Inc Small Business
Businesses want simplicity and lower tax rates. Here's how we should start.
It’s a sad state of affairs when Jay Leno can make this joke, as he did recently:
"President Obama held a press conference today. He said he still wants to close the Guantanamo Bay prison facility, but he doesn't know how to do it. He should do what he always does: Declare it a small business and tax it out of existence.”
We can argue about whether the punch line is true, but either way, the suspicion persists. And it hurts the business confidence that is essential to get more hiring and generate more wealth. Everyone (except maybe Jay Leno) would win if the administration took steps to dispel this notion.
The Internet sales tax bill passed by the Senate is the latest example of government adding complexity and confusion. If this becomes law, will small businesses have to file 50 state returns? The government should be figuring out ways to be less of a burden so we can focus on growing our businesses and creating jobs. Unfortunately it seems all too busy doing the opposite.
But how? The following four steps would be a win-win for both parties, since they would appeal to both the Republican and Democratic base:
· Simplification of the personal tax code, so there is less suspicion that someone somewhere is getting away with something.
· Reduction of the corporate tax rate, which is 35 percent, to the average rate of our biggest trade competitors, so we don’t compete with an arm tied behind our backs and so we have more money to re-invest in our businesses. At Marlin Steel, we believe we’ve lost a few jobs to competitors in other Western countries due to their corporate tax advantage.
· One-time lower tax on repatriation of profits earned overseas. That way, big companies can bring home profits without paying large, double taxes, which is why they’re currently parking that money overseas. The government would get some revenue, and those companies would have more money to buy products from small businesses like mine.
· A two-year holiday on the one percent FICA tax--known as the payroll tax--for both employees and employers. People would have more money to spend and companies would have fewer obstacles in the way of hiring more workers.
Haven't considered the "Entertainment Capital of the World"? Maybe you should--the economics work in your favor.
The casinos! The shows! The low taxes?
The strip may get all of the attention in Las Vegas, but for start-up founders, the real attractions are the ones that get overshadowed by all of the glitter.
Consider, for example, that Nevada ranks consistently high as one of the nation's most business-friendly states. The advocacy group Small Business and Entrepreneurship Council ranked the state No. 2, behind South Dakota, on its 2012 U.S. Business Policy Index.
Here are four reasons--most of which involve saving money--for why you might want to consider launching in Las Vegas:
1. The low cost of living.
Looking to cut costs as you work on your launch? Unlike more prominent start-up hubs--including the San Francisco Bay Area, Boston, and New York City--Las Vegas boasts a cost of living that's cheaper than the national average. The difference in housing costs alone is pretty convincing:
(Compared to the national average)
- Las Vegas: -10 percent
- San Francisco Bay Area: +196 percent
- Boston: +74 percent
- New York City: +355 percent
2. A slew of tax breaks.
Nevada's recognition for being business-friendly comes from its extremely friendly tax climate. The absence of several taxes has set it up to be among the least burdensome in the country, making it hard for any other state to compete.
Here are some of the major tax breaks you'll receive in Las Vegas:
- No business income tax
- No personal income tax
- No franchise tax
- No gift tax
- Limited tax increases altogether
3. An opportunity to get in while the getting is good.
Las Vegas is a city in transition--and perhaps one of the few where an uber-successful entrepreneur is the one leading the charge. Zappos CEO Tony Hsieh is pumping $350 million of his own money into the city to jumpstart the start-up community in the downtown area. Plus, he set up the Las Vegas Tech Fund to give seed investments to companies willing to set up shop in town. Building a thriving hub is going to take work--and perhaps years--but how many other places can you go where you can get in early, surround yourself with like-minded folks, and help pioneer a community that has so much potential?
4. It's a buyer's market.
Thanks to the recession, you'll have a serious advantage when it comes to buying commercial real estate. The cost has gone from between $4 and $6 per square foot to between $1 and $2. Today, landlords are even agreeing to pay for the build-out of a simple space with cement floors and bare walls, leaving businesses to brand their own buildings. And if you're not ready to buy, the odds are you'll find below-market leasing deals.
What do you think? Would you consider starting your business in Sin City?
Take a closer look at some of the fundamentals underlying the recent positive economic news.
In its monthly "beige book" report, the Federal Reserve recently reported moderate economic growth across the country. This was backed up by gross domestic product numbers, which showed a 2.5 percent annualized growth in the first quarter--a significant improvement from the 0.4 percent annualized growth from the fourth quarter of 2012. The unemployment rate continues to tick down. Personal income and spending both increased, pending home sales reached a three-year high, new residential home sales improved, and home prices are surging. The American auto industry had its best performance in 20 years. Most economic indicators seem to be in the normal range.
But--hold on a minute. A recent report found that U.S. home ownership fell to its lowest level since 1995. Both manufacturing activity in the country and orders for durable goods plunged last month. A Kauffman report revealed that entrepreneurial activity declined last year, and the National Federation of Independent Businesses said last month that small business confidence remains at historically low levels. If that's not bad enough, the University of Michigan said that consumer sentiment fell to a three-month low, and, separately, port traffic in the Los Angeles area decreased in March. Things are so gloomy that more than 12 million Americans actually believe that lizard people are running the country.
So is the economy in good shape--or not?
Why are so many small business owners still not feeling as confident as they did a few years ago? The fact is that most of the business people I speak with are very tentative, still uncertain, and still very concerned about some of the fundamentals underlying the numbers.
Here's four reasons why:
1. A deficit decline is not sustainable.
Since 2009 the country has become accustomed to a trillion-dollar annual deficit. I've been watching, with a growing sense of panic, the U.S. national debt, which is now approaching $17 trillion and is, for the first time in U.S. history, greater than the entire national output. But some are celebrating. That's because many projections now show that, with rising tax receipts and some cuts in government spending, the deficit this year is projected to fall to under $800 billion. And the projected annual deficit is estimated will decrease to as little (as little?) as $600 billion by 2015. This doesn't mean the deficit is under control, and you know it. Back in 2007, the deficit was "only" $161 billion and even that was too high. Remember, this is all adding to the country's national debt. And after 2015, the deficit is projected to increase yet again, soon surpassing a trillion dollars a year as the costs of health care, social security, and other entitlements begin kicking in with a vengeance. The business owners I know aren't buying into the myth that the deficit is coming down. The long-term debt could affect the U.S. economy as it's now doing in parts of Europe: rising interest, cuts in spending, tax increases, exchange rate fluctuations, economic turmoil. A decrease in the deficit is purely a short-term thing. I'm concerned about the long term.
2. The stock market boom does not indicate a strong economy.
No one is complaining about the recent rise in stock prices. The benefits of a strong stock market are enormous for small business: It gives customers confidence to spend, adds to a general feeling of optimism in the market, and sure feels good to see my own investment accounts going up, particularly since I have college tuition bills looming. But many business owners I know have serious doubts about the strength of the stock market. Why? Because with easy money flooding the market from the Fed, interest rates so low, and real estate barely recovering, where else is there to invest but the stock market? It's pretty much the only choice for someone not willing to take an enormous amount of speculative risk. So the money flows to the stock market, and prices go up. Does this mean that the market's growth is truly indicative of a strong economy? Or is it a temporary phenomenon? I'm wary, and trying to limit my exposure.
3. Inflation is not dead.
I have to give credit where credit is due: the Federal Reserve has managed to keep inflation pretty much under control for the past 25 years. This has helped keep U.S. prices competitive, costs under control, and interest rate risk at a reasonable level. But if you dig into this, like I did, you get concerned. As shown here, the Fed's balance sheet has literally exploded over the past few years because of the Troubled Asset Relief Program (TARP) and bond purchases. These initiatives were done with good reason--to provide liquidity to struggling markets. But what if the economy grows more than expected? What if the demand for new loans substantially increases, and excess reserves are drawn down by banks eager to fill the needs of their customers at a rate that's faster than the Fed can control? What if the Fed's exit strategy isn't effective? It's a very high risk game and, if mistakes are made, inflation, followed by high interest rates, could very well happen. Inflation is not dead. It's a dangerous animal that is, for now, kept in its cage. I'd bet you're watching and hoping that this cage holds like I am.
4. Corporations don't have as much cash as it seems.
There's no doubt that companies have a lot of cash on hand. In fact, recent numbers show that non-financial companies have about $2.3 trillion in their bank accounts, a historical high. But this number is misleading. As financial analyst James Bianco explained in this great column: "Liquid assets held on companies' balance sheets is a nominal number, much like the nominal level of GDP, that rarely decreases. Of course cash on the sidelines is at a record nominal level; it usually is. This series must be compared to other balance sheet items for relevance." He uses a chart to explain it: In 1952, 40 percent of companies' total assets were "liquid assets" (cash), and that number is down to only 15 percent today. "It is not as though companies currently have 40 percent of their assets in the form of cash waiting to be invested, as was the case in the 1950s," says Bianco. If investment opportunities become more "enticing," and companies see a potential to make a profit, these levels will drop to the 30-year historical norm of 10 percent or 11 percent.
These are concerns. But no reason to panic. There are always concerns. And one great thing about being a business owner is that you're a glass-is-half-full person. The country is at the very beginning cusp of an energy boom, has tremendous technological resources, a market full of skilled people, and a free economy that is enjoying low interest and low inflation. Of course there are challenges, but no matter how much I complain, there is not a single business owner I speak to who would prefer to be living, raising her children, and doing business anywhere else but in the United States. And that speaks for itself.
In an interview Tuesday, Marissa Mayer said she knows exactly what you think of her telecommuting policy but doesn't care--because it's working.
Marissa Mayer knows precisely what you think of her--and her telecommuting policy--and she couldn't care less. The Yahoo CEO said as much during the Wired Business Conference on Tuesday.
"I don't pay attention to it, I deliberately don't," she told Wired writer Steven Levin. "I think we have a lot of work to do, we're really focused on the user, we're focused on what needs to happen at Yahoo."
More precisely, she's focused on expanding Yahoo's reach on mobile. "I think the moonshot for Yahoo is being on every smartphone, every tablet, every PC, everyday for every Internet user," she said. "The nice thing is we're not that far off."
During the interview, Mayer made the case that Yahoo has done exceptionally well at releasing products quickly and efficiently while hitting user targets. Yahoo! Weather, for example, which was released last month, reached its goals for the quarter in only four days. But that couldn't have happened without a strong team or the decision to do away with the company's telecommuting policy--a move that Mayer said has fostered a collaborative, inventive environment.
"When you look at things like the Yahoo! Weather app, that wouldn't have happened if those two people hadn't run into each other," she said. "You needed someone from Flickr to say, 'Hey, I've got these geo-tagged photos, and I know where these photos were taken and we can probably detect whether or not there [are] faces in them or whether they're a scene' and them running into someone from Weather who says, 'Hey, could we make our app more beautiful?'"
"I sort of call it the Reese's Peanut Butter Cups effect," she added. "The chocolate and peanut butter taste great together, but that only happens when people really say, 'What happens when we combine these things?'"
Launching a debate over telecommuting was never the point--"we were just saying that it's not right for us, right now"--but she's well aware of what's said about her on Twitter. She "generally won't click," but is active on Twitter and occasionally has her husband read aloud the occasional tweet. "It always sounds better coming from someone you love or someone who loves you."
The business-to-business market is tougher than ever. Here are three different approaches to improve your sales efforts. Choose the one that works best for your business.
A big shift has happened in the way large companies make decisions. I described it in my blog on "Zombie Apocalypse". Big companies have taken away the purchase power of middle- and higher-level executives in favor of either senior executives or purchasing/procurement buyers. In order to set your growth strategy for this reality, you need to consider the three approaches below and then choose which one to bet on most heavily. Most businesses will need to take a diversified approach in order to cover all their current customers as well as attract new ones, but that doesn't mean you shouldn't put more emphasis on the approach that seems to be your best bet.
Here are your options
1. Get good at selling lots of small sales to many customers.
Companies such as Amazon and UPS have figured out the ratio between volume-and-efficiency necessary to produce customers and profits. For B2B companies, the challenge is shifting your culture to handle service and sales to an efficiency model without losing the high-touch. Some companies have changed focus from high-touch to high-visibility by using online portals for order placing, tracking, and customer-satisfaction feedback. Others have created relationships that are demand-based, so that there are fewer interactions between customers and providers. This drives down service costs and the amount of time employees spend on each order.
2. Become great at winning RFPs, reverse-auctions, and bidding.
This is the sacred cow of many companies, however much they despise them. I should know, I wrote the book, "RFPs Suck!, " which was written for companies navigating the RFP process. For lots of reasons including governance, price comparison, and free market intelligence, companies are relying on these tools for choosing their vendors and suppliers. Often the same tools used in these structured approaches show up as procedural requirements for procurement departments. If you become good at navigating these waters, you can be successful in winning more sizable pieces of business. It is distasteful for many companies who are not good at it. That is what makes it a great competitive strategy for those companies who become good at it.
3. Learn how to reach higher level decision-makers.
Everyone knows that you should target higher-level decision makers. The problem is that your current level is not high enough. In the modern buying scenario, you need to go at least one, if not two levels higher. There is an old saying, "You get sent to whom you sound like." If your sales people are not connecting with the higher-level decision makers it is probably because they are not effectively representing your company's ability to solve higher-level problems. Your sales people's strategies, contacts, and processes that were effective five years ago are no longer going to work. The reason is the loss of both the "knowledgeable buyer" and the trend of stripping middle-level executives of true buying authority.
To be successful in this quickly evolving B2B marketplace, you will need to improve in all three categories. Most companies do not have the resources or people to equally attack all three. It is the job of the CEO to decide which strategy to put the most resources behind. It's a lonely decision and the risk is all yours. The choice can often produce internal conflict when one area of the business is favored over another. However, in stormy waters the CEO has to make the choices and steer the boat.
A growing number of big companies want to fund small businesses in their industries, but be careful of the terms.
Every small business worries about having its lunch eaten by its largest competitors. So it's a big step to go from eyeing your most formidable competition warily to depending on them as a source of financing.
Although banks are beginning to re-open the spigots now for small business loans, the recent recession spawned a boomlet in alternative financing like factoring and asset based lending from non-bank sources. One alternative that's blossomed recently is financing from large companies, some of which have begun to sponsor accelerator programs for startups in their industries.
So far, about half a dozen big companies have done this, choosing a handful of businesses each year to support. While that's a drop in the bucket in terms of small business' overall financial needs, the programs address a seed funding gap for startups that banks and venture capitalists don't address. The financing typically comes as a loan or a stake in the fledgling company.
Small businesses benefit not only from the cash but from the access to a group of knowledgeable mentors within their industry. The big businesses benefit by having a direct path to innovators. But repayment terms can be higher than traditional financing, and some of the programs force nascent companies to give up equity right out of the gate.
Microsoft and Nike, for example, offer financing to as many as 10 startups annually, in partnership with start-up accelerator TechStars. Both companies give the startups $20,000 in return for TechStars taking a 6 percent stake. The entrepreneurs go through multi-month business courses, perhaps in marketing or finance. These courses are usually offered at or near the corporate campuses, where the companies are also given space to work. At the end of this mentoring process, they are introduced to potential venture capital investors. In return, the bigger businesses get access to a promising company that may be useful to them in the future.
"Corporations have traditionally struggled with innovation, so you're seeing a few examples of them outsourcing this activity" through these programs, David Cohen, chief executive and founder of TechStars wrote in an email.
Others, like beer Boston Beer Company, which produces the Samuel Adams brand, offer micro-loans to brewers and other companies in the food industry. Its Brewing the American Dream program has assisted some 230 small businesses with about $1 million in total loans since 2008. The loans are generally less than $10,000, have interest rates between 10 percent and 11 percent, and are repaid within three years. (Although bank loans have proved quite difficult for small businesses to find in the past five years, their interest rates are generally two to three perentage points lower.)
"The best applicant we get is somebody who has a small business and is doing fine, but they have an opportunity to expand and they need money for it," says Jim Koch, founder and chief executive of Boston Beer Company.
One such company is microbrewery ROC Brewing Company, of Rochester, New York, which received a microloan of about $8,000 from Boston Beer in 2011. ROC specializes in golden ales, English pale ales, and Cullan's Irish reds. It produces about 600 barrels of beer annually, and part of its production is outsourced.
Founders Jon Mervine and Chris Spinelli had rounded up $150,000 in financing from family and friends to start the company, which broke even after the first six months. To make sure ROC stayed on top of quality control, the company needed a keg washer to scrub out the barrels. But there wasn't a lot of extra free cash for the $10,000 item. Banks didn't really understand ROC's need for the washer, but Boston Beer did, Mervine and Spinelli say, and in April of 2011 Boston Beer gave them the equipment loan.
"It allowed us to do larger scale production, and without that our business would not have been able to grow," Mervine says.
Today, ROC, which is staffed only by Mervine and Spinelli, has revenues of $170,000.
For his part, Koch says the program is mostly philanthropic and actually loses money due to origination and administrative costs. But Koch feels strongly about continuing to offer the program, he says, from his own years as the owner of a start-up who wished he could access mentors who could help with specific problems.
"When I started out, there were two things I would have loved to have that were not available: one was loan money and the other was nuts and bolts business advice," Koch, a Harvard Business School graduate and former Boston Consulting Group consultant, says.
Small business finance experts generally laud these programs, saying the mentoring and advice small businesses can get from seasoned industry experts is invaluable. So, too, is the seed financing for startups, which is generally in short supply. But that doesn't mean start-ups should get involved without a second thought; they should carefully consider the terms.
"I don’t like to see any early stage company give out any percentage, if at all avoidable, because once you start diluting the ownership it affects longer-term access to capital," William Brigham, director of the Small Business Development Center at the University at Albany-SUNY, which offers its own loan program and takes into account character analysis, among other qaulifying factors.
"But there are so many pitfalls and weaknesses that small businesses can fall into, and having somebody who has been through this, mentoring you in these areas, that is where the value comes from," Brigham says.
The government just eliminated a cap on contracts for women-owned small businesses. Here's what the change could mean for your business.
If you run a woman-owned small business and you want to get government contracts, things just got a little bit better for you.
Sequester or no sequester, the U.S. government spends a ton of money. Regardless of how you might feel about that politically, it means opportunity for small businesses. A small change to the federal rules that just went into effect that means more of those opportunities could go to women-owned small businesses.
First, the bad news, which Inc's Liyan Chen wrote about in January. Women-owned small businesses landed about $16.4 billion in federal contracts last year, down 5.5 percent from $17.3 billion in fiscal 2011. By the way, men-owned firms also saw a drop (by 4.1 percent, to $80.9 billion).
But the good news now for women-owned small businesses is that the government now has authority to set aside more contracts for women. Previously, contracts had to be comparatively small to qualify--worth less than $6.5 million for manufacturing contracts and $4 million for all other contracts. Now, that cap is gone.
Technically, the SBA issued an "interim rule," rescinding the cap, which you can comment on until June 6 at www.regulations.gov. (Just look up the regulation number RIN 3245-AG55.) The whole thing is a result of direction found in the 2013 National Defense Authorization Act. The SBA is also launching a series of educational programs for women-owned businesses.
To qualify for set-asides, a firm has to be at least 51 percent owned and controlled by one or more female U.S. citizens, and firms have to be certified ahead of time. You can find out more about certification on the SBA's website, here.
While this change affects only women-owned small businesses, the government tries to give about a quarter of its contracts to small businesses, although the percentage has generally fallen a bit short in recent years.
The government also formally sets aside opportunities for firms run by members of economically or socially disadvantaged groups, service-connected disabled veterans, and businesses located in certain underprivileged geographic areas.
So how do you get these kinds of opportunities? Well, to get a sense of the scope of opportunities, check out the contracting clearinghouse website, which currently lists about 26,700 open federal contracts. That's a lot, but when I wrote about federal contracting after attending the SBA's Small Business Week conference a year ago, there were 31,000 contracts listed.
Beyond that, experts I've talked with advise looking for opportunities to become a subcontractor to larger firms, and developing personal relationships with officials at the agencies you hope to contract with and their prime contractors.
Not sure where to begin with that? Here's one idea: Small Business Week this year runs June 17 to 21, with events in five cities this time: Seattle, Dallas, St. Louis, Pittsburgh, and Washington, D.C.
Not everyone is eager to splurge $1,500 on Google's high-tech eyewear, least of all the writers at "Saturday Night Live" who roasted it in a recent skit starring Fred Armisen. Here's why they nailed it.
In a recent SNL skit, Fred Armisen plays Randall Meeks, a so-hip-it-hurts fan boy in love with his high-tech headset. As always, Armisen nails it, playing up the quirks of the high-priced gadget to the hilt. The skit also plays into consumers' deepest, darkest fears about sinking $1,500 into the mostly untested device. As several tech sites have noted, the first iteration might prove to be more buggy than it's worth, and could easily offend non-wearers since there's no way they can participate in the experience, or tell what the wearer is doing. Here are five reasons consumers aren't sold on Google Glass just yet.
Forget peering at your smartphone under the dinner table--with Google Glass, there's no telling what you're up to, though everyone will suspect you're up to something. As Armisen quips, "I just spend so much time in my life, looking down at my phone ... but now I can use it without being rude or distracting!" Too bad there's no way to actually tell whether the camera is on or off so you can assuage people you aren't recording them.
One of the best gags of the skit is when Armisen repeats his password "Peacock," in various intonations in order to get the headset working. What's supposed to be simple turns out to be a production, and Armisen is visibly pained. In reality, Google hasn't worked the software kinks out yet, says Engaget. As an example, "if you speak slowly, clearly and avoid grammatical contractions you have a chance of sending a correct e-mail," notes Tim Stevens. "Should Glass hear you incorrectly, you have to cancel the entire message and start again."
Halfway into the skit, Armisen's character declares, "Best of all they look like totally normal glasses!" But as Engadget notes, they're anything but. The overall design is simple and clean, yet aside from the plastic-backed titanium band that forms the frame and gives Glass its distinguishing look, the device is hard to fit over most eyeglasses comfortably, and the hardware can be tricky to put on (and keep on, due to is weight). Even worse, the headset's a pain to take off, as the stems cannot be folded.
Cue the NSFW warning: Though most people can't tell what Glass wearers are doing, the expression on their face might give it away, as Armisen comically demonstrates. Also, because Glass has no built-in cellular data connection, you'll still have to pair it with a smartphone when you take it outside--not a good look for anyone on a tight data plan. Glass' touch controls require you to swipe forward or backward, and you have to look up to activate Glass, or tap the air to bring up photos and videos.
Don't want a migraine? Then steer clear of Glass. You'll be looking at content very close to your face, and a constant deluge of push notifications ensures you'll be craning your neck just as often. As hedge fund manager Eric Jackson tweeted recently, "VC told me this wk - who'd tried it & knows many people who have - Google Glass actually is not very good at the moment, gives big headaches."
You know what happens to people who try to rush to the top, don't you?
Our accelerator, The Triangle Startup Factory, is in week five of the current 12-week program. A combination of structured mentoring and serendipitous advice is the order of the day. Our current founders are all smart, thoughtful, high-energy, pedal-to-the-metal people. This is fun.
But I have one concern. A big one.
I was having trouble describing it naturally. So one of our local mentors offered an analogy that seems to fit:
In order to climb Mt Everest, you must plan, work, and make adjustments at each of four Base Camps.
How does this relate to start-ups?
Founders create product road maps detailing and prioritizing various features and functions. They outline, test, and roll out various customer acquisition tactics and model how the acquisition costs will come down as their viral coefficient goes up. They consider various funding scenarios and match their vision to funding milestones.
But as they do that, they tend to in terms of Base Camp 4. Especially if they have a high level of entrepreneurial DNA, as our people do. They immediately project three years down the road. That’s dangerous. You don’t get to skip Base Camps 1, 2, and 3.
You can’t take the express customer-acquisition train. You can’t super-think and super-work your customer acquisition in order to bypass these requisite stages and go right to a million customers.
Base Camp 1 might represent the acquisition of your first set of customers. Depending on your business, Base Camp 1 might mean 50 customers (enterprise-like application) or 1,000 (consumer-oriented). The acquisition tactics at this stage are naturally guerilla--we need customer feedback and data! One of our teams put a table in the middle of a business courtyard and produced 700-plus initial signups.
You reach Base Camp 2 by identifying new acquisition tactics (while possibly doubling down on tactics that worked previously) and making product and feature modifications to fit those tactics. The goal at this juncture is to begin laying out the handful of acquisition programs that will drive the business to the next customer goal.
Base Camp 3 and Base Camp 4 represent bigger and more expanded versions of Base Camp 2. The acquisition strategies may morph with your fundraising strategies as these new investments drive customer adoption. (In plain English, the purpose of your new funds will be to secure new customers.)
My point is that you have to have the patience to acquire customers in this systematic way. You simply do not know enough to grow from 10 to 10,000 customers in two months. This needs to be done incrementally, with knowledge and understanding gained at each Base Camp.
Those companies that find lightening in a bottle and achieve rocketship growth are freakish and not a good model. And in fact they probably grew more slowly than you realize: When you peel back the curtain, you typically find that they too had to go through months or years of incremental growth before they accelerated to the numbers that suddenly made them seem ubiquitous.
The more I have talked about this, the more I see stats like this:
- Meetup.com grew from fewer than 500k active users to 2.5m in six years
- ReverbNation, which has more than 2.5 million bands as customers, has been in business for seven years.
- Twitter took three years to get to 3 million users, and now sits at 225 million.
The significant variable in this equation is time. Work hard, but have the patience to let this play out.
From seniority to raises, just because everyone else has these stupid policies doesn't mean you should.
In order to get people to work for you, you have to pay them. And if you want good people to work for you, you need to pay them fairly. What does fairly mean? Well, it's more than paying them the amount that they negotiated during the hiring process. Here are five problems that I see frequently in businesses of any size.
You set a maximum raise percentage. This is super common. No one can receive a pay increase greater than, say 10 percent, in a given year. This seems to make sense--how does someone become 20 percent more valuable in a given year? Well, they take on new responsibilities, they take a new position, or they were undervalued to begin with. What's wrong with this? If someone is being paid below market rate, they will resent you and eventually leave. How much will you have to pay someone to replace this person? What you should have been paying in the first place, plus the cost of recruiting and training.
You don't make contracts. Have you ever paid to relocate someone, with all the details worked out via email? What about having a tuition reimbursement program but no retention component to it? How about sign-on bonus with no repayment clause if the employee quits within a year? All of these happen all the time. It is worth your time and money to pay an attorney to draw up a contract that specifies exactly how you are paying for relocation and what percentage the employee has to repay if she quits within X number of years (standard is two to three years). If you are offering tuition reimbursement, make sure you give the person new responsibilities that relates to his new knowledge. And, include a repayment aspect again. Sign ons? Should always come with a signed document that details when repayment is required.
Your pay and promotions are based on seniority or last name. Bob's been here the longest, so he'll be the new manager! The only idea that is worse than that is, "Bob's my son, so he'll be the new manager." Yes, the person who has been there the longest often can be the best choice, and your son may have inherited your keen sense of detail, but you need to makes sure that the person who gets the promotion is the one that can do the job. Managing is different than doing. Someone with good "doing" skills doesn't necessarily have good "managing skills." Both can be trained, but you need to provide that training. Giving someone a promotion without the support is a recipe for disaster.
You're illegally cheap. Yes, everyone must be fiscally aware. If your business isn't bringing in the money, you'll have huge problems. But, you can have even bigger problems if you take deductions from employees pay that you shouldn't, or not pay overtime that you're required to pay by law. You cannot avoid overtime payments simply by making someone exempt. They also have to meet the strict requirements of the law. Sometimes even the act of paying someone a day late can be a violation of the law.
You interview multiple candidates even when you know who you are going to hire. Many companies have policies of interviewing three or more candidates for every position. Sounds good, right? You don't want to get the wrong person in the job. But, often the hiring manager has already determined who will be in the position--especially in the case of an internal promotion. But, to stay in policy, they interview three people anyway. And what good does this do? None. A decision has already been made. But worse, you've just made external candidates take a day off their current jobs in order to come in. Would you like to waste a vacation day for a completely fruitless exercise? And internal candidates? They don't enjoy the stress and anxiety either. If you know who you are going to promote, just promote her.
When it comes to launching a digital product, knowing your customer is key. Here are three strategies.
Remember the last time you waited as someone fumbled at the self-checkout counter? Those machines were designed to solve a business problem (reducing staff, opening checkout lines), but they haven't done much to help customers. They need store clerks to help them find the right products, but don't need the burden of the store clerk's job. Soon those million-dollar machines will have to be dismantled and the money will go to waste.
You wouldn't build a house without drafting a blueprint, yet all too often companies skip this foundational step when launching new products. They build, test, launch, and measure success without fully understanding their customer. Sound familiar?
Building a great digital product requires getting into your customers' heads. You have to go beyond asking, “Can they use it?” to get at the heart of the problems your product will solve. Here are three tricks to get help you get started.
Determine whether your product--or the surroundings--are the problem.
A client at my digital consultancy AnswerLab makes software for banks to automate their loan process. The client signed on a major bank around the time it was implementing a new version of its product. Soon customers large and small were complaining. The client needed to understand which issues were environmental--the process they were trying to automate, bandwidth issues, etc.--and which ones stemmed from the new software.
By casually observing how users interacted with the product, researchers uncovered a few external factors driving their experience. Shockingly, we found the loans were being processed three times--first, as a loan officer encountered issues and then gave up; second, as an officer resorted to the pre-software method, paper; and third, as a closer cleaned up the incorrect data. We soon found the culprit: Loan officers had a compensation system that encouraged them to enter as many loans as possible in the system, regardless of accuracy. We realized a product isn't the only thing that can impact a users' experience. How--and where--that product is being used impact it as well.
Watch how customers interact with your product.
To help PayPal test ideas for a mobile wallet, we conducted innovation games with consumers, asking them to share the contents of their wallets and describe their ideal shopping assistant. We then transformed a traditional research lab into a mock retail store, where participants completed a series of shopping scenarios and tested the various concepts PayPal had in mind. In each scenario, some rule or element of the game was altered to tweak the overall experience, such as allowing players to pay ahead using their mobile device or search for store coupons and deals on their phone.
Putting customers in the context of a mock store environment allowed us to gather several key insights. For starters, consumers admitted they'd feel like real jerks cutting in line for a coffee they'd already purchased. Such insights couldn't have come from traditional focus groups or usability testing alone.
Take a microscope to your customers.
A geneology company recently asked why more customers weren't converting to its paid subscription service after a free trial. To research the problem, we conducted a diary study to track customer sentiment over time.
It turns out the drop-off in customers had more to do with needing a break than being displeased with the service. The only subscription model in place at that time was a monthly service that could be turned On or Off. But if an alternative subscription could make it cost-effective for customers to maintain a relationship while taking a break, then we found there would be less churn.
Fashion start-ups have a lousy track record on Kickstarter--the vast majority never reach their goals. Here are three instructive exceptions.
Of the 40,000 successful Kickstarter campaigns hosted on the crowdfunding platform since it came onto the scene in 2009, fashion campaigns are the least successful--only 28 percent of them meet their funding goals.
But in recent months a few breakaway campaigns in this space are worth noting for the lesson they offer any consumer product company seeking to win hearts and pocketbooks. Each company is founded on noble principles that you might think would be the key to their marketing strategies. But ultimately each says there's primarily one thing responsible for their Kickstarter fame: a high-quality product.
This two-year-old shoe company recently managed to raise more than $85,000, something most companies--in any category--struggle to do.
The idea: Use the Peruvian rainforest's natural resources to create a sustainable business, pay rubber producers fair prices, and wrap it all up in an avant-garde product fashioned by chic Parisian designers.
"We set up an economic development project with US-AID to establish fair trade prices for the rubber and to ensure that our producers got paid a fair wage," says co-founder Joshua Rudd. "The World Wildlife Fund was the team who trained them on how to cut the trees properly and in an environmentally-friendly way without killing the tree," Rudd says.
Not only does Piola now source its materials from 33 wild rubber producers and 55 organic cotton producers in Peru, but also pays them three to five times the market price for these materials.
You can see the appeal here. Not only can you tromp around in cool-looking French shoes, you also get the nice feeling that comes from supporting a company that treats workers fairly and tries to preserve the rainforest.
The 10-Year Hoodie
Flint and Tinder founder Jake Bronstein has a problem with "planned obsolescence," a tactic manufacturers use in which their goods wear out or become unusable sooner rather than later. As a result, consumers buy products more frequently.
His solution? A high-quality, American-made hoodie guaranteed to last at least a decade. If it doesn't, you can send it to Flint and Tinder for mending and the company will mail it back to you for free.
"These days when you walk into a store it almost seems like companies have lowered your expectations so far to the point where, yeah, you can buy something really cheap and that's nice, but when it falls apart on you or when it isn't what you wanted or when it comes apart at the seams quickly, you almost know better than to take it back," he says. "You assume that there's something written on the back of the receipt that says that you got what you paid for and you're not entitled to anything else."
It wasn't always this way, Bronstein says. Background props in his Kickstarter video include things like an old metal fan, a rotary phone, and a hand-crank pencil sharpener--all nostalgic triggers that elicit the idea that "they don't make 'em the way they used to." You'll also see a strategically-placed flag behind him as he speaks--a reminder that the hoodie is made in America, something Bronstein says is important to his customers.
"When my dad was young, you could take anything back to a department store. They had a reputation and valued the relationship that they had with you and they really only wanted to sell something that they felt was going to live up to the promise of both the product and the company selling it and so we kind of wanted to revisit that idea," he says.
It's a compelling concept. The 10-Year Hoodie is the most successful fashion campaign ever conducted on Kickstarter--it recently exceeded its $50,000 goal by $1 million.
Jeans makers Josh Gustin and Stephen Powell, co-founders of San-Francisco-based Gustin, did something quite different with their Kickstarter campaign. The six-year-old company offered fans the chance to change the way they buy jeans. Instead of paying as much as $205 for their high-quality American-made jeans typically sold in swanky boutiques, Gustin asked them if they'd rather buy them online in a Kickstarter-like platform of their own.
In other words, after more than 4,000 backers pledged nearly $450,000 through Kickstarter to buy its jeans, which start at $81, Gustin promised to let them keep doing it going forward. Now if you visit weargustin.com you can pledge to buy a certain pair of jeans, but Gustin won't actually start cutting and sewing material until enough backers have committed to buy a particular style. In that way, customers are actually deciding which styles get produced--a pretty genius way to get full transparency into what buyers want most.
"For us, the whole brand is about authenticity," says Gustin. "I think we're changing the way typical fashion brands engage with consumers. Fashion is typically very standoffish--creative geniuses that you'll never understand or talk to and they're just brilliant. We like how we design and our products are great but we don't need to keep our consumers at arm's length," says Gustin.
The Common Denominator: An Exceptional Product
Fair trade, preserving the rainforest, made in America, a tight relationship with customers--these are all compelling reasons to buy products like Piola shoes, Flint and Tinder hoodies, and Gustin jeans. Even so, each company says these underlying principles come as bonuses and are not the primary draw to their products.
For example, when asked if the idea of helping people in Peru and protecting the rainforest are Piola's main virtues, Rudd said, "It hasn't really affected our customers to the point where they will go out of their way to spend the extra dollar. The fashion obviously drives the market first. If they like the aesthetic of the shoe, the customer is going to buy it. A lot of the time they won't even know the story behind Piola and what we're doing until they research us."
Bronstein sings a similar tune when it comes to his long-lived sweatshirt and the draw of "made in America."
"We made the absolute best product that we could," he says. "If you ask people to buy something because of where it was made that's almost like charity, it's not really sustainable. They have to love it, and then where it was made or how it was made is a secondary plus."
As for those crowdsourced jeans, Gustin shares the insistence on creating first a beautiful or superior product. "We're trying to do super classic, super high-quality clothing," Powell says.
Want to see examples of other Kickstarter campaigns that soared past their funding goals? Check out 9 Insanely Successful Kickstarter Campaigns, which highlights companies that are nailing both form and function.
If this guy can build a thriving group on industrial water treatment (no, really), you can be master of your own niche on LinkedIn.
There are almost 2 million LinkedIn Groups, since any of the more than 200 million LinkedIn users can create one. Does that mean there's no longer an opportunity for you to create and moderate a thriving group?
It all depends on your approach.
The macro-subject group turf is already well staked out but there are still great opportunities to network, create great discussions, and increase your professional profile if you're selective about your topic.
Here's an example. I stumbled across a group called Industrial Water Treatment. Discussions included questions like, "What could happen if a filming amine is overfed in a stream system?" and "Why is the conductivity of a softener's effluent water a little different than the influent water?"
Reading the questions only served to make me feel stupid but I was still fascinated by how most of the questions generated thoughtful, in-depth responses.
So I asked James McDonald, the engineer and certified water technologist who founded the group, how he founded and continues to moderate a successful LinkedIn Group.
Here are James' tips in his own words:
Build connections first.
I had a profile on LinkedIn for years and I finally decided to see what I could do with it in October 2011. I went all out and increased my connections from 180 to 1,000 in a couple months. I'm sure that's really not what LinkedIn intends, but I wanted to see what I could do with a bigger network of connections.
Check out other groups.
Then I joined several groups while thinking about starting my own group. Since I work in industrial water treatment I knew that would be my topic, but how could my group be different? Why would people want to join?
Looking at the other groups, I noticed that 1) most were not well moderated and had lots of advertising or off-topic posts, and 2) the other groups allowed members to post whatever they wanted with no real guidance or structure.
I thought a quality group would be the opposite of what I saw, so I started a very moderated group where I ask all the questions on a daily basis and let the members respond.
I invited all my contacts to join and I also shared the link with several other groups. From there it has grown organically as more and more people connect.
Focus on quality members, not quantity.
By August 26, 2012, we had 1,000 members. As of now we have 1,788 members, and hitting 2,000 isn't that far way.
That's not the millions of followers that big names have, but for a niche group, specializing in industrial water treatment, it's a lot. The membership spans the globe as well, which is a really cool aspect.
Plus a camaraderie has developed among the members, especially when the topics get more non-technical, like years of experience or how they got into the water treatment field. Those discussions often lead to members sharing stories that inspire others to share similar experiences and connections, etc.
For my 300th question of the day I asked, "How many years of industrial water treatment experience do you have? So far, members have reported a total of 1,516 years of experience with an average of 26 years. Not bad! What a brain trust we have in this group!
With the LinkedIn Search feature we can go back and search for answers on various topics. I've done that many times. It's a great technical resource.
It's important to ask questions that spark immediate discussion, but don't forget that discussions will live on and can help build a library of useful information.
Set sensible rules.
My rules are somewhat restrictive. Only I can post the original questions. Then any member can comment on those questions.
I also turned off the Promotions and Jobs settings so no one can try to post to those areas. I still have people trying to submit posts, but I go through those each morning. Most get deleted because they are mainly advertisements, but some are used as the basis for a Question of the Day. (I only get a couple of those a day, so it's not a big task.)
I decided not to allow any advertising and the group appreciates it. When I see advertising I delete it immediately and often message the member to let them know what I did and why.
I also hesitated to allow headhunters to join, but then I thought about the huge number of added connections and job opportunities they could bring to my members, so now I allow them to join. They haven't done anything to detract from the conversation so I think I made the right choice.
The key to moderating a successful group is to make it a daily habit and be consistent.
On my drive in to work I think about the next question of the day. Every morning I review the previous night's responses and approve new members, then I post the a new question.
Since water treaters are engineers, chemists, and other professionals, they behave themselves rather well. I've only had to ban one member. I really think a few of the members live for reading the next post and offering their sage advice.
Sometimes sparks fly a little, but it usually only takes a nudge from me or another member to keep things on track.
Focus on tangible and intangible goals.
I haven't gained any direct business that I know of, but that's not my driving force for doing the group. I just like to help knowledge flow in my area of interest.
But I have had colleagues within my company from across the globe that I never thought even knew my name comment on the group, and that's pretty cool. And one international member asked if I want to possibly co-author a book with him.
Will my group hit 1 million members? No. There aren't 1 million water treaters out there. But now, 1,788 of them are connected in a way they never were before.
Five healthy alternatives to energy drinks that will give you a midday boost without the caffeine crash.
Start-up life often means stressed out, 24-hour workdays. When coffee doesn't cut it, some entrepreneurs turn to energy drinks like Red Bull and Monster Energy. But these beverages not only make your energy spike and crash, but they can also take a toll on your body. Just ask my client Lynn, who owns a Web design firm. Lynn had always eaten healthy and worked out religiously, but as her company grew, she started skipping meals and relying on energy drinks to help her meet the demands of her busy day. Soon, Lynn began experiencing bouts of dizziness and fatigue. She reluctantly dragged herself to a doctor and was diagnosed with a heart arrhythmia. She was gaining weight too.
After Lynn and I reviewed everything that she was eating and drinking, she revealed she had been drinking about two energy drinks a day. The average can contains a whopping 30 grams of sugar and 180 mg of caffeine. That combo can make you feel anxious and stressed in the short term and then exhausted after the effects wear off and your blood sugar plummets. Not only that, but ingesting an extra four tablespoons of sugar ever day--the amount in just two cans--will absolutely add weight to your midsection.
There are plenty of healthy alternatives that can help you feel energized--without the negative effects of loads of caffeine and sugar. Made from natural ingredients, here are five healthy options that will help you stay focused throughout the day.
1. Protein smoothies. Blending fruit and protein powder will boost your energy in a natural and sustainable way. If you are being mindful of your weight, use berries, which are low in sugar, as your main fruit. Don't forget to add the protein powder, which will provide lasting energy and better help maintain focus and concentration. If you don't have time to make your own, head over to Jamba Juice.
2. Green drinks. These juices are a combination of vegetables (and a little fruit to make them palatable). One 16-ounce drink may provide the equivalent of four to six servings of vegetables and one or two servings of fruits. Loaded with vitamins, minerals, and enzymes, green drinks help nourish and hydrate you, which will keep you feeling focused all afternoon. You can find them at many places, including Juice Generation, BluePrint, and Organic Avenue.
3. Solixir energy drinks. Created by health fanatic and entrepreneur Scott Lerner, Solixir makes energy drinks with natural ingredients and very little sugar. Two of the company's beverages are particularly helpful for stamina and concentration--without the spikes and crashes of many energy drinks. Using natural ingredients, such as ginseng, and a small amount of caffeine, the Awake formula is great for a subtle afternoon pick-me-up. Or, for a caffeine-free concentration boost, try Think, which contains gingko biloba.
4. Water. Amazingly enough, simple tap water can have profound effects on your energy levels. Dehydration makes you feel tired, hungry, and unable to concentrate. Being dehydrated can also have a negative impact on your digestion and blood pressure. Instead of shooting for the standard eight glasses, just have a glass of water every time you feel tired or hungry.
5. Coconut water. If drinking plain water bores you, try this. It has about the same electrolyte balance as your blood does, providing the minerals you need to nourish your circulatory system in a healthy way. It is also a great source of potassium, which has been found to help keep blood pressure in check. Hydrating your body can help you feel more energized, so coconut water can be a refreshing pick-me-up in the middle of a hectic day.
The Alternative Board, a peer coaching network for business owners, surveyed 300 of its members. Here's what's keeping them awake at night.
There are a lot of ways for a fledgling company to falter in its early days. Too many unique obstacles to name, I'd wager. But at any given time, businesses also face a number of common challenges.
To find out the biggest problems facing entrepreneurs today, I went to The Alternative Board (TAB), a peer board helping thousands of business owners connect and gather insight and advice. TAB surveyed 300 of its members. Here's what they identified as the top five biggest threats to their businesses:
A whopping 57 percent of TAB business owners identified government as the No. 1 threat to small business. Owners are worried about tax regulations, the limited number of grants and loans, marketing restrictions, and other rules and regulations. Still, 60 percent of business owners said they feel economy has improved since last year.
Thirty-seven percent of entrepreneurs identified sluggish demand as the biggest threat to their start-up. It doesn't matter how many positive signs economists think they see: Without customers, businesses can't grow.
If this is one threat you're particularly worried about, spend some time improving your online marketing. Strategies such as blogging, social media outreach, and search engine optimization are all great and inexpensive ways to increase your marketing efforts, especially because you can easily track their success.
A total of 22 percent of TAB members identified lack of capital as the biggest threat to their business.
There's no easy answer to this problem, but more and more product companies are turning to crowdfunding to bridge the gap. Consider successful projects like Hand Stylus and others. In just over a month, Hand Stylus raised $313,490, far exceeding its original goal of $25,000. Consulting with an angel investor, accelerator, or venture capitalist is another option.
Twenty-two percent of TAB entrepreneurs cited increased competition as a major threat to their success. The solution to this problem? Build a better brand. Credibility often starts with a great website, a focused online marketing strategy, and media coverage. Just as important, make sure you clearly communicate why you're in business--not just what you do. Instead of "We build websites," go for something more direct and goal-oriented: "We help businesses grow."
With looming changes requiring businesses with 50 employees or more to offer healthcare coverage come next January, it's no surprise that 15 percent of TAB members are worried about footing the bill. In the coming months, you must decide if you're going to cover all of your full-time employees or yank your coverage and pay the penalty. But there may be a third option. Check out fellow Inc.com contributor Gene Marks' informative post that explains an alternative.
How can you bootstrap when you have to build an actual product? And a complicated one, at that?
Perhaps you’ve heard the term “cash is king,” or the mantra “debt doesn’t kill a business, cash flow kills a business.” They are both correct. In the early stages of your business, cash is the most precious asset you’ve got. There are innumerable ways to burn through it and countless service providers that nibble away at it. How does a hardware entrepreneur prioritize spending and keep his or her efforts focused on the right things?
1. Milestones. Focus on key milestones that enable your business to get to the next level. “Next level” may mean secure a customer commitment, a government contract or grant, or equity financing. What is the first milestone you need to hit, and how much money do you need to get there?
2. Feasibility is nice, but prototype is better. In hardware, customers react to something they can touch and feel. A slide deck just doesn’t make the same impression. An early stage touch-and-feel prototype that shows form and fit can make a big difference, even if it doesn’t have all the functionality of your final product. Including some key functions would be even better. Make use of 3D printing services and ask yourself what it would take to show just the bare bones of the functionality you want to offer. Then assess how much money it would take to get there.
Work with outside partners. Choose partners wisely. Be very clear about what you will and will not pay for at this early juncture. Leverage reputable firms accustomed to early stage companies for custom electronics, mechanical design, software, and firmware. All this helps you move quickly. Be sure to spell out, clearly, that you own all design work in the contracts. Chances are, you’ll have to act as the program manager and coordinate everything.
4. Think virtual. Can you prototype your hardware without building up a lot of business infrastructure? The buzzwords are “virtual company” and “lean start-up.” To investors, that means their money will go toward product development rather than administrative costs. This will only take you so far, but when you’re spending those first tens of thousands of dollars, it can be a good choice.
Learning to run a capital-efficient company begins with stretching your cash far enough to get a prototype that launches you to the next level. Hopefully that discipline will never leave you--even if you do raise a lot of money later.
"A" players are rare, hard to recruit, and completely necessary to a start-up. Make sure you use them to your--and their--best advantage.
When you build your own business from the ground up, you must focus on bringing in “A” players: those who are above-grade and outstandingly talented.
How to spot an A player? They are the people who effortlessly switch from fedora to baseball cap, and perform the corresponding skill well. They constantly surprise you with innovative approaches and excellent work.
This is absolutely critical to your success. To put it bluntly, success is a matter of A players, or failure. At every stage--as you’re starting up, once you’ve expanded to a small business, and during rapid growth phases--every single person’s contribution is crucial. Good is never good enough. When you’re creating a company, it’s not about just passing the test. It’s about acing it.
Most people are not, unfortunately, A players. To be frank, you’ll encounter mostly B’s and even more C’s. C players should be managed out. B players should be evaluated: Can they rise to A level or not?
Your team needs to be optimized just like any other resource. Just because A players are excellent and exceptionally talented doesn’t mean they don’t need to be managed. Make sure that you are making the best use of their abilities by focusing their talents on projects that will be most beneficial to your growth.
For instance, I know one entrepreneur who took his A-playing employee and had her design an internal software system. It would have been less time-consuming and more cost-effective to use an off-the-shelf solution. That business ultimately went under (he has since launched another), but maybe it would have succeeded if his A players had been able to direct their talents towards helping the company achieve profitability.
Identify what each of your A-players is best at, and focus their energy and efforts on doing more of it. At Lexion Capital, we play to each person’s strengths. Instead of giving an employee a 360-degree review and having them work on the areas of weakness, we encourage them to focus on projects that utilize their best skills. By managing to strengths, you use each A player in an area where they have a natural proclivity for peak performance.
As an entrepreneur, you’re aiming for exceptional, not just good. By optimizing your staff so that each team member is performing at the peak of their talent, your business becomes a tight-knit team of experts. All aces.
When you feel your stress levels rising, fight back and relax your mind with this simple method.
Being a business owner is stressful. You can fight worry and anxiety over the long-term with smart interventions and healthy habits, but what if your problem isn't stress in general, but stress right now?
Maybe a deadline is looming or a crisis blossoming before your eyes and you can feel your stress levels rising. Your mind is racing and so is your heartbeat. You feel tense and you know you're neither your nicest self nor your most clear-thinking one. You need to relax and you need to do it now.
Can science offer a solution? Turns out, it can. Psychologists understand how to handle these emotions and offer a simple, three-part strategy for relaxing your stressed out mind.
PsyBlog outlined the process recently, explaining that the method "was actually developed by psychologists specifically for people with dementia (Paukert et al., 2013). Because of this it has a strong focus on the behavioral aspects of relaxation and less on the cognitive. That suits our purposes here as the cognitive stuff (what you are worrying about) can be quite individual, whereas the behavioral things, everyone can do." So what are the steps? The post lays out this simple ABC:
Awareness. This is the step most people skip. Why? Because it feels like we already know the answer. You probably already think you know what makes you anxious.But sometimes the situations, physical signs and emotions that accompany anxiety aren't as obvious as you might think. So try keeping a kind of 'anxiety journal', whether real or virtual. When do you feel anxious and what are the physical signs of anxiety?
Breathing. Taking conscious control of breathing sends a message back to the mind.So, when you're anxious, which is often accompanied by shallow, quick breathing, try changing it to relaxed breathing, which is usually slower and deeper. You can count slowly while breathing in and out and try putting your hand on your stomach and feeling the breath moving in and out.
Calming thoughts. It's all very well saying: "Think calming thoughts," but who can think of any calming thoughts when stressful situations are approaching and the heart is pumping?The key is to get your calming thoughts ready in advance. They could be as simple as "Calm down!" but they need to be things that you personally believe in for them to be most effective. It's about finding what form of words or thoughts is right for you.
OK, so this method isn't entirely in the moment. Noticing when you get anxious and what it feels like can ease stress over time, and you do need to prepare some simple calming thoughts in advance. But come on, you're a business owner - you know you're going to get anxious eventually, so it's probably worth getting your relaxation routine down cold so you can deploy it whenever your blood pressure starts to rise.
Need other ideas? Chewing gum and self massage (rubbing your neck and shoulders) all seem to help, as does a nice cup of tea. If stress is more of a chronic issue for you, check out the complete PsyBlog post which also discusses how being more active and changing your sleep habits can help.
What's your prefered relaxation technique?
These ten books have ten different (and powerful) approaches to accumulating personal wealth.
Previous posts have identified the best motivational business books of all time, and the best eye-opening books for the entrepreneur. Here's a list of books to help you get out of the rat race of debt and achieve the wealth that you truly deserve.10. The Richest Man In Babylon
George S. Clason's faux-biblical parables about acquiring wealth have inspired investors since the 1920s. Like most of the personal finance books that followed, The Richest Man In Babylon emphasizes saving over spending. However, the book also insists that charitable giving is equally as important, provided you don't allow those two whom you give to become dependent upon your gifts.
Best quote: "Budget thy expenses that thou mayest have coins to pay for thy necessities, to pay for thy enjoyments and to gratify thy worthwhile desires without spending more than nine-tenths of thy earnings."9. Rich Dad, Poor Dad
An eighth-grade dropout who spends less than he earns is smarter than a college professor who can't make ends meet, according to Robert Kiyosaki. Furthermore, while working for a steady paycheck can get you started, your best investment of your time and money is to buy property or a business. Or better yet, do what Kiyosaki himself did and write a best selling book.
Best quote: "The key to financial freedom and great wealth is a person's ability or skill to convert earned income into passive income and/or portfolio income."8. The Millionaire Fast Lane
Working hard, saving 10 percent, and retiring at 65 is a chump's game because 1) financial markets are simply too volatile and 2) you'll "be in a wheelchair" by the time you actually have enough to retire, according to author MJ DeMarco. A better strategy is to use the volatility of the financial markets to get rich quickly and enjoy it now.
Best quote: "Show me a 22-year-old who got rich investing in mutual funds. Show me the man who earned millions in three years by maximizing his 401k. Show me the young twenty-something who got rich clipping coupons. Where are these people? They don't exist."7. Your Money or Your Life
Contrary to popular belief, living more frugally increases (rather than decreases) your quality of life. Author Vicki Robin's cites many examples, such as the practice of working at a job that brings in less than the amount you pay out for childcare and "time saving" trips to McDonalds.
Best quote: "Conditions have changed, but we are still operating financially by the rules established during the Industrial Revolution--rules based on creating more material possessions. But our high standard of living has not led to a high quality of life--for us or for the planet."6. The Science of Getting Rich
Even though it contains nothing that even vaguely resembles "science," this 1910 book provided the intellectual framework for thousands of personal wealth-building seminars. Author Wallace Wattle believed that your ability to accumulate wealth is directly dependent upon how you think about it. In other words, if you believe that money is the root of all evil, you'll never be wealthy.
Best quote: "No man can rise to his greatest possible height in talent of soul development unless he has plenty of money."5. The Millionaire Next Door
Through research into U.S. households with a net worth of $1 million or more, authors Thomas J. Stanley and William D. Danko identifies most individuals as Under Accumulators of Wealth (UAW) who have a low net wealth compared to their income. They then provide advice (like take skimpy vacations) to help people achieve a higher net worth compared to their income.
Best quote: People whom we define as being wealthy get much more pleasure from owning substantial amounts of appreciable assets than from displaying a high-consumption lifestyle.4. Total Money Makeover
Anyone who's listened to Dave Ramsey's radio show knows that he's all about common sense: avoid buying on credit, pay cash for everything possible, get yourself out of debt and build an emergency fund. Rather than airy-fairy promises and feel-good anecdotes, he offers solid basic advice for the everyman and everywoman.
Best quote: "What I have done is packaged the time-honored information into a process that is doable and has inspired millions to act on it."3. The Money Book for the Young, Fabulous & Broke
Most personal finance books seem to be written with the about-to-retire set in mind. In this sprightly offering, TV star Suze Orman helps millennials navigate the basics of the financial world, like coping with huge student loans and a job market that, for young people, is nearly as dismal as the Great Depression.
Best quote: "You picked up this book because you are broke. Keep reading and you will discover what you need to know--and do--so you will not be broke forever."2. Secrets of the Millionaire Mind
If you're poor, it's because you think like a poor person and if you're rich, it's because you think rich, according to author (and multi-millionaire) T. Harv Eker. To make matters worse, poor people essentially program their children to be poor, by providing them with a worldview that makes wealth accumulation impossible. Not to worry, though. If you start thinking like a mogul, you can be one, too.
Best quote: "The vast majority of people simply do not have the internal capacity to create and hold on to large amounts of money and the increased challenges that go with more money and success."1. Think and Grow Rich
Way back in the 1930s, author Napoleon Hill interviewed a series of millionaires and philanthropists, starting with the steel magnate Andrew Carnegie. The result was a perennially best-selling work of self-development that encourages the notion that "greed is good"--as long as you're willing to share your wealth.
Best quote: "If you truly desire money so keenly that your desire is an obsession, you will have no difficulty in convincing yourself that you will acquire it. The object is to want money, and to be so determined to have it that you convince yourself that you will have it."
What other books should have been on this list. Leave a comment!
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Berkshire Hathaway's chairman has a reputation for eloquence in his annual shareholder letters. Here are five gems from over the years.
For decades, the unflappable chairman of Berkshire Hathaway has addressed shareholders in an annual letter that is part economics manual, part philosophical musing, and part conversation between friends.
Warren Buffett's reports on Berkshire’s earnings and losses over the years have transitioned smoothly between lessons in basic accounting, anecdotes from his personal life, and metaphors equating Woody Allen’s sex life to a clever investment strategy.
In April, editor Max Olson published a complete anthology of Buffett’s letters, billing it as a "lesson plan" covering the Omaha businessman’s views on business and investing. There are no guarantees these five lessons will help you replicate the Oracle of Omaha’s exact path to success, but they can't hurt.
Be optimistic about the challenges you face...
Buffett’s optimism, like that of many entrepreneurs, was tested in 2008 following the onset of the financial crisis. Berkshire Hathaway’s net worth decreased by nearly $12 billion that year, yet the chairman offered up this reassurance:“Amid this bad news, never forget that our country has faced far worse travails in the past. In the 20th Century alone, we dealt with two great wars (one of which we initially appeared to be losing); a dozen or so panics and recessions; virulent inflation in 1980; and the Great Depression of the 1930s. America has had no shortage of challenges. Without fail, however, we’ve overcome them.”
...And realistic about your successes.
Buffett acknowledges dumb luck as much as he discourages blind panic.
“This was a year in which any fool could make a bundle in the stock market,” wrote Buffett in 1995. “And we did. To paraphrase President Kennedy, a rising tide lifts all yachts.”
Similarly, in 2006, Buffett credited the weather for a $16.9 billion gain. The lack of natural disasters boosted insurance payments--a business in which Berkshire is heavily invested.
“Mother Nature, bless her heart, went on vacation. After hammering us with hurricanes… she just vanished,” he wrote, “Last year the red ink from this [insurance] activity turned black--very black.”
Thank those who feed your success.
Buffett may be the third richest man in the United States, but he knows when to thank the little people--and the not so little people. Buffett’s praises of his support team and business superstars might just deserve a book of their own.
In 2006, Buffett praised GEICO's then-CEO Tony Nicely for his “staggering” productivity the year before. “Last year I told you that if you had a new son or grandson to be sure to name him Tony,” Buffett wrote. “But Don Keough, a Berkshire director, recently had a better idea. He wrote me, ‘Forget births. Tell the shareholders to immediately change the names of their present children to Tony or Antoinette.’ Don signed his letter ‘Tony.’”
Be cautious of the advice you buy.
Buffett advised his shareholders to question the wisdom of large institutions when it comes to investing--even his own. Paraphrasing a story told by economist Ben Graham, Buffett illustrated how established leaders can get caught up in their own hype.
In Buffett’s story, an oil prospector about to enter heaven is met by St. Peter and told that he is qualified for residence--but the compound for oil men is already packed. The prospector thinks for a moment and then asks if he can say just four words to the current occupants. St. Peter agrees, so the man cups his hands and shouts, “Oil discovered in Hell!” Immediately the compound empties in a flurry of prospectors racing to the underworld. Impressed, St. Peter invites the man in. “No,” says the man, “I think I’ll go along with the rest of the boys. There might be some truth to that rumor after all.”
But be patient with those who dispense it.
In 2000, Buffett addressed the subject of his own fallibility--and mortality--with characteristic poise.
“There is a negative that recurs annually,” he wrote, ”My partner [Charlie Munger] and I are a year older than when we last reported to you.”
The solution to such a problem, Buffett explained, was to appoint young talent to key positions within Berkshire’s interests. “Mitigating this adverse development is the indisputable fact that the age of your top managers is increasing at a considerably lower rate… than is the case at almost all other major corporations,” he wrote.