The Purpose Is Profit

The Truth about Starting and Building Your Own

Business
Ed McLaughlin, Wyn Lydecker and Paul McLaughlin
Copyright 2016 Blue Sunsets LLC. Published by Greenleaf Book Group.
328 pages
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Rating

9 Applicability
8 Innovation
9 Style

Take-Aways
Building a new business takes more than passion alone. Competence is the best
foundation.

The Startup Roadmap explains 21 steps to follow if you are launching your firm.
If possible, finance your start-up with your own money and keep sufficient cash on
hand.

Focus

The dynamic planning technique allows you to adjust your strategy and activities to

Leadership & Management

Make sure you can explain your business idea in a few sentences.

Strategy
Sales & Marketing
Finance
Human Resources
IT, Production & Logistics
Career & Self-Development
Small Business
Economics & Politics
Industries
Global Business

fit developing circumstances.

You must know your customers to become a successful entrepreneur.

To start a new business on sound financial basis, try to have advance orders before you
open.

Compensate salespeople with percentage shares of your firms profits. This turns
salespeople into profit-and-loss managers for their own sales accounts.

A good start-up business model should show how your firm will profit and grow.
Your corporate culture should exemplify integrity, trust and accountability.

Concepts & Trends

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Relevance

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What You Will Learn
In this summary, you will learn:r1) How Ed Skip McLaughlin built a start-up into an Inc. 500 company 2) What
Roadmap steps to follow to start a business and 3) How to take 21 steps to profitability.
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Review
Ed Skip McLaughlin writing here with his son Paul McLaughlin and with business-planning expert Wyn Lydecker
is an Ernst & Young Entrepreneur of the Year and the founder of four businesses. The authors tell the story of
USI, a start-up that McLaughlin and his partners built into an Inc. 500 company. They present a 21-step roadmap
of practical, clear, actionable advice for starting, building and expanding a business. getAbstract recommends their
valuable guide to business owners, start-up entrepreneurs and students studying how new businesses succeed.
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Summary

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You are betting on
your ability to turn your
idea into a profitable
business.
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You will set the
pace, the tone and the
direction. You will make
the decisions, and you
will be responsible for
the outcomes.
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The Rise of USI

Ed Skip McLaughlin worked in sales for Hewlett-Packard, IBM and the Trammell Crow
Company, a nationwide US real estate developer. In 1991, in his mid-30s, McLaughlin
left Trammell Crow to start his own business in real estate outsourcing, his area of special
competence and expertise. Confident in his knowledge and experience, McLaughlin felt
certain he could create a successful new business. His certainty sprang from a preorder
sales commitment from Bill Scheller of Patterson Dental, Americas largest distributor of
dental equipment and supplies. Kip Chafee, head of real estate at IDS Financial services,
also promised to become a client of McLaughlins new firm, United Systems Integrators
Corporation (USI). The firm targeted real estate customers at Fortune 1000 corporations.
McLaughlin went into business with two partners, Gus Poulopoulos, a recent graduate of
Fordham University, and Tom Dever, the husband of McLaughlins assistant at Trammell
Crow. To fund his start-up, McLaughlin relied on bootstrapping with his own money. He
didnt take a salary during his first year of operations. He paid his partners small salaries,
and offered them each 5% equity in the new business. Both men signed noncompete and
nondisclosure agreements.
Dynamic Planning
To set a path for their new venture, McLaughlin and his partners use a strategy called
dynamic planning. In this process, entrepreneurs first define their goals and then adjust
their day-to-day activities and operations to fit changing circumstances and adjust to
new information. This provides maximum flexibility for dealing with unknowns and
uncertainties as they arise.
USIs value proposition reducing real estate management and delivery expenses for its
customers was central to its success. The company, which became an immediate hit with
its clients, eventually achieved a 95% contract renewal rate, a compounded annual growth
rate of 40% and a 20% net profit margin.
Entrepreneurial Branding
When they opened USI, McLaughlin and his partners focused on entrepreneurial branding,

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which sums up a companys vision, values and performance. Besides its name, USIs
branding included a great tagline Serving Real Estate, Management and Information
Needs and a memorable logo with a blue flag bearing its initials and two white stripes.
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Determine your
distinctive competence,
and apply it to a
bankable business
model that serves a
customer need.
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Expertise is not as
sexy and exciting as
passion. But starting
a business in which
you have distinctive
competence will give
you a much greater
chance of being
successful.
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If youre feeling
the pull toward the
entrepreneurial life,
sit down and craft a
covenant. Document
your goal to start up
a business and sign
it in front of a trusted
friend.
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Develop a business
name that introduces
your unique advantage
combined with a
tagline that clarifies
your business purpose
then every time you
send a message, you
will be making a lasting
impression.
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As part of its branding, USI promised stellar customer services. It offered a meaningful
guarantee that its products would work as promised, and it made staff members available
every day, around the clock, to resolve customers concerns.
Sigma Communications Inc.
Nine months after opening USI, McLaughlin started another firm, Sigma Communications
Inc., to publish a quarterly magazine, The National Register of Commercial Real Estate.
While McLaughlin was passionate about this new venture, he lacked experience and
competence in publishing. Sigma was a huge money loser. McLaughlin had to close it after
three bad years.
However, USI continued to be a major success. The firms sales force was extremely
productive. For years, it closed 50% of its sales to prequalified prospective customers. One
competitor concluded, USI seems to win every time. This was notable praise given that
USI was a multimillion-dollar upstart in the real estate outsourcing space surrounded by
multibillion-dollar competitors, including such major firms as Cushman & Wakefield.
The compensation program USI offered its salespeople distinguished it from its rivals. Sales
staff members received a percent of the profit on each customer they served, not revenue.
This pay structure encouraged each salesperson to think like a profit-and-loss manager. It
tied salespeoples personal income directly to USIs income. What was good for USI was
good for its salespeople, and vice versa.
The Merger
In 2004, the leaders of Johnson Controls Inc. (JCI), a Fortune 100 company and a $25 billion
provider of automotive systems and building controls, asked McLaughlin to discuss a
merger with USI. Johnson Controls wanted to tap USIs secret sauce, a JCI executive
explained, referring to the firms creativity, innovation, skill, speed and tenacity. JCI
wanted exclusive rights to purchase all of USIs stock. Instead, McLaughlin appointed
Barrington Associates to conduct an auction of USI.
After 14 firms submitted bids for USI, JCI ended up buying the company for $80 million.
At the time of the sale, USI was an Inc. 500 firm. McLaughlin became president and CEO
of the joint Johnson Controls real estate and facilities management operation in North and
South America.
McLaughlin had been in complete control at USI. Now things were different. He quickly
became frustrated about having to report to his JCI boss, who followed a hierarchical
governance structure in marked contrast to McLaughlins entrepreneurial all-hands-ondeck mentality.
McLaughlin completed his 30-month contract and went back out on his own. He started
another new business, Blue Sunsets LLC, which creates real estate projects among its other
activities.
Following the Startup Roadmap
This roadmap for start-ups sets out the steps you can take to succeed as an entrepreneur.

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As you grow your
business, invest the
time to listen to your
customers. Your
customers will tell you
about their problems
and help you figure out
the best way to solve
them.
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Team members are
better equipped to
focus on bottom-line
results when they
have a crystal-clear
understanding of their
goals, responsibilities
and reward structure.
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Building an effective
sales force is vital to
every organization
that requires face-toface contact with the
customer to secure an
order.
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If you fill your roster
with second-rate
talentexpect secondrate results.
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But, before you begin, deeply consider the crucial decision about whether to launch a new
business in the first place. If youre ready, follow the 21 steps to profitability. Each step
begins by asking yourself a major, strategic question:
1. Business idea Can you briefly describe your business? You should be able to explain
your business in a few sentences. If you cant, your idea may be too complex. Thats not
what your prospective clients, colleagues or investors want.
2. Distinctive competence What distinctive know-how, abilities or experience do you
offer? If you have a competency void, decide how you will compensate for it. Never
start a business in a field you know nothing about or in which youre not an expert.
Success is elusive even when you know what youre doing.
3. Product description Can you briefly explain your product and the problem it
addresses, and identify your potential customers? Know your products primary features
and benefits, what differentiates it from its rivals, and how it will evolve over time.
4. Market opportunity Do you understand your new industry and how it will develop
in the future? Determine whether your product might transform its industry and why the
industry is growing or not.
5. Target customer Who will purchase your product and for what reasons? Learn your
targeted customers demographics, available budgets, motivations and special needs or
wants.
6. Value proposition What is your products unique benefit? In what way does
it fulfill a crucial consumer need? Most popular offerings solve particular customer
problems. Your value proposition requires an explicit enumeration of the benefits your
product supplies to consumers. Evaluate your value proposition based on how well it
supports your business rationale.
7. Competitive advantage How is your business different from its rivals? Consider
whether you offer advantages in technology, first-mover innovation, productivity,
revenue-enhancement or cost savings.
8. Preorders Are you able to land advance orders from your prospective clients? Few
issues matter more than securing formal sales commitments prior to launch. Securing
preorders is a vital psychological and economic hurdle that every entrepreneur needs to
clear. To develop preorders, create a list of probable purchasers, contact them and ask
for their business. Leverage your network to secure introductions to likely customers.
9. Business model How will you make money? Many entrepreneurs so love
their new businesses and their offerings that they fail to develop realistic business
frameworks. Without a sound, sensible strategy, even the greatest new product or service
may fail.
10.Revenue generation What will you do that earns money? Consider various possible
types of income, including commissions, product sales, service fees, advertising sales,
data access fees and license fees. Determine if your firm will serve as an intermediary
that earns a fee at point-of-sale by uniting sellers and buyers. Will you create online
content and a paying online community? Will you collect fees for providing specialized
data? Will your firm have multiple revenue streams? As you generate revenue, create a
financial war chest for strategic advantage.
11. Product pricing How much will your product cost your customers? Plan your
pricing model, how youll cover product costs, and whether youll use competitive or
premium pricing.
12.Production and distribution How will you develop, fabricate and distribute your
merchandise? Manufacturers must consider their raw materials, labor, machinery,
inventory and distribution. Companies that provide services must consider staffing,
travel costs, response times and performance reporting.

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Too many
entrepreneurs try to
interact with customers
through arms-length
relationships. This
is almost always a
mistake.
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Your business is your
baby it demands
devoted care and
regular feeding.
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Many times we hear
of entrepreneurs
who develop new
products and exclaim,
This product is so
innovative it will sell
itself. The road to
the entrepreneurs
graveyard is paved
with the remains of
businesses that held this
belief.
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13.Creative use of technology Can you use technology to become more efficient,
better serve clients and create fresh income sources? Wisely using high tech helps
you meet your customers needs. Use technology to add a profit stream based on
proprietary applications. These help customers improve their operations, manage
workflows, eliminate process steps and gain access to critical information. Determine
what information your customers need to make better decisions and what tools you can
offer to help them manage their work more efficiently.
14.Marketing What will you do to let your customers know about your offerings and
to spur their purchases? Plan for cost-effective marketing that delivers the sales you
need. Marketing includes any promotional goods, plus your website, online advertising,
social media, mobile, direct email, promotionsevents, public relations and CRM
systems.
15.Sales How will you secure hard orders from your target customers? You can
outsource sales or set up a direct-sales force, a call center or an e-commerce platform.
16.Resource requirements How will you design, manufacture, deliver and sell your
goods? Quantify the costs that personnel, raw goods, machinery, outside services and
financing will incur. Most operations require the right people as well as enough money
to create a customer base, hire the right staff, develop their offerings, and manage their
workforce.
17.Profit validation Can you forecast a profit? This requires expert staff or outside
professionals to help you with budgeting and fiscal reporting.
18.Financial projections What will it take to make a profit? Figure out your monthly
sales estimates, targets and pricing.
19.Cash flow Will you have enough cash? Outside investors will want to know about
your operating cash flow before they invest.
20.Management team Do you have a good plan for running your organization?
You know your management capabilities. Supplement your expertise with professionals
who complement your skills. Use a profit-based reward structure to determine your
managers compensation. This model rewards them for meeting your fiscal objectives.
21.Future growth How will your company grow and make more money? Growth
areas include adding customers, new products, and fresh geographic markets nationally
and internationally. Seek corporate expansion in strategic partnerships, mergers and
acquisitions. As you expand, create profit centers that help your business grow.
Ethics and Accountability
No matter what your new business entails or what products or services you offer, your
corporate culture must exemplify integrity, trust and accountability.
Meet every contractual promise. Pay your employees and suppliers fully and on time. When
you make a mistake, admit it quickly and correct your error. Make sure that your customers,
suppliers and investors can count on you and trust you. Ethical behaviour will be integral
to your success.
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About the Authors

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Ed Skip McLaughlin has founded four businesses and is currently running his fourth company, Blue Sunsets
LLC, investing in startups and real estate. Wyn Lydecker launched Upstart Business Planning. Paul McLaughlin,
MBA, is an associate in the financial advisory services group of Deloittes real estate consulting practice.
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