Lessons I Learned Today 5/20/09 – Which way do I go?

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.


*Growing Too Fast? Watch the Danger Signs by Shel Horowitz

A closely held business should prepare for the day when it might be for sale, and the business will fetch its best price only if everything is in order.

For bankers, the biggest caution flag is a cash flow problem and the most important criterion: a business should be able to repay debts out of income generated through normal operations.

There is a long list of red flags focused on lack of proper corporate documentation, which covers a number of areas:

  • Documentation that is inconsistent with current practice
  • Poorly negotiated vendor and franchise agreements
  • Failure to document loans from shareholders or problem employees
  • Improper protection of trade secrets and intellectual property
  • Noncompliance with ERISA disclosure rules
  • Lack of buy/sell and succession agreements
  • Inability to move forward because 50/50 ownership creates a voting deadlock
  • Inadequate cash reserves to pay taxes (especially for S corporations
  • A history of contract disputes
  • Unwillingness to grant sufficient independence to advisors or lack of follow-through on their recommendations


*Competitive Intelligence on a Shoestring by Shel Horowitz

“There are a lot of things you can do on the cheap that help you understand your market better.” It can help you:

  • Be prepared when your competitor launches a new product or enters a new territory
  • Understand the opportunities and threats posed by your competitor’s strengths and weaknesses
  • Know when organizational shifts create power vacuums or new directions and centers of influence
  • Watch technology trends that could create an upheaval in your industry
  • Know how to protect your company’s uniqueness: the “special sauce” or “crown jewels:” that differentiate you from everyone else in the market

Among many other techniques you can use with essentially no cost to you:

  • Examine the company’s own website
  • Collect information from trade shows, industry journals, etc.
  • Ask questions of former employees – that don’t violate their NDAs (for instance, “Who are the rising stars, what makes them tick? You’re not asking them to show you the blueprints, but the contextual info can help you understand what they’re going to do next”.)
  • Visit job websites such as Monster.com and see what kinds of positions they’re listing
  • Put their company names into news alert services and receive a notice when they get press
  • Ask journalists who’ve interviewed your competitors about the back story that didn’t make it into print
  • Look on business portal and information websites such as hoovers.com and ceoexpress.com
  • Ask their customers, suppliers, and other stakeholders

This article was worth reading simply because of the amazing list of hyperlinks to CI resources, divided into ten categories. You have to bookmark this article.


*Grow Your Business with Strategic Questions by Shel Horowitz

By focusing on the positive, on the encompassing, broad-based “how” rather than on the narrower, more defensive “why,” strategic questions uncover new opportunities that might otherwise have stayed hidden.

Typical strategic questions might be:

  • How might we..?
  • What would it take..?
  • What might shift our situation for the better?
  • What in the past leads you to think as you do?
  • How has change happened here in the past?
  • How did the issue of… first get on your radar screen

Strategic questions can help your business last through the ages. Lipke cited a Royal Dutch Shell study of 40 companies that were hundreds of years old (the oldest was a 700 year old Scottish firm). The researchers identified four common characteristics:

  • fiscal conservatism, including large cash reserves;
  • a strong sense of organization, community, and each individual’s role;
  • seeking outside influences ” for example- ongoing conversations with the most radical thinkers they could find”; and
  • active encouragement of unconventional experimentation


*Branding: Three Experts, Three Approaches by Shel Horowitz

Branding is about creating loyalty: generating repeat customers and positive word-of-mouth that leads to referral business. The final result comes out of an exhaustive six-stage process:

  • research
  • strategy
  • creation
  • tools
  • launch
  • maintenance.

Each of these has many subelements. For instance, within the category of brand creation, selecting a name is one of the steps. Selecting the right name involves seeking something short…easy to spell…easy to say…distinctive…memorable…long-lasting…and without any really brainless cultural baggage in the words, the shapes, the colors (like trying to market the Chevy Nova in Spanish-speaking countries where the name translates as “doesn’t go”). Oh yes, and it should be available as an Internet URL.


*What Kind of Business will You have in 30 Years -And Who will Be Running It? by Shel Horowitz

“A successful succession strategy recognizes the need to combine younger visionary dreamers—sometimes called the “lunatic fringe”—and Boomer-generation practical managers who can turn those sweeping visions into systematized, replicable products and processes.”

Getting the radically different perspectives—the visionary and the manager—to harmonize requires an adjustment.

Collaborative leadership is key to fusing those two very different personalities.

You need a task team” to integrate marketing, sales, and manufacturing. “You will need collaborative leadership for boundary-less management.”

“In a traditional organization, knowledge transfer does not take place; people are protecting their turf. In collaborative leadership, we all work together. Everyone may not benefit equally, but together we’ll change the size of the pie.”


*Where to Locate Your Business by John Tozzi

Each year, entrepreneurs start or expand some 650,000 small companies, according to data from the Small Business Administration. Choosing the right place can mean the difference between profitability and failure.

Large corporations typically pay professionals high fees to find the best location for new plants, offices, or stores. But the cost can be prohibitive for small companies, ranging from $50,000 to $125,000 or more.

Many factors affect whether a place is a good location for a particular business, including the labor force, tax rates, distance from suppliers and distributors, access to transportation, and the local market for the company’s products or services.

GIS Planning launched a site three months ago called ZoomProspector.com, designed to help entrepreneurs find and evaluate potential sites based on what attributes of a place matter most to their business. Other Web sites like City-data.com provide local information, but Ubalde says ZoomProspector’s proprietary data, much of it collected from the company’s economic development clients, offers small business owners access to the same information large companies use when they decide where to site new locations. ZoomProspector is free for users and makes money by selling geographically targeted advertising,

Aside from the labor pool, tax rates differ significantly from state to state, and they may be more important for small businesses with few employees.

Those small businesses in a position to create jobs can appeal to local economic development groups for help, and use other tools such as the Site Selection Network.


*Think Twice About Being First to Market by John Tozzi

New research offers fresh insight on when to launch a product or service, and shows that being first to market isn’t always a competitive advantage.

“Conventional wisdom says being first to market creates a competitive advantage. Reality is more complicated. Market opportunities are constantly opening and closing, and a hit idea at one point could be a dud a year earlier or a yawning “me too” business a year later.”

“New entrepreneurs can improve their odds if they weigh how much they stand to gain or lose by waiting.”

“In a hostile learning environment, entrepreneurs gain relatively little benefit by watching others. For example, if the relevant knowledge is protected intellectual property, studying the market before entering wouldn’t yield much advantage. In these situations, the trade-off favors entering early. But in less hostile learning environments, where entrepreneurs gain valuable information likely to increase their success just by watching other companies, companies benefit from waiting and learning lessons from earlier players.”


*Desperate for Entrepreneurs by Amy S. Choi

With a 22% unemployment rate and the second-highest foreclosure rate in the country, Merced County is pinning its hopes on small business.

Entrepreneurs and small business owners in Merced County are facing dire times, and seeking financial assistance to help them stay afloat or, in Lucy’s case, get up off the ground. The cities want to help them. Local authorities, in fact, are pinning their hopes on entrepreneurs to help create jobs and restore economic health in the region.

Small businesses are the backbone of our economy. Entrepreneurs will pull the economy out of the recession. But without some assistance, whether that comes in the form of financing, refinancing, or debt relief, it seems all but impossible that entrepreneurs such as Lucy Whittle will be able to thrive, much less carry the rest of the economy on their shoulders.


What I Think

I think many of my business clients can use a road map. Fortunately, there are lots of such guides out there. This series of articles, once again, was chosen randomly. Look at the common thread, however. Every one of these articles can help an entrepreneur at some stage of the process of starting, running, or getting out of a business.

The Desperate for Entrepreneurs article by Amy Choi and the Where to Locate Your Business article by John Tozzi point out the significance of site location. There are tremendous differences in the availability of resources and the cost of locating in different parts of the county, and even within different cities in a single state. The “Big Guys” certainly put a lot of research into the decision on where to locate a new operation, as well as whether they can squeeze a little more out of a location by staying, or ultimately do better by relocating to another place. Why shouldn’t small to mid-sized businesses do the same?

Obviously, the “Big Guys” have resources with which to conduct such analysis, which it would seem smaller companies don’t have. On the other hand, these articles point out that even smaller companies can do extensive site location research at nearly no cost with resources pointed out in these articles. It would seem extravagantly foolish not to take advantage of such tools, which can provide a long term advantage or disadvantage to your business.

Another roadmap to success can be found in the Competitive Intelligence on a Shoestring article by Shel Horowitz. This article is packed with links to find out almost anything you want to know about your competition, your market, funding, the future of your industry, and all for free. Once again, before charging in or continuing on, shouldn’t you check the map to make sure you’re on course to your chosen destination?

Once you are up and running, the Think Twice About Being First to Market article by John Tozzi is a good one, which can help you save your limited resources to apply them most effectively. “Common wisdom” is to be first to market because once you become the leader, you have beaten the competition. As with the article I posted recently by Wil Schroter, Draft Your Competition, there are actually two ways of looking at this. In some cases, just as in the Indy 500, you are more likely to win the race if you sometimes draft behind your closest competition, watching for their mistakes and missed opportunities, as they expend more of their resources than you, all to stay ahead.

The road from start-up to a successful final destination is typically long and difficult. Sometimes it simply makes sense to be conservative at the beginning, to keep checking your map to make sure you are on course, and to conserve as much of your finite resources as possible for the final push. The articles by Shel Horowitz, which I posted on this date, should all be helpful in making the best use of those resources. All of them should help you keep your focus on your goal and help you reach it a little faster and in a little better shape than if you didn’t check those directions.

They have lots of road maps in service stations along the interstates for a reason. Are you one of those guys they talk about because you refused to stop to ask for directions?


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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.

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Posted in Applied Entrepreneurship, business, Business interruption, crisis, etc., Business life cycle, Buying a business, entrepreneur, Financial security, Financing a business, Growing a business, Innovation, Intellectual property, Perseverance, Personal happiness, Planning for a business, Recession strategies, Running a business, Selling a business, Social networking & media, Starting a business, Succession Planning, technology, Thinking about a new business

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