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via Forbes: Whoever said you can’t learn anything from reality television hasn’t watched Tilman Fertitta’s Billion Dollar Buyer. I’ve been avidly following the show for three seasons, and Fertitta’s advice to young entrepreneurs is just as on point and relevant for young entrepreneurs as for experienced entrepreneurs like myself.

If you’re not familiar with Fertitta (full disclosure: Fertitta is listed as a speaker on my website but we have never represented him), he’s a billionaire entrepreneur who grew his business from a steakhouse in Texas to a three-billion-dollar, multi-business empire. When he’s not managing his business, he helps young entrepreneurs grow their businesses on his show.

On each episode, Fertitta samples the products of two small companies to see if they can be used in his businesses. Unlike Shark Tank, Fertitta is not investing in the company. Instead, he is purchasing products. His goal is to help small businesses by giving them entrepreneurial advice and then making an order large enough to put them on the map if he sees the company can deliver the goods.

Here are five things I learned from watching Fertitta on Billion Dollar Buyer and how you can apply them to your business.

Know your numbers.

The key to financial success is knowing your balance sheets. If your costs are too high because you’re paying too much for your linens or your vegetable supplier, you won’t be able to grow your business. It’s also important for your sales pitch. You can see Fertitta practicing what he preaches on Billion Dollar Buyer. He’s always asking young entrepreneurs about the margins between production costs and retail sale price.

Knowing your numbers is important for any company or division you run. Each quarter, I review my company’s financial results with the person who has P&L responsibility. I call it “climbing into the box.” Ask questions such as: Is revenue increasing? At what rate? How are margins holding up, including gross margins, the bottom line and net margin? Are we working harder and turning over more money but only making the same amount or a fraction more? If that’s the case, you’re doing something wrong.

As my grandfather used to say, “Turnover equals vanity; profit equals sanity.”

Business is cyclical, so have your cash ready.

It’s important for entrepreneurs to understand that business cycles go up and down. Be prepared for the down cycle. During down cycles, use your cash to expand your business. During boom cycles, save cash for the next downturn.

During a boom cycle, Fertitta took his 12 restaurants public and was valued at over a hundred million dollars. However, when the recession came, he had enough money saved that he could take his business private again, which has been one of the keys to his success.

One of the biggest mistakes an entrepreneur can make is to assume the good times will always last. I’ve been through three major economic downturns and being prepared is the only way to weather these storms. During the 2008 recession, my company was caught off guard. Our income dropped by 60%. We had to let staff go and negotiate our way out of an expensive lease. Fortunately, we survived and learned our lesson. Now we have cash set aside ready for the next downturn. And so should you.

Follow the 5% rule.

Fertitta firmly believes that a business can be doing 95% of things right and still have problems. He always looks for the 5% that’s going wrong because that’s where there is room for improvement. For example, when he visits one of his properties, he’ll see if there are cigarette butts on the sidewalk or weeds growing in the parking lot. It’s these little details that separate the good from the great businesses.

At my company, we go a step further. We make sure to applaud the 95% because that’s what humans need. Then we look at what’s broken and how we can fix it, always remembering to focus on the problem and not the person.

Use digital marketing.

Over the years, Fertitta has experimented with marketing from billboards to television, but he now swears by digital marketing. If you are concerned with customer acquisition and lifetime value, invest in digital marketing because its customization allows you to market to your exact customers.

That’s why 90% of our marketing is digital. It’s especially important for small companies that don’t have a large budget. We are constantly experimenting with new platforms, new ways of ranking and new ways to engage customers — whatever it takes for market domination. We now joke about how we used to send out mail-bound catalogs and DVDs. Those days are long gone.

Be open to change.

According to Fertitta, the six deadliest words in business are “We’ve always done it this way.” It is the biggest cause of failure. Be open to change so you can weather the ups and downs of the industry and continue to be relevant and exciting.

I call this, “Get rid of the legacy spaghetti!” We’re always open to learning new ways of doing things. We also study our competitors to understand what they are doing successfully. Doing it the same old way is what stop businesses from innovating. Whether you’re new to the business world or you’re a seasoned entrepreneur, make sure to always question what’s been done and cut out the clutter.


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