by Sean Oliver
One of our attempts at diversity during our fat years was Heat-Wear, a T-shirt line based on our programming. Shows are a hit, so shirts about those shows will also be a hit. Right?
Wrong. It wasn’t a total miscalculation. The shirts were thematically aligned to our programing and the sensibility of the shows. We were okay with branding. But we did nothing special in getting them out. We just designed the shirts, designed a correlating website, and did some advertising on our KC site. We added a buy button below the shows also. But as always, the market sits as judge and jury and the verdict was “move on.” We still have some Heat-Wear if you like to collect relics.
Your passion for your Business of Blood should work to keep it out of harm’s way. It’s an instinct not unlike a parent’s. A child is usually never safer than under the watch of a caring parent. You may make a bad decision here or there but it will likely not be on a scale causing massive damage. The trick to keeping the child or the business safe is flipping your mindset from emotional to analytical. You love to see that big smile on your happy child, but letting them open that third candy bar will land them at the dentist for an unhappy session.
18. Adjustments
LET’S CONSIDER THE following metaphor—big business as a gigantic ocean liner cruise ship. I’m a visual person. If you ask me what time it is I’ll grab a pad and draw you a watch. Just bear with me. You don’t have to go far.
Inside of our massive cruise ship are hundreds of crew members, all with individual jobs to do, but they all contribute to making the ship run smoothly. Someone is steering, people are cooking, many are serving, some are entertaining, but all are making the machine function.
Let’s add our Business of Blood to the marketplace, or in this example, the open seas. We’re a speedboat. We just have a couple of people with us. You can drive the speedboat. I’ll stand here and help out.
How do you think each boat will respond to turbulence? The big ship will get bounced around a lot less in choppy waters. Its structure is such that it can withstand battering. Our small speedboat could be in real danger if the waters get too rocky. We’re not built to withstand a great amount of punishing weather. If it’s bad enough it could mean the end of us. The big ship can plow through the temporary wrath of the storm. We need to do some real quick thinking.
Fortunately for us, we have some advantages before we ever hit the eye of the storm. Technology is such that us little guys can have access to the same information about the waters that the other big ships also have. That information, along with some foresight, can tell us some trouble may lie ahead. Even if we don’t have much time, we can make some adjustments.
If both ships needed to steer out of the way of danger, which ship would make the quicker adjustment? And which would be able to get their crew reassigned and working toward a new direction faster?
Exactly.
Our small boat is more nimble than the massive operation that is the ocean liner. Our rapid adjustments can keep us out of harm’s way so we never have to find the eye of the storm. It’s up to us to steer that boat properly and holler over our shoulder, “Hang on, we’re turning east.” That big cruise ship has a lot more going on. Add some confusion to the mix and try and swing that bad boy around quickly. It’ll take miles to make the turn. We’re already headed in the other direction.
Adjustments in big business happen slowly. There’s a chain of command a million miles long and that’s filled with a lot of egos with opinions. They’re all gonna weigh in with their suggestions. All departments will be consulted. Their product lines are in varying states of the supply chain, from factory to the warehouse, to the shelves. The company’s advertising is set, ads currently bought, and more in production for next quarter. A small change can be a headache. A big one could upset the applecart.
It’s up to a Business of Blood to use that nimble quality to its advantage. The Blood gives us a great advantage in the way of market knowledge and insight. That will certainly help hone our sonar and allow us a peek at what coming.
But you’ll need to be aware of the cold part of your business also. Those numbers will also indicate a problem. Keep checking the health of both your company and your product lines. Then make changes. That’s steering out of the storm.
At Kayfabe Commentaries we are now in the process of a big market adjustment as we look at moving our programing to an entirely subscription-based network format. Prior to this, our biggest market adjustment came about 6 months into our existence. Our original business was recording downloadable mp3 audio files of wrestlers doing commentary tracks for their historic matches. It was an idea that had never been brought to the industry. We employed our idea, born on Blood, and put to use some cutting edge technology that allowed us to sell downloads online.
We’d bring a wrestler in, have them watch 8 or 10 of their most historic matches, and in real-time they’d get on headset with me and discuss the intricate, inside details of what we were seeing. It was akin to the director of a film recording their commentary track for a DVD. iPods were all the rage and now you could go to our site to download the tracks, put them on your device, and watch your DVD of the match while listening to the track and experience the historic matches in a brand new way.
This was a unique product and on paper it was a model that seemed foolproof…until our cold data told us otherwise.
They sold at a modest pace. We began to get some coverage in the wrestling media and everyone thought it was a cool idea. What we didn’t know was that our market demands far less work on the part of the customer. Firstly, we were asking them to download the file. A large segment of our fan base was the fan of classic wrestling. The age bracket of a fair portion of them was older and many had insufficient computer speed in 2007 (and some today as well). The downloading aspect was a problem.
Then we had the issue of their having to move the file to portable media. Some of the more tech-savvy had no problem with this. But still another portion of our market would have great difficulty. Then we required them to have a video copy of the match accessible somewhere. Remember, we were selling the audio, but we didn’t own the rights to any of the matches. The fan was on their own, as far as the visual element was concerned.
Further, they’d have to start the audio and the video at a designated point so their experience would be in sync while they watched and listened. If the phone rang and they had to pause and restart all the media to stay in sync they’d have further stress added. It was a great idea but it posed too many challenges.
We knew we could provide the same kind of insider information and the same fan experience if we moved to video. The shoot DVD market was a competitive one. There were a few long-time players in there from whom we’d have to win market share. But we already knew there were lots of customers available to convert. We knew this because Anthony and I were two of them. As viewers of these shoot DVDs, we knew what that market lacked. We watched them back when they were often traded with others online, on VHS tapes, and not much had changed in those productions other than the media. We knew we could make a big splash by being very different.
We had had to create a customer base with our initial mp3 commentaries. Nothing like that existed. Like the speedboat, we flipped a switch, changed our entire focus, developed Guest Booker, and got into the business of converting customers in the shoot interview market. From a traditional business sense, it was a radical change. The product line changed and we went from a space that we had basically invented, to a new, existing market segment of video production and distribution. The written business plan (if we had ever bothered to do one) would in essence have been torn up and written anew.
But we were a Business of Blood. We were two fans with a small business, intense market knowledge, great instincts, and nothing to lose. Making that change was as easy as calling Kevin Sullivan’s agent and booking him for an edition of a high-concept shoot program we had come up with called Guest Booker. I had already spent many years in entertainme
nt from the production end and the performance end, and Anthony had his time split between production and computers. We were naturals at what we were setting out to do, in addition to being consumers—from rock fans to rock stars. We knew we’d pull it off.
We were able to transition into that new market by seeing the waters were problematic, and swinging the boat around quickly.
Part Three:
Growing It
19. Targets and Goals
YOU DON’T GET somewhere by accident. Both failure and success have a road paved with decisions that lie before them. Some decisions prove to be good ones, some less so. They usually lead to a predictable destination based on which set of choices you act upon.
A Business of Blood’s early stages are loaded with start-up tasks to keep you scrambling to gain footing. You’ll be busy studying the analytics, developing products and ideas, and trying to get noticed by customers and industry. It’s quite easy to forget about looking down the road and planning for the future. You should be constructing a mental picture of where you’d like to go, both from a company as well as a product standpoint. Your goals will require you to chart the course to get your company to where you envision it. Your targets, however, will be the rungs on the ladder you’re climbing. Your targets are the stepping-stones to your goals. In short, goals are your bigger picture; targets are your more immediate achievements.
Targets are usually associated with cold data. Targets can be revenue, net profit, a margin, a customer base, a number of subscribers, a customer approval rating, whatever. It’s a specific number you’re trying to hit, in a designated period of time. Once your Business of Blood is up and running you’ll see what targets are realistic for your company. You have to be faithful to those targets; therefore they need to be realistic. There’s no point challenging yourself and your workers to hit an unreasonable number. Strive for realistic growth. 10-15% annual growth in revenue and cash flow is a very respectable number.
Both of those should be emphasized. Too often, pursuit of revenue sacrifices the bottom line. The big dogs are guilty of that too. Desperate for that quarterly number, companies will eye the revenue only. If you’re not carrying money down to the cash flow line, not much else will matter in short time. It may seem like Business 101, but take a second and go on the Internet and checkout Yahoo Finance or MSN Money. I want you to see how often companies of every size lose sight of that basic tenet. Select a company and look at their revenue growth every year on a 10-year statement. Then check their cash flow statement. Do they correlate? If they’re growing revenue at 10%, are they also growing cash at a comparable rate? Check a few companies and it won’t take you long to discover that most companies fail this test. Revenue is what you make; cash flow is what you keep. Too often they’re not balanced.
The reasons for this are many. But the basic info is all you need to know—somehow, someway, that business is spending beyond its means. The cost for that revenue growth is too high and unless it’s a capital investment that will pay dividends down the road, it’s a recipe for bankruptcy.
There are instances where that is necessary, or at least unavoidable. Occasionally a large lawsuit must be settled or a penalty is paid. Maybe the company’s expansion into Bolivia required the construction of a new plant in South America. In such a case that large expenditure is considered a one-time expense and its deleterious effect on the bottom line for that year isn’t necessarily a sign of mismanagement. (Assuming we’re ignoring the grounds for that lawsuit.)
Another large one-time expense is often a technology overhaul. A company may explain a weak bottom line by saying, “We used our cash investing in better, newer, more efficient equipment.” In your early stages, you’ll likely be reinvesting revenue into your company, and you should. It’s a great investment, provided that money is making some aspect of production easier. It isn’t all about money on the surface. If that new machine frees up some of your time then that’s also valuable. You now have more time to go design the website, meet vendors, make calls, do interviews, conceive that new product, etc.
The flaw here would be filing technology as a one-time expense in your mind. Be sure to allot a part of your budget to technology every year. Year One, your computer may be your only large tech expense. Year Two you may need two or three pricey software programs. Year Three you may add a laptop to your arsenal. By Year Four, it may be time to replace that desktop PC you started on. Are these really one-time expenses? Technically yes, on the spreadsheet, as you’re not repeatedly incurring them as you would postage, rent, salaries, insurance, and the like. But don’t look at technology as anything less than a repeated investment in your growth.
At the level that our Business of Blood operates, assuming we’re not yet raking in millions in revenue, it’s easy to see where our expenses inflated and deflated cash flow. As a start-up, some or all of your first three years will likely show a loss in your net cash. Putting the pieces in place can be costly up-front in relation to how much revenue you’ll be generating right out of the gate. Your start-up capital should be working to cover the expenses that your sales aren’t. But that start-up capital has to end and your business must become self-sustaining. That’s actually the very definition of a successful business—one that operates off of the cash it generates, and retains some in the end.
You’ll get there by setting realistic targets and goals. Those targets need to have means by which to achieve them. Simply saying, “We want 15% growth in revenue and 10% growth in net cash flow” is great. That’s the target I usually set at KC. But with that target comes a mountain of strategies needed to get there. You have to announce where you want to go, but also how to get there. Without means, your targets are just prayers. I don’t know how many deities there are out there to which I can pray, but none I’ve ever heard of work in my industry. So it’s up to the strategies that Anthony and I conjure up to make it happen.
20. Meetings
DISCUSSIONS OF TARGETS and goals should be happening at your meetings. They’re very important and you need to schedule them if you have partners or employees. In this day of text and email, it’s easy to fall into the trap of minimal interaction, and for basic day-to-day stuff that’s fine (and often preferred). But you also need time with all involved parties in the room. Brainstorm, plan, whatever. If you’re solo in your venture, take periodic, one-hour planning sessions. No busy work, though—think, doodle, scribble, have a cigar.
The meetings can be as formal or as informal as meets your needs, but give your business the respect of at least a few meetings per year. Actually, if you incorporate (and you should), you’ll need to have at least one mandatory meeting per year, with recorded minutes. I think it’s healthy to plan on quarterly meetings. It’s easier to string your results together over four quarters to arrive at the desired final score—that being your annual targets.
At KC we always had four quarterly meetings and one annual planning meeting. The quarterly meetings were structured around the cold targets, for the most part. They reviewed the financials of the previous quarter, then forward looking initiatives for company, marketing, and production.
Our annual planning meeting is driven by broader topics. In them, we are more focused on the goals and direction of Kayfabe Commentaries for the next 12 months. Companies are dynamic, changing, growing things. You have to monitor, assess, and plan. Set your targets and make a plan to get there, and then review why you did or didn’t make it.
Our friendly fisherman’s store is doing quite well. Within his first year he paid off any startup debt, and finished the year with a small profit after all expenses and salaries. His business can be considered a success. Now it’s time to focus on growth.
Based on his market, his annual financials, and his business’ needs, Mr. Fisher decides that a 10% growth in sales would be an attainable target. He also thinks that the storeroom is getting a bit crowded with all the supplies and merchandise. If his business is to grow and hit that 10%, he’l
l need to add even more stock obviously, crowding that back room even further. He needs space. There’s an expense in the near future, it is clear.
Mr. Fisher’s goals for the coming year are to build an extension to his rear storeroom. He also plans on launching a personal instruction course, wherein he teaches a small group of paying students how to use the right lures, the right rods, and general techniques for a more successful fishing excursion.
There’s a symbiotic relationship between Fisher’s goals and his targets. His company’s goals will help make those targets attainable. With the larger stockroom he can now handle more product, which can be more widely advertised along with the new classes, which will all add revenue. That revenue will first fill the gap for what’s been spent on expansion, and then beyond that Fisher will focus on continuing to bring that added revenue to the bottom line. Don’t forget that all-important relationship between revenue and cash flow. Make it your mantra.
If you’re doing it right, sales should yield more sales. Fisher’s got a good system in place by adding his classes. The students finish the class right there in the store, among all the merchandise they need to buy in order to fish. Not a bad plan.
Fisher will check his numbers on a quarterly basis and ensure that his goals are being met and initiatives are succeeding. The important thing to note is that each step in the process and the associated cost is justified by growth. If he threw all his money at the stockroom extension and new products right away, his well may have run dry. But by waiting for successes to justify playing his next hand, his targets and goals act like steppingstones to achievement.
