Currently Reading

  • The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About ItThe E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It
  • Blue Ocean Strategy: How To Create Uncontested Market Space And Make The Competition IrrelevantBlue Ocean Strategy: How To Create Uncontested Market Space And Make The Competition Irrelevant
  • The Know-It-All: One Man's Humble Quest to Become the Smartest Person in the WorldThe Know-It-All: One Man’s Humble Quest to Become the Smartest Person in the World
  • Entrepreneurship, Netflix and Microbes

    Entrepreneurship: As an entrepreneur one thing that we all need to do is to network.  Now, I have gone on record as saying that I hate the kind of networking that seems like speed dating.  But some helpful tips on how to introduce people well is always helpful.  Marci Alboher writes about the Seven Deadly Sins.

    Behind the Scenes: Another behind the scenes article caught my eye.  If you have ever received the familiar red envelope from Netflix, here is a photo montage that shows you how they do it.

    The Big Picture: The germophobes among us who continually use Purell and Lysol have helped to create Antibiotic Resistant Microbes.  These microbes have become much more prevalent in our world and will continue to be a significant infectious disease problem.  Bonnie Bassler presented a talk at the TED conference this year on how microorganisms communicate which might prove to be useful as we look for therapies for these diseases.

    Magic Numbers

    I get really jazzed up at this time of year.  Some of it is the magic of springtime, green grass, cycling again, robins chirping.  But mostly it is because baseball is back.  Baseball conjures up in me many things.  Partly it is the memory of “having a catch” with my dad (and continuing the custom with my kids).  Some is the love of the teams and the rivalries (Red Sox vs. Yankees and Cubs vs. Cardinals).

    A lot of what we love is related to the ways that we can follow baseball.  Sure, a day at Fenway or Wrigley can be a memorable event. Following the box scores in the paper or watching SportsCenter can stoke the habit.  But in the end, baseball is a complicated game, full of arcane rules and strange rituals.  One way to make it easier to understand is to break it down into numbers.  Everyone knows about batting averages and ERA.  If you are really into baseball, you might know PECOTA, OPS and SLG. These stats help us to visualize, compare and project a team’s future.

    In business, as well, we can use stats to help us understand where things are going.  I like to talk about these as Magic Numbers.  Everyone is familiar with the biggies — Net Profit Percent, Average Ticket for a restaurant, Return on Investment, Debt to Equity ratio, P/E Ratio.  But every business has (or should have) some specific measures that are important to its health.  These should be easy to calculate, presented on a regular basis (daily or weekly) and help the manager to forecast where the business is going.

    For example, when I was running my consulting company, we had a few numbers that we tracked weekly.  They included Cash in Bank, Average A/R Days, Utilization %, Sales Pipeline and Backlog $.  Some of these were trailing stats; that is, they told us of what had already happened — Cash, Avg. A/R Days and Utilization fell into this category.  Pipeline and Backlog were leading indicators.  Pipeline told us how many deals we had in play for how much and when they were expected to close. We used an expected value (Expected % of Close * Dollar Value) as a tracking mechanism. Backlog told us how much work we had on our books that was signed by the client, but was not performed yet.  We needed to keep backlog increasing through sales at a reasonable rate.  The working off of the backlog would take care of itself; every week people were decreasing it.

    Norm Brodsky, an entrepreneur and columnist at Inc. Magazine wrote about his use of Magic Numbers and how the practice allowed him to forecast a downturn in his business.

    Sometimes Magic Numbers can be developed that will help you understand your market, while measuring things totally outside of your sphere of control. There are stories about people who count the number of cars in a mall parking lot to determine if their restaurant’s prognosis is up or down.

    So, the question is do you employ magic numbers in your management process and if so, what types help you to forecast the health of your business?

    Fun, Marketing and Big Picture

    Fun: A quick time waster for those of us who like word games is DeepLeap.  A whole game is 2 minutes and is reminiscent of Scrabble.

    Marketing: Marketing is an exceedingly hard thing to do well.  I love to find examples of people who try, but really “just don’t get it”.  This one was pointed out by my friend Kristin.  Check out this Twitter from Jason’s Deli:

    Happy Passover folks! For the first ever, we are offering Matzo to customers. But I don’t recommend ordering a Reuben on matzo. Oy!

    Nice try that they are offering matzo for customers who are celebrating Passover.  But, is there any reason that someone who would request matzo would go to a sandwich place for lunch?  Perhaps for their ham and cheese on matzo?

    Big Picture: Dubai is the new shining city in the desert.  How did it get that way and what is coming next?  This article explains the dark side of the developing city.

    Fun: As father of two umpires, this article by George Will made my day.


    Bad Economy

    From time to time, I will give the floor to a guest blogger.  Today is one of those times.  Meet Howard Bender.  Howard is my friend and also the owner of the only Jewish delicatessen west of Chicago, Schmaltz Delicatessen.  Today, he talks about the need to look for positives in the current economy.

    In a world filled with miserable attitude, bad economic times and lots of self-fulfilling prophecy of failure, an attitude as a small business owner and entrepreneur to be a survivor as opposed to a victim is everything. I just want to point out one trashy note today that can snowball and lead to a bottom line of success for me. I have never in my lifetime seen such a buyer’s market. Our vendors are scared of losing us, we are scared they are mistreating us, our customers are looking for more value with the same quality, our bankers are scared and our families are nervous.

    In our business, we have driven down on our expenses to re-evaluate each and every line that sends cash out the door. We began about 45 days ago, re-bidding out everything from food and supplies to garbage and toner. Today, I sat down with our bookkeeper and looked at 3 competitive bids on garbage removal. Each and every one was 30% less than our current vendor. Shocked, dismayed and thrilled all at the same time! But wait, our current vendor’s service is superb. Let’s call them too! After reaching our current vendor, putting it on the table in a honest and real manner, I am pleased to say we now pay 30% less for superb, consistent service.

    Now, there was a time when I would have felt I had been screwed for many years and no matter what,  I will switch garbage vendors just for that. But having spent the last couple of decades in this business working for hotels, restaurants, bakeries, and even on the other side as a foodservice distributor, I am convinced I have not been getting screwed. In fact, up until just months ago, I was paying a very competitive price. We bid this service out a few times over the last few years and all vendors were around the same price that I was paying up until today.

    The rules have changed. They have changed for me, they have changed for my vendors, and they have certainly changed for my customers. The concept of competitive pricing is swinging on the pendulum. Always competitive but only the price changes. So in the inflated economic times of a few years ago, the price was competitive… and high. Now our competitive price is on the other end of the pendulum and is very low. The trick is to get a contracted price at the end of the pendulum… I’m working on it. I’m also opening my eyes a little wider to asking every vendor for a break… everyone knows they will charge more when they can. When I was a sales manager for a foodservice distributor, I used to tell my sales staff that if your customers are not complaining or questioning your price, you are not charging enough. Today is a really, really good day to question.

    Entrepreneurship, Urban Studies and Grammar

    Entrepreneurship: For anyone who needs to give a killer presentation or just to prepare a cool way to show mixed media, check out Simile Widgets Exhibit.  It is open source and free to use. For a helpful introduction, see what LifeHacker has to say.

    Economy: Based upon the news media, it would seem that the whole country is in a deep recession.  However, Joel Kotkin writing on NewGeography.com talks about a swath of middle America that doesn’t seem to feel the pinch as much as the rest of us.  The article also takes an in-depth look at the center of this swath, Kansas City.

    Grammar Police: Those of you who know me well, know that I have, occasionally taken my red pen to a document.  Most often, I use Microsoft Word’s track changes.  But if you want to know what is right to write, check out this comprehensive site by Paul Brians.

    The Business Plan

    Nothing sends shivers down the spine of the new entrepreneur more than the idea of writing that business plan.

    Over the past several weeks, I have had the pleasure (?) of reviewing a number of business plans. Some were for a business plan competition, others were for companies that I have been advising and still others were presented as part of a class that I have been taking.

    It is very instructive to me to see how people treat their business plans.

    A very few build their plans so that they can be used as a real guide to build and grow their business, much as an architect uses a blueprint to guide the building of a house. However, often they forget that another reason to write a business plan is to sell your idea to an investor or a banker or a vendor.  You need to have that hook in there that explains the mystery of WIIFM (What’s in it for me?) for the reader.

    Others use the business plan as a marketing piece. The more graphs, flowcharts and photographs the better. If you can find a way to throw a video in there, it must be golden. Market size, the entire population of the US? Develop a comprehensive  financial or operations plan? — they figure they’ll get those sorted out when they get the investor bucks.  Um, sorry, but investors want to understand how the business will make them money. That WIIFM concept comes back to haunt us.

    In reality, the business plan is an exceedingly hard document to write.  It has to function in both modes, as a management tool and as a marketing piece.  If you look at writing the plan as something that you have to do to check the item off the entrepreneurial checklist, I can almost guarantee that the final product will not achieve what you want. If you do not have a few trusted people edit the document and provide feedback, it will not achieve what you want.  If you do not take the time to lay the document out clearly with a title page, table of contents, headers, footers, section headings, spell check, grammar check and possibly footnotes, it will not achieve what you want. If you don’t make sure that your financial statements tie together and are reasonable, it will not achieve what you want.

    And the sad part is that an investor or banker probably sees hundreds of business plans a year.  They probably spend an average of 5-10 minutes scanning the document to see if they should invest the time necessary to evaluate the plan.  You may have the best widget or service on the planet, but if the plan doesn’t sell in the first 5 minutes, you may not get a chance to present to the target.

    The business plan has to be able to clearly explain what the business is all about, why it is necessary, who will buy from it, how you will operate it, who will have what responsibilities, what the financials are projected to be and what kind of returns an investor can expect.

    In the past several weeks, I haven’t read one plan that met all of these criteria.  But I remain hopeful that I will find the Holy Grail sometime soon.

    Business, Economy and Fun

    Business: Seth Godin put together a good resource page to help those of us who are graphically challenged find our way in the world.

    Economy: Normally, I wouldn’t take Penn Jillette’s economic advice, but he does have some good points about skidding and crashing and hoping that our leaders know the difference.

    Fun: As the father of a 19 year-old and a 14 year-old, sometimes I wonder where the time has gone.  Amy Flanagan sure helped me remember how far technologically we have come in 16 years.

    Economy: Several weeks ago I wrote asking why corporate CEO’s weren’t going for the PR play of telling the world that they would not lay anyone off this year.  Mark Cuban tells us the reason and what we can do about it.  Granted he is only one voice, but it makes sense.

    Spring Break

    I will be out of touch for the next three days.  Look for my next post on Monday, April 6.  Happy Spring Break.