Where Is Your Business Overspending?

BY JOE WORTH 

Q: What are the most unexpected areas of overspending for a small and growing business?

A: First, let's step back and ask ourselves: Why would any expense be unexpected? I mean, as a small-business owner, are you sure you're getting accurate financial statements every month from yourbookkeeper or controller? And do you understand what those statements say, or did you just use the closest QuickBooks chart of accounts template? I don't mean to be harsh, but to a money-focused guy like me, if you're overspending, it's a sign that you're not on top of your game.

That said: There are two key areas in almost any company where overlooked costs can spiral upward. What's insidious about them is that they may appear benign on your income statement--just the cost of doing business. It's not until you check the numbers against costs from the previous quarter or year that you see the red flags.

Cost of Goods or Services

Every business makes something or provides a service to customers (or both). The direct costs associated with this activity are recorded in the Cost of Goods or Cost of Services section of your income statement. However, I've found that with small businesses it's quite common for these costs to end up under Operating Expenses, where they're easily overlooked.

When I started working with a fast-growing security systems company, all payroll costs were lumped together under Operating Expenses. The owner believed that putting them all in one place made them easier to manage. But in reality, he had no idea how much his payroll was affecting his profitability and his long-term success. Unless all of these direct costs are correctly split out into the appropriate categories, there is no way to accurately calculate the gross margin on your products or services. At worst, you could be in for a nasty surprise--you could be actually losing money on each sale or job.

If this seems simple, it is. Yet I can tell you from experience that in rapidly expanding companies, many entrepreneurs inadvertently overspend in the Cost of Goods category in the name of growth.

Insurance

Businesses have a laundry list of insurance coverages: workers' compensation, unemployment, general liability, general property and casualty, vehicle, health and other employee benefits. It's a lot of paperwork and a lot of hassle--so much so that many entrepreneurs are reluctant to change their routines, despite high costs.

When was the last time you shopped around for insurance plans? I'm not referring to the options your insurance agent/broker presents to you; rather, to you shopping among several agents/brokers to see who comes up with the best deal for your company.

While you're at it, ask each candidate to evaluate your current program for limits that are too high or too low and for areas in which coverage may be lacking entirely. If it's been a few years since you went through this process, you should be able to save at least 20 percent on your insurance premiums.

Read more stories about: Budgeting, Insurance, Cost cutting, Money management

SOURCE: www.inc.com

An Open Letter to Mark Zuckerberg

BY: ALL ABOUT THE PLATFORM | Phil Simon

Inc.com columnist Phil Simon says Facebook could solve a few key problems with one simple solution: Charge users--they'll pay.

Associated Press

 

81

inShare

Dear Mr. Zuckerberg:

You're clearly one of the smartest entrepreneurs around today. Despite that (or maybe because of it), there's no shortage of talking heads giving you unsolicited advice. Add me to that list.

With Facebook closing in on one billion users, kudos are in order. You've built the single most popular website (nay, company) in history. To your credit, you've consistently put the user experience at the top of your priority list ever since you founded The Facebook back at Harvard.

But you're not in Cambridge anymore.

The Tide Is Turning

The user experience doesn't appear to be at the top of Facebook's priority list anymore. To be sure, that list is no longer just yours, even though you control 57% of your company's voting shares. Your company needs to make more money--and fast. Many people are telling you that you have to run more ads, especially on mobile devices. Historically, you've resisted this, but Facebook's recent actions and changes indicate that you're softening your stance here. Some portend that if you don't crack the nut on monetizing mobile, Facebook will go the way of MySpace.

While admirable, your company's quixotic mission to connect the world has to be tempered with the short-term financial realities that all publicly traded companies face. And that's why the Facebook user experience is being compromised.

You might have read the TechCrunch piece on the subtle design and semantic methods that your company has adopted to trick users into giving up even more personal data. For two reasons, I'm not contending that this practice is illegal or even unethical. First, everyone uses Facebook voluntarily. No one is compelled. Second, Facebook has every right to attempt to make money. It isn't a government utility; it's a business. Real estate, employee salaries, and data centers cost money.

However, there's a growing backlash among many users that Facebook has gone too far, even among Generation Y. Start-ups like App.net aim to create ad-free social networks, even if that means charging users a modest annual fee (in this case, $50).

Which brings me to a modest proposal: Charge me.

Simon Says

Yes, you've always said that Facebook was, is, and will always remain free. That's fine, but I don't mind paying for greater control of my data. I'd love to opt out of sponsored stories in my news feed, downright ugly and space-consuming ads on the right-hand side of Facebook, and other potentially unscrupulous things of which I'm not aware.

My hunch is that I'm not the only one who feels this way. Let's say that 10% of Facebook users (about 100 million) pay $25/year for a premium (read: ad-free) experience. That's $2.5 billion in revenue.

Will a Facebook Plus/Freemium model solve all of your company's problems? Of course not. There's no easy solution. However, I'd argue that this new revenue source would stem the decline in your stock price and, for a modest fee, allow others to buy a better user experience.

Sincerely,

Phil Simon

SOURCE: www.inc.com

5 Reasons People Fail (& What to Do Instead)

BY: SALES SOURCE | Geoffrey James

These barriers to success are easy to overcome, but only when you know they're there.

 

966

inShare

Why do some people achieve their goals while others fail? I believe it's because successful people manage to overcome five barriers that, in many cases, guarantee failure. Here are those barriers and how to overcome them:

1. Uninspiring Goals

When most people set goals, they envision a "thing," such as a particular amount of money, an object (like a new car), or a specific achievement (like writing a book). Unfortunately, these "things I'm gonna get or do" goals don't appeal to the core of what motivates you, because they miss the point that what you're actually seeking in life and work is the POSITIVE EMOTIONS that you believe those things will produce.

Fix: Rather than envisioning a "thing" as your goal, envision--with all the strength in your imagination--how you will feel when you achieve the goal. That way, you'll be inspired to do whatever it takes (within legal and ethical bounds) to achieve that goal.

2. Fear of Failure

If you're afraid of failing, you won't take the necessary risks required to achieve your goal. For example, you won't make that important phone call, because you're afraid that you'll be rebuffed. Or you won't quit your dead-end job and start your own business because you're afraid that you might end up without any money.

Fix: Decide--right now!--that failure, for you, is a strictly temporary condition. If things don't go the way you'd like, it's only a setback that, at most, delays your eventual success. In other words, accept the fact that you'll sometimes fail, but treat that failure as an unavoidable (yet vital) component in your quest.

3. Fear of Success

In many ways, this fear is even more debilitating than the fear of failure. Suppose you achieved something spectacular, like enormous wealth. What if it didn't make you happy? What then? What if you ended up losing all of it? What then? Would your friends start acting weird? Would your family be envious? Such thoughts (and they're common) can cause even a highly motivated person to self-sabotage.

Fix: Decide that you're going to be happy and grateful today and happy and grateful in the future, no matter what happens. Rather than focus on possible problems, envision how wonderful it would be to be able to help your friends and family achieve THEIR goals. (Hint: Watch the last season of the TV series Entourage!)

4. An Unrealistic Timetable

Most people vastly overestimate what they can do in a week and vastly underestimate what they can do in a year. Because of this, most people try to cram too many action items into the short term rather than spacing out activities over the long term. The inability to get all the short-term steps accomplished creates discouragement and the impression that the final goal is slipping away.

Fix: As you list the activities and steps required to achieve a goal, schedule only the 20% of the activities that will produce 80% of your results. (I explain more about this in the post The Secret of Time Management.) Beyond that, set ambitious long-term timetables, but always leave some "wiggle room" when you plan short term.

5. Worrying About "Dry Spots"

It's easy to get discouraged when you reach a point at which nothing you do seems to advance you toward your goal. For example, suppose you're trying to master a certain skill. You make swift progress at first but then, after a while, it seems as if you're not doing any better, or maybe a little worse. Some people use these "plateaus" or "dry spots" as an excuse to give up and therefore fail.

Fix: Whenever you reach a plateau or dry spot, it's time to celebrate rather than give up. A plateau is almost always a sign that you're on the brink of a major breakthrough, if you just have the patience to stick with it and trust that you'll eventually achieve your goal.

SOURCE: www.inc.com

Grow Your Business by Buying Domain Names

ALL ABOUT THE PLATFORM | Phil Simon

Sometimes acquiring another domain is the cheapest way to increase leads and sales.

shutterstock images

 

23

inShare

Many businesses operate on what I call the "one website theory." That is, they buy a single domain, add content on a regular basis, and try to drive as much traffic to that domain as possible.

To be sure, this is a tried-and-true strategy. In fact, compared to the more than 60% of all small businesses that don't even operate proper websites, buying one domain would be a vast improvement over waiting for the resurrection of the Yellow Pages.

But for many entrepreneurs, spreading their Web presence across more than one url makes more business sense.

One Size Does Not Fit All

I'm not a fan of the "one size fits all" strategy for many reasons. I've launched separate sites for my last two books, The New Small and The Age of the Platform. Also, I run a few other sites, including a separate WordPress "playground" site to experiment with different things.

Maintaining multiple domains works better for me for several reasons. First, each site is more focused. People who hear about one of my books (say, The Age of the Platform) probably want to find out more about that book. That is, they may not want to read about my other activities. Second, multiple domains can be good for SEO. I want people to see those sites when they Google the title of the book. Third, people will remember www.theageoftheplatform.com or www.thenewsmall.com much easier than www.philsimonsystems.com/books/theageoftheplatform. Finally, each site represents  another Web property. Think of the board game Monopoly. Why limit yourself to just one house on Boardwalk?

Capturing Traffic

But there are different reasons to own and manage more than one website. Consider what my friend Mark Cenicola recently did. Cenicola is the co-founder of Las Vegas-based BannerView.com, a company that hosts and designs websites for small businesses.

The company never paid much attention to optimizing its website for localized terms such as "Las Vegas Web Design." Why? Because Cenicola wanted his company to be seen as a national player. Fair enough, but BannerView.com by itself was unable to capture searches done by local businesses looking to launch a website. Why not buy lasvegaswebdesign.com?

Cenicola found that that domain name was, in fact, for sale and had a key selling point: It ranked high for the keyword phrase "Las Vegas Web Design" and other related terms specific to website design here in balmy Las Vegas.

After some negotiations with the site's former owner, Cenicola acquired the new domain name. Today, going to www.lasvegaswebdesign.com forwards to a Las Vegas-specific BannerView.com site. The results? BannerView achieved first place placement for terms related to website design and Las Vegas on all three major search engines: Google, Bing, and Yahoo.

The lesson here: To some extent, a company can have it both ways, being both national and local. In this case, BannerView made a very targeted effort to reach the top of search engines without compromising its national audience.

Simon Says

One website is certainly better than zero. After all, the Internet isn't going anywhere. But I'd argue that you should consider whether one website is enough for your business. (It's interesting to note that even Google itself is completely on board with this strategy: It's bidding to acquire "lol" and .YouTube domain names.)

Yes, your mileage may vary. But you might find that your sweet spot is three separate sites, each with a specific mission or targeted audience.

Have any experience with multiple domains? Let me know about it in the comments.

SOURCE: www.inc.com

My Unexpected Path to Success

BY: A HAPPY BUSINESS | Shazi Visram

Happy Baby founder Shazi Visram's first product launch was an absolute dud. When she looked closer, she found the fundamental problem (and a better strategy for growth).

Courtesy Company

Happy Family CEO Shazi Visram with her son Zane.

 

47

inShare

We launched Happy Family on Mother's Day 2006 with a grand vision: to provide moms with a healthful alternative to overly processed food in jars. 

With the technology available at the time and a limited budget, we set out to change the world in a seemingly odd place: the freezer. We started with Happy Baby, our first line of frozen, heat-and-serve organic baby food.

But soon after the product was in stores, we realized we weren’t getting any real traction. 

The reason? Well, it was the freezers.

While I was doing demos in stores, I began noticing how moms shopped. I’d stand near the freezers with a set table --little spoons and all--our brightly colored foods on display, stopping anyone with a young child. But I got very little traffic. I noticed that most moms simply weren't shopping for their little ones in the freezer aisle. So, I moved my demo table as close to the "baby aisle" as I could get. 

I knew from our research that moms did actually love our product, but we had a major challenge to overcome if we wanted to get frozen baby food in Mom's hand. The bottom line: Our consumers shopped the jarred baby food aisle, and we were in a different part of the store.

In addition, I realized that our customers (more familiar with jarred baby food) would have to learn how to use our product if they weren't yet familiar with homemade baby food.

My heart sank.

Starting Again

Obviously, it was disappointing at first, but setback breeds innovation, and we quickly shifted our focus to innovating in the shelf-stable aisle. We then had the idea to launch the first ever probiotic cereal for babies, Happy Bellies, a true revolution for digestive health. It started to fly. Then we launched the first ever organic melt-in-your-mouth puff snack for babies, our beloved Happy Puffs.

And, it was finally beginning to look like the business I had originally envisioned when we stumbled upon the true alternative to the jar: the pouch. And now we had distribution and brand loyalty.

We went back to our original idea of thinking outside the jar, and the result was the Happy Baby pouches--which is our signature product today. Moms loved the portability of the pouches, and the innovative packaging encouraged their little ones to explore self-feeding. Not only was the format inventive, but also we raised the bar on ingredients, being the first company to offer kids' products enriched with rich, essential nutrients (such as choline for brain and eye development and the supergrain Salba). Lastly, the carbon footprint of our products was just 10 percent of the footprint of food sold in the typical glass jar. 

Pouches were suddenly flying off shelves, and parents were clamoring for additional Happy Family products, which led to the creation of a full line of family-friendly meals and snacks, including Happy Tot pouches and Happy Munchies, to name two. 

Mistakes Lead to Payoff

As a result of our willingness to change course and adapt to the market, the Happy Family brand has expanded from those first few stores in New York to more than 17,000 stores nationwide, including Target and Whole Foods Market. Our products are also sold online at Amazon.com and Diapers.com.

We've grown from $115,000 in revenue to $35 million in 2011, with amazing growth so far this year. Had you asked me six years ago, I'm not sure I would have anticipated having to change direction quite so early on.

Looking back, I am so grateful that we were able to be so nimble, shifting our entire to-market strategy on a dime and figuring out how to deliver on the original promise in a big way. We made a big change, but our goal is still the same: to provide babies everywhere with the best, most nutritious organic foods.

SOURCE: www.inc.com

Facebook's Biggest Problem

ALL ABOUT THE PLATFORM | Phil Simon

The social network is making money--but not enough for Wall Street. Here's why small business, in part, is to blame.

Flickr/babyben

 

38

inShare

Unless you've been living in a vacuum, you know that Facebook's stock has been reeling. Sure, the company is making money but not nearly enough to satisfy Wall Street.

The company has built the largest trove of data the world has ever seen and is rapidly closing in on one billion users. But Facebook still has to figure out how to monetize its increasingly mobile user base in the post-PC or "PC plus" era.

In this post, I'd like to look at one of Facebook's biggest problems from the perspective of a small business owner.

The Power of Free

For many reasons, I'm pretty active on Facebook. Yes, I like to keep up with my friends (and make new ones), but there are legitimate business reasons for spending a decent amount of time each day on the social network. In my case, I manage six Facebook pages. Why six? Well, I am the founder and owner of two small businesses and have written four books. Because of the ubiquity of Facebook, I easily set up pages for each endeavor. And why not? It took very little time, cost virtually nothing, and allows me to potentially reach some of those 954 million users.

And when someone likes one of my books or companies, Facebook tells me when and who (and sometimes why). That is, I can easily identify the fans of The Age of the Platform, for instance. Because of this, I don't have to run ads. Sure, ads would theoretically allow me to reach more people, but ads are not free and their effectiveness is suspect.

And I'm hardly alone here. The ability to reach potential customers sans payment is arguably the chief reason that General Motors stopped advertising on Facebook, although the company is rumored to be rethinking that decision.

Consider Amazon's approach for a moment, because it serves as an instructive contrast to Facebook here. Anyone can like one of Amazon's products by clicking that button on its page. However, that "like" data is only visible to Amazon employees--not the author of that book nor the maker of that widget. As such, only Amazon can directly identify and market to those people. I as an author and small business owner cannot circumvent Amazon.

In effect, Jeff Bezos has ensured that Amazon will be a part of every transaction on its platform. Affiliate marketing programs incentivize users to promote Amazon products on their own sites. Google does the same thing with AdSense. For his part, Steve Jobs recognized the cardinal importance of the direct relationship with the customer when he negotiated a deal with The New York Times for the iPad.

Simon Says

It's tricky to strike the right balance between open and closed. One one hand, if a platform is too closed, then it may not grow at all. On the other, as Facebook has seen, there's a real risk in giving companies like mine and people like me the ability to directly reach new users and customers (and subsequently circumvent ads and other revenue streams).

What say you?

SOURCE: www.inc.com

You Really Need Outside Directors. Here's Why

SERIAL CEO | Margaret Heffernan

Trying to save time and money by cutting your advisory board? You could find yourself short on both.

Getty

 

73

inShare

Private companies aren't obligated to have outside directors, and there's evidence that businesses are eschewing them. Doing away with your board feels efficient because it saves time and money. But is it really a good move?

According to University of Windsor business school professor Roger Hussey, private companies with boards did better in the last recession than those without them. This shouldn't come as a huge surprise but it's nice to have some data attached to it.

Why would non-executive directors make a difference?

Perspective. Every business, no matter how small, gets wrapped up in itself, its own politics, and processes. That means every CEO needs advice and objectivity from those who care about the company's success, but can view it from a healthy distance.

Contacts. No individual's contact book is big enough. Every company needs help growing. Outside advisors and directors can broaden a company's reach and raise its profile.

Experience. Most companies follow a pretty well-understood life cycle, each with its characteristic challenges, advantages, and symptoms of health. It's profoundly helpful to distinguish between crises that are normal for your company's stage, and those that are anomalous and therefore troubling. If you're making a big acquisition, no lawyer will give you the kind of unfettered advice that you will get from someone who's done such deals before. Smart people are willing to learn faster from friends.

Daring. When you bring in board members, you create an opportunity for people to disagree with you. This is essential. As a smart entrepreneur, you need challenge, argument, and debate from knowledgeable people who are on your side. If you fear those questions, what secret terrors are you hiding?

Of course to get the full benefit of a board, you need to take it seriously and give it both time and money. If you don't, you may well find yourself short of both.

SOURCE: www.inc.com