Most Businesses Fail. Here Are 5 Tips That Help Grow Your Profits (#188)

[00:00:00] Jeffrey Feldberg: Welcome to the Deep Wealth Podcast and for this
episode, we're doing a deep dive on a topic near and dear to every business
owner's heart. And that is growing your business, growing your profits.

You know, when you look at the
statistics, they're not great. According to Lending Tree, almost six out of 10
businesses will fail within the first seven years of business. So think about
all that time, that effort, all that money that's for not. And there's another
statistic that even if you've been in business for close to 12 years, 75% of
businesses are going to fail.

So let's talk about the root
cause of the failure and what you can do and what I love about the Deep Wealth
9-step roadmap of preparation. It's also the same strategies for growth. So
think about that for a moment. While you're preparing your business for a
future liquidity event, whether that's a year from now or 10 years from now.

The strategies that you're
deploying are growing your business. So when you do show up for your exit,
whenever that is, you have a better business, a more resilient business, and
one that has a higher enterprise value.

So let's talk about strategy
number one, and it's all about something called inflection points and why
finding inflection points today helps grow your profits tomorrow and beyond. So
what's an inflection point? Well, an inflection point is what some people call
a blind spot. It could be a change in your industry. It could be a change in
your business. It's something that you're not aware of. And when it comes to
inflection points, there's always two sides to an inflection point.

And inflection point left
unchecked in other words, if you do nothing about it, maybe you're ignorant to
it. You don't even know that it exists it can put you out of business. And if
we look to the history of business, the books are scattered with Titans of
business who have been around in some cases for decades and decades who
ultimately went out of business because they miss an inflection point. And then
on the flip side of that inflection point, when you know how to find an
inflection point, and that's what we're going to be talking about today.

You can put yourself out of
business to go into a bigger and better business. Let me take one inflection
point. I'll talk about one well-known business saga. And that's with Netflix
and Blockbuster, both knew about an inflection point. In this case, Blockbuster
decided to do nothing about it. Netflix decided to do something about it and
the results speak for themselves.

So what was that inflection
point?

The inflection point was online
streaming. So the ability to stream movies over the Internet. Now coming into
this before Netflix even started, Blockbuster was the 800-pound gorilla. They
owned the marketplace when it came to renting a movie and because they're so
big because they're so successful and this is why I always say that in your
success today are the seeds of your future failure if you don't do anything
about it.

And so when it came to online
streaming. Blockbuster did what many businesses did. Well, you know what? It's
a fad. It's not going to affect us. It's not going to last, who in the world
would want to stream online movies when they can come to our stores and get
whatever movie that they want?

Netflix on the other hand, when
they went into the business. They couldn't do online streaming at that time. So
they decided to do rentals through mail. But even the name of the company,
Netflix showed that they were having an eye toward the future.

That it wasn't going to be DVD
rentals all the time. That at one point in time, whenever that's going to be,
there'd be the opportunity to stream movies. So Netflix saw that it was coming
this inflection point. They prepare themselves for it. They acted on it.
Blockbuster decided to do nothing. And we all know where that went. Ultimately
Blockbuster went out of business.

So the takeaway here is finding
an inflection point today is not only going to prevent you from going out of
business. It can help put you into a much bigger and better business going
forward. So strategy number one, why finding inflection points today helps you
grow your profits tomorrow and beyond.

That leads nicely into strategy
number two, and for strategy number two, it's why you'll grow your profits when
you turn off autopilot for your business. And as I said earlier, your success
today contains the seeds of tomorrow's failure. And let's be honest, it's human
nature. When things start to work when revenues start rolling in, when you have
those profits when you're growing hand over fist. You don't want to change
anything.

As the saying goes if it ain't
broke. Don't fix it. Why would I want to change it? So in other words, human
nature, we become lazy. What's working today is going to work tomorrow. Why
would I want to change anything about that? And along the way, we lose our
curiosity to find new and painful problems to solve. And let's pause here for
just a moment.

I want you to think about when
you started your business. Before you got into business, you were curious, you
found a problem. The problem was painful for you. The problem was painful for
prospective clients and you're a passionate on figuring out how to actually
solve that problem.

So you were curious and that
curiosity set you up in business and you did things really well. You were
world-class in solving that problem. You turn prospects into clients. Because
you're world-class, those clients ultimately became raving fans. And as the
saying goes, the rest is history.

But then something happened.

You got more involved in the
business, different issues began to pile up. Instead of working on the
business, you began working in the business. We tend to go into autopilot when
things are working, we get very comfortable. The systems that we put into
place, save us time. They save us effort. We know what to expect. We know what
to do. There aren't any surprises.

But there is a big surprise
because we're not being curious. And by not being curious, we're setting
ourselves up for failure. Just because something's working today, you know that
there's no guarantee that it's going to work tomorrow.

In fact, the only thing
constant both in life and in business is change. Change is always happening.
And the only question is what are you going to do about it? Because you also
know as you become more successful, as the word gets out there in the
marketplace about what you're doing. You're now attracting attention to your
business.

Existing competitors find out
what you're doing and they start to imitate you. New competitors enter into the
marketplace that begins to copy you and other competitors will come into the
marketplace, doing something with a little bit of a twist. It's not quite what
you're doing is a little bit different, but you know what it is actually better
than what you're doing.

And now there is a situation
where competitors can not only take your existing customers, they will also
take your future customers and you find yourself in a not-so-great situation.
So it really begs the question. What can I do? How can I find these inflection
points? How do I grow my business? How do I grow my profits?

And that leads nicely into
strategy number three. Strategy number three is the one and the only question
to ask on how you can grow your profits. So, what is this one and only question
to ask?

Well, I'm going to go to the
Deep Wealth 9-step roadmap, and it's actually step number two, X-Factors that
insanely increase the profits of your business, as well as the value of your
business. And when you know how to find these X-Factors, you put yourself in a
position to grow your business and to grow your profits. So what's this X
factor? What's this one and only question?

Well, the question is, and you
ask this to every one of your clients, you, your team from frontline employees,
all the way up to the president, the CEO, and yourself, the question is what
keeps you up at night?

So if. If I was your customer
and you're speaking with me, hey, Jeffrey, I'm curious when it comes to your
business, what's keeping you up at nights?

And then you stop talking and
you listen. You listen to what you're being told now, you may get a hundred
responses and of those hundred responses at 99, won't be valid for you to go
into and do something about. But it just takes one.

And I'm going to share a quick
story with you when this happened at my e-learning company. Embanet. So, as you
know, I started at Embanet, right? Into my MBA program. I had no money. I had
no experience. I had no team. I was living out of my parents' attic. I was
literally failing forward each and every day.

Thankfully my grit, my passion
kept me in the game long enough that Embanet eventually became successful. And
truth be told the story could have stopped there. I could have said with myself
and my business partners, hey, life is great. We're growing. We're now the
golden child in the industry, the profits are starting to roll in. Life has set
for us.

But that didn't happen very
deliberately that didn't happen because we knew that the seeds of Embanet's failure
we're contained in our success today. So I would always ask and the team would
always ask that magic wand question. What's keeping me up at nights and I'll
never forget. I was speaking to Jon Clark, who was the Associate Dean at the
MBA program at Colorado State University.

I called Jon that day on a
regular call, as I often would just to check in how things were coming along,
what's going on, and just exchanging information. And at the end of the call,
it said, hey, Jon, great speaking to you, by the way, I'm just curious. What's
keeping you up at night when it comes to your program when it comes to the
business?

After I asked Jon that
question, there was a pause and he was thinking about it. And then he said, you
know, Jeffrey, I'm really glad that you asked me that question. Maybe it's a
coincidence, but as it turns out later today, I have a very uncomfortable
situation where I need to speak to the board.

We're having a board meeting.
And I need to tell them why our enrollments are down. Why our revenues are down
and why our profits are going to be down? It's become very difficult for us to
fill the seats. At that time this was in the mid-nineties, this new thing
called the Internet he said is now come on board. And my competitors are
starting to take away my students from the Internet.

Some of my competitors have set
up shop in town and they're taking my students away locally. And some of them
are also doing things like video conferencing. So it feels like I'm getting hit
from all sides and filling the seats is no longer as easy as what it used to
be. Hey Jeffrey, since you asked me that question, he said, is there something
that you can do to help me?

Now at that point in time, I
was naive and I said, Jon, Hey, give me two, three weeks. Let me think about
that and I will come back to you with an answer. Now Jon had given me an
inflection point.

Embanet at that point in time
was not a marketing company. Jon had a marketing problem. Embanet the original
Embanet I'm going to call that Embanet One. Embanet One was focusing on keeping
the students in the seats. We did hosting, course conversion, 24/7 technical
support. All the things around, keeping the students in the seats.

Marketing was not one of them.
So at first blush, my initial reaction was, well, huh, this is a marketing
problem. It's not really what we do. And it would have been very easy for me to
be lazy and say, well, that's going to be Jon's problem. He'll find some kind
of marketing situation too. It is nothing to do with us, but instead, I was
curious and I said, oh, isn't that interesting? I wonder what's changing in the
industry on the marketing side that their marketing is no longer as effective?

And true to my word. I began
looking in the industry to help Jon with a marketing solution. Now I found lots
of marketing solutions. But the issue was those marketing solutions really
weren't appropriate for Colorado State University. The marketing solutions were
being used by other schools, but they didn't have the prestige that the
Colorado State University MBA program had, they didn't understand that the kind
of culture that was there.

And the more I looked, the more
frustrated I became and I now began to understand what Jon was going through
with his program and with the marketing efforts. And was shortly into my search
that I pulled us out my partners and I said, hey we've got a real opportunity
here. It's an issue on the one hand, it's an opportunity on the other hand. And
I also knew that at that point in time, Embanet was going through an inflection
point because what I saw, I didn't like. The technology was becoming easier. So
universities turn to Embanet One because it was hard for them. The technology
wasn't easy, their internal IT Departments, weren't doing the best job. It was
expensive. But as the technology became easier, As the IT Departments began to
get better. I saw the writing on the wall. I knew that if left unchecked if we
didn't do anything at Embanet, we would either be put out of business or our
profits would go down significantly to either break even or just a little bit
of profits, not a whole lot, because good is often good enough.

And I could see it at a time
when the universities would say to Embanet. Yeah, we know you're better than
our IT Department, but the IT Department can do it. It's not going to cost us
anything. And they're good enough for what we need to do. So between Jon's
issue between Embanet's issue between that inflection point that I saw going on
there, I knew something had to be done.

So we had two inflection
points. One inflection point was technology becoming easier, which meant that
our existing clients had a better chance of doing it on their own without
Embanet One.

And the second inflection point
was filling the seats. And ultimately what we did was we created a new Embanet
called Embanet Two. And the goal of Embanet Two was to put Embanet One out of
business, because look, let's face it.

If you're going to go out of
business, isn't it better that you are the one that puts yourself out of
business? So you can put yourself back into a bigger and better business. Now
Embanet Two began focusing on how do you feel the seats.

It was not easy. My two to
three weeks I told Jon actually turned into a few years. We tried lots of
things. It didn't work. We were literally failing forward once again, but I
knew that if we didn't do something, the marketplace would do something for us.
And I didn't like what that was. Eventually, we figured it out through Embanet
Two.

How do you fill those seats
effectively? We weren't the ones that invented marketing. But we took our own
twist and we put that into the marketing solution. That was for Tier One
institutions. And, you know, the rest of the story, Embanet Two became the
golden child in the industry. We figured things out of how to fill the seats.
We came up with an entirely new business model and when I look back, you know,
hindsight's always 20, 20, it's very clear. Embanet Two made Embanet One look
like a rounding error. In fact, the 9-figure deal that we ended up doing for
our exit was primarily based on Embanet Two, not Embanet One. And thank
goodness we put Embanet Two into place because left unchecked Embanet One
ultimately you would have been break even, or eventually go out of business,
not a great scenario.

So the one and only question
is, hey, what keeps you up at night? That's how you begin to find inflection
points from your clientele who are going to tell you things that aren't visible
to you through the pain points that they're going through. So always be curious,
always ask that one and only question from you to the entire team. Whenever
you're speaking with clients.

Knowing that most of what
you're going to hear is not applicable, but again, it just takes one issue
brought to your attention. That could be a game-changer. So from strategy,
number three the one and only question to ask to strategy number four, if you
want success, you must identify what your business must stop doing.

So independent of an inflection
point you must always be on the lookout of activities that you're doing today
that you shouldn't be doing. And let me go back to the Blockbuster and Netflix
saga. It's a well-known saga and you're probably going to relate to some of the
things that Blockbuster was doing that they should have stopped doing.

One of the things that really
upset the customers were Blockbuster was the late fees. In fact, at one point
in time, 16% of Blockbuster's revenue, which has a whopping $800 million came
from late fees.

Now whether it's an urban
legend or a myth it goes that Netflix in part was created because of the
frustration that the founders had in having to pay these late fees for
Blockbuster.

Now Blockbuster knew about the
late fees. This was nothing new to them. There was a market outcry. People
spoke about it, but they decided to do nothing about it. And the irony here is
by doing nothing about it when they were aware of it and in essence, they were
lazy. They said, hey, you know what, why stop $800 million of revenue coming in?

We're going to get it anyways.
Nothing's going to change. Not realizing that they recreating their own demise.
Where competitors were now starting to attack that. Not realizing at that time
that they were creating the very company through Netflix that would put them
out of business.

 And your takeaway, pause
this episode right now. And I want you to think about what are the activities
that your business should stop doing. And if you're coming up blank on that,
why not make a phone call right now to your leadership team and ask them, Hey,
can you speak to your team? Can you find out what the annoyances are that we're
creating for our customers? What do they like about us? What are they
complaining about?

And perhaps it's time that you
come up with a hit list, you prioritize that list and you now start to look at
how can we remove that and what can we replace that with. Because again, what
you're doing today, perhaps it's a small pain point. It'll go on to become a
much bigger pain point. You must stop doing that and look to Blockbuster and
what not to do for business longevity. In fact, Blockbuster was on autopilot.
They weren't listening to what the marketplace was saying. They weren't
listening to what the customers were saying.

And then the other question
that you can be asking yourself. Given where your business is right now how
could you fail? What would that look like? What would have to happen for your
business to fail?

And again, pause this. Think
about this, speak to your team about this, perhaps for your next management
meeting you can ask that question, what would have to happen for the business
to fail? And I wouldn't be the least bit surprised in that discussion. If you
began to identify inflection points.

Well, if A, B, and C were to
happen. That would make us vulnerable that could put us out of business. And
then the next obvious question is, okay, well, if ABC did happen, what will we
need to do to protect ourselves from that? Maybe it's getting out of a certain
segment of the industry and finding another opportunity for you to focus on.

Maybe it's replacing your old
services with some new services, whatever it's going to be. Ask yourself what
would have to happen for the business to fail. And then the third thing that
you can do you and your team go into the field. Select your top clients and
visit them.

Whether it's a car drive or you
have to hop on a plane. Go onsite, ask for a tour, meet their team, go into the
field. Because what you're going to see, you're not going to be able to get in
a phone call or an email, just that interaction of walking around, speaking to
their staff, seeing what's going on, asking the what keeps you up at night
question, you're going to see all kinds of things. You're going to put yourself
in your customer's shoes in a way that you can't do right now.

And from there, you're going to
come up with a hit list of things. And then what you can do with what you and
your team find is you can start an experiment and I use the word experiment
very deliberately. Because when you say to your team, let's do an experiment.

Based on what we saw why don't
we experiment for a small period of time with offering this new service?
Contrast that to saying, hey, we're going to do a bet the farm decision. We're
going to go into this one area. We're going to knock it out of the park. We're
going to be the best ever.

And between the two of them the
latter one has issues. Number one, it's scary. Number two, it sounds like it's
forever. And it also sounds like it's a lot of change when you use the word
experiment. And I know it's such a nuance, it's a very subtle thing, but when
you use the word experiment, the mindset changes. Yes, welcome to the art side
of business. And through the experiment, people know by the very word, Hey, it
may not work. We're not going to spend a lot of money doing it. Then, you know,
worst case scenario, we're learning a few things about that. So people are much
more open to an experiment instead of a permanent solution.

And it'll also be easier for
you to digest knowing that you're not going to have to spend a lot of money. So
here are some questions that you can be asking with you and your team based on
what you're seeing, both in the marketplace and from your clients and your site
visits to your clients. The questions are as follows.

What's the specific problem?
Again, that's going to be an inflection point.

The next question.

What would be three to five
features of the solution?

What would be a compelling
narrative for that solution?

Based on the solution is there
a blue ocean that we can create for ourselves? Is there a blue ocean that the
solution creates?

Who would be the target market?

Okay. Let's assume that we're
now in there. How do we know if we're successful? What would be the key metrics
that we need to define right now upfront that we can measure ourselves on?

Other questions that you can
ask:

Once you have that solution,
what would be the wow factor? That converts, not just prospects into clients
but clients into raving fans.

Another question would be what
are the communication channels that we can leverage to get the word out there?

And now we go down to dollars
and cents and the question would be well, what would the cost structure for the
experiment be?

And then lastly, what's the
compelling business model?

So there's a whole number of
questions that you can begin to ask for your experiment that will help you
refine it. Looking back at those questions I have to share that when we did
that at Embanet we didn't have all the answers in the first meeting. We didn't
have all the answers in the second meeting or the third meeting, but we knew
that done is better than perfect. And every time we met, we asked those
questions. We came up with better answers because we do research. We would have
more conversations.

We even looked at some of our
previous answers and we updated them. And so the whole point is to always
refine it, but you're not looking for perfection. What you want to do is answer
those questions as quickly as you can.

And in an experimental mode
begin that process of implementing it into the marketplace. And as you think
about that, let me take you back to Embanet Two. So when Embanet Two was
created, it was a big risk for us. We took the profits because Embanet One had
just become profitable when we created Embanet Two and we took those profits
and we put them into Embanet Two.

And what we did instead of
going out in a very big fashion hiring teams of people, we made it a very small
team. We took our all-stars from Embanet One to put them into Embanet Two.

And we began tracking and
monitoring what we were doing. And as you heard earlier, success was very
elusive in the early days, but we stuck with it. We kept on asking those
questions. We kept on updating things. And eventually, we found it. And once we
found that solution, we never looked back. We were able to create that blue
ocean we're able to create a new business model. All those X-Factors and
Rembrandts that we speak about in the Deep Wealth 9-step roadmap actually came
to fruition.

And that's, what's so powerful
about the Deep Wealth 9-step roadmap, the strategies that we created we weren't
thinking about an exit at that point in time, it was solely about growth. Growth
was front and center for us. How do we become a bigger and better company? How
do we ensure with our cockroach startup mindset that we live another day that
we're in business to be in business? Growth was all that we were focusing on.

And because we did the growth
so well, that Embanet went on through Embanet Two, to create a market
disruption. That became the foundation for the liquidity event. So in other
words, had it not been for the growth that we had done that we'd put into place
through the 9-step roadmap. The liquidity event would not have been as
desirable as it was because of the higher growth, the higher profits which
automatically increased the enterprise value.

So there you have it. Those are
the five strategies you now know that most businesses fail, but you now also
know five tips that help you grow your profits.

So let's do a quick recap on
what those five strategies are. Strategy number one, why finding inflection
points today helps to grow your profits tomorrow and beyond.

And there we spoke about why
you must find a change in the industry and in find the change in the industry,
it might be new services that your competition's offering. It might be, you're
not growing as quickly. It might be that there's new competitors coming into
the industry. Those are all likely signs of inflection points that you want to
identify.

Strategy number two, why you'll
grow your profits. When you turn off autopilot for your business. And here we
spoke about how your success today contains the seeds of tomorrow's failure.
And we spoke about not becoming lazy.

And having the desire to change
and why you always want to be curious to find those new and painful problems
and really strategy two is built off a strategy one because when you find an
inflection point. Through strategy two you'll become curious about that
inflection point on how to solve it. So that you can create a market disruption
and move your company to the next level.

Strategy number three, the one
and only question you must ask to grow your profits. And the question is what's
keeping you up at night when it comes to your business?

And with strategy, number
three, we are leaving nothing to chance. If you're not finding inflection
points on your own strategy number three, the one and only question is a
terrific way to find those inflection points through your clients and what
they're saying.

And your recall that by asking
that magic wand question, that's what ultimately led to the creation of Embanet
Two. And Embanet Two is what drove the growth and the profits that help lead to
a 9-figure exit.

Strategy number four. If you want
success, you must identify what your business must stop doing. And here you're
looking for pain points that you're unintentionally creating for your
customers, or maybe it's intentionally creating it for your customer, who
knows, but you want to stop that. And the example that we spoke about was the
late fees that Blockbuster was charging its customers that pain point
ultimately led to the creation of Netflix, which put it out of business.

And then strategy number five,
we spoke about how you should be going out into the field, visiting your
customers seeing what's going on. Finding their pain points.

And then based on what you're
seeing, you're going to have an experiment. And again, we use that word
experiment very deliberately because it doesn't scare people on how you're
going to solve your client's problems.

So there you have it. Those are
the five strategies that are going to help drive your business growth. They're
going to keep you in business.

And help you create a market
disruption along the way.

So as we wrap this up, I have a
question for you. Did you find value from this episode? Are there some new
strategies that you can now deploy in your business that will have you with a
bigger business, a more profitable business?

I sure hope the answer is yes.
Why don't you help us here at Deep Wealth, we are on a mission to change the
social fabric of society and how we're doing that is helping business owners
grow their business.

And when it comes time for
their exit, those same business owners are showing up with a more profitable
business, and thanks to the Deep Wealth 9-step roadmap they've grown their
business with that. And they're going to use the same roadmap, the same strategies
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Enjoy the interview!