Capítulo 4
Breaking Free from the Prison of Conventional Wisdom
Conventional wisdom is "the opium of the people" and "the scripture of mediocrity." It stifles risk-taking and creative action through mindless platitudes that make losers feel better about themselves. Throughout my career, I've repeatedly been told "you can't do that" (I've compiled a list of 95 such instances) but have succeeded by ignoring these limitations.
Before creating a successful company, you must first recreate yourself by cleansing your mind of conventional wisdom. Mental barriers often prevent achievement-consider Roger Bannister breaking the "impossible" four-minute mile in 1954, which was quickly followed by others once the psychological barrier was broken.
Russian hotelier Boris Lissanevitch defied conventional wisdom by opening Nepal's first hotel despite being told it was impossible in a 15th-century kingdom with no roads or modern amenities. By purchasing a medieval palace and importing everything needed piece by piece, Lissanevitch created the prestigious Hotel Yak & Yeti, demonstrating that "impossible" business feats are often simply those not yet attempted.
I define "morons" as anyone whose advice or attitude would limit my success potential. These people are everywhere-at work, in your neighborhood, and even in your family. They've limited their thinking and would feel more comfortable if you limited yours too. You may even pay for conventional wisdom from conservative professionals like accountants earning $70,000 who shake their finger saying "You can't do that!" When operating under New Rules, you can't care if you repeatedly embarrass yourself. Just keep saying, "It doesn't matter what the morons say."
New Rules require new habits and companions. Successful entrepreneurs George and Deann Verdier found their old social circle dropping them after their success grew. "We've been so successful that our old circle of friends was no longer comfortable around us," Deann explained. Surround yourself with more successful people-I joined an expensive country club early in my career to absorb wisdom from retired executives.
When facing "important" business decisions, put them in perspective by asking "Will anybody die as a result of my decision?" Unlike Sophie's Choice, most business decisions won't threaten lives-you might lose money or face inconvenience, but the earth won't tremble in its orbit. Keep your sights above today's worries and nitpicking details-focus on the ends, not the means. By visualizing success as if it were already reality, you transport yourself into that future.
Capítulo 5
Expanding Your Comfort Zone for High Performance
To achieve super success, you must become comfortable in the high-performance environment through practice. Unlike most Americans who live in the same comfort zone their entire lives, high performers constantly expand their boundaries by pushing limits and seeking new experiences. I prepared myself early by joining clubs with retired CEOs, buying luxury cars before I could afford them, and dressing impeccably to practice being successful. The alternatives to expanding your comfort zone are boredom, anxiety, fear, and the certain death of growth potential.
Writing down your vision clarifies it by removing ambiguity. Carry this written vision with you daily until it becomes part of your identity. Beyond merely thinking about the future, you must visualize specific details-not necessarily how you'll get there, but precisely where you're going. I visualized my company's Houston headquarters years before it existed, down to the marble floors and blonde receptionist, experiencing deja vu when it finally materialized exactly as imagined.
My Five Credos have guided me since the late Seventies:
1. "Yesterday's dreams are today's realities"-without dreams, you never progress or make Quantum Leaps.
2. "See your dreams ahead of time now"-virtually everything I accomplished I visualized beforehand.
3. "Simulation: Practice within then you're without"-think and act like the high-performance person you'll become before opportunity arrives.
4. "Act as if there are no limits to your abilities"-I've achieved more by pushing beyond where others stop.
5. "Enthusiasm comes from the Greek word 'entheos,' meaning 'god within'"-enthusiasm generates the passion and determination necessary for high performance.
While mastermind networks and CEO clubs are fashionable, truly top performers like Murdock, Branson, Trump, and Gates are lone hunters who strike on their own counsel, not consensus. These networks often devolve into social groups rather than productive enterprises.
The value of mentors is universally acknowledged, yet rarely solicited. I've had three pivotal mentors: Jim Newman, founder of PACE Organization, who taught me about comfort zones and negotiation tactics; Jerry Ormand, an oilman who guided me through the chaotic oil industry; and Constantine "Costa" Gratsos, executive heir to the Onassis empire. Select mentors who are significantly more successful than you, whom you genuinely like and respect, who achieved success in your field (though not mandatory), and with whom you share common interests beyond business.
Capítulo 6
The Power of Perception in Business Success
Super success begins with masterful illusion-not just creating what others believe, but what they must believe for you to achieve your goals. Perception is reality in business. As a young real estate salesman, I sold desert lots at Lake Havasu by helping prospects visualize their dreams rather than the barren reality. Within legal and ethical bounds, illusion becomes a weapon to build advantageous perceptions in stakeholders' minds.
You only get one chance to make a first impression. I dress impeccably in Savile Row suits with gold accessories to immediately establish myself as different and powerful. This creates an intimidating presence that gives me the upper hand in business meetings, especially with bank loan officers. Consistency in your impression is vital, though occasional unpredictability keeps others alert.
Perception creates reality through numerous examples. One of my disciples maintained the illusion of a large corporation while working from home by using an answering service as a corporate switchboard. The Verdiers carefully cultivate prestige for their craft shows by selecting only quality exhibitors and sponsors, recognizing that perception must eventually be backed by performance. My most dramatic example was purchasing a Scottish castle I could barely afford, using chauffeur-driven luxury cars when viewing properties to be taken seriously.
Perception accelerates success-whether through luxury cars or exclusive club memberships-by encouraging others to see you as already successful. When you're perceived as successful, opportunities find you rather than you having to chase them. We live in a world of perceptions where nothing is as it seems, from political campaigns to business dealings, making it vital to craft your own advantageous reality.
Capítulo 7
Building Your Dream Team for Quantum Success
No matter how talented you are, achieving super success requires assembling others to help execute your vision. You must relinquish pride of authorship and entrust specialists with aspects of your business.
Directors should be assembled before you begin operations, not as an afterthought. Recruit recently retired CEOs and executives who bring credibility, prestige, and experience to your venture. Your chairman should be an executive heavyweight who has completed hundreds of business transactions. Fill other positions with financial experts, accounting specialists, and individuals who've achieved what you're pursuing.
Before approaching professional firms, create a mission statement articulating your vision. Use powerful language about "dominating the industry" and becoming a "major force." Mention plans to "consolidate a fragmented industry" to signal geometric growth through acquisitions.
From the beginning, engage a Big Four accounting firm rather than smaller local options. Present your mission emphasizing industry consolidation through acquisitions. Leverage your potential growth to negotiate flexible fee arrangements using terms like "value-added fees" and "success-oriented fees." With lawyers, negotiate similar arrangements-perhaps $100-200/hour if deals fail, but $550-600/hour when successful. Always seek out hungry up-and-comers within these firms who can become your "moles"-professionals whose allegiance shifts to you.
When seeking partners, look for individuals whose skills complement your own-you don't want another you, but someone who fills gaps in your strengths. Choose superior partners who elevate your performance rather than weaker ones who make you look good by comparison. When hiring key associates, look for experience, enormous talent, and most importantly, attitude over credentials. Seek people with appetites for adventure who salivate at helping you conquer new territory. Above all, look for total commitment-people willing to work nights, weekends, and holidays when necessary.
My dream team at Great Western included Mark Harrison and Charlie Soladay-men who shared my fervor for success and were driven by their own dreams. Mark, a brilliant lawyer specializing in oil and gas matters, started part-time and eventually became COO with 10% ownership. Charlie Soladay, formerly with Coopers & Lybrand, became my CFO with 10% ownership. Despite not being paid for five months initially, Charlie committed fully, often sleeping on my couch between meetings across the continent.
Leadership is a towering peak with standing room for one. You can get advice from team members, but there's only one captain. People won't follow you just because you have a title-they must want to follow you. True leadership implies action and forward movement. History proves people prefer following a madman with clearly defined purpose than a nice guy with no apparent goals.
As CEO, you have three jobs outside the office. First, kiss frogs-meet countless people because one day one of those connections will help you make millions. Second, look for expansion opportunities-deals or "schemes" that create equity, not just income. Third, find Other People's Money (OPM). Meanwhile, your carefully selected Dream Team runs your operation with less control, not more.
I have four rules for managing staff: First, pay your people good money-they'll do anything for you if compensated well. Second, never reprimand. Instead of criticism, ask questions that help employees learn from mistakes. Third, train employees for your job-bring them into a sense of ownership by teaching them to do what you do. Fourth, never make decisions for your employees. Give them information, responsibility and authority to implement their own actions.
Capítulo 8
The 11-Step Formula for Making Deals Happen
Making decisions swiftly and taking immediate action is essential for success. Warren Buffet calls unnecessary sitting and thinking "thumb-sucking." Being decisive doesn't mean being reckless; it means weighing information, experience, intuition, and advice efficiently to move forward.
Step One - Identify the Idea: Define exactly what deal you want to develop. You and your partners must agree on the basic strategy and its feasibility. At Great Western Resources, our vision was becoming a major player in international energy through acquisitions rather than internal growth.
Step Two - Investigate Generalities: Before investing time and money, investigate thoroughly. We needed to understand why MAPCO wanted Bow Valley's assets and why Bow Valley would sell to a smaller company like Great Western. Investigation means searching for "red flags"-when you find even one, exit immediately.
Step Three - Investigate Specifics: Re-check your sources for details you might have missed. When risking millions, probe beneath the surface of any company or individual. Look for personal issues like drinking problems, drug use, treatment of employees, or other behaviors that could affect business.
Step Four - Commit to the Idea: Getting your Dream Team to hold the same vision is one achievement; getting them to commit to the fight is another. Partners and executives must publicly commit to the project. Any reservations need to be aired and addressed.
Step Five - Make the Preliminary Decision: Your team commits to moving forward, understanding this isn't the final decision but a working consensus. Now you must become the cheerleader, generating enough energy and momentum that when battle is joined, your team charges forward with no thought of defeat.
Step Six - Continue the Investigation: This isn't redundant-your investigators should continue their work as long as the project remains viable. Don't trust the people you're trying to buy or your competitors. Where millions are at stake, integrity is usually the first casualty.
Step Seven - Formulate Your Action Plan: When every indicator says go, you must push the button. Get your partners to make that final commitment and then keep momentum at fever pitch. Never express doubt-even the slightest negative reaction can spread like wildfire through company morale.
Step Eight - Establish Your Critical Path: Chart the sequence of events necessary for success and create instruments to measure progress. Like a construction manager, develop a flowchart with timelines for securing financing, nailing down guarantees, and starting negotiations.
Step Nine - Implement and Follow Up: The complexities of a multi-million-dollar deal are like constructing a giant house of cards-every link must hold simultaneously. Follow-up becomes a fine art. Don't take anything for granted-even your most trusted partners can let details slip.
Step Ten - Execute! Bomb bay doors open! With financing and guarantees in place, you must lead from the front. No more phone calls, faxes, or emails-your intimidating presence, scowling face, and hardened determination must stand before the enemy across the table.
Step Eleven - Review and Re-evaluate: Return to review every detail of Steps One through Ten if execution fails. When the Bow Valley USA deal seemed dead, I took direct command. I launched an offensive of threatened injunctions and legal filings, spending over $100,000 in legal fees in 48 hours. After 72 hours and two fistfights, we closed the deal. Great Western paid $116 million for Bow Valley's coal operations and $25 million for oil and gas interests, plus another $7 million for additional assets.
Capítulo 9
Creating Success Without a Safety Net
In war and business alike, you must act as if there are no limits to your abilities and failure is not an option. Like the Chinese general Han Hsin who positioned his army with their backs to a river-giving them no choice but to fight or die-high performers create situations where retreat is impossible.
In high-performance companies, strategy must dictate structure-not the reverse. Structure describes organizational makeup: org charts, chains of command, and "the way things have always been done." Strategy requires thought to exist and implies movement toward objectives. At Great Western, we maintained basic organizational structure but remolded it instantly to meet strategic needs when pursuing acquisitions.
Conflict is a natural part of life that results when people pursue varying interests and priorities. Despite what idealists believe, conflict isn't necessarily bad-it weeds out losers while confirming the superior's right to prevail. Business deals at high performance levels concentrate conflict because the stakes are so high.
Negotiating isn't for the touchy-feely. People who'd rather be loved than victorious invariably lose. As J. Paul Getty said, "The meek shall inherit the earth-but not its mineral rights." Skillful negotiators are forceful, persistent, perceptive and patient. The key to winning is making others think they want what you've got more than you want what they've got.
I maintain five ground rules for negotiations: 1) Suits required-showing this is your absolute top priority; 2) My place-home team advantage with familiar surroundings; 3) My contract-volunteer to draft it with your lawyer's carefully crafted language; 4) Nobody leaves until the deal is done-prepare for a non-stop marathon; 5) Everyone necessary for a final decision must be present.
Capítulo 10
Financing Your Dreams with Other People's Money
Borrowing money is like sex-both parties want it, but lenders need reassurance and foreplay. Many potentially successful people are still held back by fear when approaching lenders, yet not a single death has ever been attributed to rejection by a banker! Capital finances quantum leaps-not pussyfooting. As CEO, your primary job is finding money (Other People's Money) and deals.
Banks fund about 60% of business ventures, making them your primary target. Look in phone books, read business sections of newspapers which often publish quarterly lists of banks seeking borrowers, and check magazines like Entrepreneur and Inc. that periodically publish state-by-state lists of lending institutions. Don't limit your search to your local market-I recommend going outside it.
Remember two critical facts: there's more money available than people trying to borrow it, and bankers want to lend you money because that's how they earn their living. When meeting bankers, position yourself as interviewing them rather than begging for money. Build relationships with individual bankers, not institutions-if your banker moves to another bank, follow them.
Don't wait until you urgently need money before approaching bankers. Start building relationships months before you need funding. Begin by positioning yourself, mentioning future funding needs with figures higher than you'll actually require. After several meetings and relationship building, present your actual request.
Your board of directors provides crucial credibility with bankers. When lenders express interest in meeting your board, arrange it. Select board members with recognition in your business community-retired successful executives whose reputations are beyond reproach.
After securing financing, maintain regular contact with your bankers through calls, lunches, or golf outings. Stay informed about changes in bank policies that might affect your credit lines. I recommend establishing a loan rotation strategy-borrow from Bank A, then refinance with Bank B to pay off Bank A, then with Bank C to pay off Bank B.
Capítulo 11
Acquisitions: The Secret to Quantum Growth
For high performers, arithmetic growth is unacceptable-geometric exponential growth is demanded. The real secret to quantum growth is acquisition-purchasing equity assets that multiply a company's net worth geometrically so it can be sold to generate substantial wealth. Investors are essentially buying future value, "sort of like buying thin air" while paying cash upfront.
When contemplating your first business transactions, you must prepare for three great personal hazards. First, the depth of personal commitment required means your acquisition deal must take precedence over normal personal considerations, demanding total commitment of time and energy. Second, you must be willing to risk everything financially-if you're unwilling to put your savings, home, car, and child's education on the line, don't try to buy a business. Third, you must endure extreme stress, requiring the mindset of a high performer who can "suck up my panty hose, act tough, slash enemies, take hostages and kill prisoners" to reach goals.
Before raising capital, you need to clarify several basic issues. First, "stick to your knitting" by looking for a business in which you already have expertise and that you enjoy. Choose an industry that is fragmented and dominated by mom-and-pop companies, large enough to handle your acquisition aspirations, and enjoys a 20-40% profit margin.
Once you've defined your requirements, don't rush to buy the first "great deal" that appears. Begin by scanning "Business Opportunities" sections in newspapers and publications like The Wall Street Journal, Forbes, Entrepreneur, and Inc. Contact local business brokers with written specifications of what you're seeking, but don't sign exclusive contracts.
Most business owners are protective of their companies and want assurance their "baby" will be in good hands, with employees protected and customers well-served. To establish credibility, have your lawyer or accountant make the initial contact, or provide references from your professional network.
Before acquisition, examine profit trends over at least three years, looking for steady growth rather than sudden spikes. Have your Big Four accounting firm conduct a thorough acquisition audit. Your capital source will expect a 35% annual return on investment after salary and debt payments, though you shouldn't accept less than 20%.
Capítulo 12
Planning Your Grand Exit Strategy
The business world is filled with once-bold entrepreneurs who have settled into comfortable roles as community leaders. Though they took risks to build their businesses initially, many have lost their appetite for further growth and challenges. The truly successful high performer understands that the strategies that generated the first Quantum Leap can be repeated. Unless you're thrown out by shareholders, you have two exit strategy options-die or sell.
As a company owner, you need to pull money out to pay yourself so you can enjoy the lifestyle you've earned. Many owners feel guilty about rewarding themselves. That mentality is fine if you never intend to sell, but if you do plan to sell, you'll feel less obligated to squeeze every penny from the deal if you've been paying yourself all along.
The market-not you-will determine your company's value. Fair market value is what your company can bring in open exchange between buyer and seller in an uncontrolled environment. Bring in professionals for valuations, though any serious buyer will conduct their own, basing decisions on what they think projections are after examining your records from three years back.
Just as 4-H kids "puff up" their prize pigs before judging, you need to prepare your company before taking it to market. This means timing your sale during favorable economic and industry cycles, cleaning up your physical premises, shoring up your organizational structure, assembling a credible board of directors, creating professional corporate literature, cleaning up your financials, securing stable long-term contracts, organizing your paperwork, implementing information control systems, and developing a transition management team.
You must act within 21 hours of finishing this book or you never will. Conventional wisdom is almost always wrong, and most people have a "loser mentality." You now know you can achieve super success by making decisions, taking risks, and focusing on ends rather than means. Think big, have passion for your dream, and practice success daily by taking actions that assume you're already successful. Visualize your dream in detail, write it down, and read it daily. Find a mentor, build your dream team, and follow the 11 Steps That Make the Deal. Forget about safety nets-commit fully to your dream.
Action really is the key to making it big in this world littered with lay-abouts and armchair dreamers. Anyone can say they want super-success. Anyone can set goals for super-success. Anyone can dream of super-success. But the rewards come only to those who actually DO SOMETHING, not talk about doing something.
