Herman: John L. Herman Jr., Author

Herman School of Business

The 3 "R's"

If you are not old enough to remember what they were supposed to teach in school, let me remind you. “Readin, Riting and Rithmatic” was all you needed to get by in the world. If you mastered these skills you could go anywhere in your life, accomplish all of your dreams and climb the ladder to success.

Today, fewer and fewer people look at a newspaper, spellcheck corrects what you write and without calculators built into cash registers your change would always be wrong because the person waiting on you doesn’t necessarily know how many quarters are in a dollar.

There are college graduates today who suffer when it comes to even a minimal level of skill at the old 3 R’s. But they somehow make it in the world because of the technological help available. If you have the old reading, writing and arithmetic knowledge down pat, you are now ready to graduate to the 3 “R’s” that you need in the new environment.

Reality, Restructure and Resources. The new 3 “R’s.”

Reality is hard and it is the first step towards success today. Business owners talk about things returning to normal. “When this recession ends and things return to normal” is a common belief held by those who will be failures in the near future. What we had for thirty years wasn’t normal…it was abnormal. This is normal.

Reality recognizes that for thirty years we didn’t have an economy based on the “supply and demand” of our population. We had hyper demand pushing way too much supply because people could spend more than they make and more than they had. The economy was a heated up, growing mass of wealth for everyone with a pulse. House prices went through the roof, mail boxes were full of credit card applications, buy now and pay later deals all over, and stock portfolios getting fatter.

It was as if we had discovered what some experts called “new math.” Where price to earnings ratios were old school and looking forward to incredible growth possibilities set the price, even the average Joe could get rich. He just popped some stock with his new home equity loan and never imagined the debt would be bad for him because his stock profits were amazing. And if one month you feel short of cash, just slide that plastic in the ATM for a quick advance of money. They seldom noticed the interest rate attached to that quick advance.

With the ability to access credit freely, demand boomed and supply had to catch up. The growth was a beast. Like King Kong. But it wasn’t beauty that killed this beast… “Twas credit that killed the beast.”

As long as everyone had houses they could refinance when the bills came due, or the fact that their stock portfolio could be slimmed down to raise some cash…then business owners could keep borrowing money to build more plants, rent more office space, construct super shopping malls, and give employees great salaries and benefits.

We falsely created wealth, built an infrastructure based on that lie, and now wonder where our customers went?

Like any Ponzi scheme, the last ones in lose everything. So, every business loan made in the last two years and every expansion by entrepreneurs built on credit or bloated customer buying power…is now in trouble.

You are now ready for the next “R.”

Restructure. If you are able to restructure debt you may be able to survive. But restructure doesn’t just apply to those in debt. Restructure means adjust your business to the levels of cost based on reality. There will be less demand, so we need less supply. Every business “in your space” is cutting prices to fight for the lower demand.

Look at an intersection. Three restaurants and a gas station. Three office buildings and a bank. Three hotels and a shopping mall. In the next two years demand will correct the excess supply. But, which two will survive and which one will disappear. It won’t be based on who is the best, or who is the most popular. It will be the business that restructures costs, stops wasting valuable cash on marketing, and doesn’t produce at continued losses that may stay alive. While the business owner that keeps giving away product, borrows more to stay afloat, or thinks that tomorrow we will go back to the pace of yesterday…will disappear.

If you are not controlling costs based on today’s sales levels you will go bust. If you borrow money now and think growth will pay it back you will disappear. If you go to bed at night without dreaming of change you will be extinct. Consolidation could be the answer. If you have a plumbing business, share your office space with an electrician. You both save rent and when his or her customer walks through the door, they might also need your services. Merge two companies into one…put your ego aside and stay alive.

If your house payment is killing you don’t blame the business. The business didn’t lease the Lexus, you did. Dump the Lexus and sell the house and maybe you can keep the business that can keep you alive. My bet is you can’t lose the business and get a job that can pay enough to cover the house and car anyway…so they will still have to go.

Now, on to the third “R.”

Resources. Use the resources to find the answers. Use resources like books, people, and the internet to find solutions. You can’t afford a consultant who might save you tens of thousands of dollars, but you can afford to lose it all by not having that resource? C’mon people, you should be dialing my number by now to hire me, not ignoring the reality of your situation which you don’t know how to restructure by yourself.

Get on the Internet and seek help. Start at www.HermanUniversity.com and start connecting with what you need. Find articles on the hundreds of sites offering help. Watch any of the thousands of videos, listen to the podcasts and interviews and find your help.

But don’t forget the first “R,” Reality. Stop following the hype about making easy money, becoming a millionaire in just months, or finding a pot of gold at the end of the rainbow. Success is hard to achieve. It takes work and time. And you have to really know both the old “3 R’s” and the new ones.

Read Comments and Add Your Own

SAVING JUST ONE COMPANY

30 years ago a man and woman started a simple business in California…they would repair and refurbish billiard tables. Who can’t remember playing pool for hours in the basement of a friend’s house? Who can’t remember Paul Newman in the movie HUSTLER…with Jackie Gleason as Minnesota Fats? And that Tom Cruise reprised a similar role with Paul Newman as his mentor in THE COLOR OF MONEY.

Shooting pool is as American as apple pie.

Those two people…eventually man and wife…became quite well known for the quality of work they did…and the woman of this story, Andee Atkisson, turned out to have a gift for creating tables of beauty. You see…she was a Master Carver and could design incredible works of art, not just pool tables.

Paul Newman had three of them. Robert Dinero, Ross Perot, Jack Nicholas, countless Nascar Drivers, dozens of Major League Baseball Players, and celebrities from the music world all own tables manufactured by Vitalie Manufacturing and designed by Andee. She is a legend over the last three decades in and around the world of billiards and the beautiful tables she has created. Master P is proud of the custom made, $100,000.00 table in his possession. You have seen these tables in the movies, on TV shows, and even in commercials…they are simply gorgeous.

Gil Atkisson is no slouch either. It turns out he had the ability to build a plant and train a staff to produce the finest crafted tables sold in the country. The designs of Andee have been duplicated at their facility which contains a unique array of special equipment and dealers across America attest to the quality of the product.

Billiards tables roll out of the factory in Rosman, North Carolina at a steady rate…supplying jobs for 25 proud, skilled hand craftsman and women. They also make the accessories that adorn the typical room where a table is used, including the cue racks, and game tables for poker that we all enjoy.

This is a story of America and how two people with a skill set and a passion worked together for 30 years employing hundreds of workers, supporting dozens of dealers while manufacturing works of art. Taxes were paid by the tens of thousands…families were raised because of the employment opportunities…and Andee and Gil plowed their earnings back into their venture to make it grow. To be sure, they borrowed money along the way. There is the mortgage on their 55,000 square foot factory. Inventory is required. There was about two million dollars of equipment purchased from around the world to keep this tradition of beautiful design and handmade quality available.

As you all know, when housing collapsed almost three years ago…new homes sat empty. Those who did buy couldn’t afford that beautiful pool table. And those with money to spend are reluctant to do so. Sales of home recreational items plummeted. Dealers were hard pressed to sell tables of this quality and price range…mostly between 5 and 10 thousand dollars.

Like all manufacturing operations there is a minimum number of units that have to be produced, and therefore sold…to maintain at least a break-even point. This company is not overly debt ridden. To owe $1.2 million on the facility is not out of line. To have a $600K loan against the two million in equipment is not extraordinary. To have $200K of accounts payable under the level of sales they have experienced is normal. But the threat of continued low sales leaves Vitalie with its nose just under water.

Just like many companies in America.

$30 billion went to save Bank of America. Nothing has gone to tens of thousands of companies like Vitalie. American companies like this can not be allowed to slip under water. Why do we put ten thousand dollars in a CD paying .005% interest when we could be putting that ten thousand dollars to work in a company like Vitalie, Saving an American icon in the world of billiards, giving the next generation of pool players the designs of Andee under the production guidance of Gil and keeping 25 people employed and paying taxes seems to me to be a better place to invest your money.

How about this…let’s put $250K in the pot, charge 5% interest, and Andee and Gill will throw in a beautiful poker table for your generosity…and Andee and Gil will execute a 3 year balloon payment back which may have the option to be converted to equity at a pre-assigned rate. And if the company is sold prior to the payback your investment will be treated as both debt and equity.

A gamble? Yes. A high risk investment? Yes. But this company means jobs for 25 Americans, it means a continuation of the production of beautiful works of art…and you just might beat the stock market on your bet here.

25 spots at $10K each are now available for your consideration. I would join the company as a Board of Directors member and oversee the investment this group makes. We could lose every dime we put in here. So what…own part of a great American company. Remember when Harley-Davidson was on its back and faltering and then the country embraced the motorcycles to blast the value of the business…creating an impressive rise in value? It can be done here on a smaller scale.

You can perform due diligence for yourself with the material we can provide, even come with me to the plant to witness the marvelous way these tables are made, and you can rest assured that Andee and Gill will continue to work as hard as ever to revitalize this company until the recession is over and sales improve.

Come on people…let’s invest our money differently…and save America.

Check out Vitalie at: www.vitalie-manufacturing.com

Herman
410-453-0280
Herman@HermanUniversity.com

Read Comments and Add Your Own

Help me build an army. Help me help America. If that sounds like a big ego talking, it is. I know there are people I have met who can play a part in changing America, thereby changing the world.

How will this work?

We need resources available to people now out of work and looking to start a business so they can survive. But that information is vital so they don’t simply spend their life savings crafting a business that will fail. What we don’t need in the next two years is 700,000 start-ups where people go backwards, not forward. These start-ups need information about legal structure, business plans, renting a facility, marketing for customers, financial planning, and much more.

There needs to be a place where women can speak with other women about how to juggle life and family and business and succeed, not fail. A place where college students start to learn from others who have tried and made it, as well as those who have tried and been chewed up…you see learning from others failures prevents future failures.

And for those who have built and run companies for years or decades, they need a place to discover how to operate in this economic reality…where their good customers are hurting and their weaker customers have disappeared.

Welcome to www.HermanUniversity.com.

My partner, Julian Awad and I, have launched the site to be THAT PLACE.

NOW LISTEN UP!

Come JOIN the army. Be a resource. Let us interview you for placement on the site. Let people find you through our site…where your article, your interview, or your profile will be available. Promote the site to your audience…let them see what professional help can do for their success.

If we can help business people thrive…they will hire more people…and America will climb out of this hole and prosper again. WRITE TO US NOW…DON’T WAIT…MAKE YOUR CONTRIBUTION.

Herman@HermanUniversity.com 410-453-0280 cell phone 410-340-9324

Read Comments and Add Your Own

Lead, Follow...or Get Out Of The Way!

Let’s trot this old axiom out for an update. No, I didn’t coin this phrase, but I have been in many training sessions where it was the topic for discussion. How is it relevant today?

Lead means take a stand…start a business…show the way…run for office…begin an initiative that helps others…it is a call for action to those who have the skills to demonstrate to others what needs to be done. If you own a business be strong, take a stand, and lead your company through the issues holding you back.

My way to lead you now is to send you to a new resource…actually a dream come true.

www.HermanUniversity.com has now been launched. This is the result of three years of networking with business leaders, national organizations, authors, bloggers, other speakers, and countless people who have written, called or met me at an event. Herman University is a virtual place for educating, inspiring, challenging, and gathering for all business minded people. It is a place by entrepreneurs for entrepreneurs.

There will be articles, interviews, podcasts, videos, free books, and a forum to talk with others as you seek answers to your questions and the secrets to success. Please visit the site, sign up for the free newsletter and please subscribe if possible ($1 per month makes it a priceless bargain) or send someone else a subscription as a gift.

Follow. We all need to follow at times. But please do so as an informed person. Follow those who can take you closer to your goals and ambitions. Too many people want to be at the front of the parade at all times…smart people realize it is OK to march with the crowd.

Probably the most important aspect of being a good follower is to believe in the idea, the person, or the philosophy you have chosen to chase.

Or…Get Out Of The Way! It doesn’t just mean move aside. It means think about whether your project is calling you to be a leader or if you are following someone else at your business…is that what you want to continue doing? Simply put…maybe it’s time to abandon this business, this project, or this pursuit of whatever is occupying your life.

Maybe the world is telling you to move on and try something else.

Heed this advice. And visit www.HermanUniversity.com as soon as you can.

Read Comments and Add Your Own

Is Your Business the "Best of Breed?"

Today is the annual trophy presentation for my fantasy baseball league…our 25th year. The party will be in my barn where we have the spring auction to draft our teams. The barn is now known as the Draft Palace. The hot dog machine will be ferris wheeling around with the dogs cooking and the guys will try to stab the dog they want…even though there is a “stop” switch they could hold while they pick out their favorite.

There will be steamed shrimp…roast beef…baked potatoes…crab soup…fruit…celery stalks…salted snacks…bowls of chocolate candy…a homemade cake…and a deep dish apple pie…to go with the dogs. This party is clearly the “Best of Breed” when it comes to gatherings for my buddies. Although it takes me several days to prep for the event and then hours to cook all the food, the pleasure it brings to me watching the men I love enjoy themselves can’t be beat. When one of them proclaims “You feed me better than my wife” one of my thoughts is that these Neanderthals need to do more at home, but it also comes to mind that I am making them happy. My wife asked me a few moments ago if I really enjoyed doing all this work and she knew the answer when she saw the smile on my face. Today my buddies will relax and enjoy…and my efforts helped make that happen.

The potatoes are huge…they are Green Giant brand and I mention to Maggie when you see their product it always has the best color, the best look, and usually the best taste. She said, “Of course Herman, they are the Best of Breed.”

At the seafood shop where I get the shrimp I always get the jumbo because they steam the best. The shopkeeper sees me take the package from the freezer and he calls me aside. “We keep an even larger size in the back that we cook for take-out orders…would you like a box of them?” He wanted me to have the “Best of Breed.”

For 25 years Simon Bakery has been supplying spectacular cupcakes for all of our events…again the B of B. Everything at the party has to be as good as we can get. No generic candy…M & M’s and Hershey Kisses are a must. Real butter, not some substitute. Nothing but the best without the blink of an eye as to the cost…because we don’t do this party every day. Now, before you say, Geez these guys are pigs, they eat too much and they spend too much for their own pleasure while others suffer…you are missing the point of the story. The money spent went to stores where the best products are sold. The products selected were made by companies that make the best products in their categories. The effort I made would not make the buddies as happy if they didn’t get the Best of Breed.

Is your business putting out the best product you can make? Is your customer service better than your competition? Are you putting in the best effort you can into your business? If you want success why not be the Best of Breed!

Read Comments and Add Your Own

Are Your Blinders Still On?

For several months now I have been getting back into the “deal mode.” In the last four months I have visited more than 15 business owners scattered around the country and the theme is almost always the same. “My business was fine, I paid my bills on time…my customers disappeared.” Following that statement would come the notion that if the owner could “raise new money” or “find a new debt source” all would be well.

Rarely does adding debt save the day. I don’t mean small amounts over short periods of time. I mean big chunks of money where the idea is that next years’ performance will make it possible to pay back the big chunk.

The part I want you to focus on is not that out of desperation someone is willing to borrow more, even at higher costs, just to build that bridge to the future next year when the recovery will make everything all right. You see…the recovery people expect isn’t coming. THIS economy will actually get worse before it gets better.

GET YOUR BLINDERS OFF.

When you feel sick, maybe with the flu, deep down inside you know as you take your medicine that soon you will feel better. You have been sick before and you got better, so you comfort your aching body by having your mind think about that recovery just around the corner. It works for almost everyone for almost every illness. It gets a little rougher when it is a long term problem like getting a new hip or knee, or suffering a more serious ailment. When it turns out you have something really bad, something that could be terminal…you start acting differently…you realize you might not recover.

I am proponent of positive thinking. But it has to be reality based positive thinking. The economy did not catch a cold. America has a potentially terminal economic illness. And you better act accordingly. You can survive when you do everything you can, as fast as you can…to survive. That starts with taking your blinders off. If your child acts out you scold them…if you find drug paraphernalia you better step up the actions taken to correct the situation. Five pounds overweight, maybe you should skip dessert a few days. Fifty pounds overweight calls for quite a different action.

This is the new economy. People have less buying power. People are actually changing their philosophy about spending frivolously on “stuff.” The slower spending comes from less available credit and a new “less stuff” philosophy…get used to it. We will be here for several years before people will change again. We didn’t have a “scare” in this country, we woke up to the reality that we might have a terminal economic illness. Short term hope based on a short term recovery will most likely put you out of business.

COMING SOON: HERMAN UNIVERSITY…what people want are answers. They read, listen to the radio, and conduct research for more than just entertainment. They want answers. I am working with others to launch an idea I have had for years…have a place for people to get answers. And since people equate going to school with finding answers I have named this blog the Herman School of Business. The next evolution of this site will be HERMAN UNIVERSITY. It will be a “six lane highway” of answers: College Students, Start-Up Owners, Women Entrepreneurs, Seasoned Veterans, the Author’s Page, and the Speaker’s Corner. I won’t send you there just yet…give me your ideas about what should be available at HERMAN UNIVERSITY.

Read Comments and Add Your Own

FREE is your marketing...

I have been preaching for about a year that spending money on marketing in today’s environment is a waste of money. Your customers are broke…they have no more credit…blasting ads at them is like teasing a kid with candy but not giving it to them. Your customer doesn’t want to see ads that remind them they can’t afford what you are selling.

Give what you have to them for free!

By now some of your inventory is outdated and starting to remind you that having a big pile of merchandise means no money in the bank. On this week’s SUNDAY MORNING show there was a feature worth talking about. A Professor offered his students a piece of “truffle chocolate” for 15 cents or a Hershey Kiss for one cent. 73% took the 15 cent bargain, going for quality at a ridiculously low price. He them lowered each by one cent…the “truffle chocolate” was 14 cents and the Hershey Kiss was FREE. The overwhelmingly majority of students took the free chocolate…taking nothing out of their pocket.

Stop having “huge discounts” on some things trying to lure customers in for a bargain. Today every store, every restaurant and every service company now offers “huge discounts” and people would be insulted if they didn’t see a price reduction. BUT…people will stop in, call you for help, and at least give you a try if they could get something for FREE.

If you own a jewelry store announce that every hour on the hour there will be a drawing for a FREE WATCH all weekend long…but you must be there to get the watch. A clothing store can give a twenty dollar gift certificate away every hour…a restaurant will give one meal FREE for every three who pay for all seated by 6PM this Friday and Saturday night. Consultants can give FREE hours…you get the point.

I keep telling you things will get worse before they get better. Ignore the MSNBC crowd who preaches we have turned the corner…we have only lost 100 banks so far…200 more will be falling over the next twelve months because the commercial real estate collapse is in full swing now. One-third of houses sold…are selling below their purchase price. Commercial property isn’t selling at all…because no banks are offering financing on commercial real estate. That’s right…banks are worrying about falling prices…then cause falling prices by not offering loans to pay higher prices…shooting themselves in the foot yet again.

Read Comments and Add Your Own

Weather the Storm...

For those of you still watching…I hope to drop a few lines as time goes by. The last three weeks have been amazing…visiting owners, bankers, private equity fund managers, and getting to speak to many business groups all over the country.

Two things stand out that need to be addressed. People are resiliant but not yet realistic. When you say out loud that things are going to get worse they think you are a doomsday person. NO…I AM A REALIST.

People don’t want bad news because it brings them down. So they want to wear rose colored glasses whenever possible. I WANT THE TRUTH.

You can’t turn the corner ahead unless you know where you are going. Today’s announcement is that the 95th bank just closed for the year. Folks, there are many more to come as we have not admitted the truth about commercial real estate loans. How can any business afford the rents from leases made two or more years ago when revenues are falling off the charts? Yet, landlords can’t cut rents and keep up payments on mortgages that are higher than the value of the building.

If you would just face reality…and think and plan in what is the real world…incredible opportunities are all around you. Ignore being sick and you will stay sick. Diagnose your problem, take the right medicine…and you get better faster!

ATTENTION MY CEO COLLEGE BUDDIES...I AM SPEAKING TWICE AT THE CEO CONFERENCE IN CHICAGO IN OCTOBER...PLEASE COME AND BRING TWO FRIENDS AS MY NEW SPEECH WILL WAKE YOU UP AND MOVE YOU FURTHER DOWN YOUR ROAD TO SUCCESS.

Read Comments and Add Your Own

Incremental Issues

We slip down the slope in small incremental steps…we don’t just jump off a cliff.

I didn’t get overweight because one day I ate too much. I ate too much on many days, over a long period of time. Incrementally increasing my weight an ounce or two until whammo…way too much.

You didn’t create debt in five minutes…it probably took five years. Your business didn’t start to fail overnight…it has been failing for quite some time. Your relationship wasn’t wonderful last night and this morning the two of you are in chaos.

How do we get here in a bad space when none of us plan to be too heavy, have too much debt, have our business collapse, or lose all respect for our partner? In small increments of time.

If you knew in ten seconds you would crash your car you would instantly put on the brakes. If you knew your regular speeding behavior every day would one day cause an accident would you start slowing down…avoiding ever being close to that accident.

People let things go down in small incremental steps which we overlook. That blouse is on sale…I have to buy it. I could make a few more customer calls but the slow sales depress me…so I will skip them. It’s getting stressful out there, pass me the potato chips. He/she will have to wait while I indulge myself instead.

How do you turn any problem you have around?

Incrementally. One small incremental step at a time. Now get to work.

Read Comments and Add Your Own

Glub, Glub Glub...

OK, there is no longer an issue that our economy is in trouble. But there is quite a bit of misinformation being dispursed about how bad it is, how long it will stay bad and what you need to do about it. They are trying to make you believe all is going well!

Welcome back.

I skipped 8 weeks of writing and I missed it. several of you wrote and I thank you for your support. Cooper came along as grandchild number 5 two weeks ago and mother and child are doing fine in California. That caused some distraction as my wife has spent the last seven weeks on the West Coast while I visited once and am leaving in the morning to travel back with her later this week.

We are now in a world of “Illusion Economy” whereby car sales are up…with a $4,500 help from Cooper’s income and is less than 30 days old. People who would have bought cars in the next few months moved up their decision to grab the bonus money…and they won’t be buyers in September and October…when car sales will slip again.

Home buyers were assisted with an $8,000.00 slice of Cooper’s future earnings to motivate them to be first time home buyers. Lower end home sales improved as people took advantage of this freebie program. Even with this surge of buyers…we are not doing new home starts at a great rate, nor are we realistic about annual car unit sales. We were selling 20 million units two years ago and now hope sales can climb to 11 million units. That is a 45% drop in car unit sales…less metal sold, less parts sold, less dealership profits, less car sales employees.

Illusion Economy.

Reality says we are on our back and better spend wisely. John McAffee, the software guru who “secures” your computer couldn’t secure his own wealth, dropping one hundred million dollars down to a level of four million dollars today…in just two short years.

Protect your family, your business and your future by spending wisely now and do not take on anymore debt at this time. The future will only be good for you if you live in the Reality Economy and avoid believing in the Illusion Economy.

Read Comments and Add Your Own

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 …

Categories

Archive of All Entries (318)

Recommended Books

Blogroll

Resources

Subscribe to the Herman School of Business

Subscribe by Email

Subscribe to the RSS Feed