Up and Running Blog

July 2009

Q&A on Seed Capital

by Tim Berry on July 15, 2009

A friend asked me: What about seed capital? Good thing or bad?

For the uninitiated, here’s how I defined “seed capital” for the bplans.com glossary:

From Flickr, cc, Image by David Crow

Seed capital is investment contributed at a very early stage of a new venture, usually in relatively small amounts. It comes even before what they call “first round” venture capital. How much is that “relatively small amount?” We’ve heard some high-end high-tech ventures in the heart of Silicon Valley call an investment of $500K seed capital, and we’ve known of other ventures that called $35K investment seed capital, and the following $300K investment the first round. It depends on the point of view.

My answer:

  1. It’s not easy to generalize. Notice even in the definition how much the terminology depends on the point of view.
  2. I like the reminder, in the name of seed capital, that it’s supposed to be like seeds, something that makes something grow. If it’s just a small amount of money but isn’t supposed to lead to more investment later, then it’s just a small investment amount, not seed capital.
  3. If by seed money you mean just a small amount, but you’re not sure that will be followed by a larger amount later, then I’d always recommend that you at least consider bootstrapping instead. I’ve posted before my reminders that owning it all by yourself, if that’s an option, is good, and working with investors as partners involves a lot of compromises. For example, here last month, and here on my main blog.
  4. Seed capital from good partners, professionals who add value, is almost always good. Subsequent investors from later rounds expect that and will like their participation.
  5. Seed capital from bad partners, incompatible partners or unsophisticated partners who get in the way of future rounds, is bad.

So it’s easy to summarize with a reminder that startup funding isn’t as simple as just finding investment–which, as I think of it, is not that simple anyhow–it’s getting the right kind of investment, from the right investors, to match your long-term goals, strategy and practical reality.

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Oregon Business Success Stories: Video Series brought to you by the OSBDC

by Chelle Parmele on July 14, 2009

Another great video from our friends at the Oregon Small Business Development Center Network.

Meet Ted Golden. Ted describes his successful business: servicing rooftop ventilation systems throughout the Portland Metro Area. He was assisted by the Mt. Hood Community College Small Business Development Center.

Watch the video on YouTube

As always, we’d like to thank Mark Gregory and Mike Lainoff for the opportunity to share these Oregon success stories with you.

Did you miss a video? OSBDCN Success Story Videos

‘Chelle Parmele
Palo Alto Software

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There are millions and millions of web sites. How is anybody ever going to find yours?

by Guest Author on July 14, 2009

When the internet was new, finding a web site was largely a hit or miss proposition. Although there were relatively fewer sites, the sophisticated search tools, like Google, Yahoo, MSN and others were not around. People tended to “surf” going from one site to another via links on those sites.

Needless to say, things have really changed a lot; search engines are now indispensable as the way to pinpoint exactly what you’re after when searching the web. The development of “local search” has now made it easy to find goods and services right in our own neighborhoods—who needs a tree trimmer if he’s in Nebraska and you’re 3,000 miles away?

A high “search ranking” is the all-important Holy Grail—you want your site to appear on the first page listing that comes up when someone searches for what you offer, and the higher up the page the better.

So how’s your site do in the search rankings? Search Google, Yahoo or MSN for what you’re offering, in the area where you do business, e.g. if you’re a plumber, key in “plumbing (your town name)” and see if your site appears in the listings. If it does, and you’re on the first page high up, congrats! If not, let’s see why.

Rankings in search engine directories depend on a few things like “keywords”, popularity and unique content. Keywords are words, and phrases, that are probably the very words people will key in when searching in a search engine, so if you’re a plumber, keywords like “plumbing, plumber, leak repairs” etc. will be necessary to add into your page code—even better if these same words are actually used in the page copy. For local search, be sure the names of all the places you do business in are included.

Popularity has a lot to do with the sites that are linked to yours and who you link to. The more quality sites that are linked to yours, the higher your popularity score, but I stress, we’re talking quality here. So linking to something completely unrelated to your business, or an amateur’s hobby site will not count. A plumber might link to a reputable plumbing supply, a kitchen and bath store, a manufacturer of shower stalls—all people he does some business with and who will provide “reciprocal” links. Up goes the popularity score!

Unique content simply means that if you just make a carbon copy of another web site with the same information etc., you won’t impress the search engines. Many times, a franchise operation will offer their franchisees a web site but it is really just a copy with a few pictures and the local name changed. No score. So write some interesting and unique stuff about you and your business that no one else can say. Find some fascinating facts about the business you do and write them up in your own words. Watch your score shoot up!

All of this is known as Search Engine Optimization (SEO). It’s a very complex and ever-changing craft. Too much to cover here but here’s a few more tips:
Be sure all your pictures have “alternate tags” that contain keywords. These are the words that show up when you hover the curser over an image. Our plumbing example might use the tag, “Leaking faucet repair in (name of town)” over a photo of a kitchen sink.

Be sure every page has a title, possible different from page to page—don’t use “Welcome to our plumbing web site”, make the title keyword rich e.g. “John’s the Plumber for fast reliable plumbing repair service in (town name).”

There’s much, much more involved, and if you are really serious, you can hire an SEO specialist to do this for you, but be warned, it’s pricey and it is an on-going job. Start with the suggestions here as the site is being constructed and you’ll be well on your way.

ducttapemarketingbadgeKen Burgin and Elizabeth Walker are the Marketing Masters (www.MarketingMasters.ca), a full-service marketing and advertising partnership that helps build busy businesses. Send your ideas on How to Thrive in Times Like These to liz@marketingmasters.ca or ken@marketingmasters.ca, or call 1-866-908-5720.

web: http://www.marketing,masters.ca
blog: http://thebuzzwithkenandliz.blogspot.com/

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Networking for the Shy Entrepreneur

by Tim Berry on July 14, 2009

I’m an entrepreneur, I love a podium and a microphone, but I hate cocktail parties. When I was at business school and they talked about networking, I shuddered. I wanted to go home to my wife and kids. If it takes networking to be successful, I decided, then I’d just be less successful.

Things got better. I discovered deep network, as in working with people you like, having common interests.

But I still hate cocktail parties. And standing and making small talk with people I don’t know.

So as you might imagine, this title caught my eye immediately: Toolkit–Networking for the Shy Entrepreneur. It was on The New York Times site, a piece by Paul Brown, who does a series of “toolkits” for small business.

It seems like good advice, overall. Don’t try to sell anything; just make friends. Keep your business objective in mind. And then these three tips for the cocktail party or its equivalent (he’s quoting John Berard, who runs Credible Context):

  1. Break the ice by talking about what is going on around you. “Every event offers something–a display, a presentation or cause–that can be a stress-free way to make a connection.”
  2. Force yourself. “Networking in person requires proximity, which can be uncomfortable to the shy person. Getting in a line–to the bar, the buffet or the book signing–is a natural way to overcome that hurdle. The wine at the bar, the food at the buffet and the author’s high school picture on the book jacket are all ways to take advantage of what’s going on.”
  3. Prepare questions to ask people you are sure to encounter at the event. It doesn’t really matter what you ask, as long as it is somehow relevant. Just the act of asking will start a conversation.

I find that very useful. And as a sometimes introvert, I liked this ending, quoting John May of Business Pundit:

“Introverts are intuitive and analytical. Use that skill.” After you have been networking for a while, ask, “What is working? What isn’t? Where do you get the most bang for your buck?”



The Cocktail Party
Flickr cc photo by dcafe

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An 8-Point Startup Plan

by Tim Berry on July 13, 2009

I like this piece called “Entrepreneur Chic” at Latina, written by Kenrya Rankin Naasel. She has a nice breakdown of the startup process into eight steps. I particularly liked the first and second steps. Here’s her list:

  1. Pick an Expertise. I like this a lot. After deciding what you like, she says:

    Next comes your single most important decision: making sure that there is actually a market for the thing you love to do. That’s exactly what Gladys Benitez-Reilly did when she started Viva Spanish! Language Programs, a company that teaches Spanish in schools and organizations in Cleveland. “It won’t feel like work if you’re passionate,” she says. “I took a look at my skill set and figured out what service I could provide that could be profitable and fill a need.”

  2. Write a Business Plan. She adds:

    The biggest mistake [Marcia] Pledger sees people make with their business plan is not writing one at all! “We operated with no real plan for years,” Benitez-Reilly admits. “If we’d gone through the process, we might have defined our own direction, rather than relying on luck.” And don’t just stuff it in a drawer when it’s done. “Things don’t generally go as planned,” Pledger says, “so it’s critical to update it as things change.”

  3. Make It Official. That’s the name, the registration and so forth. Another quote:

    Take care when picking a name. “This is crucial, as it’s the face of your business,” says Liliam M. Lopez, president and CEO of the United States Hispanic Women’s Chamber of Commerce. Ask yourself three questions: Is it easy to remember? Does it give an idea of what you do? Is it already being used? You can figure out the first two with the help of friends; for the third, do a trademark search on United States Patent and Trademark Office’s site (uspto.gov).

  4. Get Your Financing Straight
  5. Be Sure to Insure
  6. Spread the Word
  7. Know the Customer
  8. Learn How to Adjust

There are, of course, a lot of other lists around and other step-by-step guides; but this is another useful one. Particularly starting by choosing an expertise, and with planning.

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Dissecting Entrepreneurs

by Tim Berry on July 10, 2009

Ah yes, research. You want the truth? Study the research–or so we all seem to think. But then the first thing you do, with any research, is look at how the data were compiled. And take it all with a grain of salt.

I saw a good example yesterday, in this post by Steve King of Small Business Labs. He’s looking at a really interesting new report called “The Anatomy of an Entrepreneur,” which was just published by the Kauffman Foundation. Here’s his summary:

  • Company founders tend to be middle-aged and well-educated and 95 percent of their survey respondents had completed college and 47 percent held advanced degrees.
  • Building wealth (75 percent), capitalizing on a business idea (64 percent) and owning a business (64 percent) were the top reasons given for starting a business.
  • Most had significant industry experience prior to starting their business. Also, 70 percent were married and 60 percent had at least one child when they started their business. The average respondents were middle-aged when they started their business.

Cool. I like this. Oh, and by the way, it turns out that most entrepreneurs are second children. And I’m a second child, and I had significant business experience, I was married and had four kids, I have a grad degree, and I fit the mold pretty well.

But no, wait. Steve discovers a major caveat:

It is important to note that 77 percent survey respondents are founders of high-tech companies. And although there isn’t much company data, it is likely most of the respondents started high-growth employer businesses with significant invested capital. Because of this, the survey results do not apply to the founders of typical small businesses.

Damn! Just when I was thinking I could win some arguments, and maybe even pinpoint who’s an entrepreneur and who isn’t. Instead, it turns out that, like just about every other survey, this one gives us just one particular view of one particular group of people who decided to answer the questionnaire.

Back to the drawing board. Interesting, but there you go again. Research is interesting, nice to know, but not solid enough to draw any conclusions from.

And probably better than just a wild guess. That is, if you have enough sense to take it all with healthy skepticism.

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Singing a Song of Customer Disservice

by Steve Lange on July 9, 2009

When I attended my first marketing and public relations classes in college, the professors stressed the strength of customer word-of-mouth marketing. In that B.I. era (Before Internet), the accepted ratio was one satisfied customer will tell one other person. That was considered good. If a customer was treated poorly they’d threaten to tell everyone they knew, which translated to their telling twenty other people. That was bad.

Today the many faces of the Internet, individual publishing, and social media have made the good better and the bad horrendous. Websites called companyxxxstinks.com proliferate, and social media word-of-mouth dissing now reaches multi-millions of people through keyword searches, RSS feeds, blogs, Facebook, Twitter, et al.

Unfortunately, many businesses haven’t woken up to this fact, and behave as if bad customer service doesn’t affect them. Or perhaps they feel they are so big they don’t have to care. That’s a big mistake.

Here is a recent example of one man’s clever, entertaining, word-of-mouth condemnation of customer disservice, in this case by United Airlines. I first saw this on 8 July 2009 when my co-editor Sara sent me the link to an online posting on Huffington Post’s Business section. It had already attained a Most Popular listing on YouTube’s front page where it was originally published on 6 July 2009.

Here we see the power of viral marketing, where the message is passed along from person to person, usually farther than the original sender could reach. In this case, the message is coming back around to harm the company. When an unhappy customer says they are going to tell everyone about their horrible customer disservice experience, that translates to telling half the world! For a company like UAL, teetering on the edge of bankruptcy, giving bad customer service and pretending no one will hear about it, or that it won’t matter is dangerous, risky business.

Don’t let this happen to you. Focus your attention on providing good customer service or risk being trashed to millions of people every day.

Steve Lange
Senior Editor
Palo Alto Software

P.S. As I’m publishing this post I’m seeing that this story has already been picked up by U.S. and Canadian mainstream media, and had elicited an official statement from UAL by 8 July.

“This has struck has a chord with us. We are in conversations with one another to make what happened right, and while we mutually agree that this should have been fixed much sooner, Dave Carroll’s excellent video provides United with a unique learning opportunity that we would like to use for training purposes to ensure all customers receive better service from us,” the statement said.

Wouldn’t this have been better for everyone if it had been handled by good customer care in the first place?

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Getting Your Product on Retail Shelves

by Tim Berry on July 9, 2009

Kelly Spors had a nice story in The New York Times the other day, called “A Small Player Breaks Into Starbucks”. It’s a good story.Flickr image by ASurroca

It’s also accurate. I know, because in my early days of Palo Alto Software, we broke into the office stores, computer stores and superstores retail channels. And it was hard to do.

Many entrepreneurs dream of placing their products with major retailers. But it can be a tough sell for small companies without a well-known brand name.

That’s putting it mildly. A lot of retail is under siege right now, threatened by a bad economy and changing business landscape. The last thing retailers need is new products (What? Did I just write that? Is that as bad as it sounds?). And even 15 or so years ago, when we managed to get in, it took a lot of calling, new packaging and a knowledgeable sales professional.

“The primary motivation of any big retailer is to get more dollars per square foot,” says H. David Hennessey, a marketing professor at Babson College in Wellesley, Mass. “You have to show them very clearly and effectively how you can achieve that for them.”

Big product makers have a clear advantage, Professor Hennessey says, because they can usually offer multiple product lines at lower prices and already have inventory management systems in place. Smaller companies must compete on price with major brands but also be unusual enough to make them worth the retailer’s investment.

Just getting that first meeting can be a challenge. In 2003, Tom Szaky, co-founder of a startup, TerraCycle, which sells fertilizer made from worm excrement, dialed up Wal-Mart’s fertilizer buyer every day for three weeks straight until the buyer finally answered his phone.

Knowing he had just a few seconds to win him over, he told the buyer he had developed an ecologically friendly fertilizer that is cheaper to produce than the major brands. Intrigued, the buyer invited him to Wal-Mart headquarters in Bentonville, Ark., where the buyer agreed to give TerraCycle a shot.

Actually, it’s not that retailers don’t want new products. It’s that taking on a new product is a lot of risk in a business that measures every variable it can find on sales performance on the shelf. There is very little room for error and not much incentive for experimentation.

With the products they now sell, stores have already established distribution systems, relationships, flow, warehousing, and–most important–customers.

And then there’s the packaging. Ah yes, packaging. Critical for retail. Dull, unattractive packaging on the retail shelves nearly killed our company in 1993.

(Image from Flickr cc license by Asuroca)

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How changing an email subject line added 56% in sales.

by Guest Author on July 8, 2009

We subscribe to Marketing Experiments.com for its marketing research results. We get to see data we can trust on issues of real importance to our clients—like this investigation into how to make the subject line of an email work best.

It’s common sense to say that emails reaching out to clients and prospects won’t work if they don’t get opened, but this experiment demonstrates that there are other things you can and should be measuring if you don’t want to leave money on the table.

Let’s look at the experiment, and what you should learn from it:

In this case, a florist wanted to increase the effectiveness of a “Thank you” email campaign to previous customers, and entice more of them to increase their purchases. They sent out two emails, with exactly the same content but different subject lines. Any differences in results could only come from the difference in the subject line.

They used an email service that allowed them to measure the “who opened the email and who didn’t” open rate, and the “who clicked through to a web site and who didn’t” clickthrough rate. Customers could also order on line, so they could also measure the sales resulting from the program. Both emails offered a 15% off special offer.

Subject Line #1 was “Thank You For Making Us Your Florist Of Choice”.

Subject Line #2 was “15% Off – Our Way Of Saying Thank You!”

Here are the open rate results: 20% of recipients of version #1 opened the email, but only 15% opened version #2, the one with the specific 15% Off offer. That’s a 26% difference.

Does that mean putting a specific offer in the subject line is a bad idea? Based on this, many people might think so—it looks at first glance that being too aggressive will put people off.

But look what we see when we dig a little deeper. 60% more people who received version #2, with the 15% offer, clicked through to the website. And version #2 ended up earning 56% more dollar sales.

Sure fewer of them opened the email, but they spent a lot more money.

What can you learn from this?

First, what you measure is important. In this case, if the florist only looked at who opened the email, she would have been badly misled. She might have planned future campaigns that practically guaranteed she would miss out on sales by 56%!

Second, testing is important. This advertiser had at least a 50-50 chance of guessing wrong with “gut feel”—and a potential huge business loss.

Third, if you use email, you need a batch or broadcast email solution that allows you to do this kind of testing and measurement. Don’t just send out to a huge “to” list—you will never be able to get the measurement and practical, business-building knowledge you need.

ducttapemarketingbadgeKen Burgin and Elizabeth Walker are the Marketing Masters (www.MarketingMasters.ca), a full-service marketing and advertising partnership that helps build busy businesses. Send your ideas on How to Thrive in Times Like These to liz@marketingmasters.ca or ken@marketingmasters.ca, or call 1-866-908-5720.

web: http://www.marketing,masters.ca
blog: http://thebuzzwithkenandliz.blogspot.com/

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About Giving Away Business Plan Software

by Tim Berry on July 8, 2009

We’re sort of back to normal at Palo Alto Software now, after the big push to create our own sort of stimulus package for our state last week.

I posted about this here last week. The idea was that we decided to do something to help our state with its unemployment problem–in Oregon we have the second highest unemployment rate in the country–so for one day we gave away our premier Business Plan Pro software to anybody in Oregon who wanted it enough to go to one of 84 locations and pick up a download card.

The Eugene, Ore., Register Guard, the daily newspaper in our town, has the story.

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