Inside Small Business | Small Business & Home Business Marketing

Blood Money

Mike Michalowicz, Serial Entrepreneur

I recently received a notice congratulating me on donating a gallon of blood. I quickly did some research on Wikipedia and learned that the human body has slightly over a gallon of blood pumping through it. Clearly, if I gave a gallon of blood in one sitting I would be a goner. Shoot, even if I only donated one third of my blood (approximately 3 pints) in one sitting I might suffer some tough consequences. But since I donate one pint of blood at a time, my body hardly misses it and I can donate as frequently as seven times a year without missing a heartbeat (pun intended). My blood donations have quickly piled up and in a very short time I have given a gallon.

We’ve all heard that cash is the lifeblood of our business. I think it’s hard to argue otherwise. Shouldn’t we treat our money like our business’s blood? Just like a medical emergency, a business in need of fiscal attention often requires an infusion of capital.

Medical needs sometimes can be predicted and sometimes can’t. Regardless of the timing, with a pool of easily accessible blood reserves the chance for survival dramatically increases. Sometimes our business problems are predictable and other times they blindside the living crud out of us. Regardless of the timing, with a pool of easily accessible cash the chance for business survival dramatically increases.

That’s why you need to regularly “donate” business cash flow to your reserves. The best method is by taking your profit first. What do I mean by this? Every time money comes into the business, and I mean every time, a percentage is automatically transferred into a separate account. Just like a pint of blood, a healthy business will hardly feel it being withdrawn. I like to call this reserve the Profit Distribution Account (PDA).

How much money can be transferred to the PDA without threatening the health of the business? Most stable companies should be able to post a profit of 10% to 25% after all expenses. So trying starting with a low threshold, maybe 5% of every inbound dollar goes to the PDA. Over time slowly increase the percentage and monitor closely to see if your business gets woozy. Once you have consciously (more often subconsciously) adjusted expenses and cash outflow to sustain your PDA withdrawals, you will quickly accumulate a tremendous cash reserve. Be cognizant not to stow away too much money too quickly. Just like donating blood, the rapid drain of cash exiting from business operations will cripple or kill your organization.

Should tough times come upon your company, and they often do, you now have a source of funds that you’ve built up. The PDA’s dinero reserve will see you through these times. On the bright side, as these funds grow they will ultimately be in excess of any imaginable rainy day needs. At that point you should take portions as an equity distribution. Trust me, it’s a real nice way to reward yourself for running a healthy business. There is a nifty little process I recommend on how to do this, but I’ll save that for another article.

If you’ve never given blood, I strongly encourage you to do it. There’s no question it saves lives. If you don’t currently donate to your company’s PDA account, I strongly encourage you to start. There’s no question it saves companies.

Author

Mike Michalowicz’s passion is making small businesses BIG and doing it fast. He was founder and former President of Olmec Systems, Inc., which he sold in 2002 through a private transaction. He subsequently co-founded and served as Co-Managing Partner of PG Lewis & Associates, LLC. There his leadership helped bring it to national prominence in three short years. The company was subsequently acquired in a public transaction in 2006.

Michalowicz was recognized as New Jersey’s Young Entrepreneur of the Year by the SBA in 2000, Young Entrepreneur of the Year in 1999 by the MCCC, and is a 2004 graduate of MIT’s “Birthing of Giants” Entrepreneurial Program. Michalowicz has been highlighted on entrepreneurial topics in Inc. magazine, the New York Times and other periodicals.

A graduated member of YEO (Young Entrepreneur’s Organization), Michalowicz has a BA from Virginia Tech in Finance and in Management Sciences. He is married, has three children and lives in NJ.

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From Gatekeeper to Door Opener: Part 2

How to build relationships with the most misunderstood sales resource
Part 2 in a 3 part series

Monte Resnick, Founder Ambition Partners International

In the first part of my series, I talked about how often gatekeepers are misunderstood and how instead of holding salespeople back, they can really create great opportunities. Let’s take a few minutes and dig deeper into the role of the gatekeeper within your sales department.

The Gatekeeper is often a very trusted resource of your prospect / customer. Beyond simply knowing the favorite restaurants, hobbies and family relationships of the decision maker (all important information for you!), they also have a keen sense of their:

Business style: The Gatekeeper knows the business practices and moods of your prospect / client better than most. Want to learn how to have the most impact during your next meeting with your prospect / client? Would it be helpful to understand their communication style before you open your mouth? Is your prospect more likely to respond faster to a personal note vs. email? Interested to know the best time to reach them by phone? Just ask the Gatekeeper!

Business Challenges: Want to know how hot (or not) business has really been recently? Do you know in which area the company has most recently shifted focus on? How are year to date sales versus expectations? What resources would be most helpful to their business at the present moment? Just ask the Gatekeeper!

Relationships: Who is your real competition in the eyes of your prospect / client? Who are your prospect’s allies in the organization? Which trade / industry organizations are they most actively involved with? What other area businesses do they tend to collaborate or network with? Who are some of their most satisfied clients (provided this is publicly available information)? Which charities are most important to them? Just ask the Gatekeeper!Here’s another critical piece of information regarding the Gatekeeper: Among their very top priorities, decision makers want to keep their Gatekeeper’s happy. So how can you begin building better relationships with the Gatekeeper’s in your universe?

My next post will discuss a few proven steps you can apply immediately. Stay tuned.

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