3 Rules to be a Billionaire

There are three rules to becoming a billionaire in business. First the business rules, then the story: Hugh MacLeod gets even with Shel Israel

  1. Sell at a profit.
    1. You have to sell at a profit. You can’t sell at a loss and make it up in volume. Any fool can reach 10M in sales by simply selling $10 for $1. Granted he will have lost at least 9M, but he will have achieved 10M in revenue! The point is you have to sell at a profit.
  2. Love what you do.
    1. You can’t sustain unless you love what you do. At least in your initial business. Sure you can tough it out for a year. Two years. Three or four. But you can’t sustain 10 to 20 years if you don’t love it. You have to love what you do (at least in your initial business!)
  3. Have a recurring revenue model.
    1. You MUST have a recurring revenue model. It takes too much energy to make a sale no matter what your profit margin is. Your customer must come back to you, and refer business to you, or you won’t make it.

The story of the three rules of becoming a billionaire:

Years ago I heard Ken Jones` speak. Now Ken has never been accused of having a shortage of ego (#heh, forgive me Ken). And I heard him speak at an IABC, or maybe a PRSA function in Houston when he told the story. I remember it as “so I talked to a man who was in the room with these three billionaires and he asked them “what is the secret” and their reply was the three rules.” I probably got that wrong, or paraphrased it poorly, but what I do know is as follows.

I have had 5 dba’s counting my current 13 year old company. 2 were play dbas for home businesses that I can barely remember. 1 dba (1994/95 ish) was real for web design but failed. The next was a corporation with a partner that never made real money and basically failed. (I never said I was a fast learner!) Then this corporation started in 1997 *almost* failed in the recession of 2001 and 2002 because we did not have a recurring revenue model. I learned my lesson. Follow the three rules.

More? Take a class from Ken at U of H for more. But know what you love before you show up because they can’t teach you that. Business is tough; stack the deck in your favor. And don’t believe that crap from wall street. Go sell something. No seriously, go SELL SOMETHING!

work smarter and harder

The false axiom “work harder not smarter” came up in conversation today. Which reminded me of this paragraph I did on the book Rework called When to Apply Business Advice:

Sometimes advice is populist, but there is a logical flaw. A company who follows the infamous “work smarter not harder“ quickly falls to a company that believes “work smarter AND harder.“ Working smarter-not-harder would only work if hard workers were dumb. But we get smarter through experience! So unfortunately, hard workers are typically also smarter than you. Oooops. But we don’t like to admit that. What we want to hear is that the  4 hour work week is a winner.  I certainly wish the global economy worked that way. (But it doesn’t)

You can read the full post at When to Apply Business Advice.

When to Apply Business Advice

I emailed out to the company today’s quote of the day, something we do internally, with the three quotes below. But given how popular advice from 37 Signals is among some of my employees, I wanted to add some commentary (after the jump). And BTW, I definitely agree with these three quotes from Rework.

“You need less than you think”¦Do you really need six months or can you make something in two?“   (pg. 53)

and

“No time is no excuse.   The most common excuse people give: “There’s not enough time.“   They claim they’d love to start a company, learn an instrument, market an invention, write a book, or whatever, but there just aren’t enough hours in the day.   Come on.   There’s always enough time if you spend it right.“ (pg. 40)

and

“When you put off decisions, they pile up.   And piles end up ignored, dealt with in haste, or thrown out.   As a result, the individual problems in those piles stay unresolved.   Whenever you can, swap “˜Let’s think about it’ with “˜Let’s decide on it.’   Commit to making decisions.   Don’t wait for the perfect solution.   Decide and move forward.   You want to get into the rhythm of making choices.   When you get into that flow of making decision after decision, you build momentum and boost morale”¦You can’t build on top of “˜We’ll decide later,’ but you can build on top of “˜Done.’   The problem comes when you postpone decisions in the hope that a perfect answer will come to you later.   It won’t.“ (pg. 77)

All from  Jason Fried and David Hansson in the book  Rework

COMMENTS: 37 Signals has been successful creating jobs for people and making a profit. They build tools for themselves and then share their applications with others. There is no question Basecamp is a success. The 37 Signals formula is to build products to the exact specifications of THEIR customers, it just so happens the customer is first and foremost THEM.

Our business model is different. We make products for OTHER people. This is a subtle but important distinction. Picture a male fashion designer who makes women’s clothes. He can appreciate them. He has a creative vision. But the clothes he designs will be worn by his female clientele. The male fashion designer’s success is when women purchase his designs built for the them. The male fashion designer is challenged to make a simple and beautiful product that works with the physical reality of his customers.

While I usually agree with the content of Rework, I find I do not always agree with the 37 Signals viewpoint. Yes, it works for them. Yes I agree with 90% of it. But just as critical is to know what advice is bad advice for a firm like ours. I think it is important that I plan for the company’s future. Thus I do not agree with statements such as this:

“Writing a plan makes you feel in control of things you can’t actually control”¦Why don’t we call plans what they really are: guesses.   Start referring to your business plans as business guesses, your financial plans as financial guesses and your strategic plans as strategic guesses.   Now you can stop worrying about them as much.“   (pg. 19)

It is catchy. It makes for a good anti-establishment Purple Cow type of quote. But I suspect the employees at Schipul appreciate me applying that advice carefully. Does that advice relate to our particular situation? No. And I think the team at 37 is plenty of smart enough to tell people to apply their advice…well, if it applies!

Sometimes advice is populist, but there is a logical flaw. A company who follows the infamous “work smarter not harder“ quickly falls to a company that believes “work smarter AND harder.“ Working smarter-not-harder would only work if hard workers were dumb. But we get smarter through experience! So unfortunately, hard workers are typically also smarter than you. Oooops. But we don’t like to admit that. What we want to hear is that the 4 hour work week is a winner.  I certainly wish the global economy worked that way!

I guess I am saying, use common sense and trust experience built upon DOING stuff.

Schipul – 12 Years Old and Counting

The company is 12 years old today. Wow. What a journey so far!

A huge THANK YOU to our clients, our employees and all of our supporters over the last 12 years. Black swans do exist, and thrive, with a lot of help from their friends. THANK YOU!

black swan by eschipul

We’ll have a party after SchipulCon 09 to celebrate. But I had to post to mark the occasion. Thanks again y’all.

Don’t fake reviews. Or else.

From the New York Times

Company Settles Case of Reviews It Faked

Lifestyle Lift, a cosmetic surgery company, has reached a settlement with the State of New York over its attempts to fake positive consumer reviews on the Web, the New York attorney general’s office said Tuesday.

The company had ordered employees to pretend they were satisfied customers and write glowing reviews of its face-lift procedure on Web sites, according to the attorney general’s statement. Lifestyle Lift also created its own sites of face-lift reviews to appear as independent sources.

Full article here.

The short version is “don’t submit fake reviews.” Pretty basic really.

Collins: The Five Key Things to Consider When Looking for the Right People

The following are my notes from listening to Jim Collin‘s audio coaching on “getting the right people on the bus.”

From Jim Collins: The Five Key Things to Consider When Looking for the Right People

“What are the characteristics of the right people? Are there any generic characteristics we are looking for in the right people.” … “As I see it, there are five basic characteristics, five basic criteria, for being a “right person on the bus“

  1. They must share the core values.
    1. “The person must share the core values of the institution or the organization you are building.“
    2. “You can’t get people to share your core values.“
    3. “The whole task is to find people who already have a predisposition to your core values…They must share the core values… those who do not have a predisposition to sharing the core values get ejected like a virus. Get escorted out the door by the organizational antibodies.“
  2. A right person on the bus is not someone that you need to manage.
    1. The moment you feel the need to manage somebody, or tightly manage somebody, you’ve probably made a hiring mistake. … that is one of your key clues that you might have the wrong person on the bus.
    2. The moment you feel the need to manage somebody, you’ve probably made a hiring mistake.
  3. Could they be the best in the industry in that seat?
    1. In the seat that they hold, could they potentially be one of the best in the industry … in that particular seat? It doesn’t mean they actually “are” the best, but at least possible that they could eventually become one of the best
  4. The Individual understands the difference between having a job and holding a responsibility.“
    1. “My assistant Vicky gets this so well… “If you were an air traffic controller and you did your job and you did all the right things but the planes still crashed, would it matter? No, it wouldn’t matter… You have a responsibility that goes far beyond having a job. …   the responsibility to worry three steps ahead to ensure that the planes don’t crash.
    2. That sense of “I have a broader sense of responsibility” rather than “I have a job” the ability to get that distinction is one of the crucial dimensions of the right people on the bus.Tthey are what I would describe as productively neurotic. If they see a hole they feel the need to fill it and to make it better.
  5. If it were a hiring decision all over again, given everything you know having worked with this person, would you still hire?
    1. This is the litmus test question.
  6. Lastly – You must be fair.
    1. And fair in the following sense. Always ask yourself the following question. Do you have a “bus problem” or do you have a “seat problem”. It could be you have a wonderful great person on the bus but you made a managerial mistake and put that right person in the wrong seat?“ “When in doubt, be fair.“

Of course he makes it sound so simple. Having been hiring and (unfortunately) firing people since my very first job out of college, I know all too well how hard it is to interview. The advice given on hiring people is always “do lots of interviews” and “slow down the process until you are sure.” Which sounds great, except not every good job applicant will go through 10 interviews and wait six months for an offer. In other words the market varies. And quite frankly you can’t always tell.

I have learned to be wary of certain groups of job applicants in the hiring process.

  1. The prideful.
    1. Prideful people do dumb things to save face. The humble will just go “damn, I screwed that up. But I learned.” The prideful will make a bad decision and then defend it to the bitter end in front of the entire company before they admit a mistake. Humble people rule.
  2. Those that tell you they are smart.
    1. Um… you are an adult. If you have to tell me you’re smart in the first five minutes of the interview something is wrong. Those silly tests only test about a third of your actual knowledge, and if that is a prop for your ego we have a problem. Tell me you are a hard worker, tell me about results, but don’t tell me you’re smart. Sheesh. What you really want is a humble hard worker who lets their work product shout about how awesome they are while their own words are quiet.
    2. Interesting conversation about telling if someone is smart here.
  3. The insecure.
    1. The most dangerous group of all. The insecure turn on you unexpectedly and like a mine field they can lay in wait for 50 years before going off. The insecure follow a leader instead of their own hard coded core values. As such they jump ship when a leader trips, and every leader must take risks and therefore WILL trip. The leader will get back up, but the mine goes off.
    2. Sometimes a leader can expedite discovery by intentionally appearing to make a mistake. But be careful.
    3. The insecure are also the most likely to rationalize unethical behavior.

There is no easy answer to hiring and firing, or to determining “which seat on the bus” a person is most qualified for. And timing also matters, a person may outgrow a position and a position can outgrow a person. Sometimes the person is so good you just need to put them on the bench, let them sit in the wrong seat for a little while before the right seat comes available. These are heavy decisions.

Having to make these decisions, one thing I am personally committed to is the development of my people. While I can’t control the economy or stop acts of God, I can ensure that no matter what my people are as prepared as possible for whatever lies ahead. Training and growing our team is within my circle of influence.

Time of your life, huh kid?

Part of blogging, for me, it contextual in regards to “the times”. The current events are relevant to the medium. And this is our current reality in the United States of America.

  1. Unemployment hits 25-year high – jobless rate hits 8.1% in February as a record-high 12.5 million people are unemployed (3/6/2009)
  2. Merrill Lynch uncovers trading ‘irregularity’ – London forex trader reported to be at centre of probe (3/6/2009)
  3. Agreement Sets Stage for Madoff Plea Bargain – massive worldwide Ponzi scheme
  4. Obama’s speech to the nation – Determined Obama vows to renew US
  5. Jindal’s response to Obama
  6. 90 minute wait, 3 minute interview – job fairs
  7. Big bank stocks get dumped again – Citigroup stock below $1
  8. Saskatchewan a jobs ‘hot spot’ in Canada
  9. Republican Bailout Bill Fails
  10. overhaul of U.S. health care system?
  11. GM going bankrupt “substantial doubt” it will remain a “going concern”

So things are kind of crappy right now. Yet we miss the most basic truth. Business is about making something and selling it. Or performing a service and being paid for it. It isn’t about derivatives that you can’t understand. And those fancy Harvard MBAs, unfortunately, are lying to you.   Find a way to humbly serve the customer profitably.

Like Joel Goodson says near the end of the Academy Award Winning memorable (seminal?) movie Risky Business:

My name is Joel Goodson. I deal in human fulfillment. I grossed over eight thousand dollars in one night. Time of your life, huh kid?

No I’m not suggesting we become Joel. I am suggesting that he is more of a business man than GM, Citibank, Merrill Lynch, Madoff, Stanford, or the lot of them.

Mom2Summit Panel Video: It’s the end of Marketing as we know it. And we feel fine.

Well it took me half a week, but here is the full video of our panel from the Mom2Summit last weekend. The title was “It’s the end of marketing as we know it. And we feel fine.” First the full video.


Panel: It’s the end of Marketing as we know it. And we feel fine. from Ed Schipul on Vimeo.

Lessons learned about video: Given this was my first real attempt at video, I learned a few things. Like you can’t work with MOV files on a PC with Movie Maker. Macs have iMovie, which rocks. And iMovie compresses video into mv4 files which is cool with youtube. Limiters: Youtube limits video length to 10 minutes. Facebook limits video length to 20 minutes. Google video allowed longer videos but they are shutting it down. The ONLY product that worked was Vimeo for a 32:56 video. In short, vimeo ROCKS!

A direct link to “It’s the end of marketing as we know it. And we feel fine

The Simple Truth About Your Business

I just finished reading The Simple Truth About Your Business, Why Focused and Steady Beats Business at the Speed of Light. By Alex Brennan-Martin, a man I have had the privilege of meeting. And a man who has earned a good amount of my money from celebrating dinners at his Houston restaurant with my wife over the years.

brennans-after-the-fireLike many things I like, I need it broken down. Numbered lists and exactness of speech. So I figured I would like a book titled The Simple Truth! Specifically The Simple Truth from the book   on page 25 states:

The Simple Truth answers the three most important questions in your quest for excellence and success:

  1. What is the real product my customer is buying?
  2. What special ingredient differentiates my product?
  3. Why is my customer buying what I am selling?

So the “for examples” are:

  1. Wal-Mart’s Simple Truth: “To lower the world’s cost of living.” – pg 27
  2. Disney World is not in the theme-park business, or even the entertainment business; it is in show business. – pg 28

Brennan goes on to clarify

You cannot deliver the Simple Truth unless the employees understand the Simple Truth. The customer is numero uno, but until the employees’ needs are aligned with those of the customer, there is an inherent conflict.”

For Brennan the simple truth of his restaurant is:

Creating Great Customer Memories – pg 50

Which brings me to a challenge with our business. We used to say simply “we build web sites that help you sell”. Probably because our turn around was in the recession of 2001 and 2002. If you could help someone survive that was awesome stuff! It prevented CEOs from having to lay people off, and that is a BIG motivator.

To this day our primary headline is “Does your website increase your sales” and our tag line is “The Web Marketing Company“. Pretty clear stuff.

Yet our vision is:

To Connect and Organize the World’s People. Do Good.

So unlike Wal-Mart, our vision statement can not double as our simple truth. Having deep thoughts on that subject now…

Mitigated Speech and Business Communication

DudeRecently finishing Outliers, I was really struck by the section on mitigated speech and airplane crashes. Gladwell‘s definition of mitigated speech on page 194 is:

Mitigated speech – any attempt to downplay or sugarcoat the meaning of what is being said.

In short, co-pilots may not communicate clearly with captains out of deference. They hint at things instead of speaking directly. Which leads to crashes and death. From page 193 of Malcolm Gladwell’s latest book:

Fischer and Orasanu found that captains overwhelmingly said they would issue a command in that situation: “Turn thirty degrees right.” They were talking to a subordinate. They had no fear of being blunt. The first officers, on the other hand, were talking to their boss, and so they overwhelmingly chose the most mitigated alternative. They hinted.

…a hint is the hardest kind of request to decode and the easiest to refuse.

Gladwell goes on to explain this is more of a problem in cultures with, using Hofstede’s Dimensions, have what is called a higher “Power Distance Index“.

Power distance is concerned with attitudes towards hierarchy, specifically with how much a particular culture values and respects authority. (pg 204)

A culture with a larger power distance index will have more hints. The west, and I’d agree speaking as an American, is “what linguists call a “transmitter orientation” – that is, it is considered the responsibility of the speaker to communicate ideas clearly and unambiguously.” (pg 216)

Working at a small company we have to train people how to write a decent email. The biggest part is helping people understand the burden of communication is ON YOU! Our email help file is linked   and the short version is:

  1. Subject Lines – all emails need a well articulated and relevant Subject Line.
  2. Links – ease of use changes behavior. (link it!)
  3. Numbered Lists – organize YOUR information. Bullets are evil.
  4. Short Paragraphs – with rare exceptions
  5. Nickel words – save them for scrabble

Going back to Gladwell, part of the solution for one airline was to switch to speaking English. By using a different language their learned subtleties of their native tongue were reduced thereby reducing accidents. Inter company email isn’t anywhere near as dangerous as piloting a jet. But nonetheless in a recession who has time for coworkers burning money with lazy communication skills?

And Gladwell isn’t alone. In the book The Influencer there is a case study on positive deviance for villages that did NOT suffer from Guinea Worm in Africa and Asia. The two “vital behaviors” that prevented the outbreak were:

  1. “In the worm-free village, the women … took a second pot, covered it with their skirts, and poured the water through their skirt into the pot, effectively straining out the problem-causing larvae.” (pg 360
  2. “The vital recovery behavior, then, was that friends and neighbors had to speak up when the Guinea worm sufferer was unwilling to do so. Only when the community took responsibility for compliance could the entire village protect itself from the failure of a single villager.” (pg 38)

Again we see the second critical issue is speaking up with candor. And basically turning your neighbor in for the good of the community. Communication is so critical airplanes crash and villages live in a painful cycle of disease without people who are willing to speak up.

And the importance of communication is more grave than ever. From The Rise of the Network Society pg 357.

Because culture is mediated and enacted through communication, cultures themselves – that is, our historically produced systems of beliefs and codes – become fundamentally transformed, and will be more so over time, by the new technological system.

Communication matters. And culture is part of that communication. I am unaware of any evidence that supports “hinting”, “deference” and other weak forms of communication as good for anything. Maybe in a medieval court, but it clearly has no place in modern society. Speak up, take care of the people you care about.

No One Makes it Alone – NO ONE.

Ninja Squirrles Cooperating
Ninja Squirrles Cooperating

Reading Gladwell‘s book Outliers, and this quote grabbed my attention.

He’d had to make his way alone, and no one — not rock stars, not professional athletes, not software billionaires, and not even geniuses — ever makes it alone.

I have always disliked the phrase “self made man” because in my experience I have never met one. Ever. We have this vision of a Galt-esque intellectual warrior who single handedly drives to success. And while this archetype may exist, they don’t achieve this success without innumerable amounts of assistance from people.

So the next time you hear someone say they are “self made”. Or a friend describe someone as a “self made man”. Please call BS. And buy them a copy of Outliers.

The photo? Two squirrels cooperating by the vision of the artist Elaine Bradford.

People Imitate Their Leaders

Ah leadership, so much a balance. While reading Execution, the Discipline of Getting Things Done by Bossidy and Charan, I came across this excerpt about Dick Brown and EDS that explains a conversation I sometimes have with managers on our team.

Starting at the highest levels, Brown [Dick Brown, EDS CEO] created new ways to drive accountability and collaboration. In the monthly “performance call,“ “¦.

The talk isn’t always about numbers. At one of the first meetings, Brown recalls, “one of the executives made the statement that he was worried about growing anxiety and unrest in his organization, worried about rapid and dramatic change. His people were asking, “˜Are we moving too fast, are we on the threshold of being reckless? Maybe we should slow down, take it easy, reflect a bit.’“

Brown turned the issue around ““ not incidentally, creating a forceful coaching lesson. “I jumped all over that. “˜This is a test of leadership,’ I said. “˜I would like anybody on this call who is really worried about where we are going and worried about the fact that we will probably fail, tell me so right now. Don’t be afraid to say you are. If you think we’re making a big mistake and heading for the reef, speak up now.’

“No one did. So I said, “If you’re not worried, where’s the worry coming from? I’m not worried, and you’re not worried. Here’s where it is: some of you say one thing, and your body language says another. You show me an organization that’s wringing its hands, listening to rumors, anxious about the future, and I will show you leadership that behaves the same way. People imitate their leaders.

– Execution, pg 49

Of course the counter point is that Mr. Brown was ousted in 2003. But his words still ring true for me as a leader. And I added the emphasis.

PS – No, this is NOT aimed at anyone in particular, just an observation that
YOU are the leader and are frequently the source of limitations.

PPS – In fact, with my concerns about the recession of 2008, you could even argue this behavior comes from me. So there is that to consider. But I don’t think so much that is the case. Not so much.

tipdish is born – startup weekend Houston

We just finished the Tendenci User Conference so I am *not* at Startup Weekend Houston. But I have been following along this afternoon through twitter and ustream. Saw this link sent out by Erica:

tipDish is Born! – Tippers & Dishers

Think, the tipping point and “dishing“ the news. So, “bloggers,
podcasters, newspapers, radio people”¦anybody who gets information out
is a Disher. And the Tipper is anybody who has information they want to
get out, like a press release, news item, whatever.

Erica by the way has restarted her reinventing erica 90 day project and I hear something about live streaming plastic surgery!? We love her, but find her a bit odd at times. Really? ustream live plastic surgery?

Fostered Appearances and Worn Out Shoes


  worn out shoes 
  Originally uploaded by eschipul

"When we think of those who present a false front or "only"
a front, of those who dissemble, deceive, and defraud, we think of a
discrepancy between fostered appearances and reality." – Erving
Goffman, The Presentation of Self in Everyday Life, Pg 59

A long time ago in a land far away I was an Operations Manager at
Circuit City stores. This was before they got their ass kicked by Best
Buy. They were still relevant (I would like to think) back then. No
used car business, just hard core retail. Appearances and reality both.

Anyway, I was 26 and had moved up to being an Operations Manager. For
those of you who didn’t have the pleasure, this is typically considered
the number 2 person at a Super Store. I have to admit I loved the job.
Really. There is a rhythm to running a super store during the holidays.
A cadence. A high velocity rush of helping people and making money, and
well it was actually quite fun. My goal at the time was to be a Store
Manager, but that got busted when I quit (a WHOLE different blog post).

Back then the operations group reported up through district to an
district operations manager. A separate tree from the method they used
towards the end where everyone reported to the store manager and they
in turn reported to the DM, etc. So there were two hierarchies, but
damn if the ship didn’t run TIGHT.

So the shoes. I was in a meeting with my Ops DM. A young Ops myself
looking at this cat’s job as a career path. And I ran a good store so
we were talking about how to improve. What could be better. Who were
the future leaders. This was probably 8 PM because the DOM traveled. A
LOT. I wasn’t a high priority visit store (manage variances, eh? and
this was before Demming was cool) because we did well.

So there I am. Meeting my DOM. And I look down. Not far down as he had
one foot up crossing the other knee. Asking me about shrink. And I look
down and there is a hole in his shoe. Through the sole. A hole. At the
ball of the foot. Clean through. Step-in-a-puddle-soak-your-sock type
of hole in your shoe.

Being the person I am, and was back then as well, I stopped answering
his questions and stated bluntly "you have a hole through the bottom of
your shoe." and then something pithy like "you need new shoes" or "what
gives?" or maybe even "are you OK"?  

Continue reading “Fostered Appearances and Worn Out Shoes”