StartupGarden: September 2006 Archives

The Magic Numbers I Track Daily

One of the best lessons I learned while covering small business at Inc. is that every small business should learn to focus on just one or two key numbers as an indicator of overall health. Bookstores and other retailers focus on inventory turn, for example. Or check out this great quote from a terrific Inc. article by Norm Brodsky on “The Magic Number”:

“I believe every business has magic numbers. A restaurant owner I know can predict his evening’s receipts by the length of time customers have to wait for a table at 8:30 p.m. My friend Jack Stack, the father of open-book management, told me about a guy with a gear-making company who can determine his sales from the weight of the gears that have been shipped. Not the dollars. Not the orders. Not the number or type of gears. The weight.”

Of course my personal business has its own magic numbers. I just choose not to track them. Here’s what I tend to check up on a daily basis:

The pennies that I’ve earned from my Amazon affiliate links
The pitiful rank of my book on Amazon
The traffic I’ve generated to my site, broken down by various categories
The comments or links I’ve generated through posts on my site or others

What I SHOULD Track Daily

The value created for customers in both financial terms and mission-oriented ones
Productive work time spent on real work
Number of words written on next book (i.e. the thing that matters most)

What do you track on an actual basis? And what SHOULD you track?

Posted by tom at 08:50 PM | Comments (2)

When Ford Was A Startup

As Ford tries to fend off utter failure by cutting workers, changing leadership, and looking for more ways to shrink to growth, I’ve been discovering some fascinating tidbits about the company when it was the dominant organization of its day, of the world.

Here’s a few items from Wheels for the World: Henry Ford, His Company, and A Century of Progress by Douglas Brinkley (though they might want to edit the subtitle to something more like a Half Century of Progress):

In the heyday of the Model T, people simply referred to cars as “Fords,” as we do today with Q-tips, Kleenex, and Xerox-ing.

For a brief period, the Jackasses of the 1910s enjoyed a sport called Auto Polo, in which they did what you would imagine: played polo, using Ford Model Ts as their horse. Look it up. (And if the guy who did the movie Dodgeball ever wants a vehicle to get Johnny Knoxvile and his cronies on board, look no further.)

During the period of intense growth, production at Ford doubled every single year for the decade after 1913. And during that time the price of the car dropped by two-thirds.

As a result of local merchants gouging Ford’s employees who were being paid the sum of $5 a day, Ford created the first modern supermarket, the precursor to Wal-Mart. He first sold workclothes, and eventually all sort of groceries, and as a result of efficiencies, sold at a lower cost than any competitors, and still made a profit.

Finally, two excellent passages about the real revolution Ford brought about:

“New and better machinery was in constant development at Ford Motor Company. It was said, in fact, that throughout the long production run of the Model T, at least one new machine or tool was introduced at the factory every single day. Not much of importance may have changed on the T to make it new, improved, or different during its nineteen-year model run, but nothing remained the same about the methods used to produce it. That was the imperative laid down by Henry Ford.”

And,

“..in 1913, the first assembly line was implemented at Ford Motor Company. The process grew like a vine and eventually spread to all phases of the manufacture of Ford cars, and then through the entire world of heavy industry. There can be no doubt that a powerful revolution occurred at Highland Park—but it was not the assembly line itself that provided the power. Rather, it was the creation of an atmosphere in which improvement was the real product: a better, cheaper, Model T followed naturally. Every man on the payroll was invited to contribute ideas, and the good ones were implemented without delay.”

Posted by tom at 02:03 PM | Comments (0)

Applying Startup Garden Rules: Learning eBay

Over the past three months I’ve started buying, and more recently selling, stuff on eBay. And the experience has confirmed to me that the web truly is becoming embedded ever more deeply into people’s daily habits, in the process enabling personal entrepreneurship to a greater degree possible.

Over the years there have been many excellent articles about the impact of eBay on small business; one of my favorites was written by Dave Freedman five years ago (!) for Inc. Magazine. In Can You Save the eBay Economy, the immensely talented Freedman made this argument:

“What the Web has done is level the playing field between small businesses and the micro-businesses that until now barely showed up on anybody’s radar screen. These microbusinesses are individuals without a substantial—or in many cases, any—business history or infrastructure behind them. Operating with virtually no overhead, typically with little inventory, and sometimes in legal gray zones, these one-person shows are often able to offer fire sale prices and still maintain a modest margin. And the billions of dollars in revenues that they aggregate are piling up come, to a certain extent, out of the coffers of more traditional businesses.”

But I’ve been really struck by the way in which getting going on eBay really takes hold of you, and taps into many of the personal elements of entrepreneurship.

Resource break, readers: I did find one book superior to all others in helping convert my naive idiocy into mere technical mediocrity, a place where I have become competent enough not to obsess over process issues. My pick is The eBay Survival Guide by Michael Banks. Like many titles in the No Starch Press line of computer books, this guide is smart, focused, and does a terrific job of balancing a wealth of useful information with a clear and inviting tone. I basically learned just about everything I needed to know, from the basic information to the more advanced matter as well. In other words, in addition to learning how to sell stuff, the book does a surprisingly good job of sharing pointers on how to make good decisions about just what to sell in the first place, and when, for example, it simply isn’t worth your time.

Over the past weeks I’ve been selling lots of children’s books my daughters have outgrown, and see why people get absolutely hooked on eBay. The auction format, whether you’re a buyer or a seller, becomes utterly intoxicating. As the contest ticks down, you feel this compulsion to track its progress—and you really want to place the winning bid—or spark a bidding war.

But for me, the experience appeals beyond the great reward of getting stuff out of our house and converting it to cash. This process reinforced my belief that eBay and other tools are fomenting the rise of, I don’t know, individu-entrepreneurship: ventures that balance a greater depth of personal color with a more standardized (i.e. tech-enabled) tool kit of professional functions. So businesses are becoming more personal by, in a sense, sharing a more common technical infrastructure.

And everyone must achieve a degree of overall entrepreneurial competence to get in the game. That is to say, anyone who wants to sell stuff on eBay must develop a handful of the key tools essential for any entrepreneurial success: an understanding of a market, the ability to price a product, the chops to market it with a degree of proficiency, the technical know-how to make it work, and finally, enough of an overall understanding of the numbers to make the enterprise worthwhile.

There are days where I get a bit cranky about what the web has wrought, particularly when I find people too wowed over what it could do as opposed to what it really does do. But ultimately I remain a believer in its transformative power. For example, there was a great story in yesterday’s Wall Street Journal about the growth in internal, mini wikis within companies who are “co-opting consumer Web technologies for everyday office use.” I thought it was a hugely important article—and reveals that while there’s been so much blather about the Wikipedia (in my opinion) the real genius of the tool has been realized in more focused and controlled settings.

One final thought triggered by all this: the continued waves of technology are doing a job of creating and destroying temporary opportunities for folks comfortable with technology. The first waves are almost always dominated by the few who are more comfortable with the toys; yet as people figure out how to make the interface Mac-like rather than PC-like, many more of us jump in.

Posted by tom at 12:06 PM | Comments (0)

What is The Startup Garden?

The title of this blog mirrors the title of my book, The Startup Garden, which seeks to help any entrepreneur take the next step forward when launching a venture. (P.S. Please buy this book from me—I have directions on this page how to do so, and hope to have an easier one-click button in place in the next day or two.) My book identifies the key skills (such as financial literacy and the ability to manage by setting boundaries) that entrepreneurs must develop to gain control, and mastery, over their nascent venture. And my key argument is that virtually all successful entrepreneurs I’ve met or reported on as a journalist for publications like Inc. Magazine has necessary developed these skills as a result of growing a business. Therefore you need to master these skills as well. (As should yours truly!)

I’m taking this step backward today in order to move forward for the next stretch of time. I’ve got a bunch of posts backed up, and they make much more sense when the context is clearer. For today, I’d like to call attention to an article I wrote for the magazine The Industry Standard three or four years ago. When I read articles about Web 2.0 and the starkly lower requirements for successful startups, I often think of my article, Small is Beautiful.

Posted by tom at 03:26 PM | Comments (0)

Read The Risk Pool By Malcolm Gladwell

If this post does nothing more than get you to go read Malcolm Gladwell’s New Yorker article on the challenges to large corporations caused by pension obligations, than I’ve done my job.

No, really. Please just go here and read the piece. I can wait. In fact, let’s take the rest of this post to the next page.

Okay, if you care to hear my thoughts about this article: it’s (okay I’ll use Doctor Evil-speak instead of what you know I want to say) frickin great. This is great writing. Great business writing.

Check out this passage:

“Looking at General Motors and the old-line steel companies in demographic terms substantially changes the way we understand their problems. It is a commonplace assumption, for instance, that they were undone by overly generous union contracts. But, when dependency ratios start getting up into the 3-to-1 to 7-to-1 range, the issue is not so much what you are paying each dependent as how many dependents you are paying. ‘There is this notion that there is a Cadillac being provided to all these retirees,’ Ron Bloom, a senior official at the United Steelworkers, says. ‘It’s not true. The truth is severy-five-year-old widows living on less than three hundred dollars to four hundred dollars a month. It’s just that there’s a lot of them.’

“A second common assumption is that fading industrial giants like G.M. and Bethlehem are victims of their own managerial incompetence. In various ways, they undoubtedly are. But, with respect to the staggering burden of benefit obligations, what got them in trouble isn’t what they did wrong; it is what they did right. They got in trouble in the nineteen-nineties because they were around in the nineteen-fifties—and survived to pay for the retirement of the workers they hired forty years ago. They got in trouble because they innovated, and became more efficient in their use of labor.”

Bingo. In terms of style, this is just perfect. The clarity of this thinking is forged by the simple, powerful prose. While his article focuses on the impact of demographic trends on international competitiveness, his attention to detail and his ability to tell a story make this feel much more than the sum of the parts. Gladwell uses a simple lens (again, the meaning of the “dependency ratio,”) to create a wide picture that addresses the decline of American manufacturing (his details on the steel industry are great.)

(As a quick aside, I confess to enjoying Gladwell’s articles more than his books. When he’s at the top of his game, as he is here, his articles feel like miniaturized books. And while I admire his story-telling genius, his books often feel to me like expanded articles, or articles-strung-together.)

(Note to self: as a topic for another day, write about business books that were better as magazine articles.)

Substantively, he’s really onto something. I’ve read quite a lot about the competitiveness of the auto industry, and of manufacturing in general, but I’ve yet to read a passage that assesses the challenge facing GM and other so clearly.

It could be that I like his article much because it does a better job of expressing a point of view I’ve held for some time—the fact is that GM now manufactures cars that are competitive with Toyota in terms of quality, and it does so in domestic factories that are, at their best, competitive with world-class manufacturers in terms of speed, quality, injuries, and productivity. This fact does not excuse the company from a multitude of other sins; but it should not be ignored. And Gladwell’s ability to point out the fact that “what got them in trouble isn’t what they did wrong; it is what they did right” might do some good in helping outsiders propose the RIGHT solutions for these giants.

In fact, Gladwell does take GM’s leadership to task, only he does so with a fine edge, by pointing out that current CEO Rick Wagoner has the power and position to promote universal health care and expanded social welfare—yet has declined to do so.

Reading this article reminded me that business writing can have grace, power, and speak to important issues. Many years ago Richard Preston wrote several (or perhaps one) spectacular articles in the New Yorker on Nucor that became American Steel, a classic business book.

Having said all that, I’m saving one thought for last (since it is the least important point here.) Since the article ran in The New Yorker, there’s been a huge online debate about things slightly tangential to what matters. Last week a writer/economist/scholar named Jane Galt takes issue with the demographic theory of “dependency ratio” at the core of Gladwell’s article. He posted a not-altogether gracious riposte on his site, and she (seemingly delighted to have bagged the online tiger) responded with a self-deprecating reply that spawned an avalanche of comments on her site. The next day Gladwell followed up with a classy after-thought.

Now, her original point was well-taken: she disagreed with Gladwell on the key theory behind his article, that of the dependency ratio. But what transpired had little to do with what I ever thought was important about his article. Instead, a gang of yahoos pig-piled on the comments, and commented on their blogs, and it all became a remarkably stupid example of web-debate at its worst: a great article about an important issue that gets hijacked by folks without the patience or common sense to try to focus on the main thing. I’m not arguing for sloppy reporting here, folks; I’m just expressing dismay over the fact that anything I read about this article on the web completely missed the point—if I were to rely on the web for my information, I would have completely missed the real point of this terrific piece.

Posted by tom at 04:54 PM | Comments (1)

A Gallon of Entrepreneurial Inspiration

A gallon as in....four quotes. Forgive the bad pun and the quick post, but the clients are hungry, and sated clients are what creates more good time for more good work. Here are four great sayings from unlikely sources. While I'm not going to state my opinion of each quote's relevance, they wouldn't be here if I didn't find a lesson for entrepreneurs in each.

Rod Carew, on Steailng Home (from Esquire Magazine):

"Stealing home is the exciting play in baseball. I got a thrill out of doing it. And the greatest thing about stealing home is this: Either you did it or you didn’t. There’s nothing else to say. Once I slid across the plate, I just stood up and walked back to the dugout. I never celebrated. I never turned around and looked at the pitcher or anything. I had accomplished what I’d set out to do for my team, and that was it. It was done."

Conan O'Brien, on finding holes (from, yes, Oprah Magazine):

“Stop thinking so much” proved to be the mantra of my subsequent weird career. People ask me all the time how I wound up with my own talk show or how I managed to make it last nine years. The truth is I don’t know. It’s like asking someone “So how did you get hit by a meteor?” My Late Night career has largely been the result of reacting honestly and spontaneously to people and problems around me. I don’t know how I got here and I certainly don’t know where I’m going. This is the essence of my philosophy and coincidentally, the words to most Jimmy Buffet songs.

“Which reminds me of one last piece of wisdom I heard a running back say about football. He said that despite the best planning and blocking, “the hole is never where it’s supposed to be.” What this man was saying is that real life is about reacting quickly to the opportunity at hand, not the opportunity you envisioned. Not thinking and scheming for the future, but letting it happen and reacting. In this way, life is a lot like football, right down to the part where you pat the ass of the man next to you.”

Sigfried and Roy on, um, capes (from Esquire Magazine):

"Wear the cape; never let the cape wear you."

Ted Williams, from his Hall of Fame acceptance speech:

“…ballplayers are not born great. They’re not born hitters or pitchers or managers, and luck isn’t the big factor. No one has come up with a substitute for hard work. I’ve never met a great player who didn’t have to work harder at learning to play ball than anything else he ever did. To me it was the greatest fun I ever had, which probably explains why today I feel humility and pride, because God let me play the game and learn to be good at it…”

Posted by tom at 03:14 PM | Comments (1)

Your Voice is Your Calling

Looking back over the past month of my inconsistent though earnest attempt to post regularly on this site, I’m struck by the randomness of the content. Most people coming to the site for the first time are probably wondering “what the hell is this about” And that’s because I still haven’t quite found the best way to speak with my true voice here.

That’s one trait of great sites which I really admire. People like Jory des Jardin, Ellen Lamb, Ken Levine, Tom Peters and Tod Goldberg (among many others) do a great job of publishing original material whose tone and content are seamless. And, without beating myself up, I haven’t realized such a consistency of voice, a fullness of who-I-am online. Yet.

And here’s why it matters so much on this site, which is really about the spirit of enterprise (that’s what my book explores too by the way.) Regardless of whether you are writing a book, starting a business, cobbling together a career, or simply living a life, it all makes far more sense when you’ve found your voice, and then travel down a path that serves as a place for you to sing. And everyone has a different voice which is as unique as a fingerprint.

Two recent things reinforced this thought for me. The first was a televised concert with Elvis Costello and guest stars, among them Billy Joe Armstrong of Green Day. When Armstrong sang Wake Me Up When September Comes (aided by a powerful performance by Sir Elvis and the Imposters) I realized that whoever chooses to cover this song, it will always be his—that he has written the perfect song for him to sing. Dancer from dance, singer from song; venture from adventurer. How can we tell the difference, and why should we care?

The second prompt came from this Warren Buffet quote in an interview about his philanthropic plans in Fortune.

“Well, when we got married in 1952, I told Susie I was going to be rich. That wasn’t going to be because of any special virtues of mine or even because of hard work, but because I was born with the right skills in the right place at the right time. I was wired at birth to allocate capital and was lucky enough to have people around me early on—my parents and teachers and Susie—who helped me to make the most of that.

“In any case, Susie didn’t get very excited when I told her we were going to get rich. She either didn’t care or didn’t believe me—probably both, in fact. But to the extent we did amass wealth, we were totally in sync about what to do with it—and that was to give it back to society. In that, we agreed with Andrew Carnegie, who said that huge fortunes that flow in large part from society should in large part be returned to society. In my case, the ability to allocate capital would have had little utility unless I lived in a rich, populous country in which enormous quantities of marketable securities were traded and were sometimes ridiculously overpriced. And fortunately for me, that describes the U.S. in the second half of the last century.”

Now, I’m just going to discount the value of hindsight here and take his words at face value. Even then they have great power. Here’s a guy who knew precisely what he was meant to do at an early age, had the good fortune to find the external resources to help him, and who performed his craft consistently for decades.

While none of us will amass the wealth of Warren Buffet, nor will few become the successor to Billy Joe Armstrong, I admire each for their consistency of vision, and their stubborn, patient, discipline when it comes to sticking to their vocation. There are certainly others I’d put on this list: famous folks like Scott Adams, Michael Lewis, Christopher Guest, Joss Whedon; and less-famous but equally worthy people like my buddy Gus Rancatore, owner extraordinaire of Toscanini’s Ice Cream.

And of course, I’d like to add a few others: you out there, and myself. My advice to you, and I assume my audience to be entrepreneurs whose ventures can be very loosely defined, is this: spend more time understanding your voice, and shape your venture to fit. Don’t pursue great wealth, or fame, or arbitrary measures that are beyond your control. Instead of launching an inauthentic business to capture a momentary business pocket; focus instead on recognizing what you’re good at, what you care about, and what you can deliver, and then adapt that to the world around you.

My advice to me is simpler: keep writing. Ultimately, the thing which I love to produce, and which comprises the bulk of my income (okay—which I’d like to comprise the bulk of it—most of which now comes through consulting), is writing. So, instead of getting too precious about this topic, I’ll shut up about it. And post again. Quickly. Quickly and slowly.

P.S. (I just came across this Ray Charles quote: ""With singing, the name of the game is to make yourself believable. When somebody hears you sing a song and they say, "Oh, that must have happened to him," that's when you know you're transmitting. It's like being a good actor. You make people feel things, emotions, and whatnot. But you gotta start with yourself. You got to feel it yourself. If you don't feel it, how do you expect someone else to?"

Posted by tom at 02:56 PM | Comments (5)