Shut up and listen! | Tilman Fertitta

Published in: 2019

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Tilman Fertitta has a net worth of $4.2bn [2021] and is the sole owner of Landry’s that owns and operates restaurants, hotels, theme parks, casinos, and aquariums around the United States. The g12roup includes well-known names such as Golden Nugget Casino and Bubba Gump Shrimp Co. “Shut up and Listen!” is about Fertitta’s best tips for aspiring entrepreneurs.

HAVE A CONSTANT CONCERN FOR YOUR BUSINESS. Your business is constantly exposed to competition and if you relax or are unfocused, you will be punished by the market. However, there is a big difference between being afraid (which we should not be) and being concerned / worried (which is healthy and developmental).

THERE ARE NO SPARE CUSTOMERS. All successful companies are in some way created around some form of hospitality / service – something many entrepreneurs do not realize. Almost no product or service is so good that it does not have competing products or services. A superb service can be what tips over the customers to your business. Fertitta has a mantra that he often says to his employees: “It’s free to be nice”.

KNOW YOUR NUMBERS. An entrepreneur must know his numbers inside out. If he is woken up in the middle of the night, he must be able to answer questions about how much working capital there is tied up in the business, delivery costs, production costs or how much of the turnover a specific customer is. Budgets are of great importance and it is good to have both weekly and monthly budgets. Some activities are also suitable for daily “flash reports”. Knowing how your business is performing on a daily basis is as important as selling your product. You do not want to be surprised 30 days after the end of a month to realize that you have made a loss.

THE 95:5-RULE – WHAT IS YOUR 5%? Most reasonably successful companies are good at 95% of what they do. It is the remaining five percent that determines whether the company thrives or not. It can be the cleanliness of the parking lot, the store or the factory, or that little extra that the customer gets but did not expect. Never be satisfied in the pursuit of improving the 5%. The 95% who work well tend to take care of itself.

SELL TO THE MASSES. Fertitta believes that we should “sell to the masses, not the classes” – that is, go for volume markets with low prices instead of premium products that only a few can afford. Companies that successfully target the masses are much less limited in what they can achieve.

WORKING CAPITAL IS EVERYTHING. Working capital is a company’s pulsating lifeblood. The amount of working capital is different for different business models and varies with seasonal variations or growth. If a company cannot finance working capital, it hampers sales during the high season. Sometimes success through an unusually large number of orders can be negative for a company with limited resources. Without available working capital to produce or buy the products, the company is forced to say no to the customers, which gives disappointed customers and a tarnished reputation.

SAVE IN GOOD TIMES. Business cycles come and go and when it is at its darkest, the opportunities can be the greatest, at the same time as bank financing may not be available. With cash, you can take market share from distressed competitors, or even take them over to fire-sale valuations. Do not fall into the trap of consuming the first success and then not have dry gunpowder when the inevitable economic downturn strikes.

BORROW WHEN YOU DON’T NEED. Make sure to arrange bank financing as soon as you can and preferably when the times are good. Then you get the best conditions and secure access to financing during future tougher times. If the conditions are good, take out a loan even if you do not need it at the moment – the option value of cash can far exceed the interest costs.

PLAN FOR THE WORST. If the business currently does not survive a “worst case” scenario, implement the necessary changes. When times are tough, we often tend to forget that it will be good again, and vice versa in good times. You have to prepare for both situations, because they are both on the way, sooner or later.

FORGE WHEN THE IRON IS HOT. In 1992, Laundry’s was listed in a hot market and overnight Fertitta’s shares were valued at $100m. Between 1993 and 2002, Landry raised $400m in equity capital. In 2004, Fertitta saw that the owner of Golden Nuggets was in financial trouble and raised $800m to take over the casino at a fire-sale price. Then came the financial crisis and Landry’s stock crashed. Fertitta, who had cash, bought out the company from the stock market. A year later, the company had recovered, and Fertitta was the sole owner of a group with $1.2bn in sales and a cash flow of $ 200m.

KEEP YOUR HUNGER – FEEL POOR. In order to be constantly evolving, it is important to never lose your hunger. Fertitta’s way of doing this is to somehow always be able to feel poor. He does this by thinking of things he really wants but cannot afford. Early in his career it was a sports car, later in his career a helicopter or a baseball team.

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