February 2010

2 Dangerous Myths About Startups and Investors

by Tim Berry on February 26, 2010

These two myths just keep on coming up. Consider this, sort of like my don’t break the law post here yesterday, another reminder of what we’re all supposed to know, but is not always understood.

For the record, what I’m calling “investors” or “investment” here is serious business investment from professional investors or sophisticated amateur investors, people who put money into your business with the goal of getting a return on that investment. We’re talking here about venture capital and angel investment. I’m not talking about getting a few thousand dollars together from friends and family or anybody else who doesn’t approach the idea as a business investment.

Myth 1: If you try hard enough you can find investors

Reality: Only a small subset of startups are ever going to get investment.

This should be obvious, but isn’t always: real investment wants a return on investment. That takes luck and hard work and a business that offers real growth prospects and a reasonable chance of getting purchased by a big company or going public in just a few years.

Services are way less likely to attract investment. Although there are exceptions, investor businesses have to be scalable, meaning you can ramp them up to high sales volumes fairly quickly. Usually that means they’re product businesses, or productized services, like some Web applications. Very few service businesses are scalable. If you’re wondering about yours, ask yourself whether doubling sales means doubling head count. If it does, you’re probably not scalable.

New entrepreneurs without startup experience are way less likely to attract investment. That’s really off-putting to new entrepreneurs, I know, but it’s important. Here too, there are exceptions, but the general rule is that you need to have startup experience, or a team that includes people with startup experience. This is a matter of reducing risk to the investors, and the general consensus is that people who’ve been through a startup are a lot more likely to succeed than people who haven’t.

Action point here: if you’re not likely to get investment, don’t waste your time. Revise your plan to make it work with fewer resources. That might mean growing slower, or focusing on only a part of your larger vision. Generate sales. Spend carefully. And the good news, in this case, is that if you do it by yourself, then you own all of it.

Myth 2: Success is getting investors to say yes

Reality: Jumping into business with the wrong investors is a nightmare. It will spoil your life, and of course your business too. You’re way better off with no investment than sharing your business with investors you don’t like working with. Think about shared goals, shared styles of thinking. The entrepreneur-investor relationship is a lot like marriage. And obviously, better no marriage at all than a bad marriage.

So your goal isn’t just to get investors. It’s to get compatible investors, people you can work with, people who will help you succeed, and people who offer skills and contacts and experience that complement what you have.

(Image: istockphoto.com)

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Where do your customers shop and what do they want?

by David Shear on February 25, 2010

The thing I love about sales is that success is easy to spot and very difficult to fake. Every sales team I have ever worked with has consisted of successful sales reps who delivered results and unsuccessful reps who delivered excuses. Somehow the successful sales people produce month in, month out, completely unaffected by the excuses that plague the non-producers. Channel and division sales operate much like a typical sales team. There are always excuses for failure if you look hard enough. Successful channel sales teams ignore the excuses and find ways to deliver.

One year ago, the retail channel was full of excuses. Store traffic was down. The economy was in a freefall. Customers were not spending money. It would have been easy for Palo Alto Software to accept the excuses as fact. We could have been happy that our sales were not dipping as much as the other guy’s. We could have resigned ourselves that the dip was due to forces outside our control, we couldn’t do anything to get the market moving again, and all we could do was wait it out.

But we didn’t choose to accept the excuses. A careful examination of the industry revealed an important trend. Sales were down, but not everywhere. Our customers had changed where they were shopping, but they were still shopping. This realization helped us identify key stores where we needed to gain shelf space. shopping-cart

Sales of big ticket items, specialty items and luxury goods were down. But customers still needed to purchase food, clothes and household goods. Armed with this knowledge, we adjusted our pricing strategy, created a new “impulse” product and began moving our software into retail chains where necessities were sold. Stores like Sam’s Club, Target, Costco, etc… still had plenty of foot traffic, and we understood now that it was important for us to be in those stores.

Don’t accept the excuses that a sales department can generate. Your customers are still shopping. You may need to step outside of the box to reach them. You need to discover and follow their trends. Don’t ever be satisfied with an “if we build it, they will come” plan. Find your customers, study their habits and take your products and services to them.

The retail channel can be the most difficult, most time-consuming sales channel your company has. If you have a product that appeals to the consumer and you can sell where your customers shop, then retail sales can be very rewarding. Thousands of companies navigate this turbulent channel because it can also be the most profitable. No other channel even comes close.

If you are considering selling in retail or looking to improve your retail plan, take a fresh look at the channel. Start from scratch. Make sure you understand your competition, distribution and your price strategy. Make sure you have the ear of the buyers or that you have hired someone who can get their attention.

Most importantly, don’t let your sales plan become stagnant. Your success in retail depends on your ability to react quickly to industry trends and your ability to react quicker than your competition. If you proactively manage your retail sales, like Palo Alto Software did, you may find that retail isn’t dead, it’s just evolving.

dave David Shear is the Channel Sales Manager at Palo Alto Software, where he oversees all academic, corporate, government and retail sales. David came to Palo Alto Software from the banking industry where he was a regional and national sales manager for Indymac Bank, Optium Financial and Rainland Mortgage; David worked in correspondent and wholesale mortgages for over a decade.

Having attended University of Oregon’s Law School, David is quick to point out that while the Oregon Ducks are his first love, sales come in a close second.

Did you miss a part of the series? Don’t worry, here are the links so you can read it from the beginning! Retail is not dead: Part One, Part Two, Part Three

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Startups, Please, Don't Break These Laws

by Tim Berry on February 25, 2010

Really, seriously: We teach this, we write this, we talk about it, but people (and yes, I mean you) somehow think it’s about some theoretical storybook startup, and not about them. They’re immune.

1. Asking people to invest is pretty much against the law.

Sure, there are some loopholes and exceptions, but you should understand that for the most part, if you go around asking people to invest in your company, you are breaking the law.

You don’t believe me, I know, because you see people doing it. You read about it. You go to a local startups meeting and the panelists tell the crowd that they’re looking for investors. That’s against the law. You can talk to friends and family, if you’re careful and you have a good lawyer advising you. Or you can talk to accredited investors, as defined by the Securities and Exchange Commission (SEC). But you can’t go around asking people to invest and, far worse, taking their money. That’s against the law.

2. Faking financials is against the law.

It should be obvious, I’d think. But spreadsheets are powerful, and the results can look so formal and reliable, even when they’re just made-up numbers.

Maybe we forget because we’re used to business plan projections, which are just that, projections. Presenting financial results is serious business. When you show an investor financial results that you made up, that’s called fraud. It’s against the law. Don’t do it.

Seems obvious, but …

Recently I heard some horror stories along these lines, real people, real companies and, potentially at least, real criminal charges and real jail. I heard it second- and third-hand, so I don’t know whether it’s true. But it’s shocking.

Don’t forget. There are rules you can’t break.

(Image: istockphoto.com)

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10 Classic Business Naming Mistakes

by Tim Berry on February 24, 2010

Not really exclusive. Legal isn’t the whole issue with names. Lots of legal names work fine until you grow and run into somebody else with the same name, in the same business area, who had it first. Check out this true-life story. You can easily have a name that’s legal but stunts your growth because even though you own it, somebody else owned it first, so you can’t really compete. It happens a lot. I saw a business plan for a high-end boutique for men’s underwear, catering mainly to the wives, partners and significant others of relatively well-to-do men. If they had called it Victor’s Secret, it would have been legal. But when they started to grow, Victoria’s Secret would have had the legal right to force them to come up with a new name.
Focusing too narrowly on the domain name. “Damn, we can’t be such-and-such, because such-and-such.com isn’t available.” Did Jeff Bezos need books.com? Did Flickr need photos.com? Did search.com beat Yahoo! or Google? Many companies run domain names different from the company name. Get something easy to remember and hard to misspell. It doesn’t necessarily have to match your company name. If you can’t get your favorite domain name, get a good name.
Confusing a name with marketing. I dealt with some young entrepreneurs who had a plan to acquire the domain name cameras.com to sell cameras. When asked their marketing strategy, they responded with blank looks. Wasn’t it obvious? They were going to own cameras.com. With that domain name, who needs marketing? No cigar, I’m afraid. The name itself doesn’t generate enough traffic for anything. If you don’t believe me, first search cameras for sale and then look at cameras.com (no offense intended to the current owners of cameras.com, who aren’t the same entrepreneurs I knew back then).
Gag-me cute, dumb, offensive names. With thanks to hubpages.com, names like Drain Surgeons, The Stalk Market and Get Plastered. Be careful with puns. I love puns, but they get old. When they work it’s great. I’ve always liked Noah’s Arf or Doggie Pause (real businesses) for dog day care. I think those two work.
Too trendy or too clueless. What if a fashion dies and your business is still around? Things named for bellbottom pants, fax machines or Y2K, for example. Did anybody else notice when Disney had to completely redo its future themes because the year 2000 came and went? And names that are plainly insensitive about ethnic identities, religions or sexual preferences; that gets old way too fast.
Misspellings. Arrgh. I hate that. My company is a client of NPD Intelect, the market research company; great company, but damn, “Intelect?” Misspelled. I suspect the problem is that they started in Germany, where that spelling is correct. Try this list of well-known businesses with misspelled names. I agree with the blogger; they’re annoying.
Your own name. I knew a guy named Bob who owned Wayne’s Garage. That was a constant small annoyance, about as trivial as a very small pebble in your shoe. On a long hike. Some day you might want to sell your company to somebody else. Maybe even somebody with a different name. And here’s an interesting piece of trivia: When Borland International got started, there was nobody named Borland involved. And have you met Peter Norton, founder of Norton Utilities? Sure, there are exceptions to every rule.
Acronyms. When I worked for Creative Strategies International, we called it CSI. But nobody else did. As I write this, “CSI” gets more than 32 million hits on Google. Not just the TV show, but Computer Security Institute, College of Staten Island, College of Southern Idaho, Construction Specifications Institute . . . on and on.
Too local. I’ve got a pots and kettles problem with this one, because my wife and I named our company Palo Alto Software while we were in Palo Alto, Calif. Then in 1992 we moved to Eugene, Ore. Whoops. Moving is easier than renaming. And ours, while a problem, could be a lot worse. At least Palo Alto sort of says Stanford and Silicon Valley. Thank heavens we weren’t living in Boring, Ore. Or Drain, Ore. Or Hell, Mich.
Too generic. Too vanilla. I learned this one the hard way, too. Palo Alto Software started out as Infoplan Inc. One day a consultant walked in and told me that there were more than 26,000 companies in the United States whose names started with “Info-” something or other. Oh dear. That’s why it became Palo Alto Software.

(Image: David Hilcher/Shutterstock)

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To Tweet or not to Tweet

by Carolyn Higgins on February 23, 2010

Wow, social media’s reputation with small business really took a roller coaster ride this year. First it was the “2009 Tribalization of Business Survey” by Deloitte, Beeline Labs and the Society for New Communications Research, in which surveyors found that 94% of small businesses plan to increase or maintain their investments in online communities. Great news, right? Well wait, then came the Citibank Small Business survey that Reuters reported on, that said 75% of the small businesses they surveyed have not found social media sites like Facebook and Twitter to be of value in generating leads or revenue for their businesses. Not so good news.

So what are we small business owners and marketers supposed to believe about the effectiveness of social media as a lead generation, revenue driving and super duper marketing tool? Wanna know what I think? I think it’s free – SO WHO CARES what the reports say? Seriously.

OK, I realize that may sound short-sighted and maybe even irresponsible to some of you, but think about it: if someone offered to mention your business to 100 friends absolutely free of charge would you stop them? As long as it wasn’t a negative mention, of course you wouldn’t. I’ll make it even more realistic: what if 100, 1,000 or even 10,000 customers and potential customers asked you to send them something of interest, either about your business, your industry, or even you, on a regular basis and all you had to do is spend 5-15 minutes to prepare that message?Would you do it? I hope your answer is yes. Guess what? That is exactly what social networking is. So then why would you automatically rule out social media as another way to promote your business without giving it the old entrepreneurial try?

With over 200 million people using Facebook alone, social media can’t be ignored as a viable and respectable marketing tool. Yet for many small business owners it’s still a big ole scary unknown. In reality, social media is an investment in your business; it is the fastest, easiest and least expensive way to build a presence and earn trust, but it still takes planning – and time. What harm is there in trying it?

As long as you follow a few simple “rules” there is no harm - it can only help. Here are a few tips to get you started.

1.   Start small – I would suggest starting with two social networking sites you are somewhat familiar with. Got a personal Facebook or LinkedIn profile? Great – set up a page for your business. You already know how to use the site; you already have a few friends, so use that to your benefit. The great thing about being in business for yourself is that your friends want to help you. Recruit them as your first fans. When they become fans of your business page, all of their friends see that – a great way to start building your business network.
2.   Become a fan or a follower – Your job (at first) is to watch and learn. Find companies that you like, especially those that are relevant to your business, and follow them (on Twitter) or become a fan (on Facebook) to learn what they do to stay in touch with their audience. On Twitter, I love @Zappos and @SmallbizMag and on Facebook, Whole Foods.   Another tip – search for people or businesses that are most likely to buy your products or services and follow them on Twitter. This will help you get to know them better and they may decide to follow you too!
3.   Don’t Sell – When you do start tweeting or updating your status the biggest mistake you can make is to start selling. No one is on social networking sites to have products and services crammed down their throats. That is the quickest way to alienate your social networking followers. Watch what other companies do – I have never seen Zappos even mention shoes in their tweets and Whole Foods – although they will promote specials and sales – they are usually promoting seasonal recipes or healthy eating tips that I find very interesting and almost always take the time to read. What are they doing? Getting me to know, like and trust them, so that when I do want to buy what they sell, I will think of them.
4.   Be helpful – There is no better way to start growing your social networking community than by helping others. Follow others in your industry (I would stay away from competitors) and repost their blogs. Or help them promote their events by retweeting or posting on your Facebook status if you think your followers will be interested in the content. By doing this you are making friends with others in your industry who may later refer you, and you are offering interesting and educational content to your readers. Voila, you’re a social networker!

That’s it, four simple steps to get you started on your path to social networking success. Remember, social media is not going to take over the world as the only way to promote your business – it’s is just another tool in your toolbox. Used as part of a marketing plan, along with other forms of promotion, it can help you grow your business. Does it take a little time? Of course it does. But if you aren’t spending time growing your business, is your business really growing?

Carolyn Higgins is the President and founder of Fortune Marketing Company. Her personal mission is to help small businesses stop wasting money on advertising and promotions that don’t deliver and help you implement an effective marketing system that will bring you more customers – consistently.

For more information about Carolyn Higgins and Fortune Marketing Company please visit http://www.FortuneMarketingCompany.com. Email chiggins@fortunemarketingcompany.com or call us at 707.631.6340.

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Ideas Don't Equal Innovation

by Tim Berry on February 23, 2010

Thanks to Twitter friends for pointing me to Ideas Don’t Equal Innovationby Mike Myatt, on his N2Growth Blog. He’s got a good list on his post, with short and sweet explanations. This is direct quote:

1. The idea should be generated within a solid framework for decisioning. It should be developed as a solution to a problem or to exploit an opportunity. The idea should be in alignment with the overall vision and mission of the enterprise.

2. If the idea doesn’t provide a unique competitive advantage, it should at least bring you closer to an even playing field.

3. Any new idea should preferably add value to existing initiatives, and if not, it should show a significant enough return on investment to justify the dilutive effect of not keeping the main thing the main thing.

4. Put the idea through a risk/reward and cost/benefit analysis.

5. Whether the new idea is intended for your organization, vendors, suppliers, partners or customers, it must be easy to use. Usability drives adoptability, and therefore it pays to keep things simple.

6. Just because an idea sounds good doesn’t mean it is. You should endeavor to validate proof of concept based upon detailed, credible research.

7. Nothing is without risk, and when you think something is without risk, that is when you’re most likely to end up in trouble. All initiatives surrounding new ideas should include detailed risk-management provisions.

8. Adopting a new idea should be based upon solid business logic that drives corresponding financial engineering and modeling. Be careful of high level, pie-in-the-sky projections.

9. Any new ideas should contain accountability provisions. Every task should be assigned and managed according to a plan and in the light of day.

10. Any new ideas being adopted must lead to measurable objectives. Deliverables, benchmarks, deadlines and success metrics must be incorporated into the plan.

The key phrase in his introduction is one I’ve subscribed to, and posted about here, for a long time: “Ideas are a dime a dozen.” In fact, as I read through it, I recognize an emphasis on accountability and measurability that have both been important to my work on business planning lately.

And my apologies to Mike. I rarely quote so extensively from another blog to this one; I prefer to do highlights and add commentary. But he does it so well here. The illustration was my selection, by the way.

I looked around his blog, after finding this post. Nice stuff. For another good example, try Your Story Matters.

(Image credit: by [a snail race], Flickr cc)

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Calling For Oregon Angel Investment Candidates

by Tim Berry on February 22, 2010

Is your company in Oregon? Is it a startup or early-stage company looking for angel investment? Does it have the kind of team and growth prospects that can make money for investors?

If you answered yes to those three questions, please go to the Willamette Angel Conference (WAC) website and submit your company for WAC 2010, to be held in Eugene, Ore., in May.

Yes, it will cost your company $199 to submit a plan. (For the record, that money goes to affray the costs of the event; not a penny of it goes to the investors.) But how can it not be worth that to get your company in front of legitimate investors?

At the end of the May 13 event, the angel investor group will have chosen a company for an investment of more than $100,000.

Even if you don’t win, what’s it worth to get feedback from people who are ready to invest real money in real companies? These people will be reading your summaries, watching your online videos and, if you get to the semifinals (12 to 15 companies will), they’ll be reading your business plan, listening to you deliver your pitch, asking questions, making comments and giving your feedback.

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Do you know a guy who knows a guy?

by David Shear on February 19, 2010

David Shear continues his series on the state of retail.

Very mafia, right? Well, I don’t think the comparison is very far off. Retail sales require that you know the right people, and that everyone gets their share of the revenue.

The people who sit on the top of the retail food chain are the buyers for each store chain. Buyers tend to be loyal and calculating, and they like to deal with the same group of people year after year.

If your company doesn’t have a large catalog of products in retail, then you probably need to hire a guy who knows a guy. Buyers don’t have enough time to speak with every sales manager from every company who wants to get their product onto shelves.

Each department buyer is responsible for hundreds of products. For every product that makes it onto the shelf, there are a handful of competitors trying to take that shelf space. The buyers don’t have enough hours in the day to speak with everyone who wants a minute of their time. If you can’t get a buyer’s attention, you will never be able to succeed in retail. godfather

Palo Alto Software uses an outside retail sales company to represent their software products, Business Plan Pro and Marketing Plan Pro, in the retail channel. An average outside sales company represents 10 to 20 companies into retail. For a small cut, the reps give you valuable market insight, and even more importantly, they deliver a valuable service that takes years to build. They deliver relationships with the buyers. You are hiring a guy who knows a guy.

As the new sales manager, I started pestering our outside sales company. I wanted to know why sales were lagging and what moves we should be making. I wanted to know why we weren’t selling into the club stores, the mass merchant stores, and why we were not getting any solid marketing opportunities. I was told by our now-fired sales firm that new opportunities were not realistic. I should be happy that our products were still in the office stores. The clubs and mass merchants were not realistic. Retail was just declining and there wasn’t much we could do to slow the slide.

After a month of excuses and lack of movement, our former outside sales firm received their pink slip. I couldn’t take the excuses any longer. I needed an outside sales firm that had vision and a willingness to step outside of the box. After a long interview process, we hired a smaller firm who wanted our business. The reps have become an extension of our sales team. I check in with them as if they work directly for my sales team.

A funny thing happened when we started fresh with a hungry group of retail reps. We got into the clubs. We got into Target. We started receiving marketing opportunities. The new marketing opportunities, new products and new stores started spiking our retail sales. Instead of managing a declining channel, I was reporting on year-over-year increases.

Quite a difference from the status quo I was supposed to be happy with, and all of that because I’d found the right “guy”.

Next time: Where do your customers shop?

Having attended University of Oregon’s Law School, David is quick to point out that while the Oregon Ducks are his first love, sales come in a close second.

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Logos: Watch Out! A Real-World True Story

by Tim Berry on February 19, 2010

Leaders get copied. Artists copy each other and we package it all up and call it a trend or a movement, like the impressionists, or baroque, or whatever. Poets and novelists do the same thing. Television producers copy good shows to make better show or bad shows, until we get sick of them. Buddy cop movies? Reality TV shows? Kids learn sports by copying: the learners copy the experts.

That’s humanity. It’s great for progress, sometimes not-so-bad for creativity, maybe.

But in business, when you get copied, it sucks. While it’s shabby and usually kind of sleazy, it happens a lot and there’s not a lot of legal protection. If you doubt me, browse the retail shelves somewhere, and see how many packages copy how many other packages. If the victims of the copying could stop it, they would.

So here’s an example that came up recently. One of the two logos pictured here is the logo of Darren Rowse’s ProBlogger, one of the older and most respected blogs around. The other one is the logo of a new blog. You be the judge. This what Darren pointed to from Twitter:

He’s concerned, obviously, that the new logo on top is the same as his tried-and-true logo, on the bottom. What do you think? Does this seem like good business practice? If you were the new one here, would you change your logo?

I am very much not an attorney, so don’t take this as legal knowledge. But I’ve been involved with some of this as a business owner, and I don’t think Darren has a legal solution. Most known software companies have had imitators mimicking packaging and interface, and sales lines, but that’s not actually illegal except in very extreme cases.

It’s just annoying. And, on the part of the imitators, kind of sleazy, in my opinion.

So if you’re interested in this, you might go visit the Facebook site that Darren linked to. The thread starts with Darren saying, tongue obviously in cheek, “So I’m wondering what the story is behind your logo. It looks familiar.” That’s nice understatement.

The answer comes back:

Good question Darren, I think our logo designer had been influenced so much by Problogger.

And that’s all followed by some pointed comments, including:

“Influenced by” is an interesting way of putting it.

This is blatant copy. Don’t let it slide.

Shame on you beamdotmy. Pathetic to say the least.

Wow. Some nerve. Gotta love fakes and thieves.

And it goes on from there. This kind of copying may be legal – like I said, I’m not an attorney, I think it is, barely so, but I’m not sure – but is it good business? What do you think?

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What about those added value New Year’s resolutions?

by Marketing Masters on February 18, 2010

I love year-end posts where we see the flood of “Best of 2009” lists of tips, tricks and ideas to steal.

I actually love getting these. I like to review them and see if we’ve used any during the past year, and whether they have worked for us. There are always nuggets to mine, and in a pinch we can compile all the lists we get and send them to clients, who love getting them too. (Yes, we always get permission first.)

So far though, no one has replaced the question Barry Nalebuff, co-founder of Honest Tea, and Oxford and Harvard economics guru asks: “What is your added value?” where “added value” means “total value, minus the value without you.”

How about it? If you asked your customers, suppliers and colleagues how you added value, would they have a clear answer? Here are some ideas we can all turn into New Year’s resolutions for 2010.

sdc Write down and categorize everything you know about your industry: all the players, the laws and regulations, current perceptions, market definitions and so forth. Now you can see your industry as a game, with well-understood rules, traditional ways players can move, and a shared understanding of how the game is won.

Now, think of what would happen if you changed any of those elements. Start by examining the tactical rules; these are the moves that don’t fundamentally change the game, like opening gambits in chess. Then look at the strategic rules, or the ones that actual define the game; for example, the way a knight is allowed to move is one of the defining rules of chess, and if the knight moved another way you could legitimately ask if chess were being played any more.

Now you’ll start to see how to re-write the rules and make up your own game. What would happen if you could reframe the industry?

Game changing doesn’t always belong to the technology big boys like eBay and Google. When the first marketing consultant or ad agency renegade offered coaching to clients, in effect installing expertise instead of selling it, the consulting game changed. In 1984 Cirque de Soleil (with a government grant for struggling arts groups) offered a theatrical, character-driven spectacle that omitted the animals, and the circus changed.

Reframing the value equation is not a guarantee of success (Cirque de Soleil almost went under about three times). But it seems to me that as we head into what may or may not be a recovery, we need to ask the question of how we provide value. If we did not offer the products and services we do, would anyone notice? Would anyone care?

ducttapemarketingbadge Ken 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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