It’s one of the first questions we ask almost every client – “What is the value of a customer to you?” Only a small percentage of otherwise sophisticated clients can muster an answer. Most of even those who do answer are simply estimating based on a guessing game in which our team plays game show host. Would you consider an acquisition cost of $X to be a win? Why? If you don’t groom your clients at all, what is their spend rate per year? If you do communicate with them, does it increase? By how much? What can you tell me about the different kinds of customers you service and their impact on your profitability? How has this changed over time? The list of questions can go on forever.

It’s not just an issue for e-commerce marketers. All marketing has the ultimate goal of finding, securing, retaining, defending, or growing the value of customers. This holds true whether or not you get the immediate feedback of an online sale or are tracking leads from a long-term, considered purchase online or off. It seems self-evident that you would need to know what an average customer and a good customer are worth to your business to have any hope of logically planning your marketing strategy and expenditures toward increasing that value. With all the talk of metrics and ROI in digital marketing, this basic but critical information seems to be missing far too often, resulting in lots of measurement and little logic in the decision-making those metrics are intended to support.

Let’s take a look at the impact of marketing informed by lifetime value (LTV) across a spectrum of marketing goals.

Finding Customers

New customer acquisition is not about gaining new customers at any cost. It is about finding those customer segments that bring long-term value and profit to your business and that can scale sufficiently to support your short- and long-term goals. Certain channels, messaging approaches, and media plans return those right customers. Knowing how to define them is the starting point for a deliberate, sustained testing program that will continue to refine your approach and results.

Securing Customers

For most categories (that aren’t insanely loyalty bound), you can create trial with new potential customers if you offer a new or intriguing experience or if you discount deeply enough. Sure, some customers will never pan out or will only buy on promotion, but some may become good customers if you continue to offer them a good value and a good experience. You need to be able to model out the expected long-term return on that discount-driven customer in order to justify the investment in what could be a negative margin initial sale. A key input in that calculation is the value that the customer is likely to provide over their life.

Retaining Customers

Long-term customer relationships are about brand-building and relationship-building activities that reinforce the value you provide customers and remind them you exist and can fill a need for them. More valuable customers should be provided with more value, more often. That value can be delivered in many forms including increased or priority access, special content or tools, or many other perks such as price incentives or rebates. All of the monetary and non-monetary value that you provide costs money and it’s impossible to know how much it makes sense to invest if you don’t know the value of your customers.

Defending Customers

The flip side of retaining customers is competitive defense. All customers have a choice and will be presented with other attractive options unless you are in a monopoly business. Stay focused on retaining those customers, especially the more valuable customers that were so hard-won. Knowing the lifetime value of your customers will help you plan your response should an aggressive competitor come into your territory. Are they after your prime customers or the marginal ones? You won’t know what to counter with or what level of spend makes sense in response unless you know your customers’ value, preferences, and responsive areas.

Growing Customers

The definition of a good customer is going to vary widely by company, category, industry, segment, maturity, and many other factors, but all other things being equal, we definitely want customers who buy in greater quantity or more frequently. We also want those customers who spread positive news about us. Through social media and other digital measurements, we can track how frequently customers engage or interact with the brand, how often they recommend the brand, or the scale of their sphere of influence.

Growing customers across any of these measures takes time, resources, and investment and can shift the way you might determine the LTV of a customer. Should you invest in growing a customer from a once-a-month buyer to a twice-a-month buyer or instead invest in grooming all buyers who have broad influence and/or are strong advocates in social media? The power of social media has changed the metrics that define LTV forever.

Despite all our cross-channel tracking capabilities and optimization proficiencies, LTV remains an elusive, if critical data point on which vital decisions depend. It’s not easy and it’s not a one-and-done proposition, but if you can’t articulate what your customer is worth to your business today, then you won’t know how to build, defend, or grow your business.

Article source: ClickZ

 

Survival has been the operative word for small businesses these past few years. Many of us hope the worst is behind us.

During the past several months, I’ve been on a nationwide book tour, which gave me the opportunity to speak to thousands of small-business owners. I was happy to hear cautious plans for growth in 2012 from some entrepreneurs, but most remain nervous about what lies ahead.

Now, usually at this time of year we all start thinking about New Year’s Resolutions. We pledge to make changes personally and professionally to enhance our success.

Faced with continued economic uncertainty, it’s tough to know what those resolutions might be for our businesses. So let me suggest that as business owners we resolve to run our businesses smarter this coming year. Let’s make well-thought-out decisions so we avoid making mistakes.

Here are a few common errors business owners make:

Not Hiring Smart

There are indications that small businesses will start to hire again this coming year. After working with little or no staff, many entrepreneurs find themselves in need of an extra set of hands to grow to the next level.

Not knowing exactly how to find the right employee, many owners resort to hiring a friend or a family member. (Big red flag!) Typically, your family and friends don’t have the skills, experience or dedication you need to really grow your business. If and when it doesn’t work out, it can ruin the friendship and harm family relationships.

Friends and family members often have good intentions when they want to join your team, but it is difficult for them to set the personal relationship aside. You’re still their buddy, BFF, cousin or sister/brother.

And, as the business owner, you trust them with a handshake and a smile, as opposed to following good operational practices. That’s where the problems begin.

Rob Lewis, founder of U.S. Equipment Sales Inc., a used construction, recycling and demotion equipment sales company in Tampa, Fla., is still dealing with the aftermath of hiring a friend of more than 17 years who needed a job.

Mr. Lewis was familiar with noncompete agreements but says, “I decided it wouldn’t be very best friend-like to make my friend sign one.”

At first, everything went smoothly. But as time went on, the friend’s attitude and work ethic changed. “He was spending days at home instead of working and would lie about visiting or calling people,” Mr. Lewis says.

When the friend’s sales fell completely flat, Mr. Lewis got suspicious and discovered his friend had started his own company and was funneling customers to that business.

“Among my biggest mistakes, I showed him how to essentially keep ahead of the competition while spending a small fraction of what they do,” he says. “I’m still torn between the possibility of losing half my customers or having to resort to litigation.” The business does a little under $2 million in revenue and this friend was Mr. Lewis’s only employee.

Always remember, business is business and friendship is friendship. It you are thinking about hiring this year, make sure you hire smart. Find the person who has the right job skills and experience to help your business grow.

Failing to do Your Homework

One of the first steps any business owner should take before launching or expanding a new business, or product or service offering, is to research the market. Success depends on analyzing the opportunity to determine whether there is a viable opportunity. You simply can’t force the market to embrace your business no matter how fabulous you think your product or service is.

Fourteen years ago, serial entrepreneur Nathalie Ekobo moved to Phoenix from Paris to live her dream of creating a French restaurant and pastry cafe. She opened her venture in a tiny strip mall on one of the most famous streets in the Phoenix area — Camelback Road. The problem was you couldn’t actually see the posh eatery from the road or parking areas.

“People had to park their cars and walk a few feet to finally see us. We got angry cell phone calls from people in their cars saying, ‘We cannot find you!’ ” Ms. Ekobo says.

Europeans consider it charming to walk through neighborhoods to find out-of-the way, hidden treasures, Ms. Ekobo says. But in Arizona, where temperatures can reach 110 degrees, you don’t want to get out of your car if you don’t know exactly where the restaurant is located, she says.

The restaurant managed to survive for four years as a result of major marketing efforts. But after the September 11 attacks, Ms. Ekobo says she couldn’t hold on any longer.

This is a perfect example of an entrepreneur failing to take the time to analyze the market and to seek additional feedback. If Ms. Ekobo had done her homework, she might still be open for business.

Playing Banker to Your Customers

No business owner wants to badger a client or customer because of late payments. You want to maintain your relationship, yet the bottom line is you need to get paid. After all, you aren’t the bank or a charitable organization.

If you permit a customer to fall months and months behind, then shame on you. You’re putting your entire business operations at risk. Once a customer starts falling behind you need to address the situation immediately. In fact, if the customer is having serious financial difficulties, you may need to make the decision to stop doing work until the customer catches up.

I know how serious this is because I made this mistake myself. When I owned a marketing firm, I failed to confront a very large client about long-standing unpaid invoices. Our relationship was positive and I assumed the client would catch up quickly. But the firm filed for bankruptcy before I was able to collect a dime. Because this was my biggest customer, I couldn’t sustain the loss and closed up shop. Don’t let this happen to your small business.

These scenarios are just a few of the mistakes small-business owners make that could be avoided by taking the right steps. The economy is out of our hands, but we can control the decisions we make. So this year, resolve to make smart choices for your business. Take time to get the information, advice and resources you need to succeed.

For questions or concerns, please email smalltalk@wsj.com.

Article source: Wall Street Journal

 

If you take the opportunity to walk into a bookstore and wander over toward the section on business books, you will see a vast multiplicity of titles on all manners of business, investment, and strategy.  Many of these books outline a ‘system’ for acquiring wealth that involves some clever means of generating superior profits from what appears to be a minimal amount of work.

However, there is a relatively simple principal that is the basis of all business success.  That principal is that you should always seek to offer a product or service that provides a greater ‘use value’ to your customer than they pay you in ‘cash value.’  Thus, the fundamental basis of business success consists of finding out what the customer wants, and profitably providing it to them at a reasonable cost.

How Can It Be That Easy?

The truth of the matter is that success never is easy, never has been easy, and never will be easy.  However, the fundamental principals of success are simple, and they are straightforward.  The problem that most people run into is that they do not apply the principals of success consistently. The building blocks of greatness are constructed from consistent application of timeless principals.  These simple principals such as providing a reasonably priced product or service where the value to the customer exceeds the cost of providing the product are truly powerful.

The simple elegance of this principal is that you will be making a practice of only conducting business in a manner where both you and your customer or employer benefits from every transaction.  If every transaction is mutually beneficial, then you will literally be helping to make the world of each customer a better place by conducting business.  Conversely, every time that somebody demands something for nothing (i.e. ‘get rich quick’ schemes or more money without providing more service) they are making the world a worse place by trying to capture resources from others without providing a commensurate service in exchange.

What Capitalism Is Really About

It has become popular to believe that capitalism is about “greed” or the belief that “greed is good.”  This represents a fundamental misunderstanding of what a market economy is all about.  Capitalism does not laud greed as being an almighty virtue, it recognizes self-interest (referred to many as ‘greed’) as being an inevitable part of the human condition.  Thus, the question is not whether or not greed will be present … greed is always present.  The question is how to harness the power of self interest so that it delivers a value that exceeds its cost to the customer.

Unfortunately, many people fail to draw a line of distinction between business activity that benefits the customer and using political avenues to extract resources from the public treasury.  Economists refer to this second activity as rent seeking … and it is the exact activity that capitalism was designed to counteract.  When government entities control resources, the people with the most wealth will be those who have garnered the most political clout.  In most cases, there is no real service that is provided to the public in this struggle for power.

Conversely, when an entrepreneur such as Andy Grove or Steve Jobs creates products and technologies that create transformational changes in peoples personal, professional, and financial lives, it becomes quite apparent that the value created by those people’s innovations vastly exceeds the (considerable) wealth that they achieve in their lifetimes.  Thus, the spite and ire being leveled against capitalism should really be directed at the government’s repeated use of public funds to funnel favors to people and businesses who are politically connected.

What About People Who Are Employees?

This principal also outlines the way to success as an employee; by providing more value to your employer than they pay you in compensation.  Similarly, if you are looking to advance in your career, the best method is to look for ways that you can provide more value for your employer than is currently being delivered.  Generally speaking, advancement and promotions are justified when the candidate is already doing work at the next level of proficiency . . . so why not ascend to the next level of productivity without being told to do so?

In the end, there is one true universal secret to business success, and it is not a secret.  It is a simple, fundamental truth that delivering value to the customer for a price that is higher than your you costs will create success.  This simple axiom has many reprocussions throughout our personal, professional, and financial lives.  The only lingering question is whether we posess the mental and moral discipline to carry through these principals of success until our goals and ambitions have been achieved?

 

When traveling on the journey of business and life, many people have a natural inclination to structure their activities to avoid mistakes.  This tendency is quite rational, in light of the fact that most of us learn through our education to prevent mistakes whenever possible.  When going through school, we strive for a high grade point average . . . one mistake can blow the average.  When working at a job, we strive to be promoted . . . one mistake can ruin your career.  The incentives that we regularly face condition us to be perpetually risk averse because of the ever present possibility of failure.

The implicit problem of avoiding failure is that it frequently results in avoiding gain also.  Thus, in our desire to avoid moving backward, we also prevent ourselves from moving forward.  The important insight to internalize is that moving forward toward your goals in spite of mistakes is more important than avoiding mistakes altogether.  Entrepreneurs frequently back into this realization when they discover that there are so many things to do that they cannot possibly be done in anything remotely resembling a mistake free manner.  What frequently ends up happening is that the first area of focus is placed on the things that are most critical to sustaining and growing the business, with improvement and refinement done over time.  The contrary version of this concept is the perfectionist obsession that frequently grips people who work at the pleasure of a manager or executive.

Fail Forward

Many people hold onto a notion of success as a linear climb where one step begets another, which begets another, on and on until your goals have been achieved.  This is typical of the linear western thought patterns.  However, the way that we achieve the things we want isn’t always in a steady climb.  Many times we have to try things that don’t work, learn, try again, learn try again, learn and try again until we achieve our goals.  In the linear world, success is simply a process of building on top of what has already been done until the pile is high enough to reach your ambitions.  in the circular world, success is a winding path that we must discover through an uneven process of experimentation.

To many people, this feels like a maddening process.  The ambiguity and uncertainty of discovering the right decision can be very difficult to maintain.  It is impossible to know if success is simply waiting around the corner or whether it is many miles away.  The opportunity that you have been waiting for may be nearly upon you, or it may be disconnected by a vast expanse of distance and time.  This ferocious uncertainty leads many people to give up.

This is where the “Fail Forward” concept comes into play.  It is not reasonably possible to ensure that everything we do will always work out the way we intend.  However, it is possible to ensure that even if we fail, we learn something important that will help us to move closer to our goals and ambitions in the future.  It is inevitable that we will fall as we go throughout life.  However, falling forward instead of falling backward is a characteristic that can have profound impacts on your long-term success.

Gifts vs. Grit

Many people mistakenly believe that great success is solely the result of superior talent.  However, many studies have confirmed that the characteristic shared by elite performers in nearly every walk of life is that they have spent a tremendous amount of time honing and refining their skills.  Some have come to call this the “10 year rule” … stating that exceptional skill can only emerge after 10 years of continued, focused work and practice.  If elite skill can only be built with this much persistence, it stands to reason that “failing forward” is a critical part of this continued development process.

When people talk about the value of persistence, what they are really referring to is the willingness to push through difficulty, uncertainty, and failure to reach your goals.  Consistently moving forward, even if it does not always feel like your movements are taking you directly toward your goal is the key characteristic that separates the exceptional from the average.  In fact, it provides a significant degree of comfort to those of average abilities, because it shows that an abundance of perseverance can frequently overcome a deficiency of talent.  In many cases, it is talent that starts a person on the path toward elite skill, but it is continued persistent work that takes them to their goal.  If you lack talent, you can substitute consistent, focused effort.

It is truly unfortunate that we have become so conditioned to avoid mistakes.  It is the mistakes that allow us to learn and grow, and ultimately what lay the foundation for greater achievements.  This effect pervades our personal, professional, and financial lives.  It is a dichotomy that many people will need to overcome if they are going to achieve their goals and ambitions.

Fundamentally, this dichotomy comes down to a “Job” mentality of avoiding mistakes, in contrast to an “Entrepreneur” mentality of discovering the ingredients necessary for success.  In the context of our personal, professional, and investment endeavors it is frequently more beneficial to ‘fall forward’ than to ‘hold back’ . . . especially in consideration of the fact that our financial future is becoming more uncertain, and it is becoming less and less likely that our employer, government, or 401k will be able to provide for our future.  Thus, it becomes the responsibility of each individual person to ensure that they are consistently moving forward.

 

One of the oldest and most frequently cited geometric axioms is that the shortest distance between two points is a straight line.  While this is most certainly true in the sphere of mathematics and geometry, the path we take through business and life rarely (if ever) moves in a straight line.  Because of this, much of our ability to realize success is dependent on our ability to adapt to the twists and turns that we are presented with on a perpetual basis.

This is especially important for our financial calculations and decisions.  It is not a secret that most financial planning models are built on the assumption of indefinite steady compounding that is expected to make you rich after a certain calculated period of time.  Of course, real life does not work in that manner.  The stock market does not compound at 9% per year, every year, with no deviation.  In some years … or in the past decade, in many years, gains do not meet expectations or values decline.

Thus, it is not just the paper performance of our decisions, but their ability to absorb uncertainty that is highly important.  The problem is that most people do not fully understand the impact of uncertainty, and even fewer people are not aware of how to make their financial plans sufficiently robust so that they can withstand abrupt, significant changes to the marketplace.

Adaptability is Key

Regardless of whether you are talking about a manufacturing line, a small (or large) business, or a financial portfolio, it is absolutely critical to ensure that your strategy is adaptable to new market realities.  The more you allow yourself to depend on static models, the more you will be susceptible to destructive changes in the marketplace.  This concept must be internalized when planning, executing, and revising our personal and professional strategies.  As reality changes, we must be able to adapt and change with it.

A simple way to understand this concept is by internalizing the following three truisms about business/life:

1. Business/Life is a game
2. The game has rules
3. The rules are always changing

If this feels highly chaotic, that’s because in many cases it is.  We cannot suffice ourselves with learning the rules (both written and unwritten) of business/life.  We must also learn how and when the rules change so that we can adjust our personal, professional, and financial decisions.  An unfortunate fact of life is that none of us possess the power to change the larger reality … we only have the ability to change the decisions we make and influence the decisions that people close to us make so that we can adapt to the larger reality more successfully.

Learning When the Rules Change

Many people make a regular habit of following the news both in print and on the internet.  The typical result of most people’s news consumption is agreement with stories support their political views, and anger at stories that stand in contrast to their personal views.  This typically manifests itself in political arguments over current events with friends, co-workers, and family members.  The only problem is that none of us have the ability to change the political reality of the world at large.  Our vote counts as one of many, many millions, and political decisions do not vary as much many are led to believe.  Politicians are wildly different in their rhetoric (what they say), but their decisions (what they do) are much more closely tied to their incentives.

At first blush, this can easily lead to a belief that the news is useless, and it is optimal to tune out.  While temping, this view is not completely accurate.  The news is not useful from the context of my ability to change the global political reality, but it is useful from the context of understanding what changes are coming in the national and global marketplace.  From this perspective, news and information take on an entirely new light.

Signal and Noise

The key to making use of what we learn through the news is the concept of signal and noise.  Within most transmissions, there is an element of useful information (signal) and an element of useless information (noise).  In everything that we see, sense, or experience, there is something we can learn (signal) and there is everything else (noise).  The challenge that we have as people and as businesses is to act on the signal, and not on the noise.  In practice, this is much easier said than done.  In following the news, we should not be simply looking for stories that either confirm or conflict with our beliefs, but looking for useful information signals that can help us make better personal, professional, and financial decisions.

In the end, each of us will be able to achieve the best results if we realize the importance of adapting our strategy and decisions to a changing marketplace, while using the signals that we gain from our everyday experience to inform better decisions in the future.  By learning to do this on a consistent basis, it will allow us to perpetually move closer to our goals, dreams, and aspirations.

 

Squeeze 6,000 travel professionals into a conference center and what you get–besides a big-league bar tab–is an accurate snapshot of their industry. The news that emerged from the Global Business Travel Association summit, held in Denver in August, was upbeat for airlines, hotels and anyone who owns their stock. Travel is up, and prices with it. That means small-business owners and their teams will need to spend even smarter in the coming months. Here are some ways to do it:

Hotels
The 12 percent surge in hotel occupancy since last year is that sector’s strongest rebound ever. New properties are in the pipeline, but most won’t open until 2014, so demand will remain high. Smith Travel Network’s Jan Freitag notes that with occupancies sitting at 70 percent, the average 50 percent figure for Sunday nights means that midweek (when most business travelers are on the go) “must be pretty rockin’.”

Savings can be found by booking in advance as much as possible. You might not know who’s going to next year’s convention, so you can’t buy a plane ticket, but you can reserve rooms and switch names later. And try to avoid New York City, which weighed in at nearly 80 percent occupancy and an average rate of $223 a night.

8.4 Percent — boost in business travel spending in 2010, after a drop of 7.8 percent in 2009¹

$758.7 Billion — amount spent by U.S. business travelers in 2010, an increase of 7.7 percent over 2009²

Sources: ¹The Global Business Travel Spending Outlook 2011-2015 study, sponsored by Visa; ²U.S. Travel Association

Airfares
Airlines in the U.S. earned some $6 billion in ancillary fees in 2010, charging for everything from a first checked bag to trail mix to pillows. “They’re here to stay,” says US Airways CEO Doug Parker. What isn’t, necessarily, is the selection of flights leaving your local airport. Airlines continue to trim schedules, eliminate unprofitable routes and downsize planes.

To avoid airline add-ons, it’s imperative to attain elite status on your favored carrier. (In some cases, that’s as easy as getting an affinity credit card.) For cheaper fares and a wider selection–or, in some cases, any selection at all–get accustomed to flying out of more distant airports on one or both ends of your journey, such as accessing Madison, Wis., via Milwaukee or Chicago. Since you’re loading the car anyway, it may occasionally make sense to drive all the way to your final destination. At least you know your bags will travel free.

Rental Cars
As auto sales rise, manufacturers aren’t eager to sell to rental car companies at their usual discounted rates. Or they’ll replace an order for small cars, a hot ticket now that gas prices are up, with harder-to-move SUVs. As a result, Hertz, Avis and the rest are holding on to their fleets longer than ever–up to 40,000 miles. And since older cars are more expensive to maintain, they’re passing that cost to you.

The green light at the end of the tunnel is Enterprise, which bought National and Alamo in 2007 and has been integrating its customer service model. If one of their brands doesn’t have a car in the category you selected, or if you’re dissatisfied with the selection, employees are empowered to find options elsewhere in their fleet, the industry’s largest, or to offer a pricier vehicle at the same price. That won’t help your bottom line–but if you’re going to pay $70 a day for a car, it might as well be a Lincoln.

The good news is that the health of the travel industry nearly always mimics that of the economy. So if the cost of travel is increasing, it could mean your business prospects are on the upswing, too.

This article was originally published in the November 2011 print edition of Entrepreneur with the headline: Up and Away.

Article source: Entrepreneur.com

 

Q: Can you tell me the Internal Revenue Service’s business, medical and charitable mileage rates for 2011?

—E.K., Saginaw, Mich.

A: Sure, but it’s important to point out that the standard mileage rates for business and certain other purposes are different for the second half of this year than for the first half. (In most years, there is only one rate for the full year.)

The reason: The IRS announced in June that it was raising its rates for the final six months of 2011 because of higher gasoline prices.

Our reader is asking about the rates many taxpayers use to figure out how much to deduct for the use of a car or other vehicle for business and certain other purposes. Taxpayers can rely on these rates instead of keeping track of their actual expenses. Most people use the standard IRS rates because the process is much simpler.

In late June, the IRS said the rate rose to 55.5 cents a mile for business miles driven from July 1, 2011 through Dec. 31, 2011. That’s up 4.5 cents from the rate of 51 cents a mile that was in effect for the first six months of this year.

The IRS also raised the mileage rate for calculating deductible medical or moving expenses. That rate rose to 23.5 cents a mile, up from 19 cents a mile in the first half.

You also asked about the rate for use of a car to provide services for charitable organizations. That rate remains at 14 cents a mile for all of 2011. It’s set by law, not by the IRS.

In June, IRS Commissioner Doug Shulman said the IRS was raising the standard mileage rates for the second half of 2011 “to better reflect the recent increase in gas prices.” The IRS also said that while gasoline is a significant factor, “other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.”

More details can be found on the IRS website. Search under “standard optional mileage rate.”

By TOM HERMAN

Article source: Wall Street Journal

 

David Meinert, owner of Big Mario’s Pizza in Seattle, has been giving free pizza to Occupy Wall Street protesters. While many small-business owners, like Mr. Meinert, share the movement’s anger at the Wall Street banks, they should be wary. Occupy Wall Street is no friend of Main Street.

To start with, small-business owners should consider who is supporting the movement. The big labor unions are firmly in the Occupy Wall Street camp, and small-business owners and the unions don’t exactly sing from the same hymnal. The National Federation of Independent Business’s continued efforts to protect small business from the power of the big unions are testimony to this fact.

The Occupy Wall Street movement has very different objectives from most small-business owners. Doug Schoen, a political pollster and Fox News analyst, recently surveyed 200 protesters and concluded that the majority of the movement’s members want higher taxes to redistribute wealth and heavier regulation on the private sector. But most small-business owners have been calling for less regulation and lower taxes to get the economy going again.

Moreover, most small-business owners believe in the capitalist system, while Occupy Wall Street expresses some anti-capitalist views. Take a look at some statements made in the movement’s first official release. “Corporations … have continuously sought to strip employees of the right to negotiate for better pay and safer working conditions…. have consistently outsourced labor and used that outsourcing as leverage to cut workers’ health care and pay…. [and] have spent millions of dollars … to get … out of contracts in regards to health insurance.”

What about views of health care? According to CNBC, most of the movement is calling for universal health care. And to the extent that Occupy Wall Street opposes the health-care reform legislation passed in 2010, it’s because the new law wasn’t extreme enough. David Maris, a health-care equity research industry analyst, wrote on Forbes.com that he spoke to 50 of the protesters and found that 49 of them believe that health care should be free. By contrast, a January 2011 Discover Card survey shows that the majority of small-business owners want to repeal the new health-care law, and only a little over a third want to keep it.

If the protesters get their way and Wall Street is more heavily regulated, small-business owners will bear the cost. Like it or not, small businesses need the banking system because that’s where they get the credit they need. As regulators have tightened their control over the banks in recent years, the lenders have become very conservative, cutting back dramatically on small-business lending. If Occupy Wall Street succeeds and the government exerts even more control over the banks, the end result will be even less small-business credit.

While small-business owners, like most U.S. voters, are likely to avoid extreme groups on either side of the aisle, if forced to choose, their interests are better aligned with the Tea Party than with Occupy Wall Street. As I have argued elsewhere, the Tea Party movement has called for three changes most small-business owners favor: cutting taxes, repealing health-care reform laws, and cutting government regulation.

So Mr. Meinhart, how about some pizza for the Tea Partiers? No need to give it to them for free, though. They believe in capitalism, so if their actions are consistent with their views, they would pay for it.

Photo: Flickr user Carwil

Article source: Entrepreneur.com

 

Eleanor Roosevelt once said, “A good leader inspires people to have confidence in the leader, a great leader inspires people to have confidence in themselves.” But, becoming a great leader isn’t easy. Successfully maneuvering a team through the ups and downs of starting a new business can be one of the greatest challenges a small-business owner faces.

Leadership is one of the areas that many entrepreneurs tend to overlook, according leadership coach John C. Maxwell, whose books include The 21 Irrefutable Laws of Leadership (Thomas Nelson, 1998) and Developing the Leader Within You (Thomas Nelson, 1993).

“You work hard to develop your product or service. You fight to solve your financial issues. You go out and promote your business and sell your product. But you don’t think enough about leading your own people and finding the best staff,” Maxwell says.

It turns out, the skills and talents necessary to guide your team in the right direction can be simple, and anyone with the determination can develop them. Here’s a list of 10 tips drawn from the secrets of successful leaders.

1. Assemble a dedicated team.
Your team needs to be committed to you and the business. Successful entrepreneurs have not only social and selling smarts, but also the know-how to hire effectively, says leadership trainer Harvey Mackay, who wrote Swim with the Sharks Without Being Eaten Alive (Ivy Books, 1995). “A colossal business idea simply isn’t enough. You have to be able to identify, attract and retain talent who can turn your concept into a register-ringing success,” he says.

Related: What’s Your Leadership Style? (Quiz)

When putting your team together, look for people whose values are aligned with the purpose and mission of your company. Suzanne Bates, a Wellesley, Mass.-based leadership consultant and author of Speak Like a CEO (McGraw Hill, 2005), says her team members rallied around each other during the worst part of the recession because they all believed in what they were doing. “Having people on your team who have tenacity and a candid spirit is really important,” she says.

2. Overcommunicate.
This one’s a biggie. Even with a staff of only five or 10, it can be tough to know what’s going on with everyone. In an effort to overcommunicate, Bates compiles a weekly news update she calls a Friday Forecast, and emails it to her staff. “My team is always surprised at all the good news I send out each week,” Bates says. “It makes everyone feel like you really have a lot of momentum, even in difficult times.”

3. Don’t assume.
When you run a small business, you might assume your team understands your goals and mission — and they may. But, everybody needs to be reminded of where the company’s going and what things will look like when you get there. Your employees may ask, “What’s in it for me?” It’s important to paint that picture for your team. Take the time to really understand the people who are helping you build your business.

“Entrepreneurs have the vision, the energy, and they’re out there trying to make it happen. But, so often with their staff, they are assuming too much,” says Beverly Flaxington, founder of The Collaborative, a business-advising company in Medfield, Mass. “It’s almost like they think their enthusiasm by extension will be infectious — but it’s not. You have to bring people into your world and communicate really proactively.”

4. Be authentic.
Good leaders instill their personality and beliefs into the fabric of their organization, Flaxington says. If you be yourself, and not try to act like someone else, and surround yourself with people who are aligned with your values, your business is more likely to succeed, she says.

Related: Tips on Loyalty and Leadership

“Every business is different and every entrepreneur has her own personality,” Flaxington says. “If you’re authentic, you attract the right people to your organization — employees and customers.”

5. Know your obstacles.
Most entrepreneurs are optimistic and certain that they’re driving toward their goals. But, Flaxington says, it’s a short-sighted leader who doesn’t take the time to understand his obstacles.

“You need to know what you’re up against and be able to plan around those things,” she says. “It’s folly to think that just because you’ve got this energy and enthusiasm that you’re going to be able to conquer all. It’s much smarter to take a step back and figure out what your obstacles are, so the plan that you’re putting into place takes that into account.”

6. Create a ‘team charter.’
Too many new teams race down the road before they even figure out who they are, where they’re going, and what will guide their journey, says Ken Blanchard, co-author of The One-Minute Manager (William Morrow Co., 1982) and founder of The Ken Blanchard Cos., a workplace- and leadership-training firm. Just calling together a team and giving them a clear charge does not mean the team will succeed.

“It’s important to create a set of agreements that clearly states what the team is to accomplish, why it is important and how the team will work together to achieve the desired results,” says Blanchard, who is based in Escondido, Calif. “The charter provides a record of common agreements and can be modified as the business grows and the team’s needs change.”

7. Believe in your people.
Entrepreneurial leaders must help their people develop confidence, especially during tough times. As Napoleon Bonaparte said, “Leaders are dealers in hope.” That confidence comes in part from believing in your team, says Maxwell, who is based in West Palm Beach, Fla. “I think of my people as 10s, I treat them like 10s, and as a result, they try to perform like 10s,” he says. “But believing in people alone isn’t enough. You have to help them win.”

8. Dole out credit.
Mackay says a good salesperson knows what the sweetest sound in the world is: The sound of their name on someone else’s lips. But too many entrepreneurs think it’s either the crinkle of freshly minted currency, or the dull thud of a competitor’s body hitting the pavement.

“Many entrepreneurs are too in love with their own ideas and don’t know how to distribute credit,” Mackay says. “A good quarterback always gives props to his offensive line.”

9. Keep your team engaged.
Great leaders give their teams challenges and get them excited about them, says leadership expert Stephen Covey, author of The Seven Habits of Highly Effective People (Free Press, 1989). He pointed to the example of a small pizza shop in a moderate-sized town that was killing a big fast-food chain in sales. The big difference between the chain and the small pizza joint was the leader, he says.

Every week he gathered his teenage employees in a huddle and excitedly asked them: “What can we do this week that we’ve never done before?” The kids loved the challenge. They started texting all their friends whenever a pizza special was on. They took the credit-card machine to the curb so passing motorists could buy pizza right off the street. They loaded up a truck with hot pizzas and sold them at high-school games. The money poured in and the store owner never had problems with employee turnover, says Covey, who is based in Salt Lake City, Utah.

10. Stay calm.
An entrepreneur has to backstop the team from overreacting to short-term situations, says Mackay, who is based in Minneapolis. This is particularly important now, when news of the sour economic environment is everywhere.

“The media has been hanging black crepe paper since 2008,” he says. “But look at all the phenomenal companies and brands that were born in downturns, names like iPod, GE and Federal Express.”

Article source: Entrepreneur.com

 

New businesses are getting off the ground with nearly half as many workers as they did a decade ago, as the spread of online tools and other resources enables start-ups to do more with less.

The change, which began before the recession, may be permanent, according to some analysts.

Start-up BiteHunter launched with three employees. Above, co-founders Gil Harel, left, and Ido Shilon.

“There’s something long-term at work here,” says Dane Stangler, research director at Ewing Marion Kauffman Foundation, a Kansas City, Mo., research group.

Start-ups are now being launched with an average of 4.9 employees, down from 7.5 in the 1990s, according to a recent Kauffman Foundation study. In 2009, new independent businesses created a total of 2.3 million jobs, more than 700,000 fewer jobs than the annual average through 2008, the study found.

Meanwhile, the overall number of start-ups has “held steady or even edged up since the recession,” according to the study.

Led by start-ups, small employers have generated 65% of net new jobs over the past 17 years, says the Small Business Administration. As such, steady declines in start-up size, which stretch back more than a decade, could explain the slow labor market recovery following the previous recession in 2001, as well as today, according to Brian Headd, an economist at the SBA’s Office of Advocacy.

“This is a significant change and not necessarily tied to business cycles,” says Mr. Headd.

Rather than purchasing the tools and manpower needed to run their companies, more small firms are renting, sharing or outsourcing resources, typically through online services, according to Steve King, a partner at Emergent Research, a research and consulting firm for small businesses.

By tapping into Web-based business tools, Sam Rogoway earlier this month launched Near Networks, a nationwide video production firm, with only four employees. An entrepreneur based in Santa Monica, Calif., Mr. Rogoway says tasks that used to require extra workers can now be done online.

“You don’t need an IT person or an accountant. It’s become so streamlined and user-friendly,” Mr. Rogoway says. “We all wore different hats and collaborated on everything.”

Last year, Gil Harel launched BiteHunter, a search engine for restaurant discounts, with just three employees. Based in New York, the site used shared screens and other communications tools to work with developers in Russia, Uruguay and Israel.

“Just to build the infrastructure to get a business off the ground used to take a lot of money and people. But things that you couldn’t do in the past, you can no w do on your own,” Mr. Harel says.

Most small companies now buy supplies, pay bills and manage payroll on Web-based services, according to the National Small Business Association, a Washington, D.C.-based lobbying group.

A recent survey of more than 500 small firms by Zoomerang, an online polling firm based in San Francisco, found a small but growing number are using shared, network-based applications—or so-called cloud computing—for everything from data storage and email, to customer service, mobile commerce, and finance and administration.

Evan Saks, the founder of online mattress maker Create-a-Mattress, says manufacturing technology that ties orders to production—known as just-in-time manufacturing—and Web-based tools have done away with the need for inventory managers or warehouse staff, among other workers.

After launching in May 2010 with five employees, Mr. Saks says he now relies on just two part-time workers—even as the business is growing.

“I didn’t have visions of building an empire. I just wanted to create a nice profitable business,” he says.

Write to Angus Loten at angus.loten@wsj.com

Article source: Wall Street Journal