Jay Conrad Levinson,
Author, "Guerrilla Marketing"
over 15 million sold; now in 43 languages.
This process has helped thousands of entrepreneurs accelerate growth an average of 406% ($2M+), up to $250 million, and it can help you do the same.
Best Practice #1. The owners have envisioned and written what the business will be like in five years (Vision Statement).
The key to good management is discipline and focus, and the key to good leadership is vision. Hot100’s distinguish themselves by envisioning solutions to problems and taking risks to implement them. Hot100’s also effectively communicates the vision of the company to the people who will help to achieve it.
Although Mission Statements are fairly common, Vision Statements are not. A vision statement is not customer-focused but rather owner-focused. Your vision statement should state what you want your business to become. For example, "We are building a business that will help the owners to __________ (fill in this statement)."
A vision statement must incorporate all that is important to the owners in relation to the business. Long-term values will have a significant impact on what is included in the vision statement. Since this statement will be used to evaluate business decisions that affect how the business benefits the owners, it is essential that it be developed by the owners and their advisors. Every attempt should be made to achieve consensus on the vision statement by all who have an interest in the business. It should also be reviewed at least annually to see if it is working and needs updating.
The following is an example of a vision statement from one of our clients: “Our vision is to be the most profitable company in the industry and a fun place to work.” We like this one because it is easy to understand and it focuses on sustainable profitability.
Best Practice #29. The owners have at least $3 million in their retirement fund, within 10 years.
Most everyone laughs when they see this best practice, yet it is often one of the real keys to building a successful AND sustainable business. Putting this as a critical goal for your business, changes WHAT you do and WHEN you do it. It makes everything more urgent and more important to get results NOW, not just stay busy and hope it all works out in the future. This is one of the keys to achieving our goals 10 to 20 years faster.
So there are two good strategies, and one great one to get there a lot faster and more reliably.
The first strategy is a good one but it depends on the business being successful right away, and that’s not always the case. The focus is on building a business that has the potential to put away $30,000 or more into your retirement fund each year. Within 10 years you should have $3 million or more, depending on your investment results. This probably means you need to be able to pay yourself a barebones minimum of $10,000 a month or $120,000 a year, and preferably $25,000 or more a month or $300,000 plus. If your business can’t do this in a reasonable time (2-3 years) then modify the business or look for another opportunity. Don’t get stuck in the high-potential hell of “We’re almost there, we just need a couple more ……years, investors, etc. In this game, only results count…not intentions.
The second good strategy is to sell your business and use it to fund your retirement. This is the old standby dream of most entrepreneurs. We know that if we just work long and hard enough, the business will eventually be worth enough to allow us to retire. And often enough this is true. The challenge is it usually take 20 or more years of hard work and everything we have is invested in the business. Then we don’t know until we actually sell, if it will be enough. In addition, all it takes is for the proverbial “800lb Gorrilla” to come to town and say he is going to eat our lunch, and it can all go away very quickly. When we’re in our 20’s or 30’s and don’t have a family to support, that doesn’t seem such a big risk. For the rest of us, our families and shareholders need more certainty.
The third and great strategy is to use the “$3 Million More” process to build a $3 million protected and guaranteed asset in about 10 years. This unique strategy was developed by Shawn Kieley, of Perfect Financial, and uses a novel cash flow system, to grow some portion of our business or family cash flow BEFORE we spend it. This is unlike most investments, where we have to put in money that is left over, and then park it for a long time.
As an example, if our business or personal cash flow is $25,000 or more a month, then that’s enough to grow our Perfect Financial assets to $3,000,000 and more, in just 10 years. It can also work with family cash flow, but the results vary depending on our budget. It can work with incomes as low as $5,000 a month but more really is better.
So whichever strategy we use, if we retire at age 65, we could live another 30 years without regular income. A three-million dollar, or more, reserve could allow us to spend one-hundred thousand dollars per year for our maintenance. With this amount, we assume that inflation will offset interest income and that we don’t plan to leave anything to our heirs. A better option is to invest in lower risk instruments and live off the after-tax return.
Another strategy, but not really a good one in most cases, is selling a home, or rental real estate. Unfortunately, that usually isn’t enough to fund a full retirement. If you depend on the appreciation of your home and other real estate to afford retirement, then you must sell your home or reverse-mortgage it to fund your living expenses. In addition, do we really want to have to sell, regardless of what the market is doing? Probably not.
Lastly, too many entrepreneurs neglect the simple fact that no one is going to help us retire. We are ultimately responsible for every last dime we need to live. The older we are the less time we have to accumulate this amount of liquid assets. Counting on the sale of the business to fund retirement, we must ensure that the business is worth enough, that it doesn’t decline in value and that there is a market for it when we want or need to sell it. If we don’t have this amount reserved for retirement, then we have all the more reason to earn another million dollars as soon as possible!
Best Practice #30. A tax minimization review is conducted semi-annually with a tax expert.
We deliberately saved this best practice for last in the Owner’s section. Not because it’s unimportant, but because a business owner should concentrate first on making money, then on keeping more of it. Roger has a goal of paying a million dollars in income taxes, because taxes are a percentage of income; think of the income! Corey prefers to think of how much of it could be tax deferred or tax advantaged.
Tax minimization is an important secondary concern that needs specialized expertise. The review should be scheduled within a month after your fiscal year reporting to determine what you should do that year. Then a follow-up should occur six months later to see how you’re doing. Business and personal taxes should never be an unexpected surprise.
These meetings with your CPA and financial advisor should make you more money every time. If not, get better experts. After a 10-minute meeting with his new accountant, one of our clients walked out with an extra $35,000 in tax savings. His previous accountant of 17 years did a good job of doing the tax return and was a great golf buddy, but he didn’t offer anything to help build his client into a Hot100. One of Corey’s clients went to a financial advisor to help reduce the taxes on $400,000 of profit. The financial advisor recommended a qualified retirement plan and stated they would save about $9,000 in taxes. Corey helped them find another advisor who showed them how to reduce their taxes by $91,000, with no additional risk. Don’t settle for standard advice. Building a real business means getting a team that can help you get there better and faster.
The most satisfying role in any business should be that of owner. Done well, a Hot100Business will provide a level of challenge, satisfaction, reward and accomplishment that is unparalleled. The business is only a vehicle to get you to your destination, in style and in a reasonable amount of time.
Transform your business and increase net income $300,000 and more ASAP!
What would your business look like at this higher-performance level?
What can get your business there faster and better? This is a great intro to the Hot100-MBA ($1m-$25m) and 5X Entrepreneur (up to $1m) programs.
Fridays, four times a year, click to see dates
9:00AM, - 4:00PM
Bellevue WA. No fee - $995 value
Congratulations to John Vechey, of PopCap Games, who was named #7 on the Top 10 Young Internet Millionaires list ($60 million at age 28). Number 1 was the founder of Facebook.
News and updates:
Feb 2015 John Vechey starts Pluto VR company.
Sept 2014. John says goodby to Popcap after 15 years. EA News.
Sept 2013. Bejeweled, the little game that keeps on giving. Business Insider article, The History of Bejeweled.
April 2012. They won! Popcap founders, John Vechey, Brian Fiete and Jason Kapala were nominated for the US Small Business Administration Entrepreneurial Success Award, by Corey Hansen, the founder of the Hot100Business Association. The award is a recognition of a company that once received SBA assistance but now is so successful they are no longer a small business and are making major contributions in the community and the country. They won the award for Washington State and the Northwest Region 10. Congratulations!
July 12th, 2011. Popcap officially sold to Electronic Arts for $1.3 BILLION; $650 million cash, $100 million stock, and $550 million in revenue trails.
Hot100Business AWARDS TALLY
--Veteran Small Business Champion of the Year - National
--Entrepreneurial Success Award - State and Regional
A few of many examples: (The growth and sustainability of these businesses is not a guarantee your business will achieve similar results, but it's a good start.)
From $0 to $800,000 first yr, to $10 million/yr in 5 years (1,250%)
Inc Magazine "Inc 500" in top 100
Entrepreneur Magazine "Hot 100"
From $9.6 million to $41 million per year in 3 years (+400%)
Inc Magazine "Inc 500"
From $400,000 to $1.4 million per year in 9 months (350%)
Ernst and Young Entrepreneur of the Year regional finalist
Mayors' Small Business Award
From $120,000 to $12 million per year in 4 years (10,000%)
Inc Magazine "Inc 500"
Business Journal "Hot 100," in top 10
From $40,000 investment to $50 million/yr in 6 yrs (125,000%)
to $250 million/yr in 10 yrs (600,000%)
Ernst and Young Entrepreneur of the Year regional finalist
SBA Entrepreneurial Success Award 2012
Acquired for $1.3 BILLION!
From $3 million to $10 million in 1 year (333%)
SBA District Small Business of the Year
Social Mission Business Service
From $400,000 to $1 million in one year (250%)
SBA Region - Minority Small Business of the Year
Business Journal "Hot 100"
From $20,000 a month to $300,000 a month in 10 months (1,400%)
Financial Institutions Services
From $1.2 million to $6.1 million in 12 months (500%)
Business valuation went to $70 million (+$65 million, 1,400%)
From $800,000 to $1.6 million in 12 months (200%)
Custom Business Software
From $1 million to $9 million/yr in 4 years. (900%)
Inc 5000 and Business Journal Hot100
100 Best Places to Work and many other awards