Category Archives: Weblogs

Truth, Magic, Stories, and the Digital Campfire

Do yourself a favor and watch Marco Tempest on this brilliant six-minute TED video. If you don’t see it here, use this link to go to the TED site to watch it. After you’re done, I’d like to tell two true stories that seem somehow related. And before the video, I want to highlight some quotes from it. First:

Experts believe that stories go beyond their capacity for keeping us entertained. We think in narrative structures. We connect events and emotions and instinctively transform them into a sequence that can be easily understood. It’s a uniquely human achievement.

And second, Marco’s delightful definition of social networking, as…

… the digital campfires around which the audience gathers to hear our stories. We turn facts into similes and metaphors and even fantasies. We polish our affections of our lives so that they feel whole. Our stories make us the people we are, and sometimes, the people we want to be. They give us our identity and a sense of community.

And from there, two true stories:

  1. In the late 1990s there was a business plan that won almost a quarter of a million dollars in MBA-level business plan competitions that was a fictional exercise, using real people, presenting a technology that sounded plausible but didn’t exist. The contestants who submitted and pitched the plan had no intention of ever launching the company it described. They wanted to win business plan contests. And they did.
  2. I once witnessed overwhelming, loud, bawling, personal-loss kind of grief, so all-encompassing that nobody else in a carful of people could talk, over the death of a fictional character is a movie.

And I think that if you watch this TED talk, you’ll see how these two little stories are related.

Q&A: Valuing a SaaS Business

This question was posted on my “ask me” page on my timberry.com site. I can’t promise to answer all the questions I get, but I try, and I’m particularly happy when I get one whose answer might be useful to other people. So here’s a question:

Do you have any idea how to value a SaaS business? Do we use our users, growth in users, revenues, margins, or what? What do investors like to see?

My answer: I’m probably a bit biased on this one because of my position in Palo Alto Software, which publishes our LivePlan SaaS offering for online business planning. But I can’t say I haven’t thought about it. Here’s what I can do to help:

  1. I really like How should you value a SaaS company, posted a few months ago by Robin Vessey and then edited by Joel Spolsky on OnStartups. Joel knows software. You’ll see there that it’s about a variety of factors, usually done on a case-by-case basis. It’s a combination of baseline revenue multiple, market potential, value of the technology, and what’s needed to take it to the next level. This is a good discussion.
  2. Notice that Robin and Joel don’t even mention profits or margins. High-tech companies are almost always valued on growth and revenues, not profits. I explained why in profits are overrated here on this blog.
  3. I read recently that publicly traded SaaS companies are valued at 5-20 times revenues. Publicly traded means that their stock appears for sale to anybody on a major stock exchange, which makes them inherently different from the smaller startups. And, unfortunately for you and me, we smaller private companies take a discount on the numbers of the big companies because we aren’t big and our stock isn’t liquid and we don’t have to publish financial information. Even there, however, it’s still more about growth and revenues than profits. A SaaS company showing strong growth and breaking even or losing a bit does better than a SaaS company with profits and stable.
  4. Investors vary on revenue vs. growth in users. I’d say that revenue is much better than just growth in free users, but then look at Twitter and Facebook and the like, which got huge valuations first for huge user bases and then only later for revenue models. So that’s debatable. When I read a business plan I mistrust user numbers that aren’t tied to revenues, because that’s too easy.

What really matters is the future. Valuation isn’t what something is worth, but rather what somebody will pay for it. So what really sells, in SaaS, is its future. There’s nothing better for valuation than indicators of growth in paying users, stories that tell about market need, and a team that can push it. And it’s magic. There’s no MBA algorithm that applies.

 

What Would You Do About This Facebook Post?

Hats off to Inc Magazine for this great treatment of a problem a lot of business owners face. In this case it’s a man named Mark, who discovers:screen shot

Recently an employee put a photo of the cover of the book Your Company Sucks on their own Facebook wall, titling the entry “Succinct.”

To his great credit, author Jeff Haden offers no easy solutions.

First he points out that Mark doesn’t know whether the employee even thought that the post might be taken as a complaint against his company. Maybe that person liked the book, and the title.

Then he quotes HR expert Suzanne Lucas saying …

ignore it completely. The chances of anyone caring one bit about this are extremely small. The chances of this blowing up in an employer’s face by taking action are much greater.

And I like his recommendation too, Jeff the author:

I would ask the employee to delete the post. No matter what the intent, others could take it the wrong way. A good employees who meant no harm will immediately say, “Oh, wow, I didn’t think of that. I’ll take it down.” If the employee really is unhappy with the company, that gives us the chance to discuss what’s wrong and hopefully make a bad situation better.

That doesn’t sound bad either. Actually, I like Jeff’s suggestion better; but that’s just me. Who knows?

I think it’s an interesting problem. Social media is publishing, and publishing is freedom, and employment doesn’t — or isn’t supposed to — limit freedom. And even before social media, did I as an employers get to monitor what people wrote in, say, letters to the editor published in the local newspaper? No. On the other hand, did I have to continue paying somebody who publicly and openly insults me or my company? Probably not, but that gets into some interesting legal issues, and I’m not a lawyer.

What do you think?

User Interface Dark Side: When Deception Works

No ambiguity with this one: the site is named darkpatterns.org…

a pattern library with the specific goal of naming and shaming deceptive user interfaces (aka “dark patterns”) and the companies that use them.

… and author Harry Brignull, in his List Apart post Dark Patterns: Deception vs. Honesty in UI Design, calls them “evil web designers. You can see the list in the illustration here: bait and switch, forced continuity, road block, all of them tried-and-false techniques to deceive users. He writes:

perhaps you’ve never thought about it before but all of the guidelines, principles, and methods that ethical designers use to design usable websites can be easily subverted to benefit business owners at the expense of users. It’s actually quite simple to take our understanding of human psychology and flip it over to the dark side.

“But it tests well,” he points out, as a good reason to use deceptive techniques.

Dark patterns tend to perform very well in A/B and multivariate tests simply because a design that tricks users into doing something is likely to achieve more conversions than one that allows users to make an informed decision.

Just reading the categories on the wiki-like dark patterns site, you recognize most of these techniques. Hidden costs, misdirection, forced continuity … we’re all exposed to most of them most of the time. Call them dark patterns, write about evil web designers, and your position on the ethics are pretty clear. It works for me.

I still believe that business ethics win over the long term. Good business practices keep customers loyal and tricks get caught often enough to impact business.

And we all say that, right? Are you doing it, in your business?

9 Women Can’t Make a Baby in a Month

I’ve been meaning to post about Mark Suster’s 9 Women Can’t Make a Baby in a Month for a couple of months now. What a great reminder, and useful in a lot of contexts.

Mark makes his point about the dangers of overfunding a startup with too much outside investment. He says:

Over funding often produces bad behavior in early-stage companies. You hire people too fast, you over build your products, you try to force market adoption and you do PR blitzes before your product is really ready for prime time. And having too much money certainly raises board expectations that you will do big things quickly. No board is going to give you $25 million up front and then expect your year-one staff expenditures to be $2 million.

And that’s great; well said. But I think the underlying problem applies to a lot of other areas in a business. Having three developers doesn’t mean the software project will be done three times faster. A lot of things take time, and time doesn’t divide into meaningful units like bricks.

Mark is a venture capitalist who also maintains an excellent blog called Both Sides of the Table.

How to Stop Micromanaging in 3 Easy Steps

How could anybody resist this title? How to Spot a Micromanager, on Liz Strauss’ Successful Blog.

As I clicked I was guessing my answer: My guess was that the micromanager would be that person you know who is chronically frustrated with people asking him or her questions all the time instead of just doing things. His or her lament would be: Why don’t they take any initiative? Why does everybody ask me every little detail?

Micromanaging isn’t just what you do; it’s the natural result of what you did: you gave (or pretended to give, because you didn’t really give it) a job to somebody, then you second-guessed their decisions and complained about results. It’s cause and effect. Ask somebody to do something and then complain that they did it wrong, and they’ll never make a decision again.

That’s not exactly what that post said, but it was close enough. And that left me thinking about what might be much more important: how to stop being a micromanager. Here’s my prescription, learned the hard way, in three steps:

  1. Give a person a whole job, not just pieces. Discuss the possibilities and uncertainties related to the job. Agree on expected results, the range of possibilities, and how to measure results.
  2. Close your eyes trust them. You didn’t want to do it, you wanted it done, so let it go. If you didn’t trust them then you shouldn’t have asked them.
  3. If you don’t like the results, you have two choices: never again delegate to that person or support them with the understanding that they had to make tough choices on the fly and you still trust them even though you don’t like these results. Make it clear that you know you might have had the same results too. Remind yourself that there was uncertainty from the outset. Don’t second-guess their decisions or they will never make another decision without asking you.

From what I’ve seen, micromanagers unwittingly create their own problem by making people ask them every detail. If you’re my boss and you don’t like what I decided, then I’m not going to make a decision again; I’m going to ask you. I’m going to ask you in excruciating detail. And it’s not my fault, it’s yours.

For the record, Liz’ post took a different angle, but I think it’s another view of the same problem:

You can usually spot a micromanager a mile away – the individual who wants to be a good leader but goes about in the wrong manner. While trying to better their workers, athletes, students, loved ones etc. they end up creating an issue that was not there in the first place.

The micromanager in many instances becomes just that because they want to make sure everything goes according to plan, their plan.

Does it Take a Social Media Code of Ethics or is it Plain Obvious?

This is the complete unedited text of an email I received last week. It’s just the latest one. I get a lot of them.

Hi Tim,

I was wondering if you took paid guest posts on your site?  Not a traditional “guest post” but one you’d be compensated for and have complete editorial control over.

I’m part of a business that does high-end brand placements worked into guest posts on a variety of subjects. The posts don’t advocate or review our clients, they are informational and/or newsy.  We include a reference link to our clients amongst other topical links inside the content. We’d provide the article, written by a domain expert, and money for you to review and post it upon your approval.

(If you don’t take guest posts, we also have arrangements where we discuss your upcoming post and find one in which a link makes sense and pay you to include it.)

Is that something that you would be interested in?

I always say no. Do you?

Back in the dinosaur days (1970-71), when I studied Journalism in grad school, they taught ethics in journalism. There was a code of conduct. And It’s still around, if you’re interested. Here’s a quote from the Society of Professional Journalists’ code of ethics:

Journalists should:

—Avoid conflicts of interest, real or perceived.
— Remain free of associations and activities that may compromise integrity or damage credibility.
— Refuse gifts, favors, fees, free travel and special treatment, and shun secondary employment, political involvement, public office and service in community organizations if they compromise journalistic integrity.
— Disclose unavoidable conflicts.
— Be vigilant and courageous about holding those with power accountable.
— Deny favored treatment to advertisers and special interests and resist their pressure to influence news coverage.
— Be wary of sources offering information for favors or money; avoid bidding for news.

I say all non-advertising writing, not just all journalism, should follow that code of ethics. Not just blogs, but all of social media too. Twitter, Facebook, LinkedIn, and Google+: if you get paid to endorse something, say so, or you’re sleazy. Social media is also publishing. And this is just simple right and wrong.

Besides which, if sell yourself like that, then you have no credibility.

What do you think?

Let’s All Change the Word Entrepreneur To Empresario

On Monday my friend Robert Jones of Penpoint Group posted 5 reasons we need a new word for entrepreneurs. They were:

  1. It’s French
  2. It’s ridiculously hard to type
  3. It’s not Twitter friendly
  4. It’s been thoroughly bastardized. (mompreneur, solopreneur, and intrapreneur, etc.)
  5. It’s begging for a lawsuit. (from Entrepreneur Magazine)

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The first four are enough for me. I’m ignoring that fifth point because I write for Entrepreneur.com and Entrepreneur Press published my last two books. I like the people there.

So we need a new name for entrepreneur.

Robert suggested venturist on Monday. I commented that it wasn’t catchy enough. Then he suggested venturer in his next post, yesterday, called Kicking Off the Antipreneur Movement. He adds:

I would argue for a term that’s as broad and inclusive as possible. Language adoption relies on usage, and you don’t gain users by excluding people. The best term is one that encompasses all the different varieties of those we currently call ‘entrepreneurs’ — founders and buyers, tinkerers and turnaround artists, profit seekers and social visionaries.
With all those criteria in mind, I wonder if ‘venturer’ might be the term we’re looking for.

And that’s why I like empresario. It’s Spanish, from empresa, which means company. And we’re all getting very familiar with lots of Spanish words that become common in American English. And empresario is easy and fun to say, easy to spell, and, in my opinion, kind of cool.

But it won’t work unless everybody does it. Robert suggested we start using the hashtag #venturer on Twitter instead of #entrepreneur. I think #empresario is even better. What do you think?

Friday Footprints: 5 Good Posts For July 8

First, my thanks to Catharina Belgraver for helping me come up with Friday Footprints, in response to my post here last Friday.

  1. Steve Tobak has a good one on the real secret to personal productivity on BNET. He lists what other people say on this subject, then gets down to his own formula.
  2. I remember a cartoon I saw in 1999. The woman says she’s really looking forward to the new millennium. The man answers “You should; you’re a woman.” Fast forward to Jessica Bennett and Jessie Ellison with Women Will Rule the World on Newsweek.com. This is a very well researched and well written think piece, well worth reading. And it makes a lot of sense.
  3. Evelyn Rusli posted Rejecting Wall Street, Graduates Turn Entrepreneurs Instead on NYTimes’ Dealbook. This is about MBAs becoming entrepreneurs, which is a theme I believe in. I say it’s about time. And maybe I started a trend back in 1983, when I did it.
  4. Ami Groth tracked statistics on the age of startup founders in People Over 35 Have Recently Launched 80% of the Startups on Business Insider. Woman RunningBeing an old guy, I can’t resist quoting this one, at least this paragraph:

    According to the Global Entrepreneurship Monitor, people over the age of 35 made up 80 percent of the total entrepreneurship activity in 2009. That same year, the Kauffman Foundation conducted a survey of 549 startups operating in “high-growth” industries — including aerospace, defense, health care, and computer and electronics — and found that people over 55 are nearly twice as likely to launch startups in these industries.

  5. Alex Rampell posted an excellent analysis of the guts of new marketing in The Power of Pull on TechCrunch.

Also, some calendar items:

  1. I’m going to be live with with Dr. Amy Vanderbilt at 11 AM PDT today on Trend POV at trendpov.com/content.
  2. I’m live with Corrine McElroy Next Wednesday July 13 at 1 pm PDT at www.edgeofchange.com/interview.
  3. I’ve discovered Plancast.com, which lets me post my interview and speaking dates online at plancast.com/timberry. I hope you can join me. I’ll be putting a widget on my sidebar … plancast.com, are you listening? Widgets, maybe?. If you go to that site you can follow me to be able to see my schedule; actually, I think you can see it on that URL whether you follow me or not.
  4. Finally, if you’re an SBDC person and you’re going to the annual conference in San Diego, please join me for a training and certification of my free-for-teachers online curriculum. That’s Sept. 6, the Tuesday before the opening, as part of the “pre-conference.” Please click here for more information on that.

(Image: MrUllmi via Flickr cc)

5 Good Posts for Friday July 1

I need your help: Can you suggest a way to give a theme and a title to a series of Friday posts listing good posts and recommended links I’ve seen from the last week? My title here is too dull. I’m not nearly good enough at titles.

I don’t want to do this every Friday, but this is the fifth time since April 1, so I’m thinking maybe I should make it a repeated theme, with a cool title. Except I don’t have the title.

  • My absolute favorite this week is Megan Berry’s post on Mashable called 7 Tips for Better Twitter Chats. It’s a very good short piece on the step-by-step details of doing a twitter chat. Megan’s marketing manager at Klout (and yes, one of my daughters).
  • Shashi Bellamkonda of Network Solutions, alias the swami of social media, posted 6 Ways to Improve Your Online Content on the Amex OPEN Forum. Shashi knows. He practices what he preaches.
  • The SBA (U.S. Small Business Administration) has an excellent short piece explaining why you need a business plan on SBA.gov. It’s not a blog post published this week, but SBA.gov tweeted it this week, which caught my attention.
  • Fred Cavazza, Why a Facebook Page is Not Enough forbes.com. I caught this one thanks to Becky McRay mentioning it on twitter.
  • The TED blog posted The 20 most-watched TED Talks (so far). How can you resist this best-of-the-best list from the amazing collection at TED.Com. Trivia question answer: TED stands for technology, education, and design.
  • (Aside: yes, I know, this is the sixth, but I can’t resist) Steve King had some fascinating demographics in his Comparing Small Business Owners and High-Growth Entrepreneurs on Small Biz Labs.