Up and Running Blog

October 2009

VCs On Art: They Know What They Like

by Tim Berry on October 30, 2009

Old saying: “I don’t know art, but I know what I like.”

I was surprised to read that a Palo Alto, Calif., venture capital firm had invested in an art business. And perhaps it’s the surprise element that has this one featured recently in Business Week and The New York Times. It’s an $825,000 VC investment in Jen Bekman Projects, an art gallery and online art business.

At first glance, this seems like an exception to the general rules. Venture capital generally wants innovative and high-tech businesses that have a reasonable chance at high growth leading to a lucrative exit three to five years from now. How does an art business fit into that?

Dig deeper, and you see that it’s not that much of a surprise. This is not just art, it’s a new way to gather and market art online. The Times story says:

The popularity and reputation of the site, which has won fans for its affordable collections of quirky work, were enough to grab the attention of Tony Conrad, a partner at True Ventures, which led the financing.

And the Business Week story refers to a “disruptive business model” (emphasis is mine):

Cash flow positive. Growing revenue. Disruptive business model. If you’ve got those three things in place, it may not matter whether you’re the kind of business VCs typically fund.

Ironically, “cash flow positive” and “growing revenue” aren’t always qualities that investors want in a startup, because they can create a company that doesn’t need to go public or get acquired later on. Investors don’t want to get trapped in a minority share of a healthy company that never generates liquidity. They have to be able to sell their share within a few years, which means either a public offering or acquisition by a larger company. And a cash-flow-positive growing company doesn’t automatically do that.

So without actually knowing her or the background, I’d be willing to bet that Jen Bekman, the founder, is personally impressive, dedicated to growth, and that she has a real exit strategy. In the background, she’s working with well-known angel investors. Her capital structure probably gives the angels who invested early some control, too, which also increases the odds of a successful exit later on.

Congratulations to Bekman. And exception or general rule or both, it’s nice to see a bootstrapped company make it to a big-time investment, and positive cash flow show up as one of its better qualities.

(Image: from Jen Bekman Project. Chad Hagen’s “Nonsensical Infographic No. 2?. Linked here from NYTimes.)

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Melodie Ellis

Learn Piano in Your Home — A Success Story

by Jay Snider on October 29, 2009

Melodie Ellis knows what it’s like to work for somebody else. And she knows what it means to work for herself. In fact, she managed to do both for almost eight years, holding down a job as an employee at a private piano studio while also teaching students on her own in the Dallas-Fort Worth area. In 2004, she decided to make the leap to full-time self-employment. She left her studio job and started her own business – Learn Piano in Your Home.

Melodie Ellis

Melodie Ellis

“I guess I was tired of dealing with politics… When you work for somebody else sometimes it can seem like no matter what you do you’re not going to be able to make things better,” Melodie remembers. But she had learned that things are different when you are your own boss. “When you have your own business, you can change everything by your actions.”

Five years later, 14 contractors now work for Melodie, and Learn Piano in Your Home caters to over 200 students, providing private lessons not just in piano, but also in voice, guitar, drums, brass instruments, and more.

“As I started to grow, I saw the need to write a business plan,” says Melodie, but since her business was so small and she had such limited time at her disposal, it wasn’t a huge priority. “What really motivated me to do it was that I  wanted to apply for a grant.” As a member of the National Association for the Self-Employed, she was eligible to apply for a $5,000 Business Development Grant. Applicants are required to meet certain criteria, including submitting a business plan.

Melodie knew she would have to do some research. She bought a few books to help guide her through the plan-writing process, but says they weren’t nearly as helpful as she had hoped they would be. “I found them to be very theoretical and not practical at all. I didn’t get anywhere with them. I understood the concepts, but when it came down to putting it all on paper… the books were just really poor at trying to help me do that.”

Next she hit the Internet, looking for some business-planning software to help. “And that’s when I found Business Plan Pro. It was definitely worth it, because it allowed me to put everything together and it made it all practical and very real.”

One of the challenges Melodie faced in writing her plan was the fact that her business had been in operation for several years prior to putting the plan together. “I had to go back and think through things very concretely. I hadn’t always paid attention to the numbers or tracked them that carefully…  I had to get all those numbers from my history and somehow incorporate them into my plan. And that can be hard when you don’t have an MBA,” she says with a laugh.

In the end, Melodie’s hard work paid off. “I know that the fact that my business plan was well put together was definitely a major factor in getting the grant,” says Melodie.

learnlogo“One of the most helpful things about the software was that, at the beginning, it asks you the question about whether you’re an existing business or a brand new business, and it tailors the plan based on your answer,” Melodie comments. She had tried other tools but found that they didn’t make this distinction, and in fact seemed to be based on the assumption that business plans were only for start-ups. That made the process harder for her, trying to fit details about an ongoing business into a start-up format.

“Just that one choice made all the difference in the world.”

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The Blog Week in Review — 10/29/09

by Jay Snider on October 29, 2009

5 Kinds of Trolls Hiding Under Business Bridges — Trolls aren’t just creepy creatures from fairy tales. As Tim Berry explains, they really do exist in the business world.

Three Magic Questions That Drive Sales — Asking the right questions can not only close a deal, but help you get what your service is worth.

See an example — When you’re working on a business plan, sometimes examples are just what you need to get started.

Homepreneurs and Pots of Gold — A new report shows that home offices are employing a lot of people, doing a lot of business, and making serious money.

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Homepreneurs and Pots of Gold

by Tim Berry on October 29, 2009

Once upon a time the so-called “home office” market was a pot of gold hidden at the end of a rainbow. Maybe it will be someday. And, maybe more important than that, home office businesses are at the very least real, employing people, getting things done and growing.

I first noticed the so-called home office market back in the middle 1980s, when I did my business from a home office (so perhaps my attention wasn’t entirely by coincidence). I was consulting for a living in those days, doing planning and related research mostly for high-tech companies. I was also writing a monthly column in Business Software magazine. And one of the markets most of my clients wanted to reach was what they called the home office.

The problem, however, was that the people who ran their home office businesses didn’t really make a market. They were out there diffused in the world, without an identity, without much in common with each other and without product identity.

What did a home office need that was different from what small businesses needed? What did a home office buy, different from a general small business? It was hard to tell. In comparison, the mobile travelers needed some predictable items and read predictable magazines. So did the students, the engineers and so on. But not home office businesses. Or so it seemed back then.

Earlier this week Steve King of Emergent Research tipped me off to new research about home-based businesses that adds a new angle on the lure of the pot of gold. In his post “The Rise of the Homepreneur,” he offers real numbers from a new report based on data from the Network Solutions Small Business Success Index. The report is available here. And some of the key findings are:

  • Home businesses employ more than 13 million people.
  • Nearly 6.6 million home businesses generate at least 50 percent of the owner’s household income
  • 35 percent of home businesses generate $125,000-plus in revenue and 8 percent more than $500,000.

So with new data from a new angle, it’s not that home office businesses are necessarily a market; it’s that they are a lot of people doing business, making money and doing (I hope) what suits them. And a reminder, as well, that “home office business” doesn’t mean inconsequential; the millions of businesses in this study are supporting people, employing people and generating real money.

And if you dig into the study, they are being taken seriously by customers and clients. And they offer lower-cost startup alternatives, too.

Now where was that rainbow?

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Startups Surprise Because They are More Than a Job

by Steve Lange on October 28, 2009

“Unconsciously, everyone expects a startup to be like a job,” says Paul Graham, programming language designer, author, and venture firm partner. “It explains why people [in startups] are surprised…and why the surprises are so extreme.”

Graham’s recent post, What Startups Are Really Like, talks about the surprises in startups. He sent an email to all the business founders who had been funded by his venture firm Y Combinator, asking what things had surprised them in their startup.

Over 100 responded and their lists were summarized into frequently recurring patterns, including:

2. Startups take over your life — “I didn’t realize I would spend almost every waking moment either working or thinking about our startup.”
4. It can be fun — “The best way to put it might be that starting a startup is fun the way a survivalist training course would be fun…”
6. Think long-term — “For the vast majority of startups that become successful, it’s going to be a really long journey, at least 3 years and probably 5+.”
12. It’s hard to get users — “I had no idea how much time and effort needed to go into attaining users. ”
13. Expect the worst with deals — “Deals fall through. That’s a constant of the startup world.”
19. Things change as you grow — “Your job description … is completely rewritten every 6-12 months.”

Says Graham, “These are supposed to be the surprises, the things I didn’t tell people. What do they all have in common? They’re all things I do tell people.”

The answer to the puzzle is that our prior experience in business is our jobs — working for someone else. Being a founder of a startup is orders of magnitude beyond our experience and ability to imagine. Despite our preparation, we can’t believe it is as intense as others tell us, hence we are surprised.

So, go to Paul Graham’s site and read this essay, What Startups Are Really Like, and think about what surprised these other founders. Print it out, and stick it up near your desk where you can re-read it often. Take the advice to heart.

My thanks to my co-editor Sara Prentice Manela for sending this essay my way.

Steve Lange
Palo Alto Software

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5 Simple Obvious Truths About Business Strategy

by Tim Berry on October 28, 2009

Once upon a time I was a vice president at a small consulting firm called Creative Strategies. That was in the early 1980s–and it still exists today, due mostly to the hard work and intelligence of Tim Bajarin, who took it over after I left. One thing that struck me as I worked there is that strategy is a hard service to sell. Maybe I’m just a cockeyed optimist, but most people, it seems to me, have a pretty good instinct on strategy.

1. Strengths and Weaknesses

Strategy is about focusing on strengths. It’s about managing resources. It’s about working around the side to minimize the impact of weaknesses. And one of the hardest parts of strategy is having the discipline to say no. Focus on what’s most important.

2. The Key to Failure

My favorite quote on strategy is from Bill Cosby:

“I don’t know the key to success, but the key to failure is trying to please everybody.”

3. About Consistency

Better a mediocre strategy well-implemented over a longer period of time than a series of brilliant strategies each implemented over a short term, contradicting each other.

4. When to Stay the Course and When to Change It

And then there’s that old country song, The Gambler, that makes life into a card game, in which the secret is knowing when to hold them and when to fold them. With strategy, that comes up a lot. When things aren’t going right, do we abandon the strategy? Or do we stick to it longer because it needs more time?

There’s no simple rule for this. That’s why people run strategies, not algorithms. But it helps to look hard at whether the strategy has been well-implemented (hint: that’s why I like business planning) and whether assumptions have changed.

5. In a Nutshell

A good friend and client, Hector Saldana, who had a brilliant career with Apple Computer from 1982 to 1994, once said to me: “Management is nothing more or less than knowing when and how to say no.” So is strategy.

(Photo credit: Worktyo Pawel/Shutterstock)

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frontpage-bird

10 Savvy Updates for Twitter

by Guest Author on October 27, 2009

What makes social networking so exciting right now is that “the book” is still being written. What I mean by that, is that people are finding a multitude of ways to use tools like Facebook, LinkedIn and Twitter to promote themselves and their businesses. Are they producing the intended results? In many cases, the answer appears to be, “absolutely.” If you haven’t stepped foot in this arena yet, at the very least set up your accounts and post a picture and a link to your website. It takes 15 minutes and it’s free.

frontpage-birdThe big question after you are LIVE is, “now what do I do?” The quick answer is start by posting updates and inviting people to be part of your network. In this article, let’s start by looking at what type of information you can post to boost exposure and promote your business. I’m not one personally for updating the world on the newest run in my nylons. So what kind of comments should you post? Strategic, well-thought-out ones of course, mixed with a personal flavour – hmmm sounds just like live networking.

Here are 10 clever ways to use your updates in Facebook, LinkedIn and/or Twitter to get results.

1. Think Media – Did you know the larger news and broadcast media are watching social networks for relevant news ideas? Well they are. So think of some catchy headlines that are topical and use these for updates.

2. Q. & A. – Do you get asked a lot of common questions? Pose the question via your update and then develop a link back to your site for the answer.

3. New Article or Newsletter Link – Check the software you are using. Can it automatically update your status? If so, set it up to do so or manually enter the topic and a link to read more.

4. Conduct a Poll – Want to test a new product or service or gauge market demand? Ask people what they think on a topic.

5. Brag - Share your successes. It lets people know you are in business and making progress. This could be a big client or an award or media exposure, as examples.

6. Invites - Invite people to your next Free tele-seminar or webinar or even to a paid event.

7. Share Interesting Resources – This could be a helpful tool, recommended reading, a great blog or a useful website.

8. Announce New Products or Services – Again, this lets people know you are invested in growing your business.

9. Introduce/Promote Others in Your Community or Network – Networking is about connecting people. Make sure you “give” back and support others by singing their praises, providing a testimonial or commenting on a useful page on their website.

10. Stay Human – Ask for help or expose a weakness. Because you may never meet these people face to face, it’s important to show people you are just like them. Poke fun at yourself every now and then, or allow others to help you. Otherwise they may see you or your company as too high-level for them.

Think about it. If you can think of 3 examples for each of the above ideas you would have 30 updates. That’s a month’s worth!

ducttapemarketingbadgeCidnee Stephen is the owner of Strategies for Success – a marketing company that focuses on the needs of budget-minded small businesses and professional services. She has helped hundreds of small businesses get out of their peak and valley ruts to finally achieve that next vital level of success. Cidnee is also a sought-after speaker, writer and blogger on marketing topics that affect small businesses and B2B service based operations.

If you would like to build a system to reach those goals quicker, check out Cindee’s Speak for Leads & Expertise Program.

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Political Hacking On Small Business

by Tim Berry on October 27, 2009

Health care, loans, SBA, job creation … have you noticed that the public discussion on all of these business-related topics is very far off base? Doesn’t it seem like the talking heads choose sides first, then recite talking points? And that the result is no real communication or discourse, because it’s all predetermined. Tell me what the pundit said and I’ll tell you which side he’s on; which uniform he wears.

Funny, everybody in government is in favor of small business. Words and phrases like “job creation” get used so much they’re diluted of all meaning.

Meanwhile, back in the real world, you and I are getting into the office early with a large cup of coffee every day, answering phone calls, following up on projects, and while these issues affect us in the long term, we have too much short term–and too much business-specific work–to allow us time to even look into it.

So I was browsing NYTimes.com online Sunday when I caught Robb Mandelbaum’s piece called Obama Talks Up Small Business, Again on his You’re the Boss blog. It seems like a decent piece of journalism, summing up the latest small-business talk from the White House. What struck me about it, though, was not the content but how much I find myself agreeing with this comment, from someone who uses only his first name (Doug) and says he’s a small-business owner. He said:

  • This is not a Democrat vs. Republican issue. I am WEARY of the fighting–neither party shows it cares about anything but winning and staying in power (or regaining it.).
  • As soon as a person brings up Pelosi or Reid or Obama or Limbaugh or Beck or Cheney–that person LOSES the argument by showing they are not an independent thinker but a follower of the hamster wheel of politics that keeps spinning, keeps getting you worked up emotionally, but never gets things done.
  • Give American small-business owners the freedom to be entrepreneurs and they will supply America with innovation, jobs and new tax revenue.

I agree.

(Photo credit: Marynchenko Oleksandr/Shutterstock)

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dollyrainbowwave1

Three Magic Questions That Drive Sales

by Guest Author on October 26, 2009

Some of our best business conversations happen in the most unlikely places, including our daily walk to the local coffee shop we fuel up in, and the dog park where Liz takes her border collie, Mike.

dollyrainbowwave1One of our dog park buddies is a woman we’ll call Mary. She’s a self-employed consultant who knows we’re always open to providing what insight we can while we throw tennis balls for Mike and his doggy pals.

We like what Mary does, so we took her along to meet a client of ours who needed the kind of services she provides. Now, when a colleague accompanies you to meet a client with a stated need, you can be pretty sure there is real business to be had, and that you have a better-than-even chance of getting it.

Here’s how the meeting went. Client to Mary: “Here’s what I need (gives detail). What would you charge me for that?” Mary to Client: “That would be X dollars. But I could give you a discount if that’s too much.”

So Mary got the job, but gave away about 20% of what the client was willing to pay her because she didn’t know the Three Magic Questions she should have asked.

Magic Question Number One:
What is the biggest frustration, or the most powerful opportunity you have been facing in the last twelve months?

Magic Question Number Two:
If you had solved that problem, or been successful with that opportunity, what would that have meant to your company (In dollars? In market share? In profit? In store traffic? In lead generation?)

Magic Question Number Three:
On a scale of one to ten, how committed are you to solving that problem, or succeeding with that opportunity, in the next twelve months?

Can you see why these questions are pure magic? Because the client has the opportunity to talk about his favourite subject (himself) and is actually telling you exactly what he wants to buy and how much it is worth to him.

If the prospect had said his commitment level was eight out of ten or more, Mary could have said, “I specialize in providing solutions that (solve the biggest frustration the prospect has) so that my clients can achieve their goal of (what the client said he wanted to achieve).” She could have quoted a fee that was reasonable in relation to the answers to Magic Question Number Two.

If the prospect had said his commitment level was under eight out of ten, Mary would have suspected that the client was not willing to pay her usual fee. She might also suspect that the project might be terminated early, or even that she would have trouble getting paid on time.

In this case, she could have said, “You’ve said your problem is (restate the problem or opportunity) and that resolving it would result in (restate the results he mentioned). But it doesn’t sound like it’s your number one priority in the next year. I specialize in this type of work, and I feel that you should invest X (a reasonable fee). How does that sound?”

Based on the response she got, she would then be able to make a decision to accept the job, decline it, or negotiate a short-term contract she and the client would be happy with.

Increasing the value of your sales? All it takes is a little magic!

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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For New Marketing, Follow the Eyeballs

by Tim Berry on October 26, 2009

There’s no question that marketing is changing. Advertising is dying and getting reborn all over the place, and word-of-mouth is leveraged by technology tools. The problem is how, how much, how fast and how does it affect your business? It’s a new world, with a changed landscape.

For idea leadership in this realm, look to Seth Godin: his books and his blog. He’s redefining advertising as “shouting.” And he looks to a new kind of marketing built on being remarkable, in a very literal sense of the word: remarkable, as in something that people will talk about. And for practical how-to leadership, I recommend John Jantsch, Duct Tape Marketing founder, redefining marketing as getting people to know, like and trust you.

And for actually working rapidly changing marketing assumptions into your own business plan, frankly, it’s hard these days. It’s complicated because the landscape is built on sand mines; it crumbles fast.

I recommend you use a methodology somewhat akin to following the money for the financial portions of your plan. But for the marketing portions, you follow the attention. You could call that eyeballs (a popular web term), or mindshare, if you prefer.

Start with attention. Ask yourself what makes people aware of a need, a problem or a want that you solve. You could call that an itch, because need is misleading: People buy a lot of goods and services they don’t really need. So you want to understand what gives people the itch that leads to you when they scratch it. And then you understand how to scratch the itch: Where do they look for solutions? Is it habit, the shop next door? Do they look in some repository in their mind or memory, like some ad they’ve got stored in the back of their mind? Or do they open a web page and do a Google or some other search?

I read about an IBM study called The end of advertising as we know it on Michael Glass’ Fuel Lines advertising blog. This is very interesting stuff. He quotes the IBM study:

Imagine an advertising world where … spending on interactive, one-to-one advertising formats surpasses traditional, one-to-many advertising vehicles, and a significant share of ad space is sold through auctions and exchanges. Advertisers know who viewed and acted on an ad and pay based on real impact rather than estimated “impressions.” Consumers self-select which ads they watch and share preferred ads with peers. User-generated advertising is as prevalent (and appealing) as agency-created spots.

And Glass adds his own commentary, from his advertising professional’s point of view.

There is no question that the future of advertising will look radically different from its past. The push for control of attention, creativity, measurements and inventory will reshape the advertising value chain and shift the balance of power.

And what can you do about it? Follow the attention. Follow the eyeballs.

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