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Archive for June, 2010


Sweat Equity and Broke

June 30th, 2010 ::

Over the last 10 years as an entrepreneur I have taken many risks and some have panned out and well others…let’s just say that I should have looked before I leaped. Then again, that is one of the truest traits of an entrepreneur, taking risk and making something from nothing.

Recently, I was reading an article called “The Sweat Equity Myth” by George Cloutier, Founder of American Management Systems. In his article he talks about the concept of “sweat equity”:

“The idea that business owners shouldn’t pay themselves a salary while they’re building a business. I call it working for nothing and being a fool.”

I couldn’t agree more with him, because I have done it and it was one of the worst things I ever did. When I started my first business, things were great and we had tons of clients. Sure it was the dotcom boom but we thought it was a whole new world. So when the sky fell and the bubble burst, many clients went out of business so we had to tighten the belt. Instead of swallowing my pride and lay people off I sacrificed my own salary and cut it in half as a message of solidarity, or so I rationalized to myself.

He goes on to mention something that I should have noticed early on, but didn’t:

“The inability to pay yourself is symptomatic of a much deeper financial problem; it’s should serve as a red flag that your business is not working. Lack of sales or quality control, bloated overhead and other financial woes are the real reasons you’re not making a salary.”

When 9/11 happened the clients we did have froze their contracts and put any new business in pipeline on hold for six months or more. My business, like many others, had a “deer in the headlights” look and many collapsed quickly. We did have some cash reserves so we had to make a decision, go on and try our luck or shut almost everything down to fight another day. We chose the later but paying everyone’s severance left me with nothing and extra debt to boot.

Over time, I did recover from that but in another business made the same mistake thinking that it was noble of me to sacrifice my sweat for equity I already had in the first place. Bottom line: Pay yourself first.

I would like to expand on that by including George’s tip to avoid this easy entrepreneurial trap:

  • Always work to make a good salary. Then cover the expenses. Not the other way around.
  • Reward yourself (but within reason). Here’s a rough formula: Pay yourself 3 to 4 cents on each dollar of revenue for doing the job of CEO.
  • Imagine you weren’t in the picture. Ask yourself how much you’d pay a general manager to run your business if you had to go away. That’s the least you should be paying yourself.
  • Remember your priorities. Don’t lose sight of why you’re running a business in the first place–to improve your quality of life.
  • Spread pay cuts around. Take a 5 percent cut along with the rest of your staff, but don’t put a 30 percent pay cut on your own back.
  • Ask yourself this question: If your business doesn’t allow you to pay yourself a living wage, what are you doing wrong?
  • Remember: There are no rich martyrs.

So what will you decide when this moment occurs in your entrepreneurial journey?

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A Real Path to Profits, Passion and Purpose

June 29th, 2010 ::

Tony Hsieh, the CEO of Zappos, created a corporate culture a world away from most of the companies you could look at. But Zappos was not the first entrepreneurial effort Hsieh created, by a long shot. Instead, it was the result of an entrepreneurial career that he has chronicled in Delivering Happiness: A Path to Profits, Passion, and Purpose. There were some failures along the way — a worm farm when Hsieh was young resulted in not much more but a box of dirt — but in, whole, Hsieh seems to have figured out the mechanics of running a business early on.

Beyond the Mechanics

In Delivering Happiness, it’s not hard to see that Hsieh’s grasp of business made Zappos (and whatever may yet be in store for the young CEO) possible. Hsieh, along with co-founder Sanjay Madan, created LinkExchange and solid it to Microsoft for $265 million. Much of Hsieh’s portion of the proceeds of the LinkExchange wound up invested in Zappos: the book chronicles not only Hsieh’s personal history before Zappos but also shows how close Zappos came to not succeeding.

The company was founded in 1999 by Nick Swinmurn, who pitched Hsieh and the investment fund he had created with other members of LinkExchange’s team after the sale. But pretty soon, Hsieh was adding to that investment from his personal savings, selling off property to raise money for the company and generally throwing his own financial future behind the success of Zappos. He also joined the company as CEO, adding the benefit of his business savvy. It wasn’t until 2003 that the company was able to get outside funding. By the way, Zappos did $60 million in business that year. Suffice it to say that the company relied heavily on Hsieh’s involvement to reach that point.

Hsieh has applied lessons learned in the other businesses he’s founded and worked with at Zappos: the company’s culture is a priority, landing it time and again on lists of the best workplaces in America. In Delivering Happiness, Hsieh explores how he and his team developed that culture and how they continue to maintain it (even after selling Zappos to Amazon in a deal valued at about $1.2 billion).

A Worthwhile Read

While Delivering Happiness is a good read for any small business owner, it isn’t the typical business book you might expect. The feel of the book is ‘here, this is how we did it.’ There’s no guarantee that if you follow the same approaches Hsieh used that you’ll get the same results. But Hsieh is able to show what his employees’ responses were to specific changes made in Zappos’ approach, pulling in emails written at the time as well as including passages written by different members of the company.

All of this adds up to a book that gives a clear picture of why Hsieh has succeeded and plenty of ideas on how you can mimic that success. If nothing else, it will shift your view on what corporate culture has to mean.

Image — Delivering Happiness

Guys in Business: Transforming a Seasonal Business Into a Year-Round Business

June 28th, 2010 ::

When people find out my brother, Nikolas Pattantyus, is a massage therapist, they exclaim, “Wow, you’re so lucky!”  Yes, I tell them, I would be lucky if he lived nearby.  Nik owns and operates a massage therapy practice based in the beach resort of Avalon, NJ.  He also, as my mom and I like to say, lives the life.  Upon graduating from high school, he knew himself well enough to have the wisdom and audacity to skip college.  He traveled to surf and snowboard (he even lived in Samoa for 5 months), and he worked when he could, mostly during the summer at restaurants in Avalon and Stone Harbor, which share a barrier island. 

Nik lived a frugal, free-spirited life, but he also knew he needed to get serious and find a career.  Six years after kissing academia goodbye, Nik enrolled at the highly regarded Utah School of Massage Therapy in Salt Lake City.  He had found his calling, and he set up his business, 7 Mile Island Massage, in the summer of 2001. 

From the end of May through October, Nik works up to 10 hours a day.  Since most of his clients live 1 ½ to 2 hours away in and around Philadelphia, he has decided to cut back on the off-season travel, live in Philadelphia during the winter, and focus on growing his business into a year-round enterprise. Here’s how he’s doing just that.

Nikolas Pattantyus

Nikolas Pattantyus

Why did you decide to go into business for yourself?  How long have you been in business?

The decision was easy.  I like being independent and doing things on my own terms.  I started the business when I was still in massage school ten years ago.  When I began doing market research on the South Jersey shore (Avalon, NJ to be more exact), I found a niche in the market; there wasn’t a single massage therapy business in the county providing outcalls

Operating a seasonal business means intense work for a short period of time.  How do you balance the need to work a lot with not exhausting yourself?

I make a point of scheduling time for myself each week to stay in top physical condition.  I try to get to the gym at least 3 times a week, surf as often as possible, and get a massage every two weeks.  It’s a physically, emotionally, and mentally demanding job, so I need to take care of myself before I can take care of anyone else.

What have been the benefits and drawbacks of owning a seasonal business?

Having the time and flexibility to do what I want in the offseason is both a benefit and a drawback.  Another big drawback is finding skilled therapists to work with me.  Competent and knowledgeable therapists are difficult to find, especially those willing to do house calls at the beach for only a few months a year.

How have you transitioned to owning a business that operates year-round? 

Most of my clientele live in the Philadelphia metro area, so I have started sending text messages or calling my clients to let them know I’ll be working in their town or neighborhood that day. 

What outreach/advertising methods have you/do you use to grow your business?

The only paid advertising I do now is the Cape May County phone book.  Most of my business is repeat business, but I also generate business through word of mouth and my website, which is optimized for search engines.  I do some networking but I don’t have a Facebook page or use Twitter. 

Thinking back on the lean winters, would you have done anything differently?

Yeah, for sure.  I used to fill my head with different places I wanted to travel to during the winter; I had no intention of being in the Mid-Atlantic area at all.  My clients would always ask me if I was going to be around Philly during the offseason, and I would always say no.  I set myself back taking that approach but I’ve learned that by making myself available all year and staying in touch with my clients throughout the year has increased my summer business with my regulars.

What are your goals?  Where do you see your company headed? 

I plan on finding dependable, quality therapists I can employ during the summer and growing my offseason business to the point where I can keep them busy in the winters, either in Philly or at the Shore or both.

If you could give one piece of advice to a burgeoning entrepreneur/small business owner, what would it be? 

Explore as many different advertising mediums as possible and track them to see which works best.   Do what you can to get new clients without selling yourself short and do whatever it takes to accommodate existing clients because positive experiences will generate good word of mouth traffic.

How Are Dating and Interviewing the Same? Part 4

June 28th, 2010 ::

by Allison Kapner

How are dating and interviewing the same? Let’s examine Step 4: The First Impression.

Congratulations, you made it! You went through the awkward first contact, prepped as much as you possibly could and now it’s show time!

Of course, all that means is that you made it through the awkward initial set-up meeting and now it’s time for the awkward first greeting.

Photo courtesy istolethetv. Flickr Creative Commons.

The interview is easy, shake your interviewer’s hand and mimic their grip. Don’t go in too strong right away… even if you are Superman or Wonder Woman. If your interviewer’s handshake is dainty and delicate and you squeeze too strong, it will work against you. Instead, be firm, quick and confident as you let them lead the way. Two other pieces of advice: 1) As you are shaking hands, make eye contact and smile. 2) Make sure you let the interviewer lead the way to the office if you have to make your way somewhere else in the building, even if you’ve been to this office before.

How about dating? Do you hug, kiss on the cheek, kiss cheek to cheek, shake hands… What do you do? It really depends on your comfort level with the person before the date and how much you’ve spoken. I generally go for the quick cheek-to-cheek kiss or awkward but-trying-to-make-it-not-awkward-hug which turns into a side hug of some sort. Regardless, expect it to be awkward but muscle up a big smile and show enthusiasm. If you are the man, opening your date’s car door will most likely win you some brownie points, and girls, for those of you who are fans of The Bronx Tale, electronic locks make it difficult to pass “the test” so don’t feel pressured. But still pay attention to whether your date doesn’t have the automatic locks or doesn’t use them to unlock his door.

Remember, in both cases, you have only 10 seconds to make a first impression. Your nonverbal communication is imperative during this stage, so make sure you exude confidence and an upbeat spirit. (People like to surround themselves with positive people so this impression will get you off on the right foot.)

No pressure, right? If you fumble during the impression, don’t worry, it’s not the end of the world. Pick yourself up and go get ’em!

Allison Kapner headshotAllison Kapner is a Relationship Manager in Career Services at the Johns Hopkins University Carey Business School where she is responsible for building partnerships with employers to ultimately create job and internship opportunities for students and alumni. She also advises and coaches students on job search techniques and brings a unique corporate expertise to assist candidates, as her past experience was as an Executive Recruiter in financial services in New York City.

Avoiding Mistakes When You Are Ready to Sell Your Business

June 25th, 2010 ::

About two years ago I sold my business and learned more in that transaction than I ever did going to business school. Negotiation replaced John as my middle name and as I worked through the due diligence process I saw how important it became that the next 30 days would be the difference in many zeros on the end of the exit I might get.

So when I came across this article on “10 Mistakes to Avoid When Selling Your Business” and saw the following list:

  1. Insufficient Preparation
  2. Overconfidence
  3. Unwillingness to Leverage Professionals
  4. Taking a Hands-Off Approach
  5. Failure to Pre-Qualify Buyers
  6. Misrepresentation
  7. Pricing Problems
  8. Only Entertaining All-Cash Offers
  9. Breaching Confidentiality
  10. Failure to Address Transition Issues

Over the course of the sale of my business I probably made half of these mistakes. Mostly it was around not having everything together and then once I got a professional to help me I didn’t stay as engaged as I would have in the past. I don’t know if it was burn out or wanting to move on to the next thing. Maybe a little bit of both. The other thing I didn’t really do well was look at the transition. I tried to sell it, stay for a few months and move on. Ultimately, that choice left money on the table and the culture of the acquiring company made it hard to maximize the full value of the business once it was acquired.

I would add a #11 to the list – Find a good fit – If you are lucky enough to have multiple parties interested, you are trying to balance maximizing the valuation with finding the best place that the business will thrive. Because rarely you will have an all cash deal that you can walk away from the minute the ink is drying on the page. You will likely have to stay and meet certain numbers to get the money in the deal (called an earn out) and then walk. Culture was not mentioned in point #10 but if you are to find a home for your business, it needs to be a happy home.

I would take a read of the full article over at Entrepreneur.com and see if you might be at risk for committing any of these mistakes.

Avoiding Critical Business Mistakes That Lead to Failure

June 24th, 2010 ::

FAILURE is the word that every entrepreneur must face head on if they are to succeed. There are two sayings that always stick with me when I speak about failure to fellow entrepreneurs:

  1. If you haven’t failed at all, then you really aren’t trying hard enough
  2. Failure is part of the process, just learn from it and don’t do it again

Now there are two types of failure – small mistakes that you learn from, move on and don’t make anymore; and critical mistakes that can be catastrophic leading to going out of business.

Recently, I came across this great article on “Eight Mistakes that Devastate Business Owners” and it really resonated with me. In the article they list eight mistakes:

  1. Keep your retirement savings intact.
  2. Avoid the lure of sole proprietorship.
  3. Read the fine print.
  4. Get insured.
  5. Get an employment contract.
  6. Protect your innovations.
  7. Don’t promise what you can’t promise.
  8. Check the books.

I know this list might seem obvious but if you are new to starting a business, think about this list for a minute. When you are in the middle of something you forget about these things or think “it will never happen to me”. All I can say is that from this list, over the 10 years I have been in business I have had three things come to bite me in the butt and while they were recoverable, if they were any bigger it would have destroyed my business and in some cases left me personally bankrupt.

They are all equally important and you should read the full article to get some great examples of when people don’t do these things. I guarantee you will be bringing these issues up at your next partner/board meeting.

Join our Smallvolution Tweetchat on Thursday 6/24 at 1pm EST

June 23rd, 2010 ::

Things that you probably can’t say on your website, newsletter or press release can now be expressed on your blog to position you as a thought leader. If done right, blogging can help drive new customer acqusitions and positively impact your small business.

Take an hour from your hectic shedule and join Beth Schillaci, President and Founder of villageWorks Communications, an entrepreneur and Top-50 female blogger to learn “How to Blog Effectively to Market Your Small Business.”

This chat is in a tweet chat format and a tweetchat defined by Susan Gunelius as “a pre-arranged chat that happens on Twitter through the use of Twitter updates (called tweets) that include a predefined hashtag to link those tweets together in a virtual conversation. The term tweet chat is sometimes used to refer to conversations that happen on Twitter using hashtags that have not been pre-arranged as a formal chat session. The term can also be confused with the third-party Twitter application, TweetChat.com, which helps users separate tweets related to specific chats to make them easier to follow.”

Tweet Chat Details:

WHAT: Smallvolution Tweet Chat on “How to Blog Effectively?”

WHEN: Thursday, June 24th, 1-2:30PM (EST)

WHERE: http://tweetchat.com/room/smallvolution

HOW: Simply log-in to Twitter and follow the hashtag #smallvolution.

Join other entrepreneurs and members of the small business community on Facebook at www.facebook.com/networksolutions.

Can Your Business Benefit From an Incubator?

June 23rd, 2010 ::

Joining a business incubator has, in all honesty, never even crossed my mind.  Many young businesses rely on a hodgepodge of networking events, memberships in groups like Business Network International and chambers of commerce, and the advice and counseling of a business coach to facilitate growth.  The more I thought about it, the more I wondered how beneficial a business incubator could be.  More importantly, what have I missed out on?

To pique my curiosity, I looked up the incubator closest to me: INC.spire in Reston, VA, which is part of the Greater Reston Chamber of Commerce.   I already knew that business incubators basically serve as a convenient one-stop-shop for growing companies, though many have restrictions on company age, industry, location, financing in place, etc., including INC.spire.  

Let’s start with these interesting stats from the National Business Incubation Association (NBIA):

Number of business incubators in North America, 2006: 1,400.
Number of business incubators in North America, 1980: 12.
Companies still in business five years later: 87%.
Non-incubated companies/startups still in business five years later: 20%.

Based on those stats alone, I’d have to say, yes, your business could probably benefit from an incubator.  Aside from a high rate of success, incubators offer a comprehensive list of services, including a lot of advice from experts in various fields, to support a company’s growth and success.  INC.spire’s services include:

Mentors.  Each client is matched with a personal mentor selected from the incubator’s Advisory Council

Advice.  One-on-one legal, marketing, public relations, human resources, government contracting, and finance advice.

Networking.  Networking events with other incubator clients, incubator alums, Reston Chamber boards and members, and business leaders in Northern Virginia.

Public Relations.  INC.spire press releases about its clients, incubator client profiles in INC.spire and Chamber newsletters, and introductions to the local press.

Office space.  A fully furnished office with high-speed internet and access to the Chamber’s meeting rooms for a small monthly fee.

I don’t know about you, but I could definitely use mentoring and operational advice every once in a while.  No matter what industry you’re in, no matter how young or old your business is, having someone guide you, answer your questions, act as a sounding board, share best practices, and help you solve a particularly vexing problem is invaluable.  All that free publicity INC.spire offers is pretty awesome, too, though I’m sure not every incubator offers that service. If you’re interested, NBIA can help you find a business incubator near you. 

Have you used an incubator to jump-start your business?  I’d love to hear from you and perhaps profile you in an upcoming blog post.

Expand Your Company's Online Footprint with a .CO domain – Landrush is Open

June 22nd, 2010 ::

.CO Landrush is here — at an unbelievable price!

For only $270.00* you can be part of the .CO era! Now is the time to secure your .CO domain and start your new business or protect your existing brand.

It’s easy to get started, simply enter the .CO domain name you’d like to reserve in the search box below.

Please note, if multiple people submit requests for the same domain name, an auction will be held at the end of Landrush to ensure fair and equitable distribution of names.

The Key Benefits of .CO

  • .CO is a truly global, recognizable and credible domain
  • .CO gives businesses and brands the chance to create a worldwide footprint
  • .CO is relevant to individuals, businesses and organizations
  • .CO is meaningful, memorable and intuitive to use for people around the world
  • .CO appeals to today’s socially-networked individuals and entrepreneur

A Few Frequently Asked Questions Answered

What if multiple people or businesses want the same domain name?
Instead of deploying a traditional “first-come, first-served” distribution of domain names during the Sunrise and Landrush phases, a domain name auction system will be used to facilitate the fair and equitable distribution of names. The application fee is non-refundable.

Will I be charged an application fee?
Yes, for every domain submitted during the Landrush process will be charged a $9.99 non-refundable application fee.

Why should I register my .CO domain name during Landrush instead of pre-registering now for General Availability?
You will have a better chance of securing popular and common domain names during Landrush. Requests submitted during Landrush are given priority over pre-registration for General Availability which is why they are offered at a premium price. When you pre-register your domain you are putting your request at the top of the General Availability list. After July 20, all names will be first come, first served. To learn more about pre-registration click here

Adding Information Products to Your Ecommerce Line Up

June 22nd, 2010 ::

When we think about ecommerce, more often than not, we think about selling physical products — stuff that may be sold online, but has to be boxed up and shipped in the real world. But products that you have to handle offline aren’t the only options for ecommerce, especially if you already have an established presence online. Information products can be a good alternative.

The Benefits of Information Products in Ecommerce

The obvious benefit for dealing in information products online is that you eliminate the need to ship your products to your clients. They pay their money and can immediately download a copy of your product. There’s no inventory to manage — just a digital file that you make available through your ecommerce website.

But there are other benefits, as well. Information products can complement physical products, letting impatient buyers get a head-start on giving you money, even if they’re not prepared to wait for a shipment of a physical product. They can also help you become the expert in your niche, leading buyers to you even if all they need is answers to questions they have with a product they’ve already purchased.

Information products can cover a wide range of niches: an software seller could offer an online training course on using QuickBooks effectively, while a vacuum shop could offer an ebook on how to remove stubborn stains. The real question in creating an information product is if your customers have a need for specific types of information, to the point that they’ll pay money to have that need addressed quickly.

Start With What You’re Already Offering

Odds are good that you’ve already got some options for creating ebooks, audio courses and other information products. If you offer any kind of consulting or technical support for the products you sell, those areas could be ripe for creating some sort of training or resource. Similarly, if you’ve had to create a FAQ page or you routinely get the same questions over and over again, those questions may be expanded into an information product. More than a few companies have been able to take materials originally created for internal use (like a consultant’s guide to training new buyers) and, with a little adaptation, put it on the market.

If you’re already taking steps to market your business, you may not have to do much to separately promote any information products you decide to sell. That is, of course, provided that your information products are targeted towards the same audience that buys your physical products. If you decide to look for other markets — such as selling templates or internal tools you’ve created for running your business, your marketing efforts may have to grow to reach out to potential buyers who aren’t necessarily interested in the products you’re already selling online.

In general, focusing on what you’re already offering and augmenting it is the best way to move into creating and selling digital products. It’s not a perfect fit for every ecommerce website, but you may be surprised how easy it is to add information products to your line up.

Image by Flickr user Edans