Industry and Business Principles

1. Customer Value -- Focus our business on superior customer value.
   1. Know our customers’ goals and problems well enough to build a business model that provides products and services (indispensable vs. of high value) to them.
      1. Deliver actual and increasing value to our READERS.
         1. Gather, create and deliver the strongest possible content that helps our readers understand how leaders in their markets are solving common problems and taking advantage of similar opportunities.
         2. Evidenced by readers making improved business decisions based on what they learn from our products.
         3. Test to ensure we are connecting to readers in the most efficient and effective ways available.
      2. Deliver actual and increasing value to our ADVERTISERS.
         1. Help our Advertisers win in their markets by providing insight, value-added content and marketing services that help them differentiate themselves from their competition.
         2. Renew at least 90% of your customers.
         3. Ensure each advertiser has a sufficient volume of compelling and unique content on the web.
         4. Ensure each group of advertisers is adequately represented in each of our products.
         5. Exhaust all efficient ways to build and connect to specific, high quality circulation that Advertisers find valuable.
            1. Develop a Maven (trusted expert) in each market who is capable of building a loyal following of readers.
            2. Engage in productive list-building activities to convert acquired names into subscribers.
            3. Acquire and convert circulation lists from the most productive sources (advertisers, associations and events).
            4. Continuously reengage valuable disenfranchised readers/users/attendees.
            5. Build original content laden hub pages to win SEO relevance, and drive and convert traffic.
         6. Evidenced by us creating and communicating “real ROI,” including generating awareness over time.
         7. Test to ensure we are connecting to advertisers in the most efficient and effective ways.
   2. Aggressively invest in those things that allow us to deliver higher value to our customers than our competitors do.
      1. Continually innovate our product shape to achieve the most and best engagement by readers (the #1 position of popularity) among competitive products.
   3. Ensure everyone continually obsesses over customer satisfaction. Exceed customer expectations.
   4. Measure the quality of our product and service:
      1. Customer retention.
      2. Customer complaints.
      3. Quality failures.
      4. Late delivery.
      5. Presentation competence at customer touch-points (wince factor).

2. Sales -- Develop a formula for perpetually increasing sales.
   1. Typical “Organic Growth” formulas include one or more of the following: 
      Our goal is to achieve a company-wide double-digit year-over-year growth rate.
      1. Ramping up an outbound sales force.
         1. Develop at least one Paragon Sales-Focused Person in each market.
            1. Employ high-character, high-initiative, linear-thinking, revenue increasing focused people,
            2. who incline to extensive, face-to-face, customer contact,
            3. who accurately perceive customer needs and objections to giving us more money,
            4. who, from that empirical data, develop a clear VISION of how we should change, 
            5. to create a “Compelling and Unique” product or service advantage to win business at the expense of the competition,
            6. who then marshal our resources to implement that VISION,
            7. causing us to win the “popularity contest” and beat our competition in the market.
         2. Minimize the number of advertiser product or service categories each Sales Rep manages.
         3. Provide superior intake and ongoing training and coaching.
            1. Provide real help to our advertisers by improving the quality of phone conversations, the depth of Parking and Influencing activities, and our performance during trade shows/events and vendor visits.
            2. Number of contacts is an accelerator of call quality, either good or bad.
         4. Recognize the value of best practices to help a sales rep achieve threshold performance levels; but a greater value than following best practices is in the development of an Independent Franchise.
         5. Act to ensure each market group dynamic is in balance.
            1. “In balance” means the collective voice of the group knows and defends what we do and What We Stand For.
         6. Keep as many non-selling activities as possible out of sales.
         7. Maintain average revenue per customer of $40k, and minimum revenue per customer of $20k.  This is best accomplished by continuously innovating and extending each market’s offering and selling more integrated campaigns to advertisers.
         8. Don’t separate employee partners. Physically co-locate employees in the same market. No work from home; establish pod-style workspaces and standard business hours.
         9. Audit performance-based activities frequently enough to outperform normal human performance cycles.
      2. Adding new products or services.
      3. Entering new markets.
         1. Add markets by morphing from one market to the next.
            1. Find the most desirable groups of advertisers and readers that have overlap with our existing markets.
            2. Allow capable salespeople to extend their territories into these markets to prove these markets have the expected value and take additional reps into these markets with them.
      4. Outspending your competition on: advertising / marketing / PR.
         1. Constantly reinforce to the market that our products work well for our readers and advertisers.
            1. Marketers – skillfully use and expand our list of “Ways To Endear” advertisers to us.
            2. Salespeople – skillfully use and expand our list of “Parking & Influencing” advertisers.
   2. Work our formula as aggressively as we are able without hurting our goals of:
      1. privately held.
      2. cash profitable.
      3. internally financed, except for large capital expenditures.
      4. competent supervisors at all levels and in all pockets of the business.
   3. Ride a burgeon.
      1. Position the business to operate in “markets with great disparity.”  — Drucker circa 1970
      2. Keep maneuvering the business into growing, non-cyclical markets.
      3. “Surveying the whole field of business, I fixed on the most developing force and the largest field of the day, and determined to attach myself to it.” – Charles Francis Adams circa 1840

3. Margin -- Keep our mark-up among the highest in the industry.
   1. Some businesses produce a “Gross Margin” – sales minus cost-of-goods-sold.
      1. With these businesses, issue a Gross Margin Report and continually push for increased margin.
   2. Other businesses produce a “Contribution Margin” – profit after reaching Initial-Break-Even (IBE)
      1. These businesses require minimal increased cost for each additional sale – like at a radio station.
   3. There are three ways to produce high margin:
      1. Have the courage to charge more.
         1. Many examples in luxury and service industries.
         2. Publishing Industry examples include:
            1. Ensure salespeople adhere to our published rate card and payment terms.
            2. Maintain above-average CPM (cost per thousand).
            3. Set rates to maintain the highest margin in the industry in each market.
            4. Give each Market Leader the ability to charge as much as each market will bear.
            5. Maintain the highest rate to comparative value.
      2. Pursue sales opportunities that tolerate higher margin.
         1. Certain industries, products or buyers will more readily absorb high costs.
      3. Lower the cost of producing what you sell, without reducing quality.
         1. Henry Ford sold cars for less than his competitors yet maintained a higher Gross Margin by producing them more efficiently.
         2. Maintain average revenue per salesperson of $750k.
   4. Before creating a new Initial Break/Even by entering a new market or business, ensure that:
      1. we have the entrepreneurial capacity to cover the new activity without harming our existing activities,
      2. sales at existing operations are growing as fast as the market will allow; unless:
         1. We’ve crossed the point of diminishing returns in our existing markets.
         2. The margins in the new market are far superior to our current margins.
         3. Customer demand in the new market is far superior to our current demand.

4. Drive down costs.
   1. Force our operating-cost-per-dollar-of-sales lower than our competitors; and lower this year than last year.
      1. Management must model behavior that teaches parsimony and frugality.
      2. Outwork our competition – do more work, and better work, with fewer employees.
         1. High employee efficiency and effectiveness.
            1. Maintain average revenue per employee of $250k.
            2. Maintain a ratio of sales-to-non-sales employees of at least 50%.
            3. Set activity targets above competitive norms (e.g. pages per day, contacts per day).
            4. Use control points (e.g. Sales Goal Summary process) to ensure we are meeting or beating these targets.
         2. High employee work quality and accuracy.
         3. Lowest possible employee head count.
      3. Lock down cash outflow.
         1. Approach each invoice payable with an “Auditor’s Skepticism.”
         2. Teach and follow written “Purchasing Rules” like “Confirm price before authorizing work.”
         3. Maintain a monthly “Cost-side-down” meeting and database.
         4. Ensure error-free payroll processing; resulting in no employees being overpaid or under withheld
         5. Adhere to our Travel Expense Policies, like: When reasonable, bunk two to a room, and drive if it costs less than flying. With clients, angle for average-priced restaurants vs. “elite” dining.
         6. Achieve our goal of paid ad-to-edit ratio.
         7. Minimize copies printed in excess of qualified circulation.
      4. Have it be true that, “Nobody pays less than us (for the quality we require).”
         1. Deliver a sufficient volume of Compelling and Unique content to attract and retain our most valuable audiences (reader, user, attendee), at our lowest cost of labor.
      5. Plug all leaks in the revenue cycle that cause a variance between “True gross sales” and “Realized sales.”
      6. Be a late adopter of technology-for-efficiency-sake, so we don’t get burned by early-stage, unstable technology. Only upgrade our technology when dysfunctional; or the R.O.I. is massive.
      7. Minimize activities or expenses that customers or shareholders would not be willing to pay
         1. Don’t spend your time doing what others want, if there isn’t a strong, near-term benefit to our goals.  e.g. sitting on outside boards, to public speaking, to as little as filling out surveys.
         2. No political activity.  Take no side in public controversy. – Giovanni de’ Medici circa 1429
         3. No charitable donations of time or money from the operating unit.
         4. Shun management comforts – and take pride in it.
   2. Meet deadlines, “On time, every time.”
   3. Collect receivables faster.
      1. Strive for prepayment.
   4. Minimize or eliminate the costs of growth.
      1. Eliminate or minimize the cost of training a salesperson to competence, through the red-zone.

Our target is a 30% Return On Sales (pre-tax profit).
A 30% return is easiest to achieve when sales are rising; margins are high; operating costs are low; and customer retention is high. (Below a 10% ROS it is difficult to produce any free-cash-flow.)

(Above this line are the four aspects of the business you strive to improve each week – The Business Tetrad. Below this line are the main principles that will help you achieve I, II, III & IV above.)

5. Scrutinize Results -- Develop reports that give us insight into our success at achieving the above-mentioned goals; then scrutinize these financial statements; productivity reports; and quality-assurance reports monthly.
   1. Act on what they tell you to change – in order to achieve the Prime Directive.
   2. Clamor for more 1) dividends; 2) productivity; 3) product quality and customer service.
   3. Emulate Carnegie, who “used productivity reports to make his company so efficient his competitors couldn’t hurt him.”

1. Establish a “world-class” organization.
   1. Employ only the best.
      1. Attract, hire, and retain top quality employees who can build the business better than our current best.
      2. Recruit new hires by using a best practice hiring system.  Don’t just “trust your gut.”
      3. “Install managers who are among the ablest, most earnest, and reliable in the field of business.” — J.D. Rockefeller circa 1880
      4. Promote those who demonstrate the Observable Traits of Management Excellence, and LEADERSHIP, and who live by What We Stand For.
      5. “The unable or unwilling must be removed from the enterprise.” – Henri Fayol circa 1900
   2. Affiliate with the best suppliers and outside service providers.
      1. Examples; accountant, legal counsel, product vendors, subcontractors.
      2. “Engage those with the best reputation; the most prominent; at the top of the field.” – Armand Hammer circa 1950
      3. Reject vendors that are less than “Grade A” – as fast as possible.
   3. Provide tools, equipment, and technology that are good quality, and the most efficient.
   4. Establish Policies and Procedures (P&P) that are considered “Best Practice.”
   5. Occupy facilities that inspire confidence in our customers, and enable us to recruit world-class employees.
      1. i.e., buildings and furnishings, in neighborhoods that our target job applicants will be proud to show their parents or spouse.

7. Bench Strength -- Build a reserve of capable employees who can move up to fill positions created by
   1. Have at all times at least one subordinate with the ambition, people skills, technical competence and values who could take over my position today.
   2. Cause managers to hire “bench strength” even for their star performers and for themselves.
      1. Only offer jobs to applicants you believe can grow beyond their starting position with us.  To do otherwise runs the risk of not having enough capable employees to fuel our growth.
      2. Offer jobs to applicants capable of solving all the problems they’ll encounter. We’re flunking if it requires the department head to solve the department’s problems.
   3. Make room for capable employees who could grow into a larger role at our company, so we don’t lose them.

8. Delegate; effectively; and as necessary.
   1. Delegate so you can do timely and well all the things that only you can do.
   2. A top manager delegating too slowly harms company growth and profit.
      1. If for several months you have been unable to get to important responsibilities,
      2. and you’ve determined it is not because of a temporary spike in work,
      3. and company goals are being harmed because you can’t get to everything:
      4. Perform a Work Study by recording your activities during the next several weeks, in half-hour increments.
      5. Individual tasks will present that can be eliminated or parceled out to others.
      6. Sometimes groups of tasks can be batched and assigned to a new position you create.
   3. Steps to delegate effectively.
      1. Do the job well yourself.
      2. Let the other person watch you do it well.
      3. Watch them do it until they do it well.
   4.  “The growth of small companies is capped if they don’t install Systems & Controls. These allow you to delegate yet keep work-quality high.” — Jon Slabaugh 1998

9. Management must set a good example.
   1. Strive for honesty and high integrity, especially from myself.
      1. This relates to my treatment of employees, customers, suppliers and laws.
      2. Comply with all software licenses, plus health and safety regulations eagerly.
      3. Decide in favor of paying less tax this year; but pay happily the tax we do owe
      4. Don’t take product, office supplies, or equipment home; or use company-paid services for personal benefit.
      5. Promote making high-character choices, as they arise, throughout the company.
      6. Lying or deceiving should result in termination.

10. Company Culture -- Establish the correct “Working Climate.” – Henri Fayol circa 1900
    1. The first requirement of organizational health is a high demand on performance – managers must set high standards for themselves and their teams. – Drucker circa 1970
       1. Hold out for the highest quality work and outcomes. Scrutinize the exceptions we are willing to make or are making. Can we be proud of the outcome as the best we are capable of? Quantity (high volume) is an accelerator to quality, good or bad.
       2. Use our “Get Good …” relationship crutch to live important performance skills live (basking, frequency and duration) which will ensure we maintain transparency, individual fulfillment, accurate thinking and accountability (as described in the business’s What We Stand For document).
    2. “Build a force of enthusiastic, loyal, harmonious co-workers.” – Harvey Firestone circa 1920
    3. Incentivize to make employees feel the way the company feels.
    4. Transmit to employees an active, unrelenting drive to affect process improvements promptly, at all levels and in all parts of the business – what the Japanese call KAIZEN.
    5. Create a culture that celebrates cost saving in every corner of the business.
    6. Involve all employees in keeping our facility organized, orderly and clean – what efficiency experts call “5-S”.
    7. Treat each other with respect.
       1. Decide in favor of the employee or subordinate when the written policy is unclear.
       2. Thank, praise, and compliment daily; to comply with the 4-to-1 rule.
       3. Model friendly, fair, courteous, compassionate behavior.
       4. We promise our incoming employees a work environment where they will not be subject to:
          1. yelling; loss of emotional control
          2. sarcasm
          3. humor at the expense of others
          4. profanity or vulgarity
          5. group reprimands
          6. moodiness or rudeness

11. Failure Analysis -- “Analyze and profit from our failures.” – Jim Rand circa 1920
    1. Whenever we find ourselves frustrated, in pain, failing at our goals, confronted with a problem, or having made a mistake, we stop the flow of our day.
       1. We recognize this as an opportunity to improve the business, and ask:
          1. What changes can we make to our process, or
          2. What form, policy, checklist, system or control can we install, or
          3. What training can we institute, so we don’t repeat this problem in the future?
       2. Before the next opportunity to encounter this problem again, we install the permanent solution.
       3. The cost of the solution must be less than the cost of the problem.
       4. For a company to suffer from the same mistakes, year after year, is the opposite of “Best Practice.”

12. Innovation and Entrepreneurship - Innovate to expand our Competitive Advantages.
    1. Innovate new and better ways to:
       1. Provide value to our customers
       2. Increase sales
       3. Raise margin
       4. Lower expenses
    2. You'll know you are succeeding at this if you can truthfully quote Rockefeller when he said, "We have ways of making money our competition knows nothing about."
    3. Competitive advantages can last years, but seldom decades. The company that fails to innovate is on the path to obsolescence.
    4. Innovations can be as little or as big as:
       1. Streamlining a process
       2. Developing a new form to solve a problem
       3. Changing how we deliver value to our customers.
    5. "When the rate of change inside an institution becomes slower than the rate of change outside, the end is in sight.” Jack Welch
    6. Keep a running list of Innovations and Competitive Advantages and how we compare to these Principles For Growing Value.
       1. Have the management team review this annually for additions and subtractions

13. Avoid debt.
    1. “Debt, grinding debt, which consumes so much time, which cripples and disheartens. -
       If you are wise, you will avoid a prosperity which loads you with more debt.” – Emerson circa 1850

14. Save -- stockpile cash -- stuff the war chest.        
    1. Feel angry, determined, redoubled resolve any month we don’t create free-cash-flow.
       1. It’s the free cash flow that allows you to accelerate debt payments, add to safety capital, fund growth or pay dividends.
    2. There will always be a next recession; at these times Cash is King.
    3. Grow our “Safety Capital” accounts until we reach our targets of:
       1. Internally financed Credit Line = 1 payroll minimum.
       2. Recessionary Savings = 2 month’s operating expense.
       3. Safety Reserve at the Holding Company = 1 month’s operating expense.
       4. Sinking Funds and Revolving Funds = as needed.

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