Category Archives: Business Stories

True Story: Why I Lied to You When You Called

Business Ethics, Business Stories, True Stories,

I’m a bit embarrassed about this story. It’s about lying. You’ll see if you read on that it wasn’t bad lying, not tricking anybody for any bad reason. But it’s a true story, so I’m posting it here because 1.) it might be useful to somebody; and 2.) I’m curious about how often it happens.

Did you ever see the television commercial where the one small business owner changes his voice on the phone to sound like different people? I did something like that for years. I answered the business phone as Evan Rocha, not Tim Berry. (If you know me well you’ll guess how I came up with that name; and if not, it doesn’t matter. )

It started when I was a one-man company. I’d done the software and the manual and the advertising, and I also took the calls. I didn’t answer the phone as me because I felt like that would be bad for business. Right or wrong, I thought there’d be an image problem, or a lack of confidence. So I became Evan.

Later, even after the company grew up, long past the early days when I had to take calls, I still took tech support and sales calls often. I did it sometimes for special case problems, sometimes to fill in when we were understaffed, and sometimes because the phone got past the fourth ring and I wanted it answered.

I like talking to customers. I always have. And it’s something every business owner should do, and especially software or web entrepreneurs. You should really talk to your customers regularly. But having the president answer the phone feels weird, so I kept using the name Evan.

It’s been several years since I was last on the phone as Evan, so I thought it would be okay to share that now. And if you happen to be one of the customers I talked to as Evan, I didn’t mean to be deceitful and I apologize for lying. It just reduced the awkwardness. But yes, that was me.

Are you an entrepreneur, or small business owner, who’s done that? I’m curious about how many others there are.

Do You Do This At Meetings? I Hope Not.

Business Mistakes, Business Stories, ,

It’s been such a delight these last four years since I focused on blogging and escaped from most of the business meetings. I openly confess. I don’t like meetings. Sure, there’s the rare exception, when a group of like-minded people discuss interesting ideas. I’ve been in meetings where people are excited, ideas bouncing about, lively discussions, brainstorming, and that’s great. hippo

But it’s so damn rare.

One of my dear mother’s favorite expressions was “if the shoe fits, put it on.” Just writing that makes me miss her. See if you fit either of these descriptions.

The runaway train

You don’t see it as easily when it’s you, but if you watch for it, you’ll see it all the time. One person is introducing a thought, gets a few words or a sentence into it, and pauses. Then another person — the runaway train person — seizes the pause and starts talking.

Lots of people pause when they talk. There are good reasons to pause. But when the runaway train comes roaring in and takes the conversation over, the group never gets the wisdom of the person who talks slowly.

It’s worse when you’re the boss. People don’t complain about the boss interrupting. Right. And, gulp, I was the boss for a lot of years. Oh-oh.

The drone

Then there is the person who goes on and on and on and on and on and … you get the idea. Interrupting is rude, so you sit there, and when at last, after what seems like forever, the whole monologue seems to be winding down, then you hear, to your horror and the horror of everyone else in the meeting:

In other words…

Which means the whole thing is going to start up again.

It’s worse when you’re the boss. People don’t complain about the boss going on and on, right? And, gulp, I was the boss for a lot of years. Oh-oh.

Conclusion: pots and kettles

I know, it’s pots and kettles. I’ve done both of them, and I hate both of them. Don’t think for a minute, because I’m writing about this, that I think I don’t. At best, I try not to. When I think about it.

But I do hope this reminder will help you do better at your meetings. Do you have some suggestions? The talking stick, something like that? Something you’ve done to make meetings better, to avoid these two problems? I’d love some suggestions. And, if it helps, print this out and post it on a bulletin board, or in the conference room. Make it a gentle reminder to all.

Endorse Me, You Gypsy Savage, Endorse Me!

Business Mistakes, Business Stories, Marketing, Weblogs, , , , ,

On the one hand, who likes big government? The FTC, Federal Trade Commission, sounds like the feds. Gear up your paranoia. On the other hand, who likes fake endorsements? And then — can I borrow your hand to make the third hand, please — wow! How can we resist highlighting this:

theifOn Monday the FTC published a bulletin with the catchy title: Firm to Pay FTC $250,000 to Settle Charges That It Used Misleading Online “Consumer” and “Independent” Reviews. Here’s a summary, direct quote from that document:

The Learn and Master Guitar program promoted by Legacy Learning and Smith is sold as a way to learn the guitar at home using DVDs and written materials.  According to the FTC’s complaint, Legacy Learning advertised using an online affiliate program, through which it recruited ‘Review Ad’ affiliates to promote its courses through endorsements in articles, blog posts, and other online editorial material, with the endorsements appearing close to hyperlinks to Legacy’s website.  Affiliates received in exchange for substantial commissions on the sale of each product resulting from referrals.

I’m glad they got them. Fake endorsements are dishonest, they dilute real endorsements, they pollute the Web, and they tarnish the wisdom of the crowd. So hooray for the FTC, catching the spoilers who make it worse for everyone else. Get those evil-doers.

But then, wait, what was that? This is a more direct quote from the same document:

According to the FTC, such endorsements generated more than $5 million in sales of Legacy’s courses.

Now that worries me. I can subtract $250,000 from $5 million in my head, without needing an accountant or even a calculator. It comes to $4.75 million. What’s wrong with this picture?

My thanks to Anita Campbell who pointed on Twitter to Geno Prussakov’s blog post on this.

(Image: Oleg Golovnev/Shutterstock)

True Story of Business Disaster With a Compensation Plan Lesson

Back to Fundamentals, Bootstrapping, Business Mistakes, Business Stories, True Stories, ,

This is a true story. Names aren’t included for obvious reasons. Don’t ask.

Once upon a time a product-obsessed software entrepreneur who didn’t like sales hired a sales-oriented entrepreneur who liked selling software. It seemed like a match made in heaven, as they say. Both of them could focus on what they liked doing.

dollars flying

The company was just starting. The software guy owned it, and paid the sales guy’s salary, and they both agreed on some very attractive incentives for the sales guy if he could double sales to a million dollars in the next year.

So they agreed, and both of them went to work. As time went by, the product-obsessed software guy focused on his computer and the code, while the sales guy made calls in the next room. When the code was ready, they worked together to create packaging. They had somebody duplicate disks (this was before the Internet) and assemble packages. And the product launched. The sales guy made more calls, and a major distributor agreed to carry the product. Soon after, several major retail chains agreed to carry the product.

When the year ended, the sales guy had made his million dollar quota. And two months later the company was swamped in debt, broke, and threatened with bankruptcy. About a quarter of the million dollar sales had been sold into the channels, but not out of the channels to actual end-user customers. So it was coming back.  And the distributors expected the broke company to buy the software back for what they’d been sold for, less a substantial amount for shipping and co-promotional marketing.

What happened?

The worst thing was that the software packages didn’t sell well from store to end user. The sales guy got it into the channels, and the stores put it on the shelves, but people didn’t buy it. And channels don’t take those losses. They send the stuff back.

To compound that problem, neither the sales guy nor the software guy knew about sell-through reports. Had they asked, the stores would have given them advance warning that the stuff wasn’t selling, called sell-through reports. Then they would have known disaster was brewing, and maybe they could have slowed things down, changed the packaging, or at least known what was about to happen to them when the stores started shipping the product back to them. (Which is a great example of the old adage: you think education is expensive? Try ignorance.)

And the second worst thing was that the sales guy had done deal after deal to get product into the channel by offering distributors and retail chains deep discounts and special deals with freebies, like two units for the price of one, or 5 for 3, and so on.

So, although sales had in fact passed the the million-dollar mark, after the returns were netted out it was only about $750,000. Plus, costs had gone from about 20% of sales to almost 65% of sales. And the $250,000 received for the software that hadn’t sold through had been spent.

The compensation lesson: the sales guy had been offered a huge bonus for getting sales to $1 million. The gross margin had nothing to do with it. And returns weren’t even considered. So he met his numbers, and it was a business disaster.

The whole fiasco reminds me of one fundamental principle of compensation: whatever the compensation plan rewards is the behavior it encourages. If sales is all that’s mentioned, then sales — not management, not information, not optimizing your company’s position — is all you’re going to get. Do you give commissions on sales, or gross margin? Do you pay commissions when the sale is made, or when the customer pays? Do you have a return allowance that holds commissions up?

(Image: Losevsky Pavel/Shutterstock)

Case Study: Vizme, Adaptation, and Living with Facebook

Angel investment, Business Stories, Starting a Business, True Stories,

I’ve been watching vizme.com since I first saw the demo about a year ago. It struck me as immediate coolness. Imagine being able to mix up a combination of online video and pictures that play when clicked, representing a topic, theme, idea, or brand; and putting that onto your blog or Facebook page as something like an icon (it’s actually bigger than an icon, but circular, as shown here) that plays when clicked.

To give you an idea, I went over to vizme.com and picked up a token for sharing. If you click the image here, a vizme token, it should take you to some person’s creative work patching together SuperBowl commercials from YouTube. In this case, it’s a lot like a YouTube playlist, but it’s a dark background and a much more direct, less cluttered, interface. I could share it on Facebook, Twitter, or, like here, on a website. And it’s free.

I’m interested in Vizme for several reasons: It’s in Eugene, OR, so it’s local to me. It entered the Willamette Angel Conference investment contest last year, and I’m a member there, so I got to watch the pitch. It didn’t win, but it did get my vote on the first ballot. I like Dan Mayhew, one of the three founders. I think it’s a cool idea, well implemented.

vizme logoPerhaps most important, though, is the principle of adaptation. While I’ve been watching, the vizme founders have gone up and down in sophistication of the interface as they went through early users and had to make changes. They’ve had to adapt to changes in the Facebook interface that (entirely by accident, without any bad intentions on Facebook’s part) changed the way the tokens work. And they’ve been scrambling for angel investment, testimonials, advisors, and interface adaptations to fit the changing face of social media. And their revenue model has been revised and adapted several times.

And, as a great example of what happens in the startup world, life goes on. Facebook changes, vizme adapts. Users work with it, suggest changes, and vizme adapts. Those changes affect the revenue model, and vizme adapts.

For a second opinion on that, you might read Will Vizme Revolutionize The Way We Share Content? over at FastGush.

Help With Naming: Am I Green or Not?

Business Stories, Starting a Business, , , , ,

I’m not sure of the answer to this one; it’s a good question. A man whose last name is Green saw my post here turning green from overuse and he asks:

I’m starting a small woodworking and furniture building shop and am looking for a name. It seems natural to use Green as it is my last name, however I don’t want to be lumped into just another green company.

My immediate reaction was:

Of course you should use your own name. It’s not just greening it up in your case, it’s authentic; it is your name. And if it resonates because it also implies natural and environmental, all the better. Overuse or not, those are both good qualities.

But then I thought some more about it. What if potential customers see Green in the name and assume greenwashing?What if, as time passes, green acquires negative meaning, becomes a diluted term like the term user-friendly in software?

So I asked some friends in Twitter, and got some good answers very fast. You can see those answers here, and, by the way, that link in one of the tweets goes to Smart Industries, which was founded by Gordon Smart in 1963, and is strong and healthy.

So – and this is what makes this a good question – there is no easy and obvious answer to this one. Like so many things in business, it depends.

By the way, those smart and helpful people who answered in Twitter, should you want to follow them, are @rieva (Rieva Lesonsky), @smallbizlady (Melinda Emerson), @timburks (Tim Burks), and @frankdekker (Frank Dekker). Thanks.

Congratulations to the Huffington Post Team

Business Stories, , , , ,

Blogs are supposed to be personal, right? This post is more so than most.

Today I can’t help celebrating the Huffington Post big deal today. @huffpo got acquired by AOL for $315 million.

I’ve been watching the rise of the Huffington Post for several years now — (and here’s where it’s personal) since my daughter started  as CTO about three years ago — and what a ride.

Many big wins seem simple after the fact. Few are, and this one no more than any. It might seem obvious now but when they started in 2005, it was a matter of huge risks and a million ways to go wrong. They’ve been working like mad, paying attention to every detail, leading a new media world step by step, but with a lot of ups and downs. When you look back at it now, they changed blogging and journalism both.

Congratulations to Arianna Huffington, Ken Lerer, Jonah Paretti, Eric Hippeau, and so many others who played a part in it. And of course to my daughter Andrea Breanna, too — but she doesn’t need a blog post to know how I feel.

(Image: copied from Huffington Post)

Business Landscapes Change. Giants Fade.

Business Stories, Business Strategy, Web/Tech, , , , ,

Quick thought for the day: business landscapes change.  Giants fall. Startups become giants.

The giant, the big power, that everybody fears, and by whom everybody wants to be acquired … it’s Google these days. It used to be Microsoft. Are you familiar with Lotus 1-2-3? There was a time when Lotus was the giant of software. And Vision? Look it up: it was the world’s largest personal computer software company in 1983.

Giants are hated and feared. 

In January 1985 Apple released the now-famous 1984 commercial that pitted the high-tech newbie against the industry giant (here’s a link to it on (ironically) Google video)  … and although it’s hard to believe now, back then that was all about IBM and everybody knew that instantly. Today it’s total anachronism. But IBM was the giant of the industry for about 20 years. It was hated and feared. They called it Big Blue.

So now it’s Google.  What do you think: For how long? Who’s next? 

A Short History of Business Plans

Business Planning, Business Research, Business Stories

Somebody on Quora asked for a history of business plans, and Noah Parsons suggested I answer. I searched for an authoritative source, and didn’t find anything that really goes into history. But the topic is interesting to me, and I’ve been dealing with business plans since 1974, so I thought I might at least add some anecdotal history.

First, an interesting bit of data, a word search on the appearance of the phrase “business plan” in books, compared to “venture capital” and “entrepreneurship,” using Google’s beta ngram search. It shows the relative use in books, from 1900 to 2008, of the terms “entrepreneurship,” “venture capital,” and “business plan.”:

What I think we see there is how the business plan (the blue line) became really prominent in synchronization with venture capital (the red line) and entrepreneurship (the green line). There was some kind of a bump in all three in 1907, then a steady increase in entrepreneurship from the late 1960s. Notice how the blue line for business plan seems to track very closely with the high-tech boom and growth of Silicon Valley, and with Venture capital.

This fits my anecdotal history, my impression of what I’ve seen in the general area of business plans since I first started with business plans in 1974, through to the present. My earliest references to business plans, back in the middle 1970s, were generally corporate. I had friends and business contacts who were managers of large companies, and they dealt with business plans as annual corporate exercises.

My first focused involvement with business plans was in 1979, when I took a course at Stanford called “small business management,” which was in fact a course on developing business plans for seeking venture capital, for high-tech ventures. It was taught by Steve Brandt. As I got out of business school and into consulting with Creative Strategies, and then when I left that company to go out on my own, business plans were a core component in all high-tech startups.

If you look carefully at the high points and drops, remember that this is book usage, so it’s on a longer cycle than say use in newspapers or magazines. It takes a couple of years for a trend to show up in a search of books.

I started on my own in 1983. I was based in Palo Alto, across El Camino from Stanford, in the heart of the Silicon Valley. There was a huge demand for business plans. Venture capital was taking off, Silicon Valley was taking off, the PC boom was in full swing. That drop in the middle 1990s, all three terms, that shows up on the chart? That was the recession of 1992-1993, I think. The PC boom started to settle, but the Internet boom hadn’t started. Then the second big drop in recent times is the aftermath of the dot-com crash beginning in 2000.

My personal opinion, not backed by research, and just a guess, is that the term “business plan” is suffering lately from the misunderstanding of the business plan as if it only exists as a formal document. In my mind, the format is evolving as tools and capabilities evolve, so that the business plan of today is as valuable as ever, but not as a set formal document, but rather as the first step in planning, to be part of a process that includes regular revision and review. If you check the large number of posts here in the business planning category, you’ll see what I mean. (Sorry, there’s 186 posts right now in that category; I write about business planning a lot.)

True Story: Dollars vs. Eyeballs in Business Valuation

Business Stories, True Stories, Venture Capital

It was a warm late-spring day in 1999. I sat in my office with a venture capitalist, my lawyer, and my son. The sun beamed in the patio outside my office. We talked about Palo Alto Software and its web subsidiary bplans.com. At one point the VC said:

You wouldn’t be an attractive investment for VCs. You’re too profitable.

I chuckled. I thought it was a joke. We’d grown sales in four years from less than $1 million to more than $5 million annual sales. We had to be profitable because we had no outside money.

He said:

That’s no joke. It’s like the Oklahoma gold rush, a land grab, and the assumption is that if you’re profitable, you’ve stopped too soon. You should be spending more to build traffic.

Those were strange times.

(Image: iDesign/Shutterstock)