Advice for Small Business Owners, business, Motivation 1 comment

Art of Negotiation

By on March 25th, 2010

In any environment with more than one person, there will always arise a situation in which the two people disagree. It could be as mundane as where to order lunch from, or as serious as whether or not to go forward with a billion dollar deal. Bring two people together, and a conflict will arise.

One of the questions often asked by new business owners is how to resolve such conflicts without creating a rift between the parties involved. The best time to look for the answer to this question is well before the situation arises, since many of the techniques used for resolving conflict are more difficult to apply once the situation has been muddied. As such, I will discuss here some basics for dealing with such scenarios, and would recommend that you look for a seminar for some further suggestions if you anticipate being involved in such scenarios often, or know that you have a hard time dealing with conflict.

The first piece of advice actually comes from the readings I did prior to getting married, and was stated very simply:

Always remember, especially when disagreeing, that you’re on the same side.

We have a tendency, when disagreeing with someone, to move into the mindset of you versus me. In marriage, and in business, it doesn’t work that way. All the people involved have the same goal, which is, to make the marriage or business succeed. The disagreement is about the means to getting that success, not about the success itself.

This brings us to the next point – stay on topic, and don’t get personal.

When a conflict moves off the original topic of discussion, and heads into the jungle of personal attacks, a pleasant ending rarely ensues, and it makes future conflicts more difficult to deal with. If you’re trying to reach a decision, you need to focus on what’s relevant to the issue, and the fact that John barely passed his accounting course isn’t relevant to whether or not the company can afford a particular expenditure today.

After the particular issue is resolved, if warranted, the background and side issues can be discussed. However, they have no place in resolving another conflict, and only serve to sidetrack you from the main issues.

The last point is possibly the most useful, but also, unfortunately, the most vague. To prepare for a potential future conflict, prepare a process to resolve a conflict.

Basically, if you head into a discussion knowing how you’re going to resolve it, then it makes the discussion that much more productive. Remember, we’re discussing resolving conflict with a particular other person, not with people in general.

One idea you might want to try works like this:

Agree beforehand who is considered to be the expert on a given set of subjects. For example, if you have a software business with two partners, one who handles marketing and advertising, the other handling development, you could easily split out technology issues and publicity issues.

Agree on an approach and guidelines for discussing issues. For example, you might agree that both parties get a chance to present their opinion, and then a chance to respond to the other persons opinion, with the length of the discussion agreed to at the beginning of the discussion.

At the end of the allotted time, if the subject is considered to fall under the expertise of one party exclusively, then they get to make that decision. If it is not an issue with which one party in particular is considered expert, then you take turns deciding.

Hopefully, with this information in mind, you can head into your next conflict knowing that you have the ability to resolve it amicably and smoothly, and move on to making your venture a success.

Advice for Small Business Owners, business, Motivation, Work at Home 1 comment

Pouring the Foundation

By on March 24th, 2010

Perhaps the most important decision you will make in a business is when you bring in the second person, either as a partner or as an investor. Done correctly, and your business will flourish; make a mistake, and the repercussions can haunt you for years.

Unfortunately, this fact is often ignored when selecting partners or investors. Quite understandable, when you consider that what’s being evaluated is the skills being offered or the amount of money versus equity being bartered. However, what is often overlooked is that few people have truly unique skills (although they may be unique in the particular combination, or availability) and that money is cheap.

Partners

There are a few reasons to have a partner in any business:

  • No one person has all the skills necessary to run a successful business, but with two people, you can get a lot closer to having all the needed skills
  • A partner can act as a sounding board for new ideas, and save you from chasing after non-profitable ideas while the money-maker is ignored

For the first point, you can solve this issue by hiring someone with the required skills. This on its own is not actually worth any equity in your business. (Note, you might give up equity instead of paying someone if you don’t have any money invested in the business which can be used to pay someone.)

The second point, however, is why you give up some ownership in the company. The partner is going to help you achieve success in your business. For that, you want someone who has a vested interest in your company, but also, you want someone you can work well with.

Investors

Like a partner, an investor, especially in the early stages of the business, brings more than just money to the table:

  • Cash, of course, is the reason you go looking for an investor
  • Experience is what comes along, with your investor becoming either a member of the board, or at least an adviser to your business

As I mentioned above, cash is cheap. If you have an okay credit rating, you can get a loan from the bank, not giving up any equity, but paying some interest instead. Alternatively, you can borrow money from family and friends to help get your business off the ground. For cash alone, there is little reason to give up any equity in your business.

Experience is different. A good investor will have experience running a company, and want to help you succeed. Of course, they’re also looking for a return on their investment, but a good angel will want to be involved, and you’ll want to listen to them. (That’s not to say that you will DO everything they suggest, but you should listen.)

Summary

As described, both founders and investors are there to provide suggestions and opinions. This being the case, you should be sure that the people you bring into your company are people you can work with. You need to be able to listen to them, and you need to be able to get along with them on a personal level.

If you do, you’ll find yourself with the advice and support that will help your business succeed.

Advice for Small Business Owners, Work at Home 3 comments

Finding the Right Price

By on March 23rd, 2010

I had 3 discussions last week with different types of people regarding appropriate fees, and came up with 1 conclusion.

You’re not charging enough.

The logic works as follows:

You want to earn $100,000 per year.

You think you can get 1000 billable hours.

Your hourly rate is therefore $100.

If you actually try charging $100 per hour, you’ll find that you’re overcharging for some work (basic PHP programming is not worth more than about $50 or $60 per hour), and undercharging for other work (needs analysis and process refinements and automation can easily be billed at $200 per hour or more).

If you try to average the fees and charge something in the middle, you’ll end up with the following situation:

People who need PHP programming don’t hire you because you charge too much for that.

People who need process refinements and automation also don’t hire you, because you charge too little.

What, someone won’t hire you because you charge too little?

But that’s exactly the problem. If you do work that other people charge two or three times your rate, then clients think they’re not getting the same quality from you as from your competitors. So they don’t hire you, not because they can’t afford you, but because they think you’re not as good at your job as your competition is.

The solution, of course, is to raise your rates. The catch, however, is that you won’t get people hiring you for the basic work, which you may need to reach your income requirements. So you do what I’ve just done – you split your fees.

Split fees

When you split your fees, you need to be careful not to give a quote too early in the process. The way I do it is by starting at my higher fee, and then working my way down. If a client wants to hire me by the hour, it will be pretty expensive, because the only fee I’ll quote up front is my higher rate.

When I look at the work, though, I have 2 fees – one for the work that the client is contacting me for, and one for the work that anyone could do, but it will probably be me. For example, if a client needs to determine how to automate a particular task, they come to me to figure out how to automate it. I will likely also be implementing that, but really, once they know the solution, they can hire a programmer for a fraction of my price to do that work.

To get that work as well, I offer to arrange for the implementation, and pass on the savings to the client. I may outsource the work, or I may do it myself. In any case, the price quoted will be competitive for the work being done. In the previous example, if the work could be done by a programmer charging $35 per hour, I’ll bill it at $40-$50 per hour. Whether or not I actually subcontract it depends on the type of work and whether or not I have time to do it myself.

From the client’s perspective, they’re only paying the premium rate for the specialty work I do. Using me as a go-between to various contractors helps ensure that the job is done properly, and they know that if my contractor makes a mistake, I’ll make sure it gets fixed.

Pricing is something that’s very difficult to get perfect – don’t charge enough, and you’ll need to work more to earn enough, charge too much, and you won’t be able to get clients. But if you can strike the right balance, you’ll have it made.

Advice for Small Business Owners, Career, work, Work at Home No comments yet

Lessons from Aircraft Carriers

By on March 22nd, 2010

If you watch a movie involving aircraft carriers, you may have noticed this. On the carrier, the crew are wearing different colored jackets. Some of the crew are wearing blue, others yellow, others gray. Watching more closely, you’ll notice that each crew member interacts almost exclusively with other crew members wearing the same colored jacket as himself.

Each crew member has a given piece of responsibility. She must trust the rest of the crew to do their jobs properly, just as they must trust her to do her job properly. Somewhere further up in the hierarchy, there’s one person in charge, who knows what each person is doing. On the deck, however, each person has tunnel vision, focused on their own tasks, and trusting that other people are doing their tasks.

A business is like this too. At the top of the chain is one person who knows what’s happening in the company. Smaller tasks get delegated down the chain, until they end up in the hands of the person who is going to do the work. Each worker must focus on their own tasks, and trust the people around them to do their tasks.

What should you not be doing? Unless you’re the person at the top, you shouldn’t be trying to oversee every piece of work being done around you. While there are certainly many successful people who do manage every aspect of their businesses, it does not foster strong businesses.

That’s not to say you should turn a blind eye to what’s happening in your business. But if you give someone a task, to some extent, you need to trust them to do their job, while they trust you to do yours.

Advice for Small Business Owners, dragons den, Work at Home 2 comments

Five Stories – One Lesson

By on March 19th, 2010

The finale for Season 5 of Dragons’ Den was devoted to the 5 constant figures in the Den, the five Dragons. The show was titled Path to Riches and went through the story of how each Dragon reached their current success.

What was especially fascinating about the show was that while discussing 5 unique stories, they all contained a single common lesson.

  • All five Dragons came from modest roots.
  • All five Dragons worked hard to get to their current positions.
  • All five Dragons had to rely on themselves.

Brett Wilson talked about his roots with family, how at one point, he let his family take second place to financial success, and learned the hard way why a person shouldn’t do that.

Arlene Dickinson talked about her roots of growing up in poverty, being a single mom with 4 children, with no formal education or training. She earned her way to the top of Venture Communications.

Jim Treliving and Kevin O’Leary both talked about the downside to working for someone else, not being in control of your own destiny.

Robert Herjavec talked about family values, and how you don’t get a free ride in life.

If you’re planning on pitching your business to the Dragons, you should really watch this episode. If you wonder why the Dragons act the way they do, the answers are all here. The key points, though, are that:

  • You have to believe in what you’re doing
  • You have to have worked hard to get to where you are
  • You have to know what your business is about

Besides that, you also need to know the following, which will help you get closer to a deal:

  • What is your company’s current financial condition (get out that balance sheet)?
  • What were your revenues in the past?
  • What are your projected revenues, and how did you figure that out?
  • Who would buy your product?
  • Who are you competing with?
  • Why does anyone care about your product (this goes back to the first point in the previous list – you have to believe in what you’re doing)?

Advice for Small Business Owners, business, Motivation, work, Work at Home No comments yet

Anything for a Buck

By on March 18th, 2010

What would you do for a dollar?

This question was put to me the other day, and made me think about how a business grows. To answer the question, I started by looking at what I used to do for money and what I currently do for money.

I used to accept money for anything that occupied my time:

  • Write something for you? $20 per hour.
  • Tutoring? $35 per hour.
  • Teaching? $50 per hour.

I settled down. I have a full-time job. I do some consulting. I do some programming.

  • Review your online presence? $200.
  • Custom programming? $50 per hour.
  • Plan technology strategies? $75 per hour.

Is this a way to grow a business? Not really. If you look at what I’ve been doing over the last few years, I’ve been all over the map. I’ve charged a variety of fees over time. I’ve done a wide variety of tasks. I rarely turned down an offer for some work.

A business doesn’t advance that way. In a well-balanced business model, there are certain core aspects to what the business does. Everything else becomes secondary to that. When asked about what your business does, you should be able to state that in one or two sentences.

I help small businesses acquire appropriate technology so that the business can grow sustainably.

That’s not complicated. What might be complicated is how I do that.

  • I buy hardware and software
  • I write custom code
  • I build web applications
  • I help with marketing and branding
  • I establish social media outlets
  • I develop technology infrastructure

However, all those tasks are secondary to my clients. I don’t get hired to write a web application, but to solve a problem.

Perhaps the client needs a custom scheduling application to coordinate his 25 employees. I’ll look to see if there’s a solution already out there that I can buy. If not, I’ll arrange to have one built. Maybe I’ll build it myself. To my clients, that’s not relevant. What’s important is that when I’m done, they are able to coordinate their employees.

In your business, what defines your services? What value do you offer your clients? Are you accepting work to earn a buck, or are you accepting work to grow your business?

Advice for Small Business Owners, business, Motivation 3 comments

The Network Reaches Completion

By on March 17th, 2010

In any given day, I spend in excess of an hour working on my networks. Some of that time is spent on this site – writing articles, responding to comments. Other time is spent talking to colleagues to keep up-to-date on what’s happening around me. I visit a variety of sites (see my list of sites for more information about which sites I visit and why).

I’m constantly reaching out to others, probing for information and strengthening ties.

Then I met the right person, and suddenly, I truly understood why I put in all this effort into growing and maintaining my network.

I’m jumping ahead of myself.

I’ve been consciously networking for a little over a year. When I went to my first event, I was excited about developing new relationships, and wrote an article describing the experience. Since then, I’ve attended several other networking events, and pretty soon, the novelty began to wear off. I still thought I understood why I was putting in the effort, but I wasn’t seeing the rewards. I started getting discouraged, that my efforts were for naught.

Perseverance is one of the keys.

Knowing what you’re looking for is another.

Fortunately for me, I did persevere, continuing to reach out despite not seeing the hoped for results. I wasn’t being called after each event with requests for my time. New clients were hearing about me from old clients. My referral network was strong, but my new network? Silent.

Then, late in 2009, I started getting contacted randomly from readers of my site. I then understood why it took so long to hear from them – it took almost a year to establish credibility. The comments of Chris Brogan and Julien Smith in their book Trust Agents (link to review) were started to set in.

My site was starting to pay off, but what about the hours spent on LinkedIn? What about the time spent meeting other consultants? When would those start to pay off?

I met Susan Varty, the most recent piece of the puzzle.

After being featured in the AdviceTap newsletter, Susan reached out to me to connect, and a few days later, we were sitting down to discuss our businesses over coffee. Susan is a writer, and as her site says, she helps you finish your writing projects. While her actual business has diversified from there, it still remains her core focus.

The conversation we had gave me a lot to think about, from adjusting my consulting rates (Susan felt that I could easily double my rates) to potential sources of new clients. As I left the meeting, though, I continued to think about what we had discussed – how our business constantly evolves, how we recognize new opportunities. Tied in with this was the work I’m doing for one of my clients, assisting in developing a complete technology infrastructure for his business, and which I had been mulling over for the last few days.

I put the two together, and am now working on a new direction for my business. I’m developing what I’ve tentatively called the Small Business Technology Kit which will contain the various hardware, software, systems and processes that small businesses need to grow and expand.

Susan provided me with the target market. Jeremy warned me about the limitations. Ron gave me a concrete example of the applications.

It was my network that provided all the pieces. I just put them together.

It took over a year to get the right set of connections to figure out where I want to take my business. It took people I met in a variety of places – family, friend, networking sites, events, bloggers. But when all the people were there, I knew what it was I was trying to find, and it appeared.

Sometimes the answer to what are you looking for? stays hidden until you find that something, and then you know that you were looking for that all along. But the sooner you recognize what you’re looking for, the easier the search will be.

business, General Site Postings, Social Media 3 comments

Digital Network

By on March 16th, 2010

This post is a little different than usual. I’ve just taken inventory of my online presence, and wanted to share it with you. Each network or site has strong points, and weak points. I’ve tried to adapt each so that I’m getting as much benefit out of it as possible, and would love to hear how you make use of each of these sites (or others not mentioned here that you think might be useful).

  • Facebook – this is primarily where I keep in touch with family and friends online. While I promote my business there as well, I consider it to be more of a social than professional environment.
  • LinkedIn – my business profile, where I look to establish new connections. My time on the site is spent answering questions and participating in various groups. I keep my profile up to date, and encourage my clients to find me there.
  • Twitter – a news feed over which I have limited control. I try to interact a bit, but mostly, I’m watching, looking for trends, interesting articles, and active news.
  • Google Reader/Buzz – I use this to follow what others are reading. Similar to my use of Twitter, except here I can apply better filters by person. I also pull in various RSS feeds here to provide me with reading material when I have the time.
  • Answers.onstartups.com – curious to know what other start-up owners are asking? Check here. I’ve asked questions, and try to provide as many answers as I can.
  • AdviceTap – a small network of consultants, this site is dedicated to issues and questions that consultants of various types face. As I do consulting, this site provides me with valuable information and questions that I can use to further my own business, along with valuable connections.
  • Sprouter – a network devoted to entrepreneurs, this site has a really high ratio of quality content to noise. Again, like Twitter, I try to watch and listen for what others are talking about.
  • Blellow – a varied network, I haven’t really nailed down how to use it for my business, but it isn’t really a social network. So far I’ve gotten some technical answers, seen some interesting work.
  • Stack Overflow – if you’re in a technical position, this site will become a lifesaver. You can get technical answers in a matter of minutes that are specific to your particular scenario.

What sites do you visit for growing your network or your business? How do you find they help you?