If you build it, will they come? Here are the criteria you should meet if you're considering opening a second location.
After several steady years of operation and a progressively growing customer base, your first retail store is a hit, and you think you're ready to open up another one.
But don't rush in too quickly; not every second location is guaranteed the same success as the first. In fact, an existing location's current profitability has absolutely no bearing on the success of a second store. On ther other hand, companies with fairly small revenues—even unprofitable companies—have still managed to successfully expand.
So with that in mind, if your first location doesn't need to be über-successful, when is the right time for a business to consider another location? While there's no perfect time, there are a number of key variables that will ultimately decide whether or not the new venture will succeed.
1. Your existing location is running smoothly.
While the existing store doesn't need items flying off shelves it certainly helps.
"You want to have the operation fairly well-running, because companies trying to expand, especially when it's out of normal range—in other words, if you're opening up in another city—is one of the three or four main causes of a company going under," says Randy Moon, consultant and co-owner at RMoon Consulting, based in Dallas. "So it is a big decision."
The reason for ensuring a healthy first location before considering another is an issue of security. Opening a second location is much more involved than simply "expanding" the first store.
"You really have to look at the second location as a first location," says Mark Loos, consultant at Consulting Services Methodology in Laguna Hills, California. "It's got to be able to stand on its own. A lot of people don't look at what it takes to actually find the employees to support the location, the right insurance provisions, what kind of zoning they're going into, there are still a lot of things that are unknowns."
Loos recommends using the template from the first business to write a completely new business plan for your second location, but carefully checking each item to see if there could be any potential crossover—maybe you can use the same insurance company for both locations—to save more money. Otherwise, keep the books between the two locations separate or else you risk cannibalizing your existing business.
Dig Deeper: The Perils of Expansion
2. You have sufficient cash flow.
"Every small businessman is best off to use his own cash flow and to stay away from other people's money as much as possible," says entrepreneur and business consultant Adam Hartung, based out of Chicago. "There's a lot of places to go get other people's money. People go to banks, they go to [angel investors] like me, but when you do that, what's really hard for most owner-operators to realize is the rate of return that other people want."
Investors will typically ask for a 40 percent rate of return, but even if you manage to pay them back in full, they still own 40 percent of your company. Most banks, on the other hand, will only ask for 10 percent return on a loan.
"Obviously if you can get a loan [from a bank], and if something goes wrong, you file for bankruptcy," Moon says. "But you give up ownership and you're going to have the bank breathing down your throat."
"If you leverage to a bank, they're going to be looking at your accounts receivable, what you have in the way of debt collections, all the things tied to specific financial statements that are audit-able," says Loos. "So you have less room to play in that respect."
Loos recommends avoiding the banks "especially in today's times of over-conservative evaluations of loans," and instead recommends finding an angel investor, or someone who cares less about guidelines and payback and more about growing the business.
"Angels tend to put more skin in the game because they have more risk, but they also get a higher payout, Loos says. "But they also complement your risk strategy because as you move into a new location, you really don't know whether or not that location's going to achieve what it needs to achieve."
3. There's a current market trend.
"Let's say you have a business, and let's say you love tuning pianos. You're passionate about it, you love it, you're really good at it, but there's no big trend to it," says Hartung. "Opening up your second piano tuning shop just because you love it isn't going to matter because there's no trend driving people in the direction you're trying to go."
Whether or not you're passionate about your business, it's important to be realistic about the chances of a second store actually succeeding. The way to discover whether or not your business will prosper is to observe the market, research your competitors, and analyze the mood.
"If the market is headed in a particular way and what you're doing is fulfilling a market need, then you need to move quickly so that you can be able to establish your position," says Hartung. "When the trend is going in the right direction, you want to take advantage of that trend."
To figure out what the competitors in your market are doing—Are they investing in new trends or search terms?—check out Quantcast, Compete, or Spyfu. These services provide access to real numbers about important market data, including the number of monthly visitors for most websites, search terms that generate the most traffic, and advertising spending numbers.
4. You have a reliable person to run the second location.
Since opening a second location is actually more like starting up an entirely new business, Loos believes it's important that the owner is present during the early stages of the second location to help it launch.
"It's more beneficial for [the owner] to be at the new location because you want to start to identify what the challenges are early on, and if he can spot those, then he can take action to correct those," Loos says. "Having the new owner there really instills a sense that there's some importance for the success of that second location, and I think the new employees there also feel that as well."
Of course, Loos notes, "it depends whether or not you need to have local knowledge." If the business would benefit from someone who knows the area, the owner might consider handing off managing duties to a hire from within the new region.
"Great success happens when you adapt to the local market," Hartung says. "Depending on what you're doing, moving a few blocks away could have a local variation, moving the next town over could have a local variation."
If the second location is far from or inherently different than the existing store, then it's beneficial to gain as much local "tribal" knowledge as possible. However, if there's no radical change in demographics between locations, it's wise to let the owner guide the second shop's maiden voyage.
"Nobody's going to care about that new business like you," Moon says. "You're not going to be making money [at the second location] for the first six or seven months, and to entrust anybody to have the desire and drive that you have to make it successful, I think, is much riskier."
5. There's a region with unfulfilled demand for your product.
If you decide to open in an already-competitive region right off the bat, you have one of two choices: Hold your turf and try to drive the competition out of business, or move one or two towns over, get your old customers to come visit, and attract new local customers.
"You want to fish where the fish are—that's trends—but if you walk up to the pier and there's 700 guys shoulder-to-shoulder throwing a line out there, you'd may wonder if that's really where you want to go out to throw your line," Hartung says. "Or maybe you should try to find some fish somewhere else."
As head of development for the restaurant business of Pepsi Co., Hartung led the initiative for Pizza Hut's Home Delivery service. He was tempted to take the battle to Domino's Pizza, go into their areas and beat them at their own home delivery game, but he thought better of it.
"We opened 600 stores and they were all wildly profitable, and part of the reason was I just wouldn't open anything where [Domino's founder] Tom Monahan already had stores," Hartung says. "If Tom Monahan had already opened 15 or 20 Domino's, we could not compete. The guys that ran Pizza Hut couldn't believe this, and I'd say, 'Yeah, you can't.'"
Unless your company plans to be a radical "game changer," it's best to avoid opening a second location in areas of heavy competition. Instead, do some research, find a region that fits your geographic and demographic criteria, and find somewhere with few competitors so you have room to grow.
"It's wise to avoid competition, especially in the infancy, until you've grown to a number of locations and you're starting to grow economies of scale," says Loos.
Dig Deeper: 10 Tips On How To Research Your Competition
http://www.inc.com/guides/201108/when-to-open-a-second-location.html
8/22/11
5 Ways to Grow Your Business
Turn your customers into salespeople.
Customer referrals can be an effective way to tap into your current customer base and explore new revenue streams. Roku, a Saratoga, California-based company that makes a device that allows users to stream media to their televisions, understands this concept. Last year, the company introduced a refer-a-friend campaign where, for every friend you refer, your friend gets the lowest price on a Roku player and you get a free month of Netflix. "We knew we had an engaged customer base that was passionate about the product, and we wanted to tap into that," Lomit Patel, Roku's senior director of direct marketing, told Inc. magazine.
Learn how to delegate.
"As organizations grow increasingly complex, duties and responsibilities across the workforce can become less well defined," writes Robert Heller in How to Delegate. "Often it seems as though everyone is doing everyone else's job. Delegation is the manager’s key to efficiency, and benefits all." In other words, in order to scale the business, a CEO needs to learn how to delegate so he or she can focus on the company's bigger picture issues.
Develop new products.
Innovative companies understand that in order to grow, they must continue to develop new products and services. "No executive today is unaware of the strategic need for winning new products," writes Robert G. Cooper in his book, Product Leadership: Creating and Launching Superior New Products. "And so the pressure is on virtually every leadership team to deliver great new products. The new corporate motto is 'innovate or die.'"
Penetrate new markets.
The Obama administration has advocated for small businesses to push into global markets, and has set the goal of doubling U.S. exports by 2014. Today, only about one percent of small businesses export overseas. One of the biggest challenges for small companies wanting to export is communication, says Marc Meyer, a professor of entrepreneurship at Northeastern University. This is especially true in emerging markets like China where little is known about marketing and consumer culture. "These countries are fundamentally different from Western Europe and you need to go there and do your homework—learning the local selling culture, how your product will be sold and merchandised," he says.
Learn how to automate.
If too much of your time is being spent on tasks that could be automated, it pays to figure out a technological solution. Technology can empower your organization, helping you improve efficiencies and even expand operations," says Mike Gorsage, a partner and technology practice leader for Tatum. "But to use that technology well, you must balance your needs with the realities of how you do business. That means understanding not only which technology to invest in, but also how it will affect your operations and how to maximize your returns on that investment." —Eric Markowitz
http://www.inc.com/ss/5-ways-to-grow-your-business
Customer referrals can be an effective way to tap into your current customer base and explore new revenue streams. Roku, a Saratoga, California-based company that makes a device that allows users to stream media to their televisions, understands this concept. Last year, the company introduced a refer-a-friend campaign where, for every friend you refer, your friend gets the lowest price on a Roku player and you get a free month of Netflix. "We knew we had an engaged customer base that was passionate about the product, and we wanted to tap into that," Lomit Patel, Roku's senior director of direct marketing, told Inc. magazine.
Learn how to delegate.
"As organizations grow increasingly complex, duties and responsibilities across the workforce can become less well defined," writes Robert Heller in How to Delegate. "Often it seems as though everyone is doing everyone else's job. Delegation is the manager’s key to efficiency, and benefits all." In other words, in order to scale the business, a CEO needs to learn how to delegate so he or she can focus on the company's bigger picture issues.
Develop new products.
Innovative companies understand that in order to grow, they must continue to develop new products and services. "No executive today is unaware of the strategic need for winning new products," writes Robert G. Cooper in his book, Product Leadership: Creating and Launching Superior New Products. "And so the pressure is on virtually every leadership team to deliver great new products. The new corporate motto is 'innovate or die.'"
Penetrate new markets.
The Obama administration has advocated for small businesses to push into global markets, and has set the goal of doubling U.S. exports by 2014. Today, only about one percent of small businesses export overseas. One of the biggest challenges for small companies wanting to export is communication, says Marc Meyer, a professor of entrepreneurship at Northeastern University. This is especially true in emerging markets like China where little is known about marketing and consumer culture. "These countries are fundamentally different from Western Europe and you need to go there and do your homework—learning the local selling culture, how your product will be sold and merchandised," he says.
Learn how to automate.
If too much of your time is being spent on tasks that could be automated, it pays to figure out a technological solution. Technology can empower your organization, helping you improve efficiencies and even expand operations," says Mike Gorsage, a partner and technology practice leader for Tatum. "But to use that technology well, you must balance your needs with the realities of how you do business. That means understanding not only which technology to invest in, but also how it will affect your operations and how to maximize your returns on that investment." —Eric Markowitz
http://www.inc.com/ss/5-ways-to-grow-your-business
Entrepreneurs Most Valuable Learning Experiences
One of the reasons I love my job is having access to so many customers who are bright entrepreneurs. When you treat your customers like the gifted business people they are, you’ll be surprised how much they can teach you.
A few weeks ago I was curious to see what SurePayroll customers consider their most valuable learning experiences. For years, I’ve said the best learning tool is making mistakes — I even give one lucky employee an award for the year's best new mistake every year. After sending a survey about their most valuable learning experiences, I learned quite a bit from their real-life stories and what their experiences have taught them.
Many of their learning experiences fall into three main categories, ranging from practical office tactics to the philosophy of running their businesses.
1. Effective employee management is a must.
One of my customers summed it up nicely: “I have been in business for over 35 years, and I’m not sure any one experience is the most important. But one thing is for sure: Hiring the right people is critical to anyone's success.” I’ve learned over years that hiring is one of the most difficult aspects of running the show and that the overwhelming majority of my customers agree.
And they’ve also learned that part of having the right people is firing the wrong people, and doing so quickly. That may sound cold, but it’s a reality business owners need to face. A few customers discussed how they struggled in their first few years because they didn’t want to be the small business owner who fired people. Or they weren’t checking candidates’ backgrounds and references properly.
Once the right employees are on board, you have to communicate the vision of your company and make sure they’re aligned with it. And as tough as it sounds, you’re going to have to give your employees breathing room to do some things their way, and to make the occasional mistake. You can trust me that when employees aren’t belittled for making mistakes, it’s good for your business. But you don’t have to take my word for it — many of my customers feel the same way.
Employees want to work somewhere they feel welcome and appreciated – and like they can be themselves. As another customer said, “We all spend so much time at work, it is important to make it a fun environment. When people feel good, their work performance improves. It’s a win-win situation.”
2. Sales and marketing won’t take care of themselves.
Ralph Waldo Emerson is famous for a lot of good reasons, but he couldn’t be more wrong when he wrote “Build a better mousetrap and the world will beat a path to your door.” My customers agree that your mousetrap won’t sell itself.
Many SurePayroll customers started their own businesses because they loved what they were doing, and wanted to concentrate on it full-time and be their own bosses. Then they found out people weren’t beating paths to their doors, even though they offered top-notch products or services. They needed to spread the word via marketing and acquire new business by spending time on sales.
One of my customers learned this by accident, quite literally. After an injury took him out of commission from his carpentry, he needed to hire a replacement for six weeks. That’s when he discovered his strength wasn’t just in his carpentry but in promoting his business. He wrote that “There were plenty of competent carpenters willing and able to take my place as lead site carpenter. I focused my efforts on sales and marketing. Sales picked up significantly. My net income doubled in the span of a year and grew by 50% more the next year.”
Taking on sales and marketing yourself might not be the answer. If you want to stay focused on your trade, let someone else take care of it. The joy of owning your own business is that you can focus on your strengths and outsource your weaknesses, whether that means relying on services or hiring competent employees.
Even the carpenter-turned-salesman would have done it differently: “The next logical step in that duplication would have been to replace myself in my sales and marketing duties, too. Remember, the duplication of effort can be applied to all people in all positions performing all tasks. My end goal could have been to become CEO where all lower level tasks were delegated to highly qualified employees.”
3. You’re your own boss—and your own teacher.
Yes, hiring experts can help you grow your business, but at the end of the day, you’re the one who has to keep learning. As my customers can attest to, education covers everything from gaining new skills to realizing your limitations.
What’s the best place to begin your education? One customer offered a great starting place: “Read. Sounds simple, but it is one of the most important things a business owner can do to improve his or her business. While it is great to have a mentor, and I have many, books are portals to some of the brightest minds from our past and present.”
In addition to traditional education like reading and business school, many customers stressed the importance of on-the-job learning — taking on projects that require them to become experts. One customer wrote, “I had a client ask me to work on a project that required me to do educate myself about the details and the best way to accomplish the task. Rather than tell them, ‘No, I do not have those particular skills,’ I tell them, ‘I will look into it and give it a try.’ So far my clients have been pleased with the results, and I continue to learn and expand the services I can provide.”
Unfortunately, sometimes you learn the hard way. A few customers got caught up in the whirlwind housing market a few years ago before the crash, losing hundreds of thousands of dollars on their office space and housing purchases. Learning not to succumb to pressure is a hard pill to swallow, but an invaluable one.
http://www.inc.com/michael-alter/my-customers-3-most-valuable-learning-experiences.html
A few weeks ago I was curious to see what SurePayroll customers consider their most valuable learning experiences. For years, I’ve said the best learning tool is making mistakes — I even give one lucky employee an award for the year's best new mistake every year. After sending a survey about their most valuable learning experiences, I learned quite a bit from their real-life stories and what their experiences have taught them.
Many of their learning experiences fall into three main categories, ranging from practical office tactics to the philosophy of running their businesses.
1. Effective employee management is a must.
One of my customers summed it up nicely: “I have been in business for over 35 years, and I’m not sure any one experience is the most important. But one thing is for sure: Hiring the right people is critical to anyone's success.” I’ve learned over years that hiring is one of the most difficult aspects of running the show and that the overwhelming majority of my customers agree.
And they’ve also learned that part of having the right people is firing the wrong people, and doing so quickly. That may sound cold, but it’s a reality business owners need to face. A few customers discussed how they struggled in their first few years because they didn’t want to be the small business owner who fired people. Or they weren’t checking candidates’ backgrounds and references properly.
Once the right employees are on board, you have to communicate the vision of your company and make sure they’re aligned with it. And as tough as it sounds, you’re going to have to give your employees breathing room to do some things their way, and to make the occasional mistake. You can trust me that when employees aren’t belittled for making mistakes, it’s good for your business. But you don’t have to take my word for it — many of my customers feel the same way.
Employees want to work somewhere they feel welcome and appreciated – and like they can be themselves. As another customer said, “We all spend so much time at work, it is important to make it a fun environment. When people feel good, their work performance improves. It’s a win-win situation.”
2. Sales and marketing won’t take care of themselves.
Ralph Waldo Emerson is famous for a lot of good reasons, but he couldn’t be more wrong when he wrote “Build a better mousetrap and the world will beat a path to your door.” My customers agree that your mousetrap won’t sell itself.
Many SurePayroll customers started their own businesses because they loved what they were doing, and wanted to concentrate on it full-time and be their own bosses. Then they found out people weren’t beating paths to their doors, even though they offered top-notch products or services. They needed to spread the word via marketing and acquire new business by spending time on sales.
One of my customers learned this by accident, quite literally. After an injury took him out of commission from his carpentry, he needed to hire a replacement for six weeks. That’s when he discovered his strength wasn’t just in his carpentry but in promoting his business. He wrote that “There were plenty of competent carpenters willing and able to take my place as lead site carpenter. I focused my efforts on sales and marketing. Sales picked up significantly. My net income doubled in the span of a year and grew by 50% more the next year.”
Taking on sales and marketing yourself might not be the answer. If you want to stay focused on your trade, let someone else take care of it. The joy of owning your own business is that you can focus on your strengths and outsource your weaknesses, whether that means relying on services or hiring competent employees.
Even the carpenter-turned-salesman would have done it differently: “The next logical step in that duplication would have been to replace myself in my sales and marketing duties, too. Remember, the duplication of effort can be applied to all people in all positions performing all tasks. My end goal could have been to become CEO where all lower level tasks were delegated to highly qualified employees.”
3. You’re your own boss—and your own teacher.
Yes, hiring experts can help you grow your business, but at the end of the day, you’re the one who has to keep learning. As my customers can attest to, education covers everything from gaining new skills to realizing your limitations.
What’s the best place to begin your education? One customer offered a great starting place: “Read. Sounds simple, but it is one of the most important things a business owner can do to improve his or her business. While it is great to have a mentor, and I have many, books are portals to some of the brightest minds from our past and present.”
In addition to traditional education like reading and business school, many customers stressed the importance of on-the-job learning — taking on projects that require them to become experts. One customer wrote, “I had a client ask me to work on a project that required me to do educate myself about the details and the best way to accomplish the task. Rather than tell them, ‘No, I do not have those particular skills,’ I tell them, ‘I will look into it and give it a try.’ So far my clients have been pleased with the results, and I continue to learn and expand the services I can provide.”
Unfortunately, sometimes you learn the hard way. A few customers got caught up in the whirlwind housing market a few years ago before the crash, losing hundreds of thousands of dollars on their office space and housing purchases. Learning not to succumb to pressure is a hard pill to swallow, but an invaluable one.
http://www.inc.com/michael-alter/my-customers-3-most-valuable-learning-experiences.html
8/18/11
Mind Control: Why the Power of Suggestion Works
Consumers don’t always behave rationally when it comes to how they spend their money, a fact that marketing firms have been trying to exploit for decades. Of all the tools in their marketing toolbox, one of the most effective is the power of suggestion: If an A-list celebrity uses a product, it must be good.
A new study in the Journal of Consumer Psychology investigated how the psychology of suggestion works based on a series of experiments. Here’s what they found:
The right suggestion can make products seem more valuable
By associating certain concepts with a product, it’s possible to manipulate a shopper’s assumptions about how valuable it is. Consumers who viewed images of Ferraris and antiques and then priced products that fell under either the category of “foreign” or “old,” tended to inflate the prices of the products they saw. Consumers who didn’t see the images tended to price the products lower.
Not all suggestions are created equal
Several experiments, including the one above, revealed that “foreign” and “old” tend to carry stronger value associations for customers than “domestic” and “new.” The strength of the association varied, too, depending on how much emphasis it was given.
To get a better understanding of how this information can be applied in the real world of marketing and advertising, BNET spoke with George Cook, professor of marketing at the Simon Graduate School of Business at the University of Rochester. Cook also spent 10 years in marketing and advertising at Ford Motor Company.
“It’s true that using foreign-sounding words and images in ads can increase consumers’ perceptions of the value of the product in the ad,” says Cook, although he admits that it’s not a one-size-fits-all approach. “Using association to sell products is most effective with luxury items, like jewelry and sports cars, when the utility of the product isn’t the primary focus of the consumer.”
One of the most effective ways to use association is to set a stage for your product. “In car ads, when you see a car driving down a European motorway with a voiceover in a foreign voice, that’s what’s going on,” explains Cook. “The marketers are creating a stage for the product.”
Right now might not be the best moment to explore this type of marketing — luxury markets took a huge hit during the recession and the audience for this type of ad has shrunk. “But the luxury markets are starting to show some early signs of recovery,” says Cook.
And when they do, it’ll be open season.
http://www.bnet.com/blog/smb/mind-control-why-the-power-of-suggestion-works/5269
A new study in the Journal of Consumer Psychology investigated how the psychology of suggestion works based on a series of experiments. Here’s what they found:
The right suggestion can make products seem more valuable
By associating certain concepts with a product, it’s possible to manipulate a shopper’s assumptions about how valuable it is. Consumers who viewed images of Ferraris and antiques and then priced products that fell under either the category of “foreign” or “old,” tended to inflate the prices of the products they saw. Consumers who didn’t see the images tended to price the products lower.
Not all suggestions are created equal
Several experiments, including the one above, revealed that “foreign” and “old” tend to carry stronger value associations for customers than “domestic” and “new.” The strength of the association varied, too, depending on how much emphasis it was given.
To get a better understanding of how this information can be applied in the real world of marketing and advertising, BNET spoke with George Cook, professor of marketing at the Simon Graduate School of Business at the University of Rochester. Cook also spent 10 years in marketing and advertising at Ford Motor Company.
“It’s true that using foreign-sounding words and images in ads can increase consumers’ perceptions of the value of the product in the ad,” says Cook, although he admits that it’s not a one-size-fits-all approach. “Using association to sell products is most effective with luxury items, like jewelry and sports cars, when the utility of the product isn’t the primary focus of the consumer.”
One of the most effective ways to use association is to set a stage for your product. “In car ads, when you see a car driving down a European motorway with a voiceover in a foreign voice, that’s what’s going on,” explains Cook. “The marketers are creating a stage for the product.”
Right now might not be the best moment to explore this type of marketing — luxury markets took a huge hit during the recession and the audience for this type of ad has shrunk. “But the luxury markets are starting to show some early signs of recovery,” says Cook.
And when they do, it’ll be open season.
http://www.bnet.com/blog/smb/mind-control-why-the-power-of-suggestion-works/5269
8/16/11
100 Things Your Kids May Never Know About
Audio-Visual Entertainment
1. Inserting a VHS tape into a VCR to watch a movie or to record something.
2. Super-8 movies and cine film of all kinds.
3. Playing music on an audio tape using a personal stereo. See what happens when you give a Walkman to today’s teenager.
4. The number of TV channels being a single digit. I remember it being a massive event when Britain got its fourth channel.
5. Standard-definition, CRT TVs filling up half your living room.
6. Rotary dial televisions with no remote control. You know, the ones where the kids were the remote control.
7. High-speed dubbing.
8. 8-track cartridges.
9. Vinyl records. Even today’s DJs are going laptop or CD.
10. Betamax tapes.
11. MiniDisc.
12. Laserdisc: the LP of DVD.
13. Scanning the radio dial and hearing static between stations. (Digital tuners + HD radio b0rk this concept.)
14. Shortwave radio.
15. 3-D movies meaning red-and-green glasses.
16. Watching TV when the networks say you should. Tivo and Sky+ are slowing killing this one.
17. That there was a time before ‘reality TV.’
Computers and Videogaming
18. Wires. OK, so they’re not gone yet, but it won’t be long
19. The scream of a modem connecting.
20. The buzz of a dot-matrix printer
21. 5- and 3-inch floppies, Zip Discs and countless other forms of data storage.
22. Using jumpers to set IRQs.
23. DOS.
24. Terminals accessing the mainframe.
25. Screens being just green (or orange) on black.
26. Tweaking the volume setting on your tape deck to get a computer game to load, and waiting ages for it to actually do it.
27. Daisy chaining your SCSI devices and making sure they’ve all got a different ID.
28. Counting in kilobytes.
29. Wondering if you can afford to buy a RAM upgrade.
30. Blowing the dust out of a NES cartridge in the hopes that it’ll load this time.
31. Turning a PlayStation on its end to try and get a game to load.
32. Joysticks.
33. Having to delete something to make room on your hard drive.
34. Booting your computer off of a floppy disk.
35. Recording a song in a studio.
The Internet
36. NCSA Mosaic.
37. Finding out information from an encyclopedia.
38. Using a road atlas to get from A to B.
39. Doing bank business only when the bank is open.
40. Shopping only during the day, Monday to Saturday.
41. Phone books and Yellow Pages.
42. Newspapers and magazines made from dead trees.
43. Actually being able to get a domain name consisting of real words.
44. Filling out an order form by hand, putting it in an envelope and posting it.
45. Not knowing exactly what all of your friends are doing and thinking at every moment.
46. Carrying on a correspondence with real letters, especially the handwritten kind.
47. Archie searches.
48. Gopher searches.
49. Concatenating and UUDecoding binaries from Usenet.
50. Privacy.
51. The fact that words generally don’t have num8er5 in them.
52. Correct spelling of phrases, rather than TLAs.
53. Waiting several minutes (or even hours!) to download something.
54. The time before botnets/security vulnerabilities due to always-on and always-connected PCs
55. The time before PC networks.
56. When Spam was just a meat product — or even a Monty Python sketch.
Gagets
57. Typewriters.
58. Putting film in your camera: 35mm may have some life still, but what about APS or disk?
59. Sending that film away to be processed.
60. Having physical prints of photographs come back to you.
61. CB radios.
62. Getting lost. With GPS coming to more and more phones, your location is only a click away.
63. Rotary-dial telephones.
64. Answering machines.
65. Using a stick to point at information on a wallchart
66. Pay phones.
67. Phones with actual bells in them.
68. Fax machines.
69. Vacuum cleaners with bags in them.
Everything Else
70. Taking turns picking a radio station, or selecting a tape, for everyone to listen to during a long drive.
71. Remembering someone’s phone number.
72. Not knowing who was calling you on the phone.
73. Actually going down to a Blockbuster store to rent a movie.
74. Toys actually being suitable for the under-3s.
75. LEGO just being square blocks of various sizes, with the odd wheel, window or door.
76. Waiting for the television-network premiere to watch a movie after its run at the theater.
77. Relying on the 5-minute sport segment on the nightly news for baseball highlights.
78. Neat handwriting.
79. The days before the nanny state.
80. Starbuck being a man.
81. Han shoots first.
82. “Obi-Wan never told you what happened to your father.” But they’ve already seen episode III, so it’s no big surprise.
83. Kentucky Fried Chicken, as opposed to KFC.
84. Trig tables and log tables.
85. “Don’t know what a slide rule is for …”
86. Finding books in a card catalog at the library.
87. Swimming pools with diving boards.
88. Hershey bars in silver wrappers.
89. Sliding the paper outer wrapper off a Kit-Kat, placing it on the palm of your hand and clapping to make it bang loudly. Then sliding your finger down the silver foil to break off the first finger
90. A Marathon bar (what a Snickers used to be called in Britain).
91. Having to manually unlock a car door.
92. Writing a check.
93. Looking out the window during a long drive.
94. Roller skates, as opposed to blades.
95. Cash.
96. Libraries as a place to get books rather than a place to use the internet.
97. Spending your entire allowance at the arcade in the mall.
98. Omni Magazine
99. A physical dictionary — either for spelling or definitions.
100. When a ‘geek’ and a ‘nerd’ were one and the same.
http://www.wired.com/geekdad/2009/07/100-things-your-kids-may-never-know-about
1. Inserting a VHS tape into a VCR to watch a movie or to record something.
2. Super-8 movies and cine film of all kinds.
3. Playing music on an audio tape using a personal stereo. See what happens when you give a Walkman to today’s teenager.
4. The number of TV channels being a single digit. I remember it being a massive event when Britain got its fourth channel.
5. Standard-definition, CRT TVs filling up half your living room.
6. Rotary dial televisions with no remote control. You know, the ones where the kids were the remote control.
7. High-speed dubbing.
8. 8-track cartridges.
9. Vinyl records. Even today’s DJs are going laptop or CD.
10. Betamax tapes.
11. MiniDisc.
12. Laserdisc: the LP of DVD.
13. Scanning the radio dial and hearing static between stations. (Digital tuners + HD radio b0rk this concept.)
14. Shortwave radio.
15. 3-D movies meaning red-and-green glasses.
16. Watching TV when the networks say you should. Tivo and Sky+ are slowing killing this one.
17. That there was a time before ‘reality TV.’
Computers and Videogaming
18. Wires. OK, so they’re not gone yet, but it won’t be long
19. The scream of a modem connecting.
20. The buzz of a dot-matrix printer
21. 5- and 3-inch floppies, Zip Discs and countless other forms of data storage.
22. Using jumpers to set IRQs.
23. DOS.
24. Terminals accessing the mainframe.
25. Screens being just green (or orange) on black.
26. Tweaking the volume setting on your tape deck to get a computer game to load, and waiting ages for it to actually do it.
27. Daisy chaining your SCSI devices and making sure they’ve all got a different ID.
28. Counting in kilobytes.
29. Wondering if you can afford to buy a RAM upgrade.
30. Blowing the dust out of a NES cartridge in the hopes that it’ll load this time.
31. Turning a PlayStation on its end to try and get a game to load.
32. Joysticks.
33. Having to delete something to make room on your hard drive.
34. Booting your computer off of a floppy disk.
35. Recording a song in a studio.
The Internet
36. NCSA Mosaic.
37. Finding out information from an encyclopedia.
38. Using a road atlas to get from A to B.
39. Doing bank business only when the bank is open.
40. Shopping only during the day, Monday to Saturday.
41. Phone books and Yellow Pages.
42. Newspapers and magazines made from dead trees.
43. Actually being able to get a domain name consisting of real words.
44. Filling out an order form by hand, putting it in an envelope and posting it.
45. Not knowing exactly what all of your friends are doing and thinking at every moment.
46. Carrying on a correspondence with real letters, especially the handwritten kind.
47. Archie searches.
48. Gopher searches.
49. Concatenating and UUDecoding binaries from Usenet.
50. Privacy.
51. The fact that words generally don’t have num8er5 in them.
52. Correct spelling of phrases, rather than TLAs.
53. Waiting several minutes (or even hours!) to download something.
54. The time before botnets/security vulnerabilities due to always-on and always-connected PCs
55. The time before PC networks.
56. When Spam was just a meat product — or even a Monty Python sketch.
Gagets
57. Typewriters.
58. Putting film in your camera: 35mm may have some life still, but what about APS or disk?
59. Sending that film away to be processed.
60. Having physical prints of photographs come back to you.
61. CB radios.
62. Getting lost. With GPS coming to more and more phones, your location is only a click away.
63. Rotary-dial telephones.
64. Answering machines.
65. Using a stick to point at information on a wallchart
66. Pay phones.
67. Phones with actual bells in them.
68. Fax machines.
69. Vacuum cleaners with bags in them.
Everything Else
70. Taking turns picking a radio station, or selecting a tape, for everyone to listen to during a long drive.
71. Remembering someone’s phone number.
72. Not knowing who was calling you on the phone.
73. Actually going down to a Blockbuster store to rent a movie.
74. Toys actually being suitable for the under-3s.
75. LEGO just being square blocks of various sizes, with the odd wheel, window or door.
76. Waiting for the television-network premiere to watch a movie after its run at the theater.
77. Relying on the 5-minute sport segment on the nightly news for baseball highlights.
78. Neat handwriting.
79. The days before the nanny state.
80. Starbuck being a man.
81. Han shoots first.
82. “Obi-Wan never told you what happened to your father.” But they’ve already seen episode III, so it’s no big surprise.
83. Kentucky Fried Chicken, as opposed to KFC.
84. Trig tables and log tables.
85. “Don’t know what a slide rule is for …”
86. Finding books in a card catalog at the library.
87. Swimming pools with diving boards.
88. Hershey bars in silver wrappers.
89. Sliding the paper outer wrapper off a Kit-Kat, placing it on the palm of your hand and clapping to make it bang loudly. Then sliding your finger down the silver foil to break off the first finger
90. A Marathon bar (what a Snickers used to be called in Britain).
91. Having to manually unlock a car door.
92. Writing a check.
93. Looking out the window during a long drive.
94. Roller skates, as opposed to blades.
95. Cash.
96. Libraries as a place to get books rather than a place to use the internet.
97. Spending your entire allowance at the arcade in the mall.
98. Omni Magazine
99. A physical dictionary — either for spelling or definitions.
100. When a ‘geek’ and a ‘nerd’ were one and the same.
http://www.wired.com/geekdad/2009/07/100-things-your-kids-may-never-know-about
8/15/11
5 Things Great Bosses Never Do
Deliver annual performance reviews. Annual or semi-annual appraisals waste everyone’s time. Years ago my review was late, so I mentioned it to my boss. He said, “I’ll get to it… but you realize you won’t learn a thing. You’ve already heard everything I will say, good or bad. If anything on your review comes as a surprise to you I haven’t done my job.” He was right. The best feedback isn’t scheduled; the best feedback happens on the spot when it makes the most impact, either as praise and encouragement or as training and suggestions for improvement. Waiting for a scheduled review is the lazy way out. Your job is to coach and mentor and develop — every day.
Say, “Look… I’ve been meaning to apologize…” Apologies should be made on the spot, every time. You should never need to apologize for not having apologized sooner. When you mess up, ‘fess up. Right away. Don’t you want employees to immediately tell you when they make a mistake? Model the same behavior.
Hold meetings to solicit ideas. Many companies hold brainstorming sessions to solicit ideas for improvement, especially when times get tough. Sounds great — after all, you’re “engaging employees” and “valuing their contributions,” right? But you don’t need a meeting to get input. When employees know you listen they often bring ideas to you. Plus, the better way to ask for ideas is to talk to people individually and to be more specific. Say, “I wish we could find a way to get orders through our system faster. What would you change if you were me?” Trust me: Employees picture themselves doing your job — and doing your job better — all the time. They have ideas. Be open, act on good ideas, explain why less than good ideas aren’t feasible… and you’ll get all the input you can handle.
Create development plans. Development plans are, like annual performance reviews, largely a corporate construct. (HR staffers love to monitor compliance and alert managers when supervisors are late turning in their employees’ development plans. Or maybe that’s just my experience.) You should know what each of your employees hopes to achieve: Skills and experience they want to gain, career paths they hope to take, etc. So talk about it — informally. Assign projects that fit. Provide training that fits. Create opportunities that fit. Then give feedback on the spot. “Develop” is a verb that requires action; “development” is a noun that sits in a file cabinet.
Call in favors. I know lots of bosses who play the guilt game, like saying, “John, I’ve been very flexible with your schedule the last few months while your wife was sick… now I really need you to come through for me and work this weekend…” Generosity should always be a one-way street. Be flexible when it’s the right thing to do. Be accommodating when it’s the right thing to do. Never lend money to friends unless you don’t care if you are repaid, and never do “favors” for employees in anticipation of return. As a leader, only give — never take.
http://www.bnet.com/blog/small-biz-advice/5-things-great-bosses-never-do/3662
Say, “Look… I’ve been meaning to apologize…” Apologies should be made on the spot, every time. You should never need to apologize for not having apologized sooner. When you mess up, ‘fess up. Right away. Don’t you want employees to immediately tell you when they make a mistake? Model the same behavior.
Hold meetings to solicit ideas. Many companies hold brainstorming sessions to solicit ideas for improvement, especially when times get tough. Sounds great — after all, you’re “engaging employees” and “valuing their contributions,” right? But you don’t need a meeting to get input. When employees know you listen they often bring ideas to you. Plus, the better way to ask for ideas is to talk to people individually and to be more specific. Say, “I wish we could find a way to get orders through our system faster. What would you change if you were me?” Trust me: Employees picture themselves doing your job — and doing your job better — all the time. They have ideas. Be open, act on good ideas, explain why less than good ideas aren’t feasible… and you’ll get all the input you can handle.
Create development plans. Development plans are, like annual performance reviews, largely a corporate construct. (HR staffers love to monitor compliance and alert managers when supervisors are late turning in their employees’ development plans. Or maybe that’s just my experience.) You should know what each of your employees hopes to achieve: Skills and experience they want to gain, career paths they hope to take, etc. So talk about it — informally. Assign projects that fit. Provide training that fits. Create opportunities that fit. Then give feedback on the spot. “Develop” is a verb that requires action; “development” is a noun that sits in a file cabinet.
Call in favors. I know lots of bosses who play the guilt game, like saying, “John, I’ve been very flexible with your schedule the last few months while your wife was sick… now I really need you to come through for me and work this weekend…” Generosity should always be a one-way street. Be flexible when it’s the right thing to do. Be accommodating when it’s the right thing to do. Never lend money to friends unless you don’t care if you are repaid, and never do “favors” for employees in anticipation of return. As a leader, only give — never take.
http://www.bnet.com/blog/small-biz-advice/5-things-great-bosses-never-do/3662
8/11/11
What Business is Wall Street In?
May 9th 2010 11:36AM
My last two posts were designed to stimulate discussion. But lets talk the real problem that regulators, public companies, investor/shareholders and traders face. The problem is that Wall Street doesn’t know what business it is in. Regulators don’t know what the business of Wall Street is. Investor/shareholders don’t know what business Wall Street is in.
The only people who know what business Wall Street is in are the traders. They know what business Wall Street is in better than everyone else. To traders, whether day traders or high frequency or somewhere in between, Wall Street has nothing to do with creating capital for businesses, its original goal. Wall Street is a platform. It’s a platform to be exploited by every technological and intellectual means possible.
The best analogy for traders ? They are hackers. Just as hackers search for and exploit operating system and application shortcomings, traders do the same thing. A hacker wants to jump in front of your shopping cart and grab your credit card and then sell it. A high frequency trader wants to jump in front of your trade and then sell that stock to you. A hacker will tell you that they are serving a purpose by identifying the weak links in your system. A trader will tell you they deserve the pennies they are making on the trade because they provide liquidity to the market.
I recognize that one is illegal, the other is not. That isn’t the important issue.
The important issue is recognizing that Wall Street is no longer what it was designed to be. Wall Street was designed to be a market to which companies provide securities (stocks/bonds), from which they received capital that would help them start/grow/sell businesses. Investors made their money by recognizing value where others did not, or by simply committing to a company and growing with it as a shareholder, receiving dividends or appreciation in their holdings. What percentage of the market is driven by investors these days ?
I started actively trading stocks in 1992. I traded a lot. Over the years I’ve written quite a bit about the market. I have always thought I had a good handle on the market. Until recently.
Over just the past 3 years, the market has changed. It is getting increasingly difficult to just invest in companies you believe in. Discussion in the market place is not about the performance of specific companies and their returns. Discussion is about macro issues that impact all stocks. And those macro issues impact automated trading decisions, which impact any and every stock that is part of any and every index or ETF. Combine that with the leverage of derivatives tracking companies, indexes and other packages or the leveraged ETFs, and individual stocks become pawns in a much bigger game than I feel increasingly less comfortable playing. It is a game fraught with ever increasing risk.
The Pimco (who I think are the smartest guys on the Street) guys talk about a new normal as it applies to today’s state of the world economy. I think just as important is the new normal as it applies to Wall Street. Wall Street is now a huge mathematical game of chess where individual companies are just pawns. This is money in the bank for the big players like Goldman, Morgan, etc. Why ? Because the game of chess is far too complicated for 99pct of the institutions out there investing money. So to keep up, they turn to Goldman, Morgan and the like to invent products for them. “You don’t know how to play the housing boom, let us show you”. “You think the housing boom is about to crash, let us show you how to play that”. “You think that PIIGS are in trouble because they can’t print money to pay debt holders, let us create a product to allow you to play that game” The big houses have the best hackers in the business and they put together the games and sell them to the many, many institutions managing Billions and Billions of dollars. They are the ultimate Hackers selling their attacks to the highest bidder, regardless of which side they are on. That is a new normal.
Again, I’m not passing judgement one or the other. I’m just recognizing what is going on in the financial world today.
It’s rare for companies to go public these days. Just as rare for secondary offerings. The only thing that keeps me in the market is that most of the stocks (not all) pay dividends or some other sort of cash payout. For the first time in my life, I bought outside the United States. I bought Australia in a big way because it is becoming increasingly hard to find new domestic investments that are not influenced by the “hackers” and the games being played on a macro level. It’s hard to believe, but evaluating countries as an investment is now easier than evaluating companies. Even with all the unrest in Europe. Or maybe because of it.
So back to the original question. What business is Wall Street in ?
Its primary business is no longer creating capital for business. Creating capital for business has to be less than 1pct of the volume on Wall Street in any given period. (I would be curious if anyone out there knows what percentage of transactions actually return money to a company for any reason). It wouldn’t shock me that even in this environment that more money flows from companies to the market in the form of buybacks (which i think are always a mistake), then flows into companies in the form of equity.
My 2 cents is that it is important for this country to push Wall Street back to the business of creating capital for business. Whether its through a use of taxes on trades, or changing the capital gains tax structure so that there is no capital gains tax on any shares of stock (private or public company) held for 5 years or more, and no tax on dividends paid to shareholders who have held stock in the company for more than 5 years. However we need to do it, we need to get the smart money on Wall Street back to thinking about ways to use their capital to help start and grow companies. That is what will create jobs. That is where we will find the next big thing that will accelerate the world economy. It won’t come from traders trying to hack the financial system for a few pennies per trade.
And solutions won’t come from bureaucrats trying to prevent the traders from hacking the system. The only certainty when bureaucrats step in is that the law of unintended consequences will smack us all in the head and the trader/hackers will find new ways to exploit the system that makes them big money and even more money for the big institutions that develop products for the other institutions that are desperate to play the game.
Regulators have got to start to recognize that traders are not investors and vice versa and treat them differently. Different regulations. Different tax structure. Different oversight. Individual investors and the funds that just invest in stocks and bonds are not going to crash the market. Big traders who are always leveraging up and maximizing the number of trades/hacks they make will always put the system at risk. We need to recognize that they do not serve much of a purpose other than to add substantial risk to the global economy. That their stated value add of liquidity does not compensate the US and World Economy nearly enough for the risk of collapse they introduce into the system.
Wall Street as a whole needs to be in the business of creating capital for companies and selling shares to investors who believe they are shareholders. The Government needs to create incentives for this business and extract compensation from the traders/hackers for the systemic failure level of risk they introduce.
There will be another crash, because there are too many players looking for the trillion dollar score. They can’t all win, yet how many do you think wouldn’t risk everything, even what is not theirs, for that remote chance to score big ? Put another way, there is zero moral hazard attached to any trade. So why wouldn’t traders take the biggest risk possible?
Update at 10pm 5.9.10
One more consideration. If there are traders of any kind that are unregulated or unmonitored, and trade for their own account, how do we know how big they are and how much of a threat they pose to the system, individually and in aggregate ?. For any High Frequency or big leverage derivative folks out there- is it possible there could be firms that have billions at risk with questionable ability to make a margin call or fulfill their side of the trade if things went against them ? Could there be hidden AIGs that few people know about or a bunch of AIG like situations ,which in aggregate fail and put the system at risk ? I have no idea. Just asking the question.
http://blogmaverick.com/2010/05/09/what-business-is-wall-street-in
My last two posts were designed to stimulate discussion. But lets talk the real problem that regulators, public companies, investor/shareholders and traders face. The problem is that Wall Street doesn’t know what business it is in. Regulators don’t know what the business of Wall Street is. Investor/shareholders don’t know what business Wall Street is in.
The only people who know what business Wall Street is in are the traders. They know what business Wall Street is in better than everyone else. To traders, whether day traders or high frequency or somewhere in between, Wall Street has nothing to do with creating capital for businesses, its original goal. Wall Street is a platform. It’s a platform to be exploited by every technological and intellectual means possible.
The best analogy for traders ? They are hackers. Just as hackers search for and exploit operating system and application shortcomings, traders do the same thing. A hacker wants to jump in front of your shopping cart and grab your credit card and then sell it. A high frequency trader wants to jump in front of your trade and then sell that stock to you. A hacker will tell you that they are serving a purpose by identifying the weak links in your system. A trader will tell you they deserve the pennies they are making on the trade because they provide liquidity to the market.
I recognize that one is illegal, the other is not. That isn’t the important issue.
The important issue is recognizing that Wall Street is no longer what it was designed to be. Wall Street was designed to be a market to which companies provide securities (stocks/bonds), from which they received capital that would help them start/grow/sell businesses. Investors made their money by recognizing value where others did not, or by simply committing to a company and growing with it as a shareholder, receiving dividends or appreciation in their holdings. What percentage of the market is driven by investors these days ?
I started actively trading stocks in 1992. I traded a lot. Over the years I’ve written quite a bit about the market. I have always thought I had a good handle on the market. Until recently.
Over just the past 3 years, the market has changed. It is getting increasingly difficult to just invest in companies you believe in. Discussion in the market place is not about the performance of specific companies and their returns. Discussion is about macro issues that impact all stocks. And those macro issues impact automated trading decisions, which impact any and every stock that is part of any and every index or ETF. Combine that with the leverage of derivatives tracking companies, indexes and other packages or the leveraged ETFs, and individual stocks become pawns in a much bigger game than I feel increasingly less comfortable playing. It is a game fraught with ever increasing risk.
The Pimco (who I think are the smartest guys on the Street) guys talk about a new normal as it applies to today’s state of the world economy. I think just as important is the new normal as it applies to Wall Street. Wall Street is now a huge mathematical game of chess where individual companies are just pawns. This is money in the bank for the big players like Goldman, Morgan, etc. Why ? Because the game of chess is far too complicated for 99pct of the institutions out there investing money. So to keep up, they turn to Goldman, Morgan and the like to invent products for them. “You don’t know how to play the housing boom, let us show you”. “You think the housing boom is about to crash, let us show you how to play that”. “You think that PIIGS are in trouble because they can’t print money to pay debt holders, let us create a product to allow you to play that game” The big houses have the best hackers in the business and they put together the games and sell them to the many, many institutions managing Billions and Billions of dollars. They are the ultimate Hackers selling their attacks to the highest bidder, regardless of which side they are on. That is a new normal.
Again, I’m not passing judgement one or the other. I’m just recognizing what is going on in the financial world today.
It’s rare for companies to go public these days. Just as rare for secondary offerings. The only thing that keeps me in the market is that most of the stocks (not all) pay dividends or some other sort of cash payout. For the first time in my life, I bought outside the United States. I bought Australia in a big way because it is becoming increasingly hard to find new domestic investments that are not influenced by the “hackers” and the games being played on a macro level. It’s hard to believe, but evaluating countries as an investment is now easier than evaluating companies. Even with all the unrest in Europe. Or maybe because of it.
So back to the original question. What business is Wall Street in ?
Its primary business is no longer creating capital for business. Creating capital for business has to be less than 1pct of the volume on Wall Street in any given period. (I would be curious if anyone out there knows what percentage of transactions actually return money to a company for any reason). It wouldn’t shock me that even in this environment that more money flows from companies to the market in the form of buybacks (which i think are always a mistake), then flows into companies in the form of equity.
My 2 cents is that it is important for this country to push Wall Street back to the business of creating capital for business. Whether its through a use of taxes on trades, or changing the capital gains tax structure so that there is no capital gains tax on any shares of stock (private or public company) held for 5 years or more, and no tax on dividends paid to shareholders who have held stock in the company for more than 5 years. However we need to do it, we need to get the smart money on Wall Street back to thinking about ways to use their capital to help start and grow companies. That is what will create jobs. That is where we will find the next big thing that will accelerate the world economy. It won’t come from traders trying to hack the financial system for a few pennies per trade.
And solutions won’t come from bureaucrats trying to prevent the traders from hacking the system. The only certainty when bureaucrats step in is that the law of unintended consequences will smack us all in the head and the trader/hackers will find new ways to exploit the system that makes them big money and even more money for the big institutions that develop products for the other institutions that are desperate to play the game.
Regulators have got to start to recognize that traders are not investors and vice versa and treat them differently. Different regulations. Different tax structure. Different oversight. Individual investors and the funds that just invest in stocks and bonds are not going to crash the market. Big traders who are always leveraging up and maximizing the number of trades/hacks they make will always put the system at risk. We need to recognize that they do not serve much of a purpose other than to add substantial risk to the global economy. That their stated value add of liquidity does not compensate the US and World Economy nearly enough for the risk of collapse they introduce into the system.
Wall Street as a whole needs to be in the business of creating capital for companies and selling shares to investors who believe they are shareholders. The Government needs to create incentives for this business and extract compensation from the traders/hackers for the systemic failure level of risk they introduce.
There will be another crash, because there are too many players looking for the trillion dollar score. They can’t all win, yet how many do you think wouldn’t risk everything, even what is not theirs, for that remote chance to score big ? Put another way, there is zero moral hazard attached to any trade. So why wouldn’t traders take the biggest risk possible?
Update at 10pm 5.9.10
One more consideration. If there are traders of any kind that are unregulated or unmonitored, and trade for their own account, how do we know how big they are and how much of a threat they pose to the system, individually and in aggregate ?. For any High Frequency or big leverage derivative folks out there- is it possible there could be firms that have billions at risk with questionable ability to make a margin call or fulfill their side of the trade if things went against them ? Could there be hidden AIGs that few people know about or a bunch of AIG like situations ,which in aggregate fail and put the system at risk ? I have no idea. Just asking the question.
http://blogmaverick.com/2010/05/09/what-business-is-wall-street-in
The 7 Biggest Financial Mistakes Businesses Make
We live and we learn. In the time it’s taken me to build two companies, I have learned and more importantly, lived, these mistakes. I hope these pieces of advice can help both aspiring and existing entrepreneurs succeed in starting and running their own businesses. Here are the CliffNotes, the mistakes you should hear now and avoid.
1. Hiring in advance of revenue. There is a common expression: "Don't count your money until it is in the bank." There is great wisdom in this. Many times in business, we receive contracts or the promise of revenue. However, there is a major difference between having revenue and almost having it. Until revenue actually hits the bank account, you don't have it, and you must overcome the tendency to be optimistic and hire too many people before the revenue is real. This one principle or mistake could be its own manifesto.
2. Borrowing money when you don't really need it, but when the bank is willing to lend it. Just because a bank is willing to lend you money does not mean you should accept it. The bank is in business to collect interest and not to optimize your financial performance. Sometimes these two goals meet somewhere near the middle, but it is not as often as you might think. It's not that bankers seek to take advantage of businesspeople; it's only that their objectives and yours are very different. In general, borrow as much as you need to grow your business. The problem with credit is not that there is too little available; it is that people get too much of it. Borrowing money adds a huge burden to your business, a stress that can often cascade into your personal life.
3. Not paying payroll taxes on time. I have known few businesspeople who have completely avoided this mistake, but it always creates unnecessary anxiety. When you pay employees, you collect a portion of their money on behalf of the government. Essentially, you are a collection agent. This is a tremendous liability and responsibility for employers that did not exist years ago when employees had to deduct their own taxes and pay them to the government. Alas, these days are over. When you hire an employee, you are also agreeing to help them pay their personal taxes, a major responsibility. Here is how this problem crops up. The employer cuts payroll checks but does not immediately set-aside the payroll liability in an operating account that is separate from the account they use to pay other operating expenses. The funds are mingled, and the person running the business has an inflated view of his or her cash balance. It is not that the employer is being dishonest or intentionally withholding the tax revenue; they lose track of the liability. Later, employers try to play catch-up, but because there is almost never as much cash available as you would like in a privately-held company, the taxes accrue and problems start severe penalties and interest. One solution is to keep two, separate accounts: one for regular operating expenses and the other for payroll taxes. Another solution is to simply use a payroll service that will give the liability its due attention.
4. Pricing too low. Unless you are Walmart or are trying to be (and have a real hope of achieving this), it is almost always better to sell fewer units at higher prices than to sell more units at lower prices. High prices protect your margins and also enhance your brand. Even 5-10 percent price increases can make a significant difference to the bottom line. I believe that, at any given time, 20-30 percent of businesses in a given market cannot possibly make a profit at their current prices—they are simply too low. In a way, these businesses have set themselves up unknowingly as nonprofit organizations. Conduct deep industry research on pricing, and then price at or near the market average—maybe even a little above it. When people start a business, they tend to price low to differentiate their offer. Instead, spend time and develop a real product or service differentiator so you can command higher prices. If you price low at the start and then later have to charge more as your operating costs grow (which they always do), you will offend and lose many of your early customers who think the increase is unfair. Price for decent margins, build and protect a real brand, and maintain your customers to build your franchise.
5. Permitting accounts receivable. Unless there is a good reason, you should not offer credit terms to customers. When you offer credit, you are now a bank and a service or product provider rather than just a service or product provider. It is rare that businesses fail because of profitability (most entrepreneurs know they need revenues to exceed costs); more often businesses fail because they cannot collect receivables and manage cash. Offer credit only when you must do so, and many businesses don't need to. This goes against commonly accepted practices, but I have seen so many businesses fail due to poor cash flow management that I flinch every time I see smaller businesses offering credit. I realize that everyone reading this will think they need to offer credit to customers, but probably only 25 percent really need to. There is an old inventory management maxim: "Inventory kills." This is wrong; it should be: "Inventory hurts, but accounts receivable really kill."
6. Counting on one major source of revenue. It is best to assume that, unless you are proactively building revenue, it is contracting. You should look at your revenue as if it were a portfolio; you do not want all or a majority of revenue coming from one or a few sources. Of course when you start out, you are often so busy serving your first few customers that it is difficult to build other accounts or business. But, with time, you should build alternative sources of revenue, so when major revenue streams die off (which they tend to), you are still building your overall business.
7. Hiring too much overhead. People at companies bring in sales, build products, or serve customers. You can justify employees filling these roles. The real challenge is when you hire "overhead" people, who cost the company money but don't sell or produce anything directly. It is best to keep this cost as low as possible. Of course, the real magic is created by properly deploying overhead people because they can help you get your business to the next level.
When I was younger, I read many books on entrepreneurship, and I tried to implement the lessons I learned from them—I really tried. However, I was not able to succeed as much as I wanted because I was not willing to listen and learn. I looked and acted as if I were listening, but, down deep, I was more interested in being right and proving people wrong. Now that I reflect on it, my real goal was not to build my business; it was to prove how smart I was (or thought I was). I'd like to say that I overcame this mistake through some kind of personal transformation, but I really only learned to listen when I realized I would never attain much success until I was willing to listen to others. You need to surround yourself with people who can help you, and these people will/should be people who won't always agree with you. For this reason, all businesses, no matter the size, should have an outside Board of Directors or group to advise the entrepreneur.
http://www.inc.com/articles/201108/7-biggest-financial-mistakes-businesses-make.html
1. Hiring in advance of revenue. There is a common expression: "Don't count your money until it is in the bank." There is great wisdom in this. Many times in business, we receive contracts or the promise of revenue. However, there is a major difference between having revenue and almost having it. Until revenue actually hits the bank account, you don't have it, and you must overcome the tendency to be optimistic and hire too many people before the revenue is real. This one principle or mistake could be its own manifesto.
2. Borrowing money when you don't really need it, but when the bank is willing to lend it. Just because a bank is willing to lend you money does not mean you should accept it. The bank is in business to collect interest and not to optimize your financial performance. Sometimes these two goals meet somewhere near the middle, but it is not as often as you might think. It's not that bankers seek to take advantage of businesspeople; it's only that their objectives and yours are very different. In general, borrow as much as you need to grow your business. The problem with credit is not that there is too little available; it is that people get too much of it. Borrowing money adds a huge burden to your business, a stress that can often cascade into your personal life.
3. Not paying payroll taxes on time. I have known few businesspeople who have completely avoided this mistake, but it always creates unnecessary anxiety. When you pay employees, you collect a portion of their money on behalf of the government. Essentially, you are a collection agent. This is a tremendous liability and responsibility for employers that did not exist years ago when employees had to deduct their own taxes and pay them to the government. Alas, these days are over. When you hire an employee, you are also agreeing to help them pay their personal taxes, a major responsibility. Here is how this problem crops up. The employer cuts payroll checks but does not immediately set-aside the payroll liability in an operating account that is separate from the account they use to pay other operating expenses. The funds are mingled, and the person running the business has an inflated view of his or her cash balance. It is not that the employer is being dishonest or intentionally withholding the tax revenue; they lose track of the liability. Later, employers try to play catch-up, but because there is almost never as much cash available as you would like in a privately-held company, the taxes accrue and problems start severe penalties and interest. One solution is to keep two, separate accounts: one for regular operating expenses and the other for payroll taxes. Another solution is to simply use a payroll service that will give the liability its due attention.
4. Pricing too low. Unless you are Walmart or are trying to be (and have a real hope of achieving this), it is almost always better to sell fewer units at higher prices than to sell more units at lower prices. High prices protect your margins and also enhance your brand. Even 5-10 percent price increases can make a significant difference to the bottom line. I believe that, at any given time, 20-30 percent of businesses in a given market cannot possibly make a profit at their current prices—they are simply too low. In a way, these businesses have set themselves up unknowingly as nonprofit organizations. Conduct deep industry research on pricing, and then price at or near the market average—maybe even a little above it. When people start a business, they tend to price low to differentiate their offer. Instead, spend time and develop a real product or service differentiator so you can command higher prices. If you price low at the start and then later have to charge more as your operating costs grow (which they always do), you will offend and lose many of your early customers who think the increase is unfair. Price for decent margins, build and protect a real brand, and maintain your customers to build your franchise.
5. Permitting accounts receivable. Unless there is a good reason, you should not offer credit terms to customers. When you offer credit, you are now a bank and a service or product provider rather than just a service or product provider. It is rare that businesses fail because of profitability (most entrepreneurs know they need revenues to exceed costs); more often businesses fail because they cannot collect receivables and manage cash. Offer credit only when you must do so, and many businesses don't need to. This goes against commonly accepted practices, but I have seen so many businesses fail due to poor cash flow management that I flinch every time I see smaller businesses offering credit. I realize that everyone reading this will think they need to offer credit to customers, but probably only 25 percent really need to. There is an old inventory management maxim: "Inventory kills." This is wrong; it should be: "Inventory hurts, but accounts receivable really kill."
6. Counting on one major source of revenue. It is best to assume that, unless you are proactively building revenue, it is contracting. You should look at your revenue as if it were a portfolio; you do not want all or a majority of revenue coming from one or a few sources. Of course when you start out, you are often so busy serving your first few customers that it is difficult to build other accounts or business. But, with time, you should build alternative sources of revenue, so when major revenue streams die off (which they tend to), you are still building your overall business.
7. Hiring too much overhead. People at companies bring in sales, build products, or serve customers. You can justify employees filling these roles. The real challenge is when you hire "overhead" people, who cost the company money but don't sell or produce anything directly. It is best to keep this cost as low as possible. Of course, the real magic is created by properly deploying overhead people because they can help you get your business to the next level.
When I was younger, I read many books on entrepreneurship, and I tried to implement the lessons I learned from them—I really tried. However, I was not able to succeed as much as I wanted because I was not willing to listen and learn. I looked and acted as if I were listening, but, down deep, I was more interested in being right and proving people wrong. Now that I reflect on it, my real goal was not to build my business; it was to prove how smart I was (or thought I was). I'd like to say that I overcame this mistake through some kind of personal transformation, but I really only learned to listen when I realized I would never attain much success until I was willing to listen to others. You need to surround yourself with people who can help you, and these people will/should be people who won't always agree with you. For this reason, all businesses, no matter the size, should have an outside Board of Directors or group to advise the entrepreneur.
http://www.inc.com/articles/201108/7-biggest-financial-mistakes-businesses-make.html
8/9/11
6 Reasons to Keep Your Business Small
The generally-accepted dogma among entrepreneurs is "bigger is beautiful." You're nothing until you have some brand name investors on your board and 50 employees at your command. This "go big or go home" attitude leads to a lot of success stories but I wonder how many would-be entrepreneurs fail because they think the only business worth having is one that is chasing a billion-dollar opportunity.
In this article, I'd like to propose an alternative approach. What if you got into business with the goal of building a $2 million company, instead of a $200 million company? What impact would a $2 million goal have on the way you think about building your business? Here are six reasons it's sometimes better to stay small than to try to go big.
1. You can do what you love. First of all, shooting for a $2 million business widens the field of industries you can get into. There is no need to limit yourself to starting a technology company or the next consumer web business. There are plenty of successful $2 million companies in just about any industry you can think of. A friend of mine owns a bike tour company and is having the time of his life. I'm not sure he'd feel quite as excited about running a technology company ten times the size. With a broader range of sectors to choose from, you can pick an industry you truly like, not just one you think will explode in popularity.
2. You can keep all of the equity, yourself. By the time you have diluted yourself down with an angel and venture capital round of investment to build your $200 million empire, you may wake up one morning as a minority shareholder in your own company and feel more like an employee than a founder. Which is fine if you're on your way to an IPO, but that may be only slightly more probable than winning the lottery. A small, $2 million business, carefully put together over time, can often be bootstrapped with the owner keeping all of the shares for him- or herself.
3. You'll need to find just 10 wonderful people. Staffing a $200 million company probably requires more than a thousand employees and cutting a few corners along the way. A well-run $2 million business might get away with hiring just ten people. Think about how carefully you could pick your team and how much you could nurture each one if your goal was to hire the ten best people you could find.
4. You'll still be rich enough. Admittedly, a $200 million business, even if you are only a minority shareholder in the end, will probably make you richer, but there is a point of diminishing returns on being wealthy. Bill Gates is famous for admitting he'd rather not be the richest man in the world. There are only so many cars you can drive or houses you can enjoy. By contrast, a well-run, $2 million business in a sleepy little corner of the market could pump out 25 percent in earnings before tax for a long time. So not only are you earning $500,000 a year, you're probably running trips and cars through your company as legitimate business expenses. Would you rather have a good shot at earning $500,000 a year for 20 years or a slim chance at a $100 million pay day? I think most people would take door No. 1.
5. You have the choice to live wherever you'd like. Just about any place in the country—even the most beautiful villages—can support a $2 million business, but a $200 million dollar company requires infrastructure and a large workforce usually found in only big, congested, polluted cities. Would you rather measure your commute in minutes or hours?
6. You'll be able to see your kids' T-ball games. I imagine that building a $200 million a year business is a seven-day-a-week endeavor. The entrepreneurs I know who have built big companies lead a high stress life. They have hundreds or thousands of employees to lead, multiple shareholders to appease, media to manipulate, customers to win—all of which adds up to a heavy burden that often falls on founders in the prime of their lives when their kids are still relatively young. How much simpler would life be if you had a nice little $2 million business nobody much cared about, other than you and a handful of employees and customers? How many ballet recitals could you go to? How many birthday parties could you be there for?
Financiers are famous for getting entrepreneurs to give up equity by asking them if they'd rather own "a small slice of a big pie or a big slice of a small pie." As you think about what you want your business to be, don't dismiss the idea of a smaller company because it seems somehow less than what you are capable of. I, for one, think there is something to be said for owning all of a tasty little pie.
http://www.inc.com/articles/201108/6-reasons-to-keep-your-business-small.html
In this article, I'd like to propose an alternative approach. What if you got into business with the goal of building a $2 million company, instead of a $200 million company? What impact would a $2 million goal have on the way you think about building your business? Here are six reasons it's sometimes better to stay small than to try to go big.
1. You can do what you love. First of all, shooting for a $2 million business widens the field of industries you can get into. There is no need to limit yourself to starting a technology company or the next consumer web business. There are plenty of successful $2 million companies in just about any industry you can think of. A friend of mine owns a bike tour company and is having the time of his life. I'm not sure he'd feel quite as excited about running a technology company ten times the size. With a broader range of sectors to choose from, you can pick an industry you truly like, not just one you think will explode in popularity.
2. You can keep all of the equity, yourself. By the time you have diluted yourself down with an angel and venture capital round of investment to build your $200 million empire, you may wake up one morning as a minority shareholder in your own company and feel more like an employee than a founder. Which is fine if you're on your way to an IPO, but that may be only slightly more probable than winning the lottery. A small, $2 million business, carefully put together over time, can often be bootstrapped with the owner keeping all of the shares for him- or herself.
3. You'll need to find just 10 wonderful people. Staffing a $200 million company probably requires more than a thousand employees and cutting a few corners along the way. A well-run $2 million business might get away with hiring just ten people. Think about how carefully you could pick your team and how much you could nurture each one if your goal was to hire the ten best people you could find.
4. You'll still be rich enough. Admittedly, a $200 million business, even if you are only a minority shareholder in the end, will probably make you richer, but there is a point of diminishing returns on being wealthy. Bill Gates is famous for admitting he'd rather not be the richest man in the world. There are only so many cars you can drive or houses you can enjoy. By contrast, a well-run, $2 million business in a sleepy little corner of the market could pump out 25 percent in earnings before tax for a long time. So not only are you earning $500,000 a year, you're probably running trips and cars through your company as legitimate business expenses. Would you rather have a good shot at earning $500,000 a year for 20 years or a slim chance at a $100 million pay day? I think most people would take door No. 1.
5. You have the choice to live wherever you'd like. Just about any place in the country—even the most beautiful villages—can support a $2 million business, but a $200 million dollar company requires infrastructure and a large workforce usually found in only big, congested, polluted cities. Would you rather measure your commute in minutes or hours?
6. You'll be able to see your kids' T-ball games. I imagine that building a $200 million a year business is a seven-day-a-week endeavor. The entrepreneurs I know who have built big companies lead a high stress life. They have hundreds or thousands of employees to lead, multiple shareholders to appease, media to manipulate, customers to win—all of which adds up to a heavy burden that often falls on founders in the prime of their lives when their kids are still relatively young. How much simpler would life be if you had a nice little $2 million business nobody much cared about, other than you and a handful of employees and customers? How many ballet recitals could you go to? How many birthday parties could you be there for?
Financiers are famous for getting entrepreneurs to give up equity by asking them if they'd rather own "a small slice of a big pie or a big slice of a small pie." As you think about what you want your business to be, don't dismiss the idea of a smaller company because it seems somehow less than what you are capable of. I, for one, think there is something to be said for owning all of a tasty little pie.
http://www.inc.com/articles/201108/6-reasons-to-keep-your-business-small.html
8/1/11
Pay Yourself and Prosper
Too many entrepreneurs neglect to make themselves a priority in their own business. The entrepreneurial spirit creates resistance to joining the ranks of corporate America because we value our independence and crave financial freedom. Yet the challenge of balancing priorities and making sound choices prevents many small business owners from achieving either. But with vendors knocking on the door and in-laws awaiting their monthly loan payment, how can soloists make their own financial needs a priority?
Let’s start at the beginning and take a look at some of the common mistakes made by small business owners as they launch and grow.
Start-up investment – Soloists often make the mistake of leaping in on a hope and a prayer that they will get enough clients or sell enough product to make ends meet. If you are considering the leap from job to self-employment, consult your accountant or a qualified mentor/coach to help you calculate the costs and a realistic financial projection. The excitement that you feel for your new venture will certainly cloud your judgment in this area. Don’t quit your day job until you have banked enough cash to carry the load. This includes both personal and business expenses, for an adequate length of time. And, of course, be diligent about your marketing plan so you know exactly where your clients will come from.
Cash Flow – Run your business by the numbers. My confession: For years I have kept a little “Beanie Baby” ostridge on top of my desk. It’s my reminder to NOT keep my head in the sand about cashflow and numbers in general. Sure, it’s scary to visit that P&L statement, but if you don’t face your numbers you will make mistakes – and mistakes compound themselves when they are not corrected pronto. Be smart about your cashflow. Set terms for collections and be diligent in collecting monies in no more than 30 days. Never make assumptions about how much and when a client will pay you and avoid spending money you don’t have.
Trading Dollars for Hours – Take a look at your business model. If you are a consultant, coach, massage therapist or the like, you are probably trading your time for a set amount of money. You have created a financial ceiling for yourself. And, you will most likely burn yourself at some point. You will always rely on your ability to attract the next client and, unless you are a very high-paid consultant who budgets for retirement, you probably aren’t planning for the future. Consider creating additional revenue streams with products, membership sites or another creative form of income. Many solo practitioners find products sold by network marketing organizations that are a great fit for their business. Some create information products and some can sell companion products on-line or at their location.
Scale up to a Salary – If you have investment dollars and are paying yourself from a bank account, rather than profits, try to split the bank. Avoid the comfort zone trap – fooling yourself into believing that your business is doing fine because http://www.blogger.com/img/blank.gifyou can pay your bills. How soon will you be able to withdraw less from savings and more from your business each month? What expenditures can you avoid so that you can take a draw and/or salary from your profits? Remember, you cannot truly prosper until you begin to pay yourself a fair wage, put money in savings and reserve funds for growth and unexpected expenses. Create a business and personal budget, account for every penny you spend and stick with it!
http://www.inc.com/marla-tabaka/pay-yourself-and-prosper.html
Let’s start at the beginning and take a look at some of the common mistakes made by small business owners as they launch and grow.
Start-up investment – Soloists often make the mistake of leaping in on a hope and a prayer that they will get enough clients or sell enough product to make ends meet. If you are considering the leap from job to self-employment, consult your accountant or a qualified mentor/coach to help you calculate the costs and a realistic financial projection. The excitement that you feel for your new venture will certainly cloud your judgment in this area. Don’t quit your day job until you have banked enough cash to carry the load. This includes both personal and business expenses, for an adequate length of time. And, of course, be diligent about your marketing plan so you know exactly where your clients will come from.
Cash Flow – Run your business by the numbers. My confession: For years I have kept a little “Beanie Baby” ostridge on top of my desk. It’s my reminder to NOT keep my head in the sand about cashflow and numbers in general. Sure, it’s scary to visit that P&L statement, but if you don’t face your numbers you will make mistakes – and mistakes compound themselves when they are not corrected pronto. Be smart about your cashflow. Set terms for collections and be diligent in collecting monies in no more than 30 days. Never make assumptions about how much and when a client will pay you and avoid spending money you don’t have.
Trading Dollars for Hours – Take a look at your business model. If you are a consultant, coach, massage therapist or the like, you are probably trading your time for a set amount of money. You have created a financial ceiling for yourself. And, you will most likely burn yourself at some point. You will always rely on your ability to attract the next client and, unless you are a very high-paid consultant who budgets for retirement, you probably aren’t planning for the future. Consider creating additional revenue streams with products, membership sites or another creative form of income. Many solo practitioners find products sold by network marketing organizations that are a great fit for their business. Some create information products and some can sell companion products on-line or at their location.
Scale up to a Salary – If you have investment dollars and are paying yourself from a bank account, rather than profits, try to split the bank. Avoid the comfort zone trap – fooling yourself into believing that your business is doing fine because http://www.blogger.com/img/blank.gifyou can pay your bills. How soon will you be able to withdraw less from savings and more from your business each month? What expenditures can you avoid so that you can take a draw and/or salary from your profits? Remember, you cannot truly prosper until you begin to pay yourself a fair wage, put money in savings and reserve funds for growth and unexpected expenses. Create a business and personal budget, account for every penny you spend and stick with it!
http://www.inc.com/marla-tabaka/pay-yourself-and-prosper.html
Subscribe to:
Posts (Atom)