Archive for January, 2009

For 17 years in the Eighties and Nineties, I worked for CMP Media Inc., a publisher of technology magazines based on Long Island. The company’s founder had an expression he liked to use in times such as these: “There’s a recession but we’re choosing not to participate.” Those were very motivating words to hear in scary times. CMP did have occasional layoffs during the years I was there. While each layoff was difficult for a time, the company always grew stronger shortly afterward. By cutting 5% of the work force, performance improved because it was weakest 5% who left. Read more

Last night my wife’s employer, Expo Design Center, called to tell her she needed to dial in to a conference this morning at 8 am. “The store’s closing and you’re getting laid off!” I said. Actually, not just her store. All 34 stores in the Home Depot subsidiary chain. She’s been there for about three years in tile and flooring sales; she enjoyed the job and her customers loved her. But I was really excited last night – and even more so this morning – when she got the news.

Before I explain why I was so pleased by the news of her layoff, there are some interesting things to say about Expo Design Center. This was an absolutely beautiful retail store with gorgeously displayed high-end merchandise, expert salespeople, and hapless management promulgating bizarre policies.

For example, salespeople were on straight salary, but had sales quotas to fulfill. However, there were no consequences if sales quotas weren’t achieved. Interestingly, the salespeople were often competitive with each other about hitting numbers even though they didn’t benefit or lose regardless of the outcome. So Expo, on one level, was pretty smart. They got people to act as if they were on an incentive plan even though they weren’t. Salespeople were told to get customers to sign up for credit cards, and whenever my wife remembered to ask the customer, they usually signed up. If Expo offered my wife $25 for each credit card signup, she would have asked every single time. They also pressured salespeople to sell Expo’s customized design services. As with credit cards, no incentive for success and no penalty for under-performing. So, no reason to remember to ask.

How is it that a company as big as Home Depot can miss the connection between pay and performance? Because there is no sense of entrepreneurship in this company. It’s pretty much like the military (not to take anything away from the military).

One more dumb practice: When a sales associate has been with the store for six months, she is eligible to apply for advancement—for example as a department supervisor. The supervisor has a hugely greater responsibility than the associate. They are directly responsible for sales performance, have to answer to store management directly, and are responsible for training new people in the department. And for this significant increase in responsibility, they are given…..50 cents an hour more. There is no doubt the store would have had more sales and better systems if my wife and others had stood up and agreed to become managers. But 50 cents?

Finally, why I am so glad: because she’s going to work with me on our business ventures, becoming part of the ongoing entrepreneuring of America. Her involvement will double our revenue in 18 months. And now she’s an owner, not an unappreciated employee.

Browsing through my Google Reader this morning I came upon The Franchise King blog, which is written by a franchise broker (someone who is paid by a franchisor when a prospect he brings in buys a franchise). The post starts with a photo of a family (above). The headline:

Microsoft is getting into the downsizing game, and in a huge way. When Microsoft fires 5,000 of it’s [sic] workers, all of us need to take notice….”

It goes on,

“Do you realize that 5,000 families have been impacted? This is the real story. I remember the 3-4 times when it happened to my dad. I remember the look on his face, each and every time it happened. It was a mixture of anger, sadness, and worry. As kids, (3 of us little munchkins) it was quite scary. Now, there are 5,000 families feeling what our little nuclear family felt. They are feeling it today. The question one needs to ask themselves [sic] is this: “How many more times will I have to feel this way before I get the courage to start owning what I do?”

Can you hear me over the movie soundtrack of the King’s melodrama? I’m hearing a John Williams-y score reminiscent of gathering storms: timpani drums, brooding cellos, a French horn perhaps. I give him credit for going after the laid-off ‘Softies – if anyone has money to spend on a franchise, it’s probably those folks.

The King’s line of reasoning plays on the emotions of potential readers. It is very appealing to say to oneself, “This time I’m gonna stick it to the man and be my own boss!”

The King will probably make some good money this year selling franchises to families on the rebound. I am a franchisee myself, in addition to being a coach to entrepreneurs. I bought my franchise when I was rebounding from a lay-off and a bunch of other things that had me very low. I have been in my franchise for seven years and have been highly successful—I would guess I am the most profitable franchisee in my system—but my decision-making process was all wrong. I was running away from something, not running toward a vision of my future. And I was highly susceptible to the sales pitch of a franchise broker who was a little more subtle than the King, but just as effective.

If you have been laid off, there is a process you can go through to get to a place where you can make good decisions about what to do next, and to evaluate whether getting another job or starting a business is the best solution. The first step is to ignore the pleas of people trying to make money off your hardship. If you want to know other steps in the process, get in touch with me. If you have advice of your own on this issue, please comment here.

Here’s another from the trove of responses I received from newsletter subscribers on the biggest challenge they’ve faced when considering entrepreneurship.

At this time in my life, I am still having the itch to be an entrepreneur, I have to say my biggest challenge is the time commitment required to own a business, as a single mother, right now the 40 hour week seems much better in terms of the amount of time I can have with my kids rather than a commitment to owning a business.

Amen! Someone who gets that, to be in business you have to work your tail off to be successful by any measure. I have read the 4-Hour Workweek and many other best-sellers on related subjects. The fact is too many people buy/start a business when they should not. They mistakenly believe they can juggle, outsource, delegate, partner and otherwise deflect work. I have not heard first-hand of a startup you can do in your spare time that’s worth doing.

But what if you get super-efficient, hire a virtual assistant, organize like crazy, time-block, schedule email time for only 15 minutes a day, sedate your toddler, and free up a couple of hours? Surely that can create the space to allow you to start a business and have a shot at success? Well, I guess it all depends on what the definition of “success” is.  Great ideas for your business come not just from physical time, but from being available to your business….to think, to obsess, to be totally pre-occupied, full-body immersion.

I applaud people who have the guts to sit out entrepreneurship and have a real job, 40-50-60 hours, paycheck, vacation, benefits. But I’m always up for a debate, so feel free to tell me I’m all wet.

I wrote the other day about the benefits of having a professional coach working with you if you are an entrepreneur or business owner. Every day my clients reinforce that message.

Today I was on a coaching call with Nancy, a financial planner for a major brokerage in Denver.  Like a lot of financial planners, she has an internal partnership with another planner who joined the firm through a merger about a year ago. One of the big issues she has been wrestling with is the integration of their “books” — their respective accounts. While she and her partner, Russ, get along very well, they haven’t cross-fertilized their accounts so that each can handle the other’s clients. Why is that even important? Well, there’s a lot to be gained by having the crossover of coverage. For one thing, Nancy and Russ have different but very complementary skills. One is a technically-oriented trader who makes investment decisions based on charting stock movements; the other is more intuitive. Also, Nancy wants to be able to slow down a bit in a few years–she’s 59, Russ is 39. They have regularly scheduled calls with clients every month. Nancy told me, “Those calls are a good opportunity for me to have Russ sit in, and then I can introduce him to a few of my clients and then the following call get him to handle my client himself. And vice versa.”

Well, yeah! How did Nancy come to this obvious idea? She told me, “I just had never talked through the problem before. Now it’s so obvious.”

Coaching allows you to get the idea out in the daylight where you can examine it. Rather than sitting and stewing with something long enough to get distracted and then turn to something else, with coaching you can focus with a trained advocate, articulate the idea, and then have a next step. The whole idea of business coaching  boils down to that, and it’s very powerful.


Like many of you, I spent a fair bit of time in December working out my business strategy for the new year. I noticed a few things about the process that may be helpful to others:

1. Get a Coach. If I were not working with my business coach, I would not have written down my strategy and goals. That doesn’t mean I would not have had them, just that I’d be carrying them in my head instead of looking at them tacked to my bulletin board. I’m not a big fan of long business plans. Just a one-page guide is all I (or most small businesses) need. Had I not written down my one-page plan, the likelihood of my remembering or acting on my strategy would be significantly diminished.  Do you have a written plan? There are many books out there–entire books on how to do a one-page plan!–and they are great resources. (Be sure to check out Tim Berry’s Plan-as-You-Go Business Plan.) To end up with one good page, you may need to gather many pages of data based on hours of research, but in the end it’s pretty simple:

  • Start with an objective, numbers-based summary of the prior year.  Sales, pre-tax profit, number of individual accounts, average revenue per account, margin per account, variable and fixed expenses, and any other things you consider drivers of the business.
  • Go account by account and project how much more business you will receive from existing accounts this year; how many new accounts you will open; and how many you will lose.
  • Will your pricing go up, down or stay the same? If you have a good business, it should go up if your value is going up. (Just for fun, read Seth Godin’s recent post on pricing.) Your value goes up the more each customer relies on you. As you build market share within an account, their switching cost rises. This makes you worth more to them. My prices have increased every year I have been in business and few customers have complained.
  • Now you can project your revenues and expenses.

Do you need to have a month-by-month revenue and sales budget? Not necessarily. I do it quarter by quarter. There’s too much variation month by month; and I do my accounting on a cash instead of accrual basis. But I have a pretty good idea of what should be happening season by season, quarter by quarter.

2. Don’t Worry about Beating the Competition: Focus on  AVOIDING Competition. In my franchise business, I am planning for an 88% increase in sales, which comes on top of a similar increase over the year before. But we’re in a recession, right? Not in the market segments I am focusing on. I have always had a distaste for competition, and like to go where others won’t find me. A business school professor of mine once called this competition-free-zone that entrepreneurs should aspire to “the space between the elephant’s toes.” I’ve had that image in my mind since I started my business. Where I find potential competition, my strategy is to turn foe into friend. I just gained a very smart business partner who was preparing to ramp up his marketing efforts in the same markets I have targeted. Instead, I will focus on marketing (since I am much further along than he is) and he will receive a steady stream of high-margin revenue. Win-win.

3. Hire More People. I am hiring a full-time account manager this quarter, another suggestion made by my coach. When I described to her my strategy and how it involved taking our base of several hundred active accounts, increasing our volume with each one and expanding the base at the same time, it became clear that I cannot rely on my very effective email and direct marketing alone to accomplish this goal. I don’t want a boiler room of phone callers. But I do realize I can’t own all the relationships any more. The business has become bigger than me. What a nice problem to have.

4. I am continuing to make investments in my businesses, particularly in CRM software and marketing.

What’s your plan for small business success in 2009?