan review, which is also a good time to re-educate employees on important benefits available to them, such as various types of preventative care, which may be covered at no cost to the employee.
Lastly, review policies near open enrollment. Typically, the carrier releases renewal rates 60 to 90 days prior to the plan expiration date. That’s the time to shop around and research opportunities with other carriers, as well as alternate plans with the current carrier.
What’s the first step to figuring out where to make cuts or restructure?
A key factor is determining how much you want to spend. The challenge is how to significantly reduce the premium without sending employees into a tailspin from extreme changes, such as increasing deductibles and copays, which inevitably raise financial concern. Additionally, it’s a good idea to conduct employee surveys to determine their areas of concern, such as office visit copays, in-network doctors, prescription drugs, etc.
It’s also beneficial to have your broker provide benchmark information to see where you are in the industry, and where your competition is. More and more, employees are seeing that medical benefits are a vital part of their total compensation package, and will often consider a reduction in salary if the company offers comprehensive plans.
Generally, what low-hanging fruit can businesses look at first?
In addition to the deductible and copays, they should review the provider network. A company with 30 employees enrolled in an HMO plan typically spends $18,000 per month. By changing to a limited network, the premium reduces to $13,000 a month — a 28 percent savings. You can use disruption reports to gauge how many current doctors are in a new limited network.
Many employers are moving toward consumer-driven plans, such as health savings accounts (HSA) or health reimbursement arrangements (HRA). These plans allow employers to give each employee a fixed dollar amount to choose how they want to spend it on medical expenses. These tax-advantaged plans result in a lower premium and less rich benefits. However, a portion of the premium cost savings can be given back to employees to use for deductibles/copays. Also, with cost decisions in the hands of employees, the onus is on them to make better health decisions.
But it’s not always about reducing benefits. Adding wellness or disease management programs help create a healthier workforce and reduce premium increases.
What’s the best way to communicate to employees?
Employers often underestimate the need for clear communication and making sure that employees truly understand their benefits. Make time for mid-year reviews, webinars, conference calls and/or payroll stuffers. If you must raise rates, inform employees as soon as possible. Also, inform employees how much of the increase the employer is absorbing. A great way to convey this is through benefits statements, which show the total cost of benefits, and how much the employer is contributing.
Health care reform is just one of the many reasons to have a broker help navigate constant changes in the marketplace and tailor a plan to fit the company’s needs.
Mary Policky is an assistant vice president at Momentous Insurance Brokerage, Inc. Reach her at (818) 574-0426 or firstname.lastname@example.org.
Blog: Get more information on employee benefits and other important insurance topics at www.momentousins.com/blog.
Insights Business Insurance is brought to you by Momentous Insurance Brokerage, Inc.
Imagine it’s a hot day. You’re thirsty and hungry, but don’t want anything unhealthy. There aren’t many options available to meet all those needs. In the early ’70s, the concept of the smoothie was born out of this unmet need. Opened in 1973, Smoothie King Franchises Inc. was the original smoothie brand.
In 2001, Wan Kim had this same urge to find a healthy option to quench his thirst and satisfy his hunger. He had his first experience with a Smoothie King smoothie while studying at University of California at Irvine. The high quality, healthy product had him hooked immediately.
Kim was so impacted by the product that he became a Smoothie King franchisee in South Korea. Since 2003 he has owned several Smoothie King franchises, and in 2012 when the opportunity came about to own the brand, he jumped at the chance.
“I bought the company in July 2012,” says Kim, Global CEO. “I really love this brand. It’s not because I’m the owner, but because we have great products. There are a lot of changes still happening, but it’s exciting.”
Smoothie King, a 300-employee, more than $230 million organization, is now 40 years old. The brand has more than 700 stores and a presence in the United States, Korea and Singapore. Despite the company’s established age and fairly big size, a new owner and plenty of potential market opportunity leave the brand in growth mode today.
“Our next five-year growth plan is to open 1,000 stores in the U.S. and 500 outside the U.S.,” Kim says. “Last year the company did about 26 franchise openings. This year in the first quarter the company has done 40 to 45 signings.”
Kim’s experience as a franchisee and now a franchisor has given the company new life and Kim is excited about where he can bring the brand and its smoothies in the near future.
Here’s how Kim is spreading the word about Smoothie King in the U.S. and overseas.
Understand all areas of your business
Kim was a franchisee for nearly a decade in South Korea. His stores were some of the highest grossing for Smoothie King before he became CEO.
“Obviously franchisees and franchisors have some different views, but eventually the bottom line is to make a better brand,” Kim says. “The path they take can be different, so you have to keep communicating to each other and look at the bigger picture.”
Kim has a very unique advantage over numerous other franchise CEOs. He now has experience as a franchisee and a franchisor.
“I have both aspects and know what a franchise wants and needs, and I know how I need to communicate,” he says. “In any kind of business, sometimes people forget why we do it. So that’s why I keep communicating and keep telling our people why we do this business. We have a great mission and a great vision. We just have to talk about it.
“A lot of people want to make money and be comfortable and I get that and that’s very, very important, but there has to be another reason why we do this. Smoothie King is a healthy choice and our mission is to help people live a better lifestyle.”
While the company’s mission is to help people live a healthier lifestyle, Kim wanted to make sure that the company’s franchises were in good health also.
“As soon as I bought the company I looked at how many single franchisees we have, because when I was a franchisee I thought becoming a multi-unit franchisee was actually very challenging,” he says. “As a franchisor, they don’t understand what kind of challenges franchisees have when they have a second or third location.
“I started to visit some multi-unit franchisees that we have to look at what kind of system they have in place. Today, we are assembling all those systems so that whenever we have a single franchisee try to become a multi-unit franchisee we have some system to help them grow.”
Having those systems in place will become very beneficial as Kim continues to look at ways he can expand the brand.
“Right now we are in growth mode and are opening a lot of stores and also expanding into other countries,” Kim says. “When you grow, you are hiring a lot of people and when you’re expanding outside the United States you encounter different cultures. In order for me to assemble all those differences I need a really strong mission for why we do this business so that it doesn’t matter what kind of culture or background you’re from.”
Prepare for growth mode
Today, Kim is focused on growing the Smoothie King brand outside the U.S. and in the Southern parts of the U.S. where the company has a strong presence, but a lot of potential still remains.
“We want to make sure that we secure our market before we expand to a different part of the U.S.,” Kim says. “That expansion is happening in Florida, Texas, Georgia and other southern parts of the U.S. Going outside the United States we are looking at Malaysia, Indonesia, Thailand, Taiwan, Japan and the Middle East. Our goal is to open two markets this year and two more markets next year.”
Fast-paced growth like Smoothie King is expecting requires a strong culture and mission that make the company attractive anywhere it goes.
“When you are in growth mode I would advise that you want to have a really strong culture in your organization, so that whomever you hire can be blended into your culture,” he says. “You have to set up a strong mission, vision and keep communicating with your employees.”
When you take your company outside of the United States you will experience a lot of cultural difference, and you have to be prepared for it.
“A lot of times when people don’t have any experience with different cultures they will think it’s wrong, but in fact it’s different,” Kim says. “In order for you to go to other countries and do business you have to learn how to respect their culture. If you don’t respect their culture they will know immediately. You have to educate your employees.”
The vast cultural differences Smoothie King employees will experience as the brand continues to expand isn’t the only change they’ll have to accept, they’ll also have to buy into the sheer amount of growth that Kim sees in the company’s future.
“A lot of times when companies grow employees don’t really see how far we can go,” he says. “When we start to grow there is a lot of work coming in and a lot of things are changing. It is very important that I need to keep communicating with employees that we can get there, because if you don’t believe we can get there, then it’s not going to happen.”
One of the first things Kim did when he bought the company was to tell the employees about the growth plan and a lot of people didn’t buy in.
“They were thinking, ‘Oh, it’s a new owner; of course he’s going to be thinking of growth, but it’s not possible,’” he says. “So I had to keep communicating that it’s going to happen and one by one, I started to show them that this would happen and then it really happened and people believed in the plan. I know there are still people who don’t believe where we can go, so I still have to communicate.”
Kim bought the company a little more than a year ago and he is having a blast seeing the company succeed little by little.
“I tell my employees to imagine if we were the size of any big fast food company, the world could be a different place,” he says. “It’s not just about making money and having success. It’s also about influencing more and more people to live a healthier lifestyle.”
How to reach: Smoothie King Franchises Inc., (985) 635-6973 or www.smoothieking.com