If you don’t do the hard work of healing, you are destined to make the same mistakes again.  If not the same mistakes, you’ll make different kinds of mistakes.  Let me illustrate.  Lance Armstrong may be the best cyclist who has ever lived.  A record seven victories in the Tour de France and an amazing third in his 2009 comeback year make Armstrong a remarkable athlete.  His recovery from cancer was even more remarkable.  Given a 20 percent chance of survival, Armstrong displayed an amazing will to live.  Yet, despite his cycling record and the inspirational nature of his comeback from cancer, I’m not sure that he has really learnt anything.  Despite his commitment to raising money for cancer research, I’m even less sure that Armstrong has matured as a man.

Brought up by a single mother, it was always Lance and his thrice-married mum against the world.  What Armstrong refers to as “the old wounds and long-ago slights” was channelled into an intense competitive energy, a self-righteous anger that stirred him to achieve beyond the levels of mere mortals.  Given his father’s absence and then, for a few years, the presence in his home of a temperamental stepfather, Armstrong became the husband-substitute for his mother.  He earned money for the family, demonstated dependability, and gave her emotional support.  Always the non-conformist, Armstrong’s world consisted primarily of his mother and long, isolated training rides into the surrounding countryside outside his home in Plano, a suburb of Dallas.

We can learn a lot from Lance Armstrong.  Always in a hurry, he learnt the patience required to win road cycling races.  Armstrong simply refused to be out-trained by anyone else.  He embraced the pain of agonising, oxygen-starved mountain climbs, just as he embraced the pain of his cancer diagnosis.   His level of self-belief has long been astounding.  When the cancer spread to his brain, Armstrong’s response was clear.  “I’m ready to crush this thing,” he said.  Following a six-hour operation on his brain, he briefly felt gratitude for having survived before an overwhelming wave of anger swept over him.

            You know what?  I like it like this.  I like the odds stacked against me.  They always have been, and I don’t know any other way.  It’s such bullshit, but it’s just one more   thing I’m going to overcome.  This is the only way I want it.[i] 

 Armstrong was dropped by his cycling team, Cofidis, and he showed them what a mistake they’d made.  He rode through worries that his cancer would relapse, ghost pains in his chest, and the scepticism of cycling commentators that he’d never come back.  When his riding legs refused to return and sponsors deserted him during 1998, he actually quit and decided to retire.  With encouragement from his mother and new wife Kristin, he gave it one last chance.  As his fitness and form returned, he made sports history.

 But here’s the rub, the bitter taste in the mouth.  First, Armstrong claimed that his victory over cancer was of greater significance than any of his Tour victories.  His 2009 comeback belies this statement.  Rather, Armstrong has such a high need for achievement that he can’t help himself.  His identity is deeply embedded in his cycling victories.  It is about the bike.  Second, Lance Armstrong has written that his ability to overcome cancer made him a better husband and father.  Tell that to Kristin, from whom he divorced in 2003, as well as the son and two daughters who came from this partnership.  Is this the same Lance Armstrong who wrote,

             Since the illness I just care a lot less if people like me or not.  I still care a little, but with the birth of my son, it’s diminished even more.  My wife likes me, and I hope my son will like me.  It’s their good opinion that I desire now.[ii]

 To cite a word that Armstrong uses himself, that’s just so much bullshit.  He had to be a hero.  He had to be the dutiful husband that his mother never had.  That’s not psycho-babble.  That’s reality.  By all means be inspired by Lance Armstrong’s victory over cancer and his unmatched record on the bike.  Don’t be taken by his life as a man, however, since his life also reveals the downsides of an obsessive-compulsive personality, an unhealthy level of ego, and a commitment to winning over all else.  Don’t become an angry man or woman in the Armstrong mould.  Instead, recognise that true healing includes healing our darker sides, normally driven by a glitch in our personalities or by the wounds we’ve carried from other times in our lives. 

 Lance Armstrong is an amazing guy.  He is an incredible achiever.  His success at fundraising for cancer research is breathtaking.

 Be strong, though, not Arm-strong.

[ii] Armstrong, p.288.

 Gerald Ratner writes that cooling down and taking time out was foreign to his nature. He was an action man. In the years after April 1991, however, he had no choice.

Gerald Ratner had taken a relatively small family jewellery business and, by dint of passion and incredibly hard work, turned it into the United Kingdom’s leading jewellery retailer. Annual profits for 1990 were £130 million and among Ratner’s 2,000 stores were 500 recently acquired on the west coast of the United States. Gerald Ratner was in the only job he had ever wanted, a millionaire master of the universe. Yet, for all of his business acumen, experience, and smarts, Ratner made a single mistake that would cost him almost everything.

On 23 April, 1991, Ratner stepped onto the stage to give a speech to 4,000 of the UK’s most influential businesspeople at the conference of the Institute of Company Directors. He was at the top of his game, and was scheduled to share the stage with future British Prime Minister John Major and former South African President FW de Klerk. Ratner was a confident speaker, known for adding humour and pithy pieces of advice to make his speeches more memorable. On this occasion, however, Ratner delivered one joke too many. A tabloid journalist scribbled down Ratner’s comment that the reason his stores could sell a sherry decanter with six glasses in a presentation box for £9.95 was because “it was crap”.[ii] The newspapers had a field day. Ratner’s comment became national news, even shifting Princess Diana from her traditional spot on the front page. Ratner’s was rechristened as “Rotners” and Gerald Ratner quoted as telling his customers that, “I’m selling total crap.”

Already facing the start of an economic recession, Ratner’s was forced to close stores. Soon after, his board forced him to resign. Despite having spent 18 months working like crazy to save the business, the name Ratner had become an embarrassment, both to Gerald Ratner and his organisation. At the age of 43, having watched the value of his personal shareholdings shrink from £8 million to £100,000, Ratner was washed up.

The phone didn’t ring for Gerald Ratner. For years, there were no opportunities to recover and begin to regain his self-confidence. To pass the time, his wife sent him out on family errands. While new business possibilities began to emerge several years later, Ratner faced a long period of self-questioning and torment before anything like career recovery began.

During these years, he learnt for the first time what it truly meant to develop relationships with his (second) wife and children. He started to get fit, riding a bicycle through the English countryside, rebuilding his physical and mental fitness. On reflection, these tough years were years well spent,

“What I now call my ‘wilderness years’ gave me a chance to recuperate. I really believe now that if you’ve been through a terrible experience, you have to get your head straight before you can do anything else…You can’t recover from a failed business – and all the pain that places on every part of your life – overnight.”[iii]

Gerald Ratner paused in order to progress. He’d lost his fortune, his business, his job, and his reputation. He’d become known as Mr Crapner. He, more than most, would agree that “sh** happens”. In coming back, however, he got through a critical period that the vast majority of people would prefer to avoid, namely pausing long enough to understand what had really happened.

Our keep-moving culture strongly discourages stopping. After all, no one who stops can win a race, can they? While we know that the roses might indeed smell nice, pausing to smell them while the world moves on without us is unacceptable, isn’t it? By definition, pausing or stopping mean that we will lose “the big mo’”, momentum.

To stop means to die, doesn’t it?

I don’t think so. To pause is to progress.

[ii] Ratner, p.148.

[iii] Ratner, p.242.

 Disappointments and setbacks test our faith.  As long as we are to the potential for new life, a weakened faith can be turned around.  It can become a faith more authentically grounded in reality and in that which will never let us down.  Let’s look at a story of a man who found just that.

 Have you ever found yourself saying, “I’d give an arm and a leg” for something?  I know I have.  It’s just a saying, but actually imagine what it would feel to lose, say, an arm.  Worse, imagine that your entire career had depended on that arm.  Imagine further if, from childhood to adulthood, your very self, your identity, revolved around the talent within that arm.  It is an arm that had brought fame and fortune.  Imagine, then, waking up one day to find the arm gone.  That’s the story of Dave Dravecky.

 He’d done his time, Dave Dravecky.  He’d played the A league, Double A, and Triple A leagues before entering the Major Leagues.  He’d also endured two miserable spells in Colombia, living in a roach-infested apartment under the constant threat of illness.  Dravecky was never going to be a legend.  He was a guy who worked hard, pursued his dream of the major leagues, and turned adversity to his advantage by channelling tough calls into a desire to prove his doubters wrong.  As he notes, however, this philosophy only carries you so far,

         Growing up, I had always been the centre of attention.  My performance had been for me, and no one else.  I had to be the star.  That kind of motivation can keep you going strong, so long as you   succeed.  But it’s not so good for dealing with failure,or with forces beyond your control.[i]

 Between 1982 and 1989, Dravecky played 121 games for the Padres and Giants, highlighted by being selected as a National League All-Star in 1983.   Along the way, he faced constant shoulder and elbow soreness which resulted in extended periods on the sideline.  He also faced the loss of his fortune when a real estate development in which he’d invested went bust.  Diagnosed with cancer in his pitching arm in 1988, Dravecky made a stunning comeback in 1989.  Having lost the three most powerful muscles in his arm, he had been told that a miracle would be required if he was ever to pitch again.  On August 10, 1989, almost 35,000 fans gave Dravecky a standing ovation in honour of his amazing return, a return preceded by day after day of painstaking rehabilitation.  During the following game in Montreal, Dravecky’s bone literally separated from his shoulder as he pitched.  The snap was heard around the stadium.  Still, Dravecky thought that he could come back once more.  Fate would decide differently, however.

 After his team won the playoffs on their way to the World Series, Dravecky joined the scrum of players and officials celebrating the victory in the middle of pitch.  Hit from behind by another celebrant, his arm was hurt again, this time beyond repair.  His career was finished.

 This time, Dave Dravecky accepted reality.  He had changed as a man, viewing life’s highs and lows as a Christian who’d learnt to put his faith in things unseen.  With this faith, Dravecky understood that some problems cannot be solved through surgery, through rehabilitation, or even through the power of a positive attitude,

             Not all obstacles can be overcome.   Each of us needs grace to handle troubles that remain even after we have done everything we can.  Some barriers cannot be broken down just by human effort and faith in yourself.[ii]    

 Life’s challenges did not end upon his retirement.  A further operation took place in 1990 to remove much of the remaining muscle in Dravecky’s throwing arm following the return of cancerous growth.  The strains of this insidious illness began to take their toll on Dravecky’s spirit and on the strength of his marriage to Jan.  The loss of the power in his arm was a metaphor for the powerlessness that Dave Dravecky felt as his life spiralled out of control.  God seemed distant.  Worse was to come.  After the deaths of her father and a close friend, Jan too faced the consequences of life when events take us beyond our capacity to cope, namely anxiety and depression.

 Things couldn’t get any worse, right?  Wrong.  An ulcerated hole appeared on Dave’s arm.  With Jan trying to keep her own life afloat, Dravecky lacked the support on which he’d relied so heavily thus far.  With the radiation treatments came infection.  His arm constantly leaked blood and other fluids.  One hole became three.  On 18 June, 1991, it was time to amputate.  Dave Dravecky had lost the pitching arm that had taken him to the majors.  He had lost part of his body and, perhaps, part of his very soul, forever.

 Dave and Jan Dravecky didn’t wake up one morning to find that life had returned to being a bed of roses.  One part of their healing came with the realisation that it never was and never would be.  Another part came from the tears and expressions of anger and questioning that the grieving process demands.  The support of true friends and the recreation of a new Christian faith grounded in the realities of God rather than a belief in a fairytale faith that can never lasts also helped, as did the support that can come from good counselling.  In the end, the Draveckys learnt to trust in the messiness and chaos of their lives, lives that raise just as many questions as answers.  They learnt that some questions may never be answered, at least in this world.

 The journey of faith is not an easy-to-follow map.  It is a one-step-at-a-time kind of experience…God doesn’t promise us a life full of mountaintop experiences.  There’ll be valleys to go through too.  Dark valleys.  Disorienting valleys. Valleys of depression and despair.  What He promises is not a road map that will give us a detour around those valleys, but that he will walk through those valleys with us.  When we emerge from those experiences, we look back and realise that that is where the growth is.    It isn’t on the mountaintops, above the timberline; it’s in the valleys.[iii]    

[ii] Dravecky (1990), p.212.

[iii] Dave & Jan Dravecky, (with Ken Gire) (1992) When You Can’t Come Back, Zondervan, Grand Rapids, p.71.

Phoenix Rising provides hope for anyone confronting life’s setbacks, disappointments and failures.  It is a positive self-help book written in the best traditions of Carnegie, of Peale, and of Seligman.

Phoenix Rising provides a process for looking squarely in the eyes of our demons, poor situations and tough circumstances.  After six years of research into the lives of men and women around the world who have come back from crises, as well as those who haven’t, the phoenix process can provide an effective, realistic, and hopeful response to our own setbacks.

The new book represents the culmination of a journey for Dr David Poole, variously an academic, politician, bookstore owner, corporate executive, sportsman, and  “garage band” singer.  Dr Poole has lived all of these lives and pursued all of these dreams.  He understands, better than most, what it’s like to live the roller coaster of the modern life.

Weaving the stories of some of the best (and least) known men and women from the fields of business, sport, politics, and entertainment who have encountered failure and yet responded in inspirational ways, Phoenix Rising provides a process for ordinary people, yet people who retain dreams of building better lives, to do just this.  It encourages men and women to reflect on their lives and on those aspects and events that have tripped them up, and to take pearls of learning from them.  It suggests that they take enough time out to heal the wounds of their stuff-ups and mistakes.  And it moves them to take and receive inspiration as they explore the world of possibilities that lies around them.

From Frank Sinatra to Michael J Fox, and from Benazir Bhutto to Mahandas K Gandhi, the personalities who inhabit Phoenix Rising are presented as they really are, or were, rather than as the caricatures by which they are often known.  In addition, each chapter includes the story of someone whose comeback was founded in values other than those truly required for the creation of authentic new dreams.

Phoenix Rising is for everyman.  Written in a reader-friendly style free of jargon but full of insights and reflections, the book speaks to today’s culture of transience, mobility, and uncertainty, so clearly articulated by Richard Eckersley (SMH, 13 June 2009),

 For all the positive qualities of Western societies, most of their people do not believe life is getting better. In Australia surveys show twice as many people think quality of life is getting worse as those who think it is getting better. The reasons? Too much greed and consumerism, breakdown in community and social life and too much pressure on families, parents and marriages.

Similarly, in the US and UK, the global financial crisis and its consequences have shaken the foundations of so many people.

America’s self-confidence is on the wane, and not only because the US economy seems to be in recession – although that is a big part of it. Foreign policy reversals and worries that it cannot compete in a changing world also play a role. (Norris, SMH, 29 March, 2008)

While the world and its people have regularly faced, and resolved, problems and challenges, each of us is confronted with the reality of our own situations and circumstances.  It can be very tough to respond positively, particularly if we’ve confronted one challenge or disappointment after another.  But change we can.  And change we must.  Like the phoenix, we can rise again.  Phoenix Rising shows us how.

Phoenix Rising is available at www.stratleadership.com for download.  It is completely free and there are no strings attached.

After a year of dramatic and radical change to almost every aspect of our organization, I found it difficult to transition to a somewhat slower pace of change and reform as my ideas began to meet resistance.  It wasn’t the sort of powerful symbolic resistance I’d faced early in my tenure, like the day I was asked to leave a meeting being conducted by the “shadow board”, a subset of board members who had created an illegitimate and unethical parallel structure to bypass my predecessor.  It was now a more insidious, creeping resistance.  It may not have been intentional on the part of those doing the resisting.  Their subsequent behavior, however, in all too easily permitting my resignation so that they could appoint their own “yes man” belies this view. 

Looking back, I think that I felt similar about six months into the job.  At that time, I thought our growth would be limited by several factors.  The first was the capacity of my people.  At that time, most of us were relatively new, completely overloaded and I couldn’t afford to hire any more staff, although new members were soon too join my team.  I was also unsure about the levels of political support.  I felt that our people, including key members of the board were with me, but they were cautious.  I was also challenged by the difficulty of altering the mental models of our stakeholders, as I sought to create the perception that things weren’t as great as they thought they were.  In addition, new strategies cost money – you have to spend it to make it – but you’ve got to find the resources to invest in the strategies first. 

So, it all seemed a lot tougher than the case studies had made me believe.  When I stood in the classroom and suggested that a CEO could simply spin-off a division here and seek a merger there, it appeared blindingly obvious and easily implementable.  It helped, of course, that almost all case studies in strategic management courses are of companies whose fortunes since the case was written are easily tracked.  Students often look back through the lense of subsequent events.  If the company made logical and sensible changes, it was these changes that brought the successes reported in the case study and could be reported as recommendations for action.  If the changes failed, then it was clear all along that failure was inevitable and that no recommendations were available to help make things different.  This is the beauty of the post-hoc rationalisation, the “after the fact” conclusion which ties all the loose ends together, bundles up the package, and mails it to the management gods.

So, in my role I met increasing resistance.  It should, perhaps, have been a hint about how things would turn out.  If I responded to this resistance by not going too far and ensuring that I did not continue to too much too soon, the old guard among the board may have never unveiled their guillotine! 

To the extent that a radically different pace of change represents a different style of management to your own, the growing gap between intentions and outcomes will cause a growing unease.  This discomfort may play itself out via unintended behaviors and actions driven by a restless and frustrated subconscious.  The seeds sown by your success as a change-driven leader may grow to become the high stalks ready to be slashed by your change-averse board members and stakeholders.

Ironically, I first sensed the stronger levels of resistance during my first day back in the office after our best ever event.  We held a fantastically well-attended, marvellously entertaining, gala awards dinner that received nothing but praise.  There were dark shadows growing, however, I had been using my love of writing to compose several press statements that turned out to a mixed bag.  While some garnered national publicity, others caused concern for some of my Board members who thought that the statements may impact negatively on their own businesses.  Since I hated doing work which did not pay dividends, I grew increasingly frustrated. 

I needed to take a few deep breaths and think strategically about the contribution I was making to the organization and may make in the future.  Maybe my role was becoming more symbolic and ceremonial than hands-on.  Maybe I needed to expand the role to account for these changes, looking for new areas in which I could make a difference.

On the other hand, the history of corporate leaders is one of leaders who favour a particular approach, philosophy, or style over others.  Very few are able to shift rapidly between one style and another.  In fact, to move flexibly between styles can, if not performed with excellence, cause others to see you as a chameleon with a wishy-washy approach.

In the end, we will only enjoy our work and make a real difference if we are working to our strengths and in proximity to our personal style.  If the gap between our style and the expectations of our organization becomes too great, it may well be time to move on.  For better or worse, that’s exactly what I did.

One of the few levers you may be able to pull is marketing, usually represented by the four Ps of price, product, promotion, and place.  For most franchisees, price will normally be set by your franchisor.  Similarly, your degree of control over product selection will also probably be highly constrained.  I have already spoken about the significance of place, or location, in Lesson 1.  It remains a hugely important variable in the success or failure of your business.

This leaves promotion.  While I am compelled to contribute a fixed percentage of revenue to a central advertising fund, local marketing efforts are pretty much up to me.  This may also be true for you.

I’ve tried several promotional strategies.  Around this time last year, I ran an Australia Day promotion coinciding with our national holiday.  I had signs made for the store and distributed almost 20,000 brochures in the local area.  It was a dud.  I gave away a 20 percent discount only for a short-term loss of profit.  Long-term benefits to the franchise through greater local recognition remain unclear.

Next, I attempted to win a competition run by one of my suppliers for the highest increase in sales for their travel books.  While my sales grew by almost 400 percent in the month of the competition, I was merely a runner-up.  One store increased their sales by more than 1,000 percent, although I remain intrigued by the reality that their equivalent sales of the same books in the previous years must have been close to zero.  In other words, I’ve learnt that while I may be highly motivated and strongly focused to win such competitions, there are others in the franchise system whose knowledge about the keys to victory is based on years of ensuring that they stay in front.

I have tried hard to encourage more of the book spend among employees in the local business district to remain in the area.  I created a local loyalty card that complimented the loyalty program of my franchisor.  In particular, I thought that this would appeal to local school teachers and similar educators who tend to buy more books than others from different professions.  Again, while incremental sales have undoubtedly been enhanced, this strategy has not provided the more significant improvements I had sought.

Arguably, the bargain-hunting book buyer is a different animal to the normal member of the book buying family.  For this reason, I have held several sales in the surrounding area.  While this strategy worked relatively well prior to Christmas, the most important retailing period of the year, it has been less successful since that time.  One attempt cost me thousands of dollars after I chose a rotten location.  Another was lucky to break even. 

The big wahu of all promotional strategies was the exclusive deal I made to sell books at the three Donald Trump events scheduled for various states in Australia last November.  I spent weeks to win this deal, subsequently signing an exclusive deal with the local promoter.  I paid him $7,500 for the privilege, and ordered more than 4,000 books to sell at the events.  I was sure I had a huge winner on my hands.  In addition, I was negotiating with Trump University to sell their range of Trump wealth-creation products at these events.

When Wall Street tanked, ticket sales stalled.  The promoter went bust, taking my money with him.  Donald Trump had been paid almost $2 million in fees to attend, however the promoter’s inability to come up with the final payment caused Trump to cancel his visit and pocket the money.   I am but one of the 650 creditors of this disaster. 

Given that I tend to have the perseverance of a bulldog, I actually attempted to resurrect the tour, offering to sell the tickets at more realistic prices, allow those who had already bought tickets to come for free, and to split any profits arising from the tour with Trump, suggesting that his share go to charity.  While I didn’t know if I would make any money myself, I truly wanted to do something for those folks who’d already paid an average of $350 for their tickets.  It would also have been nice to sell some of the thousands of books I’d ordered.

So, there you have it.  Promotional strategies from the realistic to the ridiculous.  It remains the nature of marketing that we must, to paraphrase Built to Last, try a lot of stuff and keep what works.  In the absence of the kinds of marketing research available to executives in large corporations, franchisees must feel their way cautiously along the dark promotional path. 

This is especially challenging during tough times, since marketing dollars are one of the few costs over which we have some semblance of control.  The overwhelming temptation is to back off and spend as little as possible.  While I wouldn’t recommend spending money that you cannot afford to lose, both new and existing franchisees must promote their businesses frequently and with gusto.  Set your budget at the outset, keep thinking creatively, and look around for new approaches that may provide a competitive advantage for your franchise.     

I began with the best of intentions.  My former accountant was a well-meaning guy with a number of small businesses in his portfolio.  His specialization, however, was the not-for-profit sector.  Their philosophy and that of this budding franchisee could not have been more different.

Believing that I should ground myself in all aspects of the business, he encouraged me to purchase bookkeeping software and complete all of the data entry associated with paying suppliers, receiving books at the store, processing credits, and so on.  Unfortunately, not only did I struggle with accounting at college, my desire to undertake such laborious processes was even more underwhelming now that I was distant from academia.  Thus, I let the bookkeeping drift while hoping that it would sort itself.  While the elf may have repaired all of the boots in the old fairytale, nothing of the sort would occur for me.

You see, I am a book keeper, not a bookkeeper!

Before telling you about the inevitable disaster that loomed over me, allow me to digress briefly to discuss the value of a franchise-familiar accountant prior to making the decision to buy a franchise.  In short, an experienced financial adviser is worth gold to you.  They can review the most important metrics underlying the success or failure of your proposed business and put their finger quickly on the flaws in your thinking.  If it is an existing business, they can spot whether the owners have been paying themselves a reasonable salary, whether they have or have not been squirreling funds between accounts to create the perception of inflated profits and revenues, and let you know if the value placed on the goodwill of the business is reasonable or overstated.

Oh, how I wish I had received that type of advice at the time!

Okay, back to my disaster.  While I was keeping up with paying my suppliers, my cash reserves were rapidly diminishing.  Cash is the lifeblood of any business and is the very heart and soul of every small business and franchise.  Despite sales revenues looking okay, I was losing the battle to stay afloat.  In addition, while not completing the critical accounting tasks, I was also neglecting to return overstocks to suppliers, a fatal sin for any bookseller.

I was just about ready to throw in the towel when I received a phone call from the franchisor.  A new employee in the accounting department had spotted a major error.  Every month since I had purchased the business I had been sending in a check to cover my royalty payments and advertising levies.  At the same time, my franchisor had been direct debiting my bank account for the exact same amount each and every month.  I had been paying the franchisor double and no one had spotted it.

When the head office employee stated that I was about to receive a refund of almost $30,000, I could hardly speak, such was the feeling of relief.  When I phoned my wife, who teaches part-time rather than working in the franchise, she cried.  While not nearly as naturally emotional as I tend to be, she had been sharing the same strain.  We shared tears of relief.

Now, I have an accountant who services the financial needs of three other stores in this franchise network in addition to mine.  He knows all of the ins and outs, can organize the leasing of new equipment, and can complete the critically important financial deliverables on which the franchisor relies.  Not only that, Doug drops by the store every few days to pick up my paperwork and discuss any financial matters that either he or I need to resolve.  He makes sure I pay my taxes on time, processes the salaries of my staff, and keeps a supportive eye on me, the financial luddite.

So, while it may be an overstatement to equate Doug with the holy father, it is nonetheless that he was an overdue answer to prayer.  For your own peace of mind, find a Doug at the outset!

For the pure entrepreneur, consider someone such as Richard Branson, now CEO and majority owner of one of the biggest and most admired companies in the United Kingdom.  From a very young age, Branson always sought to go his own way.  His first business venture was a student newspaper he started from scratch, a business he later sold to a multinational company for a tidy profit. 

Richard Branson considers himself to be a business and brand creator, someone who can reshape an industry through both innovation and an incredibly strong commitment to seeing things from the customers’ perspective.  By better responding to meet their needs than anyone else in the sector, his Virgin companies almost always carve out significant chunks of the market.  Clearly, Branson could never work for anyone else and, in fact, has never done so.

In the United States, Donald Trump is a superb example of an entrepreneur who always demanded total control of his business and his future.  While he worked with and for his father Fred, a Brooklyn-based real estate developer, during his college years, Trump created The Trump Organization during his early 20s.  His aim was to create the instant perception among potential clients and customers that his corporation was far more significant and expansive than it appeared, even though at first he was its only employee.  Like Branson, Trump has long been a lone ranger who has always needed to maintain primary control over any business venture with which he is associated.

If this approach is also your own favored approach for getting into business, buying a franchise may not actually be for you.

In summary, the franchising organization retains substantial control over what you can do, how you can do it, and when and where you can do it.  This information is contained in the franchise agreement that every new franchisee must sign.  While the restrictions on your behavior will differ from one franchisor to the next, the motivation for such constraints on your freedom is common to all.  That is, they are seeking to ensure that their offerings are standardized to the highest possible extent and that they maintain maximum control over their empires. 

If you have ever read Michael Gerber’s excellent book, The E-Myth, you will understand why this is so.  Developed appropriately, the policies and procedures to which you will be subject serve both franchisor and franchisee in positive ways.  They ensure that customers who visit any of the franchises receive similarly high levels of service.  They ensure that franchisees don’t drop their standards or personalize them in ways that compromise the franchisor’s reputation and brand.  Most importantly, they are designed to ensure that anyone with a reasonable degree of intelligence and a commitment to hard work can achieve them, thus limiting the reliance of the franchisor on the vagaries of individual brilliance and talent.

For the franchisee, the rules under which they operate limit the risks associated with starting a new business, since they are less likely to make dramatic mistakes.  Their potential customers may be already familiar with the brand and its characteristics, thus making it easier to develop customers and patronage.  Many decisions, particularly those associated with marketing, purchasing, and the creation of IT systems and databases, may be out of the hands of franchisees, therefore encouraging them to focus their efforts on building sales.  In all likelihood, franchisees will also benefit from the buying power and managerial support provided by their franchisor.

If this is more your ballgame, you are what I call a “frentrepreneur” rather than a pure entrepreneur.  Yes, you retain many of the characteristics of the traditional entrepreneur and likely associate yourself with their stories, but you act within a somewhat different operational context.  In essence, you deliberately choose to trim your wings in the knowledge that you will likely fly longer than other birds, recognizing too that you may also not get to fly as high as they do.

While accepting the downsides, this can still be a personally rewarding and totally appropriate business decision.  The world is full of franchisees who remain enthusiastic about self-selecting into a franchise system rather than starting from ground zero.  In fact, I walk past one every day, a bakery and pastry franchise, who proudly stated to me that he is the nation’s highest revenue franchise.  Not only is he delighted about this achievement, he is clearly making a great deal of dough with his dough!

In buying a franchise, it is therefore essential that you first examine yourself, your motivations and your relative need for control and autonomy before concluding whether you are an entrepreneur or a frentrepreneur.  In whichever industry you are exploring, ask existing independents about the benefits and costs of remaining outside a franchise group.  Also, ask current franchisees about the pluses and minuses that they consider to be part and parcel of being a franchisee.  It is only after you’ve reflected on this information that your true identity, as entrepreneur or frentrepreneur, will become clear.  Armed with this self-knowledge, a critical early decision will have been made.

The dog may as well have eaten it, for it wasn’t worth much. My preparation for buying a franchise wasn’t even close the quality of what yours must be if you are going to make a sound buying decisions.

Let’s consider some of my mistakes.

Most significantly, I was far too driven by emotion, passion and impatience. I had recently concluded a term full of part-time university teaching and when the phone stopped ringing my nervousness about the future took over. As I sat at my home computer in August 2007, I thought, “why not buy a bookstore?” and proceeded to go to the website of the chain from which I bought most of my books to view the opportunities. Since there were three existing franchises for sale, they were the three I examined. Since I couldn’t afford the start-up costs of a new store, I didn’t consider any other options for establishing a store. At the very least, I should have looked at what other franchisors were offering. I didn’t.

Of the three stores, only one was within my price range. While performing poorly, it looked like it would not be falling over any time soon, whoever was the owner. It was probably operating around its break-even revenues, thus offering a lower level of risk than one of the other stores, then struggling against huge local competition. It didn’t open Sundays, thus appealing to my sense of family, and contained a low level of inventory, therefore reducing my required levels of borrowing.

Having said that, it seemed to be providing the existing owner with a basic salary but little more. I knew that I could turn make it run as well as it had in years past, however I missed some critical information that I should have noticed. First, the owner’s partner had been employed full-time in the store yet was only being paid the equivalent of a couple of days a week. With my wife teaching part-time and looking after the kids otherwise, this was a salary expense I had not foreseen and would need to incur.

Second, the previous owner’s borrowings were much lower than mine, so his loan servicing expenses didn’t impact on the bottom line as much as mine did. While my accountant was competent, I should have sought advice from a financial adviser with more experience in small business generally and franchises in particular.

Third, given all of the above, I should have offered far less to buy the business than I did. While the existing owner dropped his price by about 30 percent, making me feel that I was a negotiating king, the reality was that the business was worth significantly less than I paid. The owner was pretty desperate to sell, there were no other serious buyers in the market, and I was too enthusiastic about showing my hand as a potential buyer to later have the negotiating power that I might have.

Finally, it turned out that the timing of my purchase was abysmal, at least in some respects. During September 2007, I left Australia for two months of teaching at a university in rural China. As I departed, I had decided against the idea of buying my favored franchise. The money was just not in it and something told me that it may never be. Nonetheless, on arriving in Shanghai en route to a central province, I received updated financials from the existing owner that gave me a little more hope. After another few days of reflection, no doubt encouraged by the fact that I was in the middle of nowhere and wondering about the state of my career, I took the plunge and bought the business.

All well and good, you might say, except that negotiating a price, completing the franchise documents, and filling in the never-ending pile of supplier credit forms was perhaps best undertaken from home rather than the middle of nowhere. Worse still was organizing a bank loan to buy the business. I had no previous record of business borrowings so had to start from scratch. Worse, my bank manager was out of the office far more often than she was in it. Tracking her down made for a ridiculous number of calls. What hurt the most, however, was that on my return, a Director of the franchisor asked me if I had used their preferred bank, since that bank had set up fast-track procedures for new franchisees and, better still, enabled the new franchisee to borrow against the value of the business rather than against their residence! If I’d known that at the time, much stress and heartache down the track could have been avoided.

While I still feel that the franchisor could have done a much better job of assisting me, the responsibility, when all is said and done, was mine, as it is yours if you are passionate about buying the right franchise at the right price in the right location. Carry out as much as the due diligence as you can yourself and, where you don’t have the skills, bring in others to better work through the critical processes that will undoubtedly have significant bottom-line impacts for your business over the long haul.

I was confident that I could restore its glory.  After all, I had doubled the membership, revenues, and staff numbers of a real estate industry association just before buying the bookstore.  I knew how to revitalize a business.  Surely I could do the same for the bookstore, right?

Well, yes, or at least a qualified yes.  Revenues are now approaching their former highs as a result of some very long hours and the implementation of some innovative marketing strategies.  Yet, for all this, I haven’t realized significant profits to show for this effort and these outcomes.

Why not?  Because, in the case of books, and probably for a heap of other products, the economics of the business model work against the creation of lucrative outcomes.  I was reminded of this by an insightful quote in the wonderful book, The Guernsey Literary and Potato Peel Pie Society by Mary Ann Shaffer,

“I love seeing the bookshops and meeting the booksellers—booksellers really are a special breed. No one in their right mind would take up working in a bookstore for the wages, and no one in their right mind would want to own one—the margin of profit is too small. So, it has to be a love of readers and reading that makes them do it—along with first goes at the new books.”

So, it’s a tough business.  But we each have to work at a place we find interesting, feel enthusiasm for, and is within our span of knowledge and expertise, don’t we?  For me, this had to be the world of books, particularly since I can’t fix or repair anything, am a dolt and a luddite when it comes to anything technical, and have had a love affair with books since my childhood.  Added to that, I self-selected into a lower-risk, lower-returns industry by buying a bookstore rather than something newer and more glamorous.

Nonetheless, it seems to me that the vast majority of franchise business models are designed with the primary expectation that it is the franchisor who will benefit most.  They pass most of the potential risks on to the franchisees, require the franchisees to undertake almost all of the “grunt” work of the business, and are not especially accountable to their franchisees except in an indirect, relatively weak manner.

Yes, they are required to monitor the health of their franchise networks, provide opportunities for franchisees to get together, and create marketing and logistics support for their franchisees, but these are arguably less onerous, less risky, and less committed tasks than those demanded of franchisees.

If it’s prosperity you seek, there are a few options you should consider.  Otherwise, you will find yourself in the very large pile of mom-and-pop franchise owners who have bought themselves jobs but do not achieve the returns deserved from their labors.

First, you can get in early and buy a franchise in an industry or niche in its early to late growth phase rather than one in its late maturity like the book business.  McDonald’s in the 1970s, Subway in the 1990, and fruit juices, salads, and sushi bars during this decade are all examples of this phenomena.  Cast your creative minds toward the growth curves of the new wave of franchises.  Perhaps there are businesses available that help people better manage the finances they have (or don’t have) that will be in real demand as the economy contracts.  The fitness and health sectors are likely to continue to grow at impressive rates, while services for our aging baby boomer generation will undoubtedly mushroom during the years ahead.  The earlier you are in, the more that you can take advantage of the above-average margins earned by those facing fewer direct competitors in the short to medium term, and the more that you can establish yourself and take advantage of further opportunities to purchase additional franchise stores or territories before the rest of the world learns about the money to be made there.  Of course, there is a higher level of risk here, but higher rewards usually follow if the risks pay off.

Second, you can snap up existing franchises with low-ball offers that may be accepted, with a little luck, by those desperate to sell.  In this way, you won’t find yourself taking years to pay back the goodwill that may or may not have been in the business you have just purchased.  I definitely paid too much goodwill for my store, adding years of additional work to pay it down.  In contrast, I know of one colleague who has recently added a second franchise to his existing store.  His timing was great for both stores, and he paid little more than the value of the inventory he was acquiring.  For him, there is a much greater potential upside than there is for me.  Live and learn, right?  

Third, you can scout around to see if there are any franchisors offering more of a win-win deal than those who cream off a flat rate of your revenues.  In my view, a truly abundance-focused franchisor would take less of your hard-earned cash as you scale up, and then a higher percentage as you move beyond your break-even to increase your overall margins.  I’m not sure if such franchisors exist, but if I was just starting out I would certainly check this out.  If you have already decided on your industry, I would also closely examine, from every angle, the slice of your money taken by all of the existing franchisors in the industry before settling on any one.  Don’t forget, 8 or 10 percent of your gross revenues may not seem like a lot, but when it is considered next to your bottom-line, you quickly realize that every dollar given to them is one that you won’t keep.  It is a dollar you can’t use for local promotions, a dollar you can’t use to pay yourself a higher salary, and a dollar unavailable to pay down your business loan.  You will never see that dollar again.  Consider this fact very, very carefully and understand its serious implications for your business and your lifestyle before buying your franchise.

Finally, you can always take on some extra work outside your franchise or establish another business to help bring in some extra cash.  This is not without its potential problems, however.  Any time spent elsewhere may take your eyes off your most important asset, your core business, and thus compromise your most critical business outcomes.  In addition, your franchisor may not look at your outside work in a benevolent way.  Check the franchise agreement carefully and, if in doubt, discuss it with someone you trust in the franchisor’s organization before moving outside the business.

If you are going to go the extra mile to make your new franchise a success, think very carefully about your expectations for the bottom-line.  If they are unrealistic and inconsistent with the likely profit flows from your business, you may quickly jeopardize your own morale and that of your people, sending the business into a downward spiral.  With some solid homework, however, you will enter and run the business with a healthier business philosophy and with more realistic expectations for its results.