Launching a New Business or Product Line

Forbes (see the March 26th article by Melanie Lindner linked below left) today published in it's entrepreneurs blog a good refresher on starting a business (or from my seat a new product line). They point out the biggest issues - having a solid Value Proposition and defining your Sustainable Competitive Advantage. You do hear these two mantras ad nauseam from venture capitalists, as well as smart angels for that matter. The only way you can obtain significant start up funding is with strong answers to these two issues.

One of the big issues not mentioned in the article was Exit Strategy, what I discussed on Monday. Investors want to know how they get their money back. Do have a read of this one, it will help you from making a fool of yourself.

Think of Your Exit Before You Enter

Exit strategies - how do you make the most from your business when you want to do something else or retire? To a great extent it depends on the type of business you've built, and the market you compete in. In today's market the most active buyers are the growing web companies like Google that pay up for niche businesses that augment their business model. A great majority of companies that are sold are bought by competitors, rather than going public. Recently, a start-up launched about 10 years ago "became" exit-able.

Local Harvest is a focused website that maps sustainable restaurants, farmers markets, grocery stores, and the like. It is a niche business in an area where some big folks are playing, notably Google Maps, which of course didn't even exist 5 years ago. If Local Harvest can succeed in gathering and holding both locations and the customers looking for these locations, then the recent mega-wave to sustainable foodstuffs will drive it's value exponentially, and make Google, Mapquest, or Yahoo take notice and think about a bid.

Now I know most entrepreneurs don't start a business looking to sell it, and these guys probably didn't. Successful businesses are driven by passionate people who really find a market to serve. But if you were starting a business from scratch today, or revising your business, it wouldn't hurt to focus now on who might want to buy you later.

Data Good - Too Much Data Bad

In the constant balancing act between searching for good information without overloading your workers, Inc. magazine finds that an astounding 89% of an average workers' time is spent conducting research, attending meetings and searching for documents. This leaves at most 11% of the work day (probably much less) for using and acting upon information.

Challenge your staff and technology suppliers to find better, more intelligent research tools and technologies that fit your niche so that quicker, better actions can become the norm. Faster computers should enable this process.

Effective judgment and good (which I equate to rapid) decision making will continue to differentiate successful companies from those that flounder. Don't let your workforce get lost in the avalanche of data.

Credit in this Environment? - Good Luck!

The crunch isn't over yet - I was on a call with some college friends recently and they were joking about which of their firms would go down first, UBS or Lehman. After the Bear bailout, probably neither. Still - not a good sign that the financial crunch, meaning lack of credit even for good borrowers, is over.

If you are a small company looking for money in this environment - look to friends or family. The banks or other lenders are looking elsewhere for now, Treasuries anyone?

Hiring College Graduates - What's with all the Female Interviewees?

Full blown research sited by the Freakonomics folks now shows that as you hire from colleges, you are more likely to find a solid gal than a guy. This performance gap is caused by learning differences and is shown to last at least through college.

The prevalence of female graduates allows small businesses to address their diversity issues in a positive way, and could lead eventually to an evening out of opportunity. Past practices led to guys making more lifetime income than women. In any case, it should tell you small business owners that the smartest way to go is hire that gal, all other issues being equal.

Hiring a highly qualified woman can lead to a better, healthier and more diverse workforce.

Liquidity is Still King

When small businesses have cash to hold for awhile, and think about investing it, many bank and corporate based options are available. As the excellent Gretchen Morgenson wrote in the New York Times Fair Game column, an investment that was represented as "near cash", so called auction-rate notes, turned out to be anything but. These notes are a relatively new type of short term investment, offered by closed end funds, with artificially low cap rates. As she notes not all "liquid" investments are truly liquid.

I can think of many short term investments that are truly liquid no matter market conditions, like money market funds and commercial paper, where interest rates float to clear the market. Banks and brokers offer a diverse number of offerings. For the truly risk adverse there are Treasuries.

Any company worth it's salt should have an investment policy that addresses the investment parameters for short term funds. Long term funds should of course be used to pay down debt, make investments in the business using ROI analysis, or repay shareholders if there are not enough good internal or external investment opportunities.

Think long and hard about the risks involved in gaining those extra basis points by putting your money in a closed fund or anything you don't understand. As we've seen recently, even the insured funds are having trouble.

iPhone Plays with Your Corporate Environment

This is a huge deal for business users. The iPhone will shortly play in the corporate environment according to this longish March 6 announcement broadcast by Apple for the next software update. Microsoft Exchange linkage is great news for companies big and small, leading to another good cell phone choice for employees. To your benefit, RIM now has a solid competitor - they no longer have a solo playing field, and for Palm, this might just accelerate their demise.

Once again the market speaks and product providers take notice - ergo you have a choice for selecting a company wide smart phone. Unfortunately, you have to wait a bit for the reality to hit - this iPhone 2.0 update, it's not coming until June.

The Vista is Not Rosy

Buying a new PC with Vista pre-installed is one thing, but upgrading your existing office PC's is now a dead issue. Witness the comments from inside Microsoft exposed eloquently by Randall Stross in yesterday's NY Times.

More importantly, as you read this article do you really think Microsoft cares about you the customer? Is this how you would approach a product launch/release? I find it hard to surmise how they continue to get away with this behavior.

If I was your Tech adviser, I would strongly consider going Mac since I now have seen both systems in small business action. The capabilities are really similar, MS Office for Mac is robust, and Leopard really does sing. Of course there are open source solutions as well, proving the market is at work for your benefit. Enjoy.

An Early Easter is Bad for St. Pats

It's not enough that retailers struggle to find a niche to generate revenues online, now the word is that off-line retailers will also suffer a decline in year over year revenue on St. Patrick's Day. The National Retail Federation ("NRF") estimates overall revenues will decline by 3.2% from 2007 as a result of fewer customers, despite a slight increase in average per customer spending.

“Retailers and restaurants that benefit from the St. Patrick’s Day holiday are up against a double whammy of an early Easter and the holiday falling on a Monday,” said NRF President and CEO Tracy Mullin.

The 18-24 crowd are still the big celebrators and spenders, allocating an average of 20% more money per person than the average and they show much higher attendance than the average.

So if you are a bar or restaurant, I would not spend much marketing money trying to pull in families or married couples, spend those dollars luring college folks and those just out, that's your best bet for a solid return on investment.

Getting Help Selling Online

Last week I wrote about full-scale online offerings for small businesses from Yahoo and Microsoft. These hosted services promise to launch you online and get you collaborating, selling and marketing as well. What if you don't need such a comprehensive solution and just want to sell your product into cyberspace? Then have a look at the options available from Flying Cart.

With Flying Cart you can be up and selling in two minutes (or so they claim). The Madison, WI company's free offering lets you launch up to 5 products, but prices range up to $30/month for unlimited products and transactions. The offering set includes:

• Web hosting
• PayPal integrator
• Email promotion
• and most importantly Store Networking

As described by Justin Petrocelli at Entrepreneur.com;

"Flying Cart helps retailers bring traffic to their sites by promoting their stores on search engines like Google and on local classified ad sites like Craigslist. The company's philosophy is unorthodox but refreshingly simple--time spent creating too many bells and whistles for an online store is time taken away from making sales. Flying Cart encourages its clients to get their businesses online quickly and make up the rest as they go. Shah (Flying Cart's founder) says the result is an online store that promotes itself."

In addition to Google and Craigslist promotion, cross-selling with similar stores online promises to be the big bang - the long held promise of the so called "network effect" where everyone links to raise the tide for everyone. A great try if it works.

Small business retailers would be wise to consider this option pronto.