Welcome to Business Book Club! We are here to pick up those words of wisdom shared with us from the authors who take the time to share their experiences. I'll share the highlights I got from the book and then you can decide if you want to pick up your own copy!
Today I’m going to be sharing information from Mike Michalowicz' book The Pumpkin Plan. After reading an article about growing the country's largest pumpkins, Mike used the same principles pumpkin farmers used on his own business to transform it into a multi-million dollar business. Let’s find out how to plant the right seeds, pull those weeds and nurture the best parts of your business:
Watch my YouTube video overview here.
Introduction
By implementing the same strategies pumpkin farmers used to grow their massive gourds, you can launch a successful business. Ordinary pumpkins are always forgotten, only the giant pumpkin draws a crowd.
Entrepreneurs are struggling, trapped in a never ending cycle of sell it, do it, sell it, do it, sell it, do it that leaves them feeling desperate hopeless and trapped.
Here is the key to your entrepreneurial liberation.
Chapter 1 - A 1/2 ton pumpkin is about to save your life
He made the mistake of not going after the right clients and working all hours of the day. Made good gross revenue but not a lot of profit.
Entrepreneurs shouldn't do most of the work. They identify the problems, discover the opportunities and build processes to allow other people and other things to do the work.
Identify and leverage your biggest natural strengths.
Sell, sell, sell.
As your business grows, fire all of your small time, rotten clients.
Never ever let distractions, often labeled as new opportunities, take hold. Weed them out fast.
Identify your top clients and remove the rest of your less promising clients.
Focus all your attention on your top clients. Nurture and protect them, find out what they want more than anything and if it's in alignment with what you do best, give it to them. Then replicate the same service or product for as many of the same types of top clients as possible.
Watch your company grow to a giant size.
A "say yes to everyone" strategy cannot be sustained over time and will actually stunt your business growth.
Work with clients with whom you enjoy working and who could make you profitable.
Focus on doing the few things you do well.
Each of the stories in the book includes examples about how to employ most or all of the strategies. You'll want to read these!
Chapter 2 - A slow, miserable death
When businesses are in a state of collapse, entrepreneurs go through 3 stages. First, we deny we are struggling because our egos can't handle it. Second, we are stressed. We blow off steam, recite sob stories but it is still ego driven. In step 3, we throw our hands in the air and say "Life sucks." This is a point at which most people give in, all fight is gone.
In order to succeed in business, you need strong roots, a carefully planned efficient infrastructure and focus on the one thing you do very, very well. Rather than fix what is not working you need to cut it out and then expand on what is working.
Sometimes we become a slave to our business because it is 100% dependent on us, our knowledge, our contacts, our unique approach. We also fall into the trap of trading time for money which can max us out. We often believe our our knowledge and skill isn't teachable so you can't systemize. That is a trap you set for yourself.
Entrepreneurs identify the problems, discover the opportunities and then build processes to allow other people and other things to get it done.
You're busy wearing all your many hats and worrying about money. Who has time to go for the dream when you barely have the time or the money to eat?
If you have said "If I could just get one more client I would finally make it", if your business is dependent on you to do the work, or if you think your dream is just that, you are trapped. You're not going to want to do some of the things to get out of this.
Chapter 3 - The Seed
What if you didn't have to waste all your time growing a bunch of seeds in different ways because you knew for sure that certain seeds would respond to your best efforts and grow big?
Follow proven methods and you have the very best chance of making it. Then focus your attention, money, time and other resources on that tight niche.
How to find your best seed: the place where your best clients and the best part of your business meet. Your favorite customers are able to derive maximum benefit from the systemized, core process that drives your business.
The people you most want to work with are those who give you the most business, have reasonable expectations and communicate well. If you don't have clients, just picture your ideal client, who likely would be a lot like you. They would share your interests, values, principles, aspirations and have a similar personality and approach to business. They get the service they need and you get the premium they are paying for it.
Your core system is the unique offering that differentiates your business from all the others in your industry. It's not just about product or service, it's also about your approach to delivering your product and service, specific talents and abilities you bring to the table.
3 areas of innovation: quality, price and convenience. Nobody can be the leader in all 3 simultaneously. Are you the quality guy who takes time to get it right? I.e. Mercedes. Can you give clients the best price? I.e. Wal-Mart. Can you offer exceptionally convenient service or delivery of products? I.e. McDonald's.
Next determine your number one strength: that thing you do really, really well. It should be the thing you want to do first.
Combine your Area of Innovation with your Business Experience = Differentiator/Unique Offering. You must be able to systemize every aspect of your business. Is this easy to do today and can I keep making it easier over time?
The needs of your best clients, intersect with your unique offering in a streamlined process.
Zero in on the sweet spot.
When looking at your offering, your advertising, your structure, do not look at your competition. You need to be yourself. The competition represents weeds in your patch. Start focusing on how you can easily offer something truly unique, something your best customers really want. You will become the leader.
Chapter 4 - Assess the Vine
There are 3 types of clients: good clients, non-existent clients and bad clients. Bad, rotten clients distract you, drain your resources and cost you money. You're better off having no clients than bad clients.
If you could only bring one client to a deserted island, who would it be? You shouldn't just go with revenue and you can't just go with your gut. You want clients who have potential, who are open to new ideas, who have the money to pay what you're worth, who respect you, who are going places and who want you to be part of it. This is the best pumpkin on the vine.
Now look for others like your rock-star pumpkin. You need the best, most promising clients to grow your business.
This also allows you to build systems systems for similar clients because if you can't systemize, you can't scale your business.
Which clients have most of the qualities you want?
When rating clients there are basic qualifiers: do they pay on time, when they feel like it, or not at all? Do they refer others or do they keep you all to themselves? Will they tell you if you made a mistake, let you fix it and let it go or would they rub your nose in it? Is a sweet deal on the horizon or are they maxed out with you? Do they tell you what they need and want or do they expect you to read their minds? Do they respect your expertise or do they consistently undermine and question you? Are they coming back for more or are they one hit wonders? Add your own qualifiers here.
The Assessment Chart
List your clients in descending order of revenue.
Now put a line through the clients who make you cringe.
Create a column for each of the following qualifiers: pays fast, repeat revenue, revenue potential communication, fix it.
Give each client an honest grade A through F.
Create 3 additional columns for less crucial qualifiers: opportunities, referrals, history.
Add blank columns for your additional qualifiers.
Place a Y or N in each of the non-crucial columns as a tiebreaker for top clients.
Add 3 more blank columns for your Immutable Laws (unbreakable rules you follow that serve as the spine of your business).
If you sell products to hundreds of customers go with the top 5 to 20% of your clientele based in revenue.
Don't play favorites. Keep it real.
Your best customers share your immutable laws. They are critical in qualifying a customer. Add at least 3 of them to your assessment chart. For example, Mike's are "No dicks allowed, blood money and give to give". They are the solid healthy root system that will grow your gigantic pumpkin.
Maybe you sell an inexpensive product and need a ton of clients or maybe most people use your product once in a lifetime. Figure out who your top clients are and cater to them exclusively.
Focus on types of customers. For example, one business found some of their clients self identified as entrepreneurs and stayed customers longer than those who self identified as small business owners. Market to yourself.
You don't have to fire everyone on your list, just the ones on the very bottom. As you continue to take on more top clients your middle clients will become your bottom client it and you will shift your attention again.
Don't worry about having the most clients, build your business on the best clients for you.
Chapter 5 - How we do things down the farm
Farmers know which pumpkins they need to pull off the vine based on which pumpkins are growing faster, which ones have damage and which ones have the strongest root system. You cannot skip this step and go straight to nurturing your best clients.
You can be great at 1 thing, or maybe 2, and you should exploit the heck out of those things and outsource the rest. Don't be afraid to say "No", say "No" to the small stuff or things that aren't a good fit because the moment you say "No" you become a hot commodity.
When you stop trying to figure out how to work less and grow your business and focus on who you want to provide service for, it becomes easy to say "No" to those you do not want to provide services for.
It's time to pull the weeds and remove the diseased pumpkins. Reversing the plan doesn't work because it takes time to cultivate relationships with your top clients and attract new better clients and if you're also working for time-sucking clients you're probably maxed out.
How to fire your clients:
Eliminate services. Whether it is a specific service or servicing a specific type of company. " We have shifted all our resources to serve an industry other than yours and we can no longer help you."
Prioritize your best clients. Take the best client calls and refuse the worst client calls.
Raise your prices. Until it becomes prohibitive for the client.
Explain you have an agreement with a major client that prohibits you from servicing them any longer.
Even nice customers have to go if they are not a fit for your offering. Introduce them to another vendor who can serve them more perfectly.
Create a new assessment chart every quarter to recorder to evaluate customers and make the tough decisions.
Chapter 6 - The Tourniquet Technique
Sometimes you have to let people go to save the company.
If you have similar clients with similar end results, it should be easy to systemize.
If you are not serving a niche client base, saying yes to everyone, playing the quantity game, trying to land any and all clients, you will have more expenses than the business can handle.
Don't stay on the hamster wheel running to nowhere for fear of jumping off. You'll keep running until you or your business collapses.
Cash is the life blood of your business. The tourniquet technique is a method for reducing or eliminating expenses associated with the clients who ranked the lowest on your client assessment chart.
It's hard to say goodbye to clients, employees, the bigger office space, etc.
Take a look at your expenses and decide what is really necessary. Could you change the way you market to your clients to better serve them? Go through everything line by line and ask if it serves your clients the best. If not, let it go.
Your main objective is to serve your top clients so your staff chart should model the ideal situation. Think of the roles and responsibilities of the positions that best serve your top clients. How would they communicate with each other? How would they report to each other? Often you will be wearing many hats. Remember to take on the CEO role more than the jack-of-all-trades role.
Chapter 7 - Play Favorites and Break Rules
Your next objective is to focus your energy on your core client group and make them so happy they would never leave you for the competition.
You will have to play favorites and dazzle them with super awesome innovation, service and skills.
Favoritism is required in business and you can only have a select few.
Create your Top 10 clients, make sure everyone knows to attend to their needs first. It doesn't mean you ignore your other clients and in the end when you fix something for a top client, it trickles down across-the-board. Never tell the clients they are in the Top 10.
You have to single mindedly nurture the enormous pumpkins and recognize the others will never grow big enough to break the world record.
Build systems that cater to their needs and give them first dibs on new products or services and accommodate their special requests.
The right customer is always right.
Think of your business as a membership organization. All the successful ones have rules on who can join. Make these rules but they are only for you and your team's eyes only.
Under-promise and over-deliver: When a client asks for a timeline figure out how much time you need and add a 10% buffer. This could be a few days, a week or even a month. If you are selling a product, come up with your delivery estimates. When a client asks for a product or service, build in a little something extra. Use this strategy 90% of the time. You will be measured by your actions, not your words so make sure to avoid being too consistent - if you always over-deliver, people will come to expect it.
Don't hide The Secret Sauce. You are no longer the keeper of The Secret Sauce, you are the executor. You do it for them, you make it easier. Give them easy solutions and be the person who will do things for your clients, sometimes even think for them!
Chapter 8 - The Wishlist
If it works for another farmer, it almost always works for you.
Ask your clients for a wish list regarding what they wish they could change about your industry, what they wish you could do for them or sell to them, what they wish anyone could solve for them, what would make their job so much easier, what would help them grow their business. Then do your best to fulfill every possible wish. The wishlist is not about you, it's about your clients And their views about your industry, not your company.
While you can't fulfill every wish, there is an opportunity to innovate, differentiate and dominate your industry.
What is your chief complaint about your industry? Your clients? Other vendors?
If you could do it easily, what would you change about your industry, your client, other vendors?
What is your biggest challenge right now?
What would need to change so you could finish work an hour earlier every day?
What would you like to accomplish in the near future?
Where do you hope to be in 5 years? 10? 20?
What frustrates you about vendors in my industry? What do you wish vendors in my industry would do differently?
If you could tweak the products or services my industry provides to better suit your needs, what would you change?
What is most confusing about my industry?
What do you wish vendors in my industry would offer?
Do not promise them solutions, you just want to get to know them better and understand their situation. Look for trends and common themes.
Once you've developed something, call your top clients and say "I'm trying to improve my services or product and I'm not sure if I'm there yet. I don't know what I don't know. I have nothing to offer or to sell. May I buy you a cup of coffee and simply get some advice from you? It won't take longer than 15 minutes."
If clients like your idea they will pursue you. If they don't, thank them for their time and go back to the drawing board.
When a client asks "how much", you know they want it.
If a prospect can't tell the difference between you and your competition you're a label in a generic category. And then it comes down to price.
If you can get your clients to label you differently not just for the sake of being different but because you are different, you make it easy for clients to notice your differences and choose you over the competition. And when you are good enough, price becomes irrelevant.
See how your clients wishlist could lead to further refinement of your niche and to the discovery of a lucrative differentiator. Work within your sweet spot, not outside your comfort zone.
If you know what your client's aspirations and frustrations are, you're better equipped to spot opportunities for them. You don't have to solve the problem all the time but hook them up because you are invested in their success.
Chapter 9 - Let them lead
You need to get your customer community to directly influence the development, launch and marketing of your future offerings.
At the end of this process, you'll have a product your clients, vendors and prospects already want and the rest of the strategy will take care of itself.
It will not work if you are a jack-of-all-trades and haven't already done the other steps in the pumpkin plan.
The company Threadless asks designers to create their own T-shirt designs, one of which is selected as a their next T-shirt.
When you can predict how many people will buy what you're selling you don't have to build, create, order, or buy more than you need. For example, I know if I'm selling a product that costs a $100 or less, I get a 39% purchase rate. So if 500 people respond to the predictor question with "Yes", I know I'll most likely sell a 195 units.
Because you have the wishlist you can add another layer to the early predictor stage by asking clients "In response to your wish, complaint, concern or frustration, I'm working on X. Would this fit the bill? Would you be interested in this?" Now you really have vested clients.
Keep your community engaged during the process: share photos, detailed videos and emails, send samples. Make it available first to the people who help develop it and months later, to the public.
Mike's sequence:
Predict. Ask clients, prospects and followers if they would be interested in your offering. Keep track of responses in relation to your total database and put more weight on top clients.
Appreciate. Thank every person for their response.
Announce. If you have enough yes responses to move forward, tell the community that since there are enough people who want your new offering you're going to go ahead and create it.
Engage. Engage your audience as you develop the new product or service. Keep them invested in the outcome by periodically giving updates and asking their opinion.
Ask. Request a small investment in the form of a deposit from people to get them committed to the process.
Limit. When you first launch your new product or service, make it available for a limited time and in limited quantities. Make it available only to the people who helped you bring it about.
Over-deliver. The key is to deliver something more or something unexpected so people don't feel let down or underwhelmed.
Keep track. Make sure you keep track of all responses.
You still have to guide your business in the direction you want it to go because you can't let clients dictate every turn and decision you make. Sometimes you have to make the executive decision to let it go or modify it to suit your business. If you can't do what your community wants, tell them the project won't be done in the near future and you will be starting the runner-up project or ask your community to give you the solutions by scheduling calls with them.
Chapter 10 - Big, fat and healthy
I looked at our roster and noticed that hedge fund firms accounted for 30% of our annual revenue yet we only had a few hedge fund clients. Remembering the 80/20 rule we needed to tighten our niche. We labeled ourselves hedge fund tech specialists changing our focus message and branding. But how do I get more clients? Waiting for referrals was time consuming. A-ha! Their vendors serve them, so we could probably share our top clients. Ask clients, "Besides me, which vendors are critical to your business and that you really like? To give you the best possible service I'd like to make sure I understand what your other key vendors do for you and that any work I do for you integrates with and supports what they do for you. I also don't want to put any roadblocks in the way of your other vendors."
Reach out to the vendors and say "{Larry} referred me to you. We're his hedge fund tech specialist and I'm hoping we could meet so I can get your advice on how I should be working to make your job easier and how we could both do a better job for Larry." During your meeting ask the questions outlined in the chapters above.
At the meeting, tell the vendor you are looking to grow your business would you refer me to other clients who may need a hedge fund tech specialist? I would love to build on our working relationship with other clients just like we did.
When growing huge pumpkins, don't spread your seeds over 17 acres, focus on half an acre and plant one seed or two, tending and strengthening that vine. When you focus on moving within one tight area, prospects see you more frequently. Join clubs, associations, advertise in their trade publications, trade shows and move in concentric circles. Market only to the locations where your key prospects are and they will believe you're everywhere.
Chapter 11 - The airline safety card method
Sometimes you get bogged down with your staff constantly asking you questions and you either end up handling yourself or so much of your time gets taken up that you have little time to get your job done.
Mistake 1: Hire really technical and experienced employees and assume you do not need to train them. They often don't believe they have to follow protocol or they undo work previously done, etc. They rejected direction and believed they knew best.
Mistake 2: I decided to do the work and hired a personal assistant and an entry level grunt worker. Most entrepreneurs struggle to make the leap from a one person startup business to 10 or more employees. We don't think we can afford to hire someone else to do it and when we hire someone with enough experience, we forgo our own salaries and those employees are unable or unwilling to do it our way. When we bring in someone with less experience, we mistakenly think we don't have time to train them and even if we had the money to hire a willing and able staff, they would not compare to our abilities.
You cannot scale your business if you do most or even some of the work. In order to scale, you cannot do any of the work. If you are finally going to stop working for your business, you must ensure that not one ounce of your deliverable, not one thing the client experiences, depends on you doing it.
You have to build systems and train your staff to do the work for you so you can grow.
Discover the opportunities and then build processes to allow other people or other things to do the work and to do it right, consistently.
Like the Airline safety card, create a system that anyone can follow. Break it down and break it down and break it down, then test drive it.
You also need to build systems to empower your team to handle unpredictable situations. Have the employees ask these three questions:
Does this decision better serve our top clients?
Does this decision improve or maintain our area of innovation? This is what distinguishes you from the competition.
Does this decision grow or maintain our profitability?
If they can't answer Yes for each question, they should not proceed.
You do have to teach your employees who the top clients are and why. You have to teach them what makes you special and what they can do to make your company even more special. And you have to teach them how your business makes money and pays for things like their salaries.
Chapter 12 - Kill the Curve
Entrepreneurs screw up when they see a trend and try to get in early and work their way to the top. The problem is they're focused on out playing the competition when they should be focused on playing an entirely different game. You have to create something so radical it makes the curve obsolete. Like Tivo.
One way to kill the curve is to give yourself a new label. Cirque de Soleil revolutionized the circus. Your clients will ask about the new label so you can explain why you're different.
Then use the 180 Technique- analyze your industry, define parameters, what are the assumptions? What is the exact opposite?
Commerce Bank - No Stupid Fees. No Stupid Hours. They behaved like a fast food restaurant. Blockbuster killed the video store. Netflix killed Blockbuster.
Put an "est" on what you already do. Funnest, cheapest, fastest, strangest, coolest, coldest, etc.
Chapter 13 - Next Season
There is a season for everything, even businesses. If your industry dies, your business dies. This is why you need to be ready for the next plan once your business is rock solid and operating on autopilot. For example, IBM left manufacturing to grow a service business. Your new niche can allow you to exploit your number one strength and better serve your top clients.
Reinvent yourself and reinvigorate your company. Steve Jobs launched Apple, then he founded Next, then he bought the graphics group renamed to Pixar and came back to Apple to do the ipod, iPhone and ipad.
Get your own copy of Mike Michalowicz' book The Pumpkin Plan. You won't regret it!