Corporate Connections

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

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

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.

Screen Shots - Advertise on Television

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

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

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

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.

Firms Go Online to Train Employees

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

Increasing Traffic to Your Internet Business

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.