This guest post was written by Bob Reiss (@bobsreiss), the author of Bootstrapping 101. Reiss is an Army veteran and graduate of Columbia University and Harvard Business School. He has been involved in 16 startups and is a three-time INC 500 winner. He has been the subject of two Harvard case studies and is a frequent speaker at University Entrepreneurial classes.

The No. 1 need for business success is a customer.

That’s pretty obvious, so why am I telling you this?

It may be obvious but most companies seem to quickly forget this essential fact. Small and startup companies desperately need customers to begin their journey to profits and sustainability. Many large Fortune 1000 companies forget the customers who made them successful.

Just look at all your daily life experiences in dealing with a phone company, an airline, a utility, your cable provider, a government provider, etc. In an effort to develop systems to deal with their size, they become impersonal and forget about the one constituency that propelled their success. In turn, the customers become increasingly frustrated with their treatment and become open to changes in their buying behavior.

You might posit that orders are most important, but, orders do not create more orders. Only satisfied customers do that. Happy customers whose expectations are met or exceeded become your best salespeople and effectively promote your wares by word-of-mouth, at no cost to you. You can’t buy more effective advertising than that.

Satisfied customers are likely to become long-term customers who will look forward to buying your new offerings. It is much easier to increase revenues through existing customers than to find new ones and much less costly. The bonus is that these satisfied customers get you new ones through singing the praises of your company, its products and/or services to their friends, family, and acquaintances.

Unlike other forms of media advertising, there is no cash outlay for this. There is, however, an investment in maintaining the quality, service, need fulfillment, value, timelines and warranty of your offering. If you deliver on these actions, positive word-of-mouth will enable you continued growth and sustainability. Likewise, if you fall short, you’ll have to deal with negative word of mouth, which can rapidly lead to your decline and is difficult and costly to reverse.

Your orders from products or services will eventually yield revenues which can be used for payroll, expenses, taxes, innovation. Most importantly, continued sales leads to profits.

So if we were to simply chart what we’ve said above, it would look like this:

Add the sales element to this equation and we have what I call the “Anatomy of a Business.”

Sales is often demeaned and downplayed by academia, students, ordinary people and even some business people. However, sales is a profession and key to any organization’s success. As we see above, the customer is also a key element because they make purchases, which creates cash flow–the lifeblood of a business. Selling is the process of persuading customers to initiate these orders. It can be a simple quick one-on-one encounter or a complex long-term process. Without sales, you will not get orders.

These basic principles are easy to forget but it would benefit all entrepreneurs to remember the anatomy of a business in their hectic schedules Of course, it gets more complicated when competition is added to the mix. When you add in dealing with other issues like having the right resources to accomplish your goals and creating a culture of integrity and innovation, remembering customer satisfaction can fall by the way-side.

So, amid all the chaos, problems, uncertainties, new opportunities and setbacks, don’t forget for a moment how all your decisions and actions affect your customers. Neglect them and be prepared to pay a high price. Satisfy them and prosper.

(This article first appeared at www.entrepreneur.com – 2/23/10)

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It’s not a secret that we are working on something cool in the past few months. I am extremely excited to tell you that our little startup company, Primitus, is almost ready to launch. One year ago, Primitus was only a dream. But thanks to our investors, it’s becoming a reality now. After getting some early feedback on Hacker News, we have decided to build our first product – “Backbone“, an easy and affordable Human Resource Management tool for small business. Today we announced that we’re just few days out from beta release.

Let’s show you some of the basic features, benefits, and a few screenshots.

Why?

We believe that traditional enterprise HR management systems are too expensive and difficult to use, especially for small business. Because of these reasons, many small businesses hack together solutions for many of their HR problems with Microsoft Excel, pen and paper, or nothing at all. We want to reduce the massive technology gap between large enterprise and small business.

In this talent age, companies with the best talent win. Small business cannot ignore the importance of talent management. We want to simplifies HR management so small businesses can focus on developing their talented workforce.

Unlike complicated enterprise HR systems, Backbone is built for small business from day one. It was created to make solving simple HR issues simple. We looked at the needs of small business managers, included the best features, and take away everything else.

Benefits

Below are some of the goals we want to accomplish with Backbone:

- Help small businesses gain control over and do more with their workforce
- Give managers rich insights into their workforce
- Save time, improving HR operational efficiency
- Foster a more inclusive and collaborative culture
- Better retention and higher productivity
- Make information about company activities more visible, accessible and measurable

Twitter-like Microblogging Feature

Like Twitter and Yammer, Backbone allows users to post updates of their activities, follow others’ updates, and share great resources. Unlike Twitter and Yammer, Backbone also combines other business activities into the news feed. In the Backbone’s activity feed, users not only can see group and personal updates but also other business activities happening inside the application. In this way, managers can monitor all activity in one single place.

Employees Database 2.0

In the web 2.0 era, the old boring employees’ profiles don’t work anymore. Backbone tries to redefine what a worker’s profile should be. We make it easy to identify employees’ hidden talents through the tagging feature.

Analytic Dashboard

Our analytic reports help small business better understanding of HR’s overall performance and employee productivity.

Expense Reporting

Our application enable workers to take care of their own expense reports. Moreover, Backbone streamlines the processes for submitting and approving employee leave. Employees use it to view their absence balances, record their time off requests, and track the approval process of their requests. And managers can look at employees’ current, planned, and historical absence events; monitor absence trends as a predictor for employee engagement.

And more…

Company goals management, group management…etc.

Interested?

If you want to sign up for the private beta, simply go to our pre-launch page and fill out the sign up form:

http://backbonehr.com

The product is free during beta and we will donate $1 to Kiva.org for each qualified beta account. If you got a special demo invitation code from other blogs, you will get a special discount in the first year after the introductory period.

We look forward to hearing your feedback and incorporating your suggestions.

Thank you so much for your support!

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This guest post was written by Bob Reiss (@bobsreiss), the author of Bootstrapping 101. Reiss is an Army veteran and graduate of Columbia University and Harvard Business School. He has been involved in 16 startups and is a three-time INC 500 winner. He has been the subject of two Harvard case studies and is a frequent speaker at University Entrepreneurial classes.

This article is based on the contents of the book Bootstrapping 101.

What’s important to the success of small-business owners and entrepreneurs? Knowledge, skill and talent.

However, many competitors have the same traits you do. The key to beating the competition and achieving success is mental, reflected in one’s attitude, totally controlled by the individual and requires no cash. This holds true in most human endeavors besides business–in sports, the arts and politics.

How many times have we seen the underdog team or player win over the more talented opponent? The difference is often attitude.

These 12 attitude attributes can put you in the right mindset for achieving entrepreneurial success.

1. Have passion for your business.
   Work should be fun. Your passion will help you overcome difficult moments and persuade people to work for you and want to do business with you. Passion can’t be taught. When it wanes, as it surely will in difficult times, take some quiet time. Whether it be an hour or a week, take inventory of all the reasons you started the business and why you like being your own boss. That should renew your passion.
   
   
2. Set an example of trustworthiness.
   People have confidence in trustworthy individuals and want to work for them in a culture of integrity. The same is true for customers.
   
   
3. Be flexible, except with core values.
   It’s a given that your plans and strategies will change as time goes on. This flexibility for rapid change is an inherent advantage of small over large business. However, no matter the pressure for immediate profits, do not compromise on core values.
   
   
4. Don’t let fear of failure hold you back.
   Failure is an opportunity to learn. All things being equal, venture capitalists would rather invest money in an individual who tried and failed founding a company than in someone who never tried.
   
   
5. Make timely decisions.
   It’s okay to use your intuition. Planning and thought are good. But procrastination leads to missed opportunity.
   
   
6. The major company asset is you.
   Take care of yourself. Your health is more valuable than the most expensive machinery or computer software for the company. You don’t have to choose between your family or your company, play or work. Maintain your health for balance and energy, which will, in turn, enhance your mental outlook.
   
   
7. Keep your ego under control.
   Don’t take profits and spend them on expensive toys to impress others. Build a war chest for unexpected needs or opportunities. This also means hearing out new ideas and suggestions no matter how crazy they sound.
   
   
8. Believe.
   You need to believe in yourself, in your company, and that you will be successful. This confidence is contagious with your employees, customers, stakeholders, suppliers and everyone you deal with.
   
   
9. Encourage and accept criticism graciously. Admit your mistakes.
   You need to constantly work on convincing your employees that it’s okay–even necessary–to state their honest opinions even it if conflicts with the boss’s opinion. Just stating it once or putting it in a mission statement won’t cut it for most people.
   
   
10. Maintain a strong work ethic.
    Your employees will follow your lead. It will also help you beat your competition by outworking them, particularly when your product or service is very similar.
    
    
11. Rebound quickly from setbacks.
    There surely will be plenty of ups and downs as you build the business. Learn from the setbacks and move on. You can’t change the past.
    
    
12. Periodically get out of your comfort zone to pursue something important.
    Many times you will feel uncomfortable in implementing a needed change in technology, people, mission, competing, etc. For the company and you to grow personally, you sometimes have to step out of your comfort zone.
    
    

Many organizational and leadership shortcomings can be overcome or mitigated with the good attitudes described above. All can be learned except passion, which comes from within. Take time out of your hectic schedule to periodically reflect on these attributes. You may be inspired to act.

(This article first appeared at www.entrepreneur.com-1/4/10)

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With all the hype about the advantages of small company size in recent years, does growing big really mean failures to your company?

Bill Taylor, cofounder of Fast Company, just wrote a great article on the relationship between size and success on his Practically Radical blog. He recently did an interview with Jack Welch, the legendary former CEO of General Electric. And one of the themes of their conversation was about company size.

While Jack agrees the disadvantages of big institutions, like waste and bureaucracy, he still believes managers and entrepreneurs should want their companies to get bigger. He said:

For one thing, it’s evidence that you’re winning in the marketplace. For another, it gives you the opportunity to bring in more people, which gives you access to more talent, which allows you to tap into more ideas, which you can then spread more widely – and start winning all over again.

In this talent age, which companies don’t want to get more brain power? But for many companies, managing talent is the hardest part. How can a company scale without suffering the costs of size? Jack has an answer for us:

“I want to be big, but then run the company like it’s the corner grocery store.”

Obviously, this sounds easier said than done. And some people even argue that GE was never run like a corner shop either. But that doesn’t mean it is unachievable.

In fact, there are many new companies which are BIG and SUCCESSFUL in the past decade. For example, Google, Amazon, Apple, Netflix, Salesforce, VistaPrint, Research In Motion, Zappos…etc. All these companies were started by a small team of people. But right now, they have thousands of workers, great corporate culture and tremendous success.

After all, IF you have the management skills and leadership to make your company remain quick, responsive, and flexible, why stay small? (Assuming you have an ambitious goal).

Don’t be remain small just because people think you are cool.

Start small. Grow big but remain agile.

In the future posts, I will dig into different strategies that help growing companies to become smarter and remain quick, responsive, and flexible.

Photo source: januszbc @Flickr

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During Startup School 2009, Mark Zuckerberg, chief executive of Facebook, and Tony Hsieh, chief executive of Zappos, talked about two contradicted theories on employee retention and hiring:

Facebook aims to recruit talented, entrepreneurial hackers who may not want to stay for long, while Zappos wants to hire the best people to fit its culture and try to keep them as long as possible.

Obviously, these two fast growing internet startups are highly successful. So is it possible that these very different approaches can actually achieve the same goal? Is employee retention really that important to startups?

In my opinion, Facebook’s current method can only produce strong near-term outcome. After all, technology is one of the most talent-intensive fields. If your employees think that moving out is more attractive than moving up inside the company, your corporate culture probably is not designed for a long-lasting company.

If you expect many of your best talents are going to leave the company in 3 to 4 years, will you still provide any career development planning for them? It is not only bad for the company’s effectiveness but also creates extremely expensive costs.

To reinforce the idea that employee retention is essential to create a great workplace, let’s look at one more internet company which is using Zappos’ method – Netflix.

In the famous 128-page presentation about their corporate culture, Netflix talks about something interesting related to “loyalty”:

People who have been stars for us, and hit a bad patch, get a near term pass because we think they are likely to become stars for us again. We want the same: if Netflix hits a temporary bad patch, we want people to stick with us.

And of course, this doesn’t apply to every case:

Unlimited loyalty to a shrinking firm, or to an ineffective employee, is not what we are about.

As you can tell, Netflix truly values their employees and they are trying to build a long term relationship together. Given Netflix’s successes as a fairly large company, it would seem that their strategy is working quite well. They are creating a high performance culture and attracting stunning employees.

Besides, Netflix expects their employees to seek what is best for the company, rather than best for themselves. Just like any sport teams, some players have to sacrifice their own interests for the good of the team. A coach will never ask a player to come and learn all the skills, and feel equally happy when the player wins a championship for another team after 3 or 4 years later. Great teams will try their best to keep all their best talents. I believe startups should do the same.

If an extremely talented hacker didn’t want to stay in your company for long, I would argue that if you should hire him/her in the first place. Ultimately, ability and loyalty of an employee should be equally important to every business.

What is your view on employee retention? Which way do you prefer? Facebook’s or Zappos’? And how do you view your employees? Are they long-term or short-term assets? Let us know in the comment section. Your feedback is priceless to us. Thanks.

Photo sources: Mathieu Thouvenin @Flickr, mathoov @Flickr

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This guest post was written by Bob Reiss (@bobsreiss), the author of Bootstrapping 101. Bob has been involved in 16 start-up companies. He is a graduate of Columbia University and Harvard Business School. His company R&R/Valdawn was named to the INC 500 list of America’s fastest growing companies three years in a row. Two of his companies have been the subjects of Harvard Business School cases. He is a frequent speaker to Entrepreneurship classes at many of the major business schools. He has written an earlier book on Entrepreneurship called Low Risk High Reward.

This is one chapter in Bootstrapping 101. For the introduction and table of contents, please click here.

Competition for customers in most industries is extremely intense. This is exacerbated if the customer is a large one and your product is not particularly unique or patent protected. Your customers are also in a high pitched battle with their competitors. This can be seen in your everyday life. Look at the competition in cars, retail stores, food stores, homes, computers, music, etc., for your dollar. This extends into the industrial sector and personal services.

Here are some non-cash ideas to help  you better compete.

Exclusives

If you have any type of new or unique product and no money to promote it, think of offering a key/large customer an exclusive. The exclusive can be for 30 days to a year with a performance clause for a time specified renewal. When we were in the game business, we would introduce a new game to the leading department store in each major city. We sold them on an exclusive basis for 30 to 60 days in return for their running an ad for our product at their expense. Your exclusive could be narrowed down to a particular channel. For instance, I  know of companies that gave Amazon.com an exclusive for all internet selling in return for them giving special promotional pushes for the product. Examples are running 2-day sales or pop-up ads when customers look at a related product (i.e., a wine game when a customer searches for one of their 9,000 wine books).

You could simply give an exclusive to a large retailer for buying it and putting it in all their stores: Radio Shack with 6,000 plus stores, Costco with 400+ stores, Wal-Mart with 3,000+ stores, etc. Exclusives can get you immediate orders, free ads, better position, earlier pay terms, earlier orders, etc. The result is more credibility, more cash, and brand building at no cost.

Better Service

Contrary to popular opinion, most purchasing is not based on the lowest price. Service is a key component in many buying decisions and can take many forms: shorter turnaround in shipping than competitors, customer training on your product features and how to use or sell it, friendly and knowledgeable people manning your phones, customer friendly website, dealing with problems quickly and fairly, admitting, correcting, and paying for mistakes.

One of the key factors of our success in the watch business was our service and special offers. The business was mature, highly competitive, and a me-too industry. We entered the industry with a unique novelty approach that featured artwork on the face and a rotating disk with art as the second hand. For instance, our most successful watch was a cute cat with a rotating mouse going around the dial that the cat always just missed catching. These watches were easy for competitors to copy. However, we copyrighted each design and consistently earned money from infringers. We offered two elements that propelled our success.

1. Special exclusive designs for a low minimum of 200 watches with no premium cost to the buyer. This was in contrast to large watch manufacturers who asked for a minimum of 10,000 watches. We accomplished our low minimum by working closely with a small Chinese factory, by using standardized parts, and by our willingness to break even on these orders. We knew the profit would come on the re-orders. Our low minimum allowed us to break into the world of Disney, selling to their retail stores, theme parks, and catalog division. All three wanted exclusive merchandise that could only be bought through them. Our small minimums allowed them to test all their ideas without paying a price for mistakes. We were rewarded with large quantity orders for the watches that tested well. We also rewarded small customers who supported our line with periodic exclusive designs. The result was loyalty and increased business.
2. Quick turnaround. This was and is increasingly a key component for small business success and survival. It reduces your cash commitment to inventory and likewise for your customer. It also reduces risk. You need to give a lot of attention and thought on how to realize quick turnaround. We analyzed every component used in a watch and the delivery or manufacturing time of each. We discovered the bottleneck in time replenishment was the unique printed dial on each watch. Every other component was easily available and in stock from many suppliers in China. Fortunately for us, the printed dial was a very low cost component. So we took chances and built up inventories of dials on watches we projected would sell well. The dials cost $.05 each; but in our pricing, we figured it at a $ .20 cost. This gave us the cushion for discarding unused dials.

   We shipped all our watches from China to a public warehouse in Long Island without boxes, which were printed in the U.S. Air freight is a widely competitive business, particularly between UPS and FedEx. Therefore, we eventually flew watches in for $.17 each. We also discovered that the processing of shipments through customs varied greatly by which city they entered. The net result was that we could get watch reorders within two weeks of the order while our competitors’ lead time was generally two months. This was a tremendous plus for us with our customers and reduced our cash needs.

Special Terms

Cash strapped businesses with high profit margins should seriously consider additional discounts for immediate or quick payment.

Toy manufacturers usually ship most of their products in the fall. To plan production, particularly with overseas manufacturing, they need orders early in the year. So they successfully offer a special early buy discount to their customers.

Many companies offer volume discounts or rebates. They spell out the discount earned at various volume levels. These discounts can be achieved as you reach the level or can be rebated at the end of the year. This encourages your customers to place more of their business with you rather than sharing with other suppliers.

Private Label

Many products lend themselves to be made under the customer’s label rather than your brand. The disadvantage to you is you don’t build your brand, and margins are usually lower. The advantages are you don’t need to maintain back up inventory, your order lead times are better, and you should get your payments quicker.

Your entire business should always be customer oriented. Special offers are particularly effective in building your relationship with a customer and does not drain your cash.

This is one chapter in Bootstrapping 101. For the introduction and table of contents, please click here.

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Just read an excellent article on McKinsey Quarterly called, “Managing beyond Web 2.0” by Donna Hoffman from the University of California, Riverside.

According to Donna, today’s customers have become both producers and consumers of their own content and services. People are more interested in reading other consumers’ experiences than the advertising messages promoted by your marketers.

While many giant corporations choose to ignore this phenomenon, smaller companies should learn how to take advantage of it. It is true that these Web 2.0 “conversations” are full of noise and difficult to track. Yet if you can become good at managing and monitoring these new consumers’ online behavior, it will be your new competitive advantage.

In order to do that, Professor Hoffman suggested companies to use the LEAD (listen, experiment, apply, develop) model, a management strategy developed by the Sloan Center for Internet Retailing for Web 2.0 and beyond.

Let’s look at what online applications can better prepare your companies to utilize this effective model.

Listen (Monitor)

Consider the tweet below as an example:

If a Sprint customer service representative saw this message and helped this customer to solve his problem, this could be a strong boost to their PR. Consequently, monitoring and analyzing customers’ conversation can be a early-warning system for your company.

If you choose to ignore customers’ opinions these days, it is not unusual to see negative comments about your company all over Twitter, YouTube, Blog posts, and even mainstream media.

This reminds me the latest saga between TechCrunch and Twitter. I wonder how much the TechCrunch’s brand was hurt by this unfortunate event.

To avoid this happen to your company, below are some useful tools for monitoring social media:

1) Viralheat (link)

Position: Affordable social media measurement product

Platforms: Nearly 30 video sites, the web and Twitter

Features: Real-time stream of topic mentions between blogs and websites. Delivering analytics that help you optimize your company’s outreach and engagement on social media platforms. Daily email alerts…etc.

Clients: Include Coca-Cola, Tivo, U.S. State Department, Weber Shandwick, Nokia, Hilton Hotels, HP, and Microsoft.

Cost: Starting at $9.99 per month

2) Peashoot (link)

Position: Quick & easy way to manage social media campaigns. Clean and simple user interface.

Platforms: Twitter only

Features: Audience Builder automatically follows people on Twitter who are relevant to you or your company. Measure ROI – tracking how much of your website’s sales are generated from you posting links on Twitter. Set & track campaign’s goals. URL Shortening. Real-time Click Map. Google Analytics Integration…etc.

Clients: Include Tokyo Art Beat and 24seven.

Cost: Starting at $17 per month

3) Scout Labs (link)

Position: Designed for Agencies. Finding signals in the noise of social media to help teams build better products and stronger customer relationships.

Platforms: Blogs, forums, social networks, image-sharing sites, video-sharing sites and Twitter

Features: Persistent searches for your monitored keywords. A collaborative space for you and your extended team (unlimted users). Monitor important Tweets, blogs, photos and videos all in one place. Sentiment analysis – assessing the tone of a post. Get support from a live human via email or phone…etc.

Clients: Include Netflix, razorfish, Zippo, loopt, StubHub, eBay, AKQA…etc

Cost: Starting at $99 per month

4) Other Alternatives

For larger corporations, you can consider Omniture and Buddy Media as well. If you only want to find out what people are saying on Facebook only, try Facebook Lexicon. Looking for a simple & free monitoring service in the beginning? Google Alerts would be your best choice.

Experiment

After getting all this information, you have to run some tests to find out the meaning behind it. Since there are not any best practices in the market yet, the only way to do this is through good old-fashioned “trial and error“. However, Professor Hoffman also reminded us that:

Unless you have Web 2.0 experts on your team, stick with small experiments, since big ones can fail badly.

The goal of experiment is to engage with your newly empowered customers. If you see a blog about your company, make friend with the blogger. When someone talks about your brand on Twitter, follow that user letting him/her know that your company is on Twitter, too. If you think your targeted audience is on Facebook, go make a Facebook Page to start the conversation with your fans.

To achieve greater customer awareness and brand engagement, you should create your company’s own social channels to foster communication between you and the users. Below are a few site helping you to do so:

1) Wordpress (link)

Why: Creating a company’s blog has become the most basic and essential way to communicate with your customers nowadays and Wordpress is the best blogging tool.

Benefits: Highest quality. Huge community around this product. Large amount of widgets and add-ons. Integrated stats system. The world’s best comment and trackback spam technology.

Clients: CNN’s Political Ticker; Dow Jones’ All Things D; Time Inc’s The Page; People Magazine’s Style Watch; and many more.

Cost: Free

2) Ning (link)

Why: Fast and easy way to create your own social network, a 100% company-controlled community.

Benefits: Allow you to create features such as photos, videos, chat, discussions, and groups; Customized visual design and themes…etc.

Clients: CNN’s Political Ticker; Dow Jones’ All Things D; Time Inc’s The Page; People Magazine’s Style Watch; and many more.

Cost: Free (not include Premium Support)

3) UserVoice (link)

Why: Capturing feedback and ideas across your whole customer base with ease. Help you turn customer feedback into action.

Benefits: Seamless integration with your brand experience, with the popular “feedback” button on the side and single sign-on system. Analytic tools. Private forum…etc.

Clients: MySpace, Sitepoint, Sun Microsystems, zynga, cafepress…etc.

Cost: Starting at $19 per month with Free basic account.

4) Widgetbox (link)

Why: Turn your content into widgets. Help you reach new users across the web.

Benefits: Support for rich media. Feed-based content makes it easy for your users to stay up to date. Simple to build. Work on multiple platforms…etc.

Clients: Perez Hilton, PopSugar, CNN, Dunkin Donuts…etc.

Cost: Starting at $3.99 per month with Free basic account.

5) Other Alternatives

If your company is selling physical products, make sure you have listed your products on social-shopping sites, such as Polyvore, Kaboodle, Stylehive, StyleFeeder and ThisNext. These are good places to find out users’ comments about your products as well. Looking for more users’ feedback? Try blippr.

Apply

After you have learned the users’ online behavior, you need to optimize your web site and content so that they can be shared on every social media sites. Also, you need to have analytical tools to track the results of your experiments.

You may want to try some of the following tools:

1) ShareThis (link)

Why: Simply click the ShareThis button for instant sharing on every social media sites.

Benefits: Work on multiple platforms. Strong reporting and analytics. Find out what people are sharing and how. Learn more about your traffic and where your content is going…etc.

Cost: Free

2) Google Website Optimizer (link)

Why: Test and optimize site content and design. Quickly and easily increase revenue and ROI.

Benefits: A/B split & multivariable testing. Intuitive graphical reporting interface. Required minimal IT support, giving you greater control, flexibility, and speed. Increase your site effectiveness and visitor satisfaction…etc.

Cost: Free

3) Mixpanel (link)

Why: Improve company by tracking how users engage with your website in real-time

Benefits: Real-time analytics, Funnel analytics, Visitor retention, Custom event tracking, API to get data out…etc.

Cost: Volume pricing with Free low volume account.

4) Other Alternatives

If your content is good and relevant to the users, you should submit your content to social news sites, such as Digg, Stumble Upon, Reddit, and Mixx. If you want a simple shorten URL tracking tool, try Su.pr and Bit.ly.

Develop

Today’s web strategy is much more than a simple company’s web site. There are so many tools helping you to integrate social media into your marketing campaign. Google paid ads may be good for ROI; however, they can’t create greater brand engagement.

Advertising was a one-way communication. In Web 2.0 era, advertising should be interactive marketing programs generating conversation with customers.

If you don’t have social media experts in your team, it is hard to create this kind of marketing campaign yourself. Below companies may be able to help you:

1) Buddy Media – App-vertisements (link)

Why: Develop cross-platform, engaging and viral social application to promote your brand.

Benefits: Drive unprecedented loyalty and exposure of your brand…etc.

Clients: FedEx, InStyle, HBO, Busch, intel, SeaWorld…etc.

2) Medialets (link)

Why: Specialized in mobile ads. Take advantage of the iPhone’s accelerometer to add motion to advertising.

Benefits: Bring together voice, interactivity, video, and text in your ads. Typical iPhone users are social influencers apt to share experiences with peers. They are highly engaged trendsetters as well.

Clients: Levi’s Dockers…etc.

3) Other Successful Examples

Hang in there Jack – brilliant social media marketing campaign using Twitter, TV, Facebook, Blog, YouTube, Widgets…etc. In addition, viral videos, such as Evian Roller Babies, could be very effective, too :)

Conclusion

Like Professor Hoffman said:

Bottom line: by focusing on the fundamental aspects of the consumers’ online behavior— not just current best practices—companies will be better prepared when Web 2.0+ morphs into Web 3.0 and beyond.

If you want to learn more about latest management strategies on the web, I strongly encourage you to follow Professor Hoffman and @MckQuarterly on Twitter.

Photo source: caffeina @Flickr

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This is the second installment of the “Startup to IPO” series. Last time we talked about how Vistaprint, Rackspace, OpenTable and Salesforce.com have distinguished themselves as a very special and elite breed of institutions. Now we will look at the obstacles these companies have faced and how they overcame each of them.

As you can tell, leadership and vision alone won’t guarantee success. These four elite entrepreneurs have also gone through the ups and downs of a startup life. As Charles Dunstone, the founder of Carphone Warehouse, would say:

“It’s not supposed to be easy. If it was, then everyone would do it.”

Based on what I have learned from these four companies, I find out that, as an entrepreneur, you don’t have to do everything right all the time. You just have to keep asking questions and try different solutions. Never lose your heart. And above all else, don’t ever give in.

Transforming from the Mail Order Catalogue Model

When Vistaprint was founded in 1995, France was gripped by the largest strike movement in the past 40 years. Because of the strike and lack of financing, Vistaprint almost went out of business, forcing Robert Keane to restart his company again in the spring of 1996. Definitely not a smooth start for a startup.

In the beginning, Vistaprint was selling their products via direct marketing catalogue. Robert convinced Microsoft France to distribute their catalogues in every box of Microsoft Publisher. In this way, Vistaprint was able to reach their targeted small business customers with extremely low cost, 10 times cheaper than acquiring customers in a direct marketing model, allowing them to grow from zero revenues in 1995 to 2.5 million euros by 1999.

Yet the company saw a problem with their business model later on. Since Microsoft only wanted them to advertise to their new customers but not their existing user base, their revenue started falling and they could not grow as fast as they want. That was a love-hate relationship. On the one hand, Microsoft was a great partner leveraging their marketing effort, and on the other hand, Microsoft limited their growth.

The company knew that they need a new business plan if they want to grow larger. That was when the Internet came. Thus Robert decided to move away from the declining catalogue business to become an online marketer of small business printing.

To benefit from the near-zero cost distribution channel of the Internet, they decided to develop a web publishing program which makes you feel like the software you run on your desktop. Sounds familiar with all of the Web App Hype these days? And that was in 1999. :)

Robert later explained:

The idea was to give [the web publishing program] away free across the Internet and then utilize the Internet to conduct our direct marketing. We came up with a production technology where we aggregated orders together. Those three changes, in retrospect, were important in changing the trajectory of VistaPrint.

Not Getting VC Money

In fact, there is one more major strategic move contributing to their survival. Robert believes the fact that Vistaprint could not raise funding during the dot com crash actually saved the company. At that time, a lot of Internet bubble companies raised huge amount of money helping them to live until 2002-2003. When Vistaprint moved to the US in 2000, they could not raise money so they had to cut costs to keep profitability or they would go out of business. In other words, other companies did not have to face reality with their big venture capital money allowing them ignore operating costs and cash flow. Like Robert said:

“As much as I would like to say we were brilliant, I really think success is hard work combined with talent from a lot of different people, and some luck. We were lucky to not get venture capital because it forced us to work harder to get to profitability.”

Imagine you were in Robert’s position, will you have the gut to change your business model and leave your best partner, Microsoft, when facing crises? Or you will just stay put and give in? We can easily see that “change” is deeply embedded in Vistaprint’s corporate culture. They did not satisfy to be a merely profitable firm. They always want to survive and thrive in the long term. Without proactively looking for the next opportunity, Vistaprint probably would remain a small company working with Microsoft. How about your company? Do you want your company to survive in the short term or grow in the long term? Given the current economic crisis, may be it is a good time for your company to change.

Huge Consolidation and Commitment to True Profit

Similar to Vistaprint, Rackspace also went through the tough time during the dot com bubble. After some wild spending with big VC funding, Rackspace had barely enough cash to sustain the business for 3 months in the fall of 2000. Due to this experience, they have learned that, in order to survive, they have to stay lean and build the company organically.

While their richer rivals continued their wild spending on costly data centers, Rackspace had to grow cautiously, buying servers just enough to meet their customer demand, growing one customer at a time.

As most people know, the hosting industry is extremely competitive, causing a lot of consolidations, bankruptcies and failures. Besides providing their excellent “Fanatical Support“, Rackspace has developed a principle of achieving “true profit” which enables them to reach the top. They defines true profit as a company’s operating profit (after taxes) minus its total annual cost of capital. The management has decided that if a project generated lower than 15% profit margin, they would just shut it down.

Rejecting a $20 Million Deal

For example, Rackspace once sold a fast-growing, moneymaking subsidiary because it doesn’t meet the rule. They also passed a $20 million deal with Morgan Stanley which would put their little-known firm on the map. Their CEO explained:

“We could have made a profit on this deal, but not enough to risk our capital. Were we willing to let Morgan Stanley use our multimillion-dollar asset and make a profit of only $600,000? No. We are 100 percent committed to making a true profit.”

The company believes this strict financial discipline has helped them to avoid the dangers of rapid growth and stay in the reality.

If you was the CEO of Rackspace, would you pass the chance to work for a respected giant company? Is your company really creating real wealth or just growing for its own sake? Are you focusing on the right projects that give you true profit? If not, your company probably is wasting money. And the costs for fixing these missteps could be very high.

Slow Start

To many people, it is hard to believe OpenTable has survived the dot-com crash which put a lot of web companies out of business.

In 1999, not many restaurant owners could see the benefits of online reservation management, especially when they already had more business than they could handle. Consequently, the company took off very slowly. They have to hire an aggressive sales force to persuade each owners that online reservation process can actually increase the number of customers, improve customer service and lower their costs. Since they have to do that one restaurant at a time, it took a long, long time before this business model and concept were proven.

It took 3 years for OpenTable to serve its one-millionth user. Yet as their popularity increased, restaurants actually suffered if they were not listed on the site. They have to join OpenTable voluntarily, paying one dollar for each referred diner. Now the company seats an average of approximately 2.8 million diners every month.

OpenTable is a business that almost didn’t happen, constantly being told “no”, but getting things done anyway. Do you have the determination to prove the doubters wrong? Does your company have the patience to start slow and smart?

Last week, Marc Andreessen, the founder of Netscape and Ning, also talked about the fact that not many startups going to IPO these days. He urged venture capitalists stop whining about Sarbox and other factors that are hurting their ability to take companies public. So what is his solution?

“Build Companies More Valuable and You Won’t Have this Problem.”

It sounds so easy but is extremely hard to do :)

In the next post, let’s talk about the growth strategies of these companies.

Photo source: mikebaird @Flickr

Part 1: Leadership & Vision
Part 2: Obstacles
Part 3: Growth
Part 4: Differentiation & Marketing

If you enjoyed this post, get free updates by email or RSS.

During the interview of Chance Barnett, the founder of GIG.FM, at Mixergy.com, Andrew and Chance mentioned that many startups just think about how to make their companies more viral, how to build a cooler product, and how to get on TechCrunch. Yet Chance, as a successful direct marketer, has a different mentality. He always thinks of how to get a dependable source of traffic and convert it into real profit.

Andrew believes that there are two communities of people in the business world. On one side, we have the “Cool Kids” who are always on TechCrunch, always have the latest iPhone, and always build the latest apps for Twitter. And then, we have the “Internet Marketers” on the other side. They are the ones making real money online but never get covered in mainstream media. They only focus on optimizing landing pages, testing different keywords, and utilizing direct marketing on Google.

No More Larger-Than-Life Entrepreneurs

Knowing this fact makes me wonder if all those cool startups are doing business the right way. Today many young entrepreneurs aim to build companies with the goal to sell them. While looking for a quick exist strategy is nothing wrong, I seldom see young entrepreneurs who define success on a very big scale, like Steve Jobs, Jeff Bezos, Howard Schultz…etc. I am talking about those who believe they can transform society and build great, lasting companies.

So why does that happen? Why so few startups go public nowadays? Is that because everyone is afraid of the costly regulations of the Sarbanes-Oxley Act? Do they just want to be inventors but not company builders? Or the problems they are solving are too small? Or they simply don’t want to grow large?

In order to answer those questions, I think it’s a good idea to learn from the past successful entrepreneurs who’ve successfully took their companies public. I want to find out why they were able to transform their companies from startups to IPO, from good to great. Like Jim Collins said:

…the best way to understand how great entrepreneurs become great company builders was to take the greatest companies of the 20th century and then rewind the tape of history to when they were start-ups.

Considering that both Built to Last and Good to Great focused on giant public companies, I want to talk about smaller companies which are founded in the past 15 years. Since I don’t have a 21-person research team like Jim Collins, I can only hand-pick the following 4 companies and see how they have distinguished themselves as a very special and elite breed of institutions. The reason I choose Salesforce.com, Rackspace, Opentable and Vistaprint is because they were not heavily covered in mainstream blogosphere despite their accomplishment. To get a better picture, all of these companies combine showing up on TechCrunch 1425 times in 2009, compared to 4730 times for Facebook and 4930 times for Twitter.

Although they are in different industries, I have founded that these founders share a lot of similarities which contribute to their successes.

I am going to divide this series into 5 parts which will focus on (1) Leadership & Vision, (2) Obstacles & Leverage, (3) Growth & Financing, (4) Differentiation, and (5) Marketing.

Let’s talk about leadership and vision today.

Building a Multi-Decade Business Institution

Vistaprint was founded in Paris after its founder, Robert Keane, graduated from business school in 1995. To many people, Vistaprint is just a typical online printing company. However, Robert has a much bigger vision. When asked about his company’s five years plan, he replied:

If you don’t mind, I would like to modify that to 15 years or 20 years. Great companies like FedEx, Swatch, eBay or Dell are built over decades. We are still only in the middle of our second decade. We have the aspiration to build a world-class and truly transformational business institution.

He believes that his company is more than a printing shop. He wants to make everything a small business needs in marketing, including low volume business cards printing, promotional T-shirts printing or even website building software. As long as a small business wants those services, his company will build them with great quality at superior prices. He wants to transform the small business marketing industry like what Southwest did to the airlines industry over the last 30 years.

Using advanced technologies to group similar orders in large groups, Vistaprint is able to provide short-run, low-cost, and low-volume production to small companies, a market opportunity of over $25 billion. Not until 14 years later, this huge potential of opportunity has finally been recognized by giant retailers, such as Staples and OfficeMax, but Vistaprint still remains as one of the leaders in this area.

I suspect not many people believe there could be more innovation from an industry like business card printing, yet somehow, Robert and his team have made it happen.

What is the larger purpose of what your company is doing? Do you compromise that your industry is too small and saturated so you can’t make a difference? Consider when Vistaprint just got started. Thousands of printing stores were already existed. Robert was just selling their services through direct marketing catalogues, one customer at a time. And today his company is worth $1.84 billion with $400 million in revenue.

World-Class Service

Similarly, even though Rackspace is already a leader in a crowed and competitive industry, their founders believe they are more than a hosting company. Pat Condon once said:

Our vision is to build Rackspace into one of the world’s greatest service companies striving to offer world-class service alongside organizations like Nordstrom, the Ritz Carlton and Federal Express. These companies are known for their unique customer service experience and we want Rackspace’s Fanatical Support to be similarly recognized. While we think we’re the industry leader in service, we are constantly striving to be better. I think this is one of the defining characteristics of a truly world-class service organization.

Because of their ambitious goal, one of their founding principles is to focus on serving customers with what they call “Fanatical Support“. They always believe that managed hosting is a service business and not strictly a technology business. This philosophy is deeply embedded in their culture from the very beginning. Rackspace wants to become the back office IT department for their customers, enabling them to focus on their core business but not hosting.

At that time, most of their competitors only focused on the technology end of hosting, but much less on service and support. By contrast, Rackspace believes they are in the business of providing their customers a pleasurable experience, and constantly pushing themselves to do that.

How about your company? Have you turn good customer service into your competitive advantage? Do you just follow what your competitors are doing today? Since 1998, Rackspace has grown more than 50 percent a year and there are currently 1800 Rackers (their employees) around the world serving their customers with their award-winning support everyday. Their dedication to great service enables them to grow their business from a small startup to a $1.65 billion public company today. Yes they did that in 11 years only. If they can do it, so can you.

Never Lose Faith

During dot-com boom, most people doubt that a company like OpenTable will succeed. It is a capital intensive business and difficult to scale. Chuck Templeton, the founder, wanted to create an online real-time restaurant reservation service for consumers and later added a comprehensive reservation management system to replace existing paper reservation systems in every restaurants.

Yet, in order to do that, OpenTable has to conquer territory market-by-market, restaurant-by-restaurant. Also, local market is one of the hardest and most expensive things to do well on the Internet. Doesn’t sound like a good Internet business model. Regardless of what the naysayers said, Chuck never gave in:

When we founded OpenTable.com, one of our goals was to make great restaurants…easily accessible to people who enjoy dining out…It has created a fair amount of jobs both directly and indirectly. It has provided both restaurants and consumers with a much more efficient and effective way to enjoy a meal at most of the world’s finest restaurants…All in all, it’s pretty cool.

Due to his determination, Opentable has grown to have a customer base of over 10,000 restaurants in 50 states and multiple countries, with $635 million market capital. And it is still keep growing one restaurant at a time.

The Business of Changing the World

Salesforce.com is known for its concept of the “end of software” model and successfully transforming software from a product to a service industry. Similar to Vistaprint, OpenTable and Rackspace, this company believe nothing is more important to them than making sure every customer is successful in their service.

However, Marc Benioff, the founder of salesforce.com, did something unique that every serious company builders should pay attention to. To be truly successful, Marc believes companies need to have a corporate mission that is bigger than making a profit, a concept that he learned from the Art of War. In other words, people can’t be united or focused unless they share a common philosophy—a philosophy that gives their effort a greater meaning.

He wants to make sure everyone in his company understand the importance of this idea so he created the famous “1-1-1″ model, a philanthropic program.

We try to follow that at salesforce.com, where we give 1% of our equity, 1% of our profits, and 1% of our employees’ time to the community. By integrating philanthropy into our business model our employees feel that they do much more than just work at our company. By sharing a common and important mission, we are united and focused, and have found a secret weapon that ensures we always win.

Meanwhile, some people argues that how they can provide the best services to their customers when their employees are volunteering outside. Marc simply replied:

You have to be able to go to San Francisco Homeless Connect and you have to be able to run your computers. Both of those things have to happen. A successful company can do that, and we do that, of course.

In fact, this model has become a critical part of their business, making them a more competitive company. Salesforce.com ranked No. 7 out of all the companies in the world in a magazine called Business Ethics that charts the work of companies that do corporate social responsibility. As a result, many corporations like their company and are actually more likely to buy services from them, although this is not their original intention. How many entrepreneurs would think that philanthropy could become an asset to the company and their ability to work with customers and recruit employees? Sometimes doing the right things will give you tremendous results that you didn’t expect.

Besides your core business, does your company have a core value that is shared by every employees? Do you know helping others can become your secret weapon in the business world? According to Marc, one of their biggest accomplishments is that Google has copied their 1-1-1 model exactly, creating a $1 billion non-profit foundation, compared to their own $30 million foundation.

For future entrepreneurs, how would you define success? Having a good lifestyle or inspiring millions to help other people or transforming an industry to make others more successful or becoming an entrepreneur people aspire to be? That’s your choice.

In part 2, I will talk about the obstacles these four companies have faced in the past and how they were able to overcome them.

Photo sources: (Robert Keane) @PIworld, (Chuck Templeton) @facebook, (Pat Condon) @rackspace, (Marc Benioff) @flickr

Part 1: Leadership & Vision
Part 2: Obstacles
Part 3: Growth
Part 4: Differentiation & Marketing

If you enjoyed this post, get free updates by email or RSS.