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More Schools Have Learning Community Management Systems for Parents to Check on Schoolwork - WSJ.com

2011-10-03T02:44:00.001-07:00

Ryan Collerd for The Wall Street Journal
Clare Girton, left, and her 11-year-old, Teddy, in their Wayne, Pa., kitchen. Ms. Girton can check her four kids' assignments and grades by using the district's parent portal.
When Debbie Sumner Mahle, an Atlanta mother, wants to know what her sons, ages 6, 7 and 10, are working on in school, she turns on her computer and logs into NetClassroom. The portal lets her see not just their school assignments but also their attendance and grades.
More public and private school systems are wiring up data-management systems, and school work is just the tip of the iceberg. Parent-accessible websites and "learning community management systems"—or LCMSs, in the age of no jargon left behind—are increasingly handling schools' scheduling, emergency contacts, immunizations, academic assessments and even meals, with some offering a daily nutritional breakdown of lunch.

Molly Baker on Lunch Break looks at the dynamic between parents and school-age children changes now that parents can see homework assignments, grades, and curriculum in real-time by logging onto the computer systems schools are implementing.
Ms. Sumner Mahle receives email reminders to place her sons' requests at orderlunches.com, which manages the meal program at their school, the Davis Academy. If she wants to work a shift as a cafeteria monitor, or bring cupcakes to a Halloween party, she signs up at volunteerspot.com.
"The sites make volunteering and keeping up on things at school a lot easier. It saves people from the endless chain of emails," Ms. Sumner Mahle says. "But the amount of time you spend online with these things is insane."
As districts look to save money by going paperless outside the classroom, the digital push is picking up steam. One immediate result is a new wave of user names and passwords for families to keep track of. Longer term, the change is requiring parents to become active seekers of information, not recipients of mailings or notes sent home from school. And there are opportunities for overuse.

Ryan Collerd for The Wall Street Journal
The district portal
More than 100,000 of the country's 125,000-plus elementary and secondary schools rely on some sort of Web presence, says Sanjeev Ahuja of Edline, one of the largest providers of website management and support to schools whose systems include Edline and SchoolFusion. The other systems out there typically have a parent portal with a name like iParent, Homelink or MyBackPack and the offerings can be customized.
For some parents, the systems are a way to feel more involved in their children's education. This isn't always a good thing for their children.
"I find it to be a really good communication tool for me. But it can also be used for evil," says Kammy Hambrick, who uses the Henrico County Public School website, outside Richmond, Va., to track the work of her two sons, ages 12 and 9. "These tools give parents more opportunity to hover, and I was completely guilty."
Ms. Hambrick says she was logging in every day to check on homework assignments, grade averages and upcoming tests and projects. "I knew what time individual teachers updated, and I would be on there at 4:01," she says. "It was bad."

Ryan Collerd for The Wall Street Journal
Clare Girton says she misses the human connection when using the district portal to keep up with happenings at school.
This school year, her 12-year-old, Jack, called her on her habit. "He said, 'Mom, you need to stay off my HCPS link. I can do it myself.' And he's right. Part of middle school is crashing and burning, and learning how not to crash and burn," she says. The two did agree that Ms. Hambrick would have the right to make random checks.
As they get older, though, students often become the ones who hover. "Sometimes you'll hear in school, 'Oh first period got their tests back,' so then everyone will race to their phone or a computer and check," says Meg Girton, a junior at Radnor High School in Radnor, Pa. "I'm starting to look at colleges and I do care about my grades."
Clare Girton, Meg's mother, says in her household, the district's system isn't a seamless communications tool yet. The Girtons' seven-year-old Dell PC sits in the corner of a second-floor bedroom—far from the family command center in the kitchen, where most of the planning and decision-making about the four children takes place.
Ms. Girton uses a double-page Month-At-A-Glance paper calendar to keep track of her family's busy back-to-school routine of homework, hockey bags, baseballs and soccer balls, lunches, backpacks and SAT-prep books. "What I don't need is another password," she says.

Ryan Collerd for The Wall Street Journal
Meg Girton, left, says some of the most avid users are students checking their own grades.
"All of these emails come from school and I can never open them because my computer is too old," Ms. Girton says. "If I want to get any information from the high school, I first ask my high-schooler's permission to use her laptop. Then I usually have to ask her to log in for me, because I don't know the family password."

Teddy, Ms. Girton's fifth-grader, wants to know if he should pack his lunch or buy. It depends: Are they serving "breakfast for lunch" or veggie lasagna? The monthly menu used to hang on the refrigerator door. Now, it's all online.
"He's going to have to take his chances because I can't be checking it all the time," Ms. Girton says.
What concerns Ms. Girton and some parents is the sense that community bonds are weakened when the district gets wired up. "Sure it streamlines it, because you don't have to talk to somebody," Ms. Girton says. "But sometimes, isn't that part of it—talking to somebody?"
Typically, privacy concerns don't surface as a barrier to acceptance, providers say, possibly because people are now accustomed to having so much of their banking and medical business online. Security and student privacy are a priority, they say, and the systems are continually upgraded.
School districts credit these systems for huge savings in paper, mailing and office expenses. Teachers praise their ability to relay the same information to all parents at the same time.
"There are parents who are divorced or separated, you've got working parents, or you could have a parent stationed in Iraq. Now they all have access to the same information," says Edline's Mr. Ahuja. "It can make for a much more meaningful conversation with children about school."
"Being up on technology is not considered a luxury or an option anymore," says Kristin Hayman, a teacher at the Haverford School in Haverford, Pa. "It used to be just young teachers or the parents who were really advanced who used the systems."
For families that lack home Internet access, many districts and schools keep computer-lab hours in the evenings. And many providers offer mobile versions of their portals, so parents can access them using smartphones.
"It's about getting parents involved not just at the end of the quarter and at report card time," says Rob Wilson, president of Edupoint, whose biggest product is the Genesis system, which manages student-information systems for more than 200 school districts.

Steve Jobs: Parting Quotes For Today's Entrepreneurs | Inc.com

2011-08-29T18:50:00.001-07:00

Posted by Renee Oricchio @oricchio at 2:00 PM

By now you've likely heard that Steve Jobs has resigned as CEO of Apple and plans to continue as chairmen of the board. COO, Tim Cook, who has filled in for Jobs in recent years during his various medical leaves while he first battled pancreatic cancer and then recovered from a liver transplant, will step in as CEO.
There is much to be analyzed and reported on regarding this announcement. Every newspaper, blog and tech news outlet in the world is weighing in right now with their take on what this means for Apple, the tech industry itself, Steve Jobs and his legacy.
In today's world of 2011, we tend to focus on only Steve Jobs, the CEO. The CEO of one of the largest companies in the world (tech or otherwise, keep in mind Apple just surpassed Exxon). It's easy to forget he was once one of you, the audience we target-- the entrepreneur, the small business owner, the self-employed maverick going your own way.
MBA students will be studying Jobs the CEO for generations to come. But you and people like you, dear reader, will likly bump into Steve Jobs the entrepreneur for inspiration and wisdom for many years to come, as well.
I thought this would be a good time to share some of his best quotes from over the years; specifically sage wisdom for you, the David who dreams of one day being the Goliath.
Apply these words from the 90's to this economy
“The cure for Apple is not cost-cutting. The cure for Apple is to innovate its way out of its current predicament.”
On you and the other guys
"We're gambling on our vision, and we would rather do that than make "me too" products. Let some other companies do that. For us, it's always the next dream."
On selling your startup
“So when these people sell out, even though they get fabulously rich, they’re gypping themselves out of one of the potentially most rewarding experiences of their unfolding lives. Without it, they may never know their values or how to keep their newfound wealth in perspective.”
On attitude
“It’s more fun to be a pirate than to join the navy."
On resting on your laurels
“I think if you do something and it turns out pretty good, then you should go do something else wonderful, not dwell on it for too long. Just figure out what’s next.”
On humility
“But it’s a disservice to constantly put things in this radical new light — that it’s going to change everything. Things don’t have to change the world to be important.”
On how innovation really happens
“But innovation comes from people meeting up in the hallways or calling each other at 10:30 at night with a new idea, or because they realized something that shoots holes in how we’ve been thinking about a problem. It’s ad hoc meetings of six people called by someone who thinks he has figured out the coolest new thing ever and who wants to know what other people think of his idea."
On quality
"Pretty much, Apple and Dell are the only ones in this industry making money. They make it by being Wal-Mart. We make it by innovation."
"Be a yardstick of quality."
On designing products
“Design is a funny word. Some people think design means how it looks. But of course, if you dig deeper, it’s really how it works... To design something really well, you have to get it. You have to really grok what it’s all about. It takes a passionate commitment to really thoroughly understand something, chew it up, not just quickly swallow it. Most people don’t take the time to do that."
On pride in your work
(Regarding the Mac OS X ) “We made the buttons on the screen look so good you’ll want to lick them.”
Should you rethink focus groups?
"It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.”
"You can't just ask customers what they want and then try to give that to them. By the time you get it built, they'll want something new."
On creativity
“Creativity is just connecting things. When you ask creative people how they did something, they feel a little guilty because they didn’t really do it, they just saw something.
The Tao of Steve
“You can’t connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future."
This is truly historic; a bookend to the end of an era in technology, business and pop culture. On a human level, let's hope Mr. Jobs is allowed many years to enjoy a well-deserved retirement. I will certainly miss writing about him.

Education Tech: Skype's Vision for a More Connected Classroom

2011-08-28T10:24:00.001-07:00

by Sarah Kessler

Since becoming the CEO of Skype last October, Tony Bates has overseen the launch of a Wi-Fi hotspot service, a partnership with Facebook that produced the social network’s first video chat feature, and a pending acquisition by Microsoft.
Though it didn’t make as many headlines, Skype also launched its formal education initiative under Bate’s leadership. Skype in the Classroom, a dedicated teacher network, came out of beta in March with about 4,000 teachers already signed up. It now has more than 15,000 teachers sharing more than 779 projects on the site.
Mashable recently asked Bates about Skype’s new education initiatives and the developing education technology space. Bates will also be speaking at Mashable’s Social Good Summit in September.

Q&A With Tony Bates, CEO of Skype

What does video chat have to do with education?
The education process is moving beyond the traditional classroom/lecture setting. More and more teachers are seeking tools and techniques to engage their classes and enrich their lessons. Video calling is one of these tools, as it removes barriers to communication and lets students move beyond the boundaries of their classrooms. With Skype video calling, teachers can provide their students with first-hand knowledge from experts around the world and with other classes who are studying the same subject halfway across the world.
Personally, have you ever learned something via Skype that you wouldn’t have been able to learn without it?
Absolutely. One of my first days at Skype, my anxiety about not having a desk phone was quickly erased after I had a Skype (video) call with an important partner. [It] would have taken months to arrange a face-to-face physical meeting. The immediacy of video contact allowed the two of us to understand each other better and that really cemented for me the power of Skype. Every day at Skype, I am able to connect with employees from around the world and engage with them on a level that just is not possible through a conference call or email. When I speak to an engineer in Stockholm, he is able to talk me through a new product he is working on. The amount of education, in the most basic sense of the word, I receive on a daily basis through Skype amazes me. The technology is one of the reasons I wanted to join Skype and am eager to get Skype into every classroom around the globe.
Do you think that there’s still a resistance from schools when it comes to incorporating technologies?
There is always a certain amount of resistance when people try to introduce new technologies and methods of communication in any setting. The biggest cause of this resistance is usually a lack of awareness about ease of use and concerns about costs.
More broadly speaking, what are some applications of technology in education that you’re excited about?
There are a number of different technologies and applications that are being used right now that I am very excited about. One Laptop Per Child is a visionary program that is leveraging technology to make an impact on a global scale. Additionally, Blackboard is a company that is using enterprise technology to find ways to benefit students and teachers. Khan Academy is a truly exciting new method of … reaching students in new and exciting ways. Coming from Cisco and understanding the benefit of enterprise-level technology, I am always encouraged to see the ways enterprise technologies can be leveraged for the classroom.
What changes would you like to see in the way that schools implement technology?
I think an open dialog between educators, administrators and school districts would go a long way in removing the obstacles that are traditionally faced in introducing a new technology into a school or classroom. Many of the technological solutions that are available to teachers right now can be easily and affordably implemented in almost any setting. By working with school districts to educate their decision makers on the technologies that are available to educators — and exactly how they will benefit — would go a long way in increasing the rate of adoption in schools.

Five Lessons Olympic Athletes Can Teach Business Leaders - The Source - WSJ

2011-07-04T16:39:00.001-07:00

British rowing athlete Greg Searle first won gold at the 1992 Barcelona Olympics with his brother Jonny. In the 1996 Atlanta Olympics he finished third in the coxless four event. After a fourth-place finish in Sydney in 2000 he retired from top-level rowing to concentrate on his career as a practice director of performance development consultancy, Lane4.
Now at the age of 39 he is back in exhaustive training to qualify for London 2012 and the chance to once again compete for Olympic gold.
He describes how the strategies used by elite athletes are very much the same employed by business leaders to compete at the very top.
1. Find a vision; set short term goals to achieve overall success.
I am in the midst of training for an Olympic comeback 20 years to the day after I won gold in 1992. Winning that medal is the compelling vision that sits above everything else. I was also inspired by London winning the games and I thought, “I want to be a part of that.”
I thought I still have the raw potential to be an athlete for the 2012 games so took the risk and started training again with that goal in mind. Another big part was imagining winning a gold medal 20 years after winning my first, which no one else has ever done.
However, the real work is to achieve smaller goals before that overall target is within reach, such as rowing 2,000 meters in six minutes on a rowing machine, performing well in trials, sticking painstakingly to my training program and getting enough rest. These day-to-day behaviors may sometimes be difficult—but because there is the compelling vision of competing at London 2012 Olympics, it provides the inspiration for the difficult things I need to do.
So many leaders talk about goals and talk about a vision but they don’t make it exciting, compelling or engaging enough for people to want to achieve it. The great leaders are the ones that can create that enthusiasm for long term success which drives everyday behaviors in their team.
Rowing on a machine is really tough, and in itself it isn’t exciting. What “is” exciting is knowing and seeing the benefit of the hard work once I get into the boat, or at the next training session.
2. Feedback is your best friend.
The difference now in British sport compared to when I first competed is astonishing. We have the chance to win several gold medals next year while in 1996 we only won just one.
The major difference is the amount of support we get from our coaching teams. This is an important point for businesses and their leaders as many companies don’t use the support function as well as they ought to.
I receive constant feedback measured against the goals that I set at the beginning of the year. Everything is meticulously measured: nutrition, psychology, and physiology, but it’s the personal feedback regarding my impact—how I behave around the team and influence them, as well as how I move the boat—that I receive from my coach and fellow athletes that is most valuable.
It’s not always the case that this has been done well. I remember on one occasion I received feedback that caused me to jump out of the boat, swim to the bank and say I would never row with that person again.
Now however, feedback is given in a much more sophisticated way and people are asked to comment on their own individual performance. The people who want to improve are ready to identify their weaknesses and ask others for constructive criticism.
In a corporate environment however, people can be reluctant to invite feedback because they are nervous about how they are going to be judged.
In sport, the higher the level you perform at, the greater the level of support. But in business the higher you are in an organization the less support you receive, or people will not offer feedback as they may be wary of you. You might employ someone outside the company who can give impartial feedback that might not otherwise be possible.
3. Unshakeable self-belief: Self-confidence versus self-esteem
When I came fourth in Sydney in 2000, I had the feeling that I had failed. I had to be helped to recognize that I hadn’t become a bad performer—or even a bad person—because I lost a race.
The respect you earn as a sportsman or in your career has been gained over the course of years. It’s important to remember that respect can’t be lost in the blink of an eye.
Many of you will have experienced the “school of hard knocks” and you must expect to lose as often as you win—maybe more. But you have to put those performances into context as steps toward the ultimate goal.
On an individual basis, self-esteem is deep lying and built upon successes and setbacks over the course of a lifetime. As such it will not be affected by things that happen day-to-day but will be swayed over longer periods of time.
Self-confidence however, is affected in the short-term by everyday events. Self confidence can afford to take a few knocks, but it’s vital to maintain self-esteem by reminding yourself of your successes in the past and that overall, your quality will shine through.
4. Controlling the controllable.
As a leader or a sportsman it’s important to be prepared by addressing the things that are within your control. There is so much out there that you think could be relevant to make you perform, but, the real trick is to recognize the things that will really make a difference and make them your focus.
After that, it is simply a case of controlling your reaction to everything else.
In my sport it is a case of moving the boat as fast as you can down your lane. What the other boats do in their lanes is their concern.
Any strategy needs to be based upon what we can do to make a difference to our performance to get the best result.
I must admit that in Sydney in 2000, I thought our boat was inferior to our competitors’ boats. I remember that I let my mind drift and think about other things that were beyond my control.
We came fourth. It was a lesson learned.
5. Recognizing pressure as a positive
I know that I can perform at my best when I am under pressure. I don’t necessarily like it. I still get racked with self-doubt and nerves—but I know when I am in that situation I have to accept that feeling as it produces the best from me.
It’s only halfway through the race that I realize I have found strength that I didn’t know was there.
In a business environment there are high pressure situations to be dealt with every day, but often that pressure can help you become focused, sharp and at your best. The key is to recognize the symptoms and embrace them. You have to reframe the situation so it ceases to be a threat and becomes an opportunity.
A vital coping strategy is to ensure you have other things in your life. I am a father with two kids. I can keep pressure in perspective. As I sit on the start line, I think about my daughter who was recently in her first swimming gala. When it comes to the Olympics, I will be in a boat with eight of my mates doing something that I have been doing for the last 20 years. I think that what I do isn’t tough compared to a 10 year-old facing the world and competing for the first time.
Greg Searle director of performance development at consultancy Lane4. He draws upon his commercial experience and elite sporting background to deliver programs in the fields of leadership and team development.

How to Write a Business Plan for a Consulting Business | Inc.com

2011-05-19T15:00:00.001-07:00

There are four key areas that you should focus on when developing a business plan for your consulting business.
By Darren Dahl | Apr 14, 2011
If you've found yourself holding a pink slip from your corporate employer or perhaps are just tired of the old 9 to 5 grind, one of the best ways to get back on your feet might be turning your experience and skills into a consulting gig since just about anyone who possesses specialized skills can hang out a shingle of their own. But before you do, you might want to consider taking the time to create a business plan for your new venture, which will not only help you map out the opportunities before you, but also the threats.
While business plans doesn't appeal to everyone, especially if you don't ever expect to raise capital for your business, it can be a critical factor in getting your business off the ground, says Jennifer Leake, a certified management consultant and founder of Consultants Gold, an online community dedicated to helping consultants run their ventures successfully.
That's why, as you get started, Leake offers the following tips for developing a plan:

Write it! "Putting it on paper requires far more thought than just having it in your head," says Leake.
Keep it simple so that you revisit it often—so don't make it too long or too complex, she warns.
Spend the lion's share of your time defining your niche and why you are uniquely situated to serve it. "If you can't succinctly articulate what your business is selling, you'll never get people to buy," says Leake.
Don't create your plan in a vacuum. "You'll develop a better business plan if you have feedback, and you'll be more likely to take action if you have accountability from mentors, coaches, or success partners," she says.

But crafting a business plan for your new consulting company doesn't mean you should stick to the average template you can find online, as you should spend your time focusing on the elements that most often make or break companies in your industry.
"Writing a business plan for a consulting firm sounds fairly straightforward because there are so many who call themselves 'consultants,' but it can be quite difficult for many reasons," says Michael Hermens, president of Finance Forward, a financial advisory firm in Dallas.
That's why Hermens says that you should focus on four key areas when fleshing out your business plan:

1. Value Proposition
Answer this question: What is your specific value proposition?
"Thousands of ex-IT programmers are now 'Social Media Consultants,' " says Hermens. "What do you do that thousands of other people don't?"
The keys to building a solid value proposition are to give decision makers solace that they made the right decision, he says, which can be done in three ways: 1. Offer a service guarantee, 2. Build and take prospects through a well-defined methodology, or 3. Specialize so narrowly that it is easier to increase your stature. "The challenge with a guarantee is that larger firms don't normally purchase on that basis and smaller firms generally take a service guarantee as a tacit admittance of being mistake prone," says Hermens. "A well defined methodology or approach takes a while to build, but is well worth it for prospects who do not know you. Narrow focus helps potential consultants gain exposure, increased stature helps clients be satisfied with their hiring decision."

Dig Deeper: Nobody Buys a Value Proposition

2. Target Market
Answer this question: What is the best target market for you, or do you hunt every potential client that might possibly need your services?
"Understanding your target market is the most difficult planning activity," says Hermens. But developing an understanding of the competitive landscape is crucial, particularly go-to-market and pricing strategies, as well as the specific problems that the industry or market segment is trying to solve. "Gaining insight into how companies in your industry go to market, the basis on which consulting firms compete, matters," he says. "In strategy consulting, it might be references of former clients or the published knowledge share that gets clients interested. In large IT deployments, it is probably the strength of the methodology. With forensic consulting, your name and personal credibility is a huge selling point." In other words, determining how you should go to market, how (or how much) you charge your clients, and your familiarity with specific industry jargon and problems the industry is trying to solve, are crucial in planning your consulting business, according to Hermens.
One approach offered by Beth Corson, founder of Your FundingKey Advisors, is to choose a few industries and then outline the size and type of businesses that you'd like to work within those industries. "Rather than the desperate approach of taking any client that comes along, be selective and create a clear road map of where you want to go," she says. "Several years from now, your client roster should be fairly close to the plan that you make now. By working with similar clients in a specific industry, your company creates a level of expertise that makes it easier to perform well and get new clients because you understand their unique challenges and how to overcome them."

Dig Deeper: How to Define Your Target Market

3. Marketing
Answer these questions: How do you market your consulting business? What tactics do you employ to get in front of decision makers to evaluate your offering?
There's no question that in order to get your new consulting venture off the ground, you'll need to market your skills and experience to potential clients. That can be difficult, though, when you're a sole proprietor, since time spent marketing is time you're not billing for. While you can always hire an outside firm to help, your fledgling business might find the cost prohibitive. The answer, then, is to be creative in finding ways to promote your offering. One way to do that could be through landing public speaking engagements, which can be very effective at promoting your knowledge and point of view on your industry's challenges, says Hermens. Another option can be to partner with other companies that might offer complementary services to your own, a tact that may also help you build experience in new areas. But, at some point, you must develop your own client relationships independently if you want to keep your company growing.

Dig Deeper: How to Promote Your Consulting Business

4. Employees
Answer these questions: If you have employees, what is the best way to deploy them, given the reality of project work? Do you plan to pay them hourly, by confirmed project, or salaried?
"The issue here is how do you leverage yourself to grow revenue?" says Hermens. "Consultants who develop their brand can write books and charge an hourly rate, but they still cannot serve two clients simultaneously. Leverage allows your consultancy to flourish as your company takes on more projects." The key, then, is to think about how you align revenue arrangements with employee compensation and how to pay employees to ensure they are available when you need them by asking yourself questions like: Do you pay a salary and risk a lull in projects? Or, perhaps you pay employees on a project basis, only when they work, risking their availability when you get a new contract? "The goal here is to align revenue with employees compensation in the beginning as your consultancy grows," says Hermens. "Once your business becomes large enough, put key people on a salary, with performance bonuses. They will stick with you, have learned your go-to-market strategy, and know your methodology inside and out."

Dig Deeper: The New Rules of Employee Compensation

8 Tips for Nailing Your Next Startup Job Interview

2011-05-17T16:11:00.001-07:00

Alex Berg is the Chief Product Officer of Bonanza and Bags Bonanza. Bonanza is a marketplace focused on creating a browse-friendly experience that helps you discover unique items. Prior to Bonanza, Alex served in leadership positions with Wetpaint, Expedia and Blue Nile.

While unemployment remains high, some sectors are hiring at a breakneck pace. New startups are cropping up in cities across the U.S., with hotspots emerging in New York, Chicago, Austin, Seattle and, of course, San Francisco and Silicon Valley. If you’ve been limiting your job search to more established companies, you might just be missing out. For every Twitter, Groupon and Zynga, there are dozens of smaller-stage companies emerging and hiring everyone from programmers to interns.
However, when it comes to hiring decisions, startups are a breed of their own. With their unique value systems, knowing a startup’s particular “fit” criteria can mean the difference between a second round of interviews and being shown the door. Equally important, of course, is understanding how well the startup fits you.

1. Why “Fit” Matters

Startups are for believers. This isn’t to say that Pollyannas abound at your average startup, but most folks are there to make a significant impact. This is true with regard to their own day-to-day roles as well as the impact that their company makes on the world at large. Startups like to disrupt markets and challenge Goliath-like competitors. Getting everyone on board is crucial to their success, and the wrong fit stands out like a red-shirted crew member in a Star Trek landing party.
Fit goes beyond merely finding believers, though. In larger companies, you can often avoid interactions with the office jerk, but the small size and fox hole mentality of a startup can turn a jerk into a real morale killer. Not surprisingly, startups are laser-focused on making sure the fit is right. When there are less than a dozen employees in a company, every one really matters. The challenge is that what constitutes fit varies from startup to startup. Some startups celebrate collaboration and autonomy, while others are manically focused on productivity or technical innovation.
And, of course, fit is a two-way street. It has to be right for you, as well. Find out as much as you can about the culture before you go in. Check out LinkedIn and sniff out info from people in your own network. Read reviews on sites like Glassdoor, but take these with a grain of salt. Company review sites can be a haven for the disgruntled and startups likely don’t have lots of ex-employees anyway. Ask pointed questions of managers and individual contributors and see how their answers line up. Don’t compromise any strongly held beliefs and don’t expect the startup to adapt to you either. If the fit is not right, be ready to walk away — buyer’s remorse of the career variety is the worst kind.

2. Getting Noticed

Once you have your sights set, the first thing to do is get on the radar. Startups’ focus on fit makes them a fairly incestuous lot. They tend to hire friends and former colleagues, so relationships really count. The best way to get noticed is not through the front door. Hop on LinkedIn and comb through your contacts. There’s a good chance that someone in your extended network knows someone who knows someone who can get you in touch directly. Take the burden off of your contact by making it clear you aren’t asking for a recommendation, only that they pass you along.

3. Spring Cleaning

While you’re mining your network, make sure your LinkedIn profile is current and nicely polished. A pretty resume template looks very “1997,” and many startups have a bias against those not taking advantage of what they consider superior tools. Besides, at some point, the decision maker is going to pour over your profile looking for someone who can provide an unsolicited reference. So make sure your skills and job history are current and your endorsements are strong.
Lastly, do yourself a favor and Google your own name before they do (and they certainly will). Make sure your online presence is the very best version of you. You don’t need to eliminate your personality, but that late night tweet or old spring break photo might be perceived unflattering.

4. Do Your Homework

Before your interview, find out who you will be meeting with. Get the names of your interviewers and research their backgrounds. You might even get lucky and know someone who has worked with them and can give you the inside scoop. When asking for feedback on a company or prospective manager, resist the temptation to send the easy email. Offer to buy a coffee instead. In a world where emails get forwarded fast, you’ll find people understandably reluctant to dish online. When candor matters, cappuccinos are currency. Even if you don’t have a direct connection, understanding your interviewers’ unique backgrounds can give you insights into how they think and what they are looking for.
When candor matters, cappuccinos are currency.
Preparation goes beyond the interviewers, though. Get to know the company’s products and get to know them well. Have pointed questions and suggestions written down and ready for discussion. Candidates who don’t bother to try a company’s products demonstrate an appalling lack of interest and are often shown the door.

5. Showing You Have What it Takes

Startups don’t want people who do what’s asked of them and little more. They want people who genuinely love what they do. Be ready to tell multiple stories about how you went above and beyond the call of duty. If you don’t have any examples in your work experience, create one as a side project. Taking on an extracurricular project shows passion, curiosity, and enthusiasm — characteristics that are incredibly attractive to startups. When interviewing engineers, my teams always look for “tinkerers” — engineers dabbling in Ruby on the side, or designers escaping their day-to-day template work with more exciting outside projects. Demonstrate that you’re more than a solid contributor and have all-star potential, and remember that showing is always more powerful than telling.
A close second to having initiative is being adaptable. In a world where terms like “fast failure” and “pivot” are celebrated, you have to be ready to flex. Startups change direction. Sometimes it’s simply a collection of tactics, but on occasion it’s the entire company strategy. Prove you’re not just tolerant of change, but actively embrace it. If you were a part of a new initiative at your previous employer, be ready to tell the story.
Startups also value candidates who are focused on what can be done, rather than on what cannot. This might sound obvious, but early stage startup teams in particular are focused on validating the appeal and market for their products. This requires rapid and repeated trial and error. What makes this possible is a culture that champions what can be done, and done quickly. Startup productivity comes to a grinding halt when the focus shifts from the possibilities to edge cases. Demonstrate your openness to new ideas and creative thinking, taking care to build on the ideas of others rather than tearing them down.

6. Tilt Your Scale Toward “Work”

Every company talks about valuing a work/life balance, but the fact of the matter is that most startups’ scales are weighted more heavily toward work. If your situation requires a predictable 9-to-5 schedule and 40 hours a week, a startup probably isn’t the right place for you. If you are accustomed to longer hours and the occasional night or weekend, that’s the kind of thing they want to know.

7. Beware of the Oncoming Bus

Take care when referring to your previous employers and managers. While your last manager might have indeed been incompetent, you’re not going to earn any points by throwing them under the bus. If you do, you’ll come across as jaded and start raising big, red “fit flags.” Find the positive in your previous gigs and, when pressed about why you are looking, retain a positive outlook. If the situation warrants it, by all means be candid, but don’t be petty. No one hires that guy.

8. Follow Up

Don’t disappear once you’ve left the interview. It’s important that you not only stay top-of-mind but also that you build your own personal momentum as a candidate. Get business cards or email addresses from your interviewers. For extra points, go beyond the mere thank-you note that expresses excitement about the opportunity and add something to the conversation. Flub an answer? This is your chance to fix it. Have an epiphany in the car afterward? Share it. Continue to demonstrate passion and interest and you’ll rise to the top.

Above all, the most important thing you can do is find out what the startup uniquely values, ensure it aligns with your own interests, and then demonstrate that you’re the perfect fit. Startup teams labor over hiring decisions heavily. The skills conversation takes about five minutes. The fit conversation? That one can take hours.

8 Tips for Nailing Your Next Startup Job Interview

14 Creative Marketing Ideas For Small Business

2011-03-07T09:08:00.001-08:00

by Gai Richmen

Let’s face it, sometimes ideas are just hard to come by.

We are so overloaded with things to remember and things to do, that coming up with some newer ways to help promote our business can be challenging.

Over the past few weeks, I’ve jotted down some ideas that appealed to me.

Some I thought of myself, some I discovered through all of my surfing ventures of late.

14 Creative Marketing Ideas

1) Create a calendar to give away. If it applies, and the photos can relate to your business all the better. Of course, this calendar will have your business name and contact information on it!

2) Conduct a free clinic or seminar about a product or service that you offer. These can be webinars as well. They don’t have to be complicated, but they do need to be relevant.

3) Put together a marketing video. Google loves video. When it’s complete, upload it to YouTube and then embed it on your website, and where ever else you can think of.

4) Write an article about what you know and post it on your website, blog, other websites, everywhere! We all know more about something than someone else does, so promote yourself as an expert in that!

5) Write a press release and submit it to your local newspaper. There are also numerous websites that you can submit your press release to, and some of them are free.

6) Create an annual award for something and publicize it.

7) Join your Chamber of Commerce, mostly for the incredible networking opportunities that it will offer you, but also to show your sense of community.

Volunteer to give a speech, or for career day at a local high school.

9) Create a customer loyalty program.

10) Create a monthly newsletter and start an email marketing campaign.

11) Team up with a non-competing business to offer a promotional package.

12) If possible, loan your facility out for meetings and other events. This is a great way to spread the word locally about your business and what you can offer.

13) Spotlight a customer as Customer of the Month. Be sure to advertise this in numerous places.

14) Start a blog.

Startup Advice: Inside Tips From Expert Entrepreneurs

2010-11-19T05:56:00.001-08:00

When the dot-com bubble burst in early 2000, many investors lost 80% to 90% of their net worth; some lost even more. The CEOs of those tech startups fared no better. Many companies that were once million dollar babies soon became the laughing stock of Wall Street. But, after a slow and deliberate crawl back to a state of equilibrium, the startup scene is thriving once again.

To gauge the pulse of today’s tech startup ecosystem, we spoke to a group of New York-based entrepreneurs and investors. We asked the CEOs of Learnvest, Roadify, Hunch, and HowAboutWe what it’s like to pitch, run and grow a company. We also asked angel investor David B. Lerner and seed-stage venture capitalist Brett Martin what they’re looking for when they evaluate a company.

How healthy do you think today’s tech startup ecosystem is? Are you a founder? Investor? Enthusiast? Let us know what you think in the comments section below.

More Business Resources from Mashable:

- 5 Lessons Madison Avenue Can Learn From Startups
- Why the Best Online Marketing May Be Headed Offline
- HOW TO: Get the Most From a Small Business Social Media Presence
- HOW TO: Run Location-Based Google Ads
- What’s the Value in a Brand Name?

'Super Angels' Alight

2010-08-16T03:47:00.000-07:00

No Longer Flying Solo, Big Investors Attract Others to Juice Start-Ups
By PUI-WING TAM And SPENCER E. ANTE

Much of the venture-capital industry is undergoing a shakeout. But a growing
breed of start-up investors dubbed "super angels" is rapidly raising new
money-and ratcheting up competition with established venture capitalists in
the process.
Aydin Senkut, a former Google Inc. executive, plans to announce that he just
closed a $40 million super-angel fund from institutional investors and
wealthy individuals including hedge-fund manager Peter Thiel. His fund
follows a $20 million super-angel fund by start-up investor Ron Conway in
May and an $8.5 million fund from by former Google executive Chris Sacca in
June.
Meanwhile, former PayPal Inc. executive Dave McClure is raising a $30
million super-angel fund, according to a regulatory filing. And super-angel
investor Mike Maples, who raised a $33 million fund in 2008, is raising a
new $73.5 million fund, according to a regulatory filing.
Many super angels started out just as mere angels, wealthy current and
former Silicon Valley entrepreneurs and executives who invest their own
money in technology start-ups.
Aydin Senkut, in his office in Palo Alto, Calif., last week. plans to
announce a $40 million super-angel fund.
What elevates super angels into an unofficial upper class generally is the
magnetic effect their participation in a deal has on other investors-a main
reason entrepreneurs like to do business with them.
And for super angels, investing has evolved into something more than a
hobby. These players are now raising funds with outside money, investing
full time and competing with VCs.
While their funds tend to be small, super angels have had an outsize impact
on Silicon Valley. As many traditional venture capitalists retreated after
the tech bust last decade, super angels filled the gap, investing small
amounts of $25,000 to $1 million in dozens of new start-ups such as Facebook
Inc., Mint.com and Zynga Game Network Inc. Super angels also work with
established venture capitalists to bring them new deals.
As these micro-cap venture capitalists now raise their own funds-giving them
more ammunition to participate in later financing rounds of a start-up-they
are siphoning off more investment deals and fund-raising dollars from larger
venture firms.
Judith Elsea, a managing director at Weathergage Capital, a $250 million
fund-of-funds firm that invests in venture funds, says she recently invested
in Mr. Senkut's new super-angel fund and has also put money into Mr.
Maples's super-angel fund-at the expense of traditional venture funds.
"It's been pretty spotty" performance from regular venture funds, says Ms.
Elsea. So "we have material exposure to several of these [super angel]
managers."
Investing in super-angel funds can pose risks in that they typically invest
in far-less-proven start-ups than venture capitalists do. And unlike venture
capitalists, who have hundreds of millions to invest, super angels generally
don't have enough money to fully fund a company to fruition.
Still, super angels are increasingly jockeying with established venture
capitalists for stakes in start-ups. Geoff Yang, a venture capitalist at
Redpoint Ventures, which closed a $400 million fund earlier this year, says
his firm has been "squeezed" into a smaller ownership share in some
investments because super angels wanted a bigger slice of the deal. While
angels have brought many new start-ups to Redpoint's attention, "every
[venture capitalist] is trying to figure out what their strategy is" with
them, he says. "Are these guys friend or foe?"
Some start-up entrepreneurs say super angels have thrown them lifelines they
couldn't secure from venture capitalists. Ryan Howard, chief executive of
San Francisco online health-care start-up Practice Fusion Inc., says venture
firms turned him down in 2008. They "want no risk," he says.
Super angels wrote Mr. Howard checks for $25,000 to $100,000, so that he was
able to raise $1 million by early 2009. "Their network is mind-blowing,"
says Mr. Howard, whose firm raised a venture round from Morgenthaler
Ventures late last year.
The super-angel activity contrasts with the rest of the venture industry,
which is winnowing out after a decade of poor returns amid a lackluster
initial-public-offering market for start-ups. The number of active venture
firms is nearly one-third less than the 1,326 in 2000, according to research
firm VentureSource.
Super-angel Mr. McClure says he tends to make dozens of small start-up bets
and can comfortably make money if just a few of the start-ups are bought by
larger acquirers for less than $100 million.
In contrast, big venture funds-often sized at several hundred million
dollars and up-need bigger paydays to turn a profit on their huge funds.
"We have a whole different set of exit criteria," says Mr. McClure, whose
biggest exit to date is Mint.com, the financial website that Intuit
<http://online.wsj.com/public/quotes/main.html?type=djn&symbol=INTU> Inc.
bought late last year for $170 million.
Mr. Senkut, who has invested in more than 60 start-ups as an angel investor
since 2005, says he raised a super-angel fund because he wants to shift from
being a minority investor in start-ups to taking majority stakes more often.
With the new fund, the 40-year-old is growing from a one-man shop to a
larger operation by hiring two staffers.
Having seen 10 acquisitions of start-ups in his portfolio over the past
year-including Mint.com to Intuit and social search service Aardvark to
Google <http://online.wsj.com/public/quotes/main.html?type=djn&symbol=goog>
Inc. for $50 million in February-Mr. Senkut says he is exiting from his
start-ups three months to three years after the initial investment. By
contrast, most venture-backed companies now either go public or get sold
after a median time of 9.4 years, according to VentureSource.
Write to Pui-Wing Tam at pui-wing.tam@wsj.com

In India, Wal-Mart Goes to the Farm

2010-04-12T17:10:00.001-07:00

HAIDER NAGAR, India — At first glance, the vegetable patches in this north Indian village look no different from the many small, spare farms that dot the country.

Enlarge This Image

Keith Bedford for The New York Times

Factory workers sort produce for Bharti-Wal-Mart.

· Times Topics: Wal-Mart Stores Inc. India

But up close, visitors can see some curious experiments: insect traps made with reusable plastic bags; bamboo poles helping bitter gourd grow bigger and straighter; and seedlings germinating from plastic trays under a fine net.

These are low-tech innovations, to be sure. But they are crucial to the goals of the benefactor — Wal-Mart — that supplied them.

Two years after Wal-Mart came to India, it is trying to do to agriculture here what it has done to industries around the world: change business models by using its hyper-efficient practices to improve productivity and speed the flow of goods.

Not everyone is happy about the company’s presence here. Many Indian activists and policy makers abhor big-box retailing, fearing that it will drive India’s millions of shopkeepers out of business. Some legislators are suspicious of the company’s motives. The government still does not allow Wal-Mart Stores and other foreign companies to sell directly to consumers.

But Wal-Mart is persisting because its effort in India is critical to its global growth strategy. Confronted with saturated markets in the United States and other developed countries, the company needs to establish a bigger presence in emerging markets, like India, where modern stores make up just 5 percent of the country’s retail industry.

Establishing good relations with farmers is a centerpiece of the company’s plans. Though Wal-Mart is pushing many of its traditional products in India, like clothes, electronics and home goods, perhaps none is as essential as food. Wal-Mart needs high-quality produce at low prices to attract customers in volume.

The challenges are significant. Buying and transporting vegetables and fruits are difficult tasks because India has millions of small-scale farmers and an agriculture system riddled with middlemen.

Here in Haider Nagar, in India’s bread basket state of Punjab, farmers who supply vegetables to Wal-Mart say they like working with the company. It typically pays them 5 to 7 percent more than they earn from local wholesale markets, they said. And they do not have to spend money transporting produce because Wal-Mart picks it up from their fields.

Abdul Majid, who sells cucumbers to Wal-Mart, says his yields have risen about 25 percent since he started following farming advice about when to apply fertilizers and which kinds — more zinc, less potash — from the company and its partner, Bayer CropScience.

Mohammad Haneef, a farmer in a nearby village, said he had sold to two other companies before Wal-Mart came to town, but one shut down and the other cheated him and paid him late. Wal-Mart is much better, he said, but its buyers are picky, taking the best vegetables and leaving him with the inferior ones that he still has to truck to wholesale markets.

“You have to establish trust,” he said in Hindi. “Wal-Mart has been paying on time. We would just like them to buy more.”

For Wal-Mart, establishing an agricultural beachhead in India will not be easy. Many Indian companies have abandoned or significantly scaled back efforts to run supermarkets. Some companies grew too quickly and flamed out. But many others were undone by the numerous Gordian knots that hold back Indian agriculture: laws limit who can buy farmers’ crops, 35 percent of fruits and vegetables are wasted because of inefficient transportation and farmers earn too little to invest in their marginal farms.

“Anybody who says they can revolutionize retail in this country in a short period of time” is overestimating their abilities, said R. Gopalakrishnan, executive director of the Tata Group and chairman of Rallis India, a company that makes fertilizers, seeds and pesticides.

Wal-Mart is also limited by New Delhi’s ban on foreign-owned retail chains that prevent it from selling directly to Indian consumers.

“Not having access to our own retail stores through our own investments is a serious impediment,” said Raj Jain, who heads Wal-Mart’s Indian operation. “How do you pay for that big back end if you are not going to have access to the front end?”

Right now Wal-Mart operates in India through a 50-50 joint venture with Bharti Enterprises, an Indian conglomerate that also owns the country’s largest cellphone company. Their partnership, known as Bharti Wal-Mart, supplies retail stores that are fully owned by Bharti and runs a wholesale store that sells to shopkeepers, hotels and other businesses.

Wal-Mart executives would not say how much money the company has invested in India, but its operation is at the forefront of a second big push into emerging markets. In the 1990s, Wal-Mart set up shop in China, Mexico and Brazil and now has hundreds of stores there. By comparison, Bharti Wal-Mart has just one wholesale store and will soon open two more. It employs 800 people in India, and hopes to have 5,000 in three years.

In recent speeches, senior Indian leaders have suggested that they would like to remove restrictions on the retail industry to help reduce food prices, which were up 20 percent in January compared with a year earlier. Last month, Prime Minister Manmohan Singh cited the need “to take a firm view on opening up the retail trade.”

But even as senior leaders speak of more openness, regulators recently published a rule that would restrict wholesale companies like Bharti Wal-Mart from earning more than 25 percent of their revenue from sales to affiliated “group companies” — a term that is not clearly defined in the rules. A spokeswoman from Bharti Wal-Mart, Arti Singh, said the company was trying to find out what this meant.

Last year, a committee in the Indian parliament said the government should not allow any more wholesale stores because companies like Wal-Mart were using them as “camouflage for doing retail through back door.” The legislators also asserted that foreign companies would raise their initial low prices after they had driven small retailers out of business.

Wal-Mart has not waited for Indian policy makers to effect changes. It has spent the last two years building relationships with farmers and suppliers, and setting up its supply system. It is building a big distribution center outside New Delhi to supply Bharti stores, which are branded Easy Day, in and around the capital.

Wal-Mart also has learned to adapt its operations to numerous challenges. For instance, because trucks move slowly on the country’s congested roads, Wal-Mart’s fruit and vegetable distribution center near Haider Nagar supplies retail stores only within 200 kilometers (124 miles) to keep produce fresh. By comparison, similar Wal-Mart facilities in China supply stores as far away as 400 kilometers.

But that means the company will have to set up more distribution centers with expensive power generators, making it more difficult to make money in India.

Still, Mr. Jain, who previously worked for Whirlpool and Unilever, was optimistic. He said the company would add more farmers and stores in Punjab and neighboring Haryana State, then begin expanding further.

This is “a controlled experiment,” he said. “It will take some time to make it sustainable and economically viable. Then once that happens, we need to take it to some other geographies and prove the model.”

Yes, You Can Build a Web Company in India. Here's How.

2010-03-25T06:57:00.001-07:00

by Sarah Lacy on Mar 24, 2010

Silicon Valley and India have a cozy relationship, but a big question has resulted in friction, failed companies and millions in losses: When will the Internet catch on in India in a big way?

A few companies have done well and a few more are coming up, slowly but surely. But there are hardly any true breakout hits.

RedBus is pretty close. It's essentially an Expedia for bus tickets in India. It sells about 3,500 bus seats per day, is the fourth most-trafficked Web site in India and has at least tripled its revenues year-over-year. The company sells seats for roughly half the bus operators in India, and that's saying something: This is an insanely fragmented market that had next to zero centralization just a few years ago. All of this has been built in three years on about $1 million in venture funding. (The company raised another $1.3 million in 2008, but it's still in the bank. Investors include Helion, Inventus and Seedfund.)

I can vouch for the company being cheap. Having spent my morning in the plush eight-acre Infosys headquarters, the offices of RedBus were a marked contrast. They are split among two buildings located in one of those very chaotic Indian neighborhoods where vendors are shouting, cows are wandering and smell of open sewers is not too far off. It feels far from the sanitized, steel-and-glass rows of multinationals.

None of this is intended as an insult– co-founder and CEO Phanindra Sama is proud of his cheapness. (Sama is pictured above, sorry it's so blurry. My camera was having issues.) We met in a no-frills, un-airconditioned conference room. He didn't turn on the air conditioning for famed Silicon Valley Indian entrepreneur Kanwal Rekhi, when he visited last month either—and Rekhi is an investor in RedBus.

Despite the sweat trickling down my forehead, arms, legs and back throughout the interview, I didn't want to leave. What Sama and his two founders have pulled off in a short period of time with little funding in India is impressive.

Background for Americans: There are two kinds of buses in India—those that make stops and have ticket-takers on board and that go to one destination only and sell pre-paid tickets only. There are some 3,000 operators of the latter category and, before RedBus, there was no way to contact them directly. To get a bus ticket, you went to an agent. That agent only had inventory from a few bus lines. To book the ticket, he or she would call one person who was in charge of booking every seat on that particular route. There was a long wait time, and frequently the routes the agents knew about were sold out – meaning you had to change your travel plans, or find another agent who had different sources. Meanwhile there was no standardization on pricing and commissions. The agent simply wrote the cost on a piece of paper and if you wanted to ride, you paid it.

Now, RedBus has a central database that gets seats from half of India's bus operators. It has done so well that it powers the bus ticket applications for most of India's more general travel sites like MakeMyTrip.com. It also sells an OpenTable-like software-as-a-service product to help bus companies manage their own inventory and better integrate their inventory with RedBus. In terms of seats, it sells less than 1% of the 750,000 rides taken daily, but with several channels and few other easy options, there's a ton of room to grow a big company.

Sama didn't set out to build a company. I know that's a cliché with startups these days, but it's a rarity in Bangalore where the glamor of being a Web entrepreneur runs high and plenty of TechCrunch-reading kids save up money, quit for a year, try to start a company, and go back to a multinational if it doesn't hit quickly. When RedBus's mentor first suggested the company raise $1 million, Sama gasped. He hadn't even thought in those amounts. His only immediate thought was: "If I had $1 million, I'd put it in the bank and make interest."

That mentor was Sanjay Anandaram formerly of Neta, Wipro and other ventures known between the Silicon Valley and Indian entrepreneur communities. Sama met Anandaram through TIE's JumpStartUp program. Despite the reach, influence and press of TIE—the uber-Indian networking organization started in the Valley— Sama is the first entrepreneur I've met in India who gives it this much credit for his company's survival.

Specifically, he cites Anandaram's advice. When RedBus was trying to sell software to the bus lines, it was Anandaram who said: Don't keep trying to sell the same thing, ask what they need and build that. The bus lines needed to sell seats. So RedBus built a site, and bought the inventory itself from the bus lines to list on the site. Once it proved it could move seats, the operators were happy to pay the company a percentage of seats sold.

Once the company could prove results, it was Anandaram who warned them to undersell expectations: Tell an operator you can sell one seat for them a month, even if you think you can sell fifty. If you sell two, you'll be a hero, not a disappointment. RedBus has carried that over to fundraising, admittedly forgoing higher valuations because it didn't want to oversell and under-deliver.

That's harder than it sounds for an entrepreneur, who is usually the single most bullish person on his company. And it is absolutely shocking in India's startup culture. I had a blog network tell me on my last morning in India – with a straight face – that it would be doing double the revenues of Gawker in a few years. I like to give entrepreneurs the benefit of the doubt, but I also know the media business. Forgive the generalization, but Indians just love to over-sell. It's deep in their trader heritage. "You have to sacrifice your ego," Sama says.

But, especially for a startup in India, the most important piece of advice Sama and his co-founders got from Anandaram might have been this: You are not an Internet company. Because the Internet isn't more widespread in India, there has to be a core mindset that the Net is an important channel, but just a channel. Just under 50% of RedBus's business comes from the Net, much of the rest is via mobile phones.

And the company invested early in two expensive ways of skirting that Web limitation. The first was building its own network of bike couriers to deliver tickets and take payments, ala the hugely successful Chinese online travel company, CTrip. The second was investing in seven different call centers throughout India, not one central call center. Says Sama, if you don't localize a call center to local slang, languages, and customs the customer service won't work.

Seriously? An Indian in Bangalore arguing a centralized, remote call center can't give good customer service? That has about as much globalization-irony as China's BYD refusing to outsource any of its manufacturing.

For Anandaram's part he noted the founders' willingness to listen and learn from someone who'd been there. He says the biggest mistakes he sees Indian startups making are not seeking advice, being too obsessed with retaining control and not valuing sales, marketing and partnerships.

The RedBus story squares with something I've been noticing more in my travels to emerging markets—frequently when entrepreneurs complain about a lack of angel investing or venture capital, what they are really lacking isn't just the money, it's the mentorship. This came up in my recent conversation with Pierre Omidyar, whose philanthropic effort, the Omidyar Network, seeks to fund both non-profit and for profit entrepreneurs specifically those in the poorest areas of the world. Omidyar Networks has money it can gives these entrepreneurs, thanks to eBay and the dot com boom—lots of money. But what the organization is increasingly finding so lacking is that horrible buzz word "human capital."

In Omidyar's own experience, eBay never touched the $3 million it raised from Benchmark in 1996. But the mentorship he got was well worth giving up 25% of the company. "That's what is so hard to find around the world," Omidyar says. "We're increasingly looking at whether $500,000 worth of human capital could help more than $500,000."

I know that the idea the VCs bring more than money is ridiculed by most entrepreneurs today, but those are usually entrepreneurs operating in a scene that has had an explosion of startups—both failed and successful ones—in the last fifteen years. Even the shiest, most awkward or most unconnected entrepreneurs in the Valley can find a mentor with little effort. Sometimes we take for granted that that's not the case in much of the rest of the world.

Lucky for RedBus's founders, they were an exception.

America's Best Young Entrepreneurs 2009

2009-10-20T09:33:00.000-07:00

by John Tozzi, Stacy Perman, and Nick Leiber
Monday, October 12, 2009

For our fifth annual roundup, BusinessWeek readers nominated a record number of young entrepreneurs. Meet the 25 most impressive

Welcome to our fifth annual roundup of the country's most promising young entrepreneurs. Before we get started examining the new batch, consider this question: Who is more likely to start a business: A college student or a worker with a few decades of experience? Yep, you guessed it: the experienced worker.

More from BusinessWeek.com:

• America's Best Young Entrepreneurs 2009

• Entrepreneurs Who Started Young

• Special Report: America's Best Young Entrepreneurs

It turns out it's boomers, not twentysomethings, who start the most businesses in the U.S. Over the past decade or so, the highest rate of entrepreneurial activity belongs to the 55-64 age group. The 20-34 age bracket, by contrast, had the lowest rate. That's according to a recent report by Dane Stangler, a senior analyst with the Kauffman Foundation, based on data collected from 1996 to 2007. It echoes research by entrepreneur-turned-academic Vivek Wadhwa, who found that twice as many tech entrepreneurs create ventures in their 50s as do those in their early 20s.

So not only are these entrepreneurs navigating the toughest economy many of us have ever lived through, they're also vastly outnumbered by older, more experienced competitors, who usually have more contacts and capital. That's even more reason to continue to give young entrepreneurs the encouragement, respect, and awe that they've received since becoming cultural icons during the dot-com boom.

Stangler says he's not suggesting young people aren't entrepreneurial or won't be. "The cachet of large, established companies has taken a hit. Job tenure has been falling for a long time. Employment is not going to recover in the very near future. People across all age groups are going to take the future into their own hands."

More from Yahoo! Finance:

• Best and Worst Commutes in the U.S.

• 10 Best Places to Launch a Career

• Highest and Lowest Paying States

Visit the Career & Work Center

Dorm Room Beginnings

Brian Ruby, 25, is just one entrepreneur who is following through on Stangler's prediction. He founded molecular imaging equipment maker Carbon Nanoprobes in 2003 in his Columbia University dorm room and has since raised about $4 million from institutional and private investors. After six years doing research, Carbon Nanoprobes is now transitioning to equipment sales, and Ruby expects about $1 million in revenue in 2010. The nine-person company based in Pike Malvern, Pa., sells its equipment to universities, semiconductor firms, and material sciences companies.

Husband-and-wife team Eric Koger, 25, and Susan Koger, 24, launched indie clothing e-tailer ModCloth in 2002, near the end of their freshman year at Carnegie Mellon University. They've managed to raise a little over $3 million from angels such as StubHub co-founder Jeff Fluhr and venture capital firms First Round Capital and Maples Investments. Eric says the 104-employee, Pittsburgh-based company is profitable, with around $1 million in monthly sales, and forecasts more than $15 million total in 2009.

Logan Green, 25, and John Zimmer, 25, started Zimride in 2007 to allow carpoolers to connect online. Its 35 clients are mostly colleges but include corporate customers such as Cigna (CI) and Wal-Mart (WMT). Universities pay about $10,000 per year to use the platform, although pricing varies. Zimmer says the Palo Alto (Calif.) firm, with six employees, expects revenue of $400,000 this year and is now profitable.

Record Numbers

These are just a few of our finalists defying the odds. To assemble the group, as in previous years, we asked BusinessWeek readers to nominate candidates aged 25 and under who were running their own companies that showed potential for growth. Given the severity of the recession, we were pleased to receive a record number of nominations this year -- more than 600. After the call for nominations ended in mid-August, our staff sifted through the nominees looking for the most impressive.

Not surprisingly, the majority were Web-based businesses, where barriers to entry continue to fall. There were a smattering of more traditional companies, including an aircraft seller, a specialty mushroom grower, and a machinery lubricant vendor. Compared with last year, more women were nominated, more businesses were profitable, and more had secured equity capital.

You can flip through this slide show for profiles of each of the 25 finalists, then vote for the business you feel holds the most promise. We'll announce the top vote-getters on Nov. 9. Then check out our slide show on where last year's finalists are now. For more elements of the special report, including a feature on selling to universities and a video interview with a standout alum, visit the related items box at upper right side of this overview.

U.S. Entrepreneurs Ages 25 and Under

This summer, BusinessWeek set out on its fifth annual search to find the country's most promising young entrepreneurs. As in previous years, we asked readers to nominate candidates ages 25 and under running their own companies. After the call for nominations ended in August, our staff whittled the batch down to 25 impressive businesses. To read profiles of the finalists and vote for the business you feel holds the most promise, click on. We'll announce the top vote-getters on Nov. 9.

Note: Revenues and traffic numbers are self-reported. To be considered, founders had to be 25 or under when the nomination form was posted in late June.

1. Ascension Aircraft

What It Does: Aircraft sales and leasing
Founder: Jamail Larkins, 25
Web Site: http://www.ascensionaircraft.com/
Based: Augusta, Ga.

Jamail Larkins has been hooked on flying ever since he took his first flying lesson at age 12. The Augusta (Ga.) native completed his first solo flight at 14, performed in an aerobatic air show four years later, and earned a bachelor's degree in aviation business administration from Embry-Riddle Aeronautical University. But instead of following a traditional career path and going to work for Boeing (BA) or Lockheed Martin (LMT), Larkins decided to channel his passion into his own business. It came naturally. At 15, he had started Larkins Enterprises, selling flight training books and videos to local pilots, to pay for his flying lessons. "I promise you we started off selling a lot less than we do today," he says. Though he continues to run Larkins to do marketing and consulting for clients that include his alma mater, the National Business Aviation Assn., and Michelin Aircraft Tires, he says 90% of his revenue comes from his aircraft sales and leasing company, Ascension Aircraft, which he started in 2006. Larkins says four-employee Ascension is profitable and had a little over $7 million in revenue in 2008, despite the downturn. He expects revenue to increase slightly this year. He continues to fly for fun every chance he gets and is planning to get back into aerobatics in 2010.

2. Box.net

What It Does: Online collaboration tool
Founders: Aaron Levie, 24, and Dylan Smith, 24
Web Site: box.net
Based: Palo Alto, Calif.

Aaron Levie and Dylan Smith started Box.net in 2005, when they were both college sophomores, as a tool to collaborate on projects with fellow students. The pair -- childhood friends from Seattle -- soon saw business potential in an online platform to let companies share information securely. Nine months after launching, they both left school (they were at University of Southern California and Duke, respectively) and moved to the Bay Area to work on the company full time, with an initial $350,000 investment from Mark Cuban. (His stake has since been bought out.) The service, targeted toward companies with fewer than 100 employees, has 3 million users representing 50,000 businesses. Individuals can try a limited version for free, but businesses pay $15 per user per month for the premium version. The company, now based in Palo Alto, has 50 employees and has raised $14.5 million in venture capital from Draper Fisher Jurvetson and U.S. Venture Partners. The firm is not yet profitable, though Levie says revenue is in the "mid-to-high single millions," and he expects it to turn a profit soon.

3. Click To Client

What It Does: Online marketing agency
Founder: Shama Kabani, 24
Web Site: http://clicktoclient.com/
Based: Dallas

While completing her master's degree in organizational communication at the University of Texas at Austin, Shama Kabani wrote her thesis on why people use Twitter and other social networking sites. She became convinced businesses could use the tools to market their products and services. But when Kabani made that pitch as she applied for jobs at big management consulting firms such as McKinsey and Bain & Co. in 2006, she was rejected. "At that point, nobody really cared for social media knowhow. They were just thinking, 'This is a fad. Our clients don't really need it.' " Undeterred, Kabani, whose parents are both entrepreneurs, founded her own full-service online marketing firm in March 2008, to build Web sites, handle SEO, and create and manage social media campaigns. The six-employee business now takes on about 25 one-off projects a month and also acts as an online marketing department for six regular clients on a retainer basis. Fees range from a few hundred dollars for a newsletter design to $2,500 for a Web site project; monthly retainer fees start around $2,500. Kabani says Click To Client had about $120,000 in revenue in 2008, expects $280,000 for 2009, and is shooting for $1 million in 2010. Her first book, The Zen of Social Media Marketing, is due out in April.

4. Emergent

What It Does: Renewable energy consulting
Founders: Jesse Gossett, 23 (left); Jayson Uppal, 23 (center); and Chris Jacobs, 21 (right)
Web Site: http://www.emergentgroup.com/
Based: Boston

Two years ago, three Tufts University students and one Babson College student attended the Energy Security Initiative at Tufts (now the Tufts Energy Forum), a group whose mission is "to spread and enhance the discussion surrounding all aspects of the transforming, global energy industry." It was there that Jesse Gossett, Jared Rodriguez, Jayson Uppal, and Chris Jacobs decided there was a need in the consulting sphere to help guide municipalities and private businesses toward using renewable energies and setting up sustainability practices. The quartet spent their final year in college researching and readying a business to do just that. Before they graduated, they landed their first consulting contract. Emergent now has about 30 clients, mostly municipalities, including the towns of Yates, Shelby, and Orleans County in western New York. The firm had $108,000 in revenue last year, and estimates it will reach $250,000 in 2009 and become profitable by 2011.

5. I Bec Creative

What It Does: Web development and graphic design
Founder: Becky Stockbridge, 25
Web Site: http://www.ibeccreative.com/
Based: Portland, Me.

While a senior at the University of Southern Maine, Becky Stockbridge wrote a business plan to start a Web and graphic design business for medical professionals, a group she found was in need of logos, brochures, and informative Web sites -- and who also had the money to pay for them. She got started in 2006 with a $4,200 grant from the Libra Future Funds, a Maine-based group that helps entrepreneurs under 25. The Maine Center for Enterprise Development awarded her free office space for one year. However, Stockbridge says she found it difficult to get through to the decision-makers in medical practices. While she struggled to make contact, Stockbridge began designing Web sites and logos for other small businesses. By 2007, she had more business clients than doctor clients and shifted her focus. Last year the five-person company had about $225,000 in revenue and Stockbridge expects $350,000 in 2009.

6. Intern Queen

What It Does: Internship placement consultancy
Founder: Lauren Berger, 25
Web Site: http://www.internqueen.com/
Based: Los Angeles

While earning her degree at the University of Central Florida, Lauren Berger says she completed 15 internships in four years. After graduating in 2006 she began helping the children of her parents' friends land internships. Soon, the idea to start a consulting business was born. But first Berger had to pay the bills, so she moved to Los Angeles and worked as an assistant at top talent agency Creative Artists Agency. While there, Berger met movie producer and director Marshall Herscovitz (Thirtysomething, The Last Samurai), who liked her concept and backed her financially for one year.

More from BusinessWeek.com:

• America's Best Young Entrepreneurs 2009

• Entrepreneurs Who Started Young

• Special Report: America's Best Young Entrepreneurs

Last September, Berger launched her company -- Herscovitz has a 12% stake -- offering to vet potential applicants and match them with more than 500 companies from across the country that pay to list on her Web site. Berger says what sets her service apart is the personal attention -- she and her small band of interns review every application and Berger calls each company to make an introduction. Potential interns can apply for one slot gratis to get a feel for the service. They pay $3 for every subsequent application; employers pay an annual fee of $50 for unlimited listings. In the four months the firm was running last year, Berger says she had about $100,000 in revenue and expects to double that to $200,000 next year. A regular on the college speaking circuit, she is also planning to expand into Canada and is exploring endorsement deals with Microsoft (MSFT) and Payless Shoes.

7. ModCloth

What It Does: Online marketplace for indie designer fashion and decor
Founders: Eric Koger, 25, and Susan Koger, 24
Web Site: http://www.modcloth.com/
Based: Pittsburgh

You might not expect an indie clothing e-tailer to get the attention of equity investors. But Eric and Susan Koger, the husband-and-wife team that launched ModCloth in 2002, near the end of their freshman year at Carnegie Mellon University, have managed to raise a little over $3 million from angels like StubHub co-founder Jeff Fluhr and venture capital firms First Round Capital and Maples Investments. ModCloth's inventory strategy helps explain its success. Eric says Susan and her buyers build rapport with independent designers, try to get payment terms of net 30, and normally sell 70% to 90% of the goods within the net-30 period. "We can turn our inventory faster than we have to pay for it. That's enabled us to scale as fast as we have." Being online only and located in Pittsburgh keeps operating costs low, too. ModCloth employs 104 people -- mostly young women who, Eric says, "come at it from a perspective that's truly aligned with the customer, because they are our customers" -- up from 22 people a year ago. The company became profitable in 2007 but wasn't in 2008, largely because it spent a lot of money to redesign its Web site -- which now gets more than 1.25 million unique visitors a month. Eric says ModCloth has around $1 million a month in sales and forecasts more than $15 million total in 2009.

8. NoteHall

What It Does: Online marketplace for class notes
Founders: Sean Conway, 25 (right); Justin Miller, 21(far right); B.J. Stephan, 24 (left); Fadi Chalfoon, 23 (second from left)
Web Site: http://www.notehall.com/
Based: Tucson, Ariz.

Launched in 2008, NoteHall is an online marketplace for college students who want to buy and sell class notes. Sean Conway, who has ADHD and finds it difficult to comprehend a lecture and take notes simultaneously, says the impetus to start the company came when he noticed fellow students shared his frustration. For initial funding, the founders used $70,000 they put together from Conway's inheritance and Miller's bar mitzvah money. To access documents, users purchase credits via the site's virtual currency system ($3 buys 100 credits; notes from one lecture cost 25 credits; a study guide costs 100 credits). When a student purchases credits and redeems them, NoteHall receives a commission that varies based on the product. According to Conway, 20 colleges and universities are participating now, including Drexel University and the University of Arizona, and an additional 30 will be by December. Last year, NoteHall had $40,000 in revenue, will be profitable this year, and expects to reach $900,000 in revenue in 2010.

9. Trunk Club

What It Does: Online clothes shopping service for men
Founder: Joanna Van Vleck, 26
Web Site: http://www.trunkclub.com/
Based: Bend, Ore.

When Joanna Van Vleck graduated from the University of Oregon in 2005 with degrees in psychology and business, she worked as a style consultant, taking men and women clothes shopping. No surprise here -- most men disliked shopping but enjoyed the new duds. So Van Vleck decided the shopping process should be turned on its head. Instead of accompanying men to the shops, she would take the shopping to them. In January 2008, she opened a location she describes as a "swanky man hang-out spot," where hesitant shoppers were sized up and regaled with advice and brand-name picks. Within a month of opening, an angel investor approached her and offered to commit $500,000 to expanding the concept to other locations. But after Bear Stearns failed that March, he changed his mind.

Convinced her idea had potential, Van Vleck searched for another source of funding. During a meeting via Webcam with a new would-be investor, Van Vleck decided to shift gears. Instead of opening physical locations, she would operate the business virtually, using Webcams to meet with clients, assess their needs, and then ship a box of clothing to them. Clients would only pay for items they liked. With zero retail experience, she launched the site in November 2008, buying marked brands wholesale from suppliers and selling them retail. Trunk Club now has six employees, 36 independent contractors who work as fashion consultants remotely, and around 2,000 members. Van Vleck says the company is close to breaking even and is on track for $2.3 million to $2.5 million in revenue in 2009. She expects to close her first venture capital round with a Bay Area firm within a month.

10. Tumblr

What It Does: Microblogging platform
Founder: David Karp, 23
Web Site: http://www.tumblr.com/
Based: New York

In 2005, David Karp was running his software consulting business, developing new media for big media companies. He got the idea for Tumblr after becoming captivated by a new form of blogging known as "tumblelogging" that presented material of various formats (such as text, photo, and video) in a stream. While building a tumblelog for himself, the programmer realized other fans of the form would want to use a simple tool that would allow them to create their own. So during a two-week window between consulting jobs, Karp, who first started coding when he was 11, created the first iteration of such a tool designed with speed, ease of use, and customization in mind. Launched in 2007 for general consumption, the Tumblr platform now has 1.8 million users and has landed $5.5 million in venture capital from two rounds of funding with Union Square Ventures and Spark Capital. Karp, 23, says the 10-person company is not making money yet but will be experimenting with revenue-generating features this quarter. "Goal No. 1 is growth. We're aiming this thing for a mainstream audience."

See the full slide show of 25 U.S. Entrepreneurs Ages 25 and Under

So, You Want to Be an Entrepreneur

2009-03-14T05:22:00.001-07:00

First, answer these questions to see if you have what it takes
By KELLY K. SPORS

Thinking about starting a business? Make sure you're cut out for it first.

In this bleak economy, lots of people are contemplating striking out on their own -- whether they're frustrated job seekers or people who are already employed but getting antsy about their company's prospects.

For some people, entrepreneurship is the best option around, a way to build wealth and do something you love without answering to somebody else. But it's also a huge financial gamble -- and some people, unfortunately, will discover too late that it's not the right fit for them.

Building a successful business can take years filled with setbacks, long hours and little reward. Certain personalities thrive on the challenge and embrace the sacrifices. But it can be a hard switch for someone who has spent years sitting in a cubicle with a steady paycheck.

So, how can you figure out whether you're suited for self-employment? We spoke with entrepreneurship researchers, academics and psychologists to come up with a list of questions you should ask yourself before making a big leap. Entrepreneurs, of course, come from all sorts of backgrounds, with all sorts of personalities. But our experts agreed that certain attributes improve the odds people will be successful and happy about their decision.

Keep in mind that any self-analysis is only as useful as the truthfulness of the answers -- and most people aren't exactly the best judges of their own character. So, you might enlist a friend's help.

Here, then, are 10 questions to ask to see whether you're up for the challenge of entrepreneurship.

1. Are you willing and able to bear great financial risk?

Roughly half of all start-ups close within five years, so you must be realistic about the financial risks that come with owning a business -- and realize that you could very well lose a sizable chunk of your net worth.

Consider how much you'll have to ante up and how losing it would affect your other financial goals, such as having a sound retirement or paying your kids' college tuition. Weigh the importance of starting a business against the sacrifices you might face.

Entrepreneurs should be sure that "if they lose this capital, it either won't destroy their financial situation, or they can accept the concept of bankruptcy," says Scott Shane, an entrepreneurship professor at Case Western Reserve University in Cleveland. "Some people thrive on the financial risk; others are devastated by the thought of losing even $10,000."

And don't assume you'll be able to lower your risk substantially by finding investors. Less than 10% of start-up financing comes from venture capitalists, angel investors and loans from friends and family combined, Prof. Shane says. And that's true even in good economic times. Banks, meanwhile, often won't lend to start-up founders without a proven track record. When they do, they generally require the founders to guarantee the loan or credit line with their personal savings or home -- an incredibly risky proposition. (To learn how to mitigate risk by keeping your old job while starting a new venture, see "A Toe in the Water".)

2. Are you willing to sacrifice your lifestyle for potentially many years?

If you're used to steady paychecks, four weeks' paid vacation and employer-sponsored health benefits, you might be in for an unpleasant surprise.

Creating a successful start-up often entails putting in workweeks of 60 hours or more and funneling any revenue you can spare back into the business. Entrepreneurs frequently won't pay themselves a livable salary in the early years and will forgo real vacations until their business is financially sound. That can often take eight years or longer, says William Bygrave, a professor emeritus of entrepreneurship at Babson College in Wellesley, Mass.

Even if you can steal away, it's hard to find somebody who can fill in for you. Many entrepreneurs must tow along their cellphone and laptop, so they can be available to answer questions from clients or employees.

Jennifer Walzer learned those lessons the hard way. In 2002, after being laid off from a $100,000 consulting job when the company closed, she started Backup My Info! Inc., which sells online data-backup services to businesses.

For the first year, the New York-based company brought in just $29,000 in gross revenue. Ms. Walzer didn't pay herself a salary until the third year, and even then it was a slim $30,000. She could have taken more out, but she wanted to shovel as much money into the business as possible to keep it financially sound.

Having no income for two years meant that Ms. Walzer had to be extremely frugal; she virtually never ate out or went on vacations or clothes-shopping trips. Twenty-nine years old at the time, she says, "I got very jealous of my girlfriends who got home at 5 o'clock every night and could go out gallivanting and pretty much do whatever they pleased." She'd occasionally meet friends for coffee instead of drinks, since coffee was less expensive.

Now that her business generates about $2 million in annual revenue, the tables have turned. Ms. Walzer says she earns more from the business than she did as a consultant, and "I have friends who are struggling to keep their jobs because they have bosses."

3. Is your significant other on board?

Don't ignore the toll running a business will take on your loved ones. Failed ventures frequently break up marriages, and even successful ones can cause lots of stress, because entrepreneurs devote so much time and money to the business.

Stephen Webster

"I'm always surprised at the number of husbands who start a business and don't tell their wives," says Bo Fishback, vice president of entrepreneurship at the Ewing Marion Kauffman Foundation.

You can avoid the heartache by talking at length with your spouse and family about how the business will affect home life, including the time commitment, changes in daily schedules and chores, financial risks and sacrifices. They must also understand the huge financial gamble they're making with you.

4. Do you like all aspects of running a business?

You better. In the early stages of a business, founders are often expected to handle everything from billing customers to hiring employees to writing marketing materials. Some new entrepreneurs become annoyed that they're spending the majority of their time on administration when they'd rather be focused on the part of the job they enjoy, says Donna Ettenson, vice president of the Association of Small Business Development Centers in Burke, Va.

"All of a sudden, they have to think about all these things they never had to think about before," she says.

Jeromy Stallings, the 33-year-old founder of Ninthlink Inc., a San Diego interactive-marketing firm with 15 employees, always felt he had plenty of passion for entrepreneurship and self-motivation. But when starting his agency in 2003 and hiring his first couple of employees, he realized he wasn't prepared for the day-to-day challenges of managing other people.

Mr. Stallings had assumed his passion would rub off on employees and they would do their jobs as enthusiastically as he did. But some clients started calling him directly, complaining that his employees weren't returning phone calls or that projects were behind schedule.

"My clients were saying, 'We love your passion, we love your skill, we're just having a really hard time with your management style,' " he says.

So, Mr. Stallings turned to peers, mentors and guidebooks for help. He realized he needed to work more closely with employees and create a more structured project-management system. "I didn't really have a plan in place for how they spend their time," he says.

5. Are you comfortable making decisions on the fly with no playbook?

With a new business, you're calling all the shots -- and there are a lot of decisions to be made without any guidance. You might not be used to that if you've spent years working in corporate America, says Bill Wagner, author of "The Entrepreneur Next Door," a book that lays out the characteristics of successful entrepreneurs.

"For most entrepreneurial ventures, there's no structure," he says. "You're going into a business, and nobody has told you how to be successful."

Mr. Wagner has surveyed more than 10,000 entrepreneurs to find out what traits distinguish successful start-up founders from less-successful ones. Among other things, most entrepreneurs he interviewed said they liked making decisions. He doesn't rule out the idea that less-decisive people could become better at the leadership role. It's just that they will have to work a lot harder at it.

6. What's your track record of executing your ideas?

One of the biggest differences between successful entrepreneurs and everyone else is their ability to implement their ideas, says Prof. Bygrave of Babson College. You might have a wonderful concept, but that doesn't mean you possess that special mix of drive, persuasiveness, leadership skills and keen intuition to actually turn the idea into a lucrative business.

So, examine your past objectively to see whether you have assumed leadership roles or initiated solo projects -- anything that might suggest you're good at executing ideas. "Were you senior class president? Did you play varsity sports?" Prof. Bygrave suggests asking.

Stephen Webster

You might even find clues back in your childhood, he adds: "A lot of successful entrepreneurs were starting businesses when they were still kids."

7. How persuasive and well-spoken are you?

Nearly every step of the way, entrepreneurship relies on selling. You'll have to sell your idea to lenders or investors. You must sell your mission and vision to your employees. And you'll ultimately have to sell your product or service to your customers. You'll need strong communication and interpersonal skills so you can get people to believe in your vision as much as you do.

If you don't think you're very convincing or have difficulty communicating your ideas, you might want to reconsider starting your own company -- or think about getting some help.

In 2007, Brad Price left a $135,000-a-year job as an associate at a Baltimore law firm to purchase a PuroClean Emergency Restoration Services franchise, which cleans up property damage such as mold and flooded basements. A former Naval officer, Mr. Price felt he was very self-motivated and a good leader. But he was less comfortable cold-calling and striking deals -- something he'd never had to do in previous jobs.

"There's a big difference in waiting for the phone to ring and getting an assignment and having to make the phone ring," says the 33-year-old Mr. Price.

Mr. Price says he now has his wife handle the marketing and networking. "My wife is very good at that, 'Hey, next time a call comes in, how about you give it to us?' " he says.

8. Do you have a concept you're passionate about?

Every morning you want to jump out of bed eager to get to work. If you're not that exuberant about how you'll be spending your time -- or the business concept itself -- running a business is going to be a rough ride.

Ms. Ettenson of the Association of Small Business Development Centers has coached many prospective entrepreneurs about their chosen business. She always asks why they're doing it. If they suggest it's mostly for the prospect of making a lot of money or because they're tired of working for someone else, she steers them toward something more in line with their interests or avoiding self-employment altogether.

"If you hate doing paperwork, the last thing you want to do is become a bookkeeper," Ms. Ettenson says. "If you'd rather be outside taking people into the wilderness, then that's the type of business you should be in."

But it's also usually wise to find a business in an industry you are very familiar with; it will be much harder to succeed if you know little about the field. Mr. Fishback at Kauffman says he has steered a doctor and other professionals away from starting restaurants because they often don't grasp how difficult and risky restaurant ownership is. And they'd be competing against restaurateurs with years of experience.

9. Are you a self-starter?

Entrepreneurs face lots of discouragement. Potential buyers don't return calls, business sours or you face repeated rejection. It takes willpower and an almost unwavering optimism to overcome these constant obstacles.

John Gartner, an assistant clinical-psychiatry professor at Johns Hopkins University and author of the book "The Hypomaniac Edge," theorizes that many well-known entrepreneurs have a temperament called hypomania. They're highly creative, energetic, impatient and very persistent -- traits that help them persevere even when others lose faith.

"One of the things about having this kind of confidence is they're kind of risk-blind because they don't think they could fail," Prof. Gartner says. And, he adds, "if they fail, they're not down for that long, and after a while they're energized by a whole new idea."

You don't have to be as driven as, say, Steve Jobs to succeed. But somebody who gets deterred easily, or too upset when things go wrong, won't last.

10. Do you have a business partner?

If you don't have all the traits you need to run the show, it's not necessarily a hopeless endeavor. Finding a business partner who compensates for your shortcomings -- and has equal enthusiasm for the business concept -- can help mitigate the risks and even boost the odds of success.

David Gage, co-founder of BMC Associates, an Arlington, Va., business-mediation practice, points to a Marquette University study of 2,000 businesses. The researchers found that partner-run businesses are far more likely to become high-growth ventures than those started by solo entrepreneurs.

The key, Mr. Gage says, is finding a partner who prefers handling different aspects of the business, so you're complementing each other -- and not constantly at each other's throats.

Someone who likes to take risks and be in the spotlight, for instance, might choose a cautious partner who prefers to work in the back room. "If they're willing to work with that person, and not just look at them as a wet blanket, then it can be great," Mr. Gage says.

But taking on a partner isn't a light decision. Many partnerships split due to conflicts over everything from attitudes about money to miscommunication and contrasting work ethics. Mr. Gage recommends that potential partners spend several days hashing out the specifics of the business and how the arrangement will work to see if they're compatible.

—Ms. Spors is a staff reporter of The Wall Street Journal in Minneapolis.

Write to Kelly K. Spors at kelly.spors@wsj.com

VC's New Math: Does Less = More?

2007-12-30T05:54:00.001-08:00

Thiel Seeks to Change Old Habits by Investing Small on Start-Ups

By REBECCA BUCKMAN
December 29, 2007

Three years ago, Peter Thiel, who runs a small venture-capital concern called Founders Fund, plowed $500,000 into a little-known social-networking Web site called Facebook Inc. Later on, his company invested a bit more.

That was a good call. The paper value of Mr. Thiel's initial stake has increased more than 50 times. Facebook now ranks among the hottest online properties, with some 59 million users and investors such as Microsoft Corp. piling in.

Mr. Thiel, the former CEO of online-payment company PayPal, is making waves in Silicon Valley with an investment strategy that differs significantly from the traditional approach. His company invests only modest amounts of money, sometimes just a few hundred thousand dollars, and focuses on entrepreneurs Mr. Thiel and his partners often know personally. He also takes an uncharacteristically hands-off approach to company management.

Already, the gambit has yielded several potential winners like Facebook.

The venture-capital world "definitely needs to be shaken up," says the 40-year-old Mr. Thiel, an avowed libertarian who helped bankroll the movie "Thank You for Smoking," a satire about improving the reputation of cigarettes.

His company also reflects how a new type of venture capitalist is emerging, as start-up costs for Internet companies decline sharply. Many start-ups now need a bankroll of no more than a few hundred thousand dollars to get rolling, compared with the millions of dollars required a few years ago.

Other companies capitalizing on this trend include First Round Capital in the Philadelphia suburb of West Conshohocken, Pa., run by former Internet entrepreneur Josh Kopelman, who started online-commerce site Half.com and later sold it to eBay Inc., and Silicon Valley concerns such as True Ventures and Baseline Ventures. Many of the companies now manage money for outside investors, unlike informal "angel" investors who typically make small, one-time investments with their own money.

Most traditional VC companies want to invest larger sums, several million dollars, say, for large stakes in start-ups and then exert control over the companies' operations. Some demand "liquidation preferences," or guaranteed returns if companies are sold.

'Cushy Jobs' of VCs

Venture capitalists often can be too quick to fire start-up founders and replace them with professional managers, Mr. Thiel says. He blames a cultural divide: Many VCs "have these very cushy jobs, they get paid a lot," and often can't relate to founders, he says.

With so much money chasing deals in Silicon Valley these days, start-ups can afford to be choosy in picking their financial backers. They are increasingly turning to companies like his that offer less of a "command and control" model, he says.

Mr. Thiel and his fund's other partners, including two other PayPal co-founders, Ken Howery and Luke Nosek, also claim an advantage because of their front-line experience starting companies themselves. Mr. Thiel also runs a hedge fund, Clarium Capital.

The Facebook coup was one of several Founders investments that have generated "a healthy amount of envy" from other venture capitalists, says Max Levchin of Slide Inc., a start-up maker of software called widgets, or mini-applications used to decorate Web pages. In 2004, Mr. Levchin invited Mr. Thiel to be one of Slide's first investors, meaning bigger venture companies such as Mayfield Fund and Khosla Ventures could only invest later, for more money.

Heart in San Francisco

Mr. Thiel, who based Founders Fund in San Francisco rather than the traditional VC hotspot of Sand Hill Road in suburban Menlo Park, Calif., is structuring deals differently from how traditional venture capitalists do. Significantly, the fund often buys only a 5% or 10% stake in a company and sets up a special class of stock that start-up founders can sell while they are building their companies -- and before venture-capital investors see profits. That way, the thinking goes, the company founders can reap some financial reward and stay motivated to build the company before an IPO or company sale, which can take years.

Some traditional investors don't think founders should make money before backers do, since early paydays might distract them from the task at hand.

All of this is causing traditional VC firms to re-examine the way they invest in tiny tech start-ups. VC concerns including Trinity Ventures, for example, are now letting a few of their entrepreneurs "take money off the table" early on by selling stock.

Many big venture firms have also started looking at much smaller deals. Accel did six deals less than $1 million this year, although the company says that was in response to increasing valuations for larger-sized investments.

About a year ago, Charles River Ventures announced a program to offer $250,000 loans to fledgling Internet start-ups, far smaller than its usual investment size. Charles River is now also making equity investments in companies through its QuickStart program.

Partner George Zachary said his company launched the program because it was encountering many companies that didn't need a traditional, multimillion-dollar VC investment and the attendant hand-holding.

Just how successful Mr. Thiel's investing tactics are remains to be seen; Founders Fund hasn't yet seen any payout from the Facebook stake. However, it recently collected a big return when one of its investments, computer-security and antispam concern IronPort Systems Inc., was sold to Cisco Systems Inc. for $830 million.

Some Backlash

Mr. Thiel acknowledges his company faced resistance from blue-chip investors when it set out to raise money for its latest, $220 million venture-capital fund. One large institutional investor, who declined to be named, said he was put off by Founders Fund's anti-establishment pitch. Others wonder whether Founders Fund could soon tap out its close-knit network of entrepreneurs and run out of companies to fund.

"The early-stage venture game has always been about getting in early and getting in cheap," says Founders Fund partner Sean Parker, who helped start companies including online-music service Napster and online address-book company Plaxo Inc. "Some of those deals are now going to funds like ours."

Write to Rebecca Buckman at rebecca.buckman@wsj.com

Power Plays - Heading Into the Wind

2007-11-13T07:59:00.000-08:00

By YULIYA CHERNOVA and JONATHAN SHIEBER
November 12, 2007

If you follow the money in the alternative-energy world, it often leads to wind-power projects.

European utilities have been snapping up wind assets in the U.S., which they see as one of the top wind sources in the world. In October, Germany's E.On AG announced the acquisition of $1.4 billion of North American wind assets from Airtricity, an Ireland-based wind-farm operator.

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The deal will make E.On one of the world's largest wind-power producers, increasing its global installed capacity to 850 megawatts from 640 megawatts, E.On says.

Among U.S. utilities recently locking in supplies is American Electric Power Co. It signed a 75-megawatt, long-term power-purchase agreement for new wind power for its Appalachian Power Co. subsidiary with the Camp Grove Wind Farm being built near Camp Grove, Ill., operated by Orion Energy LLC. American Electric Power, based in Columbus, Ohio, has been acquiring wind power in response to plans by Ohio to require utilities to derive 25% of their power needs from renewable sources.

With such demand, companies are rushing to enter the wind market. One wind-development firm, MMA Renewable Ventures, aims to help small developers prosper in what is a market of increasingly large players.

Investing in projects at a preconstruction stage, MMA, which is a subsidiary of MuniMae LLC of Baltimore, provides debt, usually from third parties, to sponsor construction and turbine procurement. Before projects become operational, MMA lines up investors who specialize in making "tax equity" investments, collecting the federal tax credits on the income from the project.

WHAT ELSE IS NEW

Here's a look at other recent deals reported by Clean Technology Investor:

* GridPoint Inc. of Washington, D.C., raised $16.5 million to close its Series D round of venture capital with $48.5 million. The company has developed an operating system to manage the disparate technologies needed to control and automate utility networks.

* Genencor, a division of food- and feed-ingredient producer Danisco A/S of Denmark, made its biomass enzyme for the production of cellulosic ethanol commercially available for the first time. The technology is aimed at helping large-scale ethanol production.

* Ciralight Inc. of Park City, Utah, raised $1.5 million from angel investors ahead of planned institutional funding. The company develops "daylighting" technology that makes more effective use of sunlight to save on the use of electric light. It is targeting the retail market.

Running on Less

Utilities have been looking for ways to trim energy use by customers. That mission underlies several recent deals utilities have made with "demand-response" companies, which recruit business customers to join demand-reduction programs run by the utilities, and help the companies go into energy-saving mode at peak hours.

In one such deal, Comverge Inc. signed a contract with Connecticut Light & Power of Hartford, Conn., to reduce electricity consumption by 130 megawatts during peak demand hours over a 10-year period.

"It's a sign of the times that utilities are feeling pressure all over to deliver to their customers," says Arthur Vos, vice president of marketing, products and strategy at Comverge, East Hanover, N.J. "Their reserve margins are getting squished, they can't build new power plants, and they've got to do something to keep the lights on."

Southern California Edison made three recent demand-response deals, with Comverge, EnerNOC Inc. of Boston and privately owned Energy Curtailment Specialists Inc. of Buffalo, N.Y. EnerNOC's deal to manage approximately 160 megawatts of capacity for SoCal Edison was its largest to date, valued at $50 million to $75 million. Comverge and Energy Curtailment each struck deals to manage 50 megawatts of SoCal Edison's power.

Sun Spots

Among competing solar-power technologies, solar-thermal technology, which relies on heat rather than light to generate electricity, has been reviving after a federal tax credit was restored in 2006.

Ausra Inc., of Palo Alto, Calif., plans to build at least 1,000 megawatts of solar thermal power plants at a cost of roughly $3 billion, says David Mills, the company's chairman and chief scientific officer. Ausra is benefiting from ambitious solar-thermal investment plans on the part of electric power provider FPL Group Inc., which said recently it plans to invest $2.4 billion over several years in solar-thermal and renewable energy projects.

Development of solar-thermal power in California also is likely to be helped by a regulatory change. The California Independent System Operator Corp., the agency that governs transmission planning, has proposed allowing utilities to borrow money to build out transmission lines to areas rich in renewable-energy potential and then get reimbursed by new developers as they start using the capacity. Currently, the first developer to need transmission has to pay the cost for building it and then let others use it without paying for the development, a significant barrier for developers of wind and solar-thermal energy, which is often in remote places.

"You can't transport the wind or the sun," says a spokeswoman for the California ISO. "That's why we feel this is needed."

--Ms. Chernova and Mr. Shieber are reporters in Jersey City, N.J., for Clean Technology Investor, a newsletter published by Dow Jones & Co.

Write to Yuliya Chernova at mailto:yuliya%20Chernova@dowjones.com and Jonathan Shieber at jonathan.shieber@dowjones.com

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Starting Up: A Benefits Package Can Reel In Talent

2007-10-13T08:12:00.001-07:00

By DIANA RANSOM

When Chris Larsen and John Witchel, co-founders of Prosper, a peer-to-peer online lender in San Francisco, sat down with three employees around Larsen's kitchen table to build the now year-and-half-old web site, benefits were the last thing on their minds. The staffers were all working for stock options at the time.

"At that point, it was a very risky venture," says Larsen of the start-up. "We weren't really paying salaries let alone benefits." But once Prosper started to, well, prosper, he says, the company "started attracting a bigger variety of folks." New employees, he found, "want to take a risk and hit a homerun like everyone else, but they needed to not also have to worry about their livelihood."

So about six months before the site's launch in February 2006, Larsen began offering his employees, who then numbered about 15, the option to participate in a group health plan. Today, at just under 50 employees, Larsen now offers a 401(k) plan, two weeks of paid vacation and maternity leave in addition to stock options. "It's definitely a process," says Larsen. But, he adds: "It's also about being frugal and communicating that we're in this together."

For small-business owners just starting up and looking to add staff, benefits such as medical and dental coverage may be just the edge you need to attract and retain stellar employees. While you want to supply the best benefits, it's a smart idea to be selective and sparing when possible.

Here are a few questions to ask yourself as you weigh the costs of offering benefits:

Do you really need to offer benefits?

By law, you're obligated to withhold income tax and half the load of Social Security and Medicare taxes from your nonhousehold employees' paychecks. You're also required to pay the other half in addition to both federal and state unemployment tax, when applicable. Additionally, you must provide worker's compensation insurance. If you have more than 50 employees, under the Family and Medical Leave Act, you're obliged to provide up to 12 weeks of unpaid, job-protected leave to eligible employees for the birth or adoption of a child or if a serious illness befalls an employee or a family member.

But offering employees health, retirement, dental, vision and life insurance coverage generally isn't required. "It's a judgment call," says John Foley, a partner at the Benefit Consulting Group in Northfield, Ill. "An employer's job is not to supply everything, but in order to get the people you need, you need the benefits."

Some smaller firms have been able to get by covering the brunt of employees' individual health-care plans rather than getting a group policy. Until recently, Phillip J. Ryan of law firm Ryan, Ryan & Landa went this route. But the first question he'd always hear during interviews with prospective hires was: Do you offer health insurance? "If it is someone who you want to come with you," he says, "it's hard to say 'find a plan first and then we'll help.'" With nine employees, the Waukegan, Ill.-based law firm is set to begin a group health plan this month complete with dental and vision coverage.

What's the competition doing?

Figuring out how your business measures up to competitors especially if you are worried about attracting and retaining quality employees is critical, say human-resources and benefits consultants. Knowing what the competition is doing allows you to set benchmarks and "prevents offering a benefit level that is too costly," says Kerry Finnegan, head of the small-business health benefits segment at Mercer in Chicago. Otherwise, "you may be wasting money," he says.

If you're in a situation where top-tier employees are few and far between, consider offering inexpensive benefits such as flexible work schedules or continuing education classes, suggests Marie Schram, director of human resources at LMI Consulting, a government consulting firm in McLean, Va. Little rewards such as Monday morning bagels and donuts as well as pumping in fresh coffee everyday could help perk up employees, she says.

How much are you willing to pay?

You will, undoubtedly, want to offer your employees the gamut of benefits. But realistically, "when you are just starting out, a brand new company has to be judicious and conservative," Schram says.

Health care, alone, is a huge expense. According to a recent employer benefits survey from the Kaiser Family Foundation and Health Research and Educational Trust, the average premiums for health insurance coverage at smaller firms in 2007 rose 5.5% to $4,553 for singles and $11,835 for families. And the employer portion for smaller firms, on average, amounts to $3,992 and $7,599, respectively.

Take a conscientious look at how much you are really willing to pay for employee benefits. To get clients thinking about the costs, Foley presents an example: If you have a company with 50 employees in Chicago you are probably spending in the neighborhood of $350,000. Of that $350,000, he asks: "How much do you want to shoulder?"

Also, keep in mind that the costs will be recurring, says Finnegan from Mercer. If you have a bad year or if premiums skyrocket, will it still be affordable? "You don't want to offer a plan that you'll have to change dramatically in the future," he says.

What type of plan should you provide?

Jerry Ripperger, director of consumer health at the Principal Financial Group in Des Moines, Iowa, recommends protecting employees against catastrophes that may result in a loss of income or worse. Focus on health, long-term disability and life insurance. A growing number of small employers are setting up health-savings accounts or HSAs, which allow individuals with high-deductible health-insurance plans to pay for routine medical costs with their own pretax dollars.

Ripperger also suggests tapping the services of a benefits consultant or an insurance broker. This person can help you parse through the minutiae of health-care plans and bring to light benefits and even cost savings that you haven't considered. Be sure to ask around and get referrals, however, as no two brokers are alike.

How can you save?

To keep costs low, you might ask employees to share part of the health-care premium burden. Or, you can opt to provide so-called "voluntary" benefits, which employees pay for themselves. Figure out what's important to your staff, suggests Holly Lifkey, vice president of human resources at Society Insurance, a workers compensation firm in Fond du Lac, Wis. "Understanding what your employees want will help you target what you offer" and possibly limit the expenses you take on, she says.

Another way to control costs is by providing a minimum amount of coverage and allow employees to, say, "buy up" to richer plans. "It is a way to get benefits to employees without the employer paying for all of it," says LMI 's Schram. With life insurance, for example, many employers will cover two times a person's salary. If you want more, you then have the option to buy up to a certain amount of coverage on your own for yourself or a spouse.

But no matter which iteration of employee-benefit package you choose and there are many every business owner will want to do some soul-searching and thoughtful analysis before and during the benefits process. But at the end of the day, says Ripperger, the thing to keep in mind is "benefit plans are investments in employees." Choose wisely.

In Search of Traffic

2007-10-03T20:13:00.001-07:00

A Web site is only as valuable as the number of people who see it. Here's how to make sure customers can find you online.

By KELLY K. SPORS
April 30, 2007

For small companies, just having a Web site isn't enough anymore. To be successful online, they must learn to harness one of the Web's most powerful tools: search engines.

After all, search engines like Google Inc., Yahoo Inc. and Microsoft Corp.'s MSN are often shoppers' first stops when they're looking for a product on the Web. So it's crucial for small businesses to show up prominently in search-engine results -- and that's a complicated job.

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Search engines don't disclose their ranking formulas, making it tough for small companies to figure out how to boost their site's results. Even worse, big competitors can afford to pour lots of resources into that same effort -- putting small companies at a bigger disadvantage.

The good news? While the exact ranking formulas are a mystery, there are plenty of clues about how to improve a site's position. Add lots of relevant descriptions to the site's text, including the search phrases for which you want a high ranking. Have other sites link to it. Offer a blog or other informational content for customers. And if these efforts prove too complicated for a business to handle, not to worry: A whole industry has sprung up to help companies improve their rankings.

Small businesses are discovering other search strategies, as well. They're getting smarter about ads, for instance. Pay-per-click ads that pop up for general search terms (such as "clothing") tend to be very expensive -- so companies are buying ads for much more specific terms to cut costs. Many businesses are also focusing their efforts on search-engine pages devoted to their own geographic area, instead of trying to compete against businesses world-wide.

Here's a guide to the best ways for small businesses to nab better search results.

DESCRIBE YOURSELF

Placing high in search results for common search phrases -- known as natural, or organic, results, to differentiate them from paid ads -- is getting ever more crucial. Studies show that Web users predominantly click on the top four results for any particular search, and then move on, says Shar VanBoskirk, senior analyst for Forrester Research Inc. in Cambridge, Mass. Very few dig more than three pages into results.

SELECTING KEYWORDS

PODCAST: WSJ's Kelly Spors talks with author and search-marketing consultant Aaron Wall for advice on selecting keywords to make your site more prominent in search-engine results.

One basic way to secure a better search-engine ranking is peppering a site's text with carefully chosen keywords -- the kinds of phrases people would use to find the site with a search engine. The search engines like it best when the keywords appear naturally in the site's text, such as product descriptions, says Aaron Wall, a search-marketing consultant in Oakland, Calif. So a good strategy is to add a generous amount of useful content that uses the keywords frequently, such as beefier descriptions or informational articles.

The keywords on each page should also appear in that page's title tag -- the blue bar that appears at the top of each page. Less important, though still helpful, the keywords should appear in the metatags, the invisible text that gives information about the contents of a page. Some Webmasters try to game the system by hiding keywords in text that blends into the background, but many search engines now penalize such practices with lower rankings.

Smarter use of keywords was one of the first strategies Allan Dick employed to boost business at Vintage Tub & Bath, a Hazleton, Pa., company that sells reproductions of old-fashioned bathtubs online. A few years ago, Mr. Dick, who helps run the 30-employee company with his brother, found he could increase traffic by using certain words in the product descriptions on Vintage's Web site.

For instance, adding more content and product descriptions that used common search terms -- words like "tubs" and "vintage tubs" -- frequently seemed to boost its ranking on search engines. "It was dawning on me that if you were wording things in a certain way, people would find us," says Mr. Dick. "It was, 'Aha, there's a certain method to this.' "

But that was just a first step. Mr. Dick bolstered his efforts by attending search-marketing conferences to learn about search rankings and new optimization techniques. And the work seems to have paid off: Last year, his company had sales of $10.4 million, up from about $8 million in 2005, and well above its $1.4 million or so of revenue in 2001. It recently surfaced as the No. 2 site in a Google search on "tub," out of 35.4 million results.

THINK MORE NARROWLY

The big choice for small businesses is which search phrases to focus on. Some companies concentrate on just a few phrases, while others tackle 20 or more. The best number depends on factors such as how many different products are sold on the site, the number of pages on the site (each page can usually hold only a few keywords) and how much time or money a company is willing to spend redesigning its site to attract search engines' attention.

It's also important to weigh how competitive the search phrases are. Instead of focusing on generic search words, such as "books" or "mortgages," that already have hundreds of businesses wrangling over them, small businesses often fare better focusing on longer, specific phrases, says Mr. Wall.

For instance, he suggests that a used-book dealer who has a book signed by Mark Twain might try optimizing its Web site around terms like "rare used books" or "autographed Mark Twain," instead of just "books." Another advantage of this approach is that more-specific search terms generally elicit higher customer-conversion rates -- turning visits into sales -- since shoppers are more likely to find what they're looking for.

There are other wording tricks small businesses can use to get better results. Businesses aiming to attract a high-end clientele might add the word "professional" to the search phrases highlighted on their site. Or a business might try to boost the search ranking for its top-selling brand name instead of just the generic product type. But "the focus should always be on coming up with terms that customers actually use to find your business online," Mr. Wall says.

Many online forums and free tools can help businesses learn to optimize their sites on their own. Yahoo's Keyword Selector Tool lets users see which terms are typed into search engines most often. Other free tools, such as Google's Analytics software, keep track of a Web site's visitor numbers, keywords used to find the site, and customer-conversion rates. Other free tools available online can track which other Web sites link to a business's site, make content suggestions and scan the site for keyword density, or the percentage of the text in which the keyword is used.

One final wording tip: A business's domain name also plays into search rankings. If the domain is "couch.com," the site will probably rank much better for the keyword "couch" than if the domain name is "tomsfurniturestore.com."

BE THE EXPERT

Loading up on search terms isn't the only way to improve a site's search rankings. Search engines are getting more sophisticated, experts say, and increasingly they're rewarding sites that offer high-quality, useful consumer content. For instance, becoming an "evangelist" on your industry and posting helpful consumer information on your site is likely to boost its popularity and ranking.

Take Ice.com, an online jewelry business based in Montreal. Besides selling jewelry, the site includes a diamond-buying guide, a checklist with steps that couples should take before their wedding, a blog and a feature where readers can ask questions about jewelry. The site recently showed up 11th in a search for "jewelry" on Google, and seventh for "diamond jewelry."

GET LOTS OF LINKS

Another big factor in search-engine results is the number of Web sites that link to a company's site that are highly ranked by the search engines. The more such sites, the better. Many Web sites that do well in search rankings spend time "link-building," or trying to coax related sites to post links to them. Sometimes companies contact Webmasters directly and try to forge relationships, or they get a link in an online search directory such as Yahoo Directory, which costs $299 a year. Having interesting or informative content such as a blog also boosts the chance of getting links from another site.

The words used by other sites in links also factor highly into search results. Let's say another site links to tomsfurniturestore.com, which specializes in couches. If the other site uses the word "couch" in its link, it can help boost "tom's" ranking for the keyword "couch."

Keep in mind, though, that no two search engines are the same. "Google's algorithm tends to place more weight on the authority and trust of the site," such as the number of links, Mr. Wall says. "Yahoo and MSN place more weight on the page content."

Vanessa Fox, a product manager for Google, says the search engines "all have different things that we're looking for in our page results."

GET SOME HELP

For many small-business people, optimizing and asking for links can get technical and time-consuming. So an industry has sprung up in recent years to help businesses with their search results. These companies -- called search-engine optimizers, or SEOs -- come in many flavors. Some are full service, handling everything from redesigning a Web site to writing content to determining which keywords are best to persuading other Web sites to post links.

Others are more like consultants. They provide Web-site audits with recommendations on how to better optimize the site, but the client's Webmaster must implement the changes. Some focus on specific aspects of search optimization, such as writing "search friendly" text or link-building.

But businesses should be careful when hiring an SEO, because not every company offers the same expertise, says Ryan Allis, chief executive of Virante, a Durham, N.C., search-marketing consulting firm. And the results can never be guaranteed, given the changing and sometimes mysterious nature of search-engine rankings.

So businesses should take bids from several SEOs and ask to see the work they've done for previous clients, Mr. Allis suggests. An SEO should also be willing to give regular reports showing how its efforts have affected the business's search rankings for various search phrases.

Then there are fees. The prices for SEOs can be bewildering to many small-business owners. Costs can range from $500 a month to several thousand -- for what often seem to be almost identical services.

Submit Express Inc., an Oakland, Calif., SEO, charges a "setup" fee of $2,500 to $10,000, which includes keyword research, optimization and link-building, says Chief Executive Pierre Zarokian. Then clients can pay a monthly fee ranging from $750 to $5,000 for continuing optimization efforts -- mostly link-building, he says.

The fees vary depending on how much work a site needs and how competitive it is already, says Mr. Zarokian. For instance, propelling a site from No. 10 to No. 1 in the search rankings may be a lot easier than moving it from No. 10,000 to No. 10.

BUY ADS

Ads are another consideration. Marketing experts advise that most businesses are best served by complementing optimization with some paid ads on search engines. It also can be a faster route to getting good exposure in search engines.

Most major search engines now offer paid ads, such as pay-per-click ads, where the Web site pays a set fee every time someone clicks on its ad. Google and Yahoo let businesses bid on their per-click fee for particular search phrases to garner a better ranking for their ad.

Paid results appear right next to natural search-engine results, usually under a "sponsored ads" heading. As with search results, businesses should try to end up in the top few paid ads for common search terms. If the per-click fee is too high for popular phrases, they should focus on more-specific search phrases, which usually cost less -- and convert to business more. For example, the average suggested per-click fee for ranking in the top three paid results for "tennis rackets" recently was $1.38, according to Google's AdWords Keyword Tool. But "graphite tennis rackets" cost only about 43 cents.

For some small-business owners, paid ads aren't a complement to an optimization strategy; they're an alternative to it. They don't want the headache of learning about search-engine optimization or hiring a firm to do it, so they rely exclusively on ads.

That's the case with Geoffrey Searles, owner of Apollo Piano Co., a piano refurbishing and tuning business in Grafton, Mass. Last September, he began running pay-per-click ads through Google's AdWords program. He bid on about 25 keywords such as "piano repair" and "antique player pianos," and capped his monthly expenditure at $200.

Since then, his site has had an average of 270 hits a month, compared with about five a month before he started using ad words. The ads have cost him about $575 total, and he estimates he has received at least $20,000 extra in work. He likes the ability to control his monthly spending and stop the ads when he has enough business. "It's just been so successful that I haven't gone any further," Mr. Searles says.

THINK LOCALLY

Small businesses should also consider focusing their efforts on one corner of the Web. Many small, locally based businesses, such as dry cleaners and restaurants, don't need Web traffic from around the globe. Instead, they want people in their area to find them easily online.

The solution: local search. These listings pop up, sometimes with a map or customer reviews, when somebody searches online for a business type in a particular geographic region.

Type in "Olympia, Wa., pet groomer," at Google, for instance, and you'll get the option to see "Local search results." This calls up a map of Olympia and a list of local pet businesses, with their locations marked on the map.

Google, like other search engines, draws these local listings from third-party directories and other sources.

For companies that want to buy ads accompanying these local listings, the competition is much more limited than with general searches, so the price is lower. Local search also can be particularly useful to small businesses without Web sites. Some specialized local search engines -- such as CitySearch.com, YellowPages.com and Superpages.com -- even provide a free, basic page for businesses that can include basic information about the company, like phone number, hours of operation and address.

A good way to get started in local search is to make sure all the local search directories include a listing for the business and that all the information, such as phone number and address, is accurate. Most local search directories also let businesses embellish their local search listings. Google's Local Business Center, for one, recently began letting businesses post photos, and many local search directories let them post hours of operation, services provided and coupons. Businesses can also buy pay-per-click ads in local search results.

Another consideration: If a local business has a Web site, the owners should be sure all the information there is clear and accurate. Search engines extract some of their local search listings from location information found on Web sites. So it's important for a business to include its address prominently on its home page -- with the state name spelled out, since many search users spell it out when searching. Businesspeople should also include the city and state in the site's title tag to increase the odds search engines will find it.

Danny Sullivan, editor of SearchEngineLand.com, an online forum on search-engine marketing practices, says focusing on local search is easy and can pay off for many businesses.

"Local search is still kind of open, and many businesses don't realize it's an option," Mr. Sullivan says. "So there's a lot of opportunity for that right now."

--Ms. Spors is a staff reporter for The Wall Street Journal in South Brunswick, N.J.

Write to Kelly K. Spors at kelly.spors@wsj.com

Corporate Connections

2007-10-03T20:00:00.000-07:00

Companies find social networks can get people talking -- about their products

By ELLEN SHENG January 29, 2007

The social-networking bandwagon is getting awfully crowded.

For companies looking to better connect with consumers and build brand loyalty, social networks are increasingly looking like the ideal tool. Users get a forum in which to share information, pictures and videos about themselves and their likes and dislikes -- and, companies hope, talk up a product. Companies, in turn, get real-time feedback on trends and products. And they can even bounce off ideas still in the works.

The incentive is obvious: People are flocking to social-networking sites like MySpace and Facebook, according to Web-tracking service Nielsen/NetRatings. MySpace, which is owned by News Corp., got more than 53 million unique visitors in November, making it the seventh most popular site on the Internet, while privately held Facebook got about 11.6 million visitors.

Social networking is "even more targeted than online advertising," says Rachel Hoenig, co-founder of New York marketing firm Digital Power & Light. Banner ads gave companies the chance to change ads quickly and direct them a bit better, "but banner ads are still one-way communication," she says. By contrast, social networking is more of a dialogue between the user and the company, she adds.

One natural area for social networking seems to be sports. After all, sports and the hottest sports apparel and equipment always get people talking.

The National Hockey League, for instance, has set up a social-networking site, NHL Connect, where hockey fans can create personal profiles, add friends, upload photos, post videos from YouTube, make comments and join chat groups. The site also has NHL news, game schedules and the ability for users to look up other fans based on their favorite teams and players. In addition, the site links to blogs by contributors as well as team blogs for the New York Islanders, Anaheim Ducks and others.

"Our fans have, for years, expressed their points of view on our game through message boards, chat rooms and blogs," says Keith Ritter, a spokesman for the NHL. "If we didn't provide the tools that our fans want, they would migrate to a place that did." He adds that the NHL doesn't have traffic or membership numbers for the site.

Over the summer, sports-apparel maker Nike Inc. set up a social-networking site, Joga.com, for soccer enthusiasts. The site, built with some technical help from search engine Google Inc., encourages local soccer groups to sign up and create profile pages. Fans can blog, create communities around particular teams or players and organize local games. The site also includes pictures and exclusive video, profiles of famous players and articles about various styles of play. Nike says that by the end of the World Cup games last July, Joga.com had attracted one million users, the most recent data the company would disclose.

Even a maker of gym equipment is getting in on the action. LifeFitness, which makes treadmills, weight machines and other fitness equipment, allows individual gyms to set up a LifeFitness site to create a sense of community around that gym -- and, of course, make exercisers more aware of its wares.

LET'S TALK

What's New: A variety of companies are using social-networking sites as their newest marketing tool.

What's at Stake: Companies hope to build brand loyalty by giving people a place to share likes and dislikes -- including about the products themselves -- with others.

The Bottom Line: The move takes advantage of the social-networking craze and gives companies a targeted way to advertise.

Raj Rao, divisional vice president at LifeFitness, says gyms have a big problem with customer attrition -- typically losing about a third of their clientele each year -- because people feel "they don't have any relationship with other members."

LifeFitness, a subsidiary of Brunswick Corp., based in Schiller Park, Ill., aims to change that by allowing users of its sites to create their own profiles and list fitness goals, workout regimes and other personal information. Like-minded users can then find each other on the site to swap workout tips and challenge one another, among other things. Users also can share workout information -- duration of workout, weight lifted, calories burned, heart rate -- with a sports club's trainers to make sure their workout habits are right for their fitness level and targets.

People also love to talk about where they've traveled or get others' insights on where to go and what to do next. So some airlines are creating social-networking sites to help users give -- and get -- feedback and advice to manage their travel time wisely.

Franco-Dutch airline Air France-KLM launched a social-networking site earlier this year aimed at business travelers to China, called Club China. The site offers members tips on doing business in China as well as assistance on tasks like finding a translator or car service. Members also get perks, such as admission to China Club, a country club with locations in Hong Kong, Shanghai and Beijing.

Once users set up their profiles on the site, they can search for prospective business contacts based on industry, home country or company size. They also can find other club members who are traveling at the same time, attending a particular conference or trade fair. One Club China member is Arie Herweijer, regional sales and marketing manager at HITT Traffic, a Dutch maker of traffic management and navigation systems, who travels between the Netherlands and China about 11 times a year. Mr. Herweijer says he finds the site useful for finding contacts he might not otherwise come across.

"China is hot," says Vikram Singh, director of customer relationship management at KLM. "KLM has its own ambitions to serve China....We thought it would be good to step in and facilitate in whichever way we could to connect customers." Club China boasts about 3,000 members, with about 40% of members logging on every month.

PERSONAL BUSINESS Some of the social-networking sites created by big corporate sponsors

Mr. Singh says the Club China site was initially set up as a value-added feature for members, but the company finds that it's increasingly getting valuable feedback about its own services. Customers might make suggestions about, say, putting in more-comfortable chairs at a certain airport lounge or adding a better selection of magazines. Mr. Singh says Club China users "can ask for virtually anything" on the site's open format forum.

A frequent flier in economy class, Mr. Herweijer often makes comments on the site. He hopes that with his frequent patronage and activity on Club China, he might get an occasional perk like a small glass of wine or upgrade. It hasn't happened yet for Mr. Herweijer, but "I keep pushing that," he says.

KLM also recently launched other sites with similar features: one targeting golf aficionados, Club Golf, and another for frequent travelers to Africa, called Club Africa.

To make a social-networking site succeed, marketing is essential, says Ms. Honig of Digital Power & Light.

When Nike first launched Joga.com, it simultaneously launched an ad campaign promoting the site. For instance, tags on Nike merchandise had Joga.com inscribed on them and invited people to join the site. Since then, the company has relied on online word of mouth, a Nike spokeswoman says.

Yet even with publicity, not all social-networking experiments are sure bets. Some say retail giant Wal-Mart Stores Inc. made some missteps when it set up a site, called The Hub, for middle- and high-school kids to promote last fall's back-to-school season.

Peter Cashmore, editor of Mashable.com, a blog about social networking, says that starting with the tag line "School, my way," the site didn't come off as believable and sounded like a company trying too hard to be cool. He adds that some profiles seemed more like ads for the company.

Another thing, he says, is that the site tried too hard to control its user base. For instance, the site would ask kids that signed up for their parents' email to get the parents' permission. While some sites targeting younger kids do this, larger and more popular sites such as MySpace and Facebook do not explicitly ask for parental permission.

Mr. Cashmore says Wal-Mart's move "was a little too much" and seriously limited the number of users it could sign up. While seeking parental consent has value since exposing your online identity is risky for anyone, a closed network is unlikely to experience the viral growth of MySpace or YouTube, he says.

A Wal-Mart spokeswoman declined to comment on the site, saying only that it was intended to be temporary for the back-to-school season. The site closed down after 10 weeks on the Web.

Experts who have set up social-networking sites say sometimes the biggest obstacle for companies is overcoming corporate arrogance. Many companies underestimate the amount of work needed to maintain the site once it's up.

Unlike a traditional site, which can be set up and then updated from time to time, the content on a social-networking site is constantly changing to stay current and to deal with customer feedback. A site that stays static is a problem, since users will get bored and stop visiting. What's more, if any criticism isn't dealt with quickly, it can put a dent into a company's image. And if customer chatter turns nasty, the company needs to be prepared to react quickly. On the other hand, a company that tries too hard to control its image on a site can come across as fake.

Companies also shouldn't read too much into things. Feedback from a site isn't a substitute for true market research, says Scott Gilbertson, the former interim chief executive of retailer J.Crew, who has since started his own firm, Ludi Labs of Mountain View, Calif., which focuses on social networking. The online audience may not be representative of a company's entire customer base, so data are likely to be statistically skewed, he says.

--Ms. Sheng is a reporter for Dow Jones Newswires in Jersey City, N.J.

Write to Ellen Sheng at ellen.sheng@dowjones.com

Rules of Engagement - Creating a Great Workplace

2007-10-01T19:24:00.001-07:00

Why Employers should and increasingly do care about creating a great workplace

By SUE SHELLENBARGER - October 1, 2007

When I first started writing a column on workplace issues for this newspaper 16 years ago, the company executives who spent much time thinking about workplace quality could have met in a phone booth.

Who cares? That was the private response of many managers -- at companies big and small -- to the idea of engaging workers' hearts and minds. Most saw little relationship between employee attitudes and the bottom line.

JOURNAL REPORT PODCAST

WSJ's Sue Shellenbarger talks with Jeff Jeffery, CEO of Irmco, on how engaging employees and sharing financial information with them helped turn around the small maker of industrial lubricants.

" See a slideshow of this year's top small workplaces.

" See the complete Small Business report.

Now, that viewpoint is almost as out-of-date as the phone booth. Executives vie for positions on best-workplace lists -- as was apparent in the number of nominations this paper received for its Top Small Workplace awards. They lure new recruits by pledging their devotion to work-family balance. And they boast to Wall Street investors and analysts about their "employee engagement" -- the buzz phrase for a level of worker commitment so strong that employees voluntarily invest extra effort on the job.

What's more, a growing body of research is finally proving what advocates of workplace quality have known for decades: that the human beings who execute the goals of business are more than just cogs in a wheel. Truly engaging them can have an almost magical effect on the bottom line.

The Wall Falls

I've seen this time and time again in my coverage of work-life issues. When I started the Work & Family column in 1991, the Chinese wall between work and personal life loomed large in most workplaces. Workers were expected to leave their personal lives, family issues and feelings at home. The concept of making workers motivated and satisfied seemed almost quaint.

But the few pioneering employers that bucked this pattern quickly saw that paying attention to workers' well-being bore business benefits. By the mid-1990s, Xerox Corp. was already trying to engage workers in some units through flexible scheduling. In a radical move, an executive in Xerox's Dallas operations announced all 300 of his employees would be allowed to set their own hours. Freed to better balance their lives, employees delivered improved customer service and a one-third reduction in costly absences.

(It's no accident that Anne Mulcahy, who led many workplace-quality initiatives as Xerox's former chief staff officer, was elevated to CEO at Xerox in 2001 and subsequently oversaw one of the most remarkable corporate turnarounds in recent history. "My priorities," she said in an interview last year, "were always customer and employee priorities.")

How It Works

The mechanism at work is simple: The rigid, controlling workplaces of the past left employees no flexibility to manage family or personal problems or the day-to-day demands of running a household. Over time, those unmet personal needs erode concentration, commitment and creativity on the job. Good workplace policies, on the other hand, enable employees to manage their larger lives, freeing them to apply more brainpower to complex Information Age jobs. Satisfied employees treat customers better, creating loyal customers. Beyond that, good policies also foster the kind of on-the-job relationships with bosses and co-workers that inspire employees to soar.

This isn't just touchy-feely, feel-good fluff. Over the years, I've seen it happen repeatedly: Real change in the workplace leads to real satisfaction among employees leads to real money for the company.

Swimming against the tide in 1995, for instance, First Horizon National Corp. (formerly First Tennessee National) saw this dynamic at work when it offered some employees who produce bank statements an occasional day off for doctor's appointments and other needs. In return, the company asked them to work longer days during the busiest times of the month. Employees responded by halving the total time needed to produce the statements, to four days from eight. And customer satisfaction "went through the roof," a First Tennessee executive said. Ralph Horn, the company's CEO at the time, called such work-life initiatives a "driving force" behind the company's quality-improvement efforts.

Employees who feel respected tend to enrich the lives of all those around them. Acuity, an 850-employee property-casualty insurer in Sheboygan, Wis., set about overhauling its rigid, factory-like workplace policies in 1999. In a conscious effort to "build an environment that was just a wonderful place to work," a new CEO, Ben Salzmann, added flextime and a fitness facility and improved training, benefits and merit raises. Executives stepped up face time with the rank-and-file, meeting workers at the door quarterly to hand out free breakfast and holding town hall meetings and small-group lunches. Acuity also began publicly rewarding performance standouts and e-mailing periodic audio files by Mr. Salzmann, sharing industry gossip and insights.

Personal Commitment

That wholehearted management support for employees was one reason Tom McDermott, a Brookfield, Wis., claims representative, returned to Acuity in 2001 after quitting the company years earlier to work for a competitor. It's also one reason he went the extra mile last year when he encountered two clients, an elderly couple and their two grandchildren, "sitting on a curb with 25 cents in their pocket" one Saturday morning after their house, with all their possessions, burned down, he says. Instead of making them wait for processing of their claim the next week, Mr. McDermott walked to a nearby ATM and took $300 out of his personal savings account, "to get you through" the weekend, he told the couple. The gesture drew grateful mail from the clients that became bulletin-board fodder at Acuity's headquarters.

This year's top small workplaces offer good benefits, focus on employee growth and create family-like atmospheres. WSJ.com's Kelly Spors reports.

Where's the real money in all this? Acuity's voluntary turnover plunged, and sales per employee soared after the company abandoned its rigid, factory-like workplace.

Does One Lead to the Other?

Amid mounting anecdotal evidence of the bottom-line benefits of employee well-being, researchers undertook systematic attempts to show a linkage between employee engagement and above-average customer service, sales and profit. After all, critics said, correlation isn't the same as causality; employees at more profitable companies would naturally be happier and more engaged.

So in 2004, Hewitt Associates, Lincolnshire, Ill., tracked about 300 companies over five years, and found that increases in employee engagement clearly preceded improvements in financial performance. Even among companies with below-average profit, an upturn in employee attitudes tended to precede a profit turnaround.

Separately, a three-year study of 41 employers by Towers Perrin-ISR, a unit of Towers Perrin, Stamford, Conn., found companies that worked consistently on engaging their employees posted a 3.74% increase in operating profit over a three-year period, while companies with poorly engaged employees saw a 2% decline, says Patrick Kulesa, Towers Perrin-ISR's global research director; the results show "the remarkable ability of an engaged work force to impact a company's bottom line."

Wrapping up these and other studies, the Conference Board, New York, a nonprofit business-research group, said in a study last year that there's "clear and mounting evidence that employee engagement is strongly correlated to" productivity, profit and revenue growth. The Hewitt study in particular, the Conference Board said, "gives credence to the assumption that employee engagement actually causes an increase in a company's overall financial performance."

Of course, Anne Mulcahy, Ralph Horn, Ben Salzmann and other CEOs like them didn't need a study to see that. The evidence was all around them.

--Ms. Shellenbarger is The Wall Street Journal's Work & Family columnist.

3-D printing for the masses

2007-09-08T17:04:00.001-07:00

The day is fast approaching when printers will produce all kinds of 3-D objects -- from toys to tools -- on the cheap, writes Business 2.0.

By Chris Morrison, Business 2.0 - August 22 2007

(Business 2.0 Magazine) -- After midnight, it's dark and nearly silent in the Klock Werks Kustom Cycles shop in Mitchell, S.D. The only sound is the low hum emanating from a box that looks like a cross between a dormitory fridge and a Xerox machine.

Behind a compartment of clear glass, the device - a Stratasys Prodigy 3-D printer - is constructing a complex shape, all curves and spaces, out of plastic.

THROTTLING UP: Brian Klock says his $60,000 printer -- which produces motorcycle parts (red) virtually identical to machine-cut versions -- has paid for itself many times over.

MODEL EMPLOYERS: The Brauns were so excited about the technology that they build a company around it.

When he arrives at his shop in the morning, Brian Klock strolls over to the printer and pops open the glass compartment. Carefully breaking away the supports, he pulls out a perfectly turned machine part - a plastic housing that slides neatly into place between the metal handlebars of the custom-built motorcycle he's been working on, covering the fuel, speedometer, and other gauges. All that's left to do is to paint it.

Klock has transformed a virtual 3-D model in his computer into an exact physical replica. He uses a process similar to the one Mother Nature uses to build structures out of sandstone, putting down one thin layer at a time.

There are two basic methods. One involves "printing" (through an ink-jet process) liquid adhesive on fine-powder layers of plaster. The other uses a nozzle to deposit layers of molten polymer on a support structure. In a shop like Klock's, the piece can be used as is or as a prototype before remanufacturing it in metal.

Ten years ago high-end printers like Klock's cost $120,000 or more. They were employed mainly by companies like Logitech (Charts) and Boeing (Charts, Fortune 500) for quickly testing prototypes of everything from computer mice to military aircraft.

But the cost of the technology has been coming down rapidly. Today the cheapest commercial 3-D printers sell for about $20,000, making them affordable for all sorts of small businesses and entrepreneurs.

Klock was an early adopter. He bought his Prodigy machine last year for $60,000 and says it has already paid for itself many times over. He can design lightweight motorcycle parts, test them, and make changes much faster - and with far less effort - than his competition can with hand tools or standard automated cutting machines.

After a year, Klock says, his business has grown more than 150 percent, and he's getting inquiries about his products from all over the world.

Klock used his 3-D printer to ramp up his business, but John Braun, a Phoenix-based project manager for a telecommunications company, was so excited by the technology that he built a brand-new company around it. He learned about rapid prototyping at a family get-together in 2003, when someone showed him a video of a 3-D printer in action.

See how 3-D printing works

"He bugged out," his wife, Dena, recalls. "He was fascinated."

The Brauns immediately started talking about what business they'd use it for. They toyed with several ideas - jewelry making, medical printing - before settling on architectural modeling.

But when they tried to buy their own machine from Z Corp., a competitor to Stratasys, they ran into a roadblock. Z didn't normally sell to small businesses and had to be convinced that the company the Brauns called Alchemy Models was real before it would take their $50,000 check.

Once the deal was done, the couple set out to sell their idea to local architectural firms, most of which had never even heard of the technology. "We've been at the forefront," says Braun, who dumped his day job a month ago to work full-time at Alchemy.

The Z Spectrum 510 printer, one of the fastest on the market, allows Alchemy to create several models a day; traditional model makers often spend weeks painstakingly constructing their prototypes by hand out of cardboard or balsa wood. Although model makers may add their own special artistic flourishes, the computer-generated renditions show more detail and can be revised without starting from scratch.

Of course, the 3-D printer can't do anything without a virtual blueprint to work with. Braun took a college course in computer-aided design to get started but says he taught himself most of what he knows. "It took me several months to learn to create something really good," he says.

You don't need a degree in CAD to start a 3-D printing business, however. Even in tiny Mitchell, Klock was able to find an employee sufficiently proficient in CAD to turn his bar-napkin fantasy of the perfect motorcycle into a computer model.

Now he's starting to make his own 3-D digital images. "It's the same as learning to draw on a computer," he says. "There's a learning curve."

That curve should get less steep as the market for 3-D printers grows and manufacturers simplify the software. "3-D printing will follow the path of 2-D printing and other high-end technologies that became available to the masses," says Tom Clay, CEO of Z. "It will get easier, faster, and more affordable."

Eventually architecture firms could start printing their own 3-D models. But Braun says he's not worried. He figures someone will need to teach the architects how to use their new equipment.

In the meantime, his business is booming. He expects his two-person company to sell $350,000 worth of models in the next year. And if the 3-D printing market balloons, as the 2-D printing market did 80 years ago, he's betting that someone will become the next Kinko's - and it might as well be him.

He expects to serve all sorts of small businesses, making everything from power tool parts to figurines of Second Life characters.

Klock's ambitions are more modest. "I'm blessed just to be here and cognitive enough to grasp the technology," he says. "3-D doesn't have to be for stealth bombers. It can be for something as simple as motorcycles."

Chris Morrison is an editorial intern at Business 2.0.

Raising Your Profile: Beyond the Basics

2007-08-29T03:02:00.001-07:00

By LAURA LORBER
August 27, 2007

Small companies may not have to take big steps to raise the likelihood that potential customers can find them on the Internet.

One or two changes in the way they do things often can help lift a Web site's visibility online, says Rudy De La Garza Jr., manager of search-engine optimization at Bankrate Inc., an online consumer-banking marketplace.

Bankrate

Bankrate Editor in chief Julie Bandy and Rudy De La Garza Jr.

Search-engine optimization, or SEO, makes a site more friendly, or "optimal," for Internet search engines such as Google Inc.'s, Yahoo Inc.'s and others. SEO can improve a site's listing in "natural" search results -- the unpaid rankings on search engines that many people use to look for information online.

Bankrate hired Mr. De La Garza last year to integrate SEO into how it thinks and operates.

With its interest-rate information, calculators and consumer-finance articles, Bankrate.com had a solid foothold in its niche. But the company was concerned that competition for search rankings based not just on a few keywords, but on thousands, could chew away at its visibility in search results. It started looking at other ways to expand its SEO efforts to give its editorial content greater exposure.

To emphasize SEO planning across the business, Mr. De La Garza, 35 years old, works closely with programmers, writers and Web designers at the 163-employee company, based in North Palm Beach, Fla.

"Part of it is having the interpersonal skills to get a midlevel manager to do something different than he or she did over time," says Mr. De La Garza, who has been a consultant to small and midsize companies.

The Wall Street Journal spoke with Mr. De La Garza about SEO tactics for small companies and how they've been put into practice at Bankrate's Web sites. Here are some of his tips.

Focus each page on one theme. The keyword or keyword phrase you choose for a page should directly reflect the page's content. Headlines, subheads and formatting, such as bold and italics, also should be related directly to this central subject. These indicators will signal to search-engine spiders that the keyword or keyword phrase is more prominent or prevalent than other words on the page, increasing the likelihood of a higher search ranking.

At Bankrate, Mr. De La Garza showed editorial employees that, for some articles, deciding on about 10 main keywords before writing could help increase their number of page views. Writers were already vying for bragging rights to the most popular articles. He told them: "You know what, guys? If we apply a few SEO tactics here, I can help you win the weekly battle," he says.

They began to coordinate metatags -- Web coding describing a page's content to search engines -- headlines, and keywords' frequency, formatting and placement. Content that's higher on a page, where spiders will read it soon after beginning to scan the page, tends to help get that information featured in search rankings.

"I would get one or two writers to take part, and it would slowly, over time, creep into the process with everyone, because they all wanted their stories to do well," he says.

Resist the temptation to overload pages with keywords. Among other factors, search engines may look at keyword density -- the percentage of words on a page that match the keywords -- when determining whether a Web page is relevant to a search term or just "keyword stuffing."

"You can out-optimize yourself," he says. Bankrate's target keyword density range is 2% to 9%, he says.

When writers don't think about keywords, they can easily leave out the search terms that could help readers find their story online, he says, "but when you get people mindful of it, it's not that hard to get it into the right range."

Know what you want visitors to do. In marketing lingo, this concept is known as a "call to action." A company might want a visitor to add a product to a shopping cart or complete a survey or newsletter sign-up, for example. Mr. De La Garza says he sees many small and midsize companies stumble on this step.

"They inundate the visitor with too much information without saying: 'Click here to buy it now,' " he says.

Bankrate.com articles, when their topics allow, often remind readers that the site has related rate information and calculators handy, by embedding links or placing them nearby.

BANKING ON SEARCH

The Crunch: A multitude of companies are competing for top rankings for a limited number of keywords in attempts to raise their Web sites' visibility in search-engine results.

A Solution: Some are turning to experts in search-engine optimization, or SEO, to use other simple but effective methods for getting noticed on the Web.

Some Tips: At Bankrate.com, an SEO manager works with employees across the business on everything from structuring Web pages to focusing on what customers want.

"We keep our eyes on the prize," Mr. De La Garza says.

Study your traffic data for trends. Web-site hosting services and search engines have tools offering an array of statistics about what pages were visited on a daily, weekly or monthly basis, the Web pages that visitors used to reach your site, how long they stayed and other data. Sit down once a day or week to see how people are using your site, so you can learn what's working and what isn't.

Bankrate uses several sources to look at how much traffic there is to be had, what percentage of the traffic it is getting, and how much business the company is getting as a result.

The company's number-crunching helps it make revenue projections and sometimes guides business decisions. "We know the difference in revenue to us if we move from No. 5 to No. 12 for a particular keyword phrase," Mr. De La Garza says.

Search engines, for example, tell the company where its sites stand in rankings associated with specific keywords. Data from sources like mortgage associations and banking groups give indicators of overall industry activity, and online-rating services can show how much traffic is going to a specific term. Bankrate also uses a Web-analytics tool from Omniture Inc. to estimate how many visits particular search terms generate, and how much business the site gets from those visits. The company can learn, for example, whether the site is getting one click out of every two searches on a given keyword, or one click out of a million searches.

"It's like trying to drink from a fire hydrant," Mr. De La Garza says. "The information is constantly there, and every second you're gathering more."

Make your site easy to navigate. It should be friendly not only to the human eye, but also to search-engine spiders programs that crawl the Web looking for up-to-date information.

A site's structure can make a big difference in how easily a spider can crawl it. Web addresses that use keywords related to the content of the page generally help a search engine better correlate them with the site. For example: www.yourwebsite.com/keyword/filename.html. The closer the keyword is to your homepage in the Web address, the more relevant a search engine will consider the page to be for that keyword, and the more likely the search engine will be to give your site a better ranking. Bankrate condensed the Web addresses of several pages to help get more hits.

Another consideration is where content is placed on the page. Spiders read pages starting at the top left corner of a page, so on Bankrate's pages, keyword links to content that's especially important for search engines to see, such as "home-equity loans" and "mortgage rates," were moved there.

Use free tools from search engines. If your site hasn't added a Google Sitemap page, consider doing so. Google and other major search engines share a common feature that allows Webmasters to tell them about each page of their sites available for crawling and how often it changes and how important it is to the site. "You're actually producing a page to have the search engine come to you," he says.

Last year, Bankrate simplified its sitemap to make it easy for search-engine spiders to find it.

Another free tool especially useful for small companies with a local clientele is Google Maps, a free local business-listing service, which displays an address, hours and description, sometimes at the top of a search-results page.

"It's hard to pay for that kind of advertising," Mr. De La Garza says.

Write to Laura Lorber at laura.lorber@wsj.com

Screen Shots - Advertise on Television

2007-08-20T20:05:00.001-07:00

New online services offer small businesses an affordable opportunity to advertise on television

By JEANETTE BORZO
August 20, 2007

Once considered prohibitively expensive, advertising on television is fast becoming a viable option for small businesses, thanks to new online services that provide everything from customizable templates for commercials to commercial-placement services.

Spot Runner Inc., Los Angeles, Pick'n'Click of Fort Lauderdale, Fla., and Spotzer Media Group BV of the Netherlands are among a new breed of online TV-ad production companies that offer an inexpensive and practical option for small firms.

Spot Runner gave timely help to BizFilings.com, a 30-person firm in Madison, Wis., that allows customers to form legal entities without hiring a lawyer. Although BizFilings has been in business for 10 years, it hadn't developed national brand recognition. Meanwhile, new rivals have continuously popped up, making it increasingly important for the company to stand out in the markets where it competes.

BizFilings turned to Spot Runner, which has an online library of templates -- already-produced commercials cataloged by industry and that require only customized voice-overs and titles. "I spent an hour browsing the library and a half-hour writing the voice-over," says BizFilings Marketing Director Troy Janisch. Within two days, the company had a finished TV commercial. The company previewed it and approved it online. "We were on the air within three weeks," adds Mr. Janisch.

The cost: Mr. Janisch says that after paying Spot Runner's standard one-time set-up fee of $499, BizFilings has paid an average of $45 each time its 30-second commercial has aired regionally on cable television networks such as CNN, ESPN and Fox news, and an average of $1,650 when the commercial ran nationally on those networks. And in every market where the commercial has run, he says, BizFilings has seen a "modest to major" boost to its business. BizFilings is a unit of Dutch publisher Wolters Kluwer NV.

Cookie Cutter

Choosing a template for a commercial won't express the uniqueness of a business or produce something as slick as a custom-designed commercial created by a leading national agency. Indeed, it's not always possible for a small firm to find the right TV spot. "The [Spot Runner] library has a great selection of TV spots for realtors and other common types of businesses," says Mr. Janisch. "The more unique your business is, though, the more challenging it is to find a spot."

Still, for a small business on a budget, it can be cost-effective. Tony Martinelli, office manager at a 10-person dental office in San Diego, estimates that a three-week TV campaign produced by Spot Runner that the office ran earlier this year in San Diego County produced enough new business to pay for the cost of the ad more than six times over.

After running TV ads for the past 15 years or so, Clarke Auto Inc., a Hudson, Ohio, auto dealership, last year hired Pick-n-Click, a service run by the Zimmerman Agency of Omnicom Group Inc. The general manager of the dealership, Darrell Fall, says it's easier, quicker and more effective to point to what he wants rather than explain it. Pick-n-Click offers a library of video to which customers can add titles or voice-overs, though for now it caters only to auto dealers.

"We've used this to help eliminate time and to produce better ads," Mr. Fall says. Before airing any commercial he has created, he adds, he always consults his advertising agency. "I'll have them check it because they're the professionals," he says. "I know my business, but they know the commercials."

Exclusive Rights

Most small businesses that use a template-driven commercial-creation service compete in different markets, so there is little risk of rivals choosing the same ad. Pick-n-Click, Spot Runner and Spotzer, for example, all offer exclusive rights to a commercial in the markets in which the customer operates for at least as long as the commercial runs. But if a company competes on a national basis, it may want to go a step further and pay to have the ad template permanently removed from the library, as BizFilings did.

"It's a very creative ad," says Mr. Janisch. "People are convinced that the guy in the ad works for BizFilings."

Of course, just because such services make it more affordable for small companies to create and air TV commercials doesn't necessarily mean that small firms should do so.

For one thing, TV commercials aren't as all-powerful as they once were, says Peter Kim, senior analyst at Forrester Research Inc. in Cambridge, Mass. The rise of digital video recorders makes it easier for consumers to skip commercials, for example, says Mr. Kim, adding that the effectiveness of TV commercials depends a lot on a company's target customers.

Companies targeting 18- to 26-year olds, for example, may not want to advertise on TV because people in that demographic spend more time online (12.3 hours weekly, according to Forrester data) than they do watching TV (10.7 hours weekly). Boomers between the ages of 51 and 61, meanwhile, spend only 6.6 hours online weekly but 13.7 hours watching TV. A small ad budget "might be better spent on alternative media," says Mr. Kim.

Greg Sterling, principal analyst at Sterling Market Intelligence in Oakland, Calif., says, "These spots ideally would complement other ads in other media and/or online." He concedes, though, that many small businesses can't afford a "multifaceted strategy."

Placement Services

Some of the new breed of online services specialize only in the placement of TV ads.

Softwave Media Exchange Inc., based in Irvington, N.Y., offers an online system for placing already-created commercials. Its Web site, SWMXTV.com, works as an online marketplace for buying, selling and managing advertising time. In return for transaction fees on executed orders, the site lets businesses tailor TV campaigns to meet their budget, audience demographics, desired time of day and region.

Rather than having to negotiate the process with multiple stations or networks to find out about rates and available times, firms can see a host of networks and stations in one place and do all the negotiations quickly and simply in one spot. After a firm posts its campaign and price parameters on the site, broadcasters can accept, refuse or counter those parameters online.

As an indicator of just how big this market niche might become, some large companies are exploring it. Google Inc. is running a trial of a similar service for placing commercials with satellite-TV provider EchoStar Communications Corp.

Visit the Web sites:
spotrunner.com
http://www.swmxtv.com/
pick-n-click.com
spotzer.com
services.google.com/ads_inquiry/tvadsbeta

--Ms. Borzo writes about business and technology from California. She can be reached at reports@wsj.com.

The Secrets of Serial Success

2007-08-20T20:02:00.003-07:00

How some entrepreneurs manage to score big again and again and...

By GWENDOLYN BOUNDS, KELLY K. SPORS and RAYMUND FLANDEZ
Staff Reporters of THE WALL STREET JOURNAL
August 20, 2007

Five years ago, Tom Scott and Tom First realized they would never have to work again. Friends from college, the pair had launched a juice brand called Nantucket Nectars from the back of their island boat and catapulted themselves -- the self-dubbed "juice guys" -- into the stuff of entrepreneurial legend as their beverage took off nationwide.

They sold a majority of their company to Ocean Spray Cranberries Inc., and when Cadbury Schweppes PLC later bought the entire business for an estimated $100 million in March of 2002, both men were set for retirement -- and they were only in their mid-30s.

But there was no retiring in their futures. Today Messrs. Scott and First are both deep into new ventures that, for now at least, appear headed for success. Mr. Scott leads Plum TV, a New York-based company that operates local television channels in historic, affluent markets such as Aspen, Nantucket and Martha's Vineyard, and has had notable investors including Starwood Capital Group CEO Barry Sternlicht, singer Jimmy Buffett and former Viacom CEO Tom Freston.

Mr. First is in the midst of a new start-up: O Beverages LLC, in Cambridge, Mass., which markets a line of naturally flavored waters already sold in nearly 20 states through Safeway, Balducci's and Bristol Farms, among other stores. In between Nantucket Nectars and their current ventures, the two men started a beverage-distribution-software company that was sold to a publicly traded technology company.

WSJ's Raymund Flandez speaks to New York entrepreneur Ari Meisel, 24, who has founded four companies -- including three before he was out of high school.

"I'm a crazy competitive person, so there's no way I'm stopping," Mr. First says. "I like being in the trenches."

Call them serial-preneurs. While some entrepreneurs struggle their whole lives to bring one idea or product to market, there's another breed: those who do it once, twice or three times more, disproving the notion of beginner's luck. In some cases, the brands and people are household names, such as Steve Jobs with Apple, Pixar and NeXT. But the ranks also are populated with lesser-known entrepreneurs who fly under the radar, hitting one start-up home run after the other.

"I really believe that some people are kind of entrepreneurial adrenaline freaks," says Wayne Stewart, a management professor at Clemson University in Clemson, S.C. "They really get their kicks by starting businesses."

SERIAL ENTREPRENEUR AS CAREER

PODCAST: What can students do to prepare for a career as a serial entrepreneur? Wayne Stewart, a management professor who teaches entrepreneurship at Clemson University in Clemson, S.C., discusses that and other topics with the Journal's Kelly Spors.

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In 2000, Mr. Stewart published a study with two other researchers looking for common traits among serial entrepreneurs -- which he defined as those who had owned and operated three or more businesses. Of the 664 entrepreneurs studied, only 12% fit the bill. But those who did scored higher in all three categories examined: They had a higher propensity for risk, innovation and achievement. They were less scared of failure. And they were more able to recover when they did fail.

Beyond that, many serial-preneurs bring tactical advantages from their first venture to apply the second and third time around. For instance, they recruit top talent from their original companies to subsequent ventures. They double-dip financially, getting money -- and connections -- from people who backed their earlier brainstorms. Several lean heavily on a trusted partner for financial, professional and emotional support in whatever endeavor they undertake.

More than anything, however, the greatest, and more crucial, challenge among repeat entrepreneurs is figuring out how to rekindle for future ventures the innocence, love and hunger that fueled their first enterprise. Despite hitting it big early with Nantucket Nectars, Messrs. First and Scott both struggled after the sale to find a business that inspired them as much as being the juice guys.

"A lot of the drive early on was the drive to not have to leave Nantucket, or write the résumé, or go do anything else. We were hustlers," says Mr. First. Adds Mr. Scott: "What happened was that while approaching the things we love -- boats, water, weather -- we stumbled on juice. I've learned from this that it doesn't matter what I'm good at. It matters what I like."

What's the Motivation?

So why do some entrepreneurs who strike gold once continue to start over? A general contractor might launch a business because he has certain skills, and then stick with it until retirement. Or a banker will work her way up the corporate ladder, happy with the security of a paycheck and benefits, and retire once she has saved enough. By contrast, serial entrepreneurs' main job is the act of creation -- and thus they keep creating new businesses, often after they no longer need the paycheck.

"Most people can't understand why someone who made $10 million would do it again," says Seth Godin, who founded Yoyodyne, an interactive direct-marketing company bought by Yahoo in late 1998. He's now running a new online venture called Squidoo, a free tool that lets users build Web pages about any topic within a searchable community. "That's because most people don't like working, and they think it's irrational to keep working," he says. "But most entrepreneurs don't care about money; it's a tool."

For instance, Scott Jones was a multimillionaire by age 30, having co-founded the company Boston Technology, maker of a voice-mail system now used by many telephone companies world-wide. He retired, and learned how to fly planes and perform aerobatics, but was quickly bored. So he went back to work and has since co-founded Gracenote Inc., an Internet-accessible music database used by iTunes, as well as a robotic-lawn-mower company and a search engine that uses human guides in real time. Those years not creating, he says, were "the most unhappy years of my life."

Moreover, serial entrepreneurs harbor an unusual appetite for risk -- something they can inherit from their parents. Dan Bricklin, 56, has started four companies in his lifetime; his first Software Arts, was sold to Lotus Development Corp. in the mid-1980s. Mr. Bricklin's father was a small-business owner who ran a printing business, as did his grandfather.

" See a chart: Voices of Experience: Perspectives on starting multiple companies from people who have been there as founders or co-founders

Mr. Bricklin, who now runs Software Garden Inc. in Newton Highlands, Mass., says he feeds on the thrill of starting something new and untested. "It's like that sense of walking across a stream on the rocks -- sort of knowing where you're going, but sort of not." As for risk? "If you actually seen the ups and downs of a business, and your family isn't terrified, that makes it a lot easier to do yourself."

Likewise, Tim Miller caught the entrepreneurial bug at age 18 when he received about $500,000 after his father sold a company. Mr. Miller stashed that money away, planning to invest in his own company one day. Fifteen years later, he dipped into the fund to start a software firm called Avitek Inc. based on an idea his then-employer didn't want to explore. Mr. Miller recalls how family members fretted about the danger of going it alone, with his brother specifically questioning his judgment after he hired his fourth employee: How could he possibly put other people's livelihoods on the line?

"But it never truly occurred to me that I would potentially need to let any of them go at any point," Mr. Miller says, adding that he believes successful entrepreneurs "see opportunities where other see risk." He sold Avitek in 1999 for about $13.5 million, without layoffs, and is now running a venture called Rally Software Development Corp., based in Boulder, Colo.

The Value of Teamwork

Mr. Miller didn't succeed alone; he had a partner, Ryan Martens, who now works with him at Rally Software. Their compatibility is an asset whose value Mr. Miller finds hard to quantify. While Mr. Martens as the chief technology officer is deeply invested in software development, Mr. Miller is the business guy. "I think great leaders build teams," Mr. Miller says, "and those teams have some glue and they tend to stick together."

Whether by design or not, on second and third ventures, serials often surround themselves with familiar faces. Partly it's about familiarity and trust. Messrs. Scott and First both tapped ex-Nantucket Nectar employees for their newest ventures. They typically talk to each other several times a week, and Mr. Scott is an investor in O Beverages. "We've never doubted the other's total respect and having the other person's good interest at heart," Mr. First says.

Repeat relationships are also about expediency. Elizabeth Cogswell Baskin has run four companies, including two advertising agencies and a book-packaging operation. Now 46, she's the CEO of Tribe Inc., a $3 million Atlanta advertising agency that works with brands including Porsche, Home Depot and UPS, and peppered throughout Tribe's ranks are faces from her previous companies. "I think it is a huge shortcut to hire someone you already have a relationship with," Ms. Baskin says.

At age 77, Jack Goeken lays claim to having helped start a string of well-known enterprises: MCI, InFlight Phone, Airfone and several others. Now, he's deeply involved in a new start-up, Polybrite International Inc., a Naperville, Ill., company that produces a screw-in LED light bulb that will fit in normal lamps. His daughter Sandra, 49, has worked with him on every venture since MCI, and says one of her father's greatest strengths is "herding tigers" -- that is, finding entrepreneurial, and sometimes difficult to manage, individuals who can make a project happen, but then making sure they don't stick around too long.

"A team can come in and do a great start-up and make history, but the team that does that isn't the team to run it for 10 years," Ms. Goeken says. The key, she says, is to let those people know they'll be taken care of after a sale, so they don't hold a company's progress back worrying about a job. Bringing them on in the next venture is one inducement. Plus, she says, "they are a known entity and you take the risk out of the equation."

There are drawbacks to repeat employees. Mr. Godin, for one, believes the strategy can inhibit a fresh start. "One good thing is 'beginner's mind' -- people looking at something for the first time often have a fresh insight," he says. Plus, new businesses have different needs. At his first start-up, Yoyodyne, he says his team worked 21 hours a day in "emergency mode" -- a pattern he didn't want to repeat. "If I put the whole team together again, I don't know if we could have worked in anything but emergency mode."

More Money, Please

By contrast, hitting up the same investors, Mr. Godin believes, is almost always smart -- particularly if you made them money the first go-around. "They are doing everything on trust," he says.

David Neeleman, the founder of JetBlue Airways Corp., says treating investors fairly and staying close to them between ventures is critical -- as is giving them an opportunity to invest in subsequent ventures. In fact, he says, all of JetBlue's investors, except George Soros, had been investors in his first airline, Morris Air. "I just went back to the investors of Morris Air and said, 'Do you want to do it again?' " He raised $90 million for JetBlue from his old investors and $40 million from Mr. Soros. Mr. Neeleman stepped down as JetBlue's CEO earlier this year after a series of high-profile flight cancellations, though he remains chairman.

What's more, serial entrepreneurs find many of the contacts, and information, they pick up with early ventures can pay off down the road. They court vendors, customers, trade groups, chambers of commerce -- even if they don't need them right away. While working in earlier ventures for her father, Ms. Goeken often spent weekends in foreign countries instead of going home, inviting business contacts to dinner. For many years, she mailed 1,400 Christmas cards all over the world, learned about different religions and picked the brains of partners' low-level employees about their country's customs.

"It may not be that important to you right now, but they might have something to teach you," she says. "I'd invest more than just getting the deal done. And time and time again, I went back to the same people in new ventures."

A Question of Desire

One of the hardest tasks serial entrepreneurs face is recapturing the drive and direction that fueled their first venture, without letting the first success overshadow or dictate what they do next. Sometimes, it's as simple as learning to let go. Says Ms. Goeken: "Walking out of Airfone was the saddest day of my life. When I finally pulled myself together, I never looked back. I don't miss a single company now."

Other times, it isn't so clear-cut. After Nantucket Nectars was sold, the founders started a beverage-distribution-software company because it seemed a natural evolution from being the juice guys. Trouble was, both men hated software, and left before the company was sold.

"I felt like I was turning into a sheep," says Mr. Scott. "I started wondering what I'd do about the rest of my life and was insecure, afraid and slightly depressed." Finally he pushed himself to understand what got him to Nantucket Nectars, and arrived at a rather amorphous answer: passion.

"We were passionate about ice, and pumping out sewage systems on boats; juice was just one of 50 things that we liked," Mr. Scott says. With Plum TV, he loves the civic nature of local TV -- even though it's about as far from juice as you can get. "I think the best entrepreneurs are like artists and painters," Mr. Scott says. "It's about creating. It's not about business."

Likewise, his partner, Mr. First, also fumbled at different enterprises, including starting a grocery store, until his wife said to him, "You're bored stiff, aren't you?" That set off a period of his own soul-searching -- eventually, leading him full circle. What he loved most, it turned out, was what he had already done: building a consumer-products company. So in early 2005, he launched O, and the first bottles hit the Boston market that spring.

Mr. First concedes that he sometimes feels the burden of re-entering a field he once dominated. Consumers don't pick up O and want to drink it just because Nantucket Nectars was a big hit; he doesn't have the "Tom and Tom" story -- he doesn't even have the other Tom.

"I constantly think about how I was the cool guy at Nantucket Nectars, a juice guy," Mr. First says. "I'm risking going back into the same industry and being a loser."

Still, Mr. First says, he's slowly learning to use the previous success to grease wheels where he can: Grocery chains, for instance, believe if he can do it once, he can do it again. The same is true with investors. "It gives me credibility," he says, "and the fight is too tough to leave a weapon in the bag."

--Ms. Bounds, The Wall Street Journal's small-business news editor in New York, served as contributing editor of this report. Mr. Flandez is a staff reporter in the Journal's New York bureau and Ms. Spors is a staff reporter for the Journal in South Brunswick, N.J.

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Write to Gwendolyn Bounds at wendy.bounds@wsj.com, Kelly K. Spors at kelly.spors@wsj.com and Raymund Flandez at raymund.flandez@wsj.com

Fast Money

2007-08-20T20:02:00.001-07:00

Factoring isn't for everybody. But for companies that need cash quickly -- or don't want to hassle with banks -- it's one way to go.

By RICHARD GIBSON
August 20, 2007

Businesses often need more cash than they have on hand. It may be for an emergency, a fleeting opportunity or, sometimes, such ordinary events as a payroll to meet.

How to be prepared and avoid a cash-flow squeeze? Short of having an ATM in-house, many firms are using what once was a controversial way of obtaining quick money.

It's called factoring, and it's based on a simple idea. A business sells its invoices or accounts receivable to a firm that specializes in collecting their payments. That firm, called a factor, advances most of the invoiced amount -- 70% to 90% is common -- to the business after checking out the credit-worthiness of the billed party. After the bill is paid in full, the factor remits the balance to the client, minus a transaction, or factoring, fee.

The process can be swift. Once the factor is satisfied that he or she will be paid, money from an invoice can be in the hands of the issuing client within 24 to 48 hours. Indeed, for many businesses, the biggest attraction of factoring is not being held captive by slow-paying customers.

"As a subcontractor for glass and glazing on construction jobs, we'd have to wait 30 to 60 days for our money," says Theresa Woods, controller at Metropolitan Glass Systems Inc., a Tampa concern. So her company began using AmeriFactors Financial Group, based in Celebration, Fla., to collect its bills. "We'd get our money on the spot," Ms. Woods says.

Help at the Start

Some businesses use factoring to get started. Because it is the financial soundness of their customers that most concerns a factor, firms with scant history can nonetheless sell their invoices. "We weren't profitable then, so didn't qualify for bank financing," founder Alton Johnson of Bossa Nova Beverage Group says of the juice maker's early days.

While Mr. Johnson says venture capital was a possibility, he decided that even with factoring's higher interest rates, paying them was preferable to selling part of the company. Factoring got the Los Angeles firm through a critical start-up and growth period, he says.

Although it has helped many businesses get on their feet, some that have factored accounts receivable to meet their cash-flow needs say they viewed it as a stopgap measure.

"It's something we will wean ourselves from over time, as we're able to establish other funding -- which we're working on," says Jeff Brain, chief operating officer of SFGL Foods Inc., a Glendale, Calif., concern that markets seafood gumbo and other items under the Smokey Robinson brand.

Perhaps chief among factoring's drawbacks is its cost. A factor may charge several percentage points more than a conventional lender.

"We know we're not the cheapest form of financing," says Jonathan Schuster, chief operating officer at Premium Financial Services, a factor in Santa Monica, Calif. And for some clients, he adds, "we're a temporary fix, not a long-term solution." But he and other factors can rattle off lists of clients who have been with them for years -- some because they consider banks to be, in Mr. Schuster's word, "intrusive."

Factoring's origins go back thousands of years, to the Mesopotamians. It was also a vital source of financing for American colonists who would ship furs, lumber and tobacco to England. Subsequently, one of factoring's biggest users was the U.S. garment industry, where the time between procuring cloth to be made into a suit, say, and being paid for the final product could be many months.

Today, though, the process is at work across the commercial landscape. Some factors specialize in certain types of businesses, such as trucking, construction or health care. Industry sources estimate that billions of dollars in accounts receivable will be factored this year.

Changing Ties

One reason cited for factoring's increased popularity is what some entrepreneurs say has been the breakdown of the personal relationships that once characterized banking. A decade or so ago, Roger Shorey, president of Accurate Metal Fabricators Inc., Kissimmee, Fla., says he could call his bank and say, "'I need $40,000 in my account,' and they would say, 'OK. The next time you come in you can sign the [requisite] papers.' "

Today, Mr. Shorey says, he'd have to do the paperwork before receiving the money. "That makes factoring more attractive to a guy like me," he says.

Factoring isn't for everyone. It probably wouldn't be economical for a firm that sends out thousands of small-denomination invoices, because of the service fees a factor may assess for reviewing each one for risk.

Another deterrent some cite is a negative connotation tied to factoring's garment-industry heritage, where companies factoring often were found to be financially fragile. A related commonly held impression is that a company uses a factor because it isn't credit-worthy enough to deal with a bank.

The U.S. Small Business Administration says it doesn't have a position on factoring as a financing source. However, it contends that some firms "may be able to find more advantageous terms and conditions through the use of an SBA-guaranteed business loan."

Advocates point to various ways factoring can save a business money. Since the factor handles credit checks and bill collections, a business can reduce its overhead by not having to staff for that in-house. Moreover, because factors won't accept a questionable invoice, businesses can avoid the headaches -- and losses -- that come in dealing with a customer who turns out to be a deadbeat. In those instances, factoring becomes a safety net.

"Any time we get a new customer we forward the name [to the factor] and they check them out immediately," says Tampa Bay Press President John Hedler, who has sold accounts receivable for a decade or more.

Depending on what his factor, AmeriFactors, learns, it may suggest a maximum line of credit his firm should extend to a customer. And while that vetting may deter Mr. Hedler from a sale, AmeriFactors is "really doing us a favor," he says. "Otherwise, if somebody doesn't pay, you have to have an attorney go after them, and it comes out of my pocket."

Factoring can be a big help for those who want to do business overseas but worry about being paid. That's especially true for smaller companies that have little or no experience abroad, or lack the financial means or connections to collect from a customer thousands of miles away.

Mr. Shorey of Accurate Metal Fabricators says he often uses factoring to obtain discounts for his Florida kitchen-cabinet company by paying for large quantities of supplies upon delivery, knowing that he can cover that check by factoring invoices. On a $120,000 truckload of steel, the discount could be $6,000 or so, he says. That's more than enough to cover his factoring costs, Mr. Shorey says. "So I'm using Kevin's money to make money," he says, referring to Mr. Gowen, AmeriFactors' CEO. Businesses also can save money by paying cash on delivery, of course -- something factoring may facilitate.

Even one-person operations can benefit from factoring. Stephen D. Lemish, a lawyer in El Cajon, Calif., who specializes in court-appointed work for indigent people, uses Premium Financial to collect from the courts and other government agencies.

"You can't usually bill until a case is over, and that could be anywhere from two months to a year," Mr. Lemish says, noting that his bills sometimes can run to several thousand dollars. Of factoring as a business tool, he says, "For anybody who has a big cash-flow problem, I would recommend it."

--Mr. Gibson is a special writer for Dow Jones Newswires in Des Moines, Iowa.

Write to Richard Gibson at dick.gibson@dowjones.com

Entrepreneurs try a variety of Recruiting Tactics

2007-08-20T19:53:00.001-07:00

Big Fish, Smaller Ponds

To hook executives of large companies, entrepreneurs try a variety of recruiting tactics

By SUZANNE BARLYN
August 20, 2007

LinkedIn Corp. had just moved to its Mountain View, Calif., offices last May when Patrick Crane visited to interview for the job of the company's head of marketing. Workmen were swinging hammers, and cardboard was scattered across the floors. But Mr. Crane, then a marketing executive at Yahoo Inc. in nearby Sunnyvale, was intrigued by the idea of leaving a corporate giant to help build an industry leader.

"The place was a mess, and that was part of the charm. There was a sense that everyone's sleeves were rolled up, and that was extremely attractive," says Mr. Crane, 34, who got the job at the four-year-old online networking service for business professionals.

Mr. Crane is among a crop of executives at large corporations who are being lured to significantly smaller companies. Executives who make this move may sacrifice salary, support staff, perks and prestige. But the small-business chiefs recruiting them are finding that other motivators can attract big-company talent, such as greater responsibility, a more collegial corporate culture, the absence of bureaucracy and the chance to help build a business and cash in if a young company eventually goes public. And in many cases they're using personal salesmanship to seal the deal.

LinkedIn CEO Dan Nye says he tries to appeal to executives' desire to make more of a mark than they might at a big company. "I point out, 'You have 20 to 25 years left in your career. Are you going to be the person who didn't take any risk and just lived a conservative, quiet life? But if you take this risk, even if it doesn't work out, you're going to feel great that you tried.' "

Offering Options

Tom Szaky, the 25-year-old CEO and co-founder of TerraCycle Inc., a maker of organic plant food, has hired several large-company veterans at fractions of their previous salaries. He finds it easiest to attract older executives looking for a second career, who might have even taken a retirement package from their previous employer -- "people who don't really need the job but want to get back in the game." But he also recently hired a midcareer executive away from Philips Electronics NV to be vice president of sales.

Mr. Szaky leans heavily on his vision of TerraCycle as an environmentally friendly company with a social conscience in his recruiting, but he also sweetens the deal with stock options that anticipate the four-year-old company going public, something he says it may do in five years.

Alan Johnson, a compensation consultant based in New York, says many executives moving to smaller companies hope that stock options ultimately will allow them to recoup at least five times what they sacrifice in salary. But, of course, it's a gamble -- one that depends on both the company's fortunes and the general direction of the stock market.

REELING THEM IN

The Challenge: How can small businesses lure executive talent away from big companies?

The Tactics: Most small companies can't compete with bigger rivals on compensation alone. But other motivators can help attract managers, including greater responsibility, a more collegial corporate culture, the absence of bureaucracy, and the chance to build a business and cash in if it eventually goes public.

The Clincher: The passion that a small-business CEO shows for his or her business can be a crucial factor in persuading a big-company executive to move to a smaller company.

Some small-company CEOs eventually conclude that they need to lure talent with big money. Derek Mercer is CEO of Vurv Technology in Jacksonville, Fla., a 290-employee human-resources technology company. He first decided to offer candidates greater compensation in 2001, when he wanted to promote the company's software and services to larger businesses with potential accounts over $1 million. "I have to compete with the big companies" for accounts of that size, he says. And to do that, he felt he had to be more competitive with them on compensation. "Paying significant salaries was a big step for me."

Raising the Scale

Mr. Mercer first added a vice president of sales for a salary of more than $200,000 and a bonus plan of up to 50% based on achievement, plus stock options. Subsequent funding from venture-capital firms made the higher compensation more affordable.

Today, Mr. Mercer offers a vice president of sales at least $250,000 in base salary, a bonus plan of as much as 150% of salary, and stock options. Before the company raised its sights, the same position would have come with only $65,000 in salary, a bonus of up to $65,000, and one-third as many stock options.

Last year, the increased compensation was key as Mr. Mercer recruited Michael Gibson from Dell Inc. to become Vurv's senior vice president of global sales and business development. Mr. Gibson, 45, hadn't considered leaving Dell until a recruiter approached him about Vurv. He was intrigued partly by the company's clients, which include Goldman Sachs Group Inc. and Coca-Cola Co. But he wouldn't have taken the job at a much lower salary, he says, unless the company gave him a significant equity stake, something Vurv wasn't offering.

Money, though, is only part of the incentive for executives to move to smaller companies. "It's not always about the dollars -- it's about what you do and the environment you're in," says Holly Nelson, vice president of finance and controller of Eos Airlines in Purchase, N.Y. The airline, founded four years ago, flies 757s between New York and London, each outfitted for only 48 passengers. It pays competitive salaries, but Ms. Nelson still earns about 10% less than she did as senior vice president, controller and chief accounting officer for JetBlue Airways Corp.

Ms. Nelson, 50, who joined JetBlue in 2001, was attracted by the opportunity to help build another airline. "There's something special about [it.] You make a much bigger difference on the ground floor," says Ms. Nelson. Jack Williams, Eos's CEO, says that in recruiting Ms. Nelson, he was able to "articulate a solid vision of where Eos could go from the space we're in and convince her that there's a real opportunity to build out a lifestyle brand."

Eric Smith, 41, who left his position as a sales director for Philips Electronics in 2005 to become vice president of sales for TerraCycle, started with the new company at 20% of his previous salary. The stock options he received from TerraCycle helped cushion the blow, but the company's eco-friendly mission and social agenda also drew him. TerraCycle packages its organic plant food in used plastic bottles, some of which are gathered in collection drives at schools, and it established its headquarters in the depressed inner-city area of Trenton, N.J., creating some jobs for residents.

"The key is having [executive candidates] believe in the dream of what you want to accomplish," says Mr. Szaky, the CEO.

Executives who move to smaller companies also often find that they can make a greater impact on the business in a shorter time than they could at their old jobs. There's far less bureaucracy at a small business, so decision making tends to be smoother and projects generally move quickly.

"It's easier to get what you're trying to move into action," says Samantha Hanson, 40, vice president of human resources for Vurv, who previously was a human-resources director for Best Buy Co. She developed a company compensation strategy within just 90 days of arriving at Vurv, a task that often gets bogged down by the need for board input and approval at large public companies.

Many executives also are able to move up the chain of command by moving to a smaller company, like Mr. Crane, the new head of marketing at LinkedIn. "Going from being a leader to being the leader has huge appeal," he says.

Contagious Enthusiasm

Mr. Crane also says he was swayed by the passion that Mr. Nye, the LinkedIn CEO, expressed for his company's work -- an attribute that many large-company executives cite as a reason for moving to a smaller business.

"One thing I found with Dan and other members of his staff was a contagious enthusiasm, a belief in a very singular mission," says Mr. Crane.

TerraCycle's Mr. Szaky has had a similar effect on interviewees. "I don't know what word I can use to finger what he is," says Mr. Smith, the company's new vice president of sales. "But there's an aura almost when you meet the guy. He makes you believe" in the company's mission.

A culture that keeps employees similarly enthusiastic can be another key in luring top talent. Vurv's Mr. Mercer believes that the three former big-company executives who joined his company last year were swayed in part by their visits to its offices. The open floor plan, with glass walls surrounding the few offices, promotes teamwork, he says. Shouts are regularly heard from the recreation room, where employees play foosball and build camaraderie, he says.

Even small touches like the free meals LinkedIn provides daily for its employees can help make an impression. The food enhances employees' sense of value to LinkedIn and provides opportunities for outsiders, including job candidates as well as potential investors from Silicon Valley, to share informal meals at the company, says Mr. Nye.

He describes food as one small expense that quietly attracts interest by promoting the company from the inside out. "When we create an environment that is casual and respectful -- at relatively small costs -- we attract, retain and motivate exceptional people," he says.

--Ms. Barlyn is a writer in Washington Crossing, Pa. She can be reached at reports@wsj.com.

If You Want to Stand Out, Join the Crowd

2007-08-20T19:11:00.000-07:00

Trade-Group Activity Is a Good Way to Land On Recruiters' Radars

By SARAH E. NEEDLEMAN
August 14, 2007

To find candidates for a senior finance job that opened up last month, executive recruiter Ed Kaye scanned the roster of a relevant industry association and quickly homed in on a longtime member. He placed a cold call, and the recipient, a manager at a similar company, agreed to interview for the position and was eventually hired.

Mr. Kaye, a senior partner at recruiting firm GSP International in Woodbridge, N.J., isn't alone in searching associations' membership directories to identify talent. The strategy is the most common way recruiters find potential candidates who aren't actively looking for a new job, according to a recent survey of 450 members of the Society for Human Resource Management.

"It never hurts to be involved in associations," says Nancy Grossman, a recruiter for Capital H Group, a human-capital consulting firm based in Chicago. "You become more visible to recruiters and it shows you are committed to staying on the cutting edge of your field."

Recruiters and company hiring managers say they also often seek out potential hires at the meetings, conferences and other events that professional groups host. "Trade shows are great fishing expeditions for recruiters," says Barry Shulman, a principal at San Francisco-based recruiting firm Shulman Associates Executive Search Inc.

To increase your odds of landing on a recruiter's radar, participate in association events instead of just attending them, advises Todd Weinman, a regional director at recruiting firm Lander International LLC. "If you're somebody who comes to chapter meetings and always asks outstanding questions, a recruiter will definitely take notice," he says.

John Cronin, a managing director at Capital Finance Recruiters Inc. in Leonia, N.J., recommends nurturing relationships with the recruiters you meet and being patient. He recently placed a candidate he met 10 years ago at an association meeting into an information-technology-audit position at a large East Coast health-care company. "We always kept in touch and finally it worked out," he says.

Another way to boost your exposure to recruiters is to get involved in a professional group's management team or local chapter, says Wendy Alfus-Rothman, an executive career coach in New York. Run for a board seat, volunteer to be on a committee or offer to speak at a seminar, she suggests. You're likely to get to work closely with the organization's leaders, as well as gain opportunities to showcase your skills, she says.

Ray Manganelli, a vice president and senior managing director at Tunnell Consulting, learned about his current job through his work as a board member of the Association of Management Consulting Firms. The group accepts companies as members, not individuals, and Dr. Manganelli represented his employer at the time. During his tenure, he and Tunnell's representatives got to know one another, and in 2003 the company created a position for him. Dr. Manganelli now serves as the AMCF's board program chairman on behalf of Tunnell, which is based in King of Prussia, Pa.

Many associations post job ads on their Web sites, and some limit access to the ads to members. Corporate hiring managers and recruiters say they like to advertise on these sites, sometimes exclusively, to target trade-group members. "All the good candidates seem to belong to a particular association and the ones who aren't as skilled usually don't," says Bob Hatcher, president of Executive Network Inc., a search firm near Chicago that specializes in the food industry. He estimates that 40% of the candidates he places into jobs are identified through trade groups.

Job seekers say belonging to a professional association also allows them to easily connect with others in their field, which often results in job referrals and provides useful insights. While most groups charge an annual fee, it is typically far less than the cost of a career coach, who typically charges between $100 and $250 an hour, according to Frank Fox, president of the Professional Association of Résumé Writers & Career Coaches in St. Petersburg, Fla. Still, there may be other costs involved in attending annual meetings and conferences, including travel.

Networking with fellow members is unlike schmoozing with professionals in nonindustry-specific settings, says Debbie Lew, a senior manager at accounting firm Ernst & Young LLP in Los Angeles. "Members will spend a little extra time with you because there's that connection," she explains.

Ms. Lew says she learned about her current position in 2004 after conversations with several fellow members of the Information Systems Audit and Control Association. After she had tapped their knowledge about the accounting firm, several of them volunteered to give her a referral.

Within a week, Ms. Lew says, she received a call from a practice leader at Ernst & Young asking her to interview for a manager position she hadn't seen advertised. Several ISACA members were among those evaluating her candidacy, she says, and they acknowledged recognizing her from the group's events. Before leaving the interview, she had a job offer in hand, she adds.

Ms. Lew says she pays ISACA an annual membership fee of $120, plus $25 a year in dues for the organization's Los Angeles chapter. "It's definitely a great deal," she says, adding that she also receives discounts on the group's educational events and certification exams and other benefits.

The cost of joining associations varies greatly and often depends on the type of membership. For example, the Public Relations Society of America charges between $60 and $225 a year for national membership, plus as much as $80 annually to join one of its local chapters. The American Institute of Architects charges fees ranging from $338 to $819.

Write to Sarah E. Needleman at sarah.needleman@wsj.com

Firms Go Online to Train Employees

2007-08-20T19:05:00.001-07:00

Virtual Classes, Videos Give Workers Flexibility And Save Owners Money

By RAYMUND FLANDEZ
August 14, 2007

A few years ago, David Dam, head of sales development for Golden Harvest Seeds Inc., was frustrated with his company's sales-training program for 250 employees and 2,000 independent crop-seed dealers. Mr. Dam would rent meeting rooms for 30 people, and only 15 would show up. He had trouble finding great trainers. Fuel prices were making travel more expensive, and the sessions took valuable time out of workers' days.

But in the spring of 2004, Mr. Dam's company tried planting some seeds in a new field -- online training.

Golden Harvest hired EJ4 LLC, a video-based online trainer in St. Louis, to produce and post online videos for teaching sales reps how to sell Golden Harvest seeds. Mr. Dam tracked the results and found that employees were watching the videos, mostly on Saturdays or Monday mornings. Sales increased, as did demand for more courses, and training costs fell to less than $100 per person from between $175 and $200.

"This would have been next to impossible if we had just standard [face-to-face] training," Mr. Dam says. Now, Golden Harvest, of Waterloo, Neb., offers about 120 training courses on its internal Web site, with 2,000 page views a month. "We're getting more done with less money," he says.

Flexible Learning

For small businesses looking to cut costs and increase efficiency, online training classes and videos are becoming more available -- and more attractive. Some businesses are turning to specialists in training, such as EJ4. Meanwhile, inexpensive or free management and training courses also are available on Web sites of some big companies, such as Microsoft Corp. and Hewlett-Packard Co., and Small Business Development Centers, which are funded in part by the U.S. Small Business Administration in Washington.

On-demand e-learning, delivered over the Web or by audio or videodisc, has become the second most popular approach to learning and training for small businesses, after print-based materials, says Steven S. Wexler, director of research and emerging technologies for the eLearning Guild, a Santa Rosa, Calif., trade group. About a third of its 17,000 U.S.-based members are small businesses that use some form of online training. In comparing the learning approaches of large and small businesses, people in smaller organizations are engaging more in "cutting-edge" training with online games, private Wikipedia-type sites, blogs and podcasts, he says.

Ken Cooper, a partner at EJ4, says companies typically can obtain unlimited online training from his firm for $100 for each employee per year. The typical online course, he says, averages 10 minutes and includes as many as 70 slides with text, animation and video making it visually appealing. Classes can be downloaded for use in video iPods or hand-held sales devices.

Some online-training providers also customize classes. EJ4, for example, can film a company's own managers or other staff teaching a specific course.

Such training galvanized Golden Harvest workers, Mr. Dam says. The company set records in new customer acquisitions and new dealer recruitments. In 2005, the first full year of the online training, the company's revenue jumped 14%, or about $30 million. (Mr. Dam declined to disclose total annual sales.) The firm was recently acquired by Swiss agribusiness Syngenta AG.

Free Classes

Microsoft offers officeliveseminars.com, a small-business resource with free, downloadable online seminars on topics like time management, guerrilla marketing, franchising and sales. The site is separate from Microsoft's officelive.com, where the company markets and sells Microsoft products and business services.

In March, H-P expanded its online offerings for small businesses with free online classes, how-to guides, business templates and success-story videos. H-P's Learning Center for Small and Medium Business is available to anyone. (Go to http://www.hp.com/sbso/ and click on "online classes" at the bottom of the page.)

The classes aren't limited to H-P products; they also teach how to use other companies' software tools, including Microsoft Access and Publisher, Adobe Acrobat and CorelDraw. Other topics include networking and data management, marketing materials and computer skills. A "Business Toolbox," containing how-to guides on computing, networking and other technology, can also be found at H-P's Small Business Connection Web site, www.hp.com/go/sbc.

'To the Point'

Bob Perry, who owns a cemetery-mapping business called topoGraphix in Hudson, N.H., has been taking the H-P online classes periodically for nearly three years, and says it has been a huge help for him.

Mr. Perry, who is dyslexic, has been downloading classes on the CorelDraw software program to help him learn to develop more mapping techniques for his clients. His business is converting paper-based cemetery maps into digital versions and conducting on-site surveys using a Global Positioning System, satellite imaging and ground-penetrating radar to find unmarked graves.

"The programs are very simplified, direct and to the point," says Mr. Perry, who used to take some courses like Excel at a local college but found it too time-consuming.

Write to Raymund Flandez at raymund.flandez@wsj.com

Blog It and They May Come

2007-08-20T12:04:00.000-07:00

Small businesses find blogging can be useful -- but awfully time consuming

By SARAH E. NEEDLEMAN
August 20, 2007

A few months after launching a blog early last year, Get It In Writing Inc. started seeing traffic to its Web site soar.

Today the small marketing-copywriting firm in Boca Raton, Fla., draws as many as 150,000 unique visitors a month to its site, compared with an average of only 100 before the blog, which features advice and trends on marketing and resides within the company's Web site.

But Allison Nazarian, the company's 36-year-old founder and president, says all that traffic didn't lead to more sales right away. In fact, the site's sudden popularity even brought on a new financial burden. "We ended up having to upgrade our Web site's hosting plan so it could accommodate that level of traffic," she says.

Now, the number of new clients is finally on the rise, as are sales, she says. So far this year, 25% of new prospects have come by way of the company's Web site, http://www.getitinwriting.biz/. Before the blog was launched, it was 1%, and most new clients came through word-of-mouth and referrals. Sales also are up by 18% so far this year from a year earlier, she adds.

Blogging is "worth it," says Ms. Nazarian, "but you definitely need patience."

Most owners use blogs -- which are easy to set up and require little technical savvy -- to drive people to their company Web site. But entrepreneurs also use them to get consumer feedback or answer commonly asked questions. And some blogs serve as stand-ins for Web sites as a way to describe what a business does.

Nice to Visit, but...

Still, getting people to visit isn't the same as getting them to buy.

"A blog can help you...establish your credibility and expertise, and that is what encourages people to click and buy," says Debbie Weil, an author and corporate blogging consultant in Washington, D.C. "But it takes time achieve it. You don't get instant high search-engine rankings. It's a fallacy to think you blog and you sell."

Small-business owners often create blogs to boost their company Web sites' search-engine rankings. High rankings can help draw more visitors to a site because people tend to click on the top results of a search first.

WRITE IT UP

What's New: Small-business owners are increasingly turning to blogs as a marketing tool.

The Uses: Most owners use blogs to drive people to their Web sites. For others, it's a place to post information and get customer feedback. Some even use a blog in place of a Web site.

The Caveat: Although a blog may get more people to visit a site, it won't necessarily get them to buy.

Search engines rank blogs with fresh content higher than ones that are rarely updated, says Caroline Melberg, president of Melberg Marketing Inc., an online-marketing firm in Wayzata, Minn. So the higher a blog is ranked, the greater the chances of consumers finding it, she says.

Indeed, fresh blog content has brought lots of visitors to Ms. Nazarian's site. In addition to writing two to four brief entries on her blog each week, she posts lengthy ones twice a month titled "Amazing Advertisements." These generate the most traffic, she says, and feature snapshots of clever advertisements from around the globe, plus pithy commentary. The company promotes the entries by submitting them to user-generated social Web sites such as Digg.com and Reddit.com, which publicize online items recommended by members.

Feeding the Appetite

But coming up with compelling content on a regular basis for a blog can be time consuming. Ms. Nazarian says a contract employee responsible for Internet marketing at her firm spends between one and five hours scouring the Web for interesting ads to profile in just one "Amazing Advertisements" entry.

Other bloggers are having better luck turning blog readers into customers.

Since Tracy L. Coenen started her blog, Fraudfiles, in November 2005, she has seen a considerable boost in revenue for her private forensic-accounting practice, Sequence Inc. The Milwaukee-based firm's revenue rose 31% last year from 2005, and is expected to climb 50% this year from 2006, Ms. Coenen says. She spends about 30 to 45 minutes a day posting as many as three entries on her blog, offering news and opinions about her specialty. The blog is located within the company's Web site, http://www.sequence-inc.com/.

Before the blog, Ms. Coenen says, "I don't think I ever had a case that came to me because of my Web site." She says she currently handles about 20 cases a year, and six have come from the blog since it launched. She adds that each case generates revenue ranging from $5,000 to $25,000.

Making the Link

Ty's Toy Box Inc., an online retailer based in Erlanger, Ky., has lured people to its blog about trends in the toy-licensing industry by having other blogs and Web sites link to it. The company arranged a link-exchange agreement in April with TheToyGuy.com, a Web site from toy-industry expert Chris Byrne that features news and product reviews.

"We coordinated it so that occasionally our blog and Chris's blog are about the same issue, but from different perspectives," says George Stolpe, vice president of business development and media relations for Ty's Toy Box. The two blogs link to each other in each post, he says.

Ms. Melberg says the links help boost a company's search-engines ranking because blogs recommended by external sources rank higher than ones without link referrals.

According to Mr. Stolpe, Ty's Toy Box pays a free-lance writer to maintain its blog and says the total cost for it is "a very minimal amount." He says while he can't quantify the blog's role in the near-triple-digit average growth in sales every year since its start, he has no doubt it has played an important part.

Sharing Information

For some businesses, a blog isn't so much about bringing in new traffic to boost sales as it is about sharing information with customers and getting feedback.

In May, Michael Hyatt, chief executive officer of Thomas Nelson Inc., posted an entry in his blog, michaelhyatt.com, asking for input on the cover design of a new book that the publishing company was preparing to put out. Readers were invited to select one of three images, and the company went with the picture that earned the most votes.

But the commentary hasn't always been positive. Two years ago, Mr. Hyatt wrote about how Thomas Nelson, which has about 650 employees, donated around 100,000 bibles to victims of Hurricane Katrina. Several readers posted comments on the blog that criticized the effort, including that donating resources such as food and shelter would have made more sense.

But Mr. Hyatt, who devotes about three hours a week to blogging, says the reaction only bolstered the authenticity of his blog as a source of honest communication between the company and its customers.

Jonathan Ham, an independent enterprise-security consultant in Missoula, Mont., uses his blog to answer client questions that may be of wider interest. He adds new entries to his blog (located within his company's Web site, jhamcorp.com) about twice a month. Mr. Ham says he's under no pressure to write more often because he isn't concerned about boosting traffic to the company's site.

Better Than a Site

In some cases, blogs are actually taking the place of a company Web site.

Take London-based tailor Thomas Mahon, whose blog, called English Cut, is about the tailoring process, or as he puts it, "what happens when you order a suit for $4,000." Mr. Mahon's entries discuss his normal business routine, including his travels to meet clients and photos of him cutting and stitching materials. He says his Web journal helps lend more credibility to his work than a Web site could because he can profile projects as they're being developed without the professional help he would need to regularly update a Web site.

Before launching his blog in late 2005, Mr. Mahon, who employs five subcontracted tailors, says he landed all client accounts through word-of-mouth -- even though he had a Web site, which he has since abandoned. Now he gets twice as many referrals and has had to limit the number of suits he can produce a year to about 150. Previously, he made between 50 and 60 suits a year.

--Ms. Needleman is a reporter for WSJ.com in South Brunswick, N.J.

Write to Sarah E. Needleman at sarah.needleman@wsj.com

The Secrets of the World's Richest Man

2007-08-12T19:44:00.001-07:00

Mexico's Carlos Slim makes his billions the old-fashioned way: monopolies

By DAVID LUHNOW
August 4, 2007

(See Corrections & Amplifications item below.)

Mexico City

Carlos Slim is Mexico's Mr. Monopoly.

It's hard to spend a day in Mexico and not put money in his pocket. The 67-year-old tycoon controls more than 200 companies -- he says he's "lost count" -- in telecommunications, cigarettes, construction, mining, bicycles, soft-drinks, airlines, hotels, railways, banking and printing. In all, his companies account for more than a third of the total value of Mexico's leading stock market index, while his fortune represents 7% of the country's annual economic output. (At his height, John D. Rockefeller's wealth was equal to 2.5% of U.S. gross domestic product.)

As one Mexico City eatery jokes on its menu: "This restaurant is the only place in Mexico not owned by Carlos Slim."

Mr. Slim's fortune has grown faster than any in the world during the past two years, rising by more than $20 billion to about $60 billion currently. While the market value of his stake in publicly traded companies could decline at any time, at the moment he is probably wealthier than Bill Gates, whom Forbes magazine estimated at $56 billion last March. This would mark the first time that a person from the developing world held the top spot since Forbes started tracking the wealthy outside the U.S. in the 1990s.

"It's not a competition," Mr. Slim said in a recent interview, fiddling with an unlit Cuban cigar in a second-story office decorated with 19th century Mexican landscape paintings. A relatively modest man who wears ties from his own stores, the mogul says he doesn't feel any richer just because he is wealthier on paper.

How did a Mexican son of Lebanese immigrants rise to such heights? By putting together monopolies, much like John D. Rockefeller did when he developed a stranglehold on refining oil in the industrial era. In the post-industrial world, Mr. Slim has a stranglehold on Mexico's telephones. His Teléfonos de México SAB and its cellphone affiliate Telcel have 92% of all fixed-lines and 73% of all cellphones. As Mr. Rockefeller did before him, Mr. Slim has accumulated so much power that he is considered untouchable in his native land, a force as great as the state itself.

The portly Mr. Slim is a study in contradiction. He says he likes competition in business, but blocks it at every turn. He loves talking about technology, but doesn't use a computer and prefers pen and paper. He hosts everyone from Bill Clinton to author Gabriel García Márquez at his Mexico City mansion, but is provincial in many ways, doesn't travel widely, and proudly says he owns no homes outside of Mexico. In a country of soccer fans, he likes baseball. He roots for the sport's richest team, the New York Yankees.

INTERVIEW EXCERPTS

"This isn't a competition. Being a businessman isn't about that kind of competition. It's a competition for the marketplace."

-- Carlos Slim, in a discussion with The Wall Street Journal. Read the edited excerpts.

Admirers say the hard-charging Mr. Slim, an insomniac who stays up late reading history and has a fondness for reading about Ghengis Khan and his deceptive military strategies, embodies Mexico's potential to become a Latin tiger. His thrift in both his businesses and personal life is a model of restraint in a region where flamboyant Latin American business tycoons build lavish corporate headquarters and fly to Africa on hunting jaunts.

To critics, however, Mr. Slim's rise says a lot about Mexico's deepest problems, including the gap between rich and poor. The latest U.N. rankings place Mexico at 103 out of 126 nations measured in terms of equality. During the past two years, Mr. Slim has made about $27 million a day, while a fifth of the country gets by on less than $2 a day.

"It's like the U.S. and the robber barons in the 1890s. Only Slim is Rockefeller, Carnegie, and J.P. Morgan all rolled up into one person," says David Martínez, a Mexican investor who lives in Manhattan.

Monopolies have long been a feature of Mexico's economy. But in the past, politicians acted as a brake on big business to ensure that the business class didn't threaten their power. But political control faded in the 1990s with the privatization of much of the economy and the slow death of the Institutional Revolutionary Party, which held power for 71 years until 2000.

"It is surprising how big companies have captured the Mexican state. This is a risk to our democracy, and is suffocating our economy," says Eduardo Perez Motta, the country's antitrust chief.

As the face of the new elite, Mr. Slim presents an acute challenge for the country's young president, Felipe Calderón. He must decide whether to try and rein in Mr. Slim despite the mogul's standing as the country's largest private employer and taxpayer. Congress routinely kills legislation that threatens his interests, and his firms account for a chunk of the nation's advertising revenue, making the media reluctant to criticize him.

During the past few months, Mr. Calderón has looked to cut a backdoor deal with Mr. Slim. In a series of face-to face meetings -- the details of which have surfaced for the first time -- the president has tried to convince Mr. Slim to accept greater competition, according to people familiar with the talks. The government holds an important card: Mr. Slim can't offer video on his network -- a big potential market -- without government approval.

But even some within Mr. Calderón's camp privately say the closed-door talks play into Mr. Slim's hands by letting him circumvent the country's regulators, underscoring the weakness of Mexico's democratic institutions. Unless Mr. Calderón extracts big concessions from the mogul, they say, he may become too powerful to control. For his part, Mr. Slim says that his companies are "in constant contact" with regulators, but played down the notion of a secret negotiation.

A talkative man who is generally avuncular but who can easily lose his temper, Mr. Slim rejects the monopolist label. "I like competition. We need more competition," he says, sipping a Diet Coke. He stressed that many of his companies operate in competitive markets, and pointed out that Mexico accounts for only a third of sales at his cellphone company América Móvil SAB, which has clients from San Francisco to Sao Paolo.

Mr. Slim's strategy has been consistent over his long career: Buy companies on the cheap, whip them into shape, and ruthlessly drive competitors out of business. After Mr. Slim got control of Telmex in 1990, he quickly cornered the market for copper cables used by Telmex for telephone wires. He bought one of the two main suppliers and made sure Telmex didn't buy any cable from the other big supplier, eventually prompting the owners to sell the company to him.

His control of Mexico's telephone system has slowed the nation's development. While telephones have long been standard in any American home, only about half of Mexican homes have them. Only 4% of Mexicans have broadband access. Mexican consumers and businesses also pay above-average prices for telephone calls, according to the Organization for Cooperation and Economic Development.

Mr. Slim agrees that many industries in Mexico are dominated by big companies. But he sees no harm as long as they offer good service and prices. "If a beer in Mexico costs 1 peso and in the U.S. it costs 2 pesos, then I don't see the problem," he says.

Despite countless measures over the years that show his companies charge high prices, Mr. Slim steadfastly rejects that notion. During an interview, he orders an aide to fetch his own telephone bills. "See? We charge $14 per month for basic phone rental, cheaper than the U.S.," he says, pulling up a seat next to the reporter. That may be so, but additional fees in Mexico make most phone bills more expensive than in the U.S. Mr. Slim's total phone bill at his own house was a whopping $470 last month. "I have a lot of maids and my sons make calls," he says.

Mr. Slim says his success comes from spotting opportunity early, something he learned in part from reading futurist writer Alvin Toffler, who wrote the best-seller "Future Shock" in the 1970s, and who sends the mogul manuscripts to review. Pulling a dog-eared copy of Mr. Toffler's last book, "Revolutionary Wealth," Mr. Slim leafs through it and shows off his comments in the margins. "Some of his numbers were out of date," he mutters.

Mr. Toffler says he first met Mr. Slim on a trip to Mexico in 1993. Mr. Slim approached him after a speech, surrounded by his family and carrying one of Mr. Toffler's books, heavily underlined. The two have been friends ever since. "If you didn't know he was the richest guy in the world, you'd just think he was a likeable and intelligent guy," says Mr. Toffler.

The fifth of six children, Mr. Slim was born wealthy. His father, Julian Slim, made his fortune on a general store in downtown Mexico City called "The Orient Star." His father died when Mr. Slim was only 13.

THE FOUR D'S

Companies that dominate their industries often resort to the four D's to defend their turf when facing competition for the first time.

Deny -- When Mexico's long-distance market opened to competition in 1997, Telmex at first denied access to its network, arguing that rivals didn't have the legal authorization to operate in the country, say rivals. In recent years, Telmex has tried to block Internet calling service Skype's entry into Mexico, arguing it needs a government concession to enter the market. Telmex says it follows legal procedure.

Delay -- Telmex dragged its feet on allowing access to its network, often not returning calls from executives of rival companies or not showing up at meetings, rivals say. When Mexico's telephone regulator, Cofetel, tried to regulate Telmex in the following years, the company took it to court nearly every single time, tying up the regulator's rulings for years.

Deteriorate -- Rivals complain that Telmex hurt competitors' service. One small rival, MCM Telecom, says Telmex would route all of its calls through one particular station to overload the calls and create busy signals. Telmex says any such move was inadvertent.

Dump -- Mr. Slim's companies can put the squeeze on rivals. Since his Mexican cellphone company, Telcel, has more than 70% of the market, it collects high interconnection fees for calls between networks roughly seven in every 10 times. Rivals, however, have to pay the fee most of the time, making it hard for them to undercut Telcel's prices and gain market share.

Early on, Mr. Slim showed an aptitude for numbers that would help his career. He taught algebra at Mexico's largest public university while finishing his thesis, titled "Applications of Linear Theory in Civil Engineering." His love of numbers also drew him to baseball, a lifelong hobby. "In baseball...numbers talk," he once wrote. Even today, he enjoys discussing baseball, telling a reporter that slugger Barry Bonds should be remembered more for his walk ratio than his home runs.

After college, Mr. Slim and some friends became stockbrokers in the country's fledgling market. Trading by day and playing dominoes by night, the clique became known as "Los Casabolseros," or "The Stock Market Boys." Despite the success, friends say Mr. Slim, less of a party boy and more private than the rest, wanted to run companies rather than trade. "He never liked money as much as the rest of us. He just wanted to be a good businessman," says Enrique Trigueros, one of the casabolseros.

Mr. Slim soon got his chance. After turning around a soft-drink company and a printing firm in the late 1960s and mid 1970s, he made his first big move in 1981, buying a big stake in Mexico's second-biggest tobacco company, Cigatam, maker of Marlboro cigarettes in Mexico. The company generated the cash Mr. Slim needed to go on a buying spree.

A good time to buy came in 1982, a year that would shape Mr. Slim's destiny. That year, the collapsing price of oil threw Mexico into a tailspin. When departing president José López Portillo nationalized Mexico's banks, the traditional business elite feared the country was becoming socialist, and ran for the exits. Companies were selling for as little as 5% of their book value. Mr. Slim picked up dozens of leading firms for bargain-basement prices, a move that paid off when the economy recovered in the following years. He bought Mexico's largest insurer, Seguros de México, for $44 million. Today, the company is worth at least $2.5 billion.

"Countries don't go broke," an unflappable Mr. Slim told friends at the time. Indeed, Mr. Slim always says his inspiration to invest during the downturn came from his father, who bought out his partner in their general store during the worst days of the 1910-1917 Mexican revolution -- a bet that made his father a fortune when the fighting ended.

Mr. Slim still spots good values. From 2002 to 2004, he amassed a 13% stake in bankrupt carrier MCI, later selling it to Verizon Communications Corp. for $1.3 billion. "He has never overpaid for anything," says Hector Aguilar Camín, a historian and friend. While the pair were on holiday in Venice, Mr. Slim once haggled with a store owner for several hours to get a $10 discount on a tie.

Despite his abilities, many here believe his biggest break was the rise to power in 1988 of Carlos Salinas, a Harvard-educated technocrat bent on modernizing the country. The two men had struck up a friendship in the mid-1980s, and Mr. Salinas spoke of Mr. Slim as the country's brightest young businessman. Local wags dubbed the pair "Carlos and Charlies," after a popular local restaurant chain.

Under Mr. Salinas, hundreds of state companies were sold, including Telmex in 1990. Mr. Slim, together with Southwestern Bell and France Telecom, won the bid over one of his closest friends, Roberto Hernandez, who got together with GTE Corp. Mr. Hernandez later suggested the auction was rigged, something both Mr. Slim and Mr. Salinas have long denied. Regardless of whether there was favoritism in the sale of Telmex, the privatization process created a new class of super-rich in Mexico. In 1991, the country had two billionaires on the Forbes list. By 1994, at the end of Mr. Salinas's six-year term, there were 24. The richest of them all was Mr. Slim.

In retrospect, it is easy to see why Messrs. Slim and Hernandez considered Telmex a prize worth losing their friendship. Although countries like Brazil and the U.S. broke up state monopolies into a number of competing firms, Mexico sold its monopoly intact, barring competition during the first six years. And while countries like the U.S. initially barred local "baby bell" carriers from offering long-distance and cellular service in their same area, Telmex got to do all three at once, and across the entire country. Indeed, it won the only nationwide cellular-telephone concession, while rivals had to settle for concessions that were limited to certain regions. When competition was allowed in long distance, foreign carriers were limited to a minority stake in the fixed-line business. Mexico didn't even bother to set up a telephone regulator until three years after the sale.

Dan Crawford was one of those who took on Mr. Slim and lost. In 1995, the California native became chief operating officer of Avantel, a long-distance company partly owned by MCI and the bank of Mr. Hernandez, Mr. Slim's erstwhile friend. Avantel spent around $1 billion building a new network, but it soon ran into trouble trying to connect to Telmex's network -- something it needed to complete calls to and from Telmex clients. Telmex executives simply ignored phone calls or failed to turn up for meetings, Mr. Crawford recalls.

When Telmex did connect the calls nearly a year later, the price was so high that Avantel paid 70 cents of every dollar it made to Mr. Slim's company, according to Mr. Crawford. When Avantel took Telmex to court for monopolistic practices, Telmex responded by asking a judge to issue an arrest warrant for Avantel's top lawyer in Mexico, Luis Mancera, on trumped up charges, Mr. Crawford says. Mr. Slim confirms the story, but says a Telmex lawyer acted rashly, and that the judicial proceeding was dropped. Mr. Mancera declined to comment.

"Slim is very aggressive," says Mr. Crawford, who recently retired from MCI. Avantel eventually defaulted on its debts in 2001, much of which were scooped up by Mr. Slim and later sold for a profit. Avantel was sold recently to another Mexican firm for $485 million -- a fraction of what it invested in Mexico.

For his part, Mr. Slim says Avantel and others mistakenly focused on the long-distance market, which was in decline, rather than wireless, which was growing.

It hasn't been much easier taking on Mr. Slim in the wireless market either. In 2004, Spain's Telefónica SA began selling handsets at a loss here to build market share. But it soon realized that tens of thousands of phones were purchased but never used. According to a case currently at Mexico's antitrust agency, Telefónica says that Telcel distributors bought the phones to keep them off the market, in some cases swapping the phone's existing chip with their own and reselling the handset.

When asked about this practice, Mr. Slim says "It could be. That happens to all of us. If you sell something for $50 or $20 that costs $100, someone's going to buy it." His spokesman and son-in-law, Arturo Elías, says the distributors acted without Telcel's knowledge.

Attempts to regulate Mr. Slim's companies have largely failed over the years. Mexico's telephone regulator, Cofetel, was so weak in the 1990s that Telmex's rivals dubbed it "Cofetelmex." When the regulator did try to act, Mr. Slim's lawyers blocked it in the country's Byzantine courts.

The Telmex chief also had friends in high places. Vicente Fox, Mexico's first opposition president when he won in 2000, tapped a former Telmex employee, Pedro Cerisola, to be his minister of communications and transport. During his tenure, Mr. Cerisola rarely moved against Telmex, say executives from rival telephone companies. Mr. Cerisola declined to comment.

Using money from his telephone empire, Mr. Slim has expanded into Latin American markets as well as new industries in Mexico. His cellphone company América Móvil has 124 million customers and operates in more than a dozen Latin American nations. In Mexico, he has focused on industries that depend on government contracts. His new construction company, Ideal SAB, is currently bidding to run some of Mexico's biggest highways. His new oil-services company recently built the country's biggest oil platform.

Some of Mexico's business leaders say in private that they feel Mr. Slim has grown too greedy. The death of his wife, Soumaya, from kidney disease in 1999 left him without an anchor, says Mr. Trigueros, Mr. Slim's friend from his stockbroker days. "She was a special woman, the kind who keeps a guy in line. Nowadays, he only has business to think about," he says.

Mr. Slim's empire is so vast here now that doing business without him can be difficult. Two years ago, Hutchison Port Holdings and U.S. railroad Union Pacific teamed up to bid on a $6 billion port and railway in Baja California to compete with Long Beach port. But Mr. Slim felt the project had been arranged behind closed doors and was against the idea of the country's biggest project going to foreigners. He made his feelings known to the Baja California governor and the project was stalled. Mr. Slim has since worked to put together a rival consortium, which includes Mexican rail company Grupo Mexico and U.S. railroad Burlington-Northern. He says his potential bid is a better option for the country because the railroad will run along Mexico's north and help spur development. Union Pacific and Hutchison both declined to comment.

Mr. Slim has recently given more money to philanthropy, but he has often said his most important legacy is his family. In 2000, a few years after heart surgery, he put his sons and sons-in-law in charge of his businesses. He also started a group called "Fathers and Sons" that invites Latin American billionaires and their heirs for annual meetings, where they sip fine wines and attend seminars like "How to Run a Family Business."

There is no obvious successor to the patriarch's empire. That gives some Mexican officials hope that one day the state can regulate his companies. Says one high-ranking official: "When Slim dies, we can finally regulate his kids."

Write to David Luhnow at david.luhnow@wsj.com

Corrections & Amplifications:

About half of Mexican homes have telephone lines, according to the World Bank. This article about Mexican telecom magnate Carlos Slim incorrectly said only 20% of Mexican homes have phone lines.

Increasing Traffic to Your Internet Business

2007-08-08T03:53:00.001-07:00

Kelly Spors answers questions from readers about entrepreneurship
July 31, 2007

Start by figuring out what phrases people are typing into search engines when looking for your type of products online. Once you know that, you can buy paid search ads, such as pay-per-click ads, using those phrases and pepper your site with them to boost its search-engine rankings.

Showing up high in search-engine rankings is very important since most people use search engines to shop for products online.

There are some key-word suggestion tools that help identify popular search phrases, usually available free. For instance, Google Inc.'s AdWords Keyword Tool and Wordtracker.com let you type in words and see which related phrases get searched most often. Type "Made in America" into the AdWords Keyword Tool, for instance, and you see phrases like "clothing made in America" and "toys made in the usa" have been searched fairly often recently. But "toys made in America" was searched hardly at all.

You also can experiment with various search phrases by signing up for an advertising program, like Google AdWords. The programs let you bid on various phrases. The price you bid is what you pay the search-engine provider each time someone clicks on your ad. The more you bid, the higher an ad for your site appears on the right-hand side of a search-results page. These programs have monitoring programs that let you see what phrases are most effective in generating traffic and customers on your site.

Another way to get attention is to position yourself as an expert on the benefits of buying American, says Aaron Wall, an Oakland, Calif., search marketing expert. You might, he suggests, write a blog on your site with daily updates on timely issues that people who buy American goods care about, such as U.S. manufacturing trends and product safety. A blog should draw more traffic and links to your site, which, in turn, should boost your site's ranking on search engines.

How to Get a Children's Book Printed

2007-08-08T03:49:00.001-07:00

Kelly Spors answers questions from readers about entrepreneurship
August 7, 2007

Finding a publisher requires some perseverance, research and, yes, superb writing. A good start is checking out the library to read the most popular children's books and seeing what publishers are behind books most similar to yours. You can then put together a list of those most likely to publish your book.

Many people have written children's books, but few meet a publisher's standards: manuscripts offering intriguing characters with a unique vision. But coming up with that next "Where the Wild Things Are" requires you to understand the publishing world and what sells.

There are numerous classes for aspiring children's authors, but you might also find a writing mentor or two by joining groups like the Society of Children's Book Writers and Illustrators, a Los Angeles-based organization that hosts seminars and networking events for people trying to become children's book writers.

Once you have a manuscript in polished form, send a typed copy, a short cover letter and a self-addressed stamped envelope to publishers. You can find one of the most comprehensive lists of publishers and their submission guidelines in the Childrens Writers and Illustrators Market 2007, a guidebook for children's book publishing. Some publishers allow you to send manuscripts you've sent elsewhere while others want exclusive dibs, so know the policies of each one before sending them your manuscript. Others suggest you send a query letter first.

If, after two months, you still have no response, contact the publisher to inquire. If you still don't hear back, you might write a letter withdrawing your submission and send it to the next one.

You don't need to send illustrations with your manuscript -- unless you happen to be a professional illustrator. Most children's book publishers have a pool of illustrators they work with and prefer lining up their own.

Having a literary agent also will greatly boost your odds of selling your manuscript, because they are attuned to working with the major publishing houses and know what it takes to get a book published. Most literary agents take a 10% to 15% cut of your profits. You can find lists of agents in the Literary Market Place, available at literarymarketplace.com. You also could check the "Acknowledgements" section of books similar to yours.

Five Steps for Creating A Business-Exit Strategy

2007-08-07T19:14:00.001-07:00

By KELLY K. SPORS --August 07, 2007
Staff Reporter of The Wall Street Journal.

From The Wall Street Journal Online

Nancy Sharp, chief executive of Food for Thought Enterprises, found herself scrambling to make some tough decisions in 2001 after her husband, then president, was diagnosed with lung cancer and couldn't run the family business day to day.

"We started to be written off a bit," says Ms. Sharp. Potential customers thought, "The owner is sick, and the wife is tending to him -- they're not going to be there when we need them to be."

Ms. Sharp says she made some rash decisions, including hiring a new president from outside the Lincolnwood, Ill.-based event and food-service company. That person didn't fit well in the new role and left within 18 months. Luckily, Ms. Sharp understood the now-320-employee business enough to keep it growing past her husband's death in 2004. But she's now building a succession plan so her successor isn't left in the same bind.

Business owners often feel that they -- and the business -- will always be around. But without some thoughtful planning about succession, it's common that businesses wither when the owner passes away or leaves.

Here, then, are four steps to making sure your business lives beyond you.

Communicate. The first step of succession planning is figuring out what you want to happen to the business after you're gone -- whether that's tomorrow or 25 years away. The goal may be selling the business. Or you might appoint a family member or trustworthy employee to take over.

But such decisions can't be made in a vacuum, says David Paradise, president of the Family Business Resource Center in Newton Centre, Mass. Accountants, lawyers and financial advisers can counsel you on the various aspects of succession planning. But more importantly, owners need to engage their most-promising employees and family in a dialogue about the future of the business, asking sometimes personal questions to gauge their thoughts and goals.

Once your goals for the business are clear, you can better lay out a long-term plan. Most succession plans look five years out and include incremental steps for achieving the ultimate goal of how ownership or leadership will be transferred. But you also need a short-term contingency plan, in case disaster strikes tomorrow, Mr. Paradise says.

Succession plans tend to evolve over time. So owners should be revising them at least once every few years as time passes and circumstances change.

Detach yourself. Many businesses rely too much on the founder's persona. So if the founder dies, there's high risk the business will, too.

To avoid this, you should start documenting all procedures and policies and writing down how the business operates in vast detail so that "if I get hit by a bus, theoretically, my staff can walk in and they can follow the steps," says Raman Chadha, executive director of the Coleman Entrepreneurship Center at DePaul University in Chicago. Mr. Chadha estimates that fewer than 15% of entrepreneurs he meets have a succession plan.

You should keep a copy of the document in a safe place, and have at least one trustworthy employee who knows where to find it and has the competency to run the business after you're gone. That person should also know the key customers, suppliers and employees so it's not such a shock if he or she has to take over the business on short notice.

Groom your successor -- early. One of the most important facets of succession planning is deciding who the next leader will be, and spending ample time -- preferably years -- grooming that person for the role. Who that person is shouldn't be a quick or emotional decision. It should be handled thoughtfully and formally -- even when you're dealing with family, says Mr. Paradise.

First, determine what leadership qualities and skills you want in the next leader. Then identify qualified candidates using that criteria, and talk with them about their interest in running the business. Devising an evaluation process and setting goals for the candidates can make it easier over time to choose the best one. You might allow candidates to lead projects so you can evaluate how they perform as leaders and engage with employees and customers.

Sometimes the best candidate must be recruited from outside the business. Bob Hirsch, co-owner of Gold Eagle Co., a family-owned automotive chemicals manufacturer, hoped to keep his Chicago business privately owned and in the family. But none of his children showed much interest in running the business and there was no employee deemed qualified to take it over.

So in 1993, Mr. Hirsch invited his son-in-law, Marc Blackman, to join the business. Mr. Blackman was first given a job in sales. Over the years, he was moved into roles with more and more responsibility. He became CEO in May, when the 73-year-old Mr. Hirsch stepped down. Mr. Hirsch still works as an adviser for the business, though he admits not being the decision maker any more "can be hard at times."

Some business owners even undertake an extensive external search. Ms. Sharp of Food for Thought estimates she's interviewed several dozen candidates in recent months to fill three senior positions. She hopes to choose the next chief executive in the next five years and then spend the following few years training him or her before she retires.

Get financial protections. Many financial planners say there are key ways owners can protect the business in case of their death or disability or from future disputes.

Having adequate life insurance to pay estate taxes in the event of your death can prevent others having to sell the business. So-called "key man" insurance can also help keep the business afloat if key employees become disabled or die.

David Ciambella, a succession planner with Rawls Group, a family-business consulting firm in Orlando, Fla., says owners should have wills and trusts that clearly outline who receives what, along with a health directive and power of attorney that appoints people to make key health and business decisions if the owner becomes unable to.

A buy-sell agreement can lay out guidelines for how ownership of the business will be handled in the future. It makes it easy for future owners who want to sell their shares and lays out how the business will be valued at any moment in time. It also makes it easier for owners to make sure the business stays in the family.

Email your comments to kelly.spors@wsj.com.

Venture Loan Comes With Fewer Strings

2007-08-07T19:10:00.001-07:00

By SIMONA COVEL --August 06, 2007
Staff Reporter of The Wall Street Journal.

From The Wall Street Journal Online

Matt Glickman didn't want his software company to take on debt.

As he watched one debt-laden company in Silicon Valley after another sink around him back in 2001, Mr. Glickman was convinced that paying back a loan "can force a company into bankruptcy that could otherwise do well."

And the co-founder and chief executive of Merced Systems Inc. didn't want to sell any more equity. In return for $2.5 million in venture capital, the company had turned over to investors about a third of the company, which is now six years old. That money was used to develop a product that was being installed at corporate call centers.

But the Redwood Shores, Calif., company needed more money to improve the product and grow the business.

So at the urging of an old business-school friend who had gone into technology investing, Mr. Glickman became a somewhat wary participant in the market for venture debt.

More Risk, Higher Rate

Venture-capital firms are known for giving money to young companies, particularly in high-tech industries, in exchange for a piece of the business. Venture debt, however, generally functions like a bank loan but the lenders are willing to take on much more risk than traditional bankers in exchange for a higher interest rate and the right to buy shares.

If a young company can convince a venture-debt firm that management is strong and cash-flow prospects are healthy, it may be able to hang onto a bigger chunk of its business. "The longer they can put off [selling] equity," the more money founders are likely to end up with in their pockets, says John Richards, associate director of the Center for Entrepreneurship at the Marriott School of Management at Brigham Young University in Provo, Utah.

With some hesitation, Mr. Glickman says he met with Maurice Werdegar, a partner at venture-debt firm Western Technology Investment and former Stanford Graduate Business School classmate.

Mr. Glickman also looked into bank loans, but quickly found that "banks are set up to loan to companies with assets," not to risky young software companies, he says. "I needed someone who understood the dynamics of the business."

After crunching numbers and some cajoling from Mr. Werdegar, Mr. Glickman says he and the board "came to the conclusion that debt used appropriately... is a perfectly good vehicle" because unlike the bankers he talked to, Western Technology wouldn't demand that the company cross certain earnings hurdles at certain times.

Fact Box

Company: Merced Systems Inc.
Founded: 2001
2006 Annual revenues: More than $20 million
Employees: 100
Executive: Matt Glickman
Title: Co-founder and chief executive officer
Age: 41
Years in position: six
Biggest hurdle overcome: Leapfrogging competitors to become market leader.
Biggest success: Becoming the enterprise standard for operations-performance management for many Fortune 500 companies.

Fewer Hurdles

In December 2001, Western Technology lent $1.25 million to Merced Systems, leaving the company with $2 in equity for every $1 in debt a ratio Mr. Glickman was comfortable with.

The annual interest rate on the loan was around 10%, higher than a low-risk loan but lower than rates on some unsecured loans given to young and unproven companies. In addition to the interest, Western Technology received warrants, or the right to buy Merced stock at a certain price. While that means possibly giving up some shares, it's a far smaller chunk than an equity investor would take and Western Technology doesn't have a say in how the business is run.

Unlike a bank, which might demand that a company meet earnings or cash-flow requirements, Western Technology would allow Merced to use the money as long as the company was still in business. Venture-debt firms are willing to waive those kinds of requirements because the lenders believe they know the patterns of growth a young technology company goes through.

Merced paid back the debt over 2 1/2 years, making monthly payments from its growing operating cash flow. The company, which now has 100 employees, posted more than $20 million in revenues last year and hasn't needed to take on more venture debt or more venture capital.

In the end, Mr. Glickman says, taking on debt "was a great way" to hold onto more of the business.

Not every business grows so quickly, however. Mr. Werdegar notes that many companies turn to a venture-debt firm looking for a line of credit to hold them until they're able to secure another round of venture-capital funding. "People look at it as six months of extra time," he says. As a debt investor, "the bet we're making is that a company can raise additional capital."

Email your comments to sjeditor@dowjones.com.

From Parties to Payoff

2007-08-06T20:27:00.001-07:00

By SIMONA COVEL
July 21, 2007

(See Corrections & Amplifications item below.)

Just days after Laurel Touby's bank account grew -- by a lot -- the mediabistro.com inc. founder sounds exhilarated and still a bit unbelieving. This week, Jupitermedia Corp. said it agreed to pay $20 million in cash plus a possible $3 million over the next two years for the business Ms. Touby started in the mid-1990s by hosting cocktail parties.

Gary He

Laurel Touby

Ms. Touby kicked off her venture when she mailed postcards to friends and acquaintances in the media industry, inviting them to gatherings to network and socialize. Sometimes, she walked around the bar with a hat, collecting contributions to cover the tab. "People got married, people got jobs, people got free-lance work," recalls Ms. Touby, who says she's "a broker of people."

By 1997, she was sending an email newsletter. In 1999, she built a Web site -- with the help of a friend's boyfriend -- and its job listings took off. Today, mediabistro.com, with close to $10 million in annual revenue, makes money mostly through job listings, ad sales, membership fees and writing classes.

The Wall Street Journal talked with the 44-year-old Ms. Touby, who once covered small business as a journalist, about how she funded her business.

The Wall Street Journal: In 1999, you had an idea that job listings could be the cornerstone of an online business, but you didn't want to go to friends or family for money. What did you do?

Ms. Touby: I started talking to everyone I knew. One thing I learned writing about small business is that you don't want to be undercapitalized. I got into the old-boy network. I met this guy he was cute, and we got to chatting. He looked like the young-old-boy network. He agreed to let me take him to lunch. I agreed to pay him a finder's fee, and he introduced me to his ex-girlfriend's father. This guy was my first serious meeting -- I wore my million-dollar suit. I was charging for the job listings and [the investor] had the vision to look at this crazy plan It took him five minutes, and he was like, "I'm in."

He put in $250,000. I said, "Do you know any leads [for more investors]?" I wanted someone who would be arm's length, not angels who often want too much control. Well, the old-boy network really works. He introduced me to [the person who would become] the lead investor, and he put in $750,000.

He put me through the ringer -- he didn't know media. They only gave me half of the money upfront, and wanted certain milestones, like revenues and profits -- hard things to do!

WSJ: Two years later, the dot-com bubble was deflating, followed soon by Sept. 11, 2001. What happened?

Ms. Touby: I was running out of money. I went back, hat in hand, to get the other half of the promised money [from the investors]. They gave me around $50,000 -- enough to get through the panic. It basically bought two months. For three months, I took a pay cut to zero. Much of my staff took a 20% pay cut. I put up my apartment for a $100,000 line of credit, though I ended up not having to use it.

WSJ: How did you turn things around?

Ms. Touby: We launched classes and seminars, and I realized this makes money. People loved it. In 2003, we had our first profitable month. By the end of 2003, we were really [consistently] profitable. Now, 15,000 people have gone through the classes.

FACT BOX

Company: mediabistro.com inc.

Founded: 1997

Employees: 27

Executive: Laurel Touby

Title: Founder and senior vice president

Age: 44

Years in position: 10

Biggest hurdle overcome: The Internet crash and Sept. 11, by launching a series of offline classes and seminars.

Biggest success: Growing by 30%-plus for several years.

WSJ: Did you go out looking for a potential buyer?

Ms. Touby: I don't just go knocking on doors. That's lame. But I'm always at conferences, always running into people. I was always friendly to potential buyers. I've been out and about -- speaking at conferences, on panel discussions. One reason you do that is to get your name and your company out there for a potential sale. I've always been strategic.

WSJ: When did buyers start coming around?

Ms. Touby: Over the past few years, we had a few hard offers and a bunch of whisper offers. Financial buyers wanted to pay low and sell in a few years. I always wanted a strategic buyer who would help achieve my goals, and I always knew in my head I wasn't going to sell for less than a certain number. We were growing at 30% each year, so it made sense to wait [for the right buyer]. Discussions started with Jupiter on March 16. We had lunch and argued. I think they got a bargain compared to what I wanted. But I think I'm going to get more out of working with them than going at it alone. I never really believed it until the money hit the bank. I was sure someone was going to snatch it out of my hands.

Write to Simona Covel at simona.covel@wsj.com

Corrections & Amplifications:

Jupitermedia agreed to pay $20 million in cash plus a possible $3 million over the next two years for mediabistro.com. An earlier version of the story incorrectly stated the possible $3 million additional payment would be over three years.

Q&A: Building a Brand Around a Personality

2007-08-06T20:12:00.001-07:00

By LAURA LORBER
July 2, 2007

Uncle Wally's may not be as famous as Famous Amos, but the same person is behind both brands: Wally Amos.

Once a show-business promoter, Mr. Amos started selling chocolate-chip cookies in 1975 in his store in Hollywood, Calif. The business took off, as Mr. Amos rode a gourmet cookie craze and advocated for adult literacy. Mr. Amos eventually lost the business and became its paid spokesman. It changed hands several times, and now is owned by Kellogg Co.'s Keebler brand.

Rosica Public Relations

Wally Amos with Uncle Wally's Muffins

After false starts with two new companies, in 1992 he co-founded Uncle Wally's Muffins Corp., a firm in Shirley, N.Y. He's chairman and spokesman for the firm, which has 140 employees. Mr. Amos, 71, also owns Chip and Cookie, a cookie store in Kailua, Hawaii, with his wife Christine, and is the founder of the Chip and Cookie Read Aloud Foundation. We spoke with Mr. Amos about building a product brand identity around a personality.

WSJ: What's key to branding a product around a person?

Wally Amos: Here's Wally Amos's philosophy: You're in business to make friends. For someone to buy your product, they really have to like you, which is key to personality branding.

If I'm your friend, you're going to do whatever you can to help me. As a business owner, I have a responsibility in that, though. I have to honor the friendship with my customer by producing a quality product, with integrity, by doing what I say I'm going to do, by being a company that gives back to the community, by being a civic-minded company.

Sure, you're in business to make money. And you have to make a profit, but what are you going to do for the customers? Why would the customer buy your product over another product? What if you have two muffins and both of them taste good? I would believe that if someone had their choice between two muffins or two cookies that both tasted great that they would choose the Wally Amos product.

That's what branding is -- the brand stands for something. The brand creates the income. People buy the product, because they know that the brand has integrity, has credibility, and the company stands behind it. If customers have a problem with the product, they can pick up the phone and get satisfaction. But all of those things create profits.

Why should someone buy your product? It satisfies a need that they have. There are so many choices today. What are you going to do to stand out?

WSJ: What's the hardest part of building a personality-based brand?

Mr. Amos: I've always operated on a very personal level. Because if I can meet you, one-on-one, I'm going to be your friend. I'm going to win you over. You're going to taste my product, and you're going to like my product, and you're going to like me, and that's genuine.

You've got to have a personality. You have to be somewhat of an extrovert, because you're before the public all the time. And you have to be passionate about your product. This doesn't work for everybody, everybody doesn't have the personality to be out front.

When you put your name and your picture on a product, it's a double-edged sword. If people don't like you, or you do something that discourages them or that is not ethical, you can go out of business. When you and the brand become one, whatever you do will ultimately affect the brand. If you're exposed to something other than credibility and integrity, then ultimately your brand is affected.

WSJ: How does Uncle Wally's build its brand?

Mr. Amos: Word of mouth is huge. Word of mouth is the best way to promote a product or to brand a product, which is what I did with Famous Amos. We had huge word of mouth. We had a lot of media attention, because I opened a store selling only chocolate-chip cookies, and we tied Famous Amos in with literacy. To use all of those avenues to bring attention to your product is important.

Public relations becomes a huge part of that. That's why we've always used cause marketing. When I had Famous Amos, I hooked up with Literacy Volunteers of America. I became as identified with adult literacy as I did with cookies, and that endeared me to people, because they knew that I meant it.

WSJ: What's different about how you promote Uncle Wally's, compared to how Famous Amos was promoted?

Mr. Amos: I don't know that there is anything different. With Uncle Wally's, we believe in giving muffins away and letting people taste muffins, because the best way to sell a food product is to let someone taste it. I always tell people: You can't fool your mouth. We align ourselves with nonprofit groups to help their causes, which helps our cause, and it helps their audience taste our product. We'll give away muffins in a heartbeat -- to charities, sometimes at events. It's all basic common sense stuff.

There are a lot of companies that sell muffins. There were no cookie stores. There are some limitations. I can carry cookies around very easily. I can't carry muffins. Muffins are more of a breakfast food, rather than a snack that you can eat all day. Ideas are not all transferable from one product to the next, just because you do it with one thing, doesn't mean that you do it with another.

Even with cookies, I thought starting Chip and Cookie would be a breeze. It's almost two years, and we haven't had a profit yet. We had a big opening party, and I said, 'OK, this is going to catapult me.' But it didn't. It did when I had Famous Amos, but these are different times. It's a different location. I'm in Hawaii. With Famous Amos, I was in Hollywood. Everything is different. It was 30 years later when I started Chip and Cookie. It's a whole different audience.

WSJ: What advice do you have for small-business owners looking to brand a product around their personality?

Mr. Amos: You can't compete with the big guys. So don't even attempt to do that. You don't have the money, you don't have the resources. But many small businesses today, because they don't have the budgets and they can't compete with all these big companies, are personalizing their business.

In this day and age when everything is so big, big is not better. Big is just bigger. People buy from other people. People do business with other people. If you have a product that lends itself to you being the spokesperson for it, you can be the person out front.

Be consistent in who you are. You have to use what you sell, and you're going to have to know everything there is to know about what you sell. You have to be passionate about what you're doing, because otherwise you're not going to be able to convince people to buy it.

You need to do what you like. Too many people get in business to make money. You have to make money. But if that's your single motivation, that's not enough. It's important to have fun. If you don't have fun, I don't give a damn what you're selling, you're not going to be successful with it. I know a lot of people who have a lot of money who are miserable. And I don't want to be one of them.

Write to Laura Lorber at laura.lorber@wsj.com

Making the Most of Online Matchmaking for Small Firms

2007-08-06T20:02:00.001-07:00

By SIMONA COVEL
July 30, 2007

Wil Schroter has started nine companies -- some successful, others not. Over the years, the entrepreneur has developed a network of investors, software developers and others who might be able to help out with his businesses. He says friends and acquaintances began to come to him on a regular basis, asking him to put them in touch with advisers or job candidates he knows.

Wil Schroter

"It dawned on me that there was no central Rolodex where anyone who's looking to start a company could come for information," says Mr. Schroter, 32.

Go Big Network LLC was born from that realization. The Web site, www.gobignetwork.com, launched in early 2006, is structured like a dating site for start-ups, where entrepreneurs can create profiles and post ads looking for investors and others to help start their businesses. Posting a profile is free, but users pay a subscription an average of $49 a month -- to contact someone on the site, says Mr. Schroter, who is based in Columbus, Ohio.

Several lender-borrower matchmaking sites have popped up in recent months. Like Go Big, RaiseCapital.com and FundingUniverse.com are designed for small companies seeking a cash infusion. Prosper.com focuses on individuals looking for money. WSJ.com talked with Mr. Schroter about what works and what doesn't for business owners using his service and how he funded his start-ups.

WSJ: Paint a picture of the typical investor on gobignetwork.com.

Mr. Schroter: The average investor on the site is a wealthy individual. They probably have as much investment capital as an angel investor, but our investor is more likely someone who has a full-time job, but also wants to place an investment in a start-up or film or what have you.

WSJ: There are 10,000 active listings on the site, and it seems most are companies looking for funding. What's the best way to stand out?

Mr. Schroter: There are 99 companies looking for funding for every investor. The best postings are short ads that are really to the point. Four sentences that are well-composed will beat four paragraphs every time. It should say: "This is the industry we're serving. This is the problem we're solving. And this is how we make money doing it."

A bad posting doesn't give any indication to the investor why they would want to invest in that company. It's: "We want to create a great company. We need more money. Invest in us." Instead, they should say: "We're going to be in the health-care industry. We found a cure for cancer. We're going to sell cancer pills for a dollar and make 90 cents on each one." An investor gets that.

WSJ: How often do companies find funding through the site?

Mr. Schroter: We don't have a way to track that. But when the average person posts, they receive three responses. There are 10,000 active listings including people looking for funding and people looking to fund. People need to be in it for the long haul. You're not shopping for a mortgage you're talking about a highly-specific fit.

WSJ: How did you fund your first business?

Mr. Schroter: I was 19. I talked to a couple of venture-capital companies and they laughed at me -- my projections didn't go past one year, and I had left things out like the cost of health benefits for employees. After three years, I had about $100,000 in debt -- a combination of credit cards and personal loans.

WSJ: How did you fund your most recent company, Go Big?

Mr. Schroter: Over time, I realized that sometimes you don't really need to raise money, but to convince people to do things for you, like build a Web site. I launched Go Big with less than $50,000. I brought together lots of people who were willing to participate [in exchange for] for stock. I employ 12 people, and they all have options in the company.

People should also pitch everyone all the time. I was in San Francisco last week, and every single person I ran into, I pitched my business. You never know, they might say, "Oh, my best friend happens to be a Java programmer."

Write to Simona Covel at simona.covel@wsj.com

Venture Loan Gives Software Firm - Needed Funding with Fewer Strings

2007-08-06T19:57:00.001-07:00

By SIMONA COVEL
July 30, 2007

Matt Glickman didn't want his software company to take on debt.

Merced Systems Inc.

Matt Glickman

But the Redwood Shores, Calif., company needed more money to improve the product and grow the business.

So at the urging of an old business-school friend who had gone into technology investing, Mr. Glickman became a somewhat wary participant in the market for venture debt.

More Risk, Higher Rate

With some hesitation, Mr. Glickman says he met with Maurice Werdegar, a partner at venture-debt firm Western Technology Investment and former Stanford Graduate Business School classmate.

Fewer Hurdles

FACT BOX

Company: Merced Systems Inc.

Founded: 2001

2006 Annual revenues: More than $20 million

Employees: 100

Executive: Matt Glickman

Title: Co-founder and chief executive officer

Age: 41

Years in position: six

Biggest hurdle overcome: Leapfrogging competitors to become market leader.

Biggest success: Becoming the enterprise standard for operations-performance management for many Fortune 500 companies.

In December 2001, Western Technology lent $1.25 million to Merced Systems, leaving the company with $2 in equity for every $1 in debt a ratio Mr. Glickman was comfortable with.

In the end, Mr. Glickman says, taking on debt "was a great way" to hold onto more of the business.

Lease Deal Helps Plane Expansion Take Off

2007-08-06T19:40:00.001-07:00

By SIMONA COVEL
July 30, 2007

William Herp needed several million dollars last year to expand his jet-taxi company. He wanted to buy a fleet of a new kind of small jet -- one that would transport businesspeople visiting clients, like a car service with wings.

With airports overflowing with weary travelers and interest in private planes on the rise, Mr. Herp believed the new jets' speed and access to smaller regional airports would lure small groups of business travelers and families who may have never chartered a plane. Instead of paying by the seat, groups could rent the planes by the hour.

Courtesy of Linear Air

William Herp (left) and Vern Raburn, chief executive of Eclipse Aviation

But a new kind of jet for a new kind of business -- banks "would never touch it," says the president and chief executive of Concord, Mass.-based Linear Air, which was founded in 2004.

Lease With a Twist

So he began courting wealthy individuals to help finance his idea. His pitch: Buy the small planes -- classified as very light jets -- and lease them to Linear Air. The buyers would receive income from the lease and a sizable tax benefit from the plane's depreciation, plus the ego boost from saying they own a jet. Linear Air, in turn, would have access to the planes without taking on high-interest loans. And the planes' owners would likely become repeat paying customers.

While most small companies don't need to buy $1.7 million jets, Linear Air's solution, a twist on a sale-leaseback arrangement, could work for entrepreneurs who need capital but don't want to sell equity or take on debt.

Leasing, says Murray Low, an associate professor at Columbia Business School and the director of Columbia's Eugene M. Lang Center for Entrepreneurship, is a form of financing "entrepreneurs probably don't use enough. It's relatively low-cost financing without tying up the rest of the balance sheet."

Mr. Herp, 44, a former chief financial officer of a public company and a recreational pilot, knew the risks associated with buying planes -- expensive products that depreciate quickly. And he knew individuals would be more likely to take this kind of risk than most bankers, because banks prefer to lend to firms with a track record of success. Recent widespread troubles among traditional airlines have rendered bankers even more hesitant to finance a new kind of plane and a new kind of operation.

Linear Air, with 40 employees and $2.3 million in revenue last year, has six Cessna Caravans -- three leased and three that it owns. But Mr. Herp's dream was a fleet of very light jets. The four-passenger jet is about the same price as the Cessna but able to go farther and nearly twice as fast. Taking the plane, for example, from Boston to Elmira, N.Y., might cost $3,000. That's within reach for a group of four business travelers and less costly than a traditional charter flight.

The plan wasn't easy. The jets' manufacturer, Albuquerque, N.M., start-up Eclipse Aviation Corp., has run as much as a year behind on delivery, Mr. Herp says. And, the "air taxi" model, where planes rent by the hour, is still unproven.

Eclipse spokesman Andrew Broom says the production delays are due to normal "teething pains" for a start-up manufacturer.

"We learned from the experience buying the Caravans what criteria equipment-finance companies or banks use to lend money," Mr. Herp says, "and we realized quickly Eclipse wasn't going to meet that criteria."

Mr. Herp says several finance companies offered to lend him money to begin the purchases -- but nowhere close to the amount he needed to put down deposits on several planes. Sixty percent of the price of each plane is due six months ahead of its scheduled delivery.

FACT BOX

Business: Linear Air

Founded: 2004

2006 Annual revenues: $2.3 million

Employees: 40

Executive: William Herp

Title: President and chief executive officer

Age: 44

Years in position: three

Biggest hurdle overcome: Finding a new market for equipment financing.

Biggest success: Building world-class team.

"The pricing was unworkable," he says. Even with the loans, "we'd still have to go out and raise cash" by selling part of the business.

So, Mr. Herp and his investment bankers constructed a leasing arrangement. Under the agreement, wealthy individuals buy a plane from Eclipse and agree to lease it to Linear Air for a period of time. During that time, the owner gets a discount if he or she wants to use the plane and also can usually earn an accelerated depreciation write-off on his or her taxes.

Leasing is common for owners of corporate jets and other transportation equipment, says Rick Schroeder, a partner in commercial finance at law firm Davis Wright Tremaine LLP in Seattle. Typically, the owner of a corporate jet will turn to an aviation-finance company, which will buy the aircraft and lease it back to that original owner. Linear Air's arrangement is a twist on that idea. In Linear's case, the company never owned the jets but persuaded investors to buy them instead. Those investors are then required to lease the jets to Linear.

While most industries don't deal with rapidly-depreciating assets like planes, lots of small companies can avoid taking on loans by leasing some of their equipment, says Prof. Low.

In the case of Linear Air's arrangement, the jet owners are also likely customers. Prof. Low notes that tapping into a potential customer base "is one of the most attractive sources of financing." When customers help finance the business, "it makes them vested" in the company's success, he says.

A Slow Beginning

Linear Air's plan appears to be working -- slowly. While several hundred potential jet owners have requested more information about the leasing program through the firm's Web site, only two deals have been completed.

That's partly because of manufacturing delays. Eclipse planned to deliver the first jet to Linear Air in August 2006, but now the plane isn't expected to arrive until August or September of this year. Because so much money is due prior to delivery, a handful of potential buyers balked after hearing of the delays. "They take a step back. They say the timing has changed, so there's no reason to do the deal now," Mr. Herp says.

One investor who has completed a deal is Chris Covington, founder of Boston boutique investment-banking firm Covington Associates, which does work for Linear. Mr. Covington, who also is a pilot, says he was attracted by the potential investment income as well as getting priority on flights. As someone who charters planes somewhat regularly -- he's been shuttling his teenage son on college visits -- he expects to reserve the Eclipse jet as often as once a month, especially if he's traveling to a city that's hard to reach directly on a commercial flight.

Mr. Covington's plane was to be delivered in May, but is now expected in September. While the delay is "regrettable," he says, "I want them to get it right."

Write to Simona Covel at simona.covel@wsj.com

Do's and Don'ts for Wooing Angel Investors

2007-08-05T12:25:00.001-07:00

By SIMONA COVEL - July 30, 2007

For a young business, it can be alluring: Find an "angel" investor to swoop in and help fund your growing company. With millions of small businesses and only a few hundred organized angel groups, where do you begin?

WSJ.com spoke with Knox Massey, a longtime angel investor, about getting started. Mr. Massey, a former senior salesman at AOL, is executive director of Atlanta Technology Angels, a private angel group that invests up to $4 million each year in young technology-focused companies.

Here is Mr. Massey's advice on what a small-business owner should - and shouldn't - do when searching for angel funding.

Research the investors. If your company is a manufacturer, don't approach a technology-focused angel group. Make sure the people you're talking to understand your business. Looking for an angel investor should be as intensive as searching for a new job, Mr. Massey says.

The best-prepared business owners, he says, know what types of companies his group has helped fund in the past. "I'm always astounded at the companies that use the shotgun approach," says Mr. Massey. "They say, 'You guys have money, let's talk.' "

Don't expect to get funding right away. Seek out investors early as possible. It could take several months to meet with different individuals or groups and answer all of their questions. "We're not going to drop everything we're doing and immediately address what that [one] company needs," says Mr. Massey.

Network. Check out associations for your industry or local trade groups. By talking with their members and officials, you may find people who can point you in the direction of investors in your industry. Call economic-development groups -- their officials might be able to direct you to potential investor organizations. Some states have incubator organizations for young businesses, like Georgia's Advanced Technology Development Center, which has several locations throughout the state.

Treat your initial interactions as the first step in a long-term relationship. "It's a partnership -- almost like a marriage," says Mr. Massey. If you're thinking about taking money from an angel group, remember that you're going to be talking to the investors on a regular basis for years, so make sure you're comfortable with them.

Don't forget about your long-term plan. "You're focusing on the fact that 'I need that half-million dollars.' But that's not the most important thing," Mr. Massey says. Think about what you're going to do after you have the money, and focus on executing that multiyear plan.

Look at your investors as potential mentors. Many angel investors are former business owners who want to help people like themselves. "We look for an entrepreneur's ability to listen," Mr. Massey says. "You can really tell that early -- if they have a tough time listening, or let [advice] fly over their head."

Write to Simona Covel at simona.covel@wsj.com

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