Cheap Advertising Tricks

Don't have the advertising budget to market your products or services like you want? A couple from Monterey, Calif., were facing the same problem. They wrote the San Francisco Chronicle's business column looking for advice about the cheapest and best way to publicize their business, which decorates hotel rooms for special occasions like wedding proposals and birthdays. Here are some of the tips writer Iiana DeBare offered:

•Set priorities. Decide the best people to market your product or service to and go after that group.
•Influence the influencers. Sell your product or service to people who will sell it for you through word of mouth.
•Pitch your story to the press. Share your story with trade journals or local newspapers and television stations and provide reporters with great anecdotes and sources.
•Look for co-marketing opportunities. Partner with businesses related to yours to offer special deals.

by. Emily Mcmackin

What U Need to Succeed #3

The right answers: Sometimes you need an outside perspective. One thing I like about my new position is the chance to be a fresh pair of eyes. When you're running a company, you live so much inside its problems that sometimes you can't see them clearly. I look at these businesses as an outsider, and I can tell what they need.
For example, one of my portfolio companies, Blue Tulip, is a gift store chain that specializes in unusual handmade cards and wrapping paper. It's based in New Jersey, and the founders told me they plan to expand up and down the Eastern Seaboard. My immediate thought: "That is one tough real estate market." So I advised them to hire a top-notch, high-level person to manage that, and helped them put one in place. In general, entrepreneurs wait too long before establishing professional management of real estate and technology--two functions that often cause the most trouble as you're scaling up.
I've also been working with companies on questions like where to locate stores and whether they should be franchises or company-owned. I've been helping Rec Room, a Chicago-based business that sells game-room furnishings like pool tables and bars, attract customers through a more entertaining retail environment. We're talking about holding parties and celebrity poker tournaments, and these stores are the ideal venue. And I'm advising Lululemon on expanding overseas, about which I've urged them to be cautious. Staples had a very rough time in Europe--it took years for us to succeed there. I've suggested that Lulu cement its presence in the U.S. and Canada first and then, when it does go global, it should do so as part of an alliance.
I look at businesses like these and think how lucky their leaders are. The early days of company building are so exciting: Happy endings are even more fun to anticipate when you don't know exactly what they'll be. Still, I don't envy these entrepreneurs. Time pressures these days are incredible, and I don't want to subject myself to that. I'm not tempted to get back into the founding game. Venture capitalism is the perfect third act for a guy like me. I get to apply all that I've learned. And I get to invest in people's dreams and help make them a reality.

What U Need to Succeed #2

I also look for entrepreneurs who can align employees' financial and emotional needs with their own. Howard Schultz is a genius at this. He quickly realized that Starbucks' (NASDAQ:SBUX) frontline baristas made all the difference. So he gave them health benefits, flexible hours, a pleasant work environment, a sense that they are appreciated. Don Perkins and Franklin Lunding, who ran Jewel Companies, the first major business I worked for, used to talk about an idea called the upside-down organization chart. They argued that the boss's first job is to serve and assist the people in the field, and I really believe that. It's especially crucial in consumer-facing organizations because field staff is where the customer meets the road. If you treat these people right, they will eat nails for you.
The right market: Preferably, it involves an absolute mob scene. Unless there is real market demand, you will fail. Why is Federal Express a success? Because people need things delivered overnight. Why is Google (NASDAQ:GOOG) a success? Because people need to find information on the Internet.
Try plugging your company into that construction and see if the resulting statement makes sense. Dean Kamen should have done that before investing so much in Segway. He is one of the most brilliant inventors of modern times, backed by a prestigious venture capitalist. But try saying, "People need an electric scooter to shoot them around town." Lacking genuine demand, the proposition just kind of lies there.
The great thing about retail is the ease of assessing your market. You see your customer every time you're in the store. There's one, trying to flag down a clerk for assistance. There's another, staring in frustration at some ambiguous signage in aisle seven. I've been telling entrepreneurs "Know your customer" so long that people must think I have it tattooed somewhere on my body. But it's still the most profound lesson in the business canon. You can tell when an idea derives from observing real people in real situations, as opposed to when it just dropped from the sky into someone's brain pan. I always get excited when an idea rings true. Then I go out and verify.
Take Lululemon. Before we invested there I dropped in at one of its stores on a Thursday afternoon. It was an absolute mob scene. Customers grabbing things off racks. Lines at the cash registers. The name wasn't even on display outside the store: It just had a logo. What does it say if people can't even see the name of a business and they're coming in in huge numbers?
The experience with Lululemon reminds me of a lesson I've had reinforced as a VC: Understand the customer but never assume that you are the customer. It is always dangerous to make business decisions based on your personal consumer needs. Entrepreneurs will say, "I started this business because I was trying to buy X or have X delivered a certain way and couldn't."
I started two companies out of just those types of frustrations: Zoots because I never found time to get my dry cleaning done, and Olly Shoes because I had trouble finding shoes at traditional stores that fit my kids. Still, I invested in tons of market research before starting them and have always asked for real customers' feedback rather than basing decisions on my own preferences. Working with a company like Lululemon is a great change for me because I have no consumer biases--I'm not a yoga guy. I did buy one of their sweatsuits, though, and I've got to say, it's the softest thing I've ever worn. And it wicks away the perspiration like that!

What U Need to Succeed #1

"The child is father to the man," the saying goes. Just so, the start-up is father to the large successful company. Now that I'm a venture capitalist, helping entrepreneurs build into their small frames the bones of billion-dollar corporations has become my mission.
The premise is less obvious than it sounds. In my experience, entrepreneurs often confuse envisioning what a business will be with laying the foundation for what it could be. So they dream big dreams and construct detailed business plans, which is fine. But it's nowhere near as important as putting in place as early as humanly possible the people and systems that will carry them through their journey, no matter what unexpected directions changing markets or technology force them to take.
That's why I don't get hung up on business plans. I read them, of course. But whatever the plan says, the company will end up looking different. When we started Staples (NASDAQ:SPLS) in 1986, for example, our business plan proclaimed we would never deliver. Delivery added costs; we figured we couldn't afford it. Also, there was no expectation of delivery in the industry.
Nine months later Office Depot (NYSE:ODP) and Office Club got into delivery, so suddenly the expectation existed. Also, we found out that delivery appeals to a different--somewhat larger--customer than we had imagined. Consequently, average delivery orders were larger, which made cost-effective delivery easier to pull off. So we changed course, as all successful companies change course--over and over again. One thing entrepreneurs know for sure: If they do well, the business will get bigger. Always be preparing for bigger.
To me, business plans are interesting chiefly as indications of how an entrepreneur thinks. Here at Highland Capital Partners, the venture capital firm I'm part of now, we spend most of our time talking about what really matters: management and market. If you have the right management team and an exciting market, the rest will take care of itself. I suspected that was true before I came here--it had always been true for me. Now I know it for a fact.
The right people: Folks who have been there and done (something like) that. So what constitutes the right management? I love entrepreneurial passion and am probably overendowed with it myself. Also, I don't discount M.B.A.'s. At Harvard Business School I made contacts and learned lessons that have served me well. But nothing--I mean nothing--counts like brass-tacks, in-the-field experience. I want to work with people who have faced similar challenges. I don't care whether they've succeeded or failed, so long as they've learned. These days I am advising four emerging companies (all in retail, which remains my specialty). In each case, I looked at the entrepreneur's professional background and said yes, this is someone I can work with.
For example, Barry Perzow, co-founder of the pharmacy chain Pharmaca, has more than 40 years of retailing experience in the U.S., Canada, and Europe--that's more than I have. He's worked for big companies and small companies. And now he's reinventing an old model (as we did at Staples) by combining prescription drugs and natural remedies under one roof. Then there's Chip Wilson, founder of Lululemon Athletica, a yoga apparel chain based in Vancouver, British Columbia. Never heard of it? You will. Before starting Lululemon in 1998, Chip spent 18 years building West Beach, a skate and ski clothing business that he eventually sold to an investment group. I remember he told us, "I know there's an opportunity. And I know if we're left to our own devices and don't have a real management team we'll never get there. I'm going to pick as my investors those people who can help me build this into a big business."
That's exactly what I mean by laying the foundation for what could be. Chip has hired some strong people, but they can't support the business as it scales. You don't wear the same clothes your whole life--your body outgrows them. Similarly, companies need different kinds of talent and professional skills at every stage. Staples had four CFOs in 20 years and each was just right for his era. We had the perfect CFO for a start-up, the perfect CFO for a small-cap public company, the perfect CFO to help us through some nasty growing pains in the '90s. I want to work with founders who accept that they won't always dance with the ones they brought. Ideally, both the founders and their teams grow into larger jobs, but often they don't. I want them to be realistic about their limitations, to recognize that over time their roles will narrow.

By: Thomas Stemberg

Show me the money

You’ve thought about it long enough, and you’ve finally decided you really do want to make the franchise leap. You’ve found the right opportunity, and you’re convinced it’s a system you’ll succeed in. But you’ll need financial help to make it happen, and one big question still looms in your head: How hard will it be to sell a lender on the idea? Despite higher interest rates than in recent years, it’s a franchise buyer’s market out there, says Rick Anderson, general manager at Franchise Finance, a Little Rock, Arkansas, firm that originates loans and leases for the franchise industry. There are fewer buyers, so more lenders are sitting on cash. “You’ve got better terms and conditions and more finance companies [that are] anxious to talk to you,” he says. “It’s not that hard to get a loan right now.”
That said, prospective franchisees face many of the same hurdles that challenge all startups when it comes to raising the capital to open their doors. A local banker won’t necessarily see a venture as less risky simply because it’s a franchise. Loy and Melissa Ehlers, both attorneys and former Marine Corps majors, discovered that when they first set their sights on opening a Cold Stone Creamery. They went scouting for ways to raise the $300,000 they’d need, but despite the ice cream retailer’s established brand name, local lenders in their hometown of Morehead City, North Carolina, weren’t feeling warm and fuzzy. “They looked at Cold Stone as a restaurant, the riskiest venture out there,” says Loy, who at the time was working as general counsel and vice president of retail licensing for a furniture chain. With all his experience get-ting other fledgling businesses financed, he figured he’d have a leg up. Says Loy, “The local guys said, ‘We love you, but we can’t do it. It doesn’t matter if you have a 200-page business plan with all the charts and bells and whistles—you’ve never operated a restaurant.’”
Fortunately for Loy and Melissa, 39 and 41, respectively, Cold Stone had a preferred lender program with Comerica that made the borrowing process a lot easier for newcomers. Comerica was familiar with the Cold Stone system and felt comfortable that its relatively small number of store closings meant the franchisor did a thorough job screening its franchisees. The Ehlerses took out an SBA-backed loan for the first store, then bought four more stores, one of which they’ve already flipped. Without a track record to point to, the Ehlerses would likely have had to stop at one store, but with the Cold Stone connection, they were able to open four locations in nine months. “I don’t care to do that again,” Loy jokes.
Cold Stone expanded its list of preferred lenders, allowing the Ehlerses to select a loan from UPS’ lending division, UPS Capital. This, along with a guide Cold Stone developed for franchisees detailing lender expectations, has significantly streamlined the borrowing process. Says Loy, “It now takes two to three weeks.” With two stores already turning a profit, the other two on track to see black, and a fifth that at press time was scheduled to open in their hometown last month, the Ehlerses have very high hopes for their burgeoning business.
Your Biggest AlliesFor first-time business owners, even those with prior management or industry experience, one foot in the door can make all the difference, which is why experts agree that the first stop on your capital hunt should be the franchisor. “A good number of franchisors already have these relationships in place and can direct the franchisee to the lender,” says Chris Reilly, president of CIT Small Business Lending Corp., which ranks among the top SBA lenders and has relationships with various franchise companies in the restaurant, early child education and hotel industries, among others. Lenders tend to loosen the purse strings more readily for an applicant who has gotten the green light from the franchisor.
“Usually, if you’re approved as a franchisee, you’re going to be approved for the loan,” says Jeff Elgin, CEO of FranChoice Inc., an Eden Prairie, Minnesota, consultancy.
The SBA program is an especially popular choice for first-time franchisees. Because the SBA guarantees a portion of the loan, lenders can make loans that would otherwise fall outside their risk parameters—and they can offer more favorable terms. “Non-SBA loans are typically five to seven years, [but] the SBA-backed loan is 10 years, or sometimes longer if you’re buying real estate in the transaction,” says Bernie Siegel, president of Siegel Capital, a national franchise and small-business lending service in Bala Cynwyd, Pennsylvania. “What I like about 10 years is it reduces your monthly payment.”
It made sense to Bernard Brophy, too. A Wall Street refugee, Brophy, 46, had worked for 20 years as a commodities trader before he was downsized at Goldman Sachs and left to think about what to do with the rest of his life. After meeting with a franchise consultant, he decided his future was in another type of commodity: dough-nuts. He approached the Dunkin’ Donuts franchise, which approved him for a three-store deal and promptly directed him to the SBA. “Without experience in fast food, it made the most sense to go that route,” says Brophy. He was approved fairly quickly by CIT, which has a long-standing relationship with the national franchise. With the loan, he financed the purchase, architectural fees, construction costs, equipment and inventory expenses for his store in Medford, New York, which opened in May. He also opened a second store in Lake Ronkonkoma, New York, in August, and he’s planning a third store for Nesconset, New York.
The only downside to SBA loans, as both Brophy and Loy Ehler acknowledge, is that the higher fees associated with government-backed loans make the capital more expensive overall. “That’s a trade-off we’re still making today,” says Loy. “Opening four stores in one year doesn’t lessen your risk profile. We’ve basically had to say we’re going to accept the higher interest rates so we can get these stores open. We’ll come back and refinance when we can show the banks proof that this [business] really works.”

Great Marketing Plans

As I work with many marketers, I am amazed at how many do not have a written marketing or business plan. Generally, close to 90 percent of companies I work with do not have a formal plan. Most have a budget, but that is as far as it goes. You know the old adage, plan the work and work the plan. Unfortunately, most marketers are spending too much time reacting to the world around them and not taking the time to write down a solid strategy and plan. Demand generation suffers when it is not supported by a well-thought-out business plan.

First Things First: Analyze
Writing a marketing plan starts with a situation analysis. What products and services are you selling? What is the market you are competing in and how large is it? Who are your competitors? Where do you sell? What does your target profile look like and how do you reach them? What is your historical sales performance for each of your products and services?

After understanding who you are and the environment in which you operate, you need to conduct an honest and thorough SWOT analysis. What threats are out there in the marketplace or internally that could affect your ability to deliver? What opportunities can you take advantage of to grow revenue and market share?

Define Your Objectives
Once you have a good handle on where you should be targeting your efforts, you need to define a succinct list of objectives that will serve as an umbrella and guidepost for your marketing activities. You should never have more than six objectives so you do not dilute your focus. Each objective should be measurable and achievable. Saying you want to sell widgets in North America is not a good objective. Stating that you want to sell 1,000 widgets to Widget Executives in California is much better.

Once you have defined your objectives, you can develop goals that support each objective, like pillars on a stool. Each goal is a specific action or series of actions that will carry out your objective. Actions are best framed in an activity plan. This is usually an Excel spreadsheet that identifies the activity, the objective it supports, the person responsible, when it is due, and how much it will cost. Activity plans can consist of multiple layers. Each activity can have sub-activities that are assigned to a different person. But at the end of the day, all the activities roll up into the initial objectives. Activity plans also consist of sales forecasting by service, product, and channel.

Advertising plans identify where you will be buying media and what objectives and goals the buy supports. Merchandising and promotional plans outline key promotions and other items that can support related goals and objectives. A solid public relations plan identifies where you will be looking to drive impressions and how each PR outlet will support a goal and objective. Finally, your demand generation plan consists of all of the lead generation efforts you will be conducting, which objectives they support, and how you will measure and account for results.

Synchronize Sales and Marketing
Good plan management involves getting both sales and marketing departments to agree on the goals and objectives of the marketing plan and to have clear visibility into its execution. Plans should be managed and updated on a regular basis, always monitoring for results and changes that need to be made. No business works in a vacuum.

Marketers will be required to make changes and additions from time to time and make tradeoffs on certain events. However, just because you have to change direction doesn't mean you throw out the map.

Measure Success, Justify Your Budget
Plans should have tight budgets and solid controls for measuring the effectiveness of each objective. As marketers start to plan and manage their activities and justify their spending, demand generation will improve. A great marketing plan can lead to a great campaign, but neither will be "great" to your executives until you can show their effect on the targeted audience. A solid demand generation solution can show both marketing and sales departments which portions of campaigns led to action by prospects and can even measure how much revenue each particular initiative has resulted in. This is important when seeking an increased marketing budget for future campaigns.

Marketing has entered a new age with the combination of creativity, technology, and accountability. A great marketing plan, along with a demand generation solution to executive, automate, and measure much of the ensuing marketing campaign, will direct well-thought-out messages to the right people...and you'll be able to prove it.

by Jeff Pedowitz

Franchising can take your business far and wide.

thousands of entrepreneurs have chosen franchising as an ideal way to expand. Who can blame them? The vision of having your business's name spread across the nation--maybe in every city, or even on every corner--has lured many a successful entrepreneur to the land of franchising. And the benefits don't end there. Since your franchisees are responsible for the investment of each operating unit, they basically bear the cost of expansion. Also, franchisees are highly motivated--much more than employees--because they're investing their own capital in the business.

So you think you're ready to enter the world of franchising? Here are a few tips.

1. Make sure your business is "franchisable." The first issue you need to address is whether your business is salable as a franchise. Ask yourself: Have I received legitimate inquiries? Is the business model unique? Do I have a point of differentiation? The business must also be replicable. That means it can't rely too highly on your personal involvement. Finally, and most important, it needs to offer a potential financial return that will allow a franchisee to generate an adequate return even after paying you a royalty. If you aren't comfortable addressing these questions, speak to a franchise consultant about whether your business has what it takes.

2. Develop a strategy. Success in franchising, as in any business, doesn't happen by accident. Your goals and resources dictate your strategy and the structure of the franchise offering. Key areas to address: position the opportunity against competing opportunities, decide what type of franchises to offer (startup, area development, etc.), provide services to franchisees and hire staff to provide those services. Other considerations include fees, royalties and other revenue sources. If you make these decisions without adequate forethought, the franchise may be doomed from the beginning.

3. Take control. Large-scale franchise success is all about delivering a consistent consumer experience. To do that, you need to be sure your systems are in place. That generally means compiling comprehensive operations manuals, training programs and maybe even training videos. But be careful: While the contents of these materials can help shield you from liability, if poorly crafted, they can actually create liability.

4. Get legal. To franchise, you need to develop the appropriate legal documents. In the U.S., those include your franchise agreement, Uniform Franchise Offering Circular and, depending on where you'll be selling franchises, registration of your franchise offering with state agencies. Don't take shortcuts here. Hire an attorney who specializes exclusively in franchising.

5. Sell it. Franchise sales start with lead generation. As a new franchisor, you should budget for a minimum of $5,000 to $7,000 per franchise sale on media alone. You'll also need first-class marketing materials, such as brochures, videos, a website, etc., to support your franchise sales efforts. But keep in mind one of the most important rules in franchising: Be selective in the franchise sales process. If you aren't confident a prospect will succeed, take a pass.

6. Make them succeed. In franchising, success begets success. If your franchisees are wildly successful, you'll find that your franchises practically sell themselves. But if your franchisees fail, no amount of marketing or sales efforts will rescue your system. So be sure you do everything in your power to make your franchisees successful.

By Mark C. Siebert

Increase Your Online Sales

People are always coming up to me and asking, "What can you tell me to help increase my internet sales?" And all too often, when I ask them to tell me about their business model, I discover they're selling only one product. So I ask them, "Have you ever considered selling backend products to your customers?"
Backend products are simply other products you can offer to your existing customers after they've made their initial purchase. Because you know what they've already bought from you, you should have a good idea of other things your customers would likely buy. And that should make it easy for you to think of new things they'd want to purchase. In fact, by adding just one more product to your site, you can increase the lifetime value of your customers--and increase your revenue--by 30 to 50 percent.
Here’s an example: The other day, I got an e-mail from Amazon.com telling me about a new internet marketing book they just got in stock. They knew I might be interested in it because I'd bought other internet marketing books from them before. And I was interested in that new one, too. In fact, as soon as I got the e-mail, I immediately clicked through to the site, checked out the book and bought it. And in doing so, I boosted my lifetime value to Amazon by another 20 bucks.
Lifetime value is simplythe income generated by a single customer over the course of your relationship with them. If you sell only one product--and if it’s something that doesn’t need to be reordered--then your customers' lifetime value will be limited to the net income that comes from a single sale of your product.
But if you sell a wide range of products, your income can grow exponentially. In fact, I've bought maybe one book a month from Amazon over the past five years at an average cost of $20 each--meaning my lifetime value to them so far is about $1,200.
And selling to existing customers is easier and cheaper than selling to strangers because you've already cultivated a relationship with them. You've put in the time and money to:
Get their attention
Establish your credibility
Build their trust in you
Overcome any resistance they may have to buying online
Close that first sale
On top of that, you now know what your customers like. The important thing to remember is, the backend products you offer have to be things your target market is going to be interested in. So how do you find the killer products that make this strategy so profitable? It's a lot easier than you think. For example, you can:
Offer products that complement your initial product. For instance, if you sell golf clubs, offer your customers a golf club bag to carry them in. Or you could sell golf balls, golf tees, golf shoes, golf training videos--the list is endless.
Sell more of the same product at a discounted price. If your product is refillable or needs to be regularly replaced, this strategy works especially well. For example, if you sell things like printer cartridges or batteries, you've got it made. But even if your product isn't refillable, you can show your customers you appreciate them by offering them a special discount on the product they've already bought. That way, if they like the product, they can buy it as a gift for family and friends.
Use paid subscriptions as backend products. If you've established yourself as an expert in your industry, you can build on your reputation by offering a subscription to premium information, available only to members. For example, if your main product is a fly fishing kit, you could sell a subscription to an exclusive course on advanced fly fishing techniques as a backend product. You could deliver this paid-for content through a members-only website or by e-mail.
Try splitting up your current product. For example, if you were selling a book on how to organize your home, you could offer a basic version for $9.95 to generate a large volume of sales at a low price. Then, 30 days later, you could offer your customers an advanced, expanded version that includes home office management and scheduling software for $29.95 or even $39.95--and increase your profits dramatically.
Try selling your customers an upgrade to their product. If they've used and liked your basic model, your customers will be open to receiving offers for an upgraded version. For example, if you sell e-books that teach people how to use a particular piece of software, you can sell updated versions to previous buyers when the software package in question is upgraded.
Write a book or create a video. E-books are great backend products with high profit margins. Consider writing a short book on a topic related to your product or service. For instance, if you sell gourmet puppy food, you might consider writing a book titled "Training Secrets That Will Have Every Puppy Housebroken and Learning Basic Obedience in Less Than One Week." You could even offer a special video that complements your product or service: If you sell barbecue equipment, you might offer a video that teaches people how to perfect their barbecuing techniques.
Offer someone else's product. Probably the fastest--and easiest--way to add new products to your site is to join another business's affiliate program and recommend their products in exchange for a percentage of each resulting sale. Selling affiliate products can be a very lucrative way to increase your sales, especially since you don't have to spend any time or money developing a new product of your own.
The bottom line is, if you're not offering backend products to your customers, you're losing out on a lot of potential income.

By Derek Gehl