Building Your Own Guthrie

Introduction: Your Quantum Leap Advantage

You've never read a business book like mine.

Because you hold this special edition, you've probably heard me speak, maybe several tunes. You may have even been to the castle, and be a business partner. So you'll realize im- mediately that this hook is written the way I talk to audiences at my Quantum Leap Advantage seminars. You'll also under- stand that it's not book for everybody, because success and the wealth it brings isn't for everybody. But I think you'll profit from it, because it captures under one cover all the Quantum Leap strategies I've been pounding into heads for several years.

In the Business sections of bookstores and libraries across America, the shelves are packed with books that tell you how to become a successful entrepreneur. Some of them are writ- ten by men and women who have achieved a respectable level of success. Others are written by professors who understand business as a theory, but, of course, have never had their own business. These books typically take the reader through the step-by-step mechanics off starting, growing and ultimate- ly selling a business. Others are manuals that cover taking a company public, tax issues, raising capital and other topics an entry-level entrepreneur needs to know. They include check- lists and graphs, and formats for business plans and letters of intent. There are probably nuggets of "how-to" information in these books. But I've found most of them to be as flat and life-less as road kill.

But more to the point, none of these books tell you how to prepare your mind for being super successful. They skip over how to adjust your perspective just slightly, so you can take what I call a Quantum Leap … make millions of dollars … and do it over and over again!

What if you had access to the secrets of a man who has the strength, skills and self-confidence to make one Quantum Leap after another, even make them simultaneously and knows he will ultimately become a billionaire before he quits. What if you could receive, in his own words, the wisdom of this ac- tive multi-millionaire—not one of those "real estate rich" mo- rons or some silk-suited seminar mooch—but a man who took his own energy corporation from an $820 investment to an incredible $400 million in market capitalization in just eight short years!

That's what this book is.

It's about achieving the mental toughness and laser-beam focus you need to make a ton of money. I've packed this book from beginning to end with tips and strategies I've used to thunder across the financial capitals of five continents. But I've left most of the minuscule nuts and bolts and checklists to that pedantic crowd of pedestrian business people and dusty professors who write those "how to" books.

Putting it another way, most business writers give you some weapons, or at least a weapons manual, and send you out to face the realities of business. Through my Quantum Leap methodology, I show you how to prepare and focus your mind and spirit for executive battle—against entrenched insti- tutions … vicious corporate assassins … and those nay-sayers of success, the purveyors of conventional wisdom. Don't let anyone tell you, "You can't do that." Because you can! That's the Quantum Leap difference.

They used to call me crazy … and worse. They'd say, "Dan, you can't do that." And, by God, I'd do it. Then, when I made my first few million dollars, they started calling me "controver- sial." A London newspaper labeled me "the most controversial man in London in the Eighties." (A public figure is "contro- versial" when he's got too much money and influence to be called crazy. Besides, he might be crazy enough to sue you into oblivion.) My British advisors would shiver and say, "Dan, you can't do that." So I'd do it.

Now, in my early fifties, I'm mellowing into "eccentric," I thought I would stay retired—I sure as hell don't have to work— but then I realized what poor advice most Americans are being fed about success by "feel good" frauds in the personal devel- opment field. You've seen them grinning and charming on TV. You know who I'm talking about.

As you know, I've become a success coach to a selected group of entrepreneurs I feel have the seemingly boundless energy and determination to become super successful. I also conduct seminars in the U.S., the United Kingdom and the Continent—and at my 15th Century home, Guthrie Castle, near the North Sea above Edinburgh, Scotland.

Through my U.K. enterprise, the Quantum Marketing In- stitute, my associates and I identify entrepreneurs, and nur- ture them along in their pursuit of their dream. The success stories coming to fruition in Scotland and England are prov- ing what I've said all along—that Quantum Leap strategies are universal in their application. You can sell a solicitor, a proper "City gent" in London, on your dream as easily as you can a lawyer in the United States. And you can take £500.000 from the Bank of Scotland as smoothly as you can from a Second Vice President of CitiCorp.

I call my basic seminar "The Quantum Leap Advantage," and I deliver others as well on more specific entrepreneur- ial topics. They are all hard-hitting, no-nonsense seminars, packed with the brutal truth about making big money and de- livered "in your face." One attendee wrote on his critique sheet, "Dan Peña is a bulldozer of knowledge …" I like that.

This book, in content and tone, is an outgrowth of those seminars. It is my answer to the question I get continuously, "Dan, you've said so much in three days. Do you have some- thing I can take home and read?" Now I do.

Bear in mind that I didn't write this book to make you feel good inside, to pet your self-esteem. Instead, I give you the unvarnished truth you deserve about how corporate America really works, and how you need to think, feel, train and be pre- pared to make the system work for you, so you can take your first Quantum Leap.

And begin building a Guthrie Castle of your own.

Chapter I. Super Success – Not for the Touchy-Feely

Super success is not for the wishy washy Victory in business, like war, comes to the toughest son-of-a-bitch in the valley.

This is a book about making money.

I don't mean a few extra bucks in your spare time. Any moron can do that. I don't mean increasing your sales 20%, or buying real estate or getting into the discount mortgage scam.

I'm talking about making so much money you can't count it—you've got to weigh it.

This is no "get rich quick" book either. "Get rich quick" implies "get rich easy," and if you think you can get rich easy in today's world, you're either about to murder your rich un- cle—or you're stupid.

Nor is it one of those "wealth without risk" books. Accu- mulating money without taking risks is a fantasy fed to the faint-hearted or the elderly who are not so much interested in achieving wealth as they are terrified of becoming poor. The high performers, the super successful do take risks. I sure did. Still do. Anybody who's not taking risks in business is not mak- ing real money. There is no super success without risk. There just isn't. And no safety in being a high-performance person.

Finally, this is not a book to help you feel better about yourself. Conventional wisdom is that if you feel good about yourself, you'll make money. As you'll see—if you read on—I grew a company to over 400 million dollars in real market value, working on the premise that all conventional wisdom is crap. The truth is that when you make a lot of money, then you'll feel good about yourself. As my wife Linda would say, "If you think money doesn't buy happiness, you don't know where to shop."

So why should you read on? Here are some reasons. I've built from scratch more dollar value than any other personal development or success coach who'll ever try to sell you a book! I'm probably forty or fifty million dollars poorer today than I was four or five years ago. And I still have more money than a lot of those slick-suited guys on the "feel-good-get-rich" lecture circuit. What else? I've made over 55,000 business decisions during my 25-year business career. That's probably 50,000 more than anyone who'll read this book—or anyone selling success books and tapes. I've made more than 300 financial presentations on five continents (all but Antarctica—there's no money there!), raising over one billion dollars during times nobody else could raise any! And in between I've logged mil- lions of miles in travel, thousands of nights in hotels, more thousands of business meetings, and more than 250,000 busi- ness phone conversations.

If anybody wants to talk about more business experience in the past 25 years than Dan Peña—in the trenches or in the peaks—let me know.

You should also read on because, if you can handle it, this book is written to you. I'm writing to aspiring entrepreneurs who have the fire in their belly to achieve super success. I'm talking to the owners of small or mid-sized businesses, people who are already successful and want more … and the CEO's and other top executives of companies who are now looking for geometric growth in a competitive, unforgiving marketplace.

But beyond that circle of capitalists, anyone who seeks a greater degree of success in their life can benefit from this book. To borrow from Joe Batten, the advertising legend whose ac- counts included the U.S. Army, I'm writing for you if you want to "be all you can be." Now that you've bought me—I assume you haven't browsed this far—let me assure you I've got more for you between these covers than you'll find in a library of sudsy proverbs and platitudes.

When I retired the second time, a few years ago, I quickly got bored with doing nothing. I gradually became interested in sharing the brutal truths I had learned in the business world with others. After all, I had made tens of millions before I was 40 years old. Why not pass along the benefit of years of expe- rience to those who were on the cusp of success, so that they could enjoy extraordinary business achievement of their own. And, quite frankly, my ego demanded it.

That idea led me to make a commitment to the success seminar business. I reasoned that if other super successful business performers could deliver their proven wisdom and strategies to a willing and receptive audience of eager listeners ready to take bold action, so could I.

I couldn't have been more wrong.


The Nazis taught us how effective a Big Lie could be. They shouted their propaganda so loudly and so often that we in the "civilized world" accepted their crimes until the brutal truth slapped us in the face. Today pimple-faced neo-Fascists scream there was no Holocaust—and a lot of well meaning people give them an audience.

At the same time, a much smoother gang, the "success evangelists," is criss-crossing the country, filling conference rooms and convention centers, and feeding desperate audi- ences the Big Lie about personal success.

My introduction to the "seminar circuit subculture" was a real eye-opener. It didn't take but about five minutes for me to realize what the seminar business is all about. The sad truth is

… about all seminars look alike. Most of them are the same dis- tillation of conventional wisdom, spooned out in outline form so you can copy it down. And if you're too slow or lazy to take notes, you can always buy the $495 to $2995 tape, manual and even software packages on the tables at the back of the room.

Even more to the point, if you listen to the tapes … if you actually read the book, you get the overwhelming feeling of, "Yeah, that's right. I guess I already knew that, I just never saw it organized before." Of course, doofus! It all sounds familiar because you grew up listening to the same conventional wis- dom these guys did! Now they're making money selling you the stuff you've heard all your life. "Achieve a balance between your business life and your personal life." "Make a list of what's good about yourself and stick it on your mirror." "Make a list of what you need to do this week." "Set achievable goals so you're not disappointed. " "Buy a used car because it's already depreciated." "Get a 15-year mortgage, instead of a 30-year mortgage." Crap … CRAP … CRAP!

You may be one of those people who attends seminars, buys the books, the videotapes, the cassettes and the financial advice life support systems. I suspect they're all lying around your home or office right now gathering dust, thousands of dollars invested in advice your parents gave you for free and against your will years ago.

But just as important as realizing the content of the typi- cal seminar message is the authority of the smooth-tongued performers who deliver their wisdom around the country and on late-night infomercials. I was appalled at the lack of busi- ness acumen of so many of the seminar presenters. Those per- sonal motivation gurus that come to your city . . . those pearly teethed infomercial guys … the so-called authors that line the book stores with "how-to" success books—they're mostly frauds!

You need to ask yourself, how many of these business suc- cess "experts" have made their money in the business world? How many of them scrapped their way to super success in the kill-or-die corporate environment? How many of them started from scratch and built a business empire worth hundreds of millions of dollars? Don't bother scratching your head. The answer is hardly any.

It didn't take me long to learn that most of these phonies have made what money they have in the seminar business— taking your money! I quickly discovered that I'm the only multi-millionaire I know of on the seminar circuit who made my money in the real business world, creating hundred mil- lion dollar empire. As you'll learn in the next chapter, I wasn't just exposed to 400 million dollars of transactions one day. I created a company that catapulted to a worth of over 400 mil- lion dollars on a major stock exchange—starting with a phone

… a leased fax machine … and $820.

Another question. These people are supposed to be teach- ing you how to become successful, which is a codeword for "rich." But how many of them are multimillionaires? Few if any. In fact, the only one I know is a good friend, Ted Nicholas, arguably the finest marketing copywriting and self-publishing guru in the country. Otherwise, my wife Linda has lost more in fur coats at airports than most of these bums have ever made. On any given night out, Linda wears in jewelry more than they can claim in net worth. Yet they're telling you how to get rich! Before you buy your next book or tape, consider the author and ask yourself, "Is this guy where I want to be?" Is his suc- cess story the blueprint I want for my success? And how did he make his money'? In the business arena, or selling books and tapes, and putting butts in seminar seats?" Think about it.

I also discovered something interesting about those room- fuls of seminar attendees I assumed were so eager to take "bold action." I was stunned to discover the level of apathy of the av- erage seminar attendee. Most of them are more interested in hearing feel-good stories and pleasant proverbs than the truth about becoming super successful. Most of them just want to be stroked, to hear, "You've already got within you what it takes to succeed. Reach inside and draw from the wealth of your own potential." They want validation that they're okay, in the tradition of "I'm okay, you're okay." What crap.

So why did Dan Peña, iconoclastic curmudgeon of the business world, decide to get into the seminar business and write a book? Quite frankly, my goal is to change the way per- sonal success development strategies and success coaching are communicated to the world. And make another ton of money. In addition to the fact I have actually implemented my success strategies continuously over most of the past 25 years in the process of making tens of millions, I have another unique advantage that works to your benefit. I'm not going to tell you what I think you want to hear so you'll like me. I don't care if you like me or not. If you want a friend, buy a dog. I don't care if you don't listen to what I have to say. I'm not in this busi- ness to make friends or to be your friend. (If you personally knew the very few high performers in America today, guys like Donald Trump or Ross Perot, you'd understand they don't give a damn if people like them or not. Personal acceptance by the masses is just not on their agenda. ) Nope I'm in this business to give you the opportunity to learn how to be enormously suc- cessful from a guy who is enormously successful. Even though half-truths and misinformation are easier to sell, I'm going to give you the unvarnished truth.

When I first started lecturing, I talked to my audiences like I would talk to my staff, expletives and all. Half of those audiences, mostly women, would get up and leave in the first fifteen minutes. I didn't care, because I was speaking authen- tically. "This is the way the super successful talk in the glass towers of success," I told them. "So get used to it." If they had seen the movie Wall Street, they had already heard a fairly representative dose of language in the real world. They left anyway. I was amazed to see their naiveté.

My marketing advisor and the people who schedule semi- nars finally said to me, "Dan, you've got to tone it down. Some of these people are really interested in what you've got to say, but you're offending them with your language." So I toned my- self down to become a kinder, gentler Dan.


Now that I've given you an idea of where I'm coming from, let's talk about some of the basics of becoming super successful. To begin with, it's not easy. Every worthwhile goal in life has what I call a "Pay Price to Action." To achieve that goal you must take action that requires you to pay a price in some other area. It's a tradeoff. The mooches on the seminar circuit tell you, "You can have it all. You can be a well-rounded parent, make a bundle of money and be loved by all." That's baloney. The truth is, you have to give up something to get something. Throughout this book you've got to ask your-self what are you willing to give up—to trade off—to get what you want.

If you want to become an Olympic discus-throwing cham- pion, for example, your Pay Price to Action is giving up eve- nings and Saturdays with the boys (or girls) and throwing the discuss a zillion times. You may have to give up beer and go on a special energy-building diet. You may even have to give up your job and get a new one that enables you to throw the discus more. But you pay that price. You want to get to the Olympics. And you don't want to bring home a Bronze or Sil- ver Medal. You want a Gold Medal and you're willing to pay the price. Hey, what price do you think seven-time Gold Medal winners Mark Spitz or Eric Heiden paid for their gold? And we all remember the price in pain paid by American gymnast Kerri Strug in Atlanta in '96 when she ignored an injured ankle to win the Gold.

Super success, whether it's in the Olympics or in the boardroom, is not for everybody. When I was building my for- tune, one price I paid was not seeing my family and not being home for 242 days the first year of my daughter's life. My wife Linda and I have been married for 22 years, but for much of that time I was not home to celebrate our anniversary, or our kids' birthdays. We waited three-and-a-half years to get mar- ried—and nine years to have our first child.

That costly Pay Price to Action may not be for you. It isn't for most people. That's why there are so few Ted Turners and Ross Perots and, yes, Mary Kay Ashes in this world. But—and this is important—that's all right. If you put into action just some of the strategies I give you in this book, you'll be infi- nitely more successful than you are today. And, by the way, you'll save a lot of money by not buying more tapes and books at future seminars.

A lot of people I talk to assume you have to be incredibly intelligent in order to be incredibly successful. I'm living proof you don't. But let's suppose for a second you have an IQ of, say,

100. That's average. For purposes of this example, I might be taking some away from you. On the other hand, I might giving you a little. (Those who've spent a lot of time seeking Universal Truth through seminars, books and tapes, and those who ask me obtuse questions during, seminars probably have what I call a "room temperature IQ" . . . a comfortable 72.)

Let's also pretend I've got a 100 IQ as well (although my old pals from schooldays would argue the point). Can anyone have 10 times your IQ? As far as I know, the highest IQ's ever recorded were in the 240 range. So it's not possible for anyone have ten times our IQ—or even five times for that matter.

So how in hell do people make ten times more than you make? How do people make a hundred or a thousand times what you make if they can't have a hundred or a thousand times our IQ? How? I'll tell you how! Because they dream big- ger than you. Their expectations are higher than yours. That's how.

I'm often asked, if I had my life to live over again what would I change. I'd only change one thing. I'd set my goals higher. That's right. With all my mega-success, I'd still set my goals higher.

What about you? Have you set goals that allow you to "be all you can be?" If not, reading this book will be an astonish- ing revelation. At the risk of overstatement, reading this book could change your life. Following the systems and methodology in the chapters ahead could change the course of your destiny. I say "could" because you must take action to change. Change is absolutely essential. I want you to understand right now that doing the same things over and over, like you've always done them, and expecting different results, is insanity.

You see these high-performance individuals, like myself, that I will continue to refer to, achieve super success because they want it more than you. They forge favorable circumstanc- es by using the two advantages of high performance business people—practiced skills and force of good habits. Or as Jim Ryun, the former world recordholder in the mile said, "Moti- vation gets you started; habit keeps you going." Trust me on this. Intelligence has nothing to do with it.


The super successful also have a different perspective on risk. They understand that risk is necessary to grow. In my seminars I refer to the Quantum Leap, an explosive, geometric growth in your company that merely more sales or new loca- tions could never achieve. A Quantum Leap requires risk.

If you're already in business, you understand risk. Remember when you first got started? Didn't establishing that business require risk? Doesn't marriage require an element of risk? Or raising kids, or buying a new home? Then why do so many people who take risks in other areas of their lives shudder at taking risks in growing their business? No matter how tight your strategy and how sure of success you are on a given deal, the specter of risk lingers at your side until signatures; are on paper and the money is in your bank. And preferably spent!

I believe that if you're not taking risks to grow your busi- ness, it's begun to wither. I hate for someone to tell me every- thing is running smoothly. By definition, I know their business is not growing anymore—and probably dying. They have for- gotten that from chaos comes order.

Some people take a risk or two, and fail, and retreat be- neath their shell of safety. Failure destroys their self-confi- dence, sometimes for the rest of their life.

In 1955, at the height of the Cold War, everybody had atomic bombs on their minds. School kids were drilled to hide under their desks so a 50 megaton bomb detonated downtown Would miss them. My father, the L.A. policeman, was talked into investing $10,000 in the Lucky 13 Mining Company, an outfit with uranium mines in Nevada. It was a con job, a scam, and he lost his ten grand, which in 1955 was a small fortune. But maybe more damaging to him than the financial loss, he was disgraced in front of his family and friends. Laughed at for years afterward.

In 1958, Dad had a chance to buy an undeveloped piece of land northwest of Los Angeles for $3000—the intersection of Topanga Canyon and Ventura Blvds. All four corners! He turned it down. No use being made a fool of twice, he must have figured. The next time that property was sold it went for

$640,000. Then 3.5 million, then 8 million. The last time we looked, one corner sold for $12 million!

Dad doesn't like to drive up in Northwest L.A. around Woodland Hills, even today. One failure drained his resolve to ever take another risk.


The super successful also have a different take on failure. Failure is what happens when you do something. The greatest successes in the world also experienced the greatest failures. The all-time strikeout record in major league baseball is held by … Babe Ruth. But we don't remember him for his strike- outs. We remember him for setting a home run record that stood for decades. No one cares about his strikeouts. The point is he kept swinging the damn bat! Most of us never get out of the dugout—let alone up to the plate. Those people not only wonder why they never hit a home run—and even begrudge the determined hitters who do!

Donald Trump has lost billions in his financial deals. But who cares. He has made billions more with his successful ventures, and he just keeps swinging the bat. After stumbling into the New World, Christopher Columbus failed in his sub- sequent explorations and died a poor and disappointed man. But on Columbus Day do we celebrate his dying destitute? Of course not. We celebrate his success.

This reminds me of a story about Tom Watson, Sr., found- er of IBM, being asked by a young management trainee, "Sir, how do I get to the top of the management ladder here?" Wat- son replied immediately, "Double your failure rate, son. Dou- ble your failure rate." His point was, of course, that more fail- ures could only result from more tries, more initiative, more risktaking … all the actions required for growth.

Most of Thomas Edison's experiments failed miserably—thousands of them. He thought direct electrical current was the answer to lighting the world, and that alternating current was a passing fad. He was wrong. And nobody cares. Instead, we're indebted to Edison's genius and his determination whenever we turn on a light bulb or hear recorded music, watch a film.

For the super successful, failure is a valuable lesson. It's a road not to take again, or at least under the same conditions. And then they move on. Failure is nothing more than testing. As Edison said, "Success is 99% perspiration and 1% inspira- tion." To the high performance person, "Fear" is "False Expec- tations Appearing Real."

The sure-fire formula for failure? Try to please everybody. That's the biggest reason most people never achieve success. They try to keep everybody happy. As a result, they fail and the people they were trying to please don't give a damn. Instead of listening to everybody around them, they should have consult- ed within themselves. They should have trusted their instincts. They should have listened to their intuition.


Intuition plays a strong role in the decision-making pro- cess of a high performer. Over the years, women have tried to territorialize intuition. "Women's intuition" is a given, but what about "men's intuition." I think intuition is what we call instinct in animals, a primal survival skill. All of us have a sense, a gut feel about situations affecting our best interests. Usually we run into problems when we ignore our intuition.


Nowadays the tyranny of computers has undermined our reliance on intuition. We Lotus 1-2-3 things to death. Suppose you're a guy at a party and you meet an attractive woman. Her smile seems, well, more than friendly. She touches you a lot, innocently. But you know she's hot. You don't need to run back to your office and Lotus 1-2-3 it. You don't have to think about it. You know. Business is much the same. But conventional wisdom dictates we over-complicate issues because, after all, our world is very complicated now. I personally believe the personal computer is the single biggest drawback to being a high performance entrepreneur. I'm not computer literate— and proud of it!


One more prerequisite for super success. The high performance person never looks back. Do you knows someone who suffers from terminal buyers remorse? That individual shops for a new car, new home, new dress or new anything and then makes a purchase. The next day, he or she begins to revisit all the reasons the item unpurchased was a better buy. Soon they're miserable. If they can, they return the item for a refund, and start the same torturous shopping process over again. They'll never be satisfied because they don't have confidence in their ability to make a decision. Or they ponder what others will think. Do you think Bill Gates, founder of Mi- crosoft, cares what others think? Of course not.

By contrast, the high performance person such as myself measures the risks, makes the decision, takes action … and never thinks, "Well, maybe I should have done this or that. Maybe I made a mistake." As a high performance person, you have the confidence in your judgment to stand by whatever de- cision you make. And you've got more to do than second-guess yourself. You've got other important decisions—so you move on. Without a look back. I often say, I may be wrong—but I'm never in doubt. How else could I have made those 55,000 busi- ness decisions!

Risk. Fear of failure. Primal intuition. The sacrifice of Pay Price to Action. Indifference to what others think. Avoidance of conventional wisdom. And no looking back. As we prepare to launch into the tactics and strategies of the high performers, you may have already figured out this is not going to be a com- fy drift through mainstream thinking. Like they say in Texas, where I learned the oil business, this book is written for those who want to hunt with the big dogs—pee in the tall grass!

Super success is not for the wishy washy. Victory in busi- ness, like war, comes to the toughest son-of-a-bitch in the val- ley. I cannot think of a single high performance success who is touchy-feely. If they exist, I've never met one. High performers are the gladiators of the glass towers. They're tough, they take action, but never take prisoners.

They make mistakes and never look back … and they make a lot of money.

I don't care if I have to drag, push, slap, kick or cajole you to super success. You will not necessarily like me, but I don't give a damn. What I do give a damn about is making you a su- per success, and helping you make enormous sums of money. If you're interested, we'll get down to specifics soon enough. But first you need to understand who I am, so you know Dan Peña has the credentials to kick your apathy into action for the next 12 chapters.

Chapter 2. The Barrio … and the Castle

If you aren't prepared to die for your dreams, you aren't prepared to live for them.

One of the differences between man and the lower an- imals is that we humans continue to evolve throughout our lives. We have the capacity to make mid-course corrections. We experience pivotal, life-changing events. Men, for exam- ple, can be changed forever by the experience of war. Women are often transformed by the experience of childbirth. In this chapter I want to trace the path of my own career and its piv- otal points of change. When you understand the origins of my business strategies, you'll see more clearly how you can apply them to your business.

I was not always the laser beam-focused, goal-driven success-motivated individual I am today. Quite the contrary, spent my adolescent years in a tough predominantly Latino East Los Angeles neighborhood, a barrio where you learned street-level survival skills early. Our main competitive sport was bar fights with guys from other neighborhoods. Three of my closest friends were Reuben Munoz, Walt Wojak and How- ard Stein. By 15, we were laser beam-focused alright—on per- fecting our 9-ball pool, getting drunk and getting laid. Reuben is now serving a life sentence in Florida's Raiford Prison for murder.

The Peñas had migrated from Spain to Mexico. My grand- father rode with Pancho Villa. In the only photo we have of him, he even looks like Villa, complete with drooping mus- tache. My father, Manuel Peña, was a Los Angeles cop. When he came home, he was a stern disciplinarian, which means he beat the hell out of me when I screwed up. The house we lived in was long ago boarded up and then torn down as a crack house for local drug dealers.

My parents tried to get me into a better environment, so I wound up attending Reseda High School, in the San Fernando Valley north of L.A. But the seeds of rebellion were already planted. I caused a lot of trouble when I bothered to attend. In May, 1963, about three weeks before graduation, the Vice Principal gave three of us our diplomas and told us never to set foot on campus again. They were afraid we'd disrupt gradua- tion. Rouben, Walt and I thought about it awhile, then went back and threw our diplomas in the guy's face. Three weeks later, we disrupted graduation on schedule.

In the fall, I entered San Fernando Valley State College. Today it is California State University at Northridge. I soon flunked out, and drifted through a couple of other colleges over the next two years. Finally, in June 1966, with no goals or ambitions, I enlisted in the Army. My Father had been an enlisted man during World War II, and an officer during the Korean War. He gave me some good advice. As long as I was going to be in the military, he said, be an officer. By December 1966, I was attending Officer Candidate School at Fort Ben- ning, Georgia, and earned my First Lieutenant's bars on July 1, 1967.

Like so many other Army "brown bars" in '67, I could anticipate becoming an infantry Platoon Leader in Vietnam. Then, for some reason long since buried in the Pentagon, I was suddenly transferred to he Military Police Corps, and shipped to Ft. Gordon, Georgia.

By October I was on my way to Europe, attached to NATO as an officer in the 64th Military Police Company. For the next two years, at stations all over Germany, my responsibilities expanded beyond the usual MP duties. I found myself trav- eling back and forth through Checkpoint Charlie, involved in various intelligence assignments. It was heady stuff for a brash young lieutenant. I loved it.

The military proved to be my fist life-changing experience. I became part of an organization which depended on personal responsibility and discipline in order to be effective. Just as it has done for countless thousands of other young man before and since, the military took an aimless kid forged a rapidly maturing adult.

Intelligence work led me into the guts of real life geo- politics. I saw firsthand that there were no real friends in the arena of world diplomacy—only allies of convenience. No acts of benevolence—only strategies which advanced one's best in- terests. The instinctive tactics of survival which had served me so well in the barrio were the same ones nations were using as instruments of policy. Later, when I entered the business world, I discovered that corporate America operated the same way. By that time, I had been well trained.

I separated from the Army in late '69, and returned to ci- vilian life, determined to make up for lost time. I re-enrolled in Cal State at Northridge and earned my degree in a year-and-a- half, averaging 20 units a semester. My final semester I made the Dean's List with a 3.6 GPA while taking 23 units, studying like a man possessed.


I received my degree in Business Administration in Janu- ary, 1971, and while I worked on my Masters degree in finance and waited to get into law school on a scholarship, I got a job with Land Consultants of America, a commercial real estate firm in L.A. We were selling land, investments in the Califor- nia dream. Kelly Norwood, the guy I worked for said, "Dan, you should sell everybody who comes through the door." Hell, I didn't know any better, so I achieved a 94.6% closing rate, and felt badly about the other 5.4% who got away.

This experience was an important lesson about expectations. I expected to sell everybody who walked in the door, so I almost did. But what if my boss had said, "Dan, real estate is tough. A new guy like you should expect to sell no more than 30% …" My expectation for success would have been less than one-third my real potential!

In April, my boss sent me to become Sales Manager of the San Diego office. The first thing I did was fire every mooch in the office. Then I recruited a sales force of Navy pilots who were getting of service at the San Diego Naval Air Station. These were shit-hot fighter jocks, Top Guns who had earned their wings in the skies over Southeast Asia. They were assas- sins in every sense of the word. And I was their leader.

I told them how easy it was to sell civilians on the Cali- fornia dream. "You ought to be able to sell everybody who walks in the door," I said. Then I proceeded to train my fired- up team of jocks, and I only had to shift their mindset marginally to turn them into real estate assassins. By the summer I was making $10,000 a month in sales commissions. I had met Linda, my future wife, back in February, 1970 (Friday the 13th) at Cal State/Northridge. So even with all this activity, I was fly- ing back and forth to L.A. where she was teaching school in Long Beach and I was a commuting graduate student.

Late that year, I decided to start fishing with nets instead of poles, conducting real estate seminars. Instead of training just a few staff people, I was teaching roomfuls of hopeful real estate magnates how to peddle dirt— and charging them for the privilege. By December of '71, I was driving my first Rolls Royce, and had a Mercedes for a second car. I had long since dropped out of graduate school, and forgotten my pursuit of a law degree.

In early '72, I was named company Vice President. Life was beautiful. Linda and I started talking about marriage and shopping for a big home in Lake Encino, a sort of quasi-Bever- ly Hills community in Los Angeles. Then the bottom fell out.

I was about to board a plane to Switzerland on a land deal, when I got a call at Los Angeles International. Come to the office, The IRS has shut us down. I raced back to find our office sealed with yellow tape like some sort of crime scene. My partners had decided to skip Paying withholding taxes. There was an IRS investigation, and I was cleared of wrongdoing, but was also unemployed.

I got a job in L.A. as a stockbroker at the firm which would later become Paine Webber. In the summer of '72, I was transferred to New York City. I got an apartment in Manhat- tan, and spent invaluable time learning the financial business in the toughest, most unforgiving business environment in the world. Ideally, every individual pursuing success in the top of his or her industry should come to New York City and mas- ter their executive skills. Sinatra was right. If you can make it there, you can make it anywhere.

I made it by all conventional definitions. For five years straight I doubled my income. But it wasn't until 1976 that I was transformed from a micro thinker to a macro thinker, and begin to redefine my own success. (The one man who turned me around, Jim Newman, became one of my mentors, a con- cept we'll discuss in a later chapter.)

In late 1977, I left New York to join the investment bank- ing firm of Bear Stearns & Company in Los Angeles. Linda and I had married in July, 1973 (Friday the 13th). At Bears Stearns & Company, we served as investment bankers and financial advisors for large corporate and private clients across the U.S. and overseas.

It was during this period I met a guy by the name of Pat Kennedy. Pat was an oil trader. He made his money mov- ing thousands of barrels of crude oil around in an uncertain oil market. I was intrigued. Then in 1979 came the second oil crisis, as Saudi Arabia cut its production to boost prices. I had seen a lot of idiots get rich during the oil embargo of '73. I quickly decided to make my own ton of money this time around. More importantly, I recognized opportunity when it came along! I've long felt that we all have many opportunities presented to us in life, doorways that suddenly open and give us a glimpse of what we could achieve. But because we're so pre-conditioned, and so fearful of failure, we stand there each time telling ourselves to let the doorway close, rationalizing our inability to take action. Then the doorway closes forever.

I left Bear Stearns in February 1979 to become president of Kennedy Industries in Los Angeles. We handled investments in real estate, entertainment, and oil and gas. By enter- tainment, I mean we found investors to co-underwrite movies, usually in return for getting to rub shoulders (and other body parts) with rising starlets. I knew about as much making as I did about the oil industry, and we lost a bundle of money, but we sure as hell had a good time!

In 1980, we formed J.P.K. Industries. I was CEO, Presi- dent and 50% owner. Pat Kennedy used his Irish charm, and I used my business acumen and grit to forge a vertically in- tegrated oil company from scratch. We were running oil and gas exploration and drilling operations, production, crude oil refining and marketing.

The decision to go into the oil business, even though I knew not a damn thing about oil, was one of those pivotal points in my career. It didn't matter that I didn't know the oil business. My accrued business skills, my years of financial management and my confidence in being able to focus those abilities on oil industry problems were impetus enough. Besides, if it didn't work out, I'd been unemployed before.

It did work out for awhile. We made a lot of money. It was during this period that I met a gentleman named Con- stantine Gratsos. Costa was in his eighties at the time, near the end of a life spent as the chief lieutenant and confidante of the billionaire shipping legend Aristotle Onassis. By the time I met Costa, his old friend had died, and from his suite of offices at the top of 52-floor Olympic Towers in Manhattan, he over- saw the sprawling Onassis empire. Costa took a liking to me, and he became my mentor. He called me his "oil expert," and whenever he needed to talk about shipping oil in his tankers anywhere in the world, he summoned me to his office.

Through Costa, I found myself traveling the world, negotiating deals with such figures as Imelda Marcos, "Baby Doc" Duvalier in Haiti and military strongman General Augusto Pinochet in Chile. Whenever I was in Manhattan, I'd work out of Christina Onassis' office in the Towers.

This was all an intoxicating experience for a 35-year-old wise-assed oil industry novice. It also led to probably the most unlikely international adventure of my life, one which has been a closely held secret for reasons which will soon become apparent. Looking back to write about it so many years later, it almost seems like a dream—or a late-night B-movie. To my loving wife Linda, it was a nightmare of apprehension … a living hell of dark plans and shadowy figures of which she only has frightening memories.

Haiti was known to have oil deposits, but oil had never been produced here because of lack of expertise and capital. Although Costa was negotiating with Duvalier for oil shipping rights, he detested "Baby Doc's" tyranny, and how he kept his nation impoverished while he moved tens of millions of dol- lars to his own private Swiss bank accounts.

Costa, in the finest Greek tradition, was a fierce believer in democracy. So in early 1980, he decided to simply remove the Duvalier regime. Although he conceded that thousands of people could be killed during an armed invasion, he calmly justified his idea with a rationale that usually began, "When human rights are at stake, sacrifices are required…"

Using his enormous wealth, leverage and influence, Costa convinced three very unlikely parties to co-finance and sup- port an armed invasion of the island nation—the CIA, Mobil Oil and the Vatican. Mobil Oil would in turn get an exclusive on the oil market there, while the Vatican was interested in reestablishing the influence of the Church. One day I was sitting in a planning meeting in Costa's office, when he turned to me and said something to the effect of, "Mr. Peña, you were in the Army, weren't you? You were in Intelligence, were you not?" Yes I had been. "Well, why don't I put you in charge of this project!" Immediately, and with all the enthusiasm I could muster, I responded, "Yes sir! Absolutely! I'll be honored to lead this project."

Events began to move quickly. Through Costa, I soon met representatives of the co-conspirators, including the CEO of Mobil Oil. Costa reassured me, "Mr. Peña, you have my assur- ances you can trust all these parties—except one … the Vatican. Don't trust the Vatican, Mr. Peña."

Through the end of 1980 and well into '81, we plunged ahead, with meticulous plans greased by enormous resourc- es. Using French contacts, we recruited and armed an assault force of some 300 mercenaries and assassins. We hired the special talents of the very best freelance demolitions expert, and brought in a widely respected mercenary, Colonel Mike Williams, who had served as the last commander of the Rho- desian Cavalry. These were men who had lived and fought on civilization's underbelly for so long they seemed to squint in the incandescence of normal society. They chatted idly about "jobs" in Angola or the Congo or the Bolivian jungle, and "getting trigger time" in ferocious firefights. Just beyond their quiet talk you could almost hear the rattle of automatic weapons fire and smell the sweat of war. They brought to life the cliché, "a breed apart."

During our spending spree, we also acquired a couple of helicopter gunships and a Vietnam-era C-47 "Puff the Magic Dragon," mounted with 105-millimeter howitzers. Ten or 15 of the project's top leadership, myself included, were spirited by the CIA into Camp Cobray, an anti-terrorist school run by Lt. Gen. Mitchell Werbell in Powder Springs, Georgia. Working with CIA specialists, we practiced hand-to-hand combat, and negotiated obstacle courses under live fire. We also became skilled sharp-shooters. We went beyond aiming a weapon and learned to fire by instinct. I got to be such a good shot I could throw a dime into the air and hit it.

The plan was to launch overland from the Dominican Republic, with air support, and with the element of total surprise, blow up the Presidential Palace and the Federal Reserve of Haiti, where Duvalier had stashed $200 million. We would liberate that money for our troubles, and then install a new president already selected by leaders of the Haitian communi- ty in the U.S. You see, we were 15 years ahead of Bill Clinton!

Although we were only 300 strong, our battle plan called for expending a million rounds of ammunition during the first day of the assault. Thousands, including the Palace Guard and most of Haiti's feared ton-ton macoute, would be terminated. It never ever occurred to us that we might be killed as well. We were immortal in those days. In fact, I made sure I was slated to be aboard the first chopper to hit the ground in the palace grounds.

In the meantime, our designated president-to-be was sit- ting in New York drawing up a hit list of his enemies. It grew from a dozen to hundreds. And the CIA was getting nervous that our plan was becoming less than a clean, surgical strike.

During the summer of '81, a climactic meeting was held in Olympic Towers, attended by our two CIA contracts, our mer- cenary commanders and other key planners. Suddenly the CIA announced they were shutting down the operation.

Talk about chaos! The mercenaries jumped up and pulled out their guns, the CIA guys jumped up and drew their guns, and my own former FBI bodyguard, Dave Reynolds, shoved me under the conference table. At that moment, Costa strolled into the room, glanced around and said, "It looks like I got here just in time for the excitement."

Once guns were re-holstered—and I came out from under the table—we accepted the fact the CIA had pulled the deal. Then they added, should our mission fail and we get captured, they would deny all knowledge of us and the project. And, oh yes, they were keeping the money. Now we were furious. I told them to get the hell out, that we were going to hit Haiti without them.

Weeks later, I was bound from L.A. to the Dominican Re- public, with a stopover at Miami International. Every element was in place. I had a message waiting for me in Miami that if we insisted on proceeding with the operation, that every leader would be whacked by the CIA. We would just disappear.

The project was finally dropped. And my friend and men- tor Costa Gratsos passed away peacefully short time thereaf- ter.

It finally emerged that no less than Jimmy Carter's Secre- tary of State, Cyrus Vance, had quashed the project. Years lat- er, at the wedding of one of our conspirators, I ran into Cyrus Vance in the receiving line. I introduced myself, and said, "You really screwed me. Cy." The man was taken aback of course, but said nothing as I continued. "You owe me, Cy. Haiti, 1981, remember?" He stared back and never said a word.

By the way, the Vatican pledged $250,000 to the proj- ect. And I learned then and there that when a mega-successful mentor warns you're about to get screwed, you either heed his advice or bend over. The Church never paid a lire. And I real- ized that the whispered stories of intrigue I'd heard about the Church were probably true.

On February 28, 1981, Nixon decontrolled the price of oil, removing the artificial price support. That same year, while I was involved in the Haiti project, Pat Kennedy decided he wanted to take a million dollars out of our company tax free and unreported. Actually, he didn't want his wife to know about it. I had been burned once before by unreported taxes so I wouldn't let him do it. A proxy fight ensued, and I was ousted by my partners on January 7, 1982, a week after Dan, Jr. My first son, was born. I was unemployed again—but getting used to being thrown out on my ass.


But now I had oil in my blood. My brief initial experience in this exciting arena had confirmed that there was a hell of a lot of money to be make in an industry like this, which at the time was in chaos. In fact, the most valuable lesson I learned from that whole period is still true today. Find an industry in chaos, going through the agony of cataclysmic change. Bring order to that change, emerge from the battlefield chaos with a company that provides order and leadership, and you'll make a pot of money.

In recent years, the health care industry has been in chaos. One of my former protégés, in fact my attorney, Richard Scott, recognized the need for a dynamic, vision-driven health care giant to lead the way in the industry. He was a brilliant lawyer, but to earn the kind of wealth he saw me and other making, he

knew he had to take direct action. Rick left law in 1987, and until recently, he was CEO and president of Columbia/HCA Healthcare Corporation, Nashville, one of the largest provid- ers of quality health care in the country.

Here's another example. Right now the entire field of in- teractive communications is also in absolute chaos. The so- called "information highway" is being build overnight across an uncharted frontier with no plans and specs. A savvy entre- preneur can go out and find the money, and create an empire almost on his own terms. He can set precedents with imagina- tion, innovation and guts—then sit back and count his money while the rest of the pack catches up. Ask Ted Turner about network TV. Ask Bill Gates about universal software.

With a growing network of contacts and sources in the oil industry, I decided to go into business for myself. So on Fri- day, July 13th, 1982, I founded Great Western Development Corporation (DWDC). At least I'd never be fired again, right?

When you're looking to increase revenues quickly, who are the stupidest people to do business with? Why, the mo- rons who buy those $750 ashtrays, of course—the U.S. Gov- ernment. I immediately contracted the Defense Fuel Service Center, U.S. Department of Defense. This agency bids out con- tracts every February and October to buy JP-4 and JP-5 jet fuel and diesel fuel.

We started GWDC with $1000. A friend of mine, Bob Anderson, retired Texas oilman and former Secretary of the Navy, chipped in $180, and I paid the remaining $820 to bid an initial $20 million contract. (I later paid Bob back his "in- vestment.") I was working in my infant son's bedroom, with a spare telephone and a leased fax machine. That was the extent of Great Western Development Corporation.


But not even the government does business with a com- pany with no track record that they've never heard of. That's when I put together my first joint venture. I tracked down Mar- rion Refining Company, located in Mobile, a firm which cur- rently had an excel fuel capacity. That means they had more time to refine crude then they had crude coming in to refine. The head of Marrion was a retired Army man, so we struck up a relationship based on our common military background.

For the paper shufflers at the D.F.S.C., Marrion Refining was a known entity. Partnering Great Western with Marrion gave us an instant track record. As a result we landed three fuel contracts totaling $50 million. Now, with government contracts in hand, GWDC was on its way. Suddenly, we were perceived as a company to do business with. And as you've heard over and over, perception is reality!

Even today, I tell audiences, "With $820, a phone and a leased fax machine in my kid's bedroom, I landed a $50 mil- lion contract and launched a company ultimately worth $400 million." Everybody sees or hears that figure and says "Wow!" But you know what—nobody ever asks me how much the com- pany made of that $50 million. The answer is just $90,000.

But how much of my own money did I spend? A thousand dollars. And who did I use to inflate my company's profile far beyond its meager size? Other people, with other skills, other contracts and greater reputations. Over the years, I've used Other People's Money ("OPM") and Other People continuous- ly to grow my company and make millions. We'll talk about locating that money and those people in future chapters.

At the time I founded Great Western, I set three goals for myself: a) to grow the company to $2 billion in assets; b) to become one of the top five paid energy executives in the coun- try; and c) to make Great Western Resources the 50th largest energy company in the country. (At that time, Penzoil was ranked 50th. There were thousands of energy companies in those chaotic days.)

I achieved b) and c) above. I fell $1.58 billion short of the first goal, measured in market capitalization and value. But so what? And what if I had set my goal at $20 billion in assets? I learned a lesson I wouldn't forget about setting goals too low. After our initial successes, GWDC entered what I call a nurturing period. I decided to nurture my company by selling tax shelters. Remember—this was 1982. The Tax Reform Act of 1986 was still four years away. Both individual and institu- tional investors were clamoring for tax shelters. And chaos, my favorite business condition, ruled the market.

I had no broker or dealer's license which would enable me to sell tax shelters, so I formed yet another joint venture—with a brokerage firm run by one of the best salesmen I've ever met. His name was Walter Levine, and he had sold me a three-year tax shelter on $1.5 million in income. When I protested, he said, "Trust me. You'll grow into it." What a guy. Walter and I formed a little joint venture we called G&J. It wasn't on our business cards, but G&J stood for "Goy & Jew." We launched our first tax shelter venture in December 1982, in the form of an oil drilling fund.

Over the next two years, GWDC put together—and G&J sold—three very successful tax shelters. The operating capital from the funds came in the form of general and administrative fees payable to GWDC. During those tenuous times when we couldn't afford the best New York attorneys and accountants, we got them anyway. How we hired them is a secret revealed in another chapter.

One California day in the spring of 1983, while Linda and I were running, the idea struck me to buy a castle I couldn't afford. Yes … a medieval castle on an island. The ultimate os- tentation. We were doing well with our tax shelters, but we still needed the help of Wall Street to remain successful. And as I knew from my own Wall Street experience, if you wanted to do business with financial institutions, you had to prove to them you didn't need their services, our own castle would certainly make that perception a reality in their minds.

A castle became our goal. It's critically important here to understand that my goal was indeed our goal. Without total, unquestioning support from your spouse, Quantum growth is next to impossible. But we'll get to that discussion later.

By the following Thanksgiving, we were shopping for cas- tles in the United Kingdom. During this period, business co- incidently brought me to London a few times, giving us more opportunities to browse the castle market.

One June morning in 1984, we drove through the ancient stone gates of Guthrie Castle, located in the Tayside Region of Central Scotland about five miles from the rocky cliffs of the North Sea. Guthrie, dating from the 1460's, is a 55-room manor home, complete with turrets and a great stone tower. At its top, open parapets, built for defense against other clans or medieval marauders, look out across a forested countryside. Endless corridors and high-ceilinged rooms almost echo the booted steps of five centuries of Guthries—and a ghost maiden who appears periodically.

Adding to its appeal, Guthrie is surrounded by 156 acres of rolling estate, icy streams and a crystal loch. Perfect for my own 18-hole gold course, I thought. We made our first offer within days. After negotiations, we made our final offer in August, which was accepted.

The interior had been stripped of very stick of furniture and decoration. Even the fireplace mantles had been yanked out for auction to pay taxes. The castle was destined to be razed had we not bought it. It took Linda and I a year living in chaos to rewire, replump, reroof, renovate, refurnish and dec- orate the place in time for my 40th Birthday Party in August, 1985. Linda made a lot of area antique dealers and decorators very wealthy during that yearlong buying spree! Her support, which was so vital, was so solid throughout this experience as the great gray stones of the castle itself. As far as the island the cream castle would occupy, Linda pointed out that Guthrie, our castle, our shared goal, indeed stood on an island—the island of Great Britain!

It occurred to me how far I had come during my first 40 years. From a Latino punk in the hard streets of an urban barrio … to the laird of my own castle in the peaceful Scottish countryside. Here, secluded in a such timeless surroundings, I could ride my Arabians or just walk the grounds in the crisp northern air, renewing my strength and spirit.

I would need that strength. For the greatest adventure of my life had just begun.

Chapter 3. Conventional Wisdom – the Loser's Crutch

Do business the way it's usally done— if you're satisfied making the usual money the way the usual morons do.

Lenin was wrong.

Conventional wisdom—not religion—is the opium of the people. It is injected into our brains from birth by our parents, our teachers, our gabby neighbors and anybody else who as- cribes to leading a safe, anonymous and respectable life. And dying forgotten.

"If you're nice to people, they'll be nice to you."

Conventional wisdom stifles the risk taking required for bold, creative action. It anesthetizes the mind with mindless platitudes.

"Real estate is the best investment. After all, they don't make any more of it."

Conventional wisdom is the scripture of mediocrity—for- tune cookie proverbs that make losers feel better about them- selves.

"Your business is doing okay. Whey risk it on some crazy idea. Better safe than sorry."

In case you missed the point, I hate conventional wisdom. And if you're going to make your own Quantum Leap to super success, you'd better learn to hate it too. And purge it from your mind as if you'd stuck an enema tube in your ear! Why?

Because conventional wisdom is almost always wrong! Visionaries have always flown in the face of conventional wis- dom. "Columbus, don't you know the world is flat?" "Mr. Ford, you can't make a V-8 engine." "Wilbur and Orville, man wasn't meant to fly."

All my life I've had people tell me, "Dan, you can't do that." "Dan, you can't take 26 academic units in one semester." "Dan, you can't go into the oil business when you don't know a damn thing about oil. And you can't do it in a collapsing market. And you sure as hell can't do it the middle of the worst energy de- pression in fifty years!" In fact I've made a list of "You can't do that's" people have told me over the years—88 of them—and included it as an Appendix.

Another phrase I detest is "common sense". Common sense is an excuse for mental laziness. Common sense is the biggest alibi of all for screw-ups caused by using conventional wisdom. "Well, Dan, it just made common sense at the time." Think about this: common sense would have to stem from common experience. If we were all born, raised and educated under identical circumstances, what sense we had would cer- tainly be held in common. But the fact is, we're all from diverse backgrounds, and imprinted with a rich diversity of experienc- es. So how the hell can we suppose we all have common sense? There is no "common sense!"

In this chapter, while I continue the Great Western story, you'll see how I constantly flew in the face of conventional wisdom. We'll also begin discussing my Seven Steps for Super Success, and how to create your personal foundation to build that success.


Before you can create and run a super successful com- pany, you have to re-create yourself. You have cleanse your mind of years of conventional wisdom, and in the void that's left build a personal foundation based on all New Rules.

The first New Rules is an old one: there are no rules. Rules by definition are limiters … walls beyond which you don't al- low yourself to venture. Rules, even your own, put you into a self-imposed box with four sides. To become super successful, you've got to think outside the box.

Your own mind is your greatest limiter. There's where all the "You can't do that" crap you hear will gather to smother your creativity and cloud your vision. If you're my age, you remember when the four-minute mile was "impossible." No- body had over done it. Then, on May6, 1954, an English run- ner, Roger Bannister, Finished the mile in 3:59.4 minutes. The very next month, Australian John Landy did it in 3:57.9. Soon a growing list of runners were conquering the "impossible" four- minute mile. Beyond challenge of time and distance, however, was the destruction of the mental barrier that cleared the way to conquest.

This story has powerful implications for anyone aiming for super success. Often the "impossible" in business is a feat that hasn't been attempted. It takes guts to move beyond the known into the unknown.

One of the legends of Asia was a Russian hotelier named Boris Lissanevitch. Trained in his youth as a ballet dancer, he escaped Russia during the Bolshevik Revolution and became a world-class dance performer. While touring the cities of the Orient, he fell under the spell of Asia, settled in Calcutta to run a restaurant, and in 1951 decided to open the first hotel in the Kingdom of Nepal. His friends in India advised him it would be impossible. After all, they pointed out, his landlocked Himala- yan nation was still stuck in the 15th Century. It was the mythi- cal Shangri La, tucked beneath the world's highest mountain range with no telephones, and access to the outside world only by perilous air travel ending on a rough grassy "runway" out- side Kathmandu. With no roads leading in or out of the king- dom, only automobile in Nepal belonged to King Tribhuvan.

Boris was not to be deterred. He bought a rambling, rundown medieval palace. He brought the second car into the country overland through the jungle from northern In- dia using porters, disassembling it into dozens of parts, and reassembling it on arrival in Kathmandu. From Calcutta, he ordered modern plumbing fixtures, power generators, refrig- eration units, furnishings and all the other trimmings to turn a dilapidated palace into a first-class tourist hotel. Since Nep- alese cuisine consists of rice soup and curry (as Hindus they eat no meat nor drink liquor), Boris also had to air freight in all food and drink. It simply can't be done, they continued to sniff back in India.

Today, the most prestigious address in Nepal is the Hotel Yak & Yeti. Host to royalty and celebrity guests for decades, it is splendid testimony to the sheer guts of the late Boris Lissan- evitch, regarded as the father of tourism in Nepal.

It take guts to lead the charge … and guts to change. Sup- pose you've got a good business deal clinched, and the pos- sibility of a better one comes along. All around you, conven- tional wisdom chirps, "Don't blow this. Remember, a bird in the hand …" It takes guts to ignore the advice of the tip-toers and meek-minded, and go for the better deal. If you've got a good product that's selling well, it takes guts to throw it out to introduce an even better product.


I don't often pay attention to what others think—espe- cially morons. In the box office hit Evita, the title character sings, "It doesn't matter what the morons say …" My definition of a moron or a doofus ("doo-fus") is anybody whose advice or attitude would limit my success potential. Morons are ev- erywhere. They work with you, they commute with you, go to your health club, live next door, and are even in your family. They've limited their thinking and would feel much more com- fortable if you'd limit yours too.

You probably even pay for conventional wisdom. Some professions exist to keep you in the box of "how it's done," and typically attract very careful and conservative men and doing several million dollars in business, for example, but you en- trust your accounting and tax functions to a CPA who has no more vision than to happily earn $70,000 a year. Even worse, you pay this furrow-browed bean counter, not to be creative, but to shake his finger in your face on behalf of the government say, "You can't do that." After all, accountants are trained and certified to follow studiously rules that help the IRS get very dime they can of your money, in large part by making sure you think conventionally about income tax.

You also risk the danger of retaining an attorney whose conventional wisdom is focused on what you cannot do. This guy sure isn't going to clear you a path to pursue your objec- tive; he's more afraid you'll take an unconventional step that'll make his job harder.

Over the course of my career, I've listened to the advice of scores of attorneys and accountants. I respect their knowl- edge. Some have been my partners. But with few exceptions I know they are conventional people dosing out conventional counsel on how to tiptoe even when my strongest instincts and inclinations tell me it's time to stampede … time to kick ass!

Morons and doofuses travel in other guises too—Stock- holders, bankers, the press and, thankfully, the competition. All that conventional wisdom can make a lot of noise if you're behaving unconventionally. That's why, when you operate un- der New Rules, you don't give a damn if you repeatedly embar- rass yourself. By the way, in the beginning this isn't easy. One pearl of conventional wisdom reminds us that we don't want to embarrass ourselves by failing at anything. You just keep saying to yourself , "it doesn't matter what the morons say."


New Rules also requires new habits and new companions. Two of the most dynamic business people I know are George and Deann Verdier. They own Sugarloaf Mountain Works in Gaithersburg, Maryland. They were already successful when they attended my Castle Experience in 1994. I hold this high- ly concentrated weeklong seminar several times a year at my

15th Century home in Scotland. It is limited to six couples, and has launched more than a few Quantum Leaps in recent years. The Verdiers listened when I said that the friends they had been socializing with might not be suitable companions during their drive for super success.

I was right. Deann and George returned to the castle for another "dose of Dan" in the spring of 1995. They reported that their old friends and acquaintances had sort of dropped them. "We've been so successful that our old circle of friends is no longer comfortable around us," according to Deann. "Since I went from driving a $10,000 Miata to a $100,000 Mercedes convertible, we have nothing to talk about." But the Verdiers and Dan Peña have a lot to talk about, and I'm proud as hell to call them two of a growing group of "Dan's Disciples."

I have always made practice of hanging around individu- als who were more successful than me. When I was just getting started, I joined a country club in Los Angeles I could hardly afford, so I could enjoy expensive golf and free advice from men decades older than me. At a glance, most of them looked like the typical old farts in baggy shorts, but they were retired CEO's and other top executives, men with fascinating success stories who loved giving a young buck like me the benefit of their experience. On the course, and especially over a cold beer at the 19th, I absorbed a lot from these guys. They know what New Rules meant—and had built their success scoffing at con- ventional wisdom.

New habits begin with developing the habit of decision- making. I've said I've made more than 55,000 decisions in my life. I've didn't say they were 55,000 correct decisions. But I acted decisively based on the available information and gut in- stinct I had. And I certainly didn't depend on pure logic. Logic doesn't consider the illogical actions of illogical humans. But worse, logic is a cut-and-dried mental process that reinforces conventional wisdom.

Let's talk about "important" decisions. You may have seen the movie Sophie's Choice. The choice that the lead character, played by Meryl Streep, had to make was between saving the life of her son or her daughter. Now that's a decision. But for day-to-day business, it's a good way to put decision-making in perspective. "Will anybody die as a result of my decision?" Whether you're deciding on whom to hire as a Sales Manager

… or how much office space you need … or which markets to expand into … or the color of your office walls—nobody's life is threatened if you make the wrong decision. It's just not a life-or-death thing. You may lose some money. You may expe- rience some inconvenience. Your mooch "friends" may scoff. But so what! The most so-called important decision you can make doesn't cause a ripple in the cosmos of time. The earth won't tremble in its orbit if you screw it up. And, unless you're a brain surgeon or a cardiologist doing a bypass operation, no- body is going to die based on what you decide. The next time you find yourself agonizing over a business decision, ask your- self, "is this a "Sophie's Choice?" If the answer is no, make the decision!

Another new habit is to listen to legitimate warnings. Who can give you a legitimate warning? Somebody who's been there. If you're about to go out and find capital to finance your business, listen to somebody who's already borrowed capital. If you're about to take on a partner, listen to his or her past partners. Listen to experience—not excrement! And don't lis- ten to some seminar bum who's never run a legitimate busi- ness in his life. Or if he has, it was a pushcart to nowhere.

Your personal foundation must include a New Rule about risk. We've talked about risk earlier. Conventional wisdom says, "Be careful." But risk is absolutely necessary in order to become super successful. Think of it this way—you're not tak- ing a chance—you're giving yourself a chance!

You risk may even be a bit crazy. Most big risks in this world were called crazy—sailing off west to find India … try- ing to make a heavier-than-air machine actually fly … putting a man on the moon … So be crazy. Just know the difference between taking a crazy risk and a stupid one. And go for it with confidence. As I've said for years, "I may be wrong—but I'm never in doubt."

Getting back to those oil drilling fund tax shelters Wal- ter Levine was selling as G&J, we set as our goal a $5.5 mil- lion package. We only raised $1.4 million, closing the deal on New Years Eve 1982. Tax shelters in those days were a dime a dozen, so we had to make each one of ours be perceived to be bigger and better than the last. Our second drilling fund ven- ture raised $3.4 million … and our third, in December 1983, raised $5.4 million.

Our office in Palos Verdes, California, was continually ex- panding, so that by early 1984, we occupied 2000 square feet of space with only six employees. These plush, spacious offices gave investors the perception of a large prosperous firm.

Our research told us that the Denver-Julesburg (D-J) Ba- sin, in northeast Colorado, held rich promise as an oil field. Us- ing funds from our third tax shelter, we agreed to drill 24 wells In the D-J Basin. Then we decided to take the deal public. In March 1984, we purchased a $60,000 six-month option to buy

$2 million D-J Basin property with great prospects as an oil field. Then with Great Western's fourth drilling fund venture, we raised another million dollars. Other people's money was about to make as all rich.

With two partners, whom I'll discuss later, I had pur- chased a small company in the United Kingdom in late '83, so I had become somewhat familiar with British business and financial practices. For several reasons, we decided to take Great Western public not on Wall Street, but in the venerable halls of "the City," London's financial heart of the Empire. This proved to be a historic decision, because no one had ever taken an option public in the United Kingdom. So why the U.K.?

We had practical reasons, of course. Our offering would have been too small to attract interest in the U.S. market, even in normal times. But these are not normal times. You may re- call that around 1984, Wall Street was aflame with junk bonds and LBO's generating fees in the tens of millions of dollars. Fees for bankers, stockholders, accountants and attorneys in the U.K., therefore, were significantly lower.

Interest in the oil market itself was at different levels on opposite sides of the Atlantic. While the U.S. oil market had been wrung dry and oil was old news, investors in the U.K. had only recently contracted "oil fever." The first oil had been discovered in the North Sea in 1975, and the British where still enthusiastic about exploration.

Finally, the regulations applying to such a public offering, especially by a natural resource company, where not as strin- gent in the U.K. By avoiding Wall Street, we wouldn't have to put up with a lot of bullshit requirements by the Securities and Exchange Commission.

But one important reason we went to London, which you won't find in any finance textbooks, is the nature of the people

who drive the traditional British finance community—inse- cure, arrogant, chained to tradition, and perfect targets for a rough and brazen American oilman. What pussycats!

We decided to go public on my 39th birthday, August 10, 1984. "You can't do that," the starchy barristers of London said, "That's the day Jaguar is going public. All the available investment dollars will head for Jaguar, a great British insti- tution being sold off by the government." They should have told Jaguar that was the day Great Western Resources was go- ing public. By the close of business that first day, GWR had 20 million shares outstanding of common stock which closed at about $2.50 a share. Beginning with our $60,000 option, the market value of Great Western Resources, with under

$100,000 in hard assets, soared to 40 million pounds—or 50 million dollars! And 60% of the outstanding shares were mine! We sold 25% of the company for ten million pounds, and the shares closed at a 25% premium to the initial offering price.

Bottom line: the company had $10 million in the bank and the cost basis in the stock held by myself and two partners was — $820.00!

Next day's headline in a London newspaper, referring to Jaguar, read, "Great Western Resources, the One That Really Roared" The paper characterized my impact on the market by concluding, " … as the most controversial businessman ever to set foot in London in the Eighties was off and running." The next month we moved to Guthrie Castle.

Was all this risky stuff? You bet it was! Could we have fallen on our butts? Probably. The secret is, aside from some astute salesmanship of possible oil-and-gas returns in god-for- saken Colorado, we focused on the ends—not the means. We thought big and moved fast. And were absolutely confident that we could outmaneuver and outsmart on our dullest, dumbest day any stiff-upper-lipped, bowler-headed Brit in the City. So we did. We acted as if we had no limits to our abilities, which is one of my Five Credos for Super Success we'll discuss in the next chapter. (Another Credo relates "enthusiasm." We sold our deal with the enthusiasm of evangelists, throwing fresh meat into the British feeding frenzy for "oil exploration.")

"Wow, how does this apply to me?," you murmur. Listen, I don't expect you to fly to London tomorrow and duplicate our achievement in the City? What about your own company? Your own dream? What about those pock-faced bankers down the street with the imaginations of mudhens? What about inves- tors looking for great stock in a company that would look like yours?—if you gave it a fresh coat of paint and went public? In order to remove Other People's Money from Other People's Pockets to build your dream, you have to build a gold-leafed perception of value around your company. We'll talk more about that later under Exit Strategies.


Let's talk about what Michael E. Gerber calls the "entre- preneurial personality." In his book, The E Myth, Gerber ex- plains that the business owner is really sort of a schizophrenic, one mind with three personalities in continuous conflict—the entrepreneur, the manager and the technician. While the man- ager writes business plans and maintains order and the tech- nician tinkers with the day-to-day work and drives employees nuts, the entrepreneurial personality leaps beyond the pres- ent to dream the dreams and focus on the vision of where the

company is headed. The entrepreneur is impatient with the present. He's through with it. It's been handled.

The entrepreneur clearly sees opportunities which are beyond the sight of his more myopic counterparts. And he un- derstands that he must control both people and events in or- der to seize those opportunities. Gerber says that the entrepre- neur who is absorbed in his vision is also impatient with those around him—his associates, his friends, his family, even his other two personalities—because not only can they not see the vision and become exited by it, their persistent foot-dragging is keeping him, the eager entrepreneur, from moving quicker toward capturing that vision and making it his own.

As an individual pursuing super success, then, you have to keep your sights above the rush and worries of today, and free of the nitpicking details which will be required to realize your vision. In other words, building your personal founda- tion includes the newfound ability to focus on the ends—not the means.

When you keep your attention focused on what an excit- ing, successful future waits you, a strange phenomenon oc- curs. You begin to transport yourself into that future. As you keep your eye on your goal, and the question ceases to be if you can get there; it quickly becomes just a logical one of how. You assume success. You visualize success as if it were already a reality.

This truth isn't confined to great and noble dreams ei- ther. A few years ago, USA Today did a management survey about daydreaming. It was based on anonymous responses, of course, but that's a good reason to put stock in the results. The questions ranged from "Have you day-dreamed about get- ting your boss's job?" and "how you're going to quit your job one day" to "How often have you daydreamed about having sex with a co-worker?"

It was fun survey to read, but it arrived a noteworthy fact—71% of those interviewed had their daydream come true within 12 months. Now think about that. If a random sample of managers can achieve that kind of success rate with idle daydreams, what are your changes of success when you focus on your vision until it becomes an obsession?

We're not necessarily talking about visualizing years into the future either. The salesman who has already visualized a successful sale before he walks into a customer's office is al- ready concentrating on how the sale will be made. Objections will become temporary barriers to leap around. Every "no" he gets becomes a "yes" the prospect just hasn't spoken yet.

We can even visualize success occurring in the next min- ute. You've seen it happen in every sport. The incredible putt on the 18th green. The home run in the Ninth. It's 20 seconds to the final whistle of the Super Bowl. A quarterback dodges on- rushing tons of defensive linemen, spots a receiver downfield, and then threads a football through waving arms and crashing bodies to hit that receiver for the winning touchdown. How? Aside from years of practicing for success, he has already vi- sualized the completed pass. It was a done deal before the ball left his fingertips.

Hell, maybe it's only a mental trick. Who cares? I'm tell- ing you it works over and over and has for centuries.

Because the high performance individual is impatient to get to the future, he's not afraid to take action. He'd rather do it right away—instead of doing is absolutely right." Don't wait until every little detail is nailed down, until every vari- able is perfect. Eisenhower launched D-Day knowing full well

the weather was lousy and seas were rough—and expecting at least a 50% chance of failure. But he played the best cards he had. He actually wrote an apology note and tucked it into this pocket to read to the world should the Allies get pushed off the beaches of Normandy into the sea.

During World War II, arguably the best field general in this century, George Patton, kept his sights on Berlin and blew tank shells through anything that got in his way. He was im- patient with the meticulous planning and plodding of other generals. He said, "A good plan executed right now is better then a perfect plan executed next week."

So there we were sitting on millions. Meanwhile, our drill- er adjourned to the fabulous D-J Basin, where our illustrious engineers and geologists, had told us that without a doubt there should be millions of barrels of oil under this wasteland.

They drilled a hole. It wasn't dry, but it wasn't what it should've been. They drilled a dozen more. Nothing to speak of. Our high-priced experts then reported that virtually the only gas and oil in the area was what they had brought with them in their trucks. Or in the hair of our British advisors. Ac- tually, we might continue to strike oil, but not in the quantities we would need to take a company public. We had the money to drill another 120 wells. But, I thought, for what?

It was at this point I called for a halt in drilling operations. I had long thought that internal growth, through operating profits, would not give the company the exponential quantum success of external expansion. Even with moderate success, we could watch revenues ease up gradually. Or we could acquire growth, and watch our growth curve shoot straight up. We needed to bump revenue.

My vision for Great Western told me to go for the latter.

That's because the name of the game in business is revenue. Lots of revenue. You can control expenses and cut costs all you want and you'll realize nickel-and-dime improvements in profitability. In recent years, companies as large as IBM, West- inghouse and General Motors have been busy "downsizing" or "rightsizing" to cut salary costs. They've instituted stringent cost controls, just-in-time inventory controls and TQM—all to become more efficient and profitable. But these are desperate, eleventh hour measures put in place because companies can't generate revenue.

Sometimes seemingly very smart executives can get over- ly excited about tiny profit gains. I once heard the CEO of a box company in California brag, actually brag to a seminar au- dience about the 1.8% profit margin his firm had maintained for years suddenly skyrocketing to 2%. Moron. I was next on the agenda. I stood up and said something to the effect that if that was the best profit he could muster, he needed to take his gold watch and retire. As it later turned out, he got the short end of the stick when his company merged with another firm. Wonder why.

So, seeking high revenues that our operations couldn't create, and instead of being content to run Great Western de- fensively, I took up an aggressive offense. It was a hell of a mid- course correction. We began looking for companies we could acquire, so that we could grow laterally in the oil business. This search had to begin quickly, so that the financial performance of our non-oil-producing drilling operations wouldn't clutter our financial statements.


Talking about quick, decisive action is a good place to bring up an element not often discussed in Business Admin class—passion. High performance, super successful people are passionate about their business, obsessed with its rising rev- enues and rapid growth. Like myself, these executives don't play not to lose. They play to win. There's a big difference. Even successful business people who make it big often begin to play not to lose. They lose their nerve because they're not sure if their first win was an accident of luck or timing. They're afraid they can't repeat that success, so they fold fetally into defensive mode to just hang on to what they've made. That's not passion—that's just shutting your eyes, ducking your head and hoping you survive. But the truth is, they're already dead. I call that, "sitting on your assets!"

Donald Trump, on the other hand, keeps winning and winning, because he has a consuming passion for developing real estate mega-deals, and the confidence in himself to know that he can keep winning and winning. Hey says, in fact, "As long as you have to think you might as well think big. It takes the same amount of energy."

The wellspring of passion varies with the individual. Some successful people, such as Trump, are passionate about developing joint venture, or setting the standard for high per- formance achievement in a given industry. I take particular delight in growing a company by Quantum Leaps, then selling it at the very zenith of its performance for tons of money. I don't care what kind of company it is as long as I believe from all available evidence that is has the potential to skyrocket in value. At any given time, I may own equity in a textile company, an auditing firm, a real estate organization—it doesn't matter as long as it's legal. (A few years ago, I had some Co- lombian businessman come to the castle and offer me millions to make their cartel operate more efficiently. I was flattered, but I politely declined.)

The source of your individual passion stems from your own personality. But whether you love dealing in the manu- facture of hard goods, or buying and selling real estate, or the prospect of striking oil in a remote, windswept field, you'd bet- ter be driven by the relentless fire of hot passion.

Passion comes with a caveat, of course. Paula Nelson agrees in her book, Guide to Getting Rich, that "passion equals profit," but warns exited entrepreneurs not to invest in a per- sonal fancy simply because they happen to love it. If you're enthralled with the idea of property in Northern Canada, she says, buy a lot build a cabin if you want, but don't expect to turn acres of frozen wilderness into a profitable venture.

When you're passionate about you business, I becomes your mistress. You think about it day and night. You think about it when you're at home, when you're traveling, when you're lying in bed at night, hell even while you're making love. You have to give up other pursuits, hobbies and pleasures because your business beckons like a seductress. You have to leave your family to entertain themselves, drop friends who don't understand you passion, forget to eat, forget to home. If you drink, you keep a bottle at the office. When you remem- ber to eat, you order in. If you work out, you install Nautilus in a spare office. If your mind wanders, and you dare to think about time off, your business comes back to reprove you for even a moment of infidelity.

Passion is required because being a super success is full-time job. There's never been a part-time high performer. Some of those seminar gurus and infomercial morons will say you can do this or that part-time and be a success. Work whenever you feel like it, and grow wealthy. That's bullshit! Sure, you can make a few extra thousand by hounding old ladies to sell you their mortgage, or setting up a 900 number or some other trendy scam. But I'm talking about millions. And wealth in the millions require a full-time, laser beam-focused commitment. Remember what I said—super success isn't for everyone.

But it is for the very few who are willing to build that founda- tion, make those sacrifices and create major sea changes in the currents of their thinking.


The quickest way to begin your quest for super success is—to take action. Make a decision you've been putting off. Don't let it ride another day. Like the TV ad says, "Just do it!" It could be something as elementary as replacing a dead weight, a loser in your organization, with a bright ambitious firebrand who can't wait to help you accelerate your quest—and then take your jobs.

What happens is, as soon as you take that action, and see how easy it really was, you'll have a higher level of confidence to take another action, an inevitable decision you've been de- laying. And another. Now you've got your aspirations in gear! Now you've got the taste of what you can become, because suc- cess feeds on itself—and is insatiable! It transcends any lust you've ever had for anything!

Before you know it, you'll love the decisive and powerful individual you've become. When you look at yourself in the mirror, you'll really admire what you see. I've got to tell you, after year of this, nobody loves me more than I love my- self. My wife's love for me pales in the presence of my love for me. If that sounds like ego run amok, I don't give a damn. The fact is that out beyond the front lines of the big business battlefield, in no-man's land where the big dogs run and assas- sins cut your heart out for a buck, you can count on one trusty warrior to lead your charge, watch your back and whack your enemies dead. Yourself. So what have you learned? To ignore conventional wisdom because it is almost always wrong, and serves only as a crutch to support the weak … to build your personal foundation for super success … to adopt New Rules, which means new habits, new companions … to not treat deci- sions as life-or-death situations … to focus on the vision, not the details … to be passionate about your business … and to take actions that will raise your own self-confidence and self- regard immediately.

What we are doing here I creating a whole new mental arena in which you can not only visualize your future success, but predict it. After all, the best way to predict the future is to create it yourself.

Chapter 4.Getting Comfortable with High Performance

Success can be as frightening as failure. Begin preparing now for the new style and tempo of life that will come with your success.

Practice makes … comfort.

Forget perfect. In an imperfect business world, even your sweetest, hottest deal is not likely to be perfect. Frankly, I’m always suspicious of a deal that is too “perfect.” But before you can achieve super success, before you can run with the big dogs and track down the big deals, you have to be comfortable in the environment in which super success occurs. And that takes practice.

So let’s talk about getting comfortable with the idea, the people, the setting and the actions associated with high perfor- mance and super success.

When I was starting out, I knew I was going to become successful. I knew it because I told myself that fact constantly. My success, really big success, was not some vague wish, some idle fantasy. It was my goal set in concrete, my inevitable des- tination.

If you know you’re going to a destination, it only makes sense to prepare yourself for your arrival. Let’s use a parallel example to illustrate the point. If you were going to open a business in, say, Thailand, you would begin to prepare yourself well in advance. You’d learn about the culture and the cli- mate. You’d study business conditions and the nature of the economy. You’d probably take language lessons and practice speaking Thai. You’d find some Thai people and talk to them. You’d no doubt visit Thailand, getting every insight you could in how Thais think, and what they value and how they do busi- ness. In other words, you’d be practicing for your new life, so that once you arrived, you’d be as comfortable as if you’d al- ways been there.

Super success is, in every way, a different place with a life that will be totally new to you. Your business will make differ- ent demands on your time and skills. You’ll be moving in dif- ferent circles of friends and associates, with different interests than those of the present company you keep. So you need to begin getting comfortable with all these differences now.


I mentioned Jim Newman in an earlier chapter. Jim, founder of the PACE Organization, was a brilliant man, a be- havioral scientist whose message and motivation have made a profound impact on my life. In fact, for 20 years, before his death in 1997, Jim was a mentor to me, a topic I’ll discuss later. Jim originated the concept of the “comfort zone,” a term which is now part of our language.

An individual’s comfort zone is the area in which he or she performs most capably, because that person is comfort- able in that area, or that level or that intensity of activity or pressure. One’s comfort zone is not fixed forever, like a locked thermostat. You can expand your comfort zone by pushing its limits, by having experiences beyond its perimeter. The problem with many people, mostly the doofuses who tell you that you can’t do this or that, is that they stay encased in the limited zone they’ve created just by continuing to breathe.

Most Americans, for example, live in the same state, work at the same job, have the same friends and take the same vaca- tions all their lives. Their comfort zone is like a coffin in which they live until they die.

Since I knew my destination was going to be stratospheric success, I began preparing. As I mentioned earlier, I joined a club I couldn’t afford to hang out with retired CEO’s who talked about the deals and intrigues of their careers. I bought a Rolls Royce and a Mercedes to see how it felt traveling like a super success. Linda and I drove around expensive neighbor- hoods looking at fine homes, mansions really, that we knew one day we could afford. Because I realized that perception was reality, I bought the finest suits from the best tailors, so that every first impression I made when I walked into an office was one of a high performance individual who was comfort- able with success. In other words, I practiced being successful with as much determination as a world class athlete practices his skills. Being a high performance super success is a learned behavior.

When I was around high performers, such as Costa Grat- sos, I observed how they acted and reacted to the pressures and problems of business. I watched them stay cool under fire, or go into a rage if more dramatic action was appropriate. Just as importantly, I listened very carefully to what they told me about the practices and politics of super success, because I knew they had been there. And, when my time came, I was de- termined to be just as comfortable as they were in performing under incredible tension; making hard, far-reaching decisions; committing millions and ultimately hundreds of millions of dollars with a signature; or handling ballbuster negotiations without a blink. I saw how they earned their penthouse towers, stretch limos and exclusive clubs—and I wanted to be comfort- able with this side of super success as well.

What’s the alternative to expanding your comfort zone? Discomfort, anxiety, even fear. And the certain death of any growth potential for your company and most assuredly you! Have you ever seen fear n the eyes of an opponent or enemy? It could have been in the boxing ring, on the football field or even on the battlefield. You’re face to face and you see his eyes flinch and dart around in terror, and you say to yourself, “I’ve got this son-of-a-bitch. He’s dead meat.” In the board room, those eyes, those sweating palms, that second of hesitation tell an adversary to go for the kill. This doofus is sitting with us, but he’s not one of us. Rip his lungs out!

Even the trapping of super success can be intimidating. Have you ever seen some moron walk into a fine hotel, or a gracious, well appointed home, gawk around him. “Golleeee, nice place you got here.” He might say. This guy is an embar- rassment, because he is clearly out of his comfort zone.

After we moved into the castle and had lived there for awhile, I got my father and stepmother to fly over from Los An- geles for a visit. We planned for them to stay for a few weeks. I was looking forward to showing them how great it was to live in your own castle, waited on by your own staff. It was a disaster. My stepmother wanted to eat in the kitchen with the cooks, and do dishes. My father wanted to sit up front with the chauffeur and be his buddy. They fretted about like fish out of water, and left after a long, miserable week. They were so far out of their comfort zone they didn’t know what the hell to do.

And they’ve never been back. For that matter, no one I was raised with or any other relative has ever been to visit us at Guthrie Castle.

Here’s my favorite comfort zone illustration. If I were to lay a 10-foot long 2×12” plank on the floor, and put a pile of thousand-dollar bills at the other end, and told you that if you walked across the plank you could have the stack of money, you’d scamper across in a second, wouldn’t you?

What if I took that plank up on the third floor, stuck it out the window and over to an adjoining building, would you still cross over and pick up your money? Maybe. You might crawl over very carefully on your hands and knees.

What if I took that plank up to the 27th floor and stretched it across a narrow alley to a nearby building. “Hey, that’s a long way down,” you might say. “You think I’m crazy?” No, you’re just out of you comfort zone.

But suppose your darling child was over in the other building, and I doused her with gasoline and struck a match and told you to come over on that plank 27 stories up or else. You’d probably be right over with little hesitation because of instinctive parental love.

The super successful operate in a different atmosphere than most people. They’re way up there, 100 stories high, in rare, thin air, and they’re quite comfortable. That’s what you have to be able to do—conduct business on that high plank without a blink or fear. And one way to do this is to constantly expose yourself to situations that by definition make you un- comfortable.

You have to expand your comfort zone. Another and eas- ier way to begin getting comfortable with high performance is through visualization.


One of the best clarifiers is the written word. If you talk about an idea or a plan to a dozen people in the same room, you create a dozen interpretations of your plan. But if you write it down, one plan exists for a dozen readers. Similarly, in order to clarify your vision in your own mind, write it on a piece of paper. The very act of committing to paper takes the ambigu- ity out of your idea. You see it before you, perhaps for the first time. Then tuck that piece of paper in your wallet and carry it with you day after day. It becomes as much a part of who you are as your driver’s license or your health insurance card … or your credit cards.

John Gale wrote, “If you don’t think about the future, you don’t have one.” That’s another way of saying that if you aim at nothing, you’ll hit it every time. But beyond thinking about it, you must visualize the details of your future—not just the generalities. Besides, you don’t have to know how you’re going there—but you do need to know where you’re going.

On May 25, 1961, President Kennedy issued an incredible challenge based on his own vision. He said, “… I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and return- ing him safely to the earth.” At that time, NASA was a fledgling agency with an unimpressive launch success rate. The previ- ous month Yuri Gagarin had become the first space traveler to circle the earth in orbit. Kennedy had no idea how the U.S. planned to land on the moon. But he illuminated the way, so that eight years later his vision was fulfilled. This, by the way, is also the best example I know of in this century of Quantum Leap thinking and macro-management. But we’ll discuss these concepts in later chapters.

Focus so clearly that the day your vision becomes real- ity, you experience déjà vu, the distinct felling you’ve already been there. On April 13, 1997, a good-natured 21-year-old kid in a red polo shirt stunned the golf world by winning the Mas- ters Tournament in Augusta, Georgia, with a record-breaking 18 under par. Everyone was surprised but Tiger Woods. He’d been visualizing the moment all his life. Earl Woods, his fa- ther, said, “He’s been talking about winning the Masters since he was five years old.” In his first on-camera interview, Tiger said he didn’t have an acceptance speech prepared because he’d only visualized as far as the 18th hole of the final round!

Years before Great Western moved into its suite of offic- es high above the Houston skyline, I visualized precisely how those offices would look. I step into an elevator which speeds me directly to the 17th floor of a downtown glass-and-steel business tower. I step out onto an Italian marble tile floor. I turn and directly ahead of me is a great golden logo that reads “GW.” Underneath it sits a beautiful blonde receptionist. I turn left walk down a long corridor, at least 150 feet, past the office of associates, until I reach the corner of the building. There, with full glass walls on two sides, is my office, complete with a large mahogany desk, richly paneled walls, spacious confer- ence room, library, bar and executive lavatory.

When the day came in 1987, and we opened our 44,000- square-foot corporate headquarters in downtown Houston, I pushed an elevator button and the above sequence unfurled before me just as it had in my mind for all those years. As my shoes clicked across the cool Carrera marble toward the young blonde receptionist, I felt not so much a feeling of achievement as one of closure … of touching the vision which had already been so real for so long. I knew it because I had visualized it down to the most minute detail. It was the fulfillment of a dream. It was coming home.


Since the late Seventies, I’ve carried on my person what I call me Five Credos. It’s the truth. Every month I copy them down on my DayTimer. They are an excellent framework for expanding and maintaining your comfort zone in the heady realm of super success.

1. Yesterday’s dreams are today’s realities. This is another way of saying “Today’s dreams are tomorrows reali- ties.” Dreams come first, lighting and energizing your imagina- tion, and gradually crystallizing into reality. Without dreams, you never progress. You never make any leaps, let alone Quan- tum Leaps. Instead you trudge through life taking whatever chances come along. Like the song says in the musical South Pacific, “If you don’t have a dream, how you gonna make that dream come true?”

2. See your dreams ahead of time now. This is a call to action. Don’t just talk about dreaming. Dream! Virtually everything I’ve accomplished of any consequence I visualized and dreamed of before it happened. So dream like me about a super successful business career filled with sweetheart deals pried from the clutches of morons and their toady attorneys. Dream about a larger home in an exclusive gated community. Dream about a vacation to Tahiti.

3. Take a look at a study a few years back by USA Today. They asked 1500 readers what they daydreamed about when they were at work. Some 77% said they daydreamed about having sex with a co-worker; 22% lied and said they did not. Seventy-three percent daydreamed about becoming CEO of their company, and 69% fantasized about what they’d say to their boss the day they quit. The survey also found that over a twelve-month period, daydreams came true for that group a surprising 71% of the time. Why? Because the daydreamer had visualized it over and over and had willed that daydream to come true. So take some time to dream now, so that your dreams have a chance of coming to fruition.

4. Simulation: Practice within when you’re with- out. This goes back to practicing being super successful. Learn to think and act like the high-performance person you’ll become, so you’ll be ready to act when the doorway of oppor- tunity opens.

5. This is nothing new. These techniques have been used successfully around the world by individuals who became top executives, champion athletes—and even successful politi- cians. It has been said that Bill Clinton practiced being Presi- dent from the moment he met JFK at the White House as a high school student. (Remember, I said practice doesn’t make perfect!)

If your goal is to become Chairman of the Board, start by chairing a committee or activity. Whether it’s in your civic club or church, volunteer to assume the responsibilities of the po- sition. Practice being the chairperson until you’re finally ap- pointed or elected. You discover quickly that when you want to work, or want to take on responsibilities in any organization, everyone moves gingerly out of your way so you can do it. “You want that job? Be my guest!”

Life itself is like that. Most people don’t seek more respon- sibility, more work, more success. They’re humming along nicely at their own comfort level, thank you. But they’ll be glad to get out of your way if you want the hassle.

In the early Seventies, I volunteered to be on the Board of Directors of my California State University, Northridge Alum- ni Association. I ultimately became chairman of key commit- tee. This experience, of stepping up to the plate, of practicing leadership and success, was invaluable later on in my career.

6. Act as if there are no limits to your abilities. Once you draw a line and say, even to yourself, “That’s all I can do. I’m only human,” you’ve set artificial, arbitrary limits on yourself. Why sell yourself short? So many times, I’ve pursued a course of action long after my associates have given up. And every time, I’ve achieved more than I would have had I just stopped when it seemed prudent to stop.

7. Even now, as I write this book, I am pursuing a “megapro- ject” which had been written off by everybody years ago. (In fact, I plan to write another book devoted to “can’t do” projects an call it You CAN Do That!)

This Credo reminds me of an interview I was giving to the Financial Times in London, arguably the finest financial newspaper in the world. I was asked how Great Western had been able to buck the energy depression to become the fast- est growing energy company in the United States. I fired back without any hesitancy, “We at Great Western create positive occurrences in our minds, and acted as if we had no limits to our abilities.” The reporter shrugged his shoulders, and in the subsequent article reported me as saying, “Great Western has no limits.” Our stock price jumped 15% in the next few days. You see, when you act as if you have no limits, it becomes a self-fulfilling prophesy.

5. “Enthusiasm” comes from the Greek word “en- theos,” which means “god within.” Regardless of your beliefs, you have the ability to draw special power from deep within yourself when you harness enthusiasm. Enthusiasm generates the passion, energy and determination to succeed that are absolutely necessary to achieve high performance. You can’t borrow enthusiasm. Your enthusiasm can’t come from deep inside your business partner or your spouse. You must generate your own fire and carry its flame yourself. Ask yourself the question: Have you ever known a successful Per- son who wasn’t enthusiastic? Remember: “A man can succeed at almost anything for which he has unlimited enthusiasm.”


One of the recent fashions in executive circles is to par- ticipate in mastermind networks. CEO clubs or other rare- atmospheric groups which meet and engage in mutual pon- tification. Many executives I know have become involved in these networks with varying degrees of success. But no super successful individual I can think of has become involved. That may be because the really top performers—Murdock, Iacoc- ca, Perot, Trump, Gates—are a species of lone hunters. They prowl and strike based on their own counsel, not the consen- sus of peers. Besides, consensus decisions are almost always

mired in conventional wisdom—which you now know is what? Almost always wrong!

Too often, what begins as a mastermind network evolves into a social group. The spouses and kids get acquainted, and what began as a productive enterprise deteriorates into cook- outs and golf games. If that’s what you want, fine. But it’s not a mastermind network.

With that caveat in mind, the rising top executive, entre- preneur or CEO can benefit from a mastermind group, to the extent the other members have as much to offer as they are willing to take from this relationship. In fact, your mastermind network will work if:

* Your members bring to the group different areas of expertise. If your group consists of five number- crunching financial types, or six executives from one industry, you’ve limited your base of expertise and po- tential for a wider perspective on problems you may be seeking answers to. Diversify your group. Bring in a retail executive, for instance, an electronics executive, a manufacturing person, a joint venturer, executives with legal, accounting or human resources experience. The wider your pool of expertise, the deeper your well from which to draw valuable knowledge.

* Your members share a similar level of experience. One “superstar” can outshine a roomful of rising stars. If one of your members is so successful that he or she intimidates and dominates your discussions, your get togethers become counter-productive. Participants are naturally going to be more comfortable and forth- coming around others they regard as peers. So they’re either all super stars or none!Your members work in the same general geographic area. You need to make getting together as convenient as possible, or you’ll find members of the group hesi- tating to attend. Even in the age of cellular communi- cations, many top executives consider travel time as lost time.

* Your members demonstrate a similar time commit- ment. If one of your group frequently seems to be “too busy” that’s probably code for “I just haven’t got the time you want me to invest in this thing.” Don’t saddle yourself and other committed members with having to carry an individual who is essentially dead weight to the group. Replace that individual.

* Don’t select or gravitate toward one individual to be- come chairperson of your group. In the ideal network, everyone is equal, with the responsibilities for coordi- nating meetings rotating as necessary.

* Your participants must have exhibited more traits of success than your peers and contemporaries. Seek out the acknowledged achievers, the “up-and-comers” in their industries, “firebrands” who are hungry for suc- cess, and who have ideas and energy to contribute to the network. If, ideally, you can bring together a se- lect group of individuals who are building their own foundations for super success, every meeting can be an electrifying, synergistic experience.

* Don’t hesitate to exit the group if the growth process falters. No relationship endures forever, especially among a group of dynamic people such as you hope to attract. Interests wane, agendas change. When the nature of the group or the character of the meetings no longer seems to be in your best interest or worth your time and effort, get out. Probably no explanationwill be necessary. But if you feel one is necessary, all you need to say is, “I’m not growing anymore.”


The value of the mentor is perhaps the most universally acknowledged truth in the business world. A mentor, of course, is an individual who’s been there, who’s traveled the road you’re embarking on, and sees the potholes and detours from the other side. Nevertheless, very few aspiring entrepreneurs or executives ever solicit a mentor relationship. I’ve discussed this topic with countless senior executives, retired CEO’s and others whose experience represents a storehouse of acquired knowledge and wisdom. Virtually none of them has ever been contacted about the possibility of becoming a mentor.

Too often, perhaps, executives feel they would be impos- ing on a potential mentor. But the fact is that most success- ful seniors are only too glad to pass along their experience to younger people seeking the road to success. All it takes is a phone call, an introduction, and maybe an invitation to lunch—which you pay for, in case it needs to be said! After all, men and women of this stature are forever picking up the bill and you want their experience with you to be completely pain- less.

In early 1995 I spoke at a seminar in Orlando, and one of the attendees was a pilot for USAir named Lennie Nock. He has since been preparing to make his own Quantum Leap through corporate acquisitions in the telecommunications industry, using, of course, Other People’s Money. Lennie says that he was particularly struck by my advice to seek mentors among the super successful. He called corporate legend Jimmy Ling,

founder and former Chairman of LTV. Ling is now in his early seventies, and doing oil and gas deals in Texas. Lennie flew to Dallas, met with Ling, and explored firsthand the possibility of an invaluable mentor relationship. But Lennie isn’t finished. As of this writing, he is pursuing a meeting with former ITT Chairman Harold Geneen! Lennie is a guy after my own heart. He fully intends to “run with the big dogs,” with the mentoring of some big dogs of his own!

I’ve had three mentors during my career. Each came along at the most opportune time for their special expertise to impact my life. The benefits I derived from their advice and counsel dramatically affected my life and propelled me forward toward super success. And I’ll appreciate them and their contribution to what Dan Peña became to my dying day.

I’ve already mentioned Jim Newman, founder of the PACE Organization. In 1976, I had been a stockbroker for four years. I was 30 and change, making big money—and my career was stalled. I had skyrocketed in estate and had tasted enor- mous success by the time I was 25, but now I seemed to be spinning my wheels, lacking the traction to leap forward. I had heard of Jim’s PACE Organization. His message was endorsed by an impressive list of high profile executives, politicians, ce- lebrities, and even such personal achievement gurus as Denis Waitley, author of The Psychology of Winning. So I thought, what the hell.

The PACE seminar was another of those pivotal points in my life. Jim Newman showed me how to get my head screwed on straight for super success. His concept of the personal “comfort zone” has been part of my business thinking since the day I walked out of his seminar.

One extraordinary mental exercise I use in negotiations is to determine the other party’s comfort zone, i.e. what would they accept out of this deal in order to become comfortable with its consummation? When I find the perimeters to that zone, I picture it as a box. Inside that box are any number of deal possibilities. I could give the other party everything they want, to my own detriment, and place my offer square in the center of their comfort zone. That would be stupid for me to do, of course, but it would make them very happy. Some busi- ness people, so eager to clench a deal, aim for the center of the other guy’s comfort zone and give away the damn store. I’ve done it myself back when doing the deal “right now” was more important than the terms of the deal.

Instead, I usually place my offer at the uppermost limit of the other guy’s comfort zone, at the very edge of what I feel he will accept. It works every time. He gets what he’s comfortable with, I get what I want!

But even more important than a powerful negotiating skill, Jim Newman taught me how to expand my own com- fort zone, so that I could move ahead rapidly and with solid direction toward my super success. I realized with clarity that, regardless of my income, I had been sitting on dead center for years, not crystallizing the dreams I had dreamed for the rest of my life. It was shortly after this seminar that I joined Bear Stearns, where I found a greater opportunity to expand my horizons. And after attending a PACE Alumni seminar in late 1978, I left Bear Stearns to become the oilman that would pro- pel me to super success and the life of “the rich and famous.”

I have often returned to Jim’s methodologies over the years. I recommend very few people in the personal and finan- cial development business, but he was one. He was truly grand master teacher of motivation, and I’m proud to say I’m out of

the Jim Newman/PACE stable of the mega-successful. Until his recent passing, Jim lived in semi-retirement in the hills of North Hollywood, occasionally holding a seminar or consult- ing with selected corporate clients. I cherished his friendship.

My next mentor was an oilman named Jerry Ormand. It was the late Seventies, and the oil industry was in chaos—my favorite condition for an industry, remember? Pat Kennedy and I had formed our partnership to capitalize on the energy crisis by building an integrated oil company. The Federal gov- ernment, in order to encourage oil exploration by every moron with a drill bit, was granting special dispensations for small refineries producing under 50,000 barrels a day. We used the money we made in refining to help build our energy conglom- erate.

The hills were alive with the sound of drilling. But “wild- catting,” the business of independent oil exploration and pro- duction, is a risky venture. Just like the gold rush days of the last century, there were precious few glory holes—and a shit- load of dry ones. Probably 95% of wildcatters went belly-up after dropping all their capital—and anybody else’s they could lay hands on—down dry holes in the middle of nowhere. The big oil companies were making tons of money, of course. They jacked up the price of oil with the usual bullshit excuse of “sup- ply and demand,” and generated the funds to drill more holes than termites. If the big companies were the battleships of the oil industry, the legions of wildcatters were little PT boats buzzing in and out trying to turn a quick profit on the scraps and droppings that an Exxon couldn’t give a damn about.

As a novice oilman with visions of becoming an oil ty- coon, I was introduced to Jerry Ormand, founder, Chairman and CEO of Ormand Industries, Dallas. Jerry could have been

the prototype for Jock Ewing. His daddy was an oil driller, and he roughnecked in the oil fields from the time he was a teen- ager. By the time I met him, Jerry had operated rigs in Kuwait and Saudi Arabia, and, out of an office in London, negotiated oil contracts across Africa from Egypt and Libya to the Congo. Even more important, his company prospered during a period of plummeting oil prices. Although he was a world class play- er in the global oil industry, Jerry took the time to guide me through the intricacies of the oil industry. He taught me how to pilot my own little PT boat among the big boys, picking and slicing my piece of the action in that chaotic arena. Hell, he turned a Wall Street stock peddler into savvy oilman!

Today, Jerry Ormand enjoys retirement in Bel Aire, Cali- fornia. He still does some consulting—and has remained a good friend. In fact, he is like a second father to both Linda and me. Out of the golf course, I bounce my latest schemes and ideas off Jerry. Even now, after 60 years of business combat, Jerry still has that fire in his belly.

I’ve already told you about Constantine “Costa” Gratsos— Greek shipping icon, executive heir to the Onassis empire, and lead actor on a worldwide stage of larger-than-life personali- ties. And yet, he put his arm around me and brought me on to that incredible stage to learn a part for myself.

By the time our paths crossed, Costa had made his for- tune and his name, and had helped the late Aristotle Onassis navigate that enormous empire through a hundred crises with all the political skills of Bismarck, Metternich and Machiavelli combined. After having succeeded and thrived in a world of assassins, he defined his friends by their willingness to offer him three things, “friendship in trouble … courage in battle … wisdom in rage.”

Costa died in December, 1981. But to this day, I often think of him and the genuine kindness he showed me. His presence seems to stand beside me at every negotiating table, and at the point of very hard decision. Often I ask myself, “What would Costa say?” The answer to my question is the answer to my problem. “I told you what Aristotle and I did in this situation.” I can hear him growl. “Now just do it!”

I recommend several requisites for selecting a mentor.

* Choose an individual significantly more successful than you are now—a person who has “been there, done that” and can shed the wisdom of vastly more experi- ence on your present problems and situations.

* Seek a senior person you genuinely like and respect. Those are two different requirements. We all know people we respect for their success, but don’t like as individuals. A close camaraderie can only develop through personal amicability.

* Your mentor should have achieved success in the same field of endeavor as your own, although this is not mandatory. Often the lessons you learn from your mentor deal with human relationships, decision-mak- ing and financial strategies which transcend specific industry problems.

* You and your mentor should share common interests beyond the business milieu. Some of the best advice I ever got was on the golf course. Mutual interests and pleasure provide a relaxed environment for you and your mentor to unwind and explore ideas. Minds of- ten work most productively together when you allow them free run of a fishing trip or other out-of-office activity.

In summation, then, get comfortable with super success before you achieve it, by practicing to expand your comfort zone. Clarify your vision, without focusing on how you’ll bring that vision to reality. Instead, focus on the details of how that reality will look and feel. As as step towards clarification, write down your vision carry it with you, so that is becomes part of your being.

Consider participating in a mastermind network, if you feel it meets acceptable criteria and you can benefit. Then, ul- timately, don’t hesitate to exit the group if your own growth process stops. Finally, seek out a mentor. Some of the greatest minds in the business world are available—and would be de- lighted—to become mentors. If you pick up the phone.

Now that we’ve talked about how you can condition your own mind and prepare it for super success, let’s turn to how you prepare others to see the same successful person you do when you look in the mirror.

Chapter 5. Building Perception to Become Reality

Super success begins with your masterful illusion that it already exists.

Never underestimate the power of illusion. More important than just creating what you’d like for other people to believe, it helps you create what they must believe for you to achieve your goals.

We live in a brutal world made more tolerable by the illusion of reality. For centuries, as an example, the true nature of war was masked in a grand illusion of colorful parades, splendid uniforms and flying flags. The warnings of those who returned from war, who quietly described its horror, were lost in the trumpet strains of marching tunes. Only late in this century, when TV news brought the carnage of battle home around dinnertime, did the general public finally realize that all the glory and grandeur was … illusion.

Illusion is one of the skills of leadership. In the epic movie Patton, the fiery general played by George C. Scott becomes frustrated at being unable to break through German lines to relieve the siege of Bastogne. Suddenly, he roars in anger at his staff, “We’re going to attack all night. We’re going to attack tomorrow morning. If we are not victorious … let no man come back alive.”

No one moves. No one speaks as Patton strides past them through the stunned silence. Then his aide approaches him and says gently, “General, sometimes they can’t tell when you’re acting and when you’re not.” Patton replies, ‘ It isn’t important for them to know. It’s important for me to know.

Perception is reality in any business. When I was a young hotshot real estate salesman in Southern California, I sold lots on Lake Havasu, an artificial lake on the Colorado River between California and Arizona. Lake Havasu later became the unlikely home of London Bridge. It was surrounded by desolate miles of desert, and wasn’t the fashionable resort region it is now. I’d take prospective buyers out there, and we’d stand gazing across the lake. Aside from the expanse of water, it wasn’t a very inviting palce. So I didn’t sell the place. I sold them their own perception of their dream. I’d say something like, “Look out there. You can see the sails of your boat as the breeze nudges you across the lake. Look over there. You can almost see the fishing dock, and that luxurious clubhouse where you meet your friends for dinner.” I sold a shitload of desert in those days.

Illusion is the camouflage behind which we pursue our dreams and goals for super success. It is the stage we set … the costume we don … the face we present to achieve our objectives. Within the bounds of law and ethics, illusion is your weapon to build the most advantageous perception you can in the minds of stockholders and stockbrokers, attorneys, competitors and the public at large—all for the accelerating advancement of your company.

But, Dan, you ask, are you suggesting I create illusions about my company? You’re damn right! You’ve got to do what it takes! If you run a business, your job as head of your comany

goes well beyond making sure it produces a top quality product or service and sells it at a fair price. You’ve got to spend days and nights continously pumping credibility into the facade that company presents to the business community … to make it appear on the business skyline not simply as large as it is, but a hell of lot bigger.

Let’s go back to that later. What about the perception you are creating personally—as an individual and as the representative of your company? For starters, you only have one opportunity to establish a powerful initial perception of yourself. The cliché is correct—you don’t get a second chance to make a first impression.

Suppose you had a young person call you for an interview appointment. Fifteen or 20 minutes after the appointed time, he shows up in jeans and a “Bad Boy” T-shirt. His hair should be on his sister’s head, he’s got an earring, a tattoo and an attitude. Now this kid could have just graduated from Harvard Business School, but you don’t give a damn. You’ve judged him by his appearance, and he’s out of there. You don’t give a damn that it would have been politically correct for you to seriously consider this burn, just to show what a open-minded guy you are. (As far as I’m concerned, political correctness is a lexicon made up by psychobabblers to make weenies feel better. But what the hell do I know? I’m just a “money-enabled white man.”)

The point is, this kid created the instant perception of a goofy, worthless doofus—and it was real enough for you.

Whenever I go to a business meeting, and especially an initial meeting with people I’ve never met, I dress for the occasion. That means a Saville Row tailored suit, maybe with waistcoat vest, handtailored dress shirt, bold tie, antique gold pocket watch and free-flowing breastpocket handkerchief. The message to those people is, I don’t look like them because I’m not like them. And when I walk into the room, I want those morons to know at a glance, in a microsecond, that their lives and destinies are going to radically change forever because I just walked in.

But you know what—I dressed like that before I was super successful. I’ve used attire to my advantage ever since I returned from Europe after working with NATO. It was there, even as a young officer, that I first saw how the European well-to-do dressed, and how they created by their actions, even facial expressions, an immediate perception of calm, self-assured superiority, regardless of how superficial they might prove to be. In the years that followed, when I’d go see a potential lender, especially one of those pasty-faced “loan officers” that makes

$35,000 a year, I’d approach his desk like the Battleship Missouri about to dock. The suit, the attitude, the eat-your-lunch eye contact—the poor son-of-a-bitch would be asking himself, “Why does he need to talk about a loan? We should probably be borrowing from him. (Nowadays, with a five-million-dollar credit line, I send one of my associates over to handle financing transactions. That suits the bank just fine. They still cringe when they see me walk in.)

Along these lines, a great book I recommend you read is Winning Through Intimidation, written by Robert J. Ringer. It advocates an assertive posture of strength in doing business in order to gain and hold the initiative. Although it was written in the Seventies, its strategies are still applicable in the Nineties. George and Deann Verdier, my friends who are experiencing a Quantum Leap in their own business, travel much of the year arranging and producing upscale craft expositions

in major cities. Deann points out they always wear executive attire to take a commercial flight regardless of destination or schedule.

“We’ve avoided the temptation to fly in jeans and sweatshirt for several reasons,” says Deann. “First, we never know who among our associates or clients we’ll run into, or what potential business contact well meet on the plane, especially flying first class. But we’ve also discovered that the airline people actually treat us better when we’re better dressed. They’re friendlier, the service is better, and they’re more likely to give us the nod if a first-class upgrade becomes available.”

But it’s more than dress. I mentioned attitude and eye contact earlier because they are among the most important non-verbal signals you can send to create the perception of power. Research has long confirmed that powerful people use eye movements to dominate and control a conversation. When they speak, for example, high performers look others squarely in the eye, but then look away when they listen. An executive who continuously looks another executive in the eye while that person is talking is perceived to be too eager to please and easily manipulated.

The personality development books tell you to smile when you go into a new interpersonal situation. Make people feel at ease. If I’m walking into the corporate office of an executive with whom I’m negotiating, or into the cubicle of some doofus loan officer to talk about taking his money, I don’t want the moron feeling at ease. My Intent is create an instant perception of myself as a super successful individual who doesn’t need to impress anybody with flattery. I’m not there to be this guy’s friend or especially his whipping boy. I’m going to intimidate him in his own ballpark, so that he has to struggle just to stay on the defensive. He has to earn a smile from Dan Peña, by saying what Dan Pena wants to hear. Sounds reasonable, doesn’t it?

By the way, part of my persona as a super successful multimillionaire is my refusal to carry business cards. Why not? Do you think Ross Perot carries business cards? Can you imagine Ted Turner graciously tendering a business card to the Chairman of CBS and saying, “Let’s do lunch sometime. I’d like to buy your network.” The super successful do not distribute business cards. Instead, they say, “Have your secretary call my office. They know where to reach me.”

Yes, first impressions are important. But even more important than that first snapshot of you walking in is the consistency of your impression. After all, the larger multi-dimensional image you mold in the mind of a potential investor, lender or equity partner is a compilation of smaller meetings and contacts. Each contact adds another facet to who you are, another quality of your character, personality and business style. It’s important that as you build this dimensionality you don’t create confusing, contradictory images. Every face you show must agree with the overall image you wish to create.

In his bestseller, The 110% Solution, Mark McCormack makes an astute observation about putting first impressions into perspective. “Think about the long-term relationships your life, in or out of the workplace. The chances are they didn’t blossom because someone overwhelmed you the first time you met, but rather because they continued influencing you on the second, third and fourth occasions.”

Consistency of perception is also vital in dealing with your own associates and employees. They need to know Action A will generally provoke Response A. Employees perform more

effectively when they’re not constantly beating their brains out trying to guess what your reaction will be, what mood you’re in or what executive mask you’re wearing today.

That’s not to say you should cultivate the image of an unemotional, unflappable boss. A little well placed and justified rage now and again does wonders. But save your table-pounding theatrics for special occasions, so they’ll make a more profound impression. Mark McCormack recommends an occasional unexpected behavior. If your people are anticipating you to yell, speak softly but forcefully. If your counterpart across the negotiating table is expecting a certain tactic, change fields and run another pattern. While consistency is a virtue, certain predictability is boring as hell.

As far as corporate perception, there are moderately successful corporations which maintain an image much like the punk kid I described above. At one particular marketing firm, the boss comes to the office in sweatpants, the employees wear jeans or shorts, and the atmosphere is more like a factory floor than an executive office. All day long the air is filled with chaos—screaming and yelling to the extent other business neighbors have come over to complain. What kind of perception does this create for walk-in clients expecting professional behavior? Or even suppliers who talk about this company to their competitors? The owner will never change. And his company will never become super successful.

Instead of pulling a company down, perception should boost the company up to the plain to which its leadership aspires. I related in the second chapter how I tied the GW dinghy to the seaworthy reputation of Marrion Refining. It never occurred to the gray-metal-desk government weenies to ask about the size and worth of Great Western vis-a-vis Marrion… that I might be just one man working out of his kid’s bedroom.

That simple poly, of associating my company with larger companies in what appeared to be equal joint ventures, became a key rung in the ladder of our success. “They must be legit,” so the reasoning went, “Look who they’re partnering with.”

Here’s another perception which paid off handsomely for all of us. From day one, Great Western Resources paid a dividend. We had no earnings to speak of, but we paid dividends to shareholders however we could. That’s because I wanted us to be viewed from the beginning as an income stock. That way, mutual fund portfolio managers would consider including Great Western in their more conservative income producing funds.

When investors looked in the newspaper at Great Western Resources dividends, it didn’t say “dividends paid since 1861 or 1975.” It just said “dividends.” We had instant credibility in the market! We got bought up by income funds like crazy! The stock price went through the roof, doubling in just four months.

Nobody ever called up, not once, and asked us, “How long have you been paying dividends?” Perception was reality. (Later, after I was gone, but still held substantial stock, the company decided to stop paying dividends. I don’t know why. As stockholders, the new management people were getting dividends too. It turned out they cut their own throats. When the dividends ended, the stock plunged into the toilet, and they all lost a lot of money.)

Lennie Nock, the entrepreneurial pilot, works out of his house near Philadelphia, or out of hotel rooms wherever he happens to be laying over between flights. But he’s thinking

well beyond his current career in the cockpit, continuously interviewing major accounting firms, investment bankers and others as he builds his “dream team.” And all the while, Lennie is creating the clear perception of an established and knowledgeable businessman.

So when you call Lennie, he doesn’t pick up his home phone and say “Hello.” His calls are routed through an answering service which acts as his corporate switchboard.

“Good morning, The Diversified Company.”

The caller, once identified, is put through as if Lennie were back in the executive offices. He even uses remote call forwarding so that, if he happens to be laying over in some Holiday Inn, the perception is maintained. “Hey, it costs me about $100 a month, and for all they know The Diversified Company is a large corporation in an executive tower in downtown Philadelphia.”

The Verdiers work to maintain the perception of their craft shows as prestigious events, admitting only the most qualified exhibitors and sponsors. “In a few of our markets, our shows have to be staged in fairgrounds arenas. That means we have to work even harder to project that upscale image, to put as much distance as possible between our expositions and the flea markets that come along. As our shows have grown in popularity and reputation, we’ve had to be more and more particular about who we accept to sponsor them in each city. As part of mainlining our quality perception, we limit our sponsors to such entities as newspapers, radio stations which appeal to our demographics—no rap, no rock—banks and soft drink companies.”

George Verdier points out that perceptions will only endure for so long. In order to produce a successful and profitable event, he and Deann must build the perception of their show’s quality in a given market long before the show ever opens. “Once we open, image gives way to the quality of our performance, and we replace our carefully constructed perception with reality and reputation. If you can’t follow through, all the perception in the world is a house of cards.”

Early on in the development of Great Western Resources, it grew increasingly clear that if my company and I were going anywhere, we both had to look as if we were already there. I knew that our business partners, investors and the financial community in general had to see me now as I planned to become in the future. Or neither GWR or Dan Peña would even have a future! I needed a quick transfusion of perception, one so dramatic that it was virtually inarguable.

So, as I mentioned earlier, that’s when I decided to buy the castle I could hardly afford. It was an expensive project, and a monumental task, emotionally and logistically, to relocate from a major U.S. city to rural Scotland. But it worked, of course. Acquiring a Scottish castle quickly becomes grist for conversation and grudging awe, even in the jaded corridors and conference rooms of Manhattan. As soon as Wall Street perceived I didn’t need their help, I got it. It was a case of using reality, the purchase, create a perception which drove a greater reality. Speaking of illusion, I decided that in order to accelerate our castle shopping, we had to be perceived as serious potential buyers. After all, there are those who play “Let’s pretend” with high-end properties for sale. They read the classifieds of European publications, then drive out to view this or that castle or chateau just to gain entry and see “what it’s like.” Real estate people can smell an impostor instantly, and reserve for them a special level of distain.

So for the purpose of putting distance between ourselves and the proletariat, and to create the perception we could even afford a castle, Linda and I would hire a chauffeur-driven luxury automobile before every viewing appointment. You can imagine how the appearance of such a spectacle gliding onto the grounds would affect the attitude of a real estate representative. We were warmly welcomed and afforded every courtesy, of course; but more importantly, we forced the issue of serious negotiations. In this case, we used perception to cut to the chase of purchasing our dream castle.

Granted, Guthrie Castle is an extreme example. But what about the perception of success you need to cultivate in order to be even more successful. When you buy a new luxury car or join an exclusive club as a way to accelerate business success, aren’t you acting as if the perception you desire is already a reality? Of course you are!

Sure, you could drive the Chevy until you’re super successful, then buy a Rolls. But not only would you tend to continue to think in a Chevy mentality about your success, you’d be encouraging others to do the same. (“I noticed he drives an old Chevy. Looks like he really needs the money … we’d be safer not to approve his loan.”) Having said that, I recall that Rick Scott, former CEO of Columbia/HCA Healthcare Corporation, drove a Buick with no radio while he was building his empire. But his social events were elaborate affairs, attended by some of the wealthiest men and women in America.

The lesson here is to position yourself where you believe people will perceive you as being successful. The Hollywood crowd, of course, has been doing this for generations. This strategy has benefits beyond the doofus lending officer. When you’re perceived to be a success, business people want to be associated with you. You become sought out by others with a potential deal. You spend less time fishing for opportunities because the fish begin jumping into your net and even your boat. My own perception as a dealmaker, of course, became reality. As a result, over the years, I’ve been continuously deluged with plans, schemes and, even a few good ideas presented by individuals and corporations looking for a champion for their venture. They know I’m always looking, and I am a real and serious player!

The value of using perceptions to create realities is not limited to image-building for up-and-coming companies or individuals. It permeates every phase of business operations. A successful company needs to pump up its image at strategic times throughout its corporate life. When you’re preparing for your initial public offering (IPO), you want brokers and purchasers alike to perceive an enormously shrewd, dynamic and aggressive company poised for skyrocketing success. You want editorial column space in The Wall Street Journal, and for your top executives to be seen in the most exclusive circles exuding acumen, confidence and comfort about taking their company public. You want stockbrokers and potential buyers talking hungrily about you at lunch, in lip-licking desire for your stock long before the day you go public. Remember—the perception of what that stock is isn’t based on any face value, but on the demand that has been generated for that stock. If you do it right, the result on the day of your offering, as it was with us in London that August 10th, will be that of selling shares at spiraling prices to eager investors quite willing to pay those prices.

Finally, well before the time comes to sell your company, you begin using a number of proven strategies to build the perception of a successful, profitable corporation. We’ll cover those strategies in a later chapter.

We live in a world of perceptions. Virtually nothing is really as it seems, only as unseen manipulators would have us believe. Don’t forget that others with whom you deal—or would deal—are busy building perceptions for your consumption. They range from resumes filled with lies to financial statements with more juggling than Ringling Brothers! Politics is the continuous example of a juggling act. That’s why, wherever you find perception, it’s absolutely vital for you to look beyond the illusions others would have you take as reality.

In an ideal world, everyone would be forthright and honest in presenting themselves and their corporate entities. But until that ideal comes along, perception will be the reality others accept about you. So it’s up to you to craft that reality to your fullest advantage.

Fortunately, you need not do it alone. You can gather around you the resources of some very skilled individuals in many disciplines … the Dream Team we discuss in the next chapter.

Chapter 6. Creating Your Dream Team

“The first method for estimating the intelligence of a ruler is to look at the men he has around him.” —Niccolo Machiavelli

No matter how good you are, you can’t do it alone.

You can do the work of two or three people—and to achieve super success you’ll work that hard most of the time—but you can’t be in a Los Angeles bank to nail down financing at noon, to sign a deal in Manhattan at two. The most determined, pas- sionate, vision-driven high performer does not have the exper- tise, energy or hours in the day to touch every action … check every figure … and review every contract generated by a com- pany assuming a growth position.

Your company, your entrepreneurial creation, is understandably a source of pride. Nobody else loves it, frets over it and perceives your vision for it like you do. Nevertheless, the time comes when you must give up some, in fact a significant portion, of that creation to others in order for it to come to the fruition you dream for it. You must relinquish pride of authorship to the hands of others inside and outside your company.

Pride of authorship has been the death of countless otherwise promising companies because its “founding father” wouldn’t let it go. Let’s follow that parental parallel for a moment. You have a darling daughter you helped bring into the world. Your highest ambition is to nurture that little girl, shape and form every phase of her young life, so that she blossoms into an intelligent, happy and successful woman. But you can’t do it alone. Along the way you have to entrust her to school teachers, piano teachers, camp counselors and drama coaches. With luck you’ll achieve your ambition for her, but to do that, you have to share control with other, carefully selected specialists.

Your entrepreneurial relationship with your company is much the same. You have to hire or retain experts in finance, accounting and tax law to help provide your enterprise direction and counsel you can’t give it. You need the skills of stockbrokers, investment bankers, merchant bankers and commercial bankers, attorneys, accountants and consultants in several fields whose knowledge you value. Finally the day comes when, for the sake of a few million dollars, you sell out piece by piece to legions of profit-driven shareholders, strangers who view your entrepreneurial creation not with your passion but with undisguised greed, or at least as a potential source of security for their retirement years.

That’s why you use two levers to pry open the way to super success—Other People’s Money … and Other People. These other people, recruited from a variety of sources, are what constitute your “Dream Team.” Let’s talk first about your board of directors, the initial Dream Team members you need to assemble before you can recruit the rest of your team.


When I mention a board of directors, your first reaction might be, hey, this is just a little hip pocket company. Isn’t a

board of directors sort of premature? Not at all. Directors are your first and most immediate requirement. You may think of your enterprise as simple and uncomplicated, but if you’re preparing for a Quantum Leap into the big leagues, you’ve got to fill all the positions on the field now! So incorporate, if you haven’t already, retain the titles of president and Chief Executive Officer, and begin your search for your Dream Team directors.

The most immediate benefits your board of directors should bring to your Dream Team are credibility and even prestige. The best source of directors is recently retired CEO’s and other top executives of local, regional and even national companies. And they’re not inaccessible. As with finding a suitable mentor, pick up the phone and call. Explain your situation and the direction in which you’re moving, and how you have some fantastic ideas on consolidating a cottage industry or whatever your goal may be. Express your desire to have the individual add his knowledge, experience and prestige to your company. You’ll be surprised at how receptive even high profile these people can be. One of my partners discovered that email is the most effective way to get their attention. These days, almost everybody answers e-mail. How do you get their e-mail address? Call their company or even their home and ask!

These senior individuals are rich with experience and wisdom you can call on, they’re probably frustrated because nobody asks them for their opinion anymore—and they’ve got time, between golf games—to give you whatever time and attention you need. And they’re not likely to try to interfere with how to run your business.

One of our partners in the United Kingdom assembled a remarkable board of directors. Victoria Haigh, at age 26, is a former fashion model and is one of Britain’s few women race horse jockeys. She’s not a Londoner, and speaks with the distinctive accent of her native Yorkshire. Her entrepreneurial dream is to consolidate the garden shop industry in the U.K.

Vicky perused a publication called Directors & Shareholders or the “DASH,” and found the name of one Randle Siddeley, a noted landscape architect. At his second job, he’s called Lord Kenilworth, because he’s a Member of Parliament in Britain’s House of Lords. Vicky rang him up, introduced herself, and, to her amazement, he ultimately agreed to join her board.

Vicky then focused on her next board member, the owner of Breadleigh Gardens, a successful bulb nursery. His name, which could only be British, is Roger Bootle-Wilbraham. He is also Lord Skelmersdale, yet another MP in the House of Lords, a graduate of prestigious Eton, and a Parliamentary UnderSecretary in numerous departments and offices. Regardless of his half-page of credentials, Vicky simply faxed his office with her proposal. He called back, they met at his office at Parliament—and Vicky recruited her second Lord.

To round out her board, Vicky also secured Christopher Powell, a former Chairman of Wyevale Gardens, a national garden center company … and Charles Quest-Ritson, a financial expert with a law background and expertise in taking companies public. With a board like hers, this young lady will have the attention of any banker in Britain and, in fact, has already secured some initial financing.

One question many of senior and retired people ask is, “How can I contribute? I wouldn’t want to be involved if I couldn’t contribute something.” It’s very disarming to have a

former CEO of a Fortune 1000 firm ask you if you think he can “contribute” to the success of your company! So just flip it around. “Sir, I would look to you for recommendations on others we might consider for director positions.”

Select an experienced chairman first, an individual with an established reputation, though not necessarily in your own industry. Your chairman should be, to the fullest extent possible, an executive heavyweight, a highly experienced person who has done dozens, even hundreds of business transactions over the course of his career. In real estate, they’d call him an “anchor tenant.” I myself am the chairman of more than 25 corporations, and in every instance was brought in because no matter what comes up for any of these fledgling companies, I’ve “been there, done that.”

The rest of your board positions should be filled with individuals from varying backgrounds who share one common quality. They all have more business and financial experience and acumen than you. Your board ideally should include a financial person, an accounting specialist, and one or two other individuals who have already achieved what you’re trying to achieve in your field of endeavor, particularly in growing a company geometrically through acquisition. Your accounting expert might be a former regional managing partner of a Big Six accounting firm. Your financial-based director might be a retired investment banker. All these people, no more than four or five in number, will inevitably “contribute” contacts. They are the core from which you will now proceed to build an aggressive, acquisition-hungry corporation.

By the way, your board must be what I call “lawsuit-aware.” Although it may go without saying, at some point mention it to them anyway for the record: you accept litigation as a part of exponential growth. You regard litigation as a legitimate business tool. And if you don’t, you should. If the idea of filing suit makes you uneasy, and the thought of getting sued frightens you away from acting in the best interests of your company, stop reading here and go get a good romance novel.

In business as in life, disagreements happen. Assassins abound. Trust me—I’ve been involved in more than 200 lawsuits—and never lost a case in the U.S. The greed, arrogance and stupidity of others need to be kicked out of your path to glory without a second thought, without a break in stride. Be mentally prepared to do battle in court whenever you have to—and have a board of directors prepared to back you up.

As far as compensation, don’t even bring it up the first or second time you and your prospective director talk. Whatever you may offer is table scraps compared to the wealth they’ve accumulated after 30 years of business leadership. Eventually, almost as an afterthought, mention you’d like to offer each director 2% to 5% of your company, depending on the extent of their time and participation involved. Offer a few points more to your board chairman, based on the projected depth of his involvement. Then the issue of compensation is covered.

Remember that you assemble your board of directors before you begin you begin your search for outside accounting and legal professionals. Assuming your board is complete, it’s time to continue building your Dream Team.


Before you make the first phone call to the first accounting firm, sit down and write your Mission Statement, to articu-late your vision and the overall strategy you intend to pursue in your quest of that vision.

The Mission Statement is important to most professional minds, in that it reveals how much you understand about where you intend to take your company, and the boldness and clarity of your vision.

Though most Mission Statements tend to be pie-in-the-sky crap, there are some “magic words” you want to incorporate into this brief document to make it stand out from others. You want “dominate the industry,” for example, and become a “major force” in determining the future of that industry. “We’re going to consolidate a fragmented and cottage industry” tells the reader you plan to grow geometrically through acquisitions, an exiting prospect for any accounting firm which would like to grow its billings the same way. Do not confine yourself to a time frame—that’s a detail at this point.

While you and your directors fine-tune your Mission Statement, also pull together executive profiles of your directors. When all the documents are complete and professionally bound as a presentation handout, begin setting up interviews with accounting firms. Your new directors will no doubt have contacts among the Big Six. Use those entrees. If not, pick up the phone and start making cold calls on accounting firms.

What kind of accounting firms? For starters, you need the expertise of a highly reputable CPA firm. My contention has always been that you avoid hiring your neighbor or your cousin the accountant, or even the hometown CPA company. From the very beginning, use a Big Six accounting firm. How can you afford the best? A Coopers & Lybrand, a Deloitte & Touche or an Arthur Andersen? We’ll get to that later.

Set up preliminary interviews with all the Big Six accounting firms with offices in the city in which you’ll be doing business. Schedule yourself and one of your directors, but not your board chairman. If possible, have the accountants meet you outside their office. If your new offices do not have a conference room, try to arrange one. If you must meet at the accounting firm, make note of the size of the conference room they put you in. It’ll indicate their initial estimate of your potential as a profitable client, as well as the seniority of the accountants you’re meeting with.

The first meeting is a brief one. Your presentation shouldn’t last more than 20 or 25 minutes, during which you simply expand and elaborate on your mission statement, reemphasizing the fact that you intend to consolidate through acquisitions an industry that is fragmented and basically in chaos. You also tell them up front you’re interviewing four or five other accounting firms, and you’ll go with the one which offers your company the most value for fees paid. The whole meeting should last but about 40 or 45 minutes.

When you’re obviously an aggressive company seeking growth through acquisitions, accounting firms will listen to you for two reasons. First, they envision their own geometric billings growth riding on top of yours. Second, a company in an acquisition mode is less likely to change accountants once their accounting firm picks up the rhythm of the company and understands its vision, pace and tempo.

As a result, you have the opportunity to leverage your potential with regard to their fees. Accountants do not work on a contingency fee basis, with fees keyed to success or failure. “Independence” is extremely important to accounting firms, and is defined for them in the Generally Accepted Accounting Procedures (GAAP).

So you talk to accountants about “value-added fees” and “success-oriented fees.” Underline these terms! They are very important phrases for you to use. During early ’96, I made presentations to a number of accounting firms, and in every instance, the partners immediately responded to those terms.

One Big Six partner suggested they would bill only 50% of their hourly rate until we made a successful acquisition; then 100%, and then play catch-up until they made up their 50% balance. Another Big Six firm said they would wait for six month after our first transaction to begin full billing. The point is that accountants are flexible as long as the aura of professional “independence” is respected.

During the second round of interview meetings, you may have narrowed the field to maybe three or four firms. You should expect these interviews to be attended by an audit partner and a tax partner, one of whom has experience in corporate finance.

At each of your second meetings, accounting partners will be selling you. They should be expected to respond to your previous presentation, and be prepared to discuss your specific needs and expectations of them as a Big Six firm.

By your third meeting, you should have the input and intuition to have narrowed your choices to two or three firms. Attend these meetings with your board chairman and another senior director. In addition to moving toward your final selection, ask for recommendations for a law firm. You will benefit from the fluidity of working with accountants and lawyers who already understand one another. Also request that each accounting firm send you a draft engagement letter, spelling out the terms of your relationship. With the help of your board, massage this draft to your best advantage, and return it

to them. Several times if necessary. This document is important, in that it may well be the basis of your accountant/client relationship for years to come. Then, based on which firm has spelled out in writing the best deal for your company, make your selection.

Once your accountant is selected, you also want to retain the services of a top law firm. I prefer an international law firm, but you want one that’s at least a nationally active. Our lawyers or “solicitors” in London, for instance, were Freshfields, a British law firm that’s older than the United States! Freshfields also represented the Queen and the Bank of England. I preferred to think that the Queen was using Great Western’s law firm. (They were pretty damn prestigious. Conventional wisdom in London had advised us, “These chaps would hardly consider representing you Americans, I should think.” But they did, of course.) At any rate, when our attorneys spoke, with advice or opinion people listened. And, by the way, have I mentioned perception/reality lately? At the outset, our choice of law firms enhanced our perception in the marketplace as being more successful than we were—but certainly as successful as we intended to be. (Incidently, our attorney at Freshfields was a cocky Australian named Allen Murray Jones—smart, yet converted to become our mole at Freshfields. Even with the amount of business we ran through Freshfields, he never did make partner. After centuries of tradition, Freshfields just couldn’t be swayed by enormous billings of an up-start American oil company. When Jones left to join another large international law firm, Durant Piese, we followed him, and the leverage of our business helped him become a partner there.)

Another tip for assembling your Dream Team, Whenever possible, within the oak-paneled offices of any attorneys or

CPA’s, I’ve always sought out a hungry young lawyer or accountant I could trust, an up-and-comer with greater ambitions and more talent than his employer appreciated. I cultivate such bright, motivated individuals, because inevitably they become my moles within their own organization. Their allegiance gradually shifts from their employer to me, so that instead of telling me what I cannot do, they find ways of enabling me to do what I want to do! Now, in no way are they doing something wrong. But they are now looking at and digesting information in a much different light. You are no longer merely a client. You’re their client.

A caution: be kind to your mole. In my younger, less sensitive days, I often screamed unkind language at our mole at Coopers & Lybrand. She served us well enough for years, but when I left Great Western, she found ways to repay my verbal indiscretions.

What’s in it for a hotshot lawyer or accountant? I continuously remind their employer how valuable they are, and how worthy they are of raises and promotions. But more dear to everyone’s heart, given the right individual and the right circumstances, I can offer them equity in the entrepreneurial success they’re helping me create. When that occurs, of course, you’ll find that they almost always leave their firm to join you full-time.

That brings us back to your venture. During the early stages of your pursuit, when you’re just building your Dream Team, how can you afford to retain a top law firm? You bring them into the equation.

C’mon, Dan, you can’t do that. You can’t walk in and buy them with a piece of action that doesn’t exist. I sure as hell did. I also secured the services of blue chip brokerage firms of the same way. More than once.

Top legal counsel costs, say, $250 to $300 an hour or more I mean the clock starts when your lawyer picks up the phone. It costs you a quarter to say good morning. But attorneys are not as concerned with “Independence” as their counterparts in accounting. Regardless of what they’d have you think, lawyers are people with needs and greeds just like you. And they’ll listen to a deal.

Here’s how. You say you’re good, counselor? You say you can make this deal happen. I believe you can. So here’s my deal. Your fee is $275 an hour? I’ll pay you $350 or even $400 an hour when we’re successful … or $50, maybe $100 an hour if it crashes. (The lower figure is meant to cover their real costs, such as paralegal and administrative expensees.)

My rationale is that any fee for a deal is too high if it crashes. But almost no fee is too high if we score. Hey, if we make

$10 million, I’m delighted to share the wealth with the attorney who worked nights for six weeks, who found loopholes that would choke a gnat, who worked for me rather than the IRS or the SEC. Accountants, of course, are bound by certain restrictions that preclude them from taking some direct equity positions and direct contingency fees, but they will work with you. Believe me—they will cooperate. In some of their most recent deals, my partners in several growth companies have found professionals quite willing to defer fees altogether for six months.

Along the way, that attorney will perform feats of acrobatic prowess even he never believed possible. Why? Because instead of getting a flat fee regardless of outcome, he’s got equity in success. And believe me, since adopting a “success:success” strategy, I’ve never had a professional advisor kill a deal.

In fact I’ve had them resurrect a number of deals, each one a financial phoenix rising from the ashes in the conference room carpet!

So … you’ve got an experienced and influential board of directors, a Big Six accounting firm and a top, perhaps international law firm on your Dream Team. You’re as prepared to begin your Quantum Leap as anyone on Wall Streat. And you’re ready to begin your search for financing. Incidently, the credentials of your dream team will not go unnoticed by every banker you approach. They know that Arthur Andersen or Coopers & Lybrand won’t accept a client without doing thorough due diligence. With the light of powerhouses such as these behind you, you cast a hell of a shadow in the offices of any banking institution!


As your enterprise gathers momentum, the next person you’re likely to seek out is a partner, a co-parent for your venture. This should be an individual whose skills, talents and temperament complement your own, and fill critical gaps in your own range of strengths. After all, you don’t want another you. You want somebody you’re not in as many areas as possible.

Mark McCormack, writing in The 110% Solution, points out that individuals perform beyond their normal capacities when they are teamed with a partner who is better than they are. In sports competition, we quite often see a tennis player or a golfer stretch their potential to keep pace with a higher ranked player.

Choosing a superior partner is an instinct we have in childhood, McCormack points out. The smaller playground team captain automatically chooses the biggest kid for his team. As we grow up, however, we become aware that our own performance is being judged and compared against others. “Self-interest makes us seek weaker partners who make us look stronger by comparison,” writes McCormack, rather than the “big kid” who can help elevate our performance. As if to reinforce such thinking, conventional wisdom dictates that you find a partner that won’t show you up or even make you look like a fool!

Just as key to a dynamic, successful partnership is the personal chemistry between you and your partner or partners. In sizing up a potential partner, you are essentially considering and ultimately proposing marriage … a business marriage. You go through a period of courtship as you get acquainted with one another’s business style, goals and operating philosophies. If either of you already have employees, you‘ve even got “in-laws” to fret about your best interests (and theirs).

But what if you’re friends? Can you be business partners without destroying your friendship? The answer is an emphatic “Yes!” The fact is that the two (or three) of you will be spending so much time together that you’re going to have to be friends. Or you will certainly become enemies! My partners and I did many things together. Our respective families became entwined, so that we developed a sizeable rooting section cheering on our success. This experience convinced me—if you can’t be friends, you can’t be business partners.

Beyond partners, hiring key associates is not for the timid. It takes guts to do it right. The temptation for a lot of entrepreneurs is to hire individuals who can be controlled, so that their own pride of authorship can be sustained. That’s insane. Why

would they bring in some doofus with less imagination, less initiative and dimmer vision, and think for a minute he’d help them propel their vision forward? Instead of adding powerful engines to their venture, these entrepreneurs are only adding ballast.

One of most obvious qualifications is experience. Read the resumes. And read between the lines. Has this guy spent his career as an executive clerk for some top corporations that read terrific on his resume? Or has he done deals? Can you see from a couple of sheets of paper that here‘s a corporate squad leader who has wrestled through the hell of negotiations and actually won?

Think of your staff as an elite fighting team. And to be elite, they must have fought.

There are other considerations as well. I seek out potential associates and partners with enormous talent, who have strength I do not, whose energy and vision match my own. And who nurture enormous egos! In short, I’m looking for people who want my job! But good help is hard to find … and bad help is abundant!

I also hire people more on attitude than credentials. You can’t browbeat them into enthusiasm. You can’t pump them up if they were born deflated and have never been pumped up. They have to bring good solid “can do” attitude with them, so you can harness it to help pull your dream.

Hire people with an appetite for adventure too. Because that‘s what they’re about to have if they sign up to join your high-velocity quest for super success. When you begin looking for associates and staff personnel, you talk to a lot of qualified, certified people who prefer the serenity and predictability of the status quo. They value their safety and security, and lead neatly patterned lives. And they’re boring as hell. In my mind they’re already dead, lying around waiting for the undertaker. But for every 15 or 20 of these losers, you discover one man or woman, one uncut jewel who salivates at the prospect of helping you explore and conquer new territory. You’re the chance they’ve been waiting for! And you can bet they’ll for-sake everything for a chance to join your adventure!

Another key factor to be considered in bringing in associates is personality. Like the weather, we can’t change personality but we can talk about it. Growing an idea into a marketable company requires enormous mental and physical energy, and a focused commitment of personal time and resources which cannot afford to be sidetracked by conflicting personalities. Your key personnel simply must have the interpersonal chemistry to get along. If not, their ego and personal agendas will divert the energies you need of them toward widening the chasm between them. And your Dream Team will give you nightmares!

At the same time, beware of staffing your organization with people because you like them or they get along with one another. You’re not putting together a social club, and a team of morons, no matter how compatible and congenial, will never accomplish anything.

I want to hire people who can surprise me. Nothing pleases a high performer more than for an employee or partner to have an idea first. Remember—the high performer values the idea, the inspiration, the solution far more than pride of authorship. Personally, I’m delighted whenever one of my partners surprises me with a spark of genius. It confirms what a perceptive guy I was to bring him or her onto the team. And it tells me I’m getting more than my money’s worth. (By the

way, I use the term “partners” because all my staff has equity of some sort.)

Finally, I look for commitment. 1 don’t mean 9-to-5. My people must be willing to work nights, weekends, holidays or whenever necessary during critical periods of growth. They must have a fax machine at home. They need to fly to New York today. They need to revise the proposal tonight, hammer out a deal tomorrow morning and meet me in Houston tomorrow night. I don’t want to hear about Junior’s softball game or a houseful of company or any other personal bullshit. I want to hear, “See you tomorrow night!”

When I’m building a Dream Team, I give potential associates and partners what I call the Doofus Test. I put them in a conflict-of-interest bind or time constriction which requires them to make a decision and take action. I schedule meetings on early Sunday mornings or Saturday nights. I find out when they have birthdays or anniversaries, so I can set up meetings that screw up party plans. Okay, I’m a son-of-a-bitch, but the Doofus Test gives me two essential pieces of information about people: first, how they react under emotional pressure; and second, how committed they are to me and my agenda. Sure, it’s fine if they’ve promised to take their kid to a ball game and can’t change their plans. But they can’t work for Dan Peña. Down the line, they might have the birth of their first child take precedence over all of us making millions of dollars.

Having talked in abstracts about personalities and commitment, it’s time you heard about the Mosby brothers. In August of 1994, I was holding a board meeting of my holding company, Great Western Development Corporation, at Guthrie Castle, Scotland. The meeting was set to begin August 17th, and it was expected to be a two or three-day meeting. One of the participants was a young man in his late twenties, John Mosby. I had brought him on the team mostly on the recommendation of his older brother, Jim, who already worked with me. Neither of them was yet 30 years old.

Unknown to me, John had confided to one of my assistants that he was a little anxious about the “two-or-three-day” meeting in Scotland, because he was getting married on August 20th. But he never mentioned it to me. Not a word! He and Jim flew to Scotland and gave a great presentation. And still no one told me about the imminent wedding. John’s desire for success enabled him to risk getting home the day of his wedding, and he never wavered. He never asked “what if?” Instead, he committed, knowing he might be racing from the airport to the wedding aisle, dressing in the car, and missing all the social rituals which precede any formal wedding. Not a very auspicious beginning for a marriage, he surely must have thought.

As it turned out, John arrived a full 24 hours before the big event. No problem, right? But let me ask you—what would you have done? Would you have demanded such commitment? Had I known, I would not have excused John from the meeting. I would have left the choice up to him, as indeed it was anyway. And would you have given such commitment? The mark of a high performer is that he both demands and delivers total commitment to the business. I’ve never asked any of my team to do something I haven’t done. In fact, I still do whatever it takes, no matter what.

And let’s talk about the older Mosby brother, Jim. I was holding a Quantum Leap seminar in May, 1995, in Los Angeles, and was expecting about 800 attendees. I had met him at a previous Jim Newman PACE Seminar in November 1993, and

he became a member of my team in late 1994. In fact, nowadays, I find most of my future business partners during my own seminars.) I asked the Mosby brothers to be there, since we could use any spare time to talk business. What I didn’t know was that Jim’s wife was expecting their second child that same week. Jim didn’t hesitate, and never mentioned the impending baby. He arrived for the seminar and stayed through the weekend, helping with the seminar and discussing business issues. Again, what does conventional wisdom say? And what would most people have done? But the larger question is, what do these two brothers possess that generates such a high level of commitment? How are they different? They both had twelve years of Catholic school education, played college soccer at Texas Christian University, joined a fraternity, graduated and married. Jim has an MBA, although I’ve never held it against him. Then they both left promising positions with large corporations, and took enormous pay reductions to join my team.

I gave them each equity in one of my companies, and put them on the Board of Directors, at a time when the company was little more than a dream of mine. Today the company has the growing potential to be worth tens of millions of dollars over the next few years. We’ll talk later about giving equity to achieve your Quantum growth.

Once before in my career, I had two partners who were as close to the ideal as I can hope for. They shared my fervor for success, and were driven by their own dreams to commit their lives to Great Western, In fact, one arguably gave his life in the pursuit of Quantum growth.

Mark Harrison was an attorney who specialized in oil and gas matters and corporate law. I met Mark while I was still with J.P.K. Industries, and he was handling our legal affairs for a nationally known law firm. He was a young, energetic partner. Because of his brilliance, I sought to cultivate him initially as a mole, and ultimately as my partner.

Mark started out with Great Western Development Corporation in 1983 on a part-time basis. I gave him a verbal deal for one year, and his law firm gave him a year to decide whether he wanted to cast his lot with Dan Peña and GWDC.

Mark became my Chief Operating Officer at Great Western, and was given 10% ownership in the company. By virtue of his legal background, he had the skills to visualize and nitpick every aspect of an issue, every phrase in a contract. I never heard him say, “Hmm, I didn’t cover that … I’ll have to get back to you.”

When we went into London, guns blazing for Great Western, Mark’s equity paid off handsomely that August day we went public. At that precious point in time, the three of us— Mark, Charlie and I—were invincible

We were Wyatt and Virgil Earp and Doc Holiday at the OK Corral, just like in the movies where they never run out of bullets and take no prisoners. We acted day after day as if we had no limits to our abilities,

In the coming years, differences of management style and opinion would remove Mark from operational authority at Great Western, and in 1991, he was terminated with a sevenfigure goodbye handshake by me.

I met Charlie Soladay when he was part of an acquisition team we formed in the late Seventies. At that time he was a partner with Coopers & Lybrand in their Forth Worth office. He was an audit partner. He knew health care best, but had a good base in oil and gas. I was immediately impressed by

Charlie’s highly defined sense of ethics. He knew right from wrong and acted accordingly. In a business world which normally operates on “situational ethics,” Charlie was a refreshing change-of-pace. I eventually weaned Charlie away from the big-company comfort of his firm, took away his safety net, made him my Chief Financial Officer—and a born again businessman! He was a natural born “workaholic,” and as one energy company CEO put it, “wore his clothes out from the inside.”

Charlie was a damn fine, totally competent CFO. But far more important to me was the fact that he was a dreamer, one who could use his talents and technical skills to make his dreams become realities. He was also a great “people person,” and the best numbers man I ever saw. But his value to me and to Great Western, lay in his wisdom. I sought his counsel. I trusted his judgement and his loyalty. I knew without a doubt that in the heat of corporate battle, Charlie would follow my lead and cover my back no matter what. I knew if I went down in a corporate gunfight, he wouldn’t leave me to suffer, but put me out of my misery, grab the flag and run with it.

Like Mark, Charlie was in for the equity, 10% ownership, but for the first five months I couldn’t even pay him. He and his family moved to Los Angeles and lived in a Holiday Inn, and then rented a small house. In case he got home at all. So many times, we would analyze, evaluate, plan our strategies far into the night. Then he would sleep at my place (sharing a couch with my two great danes), fly off into the early morning to another meeting across the continent, and see his family whenever he could.

From the time we decided to take GW public in March, 1984, through two major acquisitions and several smaller ones by the end of 1986, Charlie, Mark and I blazed like a comet across the financial world. The second acquisition was that of a U.S. subsidiary of a foreign multi-billion dollar natural resources company, and involved coal mines and gas and oil properties across the country. It was a long, tough negotiation I’ll get into later, but by the time the deal was closed in December, 1986, we were all exhausted.

Our ship had come in—and it was loaded with money for all three of us. Jackpot! All the dreams, the work, the pressure, the doing without a “normal life” with family, friends and sleep had paid off. My Dream Team had come through for me. We were wealthy beyond the dreams of most mortals … invincible! I went home to Guthrie Castle, my own Camelot, to heal wounds and savor our victory. We were, as the Roman legions, “Invextus” We were not conquered!

The next month, Charlie Soladay died of a heart attack at 40. Just inside the threshold of his greatest super success, it was over. John Lennon said, “Life is what happens while you’re making plans.”

Dan Peña says, “Man plans … and God laughs.” My life was changed forever. It took almost three years to recover from an acquisition eight to ten times our size … and Charlie’s death.

No matter who you recruit for your Dream Team, and how gifted and committed they are, they’re going to need leadership. Even more to the point, they’re going to want leadership. And you’re the leader. It’s no wonder reports say that almost 70% of the Fortune 500 CEO’s have military backgrounds. The toughest thing about being a leader is that you’re always alone in the lead position. Leadership is a towering peak with standing room for one. Sure, you can turn and get advice from this

or that team member, but there’s only one captain, one driver, one pilot in the cockpit. You. You can save your company from mistakes the others may make, but the others can’t save the company from you!

The guy who said “It’s lonely at the top” had surely been there. I often tell my business partners they must learn to be alone without being lonely.

You’re only a leader if you have followers. You can buy quasi-loyalty with money—and we’ll talk about compensation shortly—but you can’t make people follow you. They have to want to. Another misconception about leadership is that too many entrepreneurs think of leadership as a static condition. They sit in a position of leadership and assume that, by definition, they’re leading. Any CEO who is not moving his or her company forward is not leading. The word “leadership” implies action. Leading is convincing others to move, to follow you as you proceed forward in a predetermined direction. If you’re not moving, or if you seem to be moving erratically as if you’ve lost your way, your associates and employees immediately perceive they’ve lost their leadership, and begin to lead themselves in whatever direction they like. And I can assure you it won’t be in the right direction.

World history has proven time after time—people much prefer to follow a madman with a clearly defined purpose than a nice guy with no apparent goals. And high performance people are often perceived as madmen. Conventional business people consider them to be loose cannon, eccentrics, even buffoons. Sometimes the most loyal employees, stretched on the bone-breaking rack of demands beyond all known capacities, are exasperated by working for high performers. But they don’t quit. Great entrepreneurial madmen include Freddy Laker, Ted Turner and Rupert Murdock. Howard Hughes was a madman long before he went crazy.

One of the most demanding high performers was Thomas Edison. In 1884 he hired a young Croatian engineer, Nikola Tesla, to work in his laboratory in Menlo Park, New Jersey. Edison was convinced that direct electric current was the way to light the world. Tesla believed that alternating current would be more practical. Already a world-famous inventor, the supremely self-confident Edison had little patience with employees who disagreed with him, and fired Tesla. In 1889 Tesla patented an AC power system, and sold it to George Westinghouse who built an empire generating AC electricity.

As you work with your Dream Team toward achieving your super success, it’s fine to be regard mad by the world beyond. Your perceived madness in the minds of conventional thinkers is a sure sign you’re on the right track. I’d be disappointed if some investment bankers I know didn’t shake their heads when they talked about Dan Peña. I relish my reputation. But remember Edison. Give your employee the latitude they need to be creative on your behalf. Exponential creativity and imagination by your people will accelerate your achievement of exponential and Quantum growth. In fact, you can’t achieve it without it!

One of the great lessons I learned from Jim Newman was to keep my eyes focused on the macro picture, and leave micromanagement to my staff. The Dream Team you assemble has to be capable of that day-to-day micromanagement, so that you can press ahead with your job, your responsibilities as both leader and player on your own team.

As the CEO or president of your company, your job is not

to design a better product, or reduce operating costs, or review

sales figures. You have engineers, cost accountants and marketing executives to handle those tasks. Your greatest danger is getting bogged down in the office, and mired in the minutia.

You have three jobs -and they’re all outside the office. The first one is … kissing frogs.

You’ve got to kiss a lot of frogs to find a prince. I tell my audiences you not only have to kiss those frogs, you’ve got to love to do it . . . and just love those little pus-filled warts on those frogs’ faces. (Okay, I know only toads have warts, but it’s my story.) Because one day, one of those little frogs, at a bank, at a brokerage firm or in a state legislature, is going to be able to help you, to croak you a good word, to give you a nod, to become the prince-in-need to make you millions. So get out there, smile . . . and start kissing frogs!

Your second job as senior executive is to look for expansion opportunities. Deals. Or “schemes” as they say in the U.K. That’s how you make the big money—equity on deals. And you won’t find hot deals in your own shop. So get out into the market, go to trade shows, overhear conversations, talk to your moles, keep your ear to the earth of the financial world. And remember—unless you’re Shaquille O’Neal or Madonna you won’t get rich from income! You get wealthy from equity in a string of transactions. Pay attention to your industry. Watching business is like standing by a river—every time you time you look, the water is different. Keep watching. Check out rumors and ask questions. If you run a mid-sized business right now, chances are good there’s another mid-sized business you could buy tomorrow with OPM—and make a Quantum Leap. Then another Quantum Leap. Quantum Leaps are repeatable! Threepeatable! And more!

Your third job is finding OPM. In Chapter 9, I talk about raising capital, finding the Other People’s Money you need to seize opportunities and take decisive action. My God, there are so many sources of capital out there it should be embarrassing for anyone to say, “We don’t have the money right now.” As you’ll find out, it’s only because you haven’t looked.

Some of the plumpest, tastiest frogs you ever lay a lip on are sitting in financial institutions all over the country, just waiting to lend you money and make themselves look good to their bosses. Help them out!

So … while you’re out looking for frogs, deals and money, who’s running your show? Other People. Your carefully handpicked Dream Team. And hopefully, with a free hand from you—and with their owning a part of it themselves. (More on that later.)

I discovered long ago that less control, not more control, is the key to effective management. You hire people you trust, empower them, and then trust them to perform. If they can’t, and you can’t trust them, find people you can. It’s not the end of the world if you brought someone in, gave him 5% or 10%, and then had to get rid of him. “But Dan,” you say, “now he has a piece of my dream.” Calm down. You can draw up buysell agreements, and you have a number of other ways to get around this potential danger. Don’t worry about it and just do it. Anyway, being a minority shareholder in the U.S. just doesn’t mean much. All a minority shareholder can do is see the books and get his share of any dividends paid. Of course, if you don’t issue a dividend, he gets nothing.

I have four rules for dealing with staff in my organization.

1) Pay your people good money, and they’ll do anything. They’ll arrive early, work late, come in Saturdays— whatever it takes to get the job done because they’re getting good money and they know it.

You start by paying them the best salaries in the market, Employees continuously compare their salaries with friends at other companies, and you want your employees to win every time. Give Christmas bonuses, new account bonuses, birthday bonuses—whatever you can to assure your people they’ve got a sweet job worth working hard to keep. Some bosses periodically hand out unexpected “Appreciation Bonuses,” strolling from desk to desk with checks. I personally tie compensation to deals and profitability—plus, you’ll recall, all my people are equity partners.

At Great Western, my people knew that paychecks were tied to income, so they all continuously thought of ways to make money. They all worked hard, but the enthusiasm was incredible.

Unfortunately, money is used in some companies as a substitute for respect. It amazes me how much crap employees will take for the right money. From the mail clerk to the EVP. I know a guy who runs a company of about 35 employees. He calls his women “sluts” and his men “dickheads,” even in front of clients. He abuses and yells at them continuously, blames them for his screwups, and buries them with more last minute work with no instructions and tighter deadlines than they could possibly handle. During one recent crisis, with his office in chaos, he took off with his pals and went boating.

But no one quits, Ask them why. “Well, he pays us good money …“ “I’d quit, but nobody in town would pay me what he does …“ “For the money get, he can call me whatever he wants…“

Of course I’m not advocating that kind of treatment for any employee. In fact, I did just the opposite. I paid them well and treated them with respect. But the point is that employees place three things at the top of their priority list: money, money and money. Above pleasant working conditions, above, benefit packages, above health club memberships. Employees don’t want to be your extended family. They want to get paid as much as they can haul down to the elevator in a wheelbarrow. And when you add respect and recognition the results are tremendous. Then you’ve got their loyalty forever. As Napoleon Hill said in his classic, Think and Grow Rich, after some 20 years of interviewing the 500 richest men in the world. “The financial motive must prevail” above all. It was true 70 or 80 years ago, and it’s true now.

2) Never reprimand. This is pretty elementary stuff, but most employers forget it in the heat of crisis. The cliché is, “Criticize in private; praise in public,” but, occasional wellplaced rage notwithstanding, I try not to even criticize my people in private. (“Sure, Dan,” I can hear them now.) Instead, after I’ve cooled down enough so I won’t rip their heads off, invite them in, close the door, and in my gentlest fatherly voice ask them questions about their mistake that almost cost me my castle.

“What was your reasoning behind taking this action?” “What happened as a result of that action that was not in our best interests?”

“What action would you take next time, given the same circumstances?”

“Next time” is the operative phrase. “Next time” tells them you respect their basic judgement and intelligence enough for

there to be a next time.

Since my company doesn’t normally employ absolute morons, I make the reasonable assumption that a) this person has redeemable qualities that make him or her worthy of continued life and employment; and b) he or she is intelligent enough to actually learn from the fiasco they’ve just caused by screwing up royally.

But more important, if employees know they’ll be reprimanded for mistakes, and especially humiliated, they’ll never venture out where they can make any mistakes. They will never get out of their own box. They’ll never expand their comfort zone.

Bill Gates, founder of Microsoft, in fact, pays bonuses for flaking mistakes. It’s true. Gates does this to encourage creativity and imagination. He knows good people will make honest mistakes, and he doesn’t want them to become apprehensive and timid about making decisions.

Besides, I’ve found that one of the biggest reasons for employee mistakes is lack of information. Employees don’t make decisions the same way as the CEO because they don’t have the same information.

The days of the closed executive office doors are past. Corporate paternalism is dead, killed by E-mail and the ease of information flow up and down the hierarchy. We no longer judge the discretion of an executive, even the CEO, by how much information he or she can keep from the rest of the company. Today we live and work in the Information Age, with staff personnel who have the sophistication to receive and process information about their company, and act intelligently based on that input. The smart CEO uses that ability to “decontrol” his organization, to let responsibility trickle down to competent people eager to accept that responsibility.

3) Train one or more employees for your job. Or your jobs, which are to kiss frogs, find deals and raise capital. You want to train others to do what you do, so together you can get to more frogs, ferret out more potential deals and get in front of more lenders. But just as importantly for your people, they are brought into a sense of ownership by doing what the CEO or owner is doing. They’ll work harder, longer and with more commitment when you allow them to help steer the future of the company, and not just its present.

4. Never make decisions for your employees. Once you give them the information they need, allow them to make their own decisions. At the same time, give them the responsibility and authority to implement their own actions. Give them chances to make mistakes they can learn from.

Your employees must grow as your company grows. It is far preferable to have the same number of enthusiastic, capable employees handling more jobs than it is to hire, say, seven more people to handle seven new tasks.

How you present new challenges will determine how quickly they learn. You can tell them how to do a job, and they’ll forget. You can show them how to do it, and they may still forget. But if you involve them in the process, they’ll understand, remember and grow.

One interesting example of how employees grow to fulfill the expectations you have of them is in spending limits. When I increased the spending authority of mid-level managers, spending actually decreased. They began to consider every expenditure as a personal one, and monitored costs more closely

and more conscientiously than ever.

And when I removed limits totally, the expenses went down even more.

Along those same lines, I’ve also found from my own experience that you want every employee to think of themselves as an independent contractor. Virtually every job can be “businessed,” or turned into a business run by an employee. A floor supervisor at the Ritz-Carlton can easily think of himself or herself as the “CEO of the Fourth Floor,” With that kind of attitude, capable people work smarter and with more pride. Look at the Saturn story. Every auto worker at the Saturn plant thinks like a CEO of some area of sub-assembly. There is no better example of empowerment at work in American industry.

Regardless of the health and vibrancy of a relationship with a partner or associate, conditions, circumstances and requirements change. Personalities change. And although you and your partners or senior executives may stay together for a lifetime, the time may come when you need to get rid of somebody, even someone you’ve been through hell with. An incident or a pattern of behaviors confirms that it’s in the company’s best interest to terminate one who helped accelerate your super success.

Getting rid of people is one of the hardest jobs for a senior manager or executive. Call it early retirement, work furlough, “downsizing” or “rightsizing”—it’s no fun for anyone.

And don’t think it’s any easier just because you don’t like someone personally. If they’re good technically, if they’re super competent, if they can work magic with numbers or negotiations, they’re going to be hard to replace.

On the other hand, don’t delay the inevitable. Harvey Mackay is right in Swim with the Sharks when he says, “It isn’t the people you fire who make your life miserable, it’s the People you don’t.” The individual who needs to be fired, is almost begging to be fired, but is still around, often performs counterproductively just to see how much you’ll take. However unpleasant the act of firing may be, as long as you put it off, you expend energy in a continuous test of wills. An about-tobe-fired employee is like a corpse lying in the hallway. Somehow, everyone in the office knows when one of their associates has become superfluous, and tiptoes around the cadaver. And the longer that body lies there for apparently no reason, taking calls and drinking coffee, the greater the impact on office morale. Get rid of such a person before it’s obvious to even the temps you need to but haven’t.

However you approach terminations, remember this rule. When you get rid of someone, never, ever give them a hook with which to get back in. Make a clean, definable and irrevocable break. Separations at the management level can be very expensive for a company, especially where employment agreements are involved. But regardless of cost, sever the relationship surgically and completely.

Don’t try and save money by offering such hooks as stock options to the person you’re terminating. Any money you think you’re saving will be peanuts compared to the expense and aggravation which you inevitably incur later on.

Creating your Dream Team, then, is the process of involving others in your adventure, your scaling the heights of super success. You won’t need all of them all the way up. But you’ll need some of them clear to the top. Choose them carefully … treat them well … give them the chance to make mistakes (even reward them like Bill Gates) … work their butts off … make it worth their while … and when the time comes, let them go completely.

Chapter 7. 11 Steps That Make the Deal

You can leapfrog to Quantum success, but you still have to do the deal one firm-footed step at a time.

Throughout this book, I’ve told you over and over to make decisions … incur risks … and take immediate action. You can guess by now that I’ve never been one to sit around and cogitate, especially when I knew that swift, decisive action would make the difference between a vicelike grip on a multimillion-dollar deal and handful of air. I couldn’t have made 55,000 business decisions during my career by hesitating in the clutch.

When the legendary Andrew Carnegie asked young Napoleon Hill if he wanted to embark on the enormous task of distilling the characteristics of the 500 richest men in the world, he pulled out a stop watch and, unbeknownst to Hill, gave him just 60 seconds to make his decision. Hill took just 29 seconds to accept a challenge that would take him on a 20-year quest. Old man Carnegie knew the value of decisiveness as an essential attribute to completing an epic task such as Hill’s.

Being careful doesn’t mean moving slow any more than taking immediate action means you have to rush in unprepared and do something stupid. We all make decisions in our lives, even trivial ones, based on several types of input—information available, previous experience, intuition, and the advice of others.

You decide where to take your car to be serviced. You decide how to handle your health insurance, and who to hire as your administrative assistant. If you take time to weigh the factors involved in these relatively minor decisions, how infinitely more complex must be your process that takes you and your business from an initial idea to the closing of a deal worth tens of millions?

In this chapter, we walk through the Eleven Steps you need to take—hell, you’d better take—between your bright idea and the moment, a seeming millennium later, when ink hits contract paper—or when it’s a matter of history.

At my seminars, I look into the hopeful faces of hundreds of moderately successful business owners, budding entrepreneurs, frustrated “wannabes,” and, of course, the usual seminar groupies, perennials who would attend a group dynamics seminar held by Charles Manson. Unfortunately, most of them came to hear me say, “Now you just keep a positive attitude, because you’re a special person, and your dream will come true.”

But you know me well enough now to know they’ll never, ever hear that feel-good crap from Dan Peña. Not because I wish it weren’t true. Hell, I wish it was! But life is like a balancing scale. You have to balance what you get with what you’re willing to give up. Period!

Regardless of what they expected me to say, most if not all of them come into the seminar with at least the germ of an idea for making money. At the close of every seminar, I solicit their ideas by inviting them to send me a one-page fax that explains their deal. Not one page and one word, or I shitcan it. And overtime I am deluged with ideas.

The point is that everybody in your life, and in your organization, has a “money-making idea” sometime. You pick up a tip from a loose-lipped broker. You read a small item on page five of the Business section. You overhear a scrap of conversation. And a small voice inside you says, “Hey, that could be something.”

For our purposes, a “deal” of another is an equity transaction that generates money income. It could be a public stock offering, or the acquisition of another company. Since I’ve made so many tons of my money buying and selling equity, I’ll use an acquisition as an example.

The biggest deal in my life at Great Western Resources began with a chance conversation on a commercial flight from Houston to Denver. In the late summer of 1986, Charlie Soladay, my Chief Financial Officer happened to sit next to an executive of MATCO, a large multinational energy corporation based in Kentucky. (Occasionally some moron will ask, “Why do you always fly first class? That’s a lot to pay for free drinks and silverware.” Of course, with as much as I travel, I upgrade with frequent flyer miles, But in case you haven’t heard, top executives fly first class so they can strike up conversations with other executives, and conversations can lead to deals which lead to more deals and more revenue. You’re not going to find a deal in Row 38 sitting beside Joe Lugnut and his family.)

So this energy executive, confident and relaxed, confided to Charlie he was working on a project to acquire the assets of a Canadian energy company’s U.S. subsidiary, a firm called Bow Valley USA. The banks, including CitiCorp Canada, were squeezing Bow Valley’s multi-billion dollar parent company for repayment of loans, so it was planning to liquidate assets to pay down its debt load.

As usual, Charlie was paying attention. He recognized that this guy, in a moment of indiscretion, had inadvertently opened a window of potential benefit for Great Western.

To appreciate the significance of what was happening here, you need to understand where the oil industry was in that summer of ‘86. Due to worldwide over-supplies, the oil recession was deepening by the day.

The spot price of oil had dropped from $28 a barrel in January to less than $10 by June. Great Western stock had plummeted from three pounds (about $3.50) on, the London Exchange in December 1984 to about 50 pence, or 80 cents, by late June, 1986. Even the monetary exchange of dollars to pounds worked against us.

Every company in the oil industry was digging in, assuming the fetal position, and covering its head to wait out the recession. That was fine with me. I had decided that Great Western was not going to participate in the recession. I knew this was the perfect time to make the Quantum Leap we’d been waiting for—if we could just find the right acquisition out there in the bone-filled desert of distressed energy companies. I knew the financing was there for the right deal. I knew that we could move quickly across the terrain in our search, because nobody else was out there looking to expand. They were all quivering under their boardroom tables! We had already looked at a lot of possible deals, but so far nothing quite right had come along. Until Charlie met his talkative new friend.

So as soon as he landed at Denver, Charlie called me at the office in Houston, and reported what he’d heard. Mark and I immediately sat down and began to kick around ideas and postulate some possible strategies for somehow getting a piece of what might be a major opportunity for Quantum growth Charlie had uncovered. What we were doing was taking Step One.

Step One—Identify the idea. This is absolutely the first thing you have to do—define and clarify exactly what you want to do, or what deal you want to develop. Not only do you and your partners have to agree on the basic strategy of the idea, you have to agree that it may be feasible and will benefit the company. Just as important, if it proves to be feasible, you have the desire to do it.

In many cases, the major benefit of an idea is not so much profit-driven as it is a vehicle to move you closer to your longrange vision for your company. My vision for Great Western was for it to become a natural resources company, and a major player in the international energy industry. And my grand strategy for achieving these goals, as you may recall, was through external growth through acquisitions, versus internal growth through continuing oil drilling and production.

We were established in oil and gas, but Bow Valley’s assets were based 75% in coal mines and mining operations. Was there an opportunity here to look beyond their oil and gasbased assets to something larger? Could our little GW snake digest so large an egg? Or, as we so often said, could the minnow swallow a whale? Looking through that brief, passing window of opportunity, we had a lot of thinking to do about how to shape an idea into a plan. My instincts, which I knew were almost never wrong, told me immediately that this was the deal we had to have to make the breakthrough into the energy big leagues. As I’ve said in a previous chapter, the deal was obviously hot! I didn’t have to run a spreadsheet. It was Bo Derek running up the beach stark naked toward me, saying, “Dan, here I am! Take me.” You bet, Bo! Somehow, some way, we had to make this son-of-a-bitch happen!

There was yet another factor that urged me to go for it. We had come off a string of conquests that had begun with taking the company public. Our people were confident, even cocky, about taking on the whole energy industry. We were young, undefeated, obviously immortal, and “ready for the title fight.” The mood at GW was electric with anticipation of our next victory. I would have found it hard to deny them—and deny me a shot at the big one. A shot at glory! But no matter how eager, even bloodthirsty we were, we still had to follow the Eleven Steps. It was the process we needed to discipline our actions, and to train and prepare our minds and spirits for the battle we were contemplating.

There were even more basic reasons for giving shape and form to our idea. If you rush past Step One, you and your partners may well be hurdling down different paths of thought, pursuing different objectives, until it’s too late to regroup and restrategize. Just like getting overrun by the enemy in battle, it’s nearly impossible to recover your original positions.

Another reason to Identify the Idea is that you’ll need to communicate it clearly to others in your organization who may be working nights and weekends to bring it to fruition. And at times like this, virtually everybody is working nights. In addition, of course, you’ll have to commit your idea to Paper with crystal precision so investment bankers, brokerage firms and nervous shareholders will understand your objectives and support them. (Again, we’re talking about clarifying your vision. Funny thing about a fuzzy idea—it doesn’t stick to paper very well!)

Once you’ve identified and agreed upon the nature of your idea of plan—not the details—and its potential for benefit to your company, you’re ready for Step Two.

Step Two: Investigate. More specifically, investigate before you invest time, effort and especially money you could more profitably allocate some where else. Any action being taken by another organization, group or individual which may impact you or your company raises key questions which must be answered Why was MATCO, a Kentucky coal company, interested in Bow Valley’s oil and gas assets as well as its coal interests? We learned that they wanted to purchase the company, then flip the oil and gas assets over for resale for a tidy no-risk profit. Why should Bow Valley sell assets direct to Great Western, they reasoned, when they could buy those same assets, mark them up and sell them to us? More to the point, why sell to a much smaller company such as Great Western, with no apparent financial horsepower, and certainly not as strong as MATCO. That was the conventional wisdom they were using.

What was Bow Valley’s financial status? What was the extent of its operations, in Canada, the U.S. and worldwide? How strong were its coal contracts, with whom and under what terms? We had volumes of investigation to do quickly, but we couldn’t afford not to turn over every rock and look beneath it.

Investigation is a search for “red flags.” How many red flags do you need to see? One. Read your investigative reports… and listen to your intuition. When the first red flag pops up, when you get an answer you’re not comfortable with—or don’t get an answer at all—exit immediately. The tiniest wrinkle in the fabric, the smallest contradiction now can explode in your face later. (Our Red Flag Check-list, as well as the 11 Steps to Execution are listed in Appendix _.)

Investigation is an integral part of a high performance company, and is vital to protect the interests of the high performance individual who runs the company. These days I’m pursuing deals potentially even larger than anything we did at Great Western. So I retain the services of a full-time private investigator even now who looks into every company I even think about seriously, and every person I consider hiring or becoming associated with. We call them “targets.”

That means you do more than call up the references on a resume, or chat with a few happy customers which are preselected and conveniently listed in a company presentation piece.

If you’re thinking about doing a deal, you need to check out two targets—the company, and the individual principals of the company.

So where do you start? You start with what you know— full name of person, address, approximate age, occupation and name of his or her company. Basic information can come from business cards, industry directories, the Standard & Poors directory, telephone directories, conversations with others in the industry and annual reports. When you’re waiting in a lobby or an outer office, don’t pick up the damned TIME Magazine. Check the desks and walls for awards, certificates, photographs and diplomas with specific information you can jot down. While you’re in an executive’s office, look around discreetly as you chat. Compliment your host on some piece of art or knick-knack, and get him to talk about himself. If you spot evidence of a common interest or background—golf, fishing, travel, military experience—use that as a lever to pry out more information. People, even busy executives, enjoy talking about themselves—and you should enjoy listening.

Information is only heresay until you confirm it. How many times have you accepted the credentials on a resume, for example, without checking them independently? You read, “Notre Dame, B.S.,178/Major: Structural Engineering” on a handsome resume from a likely prospect. You pick up the phone and call the Administration Office of the School of Engineering at Notre Dame. If they’ve never heard of your prospect, that’s a red flag—and all you need to terminate consideration. Begin the verifying process with the names of individual targets. The easiest thing in the world is to have business cards printed with an alias. Call the County Registrar of Voters to check voter registration and to confirm complete names, addresses and dates of birth.

A lot of records are filed at the county level, at the County Recorder’s Office. You can investigate an individual or a company by calling the County Recorder and requesting a “General Index,” listing all filings involving your targets, including document title, document number, any other parties involved and date filed. Filings with the County Recorder may include:

* Property documents/deeds;

* Grantee/grantor records;

* Tax liens;

* Notices of default;

* Judgements;

* Power of attorney.

Civil suits and criminal records are a valuable source of information, but the procedures required to search these files vary from county to county and state to state. Rather than getting bogged down in an infinite number of bureaucratic variables, let’s talk about this area of investigation n general terms, so you understand why this depth of investigation is important.

Check to see if an individual has a pattern of litigation. Civil litigation files are kept at the county level and the Federal District level. While you’re checking individual targets, check the company for litigation as well. You might find civil suits over breach of contract or debt payment default. Anybody can be sued for anything, of course, but if a principal of the target company or the company itself has a record of breach-of-contract suits, you need to know before you make a decision about pursuing your deal.

Check to see what law firm they use while you’re at it, A high-profile law firm means they are sued and sue often, that they’re combative and are willing to pay top dollar to enter and win a suit. That’s good to know up front.

It’s also good to know if the guys who may soon be smiling at you from across the table have criminal records. Check them out long before you sit down at the table. You may not realize it, but criminal conviction information is available on many county and state levels, as well as the federal level. Arrest information, by contrast, is not available in most states. Begin with the County Clerk’s Office, and check your target for both felony and misdemeanor convictions. Check at the state and federal levels as well. Again, procedures vary. The point here is to check for past criminal convictions. You can do all this yourself, of course, but by now you can understand why you might need a good experienced private investigator to expedite the process!

You can also check at the County Tax Assessor’s office for property ownership. Verify professional licenses, i.e., real estate brokers, building contractors or attorneys, at the state level.

Hey, Dan, do you really go through all this investigation? You bet! By the time I’m sitting down to hammer out a deal with an individual or a team of people, I’m going to have a file on every one of them. If one of those mooches has a birthday coming up, for instance, I’ll know about it and make damn sure we’re still negotiating late that afternoon, so he’s under pressure to make a deal and get to his birthday party.

Step Three—Investigate again! Re-check your sources for details you might have missed. Then if you’re in doubt about your sources, investigate them. Go deeper. If you’re about to risk millions, don’t think twice about probing beneath the calm surface waters of an apparently straightforward company or individual.

Before you bring in a partner, for example, check not only with his previous associates who may give you a prepared story, but with their employees who might give you a different perspective. Does this guy drink too much at parties? Does he do drugs? How is he to work for? Does he abuse employees? Does he beat his wife? Does he chase skirts around the office? Is he gay? Remember, you’re not gathering information for a testimonial dinner in his honor. You’re running your fingers over the fabric of his business and personal life, feeling for any stitches that are out of place. Maybe you don’t care if he’s a cross-dresser, but you need to know.

(By the way, in case you haven’t noticed, I’ve talked throughout this book in the male gender, One reason is that I’m not going to stop and say “he or she” every time just to mollify the PC crowd. Another is habit. It’s an inescapable fact that 93% of America’s top executives are still men. This book is not about equal opportunity; it’s about making money. But if you’re more concerned about the ditsy details of Political Correctness, you’ve probably already tossed this book anyway.

Having said that, if you’re a woman, I encourage you to push beyond the gender issue in the knowledge that the number of women business owners and entrepreneurs grows dramatically every year. Also, if you’ve gotten this far, you’re a serious player with potential to make your ton of money. So stick to your guns.)

Re-investigate and continue to check throughout the negotiating period which may follow. As a matter of fact, your interest, once it’s discovered, could generate a flurry of cosmetic action by the target filings, financial shuffling or other activity you need to know about.

Targets of investigation, especially in business, are moving targets. Companies and individuals continue to leave tracks as they move forward in time. Never take your eye off the target while you’re aiming at it!

(We recently wrote a small book entitled, Investigate Before You Invest. It’s well worth having as a guide for serious investigation, and you can order a copy by calling my office at 1-800-KWANTUM.)

Step Four—Commitment to the Idea. It’s one accomplishment to ensure that every member of your Dream Team holds the same idea you do—your objectives, how they relate to your long-range vision, your grand strategy to achieve your objectives, and even some of the tactics and maneuvers you may have in mind. It’s quite another feat to begin lining up commitments to get into the fight if it begins, and to see it through. Unless you’ve surrounded yourself with lobotomized syncopants. If some of your people have reservations, if there is some facet of the project they’re uneasy over, they need to get it on the table so that it can be dealt with and over come, or at least acknowledged. Even I with all my self-confidence, had tinges of misgiving.

The preliminary decision-making time is when you ask yourself, “Is this an area in which I have, or have any access to, real expertise?” When Pat Kennedy and I were partners in building a vertically integrated oil company, we strayed into areas of the oil industry we didn’t know beans about. And paid dearly for the experience. One of the lessons I learned was, “Stick to your knitting.” Deploy your assets, resources and capabilities in areas of your expertise and experience. I thought a lot about that lesson as I now considered moving into the coal business. I ultimately decided to proceed with the acquisition on the strength of another Peña business rule: Dream big. Think big. Be big! Besides, my instincts and intuition were screaming—this one’s hot. Bo Derek was so close I could touch her.

There may be cases where one of your key people simply cannot buy into an idea. For whatever reason, that individual is opposed to the project you know will launch your Quantum Leap to super success. Even before you make a final decision, you need to ascertain whether the individual is going to perform his duties and responsibilities regardless of personal feelings, or whether his opposition is going to become a dead weight, a counter-productive stumbling block during the negotiating battle which will follow. During the preliminary discussions about the acquisition of Bow Valley USA, for example, my Executive Vice President of Exploration resisted the idea of getting into the coal business. Frankly, he didn’t like the prospect of his oil-and-gas division taking a back seat to a newly acquired coal operation. When he realized that we were moving ahead with or without his blessing, he eventually came over, and even convinced himself the project was his idea. Whatever works. (Ironically, as I write this, the coal division is being sold off by Great Western as a loser.)

Step Five—The Preliminary Decision— Your Dream Team, including those with questions or uncertainties, buys into the commitment and makes it their own. Make it clear that this is not the final decision, but a working consensus or agreement to move ahead. Your investigations thus far have turned up no red flags which would cause you to reconsider or walk away from the deal. The deal still looks red hot. You have begun to prepare for battle.

It’s at this point, in the preliminary stages of the process, that your people have to become obsessed with an idea which is now going to rise like a monster, assume a life of its own, and dominate their waking hours for weeks and months. You’re the leader, so now you have to be the cheerleader. I was called the Vince Lombardi of the oil business. You’ve got to help your team get absolutely psyched up, generating enough energy, adrenalin and momentum that, when the battle is joined, they suck up their pantyhose and charge into the cannon with no thought of defeat, fatigue, hunger, sex or any other preoccupation.

If that means stringing banners across the conference room, or pep rallies, or promises of bonuses when the deal is done—do it! Do it all. But ignite that obsession, so that your people, from your partners to the mail clerk, know it’s not business as usual. You’re on war footing and, like MacArthur said, “There is no substitute for victory.”

For the record, my warriors at Great Western made me proud. We never lost in battle, nor knew how to lose. We acted as if we had no limits to our abilities. In that, that became our war cry. If you want similar results, you should act the same.

Step Six—Continue Investigation. This is not a redundant step. Frankly, your investigators, whether staff people or an outside firm, should continue their work for as long as your project is a viable one. By definition, you don’t trust the poor bastards you’re trying to buy, nor those who may be competing with you for an acquisition. You simply don’t believe anything they tell you, or that you hear or read about anyone, since all parties are now posturing to be in the best negotiating position. Over the course of a major deal, you’ll be bluffed and bullshited, and plain lied to, directly and indirectly. You’ll be lied about as well. Where hundreds of millions of dollars are on the line, or even hundreds of thousands of dollars, integrity is usually the first casualty. Make sure it’s not yours! If this sounds cutthroat, I’ve made my point. It is!

As you can see by now, these Eleven Steps are not necessarily sequential; in many cases they run parallel. Investigation never stops. Affirmation of your goal should be continuous. Your pep talks, your obvious enthusiasm, your total commitment all serve to replenish the emotional drain on everyone in your organization for as long as it takes, even unto death, to consummate your deal … or in our case, for the minnow to swallow the whale.

Step Seven—Formulate Your Action Plan. There comes a time in your planning and talking when you have to draw the line in the carpet in the conference room. Every indicator says go, but you have to push the button—or pull the trigger. Once you’re convinced you can do the deal, and you can almost feel your toes digging in, your muscles tightening to make that Quantum Leap, you may have to persuade, cajole, beg, scream and bully—whatever it takes to make your partners step over that line of final commitment. Chances are, however, you’ve chosen partners with the same clear vision and sense of mission you have, so at some point in your strategizing, everybody sort of looks at each other and knows in his gut… God, we’re going to go for it. You put your heads together, load your guns, count to three, and come out smoking like Butch Cassidy and the Sundance Kid. It’s a magical moment, that fusion of minds, spirits and souls. And before it’s all over you’re going to need all the magic you can get! Once you’re committed, and your company is committed, it’s up to you to keep initial momentum at fever pitch. Regardless of the roadblocks, snags and ambushes you run into, you never by word or groan, express a doubt. As I’ve said before, I may be wrong, but I’m never in doubt. Even the slightest negative reaction can rip like wildfire through your company’s morale. During periods of high company stress, employees who are working hard as hell for you need constant reassurance everything’s going to be all right. Like little kangaroos, they want to stay in a warm secure pouch. Give them that pouch.

During the heat of our negotiations over Bow Valley USA, I made a casual comment to one of my associates to the effect it was looking pretty touch-and-go right now. Then I flew off somewhere on business. My associate mentioned my comment to his wife. She ran into another company wife over at the health club and told her. By the time I got back, I all but had hari-kari in the hallways, The word was out from the CEO himself—we’re going to lose this deal! We’re going down in defeat. I stomped through our offices, stamped out the fire, and re-learned a lesson I already knew: Share a hope, share a dream—but never share a doubt.

At this point you begin to formulate your Action Plan. This is the blueprint that keeps you pointing in the general direction you want to be headed as you proceed through the process of the deal. The first step of your Action Plan is to Define Your Desired Outcome. What do you want, what do you need to get out of this deal? The answer is not something vague like “a lot of money” or “a bigger share of our market.” Have your pencil-necked analysts run several what-if scenarios what spit out your worst-case, optimum and best-case results.

Number and write down the elements of your Desired Outcome. Start with the whiteboard in your conference room in front of all your decision-makers. Make hard copies and distribute them to associates and staff. All those people who are going to be busting their chops for the next several weeks or months need to know what you want to come out of the nights and weekends you’re asking them to sacrifice.

The next step in your Action Plan is to Define Your “Pay-Price-to-Action.” Remember—your pay-price-to-action is how much you’re willing to pay, to forfeit in order to achieve growth. Even the sweetest deal, unless you’re a purse snatcher, requires that you give up something in order to gain something. If you don’t decide in advance how far you’re willing to go, how large a price you’re willing to pay, the momentum of events later, in the heat of negotiation, could well push you into giving away the store. Define your parameters now— and stick within them.

Step Eight—Establish Your Critical Path. By this time in your Action Plan you need to chart the critical path, the sequence of events which must fall into place for you to achieve success. You also need to set up an instrument by which to measure your progress toward that success. How in hell can you know where you are at any given time if you don’t know where you’re supposed to be? Like a construction manager or a project engineer, for example, you develop a flow chart, an optimum time line for securing bridge financing, nailing down loan guarantees, and starting face-to-face negotiations. You need measurement, because it gives you a sense of discipline and order. And when the battle is joined, when the smoke of corporate combat obscures your field, you’re suddenly struggling hand-to-hand with both foes and fair-weather financial friends, and you’re calling in air support on yourself to kill the bastards so the deal can live—you’re going to need all the discipline and order you can muster! Your Action Plan should also require you to Modify Your Plan As Necessary. The route to the best deal you can make is not a straight shot across an open field. Minds change, spirits fall, rates rise, alliances crumble, conditions change. And you have to react quickly and leverly to every twist in the road. In my seminars, I tell my audience to think of a rocket that takes off from earth, headed for, say, a rendezvous with Jupiter. The son-of-a-bitch is offcourse 95% of the time. Technicians on earth are continually beaming up mid-course corrections to offset conditions in deep space they never dreamed of. Think of your deal as a great juggernaut hurtling through time in virtually the right direction. You just have to keep nudging it to hit the ideals expressed in your Desired Outcome.

Step Nine—Follow Up. That means don’t take anything for granted. Or anyone. Even your most trusted and reliable partner, being human, can let a detail slip, forget a phone call, overlook a loose end. Even the most solemn pledges of support from others are often made on shifting sand.

In order to relate how minds and loyalties change, let me give a little background. We had originally had in mind to purchase just the oil and gas assets of Bow Valley USA, but MATCO shunned our interest in a joint venture acquisition. They treated us like a pesky little kid, which pissed me off. But I saw their rejection of Great Western as an opportunity– to go for the whole company! Of course, we hadn’t set up the financing for the oil assets yet. But this was an opportunity staring at us in the missionary position. And we jumped on it!

The complexities of pursuing a multi-million-dollar business deal are akin to constructing a giant house of cards. Every link at every level has to hold in place simultaneously. A high performance individual must have the tact, patience, strength and delicacy to add one “card” after another without the whole damn thing collapsing … and the clarity of eye to catch trembling, wavering elements and shore them up before they snap and fall. That’s where follow-up becomes a fine art.

Great Western’s largest shareholder was the an arm of Kuwaiti government. Although only one guarantor was initially required, the Canadian owners of Bow Valley USA now insisted that both our largest shareholder, the Kuwaitis, and our stock brokerage firm, in London, guarantee the deal. The Kuwaitis had reluctantly agreed to guarantee the entire transaction, but suddenly they were backing away from their agreement, because they didn’t want their name disclosed in the documents. Meanwhile, our brokerage firm in London was going through senior personnel changes, and our allies in the deal were replaced by other company personnel we weren’t so familiar with. I flew to London to steady up our “friends.” And negotiations began in Los Angeles, handled for us by Mark. Why Los Angeles and not their office in Denver? Or better yet, our office in Houston or London? Because Mark’s wife was about to have a baby in LA. Nice gesture … bad mistake.

Finally, just as I got the guarantees, and Charlie got bridge financing in New York, negotiators for the parent company of Bow Valley USA closed their briefcases and walked out on Mark in Los Angeles. They were actually heading for the L.A. airport while I was holding a board meeting in London to secure approvement for the deal.

The final outcome of what was becoming an intercontinental fiasco is not so important hero as the fact I had to constantly follow up, almost hour by hour, on events in Now York, London (where the Kuwaitis were) and Los Angeles. Step Nine says you never, ever take the smallest detail for granted, the surest victory for final, the closest ally for firm, Money in the millions turns good men, companies and countries into snakes and weasels. Greed turns men into beasts, and beasts into demons.

You’ve implemented all your processes, investigated yet again, followed up, checked every commitment for leaks—and you’re ready to begin …

Step Ten—Execution. Bomb bay doors open! Your supporting elements of financing and guarantees are in place, hopefully by the time you sit down in the boardroom across from your adversaries to begin negotiations.

At this point, more than any other, you have to lead from the front. No more phone calls from home office. No more faxing instructions. Your intimidating presence, your scowling face, your hardened, blood-spattered determination must stand in person, laser-beam focused, before the enemy across the table.

If execution still isn’t feasible, one or more of your previous 10 Steps was a mis-step. That’s why you may need Step 11—Repeat Steps 1-10. Return to review evary detail of every step. Tighten the bolts of every phase. Chances are you’ll run across some glitch, some uncrossed “t” or undotted “i”, from weeks or months ago, which now prevents you from taking the Execution Step.

Six days had passed since the team from Canada had packed up and left Mark in Los Angeles. Our Kuwaiti associates had lost face and were fuming. Foreign tax issues had arisen. Now the Canadian government ostensibly had to approve any deal. My Executive VP of Exploration was running through the corridors of Great Western saying, “I told you so?” Even our own auditors had recomputed real taxable income before and after the proposed acquisition, completely changing our projected rate of return. The whole deal was disappearing down the crapper, Conventional wisdom pronounced it dead. Imagine what Dan Peña had to say about that!

During those six days of hell, I took direct command of the littered battlefield, and began an offensive of, threatened injunctions, motions and filings in New York, California and Canada. I promised to sue every moron on the Canadian board of directors, their mothers and their unborn children. I spent more than $100,000 in legal fees in 48 hours.

And on the seventh day … it worked. The pouting Canadians and Great Western, with key advisors and led by Dan Peña, convened in one room around a 40-foot conference table. Our team of six stood against their team of more than 20, Our lead transitional attorney was Rick Scott, one of my first “disciples,” who as I’ve mentioned went on to found the 20billion-dollar Columbia Health/HCA Healthcare Corporation, the most successful healthcare giant in the world.

We had met their demand to hold talks in their lawyer’s office. But I took control. I stood, looked every Canadian in the eye and told them that we would “either breathe life back into this deal or crush the son-of-a-bitch out of existence. And nobody leaves this room until one or the other has occurred. We have trashcans in the corners of the room to serve as urinals. Period.”

And so it began. From the outset, no figure, no projection provided by Bow Valley’s parent company was taken at face value. Our accountants at Coopers & Lybrand had combed through the financials the Canadians were required to provide us, and by the time we sat down we had a clearer fiscal picture of Bow Valley USA than its own parent company.

Bitter arguments erupted like gunfire at the slightest provocation. As an example, their books showed Net Operating Losses of $10 to $12 million, on which we figured to pay maybe 50 cents on the dollar. It was built into our purchase price. Then they announced a new NOL estimate of $50 to

$60 million, and demanded the same 50-cent payment. That was insane! Out of the question! To agree to such a demand would jack the purchase price far beyond our ability to pay, and collapse our tediously constructed house of cards. We raged in disagreement. Our attorney advised me, “Don’t roll on this one, Dan. Don’t cave in. Screw ‘em! Let’s walk!” But we were committed. We had to fight—so we charged! We eventually discovered closer to $100 million in NOL, even more than the damn Canadians had figured. And we wound up paying 10 cents on the dollar.

Finally, 72 hours and two fist fights after we’d begun, the deal was done. No one was ready for the kind of gut-wrenching ordeal we lived through. No previous experience could have conditioned any of us, including me, for what happened in the name of “negotiation.” Anyone who was there during those three dark December days will never forget it. I get goosebumps and a lump in my throat just writing about it. A thing of beauty born in terrible conflict.

Bottom line? Great Western paid $118 million for Bow Valley’s coal operations, and $25 million for their oil and gas interests. Additional oil and gas assets cost us another $7 million. We raised $168 million in cash: $85 million in short-term loans from our bank; and $85 million from Series B preference shares of Great Western stock, which were gobbled up by our Kuwaiti friends. Great Western kept another $20 million for “future projects.”

It was quite a cost to pay. It took the minnow years to digest the whale. But at the interim report to GW shareholders in March, 1987, we presented total assets of $272 million and some change, a Quantum Leap growth of $191 million from the previous fiscal close of $81 million.

Another cost? Charlie was dead within a month. A massive heart attack.

Chapter 8. The Plan with No Escape

The leader who anticipates the failure of a bold plan, and prepares for it … will fail.

In 204 B.C., the Chinese general Han Hsin led his army to a position near the camp of his enemy, the army of Chao. In sight of the fortified camp, he aligned his army along the length of a river bank, placing their backs to the deep, swift waters.

Sun Tzu, in his classic, The Art of War, relates that the soldiers of Chao enjoyed a good laugh watching their enemies line up along the river. Then almost immediately the army of Chao left its fortifications and attacked Han Hsin’s army. With their backs to the turbulent water, Han Hsin’s men fought so fiercely they overwhelmed the army of Chao, put them to flight and killed their king.

After the battle, some of Han Hsin’s officers questioned his strategy. The general replied, “It is written, ‘Place your army in deadly peril, and it will survive; plunge it into desperate straits and it will come through safely.’ If I had not placed my troops in a position where they were obliged to fight for their lives, but had allowed each man to follow his own discretion, we would have suffered a rout.”

For three millennia, Chinese militarists have subscribed to the strategy of “burning the boats and breaking the cooking pots,” acts which told their armies, in effect, “We have no Plan B. Fight or die.”

At Jamestown in 1606, Captain John Smith ordered the destruction of the ships which had brought colonists to the wild Virginia shore. They were set afire in Jamestown harbor in full view of the townspeople. The flames devouring the decks and crumbling sails made irrevocable the decision to stay, make their home on hostile land, and begin building a country.

My return to military analogies throughout this book is no accident.

Many of my skills and attitudes about leadership originate from my years in the Army. At the same time, of course, I know a lot of tough-minded high performers who never saw the inside of a military base.) I believe strongly in the need for discipline which military training instills in individuals. Without personal discipline we are little more than animals. A leader with a self-imposed code of discipline commands the high ground to impose discipline on others, and to lead, whether platoons or corporations, by moral force. And make no mistake, that much of being a high performance super star is leading yourself and others against the popular pap of conventional wisdom.

Many of strongest American presidents—Washington, Jefferson, Jackson, Lincoln—were tempered as young men in the fires of war. George Bush was nothing more than a rich preppy kid until he saw brave men die in war against dictatorship. Years later, the former Navy pilot still had the resolve to craft an unlikely alliance of Americans, Russians, Arabs and Israelis to crush the armies of another dictator.

The military trains you to be decisive, to quickly analyze

information and take action immediately. (How else could I have made more than 55,000 business decisions during a 25year career?) During the Civil War, Union General George McClellan looked and talked like the consummate leader to bring the North a quick victory. His men loved him. His Army of the Potomac was larger than the forces it opposed. But he couldn’t bring himself to make the decision to fight. He acted as if he didn’t believe in his own abilities to conduct war.

In business, as I’ve said, you must act as if there are no limits to your abilities. Add to that—you must act as if failure is not an option.

In the late summer of 1984, I sent Charlie Soladay to New York with instructions not to come back without bridge financing for our deal to buy Bow Valley USA. He stayed ten days, and worked day and night, negotiating with CitiCorp, our bankers, for bridge financing, and Salomon Brothers, the old line Wall Street brokerage firm, to underwrite the required loans. It was year’s end, and as with all major players in this industry, their plates were full with bigger fish than us.

I knew they’d be listening to our proposal very carefully, and watching us closely for beads of nervous sweat. Investment lenders use intuition too. So our strategy was to act from an irrevocable position of incredible confidence, as if the deal was virtually a given, the financing was a fairly standard proposition, and the chance to participate in that financing was a privilege sweetened with potential for enormous profit. Accordingly, Charlie calmly paid CitiCorp $250,000, and Salomon Brothers $500,000 up front just to look at the deal! That money, which would become part of the overall fee if they handled financing, was non-refundable. Even in the Eighties,

$750,000 was an impressive sum, and represented a huge portion of cash for Great Western to lay out, considering we only had about a million total in cash! And admittedly, this was a radical departure from the way I usually handled fees, but in desperate times, “you gotta do what you gotta do!”

Imagine how those buttoned-down bankers, conservative by nature, perceived our level of confidence. Charlie had just pushed them to the table by handing them $250,000 in advance. Over at Salomon Brothers, meanwhile, we had gotten their attention as well. I can see them wide-eyed, rubbing their little palms greedily, saying, “This must be a hell of a deal, for Pena to plunk down half a mil in advance. We better take a good look at this coal deal. Look at the fat fee we might be missing now. Plus all those fees down the road.” They must have been salivating on their pinstripes.

But Charlie pushed even harder, acting as if he had no limits to his abilities. He told the bankers if they didn’t act in ten days, he was taking the deal to our bankers in the UK. Ten days, boys, or kiss it goodbye!

But our backs were to the river. We had no backup. Our bank in the UK, Samuel Montegue, had already turned us down. We were fighting tooth and nail for the survival of this deal. The bluff worked. And we got the financing—$85 million in short term loans from CitiCorp, underwritten by a take-out commitment by Salomon Brothers with bonds to be issued by early ‘87.

The lesson is that you’ve got to plan for and expect success. That means no backup plans. No ripcords. No failsafes. Or you will fail. The finest highwire acrobats work without a net. The only faint hearts are in the audience. In our opening tale, the Chinese commander knew that armies fight best on desperate ground. With no alternative, the hungriest salesman

closes the hardest. Facing death, the cornered animal is the fiercest.

Returning to the wisdom of Sun Tzu, the ancient strategist advises advancing generals not to press a desperate foe too hard, or block a retreating enemy, for he “will fight to the death against any attempt to bar his way, and is too dangerous an opponent.”

Look for ways to make your people “dangerous opponents” when the stakes get high by creating for them—and yourself—a level and an atmosphere of risk. This goes back to your comfort level for taking risks. No matter how many risks you take and how often, they’re still scary. The only risks that aren’t a little scary are the ones not worth taking. If you’re experiencing no anxiety or occasional fear as you grow your business, the so-called risks you’re taking are probably not worthy of you.

Let’s talk about dealing with fear. Fear and pain are related in that they’re both signals you’ve crossed a line beyond which your mind or body is not comfortable. Just as a blister creates pain, risk creates fear. They’re both natural, primal responses. The trick is to become comfortable in the presence of those responses. The athlete who learns to perform and win regardless of pain has raised his or her comfort level to deal with that pain. As a high performer, you must do the same with fear caused by risk. The fear never goes away—you just deal with it, and become comfortable in its presence. Does Dan Pena still feel a tinge of fear? Sure. He is ready when it’s time to fish or cut bait? Damn right! I’ve told people for years, “I was born ready!”

But the reality is that I’ve trained myself by exposing myself to thousands and thousands of uncomfortable, even per

ilous situations, so I would be comfortable with my abilities when testing time came.

I’m not unique. High performance individuals flourish in an atmosphere of conflict, crisis and trouble. In fact, progress often masquerades as trouble. (As an aside, I avoid and detest the bastardization of the words “challenge” and “opportunity” as synonyms or euphemisms for “trouble” or “problem.’ When some cheery-faced office moron chirps, “We’ve got a challenge to meet,” I want to throw up. Did the Captain of the Titanic, wading in sea water, discuss challenges and opportunities with his crew? Did Custer turn to his troopers at the Little Big Horn and say, “Men, with regard to arrows, we have a challenge this morning …” If you’re in big trouble, have the respect for your executive staff to say so without having to sugarcoat it as a “challenge.”) We’ll talk more about conflict in a moment, but now let’s examine the relationship of Strategy and Structure in a high performance environment.


In the knowledge that unforeseen problems will arise to screw up the best laid corporate plans, let’s discuss the utilization of two separate elements of company organization— Structure … and Strategy.

Structure describes the organizational makeup of a firm’s being—the form and nature of its existence. Evidence of Structure includes such elements as the ubiquitous organizational chart and the chain of command; executive committees; individual job descriptions, typeset and posted in every cubicle … and a “the way things have always been done” mentality.

Structure requires no human thought to continue to exist.

On a day to day basis, Structure is a permanent framework within which every project, every potential for new revenues, every lurch forward must be filtered. Structure, if immoveable and inert, becomes over time a temple of Conventional wisdom … and an impediment to quick decisive action. A Structure which at once may have facilitated strategic planning and implementation now hinders and discourages it. And the larger the company, the more complex and intimidating the Structure. In recent years, such corporate giants as Sears, GM and IBM have become classic examples of this truth. And, of course, the federal government, plodding through its paperwork and bureaucratic bullshit, is the granddaddy of them all. Having said all that, we need to remember that Structure itself is not only not inherently bad, but absolutely necessary in some form, so that a company maintains a semblance of orderly operation.

Strategy is entirely different, almost the antithesis of Structure. It requires thought to exist. Strategy implies movement toward an objective, and is fluid in nature. It is a plan created to propel and utilize people and resources efficiently, cost-effectively—and especially profitably. Whereas Structure has no known origin but is framed and hangs in the lobby, Strategy has many sires, and is scribbled in marker on a whiteboard.

In too many companies today, Strategy follows Structure. Executives trying to develop Strategy in pursuit of a passing opportunity must scramble through the gridwork of existing Structure, seeking approvals, following form, observing protocol. The aforementioned corporate entities, e.g. Sears and GM, are textbook examples of strategy following structure. (During the Nineties, this trend has abated, as companies return to more flexible, more participatory management structures.

At Great Western, I emphasized continually the dictum that “Structure follows Strategy.” We maintained a basic organizational structure, of course—a CEO, three EVP’s, midlevel management, etc. But as soon as we made the decision to take action on a project, such as an acquisition, and formulated Strategy, we had the flexibility to remold Structure and streamline it to meet the needs of that Strategy, Job descriptions changed. Procedures were compressed. And “normal” working hours became days, night and weekends. When we were on war footing, we defined Structure as whatever the hell it took to keep Strategy on target and on schedule. And our target was winning at all costs!

Even more important, Structure in support of Strategy enabled us to maneuver through crisis, to handle the ambush of an unforeseen problem as quickly as it arose, and move on.


Conflict is part of life. It is a natural phenomenon that results when people act in pursuit of varying interests, priorities and desires. Kids fight over toys. Primitive tribes fight over territory. Companies fight over market share.

Contrary to what mush-brained idealists would have you believe, conflict is not bad. Conflict weeds out losers, while confirming the right of the superior to prevail. It is how that conflict is managed or mismanaged which defines its quality. It’s very evolutionary, almost Darwinian, how the doctrine of survival of the fittest reveals itself across the corporate landscape in the form of downsizing, mergers and major consolidations.

Business deals, especially at high performance levels, distill and concentrate conflict, because the stakes are so high. In global politics, when negotiations break down irretrievably, the parties can go to war, since killing in war is not illegal. But in business the force of law and ethics—mostly law probably— discourage executives from physically harming one another to get their way. So the ultimate corporate arena for conflict resolution, short of legal action, is the negotiating table.


Negotiating, like super success itself, is not for the touchy feely. People who’d rather be loved than victorious invariably lose their ass at a negotiating table. As another high performance oilman, J. Paul Getty, once said, “The meek shall inherit the earth—but not its mineral rights.”

I love the dynamics of negotiation. Skillful negotiators, of which I am among the best, are forceful, persistent, and patient. I thrive on seeking out and defining my opponent’s comfort zone, that imaginary box we discussed in Chapter Four, and then placing an offer on the inside rim of that comfort zone closest to my own best interests. This delicate placement gives the doofus the absolute minimum he’ll accept to close the deal and still be able to convince himself he won, that he really stuck it to me.

Negotiation is a poker game, played with fortunes at stake instead of chips. To win—and this is key—you have to make the other guys think they want what you’ve got more than you want what they’ve got. And, in Kenny Rogers’ words, “You’ve got to know when to hold ‘em, and know when to fold ‘em.”

Negotiation is the ultimate in power play. Knowledge of your foe is your most powerful weapon, of course, and I maintain a full-time private investigator on my staff. But control of the physical elements of a negotiation is also crucial. From the moment you enter the room, you want as much accumulated power on your side of the table as possible. Accordingly, I have five ground rules for my people or myself entering a negotiation:

1. Suits required. That seems obvious enough, but I’ve bargained against morons who wore their golfing attire to a morning session because they anticipated getting out in time for an afternoon tee time. You think Dan Peña adjusted his negotiating strategy to make sure there was no golf that day until he had Dan’s deal on Dan’s terms? You bet! But beyond that, your custom business suit and “power tie,” even at 6:00 on Saturday morning or WM Sunday night, tells your counterparts that you came for business, and that this negotiation is your absolute top priority. A clown in a sport shirt tells me he’s got something also on his mind.

2. My place. Like any other “contact sport,” negotiations favor the home team. In my conference room, the familiar furnishings, the familiar fool of the chair beneath me, even the lingering aura of past victories won there, all contribute to my power level, By contrast, my adversaries are on unfamiliar ground. They are dependent on me and my staff for coffee and other amenities, and to tell them where the restrooms are— if I decide to tell them. When you’re getting ready to hammer a negotiating opponent before he realizes it, there’s no place like home.

3. My contract. Always volunteer to draw up the contract. “I’ll go, ahead and have my people draw up the contract … its no problem.” It seems innocuous enough to offer the courtesy of handling this detail. But now every one will be beginning with your contract, and the language your Dream Team attorney has carefully, cleverly written to earn his equity. And you get a first and longer look at what it says and how it reads. You enter negotiations with the perfect instrument from your perspective, so the burden is on the other side to find and recognize terms, terminology and clauses not to their advantage.

4. Nobody leaves until the deal is done. You tell your counterparts in advance that you expect the deal to be signed at the end of upcoming negotiation meeting, and for them to make whatever preparations required for a non-stop marathon. In fact, memo them to that effect. They’ll agree, because from the comfort of their own offices, they can’t envision the type of meeting you are already mentally preparing for.

5. Everyone necessary for a final, definitive decision must be present at the meeting—or there is no meeting. It’s like a salesman who must have the “buying committee” present in order to close a sale. If one executive is “not able” to attend an important negotiation where millions of dollars are at stake, one of two dynamics are occurring. The other party does not want to make a final decision and put ink to paper before the doors are unlocked … or a key player is revealing an attitude problem and by his absence is saying, “I don’t like this deal, I don’t like you, and I reserve the right to veto every decision and negate all the work invested by both parties.” Either way, it’s a negative force which must be resolved before serious negotiations can begin.

With all the above ground rules met, the other team arrives at, say, 9 o’clock in the morning. You greet them with friendly formality, offer coffee, and escort them to where you want them to sit. Then you buzz your assistant and instruct that no one is accepting calls. You get up, go over to the conference room door, and lock it, saying, “I know this as important for you as it is for us, so we don’t want to be disturbed, do we.” How can they disagree? At the same time, your message or memo about remaining in negotiations until the deal is consummated is starting to sink in. He means it.

You have to make some allowance for potty breaks. After all, you did give them coffee. That’s why the conference rooms of high performance companies have adjoining restrooms. But the point is that you expect no one to leave. Not for another meeting, not for golf at three, not even for meals, which you thoughtfully order in. In handling the meeting this way, you are exerting total power over these unsuspecting doofuses. Your place. Your contract. Your rules.

The most successful negotiation is the “win-win” deal. That doesn’t mean necessarily that both sides win, although that could be the case. An apparent “Win-win” means that each side believes it got enough of what it sought to declare victory. Of course, there is no real win-win situation. That illusionary phenomenon is a product of today’s feel-good rhetoric, dribbled from the lips of morons who’ve never been there and done it.

Negotiating styles range across a fascinating spectrum. We Americans, for the most part (except for Dan Peña), have a basic need to be accepted, and maintain a low-key, patiencedriven style. Most executives have been conditioned to be comfortable with a genuine “win-win” that results in everyone departing filled with not only satisfaction but mutual respect. Because perception is reality, this occurs in theory, but rarely in reality.

The other end of the spectrum is to stay brutal, abusive and inflexible. Such negotiators frankly work on the premise, “We win and take everything; you lose and get nothing” During the Cold War, U.S. negotiators played hopelessly by winwin rules against Soviet negotiators who wouldn’t budge an inch. The Soviets were absolutists, meaning they would settle for nothing but absolutely everything. The end of the Cold War hasn’t changed them. Their recent “negotiations,” with fellow countrymen men in Chechen in ‘95 and ‘96, consisted of leveling whole cities and killing entire populations. This dichotomy of negotiating styles has always worked to our disadvantage, gave rise to the saying, before Vietnam, “We never lost a war, nor won a peace.”

Have someone on your team take thorough notes, especially of the details of the deal as they’re hammered out. At the end of negotiations, or even at the end of a lengthy session, have those notes typed and printed out in hard copies for the two chief negotiators. It’s amazing how people forget little negotiated points, especially concessions they’ve made in the heat of the moment. So memorialize your deal as your notes reflect it—and leave a little space at the bottom of each page for you and the other chief negotiator to initial.

Initialing such a memo shouldn’t be a problem, if verbal agreement has already been achieved. Say something like, “This is pretty standard. We always do this to protect both parties. Hell, sometimes I forget things myself.” You read the memo first, before you hand a copy to your counterpart, as if checking for accuracy. Then you initial your copy first to demonstrate your good faith.

But, Dan, what happens if they send you a contract later in which minor details have been changed? Send it back. They’re testing to see how your resolve weighs against your desire to get the deal done with no further delay. Send it back immediately. You might even attach a copy of the memo they initialed at the conference table, highlighting the item they’ve tried to renege on or “adjust.” Don’t let them weasel out on one percentage point, not one digit or dollar.

Sometimes, even your most adroit negotiating, your cleverest ploy, will not dislodge a position taken by your opponent. If you can’t agree to that point in the deal, say so. “This proposal is unacceptable to us as it stands. If you can’t work with us to solve the impasse, we’ll have to break off negotiations.”

They’ll call you on it, by replying something like, “At this point, we’re not prepared to compromise on this issue. But we can talk about it some more…”

Without a word, you gather your papers, put them into your briefcase and slam your briefcase shut. Your associates mechanically do the same. Then you look their senior man in the eye and say, “You can reach me through my office.” You and your associates stand up and walk out. If you’re in your conference room, you’ve left the other side to scratch its own head in disbelief and find its own way out, or be shown out by a secretary.

If the meeting happens to be in their offices, or in their attorney’s office (the worst place), it’s even cleaner for you to execute your walk out. Just remember—when you get outside, keep walking—and never, NEVER look back. They’re watching you from the windows. Then you disappear from their day, giving them time and space to reflect on their stupid intransigence.

The point is, don’t be afraid to walk out. A dramatic exit is a killer because it’s always unexpected. Just like those bastards did to Mark in Los Angeles. A lesser company than Great Western would have accepted defeat, but we wanted that deal. No, we needed that deal more than blood in our veins! And we did what it took to get negotiations back on track. Walking out is a tactic as surely as sitting with your back to the window so the other guys have to squint.

Also, never make an empty promise or an idle threat. Mean what you say, then do it without a blink—as if you’ve done it a thousand times. If you say you’re going to walk, you’d better damn well walk no matter what. Or they’ll never believe another word you utter again. Don’t worry … you can always resurrect another day.

I’m not going to get into the nuts-and-bolts strategies of successful negotiating. Those books have already been written. My message is—learn to thrive in the conflict of negotiation. Know your foe, master your tactics, enjoy the poker game

… and win! No matter what!

So … create a plan with no safety nets, no escape. Make sure Strategy drives Structure—not vice versa. Learn to thrive in conflict … and become a master poker player at the negotiating table.

Now, let’s go raise some capital.

Chapter 9. Offering Lenders the Chance to Finance Your Dream

Borrowing money is like having sex with your banker. You both want it, but he needs reassurance of your intentions. And foreplay.

No matter what business or profession you happen to be in, there are processes and procedures you perform so often, that you regard as so basic, you take it for granted everyone knows how to do them. If you were to ask a master carpenter how to drive a 3-inch nail through a board, he’d look at you funny and say, “You just do it.”

I feel the same way about raising capital. I could almost sleepwalk into a bank and walk out with several million dollars. It’s so basic to what I do, that I didn’t realize it was a “secret.”

I conduct Quantum Leap seminars all over the U.S., and more recently in Europe. I also host an extraordinary weeklong Castle Experience for business owners and entrepreneurs at my home in Guthrie, Scotland. At the conclusion of every seminar, I ask attendees to complete critique sheets, and to offer suggestions with regard to seminar content, delivery and overall value. In reviewing these critique sheets, I realized that a significant number of respondents were asking, in one way or another the same question: “How do I get the money?”

I was astounded. I assumed that when seminar attendeesbegan thinking like high performance individuals, and applied the strategies of high performers, they would instinctively know how to find and secure the capital they needed to take action.

Two simple facts emerged from these critiques. First, most potentially super successful people are still held back by a residue of fear of asking for money. They still approach even the idea of talking to a lender with trembling lip, sweaty palms and pounding heart.

If the idea of walking into a banker’s office strikes mortal fear in you, let’s put this in perspective right now and move on. A recently published news article entitled “What Kills Us” listed the statistics for the most frequent causes of death in America. Heart disease is the number one killer, followed by cancer, then stroke and lung disease. But not one death in the

U.S. has ever been attributed to rejection by a banker, or indeed the rejection of any deal. Presenting a deal is not “Sophie’s Choice.” So get over it! The second fact I learned was that the techniques of dealing successfully with bankers remain a mystery. Even some of my fiercest protégés were hesitating before the barricades of uncertainly, artificial barriers I had trampled to splinters so long ago I’d forgotten about it.

As a result of these revelations, I developed a new seminar in 1995, called the QLA Raising Capital Program, dealing exclusively with finding and securing capital. It focuses on the step-by-step details and techniques of this apparently mystic and forbidding process. We even do role-playing, often with myself case, or miscast, as the doofus banker. This chapter and the next briefly summarize the content of this seminar. But if you’re serious about giving lenders the opportunity to lend you some of the cash they’re sitting on, I urgently recommend you attend this ten-hour exponential explosion of information. In fact, my standing guarantee to attendees is that, if they stop their moaning, get into gear and follow my methodology, and don’t get their capital funding in one year, I’ll refund their seminar tuition. Period!


As you’ll recall, the two primary jobs of a CEO are to find money—Other People’s Money—and to find deals. If you’re the owner or CEO of your company, you should leave operations, marketing, administration, and group insurance to the competent people you’ve hired, and spend 95% of your time kissing frogs! And if you don’t have any employees yet, find people to handle these tasks as quickly as you can.

And why do you want money and deals? Because, unless you’re selling drugs, there’s no way you can grow internally faster than you can externally. There just isn’t. Forget new sales territories, forget new products, forget cutting costs. All you’ll achieve from these piddling efforts is humdrum arithmetic growth—widget sales up 7% … 13% less spent on paper clips. Who cares! You want to grow your business exponentially, in Quantum Leaps, “as fast as humanly possible.” While arithmetic growth means 1 + 1 = 2, 2 + 1 = 3, etc., exponential growth means 1 x 10 = 10 x 10 = 100 x 10 = 1000. Isn’t that a little more exciting?

There’s an old Chinese proverb, “You don’t leap a chasm in two bounds.” For high performance business people, that translates to, “You don’t pussyfoot yourself to Quantum growth.” After you’ve practiced for success, flushed conventional wisdom, visualized your dream, incorporated New Rules and started running toward that chasm between you and Quantum success, you’re probably going to need more money than you’ve got to finance your leap. Besides, not even the most doofus banker is likely to lend you money to just “get your feet wet.” Your wholehearted, enthusiastic commitment is as important to him as it is to you. He wants to be assured you’re going to use your loan to create revenue—so both of you benefit from the transaction.


No matter where you live, you have a choice of financial institutions to consider when you begin thinking about borrowing capital—banks, savings & loans, venture capitalists, finance companies and other sources. Since banks fund about 60% of business ventures, we’ll discuss banks first.

You’ll recall I said that Quantum Leap strategies can be universally applied. The fact is, many of my capital raising skills were developed in the United Kingdom, then perfected in the U.S. I know British lending institutions better than most Brits. That’s why I remind my British audiences that there are 311 banking organizations in Great Britain—and 428 banking offices in London alone.

Wherever you are, look in the phone book. Read the business section of your newspaper. A lot of major metropolitan newspapers publish quarterly a list of banks who are looking for borrowers. Call the business desk of your newspaper and secure a copy of the most recent edition of that report. Ranging further afield, such magazines as Entrepreneur, Success and Inc. periodically publish a state-by-state list of financial

institutions who seek to publicize their desire to lend capital. So you shouldn’t necessarily limit your search for financing to your local market or even your state. In fact, I would strongly recommend you go outside your local market. In seminar after seminar I wave the latest special newspaper section or magazine edition with all these listings in the air, and ask to see the hands of all those business owners or entrepreneurs who have used any of these publications to seek capital. I get maybe one hand. Or no hands, It’s like these listings were published on Mars. I raise hell with the audience, and tell them that, even today, I keep an active file on banking news that regularly appears in The Wall Street Journal, The New York Times, The Times of London and other major publications. If they’re serious about finding capital, they should pay attention to the wealth of information that institutions are disseminating. And so should you!

So, using all the resources available, make a list of banks which begins with “First Megabig Bank” headquartered in the tallest skyscraper in the state … and ends with “Community Corner Bank,” down at the strip mall by the gas station. Then you do some homework to find out who the managers are of your most likely prospects. And who the lending officers are. Go down the list, call each bank and ask. The names of these bank officers are not a state secret. Stop by and ask the receptionist or even the security guard. What financial institutions are most likely to lend you the money you need? At the very top of the list is any newly opened branch office. New banks have no customers. They are stacked to the ceiling with money they need to shovel out the door in order to begin generating income. And they’re run by a shiny new manager who has a desperate need to prove himself or herself by generating loans.

Consider this actual promotion recently written for a new bank in Florida:

Midstate Bank of Florida is now open at the corner of Rolinson Street and Magnolia Avenue to handle all your personal and business banking.

At MBF, our style of community banking is based on building personal relationships with our customers. We get to know the needs of your business, so we can provide the best mix of financial services, adapting them to meet your specific business requirements.

When you need a loan or a line of credit, relationship banking means that approvals come quickly from local management people who already know you.

This bank is saying, “Please give us the chance to lend you money.” In the world of finance, we call this bank a “laydown.” They should have their grand opening in the vault. If I were shopping for capital in Florida, I’d be all over this bank like foul odor on feces!

I recently read where two women banking executives had joined together to open their own bank. If I were a woman trying to secure funding for my dream, I’d be on the phone to them in a heartbeat. And that’s not a sexist observation. Who can deny that, all other factors being equal, a strong chemistry pre-exists between the founders of this bank and any female entrepreneur.

For lending purposes, there are basically two types of banks—centralized loan institutions … and branch bank institutions. The centralized bank pools its loan requests from several branches, and this bundle of requests is forwarded up to people who’ve never heard of you. Your deal will be weighed

objectively in competition with all the other requests, and regardless of its merits as a splendid opportunity, it’s likely to got lost among more promising deals, backed with stronger collateral and other advantages.

Instead, you want to approach a branch bank institution with local lending approval power. Like Midstate Bank above, this is likely to be a “community” bank or a “hometown” bank, run by “your neighbors in the banking business.” The loan committee is comprised of your individual banker, who becomes your advocate, and three or four other bank officials or directors, community business people to whom bankers look for guidance.

Suppose you’ve picked five banks which are possibilities. Which bank do you try first? The one that’s least likely to provide you financing. That’s because you need to practice your presentation skills, both on the phone and in your face-to-face meetings. Make all your mistakes, expend all your butterflies before you get to the serious prospects.

What’s your first point of contact? If you’ve recruited your Dream Team, I recommend you have your accountant or your attorney make the first call on your behalf. Either one of these individuals is likely to have more clout with the banker than you. In fact, the banker will take the call of an attorney or accountant long before he’ll take or return your call. And an intercessory call made on your behalf suggests you are a significant or at least knowledgeable player in the local business community. (“Perception is reality.”)

Your accountant, hopefully a prominent CPA associated with a respected, even a Big Six firm, calls the banker and says, “As [YOUR NAME HERE]’s accounting firm, we’ve recommended that his company consider your bank to establish a business relationship. They’re in the so-and-so industry. Do you foresee any conflicts?” Of course not. “Good, I’ll have him call you and set up a meeting.”

But suppose you’re still selecting your Dream Team, and have to make that first call yourself. No problem. You start with the manager. But you may be passed to the Vice President/Lending. Most likely, however, you may find that Mister

J. Doofus Banker is “not available,” and some assistant will take your number. Do not sit by the phone and wait for him to return your call. Like most bankers, he’s a very busy individual being phoned constantly by people he already knows who are more important than you, a total stranger. Call him back. Call him again. If he has a voice mail, saturate the system with your patient, professional messages. (If I find out he has no time-called indicator, I’ll call 13 times in ten minutes!) Finally, J. Doofus will realize, hmmm, this guy’s persistent, and he’s going to screw up my voice mail if I don’t t call him back. So he calls.


You introduce yourself, graciously thank him for returning your call, and begin the same basic opening routine about “I’m in the so-and-so industry, and we’re experiencing rapid growth, with opportunities in several directions. I’m looking to establish a financial relationship for my business, and I’m in the process of interviewing several banks which have been recommended. But rather than go into details over the phone, I’d like to set up an appointment to meet you and talk personally. When would be the best time for me to come by?”

Notice you didn’t say, “I need to borrow some money, and I need it by next Thursday.” Bankers, you see, are very much into relationship banking. They want to know who you are, see your face, understand what the hell you do, and begin forming

a judgement as to whether you’ll be able to pay back any capital they may ultimately lend you. Personal chemistry—not the numbers—is absolutely key, both for you and J. Doofus.

By the way, it’s part of your strategy that you inform Doofus you’re “interviewing” banks. This puts him on notice that, as far as you are concerned, you’re the one doing the selecting

you’re in control of hiring a bank, maybe his, to handle your affairs. It also tells him you’re talking to his competition, and if you are a significant account for him, he’s going to have to earn it. Doesn’t that approach beat the hell out of how you always thought it would be—crawling in on your knees to grovel for a loan?

So, in order to begin developing your mutually beneficial relationship, you might suggest lunch. Bankers always pick up the tab. It’s part of their training. I’ve been dealing with bankers for some 25 years, and I’ve never had to buy a banker lunch. It’s even better if you can arrange for one banker to see you having lunch with another banker.

Your first meeting is to get acquainted, for each of you to see what the other looks like and sounds like, so the bonding process between you can, you hope, begin. Your initial presentation of your project should still be general, and last no more than five to ten minutes. You also have two other things to do during this meeting: listen … and ask questions.

As you discuss your ideas, give the banker a chance to react to what you’re presenting him. After all, he’s had a lot of dreams come over his desk, some dissolving into smoke, others becoming realities. This guy can probably offer some suggestions and ideas you can incorporate into your thinking, help you sharpen your focus, and even give a better presentation to the next banker you talk to. His advice is free, and it’s based on experience. So listen to him,

Most “wannabe” borrowers sit in front of a banker with no idea of what to ask beyond “Can you help me?” They don’t understand that they should be in the interview mode, asking questions to clarify just what this bank is all about—and if it’s the best bank to fund their project. In Britain, that means you’ve got to know the differences between, say, the Bank of Scotland and Midlands Bank. Let’s talk about some of the questions you need to ask each banker with whom you have a meeting—and why each question is important.

1. What is your personal lending limit? Secured and unsecured. Every bank manager and loan officer has a credit limit that he or she can approve without having to check with a superior. Ask. In fact, ask this question on the phone before your first meeting. You may be talking to the wrong person. And don’t let them hedge around with relationship doubletalk and bullshit. It’s a specific number. If they tell you $50,000, you’re going to probably need about $48,000. If it’s $100,000, your requirement will coincidently be about $95,000. But if you determine that this person does not have the authority to approve as much as you may need, move beyond him immediately.

2. Who do I have to go to for an approval on the next level of financing? When Doofus tells you who the official is at the next approval level, that’s the person you want to meet. Don’t waste your time making presentations to the wrong people. While you’re asking about lending limits, inquire about the credit limits of the bank itself. When you ask a banker about his employer’s unsecured credit limit (usually 1% of assets), he begins to think of you in terms of maximums.

3. Are you a centralized loan institution that pools loan requests, or a branch-based lender? We’ve already said you’re looking for branch-based lender and why.

4. Is your bank presently in a lending mode, or in a downsizing mode? This is code for, “Have you made some bad loans in the recent past, to the extent the government is watching your lending practices very closely?” It’s not classified information, and you’re banker will respect you for knowing to ask the question. If he says something like, “Well, we’re in a holding process right now,” that’s his coded response for, “We’re in a death spiral right now. Do you have any openings for a former banker?” Before you escape, you may want to buy his lunch.

5. What type of ventures do you like to make loans an? Some institutions focus on telecommunications; others on health care, or international trade. If you’re opening, purchasing or expanding a chain of hardware stores, for example, you want a bank which has a comfortable lending record in retail ventures. If you’re in the retail liquor business, or want to expand your chain of “gentlemen’s clubs,” you need to be aware that some banks as a matter of policy try to avoid “vice” industries. (The thought of a $20 million deposit, however, might change that policy.)

6. What was the last deal your bank turned down? And why? Another unexpected question. But get your banker to tell you about that deal, even hypothetically. As he relates to you a case of what he was not looking for, you gain a new insight into what he is looking for in a lending relationship.

7. What was the last $5 million deal you did? You might not ask this question to a V-P at Chase Manhattan or Barclays, but for some likely lenders in your community this is a significant question. You’re asking your banker, in effect, to demonstrate his comfort level and skills at maneuvering the both of you through the multi-million-dollar lending process.

8. Can your institution take me to the next level of my Quantum growth? How much are their assets. Once again, as a rule of thumb, banks can lend 1% of total assets unsecured, and 2% to 3% of total assets on a secured loan.

9. What is your bank’s policy on “asset lending” versus “cash flow lending?” By now Doofus is regarding you with a degree of awe. You’re already sounding more sophisticated than 90% of the morons he talks to about loans. In asset lending, the loan limit is determined by loan-to value of asset. Take 50% as an example. If you’ve got approximately $100,000 in tangible assets, the bank will lend you $50,000. Many banks these days steer away from asset lending, because in the past loan defaults have forced them to become reluctant property owners. You should look for an asset-based collateralized loan, since most banks will bend over backwards to work with you in a pinch rather than take possession of your chain of dry cleaners or pet stores.

Cash flow lending bases lending parameters on percentage of existing cash flow revenues less operational expenses, cash costs and taxes, typically between 50% and 65% of cash flow. (without “smoke and mirrors.”) if you’re already producing income, many banks prefer this basis because they can get their hands on income without the hassle of property ownership. If you’re just starting, show them how much income you project generating, so that they might consider giving you the loan based on future cash flow.

10. Are you an interstate bank, or do you operate just within this state? I’m talking U.S. banks, of course. You’ll already know the answer to this one by the time you and Doofus sit down. You will prefer an intrastate bank, since it’s simpler to deal with an institution which operates in only one state. Besides, interstate banks are subject to more federal red tape and regulations. But again, you’ll bank with whomever has the funds and buys your dream!

11. Could you give me some recent examples of companies for which your bank has approved business loans? Come on, Dan. Isn’t that a little presumptuous, asking a banker who he’s lending money to? Damn right! So what! You’re interviewing banks, and what do you ask for during any interview? References, of course. They’re going to check yours—so you check theirs. You’re not necessarily asking dollar amounts or terms—just who. (I will. I’ll keep asking questions as long as they give me answers.) If your banker is eager enough to lend you money, he may actually give you a list you a list of recent lending approvals. But even if he mumbles some crap about confidentiality or bank policy, this question keeps him sitting up straight. And it reminds him who’s running this meeting. You!

12. Do you anticipate any conflict with your present banking clientele in handling my banking business? This is an incidental question that signals to the banker your sensitivity to one of his possible concerns. Chances are slim of a conflict of interest, but it’s better to have that question—and its answer—addressed and acknowledged.

Suppose you establish a working chemistry with an individual banker. You meet for lunch periodically. You play golf. You nurture the relationship for months or years—and then he takes a position with another bank. Do you stay with the bank? No! The spirit and substance of that relationship is with the individual. The bank is nothing more than a mechanism for getting the capital your banker arranges because he’s comfortable with you. Unless there are unanswered questions about the move, always go with the banker instead of the bank. Otherwise, you’re back to square one at your present bank.

Finally, under the area of choosing a bank, don’t overlook the option of spreading your capital requirement out over two or even three banks. We’ll talk more about that later.


Most business people make two false assumptions about lending capital: first, that there is a finite amount of money available for an infinite list of potential lenders; and second, bankers are your adversaries, using their office to keep you from borrowing their money. If

1. There is more money out there crying to be borrowed than there are people trying to borrow it; and …

2. Bankers want to lend you money, because that’s how they put food on their own table. Their money does not produce revenue sitting in the bank. That means if they’re even halfway convinced of the viability of your dream, they’ll give you the benefit of the doubt. No wonder most banks, regardless of what they’d have you believe, are “laydowns.” especially with the right romancing. An associate of mine at Clydesdale Bank told me in early ‘97 they were £788 million underloaned. That’s a lot of “dash” gathering dust! “Bring me a deal,” he pleaded, “If the numbers stack up, the money’s yours.”

British entrepreneurs should look across the channel as well, where they have access to an enormous wealth of funding sources through an economically burgeoning Europe. I mean, European banks are flush with capital.

The fine points of how to deal with your financial institution begin to surface during the selection phase we’ve just discussed. The operating premise is that you want to develop rapport, understanding and chemistry with a banker from the first words he hears you speak, and from the first time he lays eyes on you. That’s why you practice what you’re going to say before you blurt it out to the banker. And that’s why you dress like the sort of business executive that a banker feels comfortable talking to and being seen with in the restaurant where he buys you lunch. Remember our discussion about comfort zones? Doofus bankers have comfort zones too, and you want to put yourself smack in the middle of it!

Let’s talk about what you say first. Words have meanings.

Remember “interview” and what it signals to the banker? If you haven’t guessed it by now, bankers like to hear words like “relationship,” “partnership” and “long-term, mutually beneficial.” When you’re communicating to a banker you don’t ever “need money.” To a refined and sensitive banker, that’s pretty coarse. Instead, you have “capital requirements.” You don’t call your accountant a “Cee-pee-a.” Everyone assumes you have a CPA, but if you use that term, it sounds like you’re impressed you have one. Use “accountant.” I mean, these are details no one would ever tell you but me.

Delivery skills will come with practice. After I’d been doing this awhile, I made a financial presentation to a large English institution that, in my estimation went particularly well. I did charts, graphs—the complete dog-and-pony show. One of my little techniques for strengthening my performance is, if the opportunity arises, to ask how I could improve my presentation. After this particular presentation, as is the custom in England, the head of the institution walked me to the elevator. I was feeling pretty good about what I’d just done, but I asked the gentleman, as I pressed the elevator button, how I could improve my presentation. The doors opened, and he said nothing as I stepped into the elevator. Then, as the doors slid shut, just before he disappeared from view, he said, “Mr. Peña, try to stutter more.”

The lesson, of course, is that there’s a fine line between a professional and knowledgeable presentation and a slick one. But that’s an advanced lesson you probably needn’t be concerned with for now.

You live in laid back Southern California … or casual, steamy Florida … or in the rural farmland of Northumberland or Texas and you need financing for an acquisition in an ag

ricultural-related industry. What do you wear to go see your banker?


I don’t care if you’re about to open a pig farm in Peterhead, you show up for your banker meeting in a black, dark gray or dark blue suit with a white shirt, yellow or red-pattern power tie, dark socks (no kidding!), lace-up shoes and short haircut.

Leave your gold chains at home. In fact, wear no jewelry other than a tasteful watch with leather band. (No Swatch watch—too trendy; no Rolex—too extravagant for a person looking for capital.) Your watch-band, shoes, belt or suspenders (“braces” in London’s Threadneedle Street) must all match—preferably black. As they say in the banking business, “Dress British, think Yiddish.”

If you’re a woman, of course, you know which business suit in your wardrobe corresponds to the male attire I just described. You can bet that Victoria Haigh, the budding mogul from Yorkshire, shows up for business meetings in her pinstripes.

You already know why, but I need to remind you. A banker is most comfortable talking to and being seen with a person who looks like him and his associates. But you’d be surprised how many otherwise bright business owners stroll in for a major lending presentation in sport shirts and Dockers.


Attendees at my seminars look at me like I’m either nuts or lying when I say I’ve rarely relied on a business plan to borrow capital—and I’ve made over 300 financing presentations, and borrowed hundreds of millions during my career. In recent years, as regulations have tightened on financial institutions, more and more bankers routinely expect a business plan, a piece of eye-wash I often wonder if anybody at any lending institution ever reads through. There are already books and software on the shelf describing the step-by-step textbook procedure for putting together business plans. But on the assumption someone, somewhere will actually read it, let’s talk about how to prepare for preparing your business plan.

Most fretful borrowers go to their first banker meeting with a business plan in their briefcase, or under their arm, so they can produce it immediately after the initial handshake. Take nothing but your dream, in your most general terms, to the first meeting. Remember, this is a get acquainted meeting. a first date. You talk about your business and where you’re planning to take it in the long term. But, if the opportunity arises, you also get the banker to talk about himself. What are his leisure interests after he stops being a banker. Does he play golf? Fish? Travel?

The point is, take to your first meeting absolutely no information on your financials. Beginning with no business plan. You don’t want the bank to have anything at this early stage they can get a hook on, and form a premature opinion. In fact, if the banker never mentions a business plan, you never mention a business plan. You’d much rather get a loan he can approve straight away. But suppose he does ask for a plan. You reply, “Oh, I’m glad you asked. Before I prepare a plan for you, I’d like to know what type of plan you’re looking for, and, when the time comes to acquire growth, the minimum rates of return you require.” Okay, let’s stop.

Banks have several ways to evaluate a deal when they lend money for acquisitions. Two include:

A cash-on-cash rate of return. This measures the revenues of a company you may want to purchase against the total equity of the company. The total equity of a company is $1 million. Revenues, or profits after interest and tax are about $330,000. The cash-on-cash rate of return is 30%.

Payback Period. This lending qualifier equates an initial investment amount with future cash flows in terms of annualized paybacks. Say you want to borrow $700,000, for example, and the bank wants payback in four years. But your best projections of cash returns for those four years—$130,000, $150,000, $180,000 and $220,000—add up to only $680,000. You need to negotiate at least a five-year arrangement to pay back the $700,000, or reduce your loan amount—or go find another banker.

Your banker, again startled at your ability to speak his language so fluently, tells you his bank will take, say, 11% cashon-cash, or a six-year payback. Now you’ve got ammunition for your business plan.

Let’s face it. The figures in any business plan are only educated guesses. The economy fluctuates, markets change, nothing is certain about business next year. So you give the bank what it wants to see by backing into the percentages they’re looking for, making sure you establish a healthy margin over their minimum. That’s not in any way dishonest, because since nobody can predict the future, anybody can predict the future. Including you on the future of your Quantum Leap.

Besides, my experience has been that even if all your figures don’t exactly stack up—and they probably won’t—you’ll find financing somewhere. Remember, any doofus deal can and will be financed somewhere by somebody—if you want it done badly enough!

Next, you ask the banker about the physical requirements of the business plan you’ll be preparing, custom-made for the eyes of his loan committee. What are they comfortable with? (Have I mentioned comfort zone lately?) What sort of document would they not be ashamed to pass along to associates and supervisors? Among the specifics: how many pages? They’ll no doubt want charts reflecting profit-and-loss projections, cash flow analysis, and pro forma balance sheets, all for the first three years, plus a break-even projection chart. Do they prefer bar charts or pie charts? Do they like full color graphics? What kind and color of paper? Do they prefer it spiral bound or in a ring binder? If this sounds elementary, it’s because bankers do receive handwritten plans on yellow legal paper.

And you’ll need more than one version of your business plan if you intend to approach more than one type of funding source. Bankers will be very interested in how solid the security is, so your business plan must reassure them of your wealth of collateral. (Now don’t panic when I refer to “wealth of collateral.” By this I mean if you only have equity in your house or automobile, you’d better be read that equity on the table to show commitment.)

The venture capitalist, on the other hand, is more concerned with the nature and extent of risks involved, so a second version should address these concerns. John Doerr is one of

today’s most dynamic and successful venture capitalists. As a partner at Kleiner Perkins Caulfield & Byers (KPCB), near Palo Alto, California, he has seen stacks of business plans, and puts them in perspective. “Don’t obsess over the plan,” he recently advised entrepreneurs in Fast Company Magazine. “The better plans we’ve seen are the shorter ones—often 30 pages but sometimes just three. The Intel business plan was one page. The Sun Microsystems business plan was three pages. What we’re looking for in a plan is how that team thinks about its business. We can figure the rest out in conversation with the founders.”

Ask the banker if he can get you a copy of a recent business plan which was approved, so you can duplicate the format. C’mon, Dan, you say, isn’t that a little too presumptuous? Hell, no! Listen, these guys will work with you. If one won’t because he’s stupid, work down your list to the next one. A good, savvy banker will do everything he can to help you because he wants to loan you the money. An investment banker may even write your plan for you before he submits it. (A securities banker will certainly write your prospectus in prepsration for a public offering.) Bankers need to get money out the door. They want you to qualify. How else can I say it?

Remember what I said about demonstrating your enthusiasm? Whenever you talk to your potential lender, let him see the fire of enthusiasm in your eyes and hear the dream in your voice. But enthusiasm also includes the language in your business plan. Write it like your deal is going to change forever the way Americans live their lives. Pump pizazz into your plan and sell, sell, sell! Hire a professional copywriter to punch it up. Even if they see your touch of hype for what it is, they’ll appreciate it as an expression of your enthusiasm.


All this preliminary stuff—lunch, meetings, conversations and, if you must, business plans—is foreplay, so that the banker becomes comfortable with one fact: You fully intend to pay back the money he’s going to approve. No matter what! The amount and payback schedule of interest is negotiable, but it’s absolutely indispensable to the approval process and his personal comfort zone that he knows his bank is going to get the principal back. And he wants to believe. Mark this in your book. The banker wants to sell you his money.

He also wants to know that you plan to bring him as much business as you possibly can. Give him all the reasons you can think of to go to the loan committee, more than once if he has to, to pitch your deal.


If you’re unsure about some element in your plan, if you have a seed of doubt that it won’t work, never mention those doubts to your banker. As with your employees who look to you for confidence, never share a doubt. While you’re keeping things to yourself, never say something like, “The last time I tried something like this I lost my butt.” An associate in one of my companies gets to stay home during financial presentations, ever since he blurted out, “Hey, the last time I went under I took two banks and an insurance company with me.” One stupid statement like these can spill negativism on your plans like indelible ink. So keep the conversation focused on the positive—on future success, not past failures.

You have a couple or three meetings with a promising bank, and the requirements become more and more specific. They may want to look at your recent financial statements. That’s fine, because your Big Six accountant (not your “ceepee-a”) has prepared audited financials on his firm’s embossed letterhead. It’s an impressive document before the banker even picks it up. It spells out your cash flow, existing capital, longterm debt and short-term debt. It is an accurate snapshot of your business. And, again, if you’re starting from scratch, you %%Till have found a joint venture partner whose track record you can use while you build your own.

There are several levels of documentation your accountant can provide. The most basic is a compilation and review without opinion, which essentially reports the figures you give him on prestigious CPA letterhead. You might get an assurance letter which deals with an isolated specific, such as receivables. The most expensive and comprehensive is a full-blown audit, with an attached opinion. This tells the banker your highly professional accountant has personally audited and checked your figures, and they are true and correct to his best knowledge. Pay the fee and take audited financials to any banker who requests financial statements. Banks will always lend more on audit numbers. And bankers will always feel more comfortable with “Big Six” audited numbers.

The next level is a Financial Review, which is the least expensive document, and tells the banker your accountant has not checked the figures, but has prepared and formatted what you have given him according to Generally Accepted Accounting Principles (GAAP). This says virtually nothing, and means nothing to a good banker.

As the time approaches for the bankers you’ve been courting to make their decision, they’ll have for their consideration any or all of the following: your articulated enthusiasm over your project and its overwhelming chance for success: your business plan, prepared, formatted and presented exactly they way they want it; your audited financials, prepared by your prestigious accounting firm … and the answers to as many questions as they can think of.

But suppose they ask a question you haven’t anticipated. After all, you’re not the first sparkling, hopeful entrepreneur they’ve talked to. Recently a banker perused the names on the board of directors of one of my companies, and spotted my financial credentials. I wasn’t in the meeting, so he asked my associate, “Why don’t you get Mr. Peña to underwrite your venture?” Without missing a beat, the associate replied, “Of course, Mr. Peña could write a check for this whole project. But he’s already generously agreed to give us his time. And we’d rather have Mr. Peña’s time than his money.” Terrific answer! And it satisfied the banker’s curiosity.

The rule of thumb, however, is that if you don’t have an answer, never try to bullshit your way through it. Chances are that they’re asking some questions they already know the answers to, just to check your BS level. Simply say, “That’s a good question. And, frankly, right now, I don’t have an answer, but I can certainly get you one.” And you dutifully make a mental note, and one on your notepad.

Finally, what happens if you get turned down? What do you do? (I’ll tell you what I’ve done. I scream, “What? How can you violate the trust of your shareholders by refusing to participate in a deal so obviously in the best interests of your institution!” And it has worked. But I probably have a little more leverage to scream that you do.) The reason you’ve been

turned down may well be that somewhere along the way, one of your selling points fell through the cracks. A “No” really means, “You haven’t given us sufficient data to approve your concept. You haven’t covered every base and done your job adequately.”

Your response is, “What element do you feel you’re missing from the proposal equation? Where do you have a problem?” A breakdown in communications is often the simplest of reasons why a deal falls through. When Great Western was negotiating to purchase Bow Valley USA for $135 million, the deal stalled for some reason. The president of Bow Valley wouldn’t return my calls. I finally got hold of him at home, and asked him, “What the hell’s going on?” He said they needed

$139 million to close the deal. Damn, is that all?, I thought. After all the financial gymnastics we’d been through, another four mil was nothing. I threw it in the pot and the deal was on again.

So ask! There’s a legitimate reason you’ve been turned down, and you’re not out of line to ask what that reason is. It could well be something you can fix.

Here’s a great success story to wind up this chapter. Barbara Baade is founder and president of Benefits 2000, an employee benefits consulting firm headquartered in Brookfield, Wisconsin. Barbara came to the Castle seminar in May, 1995, and the following August attended my Quantum Leap Advantage Capital seminar in Los Angeles. Her company was in a growth mode, looking for acquisitions. After her first “dose of Dan,” she went back and formed her Dream Team. Late in the year, she decided to approach a bank with which she had not previously worked, to see if she could get a loan. She invited the president of the bank to come to her office to talk about beginning a relationship. Here’s what happened in Barbara’s own words.

“We spent an hour ‘establishing a relationship.’ That means we talked about business generally, and the banker became comfortable in the realization that I was a knowledgeable, responsible business person with a good business. I didn’t give him a business plan—I didn’t give him anything. Just like Dan said, I offered the guy an opportunity to grow with us. I asked him what his personal lending limits were. He told me he could approve an $800,000 unsecured loan, which would be no problem, and if needed more, he was confident his board would take his recommendation for more funding.

“Containing my delight, I told him that $800,000 was all I needed for now. Besides, collateral was such a hassle with all that paperwork. He agreed. He shook hands, and he said he’d send one of his lending officers around the next week with the papers to sign. That was it. All I could think of was, Dan Peña was right. I used his methods, asked his questions, and $800,000 of growing money floated across my desk.”

Bankers are not gods, regardless of what some of them would have you believe. They’re people with human needs representing an institution with corporate policies and guidelines which have a great deal of resiliency. Make your banker your partner, your co-conspirator in helping you realize your dream. If you’re prepared, if you’re knowledgeable and professional, and court your banker step by step into what promises to become a long-term, mutually profitable relationship, it will suddenly seem he’s working for you instead of his employer.

Now let’s move along to some more so-called “secrets’ of raising the capital to launch your Quantum Leap.

Chapter 10. More Capital Ideas for Financing Your Deal

The business community offers a universe of funding sources—but not one will ever come to you.

After conducting Quantum Leap seminars all over North America and Europe, I’m still amazed at the enormous gulf which exists between attendees’ academic understanding of searching for capital and their emotional commitment to pursuing the search.

Over and over I ask audiences, “How many of you have made a financial presentation in the past 24 hours? Raise your hands.” No hands. “How many in the past three days?” No hands. “The past three weeks?” Maybe one hand. Maybe. Each time, I’m talking to a roomful of CEO’s, business owners and aspiring entrepreneurs who seem to be paralyzed with fear. We’re not talking about a tightrope walk over Niagara Falls here. You may hate rejection, but the fact is, you will not die from making a financial presentation.

So how do you overcome fear of rejection or fear of presentations? Practice. You raise your comfort level by forcing yourself to make presentations. I used to practice my presentations in front of a mirror, getting down the content, the rhythm, the sequential flow. I practiced when to talk quietly and firmly, when to pause for effect—and even when to roarinto their faces. (My people today think I’ve forgotten all but the last skill.) Nowadays, as much as I know about growing a business—and that’s volumes—I still prepare and practice before every one of my seminars. Every time you make your pitch, even to your dog, you get better, smoother and more comfortable with it.

If you’re still nervous, take your accountant with you. Pay somebody to go along. But you must get out there and make presentations. If you ever want to take that Quantum Leap to super success—and make shitloads of big money with every equity transaction, you can’t escape, you can’t circumvent making presentations. Are we clear on that?

I recommend, even demand, that my protégés make two presentations a week. That’s two lunches or two meetings with two bankers. After about a month, you’ll get pretty comfortable with your pitch. You’ll even start to vary it based on what you perceive to be the most important factors to your bankerof-the-day.

Two pitches a week isn’t that much. Some weeks, since I own significant portions of about 25 companies, I make five or six presentations. Keep in mind that two measly presentations is a modest Pay Price to Action for the prospect of netting a small fortune for yourself through your Quantum Leap.

So get off your dead ass … start checking out banks today

… and begin making those presentations.


In Chapter Nine, I mentioned not waiting until you need the money by Thursday before you call a banker. That was fa

cetious—occasionally I’m facetious—but the fact is, a lot business people do just that. They decide on Monday to buy out a competitor, grab a hot deal or double the size of their plant, and pick up the phone to call the bank where they have a checking account. They regard commercial lenders as a multi-milliondollar ATM machine. It doesn’t work that way.

With banks, you start romancing in May for sex by September. During your first conversation with a prospective banker, you start positioning yourself. Say something like, “In six to 36 months, we’re going to have a funding need, for somewhere in the neighborhood of [x-number of] dollars …,” quoting a figure higher than you think you’ll need. Then, later, you mention you may need “interim financing” in three to six months. And after a few weeks, after two or three meetings, and maybe a round of golf, you hit them for the amount you need with your drop dead presentation.


Bankers enjoy all the dancing around before they go to bat for you. Your banker doesn’t want to be embarrassed by your not paying the loan back, so when you mention your board of directors, he’s likely to say, “Oh, I’d like to meet your board the next time we get together.” You think, this moron doesn’t believe I have a board. You say, “Oh, good. In fact, my board members have expressed an interest in meeting you too, if that would be helpful to the lending process.”

You’ll recall that in the chapter on building your Dream Team, we discussed the value of a board of directors. So if you don’t have a board of directors, get one. It can be very helpful to you, and has virtually no drawbacks. But rather than your drinking buddies and cousins, go for business people with some recognition in your business community. Bankers understand that retired successful executives, with no financial worries, are usually very concerned about their reputation. They would not be associated with a company which they feel would damage the good name they’ve built over decades in the business community. Once again, as with a joint venturer, you’re borrowing their credibility to boost your own.


Your present bank may be your strongest possibility for a loan. It’s certainly the most obvious. Even if all you have is a deposit relationship, you should approach them, using whatever current business you may be doing as a stick. If your present bank isn’t interested, and another bank is cooperative, even eager, for your lending business, move all your business down the street. Your bookkeeper will hate you, but who cares.

Then, when you have a lending relationship established with your new bank, and you’re still on your honeymoon with them, begin negotiating to move your deposit business, payroll and other miscellaneous business. Demand concessions for the inconvenience of moving everything. Begin with personal lines of credit for all your executives and managers. Request re-financing of home mortgages at the best possible rate. And of course you’ll need credit cards for yourself and your people at the highest limits issued. In return, you may want to accept no interest on your deposits, as I did when I was starting out. (I don’t mean demand deposits or CD’s.)


Part of the expertise of raising capital is understanding what the hell your banker or a specialist in any other type of lending is talking about, especially when they discuss such often esoteric items as debt, equity and credit. For example:

* Long Term Debt vs. Short Term Debt—Long Term Debt is a debt to be repaid over a period longer than one year; Short Term Debt is debt to be repaid in less than a year, usually to raise operating capital to purchase inventory or equipment.

* Secured Debt vs. Unsecured Debt—The debt you are likely to incur at this stage of your skyrocketing career is all going to be secured by collateral, i.e., business assets, projected revenues, your home, automobile, other personal property, patents you may own and any other items which, if worse comes to worse, the lender can convert to cover its loan principal. Unsecured debt is a signature loan, the bank’s acknowledgement that you have proven yourself as a reliable borrower.

* Guarantees—I tell my seminars that the definition of a Guarantor is “a fool with a pen.” Unfortunately, as the owner of a newly forming or small company, you can’t avoid getting your name “on the paper,” to be ultimately responsible for debt repayment. So suck up your panty hose, sign your name, and go for it.

* Lines of Credit—You absolutely need an unsecured line of credit—or an “overdraft” in the U.K.—from a banking institution. Thanks to tireless marketing, virtually everyone has a line of credit these days—Visa, MasterCard or Discovery. But as an entrepreneur looking for credibility, you’ll need something a little more substantial to point to when a potential lender asks, “Do you have an unsecured line of credit?” When you can say yes, your lender understands that some other banker somewhere has investigated your credit record and has put enough trust in you to give you unsecured credit. It doesn’t matter what amount. But if you have to say no, your lender is likely to sigh and say, “Well, you’ll need a secured line of credit.” And one more asset in your life or business becomes collateral.

Start with your own bank. Even if the only people you know there are the drive-in window tellers, they should be able to give you a small line of unsecured credit. If they won’t, get a new bank.

While we’re talking lines of credit and business banking, suppose you need to raise your line of credit. Your banker says no. You reply, “Well, we’ve had a good relationship here, but your bank doesn’t fit the profile of the sort of bank we want to be partners with during our period of high growth. You just don’t fit our pistol anymore, so I think it’s time to withdraw

…” Your banker may then say, “Uh, how much of a credit line do you need?” But if he still doesn’t budge, you must leave and find another bank.

This reminds me of a story about one of my disciples, a Doctor Bokhari who is an alumnus of one of my three-day Quantum Leap Advantage seminars. He’s a plastic surgeon in the Baltimore area. When he was setting up his practice, he wanted his own operating room adjacent to his offices. He went to his bank for a loan, and they refused him. He went to a second bank, and was also turned down. The third bank he approached agreed to finance his operating room, so he switched all his banking to that bank. Dr. Bokhari’s experience demonstrates two points: first, he understood that he made the rules, not the banks; and second, even a plastic surgeon who is not primarily a businessman has to go to certain lengths, however inconvenient, to attain his Quantum Leap.


Once you get your financing from a commercial bank, you don’t just take the money and run. It is in the best interests of both you and your company to nurture that relationship, to maintain contact with the banker or bankers who made your loan possible. After all, you never know when you’ll need more financing for another Quantum Leap in the future. In fact, if you stay in business, I can guarantee you’ll need more financing.

But beyond that, you want to give your banker a call every few weeks, have lunch, play golf or whatever, just to find out how things are at the bank. If, for example, conditions change and they find they need to manage their capital more conservatively, your lines of credit could be cut back. It just pays to stay in touch with your banker.

I also recommend that you take out a loan and roll it from bank to bank. Borrow, say, $50,000 from Bank A. Then three months later, borrow $52,500 from Bank B and pay off Bank

A. Four or five months later, borrow $53,750 from Bank C and pay off Bank B. This rotation of your loan and the act of paying it off will give you a track record as a reliable lender with several banks. Borrow the original amount from Bank A for whatever purpose you may need capital. Tell Banks B,C,D etc. you’re “consolidating debt,” which will be the truth.

Some business owners worry about bank fees. Let’s face it—bankers will smile and say, “We’ll just charge you within the normal range … “ then stick it to you with fees however and as often as they can. Bank fees are one of life’s mysteries— and certainly one of its necessary evils. But—if that’s what you worry about, you’re not entrepreneurial material and need to return this book for a refund. Bank fees are simply not important in the great scheme of things, as long as you have plenty of money … all the time. As I told my own banker at the Bank of Scotland, “I really don’t care if I pay one or three points over liboar (their term for prime rate) as long as I have the money when I want it.”


We’ve talked about asset lending and cash flow lending as two types of collateralized financing. If for some reason you can’t get these or any other type of financing—and as a newly emerging entrepreneur you might not—try for what is called “receivable financing.” This is borrowing money against the receivables your customers owe you. Some banks will do receivable financing. With receivable financing, you will normally maintain the credit relationship by collecting the receivables yourself.

Receivable financing is sometimes referred to as “factoring,” and is usually available from other third party lenders such as finance companies which lend you the money you need—or part of it—at interest rates just under what’s allowed by usury laws. Most banks will not enter into a factoring relationship. The advantages of factoring are that the finance company becomes responsible for collecting the receivables they buy and for the bookkeeping involved. Also, banks take into consideration that another party has contracted with you to handle collections, so they may become more comfortable in partially financing your entire required amount.

Remember—the main difference between receivable financing and factoring is that you will normally give up control of the paper with factoring.

There are about six “paper” classifications of clients who might apply for receivable financing—”A” through “F”. While an IBM might be an “A Paper” borrower, you’ll no doubt be an “F Paper” borrower. It’s an expensive proposition, but, as I’ve said, sometimes “you gotta do what you gotta do.”


We’ve been talking about various ways of financing your Quantum Leap through incurring debt. Of the three ways to grow your business—allocation of revenues, debt and equity financing—the chances are overwhelming you won’t be able to accrue the revenues you’ll need to finance a Quantum Leap. Debt financing is my least favorite, because you’re committed to a debt obligation, plus interest, well into an uncertain future. A rise in interest rates or a downturn in business could screw up your ability to service your debt. Also, if the deal blows up and you lose your ass, your frantic lender will want its money back—even out of your flesh.

I have always taken the position that equity financing is more advantageous, in that fresh Other People’s Money is infused into your company in exchange for equity ownership.

This puts those Other People in the same boat you are visàvis the company’s survival and profitability. They buy into a share of your dream knowing they could lose their investment. Unfortunately, depending on how you structure your equity offering, it also gives them a say so in how you go about pursuing your dream. Therefore, before you dilute yourself below 50%, make sure you’re well on your way toward your Quantum Leap.

When I started out with Great Western, I owned 100% of the company. Then I gave Mark and Charlie each 10%. Then we sold 25% when we went public on the London market in 1984 and created $50 million in market capitalization. That still left us, the three partners, with 75% ownership. During the process to finance our acquisition of Bow Valley USA in 1986, we subsequently sold almost 15% of our voting shares to the Kuwaiti Investment Office (KIO). My own percentage dropped to less than 45%, even though the KIO had put up 78% of all the money. Further financial restructuring during the late Eighties and early Nineties ultimately reduced my portion of my own dream to just over 15%, but it was 15% of a $300 million energy conglomerate which would grow to more than $400 million in value (market capitalization)—all from that $820 investment in 1982.

During those incredible years, we did equity financing wherever we could, and debt financing whenever we had to. Under my leadership, every nickel of debt principal we repaid, and our shareholders made a ton of money. All in all, not a bad track record for a punk kid from East Los Angeles who was expelled from school three times before third grade.


Venture capitalists are professional management companies who manage high-risk funding. Their capital comes from such institutions as corporate pension funds, insurance companies and limited partnerships, and they typically concentrate on investment opportunities beginning around $500,000. Venture capitalists will also use their own money to finance a very promising start-up company with high growth potential—myself included.

Although it will take any interest instrument, a venture capital fund is not particularly interested in a fixed income such as interest would generate. Instead, it likes to take equity positions in anticipation of taking the company public or selling out in the foreseeable future. Then, through a public offering (its exit strategy), it stands to make a ton of money. The timetable for execution of their exit strategy varies, but is usually between three and seven years.

Venture capitalists prefer to become involved in the early stages of a deal, and are especially interested in small companies with big promise. They look for such indicators as sound management and proven track record. If you’re just starting out, you might consider a joint venture partner with track record the venture capitalist would accept. This is the primary reason people bring me deals.

Venture capitalists are more comfortable risk takers than bankers too. That’s because, unlike your Vice President/Commercial Lending at Pussyfoot Bank & Trust, venture capitalists are likely to be successful entrepreneurs who tend to make sound decisions quickly. For that reason, you should insist from the beginning that venture capitalists communicate with you clearly. John Doerr suggests, “When the first meeting is over, the entrepreneur might say, “I’d like a yes or now right now, but I understand you will need more than one meeting. So what’s your level of interest, and what’s the next step,”

With so many other items on your starting up checklist, you would no doubt prefer a decisive “no” to a long, drawn out “maybe.” Few people venture to push for that kind of action. Besides, if one venture capital group decides to pass immediately, you’ve got more time to focus on the others you’re courting.

There are more than 150 Venture Capital Clubs around the world where entrepreneurs can present their plans and ideas to potential investors. At a typical monthly meeting, an entrepreneur may stand up and explain his need for $150,000 or $500,000 to make a Quantum Leap (although he probably doesn’t call it that). At the same meeting, a venture capitalist may get up and say he represents a group of investors with $5 million to invest in one or several projects. These clubs present a great way for entrepreneurs and venture capitalists to chat make contact in an informal atmosphere. The International Venture Capital Institute (IVCI), Stamford, Connecticut, publishes an annual directory of both domestic and international Venture Capital Clubs.

The National Venture Capital Association (NVCA) in Arlington, Virginia, publishes a membership directory with a listing of its more than 200 members—venture capital organizations, financiers and individuals—including addresses, phone numbers and contact names. Association staff members can also give you information on federal regulations and the most recent legislation regarding venture capital. In the U.K., get

the equivalent, a free copy of the British Venture Capital Association Manual. And the Venture Capital Journal is available in both U.K. and European editions.

Coopers & Lybrand provides several publications on venture capital, including Three Keys to Obtaining Venture Capital; Venture Capital: the Price of Growth; and Charting a Course for Corporate Venture Capital.

In fact, all the Big Six accounting firms publish similar information.

The point is that venture capital, like bank money, is not buried in some secret vault known to a privileged few. Information is readily available from many sources. And you need not tiptoe around venture capitalists. Seek them out and sell them your deal, Give them an equal opportunity to invest in your dream.

Venture capitalist John Doerr says, “There’s never been a better time than now to start a company, America honors, supports and encourages entrepreneurs. Not that it’s easy. But part of the American Dream is building a new business that creates jobs and financial independence.”

How much venture capital is available? In 1994, approximately $21 billion was invested in business by venture capitalists—just in California! In Florida during the same year, about four billion was pumped into business by venture capitalists. These figures continue to rise, and indicate that hundreds of billions of dollars are available from venture capitalists nationwide for growing businesses. Including yours.


Issuing bonds, or fixed income securities, is yet anotherway for a corporation to raise capital. Bondholders receive a fixed rate of interest—the coupon rate—each year, with their original principal being paid back when the bond matures on a pre-determined future date. There is a variety of bonds which a company can issue, based on the nature and structure of its business and its capital requirements.

* Subordinated convertible bonds or debentures— The company pays the buyer, say, 12% interest on bonds sold to a venture capital firm. Then, at some time in the future, hopefully when the company takes off, the holder can exchange them for common stock or just collect the interest, or redeem them for the original face amount when they mature, having collected interest along the way. In the meantime, debentures are “subordinated” in that they are usually unsecured, and are secondary or “junior” to bank loans made concurrently or even later. If the company goes belly up, the bank has first claim against assets, the venture capital firm.

* Royalty bonds—The holder receives income from the proceeds of a royalty on a product or other specific source of income;

* Zero coupon bonds—This popular type of bond was created in the Eighties to attract investors looking for predictable returns on their investment for retirement or a child’s college education. Zero coupon bonds don’t pay any interest, but are sold at a big discount. These bonds sold by investment bankers to finance a company’s growth can be a safe investment if the bankers hold Treasury bonds as collateral.


Insurance companies and pension funds often seek out investments among corporations attempting to raise longterm capital, although more typically for purchases of equipment or real estate which can be taken as collateral. The advantages of this type of funding are usually lower interest rates and long-term maturity of loans.

Angels exist! In the corporate world they take the form of individuals or organizations such as private foundations which seek to encourage and underwrite entrepreneurial efforts which prove themselves worthy of angelic support.

Private Foundations, such as the Ford Foundation and the MacArthur Foundation, are often open to funding company growth, especially firms which are active in specific areas of interest or commitment to the foundation, such as social progress, health care or environment protection. Similarly, individuals who have amassed personal wealth often put that wealth to work by underwriting carefully selected corporate growth projects. W. Clement Stone, founder of Positive Mental Attitude PMA), is an excellent example of an angel, one who takes no hand in management and only asks a pro rata share of corporate profits in return. Warren Buffett, the legendary investor, is a frequent angel, although he might argue the term per se. I recently read where, if you had invested $10,000 with him in 1956, you’d have earned $95 million by 1995, If he isn’t an angel, I don’t know one!


Taking your company public is one of the great and heady experiences of the free enterprise system. The day we watched Great Western Resources make its debut on the London Exchange, August 10, 1984 (my 39th birthday), is memorably engraved in my mind as a experience I only hope to duplicate again in my lifetime. Going public is risky and expensive, costing in fees and other expenses typically 10% to 20% or more of your entire offering, or total capital raised, depending on where you go public.

But to you as a founder who has probably made a substantial investment to grow your company enough to go public, your percentage of return in relation to the net worth value of the company can be incredible, A stock share might score a 10 to 12 price-to-earnings ratio (P/E), which means it sells at 10 to 12 times the company’s net after-tax earnings During a small initial public offering (IPO), this ratio may well skyrocket to 30 or 40 times the company’s earnings. At Great Western we turned our initial investment, a $60,000 option on mineral rights, into $50 million. Even today, it’s hard to imagine making that much money that quickly without a mask and gun! It triggers an adrenalin rush with an emotional high that cannot be duplicated.

As with any other business option, there are disadvantages to going public. All confidentiality is forfeited. Your business transactions, financial records and even marketing methods must be open to the scrutiny of government regulators, suppliers, stockholders, prospective stockholders and even competitors.

A public company must also subject itself to internal accountability, the transactions between the company and its officers or directors. Government regulators are forever sniffing around for conflicts of interest, insider deals and special favors which, if not illegal would be construed to be not in the best interests of the shareholders.

Another disadvantage, and a supreme irony, is that just as

you get the financing to reach your dream, you simultaneously lose total control of that dream. As in the example of Great Western Resources during the course of its IPO and subsequent offerings, every time we made a public offering, my own share of my company was substantially reduced.

Finally, what I call the “dark side” of choosing to go public is the almost inevitable consequence that one day you’ll have to leave your company, forced out by many of those you invited aboard your dream along the way. The fact is that the days of the entrepreneur with his public company are limited. He may be a genius at envisioning, siring and breathing life into his dream. But unless he has also the patience and skills to be a management genius, the entrepreneur will sooner or later recognize the approach of his own departure.

The bright side of the “dark side?” He leaves with his pockets full of lots of money. And he can begin this exhilarating adventure again any time he pleases.

The Gulf War in 1991 was my Waterloo. I was ultimately removed as head of Great Western when my Kuwaiti “friends,” preoccupied with invasion and other internal strife, transferred their loyalties and their voting power to a faction in the company which felt my own time had passed. Although we had to go to court to settle the issue, Great Western Resources paid me handsomely with a “golden parachute” in the millions, plus a start-up subsidiary in the textile business. And I’m still, at this writing, the largest individual GWR shareholder.


Aside from the basic “How do I get the money?”, seminar attendees inevitably ask other questions over and over. To possibly prevent one person from asking one of those questions at a future Quantum Leap seminar, I want to conclude this chapter with a quick “Q&A.”

Q—How much money should I ask for? How do I figure what to ask for?

A—No matter what you figure your acquisition or your IPO or any other Quantum Leap is going to cost you, you can bet your numbers will be short. The only figure you can be sure of is that the bank will loan you a maximum of up to 2-3% of its total assets on a secured loan. My advice is to ask for three to five times more money than you think you need. If you get it, you’ve got a pot of capital you can always use; if you don’t you’ve at least cleared yourself some negotiating room for a smaller loan.

By the way, it’s actually easier to finance a larger deal, because the bank is more anxious to “sell” you more money if you’re approved. Bankers have to do less to get more money out the door—and their bonuses are tied to how much they lend. These are all reasons to ask for more than you think you’re going to need.

Q—I don’t have a track record. I’m a new company with nothing to show the bank.

A—Find a joint venture partner who does have a track record. Attach your company to an established name. You’ll recall that nobody at the Defense Fuel Service Center had heard of GWDC, but they had done business with Marrion Refining Company. Put together a Board of Directors which includes prominent and successful business people who can lend their reputation to yours. Borrow credibility, so you can borrow money.

Q—How many financial presentations should I make?

A—That’s like asking, “If I’m trapped in a burning house, how many times should I try to get out?” As many times as it takes, doofus! Make as many presentations as you can! Set your goal for at least two presentations a week, more if you’re trying to raise your comfort level faster.

Kenny Scott and Scott Fairgrieve, my Scottish partners in a home improvement company in Edinburgh, made more than 40 presentations to secure the overdraft they needed to begin their acquisitions. They talked to various offices of the Bank of Scotland, the Royal Bank of Scotland, Barclays Bank, Midland Bank, National Westminster, Clydesdale and Allied Irish Bank, plus a list of venture capitalists. And let me tell you, in case you missed Braveheart, it takes a lot of bollix for two Scottish lads, both in their twenties, to go kiss frogs in English banking institutions.

Q—Should I fight for a certain number of points over prime rate?

A—Worry about getting the damn loan, not how many points above prime your interest is going to be. If that’s an issue, if the amount of interest you’re going to pay is a big thing, your deal is too tight. You’re asking for a loan which gives you no room for error. And you can bet your executive ass there’ll be costs slapping you in the face you never heard of! It’s just as easy to ask for 2.5 or three million as it is to ask for $750,000 or one million. Maybe easier, Go for it!

Q—I’ve made some presentations, but I was turned down. What’s my next step?

A—Go back to those institutions and try to find out why you were turned down. You may have not answered their questions to their satisfaction. Try to revive your proposal by filling these holes.

If you can’t get back in, your next step is to move on to other sources: other banks, venture capitalists, foundations, insurance companies, pension funds, angels—the list is as endless as your determination should be to get your funding.

Q—Won’t being turned down by financial institutions ruin your credit?

A—No. Searching for finance does not hurt your credit. In fact, I think you must make five to seven presentations before you understand what the procedure is. What hurts your credit is proving to be financially irresponsible, for whatever reason, with the money you do borrow.

Q—When is the best time to go for a loan?

A—Without question, the end of the year. About 75% of all business loans are made in the final 75 days of the year. And remember—like car dealers at the end of the month, bankers are scrambling to boost their own end-of-year bonuses based on how much lending money they’ve pushed out the door.


I tell my seminars we all have two bank accounts—financial and emotional. As low as you think your financial bank account is, you may drain your emotional account even faster. Fear of failure drops the balance. Fear is “False Expectations Appearing Real,” at least in your mind. My emotional banking account stays high, because years practicing my skills in uncomfortable situations has reduced my fear and anxiety level to virtually zero. As I’ve said, I may be wrong from time to time, but I’m never in doubt. I’ll bet you’ve never heard a high performance individual whine and say, “Well, I don’t know if we’re gonna make it.” Failure is testing. Failure is learning. Every financial presentation you make, even if they laugh you out of the bank (which they’ll never do), even if they shred your little business plan (which you probably don’t need) and throw it in your miserable face, is a positive experience—and no reason to debit your emotional bank account.

So get moving. Make those financial presentations—and make some more. You’ll find somebody somewhere to lend you the money to reach your dream. Not only that, when you see Dan Pena in a seminar screaming about who in this room of doofuses has made a presentation in the past three weeks … you can raise your hand.

Chapter 11. Acquisitions – the Secret Of Quantum Growth

For the high performer, arithmetic growth is unacceptable. Geometric, exponential growth is demanded.

Throughout this book, we’ve talked again and again about Quantum growth, and making your Quantum Leap to becoming super successful—and, by the way, enormously wealthy. In this chapter, let’s nail down the specifics of Quantum growth and the best way I’ve found to achieve it—through acquisitions.

But first, I want to focus a minute on one of the most abused words of the Nineties. “Success” has almost become a cliché in a world where everything is relative. The feel-good mooches in the seminar circus will assure you with a straight face that you’re a success if you’re feeling better about yourself. If you’ve achieved harmony. Hell, these days, you can be “successful” if you’re happy shoveling horse stalls. Or if you achieve contentment living under an overpass. We don’t want anybody to think they’re a loser, that they’re basically worthless to society. So thanks to such inverted thinking, nowadays even failure is success!

In fact, there’s a snakeoil artist on the seminar circuit now who charges $7000 a head for taking all your assets away so you can learn to live with nature in abject poverty! And the morons buy it. It should be illegal to be that stupid!

So let’s get back to reality. The only success in life, and especially in business, is that which you can quantify or measure. Otherwise, you’re playing word games. I define success in terms of the most universally accepted quantifier of all— money. Cash! Nobody argues with cash. “Money talks and bullshit walks.” If you’re making Quantum Leaps and pulling down millions in personal wealth—and a lot of people are doing it—you are without question successful.

Remember in Chapter One we discussed people who were uncomfortable talking about money? That’s because the morons never had any to talk about. You’ve got to become as comfortable with lots of money as you do with success—because real success begets real money!

Let’s define Quantum growth by what it’s not. Quantum growth is not making more sales than last year… or picking up new clients. Or adding more products or stores or branch offices. All of those are indicators of growth all right—internal growth. And more to the point, arithmetic financial growth. One plus one equals two. The healthiest internal growth in any business is always going to produce only gradual long-term arithmetic growth. Nothing more.

Why do entrepreneurs settle for gradual, boring growth? The best that can be said for arithmetic growth is that it’s better than no growth at all. And, in fact, if you’re company is only growing arithmetically, it’s probably dying. But why does an entrepreneur, an uncommon individual who once had a bold vision to build a company, and worked days and nights to see his vision come to life—why does this same person now accept the humdrum growth of 4% better sales than last year … or a 2.5% higher profit margin?

It’s not as if this person has never known Quantum, skyrocketing growth. The fact is that, in the beginning, the founder of a successful company did experience Quantum growth. And it was exhilarating! He no doubt spiraled from zero to enormous success, maybe growth in the hundreds of thousands of dollars in the first year of business. All business was new business. All money was new money. The growth curve shot almost straight up and soared across the chart like a comet!

Then, inevitably, the company settled into a routine. The entrepreneur became a manager, and got mired in sales figures, group insurance and payroll. The growth curve flattened out, the comet fizzled… and the once bold venturer accepted it all as part of owning a business. After all, the other companies in his industry were doing about the same. So everyone was successful. Actually, everyone was satiated. They became part of the “less than all you can be” herd of doofuses. Their expectations settled into “average.” Average, God, how I hate the sound of that word!

If I had continued to drill wells in Wyoming in 1984 with all that capital we got from our public offering, and pumped out a respectable number of barrels of oil like our engineers had projected, Great Western would have growth internally, gradually and arithmetically. Our GW shareholders in the U.K., still clutching their prospectus and getting their dividend checks, would have been happy as pigs in shit. “Look, we made 12% on our investment. Those noisy yanks are a bit of all right after all.” But punching hundreds of holes in Wyoming was not where I wanted to take my company, myself or my shareholders. My vision was light years beyond theirs.

I knew that Quantum growth, the kind of warp speed financial performance I wanted, would only be achieved through external growth. And, as I’ve said, external growth is only possible through equity transactions. A series of transactions!

Let’s examine the difference between what we’ll call a “product” transaction and an equity transaction. A product transaction is essentially an even trade. The profit produced by an almost even trade of goods for money is negligible. We use the term “profit margin,” because the damn profit may be a barely visible sliver of the whole transaction. So sales people have to do a zillion product transactions to generate substantive profit.

An equity transaction, by contrast, creates value. A board of directors decides to sell equity to raise capital. It votes into existence half a million shares of common stock for a public offering. When shares sell, value has been created from nothing but the perception of value! Investors, in fact, are buying, not a product, but a future value that may exist. It’s sort of like buying thin air. And paying cash up front for it! The down side, of course, is that a company cannot go on diluting its ownership indefinitely.

Accordingly, the equity transaction which is the real secret of Quantum growth is acquisition—the purchase of equity assets which enables a company to boost, to actually multiply its net worth geometrically, so that it can be turned around and sold to generate a ton of money.

One of the rages among seminar gurus lately has been “real estate investing,” which is code for buying and selling cheap residential properties, or “flipping” houses, with little or no money down. Those so inclined can buy “fixer-uppers,” slap on some minimal improvements, sell them to the next buyer and make a quick profit of a few thousand dollars. These types of investment are only the beginning, not ends in themselves.

These are poor man’s equity transactions. How infinitely more lucrative is the equity transaction in which a company is acquired for, say, $5 million in Other People’s Money (OPM), pumped and prettied up, and sold for $10 or $12 million!


If you’re contemplating your first business acquisition, you need to approach your venture knowing in advance the three greatest personal hazards you face. Having the will and determination to clear these hurdles, as you’ll recall from our first four chapters, is what becoming a super successful high performer is all about.

1) The depth of personal commitment required. Your acquisition deal must take precedence over normal personal considerations. You have to make a total commitment of time and energy. Buying a business, especially the first business, is a full-time proposition. If you are trying to hold a job at the same time, you’ll either have to quit that job or give up making your Quantum Leap through acquisition. You’ll be spending days and nights figuring, refiguring, analyzing and strategizing—and then doing it all over again. Because if you don’t, if you do a half-assed job of planning and calculating every step and every nitpicking detail, you’re likely to fail. All this means no days off, no vacations, constant travel and continuous meetings. Remember my “doofus test,” which put a prospective associate under pressure? When you’re working an acquisition, your whole life is a doofus test! You sleep on your couch, eat at your desk, work on your bed. Your lawn goes to hell, your friends think you’re crazy, your family stays mad at you for ignoring them, forgetting their birthdays and missing their recitals.

You must have a commitment of support from your family. If not, you have to make a decision—your Quantum Leap or your family. When I hold my weeklong seminars at Guthrie Castle, I stress the importance of couples attending—wives or “significant others”—because the depth of commitment required is such that the “other” in the personal relationship must be a signatory to the Quantum Leap his or her partner is about to make. On occasion, a castle attendee has ultimately divorced his or her spouse or business partner, because the other person was unwilling to make a corresponding commitment to the Dream.

2) The total financial risk involved. You must be willing to make a total commitment of your financial resources to put everything you own on the table. Sure, a lot of Other Peoples Money is available, but many sources of OPM are looking to see how willing you are to lay your resources on the line first. Mark this sentence: If you’re not willing to risk everything you own, now and in the uncertain future, don’t try to buy a business. If you can’t afford, or don’t want to afford to risk your savings, your home, your car, your child’s edu cation—everything—find another way to earn a living and file your Dream under “Nightmares I Avoided.”

3) The degree of stress you must endure. Here is an important reason why I practiced being a super successful high performer long before I achieved my greatest success. I knew from what I saw and from what others who had been there told me that the Quantum Leap would be no picnic. I knew I would have to suck up my panty hose, act tough, slash enemies, take hostages and kill prisoners to reach my goals. I knew, almost instinctively, the pressure would be enormous to equivocate, to compromise, to surrender. I foresaw times when, unless I practiced, I would be too wound up, too stressed out, too beat up or just too damned tired to take actions in my best interest. So I practiced. I thrust myself intentionally into one uncomfortable situation after another. I led charges when other retreated. I picked fights while others prepared to surrender. And, except for a few modest vices, I’ve kept my body and spirit in peak fighting condition for more than half a century. In Texas, where I battled with the energy giants, they called Dan Peña “twisted steel and panther piss.” Among other things.

Sooner or later, stress can kill most people. Stress no doubt contributed to the loss of my dear friend and partner Charlie. But the fact is, life eventually kills us all. My feeling is that—no blasphemy intended—life after death isn’t so important as life before death. So I live the son-of-a-bitch, play the cards, and seize the day, stress be damned. I give ulcers, I don’t get them! If you can’t handle stress, if your health is of more immediate concern than your Quantum Leap—move away from that terrible chasm. Once again… it isn’t for everyone.


We’ve discussed in detail the process of raising capital for the purpose of acquisition. But well before you arrive at the point of beginning to interview capital sources, there are several basic issues you need to clarify in your own mind.

You’re an energetic, ambitious individual with a threedigit IQ who sees less capable people than you run a success-

ful business, live a luxurious lifestyle, then suddenly sell their company and retire early to a tropical island. You’re an employee now, maybe, but you have the imagination, self-discipline and chutzpah to run your own company—and you’re tired of working your tail off to make your boss rich.

Your first question is—what kind of business? I have some guidelines for answering that question. First, as I preach to my disciples, “Stick to your knitting.” Look for a business in which you already have expertise. You’ll face enough problems (not “challenges”) borrowing capital, assembling your Dream Team, taking over your company and learning to become a CEO, without having to acquaint yourself with the technical processes and jargon of a whole new industry. Do what you know. (Later, after you’ve made several Quantum Leaps and become more comfortable with the acquisition process, you’ll see common characteristics, and be able to handle acquisitions regardless of the industry, much as I do now.)

Do what you like as well. Regardless of the problems you run into, your Quantum Leap will seem less harrowing when you’re making it in an area you know and from which you derive pleasure.

There are other, practical criteria too. You want to make your acquisitions in an industry which is fragmented, and dominated by mom-and-pop companies. You want an industry that’s large enough to handle your acquisitional aspirations. If you’re planning to purchase one of three companies that serve what is essentially a limited market, such as buggy whip repair, you have nowhere to expand.

You want industries that enjoy a 20% to 40% margin. In my own experience, these include such industries as retail jewelry, landscaping, building maintenance, publishing, home

improvements and trailer parks. If you get into a business with 3% or 5% profit margins, you’ll take forever to build your dream.

Narrow your focus. You might be interested in health care, but you need to find a niche no one else is consolidating, such as child care or senior living facilities.

The size of business you want to acquire depends on the size of your goal, and the clarity of your vision. My guess is that if you’ve read this far, you’re looking for more than a steady income and a secure retirement from a couple a dry cleaner operations. I sure as hell hope so! I want you to be getting ready for a Quantum Leap to haul in an incredible degree of personal wealth. That means your acquisition must be something on the order of a large manufacturing firm or distribution business which will catch the eye of investment bankers.

How big is a company? As a general rule, you as an owner can reasonably expect to receive income, before debt service, of about $25,000 from intangible service or consulting sales of $50,000, since there is no inventory, and usually no equipment beyond office furniture; about $25,000 from retail sales of $100,000; and the same from manufacturing sales of about a million dollars, depending on the type and amount of manufacturing equipment, degree of automation and cost of materials.

The bottom line is—take some quality time to define exactly what you want before spending money and effort “shotgunning” the market.


Once you’ve defined the type and size of business that meets your requirements, there are several avenues to take for locating likely prospects. The most important thing to remember at this point, in your eagerness to buy, is not to buy the first “great deal” that comes along. If you looked at 20 houses or more before you purchased your most recent home, why would you grab the first business that sticks a “For Sale” sign in your face? Even if you find the perfect sweetheart deal the first day of your search, shop around anyway. Take the time to analyze and compare several prospects, so you’ll know a great deal when one comes along.

Begin by scanning the “Business Opportunities” sections of your local and regional metropolitan newspapers and The Wall Street Journal. If you don’t yet subscribe to such magazines as Forbes, Entrepreneur and Inc., my first question is why not? Get current copies of each of these and look for opportunities which match your criteria. Get copies of trade publications in the industry of your prime interest, and check the “Marketplace” or “Classifieds” section for businesses for sale.

Contact local business brokers, and explain exactly, in writing, what you’re looking for. Otherwise, like real estate salesmen, they’ll show you every listing from ice cream stands to funeral homes. Typically, the seller of a business pays broker commissions, so it should cost you nothing for a broker to help you during your search process. But don’t sign any exclusive contracts. One of the largest business brokerage firms in the country is VR Business Brokers, headquartered in Newport Beach, California, with almost 50 independent offices in 15 states. According to VR’s Chairman, Don Taylor, a professional business broker has the expertise to accelerate the process leading to an equitable acquisition. Although VR’s brokers are reputable, my experience over 25 years has been shabby at

best using business brokers. I would advise extreme caution. Sources of information abound. Ask your banker, accoun-

tant, attorney, industry suppliers and wholesale for any companies which might entertain a purchase offer. An inside tip gives you a head start on any deal.

The most direct approach is to contact a list of qualified companies directly. A lot of burned out owners are hiding in the corporate jungle, desperately wishing they could retire. You could be their salvation.

In fact, you’ll be amazed at how receptive so many business owners are to at least considering selling their business. Bruce Whipple, my partner in Property Tax Consultants, Inc., decided the best way to approach prospects in his industry was a cold phone call to the owner himself. Bruce says that he frequently got a response to the effect, “Our company is not for sale. We’re having a great year. When do you want to get together?”

Another of my partners, David Reacher, is an ambitious publishing entrepreneur. He sent out 240 inquiry letters to publishers he found through Dun & Bradstreet. The letter was intentionally vague as to the size and type of publishing companies he was looking to acquire. What it did say was that Dave was “in the process of building a unique kind of publishing company.”

From those 240 inquiries, he got more than 80 responses—about a 35% response rate! Of those he qualified his pursuit list to about 30 publishing companies which fit his revenue parameters, and whose principals, want to discuss selling their firm. By the way, the first question many of those who called asked was, “What do you mean by a “unique kind of publishing company.” A little teaser on the bait never hurts.

Dave has continued to refine this simple yet powerful inquiry letter. It is so effective that I include it as a handout at my high-ticket Mergers and Acquisitions Seminars. But, as an added value, I’ve included it for you in the Appendices, along with other letters and outlines used successfully by my protégés and partners—all for the price of this book.

Want another example? Lennie Nock, the fired up Philadelphia airline pilot soon to become a millionaire entrepreneur, sent me a hypothetical copy of a letter he sends out, under his new company’s impressive letterhead, to prospects in his target industry. You could literally change the industry and price range and use it yourself. Thanks, Lennie!

Mr. John Winchester


Corona, CA 90701 Dear Mr. Winchester,

We are interested in acquiring a medical laboratory firm located within the greater Los Angeles area, with sales ranging between $2,500,000 and $5,000,000. Our preference is for a company that supplies the needs of most local physicians; however, we are flexible and will consider other opportunities.

We are principals (not business brokers) with adequate capital and financing, and we’re prepared to close very quickly on the right situation.

If you have an interest in selling, please call us at your earliest convenience. You have our assurance that all matters will be held in the strictest confidence. We en-

close our business card for future reference in the event you have no present interest in selling. Of course, we would greatly appreciate your directing this letter to any of your colleagues within the field whose business may be on the market.

Sincerely, Leonard Jay Nock

Managing Director

Every element of this letter nurtures the perception of Lennie’s company as a large, professional, well financed organization. He assures the reader he’s not a broker fishing for leads, that he’s got capital sitting in stacks of large unmarked bills sitting on his desk, and that he’ll buy immediately if the company and terms are right. Hey, if I were Mr. Winchester and wanted to say “Screw it, I’m retiring to Barbados!”, I’d pick up my phone in a heartbeat and call this guy Nock!


Most business owners, particularly those who have founded and grown their company from scratch, are very protective about their firm. It’s their baby, and even though they’re entertaining the idea of selling it, they want that baby in good hands. They want their employees protected and secure. They want their customers taken care of.

The first questions they’re going to ask, at least in their own mind, are, “Who are you?”… and “How do I know you can run my company the way it should be run?” They do not want to sell it to a kamikaze owner who’s going to drive it into the

ground. That’s why it may be best for your attorney or your Big Six accountant to make the initial call for you on your behalf. You get instant credibility. Or, if you prefer to make the first call, and you detect those questions bubbling around, offer as references the names and numbers of your attorney, your accountant and maybe one or two of your directors whose names he may recognize. Once the prospective seller has chatted with your man at Deloitte & Touche or Arthur Andersen, you can bet his due diligence is done.

Another method that is equally good is to send a short letter which includes the profiles of your board of directors, much as you did when seeking your accounting firm. This also gives you instant credibility, and should remove any hesitancy on a prospective seller’s part.

What if your prospect cuts to the bottom line, just to see if you’re serious. He says, “Well, I may be willing to sell. What are you willing to pay?” You say something like, “Oh, three to eight times your after tax earnings, but of course we have to look at the books. I’d probably do an acquisition audit. But we can talk about that later.” You’ve sidestepped his probe with an answer that tells him you know what the hell you’re talking about, so don’t ask any more stupid questions.

Regardless of the deal you eventually hammer out, here’s a key point. Make the other side part of the transaction, so that his net worth increases. If it makes the deal, factor the seller into future revenues for a specified period. Give him cash or stock. Or cash and stock. Pay him a consulting salary for a specified time. But give him his spoonful of sugar. Make his departure from his company as honorable as painless as you can. And the most comforting balm you can apply is … money.

What if you find the dream company, meeting your criteria beyond your expectations, and the owner says it’s not for sale. And means it. You may well move on to the next prospect. Or you may employ a strategy Dan Peña uses on occasion, especially with companies that are in big trouble but are in denial vis-à-vis their real financial condition.

Virtually every company in business has debt. Your target has a $300,000 line of credit with $60,000 outstanding. You find out which bank is holding the paper and pay the banker a visit. You negotiate to purchase the note at a premium from the bank—yes, you can do that because banks enjoy profit as much as you do—and then visit the reluctant prospect. You ask him nicely once more if he’d care to sell, and when he says no, but before he throws you out, you advise him you own his note, you’re calling it, and you demand immediate payment in full. Now, sir, let’s talk quietly about buying your company.

That’s chilling, you think. Somebody could do that to me. Not if you have your attorney draw up your own lending document which specifically forbids purchase by a third party. You don’t have to use the bank’s “standard” document; most companies just do without questioning it—and without reading the fine print.

Another tactic is to contact your prospect’s customers, and offer them a deal which makes you a more attractive supplier than present ownership.

Like I said, you may prefer to move to the next prospect on the list. That’s fine. But I give you these alternative strategies because business is hardball; and if you’re more comfortable pitching softballs, somebody, sometime, is going to knock your butt right out of the park!

Speaking of hardball, I tell my seminars that in any deal there’s a high road … and a low road. You should always assume the other side will take the high road. Give them that-benefit of the doubt. But if and when they step off the high road—be ready. I’ve referred to litigation as a legitimate business tool. Of course you always want to avoid litigation. It’s costly and it takes your focus off your real priorities. But if the other party even mentions litigation, sue the bastard. Never threaten to sue—sue! That’s because you want to be the plaintiff. The plaintiff gets two shots at the jury—and picks the venue for the civil trial. How do I know? Dan Peña has been involved in about 225 lawsuits over his career. His record is 225-0 in the U.S. and England.

So whether they’re just testing your resolve, or maneuvering to stick it to you, instruct your attorney to act quickly and decisively with sufficient force of law to have them realize their miscalculation. Then resume negotiations.


After you’ve got some prospective acquisitions identified based on type and size of business, take a look the profit picture of each. You want a company which has shown increasing profits over at least the past three years. Look for a trend, rather than a sudden spurt of profit growth. Comb through their books with a lice comb!

Then invest in an acquisition audit by your accountants. Since it’s a Big Six firm, they will have staff people who specialize in acquisition audits. If you have already made tentative offer, and your own audit indicates your offer is too high, adjust it. If your prospect protests, just tell him what he already knows—that the numbers your audit revealed agree with his and do not support your initial offer.

Your capital source, especially investment bankers, will want your annual return on investment, after you take your salary and make debt payments, to be about 35% Regardless of where you get your funding, you should accept nothing less in ROI than 20%. Of course there are acquisitions you may consider that have no profit you’ll be able to turn around. I would be hesitant in such a case unless I had a couple of buyers tucked under my belt.

All the answers you’re looking for are not in the books. Books can be cooked to perfection. So begin your investigations immediately. Check court records (Chapter 7) for outstanding lawsuits or claims against the company or companies in which you have interest. Investigate the owner and senior management. Are they honest? Are they who and what they say they are? Look for red flags. And don’t blink at red flags because you want the acquisition so badly. Be willing to walk away from the most promising deal if a flag pops up.

As you can see, the financial and legal considerations become complex quickly. Now you can better understand why you want the best acquisition attorneys and the best accounting firm you can get!

Some of your investigation is best done by you. Once you’ve narrowed your search to one or two companies, and you’ve made contact with their owner, it’s time to talk to key management people. If and when the company is purchased, do they plan to stay? Or is their primary loyalty to the former owner? In instances where highly technical processes are involved in manufacturing, how do the skilled technicians feel about staying on? These are vital issues because existing customers look for continuity.

The fact is—everybody wants continuity. Especially you. Continuity of operations, and the strength of that continuity to generate increasing profits, is what you’re buying. A Quantum Leap is actually a direct leap from zero to full profit-making capacity, giving you the opportunity to skip all the growing pains in between. And your ability to assure employees, suppliers and especially customers of continuity—to tell them nothing will change after the buyout and make them believe you—will do more than anything else to get you your money’s worth of new company. Unfortunately, every predatory corpo ration which buys out a competitor grins and says, “We have no plans to make any changes in personnel or operations at this time.” Besides, you may have a better Vice President waiting in the wings. So the best you can do is create the perception of continuity, and feed it to those who need it.

Your investigation should include a lot of listening as well. When I visit a prospective acquisition, the scenario goes something like this,

First I have dinner with the CEO. Just the two of us. No wives. I listen to see where he’s coming from, and what he’s looking for. Most important, I’m gauging who this individual is that I’ll soon be sitting across from in negotiations.

Then, preferably the next morning, I have breakfast with the company’s Chief Financial Officer or its equivalent. This gives me a different perspective of the same target. And I can compare what the finance man tells me against what the CEO said the night before. Afterward, by prior arrangement, I spend the morning talking to employees from several departments. Meeting with them one at a time behind closed doors, I ask them what they do, how they like working here and other questions that reveal facets of the company from the bottom

up. Ideally, I have lunch with a partner in the company, or some other key executive, as I continue to build my picture of the company.

Finally, I try to invite the marketing and sales people, always a gregarious bunch, out for a few drinks after work—on me, of course. After a few rounds we’re all asshole buddies, and they do what drunken employees do best—bitch about the Company. This is inevitably the most instructive meeting of all.

You want to acquire a company with a broad customer base. The last thing you need after you sit down in your new corner office is to get a call from the customer who represents 40% of your billings saying, “We’ve decided to move our business down the street.” The largest customer of any company you consider should account for no more than 15% of include total billings. Part of your preparatory work should even include a chat with the largest four or five customers, to see how they feel about dealing with a new owner. If less than 20 or 30 customers are involved, you may want to see all of them.

I buy and operate companies wherever I find them. So I fly a hell of a lot. But I don’t mind, because my business life has always necessitated travel and my procedures are geared to working on planes, in phone booths and hotel rooms.

One day you may feel as comfortable with out-of-town or out-of-state business ownership as I do. But for right now, your first acquisition should be local if at all possible. Otherwise, you’ll inevitably have so many situations and problems arise that commuting back and forth will become a colossal pain in the butt. If you have a family, and want to keep them, it’s even worse. Staying local not only means less travel, it puts you into a business where you already know the market, you

may already know some of the customers, and you’re established in the business community.

Finding the best possible acquisition target is not easy. Unless you happen to know somebody who knows somebody trying to sell exactly what you want to buy, or you stumble onto a gem with beginner’s luck, you can expect your acquisition search to take four, five or six months or more. Even if you find your dream company the second day, you still need to validate it by looking at a lot of other companies. This process is important, because you eliminate half your problems when you select and go after a qualified target. But remember… the deal is either hot—or it’s not. Period! Then you still have to investigate.

When you’re satisfied with your investigations, and the deal looks good on paper and feels hot, it’s time to tie it up and move to closure. I use a letter of intent which spells out the specifics and gives me an option to buy at a certain price. My letter of intent concludes with a sense of urgency, saying, in effect, “Please let us know as soon as possible (or by such and-such date), so if you do not intend to act we can move on to our next choice.”

I don’t use contracts, because a letter of intent is just as effective and less intimidating to the prospect. At the same time, I have begun to search for my funding, since I intend, as always, to use Other People’s Money.

Let’s buy a hypothetical company. We’ll call it Rufus Electronics. My acquisition audit tells me this company is worth

$10 minion. I tell Mister Rufus, who is looking forward to re tirement, I can pay him $9 million cash. After some requisite hesitation, he accepts my offer.

Now all I need is $9 million. But I’ve got it all worked

out. Rufus Electronics has shown a fairly steady three-year cash flow of almost $90,000 a month. That figure supports a $60,000 per month debt, based on the Peña rule-of-thumb that cash flow should be about 1.5 times debt service. Since current cash flow determines debt level, my banker has determined Rufus Electronics can support roughly a $720,000 annual debt service. At 10% of total debt, this figure in turn supports approximately a $7 million dollar non-equity loan. And as always to preclude escalating debt service, I borrow at a fixed rate.

A good rule to remember is that if cash flow will not service the debt, you’re paying too much! Of course, there are exceptions, i.e., a company that is losing money. But I really want to purchase Rufus Electronics, and to demonstrate how to make that purchase with none of my own money.

So all I need is $2 million. What are my options?

1. Mister Rufus takes back $2 million in paper, a promissory note to pay him in monthly installments for a predetermined number of years.


3. I generously make Mister Rufus a part of the Dream with 12%, 15% or even 19% of the company still his, based on my accountant’s recommendation. I give him an office and an emeritus title, and the reassurance that when I sell his former company he shares in the profit, which might be even more than a paltry two million. This option is especially attractive for the Rufus mooch heirs.


5. I find an equity player, a venture capitalist who’ll give me $2 million in return for maybe 20% equity in the company.


7. I locate another lender who’ll take assets as collateral, with cash flow as secondary collateral.

By the way, since I’ve run my figures so cleverly, my bank loan is actually for $7.2 million, and I have $200,000 of slush to play with—or even better, to distribute as bonuses to my new employees who, in a sudden burst of love and loyalty for me will forget all about old Rufus.

The point of all this is that there are many ways and combinations of ways to secure OPM. You just have to keep probing the financial market until you find the right combination. But trust me—the money’s out there!

Sometimes, however, in spite of your most adroit dealmaking skills, a promising acquisition negotiation begins to unravel. Most people try to FIX the deal. It’s a natural urge to say, “Hey, we’ve spent too much time on this to let it fall through now.” Or maybe you hang on because you don’t want to admit you’ve made a mistake.

The time and expense you’ve invested to that point is nothing compared to what you are likely to lose with a patched up, compromised deal that closes on crutches. Step back and give yourself the clarity and courage to cut your losses, and move on to the next deal. And there will be a next deal.


Let’s assume the best. You found the perfect company for your first acquisition, you located financing, you maintained continuity and this morning, some three years later, you woke up with Acquisition Fever.

If you’re like most budding high performers, the “fever”

is really an outgrowth of your realization that you’ll never achieve another Quantum Leap out of your present company until the day you sell it… until you make an equity transaction. Profits are inching up, revenues are steady, sales are up from last year—and you’re bored.

Before mold forms on your elbows, it’s time for more Quantum growth.

Not long ago this exact scenario was being played out in the business life of a close friend and protégé of mine, Casey Stephenson. Casey is an energetic, ambitious guy from Hanford, California, near Fresno, who owned his own jewelry store by the time he was 21. After a couple of years, he had “been there, done that” in jewelry sales, and wanted more. He tried to grow his company by opening new locations, but he was just working harder doing the same thing, perpetuating his job at the same level.

Casey attended my first seminar, in May, 1993, and heard me talk about Quantum growth through acquisition. “I was overwhelmed,” he says. “That idea would work, but how could I use it?” He targeted the acquisition of a jewelry store twoand-a-half times the size of his own. Everybody though he was crazy.

The owner didn’t want to sell. He didn’t even care for Casey as an individual. Casey remembered that Dan Peña says, “No means yes,” so he approached the country’s largest jewelry acquisition store—and they tried going behind his back!

Casey wanted that store. So he finally made the owner an offer he couldn’t refuse. In addition to the purchase price, the guy would receive 50% of all profits during the first 90 days after the acquisition, when they would liquidate the assets. He made the seller a generous part of the transaction… soothed his pride with money … and the deal went through.

Casey later wrote, “In following the same steps Dan Peña did when he was acquiring multi-million-dollar companies, I was able to: purchase the oldest jewelry store in the state of California in just three months after attending Dan’s seminar, battling against the biggest jewelry acquisition company in the world; and without using any of my own money or taking on debt. Minnow swallows whale! And the revenues in my busi ness will triple in one year due to this acquisition, which is the real Quantum Leap in my success.”

As you consider a second acquisition, there are some rules of thumb to consider. First, your first acquisition should have established or continued a profitable track record—but that’s not mandatory. If your first company is struggling for breath, a second company won’t pump life back into it automatically. A good idea is to give the first company about three years of operation after your acquisition, so you and your “Cee-pee-a” can make a qualified judgement about its long-term health. Also, during those three years, your first company will have had time to establish a reputation within the business community.

These are all rules of thumb. But … if you find another hot deal and your instincts say yes—go for it!

After you made your first purchase, you no doubt became a managing owner. In your excitement and enthusiasm, you got in early every day, reviewed receivables, walked through production, checked orders, talked to customers and monitored every figure for signs of profitability. Your employees would look up and say, “Here he comes again.”

You can’t do that with two plants, two stores or even two offices. You have to hire or train another individual—or several—to take over your management duties so you can spend

more time kissing frogs for your next acquisition. Your second acquisition, in fact, signals the end of your role as a hands-on kind of owner. Otherwise you become your company’s worst confusion factor. And worst enemy.

You also want to pay off your short-term debt. You’re going to need plenty of short-term cash during the second acquisition—and this time it should come from revenues of the first acquisition, not your own wallet. So pay down the operating line. And do it all over again.

I tell my seminars, “Never apply short-term solutions to long-term problems.” The same holds true here. Never use operating funds to make the equity contribution in a second leveraged buyout. Don’t use short-term borrowing to make a long-term purchase.

Look for a second company that complements the operations of your first. “Stick to Your Knitting—Part II.” At Great Western, we stayed in the energy business, expanding only from oil and gas to coal.

Our acquisitions were energy support companies, so that we were vertically integrating our organization in an area in which we were already familiar. Casey Stephenson, the jeweler, stuck with what he knew. At a somewhat higher plateau, Time Warner, already a communications giant, targeted Turner Broadcasting System. And putting a very complex deal very simply, Disney sought outlets for its entertainment products by purchasing Capital Cities/ABC.

You will have learned volumes from your first acquisition which you can apply to your second. At the same time, you’ll be regarded in a different light by bankers, attorneys and owners of potential acquisition targets. Your first time, you were regarded as a novice, and given slack and consideration for your

lack of experience. This time, you may be regarded as a greedy capitalist, reaching out to grab other men’s dreams to extend your own. You may be met with suspicion, and every word you say or write will be examined for content and implied meaning. Your best defense is calm reassurance of your intent, and the determination to remain fair to all parties.

Once you’ve done a successful acquisition or two, an amazing thing will, occur. Deals will start to seek you out… Accountants, attorneys, owners and brokers will bring you deals because you’re a proven player.

The acquisition of a company, its development and improvement as a player in the marketplace, and its inevitable sale for millions in profit—that process has been for me the most exciting part of my career. And certainly the most profitable. I’m a committed frog kisser. I hunt for acquisition deals every day. I solicit deal proposals for consideration from those who attend my seminars. I am always ready to participate in any deal which will help an enterprising individual make more money than he or she ever dreamed possible. And, naturally, make a bundle for myself.

I encourage you to think beyond cost reduction and more sales. Adjust your thinking and your vision just 10% and look past day-to-day business banalities, toward the chasm beyond. Go for your Quantum Leap with the acquisition of a company just waiting for your level of excitement and caliber of expertise.

Listen to young Casey Stephenson today. “Now I look at everything differently. I’m able to see opportunities. And there are lots of them around. I’ve got so many things coming at me now. People in the industry are calling me to buy their stores. It’s phenomenal.

I mentioned David Reecher, the publishing mogul-to-be earlier. Dave is a dynamo of energy, and has pursued the goal of building his dream publishing empire in every waking moment.

Dave’s strategy is to combine publishing, which is essentially a literary industry, with book distributing, which is a marketing industry. So he wanted his aggressive new publishing company, Great Wisdom Publishing, to purchase a master book distributor. Most publishers are writers, not salesmen, so they sit back and wait for manuscripts to fly over the transom. The larger and more successful the publisher, the more manuscripts they receive from which to choose what to publish. Talk about a random way to do business! Most publishers in this country should actually be called “Random House!”

Distributors, by contrast, seek publishers as clients. They want to sell books—everybody’s books, and the more the better. That’s how distributors make their commissions. But what if the publisher and the distributor were two peas in the same pod? … and the distributor’s marketing expertise drove what was published and distributed based not on what made it over the transom, but what the reading public actually wanted?

To achieve his dream, therefore, Dave had to purchase the most promising distributor he could find—and with none of his own capital, since he didn’t have any capital!

He sent me a chronology of his success between May, 1998, and early 1997. Here’s what Dave achieved in less than a year:

* May—Shopped a potential book distributor in Northern California. Decided against acquisition, but maintained contact with key people in that organization;

* July—Signed a letter of intent to buy a book distributor in Michigan with 2% of Great Wisdom Publishing—which had no assets at the time—and a fiveyear employment contract for the owner. This took

$200,000 in debt off his shoulders. The company had annual revenues of $2 million and a positive book value of about $200,000.

Dave evaluated the company and discovered a weak sales force and a weak product line. He hired a distribution specialist from the company in Northern California. His job, once the acquisition was a done deal, would be to improve the product line.

* August—The California distributor slapped a restraining order on Dave, Great Wisdom and the Michigan distributor Dave was trying to purchase. Dave went to court prepared, and the judge lifted the restraining order, citing competition as the “great American way” of doing business. Dave remembered my attitude that court action is simply a business tool. Don’t avoid it. Don’t shy away from it. And be prepared to win!

Next, the California distributor ceased operations and began to pass all their publisher/clients to another distributor in Nashville. The publishers were irate and being passed around like cheer-leaders on the football bus. Dave’s new man, formerly with the California distributor, brought 28 of those publisher/clients to Great Wisdom within 30 days—totaling over S3 million in annual billing! Great Wisdom also picked up 50% of that firm’s total revenue, and grew by at least 150% in less than 30 days. Not a bad August!

* October—Dave got his financing from a local Michigan bank, and Great Wisdom acquired the assets of the Michigan distributor. He immediately replaced twothirds of the sales reps. The new company, ACCESS Publishers Network, recorded $334,000 in sales its first month of operation.

* November—The company showed a $24,000 profit in its second month of operation. The same month, Dave met a veteran of the New York publishing industry, formerly with Bantam, Doubleday and Dell Books— and by January, 1997, had made him Chief Operating Officer of Great Wisdom Publishing.

As this book goes to press, Dave is aggressively seeking further acquisitions. As far as acquisition capital, he got a letter from the Michigan bank, one of the most conservative lending institutions in the country. They said, “You have made” believers out of us and we want to continue being your bank.

Dave’s story is exciting, and need not be one of a kind. As we’ve said earlier, we live in an exciting time. A strong world economy… middle-of-the-road governments in both the U.K. and the U.S. which do not threaten the momentum of business… and a business environment which encourages new entrepreneurs to step out and chase their dreams — all these factors are working hard for you.

Finally, when you get just a glimpse of your potential for success, quantified and measured by the flow, the flood of money into your bank account, I guarantee with no reservations that you’ll never ever be the same again.

Chapter 12. Your Grand Exit – Dying or Selling

“Some long for the glories of this world; and some sigh for the Prophet’s Paradise to come. Ah, take the cash and let the promise go …”

Omar Khayyam

The Rubaiyat

The CEO world is largely populated with careful, comfortable company founders and owners who were once courageous entrepreneurs. No matter where you live, they’re familiar names in your community … “business leaders” who speak to the Rotary or head up the United Way drive. They run a mid-sized CPA firm or a lumber company, an ad agency or a manufacturing plant.

At one point in their lives, they snatched control of their destinies, stacked all the chips they had on the table, and created or acquired a business of their own. They took a ballsy chance and succeeded.

Then, recoiling from their own success, they decided that their one big score was a lucky break, a fluke, and they could never repeat it. So they took up a safe defensive posture to protect what they had. They dug in, and frittered away the rest of their career trying not to lose what they had achieved. Today, years or even decades later, they’re still dug in, basking in respectable mediocrity. Their names are on the letterhead, their portraits are in the lobby, and their stupid sons are in the Vice President’s office down the hall waiting for them to die.

I’ve come out of retirement again and committed myself to saving as many energetic, determined entrepreneurs as I can from the fate I’ve just described. If I can kick you around and hold your attention long enough to inspire your first Quantum Leap. I’ll be damned if I’m going to let you do it once, then quiver behind your desk for the rest of your career.

The truly successful high performer understands that the strategies and skills which he marshalled to generate the first Quantum Leap can be called upon to repeat that success over and over. That’s why he doesn’t hang on to his first venture like some sort of incorporated teddy bear. He’s secure enough in his abilities to build it up, then sell it off for a bundle. And starts the process over.

You, as a progressing or even entry-level entrepreneur, can make one Quantum Leap, hold on to your company, and sit on your assets the rest of your life. Or… you can keep your dream humming along for a few years, improve its profitability, then dress it up and unload it for a substantial profit.

Succinctly put, unless you’re thrown out by your own shareholders, you have two exit strategy options—die or sell.

I can’t help you prepare for the first option. Fortunately, I’ve never used that strategy nor talked to anyone who did. I’m far more familiar with the latter—selling. And I can give you some pointers on how to “puff up the hog” and get it ready to bring you top dollar.

Owners sell their companies for several reasons. Some are simply ready to retire, take the cash and enjoy a more leisurely life. Others want an injection of capital to continue to grow their company, or an affiliation with a larger company for greater distribution, marketing or manufacturing resources. The best reason I can think of to sell a company is to free

up assets and turn equity into cash. Lots of cash. Selling is the natural end of a cycle that began when you decided, years ago, to begin or acquire your first company and make your Quantum Leap.

If you’re young and energetic enough—and most of us are—you can take part of your newly liquified assets or the leverage it provides and acquire and second or even third company, and start the process over again. One thing I learned quickly—making an enormous amount of money suddenly, from a single transaction, is habit-forming. Absolutely delicious! It’s like sex when you’re about 18—you can’t get enough. The more you do it, the more you want to!


Before we get into the specifics of implementing your exit strategy, let’s talk about paying yourself and your people. A company owner whose first responsibility is to grow the company will characteristically plow profits back into the company to strengthen its financial profile, to purchase new equipment or expand however necessary. I can’t emphasize enough that you as a company owner need to pull money out of the company to pay yourself, so you can begin to enjoy the lifestyle that you and your family have earned. Many owners feel guilty about rewarding themselves, as if they’re betraying the company. That mentality is fine if you never intend to sell. But if you do plan to sell—as I hope you do—you’ll feel less obligated to squeeze every penny out of the deal if you’ve been paying yourself all along.

While you’re paying people, never forget the employees who have made your company successful enough to become a marketable item. Your employees may love you for your charismatic leadership, but, trust me, they’re in it for the money. If they do everything you tell them to, everything they feel is expected of them, they don’t care if business is temporarily lousy, they expect you to reciprocate. They need a bonus now and then—especially at Christmas or end-of-year—which confirms their value to the company.

So take money out and put it aside for you and your employees so you can pay deserved bonuses in all business conditions and cycles. When you borrow money, borrow enough to tuck away for employee bonuses. Don’t make yourself wait, and don’t make your people wait for the rewards they deserve. The cliché is true—take care of your people, and they’ll take care of you.


The market—not you—will determine how much you will ultimately got for your company. The fair market value is what your company, or any commodity, can bring in open exchange between a buyer and a seller in an uncontrolled market environment. You should bring in professionals to perform valuations so you have at least a ball park estimate of how much to ask.

Be assured that any serious buyer will conduct his own valuation, because nobody believes projections or even current figures provided by the seller. Buyers make their decision based on what they think the projections are, after examining your records from three years back.

Regardless of who does it, there are four universally accepted means of valuating a company—plus one which is too often used by business owners:

1. The Asset Approach based on fair market values— This method adds up the fair market values of company assets, after netting out the total of the firm’s tangible liabilities. A real estate holding company might use this approach. Quite often a company in financial trouble will do an asset-based valuation just before a “going-out-of-business” liquidation sale. This type of evaluation would be appropriate for an outdated manufacturing plant sitting on a valuable piece of property.

2. The Income Capitalization Approach—This valuation method, also called discounted value of future cash flow, is based on the current worth of economic benefits which will be enjoyed by the buyer in the future. It tracks the company’s expected future earnings stream over a predetermined payback period, expressed in present value dollars. This method is filled with “iffies,” since who can predict interest rates, inflation, or hypothetical future revenues and expenses? Nevertheless, most prospective buyers want to use this approach to assess your company’s value, since it stresses future performance. (Buyers will typically pay three to five times annual cash flow, all other factors being equal.) Accordingly, if you use the same type of valuation, you get a clearer idea in advance of how much a prospect may be willing to pay.

3. The Market Comparison Approach—This method is similar to that used in the real estate market, comparing the financial performance and ratios of similar companies, i.e., return on assets, debt-to-equity ratios, return on sales ratios, return on equity and price/earning (P/E). Average industry ratios are published by Dun & Bradstreet, and by the U.S. Bureau of Census in Quarterly Financial Report for Manufacturing, Mining and Trade Corporations. The P/E ratio is perhaps the most widely used measure of comparison, since it provides the most accurate reflection of a company’s earning power and growth possibilities. It expresses a company’s value as a multiple of net earnings after taxes. The higher this key ratio, the higher is the firm’s growth potential.

4. The Gross Revenues Approach— This method is for companies like the ones I like to run. They gush torrents of income and matching expenses, with few if any retained earnings. In most cases, they have few assets and little capital investment. Examples of these are consulting firms, retail companies, radio stations, employment agencies, dealerships, professional service businesses, and public relations and advertising agencies. A specific company’s value is expressed as a multiple of annual gross revenues. The multiple is based on such factors as the company’s reputation, time in business, sales record and the strength of its industry. Multiples are very subjective, and are based as much on educated guesswork as industry figures. This is the best way to valuate a company which is referred to as a “cash cow,” a company which only requires the buyer to survive and keep quiet to make money on his investment.

5. The “Here’s How Much I Want” Approach—Some business owners, especially those who have developed a deep emotional attachment to their company over the years—or who have specific cash needs—will begin their valuation, not from the worth of their company,but from the amount of money they want or need out of the company. Unfortunately for them, companies are valuated on their respective strengths and weaknesses—not on the personal desires or agendas of the owner.


“Puffing the show hog” is no idle phrase, as any former 4-H kid will tell you. When your prize porker is going to be judged by the “pound and the round” of its figure, you make sure that before the two of you head for the fairgrounds, that sucker is fed to the snout with his favorite corn. What better scrap of Americana could I apply to your taking your own prize company to market!


As you will have learned after you’ve been in business for awhile, you compete in a cyclical economy and a cyclical industry. It goes without saying that you want to sell your business in a strong market; the problem is that there are several indicators you need to read and consider before putting your company on the block.

The ups and downs of the economy sweep over your company like waves, influenced by interest rates and periods of stable growth and general confidence in business. Concurrently, your specific industry may be in an upswing or downswing. The mid-Nineties, for example, saw such industries as computer technology, communications and health care sweep like tidal waves into the hearts of investors. Others, which cater to fairly stable wants and needs, hardly feel the bumps and dips. Add to these variables the condition of your own company, and its profit picture over the past three years. You’re hardly in a position to demand top dollar if your revenues over the past few years have been flaccid. Achieve at least three years of solid profit, and make it jump out of your books to grab the attention of the most casual reader.

You’re likely never to ride the crest of all three of these waves at the same time; nevertheless, you need to monitor them—the economy, your industry, your company—so that you can at least aim for a seller’s market when you decide to sell. If your overall plan calls for you to sell in five or ten years, you’ll track through several cycles of change before you finally sell. As a rule of thumb, however, I tell owners that if they’re over 40 years of age, to sell during the next upcycle and get the hell out. Period!


The snapshot of your company on any given day—its financials, its contracts, even its physical condition—is not the picture you want to present to potential buyers.

When a potential buyer strolls through your premises, the most insignificant images stick in the mind—the receptionist’s greeting, the clutter in the stockroom, dirty carpets, the crowd in the lounge, the awards on the walls, the general tenor and noise level of employees. Remember—whether a person is buying a car, a house or a business, much of the decision is emotionally-based. Above and beyond the financials, buyers feel whether a company is right or not, just as you as the seller

feel whether a buyer is the kind of individual or conglomerate you want to sell your hard-earned company to.

Prior to trying to sell your pride and joy, paint and repair as needed, clear corridors and storage areas of accumulated files and boxes, replace outmoded equipment, repave the parking lot if necessary and redecorate your offices to reflect an efficient, productive yet warmly human working environment. This is called puffery!


Housekeeping at the most elementary level requires that you update—or create—salary guidelines, board meeting minutes, job descriptions. In fact, even the smallest company needs a policy and procedures manual for employees, covering hours, vacations, health insurance, retirement plans and record keeping procedures. An organizational chart, complete with titles and lines of accountability, will convey a sense of organization, and suggest that you as a CEO are already grooming others for senior executive positions.


Another preparatory step is one we’ve discussed relating to establishing your company in the financial community, that of assembling a distinguished board of directors. Just as a list of respected business executives on your board impresses a banker, it also speaks volumes to potential buyers. Recruit them carefully, person by person, as if you were putting together a team of all-stars. Offer them free stock, or options and warrants, to compensate them for the use of their name and the time they may spend advising you and your successor. Far beyond window dressing, in fact, your board can provide you, and your potential buyer, with a wealth of business acumen and wisdom well worth purchasing.


Your company also needs some literature to add to its legitimacy. A brochure tells prospective buyers, as well as clients, of course, that the company is prosperous, and aggressive in its marketing program. Brochures for high-tech firms are especially effective in explaining what the company does in pedestrian language. An illustrated color brochure will add pizazz to the most seemingly mundane or complex businesses.


Clean up your financials too. I’m sure you wouldn’t do this, but a lot of companies use “tax avoidance strategies,” such as excessive compensation, to camouflage earnings from the IRS. Such tactics may well have a negative impact on a potential buyer who says to himself, “Hmmm… what else are these guys hiding? But beyond ethical issues, buyers will typically only recognize your traceable profits. They are not going to pay for earnings that are invisible or not clearly documented.

In order to avoid getting caught between the IRS and the concerns of potential buyer, I suggest that in anticipation of putting your company on the market that you “invest in taxes” for a couple of years. Yeah, when all else fails pay your taxes. Just keep in mind that your company will be acquired based on multiple of earnings, so you invest in one or two years taxes should bring you multiple of that amount when you sell.

We’ve talked about audited financials. Such a report issued under the logo of a respected accounting firm will quickly credentialize your company. This is another reason to “get honest” on your tax avoidance schemes, since a reputable national CPA firm will “tsk-tsk” you for these practices. As you’ll recall, these eyeshaded bean counters are really trained to work for the IRS and against you unless you can convince them otherwise.

During the normal course of business you may have gotten a little loose in collecting your receivables and tightening up you inventory. Uncollected receivables that you’ll never collect should be marked down, as should those dated and cobwebbed items in inventory that you’ll never sell. Sure as hell, a prospective buyer will dispatch his auditor to find these untidy holdovers. So you find them first, and write them off. None of my companies will ever enter into an acquisition without an acquisition audit by a “Big Six” firm.


Another clean-up chore is to strengthen and lengthen contractual agreements. Any potential purchaser wants to buy into the same pattern of arrangements which have helped make you successful. These arrangements include any property and equipment leasing contracts, if you’re anticipating selling, negotiate ahead of time a long-term labor contract that subsequently gives any buyer a sense of stability with regard to his union workers. Although this isn’t always possible, it is definitely worth trying.

Customer contracts are equally important. When we were negotiating to purchase Bow Valley USA, we looked carefully at the extensive coal contracts the company had with utility companies all over North America. Those contracts were part of the firm’s assets as surely as were its coal mines.

Also solidify any contracts you have with suppliers, to provide you with raw materials or other products at a certain price for a certain number of years. The more contracts you nail down, with every party, the more stability you craft into a promising deal for a likely buyer.


If you’re like most owners of private companies, operating outside the public spotlight and SEC disciplines, you’ve got a hell of a lot more to do than keep clean, timely records. Like run the damn company. That’s fine if you never intend to sell. Otherwise, it’s in your best interest to maintain all the data a prospective buyer looks for as evidence of an organized and efficiently run operation. For example:

* Payroll records

* Tax records, reflecting up-to-date filings;

* Documentation of any bank loans;

* Documentation of copyrights, trademarks or patents;

* Copies of current licensing, distribution or franchise agreements;

* All documentation required by OSHA, the EPA and other bureaucratic tentacles of government.

Speaking of the EPA, make sure your company is in compliance with any appropriate environmental regs and guidelines. Hire an outside evaluator if you need to, to check your procedures and processes for dealing with handling and disposal of any waste your company may be generating. And document everything.


Buyers who see a working system of controls in place are more likely to pay a premium for the company. They know that your systems will save them the agony of having to install these processes at a time they’re going through post-acquisition transition. I suggest you have your accountants or an external consultant review your controls and data processing systems to ensure they meet your needs. The cost of this review will be more than recouped in the price paid by a satisfied buyer.


Buyers want assurance that you’re not going to hand them the key at closing and disappear, along with all the expertise which has made your company successful. You may now be running your company single-handedly, but if you’re planning to sell, you’d better begin to develop a management team, a second level of competent management and control which will ultimately make you dispensable, and raise your buyer’s comfort level about the people he is inheriting. Especially key to this management team is a conscientious, credentialized Chief Financial Office who continuously feeds data into the system. In addition, almost any buyer will want you personally to be around during the transitional period, leading him through processes you know by heart, and helping him establish relationships of his own with employees, customers, suppliers, bankers and anyone else in the business community who can continue to provide him support. Depending on the size and complexity of the company, and the confidence and experience of the purchaser, you might be asked to stick around for anywhere from 90 days to two or three years. Negotiate for the shortest period in your buyer’s comfort zone. You want to get on with your life—and begin your next Quantum Leap! Besides, former owners, becoming increasingly irrelevant to all parties, tend to take on the aura of a ghost from the past if they hang around too long.


While you’re tidying up, clean up your lawsuits. If you’re the defendant, settle wherever possible and put litigation behind you. On the other hand, if you’re the plaintiff, keep the suit. Make sure you advise the buyer of the particulars of the suit, and emphasize why you feel it’s important to pursue it to the end. The buyer will appreciate your being forthright, and you give him the option to continue or drop the action after purchase.


The financial and legal form your company sale takes depends on your liquidity objectives, tax strategies and other goals which may or may not be in conflict with those of the buyer. The structure which emerges from acquisition negotiations is typically a compromise of what you need and what the buyer wants.

There are four basic ways you can structure the sale of your business:

* the purchase of your corporate stock for cash and/or other considerations; and you pay taxes on the purchase price;

* the acquisition of your stock in a tax-free exchange of stock;

* the taxable for purchase of all or a portion of corporate assets cash and/or other considerations;

* the acquisition of all or part of your assets in a tax-free exchange of stock.


With regard to taxes, if you’re at the stage of founding or purchasing a company, talk to your accountant about establishing it at the outset as an S Corporation. This is a vehicle which has been popular with qualifying companies since the Tax Reform Act of 1986. It gives companies the protection and structure of a corporation, but the tax treatment of an partnership. An S Corporation which sells assets passes the gain or loss to individual shareholders who are then taxed at their individual rates. There are no corporate taxes.

The law stipulates that to qualify as an S Corporation, your firm must have only individuals as shareholders—not investment groups, for example—only one kind of stock, and no more than 35 shareholders. Before you think about converting your existing company to an S Corporation, bear in mind that the IRS says you can’t sell or liquidate within ten years of your conversion. If so, you’ll be taxed like a regular corporation.

In summary, the time to begin thinking about your exit strategy is at the beginning of your entrepreneurial experience. From the first day you open your doors, keep full records and documentation, maintain written policies and procedures, and regardless of how much of a pain it is, operate as if you were planning to sell in three months. Watch and learn to anticipate economic and industry trends and cycles. Keep an eye on what companies comparable to yours are selling for. The whole time you’re in business, you’ll be preparing to exit on your terms. And, should a buyer happen to appear in your lobby unexpectedly some morning, you won’t have to scramble around at a disadvantage which could cost you hundreds of thousands, maybe millions in purchase price.

Finally, whether you’re just starting out or you are already in business, think of your dream company as a stepping stone, not as the end product of your dreaming. You can grow and nurture it, but never develop such an attachment that can-not bear to sell it some day, regardless of your best interests. High performers regard companies as a means to a greater end that end being enormous wealth and total independence to pursue further goals in life, Your Quantum Leap will have already propelled further than most people dare to dream. And put you at the starting mark for a lifetime of Quantum Leaps!

Chapter 13. Take Action Now! – or Never

If you take no action to begin your Quantum Leap within 21 hours of finishing this book, you never will!

If you’ve read me this far, you’ve had a damn good “dose of Dan.”

We talked about creating your personal foundation for success by thinking yourself out of the box of conventional wisdom, which is almost always wrong. You know you can’t talk about your goals and aspirations with your business peers, your friends, neighbors or even family, because they’re all mired in conventional wisdom. The only advice they’ll give is, “You can’t do that.” Now you know you can.

You also know you have to get comfortable with making decisions, by realizing that every decision is not a “Sophie’s Choice,” and nobody is going to die if you screw up. You have to take risks too, understanding that failure is only a learning opportunity, not a social disease. Risk means you’re not taking a chance—you’re giving yourself a chance for super success. And the more mistakes you make, the more action you’re taking toward achieving you final goal.

You know now that you must focus on the ends, not the means. Think macro and big picture, executing a good plan right now, to paraphrase Patton, instead of a perfect plan next week. As an entrepreneur, you’ve got to think big, not only for yourself but for those you take along with you. Your dream— and that’s what it is—must be big enough for everybody to see… like the flag at the front of a parade … like a beacon of clarity that cuts through the fog of bullshit. You must have passion, and be obsessed with your dream, and the values it represents. As we learned from President Ronald Reagan when values are clear, decisions are easy.

You know you can’t just wake up one morning and be successful, any more than you can wake up and play piano. You have to practice success. Take actions that assume you are successful. Act as if there are no limits to your abilities. Put yourself in risky situations and work your way out. Build your confidence. Expand your comfort zone. And all the time, visualize your dream down to the smallest detail. The carpet style in your corner office… the pictures on the wall. Write down your dream, keep it in your pocket and read it every day. Don’t just think it—”ink it!”

Find a mentor too—a super successful executive or CEO who has been where you’re going. Some of the nation’s finest minds are retired from active business, and have the time and wisdom they’d love to share with you. Retired successes are national treasures we ignore. Claim one as your own!

While you’re taking care of all these substantive tasks, you have an image-building task as well—to create and feed the perception that you already are who you want to be. Act successful. Dress and travel in the style of your success. Never share your doubts. Like Trump in bankruptcy, keep on smiling and keep on dealing. If you are perceived to be successful, people will want to be associated with you.

Start working on your Dream Team immediately. Today!

You’ll need first-class accountants, attorneys, bankers, associates. Because you can’t do it alone. Get help. And give equity. And don’t hire credentials so much as attitude … people with an appetite for adventure! Then lead them on that adventure. Give them responsibility, enable them to make decisions and mistakes. And pay them well.

I gave you my “11 Steps That Make the Deal.” Start with identifying you idea and defining the deal, then investigate thoroughly and continuously throughout the process. Then you make the commitment, establish your critical path, continuously modify as you need to … follow up every step to make sure it’s taken. And execute.

And forget about Plan B or safety nets. Just like the Chinese general who posted his troops with their backs to the river, fight or die. Commit yourself and your people to fight for your deal, your dream as if there’s no tomorrow.

As far as raising capital, you have more hard information about how to find Other People’s Money and get your hands on it in Chapters 9 and 10 than 98% of the people who ever tiptoed into a bank. Use it! Nothing you can do in a business suit is more satisfying than to outflank a doofus banker, shake his hand and take his money.

We also talked about the heart of any Quantum Leap adventure, equity transactions. Where real money is made. You should begin immediately to search for likely acquisition targets.

Finally, you now know that, unless you plan to hang on to your company, sit tight and be buried someday under your woodb grain desk, you should begin planning your exit strategy.

With such a wealth, a trove of information, you’ve got no reason not to get your ass off your couch mentality and get moving. Adding to your urgency is that once you finish this final chapter, a proven countdown kicks in. I used to tell my seminar attendees that if they didn’t take at least some small action toward making their Quantum Leap within 21 days they never would. I’ve since come to believe that the “take-action” time is far shorter. Now I’ll tell you that if you don’t take action within 21 hours, it’s almost guaranteed you’ll never do a thing but stick this book on your bookshelf with all those “feel-good” volumes you wasted money on.

Call an accounting firm. Call a local banker and use Chapter 9 as a script to at least set up a practice interview. Call your local newspaper, or the nearest metropolitan paper to where you live, and ask the Business Department for the most recent list of financial institutions begging for the chance to lend you capital. Do something, for God’s sake! Get off your dead ass NOW!

“Well, Dan,” you may be whining in your mind, “it all sounds good, but how do I know what you’ve said is valid for anyone else but a Dan Peña type … a guy with in-your-face approach to business?”

I’m glad you asked such a doofus question. After my seminars, there’s always some moron who writes on his critique sheet, “How does this apply to me?” A lobotomy would be a step in personal development for people like this. Instead of re-stating everything I’ve said so far, I want to introduce you to some of the business people I’ve worked with over the past two or three years. In every instance, these people were already successful entrepreneurs, individuals running their own com panies and making money. You’ve already heard one success story, that of Casey Stephenson, the young jewelry mogul in California … the minnow who swallowed the whale. Here are some more.

Beryl Crump is a land developer in Ottawa. She was successful, doing million-dollar commercial land deals. In September, 1993, she attended one of my first seminars. Here’s what Beryl would tell you.

“I’m not a rocket scientist. In fact, I was a registered nurse before I got into commercial development. Since I began using Dan’s methodologies, I’ve experienced tremendous growth in my personal as well as my professional life. My net worth has increased 300%. I went from doing small deals—S2 million or $3 million— to now doing deals of 40 to 50 million. I’ve made a lot of money, and will make a lot more. Dan’s methodology works! It’s very easy to follow, and for a small business, or a large business … anyone can use it”

As I finish this book, Beryl is still doing mega-million-dollar deals. When some woman tells me they can’t do what Dan Pena has done, and can’t get away with some of the assertive strategies I talk and write about, because they’re a woman, I’m liable to say, “Excuse me, ma’am, but bullshit!” Closer to the truth is that most women won’t let themselves try to implement my strategies, because they’ve been pre-conditioned by conventional wisdom to keep their expectations low. Quantum growth is harder for most women in business, not because of some sex-based deficiency, but because they’ve been told all their lives that, in essence, super success is for men. “You can marry it, sweetheart, but you can’t make it!” Ask Beryl about that.

Ask Lucinda Burke, who in her mid-twenties is building an empire in the mobile home industry. Talk to Victoria Haigh, who is busy consolidating the garden center industry in the U.K.

Or ask Deann Verdier. She and her partner George, who happens to be her husband, were already making good money organizing upscale craft shows. They were working hard, and growing a little each year. By every conventional standard, they had no reason to change their thinking or their mode of operation. A year after her “dose of Dan,” Deann wrote me to say:

“As a direct result of attending your seminar, many changes have taken place. On the cash flow front, we’ve already found and instituted a way to increase cash flow this year by $500,000. Since your seminar, we’ve also added four new shows to our [next year’s] schedule—a 50% increase over the number we’re doing this year.”

So, ladies, I’ll repeat this for you: Act as if there are no limits to your abilities. You can’t make your Quantum Leap with your head down, looking at goals in the dirt. You’ve got to see clearly the other side of the chasm, and have the unbridled confidence to know that the next time your feet touch ground, it’ll be on the far cliff.

Another super success that came out of one of my early seminars is Bruce Whipple, co-founder of Audit Cost International, a company that audits utility and phone bills for large corporations, inevitably finds billing errors, and saves them maybe hundreds of thousands of dollars over a year’s time.

After Bruce heard me, he took my advice and “fired more

than a hundred small clients and turned his focus to Fortune 500 corporations. He landed one immediately—IBM—and has saved it more than $12 million annually. Here’s what Bruce said:

“With Dan’s help, we are now working with more than ten Fortune 500 companies. There is absolutely no question that what Dan says really works. it’s extremely rare to find someone who has accomplished as much as Dan, and can teach others to do it. Dan’s done that better anyone I’ve ever seen. He’s been fantastic for us.”

And here’s the testimony of Michael Crab, a gentleman, from Hawaii who is now in business on the West Coast—and who, after attending one of my seminars, charged off to make his own Quantum Leap.

“I went to Dan’s one-day preview seminar and implemented his principles immediately fallowing that. In fact, on Tuesday of this week, we were in the middle of a project and I implemented about three or four of his concepts by assembling my Dream Team when we went to negotiate a deal … Just by using those few principles, we saved ourselves $10,000. I mean immediately! So I know Dan’s stuff works!”

Andrew Harris owns American Olympic Karate Studios, located in East Northport, New York. In 1994, Harris had 120 students with annual revenues of about $120,000. He also had about ten employees, but they were all just getting by. He tried various ways to grow his company, but nothing worked. Then he attended a Quantum Leap Seminar. He’s what he later wrote.

“Dan Peña shattered even the big goals I had. He one good idea from a seminar, it’s time well spent. I’ve counted 103 specific notes of ideas I’ve gotten from this seminar, and I plan to use them in my activities.” took me out of my box. He created a new level of thinking for me. I had attended other seminars, but after Quantum Leap, the others seemed like limited thinking. Dan shows you how to laser-beam focus on what you want.”

Harris has since doubled his enrollment—and empowering revenues. He told me he took to heart my advice on empowering people—by letting go of company control. Just about everybody got more responsibility, and his newly empowered staff is so positive and fired up that nobody has let him down. Now he’s got time to do what? Kiss those frogs, of course! Hunt for deals … hunt for money. He’s planning to expand overseas, all the way to Australia. Andrew Harris is terrific Quantum Leap success story unfolding even as I write about him.

One of the best testimonies I’ve ever received came from a world-class professional in the field in which I am only beginning. I previously mentioned Ted Nicholas, arguably the most prolific and successful direct response advertising writers on the planet, and one of the few other seminar lecturers active today besides Dan Peña that I’d recommend hearing. Ted, who spent a week with me in Scotland during a “Castle Experience,” said this:

“I think this is the greatest seminar I have ever attended. This information is worth millions of dollars in the right hands. You could go to Harvard or Stanford and never get the practical, hard-hitting information Dan presented this week. It’s often said that if you get

How many ways and through how many people can I say it? This stuff works. And after you laser-focus on your vision, ignite your passions, and practice your success, and then you land on your feet after your first Quantum Leap, you’ll want to do it again. You’ll look at your bank account, suddenly the size of the Matterhorn, and say, “Hey, Dan, that was fun.” Yes, I know. I’m still making my own leaps—for the love and the money of it. It sure beats business as usual for the rest of your life! And if you don’t make $20 million … if you aim for $20 million and only make $7 million—so what?

I look for deals everywhere. At my seminars, where up to 400 people or more may attend, I conclude my lectures with an invitation. I tell my audience of established business owners, entry level entrepreneurs and “wannabes,” that if they have a project, a deal they think I might be interested in, fax me a one-page memo. Not a page-and-a-word, just page. I can read that page, and tell first of all if it’s hot, or just a mush-brained fantasy. If it is hot, I can determine in a heartbeat what it needs to take off, to become a multi-million-dollar Quantum Leap.

I almost, never put my own money into a deal, of course. Instead I approach the bearer of a hot deal in one of two ways. I take for free at least 25% in equity—sometimes 40% or more Or I bill for my consulting services at $3000 an hour or $25,000 a day, whichever is more, plus expenses. You think Dan, you’d take 40% or more of my dream? Damn right! Which had you rather have? 60% of several million I can pump your hog up to? Or 100% of nothing. The choice is yours.


If you’ve stuck with me this far, you’ve passed a doofus test of your own. You’re probably a serious individual, scratching and clawing your way toward a dream that may have seemed further away this morning than it did yesterday. You may be, even unconsciously, doing the same wrong things over and over—and expecting different results. As I’ve often said, this is my definition of insanity. You’ve got a good business that’s getting by, paying the bills. You’re on the cusp of giving birth to a new venture, but just can’t get her going. Or you’ve got a hell of an idea, one you’ve been tweaking for years, one every expert says will make you rich and famous … but after all this time, it’s still just an idea.

Other people are doing it. You know something’s missing in your formula. Maybe that’s why you go to all those seminars and buy those books and tapes at the tables in the back. What the hell’s the answer?

I had a guy who filled out a critique sheet at the end of a recent seminar, and it was like the light of knowledge had just burned right through his eyeballs into his brain. “I’ve been looking for the secret to raising money and building my super success, I found out the secret today. There is no secret! Dan Peña explains why people who I’d never suspect of financial acumen … are out building monster companies and monster deals, while I’m on the sideline trying to figure out how they did it. Now I know.”

And now you know. And you have no one to blame but yourself.

Look at your watch. Your 21 hours have started.