strategic allies | The Barefoot Spirit

Think You Need a VC to Start Your Business? Try the Barefoot Spirit Instead!

Michael Houlihan & Bonnie Harvey — Thu, 27 Jul 2017 17:00:59 +0000

These days it seems like most people believe that you can’t start a business without some sort of venture capital financing. Shark Tank, Silicon Valley, and most of the business publications underscore this popular premise. In fact, the business plan is now viewed as an application for venture financing. The idea seems to be, come up with an idea and get it financed, and you are golden.

But you’re not. Far from it! Now you have given up equity to raise capital that you can spend in ways that may not be necessary or effective. Now you have given yourself the false sense of security that because your plan got financing, it must be right. Now that you have secured a “runway” and “burn rate,” you attract service suppliers interested in grabbing some of that capital. They want to sell you goods and services you don’t necessarily need, including staff, facilities, and other overhead with monthly bills hungry for your money. Have you made adequate sales to justify those expenditures?

So, now you have funded your company without thoroughly understanding the sales or growth process, especially the most often overlook and underestimated expense: the cost of sales. Do you even know what it costs to make sales? And what it costs to service what you sell? Now you can get into trouble because the only funds you have are from financing …and you are burning through that at an alarming rate. Pretty soon, you go back for a second and third round of financing and you give up more of your equity.

We have heard many startup founders say, “We had to close down because we couldn’t raise additional capital.” But that’s not the real reason! They simply didn’t have sufficient revenue to achieve a positive cash flow given their hasty commitment to overhead. In other words, they focused on production and administration instead of sales.

There’s a good reason why VC’s look for returns that are ten to twenty-five times their investment. They are losing on nine to twenty-four of their investments.

On the other hand, the startup using the Barefoot Spirit focuses on achieving a positive cash flow much sooner. It’s not as sensational as the promise of “six digits in six months,” but it is solidly based on sustainability. It’s not the glamorous rocket to the top, but it is a practical way to discover the true cost of sales before you get over-extended or commit yourself to regular monthly bills you just can’t sustain. It’s not an instant success that’s crushing it on a national scale, but it is a slow, step-by-step process that is deliberately small in scale to allow you to get the real market education you need to make sensible growth decisions and preserve your equity.

The Barefoot Spirit is an attitude and a philosophy that puts you in the other guy’s shoes at every turn. From your own people to your vendors, from your supplies to your bankers, from your distributers to your retailers – learn what they want. This is how you discover your strategic allies, be more resourceful, and save time and money. This is how you can grow your business on a positive cash flow!

The Barefoot Spirit has proof that you can do it without VC money. And you may even do it better.

In the coming months, we will be describing and advocating the Barefoot Spirit approach to starting a business. Isn’t it about time we got back to basics?

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.

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Ask the Right Questions to Get the Right Answers

Michael Houlihan & Bonnie Harvey — Thu, 07 Jan 2016 18:00:41 +0000

Last week we had the honor of hosting 21 undergraduate students from the Minor in Entrepreneurship (MiE) program at Nanyang Technological University in Singapore. For most of them, this was their first time in the US. They went on to visit the great entrepreneurships in Silicon Valley, but our home was their first stop.

This would be their first impression of America and American entrepreneurship, so we had to set the tone for their visit and lay the foundation to interpret the keys to successful entrepreneurship.

We decided to start with the basics by asking key questions and giving them the three core competencies necessary for success. We examine these critical issues in depth with plenty of examples and stories in our new full length course (The Entrepreneur’s GPS) designed for aspiring, startup, and growth-phase entrepreneurs.

Here’s a brief summary of some of the questions we posed in the live, in person seminar we put on for the Nanyang students:

Why are you starting a business anyway? Are you looking for a lifestyle, a legacy, or are you building a brand that you will one day sell? If it’s the later, that goal will have a great bearing on how you organize, strategize, and grow your business. It will greatly influence your decision-making process.

How will you pay your bills? Cash flow management is absolutely crucial to the survival of any successful business. You simply must make more than it costs to stay in business. Not only that, but you must find ways to reduce your need for cash through resourcefulness, strategic alliances, and fostering critical relationships that build trust.

How do you engage your people? The hiring process is the most important part of this process. We shared what to look for in selecting new hires and how to orient them to understand exactly how their job makes a difference in sales, the overall security of the company, and ultimately the security of their own job. We discussed how to pay them, acknowledge them, and get their insight to solve problems.

How do you get your product to market – and keep it there? In reality, this is the biggest single challenge a new entrepreneur will face. A popular misconception is that price, quality, and value alone will do the trick. It’s just not so! What does each person who touches your product really want? It may not be what you think. And are you ready to do their job if necessary? Who are the real owners of your brand?

All these questions and more must be answered correctly by every successful entrepreneur. When you see a big, successful company, remember, they weren’t always this way.

We tasked the Nanyang students to look for how each of the successful companies they would visit actually answered these questions. We did not give them all the answers, but we did give them most of the important questions. We hope they enjoy and learn from their exposure to successful American Entrepreneurship.

Who We Are

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

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Thinking About Taking the Plunge into Entrepreneurship in the New Year?

Michael Houlihan & Bonnie Harvey — Thu, 17 Dec 2015 18:00:18 +0000

A lot of you are sitting on the fence between a comfy, secure job that bores you to death, and taking that adventurous plunge into the unknown – entrepreneurship.

What’s going through your mind? Short-term security with a good “solid” job and get-by retirement, with apparently little risk? Or a much bigger risk but a giant paycheck for building and selling a business?

Before you take the plunge, take stock of your philosophies. That’s right, your philosophies, how you think about stuff, how you make decisions, and how your judgements are formed. More than any other single factor, success in entrepreneurship comes down to making more right decisions. What influences those decisions? What standards do you hold up as guides and measures? In entrepreneurship it is your decisions that can make or break you.

Do you think, for instance, that if your idea is good enough, your quality high enough, or your prices low enough, sales will take care of themselves? In other words have you bought into the popular notion that it’s all about the product or service? We did! And boy were we surprised! This is a commonly held misconception! Sure, you must have a great product at an attractive price, but actually getting it to the ultimate customer is a much bigger challenge than producing it in the first place.

Do you think that those who have a financial interest in seeing your product stay in stock and reordering it, will keep selling it? We did! Wrong again! They have too many other products to sell to put much energy in to a new, unproven one. Especially in the critical early stages, we found that we had to sell it for them, over and over again. In fact we had to do so much of what we thought was the other guy’s job that we wound up with our own sales team, and that cost us plenty.

Do you think you need tons of money to get started? In retrospect, we found that being undercapitalized actually forced us to be resourceful and innovative. If we had been “properly financed” we would have never discovered how to get the word out about our product through worthy cause marketing. We would have just thrown lots of money at advertising, the common approach to marketing.

Do you think your vendors are trying to squeeze you for payments? We actually increased our credit when we were late on our payments! How? By treating our vendors the way we wanted to be treated, with a friendly heads-up call in advance of a late payment, along with a plan to bring our account current. We met with them bi-monthly to appraise them of our progress. Your vendors can be your strongest strategic allies!

Do you think salespeople are out to unload merchandise on you or somehow get over on you? If you do, you will lose one of the best sources of information about your competitors and the market changes. Vendors and salespeople know what’s going on and they can share it with you.

Where do these inaccurate business philosophies come from? It could be your childhood, what you have heard from others, or assumptions you have made about the market. For instance, you may think no one has come up with your great idea yet because you haven’t seen it. In fact, you may not have seen it for sale because the original developers may have been unable to bring it to market. Don’t be like them.

We can help by sharing the lessons we learned most often the hard way. Get the big picture before you take the plunge!

Who We Are

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

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7 Steps to Setting and Achieving Your Goals for the New Year

Michael Houlihan & Bonnie Harvey — Thu, 03 Dec 2015 18:00:48 +0000

Yes, it’s that time of year again when we start thinking about our goals for the coming year. Before the New Year begins is the perfect time to see what you have achieved over this last year and identify what you have yet to achieve.

Reviewing your achievements is a great place to start. This will remind you that your goals are doable, and will give you the enthusiasm to get down to business with your new set of goals. After acknowledging your achievements, take a look at your uncompleted goals, revise them as needed, and start your list for next year with those. If you are like us you will have several to get you started!

So how can you better prepare to achieve your goals in the coming year? Here’s the checklist we use:

Clearly State your Goals. Seems simple enough, but it actually requires some thinking. Adding in details will create a stronger image in your mind. So, under the goal of “Clean the attic,” for instance, write “Reorganize the boxes into categories of tax files, holiday decorations, camping gear, etc.; toss out the unused items; donate old clothes.” Be sure your goals are reasonable. What kills most goals it that they are unreasonable.
State your Deadline. Just putting a deadline on your goal throws a switch in your brain that says, “We’re really going to do this!” Is it doable in just one year? Or is it part of some master five-year plan? If you want to use that camping gear next summer, then put in an earlier date. Be sure to include your life goals – some people call this their “bucket list” – and record the progress you make towards them throughout the year.
Identify your Strategic Allies. Make a list of the folks who you will need to work with in order to achieve your goal, and what is in it for them. List what you need from each person. Again make sure it’s reasonable. They are helping you, so don’t blame them if they don’t come through.
Lay out the Sequence. Plan the chain of events that are dependent upon each other to bring your goal into fruition. Understanding the interdependencies will give you the confidence to keep going. What has to happen first, second, and third? Determine the milestones. Important – get started on the first milestone immediately.
Identify the Lead Times. How long does each sub-section of your goal take? Who has to be notified, give approval, or complete a project? How much notice do they need? Work backwards to discover when each detail needs to be accomplished. This way you won’t be surprised by a road block you could have seen coming and easily removed with adequate preparation.
Track your Status. Put your goal and your strategy to achieve it at the top of the page and enter your progress weekly. If you have no progress one week, that’s a great time to review your past progress posts. This will give you the confidence that you are making progress. It’s also a great time to review your goal, your plan, your allies, and your lead times. It is okay to make practical adjustments as you go.
Celebrate! Yes, plan a reward for yourself and others for achieving the goal. Maybe it is a camping trip once you clean the attic! Maybe it’s a dinner out, a party, or a purchase, but it is an acknowledgement that you have succeeded. Plan the reward when you set your goal to create the mental picture of yourself as happy and fulfilled after having achieved your goal. There’s nothing like a prize to make you want to win!

We have kept a goal book for years, which we regularly review. So, what’s stopping you now? Use this checklist to begin achieving your goals today!

Who We Are

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

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4 Tips to Avoid Drowning in Startup Expenses

Michael Houlihan & Bonnie Harvey — Thu, 19 Nov 2015 18:00:36 +0000

Worcester Polytechnic Institute near Boston may not be a familiar name. However, many major tech and engineering companies regularly recruit WPI grads. They appreciate the well-rounded education of many of their students who also take classes in business, management, and entrepreneurship.

We recently spoke as part of their executive speakers series about the three core competencies of entrepreneurship: Cash Flow Management, Personnel Management and Distribution Management. We shared with the WPI students and faculty lessons we learned from our experience building the Barefoot Wine brand that we believe all businesses must master in order to survive and thrive.

Many wanna-be entrepreneurs fear failure or loss of control of their companies due to lack of funds. They know many startups fail because they have made too many financial commitments before achieving positive cash flow.

Actually, what they really need is sales! Sales earn investments in real estate, equipment, and personnel, and not the other way around.

In our talk about Cash Flow Management, we offered these tips designed to avoid unnecessary expenses and lengthen the runway until sales take off:

Use Your Hidden Assets. Maybe you have a garage or an unused room you can use as an office to get started. We used our laundry room for the first two years. Maybe you have family members who can do some of the work. Bonnie’s mother and nephew came to live and work with us. What can you repurpose for your workspace? We used an old door on two sawhorses for our desk. This allowed us more funds for the surprising cost of sales required to get our business off the ground, as you too will soon discover

Outsource to Local Producers and Service Providers. Right in your own region are companies that can provide you with many of the goods and services you need. You can pay as you use them, eliminating the need to tie up capital in manufacturing, hardware, or office space. In fact, if you write your contracts properly, you don’t have to take delivery of any products not up to you strict quality control guidelines. We succeeded without ever owning an office, a vineyard, or a winery.

Hold Minimum Inventory. Strive for just-in-time production. Although it’s tempting to go for the quantity purchases to reduce your cost per unit, sitting on unsold inventory can be costly and get your business in trouble. Sales volume must justify quantity purchases. Instead, find suppliers who will warehouse goods for you until you need them. And offer buyers quantity discounts for cash to help your cash flow. We found when buyers buy big, they sell big – and reorder quickly!

Extend Your Credit and Terms. Treat your vendors as strategic allies. Grow together, each benefiting from the growth of the other. Gain you supplies trust by monthly or quarterly meetings where you share your goals, opportunities, and challenges. Show them empathy when you can’t pay your bill on time by giving your vendors advance notice and payment plans. Give them a long-term contract so they see your loyalty. Be patient. Your positive performance over time will win you the higher credit limits and terms you need to save your cash flow.

There’s more than one way to achieve a positive cash flow in the early days. These are some that worked very well for us. And, if you are lucky enough to have investors, they will be more comfortable working with you when you demonstrate resourcefulness by reducing your need for cash.

Who We Are

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

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7 Ways to Reduce Your Need for Capital

Michael Houlihan & Bonnie Harvey — Wed, 11 Nov 2015 17:28:09 +0000

Happy Veterans Day, everybody! Today, November 11, 2015, it is our honor and our pleasure to speak at the first annual Vets Rock event at Mohegan Sun in Connecticut. What would we share at this keynote event with more than 100 veteran-owned businesses that would be of the greatest value to them? What lessons have we learned, often the hard way, in our own business experience that they could use to improve their own businesses – tomorrow?

Of all the challenges aspiring, launch and growth-phase entrepreneurs face, the top has to be capital, or should we say the lack of it. The key to success of any business is simply making more money than it costs you to stay in business. So we decided to share how to reduce the need for capital in the first place.

Here are 7 tips that worked for us:

Discover Your Hidden Assets. What do you already bring to the table, and what can you find if you look with expectant eyes? Discover how you can repurpose something you have for something you need. Be resourceful. Solve problems creatively. We used a door for a desk and a laundry room for an office.

Identify and Work With Your Strategic Allies. Those who succeed if you succeed are your strategic allies. Learn how your products or service benefit your customers, suppliers, and the community. Find a small company you can work with that is poised to grow, and grow with them. We provided a small company called Trader Joe’s with a fun California product and together we spread across the country.

Use Your Suppliers and Buyers as Bankers. Treat your suppliers like business partners. Enter into long-term contracts so they can see a future with you. Keep them up to date on your progress, challenges and opportunities. Notify them in advance when you will be late on a payment, and show them how you will get current. Then ask for extended credit to expand your business and increase your purchases from them. We offered our buyers quantity discounts for cash.

Pay for Performance. Discover the metrics that demonstrate sales, growth, and profitability, then reward your people for achieving those goals. Keep the bonus period short term, such as every month or every quarter to keep the goals active and achievable in their minds. We matched our people’s 401K either 50%, 100%, or 150% based on quarterly achievement.

Outsource (Locally) Everything but Sales, Quality Control, and Accounting. Don’t invest in a ton of bricks and mortar or other overhead that require monthly payments whether you have sales or not. Try for just-in-time production and avoid holding large inventories. We outsourced production but held our producers to a set of quality specifications in a contract.

Reduce Turnover. The #1 hidden cost in any business is turnover. It can result in the loss of your company knowledge, supplier relationships, and even customers. The key is to hire, orient, train, and compensate properly. If you are paying your people right, the producers can’t afford to leave and the non-producers can’t afford to stay.

Reduce Your Cost of Advertising. Think about your customers as belonging to a community which is interested in more than your product. That community has needs and cause-based groups that work to satisfy those needs, such education, conservation, human rights, and support of the arts. By supporting community fundraisers and non-profits , we gave their members a social reason to buy our products.

These 7 tips can help anyone who runs a business, and we are happy to give back to our vets by sharing these lessons with them today, Veterans Day, 2015.

Who We Are

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

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How to Use Your Suppliers as Investors to Reduce Your Need for Capital

Michael Houlihan & Bonnie Harvey — Thu, 15 Oct 2015 17:00:13 +0000

Nobody likes to get bills. They seem unending and chew up your monthly income as fast as it comes in. It’s probably the scariest part of starting a new business. You begin to realize that the bills are due no matter whether you have the funds to pay them or not. Many businesses fold simply because they can’t pay their bills. Many that survive find they can’t expand without a big cash infusion that may cause them to lose control of their own company. Is there another way?

When you are new in business this is especially trying. You find yourself playing catchup almost immediately and it can take years before there’s anything left you could conceivably call “profits.” For us it took 10 years to really get ahead! Why? Because we were growing and everything we made went right back into growth. Sound familiar?

But we found something surprising about all those bills. We discovered that there were several vendors we had who depended on us for their own growth! They actually wanted us to make it so they could sell us more and send us even more bills!

Take another look at your vendors and suppliers. Who’s getting the most money out of you each month? If you succeed do they succeed? Shouldn’t you be strategic allies? How can you make them increase your credit and lengthen your terms so that you can better afford grow, and, in the process make them a lot of money? Answer: TRUST. That’s right, they have to trust you!

They have to believe that you will stick around when you get bigger and don’t need them anymore. They have to believe that you will pay your bills on time. They have to believe that you will notify them as far in advance as possible when you can’t – with a plan to bring your account current within 30 days. They also have to believe in you, your product, your management and your growth strategy.

What would make them believe in all this? How about quarterly meetings where you outline your progress, your challenges and your plans? How about long-term contracts? How about treating them like a real partner with updates and opportunities?

This isn’t going to happen overnight. It will require some seasoning, where, over time, your consistent behavior earns their trust! It took us years but eventually our supply companies, vendors and bankers all extended our credit and terms enabling us to reduce our need for capital and grow on our cash flow. Sure there were times when we were unable to perform, but because they believed we had their best interests at heart, they were lenient. They’d seen how we handled the same situation in the past. They judged us not by how well we paid when we were on time but by how fast we became current when we were late!

Maybe it’s time for a meeting with the vendors and suppliers who send you your largest bills. Find out what it would take to get them to extend your credit. Usually they will have a performance plan whereby you prove over time that you are worthy of more credit. Go ahead and prove it! It’s a whole lot cheaper than a loan, you stay in control of your company, you reduce the use of your interest-bearing line of credit, and you forge a long-term alliance with a supplier who has a special interest in your success. Yes, it’s sort of like what the pioneer said, “Thar’s gold in them thar bills!”

Who We Are

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

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