Lessons I Learned Today 6/18/09 – Potholes in the Highway to Heaven

This is a digest and recap of highlights, quotes, and comments from articles and discussions posted on this date on the Applied Entrepreneurship, LinkedIn group site.

 

*Have You Created an Impossible Business? by C.J. Hayden

“It’s easy to think that any business can be successful if you work hard enough, but there are many situations where this just isn’t so. Consultants, coaches, and other service professionals often start a business believing that all they need to do is charge a “reasonable” fee and sell “enough” of their time. But unless you do the math to prove or disprove your assumptions, you may be creating a business that can never succeed. Here’s what can happen.”

“If earning a decent living as a self-employed professional sometimes seems impossible to you, start asking how it could be possible. What can you change about how you are marketing yourself, how much you are charging, and how you are packaging your services? While it could be that success will come if you just work a little harder, it’s more likely that you first need to start working a little differently.”

The articles give two examples of entrepreneurs whose businesses were “remodeled” to be more profitable.

 

*Four Reasons Why Small Businesses Succeed (or Fail) by Robert A. Normand

“No society in the world is better or more prolific at creating new businesses than the United States capitalistic system but often we are so busy commercializing ideas and starting new ventures that we don’t take the time to learn basic, successful management principles that have been developed by our larger companies.”

“As a result of inadequate management, many small businesses fail in the early years. They fail not because of a weakness in the product or service concept they have, but because the business was not properly managed in the back office.”

Once a business has emerged or grown to a certain level, management techniques must change or the business will run into trouble. For many small businesses this level is $1-3 million in annual sales or 5-15 employees. Sometimes the critical point is smaller and sometimes it is larger, however, when it occurs, the owner or manager of a small business must evolve, morph or otherwise change from a manager of things to a manager of people and from a technical expert to a strategic thinker.

What do successful businesses have that troubled businesses don’t?

• Invariably they have a positive attitude towards their business and life in general.
• They are committed to their effort.
• They are patient.
• They are persistent.
• They have developed a business blueprint called a Strategic Business Plan that clearly describes their business concept, their mission and their philosophy of business.
• They have developed an Organizational Structure that functions as a well-oiled machine.
• They have developed Operational Support Systems.

 

 *10 Business Plan Gaffes You Don’t Want To Make by Benjamin Tomkins

 ”Done right business plans aren’t something you use to lure investors and then stick in the bottom of your desk drawer. Rather, they become living documents that guide your business, keep you on course, and — yes — adapt as your businesses changes. But too often, business plans are rife with problems. Expert Tim Berry breaks down the top 10.”

1. Straightjacket Plans – Do only what you need, and not one thing more than that.
2. Pollyanna Profits – Plans projecting making 50% on sales three years later aren’t showing me how good the business is, but rather that the planners don’t know the business. 
3. Vertigo – Detailing parts of the business you’re in love with but glossing over other parts you don’t really don’t know
4. Potholes – A plan that leaves a big hole, such as based on strength of management team but no description of how that strength fits this business. 
5. What’s The Story? – Business plans should tell stories. What better way to explain a business than to tell a story of how this person had that problem and found this solution? Make it come alive, make it real. 
6. Hockey Sticks – Good plans have good reasons, documented reasons, for growth rates turning up. 
7. All Those Cs – Do me a favor: if there’s just two or three or four of you, don’t give yourselves the titles CEO, COO, CFO, and CTO.
8. Lowball Pricing – I like business plan that uses segmentation and differentiation to price for quality. 
9. Working For Free – Investors don’t want people working for free; they want businesses that can afford to pay their people fairly.
10. Dead Scrolls – Make it concrete and specific, and then follow it up. Review the plan, check the changing assumptions, and expect to revise.

 

* The Case of the Screwed Screw Maker by Jason Voiovich

“What is Titan to do? Are the others infringing? Perhaps. Are they causing confusion in the market? Certainly. Is the confusion hurting the reputation of the Titan brands? Probably. Will Titan be able to get them to stop? Doubtful.”

“At first, its tempting to think Titan has a legal problem (and they very well might), and to come up with legal remedies (which they could), but that’s really not the central issue. The issue with the Titan brand portfolio is really a failure of marketing strategy. Specifically, a three-part failure:”

1. “Underfunded brand development effort – A properly promoted brand would be able to garner market share fast enough to create a stranglehold in the marketplace, locking competitors into a minority share and decidedly sub-dominant position.”
2. “Failing to employ the “Kleenex®” brand strategy – They could have adopted the king-of-the-hill brand position, naming their product directly after its function – composite deck fastening. Instead, the company employed a strategy focusing on the key benefit”
3. “Weak channel marketing –  The fact you can easily buy another brand of screw at all is a failure of channel marketing.”

 

*How a $0.04 text message ruined $500 million in reputation building by Jason Voiovich

“On Monday, May 12, 2008, a 7.9 magnitude earthquake hit southwestern China’s Sichuan province. Many smaller villages were, literally, wiped off the map. Much of the provincial capital Chengdu was reduced to rubble. 10,000 people were dead within an hour. At least 60,000 lost their lives as of this writing. 200,000 have been forced to flee a tenuously perched lake created from massive landslides. Millions of others have been left homeless.”

“The real reputation management story here, however, is the domestic corporate response in China.”

“Multi-national corporations (McDonald’s, Samsung, Nokia, KFC, and many others) responded as well. They donated money and supplies just as quickly, to the tune of $500 million. At the time, everyone in the corporate community seemed focused on meeting the challenges of the disaster.”

“Then simple text messages began appearing on Chinese phones. Essentially, they accused these multi-national corporations of donating too little to earthquake relief efforts. That the “iron roosters” (a symbol in China of the uncaring tightwad) only were interested in exploiting China’s resources, but cared little that its people were suffering”

“The power of the humble text message is undeniable. It can have instant distribution. It can cast a wide net. Most interestingly (and frighteningly to those on the short end of one), text messages can carry surprising credibility.”

A few things to consider:

1. Authenticity: If you truly are who you say you are, and do what you say you will do, your company’s reputation has the solid foundation it will need to build upon not just during a crisis, but over the long haul.
2. Relationship building: The crisis event is not the time to build relationships with those stakeholders who can affect your reputation.
3. Fighting fire with fire: Corporate reputation managers often find themselves remiss to use the same guerrilla tactics their detractors would use – blog posts, text messages, and viral campaigns. A costly strategic mistake

 

*Planning Your Exit by Michael J. Franz

“If you’ve ever given any serious thought to exiting your business, now is the time to start. Exiting is a multi-step process that can take from weeks to years depending on the size of the organization and the reasons for exiting.”

“When it comes to planning, how you exit your business is just as important as how you start it. The goal is to maximize the value of your company before converting it to cash and minimize the amount of time consumed.”

“Getting out of business is a process. The length of time required to complete the process is directly related to the complexity of the business and the circumstances underlying this decision to get out of business. It can range from one week for a home-based sole proprietorship to several years for a corporation forced into involuntary bankruptcy. Disputes and litigation add another dimension to the timeframe”

The getting out of business process typically includes the following:

• Reach Agreement and Obtain Authorization from Owners to Dissolve Your Business Entity.
• Designate a Leader & Organize a Team. Authority and roles should be clarified.
• Engage Professionals & Consultants as Team Members.
• Prepare a List of Assets and Perform a Physical Inventory.
• Develop a Schedule for Implementation.
• Release Announcements & Notices.
• Implement the Plan.
• Conclude or Transfer Contract Obligations.
• Close Operations.
• Dispose of and Transfer Assets.
• Prepare Final Financial Statements & Tax Returns.
• File Articles of Dissolution.
• Prepare and Issue Special Filings, Notices, Informational Returns, and Taxes.
• Receive Tax Clearance Notice. File in financial records.
• Close Bank Account.
• Store Business Records.

“The process for getting out of business successfully requires the same amount of planning as going into business. While the process should be easier, it is likely to be less enjoyable and more stressful. The best advice for business owners is to think about the future during the early stages of getting into business.”

 

*The Purpose Driven Business by John Jantsch

“What’s the purpose of a business? Or, perhaps more specifically, what’s the purpose of your business? Do you ever think about that throughout the course of the day? Or, does it only haunt you at night or when you are trying to clear a jam in the copier?”

“I would have to say that the real purpose of a business is to give the owner of that business more life, more freedom.”

“Has anyone come to realize that your business can rob you of your life it you are willing to let it?”

“The answer to this puzzle comes down to two things – focus and connection. “

“Focus involves a discovery, or at least rediscovery, of what you want most out of your life. That knowledge then must become the focus of your thoughts and the basis for your business decision-making.”

“Connection is the systematic application of your purpose in life to the day-to-day function of your business.”

“Find what you want out of life, find what you are willing to leave behind in order to get it and then connect that purpose every single day with what you do and you just may actually catch a glimpse of the magic that owning a small business can bring.”

 

What I Think

I think more entrepreneurs should consider John Jantsch’s thought, in his article posted on this date, The Purpose Driven Business: “The real purpose of a business is to give the owner of that business more life, more freedom.”

That thought should sometimes be considered in conjunction with the comment by C.J. Hayden in his article, Have You Created an Impossible Business? That thought is: “It’s easy to think that any business can be successful if you work hard enough, but there are many situations where this just isn’t so.”

Way too many entrepreneurs ruin their lives struggling to reach a dream, and not necessarily because that dream is impossible, nor because they don’t work diligently toward their goal. In many cases, it is because they simply fell into one of the “traps” described by Benjamin Tomkins in his article, 10 Business Plan Gaffes You Don’t Want To Make. Tomkins describes many common errors entrepreneurs make with their business at the business plan stage. Banks and investors are certainly accustomed to seeing the “hockey stick” financial projections, where the entrepreneur simply boosts the estimated profits, shortens the time to the ROI, and clearly underestimates the expenses, all without any basis in research or reality.

Perhaps the most “sinister” of these errors is made by entrepreneurs who diligently work on the business plan in good faith, not to raise capital or to persuade others to join “the cause,” but for themselves. In some of these cases, the business plan will never really be reviewed by anyone else, or at least not by the proverbial “trained professional.” What is “sinister” about this is that if the business plan contains one or more serious “potholes,” as described by Tompkins, the entrepreneur may never realize it until it is too late. “Too late” may be after a substantial amount of the entrepreneur’s money has been invested in the business, possibly accompanied by money from friends and family. “Too late” may also be after a lifetime of toiling to accomplish something, which might have been possible if another direction had been taken, or strategy used, but the entrepreneur cannot or will not see it.

In such cases, the entrepreneur may be doomed to a fate much like that of Sisyphus. If you’re not up on your Greek mythology, although there are several interpretations, Sisyphus was a deceitful Greek king, known for his cruelty, trickery, and hubris. Hubris, a crime under ancient Greek law, might generally be described as overwhelming pride rising to the level of arrogance, often resulting in actions which intentionally or unintentionally shamed or humiliated others.

The hubris of Sisyphus was so great that he thought he was as clever as Zeus, chairman of the board of “Mount Olympus, Inc.” Perhaps because of this, Zeus thought up a particularly fitting punishment. Sisyphus was required to roll a huge rock up a steep hill, but each time he did so, before he could reach the top of the hill, the rock would always roll back down to the bottom, forcing him to begin again. Sisyphus was doomed to do this for eternity, also becoming the first perpetual motion machine. Too bad the United States Patent Office had not yet been invented.

The point of this follows nicely with a fortune cookie witticism I’ve kept under the glass atop my desk for many years. As the saying goes, “many people spend their lives trying to climb the ladder of success, only to find it is leaning against the wrong tree.”

If the real purpose of business is to give the owner more life and freedom, then getting trapping in a dead-end business may be worse than not quitting your day job. Just because you start a business shouldn’t mean you can’t get out of it. Many entrepreneurs, however, become so myopic (I won’t digress again into the Greek background for this word) about their business that they can’t see their way out of the trap they’ve put themselves in. These days, the danger of digging a bigger hole is easy to do, and entrepreneurs are, as I write this, undoubtedly finding ways to borrow more money they won’t ever be able to repay, even if the economy does turn around in the next year, or two, or three.

The mythological story of Sisyphus is the antithesis of the lesson entrepreneurs should be following. Leaving room for escape should be an essential part of any business plan. A good failure plan can be just as valuable as the succession plan, which Michael J. Franz’s article discusses. Thinking the path to the goal will be without bumps, is a silly as thinking you can travel down any unknown road without encountering a pothole. If your hubris is so great that you ignore this warning, I only hope you don’t run into one big enough to fall into. If you do run into “The Big One,” you might just have to introduce yourself to Sisyphus. Don’t think he’s ignoring you, however, he’s just really busy.

 

If you enjoyed my impression of these articles, why don’t you read them for yourself and see what you and I missed or hit? Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.

Lessons I Learned Today 6/17/09 – Don’t Forget About You

This is a digest and recap of highlights, quotes, and comments from articles and discussions posted on this date on the Applied Entrepreneurship, LinkedIn group site.

 

*Unleashing Your Entrepreneurial Spirit by Brian Kurth

Merely conquering your fears is not nearly enough to ensure success in starting your own business. You might have all the desire and motivation in the world, but there are still many steps that need to be taken, and many questions that need to be answered. So once the desire outweighs the fear…then what?

1. Start Researching

2. Raise Money

3. Get to Work

 

*Am I Ready? Tough questions to ask yourself before starting your own business. by Susan Martin

1. Personal questions:

• Am I a self starter?
• Do I enjoy challenges?
• Am I a creative problem solver?
• What are my strengths and weaknesses?
• What interests, talents, and skills do I have that will assist me in running my new business?
• What skills do I need to learn or brush up on to run my business effectively?
• Will I be doing work that is meaningful and really interests and excites me?

2. Business questions:

• Do I really have a money making idea?
• Who is my competition?
• What do I offer that the competition doesn’t — what makes my services or product unique?
• Who are my ideal target customers?
• Do I have effective marketing and sales plans?
• Have I established business goals?
• Will I need capital to startup my business?
• Have I written a business plan?
• What are the things that my business will require that I cannot do myself?
• What type of managerial and leadership skills do I possess?
• What financial risks are involved?
• Do I really have a money making idea?

 

*7 Financial Strategies for Transitioning from Salaried to Solo by Nina Ham

Everyone has to decide for themselves what level of sacrifice and risk they’re willing to undertake in order to enjoy the satisfactions of working independently. Knowing some strategies for managing the risk will allow you to make a well-informed decision.

Of the seven strategies included below, the first two suggest ways to gradually transition from salaried to solo, instead of diving off the edge. The second two are ways to stretch the dollar; and the final three are ideas for getting started without stopping.

1. Continue to draw a (reduced) salary.

2. Develop another income stream.

3. Reduce expenses.

4. Borrow.

5. Identify your niche.

6. Create your marketing plan.

7. Manage fear!

 

 

*When Planning Your Business, Don’t Forget About You! by Joseph Lizio

There is one thing that almost all new business owners miss – and that is their personal situation. They miss it because they get so engrossed in planning the business side. Further, most business plan templates or software just do not cover this issue.

To be a successful entrepreneur, a business owners needs to have the least amount of disruptions (non-business disruptions) possible as well as have the ability to take advance of all opportunities that come their way.

This requires a very solid personal foundation. An entrepreneur must first be mentally ready to put in long hours, make hard decisions and choices and be willing to do what it takes to succeed (take risks). They must also be willing to make personal sacrifices for the business knowing that these scarifies will pay off in the long-term. And, lastly (and most importantly) they must be financially prepared.

This can mean:

• 1) Having your personal finances in place so you are not reliant on the business to cover your living expenses.
• 2) Reducing personal obligations to the lowest level possible.
• 3) Lowering living expenses to the most basic of needs.
• 4) Improving credit scores.
• By making yourself the as lean as possible – reducing personal distractions and putting yourself into a position to jump at every opportunity – will go a long way towards your business success.

 

*The Seven Roller Coaster Stages of a Start Up by Rob Spiegel

Here’s a quick sketch of the emotional ride of a business start-up.

1. Planning dreams.

2. Raising cash

3. Early spending and a promising beginning.

4. Slow pay and more spending.

5. A growing cash crunch.

6. The desperate search for more cash.

7. Breaking into new markets and fiscal discipline.

If your business doesn’t die during stage six, you may actually learn how to run a business. You tweak your product or service, experiment with marketing, gain some confidence with new customers. You count every paper clip and use both sides of copy paper. You learn how to small capital sources from two towns away and discover how to push the right buttons with bankers.

 

*Start-up Marketing Strategies by corecubed

TIP #1: Write down what your product or service does for the customer.

TIP #2: Make room in your budget for a modest marketing plan.

TIP #3: Hit them with everything you’ve got.

TIP #4: Learn the art of networking.

TIP #5: Measure what is successful.

 

*Five Ways to Find the Perfect Business Idea by Joseph Lizio

Each perfect business is defined by the business owners. Keeping this in mind, let’s start on my five concepts of finding the perfect business:

Number One – Understanding your customer

Number Two – Passion

Number Three – Understand Your Competition

Number Four – Cash Flow

Number Five – You

Regardless of the level of your desire for your business – a lifestyle mom and pop operation or a multi-national conglomerate – if you develop a business idea with these five concepts in mind – your idea will be the perfect business idea for you.

 

*How to Become a Fearless Small Business Owner In Uncertain Times by Robin Fisher-Roffer

STEP 1: Go Fishing for the Real You. Focus on what you do better than anyone else and put that out there to your customers and prospects.

STEP 2: Use Your Differences as a Lure. Use the strengths of what makes you different to make a difference with your customers.

STEP 3: Find a Few Fish like You. Deepen customer relationships to ensure your security and your company’s future.

STEP 4: Swim in Their Ocean Your Way. Look for what resonates with you and don’t buy into what doesn’t feel right.

STEP 5: Put Yourself Out on the Line. Give to others instead and watch what you receive in return.

STEP 6: Evolve by Casting a Wide Net. Use your place outside the circle to always be relevant to your customers and industry. It’s about staying true to the essence of who you are, and then recasting your image to feel brand new.

STEP 7: Reel in Your Unique Power. Use your unique power to make them believe that you are indispensable and that is exactly what you will be!

 

*Business Start-Up Checklist by Janet Attard

Choose a business based on your skills and interests

Research the business idea

-       What will you sell

-       Is it legal

-       Who will buy it and how often

-       Are you willing to do what it takes to sell the product

-       What will it cost to produce, advertise, sell & deliver

-       With what laws will you have to comply

-       Can you make a profit

-       How long will it take to make a profit  

 

*Break-Even Analysis by Tim Berry

The Break-even Analysis lets you determine what you need to sell, monthly or annually, to cover your costs of doing business–your break-even point.

The Break-even Analysis depends on three key assumptions:

1. Average per-unit sales price (per-unit revenue):

2. Average per-unit cost

3. Monthly fixed costs

The break-even analysis depends on assumptions made for average per-unit revenue, average per-unit cost, and fixed costs. These are rarely exact.

 

What I Think

I think it might be hard to convince you I didn’t pick the articles posted on this date because of the theme of each article. The truth is, these were picked randomly, as I crawled the Web like the proverbial spider, looking for my daily dose of articles on various aspects of entrepreneurship.

While I’m sure there are a variety of common threads to be found in these articles, the one most obvious to me is how they fit together as a mini seminar or threshold test for the new entrepreneur. Starting with Brian Kurth’s article, Unleashing Your Entrepreneurial Spirit, many seasoned entrepreneurs will recognize a natural progression from employee to employer.

First comes the burning desire to do “something” which eventually outweighs the fear of change and, in turn, eventually changes the shape of the comfort z0ne envelope. This, fortunately, is where we lose most entrepreneurs wannabees. Without that overriding courage to face dramatic change, very few entrepreneurs would find success. Better to stay an employee if you don’t possess this attribute.

Next come the soul searching questions posed by Susan Martin in her article, Am I Ready? Tough questions to ask yourself before starting your own business. Many entrepreneurs have the courage to get past step one, but are not honest enough with themselves, or are so unsophisticated and naïve about being an entrepreneur, that they skip this vital second stage.

Even though there may not be any perfect answer to each of the questions raised by Martin, the odds certainly change, depending upon how many of them can be answered with an appropriate response. For every negative answer, the entrepreneur is likely to be one step further away from success, and although there are no guarantees in life or business, for every positive answer, the entrepreneur should be that much closer to having what it takes to be successful.

Stage three of the novice entrepreneur’s journey becomes clearer with the help of Nina Ham’s article, 7 Financial Strategies for Transitioning from Salaried to Solo. No matter how easily one can fly through the first two stages, the rubber starts to hit the road when it comes to thinking about quitting your day job to pursue the dream of becoming a full time entrepreneur.

Ham’s article suggests several strategies to allow the employee to ease into becoming the employer with minimal strain. The difference in going to work every day with insurance benefits, a salary or existing customer base and infrastructure, vs. having to hope you will some day be able to create this from the profits of your new start-up venture, is exactly what causes many entrepreneurs to fold their tent early in the process, never to return.

Finally, Joseph Lizio’s article, When Planning Your Business, Don’t Forget About You, teaches us the same lesson an athletic trainer would teach an athlete getting ready to run a marathon or participate in any other grueling athletic endeavor. “Get yourself ready” is the message. Cut back on your expenses, save your resources, eliminate or minimize distractions,  clarify your vision of the best route to the goal, prepare yourself to recognize barriers and traps as early as possible, and still have the perseverance to overcome them all. Pack light, and travel lean and smart. Don’t reinvent the wheel. Find a guide/mentor. Keep your bearings and your goals in sight. Be ready to adjust course, and be watchful for all sorts of predators at every stage of your journey to the finish line.

The other articles posted on this date run you through later stages on the roller coaster of entrepreneurship, but it is the foundation built from these first four stages, upon which everything else follows. A relatively small percentage of all prospective entrepreneurs will make it through these first few stages. Those who do, by necessity, may have learned that they must be true to themselves before they can provide the value and balance necessary to be good to their dream business.

 

If you enjoyed my impression of these articles, why don’t you read them for yourself and see what you and I missed or hit? Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.

Lessons I Learned Today 6/16/09 – Looking for the Silver Lining

This is a digest and recap of highlights, quotes, and comments from articles and discussions posted on this date on the Applied Entrepreneurship, LinkedIn group site.

 

*Divorced – but still in business together by Joseph V. Tirella

“The firm, co-owned by Joseph Carini, 47, and Aurelie Lang, 37, sells rugs and tapestries that are handwoven in Nepal using Chinese silk and wool from sheep that graze the Himalayas. Prices typically range from $8,000 to $10,000.” 

“Carini and Lang – he’s an artistic New Yorker, and she’s a native Parisian with a no-nonsense approach to both business and life – married in 1996 but are going through a divorce (they are legally separated). They live on the same Brooklyn block and share custody of their three children: Celia (8), Leonardo (5) and Gregory (4). Although the breakup was heart-wrenching, the process has been amicable. They recently drew up papers splitting the firm fifty-fifty.” 

“We’re still in business together because we trust and respect each other and bring different skills to the table,” says Carini.

 Despite their complementary styles, they don’t always see eye to eye. Although Carini and Lang agree on their firm’s problems, they often disagree on possible solutions. 

The article business details advice given the couple by three experts hired by Fortune magazine. 

 

*Expanding your biz, despite the downturn by Emily Maltby

“Like many business owners fighting the recession, Mark Rickard is looking for ways to draw in new customers. The challenge: How to expand beyond his firm’s traditional services without confusing customers or taking on more than his company is equipped to handle.” 

“Rickard List Marketing is a direct mail marketing company that Mark and his sister have run since their father’s retirement. Rickard wants to use this slow period to rebrand the company, but he has questions about how to make the transition. He’s brought the issue to a gathering of The Alternative Board (TAB), a panel of seasoned business owners who meet monthly to swap advice on their business challenges.” 

“Think about the long-term future, Buonfiglio says. Building up new lines of business will inevitably take some of Rickard’s time away from current customers and projects, but that temporary trade-off can be worth it if the expansion will pay off for the company down the road.” 

“You’ll have to consider opportunity cost versus reward,” he says. 

The best way to grow is through “baby steps,” Labriola emphasizes. “You don’t want to be too far from the core. Insulate it and expand into areas that are safe. Pick a few things off your list just to elevate who you are. It takes a long time.” 

“You have a million ideas and directions. Take a holistic look and examine the risk factors associated with each idea. Look at where you are with each one today and where you want to go. Then, you can start to execute those ideas. And only then should you think about marketing.” 

 

*A frontline view of the Great Recession by Emily Maltby 

“Behind every statistic about whopping job losses and the shrinking economy are thousands of small businesses battling the everyday realities of trying to survive with less staff and fewer customers. A group of entrepreneurs from peer advisory group The Alternative Board (TAB) gathered to discuss their view from the frontline of the recession.”

“To adjust to the new economic realities, business owners are shaving their staffing down to the bone. Businesses with fewer than 50 staffers have collectively shed 1.4 million jobs in the past six months, according to estimates by payroll processor ADP.”

“Managers are taking a hard look at their remaining staffers – no one can afford to carry marginal performers these days.”

“There’s one silver lining for business owners in the grim job market: When they need to hire, they can hold out for an exceptional candidate.”

“Economic experts say there are signs the economy may have already hit bottom and begun its rebound, but down in the trenches, business owners see a hard slog ahead. Those gathered for the TAB meeting predicted it will be at least a year or two longer before they feel the effects of an economic turnaround.”

“I think we’ll see some recovery in the first quarter of 2010, but the aftermath may last a year,” said Owen Mester, the baker. “The unemployment numbers, for example – I can see them lagging for months.”

 

*Recession: A Great Time to Start a Business! By NicoleR

“Despite a struggling economy with high unemployment rates, tight salaries and a crumbling corporate world, a recession is actually a great time to start a business.  History has shown that recessions can be birthing grounds for some of hardest working, most successful and creative entrepreneurs today.  A recession can teach an entrepreneur a lot about running an effective business that has the potential to do great things in a sprouting economy. Practices such as learning to operate on a budget, investing more time in client satisfaction and taking time to trial and error your business model are essential to operating a successful business.  The truth is if a business can survive even the toughest of times, that business is most likely to be a forerunner in the best of times.”

“Many businesses do not keep as close of a watch on their financials as they should.  A recession can force a business owner to closely monitor its spending habits on marketing, advertising, operating costs and other company investments.  In a recession, a business is more likely to search the market for the best deals on software and supplies, the largest ROI advertising opportunities and alternative methods to marketing aside from ‘big name’ publications, television airtime and costly PR campaigns.”

“More attention on customer satisfaction and retention is another valuable practice a small business will attain during a recession.  Since a recession leaves many individuals watching their pennies and focusing more on product quality and credibility, it is the perfect time for a company to devote more time to their customer service department.”

 

*An office where work is a family affair by David Koeppel

“After taking a six-week, fully paid maternity leave earlier this year, Francine Gemperle was anxious to resume her job but reluctant to be away from her infant daughter, Veronica. Fortunately, she didn’t have to choose between them. Maya Design, a Pittsburgh-based creative consulting firm, allows parents to bring newborns into the office.”

“Maya’s CEO and president, who argues that the policy builds loyalty and helps parents shift back into work mode.

“Babies at work, four-week vacations, continuing education — it’s important to strike a good balance between work and life,” he says.

“As part of its balancing act, Maya shares up to 20% of quarterly profits with its employees.”

 

*Strange brew: Beer and office democracy by David Koeppel

“A Colorado brewery views perks like free bikes as a core part of the company ethos. The perks aren’t just for fun, though. The free bikes help the environment.”

“Operating a business in a way that is consistent with your values is particularly pleasing,” says Jordan, 50.

Those values include employee ownership. Workers own 33% of New Belgium, which has 320 employees and posted $93 million in revenue last year. A large proportion of the staff participates in strategic planning and budgeting. “People are engaged and committed,” Jordan adds.

Some workers “get sucked into an entitlement mentality. Ownership investment gives the company a sense of cohesion, but giving everyone ownership can undermine the hierarchy.”

 

*Magic Johnson’s captivating customer service by Desa Philadelphia

“As an NBA Hall of Famer, Earvin “Magic” Johnson faced down such giants as Larry Bird and Julius Erving. Diagnosed with HIV in 1991, Johnson has fought off full-blown AIDS for the past 18 years. Now, as a coffee shop proprietor, he’s fighting his latest battle against…scones.”

“My customers in urban America are so skeptical, we have to win them over,” he says — and the skepticism extends to exotic pastries. “So in my Starbucks, we serve sweet potato pie.”

“When Johnson makes public appearances, he isn’t just signing autographs. He also gives his office phone number to any customer who complains to him personally, even if the problem is a dearth of sugar packets. If the problem persists, he wants to know about it. “

“Minorities appreciate that, because we are used to corporations coming in, opening up their building, but then disrespecting us with their service,” Johnson says. “If you don’t engage us, we’re going to cut you off our list.”

Selling sweet potato pie instead of scones, he says, “shows customers that you’re trying to figure out how to serve them in new ways.” By targeting a less affluent market, Johnson benefits from less competition, greater loyalty and, paradoxically, more revenue in the long run.

“The lifetime value of his customers can be quite high, even if they don’t bring in as much money in the short term,” Hanssens says. “Everybody loses business in a recession. But it’s better if your existing customers stay with you and just spend a little less.”  

 

*Drive-by message: One entrepreneur’s crusade against guns by Alyssa Giacobbe

“John Rosenthal has a long history of social activism — and the prison record to prove it.”

“He launched Stop Handgun Violence, a nonprofit advocacy group dedicated to reducing gun violence without banning guns. Rosenthal was a card-carrying member of the National Rifle Association and an avid rifleman (he shoots skeet, not animals), which makes him a voice of moderation in the often polarized debate on gun control.”

Businesspeople solve problems every day; that’s what we do,” says Rosenthal. “If more entrepreneurs involved themselves in activism, we could solve every problem this country has — and for a lot less money.”

 

*The six-year fight to start a Boston company by Malika Zouhali-Worrall

“Erroll Tyler doesn’t give up easily. For six years the Melrose, Mass. entrepreneur has been battling the cities of Cambridge and Boston to get his amphibious-vehicle sightseeing company, Nautical Tours, off the ground and into the water. His case is pending in federal court.”

This article gives some of the details of his journey through the Cambridge License Commission, Massachusetts Department of Public Utilites, Boston Police Department, and United States District Court.

 

*Training entrepreneurs to save cities by Sheena Harrison

“In the midst of a struggling economy, the Small Business Administration is hoping to create jobs and generate wealth in hard-hit urban communities by boosting small-business growth through its Emerging 200 initiative.”

“The six-month program, which launched last year and began its second session a month ago, aims to provide training to small-business owners in 15 major metropolitan areas that have experienced flat or negative job growth rates in recent years. Initially intended to train 200 entrepreneurs per session, the program has attracted enough interest that around 215 companies have been accepted for 2009.”

“The project’s goal is to provide talented entrepreneurs with the skills and contacts they need to grow their companies and create more jobs in their communities.”

“The group’s business owners attend classes every other week, which are hosted by officials from local SBA branches or by partner organizations such as chambers of commerce. On the off weeks, the attendees gather for peer-group sessions, at which smaller groups of four or five participants collaborate on class homework and discuss the ups and downs that their businesses face.”

“At the end of the six-month program, E200 participants walk away with a written, three-year growth plan – a helpful document to have handy for entrepreneurs looking for business loans or investors.”

“Other E200 lessons include primers on analyzing financial documents, new marketing techniques, and human resources strategies that can increase productivity and help business-owners delegate tasks. Bienko describes program as a “mini-MBA” for entrepreneurs.”

 

What I Think

I think one common thread in the articles posted on this date is the ways entrepreneurs struggle to find solutions to their problems and try to capitalize on the problems of the competition. Trust in the old English idiom, every cloud has a silver lining, would seem to be helpful here.

What could seem worse than having your biggest asset take the form of a troubled business, which you own with a spouse you are divorcing? The Tirella article, Divorced – but still in business together, teaches us that it is possible to make even this work. With help from some experts, the owners of this business were working on strategies to turn around sagging sales and resolve other business issues. Stress in managing a business together may have been at least partially responsible for the breakup, but the net result for the business, based upon assistance from the experts, may very well end up being a stronger business than was the case during the marriage.

NicoleR’s article, Recession: A Great Time to Start a Business, makes another great case for the silver lining.  The lack of available capital becomes a great teacher of frugality. In all likelihood, entrepreneurs starting a business during a recession are going to have to economize on start-up expenses and operate with a minimal burn rate. They will also develop a short pipeline, out of necessity, between startup and income stream. More good news can be found in the ready availability of one of the most important assets of any business, exceptional employees.

Several of the articles focus on entrepreneurs who are making a difference in their community, as well as making a profit in their business. Magic Johnson is achieving great success by giving great, personal service. Others are giving their employees exceptional perks instead of cash, while still others manage to focus on community service issues, as part of their business plan.

In several of the articles, the silver lining was discovered with the help of one or more consultants. In some cases, it was simply the perseverance of the entrepreneur or the ability to innovate. To some extent, a few of the turnarounds seem to simply be possible because the entrepreneur was able to make the proverbial lemonade out of lemons.   One thing is clear, however, in essentially all of these situations, a lesser “entrepreneur” would have quit or sold out, but the entrepreneurs in these articles have had the dedication and talent to recognize a problem and to stay with the path to finding the silver lining.

 

If you enjoyed my impression of these articles, why don’t you read them for yourself and see what you and I missed or hit? Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.

Lessons I Learned Today 6/15/09 – Lessons for Young Wannabees

This is a digest and recap of highlights, quotes, and comments from articles and discussions posted on this date on the Applied Entrepreneurship, LinkedIn group site.

 

*Top 5 Mistakes in Forming Your Corporation by Brad Sugars

“While some owners think incorporation is only for “big” companies, there are a number of reasons even “small” entrepreneurs should think about incorporating, mainly from the standpoint of personal liability protection.”

“While the number of sole proprietorships outnumbers corporations, most of those entities exist by default–meaning the owners have taken the easiest and least expensive road to getting their businesses off the ground.”

“What those owners fail to see, however, is the downside of having all of your “business eggs in one basket,” and many are just a lawsuit away from losing every asset in their name–including their home, cars and any personal or investment savings.”

“While forming a corporation or LLC is less expensive and easier than ever before, here are some things to avoid to get your corporation off the ground.”

• Incorporating without getting the advice of a good CPA
• Thinking the corporate veil gives you unlimited liability protection
• Incorporating, then operating without getting the proper local business licenses
• Incorporating and then not filing periodic paperwork or taxes as required by your state
• Incorporating without sufficient capital 

“Getting sound financial and legal advice may up your cost of incorporation… but in the long-run, the costs of doing things right pale in comparison to the hard costs of being in the wrong type of corporate structure. Or worse yet, finding yourself subject to fines and penalties you never knew existed.”

 

*Entrepreneurs’ predicaments illustrate role of lawyer by Stuart Adams

Entrepreneurs can sometimes see only a golden opportunity or irreversible disaster on their horizon because of a lack of perspective. In many such circumstances they might benefit from an attorney’s impartial counsel.

Entrepreneurs, like all of us, sometimes get too close to a situation and can’t see the forest for the trees. An impartial professional can be an invaluable ally in achieving success or avoiding disaster.

Good and bad deals come along every day. When one crosses your path, it’s easy to lose perspective and jump on impulse. Taking the time to thoroughly analyze the opportunity with trusted advisers can spell the difference between fortune and disaster.

 

*Change Aversion – Coming to Terms by Dr. Earl R. Smith II

“Many people see it as stepping from the known to the unknown. However, the only way that you can see it this way is to ignore that change is an unavoidable part of your every day. You are changing all the time. Therefore, the question is not whether or not you will change but how big are the steps you are ready to allow yourself to take. Your personal growth depends on this very decision.”

“Stress over change comes from two sources. The first is the process of change itself – you have to pay attention to what is becoming the new ‘reality’. The second is the apprehension that you bring to the process when you contemplate changes at your upper level of tolerance. Your ability to come to terms with change and grow will depend on how comfortable you can become with the first apprehension and how much you can reduce the second.”

“It is a truism that there will be no growth without effort. Change and the challenges that it brings is the common denominator. Your approach to change and ability to achieve the correct balance will define your life as much as any other factor – and much more than most.”

 

*Building a Strategy Pyramid by Tim Berry

“I came up with the strategy pyramid, which made it possible to track implementation and work on strategic alignment. We used it to build a database of business activities that we called “programs” and track them back up through tactics and strategy.”

“You can use the strategy pyramid in your own planning. Focus on three or four main strategic priorities and build a conceptual pyramid for each one. Don’t sweat the details like definitions of strategies and tactics; just make it work for you, in your business, with your pyramid. Do sweat the details like making programs with specific responsibilities, budgets and projected outputs when possible.”

“Remember, good business planning is nine parts implementation for every one part strategy.”

 

*Assumption is the Mother of All … – Lessons for Young Wannabees by Dr. Earl R. Smith II

In any logical structure, there are key assumptions that, if overturned, will result in the total disintegration of that logical structure. In philosophical terminology, these are ‘synthetic judgments a priori.’

These assumptions are taken as given without question. Examples might be ‘god exists’. ‘I am alive’ or ‘today is the day after yesterday’. However, if these assumptions are proven false, the entire structure that has been built upon them crumbles and falls.

1. Question everything

2. Particularly the most important assumptions

3. Accept nothing as true

4. Unless you have drilled down to bedrock

5. Blind faith is religion

6. Business is validating and debunking

7. Debunking is as important as validating

8. Fools accept – professionals validate

“Remember: in business, it is much more important to be successful that to be right. Business is not about demonstrating the inherent correctness of your belief about reality. It is not about validating your assumptions about reality. It does not give you an opportunity to ‘change the world as we know it’. Business is about connecting a value proposition that can be delivered on with a set of customers who recognize the value of that proposition and are willing to pay an adequate price for receiving its benefits.”

 

*Beware the ‘Shiny Stuff’ Seduction by Luke McKinney

“Equipping a new office is a fine line between being on Wall Street and a kid in a candy store: you don’t want your brand new business to fail because of penny-pinching, but every cent spent is taken out of the pile keeping your company alive until it’s profitable.”

What questions should you be asking every time you’re about to be invoiced?

• What You Need, Not What You Want
• Don’t Be Ready For Everything
• Time Is Money, But How Much?
• Counting the Concealed Costs

You can’t plan on things working. You have to know what to do when things go wrong, and if you didn’t already know that you should reexamine your business plan.

 

*Drafting Trouble-Free Social Media Policies by James Wong

“In just two years, social networks have grown from little-known, niche Web sites to popular super-sites on Web. For many company workers, signing on to Facebook is now as much of their morning ritual as the Starbucks latte or checking out the sports pages. Rumor has it that Bill Gates spends 30 minutes per day on Facebook; and President Barack Obama twitters.”

“Meanwhile, in legal departments across corporate America, social networks are under the radar, either because general counsels believe that existing policies are sufficient to manage risk, or worse, they believe what employees post onto social media poses only minimal risk to the corporation.”

The risks presented by unfettered communications on social networks are serious, pervasive and increasing. Existing policies are unlikely to cover evolving situations, but even assuming existing policies are in place, enforcement can be problematic.

“In the area of intellectual property: too much sharing by engineers could jeopardize claims for patents or trade secret status; uploads may infringe copyrights; and the company’s trademark may be misused, for example, on worker blogs that complain about the company’s workplace practices.”

“In securities: misleading statements made by persons with knowledge of the company may be construed as securities fraud; bloggers may make statements during a company’s “blackout” period; bloggers airing a corporation’s dirty laundry on a blog or forum may run against the company’s view of disclosable events.”

“HR departments may go to social networking sites to research job applicants. However, there is a danger that they may gather protected information such as race, age, religious backgrounds, etc., that may expose the company to anti-discrimination claims.”

“Counsel need to create, adopt and enforce policies that reduce risk without causing bigger problems, like resistance from colleagues. Companies may find their policies posted on the Web, dissected and criticized by the general public. So the creation of policy itself becomes risky.”

“One of the most difficult aspects of formulating policy will be enforcement. Significantly, there are numerous federal and state statutes protecting employee speech rights in the workplace, including those that shield whistleblowers. Garden variety review and termination provisions may not be enforceable.”

 

*Harness the Power of a Trademark by Tamara Monosoff

“In the inventing world, a lot of attention is paid to patenting. Often overlooked is the power of a trademark–a wonderful tool that can provide an incredible value when it comes to protecting your product or brand name.”

“A trademark can become one of your company’s most important and valuable assets. For example, consider all the brands you know, trust and prefer. These trademarked names have immeasurable value, and they’re protected. You couldn’t open up an ice cream shop in your town and call it Ben & Jerry’s without a quick visit from a powerful lawyer.”

“One important thing to know about a trademark is that you should begin using it immediately, prior to the formal application process. And keep detailed records regarding the date the mark is first used in commerce; this is of critical importance when filing the trademark application paperwork. Additionally, by placing the trademark symbol beside your product or service name, you acquire some common law rights. This varies from state to state.”

 

*How to Value Your Startup by Asheesh Advani

“Entrepreneurs need to put a value on their startups in order to raise money, and investors need to put a value on their investments to generate liquidity. Since neither entrepreneurs nor investors are known for right-brain artistic thinking, this article aims to provide some tips for left-brain thinkers to make sense of startup valuation.”

“If investors are telling you that your startup is worth $1 million, then that’s what it’s worth.”

“If you’re not profitable, your business probably isn’t worth very much.”

“Be careful about overvaluing your startup with faulty assumptions; it will only make your life more difficult-particularly if your investors have governance rights, such as positions on the company’s board.”

“Much like artists, entrepreneurs need to use creativity in valuing their startup businesses. Traditional approaches to valuation based on book values and P/E ratios are akin to painting by numbers.”

 

What I Think

I think the relatively broad range of articles posted on this date provides a nice primer for first time entrepreneurs and validation for experienced entrepreneurs as well. Brad Sugars’ article, Top 5 Mistakes in Forming Your Corporation, makes the point that sometimes doing things right from the beginning may cost more, but it can save many times that amount in the long run. Many first time entrepreneurs will try to save money by cutting corners on hiring the proverbial “trained professional” to help with critical steps in the process of taking the start-up to the next level.

Although Sugars’ article mentions only fines, penalties, and tax consequences, Tamara Monosoff’s article, Harness the Power of a Trademark, should also give clues about the danger of losing a valuable trademark or service mark. James Wong’s article, Drafting Trouble-Free Social Media Policies, should likewise give some insight into the dangers entrepreneurs face by ignoring the opportunity to obtain professional counsel on issues such as creating employee policies. A slip on either side of the proper path can be extremely costly in many ways, including legal fees greatly in excess of what the entrepreneur would have paid to obtain correct advice to start with, let alone judgment damages imposed by a court.

Luke McKinney’s article, Beware the ‘Shiny Stuff’ Seduction, teaches us to watch the fine line between spending valuable start-up resources on those things which seem important or desirable, and those things which actually are essential. Too many first time entrepreneurs think they know what they’re doing when they attempt to start their first business. Unfortunately, I’ve seen many an MBA and highly compensated executive fall flat on their face when starting their own company.

If starting a business were easy, everybody would be doing it successfully. Many try, but figures from the SBA and other sources indicate the success rate is relatively low. Much of this failure is based upon the entrepreneur not doing adequate research or being underfunded. Sadly, many first time entrepreneurs simply don’t know what they don’t know. Since the devil is often in the details, it makes sense to find a mentor or professional who can guide you through these difficult day-to-day challenges. Until you’ve been down the often circuitous road of entrepreneurship, it is way too easy to miss a step or take a fork in the road, only to end up in the unhappy land of the “wannabees.”

  

If you enjoyed my impression of these articles, why don’t you read them for yourself and see what you and I missed or hit? Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.

Lessons I Learned Today 6/12/09 – Up and Down the Elevator Speech

This is a digest and recap of highlights, quotes, and comments from articles and discussions posted on this date on the Applied Entrepreneurship, LinkedIn group site.

 

*Running Your Own Shop by Dr. Earl R. Smith II

“I want to run my own shop – be my own boss – be in command of my own destiny. I don’t want to report to anybody – be beholden to anybody – or controlled by anybody. As captain of my own ship, I can make the decisions – take the actions – and suffer the consequences without asking permission.”

“No one runs their own shop – no one is their own boss – no one is control of their own destiny. Business is a collaborative team sport – the team that works most closely and effectively together regularly buries the lone riders and dysfunctional gaggles.”

“Business is a team sport that requires all team members to have a strong inclination to collaborate, communicate, learn, teach, evolve and contribute.”

 

*Social Strategy for Exciting (and Boring) Brands by Josh Bernoff

“There are two kinds of brands in the world. There are brands people like to talk about, and brands they don’t.”

“The key with boring brands is to get people talking about their problems, since they won’t talk about your brand. In advertising, you can force messages on people watching other things. In a social context, this fails miserably.”

“Applications that talk about customers problems create “borrowed relevance,” since you generate talk they care about, then make yourself a part of it. American Express (credit cards are boring, face it) created the Members’ Project, a contest to choose deserving charities, since it realized that charity would generate more passion than credit cards. And in perhaps the most dramatic example, Procter & Gamble knew girls wouldn’t talk about tampons, but would talk about music, cliques, and school, so it created beinggirl.com as a vehicle to deliver (very quietly) the occasional feminine care products message.”

“Regardless of whether your brand is talkable or boring, as you launch these social applications, you’ll generate something very valuable – people who care about your brand, or at least the problems it solves.”

“If your brand is talkable, your social efforts will surface the brand enthusiasts who have the most influence. If it’s boring, your social applications will help you find your rare but valuable brand enthusiasts, or even generate a few. Pay attention to these people. Because as advertising clutter rises and word of mouth becomes more important, they’re about to become some of your most important corporate assets.”

 

*Social Networking Explodes and The Law Will Follow by Eric Sinrod

“Social networking is not a passing fancy; indeed, the time spent by Americans on social networking sites is increasing dramatically.  And, of course, where people go, the law will follow.”

“According to a recent report from Nielsen Online, the time that Americans spend on social networking sites is up a staggering 83% from just one year ago.”

“Unfortunately, it is a fact of life that where people congregate, some disputes ultimately emerge.  Social networking interactions therefore will not be free of friction and conflict.”

“As social networking increases, we probably will see a rise in lawsuits related to social networking communications and exchanges.”

“Inevitably, we will see lawsuits where people allege that they have been defamed by false information about them posted on social networking pages.  There also are bound to be lawsuits concerning alleged invasion of privacy having to do with the posting of revealing photos and videos without consent. “

“In addition, lawsuits alleging the improper revelation of trade secrets and intellectual property on social networking pages could come out of the woodwork.  And, we very well may see cases in which there are allegations of harassment, intimidation and hate speech on social networking pages.”

 

*Just Verb It? A Legal Perspective on Using Brands As Verbs by Steve Baird

There is a growing interest and, quite frankly, a dogged persistence among branding professionals to select brand names that have the ability and potential to be “verbed.”

“The International Trademark Association offers these guidelines on proper trademark use to trademark owners and those in the media: ‘NEVER use a trademark as a verb. Trademarks are products or services, never actions.’ INTA provides this example: ‘You are NOT rollerblading, but in-line skating with Rollerblade in-line skates.’ It also offers this test: ‘A good test for correct usage of a trademark is to remove the trademark from the sentence and see if the sentence (generic) still makes sense. If it does not then you are potentially using the mark as the descriptive term or as a verb and not as an adjective followed by a noun as you should.’ Why? To prevent brand names and trademarks from becoming generic names and part of the public domain for anyone to freely use, even competitors.”

“The challenge for trademark types and trademark owners is that many marketers are not listening to these cautious admonitions. As a consequence, trademark types will need to be increasingly more and more creative in their approach to mitigate the risk of the brand not only going to marketing heaven, but dying an sudden death immediately thereafter.”

 

*Understanding Equity Capital

“Equity capital or financing is money raised by a business in exchange for a share of ownership in the company. Ownership is represented by owning shares of stock outright or having the right to convert other financial instruments into stock of that private company. Two key sources of equity capital for new and emerging businesses are angel investors and venture capital firms.”

“Debt Capital: Debt capital is represented by funds borrowed by a business that must be repaid over a period of time, usually with interest. Debt financing can be either short-term, with full repayment due in less than one year, or long-term, with repayment due over a period greater than one year. The lender does not gain an ownership interest in the business and debt obligations are typically limited to repaying the loan with interest. Loans are often secured by some or all of the assets of the company.”

“Equity Capital: Equity capital is represented by funds that are raised by a business, in exchange for a share of ownership in the company. Equity financing allows a business to obtain funds without incurring debt, or without having to repay a specific amount of money at a particular time.”

“”Business “angels” are high net worth individual investors who seek high returns through private investments in start-up companies. They seek companies with high growth potentials, strong management teams, and solid business plans to aid the angels in assessing the company’s value. They often co-invest with trusted friends and business associates. In these situations, there is usually one influential lead investor (“archangel”) whose judgment is trusted by the rest of the group of angels.”

“Venture capital provides businesses a financial cushion. However, equity providers have the last call against the company’s assets. In view of this lower priority and the usual lack of a current pay requirement, equity providers require a higher rate of return/return on investment (ROI) than lenders receive.”

 

*Angel Investing – The ‘Elevator Speech’ Antidote by Dr. Earl R. Smith II

“Listening to the delivery of an elevator speech is the single most distracting event in an investor’s journey. It is to that point in time – the equivalent of ‘love at first sight’ – that most of the subsequent failures can be traced. An elevator speech is an advertising undertaking. It is an attempt to draw in a potential investor and get them interested in providing funding for a venture. It the starkest terms, it is a money trap.”

“Investors have lost more money because they failed to critically evaluate and aggressively test key underlying assumptions than for any other reason. This single misstep is by far the biggest ‘deal killer’ in the process.”

In this article, the author recommends a series of questions to ask an investor when reviewing a potential investment.

 

*Financial Strategies – Some Basic Rules by Dr. Earl R. Smith II

“The CEOs principal contribution to the process is to make sure that the correct financing strategies are in place and well focused. As CEO, you should make sure that the strategies deployed meet, at minimum, five basic criteria. First, are the financings that are being pursued adequate to the needs of the company? Second, are the right financial instruments being used? Third, are the right sources being approached? Fourth, how does each individual financing strategy fit into the overall capital structure of the company? And fifth, can the company afford the financing … is it really a good idea?”

“Don’t fund research by selling equity in your company. If you are spending money to sell what you ‘hope to have,’ your potential customers will generally treat you as a ‘might become.’ If part of the pressure on your financial resources is because you are spending unwisely, financing an error in judgment is a very costly undertaking.”

“Venture Capitalists are, for the most part, highly professional people who are having to search harder and harder for good investment opportunities. While you are chasing them and getting turned down, they are spending significant portions of their days looking for good investment opportunities. So, as hungry as they are to invest, what should it tell you if three or four of them have turned you down? Just exactly what part of ‘no’ are you having trouble understanding?”

“Make sure that you are turning over every stone in the pasture. Don’t let your ego or limited understanding of the options limit your company. Get in touch with experts in the field and really pick their brains. Make sure that you are looking down every alley and then pick the most efficient of the options.”

Here are five options to start with:

• Friends, Family and Fools
• SBIR, STTR & Other Grants
• Universities and Research Centers
• Your Customers
• Strategic Partners

 

*Blocking Social Networking Sites in the Workplace by Eric Sinrod

“An analysis of data submitted by thousands of Barracuda Web Filter customers demonstrates that as many as 50.2% of businesses using these filters are setting up barriers to MySpace and/or Facebook.”

“According to the Barracuda survey, the chief concern is fear of viruses or spyware (cited by 70% of respondents), with potential drain on employee productivity as the second greatest worry (cited by 52% of respondents).”

“Employers raise bandwidth issues (cited by 36% of respondents) and potential liability issues (cited by 28% of respondents) as additional reasons to put restrictions on Internet access by employees.”

“The challenge for employers going forward is to continue to protect themselves from intrusions such as viruses and spyware, and to keep employee productivity up and potential liability down, all while becoming positioned to utilize the most robust Internet communication tools possible.”

 

*The Lowdown on ARC Loans by Mark Deo

“The Small Business Administration recently released “lender guidelines” for America’s Recovery Capital (ARC) Loan Program. ARC loans will be up to $35,000 and available to established, viable, for-profit small businesses suffering “immediate financial hardship” in order to provide some temporary financial relief so they can keep their doors open and put their cash flow back on track. It is intended for businesses that need short-term help to make their principal and interest payments on existing qualifying debt (including conventional loans, credit card obligations, notes owed to suppliers and utilities).”

“The SBA defines a viable business as “a for-profit business with evidence of profitability or positive cash flow in at least one of the past two years.” Businesses must provide three years of financial statements, cash flow projections based on reasonable growth over two years and demonstrated ability to meet current and future debt obligations, including future repayment of the ARC loan. Also, the borrower must certify that they are currently no more than 60 days past due on any loan paid with an ARC loan and they must have an acceptable business credit score as determined by SBA.”

“The SBA is requiring businesses to show evidence of a “change in the financial condition” such as declining sales, frozen credit lines, difficulty meeting payroll, paying rent or difficulty making loan payments.”

“The loans are 100 percent guaranteed by the SBA and made by existing SBA 7(a) lenders. They have no SBA or lender fees associated with them (unless the lender must secure collateral as part of the loan). The disbursement period (up to six months) is followed by a 12- month deferral period with no repayment of principal. After the deferral period, the borrower pays back only the ARC loan principal over a five-year period. ARC loans are available through SBA-approved lenders as long as funding is available or through Sept. 30, 2010.”

 

What I Think

I think one of the common threads among the articles posted on this date is the force of opposites. In these difficult economic times, angels and venture capitalists are looking hard for worthy causes in which to invest. Likewise, worthy businesses, rebuffed by the banks and other traditional sources of capital, are now searching for an angel or venture capital fund, which is willing to invest in them.

The same sort of dance is going on between social media and businesses. New social media applications are being pumped out by the minute and users are lining up to try them. Businesses are searching for new ways to market themselves and strengthen their brand, but some fear abuse will be the result of employing social medial campaigns, so some many are consequently deploying blocking strategies against the very thing they may be looking for.

The government is attempting to find strategies to stimulate the economy, using programs like the ARC loan program. Troubled businesses, the target audience,  are, however, having a difficult time finding a bank, which seems to even have information on the program let alone a way to make such a loan.

Something is clearly missing. A year or two ago, there seemed to be an attraction factor linking such natural partnerships. What seems to be gone or at least weakened is the glue. Replacing it is the fear factor. Even when natural attractants get in range of each other, instead of being drawn together, they almost seem afraid to get too close.

Fear is natural, given the reports of a horrible economy. Part of the problem, is that the fear feeds upon itself and rumors of doom become a self-fulfilling prophecy. Fear stands between forces which are naturally attracted to each other, preventing them from uniting. Since there is not much sense giving an elevator speech which mimics this fear, let’s all try a little courage and see if we can let those natural attractants already in place, simply slide back toward each other.

 

If you enjoyed my impression of these articles, why don’t you read them for yourself and see what you and I missed or hit? Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.

Lessons I Learned Today 6/11/09 – Leverage; Ben Franklin to Breast Milk

This is a digest and recap of highlights, quotes, and comments from articles and discussions posted on this date on the Applied Entrepreneurship, LinkedIn group site.

 

*Why Benjamin Franklin Was a Better Entrepreneur Than You by Matt D Walker

“As Benjamin Franklin said: Those who would give up essential liberty to purchase a little temporary safety, deserve neither liberty nor safety.”

This quote could probably be interpreted in many different ways, but the one way that I see most fit for this article is going to be with entrepreneurship versus being an employee.”

“The difference between employees and entrepreneurs is staggering. Everything from money management, shopping trends, to problem resolution and beyond. What really makes the difference between an employee and an entrepreneur is simple. It simply boils down to time management, and entrepreneurs know that in order to get something better than what they have, something else must be given. For some, it’s money, for others, it’s time. This is definitely the determining factor.”

“Many entrepreneurs start a traditional business and end up creating a job for themselves.”

“Leverage is essential to any business, and with leverage, you can gain time freedom and still earn income needed to support time freedom and retirement. One of the best business models for leverage is network marketing.”

 

*It Takes a Village to Run a Successful Business – Don’t Go it Alone by Lisa Montanaro

“Imagine a group of people that are available to bounce business ideas off of, to help you make pivotal business decisions, and to serve as a sounding board. Major corporations have a Board of Directors. Non-profits have a Board of Trustees. Why can’t the solopreneur or small business owner too? You can! How? By developing a Board of Advisors for your business.”

“Be careful not to include anyone on your Board of Advisors that pushes your buttons, saps your energy, or is competitive. In addition, try not to surround yourself only with “yes” men and women who nod approvingly at everything you do, and never challenge you or hold you accountable. You want members that challenge you to stretch your entrepreneurial muscles.”

“Do not confuse your Board of Advisors with your official team of advisors. Your team of advisors is usually made up of people that you retain to assist you with certain aspects of your business operations, such as a lawyer, accountant, graphic designer, webmaster, etc. These are paid professionals that you hire to provide services to your company, as opposed to an individual that is voluntarily providing assistance to you and your business.”

“A Board of Advisors can push you when you need a nudge, lift you up when you lose focus or faith, and help to keep you on track.”

 

*Overcoming the Fundamental Obstacle to Entrepreneurship by John Vespasian

“Starting anything new entails risks and demands dedication. Irrespective of the technical difficulties of your chosen endeavour, nothing can be compared to the level of commitment required to get a new business off the ground. The sheer number of different tasks that entrepreneurs must perform, from product development to marketing, is overwhelming.”

“On the other hand, entrepreneurship possesses three characteristics that render it uniquely inviting and reassuring. No other human activity offers these advantages to its practitioners. It is regrettable that many men and women graduate from their studies without knowledge of these facts:”

1.- UNLIMITED POSSIBILITIES:

2.- UNLIMITED SCOPE

3.- UNLIMITED LEARNING

“The fear of being unable to achieve enough sales is what blocks 99% of those who entertain the idea of becoming entrepreneurs. Other obstacles pale in comparison to this one. If you succeed in getting over this initial hurdle, chances are that your business will be able to face whatever problems might come your way.”

“Start small, try different things, see what works and what doesn’t. Learn from mistakes, don’t be discouraged, and ignore malevolent criticism. Take limited risks, follow market signals, be persistent, and you will eventually get it right.”

 

*Why 99% of Entrepreneurs Fail: Because they don’t do anything by Jessica Mah

“Many of you have had the pride and joy of thinking that you know the next billion dollar idea. For scholars, a similar feeling is found when you come to a philosophical epiphany. The high is so great, that it’s difficult to get your mind onto anything else.”

“There are three types of amateur entrepreneurs out there, and in my young life, I’ve been every single one of them. By coming to terms with my failures, I’m more prepared to classify which type of amateur entrepreneur I am, and thus preventing myself from failing in the same way again.”

Type 1 Amateur Entrepreneur: All ideas, no implementation.

• Type 2 Amateur Entrepreneur: Lots of ideas and half assed implementations.
• Type 3 Amateur Entrepreneur: Lots of ideas, lots of implementations, and absolutely no focus.

“Everyone is “working” on a project, but 99% of self-proclaimed entrepreneurs fit into one of the three profiles above. If you’ve thought of the next billion dollar idea, please refrain yourself from being an amateur entrepreneur. If you find yourself as being an amateur entrepreneur, it’s not too late to change. Pick one idea that you’re passionate about, and whole-heartedley follow through with your implementation.”

 

*Fair Trade importer Alter Eco cultivates growth by Lindsay Riddell

“Alter Eco Americas is bringing Fair Trade and organic goods from across the world to U.S. grocery stores while trying to make a dent in global poverty. The startup has more than quadrupled its revenue over three years to $1.5 million in 2008 by landing distribution for products such as quinoa and jasmine rice in major grocery chains. One grocer that carries its products is Whole Foods, which has increased its Fair Trade offerings to more than 1,000 products in the last two years, including Alter Eco’s organic extra virgin olive oil from Palestine.”

“Alter Eco imports 150 products, including coffee from Peru, Ethiopia and Mexico, cocoa from Ghana and Bolivia, unrefined sugar from the Philippines, rice from Thailand and other foods under its brand. Alter Eco Americas has introduced 26 of those to the United States. Most products carry the Fair Trade label, which certifies that companies pay their workers fair wages and provide decent working conditions, among other things.”

“Alter Eco Americas also offsets the carbon emissions for the life cycle of the products. Paying fair wages, offsetting the carbon emissions and requiring products to meet organic standards squeezes margins.”

“In the U.S., we’re competing against brands that don’t have the same standards,” said Senard. “We have to be competitively priced even though we pay our farmers more.”

 

*CD buys aimed at helping businesses by Renee McGaw

“I was thinking, well, people aren’t really thinking about Arapahoe County,” said Milliken, the county’s treasurer. “Crisis is always an opportunity and I thought this is a good time to bring something home to the county.”

“So he came up with his own local stimulus program. Arapahoe County has bought $5 million in one-year certificates of deposit (CDs) from three locally owned banks — Colorado Business Bank, Citywide Banks, and Guaranty Bank and Trust Co. The banks have agreed to use the cash to make loans to Arapahoe County businesses.”

 

*Branding is just not for Coca-Cola or McDonald’s anymore by Steve Beseke

“Personal branding is your 21st century key to promoting yourself in the workplace. Today, branding isn’t just for companies, Hollywood celebrities, or highly-paid athletes. People in all walks of life are starting to use personal or self branding to get ahead in the game of life.”

“The single factor that often explains the difference between a professional who is competent and doing okay and one who earns a significant income and generates lots of business is self branding.”

“Self branding is a strong personal identity based on a clear perception about what you stand for, what sets you apart from others, and the added value you bring to a job or situation.”

“Your self brand is the sum total of other people’s feelings about your attributes and capabilities, how you perform, even their perceptions about what you are worth.”

“It is important to set personal brand goals with a specific time frame and plan of action for achieving the goals. So just like a marketer would, you write down personal marketing activities to achieve your goals. And, of course, you execute the marketing plan. You can’t get to where you want to go unless you plan it and then do it.”

 

*Winds of change for baby business by Jane Meyer Brahm

“A childbirth educator, certified labor doula, mother of five and new grandmother, Wallace started Gracewinds in 2002 when she saw that expectant couples and new parents had to look all over town for services.”

“It was crazy,” she said. “I thought, why not put them all together?”

“She started with five contract practitioners operating out of a former tavern. She and her husband, Jeff Carson, self-financed the business with a few thousand dollars. Jeff did carpentry and remodeling in exchange for a few months’ rent on the building. Christine made use of her art background by painting murals.”

“A childbirth educator, certified labor doula, mother of five and new grandmother, Wallace started Gracewinds in 2002 when she saw that expectant couples and new parents had to look all over town for services.”

“It was crazy,” she said. “I thought, why not put them all together?”

“She started with five contract practitioners operating out of a former tavern. She and her husband, Jeff Carson, self-financed the business with a few thousand dollars. Jeff did carpentry and remodeling in exchange for a few months’ rent on the building. Christine made use of her art background by painting murals.”

“Her big dreams are still evolving. She’s working on a new-fathers program that will become the first of its type certified by the national Childbirth and Postpartum Professionals Association. She started her own publishing company, Braxton-Hicks, to publish her labor guide for doulas, which now has international distribution. She set up Gracewinds Global Breast Milk Initiative, a nonprofit focused on promoting and supporting breastfeeding in third-world countries. She holds monthly meetings for women business owners, focusing on entrepreneurship.”

“What we’re providing here is age-old and timeless – a community of support under one roof.”

 

What I Think

I think some may feel the title of this post is a stretch, but if you look at the articles posted on this date, many of them deal with leverage in one form or another. Matt D Walker’s article, Why Benjamin Franklin Was a Better Entrepreneur Than You, makes the point that entrepreneurs are different from those willing to simply be someone else’s employee all their lives. Entrepreneurs understand they must make a sacrifice to accomplish a quantum leap, but also understand that the rewards are worth that sacrifice. Entrepreneurs make their own “lever,” managing their time more efficiently than others, and failing to be deterred from reaching their vision.

Ben Franklin understood that the American enterprise desperately needed partners if it was to survive a hostile takeover on the heels of the initial launch of the new brand. The American start-up lacked sufficient credit, like many new organizations, and initially was rebuffed by the more established European power brokers. Franklin realized he had to turn his enterprise’s apparent weakness into strength. His innovative approach to European politics made his “wilderness” non-conformity a novelty with which to open doors and purses.

Franklin was a master of the personal branding techniques advocated by Steve Beseke’s article. He made himself so unique he became a celebrity. The barriers to entry facing our Founding Fathers would have seemed insurmountable to another team, but they divided and delegated the various tasks involved in building the foundation of the new enterprise and the bridges necessary to allow it to open trade relations with much more mature and sophisticated competitors in the world economy.

Franklin and the others on the start-up team certainly didn’t accomplish all this by themselves. They could easily have fallen prey to any of the three cardinal sins of entrepreneurs suggested by Jessica Mah’s article, but they were passionate about getting the new enterprise launched, and whole-heartedly followed through with implementation.

 They enlisted the help of an extensive advisory group, just as Lisa Montanaro’s article suggests. They put the talents of their start-up team together and the resulting foundation they gave the new American enterprise was so skillfully crafted that it has withstood the winds of change for over two hundred years. It has certainly changed and grown during that time, but it is obviously now much more diverse and powerful than perhaps anyone other than the Founders could have imagined.

  

If you enjoyed my impression of these articles, why don’t you read them for yourself and see what you and I missed or hit? Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.

Lessons I Learned Today 6/10/09 – Pulling the Angel’s Teeth

This is a digest and recap of highlights, quotes, and comments from articles and discussions posted on this date on the Applied Entrepreneurship, LinkedIn group site.

 

*Tough Terms, Tougher Entrepreneurs by Roslind Resnick

“Even in good times, it’s never easy to get an investor to hand over a check. But, in times like these, persuading an angel investor to risk even $50,000 on a startup can be like pulling teeth.”

“Entrepreneurs are going to have to seek out new types of financing structures if they want to get their ventures off the ground.”

Trends:

• We have seen an increase in insiders loaning funds to their firms to bridge the gap to better times and also offering investment opportunities to existing investors through rights offerings.
• Sometimes your best financing partner is right in front of your nose.

 

*VC Firms Give Advice on Getting Startup Funding by Ken Sweet

“Small-business owners looking for funding should concentrate on networking and creating pitches that “wow” prospective investors, some prominent venture capitalists said.”

“VC-firm representatives said that while it remains a difficult economic environment for the general economy as well as technology-based companies, all venture capital firms said they are still looking to finance good ideas.”

“All four venture firms at a forum in New York said that networking is an important first step in presenting an idea. Very rarely will venture capitalists take cold calls or emailed proposals.”

“Referrals are extremely important. If an entrepreneur cannot find us through our own ecosystem, they probably aren’t worth talking to.”

“Once an entrepreneur has established relationships with the venture capital firms that invest in their sector or industries, the next step fund managers said is a business proposal.”

“If you cannot be clear and succinct about what value your idea brings, you need to go back to the drawing board,”

“It’s less about the idea and more about the person behind it.”

 

*Virtual Storefronts: Can You Go Home Again? by Roslind Resnick

“Lately, there’s been a lot of talk about mom-and-pop retailers pulling the plug on their physical storefronts and running their businesses from home.”

“It’s easy to see the appeal: No more rent, no more utilities, no more sales staff, no more fines from the city for putting out your trash on the wrong day.”

“The downside: No more customers.”

“When I started my consulting firm, I opened a storefront in Lower Manhattan offering walk-in consulting services for small business owners and entrepreneurs. While the storefront attracted hundreds of customers and rang up lots of sales, we were never able to break even after paying the landlord, the light bill and our eight-person staff.”

“Two years later, I shut down the storefront and took the firm virtual, hoping that optimizing our site for the search engines would bring in enough business to keep us afloat. My gamble paid off–but only because I supplemented our online marketing strategy with a heavy dose of networking, writing and public speaking.

“So take it from me: Before you close your doors and kiss your storefront goodbye, put a plan in place that will keep customers coming in the door. Place a fishbowl at your checkout counter to collect business cards, send out an e-mail newsletter once a month, do your homework on search engine marketing and ask your kids to clue you in about Facebook and Twitter.”

 

* Kiva Brings Microlending Home To U.S. Entrepreneurs In Need by Leena Rao

“Kiva.org, one of the web’s most interesting innovators in the micro-lending space, is hoping to come to the aid of U.S. entrepreneurs and small businesses by launching a pilot expansion that would allow individuals anywhere to make small loans to low-income U.S. entrepreneurs through Kiva’s platform.”

“Kiva is a peer-to-peer lending site that facilitates micropayment loans between citizen lenders and extremely low-income entrepreneurs in developing countries. Through Kiva’s platform, anyone can loan $25 or more to support an entrepreneur and the specific progress of the loan can be tracked from initial funding to repayment. Upon receiving repayment, lenders can withdraw their funds from Kiva or lend again to another entrepreneur, thereby continuing the lending cycle.”

“Since the microfinance platform’s birth in 2005, over $75 million has been loaned through Kiva.org to support more than 180,000 individuals from 44 developing countries.”

 

*Consulting Business Strategy: It Takes More Than Wishful Thinking by Beverley Hamilton

“Some Independent Business Consultants (IBC) whether they be in marketing, sales, IT or HR, assume that just by talking to people, just by having a website or just by having a glossy brochure they will automatically get clients. And it’s this assumption that will ultimately cause frustration, stress and despair as their consultancy flounders due to a lack of clients.”

Your consultancy is a business and a business requires a workable, systemised infrastructure to make it truly successful. The development and sustainability of a profitable consultancy requires thought, planning, trial, review and thought – in all areas of the business. Those businesses that are truly successful have numerous common factors, two of which are:

1. Clarity of who their ideal clients are

2. Sustainable client acquisition systems

Random, ad hoc and unspecific activity may give you clients in the short term but in the long run it will not.

 

*How to Give Your Consulting Clients What They Really Need by Beverley Hamilton

“Just because you know your clients need what you have to offer, doesn’t mean that they know they need what you have to offer. There are a number of reasons for this. The difference between need and want can be minimal but it can also be a chasm.”

You’ve made the break from the constraints of corporate life and are excited to be establishing your new business as a consultant. As an Independent Business Consultant (IBC) whether that be in marketing, HR, IT or sales, you know that what you have to offer is of high value and can create tremendous benefits for your current and potential clients.

You know that what you offer is what your clients need because you have researched your market, listened to clients and you fully understand the problems your clients have. You know that your services can provide the ideal solution.

So what’s wrong with that?

Just because you know your clients need what you have to offer, doesn’t mean that they know they need what you have to offer.

There are a number of reasons for this;

1. They are so caught up in their own world dealing with their problems, which are so immediate, that sometimes what they see as their problem is not their real problem.

2. Some clients already believe they know what the problem is and have a fixed idea of what they see as the right solution.

3. Some clients know what they want but they don’t know or won’t acknowledge what they need

The difference between need and want can be minimal but it can also be a chasm.

 

* How to Start a Consulting Business

“What separates a good consultant from a bad consultant is a passion and drive for excellence. And–oh yes–a good consultant should be knowledgeable about the subject he or she is consulting in. That does make a difference.”

“In this day and age, anyone can be a consultant. All you need to discover is what your particular gift is.”

Things to Consider Before You Become a Consultant

• What certifications and special licensing will I need?
• Am I qualified to become a consultant?
• Am I organized enough to become a consultant?
• Do I like to network?
• Have I set long-term and short-term goals?

 

This is a very nice and complete article for anyone interested in becoming a consultant.

 

*Mistakes To Avoid When Marketing Your Consulting Business by Michael McLaughlin

Many competent consultants risk their own success, and their bank balances, by driving straight into the same old marketing potholes again and again. Take action to avoid these ten common marketing traps:

• The curse of experience.
• Go it alone.
• Overestimate clients’ interest in you.
• Believe your services are top-notch just as they are.
• Sell too hard.
• Dabble in marketing.
• Focus on your “accounts,” not your clients.
• Take the one-size-fits-all approach.
• Impatience.
• Dread marketing.

 

*Survey Says: Entrepreneurs Nix Consultants by Nina Kaufman

“A recent survey conducted by BizBuySell, the largest online business-for-sale marketplace, found that nearly 75% of business owners doubted the effectiveness of hiring consultants to improve business reputation, preferring instead to do their own marketing without external assistance.  Of the survey sample, 68% of respondents said they had never engaged a consultant to help improve their business. Of those who had engaged consultants, 45% were moderately satisfied with the results. 27% felt the consultant did a great job for the business, while 24% regretted the decision to hire a consultant, stating it was a waste of time and money.”

“Sometimes, it’s worth working with more expensive consultants, because they may be more likely to have the know-how to help you.  Find out if they’re on the speaking circuit.  See if they’ll divulge how much money they are making/how many clients they have each year from their consulting practices and products.  See who recommends them and in whose circles they travel.  That’ll give you a definite sense of whether they are successful at what they do.”

 

*The Secret To Becoming A Great Entrepreneur by Laurie Hayes

“You may have an exceptional product that can improve the lives of many.”

“You may provide a service that is second to none.”

“BUT …if you don’t have exceptional sales skills, you will lose out on many an opportunity to demonstrate or provide value to anyone.”

“The most important, yet least developed business skill in many small and home-based business owners is selling. Lack of effective sales skills is a major contributor to the demise of a business.”

“Although you are an entrepreneur, you are also a sales person. You are in the business of selling a product or service to others.”

 

What I Think

I think the common thread in many of the articles posted on this date is wishful thinking. Angels and venture capitalists say they’re looking for the “wow” factor in business opportunities they review for potential investment. In nearly the same breath, they also say entrepreneurs need to find new types of financing structure.

Likewise, some bricks and mortar businesses are trying to stay afloat in rough economic waters by closing their physical location in favor of a low cost or no cost virtual presence in the market place. As one of the articles suggests, sometimes closing off your physical location will prove a roadblock to your customers finding you in sufficient numbers to keep your business alive. It is wishful thinking to believe that cutting costs to the bone can be the sole solution in an economic downturn. This may prove the reality is that you’re cutting the throat of your own business.

The wishful thinking theme also runs through the consultant’s dilemma articles. Many a consultant has tried to build a client base by posting a beautiful Web site and sending out tons of glossy brochures. This is not an alternative to hitting the streets or entering into the business with a book of business.

In consulting work, there is always a pipeline, which has to be full. If you start with no clients, cash flow can kill you before the cash matches the expenses, even if lots of business is coming in the front end of the pipe. By the time new business reaches the profit end of the pipe, quite a bit of time and expense will likely have already accumulated. If borrowing money has become a pattern for keeping the business alive while you wait for the pipeline to fill, or worse yet use/abuse of credit cards, the debt service on the loans and credit cards alone can put a profitable bottom line out of reach.

Clearly, to be a successful consultant, one should have demonstrable skill in one or more areas needed by clients who have an ability to pay for this expertise. Ability to pay, however, is not enough. Some markets are simply tougher than others. Some industries and markets are very much accustomed to working with all sorts of consultants. In other markets, however, you will find just the opposite.

The articles posted on this date indicate that being a proficient networker is an essential skill for consultants and those seeking funding from angels and venture capitalists. Both of the groups, seeking clients and financing, respectively, have been known to overestimate the interest of those they seek, and underestimate the amount of research and other groundwork necessary to bag their prize. Both consultants and entrepreneurs seeking financing must do the homework, be ready with answers for every question, be able to demonstrate the superiority of their cause above others with whom they compete, and communicate all this with clarity and brevity. Anything less will result in odds of success similar to those of one trying to pull an angel’s teeth. 

 

If you enjoyed my impression of these articles, why don’t you read them for yourself and see what you and I missed or hit? Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.

Lessons I Learned Today 6/9/09 – Innovation Playbook; Turning the Titanic in a Bathtub

This is a digest and recap of highlights, quotes, and comments from articles and discussions posted on this date on the Applied Entrepreneurship, LinkedIn group site.

 

*The Innovation Playbook by J.P. Donlon

“With almost $10 billion in annual revenue, Heinz has leading brands in some 200 countries. (Its top 15 brands account for 70 percent of sales.) In trying to build a platform for future growth, Johnson and his senior team had one major advantage. Heinz ketchup, according to a Harris poll, was identified along with Coca-Cola as the most familiar brand in the U.S. The company is also a brand leader in beans, soups and infant foods in the U.K. and Australia. But iconic brands are not enough in a competitive world food market dominated by numerous brands and tight margins. The challenge was to grow the core portfolio, accelerate growth in emerging markets, and leverage its brands on a larger global scale.”

“At this moment you have two choices. You either recognize the changed circumstances and deal with it and move forward, or you try to live in the past. I’m a forward-looking person. There was no point in going back and reliving that. The market had spoken to us.”

“You don’t turn the Titanic in a bathtub. You don’t make fundamental changes in two weeks.”

“Although we have wiped out the not-invented-here attitude, there are occasionally pockets where we want to do something, and somebody is resistant. There are two ways to convince those individuals. One is with facts and logic, and the other is to tell them to do it anyway. We’ve upgraded our capabilities dramatically, but we are nowhere near perfect. That’s what makes this job challenging.”

 

*My Boss Wants to Sell Me The Business by Tim Berry

“Where do I start? My boss said he would sell the business for $500,000. What would be the best way to go about getting this business; and what should I know?”

“Of course this might be the opportunity you’ve been waiting for, but let’s also understand that your question is even more open-ended and complex than if you’d been offered a house to buy. You start with the problem of what it’s worth, objectively, then add the problem of how you’re going to finance the purchase. And all of that rests on the problem of whether you want to run a business and know how to run it. Books have been written on this stuff. In fact, the amazon.com search for books on “buying a business” produces 18,623 results.”

This article provide links to resources on business valuation, and gives brief comments on issues such as leveraged buyouts and seeking professional advice when buying a business.

 

*Do You Have an Exit Plan? by John M. Leonetti

“As a CEO, and most likely owner or part-owner of your enterprise, you are responsible for grasping the big picture of how the company is performing; you make critical decisions in order to succeed and direct the future of the company. With that said, how well prepared for your company’s future do you think you are? Have you taken the time to outline your ultimate goal of how you plan to exit the business? If so, how confident are you that this move is the most profitable option, and, at the same time, the best strategic move for the company?”

“Creating an exit plan for your company should be considered standard practice, a regular component of your business planning. An exit plan does not, and should not, imply that you are currently considering selling the business or looking to retire in the near future. On the contrary, well thought out exit plans occur over many years and often times selling the business is only one of the many options considered in the plan.”

“What your exit plan should do is analyze the possibilities for the ultimate succession of the business’s ownership and control, the tax and business implications of each option, taking into account the wants and needs of the company’s ownership.  What then will creating an exit plan give you if you do not believe your company’s ownership is nearing an exit? The answer, it will give you confidence that the decisions you make today are supporting your ultimate exit plan as well as providing you with the maximum exit value when the time is right.”

The article discusses the various steps in creating an exit plan, including looking at the current ownership of the company to determine how prepared they are for an exit, understanding all the options, executing on the plan, and then protecting your wealth.

 

*Succession Planning Crucial For Corporate Image by Fayazuddin A. Shirazi

“For Ken Makovsky, succession planning is all about safeguarding a company’s image. According to him, if the succession issue goes unattended, it can seriously dent the reputation of the company. “One of the main responsibilities for a CEO and the company’s board is the development of a succession plan to insure the continuity of the company. The company’s reputation can be seriously tarnished if the succession issue is left unaddressed,” he says.”

” A survey of more than 2,500 senior HR executives by Boston, MA, based talent development consultancy Novations Group reported that despite having succession planning in place, more than a fifth of the survey respondents believed it was valueless because, more often than not, they ended up recruiting someone externally anyway.”

“The report which was released last year further revealed that barely half of US firms regularly update their management succession plans, meaning that when valued high-flyers depart for greener pastures, it is more than likely that their only option will be to throw money at the problem.”

 

*Succession in Practice by Beverly A.Behan, Jeff Kirschner and Susan M.Snyder

“To understand the perspectives of today’s CEOs on succession planning, we spoke with 18 sitting CEOs, one recently retired CEO and one sitting chairman, as listed in the sidebar on p. 30. To gain varied perspectives on this important topic, we spoke to CEOs from a variety of industries and different company sizes, with our sample group admittedly weighted towards larger public companies.”

“I think the days of the imperial CEO are long gone but while they lasted, succession planning was a subject that a CEO could defer,” noted James Cornelius, CEO of Bristol-Myers Squibb. “In today’s world of governance, it’s impossible to defer what is probably the most important decision, namely who will be the next CEO.”

Most describe an effective CEO succession process today as a partnership between the board and the CEO. While the ultimate decision rests with the board, the CEO nonetheless plays a critical role in the succession process. “The board is the ultimate decision maker about who the next CEO should be,” explains Don Shippar, CEO of Allete. “The CEO, however, needs to weigh in on issues about what’s important in the CEO job, and the criteria for someone to be successful in that job, and should help the board to come to agreement on these things.”

Formal executive assessments are increasingly becoming an important feature of the CEO succession planning process. “We do 360 [reviews] with all of the executives, including me,” reports Carlos Cardoso, CEO of Kennametal. “As a result of those 360s, there’s coaching and feedback.”

“While the role of the CEO in succession planning may have changed, today’s CEOs feel their role in succession is more important than ever – in partnering with the board on succession, developing a pool of candidates and mentoring candidates to the point that they can successfully step into the CEO’s shoes. They emphasize the importance of starting early, incorporating formal assessment tools into the succession process and avoiding public horse races along the path. They recognize the CEO’s role in giving the board meaningful exposure to succession candidates and in giving candidates experience in learning how to work with a board.”

 

*Small Biz Blogging 101-Getting Started by NicoleR

“Most startup blogs are small, but with time and regular updates your audience can grow. As a small business it is important to start your blog early because this can be one of the most cost effective ways to start marketing your business. As your business grows so will your number of followers and those who become faithful, will appreciate your information and possibly become future consumers.”

The article lays out a few tips to get you on your way:

• Use other people′s blogs to establish yourself as an expert
• Use your blog as a form of communication
• Define you topic and stick to it
• Stay current and up to date
• Don′t forget about spelling and grammar

“It′s not necessary to be a professional author or multi-million dollar company to have a blog.  All you need is opinions, information and insight in your area of expertise.  If you prove to be genuine and knowledgeable your readers will notice and your blog will become one of the most cost effective marketing tools your small business could invest in.”

 

*Lifecycle Quiz for CEOs by Robert M. Donnelly

“Company’s, (sic) like people, go through a natural evolution from their entrepreneurial beginnings or embryonic phase, through the growth phase into maturity, and if they are not careful they can age prematurely and eventually die. The individual products that make up the company sales have their own product lifecycles as well.”

“The problem is that many CEOs do not know where their company lies on the lifecycle curve. Nor do they seem to know where their products fit in the natural evolution of product lifecycles. As a result they are frequently surprised when they realize that it is often too late to reverse their situation.”

“Nobody plans to fail…they just fail to plan.”

“The lifecycle of a business mirrors the biological cycle of humans. The stages of the business/product lifecycle have been well documented and are played out in the marketplace every day. The question is – where is your business in this age old evolution? Do you know?”

“Every company generates immense amounts of data. However, all that data has to be converted into information and that information used to develop insights to determine where the company and its products are in their natural lifecycles.”

“Each stage of the lifecycle of a business has natural strategies that can be implemented successfully to continue the profitable evolution of the company.”

 

*Small Business Networking for your Bottom Line by NicoleR

“Traditional means of marketing are not dead; in fact, they are still very much alive and proving to be effective. Tactics such as face-to-face networking and word-of-mouth is proof of this. When deciding on what business networking methods you will use, it is important to first, understand how networking can work for you. Second, research what groups are right for you. Third, make a goal for what you want to accomplish.”

“Business networking in the form of joining and meeting with trade groups, industry associations, chambers of commerce and similar organizations in person can flat out increase your bottom line. By meeting other professionals in person, on common ground and at a place of mutual interest, you will begin to form relationships among your community. Once you start building relationships and regularity among these groups, members will begin to remember you, your abilities and your expertise. The next time a member needs something in your field; they will remember you and therefore will probably reach out to your small business. In essence, you will form a loyal network of followers who may at some point need your business, refer your business or want to collaborate on a joint goal.”

“Business networking in the form of joining and meeting with trade groups, industry associations, chambers of commerce and similar organizations in person can flat out increase your bottom line. By meeting other professionals in person, on common ground and at a place of mutual interest, you will begin to form relationships among your community. Once you start building relationships and regularity among these groups, members will begin to remember you, your abilities and your expertise. The next time a member needs something in your field; they will remember you and therefore will probably reach out to your small business. In essence, you will form a loyal network of followers who may at some point need your business, refer your business or want to collaborate on a joint goal.”

 

*BizEquity: What’s Your Business Worth? By Tim Berry

“If you own a business or want to start a business, then you care about valuation and how it works. Even if you don’t now, you will later.”

“Businesses that seek investment need to anticipate valuation as part of the exit strategy, which is how the investors make money. You get investment now, but only if investors believe they’ll make money when the business sells later. “

“For estate planning, you need to estimate valuation if you deal in shares of a business for your wife, partner, significant other or children. Tax code defines how much you can give in any given year, and that depends on valuation. “

“Lots of people who never thought of exit during years of running a business start thinking of selling as they get into their 60s and 70s. And that means selling the business. “

“Valuation is obviously critical for buying or selling a business.”

The article outlines a trial run of BizEquity.com where “you can search your ZIP code for estimated valuations by type of business. You can search for your specific business by name. Most interesting, and a new feature, you can sign up and run through a valuation based on your business numbers.”

 

*Do You Really Want to Find Investors? by Tim Berry

1. Are you really sure you want to go that way?

2. Do you have a business plan?

3. Do you need enough money to interest investors?

4. Can you grow your business a lot, in a few years?

5. Do you have a convincing team?

Investors are going to want track records, people on your team who can run the production, marketing, sales, and administration of your business. They want people who have done that kind of thing before, successfully. If you don’t have them on your team, then the investors won’t be interested.

If you can answer yes to all of those questions, then you’ll likely be able to get investment

 

What I Think

I think, as Donnelly’s article points out, “nobody plans to fail…they just fail to plan.” Many of the articles posted on this date demonstrate both sides of the planning equation. Those entrepreneurs who think up front about their businesses and their own mortality, should do better than those who don’t. Those who start their planning too late in the life cycle of their business or their own lives, have corresponding less chance of success. Those who plan on the basis of incorrect or insufficient data, as well as those who don’t understand the data, are as likely to succeed as they are to be able to “turn the Titanic in a bathtub.”

These all seem like pretty basic rules, but that is a matter of perspective. If you understand the rules, they become obvious to the point of being second nature. If you don’t know the rules, perhaps because you are in unfamiliar territory, you don’t know what you don’t know.

A perfect example comes with the employee whose boss and company owner offers him an opportunity to buy the business. With the economy in the shape it is currently, this is likely to be happening at a record rate. So, what are the rules in this situation? Perhaps they not so easy to tell.

Based upon some of the articles posted on this date, the issue of valuation arises. There are certainly many ways to value a business, each method having its own rules. Once again, in this economy, many of those rules are changing, but all according to a higher level of rules.

The stages in the life cycle of a business or product are sometimes so long and so subtle to the uninitiated, they are harder to see than the movement of the hour hand on a clock. Likewise, other than gray hair, the life cycle of a business owner can be deceptive for both the employees and the owner too. Following one rule from these articles, starting early in the process, whether it be working toward buying a business or finding a successor to run your business, may just allow you to turn the Titanic, but not to make fundamental changes overnight.

 

If you enjoyed my impression of these articles, why don’t you read them for yourself and see what you and I missed or hit? Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.

Lessons I Learned Today 6/8/09 – Radical Innovation and Entrepreneurship

This is a digest and recap of highlights, quotes, and comments from articles and discussions posted on this date on the Applied Entrepreneurship, LinkedIn group site.

 

* 10 Lessons Learned in 22 Years of Bootstrapping by Tim Berry

“Last week a group of students interviewed me, as part of a class project, looking for secrets and keys to success. They were asking me because after 22 years of bootstrapping, my wife Vange and I own a business that has 45 employees now, multimillion dollar sales, market leadership in its segment, no outside investors, and no debt. And a second generation is running it now.”

Berry and his wife came up with these 10 lessons:

• We made lots of mistakes.
• We built it around ourselves.
• We offered something other people wanted.
• We planned.
• We spent our own money. We never spent money we didn’t have.
• We used service revenues to invest in products.
• We minded cash flow first, before growth.
• We put growth ahead of profits.
• We hired people slowly and carefully.
• We did for employees’ families as we did for ourselves.

“Bootstrapping is underrated. It took us longer than it might have, but after having reached critical mass, it’s really good to own your own business outright. It might have taken longer, and maybe it was harder — although who knows if we could have done it with investors as partners — but it seems like a good ending.”

“Family business is underrated. There are some special problems, but there are also special advantages too.”

 

* 7 Tips for Defining Your Business Goals by Keller Hawthorne 

“One of the best steps you can take to ensure success for your online business is to specify your goals. It’s amazing how many of my clients can’t tell me how much money they want to make in their first year of business, or how many subscribers they would like to have on their newsletter. If they don’t know what their goal is, how will they know if they’ve succeeded?”

Some of the thoughts on how to keep business goals in line are:

1. Keep them Specific!
2. Don’t go Overboard
3. Be Realistic
4. Keep them Dynamic
5. Create a Timeline
6. Be Good to Yourself!
7. Make Learning a Goal

 

* Four top entrepreneurs talk about business plans, loneliness and the passions that drive them

“What makes an entrepreneur an entrepreneur? Is it a lonely adventure? Are mentors important? These were some of the issues that four prominent entrepreneurs discussed in a panel discussion last year.”

The panelists were:

• Steve Demos, co-founder and chairman of Next Foods Inc., which sells a line of stomach-soothing probiotic juice products.
• Mark Kern, co-founder and chairman of Red 5 Studios Inc., an online-videogame maker. Before starting Red 5, Mr. Kern was the team leader on the popular multiplayer online game World of Warcraft.
• Marion Freijsen, co-founder and chief technology officer of E.Factor, which aids entrepreneurs by providing a virtual platform for the sharing of ideas and experiences.
• Tom Scott, chairman of Plum TV, which operates local television channels in historic, affluent markets such as Aspen, Nantucket, and Martha’s Vineyard. Mr. Scott was a co-founder and chief executive of Nantucket Nectars, which was sold to Cadbury Schweppes for about $100 million in 2002.

Here are some examples of the discussion.

“DEMOS: I think an entrepreneur’s responsibility is get you to the playing field and then listen very carefully to the consumer, because they’re really telling you what to do. I think, as an entrepreneur, I see trends but not specificity. And I look to the market to help me hone and fine-tune the specificity. Remember, I spent 20 years making the most hated food in the U.S., which is tofu, but we ended up on a rocket ship called Silk Soy Milk.”

“What you don’t know is in between those two products there were 200 other products. And we were basically dialing through products to determine where will the consumer show up to eat lower on the food chain.”

“KERN: I think it’s not just about adapting to your consumer and adapting to your marketplace. In my industry, you work with a lot of creative talent and they come on board, initially, for the vision that you hold out to them. But eventually they need to have contributions to that vision as well.”

“So you start out with your vision but it really has to morph and include everyone’s vision on the team, if you want to continue to [attract] the best talent to your company. And you do have to listen to them. You may be very stubborn because you started this thing and you think it’s got to be this way. But listen not just to your consumers, but to what your internal talent is telling you.”

“DEMOS: I think for me, personally, business is all about fulfillment, not achievement. I think achievement accompanies fulfillment, but not the reverse. So we really, honestly weren’t focused on the money because that was going to be the fait accompli if we fulfilled our mission. Meaningful purpose is probably the highest order of use of my consciousness that I can think of.”

“FREIJSEN: Right. Exactly. Being an entrepreneur is a lonely business. I had an entrepreneur turn up at an event. He was almost in tears. He said, this is so great. When I talk at home about my business, my wife only cares about what income I bring in and the rest of my family doesn’t understand. And here I can talk to people who are like me.”

 

* Sell More by Seeing Your Store Through Customers’ Eyes by Kare Anderson

“In a stressful economic time, coddle customers to keep them.  In fact, give them bragging rights about “my store” so they come back and tell others. “

“Next to value-priced quality products, a motivated staff is the most cost-effective way to stand out from the competition while avoiding costly price wars. So many no-cost and low-cost staff behaviors can make all the difference in how a customer feels about your store.  The devil is in the specifics because even the most well-intentioned staffer may unwittingly slight someone. “

“As customer service expert, Holly Stuhl is fond of saying, “You never get bitten by an elephant.  It’s the mosquitoes that eat you alive.”

Anderson’s article outlines ten strategies to improve customer relations for your business.

 

* Get Help Starting Your Home Based Business by Margie Zable Fisher

“Starting a home business sounds like a terrific idea, until you realize all that’s involved in getting it up and running. So getting some assistance really helps – especially if it doesn’t cost a lot of money.”

“Three successful business owners explain how they found the right opportunity, through a franchise or training program, and made it work for them.”

 

* High-Tech Start-Ups Put Down Roots in New Soil by Simona Covel

“High-tech start-ups are increasingly setting up shop in places previously not known for attracting high-tech firms.”

“A number of cities, such as Kalamazoo, Mich., and Toledo, Ohio, are offering grant money and tax breaks to high-tech start-ups, just as the usual venture-capital hot spots, such as Silicon Valley and Boston, continue to see a pullback in venture lending. Many of the nontraditional cities require that start-ups receiving grants invest in their area, leaving companies little choice but to locate — or relocate — their businesses.”

“Firms also are being lured by the lower cost of doing business in such cities. And, as the number of high-tech start-ups increases in these areas, existing companies find that as they grow, they no longer have to leave Ohio, Michigan and other states that traditionally have had less to offer in the way of high-tech communities and investors.”

 

*It’s Time to Reinvent Knowledge Work by John Sviokla

“Most leaders don’t realize that the entire world-wide personal computer revolution is based on thinking that is about as old as the fundamental engineering of the Space Shuttle — circa early 1960s. This thinking was not invented by the technology titans of the time, IBM and AT&T. Instead, it was invented by Xerox (which at the time was just a copier business), and the Rand Corporation, supported by academic and military work.”

“I think it is time to go back to some fundamental innovation around the way high-performance teams conduct complex, time pressured, knowledge work. Creating value and solving new problems in new ways is essential to competitiveness. But executives must be willing to invest in new ways of doing work — and to take some risks. The costs of these efforts are dwarfed by their potential value, but because it takes new, bold thinking to explore this territory, not the lazy mentality of benchmarking or optimization, it will need true leadership to make it happen.”

“As William Gibson, the famed Cyberpunk novelist said: the future is already here, it’s just not evenly distributed. I think the future of knowledge work is here. It’s about figuring out how to create new ways to gather vital information, and linking the experts physically and virtually into a much richer, faster data-world. It is only through this type of reinvention that we’ll get the breakthroughs we need.”

 

*Twitter’s Ten Rules For Radical Innovators by Umair Haque

“Is the hype justified? Yup: Twitter isn’t just changing how we communicate — it is changing how we innovate.”

“Here are Twitter’s ten rules for radical innovators (which have, just maybe, had a bit of influence when it comes to Twitter).”

1. Ideals beat strategies.
2. Open beats closed.
3. Connection beats transaction.
4. Simplicity beats complexity.
5. Neighborhoods beat networks.
6. Circuits beat channels.
7. Laziness beats business.
8. Public beats private.
9. Messy beats clean.

10.  Good beats evil.

 

*Unique Ways Entrepreneurs Are Raising Money by Diana Ransom

“When Brooklyn coffee shop owner, Debi Ryan, was faced with the possibility of shutting her doors, she appealed to her neighbors, asking them to become mini venture capitalists and invest in her business. As a result, she just hosted a grand re-opening. Instead of taking a loan or seeking venture capital funding, entrepreneur Paula Conway managed to pay for the launch of her travel web site with money she made selling — of all things — cupcakes.”

“Taking such unconventional routes to raise cash has become a necessity for many small-business owners as traditional sources of funding (i.e., venture capital and bank loans) have dried up.” This article describes how several entrepreneurs used such unique tactics to raise money to start their business or to re-start it after being hit with an unexpected financial crisis.

 

*Three out of Four Americans Believe New Entrepreneurs Are Key to Reviving Economy

“More than two out of every five Americans (42%) have considered starting a business since the economic downturn. Among those Americans, roughly a quarter (24%) have actually acted on the idea. Additionally, three out of four Americans believe new entrepreneurs will do the most to revive the economy and four of five say that at some point they have considered starting their own business. These findings, among others, were revealed today in a national survey from Alibaba.com, the world’s leading business-to-business e-commerce company.”

“Also according to the 2009 Alibaba.com Newpreneur Survey, more than four in ten (44 percent) of Americans who considered starting a business said not knowing “how to handle the logistics, such as where to make or get my products” was one of the top two reasons why they didn’t start their business. That’s greater than those who say that they were afraid of failure (37 percent).”

““The renewed confidence in entrepreneurs is evident across the country and proves that the American dream is still alive and well,” said David Wei, chief executive officer, Alibaba.com. “As the data shows, Americans strongly believe the down economy provides an opportunity for a new class of what we call ‘Newpreneurs’ – people who are using the recession as a catalyst to start a business or develop an idea. Alibaba.com can help Americans turn their dream into a reality by connecting them with business partners and helping them succeed in global trade.”

 

What I Think

I think many people feel the key to becoming a successful entrepreneur is radical innovation. To them this may mean inventing a new product or service, or providing a revolutionary way to combine existing elements. Undoubtedly, many entrepreneurs have found success in this way. Many, however, have taken a different path.

Looking at the articles posted on this date, there are entrepreneurs involved in everything from probiotic juice products to World of Warcraft. There are, as is often the case, similar threads running between many of the stories. Many started with the excitement of the initial “cool” idea, only to run into problem after problem. One entrepreneur recounted 200 iterations prior to finding a successful product consumers would accept. Stories about others referenced that they had found novel ways to raise enough money to re-open their business after being forced to close.

Certainly, some of the common threads in these articles are perseverance, failure to take no for an answer, and ability to find a work-around after hitting the wall. In the race to the goal, whatever that goal may be, the successful entrepreneur is often the one who can take the punches and get back up off the canvas. Once up, the successful entrepreneurs regroups, figures out what went wrong, and finds a way to make the customer happy.

Twitter may be the new phone system, but when an entrepreneur can raise enough money to start a business by selling cup cakes, innovation is at work.

 

If you enjoyed my impression of these articles, why don’t you read them for yourself and see what you and I missed or hit? Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.

Lessons I Learned Today 6/6/09 – Twittering Entrepreneurs

This is a digest and recap of highlights, quotes, and comments from articles and discussions posted on this date on the Applied Entrepreneurship, LinkedIn group site.

 

*Meet the PayPal mafia by Jeffrey M. O’Brien 

This article is “an inside look at the hyperintelligent, superconnected pack of serial entrepreneurs who left the payment service and are turning Silicon Valley upside down.”

“Holy cannoli. Peter Thiel has a butler. The 40-year-old entrepreneur runs a $3 billion hedge fund. He’s the founder of a new venture capital firm that’s the talk of Silicon Valley. He’s got an early $500,000 stake in Facebook that’s now worth about $1 billion on paper. The man has bankrolled everything from restaurants to movies and is lauded by many as some kind of free-market genius. He drives a half-million-dollar McLaren supercar. And now a butler”

“Max Levchin (left) and Peter Thiel hatched the idea for PayPal over breakfast. Their brainchild would change the course of the Internet. They’d bring on several hundred employees to what would become PayPal. They’d sign up more than 20 million users and burn $180 million in funding before breaking even and selling out to eBay for $1.5 billion.”

“During the past five years they’ve been furiously building things – investment firms, philanthropies, solar-power companies, an electric-car maker, a firm that aims to colonize Mars, and of course a slew of Internet companies. It’s amazing how many hot web properties can trace their ancestries to PayPal.”

“Besides Facebook and Slide, there’s Yelp, Digg, and YouTube. Thiel and Levchin, the don and consigliere of the mafia, figure that all told, there are dozens of enterprises worth a total of roughly $30 billion – and that value is growing rapidly, as evidenced by Thiel’s good fortune with Facebook.”

PayPal was a petri dish for entrepreneurs. The obvious question is, Why?

“Maybe it comes back to the early hires. After their first breakfast, Thiel and Levchin began recruiting everyone they knew at their alma maters. “It basically started by hiring all these people in concentric circles.”

“They were looking for a specific type of candidate. They wanted competitive, well-read, multilingual individuals who, above all else, had a proficiency in math. Levchin’s original idea for PayPal was to beam money between PalmPilots, but Thiel has a way of seeing the bigger picture.”

“Thiel and Levchin also wanted workaholics who were not MBAs, consultants, frat boys, or, God forbid, jocks. ‘This guy came in, and I asked what he liked to do for fun,’ Levchin recalls. ‘He said, ‘I really enjoy playing hoops.’ I said, ‘We can’t hire the guy. Everyone I knew in college who liked to play hoops was an idiot.’”

“In other words, they were looking for people like themselves.”

Recruiting underclassmen from the middle of the country assured Levchin that his charges would have few preconceived notions and fewer social distractions. “Most of them were very introverted anyway,” Levchin recalls. “They’d come in, eat crappy food all day, and sleep under their desks.” “The difference between Google and PayPal was that Google wanted to hire Ph.D.s, and PayPal wanted to hire the people who got into Ph.D. programs and dropped out.”

“Thiel’s leadership style is as unconventional as his worldview. His hallmark management MO at PayPal (at least, pre-IPO) was the all-hands open-book session. Customer logs, revenue flow, fraud losses, burn rate: He’d display it all for every employee to see. This access to information, coupled with the lack of offices, created a flat structure where any idea could win the day.”

 

*The Consequences of Real-Time Information by Sam Huleatt

Consumers are switching from ‘conspicuous’ to ‘conscious’ consumption, according to investment strategist Edward Kerschner. “There are assumptions that consumers make when a brand lowers its price. 61% of consumers think the price will just change again soon. 60% think it will go down further. Instead, it will be the companies that offer the perception of value – as opposed to just putting things on sale – that will be the ones that benefit.”

“In the last few decades, we have become the experiential generation. People crave unique experiences, not necessarily just products.”

“People want a sense of identity and community. Sports clubs will become popular. For every 1% increase in unemployment, we’ve found, there’s a half-point reduction in inactivity.”

“Consumers will plan purchases more carefully. 70% say they won’t delay if it will save them money in the long run, like socially or environmentally conscious products. We’re seeing no reduction in the purchase of environmentally-friendly products.”

“10% of consumers are spending less on green products, but 35% are spending more. 65% of consumers say they are spending more on products that they know will benefit a good cause.”

“It’s not about price. It’s about the whole value proposition. And that result is true for consumers who say they have a lot economic anxiety, too.”

“We’re seeing a huge increase in the middle-class population, a huge increase in spending, and a tendency to trade up and buy better brands. That trend won’t be stopped by this recession.”

 

*New Path by Michael Karnjanaprakorn

“I’ve always lived my life and made decisions based on a couple of key principles.  These may sound like tried and true cliches, but i actually DO follow them.  Stop and think about what they actually mean instead of letting them fall on deaf ears.”

1. Never chase the money.
2. Every step moves you closer to your goals.
3. Do what makes you happy.
4. Live life with no regrets.
5. Trust your gut.
6. Most importantly, have fun because life is short.

“People shouldn’t make decisions based on past investments.  And if you’re wondering how this applies back to poker.  Once you make a bet and put your chips in the middle, that money is no longer yours (so you shouldn’t make bad decisions on getting it back).”

“Instead, you should look toward the future and look at all the different paths, opportunities, and possibilities presented to you right now.  The sky is the limit.  Everything in your past gets you to this point but it’s up to you to make the best possible decision on which path you want to go down. And that’s where gut intuition, happiness, and the rest of my cliche life principles come into play.  Because at the end of the day, if you make the right decision for yourself, there’s no way that it’s a bad one!”

 

*Interview with Tyler Cruz

“What started as an assignment at school now earns Tyler Cruz 6 figures a year. He runs over a dozen websites, and has sold domains for as much as $200,000!”

“I actually wasn’t all that young when I started. I started making my living from the web at around the age 21 which these days isn’t very young. Then again, it’s far easier to make money online now than it was back then. Once I moved out and started to truly rely on my web income for a living, it only took around a year to a year-and-a-half to where I was making $100,000 a year.”

“It’s amazing how such simple ideas are so often the most successful.”

“Find a job you love, and you’ll never work a day in your life.”

 

*The fight for startup cash by Adriana Gardella

This article tracks one of forty-two startups who “duked it out in the world’s most lucrative business plan competition.” “Striking deals with the San Francisco Giants and landing millions in venture financing, these top teams from last year’s Rice Business Plan Competition have battled the downturn to push their ventures forward.”

“The stakes include a share of $800,000 in cash and prizes. But the prize money is almost incidental. Judges at Rice offer invaluable contacts and feedback, even contact numbers and possible financing. Competitors are evaluated on the potential of their businesses, not the academic merit of their plans.”

“Business plan competitions are gaining popularity nationwide.” “Students who would have gone into high-paying jobs are now willing to take a chance on an entrepreneurial venture,” says Philippe Sommer, director of entrepreneurship programs at the University of Virginia’s Darden School of Business. Darden sponsors a competition that drew 91 submissions this year, up from 42 in 2008. “You could argue that this is a bad time to start a business,” he says. “But good ideas are always likely to get funded, and in a down economy there’s less money chasing marginal ones.”

 

*Interview with Young Entrepreneur David Nilssen by Adam Toren

“David Nilssen is co-founder and CEO of Guidant Financial Group, Inc. Guidant helps aspiring entrepreneurs to invest their retirement funds into a business or franchise without taking a taxable distribution or incurring penalties.”

“I believe our achievements are due to the fact that we hired a great team, focused on our customers as unique individuals with unique needs, and we continue to invest in scalable technology. Each year we realize productivity gains because we continue to improve our customer experience without having to scale overhead.”

Nilssen’s advice for to aspiring entrepreneurs:

• Don’t take yourself so goddamn seriously
• Invest in technology so your business can scale!
• Hire potential first, experience second
• Have fun

The pattern or formula to becoming a successful entrepreneur:

• Be manically focused on your vision
• Hire great people
• Love what you do
• Do the right thing no matter what

 

What I Think

I think the further we push the envelope with our virtual world, the more opportunities there will be for entrepreneurs who are able to give people a sense of community and identity. As much as you may twitter at the thought, we are all becoming more and less connected at the same time.

If you stop at an intersection and watch the cars turning from one of the other side streets, chances are that well over fifty percent of the drivers cutting across the intersection will be on a cell phone. Probably a good chunk of the rest will have just hung up or are trying to figure out what to say or who to call next while they drive along, oblivious to the real world around them.

Likewise, if you go to church, sit waiting for a movie to start at the theatre (presuming you even still physically go to the movies or church) you will undoubtedly see a few folks frantically trying to get in one or two more messages before the show starts. Many others will keep anxiously looking at their Blackberry, seemingly wondering why it hasn’t vibrated, lit up, or rung in the last thirty seconds.

The excuse we get from business folks is that they have to stay connected to close the deal or be ready to receive it when the big one comes in. For some that is undoubtedly true, but for others, it is clearly just another sign of addiction.

One of the sad parts of the addiction is that, by definition, it involves dependence upon the electronic device rather than upon personal contact. I may be getting off track a bit here, but I have found a decreasing level of proficiency in social skills, including ability to speak or write the language, from the younger generations. In part, this is from a failure of our education systems. In part, I blame video games, including the cell phone, Blackberry, laptop, all of which become a version of an electronic game. While good at connecting virtually, they also have the false benefit of insulating us from personal contact.

They say people who wear a mask while committing a crime are likely to be more impersonal and violent than those not wearing a mask. To some extent, I think some folks are using these devices and technologies as a sort of mask, all the while longing to be asked into the real, live party.

Regardless of the cause, the result may very well be an increasing level of social dysfunction. I think a natural tendency, when one is not good at something but is interjected into a community or group of some sort, where there are others whose skills match up better than yours, is that you feel inadequate. The result of a feeling of inadequacy, for some, is to seek relief. That relief, for many, may be finding a way to fit in somewhere or somehow else.

Queue the virtual community of cell phones, laptops, and twitterers. In these virtual communication worlds, it is not always as necessary to have social grace, speak or understand the language, or to otherwise interact as you would in a real, physical environment. Virtual communications can become something of a haven. You can get that reassuring voice on the other end of the phone, watch your “watchers” or “friends” mount up, and be reassured you are part of a community and do have self-worth.

Talking to a person face-to-face, is a substantially different experience than talking to them on the phone, twittering back and forth, or even video conferencing with them. Perhaps it is the trial lawyer in me, but in comparison to these virtual communications, I can tell a lot more about a person if I can see whether they look me in the eye when talking to me, cross their arms or maintain a more open posture, lean forward or back, cross their legs, fidget, doodle, or, more likely, just keep looking at their cell phone.

To some extent, my generation probably misses personal contact more and more, as we become isolated by the success of our own advances in communications technology. I think the younger generations may as well.

Humans seem, by nature, to be social. This is inherent in our makeup. We can survive without it, but we tend to thrive with it. Witness the PayPal mafia. These boys do so well, aside from being brilliant, partially due to the physical proximity to each other and the rest of their ever-changing group.

While they might not be able to survive without their electronic communication devices of choice, I would suggest they would have become less successful if they were denied in-person human contact, as opposed to being denied virtual communications. In part, I suspect my theory is correct because, as consummate deal spotters and closers, they need that personal touch to separate the rats from the fat cats, and to personally smooth over the inevitable rough edges during the deal making process.

I think we all like to belong to something. There is, of course, the old saw to the effect that “I would never join any club that would admit me as a member.” In reality, however, I think most of us would rather be in “the club” than not. That is the great opportunity I see in these articles and in where our business climate is going. In many ways, it is about making connections and then feeling that warm security of knowing you are connected within a community.

What many of the entrepreneurs in the articles posted on this date are doing, is simply finding different ways of connecting people, whether it be a PayPal or Facebook application. In fact, some of these young entrepreneurs are so concerned with staying within the comfort zone of a friendly community, they won’t even hire employees who are not very much like them. Granted, being like some of these guys means you are a genius workaholic, but that is still a community. You fit in or you don’t.

This presents, in my opinion, a starting point for a good segment of the business plans I see. The overriding question may be, does this proposed business help the customer or client feel like they are part of a community? Does it connect them in some way, which can give you a competitive advantage?

  

If you enjoyed my impression of these articles, why don’t you read them for yourself and see what you and I missed or hit? Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.