Thursday, September 14, 2017

Trying Oculus Rift

Two days ago, I stepped into the world of virtual reality. It truly was amazing. If you're a Star Trek fan, as I am, putting on the Oculus Rift headset is like stepping into the holodeck.

I got to try Oculus Rift because two friends of mine have formed a startup to develop a B2B application using virtual reality. One of those friends invited me over for a demo. While I didn't get to interact with her app, I did work through Oculus Rift's usage tutorial, learning how to use my hands and head to interact with my 3-D surroundings.

The imagination that has gone into this product is absolutely incredible, from the hardware design to the mind-blowing software. First, you're in a Japanese-like room with a fireplace and sounds of water, then you're in a blank infinity room, and you can see your virtual hands in front of you, holding the controllers. An English-accented woman gives you instructions. She sounds very other-worldly. You learn to push buttons and then shoot circles simply by pressing a button and pointing your index finger. Just like being a kid again. Blam! Blam!

But the best part was yet to come - winding up in a workroom filled with electronic junk and a little robot. The robot has personality and actually seems to want you to interact with it. My friend told me to turn around. You're really in a 3-D space! The robot gives you disks to put into a 3-D printer. Out pops butterflies. You can make them land on you and fly away. The experience is enchanting and somewhat addictive. I got to build and interact with a few more items - like little rockets - before the system froze.

I've known a lot of entrepreneurs over the years, but this is the first time I've dealt with ones who are in the field of virtual reality. Now I'm hooked and can't wait to go back and experience more. I'm really looking forward to seeing my friends' app and trying it for myself.

Tuesday, May 9, 2017

3 Reasons Entrepreneurs Should Be Financially Literate

By Wyn Lydecker
If you are like most entrepreneurs, you have a big idea you want to develop as quickly as possible. While you may wonder how you will raise funding for your startup, chances are that you have not had much exposure to accounting or finance. You may even have no idea how you will keep track of the money flowing through your business. But your degree of financial literacy can make a huge difference in how much success you achieve. Here are three reasons why every entrepreneur needs to acquire at least some of the knowledge taught in an Accounting 101 course.
Reason #1 – To Know How Much Money You Make
           Several years ago, when I was working with an innovative energy-efficient lighting company that wanted to raise half a million dollars, I asked the CEO why he needed to raise funding. His answer was typical: so he could grow his business. He and his partner had used home equity loans to finance their launch, and now they wanted to expand. But when I asked him how much money his company was making, he had no idea. “I have to ask my accountant,” he said.
I was stunned. How could someone who had put his home on the line and now said he needed to raise capital, not keep track of the money his business was making – or worse – maybe losing? This man was an intelligent and effective salesperson, highly capable of attracting new business. But he and his partner, who provided the technical brains, had completely outsourced the financial side of the business to their accountant. Once we had the financial statements in hand, it was obvious that the company had plenty of income and plenty of cash flow to fund a good, steady rate of organic growth. They just needed to keep plowing their earnings back into the business. 
Reason #2 – To Enable You to Raise Financing
           Blindly trusting an accountant or using QuickBooks to do your books yourself when you don’t have a basic understanding of accounting or of general financial management can hurt you when you try to get financing from a bank or an equity investor. In another case, I was developing a business plan for a fashion designer. Even though she kept meticulous spreadsheets detailing the amounts and the costs of every item that went into the clothes she produced – everything from imported fabric to buttons – she left her bookkeeping to her accountant. The statements he provided convinced her that she was losing money, and she desperately wanted to get a line of credit from a bank to enable her to create samples and inventory. She had to spend money on raw materials, labor, warehousing, and shipping months before she was paid by the boutiques that sold her line.
           When I saw the statements, I was incredulous. Using QuickBooks, her accountant had allocated 100% of her raw materials to her cost of goods sold as they were purchased. A key principle of accounting is to match revenues and expenses. Some of those raw material costs should have been capitalized on the balance sheet. Then, as she sold her merchandise, she could match the revenues and the cost associated with producing those revenues. When we took her records from her own spreadsheets and developed fresh financial statements using Excel, it was clear that the designer had excellent gross margins and even made a net profit in some quarters. Her biggest problem was timing of receivables and payables through the different fashion seasons. She needed working capital to tide her over from season to season.
Armed with the revised statements, the designer went to her bank and received an unsecured line of credit, enabling her to produce new samples to sell at New York’s Fashion Week and to expand distribution to more boutiques.
Reason #3: To Build Financial Resources for Expansion
Contrast these last two scenarios with the following. Ed McLaughlin, with whom I coauthored a book on entrepreneurship titled, The Purpose Is Profit: The Truth about Starting and Building Your Own Business, did not have a degree in business, so he asked his accountant for instructions on how to keep track of his cash and his accounts. His company did all the bookkeeping in-house, and he took home a print-out of the financial statements at the end of each day. Ed wanted to know where his company stood because he had bootstrapped his real estate services outsourcing business, USI Companies Inc, with personal savings, and he had a young family that relied on his income.
As USI grew, Ed hired a CFO who put in more sophisticated accounting software. With the CFO in charge, Ed stopped taking statements home every day, but he continued to read his financial reports each week throughout the life of the business. Armed with such knowledge, the company was able to built a war chest of retained earnings, which they used to invest in regional and product-line expansion. Ultimately, when Ed and his partners sold USI to Johnson Controls, they realized the value of their financial discipline.
It didn’t take an MBA for Ed to understand and track his revenue, expenses, payables, and receivables. He found people who showed and explained the concepts to him, so he could grasp how much cash was flowing through his company. It is cash flow, after all, that determines whether a company can stay alive or not.
The accounting systems we use today were first developed in the Renaissance by the merchants in Venice to keep track of the trade flowing through their ventures. If you are starting a business or own a business, it will pay to invest some time in understanding the power of these systems and in developing financial literacy. If you are starting or building your own business, take the time to learn about basic accounting principles. You can get advice online, in books, or from your banker or accountant.                 
Wyn Lydecker is the coauthor of The Purpose Is Profit: The Truth about Starting and Building Your Own Business with Ed McLaughlin and Paul McLaughlin. This article first appeared on the Wharton Entrepreneurship Blog.      

Friday, April 21, 2017

How Your Customers Can Help You Scale

by Wyn Lydecker

When Ed McLaughlin was growing his business, United Systems Integrators Inc. (USI), he realized that retaining his initial customers and serving them in new ways would help the company grow faster than just focusing on new customer acquisition. It turned out that his strategy paid multiple dividends. Experts estimate that new customer acquisition costs can be five to 25 times more expensive than retaining a current customer.
Your most valuable asset
Your customers are your most precious asset. Your goal is to build a customer base of repeat buyers who promote your business to other buyers. An effective customer-referral system is the business equivalent of obtaining the Golden Fleece.
If you expect to build a powerful customer-referral system, you should have solid answers to the following questions:
·         Do you deliver on your value proposition?
·         Do you maintain a clear competitive advantage?
·         Do you provide superior customer service?
·         Do you make doing business together a pleasurable and rewarding experience?

Listed below are 10 key ingredients you can provide to deliver superior customer service:
1.      Make a cultural commitment to superior customer service from the outset.
2.      Assess, manage, and satisfy the customer at every single interface point.
3.      Provide a significant product performance guarantee.
4.      Assign a dedicated account manager to each customer relationship.
5.      Be available 24/7 to log and address customer concerns.
6.      Provide a 24-hour-response-time commitment.
7.      Schedule customer engagement forums for feedback.
8.      Reward team members for providing superior customer service.
9.      Make sure that senior team members get directly involved with customers and lead by example.
10.  Develop customer-feedback systems to stay in touch with customers and ahead of the competition.

USI's commitment to customer service enabled USI to enjoy a 95 percent contract renewal rate, while growing the business at a compounded annual rate of 40 percent. And they never entered a courtroom to resolve disagreements.
The long-term relationships you build add tremendous value, as shown in an analysis by Josh Chapman,  a finance expert at TOPTAL. His article, The Importance of Customer Retention — An Empirical Study, uses financial modeling to demonstrate the financial impact of customer retention when growing your business.


To build trust with your customers, take the following actions:
·         Develop an advocate or coach within the customer organization.
·         Ensure your product’s benefits align with your customers’ needs.
·         Work together to formulate plans to solve problems.
·         Jointly develop and sign contracts for trial work.
·         Exceed customers’ expectations on every assignment.
·         Jointly market your success within the C-Suite.
·         Execute a master contract for an exclusive relationship.

When Ed was growing USI, he made listening to his customers and adapting his business model to meet their needs top priorities. This practice enabled the company to grow by adding product line extensions. During the early growth stage, USI had the good fortune to land an exclusive real estate service contract with the Olsten Corporation on Long Island. Olsten was a high-growth temporary service firm competing with the likes of Manpower and Kelly Services. Olsten had hundreds of offices throughout the United States. USI was tasked with the responsibility to find, negotiate, and open new Olsten office locations. We also built and managed Olsten’s real estate information database.
        Olsten's needs opened up a path for a new hire Michael Casolo to leverage USI’s business model and relationship base to sell design and construction services to Olsten. Under Michael’s leadership, USI’s service lines expanded to include space programming, space planning, project management, furniture management, signage, and workplace consulting. Each service line was managed as a profit center, which rolled up into USI’s Design and Construction P&L. USI became the first real estate outsourcing firm to offer comprehensive design and construction services. Michael’s contribution played a significant role in USI’s profitability and penchant for expansion.
As you grow your business, invest the time to listen to your customers. Your customers will tell you about their problems and help you to figure out the best way to solve them. Then hire entrepreneurial people who will listen, observe, innovate, and execute. Once you have them on board, listen to their ideas, and let them lead and build in their areas of distinctive competence. Give your leadership the opportunity to challenge the status quo and create genuine change. They will take you to places you never thought possible.

Parts excerpted from The Purpose Is Profit: The Truth about Starting and Building Your Own Business (Greenleaf Book Group), coauthored by Ed McLaughlin, Wyn Lydecker, and Paul McLaughlin.