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Forty Four Ways to Figure Out if You Are a Good Leader

Posted on January 21, 2010 by Brian

My partner recently sent out a neat article:

11 Business Lessons From The Battlefield

As I read through the lessons I naturally began asking myself “Do I do that?”, “How am I on that one?”, and “I wonder how my managers would rate me on that one.”  So to make things a bit easier, I went ahead and turned the 11 lessons into 44 more specific questions.  Here you go:

Eleven Lessons Become Forty Four Questions

  1. Do I genuinely respect the people who work for me?
  2. Do I help my employees reach their career goals in tangible ways?
  3. Am I more interested in what is best for my employees or what is best for me or the company?
  4. Do I conduct myself in a sober, professional way?
  5. Do I make employees feel degraded or humiliated?
  6. Do I provide relevant, positive reinforcement?
  7. Do I criticize more than I compliment?
  8. Do my employees know who I believe the star performers are?
  9. Do I actively listen to people?
  10. Do I allow employees to choose their own path much of the time?
  11. Do I overrule my employees plan too frequently or without giving them a chance?
  12. Do I bend or give in on nonessential issues or questions?
  13. Do my employees believe I can distinguish between essential and nonessential?
  14. Do I seek clarity on an issue before correcting or reprimanding?
  15. Do I know when and how to give an order?
  16. Am I timid about giving orders?
  17. Am I condescending when giving orders?
  18. Am I direct about what needs to happen when giving orders?
  19. Do I make eye contact when giving orders?
  20. Do I remain cool and firm, without yelling, when giving orders?
  21. Am I passive aggressive when giving orders?
  22. Do I validate grievances when giving orders?
  23. Do I explain why an order is being given?
  24. Am I afraid to insist on a standard?
  25. Am I afraid to tell people what to do?
  26. Am I afraid to demand quality?
  27. Am I a “yeller” or “nice guy freakout yeller”?
  28. Am I meek?  In the “poor leader” way or the “inherit the earth” way?
  29. Do I do an appropriate level of inspection of work?
  30. Do I care about output and results?
  31. Do I allow employees to become lazy and complacent?
  32. Do I care about the unglamorous tasks?
  33. Do I see myself as above the unglamorous tasks?
  34. Am I clear about expectations?
  35. When giving a task, am I clear about what the task is, who has to do it, and by when or clear that my employee needs to identify the task, assign it, and establish a due date with his/her team?
  36. Do I believe everyone gives a crap about my credentials, or should?
  37. Do I give a crap about my credentials?
  38. Have I established a reputation for competence, common sense, and listening?
  39. Once a path is established, do I balance small, firm corrections with steady, disciplined execution?
  40. Do I have a tendency to waffle on initiatives or change direction frequently?
  41. Do my employees have a clear understanding of the paths/initiatives I believe are important?
  42. Do I address problems in a clear, timely manner?
  43. Do I have a tendency to side step problems and let them fester?
  44. And lastly, if I sent these questions to my managers as a survey, would I do anything tangible with the responses?

 

If you’re interested in more leadership insight from a military perspective, here is a link to the widely distributed 18 Lessons in Leadership by General Colin Powell.

 

Enough With Opportunity, Let’s Add Some Vision!

Posted on November 20, 2009 by Brian

Ok, so I came a little late to the mobile commerce game.  I’ll admit it, I didn’t think too much about it, good or bad, until one day my partner sent out a video clip to our managers.  Here it is:

 

 

As usual, we had a good discourse related to what we could learn about our customers from the video, how we could adjust accordingly, how funny it was, and so forth.  As I pondered the issue, strangely, my mind made its way to mobile and my eyes began to open.

As I watched the Google survey video I wondered why one would care if a person knew what a browser is, unless they were selling a browser.  It is obvious everyone interviewed knew how to get online and do their version of surfing, even if they couldn't delineate between a browser and a search engine.  If you asked 50 people what a graphical user interface is, most commonly referred to as a GUI, there might be 8% who know the answer, even though every one of them may use a GUI effectively every day. I would also guess a majority of Twitter users couldn't define "micro-blogging" if asked on the street. Maybe in our technology bubble we think some things are important that just aren't.

Maybe we shouldn't assume it's important that our customers know what our tools are, such as a browser vs. a search engine, but rather how to extract value from them. Even better yet, instead of wanting them educated so they can better see the value and get the value as we deliver it today, we should find better ways to bring them the value in ways they already understand, and are comfortable with.  You know, like getting a movie on demand in my living room rather than having to go to the theater. Enter mobile commerce. I bet 100% of people reading this know what an iPhone is. So Apple doesn't care if 92% don't know how it works or what the components are called.

As I’ve continued to ponder the notion of reaching into our customer’s environment in a comfortable way, rather than pulling them into ours, I’ve refined my vision of mobile. This thought line, in part, spawned a new business that is currently in development at Gordian Project.  Although not ready for release, we believe it’s a visionary blend of e-commerce, m-commerce, the social web, and time tested marketing techniques. I say visionary because it’s definitely not the opportunistic reaction we see in the “mobile version of your site” tools of today.  If you don’t know the difference, read Mark Goulston’s post The Opportunist in Visionary’s Clothing. PlumberSurplus.com and OutdoorPros.com are both opportunistic and now we’re going to take a gamble at visionary. We’re going to assume that because a cell phone can display a traditional web site doesn’t mean that is how a cell phone user wants us to inject our value into their mobile environment. Injecting the same tools in a new environment is opportunistic; using new tools in this new environment can be visionary.

I wrote this post today because I got some encouraging news. Those assuming the opportunistic move to provide the traditional web on a smaller screen are finding little traction. Here’s the news: App Publishing offers retailers low-cost entry into m-commerce. So mPoria has stagnated in nowheresville and it’s too soon to tell if Mobile Store Maker is making a materially better effort at it. This gives me reason to believe our approach will be a little less of a gamble. There’s your teaser, be on the lookout for more…

 

How Google Checkout Lost 2/3 of Their Market Share in One Day

Posted on October 22, 2009 by Brian

At Gordian Project we use Google tools extensively.  Adwords, Analytics, Apps, Chrome, Website Optimizer, Webmaster tools, Checkout, YouTube, we use them all.  We’ve even got some nice press about our development of Google Checkout pixel tracking for affiliates and our utilization of Google Checkout combined with other Google products to improve overall marketing efforts.  We’ve had a good relationship with Google, have enjoyed several dinners with our Googlers, and have enjoyed the annual Christmas gift we receive from the Adwords team.  Unfortunately, that positive momentum has taken a severe blow.

A couple weeks ago Google Checkout’s finance team performed a review of our account and decided that a reserve would be required to “offset any refunds, chargebacks, or other claims against [our] balance.”  The notion in general was quite surprising since no other payment processor has ever set a reserve requirement on any of our accounts.  More surprising, though, are the amount of the reserve relative to our account activity, the lack of details as to how it was determined and what could be done to reduce/remove it.  This led to a fairly passionate phone conversation with a Google Checkout team member followed by a discussion with my management team as to how to proceed with Google Checkout on PlumberSurplus.com and OutdoorPros.com.

First, let’s tackle the sheer amount of the reserve.  Before sharing some numbers, for those unfamiliar, “Other Activity” is the bucket Google Checkout uses for refunds, chargebacks, claims, etc.  Each day a merchant has a starting balance, purchases, other activity, a payout, and an ending balance.  Starting Balance + Purchases – Other Activity – Payout = Ending Balance

For the Google Checkout account in question…

  • When looking at “Other Activity” the reserve requirement represents:
    • 786% of our highest “Other Activity” on a given day in 2009
    • 4,561% of our average daily “Other Activity” over the last 12 months
  • The reserve represents 670% of our average daily “Purchases” in 2009
  • At our Q3 2009 average weekday payout, and the fill rate from Google, it would take over 5 months to fill the reserve.  This would be even longer if we reduce our promotion of Google Checkout as a payment option.
  • When combined with our average “Ending Balance” Google will be holding over nine times our average daily “Purchases”.

All of you merchants out there know nine days of cash is unprecedented and ridiculous.  Particularly for an account that has been with Google Checkout since inception, without a single issue with respect to meeting our refund, chargeback, and claim obligations.  We currently offer Visa, MasterCard, Discover, AMEX, PayPal, and PayPal Pay Later along side Google Checkout.  None of these other payment methods, through which we transact significantly higher gross dollars, have required a reserve, most make funds available in a day or two, and at competitive rates.  Google Checkout stands alone in this reserve requirement.

When we challenged Google Checkout on these points they responded with:

Once the reserve is filled, no more funds will be withheld from your future disbursements. Furthermore, your ending balance is not included in the reserve. It is highlighted on the Merchant Help Center that Google initiates payouts within two business days of charging an order; therefore, Google is not effectively holding money back from you and these funds are not included in the reserve.

They’re obviously missing the point, the fact that after the reserve is filled the money that is earned is paid out in two business days is irrelevant to a merchant.  You are still holding the pool of cash.  By their logic we wouldn't care if the reserve was $1.00 or $5M as long as after it was full we received new money in two days.  Heck, make it $10M.  Yes, every dollar that goes in is paid out in two days on a last-in-first-out basis but we in essence must give tens of thousands of dollars to do business with Google Checkout.  The only way we can compare this with their competitors is to compare how many days of cash each holds at any given time, for whatever reason.  Many hold less than one, a couple hold one to two, and Google Checkout now wants to hold nine.  Additionally, our merchant accounts allow us to keep transaction fees through the month for debit at the end, which is another cash flow plus over Google Checkout.

So Google is in left field in terms of understanding the language of the merchant, and the amount of our reserve is extremely high compared to our volume of business.  So, to the second point, how did they come up with it?  Maybe that will also shed some light on how we can work to have it reduced or eliminated.  After some prodding, our Google Checkout contact responded, “For clarification purposes, the way we determine whether an account should be placed on a reserve is based on a proprietary set of rules…  However, the way we calculate the reserve placed on your account is an industry standard formula that other processors use.”  So the obvious… how, for a given account, can an industry standard formula result in a reserve requirement for Google Checkout but not for any other major payment processor in the industry?

Our subsequent request for the “industry standard formula” returned the high level variables included, without their values or the formula.  The variables included are, “your chargeback exposure, your refund exposure, and your delivery exposure.”  Given the numbers above I’m pretty confident chargebacks and refunds aren’t the culprit, which leaves delivery.  Google wants to cover the dollars that have been ordered but not shipped.  In essence, by setting a reserve that covers dollars in open orders Google is deciding we can’t have our money until the point of shipment, rather than at the point of order.  On average, Google keeps the cash for our work in process.  The point at which to charge a customer should be a decision made by the merchant, not the payment processor.  Some merchants offer only fast moving products that are always in stock and opt to charge at the point of shipment while other merchants may offer special order or hard to find products with lead times and opt to charge at the point of order, possibly to procure the special order items.  For the latter group, Google holding a reserve to cover the open dollars is a de facto trump of the business decision to collect up front.  Whether the former or latter group, it’s a business decision and shouldn’t be under the purview of the payment processor.  Most payment processors don’t even have shipment data.  They don’t need it; they simply process transactions, which yields no exposure.  Even still, lumping our total open dollars on top of our average “Other Activity” I couldn’t get anywhere near the reserve requirement Google calculated.

Ultimately, in fact, no specific changes or improvements have been recommended and the rep in our call finally agreed that our best bet is to hold our breath, cross our fingers and hope that the magic Google machine makes a better decision next time.

At the least this issue highlights Google Checkout’s lack of maturity relative to the payment processing space they have entered.  At its worst, this issue represents a seemingly arbitrary, punitive move to support Google’s interest income goals.


This has led us to strongly reconsider our approach to promoting Google Checkout as a payment option.  This year, across our sites, Google Checkout was presented as the first option in our checkout flow.  In light of these events, we have moved Google Checkout to be the last option in our checkout flow and in the first couple days noticed a drastic drop in Google’s share of our payment processor pie, to about 1/3 the previous level.  Interestingly, overall daily sales have increased noticeably.

Checkout Options

Just prior to completion of this post, Google Checkout reduced our reserve by about 29%, without sharing the new calculation.  At our new, lower sales volume through Google Checkout, this reserve, without including our average Ending Balance, is over 20 days of “Purchases” and will take over a year to fill.  Although I appreciate the reduced reserve, I’m not sure we’re making progress, or making sense.


If as the shimmer of “Google” begins to fade, and it inevitably will, this is how they begin treating customers, I’m betting on PayPal.

 

 

Monetizing Interpersonal Obligation in the Online Buying Experience

Posted on February 19, 2009 by Brian

During the last several months one of my brothers and I both purchased our first house.  Inevitably we end up in discussions about various renovation and repair projects we have in work, or on the horizon.  One such discussion included my brother’s tale of a pair of pruning shears he paid some ridiculous price for, like two to three times the price than what was listed as the price at the big box up the street.  Why?  Well, he was standing across the counter from the guy that just spent time explaining what shears he needed and how to use them to properly prune his trees.  He visited the nursery because he knew he could get the information he needed and now the interpersonal obligation pushed him to buy the overpriced shears.  In all fairness, maybe the shears were fairly priced when the value of the information and advice was rolled in.  Unfortunately he didn’t get to see the information price tag up front.  Interestingly, I found myself in a similar situation, at the exact same nursery.  For me, it was information plus a jug of some chemical needed to solve a citrus tree fungus problem.  I too couldn’t muster the shrewdness to thank the attendant for the information while passing on the grossly overpriced chemicals. 

The lesson … interpersonal obligation can be a huge component of monetizing information.  If my brother or I had found the appropriate information online from a given source we would happily have made the subsequent purchase from another source based on whatever price, trust, etc. considerations we use when actually buying a product we’ve settled on.  There would be no interpersonal switching cost associated with buying from a seller who hadn’t provided the necessary information during the shopping process.

So, the obvious question for internet retailers is how to add a sense of interpersonal obligation to the process of providing information in the hopes of converting a sale.  This wouldn’t serve as an excuse to ignore the portion of the buying cycle that falls after information gathering, learning, and item selection, but it could help mitigate the impact of low switching costs that occur at that point.  Mitigating that impact may help to pay for creating all that informative content.

If you have any neat ideas for adding “interpersonal switching cost” to the ecommerce experience please add them to the comments; we’ll do the same.

 

Feed Readers: Taking the Discipline Out of Decision Making

Posted on December 23, 2008 by Brian

First, this is exactly the kind of post I’m talking about in this post.  I had a thought driving back to work from lunch, I’m going to write a few paragraphs about it, and then I’m going to post it.  The truth is I’m not even sure I agree with what I’m writing.  But it doesn’t matter, it’s too easy to write and post it, rather than bothering to stop and really consider it.  Much less research and ponder it until I have some real conviction about it.  So what is this thesis I’m not sure I agree with?  Blogging has made speculative, opinion based content generation and regurgitation so easy that the quality of the content has dropped significantly.  As a result, those basing decisions on the content lack any of the discipline that would otherwise inherently come with the authors efforts to research and validate their content.

I’ve seen this phenomenon to an increasing degree as I study the economic climate and changes of recent weeks.  Maybe it isn’t new but rather I’m seeing it anew as I get deeper into researching these challenging times.  In particular, there is a plethora of opinion being puked out surrounding the general “what should small businesses/startups/entrepreneurs do/think during the down market” subject.  Everyone is weighing in and while there may be some common themes there are certainly enough conflicting viewpoints to prove that either no one knows the answer or few are thinking before they write.  I’m not sure what I should do…

  • Monday: Paint a clear, honest picture, control cost, get profitable and hunker down.
  • Tuesday: Stand up and lead charismatically with a focus on new innovation to grab market share and emerge victoriously.
  • Wednesday: Be nimble, or, oh wait, was that remain steady and stay the course?
  • Thursday: Focus on value oriented products, services, and promotions.
  • Friday: Roll back all non-profitable, price destroying promotions.
  • Saturday: Yard work.
  • Sunday: Go to church; decide to start a non-profit (yeah, I actually read a blog about switching to a non-profit, and I wasn’t even researching the subject).

And maybe worst of all, the underlying culprit, would be to react to every blog I read.  Why would I let un-scrutinized, rampant opinion and conjecture replace my own decision making discipline?  Even if it does sound smart, eloquent, and like the author knows my business.  Answer… either it’s easier to shirk responsibility or I’m not capable of taking it all in, filtering it, organizing it, and making effective use of it within my business, strategy, and timeline.  Maybe that latter ability will actually mark the difference between those who thrive, those who survive, and those who parish.

So, until it somehow gets tougher to publish, make sure you don’t knee jerk or you may end up kicking yourself in the butt.  Alternatively, scour until you find the good authors in the midst of the mess and then stick to them.  You’ll find even they don’t always agree and their opinions can’t be a crutch, but at least they’ve studied.

Finally, if you’re going to go with the “read more of what is out there” plan, make sure you also incorporate the “forget more of what you read” plan, including this post if you see fit.

 

Don’t Accidentally Sell Your Business, for Less than It’s Worth

Posted on October 28, 2008 by Brian

This post is for the newbie’s who have compiled lots of good business reasons to take the easy route.  Let me explain.  Let’s say entrepreneur “John Doe” decides to launch a category level ecommerce company servicing a specific industry, say home improvement.  John is going to establish several partnerships along the way as he builds his business: Banking partnership, landlord partnerships, marketing partnerships, vendor partnerships, employee partnerships, etc.  We’ll use vendors in our illustration.  Let’s say John is plowing his way through various manufacturers, distributors, and wholesalers in his attempt to setup a vendor network.  Cold calls, conference calls, meetings, pleadings, and so forth.  In the midst of this effort a golden nugget appears.  The largest wholesaler in the country agrees to work with John.  Amazing!  A huge catalog, consolidated supply, good pricing, strong fulfillment, available electronic product data, everything!  John is ecstatic; he signs on, and drops his pursuit of “smaller” vendors.  John just sold his company for less than it is worth.

By entering a hugely unbalanced relationship John has forfeited all negotiating power when, in three years, his wonderful, global vendor decides to acquire or drop John.  John faces accepting their valuation, drastic downsizing while he goes back to the vendor setup process he abandoned three years ago, or closing his doors.  John took the quick and easy route for a handful of seemingly good reasons rather than putting in the time to build his negotiating position.  The quick, big dollars John saw were followed by a less than optimal transition, or forced exit.

Sometimes this conscious decision makes sense.  For example, when you’ve grown enough that the next level requires the participation of the biggest players.  However, early on, you’re likely better off applying some elbow grease to create some value.

Luckily, we were able to avoid the scenario John suffers above.  However, our banking relationship is an example of an unbalanced relationship that hasn’t gone as well for us.  Early on, we had the opportunity to engage small local banks, medium regional banks, or large national banks.  We went with the big boys.  Since then, our small fish in a big pond position has caused us to suffer in terms of customer service, flexibility, available tools and so forth.  If I had to do it over again I would have started with a medium size bank that we could grow with and eventually graduate from.  The scale of mutual value on both sides of the relationship would have been more equitable.  At this point the transition is more costly than the pain so we push on.  Thankfully, this relationship doesn’t have near the negative slant John’s vendor relationship had.

These days we’re becoming a bigger fish who can swim well in bigger ponds.  It may have been harder building our company without some of those big vendor perks but looking back it was the right decision.  We still own our company, both legally and practically.

So, watch out for those unbalanced relationships; you may be negotiating your valuation earlier than you think.  Don’t accidentally sell your business before you even get going.

 

Taking a Step Back: A Business Owner’s Perspective on Letting the Team Take Over

Posted on September 23, 2008 by Brian

Hey business owner, are you willing to be bored? (Don’t let your employees read this.)

If you’ve worked on a startup you can likely argue that it involves little boredom.  However, what I’m finding now, a bit over four years in, is that a little boredom at the top may be a necessary evil.  I think understanding this issue requires understanding resources, growth vs. leveling off, and good management.  So the question I ask myself is “If we’ve tapped into all of the financial resources available and established a qualified, motivated team, charged with managing and growing the business according to our plan, what should I be spending my time on?” 

I have come up with seven options that may be likely considerations:

  1. Get all in my management team’s mix - I could repeatedly request status, take over decisions, drive their teams, and other micro management efforts.  I think we know this undermines their efforts, creates inertia and waste, prevents learning, and ultimately renders the team impotent.  The key is to get the right people, build trust, and let them go within a wide boundary.
  2. Find random little things to involve everyone in - You know, that neat new idea I just read a blog about.  Instead of efficiently rolling new ideas into the strategic plan, I can simply nab people here and there to run down what I consider to be fun, but are ultimately distractions.  Nimbleness should be innate, not the result of boredom.
  3. Keep coming up with new projects, assignments, and responsibilities – Even the good projects, valuable assignments and important responsibilities cannot be tackled effectively without new resources. The assumption that my team has endless capacity to tackle new opportunities will quickly lead to burnout and de-motivation.  Eventually they’ll just stop getting anything done, or ignore me.
  4. Join the "data team" - I could throw my body at whatever projects are currently in work.  I am sure that there are tasks that are consistently in need of an extra hand: Data entry, physical inventory of the warehouse, answering calls, issuing refunds, cleaning the trash bin, etc.  This is a tricky one since it seems like a good idea to jump on whatever fires I can see, and I’ve done so in the past.  At some point, however, we have to stop covering the fires with elbow grease from higher compensated workers.  We need to let those groups work through their staffing, processes, or focus issues rather than building in inefficient use of our dollars.  I’ve also found that sometimes I’m more trouble than I’m worth when I randomly toss myself into a department for a couple days.
  5. Here’s a scary one… replace someone on the management team - Let’s face it, my partners and I have done each of their jobs at some point in our history.  We may be a bit rusty but it could be done again.  Assuming we don’t want our business to level off and slowly die, this may be the worst idea on the list.  If we’ve worked to put together a team that can use the available resources to grow the company, any reduction to that team would be a step backward to some previous point in time.  Our growth mentality makes this a last resort driven only by necessity, and definitely not boredom.
  6. Get outside the office - This may be the best option, given the right team.  If your team needs to see your car in the parking lot every day you may have to take up web browsing as a profession.  Otherwise, I can get my creative juices working on the next thing, related or unrelated to this business.  The risk here is taking your eye off the ball, moving to something new too early, or not resisting trap number three above.  There is a possible upside to this, you may quickly test your assumptions about a “qualified, motivated team”.
  7. Find more resources - Maybe this is my real job.  Debt, equity, grants, profits, couch cushions, recycling, Guido…  My partners and I need to make sure we are always on the limit of what we can do, and are willing to do, in terms of fueling our business with financial resources.  This goes back to my assumption … assuming we’ve tapped into all of the financial resources available. 

At the risk of sounding pompous, I suppose I’m learning the difference between managing and leading, or maybe a GM vs. a CEO.  At the core, I think the lesson is that we can’t always do more, even if I have time to spend.  If we’re leveraging every resource available to attack the highest priority opportunities in the best way possible, maybe it’s time to let the team carry the torch, while I simply make sure the two basic assumptions are progressively being met.  Eventually, as they build, we’ll reach new milestones that will require more of my involvement and guidance.  Otherwise, if I choose the wrong option above we change our trajectory, which isn’t best for anyone.  If I’ve maxed resources, setup the team, and created the plan, maybe I can use any extra time on a random Thursday to jump start a new venture of my own with personal resources.  I wonder if Guido will still give me that short term loan at 45%?  Uh, I guess I like my knee caps too much to take that deal.

 

 

Forecasting 101: Basic Forecasting Processes for Businesses

Posted on August 19, 2008 by Brian

Forecasting: A Basic Process for Stabbing in the Dark

Over the last few days I’ve spent some time polishing up our financial forecasts for some interested 3rd parties.  I’m a firm believer in the value of forecasting and planning from the very earliest stages of a venture.  I do all kinds of estimating, budgeting, and forecasting for many reasons.  Sometimes I need an accurate picture of where we are, sometimes I need a conservative picture of where we will likely be in the near term, sometimes I need and exciting picture of where we could be in the longer term.  In any case, the aggregate of the analysis helps provide me with a comprehensive understanding of our business, past, present, and future.  During the refresh process I decided it may be valuable to share some basic thoughts regarding forecasting for a small business.  Although there are very sophisticated methods available to “Engineer MBA’s”, there are some real basics that I think would be beneficial to someone just starting out, and pointed in the right direction.  After all, who really wants to get into linear regression?

In general, as you walk through the accounts in your profit and loss statement you will find that some accounts are what I will call “fixed and known”, at least in the near term.  These accounts may include things like monthly lease payments, general liability premiums, or your annual California LLC fees.  The rest of the accounts are things that are generally tied to a combination of historic reality and a forward looking strategic plan.

Start with the “Fixed and Known” 

I suggest tackling the more obvious “fixed and known” accounts first.  For example, if you’re in the highest LLC fee tier then the fee isn’t going to change until it’s finally ruled unconstitutional and goes away.  Then you get a big refund check, assuming you’ve filed the right paperwork, and you can go buy a Range Rover.  Anyway, knock those easy ones out first.  Careful though, even some of these “easy” ones may need a little extra thought...  If you’re sure your office space and lease terms will accommodate your planning horizon then plug in the number.  However, if you plan to grow or move within the period, you’ll need to estimate the new “fixed and known” lease payment numbers starting at that point.  If your office space use is very flexible you may even forecast based on headcount and a standard square footage per employee.  In any case, with a little thought and consideration of your future plans you’ll be able to knock these out fairly quickly. 

Forecasting the Unknowns 

On to the tougher ones!  The revenue forecast may be the most challenging and important forecast of all.  Many times other accounts are driven by the revenue forecast.  For example, if your margin is a steady 35%, your cost of goods sold will likely be forecast at 65% of revenue, assuming the absence of early payment discounts.  The revenue forecast should incorporate your historic performance as well as future plans.  You can look at simple sales dollars, customer acquisition, order generation, average ticket, market trends, growth rate when you did X vs. Y in the past, etc.  Hypothetically speaking you may say that in 2006 you focused on “product offering breath and depth” initiative which generated 35% growth in order count.  In 2009 you plan to focus on that initiative again, while also implementing an up-sell program to increase average order by 5%.  You can use these numbers, with a 2008 actual, to build a 2009 forecast.  Likewise, if your plan includes less sales growth focused initiatives in 2010 you may forecast less growth in that year. 

Performance, Present Condition and Future Plans 

This past performance, present condition, future plans thinking is the cycle you need to go through for each account.  Using transaction fees as an example… A) In the past our volume was lower and our rates were higher. B) Recently we had our rates reviewed and lowered based on our increased volume. C) Next year we plan to implement a payment service that carries a lower average rate than the services we offer today.  If you can estimate the percentage of transactions that will use the new service based on some past marker you can easily forecast the transaction fees through your planning horizon by applying the current rate to a portion of your revenue forecast and the new rate to the remainder of your revenue forecast.  How about 3rd party vendors that don’t have fixed contracts… A) How many seats with which vendors have you used at past revenue levels?  B) How many are you using at current revenue levels?  C) Do you plan to fundamentally change seats/revenue dollar in the future?  Maybe you exchange revenue levels with customer service rep count, which is based on a staffing plan pegged back to revenue.  In either case, revenue is driving its way through to give relative reference for A, B, C, and the forecast.

In this way you’ll go through each account: A, B, C, forecast.  Historic data, current actuals, and a strategic plan is all you need.  And, well, a spreadsheet.  Hope this provides some help and motivation to get started with your forecasting early!

 

Soft Economy Priorities? Time to Paint Your Parking Spaces

Posted on July 2, 2008 by Brian

If you’ve ever leased commercial space you’re likely aware that parking spots can be an important concern.  In the past it has been for us.  How many spaces do we get, what lot are they in, is the lot shared, and so forth.  A good lease will answer all of these questions for all tenants involved.  Luckily in our current location the issue isn’t of much concern.  We do share a lot with our neighbor but there is ample space for all employees and visitors.  We’ve never once exhausted the available parking.  

None the less, a few days ago our neighbors decided to paint their business name on a handful of the parking spaces closest to their building.  Bare in mind, closest to their building means 20 steps closer than the furthest available space.  As one of my partners and I stood in the lot chuckling at this discovery we found ourselves thankful that (1) in this soft economy our business is busy enough that we don’t have time to unnecessarily paint parking spaces and (2) we knew all of our employees are graceful enough to gladly walk the extra 20 steps if it made our neighbor’s day a smidge better.  Just a fun share from the life of an entrepreneur.

 

Business Name Change Helpful Hints

Posted on April 28, 2008 by Brian

What’s in a name? err, well, what’s in changing a name?

If you’ve been living in a cave you may not be aware that we recently launched OutdoorPros.com.  Ok, given the budget for our PR blitz you may get a pass on being up to speed with our new site.  There’s lots to discuss related to the strategy behind this new venture and the execution of our plan, but I’d like to boil this post down to one of the more practical aspects of this step in our growth.

When our plans to launch into a new industry began to take shape my mind quickly began running through some of the ancillary components of the effort.  Sure, we needed to build the site, establish supply, prepare marketing campaigns, and so forth, but we also needed to decide how to organize our business entity, finances, accounting, and banking around two, at that time distinct, businesses.

Long story short, we ultimately decided to create a parent company to house our various website businesses.  This decision combined with other factors has thrust us into the throws of upgrading our accounting system, changing banks, and establishing financial and operational reporting and metrics at the parent and child organizational levels.

Wow, that’s a long intro to present a few tips I hope are helpful if you find yourself in a position to change your business name.  You see, in the midst of all these dominoes, one task was to change our name and form the parent/child entities.

Our business machine has been chugging along for a while now and when I dove into our files titled “business formation”, “operating agreement”, “meeting minutes”, “business license”, etc. I quickly found myself in a pile of paperwork.  After having plowed my way through, with much help from fellow blogger Ellen, we nursed our paper cuts and got the process completed.  So, without further ado, here are the steps/tidbits presented in the order we attacked the change:

 

  1. Make sure you can secure the necessary domain names and do so.  This is obvious to the online community by now.  If you can’t get the domain names, and I’m not talking about some slightly off version of them, pick a different name. 

  2. Depending on the type of business entity you have, ours is an LLC, it may be wise to document the meeting minutes when members voted to accept the motion to change the company name.  Along these lines, this would be a good time to challenge your business type given that the new name may represent significant changes.  It may be time to grow out of that sole proprietor status and into a single member LLC, or an S-Corp.  Consult your attorney and accountant; we certainly did before deciding to stick with the LLC. 

  3. Consider updating any Operating Agreement or Partnership Agreement you may have.  We were able to add a simple addendum to make the name change.  It’s a simple process and can keep the flow of changes well documented and straight forward. 

  4. And the fun part… here is an overview of some agencies we dealt with to make the change, as a California LLC:
    • We filed with the Secretary of State to change the name of the LLC to the new parent company name.
    • We were able to keep our existing Federal Employer Identification Number (EIN) but needed to change the name.
    • We were able to keep our existing State Employer Identification Number (SEIN) with the Employment Development Department (EDD) but needed to change the name.
    • We filed for Fictitious Business Names, or DBA’s, in the name of the parent company and the two sites we currently operate with the new parent company as the registrant.
    • We filed for a business license in each Fictitious Business Name.
    • We updated our seller’s permit with the Board of Equalization.

  5. Finally, plan a fun afternoon of errands.  The county building, the city building, the post office, some shady underground newspaper company that writes your credit card number on a post-it with a crayon, and you are done!


Well, done with that task.  Now its merchant accounts, credit lines, POS integration, and QuickBooks vs. Peachtree.  Hope this sparks some ideas and reminders.  And of course, let me know if I missed anything!  (I’ll blame it on Ellen, as the company fall girl she’s used to that.)