I have written before on finding your purpose and discovering why you do what you do. It is important to understand your “why” because it changes the way you communicate with your target audience in order to sell your products or services. Most of us communicate with others by discussing our features and benefits, which is the “how” and “what” of the work we do.

Discovering and sharing your “why” with your audience connects them in an emotional way that motivates the decision making process. In Simon Sinek’s TED video, “How Great Leaders Inspire Action,” he shares his discovery of the “why” and understanding why you do something and why your organization exists.

Simon says, “People don’t buy what you do . . . they buy why you do it.”

The goal is to do business with people who believe what you believe. Simon uses Apple, the Wright Brothers, and Martin Luther King, Jr. to show examples of the power of WHY!

This is all grounded in biology. The human brain is broken into three major areas. The neo cortex corresponds with rational and analytical thought and language. The middle two sections correspond with our limbic brains, which are responsible for our feelings, such as trust and loyalty, as well as for all behavior and decision making. When we are communicating to the inside part of the limbic brain, we are talking to the area that resonates with our decision making ability.

This is done by stating what you believe. Instead of talking about all your benefits and features, tell them what you believe. Tell them your “why” of what you do. Those that you resonate with will look at you with their decision making limbic brain and will more likely choose to do business with you.

If you don’t know your “why” and are having a tough time figuring this out, there is a process that has been developed by my fellow EO Forum mate Ridgley Goldsborough that shares the WHY Marketing Formula. Watch his video here. This powerful approach can help you discover your “why.” Use this to connect with your target customers in such a way that business explodes.

Are you connecting with the “why” and the decision making part of the brain for your customers? How do you share your sales and marketing language? Do you share with benefits and features or with the “why” of who you are?

I have returned home from my EO adventure in Istanbul, Turkey. What an amazing time with 800 entrepreneurs from 91 EO chapters in 39 countries around the world! We heard many interesting speakers, including the Turkish Prime Minister Tayyip Erdogan, who sent a recorded message for us. He told us about their country’s openness to trade and commerce. They are the fastest growing G-20 nation at 8.5%.

As I write this blog, I am waiting in the Frankfort airport and traveling to Istanbul, Turkey to join the EO University and about 700 of my fellow entrepreneurs, including some of my very close friends. I have been looking forward to this conference for a while and have been intrigued with Istanbul for as long as I can remember. I suspect it has something to do with a movie I had seen when I was younger. I look forward to sharing some of my experiences from exploring the city and attending the conference in upcoming blogs.

On the plane, I was reading “Crucial Conversations: Tools For Talking When Stakes Are High.” What makes this book so interesting is its implications for all areas of your life, even though it is a business book. It has really challenged me to think about why we tend to mess up conversations in important situations, like requesting a raise, discussing a big business deal, determining if your relationship will last, or trying to rekindle an estranged family relationship.

Why do we mess these up? In a crucial conversation, our natural fight or flight response kicks in, so blood leaves our brain and travels to the extremities in preparation for fight or flight. The blood leaving the brain decreases our cognitive ability to consider how to say the important things we want to say in a respectful and appropriate manner given the situation. In my experience, our words typically come out in the wrong tone or in a way that does not get the desired positive outcome.

The authors have researched thousands of crucial conversations, and they say having effective discussions is a learning process. When you understand what happens to your brain, you can combine this knowledge with some of their key findings and learn and grow in this area.

Their findings conclude people skilled at having productive conversations:

• Start from the heart. This means they start with the right motives. Winning is usually not the right motive. We are brought up to want to move forward and get ahead. When this is brought into the crucial conversation, it leads to bad outcomes.

• Focus on what they really want. When you are starting to move toward a position of silence, defensiveness, or punishing the other, ask yourself, “What do I want for myself, for others, and for the relationship?” By clarifying what you do and do not want, you free your brain to start searching for better and healthier options.

I know I need to work on this, so I’ll focus on it until I grow my awareness and really improve. How about you? Are your crucial conversations productive and healthy?

I caught up with one of my long-time EO friends, Greg Crabtree, at the EO Nerve Conference in Atlanta. We have hung out and experienced EO events around the world, and we are both passionate about EO and the people there that we learn from and grow with. Greg served on the EO Board as the Finance Chair, which was a perfect fit since his unique perspective allows him to explain numbers in a more entrepreneur-focused way rather than typical accountant speak.

I was excited to catch up with Greg and learn about his first book release! He wrote “Simple Numbers, Straight Talk, Big Profits,” and Nerve thought enough of it to share with all the attendees. Greg told me a little about the book, so I have been eager to read it.

Greg opens the book with a really insightfully point: Most entrepreneurs are not clear on the difference between their salary and the return on what they own. Greg continues, “In fact, all of my clients have confused the profits of their business with their salary.” You get paid a salary for what you do, but you get a return on what you own. When you are not paying yourself a salary at market levels, you are distorting your true net profit margins.

When you are not looking at accurate numbers from this perspective, your financial data is worthless. Making decisions from skewed financial data is, as Greg says, like having a compass that is five degrees off in every direction. If you don’t get real with the numbers, then you won’t get where you want to go.

He gives an example of a client that thought they had at least a 20% net profit margin, but when he looked closer he found they were paying themselves a below market wage. When it was adjusted, they realized that their true profit margin was 5% before taxes. Shockingly, he found most of us entrepreneurs are underpaying ourselves. This may be to show off our higher numbers to others or because we really didn’t know the difference.

Greg subscribes to the Economic Research Institute’s Salary Survey Assessor but says you can go to www.salary.com to compare your salaries with the industry averages. After reading just the first four chapters of the book, I see many opportunities to share more insightful wisdom from Greg in future blogs.

Are your net profits where they should be, or are you over or under paying yourself?

As discussed in the X-Factor Blog, I attended and spoke at the Nerve Conference in Atlanta just over a week ago and had a great time! We listened to some interesting speakers and had a fun spending time with our EO friends and meeting some young aspiring entrepreneurs. The breakout went well! The X-Factor content leads to such powerful discussions and opens us up to the possibilities of creating breakthrough opportunities for our businesses.

The conference theme “Dream, Challenge, and Lead” was inspiring. They kicked it off with video of Martin Luther King, Jr. Then a gentleman came up on stage looking like a young Dr. King and orated the “I Have a Dream” speech. What a powerful experience!

We later listened to the three young international workers that had been captured and held hostage for over a year because they had been hiking near Iran. It was seriously challenging to listen to them share their stories, let alone be in their situation for that amount of time. They spent much of the time in solitary confinement, and they spoke in depth about how incredibly difficult that was for them. Their stories on this hit me hard and reinforced how social a species we really are. When we don’t have human contact, we are driven to a psychological breaking point.

The natural instincts we have to be social would explain the success of social networking and the intrigue we have around the success of Facebook. So when we were told the Winklevoss Brothers were speaking, we packed the conference room. They came up with the idea of a social website and asked Mark Zuckerburg to try and build it, and then he went off and built one himself. The twins talked about their work habits and the challenges of being Olympic caliber rowers. They did a great job comparing Olympic sport to the business world and what they are doing today.

They didn’t really break out into the issue we all wanted to hear about and what really happened with the Facebook before Q&A. However, we jumped right in and asked when they took questions. They shared that they felt it was pure fraud, and they were very disturbed by his actions. I would say they don’t have much to complain about with Facebook stock getting ready to go public, and they also got rich while training for the Olympics. They have new ideas (shhh it’s a secret) that they are exploring with all that money they have now.

I find it very beneficial to be at these conferences (being social) and to gain exposure to the experiences of proven and successful people, whether they are the speakers or the members attending. I was excited to meet a couple of young entrepreneurs with that look in their eyes that says they’re ready to go after something big and create something from nothing. Quinn and Michelle go out and make the world a better place with your budding entrepreneurial spirit!

What are you doing to let that inner entrepreneur to come out?

I have been working on putting together some content for a breakout session I’ll be doing at the EO Nerve Conference in Atlanta next week. This content was created for Insignia and Quantum leap EO programs to help Forums engage in more stimulating discussions around your businesses with the other business owners. I really enjoy these events, catching up, and sharing with my existing EO friends and meeting new ones.

The topic has to do with discovering your X-Factor, which is not an easy task. Your X-Factor is a decision or strategy that solves an industry bottleneck and gives you 10 to 30 times the competitive advantage. This is something that is not visible to your customers. In fact, you don’t want to share it with anyone outside your organization. Treat your X-Factor like your company’s top secret magic ingredient, which will greatly increase your profitability compared to your competitors.

What are some of the industry bottlenecks? Bottlenecks can come from delivery, largest cost, innovation, process flow, customer retention, employee retention, selection, or people reduction. There are so many options, the ones listed and some that may not be thought of right now. That’s the beauty of it! Seize the opportunity to seek out and develop your X-Factor.

Now, what are a few examples of X-Factors? Outback Steakhouse created a compensation plan to retain restaurant managers (an industry bottleneck), keeping them for 5 years or longer when the average was around 6 months. AutoNation offered all the brands of the various cars to break the bottleneck of customers not returning four out of five times. Starbucks focused on higher prices, giving them unbelievable margins.

So, what process can you follow to help discover your X-Factor? This takes some analysis and digging. Sometimes, you discover it at the industry trade shows. Looking at all the breakouts, you will see the problems they are trying to solve, and that may be just the clue you need. You can brainstorm around these questions: What is the biggest cost in my industry? What are the people problems? Where is innovation not happening? And how do I keep my customers and employees happy? Once you think you have a handle on it, then ask yourself, “Why?” five times and watch the onion open up and reveal itself.

When you latch onto your X-Factor, you will be ready to jump on and ride the rocket, so be prepared to hang on. What are you doing to discover your X-Factor?

Anti Herpes

Last week I discussed a study done on Entrepreneurs by Sara Sarasvathy that I found fascinating.  Her study analyzes the characteristics, habits and behaviors of what she calls the species entrepreneur.  She traveled to 17 states and met with 30 founders of companies ranging from $200M to $6.5B, covering a variety of industries.

So what she determined is that there are 2 methods of reasoning, effectual and causal.  The causal approach is one that you commonly find in books.  This is where you have a predetermined goal, a given set of means, and you work to identify the most optimal, efficient, and financially feasible way of reaching the set goal. 

The alternative is the effectual approach.  This is the method of the entrepreneur, and it is when you have a particular set of means, and out of that comes the goal.  This happens with the day to day feedback you receive from employees, partners and the marketplace.

Causal thinking is much more structured, whereas Effectual thinking is more creative and exploratory.  Most people can think both ways, but the startup entrepreneur tends to prefer effectual reasoning for new ventures.  Sara used cooking dinner as a great example of using both types of reasoning.  The chef that goes into their own kitchen, knowing exactly what ingredients they have and exactly what they are going to cook is a causal thinker.   The chef that goes into an unknown kitchen with unknown ingredients and creates a meal is an effectual thinker.  To do what the second chef did demands something more – it takes imagination, spontaneity, risk taking and salesmanship.

The three principals that Sara digs into are:

1) While causal reasoning focuses on expected return, effectual reasoning emphasizes affordable loss.

When I started the mutual fund I limited the attorney to a fixed cost and sent in $1500 to the SEC to get it registered. I knew what my risk was at each step.

2) While causal reasoning depends upon competitive analyses, effectual reasoning is built upon strategic partnerships.

When we started the software company, we did a project that was going to save our client money, but we reserved the rights to sell the product to all the other dealers in their industry. Thus, we partnered with our client.

3) While causal reasoning urges the exploration of pre-existing knowledge and prediction, effectual reasoning stresses the leveraging of contingencies.

Our software company is building web based applications to help businesses be more efficient. We don’t know which one the market will love so we are building multiple ones for our contingency.

Do you recognize any traits of an Effectual Entrepreneur in yourself? Does this give you insight into why you analyze things the way you do?  Successful companies are being built every day this way, so we can all take a big sigh and know that we are not so alien afterall.

One of the benefits of being an Entrepreneur and being in EO is that you get to hang out with interesting people that are creating new and better ways of doing things that make the world a better place. I am in Grand Cayman with internet guru Ridgely Goldsborough who is doing some super cutting edge stuff online.  Take a look as I pick his brain on the special sauce that makes it all work:

I am currently at the EO Amsterdam University, which is a 5 day conference packed with amazing speakers (even 2 Nobel Prize Winners), incredible, fun loving, successful entrepreneurs and exciting activities and venues.  One of the most interesting things we’ve done is take a canal ride through the city, making our way through the canal system and on to dinner, where we wore Dutch Clogs.  The really cool thing about this conference, though, is that it’s centered on changing the world and how each of us can do our part to make a difference.  The only thing stopping us is our own self imposed limitations.

Before I go any further, I first want to send out a thank you to those of you who sent me email, texts and Facebook messages about my 9/11 experience.  Your thoughts were very heartfelt and appreciated.  Something I wanted to add to my story is that the following day I rented a car and drove to Rochester, NY to see my family.  I arrived about 30 minutes after my brother Mark delivered his 3rd daughter Ava.  After witnessing so much death and destruction, it was incredibly uplifting to walk into the hospital room and be greeted by my entire family, including the latest addition, baby Ava.  Happy Birthday Ava, and thank you for spreading so much light on all our lives!

Now back to change. I’ve talked a lot about the social aspects of entrepreneurialism, how to approach change and make a positive difference, both personally and professionally.  What we’ve done at the conference is break out into groups to do some creative brainstorming with creative specialists, which proved to be a very stimulating and educational process.  We focused on what brings about change in our lives and what experiences we’ve had that caused major change to take place.  We then discussed what kind of change we would like to see for future generations.

On the topic of change, Dr. Muhammad Yunus spoke to us about change that benefits and empowers poor people around the world.  Yunus is founder of the Grameen movement and winner of the 2006 Nobel Peace Prize.  He’d heard some years back about people in Bangladesh working with loan sharks in order to purchase things needed to run their businesses and just survive.  The loan sharks were charging interest as high as 1500%.  Yunus went to Bangladesh and pulled together a group of business owners.  When he asked them the total that they had borrowed, combined it came out to be the equivalent of around $43.  He proceeded to loan them the money to repay the loan sharks at no interest.

Once they all paid him back, he gathered others to help raise money to loan the people, who continued to repay him around 98% of what he’d lent.  This was the catalyst that started the Grameen Movement that has raised millions of dollars to be lent to thousands of people as they seek to change and better their own lives.

You might recall my mentioning a desire to start a microfinance opportunity in Pondicherry, India where Efficience has our software development office.  I spoke to Dr. Yunus, who gave me his card and offered to help me.  If you’re seeking something, the universe might just put the right people in your path to help you, so keep your eyes peeled.

I will use this opportunity to do my part and try to create a positive change in the world, to try and help others have better opportunities and hopefully better lives.

How are you changing the world?

How to Communicate, and after sitting on shelf for who knows how long, I finally picked it up and started reading it. I might as well have picked up a sling shot and turned it on myself because it pegged me right between the eyes.

It starts with a lesson on how listening is key in good communication. When we listen, we have deeper relationships, friends are drawn to us, and we are able to learn valuable information for business. The book moves on to the Blocks to Listening. There are 12 of them: Comparing, Mind Reading, Rehearsing, Filtering, Judging, Dreaming, Identifying, Advising, Sparring, Being Right, Derailing, and Placating.

Advising is a block that, as a strategic thinker, I am guilty of because I am trying to figure out the issue being shared and solve it instead of getting deeply involved in what the person is feeling and acknowledge their pain.