So many “small business owners” love and live by outsourcing, good for them - “small business” is not what we talk about at this blog. Here, we talk about building a $100 Million business. Bottom line, outsourcing won’t cut it for the long-term. Before I offend anyone I work with…Let me preface that by saying that I currently am working with outsourcing relationships that are AMAZING…but to build a $100M company we will one day have to pool all that talent together under one roof

See I don’t want anyone to get me wrong, my personal business (disclosure: still far from that $100M number) could not be anywhere near where it is today if it were not for outsourcing - actually, a LARGE bulk of our work is still done by outsourcing.

HOWEVER - month by month that is disappearing, we are bringing as much as possible IN-house. So, am I done outsourcing? No way and I’m not sure there is a SINGLE company in the world that does not use outsourcing.

Am I going to re-focus away from outsourcing and focus on building an INTERNAL team? Absolutely…

“Why? You ask…”

Let’s use a few days back as an example. We’ve been slowly “filling in our gaps” and bringing on internal positions and very dedicated, loyal and intelligent personnel who we can trust - however, some positions we still have no choice but to outsource.

Well, it turns out that we’ve been relying on a company (who we’ve worked with for over 3 years) to deliver a critical project that is launching well…NOW. Hickups, problems, hurdles, obstacles - that’s all I’ve heard for the last 2 weeks. Every day it’s something new.

Absolutely NO incentive to just dig their heels in and FIGURE IT OUT.

(By the way, this is not an isolated case, I deal with this all the time in any position that is outsourced).

So, we finally had no choice, we took the work from that company and just assigned it to our internal team (Disclosure: technically, this team is not really internal yet, but we work so well together that we consider them internal until we can make it official)…

Long story short - the same work that took over 2 weeks to get NO where was finished in literally 3 days when all of a sudden we had a team that cared about the project.

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Here are a few reasons outsourcing agents just don’t work out for the long haul:

1. No urgency

Honestly, what do they really care? Worst case, they lose your future business. YOUR worst case, you could lose your entire business.

2. No ownership

Whatever they’re doing, they’re just getting paid for it - they don’t see any long-term impact/effect. They don’t have any stock or ownership to protect - no skin in the game!

3. Other Work

The way outsourcers survive is by having multiple clients right? That means you’re fighting with others for their attention and time. The ONLY time when outsourcing has worked well for us has been when we pay so well, we’re typically the only client.

But, that’s an expensive proposition many times!

4. Their Own Agenda

Let’s face it - you have your wants and needs and they have theirs. If they were IN your company, there is much more chance that there would be overlap in your wants and needs.

5. Their Own Problems

They have their own employee problems, office issues, server problems…you literally DOUBLE the chance of those “things” effecting your business.

I could literally go on forever, but I’m going to stop.

With all of that said, I want to say a few things:

1. I do like outsourcing and think ALL small businesses need to make good use of it (it’s smart business). But any time you start seeing consistent work in a certain area, do what you can to get that position internal…

2. Some outsourcing relationships work out very well (but this is rare). We are currently in relationships that are amazing. But just so you know, one of them took me losing $150,000 with the prior company to find them. The others, we’ve been through multiple agents before we found a good one.

Plus, I’m a lucky guy - what can I say!

For those of you who want to know how I outsource the few things that I do and how I find them, I’ll do a blog post about it one of these days - stay tuned…

Until then, I’ll leave you with this thought:

If you want to build a $100M business, you need to fill in the gaps. Think team building. Get smart people, wrap them around an idea and watch art happen.

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This is a question that I and the team wrestle with every show and due to limited budgets, we don’t usually do it but have been able to find interesting ways to get “sponsorship” like exposure for free.

In a nutshell, I think sponsorships are good but really ONLY GOOD FOR BRANDING. Please read that again, if you think you’re going to sponsor a party and sell product their to cover the cost - you’re out of your mind.

Here are the different kinds of sponsorhips I have seen mostly and my personal feelings on them:

Show Sponsors - These are like “Platinum” “Silver” or “Gold” sponsor. You get your logo on the home page and on banners around the show.

These are ONLY good for branding. Unless the show really plans on tooting you around, I’m not sure these are worth the money.

Breakfast Sponsor - Don’t do it. No one comes to breakfast. No one cares.

Lunch Sponsor - Don’t do it. People come, but they’re busy eating/networking. They don’t want to hear you yack and they may see your banner a couple of times at max.

Dinner Sponsor - Don’t do it - most go out to their own dinners with their own click.

Cocktail Sponsor - DO IT…people love drinking and a good crowd always comes. But again, focus on the networking and branding - that’s all it will do for you.

Main Party Sponsor - Usually very expensive, but DO IT if you can. These are GREAT for branding. Basically the trade show will endorse a main party. The entire show people run around saying “Are you going to — COMPANY NAME’s — party?”

Great for branding.

Lanyard - Do it - EVERYONE has these and see them over and over.

Bags - Do it - Same as with Lanyards.

There are many more, but I’m tired of thinking about them for now (can share more later). Anyways, just think of them in terms of branding and name recognition and networking - do the numbers work for you?

Here are a few things we do to help us get the same exposure and buzz…

1. Piggy Back Event - Basically throw your OWN tiny little conference/seminar the day before or after (advisable to do before) the event. That conference can’t stop you and the entire crowd will be there anyways!

In our experience, the trade show actually lets us pay to have them endorse it (just a small fee - not like the sponsorships).

2. Speak At The Trade Show - Get your speaker proposals in and speak. That way the conference promotes you and your company FOR you.

3. A GREAT Give-Away At Booth - something that peoeple can easily see, it can go a loooong way.

So, next trade show - think BRAND and NETWORKING, how can you get people to see your name and logo the most. Some sponsorships work, others not so much.

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Having exhibited at a trade show about 4 times now, we’re starting to learn some neat tricks to get more exposure.

We haven’t personally tried some of these, but having seem them get implemented - I can tell they work and we’re slowly working them in.

Here are 10 Tips To Get More Out of Your Booth. I’m splitting 5 and 5, 5 things TO DO and 5 NOT to do.

The TO DO:

1. See if you can get a “corner” booth

These may cost more, but they may be worth it based on the cost.

Corner booths are more visible and have TWO or more sides where people are walking by and can be grabbed.

2. Good Give-away

The biggest buzz on the floor is usually “hey, where’d you get that!” - these give-aways can get VERY expensive, but I’ve seen how much more powerful it is for booth traffic.

But, just make sure you GRAB the people that come by and talk to them - otherwise they just take the stuff and leave.

3. Play games at your booth

Have some prizes and play some games. Whether it be something like darts, spin the wheel or something more creative. It gets people sticking around and having fun.

4. Piggy-Back Other Companies

I always try to see what other companies are exhibiting and where. Some companies are just known to get more traffic and are more popular.

Grab that spot - you can “steal” their visitors - mu ha ha ha

5. Near Doors, Entrance, etc…

A couple of shows back, we had our booth right in-front of the registration desk - how crazy is that - the branding was rediculous. But it gets better…

The booth was in the middle of the hall that EVERY person had to walk down over and over to go to the “seminar sessions.”

So, EVERY single one of the 2,000+ attendees had no choice but to at some point see our name and stand near our booth.

(( The earlier you register, the better spot you can grab so register early ))

NOT TO DO:

1. Booth Babes

Yes, people stare at them - but I honestly don’t think they care much more about the company, they just stare at the boobs.

These “models” don’t know a darn thing about your company and trust me, the fliers they hand out…NO ONE reads them.

2. Sit Inside Your Booth Or Behind A Table

You want to be approachable, even if you’re sitting in your booth - make it a HIGH chair so you keep eye level.

Always try to stand right at the edge of the hall so you’re almost outside and grab people as they walk by.

Lead in with a hand-shake, they almost always reciprocate and then are “caught” in your trap!

3. Lots of video

I’ve never once stayed at the booth to WATCH the demo. Rather, set-up multile computers and invite people to get a PERSONALIZED demo or “experience” the product.

Looping videos, in my opinion, make the booth look flashy, yes, but don’t add much promotional value.

4. Talk Smack About Visitors

OK, my entire team (myself included) is guilty, I mean what can we do? Some people who come by are REALLY weird.

But still, other visitors can hear you and it’s a major turn-off. Creates a bad environment.

5. Don’t Give Away Too Many Fliers

Listen, people really don’t read that stuff much and it’s so much easier on YOU and the VISITOR if you can condense your material into 1 or 2 easy to understand brochures/fliers.

Focus mostly on getting their business card so you can follow up with them personally.

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Alright, these are some of the fresh tips in my mind since I am flying back right now after exhibiting at a show.

As more come, I’ll keep on sharing.

Coming Soon - My view on buying “sponsorships” at trade shows.

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First of all, sorry I haven’t blogged in the last few days. I first got invited to porsche driving school (AMAZING) and then I had to run down to a trade show for a few days.

For today’s post, I wanna talk about “the power of the team.” Here’s the thing though, today’s post probably does not directly apply to a $100 Million CEO. At that point a team is a given, but you can’t get to $100 Million without going the stages…

The Power of The Team…

This past weekend our company launched our biggest product in the last 3 years the day before the biggest trade show in our industry (where we hosted our own live event as well). The response has actually been OVERWHELMING. For the first time, I almost felt like a pseudo celebrity with people chasing our team members down just to say “THANK YOU THANK YOU THANK YOU!”

(( They’re thanking us for the free live event we put on, not the product yet ;))

A lot of people gave ME a lot of credit for the success of the live event and the success of the new product we’ve launched. Here’s the thing though - I had almost nothing to do with either one.

The live event was planned, set-up, hosted and managed entirely by my team. I simply flew in a few hours before it, grabbed a microphone and MC’d it.

The product we launched…the team has been working on it for months - not just 1 person, but multiple people each taking responsibility. All I’ve ever seen are the updates they give me and the few times they ask for my opinion or suggestions (which is rare).

As our business grows, this is the absolute first time our company has ever launched a product and I did not have a lick of stress by it (and it went smooth as can be). The even more amazing part is that the entire time I’m quietly working away on another project that we can launch soon, so you can see that things are getting better not only in terms of quality but even quantity now.

With team comes the ability to scale, grow and get your sanity back. If you’re doing everything yourself, you’re crazy and you’ll never be a $100 Million CEO.

Do this exercise:

Step 1: Make a list of everything you do during your day.
Step 2: Categorize everything (ex/ administrative, marketing, financials, support, etc…)
Step 3: Which list is the biggest?
Step 4: Time to add someone to the team to take over that category

Simple, eh?

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A lot of people who actually OWN stock options have no freaking clue what they are. In total honesty, I was actually ISSUING stock options 2 years ago before I truly understood what they were. I’m glad to say that now I do.

A stock option is really the “option to buy stock of a company at a certain strike price.” So, as an incentive for employees, a lot of start-up companies (that eventually want to one day build to doing $100M a year and then selling for $1 Billion : ) will issue stock options as a part of the compensation.

Typically doing this allows them to be able to pay “lower salaries” since cash is precious to a new company but also is a great retention tool to keep the employee around longer.

How do stock options help keep an employee around longer?

Simple - the most common stock option agreement has a few things that you have to look for:

1. Strike price: This has nothing to do with retention, but it’s important. This basically is the price the company is guaranteeing you can buy your stock for. Example, how great would it be if you had Google “stock options” at a strike price of $1 (as I write this GOOG is valued at $509), that would mean you can immediately make $508 per share!

2. Vesting Period: THIS is where “retention” becomes key. Most stock options are vested over 4 years. This means you get your rights piece by piece the longer you stay with the company.

3. Cliff: A good majority of stock options have a “1 year cliff” - that means you have to be in the company for at least 1 year before you start vesting any of that stock.

So, now you see how stock options help a company retain their talent?

But, at the same time, they really are great for the team members too. You get a chance to participate in the UPSIDE of the company that you’re helping build - you get your skin in the game!

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This is such a fitting post considering that I’ve been chatting about board of directors and what not. As we all know, Microsoft recently made a bid to buy Yahoo! which Yahoo! rejected.

Well, instead of raising the bid, Microsoft has decided to go after a HOSTILE takeover. As TechCrunch reports:

“Microsoft is preparing to try to unseat Yahoo’s board members in a proxy battle that could cost as much as $30 million (which is still cheaper than raising its bid).”

Now I heard that and thought: “Damn, that’s smart…what’s Yahoo! going to do?” Well the good ol’ boys at Yahoo! had a response and one that just made me laugh and think “Ha Ha Microsoft!” (think in the voice of Nelson from The Simpsons).

Yahoo, for its part, amended its severance plan to cover all employees in case of a change in control of ownership. It includes accelerated vesting of options, continued severance pay of between four to 24 months of each employee’s base salary, plus $3,000 to $15,000 in outplacement services per laid-off employee. And there are going to be a lot of those after the merger.

The part about “accelerating the vesting of options” is just PURE genius. What better way to scare off someone from acquiring you than to tell them: “Sure, go ahead, but once you do, everyone gets their money and everyone (the employees) leave and you’re left with nothing!”

My hats off to you Yahoo - you brought a smirk to my face.

But I guess this is one of the problems with becoming a HUGE company - you get a few MBAs involved and this crap starts to happen. Can’t we all just get along, make money and hug?

Source: I first learned of this at TechCrunch…

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Here is a very interesting note that came out of the last board meeting I had on Friday. The way I’ve thought about business is always to think:

“There must ALWAYS be profit…”

Now, not that I’m saying your company shouldn’t have a profit - but the real question here is:

“Does a YOUNG, GROWING company want to declare millions in profit right from the get go?”

The short answer is no.

Before you start disagreeing and thinking I’m an idiot, let me explain what I define as “profit” first. I’m talking about profit in terms of your tax statements.

Before I went into the board meeting, we had a financial “plan” that could potentially show a VERY large sum in profit at the end of 2008 and I was very happy to report it. I thought I’d get a “pat on the back” - but the reaction from the board was:

“Do we really want to have this much money just sitting around in the bank at the end of the year?”

Firstly - we have to pay a HUGE sum in taxes that goes bye bye.

Secondly (and this was the point that made me go AH HA!) - A shareholder would argue that wouldn’t the money be best used by the company and achieve a higher return on investment if it was invested by the company in it’s growth?

See, the whole point here is to create “share holder value” - money sitting in a bank account can (at max) make you 4-5%. But, a fast growing company may be able to invest that money in many places that could return much higher, such as…

- New product development
- Expansion into new businesses
- New hires
- Acquisitions
- etc…

So, think again if you’re a very young company looking to get acquired one day or even to build to that $100M a year business.

Rather than thinking “PROFIT” - think “MONEY TO RE-INVEST FOR FASTER GROWTH!”

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So this is my first post, bare with me as I find my niche in what to talk about. Ideally I want this blog to be about “high level” business thinking. Not “how to start a home business” - but how to start a $100 Million business.

As the days go, I’ll add more information about myself and my own business and what my future plans for this site are - for now, let’s just hear about my recent “first board meeting experience.”

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I won’t lie - I had avoided having a board of directors to date mostly out of the fear of having a group of old grumpy men tell me what to do and also simply out of laziness (rather than sit around fumbling with excel files and charts, I’d rather be out making products and building a business).

Anyways, our company has reached such a point at which “proper governance” is important. The whole “Because Nick said so…” mentality has to go and we need to show that all shareholders are represented in our decisions.

Naturally I asked my business mentor and close friend (who also happens to know our industry very well now) to be the first member of the board. Just to be clear, I didn’t ask him because he’s my “friend” - that would be idiotic and bad judgement. I asked him because as it already is, he’s typically the one that advises me on all “board type” matters anyways…

We had our first board of directors meeting officially on Friday, February 15, 2008 at 2 PM ET (quite a monumental day for me really, I felt like such a big boy with my briefcase, notes, reports and excel printouts).

For those of you who think that board meetings are held in fancy buildings with big tables, think again - this is a new age. We were surrounded by chickens, a dog (a.k.a the wolf), 2 cats, squirrels, blue birds and 5 children. If you didn’t figure it out yet, yes, we were in a home at a kitchen table.

I don’t care how big my business gets, I hope I can continue to meet in such a fashion - it brings a certain “calmness” to the entire meeting. I mean, think about it, it’s hard to fire people if you have little kids playing nearby

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Our board meeting started with a quick company update and then we went through the financial plans and some other HIGHLY confidential material that I just cannot share (but wouldn’t you love to know).

In custom with the beginning of most things I do for the first time with my friend and mentor, we started with a brief lesson about WHAT exactly happens at board meetings. His 5 minute explanation completely corrected my misunderstanding - so that’s what I REALLY want to share today.

What Is Supposed To Happen At Board Meetings?

Company strategy?
..
..
Nope.

Hiring strategy?
..
..
Nope.

Financial planning!
..
..
Wrong again!

Those are all things I thought as well, but actually those above are all things that MANAGEMENT is supposed to do. The board meetings are about one word and one word only…

GOVERNANCE

See, like with any country that has a set of laws, each company has what they call their “articles of incorporation” - these are the laws by which the company must abide.

The point of the board is simply to make sure those laws are being abided by and that the decisions being made are in the best INTEREST of the shareholders (that does not necessarily mean that they are the right decisions - anyone can be wrong - but they can’t be sneaky/malicious decisions).

Here is a perfect example.

The board does not decide whether a certain position is hired. The board simply “empowers the management to pursue that hire” - meaning it’s still management’s job to make the final decision - the board just acknowledges that they understand why the position is being hired.

So, when you have your first or next board meeting…remember.

GOVERNANCE…not strategy.

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