I don’t think of myself as an entrepreneur, but my background would likely confirm otherwise. Maybe it is my impetuous nature that was the basis of my independence. When I was growing up, having a paper route was a business for kids. The “routes” were sought after competitively, and to get one you had to start out as a “sub.” It was slave labor at $0.25 per day. Subs took care of folding the papers when they came off the press (resulting in ink all over your hands and arms) and delivering most of the route. The idea was to hang on until the route owner went off to college or a better job. I ended up with an incredibly good route—about half commercial and the balance residential. It was a growing-up adventure for me. I was lucky because collections on the commercial half of the route were easy, while the residential had many slow or nonpaying customers. Going back over and over to collect was tiresome and usually resulted in being told to come back later. “Later” usually never came, so I would cut off their delivery. This was followed by the paper company telling me I could not stop delivering to the nonpayer. Wait a minute. They do not pay, so why should I continue delivering their paper? I usually stopped their delivery anyway. Long time lesson learned: some people just do not pay their bills.
Dealing with older boys who held court on top of the paper rolls every day was necessary and sometimes abusive. This was the area where we waited for the papers to come off the press so we could fold them for easy throwing. There was a “pecking” order where the tougher, older boys got first runs off the press while the rest of us had to wait. If one tried to go around this unwritten rule, he was bullied and usually beat up. It was “grin and bear it” and wait your turn. The responsibility of delivering papers every single day—no excuses—was part of growing up. It was not always easy, especially if you were sick or the weather was bad. Overall, it was a great learning experience and stayed with me the rest of my life.
Today’s youth likely can’t be “paper boys,” but there are many other opportunities to learn basic habits. Flipping hamburgers, sacking groceries, mowing lawns, and painting houses are just a few of the opportunities that young people can do to get a paycheck. These beginning jobs teach important skills in managing money and learning many other lessons they will need as they grow up.
What we do with our lives should be something we are passionate about. It is the fundamental key to our well-being. Life does not usually let us decide our future. It is just the way it is, or our maker pointing us in a better direction. This happened to me when I was discharged from the navy in Long Beach, California, during the Vietnam era. Because my first job after graduating from college was on Wall Street, I had visions of a career in money management. I did not want to go back to New York, so I accepted a job with a bank in Los Angeles to restart my financial career. Like most young people of that time, I did not have a clue as to what I really wanted to do. I was more interested in how much I could make and where I wanted to live. Southern California seemed infinitely better than New York. Even though working for a bank was not appealing, the money was okay, and I figured it was a good restart opportunity. About a week before I was scheduled to show up at the bank, my dad flew out from Kansas with a plea. Our family owned a small flour milling company on the Kansas–Oklahoma border. He needed help. The prospect was clearly not appealing, especially the thought of living in Kansas. Also, the meager pay added to the negatives of the company’s declining status. The future for the flour market looked bleak—the old days where women stayed home, and baked biscuits and bread were gone. It must have been the bond between father and son that coerced me to agree. It turned out to be the best deal of my lifetime twenty years later.
CHAPTER II—SAVING THE FAMILY BUSINESS WITH MY DAD
My story of my life in Kansas in the flour milling business is worth telling. My father and I knew we had to change and go for better markets. The only choice that made sense was to sell to commercial bakeries. We weren’t sure we could be competitive, but it was our only option. At the time, the flour market was stabilizing after declining for years. A lot of family-owned mills were fighting to stay in business and gradually disappearing.
From a financial standpoint, flour milling is a “bad business” unless one has buckets of money. It mirrors the opposite side of the Walmart model. The latter collects cash from their customers and demands their vendors give them up to 90 day payment terms. Since their inventory turns over quickly, as they grow more cash is generated. Flour milling is just the opposite. In this business you pay for the grain (wheat) before it is shipped. To be competitive you extend payment terms to your customers (about forty-five days). The more you grow your sales the more cash is needed. It is a cash negative model. You must borrow a lot of money, usually from banks. They love you because they own everything that is “yours,” especially the wheat. The latter is like “cash,” as it can be liquidated in a day. If you “hiccup,” they sell you out. It was somewhat like playing poker with them, but they held all the cards. Waking up at night, one agonizes over knowing everything you own is in their hands—your business, your house, dog, and cat—and everything can go away.
It was imperative that we lower our costs to become a “low-cost producer.” This required upping our production and doing so without money. The proverb “necessity is the mother of invention” became our motto. We started out changing things that were not supposed to be altered. I was out in the mill one day talking to the plant superintendent. We were standing next to one of the roller mills, and I asked him, “How fast is it turning?”
He responded with “400 rpm.”
I asked, “What happens if we speed it up to 600 rpm?” (It was just a number I pulled out of thin air.)
His response was, “You can’t do that because the manufacturer specifies 400.”
Two weeks later, his subordinate caught me in the plant and said, “I think we can speed all of the roller mills up to 600 rpm.” So, we did, which caused all kinds of downstream problems with choke-ups and overloads. Over time, with other related changes, we were able to increase our capacity by over 50 percent.
Often not knowing a lot about a business can be a plus. Asking questions that seem superfluous can change outcomes. Ignorant of operational issues often allows one to see opportunities that others are hindered by historic norms. Sometimes the simplest ideas can result in huge benefits. Having visited several very large bakeries, I began to think about their problems. It was mostly about flour consistency. They needed the flour to have similar baking characteristics from load to load. Since wheat has different properties from field to field, often with marked differences in performance, it is a challenge for millers. It dawned on me that the way to provide consistency would be to blend the wheat multiple times, over and over – and over. We worked out a program where the wheat would be blended from numerous bins into three and then one bin, which would feed the mill. The homogenous amalgam resulted in a consistent baking characteristic of the flour. This created a lot of extra work for the elevator superintendent, so I took the time to explain why it was necessary. The feedback from our customers was incredible: “Don’t change a thing; this is the best flour you have ever shipped us.” Working together with your customers to achieve better results always pays off.
For the first several years of my involvement, we barely stayed afloat. People would call and ask if the company was going out of business. Day by day we kept plugging along and hanging on. Our bankers were nervous and always hinting they might foreclose. Our costs headed downhill, and we slowly became a competitive producer, and were making money. I got busy making sales calls, and we woke up with the mill running full out six days a week twenty-four hours a day. We got to thinking about seven days. This turned out bad, as our maintenance was impaired and most of our employees wanted time off. It came to a head when deer hunting season arrived and many of our people didn’t show up for work.
A crisis happened in 1972—no one could see it coming. The Russians had a major wheat crop failure. It was a disaster and would probably have resulted in a famine throughout the Soviet Union if they couldn’t buy wheat. They had gold reserves, which they used to purchase over four hundred million bushels of US wheat. It threatened our finances when wheat rose in price from $2.50 per bushel (a bushel weighs 60 lbs.) to over $6 between the latter part of 1972 and the early part of 1973. Since we were using over 25,000 bushels per day to supply the mill, the financial impact was devastating. Raising our flour prices was not an issue, but financing the operation was nearly impossible. Our banks refused to lend us more money.
TABLE OF CONTENTS
Preface
Chapter I—Entrepreneurial Me
Chapter II—Saving the Family Business with My Dad
Chapter III—Trust Your Instincts
Chapter IV—Mistakes Can Be Learning Experiences
Chapter V—Sustainability
Chapter VI—Opportunities and Changing Markets
Chapter VII—Lemonade Stand Basics for Successful Startups
Chapter VIII—Artificial Intelligence Can Guide and Help You
Chapter IX—Your Best Opportunities
Chapter X—Financing Your Business
Chapter XI—Employees and Relationships
Chapter XII—Dealing with Problems
Chapter XIII—Extending Credit
Chapter XIV—Franchises
Chapter XV—Enjoy Life