MITX Events - Free Social Media Tools

There were so many great tips and tricks given out at yesterday's MITX event I felt the need to blog about my take from the session. Panellist details are here:

Web Sites/Tips mentioned:

1. Slideshare.com - open an account and start sharing, get your words picked up by the search engines
2. ACME.com - see who links to you and your Google ranking
3. Flickr - turn your powerpoints into jpgs and upload your manifesto
4. Twitter Grader - Explore your ranking on Twitter and much more
5. Do one really good white paper and syndicate like crazy, push it through all the channels
6. GetSatisfaction.com a great site for connecting with customers and employees
7. Give more than you get in the social media world
8. Always link your blog to clear next steps, e.g. a potential webinar, web site resources, graduate your audience towards engagement and ultimately sales
9. The objectives of your marketing campaigns are key to the metrics you measure. I would put it more fundamentally than that - the business you are in, the unique market you intend to dominate -- determines what you measure.
10. Twitalyzer - fascinating analysis on how influential your are at tweeting
11. Facebook Insights - check out new metrics using Facebook Advertising
12. Check out Linkscape - optimize SEO rankings
13. Check out Ad Lab Microsoft - for metrics guidance
14. Spydermate -another great SEO tool to improve rankings

The overall picture in this exploding world of social marketing is that it is possible to obtain jugular dashboards as a start for free but I would encourage bringing in the experts to really maximize your exposure.

Good luck! More general advice on growing businesses can be found here where I've published some great one pagers.

The Compelling Arguments for SaaS

Around $9 Billion of the $284 Billion software market is currently sold using an online method, Software as a Service or SaaS. The online market is growing at 40%, the traditional market at 3%. So what's all the fuss about? Well I am convinced that buyers of software get a great deal with SaaS but it could lead to seriously reduced margins for the vast majority of software vendors.

The good news for buyers:

1. Great concept for tight budget, pay and play
2. Reduce admin costs and hassle of rolling out new software across all the users
3. Reduced hardware costs
4. Great for cash flow, no more large enterprise license payments
5. Software always up to date with all the new features
6. Difficult to customize however CIOs are now recognizing the huge wasted effort and expense of underutilized features in tailored software
7. Switching costs relatively low
8. Concerns over security and data leaving the business, outside the firewall. Watch Sox exposure. However you have to ask, is your internal security really any better than an outside supplier.
9. Clearly certain defense, intelligence, Pharma type companies may resist the SaaS model because of security worries but even this is changing
10. Difficult to integrate SaaS software with existing in-house software eg to achieve smooth workflow processes. (however this is also the case with existing disparate client/server systems
11. Ultimately after SaaS software gains enough users it is usual for the buyer to sit down with the vendor to talk about volume pricing deals (as they would in traditional software deals)
12. However cost savings may be less over longer periods (see Gartner analysts comments)

The issues for software vendors:

1. Building/renting sever capacity for
   hosting the service is becoming easier using Cloud Computing
2. Metrics management is key, eg Monthly Recurring Revenue or Committed Monthly Recurring Revenue (CMRR), CMRR growth, Churn (attrition rates) and cash generation.
3. Customer acquisition costs (CAC) are vital. Customer Lifetime Value ratios are vital. The web architecture allows deep and detailed analysis of customer behavior which allows dashboard type metrics worth measuring.
4. Watch scaling sales force too quickly
5. Sales lead times can be shorter than traditional sales model
6. Commission structures tricky but manageable – watch rewarding the correct behavior (no maintenance renewals in SaaS models)
7. US seems to be a few years ahead of Europe
8. No shelf ware concept ie if the customer isn’t using your product you are in trouble. It’s on demand computing like switching on the lights – need to over-service clients
9. Watch bandwidth of service regarding outages and servicing the customer
10. Avoids customizations of software (most of the time)
11. Staffing needs: Inside sales teams and how to motivate them.Outside sales teams needed eventually to close the enterprise type deals. Customer service professionals and technical support vital, VP Marketing probably more important than VP of sales
12. Ability to use aggregated data to share trends with your customer

Large software groups have a massive cultural issue on their hands (see WSJ article here) and many may need to hit the acquisition trail to garner that knowledge and culture quickly enough. Smaller software companies need to wake up to the fact that their overpriced client/server/maintenance model is over or at least build SaaS product offerings into their Product Road Map.

Twitter: Why and How I use it

How:

1. Go to Twitter.com and sign up.

2. Start Tweeting on key messages you care about.

3. Big difference between Facebook and Twitter. On the former you have "friends" who see each other's stuff. On Twitter you "follow" someone, bit like stalking, and hopefully they follow you but it is not guaranteed.

4. Think of Twitter more as an "announcement' based micro-blog.

5. I've found the best way to control and engage in conversations is through "Tweetdeck". Download Tweetdeck (or Seesmic Twitter) for free which gives you a great Dashboard to manage the tweets from people you follow in one column, then add a column for your own tweets so you can instantly see what you have said. Add a further column to spot tweets on key subjects say on Software as a Service (SaaS) by typing #SaaS in the search box along the top or #Bing, the new search engine by Microsoft. That # sign is very important. Twitter arranges stuff using # prior to words as a signal to trap those words.

6. At the top of Tweetdeck just type your 140 characters, anymore the screen goes red alerting you to cut it down. Spelling errors underlined in red.

7. People that follow you and that you follow are now connected. Therefore you can now Direct Message them eg say you are going to a function that evening and you want to know whether IanDSmith is going too! Just go to IanDSmith’s picture, hover over it, pick the top right hand box and DM. Type your message to Ian and hit enter.

8. Again with Tweetdeck in front of you, look at the top right hand corner, tick the Facebook box and now you have a live stream of all your Facebook updates.

9. I look for tweeters that share my interests and start to follow them.

10. I focus my tweets on ideas, quotes, articles, information that will help owners of businesses maximize growth. I’m looking for remarkable thinking, action, making things happen.

11. To maximize the impact of my 140 characters, I use tiny.url to shorten my links, thus maximizing my ability to say something useful.

12. Really good stuff is Re-Tweeted by me, as I spot it. Dead easy with Tweetdeck, hover over picture, bottom left square is Re-Tweet.

13. Occasionally I’ll give a personal update on my hobby of competitive masters track.

Why:

1. It’s another opportunity to get your manifesto out there, to add value to your community, to give something back, to add value.

2. It incentivizes me to stay current, blogs, FT, WSJ, HBR, Inc Magazine etc. Once read i grab great content and tweet it.

3. It allows me to cross-reference stuff happening on my web site or my blog.

4. It allows me to join conversations on events in real time. (Although clearly full scale blogging is better)

5. I can follow the companies I’m working with and spot conversations they are having and thus stay on point when I’m making observations.

6. I expected to meet like minded software entrepreneurs and I have: and because some of them were New England based, I was able to meet for coffee and start collaborations on a personal level.


Fears Overcome:

1. A big time suck: solution, I try to keep tweets to 10 minutes every day around lunchtime.

2. Watch spammers: I don’t follow everyone who follows me.

3. Nothing to say: Solution, surprise yourself. I think it forces you to define what your strong coat is, what you really feel strongly about.

Where is it going?

Who knows, but it is a very effective tool to keep aware of the big issues that impact your sector, communicate with your customer base, signpost great knowledge to your community and build your influence.

Negotiations – A Checklist to Improve the Odds

There are a million books on negotiation but busy executives don’t need a book, they need a cheat sheet! I offer these tips based on buying & selling businesses, negotiating with unions, negotiating with venture capitalists, turning around a software group and best of all winning arguments occasionally with my two teenage daughters! We negotiate every day of our lives: sales meetings, staff salaries, policy changes, vacation locations, budget cuts, acquisitions. Life is a negotiation.
I’m framing this advice around a major commercial negotiation between two reasonable parties.

Possible Tactics

1. Always clarify the up to date position. e.g. you mentioned that a new sales order was imminent the last time we met, tell me more.

2. Try to establish the housekeeping of the meeting; prospective agenda, time allowed, anyone joining via conference call. (this has the subtle advantage of establishing you as de-facto chairperson)

3. It is essential that your team stay relaxed and focused. Think of it as gears in a car. If you start the meeting in fifth gear and you get stressed, excited, over zealous – you have very little emotional capacity to go upwards and you will explode! Stay in first gear and seamlessly move up the gears to make a critical point but remember to come back down again. (see here)

4. Your team leader dictates the pace. Never speak unless invited to do so by the team leader. Don’t interrupt a silence. A professional team can make this look very natural.

5. Use questions to understand a specific stance, assumptions can be dangerous.

6. On the other hand if you are relying on key assumptions in making a point e.g. the price of a company, please state clearly the main facts you believe to be true including forecasts to allow yourself an escape route if circumstances change.

7. Be yourself which in my case means never bluffing.

8. Don’t try to be smart e.g. with respect it is clear from your spreadsheets presented that there is a flaw in your numbers.

9. Watch body language very carefully especially of the people not talking.

10. Difficult issues should be put to one side to keep the momentum moving forward.

11. Use time outs sparingly but effectively to gather your thoughts and garner input from the team.

12. On big points please believe in what you say. It will show.

13. If advisers are involved it is highly recommended that on really big points you deploy the “Principals Only” tactic. e.g. the acquirer and the seller excuse themselves to retreat to a separate room to agree a deal on that key point.

14. The word “help” is underutilized. As in, perhaps you could help me understand how you win the majority of your business.

15. Rudeness and sarcasm don’t work even if you’re British.

16. Document agreements along the way and make great theatre of the volume of points agreed.

17. Close on clear next steps with a timetable and agree action for non-compliance.

Strategies to Acquire World Class Talent

One of the key drivers of shareholder value is the quality of second tier management. Buyers of companies, sponsors of IPOs, and PE & VC companies invest in products, people and markets..... but especially people! As a recent WSJ article put it so well, investing in great talent (as opposed to one superstar) assists in four key areas:

• the creation of knowledge, sources of information.
• insightful and honest feedback.
• provides a critical link to clients.
• allows senior management to shine.

Practiced acquirers don’t have a warehouse of post acquisition specialists that run the acquired target for the next 5 years! They need a plentiful supply of world class and effective talent.

Now is an unusually attractive time for small and medium sized companies to acquire this talent. It’s more available and at a better price than at any time in the past twenty years!

The key is to think proactively. Ideas worth considering include:

• Employer branding; a recent WSJ article highlighted using segmentation techniques to find the talent you need.
• Discard job specifications and instead create “performance profiles” that set out the various roles that the business needs to see being performed well. Many of these profiles will describe roles in say, “social media measurement”, which are badly done today.
• Review new ideas from HR specialists like Dr John Sullivan. His web site is packed with great strategies on acquiring talent.
• Build a tight and meaningful relationship with an outside recruitment house.
• Deploy state of the art technology to control your recruitment process.
• Educate all staff on your compelling story, turning it into an evangelistic message. Passion is infectious to prospective candidates.
• Attract similar passionate people to you, by publicizing your culture, Google, Pixar, Apple and smaller private companies such as MathWorks come to mind.
• Create a University concept. Teamstudio, a small successful software company, was able to create an identical induction experience for new staff covering their first 6 weeks whether they were joining the US, EMEA or APAC offices.
• Encourage the execution of projects by the use of multi-disciplinary teams cutting through old fashioned silo departments. Then advertise this approach to prospective candidates. You are competing for the best talent in the marketplace. Attractive training and job experience are often higher priorities than marginally better salaries.
• Create innovative, clear and precise long-term incentive plans. In private companies, subject to tax advice, it is possible to create really smart capital instruments that return lower rewards if someone leaves but offer attractive returns on achievement of strategic goals. Public companies should look beyond share options to offer a more direct and granular reward for second tier management.

The acquisition and retention of great talent should be high on the list of any CEO’s agenda. Next to positioning, it’s the one thing that makes a material impact on shareholder value.

Best Industries in Recession - Inc.com suggestions

Those clever guys at Inc.com pushed out a great little thought provoking piece titled
The Best Industries for Starting a Business Right Now.

So I thought it would be useful to list them and offer a few comments:

#1 Candy - industry grew 3.7% - think niche and value, be remarkable

#2 iPhone Apps - 30,000 apps to date - keep the day job, 95% of these apps will not make money for the developer

#3 Health-Care Technology - $19Bn pledged in the stimulus bill for health-information tracking systems - Great part of the software space, but be clear on your business result and the customer you are trying to impress

#4 Beer, wine wholesale - export of American whiskey grew 8% last year - stay close to the value argument, still very price sensitive

#5 Software as a Service - software as a sector expected to grow at around 5% but SaaS potentially at much higher levels - the on demand, subscription model is very compelling for buyers but vendors need to be crystal clear on their business model

#6 Home Health Care - demographics on your side -the key is choosing a niche you can dominate

#7 Yoga Products & Services - staggering to think Americans spent $5.7Bn on yoga stuff in 2008 - think about what has not been done in this industry

#8 Technical & Trade Schools - plenty of potential candidates - think about repeat business and revenue model carefully

#9 Fast- Casual Dining - Panera Bread grew 16% last year - see my twitter ref to food trucks

#10 Green Construction -green building space taking off - perhaps a good time to train your staff on the issues affecting this sector to get ahead of the curve

#11 Niche Consulting - saving money, pr damage control mentioned - it will take much longer than you think to build a brand - allow 9 months for your first client

#12 Education Technology - US still emerging market - great opportunities for hardware and software but again you will need to be remarkable and niche to stand out

#13 Temp Staffing Firms - in theory yes - but in practice, we need to be much closer to recovery to see this industry pick up - long term the trend of senior temp execs will be big in the US like Europe

#14 Government Services - Huge growth stats being thrown off this sector - invest in quality RFP and documentation preparers

#15 Accounting Services - cash flow management driving growth - great opportunity for regional practices to steal market share. The public are very cynical of the big brands

#16 Repair Services - if it's worth repairing why buy a new one -quality of service will separate the winners from the losers

#17 Self Improvement - historically seen strong growth - pricing of these products and services will be key, need to show remarkable value

#18 Energy - fastest growing sector of the Inc 500 -watch the divergence between investor appetite and entrepreneurial passion, bootstrap for as long as you can

Good luck!

How VCs Price Deals

At some point in your career you may encounter the VC or PE world (see helpful list). You might: sell a non-core subsidiary to them, use their funds to start a company, use their money to buy a company, or buy out your partners, or even take a company private from the public markets. Whatever the transaction, their pricing model seldom varies.
The VC needs to value the business before their money goes in and of course on exit. Depending on their perceived risk they will be shooting for an Internal Rate of Return (IRR) of 40% to 60% or in plain English they expect their money to produce a compound annualized rate of return of vast proportions. Now many of their deals will not work out so they need to aim high. In two tables below I have summarized a fictitious example based on many deals completed.

The target company is purchased for $16m using valuation methods described in my previous Briefing Paper #4, let’s assume this time it’s based on an EBITDA multiple of 8 on $2m. It is assumed to exit in 2014 for an EBITDA multiple of 10 on $6m EBITDA. The VC exits the deals owning 65% of the equity. The VC expects to achieve an IRR of 47.85%.