Archive for August, 2012

Snake in the Grass Syndrome: Small Business Channel Partners


Often small businesses build relations with various suppliers and channel partners only to later find the relation is not as strong as first thought. The small business entrepreneur needs to protect against interruption occurring in the supply chain and make sure that everyone involved is on the same page.

I have had the unfortunate experience of working with a channel partner only to find later the channel partner only had its own interests in mind. I found the channel partner did not share a common vision and did not want to genuinely build a lasting relation. After working hard to build a good relation, the channel partner let the company down by not performing up to expectations. I call this the “snake in the grass” syndrome.

Because of this experience, I encourage small business entrepreneurs not to put all their eggs in one basket. As much as an owner likes a particular channel partner, competition is good and promotes efficiency. An interruption in the supply chain can have devastating effects on the small business. Consider what would happen if a missing link exists in the supply chain. Finding a new channel partner at the last minute is not easy and could harm the quality of the product or the service provided to customers. I suggest finding at least three suppliers for every slot in the supply chain to avoid last-minute problems.

Another step a small business entrepreneur can take is to make at least an annual evaluation of all channel partners in the supply chain. A business is only as strong as the weakest link in its supply chain so it pays to remove weak channel partners and replace them with stronger ones. I suggest developing a formal written evaluation form and think about what is important to the business.

Do you have a procedure to evaluation channel partners in your supply chain? I want to hear your thoughts? If you want to know more about how to remove the “snake in the grass” I urge to get help now. Learn more.

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David and Goliath: The Dyson story


The Dyson vacuum cleaner story is an interesting case study about a man taking on the established vacuum cleaner industry by believing in a superior product. Dyson believed in making the world better through ingenuity and took on the giants. Dyson took on the role of the consummate protagonist (Carruthers, 2007).

Dyson grew up in a family in which he had little direction and he developed a distaste for conventional institutions. Dyson’s parents knew of his rebellious side and wanted him to take up teaching, become a doctor, or become a professional. Dyson gained an understanding of industrial product design through the art school he attended in London (Carruthers, 2007). Entrepreneurs typically have a disdain for the way conventional businesses do things and have it in their DNA to reject conventional wisdom. Rebellion is an integral part of the entrepreneur’s mold.

Entranced with the idea of improving the vacuum cleaner, Dyson began his adventure by stripping down the Hoover Junior to understand its poor performance. Dyson introduced the cyclone and clamber in developing his prototype. At first, Dyson had no fear, but balked when low-income, a big overdraft occurred, and he faced the uncertainty. Dyson experienced several brushes with bankruptcy (Carruthers, 2007). Entrepreneurs have to learn how to deal with their fear and overcome it by moving on. Keeping an eye on the opportunity trumps the original fear, but the entrepreneur faces failure each time he encounters a hurdle and has to deal with it in a positive way. Risk-taking is scary even to the most accomplished entrepreneur.

Jeremy Frey had mentored Dyson and provided the original funding for his venture. Dyson met Frey at college, and the millionaire and founder of Rotork served as an innovative person with whom he could identify. Dyson spent three years working on thousands of  prototypes and testing them. Dyson found industry unwilling to accept or license his ideas, but Japan did eventually license the Apex and G-Force products. Dyson relied on inventing and marketing himself instead of the conventions of big business and its marketing tricks (Carruthers, 2007). Entrepreneurs are bold people who reject established mediums and want to improve on them, but fighting with the enemy has its risks.

Dyson decided rather than to license his work to produce the product himself. Self-manufacturing the products, obligated Dyson to raise capital by borrowing against his property putting his family at risk. Dyson decided to take this path and export directly to the to the United States (Carruthers, 2007). This experience shows entrepreneurs have to look danger square in the eye and have the confidence to deal with it.

The last challenge for Dyson is to bring the product to the United States, the world’s largest market, where he must beat Hoover, Amway, and Black and Decker. Although Dyson set up manufacturing in Asia, he must confront the Big Three on their own turf in the United States. To bring the product to the United States, Dyson has to distastefully import the product from Asia and play by the rules. Dyson successfully captured enough of the United States market, but faced intense competitive pressure from his rivals. Hoover infringed on Dyson’s patent rights and Dyson filed suit to protect his business. Despite the challenge, Dyson wins the battle and confirms his success (Carruthers, 2007). Entrepreneurs often want to create the rules they play by, but sometimes have to conform to win the larger battle. The Dyson story shows how entrepreneurs can persist and improve existing products. David beat Goliath!

What have you learned from the Dyson story? Please let us know your thoughts. If you need help getting started I urge you to seek our help now. Learn more.

References

Carruthers, I. (2007). Chapter 5: The Entrepreneur’s Story Great brand stories Dyson: The domestic engineer: How Dyson changed the meaning of cleaning (pp. 85-99). London: Marshall Cavendish Limited.

 

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Defining Roles: Visionary versus Missionary Leadership


Many times people starting a new business find a partner they know little about. Defining the roles partners play in the business at the start is important to avoid problems later. Looking at a live example might help identify the problem and discover some lessons learned from forming a new partnership. This story applies to either a partnership or a small business corporation such as a limited liability company or an S corporation.

Joe and Jerry worked together as real estate agents at a local brokerage and decided they wanted to start their own. Joe had extensive experience in management and finance. Jerry came from the ministry after serving as an Episcopal priest. Joe and Jerry worked well together as real estate agents, but knew little about each other otherwise.

The two men worked together to develop a plan to start their own business. Joe and Jerry decided to divide the business equally and make an equal contribution. Joe and Jerry did not know is the role each would play in the business, but Joe believed Jerry had excellent marketing skills because of his dealings with people. Jerry believed Joe had excellent administrative and financial skills to run operations, but neither man shared their beliefs with the other or formalized the role each would play in running the business.

The men did work together to find a real estate office available at an excellent location and proceeded to lease the building. Jerry wanted to make the office comfortable and professional insisting on first-class furniture and equipment. Joe wanted to find sales Associates as quickly as possible to train and ramp up sales.

After leasing the office space, the two men worked to redecorate the office and lease furniture and equipment. Jerry took the lead on redecorating the space and Joe worked on incorporating a business. Each man did what he thought important to start the business and prepare for the grand opening.

Once the office opened, Joe worked feverishly to recruit sales agents to start finding business. Jerry showed up occasionally and worked from home. Joe quickly recruited 16 new agents and began to train them, while Jerry continued to work from home expecting a paycheck despite not having enough revenue to earn a salary.

Joe and Jerry started having discussions about how to develop enough revenue to meet continuing expenses. Joe continued working feverishly to train agents and teach them how to sell. Jerry continued to work at home contributing little to the operation. Jerry continued to insist he needed a paycheck despite a lack of revenue. Joe argued both he and Jerry should work the plan keeping the vision in mind for the future. Jerry continued to espouse his mission to earn a paycheck.

Although the sales agents started to develop, the revenue did not keep pace with Jerry’s mission for a paycheck. Joe felt good about the developing sales agents who started to ramp up sales. Jerry began withdrawing from the company because his sole mission relied on earning a paycheck. Joe started to feel overwhelmed because he had to do everything himself.

The lesson learned from Joe and Jerry’s experience is to know your partner and decide on their roles before starting a business. In this case, Joe took the role of the visionary leader to follow plan. Jerry’s only role came from his mission to receive a paycheck. A visionary leader needs to have teamwork. The missionary leader has more selfish motives and sits back waiting for business to develop.

Before taking on a partner consider not just how to divide profits, but what role each will play in running the business. Consider the expected time the business needs each partner to devote and what to hold each partner accountable for. Decide how often partners will meet and go over plans to stay on track. A few questions to ask include:

  1. How does the company track and share information?
  2. How does the company decide on use of available capital?
  3. How are organizing goals decided and carried out?
  4. Who is responsible for carrying out the strategic plan?
  5. What steps does the company need to seek more assets?
  6. Does compensation match with the role of the partner?

Are you thinking of taking on a partner? Have you defined the roles of each partner before starting your business? I urge you to do so before problems start to develop. Do you want help in setting up a plan and agreement for your partner? Learn more.

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Entrepreneurs Connect Where Others Fear to Tread


Entrepreneurs have the unique ability to connect with consumers and find out what they need. Big companies usually brand their products and use already proven models to produce profitable lines of business. These companies do little to connect with the consumers they aim to serve once they find a working model, but the entrepreneur is in a unique position to see what works for consumers and what does not. The entrepreneur continually reaches out to consumers to note changes and find ways to serve them (Rae, 2004).

Bruder (2010) offered several accounts of entrepreneurs who wanted to reach out to consumers and develop their stories to personalize their products and show consumers why they benefit them. Bruder explained such accounts humanize the products to customers and show them why their products will solve their problems. Big companies often overlook the human touch and personal connection with consumers. Rae (2005) developed a model showing entrepreneurs learn their businesses from contact with consumers through personal and social connections, recognizing opportunities from cultural exchanges, and engaging with consumers. Entrepreneurs have more intricate relations with consumers and can better address their needs by learning and gaining experience from such dealings.

Thilmany and Loughlin (2010) suggested entrepreneurs should never stop learning and finding ways to improve their products. Experience with consumers helps the entrepreneur understand flaws in the competition and shows commitment to solving problems consumers face with existing products. Conversely, big businesses work their model until it matures and starts to falter before exploring flaws giving the entrepreneur an edge because of the closeness to the consumer.

Rae (2004) explained savvy entrepreneurs should spend more time working on the business than in the business. Opportunities come from learning what works and what does not. Working on the business spreads and minimizes risk, attracts and retains employees, and improves developing innovations. Working on the business helps build customer relations, develop managers and teams, and develop new markets.

Do you as a small business owner go where others fear to tread? Please let us know your thoughts, or if you want help I encourage you to contact us now to learn more.

References

Bruder, J. (2010). Turning business owners into stars of their own stories, New York Times, pp. B.8-B.8. Retrieved from http://search.proquest.com/docview/757765326?accountid=35812http://linksource.ebsco.com/linking.aspx?genre=article&issn=03624331&volume=&issue=&date=2010-10-14&spage=B.8&title=New+York+Times&atitle=Turning+Business+Owners+Into+Stars+of+Their+Own+Stories%3A+%5BBusiness%2FFinancial+Desk%5D&au=Bruder%2C+Jessica&isbn=&jtitle=New+York+Times&btitle=

Rae, D. (2004). Practical theories from entrepreneurs’ stories: Discursive approaches to entrepreneurial learning. Journal of Small Business and Enterprise Development, 11(2), 195-202. doi: 10.1108/14626000410537137

Rae, D. (2005). Entrepreneurial learning: A narrative-based conceptual model. Journal of Small Business and Enterprise Development, 12(3), 323-335. doi: 10.1108/14626000510612259

Thilmany, J., & Loughlin, S. (2010). Taking care of business: Entrepreneurs share their success stories. Biomedical Instrumentation & Technology, 44(6), 472-473. doi: 2229159061; 56859991; 68217; BMIT; 21142509; INODBMIT0006941046

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Entrepreneurs: Knocking on Heaven’s Door


Alexander Graham Bell once said, “When one door closes, another opens; but we often look so long and so regretfully upon the closed door that we do not see the one that has opened for us” (Bell, n. d.).

Often the entrepreneur dwells on the negative instead of pursuing more positive leads. The doors of opportunity are all around us, but when a prospect shuts the door we spend too much time looking for reasons the door shut on us. The savvy entrepreneur moves on and does not dwell on doors shut by prospects. The novice entrepreneur spends too much time trying to find out what went wrong. Entrepreneurs can learn from the shut door, but should move on. Often the reason comes out later anyway. So why dwell on misfortune instead of focusing on new opportunities?

The next opportunity may show the entrepreneur what went wrong the first time around, but if the entrepreneur does not pursue the next opportunity, likely he or she will not learn nothing from the lesson of the closed door. Comparing experiences helps the entrepreneur see how effective different strategies are. The entrepreneur should not keep taking the same steps if the results do not change. Trial and error helps entrepreneurs open doors the next time around.

Extensive planning and analysis is for managers, not for entrepreneurs. Entrepreneurs find success by failing and trying new approaches. Dwelling on closed doors puts the focus on failing, but trying new approaches focuses on opportunities. The more the focus is on new opportunities, the greater the chance of succeeding by learning from mistakes (or failures).

Each failure is a step closer to the next success and entrepreneurs should look at failure not as failure, but as a mover closer to success. Failures are a challenge all entrepreneurs must overcome to see success, but they should not let failure paralyze them. Why fail when you can succeed?

I encourage you to start find the motivation to look at opportunities instead of failures. Start knocking on heaven’s door. You can start now by signing on with us to help you. Learn more.

References

Bell, A. G. (n. d.). QuoteWorld.org. Retrieved from http://quoteworld.org/quotes/1168

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Does Your Business Need an Attitude Adjustment?


Think about why some companies succeed despite their characterization as risky. For example, one of the most risky businesses people think of is to start a restaurant. The failure rate for restaurants is high, but those that succeed have some special qualities. A good business needs to adapt to what people want.

I am originally from Chicago and I distinctly remember a restaurant chain that became very successful because of its ability to provide what people want. If you have ever heard of Lettuce Entertain You Enterprises, Inc. you may have a good idea what I mean. Richard Melman with Jerry Orzoff ¬†started Lettuce Entertain You in 1971 with $17,000. Melman wanted to start an upbeat restaurant directed at young singles interested in rock music, casual clothing, and healthy food. R. J. Grunts became the company’s first eatery in Lincoln Park followed by Fritz That’s It! in Evanston and Great Flying Food Show in 1974. In 1975 Lettuce Entertain you introduced Jonathan Livingston Seafood and Lawrence of Oregano opened in 1976. Lettuce Entertain You mastered the avante garde casual restaurant business with its unique themes (Anonymous, 2012).

A good business needs to anticipate what customers want like Melman did with Lettuce Entertain You. Traditional restaurant startups do not typically think about what will make a restaurant stand out to a certain crowd and will take a more conservative route. A good entrepreneur has an open mind and anticipates providing a service or product customers will want. Lettuce Entertainment did not stop with the off-beat casual idea, but opened more restaurants with more ¬†ambience like the Pump Room on Chicago’s Gold Coast and Ambria in partnership with renowned French chef Gabino Sotelino. Later Melman introduced several other themes by opening a series of other restaurants (Anonymous, 2012). My personal favorite is Tucchetti’s.

An open mind is important to becoming a successful entrepreneur. This notion reminds me of a TED talk by psychologist Jonathan Haidt I viewed not too long ago. Haidt explained five key differences between conservatives and liberals (Haidt, 2008). Entrepreneurs with closed minds often do not succeed because they fail to anticipate what consumers want. Lettuce Entertain You showed how new themes can entice people.

Think about your business! Does your business need an attitude adjustment? Lettuce Entertain You provides a good example of how an open mind can open doors for a new business and keep customers happy. If you want to start a new business I urge you to start now to explore how to keep an open mind by working with us. Learn more.

References

Anonymous. (2012). Lettuce Entertain You Restaurants. Lettuce tell you our history, from http://www.leye.com/about-us/history

Haidt, J. (2008). Jonathan Haidt: The moral roots of liberals and conservatives. Retrieved from http://www.ted.com/talks/jonathan_haidt_on_the_moral_mind.html?quote=339

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