Capital Management vs. Cash Management

An interesting article from the Business Journal in Alabama, with some great tips at the end….

There are many tasks every small business owner must handle personally, but none is more CEO-specific than allocation of capital. Because the only thing more precious to a small business than capital is time.

Cash management is also a CEO-critical task, but operating cash is not capital. Cash is for expenses and is measured daily, weekly, and monthly. Capital is for investment and, as such, is measured in years; possibly even generations.

Below are three classic capital expenditure categories:

1. Replacement and upgrade

This is not repair (that’s an expense funded by operating cash flow), it’s a bigger commitment, most often caused when repair is no longer an option, or by obsolescence.

2. Innovation

Exciting innovations in digital devices and programs are at once creating opportunity and causing disruption. Small business CEOs have to mete out precious capital for innovation in a way that maximizes opportunity and minimizes disruption. This is a tough job because 21st century innovation weaves a fine seam between the leading edge and the bleeding edge.

3. Growth opportunity

Should your market footprint be expanded with an acquisition or new branch, or should an investment be made to build-out more online capability? Should investment be made in support of a new product direction, or in a digital inventory management system connected to the supply chain?

What to invest capital in – and when to do it – is different for every business. But what is not unique is making sure cash and capital are applied properly. Here are three classic best practices:

1. Don’t use operating cash to pay for something that has a life of more than a year.

2. Leaving profits in the business produces retained earnings as reserves to be used for capital investment.

Sam Adams Beer the next Microlender?

When Jim Koch launched the Boston Beer Co. (SAM) in 1984, he learned that ventures like his shouldn’t waste time trying to get a bank loan. “What one of the bankers said to me was, ‘We’re not in the business of taking risks. We don’t get paid to take risks. Look at our margins.”

That reality check led the sixth-generation brewer—who holds a bachelor’s degree, a law degree, and an MBA from Harvard—to create a philanthropic program to finance loans and offer advice to other entrepreneurs in the Boston area running food, beverage, and hospitality businesses. Launched in 2008, the initiative aims to go beyond traditional corporate philanthropy to “leverage” Boston Beer employees’ expertise, “rather than just giving away money or time or beer,” says Koch. “I wish I could’ve had some loan money instead of having to raise equity, and I would’ve loved to have advice about the nuts and bolts of growing a business.”

Now the program, Brewing the American Dream, which has advised nearly 3,000 business owners and financed more than $1 million in small loans for about 150 businesses, is going national. Boston Beer, the largest craft brewer in the U.S., plans to lend at least $1 million this year, hold monthly speed-coaching events in major cities across the country, and curate an online-networking and education site for participants.

The coaching events, at which beer flows freely, are meant to be informal and are open to any business owner, not just loan recipients. “You put [Jim Koch] in a room with business owners and they’ve come in part because they know of his success and they really admire the brand,” says Gina Harman, president and chief executive officer of Accion U.S. Network, a nonprofit microlender with which Boston Beer has teamed to administer the loans and help coach entrepreneurs. “They expect somebody who is completely unapproachable to enter the room. Inevitably he walks in in his khakis and his blue shirt and a bottle of beer in his hand and you can just see the whole room relax.”

Koch isn’t seeking a financial return from Boston Beer’s investment in the program—a tiny fraction of the $157 million the company says it spent in 2011 on advertising, promotions, and selling expenses. “There is a huge amount of coaching, hand-holding, advice to get the repayment [rate] up to 95 percent,” says Koch. “I know from the economics of our program; you lose money on it. It has to be philanthropic.”

Supporting small businesses through donations to nonprofit lenders has been catching on among prominent companies, which have created programs such as Goldman Sachs’s (GS) 10,000 Small Businesses and Starbucks’s (SBUX) Create Jobs for USA. “But [Boston Beer’s] combination of employee engagement, capital resources, and mentoring feels new to me—and very much a response driven by what’s been happening in the economy in the U.S. over the last several years,” says Harman. “It was a right time in the economy because lending had all but come to a halt and small businesses were really struggling.”

Anita Gokey got a sense of Koch’s pain when she and her husband bought Karl’s Sausage Kitchen & European Market, a gourmet retailer outside Boston nearly five years ago. They were turned down by several banks when they sought a loan for capital improvements. She received an $18,000 loan within about six weeks of applying to Boston Beer’s program in 2008. Now Gokey says she’s just landed a conventional bank loan that she is using to buy and gut a building twice the size of her existing space. “We could show a track record of investment and growth in the business, so the new lenders were much more into working with us on the next venture because of that,” she says.

Business Sales Start to Resume

Another good sign for the economy.  This post taken from the Business Journal….

Here’s another sign that an economic upswing is taking hold: Business owners are finding it easier to sell their companies.

The number of U.S. businesses sold in 2012’s first quarter was 3.9 percent higher than during the same period a year ago, according to BizBuySell.com, which collects data from business brokers across the country.

BizBuySell reported the sales of 1,729 businesses in January, February and March 2012.

The number of transactions was the largest in any quarter since the final three months of 2008. The recession officially began in December 2007 and reached its worst levels in 2008 and 2009.

But this increased activity came with a price — more specifically, a slight decrease in price.

The median sales price for business transactions actually dropped during the past year — from $155,000 in the first quarter of 2011 to $150,000 in the same quarter this year.

And the same trend is evident when prices are compared to revenues and cash flow. Buyers typically paid 2.48 times cash flow for businesses a year ago, a multiple that dropped to 2.36 times cash flow during the most recent quarter.

So which trend will prove to be more significant — higher sales or declining prices?

BizBuySell opts for the former. Its quarterly analysis suggests that business owners are gaining confidence that their companies are healthy enough to sell, even if the yield may a bit lower than they might have hoped.

“There are certainly small business owners who have been biding their time since the recession hit in 2008,” said BizBuySell’s group general manager, Mike Handelsman, in a prepared statement. “With better financing available for buyers and a larger supply of businesses ready to hit the market, we may finally have the right conditions for a more significant bump in the number of closed transactions.”

Facebook purchase of Instagram marks shift to mobile platform

Interesting correlation between this event and the movement toward mobile platform.  How long will it take for Microsoft to fall?

Facebook’s surprise announcement that it would buy Instagram for $1 billion, less than a week after venture capitalists valued the company at half that amount, has sparked talk of inflated valuation for the photo-sharing company.

Andy Baio of Wired compares the Instagram purchase to some other prominent tech buyouts and reached the conclusion that Mark Zuckerberg got a bargain, sort of. And Jenna Wortham of the New York Times makes the case that Instagram may mark the first of a series of deals involving companies with little presence on computer desktops but plenty of mobile users.

Baio writes that young Internet companies have traditionally been valued for their growth and number of users. By those measures, Instagram beats most, even though the company has no revenue and no clear path toward making money. He argues:

If we look strictly at the acquisition cost per user, Facebook got a relative deal with the Instagram purchase, paying roughly $28 for each of Instagram’s 35 million users.

Meanwhile, the Times reports that Facebook’s big buy has other app makers seeing dollar signs, and the purchase is a giant step in the shift from desktop to mobile computing.

Wortham writes:

Smartphones are everywhere now, allowing apps like Foursquare and Path to be self-contained social worlds, existing almost entirely on mobile devices. It is a major change from just a few years ago, underscoring how the momentum in the tech world is shifting to mobile from computers.

In that context, the Instagram deal looks like something of a turning point, as even the Web giant Facebook tries to get a better grasp on a market that requires a rethinking of old rules.

“For decades, the center of computing has been the desktop, and software was modeled after the experience of using a typewriter,” said Georg Petschnigg, a former Microsoft employee who is one of the creators of Paper, a new sketchbook app for the iPad. “But technology is now more intimate and pervasive than that. We have it with us all the time, and we have to reimagine innovative new interfaces and experiences around that.”

If that is indeed the case, the Instagram deal is just the start of something very big as the world of apps comes of age.

Read more: http://www.portfolio.com/views/blogs/money-hunt/2012/04/11/facebook-instagram-purchase-has-some-seeing-bubble-while-others-see-next-big-thing#ixzz1rpDreuHB

Piniterest Meteoring Up To #3 Social Media Site

Incredible!  They already passed Google Plus in terms of traffic.  This post from David Cohen says it all…

That didn’t take long: Pinterest is now comfortably in third place in terms of traffic for social networks, trailing Facebook and Twitter.

Experian said Pinterest saw its traffic jump 50 percent in February compared with January, vaulting it past more entrenched social networks such as LinkedInTumblr, andGoogle Plus.

Facebook not only held onto the top spot, but retained dominance in average minutes per month, clocking 405, compared with 89 for Pinterest, according to comScore.

Perhaps helping Pinterest’s leapfrogging over Google Plus to take the number three spot is connecting to Facebook. The search giant remains frozen out of that due to AdSense not yet complying with Facebook’s advertising rules, among other issues.

Pinterest seems to be gaining many users from virality on Facebook, where users see news feed stories about their friends activating accounts on the pinning site. But so far the demographics are still skewed on the number three site, according to our sibling blog Social Times, which said:

The image bookmarking site has grown exponentially since the site launched in March 2010. There were 21.5 million total visits to the site during the week ending January 28, 2012, which is nearly 30 times the number of total visits that Pinterest had received six months earlier. From January 2012 to February 2012, traffic went up 50 percent.

The crowd is 60 percent female (which is a different number than we’ve reported previously) and 55 percent of them are between the ages of 25 and 44. California and Texas provide the most traffic, but Pinterest has more visitors from the midwest, northwest, and southeast than sites like Facebook and YouTube.

Home decor, fashion, and food are all popular categories on the site, but “hobbies and crafts” in particular is the category to watch. Pinterest users outnumbered visitors to other hobbies and crafts sites in 19 states. The baby boom and boomerang generations were most likely to spend time in this category, with Pinterest capturing 10 percent of this audience.

Experian’s analysts say that social media communities are becoming less about friendships and more about common interests: a new facet of the overall movement toward social personalization.

Pinterest hits both targets with a Facebook integration as well as an open community where users can explore and share images with people outside their networks.

While Pinterest and Facebook work together as partners rather than rivals, the number one social network has duly noted the popularity ofpinning, adding it to timeline pages. Right now, you can only pin one thing at a time to a page, and the capability doesn’t yet extend to profiles as a native feature.

However, a third-party application called Friendsheet transforms Facebook profiles into a Pinterest-like interface. We wonder whether the recent liking of this app by Facebook Chief Executive Officer Mark Zuckerberg signaled the beginnings of talks toward a possible acquisition of the startup.

So, have you used Friendsheet or set up a Pinterest profile linked to your Facebook account, readers?

Farming in the City?

Enjoyed this article from Portfolio.com

We have some good examples of urban farming in Phoenix, also (check out http://www.facebook.com/singhfarms)

Brooklyn is New York City’s most populous borough and a horn of cultural plenty: It’s got historic brownstones in Brooklyn Heights; it’s a hotbed for hip-hop musicians like Jay-Z who grew up in Bedford Stuyvesant (readily accessibly by the J and Z trains); and then there’s such classic grub as Junior’s cheesecake and Nathan’s hot dogs on the boardwalk at Coney Island.

Love Brooklyn or hate it, there’s an official sign on the way out that pretty much encapsulates the attitude of residents: “Leaving Brooklyn, Fugheddaboudit.”

One thing the borough hasn’t really been associated with: farms. Until now, that is.

BrightFarms, a private company formed in 2011 that finances and builds greenhouses nationwide in an effort to bring fresh produce closer to the end consumer, announced plans to create a gigantic greenhouse on a roof in Brooklyn’s Sunset Park neighborhood. The facility is expected to harvest a million pounds of produce a year, the New York Times reported Thursday.

Construction of the hydroponic greenhouse, which will occupy as much as 100,000 square feet of rooftop space and does not require using soil, is set to begin this coming fall. BrightFarms officials tell the Times that it will be the largest rooftop farm in the United States—and possibly the world.

“Brooklyn was an agricultural powerhouse in the 19th century, and it has now become a local food scene second to none,” said Paul Lightfoot, the chief executive of BrightFarms. “We’re bringing a business model where food is grown and sold right in the community.”

The Brooklyn greenhouse will rise 20 feet from the roof of an eight-story, 1.1-million-square-foot structure that was built in 1916 for the Department of the Navy. And, it won’t be the only rooftop farm in the borough. Another rooftop farm developer, Brooklyn Grange, is set to open a 45,000-square-foot commercial operation at the Brooklyn Navy Yard.

After the Brooklyn debut, which the company says will serve as “a new national model for urban agriculture,” BrightFarms also plans to open three more commercial greenhouses this year in locations across the country, including Bucks County, Pennsylvania.

Brooklyn says you’re welcome.

Read more: http://www.portfolio.com/views/blogs/innovation/2012/04/06/brooklyn-to-host-largest-rooftop-farm-in-united-states#ixzz1rdwvLzfL

Email Marketing For Small Business Success

Email averages a return on investment (ROI) of $40 for every $1 spent, far outstripping banner ads ($2) and keyword ads ($17). So it’s no surprise that 67% of organizations plan to increase their email spend in 2012.

You can use those increased email marketing budgets to push your ROI higher by focusing on the following three areas.

1. Deliverability

Though it’s long been discussed, email deliverability remains a critical issue. A recent Return Path report found that nearly one-in-five emails sent by commercial email senders never reaches the intended recipient’s inbox (and may not even reach the spam folder!).

Therefore, the average campaign can enjoy a 25% increase in response. If you believe that emails that don’t bounce are being delivered, you may not realize anything is wrong.
How to Do It

A lot goes into email deliverability. Deliverability experts can offer guidance for your specific program, but make sure you’re covering the following basics:

1.Reduce complaints. Subscribers report unwanted email as spam (or, worse, they send it to antispam institutions such as SpamCop), which damages the sender’s reputation. So, make it clear at the time of subscription how often you’ll email subscribers. Include a name that subscribers recognize in the sender field of your emails, and make it easy to unsubscribe. Do not require subscribers to provide you with a username and password, an email address, or a “mail us your request” note to unsubscribe. Allow them to unsubscribe via one click (because it’s very easy for them to click the “spam” button as an alternative).

2.Don’t set off content filters. Though no longer the most important component of spam filtering, “spammy” words and coding errors still set off alarm bells. Many email service providers (ESPs) offer in-platform tools to check emails before hitting “send.”

3.Monitor your delivery with a seed list. Set up accounts on top domains and include those accounts in your lists for each campaign. Then, confirm your email messages reached the seed list inboxes so you know about problems as they arise.
2. Behavioral Targeting

Behavioral targeting is not a new concept, but it’s more technically difficult—and so less used—than demographic or geographic targeting. Marketers who use behavioral targeting to send emails (or, better yet, to trigger automatic emails) achieve hefty gains in revenue per email sent. (One-to-one marketing emerged 30 years ago, right? Are you still sending the same email to every subscriber?)

How to Do It

Though the methods for implementing behavioral targeting for email are almost limitless, here are three ideas to consider if you’re just getting started:

1.Purchase behavior. Many marketers send triggered emails to recommend complementary products after a purchase. For extra accuracy, Nespresso (which makes coffee makers that my coworkers might not make it through the day without using) calculates customers’ reorder time based on previous purchases.

2.Nonpurchase behavior. Cart abandonment emails are among the best known triggered emails… and for good reason. Those emails can help you reignite interest in an abandoned purchase or elicit feedback about why the purchase didn’t go through.

3.Email behavior. Targeting by email behavior can be the simplest method because the information is already in your ESP’s platform. Consider sending a loyalty offer to the subscribers who most often open your emails. Or, include a special offer in the subject line for those who rarely (or never) open your messages.
3. Acquisition Email

Handled well, acquisition email offers an opportunity to bring the high ROI of email to your customer acquisition strategy. For marketers, retaining subscribers and increasing their numbers are perennial priorities. What better way to do that than by using your email marketing skills to build your customer base?

How to Do It

If you’ve never used acquisition emails in the past, consider these three key ideas.

1.Value. Offer customers something of value in a creative and appealing way using the skills you’ve gained via retention email. I agree, that should be evident! But, sometimes, email acquisition campaigns look… cheap. This email is your first impression, so make it a good one.

2.Target. The days of batch-and-blast emails sent to huge numbers of people with the hope that a few will respond are over. To get the best response, narrow your focus to people who are likely to be interested. Again, it’s all about behavioral targeting. Unfortunately, what has done for years in display advertising had not (until now) been implemented in the email channel.

3.Respect. Show respect to your…
Prospects. Send emails only to opt-in records via a publisher or service provider that accurately represents who the email is from (both the brand of the list and the advertiser) and uses legally compliant unsubscribe links.

Customers. Are you offering free shipping for the first order? A 20% discount for new customers? Please don’t send that message to current customers. Are you scrubbing your list of customers from email acquisition campaigns? You should be.

Brand. The more “blast” emails you send, the more Internet service providers (ISPs) will hate your brand. Do it the wrong way, and even your transactional and retention emails won’t reach subscribers’ inboxes. Send as few emails as possible to the right people if you want to keep a solid “technical reputation.” Easy to say… but not always easy to apply with the current practices in the email acquisition market.
* * *
Some of the points in this article rely heavily on email acquisition channel best-practices and good habits, and very few companies can partner with you to make those happen. But things are changing, just as they did when the first AdServer (DART) was created.

What do you think are the biggest drivers for email-marketing effectiveness? What are your biggest challenges in raising the bar and getting things done the right way? 

Read more: http://www.marketingprofs.com/articles/2012/7500/boost-your-email-marketing-roi-by-focusing-on-three-key-areas#ixzz1rJduyNwg

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