I ran into Lauren Solomon of LS Image Associates, whom I worked with several years ago, and haven’t seen in good while. She introduce me to Elyissia Wassung of 2 Chicks with Chocolate.

We went inside, and here are my live blogging notes (excuse typos and partial sentences – this is raw note-taking).

Street Smarts Live – an Inc. Magazine Event:
The Knack, How Street Smart Entrepreneurs Learn to Handle Whatever Comes Up, by Norm Brodsky and Bo Burlingham.

How Street Smart Entrepreneurs Learn to Handle Whatever Comes Up.

Norm: 1st Business  asked How were our sales yesterday didn’t understand that there were more than sales gross margin, profits, etc are important
Cash is the hardest commodity to get, and easiest to spend. Lots of first time entrepreneurs think image type things like stationery is important, decorations, etc. They’ll need to have cash later on, don’t waste on fancy stuff. He always bought furniture at bankruptcy or close-outs.
Logo design did within company  – never outsourced to designers.

Sold recent business for much more than last one because it had better gross margins important to understand.

Norm always learns from mistakes.
Biggest mistakes entrepreneurs make is in planning  don’t just start business do free market research also, other executives in business  not in  your exact field or territory may answer questions for you. Go to sector groups.
Make sure business you are starting fits in with your life/life plan. For example, if you only want to work 3 days a week, don’t start a 24/7 store. His long range plan was to take off 16 weeks a year. It took him 15 years to set the business up that way, but he worked to it.
Make sure you’re capitalized sufficiently to get to level that you don’t need to be borrowing. If business will cost 200k, put 50k in reserve (25%).
Most people are overly optimistic in projections.
Most common problem in running, on going business: people don’t understand gross margins. They’re not making enough in sales. Sell service for 10$, your direct cost is $6, 4$ is your gross profit. $4is used for overhead,   If we hire and pay salesperson 40k a year, we need 100k to hire him or her.

Accounting is Quickbooks good? QB or any accounting system crap in, crap out. If you do it by hand you may understand relationship between numbers more directly.
If you follow numbers by hand, it may show you trends that you might not notice on computer.
Accountants are great historians, but when you get year end or quarterly statements it may be too late. You need understanding quickly.
Q: as business starts, most people micromanage everthing. As business grows, you have to hire others. How to do this best.
A: Important to set culture of the business. Learned he’s a terrible manager liked to be involved in everything. It is hard for entrepreneur to let go and let others do their jobs. Also promote people to peter principle to too high a position. Learned also to hired people for attitude, and can teach them abilities. Try to promote from within. If you hire good in the beginning, you’ll be better later on.
Let people make some of own mistakes.
Eventually let staff lock him out of staff meetings.
Q: When’s the right time to step out of the business?
A: business must be running on own cash flow, and you know that people there can do the job.
Q: Bo there are different stages to this at one time, you backed off from meetings, but you were still involved.
A: He was also making decisions that were in best interest of him, not of the company. He stayed on for a few years when he sold company, and there were challenges.
Q: What happens when you have been running business for years, economy changes, and you have to grow it. The employees aren’t of the ability to grow it?
A: You have to take emotion out of business decisions people work with him or for him but they are not friends, because sometimes you have to make decisions that affect them in a mental or monetary way. If you make decisions about what’s best for company, you may hurt people along the way but the company, if it gets bigger, may be better for everyone. The business comes first.
Q: Did you have investors invest in  your companies?
A: First business funded by lawyers and accountants that financed him. He eventually bought them out (didn’t have a buy out agreement, so there was a dutch auction). He had customers fund cash to fund his buyout. 95% of all companies do <$1M a year in business.
Only 5000 companies do 30m a year or more. Microsofts and HPs are the rarities in business.
Q: How to get away from staff and day-to-day to create systems and processes
A: Believes in critical numbers simple reports, weekly: Sales, margins, new boxes in, etc. and a few more, and via that he can tell how business is going. In fact, staff will tell him how things are going put in notes when things change.
Also, surround yourself with someone who’s great with numbers, and other weak points, but learn to understand it.
Bringing up 2 entrepreneurs now, Brian Kelly, City Beans, and Mike ? West End ? Express
Mike: Wanted to get from $1MM to 10MM a year, Norm told him he couldn’t do it in way he was talking about got him to $3MM, then eventually. They allowed him to do it while taking off weekends, having a life plan. If he had done sales sales sales, he never would have been able to enjoy life.
Brian: Went to Norm, article about shredding business, had a coffee business and was working as fireman, Norm helped him get business started.
Business nightmare starbucks was moving in next door to his store. He had been competing with Dunkin, business was cash-flow positive. He was worried that they’d cluster around him and drive him out of business. Norm helped him look at it a different way – $bucks is big company, what can I do that they do, and how can I make up for the loss of business they’re going to have  what’s the plan? The answer was he had done catering for years they did soup, salad, sandwiches, and did corp catering. Lost 11% but gained it back in catering business.
The important thing is you’re going to have competition, you have to figure out why you’re better than everyone else.
Norm: Dad was door-to-door peddler bought dresses for $4, sold for $8. There are opportunities everywhere.
Customer asked box storage question he did research, found industry prices, and realized he had opportunity to outsell them. Put boxes in his office to start, eventually became largest archival storage company in the country.

Q: New entrepreneurs most difficult part is finding sufficient capital. Where is capital most easy to access?
A: Norm: it is A difficult part, always an issue. Most people start with their own, bank accounts, 2nd mortgage on house, go to family and friends or rolodex for money. Some unconventional avenues  – going to potential customers  get them to invest in your company if you’re going to produce service for them. You may have big idea, but start at a smaller level. Get investor to help you do small part, before you go to larger idea.
Brian financed first Coffee business by working 2 or 3 jobs, took money from tax returns, credit cards, built coffee bar himself as carpenter.
Q: You spend time finding the Niche you have to continue to look for ways.
A: Perfect Courier  the only computer you could buy was an IBM32  a big box that could take customer addresses and total a bill. Was trying to get Scalia, McCabe, Slobes as a client. Problem they had was a chargeback to clients they were not getting the data in way that accounting department could use it. He took 1500 tickets, had 20 typists type the bills perfectly  the agency’s accounting department wanted the program he said it was proprietary. He had to have 60 typists until he got the thing programmed 4 months later.
He went from courier to a billing service.
Niche he discovered with storage service he was closer into town than big companies like Iron Mountain he could do faster delivery.
Q: Focus on making sale, getting customer and develop a relationship What’s value of capital vs getting customers?
A: You’re either an onsite or offsite shredder offsite was 750K, onsite cost 250k.  Partnered with someone outside of town. Eventually he doesn’t own a shredder he basically owns customer relationships and partners with everyone.
Q: You’re making money – how to expand correctly
A: Before you start business, you don’t know opportunities stick to One. Once you’re running business you see many opportunities. Once you have cash flow sufficient, you can expand, but also do them one idea/expansion at a time.
Be careful you don’t kill golden goose.
Q: Debt vs equity financing? Challenge of getting rid of equity
A: doesn’t like to give away equity. In beginning, you may not be able to get rid of debts quickly enough.
Q: Finding partners and structure
A: His 2 partners were sweat equity partners, took >20 years for them to get it, with right to buy it out.
Q; In book you talk about compensation of sales people no commission  how do you keep them motivated?
A: Doesn’t believe that only commission motivates people. If you’re not feeling fairly paid, or happy with job, they can find other jobs. They have a culture, and pay sales people fairly, and prosper for bonus, and how company does. Sales people also want consistency  it can be positive for them. Sales people can cover for each other.
Q: Have run by KASS rules up to now, has challenge finding a good lawyer.
A: Rarely gets involved with lawyers both sides walk away a little unhappy is a good settlement. Lawyers shouldn’t make business decisions for you  they’ll tell you about the law.

Guest: Mark Grossman – Attorney and “TechLaw” Columnist

The industry should be embarrased – contracts are horrible, not so much one-sided as incompetently drawn, fail to address basic questions. VERY often, the contract delivered is not the deal the parties wanted to do. Most business litigation is honest business people, honestly disagreeing about their items that are unclear.
You have to be on the same page – legal review helps you – lack of attention to details will bite you later – it is a safety net. But sometimes people agree to agree later.

Sellers are in the best position to put out the first draft for a deal. Good form documents are helpful for you to close and seal a deal.

Assumption: assume that no one at the table will be involved after the parties sign, the doc stands on its own, and its well written and could be understood by people not familiar with the details. Who do you write for- the judge, the (high school and college educated) jury, who? – Work with assumption that everyone who negotiated will not be there but have the same skill set – and they could read the document and understand it.

Mark now shows 6 basic questions for a software dev contract – responsibilities, procedures for feedback, corrections and changes; procedures for final acceptance; price and when it’s paid; who owns the copyright and ip rights; remedies for delay or failure.
Who’s responsible for: text, graphics, look and feel, layout. Is it defined?

Licensing – who licences 3rd party software? Who does due dilligence on underlying licenses now?

What’s the procedure for change orders? – must create procedures for collaboration

Changes require approval of both parties, needs to deal with timelines, mechanisms for adjusting price, do not get sloppy with procedure – creates litigation.

Procedure for final acceptance – including functions, speed, and response time. Have to think about failed tests – procedures, time for fixing, etc. What happens if parties never agree it works.

What’s the price for the work when it is paid? – flat fees – more work up front to clearly delinate the scope.
Is it based on time? What’s hourly rate? Time to completion? Require regular updates on time to date.

When is payment due? Dates vs milestones.

Who owns the copyrights and other IP rights in a website?
buyer – “I paid for it – how come I don’t own it?” vs developer – “losing rights to my own programming library.”
Work made for hire – unless agreement says the buyer owns it, the seller owns it.
If doing outsourced work, even if venue for law is New York, always check with foreign lawyer.

Remedies for delay or failure – careful balance needed. If customer doesn’t provide what’s needed on time, like logos, graphics, etc. developer can’t deliver on time.

Whose law should apply? NY can be a compromise state.

Magic language- time is of the essence – - Courts don’t like to enforce time limits, but putting this in can make court put higher priority on timeline. (Shouldn’t be acceptable to a seller).

Where and how to battle – Lawsuit, arbitration, attorney fees to the victor?

Norms on limitation of liability – no matter what we do and how bad it is, we owe you little, and you owe us first born.

Limits on liability – from seller – it’s a price issue, its an industry standard, we’ve never done it any other way, we can’t be possibly responsibile for all the harm our software would do if it failed. You have to have backups in place.

Buyer’s perspective – full amount of contract or more, exclude 3rd party property damage and bodily injury, exclude liability for infringement of IP, exclude NDA liability, reciprocal.

In general, great presentation, very informative, I learned a lot.

My US friend Tom Watson of Changing our World and On Philanthropy invited Pamela and I to join a group of friends to meet MP Tom Watson, Cabinet Office Minister from the UK.
MP Watson’s office recently released a report on the Power of Information, documented here in his blog.

Yes, his blog, the archives of which go back to 2003.

Five years ago, I set up political blog. At the time, it was seen as a radical act…People couldn’t believe that I had opened myself up to such scrutiny and occasional daily abuse.But the blog broke down the walls between legislators and electors in a way that interested me. So I persevered.

He’s also got a LastFM badge. This is a real blogger. A gentleman at dinner asked him what he looked at first as far as websites and email, and he started quoting LifeHacker and GTD and how he manages his information flow. This already is different from almost any American Politican I’ve met at any level. He also was impressed I had gone to ITP, since he’s a fan of Clay Shirky.

It is clear that Tom is passionate about helping people get a handle on their information. From the aforementioned blog link:

Today I am going to offer two arguments that I think compliment the Prime Minister’s recent announcement on public service reform.

Firstly, that freeing up data will allow us to unlock the talent British entrepreneurs. And secondly, engaging people – using the simple tools that bring them together – will allow the talents of all our people to be applied to the provision of public services.

Free up data – liberate talent and catalyse creativity. Engage – bring people together using simple tools and you empower.

The dinner was held under Chatham House Rules, which allows the participants to use the information they gathered, but not to attribute the identity or affiliation of the speakers. So, I can’t really go into depth on the discussions. However, it is clear to me that MP Tom Watson will be helping to open up the UK Government in a way that may prove quite beneficial to the citizens of the UK and be a model for us here in ‘the colonies.’

Tom will be in SF for the Web 2.0 Expo, and I’m hoping to get him together with a few of my friends who will be there. If you’re interesed, please get in touch with me.

My panel included: Marnie Webb, Co-CEO, TechSoup, My Luu, Market Development Executive, Small &amp;amp; Medium Business, IBM, Aaron Strout, VP, New Media, Mzinga, and Jordi Duran, Founder and CTO, iWith.org.

We covered a large amount of ground in just one hour, and as moderator I wasn’t exactly taking notes to blog with, but I did learn a few things to share.

Marnie works at Tech Soup, which offers nonprofits a one-stop resource for technology needs by providing free information, resources, and support. It’s so much more than that, go check the site. One of her big projects currently is the net squared mashup challenge. Marnie noted during the panel that they let the “community” (meaning anyone interested) vote for their favorite projects, which will be reviewed at a conference. While some of the contenders might not have been what her team might have picked, she felt the community did a great job in surfacing interesting projects.
The benefit to groups submitting to the challenge was that all submissions were public, and that allowed any smart people to comment on them and potentially improve the submissions before the deadline.
The entire project is a great example of the ‘Wisdom of Crowds‘ that is often referenced around web 2.0 efforts.

Aaron was involved in another community-built effort, the book We are Smarter than Me. This book was written using a wiki to source comments and ideas from anyone on the internet who choose to share and contribute. (Disclosure, I participated in the Wiki a few times, and am credited in the book, but don’t have any significant role in it).

Jordi gave me 2 really great things to think about. First, his group, iWith.org has partnered with AlternativeChannel.tv to host video content for not-for-profits looking to share their video and use something other than You-Tube. Looking at the site, I also note that: Alternative Channel in collaboration with iWith.org in Barcelona organize the Alternative Channel Forum on Social networks and responsible media.. The event is scheduled for April 30, 2008. Read it for more.

Jordi noted that iWith.org had originally offered a bunch of software-as-a-service hosting for not-for-profits, but that when they gave the service away, many groups didn’t make much use of it. Now they charge Euro40/month, but offer grants and discounts to organizations who need them. I love this lesson – if it costs something, it counts and groups will use it. This is the same reason I often have charged $5 or $10 to attend an event like Social Media Club in NY – it’s enough money that people have to think about attending, but not enough to keep people away.

Jordi also had an insight that (and I quote):

NPFs have been leading social movements in 20th century. From charity, to political parties, and labor unions, most of the volunteering from these causes was young people, mainly students that participate with their free time in the cause of their choice. But in 21st century, younger people are spending more and more time online, and the net offers volunteering opportunities, from co-creating an online encyclopedia, to develop an operating system. That is happening while traditional NPOs are becoming more professional, structured, big and “like a job”… [Jordi is] seeing more virtual and less structured groups – those organizations that once lead social volunteering in the 20th century are losing resources to online groups – they must use and participate online in groups or lose attention and fundraising resources – as their volunteers move to other interests online.

It makes sense to me that organizations have to allow the youthful volunteers –who are often the backbone of groups — the freedom to connect with each other and with the organizations online, and become infrastructure for the cause and be a connection point.

My’s project with IBM and the World Bank created a toolkit for small businesses. The site has resources, forms, and content, can be found at http://www.smetoolkit.org/smetoolkit/en . Definitely worth a look!

An audience question asked about deploying social networks, and noted how in the traditional tech model, companies had Integrated Systems Vendors (ISVs) who would deploy hardware and help small to mid-sized businesses who needed coordination and might not have IT staff. What’s the equivalent to an ISV in social media? This ended up being a soft-ball question for me, and I replied that this is part of the role that my company is playing. Many fimrs will deploy a software-as-a-service social network, but not have the strategy abiliites in-house to make a community grow. My consultancy focuses on this strategy component, and I work with other consultants and have relationships with multiple vendors. (end of commercial).

There were lots of other panels, and I will blog about them in the near future. I look forward to questions and comments from attendees and others, and thank UN-GAID and Gary Bolles for this unique opportunity to contribute.

This video clip courtesy of Michael Pinto of Very Memorable who has kindly showed me that I say “um” a bit too much. Something to, um, work on.

[youtube]http://youtube.com/watch?v=07dV9w7vXRY[/youtube]

More coverage and video via Center Networks
NYSIA February Meeting Recap – Discussion With Howard Greenstein and Henry Blodget
and thanks to Allen Stern for posting it so quickly.

Pictures and video on Facebook:  NYSIA State of the Industry.

Keeping Loose Ties Active
At a recent holiday party thrown by Larry Aronson, I ran into a person I’ve always liked but never spent much time with. We serve together on the board of NYSIA and he’s a VC (I guess this narrows it down). He came up to me and my wife, and, after the usual greetings, said “I haven’t seen you in a while but I feel I know what you’re up to because I follow you on Facebook. I see your twitters, your blog posts, and pictures, and I feel like we’re in touch.”
Well, my wife’s jaw dropped. Here’s someone who has lots of money to invest, works with companies I admire, and just by participating in Facebook I’m keeping him interested. This hasn’t lead to a direct lead, but it validates my strategy.

Shared Interest Leads to A Pitch
Recently I stated I ‘might attend’ the “Graphing Social Patterns” event put on by Dave McClure and O’Reilly. It’s certainly something I’d like to do, but I’m not sure I will be able to swing it due to scheduling. However, it showed in the Facebook news feed of a college friend who I had connected to, but haven’t spoken with in about seven years. He messaged me on Facebook and asked if I was interested in Social Media, as he had been tasked with looking into it for his company. Through a series of messaging exchanges, it has led from a phone call to an opportunity to pitch his company on Social Media Consulting services from my company, the Harbrooke Group. While the contract is still not signed, I never would have had the opportunity to pitch without updating my social status.

LinkedIn Links a client with a Fortune 500 in 4 hours
Recently I was able to do small bit of consulting with the excellent Truman Company from the Boston area. They are working on behalf of a Fortune 500 client who wanted a connection with, of all companies, LinkedIn. After leaving the call, I used my own LinkedIn network to find Mario Sundar, LinkedIn’s excellent community evangelist. Via Mario we got to the correct person at LinkedIn, and had a conference call scheduled in about half a day. It seems obvious, but the networks we build by connecting to people can and should be used to create connections that create value for our clients, our friends, and ourselves.

How have Social Media networks and connections improved your business? Comment or send me a note.

Technorati Tags: marketing, business development, social networks, facebook, howardgr, twitter, blogging

Your feedback is also welcome as to how I can improve this. And finally, if you’re not sure how to get your conference listed, get in touch with me – howardgr at the gmail email service.

I was able to spend a few minutes at the cocktail hour speaking with Jeff Jarvis, Jack Meyers and Cynthia Ginsburg (see photo). (The entire photo set is on Flickr.)

We discussed TV, TIVO/PVRs and a bit about what people are watching, while standing in front of the new Fox Business Channel booth on the floor of the exchange.

Jeff, who among other things is famous for the “Dell Hell” discussion on his blog a few years ago, told me that in last week’s issue of Business Week he got a chance to interview Michael Dell (here on video) about how they’ve learned to listen much more effectively to their customers. Mr. Dell says in a very candid, bloggy way:

“These conversations are going to occur whether you like it or not, O.K.? Well, do you want to be part of that or not? My argument is you absolutely do. You can learn from that. You can improve your reaction time. And you can be a better company by listening and being involved in that conversation.”

Great quote, and an article worth reading whether you’re a competitor to Dell or a small business.

It’s always wonderful to catch up with Isabel Walcott (in black) and Francois Gossieaux (pictured here with me). They seem to be doing some interesting things at MarketHum. I hope to learn more.

I also got a chance to speak with Heath Row for the second time this week, as he had visited Social Media Club on Tuesday.

At dinner I was at the “Storytellers” table,
and met several interesting folks, including Susan Danish of the Association of Junior Leagues International. From their site:

The Association of Junior Leagues International Inc. (AJLI) is an organization of women committed to promoting voluntarism, developing the potential of women, and improving communities through the effective action and leadership of trained volunteers. Its purpose is exclusively educational and charitable.

We had an excellent discussion on how many of the Junior League chapters are using social media sites such as Facebook and MySpace to connect their members. An example is the NY Junior League on Facebook (note, Facebook login required). Susan told me how the members are helping the organization to see the value of Social Networks and that the individuals involved are moving the organization forward and getting their message out in new ways.

I look forward to interviewing Susan in more depth to learn what new things are developing because of these social community connections.

One other unique feature of the evening was that WF360 had put cards from their “Leading Questions” series on the tables. As a group we discussed a few of them, and we received a copy of the set (along with some other nice schwag) in gift bags.

All in all a thought-provoking evening of good conversations.