Friday, May 22, 2009

Customers: good and bad


During our Entrepreneur breakfast yesterday (May 21st), our speaker told a story about being kicked out of the local IHOP.

It seems he and his wife and a second couple were having brunch in the local IHOP. He has known the owner for many years, and they are regular customers. During the course of their meal, he was telling a story that ended with a slightly off color statement. And being rather gruff, his voice carried. From the table next to them, a women with her family loudly complained at him for his crude comments.

Now this woman's children had been very loud and unruly during the entire meal - so much so that the couples had almost told her to quiet the kids down.

Of course, the result was the two tables arguing back and forth. The owner came up to them and said it would be best if they left.

Let's put ourselves in the position of the owner. He has an argument going on in his restaurant, and has to decide what to do. On the one side is a longstanding customer, on the other, a family with children. If he kicks out the regular, he could lose them. If he kicks out the family, it could be a marketing nightmare - it is an IHOP family restaurant.

What would you do?

I believe he did the right thing. He knew that his friend and regular would undoubtably return, and he could always seat them away from families in the future. The family, however noisy, might just tell their friends about this rude table being removed from the restaurant, etc.

Let's open the net a bit wider: you have a product and you can only deliver it to one of two customers right now - an existing customer or a new customer. Who do you get the product to first? (Or two technical support calls, or two client projects.)

How you as a business owner will balance competing claims for your attention will be critical - not only for the result - but for how your employees will also react in the same situation.

Tuesday, May 19, 2009

Kinds of Entrepreneurs


As we get closer to summer, young people are looking for summer jobs - or their parents are urging them to look for summer jobs! Given the current economy, it is not surprising that newspapers and magazines are running articles on teenagers who started their own business.

Do you ever notice the list of tips or advice for the group described in the article are pretty much the same as one would give any startup. For example, in the USA Today article on teen entrepreneurs, they provide the following list of advice: "don't let shortcomings thwart you" "price wisely" "don't over invest in supplies". These could be given to any startup. There is nothing distinctly teenager about those items. Just as like articles for women entrepreneurs give advice that could cover men entrepreneurs as well. This is not surprising if you consider that business remains the same regardless of who runs it.

What grabbed my eye in the article is a couple of the comments from the teen entrepreneurs. The young man notes he is learning more than he would at a typical summer job, "this is just the foundation for learning how to be a businessman," he says. "I couldn't learn this just working at a restaurant."

The young woman had to convince her parents to let her start her business. When Archer first brought up the idea of selling hair pomade, her parents didn't take her seriously. "It took a lot of convincing" to get the business going, she says."My mom was like, 'Maybe you can start the business when you are 20 or when you get out of college.' "

The consequence I draw from these two comments is that it is not the youth or teenager who needs to be convinced of the importance of getting out there and starting his or her own business - but the parents or adults in his or her life.

The young woman's mother would rather her work at a fast food restaurant all summer long to make - say $2000. Her daughter learns to make fries. Instead, her daughter wants to open a business. Let's say she does open the business and it fails (in her case, it is succeeding). Then the parents would have to cover her lost income. But the daughter would have learned a lot more than making fries. But the mother would rather her daughter wait to start a business when she is out of college?

And the young man realizes that he is better off not doing the restaurant job (and so does the daughter). But why not the parents? The risk is low, the learning high, and at the worst, the daughter learns something about herself. Strange.

I am reminded of a Buckminster Fuller quote, "we are all born geniuses". I take this as meaning as we get older, we get less pliable, less open to taking advantage of our genius. Why not try to be open to the possibility? [And of course - take the useful advice on how to start a business!]

Friday, May 15, 2009

Getting in your Customer's Business


There was a very good article in BusinessWeek this issue: how Sysco, the restaurant supply company, is helping their clients (restaurants) to become better businesses. The effect: better more profitable restaurants will be able to order more product from Sysco.

What I really like about the article is that it brings up something that even a small business in the B2B market can do - help its customers to be better businesses.

The word partner is often overused - if you are my partner, then help me pay these bills of ours.

You are selling your clients a product or service, but you can increase the value  of what you are offering by helping them to solve an additional problem. Don't empathize with their pain, relieve it!

A good business owner knows if his customers are doing well, and the customer views him as the reason they are doing well, that is going to mean a strong relationship.

Rather than cutting the cost of their products, Sysco realizes that if they can get their customer's restaurants to make more money, the restaurant owners will be less worried about a few cents of price difference in the product and more willing to go back to Sysco for more products. And as long as the cost of the programs they are offering are more than offset by the additional sales they generate it is a win for both (which is really what a partnership is all about).

As often is the case, my point is just trolling in the wake of something Seth Godin said last week in his blog, "When all of your competitors are busy increasing value by cutting prices, you can actually increase market share by increasing value and raising benefits."

Finally, remember that the additional value you provide has to be meaningful - a free 20 cent pen is not going to make the value increase on a $1000 sale. We stopped getting toasters for opening a bank account years ago.

Monday, May 11, 2009

Avoid being an Entrepreneur


In a recent post on their site, Matt from 37 Signals argues that you don't have to be an entrepreneur to be sucessful. There are many very sucessful people out there who are " succeeding without MBAs, business plans, and all those other credentials you’re supposed to have before starting a business."

We have somehow created the myth of Entrepreneurs - MBA from a top school, writes a killer business plan and Venture Capitalists flock in... It almost sounds like something from The Fountainhead.

Thankfully most of the (small e) entrepreneurs I deal with are not so characterized. They don't have big MBAs or venture capital, and in fact, concentrating at all on those ideals must set up a false demand in the prospective business owner. Instead of finding a niche or market they understand, they try and develop something towards this mythical Entrepreneur.

We must break ourselves from this mythical Entrepreneur.


Matt also remarkes that "It’s time to get over the idea that risk and reward are so intertwined in business." This is a incisive point. Many of the financiers we are now bailing out had much reward for their actions - though little significant risk. Likewise, starting up a small software shop in college or just out of college has very little risk (Paul Graham has written persuasively on this as well), so any reward is positive.

What I don't have an answer to is how, as a 40ish mid-career person, I can balance the reward and risk where I am now as a business owner. And many of the people who have been laid off right now are exactly in this position. Revised 5/12: What I meant to say was: I am neither a recent college grad, nor a wealthy ex-financial - I am a mid-career person with a mortgage, car payments, etc. For me and my family, the risks of starting my own business can be very high. And if I were a recently laid-off mid-career worker, the risks are even higher. How then do I manage to untangle the risk and rewards of opening my own business?

How do we go forward?

Friday, May 1, 2009

Status updates for projects


If you are trying to discover how far along a person is with a particular project or job, instead of asking "what percentage complete are you?" (or "how far along are you?") ask the following:

How long have you spent on the project?

How much longer do you need?

By asking percentages, you are likely to get answers like 50% or 80% or 30%, which often have no relationship to where the project really is.

By asking times, while it is still a swag, it is a more realistic swag.

When someone says "two hours", resist the temptation to say "what did you do the other 6 hours?" or you are likely to get told "eight hours" next time! Instead, go to the second question. Track how long tasks take and you'll do a better job as you go on estimating who can get things done right and how long it will take.

I always think I can do projects much faster than those who work for me or in the group I am in. As an entrepreneur I often have to remember that no one is going to do the job the way I will do it. But I can be more systematic about assigning work and time it takes to get the job done right.