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.

We ran into this perceived value challenge when we started Barefoot Wine. Our concept was to produce a product that delivered the value common at the $10 price point for $5.

Seems like a slam dunk, right? Wrong.

We were up against the perception that anything at $5 had to be mediocre because the vast majority of the choices at that price point were just that: mediocre. Their producers would say, “What do you expect for five bucks?” And we were thrown into that same boat.

Never mind that we won gold medals and Best of Class in open pricing competitions, and we were written up for quality in all the industry journals. “It can’t be any good at $5,” we’d hear.

To read the complete article, please visit The Business Journals 

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 How to Overcome the Challenge of Perceived Value appeared first on The Barefoot Spirit.

In this series, we have endeavored to demonstrate how our guiding principles affect our success. By putting ourselves in the other person’s shoes, we get an objective view of our own business practices. The ultimate standard by which most business decisions should be measured is, “How would you like it?”

Seems simple, but it’s not. So here is the last question:

4. Would You Buy From Yourself? (This includes the correlated question, “Would you buy your own product or service?”) Would you buy from a company that treated you like a pain in the neck if you had a problem with their product, or would you prefer to buy from a company that thanked you for bringing your concerns to their attention? Would you buy a product that previously tricked you with false claims, fancy packaging, and an amazing price? Or would you be loyal to a product that demonstrated time-tested value? Would you continue to buy a product that had “cheapened” over time, or would you shop for an alternative? Would you rather buy from a company that saw your purchase as clicks on a page, or one that gave you personalized attention before and after your purchase?

When we built the Barefoot Wine brand, we were often pressured by producers, packagers, middlemen and retailers to reduce our price – even if it meant reducing our quality. This implied that price was the main reason our customers bought our products. We were advised to use less expensive supplies, cheaper packaging, and mass standardization. They told us it would make their jobs easier. We resisted their well-meaning attempts to reduce costs and labor. We believed they did not take into account the value proposition to our customers. We believe that brand loyalty is based on the same concerns that we as consumers have about the products we buy. Here is what concerns us:

Over Delivery. We look for products and services that provide good value for the price, either in quality, quantity, or both. When products meet or exceed our expectations, we are more likely to remain loyal and recommend to friends and family. When those brands take a stand on issues important to us and our community, we have a further incentive to remain loyal.

Perception of Quality. A product’s packaging, pricing, and reputation all send us signals about its value. If it lives up to those “brand promises” of quality, we are validated in our decision to buy. Until the price goes up, the quality goes down, or the packaging becomes more corporate or generic, we remain loyal. Consistent quality and value is king.

Third Party Endorsements. We all need the continued validation that we are making the right decision to be loyal to a brand.  Awards, accolades and endorsements are what we look for. Continued recognition for quality and value demonstrates reliability, and keeps us coming back.

Excellent Customer Service. How we are treated when things go wrong is more important  than how we are treated when things go right. It’s when we see a company’s true colors and decide whether or not to continue buying their products. Reputation is based on excellent customer service.

It’s just good business to put ourselves in the other guy’s shoes. Our guiding principles are the standards by which we make our decisions. Sell the product you would buy. Build the brand you would be loyal to.      

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 Build Your Business using Guiding Principles – Part 4 appeared first on The Barefoot Spirit.