.Roaring Mouse

Mike Speiser’s post on GigaOm is an interesting read. In it he talks about the opportunities that small businesses represent and why technology now allows entrepreneurs to target a relatively untapped market.

http://bit.ly/2cPcu3

Kiva, the famous web-based micro-lending service that’s helped entrepreneurs globally fund their ventures is now offering its service in its own backyard. View the links before for more information.

http://www.readwriteweb.com/archives/kiva_now_allows_you_to_invest_in_us_small_business.php

http://www.techcrunch.com/2009/06/10/kiva-brings-microlending-home-to-us-entrepreneurs-in-need/

The phrase “outsourcing” has been a much-maligned one here in the United States. This is primarily because people automatically associate the outsourcing efforts of corporations with the loss of jobs to companies abroad. However, when functions as diverse as customer service, software development and graphic design can be performed cheaper outside the company, it’s logical for any commercial enterprise, small or large to at least study a lower cost alternative. Given that, though, I submit that there’s a distinct difference between outsourcing in a small business environment vs. outsourcing in a large corporation. While a large company often has a choice whether to engage in outsourcing activities or not, given the fact that they’ve often already developed the expertise in question internally, outsourcing for small businesses is often a matter of survival or the only catalyst to growth. Having been intimately involved in two small businesses in my professional lifetime, I can easily vouch for the necessity of outsourcing and how it can propel a small business forward. My goal in this post is to focus solely on how to approach outsourcing (whether farmed out to a domestic company or abroad) so that you give yourself the greatest chance of achieving success with the effort.

• WHAT SHOULD I OUTSOURCE? - “Stick to what you know best and outsource the rest”
  • You work for yourself because you believe that there is one or a handful of things that you can do better than anyone else. Whether that’s baking bread, creating Drupal-driven websites or selling music to a discerning local community, you are good at what you do and should spend the majority of your time offering that unique ability to your customers. The likelihood that you have the expertise and bandwidth to perform all tasks related to growing your business is slim, so choose the two or three things that you believe you can do well and look for other people who can do the rest. Over time, you will develop a more intimate knowledge of the general management skills necessary to conduct a business successfully, but it’s tough to try to develop those abilities while you’re just starting out.
• WHO DO I OUTSOURCE TO? - “Check out the RAP - References, Accreditation and Portfolio”
  • Once you’ve overcome the hurdle of thinking that you can do everything related to a business well, the next step is to find the right people to help perform the tasks you’ve decided to outsource. Web-based businesses such as oDesk.com, guru.com and Elance.com are available to help you find contractors for a variety of different outsourcing functions. The rating system, previous client reviews and the ability to view the providers’ portfolios allow you to make a more informed choice about the provider that you end up choosing. On a local level, there’s the tried and trusted method of word-of-mouth referral. Try your local business contacts or your local Small Business Administration office for recommendations. For functions such as accounting and business law advice, be sure to ask for proof of certification and accreditation. One would think that this is a given, but I’ve heard terrible stories about people getting bad advice from self-proclaimed subject matter experts whose only claim to expertise is having worked in an accounting firm or lawyer’s office in the past! Here, the adage “You get what you pay for” rings true. While not every expensive service provider is worth the money they charge you, markets have a funny way of shaking out those who overcharge or undercharge for their services and for the most part, the value you derive from someone’s services is commensurate with the amount you pay them.
• HOW SHOULD I APPROACH OUTSOURCING? - “Outsourcing is akin to a Hollywood romance movie”
  • Now that you’ve decided who to work with, what’s the right way to approach an outsourcing relationship? A few important things spring to mind immediately. In the same way that modern day Hollywood romance movies prescribe a “get to know you slowly” approach to building a relationship, the most successful outsourcing relationships are formed upon the foundation of a few small, successful ventures. By choosing less critical tasks as your first outsourcing projects, you risk losing less if the relationship doesn’t work out and also have an opportunity to get a feel for how the relationship will develop. After choosing the projects you want to outsource, the next step is to set expectations. This is probably the most important step in the relationship-building process, as it completely outlines what both parties expect and deliver to each other. Important things to consider when setting expectations are milestones for the project, the costs associated with each milestone or checkpoint, the timeline that each milestone lines up with and the quality of the deliverable. While it’s not always easy to do this, a Hollywood style pre-nuptial agreement is no less applicable in the business world. If the relationship doesn’t quite work out for any reason whatsoever, it’s good to have something committed on paper that clearly states what each party is entitled to if the relationship is terminated before the project is complete. Even if the issues do not stem from trust and integrity, expectations and results are frequently misaligned as there are many tasks that do not always lend themselves well to written descriptions. It’s best to protect yourself in these instances.
• HOW SHOULD I TREAT MY OUTSOURCING SUPPLIER? - “Your supplier is a remote employee”
  • Anyone who’s managed an employee or been one knows that lack of communication can easily result in unmet expectations, even if there’s frequent daily interaction between employer/manager and employee. Working with an outsourcing supplier is very much like working with a remote employee. Opportunities for personal interaction are rare and the onus is on you to ensure that communication is frequent and accurate. After all, you’re the one who stands to lose the most if the relationship doesn’t work out. And of course, like any other employee, an outsourcing supplier expects two very basic things from you - your respect and on-time payment.

I have tried my best to capture the steps necessary to ensure a successful outsourcing experience. This list was born out of my own personal experiences, and is certainly not exhaustive. If you’ve had successful or painful outsourcing experiences, I’d appreciate it if you’d share the lessons you learned with us in the comments section.

At a recent technology/business event called Startup Weekend, I learned more about a concept called “co-working” (or coworking, to some). The basic premise is simple. Co-working allows solo entrepreneurs, remote workers and freelancers to work together in a common space and engage with others within a shared context. Co-working spaces are dedicated to co-working and are not merely shared office space. The physical amenities are identical between the two, but co-working spaces have deliberately been set up to foster interaction among co-workers.

There are several reasons to co-work instead of merely working at home by yourself. Alex Hillman, a co-founder of IndyHall, a co-working space in Philadelphia does an excellent job of listing and describing 6 reasons to co-work. I have listed them below in summary, but it’s instructive to read the detailed explanations from Alex. You can access his article here.

1.      Helps you avoid the feeling of loneliness from working by yourself

2.      Provides an external source of motivation

3.      Easy way to learn new things from other people

4.      Allows you to keep abreast of what’s going on in your community

5.      Keeps the separation between work and life distinct

6.      Resource-sharing helps you lower costs

Arguably, the most fundamental benefit of co-working is in the sense of community that it fosters. You can say “no (wo)man is an island” or insert a ton of other overused clichés about working solo here, but the fundamental truth is that people often work best when challenged and complemented by other people with different experiences, talents and resources. Brad Neuberg, one of the founders of the co-working space movement says his desire was to “create a means to an end; to be able to invent, within a community structure, without having to join a company”. Chris Messina, another of the early founders of co-working environments, describes the benefit of co-working spaces as “accelerating serendipity”. 

If you’re a solo-worker who believes that you can benefit from working together with a community of like-minded individuals, co-working might be for you. To learn more about co-working and where and how you can get involved in a co-working space, check out the links below.

http://blog.coworking.info/

http://groups.google.com/group/coworking

http://wiki.coworking.info

Thought I’d share this with everyone, since I recently argued that this is a good time to start your own business.

http://www.nytimes.com/2009/03/14/technology/start-ups/14startup.html?emc=eta1

You’ve probably heard the phrase “Cloud computing” being used in technology circles for a while now. For those of you unfamiliar with the term, cloud computing simply means that instead of having your software and data on your hard-drive, it’s located on a bunch of servers somewhere in the ‘cloud’. Your interaction with software is primarily conducted through your web browser and you access the software and your data through the Internet. (you can go here for a more detailed Wikipedia explanation)

Cloud computing in its rawest sense is not a new idea. If you had a Hotmail email account when it first launched years ago, you were an early adopter of cloud computing. After webmail, the next step in cloud computing was web photo-sharing. Web photo-sharing allowed you to upload your images to a server somewhere and display them without forcing you to learn how to create a webpage in HTML. Web photo-sharing was a big step in helping democratize photography, as it made it easy for people to share their photos with friends and family.

While email and web photo-sharing were the first cloud computing services, cloud computing wasn’t much of a hot topic until more recent times. It can be argued that the real fanfare over cloud computing truly began when commercially-focused pieces of software migrated to the ‘cloud’. The advent of Salesforce.com placed a spotlight on the promise of cloud computing to improve employee efficiency and productivity by providing them easy access to important information, at any time of the day. Salesforce.com’s online CRM offering led the way to prominence for other ‘cloud’ enterprise, productivity and storage offerings such as Netsuite (an Enterprise Resource Planning app), 37 Signals’s suite of software, Google Apps, Zoho and even Lenovo’s Online Data Backup service.

The advantages of cloud computing for a small business are manifold.

1.        Low cost: Cloud computing software companies charge a small monthly subscription fee instead of large per seat licenses. Now, instead of needing a large sum of money for capital expenditure, you’ve turned your software into a monthly operating expense, helping you lower your capital financing needs. In the event you don’t like the software, you can simply cancel your subscription and take a loss only on a month’s worth of subscription fees.

2.        Device independence: You’re not tied to a specific computing device, since all you need to run the software is a web browser. Use your smartphone, desktop, notebook or netbook on operating systems as diverse as Mac OS X and Linux to conduct business. Small businesses that don’t have a big IT budget can use a “bring what you got” approach to run their business.

3.        Anytime, anywhere access: Since your files are stored in the ‘cloud’, you can work on them even if you’re not close to your primary PC. You can leave your computer at home when you’re traveling and use a friend’s laptop or use the desktop at the library to do some work.

4.        Automatic backups: Cloud computing companies may provide multiple levels of redundancy to ensure that data you store in the cloud is safe. Data backups are automatic, and while you may pay for storage in the cloud, you don’t have to buy backup software and extra hard disk drives to store your data.

5.        Automatic and transparent software updates: You don’t have to spend your hard-earned money upgrading your software every so often, or bite your nails as you upgrade your software to the latest version, hoping that the upgrade doesn’t cause any instabilities or crashes in your system. Cloud-based software will update itself without you telling it to do so. The only time you’ll notice is when you see the nifty new feature you’ve been requesting for months suddenly appear in your browser.

6.        Email-less collaboration: Some cloud-based software such as Google Docs and 37 Signals’s suite allow you to collaborate in real time without having to email files back and forth to each other. Changes you make are updated immediately, eliminating the lag time between when you complete your edits or changes and when your business partner or employee has access to those updates. Add VoIP or video chats to the mix and you have a great collaboration platform.

7.        Security: Since your application and data files aren’t on your hard disk, the threat of viruses, trojans and worms corrupting your important information decreases significantly. You can now entrust your data to enterprise-class security, without spending the dollars to do so.

Cloud computing promises a lot of great things, but there are reasons why it has yet to become more prevalent. Here are some of the things I believe will need to exist in order for cloud computing to take off.

1.        Ubiquitous connectivity: Since all interactions happen through the Internet, being connected is a fundamental requirement for cloud computing to become successful. With the proliferation of smartphones and mobile broadband on notebooks and netbooks, we are making major strides towards realizing the positives of cloud computing.

2.        99.9999% Reliability: If you’re accustomed to your software always doing what you want it to do, you may occasionally be frustrated when your cloud-based software is down, even for a few minutes. The reality is that though not all cloud-based software suffers from any appreciable downtime, some do, and until everyone’s software works as consistently as their hard-drive-based counterparts, en masse adoption of cloud computing will not happen.

3.        Offline capability: While you may be connected to the Internet most of the time, there will be times when poor WiFi or cell reception will force you to work on a local copy of your files. Being able to work on your files while you’re not connected is an important requirement for widespread adoption of cloud-computing. Thankfully, technologies such as Adobe Air and Google Gears enable offline use of cloud-based software.

Cloud computing is changing the way we perceive software, allowing us to work and collaborate in ways we could never have done in the past. The addition of value-add, secondary services that are attached to cloud-based software and services changes that paradigm even more. I believe that the move to an all-Internet based software environment for most business software is imminent. Perhaps you’re an early adopter and have already made the switch completely. I’d appreciate it if you’d take the poll below and share your thoughts on cloud-based computing in the comments section.

P.S. This is a list of cloud-based software that I’ve personally found useful.

TO DO LIST: Remember the Milk - www.rememberthemilk.com

PROJECT MANAGEMENT: Basecamp from 37 Signals - www.37signals.com

CRM, including Inventory Management: ZOHO CRM - www.zoho.com/crm

PERSONAL FINANCE: Mint - www.mint.com

My friends and I discussed the title topic the other day, and we tried to identify reasons for and against starting a business during this economic downturn. What we discovered towards the end of our discussion was that although it may not seem intuitive, starting a business now could actually be a good idea. Here are the reasons why this may be a good time to say hello to entrepreneurship.

Motivation - If you are unemployed and having difficulty finding new employment, chances are that you are extremely motivated to take control of your own destiny because (i) There simply aren’t any jobs out there for you and/or (ii) You swear that you’ll never allow someone else to determine your professional destiny.

Talent -With the sweeping, industry-agnostic layoffs that are taking place these days, there is probably no better time to take advantage of the fact that there is a large number of talented people who are looking for employment. Chances are that they’ll be willing to accept less than what they’re accustomed to earning to do the same job.

Lower Expenses - The sad reality is that business is down for most people, but out of that grim fact comes an opportunity to procure the goods and services you need for your company for less money. As a decreasing client base intensifies competition, companies are more likely to make concessions, provide discounts and add ‘bonus’ goods and services to secure your business.

Discipline - What better time to force yourself to be disciplined in all your decision-making than when times are hardest? When cash flow is not as free as in times past, increased financial rigor is crucial to starting and growing your business. The discipline that you instill now will always serve you well, making you more efficient and more prudent in your choices in future.

Timing - Economic downturns are part of the natural business cycle, and there’s a strong likelihood that your business will start to hit the upswing in the economy as your entrepreneurial efforts start to mature. While trying to time anything precisely in the business world is a little dicey, the aggregate improvement in the economy over the span of the next 2 or 3 years should bring a corresponding return that’s favorable to you.

I recently had the good fortune to discover “Small Giants”, a book written by Bo Burlingham,  one-time executive editor at Inc. magazine. Rather than prescribe the latest “10 rules of this” or “9 effective methods of that”, Bo leads readers on an exploration of 14 different companies and how they’ve accomplished that which many corporate denizens are in constant search of - job-related success and happiness. The industries, methods and personalities that are highlighted in this book are disparate, but are all interesting, even if they don’t seem familiar. While two deli owners in Ann Arbor, MI, a tattooed punk-folk singer from Buffalo, NY and a hippie builder from California don’t appear to have anything in common on the surface, Bo Burlingham manages to weave a slender thread through every single personality and business highlighted in the book and cinches it to create a cohesive story that is entertaining, informational and inspirational.

“Small Giants” is a relatively simple read and serves as the perfect antidote for the somber mood that the business world is currently in. The book also offers hope for people who long to find ‘the perfect’ job and to those who believe they know how to do ‘it’ better than the way their companies currently do. You can read more reviews of the book at Amazon.com or visit the book’s site at Smallgiantsbook.com.

Over the weekend, I caught up with an old classmate of mine and during our conversation, he introduced me to the concept of “search funds”. A search fund is a pool of money that’s primarily used to finance the “search stage” of a business acquisition. This encompasses the following steps:

1. Identifying a business to acquire
2. Due diligence and evaluation of the target business
3. Negotiation of the deal

Search funds are structured organizationally in the same manner as a traditional investment vehicle, with one or more managing partners and several limited partners. The managing partners take the most active role in the search fund, and are responsible for all the steps described above. Limited partners are usually high net-worth individuals who provide the funding for the “search”. In a typical search fund, the limited partners are given the first right of refusal to invest in the target company once it has been identified and vetted. In practice, the majority of the invested capital is raised from the group of original limited partners.

Where search funds differ from private equity (PE) groups is in the focus of the investment. While PEs are generally viewed as “strip and flip” investors, whose goal is to maximize their investment within the shortest period of time, search funds take a longer term view of their investments. The managing partners of search funds become active managers of the acquired business and are focused on running the business much as if they started it themselves. The benefits to sellers of the business include:

1.      A possible answer to succession planning issues

2.      An exit strategy that allows them to liquidate while preserving the core tenets of the company

For the aspiring entrepreneur(s), a search funds provides the following advantages:

1.      Time to evaluate the right industry and company to match his/her/their skillsets and interests

2.      The ability to inherit a business that’s already operational and profitable instead of having to start from scratch

Currently, there are approximately 200 active search funds and most were started by business school and law school graduates. However, the concept should be intriguing for anyone who would like to own and operate their own business, but do not want to start from scratch. For more information on search funds, please check out the table and the links below:

Stanford Graduate School of Business search fund page

Interview with some search funders

I’d like to thank Andrew Matricaria at Lakeshore Capital Partners, LLC for his detailed and patient explanation of search funds.

Several  years ago, the choices for notebook PCs were somewhat limited. In general, you’d find notebooks that had display panels that spanned in size from 12″ to 15″. Anything outside of this range was unconventional, and hence, expensive. Today, though, a plethora of different display sizes has become mainstream. You’ll just as easily find an 8.9″ notebook at an online computer store as you would a 17″ system, all at prices that are significantly cheaper than they were even 3 years ago. In fact, notebooks are so affordable now that more than half of all PC sales in the US and Canada in the most recently closed calendar quarter were comprised of notebooks (55.2% in the US, to be precise). However, with choice comes confusion, and the recent entry of the ‘netbook’ category of devices into the mix complicates matters even more. Aside from working on the ThinkPad SL, I’m also the product manager on Lenovo’s IdeaPad S-series netbooks and I’d like to summarize some of the major differences between netbooks and notebooks so that you can make a more informed decision about which the right system for you is. Some of the information isn’t universally true, but it’s safe to assume that the information is valid for sub-$500 netbooks. Please feel free to ask me questions about these systems in the comments section and I’d appreciate it if you would also participate in the accompanying poll.