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You’re the Boss Blog: An Entrepreneur Retreats Into a Swedish Forest

June 19, 2013 by Leave a Comment

Thomas Backlund: Courtesy of Thomas Backlund Thomas Backlund: “I needed to cut costs.”

Dashboard

A weekly roundup of small-business developments.

Thomas Backlund, 33, is a programmer from Stockholm who is trying to start a business, Blockie.io. As mentioned in this week’s Dashboard roundup of small-business news, Mr. Backlund has quit his job and left his apartment and moved to a Swedish forest in order to save expenses while creating his new venture. We contacted Mr. Backlund by e-mail for a conversation that has been edited and condensed.

What’s your start-up about?

Blockie.io consists of me as the coder and my friend as the designer. We are trying to bring software development to the masses by building a service that would take the coding part out of the equation and make logic the only necessary component for building a technical back-end, which would save a lot of time and headaches.

Why the woods?

I needed to cut costs because I wanted to totally focus on one thing in my life, Blockie.io, and I’ve longed to get out in nature for some time now. I started on May 9.

Have you had wilderness experience before?

Some, not much. The first time was two years ago when I tagged along two friends to the Swedish mountains. Since then, I started to get out on my own, sleeping out in the forest sometimes and then going to the office in the morning.

How do you get online?

I can access the Internet from my phone. It works pretty good most of the time.

You must encounter problems that are unique to being in the woods.

Small problems are big problems. If my phone breaks it takes a whole day to get to town and back. I’ve got sick two times so far — that is not fun at all. And sometimes it’s a hassle finding good places to stay since you do not want to waste time moving too often. But then again I can spontaneously throw off my clothes and take a swim anywhere it looks nice!

What about speaking to others: potential partners, investors, customers?

I do most everything through e-mail. But I do not hesitate to book a meeting in the city (Stockholm). I have no strict policy of not ever leaving the forest.

How are you paying your bills?

I have some reserves of my own still, and if it runs out, I may pick up some small consulting gigs. I pay them all electronically. I get some help for the small amount of paperwork for the business.

Do you feel isolated?

I do not meet my friends very often now, but this experience still makes us closer I think. I get many responses from the Listserve I subscribe to and also from many others who have seen me on Hacker News, Mashable and other places. Many people reach out to me just to say they really support me in this. Some have questions about how to do the forest thing. Some want to help develop Blockie.io, and some just want Blockie.io right away.

Many start-up owners prefer to be around people so they can share ideas — like an incubator.

I think such a place would be great for me when Blockie.io is ready for testing because then I could get people to test it, and I would get instantaneous feedback. But for now I think the isolation is good because in this phase there are things that have to be solved in my mind and then just hammered into the computer. I think that when your head is full and your ears are hurting, then it’s time to be alone to let your mind summarize all the information to something useful. The next phase may be different.

How long do you expect this to last?

There is a physical limit. First the sun will get too weak to charge my batteries, although I could work around by sleeping in hostels every third day and recharging everything there. The next limit is the cold. I cannot sit and code when it’s too cold. So when winter comes, I must think of something else.

What did you have for dinner last night?

I had grilled elk beef with grilled halloumi cheese, chili béarnaise and a grilled onion. My cousin came to visit and brought some goodies with him. Otherwise it’s a lot of beans, eggs, red peppers, carrots and hummus.

Gene Marks owns the Marks Group, a Bala Cynwyd, Pa., consulting firm that helps clients with customer relationship management. You can follow him on Twitter.

Article source: http://boss.blogs.nytimes.com/2013/06/19/an-entrepreneur-retreats-into-a-swedish-forest/?partner=rss&emc=rss

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You’re the Boss Blog: Is $75 Million in Venture Capital an Advantage?

June 19, 2013 by Leave a Comment
Today’s Question

What small-business owners think.

Steve Blank: Eric Millette Steve Blank: “The question is, ‘Better positioned for what?’”

Steve Blank retired from serial entrepreneurship after working with eight start-ups, including E.piphany, a software company that he helped found and sold in 2005 for $329 million. Today he’s an associate professor in management science and engineering at Stanford University and co-author of “The Startup Owner’s Manual.” Mr. Blank is credited with helping to create the lean start-up movement, which holds that start-ups can be successful without large amounts of cash. As we considered the example posed in our just-published article contrasting the financing experiences of two data companies that went after roughly the same market at roughly the same time, GoodData (venture-backed) and RJMetrics (mostly self-financed), we asked Mr. Blank for his views on an age-old question.

The following conversation has been edited and condensed.

What are the advantages of bootstrapping?

You own more of your company. The most expensive investment you’re going to take is your initial investment, when your valuation is the lowest.

It can’t hurt to have money to invest in the business, can it?

Taking a lot of money before you’ve figured out a repeatable business model actually is one of the greatest causes of start-up failure. I’ve never seen a start-up that’s raised $1 million that doesn’t spend $1,000,001. The more money you raise, the more burn rate you layer in. And if you haven’t figured out how to generate revenues by the time the money runs out, all the salaries and building rent will come due, and you’re going to be out of business very quickly.

Venture capitalists say you need to do a land grab or you will leave opportunity behind.

The land grab, what was called the first-mover advantage in the last bubble, well, we ran that $1 trillion experiment in the last bubble, and it’s about 99 percent scientifically proven that that’s wrong. There’s actually a first-mover disadvantage. The pioneers have arrows in their back. There’s actually a second-mover advantage.

It has to be an advantage sometimes, no?

There are small corner cases where, if the market is only six customers, maybe the first-mover advantage is true. In almost every other case, like consumer Web or mobile Internet, I don’t think so. People say, what about Amazon? They weren’t the first mover. What about Microsoft? They certainly weren’t the first mover. Apple? Not the first mover. These are all second followers.

If V.C.’s were useless, wouldn’t they have gone extinct years ago?

The advantages of venture capital money are pretty clear. It turns out that during his lifetime, a venture capitalist will see thousands of start-ups and get involved in hundreds and sit on maybe 50 boards. They’d have to be deaf, dumb and blind not to have some modicum of pattern-recognition skills far and above what you as an entrepreneur sitting in your first start-up are ever going to have. They’ve seen this movie a million times.

And they’re putting down real money, so they want their entrepreneurs to succeed.

Your interest and your V.C.’s interest in liquidity may not be the same. Those who take big V.C. money have signed up for, “We’re going to be a home run or we’re going home.” That’s the interest of the V.C.’s. They have a portfolio of 10 or 15 investments, and they’re going to swing for the fences on all of them. That’s their business strategy. But you might not have realized what you signed up for. Because if someone had sat you down and said, “Would you be happy if it got sold for $25 million?” you would say, “Yeah, I get to take home $5 million, that’s more than I’ve ever seen.” But that’s not your V.C.’s strategy.

How much do V.C.-funded entrepreneurs need to grow to make money?

They need the company to be some large multiple of the investment they got. There is typically something called a liquidation preference in any investment document with a venture capitalist. That means the V.C. gets 3X or 5X or something like that. It’s never obvious to a first-time entrepreneur. The allure is the big amount of cash and the huge valuation. It turns out that the huge valuation is detrimental to a founder making money.

Which of the two companies mentioned in the article — RJMetrics and GoodData — is better positioned?

The question is, “Better positioned for what?” GoodData is better positioned to get big or go home. The good news is, with $75 million in the bank, you can make a lot of mistakes and still be in business. The bad news is that raising all that money makes you act like all you have to do is execute and everything works. The reality is that no business plan survives first contact with customers. After raising $75 million, GoodData needs to sell (or take public) the company at several times that number for the investors/founders to make money. To grow that large they’re going to be selling software to companies that can pay $100,000 and above. RJMetrics, either by default or design, has minimized the amount of capital they raised. From an outsider’s perspective, it looks like they spent their time finding a repeatable and scalable business model before they gave away equity to a V.C. Now it appears they’ve found a business that works, and they’re using their investors’ dollars to go for scale.

What do you think?

Article source: http://boss.blogs.nytimes.com/2013/06/19/is-50-million-in-venture-capital-an-advantage/?partner=rss&emc=rss

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Self-Finance or Raise Money? A Quandary for Start-Ups

June 19, 2013 by Leave a Comment

But while Mr. Stanek and Mr. Moore went after roughly the same market at roughly the same time, they differed in one critical aspect: how they financed their dreams. One quickly raised more than $50 million, while the other mostly self-financed, thus creating a rare opportunity to assess the difference venture capital can make and bring new perspective to an age-old debate.

When Mr. Stanek, a Czech entrepreneur, founded GoodData in San Francisco in 2007, he already had plenty of experience with venture capital. He had sold a venture-backed software development tools company, NetBeans, to Sun Microsystems in 1999 for a little more than $10 million. And in 2006, he sold Systinet, a Web-service company, to Mercury Interactive for $105 million.

After financing the first year of GoodData’s software development with several hundred thousand dollars from his Systinet sale, Mr. Stanek began to seek investors. Eventually, he brought in $53.5 million from the likes of O’Reilly AlphaTech Ventures and Andreessen Horowitz. “We spent three years building a product and we are still building big pieces. That was funded by the V.C.’s and myself,” said Mr. Stanek, 47. “It’s like the printing business. I have to spend money on my printing machine. There’s an initial large investment, and then once you have the printing press running, it’s very predictable. So if we wanted to create a dominant large company, we didn’t have a choice.”

By contrast, before starting RJMetrics, the co-founders, Robert Moore and Jake Stein, worked as junior analysts at a New York venture capital firm, Insight Venture Partners, where they came across entrepreneurs who had built profitable businesses without a lot of capital and put off fund-raising as long as possible. “What happens in those situations is those entrepreneurs do extremely well personally,” said Mr. Moore, 29.

When they started RJMetrics in late 2008, Mr. Moore and Mr. Stein invested $10,000 of their own money. Mr. Moore wrote the first version of the company’s software in his attic in Collingswood, N.J. They did not hire their first employee until 2010, and they moved to an office in Philadelphia, where costs are far less than in New York or San Francisco.

By the time they did raise some money, in early 2012, they had 100 customers and annual revenue of about $1 million. “That put us in excellent negotiating position, because we had a proof point that other companies at our stage didn’t have,” Mr. Moore said. The owners raised $1.2 million, almost all from RJMetrics customers.

The two approaches have created very different companies. RJMetrics signed its first paying customer to a rudimentary prototype just three months after it started. To build revenue, it had to hope for good word of mouth (which it got) because it did not have a sales staff. But bootstrapping, or self-financing, did allow the founders to keep a large percentage of the company’s equity and to avoid the distortion that can come from having money and the demanding investors who supply it.

The venture capital industry views bootstrapping in the face of a big market opportunity as false economy. John O’Farrell, a partner at Andreessen Horowitz, said that it generally took an investment of $75 million to take a software company from start-up to initial public offering. “If you want to capture a big open market, you want to bring in money to grab land,” he said. “If you bootstrap, the tendency is to try to get profitable early so you don’t need to put in more money, but you end up missing a big opportunity.”

GoodData’s war chest allowed Mr. Stanek to staff up for the land grab. The company now has about 250 employees, half dedicated to the product and half charged with sales and marketing. RJMetrics, on the other hand, has 26 employees, more than half of them working in product development and only four on sales and marketing. The company’s first director of marketing started in February.

Inevitably, the companies have gravitated toward different markets. While RJMetrics has gone after small and midsize companies, GoodData has pursued Fortune 2000 clients that demand robust products and have the money to pay for them. RJMetrics had about $1 million in revenue in 2011 and about $2 million in 2012, according to Mr. Moore. Mr. Stanek declined to specify his company’s revenue, but he noted that last year GoodData signed 42 contracts that were each worth more than $100,000 a year, which would suggest an annual run rate of at least $4 million.

Article source: http://www.nytimes.com/2013/06/20/business/smallbusiness/self-finance-or-raise-money-a-quandary-for-start-ups.html?partner=rss&emc=rss

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Staying Alive: How Our Sales Process Broke Down

June 19, 2013 by Leave a Comment
Staying Alive

The struggles of a business trying to survive.

Editor’s note: Paul Downs is writing this week about his decision to hire a sales consultant. The series started with this post.

At the beginning of 2012, I had set a sales target of $200,000 a month, and in the first two months of the year, we hit that number. But March came in weak: we sold only $135,732. April was almost as bad, with just $146,677 in new orders. And May was even worse: $114,042. By the end of May we were $200,000 behind our target, and I was worrying about running out of work.

We can generally handle a down month now and then without difficulty, as these are often followed by months in which we far exceed the quota. But three weak months in a row means a serious mismatch between our production capacity and the amount of work we actually have on hand. That’s bad in two ways: first, the missing sales mean less cash coming in from deposit payments, and second, we will eventually have no work to do. I had hired five people in 2011 to ensure that I could get $200,000 worth of work out the door each month. That was now looking like a big mistake. Would I have to lay off all of those people?

Naturally, I spent a lot of time thinking about what was happening, and eventually I decided that my problem was the economy. In the spring of 2012, there was quite a lot of chatter in the media about poor job growth and the possibility of a double-dip recession. I latched on to that story and convinced myself that the problem was out of my hands. I was ignoring the possibility that we simply weren’t doing a good job with sales, mostly because my method had worked well in the past. I hadn’t changed anything about how we made sales, and it just seemed as though that couldn’t be the problem.

But now, when I look back at what was happening, it’s clear to me that there were danger signs I ignored. In particular, I downplayed a couple of big jobs that slipped through our fingers. One, for a large company in California, had seemed to be a lock. Our contact at that company had even told us that we had the job and promised a deposit the following week. But it never came. Instead, I got a call from an office furniture dealer who was providing furniture for the rest of the project, a major office expansion.

He had seen our proposal and said he was very impressed. He called to see if there was some way we might work together on future projects. Or so he said. I spoke to him about how we might collaborate and left with the impression that we would work together soon. But I never heard back from him, and the job we had been counting on didn’t come through either. Eventually, we heard from the client that it “had decided to go in another direction.” The dealer had simply bought the job out from under us. Having seen our product and our pricing, he had come up with a competing offer and price that the client accepted.

In another instance, we put a great deal of time into working with a military client, doing extensive design work, revision after revision, that the client took and used as the basis for its bid package. It went on to award the job to another company, one it had worked with previously. Both of those jobs were large enough that, had we received either of them, we would have exceeded our targets for April and May. And in that case, I might not even have noticed we had a problem. But we are vulnerable when we lose the big ones, because a bunch of smaller orders may not take us to our target. And in this case being played for chumps made a real difference.

As I wrote in my posts last fall about my AdWords debacle, I took my sales problem to my Vistage group in May 2012 and got some good advice — namely, that the problem was not the economy and that I needed to look within my own organization. At this point in my AdWords posts, I spoke about what I did with my campaign to restore a particular type of incoming call.

But I left out the other big change I made in response to a recommendation from one of the members of my Vistage group, Sam Saxton. Mr. Saxton owns a custom stair-making company, Salter Spiral Stair, that is in many ways similar to mine. It manufactures custom items and sells them over the Internet. He told me that he had hired a sales consultant who had helped him double his sales volume in the previous two years, and he suggested that I follow his path.

Wednesday: Meet the Sales Consultant.

Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside Philadelphia.

Article source: http://boss.blogs.nytimes.com/2013/06/18/how-our-sales-process-broke-down/?partner=rss&emc=rss

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Staying Alive: Meet the Sales Consultant

June 19, 2013 by Leave a Comment
Staying Alive

The struggles of a business trying to survive.

Editor’s note: Paul Downs is writing this week about his decision to hire a sales consultant. The series started with this post.

Sam Saxton had hired a consultant to help him revamp his sales operation shortly after acquiring his company. Unlike me, Mr. Saxton had not spent years selling a product that he had designed himself. He did no sales at all, and he had never been directly involved with selling. And the sales staff that he inherited when he bought his company was not performing well. So he brought in a consultant, Bob Waks, to give them a tune-up.

Mr. Saxton is a courageous guy. When he needed sales help, he just searched online for  “sales consultant” and called a couple of the companies that came up in the results. After interviewing a number of candidates, he chose Mr. Waks. By the time my problem came around, Mr. Saxton had been working with Mr. Waks for more than a year and had experienced a striking increase in sales volume. He told me that I should get some help with selling and that Mr. Waks was the guy to call.

Being told that my selling methods needed improvement was a blow to my pride. I had been closing deals for 24 years, and I thought I had a pretty good handle on how it should be done. I also thought I had the right attitude about my sales efforts: passion for my people and our work and pride in our beautiful proposals. Asking for outside help was an admission that maybe I wasn’t as good a salesman as I had thought and that maybe our process wasn’t so great either. But by the end of May 2012, with our sales lagging far behind target and our backlog disappearing, I called Mr. Waks.

Our first meeting was a little disconcerting. Mr. Waks came over to my shop and, like all visitors, he was given the tour: busy workshop, cool machines, highest quality woodwork being produced. My usual guest is a potential buyer, and a little walkabout puts them in the mood to place an order. But Mr. Waks was giving out a different vibe.

He wasn’t blown away by what he had seen, because that wasn’t what he had come to see. He was intent on signing me up. We ended up chatting in my office, and, to be frank, he came on a little strong. There was just the slightest whiff of snake oil in the room. I wasn’t prepared for a sales professional unleashing his whole skill set on me. Through all of the years I had been selling, my main method had been to let my product speak for itself. My approach was to tell the story of how we designed and built work. A certain type of buyer wants what we make, and that’s whom we try to sell to.

Mr. Waks had a different approach. He had a strong idea of what was common to every sale, in every business: the relationship between buyer and seller. He had a very distinct point of view as to what happens between the two. His pitch was that we needed to understand selling, pure selling, first. When we had received that training, then we could adapt those ideas to our particular product and sales methods.

I had never thought about selling that way. Frankly, I had never felt that I needed to think about the pure art of selling, separate from our product. The method I had developed, using our design and engineering skills to make a beautiful proposal, was a direct extension of the way we make furniture. The proposals were a little bit of craftsmanship that we gave away for free. Usually it worked, but my recent failures were fresh in my mind. In those cases something more had been required. Mr. Waks was promising to teach us a strategy that would help us understand what we needed to do beyond just writing good proposals.

His pitch was convincing, and his ideas made a lot of sense. But there is always something a little suspect about a pure sales animal. I wanted to believe in what I had heard, but on the other hand I was aware that I was getting the full treatment from an ice-to-eskimos kind of guy. And his services weren’t going to be cheap. He recommended a three-part contract: first, evaluation of myself and my sales staff and our methods. Then a 10-week training course in the Sandler Method of selling for myself and my staff. And throughout that, and continuing for a year, monthly consults. One meeting would be one-one-one with me, and the other with me and my three salespeople. All of that would cost me $37,000. It would be $8,000 to start, the rest spread out in 12 payments.

Mr. Saxton’s experience with Mr. Waks had been positive, so I pulled the trigger. I wanted some outside help. I have benefited greatly from getting some coaching on being a leader, courtesy of my Vistage group, and I also felt that I had little to lose. Our sales volume was dropping fast. I needed a fresh approach.

Thursday: The Brutal Truth: How I Scored as a Sales Manager.

Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside Philadelphia.

Article source: http://boss.blogs.nytimes.com/2013/06/19/meet-the-sales-consultant/?partner=rss&emc=rss

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You’re the Boss Blog: Nine Lessons We Learned From Andy Taylor

June 18, 2013 by Leave a Comment
Building the Team

Hiring, firing, and training in a new era.

Last week, I wrote about why we set out to visit with Andrew C. Taylor, chairman and chief executive of Enterprise Holdings (“Maybe Someone Else Has Already Figured This Out“). In this post, I want to highlight what we learned during that half-day session in St. Louis in 2011.

Take time to teach

The time that Mr. Taylor, who is now executive chairman of Enterprise, spent with the H.Bloom team was not anomalous. The day before we were there, he had met with senior executives from one of the world’s largest banks. Every day, the team at Enterprise takes the time to teach new employees at Enterprise. Because their leaders do this at a world-class level, business people at other organizations want to learn from them as well. When people in an organization see the organization’s leaders taking the time to teach, they understand that it is important and they learn to do it themselves. This culture of teaching starts at the top.

Develop senior leadership that’s passionate

The senior executives that we met along with Mr. Taylor – Dave Deibert, Aaron Toombs, Tina Diehl, Steven McCarty and Pam Webster – were all passionate about Enterprise as a company. Each one had been with Enterprise for many years, some for decades, and they had moved from place to place as they climbed the ranks. Mr. Taylor talked about the importance of this dynamic: “Develop a small group of senior leaders who are in love with the business and are thinking about it all of the time.” It was clear that this group loved Enterprise, were proud of the talent development programs they had developed and were eager to share what they had learned with us. This type of enthusiasm is nothing but contagious. If you can get your senior leaders excited, they will ignite the passions of their direct reports, and so on.

You can be a nice person and tough

In the three hours that we spent with Mr. Taylor, he came across as a genuinely nice person. But, it was clear that he was no-nonsense about his business. “Do not compromise on talent,” he said. “Provide great training and extraordinary opportunity. But be honest about the hard work. The Management Training Program at Enterprise isn’t for everyone. Even if folks don’t make it to the end, they will have learned a lot that they can take with them to another company.”

You want only to promote the best

At Enterprise, management trainees are in the program for six to 12 months. Then, they have a written skills-evaluation test. After that, they participate in something called “The Grill,” which is an oral test conducted by an area or district manager. If a trainee passes this test, she is ready to interview for a management position when the next one becomes available. This is the first position that is eligible to receive incentive compensation from branch profits.

It’s not about the Ping Pong

There is always a lot of talk about company culture. Often, the talk is focused on the perks a company might offer: onsite dry cleaning, unlimited soda and snacks, a table tennis table. At Enterprise, it is clear that the company’s culture is built on the people. “We promote from within,” Mr. Taylor said. “We provide a career path. People move around to move up; we average 8,700 internal transfers per year. And we celebrate success.” This is sustainable culture. The reason the executives I listed above have been at Enterprise for so long is because they love the company and believe in its mission; it’s not because of a superficial perk.

Building the team is building the business

“Take care of your employees and customers first,” Mr. Taylor said. “Growth and profits will follow.” He knew that as Enterprise grew, he couldn’t be everywhere all of the time. The key to growth would be to train and then empower his employees. Moreover, if he could provide them with a well-defined career path, they would have the incentive to perform in their current roles and the chance to be promoted into a position of greater responsibility and compensation. At Enterprise, the career path looks like this (though at the branch manager level, many additional opportunities open up within the company as well):

  1. Management trainee
  2. Management assistant
  3. Assistant manager
  4. Branch manager
  5. Area manager
  6. Group rental manager
  7. Regional vice president
  8. General manager

Keep base salaries low but pay for performance

At Enterprise, income is tied to profit performance. Employees know base salaries remain low, but they have the ability to earn more and more money as they move up in the organization. As an example, while general managers may have the same base salary as management trainees, their overall compensation is far greater, which provides the incentive to work hard and rise through the ranks.

Leaders and managers are different

Mr. Taylor talked about how his company worked hard to separate leaders from managers. “Anybody can count the money,” he said. “We need true leaders to run our markets.”

Measure everything and share the results

Enterprise has dashboards to measure performance. Each market has a scorecard that evaluates performance in four areas: growth, profits, customer service and employee development and retention. Each market is then ranked on its overall performance, and everyone sees the results.

Bryan Burkhart is a founder of H.Bloom. You can follow him on Twitter.

Article source: http://boss.blogs.nytimes.com/2013/06/18/nine-lessons-we-learned-from-andy-taylor/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

Building the Team: Nine Lessons We Learned From Andy Taylor

June 18, 2013 by Leave a Comment
Building the Team

Hiring, firing, and training in a new era.

Last week, I wrote about why we set out to visit with Andrew C. Taylor, chairman and chief executive of Enterprise Holdings (“Maybe Someone Else Has Already Figured This Out“). In this post, I want to highlight what we learned during that half-day session in St. Louis in 2011.

Take time to teach

The time that Mr. Taylor, who is now executive chairman of Enterprise, spent with the H.Bloom team was not anomalous. The day before we were there, he had met with senior executives from one of the world’s largest banks. Every day, the team at Enterprise takes the time to teach new employees at Enterprise. Because their leaders do this at a world-class level, business people at other organizations want to learn from them as well. When people in an organization see the organization’s leaders taking the time to teach, they understand that it is important and they learn to do it themselves. This culture of teaching starts at the top.

Develop senior leadership that’s passionate

The senior executives that we met along with Mr. Taylor – Dave Deibert, Aaron Toombs, Tina Diehl, Steven McCarty and Pam Webster – were all passionate about Enterprise as a company. Each one had been with Enterprise for many years, some for decades, and they had moved from place to place as they climbed the ranks. Mr. Taylor talked about the importance of this dynamic: “Develop a small group of senior leaders who are in love with the business and are thinking about it all of the time.” It was clear that this group loved Enterprise, were proud of the talent development programs they had developed and were eager to share what they had learned with us. This type of enthusiasm is nothing but contagious. If you can get your senior leaders excited, they will ignite the passions of their direct reports, and so on.

You can be a nice person and tough

In the three hours that we spent with Mr. Taylor, he came across as a genuinely nice person. But, it was clear that he was no-nonsense about his business. “Do not compromise on talent,” he said. “Provide great training and extraordinary opportunity. But be honest about the hard work. The Management Training Program at Enterprise isn’t for everyone. Even if folks don’t make it to the end, they will have learned a lot that they can take with them to another company.”

You want only to promote the best

At Enterprise, management trainees are in the program for six to 12 months. Then, they have a written skills-evaluation test. After that, they participate in something called “The Grill,” which is an oral test conducted by an area or district manager. If a trainee passes this test, she is ready to interview for a management position when the next one becomes available. This is the first position that is eligible to receive incentive compensation from branch profits.

It’s not about the Ping Pong

There is always a lot of talk about company culture. Often, the talk is focused on the perks a company might offer: onsite dry cleaning, unlimited soda and snacks, a table tennis table. At Enterprise, it is clear that the company’s culture is built on the people. “We promote from within,” Mr. Taylor said. “We provide a career path. People move around to move up; we average 8,700 internal transfers per year. And we celebrate success.” This is sustainable culture. The reason the executives I listed above have been at Enterprise for so long is because they love the company and believe in its mission; it’s not because of a superficial perk.

Building the team is building the business

“Take care of your employees and customers first,” Mr. Taylor said. “Growth and profits will follow.” He knew that as Enterprise grew, he couldn’t be everywhere all of the time. The key to growth would be to train and then empower his employees. Moreover, if he could provide them with a well-defined career path, they would have the incentive to perform in their current roles and the chance to be promoted into a position of greater responsibility and compensation. At Enterprise, the career path looks like this (though at the branch manager level, many additional opportunities open up within the company as well):

  1. Management trainee
  2. Management assistant
  3. Assistant manager
  4. Branch manager
  5. Area manager
  6. Group rental manager
  7. Regional vice president
  8. General manager

Keep base salaries low but pay for performance

At Enterprise, income is tied to profit performance. Employees know base salaries remain low, but they have the ability to earn more and more money as they move up in the organization. As an example, while general managers may have the same base salary as management trainees, their overall compensation is far greater, which provides the incentive to work hard and rise through the ranks.

Leaders and managers are different

Mr. Taylor talked about how his company worked hard to separate leaders from managers. “Anybody can count the money,” he said. “We need true leaders to run our markets.”

Measure everything and share the results

Enterprise has dashboards to measure performance. Each market has a scorecard that evaluates performance in four areas: growth, profits, customer service and employee development and retention. Each market is then ranked on its overall performance, and everyone sees the results.

Bryan Burkhart is a founder of H.Bloom. You can follow him on Twitter.

Article source: http://boss.blogs.nytimes.com/2013/06/18/nine-lessons-we-learned-from-andy-taylor/?partner=rss&emc=rss

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You’re the Boss Blog: How Our Sales Process Broke Down

June 18, 2013 by Leave a Comment
Staying Alive

The struggles of a business trying to survive.

Editor’s note: Paul Downs is writing this week about his decision to hire a sales consultant. The series started with this post.

At the beginning of 2012, I had set a sales target of $200,000 a month, and in the first two months of the year, we hit that number. But March came in weak: we sold only $135,732. April was almost as bad, with just $146,677 in new orders. And May was even worse: $114,042. By the end of May we were $200,000 behind our target, and I was worrying about running out of work.

We can generally handle a down month now and then without difficulty, as these are often followed by months in which we far exceed the quota. But three weak months in a row means a serious mismatch between our production capacity and the amount of work we actually have on hand. That’s bad in two ways: first, the missing sales mean less cash coming in from deposit payments, and second, we will eventually have no work to do. I had hired five people in 2011 to ensure that I could get $200,000 worth of work out the door each month. That was now looking like a big mistake. Would I have to lay off all of those people?

Naturally, I spent a lot of time thinking about what was happening, and eventually I decided that my problem was the economy. In the spring of 2012, there was quite a lot of chatter in the media about poor job growth and the possibility of a double-dip recession. I latched on to that story and convinced myself that the problem was out of my hands. I was ignoring the possibility that we simply weren’t doing a good job with sales, mostly because my method had worked well in the past. I hadn’t changed anything about how we made sales, and it just seemed as though that couldn’t be the problem.

But now, when I look back at what was happening, it’s clear to me that there were danger signs I ignored. In particular, I downplayed a couple of big jobs that slipped through our fingers. One, for a large company in California, had seemed to be a lock. Our contact at that company had even told us that we had the job and promised a deposit the following week. But it never came. Instead, I got a call from an office furniture dealer who was providing furniture for the rest of the project, a major office expansion.

He had seen our proposal and said he was very impressed. He called to see if there was some way we might work together on future projects. Or so he said. I spoke to him about how we might collaborate and left with the impression that we would work together soon. But I never heard back from him, and the job we had been counting on didn’t come through either. Eventually, we heard from the client that it “had decided to go in another direction.” The dealer had simply bought the job out from under us. Having seen our product and our pricing, he had come up with a competing offer and price that the client accepted.

In another instance, we put a great deal of time into working with a military client, doing extensive design work, revision after revision, that the client took and used as the basis for its bid package. It went on to award the job to another company, one it had worked with previously. Both of those jobs were large enough that, had we received either of them, we would have exceeded our targets for April and May. And in that case, I might not even have noticed we had a problem. But we are vulnerable when we lose the big ones, because a bunch of smaller orders may not take us to our target. And in this case being played for chumps made a real difference.

As I wrote in my posts last fall about my AdWords debacle, I took my sales problem to my Vistage group in May 2012 and got some good advice — namely, that the problem was not the economy and that I needed to look within my own organization. At this point in my AdWords posts, I spoke about what I did with my campaign to restore a particular type of incoming call.

But I left out the other big change I made in response to a recommendation from one of the members of my Vistage group, Sam Saxton. Mr. Saxton owns a custom stair-making company, Salter Spiral Stair, that is in many ways similar to mine. It manufactures custom items and sells them over the Internet. He told me that he had hired a sales consultant who had helped him double his sales volume in the previous two years, and he suggested that I follow his path.

Wednesday: Meet the Sales Consultant.

Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside Philadelphia.

Article source: http://boss.blogs.nytimes.com/2013/06/18/how-our-sales-process-broke-down/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

You’re the Boss Blog: Why We Hired a Sales Consultant

June 17, 2013 by Leave a Comment
Staying Alive

The struggles of a business trying to survive.

Editor’s note: This week, Paul Downs is writing a series of posts about his decision to hire a sales consultant.

A year ago I was in the middle of a collapse in sales, which caused me a great deal of anguish and led me to try a number of solutions. In the fall, I wrote about puzzling through the reasons for the slump and my putting a solution in place. At the time, I believed the problem resulted from a change I had made in my Google AdWords marketing and that the solution was to restructure my campaigns.

I still think that AdWords was an important contributor to the problem, but I am now convinced that the real solution came from another change I made, one I gave short shrift in my first look at the situation. In June of last year, I hired a sales consultant to provide a critical evaluation of our selling methods, to suggest changes and to work with us to carry out those recommendations. The contract for that work has just expired, and I’d like to share my thoughts on why we hired a consultant, what we learned about selling and whether I should renew the consultant’s contract.

I should start by pointing out the obvious: the solution to a shortfall in sales is — wait for it — more sales. And for me, it was not just about returning to the right number and type of inquiries but actually closing deals at an acceptable rate. Fixing my AdWords campaign did restore the number and type of customer calls we got. But to declare that that was the whole solution to our problem is to ignore what happens after an inquiry is received.

In our case, closing a deal involves a lot more than picking up the phone. We make an expensive custom product, conference tables. We need to inspire enough confidence in our customers that they will send us large amounts of money for a product before it even exists. And so we have a complex process that we use to convert a curious caller into a committed buyer. I ignored all of that when I wrote about AdWords — in part because I was still figuring out what we were doing wrong and how we could do it better.

Here’s a quick recap of our sales process at the time the trouble started. Inquiries were coming to us in two forms: as an e-mail or a phone call. In either case our response was the same. We would ask a series of technical questions meant to reveal the functional aspects of the potential client’s table needs. We wanted to learn the desired size, the anticipated number of users, the size of the room, the wiring requirements and whether we were matching any existing furniture. We would also ask about the budget.

If we received answers, we prepared a proposal. This was a pdf document that contained images of the options we recommended and information on wood choices, power/data options and pricing. These proposals were impressive. We saw them as a good way to demonstrate our engineering skills and craftsmanship, and they took advantage of all of the advances in software and communications that had become available to us. I had developed the format myself, and we had used it to good effect, with more than $16 million in sales since 2003.

I had also developed a game plan for the proposal that, in retrospect, was more a reflection of my own inclinations than a rationally thought out method. Keep in mind that I had started out at the bench, making furniture, and that making things is in my blood. I learned to sell only because it was a way to keep working. But I soon found that I had some talent for it — I’m a smooth talker, when I need to be. By 1992, I had stopped working at the bench and for the next 20 years I spent most of my time selling. I found that I enjoyed meeting new people, showing them what we could do for them and closing deals.

For many years the volume of incoming business was manageable, but in the period that has followed 2010, as we recovered from the recession, increasing call volume strained my capacity to keep up. So I developed an assembly-line method of writing proposals: ask questions, design like crazy and send them off. Next!

When I promoted one of my bench guys, Nathan Rossman, to sales representative, I taught him the same method. And when I added another sales rep, Don Wuest, a year later, he worked in the same manner. We were brilliant at responding to requests, but we did no follow-up. The funny thing is that it was working. At least it was until it wasn’t.

Tuesday: Our Sales Process Stops Working

Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside Philadelphia.

Article source: http://boss.blogs.nytimes.com/2013/06/17/why-we-hired-a-sales-consultant/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

You’re the Boss Blog: This Week in Small Business: Analytics and Hashtags

June 17, 2013 by Leave a Comment
Dashboard

A weekly roundup of small-business developments.

What’s affecting me, my clients and other small-business owners this week.

Must-Reads

Kevin Colleran discusses the troubles of raising an entrepreneur. Cullen Roche says these are the three worst financial predictions from the past five years, and David Rotman explains how technology is destroying jobs.

Economy: Is Bernanke the Best?

The government’s finances continue to get better, Standard Poor’s upgrades its outlook for government debt, but the United States hits the debt ceiling anyway. Housing gains may be setting off an uneven small-business recovery. Dan Ritter lists four reasons that the Federal Reserve chairman, Ben S. Bernanke, may be the world’s best central banker. Mortgage applications increase and mortgage rates are the highest since March 2012. Retail sales (pdf) also increase. But machine tool orders drop, the Aruoba-Diebold-Scotti Business Conditions Index continues to show worse-than-average conditions, and there were still 3.8 million job openings on the last business day of April (little changed from 3.9 million in March). Robert Reich wants a national economic strategy for better jobs.

Small Business Week: The Complete Schedule

Here’s the Small Business Administration’s complete schedule for Small Business Week. ADP will be a co-sponsor of some events and contribute to panel discussions on the new health care law. The UPS Store is also showing the love. The National Federation of Independent Business reports a rise in small-business confidence, and another survey says three of four small-business owners expect revenues to increase in the next year. But a Pew study shows that 70 percent of small-business owners see threats to their businesses and the economy from the lack of retirement security. The Hartford finds small-business owners are playing it safer.

Social Media: Analytics and Hashtags

Twitter opens up its Tweet analytics to everyone, free, and joins with JPMorgan Chase to encourage small businesses to advertise more. Facebook promises a more simplified advertising experience and introduces hashtags. A tanning salon’s text-messaging campaign generates $196,000 in its first 30 days. Will Oremus says people trust the National Security Agency more than they trust Facebook. This is everything you need to know to sell your stuff on Facebook, and Kim Stiglitz lists five Facebook metrics you should be watching. An entrepreneur sells his @AMD Twitter handle to Advanced Micro Devices for a charitable sum, and Hillary finally sends a tweet. Kelly Clay says that gaming LinkedIn is surprisingly easy (and John Sculley doesn’t really want to be your friend). This is how social media changes everything, and here are seven social networks to keep an eye on. This infographic reveals the best (and worst) times to post to social media.

Marketing: Old Spock vs. New Spock

A book from the founder of FreshBooks explains how to charge what you’re worth. A car commercial pits old Spock versus new Spock. David Daniels and Mike Hillyer share six secrets of successful e-mail senders. Amanda MacArthur suggests big ideas for small businesses that want to make their customers feel special, and Shep Hyken wants you to ask yourself: “Is what I’m doing right now going to get the customer to come back the next time he or she needs whatever it is that I sell?” This is what it takes to develop a brand, from conception to introduction.

Cash Flow: One Way to Save Money

The Initiative for a Competitive Inner City is looking for inner city companies that need growth capital. These four companies are helping small businesses navigate the perils of shipping. A keyboard snooze turns into a huge bank error, and an entrepreneur saves money by moving to the woods.

People: What Makes Employees Stick Around

New technologies will help improve work force management, enable you to better track remote employees and use “telepresence” so that even workers out of the office can roam around the office. Some companies let employees buy extra time off or sell unused vacation time for cash. More employees are standing up for their workplace health while others learn a few lessons from the military. Laura Walter suggests 15 ways to create a happier work environment. This company can explain what makes employees stick around. This is how a 28-year-old got her job with Warren Buffett. Sixty thousand people sing “Bohemian Rhapsody.” Here are three of the most common time wasters at work, and Paula Davis-Laack says life is too short to tolerate these 10 things. Here are the best 17 pieces of advice you’ll ever hear.

Start-Up: Exploding in St. Louis

A start-up that makes it easy for developers to add telephone calls and texting to Web sites and mobile apps wins a $70 million investment, and another start-up that brings Big Data to college search raises $4 million. A New York start-up tries to mobilize every small- and medium-size business in America. Colorado introduces a start-up every 72 hours, St. Louis’s tech start-up scene is exploding, and cities around the country hunt for the same magic. Alex Payne, formerly of Twitter, cautions young programmers who are considering careers in start-ups. Ellie Cachette has advice for start-ups that don’t fail but don’t succeed.

Management: What Jelly Can Do for You

Marina Krakovsky says one thing makes a company last forever. A June webinar will help you prevent manufacturing downtime. Tim Berry explains why decision-making is easier than decision-doing. Lajos Moczar says agile methodology promises many things, but the reality is often very far from the expectations. Some experts say information technology departments won’t exist in five years. If you work from home, you may want to try Jelly. Barbara Austin explains how to rise above the pack (without biting or clawing). This is how to be a team leader in a small business. Alexandra Franzen gives a backstage tour of her business, and a dog-groomer in Illinois explains how her business works.

Retail: Who Killed the Cash Register?

David Lipson has a few tips for cutting expenses in your restaurant. A restaurant uses a mini-helicopter to deliver food to tables. This is why millionaires shop at Wal-Mart in Canada. Here’s how small retailers can build a powerful, budget-friendly surveillance system. Two detectives want to find out who killed the cash register. Chris Petersen wonders if retailers should replace the four P’s with the four C’s. Microsoft will open stores in Best Buy locations.

Around the Country: A Black Market in Cronuts

Small businesses may be over the economic hump in Florida. An ADP regional employment report shows that the South Atlantic, West South Central and Pacific regions generated more than half of all new private sector jobs in May. A survey concludes small businesses are exporting more. Sam’s Club introduces a 25-city small-business “boot camp” series. Miami is the most “underbanked” city in the country. A black market in cronuts has appeared in New York City, and the city’s government has proposed a polystyrene ban. Entrepreneurs are celebrated in Louisiana. And here are five maps that show how divided America really is.

Around the World: Starting Up in Moscow

In Britain, a young entrepreneur organizes her town’s farmers’ market. British workers over the age of 65 reach a record one million. The nation’s industrial output increases, and some officials hope the royal infant helps the economy. China’s economy stumbled in May. More than 3,500 participants, including entrepreneurs, investors, business people, I.B.M. employees and Dmitri Medvedev, attended a start-up conference in Moscow. Niraj Choksi believes the biggest threat to the global economy could come from outer space. American shale resources have added 47 percent to global gas reserves.

Red Tape: No Light Sabers

The Internet’s big names battle to salvage their reputations after recent revelations about the National Security Agency (the story is better when told through these classic children’s books). The federal income tax quietly turns 100. Ed McCarthy lists 10 steps to avoid estate-planning mistakes. The Transportation Security Administration tries to take away Chewbacca’s light saber. The American Institute of Certified Public Accountants announces a new financial reporting framework for small- and midsize entities. The Senate approves a five-year farm bill that would cut $24 billion from farm spending over 10 years, including a $4 billion reduction in food stamps. House Republicans have their eyes on a JOBS Act 2.0. And guess what: when businesses give judges money, the businesses usually get the rulings they want.

Ideas: The RoboRoach

A Kickstarter project promises a remote control to control live insects (the RoboRoach). A new door seal will keep conference rooms from becoming stuffy. Google reveals 90 regional finalists for its science fair. A report highlights growing opportunities in green markets. This is how Japan’s underground bike parking systems work.

Technology: Low-Tech Solutions

Apple unveils upgrades but some third-party developers say the company “ripped them off” with iOS 7. Hewlett-Packard introduces tech tools and a one-stop shop solution for small businesses. A Microsoft survey finds that once small businesses use the cloud, they consider it more secure than their own premises. Some believe Amazon will seize 3-D printing. Half of American homes own a tablet. An old-fashioned business copes with modern tech issues, and here are eight low-tech solutions for high-tech problems.

Tweet of the Week

@Hyken Employee engagement is real. And, it impacts the bottom line and customer service/experience.

The Week’s Best Quote:

Nate Kontny, an entrepreneur, discusses the importance of luck in his success: “I got lucky a writer with a lot of clout took interest in my project — interest that started because he once worked on a similar project seven years prior, so he understood the challenges I was addressing. … And I’m insanely lucky to have parents who taught me to persevere when I fell on my face. I’ve done that a lot getting here. But see, that’s the thing about luck. It has a funny way of showing up, when you keep showing up.”

This Week’s Question: Do you think the cloud is more secure than your own environment?

Gene Marks owns the Marks Group, a Bala Cynwyd, Pa., consulting firm that helps clients with customer relationship management. You can follow him on Twitter.

Article source: http://boss.blogs.nytimes.com/2013/06/17/this-week-in-small-business-analytics-and-hashtags/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,
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