Risk and Reward

There are many expressions around describing the fact that you have to work to get rewarded – there’s no such thing as a free lunch – and that the amount of the reward will be proportionate to the work done – you get what you pay for. There are expressions relating risk and reward – the man who says it cannot be done counts the risk, not the reward.

What does all this mean to you? It is intended to serve as both a warning and as a motivator.

Like many people, I spent a significant amount of time reading about various get-rich-quick schemes, thinking that I would be able to plug into some formula and soon be spending all my time scuba diving in Aruba. I read through the posts about MLM schemes, about marketing other people’s products at significant commissions. But at the end, I learned a very simple truth – there is no way to get rich quick without putting in the work.

Granted, there are programs available that can change the nature of the work to something that you will enjoy more. You can change the number of hours that you will work. You can change the rate of return on your time investments. But the work itself cannot be eliminated.

The second reality I discovered is that the greater the payout, the greater the risk. Quite simply put, the opportunities I saw that had enormous potential to put large amounts of money in my pocket had a proportional chance of not only not profiting me, but also setting me back.

Is it all doom and gloom?

Not at all. The last reality I found was that every person has a tolerance for risk, though the level of risk varies wildly from person to person. But every person also has the ability to shape their own path to get it paved, to some degree, down the road.

As an example, my own risk tolerance is quite low when it comes to personal finances. I have responsibilities to my family, and so cannot (in my opinion) risk that responsibility even against a large payout. That being said, when an opportunity knocks, I can still recognize the opportunity and attempt to take advantage of it while at the same time mitigating whatever risk might be inherent in that opportunity.

In particular, I had an idea for several websites and applications. If I was more risk prone, I might have moved toward working on these applications full-time, and hope for the eventual payout. I might have borrowed money from the bank, or family and friends, to finance my dream of turning these ideas into a steady source of income.

I decided to take a different path. I continued at my day job. I did the occasional work for clients, sometimes more, sometimes less. But I also worked on my idea in the stolen minutes and hours in between my other responsibilities.

  • I did my own legal research as needed.
  • I did my own marketing plans.
  • I did the software development.
  • I used freely available templates for their graphics.
  • I looked into different payment structures.

What I did, in essence, was reduce the risk by doing as much as I could, when I could. As a result, the projects have been moving slower than they might have otherwise progressed. It will take me significantly longer to launch, increasing the risk that someone will beat me to it. But this is a risk I can accept, and I’m enjoying the journey.

Rewards will come, of that I am sure. When? Perhaps this month, perhaps this year, perhaps this decade (that was a depressing thought). The reward will in some way be proportional to the risk it took to get it. The delay in reaching my goals can perhaps reduce the ultimate reward. But at least I have enjoyed the journey will striving for the big reward, and that too is a reward.

You Need to Communicate

Earlier this week, I noted that I had written my 200th article for this site, despite the fact that I’m not a writer. While in school, I always enjoyed writing, but I have never studied the art and science of communicating. In hindsight, this is regrettable, as I have discovered since graduating university that the skill most in demand is the ability to communicate effectively, in all forms.

Looking at every industry (I used a naughty word there – please forgive me for generalizing), there is the need for communication in one form or another. A graphic artist must communicate with her clients to understand their needs and wants. An employee must communicate with his manager to understand what is expected of him. A cashier must communicate with customers to ensure good service.

The form of communication, however, will differ from one area of life to another, from one type of work to another. What is perhaps a necessity in communication for one person could be of no use to the next person. A singer must be able to communicate through music, but this skill is not a requirement for a computer programmer such as myself. Reversing that, I must be able to communicate effectively through code, something a singer would perhaps find to be of no use to them.

Additionally, effective communication is needed in all directions. While a manager must be able to coordinate their team to bring success to their projects, requiring good communication skills, the various members of the team must also be able to communicate effectively. The reason for this is simple – not everyone can communicate effectively, but having a few individuals on a team who are able to communicate well can decrease the impact of the other individuals on the team who cannot.

In your field, what forms of communication are considered to be the most valued? Written? Oral? Some other form? What are you doing to increase the effectiveness of your ability to communicate?

Technology Consultants

I’ve been touching on this subject on occasion, perhaps because this is the premise behind my business, but also because I’ve seen several business cripple their own ability to grow due to a lack of foresight in this area. Several people have debated this concept with me, and I’ll let you judge for yourself.

The statement that triggered each of the various discussions was as follows:

Every business needs a technology consultant.

Elie Kochman, April 2010

This statement triggered a variety of reactions, one of which caused me to rephrase my statement for the sake of clarity:

Any business needs a technology consultant.

Elie Kochman, April 2010

The change serves to acknowledge the fact that a particular business may not require this, but it will not be because of the industry or field, but because of some other factor. As an example, the second statement says that flower shops need a technology consultant, but John’s Flower Store might not.

The question that has not yet been answered, though, is why?

Other Services

Businesses have an accountant on retainer, because in the long run, the business will get better advice for financial issues from an accountant who understands the history of the business as well as its current structure. Additionally, long-term plans can be made for tax planning purposes that could only be done by someone who truly understood the business.

Lawyers operate in a similar manner – certain legal work could possibly be done by anyone, but a lawyer who understands his client’s history, current situation, and needs, can provide better service.

Technology

In technology, there are two very fundamental divisions of work done on behalf of clients. The first, which most clients are well aware of, is implementation. The second, perhaps less well-known aspect to technology work, is strategy and planning.

Implementation is as simple as the definition of the word – the client knows what they need/want, and they pay someone or a company to make it happen. For example, the client decides their website needs a complete makeover, and they want to do a full re-branding. They can find a company that does this kind of work, and get it done.

Strategy and planning goes further than that, and is provided by some technology-based companies. This work is less about the implementation itself, and more about determining what needs to be implemented at all. The planner will look at the business, what it does, its history, its current situation, what technology and processes are already in place, and then, based on that information, help the business reach its goals (usually a combination of reaching more customers, selling more products, providing better service).

Why it Matters

The most common argument I’ve heard to paying a technology consultant is that they don’t provide any real value to their clients. Sure, they can help figure out that you need CRM software, and even suggest a particular package, but often, this work will be done by someone else, who probably could have made the same decision.

This notion, however, is flawed, because it assumes that an IT consultant doesn’t do implementation. While there are certainly examples that validate this assumption, there are also many consultants who do provide both strategy and implementation. The difference, however, is the focus of their business.

A company who’s focus is about what they can build and create may provide extraordinary implementations. As an aside, they will help you figure out what it is you need. However, because their company specializes in a particular sub-field of IT, they will be concerned with that area more than any other.

On the other hand, an IT consultant has equal concerns for all areas of technology as it relates to your business. Additionally, they understand how businesses work, and spend time learning how your business in particular operates. This diversity of specialties means that your business ends up getting all its needs filled in harmonization with one another.

In fact, you can take the advice provided by an IT consultant and hire your own implementers directly. However, using the consultant to help in this area also ensures that the strategy is played out to completion, and all the pieces fit together smoothly. They will often have a large network of qualified providers, with whom they can get work done at a competitive rate, to which you can now get access.

Any Other Reason?

If you are not yet convinced, here’s another reason that an IT consultant provides ongoing value to your business.

Knowing the structure of your business and technology means that when new technologies become available, there is someone out there who is already thinking about how to apply it to your business in particular. Sitting down to meet once every 3, 6, or 12 months can make sure your business is adopting appropriate technologies as soon as possible.

Your accountant looks over your business at least once a year, and can help you plan forward. If you’re incorporated, you lawyer likely updates your minute books on an annual basis as well. You visit the doctor once a year (at least, some of us do) for a checkup. Visiting your IT consultant is exactly the same – it provides you with updated information appropriate to your business on an ongoing basis.

How about You?

What is your opinion? Do you see value in having such a consultant on retainer? Did I miss some points? Or perhaps you disagree completely – I’d love to hear back from you.

Milestones

This is the 200th article on this site, which makes it the topic of today’s article – milestones.

Back in January, I started a schedule of posting 3 articles per week, Monday, Wednesday, and Friday. Then, at the end of February, I merged another blog with this one, and increased my publishing frequency to 5 times per week. I have surprised myself by not yet missing a post.

To be honest, when I started the publishing schedule, I didn’t know what I was going to write about in the long-run. While I had many ideas for articles, I didn’t know if I would reach the point of having written 200 articles and going strong. My goal, at least back when I started scheduling posts, was to settle into the schedule, and to reach this stage of having written so much.

What goal was it that brought me to the point of being able to make the statement I write, but I’m not a writer and to have 200 articles published? Why do I bother with all this effort or writing 5 articles every week?

In the article I wrote for WordTree a little while ago, I discussed the reasons that I write and how, over time, it’s the general writing that brings me success, though not any one article or post in particular. Based on that, it would appear that my goal is to attract new clients through my writing.

However, writing 200 posts is really a milestone, because I have now written a sufficient quantity to evaluate what it is I am doing with my site and business.

This is, in fact, the reason to use milestones in the first place. Each milestone provides an achievable goal, and, once reached, can be used to evaluate how past accomplishments are helping you to move forward. Below is my own analysis of my personal achievements, and how they fit into my current goals.

Goals

My personal goals, when it comes to the consulting I do, are:

  • to be recognized as knowledgeable in the area of technology as it relates to running a small to medium-sized business;
  • to provide quality advice and service to my clients;
  • to be self-sustaining with both recurring revenues from existing clients and a constant influx of new clients.

This Site

This site helps me reach these goals, though not directly. I don’t get clients directly from the site, nor does it provide me with any real form of revenue. What it does do, however, is assist me in establishing credibility with potential clients. In that, I believe, this site has been a success, and is why I will continue to write articles at the same intensive pace.

Next Steps

The next milestone for this site is not about content, but about context. The content will continue to be expanded on, and extended to new areas. However, my next milestone is regarding the people I meet through my posts.

I’m now looking to establish clients directly through the content on this site, whether by having readers contact me (which has already happened) or by sending prospects to read up on specific articles I’ve already written that would be of interest to them. While I have not yet determined how to quantify success in reaching this “milestone”, it is a short-term goal that provides me with something to strive for in the next several months.

Explosive Growth

Running a business can be incredibly complicated, especially during a growth phase. As the owner, you have multiple demands on your time and attention, such as:

  • Answering customer questions
  • Reaching out to new clients
  • Dealing with legal and financial issues
  • Working with employees
  • Managing cash flow

If you want your business to grow exponentially, all of these will require some of your attention. The problem, though, is that there are not enough hours in the day to deal with all these issues. Some of these, however, are more important to your business’ ability to undergo explosive growth than others.

I was reading an article the other day in which the author discussed why it’s hard to get investors into a business which provides hourly services. The basic issue was growth and expansion – the business would only be able to grow by hiring more people to bill hours. If there’s little to be levered, then there’s little to invest in.

This is a function of the same issue as how you grow your business, which comes back to the question of what your business priorities are.

If your business is involved in distribution, then the cap on your business is how many customers you can reach for as small an investment as possible. If you manufacture a product, then the cap is the production limit. If you’re in a service based industry, then the cap is the amount of service you can provide for a single time-investment.

Work Once, Get Paid Often

Think about the author of a book. They spend hundreds or thousands of hours writing their book, and then sit back and collect money as copies are sold. Once the initial job of writing is done, further time investment is not needed to get paid again. (For argument’s sake, I’ll ignore book tours, speaking engagements, and so on.)

In your business, you want to do something similar. You need to make it a priority to develop something reusable. Maybe it needs to be customized, but the core of the work can be reused as often as you want. As an example, if you develop some software, you want to be able to sell the same program to many customers. Since you can charge the same amount for the 100th copy of the program as you did for the first, the only remaining cost is customer acquisition.

Customer Acquisition

The one cost your business will always have is how it attracts customers. Whether you are paying for advertising, pushing your website through SEO, or cold-calling prospects, there will be some cost to acquire a new customer. In the perfect business, this is your only cost.

In the previous example of writing a program, the cost to distribute the new program is negligible. Finding a customer, however, can cost significant amounts of money or time. As such, another priority of your business is to reduce that cost as well, and to find ways to leverage your current customers to make future sales at a reduced cost.

Priorities

The priorities of your business are therefore two-fold. You need to leverage your business to bring down costs, both by reducing the cost associated with each sale or service provision, and by reducing the cost of customer acquisition. Only then will your business be able to undergo explosive growth.

Breaking into the Vault

Every so often, an article will appear with a title along the lines of “Customer data stolen from Corporation X – thousands of records released”. The article will then go on to explain the type of data, whether it was encrypted, and the means by which is was taken (for example, a hard-drive was stolen, but the drive was encrypted, and it only contained mailing addresses).

As a business owner, these articles should be of major concern. Your clients entrust you with some of their information, starting with their contact information. That trust can prove to be fatal to your business if you don’t take the proper precautions to prevent the data from falling into the wrong hands. The problem, however, is that you do need to be able to use the information, as do your employees.

The question then is, how can you balance the need to access secure information against the need to secure the information against access?

Prevent Access

The first model of protection is to place the data in a location that is difficult to access. This is similar to the construction of a moat around a castle, placing slits for archers in the outer walls. The idea here is to make it as difficult as possible for someone to get into the castle, or, in the case of your data, as hard as possible to reach the files.

The problem, however, is what if an attacker does manage to get into your castle.

Prevent Escape

Preventing escape is a little different. I’ve walked around a few castles, and one of the things I’ve noticed is that there are rarely any direct routes out of the castle. It’s easy to take a wrong turn and spend ten minutes figuring out where you are. Those familiar with the castle can quickly cut off escape routes, preventing items from leaving the secured location.

Your data is no different. You can design your security in such a way that removing it becomes a time-consuming process for anyone unaware of the proper ways to do it. This won’t hamper your employees, who know how to access the information, but trying to hack your way out can be made like trying to navigate the outer walls of a castle.

There’s still a problem, however, in that there is still a legitimate route in and out, and often it is not an outsider who leaks data, but an (ex)employee.

Track Access

The last step is to track all legitimate access to secure data. Every id that can access your data should be owned by a single person, and every time data is accessed, a note should be made elsewhere of the time and date of access, the user who accessed it, and where the access was done from. This information should not be accessible to any of the users of the system, and should be backed up independently on a regular basis.

In this case, the message being sent to those with legitimate access is that you might not be able to prevent them from taking the information, but if their id is used to do something like that, you’ll know about it.

Summary

When protecting data, you need to have all three elements of defense. You need to make it hard to get in, hard to get out, and hard to do either anonymously. A failing in any one of those three areas can expose you to risk of losing both your clients’ data and their trust.

When the Fans Hate You

I went to the home opening game for the Toronto Blue Jays a few days ago, and experienced something interesting. A player who had formerly played for Toronto was at the game playing for the Chicago White Socks – Alex Rios. He came to bat 5 times during the course of the game, and each time, he was booed by a significant number of fans.

The stadium was full, with about 46,000 fans in attendance. When Alex came to bat, they all shouted at him. As a Canadian, the level of emotion driving at Alex astounded me – where were the stereotypical pleasant Canadians hiding during these outbursts? Why were the fans so bothered by Alex’s presence on the opposing team? Playing baseball in the Major Leagues is a profession, not a hobby, so why would anyone expect team loyalty from the players?

The more I thought about it, the more I realized this is like developing a product in business, and your customers all shouting at you that they hate the product. In business, this is a good thing – your customers care enough to complain. In fact, if your customers are not complaining, you have to wonder if perhaps you’re connecting to them at all. Silent customers don’t help you improve your product – it’s the one’s who complain that get the new features they want added.

Much like what was happening to Alex Rios. Sure, the fans felt betrayed that he left “their” team. But the reason that they booed so loudly was because they never had wanted him to leave – deep down, they wish he still played for Toronto. (I’m sure there are fans who will disagree with my assessment. If you’re one of them, please answer the question as to why you booed so loudly if you’re happy he left Toronto.)

In my business, I’ve had customers complain, and customers quietly accept whatever I tell them. Honestly speaking, the one’s who complain usually end up with better service – because they tell me what they want or need! If all my customers were vocal in their satisfaction with my work, they would all get better service. But I can only fix what my customers tell me about (okay, that’s a bit extreme, but you get the gist of my point).

My Business and Homemade Liqueur

Sunday evening I decanted a couple bottles of coffee liqueur which I had made several months earlier. It’s been 18 months since I made my first batch, and I reflected on the fact that my business is quite similar to the process of making a bottle of homemade liqueur.

Experiment

First, there’s the fact that making the liqueur involves a significant amount of experimentation. I started off with a recipe, but when making each batch, I try something a little different, to see if I can get my recipe even better. I taste a batch, and find it too sweet, so in the next batch, I reduce the sugar. Or maybe there’s not enough vanilla, so I add a small amount of extract to each batch.

Business is like that too. You can take a formula for a successful business, but then you tweak it. You try a different advertising campaign, and measure the results. You stock different products, offer different specials. Eventually, you’ll find something that works for you. It may have started with a recipe, but the end result is far different from the description in your downloaded business template.

Iterate

Each time I make my liqueur, it takes between 3 and 6 months before I’ll know how it came out. After I make each batch, I wonder if I got it right, but I wait to see how it came out before trying something different. Occasionally I’ll make a couple batches at the same time, each slightly different from the other. But then I wait for them to be ready before trying something else.

In business, when you experiment, there’s a period of time before you’ll know whether your attempt was successful. While you may be tempted to try different things at the same time, you need to be able to measure your success with each experiment, so you can figure out what works and what doesn’t.

Wait

After making each batch of liqueur, I need to wait until it’s had a chance to settle, for the flavors to blend properly. I’ve tried sampling it too early, and it can spoil an entire bottle by opening and decanting too early. Trying something in business is the same – sometimes you need to let things run their course before trying to measure their success. Measuring the success of a 2 year plan after 6 months won’t get you accurate results.

Document

How do you know what works? As I bottle each batch of liqueur, I write on the bottle exactly what I tried in that batch. When I open the bottle several months later, I make sure to copy those notes so that I can apply what I learned from that batch. Last, I include my tasting impressions with the notes on the recipe so that I can reproduce a particular taste.

In business, if you don’t write down what you did and what happened, you’ll have a hard time reproducing certain results. Not only that, but you risk deluding yourself later on into thinking that a particular experiment had better results than it actually did. If you try to reproduce the event, you’re more likely to end up running a new experiment rather than doing something tried and true.

Summary

A business can be started with a recipe, but like many things homemade, the recipe gets changed to suit your personality. You’ll also try things, and, if you do it right, will have other people asking you what your secret recipe is for success. Why not be able to give it to them?