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Home Page Articles
Entrepreneurial Outsourcing: Operating Like the Big Guys
Author: Mason Kauffman, Founder and Chairman, The World Logistics Organization
In 1994, when I launched Accuship.com, Inc., I had no other employees or investors so I quickly learned how to operate creatively and efficiently. To be successful, I had to evolve from doing everything myself to relying on strategic outsourcing partners. Achieving that goal enabled me to focus on my core business instead of just working harder. Other entrepreneurial companies can follow this same formula. Let me share what I learned.
In the past, only large corporations like Microsoft or Wal-Mart took advantage of strategic outsourcing opportunities. Microsoft focuses on its core business of software development and outsources processes such as manufacturing and distribution. Likewise, Wal-Mart doesn't make the products it sells, sticking instead to its core competencies of purchasing, retailing, and distribution.
Today's collaborative technologies empower growing, entrepreneurial companies to benefit from strategic outsourcing just like the "big guys." Benefits include capital expenditure control, increased efficiency, labor cost reduction, speed to market, core business focus, competitive advantage, and risk avoidance. The result: Smaller companies can be more efficient and profitable.
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Entrepreneurial Outsourcing: Operating Like the Big Guys
Author: Mason Kauffman, Founder and Chairman, The World Logistics Organization
In 1994, when I launched Accuship.com, Inc., I had no other employees or investors so I quickly learned how to operate creatively and efficiently. To be successful, I had to evolve from doing everything myself to relying on strategic outsourcing partners. Achieving that goal enabled me to focus on my core business instead of just working harder. Other entrepreneurial companies can follow this same formula. Let me share what I learned.
In the past, only large corporations like Microsoft or Wal-Mart took advantage of strategic outsourcing opportunities. Microsoft focuses on its core business of software development and outsources processes such as manufacturing and distribution. Likewise, Wal-Mart doesn't make the products it sells, sticking instead to its core competencies of purchasing, retailing, and distribution.
Today's collaborative technologies empower growing, entrepreneurial companies to benefit from strategic outsourcing just like the "big guys." Benefits include capital expenditure control, increased efficiency, labor cost reduction, speed to market, core business focus, competitive advantage, and risk avoidance. The result: Smaller companies can be more efficient and profitable.
To view the full article, please click here.
Review all the How To articles, Entrepreneurs’ Stories, and Tools & Templates on this topic.
Getting "Lean"
Author: Rod Matthews, Managing Partner, Southern Vinyl Manufacturing, LLC
I have nearly thirty years of experience in the building materials industry. In 2002 I was interested in investing in a segment poised for rapid growth, and after extensive research I found Southern Vinyl Manufacturing. The company, which started in 1997, manufactures PVC fence and rail systems. We sell these products to building material professionals throughout the Southeast and are in the middle of expanding nationally. We need to be very good at what we do. Otherwise, why grow?
When I became involved in the company, there were ten employees working out of a 1500 square foot, two-bay garage. Input materials and discards were everywhere, and there was no rhyme or reason in how we were organized--a typical small fabrication business. Dean Ervin, my business partner who started the company, often called it Santa's workshop.
Three months later, the company moved into a new, larger facility that was ten times the size of the old one. We were ready for growth. We began setting up multiple manufacturing lines in a manner that we thought made sense, and we brought with us a lot of our old practices and procedures. After a year or so, however, we discovered unless we made dramatic changes, profitable growth would elude us.
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Investment Valuations of Seed- and Early-Stage Ventures
Author: Luis Villalobos, Managing Director, Angel Venture Partners
Some early-stage investment negotiations resemble a game of Texas Hold-'em poker. Each player withholds information and tries to convince opponents that his hand is better than it actually is. But valuation negotiations are not card games. Unlike poker, the objective of investment negotiations ought to be for investors and entrepreneurs to share information as openly and completely as possible and to work together toward a common goal of building successful companies.
Why focus on valuation? At the time of investment, valuation is the core determinant of return for investors. In other words, the return to investors is based on the increase in the valuation of shares they receive in exchange for their capital. Understanding valuation is critical to successful investing. Unfortunately, valuation is the most misunderstood part of the investment process and often leads to contentious negotiations that get the entrepreneur-investor relationship off on the wrong foot.
What is the problem? Most entrepreneurs and investors have oblique points of view—in other words, their views don't intersect. In fact, the two sides don't even speak the same investment language. More fundamentally, neither understands what I call "divergence" of valuations. Understanding divergence can reduce contentiousness and ensure that negotiations build an effective working relationship between investors and entrepreneurs.
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Compensating, Rewarding, Retaining "A" Players
Author: Gina Galgano Hoagland, President, Collaborative Strategies, Inc.
Whenever I ask business owners if anyone has enough "A" players-with "A" players defined as the top 10 percent of people out there who can do a job in the compensation range they are willing to pay—NO ONE ever raises her hand and says, "I have enough." At my firm, I only hire "A" players, and I still don't have enough! Over the years, some wise people have shared with me all sorts of compensation axioms. Here are a few:
- Compensation is a bad reason for a good person to leave your firm.
- For most people, compensation is a hygienic factor, meaning we don't usually notice someone's hygiene unless it needs a little work.
- Only 10 percent of people are solely money motivated.
When it is all said and done, I believe that there are many ways to keep "A" players. Compensation is one factor among many. If we focus in on compensation, let's look at what some of my clients have done over the years. And keep in mind, my clients are entrepreneurs—business owners like you and me.
Also, take a look at the Sample Compensation Philosophy included in eVenturing's Executive Compensation Collection. It can serve as guiding principles to consider as you're establishing your company's overall compensation philosophy. These principles can be easily adapted.
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Outsourcing Your Contact List
Author: Colleen Moffitt, Cofounder, Communiqué Public Relations
When Jennifer Gehrt and I started Communiqué PR, a Seattle-based boutique firm that provides strategic counsel and tactical execution to help companies achieve their business objectives, in February 2004, like most startups we faced the challenge of staying focused on our core business while reaching out to various audiences, providing them with valuable and timely information, and building awareness about our company. At the time we decided that an electronic newsletter would help us do this, there were only five people on our staff. Outsourcing to an e-mail marketing company was an obvious choice. We started using Constant Contact in August 2005 on the advice of our Web site development company. Since then, our distribution list has grown from 150 to more than 600 subscribers.
In retrospect, the only thing I might have done differently is started doing it sooner. Not only does our newsletter have an average open rate of 47 percent-compared to the two percent direct mail industry average-but we've achieved this without large amounts of time or money spent on any phase of the process.
The three service features of contact list management we enjoy with Constant Contact-and which we recommend that any entrepreneur look for in choosing an e-newsletter vendor-fall into three categories: Operational Ease and Flexibility, List Management Integrity, and Reporting Quality.
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Creative Research to Test Assumptions
Author: Kevin Leibel, President and Founder, innovation Management, LLC
How does a guy with an entrepreneurial spirit and no undergraduate degree wind up earning a MBA, starting a highly successful marketing company, and serving as an adjunct college professor? By always asking, "Why not?"
This mantra has served me well and is a key element in our success at innovationManagement, now in its tenth year. I believe you have to always challenge the conventional wisdom. It's okay to have a reasonable impatience with norms, rules, and the status quo. When something or someone says you can't succeed, you must ask, "Why not?"
And then continue to push back until all of the evidence and insight you can bring to bear on the matter is exhausted. This mindset is particularly relevant to the market research part of our business, as we work to validate or negate assumptions and help move our clients beyond what is traditional or expected to become more successful.
As a relatively small company, we're fortunate to do business with some of the nation's largest companies. We know they can work with anyone they like, so we have to be different-we have to solve their problems in creative new ways. We always ask ourselves: "Why not work with a small firm, and what can we give clients that the large agencies can't?"
This philosophy has led to the model for our business-one in which we focus on critical thinking and innovative research techniques to identify solutions for our clients. Because we use the clients' internal teams, they're able to take ownership of the solutions.
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Market Research Informs a Business Idea
Author: Sally E. Smith, President, Smith & Associates, Inc.
Launching my first entrepreneurial venture was the result of what may be best described as a treasure hunt, with market research serving to reveal important clues along the way.
This approach, which I coined "reverse marketing," was all about the process, one in which the clues led us to certain conclusions or premises that then required some decision or action. Whatever our decision, the outcome would lead us down yet another path, in turn uncovering the next clue and informing a subsequent conclusion or action.
As such, we didn't start with any preconceived notions about the product or service that was to be the core of our business. Rather, we kept on the hunt, month after month, applying different research until we reached the treasure—the realization of the business we were meant to start.
If someone had told me my first entrepreneurial venture would be starting a mail-order specialty meat company, I never would have believed them. But when all of the clues were uncovered and all of the dots connected, that's exactly what we did. In 1989, we launched Chops of Iowa based out of Des Moines.
And it turned out to be a very wise decision. After only four years of solid growth, my partner and I successfully deployed our exit strategy and sold the company to a regional corporation.
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Bootstrapping: Techniques to "Extend the Runway"
Author: William H. (Bill) Payne
Bootstrapping enables entrepreneurs to operate their startup companies with minimal infusions of cash from others, postpone raising capital from outsides sources, and maintain 100 percent ownership of their companies.
After capital has been raised from friends, family, angels, or VCs, bootstrapping is the technique entrepreneurs use to "extend the runway." That is, to postpone raising additional capital until key milestones can be met. Meeting milestones demonstrates the viability of the company, increases the valuation of the company when raising money, and allows the entrepreneur to maximize personal ownership in the company.
Bootstrapping can take many forms, but can be divided into personal or business sources of cash and/or reduction in expenses.
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Archives
Keeping Your Business Safe
Because my company employed family members, I never dreamed I would need to protect it from internal theft. However, that's just what I had to do when I discovered that four key staff members, who were also family members, were leaving my IT support company and stealing intellectual property to start a rival business.
My story involves an operations manager, a top salesperson, two senior engineers, and the abrupt departure of several clients. When we lost the first major client, I met with the engineer who serviced the account to discuss it. The engineer told me the client hired internal IT staff and no longer needed our services. Soon after, another client working with this engineer left. And then another. In each instance I followed up but did no additional research since sometimes clients do leave for reasons I was offered.
Then suddenly and much to my surprise this engineer resigned. In an exit interview, he said he was leaving the IT field altogether and entering into a new venture with his wife. While his resignation was abrupt, there was no reason to doubt him.
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PR in Service to Building the Company
When I joined Ascend Communications as vice president of operations in 1990, took the company public in 1994, and sold it to Lucent Technologies in 1998 for $24 billion, public relations (PR) was not at the top of my list of concerns.
Nor is it at the top of my list of concerns for Zhone Technologies, Inc., the telecommunications equipment company I founded in September 1999 with $500 million in first-round venture capital.
What propelled Ascend to the top—and I believe will do the same for Zhone—was unremitting focus on building a company with a unique product tailored to a well-defined customer.
Ascend was founded in 1989, developed the architecture for Internet-based communications that enabled high-speed networking connections, and became the leading maker of digital switches and networking products for wide-area networks. The company grew 30 to 40 percent annually, and by the time it sold had more than 3,000 full-time employees and nearly $2.3 billion in sales.
To view the full article, please click here.
For Entrepreneurs: How to Make a Strategic Partnership into a Successful Long-Term Relationship
Entrepreneurs considering a strategic partnership with a larger company to help grow their company may benefit by approaching this special relationship like a potential marriage: before committing, spend plenty of time getting to know your potential partner, learn everything you can about their goals and values to be sure you’re in synch and communicate clearly about your expectations.
This month, Kauffman eVenturing™ (www.eVenturing.org), a Web site for growth-oriented entrepreneurs operated by the Ewing Marion Kauffman Foundation, features a collection of articles that explores various aspects of selecting, evaluating and working productively with prospective partners, with particular emphasis on the needs of technology-based businesses.
“Strategic partnerships represent a tremendous opportunity for entrepreneurs who know how to manage those relationships,” observed Donovan Moxey, Ph.D., an experienced entrepreneur and technologist, and a Kauffman entrepreneur editorial advisor. “Successful partnering with a much larger company takes preparation, finesse and a formal agreement that specifies exactly what each party will get out of the association.”
The articles, which are authored by entrepreneurs and legal experts, focus on fully understanding how to leverage growth opportunities while avoiding common areas of dispute that can arise from strategic partnerships. They cover product/technology development, distribution/reseller arrangements and co-marketing programs.
For Entrepreneurs: Leveraging Growth with Online Marketing Strategies
Featured on Kauffman eVenturing™ Site
Online marketing offers savvy entrepreneurs the opportunity to expand their customer base, increase brand awareness and strengthen their customer relationships. The trick is crafting an online strategy that is targeted and efficient. This month, Kauffman eVenturing™ (www.eVenturing.org), a Web site for growth-oriented entrepreneurs operated by the Ewing Marion Kauffman Foundation, features a new collection of articles to help entrepreneurs evaluate different aspects of online marketing, from search engine optimization and key word advertising to blogging, online publishing and using eBay as a distribution channel.
"Many entrepreneurs are using online marketing as part of their marketing mix to gain cost-effective access to new customers," said Judith Cone, vice president of Kauffman Foundation's entrepreneurship initiatives. "The Internet provides entrepreneurs with flexibility to try out different marketing strategies and adapt quickly to changing customer needs."
The articles, written by online marketing gurus and entrepreneurs, provide insights on how business owners can take advantage of the latest online strategies to level the playing field and compete more effectively with their larger brethren.....learn more
What Entrepreneurs Should Know about Protecting Their Intellectual Property
The Kauffman eVenturing™ Site Provides Information and Tools to Help Business Owners Protect their Ideas, Products, and Services
There’s nothing more powerful in driving business growth than a good idea – and nothing more vulnerable, as many entrepreneurs discover. Protecting intellectual property (IP) – which can include everything from trade secrets and inventions to a company’s manufacturing processes, products and even brand name – is extremely important for growing companies. Kauffman eVenturing™ (www.eVenturing.org), a Web site for growth-oriented entrepreneurs operated by the Ewing Marion Kauffman Foundation, just posted a new collection of articles to help fast-track business owners better understand how to safeguard their IP assets.
“Entrepreneurs who may be short on resources can be particularly vulnerable to intellectual property infringement,” said Judith Cone, vice president of Kauffman Foundation’s entrepreneurship initiatives. “The greater their awareness of their options, the more focused and cost-effective their efforts to protect their intangible assets can be.”
The articles, written by legal experts and entrepreneurs, cover the gamut of IP-related issues from patents and how to obtain them, to copyrights and trademarks. The pieces provide business owners with a detailed overview of key issues, as well practical information and tools to help them protect and better leverage their intellectual property....learn more
Guidance for Entrepreneurs on Selling a Business
Featured on Kauffman's eVenturing™ Site
For most entrepreneurs, deciding whether and when to sell their business is one of the toughest calls. To help them evaluate their options, Kauffman eVenturing™ (www.eVenturing.org), a Web site for growth-oriented entrepreneurs operated by the Ewing Marion Kauffman Foundation, just posted a new collection of articles on successful selling strategies.
"Emotions can run high when an entrepreneur contemplates whether it's time to sell his or her company," said Judith Cone, vice president of Kauffman Foundation's entrepreneurship initiatives. "That's why it pays to step back to fully understand your true goals, gather key data and objectively analyze your decision."
This new collection, written by financial experts and several entrepreneurs who have successfully sold companies, offers business owners practical guidance on timing and other difficult issues, such as deciding who to sell your company to, whether to seek a buyer yourself or use an investment banker, how to get the best price once you do decide to sell and how to tell your employees.
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Negotiation Strategies for Entrepreneurs
Featured on Kauffman's eVenturing™ Site
Negotiation skills - an increasingly important part of virtually every aspect of business and life - are especially valuable to entrepreneurs engaged in growing their companies. This month, Kauffman eVenturing™ (www.eVenturing.org), a Web site for growth-oriented entrepreneurs operated by the Ewing Marion Kauffman Foundation, features new articles by global leaders and experienced entrepreneurs to help emerging business owners become better negotiators in their daily and longer term business dealings.
"Entrepreneurs who have mastered the art of negotiating clearly have a leg up on the competition," said Judith Cone, vice president of Kauffman Foundation's entrepreneurship initiatives. "Those who understand how to make both sides feel they are walking away as 'winners' are typically the most successful in achieving their goals."
When entering negotiations, entrepreneurs should take the time to fully understand both sides of a deal and enter the process with realistic expectations. In addition, they should be aware of the strategies and tactics that can help ensure a favorable outcome for all the parties involved.
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Kauffman eVenturing™ Site Spotlights the Role of Boards of Directors in
Entrepreneurial Growth Companies
Building an effective Board can contribute to growth and add value through experience, strategic thinking, contacts and resources
In an era of heightened attention on corporate governance, Boards of Directors are playing an increasingly important role in public companies. In the case of many entrepreneurial companies, Boards can also be a key factor in fostering growth by contributing their experience, strategic insights and industry contacts. How to build an effective Board of Directors is the subject of a new collection of articles posted on Kauffman eVenturing™ (www.eVenturing.org), a Web site for growth-oriented entrepreneurs launched recently by the Ewing Marion Kauffman Foundation.
The articles, written by entrepreneurs and long-serving Board members, provide practical advice on why entrepreneurs should consider independent Boards and how they can get the most out of their Boards by adopting clear objectives, processes and a scope of responsibilities. Entrepreneurs will get useful guidance on how to structure, recruit and compensate their Boards.
"Boards of Directors are one of the most valuable resources an entrepreneurial CEO can tap," said Judith Cone, vice president of the Kauffman Foundation's entrepreneurship initiatives. "They can provide a rare blend of objectivity and involvement to help a company achieve its growth objectives."
Following are highlights from the Kauffman eVenturing site's collection,
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Sales Compensation Plans That Work for Entrepreneurial Companies Featured on Kauffman eVenturing
The key to winning new customers and incremental sales – the lifeblood of most growth-oriented entrepreneurial companies – is a great sales team and the right sales compensation plan to motivate them. This month, Kauffman eVenturing™ (www.eVenturing.org), a Web site for growth-oriented entrepreneurs launched by the Ewing Marion Kauffman Foundation, features new articles and tools to help entrepreneurs design, monitor and leverage sales compensation plans that generate maximum revenue and fairly compensate those who produce it.
“The competition for top sales people is fierce,” observed Susan D. Hesse, a Kauffman Foundation entrepreneur-in-residence. “For growth-oriented entrepreneurs, who are often in competition with larger companies for highly-valued sales talent, an effective compensation plan can make the difference between success and failure.”
When designing their compensation plans, entrepreneurs need to find the right balance between base salary and commissions that best aligns with their particular growth strategy, company culture and objectives. In addition, they should be aware that the shelf life of a compensation plan is typically one to three years, depending on how quickly their company is growing and changing.
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Hiring Strategies for Entrepreneurs Seeking Top Talent
Featured on Kauffman eVenturing™
Seasoned Entrepreneurs and Experts Share Tips on How to Maximize Top Team Hiring Successes
Identifying and hiring the top team to help take their companies to the next level is one the toughest challenges faced by entrepreneurs. To help business owners become more successful in their quest to hire more "A-list" winners, Kauffman eVenturing™ (www.eVenturing.org), a Web site for growth-oriented entrepreneurs launched by the Ewing Marion Kauffman Foundation, today posted a new collection of articles filled with practical, actionable advice written by experienced entrepreneurs and hiring experts.
"Hiring the right top team is absolutely critical for any entrepreneurial company focused on growing its business," said Judith Cone, vice president of the Kauffman Foundation's entrepreneurship initiatives. "Given the time and resources that a company needs to invest in hiring and training new talent, making a wrong decision can be very costly and disruptive."
All too frequently, busy entrepreneurs rush the hiring process to get a position filled quickly, or make decisions based largely on instinct or informal interviews. The articles featured in this collection emphasize the longer-term value of using a more structured, disciplined approach to add an element of 'science' to the art of hiring the best people for an entrepreneurial company. The articles draw on the first-hand experiences of successful entrepreneurs and recruiters who share the hiring techniques that have worked best for them.
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Optimizing Your Cash Flow
For Entrepreneurs, Effective Cash Management is Key to Survival and Growth
Effective cash management, while important for all companies, literally can make the difference between success and failure for a growth-oriented entrepreneurial business. How to optimize cash flow is the subject of a new collection of articles posted on Kauffman eVenturing™ (www.eVenturing.org), a Web site for growth-oriented entrepreneurs launched recently by the Ewing Marion Kauffman Foundation.
The articles, written by entrepreneurs and financial experts, provide practical advice on why entrepreneurs should put systems in place to help them quickly and easily monitor their cash flow, as well as tips and tools for better managing accounts receivables, accounts payables, inventory and payroll expenses to maximize available cash on hand. Several pieces address what entrepreneurs need to do to prepare for bank financing.
"Cash is the essential fuel that powers an entrepreneurial venture, so the greater the cash flow that can be generated by improving operational efficiencies, the better," said Judith Cone, vice president of the Kauffman Foundation's entrepreneurship initiatives. "Equally important, the stronger your cash flow, the more attractive your company will look to potential investors and lenders, if and when you do decide to raise capital externally."...learn more
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FastTrac Alumni Profile
Vivian Bowers
Bowers & Sons
In 1994 the future looked bleak for Bowers & Sons, at least as far as Vivian Bowers was concerned. Her parents, Horace and Alice Bowers, had decided to retire, which meant the 44-year-old family dry-cleaning business would either be sold or shut down. ...more
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