Monthly Archives: October 2010

Pricing = Timing

People talk about price as if its the only thing you negotiate. Its not obviously, but pricing can have interesting impacts on your business and the the timing of your sales. I was at a family function many years ago when an older Jewish real estate agent, took my hand in his vice like grip, stared into my eyes and said. “You make your profit on the buy, not the sell”.

At first I thought it was simply weird old guy stuff, but the phrase stuck in my head and I realised he was right.

When you at a reasonable price, you don’t have much option but to hold out for the sell price you want to maintain your required margin. But when you buy well, you can alter your timeline. i.e. if you need a quick sale, drop the price, if you don’t be relaxed and enjoy super profits.

So the best way to buy well, is to buy for free. So how do you buy for free? I can think of a couple of ways.

  1. Indent Stock – You get paid when I get paid, you’re just using my premise as a warehouse. This is common in retail, and can be applied elsewhere.
  2. Buying the right to buy – Rights don’t normally get sold outside of equities, but doesn’t mean you can’t. I have seen someone rent a holiday house and pay 12 months in advance for the right to buy that property at a set price.
  3. Swapping – you don’t have to pay cash. Consider swapping for something you no longer value.
  4. Sharing the Yield – An interesting deal is sharing the yield. You obtain the right to sell something, for a pre-agreed share of the profits.

Have I missed anything?

Syncing Mechanics for Google, the iPhone & Windows

Last week I talked about how I had come up with a better solution for syncing my calendar and contacts information across a variety of devices, including my windows based computers, iPhone and iPad. But I didn’t go into the actual mechanics. So without further ado, here’s the how to do it.

Windows (on the desktop and on the netbook)

To get my Google contacts automatically synced with the Thunderbird email client that I use, I downloaded the free Zindus “Google and Zimbra contact sync” for Thunderbird. Its simplicity itself to install. Inside Thunderbird you click tools, add-ons then install then select the downloaded file. You then configure it inside Thunderbird, by selecting Tools | Zindus (its a new option that has appeared), and adding your Google Mail account and password. The two systems then keep themselves sync’ed without any interference.

Two points to note.

1. I discovered whilst writing this that Zindus was written by a friend of mine in Richmond (well done Leni!)

2. Double ups of information generally occur as people switch jobs, and email addresses. Google Mail has a lovely tool to find the “double-ups” and fix them up for you.

The second area where I want to Sync with Google is with my calendar. I use a product called Lighting, which integrates with Thunderbird. I downloaded the free Google Calendar Provider and installed it the same way I installed Zindus above. By selecting Tools | Add Ons | Install inside Thunderbird.

When you run Lighting, click the calendar icon in Thunderbird, you can then create a Google Calendar “feed” to be displayed. To create the Calendar feed select File | New | Calendar. You then select Google Calendar and enter the Calendar location. The Calendar location can be found by going to your Google Calendar in a web browser, selecting Settings | Calendar Details and pressing the XML button for the private address. Cut and past this address into Lighting and Voila! Your Google Calendar and Lightning Calendar will automatically sync with each other.

The lovely thing is I can repeat this same setup on every device I may touch, and they will all automatically sync without getting confused as Google is always the “source”.

I can also go to my Google account and see my up-to-date calendar, contacts and send email if I drop into an internet cafe.

Although I don’t use Microsoft Outlook, the same principle works there as well. There is a great article here on how to set it up with links to the free software.

On the iPhone and iPad

Both the iPhone and iPad are pretty much identical to setup. Its a two step process. The first step is to add your Google Account, the second step is to tell the device which calendars you want synced – I have 9.

To setup your Google account you go to settings on the device and add, here’s a tricky bit, a Microsoft Exchange Account (not the listed Google Mail account). This means you will access Google via an exchange server Google has licensed, which gives you the functionality you need to sync lots of accounts. The process is explained in detail, with pictures, here. With this one stroke you can setup eMail, Contacts and Calendar. Its also likely that you will delete any existing contacts you have on the device, but that’s pretty much a good thing at this stage. Just take a backup of your contacts first in a basic format such as csv (a comma delimited text file) and import these into your Google Contacts when you are done.

Miraculously, Contacts will start appearing on your iPhone in batches. In my case downloading the 2,500 or so contacts normally takes a number of hours. I don’t know why it takes this long, but I don’t care. All I know is that it works.

The second thing you will want to do is add additional calendars to Sync. On the iPhone and iPad, each calendar comes in its own colour and I can turn them on or off, depending on whether I want to see the big picture or just focus on one thing. Why I have multiple calendars, is something I have written about before, but won’t go into here.

Instructions for setting up multiple calendars to Sync are published here by Google. Basically you just goto http://m.google.com/sync , login and select the calendars. The trick is to use the web browser on the device you want to sync as the Google Sync website recognises which device you are using to access it, and configures the available options automatically.

This doesn’t just work for the iPhone and iPad, the Google Sync website also has instructions on how to make the hole thing happen with Android, Blackberry, iPhone’s Nokia’s and others.

There was only a tiny bit of fiddling to get the whole kit and kaboodle working, but now that its done, it just works. So much so that I regularly find myself surprised when other people mention that they are having issues. Hope you find it useful too.

My Event Notes from “Dealmaker” at the Churchill Club

Our Open Forum Panelists were:

Panelists

Dominic Carosa – CEO, Dominet Digital
Kath Murphy
– Principal Consultant, Scotwork
Richard Llewellyn – Executive Director, Howitt  & Co.

Moderator

Brendan Lewis – Managing Director Flinders Pacific & Chair of the Churchill Club

Negotiation Basics

Like almost everything in life, 90% of the job is in the preparation and 10% in the execution.  Even if you close a deal, you are guaranteed to be leaving money on the table if you don’t do your homework.

Learn to be both strategic,  understanding what your big picture is, and opportunistic, taking advantage of what pop’s up.

Determine what is fair and reasonable for you and them, then ask for a percentage more, leaving a bit on the table to negotiate with.

Its hard to negotiate for yourself, by yourself as you are emotionally attached and full of biases (whether you realise it or not).  This makes you much less commercially astute.

Negotiation is like selling, get a series of yes’s.  Start with small agreements, then work your way up to big agreements.

There is no such thing as a merger of equals.  Everyone is different and has slightly different agendas.  Its appears to work out best when there is only one MD at the end of a merger process.

Understanding what questions you will be asked should always be part of your preparation.

Understanding the other Party

We were given two ears and one mouth.  Spend your time listening and make less, better targeted offers.  Its easy to look like a goose, so don’t hesitate to ask people to explain if you are unsure about their position.

Emotions are important, you must understand how the other party feels about the vision for the deal, themselves and their people.

Quite regularly the motivation for the sale of a business isn’t money.  All to often its things like being tired or burnt out, getting a divorce or wishing to retire but not having a viable heir.  Remember that money is generally only one of the the items on the table.

You need to seek to understand the party to a negotiation.  Failure due to a lack of information “Why didn’t you tell us this earlier” happens often.

Good probing  questions to understand the the other party’s goals and what they are flexible with (eg price) include:

  • If we went down this path, would you be interested?
  • Under what circumstances would you be flexible?

Also, listen for descriptors such as “in the order of” and “at least”.
Asses the type of person you are negotiating with.  Do you like them?  Are they prepared to listen?  Are they confident (good) or arrogant (bad).  Remember that what normally starts with laughter, ends with tears.

Deciding what you want from the Deal

Be creative and have a wish list before the negotiation.  Remember that you always need stuff that you are prepared to trade.

When there is no precedent, ask for everything on your wish list.

Be determined and patient, because sometimes deals take years.

Be strategic, but opportunistic as well.  Eg Freeonline was given the opportunity to shut down the business, but give the investors a 40% return, so took it.

Need to understand clearly what you need as compared to what you want.  Your wants can be watered down, but not your needs.

Dealing with a large party

When dealing with a large organisation, you need to first figure out what the whole deal could look like, then figure out how to test the waters.  Do a small deal first and see how that plays out, before you investing your time and resources into something much bigger.

Don’t get over excited by doing a big deal, because stakeholders with the larger party can leave and the passion dies.  This happens all the time so be very sceptical of large deals.

When you do a deal with big guys, if there is no guarantee on income levels, there is no motivation for them to focus on you.

The best advice is normally to sell and move on to your next venture.  Its unlikely you can find a satisfying role in a large organisation that you have sold your business to.

Dealing with a difficult party

How do you deal with an Unreasonable Condition – Match it with an unreasonable demand of your own to diffuse the situation  eg The Liberty Bell was cracked when delivered – 150 years later the local council demanded the warranty was honoured and the bell was repaired for free.  The manufacturer then politely asked for it be returned in its original packaging, as per the warranty.

How do you deal with Shifting Sands – people that backtrack and reopen solved issues.  Have negotiations rich with variables, so there is no agreement until the end.  The last issue should be price, so that re-opening any issue will affect price.  You can also reserve the right to reopen and agreed issue, to get past the roadblock.

How do you force decisions? – Propose solutions and ask for a response.  Also, don’t be afraid to ask hard questions like “how do we speed this up”.

Dealing with an easy party

Negotiation is different from persuasion, both parties are required to be “negotiating” to get to a deal.  You need to consider

Rules of thumb.

  1. How good a result can you get without tarnishing your reputation.
  2. Its foolish to think you would never meet these people again, consider this before burning them.
  3. Remember that credibility and reputation are the only things you take with you.

Dealing with Potential Investors

Everyone talks about Smart Money and Dumb Money, but every investor thinks they are offering smart money.  Smart Money is Money that comes with mentoring, experietse, synergies and opportunities.  In truth its wrth 2->3 times dumb money.  A good example is the story of Cosmetics Entrpeneur Poppy King.  Poppy was offered a ebtter financial deal from an investor with no strings attached, than from an inverstor with a large amount of industry experience that they would bring to the table.  She chose the money without strngs attached and had closed down within 18 months.

Investors may also seek their own “smarts” to go with the deal, seeking out further investors with the right skills or attributes to add value to the venture.

Your Negotiating Team

SME’s can’t negotiate anything decent on thrir own.  Large corporates have a team to support them.  It is ridiculous to think that you can do better by yourself.  Both old and young entreprenurs normally have a panel of mentors they can call on.

Should you get a professional to negotiate for you?  Yes.  Professional Negotiators will also determine your position much more accurately that you ever can, and pressure test your assertions.

Having to go back to your stakeholders is a useful technique as it gives you breathing space.  Deferred authority is important “especially when a decision is demanded  “I want a decision now”.  Dom always makes it clear he will need to take the deal to his advisors to confirm (even when his advisors where just his sister and their accountant).

Its good to have a housekeeper on your team who records and summarises.  It takes pressure off you and gives you breathing space to think.  It also allows you to watch body language when difficult questions are being asked.

Your ideal team should include:

  • The Negotiator
  • A Summariser – who confirms understandings and records them.
  • An Observer – who just listens and watches reactions, for later discussion.
  • Specialists as required.

Bring lawyers in after you have come to a Heads of Agreement.  The lawyers should draft the agreement to reflect the HOW.  They should not drive the negotiations.  Too many snouts in the trough drives the price up.

Only allow two iterations of back and forth between Lawyers on the paperwork,  then meet with the other party to resolved.  Lawyers hate this as they don’t get to bill as much.

International Negotiations

Other cultures can be very difficult to negotiate with but negotiating still follows the same sequence.  You cannot ignore the cultural differences and should always have cultural assistance on your team to understand the other side’s thinking and values.

There is also a dramatic difference between the commercial environments in Australia and the US, but not particularly Melbourne and Sydney.

In the US

  • The market is much, much bigger.
  • Investors are more generous.
  • They are only interested in global solutions.
  • You are expected to negotiate much, much quicker.

Australia is a terrible place to raise private equity.  Richard indicated that Private Equity investments as a percentage of GDP was:
Australia = 0.6%
USA = 2.8%
Israel = 4.5%

– end of document –

Syncing Phones, Computers and the whole kit and kaboodle

So here’s the problem I noticed.

I was browsing Facebook on the weekend, and noticed a friend of mine had recently purchased one of the new 4G phones, the Samsung Epic 4G. He posted that he had finally managed to be able to transfer his contacts over.

A colleague that I am assisting make some acquisitions in London, had problems with the sync his laptop and iPhone, and managed to lose all his contacts and corrupt the database. He was most embarrassed as he had no backup solution and was having to slowly re-contact everyone.

Another colleague I had breakfast with last month was having difficulties with Mobile Me, the Mac specific  iPhone / Mac syncing solution that costs $99 per year. Every time he syncs, his contacts double up.

The basic mobile phone concept that most of us, who have had mobile phones since the early days, work with is “your phone is paired with a computer, and every once in a while you sync your contacts and calendar”. This worked well when we all had one computer, one mobile and a handful of contacts. But now that life is more complex, that solution just doesn’t cut it.

The Old Way

I regularly use one Windows desktop, one Windows netbook, one iphone, one iPad and occasionally login to my files using other peoples desktops. I have around 2,500 contacts and regularly check 9 different calendars. I’m not exactly a basic user, however my issues, and how I solved them appears to have a bit of currency with other people.

The reason the old solution doesn’t cut it is that:

  1. Its generally a manual process, so likely to not happen as regularly as I would like (due to my laziness).
  2. Its a lot more time consuming syncing multiple devices.
  3. You regualrly need to purchase additional software, especially in the windows mobile world, to sync contact systems and calendar with a variety of calendars, contacts systems and email systems.
  4. Its an individual solution, not a collaborative solution.
  5. With 2,500 contacts, failure is a lot more painful.

So because I am a technologist, a tight arse and lazy, I worked out a solution that works for all my devices, costs nothing and works automatically for both myself and other members of my family.

Here’s what I did:

  1. I created a GMAIL account on Google, which I used to manage my contacts, but I rarely use for email.
  2. I created a CALENDAR account on Google.
  3. Conceptually, I see the Google Accounts as the “source” for all my information.
  4. I then set-up each device I use to Sync to GMAIL and Google CALENDAR.

The New Way

The specific steps of doing this, will be the subject of next weeks post, but here’s the benefit of the new system.

  1. Syncing happens automatically. If I enter someone’s contact details into a web browser, they “automagically” appear on my phone and every other configured device later that day.
  2. Every piece of software I use on every single device has its own free piece of software to sync with Google.
  3. There is no charges from Google for this service, and the Mobile phone phone data charges is negligible ie its always been well under my cap as we are talking less than 1MB at most of data transfers a month).
  4. My wife’s calendar also syncs onto my phone and mine on hers, so we know what each other is up to for planning purposes.

I have been running this solution for around two years and never, ever had an issue.

  • If I lose my phone don’t lose any data.
  • I don’t have to worry about the technology, it just works.
  • Google, a multi-billion dollar company is doing my backups for free.
  • Its not some weird, edgy solution. Everyone wants to interface with Google.

Next week I will go through the configuration mechanics, but I thought it was best to get the idea out first.

My very own hotspot

During the school holidays I went down to the Morning Peninsula and spent time entertaining the children.  I managed to get a kite up in the air for around 20 minutes, so I felt completely validated as a parent.

While I was away I still managed to get a bit done courtesy of a small device I purchased, which I must say I thought was fabulous.  Its a Netcomm 3G Wireless Router.  About the size of a small stack of business cards card its a wireless access point and 3G router in a portable device.  What it meant to me was that I had my own wireless hotspot that I could use at home or at a cafe.  I could also access the internet using my notebook and my iPad at the same time.

I purchased a plan from Optus giving me 2Gb of data for $20 a month.  So far I haven’t blown this despite the fact I have spent a spare bit of time web surfing and pulling down emails with attachments, but not watching videos though.  The speed was of course slower than what I was used to, but seemed to depend on where I placed the device in the house.  I Also liked the fact that I could put these charges on my Optus mobile phone bill, and not generate extra paper.  However in hindsight if I keep going to the country, I should probably switch over to a Telstra account as they appear to have better coverage in regional areas I like such as Warrnambool and Lakes Entrance.

It also come in a bit handy when I overnight in Sydney.  It galls me to pay $26 for 24hours internet access in my hotel room, when I I want is to quickly check my email.

Setting up was really easy, other than having to know the name of the network I was trying to attach myself to.  Unfortunately Optus had more than one option and because it was slow to change itself, I became quickly confused when everything I tried, and I’ll admit a little impatiently, didn’t work.

At $299 it was a little pricey, but I would expect that to come down a bit as soon as it has competitors in the market place.

The kids loved it to as a lot of the games they pay on the iPad require internet connections and stand alone games just don’t seem to cut it for them.  All in all I’d give it an 8 out of 10 as a handy gadget.

Superprofits from the Arcade

Crane GameI just spent a week down on the Mornington Peninsula with the kids over school holidays. I tried to keep my mind on Kite flying and mucking about at the beach, but I came a across a small business that I found just fascinating in how they generated their revenues.

On first glance it appeared to be a games arcade with lots of video games and machines that you thump, prod or throw balls in. I was surprised to find that they didn’t have much food or drink for sale, but they did have lots of prizes in cases you could win.

It may sound weird but at the end of half an hour or so, I suddenly had an epiphany about their business model. They weren’t selling arcade games, they were selling primitive plastic gifts at outrageous margins.

Consider this:

  1. We purchased tokens from a machine, to put in the arcade games. Roughly $1 per token with a volume discount (eg. 6 tokens for $5).
  2. When you finished the game (or even part way through) the arcade game started spitting out a string of tickets, the length depending on your score.
  3. At the end of playing all the games, you gathered up all your tickets and fed them into another machine, which spat out a receipt with the number of points you had earned.
  4. You swapped the the receipt for a prize (eg 10 points got you a sticker book, 40 points got you a tiny plastic pool table).

All these steps (and opportunity for mechanical problems) seemed a bit strange to me which got my antenna up. I then did some quick mental calculations and realised that the prizes you could “win” were overpriced roughly 10 fold, but it was difficult to notice because we were so abstracted from the original cash spend. For instance:

  • A $15 metal car was worked out to $250.
  • Tiny Sticker Book worth a dollar worked out to $10.
  • and a single lolly worth 50c was $1.

The business model innovation of turning the purchase into an experience and abstracting the cash spend from the purchase, allowed them to generate super profits in a traditionally highly competitive commodity market. Makes me wonder what lessons I can find here for improving margins in my business?