MBA1863 Guest Teacher – Walter Hill, Jr. – How To Maximize Profits With Red Flagging

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Hey, welcome to the Hundred Dollar MBA show. Because a great business isn't built overnight, that's why we deliver daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of Webinar Ninja, an independent software company I started with my co founder back in 2014 and today's episode is a guest teacher episode. On our Guest teacher episodes we bring on an expert to teach their area of expertise. Today's guest teacher is Walter Hill Jr. And he'll be teaching you how to maximize profits with red flagging. This process of red flagging has literally saved my business. We implement this process in our own business at Webinar Ninja to make sure we we deliver an exceptional experience for our customers and are able to charge a premium because it's worth it. Our guest teacher, Walter Hill Jr. Is the founder of an exceptional company called Icon Blue. He's also served on boards like the Los Angeles Chamber of Commerce, the Greater Los Angeles African American Chamber of Commerce, Mattel's Children's Hospital at UCLA and more. He's also the author of this amazing book called Think Red Flags. You'll absolutely love his lesson today because it's so practical in learning. What are the red flags you need to look for in your business and how to do all that in a systematic way. So let's get into it. Let's get down to business.

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Today's guest teacher, Walter Hill Jr. Is not only a well accomplished entrepreneur, but a very interesting person. He's a second generation entrepreneur. His father owned three small businesses. He took what he learned from his dad and parlayed it into his future career and became a well known brand marketing expert. His company Icon Blue has been awarded by so many people, including his own suppliers. Like being awarded the highest award by Macy's, by Honda. And that is no mistake because Walter built an amazing business, an amazing system for his business. An operating system that allows him to to really have a low margin of error. Mistakes are costly, not in terms of money, but time and effort and team. It really is a headache. The less problems you have in your business, the more momentum you'll have. That's my own experience, but let me pass it on to Walter to teach his guest lesson today and I'll be back to wrap up today's episode and give my own takeaways. But for now, take it away Walter.

Hello everybody. My name is Walter Hill Jr. And thank you for joining me today. I'll be teaching you about how to maximize your profit with red flagging. So let's get down to business. There are many factors that control profit in a business. How well you execute those factors will have a major effect on your bottom line. Red flagging is a term that we developed in my business to help us identify and avoid mistakes that could have a negative effect on our. Red flagging is a common term used to provide a warning, an alert or caution in the context that we use it in business. It's a simple but profound way of thinking where you ask what if questions to identify potential problems and devise a plan to avoid them. What is red flagging? Well, the more you learn about the causes of business failures, the better. The Small Business administration says that 20% of new businesses fail within the first two years and 45% of new businesses fail within the 1st five years. The good news is that within those first five years, 55% of the businesses succeed. If you're currently in a business or you're just starting one, you might want to ask yourself how can I increase the odds to my favorite so that I can join the winning 55% group? Well, I wrote Think red Flags to help you get there. As I did, I learned the red flagging process at a very young age while working for my father and I continued to develop the process over the years which led to my business success. Success I've always believed is intentional. It does not just happen. If you can avoid most of the high impact, costly mistakes in your business, you will increase your odds for success. So let's talk about the mindset that you will need in order to effectively red flag your business and make a profit. You make profit by delivering a product or service to a target customer error free, on time and at a price point that represents real value. To create a margin above cost, that is profit replacing defective products, correcting service areas, rerouting shipments are a few of the enemies to profit now. There are too many variables in different businesses to suggest that red flagging can apply using a four or five step process for all. Again, it's a way of thinking where you once learn and understand the principles. You can apply it to both your business and your personal life. Identify the key elements in your business that you must do well in order to make profit. For example, cash flow is important to any business. If you bill customers for services, develop a matrix to deliver a service or a product as promised. Bill accurately, quickly and confirm receipt. Follow a consistent process to manage your receivables that includes a monthly review and follow up on open invoices. In my business, suppliers offered net 30 day terms, but many of our larger clients requested 60 to 90 day terms. This is an obvious red flag that needs to be addressed. The time deficit between the income from the customer and the output to the supplier will lead to a nagging cash flow problem. There are several ways to address this problem. Small businesses can often use a high limit credit card to pay their suppliers at the invoice due date, which is usually 30 to 40 days, which will create another 30 days before you pay the credit card. In some cases you can negotiate better terms with your suppliers who want your business. A bank credit line is also effective to manage such terms. However, you should calculate how the cost of the loan will affect your profit margin. Will you have enough margin to run your business after you pay the cost of the loan? If your margin permits, a factoring company might be an option. They will buy your long term invoices at a discount, that is if you have sufficient volume. The point is that by being aware of the fact that this is a real issue that does occur, you can be better prepared to address it. And that's what red flagging can do for you. In my book Think Red Flags, Tom Sims, the founder of Mimi's Cafe, a national chain of over 150 restaurants, he talks about out some of the caution points in the restaurant business. According to Tom, to make a profit in the restaurant business, you must locate in an area accessible to your clients, offer a menu to your customers that they want, provide a very clean environment, greet your customers warmly, seat them quickly, serve hot food hot cold food cold. Tom developed a matrix to consistently address these issues and more individually. These tasks may have a very low impact on your profit. Collectively, however, not performing these services will have a major impact on your profit margin. Restaurants depend on repeat customers. The customer experience must be memorable in some positive way or the customers won't come back. Recognizing the importance of developing a culture to provide the service quality you desire should be done with intentionality.

A question that can be asked is how does one develop the instincts to red flag? I think that most people over the.

Course of their lifetime, starting from childhood.

Have had experiences that would contribute to effective red flag. For example, one of the first lessons that we learned as a child is in crossing the street. We are to look both ways before we cross the street because of potential danger. That's one of the first and original caution points that we learn about when we are growing up.

The combined experience that we have over.

The years usually includes red flag opportunities.

There are three basic ways to learn how to red flag.

1. We start with reading and education Learning from other people's experiences, case histories through reading, formal education, college where we further our studies, personal experience of working for someone else and other people's experience the Benefit of Advisors and Mentors I know that mentors played a very important role.

In my own personal development.

In my book Think Red Flags, I interviewed six successful business owners from six different business categories. The real estate investor, a restaurant owner, construction supply owner, an event management company, information technology and marketing npr. The thing that you will notice as.

You read about each of these successful.

Business owners is that there's a common thread between them. How they evolved to know what they know in order to accomplish and do what they're doing. Each experience reveals how they were able to gain the knowledge to successfully red flag through their reading and education, their personal experience of working for others, and other people's experience they all have in common the use of advisors and Mentors what do mentors do and how do you find one? It's been my experience that most mentors are very eager to share. Most of them will provide insight from their own successful experience and they can serve as a strategy partner to you in helping you move forward. How do you find one? Well, industry organizations, referrals from others, social media My wife is a corporate governance specialist having served on 16 major corporate boards over her career. She receives calls on a weekly basis to coach someone and gladly responds to it. Self education is important and readily available at this time. Forbes.com estimates that about 11,000 business books get published each year. That's a lot of books and just in one small segment of the publishing world. Access of information is available to you and you should certainly take advantage of it. Personal experience is not always possible, but when it is, it can provide a very important foundation on which you can build a successful business. My experience in a promotion business was one that I think is a very good example of how experience in a particular industry can help you succeed in your own business. I worked for a company for five years and it allowed me to learn how to recognize and avoid those landmines that could cause a business to fail.

Or a project to fail.

I later went to a developed and award winning company, Icon Blue. And with Icon Blue, because of what we had learned previously from my work, my experience, I was able to accomplish a less than half percent error rate in my company, which made us very, very profitable.

A business that is sound in its practice of the basic fundamentals of good execution is more likely to enjoy a much higher profit margin than a company that does not. Red flagging helps your business hone in on those basic fundamentals. All right, this was Walter Hill Jr. And if you want to continue learning about the Red Flag process, you can visit walterhill junior.com and thanks for joining me today.

Now back to Omar USAA knows dynamic duos can save the day like superheroes and sidekicks or auto and home insurance. With USAA you can bundle your auto and home and save up to 10%. Tap the banner to learn more and get a'@usaa.com bundle restrictions apply.

What a fantastic, fantastic lesson by Walter Hill Jr. I'm telling you guys the principles he taught today I implemented just recently a couple years ago in our software business, Webinar Ninja, where errors, bugs, problems is really an issue for our business. So we had to make sure we implement this red flag strategy in our own SOPs, in all our departments and understanding what's going to stop us from growing? What's going to stop us from delighting our customers? What's going to stop us from having rapid viral word of mouth. If you want to learn more about this, check out Walter Hill Jr's great book Think Red Flags. You can pick it up on Amazon. I have Kindle Unlimited and it's part of Kindle Unlimited right now, so it's a great, great read. You can also check out his website@walterhill Jr.com thank you so much for listening to the $100 NBA Show. If you love what you hear, hit subscribe on whatever podcast app you love listening to or using. By hitting subscribe or follow you get our next episode automatically. It also keeps you in the loop when we have a new episode and allows you to dig into our archives when you hit subscribe so you have access to over 1800 business lessons. Before I go, I want to leave you with this. When I was first taught this strategy, kind of shied away from it because I didn't want to talk about or think about what are some areas of weakness we have or points of failure, what are the possible bad things that can happen. I wanted to be positive about things. But this is really important as you're growing your team and growing your business. This is gonna allow you to save your whole team a lot of headaches. It's gonna allow you to have a little bit more momentum. It's gonna allow you to feel comfortable when bad things do happen because you're prepared and they will happen. You know, that's just part of business. And once I got over that once, I just realized, hey, this is just part of growing as an entrepreneur. I gotta get over this. My life just got so much easier and the business started to move much faster and smoother and I'm so glad we started to implement these strategies. Thanks so much for listening to the $100 NBA show. I will check you in tomorrow's episode. But a quick heads up, we have a bonus episode that got released today about a brand new podcast our producer and my co founder Nicole Baldino released called Nicole and K Can Relate. If you want to learn more about what that podcast is all about, check out the bonus episode. I'll check you on that episode. All right, I'll see you there. Take.

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