Despite the constant barrage of low ranking for the US in the world on such topics as health care and unemployment benefits, there is thankfully one area where we still are #1: Business Management. According to a study undertaken by European researchers, it seems that the U.S. system of competition and freedom still win out.

The first major advantage for U.S. companies is that the competitive environment means that bad management decisions put people out of business. Another way to say it is that U.S. management has to keep evolving and improving, because their direct competitors are constantly getting better and raising the bar. Improve or lose relevancy with the customers.

The second major advantage is that most American companies value PEOPLE. While the study points to a higher level of education for the general population, I think the human capital element in U.S. firms is unrivaled. This is one of the key elements for any branded business. The humans behind a brand are what define and ultimately ensure the success or failure. I know firsthand that the more you invest in finding the right group of people, the more you encourage them to be the best they can be, the more money and success that the brand enjoys.

The third, and I think the most important difference, is American businesses can hire and fire people much easier than any other country in the world. While that sounds bad for the employees that get fired, it makes for a much more profitable enterprise. In addition, any employee that gets hired and subsequently let go is better off to find a work situation that fits their needs.

Work forces with incentives based on meritocracy, not seniority are the widespread in America. Many countries have world-class companies with amazing management, but on the whole, most countries allow a large percentage of mediocre companies to survive in their home market due to government regulations against competition or subsidies.

The ability of U.S. firms not to get stuck with bad employees is the main reason we are still on top from a business performance point of view.

Pierre Cardin, the most extreme form of a fashion brand in licensing is for sale for $1 Billion Euros. Many companies are questioning whether there is riches to be had licensing out their brands. The key to success is to license out categories that the company is not expert in, but would like to eventually grow.

Licensing is the when you allow other companies to make products with your brand name on them, in exchange for a royalty payment. Many times this royalty payment can range from 3-10% of revenues, depending upon the amount of marketing support and strength of the licensors brand name.

Brands love to license their name as royalty checks come regularly with no capital outlay to support the revenue stream. Royalty payments drop straight to the bottom line on many company balance sheets, which frees up capital to concentrate on core categories. Another common negotiating point is a guaranteed royalty payment, so the licensor knows it will get a minimum amount even if the license fails in the particular category.

The risks of licensing your brand are that it may degregate your brand equity due to the channel of distribution or product category. The key is to test the waters in certain categories close to the brand’s heritage, and then slowly expand into outlying (profitable) categories.

Overall, if you have created a brand that has consumer equity, and you also would like to expand into new categories without the upfront cost of development and inventory, licensing is a great way to grow your bottom line profits.

Money, freedom, and lack of petty stuff are reasons we work for ourselves.

When you walk by an Anthropologie store you see some of the greatest DIY artwork in the windows. Fantastic displays that incorporate ordinary objects into beautiful creations. The store windows change every month. It makes you want to go inside, where there are even more scenes set up around the store to complement the products on display. My friend Emily makes those actual displays, and has been a visual merchandiser for Anthro for more than a year now. She has been promoted to one of the top performing stores, and recently got an hourly increase. Her pay raise was less than a dollar an hour. Do you miss working hard all year to get no monetary benefit from your efforts from the company you worked for?

You work for yourself and get three key benefits. You get the benefit of more of the money you earn, you have the freedom to set your own hours and productivity, and you can cut out all the petty things that come with someone else’s work rules.

More Money

I used to be a 6-figure corporate executive. I effectively paid half my earnings in taxes every year. Even 6 figure bonuses could turn into half that amount very easily after taxes. Now all the money earned from customers goes into the company bank account, and you choose how it is spent.

Yes, you now have office overhead, payments to vendors and health insurance. But you can still maintain the same standard of living by earning less money in total. Because many of the things you used to pay for with after-tax money is now a business expense and paid for by the business.

Take into consideration the possibility that there is no longer a cap on how much you can make. Before, you had a salary and maybe some additional monetary perks. Now, if you do something great, you get to keep all the profits generated by the activity.

What actually happens is you make as much gross income as before, but you just get more out of it because effectively many of your old expenses are paid pre-tax instead of post-tax.

Freedom

Your kid has a school event in the middle of the day? No problem. You have no pressing work on Friday? Take the afternoon off! The flexibility to manage your own work hours many times means you work at non-traditional times of day. But it also means you can do what’s important to you, and schedule your work when it’s convenient. This is in contrast to the 90% of workers who are stuck at work for 8+ hours a day and have to manage their personal lives remotely without their boss finding out.

Many business owners I talk to cite the freedom to control their work timing as a key non-monetary incentive to never go back to a paycheck job.

No Office Politics, Dumb Rules

The bigger the organization, the more effort you have to put in to office politics to get your projects moved forward. Layers of approvals, meetings to get consensus, who needs them? One of the advantages of having your own business is cutting out all the useless crap that takes up your day and keeps you from doing actual work.

Who said you have to be there before your boss, leave after your boss, go to endless meetings? Rule makers who are concerned about command and control, not volume of work output. With your own business you can throw out all those silly rules that would keep you and your employees from being as effective as possible in the least amount of time.

No Ceiling, No Safety Net

On the positive side, there is nothing that limits your income except your own ideas and efforts. The down side is there is no net that gives you a paycheck even if you have not done any work. (Unless of course you have trained your employees so well that you can make money without having to show up at work!)

The jobless economic recoveries are becoming the new norm. More and more people will give up (in)secure paycheck jobs and start doing the same work on their own. Embrace the fact that you are already out there, hustling for work and in control of your money, freedom, and free from the annoyances that employers impose on their employees for control. You are the new workforce that will define this next new economy for your secure future.

5 Traits of Successful Business Partnerships

Steve Jobs famously said, “Great things in business are never done by one person. They’re done by a team of people.” You can build a lifestyle business by yourself and live comfortably, but if you want to change the world you will need a team of people.

Many people start businesses with partners because they need what the other person has, most commonly money or specific skills. Other times people start by themselves, but take on partners to address specific missing key elements as the company grows. There are five key elements that factor in to the long term success of a business partnership.

1. Each Partner Has Complementary Skills

Let’s say for example two designers go in to business together. They might compete for the design work, or worse, fight over who is better. They draw straws over who has to do the business side: accounting, sales, office management, etc.   It ends up being a company that is strong in one area and weak in many others.

A better partnership choice is when the partners have different, but complementary skill sets. For example, if one partner is creative, one is good at sales, one is good at operations, and one is good at finance. Together they can leverage their strengths while deferring to the other partners outside of their area of expertise. The sum is greater than the parts.

2. Division of Workload is Fair

When one partner has a larger portion of the workload or responsibility in a business without a corresponding larger ownership stake, it causes strife amongst the partners. Even worse, there have been many partnerships where one of the partners doesn’t even show up for work for extended periods of time, yet still demands to get paid both salary and profits. Many times the partner with leverage takes advantage of the other partner(s).

The way to keep the partnership fair is to divide the responsibilities as evenly as possible. If one of the partners is doing more of the work, it is fair to redistribute the load to other partners or employees. The best partnerships delegate authority to the different partners in their areas of expertise, and companywide decisions are put to a partner vote. If the workload is fair, there will be less in-fighting and more effort spent growing the business.

3. Work On the Shared Goals and Values

Many partnerships break up because partners fight for issues outside the scope of the business. To visualize the solution, imagine each partner is represented by a circle. Inside this circle are all the hopes, dreams, and realities of the business for that partner. Each partner has their own circle. Now overlap the circles where the partners share the same goals and results of the business. Each partner has some part of their circle that does not overlap with the other partners. This part that does not overlap should not be introduced into the business. Concentrating on your shared goals and results keeps the dialogue professional and on course for the scope of the business.

4. Buy-Sell Agreement in Place

Agreeing at the beginning how partners would break up sets realistic expectations and a clear path for the longevity of the company. A good Buy-Sell Agreement answers these important questions: How to value the company at any given time; how to deal with a partner that dies, is disabled, or does not perform; and a clear path for the company to buy out a partner’s share without putting the company out of business.

Buy-Sell Agreements can be added to a partnership at any time. It is best to get all partners to sign it before there is a need, so that all involved can negotiate with a level head. Buy-Sell Agreements manage each partner’s future expectations, so if their interests lie outside of the overlapping circles of the other partners, they have a clear path towards exit.

5. Partners Change Over Time

People grow personally and professionally at different rates in the same environment. One partner may have more money than they ever imagined, while another partner in the same business may have the drive to grow the business another 10 times larger. It is OK for partners to want different things. It becomes not OK when one partner threatens the existence of the company because of their demands on the other partners. Partners come and go over time in business, but the goal is that the business goes on.

Preparing a business for sale forces the owners to solve all the lingering issues in a business. More business owners should be ready to sell their businesses at all times, in order to maximize their current results. While this seems counter-intuitive to both growing businesses and family owned businesses, it is sound advice.

To get the highest price possible, businesses need to have a clear history and a growing future. Business owners need documented processes in place. The clear test is when a company can operate without the owner showing up to work. Owners should work on the business, not in the business.

The things that happen inside a company that is preparing to sell:

• Intellectual property issues get resolved
• Clear employee manuals, operating manuals, and marketing strategies
• Solidly profitable, with a 2-5 year track record of profitability
• Marketing and product plans that show a solid path for the coming years of revenues
• Budgets are followed with costs declining and revenues rising

Who Buys Businesses?

The normal acquirer is a larger company that wants to grow faster than organically in that product or service category. They normally can leverage their distribution and back office functions for the sales to be accreditive directly to the bottom line at the marginal rate. That means it costs less for a larger company to sell the same products or services because they can knock out one of the budget lines from the acquired company: sales dept, warehouse, accounting, production, or marketing.

How Long Does It Take to Prepare?

It typically takes 3-6 months to create and fulfill an offering memorandum with all the key components in place or in process. It starts with an assessment of the business and its shortcomings to be salable. Next processes are documented, prior year numbers finalized, and budgets prepared for coming years. Finally any lingering issues are resolved or disclosed.

The Sale Process

A company that has been approached about selling itself presents an offering memorandum to the potential buyer.   The buyer sends an offer letter. The selling company accepts or counters, and it goes back and forth until an offer is accepted. The buying company does due diligence to confirm the presented information is correct, and the deal closes.

Why Prepare Now If We’re Not Ready to Sell

The purpose of preparing is that you run your company at its optimum because you would want to sell at a high point. If you are always ready to sell, when an offer comes in you can act quickly and get the best possible price. The option of taking the next 5+ years earnings right now without having to go through hard work and financial risk is very appealing to many weary business owners.

Many products that were hard to find, where you had to travel to specialty stores, are now just a click away. Yet the number of retail storefronts needs to decline, and probably will, for the foreseeable future.   The key shift in the market is a significant number of people order a portion of their purchases online, and there is less need for physical retail outlets in the distribution of goods.

On both ends of the spectrum online purchases make sense. If the exact product is known, it is more convenient to order and re-order online because it saves travel time and money. Conversely, if it’s a hard to find item, it is easier to order from some obscure online retailer that carries that particular brand or product than to drive all over town.

For all the purchases in the middle, either impulse or time sensitive (like food), there is still a significant physical presence. This shows in the number of restaurants, grocery stores, and entertainment venues. The movement for these types of retail outlets is a movement towards the best locations as vacancies come up in premium properties.

What Happened to Retail Therapy?

People still like to shop for no particular reason, other than to reward themselves and feel better.   The difference is that they can window shop online, put all the things they want in the virtual shopping cart, and then turn off the computer without hurting their credit card.

What Does the New Retail Landscape Look Like?

It looks like a lot of retailers that primarily sell their own brands, offer convenience, or have an entertaining shopping experience. All the former stores that carried national brands, the unique boutiques, and the mom-and-pops are disappearing and probably will not come back for quite some time.

Amazon.com is becoming the new Walmart. Besides the obvious savings of not charging sales tax and lower rents, their Prime shipping encourages customers to order as much as possible during the year and receive free two day shipping. Walmart killed the local stores within driving distance every time they opened a new superstore. Amazon.com is slowly doing the same thing by having small stores sell their goods via amazon.com. Once a product sells well enough, Amazon starts carrying it direct and undercuts their retail partners on price and shipping costs.

Who Loses the Most In the New Retail Landscape?

Private landlords who own all these strip malls and commercial real estate are actually the biggest losers. It’s hard to feel sorry for these people, as most either inherited the properties or bought them as a long term investment because they were already wealthy.

The consumers that used to shop at all these malls, strip malls, and main streets face a reduced choice. They can shop the remaining storefronts, or they can find what they are looking for online. Either way, they still shop, but using a different method of distribution.

Result: All these commercial retail spaces, which carried the highest rent per square foot, are going to have to be repurposed either into office space, residential, or warehouse. Just like all the people who were unemployed in the recession, there will be a long term solution to use the assets again. Unfortunately, it will be very expensive in the transition.

How can you give something away and still get paid a significant amount of money? While these two scenarios seem polar opposite, the reality today is that you have to give before you receive. Educate yourself here how to identify and create sales funnels in your company.

Sales funnels are everywhere. Your website can attract a large group of people who will find your offer or service relevant. They want to know more. You give them something of value and you give it away for free. This is called a freemium. A certain number of those people will want more advanced features, functionality or related products and services. You provide these at a reasonable price point relative to your competitors or in relation to the amount of money the customer makes or saves. A subset of this paying group will want personalized or specialized products and services, which they will pay a significant premium because of the value it creates for those individuals.

A recent example of a well-functioning sales funnel is a marketing software company. They offer free webinars every week highlighting the latest marketing data and tactics as it unfolds. They have tens of thousands of new people watching these webinars and getting great, free information that can be turned into thousands of dollars of sales. The marketing software company lease software as a service to increase leads and sales through websites for $250-$1500/mo. They publish that they have 4000 customers from the 500,000+ viewers of their free webinars. Giving away information every week to 99% of their potential customers still generates an estimated $1,000,000 A MONTH for a software service that does not cost hardly anything to support additional users.

Figure out what you have that is valuable. Create a version that gives customer value whether it is a “lite” version, limited time, limited capacity, or single user, and advertise the freemium broadly. There will be a natural narrowing down of customers who are willing to pay for a more feature laden product or service. The most profitable customers will then present themselves as they need more personalized service because of the enormous value they receive when you provide your product.

Many people would say “what discretionary spending money?” these days with high unemployment, household debt and no real wage increases. Recent data released by the Commerce Department shows that the portions of household income that consumers spend on cars, food, and household items have changed, somewhat dramatically since the beginning of 2009.

While the financial recession officially started in 2008 (or the peak was in October 2007), most people did not feel the real recession hit until the massive layoffs that happened in the beginning of 2009. With this came sharp cutbacks in spending until individuals could assess how much money they would need to ride out the recession.

Consumer spending has rebounded in total off of the lows of 2009, but most importantly there has been a shift in the percentage of the spending total on different categories within the discretionary spending.

Cars have remained at about 16-17% of spending, but gas costs have gone from 8% to 12%. That money for gas has to come from somewhere, and it’s been taken from department stores (-1%), food and beverage (-1%), and bars and restaurants (-1%).

Has anything gotten more of our money than the oil companies? Internet sales are up (1%) which offsets some of the retail store losses (much of which is probably Amazon.com taking from local merchants).

Result: most people have a fixed amount of household debt to pay every month, but the discretionary portion of their wages in increasingly going in the tank out out the tailpipe at a much higher rate than they are shifting their buying habits online. The end result is that retail stores and food/beverage establishments are taking the brunt of the increase in energy costs.

Everyone believes they come up with their own ideas for entertainment, knowledge, and happiness, but many times that new “discovery” is via an external source. With the always-on aspect of the internet, it appears all knowledge and information is at your fingertips.

It is common today for people to research products and services they do not know much about, and make a buying decision based on that research. This means that the best chance of selling that product or service is based primarily on the positive result of their research. How does a brand lead a positive influence loop to interested consumers?

Many times people type in keywords into a search engine like Google or Yahoo. If they know the product name itself, Amazon is the most used review site. Consumers must filter out the fake reviews in their head, of which they are trained to be skeptical of 50% of all reviews either positive or negative. Relevant information is consumed, and a decision gets made. Many times the “Like” button is pressed, which allows the person’s Facebook network weigh in on a potential purchase.

What causes one to look up “double rainbow”? More often than their best friend, the most common influencer on a daily basis is co-workers or those who are in close proximity to the consumer. While the true friends influence life’s big decisions, many times the Facebook friends or the acquaintance network is the main purchase influencers for consumable non-durable goods.

Charlie Sheen and Lord Voldemort have been hot trending topics on twitter. Products with a tie-in to these subjects were marketed in 2011 and I analyzed the data to understand the outcome. Millions of people saw the funny t-shirts, over 150,000 people clicked through to the buy now page, yet almost nobody bought it. What causes something so entertaining not to convert to sales?

Standard ecommerce metrics are that 2% of visitors convert to sales. If this was the case we would see a sales north of 3000 shirts for the traffic generated through twitter marketing. The twitter accounts used are in the top 99.99% of all tweeters as monitored by twitaholic.com.

The products offered were not relevant to the audience that clicked to find out more. Relevancy is the number one reason a product resonates with the consumer or not. The product must fulfill a need and desire that matches the sensibility of the buyer. There has been a dramatic trend in popular culture of people enjoying the entertainment of Winning or Tiger Blood, but not participating with their wallets.

The actual statistics on views and sales were as follows:

Charlie Sheen Shirt

• 47,606 actual product page views from Twitter over 3 days
• 77 sales in 3 days
• Conversion rate .16% vs. 2.33% conversion on all other products on site

Lord Voldemort Shirt

• 119,057 actual product page views via Twitter posts over 3 days to 1,000,000+ followers
• 9 sales in 3 days
• Conversion rate approximately 0 vs. 2.12% conversion on all other products on same site

Conclusion: The offer has to be relevant to the viewer, and not just entertaining in reference to popular culture. The product has to represent how the buyer wants to be seen by others, and how they view their “most perfect” selves.