The Secret – Your Life as a CEO/Entrepreneur
HAVING THE END IN MIND
Take a moment to think back to the very first time you sat in the chair as CEO; the first time you were the ultimate decision-maker in your company. Can you remember what year it is? Do you remember what you were thinking and feeling? Do you even remember what the company was?
Write down three goals and dreams you had the day you first sat in the CEO’s seat. For example, when Sutton began his first business in 1971. His first three goals were:
1.To earn a million dollars
2.To open a branch office
3.To own a business with 20 employees
People who become CEOs only for the money are almost never satisfied, but money does play an important role in your position. Therefore, it’s important to be able to answer the question, “How much money do you need to live for the rest of your life in whatever manner or style you would like to live?” In other words, “How much is enough?”
If you suddenly received “enough” money all at once, how would you answer these questions:
- Would you take the money?
- What are you going to do with your life for the next 10 years?
There are many ways to end CEO careers. Here are some that Sutton has encountered:
- A CEO sold his business for 40% of his “how much is enough?” figure. He now looks at other businesses to see how they are run and gets paid as a consultant for doing it. He gets a tremendous experience of business without having any debt.
- A CEO sold his company for 150% of “how much is enough?” at age 54 and chose the traditional retirement: playing golf and tens, visiting the grandchildren and traveling all over the world.
- A CEO sold his company for 20% of “how much is enough?” arid became a photographer and artist’s rep. He changed his lifestyle to deal with the money issue and is currently very happy.
- A CEO sold his business to a competitor for $10 million and lost $7 million of it trying to start four new businesses. He got elected chairman to the board of the parent company and quit flying to run the businesses. All are now doing much better.
- A CEO sold his business for 200% of “how much is enough?” and opened a foundation to teach entrepreneurship to small children. He works at the foundation four days a week.
- One CEO has not sold his business. His father died at age 54, so this CEO lived his whole life expecting to die at age 54. He is now 62 years old, is still running the business, and has no idea what to do with his life. He is not a happy camper.
CEO “MUST Do’s”
You can’t be a CEO without also being an entrepreneur to a certain extent. Even in the very large companies, CEOs must have some level of entrepreneurial drive.
In theory, theory and experience are the same, but in experience they aren’t. Actually doing something is never the same as it ought to be in theory.
In real life experience, there are nine things you must do, implicitly and explicitly, as a
CEO/entrepreneur:
- Survive.
Your primary, undelegatable truth is to make sure the business survives. You absolutely cannot abdicate this responsibility. The burden of this responsibility wears many CEOs down.
The day you first open the door for the business, the risk of the business dying is at its highest. As the business grows, the risk diminishes over time until it hits a low point. Eventually, though, the curve turns around and risk begins to increase because the CEO gets tired or bored, the product line reaches the end of its cycle, the market changes, etc.
Answer these questions:
- Where is your business on this cycle?
- When was the last time you hit the “survival button?” (The “We’re going to die if I don’t do something!” button.)
- How often have you hit the survival button in the last year or two?
- Make the deals.
Making the deal isn’t the same as making every sale. It means being the prescribed and dedicated deal-maker for your company. Bill Gates is a good example. He certainly doesn’t make every sale for Microsoft, but everyone knows he is their deal-maker.
Making a deal isn’t the same as signing the contract. Two of the most important questions you can answer as CEO are, “What does a deal look like in my business?” and “How many customers make up 80% of my business?”
- Find and navigate the “river of cash.”
The river of cash is the mainstream of the business. A business can, and often does, have more than one river of cash. For example, Walt Disnels first river of cash was animated movies. They now have many: theme parks, video sales, Disney stores, etc.
The river of cash is not called the “river of revenue” because there is a lot more to running a business than getting revenue. It’s a river of cash because you are the captain. You pick what sort of boat to put in the river, what type of engine will be in the boat, and who will be on the crew. You have to make all those kinds of decisions and then navigate the river, no matter how turbulent.
Ask these questions:
- What is/are the river(s) of cash in your business?
- Where are you along the river?
- Where is/are the next river(s)?
Part of the responsibility of finding and navigating the river of cash is to know where the next one is, because odds are you will be the one to find it and navigate it.
Assess where you stand on awareness of the river of cash continuum. On the left-hand side is “I don’t know where all this money comes from or how long it will last.” On the right hand side is “I have mapped our river and have another in mind to replace this one.” Where do you currently stand?
- Bear debt and allocate profit.
It doesn’t matter whether you own the company or not, you must feel personally responsible for the debt of your business and you must allocate profits.
How much is your total business indebtedness? If the doors were to slam shut tomorrow, how much would you owe? How much personal debt do you have in the business?
Many CEOs can’t get within 20% of the correct answer. If you can’t answer this question today, make it a goal to answer it during your next annual personal assessment. A crucial part of bearing debt is knowing what it is. At least once a year, make it a point to know exactly what you owe.
There is a huge difference between running a business with little or no debt and running a business that is allowed to borrow money within the parameters that most banks prescribe. Banks don’t lend you $10 million because you are personally worth that much. They lend the money because you managed to convince them that if things go wrong you have enough assets to make the deal right. Living under that kind of pressure is vastly different than running a no-debt company.
Although running a no-debt business involves less pressure, you pay a price in other ways. You can’t grow the company as fast and you can’t take out as much cash. On the other hand, you pay a lot less interest on loans and end up with a lot more equity in the business. In some circumstances, companies can end up becoming their own bankers. There are few things better than borrowing money from yourself.
The idea of running a business with little or no debt is novel to most CEOs. On the debt awareness continuum, the left-hand side is “Our debt drives me nuts and I don’t know what to do about it.” On the right-hand side is “I understand our debt and know how to reduce or eliminate it.” Where do you stand?
- Discover the secret of your business and use it.
Think of your business as a large grandfather clock. It runs smoothly and looks great on the outside. But behind the polished exterior are gears, oil and ratios. What are the real guts of your business, the part that only you really know about it?
For example, Bill Gates’ secret is knowing how to write code that can be sold over and over again.
Warren Buffet knows how to value businesses and make strategic investments at a core level that is almost impossible to explain. Andy Warhol knew how to make and promote provocative art. Henry Ford knew how to build cheap high-quality cars. IBM knows how to solve very complex problems.
To succeed as CEO, you have to be able to figure out the secret to your business. It may not be easy to find the answer. Start out with a few bullet points regarding what really makes your business tick and keep working at it until you uncover the secret.
On “secret to my business” continuum, the left-hand side is, “I have no idea how this business works, it just does.” On the right-hand side is, “I know my secret and how to hammer it for huge returns.” Where do you stand?
- Apply the rule of entrepreneurs and managers.
Don’t try to be a CEO/entrepreneur and a manager at the same lime. If you do, recognize how much of your lime, effort and vision it saps.
Entrepreneurs are the only people who can start, significantly expand or transform an enterprise. Every business needs management, but managers don’t found, significantly expand or transform businesses. Managers do, however, run most parts of businesses.
Good managers often exhibit some strong entrepreneurial traits. But they rarely convert from being managers to entrepreneurs, especially within a single business setting. Executive vice presidents rarely make it as CEOs. Just because a person has been next to the CEOs for 10 years doesn’t necessarily quali~ them to be the CEO.
Entrepreneurs can do management jobs, but usually poorly and inefficiently. For each “jewel” of energy a good manager requires to get a job done, an entrepreneur may have to spend 10 to 15 jewels to get close to the same results. Plus, they usually end up stepping on many toes in the process. As CEO/entrepreneur, don’t waste your time trying to do managerial jobs. Instead, surround yourself with people who know how to manage and embrace them.
The successful entrepreneur who aspires to be a great manager may be condemning his or her business to death. The great unifying principle of this paradox is that a good entrepreneur must understand, accommodate and nourish good managers, not become one.
On the “entrepreneur vs. manager” continuum, the left-hand side is, “I mainly do the work of a manager.” On the right-hand side is, “I only do the work of an entrepreneur.” Where do you stand?
- Build a society and define the seasons.
You have more influence over your business than you can imagine. Like it or not, you set the tone and society for the business.
A frustrated CEO once yelled at his vice president, “If you had dynamite for brains, you couldn’t blow your nose.” Less than two weeks later, while walking around the shipping dock, he heard a supervisor say the exact same thing, word for word, to an employee. That’s the kind of influence you have in your company.
You have a lot of choices about the atmosphere around your business. Your actions and behaviors, whether you are conscious of them or not, have a lot to do with defining that atmosphere. What is your leadership style? What is your business philosophy? What is your organizational structure? What is the season of your business? Be cognizant of your choices and consciously make them.
“Every business has seasons. Figure out the season of your business and use it to your advantage as opposed to just letting it happen.
On the “building a society” continuum, the left-hand side is, “It’s like bedlam it’s so unpleasant around here.” On the right-hand side is, “We have developed an exciting and productive society around here.” Where do you stand?
- Acquire and exercise vision.
The simplest exercise for vision is to put a pencil a few inches from your eyes and focus only on the pencil. When you do, you can’t see much else clearly. If you don’t exercise looking out into the future, you won’t be able to exercise vision, and nobody in the organization will do it unless you do.
Although others can help, you are ultimately responsible for the vision. In many times, visions are derived with a lot of input from others. Frequently, vision unifies great ideas in a certain direction. But it is your call and yours alone. It’s your business and you have to figure out where it is going.
Be very clear that you are the CEO and the visionary of the business. If your people can’t buy into the vision, perhaps they need to go somewhere else.
On the vision continuum, the left-hand side is, “I don’t look past tomorrow.” The right-hand side is, “I can build several scenarios for this business 10 to 20 years out.” Where do you stand?
Some businesses actually do 100-year visionary plans. They are very general, but some interesting things happen when you look that far ahead. When you project the business beyond your children, it changes the principles by which you operate.
- Live a life.
In the middle of everything, it isn’t enough to be a good CEO. Sitting in the CEO chair can offer a lot of thrills, but sooner or later you have to live a satis~’ing life. Too many CEOs simply evacuate themselves from their lives and when their time is up, they don’t know what to do.
One of the misconceptions of the idea of living a life is that you have to be equally balanced in mind, heart, body and spirit. You are almost never at the center. Being a CEO is one of the greatest, most exciting and most difficult jobs in the world. As a result, many CEOs forget they need to also live in the spirit world.
Nobody gets out of life alive. It isn’t a dress rehearsal. Take the fact that you do it once seriously, and don’t sell the other sides short. It’s your responsibility as an effective CEO/entrepreneur to do so.
On the life balance continuum, the left-hand side is, “I am unhappy at and away from my work.” The right-hand side is, “I feel good at work and have a rich and happy life throughout.”
For now, put away your answers to all these continuum questions. Answer them again a year from now to see what progress you have made. The more you can answer toward the right-hand side, the more you will have a successful life and business.
TOOLS FOR THE CEO/ENTREPRENEUR
- Annual personal assessment
Go away each year for two to three days and do a personal assessment and a personal financial review. This is best done alone, without your partner or significant other. We come into this world alone and in one way, we go out of this world alone. No matter how much they mean to us, we need to do evaluations of ourselves without the influence of our partners.
One technique is to write a list of everything you want to do before you die. Put down anything and everything, without judgment. If you get less than five or six pages you aren’t working hard enough. Categorize the items on the list and leave it alone for at least a day.
Next, make a list of everything you’re going to do within the next five years. Be specific. Compare these against your life list because they may not be the same. Again, let this list sit for a day.
Next, pretend you have just discovered you are going to die in six months. Make a list of what you are going to do in those six months. Compare this list with your life list and five-year list.
By doing this process once a year, you solve the problem of knowing yourself as best you can.
- Strategic planning.
Do it with your senior management. Make it off-site and participatory. Use an outside facilitator so you participate as a planner and not as a CEO.
At a minimum, get:
- A good picture of where your company fits in the world.
- A good analysis of the significant outside threats that could kill your business.
- A good list of market opportunities.
- Specific tactical action plans for achieving your results.
Strategic planning should be done once a year, with quarterly updates (with the outside facilitator) to see how you are doing.
Strategic planning is the biggest single tool in terms of its effect on mid-market companies. Nothing changes a company faster than a successful planning cycle.
- Separate marketing plan.
At least once, hire an experienced marketing consultant to survey the world your business lives in. Markets can change very quickly, so do this as often as needed.
- Disaster planning.
During the last four hours of your strategic planning session, pretend you’ve just lost 50% of your revenues. Ask your management to devise a plan to save the company.
- Core team.
Build a small core of people who really run the business. Meet often and have everyone participate in the planning and running of the business. Do yearly team assessments with an outside facilitator.
- One-to-ones.
Hold one-hour, 360-degree one-to-ones with your key people. Your subordinate sets the agenda and you talk only 25% of the time. These meetings must be completely confidential. This is the greatest tool for breaking down barriers between you and your managers.
- Board of advisors.
Put together a board of people outside the business who know what they are talking about and can represent the business functions where you need help. Select people you can trust and pay them for each meeting.
- Team-based operations.
Companies with teams throughout the organization are getting production rates that leave other techniques far behind.
- Flat, flexible nuclear organization.
If you can run your organization with three to four levels, you can do things much more quickly and with less effort. Many effective businesses run with only two levels? the core team of managers and everyone else.
- Sharing company financials.
Like it or not, the rules of business are the numbers. Plus, if you have a compensation plan where people earn bonuses based on profit, sharing financial information is most helpful. Sharing financials doesn’t give anything away. Instead, it helps to bring people on board and give them some sense of the reality of the business.
- Daily statistics.
Identify the key factors that truly drive your business success and put those measures on one page. Share them with managers on a daily basis.
- Simple, accurate, timely accounting systems.
In the age of computers, there’s no reason why you can’t have current financial information when you need it. Never let your accounting people tell you they can’t close the books until weeks or months after the close of a business period.
- Independent personal financial advisor.
Most entrepreneurs are great at earning money but lousy at keeping it for themselves. It often takes two to three years to find someone you trust and understands how to put together a good financial plan for you.
- “No thanks” money.
Have enough money so you can say “no thanks” to customers and contracts in which the aggravation far outweighs the profit.
- Refine an equity point of view.
One of the biggest mistakes of CEO/entrepreneurs is that they rarely take an objective view of their shareholder rate of return. Ask, “Does this business make sense? Are we pushing hard enough?” Refine that point of view and add it to your personal yearly retreat.
- Discover and refine the secret in your business philosophy.
Work with this year after year until you get to the guts of your secret.
- Learn and practice public speaking.
One of the most important things you can do is practice and refine your stump speech, the five- to ten-minute talk that says why you’re in business and what you are doing. Hire a consultant or join Toastmasters, but do whatever it takes to refine your public speaking skills.
- Performance-based compensation.
This is a great way to pay people but it’s very hard to do right. Unless you have a lot of experience in this area, find a good consultant to help out. Money doesn’t always motivate, but when pay is tied to the bottom line, it changes the way people look at the business and go about their jobs.
- Read.
Reading opens you up to all kinds of new ideas.
- Foreign travel.
Few things will broaden your perspective and provide new ideas like foreign travel.
- Personal retreats.
Periodic retreats of personal introspection are very empowering. Once a month go off by yourself to think about the greater issues of life rather than cash flow or the pressing problems of the day.
- Use the Barry Rodgers evaluation technique.
To do a bottom line assessment of what you are worth, pretend that you shut the doors and sell everything. Discount everything to what you would actually get, and whatever you have left over is what you are worth. Anything you get in a real business valuation will make you feel a lot better.
- Get involved with your family.
Almost every happy CEO is involved with their family.
TEC – The Secret – Your Life as a CEO Entrepreneur – Walter Sutton