Small Business News
Local and national business news for Wichita, Kansas.Kansas Labor Secretary Jim Garner on Friday declared the state’s job market is “on the road to recovery.”
Frontier Airlines parent Republic fined $110K for filing delays
Republic Airways Holdings Inc. -- parent of Denver-hubbed Frontier Airlines -- has been fined $110,000 for alleged delays in filing financial data with federal officials, according to a news report. (RJET)
Cargill recalls ground beef
Cargill Inc. is once again in the news with a ground beef recall; it’s recalling 8,500 pounds of ground beef products that may be contaminated with dangerous E. coli bacteria.
Boeing testing 787s all over the world
Boeing Co. said its five 787 flight test airplanes are conducting tests this week all over the world. (BA) (SPR)
The Pantry Inc. buys Kansas Presto convenience stores
The Pantry Inc., a convenience store chain with operations mostly in the Southeast, has bought the 47 properties of Presto Convenience Stores LLC of Kansas. (PRTY)
Parkinson appoints Wichitans to statewide health data organization
Gov. Mark Parkinson appointed three Wichitans to serve as members of the Kansas Health Information Exchange Inc., a statewide data-sharing organization.
Union: First Cessna proposal ‘ugly’
Bob Wood, a spokesperson with the International Association of Machinists and Aerospace Workers, says the union isn’t happy with what it’s hearing from Cessna Aircraft Co.
Select-A-Seat makes branding changes
Wichita-based Select-A-Seat is rebranding.
Machinists holding rally
The International Association of Machinists and Aerospace Workers is holding a rally at 3 p.m. Thursday near Cessna Aircraft Co.
Boeing projects $700 billion North American market
The Boeing Co. on Thursday forecasted that the North American market for commercial airplanes will be worth $700 billion during the next 20 years. (BA) (SPR)
Machinist union members at Cessna Aircraft picketed near the company's plant in southwest Wichita on Thursday to protest jobs being sent outside the city.
Members fought strong, gusty afternoon winds and carried signs that read "Keep it Made in Wichita," "Outsourcing is Treason" and "We built the Air Capital," as they picketed at K-42 and Hoover. Some carried American flags.
"We've got to protect our jobs here in Wichita," said Dean Crabb, an avionics flight line lead, who's worked at Cessna 15 years. "We've already sent enough down there (to Mexico) ... We're definitely worried about them moving more out of here."
N.C. company to buy Presto stores
When Terry Presta received an unsolicited offer to purchase his Andover-based convenience store chain, it set off a process that culminated with Thursday's announcement that a North Carolina company will acquire Presta's 47 stores in Kansas and Missouri.
The Pantry said it had signed a definitive agreement to acquire Presto Convenience Stores, which operates 19 Wichita-area stores.
"Rather than accept that (unsolicited offer), we went through a process of offering it out to some industry people," Presta said Thursday.
Retail spending beats low expectations
NEW YORK — This year's back-to-school season isn't as big a bust for retailers as they feared — or as last year's — but it's not great either.
Americans are spending only when the item and price are just right, according to August reports from major chains released Thursday that showed shoppers bought a little more than a year ago.
Analysts expect stores will need to keep discounting to get shoppers to spend this fall and for the holiday season while they grapple with job worries and tight credit.
Cartridge King helps disabled, environment
Cartridge King of Kansas' customers come in at least three varieties, said Colin McKenney, head of the nonprofit company that remanufactures printer cartridges.
There are people who want to save money, people who want to protect the environment and people who want to help the employees of Cartridge King.
"It's a nice mixture of all three of those," McKenney said. "That's one thing that's helped us become successful."
Time is now to deal with changes to health care
The new health benefits law may be as irritating as fingernails on a chalkboard, a Wichita attorney said Thursday, "but we all have to deal with it."
And employers better start dealing with it right away, Eric Namee, an attorney with Hinkle Elkouri, told a group of benefits managers and others.
He and two colleagues joined with Gary Hardman of Hardman Benefit Plans for a workshop on what employers need to know about the new law.
Workers bear larger share of health costs
WASHINGTON — Strained by rising health care costs and the sour economy, U.S. employers are pressing workers to shoulder the added burden alone as employees pay higher insurance premiums and more out-of-pocket expenses for their medical care.
The average employer-provided family health plan now costs workers nearly $4,000 a year, up 14 percent from last year, according to a survey by the nonprofit Kaiser Family Foundation and the Health Research and Educational Trust.
That is the largest annual increase since the survey began in 1999 and a marked change from previous years, when employers generally split the cost of rising premiums with their employees.
Hurricane funds used to lure businesses
Wichita sits too far from the Gulf Coast to be damaged by hurricanes — until now, that is.
Louisiana and Mississippi are using federal money meant for hurricane reconstruction to attract large companies from other states.
That makes the Machinists union, now facing sizable wage concessions at Hawker Beechcraft to keep jobs in Wichita, cry foul.
Wichita isn't on Southwest 2011 list
Wichita's opportunity to land Southwest Airlines is at a standstill, for now.
The airline doesn't plan to add cities in 2011, other than those already announced, a Southwest official said Wednesday.
"We're not closing that door forever," Southwest spokesman Chris Mainz said of offering service from Wichita Mid-Continent Airport. "We'll continue to study the market."
Chat live about Wichita business at 10:30 a.m. with business editor Dan Loving
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Join business editor Dan Loving during this weeks Business Today chat at 10:30 a.m. today.
Plans pan out for Corporate Caterers
Ben Arnold calls Corporate Caterers' growth through this year's economic turmoil "driving through all the smoke on the racetrack."
"You know, if you're racing and there's a wreck in front of you, a lot of people would slow down and stay behind the smoke," said the founder of the local catering firm. "Not me. I step on the gas pedal and blow through it."
In a year when many food and restaurant providers are struggling, Arnold is competing for Wichita business as his company celebrates its 10th anniversary by growing.
Andover MarketPlace signs 4 new tenants
In today's economy, it's a gamble to build a speculative shopping center and hope to find tenants for it, but it's a move that's paying off for Paul Jackson .
The Vantage Point Properties developer has Andover MarketPlace , a 140-acre development on the southeast corner of Kellogg and Andover Road in Andover.
In May, Jackson began building the Shops at MarketPlace , a 14,000-square-foot center next to Dillons Marketplace .
5 questions with Robert Layton
Robert Layton hit Wichita at exactly the wrong time, if you look at the economy and the city's budget.
Jobs disappeared, cutting into retail and commercial sales. As a result, the city's budget is locked into austerity mode through at least 2012.
But that doesn't mean Wichita's city manager has any regrets about leaving Iowa for Wichita almost two years ago.
Bombardier says it won't cut production in Wichita
Although delivery rates of Bombardier Learjet business aircraft are low, the company doesn't expect to cut production at its Wichita plant, a Bombardier official said Wednesday.
Bombardier has seven months of backlog for its Learjet products, up from six months earlier this year.
Bombardier delivered three Wichita-built Learjets in the quarter ended July 31, compared with 13 during the same time a year ago.
State: Hotel owes $137,000 in back taxes
The Kansas Department of Revenue has filed a tax warrant of more than $137,000 against a west Wichita hotel.
The warrant says Petali, doing business as EconoLodge Inn & Suites in west Wichita, and Bhupendra Patel owe $137,224.83 in transient guest taxes for the period from October 2008 until April 2010.
Patel, who said he was part owner of the hotel at 600 S. Holland, said he was working with his bankers to get the amount paid "as soon as possible."
U.S. auto sales hit potholes in August
DETROIT — Americans nervous about bad economic news stayed away from auto showrooms. Automakers nervous about their bottom lines didn't offer deals to lure them in.
As a result, it was the worst August for U.S. auto sales since 1983, when the country was at the end of a double-dip recession. General Motors, Toyota, Honda and Ford all reported declines from the month before and from a year earlier.
The bleak results were a reminder that, for all the good news about the turnaround of the Detroit automakers, the market for cars and trucks in the United States remains frail. Initial data showed sales came in at about 997,000, down 5 percent from July, according to AutoData Corp.
Banks have mixed first half
The first half of the year was mixed for the 10 Kansas-based banks with the most market share in the Wichita area.
According to data released this week from the Federal Deposit Insurance Corp., five of the 10 — Fidelity Bank, Southwest National Bank, Equity Bank, Rose Hill Bank and First Bank of Newton — posted higher earnings than the same period a year ago. Emprise Bank's earnings were nearly flat.
Intrust Bank, Capitol Federal Savings and Legacy Bank posted lower earnings but remained profitable.
Fidelity, Weigand in partnership
J.P. Weigand & Sons and Fidelity Bank have agreed to a deal that will place mortgage bankers in three of the Wichita real estate giant's residential brokerages.
Mortgage loan offices will be located in Weigand brokerages at 6530 E. 13th St., 2872 N. Ridge Road and 10811 E. Harry within the next month, officials said.
The two firms are considering part-time lending hours in other Weigand brokerages, but plans aren't finalized.
Old Town boutique to expand on E. Kellogg
Reb Boutique's first grand opening was April 23 in Old Town Square . Now, owners Glenda Sue and AJ Morris are preparing for their second grand opening — this time in a new location.
"We decided to get a larger space with more visibility," Glenda Sue Morris says.
They're moving the shop, which sells fabrics, clothing and furniture, to the former Tux Shop space in front of Scotch & Sirloin on East Kellogg.
Senior homes to open on west side
Gracious Senior Living at Bethel House plans to open its first two west Wichita home-plus homes in mid-September, with more being built west and east.
The new homes are part of an overall business expansion for Bethel House, a Wichita health care company that started about five years ago. The expansion includes more training in related fields and a new cooking facility.
The two new Gracious Senior Living homes are in the final stages of construction at 551 S. Holland, near Kellogg and Ridge Road. Each 4,000-square-foot home has eight bedrooms around central kitchen and living areas.
Used-car dealers say several factors are behind rise in demand, prices
Some used-car dealers are seeing a sharp increase in the price of cars and trucks they purchase for their lots, while others said the increases aren't as steep.
Auto information website Edmunds.com said recently that the average price paid for a used, 3-year-old vehicle was 10.3 percent higher in July than the same month a year ago.
The climb in the average price paid, Edmunds officials said, is the result of an increased demand for used cars and a shrinking supply.
Each day, Inc.'s reporters scour the Web for the most important and interesting news to entrepreneurs. Here's what we found today:
Getting serious about in-bar promotions. Lovely gals selling candy-colored shots to drunk guys – sounds easy as pie, right? Well, it turns out there's a little more to the formula than meets the eye. Today the Wall Street Journal profiles a service that outsources these so-called "shot girls" to trendy Manhattan bars and clubs. Founded by a pair of former J.P. Morgan and Bear Stearns analysts, Auld D'Leo Inc. trains its 25-person staff in the 10 best practices of the trade, which are distributed to each new waitress-slash-promotions specialist on her first day of work. Unsurprisingly, the list includes practices like being as friendly, personable, upbeat as possible, and not spending too much time with a single patron or group of patrons. Following the practices, these mostly college-educated women rake in between $300 and $600 a night. And if all else fails they can get a little, well, creative. One woman uses her large hands as a secret weapon, coaxing guys into wagering a round of drinks over whose hands are bigger. Typically the guys take the bet, and buy the shots.
Private sector jobs up, overall numbers down. In its August report on employment, the government announced that the private sector added 67,000 jobs last month, about 26,000 more than was forecasted, The New York Times reported. At the same time, the overall economy lost another 54,000 jobs, with the unemployment rate rising to 9.6 percent from 9.5 percent. The government attributed the job losses to terminated Census-related temporary positions and the paper said the results were still better than expected. But as former Inc. reporter, and current Huffington Post associate business editor Ryan McCarthy tweeted: "What % of Americans actually care whether the jobs numbers are 'better [or worse] than expected'"?
Forget cockroaches. Forget fruit flies. This isn't your typical office infestation, but it might just be the infestation of the future. Yes, Google has bedbugs. Infestation by the nocturnal, blood-sucking insects isn't as of late an uncommon problem for New York retail spaces - like Hollister, Abercrombie & Fitch, and BuyBaby. That doesn't mean it isn't gross. Meanwhile, the New York Observer is already trying to turn Google's bug problem into a whodunit. Start your bedbug conspiracy theory engines, because this problem for businesses isn't going away anytime soon.
How everyone benefits from more women in technology. Venturebeat has a piece weighing in on the question of why there aren't more women in tech that takes a refreshingly practical approach to the issue, giving advice to members of both genders on how to boost the gender diversity and why they should bother. The author, herself a woman and tech journalist, counsels men that female employees and co-founders are a competitive edge that concretely bups financial performance. For women, she suggests making the most of the fact that they aren't insiders. She cites Anita Roddick of The Body Shop as a favorite female entrepreneur for "pioneer[ing] notions like environmentalism and fair trade in business long before they were fashionable or profitable." Check out the top woman building successful companies in tech and other fields on the Inc. 500.
China gets the Google treatment. The former head of Google's Chinese outpost, Kai-Fu Lee, is investing in 12 growing businesses in China through an incubator he founded called Innovation Works. According to BusinessWeek, Lee's interest in Chinese innovation is part of a larger trend that sees more investors turning their attention East. One University of San Francisco entrepreneurship professor tells BusinessWeek, "While confidence in Silicon Valley has been declining among VCs, there's more money flowing to China venture funds." In Lee's opinion, because China's angel investor community is virtually "nonexistant," it's up to well-funded incubators like Innovation Works to encourage Chinese entrepreneurs to grow. For more information on doing business in China, check out our Beijing city page.
Nine tips to being a better boss. Sometimes the best thing a boss can do is to get out of the way and let their employees do what they do best. With that in mind, the American Express OPEN Forum has a list of nine things a boss can do to remove those stumbling blocks that keep employees from reaching their potential. Excerpted from the book Good Boss, Bad Boss: How to Be the Best...and Learn from the Worst, the post extolls the virtues of simplification. Among the key suggestions is to, "List all the performance metrics you use. Pick the three most important. Do you really need the rest?" (As long as you are on a self-improvement kick, here's our list of 6 ways to be a better CEO.)
Tips for collecting on late payments. The first rule of making sure late payments don't spoil your cash flow is to act quickly, according to a post on BusinessWeek. The odds that the delinquents will cough up your cash drop drastically over time from an 81 percent payback rate at two months, to 52 percent at six months, and less than 25 percent after a year. So don't be shy about demanding what you're owed and doing it fast. For four more tips on coaxing money from laggard customers see the rest of the article.
Silicon Valley, vacation destination? Well, the New York Times seems to think so. The former agricultural cradle that swaddles Apple, Google, Intel, and countless start-ups is featured in this week's "36 Hours In..." feature. What's hip to do on a vacation to programmer paradise? Rub elbows with venture capitalists at Rosewood Sand Hill hotel in Menlo Park, stake out the Googleplex from Shoreline Boulevard, or take an Airship tour to spy on Larry Ellison's "23-acre Japanese-style compound." The piece also urges visitors to stop by the bar where an Apple software engineer lost an iPhone 4 prototype last April. And don't forget to stay in the Avatar Hotel and visit the Computer History Museum! Oh, man, where are those shot girls when you need them?
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The Social Butterfly of Start-ups
If theres such a thing as a socialite in the start-up community, Chris McCann, the co-founder of Startup Digest, would be it.
A little more than a year ago, he arrived in Silicon Valley, fresh out of college at Cal Poly, San Luis Obispo, where he graduated with an entrepreneurship degree (a degree, of course, that he helped develop). Knowing few people in the Bay Area, McCann started hitting the start-up event circuit and networking with Silicon Valleys finest. Some events were useful. Some, not so much. To keep track of each one, McCann logged his experiences in a journal of sorts, which he emailed to a group of 22 friends back in November.
Since then, what started as an informal email chain has grown into a weekly newsletter with more than 64,000 subscribers in 51 cities, from Houston to Tokyo. Startup Digest, as its now called, has representatives around the world, who seek out the most important events for entrepreneurs and recommend them to subscribers. Though McCanns a little too busy these days to attend every lecture and meetup in and around Palo Alto, where the companys based, he recently spoke with Inc. reporter Issie Lapowsky about Startup Digests growth and the crucial need it fills for entrepreneurs.
When did you realize you might be able to turn your networking skills into a service for other people?
I got to know my co-founder Brendan McManus about three years ago when he was working on a start-up called UpDown. I was one of the early users of it. We both independently moved up the Bay Area, and he randomly Facebook messaged me and was like, Im in Silicon Valley, do you know any place to stay? Coincidentally, I was being kicked out of the sublet I was in, so we came together to look for a house. What I loved about him was when we moved in together it was like 9 oclock at night and he was like, Well? What are we going to work on? I was like this is awesome. So we just tried a whole bunch of ideas out, and Startup Digest was one of those things.
Howd you get the word out about it?
The thing with the Digest is, I was actually going to the events I was featuring. At the event, Id always ask the organizers if theyd let me talk for a minute afterward to tell people about Startup Digest. So I remember the first time, I gave a little thing about it, and we originally didnt have a website. The only way you could sign up was you had to either email me or Twitter me, and that was the only way I could put you on the list. The first time I said it at an event, I had 20-30 people come up to me asking to be on the list. Silicon Valleys a very small place, so word spread quickly.
Now that you have newsletters going out all over the world, how do you maintain quality control?
We have curators in each city. Most of them are startup entrepreneurs themselves. Some of them are investors in startups, and some of them have cashed out of their startup, but they have to be somewhere along that chain. We pre-screen people, and then theyre the ones who pick the events in their city. And its not like we pick specific cities and try to find someone there. People come to us and say, 'Im a founder in Seattle, and I heard about you guys. I really want to do it here.' We have a little form where they can apply on the website, then we do a quick call with them to make sure theyre doing it for the right reasons and get to know them a little bit, and then we have an internal wiki to set them up.
Were you surprised by anyone who contacted you?
Actually, one of our fastest-growing cities was Capetown, South Africa. This guy has a company called Personera, which is really freaking cool. He heard about us because he had an investor in San Francisco, and he was like, 'Hey we need something like this in Capetown.' He just applied through the online form, just like anybody else, and he went from like 1 to 81 members in a week or two. Now, I think its at almost 1,000 people signed up.
What's the cost of running a newsletter on this scale?
The start-up costs were basically nothing. We started with Gmail to send the emails and Excell to manage the list. All we had was the website cost, which was, all in all, less than $100. Now the costs to operate are less than $1,000 a month. We're spending $500 a month on emails, then the rest on hosting, travel, events, etc. The biggest cost is Brendan and my living cost. We make the majority of our money through advertorial emails and sponsorship.
Which events get the most attention?
The ones that are always the most popular are private events, the ones you have to apply to get into. We usually feature the event and say, 'Heres how you can get in touch with the people.' Those do really well. Also, launch parties do really well. We feature events from huge conferences all the way down to really small meetups, and you find that the smaller meetups that are usually more technical and skill-focused, actually perform surprisingly well.
You guys host your own events, too, right?
We only do one event, and its more fun and silly for our subscribers. It's called Startup Waffles. Its free waffles, and whenever we travel, we do one for our subscribers, and we do it once a month in San Francisco.
Do you have anything new in the works?
At least for now, its all event listings. The Silicon Valley one is still the biggest of all the cities, and were transitioning that one slowly into more of a daily newsletter, sort of like Daily Candy, because people have been demanding more content from us.
Why do you think Startup Digest has become so popular so quickly?
As much as I use Facebook, Twitter and all that stuff thats out there, theres nothing thats going to replace person-to-person interaction. You go and meet an investor or customer face-to-face, and youre excited about it. You make a stronger connection really quickly. Then its a lot easier to follow up on these other channels, but that person-to-person feeling can never be replaced.
3 Ways to Test Your Business Partner
How much money are you planning to pull out of your company this year?
If you own your business outright, the decision is yours, but if you have one or more partners, things can get a little dicey, says Jordan Dolgin.
Dolgin is a Toronto-based lawyer who specializes in business law and has seen many business partners fall out. In one example he recounted to me, two partners had vastly different ideas about how much money they wanted to take out of their thriving business. One partner had a healthy appetite for the finer things in life and wanted to claw out most of the cash to fund his ever-growing lifestyle. The other wanted to leave most of the cash in the business to fund new projects and provide a safety net. Their difference of opinion escalated into an all-out war. They stopped talking and eventually couldn’t even be in the same room together.
Finally, the more conservative partner asked their banker to change their account so that both partners had to sign all company checks. This move caused the bank to lose confidence in the business, and their credit line was pulled until the partners could work out their differences.
Like with all marriages, it’s better to size up your partner before you commit. Here are three ways to evaluate your potential business partner:
1. Go to lunch
Watch how your potential partner treats your server, and you will have a good idea of how he or she will treat your employees.
2. Compare your numbers
Ask your potential partner trade-off questions to evaluate their need for financial reward with their lifestyle aspirations. Once the business gets going and the profits start rolling in, how much money do you need to be happy, and at what point is an extra week’s vacation more important than the next $10,000 in personal compensation?
3. Look in the parking lot
Compare your potential partner’s current spending habits to yours. In particular, get a look at the car he or she drives. A car is the ultimate expression of the image we want to display to the world. If your potential partner is driving a Porsche, and you’ve got a sensible sedan, consider this a reliable bellwether of problems to come.
John Warrillow is a writer, speaker and angel investor in a number of start-up companies. He writes a blog about building a sellable company at http://www.BuiltToSell.com/blog. You can also follow him on Twitter at @JohnWarrillow.
Small Businesses Smacked with Credit Card Rate Hikes
Small-business owners have been slapped with credit card interest rate increases of more than 30 percent since January 2010 because their cards aren't getting the same protections as those of consumers, says a new study.
The Credit Card Accountability, Responsibility and Disclosure Act, enacted last year, limits rate increases, requires banks to apply payments to higher-rate balances first, and mail bills 21 days before the due date instead of 14 days, among other provisions designed to protect consumers from unfair billing practices and rate hikes.
But cards offered to businesses aren't included in the legislation. According to a study by BillShrink, a search engine that compares product options, before the rules took effect in February a third of issuers raised consumer card rates an average of 16 percent. But rates on small-business cards can rise unchecked – and so far have increased more than 30 percent this year, says the study, which analyzed data from 2,300 small businesses seeking advice from the site.
"We predicted earlier this year that small businesses would be subject to rate increases as the banks try to make up for lost consumer revenue resulting from the CARD Act," said Schwark Satyavolu, CEO of BillShrink, in a statement. "Since small businesses aren’t protected, they appear to be an easier target for card rate hikes."
(How keen are credit card companies to cash in on this loophole? So keen that they are reportedly offering corporate cards to peoople who don't own businesses, prompting Senator Charles Schumer, the New York Democrat, to write to the Fed asking it to curb the pitching of the legislation-exempt cards to consumers.)
Small firms also have a lot more offers to be wary of: Issuers increased mailings of corporate-card offers by 256 percent in the first quarter of 2010 compared to the year before, according to Synovate, a London-based market research firm. And according to the Federal Reserve, 83 percent of small businesses in 2009 used business and personal credit cards, which essentially amount to short-term loans.
Despite the different treatment from credit card companies, small businesses tend to pay off their monthly balances more often than consumers, according to the BillShrink study. Just over a quarter of small firms don't pay off their balance every month compared to 40 percent of individuals. The average debt held by a U.S. small business is $12,100, compared to $7,020 for consumers.
Other survey findings: Perhaps not surprisingly, small firms that pay off their balances tend to have better credit ratings and larger annual revenues than those that don't. A full 60 percentof companies carrying a balance have revenues under $149,000. (For the record, these business owners rated cashback benefits as the most important card reward feature, followed by airfare rewards.)
Switching to a card with better rates and improved rewards could save the average small business owner more than $1,500 a year, the study said.
EBay Says: PayPal Only Please
Effective July 1st of next year, eBay will no longer allow third party checkout transactions for customers. That means you will only be able to make purchases using eBay-owned PayPal.
eBay claims that only about 10% of purchases made are done by third party options. In the same announcement, the online auction giant tried to throw a little oil on what will surely be turbulant waters as reactions ripple through the web. eBay says it will be upgrading its checkout system with better credit card integration, tax reporting and smoother shipping to places like Alaska and Hawaii. Yeah, yeah....
Speaking of turbulant waters, there's already been some brouhaha over eBay using this to throw Google Checkout out of its sandbox. Just a clarification; Google Checkout was never in the eBay sandbox to begin with.
It's long time until next July, we'll see what the FTC has to say about this between now and then.
How to Buy Radio Advertising on a Budget
Advertising on radio has consistently proven to be an effective and efficient medium to help generate brand awareness and grow business for a variety of companies and in a variety of geographical markets. But for small and mid-sized businesses that are on a tight budget, it pays to know some tricks of the trade to keep radio advertising affordable.
"Negotiation is key. You have to go in and negotiate what you want," says J. T. Hroncich, managing director and principal of Capitol Media Solutions, an agency that helps companies buy advertising. "There's a lot more to it than placing a simple print ad. You have to look at the target audience your looking to reach, size of your budget and the ratings of the stations you are interested in purchasing."
The sections below will detail how to understand your options for radio advertising, tips for negotiating deals for radio ads within your budget, and other promotional opportunities on radio.
Dig Deeper: Making Your First Advertising Buy
How to Buy Radio Advertising On a Budget: Understand Radio Advertising OptionsDespite the rise of television, cable, and the Internet as advertising platforms, radio advertising "still makes sense," says Hroncich. During the recent economic downturn, some businesses stayed away from radio, fearing that as people lost jobs, there wouldn't be as many commuters during drive-time hours. But that seems to have settled down. "It is still really relevant, but a lot depends on the market. If you're in Atlanta, Washington, D.C., or Los Angeles, where a lot of people still drive to work, it's a good platform to get your advertising message out."
Certain types of companies tend to advertise more on radio – auto dealers, banks, jewelers, salons, and so on. They tend to be local and they often provide a phone number, website, or location so that you can reach them. "At the end of the day a lot of them want you to come into the store," Hroncich says.
Often, radio stations will help produce the commercial for you as part of negotiating an advertising deal. "You can give them the copy and they'll create the ad for you, as long as it's a pretty straightforward type ad," says Hroncich. "Most times it is included in the price. Otherwise you can pay $1,500 to $3,000 and up to have an ad created."
Before negotiating, you have to figure out what target market you are trying to reach and then find radio stations and programs that do a good job of reaching those markets. Advertising agencies are often hired to do the research and the bidding for you, and can often negotiate more "value added" features to a contract.
Dig Deeper: On-Air Endorsements
How to Buy Radio Advertising On a Budget: Tips for Negotiating Radio Advertising DealsThe first rule of thumb to save money on radio advertising is to plan early and negotiate a long-term (13- or 26-week) or yearly contract. "Stations very often provide discounts and/or value added for clients who commit to purchasing a designated amount of advertising in advance," says Wendy A. Schmidt, a 20-year radio sales veteran in the Boston market who is a senior account executive for CBS Radio's premier Boston station, WBZ NewsRadio 1030 AM. "When you lock into a longer term, your rate is guaranteed for that contract period against future rate increases, and you do not pay in advance. Airtime is generally billed weekly or monthly only after the commercials air."
If you don't purchase your radio campaign in advance, you are at the mercy of supply and demand, whereby rates may increase as inventory decreases, Schmidt says. And, you may not be able to run your campaign at all if a station is sold out during busy months.
Here are some other tips for buying radio ads on a budget:
Dig Deeper: Saving Money on Radio Advertising
How to Buy Radio Advertising On a Budget: Other Types of Radio PromotionsOutside of on-air radio spots, there are other opportunities you may have on radio to promote your business. Here are a few:
Radio station promotional events. To add value to your radio campaign, you may want to sponsor a radio station event as part of your advertising, Schmidt says. This can be negotiated as part of your advertising package. Make sure to ask about any promotional opportunities. "For example, a radio station may host a business breakfast series in which qualifying advertisers are included as sponsors," Schmidt says. "Or, a station may also customize a promotion exclusively for your business."
In addition to on-air exposure, you may be able to capitalize on in-person exposure to potential customers. "Your company may be allowed to provide samples or sell product, do demonstrations, and/or distribute promotional materials at the event," Schmidt says. It depends on the client whether sponsoring events makes sense, Hroncich says. "If it's an event featuring the most popular DJ in the area, you're going to have to pay a little more appearance fees, but it may really lend credibility if you have a popular on air personality reading your commercial or endorsing your product," he says. "That goes a long way."
Cross promotions with other advertisers. Schmidt recommends that businesses ask the radio station sales representative about other advertisers who may be interested in cross promotions. "Each advertiser would mention the other in their advertising, often providing an offer such as something free or discounted with purchase," she says. "For example, a supermarket may advertise a discounted ticket to an area attraction with the purchase of specific food items. The attraction, similarly, would promote the supermarket." Cross promotions can be rewarding for both advertisers, as they are increasing their airtime and exposure, while simultaneously providing a consumer incentive to help drive sales for both businesses.
Determine if you qualify for co-op advertising funds. Schmidt says co-op advertising funds may be provided by a manufacturer whose products the retailer sells. "The amount of funding the retailer receives is generally based upon meeting a sales benchmark of the manufacturer's product," she says. "For example, a particular brand may pay a percentage of the store's advertising, provided that the radio commercial mentions the brand and/or slogan a designated amount of times." Co-op funds may accrue yearly or quarterly, but have specific deadlines in which to use the funds, otherwise they lapse. "It's important for retailers not to overlook this valuable potential source of advertising funding," Schmidt adds.
Tap into the radio station's online audience. Most radio stations have websites, and "stream" or broadcast their programming online. Generally, for a minimal investment, advertisers can add value to their on-air radio campaign by also advertising on the station's website. Sometimes, Hroncich says, radio stations will sometimes throw in website advertising as part of the "value add" in an advertising contract.
–––––
How to Buy Radio Advertising On a Budget: Recommended Resources
The Radio Advertising Bureau
The sales and marketing arm of the radio industry, the RAB has nearly 7,000 members including some 6,000 stations in the U.S.
Radio Locator
The most comprehensive radio station search engine on the Internet.
Radio Ad Lab
An independent organization funded by radio industry companies to further the understanding of how radio advertising works and to measure radio's effectiveness.
Arbitron
A media and marketing research firm serving the media -- radio, television, cable and out-of-home -- as well as advertisers and advertising agencies.
Google Taking on Facebook
The Wall Street Journal has reported that Google is working on a social networking solution to compete with Facebook, although when asked if the solution will resemble Facebook, CEO Eric Schmidt said, "The world doesn't need a copy of the same thing." They are talking with top game developers like Playfish and Zynga (the company that brought Farmville to Facebook).
Google already owns Orkut, a social network that enables instant messaging and the sharing of photos and videos, just like Facebook.
If you remember, I previously blogged about four guys who were taking on Facebook with their own solution, Diaspora. Will anyone ever be able to tame the Facebook beast, or are all attempts in vain?
Google is big and smart and rich and Facebook is a UI nightmare, so maybe there's a way for Google to win here, but they haven't won at everything and they don't make money on everything. They still make most of their money from search ads.
Lotsa luck guys!
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The Rise of High-Resolution Fundraising?
Venture capital firm Y Combinator co-founder Paul Graham sent the VC blogosphere into a tizzy this week when he tweeted:
“Convertible notes have won. Every investment so far in this YC batch (and there have been a lot) has been done on a convertible note.”
At issue for everyone was whether this was 1) true and 2) a good or bad thing.
If you’re interested in the various opinions, I offer up these links:
Fred Wilson, a well-known New York VC: Some Thoughts On Convertible Debt
Foundry Group managing director Seth Levine: Has Convertible Debt Won? And If It Has, Is That a Good Thing?
The Business Insider: What’s All This Noise About Convertible Debt?
Those are some pretty big responses to a 25-word Twitter message. In the end, no one could really agree on who benefited from the trend. The most common answer: well, it depends.
But back to Graham himself. He offered a follow-on post at his website explaining why he thinks the rise of convertible debt is a positive trend for both entrepreneurs and investors. The short answer is that it speeds up the fundraising process and is generally fairer to everyone involved.
In terms of legal complexity, drawing up a convertible note is a breeze compared to equity. Therefore it's a lot cheaper. Additionally, you don’t get sucked into the debate over valuation.
By far the biggest influence on investors' opinions of a startup is the opinion of other investors. There are very, very few who simply decide for themselves. Any startup founder can tell you the most common question they hear from investors is not about the founders or the product, but "who else is investing?"
Since no one wants to be the first mover when it comes to investing and putting a valuation on a company, it’s easy for fundraising to grind to a halt.
Graham argues that the beauty of convertible notes is you can bypass the groupthink and give different prices to different investors, rewarding those taking more risk and those likely to help you in the future. He refers to this variable pricing as “high-resolution fundraising.”
(This is presumably opposed to the low-resolution process of fixed-size equity rounds where no individual investor is willing to pipe up with his or her intent to invest or valuation.)
This seems a lot more equitable to Graham (pun not intended):
Bolder investors will now get rewarded with lower prices. But more important, in a hits-driven business, is that they'll be able to get into the deals they want. Whereas the "who else is investing?" type of investors will not only pay higher prices, but may not be able to get into the best deals at all.
And whether or you're on board with this kind of system, it doesn't much matter to Graham: “Different terms for different investors is clearly the way of the future.”
8 Places To Find Advocates for Your Business
You've probably spent a lot of time and energy building up your business, so now it's time to locate those people who love to shout from the mountain tops how great they think you are. Why? Well eventually you'll want to reach out to these very special people, thank them and treat them extra special.
At my company VerticalResponse, we create a list of advocates from different channels so that when we're ready to really motivate them even more than they already are, we can do it easily. So where do you start?
Your Employees - Your employees can be the very best advocates for your business. You know who your best employees are and those who love what they do. Ask them to talk about your business on Twitter and Facebook if they'd like, and to post that they work for you on LinkedIn.
Best Customers - Look to see who your best customers have been, these are probably people that have purchased from you a number of times. Then based on your criteria, create your "best customer" list.
Survey Responders - If you're sending out customer satisfaction surveys, why not monitor who responds positively to your surveys? Then create your "survey advocates" list.
Google Alerts - Sign up for FREE Google Alerts with your business name, your name, even you competitors name. See if there is anyone who keeps talking about your business more than a few times. Call this your "google advocates" list.
4Square - If you've got a local business, monitor who becomes the Mayor of your business on 4Square. When they check in, make sure you know and you find them and give them a special discount or deal. They'll be sure to visit often and tell their friends. Call this list your "4Square Mayor" list.
Twitter - Search your twitter handle on twitter.com. You will see who is talking positively about you. We use TweetDeck and set up a variety of keywords to track. Then from that easy interface we can manage our conversations with them. Make sure you RT them asking them to send you an email, include your email address. "Thanks for the RT! Email me at [email address] for a special deal!" You only have 140 characters so make sure you can fit it all and you will get their email address so you can start to build your email list of "Twitter advocates."
Facebook - Create a Facebook Fan Page and monitor who is speaking up with comments and likes. Set up a "Reviews" Tab and ask your followers what they think about you. Then message them back thanking them. Ask for their email address so you can send them something (free product, discount.) For anyone who "Likes" what you write, add them as a friend on Facebook. Then message them and ask for their email address as well. Start to build your list of "Facebook advocates".
Blog - Check out those who've commented on your blog. Most blog platforms enable you to see their email address. These will be your "blog advocates."
Now that you've collected all of your advocates, keep this list fresh at least every month. Then be sure to reach out to them with an email marketing campaign, thank them and give them some extra special love.
Are you finding your best advocates? If so, how? Please comment!
Battle for the Nerds
Each day, Inc.'s reporters scour the Web for the most important and interesting news to entrepreneurs. Here's what we found today:
Google vs. Facebook: the employee bidding wars are on. Sure seems like a good time to be a developer at Google. According to TechCrunch's Michael Arrington, Google is combatting an increasing number of employee defections to Facebook by offering some astounding perks: in one recent case, Arrington writes, Google offered a developer threatening to leave for Facebook "a 15% raise on his $150,000 mid level developer salary, quadruple the stock benefits and...a $500,000 cash bonus to stay for a year." The most concerning part for Google? "He took the Facebook offer anyway," Arrington writes.
Ten B-School courses not to miss. The debate over whether an MBA is of value to entrepreneurs starting a business will likely rage on forever, but for those who do choose to go back to school, Business Insider has a list of the 10 MBA courses entrepreneurs must take. Using data gathered from professors, venture capitalists, and entrepreneurs, the article lists the courses that have proven valuable to entrepreneurs facing real-world business dilemmas. Among the must-take courses are the core finance classes as well as classes on feasibility analysis and new venture management.
Flex your personality muscle. Last month a group of online marketing and social media trendsetters came together to share advice on how companies could increase their influence online. This week the New York Times' MP Mueller reports how the findings of the aptly-titled "Influencer Project" can help small businesses. Overwhelmingly, and somewhat surprisingly, the experts agreed that good social media skills really boil down to good communication skills. The same things people have been doing for centuries offline -- telling great stories, listening intently, being transparent -- seem to work online as well. Use social media platforms to share your stories, passion, and ideas with consumers along with the products they purchase. Consistency is key to forging relationships and resonance with your audience. For more social media tips, visit our Social Media Toolkit.
When will your cell phone be your wallet? Perhaps as soon as next month. Sure, the Japanese already have tap-your-phone-to-pay technology, and call it osaifu keitai. Now it's coming to the United States. Visa is releasing an iPhone case that makes the smart phone compatible with tap-to-pay consoles. And MasterCard is using tags that stick directly to phones. But these are just temporary solutions - Nokia will include near-field communications (NFC) chips in all new smart phones next year, Fast Company reports. At that pace, NFC should be ubiquitous in the United States in three to five years.
31 start-ups named world's tech pioneers. Yesterday, the World Economic Forum announced a group of 31 tech start-ups having a noteworthy impact on the world (via ReadWriteWeb). Past winners include Twitter and Kevin Surace's, an Inc. Entrepreneur of the Year, Serious Materials. Some winners this year include the location-based social network Foursquare, and the augmented reality company Layar. The winning companies and their technologies were chosen for "empowering people in all walks of society by giving them more information, more options, a bigger voice in the world around them and more control over their own health and their impact on the environment."
Entrepreneurs on the campaign trail. Today's Wall Street Journal tells the story of a few companies who attribute the bulk of their growth to political campaigns. Take VictoryStore.com. The Iowa-based company, run by a former Republican party chairman, expects to nearly double its revenue this year thanks to a new product line: cardboard cutouts of political incumbents. Other businesses, like Broadnet, are replacing automated campaign phone calls with interactive broadcasts of live town hall meetings. It seems regardless of who wins the Senate and House elections in November, there are some business owners who stand to win either way.
Dr. Seuss on innovation. In the Harvard Business Review, Scott Anthony writes that bedtime reading helped him visualize why a company was approaching innovation the wrong way. Remember the story of the star-bellied sneeches? Well, they thought themselves superior to the sneeches without "stars upon thars." Sylvester McMonkey McBean unveils a machine to add a star to the belly, and then one to remove stars. Eventually, no one remembers who had a special star in the first place. How can this apply to business? When structuring a company, creating an autonomous group - like a board or a review panel or a marketing group - remember to make sure it is actually autonomous, and isn't just a special label applied, like a star upon the belly of a sneech.
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Would You Challenge Taylor Lautner to Push-ups?
Thirty seconds into one of the insanely popular Twilight films (or a quick look at any Twilight poster) and you know that Taylor Lautner, a.k.a. Jacob Black and the guy whose pecs are usually on display, would win a match of muscle against a mere mortal.
But by challenging Lautner to a push-up contest, the owner of a trailer company just might come out the stronger man – or at least with stronger sales.
The saga began last month, when Lautner started legal proceedings against McMahon's RV of Irvine, California, after a dispute over a customized trailer.
Lautner, 18, was planning to use the custom-painted, upgraded vehicle on the Pittsburgh set of his latest flick, Abduction, this summer, but was unable to relax in his new $300,000 toy, as the dealership failed to deliver it by the June 21 deadline. When McMahon's RV finally did deliver it, Lautner and his company Shark Kid Entertainment claimed it was not safe to drive. (The RV company says Lautner paid the full purchase price, accepted delivery of the RV, and did not attempt to return it. The company denies any wrongdoing.)
So Lautner and his dad Dan, who negotiated the contract, sued McMahon's RV, claiming breach of contract and fraud—and that the late delivery caused him emotional distress, according to the Associated Press.
Brent McMahon, the 47-year-old owner of McMahon's RV, was not cowed. The former RV salesman turned entrepreneur (he started his company in 2000, after 14 years working in the field), flexed his PR muscles, challenging the Twilight star to a push-up contest to settle their differences.
McMahon – whose company website claims its "one of the only RV dealerships in the world that employs a dedicated Customer Satisfaction Department" -- said he'd hand over the damages if Lautner won, but would give the cash to charity if he lost. (Lautner's legal team had told McMahon they'd settle for $40,000, which is when McMahon suggested the push-up contest.)
Asked about McMahon’s chances of beating the super-fit Lautner, McMahon’s attorney joked: "He works out regularly, but he’s a 47-year-old man. He’s no Taylor Lautner."
Team Taylor, however, isn't giving him a chance. They've rejected the challenge, with lawyers insisting the move demonstrates the trailer company's "lack of professionalism."
"McMahon RV's response to our client's legitimate claim further demonstrates the lack of professionalism that Mr. McMahon, his company, and his employees have exhibited from the outset, and that compelled the filing of this lawsuit in the first place," Lautner's legal team said in a statement.
The team does, however, "welcome the opportunity for [McMahon] to resolve the matter by making a $40,000 donation to the charity of Mr. Lautner's choice."
So far, McMahon hasn't let Lautner's refusal get in the way of (possibly) doing well by doing good – he's said he'll donate $50 to the Children's Hospital of Orange County for every motorized RV sold until December 2011.
What About That Other Ping?
So, there's Apple's new social network for iTunes called Ping. It was just announced this week and as Steve Jobs himself described it; it's "like Facebook and Twitter meet iTunes."
We all know how this goes. Jobs launched it, so count on Ping to be Webster's newest verb by Friday. (As in, "let me ping you that song" or "what's the name of that new group? Can you ping it to me later?").
But wasn't there already a Ping brand out there? What about the golf brand, Ping?
It turns out, Apple has already cut a deal with the owner of the Ping name in golf. Ping's parent company, Karsten Manufactoring, has even put out a press release blessing Apple's new music endeavor.
"Like Ping, Apple carries a reputation for innovation and quality."- John Solheim, CEO of Karsten Management
5 Ways to Improve Quality
Every business owner likes to think that he or she has a commitment to quality. If that were truly the case, of course, no product would ever disappoint, and no service would result in a complaint. So how can you improve quality at your company? Here are 5 steps you can take to put you on the right path.
1. Make a commitment.
W. Edwards Deming, the father of the quality movement, famously laid out 14 points for management—chief among them, the notion of "constancy of purpose."
Deming argued that a company's commitment to quality had to come from the top, and it had to be reinforced over and over again. Unless a business views quality as its single, non-negotiable goal, workers will inevitably feel the need to make tradeoffs and quality will slip.
"Constancy of purpose means that quality decisions are not situational," writes the operational expert Rebecca A. Morgan. "End of month quality is the same as beginning of month. It means that the long term benefit of the organization is not sacrificed to hit quarterly targets."
So are you ready to commit? If you are, you should tell your staff—and then think about how you will handle the first conflict between your stated objective and a pressing deadline or an attractive short cut.
Dig Deeper: The Power of Purpose
2. Track mistakes.
If you are going to commit to quality, first you must define exactly what quality is. For manufacturers, this process involves statistical quality control, the process of setting a product's specifications and then sampling a small number of units from the production line to see how closely they measure up to those specs. Standards are set and, if too much deviation occurs (or if quality appears to be trending in the wrong direction), the manufacturing process is altered.
Tracking quality is admittedly more difficult in a service business, and efforts by groups such as the International Organization for Standardization (known as ISO) to create meaningful benchmarks beyond manufacturing have had mixed results.
One way to gauge customer satisfaction (and, by extension, the quality of your service) is by tracking what is called a net promoter score. Devised by a Bain consultant named Fred Reichheld, a net promoter score keeps tabs on the number of customers who would recommend a business to their friends. A customer who answers 9 or 10 is seen as a promoter; a customer who answers 7 or 8 is seen as passive; and a customer who gives a company a score of 6 or lower is seen as a detractor. By subtracting the number of detractors from the number of promoters, a company arrives at its net promoter score.
Dig Deeper: How to Address Quality Issues
3. Invest in training.
An old saw of the quality movement is that any business with a quality control department is doomed to poor performance, for it has demonstrated to every other employee that quality is not his or her chief concern. Instead, quality experts recommend that businesses train workers at all levels to look for ways to improve quality and to ameliorate problems.
Training takes on several dimensions. For starters, you should set up a new-employee initiation program that trains workers to focus on quality issues from their first day on the job. Different CEOs have different perspectives on how best to do this. Ralph Stayer, the quality-obsessed CEO of Johnsonville Sausage in Sheboygan Falls, Wisconisn, believes your existing employees should be put in charge of training new employees, because only they can provide a firsthand perspective on how your company's operations work. Ari Weinzweig, founder and CEO of the Zingerman's Family of Companies in Ann Arbor, Michigan, takes a different approach: He personally leads all new-employee orientation training sessions (which last several days) because he believes an employer never has a better chance of instilling values and a sense of purpose than right after he or she has hired a new employee.
Whether you hand train duties to your employees, take them on personally, or some combination of the two approaches, it's important that you provide workers with a history of the company through the lens of quality. Let them know what problems you have had in the past, how you corrected these problems, and where your company stands with respect to its quality goals today. You should also go over your definition of quality in detail, and show them how you measure quality (see the previous section.) Finally, train workers to see the connection between their actions and, more broadly, their work ethic, and the company's overall performance. By tying individual behavior to an overall system of work, and then showing where that system can, on occasion break down, you will be giving workers the information they need to be good stewards of your business.
Dig Deeper: Ralph C. Stayer on How Johnsonville Sausage Embraced Quality
4. Organize quality circles.
Your staff members may roll their eyes at the introduction of such a dated technique, but organizing employees into quality circles can be an effective way to identify and address problems. Simply put, quality circles are groups of employees who are encouraged to assess processes and recommend improvements, all with the goal of promoting quality, efficiency, and productivity. The concept was developed by Deming in post-war Japan, and made its way to the United States in the late 1970s. At one point, half of all large corporations had adopted quality circles, but then interest in them faded.
That's a shame. Quality circles, by any other name, are teams of workers who are given the authority and responsibility for making a business better. To succeed, experts say that participation in a quality circle should be voluntary; circles should draw members from all corners of a company; and the circle should set its own agenda (rather than pursuing a company owner's agenda.)
Once you have invited workers to join a quality circle, provide them with adequate resources to pursue their analysis, and schedule a time in the future at which they may present their findings. It is important that you act on their recommendations, even if the group's conclusion is not necessarily one you would have drawn yourself. Remember, the purpose of the exercise is less to solve a particular problem than it is to engage workers in the process of finding and addressing concerns. Moreover, you should be tracking customer complaints or product defects on a regular basis, so if the circle's recommendations do not produce the desired result, you'll know it, and be able to act.
Dig Deeper: How to Set Up Quality Circles
5. Have the right attitude.
Too many people turn the quest to improve quality into something oppressive. No less an authority than Deming rejected the idea that the quality management had to be dreary and involve a lot of negativity. "The prevailing system of management has crushed fun out of the workplace," Deming moaned in an interview in the 1990s.
This attitude is not necessarily easy to adopt and runs afoul of some of the basic management practices we take for granted. For example, Deming was not a fan of performance reviews, as the writer John Case has explained. "[I]f your evaluations are fair, you will determine that half your workers (by definition) are below average, and you will tell them so," Case writes. "Result: half the work force is instantly discouraged and demoralized, and any sense of common purpose is undermined."
Rather than pointing out inadequacy wherever it might be found, Deming believe that the job of managers was to frame the pursuit of quality as an interesting, noble, and worthwhile goal. If you are to truly improve quality at your business, whether you manufacture products, distribute goods, or perform a service for your clients, your first step (and also the hardest) is to resist the temptation to dwell on your company's flaws and instead rally your team around the cause of rooting them out.
Dig Deeper: Zero-Defect Management
What the Apple Announcement Means
Steve Jobs just wrapped up another keynote–Chris Martin from Coldplay is playing a little send-off right now. As far as Apple announcements go, the keynote might have felt like a bit of a letdown, but there were three important reveals:
1. Apple TV
The scuttlebutt: An iTunes-connected TV box–Kevin Rose guessed it would be renamed the iTV–that would run iPhone apps, thus creating an opportunity for app entrepreneurs to invade the living rooms of millions of Apple fanboys.
The reality: The device is still called the Apple TV. It's cheap, it looks sweet, and there are cut rate prices for video rentals. But no app store.
The upshot: A big letdown for entrepreneurs, who would have had a shot at reaching consumers in yet another place. I expect that apps will eventually come.
2. New iPods
The scuttlebutt: Apple would launch a new version of the iPod touch to keep pace with the iPhone 4.
The reality: Delivered! The new touch is basically an iPhone 4 without the phone. It includes the same display and processor, plus two cameras for video calls and the ability to record videos in high definition. Plus there's a new line of the smaller iPods. Jobs called this "the strongest lineup of iPods we've ever had."
The upshot: Great news for app developers, especially those making games and communications applications. During the keynote, Jobs pointed out that the iPod touch is the most popular portable game player in the world, with more than 1.5 billion entertainment apps downloaded. The improved iPod Touch should make the device even more attractive–and further broaden the market for game companies.
3. Wardrobe
The scuttlebutt: Black mock turtleneck, of course.
The reality: Crew neck!
The upshot: Bad news for high neckline holdouts. Your icon has left you.
New Sony E-Readers
On the heels of Amazon’s new lower-cost Kindle, Sony has announced the launch of three e-readers that are slimmer and lighter than the company’s previous models, with improved touchscreen technology. All three devices have E Ink Pearl paper-like displays that are readable in direct sunlight. Here are the details on each model:
The Pocket Edition has a 5-inch touchscreen and 2 GB of memory, enough to store up to 1,200 books. It comes in silver and pink. Cost: $179
The Reader Touch Edition has a 6-inch touchscreen and 2 GB of memory, along with dual expansion slots for adding up to 32 GB of additional memory. You can also play MP3 files and AAC audio files on the device, which is available in black or red. Cost: $229
The Reader Daily Edition, which has a 7-inch touchscreen, provides a wireless connection to Sony’s Reader Store using AT&T’s 3G network. It also has WiFi and basic Web browsing capability. Like the Touch Edition, it has 2 GB of memory with the ability to add up to 32 GB. It comes in silver. Cost: $299
Do You Love Your Business as Much as Hef Loves Playboy?
Last year, a New York Times reporter quoted 84-year-old Hugh Hefner as saying, “If I sold it (Playboy Enterprises), my life would be over.”
If your workday entailed lounging around in a robe at the Playboy mansion, most guys could see why you might not want to give it up.
But assuming your business is a little less—ahem—sexy, could you imagine life without it? Some psychologists have likened the sale of a business to the loss of a child in terms of its psychological impact and sense of loss for the founder. I think there are some steps you can take now to lessen the letdown.
When I started Warrillow & Co., my name was literally on the door. In the beginning, I was so desperate for it to succeed that I poured all of my waking hours into the business. My hobbies and relationships started to wither from lack of attention. I rationalized my schedule, saying that once I got the business going, I could get back to “my life.”
After a while, the business did get off the ground, but I never changed my work schedule. The source of my drive evolved from necessity to the adrenalin rush I got from building a successful company.
It all started to come undone in 2004, when the departure of an employee made me feel personally rejected. This employee was an important part of our team and managed one of our key relationships. She was going to a great job with a big multinational firm, but I felt betrayed.
The loss of this popular employee triggered the departure of a number of other workers soon afterward. I was left with a skeleton staff, a troubled business and a bruised ego.
The whole experience made me realize just how much a part of my personality my business had become—and just how personally I was taking things associated with it.
Eventually, I picked up the pieces and rebuilt the company. But, like a person who had been betrayed in a relationship, I became more hardened and started to look at my business as an inanimate economic engine instead of a defining aspect of who I was.
Rather than continuing to give all my time to my business, I vowed to get back in touch with the people and things that were important to me.
I stopped putting “life” off and started to get one. I taught myself how to windsurf again. I bought a mountain bike and competed (that’s a charitable way of describing my performance) in a three-day stage race. I started running; I bought skis and a snowboard and organized an annual trip with old friends. In short, I got back in touch with the things I like to do.
Now that I am no longer working in my company day to day, I do miss the people. However, for the most part, I don’t miss the business itself because the void has been filled with other relationships, hobbies, interests and investments that I started nurturing long before selling my company.
When I look back, I’m glad I had a near-death experience in my business as it forced me to nurture outside interests and investments in my life before I actually attempted to sell.
As for Hef, my guess is that all of his interests can still be found at the office.
John Warrillow is a writer, speaker and angel investor in a number of start-up companies. He writes a blog about building a sellable company at http://www.BuiltToSell.com/blog. You can also follow him on Twitter at @JohnWarrillow.
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Why Greenpeace Isn't Facebook's Friend
Each day, Inc.'s reporters scour the Web for the most important and interesting news to entrepreneurs. Here's what we found today:
Facebook makes a new enemy. Yesterday we told you a bit about the brewing social media war between Google and Facebook, but now the 500-million-strong social network has a new enemy, and its name is Greenpeace (via TechCrunch). The feisty environmental non-profit is criticizing Facebook for running its new Oregon data center on “dirty coal-fired electricity,” and given the activists’ track record, it wouldn’t be surprising if they pulled a high-profile prank on Zuckerberg if he doesn’t mend his polluting ways. If you’re worried about your business’ footprint, check out our guide on encouraging employees to bike to work.
Advice for Digg's new CEO. Digg founder Kevin Rose recently told AllThingsD that being the company's head honcho is "a pain in the ass and something I would never wish on my worst enemy." That's too bad for Matt Williams. He's the guy who's been chosen to fill Rose's shoes as CEO following a massive overhaul of the site that has Digg users up in arms. Though Williams has plenty of experience as a former Amazon manager, the LA Times has some advice for him on how to handle the user backlash that most social media outlets know oh-so well. Following Twitter's example, the Times writes, Williams could learn one simple rule: "don't ignore the negativity." And at Facebook, the company with perhaps the most experience in the complaint department, the dominant strategy is to let things "stew for a bit" before addressing the major issues in a blog post penned by the CEO, himself. Rose, it seems, has taken the Zuckerberg approach, but it'll be up to Williams to decide where to go from here.
Technology gets all touchy feely. If you haven't gotten your hands on one already, it's time to get to know "touchable" gadgets. The New York Times reports this week that natural interfaces like the iPad's are part of the "general trajectory" in the computing industry, making machines more open to human gestures and intentions. Evidence comes from computer and tech companies across the board, including Amazon, which is already planning its first Kindle with a nonglare touch screen. Industry leaders believe the natural movements of such devices open up the market to even people who aren't so tech savvy.
The great lending myth. John Paglia of Pepperdine Capital Markets Project spoke to Business Week's Karen E. Klein about research that shows banks' recent hesitation to lend. While revenues have increased and expenses have decreased over the past six months, access to capital remains the number one concern for private companies. Banks have said that they aren't lending because demand for loans are down, but Paglia's research shows loan applications have in fact increased significantly over the past six months. Banks, it seems, are simply more risk-averse than they were two or three years ago, scrutinizing applications "in the manner they should have been doing all along," Paglia says. To evaluate your company's financial positions and ensure your access to loans, click here.
What smart phones can teach you about pricing. Think about it: no matter how buzzed-up or badly reviewed a smart phone is, it costs about the same, $199 (with the obligatory two-year contract). CNN asked some pricing and telecom experts why. There are several reasons. Sure, $199 might be a perfect price point for smart phone sales volume, but it's also not the whole cost of the phone. While you'll pay $199 for an HTC Tilt 2, which runs on an operating system "so out of date that Microsoft is set to completely abandon it" in months, that amount could also buy you an iPhone 4. Basically, wireless carriers charge as much as they think you'll pay for a phone, and themselves pay the rest of the cost of the device (really, that's $599 for a 16 GB iPhone). Adding to a carrier's overhead are phones that eat up more bandwidth, and phones that are difficult to service.
Meet the Trojan horse of office technology. Oh, it's just an iPad. Think Equities' Rajesh Ghai sent a note to clients yesterday mostly avoiding speculation about what Apple is set to announce this afternoon (via Fortune). He instead focused on why he believes the iPad is the magic device that's found a way to make it past companies' IT department gates. "Considering the iPad's early lead and traction in the tablet form factor, we believe it could be the product that finally makes Apple a broader IT hardware supplier into the enterprise," he writes, adding new - much higher - sales estimates for the iPad.
Renowned start-up accelerator comes to New York City. Just a few weeks after SeedStart became the first New York City start-up incubator to graduate a class of young companies, Boulder-based TechStars is entering the New York tech scene, writes Silicon Alley Insider. Foursquare co-founders Dennis Crowley and Naveen Selvadurai, VC Fred Wilson, and Thrillist.com CEO Ben Lerer are just some of the local names who have signed on as mentors. You can apply for the inaugural 2011 class here.
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Solving the Pricing Riddle
Dear Norm,
In October, I parted ways with my former employer. I have decided to start my own business creating mobile websites and apps for businesses. The trouble is, I have no idea how to set pricing. My overhead is $7,044 a month, and it takes me about two weeks to develop each website or app. I have one client, a friend of the family, whom I charged $500 for a huge website, which I know was too little, but I'm worried about losing customers by setting my rates too high. Then again, I need to eat! What do you advise?
Kate McGinley, founder, McGinley Media
Pittsburgh
Everything has a price, as the saying goes, but a lot of people struggle with figuring out what the right price is. I get more inquiries about pricing than about any other subject. The classic mistake is the one Kate was about to make: setting a price based on what she feels she needs to earn rather than on how the market values her service. Competition generally determines the price you can charge. So the first step should always be to find out what competitors are charging. There are many ways to do that. You can call up other providers and -- posing as a customer -- get estimates. Local, state, or national trade associations may also provide the information you're looking for. If all else fails, you can follow my father's advice, which he gave me in the form of a humorous story:
A brand-new optician opens up a store and isn't sure what to charge. On the first day, he gets his first customer, who looks at some glasses and asks how much they cost. "Uh, $20," the optician says. "$20?" the customer responds. "That's all?" "Well, that's just the frames," the optician says. "The lenses are extra." "How much?" the customer asks. "Uh, $15," the optician says. "Only $15?" says the customer. "Per lens," says the optician. "Oh," says the customer. "So that's $50 altogether." "Well, the case is $5 extra," says the optician. "Hmm, $55," says the customer. "That's a little high, but I'll take it."
I've used this method, and it works. But whatever approach you take, the rule is the same: You don't set the price; the market does. Your job is to determine what the market will pay. Then you can decide whether it's enough to cover your costs and fund your lifestyle. If you do it the other way -- starting with your own financial needs -- you're likely to wind up charging too much or too little. And charging too little is even more dangerous than charging too much. If you set your prices too high, you can always just reduce them. But if you undercharge, you develop the wrong kind of reputation. I told Kate, "You don't want people saying, 'Let's use Kate McGinley. She's cheap.' It's a lot better if they say, 'Yes, she's a little expensive, but her quality is worth paying for.' "
Please send all questions to AskNorm@inc.com. Norm Brodsky is a veteran entrepreneur. His co-author is editor-at-large Bo Burlingham. Their book, The Knack, is now available in paperback under the title Street Smarts: An All-Purpose Tool Kit for Entrepreneurs.
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Norm Brodsky on Keeping Your Business Concept Simple
The final query this month comes from Meri West, who asked about choosing a name for her home-cleaning business in the July/August issue:
Dear Norm,
Can I ask you a follow-up question? How many add-ons can I have before I start looking desperate and willing to do anything? For example, I'd like to offer swimming pool maintenance -- balancing chemicals, scrubbing walls, cleaning skimmers, and such. And I could also do light pet care, such as walking or brushing a dog or taking pets to a vet. I could offer basic plant care as well, and light home maintenance such as cleaning lint filters, dealing with air and water filters, and replacing toilet seats. How much can I offer without appearing to be a jack-of-all-trades and master of none?
Meri West, founder, A Well Kept Home
Jacksonville, Florida
At least Meri understands the risk she runs by offering to do too much. I shudder to think what her business card would look like if she tried to include every little thing she's willing to do. Here's a better idea: Meri should say simply, "I take care of your home." Period. If people ask whether she changes filters or scrubs swimming pool walls and walks dogs, she can say, "Of course. That's part of taking care of a home."
Please send all questions to AskNorm@inc.com. Norm Brodsky is a veteran entrepreneur. His co-author is editor-at-large Bo Burlingham. Their book, The Knack, is now available in paperback under the title Street Smarts: An All-Purpose Tool Kit for Entrepreneurs.
My Husband's Next Business
As a resident of New Hampshire, I do not fear earthquakes. But I live in terror of four little words: "I have an idea." When my husband utters them, the ground beneath me trembles.
We were hiking a local mountain when Gary revealed his brainstorm for a chain of healthy fast-food restaurants. This was in 2000; his first venture, Stonyfield Yogurt, had been profitable and stable for several years. Gary saw this new business as a logical extension of the mission of our organic yogurt company. My husband sometimes refers to himself as a "pathological optimist." To me, this plan was just pathological.
When you live with a serial entrepreneur, you are never safe from the siren song of new ideas. As one repeat offender told me, "The personality of a serial entrepreneur is almost like a curse. You see opportunities every day." Danny Meyer cites a practical reason for populating much of Manhattan with his eclectic restaurants and food businesses: The new ventures provide development opportunities for his 1,500-plus employees. But as fundamentally, "I can't stop thinking of ideas that excite me," he says.
That creativity and independence are what attract people like me to entrepreneurs in the first place. As Gary points out, I knew what I was getting into when I married him. "While you didn't sign on for multiple rounds of pain, you signed on with me," he says. "You were drawn to the upsides of entrepreneurial business -- the excitement, the fascination, and the fun." All true. It had never crossed my mind to request a one-company-only prenup.
But when Gary broached the restaurant idea, I had not recovered -- in fact I have still not recovered -- from the extended trauma of the yogurt company's start-up. Stonyfield took nine agonizing years to reach profitability. Even though Gary said he intended to hire a CEO to run the restaurants, I anticipated a return to the grueling hours and constant distractions I thought we had finally put behind us. Serial entrepreneurs are like women who suppress the recollection of labor in order to marshal the stamina to give birth again. For their families, such selective memory is not so easy to muster.
Then, of course, any new business entails risk. Here I thought we were on terra firma, only to find Gary gazing longingly at rough seas. Entrepreneurs, as I knew from experience, are masters at defining risk down. So in my brain: "Gary knows nothing about the restaurant business." In Gary's brain: "I'll bring in smart people and figure out the rest." For many spouses, life stages enhance that sense of risk. Entrepreneurs launching second, third, and fourth companies are by definition older than when they started out: If they fail, there are fewer years to rebound. No wonder when the adrenaline kicks in for the serial entrepreneur, the cortisol spikes for the spouse.
Yet who would want to quash a loved one's dream? That way, unhappiness and resentment lie. "It's a crappy part for the spouse to play," says a friend whose husband started a second company. "To say 'no' or 'have you thought of this or that problem?' The way I dealt with it -- and I'm not proud of this fact -- is, I said, 'You want to go through this again? Fine, but I don't want anything to do with it.' We agreed on a certain amount of money he'd sink into it -- but we passed that number long ago."
Inc. reader Mallary Tytel, an entrepreneur married to a serial entrepreneur, tries to be realistic. "You have two choices: fighting it or going along with it," says Tytel, founder of the consultancy Healthy Workplaces. "As an entrepreneur myself, I know there's no percentage in going against the grain."
Nor could I go against the grain with Gary. Painful as the prospect of this new business was, I kept my mouth shut. As long as he wasn't jeopardizing the roof over our heads or our children's college funds, I figured he was entitled to his next dream. I comforted myself with the fact that he'd succeeded once. This time the learning curve should be less steep. Would be less steep. Had to be less steep.
At what point, though, does the spouse get to say enough? Let's assume that the first business was successful, and financial need is no longer a compelling motive. When does a spouse's desire for calm and security outweigh the entrepreneur's desire to be "who I am"? The answer, of course, is different for each couple and set of circumstances. Is it selfish to discourage a loved one from doing something he or she desperately wants to do because it makes you uncomfortable? Or more selfish for him or her to persist in spite of your discomfort?
Among other things, the spouse should consider whether the entrepreneur is truly succumbing to an irresistible opportunity or driven by a darker motivation. He or she may be depressed or bored, or seeking to fill a psychic or emotional void. One man told me that he kept creating businesses to escape his marital woes. Unfortunately, he didn't have that insight until after his divorce. At that point, he realized other ways that starting multiple businesses had made him less fit as a mate. "Entrepreneurs feel they have to have all the answers," he told me. "Starting several businesses only reinforced that. The control issues became habit forming, a way of being. When you apply that trait to your personal life, it doesn't go over very well."
Fortunately, there are less risky ways, both personally and professionally, for an entrepreneur to flex those creative muscles. Passive or active investing and mentoring can be like methadone for the entrepreneur, providing some of the thrill without all of the risk. Gary loves to mentor because, he says, "what I remember most about Stonyfield's dark days was the loneliness. I'm rewarded by the idea that with a little of my extra time and money, I might be able to help others avoid some pain."
And running an existing company -- even a mature one -- offers some of the charge of a start-up. "In my work at Stonyfield, I'm inventing new enterprises all the time," Gary says. "I take huge risks every day."
Not that that stopped him. Gary launched the first O'Naturals -- recently renamed Stonyfield Caf -- in Falmouth, Maine, in 2001. As I'd feared, the business has consumed considerable time and energy. Also cash: Gary has put in much more than either of us expected. (We have since agreed on a total amount that he can risk on entrepreneurial ventures, including this one.) The caf is now in two locations and is still finding its way as a business. I avoid discussing it with Gary and try not to think about it too much.
Recently, Gary assured me that he wouldn't start another company unless I was fully behind it. If this is true, he won't be starting another company anytime soon. Or, actually, ever. But somehow I suspect that our lives will continue to be rocked by seismic activity. I hope Gary's next idea will score lower on the Richter scale.
Meg Cadoux Hirshberg (mhirshberg@inc.com) is married to Gary Hirshberg, president and CEO of Stonyfield Yogurt. She writes a regular column about the impact of entrepreneurial businesses on families.
The Truth About Real Estate
My software company, 37signals, is nearly 11 years old. But until now, it's never really had a place to call its own. For much of that time, we've been positively nomadic.
Our first headquarters was in the office of one of our original partners, a Chicago-based graphic designer named Carlos Segura. Carlos's office also housed his design firm, as well as the T26 Digital Type Foundry and Thickface Records. 37signals lived on a corner of a big desk in a room upstairs. It wasn't glamorous, but we didn't need much space. It kept our costs down, too.
After we had been there a year, Carlos left the company, so it was time for us to move on as well. By this time, 37signals was three people -- Ernest Kim, Matt Linderman, and me. We were making money and doing well and didn't require much in the way of an office. So when some friends/clients at a company called Data Harbor invited us to sublease some of their extra space, we said, "Sure."
A year after that, Data Harbor moved, and we took over the remainder of its lease for a few months. Then we decided to finally get a place of our own. We found it across the street (we could see it from the window of the space we were still occupying). It was too big -- 3,500 square feet for just three Chicago-based employees -- but the location was good, the rent was fair, and the landlord was a nice guy. Still, it never really felt like home. Rather than investing in the space, we just put some cheap tables together and got DSL. We worked that way for three years. During this time, we brought on a couple more people, but they were working remotely from other cities.
I suppose we were thinking about office space the way most businesses do -- as a cost center. After all, between rent, furniture, technology, and the like, it adds up fast, especially for a young company. We were doing fairly well, so $2,500 a month wasn't much of a burden. At the same time, it was $30,000 a year out the door when we could all have just worked from home, which might have explained our ambivalence.
But over the course of three years in that Spartan space, we learned an important lesson: An office could make you money, not just cost you money. We had a lot of empty space. Our three desks, conference room, and personal space took up only about 25 percent of the office. Perhaps we could turn that empty space into a revenue stream. Not by subleasing it but by using it to host our own workshops and conferences.
For a few years, we'd been sharing our ideas on software design, marketing, and business on our blog, Signal vs. Noise. We'd begun to build a loyal and passionate following. So why not take advantage of that and hold a workshop about the things we were writing about on the blog? We could host it in the spare space in our empty office. And charge for it.
We put together a one-day agenda, charged about $300 a person, and sold about 30 seats. Suddenly, we found ourselves with $9,000 in additional revenue. Our monthly rent at the time was $2,500. In one day, we just paid more than three months' rent. That was a light-bulb moment. An office can be free -- and even a profit center -- if you start thinking about your company's byproducts.
What do I mean by byproducts? Just like the lumber industry can sell its sawdust (a byproduct of milling trees), we discovered that we could sell our knowledge (a byproduct of running a business). And we could sell it in our spare space. Eventually, we packaged this knowledge in book form. All told, the combination of the book and the workshops has brought in revenue of more than $1 million.
But back to our real estate saga. When our lease was up, we decided not to renew. But instead of getting another space of our own, we hooked up with another friendly company we knew: Coudal Partners. I knew Jim Coudal, owner of the advertising and design firm, through a mutual friend. Jim had some extra space, I mentioned that we were looking, and he offered it at a fair price. This was in 2003. For the past seven years, we've been working out of that office.
It's been a wonderful experience. The folks at Coudal Partners are wildly creative. We've hired them to shoot and produce some video for us, and we even started a side company together called The Deck, a targeted ad network that helps companies reach graphic designers, Web designers, and other creative professionals.
However, since we're sharing the space, it's not ours to do whatever we want with. Holding workshops there has been a logistical challenge, because those events mean that the people at Coudal Partners can't work at their own office for a day. That doesn't scale well. We'd like to be able to do a workshop every six weeks. Or maybe host a spontaneous gathering of all our nearby customers. We needed more flexibility.
What's more, since we've expanded from just a few people to 20 (nine of whom are in Chicago), we've outgrown the six desks we had been renting. Privacy is another thing you don't have much of when you share an office with another company. It wasn't an issue early on, but it is now. Our friends at Coudal Partners have been fair and accommodating, but we decided it was time to move on.
So last year, we began looking for a place of our own. From the outset, we decided to recall what we had learned years before: We weren't just going to spend money on the space; we were actually going to make money on it. That requirement became the driving force for finding the right space.
We looked at a bunch of places -- houses, lofts, offices that already had been built out, raw traditional office spaces. We almost had a lease done on a large factory that had been turned into a six-bedroom residence (we'd use the bedrooms for private offices). But the deal fell through because of zoning and parking issues.
Eventually, we found a beautiful raw space just six blocks from our current office. It's a corner space with two enormous walls of windows. Natural light pours in. We hired architects to review the space and draw up plans. We negotiated the lease, paid the lawyers, paid the lawyers some more, and signed the papers.
The design process took a few months, and the build-out took about four months. We finally moved in July. True to our vision, about a third of the 10,000 square feet is dedicated to teaching. We built a theater-style classroom, with 37 seats, in which we can give presentations, hold workshops, and offer training and support classes for our customers. We plan on holding the first of many regular workshops this fall.
For the past few years, we've rented out different venues for our workshops. It cost us a few grand for the space, another few grand for the overpriced catering (we had to use each facility's sanctioned caterer), and another few grand for audio-visual requirements and other logistical considerations. Though we were able to charge about $750 per seat for a one-day event and sell about 50 seats per workshop, renting still took a good chunk of profit out of the equation.
With our own space, we'll not only save money on the costs side; we can make more money on the profit side. We also believe we'll be able to charge closer to $1,000 a seat. At 37 seats, that's $37,000 in revenue. All we'll have to pay for is catering. All the AV requirements and Internet connectivity are built into the space. And it's much more attractive than the venues we were renting out before. Just a few of these workshops will cover our rent for the year.
The lesson here is less about real estate than it is about business itself. Whenever you make something, you make something else. Your byproducts may not be as obvious as sawdust, but they're there. Maybe it's the knowledge you've acquired by running a business. Maybe it's a piece of software you wound up making when you made another piece of software. It's there; you just have to look for it. You may even find a business you never knew you had.
Jason Fried is co-founder of 37signals, a Chicago-based software firm, and co-author of the book Rework.
Why I Stepped Down
During a summer hike with his son, Steve, in 1990, Kent Savage proposed they start a business that would distribute products made from recycled content. Over the next decade, they built Boulder, Colorado–based Eco-Products into a profitable distributor of items such as earth-friendly disposable cups and cutlery. After Kent died, Steve oversaw an ambitious shift in the business model. The change spurred phenomenal growth. But with that growth came a startling realization for Steve: Perhaps the best thing for the business would be for him to step aside.
My dad retired in 1999. That's when I became president and CEO. For 15 years, we were a retail distributor for other manufacturers. We started to have abnormal success in restaurant supplies and realized if we ever really wanted to grow the brand, we needed to start manufacturing the products ourselves.
In 2005, we began a two-year process of transforming into a manufacturing wholesaler. We wanted to expand into new sales channels, such as office supplies and retail, but I didn't have any experience in those areas. We also wanted to start making acquisitions.
At first, we tried to hire a CFO who had the experience we needed. It was during that process that I thought, You know, I don't think having a CFO is going to solve our problem. I realized that we needed to look at my position. The company is very special to me. It's a family business, so I wanted what was best for it, and I thought it may be best to hire a more experienced CEO.
I mulled over the decision for three or four weeks. My siblings and mom own stock in the company, but they aren't involved in business decisions. My wife was supportive, though she was more nervous than I was about the move. I also had lunch with Aaron Kennedy, the founder of Noodles & Company. He told me that going from CEO to executive chairman of his business was the best decision he ever made. That helped.
It was definitely emotional, but by the time I made up my mind, I was 100 percent certain it was time to step down. I led the process to find a replacement, with the help of three board members. We notified our management team, and they interviewed our final two candidates. One of them was Bob King, who had taken Corporate Express from a $50 million business to a $4.5 billion business. It was obvious that he would be a great replacement.
I announced the news to the rest of the company at 8 o'clock in the morning on Bob's first day in July '09. The team was a little nervous at first, but when Bob stood in front of the group and started to talk about his background and the future of Eco-Products, they responded very well.
As expected, Bob has expanded Eco-Products into new channels with ease. Today, our products are available on the Staples and Costco websites. I'm chairman of the board. I go to the executive meeting every week, so I know what we're doing and why; I'm just not involved in rolling it out. I spend 10 percent of my time on Eco-Products and the rest on National Eco Wholesale, a distributor of eco-friendly products, and Ellie's, a retail store. Eco-Products was my firstborn, but I love what I'm doing now.
My father passed away in 2003, so he didn't witness the transition. But people who know my family often say, "Your dad would be proud." I know he would be.
What Politics Taught Me About Business
Having launched two tech companies and a consulting business in Cary, North Carolina, Glen Lang decided to take on a different kind of challenge: politics. After Lang was elected mayor of Cary, he got to work easing the city's growing pains and tackling its infrastructure problems. But he never stopped thinking like an entrepreneur. Lang's political career, which ended in 2003, inspired him to start Connexion Technologies, which installs private fiber-optic networks that deliver Internet, phone, and television services to housing developments and apartment complexes nationwide.
I've been in the tech industry since college. I worked for Sun Microsystems before starting a software development company in 1992. It had about 78 employees when I sold it for $11 million. I started two more companies: a cable modem business and a consulting firm.
When I turned 40, my wife thought it would be best if I quit starting companies and stayed home with the family. So I cut back and just did consulting.
I was home and partially retired when city workers came by to dig up our neighborhood to replace the sewer line. That was a waste of funds; only part of the line needed repair. I led my neighbors in opposing the project at city hall. That's what got me thinking about public office.
In 1997, I was elected to town council. I became mayor of Cary in 1999. I ran on a platform of slow growth. Cary's population, which is now close to 137,000, had been growing about 9 percent a year, but infrastructure wasn't keeping up. As mayor, I got the city to slow approval of new home permits while we built new roads, schools, and water plants.
I also commissioned a study to see what it would cost to wire the city for broadband Internet. I used the findings to nudge Time Warner and Bell South to speed up their deployment of high-speed Internet access in Cary.
I kept thinking about this problem of how to get Internet service without having to rely on big companies. There seemed to be an opportunity for a private company.
I founded my current company in 2002, when I was still mayor. We build private fiber-optic networks and lease them to telephone and cable companies. I pitched my business plan to Jim Goodnight, the founder of SAS, which is based in Cary. He liked my idea. He said I worked hard as mayor and that anyone with my persistence would be successful. He invested a couple million dollars.
Being mayor taught me about the utilities business. With a new development, the city grants rights of way, which allow cable and telephone companies to lay new lines. We go directly to the landowner and get an easement, which lets us install our fiber networks on the property first.
We're outfitting apartment complexes across the country. In many areas, there didn't used to be a choice of service providers. Now, consumers get more choices and lower costs, and providers don't have to invest $1,000 to $2,000 per unit in infrastructure to service that community.
I definitely enjoy private enterprise more than I did public service. But no matter what you do, as long as you keep learning, you evolve as an entrepreneur.
A Supplier of Film Extras Now Trains Military Troops
Lexicon Consulting, in El Cajon, California, got its start by providing extras for big-screen military battles. Now CEO Jamie Arundell-Latshaw's company creates mock Afghan and Iraqi villages to help train troops who are headed overseas. She spoke with Inc.'s Jason Del Rey about Lexicon (No. 4), the top woman-run company.
What are the most radical circumstances your employees replicate?
At Fort Irwin, in California, as troops and medics drive up to a village, a rocket-propelled grenade goes off, a car explodes, and we have role players screaming and chanting. We hire amputees who fall out of vehicles. The wounds look realistic, and they're set up in a way that the medics have to put pressure on the wounds and stop the bleeding. Our goal is to make the simulation as real as possible.
Where do you find your role players?
One of the reasons we have our office down in El Cajon is that there's a big Iraqi population there. Our recruiters know what we're looking for.
So, what do you look for in a role player?
We want people who can speak the language and understand the culture. And we also want people who have a passion for training troops the right way. Without that, you're not going to be motivated to go above and beyond to provide a better service.
What is your biggest challenge going forward?
We're growing so fast, so our challenges are hiring people who share our goals and having liquid cash. We don't always get paid by the government within 30 to 60 days, so we have to balance trying to get new work with making sure we have money to perform the work.
And the most rewarding part of the job for you?
When troops return from multiple deployments overseas, the role players and managers who worked with them often get feedback like, "Learning what to do in each scenario made a difference in how I performed over there."
To learn more about Lexicon's military training work, "Lexicon Consulting," and to browse the complete Inc. 500/5000 list online, go to www.inc.com/inc5000.
Inc. Live: Ask Top Entrepreneurs Your Questions
Check out our new series of live video chats featuring accomplished entrepreneurs such as Inc. columnist and 37signals co-founder Jason Fried, Zappos CEO Tony Hsieh, Mint.com founder Aaron Patzer, and Method co-founder Eric Ryan. To view the schedule of chats and watch archived chats, and to pose a question during our next chat, go to www.inc.com/live.
Norm Brodsky on Fighting Bureaucracy
Dear Norm,
I have a company of about 40 employees, who are dedicated and passionate about what they do. Most of them are motivated by the company's culture and mission. In the past year, I have hired three new senior people: a COO, a CFO, and a national sales manager. While it's great to have experienced professionals around, I worry about preserving our company culture. Some of their ideas seem like big-company bureaucratic solutions to simple problems. The latest is an annual employee evaluation. I just got wind of their new form. It's nine pages long and contains 20 questions on which the employee is rated from 1 (unacceptable) to 5 (superior). I am all for giving employees feedback on their performance, guidance for improvement, and rewards for a job well done. But this seems more demoralizing than beneficial. What do you think about these types of forms?
Jeff Patterson, president, Gaggle.Net
Bloomington, Illinois
I believe that an owner and CEO has no more important responsibility than setting the culture of his or her company. That can be quite a challenge, however, when you're 2,000 miles away, as Jeff is. When we spoke, he told me that he lives in Los Angeles, and his company's headquarters and operations are in Bloomington, Illinois. He spends one week out of six there. For most of the past 12 years, he has had a partner who has run the show in Bloomington, but the larger the company became, the unhappier the partner was. Jeff finally bought him out last October. The three new senior managers were hired in anticipation of his exit.
Now, I happen to agree with Jeff about employee evaluation forms like the one he described in his e-mail, but that's neither here nor there. What's crucial is that he and his on-the-scene managers be in total agreement about the culture. The managers are the ones who will be shaping it on a daily basis. If they're replacing Jeff's culture with something else, he will lose control of the business. Culture determines how a company functions -- who works there, how hard those people work, how they treat one another, how they relate to customers and suppliers, and on and on. A dramatic change in the culture would jeopardize everything Jeff has created.
I told him that, first, he has to decide whether the new senior managers will follow his direction. If the answer is no, he has to replace them. If the answer is yes, he has to sit down with them and work out the ground rules. Not that he should stifle them. He needs to let them know that he welcomes their ideas and will use some of them, but not those that undermine the current culture. "You should follow your gut feelings," I said. "They got you this far, and they'll get you to the next level. Yes, you'll make mistakes, but you'll be right more often than wrong."
Jeff seemed relieved. "I appreciate hearing that," he said. "It's so easy to second-guess yourself." He's right, of course, but entrepreneurs have to learn to trust their instincts.
Please send all questions to AskNorm@inc.com. Norm Brodsky is a veteran entrepreneur. His co-author is editor-at-large Bo Burlingham. Their book, The Knack, is now available in paperback under the title Street Smarts: An All-Purpose Tool Kit for Entrepreneurs.
Serial Entrepreneurs Share Their Words of Wisdom
1. Get in over your head. --Robert Donat, GPS Insight No. 281
2. Before you build the product, write the ad. --David Friend, Carbonite No. 9
3. Focus on simple things like profitability and execution. You don't need to come up with the next Facebook to create a successful business. --Jesse Lipson, ShareFile No. 104
4. Keep the main thing the main thing. --Brad Oberwager, Sundia No. 130
5. You will be remembered for how you deal with the ups and downs. --Andy Monin, Vendormate No. 25
6. Failing gracefully is much more important than succeeding. --A.J. Lawrence, The JAR Group No. 475
7. Surround yourself with great partners and share the rewards. --Curtis Hite, Improving Enterprises No. 210
8. Hire slow; fire fast. --Justin Talerico, ion interactive No. 202
9. It's a lot harder to repair a train while it is rolling down the tracks, so get everything set up before you build momentum. --Gabriel Krajicek, BancVue No. 117
10. Systems run the company; people run the systems. --Curt Richardson, OtterBox No. 395
11. It will take four times as much work as you expect but be 10 times more rewarding than you can imagine. --Eric Albee, Aromatic Fusion No. 205
12. There is always a solution. --Gregory Lilien, IguanaMed No. 264
13. You cannot do everything yourself. --Elia Wallen, Travelers Haven No. 90
14. Without knowing where you are at all times financially, you are destined to fail. --Dean Austin, Wyngate International No. 163
15. Never confuse a consultant with a partner. --Bing Howenstein, BackJoy Orthotics No. 51
16. At its founding, a business is victim to what you don't know; at adolescence, it's victim to what you think you know; and as it matures, it's victim to how willing you are to hand the reins to those more qualified. --Kevin Burke, Centuria No. 79
17. You don't lose until you give up. --David Wachs, Cellit No. 262
Editor's Letter: Meet the Inc. 500 Class of 2010
There was a song we Girl Scouts used to sing as we swayed in sisterly harmony around the campfire. It went like this: "Make new friends, but keep the old/ One is silver and the other gold." I know. Corny. But as I read through the names and company descriptions on this year's Inc. 500, that sentimental lyric kept running through my head.
Here's why: I recognized a good number of companies from Inc. 500s past. Eighty-four companies returned for the second time, another 17 for the third. Growing at all during these past few years of recession, frozen credit, uncertain markets, and depressed business and consumer spending is noteworthy. Growing fast verges on incredible. It was good to see companies such as Monoprice, Morgan Borszcz Consulting, Skullcandy, Triplefin, Walz Group, and all the others continuing to do so well. Hats off to everyone at those companies.
There were other companies that are first-timers on the list but not to Inc. or Inc.com. Like Pandora. When we first wrote about that company in an October 2007 cover story, founder Tim Westergren was trying to break out of perpetual start-up mode for his Internet radio site, which at the time had eight million listeners. This year, Pandora ranks at No. 253 with a three-year growth rate of 1,221.5 percent, more than $50 million in revenue, and 60 million true believers. If you come to this year's Inc. 500|5000 conference, September 30 through October 2 in Washington, D.C., you can hear this clever and creative entrepreneur speak on the subject of "How I Got to Profitability." Consider this a plug.
I also came across the familiar names ModCloth (No. 2) and Thrillist (No. 93); their CEOs landed last year on our popular list of "30 Under 30." It was good, too, to see StumbleUpon, at No. 126, though not all that surprising, given that we've called upon CEO Garrett Camp for tips on how to be more productive.
The rest of the ranking -- the other four-fifths -- comprises newcomers (the silvers, if I continue with the Girl Scout thing). Some have surprising histories, like the gunmaker Freedom Group (No. 217), which, 194 years after its founding, has 2,900 employees, $848.7 million in revenue, and a three-year growth rate of 1,360.8 percent. Then there's The Elf on the Shelf (No. 222), a company that sprang from a family's Christmas tradition.
The Inc. 500 is all about fast growth. From 2006 to 2009, our No. 1 company, Ambit Energy, grew 20,369.4 percent. No. 500, three-time honoree AtTask, grew 603.6 percent.
But numbers tell only part of the story. Behind the achievement of fast growth are CEOs whose success proves that no industry is too humble or too sophisticated for the truly ambitious. These are men and women who ferret out opportunities, unearth profitable niches, and then find confirmation of their ideas and strategies in the marketplace. Of course, they take pride in the achievement of fast growth. But if you read their stories in the pages that follow, you'll find that their companies are much, much more than engines of growth. They are expressions of what's important to them, of how they want to live their lives, engage their minds, treat other people, feed their families, and influence the world.
So in the end, it's not really about the numbers at all. But you knew that.
Reflections on a Wild Year in Business
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How to Deliver Great Customer Service
A widely quoted statistic gets to the heart of the value proposition behind customer service: The cost of acquiring a new customer is five times that of retaining an existing one. For businesses that succeed by forming a bond with the customer, the disparity is surely even greater.
Good customer service is essentially a variation on the golden rule: You want to meet the same expectations you would have if you were the customer. "The basic things will never change," says Tony Maggiotto, an adviser at the Buffalo State College Small Business Development Center in New York. "If people believe that they're being remembered and are known to the business, that will have a positive impact on their disposition toward your business."
Providing good customer service is often a matter of common sense, but that doesn't mean it comes naturally to all business owners. For some, in fact, it means behaving differently than they do in other business situations, says Richard Proffer, a counselor at a University of Missouri Small Business & Technology Development Center. If you are used to fighting about every detail of a business deal, say, you may have to adjust your attitude. Ditto if you feel that selling is a zero-sum game; to win customers, you will sometimes have to make them feel they have won, too. The pages that follow are a guide to providing excellent customer service.
Caring for Customers1. Great Customer Service Begins With You
Simply put, the most inspiring leadership is by example. If you show indifference to your customers, your employees will mimic it. If you are enthusiastic and courteous, your troops are more likely to be so as well.
2. A Culture of Customer Service Must Be Codified
Start by hanging on the wall a set of core values, 10 or fewer principles that include customer service ideals, suggests Susan McCartney, Maggiotto's colleague at the Buffalo SBDC. "Share them during the training, have employees sign them, and evaluate employees based on the values," she says. "But don't call them rules."
Employee training on customer service precepts should be intensive: written materials, verbal instruction, mentors, and on-the-job demonstrations all ought to be part of the coursework, says McCartney.
3. Employees Are Customers, Too
Companies renowned for their customer service -- the online shoe retailer Zappos, for example -- treat employees as they would have their employees treat their customers. "Employees take on more responsibility because they know they are appreciated and an important part of the team," says the University of Missouri's Proffer. "People who don't feel like they're part of the bigger picture, who feel like a small cog in a big machine, are not willing to go the extra mile."
Not every business can afford to shower staff with generous pay and benefits, but not every business has to. Small companies, says McCartney, can show "intense interest" in employees, in their welfare, their families, and their future -- what McCartney calls the family model. It's also important to recognize an employee -- publicly -- for a job well done. Some companies also offer incentives for exceptional customer service, but if you can't spare the cash, you might throw an office party or offer another token of appreciation. When he was a manager at cable provider Tele-Communications Inc., for instance, Proffer personally washed the cars of notable employees.
4. Emphasize the Long Term
Short-term sales incentives can sometimes undermine long-term customer satisfaction. Prevent that by building short-term programs atop an ongoing program that rewards broader improvements, says Paula Godar, brands strategy director for Maritz, a sales and marketing consulting firm based in St. Louis. Moreover, winner-take-all incentives "can drive a lot of unhealthy competition and disengage the rest of the sales force," says Godar. "We've improved sales performance by much greater percentages when we've improved the performance of the large group in the middle of the bell curve."
5. Build Trust
Use your customer's name whenever you can. And sometimes you have to give to get. In his book The Knack, Inc. columnist Norm Brodsky relates how he won a sale against long odds by venturing his time and expertise to help a prospect cut costs. "I was showing him not only that we could help him save money but that we cared about saving him money," writes Brodsky.
6. Listen
"The best salespeople spend 80 percent of their time listening, not talking," says Marc Willson, a retail and restaurant consultant for the Virginia SBDC network. Ask open-ended questions to elicit a customer's needs and wants. "Once they've identified what they're looking for, use their words throughout the process," suggests Proffer. "That way, they've sold it for you."
If the prospect is "just looking," don't press further. But be discreetly nearby. "Straighten the racks, or dust something," says Willson. "You need to be within earshot or eyeshot, because every retail sale involves a re-approach."
7. Sometimes It's the Little Things That Matter
Small gestures that anticipate customers' needs or attend to their comforts -- such as offering a cold glass of water on a hot day or a children's area with toys -- go a long way toward winning them over.
8. If You Can't Help a Customer, Point to an Establishment That Can
And saying "You might try Smith's, on Main Street" won't make nearly as strong an impression as confirming that Smith's has the item in question and giving directions to Main Street. "This is the ultimate in customer service," says Tom Maydew, regional director of the SBDC in Pocatello, Idaho. "That customer will be back."
9. Show Your Appreciation
One important element of retaining customers is communication. Willson suggests a personalized thank-you note after a deal or sale -- "If Nordstrom's can do it, everybody can do it" -- and even a follow-up phone call a month or so later. In a retail business, loyalty programs or rewards cards drive repeat business (as well as help you collect information about what your customers are buying). Many businesses send out birthday and holiday cards; Proffer prefers marking the anniversary of a client's or customer's first purchase.
10. Treat Your Best Customers Better
If your company relies on a relatively small number of clients to provide a disproportionately large share of revenue, it makes sense to devote a disproportionate amount of time and energy to serving them. (Think of airlines and the escalating benefits in their frequent-flier programs.)
Some luxury retailers and services practice "clienteling," by which all of the activity around every customer -- every conversation, every visit, every transaction -- is logged with contact management software. Most businesses need not go that far, but it's well worth keeping your best customers informed. You might, for example, keep track of their preferences and let them know when new merchandise arrives that they are likely to be interested in. You might also organize appreciation days just for those clients, or invite them to private pre-sales in advance of the public.
Resolving Customer DisputesIt's bad enough when a customer is unhappy with your product or service. But if the attempt to redress the problem is frustrating or fruitless, it makes matters much worse. A satisfied customer may tell one or two friends about your company, says Richard Proffer, but "an angry customer might tell a dozen." Some aggrieved customers can never be placated, but, more often, successful dispute resolution lies in a business owner's hands.
Solve the problem when it occurs. It's always best when people on the floor or in the field are the first line of response, say Proffer and Marc Willson. Vest them with authority to resolve certain types of problems themselves.
Don't greet agitation with agitation. "Our first tendency is to match our tone to their tone, but you don't want to do that," says Proffer. "If we stay calm, their voice will start coming down, and they'll begin to relax."
The Five A's. Proffer says it's helpful to think of resolving a dispute as a five-step process called the Five A's: Acknowledge the problem. Apologize, even if you think you're right. Accept responsibility. Adjust the situation with a negotiation to fix the problem. Assure the customer that you will follow through.
Don't forget salesmanship. The skills and techniques of good selling discussed earlier are even more valuable in difficult situations. Address customers by name, and repeat what they've said. "Whether you resolve the issue or not," says Willson, "they'll see that you have their best interest in mind."
Hiring for ServiceFor employees who interact with customers, technical proficiency at the job isn't enough. Nor is passion for your product or service. Staff members who deal with customers ought to be intuitive, empathetic, and good listeners. Here are tips for vetting those traits.
Interview in a neutral, public place. Tony Maggiotto suggests meeting the prospect in a caf or restaurant to see how he or she interacts with other people -- like the wait staff.
Ask the right questions. Ask questions about how the applicant reacts to a situation. For example: "Tell me about a recent situation in which you had to deal with a very upset customer." Check references in the same fashion. You should also ask questions to see how well the interviewee listens and processes information. "Outline a problem and ask them to respond to that," suggests Susan McCartney. "Even if they ask you questions to clarify, I would give them points for that."
ResourcesInc.'s collection of customer service articles is at www.inc.com/customer-service.
The Customer Service Zone (customerservicezone.com) has aggregated hundreds of articles from around the Web on dozens of customer service topics -- and it's all free.
Customer Service Manager (customerservicemanager.com) offers many short articles on customer service topics authored mostly by consultants.
America's Fastest-Growing Government Contractor
No. 1 in Government Services
Luke & Associates
16,636.6% Three-Year Growth
Revenue: $37.5 Million
Employees: 588
CEO: James Barfield
Founded: 2004
Overall RANK: No. 3
Merritt Island, Fla. lukeassoc.com
James Barfield spent his early career decked out in protective breathing gear, checking the air inside spacecraft for toxic chemicals and gases. Then his employer, Kennedy Space Center, discovered Barfield’s talent for writing winning project proposals. Barfield moved on to Bechtel, where he split his time between tasks such as managing hazardous waste cleanups and assembling the voluminous proposals that snagged such contracts. In 1993, he became a consultant to large companies pursuing government work. In 2003, the Department of Defense consolidated medical services for most of its bases into a single contract. Barfield and two friends, Glen Bottomley and Rich Hall, launched Luke & Associates and became one of six vendors to land part of a nearly $2 billion Air Force job. Today, Luke & Associates staffs Army- and Air Force–base hospitals and clinics with more than 900 professionals, including neurosurgeons and nurses. The company appeals to physicians eager to escape the bureaucracy of managed care and treat challenging cases such as posttraumatic stress disorder and brain injuries. And most find it gratifying to serve the troops. So does Barfield, whose son will deploy this year to Iraq.
The High Fives: The Top 5 Minority- and Woman-Run Companies
Top 5 Minority-Run Companies
Raj Prasad
WDFA Marketing • No. 5
Prasad was born in Fiji and moved to the U.S. at 2. He landed his first advertising job at 16 and at 25 founded WDFA -- which runs microadvertising campaigns. "It's all about buzz."
Kevin Paul
KPaul • No. 10
Paul moved from India to Indianapolis at 8 and joined the Army straight out of high school. His business, KPaul, sells supplies to the government. Paul says 14 years in the service taught him how to handle clients. "Just give them the facts -- don't sugarcoat anything."
Siva Kumar
TheFind • No. 12
Kumar's grandfather started one of India's major movie studios, and his relatives operate theaters and produce movies. But Kumar chose to forge his own path. He moved to the United States in 1981 and started the e-commerce site TheFind.com in 2004. "I just want to do things on my own."
Michael Evangelista-Ysasaga
The Penna Group • No. 13
Evangelista-Ysasaga started a general contracting firm at 18. When he became a lawyer, his clients were builders. Now he manages construction projects for federal agencies. "Contractors don't always generate good paperwork. But for the government, documentation is critical."
Amit Raut
Digital Advertising • No. 14
Raut, the son of Indian immigrants, launched Digital Advertising in 2000. The company does just what its name suggests: manages online marketing and lead generation campaigns. "It's all about delivering superior service."
29 San Francisco Bay Area
23 Dallas-Fort Worth-Arlington, Texas
27 Los Angeles-Long Beach
48 New York metro area
48 Washington, D.C., and Maryland and Virginia suburbs
Top 5 Woman-Run CompaniesJamie Arundell -- Latshaw
Lexicon Consulting • No. 4
A West Point grad and former officer in the U.S. Army's Transportation Corps, Arundell-Latshaw founded Lexicon in 2005. The company creates mock Iraqi and Afghan villages used to train military personnel. "Service members need the most realistic training possible."
Maria Vogt
Ayuda Management • No. 22
Vogt learned the ropes of government contracting at her father's IT business. In 2002, she launched Ayuda Management, which provides construction management services to government agencies. "I thought, I might as well win work for myself and hire good people to do the work."
Marie Diaz
Pursuit of Excellence • No. 26
Diaz puts family before work. In the early days of Pursuit of Excellence, the human-resources firm she founded in 1994, she often turned away work to spend time with her three sons. "Now, it's easier to focus on the business."
Eileen Gittins
Blurb • No. 47
Gittins is the founder of Blurb, a website on which writers and artists design, print, and sell books. She attributes Blurb's success to the rise of social media. "People who are not authors now have audiences that want to see their books."
Mindy T. Withrow
CSS Distribution Group • No. 55
Withrow and her husband, Daniel, were packaging-industry veterans when they launched CSS, a warehouse supply business, in 2006. Mindy got the CEO title thanks to her sales experience. Being a certified woman-owned business helps CSS land key accounts. "Clients can get tax breaks for dealing with companies like us."
For These Business Partners, Age Is Just a Number
Amy Gonzales, a geologist and wetlands scientist, played mentor to Kelly Caldwell, a biologist, at their former employer, for which they did environmental-impact studies of proposed gas pipelines and other energy projects. When Gonzales grew frustrated with her bosses, Caldwell, who was 17 years her junior, suggested they start their own company. The result is AK Environmental, which performs environmental surveys and manages construction projects nationwide. The women run their company virtuallyGonzales lives in New Jersey; Caldwell, in North Carolina.
Kelly Caldwell: I think people thought we were nuts to quit our jobs and start our own business. I think they also said, "Is Amy crazy to trust this kid?" I was just 26 at the time. She was the one with all the experience.
Amy Gonzales: I didn't even think about her age. If people can do their job, it doesn't matter how old they are.
KC: People would always tell me that it was strange that Amy and I never worked in the same place. But we never did. She mentored me, but I was in New Jersey, and she was in Pennsylvania. I call her 10 times a day and e-mail constantly. Communication has never been an issue between us.
AG: I own 60 percent of the business, and Kelly owns 40 percent. In the beginning, we both worked from our homes. In 2004, we hired my husband, Ed, who is an engineer. That's when I moved my office out of the house, because we couldn't work together very well.
KC: Around that same time, I had my first daughter and stopped doing fieldwork. We were doing other hiring as well, and as we started to growfrom six employees to 11 and then to 40it became increasingly important for me to focus on the business side of things anyway, like payroll, invoicing, and insurance. When I had my second daughter a few years later, I did payroll in my hospital room as the nurses went in and out.
AG: I focus on the technical and marketing aspects of the business, and Kelly does an amazing job focusing on issues like banks and payroll. There isn't a lot of overlap.
KC: I admit that I miss doing the fieldwork from time to time. But this role was what I needed to do. Now, I don't think I could trust anyone else to do this.
AG: I've had employees ask me why they have to carry a business card around that says our company is a woman-owned enterprise. And I tell them, "Because it is." We work in a male-dominated industry, and we're proud of how quickly we can turn projects around and cut through the red tape. And, while we are serious about our business, we like to be lighthearted, too. Sometimes when we're in meetings with clients, it's like they have never heard anyone laugh before.
KC: The funny thing is that Amy and Ed are very well known in the industry. I have had employees or customers ask if I'm Ed's daughter. I even had an employee tell me he didn't know I was one of the owners. It makes me laugh to think about it. Ed actually reports to me, but mostly just for technical reasons. The three of us work well together.
AG: Kelly makes a real effort to visit the staff out in the field, so she sees more of them than I do. We have done work in 20 states, so we have staff all over the place. We encourage everyone to call and talk to us. We also try to do marketing things together so that our clients can see the face of AK. They always seem excited when they figure out that, Oh, AK comes from Amy and Kelly.
The Case for User Reviews
It was late August 2007, and Michael Ortner and Rakesh Chilakapati, co-founders of Capterra, had gathered a handful of key managers for a meeting in the company's small conference room. As the group assembled around a blue Ping-Pong table that sat in the center of the tiny, windowless room, Ortner made his case for a big step forward. He wanted Capterra, which operates an online directory of business software vendors, to start including product reviews from users on the site. Surveys showed that the site's users were craving the feature, and Ortner figured that providing it would help build community and loyalty.
Chilakapati, Capterra's chief technology officer, with whom Ortner had teamed to launch the company in 1999, listened politely but wasn't convinced. He was worried that introducing the feature would overtax the company's 18 employees, wasting time and money, and that opening the site to nasty reviews would only rankle the very software sellers that are the sole source of Capterra's revenue. Moving forward could invite only headaches and lost momentum. "What if a big company wants to sign on, but they first want a bad review taken down?" he asked. Ortner's response: "So, let them walk."
The two co-founders are friends but don't always see eye to eye. Chilakapati, the introvert techie, is the skeptic -- "the last line," says Ortner, "to make sure my ideas are vetted." Ortner, the extrovert salesman, on the other hand, often embraces risk. After four years of working in the IT departments of Price Waterhouse and J.P. Morgan, he joined a Washington, D.C., Web hosting company called Digex. There, while looking for software partners, he hit on the idea for Capterra. "I saw how fragmented the business software market was," he says. "And it was very expensive for those software companies to reach their target audience. It made a lot of sense to create a website that would connect the buyers and software vendors."
The problem was that when Ortner and Chilakapati launched Capterra, there was no ready-made audience of online software shoppers, and few sellers were willing to sign on. Capterra's model hinges on vendors receiving preferential placement on Capterra's online directory in exchange for paying for sales leads and click-throughs to their websites from Capterra's. It took a year and a half to land the company's first customer and another excruciating 13 months to land the second. By that time, Ortner and Chilakapati had run through the money they raised from friends and family, and Ortner had racked up about $250,000 in credit card bills. Finally, in 2002, Capterra started landing more vendors. Capterra's customers now include IBM, but most are small and midsize companies that sell customized software to help businesses with, say, accounting or logistics.
In early 2007, Ortner began toying with the notion of adding customer reviews. In surveys of Capterra's buyers, reviews were the most frequently requested feature people wanted added to the site. Ortner's first thought was to start gingerly by posting testimonials. That way, vendors wouldn't feel threatened that they may wind up paying for the privilege of getting slammed by some unhappy customer. The vendors would also control the content, taking down any testimonials they didn't like.
Sharing his idea with his core management team and sales and marketing staff, Ortner got some positive feedback, including from the company's product director, Cristina Stensvaag. But soon, Ortner started to have second thoughts. "I realized this was dodging the real issue," he says. "Buyers want reviews and ratings -- and negative reviews are part of that."
Ortner and Chilakapati spent hours poring over review-heavy websites like Amazon, eBay, and online car buying guide Edmunds.com. Both liked the requirement on Edmunds.com that reviewers give both pros and cons, something they agreed would eliminate overly puffy and overly negative reviews. But Chilakapati remained wary that vendors would ever agree to cede so much control of their message.
The pair also agreed that a review feature, should they go ahead, would not permit anonymous reviews -- to protect against competitors posting phony, damaging reviews. Vendors, moreover, would verify that reviewers were, in fact, customers and could respond to any negative reviews. But Chilakapati and several members of his staff were still not convinced that building the review feature would, in the end, be worth the trouble.
The discussion came to a head in the August meeting around the Ping-Pong table. To win over his doubters, Ortner proposed sending a survey to Capterra's 1,000 paying vendors to get their reaction. But the survey simply sowed more doubt. The results showed that although most vendors would encourage customers to submit reviews, about half also worried about negative reviews.
Ortner, increasingly convinced that unfiltered reviews were the best path toward credibility, began working the phones. He started his lobbying campaign by calling vendors who had expressed major reservations about the reviews. Among them was Glenn Martin, president of Promantek, a seller of performance-appraisal software aimed at small and midsize companies. "I recoiled," says Martin about his initial response to the plan. Among his concerns were the possibility that bigger companies would prompt their army of customers to submit glowing reviews, while Promantek would always run the risk of getting hit with negative postings among a smattering of reviews.
Ortner says the feedback from Martin and some other critics convinced him they were all missing the opportunity to get great reviews posted for their companies. "Those conversations cemented in my mind that we should do this," Ortner says. "I wanted to prove they were wrong."
Chilakapati, though, saw it differently. Discontent from a big customer over a bad review "was one of the heavy cons," he says. "So, how do we handle it? My point was, we needed to take a stand: Either we allow all reviews, or we don't." If they allowed all reviews, a lack of buy-in from vendors was a major risk. And, without a sizable pool of reviews, the system would have little utility.
The Decision For three months, Ortner and Chilakapati debated the issue, often ending in a charged game of Ping-Pong to relieve stress. Finally, on the first Monday in October, Ortner set out on his twice-weekly five-mile run from office to home. The stretch of quiet solitude cleared his thoughts. "We had beaten this issue to death," he says. "Now I was listening to my gut, and it said we have to do this."
The next morning, Ortner instructed his team to move ahead, though he was careful to respectfully acknowledge Chilakapati's concerns. "While we were not in perfect agreement, he was satisfied with our evaluation process," says Ortner. "So we decided to proceed."
Over the next 10 months, Chilakapati's team assembled the software to run the program. (He estimates the total time spent on the job was 2,000 man-hours, valued at $150,000.) And in August 2008, Capterra asked vendors to contact customers and encourage them to go to Capterra's site and submit a review. The company collected about 500 reviews over the next year. "Once we started gathering reviews, I realized this was worth our investment," says Chilakapati. "That was the turning point."
The review system went live last summer. Since then, the company has continued to collect reviews solicited by vendors. But visitors also submit reviews directly, and those unsolicited posts account for about 40 percent of the 2,000 reviews now on the site. Most are positive, generating four or five out of five stars, but some 10 percent to 20 percent are three stars or fewer. An occasional less-than-glowing review is a small price to pay, says Promantek's Martin. He now sees the reviews as a boon for his company, increasing leads through Capterra more than 30 percent. "We are visible and highly ranked," he says. "And it gives potential customers the confidence that we are a worth a look."
Ortner's hope all along was that such satisfied vendors would spread the word and bring increased business listings to the directory. That seems to be happening. Last year, revenue was up 29 percent, to $4.9 million. Today, both Ortner and Chilakapati agree that their worries about negative reviews alienating vendors were overblown. Says Ortner: "Not a single one walked."
The Experts Weigh InGood Start, But Needs More Reviews
Capterra has done lots of the right things to provide customers with the reviews they crave. Where Capterra appears to have fallen short is in the number of reviews it has attracted. In most categories, only one or two products have reviews. Capterra might arrange with vendors to pull in an RSS feed from their customer support sites, where customers strut their stuff and ask each other questions about how to do things. This would give prospective buyers a view into what actual customers are doing and talking about.
Patricia Seybold
CEO, Patricia Seybold Group
Boston
Don't Overdo the Controls
The reviews provide differentiation for Capterra. Customers are looking to make informed decisions, and if they don't get the information from Capterra, they will just Google their way to other sites to find it. But where this gets challenging is vetting the customers. You do need an ongoing effort to prevent people from gaming the system. But by having vendors review the reviews and verify that the writer is a customer, the software user will think twice about writing a review. If the site is overvetted, people will stop submitting reviews. This gives too much power to the vendor. My gut tells me nobody will submit a negative review.
Gene Alvarez
Vice President, Gartner
Stamford, Connecticut
Look Beyond the Purchase
Discouraging anonymity was a smart move. There are places where it is appropriate, but I don't think this is one of them. The more someone can identify with the person who submits a review, the more likely the reader is to believe it and find it valuable. But customer service is keeping customers engaged before, during, and after their purchase. The next step is to think about the postpurchase experience. One option is to open up a space on Capterra for individual products where customers talk about using the product. This keeps customers engaged with the product and with each other.
Lane Becker
President, Get Satisfaction
San Francisco
How I Beat the Fed
Not every entrepreneur is eager to take on the federal government. Gabriel Krajicek, CEO of BancVue, did it because he had no choice. BancVue, based in Austin, provides community banks and credit unions with software and technical support that allow them to offer an array of interest-bearing checking accounts. More active accounts earn higher interest rates. When, in 2006, the Federal Reserve ruled that these products were illegal, the company had just three months to change regulators' minds. After that, its cash reserves would be depleted, forcing the company to close.
I came from the auto industry, where I had built websites for dealers. I didn't know a lot about banking regulations. We were blowing and growing, and I didn't have time to learn them all. But we really felt we had done our due diligence. We had signed up about 45 institutions -- most went through multiple examinations by the Fed and the FDIC, and none had ever run into a problem using our product. Revenue in 2005 was about $400,000, and we were on track to make about $1.6 million in 2006.
Then, in October 2006, a compliance consulting company, hired by a prospective customer, said it thought our program was illegal because the Truth in Savings Act says you can't stop paying interest to a depositor for a lack of account activity. We disagreed, since most states define a dormant account as one in which no action has been taken in six to 12 months. We were clearly not in violation of that. Our rewards program paid interest to people who, say, make 10 debit card transactions instead of eight. But the consultant contacted the Fed.
That's when the Fed told us that our program was not in compliance. I asked Tim Eisenman, a banking veteran who sits on our board, if this was a big deal. He said it was the kind of big deal that would put us out of business.
It was a crushing blow for me personally. I had moved my wife, Beth Anne, down from Nashville. I had promised her this was going to be an awesome company, and now it looked like it was going to end.
I called up Don Shafer, our chairman and co-founder. I expected to hear some four-letter rant followed by talk about wrapping up the business. Instead, this voice booms out into the phone: "Hallelujah! Thank you, God, for giving us the chance to show how awesome you are." He then told me, "You're a smart guy; you'll figure it out," and then he hung up.
After I got home that evening, I had a revelation. We were going to go to war with Washington. We were going to fight and win. I walked into the bathroom, grabbed a razor, and started to shave off all the hair on my head. Beth Anne had to help me.
Everyone in the company saw their CEO with a bald head. They also heard me on the phone every day for three months with our attorney and the folks at the Fed haggling over ways to reinvent our program. I wanted my employees to know that we were going to war and that I wasn't hiding or dragging my butt just because things got scary. I wanted them to see my game face and to know that I was 100 percent committed to winning.
In December, I got an e-mail from a guy at the Fed in response to a proposed revision to our program. We thought we had found a loophole in the regulation. If the banks paid interest to all their customers but offered different tiers, paying out higher interest for more active customers, we would be in compliance. The Fed guy wrote back, saying only, "That should work." That's all we needed. I walked around the office with that letter held high over my head. I felt like I was floating on clouds and angels were singing all around me. I knew we were still in business.
How Bill Bartmann Lost It All and Got It Back
Bill Bartmann has known great success, but he is best remembered for losing some $3.5 billion in paper wealth and his status as one of the richest people in the U.S. That was 12 years ago, when his debt-collection company, Commercial Financial Services, collapsed in scandal. But Bartmann has been climbing back, using Bill Bartmann Enterprises first to tell his story through books and on the speaking circuit, then to teach other people how to make money collecting debt the way he did with CFS. And now, at 61, he has yet another big idea.
In October 2008, I was watching television with Kathy, my wife of 38 years. We were watching C-SPAN at the moment Secretary of the Treasury Henry Paulson stood up on a podium and asked Congress for $700 billion. After he said that, we just looked at each other with stupefied looks on our faces that said, "Is this really happening again?"
What Paulson was doing was running the same plays the government did back in the 1980s with the Resolution Trust Corporation after the failure of the savings and loan associations. We had built our company, Commercial Financial Services, at that time by buying up debts from the government on the cheap and then collecting on them. After we experienced that sense of déjà vu, I asked Kathy if she wanted to go do it all again. She said no, that was a lot of work and we're older now. That's when we decided to do it a different way. We would show other people how to do it.
We started CFS in 1985. It was phenomenally successful and was a four-time Inc. 500 company. We also had a lot of fun. I once leased 27 Boeing 747 jets to fly our 3,900 employees and their guests to Disney World for a weekend. Another time, I dressed up like Caesar and was carried on a throne into a Las Vegas casino, where I then wrestled Hulk Hogan in front of 6,000 people. In 1997, I was called the 25th richest person in the U.S. Then I lost it all.
CFS ceased to operate after an associate of mine was convicted of a crime. Everything came to light after someone sent an anonymous letter to the credit rating agencies. When I confronted my associate about it, he didn't deny it. He eventually went to prison for five years, but our reputation was ruined.
You can't imagine how hard it is as all of your friends start running away from you. The words of those people who accused me and made allegations have faded. But when I think back to the friends who weren't there -- that hurts more than strangers accusing me. It's easy to forgive strangers since they don't know any better.
It got worse when the federal government decided to indict me on 58 felony counts. That's a world-class problem. That's not like having a bad-hair day or losing a deal with a customer. When the government indicts you, it's calamity time.
Fortunately, Kathy and I mustered the courage and strength to deal with the adversity. I was innocent of the charges and refused to take the misdemeanor deal they were offering. I challenged them and went through a full-scale trial. Eventually, I was acquitted. I even received an apology from the government for prosecuting me, which rarely happens.
But I was bankrupt, and I wondered why all this bad stuff was happening to me. But what could I do? Blame someone else? Cry in my beer? It wasn't the first time I had lost everything. I needed to find a way to crawl out from the hole I was in, to come back one more time. I have always gotten back up after someone knocks me down. I grew up in a rough neighborhood and pulled myself up time and time again. I'm not sure why. Maybe I'm still trying to prove something to my third-grade teacher.
I took a good look at my personal inventory by asking questions like, Who am I? What do I know? What am I good at? What am I not good at? From that, I figured out I had a great story to tell about overcoming adversity and challenges. I decided what I should be doing is teaching my story so that when other people suffer their own calamities, my experiences might encourage them. So, I wrote a book and started traveling on a speakers' tour with people like Steve Forbes and Colin Powell. It was called the Get Motivated! tour. And so I stood onstage in front of 50,000 people and told my story.
I got to tell about what it was like to go broke, something most people don't like to admit. But I would tell them with a smile that I went from the 25th richest person in America to the 25th brokest person. I let them see that you can survive anything. It is every bit as bad for people suffering from losing jobs and their homes as it was for me to lose $3.5 billion. My job was to give them hope and inspiration that they could overcome their challenges.
But then there was Paulson on C-SPAN. Lo and behold, I recognized the same economic gaps that existed in the 1980s were back. I thought, Wow, this is too coincidental. There must be a purpose to this. At 59 years of age, I didn't want to build another billion-dollar company. But I could teach other people how to do what we did at CFS, to buy people's debts for nickels on the dollar and then treat them with dignity and respect. People want to pay their debts, but not everyone has to for you to make money. Now, we teach people how to create their own businesses during these tough economic times, which helps them make money and overcome adversity at the same time.
Our program is like going to school. We offer a two-day seminar in Palm Springs that introduces the topic and the industry. We also offer a five-day program where I'm the instructor. When people pay you money, they want to learn from you, not a surrogate or substitute. We have had more than 2,000 people go through the program.
As we saw how well our students were doing, Kathy and I looked at each other again. And this time, we said, "This is too good an opportunity to pass up. We need to do this." So, we launched a new company on July 1, 2010, called CFS II. We hired eight former CFS employees to get started and then started talks with hedge funds on raising $400 million, which we will use to build a new debt portfolio.
We are about to see history repeat itself. I see a great future coming out of this bad economy. I really feel bad for all the people on the wrong side of the coin. But if we help those people come out of it and we get paid, that's a great thing.
Going broke has helped me by providing me with opportunities to succeed. What separates successful people from those who aren't is the way you deal with problems. And, as an entrepreneur, there will inevitably be problems. It's the nature of the beast. I do understand that there could be another challenge in front of me, something I accept and embrace. But I do work hard every day to make sure it doesn't happen. I want my two daughters, who both work in the business, to succeed me and have a thriving business to manage in their lifetimes. You have to be a masochist not to hope for a happy ending this time.
How Google Cost Me $4 Million
When Ryan Abood looked at the books for his parents' New Hampshire flower shop, one number popped out. Without a bit of advertising, sales of gift baskets had grown 400 percent. For a year and a half, he worked a hundred hours a week to make his spinoff, GourmetGiftBaskets.com, into the third-largest player in his niche. Then, one day, he woke up to find that Google, the source of 80 percent of the company's revenue, had banished his site from its search results. His company ended up the better for it.
On November 11, 2008, I woke up at 6 o'clock and did a Google search on my phone, like I do every morning. We're usually one or two for just about every industry keyword. But we were nowhere to be found. I opened up my laptop. We weren't in the first thousand results. This was right before the holiday season, when we typically make 40 to 60 percent of our annual revenue. It was really, really devastating.
We weren't sure what had happened. Occasionally, Google will drop a site from the index -- just algorithmically forget about you for a few days. People said, "You either have some type of temporary exclusion, or you have a penalty."
I called the two companies we hired to improve our ranking. In the past, I'd done all our search-engine optimization myself. But as we grew, we started paying companies to reach out to relevant sites and ask them for links. Instead, one of the companies admitted it was paying for links. Google looks at that like buying an election.
Google has a form called the re-inclusion request. We call it the Google confessional. We said, "These are the links that were paid; these are the links that weren't paid. We've obviously violated your trust, and we're taking steps to remedy it."
That holiday season, we pay-per-clicked out the wang. We spent a lot of money. They penalize you organically, but they still let you buy ads. We leaned on our affiliate channel. Meanwhile, we were slashing inventory, letting people go, getting neat and trim. It ended up costing us $2 million in sales that winter and another couple million in 2009.
Before the penalty, we had zero social media presence. We sort of looked at it like, "It must be nice to have the time to do that." Now, as part of our whole strategy of never buying a link again, we blog about anything. We're up to 3,200 Facebook fans. We Twitter every day.
This March, we also hired a manager of comparison shopping, a social media manager, an affiliate marketing manager; and we have someone in-house to watch our link portfolio. If somebody might misinterpret a link as paid, we take it down. We're not messing around.
We didn't see the kind of ratings we had before the penalty until Google's Caffeine update, this June. That was our final pardon. Now we're back at the top.
Without the Google penalty, we wouldn't be anywhere near as far along as we are. You have two choices: You can roll over and die, or you can grow beyond it.
How I Handled Myself During a Prison Riot
Arranging medical appointments is a trivial task, except when the patients are inmates who must travel under guard and without prior notice so they can't plot an escape. In 2006, Jerry Heftler ditched his old business model -- providing cardiac imaging services -- in favor of managing prisoners' outside care. Integrated Medical Solutions, based in Mansfield, Texas, contracts with hospitals and doctors around 13 client prisons, makes inmates' appointments, arranges for outside rehab and nursing services, and manages case files and insurance paperwork.
They were our second customer, and we'd had them only a couple of days:a federal prison in Texas with approximately 1,600 inmates. I'd made a preliminary call to the contracting officer -- our first point of contact -- and planned to conduct extensive conversations with the director of health services and other officials there the following week. Beyond that, we didn't even know who was who.
It was late on a Friday afternoon. My staff of three and I were phoning physicians' offices near the prison, setting up a network of providers willing to serve inmates. (That's not always easy. Some physicians resist exposing their regular patients to guys in handcuffs and jumpsuits. Even those who sign on with us often require that inmates be delivered through a back door and hustled straight to the examining room.) I was talking about the prison with one physician when he asked if I'd seen the TV. "There's a riot going on there," he told me.
The physician described the scene unfolding on his television and, sure enough, it was our new client's facility. He said there were medevac helicopters hovering overhead, so we knew there were injuries. I presumed chaos. Staff would be trying to account for every employee to make sure there were no hostages. Making sure there were no bodies. Working like crazy to secure the institution.
I immediately phoned the prison and worked my way through to the health-services director. I introduced myself and asked what we could do. Technically, our contract didn't kick in for another week, but she asked if we could start now. She and her small staff were triaging inmates (thankfully, no staff had been hurt, but one inmate died), then dispatching the worst cases on gurneys to the back gate, where they were being loaded onto helicopters and into ambulances. Many had head traumas and multiple stab wounds, but still they traveled in handcuffs. Whichever guards or other staff members were on hand jumped in alongside them. The emergency vehicles were transporting the injured to six hospitals in five cities as far as 75 miles away. In the chaos of those early hours, no one was sure who had gone where.
When you're new in a business, you want to impress customers with your experience. Probably few vendors could have reassured this client with, "Hey, don't worry. This isn't my first prison riot." But I'd spent 22 years at the Department of Justice, where among other things I practiced and taught hostage-negotiation skills. A cool head comes with the territory. I told the director of health services that we would track down the inmates, make sure the hospitals had authorization for surgeries and respirators, and arrange additional transportation and treatment at specialist facilities where needed. We would also alert the prison to everyone's whereabouts in an organized way so they could efficiently dispatch guards to take over for whoever had left with the injured. Even in their hospital beds, the prisoners would need guarding 24/7.
We spent the next eight hours and all of Saturday on the phone, first trying to convince hospital officials of who we were (they were deluged with inquiries from journalists and ambulance chasers, so they were understandably wary) and then struggling to put names to the 26 inmates who had been evacuated. Most had arrived at the hospitals unconscious, and the staff members with them often did not know who they were. And, of course, inmates don't carry wallets. In many cases, hospital staff had identified patients by their prison tattoos: "Inmate: knife through cross"; "Inmate: Mexican Mafia." To simplify things, I decided we would enter those same descriptors into our own system until we had better information. We used the tattoos to coordinate and track treatment with the hospitals, authorize procedures, and help health officials at the prison keep a handle on things while the corrections side contained the riot and brought life back to normal. For months afterward, we wrestled with the insurance snafus that predictably resulted from care administered amid such bedlam.
I had promised the director of health services I'd stay in constant touch. Once she finished triage, she was out and about in the facility. She gave me her cell number, which was useless since you can't bring cell phones into prisons. So I'd call the control center; they'd send her the message via radio, and she would rush to a phone. We had a lot to talk about. Most of the inmates required surgery -- some had more than 30 stab wounds.
We also found ourselves inundated with queries from the press. Once hospital personnel understood we were coordinating inmates' health care, they started giving our contact information to journalists. Family members started calling as well. I gave my employees a quick course in federal law-enforcement requirements for protecting information.
Today, we have 13 prisons under contract, but our relationship with that second customer is unusually close. We've been through the fire together and have a shared sense of perspective. When small problems crop up, no one breaks a sweat. They have confidence in us. We have confidence in us, too. When it was all over, we looked at each other and said, "If we made it though this, we can make it through anything."
Why I Traded One Dream for Another
As a psychologist and a tenured professor who specialized in researching and devising strategies for teaching troubled children, Stewart Pisecco was doing the work he loved. But then he had an idea for something he thought could reach more children: software that lets teachers and school administrators easily track and manage the implementation of behavioral improvement strategies. And he had to decide: Is it worth risking one dream to pursue another?
I knew I wanted to be a psychologist from the time I took a psychology class as a junior in high school. And I knew as a sophomore or junior in college that I had a real interest in academia. I loved research and statistics and combining the ideas of research and social sciences.
I had been at the University of Houston for five years when I got tenure. I had my doctorate by 28 and was tenured by the time I was 34. At the time, I could never have imagined doing anything different. It was what I loved to do, and I had worked my entire professional career to get to that point.
I thought I'd be crazy to leave. I had pretty much a good job for life, was doing what I wanted to do, and had lots of security. At the same time, I was relatively young and thought I could take some risks.
The idea for our company came from one of those chance experiences. I was doing my taxes with TurboTax and just reading research literature on the typical reasons teachers struggle with behavioral intervention. And I thought, Why can't we come up with a software system like TurboTax that would guide teachers through the process of designing good behavioral strategies for their kids and then allow the administrators to monitor how the kids are responding to intervention approaches?
Most faculty members have a part-time private practice that they work on one day a week, but in 2000, I began committing that time to working on the business. I spent a couple of years researching the effectiveness of the software and then a couple of years working with teachers to refine the implementation process. But most of that work was getting crunched into the one day a week.
I thought it would definitely be a gamble to leave, but I read the market and got the sense that momentum was building. I always thought it was really important to chase your dreams, and this was my new dream. As I began seeing more results and as I felt like we were making a really good impact with kids, the decision became easier.
I always felt that we would do well. But I do remember driving out to an appointment about two years in and saying to myself, If we don't get this deal, it might be tough to get this thing going. A main struggle for us was dealing with the seasonality of cash flow. It's not a very transactional business, so it's very lumpy how we get our cash flow. Luckily, we had as a shareholder a group that did a bridge loan until the company got paid, and it didn't cost us equity. You don't find a lot of folks who will do that.
Now we're at the point where my vision has been laid out and is being embraced and adopted by customers. The excitement that comes with that far outweighs the sadness of leaving academia. So I've realized this is also something I really like to do. And it's very satisfying.
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From the Ashram to the Strip Mall
Michael Penny had never been interested in business. For two decades, he lived in an ashram, a secluded spiritual compound in which he practiced yoga and sought purity and simplicity. But when a scandal rocked his community, Penny was forced to reevaluate his life. He moved out and started over. At age 41, with little money and no formal work experience, Penny struggled to support his family. He eventually found a new path to fulfillment by launching Savvy Rest, a Charlottesville, Virginia, maker of organic mattresses. His products are sold by dealers across the country.
I took my first meditation course when I was in college. It felt so good. I felt relieved and centered. Meditation got me away from everything everybody else was doing, which back in the '70s was drinking and smoking pot. I majored in psychology, because I was interested in helping people. I didn't want to have anything to do with the business world.
Usually people strive for money, power, fame, or sex. I didn't see myself becoming fulfilled by any of those things. I graduated college in 1975 and moved into an ashram in Pennsylvania. I don't know if it was just anxiety about stepping into the world or an inability to make a decision, but I felt like I really wanted to experience going deeper within myself and having a deeper experience with yoga.
The ashram was demanding in a lot of ways, but to me it felt like home. We woke up every day at 4:30 a.m. We dressed in white and practiced yoga, meditation, breathing exercises, and chanting. We all had jobs within the community, which grew from a group of 70 to hundreds of people. My jobs ranged from bookkeeping to managing the kitchen. I was a good yoga teacher.
We lived very simply. The ashram provided a small allowance as well as food and clothing. Everyone shared the common understanding that we were spiritual seekers on a path of enlightenment and self-discovery.
While living there, I met my wife, Heather. We married in 1982 and had two sons, Gopal and Santosh. We felt we had found what we were looking for. We planned on staying in the ashram for the rest of our lives. But in 1994, everything changed. It came out that our guru had been sexually abusive with some of the women who lived there.
We didn't understand how we could have allowed ourselves to be so misled. We wanted a clean break, so we picked up and moved to Virginia. We didn't know who we were separate from our life in the ashram. But I believed we would land on our feet. We were willing to work hard. And we had lived for so long on nothing that we had nothing to lose. I think we were overconfident.
We had enough money for a few months' rent. I believed that the universe would provide for us. My wife worked as a massage therapist. I took the first job offer I got, which was selling satellite dishes. I said to my wife, "Well, it must be meant to be. I'm supposed to sell satellite dishes." I lasted only three weeks. I was awful at itI hadn't watched television in 20 years!
I needed to make a living. I worked for a while at a senior center and then delivered newspapers for a few months. I just did whatever I had to do. It was overwhelming emotionally, but I didn't have time to process all of that.
Eventually, I got a job from someone who had lived in the ashram. He had a futon store, and he needed a manager. He wasn't a very organized person, but I was. I worked at the futon store for about six years.
In 2003, I decided to start my own mattress store, the Savvy Sleeper. People were constantly coming in asking for all-natural mattresses. I tried a few different kinds, and they tended to be either really hard or really soft. They just weren't good-quality products.
I met with a natural latex manufacturer from India, and we began manufacturing organic latex mattresses. Today, we have about 60 dealers and 15 employees. My youngest son works in our warehouse part time, and my older son handles our website and marketing.
When you have a need for somethingwhatever it isthen you put more energy into it. In this case, I had a personal need for my company to be successful. Sometimes, people say you create your own reality or that if you believe in something hard enough, you can make things happen. I think there's some truth in that. But I also think there are a lot of forces at work, like grace and luck.
After living in the ashram, I believe that I know how to listen to what my customers need on a deeper level. For example, I've learned that trying out a mattress in a store for a few minutes isn't a good-enough test. That's partly because of the nature of the situation. The customer testing out the mattress is often stressedand often hovered over by a salesperson on commission. The customer is usually wearing constrictive clothing and feeling muscle tension from the day.
We designed our mattress in layers. Each layer can be firm, medium, or soft, and there are many possible combinations. If a customer doesn't like what she chose the first time, she can swap layers for 90 days. For example, she could exchange a firm layer for a soft one. Sleeping on a mattress for a few weeks is the real test. We've made it so people can do that in their home, where they feel most comfortable. About 10 to 12 percent of our customers will do an exchange; for the rest, it's comfort and relief that feels right from the get-go.
When I started my business, I wanted to create an environment that was safe, warm, and inviting to everyone, including employees, suppliers, dealers, and customers. I always tell every new employee that all customers must feel safe, warm, and welcomed. I'm not particularly demanding about anything else.
Responding in a Time of Need
Jean Orelien left his native Haiti in 1980 and later made his way to the U.S. to attend college. He stayed on, earning advanced degrees in statistics and public health. In 2001, Orelien founded SciMetrika, a public health consulting firm that works with agencies such as the Centers for Disease Control and Prevention and the Environmental Protection Agency. After a massive earthquake devastated Haiti last January, Orelien organized a nonprofit team to gather data on victims, with the goal of helping aid organizations more accurately target their relief efforts. Now, Orelien hopes to conduct similar studies around the globe.
As I heard the news reports on the earthquake, I realized there wasn't a good handle on what was happening. There were estimates on the number of the dead and the homeless coming from various news media, and they kept on changing. It wasn't clear who was helping to collect that data. I thought that as someone who knows the country and as a statistician, I could help. I felt a duty to contribute.
I reached out to the president of the American Statistical Association about providing volunteers. He told me it would take too much time to put together a proposal for the board to vote on. He recommended that I go to Statistics Without Borders, a member group within the organization. We exchanged a couple of e-mails, and they were on board.
In March, I went to Haiti with three members from Statistics Without Borders. Our goal was to gather data on displacement and the economic impact of the earthquake. The standard method of collecting data is to conduct a field survey where interviewers knock on doors, but that would not have been practical. Then we saw that pretty much everyone, especially in Port-au-Prince, had a cell phone, so that was the way to go.
I still have cousins and in-laws in Haiti. I brought along three tents for them. That's the most I could carry. I wasn't prepared to see people living in such substandard conditions. There were a lot of people who weren't even living under real tents -- they were makeshift tents. I saw people taking showers, and their privacy was not even protected.
I stayed in Haiti for nine days in March. We met with Voilà, one of Haiti's main cellular providers, and we talked to people in the Ministry of Planning. We were able to call about 200 numbers for a preliminary study to determine our sample size. Once we got back in the U.S., we finalized our questionnaire.
In June, I went back for seven days to collect more data on things such as marital status and household structure. We had 10 university students from Haiti serve as interviewers. We're analyzing the data now. With all the problems with latrines, with sewage, certainly there are diseases that have broken out. Public officials need to be aware so that they can take action in a timely fashion.
We're in the process of creating a nonprofit organization to pursue projects in global public health. There is often resistance among aid organizations to working with for-profit companies, and we don't want our status to prevent us from consideration. After the earthquake hit, we received information that the CDC was planning to help rebuild Haiti's health infrastructure. We want to be part of the solution there, and we want to get involved in other countries as well.
My connection to Haiti is a big part of my desire to work globally. Certainly, there's a greater need there than in the U.S. when it comes to public health. I also feel that I have not paid my dues. I had gone back to Haiti a couple of times since coming to the U.S., but not as much as I should have. I'm living a normal life, in a suburban area with my wife and four kids. I think my work with SciMetrika thus far is a start, but it's just the tip of the iceberg, and I'm looking to give even more.
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