33 secrets for super success

How To Make Quantum Leaps in Your Business Reveals 33 Secrets for Super Success

Mr. Pea turned $820 into a $400 million market-valued energy company in 8 short years! Now hes coaching others how to duplicate his success. Visit: http://www.DanPena.com

Copyright 2004 Daniel S. Pea Sr.

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SECTION 1

INTRODUCTION

OVERVIEW Welcome to the Quantum Leap you Can Do That! Seminar. The YCDT seminar presentation has been designed especially for you, the entrepreneur and would-be entrepreneur. The seminar covers what I believe are the most important tools for developing, starting, and growing a business enterprise. In fact, I have attempted to organize the seminar and this course manual as if it were a new business. You wont find a lot of detail and analysis in these pages. What you will find is a statement of a business philosophy and some guidelines for making business decisions, which are in line with that philosophy.

THE PHILOSOPHY The Quantum Leap You Can Do That philosophy is about dealing with the conventional wisdom; its about making decisions in business and in life that go against the tide of popular opinion. It isnt about anarchy or rebellion. Its just a different approach to handling the often heard statement, You cant do that. We hear this admonition may times a day. When it protects us from harm or from committing a crime, we should heed its warning. After all, we live in a society of laws and rules and must conduct ourselves accordingly. But we also hear this phrase when it has nothing to do with harm or crime prevention. We hear it all too often as the conclusion of other statements like, Thats never been done before, or It just doesnt sound right to me, or the worst, I dont know how to do that; therefore, you cant do that. Philosophy is one thing, implementation and completion are others. This seminar is about recognizing You can Do Thats. It is about differentiating between legitimate warnings and ill-founded advice. It is about implementation, execution, and completion of decisions made in the face of the conventional wisdom. The YCDT philosophy is not for everybody. If at any time during the seminar presentation you begin to feel uncomfortable, dont be alarmed. Many of the precepts, concepts and what I call Pea-isms will be very different from what youre accustomed to.




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SEMINAR PRESENTATION There is no set presentation format for the seminar. There is a beginning, so to speak, but there may not be an ending. It is my intention to cover the materials in this seminar manual, but it is not absolutely necessary that that be done. The beginning of the seminar will be comprised of some introductory remarks and the introduction of the participants. After that, its up for grabs. Its up to you, the participants, to dictate how far we go down any path. It is infinitely more important that every question be resolved than it is to complete the manual. You will take this manual with you when you leave; you cant take the participants and their unique experiences and observations. You can always refer to this manual if you choose to do so; what you will not have is the option to avail yourself to the minds and voices of the seminar presenter and the other participants. By the time this seminar ends, there will be no question in your mind about the meaning of the YCDT philosophy. There will be no argument as to its application in business, especially for the entrepreneur and would-be entrepreneur. Each seminar group will simply find the answers using its own means.

THE SEMINAR MANUAL This seminar manual has been written in an easy-to-read, easy-to-use manner. The manual has been written, and punctuated, very much like I speak. This is not an English composition book. Although based on the events of my personal and business life, all of the names, dates, personalities and other nice-to-know information and data have been eliminated. All that remains is the hard technical information that the participant needs to know about gut executive-level decision making in the face of the conventional wisdom.

SEMINAR AND SEMINAR MANUAL ORGANIZATION The topics covered in each section of the seminar manual represent homogenous groupings of issues requiring the same or similar decision process. The sections of the book from front to back represent a rough timeline of events that the entrepreneur would face in starting, developing and growing his business.




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The YCDT philosophy is embodied in The Five Credos for Success. As was noted earlier, philosophy is one thing, but implementation and execution fare another. In the classic scheme of things, philosophy gets ready for action by being codified into a set of principles, which in turn get restated into a set of operating procedures, which in turn get restated into a set of day-to-day standard operating practices. This is the normal implementation and execution process. And this was the process I used to build Great Western resources inc. (GWR). But many hours of describing how to fit a myriad of principles, procedures and practices into each participants unique situation would get fairly boring, fairly quickly. For ease of presentation purposes, the PPPs have boiled down into what I term Pea-isms. These are hardly akin to the statements of Chairman Mao, but they are Words to live by if you are serious about entrepreneurial success for your business project. To illustrate how various Pea-isms worked in certain situations, some of the conventional wisdoms I faced as I built GWR are covered in this manual and the seminar presentation. A current list of all Pea-isms is provided in Appendix A. As you will quickly realize, these are not unique to me or to GWR by any stretch of the imagination, and each seminar participant has probably faced the same situation before in his own circumstances. What is unique, however, is how I handled the situation and succeeded. During my professional life I was told 86 times what could not be done. I know it was 86 times because I kept a list! (See Appendix B) In all 86 instances I accomplished what I really desired. And in terms of Great Western, Im not talking about small triumphs, Im talking about huge, insurmountable tasks like

TURNING $820 INTO $400 MILLION MARKET-VALUED ENERGY COMPANY IN 8 SHORT YEARS WHEN THE PRICE OF OIL WENT FROM

$40 TO $10 PER BARREL!

GETTING A $20 MILLION CONTRACT WITH THE FEDERAL GOVERNMENT WITH NO OTHER EMPLOYEES OR OFFICE SPACE

ONLY A PHONE AND LEASED FAX MACHINE!

ACHIEVING REVENUE OF $50 MILLION MY FIRST YEAR IN BUSINESS!

BUYING A FOREIGH SUBSIDIARY FROM A FORTUNE 200 SIZE COMPANY OVER THE PHONE




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ON NEW YEARS EVE!

BUYING A $150 MILLION U.S. COMPANY FROM ITS MULTI-BILLION DOLLAR FOREIGN PARENT WHEN THEY DIDNT WANT TO SELL!

the exciting details are in the subsequent sections.

CONCLUSION This seminar manual and the seminar presentation in which you are about to participate are about success in business in a free enterprise economy. Its about choices; its about decision making at the business management level. I believe my approach to the subject matter is significantly different that no other how-to venues in one very important aspect: I have already achieved the success. I created the philosophy and developed the process. And, most importantly, I used the process to start, develop and grow my company, Great Western Resources. I have achieved implementation, execution, and completion. Great Western Resources is a diversified public company in the energy business. Its real you can go touch its oil derricks and coal mines; you can talk to its management and its employees. The YCDT philosophy isnt a get rich quick scam. There is no elevator to the top. There is nothing beyond this seminar except for the audiotapes, which you get at no additional cost. There is no magic computer software, no cute T-shirts available for purchase. Id like to see each and every one of you succeed. I did so can you. But if you dont, well, you didnt want success bad enough better luck next time. As you will better understand at the end of this seminar, being an entrepreneur means there is always a next time. This seminar is simply one form of opportunity. It is knocking now at your door. But it is up to you to answer the door.




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SECTION 2

THE MANY FACES OF THE CONVENTIONAL WISDOM INTRODUCTION First of all, as Im sure you have already noticed, this manual is written in the first person singular. I can do that since this is my seminar and my seminar manual. That means that you, the reader, will see a lot of Is as you pour over the text. Most English teachers would tell you to minimize the use of the pronoun I when writing. And they are probably correct. But Ive chosen to ignore that piece of advice, which is alright, because I also ignored it back when I was still in school. Besides, if I ignored it back when I was still in school. Besides, if I used Daniel S. Pena or Dan Pea instead of I, you would get tired of that, too. So, I it shall be; the decision has been made. Is it the right decision? Who knows, or more importantly, who cares because:

Pea-ism: the consequence of a misguided decision




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is de-minimis in the concept of eternity. OPPORTUNITIES As I stated in Section I, this seminar program is really all about choices: recognizing opportunities, which present themselves to us at various times in our lives and deciding what to do with them. It is about getting on base no matter what, i.e. stepping into a pitch if necessary. It is about getting hits and knowing when to swing away for a home run. And even more important, this seminar and the YCDT philosophy is about getting into a position for a Grand Slam. But most of all, this experience is about feeling comfortable swinging away when the bases are loaded. As result of what you learn at this seminar, you will know when your special time comes and youll know what to do with that bet. Before I started Great Western Resources, I had a lot of opportunities present themselves to me. But I ignored them. Why? Because with every opportunity there came seemingly a thousand You cant do thats. There were always more than enough reasons for doing nothing. The conventional wisdom always had plenty of support for any decision which said, Do nothing. In fact, as time went on, the conventional wisdom presented itself to me so many times that every time an opportunity came up, the words You Cant Do That would immediately float across my mind. It got to the point where You Cant Do That seemed the natural and probable consequence for everything. Remember the list of the 86 times I was told it couldnt be done! (Appendix B) Then in 1976 a significant event occurred in my life that changed the way I looked at opportunities. Between 1976 and 1978 I redefined my meaning of success. What was that significant event? Well, Im not going to tell you because 1) it would be too much of a surprise; and 2) its personal and its my secret and I dont go around telling secrets. Some of you will experience significant events like mine, and some of you will not. If you dont does that mean that you cannot possibly be successful? Of course not.




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But Ill let you in on this little secret: this seminar could be a significant event for some of you. This could be the proverbial knock! SETTING GOALS AND OBJECTIVES. Whether you are in an entrepreneur on the verge of brilliance or a seasoned executive, you have already experienced some form of serious goal setting in a business environment. That pro forma you prepared for your bankers in an attempt to get working capital funds with which to start product development was the quantification of an objective. The plans for the near term that you laid on your partner or subordinated at the last meeting were really goals. Do goals and objectives have to be realistic? If they are not, the probability of achievement is low, and failure to consistently achieve goals can lead to frustration and disillusionment. At least, thats the conventional wisdom.

Pea-ism. Always shoot for the moon. That way, even if you dont hit the bulls eye, youll at least get eighty percent.

GOALS As you will see on the pages that follow, I kept track of goals (in no particular order). In some years references were set down on scraps of paper. In other years, my wife wrote them down for me very neatly on a legal pad. As a family, we normally choose the week after Christmas to sit down and list our goals. I never assigned deadline dates, fearing that it might actually become a self-fulfilling prophecy, since most goals can be achieved in less time than we believe. For example, I decided I was going to buy an island with a castle in the Spring of 1983, less than a year after founding GWR. At that time, I hadnt bought a U.K. company or even thought about going public. Some nine months later, GWR purchased a UK company and sixteen months later, in August 1984, we went public. I cant tell you if we would have never gone public in the UK even by 1995 if I had put a time limit on my big goal: the castle. I just know I had no time constraint and did it in 1984. I was focused on buying a castle and I subconsciously did whatever it took to fulfil my goal.




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You will see that definitive time limits act as boundaries for how fast you can achieve something, not as a benchmark for achieving something in a timely manner. Castle Goal time Sequence

1) Set castle goal April 1983 2) Looked at castles in UK Thanksgiving 1983 3) Bought UK subsidiary from large U.S. company in a totally unrelated

transaction New Years Eve 1983. 4) Visited UK company (Spring 1984) and decided, while in the UK,

there was a huge opportunity for GWR to go public. 5) Went back to US and found something to take public. 6) Made first offer on castle June 1984 7) Went public on my 39th birthday August 10, 1984 8) Made final offer August 1984 9) Moved in castle September 1984

While building Great Western I had two goals. The first was to become one of the ten highest paid executives in the energy business. The second was to amass assets at Great Western in the $2-3 billion range by the early 1990s. My tenure at GWR ended before I could realize the latter, but I did achieve the former. In fact, I was in the top five from 1986 to 1990. You may be thinking that I somehow sacrificed the latter for the former. Nothing could be further from the truth. Executives dont get big bucks unless they perform, and I performed. And when I performed, everybody employees, management, advisors and stockholders benefited. I had no greater joy than when employees were able to buy a new house or something of that nature when they exercised their stock options. I was especially happy the day my long time administrative assistant bought her new house. You may want to keep that idea in mind the first time you feel bad about how much money youre making. Besides, always remember:

Pea-ism. Always, always, always pay yourself first.

DRAWING ON EXPERIENCES We have all heard the old sayings, Experience is the best teacher and Those who dont learn from history are doomed to repeat it many times. I firmly believe in the teachings of these words, and so should you.




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Experience comes in two forms: there are good ones and there are bad ones. You should build on the good ones and remember the lessons learned from the bad ones. And once you draw up the rules of conduct for the future, stick to them, no matter what.

Pea-ism. Dont, under any circumstance, ever Ever second guess yourself.

Before founding Great Western resources, I was president and CEO at another vertically integrated natural resources company, a company that I founded and helped to build and position to become a real up-an-comer in the energy business. Notwithstanding all of my well-documented successes there, there was one thing that really bugged me. I was the number two man at this company, and, as such, I didnt really have the final word on the big decisions. That one aspect of corporate life was so distasteful to me that I vowed I would never do it again. After I left that company, I had a seemingly fantastic opportunity present itself to me. I was offered a position with a salary of $1 million a year. The position was for the number two man at an emerging company. That million dollars was more than a little tempting, believe me. However, I turned it down and never looked back. Just another dumb luck story? Not at all. I knew in my heart that I needed to stick to my rule of conduct. I did, and so should you. It is one of the best pieces of advice that I can give to you. Speaking of sources of advice, try looking to the experiences of others.

Pea-ism. You wont always have all of the answers. Take seriously the advice of others who you respect.

Periodically throughout this manual, I will say I went with my instincts, or I knew in my heart, or I made a gut decision. The difference between success and failure many times will be how you, as CEO, feel about the course of action that should be taken.




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There will be times that this feeling will give you additional insight. Ive learned the hard way to go with my gut feeling. Normally this feeling is associated with bad deals. So when the feeling comes, dont fight it. It is likely to save you a great deal of pain and heart ache. You may develop the same gut feeling for good deals. I can only feel bad deals. One of the most influential people in my professional life was a man I met early in my career. At the time, he was almost three times my age and looked like he belonged in a retirement home. He had no formal education and was very rough around the edges. Yet he ran one of the largest international corporations in the world, with luxurious offices and accommodations in the heart of New Yorks financial district. I hung on his every word, thankful for the opportunity just to get close enough to hear what he had to say. We formed a pretty close friendship and I would stop by to see him whenever I had the chance. For whatever reason, as soon as I would get to his office, he would say he had to go to the bathroom and we would talk together in the mens room. Some of the best advice I ever got was given to me while standing side by side with this elderly gentleman at the urinal. Is there anything to pass along to you? Just one thing: simplicity. My friend ran his international corporation from New York as if it was nothing more than a vegetable stand sitting alongside a dusty country road. For instance, his entire finance department consisted of one person: one man with a journal and an adding machine whose job it was to count the money. Seriously. I never forgot that.

PERCEPTION IS REALITY Never underestimate the power of illusion. Reality is in the eye of the beholder. What seems real, is real; perception becomes reality. Early on in the development of GWR it became increasingly clear to me that if I and Great Western were going to go anywhere, we had to make ourselves look as if we were already there. I knew that our business associates had to see me in time now as I planned to be in time future, or there wasnt going to be any future for either of us. I needed a quick transfusion of perception in order to acquire the perception. Sound like double talk? Read on. As Ive already said earlier in this chapter when referring to goals, one day in the Spring of 1983 while running with my wife in Torrance,




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California, I had decided to buy an island with a castle. Yes, a castle, the ultimate ostentation, clear evidence that one has reached the pinnacle of success. After all, I knew from my Wall Street days that if you wanted to do business with financial institutions, you had to prove to them that you didnt need their services. So the castle was to become the perception which would cause the business community to realize that we didnt need their help since we had already arrived, which, of course, we hadnt. There was just one small problem: Hey, Dan Pea, whats wrong with you anyway? You cant buy an island with a

castle. Youre a nobody and nobodies dont go around buying such things. Before you can own a castle, you have to be somebody. You cant buy a castle! You

cant do that! ****************************************************************** The conventional wisdom was right, of course. Which was exactly why I ignored it. I bought the castle, Guthrie Castle in Angus, Scotland. And as my wife Linda points out, it is on an island called Great Britain! I bought it because I made myself look like I didnt need it, like I already had two or three others tucked away and this one was just a bauble. So I manipulated perception to form reality to acquire the perception which would form the basis of other realities. Guthrie Castle is now my permanent home, the safe harbour for my family. It is no longer a perception, it is real. In conjunction with our decision, my wife and I had decided we wanted to raise our children in a different socio economic milieu. This may sound like a strange example. But it really isnt when you buy a new car or join a country club as a way to achieve business success, you are acting out perception as reality. You are putting yourself where you believe people will perceive you as being successful. The castle is merely an extension or a quantum leap from the rational. So where does all of this lead? Just where, you may ask, am I going with all of this talk of choices, opportunities, experiences and perception/reality. It leads to the YCDT philosophy; it leads to The Five Credos.




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THE FIVE CREDOS The Five Credos is not a rock band from the 1960s. It is the operational arm of the YCDT philosophy. Its where theory gets down to business, where the rubber hits the road. The Five Credos are what enabled me to take $820 in cold cash and turn it into a $400,000,000 public company in just eight years. I have carried these words on my person since the late 1970s. If you dont believe that, just ask me and Ill show you my DayTimer where I have written them down every month since the late 70s.

The Five Credos

- Yesterdays dreams are todays realities.

- See your dreams ahead of time now.

- Simulation: practice within when youre without.

- Act as if there are no limits to your abilities.

- Enthusiasm: comes from the Greek word, god within. QUANTUM LEAP/HYPER GROWTH In this seminar, I and you are going to cut tight to the heart of the matter. Im going to show you how to Quantum Leap your career, your finances, your life by concentrating on the one and only objective that means anything at all: your real dreams! And when I say concentrating, I mean a focus, a tight focus a laser beam focus on the achievement of that objective. There is only one path to success: absolute and total commitment. If you just think you may want to be successful, then youre in the wrong seminar. And I can guarantee, you will not be successful! If you came here just to see if I was even half of what youve heard, I cant do a thing for you. But if youre here because you have a dream, and you believe deep down in your soul that your dream can come true, then you came to the right place. As long as you have a burning desire to succeed, believe me, you will succeed. You must keep those fires burning. And many times it will not be easy. In fact, very often it will be almost impossible!




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However, as long as you have the will, But dont know the correct path, I can provide the way. It doesnt matter that you may have failed in the past, no matter how many times. (And perhaps it may be better that you failed a few times.) But forget about those past experiences! Forget about those past obstacles! Im going to show you how to ignore them completely or work around them or over them or go through them! Pea-ism. To achieve hyper growth, you must avert avoidable mistakes and

let your successes run their course.

All of this is possible only if you believe in your dream and are focused on it becoming reality, Laser beam focused. Concentration. When I built Great Western I lived and breathed its success. I believed in my dream. I was obsessed. I was so focused on its achievement that I slept most of the time in my office just so I could be near it. I had often wondered why CEOs had showers in their offices. I found out why. Well, its time to get going with that company you are trying to start and/or develop and run. No more prefatory remarks, no more introductions. Its time to put the pedal to the metal; its time to put the rubber on the road. Ladies and gentlemen, start your engines!




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SECTION 3

BUSINESS DEVELOPMENT: A HOST OF INITIAL OBSTACLES

ARE YOU AN ENTREPENEUR? Websters defines an entrepreneur as One who organizes, manages, and assumes the risk of a business or enterprise.




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The guy who started General Motors was an entrepreneur. But so is the young lady who is just now starting her engineering firm, and that man who just retired and is opening his own printing shop. The concept of the entrepreneur has been blown way out of proportion. We have attached to it a sense of grandeur and awe that simply does not belong. Maybe its because entrepreneur is a French word. Anyway, most people see entrepreneurs as gallant and determined dreamers who must fight the establishment in the form of financial institutions and the industry base. Its the little guy with the new idea against the big guys with the market share. Its good against evil; small against big; new against old. The fate of the world hangs in the balance! Nothing could be further from the truth. Its simple. If you work for someone else and get a regular paycheck, youre not an entrepreneur. If you organize, manage, and assume the risk of a business or enterprise, youre an entrepreneur. One more time. There are only two types of folks involved in business: those who like the comfort of a paycheck, or those who like to risk everything on success or failure. Pick one, but only one.

THE GREAT UNKNOWN Year after year, the single largest cause of business failures is mismanagement. But no one who ever had a failed business will admit to that. Mismanagement may have caused everyone elses business to fail, but not theirs. No, their business failed because the market went away, or the federal government did something or didnt do something, or it was those cheap imports. They could have made it, but external events simply overcame them. As they say in the boxing world, I couldda been a contenda. Two things cause businesses to never get started or fail once they get started. The first is not having a full appreciation of the impact of the unknown, and the second is failing to manage in known conditions of the unknown. The sheer mass of the unknown is at its greatest when the business is being initially developed. Each entrepreneur starts the race to grow his company from a different position on the track. We all come to the race with different experiences and capabilities. Some of us are more prepared than others. Before starting Great Western, I had a lot of experience in the business world in general, and a little experience in the oil and gas industry in particular. That general experience gave me a head start in the race, especially because I knew:




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Pea-ism. Even when one thoughtfully and judiciously plans, more often than not such plans are overcome by external events. Therefore, never

underestimate how wrong you can be.

At Great Western, we never underestimated how wrong we could be. We thought over everything; we put every possible event, issue, and consideration into our decision models. We ran every conceivable scenario, and then we ran them again, and then we ran them one more time. We discussed them at breakfast, over lunch, and at late night dinners. We talked about them constantly. We planned for success but provided for detours occasionally by one or more unknowns. We worked seven days a week, sixteen hours a day. Its all part of being an entrepreneur a surviving entrepreneur! Once you get started, you must continue to grow. The amount of time spent at the business is the same, but the areas of focus change. It is now time to manage in known conditions of the unknown. There are many theories of management, and all of them have one or more applications across the broad spectrum of different industries products and services, utilizations of resources, and management styles. The one universal dictum seems to be that financial return is directly proportional to the assumption of risk (i.e., that which distinguishes the entrepreneur from the guy who gets the paycheck). The saying, high risk/high payoff is a very familiar one, indeed. But implicit in this risk/return equation is the presumption that the management of a company can, in fact, manage its affairs in such a manner so as to realize the financial return accruing from the assumption of the risk in the first place. In every business proposition there is upside risk and downside opportunity. If these two elements are in a state of equilibrium, the company will perform in the long term at some average, or normal, rate of return. I thought long and hard about these management dicta, and applied them to the natural resources industry in general, and to the operations of Great Western in particular. There is a lot of risk in the oil and gas industry. There are enumerable unknowns. In fact, every prospectus you read from an oil and gas company contains the caveat emptor, oil and gas exploration and development is a speculative activity




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which, compared to other activities, involves a relatively high degree of financial risk. I had to read that statement many times, but eventually began to wonder if it were really true. There were unknowns, but if you managed a business in a manner to account and provide for these unknowns wouldnt you otherwise be underwriting its success? I firmly believed so. Besides, I didnt want the management at Great Western to allow themselves the opportunity to fall back on a false premise. If you accepted the argument that it was hard to make a buck in the oil and gas industry because it was risky, then you could excuse yourself from not making that buck for the same reason. If you allowed yourself to be overcome by external events, you could excuse your poor performance due to these events. I found such a notion abhorrent. Pena-ism. Plan for success: no back-up plans, no rip cords, no fail-safes; or,

you will fail.

One final point on the unknowns. Each entrepreneur believes deep down in his heart that his problems are truly unique. A lot of other entrepreneurs have succeeded at their enterprises, but then, they never had the problems that I have is a familiar lament. Let me be the first to tell you that we all share the same boat. The problems and the obstacles are the same, they just come in different guises. I looked at the risk factors enumerated in the prospectuses I saw and came to the conclusion that the oil and gas industry was really no different than any other industry. Each of us had to deal with the same unknowns, they just came wrapped in different packages. For instance:

Even if oil and gas interests are in areas of proven reserves, there is no guarantee that a discovery would have commercial significance.

Was that any different than a pharmaceutical company trying to develop a new drug? An agricultural company trying to develop a meatier tomato?

The appraisal of oil and gas interests is not an exact science.




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Is there any form of prognosticating, estimating, and forecasting that is an exact science? Unforeseen circumstances may result in drilling delays or lower that

expected production levels.

Was the oil and gas industry the only one having to deal with unforeseen circumstances? Movements in the market price of oil and gas or changes in taxation

or other government action may have adverse effects on income levels.

What, the airline industry never had to worry about deregulation? The automobile industry about air bags? Different industries, same problems. We are all in the same boat. The unknowns dont play favourites. I am a firm believer in the adage, Things that start off wrong only get progressively worse. There is no better method of operating in the world of unknowns that to do your homework. The more effort expanded before the decision, the less the pain when things dont work out, or

Pea-ism. The more you investigate, the less you have to invest.

THE PEOPLE PROBLEM The human resources of a company represent an ironic situation: they are the one asset that counts the most but also the one that never gets counted on the balance sheet. They are also a businesss greatest source of frustration. My experience with the people side of organizations puts the issue into three different, but related, categories: getting people, dealing with personal/professional relationships, and getting rid of people.

Hey, Dan Pea. Whats wrong with you, anyway. You cant get top quality professional people to give up their promising careers to come join you at Great

Western. What can you offer them? It will never work. Youre wasting time, both yours and theirs. You cant do that!




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Its difficult when youre starting out to let go of any portion of your dream. Its not that youre afraid someone else will steal it, its because youre afraid no one else will embrace it with the same love and devotion as you do. Pride of authorship has killed more budding business deals than anything else I can think of. Personally, I would rather have 50% of something than 100% of nothing. But once you convince yourself that you cant do what needs to be done alone, you need to find the right people to travel the long journey with you. How do you go about finding the right people? How do you pick your partners? How so you form the team with the greatest probability of achieving success? Before you make the final decision, ask yourself this: Could I be married to this person? Because thats what you are going to be for an undeterminable period of time: you are going to be married to this other person or group of people. My two partners came to GWR from their professions, one from accounting and one from law. We had met along the way of separate careers, finally joining forces at my behest to pursue the dream called Great Western. They were A-1 performers at their respective firms, and both would have done exceedingly well even if they hadnt done so at Great Western. They were both very well paid partners at their respective firms. The conventional wisdom was wrong once again. Both of my partners gave up a lot to dedicate themselves to Great Western. Why? I dont know. I presume that there were any number of reasons. The lesson to be learned there by you is that it CAN be done. The means you employ are up to you. The question is often posed as to whether or not people in business can have both a personal and professional relationship without destroying both relationships. The answer is a resounding, yes. My partners and I did everything together. Its all part of the entrepreneurial marriage thing of which I just spoke. You spend so much time together that a personal relationship is unavoidable; in fact, its a foregone conclusion. If you cant be friends, you cant be business partners. We all became very close, as did our families and circles of friends. You are going to have to deal with your personal relationships outside of your professional ones. These are easy if your entrepreneurial endeavours fail. Down deep in their hearts, most of your friends want you to fail because that makes




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you look bad. If you succeed, then they look bad. When you fail, theyre happy because they have the upper hand. This revelation may shock you but, believe me, its true. Its just human nature - jealousy and those other evil things. Well, you cant control what others do, but you can control what you do.

Pea-ism Always maintain your personal relationships on the same plane upon which they were formed. True friends will rejoice in your professional

successes; allow them to enjoy them with you. Do not ever reassess their personal and professional lives in terms of your own.

One of the hardest jobs for a senior manager is to get rid of people. It doesnt matter what you call it - work furlough, layoff, early retirement, reduction-in-force, a firing - it all leads to getting rid of somebody. And dont think it becomes any easier just because you dont like somebody. You may not like them personally, but they were probably very good technically, and they are probably going to be hard to replace. Regardless of your approach to this matter, there is one cardinal rule you must follow:

Pea-ism When you get rid of someone, never ever give them a hook with which to get back in. Always make it a clean, definable break.

Separations at the management level can be very expensive for a company, especially if employment agreements are involved. But no matter what the cost, sever the relationship completely. Do not try and save money by offering hooks - such as stock options - to the person who you want out. Get them out and keep them out. And money that you think you are saving will be peanuts compared to the aggravation youll experience later on.




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DOING YOUR FIRST REAL DEAL In the early stages of the life of every business there comes the time when you, the entrepreneur, must do your first deal. It may be your first financial arrangement with a bank, an initial advertising contract with a real customer. Regardless, how you perform at this juncture will have a significant impact on the survivability of your business enterprise. A lot of the topics discussed to this point will come into play during the conduct of your first deal-making adventure. There will be real opportunity to see how well you handle your first transaction. If all goes well, will you build on the experience? If things go poorly, what mental corrections will you make? What illusions will you create to maximise your benefit form the transaction? Have you prepared yourself for success: no fail-safes, no fall-backs? Have you covered the unknowns from every possible angle? Have you identified and practiced (in you mind) all of the scenarios to reduce the probability of error to its minimum; have you all but eliminated the margin for error? The game is on the line, so to speak. The fulfilment of your dream hangs in the balance:

Pea-ism. The fulfilment of your dream is directly proportional to your desire to succeed. How badly do you want to succeed, how much are you willing to sacrifice. For if you are not prepared to die, then you are not

prepared to live.

I remember my first real deal with what was then called Great Western Development Corporation, the company I started on Friday, July 13, 1982 with $820 cash. ***************************************************************

Hey, Dan Pena. Whats wrong with you, anyway. You cant get a major contract from the federal government with no employees, no office, no money,

and a leased fax machine. They wont give an important contract to a company like GWDC. You cant compete for that contract. You cant do that!

*************************************************************** Great Western Development Corporation had bid on and won a jet fuel supply contract from the U.S. Government through its Defense Fuel Center operations. I had found out about the opportunities (theres that word again) for such contracts during my visit to Washington D.C. The original value of




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the contract was $20 million, but that would eventually grow to over $50 million. How improbable was this deal? It is the conventional wisdom that one could sell Amway products out of a spare bedroom in the home, but not fuel for Uncle Sams war machine! Was I scared? You bet! Was I apprehensive about the transaction? You bet! Was I comfortable with the situation? You bet! Was I afraid of success? No way! Was I afraid to die? Never, because I wanted to live more than anything.

SECTION 4

BUSINESS DEVELOPMENT: RAISING INITIAL CAPITAL FOR GROWTH




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THE NUTURING PERIOD Great Westerns fuel supply contract with the federal government came with a slim margin, but it provided enough working capital to keep the business going and also gave me breathing room in which to consider some candidate opportunities for growth. It was 1982 and the Tax Reform Act of 1986 was still four years away which meant that tax shelters were still the rage with both individual and institutional investors. As you may recall, the Tax Reform Act took away virtually all of the attractiveness of tax shelters as investment vehicles. For the next two years Great Western Development Corp. put together three tax shelters in the form of drilling funds that performed fairly well, both financially and technically. Operating capital from the funds came in the form of the G&A fees payable to GWDC. These fees paid for two things: The operations for the business and the operations of the Daniel S. Pena, Sr. Household. This was the nurturing period for GWDC. Every new business goes through this period. During this period, the business enterprise is in its most fragile condition. The slightest bump or jar will break it into a thousand little pieces. It must be handled very gently; it must be coddled; it must be nurtured as if it were a newborn child. I nurtured GWDC with a velvet-covered iron fist. The velvet was for GWDC, the iron fist for me. I knew that GWDC needed nourishment to grow, and I also knew that selling a series of look-a-like tax shelters would not provide that needed nourishment. I knew that the second tax shelter had to be grander than the first, the third grander than the second. I knew it was time to put myself under the threat of the iron fist. It was time to see what I was made of. Great Western was either going to live or die, but either way, it was time to find out. I knew that the road to the big time in tax shelters went through Wall Street, but I also knew that you couldnt get there from a small office in Southern California with a no-name product base. I went to work and put together a series of illusions which put me on Wall Street with the third tax shelter. It was a classic example of the perception/reality ruse, and it worked very well. It was the first time that I had really done this trick with my own money at stake, and I was surprised at how easy it was to pull off. As a matter of fact,




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my successes with GWDCs second and third tax shelters lead directly to my decision to acquire what would eventually be Guthrie Castle. As I mentioned previously, even though the drilling fund tax shelters were successful financially, there was one aspect of this period in GWDCs nurturing period that really bothered me. The revenue steam from GWDCs operations had to fund both the business and my household. I was playing with my own money. The business decisions I had to make contained a variable that didnt belong. There was a problem that needed to be taken care of.

Pea-ism. You cannot win at poker with scared money - it gives off a stench that is repugnant to the winning hand. If you are going to play

poker, leave your money at home and play with OPM: Other Peoples Money.

Most entrepreneurs find themselves in this same situation. On the front end of the business development cycle, it is usually their money that is funding operations. It is scared money, and scared money is very difficult to play hard and tough with. Remember, this is the nurturing period for the business. Everything is in its infancy: the technical aspects, the organization, the human resources, and the financing. The entrepreneurs attention is needed everywhere. There is a new problem occurring seemingly every minute. Stress is at its maximum pressure. Its time to get some relief; its time to get some OPM.

FINANCING ALTERNATIVES A business enterprise needs funds for working capital and for facilities capital. Working capital pays for on-going operations, business development, and product development. Facilities capital pays for the facilities, machinery and equipment necessary to conduct the mission of the business. The corporate business entity has three sources of funds available to it to finance working capital and facilities capital requirements: earnings retained in the business (capital surplus), debt, and equity.




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Debt can be in the form of trade debt (payable in the normal course of business operations), short term debt (payable within a one year period), and long term debt (payable in whole in part beyond a one year period). Equity can be in the form of common or preferred shares to stock, or any hybrids and variations of the two. Financing the working and facilities capital requirements of a new business enterprise with funds from retained earnings is not a viable alternative. First of all, there probably isnt going to be an earned surplus, but rather an accumulated deficit. Secondly, even if there exists an earned surplus, it probably wont amount to enough to provide a serious source of funds for growth. That leaves debt or equity as the remaining sources of funds for the new business. With debt, you retain ownership but incur interest expense, a fixed charge of the business which can eat up a lot of net margin dollars, thereby restricting managements ability to use the funds from operations for its own projects. With equity, there is no drain on the funds from operations but there is a dilution of ownership and control. A detailed discussion of the pros and cons of using debt or equity is beyond the scope of this seminar program. Each situation is different. If you are really interested, let me recommend to you that you seek independent guidance from professionals in this area. Unfortunately, most of the guidance you will receive comes from people who never started or ran their own business. In August, 1984 I chose to raise capital for Great Western Development Corporation through the use of a public offering for equity shares in a new corporate entity called Great Western Resources Inc. Another option available was a private placement of equity shares. Once again, for those readers interested in the pros and cons of public vs. Private offerings, I would direct you to the same appropriate professionals in this area. GOING PUBLIC On August 10, 1984, my 39th birthday, GWRI had its initial public offering on the London Stock Exchange. Of 25,000,000 common shares authorized, 20,000,000 were issued on this day, 5,000,000 to be traded by the public on The Exchange. The stock was issued at 160p (about $2.00). At the end of the day, our stockbrokers presented me with a check for $10,000,000 representing the publics 25% share of the IPO. The remainder of this seminar manual, starting with the IPO, covers topics on business growth and development as I encountered them at GWRI from 1984 to 1992.




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SECTION 5

THE INITIAL PUBLIC OFFERING

BACKGROUND FOR THE DECISION By the time 1984 rolled around, I had accomplished a lot with Great Western Development Corporation, the company I started with $820 cash. The conventional wisdom had tried to dictate to me on a number of key issues and had come up short on all of them. My YCDT philosophy was now a permanent part of me. I didnt go around looking for the impossible, but I never backed away from anything just because it seemed impossible on the surface. The conventional wisdom had declared: You cant sell tax shelters on Wall Street from a little outfit in Los Angeles - I

did it with our third drilling fund in late 1983.




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You cant come out with new tax shelters and compete in a already saturated market: I did it twice, and quite successfully, in 1983 with our second and third drilling funds.

You cant get orthodox Jews to come out on the Sabbath and sign a contract: I

did it, In Israel, as part of a joint venture deal with the Israeli government, also in 1983.

In early 1984 I was convinced of a number of things concerning GWDC as an emerging company and about myself as an entrepreneur. I was convinced that GWDC was in the right business sector (oil & gas) at the right time ( pre Tax Reform Act of 1986 and with the Republicans in the form of Ronald Reagan in the White House). And I was convinced that I had the right stuff (the YCDT philosophy in the form of The Five Credos) to recognize and take advantage of the right opportunities. But I also knew that philosophy and theory were one thing, but implementation, execution, and performance quite another. I took inventory of the things I had, to see if they were enough to take GWDC out of its nurturing period and into an accelerated growth period. First, and most important by a mile, I had a dream. That dream was to build the

fastest growing and eventually the largest natural resources company in the world. I had the human resources. I had two partners who shared my dream and

believed in it. They were also very good technicians in their fields of expertise. Additionally, I had hired arguably the best administrative assistant in the world. She is still with me today. I had seen the perception/reality ruse work with the second and third tax shelter

and with the purchase of Guthrie Castle. I had established my credibility with the American banking system. I had

financial support. Remember that federal government fuel supply contract that grew to $50 million in value? Well, that money found its way into the banking system and became what bankers call float. Bankers like float and they liked me because I gave it to them. Last, but by no means least, my partners and I had tasted success. We knew

how it felt and we liked it. It whetted our appetites for more.




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And I became even more obsessed with it! UK vs. THE U.S. (THE PROVERBIAL KNOCK) All of GWRs income-producing assets are in the United States. They have always been in the United States. I have been asked many times why we went public and are traded on the London Stock Exchange instead of one of the American exchanges. Some of the major reasons are listed below. They were valid back in 1984, and are still valid today. Im not recommending that every entrepreneur run to the London Stock Exchange as the only source of ready capital. But I am suggesting that there are numerous opportunities beyond our home soil. 1. The fees available for merchant bankers, investment bankers, stock brokers,

lawyers and accountants were way too low to get U.S. firms interested. However, we were big enough for the UK firms to take notice. 2. We were too small for the U.S., fees aside. It would have taken a monstrous

effort just to get somebody even to the point of remote interest. 3. In 1984, the U.S. oil market was simply wrung out. Besides, the U.S. was

going berserk with junk bonds and LBOs where fees generated were in the 10s of millions of dollars.

4. The UK was new to the oil business. The first oil had been discovered in the

North Sea in 1975 and the British were still enthusiastic about exploration. 5. The regulations covering IPOs were not quite as stringent in the UK as they

were in the U.S., especially for natural resource companies. We were not subject to the same scrutiny as were would have been by the SEC.

THE CHINK IN THE ARMOR This last point was important, very important, to the quantum leap development schedule I had established for GWR. It took me eight years to run $820 cash into $400,000,000+ in market capitalization for GWR by 1990. My goal was $2-3 billion by the mid 1990s.




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If I had tried to do that in the U.S., it probably would have taken me 20 to 25 years just to get to the first $400 million. I did it in eight years in the UK for the five reasons listed above, plus one other you wont find any mention of it in the text books on business management. I found the chink in the armour of The City, the international cognomen for the financial district in the City of London. The chink was the ego, arrogance, and insecurity of the people who inhabited The City. It was all part of the tradition, the lore of life in The City. It was as British as kidney pie and cricket. It was in their blood; it was in their training; it was in their entire sense of being. And I found that I could play them like a Stradavarius. It was easy for me because the biggest ego in The City from 1984 to 1990 was mine; it was easy for Great Western because on our worst day we were smarter and more assertive than they ever dreamed they could be. They were no match; they never had a chance; it was embarrassingly easy. Whether we actually were smarter or not wasnt important. The issue was we felt and acted a great deal smarter. We acted as if we had no limits to our abilities! Okay, so where does that leave you, the reader of this manual? Im no Dan Pea, you say? I have no desire to take on the financial institutions in London, you say? You dont have to be or do any of these things to succeed with your dream. All you have to do is find your own version of The City. That may be just a feeling of superiority you get when dealing with others in a certain way. Those that find it will succeed; those who dont, wont.

THE PROSPECTUS In early 1984 we had purchased for $60,000 an option to buy an equity interest in a series of oil & gas properties with the right to drill up to twenty-four wells. We still had some assets from our drilling funds around. At the close of business on August 10, 1984, Great Western had issued and outstanding 20,000,000 shares of common stock which closed that day on The Exchange at approximately 2.00, or $2.50. The market value of the company was 40,000,000, or $50,000,000. We sold 25% of the company for $10,000,000 and the shares closed at a 25% premium to the IPO price. The company had $10,000,000 in the bank and the cost basis in the stock held by myself and my two partners was $820.00.




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How could this happen? How could you generate $50 million in value off of hard assets under $100,000? Opportunity? To be sure. The prospectus for the IPO included a highly respected petroleum engineers report on the commerciality of the oil & gas properties. The engineering report indicated there was a good probability that there was $50,000,000+ of oil reserves. Anyone buying into the 5,000,000 shares put on the market for public consumption was free to draw their own absolute conclusions. Salesmanship? To be sure. One of the things we always did best at Great Western was sell institutions on the value of our stock and the promise of our company. Perception/reality? You bet. Works every time. All that really happened was I convinced The City I would build a very large energy company. I acted as if I knew I would. Did I exploit the chink in the armor of The City? Without a doubt. But I also did build a large energy company. How much of each of these types of things is necessary to be successful? Is there a recipe? There is no recipe. There is no requirement to incorporate all of these aspects into every floatation. There are other aspects not mentioned here which may be required. There are other aspects which may be present over which you will have no control, such as general economic or market conditions. But this is for certain: IPOs are gut decision making at its finest; its one of the best ways I know of to separate the men from the boys and the women from the girls. The aforementioned discussion and methodology is no different when you, the entrepreneur, decide to sell assets or your entire company as part of an exit strategy. If you dont act (sell) with enthusiasm, you will never command top dollars in the selling process.




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SECTION 6

LIFE AFTER THE IPO

THE MANDATE As an entrepreneur, probably the single most exciting event in your life is to witness the initial floatation (IPO) of your company. You will want to pinch yourself many times to make sure that youre not dreaming. It will all seem so improbable. An initial floatation is a true measure of success, but it is by no means the final measure of success or the only measure of success. It is merely the most quantifiable. Because it is quantifiable, an entrepreneur should set going public as a goal. Whether it ever comes to fruition or not is of no importance. The idea will help crystallize many of your thoughts, vis--vis operations controls, financing, marketing, personnel, accounting and most of all, how your business is valued. You must have your store in order to go public because you are taking the publics money. It is a good habit to get into. Acting as if you are a fiduciary is especially helpful when dealing with banks or other financial institutions. An IPO is a major milestone along the path to making your dream a reality, but its also a wake up call. Its truly the point of no return on your companys journey to its eventual place in the annals of trade and commerce. You cant help but wake up the day after asking yourself, Gee, what do we do now? When the public buys stock in your company, they are buying into something. They are buying into an opportunity they think will generate a financial return that meets or exceeds their investment criteria. If it didnt meet or exceed their criteria, they would invest their dollars somewhere else. Financial investment dollars will always seek out the vehicle offering the highest available return on invested capital.




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A companys opportunity statement(s) are included in the prospectus for the sale of the shares of capital stock. Each investor finds their own opportunity in the prospectus. It may be the attractiveness of the current financial statements. It may be the believability of the pro formas as the basis of the discounted value of the business enterprise. It may be the positive assessment of the downside opportunities in the face of the assumption of the upside risk. It may be the perceived strength of the companys management structure. It may be the perceived leadership capabilities of the executives. Any and all of these things can be quantified for purposes of making an investment decision. But the prospectus for the sale of share capital is also something else, something very important, especially to the entrepreneur. It is a mission statement. It is a mandate. The mission statement and the mandate may not be obvious from a reading of the language in the prospectus. This is not to imply that the prospectus is written to hide the true intentions of the company, or that it contains false or fraudulent data. It simply means that the mission statement and the mandate may be known only to the entrepreneur; that no matter how grand and effusive the disclosure in the prospectus, it is not obvious to the casual or deliberate, reader. It is obvious only to the entrepreneur because it can only be read with the heart and soul of the person who has given life to the company. In the introductory remarks at the beginning of this manual, I talked a lot about the relationship of success and the burning desire to succeed. Wanting it more than anything else in the world. Eating it. Sleeping it. Concentration. Focus tight focus laser beam focus. For the entrepreneur, how do you keep the intensity level up after the IPO, the first real tangible indication that your dream has become, or is just beginning to become, a reality/ how do you keep that fire in the belly going? Easily. You treat it the same way you would a marriage,




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for those of you not married, the way you would a meaningful relationship with another person. You work at it. You work at it damn hard. Even in those times when its continuance is seemingly impossible, you work at it. Never let down; never slack off. Focus: laser beam focus. There is no such thing as too much success; there is only more success, the next sweeter than its predecessor.

Concentration Hyper growth. Quantum leap. Dont stop, keep going. Your dream, only your dream. And in the infamous words of Sir Winston Churchill (more recently borrowed by Ross Perot), never, never, never, never, never ever quit.

WHICH WAY TO GO As we commenced business operations immediately after the IPO, everyone at Great Western proceeded under the assumption that the mission of the company was to explore and drill the twenty-four wells on the properties for which we had purchased options. Everyone except me. I had a much larger vision.

Hey, Dan Pea. Whats wrong with you anyway? We just went public three months ago. We had a prospectus. We had facts and figures. People believed in us

and what we said. They pushed our stock up to $3.50. And now you want to do something different. You cant change direction from the IPO document so soon.

You cant do that! My vision for GWR after the IPO was the same one I had always had. It was a simple one. And it was an elegant one. In fact, I always marvelled at its elegant simplicity: I was going to buy assets in a blending fashion as the means of building the fastest growing and




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eventually the largest natural company in the world. When I brought this to the attention of the board of directors and the management (I was the Chairman, President and CEO in the post IPO corporate structure), they acted surprised. They saw it as something different and a change of direction. I saw it as being totally consistent with the mandate in the prospectus. I never believed for a second that the public and the institutional investors paid what they did for their shares of stock just to see how the twenty-four wells would come out. If you were conservative, you would have been better off putting your investment dollars in a passbook savings account. After all, we had no earnings and no track record in running a public company. In reality, all we had was a vision. Albeit, a very clear vision, but clearest of all to me! If you are a gambler, you might have done better with the odds in Las Vegas.

AGAINST THE ODDS I believed then, as I still believe now, that the overwhelming response to Great Westerns IPO was a mandate for me to pursue my dream and my vision. And I set out immediately on the road of implementation in performance of that mandate. Great Western was born in a hail of You Cant Do Thats. In retrospect, that environment only served to strengthen its mettle. August, 1984, may not mean anything special to you, but it did to the folks over at Jaguar (motor car) because thats when they went public too. I was told more times than I care to remember that GWR couldnt come out at the same time because all of the investment dollars would be scooped up by Jaguar. The British government was selling off to the public one of its cherished assets Jaguar! I was told to wait. I didnt wait; I knew it had to come off as planned or it would probably never come off. As it turned out, I was correct. We did very well on our IPO. As I mentioned, our share price closed at a 25% premium to the IPO offering




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price. And the headlines of one major U.K. newspaper said, when referring to our IPO the same day as Jaguar, Great Western resources, The One That Really Roared. Just another lucky shot? Perhaps. One other thing about the advice I was getting. Some of it came from the members of the most prestigious law firm in London, a law firm whose representation I was told I would never be able to get. A law firm that was older than the United States itself. Thereafter, I would tell anyone whod listen that our firm of solicitors (as lawyers are called in the U.K.) also represented The Queen of England, The Bank of England, and Great Western Resources. Which they did! I can still remember being told by their most senior partner that if there was ever a conflict of interest between the Queen and Great Western, they would have to resign. And they hoped I understood! The conventional wisdom. Popular opinion. The tide of conventionality. These are the entrepreneurs worst enemies. You need to constantly protect yourself against them if you desire exponential growth.

SECTION 7

GROWTH VEHICLE ALTERNTAVIES

INTERNAL VS. EXTERNAL Great Western had two ways to go. We could watch the performance of the




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current assets in the form of oil & gas properties, or we could pick up the mandate and follow my vision, my vision. The conventional wisdom Vs. a dream.

Pea-ism. A number of years ago, the singer Kenny Rogers had a big hit song called The Gambler. There is a line in that song that has direct

applicability to the business world.

The CEO of a company has got toknow when to hold them , and know when to fold them. As a CEO, you will get more advice from your staff than you know what to do with. Most of the time it will be good, sound advice. But all the efforts of the people in the company will all be for naught if the CEO

doesnt know when to hold them, or when to fold them.

Only your instincts can tell you these things. And when they say hold them, you hold them; and when they say fold them. You fold them. Do not ever-

second-guess your decision.

The issue before me was a simple textbook case of internal vs. external growth vehicles. We could expand our interests in our current oil & gas properties and establish our out year growth curves on that basis, contenting ourselves to watch the curve move up and to the right at some annual rate of increase. Or, we could take a series of actions that would have the effect of taking that curve and pushing it straight up a couple of notches. We could acquire growth. My vision embraced the latter. The name of the game here is revenue. Like success, you can never have enough revenue. More revenue. More and more revenue. Tons of revenue. Tons and tons of revenue. My vision embraced more revenue; my laser beam focus was on more revenue. Anybody can control and cut costs, but you can never experience hyper growth and quantum leaps in business without generating more revenue. Pea-ism: All managerial performance sins shall always be forgiven during

periods of rapidly increasing revenue streams.

One of the things that I always did better than other executives in my peer group was know when to hold them, and know when to fold them. This time I was going to hold them, and then play them with a vengeance. The first series of wells on our properties didnt turn out so well (no pun




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intended). Mother Nature and some overly-optimistic geological data teamed up to get us off to a rocky start. But no matter, we were already looking at our first acquisition candidates. The issue here was the timing. It had to be done quickly or the financial performance of the initial well explorations would be cluttering up our financial statements. We isolated the acquisition target and negotiated the deal. We took it to the stockholders and got approval in June, 1985. It was the wholly owned subsidiary of a Fortune 400 conglomerate that had gotten it wrong trying their hand at oil and gas. We also got approval to increase the authorized common shares from 25,000,000 to 35,000,000 on the basis that we needed the flexibility to continue in our growth mode. Perception/reality. OUTSIDE ADVISORS This is a good place to introduce a cast of characters who fit the good news/bad news description perfectly. These are people you cant live with and cant live without. They are the companys outside advisors: merchant bankers, investment bankers, commercial bankers, stock brokers, petroleum consultant engineers, lawyers and accountants. Pea-ism. In order to really succeed in business, you need outside advisors. These advisors must be trusted advisors. To have trusted advisors, you need

a very special relationship with someone at the firm. You need a mole.

The perfect mole is someone who is motivated, aggressive, ambitious and bright enough, but not as bright as he/she thinks.

We had moles in each of the firms of our outside advisors. They took special care of us and we enhanced their careers, all according to Hoyle. We made their career enhancement Great Westerns business. When possible, we encouraged their respective firms to promote them ahead of the curve. Great Western paid a lot of fees to a lot of firms, but GWR is surely not unique in that respect. All large business enterprises have large teams of outside advisors. The lessons to be learned here are twofold:

1. As an entrepreneur, it is hard enough to let go of some part of your




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dream to your business associates and partners inside the company, even those people who may have been your lifelong friends.

It is much harder to now let go of more of your dream to people outside of the company; people who, but for the existence of your company, you wouldnt give the time of day. But you must do it or the company will simply wither away. Exponential growth only comes from having less control, not more. Outside advisors are merely a necessary evil; they are simply part and parcel of the game. 2. All companies of any size have outside advisors. Many more companies fail than succeed. Maintaining the stable of advisors is not a dispassionate exercise. The mole-based relationship must be established and maintained.

Admittedly, GWRs relationship with its advisors in The City was easy to accommodate because of the existing chink in the armor. Being able to dangle the carrot of power and wealth in front of the denizens of The City was a big help. A little greed goes a long way. But the mole-based relationships also worked quite well on this side of the Atlantic. Greed is greed; it does not discriminate between dollars or pound sterling. A good example of greed and how it affects transactions is the U.S. junk food fiasco of the 80s. One final note on advisors. You will be awestruck at how much advice you will get and how adamant the giver of the advice can be. It never ceased to amaze me how determined people can be with their strong opinions, especially when they are not responsible for the outcome of events should their advice and guidance be adapted. Anyway: Pea-ism. When dealing with the opinionated and/or egotistical, always give

credit where it is not due.

A TALE OF TWO ACQUISITIONS




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Great Western had made its first acquisition in June, 1985. It was a $10,000,000 deal and we had gotten our feet wet and learned a lot in the process. Looking back to September 1982, Great Western did a 10,000 joint venture in New York City to get its first drilling fund on the street. Thirty-three months later, we made a $10,000,000 oil and gas acquisition from a Fortune 400 conglomerate. As I will elaborate on later in this manual, were we ready to deal with a major conglomerate? No! Were we comfortable with ourselves and the situation? Damn right! It is the comfortability of the entrepreneur that is important, not his readiness! I would now like to turn to the next two acquisitions Great Western would make. They are excellent illustrations of the process of building a company through the external growth mode. The next two sections of this manual describe how to assess the need for and then go after assets, financials, diversification, people, capabilities and opportunities. They also illustrate hyper growth at its finest.




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SECTION 8

ACQUISITION #1: HUMAN RESOURCES VS. PHYSICAL RESOURCES

BACKGROUND The oil & gas industry in the U.S. was in the state of a serious recession. In September, 1985 the spot price of oil stood at $28.00 a barrel; one year later it would fall to $14.25, having dipped to $8.00 in the summer of 1986. A lot of companies in the U.S. would dimply implode upon themselves, victims of their debt loads. They had borrowed heavily for exploration projects and expansion. But remember banks and advisors were right behind these companies collecting fees and telling them it was okay! Bad wells drove up finding costs, and contraction in the industry caused prices to tumble. They could no longer stay the course; there was no more money to fund operations, let alone exploration, because for every company going down the toilet a bank had okayed the deals would follow in the same flush. Great Western Resources had not one penny of long term debt on its balance sheet. Our finding costs were 23% below the industry average, and our lifting costs were half of those of the average new field in the North Sea. I was proud of our numbers and our performance to date, but we had to move ahead quickly.




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THE STRATEGY My strategy for the growth at GWR at this time had four major points:

- We were not going to spend any more time on limited partnerships, drilling funds, or tax shelters. We would concentrate on the core business area of oil & gas exploration and drilling. We were going to get very focused.

- We were not going to spend any time analysing our financial data to see if

the actual rates of return were equal to or greater than the ones we had estimated and disclosed in the prospectus.

Nobody cared, least of all me. The ultimate share price was the single criteria by which the company would be judged. - We were going to get our advisors to help us in a way which they were not

accustomed: They were going to learn how to sweat along with us; they were going to learn how to invest in the future or GWR.

- I decreed that we were not going to participate in the energy recession. It

was that simple: we were not going to participate!

I knew that what we were about to do was not going to be easy. It was going to take an enormous investment in time and resources. It would take a heavy toll on everybody, both professionally and personally. There would be casualties, but it just had to be that way. I had my dream. I wanted the next success. My dreams were becoming realities. I was focused. I had to be focused because Pea-ism. To succeed at anything, one must be focused to the exclusion of

family, friends, God and country but not necessarily in that order.

THE ASSESSMENT I knew after our first acquisition in June, 1985 that we had to bring the technical aspects of our business in-house. Here we were, in early 1986, supposedly a big-time oil & gas exploration company, and we only had one person in the company with the words petroleum engineer on his resume. Up to this point in time we had used contract people to analyze the geological aspects of our acquisition candidates. Contract labor makes sense up to a point, but a good cost/benefit analysis should tell you when its time to change operating modes. The contract people seemed to be around more than our own employees. It was time.




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So, for purposes of our first major acquisition, assets and financials were secondary to the need for facilities and capabilities. THE TARGET Company #1 would give us the necessary in-house technical capabili

33 secrets for super success

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