Over the next couple of weeks, I am going to start posting about real estate transactions. The first set of posts are going to be related to managing bank relationships. I know that most investors avoid banks because they have bought into the hype about the importance of being ananymous. As a lawyer, I believe it is more important to do what is right, accept the fact that you are going to get sued and prepare accordingly. Bank money is usually provided at decent rates, predictable terms and average loan to value ratios. Your personal guarantee should not be a problem if you are person of integrity. I am not saying that you should avoid other forms of financing but you should start with establishing a good relationship with a local community bank. I have 5 community banks that I do business with and all of them provide great customer service and better then average terms.Here are 10 things to do to establish a banking relationship:1. Spend the money and time to have your accountant prepare industry accepted financial statements and have them updated every 6 months.2. Prepare an asset sheet with liabilities to provide the bank a clearly defined net worth, cash on hand and debt load analysis.3. Have your tax returns for the last 3 years scanned into the computer so that you can email them to the bank quickly. They are going to move them around internally and paper gets lost.4. Always maintain a cash reserve in a mutual fund or other liquid vehicle to prove reserve funds but never use that money.5. Never take out second mortgages on investment property.6. Provide a written explanation of your tax return if one of the most recent years has something abnormal on the return.7. Ask for more than you are going to receive.8. Ask the personal banker the types of deals they are looking for before you ask them for something. 9. Try to establish less than 75% loan to value in your deals that you take to the bank.  (I will teach you how to limit the cash out of pocket later)10. One deal at a time. Do not try to take down multiple deals with a new bank. Do one, close it, make 3 payments and then inquire if they are willing to do another transaction.AH 

“The question for each man to settle is not what he would do if he had means, time, influence and educational advantages; the question is what he will do with the things he has.  The moment a young man ceases to dream or to bemoan his lack of opportunities and resolutely looks his conditions in the face, and resolves to change them, he lays the corner-stone of a solid and honorable success.” Hamilton Wright Mabie

Lawyers are notorious for not returning phone calls timely. There are a lot of excuses for this shameful stereotype but the reality is that it is true. I am constantly working on this with my associates and staff. I believe we are better than when I first started practicing. I have called attorneys and I have not received a return call for 2 weeks. I would expect a staff member to call and say, “Hey uh Mr. ? does not really want to talk to you so I am calling to let you know that you are not important enough in his life to call you back timely. Good Luck, Thanks for calling. Ms. or Mr. ? Assistant to the Attorney to important to call you back.”Truthfully, I know that there are some clients that I don’t call back because I need to fire them.  I don’t want to deal with them because I  am a coward.A distinction that I have used to train my staff is the difference between communicating and informing. Communication requires the tone, inflection and melody of a human being’s voice. Informing someone is an act of transferring data from one place to another using various methods such as fax, email and voice mail. Clients will not get irritated if you make the distinction clear and properly identify what the situation requires. Remember that the client’s expectation must be set around how the business will be communicating and informing the client.   Here are some tips:1. Information such as confirming a time, date etc. does not need a voice call.2. Information such as a request for a fax or copy of something does not need a voice call.3. Requests for information should be done via email and fax if possible so that you have a record.  3. NEVER EVER EVER GIVE BAD NEWS TO SOMEONE IN AN EMAIL IF YOU ARE GOING TO BE WORKING WITH THIS PERSON IN THE FUTURE.  CALL THEM ON THE PHONE. 4. IF YOU ARE TERMINATING THE CLIENT BE CLEAR SEND A LETTER NOT AN EMAIL. 5.  Call someone on the phone if an email or fax is not clear to you and ask them to explain it to you by asking pointed questions about the document.  AH 

Time is the most precious thing in business. As busy business people, the one constant is time. What I mean by that is that everyone has 24 hours in a day 365 days a year. I have 24 hours and you have 24 hours. A technique that I use daily is the phone conference. A phone conference is a predetermined time in the future where two or three people initiate a call about a specified topic. Voice mails if used improperly could possibly be the most painful invention of the century. If I receive a voice mail that says,  ”A please call B back. Thanks.” What is the purpose of that stupid message? Wasting my time to have to make another call in the future. Use email if I am not answering my phone. There is an exception to this rule. Friends. Not a problem. I want to call them back but if a business person says call me back and I am now aware of the nature of the call I am setting myself up for failure. NOTE TO SELF - USE A PHONE CONFERENCE. This phone meeting allows four important things to be accomplished. (1) You stop playing phone tag. (2) You control the length of the meeting. (3) You can prepare for the call so it is more productive. (4) You can avoid unnecessary conversation because all parties are in agreement about the expectation of the call. Try it.AH 

Yesterday a friend called me and left me a voice mail. Doug is a man of character and integrity. He is also generous because over the past 9 years he has constantly referred one great client after another to me. I have not referred him one person. I know that this has not been conscious but he knows that and recently graciously released me from the burden of needing to catch up. He continues to use my firm’s services in spite of me. He called to congratulate me on being named to a local charitable board. The time energy and effort to stop his day and acknowledge me meant the world. It humbled me. I realized after he called that friendship is deeper, wider and stronger than business. He will never know the impact his kind gesture had on my life yesterday afternoon. Thank you Doug. AH 

We learn more from failure than success. The recent movie “21″,  although a poorly constructed movie, has a good line or two. Kevin Spacey’s character says that the trip to Vegas is “business -  they are not gambling.” He makes the distinction that “gambling is emotional.” When the main character gets emotional he loses everything. Business is far too often gambling. An act of personal reflection manifested into a business full of the founder’s emotions. True business must be emotionless in execution. An exception to this rule is the need for true leaders of business to be emotional when it comes to following ethical, moral, and spiritual norms. True leaders will infuse emotion into the business to protect employees or perpetuate philosophical principles. If failure comes out of these emotional decisions then the world will be better off with a little less efficient businesses. Enron, WorldCom and Bear Stearns could have used some righteous emotions from their leaders. Our business failures should not be processed emotionally. If a business person processes emotionally then he or she will react emotionally and often times produce an emotion instead of a product. Remember we fail 9 out of 10 times (Robert Kyosaki). If we failed 70% of the time we could play professional baseball or become a meteoroligist.   Failure is essential to reveal what does not work. Sometimes that is 90% of the battle. Step back and put your emotions aside and embrace failure.AH 

” Knowing yourself is the beginning of all wisdom.” Aristotle

Rolling River, trickling stream, tsunami. All of these could describe business. What about a whirlpool? Sometimes the business model that you are using can create a circular pattern. In other words, the same clients, same patterns and same techniques create the pooling effect. On the inside of this pool there seems to be activity, motion, movement and speed. But on the outside looking in you discover that there lacks perpetual forward motion. If the pool is big enough you might miss going in a circle but eventually all activity moves into the center where the water is stagnate. Center is where business ends up if you do not redirect the flow of marketing, resources and time. A whirlpool is self-contained and if you lack the initiative to move away from the comforting flow another business will absorb the water around you watching you die out. Are you floating or swimming? To find out ask these simple questions:1. Am I adding value to my clients this year more than last year?2. Is my staff getting better?3. What new technology can I implement to cut costs, increase productivity, and decrease mistakes?4. Should I eliminate an area of my business that is not profitable?5. Have I added new clients in the last week from a new referral source?6. What are my 6 month goals for business activity?7. Should I replace myself with a manager, technician or chief operating officer?8. Am I doing what I love?AH 

“Go confidently in the direction of your dreams.  Live the life you have imagined.” Henry David Thoreau

“The best way to prepare for life is to begin to live.” Elbert Hubbard

“Dost thou love life?  Then do not squander time, for that is the stuff life is made of.” Benjamin Franklin

People are powerful. In the age of digital separation and technological segregation personal networks are the advantage in the 21st century. People connected to other people creates mini-communities that allow for business to be conducted quickly and efficiently. If the parties in the network become stale or inefficient, the person who wants to achieve success does not contract the network by burning people up. The person identifies a weakening portion of the person network and asks the following:
Will more resources directed to this part of the network create an exponential result?
Should I remove resources from this person in the network and assign them to another resource?
Maybe I should add an additional person to the network?
Will more time given to this person result in additional network opportunities?
An ever widening and tightening personal network allows for an increasingly profitable network!
The power of maintaining personal networks comes from capturing opportunities and then having those opportunities directed back to yourself with minimum effort and capital outlay.
This idea is a sort of emotional leverage. The advantages are many. Such as win/win, low cost, synergy based on desire not obligation, two heads are better than one, widening perspective, additional help without high costs and increased reaction time.
AH
AH

“The unexamined life is not worth living.” Socrates

Managing cash in a business is important for continued success. I prefer to see incoming cash in four segments. First, tithes and charity. Second - savings. Third - payroll. Fourth - Operating Expenses. Every deposit no matter how small should be divided into these four segments based on a formula. The formula I use for my businesses is 10% of gross for tithes and charity and 10% of gross for savings. Out of the remaining 80%, 60% to payroll and 40% to operating expenses.  Installing cash segmentation of each deposit allows choices for cash flow and an indicator of daily deposits. These percentages should be created based on a profit and loss of the previous 12 months, 6 month or 30 day averages. A goal in cash segmentation is the predictability of cash on hand after the segmentation which should predict profitability for the day, week and month. Try it for 2 months and see if it works for you. You might have to change the percentages but see what happens.AH 

“Don’t bunt.  Aim out of the ballpark.” David Ogilvy

Time has moved quickly while I have been practicing law. I started practicing law in 1999. Horribly naive and incredibly brash, I thought I could do anything. What a fool was I. Wait, I’m still a fool because I still struggle with the most important thing in business - cash flow. Law school does not prepare you for business. Practicing law is a business and a profession and law schools teach you how to think like a lawyer but they do a horrible job of teaching lawyers how to be business people.The most important business rule to keep in mind is cash flow. Over the last 9 years I have done my share of fighting businesses that have robbed Peter to pay Paul because of a lack of cash flow. I have attempted to rescucitate companies with legal maneuvers directed at trying to achieve the owner’s goal of holding on for “2 months” so they could land this contract or receive this payment.CASH FLOW!!!!I have advised many people to seek bankruptcy protection because of a lack of cash flow. I am learning that cash flow is different from cash reserves or cash availability (such as a line of credit).  Reserves and available cash are stagnant pools of money that might hold off the inevitable but these are far cries from Cash Flow.  Reservoirs of money do not bring life into a company. Credit lines and cash reserves are the morphine and oxygen of a company placed in hospice. Cash flow is the blood of any business. As money flows in beating the heart of the business which pumps needed cash blood into other parts of the company.  Activities that relate to cash flow are the steady reduction of interest bearing debt, expansion to meet demand by purchasing new materials, investing in technology or bringing on needed employees. YOUNG ENTREPRENEURS LISTEN AND LISTEN WELL BECAUSE YOU COULD HAVE THE BEST IDEA IN THE WORLD BUT IF YOU DON’T HAVE CASH FLOW NOTHING MATTERS. 

YOUR BUSINESS WILL BE DEFINED BY YOUR BUSINESS CASH FLOW!!!!

AH 

I own and manage a law firm in Chesapeake, Virginia. This place has been a blessing and a curse. In turning over this new leaf of confession, I thought it would be neat to share my experiences with the world of being a serial entrepreneur with a business you love to hate. I am going to submit these posts in a problem solution format.ProblemSmell of urine in the bathroom. In December of 2007, one of my staff members complained of a foul odor in the hall/client bathroom. This complaint came and went over the next few months. In the last week of March, 2008 my office manager (i will refer to her as E) came to me and said, “it smells awful and it has permeated the lobby, what do you want me to do?”Solution:Now I know you guys are thinking, “what does this have to do with business?” Well, this is the dirty part of business, ready? Staff have to urinate. They also defecate. These activities occur at work.  An employee’s comfortability rating is important to performance never mind the smell of urine in our lobby with our clients. I sprang into action and delegated. I directed her to call a plumber. Here is where the situation gets interesting. My best friend’s company does our maintenance so E called Bill and asked for some help. Bill arrived, black light in hand. Yes, that is right. A black light like a legal version of Room Raiders MTV. I received the following email on my blackberry from E  later that day: 

I have received numerous complaints from the staff regarding the strong stench of urine coming from the public bathroom.  Last Friday morning the odor consumed the entire reception area and ARH had me call a plumber. This morning a plumber came out and identified the source of the smell.  The bowl was left full of urine during the night.  Whoever used it last yesterday no only left the seat up, but neglected to flush.  There is copious amounts of urine on the base of the bowl, on the floor, on the walls, etc. While the obvious assumption may be that these contributions are from our clients  it does not prove true inasmuch as our last and only appt yesterday was at 2pm.  Therefore, I have no choice but to request that better aim be practiced.  If you are required to wear eye glasses please do so.  If you require a target, please advise and I will fashion one for you.Finally, I will be sending our female employees a similar email requesting that they refrain from standing when urinating. 

Now when I read this email, I thought to myself, ” Am I running a respectable business or what?” I thought the email was great and proceeded to call E from Kings Dominion where I was spending the day with my wife and kids. She told me that when Bill turned on the black light obvious urine stains were evident 2 feet from the floor on the walls around the toilet and on the floor in back of the toilet. She told me that the female staff are refusing to use the restroom in that hallway. I was disgusted and asked her what the plan was to fix the restroom. E indicated that she was on the task and corrections were being made to the facility. WOW. My theory is that my employees secretly hate me especially the attorneys and have not only urinated on the walls in the bathroom but secretly urinate around my door and probably in my chair. I refuse to get the black light and see because I don’t want to wear a hazmat suit to work. Tales of a legal professional, UGH!!!

AH 

My biggest personal failure has to be with my wife. She is a great person but I really lose patience with her. I can endure clients and strangers complete absurdity as if I am in a moron marathon, but with my wife I short fuse her. I mean that really stinks of me. It should be the opposite really. Maybe with my wife there are more items of interference. Things like, hey I wanted to have sex last night but I didn’t get to have sex last night. I never have to ask a client or wonder why my desires did not get fulfilled. I tend to forget that my wife is a real person separate from my desires. That sounds horrible doesn’t it?  I am conclusively selfish and self-centered. My hope is that I am not cruel or indifferent but she is my wife and I forget to acknowledge her apart from my hopes desires and dreams in my life. Sometimes I will sit on the couch with her and I forget the 20 years of history we have together. In those brief clear moments I realize that she is an independent, smart, vibrant, funny, caring and loving person. Then I get scared and realize that I had nothing to do with her creation, I am just the beneficiary of her. Maybe I should stop being such as jerk. The problem is I really wanted to have sex last night. Well there is always tomorrow night.AH 

I have decided to create some accountability in my life using this my blog. I struggle with things and for most of my life I have been quite transparent. Recently, I have started to become more reclusive. Today that changes. I have decided that choices can come out of my failures. So, If I divulge my failures as a person, businessman, father, husband and citizen maybe someone out there will create some choice in their life.I know that this might be painful and embarassing but my mentor has taught me a lot about accountability so here is it goes. Hyperdrive commences hold on.AH