All posts by Al Herbach

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DePaul, Business Strategy, Behind the Scenes and Fun

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DePaul: Thursday was a long day and thus no blog post.  DePaul University’s Coleman Entrepreneurship Center had their gala event and gave out several awards.  Congrats to Chris Campbell of Lakeshore Branding and Greenwerks, Jen Moran of Greenola and Ben Meader of CareerHook.  Also congratulations are in order to my friend Bruce Leech of evolve who was named the Coleman Foundation Catalyst Award Recipient.

Business Strategy: Tim Ferriss talks about a book by his friend, Alan Webber, called Rules of Thumb: 52 Truths for Winning at Business Without Losing Your Self. In the article, he has an excerpt of the book, RULE #24 – If you want to change the game, change the economics of how the game is played. After reading this, I need to read the entire book.

Behind the Scenes: We all remember the heroism of Captain Chesley Sullenberger in the saving of US Air Flight 1594 on the Hudson River.  What we have never seen until now are the pictures of the plane as it was recovered from the chilly waters of the Hudson.  Photographer Stephen Mallon was there and photographed the scenes for Wired.

Fun: A fun new toy to play with, but one that has significant potential to be a solid research tool is Wolfram|Alpha.  Gina Trapani played with it and wrote a multi-faceted review.

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Innovation, Chicago and Entrepreneurship Education

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Innovation: Allan Young writes a great article on the virtues of the Pareto Principle as it relates to your career.  You probably remember the Pareto Principle as the 80-20 rule.  In this article he also talks about the venture capitalist’s issue with the Pareto Principle.

Chicago: I have been thinking about the Chicago Entrepreneurial environment lately for a new idea and one of the big issues is that we, here in Chicago, have this notion that the financing folks (angels, VC, private equity) are socially conditioned to be risk averse and thus new start-ups don’t start or prosper here at the same rate as on the coasts. This post by Micah titled competitive cooperation, after you get past his illness description, talks about how the tech community in Boulder works to support each other, while striving for personal success. It would be great to get some of this thinking going in Chicago.

Entrepreneurship: For some reason, I am in a teaching mood today.  Here is a long post by Mark Cuban about success and motivation.

Essay

What’s Your Niche?

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Way back in the good old days (circa 1984), when I was just a young whippersnapper, my wife and I started our business.  Well, actually to be correct, she started it and I joined in after about a year.  We were a small (4 person) company focused on developing solutions for IBM minicomputers.  We had an expertise in an ERP product on that platform and we were looking to grow. An opportunity came along from IBM to join a Marketing Assistance (or Partner) Program. We joined up and dutifully went to the first few meetings.  We had the requisite skill set on their hardware and operating systems.  The IBM partner coordinators asked us, what is your specialty?  How can we determine who to send to you?  Being the smart marketers that some of you know us to be (NOT!), we said “We can work with any customer.  We know the programming language and the operating system.”  Of course, for the next 6 months, the only sound not coming from our office was the ringing of the phone from our partners at IBM.  There was, however,  wailing and crying and asking “What is wrong with us?”, mostly from me.

We went back to our IBM partner advocates and told them about our prowess with Distribution Systems, including a product that they sold. We talked about our technological expertise and then about some success stories helping customers solve distribution issues.  From that point on, we finally got some leads from IBM.  Over the course of the next 13 years, I would venture that this distinction allowed us to book over $3M of revenue.

We had a common problem.  Our problem was not that we weren’t good at what we did.  We were and we had revenue paying clients to prove it. Our problem was that we had to get over the fact that we couldn’t be all things to all people.  We needed to put a line in the sand and proclaim to all that solving distribution software problems for companies were what we were best at.  Once people (clients, partners, recommenders) have a hook, they can then help you get to the next step.

Most young companies don’t want to skinny down the possibilities, afraid of closing doors. My recommendation is not to worry about closed doors. Worry instead about making your open doors a clear priority, with an easy to understand differentiator and a clear value proposition.  Oh, yeah, it helps if you are really good at that niche.  But to paraphrase Seth Godin, Be Remarkable.  You can’t be remarkable if you say you can do everything for everybody.

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Big Picture, Innovation and Ideas

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Big Picture: It is always interesting to me to see how founders think about their companies. Sergey Brin, co-founder of Google, writes this annual report. And while we are on the subject of Google, Jim Spanfeller, CEO of Forbes.com, wrote a scathing indictment of Google and their role in the demise of the publishing business.  A much more fun read is the response by Danny Sullivan at SearchEngineLand in a point-counterpoint post.

Innovation: Scott Adams of Dilbert fame talks about information flow using a time based methodology.  He envisions a world where our calendars will become much more intelligent, personal and useful.  I like this vision of the future.

Ideas: If you have never seen Seth Godin speak, you now have the opportunity to view this talk on Tribes from the 2009 TED Conference. And for a little historical Seth, here is his riff on Purple Cows from 2003.

Essay

Business Rules

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I have just finished reading The Knack: How Street-Smart Entrepreneurs Learn to Handle Whatever Comes Up by Norm Brodsky. I have read Norm Brodsky for years in Inc. Magazine and have loved his earthy, down to business common sense. The book is more of the same and it was a good read and a valuable reference for all you budding (and even experienced) entrepreneurs out there.

A sample lesson from the book and a real life example of how sometimes companies get messed up:

Norm’s Lesson

We tend to make bad rules not when we’re attacking problems but when we are avoiding them.  We fall into the trap of looking for shortcuts and easy answers.  So, one bad customer drives off without paying his bill, and we put restrictions on all of our good customers. Or one employee uses bad judgement in issuing credit, and we tie the hands of all of those who are perfectly sound.

Real Life Example

My nephew is a high school senior and a sports fanatic.  He loves basketball, football and especially baseball.  He has given up on his dreams of playing in the Majors but still loves the sports world so much, that he plans to major in Sports Management in college starting next year.  I helped him get an interview for an intern position with the local minor league baseball team in his town.  During the interview, he was told that the job was doing anything that needed to be done for the team, might be painting the outfield wall or taking tickets or cleaning the bathrooms.  My nephew was still pumped.  The interviewer said “You know that this is an unpaid internship”.  My nephew said that was ok, he wanted to see what life was like in the baseball industry.  At the end, the interviewer said “We are so happy to get someone like you in this position.  But there is this one thing.  In order for us to take you on for this unpaid internship position, you need to get a letter from your school that they will give you credit for taking this internship.”.  What could this be all about?  Well, several years ago, a college student took this position and then sued the team because he did not get credit for his internship.  So, to make sure that this didn’t happen again, the team requires that the college provides proof that they will issue school credit for the internship.  You couldn’t sign away your rights, you couldn’t promise, you couldn’t double-dog swear.

Now, my nephew hasn’t even started at the University yet. But he duly went through the process of trying to figure out who to talk to and find out whether he could get credit.  After the process, he determined that the answer was no.  He called the team and tried to figure out a way to make it work, but they were unwilling to change the rule that they had put in place.

I don’t run a minor league ball club and surely don’t understand all of the ins and outs of running a team, but I do know that the one thing that they need is what my marketing friend Michelle calls “butts in seats”.  The way to get those seats filled is to get people who are in your community and who like your product to tell their friends.  What do you think will happen when my nephew is asked about his opinion of the local team?

This was a no-brainer.  Here you had a kid who was willing to do scut work for no pay, was a recognized baseball aficionado in his circle, wants to continue on in this industry and you could make him a huge fan and recommender, but that kid from several years ago clouded the owner’s mind.

As an entrepreneur, you must keep on the lookout for these rules and squash them as soon as you find them.

Essay

Bumps in the Road

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I am a big fan of entrepreneurs.  You all know that already.  I love the energy, the risk taking and the determination to make the vision into a viable moneymaking enterprise. As an entrepreneur, you always have to be ready for the bumps in the road.  Sometimes the bumps are internal.  Sometimes external.  But they all hurt as you try to navigate around them.  The best of us find the ways to get to the end, wherever the end is, by working our determination.

For some reason, today found me awash in examples…

A friend owns a restaurant.  He has the opportunity to expand the restaurant.  Can you believe it?  In this economy, he is seriously looking at expanding a restaurant. Oh, but expansion will cause the size of his restaurant to move to the next class under the city’s ordinance.  No problem, what could that mean?  2 new bathrooms.  He got the estimate this week and the cost to develop 2 new bathrooms is $50,000! $50K seriously?  You could buy a 3 bedroom house in parts of this country for $50K.  How many meals does he have to serve to recoup $50K?  Is this an incentive to being an entrepreneur? No, but it is a part of the journey down the road with many bumps.

Another friend sold his company years ago.  He decided to start a Montessori preschool in his town as a non-profit venture.  Over the years the school has grown due to the progressive and excellent education provided.  He now serves 70 kids in his suburb and is outgrowing the rented space he has had for 7 years.  Great job in building a company that the community has found helpful, right? He found a former church building, bought it and made plans to refurbish and move in last year. Only one thing.  There were 17 families who lived near the church, who were worried about noise and traffic.  They went to the city and zoning board and protested.  They planted signs in their yards.  They waged a negative PR campaign. My friend spent a year and significant dollars in legal and planning fees, developed a remediation plan and went through the process with City Hall.  Finally, after a year and significant scrutiny, City Hall ruled that the school would get the necessary permits.  Now the neighbors have sued the city and my friend because they felt they didn’t have enough time to prepare their defense.  When these folk’s taxes increase because businesses are scared of the hassles of locating in their suburb, they would do well to remember this.  However, for my friend, he is continuing on the path that was allowed by the City Hall approval.  And I give him a lot of credit to continue the dream after being beat up by the bumps in his particular road.

As an entrepreneur, it is critical for us to remember that in order to survive, we need the determination to see things through, even if we haven’t planned for the side trips.  It is all part of the journey and the journey really is the reward.

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Economy, Behind the Scenes and Entrepreneurship

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Economy: James Surowiecki, writing in the New Yorker notes that for the first time in many years, the size of the financial industry has declined.  What does this mean for us?

Behind the Scenes: Nicholas Felton makes me feel like a voyeur.  But I just can’t help myself.  He writes and designs an awesome annual report of his life every year (2008, 2o07).  Now he has made the software available for others to journal their life and chart what is important to them at Daytum.com.  Interesting…  Don’t think I am going to start charting myself, but I like the end result a lot.

Entrepreneurship: April Lane, Associate Director of the Coleman Entrepreneurship Center at DePaul University wrote a good article today on the habits that owners of service companies need to practice to achieve success.  I might have mentioned one or two of them before, but it never hurts to have a reminder.

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Big Picture x2, Entrepreneurship and Chicago

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Big Picture: As I get older, I find that the “rules” that I once were taught are not hard and fast anymore. In fact, some of the ideas about demographics have changed significantly even since the beginning of this century. The Woodrow Wilson International Center for Scholars has an engaging study of world demographics that puts some of those old rules to the test.

Big Picture: Sometimes it is hard to comprehend the meanings of million, billion and trillion.  Terence Tao has taken the US Federal Budget and rescaled it to the approximate scale of the average family in the US.  This helps to understand how much money is being spent on which items.

Entrepreneurship: Jim Stoynoff has written a good blog post on the ways that small businesses can work better with bankers.  A lot of it is common sense, but communication ranks high on this list.

Chicago: Woo Hoo! Fast Company has named Chicago its U.S. City of the Year.

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Big Picture, New Inventions and Behavior

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Big Picture: Malcolm Gladwell writes in The New Yorker about how David can beat Goliath. In many cases, it is thinking outside the box and not falling to conventional wisdom.

New Inventions: From the pages of Harry Potter, along comes an invention that we can all see merit in (or not) – the cloak of invisibility.

Behavior: Have you ever wanted to understand how a con-man was able to work his magic?  Read a lesson in How to Cheat from The Economist.

Essay

Presentations

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I have been a business plan competition judge for a few years now. Not as glamorous as the Miss America contest and not as tasty as a BBQ Competition judge, but fun all the same.  I really enjoy feeling the energy that comes through from the entrepreneurs in their ideas.  As part of my role, I have the opportunity to read a lot of business plans and watch some presentations to panels. I have also had the ability to see how groups of judges make decisions, as we all have our own points of view that must be aligned before determining the placing of the contestants.

A few lessons from the judge’s table (in no particular order):

Make your projections reasonable, meaningful and achievable. So many of the plans show either Year 3 earnings of $100 million or $200 thousand. Investors don’t believe the former and don’t bother with the latter. In any case, make it easy for the judge to vote for you.  Make sure that your financial tables foot, are right justified, have thousands separators, are complete and are rotated to allow for easy readability on the screen without printing it out. Take the opportunity to explain all assumptions that you make while determining your financials. Don’t assume that every month will be the same. Is there seasonality?  Will month 1 really be the same as month12? Include every expense that you can think of and make sure that the expenses that are outlined in the text portion are considered in the financial plan.

Detail your marketing plans beyond “advertising and trade shows”. Our world is changing faster than ever.  Don’t bet only on the same old strategies that our parents might have used.Try to stay away from discounting and couponing in the initial years.  You might have to resort to that if the economy goes south, but it probably is not a good strategy right out of the box.

Beware of planning your long term growth strategy on existing tools. Will Twitter or Facebook look the same in 5 years?  Will it look the same in 1 year?

Sample, if you possibly can. Let the judges (or angels, private equity folks, friends and family et. al.) touch, smell, see and taste your product.  Do a demo, if it is software, even in there is nothing behind the demo.  Don’t lie and tell folks that there is, just show them what you can.  In the last competition, one company had clothing, but did not let the judges feel or interact with the interesting material.  Another concept was a restaurant, where the chef came out and cooked for the audience.  Hearing the garlic sizzle in the fry pan and then smell the just cooked foods, made a huge difference in their presentation.

Leave the arrogance at home. Try to answer the direct questions as clearly as possible without signs of impatience or omnipotence.  Take a deep breath before answering, gather your thoughts and give the best answer you can, which might be “I don’t know, but I will find out and get back to you.”.  The judges don’t know your business as well as you do, but also, remember that they may be looking at it from a new angle that can provide insights to you.

Make sure to have people proofread and edit your submission. You may be the best interior designer in the world, but if your financial page is wrong or your marketing plan is half-baked, it is better to know and correct before the big day.

Presentation skills count. Think about how the presentation should flow.  If you have 3 founders, it is difficult to follow when each of you does one slide at a time.  Don’t read from your slides.  Your slides should guide your talk, not take the place of it.  See what Seth Godin has to say about presentations.  If you can add a video to break up your presentation, do so.  Practice, practice, practice.  If you practice enough, you will not be nervous at the time of the big show. Know how long it takes to give the presentation.  Use cue cards to make sure that you convey the right ideas for each slide – bullet points, not complete sentences.  Important – do not read your presentation from the cue cards.

Even if you are not entering a business plan competition, these are all good rules to think about when making a critical presentation.  It could be for an internal project approval at a large company or for venture financing.  You are the best sales person for your idea.  A great presentation will get you further along towards getting that approval than anything else.