Necessity is the mother of invention, but the birth of an entrepreneur requires more than necessity. It requires a great dream, unwavering determination to survive and an unquenchable thirst for improvement.
From an almost empty pocket and a dream of being my own boss, I have managed to learn a lot of things about entrepreneurship including the fact that when one decides to be his own boss, scaling up should be a part of your plan, starting day one. Here are some lessons I learned along the way.
I. How I started
At the age of 28, I wanted to “be my own boss”. With a few hundred dollars I started my first “real” business ;- buying and selling second-hand furniture. I have watched dealers at an auction and simply thought that it looked like an easy way to make a buck. I had no idea what I was doing. A friend in the industry gave me guiding advice:- “You work on 100% mark up. You buy it for less than it’s worth and you sell it for what it’s worth”. Move on stale stock. His final word – if you don’t know, go low. That was my entire education on how the industry works.
I started by buying at auctions and selling by advertising. Although I discovered this was not highly profitable, within a few months I managed to generate enough cash and confidence for me to rent a shop and stock it. The shop had been empty for over a year so the owner freely agreed to a 3-month rent free period in exchange for a longer rent. This effectively funded my start-up. Start from where you are “at” – avoid borrowing and work a win-win solution.
The shop was located on a corner and was exposed to a very high traffic volume. I figured selling would be dependent on attracting the passing traffic. I had no budget for signage so I cut the letters for my signs “Cheap Second-hand Furniture” out of polyurethane foam, painted them fluorescent orange and glued them high up in full view on a frontage that I had painted jet black. To say it was tacky is an understatement, but it really stood out. From the moment, we opened the doors we were inundated in customers, nearly all passed comments about the signage.
#1 Lesson: A shop full of customers commenting about your terrible looking signage is better than an empty shop with no comments. STAND OUT – Be noticed.
Later, when we had other shops, this first shop on the very busy road always turned over at least 4 times than our other shops, at double the rent.
#2 Lesson: I will always pay double the price for exposure to traffic that gives me 4 times the turnover anytime.
I was a great second-hand dealer. I quickly discovered poor people had to get as much as they could from the items so they were a bad source of buying for me. rich people just wanted to get rid of it and they really didn’t care.
Mixed into these two markets, were a lot of people who simply didn’t know the value of their stuff. A few individuals were negotiators who would argue at any price, while the rest accepted what I offered. I became skilful at chatting and assessing their “type” before offering them my price.
#3 Lesson: Understand how the people you are dealing with “think”.
The secret to second-hand dealing was in buying. You make your profit when you buy. The cheaper you could get it, the more you were assured of a good profit. I became really focused on how to buy lots of easy to sell things. We discovered that good buying came from small lineage adverts we placed in newspapers.
A typical advert read like this: “Cash paid on the spot for furniture Ph. XXXXXX 7 days”. We started with one advert and it worked. It didn’t take me long to work out that I could run multiple adverts in the same section with different phone numbers. We used this method to dominate the “wanted to buy” section of nearly every newspaper in our city.
#4 Lesson: Understand where your profit comes from. Find something that works and do it more. Today, we are doing the same with different websites.
In the belief that the one call you missed was always the biggest opportunity, we answered the phones 24 hours a day. We ended up with a row of 4 different coloured phones. As a seller, we called each one of the leads and every time, we would change our voice and the type of questions. We could both judge how desperate they were to sell and sometimes even get the opportunity to “quote against ourselves” as some phoned every advert in the paper.
Interestingly, we also learned what words worked and what didn’t. We kept careful counts of both call volumes and outcomes for each type of advertisement we ran. We applied this same thinking to the Yellow Pages book later – multiple adverts in the same section with different wording and different phone numbers etc.
#5 Lesson: NEVER miss an opportunity. Today, we treat email and live chat as importantly as we treat phone calls. Build a machine that feeds the profit component of your business – systemise and duplicate to scale it up. OWN your market.
VI. What does and doesn’t work
We also quickly worked out that some things sell and some do not. For example, in those days, wardrobes were bad sellers. They were big so they took up valuable space and simply sat there and were never sold. This led to us to perfecting on the phone assessing of the quality of the “buy”. We looked for the type of seller and the sale-ability of the goods.
#6 Lesson: Target what has profit.
VII. Look after your competition
Later, when our success was noticed, many started setting up similar shops very close to us. There was a prevailing theory that “as we were not selling the same goods, we were not directly competing”. There was a degree of logic to this, however, they all overlooked the secret to the Second-hand business
New dealers were a pain because they came in and started paying too much for things. This, in turn, really rocked our profit. We overcame this by sending them to any sellers we came across who had either unsaleable goods or clearly knew the value of the item and wanted too much for their things. It was amazing to watch this strategy at play. The new shop owner, acting all friendly, would boldly come into our shop and introduce themselves. They always gave their spiel around not competing with us. They would even ask where we bought things from, often saying they used the auctions – a buying source we learned was not good.
We would say that we are always being offered lots of stuff and if they liked, we could send some buying their way. Then, every time a bad buy came in on the phones, we would be all helpful, explaining we were “full” and giving them the new shop’s number. We watched trader after trader come in and buy all the stuff that doesn’t sell, fill up their shops and use up their buying cash, then go broke. Time after time, they would come back, all friendly, and explain how bad their sales were and ask if we would buy their stock. We sent them to the auctions. They never twigged that we had “out-competed” them in business.
#7 Lesson: Beware of the helping hand and understand how a business works before competing with someone. Copying is competing, and unless you really know your stuff, you are heading for a train crash.
VIII. Buying or selling
Of course, at the start, I had no idea what things were worth so I applied the “don’t know, go low” rule. I would arrive back at my shop with all sorts of neat things that I had paid very little for. My two helpers did the selling. They would argue between themselves and often agree my price was silly and sell the item for many times what I paid for it. I learned to separate buying from the selling. I figured out how to assess the type of sellers, as well as the probable knowledge of the seller about value of the items, and apply that to what I paid.
#8 Lesson: See the big picture of how it all works.
IX. Stale stock
My helpers worked the retail tricks. Put the best out front, based on either attractiveness or price, to lure them in. Always display the prices and never ever give discount or lower a price if asked. If it’s worth that, that’s what it’s worth. The exception was when we had decided an item wasn’t selling, so we would heavily discount it to clear it out and make room for something that was going to give us profit.
#9 Lesson: Move on from bad deals.
The woes of the business operator
Over a period of 6 years, I grew this business to 3 shops. I had become involved in getting the government to change the legislation that regulated the industry. And had a nice leased car and had started paying off a house. I belonged to the local Chamber of Commerce. To everyone, I was “successful”. Certainly, we made a profit every year and it has increased incrementally every year.
The problem was the fact that I was personally working 7 days a week and earning pretty well what my employees were earning for their 40-hour week’s work. This must be close to the definition of “stupidity”.
#10 Lesson: What you “see” is hardly ever what it really is.
So many of us today are trapped into “work hard” thinking and end up in this space. We proudly work hard in our businesses, not letting anyone near “what we do” as we want it done perfectly.
#11 Lesson: Learn to delegate – it’s an acquired skill.
At the age of 34, for the first time in my life, I started to think about what I really want in life. I, Mike O’Hagan, the individual. Sure, I understood I had my family and all other big things to think about – but there I was, working 90+ hours a week, earning pretty much the same as my employees who were working just 40 hours a week. This wasn’t really helping anyone.
#12 Lesson: Think about where you really want to be in life.
One night, while watching TV, I suddenly realised my “desires”. I was yearning for a big house, a fast car and a big boat, with the jet-setting lifestyle to go with it.
As I thought this through, I realised that I need to feed the lifestyle I dreamed of. I needed two things:
- A crap load of cash coming in every week. Like $20,000 to $40,000 a WEEK.
- The freedom to select HOW I SPEND MY TIME.
Many of us understand the money thing, while very few focus on the “time” issue.
I realised that employment on wages was never going to fund my desires, nor allow me to enjoy the life I wanted. So, I needed a bigger business. And I became very focused on the outcome – my lifestyle.
I increased my learning about business. I attended every business convention, listened TO motivational speakers and read all the business books I could lay my hands on. One day, one speaker said, “You can own a job or a business. If you must, it’s a job – if it works for you, it’s a business”. It was then I realised the power of scaling up.
#13 Lesson: It’s in your “mindset”.
Systems and duplications
I had read the McDonald’s stories and was intrigued by systemising and duplicating.
I had tried, many times, to get an employee to be a buyer. However, since it’s not their money they were using to buy items for the company’s stocks, they were never as “mean” or as assertive as I was. I realised this would stop me from duplicating this business. In short, I could teach people how to sell, but could not teach them how to buy.
Funny thing is they were essentially the same skill. Selling was all about stroking an item and telling people why it was wonderful, buying was about kicking something and saying it’s not worth much.
I came to a decision to find another business. Something lots of people wanted, products that there was a demand for (so it’s easy to sell), something I could develop as a competitive advantage around that wasn’t under threat from technology or society changes, and that something should have the potential of being systemised and duplicated. I developed an “assessment list” and used it to consider each of the opportunities I noticed. Sometimes the “use by date” is up, and you need to move on.
On a 1 to 2-year period, I concocted all sorts of ideas. Most of those ideas are things I could convince myself wouldn’t work. I once even did a course in building a business plan, only to convince myself on paper that the idea was unviable.
One day, by accident, a second-hand business customer had been let down by a traditional moving company and needed to move to a new house – right then. I used a truck and two mates to address her problem. Out of this fell an idea that the home moving services during those days (30 years ago), that usually involved big companies sending a salesperson out and giving a fixed price quotation even if the customer was just moving next door, were not the best solution for the customers. I realised that it was much cheaper to get rid of the salespeople, offer the services on the phone, and give price quotations based on hourly rate charges. Booking on the phone also meant I could do lots of moves anywhere.
It’s important to understand that this business started from day one with the sole intention to grow me into a lifestyle. Every thought and plan was around scaling it up. I mentor lots of business owners today – rarely do I find anyone with the determination needed to really ramp up the business.
Initially, I played with the market demand by running advertisements. We were inundated with calls. A demand existed.
#14 Lesson: Develop determination and Test – test – test.
We had the truck and communication system – we had the basics needed for a moving business. It was that simple. Not into risk, I kept the second-hand shops. They feed my family. We took no profit from the moving business for a few years, pouring everything back into the business to feed growth.
Later, we sold the second-hand business, but only after viability and profitability of the moving business was well proven.
Developing my moving business became a matter of trial and error. Again, I was starting from next to nothing, with no idea of how the industry worked. In hindsight, this became a major advantage. Because we didn’t know how it all worked, we used every experience (mostly bad) to learn from. We used common-sense for solutions, often inventing new ways – very disruptive ways – to service people wanting to move a short distance.
#15 Lesson: Try lots of things – most don’t work – do more of what works.
The first employees were “experienced” and they taught us the workmanship skills we needed.
After the business grew to owning about 2-3 trucks, it was apparent we had something in what we were doing. Customers were starting to rave about the simplicity and quality of our services. Word of mouth referral started driving more work.
At this point, I came across some university students doing MBAs who needed real projects to conduct market research. They liked my ideas and their services were free.
This suited my needs. Their market research showed a massive opportunity. The traditional services marketed to longer distance, interstate, overseas, and the corporate markets. 95% of the people relocating moved less than 15kilometres. In short, the “industry” targeted 5% of the market and there was no specialised solution (at that stage) for the needs of the 95%. Of this market segment, 78% moved themselves with the industry servicing 12%. The missing 10% fell between the research cracks. To me, my competitor became “people moving themselves”.
#16 Lesson: Avoid assuming – try to work with facts.
Therefore, we developed marketing strategies that grew the work. We hired more people and then got more trucks. Over and over. There was never a shortage of work.
Buying trucks became an interesting problem. I was concerned with borrowing money. By accident, I met a guy who owned a truck but was personally in financial trouble. He owed more on the truck than what it was worth and he had no work for it. No income and unable to sell, he was in trouble. I hired the truck (only no workers) on an hourly rate – we had a second truck. Without borrowing a cent, without risking much, we built this business to 18 trucks WITHOUT buying any equipment. I sought out little operators in trouble and hired their equipment. The cashflow from this allowed them to meet their payments and all was happy.
#17 Lesson: Yes, you can start with very little money – you just need to think outside the box.
Workers to service the customers was another issue. The early employees kept telling me that we were doing lots of things wrong. My focus of building a growth model was clashing with the way they were used to this industry working. Avoid the nay-sayers.
We did flaunt with subcontracting for a bit but discovered these guys really wanted to own their own business. So, after we taught them, they left us and became competitors. We also discovered hiring “experienced” movers has issues, as many were not with their previous employer for a reason – which we usually discovered a few months after starting with us. When we targeted inexperienced people and developed an effective training, the business literally took off.
I’m often asked how we find such great people working for us. My answer is “we create them”. Today, we will hire no one from the industry, we will not even hire anyone with a truck driver’s license. We speed train and license every mover we have.
#18 Lesson: Train new staff to operate to your guidelines.
My approach to the systemising processes was also creative. From day one, I was aware we needed to know exactly what our people were up to. Well before we needed, we started building our own computerised operating system. This has been a continuous project for nearly 20 years. It’s all done in-house. From the moment a customer contacts us by phone or through the internet and from the moment a potential employee contacts us through all the booking and training process, to arriving and completing the services; every aspect is recorded including workmanship quality. The result is: we can instantly see our best and worst employees, also the best performing depots and areas. Problems are highlighted and actions can be taken very quickly.
#19 Lesson: Never lose sight of the end goal.
Industry standards and internal standards
Our focus is to lead the industry. We don’t look at others, we benchmark against our past performances continually improving.
My role is to find new, better ideas. We were the first to put our prices online. We introduced an iron clad workmanship guarantee and some amazing processes to ensure we stand by this.
#20 Lesson: Innovators lead the market – copycats follow.
To me, the growth journey has been about balancing among the following:
- marketing for new customers,
- hiring and retraining better workers,
- and adding service upgrades
- as well as innovative solutions to add further value.
Like most service businesses, the key to growth comes from doing a great job. Impressed customers rave about you and tell others. 78% (we always counted) of our work comes from our previous customers and referrals. Any competitor who copied our advertising quickly discovered it didn’t work as well in the service sector. In fact, most of the 78% didn’t call anyone else – just us. Try competing with that – many copycats have and failed.
Missing from this is financial control. I have to admit I suck in this area. I rely on others to take care of the compliance stuff. The actual steering of the business comes from weekly management reports. We use graphs to show performance and trends. The monthly P&Ls are useless as a management tool. Same with budgets. I’ve never been good at guessing the future, but I know exactly how a stack of indicators historically has been. We set these indicators as the benchmarks and target improving continuously.
#21 Lesson: You cannot count money until – a customers has been found, a service provided and the customer has paid.
As our business peak, we moved over 1000 moves A WEEK in our founding city. We had 500 employees and today operate in 6 Australian cities.
We find planning and executing to the plan does NOT work for us. My strategy is to try lots of things (often at the same time) in an affordable way, carefully measure the results, be relaxed with the fact most of won’t work.
#22 Lesson: When we discover something that works: we adopt, systemise and duplicate.
Today, the shareholding remains in my family. Whilst still deriving a good income from it, I have moved on and diversified. We now own 6 businesses in 4 countries – but that’s another story.
I have a passion for giving back. It comes from an absolute belief I have, that the future of my home country can only come from the entrepreneurs it develops. And it’s doing a crap job at developing entrepreneurs. It does a great job at developing “managers” who work in their business like I was: working 90+ hours a week achieving the goal I had set “to be my own boss”.
What about you?
The main thing holding most of you back are your beliefs. You have convinced yourself that all the commonly-thought obstacles are real – like you need money to make money, business is too risky, or if you are in a business, you either won’t let go and delegate, or your business model is flawed and you refuse to change.
You end up where you aim. I mentor many. In my opinion:
MOST AIM TOO LOW.
Serial Entrepreneur Mike O’Hagan shares how easy it is to build a business from nothing.
“A business should be a machine that generates the cash income you need and the freedom of choosing HOW you spend your time – so you can have the LIFESTYLE of your choice”.