Ask better questions, and lots more of them. Ask your customers,your marketplace, your clients, your partners. Ask, and then shut up and listen. Do it often enough, and sincerely enough, and you'll learn everything you need to know to make all the right moves as an entrepreneur and business person.
In a world of “must reads”, Mr. Buffet’s annual letters stands tall above the rest.
“If you are a CEO who has some large, profitable project you are shelving because of short-term worries, call Berkshire. Let us unburden you.”
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This is my first business flyer, typed out on an IBM Selectric at my dad’s business.
I was 12.
Price worked out after the show.
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Chris Dixon is one of the smart guys I follow with a passion. He wrote a great blog post today about their lead investment in a $30M round of financing in a fantastic startup – Shapeways.
This will change the world.
My dad told of a lesson he would teach disk jockeys when he was a program director.
He was outside the studio door when he heard an announcer swear – OFF Air – just the usual cussing of a frustrated employee.
My Dad burst into the room at a full run, rushed to the console and quickly snapped the microphone switch – moving it quickly from off to on and back off again.
He then stared at the confused announcer and with all seriousness and righteous anger asked:
Phil: “Did you know your microphone was ON?!?”
… stunned silence as a look of horror would spread over the Jocks face…
(Stammering) Jock: “I don’t know… I thought it was off… honestly, I don’t know!”
Phil: “That’s the point.”
And he would turn and leave the room.
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I mention this because recently a news anchor in North Dakota was fired for swearing when the microphone was on. This has, of course, happened hundreds of times, and has caught Presidents as well.
My point? As a business owner, always assume your microphone is on. Never communicate, in words or in actions, thoughts you would rather not have your employees, customers or investors hear.
Because, of course, you never know when the microphone is hot.
I had a blast teaching Oak Tree Simulation’s Maven game to my Marketing 100 class.
Students have to manage two products across three regions – keeping track of price, promotion, advertising, sales forces, quality and finance. It is just tough enough to require students to think, but simple enough that they can have fun competing.
Maven: A Marketing Simulation Game
I think small business owners could learn quite a bit from a simulation like this. How often do we get a chance to “play” at business? A consultant can preach terms like “contribution margin” and demand curves, but until you actually play with these concepts, it is difficult to comprehend.
If anyone would like a walk through, reach out and let me know. Who knows – you may learn new ways to manage your business!
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When you invest in something, or ask someone else to invest in your company, you need to answer the question – what will they get back? When will they get it back? What is that worth?
I’ve helped create hundreds of business plans, and read a few hundred more. Many look good, but few answer this basic question for investors.
Enter ROI – Return on Investment.
Let’s say you ask investors to contribute $100,000 to your company. How much total money will they get back, and when will the get it?
Let’s say that you predict the following:
In the first two years we will not be able to distribute any money to investors. In year 3,4,5 we can distribute $25,000 a year. At year 6 you will sell the business and investors will receive $200,000.
In effect, you have offered your investor a 20.8% return on their investment.
Now, it is up to the investor to judge the riskiness of your proposition. If they can earn 5% in a “safe” bet – is the 15.8% risk premium worth it to them?
IRR stands for Internal Rate of Return – and it is a way of calculating “what is the percentage rate do I need to invest 100,000 today and pull out this stream of cash?”
Next week we will explore the Time Value of Money – and why a dollar today is worth more than a dollar tomorrow – and how to value it.
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Years ago a smart guy named Fred Wilson started MBA Mondays on his blog. I love this, and have made it required reading in my MBA course.
However, many of the examples are focused on bigger companies and tech ventures.
Since I spend so much of my life with small companies – and many lifestyle companies, I thought I’d take a crack at re-interpreting the topics he presents from the point of view of the small business.
Today is my first try… let me know how I’m doing…
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Found this gem in my notes from the MBA program at Melbourne Business School:
If you make Value but not profit, you are a charity.
If you make Profit, but not Value, you are a thief.
That leaves us with an interesting relationship – consider:
Which begs the question – Are you living Above the Line?
Do you make more value in the world than you take?
If not, what is stopping you?
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I can not recommend this enough!
I’ve been following Venture Capital Guru Fred Wilson for years – and now there is a $5 best of Fred – mini MBA course. All proceeds go to charity.
Do it. Now.
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The Big Red Car had a great post on Internet scams the other day and it drove me to post a comment. I thought I would share it with you:
Back in the day I owned a company called Minnesotacars.com – a we had a TON of “Nigerian Scams” . A bank president alerted me when his mom fell victim.
Interestingly, we worked with the United States Secret Service to help protect our customers.
Again – this was the late 90s and early 2000s – when we were all so young and innocent.
We had a few hundred people posting cars for sale on our site every month, as well as around 200 dealers. The private parties would receive the legitimate request, and receive a cashiers check, drawn on a US bank, for more than the amount. The private party would take the check to their bank, and it would clear. The buyer would then tell the seller to send the excess to their “transportation” agent. No would ever show up for the car.
About a month later it would be discovered that the check was counterfeit – though drawn off of a legitimate account. The liability then would rest with private party.
We ended up writing some sophisticated algorithms to spot the information requests before they went to the buyer… we also created a blog to publish the offenders email addresses and IP information. I think at the peak we would trap hundreds of scams a month.
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I have two new friends. Actually, we’ve been reading each others comments for years, and now we’ve connected.
Over the years I have become an avid follower of AVC.com – a fantastic blog created by Venture Capital manager Fred Wilson. And, over the years, his blog has evolved into a community. Each day hundreds of comments by smart people.
Over the years we’ve come to know one another by our screen comments. Then, and some point I started reading their blogs. The first was Jeff Minch’s Mussing of a Big Red Car – Leadership advice from a really smart guy – told from the point of view of his big red convertible.
Note – I said my new friends were smart – not boring.
One night at around midnight I left my first comment on his blog – a great post about the role of the SBA. Within minutes there was a comment back: Let’s Skype.
The next day we had a fun hour long chat – turns out the car has a pretty cool owner. And, I’ve conned the guy into speaking to my MBA class in the fall.
My next contact just finished chatting with my Introduction to Global Business class – 54 students heard from the amazing Andy Swan.
This interaction started with a tweet. I was preparing for a lecture, and ran across a slide that credited Andy Swan. I recognized that name from the AVC.com community.
A few tweets and a couple of emails, here he was sharing incredible start-up wisdom with my class.
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