Conclusion

Well, what have we learned? Let’s review the Business Rules and Lessons Learned from each chapter in this conclusion.
We hope you have learned valuable tools and concepts that you can use to pursue your dream. Best wishes and enjoy your journey.

—Ed and Charlie

Business Rules

Lessons Learned

Chapter One

1. Businesses succeed only by meeting customer needs.
2. Businesses succeed because they make profits.
3. Business profit equals cash in from customer minus cash out for costs.
4. Successful entrepreneurs meet customers’ needs better, faster, or cheaper than someone else.
5. IQ, education, family background, race, religion, and ethnic origin are not predictive of entrepreneurial success.
6. Successful serial entrepreneurs are not big risk takers—they take small-measured risks.
7. Most successful entrepreneurs are not inventors or discoverers or geniuses.
8. Business is about people. You need people to buy your product, people to work hard for you, and people to finance your business.
9. Many successful entrepreneurs had previous work experience in the same types of business they started.
10. Many successful entrepreneurs developed their businesses part-time before quitting their paying jobs.
11. Entrepreneurs are doers.
12. Entrepreneurs test an idea—they do trials.
13. Entrepreneurs learn and iterate, tinker and get better.
14. Entrepreneurs listen to customers.
15. Entrepreneurs constantly get better and improve their products or services.

Chapter Two

Businesses generally fail for 8 fundamental reasons:

1. People choose a bad business opportunity.
2. People try to sell to the wrong customers.
3. People try to sell the wrong products or services.
4. People price their products improperly.
5. People overestimate the number and the speed at which people will buy.
6. People cannot manage the business so as to consistently produce high quality products on time at a profit.
7. Employee problems.
8. People cannot scale their businesses to accommodate customer demand.

Chapter Three

1. Business ideas are like sand at the beach—plentiful, but there are few new or unique business ideas.
2. Not every business idea will make a good business opportunity.
3. Your idea needs to "pencil"—that is, make economic sense.
4. The key "pencil" drivers are:
   

   • The amount of money you need to make

   • Net profit margin

   • Customer conversion rate

   • Customer traffic volume

   • Speed of sales

   • Customer buying frequency

   • Burn rate and staying power—how much time (money) can you invest until you make a profit?

5. Remember the 7 Ws:
   

   • What can I sell?

   • To Whom can I sell?

   • Why will customers buy from me?

   • At What price?

   • What are my costs?

   • When will customers buy?

   • What will the competition do?

6. Common mistakes business starters make:
   

   • Overestimating the number of customer sales

   • Overestimating how fast people will buy

   • Underestimating their costs

   • Underestimating the competition

7. Owning a low margin business means:
   

   • You need a lot of customers.

   • Customers need to buy frequently.

   • You will have to operate very efficiently.

   • Your room for financial mistakes or errors will be small.

   • Volume of customer traffic, customer conversion rates, and knowing the competition is very important.

8. Owning a higher margin business generally means:
   

   • You need fewer customers.

   • Your customers probably will not be frequent buyers.

   • You will need to consistently generate new customer prospects.

   • Customer conversion rates could be low.

   • You need a constant flow of good customer prospects.

9. Your estimated weekly costs help you predict your burn rate: the speed at which you will burn through your money. Burn rate tells you how long you can stay in business until you hit break-even.
10. Break-even is the point at which your weekly incoming cash equals your costs going out.

"The sole purpose of business is to serve customers."

—Peter Drucker

"If you do not make a profit in your business, you are a charity—a not-for-profit."

—Ed Hess

Chapter Four

1. Your company’s likelihood for success is directly tied to identifying your prospects’ most important needs and wants and then providing a solution that best meets their objectives.
2. Because not all prospects are equally as likely to buy your product or service, it’s important that you determine which specific prospects are most interested in buying your product or service and what’s different about them from the rest of the market.
   Prospects who are the most likely to buy your product or service are your target market.
3. The benefits of identifying targeted prospects include marketing and advertising savings, more enhanced product or service design, and increased sales.
4. Doing your homework is critical to your success.
5. Talk to people—learn firsthand people’s needs/wants.
6. Constantly survey prospects, customers, and the competition.
7. Know your competitors’ strengths and weaknesses so that you can take advantage of their limitations and better serve your targeted customers.
8. Your goal is to spend your time on high-probability prospects.
9. You have limited time and money. Do your research, focus, and be disciplined.

Chapter Five

1. Customers buy solutions, so you must constantly assess what customers really want or need and make sure you give them that—not what you think they need nor more than they need because they will not want to pay for anything they do not need.
2. The goal is to deliver the most value to your customer at a cost that is both affordable for your customer and profitable for you.
3. Avoid the Winner’s Curse—overconfidence and complacency.
4. The competitive advantage you are seeking is to offer more value at an affordable price and do it defect-free, on time, and with good service every time.
5. Don’t fall in love with your product or service—that is the job of your customers.
6. Go to market as fast as possible—learn from your customers.
7. Get customer references as soon as you can—they will help you make more sales.
8. Product benefits are necessities. Product features are options.
9. The Value Proposition Ratio is Value = Benefits ÷ Costs.
10. Value is what the customer perceives it to be—not what you think it is.
11. Your "reason for being" is your essence, your differentiator, and what your business stands for in the minds of customers.
12. Low innovation product design is less risky than developing a totally new product.
13. Remember you have to be able to build or produce your product reliably and 99% defect-free, on time, and at a profit.
14. Develop a prototype and get in the market quickly and learn from your customers. Test and learn and adapt and improve. Constant improvement is key.

Chapter Six

1. Price impacts your volume of sales and your profit.
2. Profit = Sales Price – Costs
3. There are two types of costs: fixed and variable.
4. Variable costs vary with your volume of product sold.
5. Review your costs monthly.
6. Price also determines your break-even volume—the amount you need to sell to earn enough profit to cover your costs.
7. Cost plus pricing and competitive pricing are two good pricing strategies.
8. You may have to offer guarantees or payment terms to certain customers.
9. Remember—to you, cash is king.

Chapter Seven

1. Customer inertia is real and serious.
2. To make a sale, you need to overcome obstacles to sale.
3. You cannot overcome what you do not understand. You have to ask questions and listen.
4. The sale starts when you understand the reasons why the prospect does not want to buy.
5. There are 9 common reasons people do not buy.
6. There are 7 techniques to get people to try your product.
7. Selling is like fishing—find the right hook.
8. Understand the customer timeline to buy.
9. Reward customer referrals and loyalty.

Chapter Eight

1. Management is the daily focus on producing high-quality products on time that meet customer needs, and it is the coordination of supplies, parts, processes, and people to get that desired result.
2. Every business has a value chain that should focus on the parts of the business you need to manage.
3. You need to develop value chain as well as supply chain and manufacturing chain flow charts.
4. Management’s goal is to get the same high-quality result 99% of the time.
5. Management achieves 99% high-quality results through processes—drilling each job down to each step needed to complete it well.
6. Employees not only have to learn the job but also have to get better and faster; they have to constantly improve.
7. Good managers manage daily by objectives—the prioritized to-dos.
8. Good managers teach at least 15 minutes everyday to all employees the key objectives, the "have-to-dos" to be successful and the "cannot-dos."
9. Managing by exception is how you focus on the mistakes and problems.
10. Mistakes are a given. The key is to find them out quickly and fix them before they become big mistakes.
11. KISS: Keep It Simple, Stupid.
12. Learn to communicate clearly, concisely, and compellingly.
13. Constant improvement is far more important than doing it right the first time.
14. Structure becomes necessary when you have more than seven employees.
15. Measuring employees’ performance is critical.
16. Measure the right things. Measure behaviors that create the right results.
17. Measure frequently and give results to all employees.
18. Reward what you measure.
19. Make work fun; make work a game to learn.
20. Create a constant improvement business, a high-performance environment.
21. High-performance environments are positive, energetic places to work and are based on the Golden Rule.
22. You need the committed hearts and minds of your employees to make money.

Chapter Nine

1. Employees are people, too. They want the same exact things you want—dignity, respect, and the opportunity to be all they can be.
2. Hire for fit; focus on values and character. You can teach skills—you cannot teach character and drive.
3. Become good at hiring. Hire only after a thorough investigation and a probationary period. Hire people with a track record of success.
4. Hire employees who are like your customers. They will understand and relate to your customers better.
5. Play to people’s strengths. You do not have enough time to fix people’s weaknesses.
6. Be clear about what the job is. Be truthful and manage expectations.
7. Teach—Teach—Teach.
8. Inform your employees often what behaviors are not tolerated. Give daily/weekly feedback and keep records.
9. Be fair, consistent, and honest. Lead by example.
10. Ask your employees monthly if they are happy. If they aren’t, why not? Happy employees result in happy customers. How you treat your employees is the critical determination of whether they are happy and how they will perform.
11. Make work fun and meaningful, and when you can, always promote from within.
12. High-performance organizations create a "family."
13. Remember: Happy Employees + Happy Customers = You make money.
14. Take care of your people.
15. Manage yourself as thoroughly as you manage your employees. Mentally rehearse the day to come and mentally replay the previous day to see where you can make improvement.

Chapter Ten

1. Growth can be good or bad.
2. Growth creates people, quality, and financial issues.
3. Growth requires more controls and processes.
4. Growth requires the entrepreneur to become a manager.
5. Managing is different than doing.
6. Every financial area of your business (supplies, inventory, accounting, cash management, HR, and training employees) will need more process and controls.
7. Controls and processes have to be created real-time as you operate the business.
8. Growth will require you to upgrade your employees.
9. Growth will require you to manage customer concentration risk.
10. Growth will require more legal and insurance costs.
11. Growth will stretch you and will require you to operate differently.
12. Growth will require you to manage more proactively than reactively.
13. Growth will change your competition.

Bibliography and Resources^[1]

^[1] Adapted from Hess, Edward D. The Successful Family Business. Westport, CT: Praeger Publishers, 2006. (ISBN 0-275-98887-2)

Books

"Building a Company" Books

Bethune, Gordon. From Worst to First. New York: John Wiley, 1998.

The story of how Gordon Bethune took Continental Airlines from last place to first place. A good management, leadership, and execution book with lessons on how to keep focused on the customer. (ISBN 0-471-24835-5)

Cathy, S. Truett. Eat Mor Chikin: Inspire More People. Decatur, GA: Looking Glass Books, 2002.

The story of Truett and Jeannette Cathy’s journey from one restaurant to building a restaurant empire based on values, character, and spirituality. All Chick-fil-A stores are closed on Sundays, and the Cathy family’s success has been passed on to the second generation. (ISBN 1-929619-08-1)

Chouinard, Yvon. Let My People Go Surfing. New York: Penguin Books, 2005.

This is the story of Patagonia and how a successful business crashed and rescued itself. (ISBN 0-1430-37838)

Dell, Michael with Catherine Fredman. Direct from Dell. New York: HarperBusiness, 1999.

From dorm room to transforming and dominating an industry, the Michael Dell story is the story of the creation of a new logistics-supply chain model, which has made just-in-time manufacturing logistics a business necessity. (ISBN 0-88730-914-3)

Goetz, Charles F., and Michael E. Axelrod. The Great Entrepreneurial Divide—The Winning Tactics of Successful Entrepreneurs and Why Everyone Else Fails! Georgia: Rathskeller Press, 2007.

This book explores what successful entrepreneurs do differently than the less successful entrepreneurs and how the reader can benefit from it. New entrepreneurial concepts are introduced that will help first-time entrepreneurs and serial entrepreneurs increase their likelihood of success. (ISBN 978-0-9799745-0-2)

Hess, Edward D. The Road to Organic Growth. New York: McGraw-Hill, 2007.

This book describes how great growth companies continuously improve, engage their employees, and build a growth culture. The lessons are good for businesses of all sizes. (ISBN 007147525-7)

Marcus, Bernie, and Arthur Blank with Bob Andelman. Built from Scratch. New York: Times Business, 1999.

The story of how two fired friends rebounded to create and build the highly successful Home Depot Company. Like many other successful entrepreneurs—Sam Walton, Ross Perot, Howard Schultz—Marcus and Blank saw an opportunity in their industry their employer did not see. And the result was that they all did it their way. (ISBN 0-8129-3058-4)

Meyer, Danny. Setting the Table. New York: HarperCollins, 2006.

A great read by a consummate, caring, people-centric entrepreneur whose passion permeates the book. Uplifting and informative.(ISBN 0-06-074275-5)

O’Reilly, Charles A. Hidden Value. Boston: HBS Press, 2000.

Stanford University’s answer to "how great companies achieve extraordinary results with ordinary people," focusing on eight companies including Southwest Airlines, the Men’s Warehouse, the SAS Institute, and others. (ISBN 0-87584-898-2)

Reiss, Bob, with Jeffrey L. Cruikshank. Low Risk, High Reward: Starting and Growing Your Business with Minimal Risk. New York: Free Press, 2000.

This book is used by Charlie in his introductory-level entrepreneurship course. Low Risk, High Reward does an exceptional job in focusing first-time entrepreneurs on understanding the importance of risk and reward as it relates to being a successful entrepreneur.

Roddick, Anita. Body and Soul. New York: Crown, 1991.

The remarkable story of how a non-business housewife opens a shop to support herself and her children while her husband leaves England to accomplish his life’s goal of riding a horse across South America. From one shop to a corporate empire, to an empire lost and regained, to a noted leader of corporate sustainability, fair trade, and corporate ethics. (ISBN 0-517-88134-0)

Schultz, Howard, and Dori Jones Yang. Pour Your Heart Into It. New York: Hyperion, 1997.

The Starbucks story from the Projects of The Bronx to the creation of a company that continues to grow. The role of values, the ground-breaking benefits given to employees, and how Howard Schultz kept his promise not to treat his employees like his father was treated. A great read about perseverance, character, and good mentors. (ISBN 0-7868-6397-8)

Swofford, Stan. Rhino Tough. Down Home Press, 2006.

A fascinating book about Ed’s friend, Billy Prim, who built Blue Rhino, his successes and near failure and rebound. Reads like a novel. This stuff happens. (ISBN 0-9767829-1-X)

Walton, Sam, with John Huey. Sam Walton, Made In America. New York: Bantam Books, 1992.

Sam Walton’s autobiography. The story of how he learned from his mother to excel and to be driven to succeed and the role of his wife and daughter in influencing Wal-Mart policies. His business model and the creation of a "family" atmosphere with his employees are crucial to understanding what Wal-Mart was under Sam Walton. (ISBN 0-553-56283-5)

Business Strategy Books

D’Aveni, Richard A. Hypercompetition. New York: Free Press, 1994.

Ed’s friend, Professor Rich D’Aveni, of the Amos Tuck School at Dartmouth, puts forth a hyper-competition model for our fast-paced, changing, volatile, global world. The importance of this book is its emphasis that one’s strategy should not be static, but rather one’s strategy is an iterative, evolving proactive response to industry changes and competitor thrusts and countermoves. A dynamic approach to business strategy. (ISBN 0029069386)

Hargadon, Andrew. How Breakthroughs Happen: The Surprising Truth About How Companies Innovate. Boston: HBS Press, 2003.

A counter-intuitive book that gives hope to us normal people that most businesses can innovate without hiring geniuses and research types. The surprising truth of Andy’s research is that most innovation occurs because people take ideas, products, and services from one domain to another—they move ideas across industries. (ISBN 1-57851-904-7)

Joyce, William, and Nitin Nohria. What Really Works: The 4+2 Formula for Sustained Business Success. New York: HarperCollins, 2003.

What makes successful companies successful? That is the million dollar question. Three professors likewise set out to crack the DNA of success and came away with their 4+2 model. They share what they learned about strategy, execution, culture, organization plus talent, leadership, innovation, and mergers. (ISBN 0-06-051278-4)

Mintzberg, Henry, Bruce Ahlstrand, and Joseph Lampel. Strategy Safari: A Guided Tour Through the Wilds of Strategic Management. New York: Free Press, 1998.

Professor Mintzberg is a brilliant strategist. Ed hired him once to teach strategy to a global group of my executives and he was spell-binding. This book is a great overview of the ten competing schools of strategy with a summary of each model. These models take either an inside-out viewpoint or an outside-in-viewpoint. A wonderful, thought-provoking read. (ISBN 0-13-695677-7)

Porter, Michael E. Competitive Strategy. New York: Free Press, 1980.

If you only ever read one book on strategy, this should be it. Professor Porter of the Harvard Business Schools gives you the methodology to analyze your industry and your competitors. His "5 Forces" are used by every company strategist we know, and he clearly states that every business needs to adopt one of two strategies: A volume low-cost producer or a niche differentiator. Professor Porter taught us the overriding importance of switching costs—the difficulty in convincing customers to change. (ISBN 0-02-025360-8)

Entrepreneurship Books

Drucker, Peter F., Innovation and Entrepreneurship. New York: Harper & Row, 1985.

The best management thinker of recent time. (ISBN 0-06-085113-9)

Gerber, Michael E. The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It. New York: HarperBusiness, 1995.

This book discusses why most small businesses fail and the difficulty of entrepreneurs moving from being a doer to a manager of others. (ISBN 0-88730-728-0)

Kuratko, Donald F., and Harold P. Welsch. Strategic Entrepreneurial Growth. Fort Worth: Harcourt College Publishers, 2001.

A very good business school textbook on entrepreneurship, building a business, and managing a business. Includes topics of innovation, globalization, and family business succession. (ISBN 0-03-031936-6)

McGrath, Rita Gunther, and Ian C. MacMillan. The Entrepreneurial Mindset. Boston: HBS Press, 2000.

The best book for learning entrepreneurial methodologies or analytical frameworks. The tools are useful no matter what the stage of your business. Discovery-driven planning, real options thinking, consumption chains, and product attribute maps are examples of useful tools. Ed uses this book in teaching executive education to corporate leaders. (ISBN 0-87584-834-6)

Timmons, Jeffrey A. New Venture Creation: Entrepreneurship for the 21^st Century. 6^th ed. Boston: McGraw-Hill/Irwin, 2004.

The best entrepreneurship book Ed has found and which he used in his Emory Entrepreneurship Course. From opportunity recognition, to screening opportunities, to financing growth, to managing rapid growth, to exiting a business—this book contains great checklists and processes for every business manager. (ISBN 0-256-11548-6)

Family Business Books

Aronoff, Craig E., Joseph H. Astrachan, and John L. Ward. Developing Family Business Policies: Your Guide to the Future. Marietta, GA: Family Enterprise Publishers, 1998.

A good checklist of family business policies. (ISBN 1-891652-01-X)

Gersick, Kelin E., John A. Davis, Marion McCollom Hampton, and Iva Lansberg. Generation to Generation: Life Cycles of the Family Business. Boston: HBS Press, 1997.

Two academics and two consultants collaborate to put forth a model for how family businesses evolve and the different roles family members can play as family members, employees, and owners. (ISBN 0-87584-555-4)

Hess, Edward D. The Successful Family Business: A Proactive Plan for Managing the Family and the Business. Westport, CT: Praeger Publishers, 2006.

Ed’s practical guide to common family issues that arise in a family business. (ISBN 0-275-98887-2)

Lansberg, Ivan. Succeeding Generations: Realizing the Dream of Families in Business. Boston: HBS Press, 1999.

This book focuses on succession and the complex issues involved in managing a succession. A good but long read on marshalling a family’s dream, the selection process, the governance issues, and about letting go. (ISBN 0-87584-742-0)

Ward, John L. Keeping the Family Business Healthy. Business Owner Resources, 1997.

Fundamentally, a strategy book for managing and perpetuating a family business. A good basic primer. (ISBN 1-55542-026-5)

Ward, John L. Perpetuating the Family Business. New York: Palgrave Macmillan, 2004.

This, in my opinion, is John Ward’s best book—what he has learned in his 25 years teaching, researching, and consulting. This book will reinforce many of the lessons you learned in Ed’s book. (ISBN 1-4039-3397-9)

Finance, Accounting, and Measurement Books

Bruner, Robert F. Deals From Hell: M&A Lessons that Rise Above the Ashes. Hoboken, NJ: Wiley, 2005.

Bob Bruner is the dean at the University of Virginia Darden School of Business and is one of the leading authorities on mergers. Do they work? Under what conditions? And what are the common pitfalls? A must-read for anyone thinking of merging their business or selling for stock. (ISBN 978-0-471-39595-9)

Copeland, Thomas E., Tim Koller, and Jack Murrin. Valuation: Measuring and Managing the Value of Companies. 2^nd ed. New York: Wiley, 1994.

The bible of valuation written by three McKinsey & Company professionals. This book should answer your questions on discounted cash flow projections, EBITDA versus accounting net income, the real cost of financing or capital, values-based management, and finding the value drivers of your business. (ISBN 0-471-36190-9)

Fridson, Martin, and Fernando Alvarez. Financial Statement Analysis: A Practitioner’s Guide. 3rd ed. New York: John Wiley & Sons, 2002.

An outstanding book for those with a basic understanding of accounting. A compendium of common issues in understanding securities offerings and evaluating competitors’ or targets’ financial statements. The ways numbers can be massaged or manipulated. (ISBN 0-471-40915-4)

Kaplan, Robert S., and David P. Norton. The Balanced Scorecard: Translating Strategy into Action. Boston: HBS Press, 1996.

How do you measure results? How do you measure employee or business unit results? Many businesses today utilize some form of balanced scorecard to link measurements and strategy and to achieve strategic alignment of their different business units, departments, or functions. This book makes it possible for every business, regardless of size, to measure better and hold people accountable. (ISBN 0-87584-651-3)

Schilit, Howard. Financial Shenanigans: How to Detect Accounting Gimmicks and Fraud in Financial Reports. 2nd ed. New York: McGraw-Hill, 2002.

From the pioneer of accounting sleuthdom, the common accounting gimmicks and ways to manipulate the financial picture of a company. Use this checklist to evaluate the financial statements of the business you may want to buy. (ISBN 0-07-138626-2)

Stern, Joel M. and Donald H. Chew, editors. The Revolution in Corporate Finance. 2nd ed. Cambridge, MA: Blackwell Finance, 1992.

A compendium of fine articles on the topics of capital budgeting, cost of capital, capital structures, raising capital, interest rate swaps, and spin-offs, carve-outs, and divestitures. (ISBN 0-631-18554-2)

Leadership Books

Badaracco, Joseph. Leading Quietly. Boston: HBS Press, 2002.

Joe Badaracco is a wonderful, humble leader and professor at Harvard Business School. He graciously helped Ed when he was beginning his teaching career with no motivation other than kindness. He, in this book, dispels the myths of leadership and asserts that leadership is patient, careful, and incremental. He lays out a framework or template for leadership analysis and action. (ISBN 1-57851-487-8)

Behar, Howard. It’s Not About the Coffee. Portfolio, 2007.

A good book on leadership and people-centric policies at Starbucks. (ISBN 9781591841920)

Bennis, Warren G. and Robert J. Thomas. Geeks & Geezers. Boston: HBS Press, 2002.

The authors look at the role of adversity in a leader’s life. They correctly focus on the fact that in extremely difficult times, character, confidence, and values are solidified and that adversity prepares one to deal with life’s challenges. (ISBN 1-57851-582-3)

George, Bill. Authentic Leadership. San Francisco: Jossey-Bass, 2003.

Bill George is the former chairman and CEO of Medtronic. His book is an illuminating story about the authentic leadership model. He focuses on purposes, values, and self-discipline and gives one hope in this era of corporate scandals that one can lead with values and morals and create shareholder value, too. (ISBN 0-7879-6913-3)

Gergen, David R. Eyewitness to Power. New York: Simon & Schuster, 2000.

The subtitle of David Gergen’s book is The Essence of Leadership: Nixon to Clinton, and he does not disappoint. A thoughtful work focusing on style, checks, and balances, character, and power. The pros and cons of each president’s leadership are here for all to learn from. (ISBN 0-684-82663-1)

Goleman, Daniel, Richard E. Boyatzis, and Annie McKee. Primal Leadership: Realizing the Power of Emotional Intelligence. Boston: HBS Press, 2002.

Goleman and his colleagues at Rutgers and Case Western University have put the leadership onus right back where it belongs—on you. Our effectiveness as leaders is dependent on our emotional intelligence. Our ability to manage our emotions, understand others’ motions, and to relate and connect to people emotionally. A must-read for every male. (ISBN 1-57851-486-X)

Greenleaf, Robert K. Servant Leadership. New York: Paulist Press, 2002.

Robert Greenleaf, a former AT&T executive, in 1977 espoused that service to others was the essence of leadership. Servant leadership is growing in popularity and is also known as values-based leadership. (ISBN 0-8091-0554-3)

Books on Lessons to Learn from Bad Leadership

Eichenwald, Kurt. Conspiracy of Fools: A True Story. New York: Broadway Books, 2005.

A spell-binding account of the inner working of Enron from a corporate finance viewpoint primarily. Reads like a mystery thriller. It tells the story of when management loses touch with the details, condones inappropriate behavior, and compensates people for the wrong results. Wall Street’s role in this disaster is not pretty. And Arthur Andersen’s overriding of its quality control people in order to satisfy Enron is shameful. (ISBN 0-7679-1178-4)

McLean, Bethany, and Peter Elkind. The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron. New York: Portfolio, 2003.

The story of the Enron Company—its culture, value, and leadership. How the greed of the 1990s impacted the ability of accountants, lawyers, and Wall Street to render their duties to the investing public. The story of arrogance, hubris, greed without values, and form over substance. How smart, "normal" people got caught up in peer pressure and lost their anchors or moral compasses for what is right and wrong. (ISBN 1-59184-008-2)

Stewart, James B. Disney War. New York: Simon & Schuster, 2005.

The excruciating details of an autocratic, insecure CEO who packed his board with those beholden to him. The pettiness, the duplicity, and the failure of core values are mind-boggling. The story is like a soap opera, and much can be learned about the CEO’s decision-making processes. (ISBN 0-684-80993-1)

Management Books

Bossidy, Larry, and Ram Charan with Charles Burck. Execution: The Discipline of Getting Things Done. New York: Crown Business, 2002.

Bossidy and Charan refocused U.S. business leadership on the key role of execution. The best strategy in the world is not worth much if you cannot execute it. Bossidy’s mantra is a culture of critical inquiry that produces reality for management. His views on constructive debate, measurement, and rewards are spot on. He sets forth the GE model of aligning strategy and action. (ISBN 0-609-61057-0)

Buckingham, Marcus, and Curt Coffman. First, Break All the Rules. New York: Simon and Schuster, 1999.

This book would have sold even more copies with a representative title. Ed uses it in his classes. It is the best book to teach you how to manage people—how to communicate, set objectives, and hold people accountable, and it is a primer for managing people best practices—based on years of research by Gallup. (ISBN 0-684-85285-1)

Collins, James C. Good to Great. New York: HarperBusiness, 2001.

Jim Collins produced the best-selling business book since Search For Excellence. (ISBN 0-06-662099-6)

Finkelstein, Sydney. Why Smart Executives Fail and What You Can Learn from Their Mistakes. New York: Portfolio, 2003.

Professor Finkelstein’s book is a welcomed addition. His research shows that most major business failures occur in big transactions: mergers, change initiatives, new competition, and they occur because of leadership’s arrogance, hubris, insularity, and from flawed cognition—the failure to see and process reality. If you are successful, a must-read to stay successful. (ISBN 1-59184-010-4)

Hamel, Gary. The Future of Management. Boston: HBS Press, 2007.

A thought-provoking read on how to build a modern business where all stakeholders win. (ISBN 1-4221-0250-5)

Magretta, Joan. What Management Is. New York: Free Press, 2002.

This book brings all of us back to the basics of what is management. Anytime you get caught up in either management hype or think you have figured the management game out—you should pull this book off the shelf and read it. (ISBN 0-7432-0318-6)

Sullivan, Gordon R., and Michael V. Harper. Hope Is Not a Method. New York: Broadway Books, 1997.

If you need to change something major in your business, read this book about the U.S. Army’s massive change initiative in the early 1990s. One of the best books on the execution of change. (ISBN 0-7679-0060-4)

Marketing and Sales Books

Bedbury, Scott with Stephen Fenichell. A New Brand World: 8 Principles for Achieving Brand Leadership in the 21st Century. New York: Viking, 2002.

From 1995 to 1998 Scott Bedbury was senior vice president of marketing at Starbucks and prior to that, the head of advertising at Nike. Need I say more? A thought-provoking book on the power of brand—what your company represents. Just maybe your most important product is your brand. (ISBN 0-670-03076-7)

Heskitt, James L., W. Earl Sasser, and Leonard A. Schlesinger. The Service Profit Chain. New York: Free Press, 1997.

Using Southwest Airlines, Ritz-Carlton, Taco Bell, and others, these three Harvard Business School professors irrefutably establish the link between employee satisfaction and customer satisfaction and loyalty and profits. This book from the logistics and marketing worlds confirms the role of values, people-centric cultures, and employee satisfaction in driving business results. (ISBN 0-684-83256-9)

Kotler, Philip. Kotler on Marketing. New York: Free Press, 1999.

Northwestern University’s dean of marketing with over 15 books to his credit. He views marketing as a competitive advantage and a disciplined strategy. Thought-provoking and it will change your view. (ISBN 0-68-85033-8)

Sheth, Jagdish N., and Rajendra S. Sisodia. The Rule of Three: Surviving and Thriving in Competitive Markets. New York: Free Press, 2002.

Ed’s friend, Jag Sheth, has produced the theory that in every industry, three companies will dominate a market. The authors give hope to small firms who specialize and who do not get too big to become a target of the Big 3. (ISBN 0-7432-0560-X)

Articles

The most consistent source of high-quality business articles written for the business person is the Harvard Business Review. Some favorites follow:

Collins, Jim, "Level 5 Leadership: The Triumph of Humility and Fierce Resolve," HBR, January 2001, 66–76.

Good to Great, the # 1 best selling business book of the last ten years busted the myth about leaders of great businesses. No, they are generally not charismatic larger-than-life heroes. They are humble, passionately-focused people.

Collis and Montgomery, "Creating Corporate Advantage," HBR, May/June 1998, 70–83.

How do you align your strategy, structure, control processes, and human resources to maximize your chances of success? Three different models are discussed based on Tyco, Sharp Electronics, and Newell Rubbermaid.

Couter, Diane L., "Sense and Reliability—A Conversation with Celebrated Psychologist Karl E. Werck," HBR, April 2003, 84–90.

Ed heard Karl Werck talk in February 2005 at one of my conferences about high reliability organizations, and in 30 minutes he added a whole new dimension to his thought process. Successful organizations not only reward values they cherish, they also focus on non-desired behaviors. This article discusses high reliability organizations like air traffic controller teams, fire fighters, and emergency room personnel.

Drucker, Peter F., "Managing Oneself," HBR, March/April 1999, 64–74.

A wonderful article about the toughest management job in the world—managing yourself. Most people do not spend the time to assess themselves and put themselves into position to play to their strengths. Drucker’s "mirror" test is a good one for any leader, parent, or partner.

Magretta, Joan, "Governing the Family-Owned Enterprise: An Interview with Finland’s Krister Ahlstrom," HBR, Jan-Feb 1998, 112–123.

A thought-provoking interview with the non-family CEO of a large multi-generational family business dealing with issues of governance, the different roles family members play, how to keep the family connected to the business, the roles of Family Councils, and a Family Values Statement.

Miller, Warren D., "Siblings and Succession in the Family Business," HBR Jan-Feb 1998, 22–36.

Three family members vying to be the successor CEO is the recipe for disaster. This Harvard case study is illustrative of the problems of having too many family members working in the business. Four outside experts present their advice. Some practical, some not.

Pearson, Andrall E., "Tough-Minded Ways to Get Innovative," HBR, August 2002, 117–124.

The former President of Pepsi Co. has more good advice in these seven pages than most books have. He demystifies innovation and growth.

Porter, Lorsch, Norhia, "Seven Surprises for New CEOs," HBR, October 2004, 62–72.

A good article for new CEOs of both public and private companies—and yes, family businesses. Generally, CEOs overestimate how fast and how much they can impact an organization. Lessons to be learned—do not think it is about you, and do not lose touch with the line employees and customers.

Rogers, Holland, and Haas, "Value Acceleration: Lessons from Private Equity Masters," HBR, June 2002, 94–101.

Private equity firms have an expertise in buying firms, operating them for a few years, and either doing an IPO or selling the business at a very good return. Why can these financial engineers run businesses better than management? The authors of the consulting firm, Bain & Company, studied 2,000 private equity transactions and came away with four key managerial principles that can apply to your business, too.

Slywotzky, Adrian J., and Richard Wise, "The Growth Crisis and How to Escape It," HBR, July 2002, 72–83.

In the decade of the 1990s, less than 10% of the public companies grew their revenues 10% or more in eight or more years. Consistent top-line growth is hard. What works? Geographical expansion, acquisitions, price increases, innovation? Their answer lies in your existing customer relationships.

Special Issue: "Inside the Mind of the Leader," HBR, January 2004.

Buy this whole journal. It contains good articles by Warren Bennis (Geeks and Geezers), Daniel Goleman (Primal Leadership), Colleen Barrett of Southwest Airlines, and David Gergen.

Ed uses "When Followers Become Toxic" by Lynn R. Offerman in his leadership classes to discuss "Yes People" and "Corporate Suck-Ups."

Information Portals

1. Entreworld.org is the information portal of the Kauffman Foundation. Its content is broken down into three parts: starting your business, growing your business, and supporting entrepreneurship. Starting your business has nine subtitles:
   

   • You, the Entrepreneur

   • Market Evaluation

   • Product/Service Development

   • The Right People

   • Finances

   • Marketing and Sales

   • Legal and Taxes

   • Technology

   • Special Interest Groups

   Under each subtitle are 3 to 7 content areas.
   
   Likewise, growing your business has nine subtitles with 3 to 10 content areas. Critical new ones are accessing capital and growth strategies.
   
   The Entrepreneur Search Engine has a wealth of information listed under: Academic Materials, Organizations, Publications, Research, Center for Entrepreneurship, Distance Learning, and Family Business.
   
   The Family Business section lists 32 Family Business Centers at universities with links to their sites.

2. Fambiz.com is the family business portal of Northeastern University. It has a good article search feature.
3. Ffi.org, Family Firm Institute, is a consultant organization that publishes The Family Business Review.
4. www.kennesaw.edu/fec (Cox Family Enterprise Center) is run by Ed’s friend, Joe Astraclan. He is the editor of The Family Business Review and Cox published family business cases.
5. www.knowledge.wharton.upenn.edu is a good, free information source from top-ranked Wharton Graduate Business School.
6. www.gsb.stanford.edu is the Stanford Knowledgebase and a good, free information source about business thought leadership. Stanford’s Executive Education site has an outstanding catalog of speeches on CDE for reasonable prices.

Author’s Commentaries

These commentaries were written by Ed Hess for private company CEOs and owners, and the content is explained in the titles. These commentaries can be found on his web site: www.EDHLTD.com.

"10 Keys to Raising Growth Capital," The Catalyst, April 2004.

"Are Your Employees a Means to Your End?" The Catalyst, May 2004.

"Blocking and Tackling," The Catalyst, December 2003.

"Corporate Social Responsibility: The Value of Business Stewardship," The Catalyst, October 2004.

"Do You Have a Broken Arrow Plan?" The Catalyst, August 2003.

"Entrepreneurial Leadership: Why Should Anyone Follow You?" The Catalyst, June 2003

"Entrepreneurs: Reality vs. Myth," The Catalyst, July 2004.

"Going Public to Get Rich: Reality Therapy," The Catalyst, April 2003.

"Independent Directors: Private Companies Need Them," The Catalyst, March 2003.

"Managing Execution," The Catalyst, January 2003.

"Managing the Family Business: The Golden Goose and the Sandbox," The Catalyst, May 2003.

"Managing VUCA," The Catalyst, June 2004.

"Rapid Growth: Be Careful What You Ask For," The Catalyst, July 2003.

"The Family Business Succession: The Duality Principle," The Catalyst, February 2004.

"The Family Business: The Unintended Consequences of Gifts of Stock," The Catalyst, January 2004.

"The ’Perfect’ Investment," The Catalyst, September 2004.

"The Silver Bullet of Leadership," The Catalyst, November 2004.

"What Do Good Leaders Actually Do? (Part I)," The Catalyst, September 2003.

"What Do Good Leaders Actually Do? (Part II)," The Catalyst, November 2003.

"What Is the Meaning of Business?" The Catalyst, October 2003.

"When Should Your Business Stop Growing," The Catalyst, March 2004.

"Why Successful Companies Often Fail," The Catalyst, February 2003.

Index

A–B

assembling (manufacturing) chain, defined

benefits (of products), defined

beta tests, defined

Blanchard, Jimmy

break-even, defined

break-even formula, defined

burn rate, defined

business ideas

business opportunities versus

evaluating

children’s clothing shop example

cost estimations

customer conversion ratio

net profit margin

net profit margin by business sector

"penciling" ideas

sandwich shop example

7 Ws

business management. See also growth management

defined

of employees

by exceptions

iteration, defined

KISS principle

manufacturing chain, defined

measurements and rewards for employees

by objectives

rule of 3s

rule of 7s

start-up overload

supply chain, defined

value chain

defined

flow charting

business opportunities, business ideas versus. See also evaluating business ideas

business success

determining

rules of

businesses, starting as employees

buy-in of employees

C

cash flow in growth management

checklists, growth management

children’s clothing shop example (evaluating business ideas)

competition

defining

researching

sandwich shop example

competitive advantage, determining

competitive analysis

competitive pricing, defined

contingency plans, importance of

cost plus pricing, defined

costs

defined

estimating

competitive pricing

cost plus pricing

customer buying timeline

Customer Conversion Rate

children’s clothing shop example

defined

low profit margin versus high profit margin

customer feedback, importance of

customer inertia

customer loyalty programs

customer referral programs

customer segmentation

customer service, importance of

customer traffic, defined

customer volume, determining

customers

defined

diversification of

high-probability prospects

defined

finding

meeting needs of

pricing factors regarding

prospects, defined

selecting

at start-up

D

daily improvement

daily preparation, importance of

delivery channels

design chart for products

differentiators, defined

diversification of customers

Drucker, Peter

E

employees

buy-in for job

expectations of

firing

growth management

hiring

for cultural fit

interviews and reference checks

probationary hiring

management of

measurements and rewards

promoting

relationship with

starting businesses as

team environment for

training

turnover

upgrading

entrepreneurs

common mistakes of

business opportunity selection

customer inertia

customer selection

employees, relationship with

growth management

poor execution

pricing

product selection

defined

paths to success of

skills needed by

entrepreneurship, defined

estimating costs

competitive pricing

cost plus pricing

evaluating business ideas

children’s clothing shop example

cost estimations

customer conversion ratio

net profit margin

by business sector

"penciling" ideas

sandwich shop example

7 Ws

exceptions, management by

Execution Process, defined. See also running daily business

F

features (of products), defined

feedback from customers, importance of

financial controls

financing growth management

firing employees

fixed costs, defined

flow charting value chains

fly fishing analogy (sales)

focus groups, defined

fully loaded cost, defined

G

Gates, Bill

goals. See objectives

Google, competitive advantage

growth management

challenges of

checklists

contingency plans

customer diversification

employee issues

employees, upgrading

financial controls

financing

legal issues

priorities, setting

questions to ask

reports

small business networking

small business services, hiring

H

high performance businesses

high profit margin, customer conversion rates needed

high-probability prospects

defined

finding

hiring

employees

for cultural fit

interviews and reference checks

probationary hiring

small business services

housing amenities example (Value Proposition Ratio)

I–J

ideas

business opportunities versus

evaluating

children’s clothing shop example

cost estimations

customer conversion ratio

net profit margin

net profit margin by business sector

"penciling" ideas

sandwich shop example

7 Ws

improvement, daily

innovation, low versus high

interviews, hiring employees

iteration, defined

K–L

KISS principle

leadership, rules for

legal issues in growth management

low innovation, defined

low profit margin, customer conversion rates needed

M

mailing lists, buying

management. See also growth management

defined

of employees

by exceptions

iteration, defined

KISS principle

manufacturing chain, defined

measurements and rewards for employees

by objectives

rule of 3s

rule of 7s

start-up overload

supply chain, defined

value chain

defined

flow charting

manufacturing chain, defined

market surveys

conducting

defined

example of

measurements (of employees)

mistakes, handling

Monthly Payment Customers, defined

N

net profit margin

by business sector

customer conversion rates and

defined

determining customer volume

determining pricing

researching competition

networking with small business owners

O–P

objectives, management by

obstacles to sales, overcoming

opportunities, business ideas versus. See also evaluating business ideas

overestimating number of customers

pencil process, defined

"penciling" business ideas

people. See customers; employees

Perot, Ross

Pfizer Pharmaceutical Company, competitive advantage

positive cash flow

preparation

contingency plans

daily preparation, importance of

pricing

break-even formula

costs, estimating

competitive pricing

cost plus pricing

defined

determining

factors in

setting

primary research

defined

market surveys

conducting

example of

prioritization

for growth management

of tasks

probationary hiring

processes

checklists for

defined

Product Differentiation Story (sales pitch)

products

benefits, defined

break-even formula

competitive advantage, determining

customer feedback, importance of

design chart for

features, defined

low innovation, defined

meeting customer needs

pricing

production considerations

prototypes, defined

selecting

Value Proposition Ratio

defined

housing amenities example

profit, defined. See also net profit margin; your profit

promoting employees

prospects

defined

high-probability prospects

defined

finding

prototypes, defined

public companies, researching net profit margin of

Q–R

qualified prospects

quality, importance of

quick sales, importance of

"reason for being," determining

recordkeeping

reference checks, hiring employees

reports, growth management

researching

competition

customers. See high-probability prospects, finding

rewards (for employees)

Risk-Adverse Customers, defined

rule of 3s

rule of 7s

running daily business

S

sales. See also employees

customer buying timeline

customer referral and loyalty programs

fly fishing analogy

listening, importance of

obstacles, overcoming

psychology of

quick sales, importance of

sense of urgency in

sales pitch. See Product Differentiation Story (sales pitch)

sales price. See pricing

sandwich shop example (evaluating business ideas)

Schulte, Horst

Schultz, Howard

secondary research, defined

selecting

business opportunities. See also evaluating business ideas

customers

products

services. See products

7 Ws

evaluating business ideas

list of

simplicity in management

small business networking

small business services, hiring

start-up companies. See entrepreneurs

start-up overload

start-up time, defined

success

determining

rules of

supply chain, defined

surveys. See market surveys

T

team environment for employees

3 Ws, list of

Timing of Payment Customers, defined

trade associations, defined

training employees

turnover of employees

U–V

underestimating length of buying time

upgrading employees

value chain

defined

flow charting

Value Proposition Ratio

defined

housing amenities example

variable costs

defined

examples of

volume. See customer volume

W–Z

Wal-Mart

competitive advantage

Walton, Sam

your profit, defined. See also profit

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