As a business owner, stop for a moment and think about where your money disappears to each month.

Rent? Insurance? Advertising?

And while these are all valid candidates for, "Highest Expense Category of the Month," I must tell you that, sadly, all of these costs pale in comparison to your biggest cost, which is personnel.

What's more, if you're in a company that sells services rather than products, your "people costs" will likely be even higher.

But this is not a column about health benefits, rising wages (actually, the opposite is now true ... the most recent studies are now starting to show that wages are declining, not increasing), or anything of the like. No, this is a column that is strictly about the turnover side of the "people" equation.

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About three weeks ago, my seven-year-old daughter, Lexi, and in a fit of boredom, asked her mother if she could set up a lemonade stand at the front of our house.

Lexi and her brother attempted to peddle cold drinks earlier this summer (I think it was just ice water), but the results weren’t good. I think they had both marketing and product problems that mid-June day.

But it was now very evident that my little girl had been doing some serious thinking between her product roll-outs. From concept to product to marketing, she now knew exactly how her business should operate. She had apparently analyzed each and every process, policy, and product feature and it was now quite clear to me that she had learned much from her earlier mistakes.

Her cousin Josh (also age seven) happened to be at our house that day. So were Josh’s brother and sister (ages twelve and fourteen, respectively). But just like my son, they had little stomach for sweltering in the 90+ degree heat that day, flagging down the residents of, and visitors to, our neighborhood. But Lex and Josh were determined to earn some spending cash and so they dug out an old desk, an umbrella, and a couple of fold-out chairs and set up their storefront at the end of our driveway.

Lex and Josh concocted their own lemonade mix. Their final product was sweet, but not too sweet. It had great color; not too orange, not too yellow. And it presented well. For example, they learned early on how to use generous amounts of ice, making certain that the the ice was fully visible in its clear glass pitcher. They also somehow realized that the pitcher itself must “sweat”. “Very smart”, I thought to myself, “It actually looks like a TV commercial”.

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I do a lot of thinking about venture and angel capital.

As regular readers of this column know, I pretty much detest “cash for equity.” Maybe this has something to do with the fact that I consider equity sacred. Kind of like family.

So, giving equity away for mere cash isn’t, and to me anyway, too far away from handing your children over to complete strangers.

Don’t like it.

Regular readers also all know that I believe that recipients of venture/angel capital immediately become “softer” for just having received it. By “softer,” I mean that they very quickly become: less resourceful, less creative, and less willing to work as hard as their “un-venture capitalized” brethren.

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Every entrepreneur’s dream is a company protected by a “moat.” For those regular listeners to our radio show, “moat” is a term used often by Mariusz Skonieczny, stock picker extraordinaire and frequent show guest. Mariusz loves moats because he knows that a “moated” company has a tremendous advantage over competition --- that being the fact that a “moated” company has found a way to foreclose competition.

In essence, then, a moat is something that enables a business to “own” its niche, free from competition.

Example: When Apple “went its own way” by creating a propriety operating system for all of its computers, Mr. Jobs pretty much made it impossible for anyone to compete directly with Apple without first licensing the Apple operating system. (Which, we should point out, is simply not available for license.) Thus, Apple maintains its “proprietary space” right along with the margins that go hand in hand with that space.

Perhaps a better example of this is Sony Corporation. Sony took a huge risk and developed an ultra-high definition video format called “Blu-Ray.” Blu-Ray, and at one time, competed with a similar product from Toshiba. But the public voted with its pocket book, and Sony won. Now, Sony has no competition. In essence, a moat.

Very early in the first semester of the very first course taught in our Entrepreneurial Program at Duquesne University, our students talk about moat-building. Except that, in instead of “moats,” we talk about niches. Remember, “A niche is a moat and a moat is a niche.” Consequently, we tell our students to, “Do whatever you must to differentiate your product or service. Then, never stop working on protecting that differentiator. Always try to ‘stay different’.”

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(NOTE: The following is true except that the names, dates, and certain other facts that could reveal the identify of the individual discussed herein have been changed.)

The story you’re about to read is repeated, every day, and in every town in America. I myself have lived this story. The chances are pretty good that you have, too.

This particular version of this story begins, roughly, in 1998. The individual in this story was in his mid-forties and had spent almost his entire professional career learning about a specific industry.

Part of his education was paid for by the government. The rest was learned in the private sector, but this man was always an employee, never an equity holder.

He and I had a luncheon meeting. I had known this guy most of my life, but we had never been really all that close. However, he had come to me at this point in time, seeking advice and insight as he pondered starting a business that would actually compete with the company that presently employed him.

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The other day, I was listening to the General Manager of the Pittsburgh Pirates’ baseball team. He was describing the club’s philosophy as it related to player development.

This guy was mostly talking about his Minor League organization, not the “Big Club” that resides right here in Pittsburgh. “We really don’t care much about winning,” he said, “We really only care about seeing improvements at all levels of our Minor League operations.”

Up until I heard that, I was only casually listening. But when I heard the phrase, “We don’t care about winning,” my head immediately jerked in the direction of the radio. Could he really have said what I just heard?

This GM went on to explain, “the organization’s philosophy was essentially to use hard, and measurable criteria to produce an individual pre- and post-assessment of each player, at each Minor League level. (Note: For those not familiar, professional baseball, unlike any other professional sport, has what is known as a “Farm System.” The “levels” in these Farm Systems become increasingly more difficult as you move up from “Class A,” to “Class AA,” and then ultimately up to “Class AAA.”)

“Measurement of hard criteria so that pre- and post-assessments can be performed,” I mumbled to myself. “Not a thing in there about winning,” I mumbled on.

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I just finished reading a terrific book about the Korean War entitled, “The Coldest Winter: America and the Korean War” by the late David Halberstam.

Early in the book, Halberstam contrasts the armies of North Korea/China and the United Nations in terms of “strategic management.” It surprised me to learn that the Communist’s army pretty much had free rein in terms of how and when to deal with the U.N., while the United Nations’ troops (primarily, these were Americans) were bound to a fairly rigid hierarchical command and control structure.

In essence, the Reds were given “The Big Picture.” They were told that the South Koreans desperately sought emancipation and, basically, that individual companies and platoons were fully permitted to “freelance” in terms of getting this accomplished. This then resulted in a series of early, stunning Communist victories; victories that were based on speed and audacity while U.N. troops wasted vital amounts of time, both awaiting orders from “Up-Channel,” and then awaiting further re-definition of those orders.

Sound like your favorite corporation?

Just the other day, I pre-recorded an interview (for my talk radio show The American Entrepreneur --- M-F 3:00 to 6:00 pm on 1360 AM) with Mr. Matt Mullenweg, Founder and CEO of WordPress, the most popular blogging engine in use today. Just 26 years old (he created the first version of WordPress while still in high school), more than 25 million world-wide bloggers today employ Mullenweg’s open source software to host their daily thoughts.

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Although it is not my style to comment on “macro” events, I jut about fell over in my tracks the other day when a friend of mine (incorrectly) said, “Did you know that more than 180,000 Android telephones are now being sold each and every day?”

I say “incorrectly” because the actual number is closer to 160,000 phones/day, which effectively translates to one new Android phone being activated somewhere in the world every two seconds.

What’s that you say? You say you’ve never even heard of an Android phone? Well, join the pack, most people think an Android is some sort of Star Wars character.

It ain’t the Android, Virginia, its the “Google Inside” that has everyone breathing just a little bit harder these days.

Consider this: when Google announced, in October of 2009, that it was giving away a free GPS (voice-based, no less) with each and every Android phone, executives at both Garmin and TomTom probably, and immediately: a.) started updating their resumes, and, b.) began lamenting the fact that their stock options had not yet vested. (BTW, and along those lines, Garmin saw its stock drop by more than 33% just after the free GPS was announced. TomTom has never recovered from the shock --- its stock price has dropped from approximately $20.00 in September 2009 to its current price of about $5.50. This, BTW, is a 72 percent reduction in share price.)

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"Easy relationships tend not to be productive. Difficult relationships tend to yield significant positive results.”

These were the (paraphrased) comments of Dan Courser, CEO of Predictive Synergistic Systems. Dan is the regional guru for the Predictive Index, a remarkable personality survey that I have been using on and off for the past two plus decades. The Predictive Index is a series of answers to survey questions that yield insights into the personality of the survey taker.

I first started using the Predictive Index (hereinafter, PI) when I was with Mastech Corporation (the predecessor to I-Gate Corporation, one of Pittsburgh's most successful high-tech start-ups). Mastech was growing at a phenomenal rate, and yet almost one of every three individuals we hired didn't last six months. This, despite the fact that we subjected each job candidate to a series of interviews by the corporation's top executives.

I have long contemplated the reasons why such things as interviews and reference checks tend not to work when evaluating and hiring people. To some extent, these techniques do not work because people tend to inject their own biases into the interview. (You know, “Hey, he’s just like me! We've got to hire this guy!”)

And of course, people lie. Sorry to have to break this to you, but it does happen.

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I very recently had as a guest on my radio talk show (taeradio.com) one of the world’s foremost gurus on the subject of high tech entrepreneurism, Mr. Jason Fried.

Fried’s latest book, entitled REWORK, is currently ranked sixth among all business books by the New York Times and debuted at #2 on the Wall Street Journal’s exclusive list of “Best Hard Cover Business Books”.

Not bad for a first-time author.

Himself an entrepreneur (Fried is co-founder/owner of 37signals, a software development and products company), Fried dedicates a chapter in his book to the conundrum faced by so many successful entrepreneurs; a conundrum I’ll simply label: “Should I sell it, or should I continue to build it”?

Fried generally advises his readers to continue building; making these points:

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One of “Morris’ 75 Immutable Laws of Life and Business,” reads like this:

“People lie … Numbers (generally) do not.”

And while I am not, and by any stretch, impugning the integrity of any of my former or even current employees, it is much easier to, for example, “get through” a staff meeting when the sum and substance of your report to management is anecdotal, rather than empirical.

I doubt that I will ever forget the light bulb that went off when I arrived at the point in my young career where I truly understood the words being uttered by one of my early-career mentors, “Measure results, not activity.” I was 22 years old and the youngest person in a twelve-person organization when I heard that aphorism and man, did it make sense! Prior to that particular curtain going up, I would approach staff meetings with complete trepidation --- fear, even. My memory is understandably fuzzy, it being nearly four decades since I heard my guy pronounce those words, but I know that at least once or twice I became physically ill just by knowing that I had to confront my sales manager, a guy almost twenty years senior to me, about his "progress" (or lack thereof) towards closing new business.

I guess it would help if you knew that this guy was a master orator and story-teller. He had the ability to convince me that the sky was red and the oceans pink. In the game of persuasion, he was both King and Knight.

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I was exhausted. Flat-out, dead-tired gassed. I felt like I had just single-handedly defeated both Julius Ceasar and Alexander the Great.

It was that kind of exhausted.

I'm referring to Tuesday, June 15, a day that may well turn out to be the most significant day in the history of Pittsburgh Business Radio.

Sounds mighty pretentious, does it not? But who knows? Maybe a decade from now, I'll look back on this date as the day that our start-up enterprise finally took flight.

About three months ago, we asked Darryl Grandy to resign his job as show producer of The American Entrepreneur radio show and instead devote 100% of his time and effort to seeking out and securing on-air interviews with the top entrepreneurs, CEOs, founders, and executives who reside on this planet. We gave Darryl zero instructions other than, "go get' em."

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My dry cleaner screwed up.

I won’t mention my dry cleaner's company name, especially since I've been with them for years. But, they recently lost a couple of my garments, replacing at least one of them with a shirt that had a sleeve-length that was a good seven inches beyond my wrist. Since I have recently been considering a straight jacket anyway, I damned near kept it.

You should have seen these guys react. Not only did I receive multiple calls from the owner, but the guy who picks up and delivers the cleaning at my house has already personally visited me twice.

I don’t do a ton of dry cleaning, but neither am I a small-time customer. In a typical month, our family can spend $300 or $400 dollars on this service. So my account is reasonably important to them.

I was at Wright’s Seafood Inn the other day. I won’t get into the details of the problems I witnessed here, other than to say that Wright's owner, Joe DeCarlo, told me that he spends "a good deal" of his time on "customer relations." As an observer, I would guess that Joe spends a lot more than "a good deal" of his time making sure that his customers stay customers.

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Many of us know Diogenes as the ancient Greek philosopher who walked around all day carrying a lamp and proclaiming that he was, “Looking for an honest man.”

Wikipedia doesn’t let us know when, or even if, old Dio ever succeeded in his quest.

Quoting that same Wikipedia article (and how did we ever survive, pre-Wikipedia?), “Diogenes believed that virtue was better revealed by actions, than theories.”

Score another one for the Big-D. I suspect that if he were walking the streets of Washington, DC, today, his “lamp” would be powered by at least two Pratt and Whitney jet engines.

Diogenes came into my mind just recently, while I was contemplating just how far our society has strayed from the principles espoused by him and, among others, President Harry Truman. Some months ago, I finished reading Pittsburgher David McCullough’s biography of Truman, which reveals a man obsessed by the truth. And because of this obsession, Truman was both admired and feared by those who dealt with him day-to-day.

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Imagine my glee wouldst that someone could possibly contact me to talk about his/her personal experience with this disease. (Note: I finally did make contact with one … that’s right, just ONE … person with N/E cell cancer, and boy did I bug the hell out of this guy!)

In 2004, no such site existed. But today, there is a site called PatientsLikeMe.com that receives, roughly, 100,000 unique visitors each month.

And why not? They have absolutely no cost of goods sold, a first-rate product (what could be more fresh?), nominal overhead, and --- they don’t even have to spend money marketing to site visitors.

Which begs the question: “Might this then be the company of the future?”

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