• Find a Supplier Who Wants You to Succeed.
• Understand the Downside of Taking Investors.
• Offer Selection, Speed and Price.
• Avoid 50-50 Partnerships.
• Choose Words Carefully.
• Install Systems to Smooth the Path to Growth.
• Hire COPS.
• Coach Via Clear Communication.
• Deploy the Four Steps of Execution.
• Learn When to do What to Achieve Results.
• Coach Yourself Before You Start Coaching Others.

Key Idea #1: Find a Supplier Who Wants You to Succeed. TiresPlus financed its growth by plowing the earnings of the business back into expansion and by borrowing from suppliers. At first, this was by necessity, as the banks would not lend to TiresPlus because of Tom's lack of experience. Later, it was a conscious decision.

Topic for discussion: Why would a bank, which is in the business of lending money, not loan money to Tom and Don, and yet a tire company, which is in the business of manufacturing tires, would?

Answer: This is a classic risk-reward analysis for both the bank and the tire manufacturer. We all know banks are conservative lenders. They take no equity position in their customers' businesses so their money is cheaper for you than venture capital or going public. Cheaper for you means a lower return for them, and a lower return means they are not willing to enter into high-risk deals. Any banker with a crystal ball would have leapt at the opportunity to finance the growth of TiresPlus, but unfortunately, success is difficult to predict. For the most part, bankers don't finance start-up operations. When they do, it's because they see a strong secondary source of repayment, such as the personal guarantee of a high net worth individual with a clear capacity to repay the loan if the business fails.

Let's look at the risk-reward relationship from the tire manufacturer's point of view. Supplier financing is more common than you might expect. The reward to the vendor is substantial, a growing, successful customer (you!) buys more than a smaller one. The risk to the supplier is actually less than we might first think. Remember, the supplier is getting the margin on the inventory you purchase. Every dollar of profit the supplier earns on your account further mitigates any potential loss on the loan made to your business. Suppliers generally evaluate customer financing opportunities in terms of the "payback period", i.e., how long it will take to eliminate the possibility of any loss on the loan. This period is generally substantially shorter than the period over which the loan is repaid.

Let's look at a specific example: A retail customer wants to borrow $100,000 from a manufacturing supplier to open a 2nd store. The customer currently purchases $10,000 per month from the manufacturer; this amount will double with the second location. The customer is willing to repay the principal of the loan ratably over a five year period. The manufacturer's gross profit is 20%.

At the end of the first year, the customer will have repaid $20,000 on the loan and purchased an additional $120,000 of inventory, providing the manufacturer with an additional $24,000 of gross profit or a total payback of $44,000. The entire payback period is just a little over 2 years, rather than the five year period of the note.

Rarely are suppliers motivated by the actual return on the investment, i.e., the interest on the loan. They are much more interested in the customer relationship and its growth potential. There is also some concern that if they don't make this financing available to you, one of their own competitors will. If you go elsewhere, the current profit associated with their relationship with you is at risk.

You think about it: What unconventional sources of capital are available to you to finance the growth of your business? (Hint: Who makes money if you make money?)

Key Idea #2: Understand the Downside of Taking Investors. As TiresPlus grew, opening additional company owned stores in large markets and franchise locations in smaller markets, Tom and Don gave serious consideration to going public. A public offering would have provided them with a significant source of capital to finance store openings. Eventually, they decided to keep TiresPlus private, even if it meant a slower pace of growth. You heard Tom say that he wanted to keep his focus on customers (guests) and employees (teammates) and he was wary of the time commitment necessary to keep investors happy.

Topic for discussion: A public offering provides a company with an infusion of capital to finance expansion. "Organic growth", expansion by re-investing the profits of the business back into the business, is typically much slower. What's the downside of a public offering?

Answer: Tom talked about the downside in terms of juggling balls. He focuses his efforts on taking care of his customers and his employees. He recognized that outside investors would place demands on him as CEO of TiresPlus. Meeting those demands would detract from the time he had available for his coaching activities. He made the choice to opt for slower growth so that he could focus on just two balls.

Going public is expensive and being a publicly traded company is also expensive. There are responsibilities for managing investor relations as well as the reporting requirements of the SEC. Accounting and legal fees are significant, as well as the internal costs of corporate management. Publicly held companies sometimes buy back their stock to privatize just to avoid these responsibilities. If you are in a position to finance the growth of your business internally, you should give it serious consideration. Even if the growth rate is slower, it may still be more economically advantageous over a longer period of time. Also, if you do not have the depth of management required to meet your obligations to your investors and the public at large, organic growth is your only option.

You think about it:Does being the CEO of a publicly traded company sound fascinating to you? If so, what can you do to explore the possibilities?

Key Idea #3: Offer Selection, Speed and Price. TiresPlus offers a wide variety of quality tires and outstanding customer service. This is part of their "guest" concept, treating customers as their welcomed guests. As the number of stores has increased, so, too, does the purchasing power of the business. Larger purchase orders generally mean better pricing from the manufacturer. Tom and Don have passed some of these savings on to their customers to ensure that their pricing is favorable. Better pricing, combined with a large selection and fast service, make a win-win-win for the customer.

Topic for discussion: Why does Tom tell his new store managers that they won't be successful if their focus is on making money?

Answer: Tom's not opposed to making money and he certainly recognizes that his teammates want to make money. His point is that if you take care of business by taking care of your customers, the money will come. If you focus on making money, then you'll lose sight of the real value in the business, the customer relationships. People buy a lot of tires. At TiresPlus, the team makes the experience as positive as possible. Customers remember this, and the next time they need tires they think first of TiresPlus.

You think about it:What's your focus in your business? And just as importantly, how do you communicate this focus to your employees? Do your teammates understand how to make money in your business?

Key Idea #4: Avoid 50-50 Partnerships. 33-33-33 is OK, but 50-50 is an accident waiting to happen. No matter how well you and your business partner complement each other, no matter how clearly you are able to define each other's roles and responsibilities, there will come a point when you fundamentally disagree on an issue. How is that resolved if you are equal owners?

Topic for discussion: If you are in business with one other person, how do you decide on stock ownership if 50-50 is not a good idea? How can you be fair to the owner with less than 50%?

Possible answers: The purpose of avoiding 50-50 ownership, even if it is 51-49 instead, is to have a clear and frank understanding at the outset of forming the business. Two individuals commit to work hard together to grow a business and decide that if they ever disagree, which one of the two of them will have the final say. This may seem heartless, but there really is no practical alternative. Without this agreement, the business would be frozen and not able to react to changing circumstances. And for obvious reasons, this is not something you want to discuss with your business partner when the disagreement arises.

Ownership and profit distribution are not synonymous. The decision between partners of who should have the final say is independent of salary levels, dividend distributions or proceeds from the sale of the company. These can still be 50-50, protecting the minority shareholder.

You think about it: If you and your partner are 50% owners of your business, do you have a formal or a tacit understanding of who makes the final decision when the two of you disagree? If not, consider having that discussion now and dispassionately. The ostrich approach won't work here!

Key Idea #5: Choose Words Carefully. Words matter. The language used in any environment will quickly telegraph rich meaning to everyone involved. Tom chose the language of sports because most of his teammates are men. It works. This may work just as well with women today because those entering the workforce have played team sports. Also, women have fathers, brother, husbands or boyfriends who may live, eat, breathe and sleep sports so it probably isn't bad to use the language of sports inside any organization today. A workforce training guru, Michael Vance used to say, "If you cut open the brain of an American male, balls bounce out."

Topic for discussion: Why did Tom decide to call himself the headcoach rather than the CEO of TiresPlus?

Answer: He observed professional and college basketball coaches and he liked the way they gave constant feedback to the players. Then he concluded that the players actually wanted the feedback. He also knew from his experience at trying to lead people that they are quick to reject management. Tom even said, "People don't want to be managed." By calling himself the headcoach and by naming his assistants coaches rather than managers, Tom took strong steps to clearly define the operational culture of his company. He was right to realize that when you call someone a manager then ask them to coach your language is creating a barrier to success.

Call a spade a spade. Why use an old word that for many is fraught with negative memories or potential fears?

Topic for discussion: Tom uses the sports metaphor to educate and lead team members. What metaphor does he use when talking about customers?

Answer: He actually steals from Disney's playbook (get it?) and calls customers, guests. The whole idea is that a customer at TiresPlus is a guest. The customer enters the TiresPlus store to purchase tires and to have those tires put on her car. She waits and while there, Tom wants the customer to be treated as you would treat an honored guest who has come to your home. You may feel you can teach your employees to intuit that a customer is a guest. Fine. But Tom didn't want to leave anything to chance. Also, his team was developed from young men. They had not had a lot of work experience before they joined TiresPlus and if they did, Tom believed that the TiresPlus way of doing things was superior to other retailers.

Tom took a strong stand and it worked. He truly believes that words matter.

You think about it: What words do you use now that may carry the wrong implication? What discussion should you have with the people who work for you about language? What are you willing to do about the use of language inside your business?

Key Idea #6: Install Systems to Smooth the Growth. This is where franchises really excel. McDonald's is probably the best known example. If you were dropped blindfolded into a McDonald's anywhere in the world, there's little chance you would know where you are. Food, décor, preparation and cooking processes, even how often the restrooms are cleaned are exactly the same in any McDonald's franchise.

Topic for discussion:What is the advantage to a business owner of being a franchisee?

Possible answer: People decide to own their own businesses for a variety of reasons. Certain reasons, such as "being your own boss" and having your compensation directly related to your own success, are just as true for a franchisee as they are for the traditional business owner. The benefit of the franchise is that the processes of your business are very narrowly defined both in operations and administration. Generally, franchises are purchased for a flat fee which may even be financed by the franchiser. For a continuing fee, generally based on revenues, the franchisee is provided with manuals and training on running the business. Certain expenses such as advertising and insurance are paid on a collective basis from the franchise fee.

You think about it: If you have always wanted to be a business owner, but you don't have an idea of the kind of business you would like to own, consider the various franchises who are looking to expand their companies. If you already own a business, what systems do you have now that need to be improved?

Key Idea #7: Hire C.O.P.S.. Tom and Don formed TiresPlus University to teach new teammates what they need to know to be successful at TiresPlus. They are not very concerned with the knowledge that new employees bring to the company. Knowledge can be taught; the raw material is what Tom and Don care about. They are looking for COPS, people who are Caring, Optimistic, Passionate, Systems-disciplined and spirit filled.

Finding the right kind of teammates is so important to Tom and Don that they pay a $500 referral fee to a teammate who successfully attracts another teammate to TiresPlus.

Topic for discussion: How do you decide what kind of employees to hire for your company?

Possible Answers: Tom and Don's feelings are appropriate for any business. Who you hire is more important than what they know. True, training employees is time consuming and costly. But an employee who has the necessary skill set to jump in and needs no training is of little value if (s)he is not motivated, sensitive to customers' needs or a team player whom other employees have confidence in. Better to invest the time training the right person than offer the wrong person a position in your business.

Most companies, when advertising for a position, will include both job requirements and preferences. Requirements are the mandatory criteria that the person filling the position must meet. Skills or experience that are "preferred" indicate that all other things being equal, the applicant also meeting those criteria is more likely to be offered the position. Remember, though, that all other things are not equal. In the end, most companies have found that the intelligent and motivated applicant, who might require a more extensive training period than the applicant with more relevant experience, provides the business with a greater return on investment.

You think about it: The next time you are hiring a new employee for your business, make two lists. One, list the required and preferred qualifications for the position. These are the technical criteria and required skill sets and will be included in the advertisement for the position. The second list, which you will review just prior to each interview for the position, will include the personal characteristics you would like to see in the new employee. These characteristics will include those most likely to ensure success for the company and the individual if they are appealing to your customer base and current employees. You can make that second list right now!

Key Idea #8: Coach Via Clear Communication. Very few people can read your mind. You might think your spouse or partner can. However, we doubt an employee can know you so well and be in such sync with you that you can float through the business and the things you want to see happen just happen. In the very funny movie released in 2000 called, "What Women Want," Mel Gibson played a Chicago advertising executive who was able read women's minds. This ability turned out to be a tremendous asset but sadly, most of us can't do it.

Topic for discussion: How does Tom "do" communication?

Answer: First he tries to understand the expectations of the other person. Next he gives his instructions in clear, plain language. Third, he offers feedback. Finally, he asks the person he is working with to tell him how he is doing. This fourth step is hard because people at first are shy to tell you the truth especially if they have something negative to say.

Tom says that to get true feedback from another person may mean you have to ask at least three times!

You think about it: What are your strengths and weaknesses with it comes to your communication skills? Which of these four steps do you do well? Which do you do poorly? What can you do to improve?

Key Idea #9: Deploy the Four Steps of Execution. Tom believes that teammates can contribute to the team success most effectively if they are:

1. Fully aware of his expectations of them,
2. Motivated
3. Educated, and
4. Provided with constant feedback.

Topic for discussion: How does a business decide how to nurture and guide employees within the business?

Answer: Here, too, what we've learned from Tom and Don is as applicable to any business as it is to TiresPlus. The challenge is in determining how to move through the four steps within your organization. Let's look at each one separately.

Setting Expectations Provide each employee with a written job description and a copy of your company's organizational chart as part of his or her first day's orientation. In addition to increasing the employee's productivity, setting expectations very clearly and in writing provides the employee with a level of comfort and knowledge of his or her role in the business.

Motivating employees Every employee in the organization should meet with the person to whom he or she reports at least annually. This meeting should include a historical evaluation of performance since the last meeting as well as goal and objective setting for the next period. The employee should be made aware of how his or her individual goals are part of the overall goals of the business. Finally, the anticipated award, e.g., promotion or bonus, for successfully achieving those goals should be clearly stated. Both the evaluation and prospective goal setting should be in writing and signed by both the employee and supervisor. Subsequent years' evaluations should include a review of goals set the previous year.

Educate employees Every position in a company requires a certain minimum skill set. That skill set should be included in the written job description. Improving the skill set with additional training for the current position or for a position in the company that the employee is working toward should be discussed in the annual evaluation and goal setting session. Every employee in the organization should benefit from training each year.

Provide feedback Annual evaluations and goal setting, formalized and documented, are an outstanding way for even a small business to effectively manage its human resources. However, once a year is just too infrequently to provide employees with the constructive feedback they need. Positive feedback should be provided publicly, with recognition given to the employee throughout the company. Negative feedback should be provided privately, behind closed doors, and documented if it is considered to be grounds for dismissal if not corrected.

You think about it:We've provided one alternative for implementing TiresPlus "four step program" in a business. How would you implement the four steps in your company?

Key Idea #10: Learn When to do What to Achieve Results. In 1969, Ken Blanchard and Paul Hersey presented their famous model called, "Situational Leadership," in their now classic textbook of the same name. We don't know if Tom studied this work but it is obvious that he has mastered the concept.

Topic for discussion: What are the four actions leaders need to take and how can they tell when to do what?

The four actions are delegate, educate, motivate and terminate. If a person knows how to do a task and wants to do it, the leader should delegate. If the person wants to do the action but doesn't know how, the leader should educate. If the person knows how to do the task but doesn't want to take action, the leader should motivate. If the person doesn't want to do the task and the leader has tried to educate and motivate, then the leader must terminate.

You think about it: When were you last frustrated with the performance of an employee? Can you think back about what action you took? Do you think you did the right thing now that you understand there are four choices for the leader in every coaching situation?

Key Idea #11: Coach Yourself Before You Start Coaching Others. If you like Tom's idea of seeing himself as a coach instead of a boss, then perhaps you'll like his idea of nurturing, encouraging, and getting the best out of himself as well as his employees. Tom calls this "self-coaching".

Topic for discussion: How do I coach myself?

Answer:Someone once said, "If you don't keep growing, you get ripe and rot." It's true! We must continue to learn and improve ourselves if we expect our employees to do the same. Tom suggested that we focus on modifying our "dysfunctional" behavior as a means of improving our business. "Dysfunctional" may be too strong of a word, but let's say, for example, that you are a shy person and would like to be a little bit more outgoing with your customers, employees and vendors. You might read books, listen to audio tapes, join Toastmaster's International, or any combination of the three to address this. You might notice a particular "dysfunction" in one of your valued employees and assist him or her in developing a plan to address it. The point is that each of us has weaknesses, and by addressing our personal weaknesses, we make our business stronger.

You think about it: If you were your coach, what would you say to yourself?