Sales Masters Guild Mentor, Mike Ainsworth looks at how having your own immutable laws can help your business.

I recently read a book called the Pumpkin Plan by Mike Michalowicz and one of the topics the author writes about is the importance of having your own personal immutable laws in business.

I have to say that the term resonated with me because I’ve always felt that other terms such as core values or maybe ethics, whilst critical to me personally, didn’t fully apply to the rules that I’ve developed in my own business life.

Mike Michalowicz and I also share my first immutable law, although after that we diverge a little.

My immutable laws form the foundation of my business. They are personal to me and they’ve evolved over the years and now there are a few of them. Sometimes I break them but whenever I do I know that I’ll live to regret that decision.

In my view everyone should develop their own immutable laws and write them down. You know that something should be a law when you get a nagging feeling in your stomach that tells you you’ve made a bad decision. Your laws might be different to mine or we might share some, as I shared a law with Mike Michalowicz. Your own laws will those that are right for your personality and your business.

As I mentioned I have a few laws and I’m going to share three today as examples.

Law One – Don’t Deal With Dicks

In a more polite moment I might refer to them as toxic personalities but either way people in this category can waste your time and drain your energy and will rarely appreciate the value you are giving them. You might even struggle to get them to pay you on time or they might haggle over the amount of the invoice after the work is done.

I had a client in my business sale practice a couple of years ago who came in the toxic category. With hindsight my Dick Radar was bleeping in my head when I signed him up but I ignored it because he had a sellable business, albeit that he was expecting a better price than it was likely to achieve.

The client – let’s call him Peter – had had a difficult couple of years as a relative had been stealing from the business and so the accounts didn’t look too great but a reconstruct based on current earnings (backed by the latest VAT returns) looked OK.

Peter was on the phone every couple of days after he signed the agreement. Then he emailed me and I noticed he called himself “Lord Peter” in his email signature. Then I sent a number of prospective buyers to view the business and every one “ghosted” me after the viewing. Ghosting (not returning calls or picking up) isn’t uncommon but for every buyer to go missing is unheard of.

I sent enough prospects to view the business to sell it twice over but we didn’t get a bite.

Finally a sale was negotiated at an acceptable price. Solicitors were instructed. Then it got complicated as the lease was owned by Peter’s uncle and he was reluctant at first to agree to an assignment. Then there was a big disagreement over payment of the landlord’s solicitor’s fees. The buyer then called me to say that Peter kept calling at all times of the day and night and would I ask him to stop. Then finally the buyer pulled out.

My first instinct had been right and I had ignored my inner voice but shortly after the sale collapsed I gave notice to withdraw from the sale agreement.

Peter’s business was one of fifty that I was selling so losing it was no loss. I had come to the stage where I was reluctant to pick up Peter’s calls (instead of saying “hello it’s Peter” he would say something like “you know who this is, don’t you?”) and he was draining my energy so I was happy to let go.

If your biggest client or even a major client is toxic then you have a bigger decision to make. If you’re starting out and don’t have many clients then you might value the income and perhaps you might put up with a time-waster like Peter although a slow-paying toxic client can put your business in jeopardy if cash is tight.

Dicks can be customers, suppliers or colleagues and they can come in different categories (time wasters, non-payers, always right, argumentative to name four) but the fewer of them you have the happier and more comfortable you’ll be with your business.

Law Two – Know Your Numbers

I’ve always been kind of a numbers person so this has come naturally to me. I know that other people don’t find it comes as easily.

Having valued about 700 businesses over the past six years and personally interviewed 700 business owners, I would say with some certainty that all of the “sellable” business owners at the very least had a good grasp of their numbers from a “helicopter view”. They might not have produced monthly accounts or had a business plan but they understood the numbers.

What do I mean by numbers?

Well at a minimum monthly gross and net earnings target and actual, then average gross profit margin, fixed overheads and breakeven. Needless to say cash flow should be there too.

Incidentally when I produce a breakeven I start with the owner’s required monthly earnings and work backwards by adding costs and then calculating the level of sales required at the current gross profit margin. In my view too many business plans start by estimating sales and then working downwards, with the final line being projected profit.

I believe this ignores the fact that you are in business first and foremost to pay yourself, and everything should follow from that.

Indeed if you are new to business my recommendation is always to start with the amount you want to earn from the business and then reverse engineer the other numbers from that. Your final figure would then be your monthly sales target.

Law Three – Cause v Effect

This law could be argued as being in the realm of neuro linguistic language but I will stand by it.

What I mean here is do you want to be someone who causes and takes full responsibility for the business outcome? Or do you want to be permanently on the receiving end, blaming others if things don’t go right?

Do I want to be Peter Jones or Richard Branson or do I want to be that bloke down the pub whose business failed but it was the fault of his partner / suppliers / HMRC / Wife … you see where I’m going.

When I’ve had a bad year or a bad outcome it’s always been my responsibility. A good year? Yeah I’ll take the credit for that too.

Do you have your own immutable laws of business? If not then I suggest you should.

Perhaps your law might be one of Mike Michalowicz’s other laws – “Give to Give”. Or possibly “Make a Difference” resonates with you. “You make your own luck in business and life” might work for some people (and is one of mine too).

When you have your laws then write them down and they should be the foundation of your business, even making sure that they are reflected in your marketing materials and websites, not to mention your own blog posts.

If you would like to discuss Mike’s training courses and how they could make an impact on your business, you can contact him directly through his Mentors profile page.

Mike Ainsworth

Mike Ainsworth

Mike Ainsworth is a Sales Masters Guild Personal Business Mentor.

Mike lists his three main strengths as: Having an analytical approach to problem solving, being commercial and understanding value, having compassion and deriving real pleasure in being able to help other people (or other people’s businesses)

Find out more about Mike on his Sales Masters Guild profile page.

Read more blogs from Mike.

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