The Use of Social Media

I’ve been spending more time thinking about the use of social media, not only for entrepreneurs, but also for my world inside a College. In this regard, my friend Mark Carbone, the president of XE Corporation, has been taking me through an educational process, and it’s interesting to see the things hitting the press on this subject. Take a look at a relatively recent piece from the PR company, Edelman. The article on their website, The Social Pulpit: Barack Obama’s Social Media Toolkit examines the role that social media played in President Obama’s campaign. The piece has some interesting lessons for those of us still learning the craft. According to Edelman, the primary social media lessons from his campaign include:

1. Start early
2. Build to scale
3. Innovate where necessary and do everything else incrementally better
4. Make it easy to find, forward and act
5. Pick where you want to play
6. Channel online enthusiasm into specific, targeted activities that further the campaign's goals
7. Integrate online advocacy into every element of the campaign

Not Waiting for a Bailout

These are most certainly difficult times for all people, but it’s remarkable to see the resiliency that’s coming from the entrepreneurial world. While the big companies are hanging out in Washington looking for a hand-out, the entrepreneurs that I talk to tell me that they are doing what entrepreneurs do…focusing on their customers, working hard and not waiting for the folks in Washington to solve the crisis. Make no mistake, entrepreneurs are concerned about the economy, but even in these challenging times they are working to position themselves to be ready when the economy turns around. Here’s an article from the Los Angeles Times by Cyndia Zwahlen that confirms from the left coast, the things I’m hearing here in Florida. Below is a quote that I particularly liked:

"My focus isn't on a handout, my focus is to have the leadership skill and visionary skill to bring a lot more relevance to my business through becoming far more remarkable," said Michael Donner, third-generation owner of Barco Uniforms Inc., which employs 175 people in Gardena.

Amen to that Mr. Donner!

Making the Grade…Literally

Today’s Wall Street Journal ran an interesting story on how the economy is hitting the world of Venture Capital. See the complete article by Pui-Wing Tam: Venture Capital Performs Triage: With Cash Scarce, Only the Strongest Investments Get New Funding.

For more detailed information on Venture Capital by region, state, industry and stage, see the PricewaterhouseCoopers Money Tree Report: https://www.pwcmoneytree.com/MTPublic/ns/nav.jsp?page=historical

The Value of Our Businesses

Jeff Cornwall, who writes the outstanding entrepreneurship blog, The Entrepreneurial Mind, has some very interesting observations regarding entrepreneurs and the wealth that they have locked up in their businesses.

“The value of the business is most heavily influenced by its ability to generate free cash flow, generally measured using EBITDA (Earnings Before Interest Taxes Depreciation and Amortization). The most common valuation method for privately owned businesses is based on a multiple of the free cash flow the business generates. The multiple is based on several factors including historic growth of the venture, strength of the industry, strategic advantages of the company, and specific industry valuation standards. The degree to which the entrepreneur is able to improve cash flow through bootstrapping techniques and other prudent management techniques the higher the value that can be created for the business.

As the recession takes hold many entrepreneurs are reporting that their profits are declining. This means that the value of their business is going down as well. So just as wealth is disappearing on Wall Street, it is also disappearing on Main Street. We just don't hear this discussed as often.”

As I read his thoughtful conclusion, I keep coming back to the notion that as entrepreneurs, we need stronger advocacy at the city, county, state and national levels. As entrepreneurs, we are so busy running our businesses that we don’t have the time (or inclination) to lobby our governmental representatives or even to communicate with the local press. But as Jeff points out, while wealth may be disappearing on Wall Street, it’s also disappearing on Main Street and you rarely see a mention of it in the national press and no one in Washington is even thinking of us. That’s something that we just have to change.

Managing in a Recession

Take a look at a recent Fortune magazine article on How to Manage Your Business in a Recession. While the piece deals with corporate America, some of the points are still instructive for entrepreneurs. In particular, note the following and think of how this relates to your own business.

“Whole Foods Market CEO John Mackey says, "We have to manage the business differently." Economic growth used to be a tail wind that the company built into its business plans. Now, says Mackey, "one of the leadership challenges I have is that that assumption is no longer true." The new era "requires a different mindset - we have to be more frugal, to think about every expense, every capital investment - because we won't be bailed out by growth."

The article also addressed the issue of cutting prices…which is something everyone right now seems quick to do. According to the author Geoff Colvin…hold off on that notion.

“Yes, everyone would like to pay less, especially in a recession, but the dangers of price chopping are greater than you may realize. McKinsey research finds that in a typical S&P 1500 company, a price cut of 5% would have to generate increased sales volume of 19% in order to pay for itself - and that almost never happens. The implication is that while holding prices steady may cause sales to decline somewhat, that course may nonetheless be wiser. It all depends on the pricing dynamics in your business, which may be changing rapidly in this recession. For example, gasoline at $4 a gallon caused many U.S. consumers to cut back drastically on discretionary purchases; since gas today is below $2, some consumers may have more available income - but may also be more worried about their jobs. Now is the time to study price sensitivity in your markets much more closely than before.”

The Fall of a Great Store and What We Can Learn from It

Over the weekend, I found myself thinking a lot about Circuit City. According to the Wall Street Journal, they’ll be laying off around 34,000 people nationally as they begin liquidating their 567 stores. What a train wreck! It’s horrible to see a once-powerful retailer lose their way and for so many people to be out of work. And as I thought about it, I wondered if there weren’t some lessons in this mess for entrepreneurs.

First, Circuit City got clobbered when Best Buy came on the scene. So for entrepreneurs, we should always be looking over our shoulder and see who is sneaking up on us. While we might have the best product or service going, we should be mindful of competition, be it from a huge company or from a brand-new startup. Or to paraphrase the words of the immortal Satchel Paige… "Remember to look back. Someone is probably gaining on you.”

A second place where Circuit City took a hit was in their sales staff. Whenever I had to get information on an electronic product, I always went to Best Buy because I always found their staff to be more knowledgeable. I also found that it was hard to find people on the sales floor at Circuit City. Again for entrepreneurs, that means that customer service is king. I always tell my students that customer service is the easiest place for the small company to beat the big guys…and here is a great example. Best Buy once was the small start-up and they used friendly, knowledgeable employees as a way to grow their business.

I’m also not sure that Circuit City reacted to the new realities of the marketplace. Best Buy was always tinkering with their warehouse stores to make continual improvements. My local Best Buy now has a guitar store in it, removing the automotive section that wasn’t all that popular. I really like the TV section which includes a great place to try out the new big screen and learn about home theater options. The last time I was in a Circuit City they didn’t have that store within a store concept working. In addition to that point, I’ve heard from a number of women that they felt Circuit City was a “guys” store whereas Best Buy seems friendlier to the woman customer.

As entrepreneurs, we need to be listening to the marketplace, and watching businesses big or small…observing both success or failure…and learning in the process.

OK…I Guess These Are Unprecedented Times

This evening, I was reading through the Corrections and Amplifications insert in today’s Wall Street Journal, when something just JUMPED off the page at me. Now the point could be made that if I’m reading corrections and amplifications, that I must be really bored. Since there was no football on TV at the time, I would have to agree with you on that point, but take a look at the graph in the link below that comes from that section of the paper.

Bank of England Rate Chart

What stunned me was the fact that the Bank of England recently cut its target interest rate to 1.5%, which is the lowest it’s been in its 315 years. Yes, that’s right, in its 315 year history, the interest rate has never been lower than we're seeing now. The rate is lower than when slavery was abolished in Great Britain, lower than during the Crimean War or lower yet than during the South Sea bubble…whatever that was. So, when one of your kids asks if you ever have seen economic times like this before, you can be safe in saying that none of us have ever lived through anything similar to this.

Everything I Need to Know About Today’s Business World Can Be Learned from Calvin and Hobbes

I had lunch today with Andrew Sellers, along with Chris Poe and Steve from Concepts in Greenery, a nifty entrepreneurial company (wholesale nursery and landscape contracting company) that is doing some very cool things to help grow their company. In particular, they are leading the way in their industry to a time when the old paper plans on the job site will be a thing of the past. Steve mentioned a cartoon from Calvin and Hobbes that was, well, just a little ahead of its time. Take a look below, and see if it reminds you of anything you may have seen recently on the news.

Calvin and Hobbes

Then consider that this cartoon was printed over 15 years ago. I wonder what the cartoonist of the strip, William B. "Bill" Watterson II would say about the auto industry if he was still drawing it today. Too bad…that would be a fun strip to read.

Coming Soon...Web 10.0

Thanks to Bob Minotti for the heads-up on the piece in Fortune magazine… “Web 2.0 is So Over. Welcome to 3.0.” I particularly liked the comment near the end: “But today's Web 2.0 companies may find themselves transformed or even eclipsed by yet another wave of web innovators. New companies are cropping up to expand the utility of the web, creating location-based services and financial payment systems that can be bolted onto existing sites. Often bootstrapped, they are frequently profitable and may get acquired quickly.”

Bootstrapping is a topic rarely discussed in regard to the startup of tech companies, but with the current credit markets, this might be the best way to get a company going. Granted, you may not start the next Google this way, but for entrepreneurs who want to get into the game, bootstrapping a winner now can lead to an even bigger success down the road.

Time for Twitter?

Guy Kawasaki has been a corporate evangelist, an entrepreneur, venture capitalist, consultant, author (we use one of his books at the Crummer Graduate School as must- reading for our technology entrepreneurship students) and all-around-interesting guy to pay attention to. Back in early December, he posted an intriguing item on his blog (How to Use Twitter as a Twool) on the use of Twitter. Now Twitter is getting extraordinary press of late, and you might be wondering how best to use it. Kawasaki’s blog is long; but give it the time it deserves because it’s a virtual “how to” manual on using Twitter.