The Active Investor: Small business

Showing posts with label Small business. Show all posts

Monday, October 19, 2009

Reptitive, Powerful, and Gentle - Intrinsic Motivation

We sense the motivation of a leader is a step above that of follower. Business owners, managers, and consultants have all wanted to capture some of whatever motivates the leader, The Active Investor, and spread it throughout the entire organization. In an 18 minute TED presentation Dan Pink sheds a bright light on the nature of that difference and what some organizations do about it. His message is that business ignores what science already knows about motivation.

Monday, October 5, 2009

Creating Products from Services

An objective of The Active Investor blog is to inspire the thinking of small business owners and professionals to create greater lasting value in their business. There is perhaps no better way to do this than to find ways to create products from services.

A product without services eventually becomes a commodity with business going to the lowest cost provider. Selling only services is a bit like selling air. You can't really sell time. You can only rent your expertise for some time. Expertise is intangible and difficult to either prove or differentiate and in the end the amount that can be sold is always capped by a time limitation. If you want to sell the enterprise, because it's your expertise and you're leaving, the residual value is relatively small. However, when the business offers a deliverable solution that can be named plus is easy to understand and refer, you have hit a "value-added" sweet spot. Here is a personal example.

Names are important. They give the offering tangibility. As a Texas business broker, I create marketing plans for my clients, as do many other business brokers. Since most small business buyers come from the internet, this plan includes multiple internet directory listings, which again, other brokers do. So far, we're still at the services level. I've then created a unique product offering on top of these services named Business Opportunities Bulletins (BOBs). With some creativity and technology, each client listing can appear on the first Goggle results page of significant search terms used by potential buyers. If a client wants to be found by potential business buyers, here is a product, a BOB, that does exactly that.

A BOB is easy to understand. The art of selling your business is to be presented to interested parties and still keep the sale confidential. Prospective clients can see how this is already working for existing clients. They "get it" immediately.

In this example, the product's name is a take-off of my own name. If a need for my business broker services gets touched upon by someone in my network, it's easy for them to explain and refer my product (my service).

Building BOBs takes time, expertise, and technology but their existence adds critical value both to immediate marketability and to the ultimate value of the brokerage practice. A product has been created out of services common to the industry. How many products can be developed from your services? Something with a name that is easy to understand and refer. I can't image anyone who can't develop at least one more.

Image credit: EraPhernalia Vintage (catching up)

Thursday, August 6, 2009

Intention and the Cooperative Universe

A new discipline has emerged this century, the study of Intention. It's often discussed as the Attraction Principle which asserts we attract into our lives those things we dwell on. Examples include if our thoughts are about physical ailments, or poor finances, or an unsatisfactory performance, we will attract poor health, lack of funds, and below standard performances. Alternatively if we genuinely intend good health, abundant finances, and superior performance, these will be what is attracted to us. By itself, the Attraction Principle might be just a sophisticated form of self-delusion; however, in literature such as The Field by Lynne McTaggart evidence is being assembled from advances in quantum physics that provide a scientific basis for its validity.

There is a strange outcome to the Heisenberg Uncertainty measurement problem that results in energy remaining after temperatures reach absolute zero. I was taught absolute zero meant no atomic motion and therefore no energy and scientists of the last century "normalized" their calculations by simply subtracting this away as "background noise". This may have been an over-simplification. When some physicists keep this energy, now called the Zero Point Field (ZPF), in their equations, it appears the discrepancies between classic and quantum physics are resolved. After further study, it appears the ZPF may be a source of abundant, ever-present energy our advancing civilization will surely require. One estimate is that the ZPF energy in one cubic meter of "empty" space would be sufficient to boil all the oceans on our planet. For Stargate Atlantis fans, this is the energy source behind their Zero Point Modules (ZPMs).

This ever-present field appears to be influenced by everything within it and in turns is an influence on everything in the universe. Scientists are now trying to study how one or more individual's Intentions can be "transmitted" through the ZPF. In many of these studies, the universe responds to the changes in the ZPF and appears to cooperate with the Intention.

The science of Intention does not fit well with mainstream paradigms and is currently relegated to the fringes of the scientific community. Yet the research continues and evidence that the universe cooperates with deeply held Intentions continues to accumulate. The research itself has been attractive to physicists, theologians, philosophers, healers, the military, and many others. It ought to be of interest to the Active Investor as well.

The forces around us shape our destinies, yet from this research we learn that we also shape those very forces. Since we see Intention also has all the characteristics of a force to build lasting value, it's repetitive, powerful, and gentle. The Active Investor should be a student in learning to harnessing its potential.

Photo Credit: EraPhernalia Vintage

Sunday, July 5, 2009

Risk and Reward

Every investor, active or passive, has in mind a financial risk/reward relationship. They have to decide exactly what degree of risk they are willing to accept in exchange for higher rewards. Passive investors generally see single digit returns these days which is one reason why there is so much interest in the much higher returns of your own business.

So why doesn't everyone want to jump on higher returns? Passive investors (people who invest in someone else's business) only concern themselves with financial risk. Running your own business also creates another form of risk, personal risk. When you're in charge, not every effort is going to work the way you planned. You can be rejected (or more accurately, you will be rejected). You are subject to frustration and self-doubts. These are just some of the personal risks each Active Investor much face.

Is it worth it for just the financial rewards? That will depend on the circumstances. What is always true is that overcoming personal risk produces personal gains of enormous benefits. In countless biographical examples, people with great satisfaction from their lives have all overcome personal challenges. Active Investors assume a double risk and receive a double reward. Both their financial and personal net worth evolve.

So what can we do about Risk Management when the topic is Personal Risk as opposed to Financial? As I was writing this posting (talk about JIT) I meet with Jeff Weaver, a Texas serial entrepreneur who spends a great deal of his time coaching and mentoring others in addition to developing his own businesses. His strategy is to move out of judgment and move into curiosity.

We worry about that last phone call or meeting. Did we say the right thing? Were we weak, or were we offensively pushy? Are these the right people? Are we doing the right thing? Every one of these internal questions comes with an implicit self-critical negative answer. That's our humanity (Ego) at work. It's what Jeff means by judgment. What if that changed to personal curiosity? We can be equally curious about that last encounter. We can review it with a sense of wonder about what will happen next. Who will we meet as a result? What will they tell us now? What new opportunities have started to emerge?

When we learn to think this way instinctively, Personal Risk converts to Personal Adventure. That's a good thing.

(For those with an interest in how this works out on a theological level, try applying it to the Kingdom Parable in Matthew 18:23 -35. An attitude of curiosity encourages a spirit of forgiveness.)

Image Credit: thegoldguys.blogspot.com/

Monday, June 22, 2009

Choice of Entity

Image by Raymond Yee via Flickr

Anyone wanting to become an Active Investor, that is invest in their own enterprise, has to choose a legal form for the business. Making the best choice will require discussions with a lawyer on liability issues and a tax professional on tax exposure. In spite of all this advice, the Active Investor needs to make some personal decisions before consulting either.

A lawyer will seek to aggressively protect their client, including recommending a business form that will provide the best shielding for personal assets. While this is prudent, you should never fall into the illusion that a chosen entity type adequately protects you from potential legal actions. Many attorneys have been successful in proving an entity has not been maintained according to state law and this has exposed the owners personal assets to their complaint. Be aware of the liability protection a business entity can provide; but never depend solely on that. There are two things every business should maintain to protect the owner from liability - a passion for excellence (quality) and insurance. If these are not both built into the heart of any business plan, then there is an argument that the best choice of entity is employee.

Before discussing tax ramifications, there is also an issue the potential Active Investor should consider. It's been said 85% of the workforce are employees, 14% are self-employed, and 1% are business owners. Are you changing from employee to being self-employed or to being an owner? If the goal is to build and own an organization, tax considerations are somewhat different from trying to minimize a self-employed professional's tax exposure. Working out of a normal (C) corporation can create double taxation for the self-employed, which is very undesirable. Some type of "flow through" entity is often recommended. However, if the objective is to build an organization, the funds to grow the business need to come from future company profits. The C corporation has a low (15%) tax rate for it's first tier. This allows the small business to retain some earnings at that low tax rate for growth. If the profits would "flow through" to the owner to avoid double taxation, those funds for growth are effectively taxed at the owner's tax rate. Different intentions create very different tax strategies.

There are many more considerations that need to be considered with an attorney and tax professional. Successful business people often attribute much of their success to having a winning team of trusted advisers who have guided them through these and other issues. However, the secret of the adviser's success is having a client who has thought through what they really want and can give those advisers clear directions.

Friday, June 5, 2009

Market Trust

Image by Lorenia via Flickr

Many believe a marketing program is successful if it raises the public's awareness of your product or service. Coach Roland in a May 31,2009 blog posting points out that we all have become saturated with messages trying to raise our awareness. Awareness alone won't lead to sales. He asserts our messages need to communicate what we intend to do to earn the market's trust. We have to do more to really get their attention.

Mature successful firms get most of their business from repeat customers or referrals from satisfied clients. Trust has been earned in prior dealings. Here the driver of continued success is the customer service staff. They are the guardians of market trust and need to be in close contact with the marketing staff. Social networking is providing marketing with a new generation of tools to measure customer service effectiveness and satisfaction. These departments work together to preserve existing trust.

Newer and smaller firms, more likely to be run by an Active Investor, may not have this kind of staff and or large base of past customers. Trust needs to be developed. How can a business reach out to the market in such a way that both trust and awareness are developed? A system dynamics approach is to look at trust as a resource, that is a stock of something that has a level that can go up and down, and then consider what are the drivers that will increase its level. Some rather universal drivers of trust are:

- Credentials: Are there authoritative "seals of approval" we can display to verify quality or competence?
- Appearance: Is our offering presented in such a way it creates an assumption of worth, or do we look mediocre?
- Recommendations: Do we understand and develop a history with those who may not purchase but still be in a position to recommend us?
- Concern: While Active Investors are typically always concerned for their customers, is this expressed in a way they can appreciate it? Do they feel we have really listened?
- Familiarity: Can we be remembered? Familiarity breeds business.
- Integrity: Is trust built into our business and personal decision making? Nothing develops trust more surely than personally being trustworthy.
- Assurances: Is there historical data or performance guarantees to factually support any measure of trust a prospect is considering granting us?

Each business is unique with its own ways to build trust. They are to be found at decision points where there is an opportunity to do the right thing or to be expedient. When you have first convinced yourself you'll always be doing what's best for your customer, you'll know what to do to further develop market trust.

Monday, May 4, 2009

Constellations are our Motivations

Image via Wikipedia

There is always a special moment when my younger daughter and I look up into the night sky together and see the bright cluster of 3 stars that form Orion's belt. I first showed her Orion over a decade ago and each time we see it a part of that father-daughter moment returns. It's what being alive is all about.

But in reality, there really is no Orion. These are unrelated stars light years apart that happen to form a pattern only when viewed from our planet.

Any social enterprise, like a business, can be understood as a constellation. It first takes an Active Investor, a business owner or owner-to-be, to see a new pattern that can meet people's needs. Previously unrelated resources flowing together in new ways.

Orion has a story. In mythology Orion, the Hunter, was in love with Merope, one of the Seven Sisters who form the Pleiades stars. She would not return his love and his already tragic life was ended when he stepped on a scorpion. Feeling sorry for him, the gods placed him in the sky near his faithful dogs, adjacent constellations, and on the opposite side of the sky from the deadly scorpion.

Each business has a similar story. Something that inspired the founder to start. Often a picture that could only be seen from their perspective. To everyone else, it was just a group of unrelated elements.

It's sad when this constellation story gets reduced to a just "mission statement". The inspiration of the story gets objectified as financial statements and business plans. When trying to value a business we deal in these valuable instruments; however, they only represent the passive side of any business investment. What makes the organization successful is the power of its invisible but very real story.

Being a part of a powerful story is also a part of what being alive is all about.