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Written by Jay Turo on Monday, June 4, 2012
Why the full future for Facebook and the performance of its stock is yet to be written, as of today it is selling at prices significantly less than at which it traded on popular, private secondary markets like SharesPost and Second Market as recently as three months ago.
This startling fact is just the latest example of the "existential" questions that have been raised for quite some time now regarding the whole purpose of traditional public equity markets for investors and companies alike.
For growing companies as recently as 15 years ago, whether or not to go public was a pretty easy decision: if you could go public, you did go public.
Why? Well, for starters, it was usually the purest and best way to raise growth capital.
Back then, equity finance was dominated by fundamental, long-term investors that had strong biases toward the clean and easy pricing of public stocks and the uniform reporting and disclosure requirements imposed by the major exchanges.
So lots of companies went public - 1,272 of them from 1990 to 1996 - and Wall Street was very much about "long" promotion of companies' growth potential and as "analog" distributors of their stocks.
Compare that to today's financial markets.
Fast, and high-volume computerized trading combined with the utilization of extremely high leverage has made Wall Street trading profits to be many multiples greater than those generated via traditional underwriting, promotion, and distribution of long positions in stocks.
To this, add-on ongoing onerous regulatory and civil litigation bias against stock promotion and distribution and what we have now is the double whammy of traditional equity underwriting not just being unprofitable, but highly risky as well.
So it should be no surprise that not a lot of companies go public anymore.
And when they do, the performance of their stocks has gotten mostly caught up in the malaise that that has seen the major indices trading at levels basically where they were 12 to 14 years ago.
Now, if the public markets are not good for companies nor for investors, then what really are they good for?
Well, the elephant in the room answer to this question is that those with big stakes in the existing order - i.e. Wall Street and the business media built around it - don't want anyone to know is not a whole heck of a lot.
It is not too much of a stretch to say that a good analogy for today’s public markets infrastructure is that of travel agencies in the 1990s.
As Internet-based travel bookings began to take hold and become more and more efficient and easy-to-use, travel buyers and sellers just one day looked up and said why do we need these guys anymore?
Now Wall Street and the business media that feeds off of it are a lot more powerful than travel agents ever were, but the tides of history and technological change are similarly not on their side.
While the Facebook IPO debacle is an extremely high profile example of the hollowness of their current value proposition, smart investors and companies seeking liquidity and growth capital have been voting with their feet for many years now.
They have been eschewing the public markets for liquidity via acquisition and for raising growth capital via private equity, hedge funds, and global funding sources.
And sophisticated buyers and sellers are increasingly getting together on the new, clean, and far less friction - filled private stock secondary exchanges like SharesPost and Second Market.
Look in the coming months and years for smart investors and entrepreneurs to do more and more of the same.
And the Facebook IPO debacle will only accelerate this sometimes disturbing but ultimately inevitable and yes welcome trend.
Written by Dave Lavinsky on Thursday, May 31, 2012
There are some marketing methods that take continual effort and persistence in order to pay off someday. This is NOT one of those. And for those of you without a website or for whom internet marketing can seem overwhelming at times...you don't even need a website to use this lead generation method.
I want to give you a quick tip today on listing your website (or just your contact information) in business directories so that people can find you online in ways they otherwise couldn't.
I'm not talking about ranking your site in the search engines, or paying for online ads. I'm talking about going to a website like Yelp.com, Manta.com, MerchantCircle.com, or other sites that list businesses by category with their contact information.
Not everyone searching for something on the internet is necessarily typing in a search for it in Google, Yahoo, or Bing. Sometimes people go to these directory sites and scan for local businesses there. Your goal is for them to find you!
And sometimes the pages about you in a business directory will come up in search results when people are searching for your keywords.
Not as good as having your actual website in the first page of results, I know, but getting your name and contact info in front of people's eyes is definitely a good thing.
Plus, being listed in an official directory can add credibility to your company in the same way that being listed in the yellow pages can set a local business apart from fly-by-night operations.
So without any further ado, here's the quick-and-dirty way to help prospective customers find you through this unique online marketing method:
Step #1: Determine your outcome
You've got to begin with the end in mind. Why are you going to list your business profile on these websites-for backlinks? Or do you want direct traffic from the sites' visitors?
Let me explain...If you list your business information on a directory (I'll describe how in a minute), you will be asked at some point to type in your website address (URL).
Your goal might be to have people find you in the directory and then visit your site at some special page for visitors (called your "money" page, which could be your homepage, your best-selling product's page, or a page designed to collect email addresses or elicit a phone call). If this is the case, then just enter in the URL of that specific page.
But, if you're listing your business in directories to get links to your site to rank higher in the search engines, then you would want to use the keyword you're trying to rank for in the business profile, the tags, and in the link to your website.
This latter method is done assuming you have a search engine optimization (SEO) plan in place, and know what keywords to rank your site for, and how. I can't explain all of that here, so if you're not currently trying to do SEO, then I suggest you just enter the URL of your "money page."
Step #2: Create a list of directories to submit to
I've already done this for you. I put together the below list for you of the Top 23 business directories for local marketing. Copy them into a spreadsheet, or print them out and check them off as you list your business information on each of them.
1. Yahoo Local Listings (listings.local.yahoo.com)
2. Switchboard Super Pages
5. Bing / MSN Local Listings (bing.com/businessportal)
19. Google Profiles (profiles.google.com/me)
Step #3: Enter your business profile into each directory
The task now is to list your business' information manually into each directory, one at a time. This is as straightforward as it sounds-find each site and look for a "list your business" section on it somewhere. Then follow their directions to set up your profile.
You'll enter your business name, address, phone numbers, emails, website, business category, and can often write a description of what you do. I would store these in a Word document somewhere and paste them the same way each time.
This is very simple to do but also very tedious in large amounts, to be perfectly frank. That's why I gave you a list of the top 23 to start with (there are over 200 total). Take 5 minutes after reading this to pick a free one and list your business there.
That wasn't so bad, was it? Now, for the rest of them, you can block out some time to knock them all out in one sitting, do one a day for a month or so, or pay an assistant or contractor to set them up for you by pasting in the business information you give them.
Step #4: Track your results over a few months
When you've listed your business on these 23 directories, you can sit back and do nothing and will probably see some great results within a few months.
Or, you can add to your list of directories and list your site on more of them. It's up to you. But whatever you determined your desired outcome to be, find a way to measure it. If your goal was direct traffic, then you'll want to use Google Analytics or your website's tracking software to see how many visitors came from each of the directories over time.
If it was worth it, go get listed in some more directories. Then evaluate if they were worth it. Keep this up until you start to experience diminished returns-meaning that the directories you're getting listed on have very little traffic and are no longer worth the time to get set up on them.
But worst case, follow these directions and in a few hours, you'll be visible in 23 more high-traffic places on the web than before. No need making it more complicated than it is...just do it!
Suggested Resource: Want to learn my complete strategy for methodically maximizing your online traffic, leads, sales and profits? Then check out my Ultimate Internet Marketing System.
Written by Jay Turo on Tuesday, May 29, 2012
Unfortunately, lost in too much of the "dramatic" coverage of the Facebook IPO has been the real lessons to be learned for those interested in successful technology and growth company investing.
Part of the confusion is understandable. An IPO is a purposely dramatic event - made so by Wall Street needing both to justify fees and to "arouse" investors from their varying states of boredom, apathy, discouragement, and distraction.
And for a uniquely high profile deal like Facebook, the media also plays a less than "innocent" role.
Let's call this the Oprah Winfrey Network effect - or the idea that a good majority of the public just isn’t all that interested in hearing the "mom, peaches and cream" Mark Zuckerberg success story over and over again.
Rather, tales of trading "irregularities" and of the "little guy" being taken advantage of by “big banks” makes strangely addictive and popular TV viewing and blogging and tweeting.
And, as long as we recognize it for what it is, a classic "bread and circus" distraction, a little bit of is mostly harmless.
But, when it rises to a level where this is where most of the coverage is focused, well that is both a problem and a huge lost opportunity to communicate the essence of value and wealth creation in a capitalistic economy.
It is that the value of a company is solely based on the quality and quantity of its future growth prospects.
This is what has been playing itself in the mostly downward gyrations of Facebook stock since its IPO - sophisticated reviewers deeply questioning whether the company can fulfill on its insanely high growth expectations.
So high, in fact, that for investors in at the IPO price to realize even a market rate of return that Facebook’s future growth expectations will have to be such as to value the company greater than that of any company in the history of the world.
This, of course seems like way too tall a mountain for any company to climb, to say nothing of one majority managed and controlled by a very bright but also very inexperienced 28-year-old.
From this perspective, the central investment lesson of the Facebook IPO should be that earning alpha returns requires identifying and investing in companies that are priced below their true growth expectations.
Now, most unbiased observers - i.e. those not making markets in or commissions on trading stocks - argue almost unrefutedly that doing so is impossible in a high profile, high valuation stock like Facebook.
And that the same can be said for virtually any public company part of a major index - Dow, S&P, NASDAQ 100, etc.
Luckily however, there is now a wide, deep, and increasingly liquid world of investable companies that can be bought at prices below “true” expectations.
They exist within the legion of start-up, small business and middle market companies that make up the beating heart of entrepreneurial America.
Once, a long time ago (in terms of development, if not years) Facebook was one of these companies.
And those that invested in it then made returns beyond any and all expectations.
This, identifying and investing in companies with growth prospects to the moon but priced only to go to the corner market, is the game worth playing, isn’t it?
Hard to do? Of course.
But as the story of Facebook's dramatic rise should teach us so well, far from impossible.
Written by Dave Lavinsky on Sunday, May 27, 2012
To help you to be more productive (and stress-free) during this new era of "crowdsourcing," I put together a list of 23 websites and services that let you harness the power of the crowd, or otherwise help people more effectively work together through the Internet.
Most of these are hubs that brings a wide variety of people together from around the world with some sort of value to exchange. It's amazing to see how this has been done in matching freelance service providers, and now business funding from multiple donors online.
What's also interesting is to see how specialized a lot of these sites are. It used to be that Elance and Guru were the only two places to go to hire people. Now it seems there is a site for every specific kind of niche freelance needs, as you'll see.
So here are 23 virtual platforms and tools that are gaining in popularity and also stand out for their uniqueness, ideas they provoke, or just plain being cool.
- Elance, Guru, and Odesk - These are the 3 old favorites for finding contractors that still got it. I suggest posting a project on each of these and hiring the best from among the total responses.
- OnlineJobs.ph - A subscription site that gives you access to hiring skilled workers in the Philippines directly, often for $300-400 per month full-time!
- Amazon's Mechanical Turk - this is a marketplace where you can request tasks requiring human intelligence-tasks from getting questions answered to writing product descriptions for you.
- Fiverr - It amazes me all of the things you can get from people here for just $5. Professional voiceovers, fast logo designs, and all kinds of writing and search engine marketing gigs are available here.
- 99Designs - a great place to get multiple designs or logos made BEFORE choosing a provider to pay. This is valuable if you've ever paid someone to make a design you didn't like.
- Hatchwise - This site is nearly the same as 99Designs. I've used them both but have no real preference. Both are worth checking out.
- Etsy - this is the "Ebay" of handmade goods. Many entrepreneurs and small businesses test-market new products here first to see what sells better before investing more in promoting it elsewhere.
- Kickstarter - The largest crowdfunding platform for creative projects and endeavors. It uses an all-or-nothing funding system, where donors' funds will not be transferred until you reach your funding goal, and reimbursed if it isn't.
- IndieGogo, RocketHub, FansNextDoor - These sites operate just like Kickstarter.
- DonorsChoose - Backed by Oprah Winfrey and Stephen Colbert, this site makes it easy to donate (as little as one dollar) to any one of a long list of charities, with total transparency.
- 8-bit funding - a crowd funding site specifically for video game developers. Probably not your specialty, but see how there's a niche for everything? Google "your industry + crowdfunding" and see what's out there. Appbackr is a similar site, but is specifically for mobile phone apps.
- RetailMeNot - this is a site where you can get (or post) coupon codes for business services and supplies at significant discounts, like office supplies or even press release submission services.
- ChaCha - A question answering service you can text your questions to get answers on your mobile phone in a few minutes. It's helpful when you're super-busy and don't feel like looking something up.
- 37signals - Probably the simplest and best Customer Relations Management software I've seen for the price (Highrise) and also project management (Basecamp). With everyone on your team able to make and access notes, files, tasks, and emails about a customer or prospect, it makes life a lot easier.
- Skype - a must-download if you hire anyone overseas, for their audio or video chat feature, but also because their Instant Messaging system is just plain handy. It's nice having a record of every conversation with someone in one place, as opposed to a bunch of archived emails.
- TomsPlanner - A good way to manage projects if you're visually-oriented without having to learn to use Microsoft Project. By the way-if you're in business, you manage projects. It allows you to list action items and schedule them in order, in a printable Gantt chart that gets everyone on the same page about who does what and when.
- Quickbooks Online - If you're still using an older version of Quickbooks, consider getting the online version. The monthly cost isn't fun but it's worth it with the time you save. It imports your online bank transactions right into the register so there's not a lot of re-typing.
- SaneBox - This one will change your email experience by making it sane again-a lot faster than by organizing and checking a bunch of folders yourself. There are even timed folders like @SaneNextWeek and @SaneTomorrow that will make your emails re-appear when you're ready to deal with them.
Written by Dave Lavinsky on Friday, May 25, 2012
If you've been following the crowdfunding phenomenon, you've seen the swift rise of small businesses and entrepreneurs that have been getting funded by everyday people-through specific sites on the Internet that put it all together, like Kickstarter.com.
Instead of trying to find the one donor to contribute 100% of your funding, you can post your project online, spread the word about it, and may end up getting smaller donation amounts from tens, hundreds or even thousands of people.
The overall trend is that the people who fund or invest in crowdfunding ventures want transparency in their investments. They don't want to be far removed from their money as with stock market investing, where they have very little control, and insider information is not allowed in the decision-making process.
With a crowdfunding campaign, people of all incomes will be checking out your project and assessing whatever opportunity you offer to them in exchange. Importantly, just as you want to know the demographics of your customers, you also want to know exactly who your "typical" or "ideal" crowdfunding prospect is, so you can attract and influence them to invest in your company.
It's all marketing - identify your target market, position your offering properly, seal the deal!
So here are some interesting facts about what types of individuals are more likely to invest in your company via crowdfunding, according to an ADCI survey asking thousands of Americans asking them just that (FYI, ADCI stand for The American Dream Composite Index(tm), which is a survey conducted by Xavier University's Williams College of Business).
Keep these survey answers in mind when planning your funding campaign:
- People over 34 are less likely to provide crowdfunding dollars.
While those in their 40s and 50s are now getting on Facebook and social networks like never before, and making plenty of purchases online, they're not using it for social connecting like younger generations are - which crowdfunding is very similar.
- Females typically evaluate businesses themselves before investing, while men take greater risks and often invest based on the suggestion of a third party.
To me, this means that it's better to put all the information up for potential crowdfunders to see, for those who want to know the complete facts to analyze themselves.
- On a percentage basis, Caucasians are less likely to provide crowdfunding than other ethnic groups in the US. Also, Caucasians and Asians are more likely to invest in businesses they don't have an existing relationship with than African-Americans and Hispanics.
- People with incomes of $100,000 or more are most likely to engage in crowdfunding. [This does seem to contradict a little with the first statistic that crowdfunders are younger, but does point to the fact that young (aged 25-34), affluent people are the ideal crowdfunding candidates.]
But plenty of people with incomes closer to median ($40,000 or more) will still contribute, and there are many more of these individuals to reach through the Internet.
Now compare this demographic information with what you know about your existing or target customers. If they're people in their 20s and 30s, they may be perfect for crowdfunding your venture.
If not, it doesn't hurt to announce it to them anyway when the time comes. You also know people within your own personal and business network that you can announce your project to, as well.
And you might use it to determine the types of ads that you run and for whom they appear, should you promote your funding project with any kind of paid advertising. Or, you may find that the opposite is true - this is why we always test and track our marketing.
Suggested Resource: I hope you found the results of this survey on crowdfunding prospects' preferences to be helpful. I've identified even more strategies and tips to ensure you succeed with your Crowdfunding raise. I put them all together in a simple-to-follow program called "Crowdfunding Formula."
Written by Jay Turo on Monday, May 21, 2012
Obviously the Facebook IPO has absolutely dominated the business news this past week, and for very good reason.
Not only was it the biggest technology IPO in history, but the company in just a few short years has embedded itself into the very fabric of the lives of hundreds of millions of people worldwide.
And the tale of Mark Zuckerberg and that of the founding and the beyond supersonic growth of the business is exactly the kind of feel good, incredibly inspirational entrepreneurial success story that America and the world desperately need.
So yes, the Facebook IPO is greatly inspirational.
And its product is off the charts awesome - intuitive, fast, elegant, user-friendly software as a service that allows networks of people to share and connect with a speed, ease, and breadth like never before in history.
So Facebook is great. Facebook is cool. I have and regularly use my Facebook account as do a lot of people (though by no means most) I know.
But moving forward, as a business with real big legs, of that I am not so sure.
You see, Facebook falls into that category of things that are nice and interesting and kind of fun - all of which of course are very good things and ones on which you can build a very nice business.
Think fashion, music, and most forms of entertainment.
But does Facebook really feel like something that anyone really needs?
And it goes deeper than that.
You see, Facebook, for lack of a better word, for too many people, even its most active users, is actually quite annoying.
Now I admit that a lot of my evidence and thought process here is anecdotal, but really when was the last time that you asked someone their opinion of Facebook they came back with anything other than some variation of the below:
"I have an account but I don't really use it”
“I just don't get what the big deal is"
Or yes, the bane of all of our Facebook’s existence: "I just can't stand people on Facebook who just brag incessantly about how great their lives are and do so like 42,000 times per day!”
Okay, so there is a strong argument, like with many new technologies that all of us just really don't know how to use Facebook yet.
And as we do, the value of the product will naturally increase and the annoyance factor will go down.
But in the case of Facebook, I am not so sure.
The best analogy I have to make on this point - and not coincidentally, the company that Facebook is most often compared to - is Google.
Google, from its first days, gave users an experience that was both incredibly exhilarating and useful.
How many times have you interfaced with a Google search and just been blown away by the speed and accuracy of the results?
And here is the key point - how many times have you done so in an "economic" frame of mind - i.e. searching for a product or service for which you were in a buying mode?
This strong intent of most Google searches is at the heart of the unique usefulness for advertisers and thus the vast and awe-inspiring profitability for Google's business model.
Now let's compare this to Facebook.
Sure, it is interesting to see what some long-lost and distant connections are up to.
And yes, this "voyeuristic pleasure" does make the Facebook experience strangely and uniquely addictive.
But, is so doing really solving an obvious and pressing problem?
It is fine if it doesn't, but at the level of current valuation of the company, the assumption is that Facebook will be solving the kinds of problems that people would pay far more for than the very obvious, pressing, and actionable ones that Google search does.
My gut tells me this won't happen.
Facebook will remain a cultural icon, but as a big, public company its monetization prospects will most likely resemble that of other "nice to have" technology services that inevitably disappoint on their so very high expectations.
Written by Dave Lavinsky on Sunday, May 20, 2012
To be effective, your marketing efforts depend on targeting the specific customers (and potential customers) who will produce the best results for your business.
No company, no matter how big their budget, can afford to spend precious marketing dollars on too wide of a group of people. You just can't be everything to everyone.
You can create fast and cost-effective growth however by identifying your core customers and focusing your marketing activities on them - attracting them, selling to them, and providing the right customer support and retention.
This doesn't necessarily mean to focus on customers who buy the most, though that is the most important criteria in a top customer. There are also the "Influencers" who are the most vocal or respected, and spread the word about you to others - very valuable, even if they don't buy more than other customers.
Who are Your Top Customers?
It's easy enough to tell which customers of yours buy the most. Look at sales receipts or customer information to see who has made the most purchases, or the largest dollar amounts.
Sort out the 20% of customers who have bought the most from you over time, and that's your target group to which you want to focus your marketing (mainly to find more potential customers like them).
Then gather whatever other information you have about these customers and see what they have in common. While every customer is different, you'll notice there are certain trends and common characteristics among your target customers.
The easiest and primary information to get about these customers is their demographics - the directly observable characteristics that describe them (as opposed to psychological characteristics such as preferences, needs, motivations, self image, etc.).
Find out their basic demographic information
This includes basic facts:
- City/Zip Code
And also some less apparent information:
- Marital status
And if you serve business to business customers, demographic information will include information such as:
- Size of their business (in revenues and/or personnel)
- Purchasing/decision-making authority
How to turn your customer knowledge into gold
Time for a little alchemy...suppose you're going through your list of top customers and find that the majority are married women in their thirties who live within 5 miles of your store.
What can you do with these four demographic facts? To me, this information could be used in the following ways:
1. Running ads on Facebook that only appear for women, age 30-39, within your city or town. By knowing this information you won't have to pay for clicks and traffic from people who are less likely to buy.
2. Using signs, flyers, or some other kind of print advertising just within the 5-mile radius of your store. This would further saturate your business area and make your potential customers more likely to buy (as it takes 7 contacts with your company or ads on average to get a response).
3. Running an offer that specifically appeals to younger married women; for example, an offer to bring in one's husband and receive a discount, if this is applicable to what you do.
4. Selecting photos for your ads of people who closely match your target customers. In this case, you'd show women in their thirties who look like they live in your city, however that can be represented. Or pictures of happy couples, if appropriate.
5. Using direct mail to target potential customers. Chances are the 5-mile radius around your store is all in 1-2 zip codes. This information is very helpful if you're doing a direct mail promotion. When you buy a mailing list through a service like MelissaData or Listsource, you can select only addresses of women within your zip code. Why spend $.50-$1.00 or more per person if they're not as likely to respond, purchase, or love you?
6. Finding out where these women congregate and then going there or sponsoring and event. For example, if you determine that most of your target customers belong to the local PTA (Parent Teacher Association), sponsor a PTA meeting or event. As a related note, this is why I love airport lounges. Yes, it's nice to stay in a comfortable environment when waiting for a plane, but I love the marketing implications. That is, virtually all of the people I see in these lounges are corporate executives and salespeople that travel a lot. If your business' core customers fit this demographic, then hanging out in these lounges could be a goldmine.
7. Designing your store's appearance and layout with these women in mind. Your store would probably be colorful, aesthetically pleasing, and perhaps "hipper" and less formal than if most of your visitors were Baby Boomers.
8. Conducting research to learn what has been discovered about these women's preferences. Did you know there have been tests showing that women prefer ovals over squares, or purple over red? This information would be very useful when creating a logo, designing your store's outside and inside, and all of your promotional materials.
See all the ways you could utilize this information? This is why big companies spend a LOT on market research and surveys, and ask this information of customers when they buy online, etc. The more you know about them, the better marketing decisions you can make.
But what if I don't have this information about your customers?
Start with what you know
If you're interacting with customers face-to-face, you know their gender and can guess their ages. Your sales receipts will probably tell you customer addresses, so there's the city and zip code.
If you have collected business cards or know your top customers' demographics from memory, write that up as a working profile for now until you can do it more formally.
Then, start collecting their information
The best way to do this is to ask for it! Have a jar on your counter for business cards and a drawing/raffle. Or hand them a short survey form to fill out with 5-8 questions.
Or you can make simple online surveys using SurveyMonkey, SurveyGizmo, or Zoomerang, and then promote the web address where people can fill it out. It helps if you offer them some incentive, like a free gift or chance to win something.
It seems like fast food restaurants are getting pretty systematic now about encouraging customers to rate their experience online or by calling into a hotline.
And last time I went to a new doctor, they had me fill out a "Patient Information Sheet" asking for quite a bit about me medically, as well as about my demographics. See how doctors and dentists collect this so routinely? Make it a part of the way you do things and you won't have to remember.
Have you ever registered for something online and they ask for your company name, company type, your job title within the company, and so on? That's a great example of collecting demographics about a business, for B-to-B sales.
Make a demographic profile
Take your findings and summarize them on one page, for easy reference.
I know several copywriters who have told me that the best way to "get through" to people reading their sales letter or persuasive copy is to sit down to write with a photo of their "ideal" or "typical" person from their target market, and write as if speaking directly to that person.
Photo or not, at least write what you know about your top customers' common characteristics and print it out on a sheet of paper.
Make this profile a quick snapshot to reference that will represent them, rather than going about your marketing haphazardly, or in a less focused manner.
Lastly, do some research
As I said, you should also look for studies and reports online about how people of certain ages, genders, or marital statuses behave differently (from a marketer's perspective).
Lastly, in order to prevent false assumptions, if your main customers fit a certain demographic, for example they are mostly of a lower income, ask yourself if this was intentional, or if your previous marketing efforts just happened to attract them.
Executing on the ideas above will shed light on exactly whom you're working hard to serve, and will aid you in your efforts to find more of them and treat them the way they want to be treated.
Otherwise, it's "Round peg...meet Square Hole."
Here's to focused, targeted marketing...good luck!
Suggested Resource: Growthink's Ultimate Marketing Plan Template allows you to expertly create your marketing plan. Importantly, it allows you to quickly and easily build your target customer profile as explained above, and much, much more in order to dominate your market. Click here to learn more.
Written by Dave Lavinsky on Thursday, May 17, 2012
Below is an easy exercise that will boost your profits.
First, list your products and/or services
Create a spreadsheet. In Column A type the names of each product or service you offer.
Second, list your market segments (customer groups)
In the first row of columns B, C, D, etc., write the names of the different types of customers you serve.
For example, if you have a walk-in store as well as a website set up for e-commerce, you will have at least two groups of customers - those who come in to purchase and those who buy online.
Or you may sell to consumers and businesses.
Or you may sell to affluent consumers and less-affluent consumers. Or you might sell different products and/or services to men vs. women.
List all of these customer segments in the first row of columns B, C, D, etc.
Place an "X" in each cell in which you have a combination
To recap, in Column A you have a list of your products and services. And in the top row of the other columns, you have a list of all your customer segments.
Now, place an "X" in each cell in which you offer that product or service to that customer segment.
For example, if you sell insurance to affluent consumers, then type an "X" in the cell that intersects these two variables.
The result will be a chart with "X"s showing all your product/service and customer segment combinations.
Next, write down a list of all the combinations you found. For example, your list might include:
- insurance to affluent consumers
- insurance to businesses
- home security to non-affluent customers
Determine your revenues and profits for each combination
For each combination, type in how much revenue and profit you generate from it.
In many cases, you will find that one combination dominates your profits. Or that one customer segment (among several products and/or services) buys the overwhelming majority of your products and services.
Importantly, in completing this exercise, you may also identify combinations you didn't know even existed.
Sharpen your marketing focus
Most entrepreneurs and business owners place equal marketing focus on ALL their combinations of product/service and customer segments.
But, smart entrepreneurs and business owners place more emphasis on the combinations that are proven winners. Now that you know your winners (i.e., the combinations that are generating the most revenues and profits for you), focus on them.
Using the example of "insurance to affluent consumers" being a winning combination for you, here's what you should do:
1. Do more marketing to them. Figure out how can you reach more affluent consumers. Perhaps stop doing general advertising that reaches both affluent and non-affluent consumers and do more targeted advertising like direct mail or cable television. Or perhaps there's another company serving this clientele with whom you can partner. Etc.
2. Better tailor your marketing to them. Rather than having advertisements that mention several of your products/services, create ads that solely focus on your insurance offering, since this is what generates the most revenues and profits. Likewise, since you know the specific customer segment you want (i.e., affluent individuals) use terminology and images that will specifically appeal to that segment.
Most entrepreneurs and business owners make the mistake of trying to be all things to all people. As a result, they water down their value proposition to the customers that give them the most revenue and profits.
Rather, by identifying your most profitable customer/product combinations and focusing your marketing efforts to them, you can quickly grow your revenues and profits, and distinguish yourself from your competition.
Suggested Resource: Growthink's Ultimate Marketing Plan Template allows you to expertly create your marketing plan. It will help you fully leverage your most profitable marketing combinations and dramatically increase both your revenues and profits. Click here to learn more.
Written by Jay Turo on Monday, May 14, 2012
One of the key objectives of the recently passed JOBS act is that it will “open” the now 11 years and counting "shut” window for initial public offerings.
Hopefully, it will help. Because golly, when it comes to the IPO market and public market returns in general, help is needed in a big way.
How bad is it? Since the Internet bubble burst in 2001, the number of IPOs hasn’t recovered to even 1980s levels.
That's 30 years ago, folks.
For perspective, before 2001 over 40% of all venture capital exits were via initial public offerings.
By 2010, that percentage had declined to a mere 3%.
Or, in hard numbers from 1990 to 1996, 1,272 U.S. companies went public.
For the period from 2004 to 2010 a mere 324 did.
Not unrelatedly, since the bottom has fallen out of the IPO market, the performance of the public market as a whole has been dreary to say the least.
Let’s call this the Boston Celtics phenomenon. Twice in the last 20 years the Celtics have had great teams decline as they “got old” as they didn’t sufficiently “re-invigorate” with younger, fresher players.
And aren’t our public equity markets - after more than 10 years now of only a handful of dynamic, innovative companies being added to them in any meaningful quantity - like that too these days?
The major stock market indices certainly seem to indicate so, with the Dow and the S&P and the NASDAQ trading today basically in the same range as they were 11 years ago.
So the hope of the JOBS bill is to encourage more “emerging” companies to take the IPO plunge via relaxing regulation and reporting requirements for smaller, younger companies as they go public.
Will it help?
…the bill will not in any way alter the technological and global macro-economic forces that:
A) Just make it far more interesting and possible for private companies to do and have everything that public companies do - from big multiple exits (see Instagram), to growth capital (see the robust world of hedge and private equity funds), to liquidity (see Sharespost, Second Market) - without the headache of a public listing; and,
B) Seem to indicate that even when companies do go public that it is almost a sign that their best innovation and growth days are behind, and NOT ahead of them.
Sure, there are exceptions, but in a world driven by SaaS, by open source, and by the “app store” phenomenon, the cost of innovation - and the cost to disseminate that innovation globally - has dropped so far and so fast that the days of needing a public market “balance sheet” to innovate seem long behind us.
What does it all mean?
Well, for investors seeking capital appreciation, it is critical to digest that the “big picture” vectors all point toward private companies that remain private being the main drivers of innovation - and thus growth - for as far as the eye can see.
Now translating this overriding point into a specific, private equity investment strategy is hard for sure…
…but the alternative of looking to public stock market investing as a true growth strategy long ago passed into the realm of that famous definition of insanity as doing the same thing over and over again and expecting a different result.
Written by Dave Lavinsky on Sunday, May 13, 2012
In your business experiences, you may have noticed that "selling" is not particularly hard when you have the right product positioned correctly, in front of the right person who wants it NOW.
But, when one of these factors are "out of whack," it can be a much tougher sale to make.
Getting funding from angel investors is the same way. It's not so much about how good of a presenter or salesperson you are (though those qualities help). Because the most important time you spend influencing potential investors is done long before you present to them, even long before you even contact them; it's done when you prepare your company for funding.
You've probably heard the quote from Abe Lincoln, "If I had 8 hours to spend cutting down a tree, I would spend 6 hours sharpening my saw." The point -- you can get a job done with a lot less effort when you are fully prepared.
So how do you prepare?
You prepare by making sure angel investors will want to invest in your company. And they'll want to invest if they believe your company has great potential to achieve a liquidity event, and one that enables them to earn a significant return on their investment.
Trust me, you're not going to show them that potential with your passion and enthusiasm alone, or a killer presentation. There are certain criteria that, if your business meets them, will show the angel that you DO have the potential. Here they are below...
Criteria #1: Scalability
This is the potential for your company to achieve significant annual revenues. An angel investor, when no future funding is required, might be willing to invest in a restaurant or website that has the potential to generate hundreds of thousands or a few million dollars-as long as a clear path has been laid out regarding how they could get a sizable return on their investment.
The problem is that some businesses are not as conducive to scaling as others. If you offer a professional services business, you can probably only handle so many customers yourself. Even with an office full of lawyers, for example, you would have to hire and manage more and more people in order to grow.
In a truly scalable business, you can multiply your sales without having to greatly increase your resources. You would simply turn the knob up and an existing infrastructure can handle it.
Criteria #2: High Barriers to Entry
Barriers to entry are those things that make it difficult for another firm to compete against you, such as patents or proprietary technology, a unique location, strategic partnerships with larger firms, and long-term customer contracts.
Having first-mover advantage (being the first to offer something) will give you an initial head start. But rest assured, competitors will copy your idea, once proven. You've got to find ways to keep that advantage by excelling so well at what you do that it will take others a long time to catch up.
Your company will need what Warren Buffet describes as a "sustainable, long-term competitive advantage" and looks for in the companies in which he invests.
Criteria #3: Strong Management Team
Who is running things (besides you)? The angels must believe in and be comfortable with both the founders and the key operating personnel of the company.
Does your management team have relevant experience and successes under their belts? Are they capable of taking things to the next level? Do they advise you, or are you currently more of a babysitter to your managers?
Experiencing massive growth is hard. You need capable leaders who can deal with the unknown and adapt to rapid change. You need people who can figure things out on their own and pioneer new ways of getting results.
The "Who" often comes before the "What" in priority. Get the right people together and they will likely choose the right course among all the options. Keep this in mind when hiring managers-will they be able to grow with your company, or does it seem like they will only be capable of their current role?
Criteria #4: Your Exit Strategy
The fourth criteria in which angel investors need confidence is your exit strategy. This means that the chances are good of eventually having another firm purchase you or your firm going public.
You have to remember that it's typically through your exit strategy that these investors profit from their investment in you. It's hard to get a company to generate enough cash off the top to pay them back over time-the original investment and some interest, maybe, and generating the cash to pay them several times their investment isn't likely (or desirable).
So angel investors count on some event happening that will generate a very large sum of money that pays them back, plus their profit. Unless they want to be an owner of your company forever, you have got to choose and prepare for your preferred exit in advance.
If you plan to sell, that's the most straightforward way to go. Set a time frame for when you'd like to accomplish a sale and work consistently towards that end. If you don't intend to sell, you'll either need to take the company public someday, or negotiate other ways of paying back the angel.
Criteria #5: Being a Local Company Helps
Another important criterion, while not necessarily tied to liquidity potential, is that angel investors tend to invest in local companies. In fact, according to the Center for Venture Research, 70% of angel investments are made within 50 miles of the investor's home or office.
Angels often like to invest in companies that are close by so they can visit them and participate in Board meetings and other events. And for retail businesses like a restaurant, they like being able to drive by and think or say "I'm an owner here."
Criteria #6: The Right Price
Finally, angel investors will only invest when the price is right. If you price your equity too high, angels may not have the potential to reap significant enough returns and will not invest.
If you know a few angel investors or angel groups in your area, find out in advance what kinds of prices and returns they would find acceptable. With this information, you may have to reset your revenue goals to achieve before getting the next stage of funding from angels, ask for less funding to increase their return, or commit to a higher payout if that's what it takes.
Understanding and preparing yourself and company to exhibit these six criteria will help you achieve your main goal-to convince angel investors to write you a check.
And not surprisingly, working towards the same objectives that attract angels will also help your business to be more profitable, stable, and positioned for growth even if you decide not to raise additional funding down the road.
So, start sharpening your saw today. Think about and strengthen your exit plan. Think about how you can build a better management team. And so on. And then, you'll be able to raise all the angel funding you need.
Suggested Resource: In Growthink's Angel Funding Formula, you'll learn exactly how to find and contact angel investors, exactly what information to convey to them and how, and how to secure your financing check. This angel funding video explains more.