Posted by Tommy Runfola | April 25, 2016
I have been in your position… I know your pain… I have lived your story….
Let me read your mail for a moment. You started a business with great ideas, great ideals, great aspirations, with great products or services. You poured your life’s blood into it, you gave it your cash, your savings, maybe you even mortgaged everything you own or ever hoped to own to find the capital necessary to fulfill this dream that started in your head and would have stayed there if you hadn’t breathed life into it. You read books, you went to seminars, you sought out gurus on the internet, you did everything you could to get an edge and to insure that your business would be the one that would beat the odds and survive and prosper.
At first things seemed to be going in the right direction, you launched the business and it seemed as though you had struck a responsive chord, maybe even better than you had hoped. Then as you entered the growth phase, you realized that this business was going to suck more cash out of you than you ever dreamed. Banks were skeptical of you because you had no track record and you were leveraged to the hilt. Friends and potential investors weren’t returning your phone calls, and you realized the word on the street was that you were having cash flow problems. You suddenly realized what every small businessperson realizes, when you have a cash flow issue in your business, it is your problem alone! No one is coming to the rescue, no one is throwing you a life line, and certainly no one is writing you a check.
So what are you to do? At this point I could go to the books and see what the “experts” would advise, and it would probably sound pretty good and you might even think that I’m a pretty smart guy by reading my “research.” But let me speak from the heart, let me get raw, honest and vulnerable and speak to you from my real life experiences. I have been through this cash flow issue a number of times in my business career, and I know what it takes to fight this giant and win. I have been there! I know about the sleepless nights, the worry, the ulcers, the ache in the pit of your stomach. I know what it feels like to look in the mirror and start doubting and questioning yourself as to whether you have what it takes, to question whether you even made the right decision to get into business in the first place.
Let me tell you about a real-life situation that I had in one of my businesses and how I faced it head on and came out with the victory. I once owned a chain of private schools. I started these schools after the terrible events at Columbine High School in the late 1990’s because I wanted to make the world a better place, change the face of education in America, and pay forward in life. I put millions of my own dollars into these schools and lots of sweat equity. Initially the venture was slow to catch on – there was lots of competition, it was hard to differentiate myself and get above the noise of the marketplace. The education that I was offering was also very elite and high-end – something that I thought would stand in stark contrast to public education and what other private schools were willing to offer. This education business required tons of overhead: Highly skilled and educated personnel, buildings, FF&E, government regulation, banking relationships, and state-of-the-art marketing to a fickle marketplace.
After about four or five years in the business, and millions of dollars in investment, I realized that based on my cash flow that while I was sure the product I was offering was the best in town, the marketplace and demographic that should have been pounding down my doors was far less convinced. Instead of analyzing my educational offering, potential school families seemed more concerned with getting free lunches (literally) and concerned that the curriculum was too difficult and might stress their child, and even criticized that our after school video games might not be as action packed (violent) as some of the other competing schools. They wanted us to open earlier, stay open later, charge no additional fees for anything, have the nicest facilities at the lowest prices. They wanted to send their sick kids to school when they shouldn’t so they didn’t have to miss work. Believe it or not, they didn’t like our strict policies about student discipline, uniforms, or attendance. It seemed as though even in the most affluent areas, we were completely missing what the marketplace seemed to want from us. Our standards were too high; our expectations were too high; and our prices were too high! All of this, of course, resulted in cash flow problems. It was time to either make dramatic changes or fold up our tent and go home.
For me, failure was not an option! I had been through this before, and while I didn’t have a specific formula for change, I knew that my product was top notch and there had to be a group out there that would appreciate my product and share my values and beliefs about what is possible for the next generation. So I started to look at my customers microscopically. Success leaves clues, and when I started to analyze my customers I realized that there was a small group within our population that complained little, seemed to appreciate the value we were offering, held education in high esteem, and believed and supported our approach to education and our goals for the next generation far more than the demographic that composed the majority of our student families. When I analyzed this group, I found that there was a common denominator among them, and that was that they were almost 100% international families – people who were from another culture in other countries who had a burning desire to get the best education for their children that money could buy and were willing to pay for it – even if it meant giving up some creature comforts for themselves.
In a short time after this epiphany we changed everything to cater to this new-found demographic – our advertising, our marketing, our food services, our after school programs, our summer programs, our social events, our financial aid programs, our website, our policies, the entire culture of our school was redirected to meet the expectations and desires of this new-found golden group within the international community. The business grew by leaps and bounds, we expanded, we became unique and exclusive within the international community. We even raised our prices to reflect the value we were offering. This led to our American demographic moving up a notch on the socioeconomic scale and we were getting the best of the best from the middle-American suburban demographic that was giving us fits just a few years before. Within a few years we not only had great cash flow, but we were packed and had waiting lists to gain admittance to our exclusive program.
What we realized is that while this process was not rocket science, it was science. We had to take deliberate steps to understand our ideal customer:
1. We had to look at our customer base
2. We examined everything about them
3. We looked at where people lived and the cost of their homes
4. We tracked how they lived, where they spent their money
5. We looked at their ethnicity, religion, social status
6. We took note of where they worked, the type of occupation they had, i.e., white collar, professional, etc.
7. We made note of what type of education and income they had
8. We tracked what types and brands of vehicles they drove
9. With whom they socialized
10. What values they held sacred.
In short, we had to understand them intimately, and ultimately that data pointed us in the direction of our greatest success. All we had to do was “change our position!” If you look closely and listen to your customers, the marketplace will tell you exactly what they need and want. Then fulfilling that need becomes infinitely easier. At the end of the day, while we made many changes they weren’t really drastic changes, but they were strategic changes.
Ultimately, after many successful years of six and seven figure growth, a national buyer came after us with an offer we just couldn’t refuse. Just think what would have happened if we had accepted defeat, given up, become bitter at the customer, or refused to do the hard work of changing our position in the marketplace.
Being an entrepreneur sometimes means becoming a marketplace warrior, being willing and able to fight your way through each and every obstacle you encounter. But, remember, you were built for the fight, and if you don’t give up and don’t give in, the fruits of victory are yours for the taking.
If you find this blog of helpful to your business, let us know. We are here to help you build your future and your fortune, so just reach out to us with your questions at firstname.lastname@example.org. We look forward to hearing from you.