Herman: John L. Herman Jr., Author

Herman School of Business

And The Rocket's Red Glare...

Take this three day weekend and forget your woes and enjoy your family. Pick up a book and get started on some enjoyment…not a book to learn something, make it a murder mystery or a trashy novel…something to escape into for awhile. Grab some ground beef and a pack of hot dogs and fire up some charcoal. If you remember as a child putting crepe paper in your bike spokes of red, white and blue stripes then you have to be close to sixty. Tomorrow I will be stopping by the past. There is a small community of one room houses that served as a religious retreat for people from the city who wandered out to this sanctuary to hear sermons on Sunday while rocking in chairs under a pavilion roof. In fact, the famous religious orator Billy Sunday actually spoke there many times nearly a century ago. My wife has a friend who bought one of these tiny shacks almost sixty years ago…and each summer the residents show up to go backwards in time.

There will be kids riding their bikes with sparklers and flags on the handlebars. There will be picnic food aplenty. People who don’t know each others’ names will share a grill and talk some baseball. My wife says my eyes glaze over when I talk about “Emory Grove.” As the day goes on we will be back in our own backyard where perhaps one of the kids will show up to have some cookout food on the patio.

But….the dark brings a special treat. You see, I live in Baltimore, Maryland. The home of Fort McHenry where the Star Spangled Banner was actually written by Francis Scott Key as he watched a battle from our Harbor during the War of 1812. There will be spectacular fireworks for all to see and as the colors blaze across the sky lighting up the Harbor I will hope that you are listening to the Boston Pops, watching a game on TV or falling asleep in your favorite chair on the back deck.

Tomorrow everyone take the day off. We can go back to work on Saturday!

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Two Words For You...

For those of you too young to remember the movie, THE GRADUATE, let me tell you what was revealed way back then…and I don’t mean just Mrs. Robinson’s body. As “Benjamin” celebrates his college completion his parents’ friends bustle about the party and at one point an older guy pulls Benjamin aside and gives him a one word secret to making a fortune…“Plastics.”

Buried in that one word secret to success is that fact that back then money was made in America making things. And many of those things were made of plastics. And while we use many things today made of plastics, and other materials as well, fortunes are not made in America manufacturing anything here…for today we buy 65% of our manufactured things from outside of this country. That means you have a much slimmer chance of making money manufacturing something (but I think there are some great opportunities here) and therefore you have to find other ways, actually easier ways, to make money in America.

There are two words I would whisper into Benjamin’s ear if we were at his graduation party today.

SERVICE and INFORMATION.

Service in America has almost disappeared. Give customers quality service and they will never leave you. Service, beginning with answering the telephone “with a smile” as one of my recent clients suggested. Lose that fandangled complex answering system with language choices, department choices, buzz me for emergency choices and just answer the damn phone! And do what you say you were going to do on time and at the price quoted. Give service to your customers at all times…they feed your family. Don’t “capture” a customer like my tree cutting guy did by showing up and starting the job and then leaving for a week to start three other ones…and then coming back a few hours a day as if he were working to complete my job. He could have come in on day one, cut the two trees down, ground out the stumps, and cleared the debris in three days…today marks two weeks since this project started.

Do you give your customers quality service right now befitting the fact that they are your lifeblood?

There are still people in this country with money. In fact, the ones with money have more of it than ever before. And do you know what they like to do with that money? They like having someone else do everything for them. I heard a great quote yesterday…if rich people could hire someone to die for them, you could eliminate poor people. Find a business that provides a service to people with money and you could do better than making something out of plastics.

Information is everywhere and no one knows where to find it. People want to know things, they want to get ahead of other people and they want information to help them. Now, the information has to be enough of a value that people will pay for it. I am not advocating that you be today’s snake oil salesman who packages up some data and a feel good message and after you take the money head out of town before people realize they paid for nothing.

If your business could share some INFORMATION with your customers that they don’t easily get elsewhere that would be a great SERVICE provided to them and hey, since we just combined the two words for today I think we can quit.

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Too Busy To Market...

While people get caught up in the daily grind of their business they forget a critical feature that made them successful and will keep them that way. They forget to keep marketing for new customers.

Take a look at the last ten customers who hired you if you have a service business. Did they come from word-of-mouth? Did they find you on their own while researching the Internet? Or did they actually come from some marketing effort you made?

When the business finds a rhythm and you are tied up all day handling the needs of current customers, paying the bills, scheduling your regular jobs, and covering for your staff as they head out for a summer vacation…who is doing the new prospecting for future customers? Probably no one. You will notice this about four months from now when the current customers don’t need you as much and there are no new ones to replace them. But you are so busy! How could you possibly find time for cold calls, or checking the new flyer or postcard mailer that should be going out? Stopping at a new customers office just to say hello seems out of the question, and yet you drove by a dozen or so new prospects just in this last week. Wouldn’t it be more cost effective to stop on your way by and say hello, drop off some company info, and at least get a face-to-face so that when the new prospect needs you that familiarity helps land the customer over their calling on a stranger, your competitor, who was “too busy to stop” on their way by.

Start-ups are probably the guiltiest of “too busy to market.” They have too many balls up in the air to do marketing for new customers, right? If they take that attitude they will soon have plenty of time, after they go out of business.

Five hours a week. That’s your challenge if you want to succeed. If you can’t find five hours a week to strictly devote to marketing for new customers you are cheating yourself, your employees, and your investors who want to see growth to fill the void of the customers who you will need to replace.

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Where Do You Invest Now?

First and foremost understand that I currently own zero dollars of stock. Zip. Nadda. Oh, I am not a genius who knew when to cut and run…I took a bath from November through January and saw enough and bailed out. Or, I would now have lost even more than I did.

This stock market has been hiding from the truth for a long, long time. People have been trading on “future earnings estimates” of companies, not on current or recent past performance. Trading on fundamentals went out of vogue a few years ago when the computer age brought amateurs into the game with professionals. I consider myself an amateur. A rank amateur. I took my first bath in the early and mid-eighties and got out after losing millions. That’s right, millions. I stayed out for over twenty years by changing my investment strategy to what one of my first Mentors taught me…I started investing exclusively in myself.

I bought companies with the money I had, not stocks. I started a few different business enterprises and watched my net worth grow. I took some money out of the business investments and started buying houses over ten years ago. My “therapy” was working on the renovations in properties that ranged in age from 225 years old, another at 150 years old, one at 120 years old and a few “modern” ones around fifty years old. As the properties were finished they became rentals for awhile and then as I saw the real estate market getting ridiculous…I sold more than half of the houses. Great move.

Then two years ago I felt that real estate was going to fail and I got out of almost all of those investments. Whew, that was a close one. And then I made the Dunderhead play of all times. I went back into the stock market after telling myself for twenty years that Wall Street was full of Hype, not Substance. That as people are getting closer to retirement and want to start taking money out…and no longer putting money in…prices must fall. Many lost dollars later I squealed like the hog being slaughtered I was! As painful as it was to admit I had made the same mistake twice in my lifetime…I did admit it. But if the stock market is stinko and real estate is still crashing…where do we put our money?

Oh yeah, that’s right…invest in yourself!

The best investment I have made in the last three years was the money I put into marketing my books, and marketing my consulting, and marketing my willingness to be a Speaker for events throughout the country. This month I am quoted in an article in INC magazine, on page 58. While the picture is a little small for geezers to see, hey…I am being quoted as an expert in INC magazine! Which came about because I chose to invest in myself, toot my horn about my skills, and grab a following if I could to pay me speaking fees, consulting fees, and make a few bucks selling books.

People need food, gasoline, entertainment and health care…the rest is a want not a need. If you want to make money in the next five years concentrate on what people need, not just what they want. Keep in mind that information is something everyone can use to help them do better than they are…so after they feel their needs, they will seek information to find a way to make enough money to get some of their wants.

And one last thought…what if you pull out all your investments and just sit on the sidelines in cash? Well, if you did that when the market almost hit 14,000 and today it closed at about 11,500 you would still have all of your cash, and probably a few bucks of interest, while those in the market lost twenty percent of theirs. In less than one year.

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It is about the numbers...

After a recent speaking engagement a woman asked me to consult with her about the expansion of her business. We met and she showed me her plan. The company she founded seven years ago has grown steadily and she now has more business farther away from her home office than she wants to handle. She recognizes the need to expand by letting others come under her umbrella and set up offices in regions she can’t handle, yet allow her to get a “cut” of what they make using her business model.

While “Franchising” is a possibility, this owner is exploring “Affiliates” or letting other’s co-op work under her name, but their direction and ownership, in territories too far away for her to handle.

Her business is a service based business where she sends workers into the field for twenty dollars an hour and she pays those workers twelve dollars an hour. She finds the work, screens the customers’ needs, trains the workers, supplies them with Worker’s Compensation, handles billing and collections and issues the workers a weekly check. I love her business and the growth potential is amazing. She is sitting on a high rung on the success ladder right now and should feel proud of her accomplishments. But looking out five more years she knows she needs the expansion to happen for a greater revenue stream…and a greater value as she starts to look at an exit strategy down the road. Those new “Affiliates” will significantly enhance the value of what she has started and allow not only for a wonderful earnings increase over the coming years but also make her company more valuable to sell or merge with someone else because of her expansion.

If she gets the numbers right.

What should a new “Affiliate” pay to join her company? They can’t just set up shop now for nothing…she has seven years of sweat equity in what is becoming a “Brand” that the new affiliate will reap value from starting on the first day they begin operation. So, first we must figure out a fair value for the new start-ups.

The business makes money from the spread of her labor charge rate of about twenty bucks an hour and what she pays her workers, which is about twelve bucks an hour. Insurance, taxes, office overhead, marketing, and managing costs all come out of that seven dollar spread before there are profits. So for the new “Affiliates” what should she get from the seven dollars spread they will make? Her company is the Brand Name being hired, but the affiliate will be responsible for hiring, training, marketing, interviewing new customers, and providing the services in their respective territories. If the Home Office charges too much per hour from the spread the new affiliate may run away in a short period of time to capture all of the “spread” and if not enough of the spread is charged to the affiliate it doesn’t value the Brand Name.

You can’t simply charge a percentage and stop there. The set-up year will be crucial to the new affiliate, but as time goes by and the customer base becomes greater, the affiliate will not need as much attention from the Home Office and therefore should not have to pay as much. If all affiliates pay a flat percentage then good affiliates are punished. One affiliate may make a “spread” of one hundred thousand dollars and pay fifteen thousand dollars on the flat percentage basis while another affiliate grows to three hundred thousand dollars of “spread” and would pay three times as much to the Home Office while getting exactly the same value from the Home Office as the bad affiliate.

The amount charged must be greater in year one, and greater for the first level of success, and then go down as more business is created by the affiliate, encouraging affiliates to grow by allowing them to keep a higher percentage of their increased sales.

Setting up this first affiliate is critical to how others will join the business in coming years. By adding value from the Home Office through training sessions, joint marketing ventures, and shared accounts that might be in the affiliates territory…affiliates will stay with the program and not venture off into their own attempt to compete with this woman’s business.

After meeting with this woman and learning the structure and financial facts of her business I will give her my point of view of how she should proceed, what should be in that affiliate agreement, and how the percentage of revenue agreed to would be of benefit to both the Home Office and the Affiliate. And while creating that document could be “priceless” to this woman, my fee for the advice and the time I will spend helping her get the first one or two affiliates on board will not be outrageous, because my intention is to create yet another satisfied customer for my consulting income…someone who will tell others that what she got for my fee was worth more than what she paid for it.

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Where is the Easy Money?

We click on the TV and get instant gratification. Entertainment is at our fingertips. Walk into your favorite restaurant and after drinks are ordered your favorite meal appears in mere minutes. Instant gratification. Turn the key on your car and varoom…off you go. We have ballgames year round to feed our need. My wife’s apple pie puts a smile on my face in seconds.

Why does it take so long to make money?

Because it takes work and work is hard. Work is something people forget when they write down their life plan. Finish school, get a job, meet a mate, buy a nice home, have two kids, make great friends and make a fortune. Huh? What about the work part.

There is one common thread that every successful person will tell you, write about, or discuss when you ask them how they did it. They worked hard. Really hard. And guess what, they didn’t say it took money or that they needed a Mentor or a Life Coach in every case, and nor did they have to have government help. They needed a good idea, the opportunity to pursue it, and the willingness to work harder than other people. Every time. I have yet to meet a person who became successful financially who said… “I woke up one day and after watching TV for a few hours I went golfing, then took my wife out to eat. We watched the kids play soccer and when we got home someone had left an envelope in the door with a million bucks in there. It was that easy.”

And therein lies a secret that you must learn or you won’t be able to keep doing the hard work. Make sure you love your idea and you love doing what it will take to make it successful…because it is work and will take a while before you get to the gold.

Using my real life example for your yardstick…two years ago I was working on my first book. I loved the process of writing and it is a good thing, because I worked more than ten hours a day for several months before we had the first one finished, and that was after many months of creating the idea. Book one hit the streets and marketing became the new hard work to accomplish. Book Store signings, marketing to newspapers, using PR people to get radio interviews, hundreds of telephone calls, thousands of emails. And book number two was being written, edited and published at the same time. Why? Because we realized while marketing book one that we “missed” on a few things to gain attention for my work and book two was created to gain a larger audience and propel me to the success that leads to money. With two books came more marketing. Speeches had to be lined up to focus attention on the work. Two years later we have been published in many newspaper articles, almost two hundred radio interviews have occurred all over the country, speeches have taken place and many large audiences are now scheduled for the coming months…and maybe the pot of gold is getting closer. Maybe. It will take a lot more hard work before that happens.

So, it is a good thing that I love the daily grind of writing, thinking, emailing, calling people, scheduling events, preparing speeches, attending functions, and networking with those who can help get me out of obscurity and into a high enough level of awareness that book sales hit a high level and the money spigot gets turned on.

In other words…I was willing to do the work to get here…and I am willing to keep doing the work to get there. Two years later the passion still burns and therefore I still have a chance to get to the other side of the rainbow. You could help a little if you would tell a friend to check out the books. C’mon, do a little work for your buddy Herman. Thanks.

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Evolve or Die...

I gave a speech this week before the Howard County Women’s Business Network and about sixty people attended the luncheon. They are a very positive group of hard working business owners, networking to support each other with a wide range of members. Home based business owners sat with owners of large companies with many employees at multiple locations. The reception they gave me both before and after the talk was warm and wonderful.

My talks hit on the fact that Failure Isn’t Fatal by giving my background mixed with stories of famous successful people who had to overcome enormous failures before climbing to the top of the mountain. Something happened after the talk that I noticed immediately. During the speech I use the example that if the room were on fire we would all exit quickly, not worrying about what others think. And yet, if your business is on fire you are afraid to admit it even to yourself, and many owners sit there amidst the flames and burn needlessly instead of getting out.

In some ways my talk was giving permission for people to fail, or at least admit that what they owned and operated was not working. One woman stood during the question/answer portion and said she had a great year last year, was doing everything the same as before and her sales are plummeting. What should she do? She thought she was failing and I told her she was doing fine, the economy was failing her. The customers she had loved her products, they just couldn’t afford to keep buying right now. During our exchange, and later when we talked one-on-one she thanked me for pointing out that even when you do everything right, there may not be enough customers to sustain you. She has two choices, just like all business owners…one is to find new customers to replace her lost sales, or sell the business to someone else because she doesn’t want the to do the work involved with growing her business.

More than one woman in the room came up to me afterwards with a big smile on their face…thanking me for pointing out that walking away after you have tried all you can to succeed but didn’t is actually a positive step, a step towards your next success. And that by staying and wallowing in your current state is the negative thing to do. Amazing how we start companies all the time without worrying about what others think and then stay too long because of what the others might say. It’s your life, live it your way. I readily admit that 6 of the 21 companies I have founded failed. Some lost a lot of money. All caused me emotional pain and time seemingly was wasted. Or, was it? What I learned from every situation was put to use in future endeavors, so while the profit wasn’t money…the knowledge gained turned into cash in a later venture.

Buy a competitor and get bigger, go find some new customers to replace the ones who no longer buy from you, or sell your company now and catch your breath and then start something else that may take you to a higher level of success. If you think you are now on the right track…but just pausing for awhile…that train coming just might run over you.

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Ed McMahon is Going Broke...

People will rescue Johnny Carson’s sidekick and he will get to finish out his life in the style to which he has become accustomed. At age 85 he ran out of money before he ran out of life…and so his five-plus million dollar house is being foreclosed by the bank.

Banks are blind as to who will be evicted when the foreclosure date hits, banks just want their money from whoever owes it. In the case of Ed McMahon he will undoubtedly find some “work” from friends in the entertainment industry and possibly he could avoid the foreclosure from being completed. Ed’s comment this morning to Al Roker on the Today Show was that he never signed a check in fifty years as others took care of his finances. Maybe those others didn’t think Ed would make it to 85.

Making money is hard. Harder than you think, especially when you factor in some unknown issues like the entire economy tanking at the wrong time, and like being in debt up to your eyeballs when your earning power hits a snag, and like you not being willing to work hard enough to make it over the mountain to the Valley of Success waiting for you.

Refuse to lose. Give yourself a chance to win. Just take yesterday as a great example of what you do wrong…and what you can change to begin living right. Go over what you did yesterday and you will surprise yourself if you honestly view your actions. I swore to be positive for 100 days a few weeks ago and I will be here. No matter how bad things are for you right now…there is a way out, and a way to make it better not just a year from today, but actually starting as early as tomorrow. You see, facing the issues that have been holding you back starts with the simple acknowledgement that something needs attention. Tiger taught us to “slow down your thinking” at critical moments to give yourself a better chance to succeed.

One of my children sent me an email yesterday about taking more control of life and doing something different. It is wonderful to see anyone take my words and make something good happen for themselves…when it is one of your children who listens you feel like a genius. The parent in me wants to “do it for her” but the man I am says she will be just fine without my help.

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Not So Fast...

You hit the scale and find out there are a few more pounds than you expected…and a lot more than the last time you had the mindset to “get in shape.” You open the mail and find out those credit card balances are going up, not down, even though you promised yourself a “makeover” on your debt a while back. And your bank statement can’t be right because you seem to have far less in your savings as you keep sliding a few bucks a month over into your checking account to cover those overages.

Listen…it didn’t happen overnight, and it won’t go away in a hurry either.

People need to take a lesson from the Greatest Golfer Who Ever Lived, Tiger Woods. Yesterday he finished what he himself acknowledged was his greatest tournament win ever as he beat Rocco Mediate in the U.S. Open. Rocco hadn’t won a tournament in 6 years, during which time Tiger won 41 of them. The lesson learned if you watched any of this tournement was the way Tiger approached each challenging shot as time was running out and he was one stroke behind.

Imagine thousands of people watching a sporting event. The noise level like a buzz in your ear, as some just whisper quietly and others shout “You the Man” on almost every stroke. Watching Tiger walk up to his shots was like watching a genius thinking out loud. He surveyed the shot, consulted with his Caddy, Steve, and then went trancelike as you could almost see him turn the volume switch in his ears off. He went into a mode where it was just him and the shot…in very slow motion. You could actually see him “slow down” every one of his processes as he pondered club selection, track of the shot, and landing area when the ball would come to rest. Tiger’s Putting is more than magic. The announcer Johnny Miller said it better than anyone else could have…“Tiger trusts his stroke, reads the Put, and takes the swing and whatever happens will be OK.”

What then can you learn from this Golfing Wonder? That you must slow down your thinking one every aspect of the problem you are trying to solve.

The weight won’t come off without executing many steps so slow down your expectation of instant weight loss. Your credit card balances didn’t shoot up overnight and it will take a long time to correct the situation and rid yourself of debt. Stop spending more than you make…slow down those purchases you don’t need…and the savings side will be left undisturbed…and once those credit cards are paid off you can increase the savings side again.

The Tiger lesson is simple. When anything problematic appears on the scene, slow down and win…just like Tiger does.

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Busy Doesn't Always Mean Progress...

It’s amazing to me how many smart, hard working people take on more jobs than they can accomplish in an effort to get a short cut to success. If you are in workshops, attending motivational talks, participating in webinars, listening to tele-seminars, and hitting up your life coach for advice…when do you find time to actually work?

While I advocate getting advice to help cut corners, some people fall off the cliff forgetting to focus on their real job. You see it in employees as well as entrepreneurs. Sort of like procrastinators, they are “work focus avoiders” because by doing all these other “feel good” things they are avoiding the one that matters…the real job that gets you over the finish line.

Be sure you need to do all those exercises, or all that research…after you do something required by the job at hand. I am now marketing myself as a Speaker. The easiest way to say what I should be doing every day is booking appointments to speak at events. So, I joined the National Speakers Association a few weeks ago. And now I have been challenged by tapes, emails, and newsletters that offer me ways to be a better speaker, ways to set up my office, books to read to improve my skills, life coaches to hire who can encourage me, places to find jokes to punch up some humor, and even places to link to so I can get cheaper tickets on my way to my speech.

I can’t find a list of people who actually hire speakers though.

To me that would be the simplest thing to get me started…who knew I needed all that other help. I contacted several people who are successful speakers and that was the best thing I have done. One told me to “forget it…start at Toastmasters…and please understand that almost no one makes a living as a speaker.” That email writer claimed he was being honest…he should have admitted he was just being arrogant. But, another speaker has been extremely helpful…and she makes a very nice living as a speaker…and assured me I could as well.

When you want to do something please write down what the most obvious thing is that will get you there. I can take all the courses to improve my skill set, hire people to punch up my marketing piece, get some jokes from a comedian, pay someone to find me more internet traffic, attend meetings to improve my looks and my presentation and practice my speech a thousand times…but if I don’t find a list of people who actually hire speakers and start communicating with them all that other stuff means nothing.

Now that today’s blog posting is finished I plan on finding ten people today who actually hire speakers and start a relationship that might actually get me hired as a speaker.

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Welcome

After 30+ years in business, I’ve decided that it’s time to share my hard knocks knowledge. Having worked in almost 200 bankruptcy cases and many other kinds of business failure situations, I have awarded myself a Ph.D. from what I refer to as the Herman School of Business. In this blog, you’ll read about starting a business, running a business, and, if the situation calls for it, selling a business; about being a business success and not a business failure. Welcome …

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