Archive for November, 2009

How Do I Get Out of This Business?

What to do when you when you realize you should have never started your business in the first place…


You had a great idea.  You went through lots of research and work to make it a reality.  You got it started or opened.  Now you are tired.


You forgot that the real work starts after the business is started.  You don’t have enough customers. You don’t have enough money for marketing.  You hate book keeping.  Or maybe you realized that the opportunity isn’t large enough to create a reward for you big enough to justify all of the risk you have taken on.  Now what?!


We have to ask three questions: should you get out, and if yes, when should you get out and how should you get out of your business?


Should You Get Out?  In general, if you believe an investment isn’t going to make a good return for you, there is little reason to keep it.  But many people do just that for emotional reasons once they are already invested.  You need to figure out how much you can make elsewhere (like from a salaried job) plus any additional money you would need to put into the business to keep it afloat and compare that to what you may lose walking away from your investment in the business.  Think of it like a stock that is decreasing in value.  Some people keep throwing money into a sinking stock because they are already invested in it and can’t bear the thought of losing money in the stock, not realizing that if they sold the loser stock and invested in a stock with strong prospects, overall they would be better off and make more money.  You need to evaluate your business as part of your earnings and investment portfolio and make an informed decision based on your situation.


When Should You Get Out?  You should get out when any additional time, money and effort you would put into the business will not realize a worthwhile return.  If putting an additional $25,000 and 6 months of effort will create something that is worth $50,000 more in 6 months, then wait.  If that same money and time will create something only worth $10,000 more, then get out before you make that investment.  You also have to consider any repercussions (such as leases, financial or other guarantees that may cost you money) in your risk-reward tradeoff evaluation.


How Should You Get Out?  If you have anything to sell and you can do it in a timely manner and recoup enough money to make the opportunity cost of keeping the business open worthwhile during that time frame, then do so.  This can be your whole business if you have created any equity in it or this can be assets.   Just make sure the tradeoff makes sense. I had a client that had a business that was generating lots of sales but losing money.  He had a hard time shutting it down because he was focused on the sales, even though it was costing him more money to keep the business open than those sales generated.  If you are in a situation like that, just walk away.  Yes, you may be able to recoup a few dollars, but if you could be making more than those few dollars doing something else, go for the higher payoff!


No situation is irreversible; while it is better to avoid putting yourself into a situation where the risks don’t justify the reward, remember to keep the big picture in mind.

Tuesday, November 24th, 2009

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The Small Business Spectrum: Jobbie, Job or Business?

Assessing where you are on the business spectrum and why you should care

Two of the most over-used words are business and entrepreneur (and all the various derivations of them).  While there are millions upon millions of corporate entities set up in the US alone, only a small percentage of them are businesses: the rest are hobbies, jobbies and jobs.  Here is my quick definition of the business spectrum:


On the far right of the spectrum is a bona fide business.  This is an entity that sells goods or services that is not dependent upon any one person for its existence (if the owner gets hit by a bus in a business, it may take a toll but the business still exists).  This is good for all sorts of reasons, ranging from allowing the entrepreneur (in the famous words of E-Myth author Michael E. Gerber) to work “on the business” rather than in the business.  This means the owner can take a vacation, can scale the business and may eventually be able to get a return on everything he has invested in the business by selling it.

 

21 million+ entities in the U.S. call themselves businesses, but don’t fit the above definition.  These are jobbies and job-businesses.

 

The Jobbie:  At the far left of the business spectrum is the jobbie.  I have coined jobbie as the term for a hobby disguised as a job or business.  Let me be clear, there is nothing wrong with a hobby that makes money.  I personally find it preferable to a hobby that sucks up all of your money like golf, collecting Disney figurines or shopping.  However, even if iyou have a business entity like a corporation, if you are doing it on the side, making less than the minimum wage on an hourly basis or less than 5-figures a year and there is not a great chance of that changing any time in the future, you have a jobbie.  So what’s the problem?  Nothing, if you know it is a jobbie.  If you think that it is a business, you may be tricked into investing tons of money in inventory, services, websites, etc. that you will have no chance in recouping, let alone making a return on them.  You will also not be able to sustain yourself or a family with a jobbie, even if it brings in some pocket money.


If you take your jobbie to the next level, then you may have a job-business (really just a job that you call a business).

 

The Job Business: Smack in the middle of the business spectrum is a job business.  A job business is just that- a business that is really just a job.  Self-employed people and small businesses with few employees can fall into this category.  You may be earning a legitimate salary each year (or you may not, 60% of business entities don’t earn a profit over their lifetime), but you are the business.  If you get hit by a bus as noted above, the business doesn’t exist anymore.  While this may be an ok option for some people, in many cases it doesn’t justify the risk of giving up a salary PLUS investing your own money.  Think of it this way, you are investing your money for the hope of earning a profit.  That profit better be significantly more than what you can earn working for someone else or the risk/reward trade-off isn’t going to make a lot of sense.  Would you risk a $50,000 salary plus $40,000 of your savings for the chance to earn $55,000 a year?  You probably shouldn’t, but many job business owners do just that.  Plus, you may be working more hours, having even more stress and doing less of what you love (and more of things you don’t like so much, like marketing and bookkeeping) for virtually the same financial outcome. 


So, to make the trade-off pay off, you need to take your job-business to the far end of the spectrum, the bona-fide business.  This is no easy task, given that so many businesses fail and which is probably why only 20% of small businesses fall in this category.  Creating a bona fide business means that you are creating an entity that has value apart from you, providing you with a means to actually capture a financial return on the investment you made in creating the business in the first place.


Knowing where you are on the business spectrum is the first step in you assessing your business goals for the future.  This is the most important step a small business owner can take right now to decide what will give you the best chance of success in the future.  You can’t stock your tool box with the right tools for success if you don’t know what type of business you want and need to build.

Monday, November 23rd, 2009

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Do You Know Publicity?

Learning publicity secrets for your business from Shawne Duperon, 5-time Emmy Award winning reporter and producer

I don’t like to promote things unless there is a good reason to do so, and I do strongly believe in information if it is good information.  You have to do your homework and get up the learning curve on things that are outside of your current knowledge base.  If you are like me, the area of PR and publicity is one of those subjects that presents a steep learning curve.  Since every business can benefit from publicity (if you know what you are doing), I wanted to give a little shout out about a new info product from Shawne Duperon and one of her business colleagues, called The Complete Step-by-Step Insiders Guide To Generating Unlimited Free Press.  I would summarize her style as law-of-attraction meets reality, so it is an interesting approach that gives you what you need to hear without b.s. in a positive format. 

Here is what I know and what I don’t know:

What I know:

- While I haven’t taken this program in its entirety, I have used some of Shawne’s other material and she knows her stuff; plus she is a really genuinely good person and I always prefer to buy from someone who is solid them some a-hole;

-She is offering a lot, including a DVD, workbook a national media guide (tv-focused), online press kit and bunch of other bonus material;

-Her core competency is local television, so expect that to be a key focus of the program

-She is offering a money-back guarantee, so you have little risk in trying it out

What I don’t know:

-Any of the in-depth specifics, so check the site out and contact the email provided there for more information 

If you need and want more publicity and are ready to get up the learning curve, go to: http://www.getunlimitedfreepublicity.com/ to learn more.  Don’t be scared off by the infomercial-style landing page (not my personal style, but the style has become very popular in promoting info-products); as I said, her content is solid.

Wednesday, November 18th, 2009

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4 Business Lessons You Can Learn from the Twilight Franchise

What can Twilight and New Moon teach you about business?  A lot!

With the 2nd installment in the uber-popular Twilight saga, New Moon, about to hit theaters, here are a few business lessons you can take away from this very valuable franchise.

1. Don’t underestimate the power of a loyal target market:  The Twilight saga is a franchise built on enthusiasts.  Its core target market (largely teen and tween girls) have bought merchandise, watched the first movie multiple times and created substantial buzz that has converted new enthusiasts.  It is much easier to market more products and services to your existing customers than to new customers.  Twilight has done that brilliantly and in the process the existing customers have themselves brought in new customers to the franchise. 

2. Have a hook that appeals to your target market (aka don’t underestimate the power of cute boys when targeting teen/tween girls):  There is something to be said about having a strong hook.  In the case of Twilight, it is not really even about the vampires, it is about using some very attractive young men that appeal strongly to the target market (again tween and teen girls).  I remember a very successful shoe store in Chicago that employed a similar strategy.  They had only really cute guys working there, who flattered every female customer incessantly as they tried on shoes.  That store did very well.  Once you are solid in knowing your target market, find a strong hook that has a strong appeal to them.

3. Strike while the iron is hot:  Twilight has not been shy about exploiting its brand. You can buy action figures, chocolates, cosmetics, clothing and more inspired by the business.  The Twilight people know that no business cycle lasts forever, so they are not shy about maximizing their potential while they can.  The same goes for your business.  Business cycles are shortening, so don’t be afraid to make the most of your opportunities while you are hot.

4. If you are successful, there will be imitators:  Adding to the pressure of shortening business cycles are imitators that will jump on anything that has been recently successful.  Since Twilight started to really take off, there have been numerous vampire-themed brands that have popped up everywhere from television (the CW’s Vampire Diaries and HBO’s True Blood come to mind) to products and more.  This creates competition and the need to continue to differentiate your product and business. 

While not the first vampire saga, or even the first teen-vampire saga, by a longshot, Twilight has been a standout from a business perspective and suprisingly gives us all some great business lessons to learn from.

Tuesday, November 17th, 2009

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Guest Blog: Taming Your Worst Clients by Rich Gallagher

A few weeks ago I had the privilege to do a customer service focused guest blog for Rich Gallagher, President of Point of Contact Group on his Point of Contact blog.  Rich has now graciously returned the favor by telling you how to deal with some of your worst clients (before you have to fire them).  Read on: 


Let’s be honest: if you run a small business, some clients are enough to drive you to therapy. Fortunately for you, I am a practicing therapist! And more important, a fellow small business owner. So let’s take a look at how you can use some simple techniques from psychology to get a handle on three common types of difficult clients.


1. Nellie Negotiator

Nellie never takes “no” for an answer – in fact, she chews it up and spits it out. She learned early in life that being pushy and aggressive is the best way to get what she wants. And because she is so uncomfortable to deal with, you usually give it to her.


How to deal with Nellie: Therapists use a technique called “joining” with aggressive people – we see their side of an issue first, in gory detail, because it makes it easier and not harder for us to set boundaries with them. And we always respond in terms of what we can do, instead of what we can’t do. Compare these two examples:


Nellie: I demand a 40% discount.
You: There is no way we can possibly do that.
Nellie: Well, I’ve been using your services for three years now. And I’m important. And I’m …


Nellie: I demand a 40% discount.
You: Of course! Everyone is running on tighter margins these days. I don’t blame you at all for pushing for the best deal. Here’s what I can do for you: I can afford a 20% discount if we could somehow double the volume of business you do with us. Would that be practical?
Nellie: Hmmm … I’ll think about that. But look, I’ve been doing business with you for three years. And I’m important. And I’m …
You: Yes you are! We’ve worked together for a long time, and it’s an honor serving someone as important as you are. So I’m certainly willing to discuss a discount we can afford, based on our volume of business.


What you are doing here is replacing Nellie’s negotiating posture with that look of stunned silence that comes from thinking, “Wait! That’s *my* line!” Keep at it, and you will turn aggression into authentic dialogue.


2. Tommy Talkative

Tommy is a gregarious sort who loves to bend your ear about his boss, his vacation, his kids, even his annual physical – all while you are trying to do business with him. If time is money, he represents a constant withdrawal. And most of us feel stuck between whether to let him ramble on and on, or force them back on-topic and hurt his feelings – or possibly lose his business.


How to deal with Tommy: Talkative people crave attention – so use the “acknowledging close” technique to lavish attention on him while taking control of the conversation. Break in, enthusiastically acknowledge the last thing he says, and then ask a “binary question” – one with a yes, no, or short statement answer. As soon as he responds, BOOM: jump in with the next binary question, and guess what, you’ve taken control of the conversation. Watch this:


Tommy: Boy, my boss has been a pain lately. Look at all the work I have to do! I don’t even have enough time to talk to vendors like you these days. I’ll tell you, things have really changed around here …
You (breaking in): Good point! It seems like everybody is under more work pressure these days. And I respect your time. So what kind of products do you need right now?
Tommy: We need more binders…
You (breaking in): Great! What color would you like?


Done properly, the acknowledging close is not only remarkably effective – it actually makes Tommy feel good, because you are locked in and responsive to everything he says as you take over the reins of the conversation.


3. Cliff the Critic

Do you have clients who are never happy, but never leave? Who always find fault with whatever you do, no matter how hard you try to please them? First, of course, look in the mirror: most complaints are valuable feedback that need to be taken seriously. But if all of your other clients treat you like a rock star while Cliff is constantly a malcontent, then maybe – just maybe – that’s his nature.


How to deal with Cliff: Most people wonder what to say to a ceaseless critic, when you should really be thinking about what to ask. Good questions – like “If you were in my shoes, what would you do?” or “Who has made you really happy with this in the past?” – accomplish three important things: they take a learning posture that lowers the heat, they give you valuable information, and perhaps most important, they hold the other person accountable every time they let loose with another barb.


Whatever your own clients do to frustrate you, the good news is that you have more power in these situations than you think. Particularly when you look at what decades of psychology research have told us, and “shrink” to the occasion. Best of success!


*             *             *


Rich Gallagher is a communications skills expert, author, former customer support executive, and practicing therapist. His book What to Say to a Porcupine: 20 Humorous Tales that Get to the Heart of Excellent Customer Service (AMACOM, 2008) was a national #1 customer service and business humor bestseller that was a finalist for the 2008 Business Book Awards, and his latest book How to Tell Anyone Anything (AMACOM, 2009) explores the mechanics of difficult workplace conversations. Visit Rich online at www.pointofcontactgroup.com.


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Those are some sage words; I hope that you will find them useful as you deal with your Nellies, Tommys, Cliffs and more…

Tuesday, November 10th, 2009

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M&A, Partnerships: What’s a Fair Deal?

How to know that the deal you are signing is fair

There is a short answer and a long answer to the question of “How do I tell if this deal is fair”?


The short answer:  A deal is fair when the seller thinks that they left a few dollars on the table and when the buyer thinks that they paid just a few dollars too much.


The longer answer:  A deal is fair when it is simultaneously a stretch and a win for both parties.  Whether in mergers and acquisitions, licensing, joint ventures or other partnerships, both parties need to be incentivized and feel they are giving and receiving.  Then the deal is a fair one and a fair deal often makes for a good deal.  If the deal is lopsided, it either won’t get signed, will create some bad blood (which always comes back to bite you in the butt down the line) or will have one side not caring enough to do their part to make it work. 


If a deal seems to good to be true, it probably is and won’t be successful; it will fall apart somewhere.  Get to that place that is just past the point of perfection for both sides to give it the best chances of succeeding.

Tuesday, November 3rd, 2009

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