It’s always painful for us to hear a new wantrepreneur talking about the first steps they’re going to take when they go into business. They usually say something like, “Well, if I’m going to go into business, I’m going to need to get an office, a production facility, and a warehouse.” And “I’m going to need a new car, a new truck, new furniture, and new machinery. Oh, and I’m going to need a full staff.”

Interestingly, they believe that their business success is based on the acquisition of those items. They’re excited to hear stories of how similar startups with similar wish lists got funded. Presumably, a big reason for the funding is to support all that overhead in lieu of income from sales for a period of time. This is also known as a “burn rate.” The idea is to get the business all set up with enough in the bank to pay your bills until sales “take off.” This is also known as a “runway.”

The Millstone Around Your Neck

We grimace when we hear these comments. True, their business will eventually need these things, for at least the startup and build up phase. However, these reoccurring monthly costs are a huge millstone around their necks, pulling them down while they’re trying to swim upstream to achieve a positive cash flow. Like it’s not hard enough already? So now, before we even achieve a positive cash flow, let’s put our precious time, money, and attention into building out the business? No!

Some startups may know that sales will be the most difficult part. They suspect it’s a lot of energy for very little return, especially at first. But they can put it off and take refuge in doing something that does “show”, like spending money on assets and overhead. Other startups may just plain underestimate the amount of time, energy and focus it takes to actually make sales happen.

What’s crazy for us is how easy it is to borrow money when there’s hard assets involved. This lending policy further temps startups to put on that millstone. It’s as if the lenders and investors believe they can take those assets back if you default. But even if they can, they’re hard to move and certainly can’t return the full cost.

Focus on Sales not the Millstone

For whatever reason, tying up precious capital in bricks and mortar and bringing on a staff can distract you from your primary objective, sales! You can outsource most of this stuff anyway. In fact, once you free yourself of the monthly millstone, you may decide you don’t want to burden yourself with a bunch of assets and overhead, so you can put more focus on sales. We believe that sales earns these types of assets, not the other way around.

When we started Barefoot Wine, the first thing people would ask us was, “Oh, the wine business! Where are your vineyards and how many acres do you have?” Our answer was simple, “None! But we have sales – lots of sales!”

When we got started, we couldn’t get financing so we had to make sales happen early and often just to survive. We had no runway and we couldn’t afford a millstone. So we outsourced as much as we could. Today we recommend this “beyond lean” startup strategy to our clients.

Outsource Everything But…

We believe you can outsource everything but sales, accounting, and quality control. By doing the sales yourself, especially to get started, you gain a deep respect for the customer and the market fit of your products and services. This will become a priceless experience as you grow your company and ultimately hire and train your own salespeople.

In-house accounting is critical. You need to see the numbers now! You can’t wait a month or two to see what’s happening in your business. It will be too late! That business plan you spent so much time writing is now replaced by the cash flow report. And successful cash flow management turns out to be a critical startup skill.

You can outsource production, but you can’t outsource quality control. You need to have your person in your contracted facilities to ensure quality. Your production contracts must specify in great detail all the requirements necessary before you will pay for those goods and services.

But pretty much everything else can be done by somebody else. And in many cases, better than you can do it yourself. Don’t encumber your fledgling business with a bunch of overhead bills hungry for monthly bucks. Jump on the hardest job, sales! Once you make that sale, you’ll be surprised at how many vendors jump out of the woodwork to help you keep those sales going. After all, your sales are what’s paying everybody’s bills.

The next time a wantrepreneur tells us about their startup plans, we would love to hear them say, “To get started, I’m outsourcing everything except for sales, accounting, and quality control!”

Who We Are

Michael Houlihan and Bonnie Harvey co-authored the New York Times bestselling business book, The Barefoot Spirit: How Hardship, Hustle, and Heart Built America’s #1 Wine Brand. The book has been selected as recommended reading in the CEO Library for CEO Forum, the C-Suite Book Club, and numerous university classes on business and entrepreneurship. It chronicles their humble beginnings from the laundry room of a rented Sonoma County farmhouse to the board room of E&J Gallo, who ultimately acquired their brand and engaged them as brand consultants. Barefoot is now the world’s largest wine brand.

Beginning with virtually no money and no wine industry experience, they employed innovative ideas to overcome obstacles, create new markets and forge strategic alliances. They pioneered Worthy Cause Marketing and performance-based compensation. They built an internationally bestselling brand and received their industry’s “Hot Brand” award for several consecutive years.

They offer their Guiding Principles for Success (GPS) to help entrepreneurs become successful. Their book, The Entrepreneurial Culture: 23 Ways To Engage and Empower Your People, helps corporations maximize the value of their human resources.

Currently they travel the world leading workshops, trainings, & keynoting at business schools, corporations, conferences. They are regular media guests and contributors to international publications and professional journals. They are C-Suite Network Advisors & Contributing Editors. Visit their popular brand building site at www.consumerbrandbuilders.com.

To make inquiries for keynote speaking, trainings or consulting, please contact sales@thebarefootspirit.com.

The post 3 Business Functions You Can’t Outsource appeared first on The Barefoot Spirit.

While traditional employment prospects are certainly less accessible and less rewarding, college grads faced with these challenges might consider a different strategy altogether – starting their own business.

Here are some reasons why today’s college grads have an advantage as entrepreneurs:

1. Less to lose. If it’s going to take a year or two to find a job, if it’s going to pay peanuts anyway, and if the chances are it can be outsourced and leave you unemployed, then the prospects of self-employment suddenly don’t look risky by comparison.

2. Information Explosion. There has never been more information available on how to start and run a business. In addition, with your college education, you have learned how to learn, how to research and how to access that information. Your college experience has taught you to seek out the advice of experienced experts, a key to business success.

3. Essentials.  If you had any liberal arts classes, you learned how to communicate with people, and respect history, culture and psychology, all essential for entrepreneurial success. If you had any business classes, you will be able to at least understand the basic principles of commerce and provide value to your customers.

4. Youth. Most of you grads are relatively young and can handle the long haul it takes to develop a successful business. Get started soon and have a greater advantage over folks who wait or who are forced to become entrepreneurs. You have more time to learn from your mistakes, perfect your processes, and build your brand.

5. Cheaper Costs. Ironically, labor is relatively inexpensive. Rent is down. Interest rates are down. Suppliers and service companies need strategic allies and are more likely to offer beneficial terms. Unemployed and retired experts are available to give you advice.

6. Increased Demand. More than ever, the country is looking for new ideas to help invent our way back to prosperity. “Find a need and fill it” has never been more necessary. We need to save our environment, find clean energy, feed more people, improve education, and solve our clean water problems – just to name a few.

7. Opportunities Abound. Technological advances are begging for applications. We have only scratched the surface of what we can do with what we already have discovered. From digital to genomes, from materials to biotech, and from optics to communication, the world is your oyster. Check out “Abundance” by Peter Diamandis http://www.abundancethebook.com/.

Yes, times are tough, but remember that the last downturn spawned many of the top companies of today. Many of them were started in a garage. As you approach today’s challenges, your college education will give you a big advantage.

A degree is not a vaccination, anyway. Can’t find a job? Maybe its time to say hello to your garage.

Who We Are

Michael Houlihan and Bonnie Harvey co-authored the New York Times bestselling business book, The Barefoot Spirit: How Hardship, Hustle, and Heart Built America’s #1 Wine Brand. The book has been selected as recommended reading in the CEO Library for CEO Forum, the C-Suite Book Club, and numerous university classes on business and entrepreneurship. It chronicles their humble beginnings from the laundry room of a rented Sonoma County farmhouse to the board room of E&J Gallo, who ultimately acquired their brand and engaged them as brand consultants. Barefoot is now the world’s largest wine brand.

Beginning with virtually no money and no wine industry experience, they employed innovative ideas to overcome obstacles, create new markets and forge strategic alliances. They pioneered Worthy Cause Marketing and performance-based compensation. They built an internationally bestselling brand and received their industry’s “Hot Brand” award for several consecutive years.

They offer their Guiding Principles for Success (GPS) to help entrepreneurs become successful. Their book, The Entrepreneurial Culture: 23 Ways To Engage and Empower Your People, helps corporations maximize the value of their human resources.

Currently they travel the world leading workshops, trainings, & keynoting at business schools, corporations, conferences. They are regular media guests and contributors to international publications and professional journals. They are C-Suite Network Advisors & Contributing Editors. Visit their popular brand building site at www.consumerbrandbuilders.com.

To make inquiries for keynote speaking, trainings or consulting, please contact sales@thebarefootspirit.com.

The post A College Degree Can Give You an Entrepreneurial Edge appeared first on The Barefoot Spirit.

For the most part, there is usually no shortage of products. There is, however, a big shortage of Purchase Orders. Why tie up precious dollars in bricks and mortar when you really need to spend them on marketing and merchandising? It’s possible, and in many cases preferable, to outsource as much production and services as you can. This gives you the time and funds required to control quality, give good customer service, and focus on the real challenge, sales. Here are some tips for effective outsourcing:

1. Look for businesses that specialize in one or more aspects of your products production. They are either already an outsource service, or they are a business like yours that invested in facilities and needs the income you offer. (Many businesses focus on production and then try to sell their products; you can do it the other way around.) Reduce your investment risk and focus on sales.
2. Write your own contract. He who writes, wins. Craft a contract that pays for finished, quality products, and not time or equipment. This way you do not pay for their mistakes or downtime. This eliminates the potential disaster of producing an inferior product yourself, and either trying to sell it or losing the money it cost to produce.
3. Hire a cop. Even though you only pay for finished quality produces, you still need a manager on-site to monitor production. Make sure your production manager thoroughly understands the job they are inspecting. Excellent prospects can be found in the industry you need to monitor.
4. Alter your product and packaging to be more efficient for the producer and their facilities. Clearly identify their constraints, equipment limitations, and profit centers. Your supplier generally will be happy to work with your producer. Bring them together at an early stage to help you make the process more productive for all involved.
5. Don’t waste a perfectly good mistake. Make mistakes right. Start a checklist. Every time your outsourced service or producer (or even your own people or suppliers) foul up, write it down. Now, see what documents you can improve, like contracts, checklists, signoff sheets, labeling, or outlines of operations. With each mistake, you’ll just get better!
6. Renegotiate your contract often. As you grow, you will experience volume buying and selling opportunities that may impact production, storage and shipping. Ideally, get your producer to hold inventory at no charge for a negotiated period of time to achieve efficiencies of scale in material purchasing.
7. Be efficient. Work with your producer’s schedule. Make full use of your production day or shift. Get the best prices by being flexible and have all your materials lined up for last-minute shipping. Just-in-time production will save you on storage costs and ultimately reduce your cost of materials.
8. Look for every opportunity to outsource. Every time there is an opening in your staff, ask yourself these questions: Can this job be outsourced? Can I reorganize my business so I don’t need that position? What other aspects of the total remaining job functions can be outsourced? Your most valuable staff have good oversight skills, understand quality control, and excel at sales and customer service.

Outsourcing can free up you and your limited capital to focus on Quality Control, Sales, and Customer Service. These are three of the most important elements of success. This is what your customer really buys. Instead of being stuck with less than perfect products you produced and now have to sell, consider outsourcing, and pay only for quality.

Who We Are

Michael Houlihan and Bonnie Harvey co-authored the New York Times bestselling business book, The Barefoot Spirit: How Hardship, Hustle, and Heart Built America’s #1 Wine Brand. The book has been selected as recommended reading in the CEO Library for CEO Forum, the C-Suite Book Club, and numerous university classes on business and entrepreneurship. It chronicles their humble beginnings from the laundry room of a rented Sonoma County farmhouse to the board room of E&J Gallo, who ultimately acquired their brand and engaged them as brand consultants. Barefoot is now the world’s largest wine brand.

Beginning with virtually no money and no wine industry experience, they employed innovative ideas to overcome obstacles, create new markets and forge strategic alliances. They pioneered Worthy Cause Marketing and performance-based compensation. They built an internationally bestselling brand and received their industry’s “Hot Brand” award for several consecutive years.

They offer their Guiding Principles for Success (GPS) to help entrepreneurs become successful. Their book, The Entrepreneurial Culture: 23 Ways To Engage and Empower Your People, helps corporations maximize the value of their human resources.

Currently they travel the world leading workshops, trainings, & keynoting at business schools, corporations, conferences. They are regular media guests and contributors to international publications and professional journals. They are C-Suite Network Advisors & Contributing Editors. Visit their popular brand building site at www.consumerbrandbuilders.com.

To make inquiries for keynote speaking, trainings or consulting, please contact sales@thebarefootspirit.com.

The post The 8 Principles of Successful Outsourcing appeared first on The Barefoot Spirit.

Jim says according to Dun and Bradstreet, a US corporation fails every 3 minutes, and Business Finance Magazine says 96% of all companies fail within 10 years. I felt somehow relieved since my company lasted for 19 and was successfully acquired. Even so, his list was so compelling, I wanted to share it with you. I’ve included my suggestions for ways that may help:

1) “Spending money on marketing that isn’t working.
Money spent on marketing is typically not linked to results……big mistake.”

Suggestion: Avoid blind advertising as much as possible. Invest rather in promotions that can be measured. Also, consider worthy-cause marketing. Go direct to your consumer with samples, and where-to-buys.

2) “Not defining a proper sales process/system.
Individual sales people not taking advantage of company and industry best practices.”

Suggestion: Hire veterans from your industry. Ask your buyers, who know who they are.  Document what works and what doesn’t. Don’t reinvent the wheel. Sell everyone between you and your ultimate consumer.

3) “Not focusing on becoming a lean organization.
You must measure and manage productivity in all departments of your business.”

Suggestion: Create two divisions: Sales, and Sales Support. Compensate everyone based on sales and profitability. Avoid silo-ing and the attendant job preservationists view of information as currency.

4) “Focusing too much on sales growth and not enough on profit growth.
Fast growing companies sometimes focus too much on the top line rather than the bottom line.”

Suggestion: Create incentives and bonuses based on quarterly profitability. Include the whole team in the quarterly numbers, the development of budgets, and what’s in it for them.

5) “Incentive plan incents the wrong things.
Incentive plans not tied to generating margin or profit.”

Suggestion: see #4

6) “Continuing to fund a business with an antiquated business model.
Doing things the way we always have and ignoring industry trends can lead to expensive mistakes.”

Suggestion: Review the viability of your business model annually. Reorganize the business regularly to address the changing environment.

7) “Not measuring the customer experience.
Not asking your customers how you are doing can be deadly.”

Suggestion: Put 800 numbers on everything. Consider your customer service department as critical to product improvement. Beyond satisfying customer complaints, they can provide production and marketing with vital information that will save everyone’s job.

8) “Poor financial management, i.e., budget/ forecasting/inventory/receivables.
Not managing the money side of your business can cause you to run out of it.”

Suggestion: Make your suppliers strategic partners. Call your soon-to-be-overdue payables with a payment plan way before the due date. Know the significant questions to ask of the data beyond conventional accounting.

9) “Launching new products/services without doing adequate financial diligence.
Losing money on new investments because there was not a proper business plan at the start.”

Suggestion: Avoid the tendency to proliferate products. Respect the limited bandwidth of your own people and the entire distribution system. Get strong with a few products and make a name for yourself.

10) “Putting up with mediocre performers.
Not outsourcing people when appropriate can be costly.”

Suggestion: Recognize when the company has outgrown former key staff who were critical to the start-up but did not expand their skill set to keep up with customer demands. Pay for performance. Outsource everything you can except quality.

Thanks Jim, for summarizing the ten biggest operational mistakes companies make, and why we should focus on eliminating waste and inefficiency. For more information about BBK, go to their website.

Who We Are

Michael Houlihan and Bonnie Harvey co-authored the New York Times bestselling business book, The Barefoot Spirit: How Hardship, Hustle, and Heart Built America’s #1 Wine Brand. The book has been selected as recommended reading in the CEO Library for CEO Forum, the C-Suite Book Club, and numerous university classes on business and entrepreneurship. It chronicles their humble beginnings from the laundry room of a rented Sonoma County farmhouse to the board room of E&J Gallo, who ultimately acquired their brand and engaged them as brand consultants. Barefoot is now the world’s largest wine brand.

Beginning with virtually no money and no wine industry experience, they employed innovative ideas to overcome obstacles, create new markets and forge strategic alliances. They pioneered Worthy Cause Marketing and performance-based compensation. They built an internationally bestselling brand and received their industry’s “Hot Brand” award for several consecutive years.

They offer their Guiding Principles for Success (GPS) to help entrepreneurs become successful. Their book, The Entrepreneurial Culture: 23 Ways To Engage and Empower Your People, helps corporations maximize the value of their human resources.

Currently they travel the world leading workshops, trainings, & keynoting at business schools, corporations, conferences. They are regular media guests and contributors to international publications and professional journals. They are C-Suite Network Advisors & Contributing Editors. Visit their popular brand building site at www.consumerbrandbuilders.com.

To make inquiries for keynote speaking, trainings or consulting, please contact sales@thebarefootspirit.com.

The post Is Your Company Doing these Things? appeared first on The Barefoot Spirit.

OK, you need some money to get started, but you can seriously reduce the amount if you take advantage of some of these suggestions. Every one of them worked for us:

1. Start in the garage, a spare bedroom, even the laundry room the way we did. Go anywhere you won’t have to pay rent.
2. Get your family to help. Retired grandmas, aunts and uncles would love to make a difference in your life, and they’ll probably be thrilled to do something new and help the family business get started. Who knows, they may do a lot more for your start-up than just add manpower. They can also provide objective opinions and common sense insight. Bonnie’s mom came up with the term,”Barefoot Bubbly”.
3. Assume someone else’s excess inventory. Find a way to sell or repurpose unsold merchandise. When you do, you’ll find sales cure-all ills.
4. Outsource everything except quality. With outsourcing, you usually pay only when the product is produced – and produced to your quality specs. Oversight is critical. What little money you may have is better spent on marketing than production facilities.
5. Use ‘Worthy Cause Marketing’ to advertise your product or service. Find and support a non-profit that resonates with both your core values and your target customer – their members will have a social reason to buy your product. Help them by getting the word out about their cause through your distribution channels, and they’ll help get the word out about your product.
6. Trade the goods and services you have for goods and services you need. Many start-ups besides yours, especially in their early days, will prefer this option to spending money, just the way you do. So find other start-ups that have what you need and need what you have.
7. Forge strategic growth alliances with suppliers. You help them grow their business when you become a bigger and bigger customer. They help you grow by extending terms and providing special discounts. Get your suppliers to extend your credit because they like the way you pay your bills. Call them as soon as you know you will be unable to pay on time and give them a workable payment plan.
8. Give discounts for cash and large volume purchases. It will put you ahead of your bills. Your buyers will sell your products faster putting them on special and advertising them to quickly recover their warehouse space.
9. Sell your product overseas. Most international transactions are cash sales based on a signed ocean-going bill of lading through a letter of credit. It’s kind of like an escrow account where you get paid when they take possession.
10. Produce just-in-time inventory – a product that is ready just in time for the sale rather than filling a warehouse with your product. Ideally get the Purchase Order first. If that’s not practical, operate with the minimum inventory you need to satisfy your customers, assuming a reasonable growth factor that you reassess every month.

These are just a sample of the cost saving measures Barefoot Wine used to survive and grow in its early days. Being undercapitalized was one of the things that forced us to be resourceful and think creatively – just some of the advantages of being broke with a good idea.

Who We Are

Michael Houlihan and Bonnie Harvey co-authored the New York Times bestselling business book, The Barefoot Spirit: How Hardship, Hustle, and Heart Built America’s #1 Wine Brand. The book has been selected as recommended reading in the CEO Library for CEO Forum, the C-Suite Book Club, and numerous university classes on business and entrepreneurship. It chronicles their humble beginnings from the laundry room of a rented Sonoma County farmhouse to the board room of E&J Gallo, who ultimately acquired their brand and engaged them as brand consultants. Barefoot is now the world’s largest wine brand.

Beginning with virtually no money and no wine industry experience, they employed innovative ideas to overcome obstacles, create new markets and forge strategic alliances. They pioneered Worthy Cause Marketing and performance-based compensation. They built an internationally bestselling brand and received their industry’s “Hot Brand” award for several consecutive years.

They offer their Guiding Principles for Success (GPS) to help entrepreneurs become successful. Their book, The Entrepreneurial Culture: 23 Ways To Engage and Empower Your People, helps corporations maximize the value of their human resources.

Currently they travel the world leading workshops, trainings, & keynoting at business schools, corporations, conferences. They are regular media guests and contributors to international publications and professional journals. They are C-Suite Network Advisors & Contributing Editors. Visit their popular brand building site at www.consumerbrandbuilders.com.

To make inquiries for keynote speaking, trainings or consulting, please contact sales@thebarefootspirit.com.

The post 10 Tips For a Start-Up Business with No Money appeared first on The Barefoot Spirit.