A Business Lesson Every Entrepreneur Should Learn
Issue #2033
- WEALTHY: How your competition can make your business stronger (Michael Masterson)
- HEALTHY: 3 reasons too much exercise is bad for your health (Dr. Al Sears)
- WISE: Diane Sawyer on competition
ALSO IN THIS ISSUE:
- Taking a conversation to the next level (Ilise Benun)
- 4 uses for your pillowcase (Lori Appling)
- It’s Good to Know… about i.e. and e.g.
- Add "lassitude" to your vocabulary
The Only Three Ways to Grow a Business
Did you know that there are only three ways to grow a business?
1. Increase the number of customers.
2. Increase the average transaction value.
3. Increase the frequency of repurchase.
Find a way to maximize each one, and your business will experience an astonishing rate of growth.
In his "9 Pillars of Business Growth" program, acclaimed consultant Jay Abraham outlines hundreds of proven, frequently unrecognized, and almost totally underutilized ways to grow these three key areas of your business. If you own a business (or would like to), be sure to take a look at Jay’s program.
- Patrick Coffey
"Competition is easier to accept if you realize it is not an act of oppression or abrasion - I’ve worked with my best friends in direct competition."
Diane Sawyer
A Business Lesson Every Entrepreneur Should Learn
By Michael Masterson
A recent Wall Street Journal article about a joint venture in China highlights a couple of ideas that we have been talking about in Early to Rise for many years:
- Many businesspeople (and apparently some business writers) think competition is bad and that reducing or eliminating competition is good. This is an enormously stupid and dangerous idea. Competition is good because it expedites natural economic selection, weeding out bad companies and bad products and promoting good ones.
- When some people say they favor "win-win" deals, what they really mean is they like 90/10 deals - i.e., we both win, but I win much more than you do. This, too, is stupid thinking.
The best and smartest businesspeople welcome competition because they know it will make them perform better. They bend over backward to make every deal they do good for their partners because they understand that, over the long run, it is much easier and more profitable to grow a business when everybody wants to work with you.
To build better cars, Shanghai Automotive Industry Corp. teamed up with General Motors Corp. in 1997 to produce Buicks, Cadillacs, and Chevrolets for China’s booming middle class. During that time, GM became the biggest car maker in China and SAI learned a lot about the manufacturing and marketing of American-quality cars.
Now SAI, using the knowledge it gained and the money it earned by working with GM, is producing its own line of mid-priced luxury cars… and they are selling well.
Does this bother GM?
Not at all. GM Chief Executive Rick Wagoner told The Wall Street Journal, "We made a big bet back in 1997, and it’s paid off for us very well."
The Journal wonders if GM gave away too much. "Its Chinese partner could end up competing against GM both in China and, someday, abroad. SAI, owned by the Shanghai city government, already makes cars that rival GM’s in a joint venture with Volkswagen AG."
And SAI probably will end up competing against GM. Hu Maoyuan, Chairman of SAI, is clear on his ambitions. "We want to build a global Chinese brand," he says. His company intends to "take full advantage of the technical and management experience that [they’ve] accumulated" in the GM and Volkswagen joint ventures.
Does that mean GM shouldn’t have gotten involved with SAI?
Of course not. During the last 10 years, GM made hundreds of millions of dollars a year in profits. Plus, it took a first position among Western car manufacturers in the world’s biggest market. Finally, it learned a great deal about selling to the Chinese people. Yes, it will have to compete with its ex-partner in the future, but it will do so from a much stronger position than it would have ever gained had it not made the deal.
The Journal’s question - Did GM give away too much? - reflects the kind of thinking that is very common in the business community. I call it "I win a lot. You win a little."
Here is a situation where GM learned lots, made tons of money, and is now in a great position to do well in the future … and the Journal is wondering if it "gave away too much." A better deal, that kind of thinking implies, would have been one where GM’s partner was never allowed to learn anything - just take its profit share and be happy.
I don’t look at business that way. What’s the fun in running a monopoly? Sure, you can make a lot of money. But you can make a lot of money competing for it too. And the difference between competing for money in a free market and taxing consumers in a controlled market is that you are much more likely to produce good products if you have competition.
Now that its partner is competing against it, GM will have to start making better cars and pricing them more competitively to maintain its dominant market position. That will be good for GM because it will have better cars to sell all over the world. GM shouldn’t - and didn’t - shy away from this competition.
I’m surprised that the writer who covered this story didn’t see that.
In making this case, I am assuming the Chinese government will not subsidize SAI and will maintain a free market. Interfering to artificially make SAI cars more financially attractive would be bad for GM in the short run but disastrous for SAI over time. Its products would degenerate from Cadillac to Lada quality.
Competition is good. Good for the consumer. Good for the economy. And good for business.
When I think about some of the businesses I’ve been involved in, this lesson is easy to understand. The nutraceuticals business, for example, was an easy business to make money in 12 years ago, when I got into it. There were only two or three players to compete with and a big and growing community of people who were willing to buy natural supplements. You could sell pretty much anything and make good money. And to cut costs and boost profits, many of the businesses operating at the time sold inferior products.
But you can only fool people - even eager, enthusiastic people - for so long. Eventually, the nutraceuticals market became sophisticated and much less responsive to hyped offers for products that didn’t have quality ingredients in optimum dosages.
As the market became more crowded with producers, consumers had more choices and so it became a lot tougher to sell cheap products at high prices. In fact, it became tougher to sell cheap products at low prices, too.
All the second-rate companies were complaining about the fall-off in the market and predicting a gloomy end to the industry. Meanwhile, some businesses were making money and growing fast. Who were they? What were they doing? They were quality-oriented businesses that were spending more money on their products and delivering nutraceuticals that really worked!
Competition weeded out the charlatans and the cheapskates but gave fertile ground to the companies that were brave enough to invest in better products.
I had two separate conversations this past week with owners of supplement companies who complained about the "decline of the market." I nodded sympathetically. Then, this morning, I met with Dr. Sears, who is committed to quality products, and was not surprised to hear how fast his supplement business is growing.
To stay on top of the Chinese market, GM will have to be very good. But that’s a good thing, being very good, not a bad thing.
Could GM have squeezed a better deal out of SAI than the one they got? Could they have persuaded SAI to sign a non-compete clause, for example? Not hardly. The Chinese government is very aware of how attractive its market is and very sensitive, because of its history, to being exploited by the West. If GM hadn’t agreed to the deal they were offered in 1997, some other large car company would have been happy to stand in their place.
But even if SAI were willing to give GM a "better" deal, it wouldn’t have been good for GM. Sooner or later, SAI executives would have learned every detail of the GM process - and when they did, they would have been ready to compete. Having some legal document in their way at that time would have been merely a legal impediment - an impediment that they would have sorely resented and perhaps used as justification for canceling the joint venture and sending GM back to America.
A deal is only good if it is good for both parties all the time, not just for a little while. When I make a deal, I ask myself, "How could this relationship become unfair to my partner in five or 10 years?" And if I can foresee a potential problem, I fix it then, at the beginning of the relationship. If I were to wait to see if the problem actually developed, it could only result in animosity toward me later on.
Just yesterday afternoon, I helped negotiate a deal between two businesses that I mentor. The deal that had been proposed was going nowhere. One party felt it was unfair to him, and the other party felt it was unfair to him. It was partly because certain assumptions hadn’t been spelled out - but it was also because neither was trying to take care of his partner.
I did my best to show them that the last thing they wanted was a deal that would be unfavorable to the other guy down the road. "Relationships that are forced are not good for either party," I told them. "Make sure your partner is happy and - if he is the kind of person you should work with - he will make sure you are happy too."
Weak people like controlled situations that protect weaknesses. Strong people are happy to subject themselves to competition. Smart people want their partners to share fairly in their profits.
Be your best self in business. Welcome competition. Make your partners happy.
[Ed. Note: Get Michael Masterson’s in-depth insights and practical advice for how to earn more, save more, and get rich faster than you imagined by picking up a copy of Automatic Wealth for Grads… and Anyone Else Just Starting Out, one of Amazon.com’s Top 10 Finance and Investing Books of 2006.]
How Does a Former Flat-Broke Landscaper Collect Over $12,000 Every Month in Passive Income?
At the beginning of every month, this former landscaper walks to his mail box and pulls out checks totaling more than $12,000. That’s each and every month. Rain or shine. Whether the stock market’s up or down. Regardless of the economy. In fact, at this point, the only thing he does for these checks is pretty much take a trip to the bank to drop them in his account.
- Patrick Coffey
Reader Feedback: "Your book knocked my socks off!"
"Your book Confessions of a Self-Made Millionaire arrived the other day and knocked my socks off! Especially the chapter on the crack addict and having a physical need to succeed. It was a powerful influence on me as I made plans for my future with a completely different view. If I can ever be of service to you, Michael, please let me know."
- Teresa Bolen
Kizu, Japan
[Ed. Note: How has reading ETR helped you - maybe even changed your life? Send your comments to ReaderFeedback@gmail.com. Include your name and hometown… and we may print your e-mail in a future issue.]
Are You Over-Exercising?
By Al Sears, MD
Too much exercise can be worse than a waste of your time. I see it in my patients daily. Muscle strain, torn cartilage, sprained ankles… all because they overdo it.
When it comes to exercise, there’s a common misperception that more is better. But your body wasn’t designed for long-duration exercises like aerobics or cardio - especially jogging and marathons. Aside from common overuse injuries, going overboard with your exercise routine creates more oxidative stress. That means you create a flood of free radicals that cause DNA and cell damage - wear and tear that can lead to chronic diseases like cancer and heart disease.
Too much cardio also shrinks your heart and lungs. It happens when your body adapts to long-duration exercise by downsizing your cardiovascular system. This "streamlining" helps your body cope with the stress of long workouts.
Here’s the good news: You can prevent disease and get into the best shape of your life by exercising less. All you need is 10 minutes three times a week. By focusing on intensity instead of duration, you can burn fat and strengthen your heart and lungs with minimal effort.
[Ed. Note: Dr. Sears’s high-intensity, short-duration PACE program has helped thousands of his patients burn fat, lower their blood pressure, and prevent heart attacks. You can get started on it today. All the details are right HERE.]
Networking Tip: Topics to Kick Off a Good Conversation
By Ilise Benun
Even if you’re naturally gregarious and friendly, getting past the pleasantries and into a real conversation with someone you’ve just met at a networking event can be hard.
One good way to kick off the conversation is to say "Hi, my name is… ." Then ask the other person why they came. This will often take the conversation directly into something related to their interests. It may also give you an indication of their business needs (which you might be able to help them with).
Another good conversation starter is to mention a business book you’ve read recently and share a bit of what you learned.
When all else fails, talk about the food.
[Ed. Note: Networking expert Ilise Benun is the author of Stop Pushing Me Around. Get more networking strategies with Ilise’s free e-newsletter, Quick Tips from Marketing Mentor.]
Simplify Your Life: Leave Your Pillow at Home… but Bring the Case
By Lori Appling
Make airline travel more comfortable by remembering to bring a pillowcase in your carry-on bag:
- If they run out of pillows before you get one, stuff your pillowcase with a jacket or sweater to create your own.
- If you need to remove your jacket or sweater during the flight, protect it by putting it in the pillowcase and storing it at your feet.
- Turn the pillowcase into a leg rest by filling it with the pillow and blanket provided.
- Use it as an extra bag. When it’s time to de-plane, take a quick look around and throw in any of the belongings you might have taken out during the flight - book, book light, headphones, iPod, snacks, etc.
[Ed. Note: Want to get paid to travel? You decide where to go - an African Safari… Hawaii… Belize… Paris… Rome. AWAI’s travel division will show you how to do it, using only a pen, a passport, and a little sunscreen.]
It’s Good to Know: About i.e. and e.g.
Although "i.e." and "e.g." are often used interchangeably, they shouldn’t be. Use "i.e.," from the Latin id est ("that is to say"), to explain something you just said. Use "e.g.," from the Latin exempli gratia, when you mean "for example."
(Source: Dictionary.com)
Start Making Money Today
Interested in getting a nice little side-business going on the Internet? Or maybe even from your living-room table?
But you don’t have too much money, you don’t have too much time, and you’re not exactly Bill Gates when it comes to technology. Sound familiar?
A lot of people are in the same boat. The good news is that ETR has heard you. And now we’ve done something about it…
We’ve asked our colleague Marc Charles to be on the lookout for profit opportunities that can be run from a kitchen table, your desktop or out on the road.
Criteria? They’ve got to be inexpensive, easy to start, and still have great income potential, but without a lot of red tape.
They say when you’re first getting your feet wet with a side-business, the most important dollar to make is the first one. Well, Marc is an expert at taking beginning entrepreneurs and showing you how to make that first buck. He knows, because he’s done it dozens of times for himself, his family and his friends.
If you’ve been dreaming about starting your own business… now you can get started for about the price of 2 lattes.
And get this - you could be making money literally just hours from now. Imagine the feeling of finally getting a side business launched - TODAY!
- Patrick Coffey
Word to the Wise: Lassitude
"Lassitude" (LAS-uh-tood) - from the Latin for "weary/exhausted" - is a lack of vitality or energy.
Example (as used by George Eliot in Romola): "The feverish excitement … had given place to a dull, regretful lassitude."
[Ed. Note: Become a more persuasive writer and speaker … build your self-confidence and intellect … increase your attractiveness to others … just by spending 10 VERY enjoyable minutes a day with ETR’s new Words to the Wise CD Library.]
Michael Masterson
Copyright ETR, LLC, 2007