Lights are on in Dragons' Den

This week on Dragons’ Den on CBC the deals returned to normal – entrepreneur comes on the show, demonstrates his product, and leaves with a deal. Or perhaps, it wasn’t quite that simple.

Lightbulb in Pina Colada

Courtesy of WarriorWriter on Flickr.com

Robert Simoneau of Saint Laurent, Quebec, came on the show representing his company, Posilight. His company has developed a product which, if not completely innovative in nature, has an interesting application. They manufacture light bulbs for refrigerators in stores which use a large number of LED lights to provide directed light with higher energy efficiency. He had, at the time of the show, secured trial runs in two large grocery stores.

He was asking for $75,000 for a 10% stake in his company. Jim Treliving, thinking of his company Boston Pizza, commented that merely using the efficient lighting in his stores could recover the full investment in a single year. Robert Herjavec, though, couldn’t get excited about a light bulb, and bowed out.

Kevin O’Leary, acting typically aggressive, tossed an offer on the table. Trading equity for royalty, Kevin offered to invest for an 11.5% royalty until the investment was paid back, reducing to 5% thereafter. In addition, there would be 1% equity. Jim quickly offered to join him, followed by Brett Wilson.

With three of the Dragons in on the deal, Robert Simoneau tried to get Robert and Arlene Dickinson to join the deal. However, Robert was not interested. Arlene, however, decided that this would pose an interesting marketing challenge, and liked the idea in general, and so she tossed her hat into the ring. That put 4 dragons together on a deal which was rapidly accepted.

What’s interesting about this deal is the nature of the product that caught the interest of 4 dragons. The product doesn’t have to be exciting. It doesn’t have to be a market leader. It just has to strike the right chord with the investors. Having solid numbers behind you when presenting make it easier to seal the deal.

Business is Business – Take it Personally

To anyone who thinks that I am referring to something they said or did, be aware that the incident triggering this article did not, in fact, involve me in any way. A story was told to me in which some of the topics in this article were brought up, and I therefore decided to write this.

It’s been a crazy week, and not just for me, but for many of the people with whom I have contact with on a daily basis. One of the common themes of this week made me think of a saying: Business is business.

Business is Business

Courtesy of T-KONI on Flickr.com

I suppose what that saying is to be interpreted as is that when it comes to business, it’s not about the people involved. What matters is the context and the content – the participants, however, can be swapped around without any implications (okay, maybe not, but you get the point). We’re told not to take such things personally – it’s about business.

In reality, few people can actually deal with business this way. At some level, there is still personality involved – and there needs to be. A motivated and driven person will interact differently than someone complacent. If you compare two such people in similar situations (professional of course) you will see them act differently. The personality of the people involved is what makes and breaks deals.

What this also means is that what is said in a professional environment will ultimately be taken personally. Whether that impacts the context is not relevant – regardless, it has had an effect on the two (or more) people involved and their ability to interact.

For this reason, it is crucial that despite the saying that business is business, one needs to be cognizant of the potential ramifications of the things they say, and how they might be perceived by someone else. This is the reason that we are also told to act like professionals – always be polite (even, or especially, when we don’t want to), always stick to the subject at hand (even if the person did talk about you at the water cooler last week), always give the benefit of the doubt.

Site Review: Alltop

I recently had my site added to Small Business on Alltop (scroll down to the bottom – I’m not the last site on the page, but close). This got me thinking about the concept of the site itself, and what it represents.

Alltop, all the top stories

First, for those of you who don’t already know, Alltop is essentially an online magazine rack that displays the latest 5 posts from each magazine (a.k.a. website or blog) in the selection. Those sites are organized by category, and there are thousands available to choose from. You can make a custom page that includes those sites that you’re interested in from the selection available, so that you don’t have to keep searching for them.

In some sense, you might call Alltop a big RSS reader with twist – each feed has been manually reviewed to ensure that it fits within the scope of the site. Yes, you could build your own, and it might not even be that hard – but Alltop is already there, someone else’ responsibility to keep it working, and works really well!

What’s the revenue model? It’s actually quite simple – advertising. Alltop is ranked just over 2,700 according to Alexa globally, so they have more than enough traffic to make this a viable model. There are over 750 topics, each with its own page with available advertising. On the Small Business page, for example, there are 2 large advertising blocks currently populated. A quick look at their advertising page reveals that they accept two sizes of ads, but no pricing information.

Unfortunately, at the moment you’re limited to seeing sites that have been already approved for Alltop in your personalized page. However, you can always submit another site for consideration, and the current selection is quite diverse.

The one other feature that seems to be missing is the ability to search for a particular site. For example, despite the fact that the title of my blog is listed as “Elie Kochman on Business and Networking”, searching for Elie does not turn up any results.

All in all, a great website, with a couple of additional features that may eventually make their way into the site.

Avoiding Layoffs at All Times

I was reading an interesting pair of articles on CNN (here and here) regarding 15 companies which have, despite poor economic conditions, managed to avoid laying off any members of their workforce. The stories were varied from one another, but there were still some common ideas behind all 15 companies.

You're fired!What struck me as being most interesting about these companies was the fact that it was recognized that a company’s most valuable assets are not any hardware or equipment it may own, but the people who work there every day. For that reason, these companies have looked to cut expenses in areas other than headcount.

The result of this is increased loyalty – in one case (NuStar Energy) employees showed up to work the day after a hurricane wreaked havoc on their city, destroying the homes of some employees. The employees are loyal to their employers, and will therefore go to greater extremes to help the business survive.

Investing in your employees is the only way to gain permanent loyalty. No, you don’t need to pay them more (another company froze merit-based pay increases for 6 months and still made the list of 15). But you do need to demonstrate that keeping the employees productive is important.

Another example is Mercedes – the car manufacturer’s CEO and executive team (28 people) took a salary reduction in order to avoid layoffs. This was following other reductions to costs, resulting in a stronger company in which the employees are loyal to the company, and costs have been brought under control.

What these companies demonstrate is that even in tough times, it is not necessary to reduce headcount in order to survive. Other costs can be reduced, employees can have their workloads redefined to make them more productive to the bottom line. When the economy rises, the companies that managed to maintain the loyalty of their employees will find themselves much better positioned to grow in the new economy.

Collecting Accounts Receivable

A while back, I wrote an article about Managing Accounts Receivable, focusing on management from the perspective of growth of a business. In today’s article, I’m going to discuss collections and getting paid for the work you’ve done.

In order to give yourself the best possible chance of being able to collect, you need to ensure that you have a clearly worded contract, in which it is outlined what you are to deliver to the client, the amount to be paid by the client, and how and when that money is due. In case of dispute, such a document will play a crucial role in determining whether or not you can collect your money.

Collecting moneyAssuming you have such a document, and the client is not making the proper payments, you should attempt to open communication by asking the client, politely, why the payments have not been made.

It may be an honest error (in one case, the client had assumed an invoice I sent him had been copied to his bookkeeper, when in fact it hadn’t been). In that case, the question regarding payment can be quickly resolved.

It might be an issue of timing – the client was deferring payment for cash flow reasons, and had forgotten to inform me that the payment would be late.

It could be related to cash flow and ability to pay – the client might not have the funds to pay the invoice, and is embarrassed to discuss it. In that case, by opening conversation, you can work out an alternate payment schedule to ensure you get paid.

Last, it could be that the client has no intention of paying. If this is the case, regardless of the reason, you need to look to other options other than merely talking to the client. (You also need to get rid of the client – read my article Firing Customers for more information on that topic.)

First, you can choose to write off the money owed as a loss. While this doesn’t regain any of your money, it does keep you from having to pay taxes on that money, which at least keeps you ahead of any future expenses on that particular account.

Second, you can hand over the funds to a collections agency. The cost here is usually a percentage of the money recouped by the agency, often as high as 50% of the money paid. Going this route is often not worthwhile to small businesses, as it generates very negative views of your business in the eyes of potential clients.

Third, you can sue the client. Here in Ontario, if it’s a relatively small amount (as of this writing, the maximum is $25,000), then you can sue them in Small Claims Court, and you don’t need a lawyer. In this case, you may be given the option of seizing the assets of the client to pay for the amount owed. However, the amount of effort involved is significant, although the direct cost is not, since the client may be ordered to pay the court expenses if you win the case.

Whatever option you choose, and each case needs to be handled on its own, you need to remember to always act professionally, and to assume that every document and e-mail that you handle may end up one day in court. If you treat the client with respect, and give them alternatives to defaulting on payment, you may find it easier to get your invoices paid.

Firing Customers

Several months ago, I wrote an article The Customer is Always Right… Sometimes in which I discussed many of the reasons a business should be listening and obeying its customers, even when it seems to go contrary to what the business stands for. However, there are times when not only is it inappropriate to listen to the customer, you should also get rid of that customer as fast as possible.

The first example is where you sell a product, and on occasion, will be asked for a refund. While you need to have a clear refund policy, you also need to know when to give in and issue the refund anyhow. A customer who won’t be happy, and is out of pocket because of your business (whether reasonable or not) is capable of generating a lot of negative attention for your business. Issuing the refund to get the customer to leave you alone will often not only rid you of an annoying customer, but also generate positive feedback for good customer service.

OK, so the first example wasn’t really about firing customers, but about having good customer service. Here’s another example.

If you do work for a customer, and they don’t pay – get rid of them if you can. A good customer who can’t pay will be upfront with you about their situation, and try to arrange alternate payment schedules. A bad customer will keep taking work, thereby driving up their balance, and not mention that they cannot pay the bill. The problem with such customers is that many of them try to justify their position and explain that they don’t actually owe you the money. In other cases, they will ask for special treatment to get their bill reduced.

It is not in your best interests to do either. When you are out of pocket on a customer, and realize that you will have difficulty collecting, you need to stop. You need to stop working for the client, you need to stop arguing with them (and yes, such situations usually end up with grudge matches, often held through long sequences of e-mails) and you need to just issue a notice that payment is due.

Be polite. Tell the client that you will not be doing any more work for them until full payment is received. Give the client any outstanding material of theirs that they may not have (for example, if you’ve collected data as part of the project, send them the data – even if that’s not part of the contract). Tell them when you expect payment by.Tell them what’s going to happen if they don’t pay (for example, I’ll sue you for the shirt off your back!).

Here’s another example where it’s wise to get rid of a customer.

Sometimes the issue is not that the client can’t or won’t pay, but that the work being done does not match the work requested originally. In that case, if discussing with the client to resolve the differences doesn’t improve the situation, you may want to stop the project. If you do, then you can try referring them to someone else who can better serve their needs. As an example, if you run a business doing SEO and SEM work, but the project turns out to be website development, then you may want to refer them to a web development business.

Sure, you may lose the project as a result, even the parts that were your forte, but at the end of the day, you’ll have less aggravation as a result.

Dragons' Den Makes Business in Court

I was fascinated by this week’s episode of Dragons’ Den on CBC and the usual two deals that were struck. No, the first deal wasn’t particularly unusual, as there was a solid business with sales that was looking to expand. The valuation was fair, and the royalty-based deal was fairly simple.

Patents and Money

Patents and Money

What was surprising was the second deal, which was not typical of the show, and the reactions of the various people involved was not surprising.

Richard Abramowicz of Yo Mama Gear came on the show asking for $3,300,000 for 30% of his business – in US dollars. His business model, however, had little to do with clothing or equipment (although that would turn out to be a part of the model).

Richard owned the patents and derivatives on the phrase “Yo Mama”, held here in Canada since 1988 and in the US since 1998. That means that anyone who uses the phrase is violating his patent – for example, Urban Outfitters, Zazzle, Cafe Press, and American Apparel. (His claims have not been verified, but those companies were the ones he mentioned on the show.) His business plan is to sue them for patent infringement.

Naturally, Arlene Dickinson was disgusted by the business model, and would have no part of it. Brett Wilson wanted no part of it, and neither did Jim Treliving.

Kevin O’Leary, however, loved the idea. Robert Herjavec talked about the technology sector, where this is a viable business model, and can be quite successful. (As an example, look at i4i and it’s case against Microsoft.)

The two of them decided to take the deal, but on very different terms. Kevin proposed that he pay $1.00 for 51% of the company, which would give him the ability to file suits against whoever violated the patents. Should those suits be successful, he would pay Richard from the proceeds of the case the balance owing: $2,999,999 US dollars.

This was an unusual deal, as the money is not made from the ability to sell or market a product or service, but from the ability to protect a patent – and in this case, the patent of a phrase that many people have been using for decades, unaware that it had been patented, or even patentable.

The Quick (but not Dirty) Guide to Online Marketing

Jason Clegg is an entrepreneur with over 5 years of experience building business and marketing on the web. He manages a full service Internet Marketing firm and writes about entrepreneurship and business topics at www.JasonClegg.com.

Growing your brandIf you know absolutely nothing or very little about marketing your business online, I’m here to help.  I’ve spent the past 6 years studying online marketing methods for small business owners and, frankly, I know what works.  The truth is lots of stuff works.  There are endless opportunities for bringing more people to your website.

Fortunately for you, I’m not going to waste your time in this guest post.  I am going to focus on just one tactic that you can start today and do absolutely free (or very cheaply) if you do it right.

As Elie has already pointed out on this blog, personal branding is absolutely critical for today’s small business owner.  In the online world, you create trust through one primary means – content.

Blogs are a testament to this fact.  Look around you.  Anyone and everyone is blogging.  Why?  It’s simple: Blogging helps you control your personal brand and builds more credibility with your existing and your potential clientèle.

But everybody’s blogging.  (I hope this includes you, of course!)

The strategy I want you to follow is sort of like blogging but, in some ways, even better.  It’s called article marketing.

Article marketing allows you to build a higher degree of trust and credibility by leveraging the already existing power and authority of very large content websites.

My absolute favorite is EzineArticles.com — this is the best of the best because they have a great relationship with Google and a very clear system for evaluating and publishing only the best content.

How to Start Article Marketing

In the steps that follow, I’m going to show you exactly how you can make use of EzineArticles.com to build your personal or business brand.  And here’s the good news — it’s not going to cost you a dime.

Step One – Setup Your Free Account

Go to EzineArticles.com and start your free account.  You don’t have to pay anything to submit content to their website.  You just have to follow the rules.

Step Two – Write an Article for Your Niche

If you’re selling dog training products, write an article about that.  If you’re a Public Relations expert, write an article about that.  Whatever it is that you do, create some content.  Just be sure that your article is 100% new and unique and is at least 400 words long.

Step Three – Publish Your Article at EZA

The process for submitting articles is easy.  Just login and click “Submit New Article.”  Then copy-and-paste your content into the fields.  Choose a category, add a brief summary, and voila!

Oh, just one more thing.  Be absolutely sure you make the most of that box they call the “Resource Box.”  This is where you’re going to include a little info about you and/or your business.  More importantly, this is where you get to include a link to your website.

Hit submit and you’re done.  The article reviewers will take a look at your submission and your article should be live within a few days.  If you have to make changes, they’ll let you know exactly what to change so you’re not left in the dark.

(NOTE: The *really* quick method for doing this is to hire someone to write your articles for you.  You can even pay a full service firm to submit too.)

Why Articles Are So Effective

Using EzineArticles.com is great because their articles rank high in Google.  These days it’s pretty tough to position a new website without using strategies like this to drive traffic.  In some cases, it’s basically impossible in the short-term.

But the greatest value you will take away from this process is an increased level of credibility.  By the time surfers click through to your website, they will have already established a relationship with you.  The chances of these visitors making a purchase or initiating contact on your website are much higher.

Give it a try.  I’m not saying article marketing is going to transform your business overnight, but it is without a doubt one of the fastest ways to get more exposure for yourself and your brand online!