Ready, Set, Traction

For accounting this week we read an article called How Much Traction Is Enough for Investors.  It listed seven ways to show investors you have a business plan that has potential:

1. Start with real sales
2. Free and freemium products need a solid base.
3. Market penetration is a must.
4. Gauge average traction sizes and sales per customer.
5. Know your customer acquisition cost.
6. Show acceptance by major customers and key distributors.
7. Land public statements from industry experts and groups.

Our project team this term is developing a plan for an eco-lodge in Sierra Leone, West Africa.  Our mission is to narrow the disparity gab by bringing extreme economic worlds together through ecotourism and promoting community development through entrepreneurial training and idea sharing. I did a little more research to see what advice (industry specific) might be out there for such a venture.

GrowThink, a highly marketed company designed to help people write hotel business plans suggest that there are five keys to success in starting a hotel:

1. Location and Opportunity – Where competitors are not fulfilling all customer needs.
2. Strategy – Consider the combinations of amenities, atmosphere, location and services that will be right for your customers.  Answer the customer’s question “why is this my hotel?”
3. Planning – A simple, clear and persuasive outline of how you will take on the opportunity.
4. Fundraising – Will be needed… so have a solid business plan.
5. Hospitality Mindset – Customer service imbedded in the culture of the management and staff.

Keeping in mind they are trying to sell me a template for a hotel business plan . . .  I will take their advice in stride.  I do find keys one, two and five helpful though in considering this specific industry.

Entrepreneur, as you might guess, says the overall “want” of a lender or investor is “If I give you X dollars, then how much money will I get back?”  The article also give an example hotel pitch and lists four key factors to raising capital:

1. The Project – What is your proposed business?  Why is it unique? What advantages does it have? Why will it be successful?
2. The Partners – Who are the key partners? What is their track record?
3. The Financing – What are the realistic numbers? What problems or roadblocks are ahead?
4. The Management – Who is running the day to day operations? What experience do they have?  How does this team set the business up for success?

I would agree that all of these factors are important however given the nature of our triple bottom line approach, the type of investors we will likely be pursuing will also want to know:

The Environmental Impact – What is your sustainability plan? What is your CO2 footprint?  How will these goals be measured and accounted for?

The Social Benefit – What social values will your enterprise stand for? Will you be paying your staff a living wage? How do you plan to partner with the local community?

The Wall Street Journal published an article that indicates chain hotels are looking to expand into Africa. The Marriott for example has plans to open 23 hotels.

 “Overall, international chains are planning 208 new hotels across Africa, according to W Hospitality Group, a research company, up from 159 in development last year.”

Though no direct advice was giving on how to purse funding it did mention that these chain hotels are relying on local developers rather than investing their own funds in Africa.  An option we have not considered is finding a local developer in Sierra Leone that we could partner with.  And if nothing else the article provides evidence that the market in developing African countries with abundant natural resources is growing and the time is now to invest.  This article indicates the same thing.

Kyle Dunn, wrote this short book from his experience in raising institutional capital.  Though not industry specific, I did find his approach very practical down to earth.  It included the following:

Top 12 Things to Do to Source Capital

1. Build a budget.

2. Say something different and reverse control of the pitch.

This one particularly caught my eye – what does he mean by “reverse control”?  Here is a clip of his explanation:

“. . . remember that no one is saying no to these investors. Keep that in mind. People tend to want what they can’t have and sometimes saying no is the fastest way to getting a yes.”

3. Create a dynamic website and promote it.

4. Establish an electronic direct mail (EDM) campaign.

5. Execute a relationship-reliant direct mail (DM) campaign.

6. Put together a basic social media marketing campaign.

7. Design a quality brochure.

8. Create a brochure with a strong Call to Action (CTA).

9. Engage a public relations (PR) firm.

10. Plan for event marketing.

11. Don’t forget traditional print advertising.

12. Optimize a CRM system.  – Which means Client Relationship Management (CRM) system, incase Q2 is a little fuzzy. ;)

Dunn’s recommendations are in place though very weighted on the marketing side.  He is all about going after the big dogs in venture capital though so in the end if that is where we decide we need to invest our efforts, his advice will be appreciated.

What if Businesses could only Market Locally?

That’s the way it used to be!  In our new flat world that is connected by the internet, mobile phones and mail systems the thought of only marketing to those near you seems archaic.  The reality is it was less than 250 years ago the US post office was formed, 77 year since the first television program was broadcast and 33 years since the internet became public. 

You may have heard of Moore’s law that basically states that the capability of technology doubles every two years.  This same trend seems to be in place for the number of advertisements on the market today.  Individuals are swamped with request for their attention and money leading many to hate marketing.

I hate marketing.  And I’m sure I’m not alone in this!  How many times have you gone to check your mailbox only to return with a handful of advertisement and no mail.  The same is true for my inbox.  Ads and promotions clog up my account making it difficult to find (easy to lose) those important email.  My only solace — at least trees are not suffering for the spam I receive.

Marketing takes up time — according to this site, Americans spend around 70 hours a year dealing with junk mail.  That doesn’t even begin to count the number of hours spend deleting or unsubscribing from junk emails.  Let alone the number of hours spent being bombarded with advertisements on television, radio, web banners, pop up ads, marketing calls, spam texts, and the endless other forms of digital marketing that is emerging. 

Sells you things you don’t really need — With the number of mini storage unites in this country housing the things we can’t fit in our houses, do we really need more stuff?  Infomercials are renown for convincing people they need yet one more thing.  Take my mother for instance (I love her but…) this Christmas she decided to buy me a “cooking machine” that basically cooks your food in different shapes — really mom!!??!  Why did she think I needed that? Do we really need all the gigots and gadgets?  I say NO!

Invades my privacy — Another thing that annoys me is the selling of my information for marketing purposes.  Last year I did some comparative shopping online for health insurance and to this day, months later I am still receiving calls telling me they are calling regarding the quote I requested.   I won’t be making that mistake again!

Often stretches the truth — “You have been selected to WIN!” . . . right!  Deceptive wording, images and claims of what a product or service will do for you is seriously a problem.  The FBI reports almost 100 million mass marketing fraud cases on the books that are pending.  It not only hurts consumers it costs tax payers money!

Contributes to environmental loss — with the boom of marketing has also come the boom of consumption.  Without factoring in the actual products consumed, junk mail alone kills 2.6 million trees each year and produces 1 billion pounds of landfill each year according to this site.  If that weren’t enough, the pulp and paper industry is the single largest consumer of water used in industrial activities using about 28 million gallons of water each year to process the same junk mail.

So what is to be done if we can’t turn the hands of time back and just focus on selling to our local market?  Though it’s not a complete solution, the way we approach marketing in our own businesses can make a difference.

Serving vs. Selling — In my research on marketing trends I stumbled across the coined phrase “marketing myopia.”  My curiosity took me to Wikipedia where it talks about a theory that I want to believe is true.  It stands for the idea that “businesses will do better in the end if they concentrate on meeting consumers’ needs rather than on selling products.”  Theodore Levitt wrote a paper in 1960 with Marketing Myopia as the title and published it in the Harvard Review where he was an editor.  Levitt held that the myopia culture would lead a business to fail because they would adopt a complacent mindset and not keep up with what the consumer wanted (vs. needed).  Some suggest that this paper marked the beginning of the modern marketing movement.  If that’s the case, maybe we need to retrace our steps and reconsider the outcomes and obvious unintended consequences of our societal emphasis on indulging our every want.

To give just one example: please don’t make me cite the sources on statistics for health problems due to obesity that are at historic highs.  Marketing has played a significant role in this and where has it landed us as people?  Yes, it made McDonalds and numerous other businesses a lot of money but at what cost? 

My point is that as citizens of the world we are consumers that have a choice to influence the market, and marketing, by our purchasing decision and how we respond to the waste that surrounds us.  As future business owners we have a choice as to how to market and how we are going to present our products, these are real issues we need to wrestle with and find better solutions for.

In the mean time as a consumer, take 2 minutes to save yourself hours later by registering on the National Do Not Mail List and the National Do Not Call List.  Your on your own when it comes to emails.

An Achievable Dream

For our team project we chose to study a school on the East Coast that is making a significant impact in the lives of children living in poverty in the inner city of Newport News, Virginia.  An Achievable Dream Academy (elementary school) and An Achievable Dream Middle and High School provide K-12 education for at risk and impoverished children.  They also have a nonprofit counterpart called An Achievable Dream Inc. that is responsible for raising the extra funds needed to run the school and also help coordinate some of the programs that benefit the children.

The children that attend these schools are children that otherwise would have likely become a statistic in the dropout rate, be yet another teen pregnancy, caught up in gang violence or just simply the unemployable.  You see, over 50% of the population of Newport News has a family income of $25K or less.  85% of the local population comes from single parent or guardian homes.  And 100% of the children that attend An Achievable Dream qualify for free or reduced lunches.  Here are some additional statistics on the area if you are interested.

Walter Segaloff, a local businessman is the visionary behind this school.  He was having a hard time finding functionally literate high school graduates to employ in his warehouse.  He would frequently find himself interviewing around 300 applicants to find 40-50 to hire.  Wondering if he was the only business facing this challenge, he consulted with the local shipyard and a couple other plant owners and found they where having the same challenge.  

Wondering how far reaching the problem was, Walter set a letter out to 200 business owners calling meeting to discuss the problem.  To his surprise 150 of those businesses came represented.  The problem was greatly affecting their profitability. 

With the business community’s support and urging, Walter began to dream about what could be the hook, the leverage point for change.  One day watching a tennis match it occurred to him that this sport could provide the inroads needed.  The next year he began an after school tennis tutoring program that over the last two decades has grown into this great school that is know for quality and excellence.

An Achievable Dream or AAD for short has a unique culture and curriculum that set it apart form other schools.  Each morning, at least five administrators, local officers or military soldiers greet children as they walk into school.  This is not because they have discipline problems — rather just the opposite.   “We really don’t have any problems with violence in our schools” says Judi Overbey, the AAD Tennis Director who is our main contact.  This same greeting also happens in between classes.  Teachers stand outside their classroom door and greet children on their way in.  The children are required to shake their hand, look them in the eye and say good morning or good afternoon.  Some of the benefits of doing this Judi said are boosting the children’s confidence around authority figures, it also gives authority figures a daily opportunity to build a relationship with the children and it also teaches the children good manners.  Likewise it give teachers an opportunity to assess how each child is doing and weather or not there might be something happening at home that would require them to provide the child will a little extra attention and support.

Once in the school the children are not allowed to talk in the hallways but go directly to their morning program, a pep rally in the gym where they line up, their uniforms are inspected, they sing the national anthem, hear a motivational message from one of the teacher that gets them jazzed up about learning and then they recite their “banners.”  Banners are saying that are hung all around the school to remind the children of important values and truths.  Through repetition and participation in saying them each and every morning, these banners become a part of each child.  Here is the complete list:

•  Proud to be drug free
• Be cool – stay in school
• Nothing was ever achieved without enthusiasm
• It’s nice to be important, but it’s more important to be nice
• Being bright is out of sight
• Decisions are up to me
• Success in school – helps me be successful in life
• Being a success means doing my best
•  I can go to college if I work hard
• An Achievable Dream loves me
• I am someone special
• Believe in yourself
• I will say no to guns
• I will say no to drugs
• Being smart sends my scores off the chart
• I must learn to earn
• I AM somebody

The culture however does not stop there.  The teachers on staff understand why they are there and have a real heart to see each child succeed.  Walter evangelizes the belief that every child can and will learn.  Extended school days, Saturday classes and four additional school weeks in the summer help children receive the attention and help they individually need.  Breakfast, hot lunch and nonperishable food sent home with children on Fridays to help students make it through the weekend and are also important elements of the care and support these children need to succeed.

As for the expanded curriculum, children attend a social rotations class each morning in which they study one of the following topics:

Speaking GREEN – In this class they work on mastering the verbal skills of the wider world.  It teaches the standard American English they will need in a college classroom, in a job or out in the business community.

Etiquette – Students must learn and are expected to display good manners.  Skills such as table manners are taught preparing the children for special occasions like when their accomplishments are celebrated.

Peaceful Conflict Resolution – Core to the AAD culture, this class explores why the pace and safety are better served by non-violent strategies that produce solutions that preserve the dignity and wellbeing of all involved.

Ethics – Teaches the children how to make sound value-based decisions.  The class focuses on putting character traits like honesty, respect, trustworthiness, integrity, responsibility and kindness into action.

Healthy Living – Time is devoted to learning sound habits like nutrition and hygiene.  Basic skills the children will need for life but may not be taught at home.

So do all AAD’s efforts pay off?  Do all the extra hours, hand shaking and special classes produce results?  — Evidently, as the school has a consistent 100% on time graduation rate with student’s test scores rivaling the students of more affluent schools in the area. 

AAD is making a significant difference in narrowing the opportunity gap and bringing social justice to Newport News. This year AAD is celebrating their 20^th anniversary.  Click here to watch their most recent video and maybe you too will be inspired that the dreams of these children can come true.

Pursuing Happiness

Each of us have come to BGI for different and yet more or less the same reasons.  We want to succeed in life.  We want to live a life that has purpose and meaning.  We want to make a significant difference in our world — in our communities.

Our vision of what that might look like varies radically, but we are at business school to learn — to be trained to use tools that will help us on our journey through life . . . to be happy.

One of the tools that we talked about this week was the Max-Neff model in Marsha’s screencasts on Social Sustainability.  Manfred Max-Neff, winner of the Right Livelihood Award theorized that the following nine needs are universal to all people. He further believes that if one of them is not met, a form of social poverty exists.

Max-Neff’s Fundamental Human Needs

He also believes you can’t overcompensate on one to make up for a different one that is not being met.

The first question that comes to my mind is, “Is it reasonable to expect that an employer should provide or nurture each of these qualities or is this a personal responsibility that we must each own and actively cultivate?”

I believe an argument can be made to some degree that these needs fall under our personal responsibility in the decisions we make in how to manage our life including who we choose to work for.  A more realistic viewpoint however would be that the responsibility falls on both the employee and the employer.  Basic needs often tether workers to jobs they “can’t live without” and yet that are “killing them” because of the non-conducive work environment.  

The fact remains, as Marsha pointed out, there is definite incentive for employers to take this responsibility upon themselves and nurture these needs as they stand to benefit:

16% better overall work performance

125% less employee burnout

35% more commitment to the organization

46% more satisfaction with their jobs

In the article we read called Creating Sustainable Performance, the authors propose that the word “thriving” best defines employees that are happy in their work.

Thriving = vitality + learning

Or in other words, those that believe . . . What I do makes a difference.  + I have the potential for further growth. = Sustainable individuals with organizational performance.

The article outlines four ways that companies can help their employees thrive:

• Providing Decision-Making Discretion  
• Sharing Information 
•  Minimizing Incivility  
• Offering Performance Feedback 

Because of the fact that happy employees miss less work — which means less lost time for the company.  And report significantly fewer doctor visits — which means healthcare savings, it make financial sense for businesses to make a concerted effort to ensure their employees happiness.

But, what do you do if you are NOT the employer (in the position of fostering this culture) and your current employer is not so enlightened as to have created this environment for you?  What do you do if you are not happy in your work? . . . if you are not thriving?

Burnout is a real problem that is affecting Americans more than ever.  According to the American Psychological Association:

77% experience PYISICAL symptoms related to stress in a given month.

73% experience psychological symptoms related to stress in a given month.

This CNN article provides additional statistics, lists signs and symptoms to watch for as well as offers some helpful tips on stress management for busy people.  Suggestions include:

• Learn to say no.
• Reevaluate your goals.
•  Reduce your commitments at work and at home.
• Learn stress management skills.
• Get plenty of rest and eat a healthy diet.
• Finally, give yourself a break. 

In a world where 50 hour work weeks are becoming the norm and “instant gratification takes too much time,” author and Ted speaker Arthur Honore suggests that it’s time for Americans to slow down and “get in touch with your inner tortes.” In his recent book In Praise of Slow, Honore reminds readers not to miss out on life by speeding through it.

Another recent Ted talk suggests that one of the best ways to succeed in life and avoid burnout is by getting the sleep that we need.  Sleep deprivation has been tied to lower work performance and poor decision making not to mention fatigue and even depression.

So, how do we become happy?  The responsibility is shared but we must not neglect our own personal responsibility in achieving it.  And so in the spirit of slowing down to get the sleep I need to be happy . . . I bid you all good night! 

Non-Profit, For-Profit or Hybrid

“In 2012, approximately 10 million people were involved with social enterprises, generating more than $500 billion in revenue.”

This is encouraging news for those of us that are interested in the possibility of starting our own sustainable enterprise that operates off the triple bottom line.  So assuming we have a viable idea — now what?

An article called Take the first Step Toward Launching a Social Venture provide some great insights to get entrepreneurs started.  And part of that process includes choosing a legal structure for your venture. “This is a choice especially difficult for social entrepreneurs — people that want to combine profit and purpose.” says an article on the Triple Pundit that explores the social entrepreneurs dilemma. 

Historically the legal structures most commonly used split endeavor into one of two categories.  They either have a social mission or focus on commercial profits.

Non-profits use revenues to accomplish its goals rather than fill the pockets of owners and investors.  Advantages include being able to receive funds from foundations and donors that want to invest in the non-profits mission.  Tax exemption for revenues received is another benefit that encourages the growth of these organizations. 

For-profits have the main goal of making money — and profits direct financial benefit owners and investors.  Owners and investors also more control in managing the company and making decisions that impact the companies growth and success.

Here is a set of slides that may help you decide which is best for you.

If you find yourself wishing there where more choices available, more and more options are being explored.  Here are some hybrid possibilities:

L3C companies’ primary purpose “is not to earn a profit, but to achieve a socially beneficial objective, with profit a secondary goal.” However they are permitted to make a profit.  Like in an LLC, members enjoy limited liability for the actions and debts of the company while offering a flexible ownership structure.  For more information on how to start an L3C, click here.

B-Corp businesses “create general benefit for society as well as for shareholders. “ They also publically report on their social and environmental performance via third party standards.  To learn more about benefit corporations, and see some examples of ones in action, go here.

For-profit subsidiary of a non-profit is “a nonprofit and a for-profit are linked. In some cases, one is a subsidiary of the other; in others, the two entities are bound by long-term contracts in which one entity fulfills a basic need for the other and vice versa.”  The above linked article also provides pointers on when this model work the best along with advantages and disadvantages. And this article provides ten rules to observe in setting one up.

Non-profit subsidiary of a for-profit is simply the converse relationship of the for-profit subsidiary.

Though traditional business models still work for some, an article in the Stanford Social Innovation Review states: “Today it is clear that the independence of social value and commercial revenue creation is a myth. In reality, the vectors of social value and commercial revenue creation can reinforce and undermine each other.”

The article then begins to unpack the “Hybrid Ideal” — which is considered to be achieved by the creation of an organization where services and products fully support social wellbeing AND commercial revenue. 

For a more exhaustive survey of the above legal structures there is one last article you should check out.

Regardless of the structure you choose, all our efforts are need to bring positive change to our world that faces so many big problems.