David Heineimeier Hansson (@dhh), the creator of Ruby on Rails and partner at 37signals in Chicago, says that planning is guessing, and for a start-up, the focus must be on today and not on tomorrow. He argues that constraints--fiscal, temporal, or otherwise--drive innovation and effective problem-solving. The most important thing, Hansson believes, is to make a dent in the universe with your company.
Showing posts with label startup. Show all posts
Showing posts with label startup. Show all posts
Tuesday, 23 February 2010
Monday, 11 January 2010
Startup Triplets: Startup Advice In Exactly Three Words
1. Watch your cash. [tweet]
2. Pick founders carefully. [tweet]
3. Hire generalists early. [tweet]
4. Hire specialists later. [tweet]
5. Invest in culture. [tweet]
6. Avoid tempting distractions. [tweet]
7. Support customers maniacally. [tweet]
8. Avoid business plans. [tweet]
9. Write a blog. [tweet]
10. Never fudge numbers. [tweet]
11. Encourage diverse thinking. [tweet]
12. Guard your time. [tweet]
13. Defer renting space. [tweet]
14. Get enough sleep. [tweet]
15. Delay raising capital. [tweet]
16. Persist through downturns. [tweet]
17. Decide with data. [tweet]
18. Improve product daily. [tweet]
19. Recognize revenue consistently. [tweet]
20. Start charging early. [tweet]
21. Reward early adopters. [tweet]
22. Sell something today. [tweet]
23. Say “NO” often. [tweet]
24. Accept imperfect data. [tweet]
25. Recruit with zest. [tweet]
26. Nurture your best. [tweet]
27. Treat vendors well. [tweet]
28. Believe in yourself. [tweet]
29. Respect your competitors. [tweet]
30. Try something new. [tweet]
31. Build a brand. [tweet]
32. Focus, focus, focus. [tweet]
33. Iterate more often. [tweet]
34. Use your product. [tweet]
35. Live your vision. [tweet]
36. Encourage rational debate. [tweet]
37. Make decisions swiftly. [tweet]
38. Face harsh realities. [tweet]
39. Don’t break laws. [tweet]
40. Protect your health. [tweet]
41. Celebrate your successes. [tweet]
42. Cancel unnecessary meetings. [tweet]
43. Improve emloyee's resumes. [tweet]
44. Beware big bullies. [tweet]
45. Share the experience. [tweet]
46. Maintain your relationships. [tweet]
47. Keep it fun. [tweet]
48. Sales fixes everything.
49. Ship then test.
50. Do not partner.
Via: onstartups.com
Tuesday, 15 December 2009
10 Questions to Ask Yourself Before Giving Up on Your Dream
1. Why did you want to pursue this goal to begin with—and has anything changed?
You had a good reason for committing to this plan. Maybe you visualized a financially free future once you started this new business, or you realized you’d live longer and healthier if you lost 40 pounds.
Odds are you still want those things as much as you did before; you just stopped believing you could have them because your attempts have yet to yield results. Now you have to ask yourself: if you push through the discomfort will it be worth it in the end?
4. What’s the worst that will happen if you keep going and don’t reach your goal?
Often when I want to turn around it’s because I’m afraid of failing—afraid other people will be disappointed in me or judge me, or afraid I’ll have wasted my time. In all reality, no one ever judges us like we judge ourselves.; and we always grow and learn through the process of striving, regardless of what we attain.
If you don’t keep going, you’ll never know how far you could have gone, and you’ll miss out on being the person you’d become through the effort itself. If you do keep going, well, it’s like this quote: “Shoot for the moon, for even if you miss you’ll land among the stars.”
6. Are you acting on impulse or emotion instead of thinking things through?
Sometimes our emotions give us hints about what we want and what we should do, but other times they’re just responses to stress, and maybe even indications we’re on the right track. If you act in that moment of intense emotion—be it anger, fear, or frustration—you may regret it once the wave has passed.
So sit back. Take note of what you’re feeling. Feel it fully, without judging it or yourself. Then act when you’ve gotten to the other side. At least then you’ll know you made your decision in a moment of peace and clarity.
7. Would you enjoy giving a loved one the honest explanation for why you gave up?
And I mean honest. Would you like telling your daughter, I stopped trying to quit smoking because cigarettes are more important to me than having more golden years to spend with you? Would it be fun to tell your mother I decided not to go to school because I’d rather spend time with my boyfriend of three months then prepare for a career that will ensure I won’t end up jobless and homeless?
If you lay out it out like this, odds are you’ll realize you had a really good reason for doing this difficult thing, and no matter how challenging the process is, it’s worth plowing ahead.
8. Would your life be better if you gave up on this goal?
This may not sound motivational, but sometimes giving up is actually good thing. Perhaps you set a completely unrealistic goal, and its pursuit is filling you with a constant set of inadequacy and anxiety. Or maybe the goal isn’t in yours or your family’s best interest, and it’s better to get out before you invest so much time it’s near impossible to walk away.
You could easily use this as a justification to delude yourself, so think about it carefully. Is this goal really a good thing, when you weigh all the consequences of its fulfillment?
9. How much have you already put in?
A concept studied in social psychology called “the sunk cost principle” indicates the more we’ve invested in something, the less likely we are to prematurely walk away.
How invested are you? How much money and time have you devoted? How many sacrifices have you made? Are you really willing to chalk it all up as a loss because you’re not feeling confident in your abilities?
10. What would you tell someone else if they were in your shoes?
Would you tell your best friend to throw in the towel because she can’t possibly reach her goal? Or would you practice your finest motivational speech and help her see what you see in her potential? Unless you’re secretly a frenemy who hopes she fails in life odds are you’d push her to be her best—so why not push yourself?
It may sound kind of cheesy, but you need to be your own best friend. You, more than anyone in this world, deserve your belief and motivation.
If you’ve gone through all these questions and still feel resolute about the decision to give up, you have my blessing to abandon your goal. (Bet you feel so relieved!)
If you don’t—if there’s some lingering doubt—keep working toward that dream that fills you with passion. Take a different approach if you need to. Enlist new assistance. Scale back your time commitment to something you can more easily maintain. But whatever you do, don’t give yourself a reason to one day utter the words, “I quit because I was scared.”
Via: tinybuddha
You had a good reason for committing to this plan. Maybe you visualized a financially free future once you started this new business, or you realized you’d live longer and healthier if you lost 40 pounds.
Odds are you still want those things as much as you did before; you just stopped believing you could have them because your attempts have yet to yield results. Now you have to ask yourself: if you push through the discomfort will it be worth it in the end?
2. Have you been operating with too much information?
With so much information at our fingertips on the good ole World Wide Web, it’s easy to overwhelm yourself with more knowledge than you can apply. You read e-books and blogs, participate in teleconferences and coaching sessions, and join user forums to talk about getting things done.
One of two things happen as a result: you spend more time planning to act then acting; or you devote minimal energy to multiple plans instead of committing to one solid approach. Instead of drowning in all the data, why not narrow it down and start again from a less overwhelming space?
With so much information at our fingertips on the good ole World Wide Web, it’s easy to overwhelm yourself with more knowledge than you can apply. You read e-books and blogs, participate in teleconferences and coaching sessions, and join user forums to talk about getting things done.
One of two things happen as a result: you spend more time planning to act then acting; or you devote minimal energy to multiple plans instead of committing to one solid approach. Instead of drowning in all the data, why not narrow it down and start again from a less overwhelming space?
3. Did you set a smart goal? SMART goals are:
Specific—you know exactly what your world will look like when you achieve this goal.
Measurable—you have a specific plan to mark your progress as you go.
Attainable—you have the attitude and aptitude to make your goal reality.
Realistic—you’re willing and able to do the required work.
Time-bound—you’ve set a concrete timeframe for completion to create a sense of urgency.
Specific—you know exactly what your world will look like when you achieve this goal.
Measurable—you have a specific plan to mark your progress as you go.
Attainable—you have the attitude and aptitude to make your goal reality.
Realistic—you’re willing and able to do the required work.
Time-bound—you’ve set a concrete timeframe for completion to create a sense of urgency.
If you didn’t set a SMART goal, you may have set yourself up for failure. How can you possibly make something happen if you don’t know exactly what you want, or didn’t really believe you could do it? Are you really willing to walk away when you didn’t give yourself every opportunity to succeed?
4. What’s the worst that will happen if you keep going and don’t reach your goal?
Often when I want to turn around it’s because I’m afraid of failing—afraid other people will be disappointed in me or judge me, or afraid I’ll have wasted my time. In all reality, no one ever judges us like we judge ourselves.; and we always grow and learn through the process of striving, regardless of what we attain.
If you don’t keep going, you’ll never know how far you could have gone, and you’ll miss out on being the person you’d become through the effort itself. If you do keep going, well, it’s like this quote: “Shoot for the moon, for even if you miss you’ll land among the stars.”
5. Are you afraid of succeeding?
One of my biggest problems is that I don’t like responsibility. There are many things I’d like to do, but I resist because I don’t want the power to impact, hurt, or disappoint other people. That doesn’t mean that I don’t have dreams—it’s just that I’m just scared of what achieving them will entail.
If you can relate to this feeling, perhaps you’ll respond well to the mantra I’ve been repeating: great power comes with great responsibility, but it also brings great rewards. If you play it safe, you won’t hurt or disappoint anyone, but you also won’t help or inspire anyone. And equally important, you won’t help or inspire yourself.
One of my biggest problems is that I don’t like responsibility. There are many things I’d like to do, but I resist because I don’t want the power to impact, hurt, or disappoint other people. That doesn’t mean that I don’t have dreams—it’s just that I’m just scared of what achieving them will entail.
If you can relate to this feeling, perhaps you’ll respond well to the mantra I’ve been repeating: great power comes with great responsibility, but it also brings great rewards. If you play it safe, you won’t hurt or disappoint anyone, but you also won’t help or inspire anyone. And equally important, you won’t help or inspire yourself.
6. Are you acting on impulse or emotion instead of thinking things through?
Sometimes our emotions give us hints about what we want and what we should do, but other times they’re just responses to stress, and maybe even indications we’re on the right track. If you act in that moment of intense emotion—be it anger, fear, or frustration—you may regret it once the wave has passed.
So sit back. Take note of what you’re feeling. Feel it fully, without judging it or yourself. Then act when you’ve gotten to the other side. At least then you’ll know you made your decision in a moment of peace and clarity.
7. Would you enjoy giving a loved one the honest explanation for why you gave up?
And I mean honest. Would you like telling your daughter, I stopped trying to quit smoking because cigarettes are more important to me than having more golden years to spend with you? Would it be fun to tell your mother I decided not to go to school because I’d rather spend time with my boyfriend of three months then prepare for a career that will ensure I won’t end up jobless and homeless?
If you lay out it out like this, odds are you’ll realize you had a really good reason for doing this difficult thing, and no matter how challenging the process is, it’s worth plowing ahead.
8. Would your life be better if you gave up on this goal?
This may not sound motivational, but sometimes giving up is actually good thing. Perhaps you set a completely unrealistic goal, and its pursuit is filling you with a constant set of inadequacy and anxiety. Or maybe the goal isn’t in yours or your family’s best interest, and it’s better to get out before you invest so much time it’s near impossible to walk away.
You could easily use this as a justification to delude yourself, so think about it carefully. Is this goal really a good thing, when you weigh all the consequences of its fulfillment?
9. How much have you already put in?
A concept studied in social psychology called “the sunk cost principle” indicates the more we’ve invested in something, the less likely we are to prematurely walk away.
How invested are you? How much money and time have you devoted? How many sacrifices have you made? Are you really willing to chalk it all up as a loss because you’re not feeling confident in your abilities?
10. What would you tell someone else if they were in your shoes?
Would you tell your best friend to throw in the towel because she can’t possibly reach her goal? Or would you practice your finest motivational speech and help her see what you see in her potential? Unless you’re secretly a frenemy who hopes she fails in life odds are you’d push her to be her best—so why not push yourself?
It may sound kind of cheesy, but you need to be your own best friend. You, more than anyone in this world, deserve your belief and motivation.
If you’ve gone through all these questions and still feel resolute about the decision to give up, you have my blessing to abandon your goal. (Bet you feel so relieved!)
If you don’t—if there’s some lingering doubt—keep working toward that dream that fills you with passion. Take a different approach if you need to. Enlist new assistance. Scale back your time commitment to something you can more easily maintain. But whatever you do, don’t give yourself a reason to one day utter the words, “I quit because I was scared.”
Via: tinybuddha
Monday, 14 December 2009
Friday, 4 December 2009
Does every startup need a Steve Jobs?
What does Steve Jobs really do for Apple?
I had a recent conversation on Apple’s incredible design culture and what it would take to create that in a startup. In many ways, it seems like an insurmountably difficult challenge to play the role of Steve Jobs, with his god-like sense of product aesthetics and interactions.
And yet, Apple has hundreds of products and experiences – hardware, software, HR materials, commercials, etc. Steve Jobs certainly doesn’t have time to work on the design of every Apple product, and of course has 35,000 employees to manage. So what does Steve Jobs really do, to create the amazing design culture at Apple?
And more importantly, can a startup hope to even start to capture the same kind of culture?
Well, let me give you my best guess
IDEO’s product framework for Desirability, Feasibility, and Viability
First, let’s take a quick detour and talk about IDEO’s perspective on new product development – this is documented as part of their 100+ PDF on human centered design, but also recounted to me by my patient girlfriend who works there.
The idea is that all products ultimately come from an epic struggle between three perspectives: Desirability, Feasibility, and Viability. IDEO focuses on new products from the desirability side, which means they think about how to make sexy products with clear value propositions, and think technology and business goals flow from that. Most of their Fortune 500 clients do not act this way, of course, which is why they have to hire IDEO.
Here’s the diagram included in their HCD toolkit:
The way this was retold to me is that these factors map into functional parts of a business:
Viability = Business focus (marketing, finance)
Feasibility = Engineering focus (technologies, agile process, etc.)
Desirability = Design focus (customers, aesthetics, etc.)
Business-focused product perspective: Viability
For business-oriented products, the focus might be on any of the following:
“hot markets”
making money
funding potential
distribution
metrics
The idea there is that you get to a product via one of these first-order items. A business-oriented entrepreneur might identify a market, then try to come up with a product within the market – for example, “wow, Zynga is making $250M/year, and fish games are big. I should come up with a social gaming product too.”
I would also argue that “corporate” thinking (including MBAs and biz plan competitions) fundamentally revolve around this approach – the most important thing becomes the analytical discussion around the business, rather than the core user experience itself. Financial metrics and market sizes become the dominating point of discussion – I would argue also that most venture capitalists fall into this bucket.
The big “religions” in this perspective are frameworks like Built to Last, Crossing the Chasm, Customer Development, Blue Ocean Strategy, even Efficient Market Hypothesis. You might also count Six Sigma, all the stuff in McKinsey quarterlies, etc.
Engineering-focused product perspective: Feasibility
For technology-oriented products, the focus might be on the following:
programming language and development stack
cool technologies or libraries
engineering processes (agile or otherwise)
For people who use this as a first-order filter, you might end up with a line of thinking like, “BitTorrent is really cool, how do we build a business around it?”
I would also put engineering processes like agile into this, because that can easily become a first-order item in how to build a product as well. Agile won’t work for every team, for every product, in every situation, and yet it’s viewed as an all-purpose hammer – does that really make sense?
The big “religions” in this perspective are frameworks are agile, scrum, open source, etc. I might also count the “ecosystems” like Rails as a unique culture with its own set of beliefs and conventions. Frameworks like “Lean Startups” ultimately combine both Business and Engineering goals, via Customer Development plus Agile.
Design-focused product perspective: Desirability
For design-focused products, the focus might be on:
context, culture, and goals
customer goals and product experience
design aesthetics and interactions
The first-order filter in this case might be “Sick people go to hospitals and have a terrible experience – how do we improve that?” The tools employed at this initial stage might include user research, development of personas and user goals, and rapid prototyping to explore many product concepts.
The big “religions” here are led by Apple and their aesthetics and standards. And of course folks like IDEO and their “design thinking” ideas.
How business and engineering goals encroach on the desirability of a product
Reading through the above, perhaps you have identified yourself as prioritizing one versus the other. And in general, the prioritization of the three different goals drives what kinds of product experiences you can build.
From the perspective of making a sexy, highly desirable product, you’ll find lots of objections from business or engineering:
“spending money on visual design is too expensive”
“polishing a product will make the process too slow”
“this product is boring to implement”
“can you redesign this product so we can build it in 1 week sprints?”
“this target user is great, but we want the product to be more powerful and support more audiences”
“but Zynga doesn’t do this, can you just copy them?”
“why build so many prototypes that get thrown away? That’s costly and slow”
“if you added X to this product, it would put us into strategic market Y”
etc.
How do you handle questions like the above?
All of them are great questions, and of course the right answer means you have to find a balance in the approach. But what is the expense towards the core of your product experience?
Back to Steve Jobs – what does he really do?
Long story short, my hypothesis is that Steve Jobs is one of the rare CEOs who is very focused on product desirability. In battles with the business and technology goals, desirability will almost always win out.
So his role isn’t that of a designer, but rather Chief Design Advocate. This means:
he makes it clear that products should be “insanely great”
he recruits a top design team, and protects them from competing goals
he is willing to spend money, adjust technology processes, all for the goal of highly desirable products
he convinces financial analysts, industry pundits, etc. that product design is very important
To me, the amazing part about this is: Any company can do it.
Maybe not as good as Jobs, but they can decide to make it a priority – but few companies do. With the pressure of quarterly earnings, what competitors are doing, and employee aspirational desires, the focus moves off of killer experiences for customers – that’s no good.
If the above is true, then any of us can be the Steve Jobs of our team. Start by prioritizing design and desirability, and place it on a better footing relative to engineering and business goals. Learn the tools, develop your own religion, and start building great product experiences.
It almost sounds so easy!
http://andrewchenblog.com/2009/12/04/does-every-startup-need-a-steve-jobs/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+AndrewChensBlog+(Andrew+Chen+(@andrew_chen))&utm_content=Twitter
I had a recent conversation on Apple’s incredible design culture and what it would take to create that in a startup. In many ways, it seems like an insurmountably difficult challenge to play the role of Steve Jobs, with his god-like sense of product aesthetics and interactions.
And yet, Apple has hundreds of products and experiences – hardware, software, HR materials, commercials, etc. Steve Jobs certainly doesn’t have time to work on the design of every Apple product, and of course has 35,000 employees to manage. So what does Steve Jobs really do, to create the amazing design culture at Apple?
And more importantly, can a startup hope to even start to capture the same kind of culture?
Well, let me give you my best guess
IDEO’s product framework for Desirability, Feasibility, and Viability
First, let’s take a quick detour and talk about IDEO’s perspective on new product development – this is documented as part of their 100+ PDF on human centered design, but also recounted to me by my patient girlfriend who works there.
The idea is that all products ultimately come from an epic struggle between three perspectives: Desirability, Feasibility, and Viability. IDEO focuses on new products from the desirability side, which means they think about how to make sexy products with clear value propositions, and think technology and business goals flow from that. Most of their Fortune 500 clients do not act this way, of course, which is why they have to hire IDEO.
Here’s the diagram included in their HCD toolkit:
The way this was retold to me is that these factors map into functional parts of a business:
Viability = Business focus (marketing, finance)
Feasibility = Engineering focus (technologies, agile process, etc.)
Desirability = Design focus (customers, aesthetics, etc.)
Business-focused product perspective: Viability
For business-oriented products, the focus might be on any of the following:
“hot markets”
making money
funding potential
distribution
metrics
The idea there is that you get to a product via one of these first-order items. A business-oriented entrepreneur might identify a market, then try to come up with a product within the market – for example, “wow, Zynga is making $250M/year, and fish games are big. I should come up with a social gaming product too.”
I would also argue that “corporate” thinking (including MBAs and biz plan competitions) fundamentally revolve around this approach – the most important thing becomes the analytical discussion around the business, rather than the core user experience itself. Financial metrics and market sizes become the dominating point of discussion – I would argue also that most venture capitalists fall into this bucket.
The big “religions” in this perspective are frameworks like Built to Last, Crossing the Chasm, Customer Development, Blue Ocean Strategy, even Efficient Market Hypothesis. You might also count Six Sigma, all the stuff in McKinsey quarterlies, etc.
Engineering-focused product perspective: Feasibility
For technology-oriented products, the focus might be on the following:
programming language and development stack
cool technologies or libraries
engineering processes (agile or otherwise)
For people who use this as a first-order filter, you might end up with a line of thinking like, “BitTorrent is really cool, how do we build a business around it?”
I would also put engineering processes like agile into this, because that can easily become a first-order item in how to build a product as well. Agile won’t work for every team, for every product, in every situation, and yet it’s viewed as an all-purpose hammer – does that really make sense?
The big “religions” in this perspective are frameworks are agile, scrum, open source, etc. I might also count the “ecosystems” like Rails as a unique culture with its own set of beliefs and conventions. Frameworks like “Lean Startups” ultimately combine both Business and Engineering goals, via Customer Development plus Agile.
Design-focused product perspective: Desirability
For design-focused products, the focus might be on:
context, culture, and goals
customer goals and product experience
design aesthetics and interactions
The first-order filter in this case might be “Sick people go to hospitals and have a terrible experience – how do we improve that?” The tools employed at this initial stage might include user research, development of personas and user goals, and rapid prototyping to explore many product concepts.
The big “religions” here are led by Apple and their aesthetics and standards. And of course folks like IDEO and their “design thinking” ideas.
How business and engineering goals encroach on the desirability of a product
Reading through the above, perhaps you have identified yourself as prioritizing one versus the other. And in general, the prioritization of the three different goals drives what kinds of product experiences you can build.
From the perspective of making a sexy, highly desirable product, you’ll find lots of objections from business or engineering:
“spending money on visual design is too expensive”
“polishing a product will make the process too slow”
“this product is boring to implement”
“can you redesign this product so we can build it in 1 week sprints?”
“this target user is great, but we want the product to be more powerful and support more audiences”
“but Zynga doesn’t do this, can you just copy them?”
“why build so many prototypes that get thrown away? That’s costly and slow”
“if you added X to this product, it would put us into strategic market Y”
etc.
How do you handle questions like the above?
All of them are great questions, and of course the right answer means you have to find a balance in the approach. But what is the expense towards the core of your product experience?
Back to Steve Jobs – what does he really do?
Long story short, my hypothesis is that Steve Jobs is one of the rare CEOs who is very focused on product desirability. In battles with the business and technology goals, desirability will almost always win out.
So his role isn’t that of a designer, but rather Chief Design Advocate. This means:
he makes it clear that products should be “insanely great”
he recruits a top design team, and protects them from competing goals
he is willing to spend money, adjust technology processes, all for the goal of highly desirable products
he convinces financial analysts, industry pundits, etc. that product design is very important
To me, the amazing part about this is: Any company can do it.
Maybe not as good as Jobs, but they can decide to make it a priority – but few companies do. With the pressure of quarterly earnings, what competitors are doing, and employee aspirational desires, the focus moves off of killer experiences for customers – that’s no good.
If the above is true, then any of us can be the Steve Jobs of our team. Start by prioritizing design and desirability, and place it on a better footing relative to engineering and business goals. Learn the tools, develop your own religion, and start building great product experiences.
It almost sounds so easy!
http://andrewchenblog.com/2009/12/04/does-every-startup-need-a-steve-jobs/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+AndrewChensBlog+(Andrew+Chen+(@andrew_chen))&utm_content=Twitter
Thursday, 8 October 2009
Everything You Wanted To Know About Startup Building But Were Afraid To Ask
Let’s say you have an idea for a startup. How do you begin the process of finding cofounders and employees, creating a corporation, handing investors, growing the company, etc.? There are lots of details about building a startyp that are usually a mystery to the newly initiated founder. Usually you have to learn this stuff on the job, making mistakes along the way.
Patzer shows how he raised and spent money, and generated revenue, throughout the lifecycle of Mint, from the very beginning to the $170 million acquisition. He also showed historical slides from early presentations to investors and compares those to the actual results.
Via techcrunch
Patzer shows how he raised and spent money, and generated revenue, throughout the lifecycle of Mint, from the very beginning to the $170 million acquisition. He also showed historical slides from early presentations to investors and compares those to the actual results.
Mint CEO Aaron Patzer on Startups from Techcrunch on Vimeo.
Via techcrunch
Monday, 5 October 2009
Thursday, 24 September 2009
Why italy?
Una delle presentazioni vista al convegno 'Un ponte fra due mondi: Milano - Silicon Valley' il 17/09/09 al Politecnico di Milano
Progetto: mind the bridge
Progetto: mind the bridge
Friday, 24 July 2009
Family Business Management and the Drucker's Rules
INTRODUCTION: THE FAMILY BUSINESS IN PERSPECTIVE
Of the 13.2 million businesses in the United States, 90 percent are family owned and managed. These companies employ more than 77 million people, or about six out of every 10 workers in the United States, pay 65 percent of all wages, and generate 55 percent of the nation s gross domestic product. Between 1977 and 1990, family businesses created eight out of every 10 new jobs in the United States.
Not All Family Businesses Are Small
Contrary to popular belief, not all family businesses are small like the husband-and-wife team running the local restaurant. About 200 of the Fortune 500 companies are family owned. There are also large Chinese family-owned businesses. As an example, 40 percent of the Hong Kongs market capitalization is controlled by 15 Chinese family groups. In Taiwan, 16 of the top 20 companies in terms of total assets are family-owned and family controlled. In Indonesia, nine out of the top 10 businesses are owned by Chinese families, and in Thailand, Chinese families own four of the countrys largest banks.
Family Business and Size
According to Drucker," There is little doubt that beyond a certain size, a business can no longer reserve management to family members and remain viable. Beyond a certain size, that management burden increasingly has to be borne by professional managers."
This article presents Drucker s Rules for family business management and the role of the family and non-family professional managers in the family business. The Chinese family business may differ considerably from family businesses found in the West, and the Chinese family business owner will have to determine which, if any, of Druckers Rules apply.
DRUCKER'S RULES
Functional vs. Management Work
There is really no difference, says Drucker, between professional management and family-managed businesses when it comes to functional work research, marketing or accounting. On the other hand, when it comes to management of the family business, different rules are required. Without them, the family business will not survive or prosper.
Rules for Family Members in the Business
Family members should not be allowed to work in the family business unless they are as capable as non-family employees. They should only be allowed to stay in the business if they qualify on merit, not because they are family members.
Respect is a critical dimension of the family member working in the business. If the family member does not command professional respect, they should not be in the company. Dr. Swaim sights a case: the son of a founder was CEO of the company, but did not enjoy the respect of the non-family professional management team marketing, finance, operations, and managers. The lack of direction hurt morale and the company performance waned. Dr. Swaim arranged for a management buyout of the son and the company is now doing very well managed by non-family professional managers. The major issue: Lack of respect.
A family member who is not willing to work, no matter what their educational background and capabilities, should not be allowed in the family business. Also, if the family member is not of top-management caliber, with the potential to take over leadership of the company, they should actually be paid a stipend to stay away from the business. Some analysts also suggest that family members not be allowed into entry level positions. Ideally, they should have spent several years gaining practical experience working in another business before joining the family firm.
With respect to promotions, family members should never be given preference if there is a more qualified and better performing non-family member in management. Finally, over time, family members will elect not to enter the business and the company will eventually become totally professionally managed by non-family members.
Rules for Non-Family Managers
The non-family members in top management should be given rewards and incentives that make them feel like owners or as Drucker says, they need full citizenship in the firm. After all, it is their commitment to the family business that allows the business to grow and continue to be successful. These rewards can be stock options, stock bonus plans, phantom stock or other creative incentives to retain the commitment and motivation of a non-family manager. Without these incentives, there is danger the non-family manager or managers will become frustrated, elect to start their own business and end up becoming a competitor. With respect to top management, Drucker suggests at least one senior management position always be filled by a non-family professional manager such as the COO, finance manager or marketing manager. For a humorous example, Drucker cites the Mafia, where the second in command to the Godfather , the consigliore, is not a member of the family and may not even be a Sicilian.
Unless the family business is small, key staff positions should also be filled by non-family members research, marketing, finance and human resources management. Family members cannot have all the knowledge and expertise required for all of these areas.
Another important rule for the non-family manager is: Dont mix business with family. If the non-family manager attempts to become too close to the family, there is a danger of losing perspective on the business. Therefore, the non-family manager should generally avoid family social gatherings unless it is a special event to which he or she has been invited. Summer barbecues, for example, do not qualify as such a special event.
Succession Planning
Who will take over the leadership of the family business is a critical decision. It shouldn t be left until the day after the founder dies. Drucker advises this decision be trusted to an outside advisor who is neither part of the family, nor part of the business. We will deal with succession planning and family business exit strategies in more detail in part two of this article in next months edition.
Summary and Plan for Change
The family business needs to plan for its eventual change in character. Drucker estimates that after two generations, the family will only be the beneficiaries of the business, not the bosses. As an example, studies have shown that 80 percent of family businesses never get to the second generation.
Finally, opportunities for family members should be available to those who are able and desire to pursue a career in the business. On the other hand, those who do not fit these requirements should stay out of the business and remain investors.
--------------------
Research on Owners of Private Businesses
Several years ago, a leading accounting and consulting firm conducted a study of owners of private and family-owned businesses and discovered the following.
They don t know the businesss value: 65 percent of business owners do not know what their company is worth. In other words, they are unaware of the fair market value of their business and what they could get for the business if selling the business is an exit strategy alternative they might consider. Knowing the value of the business is also important if the owner is considering other exit strategy alternatives, such as passing the business on to family members.
They have no exit strategy or succession plan: 85 percent of business owners have no exit strategy or succession plan. The owner has not given any consideration to how or when they will eventually retire and who will take over the management of the business. This is often attributed to their reluctance to accept their own mortality they will live forever, and the fact that their personal identity is intertwined with the business they lose their identity if and when they leave their business. Also, many owners are unable to give up their baby, similar to the father s concerns when their daughter gets married and he must give the bride away at the wedding ceremony.
The majority of the owners net worth is in the business: 75 percent of the business owners net worth is tied up in their business. There is a prudent rule that suggests that not more than 20 percent of an individual s personal wealth should be tied up in any one investment. Obviously, most business owners have disregarded this rule. Having equity in the business is all well and good, but how does one convert this into cash for ones retirement?
They have no personal financial and estate planning: 25 percent of senior generation owners have not done any estate planning to minimize their taxes or worked out how to convert the equity they have in their businesses into personal wealth and liquidity. It is one thing to pass the family business on to a son or daughter, but in so doing, how does the father get compensated for the work he put into starting and growing the business over the years?
Six Exit Strategies
"You develop an exit strategy the day you start the business."
-Richard Rodnick,
founder, former chairman, Geneva Companies
Richard Rodnick, founder and former chairman of Geneva Companies, a merger and acquisition firm in the United States, has a rule that the time to develop an exit strategy is the day you start the business.
As an example of practicing this rule, Rodnick had an exit strategy that he would sell Geneva Companies five years after he started it. He sold the company to the Chemical Bank of New York for in excess of $30 million.
Some would argue that this rule does not allow the owner to get full value for the company-that if he held on to the company for several more years, he might get considerably more money for the business.
To counter this argument, there is another interesting quotation. When Bernard Baruch, an individual who amassed a personal fortune in the mid 1900s was asked how he became so wealthy? he replied," I always sold too soon."
Drucker also stresses that succession planning should not be left to the last minute, such as right after the owner-founder passes away and was buried yesterday. Therefore, let us briefly review the various exit strategies available to the business owner and then deal with succession planning as part on of the exit strategy alternatives.
Six Exit Strategy Alternatives
There are six main exit strategy alternatives available to the business owner to consider, excluding liquidation of the business. The first five deal with strategies to consider when there are no family members qualified or interested in taking over the management of the business, and the last strategy deals with succession planning where there are family members who potentially could take over. Actually, there are situations in the first five strategies where family members may still continue to manage the day-to-day operations of the company, but will no longer have a significant percentage of its ownership.
1. Selling to outsiders
This exit strategy involves selling the business to outsiders through a direct sale or possibly a merger where the other party gains a majority interest in the new business combination. Although it may be called a merger, usually for the owners ego we merged with the multinational giant 100 times our size most of these transactions are actually acquisitions.
Selling a privately owned business is more complicated then it may seem and the process of selling a business is too lengthy to include in this article. For additional insight on mergers and acquisitions, check out Drucker on mergers and acquisition in Business Beijing of March 2002 Issue 68.
2. Sell to insiders management, employees
Selling the business to its non-family member management and employees is another strategy usually considered. Oftentimes, management may be disenchanted with the lack of direction in the company when the owner-founder loses his energy and enthusiasm for growing the business. The owner-founder continues to lead a good life in terms of his or her personal compensation and perks, but has become conservative and averse to taking unnecessary risks. Thus, the company ages poorly, often resulting in loss of market share.
Management may feel new leadership can turn the situation around. The problem with considering this exit strategy however, is how will management and employees raise the financing required to acquire the business? Passing the hat around, so to speak, and asking management and the employees to contribute some of their personal savings to acquire the company generally will not even raise enough money for a downpayment on the acquisition.
3. Selling to a partner or other shareholders
If the owner-founder has other partners or shareholders he might consider selling his interest in the business. Two issues arise here that need to be dealt with to implement this strategy. First, what is the value of the shares to be sold and do all shareholders agree on the value? This typically can be resolved by using an outside professional business valuation firm to establish the fair market value of the business and value of the shares. Second, as in the case of selling to management and employees, how will the other shareholders raise the financing to acquire the owner-founders shares? Agreeing to be paid out of future profits is a typical method. However, this leaves the owner-founder at considerable risk if the new management makes poor business decisions. Ideally, the shareholders should borrow the money to cash out the owner-founder and repay the lending institution from the future profits of the business.
4. Sales to equity funds, private investor groups
Equity Funds and Private Investment Groups (PIGs) can be an attractive exit strategy. In fact, this is one of the best strategies to consider. In investment banking industry terminology, this is called a re-capitalization or recap. Equity Funds and PIGs typically invest in a portfolio of businesses that meet their investment criteria (type of business, industry, geographic location, size in revenues) and will usually acquire a 60-80 percent ownership percentage, sometimes higher, in the business.
One of the major criteria of Equity Funds and PIGs is that there must be a strong management team in place in the business as they are typically not interested in running the day-to-day operations of the business, but only in providing strategic direction at the board level. There should also be a certain degree of synergy with their existing portfolio of businesses such as same or related industry, market served, technology used.
If there are family members who are capable of, and interested in managing the business, this is an excellent way to meet the personal and business objectives of the owner-founder by allowing him to receive a significant payment while management and the remaining percentage of ownership in the business can be transferred to the next generation.
5. Selling to the public: Initial Public Offering
Although there are some very large family businesses as mentioned in Part One of this article, the typical family owned business is generally too small to seriously consider an IPO as an exit strategy alternative. We will not discuss the IPO in detail other than to mention it is a time consuming and expensive process.
6. Transfer ownership to other family members-the succession plan
Succession planning is essential to ensure the future continuity of management of the business, particularly if there are other family members interested in, and capable of managing the business.
The quotation at the beginning of this article illustrates the importance succession planning has on the future of the business The average life expectancy of the family business is 25 years.
Succession planning when there is single heir, son or daughter, is the least complicated model, if he or she desires to enter the business, and has the ability to eventually run the business. The models get more complicated when there are multiple heirs, older vs. younger children, sons vs. daughters, inactive family members, the spouse of the dead owner-founder, a second spouse, a son-in-law, and unrelated (non-family member) successors.
In the case where there are multiple heirs, succession planning should involve two entities in the planning process: a family council and an outside advisor. The role of the family council is to first define the responsibilities and qualifications required for the successor in terms of knowledge, skills and experience. Some suggest the following criteria be considered when identifying potential successors:
3-5 years employment in a job or jobs that have depended on competence, skill, and sustained performance, rather than on family-based relationships. Many also suggest that this experience should have been gained outside of the family business.
Experience in directing the activities of others.
Recognition for proven competence on the job.
Evidence and ability to manage relationships, both with peers and with supervisors.
Evidence of the ability and willingness to take initiative on the job.
Evidence of having been a valued employee with legitimate contributions to make.
The next step for the family council is to then identify possible successors, either family members or non-family professional managers, but not to make the selection themselves.
This should be left, as Drucker suggests, to an outside, non-family advisor who can provide an objective perspective and eliminate the chance of potential conflict among the family members. As part of the selection process, it is also important to make it clear to everyone involved that they are not required to join the family business.
With respect to the spouse eventually becoming a successor if the owner-founder passes away, this depends on how much involvement she or he had in the business prior to the death. If there is another business partner, or business partners, they may not want the spouse involved in the business.
This potential problem can be resolved with a buy-sell agreement established between the partners at the time of the formation of the business outlining how a partner s share in the business can be purchased in the future.
Once the successor has been identified, it is important to have a developmental plan for the individual to gain the necessary knowledge and experience to take over the management of the business. The extent of the developmental plan will obviously vary depending on the age and experience of the potential successor.
The son or daughter entering the business after working elsewhere in their first job will require considerable more development as compared to a non-family professional manager who is already performing in a key management position as suggested by Drucker in our first article.
Summary
The first article outlined Druckers Rules for managing and growing the family business and this part with how to ensure continuity through succession planning.
Various exit strategies available to the owner-founder when there are no apparent family members interested in eventually managing the business were briefly discussed.
We conclude with Drucker s two key points relative to succession planning and exit strategies don t leave this important task until the last minute, and use objective, non-family advisors to assist in the selection process. Finally, no attempt was made to compare how the concepts presented in these articles relate or do not relate to Chinese family businesses. Although we feel many of these concepts would relate, history, tradition, and culture would most likely and unfortunately, cause these concepts to fall on deaf ears.
Of the 13.2 million businesses in the United States, 90 percent are family owned and managed. These companies employ more than 77 million people, or about six out of every 10 workers in the United States, pay 65 percent of all wages, and generate 55 percent of the nation s gross domestic product. Between 1977 and 1990, family businesses created eight out of every 10 new jobs in the United States.
Not All Family Businesses Are Small
Contrary to popular belief, not all family businesses are small like the husband-and-wife team running the local restaurant. About 200 of the Fortune 500 companies are family owned. There are also large Chinese family-owned businesses. As an example, 40 percent of the Hong Kongs market capitalization is controlled by 15 Chinese family groups. In Taiwan, 16 of the top 20 companies in terms of total assets are family-owned and family controlled. In Indonesia, nine out of the top 10 businesses are owned by Chinese families, and in Thailand, Chinese families own four of the countrys largest banks.
Family Business and Size
According to Drucker," There is little doubt that beyond a certain size, a business can no longer reserve management to family members and remain viable. Beyond a certain size, that management burden increasingly has to be borne by professional managers."
This article presents Drucker s Rules for family business management and the role of the family and non-family professional managers in the family business. The Chinese family business may differ considerably from family businesses found in the West, and the Chinese family business owner will have to determine which, if any, of Druckers Rules apply.
DRUCKER'S RULES
Functional vs. Management Work
There is really no difference, says Drucker, between professional management and family-managed businesses when it comes to functional work research, marketing or accounting. On the other hand, when it comes to management of the family business, different rules are required. Without them, the family business will not survive or prosper.
Rules for Family Members in the Business
Family members should not be allowed to work in the family business unless they are as capable as non-family employees. They should only be allowed to stay in the business if they qualify on merit, not because they are family members.
Respect is a critical dimension of the family member working in the business. If the family member does not command professional respect, they should not be in the company. Dr. Swaim sights a case: the son of a founder was CEO of the company, but did not enjoy the respect of the non-family professional management team marketing, finance, operations, and managers. The lack of direction hurt morale and the company performance waned. Dr. Swaim arranged for a management buyout of the son and the company is now doing very well managed by non-family professional managers. The major issue: Lack of respect.
A family member who is not willing to work, no matter what their educational background and capabilities, should not be allowed in the family business. Also, if the family member is not of top-management caliber, with the potential to take over leadership of the company, they should actually be paid a stipend to stay away from the business. Some analysts also suggest that family members not be allowed into entry level positions. Ideally, they should have spent several years gaining practical experience working in another business before joining the family firm.
With respect to promotions, family members should never be given preference if there is a more qualified and better performing non-family member in management. Finally, over time, family members will elect not to enter the business and the company will eventually become totally professionally managed by non-family members.
Rules for Non-Family Managers
The non-family members in top management should be given rewards and incentives that make them feel like owners or as Drucker says, they need full citizenship in the firm. After all, it is their commitment to the family business that allows the business to grow and continue to be successful. These rewards can be stock options, stock bonus plans, phantom stock or other creative incentives to retain the commitment and motivation of a non-family manager. Without these incentives, there is danger the non-family manager or managers will become frustrated, elect to start their own business and end up becoming a competitor. With respect to top management, Drucker suggests at least one senior management position always be filled by a non-family professional manager such as the COO, finance manager or marketing manager. For a humorous example, Drucker cites the Mafia, where the second in command to the Godfather , the consigliore, is not a member of the family and may not even be a Sicilian.
Unless the family business is small, key staff positions should also be filled by non-family members research, marketing, finance and human resources management. Family members cannot have all the knowledge and expertise required for all of these areas.
Another important rule for the non-family manager is: Dont mix business with family. If the non-family manager attempts to become too close to the family, there is a danger of losing perspective on the business. Therefore, the non-family manager should generally avoid family social gatherings unless it is a special event to which he or she has been invited. Summer barbecues, for example, do not qualify as such a special event.
Succession Planning
Who will take over the leadership of the family business is a critical decision. It shouldn t be left until the day after the founder dies. Drucker advises this decision be trusted to an outside advisor who is neither part of the family, nor part of the business. We will deal with succession planning and family business exit strategies in more detail in part two of this article in next months edition.
Summary and Plan for Change
The family business needs to plan for its eventual change in character. Drucker estimates that after two generations, the family will only be the beneficiaries of the business, not the bosses. As an example, studies have shown that 80 percent of family businesses never get to the second generation.
Finally, opportunities for family members should be available to those who are able and desire to pursue a career in the business. On the other hand, those who do not fit these requirements should stay out of the business and remain investors.
--------------------
Research on Owners of Private Businesses
Several years ago, a leading accounting and consulting firm conducted a study of owners of private and family-owned businesses and discovered the following.
They don t know the businesss value: 65 percent of business owners do not know what their company is worth. In other words, they are unaware of the fair market value of their business and what they could get for the business if selling the business is an exit strategy alternative they might consider. Knowing the value of the business is also important if the owner is considering other exit strategy alternatives, such as passing the business on to family members.
They have no exit strategy or succession plan: 85 percent of business owners have no exit strategy or succession plan. The owner has not given any consideration to how or when they will eventually retire and who will take over the management of the business. This is often attributed to their reluctance to accept their own mortality they will live forever, and the fact that their personal identity is intertwined with the business they lose their identity if and when they leave their business. Also, many owners are unable to give up their baby, similar to the father s concerns when their daughter gets married and he must give the bride away at the wedding ceremony.
The majority of the owners net worth is in the business: 75 percent of the business owners net worth is tied up in their business. There is a prudent rule that suggests that not more than 20 percent of an individual s personal wealth should be tied up in any one investment. Obviously, most business owners have disregarded this rule. Having equity in the business is all well and good, but how does one convert this into cash for ones retirement?
They have no personal financial and estate planning: 25 percent of senior generation owners have not done any estate planning to minimize their taxes or worked out how to convert the equity they have in their businesses into personal wealth and liquidity. It is one thing to pass the family business on to a son or daughter, but in so doing, how does the father get compensated for the work he put into starting and growing the business over the years?
Six Exit Strategies
"You develop an exit strategy the day you start the business."
-Richard Rodnick,
founder, former chairman, Geneva Companies
Richard Rodnick, founder and former chairman of Geneva Companies, a merger and acquisition firm in the United States, has a rule that the time to develop an exit strategy is the day you start the business.
As an example of practicing this rule, Rodnick had an exit strategy that he would sell Geneva Companies five years after he started it. He sold the company to the Chemical Bank of New York for in excess of $30 million.
Some would argue that this rule does not allow the owner to get full value for the company-that if he held on to the company for several more years, he might get considerably more money for the business.
To counter this argument, there is another interesting quotation. When Bernard Baruch, an individual who amassed a personal fortune in the mid 1900s was asked how he became so wealthy? he replied," I always sold too soon."
Drucker also stresses that succession planning should not be left to the last minute, such as right after the owner-founder passes away and was buried yesterday. Therefore, let us briefly review the various exit strategies available to the business owner and then deal with succession planning as part on of the exit strategy alternatives.
Six Exit Strategy Alternatives
There are six main exit strategy alternatives available to the business owner to consider, excluding liquidation of the business. The first five deal with strategies to consider when there are no family members qualified or interested in taking over the management of the business, and the last strategy deals with succession planning where there are family members who potentially could take over. Actually, there are situations in the first five strategies where family members may still continue to manage the day-to-day operations of the company, but will no longer have a significant percentage of its ownership.
1. Selling to outsiders
This exit strategy involves selling the business to outsiders through a direct sale or possibly a merger where the other party gains a majority interest in the new business combination. Although it may be called a merger, usually for the owners ego we merged with the multinational giant 100 times our size most of these transactions are actually acquisitions.
Selling a privately owned business is more complicated then it may seem and the process of selling a business is too lengthy to include in this article. For additional insight on mergers and acquisitions, check out Drucker on mergers and acquisition in Business Beijing of March 2002 Issue 68.
2. Sell to insiders management, employees
Selling the business to its non-family member management and employees is another strategy usually considered. Oftentimes, management may be disenchanted with the lack of direction in the company when the owner-founder loses his energy and enthusiasm for growing the business. The owner-founder continues to lead a good life in terms of his or her personal compensation and perks, but has become conservative and averse to taking unnecessary risks. Thus, the company ages poorly, often resulting in loss of market share.
Management may feel new leadership can turn the situation around. The problem with considering this exit strategy however, is how will management and employees raise the financing required to acquire the business? Passing the hat around, so to speak, and asking management and the employees to contribute some of their personal savings to acquire the company generally will not even raise enough money for a downpayment on the acquisition.
3. Selling to a partner or other shareholders
If the owner-founder has other partners or shareholders he might consider selling his interest in the business. Two issues arise here that need to be dealt with to implement this strategy. First, what is the value of the shares to be sold and do all shareholders agree on the value? This typically can be resolved by using an outside professional business valuation firm to establish the fair market value of the business and value of the shares. Second, as in the case of selling to management and employees, how will the other shareholders raise the financing to acquire the owner-founders shares? Agreeing to be paid out of future profits is a typical method. However, this leaves the owner-founder at considerable risk if the new management makes poor business decisions. Ideally, the shareholders should borrow the money to cash out the owner-founder and repay the lending institution from the future profits of the business.
4. Sales to equity funds, private investor groups
Equity Funds and Private Investment Groups (PIGs) can be an attractive exit strategy. In fact, this is one of the best strategies to consider. In investment banking industry terminology, this is called a re-capitalization or recap. Equity Funds and PIGs typically invest in a portfolio of businesses that meet their investment criteria (type of business, industry, geographic location, size in revenues) and will usually acquire a 60-80 percent ownership percentage, sometimes higher, in the business.
One of the major criteria of Equity Funds and PIGs is that there must be a strong management team in place in the business as they are typically not interested in running the day-to-day operations of the business, but only in providing strategic direction at the board level. There should also be a certain degree of synergy with their existing portfolio of businesses such as same or related industry, market served, technology used.
If there are family members who are capable of, and interested in managing the business, this is an excellent way to meet the personal and business objectives of the owner-founder by allowing him to receive a significant payment while management and the remaining percentage of ownership in the business can be transferred to the next generation.
5. Selling to the public: Initial Public Offering
Although there are some very large family businesses as mentioned in Part One of this article, the typical family owned business is generally too small to seriously consider an IPO as an exit strategy alternative. We will not discuss the IPO in detail other than to mention it is a time consuming and expensive process.
6. Transfer ownership to other family members-the succession plan
Succession planning is essential to ensure the future continuity of management of the business, particularly if there are other family members interested in, and capable of managing the business.
The quotation at the beginning of this article illustrates the importance succession planning has on the future of the business The average life expectancy of the family business is 25 years.
Succession planning when there is single heir, son or daughter, is the least complicated model, if he or she desires to enter the business, and has the ability to eventually run the business. The models get more complicated when there are multiple heirs, older vs. younger children, sons vs. daughters, inactive family members, the spouse of the dead owner-founder, a second spouse, a son-in-law, and unrelated (non-family member) successors.
In the case where there are multiple heirs, succession planning should involve two entities in the planning process: a family council and an outside advisor. The role of the family council is to first define the responsibilities and qualifications required for the successor in terms of knowledge, skills and experience. Some suggest the following criteria be considered when identifying potential successors:
3-5 years employment in a job or jobs that have depended on competence, skill, and sustained performance, rather than on family-based relationships. Many also suggest that this experience should have been gained outside of the family business.
Experience in directing the activities of others.
Recognition for proven competence on the job.
Evidence and ability to manage relationships, both with peers and with supervisors.
Evidence of the ability and willingness to take initiative on the job.
Evidence of having been a valued employee with legitimate contributions to make.
The next step for the family council is to then identify possible successors, either family members or non-family professional managers, but not to make the selection themselves.
This should be left, as Drucker suggests, to an outside, non-family advisor who can provide an objective perspective and eliminate the chance of potential conflict among the family members. As part of the selection process, it is also important to make it clear to everyone involved that they are not required to join the family business.
With respect to the spouse eventually becoming a successor if the owner-founder passes away, this depends on how much involvement she or he had in the business prior to the death. If there is another business partner, or business partners, they may not want the spouse involved in the business.
This potential problem can be resolved with a buy-sell agreement established between the partners at the time of the formation of the business outlining how a partner s share in the business can be purchased in the future.
Once the successor has been identified, it is important to have a developmental plan for the individual to gain the necessary knowledge and experience to take over the management of the business. The extent of the developmental plan will obviously vary depending on the age and experience of the potential successor.
The son or daughter entering the business after working elsewhere in their first job will require considerable more development as compared to a non-family professional manager who is already performing in a key management position as suggested by Drucker in our first article.
Summary
The first article outlined Druckers Rules for managing and growing the family business and this part with how to ensure continuity through succession planning.
Various exit strategies available to the owner-founder when there are no apparent family members interested in eventually managing the business were briefly discussed.
We conclude with Drucker s two key points relative to succession planning and exit strategies don t leave this important task until the last minute, and use objective, non-family advisors to assist in the selection process. Finally, no attempt was made to compare how the concepts presented in these articles relate or do not relate to Chinese family businesses. Although we feel many of these concepts would relate, history, tradition, and culture would most likely and unfortunately, cause these concepts to fall on deaf ears.
Via: btmbeijing.com
Thursday, 23 July 2009
Mission and Vision statement (with examples)
Some examples of Mission and Vision:
Nike: To experience the emotion of competition, winning and crushing competitors.
Wal-Mart: To give ordinary folk the chance to buy the same things as rich people.
Disney: We create happiness by providing the finest in entertainment for people of all ages, everywhere.
Google: To organize the world's information and make it universally accessible and useful
Yahoo: Our mission is to be the most essential global Internet service for consumers and businesses
Amazon: To build a place where people can come to find and discover anything they might want to buy online
Dell: To be the most successful computer company in the world at delivering the best
customer experience in markets we serve.
Hewlett-Packard: To make technical contributions for the advancement and welfare of humanity.
Ford Motor: To become the world's leading consumer company for automotive products and services.
Ebay: to provide a global trading platform where practically anyone can trade practically anything.
Facebook: Facebook gives people the power to share and make the world more open and connected
Ibm: we strive to lead in the invention, development and manufacture of the industry's most advanced information technologies, including computer systems, software, storage systems and microelectronics
Microsoft: we work to help people and businesses throughout the world realize their full potential
Sony: To experience the joy of advancing and applying technology for the benefit of the public.
Apple: To produce high-quality, low cost, easy to use products that incorporate high technology for the individual. We are proving that high technology does not have to be intimidating for noncomputer experts.
Generalmotor: to provide products and services of such quality that our customers will receive superior value while our employees and business partners will share in our success and our stock-holders will receive a sustained superior return on their investment.
Toyota: To sustain profitable growth by providing the best customer experience and dealer support
Mcdonald's: McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile.
Burger King: We will prepare and sell quick service food to fulfill our guest's needs more accurately, quickly, courteously, and in a cleaner environment than our competitors. We will conduct all our business affairs ethically, and with the best employees in the mid-south. We will continue to grow profitably and responsibly, and provide career advancement opportunities for every willing member of our organization.
CocaCola:Everything we do is inspired by our enduring mission:
To Refresh the World... in body, mind, and spirit.
To Inspire Moments of Optimism... through our brands and our actions.
To Create Value and Make a Difference... everywhere we engage.
Pepsi: We have absolute clarity about what we do ‘WE SELL HIGH QUALITY FOOD AND BEVERAGE PRODUCTS.’ Our success will ensure: customers will build their business, employees build their futures, and shareholders build their wealth.
Ford Motor: To become the world's leading consumer company for automotive products and services.
Ebay: to provide a global trading platform where practically anyone can trade practically anything.
Facebook: Facebook gives people the power to share and make the world more open and connected
Ibm: we strive to lead in the invention, development and manufacture of the industry's most advanced information technologies, including computer systems, software, storage systems and microelectronics
Microsoft: we work to help people and businesses throughout the world realize their full potential
Sony: To experience the joy of advancing and applying technology for the benefit of the public.
Apple: To produce high-quality, low cost, easy to use products that incorporate high technology for the individual. We are proving that high technology does not have to be intimidating for noncomputer experts.
Generalmotor: to provide products and services of such quality that our customers will receive superior value while our employees and business partners will share in our success and our stock-holders will receive a sustained superior return on their investment.
Toyota: To sustain profitable growth by providing the best customer experience and dealer support
Mcdonald's: McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile.
Burger King: We will prepare and sell quick service food to fulfill our guest's needs more accurately, quickly, courteously, and in a cleaner environment than our competitors. We will conduct all our business affairs ethically, and with the best employees in the mid-south. We will continue to grow profitably and responsibly, and provide career advancement opportunities for every willing member of our organization.
CocaCola:Everything we do is inspired by our enduring mission:
To Refresh the World... in body, mind, and spirit.
To Inspire Moments of Optimism... through our brands and our actions.
To Create Value and Make a Difference... everywhere we engage.
Pepsi: We have absolute clarity about what we do ‘WE SELL HIGH QUALITY FOOD AND BEVERAGE PRODUCTS.’ Our success will ensure: customers will build their business, employees build their futures, and shareholders build their wealth.
3M: To solve unsolved problems innovatively.
Fannie Mae: To strengthen the social fabric by continually democratizing home ownership.
Mary Kay Cosmetics: To give unlimited opportunity to women.
Merck: To preserve and improve human life.
for more missions, visit: Man on a Mission or this one
Fannie Mae: To strengthen the social fabric by continually democratizing home ownership.
Mary Kay Cosmetics: To give unlimited opportunity to women.
Merck: To preserve and improve human life.
for more missions, visit: Man on a Mission or this one
Tuesday, 21 July 2009
5 Simple Ways to Protect Your Brand
1 Choose Wisely
The more creative your brand name is, the greater the odds that it is unique. A more distinctive and create name or slogan is generally more capable of standing out among the competition and becoming a brand with real value. Which sounds like a more exciting brand, a more valuable brand: “Jim’s Gym” or “Vantage Fitness“? “Cincinnati Frozen Yogurt” or “fraîche”? “Joe’s Pizza” or “Pie-tanza”? “Search.com” or “Google”?
2 Use it
The more you use your trademarks – brand names, logos and slogans – the stronger and more distinctive they become and the more your likely customers are to remember your brand and to use it to tell others about it.
3 Distinguish It
Use ALL CAPS, bold or italics to emphasize your brand as often as you can. Then the customer knows exactly what your brand is.
4 Apply to register it
Registration with the U.S. Patent and Trademark Office, a federal agency and part of the Department of Commerce, enhances the protection and the value of your trademark assets. Registration allows use of the ® symbol, provides substantial benefits and savings if you ever have to go to court to stop an infringement, and may help stop cybersquatters from registering new domain names. See http://www.uspto.gov/teas/index.html for more information.
5 Create Google Alerts
An easy and free way to monitor for others copying your brand or commenting on it. If you find a possible infringement, contact the offender and if unresolved, contact an attorney. www.google.com/alerts.
The more creative your brand name is, the greater the odds that it is unique. A more distinctive and create name or slogan is generally more capable of standing out among the competition and becoming a brand with real value. Which sounds like a more exciting brand, a more valuable brand: “Jim’s Gym” or “Vantage Fitness“? “Cincinnati Frozen Yogurt” or “fraîche”? “Joe’s Pizza” or “Pie-tanza”? “Search.com” or “Google”?
2 Use it
The more you use your trademarks – brand names, logos and slogans – the stronger and more distinctive they become and the more your likely customers are to remember your brand and to use it to tell others about it.
3 Distinguish It
Use ALL CAPS, bold or italics to emphasize your brand as often as you can. Then the customer knows exactly what your brand is.
4 Apply to register it
Registration with the U.S. Patent and Trademark Office, a federal agency and part of the Department of Commerce, enhances the protection and the value of your trademark assets. Registration allows use of the ® symbol, provides substantial benefits and savings if you ever have to go to court to stop an infringement, and may help stop cybersquatters from registering new domain names. See http://www.uspto.gov/teas/index.html for more information.
5 Create Google Alerts
An easy and free way to monitor for others copying your brand or commenting on it. If you find a possible infringement, contact the offender and if unresolved, contact an attorney. www.google.com/alerts.
Via: dumblittleman.com
Thursday, 16 July 2009
5 Business Models for Social Media Startups
During the first Internet boom, the most common business model was probably, “get a ton of traffic, then figure out how to make money” — which savvy readers will note isn’t a very good business model. Often, the way those businesses attempted to make money on that traffic was to use display or text advertising. Making money from advertising is still possible, but it’s no longer as easy as building a site and putting some ads on it. Fortunately, there are a number of business models to choose from.
Today’s social media startups are finding unique ways of generating revenue from the very beginning. Here are a few of the revenue models that they’re using and how you can apply them to your company.
1. Freemium Model
Description: This business model works by offering a basic service for free, while charging for a premium service with advanced features to paying members.
Examples of the Freemium Model: UserVoice, Flickr, Vimeo, LinkedIn, and PollDaddy
The biggest challenge for businesses using the freemium model is figuring how much to give away for free so that users will still need and want to upgrade to a paying plan. If most users can get by with the basic free plan, they won’t have a need to upgrade. For example, I’ll probably never upgrade my LinkedIn account and because I don’t shoot high definition videos, I’ll never need a Premium Vimeo account either.
I spoke with Marcus Nelson from UserVoice about their use of the freemium model and how it works:
1. Is UserVoice profitable?
We’re “ramen noodle” profitable, but have recently taken funding to accelerate our growth.
2. How long did it take UserVoice to implement a business model?
Eight months, though I would not recommend that as a new startup. I talk a lot more about this in an interview on Mixergy.
3. How long did it take to get your first customer?
Depends on your definition of customer – we had sign ups immediately and grew by 30-35% a month. What we had built was core features, so as we spoke with customers we began asking what would they pay for on our UserVoice page. Once we had some premium features in place, we went back to those customers and began doing paid pilots to test out the service. The first paid customer arrived in November.
4. How many users do you have right now?
16,652 as of June 5, 2009.
5. What percentage of users are paying members?
Since moving to paid plans, our conversion rate is around 5%.
6. What are the biggest obstacles that UserVoice has for getting members to pay?
The same as most businesses, providing value that customers want to pay for, and overcoming objections for implementation.
2. Affiliate Model
Description: This is a model in which a business makes money by driving traffic, leads, or sales to another, affiliated company’s website. Businesses that sell a product, meanwhile, rely on affiliated sites to send them the traffic or leads they need to make sales.
Examples of the Affiliate Model: Illuminated Mind, ShoeMoney, DIY Themes
Like businesses that rely on advertising, high traffic sites predictably have a much easier time making money using affiliate links than sites that are just starting out. High traffic means that even low conversion numbers can equal big bucks. However, in just a year since starting his blog, Jonathan Mead from the Illuminated Mind generates enough income from affiliate links that he has been able to leave his full-time job. This is a dream of many bloggers and this is how he did it:
1. When did you start your blog and how long did it take you to generate enough revenue to be a full-time blogger?
I started blogging in February of 2008, so it took me a little over a year (15 months) to become a full time blogger.
2. How much revenue are you generating through affiliate links?
I earn roughly $2-3k per month from affiliates. It depends on the month though, some are better than others.
3. How many page views per month do you have to receive in order to generate the status of a full-time blogger?
I don’t think page views really played a critical role in my success. I think creating a community based around living on your own terms and making self-development palatable, was really the key to my success. You can have tons of traffic without anyone really caring enough to value what you have to offer.
4. What is the best way to get your readers to click on your affiliate links?
I’ll try to break it down into what I think are the three most important factors.
5. What are the best kinds of affiliate links: Low price point and low margin, or high price point high margins?
I only aim for $20 and above range, so I’m not sure how the lower priced products convert.
6. What are the biggest obstacles to overcome when generating revenue through affiliate links?
Reader trust and proper targeting. These things seem so simple, but it’s amazing how many people don’t get this part right. It’s worth the time researching those in your niche selling products and starting conversations with them. Ask them why their readers buy and then use that in your copy.
3. Subscription Model
Description: Sites using the subscription model require users to pay a fee (generally monthly or yearly) to access a product or service.
Examples of the Subscription Model: Label 2.0, Scrooge Strategy, Netflix
I talked to Greg Rollett, the founder of Label 2.0, a marketing school for musicians that sells its services for a monthly membership fee. The service teaches musicians how to use online tools to help further their careers, find more fans and navigate the business of music.
1. Why did you decide to use a subscription based model over a one-off sales model?
When Eric [Hebert] and I decided to work together I was actually presenting him with an offer to promote a product that I had created and he was working on something similar. Instead of offering a one-off sale for both products and fighting for the same niche (our sites have nearly identical target audience and traffic). We decided that coming together and creating a long term relationship with the people we were helping would be better for our business in the long run. We have enough content and features that every month will be an exciting new journey. The business model was pretty simple. We took the features that we liked the best and least from popular internet marketing strategies for membership sites, continuity programs, etc as well as different ways to run the membership software and found what was going to be the easiest for us to use and easiest for our members to digest
2. How did you prepare to have a successful launch to your service?
Luckily Eric and I had been building up trust and a user base for years through our blogs, Twitter, live speaking events and client work. We have both worked on high profile projects and that helped us secure a great position in the market. We both posted teaser blog posts and within a few days we had over a 100 musicians testing it out and providing feedback for our public launch. We expect 300-500 paying members within the first 2 weeks.
3. What are your price-points and how are you maintaining a personal touch with your subscribers?
Our pricing model is high for the industry we are in and we know that. At around $50 a month and $400 a year we have priced ourselves to only work with those that really want to see an impact in their careers. If you look at the bigger picture and see that for consulting we typically charge $100 an hour, you are getting a great deal, but losing that one-on-one feeling. That is why we are having bi-monthly conference calls, webinars, walk-throughs, Q&A’s and really doing our best to ensure that every musician gets their bang for their buck.
4. What are the biggest obstacles in the subscription-based model?
4. Virtual Goods Model
Description: Users pay for virtual goods, such as weapons, upgrades, points, or gifts, on a website or in a game.
Examples of the Virtual Goods Model: Acclaim Games, Meez, Weeworld, Facebook Gifts
Virtual Goods come in all shapes and sizes. Hot or Not was one of the pioneers of virtual good in the online dating industry by allowing users to send virtual roses to other users that cost from $2 to $10. The beauty of virtual goods is that margins are high, since goods essentially only cost as much as the bandwidth required to serve them, which is generally almost zero. I spoke with Ali Moiz from Peanut Labs, a social monetization company that focuses on virtual goods and currencies.
1. What is the margin on each item sold?
Very high. There is little or no marginal or production cost once you setup an economy, so for game companies this is in the 90% or higher range.
2. What percentage of your users actually buy virtual goods?
10 – 20% buy it using credit cards, another 30 – 40% get it for free by doing surveys and offers through Peanut Labs Media and companies like us.
3. What are the biggest obstacles in selling virtual goods?
Creating something that users want and need, and that is relevant to the community.
4. What are the most popular types of virtual goods sold?
3 main categories: functional, status items, decorative. All 3 play a major role.
5. Advertising Model
Description: Sites that rely on advertising, sell advertisements against their traffic. In basic terms: the more traffic you have, the more you can charge for ads (additional demographics about your site’s visitors, such as age, gender, location, or interests, also affects the amount you can charge advertisers to place ads on your site).
Examples of the Advertising Model: Yahoo!, MySpace, Tweet Later
I spoke with Dewald Pretorius from TweetLater, whose site relies on a unique variation of the advertising model in which users are able to bid on daily sponsorships on his site. When researching the site, I found that the average bid amount for a completed auction was $50-$80. Predictably, most of the users that won the sponsorship auction also linked out to TweetLater web site from their Twitter profile — driving more traffic and potential bidders back to the site.
1. Is TweetLater profitable?
Yes, absolutely! I run my business with very low overhead costs, and TweetLater has been profitable since the very start when I monetized it in February 2009.
2. How long did it take TweetLater to implement a business model?
I started TweetLater in April 2008, and ran it as a completely free service until February 2009. That period allowed me to build a solid user base, which was very willing and keen to dive into the paid side when I released it. Personally I think some people are too anxious to start making money immediately and underestimate the value of being patient and first building a reputation and user base.
3. How long did it take to get your first customer?
After I announced TweetLater Professional? If I remember correctly, it was about 10 minutes after I made the announcement that I got the first subscription. I might be wrong. It could have been 5 minutes.
4. How many users do you have right now?
TweetLater has around 71,000 users, and is steadily growing by around 600 users every day, seven days a week.
5. What are the biggest obstacles that TweetLater has for getting members to pay?
It is never easy to monetize something that sits on top of a free service. I have done that successfully, and logically it is because folks feel they get real value for their money. Maintaining and increasing the value proposition is one of the things I think of every single day. I believe that giving people a free trial of TweetLater Professional has contributed to its success. People can test-drive it with no commitments and no catches before deciding whether it is the right service for them. I believe it demonstrates respect for the users, as well as confidence in the value that the service provides.
Conclusion
Before you launch your startup, make sure you have a clear business model in mind. You will most likely have to change and tweak your business model as your startup progresses, but at least you will be focused on cash generation from the start, which means you’ll be ahead of the game.
This post covered just a small number of the many business models available to web startups. Please feel free to use the comments below to discuss these models and others that you may be using or considering for your startup.
Via: Mashable
Today’s social media startups are finding unique ways of generating revenue from the very beginning. Here are a few of the revenue models that they’re using and how you can apply them to your company.
1. Freemium Model
Description: This business model works by offering a basic service for free, while charging for a premium service with advanced features to paying members.
Examples of the Freemium Model: UserVoice, Flickr, Vimeo, LinkedIn, and PollDaddy
The biggest challenge for businesses using the freemium model is figuring how much to give away for free so that users will still need and want to upgrade to a paying plan. If most users can get by with the basic free plan, they won’t have a need to upgrade. For example, I’ll probably never upgrade my LinkedIn account and because I don’t shoot high definition videos, I’ll never need a Premium Vimeo account either.
I spoke with Marcus Nelson from UserVoice about their use of the freemium model and how it works:
1. Is UserVoice profitable?
We’re “ramen noodle” profitable, but have recently taken funding to accelerate our growth.
2. How long did it take UserVoice to implement a business model?
Eight months, though I would not recommend that as a new startup. I talk a lot more about this in an interview on Mixergy.
3. How long did it take to get your first customer?
Depends on your definition of customer – we had sign ups immediately and grew by 30-35% a month. What we had built was core features, so as we spoke with customers we began asking what would they pay for on our UserVoice page. Once we had some premium features in place, we went back to those customers and began doing paid pilots to test out the service. The first paid customer arrived in November.
4. How many users do you have right now?
16,652 as of June 5, 2009.
5. What percentage of users are paying members?
Since moving to paid plans, our conversion rate is around 5%.
6. What are the biggest obstacles that UserVoice has for getting members to pay?
The same as most businesses, providing value that customers want to pay for, and overcoming objections for implementation.
2. Affiliate Model
Description: This is a model in which a business makes money by driving traffic, leads, or sales to another, affiliated company’s website. Businesses that sell a product, meanwhile, rely on affiliated sites to send them the traffic or leads they need to make sales.
Examples of the Affiliate Model: Illuminated Mind, ShoeMoney, DIY Themes
Like businesses that rely on advertising, high traffic sites predictably have a much easier time making money using affiliate links than sites that are just starting out. High traffic means that even low conversion numbers can equal big bucks. However, in just a year since starting his blog, Jonathan Mead from the Illuminated Mind generates enough income from affiliate links that he has been able to leave his full-time job. This is a dream of many bloggers and this is how he did it:
1. When did you start your blog and how long did it take you to generate enough revenue to be a full-time blogger?
I started blogging in February of 2008, so it took me a little over a year (15 months) to become a full time blogger.
2. How much revenue are you generating through affiliate links?
I earn roughly $2-3k per month from affiliates. It depends on the month though, some are better than others.
3. How many page views per month do you have to receive in order to generate the status of a full-time blogger?
I don’t think page views really played a critical role in my success. I think creating a community based around living on your own terms and making self-development palatable, was really the key to my success. You can have tons of traffic without anyone really caring enough to value what you have to offer.
4. What is the best way to get your readers to click on your affiliate links?
I’ll try to break it down into what I think are the three most important factors.
- You have to have your reader’s trust. If they don’t trust you, they will not buy what you recommend.
- You have to target the products to your readers. Speak to their interests, personality and emotions.
- You need to be able to write decent copy and communicate in a compelling way why they should buy what you’re recommending.
5. What are the best kinds of affiliate links: Low price point and low margin, or high price point high margins?
I only aim for $20 and above range, so I’m not sure how the lower priced products convert.
6. What are the biggest obstacles to overcome when generating revenue through affiliate links?
Reader trust and proper targeting. These things seem so simple, but it’s amazing how many people don’t get this part right. It’s worth the time researching those in your niche selling products and starting conversations with them. Ask them why their readers buy and then use that in your copy.
3. Subscription Model
Description: Sites using the subscription model require users to pay a fee (generally monthly or yearly) to access a product or service.
Examples of the Subscription Model: Label 2.0, Scrooge Strategy, Netflix
I talked to Greg Rollett, the founder of Label 2.0, a marketing school for musicians that sells its services for a monthly membership fee. The service teaches musicians how to use online tools to help further their careers, find more fans and navigate the business of music.
1. Why did you decide to use a subscription based model over a one-off sales model?
When Eric [Hebert] and I decided to work together I was actually presenting him with an offer to promote a product that I had created and he was working on something similar. Instead of offering a one-off sale for both products and fighting for the same niche (our sites have nearly identical target audience and traffic). We decided that coming together and creating a long term relationship with the people we were helping would be better for our business in the long run. We have enough content and features that every month will be an exciting new journey. The business model was pretty simple. We took the features that we liked the best and least from popular internet marketing strategies for membership sites, continuity programs, etc as well as different ways to run the membership software and found what was going to be the easiest for us to use and easiest for our members to digest
2. How did you prepare to have a successful launch to your service?
Luckily Eric and I had been building up trust and a user base for years through our blogs, Twitter, live speaking events and client work. We have both worked on high profile projects and that helped us secure a great position in the market. We both posted teaser blog posts and within a few days we had over a 100 musicians testing it out and providing feedback for our public launch. We expect 300-500 paying members within the first 2 weeks.
3. What are your price-points and how are you maintaining a personal touch with your subscribers?
Our pricing model is high for the industry we are in and we know that. At around $50 a month and $400 a year we have priced ourselves to only work with those that really want to see an impact in their careers. If you look at the bigger picture and see that for consulting we typically charge $100 an hour, you are getting a great deal, but losing that one-on-one feeling. That is why we are having bi-monthly conference calls, webinars, walk-throughs, Q&A’s and really doing our best to ensure that every musician gets their bang for their buck.
4. What are the biggest obstacles in the subscription-based model?
- Price – Musicians are used to free. MySpace is free, YouTube is free, there is free information everywhere and musicians would rather spend $500 on a new guitar pedal than invest $50 into something that can find them hundreds of fans with which they can begin to make a living on.
- Stereotypes – Musicians do not think of themselves as marketers. They feel like that is what a manager, record label or promoter is supposed to do. We are helping them turn that stereotype upside down by teaching them how to market themselves to create better relationships with their fans which is going to help their business in the long haul.
- Monthly membership sites have a high attrition rate – The reason is after their 1st or second time they login, they forget about it and never come back. We are doing everything that we can to ensure that there is always something going on, from new lessons to trainings to calls and webinars to activity in the forums to leveraging the community to make everyone stronger.
4. Virtual Goods Model
Description: Users pay for virtual goods, such as weapons, upgrades, points, or gifts, on a website or in a game.
Examples of the Virtual Goods Model: Acclaim Games, Meez, Weeworld, Facebook Gifts
Virtual Goods come in all shapes and sizes. Hot or Not was one of the pioneers of virtual good in the online dating industry by allowing users to send virtual roses to other users that cost from $2 to $10. The beauty of virtual goods is that margins are high, since goods essentially only cost as much as the bandwidth required to serve them, which is generally almost zero. I spoke with Ali Moiz from Peanut Labs, a social monetization company that focuses on virtual goods and currencies.
1. What is the margin on each item sold?
Very high. There is little or no marginal or production cost once you setup an economy, so for game companies this is in the 90% or higher range.
2. What percentage of your users actually buy virtual goods?
10 – 20% buy it using credit cards, another 30 – 40% get it for free by doing surveys and offers through Peanut Labs Media and companies like us.
3. What are the biggest obstacles in selling virtual goods?
Creating something that users want and need, and that is relevant to the community.
4. What are the most popular types of virtual goods sold?
3 main categories: functional, status items, decorative. All 3 play a major role.
5. Advertising Model
Description: Sites that rely on advertising, sell advertisements against their traffic. In basic terms: the more traffic you have, the more you can charge for ads (additional demographics about your site’s visitors, such as age, gender, location, or interests, also affects the amount you can charge advertisers to place ads on your site).
Examples of the Advertising Model: Yahoo!, MySpace, Tweet Later
I spoke with Dewald Pretorius from TweetLater, whose site relies on a unique variation of the advertising model in which users are able to bid on daily sponsorships on his site. When researching the site, I found that the average bid amount for a completed auction was $50-$80. Predictably, most of the users that won the sponsorship auction also linked out to TweetLater web site from their Twitter profile — driving more traffic and potential bidders back to the site.
1. Is TweetLater profitable?
Yes, absolutely! I run my business with very low overhead costs, and TweetLater has been profitable since the very start when I monetized it in February 2009.
2. How long did it take TweetLater to implement a business model?
I started TweetLater in April 2008, and ran it as a completely free service until February 2009. That period allowed me to build a solid user base, which was very willing and keen to dive into the paid side when I released it. Personally I think some people are too anxious to start making money immediately and underestimate the value of being patient and first building a reputation and user base.
3. How long did it take to get your first customer?
After I announced TweetLater Professional? If I remember correctly, it was about 10 minutes after I made the announcement that I got the first subscription. I might be wrong. It could have been 5 minutes.
4. How many users do you have right now?
TweetLater has around 71,000 users, and is steadily growing by around 600 users every day, seven days a week.
5. What are the biggest obstacles that TweetLater has for getting members to pay?
It is never easy to monetize something that sits on top of a free service. I have done that successfully, and logically it is because folks feel they get real value for their money. Maintaining and increasing the value proposition is one of the things I think of every single day. I believe that giving people a free trial of TweetLater Professional has contributed to its success. People can test-drive it with no commitments and no catches before deciding whether it is the right service for them. I believe it demonstrates respect for the users, as well as confidence in the value that the service provides.
Conclusion
Before you launch your startup, make sure you have a clear business model in mind. You will most likely have to change and tweak your business model as your startup progresses, but at least you will be focused on cash generation from the start, which means you’ll be ahead of the game.
This post covered just a small number of the many business models available to web startups. Please feel free to use the comments below to discuss these models and others that you may be using or considering for your startup.
Via: Mashable
Wednesday, 1 July 2009
12 things entrepreneurs should not do
- Don’t worry, be crappy. Perfectionism, first of all, is an illusion. Nothing is perfect. Even worse, perfection stands in the way of revenue and truly learning what customers think because nothing is in their hands yet. When your product is “good enough” (but not “perfect”), ship it, and see what happens.
- Don’t give out lofty titles. Just because a roommate was there during the drunken weekend when you came up with the idea for your company, doesn’t mean he should be CTO. Someday, you’ll need to hand out titles like director, vice-president, and chief whatever officer, so keep them in reserve. Until then refer to each other as “co-founders” and describe the area of responsibility: for example, “programming.” If your roommates aren’t cool with this, they’re doing you a favor by showing their colors now.
- Don’t hire your family. The probability that your spouse or relative is the best person you can get for a job is 0%. The probability that people will hate working at company with spouses and relatives is 100%. The probability that one of you will have to go someday is also 100%. Never hire out of expediency. Always hire the best person you can get. This usually means not hiring your family unless you’re Jack or Suzy Welch.By the way, if you both hire your family and give them a lofty title, you are truly a bozo.
- Don’t sweat valuation. This is easy for a venture capitalist to say, but your company is either going to die or make you more money than you imagined. Whether you have 10% or 15% and whether your pre-money valuation is $2 million or $3 million isn’t going to really matter. Do the math: 15% of $0 is $0, so stop negotiating, take the money, and build something that’s worth more than $0. Whatever valuation a venture capitalist offers you, increase it by 20% and counter her offer. This is just enough to show you’re not a pushover, but not too much that it will prolong or blow up the negotiations.
- Don’t believe venture capitalists. Having said that you shouldn’t sweat valuation, you shouldn’t believe venture capitalists. It’s not that we’re all liars—we just don’t finish our sentences. Rule of thumb: add “as long as things are going well” to everything a venture capitalist tells you. For example, “I am investing in your team” or “I will be there for you.”
- Don’t create lofty forecasts that you call “conservative.” You know you’re pulling numbers out of the air. We know you are too. You know we know. We know you know. So why would you forecast the fastest ramp in the history of capitalism? (It’s more likely that I will play in the NHL than you will achieve $2 billion in sales in year four.) Just project $25 million in year four, and we’ll all be in agreement about your lie.
- Don’t believe that the exception is the rule. This is called the Twitter Effect. It goes like this, “We’re focusing on usage and eyeballs like Twitter. We’re not that concerned about revenue right now. Look how valuable everyone thinks Twitter is. We’ll be just like that.” Twitter is the exception. Facebook is the exception. YouTube is the exception. There, I listed all the exceptions. Everyone else needs revenue asap, or you will #fail.
- Don’t focus on partnerships. “Partnership, noun, a relationship between two parties that does not increase the profitability of either.” If your partnership doesn’t cause you to edit your Excel spreadsheet, it’s meaningless. Focus on customerships, not partnerships if you want to succeed. When you’re a big, dumb, slow-moving company, then fabricate all the partnerships you want.
- Don’t build out your infrastructure. Sure, your conservative estimate is for a growth curve that makes Twitter’s look like a blip, so you need customer service, technical support, and racks of servers. I’ve never seen a company achieve even its “conservative” projections—I take that back: I’ve seen plenty of companies reach their overhead projections. The odds are that you’ll run out of money before you’ll run out of infrastructure.
- Don’t assume you’ll ever raise another round. Most projected timelines should contain a event that’s called “This is where the miracle occurs.” A much better assumption is that no miracle occurs, it takes years of grinding it out to succeed, and you’ll never raise another dime, so you must reach profitability with what you already have. Miracles happen in movies, not startups.
- Don’t compare your intentions to other employees’ results. Most people compare their intentions to the results of others. In this way, you’re never at fault or a failure. For example, you intended to ship on time, but the sales gal didn’t achieve her expected results. The effect of this is poor morale and chasms between people. You need to face the facts: you probably delivered less than you intended. Maybe others did too, but at least you’ll be more humble.
- Don’t ask people to do something you wouldn’t do. This is the Golden Rule of business. If you wouldn’t fill out ten fields of information and provide a credit card number for a free password, don’t expect your customers too. If you wouldn’t work on weekends stuffing envelopes, don’t expect your employees to. If you wouldn’t invest in your company, don’t expect venture capitalists to.
Via: Open Forum
Friday, 29 May 2009
Sunday, 8 February 2009
Creare un business partendo da zero. Suggerimenti da chi ce l'ha fatta.
C'è chi dice che: “Il primo milione di euro è il più difficile da guadagnare”.
Vero.
Questo principio è ancor più vero se si parte con molti soldi in tasca. Perchè?
Molta gente pensa che più soldi hai in partenza più facile sarà per te guadagnare.
E con questa convinzione, c'è chi parte in quarta iniziando a “investire” (così si dice quando si spendono un sacco di soldi nella speranza che un giorno ci ritornino con un congruo profitto) convinti di essere avvantaggiati.
Non è così, perchè il denaro devi saperlo guadagnare, prima ancora di saperlo spendere.
E i giovani imprenditori che iniziano una attività con una somma modesta di denaro, sanno di che cosa sto parlando.
Allo stesso modo, è più facile perdere un'opportunità avendo troppi soldi che avendone troppo pochi.
Chi parte con molto denaro è un pò come chi nello sport, usa sostanze dopanti: forse ne ricava un vantaggio all'inizio, ma alla lunga le conseguenze potrebbero essere negative. Micidiali.
Perchè mi piace creare startup facendo bootstrapping (creare un'attività imprenditoriale partendo con budget 0)?
I motivi sono almeno 3:
1) Minore valore del punto di pareggio.
un business con un alto punto di pareggio è meno flessibile di uno con business con uno basso. Un'intensità elevata di capitale, un pesante fardello di debiti ed elevati costi fissi, sono fattori che riducono la flessibilità finanziaria e strategica.
2) Nessun rischio di sovracapitalizzazione.
Lo sviluppo delle startup ha somiglianze con il cambio delle marce di un auto. in ogni stadio c'è bisogno della marcia giusta per raggiungere la velocità necessaria a poter scalare quella successiva. Solo poche startup lo capiscono. Quelle sovracapitalizzate partono con la terza marcia inserita.
3) Incentivi alla creatività e all'ingegno imprenditoriale.
Nelle iniziative pubblicitarie, nella assunzione di un valido collaboratore, nella implementazione del business, l'imprenditore creativo si chiede: "Ho budget ZERO. Come potrei fare queste cose realizzando ottimi risultati in termini di qualità?" Molto spesso le risposte a queste domande portano a dei risultati inimmaginabili, spesso con risultati migliori di chi ha tante risorse a disposizione, ma poca creatività.
Via: Futuro alle idee del futuro
Vero.
Questo principio è ancor più vero se si parte con molti soldi in tasca. Perchè?
Molta gente pensa che più soldi hai in partenza più facile sarà per te guadagnare.
E con questa convinzione, c'è chi parte in quarta iniziando a “investire” (così si dice quando si spendono un sacco di soldi nella speranza che un giorno ci ritornino con un congruo profitto) convinti di essere avvantaggiati.
Non è così, perchè il denaro devi saperlo guadagnare, prima ancora di saperlo spendere.
E i giovani imprenditori che iniziano una attività con una somma modesta di denaro, sanno di che cosa sto parlando.
Allo stesso modo, è più facile perdere un'opportunità avendo troppi soldi che avendone troppo pochi.
Chi parte con molto denaro è un pò come chi nello sport, usa sostanze dopanti: forse ne ricava un vantaggio all'inizio, ma alla lunga le conseguenze potrebbero essere negative. Micidiali.
Perchè mi piace creare startup facendo bootstrapping (creare un'attività imprenditoriale partendo con budget 0)?
I motivi sono almeno 3:
1) Minore valore del punto di pareggio.
un business con un alto punto di pareggio è meno flessibile di uno con business con uno basso. Un'intensità elevata di capitale, un pesante fardello di debiti ed elevati costi fissi, sono fattori che riducono la flessibilità finanziaria e strategica.
2) Nessun rischio di sovracapitalizzazione.
Lo sviluppo delle startup ha somiglianze con il cambio delle marce di un auto. in ogni stadio c'è bisogno della marcia giusta per raggiungere la velocità necessaria a poter scalare quella successiva. Solo poche startup lo capiscono. Quelle sovracapitalizzate partono con la terza marcia inserita.
3) Incentivi alla creatività e all'ingegno imprenditoriale.
Nelle iniziative pubblicitarie, nella assunzione di un valido collaboratore, nella implementazione del business, l'imprenditore creativo si chiede: "Ho budget ZERO. Come potrei fare queste cose realizzando ottimi risultati in termini di qualità?" Molto spesso le risposte a queste domande portano a dei risultati inimmaginabili, spesso con risultati migliori di chi ha tante risorse a disposizione, ma poca creatività.
Via: Futuro alle idee del futuro
Wednesday, 4 February 2009
Ecommerce Tips
«Internet funziona - spiega Marchetti - solo quando il prodotto è scarso e c' è un vantaggio di prezzo. Noi abbiamo tutte e due le caratteristiche»
Federico Marchetti (yoox)
«Non è sufficiente dare lo stesso prodotto, traducendo l'off line in on line. E', invece, necessario proporre percorsi esperienziali diversi, essere creativi e differenti, studiare il modo di personalizzare l'offerta sfruttando le tecnologie per proporre i prodotti nel modo migliore. E non va trascurata la logistica, dai sistemi di pagamento alla gestione dei resi»
Un aspetto rilevante per questo settore è il business-to-business, ovvero le transazioni tra i diversi attori della filiera. In Italia vi sono due tipi di iniziative in tal senso: i lead generator, tesi a creare nuove opportunità di business per le aziende del settore, e i process facilitator, con lo scopo di rendere più facili ed economici i processi tra aziende della filiera.
Link1
Link utili:
Etnoteam
Fondi
NetPartners
cercare cosa sono fondi Kiwi
Federico Marchetti (yoox)
«Non è sufficiente dare lo stesso prodotto, traducendo l'off line in on line. E', invece, necessario proporre percorsi esperienziali diversi, essere creativi e differenti, studiare il modo di personalizzare l'offerta sfruttando le tecnologie per proporre i prodotti nel modo migliore. E non va trascurata la logistica, dai sistemi di pagamento alla gestione dei resi»
Un aspetto rilevante per questo settore è il business-to-business, ovvero le transazioni tra i diversi attori della filiera. In Italia vi sono due tipi di iniziative in tal senso: i lead generator, tesi a creare nuove opportunità di business per le aziende del settore, e i process facilitator, con lo scopo di rendere più facili ed economici i processi tra aziende della filiera.
Link1
Link utili:
Etnoteam
Fondi
NetPartners
cercare cosa sono fondi Kiwi
