SOPHISTICATED FINANCE

Reflections

I always enjoy the New Year. By nature I am an optimist and I always expect that the new year will only bring positive things. Part of my optimism is based on a proven belief that any bump in the road ahead is just a learning opportunity and the only real problems are health problems. Everything else can be dealt with and the older one gets the easier it is to handle the bumps.

If you live an active life filled with meaningful activities, you have the constant opportunity to learn how to handle new problems. Of course the "new" problems get fewer and fewer as you get older. Even if you have not seen the problem before, you usually have a well developed set of problem solving techniques to use.

A few thoughts on what I learned in 2009:

1. Hire world class people, but the most important ingredient is way above average intelligence. I have always known this fact, but in 2009 I worked with a great client that only hires the very best
2. It's all about networking. This year I spent more time networking online and in person than probably any other year. I met some terrific people who now enrich my life. Some may even refer some business.
3. Writing has greatly helped me to understand many things about myself and other topics. Looking back I wish I had started writing 30 years ago.
4. Just be nice. This year I helped a lot of people, some of whom I did not know, without any expectation of a benefit to me. Perhaps teaching has just made me a nicer guy. Perhaps old dogs can learn new tricks.
5. Teaching continues to be the most fun I have. Being a showman was confirmed by a good friend as an acceptable teaching technique. I always had wondered if I was having too much fun teaching.
6. I always say this, but the basic principles in the Bible, Koran, Talmud or Buddhism are all one needs--to live life, manage a business or be happy.

My goals for 2010:

1. Try doing stand up comedy. Opportunities would be most welcome, but I think I need an adult audience
2. Get my book on growing your business published. Introductions to publishers welcome. (The book is days away from being finished and ready for some people to review the draft.)
3. Get Bold Thinking really off the ground and through it develop nationwide speaking opportunities and workshops
4. And my goal every year...find a way to  live in Paris and still make a decent living

Happy New Year and thanks for reading Sophisticated Finance.

Image credit: freeimageslive by chrismashat

Spring 2010 FIU Entrepreneurship Workshop Lineup

The Pino Entrepreneurship Center at FIU has just announced their Spring 2010 lineup of workshops. The series has been completely revamped and I believe they will be even more effective and informative than the previous offerings. There are several new speakers who bring some new perspective to the workshops.

I even get to give some new workshops, which will allow me to share my thinking on some topics I have not presented before, such as understanding the customer and product development.  The six workshops are described below. More information on the workshops is here.

The Power of Outsourcing

I have been working with an interesting client for the last few months. The company sells a high tech product and revenues in 2010 are forecast to reach $300 million but $400 million is possible. The company operates worldwide with major customers in four countries and no business in the U.S. The company has nine employees.

Six employees are devoted to sales, with two accounting types and a supply chain management executive. This lean staffing is possible because the company outsources manufacturing, product development, logistics, IT, PR and website management. HR will soon be outsourced to simplify management, although taking care of nine employees only takes two hours per month.The plan in 2010 is to add 1 or 2 staff in sales and to expand the office to 3000 square feet.

Such an approach offers several benefits:

1. The whole company is focused on sales because nearly everybody is a sales person
2. Dealing with product development and manufacturing is very efficient because we dictate how these two relationships are handled; very few spontaneous (routine) inquiries
3. We have world class outsourcing partners who have been trained by the Fortune 500 to be very professional
4. Whenever you need something special you naturally contract it out, which means you take less time away from sales; 

There is one disadvantage to the heavy reliance on outsourcing and the passionate focus on sales. It is not always clear who is responsible for the non-sales functions, but I am becoming the utility infielder and special projects person, when I am not selling.

For you marketing mavens, we have no marketing! We have a terrific PR program and a website that explains everything about a complex product, but that is the total "marketing" effort. In traditional terms I suppose you could say we have outsourced marketing (PR and website), but I prefer to say we have none:)

Afghanistan Helicopter Heroics

I have had some experience with helicopters in operations with the Coast Guard Auxiliary. The CG pilots can do amazing things with their helos, but the photo below takes amazing to a new level.

This photo of a helo rescue mission was taken by a soldier in Afghanistan . The pilot is a Pennsylvania National Guardsman who flies EMS choppers in civilian life. How many people on the planet could set the back end of a helo down on the roof of a shack, on a steep mountain cliff, and hold it there while soldiers load wounded men in the rear.

God Bless America!

Christian Phone Call

Caller 1:Steve?

Caller 2: Pete

Caller 1:Steve?

Caller 2: Pete

Caller 1: Steve?

Caller 2: No--Pete, like in Psalm

Cracked me up. True story from my brother who is obviously funnier than me.

Slow blogging day.

Image credit

Venture Capital Outlook 2010

The National Venture Capital Association has just released their latest member survey. Expectations for 2010 are as follows:

1. The number of venture capital firms will decrease as poorly performing firms will be unable to raise new money
2. Lower risk later stage investments will attract a greater percentage of available capital, as VCs look for lower risk investments
3. Existing portfolio companies will receive a greater percentage of capital
4. Early stage companies will be more difficult to fund through venture capital

In summary, the investors in venture capital funds are being more selective in these challenging economic times, which forces the VCs to lower their risk profile to attract new capital. Plan accordingly.

Upload Music to Facebook

The Music Producer, based in Miami Beach, FL, has a new feature which let's you upload your original music  to Facebook. Maybe my FB friends don't upload music but I have not seen this feature yet on FB.

To upload music to FaceBook, go to The Music Producer website, create "My Music Space", click on FaceBook Connect. Then any music you create in Music Producer or upload to My Music Space appears on your wall on FaceBook and in the news all your friends see. You can also use My Music Space to upload videos and photos to FaceBook.

The Music Producer is a nifty product that let's you create your own music and has a 30 day free trial. Check it out here.

"Social Entrepreneurship" Confuses the Issue

I have been involved in a well known non-profit project for the last 120 days. This is a project with a recognition level similar to Save the Children. I have learned a few lessons, which are listed below.

1. Everybody will take a meeting with a representative of a well known non-profit
2. To become a well known non-profit, in large part it is all about who the spokesman/leader is
3. You must have an audacious goal which changes the way people think about the problem
4. Many people involved in the project have different objectives and different sets of principles for decision making
5. There should be no difference in the project whether you sell cups with the project logo or sell a product with a contribution margin as the means to fund raise for the cause, provided the financial contribution is reinvested in the project and does not conflict with achieving the mission

Most of these "lessons" are the same findings in determining a successful startup. Entrepreneurship is entrepreneurship whether you are a non-profit or the next Google. What the non-profits need to do is think more like entrepreneurs. What more entrepreneurs need to do is to recognize that social objectives are consistent with profit making companies.

I think over time the distinction some people draw between social entrepreneurship and entrepreneurship will go away. The distinction does nothing to contribute to understanding. Evidence that the distinction is going away comes from Atlanta-based Better World Books, a VC-backed company with an explicit commitment to a social project (illiteracy reduction) and a defined financial commitment to support that goal. However, to achieve the overall objectives the company is a for profit company. More people should be considering the Better World Books model. Then we can stop talking about "social" entrepreneurship and have more time to solve the world's problems.

Previous thoughts on "social" entrepreneurship are here.

Image credit: echoinggreen.org

Decision Making and the Smart Man

Back in March I posted on the role of assumptions in developing the business and financial model. The important point was that the assumptions represent the key risks in the business model. Yesterday I read a good post on recruiting in the Private Equity and Venture Capital Recruitment blog. In the post the author suggested that one should trust their intuition and check their assumptions. The key point was that your intuition is frequently a better indicator than a rigid checklist approach.

My definition of intuition is " facts that you cannot articulate". Therefore, when you rely on intuition there are a series of facts and certain assumptions which logically lead to the conclusion--the intuition. I have on many occasions worked with highly intuitive people. Frequently I have been able to put togeher the facts and assumptions that led to the intuition. There are two points here.

1. For most intuitions the facts can be discovered, if you work at it--perhaps with another person
2. The assumptions in the intuition represent the risks in the decision or conclusion

I do not use intuition much and never have, but I have great respect for intuitive people. However, I always take the time to construct the facts and the assumptions in an intuition in order to identify the risks or the errors in logic.

Another technique I always use is the "smart man" hypothesis. Whenever, you are trying to understand something like an intuition, assume the person is very smart. By assuming they are very smart, you force yourself to find the facts and the assumptions that would logically lead to the smart man's conclusion. Dismissing something as "woman's intuition" or "off the wall" usually means that you were not willing to put in the effort to understand how a smart man would have arrived at the conclusion.

Note: I learned about the smart man hypothesis back in the early 1980s. It has served me especially well in better understanding many, many people and their thinking. I am sure it has been renamed to be more gender neutral but I do not know the new term.

Mission

In entrepreneurship and in corporate America much is made of the “mission” of the firm. The mission explains the corporate focus and principal objective of the firm. Unfortunately, the mission statement is frequently written and then ignored. Equally problematic is the executive who puts his personal ambition and recognition ahead of the mission.

An excellent example of people who understand mission are the guards at the Tomb of the Unkown Soldier in Washington, DC. This story was sent to me by several people today, the anniversary of the December 7, 1941 attack on Pearl Harbor.

In 2003 as Hurricane Isabelle was approaching Washington , DC , our 
US Senate/House took 2 days off in anticipation of the storm. On the ABC evening news, it was reported that because of the dangers from the hurricane, the military members assigned the 
duty of guarding the Tomb of the Unknown Soldier were given permission to suspend the assignment.

They respectfully declined the offer, 'No way, Sir!' Soaked to the skin, marching in the pelting rain of a tropical storm, they said that guarding 
the Tomb was not just an assignment, it was the highest honor that can be 
afforded to a service person. The tomb has been patrolled continuously, 24/7, since 1930.

CEO Needs to Consider More than Profit

A new study published by a group of academics in Arizona shows that employees are more highly motivated when the CEO focuses on more than company profitability. A survey of 520 companies shows that employees place a high value on relations with customers, their own welfare, the community and environmental issues. CEOs that ignore these concerns lose respect from employees and demotivate them. Additional detail is available in HBR December 2009.

Not a surprising set of findings but perhaps the survey results will make this type of thinking more mainstream. For those of you who do not think you can afford concerns such as the environment or the community, consider what the cost is of demotivated employees.

SFL-Social Media Calendar

Courtesy of Refresh Miami, the upcoming events in South Florida for social media are shown below.

Refresh Lauderdale - Intro to Web Typography - December 3 @ 7:30PM
Come join us as our second Refresh in Broward county kicks off the month. Dan Rubin and Michael Montgomery will be speaking about web typography.

Pizza and sodas will be provided, and we’ll all go grab a beer/wine/drink after at Lolas.

200 East Las Olas Boulevard, Suite 120, Fort Lauderdale, FL 33301
You can RSVP on facebook here:

Refresh Miami December 16.
We'll most likely be having a holiday party, get together on the 16th. If you’d like to present, please let me know. RSVP

Upcoming South Florida Events

December 3
SFTA Holiday Networking Party 5:30PM - 8:30PM
 
December 4
Conversational Marketing Workshop at FIU

December 5
iPhone Developer Meetup "Hands on code to learn push notification with Appush"

December 7
Web Monday West Palm Beach December Meetup

December 8
Social Media Club South Florida - 7PM @ Transit Lounge (729 SW 1st Ave Miami, FL 33130)

December 9
Wordpress Meetup: Hack proof your WP site. Security tips.

Wine Tweetup at Jade Kitchen WPB

December 10

Terremark: CLOUD COMPUTING: IT Strategies to Rebound from Recession with Confidence

SFIMA - Holiday Wine Party : Support of US Marine Corps Toys for Tots

December 11

TechAmerica Abacus Awards

December 16
RefreshMiami Holiday Party
http://refreshmiami.org

December 21
Miami Ruby Brigade December Meetup

Overcoming Startup Fear?

Social media tends to follow themes. I think it has something to do with the phases of the moon, but I am still researching. Recently I saw two good posts on overcoming the fear of doing a startup (here and here). Both writers basically talk about the fear that almost everybody has of a startup and illustrate their success in overcoming the fear.

Most people are afraid of failing. As you get older you realize that failing is part of life and you just need to start over. The more logical fear is the fear of losing the money invested in the project. Again, life shows that money can be replaced. The other common fear is related to what your peers or friends will think of you if you fail. Most good friends will admire your courage to strike out on your own. So go for it!...but first read every post on SF about knowing the customer need and determining the size of the market opportunity.

Image credit

Another Benefit of Twitter

Last week I put up a silly weather tweet.

"Need wood workers to build ark in Miami. Torrential rains but low winds."

My fiend @Neilkod responded as follows.

@rhhfla no kidding. My 5:30 AM bike ride was rained out. didn't see that coming. how about an iphone app that cancels the alarm if raining?

With the current state of location-based services (LBS), the iPhone technology and NOAA weather feeds, the idea of managing alarms based on weather conditions is not far fetched. In fact the whole idea of managing alarms based on a variety of external data sources is quite intriguing. Maybe a conference call alarm could be triggered only when the host is on line or the buy dinner alarm would only trigger when the spouse leaves the office.

I think the informality of Twitter spawns creativity.