HATTIE: Welcome back. Not everyone stays small. We'll look at a case of how small explodes, a business that has grown big but still acts like a small business. And we have all kinds of how-to information for you, like how to use direct marketing to reach new customers, and how to raise money if the banker says no. In fact, we have so many ideas on raising money, you might want to grab something to write with. Plus, we have great how-to information from our regulars on growing your business. But first, as we do each week, let's start off with a look at a business owner in the trenches. Today, someone who took a simple idea--men's clothing--put unique spin on it and has grown it from a small business to a booming one.

Unidentified Man #4: Come in, JIM.

Unidentified Man #5: Hello, MARK. Something with a little bit of red, and the gray that's in that.

(Voiceover) At first glance, it looks like they're playing blackjack.

Unidentified Man #5: Here's a beautiful one.

(Voiceover) But actually this is the way the Tom James Company sells its upscale line of custom and ready-made men's clothing. They take advantage of the fact that their customers are busy people.

JIM McEACHERN: The thing that influences most customers to buy from us is the idea of not having to go shopping.

(Voiceover) Thirty years ago, Jim McEachern and his co-founders decided to sell clothes the way they'd sold books, directly to the customer. The fact that they didn't know much about their product didn't bother them.

JIM McEACHERN: Well, I didn't know how little I knew, and so I didn't feel any particular disadvantage. I didn't know that there was a whole lot to know about clothes, so--I didn't have any business education, no financial education, and so I learned a lot of mine by reading about people who had built successful businesses, or talking directly to people who had built, you know, big businesses, being our prospects and customers.

(Voiceover) So I asked him to tell me some of the thing he had learned about growing a business. What do you look for in a salesperson?

JIM McEACHERN: The first thing I want to know is: Does the person have character? And what I mean by that: Is the person trustworthy? I think if a person has good character, if they're trustworthy, then you have a good starting place.

HOST: Well, how do you find out if they have character?

JIM McEACHERN: By spending a long time in the interviewing process. It's not unusual for our interviewing process to last several weeks. And so the more time you spend with people, the more they reveal what they're really like.

HOST: Have you ever had a situation where your customer decides he wants to come to work for you?

JIM McEACHERN: We've had quite a few people over the years who were customers first, and then they became employees. (Voiceover) Salespeople in most direct organizations are treated as independent contractors; at Tom James, they're employees who become owners.

We feel that people that are employees, especially if they're also owners, will be a whole lot more highly motivated, so if they have a stake in the company, other than just the paycheck, well, then they're going to look out for the interest of the company. We don't want them to have a lot of financial pressure on them because they'll be figuring out how to pay the bills rather than how to develop a clientele. We feel that the best way to train people is to show them exactly what we do, so they'll spend the entire first month following someone in the field, watching them sell and do all the things that are part of the typical day. We've established what we believe are essential success habits, and basically those essential success habits form the foundation for the job description.

(Voiceover) The essential success habits serve as a daily checklist and include how many phone calls to make, how many selling appointments to book, even the kind of attitude to adopt. How do you teach your vision to people who work for you?

JIM McEACHERN: Vision is partly taught, I think, and it's partly caught. You cannot necessarily, just by what you share with a person, you know, cause them to buy into your vision. We identify those things that they want to have, they want to do and they want to become as if anything was possible, and then we start calculating what it would cost to have those things, do those things.

HOST: About goals, I heard you say one time you don't believe in target dates.

JIM McEACHERN: If you miss a target date, there's a tendency to give up, and so the goal--some goals, I think, you ought to stick with just however long it takes, and one example of that is in 1967, when Tom James was a $165,000 company, I set a goal to build the company to $100 million, and I had an 18-year target date. It took 25 years. And in my suit I keep a slogan; it says `I Ain't Quitten.' That basically means I'll pursue the goal however long it takes.

HOST: That's great. What do you think are the secrets to motivating a sales force?

JIM McEACHERN: Well, I'm not sure you can motivate anyone else, but you can create an environment where they're motivated. And so helping them identify what they're all about, what they want, and then treating them like they're worthwhile. One of the mistakes I made early on is I tried to control too much, I think, because I was--I felt like it would go right if I was controlling it. And yet, you know, you limit yourself by how much you can control. And so I'd rather control by influence than by saying, `You can do this, and you can't do that.' I'd rather control by giving, helping people develop a vision and an idea about how to carry out that so that they're basically in control, and not me. We have the basic attitude that everybody has to sell, or sew, or scorekeep. And sell, obviously, is dealing with the customer; and sewing means producing the product; and the scorekeepers are the accounting department. So we don't have a lot of executives who sit in ivory towers. In fact, we don't have any.

(Voiceover) He's not kidding. Not only are there no ivory towers, there's no central headquarters. The executives are all over the country.

JIM McEACHERN: I don't personally have an office. I have a corner in our training director's office, and I'm happy with that. That saves a lot of money. I believe that if you have, let's say, all the executives in one location, they tend to spend their time talking to each other rather than talking with the other people. And I think there's a good chance that the person who's in the highest position ends up doing too much or being too much influence on those in other positions, and maybe inhibits decision making. I realize that as an owner, a lot of people's jobs are at stake. And if I do my job well, then they have great opportunity. If I do my job poorly, I take away their opportunity.

HOST: What are the most important things to you in life?

JIM McEACHERN: Well, back in my first year with Tom James, I saw a film of Vince Lombardi called "Second Effort." And he said, `Your priorities ought to be God, family and the Green Bay Packers, in that order.' And I liked that. And so I said, `My priority will be Tom--you know, God, family and Tom James, in that order.' And I won't say that I've practiced that perfectly, but that is my priority. If things are not going right in any part of your life, it tends to carry over into all the other parts of your life. And so if a person's overall priorities are right, then I think their performance and their job will be higher. One of my goals I set a long time ago was to try to make my wife the happiest woman on Earth. And so I try to leave the house every morning with her feeling good about our last few minutes or, you know, the morning, whatever it's been like up to that time. And then on the way back to the house, the last five minutes or so one of the things I try and do is to make sure I can think of something that will make her feel really good about me being home.

(Voiceover) Here's what I learned from Jim McEachern.

1. Control through influence, not orders.

2. Go for your Goals no matter how long it takes.

3. Don't let target dates keep you from reaching your goals.

4. And if a person's overall priorities in life are right, his job performance will be at its best.

5. Right priorities make for top performance.

HATTIE: In a lot of ways, Jim McEachern is the epitome of the modern business owner: No big office, no headquarters, but he stays in touch no matter where he is.

A lot of us do it, and increasingly we work away from the traditional office. Susan Laughridge tells us there's a lot we small-business owners can learn from big companies in this week's You're Wired.

SUSAN LAUGHRIDGE: All of us are trying to get the same thing accomplished, as far as not spending dollars that don't add value to our end-user customer. One of the things that we look very seriously at is telecommuting. We have many associates that instead of working in our work locations work from home. They have the advantage of having all the resources as if they were in their office, but they can work from home and save us from having to have fixed costs and expensive real estate for them to work in.

HATTIE: Now is it expensive for me as a small-business owner to set up someone to work in their home? SUSAN: Not with technology anymore, HATTIE. The capacities are going up, the costs are going down. We find that many small businesses utilize the same type of technology that large businesses use. So, it's very affordable.

HATTIE: So if one of my employees is going to work at home, what do I need to give them so they can be productive?

SUSAN: Well, you need a telephone system and today we recommend DSL so they can have Internet, fax, and two telephones, even video teleconferencing all in one. There are DSL-ready PCs with a little camera that's linked in so that they can talk, work colaboratively on a document, see each other, go to the net, and receive a fax, all at the same time.

HATTIE: You think I can afford it? SUSAN: You can not afford not to. (that's a double-negative, isn't it?) But you know what I mean. If you take a look at what your competitors are doing, and if you look at the long-term savings, it pays for itself.

HOST: A lot of us use cordless phones at home or in the office. But our legal expert, John Patrick Dolan, tells us there are things to be aware of when we cut the cord.

JOHN PATRICK DOLAN: Most of us are using cordless telephones now, and something new has come down from the Supreme Court. It happened to do with a criminal case, but I think it has application to small-business owners who are our viewers. Police were monitoring cordless telephone transmissions, and they heard in this monitoring process what sounded like drug transactions. And so they set up an observation post and they watched people come in and out of the individual's home who was being monitored. And they determined it was, indeed, drug transactions, and they got a search warrant, searched the house and found illegal drugs. Well, the case was thrown out of court because the court found we have a right to privacy in our telephone conversations. And you can't listen in on someone else's telephone conversation and then use that information, in this instance, for law enforcement purposes. Where I think this has big significance for those of us who are in small business, especially in the area of business that relates to technology, is to first be aware that when we use cordless telephones we are broadcasting in the general marketplace information, information we might not want to broadcast. So we first need to be very careful about using the cordless telephones. And second, for those people who intercept this information, there's an interesting question about what they can do with that information lawfully. It may very well be a situation where liability is created if it is proven that someone intercepted information from a cordless telephone conversation and used that to business advantage.

HOST: So would this apply, for example, to a car phone?

JOHN: Absolutely. Any time we're on a telephone where microwave or broadcast technology is used, our conversation could be intercepted. So we have to be very careful and make sure if there's anything that's significant, secret, a trade secret, we don't want to use any of these kinds of communication mechanisms if we want to maintain our trade secrets.

HATTIE: Direct marketing works for big companies, and it can work for you too,. For the next several weeks, we'll tell you exactly how to develop a direct mail campaign for your own business. We'll visit with the people the big guys hire to do their direct mail campaigns. Let's meet two women who can tell you how to Deliver Your Message.

Tell me what a list broker does. You own AllMedia. That's a list brokerage house. What do you do?

LAURA McCLENDON: What we do is help people find very targeted prospect lists to use on their direct mail campaigns. And so, we ask them about their customers. We try to find out as much as we can about how they're already doing business and who buys from them and who doesn't. And then we take that information and go out and research the 20,000 or so lists that are on the market right now and try to refine that for them and pick pieces of the marketplace that are appropriate for them.

HATTIE: You said there are 20,000 lists.

LAURA: If you want to count the lists by name that are on the market, there's about 20,000. Within each of those lists, there are lots of segments. And those segments, when you add those all together, it's more like 200,000.

HATTIE: Direct mail must be something that's huge. It must be huge. LAURA: It is huge. It's a huge industry. And the reason it's huge is because it's very effective.

HATTIE: Don't you have a list here that we can look at?

ANGIE GARRISON: Yeah, we sure do. If you want to follow me, I'll show you.

HATTIE: I do. I want to see it.

ANGIE: And this is a library of every single address in the United States. It is categorized through ZIP code, carrier route. And to that level, we have demographic information. And that information is average age, average income, length of residence. And it comes from not only the census that goes through, but also when you go and you buy an electric mixer and you fill you out a warranty card and you answer all those questions on the warranty card? Well, what they're doing is collecting that data. And they will then go back to that address where you live and start laying that data down.

HATTIE: No! ANGIE: Yes. So that they can give you some averages as to certain neighborhoods and what the demographics of those are like.

HATTIE: How important is the list when it comes to direct mail?

LAURA: Well, it's--I think it's crucial, as does most of the industry. You can have a sort of a weak offer, and you can have some rather weak creative. And if you have a very targeted list, you may still very well be successful, because you've reached people who really need what you're selling.

HOST: It's also important to be timely when you deliver your message. Jim and Naomi Rhode helped thousands of professionals make more money by marketing their practices. Jim tells us just how important timing is in this week's Smart Practice.

JIM RHODE: You see, our clients--our patients, our customers--live in a world where time has shrunk. It used to take an hour to bake a potato. How long does it take you now? It takes eight minutes. It used to take three days at the drugstore to get your film developed. Now it takes how long?

One hour. It used to take three days to airmail a letter or document across the country. Now it can be done 9:30 tomorrow morning. Or even better yet, almost instantly with a fax or email.

So our clients are used to that sort of thing. So as a small business, if you speed up how you serve people, you have more people to serve. Isn't that great?

Business Basics

HATTIE: Last week, we learned how to get a banker to tell us yes. Also, we learned exactly how venture capital works and how we can go about attracting a venture capitalist. If those two channels for funding don't seem practical for you, we have more ideas.

We know that for every $100 loaned by banks in this country, 92 of those dollars go to big business.

This means with only 8 percent of the bank loans, we are employing 50 percent of the country's workers.

How is this happening? It happens because we are creative. If a banker won't tell us yes, we'll figure out another way. Doug Carleton is an independent contractor representing South Eastern First Financial, which specializes in business lending for small businesses.

Grab a pencil, because in the next few minutes he's going to give you 12 ideas which will help you raise, conserve, stretch and manage money.

#1: Buy a business

DOUG CARLETON: Considering buying an existing business. In many cases -- in most cases, small businesses that are sold are sold with the owner holding most of the financing. So that the business owner, basically, provides the financing. The business owner is the bank.

#2: Suppliers & Lenders

CARLETON: Suppliers want your business as badly as you want to do business with them. So if you're starting a business or if you're young in the business or if you have a small business and you need financing, and you're buying supplies or services from someone in a fair amount of quantity, go to that supplier and say, `I need some help,' or `Is there a way that we can stretch out the payments to help my cash flow?'

#3: Revenue Sharing

#4: Sub-contracting

#5: 3rd-party guarantees

#6: Joint Ventures

#7: Leasing.

#8: Barter .

#9: Tenant sharing .

#10: Contract Financing .

#11: Future Commitments .

#12: ...and Credit Cards .

CARLETON: Let's say you have a $5,000 line limit of your credit card. That's just like a $5,000 line of credit at your bank. And if you--like so many people -- potentially a revolving line of credit. Small business very often is a desperate game. You do things that you would never think you would do in order to survive and get financing to do it. The Wall Street Journal has had articles on people who have started small businesses and survived on their credit cards. So it's a working capital line. You just have to make sure you keep it current.

HATTIE: Now you have no excuses for not taking action on your idea. There is money. You just have to unturn every stone.

Jeff Slutsky's street fighter philosophy is, `Don't outspend the competition, out-think them.' And Jeff says that means not doing the wrong kind of advertising.

JEFF SLUTSKY: Sometimes given the same dollars, it's better to place your money on two different media--advertising media then to leave it all on one. For example, a lot people buy a lot of newspaper. But if you were to shave off 20 percent, 30 percent, 40 percent of that newspaper buy and maybe stick it into radio, and then in the radio advertising say, `Be sure to see our ad in Sunday's paper,' sometimes they work together given the same dollars. Now the only exception to this is never, ever, ever say, `Look for our ad in the Yellow Pages.' I know you've seen it on billboards. You've seen it on sides of trucks. You've seen it in other advertising, `Look for our ads in the Yellow Pages.' Well, why wouldn't you do it? It's the only advertising game in the world where you're right next to your competition. I mean, who would do that? But they do it. So don't do that. Be a street fighter. Next, Jeff shares with us how to develop a winning marketing plan. Plus, we'll meet a woman who's decided to take on the competition in the ambulance business.

HATTIE: Remember, this program is about your business and your life. So stop thinking about it. Take the leap.

The Closing of the Show.