Manufacturing, Marcellus & Money
Filed under: Marcellus Shale, Profitable Growth, Utica Shale
The Shale Gas Boom is Kicking BTU!
What’s new in the shale gas business? Gas prices have inched up and no drilling-related seismic disasters have happened just yet. However, the overall impact of labor shortages, safety needs and environmental regulations are creating problems that smart manufacturers are leveraging into opportunities.
Ever since ISNetworld (a group that assists companies and organizations with contractor and supplier prequalification, management and monitoring) became the dominant third-party data administrator helping Tier 1 companies hire better and more intelligently, there have been higher standards for hiring skilled workers. Unfortunately, there is a growing chasm between the needs of the employers for skilled laborers and the capacity of the local workforce to fill the openings. Those manufacturers who have superior workers are booming.
There is also a growing rift between the creators of environmental, workforce and healthcare regulations and employers who worry that if they ask regulators for clarifications, they expose themselves to audits and out-of-court settlements. This, in turn, is causing an opportunity for third-party providers of information to create a shield for wary employers from overzealous regulators. “Safe” regulation counseling will be a growth industry.
Here’s news of how the shale gas sector is progressing and what new opportunities are emerging:
- Distributors and trucking firms serving stores and gas stations are shifting some of their capacity to serve gas well sites by directly supplying them with food and other commodities. What can you sell directly?
- After grousing why his lunch wagon business could not break into serving well-paid workers, an owner found his simple answer. The customers prefer their “Community Coffee” brand (which is an energy industry favorite from Louisiana) instead of his local Pittsburgh coffee. Upon switching to community coffee, his business is back on track. What can you sell homesick transplants?
- As more Compressed Natural Gas (CNG) pumps sprouting up at manufacturing sites to refuel converted vehicles, several companies are fabricating CNG tanks to be placed on vehicles to extend their driving range. What else does a CNG vehicle need?
- At every step of the way western Pennsylvania’s and eastern Ohio’s labor the shale gas boom is exacerbating already scarce labor shortages for open jobs. Employers are finding that seeking welders at fast-food–level wages has gone from difficult to impossible as they are competing for this skilled wage earner against $50,000-$70,000 permanent jobs. Who is stalking your company for your skilled workers?
- Those in the temporary staffing fields are finding that their customers are asking for shorter temp–to–hire periods so they can get these workers health care and other benefits. This in turn is causing smaller manufacturers to have to stay under 50 employees so they can avoid the Affordable Care Act ceilings and circumvent providing health care altogether. Are you scaled to stay below the radar or on the radar?
- Safety continues to be a dominant demand of buyers throughout manufacturing companies and all those in the shale gas supply chain. Tier 1 Companies are demanding safety experience, programs and clean records from Tier 2s and Tier 3s. Is your firm MSA compliant?
In sum, the shale gas boom will continue to spin off its economic benefits. Customers will demand more capability and capacity in terms of people, transferring of risks, controlling of costs and the reporting of safety information. The energy business has centuries of experience confronting risks, avoiding obstacles and getting their business done. How can your business participate in helping those already in the gas industry to get their work done through your resources, energy and business savvy? Start thinking….
Birol Growth Consulting Helps Jeffrey J. Morella and the Complete Captive Solution, LLC Grow Quickly and Profitably Toward Long-Term Success.
Filed under: Business Growth, Pittsburgh, Profitable Growth, Uncategorized
Background:
In 1991, Jeffrey J. Morella opened Morella & Associates, A Professional Corporation and has built it into a successful practice focused on meeting the legal and tax planning needs of business owners. Over the years, Jeff’s expertise continued to grow as his clients faced increasingly sophisticated tax, insurance and business planning challenges. In 2005, Jeff began assisting his business clients in creating captive insurance companies as a cost-saving vehicle and to provide more flexibility for their companies.
Then in 2010, as Jeff watched the Federal Government’s punitive tax policies create an ever-increasing burden on the plans and dreams of small business owners, Jeff knew he had to find new ways to bring needed relief to his clients. In response to his large base of business owners’ pleas to reduce their insurance costs and preserve more income, Jeff began expanding his expertise in the captive insurance field of creating alternative insurance structures that reduce insurance costs, as well as provide opportunities for asset protection, wealth transfer, estate and tax planning, and business succession planning. These alternative insurance structures, specifically known as series captives, allowed Jeff to create, build and manage customized, independently owned Series Business Units (“SBUs”) for his clients.
Current Situation:
As Jeff Morella’s expertise and success continued to grow with Series Captives, he knew it was time to spin off this growing practice into a standalone business that could establish and run captive insurance companies under its own brand. But how could Jeff do this? After watching his competitors stumble when trying to run similar businesses as a sideline to their legal, accounting or insurance practices, he was determined to correctly and independently build his business right from the start. But in 2012, as his questions of how to price the services, establish the distribution network and build the business infrastructure mounted, Jeff knew that these decisions called for business growth expertise outside of his legal training, and he needed help now. That is when he called in Andy Birol of Birol Growth Consulting. As Jeff states, “I was impressed by Andy’s out-of-the-box thinking, as well as how quickly he built his business growth practice in Pittsburgh, so I called him in, dumped my files, business challenges and goals on his lap, sat back and watched how he would react. To my delight, Andy quickly grasped, synthesized and framed all my thoughts into four key tactics for us to build my new business.”
Birol Growth Consulting Solution:
Upon his engagement, Andy tore into Jeff’s financial analyses and interviewed his business partners and clients. Andy quickly recognized that while Jeff had created a breakthrough, proprietary approach to providing “The Complete Captive Solution” (a/k/a the new company), without an equally sophisticated approach to marketing, selling, distributing and delivering its value, Jeff could not achieve the results he expected. What specifically did Andy accomplish for Jeffrey J. Morella and his new business, The Complete Captive Solution, LLC (“CCS”)?
Andy worked with Jeff to:
1. Develop CCS’s clear go-to market strategy and its tactics, before designing the organizational chart and key company positions.
- Andy designed the needed roles and responsibilities and defined the COO position and actually identified CCS’s new COO, Mr. Shep Werth.
2. Frame CCS’s marketing challenge as a distribution problem, instead of a demand problem.
- Andy suggested Jeff take his message directly to his ultimate clients, business owners, with the support of their advisors.
3. Andy outlined key sales and marketing tactics and located the resources, people and tools needed to have it up and running in months.
- He simplified the complexity of communicating the details of what a series captive is, who it is for, and how it works best for certain business owners.
- By introducing and overseeing a professional marketing communications specialist, The Karol Company, Andy assured CCS’s messaging was simple, engaging and consistent, starting from its website through its sales collateral and finally throughout actual client proposals.
Client Results:
Within months of Jeff, Andy and Shep establishing its strategy, The Complete Captive Solution, LLC is up and running as a going concern, having secured it’s licensing, established its key business partners and landed its first 10 clients. Sales are on budget and both business owners and their advisors have recognized CCS as the premium provider and clear expert in the emerging field of series captives and how a business owner can best use them.
When Jeff Morella was asked, “What was Andy Birol’s contribution to the genesis of CCS?”, Jeff replied, “Andy Birol took my vision of offering an innovative service and guided me in turning it into a standalone business, built on a strong foundation and driven by clear business principles. This assures it becomes a very strong, profitable business with sustainable growth. Andy’s creativity, business experience and tenacity were the missing ingredients I needed as a lawyer to help me build an independent business. I would encourage any business owner and their advisors to bring Andy into the job or case. His unique style of independent thinking, business judgment and relentless follow-up make him a special breed of consultant. I am fully confident that my dream of building a standalone, sustainable business is being realized and I am proud of the results that CCS has already achieved.”
Drive Your Business Despite Obamacare: Six Steps to Avoid the Pileups.
Filed under: Business Growth, Profitable Growth, Uncategorized
It seems every decade a new “roadside accident” appears to distract you from driving your business down your highway. In the 1990’s it was Y2K, in the 2000’s it was Sarbanes-Oxley. Now, with the help of our government, lawyers, accountants and healthcare experts, Obamacare will be the epic 500-car pileup of the century. Make no mistake; I am not challenging the merits of universal healthcare; just the burden it will place on business owners everywhere.
After attending three healthcare briefings, I am convinced that in addition to the added costs of conforming to the thousands of requirements, Obamacare will require you, as a business owner, to spend time you don’t have, become expert in handling confidential employee health issues you’d rather avoid, and could cost you as much in fees as actually paying for increasing health care benefits.
Or does it have to? Here are six steps you should take to minimize your impact, leverage your predicament, or even exploit the opportunity that Obamacare places on your business.
By now, you’re seeing the impact that Obamacare will have on your choices, costs, and even the type of health benefits you must and can offer. Will you choose to pay the added price tag to your employees in salary, or to companies in premiums, or to the government in penalties? Have you budgeted for your time? For the impact your choices will have on your HR and talent management strategy? Which service providers will you have to hire and trust not just to advise you on the right health care choices but to leverage the impact these choices will have on your overall business strategy? For example:
* How will your workforce change based on what you offer your employees versus what their spouses need and obtain at their place of work?
* If you choose to buy your way out of Obamacare at a cost of $2000 per employee per year, will your workforce become younger and less experienced?
* Will you need to hire a VP of HR instead of relying on your CFO or office manager who is hard-pressed to handle benefits as they are today?
By this point you’re probably thinking up your own list of how Obamacare will change your business. Well, you can either look at your glass as half-empty or half-full. Here are six steps to confront the impact of Obamacare head-on:
1. Revisit your strategic growth plan and look at it from the perspective of how your business relies on its key players, the entire workforce and how your business fundamentally relies on people to get its work done.
How will these three factors change and what does it mean for your businesses success and your ownership plans?
2. Factor in your organization’s Best and Highest Use®. Will your company’s people continue to deliver on what it is good at doing, likes doing, and is valued by your customers and the marketplace for doing? Your firm’s investment in providing personal service will likely increase and you will need to ask your customers to pay more for it.
3. Fundamentally choose whether your company will or won’t be a net benefits provider. Family-friendly companies may want to offer full Obamacare while other companies might pay the higher wages but choose to opt out. Obamacare will impact these decisions more than you may first imagine.
4. Take a hard look at where you as the leader spend your time and energy. Imagine spending more days to reconcile the demands by:
• Meeting with your outside healthcare advisers and providers,
• Making hard decisions in terms of the above three points,
• Communicating the complexities of your decisions to employees who know less and fear more than you do, and
• Building your firm’s internal capability to oversee your Obamacare health benefit plan so it helps your employees and meets your goals.
5. Meet with and ask very hard questions of your existing health benefits providers and advisors. How are they going to step up and meet your challenges as expressed above? In my brief exposure to date, I am very concerned as to how stretched your insurance brokers, benefit providers, and financial experts are going to be as they attempt to meet the demands of their clients. Beyond the revenues they will earn, I question whether they have sufficient staffing or business plans to meet the needs of their clients themselves.
6. Finally, please accept that you and your business can only focus so much on Obamacare. Beyond your employees, you need to refocus on serving your customers, ensuring your operations are delivering and that your administration continues purchasing smart and collecting receivables. Remember, your vendors and your customers will be going through the same pain and suffering in implementing Obamacare as are you.
In the middle of WWII, President Roosevelt created Social Security and health care benefits to incent military spouses to go to work and become the “Rosie the Riveters” who ran our wartime factories. In doing so, Pres. Roosevelt also forced business owners to become healthcare experts; a job no entrepreneur ever sought. Pres. Obama has not just brought universal healthcare and its benefits to the many who need them, but has created the mechanism and requirement to socially engineer all businesses. So, to quote Bette Davis in “All About Eve”, “Fasten your seatbelts, it’s going to be a bumpy night.” Remember this as you drive your company forward down your highway; make sure it’s running well and keep your eyes on the road to avoid the pileups, traffic jams, and detours that are coming.
Running Your Business When You’re Under the Weather
In our hearts we all believe the saying, “Nobody is indispensable in a business, not even the owner.” But whether it’s a really bad flu or a broken leg (I’ve survived both) the worst part is the resulting depression as you are out of commission and recovering. So what does a business owner do when he or she is coping with the damage and the resulting blues? What should you do when you, the owner, are simply knocked off your game? Especially when there’s no one to pick up the slack?
Having survived my share of challenges and watched hundreds of business owners cope with theirs, here’s the progression of what I’ve seen happen when a business owner has a meltdown. In progression, an owner first loses his or her ability to
- Approach new prospects and close new customers, then
- Create new ideas, products and services, then
- Serve and oversee existing customers, partners and employees, then
- Focus on individual projects not involving other employees, customers or partners.
So if you are seeing this in yourself, your partner or another owner what should you/they do?
- Don’t fight it. Get the help and take the time you need to heal.
- Use the time to dream and question. If you are really knocked for a loop, your self-doubt and anxiety at some point will emerge and fester. Take advantage of the opportunity to look at all sides of what you are doing and why. Just don’t make any decisions until you are feeling better again.
- Control what you can and can’t do and know the difference. By nature we owners are control freaks. Getting sick is living proof we aren’t in charge. Rely on your faith, loved ones and the healing powers of sleep. Do nothing for a change.
- Count on your reputation, talents and value. Mortgages will get paid, payrolls will be made and most clients will accept your delays based on your good reputation. The ones who won’t aren’t worth keeping for the long term.
As you start to heal, re-engage back into your job in the reverse order of the above 4 steps. Start first with your routine, individual tasks and then progress back to creating new value and selling it to prospects. Misfortune, sickness and the general stress of running your business will eventually take its toll, throw you for a loop and require you taking some time off. Consider it a forced vacation and enjoy your time off, even it is costing you a lot in the short run.
Your Piece of the Marcellus Pie: Three Signs Your Dessert May Be Ready.
Filed under: Business Growth, Marcellus, Marcellus Shale, Pittsburgh
At this point, you know where to point your business to put food on your table. You know your core customers and target markets and can read the signs that tell they will or won’t buy more from your firm. For example if you:
- Sell technology to early-stage companies, you’ll pounce on those who get venture backing.
- Are in the building trades; you study the Dodge reports to see which owners and contractors are bidding jobs and work to get approved as a small or minority-owned business.
- Target the federal government, you are GSA and military-spec approved and watch what Congress is funding.
But now there’s all too much talk about the Marcellus and Utica Shale opportunity. If you’ll think of your core business as your “steak” consider the emerging energy sector as your “dessert.” While it won’t sustain your business it would be a very nice way to supplement your main “course.” So, what are the signs that its time to pounce? How do you approach this trillion-dollar segment especially when your services or products aren’t a neat fit with what gas drillers, landowners or energy companies buy?
First, here’s a quick review of Shale Gas 101. Watch and mimic the owners who are successfully targeting energy industry suppliers — and those who supply their suppliers, for example, trucking companies and those who supply their trucks. For more of a brush-up, visit www.marcellusshaleboom.com.
Here’s the next step: Learn the key signs when your business should pounce on its Marcellus or Utica opportunity? With gas prices down and environmental concerns up, what are your leading indicators that now’s the right time for your business to enjoy its just Marcellus desserts? Here are three signs (of many) that I’m seeing that might apply to your business.
1. Find Your Catbird Seat. Medium and small technology firms who can aggregate content and deliver it over the cloud are thriving. By exchanging information between “Tier 1’s” (CONSOL’s) and their Tier 2 and 3 suppliers, these firms are adding value in the safety, environmental, HR and any other field where compliance and record keeping is imperative.
a. Your Sign to Watch For. Watch for where and how the Tier 1’s are creating MSAs (Master Service Agreements) to manage their vendors. How can you become their go-between?
2. Hype Where’s The Pipe! Despite the apparent slowdown in drilling and gas prices, midstream pipelines are being built and furthermore, Hart Energy’s Marcellus Midstream Shows grow each time they come to Pittsburgh.
a. Your Sign To Watch For. Constructors announcing pipeline projects that move gas from local stockpiles to consumers can mean business for you. Watch what’s happening in your target markets. Pipelines create countless follow-on projects and potential work for your firm. The more piping that is sold, the more likely Tier 2 and Tier 3 shale gas-related businesses will bloom for you to approach and close.
3. This Isn’t Your Father’s Gas-Guzzler! Look who’s converting their oil or coal operations and vehicles to natural gas! And coal plants are closing or converting to LNG along with schools and residences. With impending new regulations for green trucks and the need to scrub diesel trucks, more and more gas is being used for local consumption. In rural areas, there is a kit being sold to convert a vehicle into a “hillbilly hybrid”
a. Your Sign To Watch For. Look for coal-related businesses. They need your help in “converting” their businesses to serve gas-fueled customers. Remember, conversions for consumption means the gas opportunity is growing regardless of the low price of gas because businesses are using LNG here and now.
Understanding the leading indicators of how the shale gas opportunity can benefit your business may not be critical to putting food on your table. After all, if your core business has survived this long, it’s likely to prevail regardless of whenever the local shale gas industry matures. But if you look forward to dessert, then consider put some of your “energy” into learning what signs point to your firm’s growth in the energy business.
Legacy Lessons from Rock Legends
Filed under: Business Growth, Pittsburgh, Profitable Growth, Uncategorized
Recently I lived the dream of every rock music fan: For four and a half days my friends and I sailed on the MS Legend Of The Seas alongside 27 classic rock bands who played nonstop on three separate stages. And sailing with 3,400 like-minded baby-boomer fans alongside our rock heroes created an instant community relishing the soundtrack of our lives.
What did I see, listen and learn from bands whose prime passed 30 years ago? Seeing rock leaders sustain their talents and keep performing for their fans inspired me to consider how business owners can do it too. If you wonder how you can keep on thrilling your next generation of customers, who like, rock fans may not even have been alive when you first got started, here are my five lessons and implications for your business along with some great concert photos courtesy of my friend Vickie Sullivan.
1. Keep your band performing like the headliners they once were. Paul Rogers of Bad Company, Free and The Firm struts and delivers a great show as if he was at Madison Square Garden.
- Implication for you. Passionately believe in your business’s value and keep delivering it powerfully and perpetually.
2. Ensure your band always has an inspired front man. When Foreigner’s leader Mick Jones replaced his lead signer Lou Gramm with young Terry McDermott, he saved the band and added decades to its life.
- Implication for you. When your business leadership requires you to replace founding members with energetic stars, put your business’s needs ahead of its past.
3. Love your core fans and they will create the next generation. The Marshall Tucker Band are the masters at drawing their audiences into their music. After hearing their leader Doug Gray tell their story, you want to sing his band’s praises as much as their songs.
- Implication for you. Your business undoubtedly has customers who care for you above and beyond just what they buy from you. Remember them and you’ll see cheerleaders you didn’t dream you still had.
4. Assume it’s all about you and you can lose your legacy. We can accept that our idols are getting old, but cannot listen to them live in their past instead of connecting to us in our present. Watching Black Oak Arkansas’ self-indulgent behavior onstage was off-putting.
- Implication for you. Double-check your business isn’t banking on its history but is building on its current successes to serve its customers in the future.
5. Classic fans know your band; new audiences want your hits. Rolling Stones’ saxophonist Bobby Keys, surrounded himself with a fresh young band and delivered his timeless songs like “Brown Sugar,” “Can’t You Hear Me Knocking,” “Whatever Get’s You Through The Night,” and “Delta Lady” as if he was still playing with Mick Jagger, John Lennon and Joe Cocker.
- Implication for you. Project your business legacy and value forward through new channels and voices. Your voice will be recognized as the founder as it carries on loud and clear!
For many of us, the music of the 70’s and 80’s is the soundtrack of our lives. As I watched Bachman and Turner sing “Taking Care of Business” it stirred me to recall my loves, triumphs, and challenges and then to think about you, my clients and your needs. As they play their hearts out in their later years, let’s be inspired by their legends and lessons as we EXTEND our business legacies!
Ten Real Examples of Western Pennsylvania Companies Making Money on Marcellus – Part Two
Filed under: Business Growth, Marcellus, Profitable Growth
In part one of this two-part series, I recounted how five companies have thrived and grown by serving companies that serve the Marcellus Shale industry. Read on to learn about five more.
Interstate Pipe and Supply, a wonderful Butler, Pennsylvania– based distributor of plumbing and water piping has boosted its business simply by following the growth of its non-shale-gas customers. These customers are growing because of the Marcellus boom.
For every dollar spent in the direct construction of natural gas pipelines, companies are spending many dollars to develop water and sewer systems for subdivisions and for septic, commercial and other piping infrastructure.
Interstate sets a wonderful example of how your customer’s growth can boost your own businesses profitability.
Campos, Inc., located in downtown Pittsburgh, is the region’s leading provider of consumer and B2B insight for corporate clients.
The firm has helped large companies learn about how customers and Western Pennsylvania consumers understand and feel about the shale-gas boom and the firms operating in this space.
By teaching those interested in the shale-gas boom, Campos has become the go-to expert and brings added first-hand knowledge and insight to those firms interested in entering this market space.
Constant Contact, the newsletter-based online marketing company, has made a concerted effort to bring experts such as myself in front of their audiences. As such I have learned to follow companies and do business with those specifically interested in reaching out to audiences I speak to.
Constant Contact shows how fruitful it is to provide local audiences with information on Marcellus to help them make money.
Jamestown Coatings Technologies, in Jamestown, Pennsylvania is a specialty-coatings company with technologies that attract firms whose metal products are challenged to perform to higher levels under harsh conditions found in the energy sector.
Michael Walton, the fourth generation of his family to lead the firm, has done a wonderful job of focusing and adapting to changing environments to make sure his family business continues to grow as it sees fit and to remain independent.
Multiple Western Pennsylvania chambers of commerce and small business development centers like the Sharon, Greene, Washington and Westmoreland Chambers and the Riverside Center for Innovation have invested in speakers like me to educate and inform their members.
They’ve learned that charging for educational programs reaps far more value than offering knowledge for free. Doing so ensures greater commitment of their members to growing their Marcellus businesses.
It’s easy to see that companies of all kinds are starting to grow their businesses through the Marcellus shale, even if they have no specific knowledge of the shale-gas industry.
What distinguishes them is their courage and forward-thinking approach to growing their business.
So what’s holding you back?
WWWW: Why Worthy Websites Work
Filed under: Business Growth, Pittsburgh, Profitable Growth, Uncategorized
My recent article for TEQ WWWWW: Why Don’t Wonderful Websites Work?, spelled out why my new website, would ignore the best advice of website gurus and would focus purely on generating conversations with visitors.
Well, I ate my own dog food and did what I told you I would. I created a blog–based website. It has no other purpose than to make it easy for visitors to qualify me, self-qualify themselves, get to content of value, and contact me. My new tag line for businesses is: Run it. Grow it. Fix it. Sell it.
The new site features case studies and success stories for three, tightly defined target markets–business owners, advisors, and meeting planners.
I made the centerpiece of the site the Growth Potential Index (GPI), a free, confidential, instant, non-promotional assessment visitors can complete. As they do, they self- profile themselves and demonstrate their interest in needing help.
My new website has been up only for three weeks, so I don’t know for sure how it’s going work. I’m told it’s too soon to tell. The spiders and crawlers haven’t yet picked it up. And I’ve chosen not to invest in keywords or other more traditional means to make the site sticky.
Instead, I use the native content that Google valued so deeply on my previous site because of my 500 articles. This approach propelled my former site to first-page status without any investment in keywords, clicks, or other artificial methods.
Thus far, I’m getting a steady flow of business owners who engage with me by taking the GPI. Their engaging with this tool gives me information I would otherwise lack on how they score on five criteria. For example:
- Best And Highest Use (BHU): Owners’ average confidence that they are focused on their own BHU is at the 53rd percentile.
- Personally Indispensable: 50% of business owners consider themselves personally indispensable to their businesses. The other 50% say that they are not.
- Focused Business: Nearly two thirds of owners report that their businesses are sufficiently focused on the right opportunities.
- Alignment: Surprisingly, owners’ average confidence level stands at the 56th percentile that their businesses are aligned with their own Best and Highest Use.
- Demand for Their BHU: Owners are at the 63rd percentile of confidence that the market will continue to demand their firm’s Best and Highest Use.
Website experts, designers, and social-media mavens may scoff. But frankly, I don’t care. If my strategy generates 10 conversations a month with business owners that I can turn into three meetings and close one sale, I’ll be pleased. Stay tuned.
Venture Capital: Russian Roulette for Your Business
Filed under: Business Growth, Profitable Growth, Uncategorized
Do you feel lucky? Will venture capital make your day? With an improving economy, you know your new business is poised to grow. However, to seize your day, you need more money. Unfortunately, with your firm’s earnings history, no banker, investor, or traditional lender is interested. With your friends, family and angel investors already tapped out, venture capitalists could 
be your best option to get the investment you need. Or, are they?
There are good reasons to seek venture capital. Venture capitalists have and will risk their money, advice, and resources just when your business needs these most. Their cost, owning a part of your business, seems minimal in light of what they say it will be worth.
Dont be fooled again: Delusion and Dilution. The basic problem with using venture capitalists is that their need to earn quick, big returns conflicts with your goal of building your business. Growing a company’s customer base rarely enriches a venture capitalists as much as the next round of investors who buy them out. To sell your company, the VC must find shortcuts to creating customer value. The technology and life sciences industries offer capabilities that may be easily commercialized and sold. However, even these odds are very long. The venture capitalists’ own statistics show how choosy they must be. Venture capitalists only:
- Fund one out of 1,000 business plans they see;
- Need two of ten portfolio companies to succeed to earn the 100 to 1 payoffs their investors expect. And, therefore, VCs may only
- Stay committed to healthy businesses, because problem companies are cheaper to close down than fix.
If you are not deluded (your business is venture capital-fundable), you face a new challenge–that of dilution. When you work with a venture capitalist, you must ensure your vision; ownership and energies stay in control. Your risk of dilution is high because:
- After successive rounds of equity financing, it is quite possible you can end up with neither ownership nor a big payday to show for your hard work and effort.
- Every minute you spend writing business plans for investors is time you could be spending growing customers. A business plan never convinced a customer to buy what you sell. In fact, many venture capitalists often shuffle plans among themselves in a practice called “passing the trash” in the hope of finding more investors to carry the risk.
- After the post dot com\9-11\Enron disasters, the improving economy is favoring real companies creating real value for customers by selling real products and earning real revenues. The “home run” technology companies are fewer and farther apart.
- The changing deal flow of venture capitalists is reflecting this. The impact of too many “dream deals gone bad” is trickling up to the VCs and their investors. They are laying-off and cutting back before funding businesses with modest returns on longer paybacks.
Don’t Get Burned: Keeping the Heat Down if You Stay in the Kitchen.Venture capital does play an important role in certain businesses. If your business must create a completely new business process before it can sell anything to anyone, you probably are well suited for venture financing. So when outside investment precedes money from paying customers, then get your business plan perfected and put it in front of the firms that fund ideas like yours. But still take the following precautions:
- Pay more for less money if it comes with fewer strings.
- Realize that venture capitalists exist to make their partners wealthy.
- The more customers you grow, the more of a real business you have and the less equity you will have to give away to get funding.
- “Lawyer up” to protect your interests and business goals.
Home Grown Venture Capital: Have Your Customers Finance Your Business.If you really plan on building and managing your business for the long run, turn your focus to finding, keeping and growing more customers for your products. There is an old saying it is better to learn how to fish than to be given fish. No business survives without a strong and well-developed ability to get new customers. If you focus on this rather than getting money first, you will be in the driver’s seat and will live and retire to tell about it. So:
- Make your new product or service something people can buy now.
- Put all your efforts into creating sales people, channels, and proposals.
- Over deliver to the first customers you close and ask them for referrals and references as soon as they are happy with what you have delivered.
- Reinvest all the money you make from your early sales into more customer services, benefits and products. This will grow your company faster than anything will.
Remember, customers get you money better than money gets you customers. Each paying customer provides you with more money you have already earned.
Turning to venture capital for money to grow your business is sort of like going to a bar looking for someone to marry. The longer the night goes on, the clearer it is that most people you meet have unacceptable objectives. So, to find capital just as you would find a spouse, the same advice holds true. Focus hard on your own success and the right people will buy into you for what you are, not who you might become.
Articles by Birol Growth Consulting are © copyrighted and all rights are reserved. However, articles may be reprinted with prior written consent if attribution is included as follows:
© Copyrighted by Andrew J. Birol, President of Birol Growth Consulting, who helps owners grow their businesses by growing their Best and Highest Use ®. Andy can be reached at (412) 973-2080, by email at andy@birolgrowthconsulting.com, or on the web at birolgrowthconsulting.com.
I Promised to Build You a New Website
Filed under: Business Growth, Profitable Growth, Uncategorized
Last March in my article WWWWW, I promised to build you a new website where you could quickly see and take advantage of my free value and then contact me to chat for more of my no-obligation help. With much thanks to Ricardo Rodriquez, Adam Paulisick, Kevin Grainger, Hank Walshak, and Fred Dugach, it’s ready for you! Here are some FAQ’s if you’re just wondering.
Q. Andy; what happened to your original website www.andybirol.com?
I liked your 500 articles, 180 newsletters and videos?
A. www.andybirol.com is and will always be available for your reference purposes. My new site www.birolgrowthconsulting.com sits “in front” and you can always link to www.andybirol.com for my library of content.
Q. What’s your refocused message?
A. I help established business owners run, fix and grow their companies so that they can keep or sell them when and how they choose. I also help business advisors and associations to empower their clients and members to profitably grow their businesses.
Q. What’s behind your “Run, Fix, Grow, Sell” philosophy?
A. If you own, advise or host owners of an established business, is it worth what it was in 2008? Can you sell it for what you need to? Do you have the mojo to recommit yourself to creating the profitable growth your business needs so you can sell it when and how you want? Intrigued? Click here.
Q. Andy, I want to suggest an improvement, pinpoint a typo or give you feedback but WIIFM? (What’s In It For Me)
A. If you find a typo, suggest an improvement or just give me your feedback at EMAIL ANY, I will send you a free electronic copy of my book, Accelerating Your Business.
