1. Go to Vendor A.
2. Vendor A gives quote.
3. You: "Buy! OMGz! Buy! Buy! BUY! OMGz!"

BOO: That's how you get bad deals from vendors.

Instead, use the supply-and-demand magic:

1. Create more supply.
2. Decrease prices. Get better deals.
3. Win!

(And even if you don't get lowered prices, you'll still get more bargaining power -- e.g., nice add-ons/features/coupons/etc.)

You + Coffee Beans

Say you want to buy coffee beans for your office.

1. Vendor A: "I can offer our office beans for $100!"
2. You: "But, I just went to Vendor B who's equally as good as you, and they offered $95 plus free shipping."
3. Vendor A: "Okay, okay. $95, and I'll give you 20% off your follow-up purchase. Free shipping."

You: Win!

Now, go to the equally competent Vendor C -- and see what they can offer you.

Say NO! to Rookie Mistakes

Rookie mistake:

1. Go to one vendor.
2. Listen to sales pitch.
3. Get enthralled.
4. Buy.

You'll slowly see your bottom-line decline like a constipated bovine.

Instead, decrease your prices and get better deals by going to multiple vendors.

'COFFEE BEEEEEEEEEEEEEAAAAANS."

• "What should I spend on that new computer?!"
• "What salary should I give pay the new secretary?!"
• "What should I invest in that new product?!"

Don't fret; here's one solution:

1. Define your expected return on the investment.
2. Divide that return with your current profitability margin.
3. You now have a budget for the investment! YAY!

Peep Example

If your company has a profitability margin of 25%, an investment should return at least a specific amount so that it won't drain that margin.

That is:

• Investment's Expected Return / 25% = Budget amount!

YAY!

For instance:

• A computer that costs $2000 should generate an additional $8000 in sales to maintain your profitability margin.
• A secretary that costs $50,000 should return an additional $200,000 in sales.
• A new product that costs $100,000 in R&D should generate at least an additional $400,000 in sales.

And if you suck...

Generating anything less than your current profit margin tells you this:

1. "We could've used that money to put it in something else!"
2. "We just left money on the table by throwing good money after bad!"
3. "We would've made so much more $$$! OH NOES!"

You expect your dollars to at least produce the same return as before; otherwise, you drain $$$ down the tubes by weakening your position.

Say NO! to the Outlandish

Financially unoptimized-sucky-suck business folks think:

1. "Hey! we have so much new money!"
2. "Let's spend! Spend! Spend!"
3. "Let's buy frickin' chairs for $1,000 each!"

Would that chair return $4,000+ compared to a cheaper one?

It might make you and your team feel a little more comfortable; and, if you're working with big purchases, it might just be worth it.

But for most folks, spending $1000 on a chair = bad!

Remember:

1. Invest your dollars according to expected returns.
2. Invest your dollars according to expected returns.
3. Invest your dollars according to expected returns.
4. Invest your dollars according to expected returns.
5. Invest your dollars according to expected returns.

If you haven't defined an expected return before you make a purchase, sense TROUBLE!! OH NOES!!

The Good Model

Before you spend chunks of cash on something, ask yourself:

1. What's the potential return I see on the investment? (>90% confidence)
2. Budget accordingly (i.e., Multiply the potential return by your profitability margin %).

You'll see yourself budgeting where your dollars can achieve the most bang for your buck.

Some More Examples

Here's one:

1. "I expect an additional $5,000 return on an upgraded computer."
2. "So, I should spend no more than $1250 on a new computer."

Or another sex-ay one:

1. "I expect an additional $100,000 return on a new assistant."
2. "So, I should spend no more than $25,000 on the assistant's new salary."

Or one more:

1. "I expect an additional $40,000 return on a new software system."
2. "So, I should spend no more than $10,000 on the software system."

Freakish win.

And:

"What if I don't return what I expected?!!!!!"

1. Slap yourself.
2. Tell yourself: "It's okay!"
3. Then, repeat: "I will not make the same mistake by investing that much in that piece of @#$% again! FREAK."

You'll gradually make smarter and smarter investment decisions until you're like super smart. Hooray for you.

For every item your company buys for the rest of eternity:

Budget based on expected return.

1. You're super-freakishly happy.
2. You think you're all badass.
3. You end up earning less than Schmo.

Why?

1. Happiness makes you complacent with $$$.
2. Instead of trying to improve yourself, you settle for "This is who I am! I am so proud of myself!"
3. So, you continue doing what you're doing -- never really improving on how you financially live your life.

Boos all over the world to you.

Are you crying?

Good.

You're one step closer to being financially successful.

Hooray!

How Happiness Destroys Your Pocketbook

Research says people who rate their happiness a 10 earn less than those who rate their happiness levels at an 8 or 9 (peak earners).

10s tend to:

1. overspend
2. save less
3. pile on debts

The conclusion:

1. Yes, you can be super happy.
2. But, don't blind yourself with superficial happiness.

Even if you're financially awesome, you can still (1) cut costs, (2) earn more, and (3) boost that mother-kereffen bottom-line for you/your-company/your-world.

Winner!

The Action Plan

Try this:

1. List out all you/your-company's expenses.
2. See how you can save 5% this month.
3. Repeat for subsequent months.

Grate those costs like mutha-effin' swiss cheese that's dying to shred itself like a two-headed ostrich.

Win.

Live like you suck.

What do you see when you look at Apple?

• "Sweet products! Hooray!"
• "They make everything so b-eee-autiful!"
• "Wow! Even their boxes are so lovely!"

But what if Schmo gave you a gut check:

1. "Apple doesn't manufacture its laptops."
2. "Apple doesn't make its own boxes."
3. "Apple doesn't build its own iPods."

If you were an Apple fanboy, would you cry?

Yes, you would.

The Reality Behind Every Big Business

Behind every big business stands a collection of a kazillion smaller companies -- companies that:

• provides its furnishings
• builds its products
• sweep its floors
• provides its light bulbs
• serves its food

A collection of a kabazillion smaller companies make Target/Wal-mart/P&G/Google/Intel/Goldman/Berkshire work.

Opportunities: Ga-frickin-lore.

Yet, Aspiring Entrepreneurs Want to Suck

The typical 'magical' entrepreneur like Johnny thinks:

1. "We got to beat some Apple ass."
2. "Then, we'll make billions!"

But when Johnny tries to compete against the big fellas, what happens to Johnny?

Johnny ends up sucking, with clients wondering:

1. "What about 24/7 support when I need it?"
2. "What if I need some enhancements?"
3. "Can't this dude go belly-up within months?"
4. "I don't know if I can trust this guy!"

A few years of exhaustive work later, he sees his potential-to-rock-like-a-mofo evaporate.

Meanwhile, his buddy Stevie in the corner office -- who has actively partnering up with bigger firms, has grown his organization like a fatty.

Don't suck like Johnny.

Instead:

Find a Friend

Small businesses rarely start off with freakish bangs.

Instead, the smarter route to grow your small company is to first become some bigger company's beyotch.

1. Find bigger guys to supply your stuff.
2. Grow your business incrementally.
3. You'll see yourself gradually becoming bigger and bigger.

...until you're the big guy yourself!

Hooray for you.

How to Start Your Journey

Do this:

1. Hop on Google...
2. Then, search "[companynamehere] suppliers"
3. Or, try "[companynamehere] procurement"
4. Or, contact a company directly and asking how you can be on its vendor list

(If you're a service company, pitch your ideas. Or, give some value first to show your stuff.)

Win!

"But what if I can't break into the Fortune 500 because I don't have a financial history?!"

Try this:

• mid-sized companies

KABAMOFOSUKO!

High-five to you.

Be a bizattchi. Supply bigger bidnezzes.

1. "Dude, I'm working 9897685709856056 hours!"
2. "And, I'm only getting paid $2!"
3. "This is how hard REAL entrepreneurs work! HIGH FIVE!"

That's the fact of an entrepreneurial life, right?

You know:

1. Work ridiculous hours.
2. Get paid barely anything.
3. Can't afford health insurance, dental care, and the other yaddas.

"OH NO!"

But wait...

Why do some "magical" entrepreneurs out there seemingly:

1. work twice as less as you
2. make five times as much as you

Get this.

Two types of customers exist:

1. Customers that will work you like mofos for two dollars.
2. Customers that pay you splendidly for your valuable work.

We tend to:

1. find the very first client that wants to work with us
2. accept meager contract price
3. work butt off for little pay that ultimately exhausts us with incessant customer demands

Take Web Designer Kelly.

1. Kelly's working on a website for a mom-and-pop shop.
2. They're paying her a measly $100 for a website that must include a "custom content management system, multi-user access, permissions galore, a custom blogging engine, and a lead system."
3. She works her freakish bootay off.

50 hours of work later:

1. The mom-and-pop's peeps don't like this, and this, and this, and this, and this.
2. They want her to redesign humongous freakish parts of the website.

50 more hours of work later:

1. "We're getting there," the mom-and-pop tells Kelly.
2. "Now, I want you to change this, and this, and this, and this. Also, can you add 20 of these extra features? Thank you."

Exhaustion sets in.

Kelly wants to escape.

But, she's determined -- because hey, Edison never quit, so why should she?

"If I just stays in the ball game, I'll be a-okay!"

But no.

She destroys her morale, burns herself out, and the simple thought of running her own business scares the beejeebus her.

Choose Your Clients Wisely

Horrifically-cheap clients that want you to change the world for them for $2 will:

1. exhaust you
2. drain your morale
3. make you work exponentially horrific hours
4. run your business into the ground

Rich clients and organizations that will pay you richly for your efforts will:

1. boost your morale
2. connect you to profitable referrals
3. grow your company
4. give you a life

Working for cash-strapped mom-and-pop shops might be good for the initial learning experience; but relying on unprofitable clients will exhaust you to your core -- and put your business on the brink of falling off the cliff.

Look for richer clients.

Think the Fortune 500. Think the government. Think bigger clients.

At the least, think clients that can pay you above market rates for your services/offerings.

(And, if you can couple that with recurring work, you'll set yourself in super fantastic shape.)

Those big guys can likely service those mom-and-pop shops in some way anyway (through economies of scale), so you won't need to sacrifice your welfare.

Win for all.

KABOOMSHAKAH!

Think bigger.

• Option A: "Price it at $10/month!"
• Option B: "Price it at $120/year!"

Does it make a difference?

You bet your bottom tidy ass it does.

Get this:

1. Peyton pays for a CRM subscription for $10/month.
2. Eli pays for a CRM subscription for $120/year.

What happens?

• Peyton uses the software more throughout the year because he's constantly reminded of that $10 monthly bill.
• Eli would use the software a bunch at first, but then gradually uses much less of it because the $120 bill becomes a distant memory.
• Therefore, Peyton would much likelier renew his subscription because he sees more use out of it.

That's according to Harvard's John Gourville and his research peeps:

• People are more likely to consume a product when they are aware of its cost—when they feel 'out of pocket.'"

The less customers know about your charges:

1. the less they'll invest time into your product
2. the less they'll understand how enthralling your product really is.
3. and, the less likelier they'll renew.

BOO!

"YO!"

1. You have $1000.
2. You spend $5 freely.

Now peep this:

1. You have $10.
2. You spend $5 freakishly wisely.

Why?

The more money you have, the less you value the dollar bill.

That's why lottery winners quickly become poor chaps:

1. "Ooooooooooh! I have so much cash!"
2. "I will spend like @#$$%#%$#! Armani! Jimmy Choos!"
3. ....
4. "WHERE'D ALL THE MONEY GO?! OH NOES!!"

How to Spend Wisely

Here's how to trick yourself, and save chunks of cash by spending ridiculously smarter -- and keep your company financially healthy.

1. Jot down your cash: _.
2. Imagine you have 50% less. (or choose your own percentage to fit your situation)
3. Spend accordingly.

What happens?

1. You'll spend more wisely.
2. You'll put much more value into the dollar bill.
3. You'll find innovative ways to boost cash.
4. You'll leave yourself a much bigger security blanket.

Win!

Spend like somebody just robbed you.

Take Dustin.

1. Dustin makes $40K per year.
2. He's buying a BMW 3-series for $42K.
3. He's gambling in Vegas, monthly.
4. He sticks to designer brands, shops at Whole Foods, and buys premiums on every-frickin'-thing.
5. Dude still lives with mama.

Flash-forward 10 years later...

What do you see?

• Dustin's still paying off debts.
• Dustin grows financially nowhere.
• Dustin still lives with Mother.

Debt makes you its bizatcchi; it keeps you in place, and cripples you and your company from rocking to the top.

How Companies Destroy Their Futures

Try diving headfirst into piles of debt by:

• Maxing credit cards.
• Buying only premium.
• Throwing money at unproven innovations.
• Throwing glamorous parties/gatherings/conferences.
• Spending $$$ where you don't have $$$.

Companies remain financially stagnant because they're financially stupid about how they spend money -- eroding their future opportunities.

They're at the mercy of changing interest rates, paying back much more than what they got.

If you're ever tempted to show off, simply remember the Forbes' 400 billionaires' biggest recommendation:

• Stay debt-free.

Win.

Debt = Steroids = Say NO!

Piling on debt is akin to taking steroids.

1. You might beef yourself up for a bit.
2. But, it'll destroy your future in the long-run.

The more you take on debt -- especially long-term debt, the more ka-ching you'll have to pay back in the future.

The result:

1. less money in the future
2. = less $$$ to invest in new opportunities
3. = stagnant growth
4. = ugly bottom line
5. = you cry.

Long-Term Debt = Bag Full of STDs

Remember, long-term debt sucks more than a $2 hooker:

1. You don't know how badly interest rates will kick your company's ass in X years.
2. You can't really predict future cash flow because rates can deviate dramatically, making your company the interest rates' b*#$%.

Thus, you can't plan for the future effectively.

Potential for rock star profits: Drained.

Just say NO.

"So Wait, Debt Always No Good?"

Some debt might be help; for instance, short-term debt can help you finance stuff quickly to satisfy a big customer order.

Rule of Thumb

A very rough rule to determine what's good/bad debt:

1. Take your profits from last year.
2. Calculate how many X months it'll take you to pay off total debt Y.
3. If you need more than a year = Bad.

But if you can, avoid debt.

Instead, grow revenues organically grow through your retained earnings (i.e. net profits), and you'll set your company up for one bright-frickin'-future to rock the world and its mother.

Debt. Boo.

1. Johnny's building his business.
2. He doesn't keep track of how many customers come daily.
3. He fails to improve.

BOO!

Wanna Improve?

Keep score.

Think baseball. Without keeping score/standings/records/leaders/yaddas:

1. Baseball players couldn't strive to improve.
2. Baseball team execs couldn't play the best lineups.
3. Baseball would suck.

Bizo how?

Like baseball peeps, business execs fail to improve because they think:

1. "I can just 'feel' how well we're doing!"
2. "I already know who the best people are!"
3. "I don't need to keep score!"

Yet, if you don't know objectively what really drives the performance of your company, you'll ruin its potential.

What Performance Drivers?

Performance drivers: Anything that helps you keep track of how well you do.

Ta-da!

For instance, those might include:

• Widgets-built/person
• Customer-visits/day
• Revenues/week
• Products-sold/seller
• Completion-time/project

Think Katherine + Bobby

Peep this:

1. Katherine builds 100 widgets/hour.
2. Bobby builds 70 widgets/hour. But, he's a crazily charismatic schmoozer.

Without understanding objectively who drives better performance, you might be tempted to give Bobby a raise over Katherine.

Times that by one-kabillion...

...according to your employee count, and see how much lost productivity revenue you waste.

That is:

1. You pay $X amount for less performance.
2. That leaves you less money to buy more productivity.
3. Result: Lost revenues.

BOO!

Baseball teams don't pour millions into charismatic dudes who bat .200.

Likewise, your business would destruct its potential if it doesn't understand who/what really drives the performance of your company.

Keep @#$% score.

You're selling a solution to solve The Big Pain of your client.

You have two pricing options:

1. Sell it for $1.
2. Sell it for $10.

What price point would put your customer more at ease?

Not the $1!

OH NO!

The client would feel more helped at the $10 price point.

What The Heck?

• MIT researchers found people felt greater relief from a $2.50 pill than from an identical one they were told cost $0.10.
• Why do people prefer named brands over generic ones? Because they feel brands have some 'magic touch' to it.
• $500 dollar jeans? It has 'special' material.

We're all irrational creatures.

Pricing too low may strip:

• how much people buy from you
• how much perceived effect you have on people

Solving customer pains?

Comparing your products/services to competitors, and do this:

Price according to your impact.