Business Banking E-Newsletter - September 2012

Cutthroat vs. Cooperative: How Do You View Competition?

Jake Rosenbarger knows a thing or two about high-stakes competition: Before he and his wife opened Kim and Jake's Cakes in Boulder, Colo., Rosenbarger was a professional bicycle racer. But for a guy who honed his chops banging into opponents' handlebars at 35 mph, he has a surprisingly laissez-faire approach to competition in his new field.

"Every shop seems to have its own identity and appeals to a different customer," he says. "I don't feel like we're directly competing. We have a different style in the way we go about our business that makes head-to-head competition a little less of a factor."

Like many business owners these days, Rosenbarger is guided by a refined, less aggressive perception of competition: less cutthroat, more introspective--even more cooperative. These entrepreneurs say they'd rather use their competitive drive not to crush would-be opponents but to focus on improving their own businesses. It's fair to say that one's approach to running a business is likely driven by one's understanding of the nature of competition.

In the business world, competition is as variegated as human behavior. Are you cutthroat or cooperative? Quick to go for the kill or willing to bide your time?

"We are reinforced in our behavior to be better than others and to eliminate our opponent as if we were in a competitive game," says Bob Vecchiotti, a Peterborough, N.H.–based business psychologist who has advised executives at companies such as Anheuser-Busch, Monsanto and Heinz. "That's where we are. That's where the culture is. And sometimes to get the cooperative side going takes a little more effort."

Chris Jaeger got his cooperative side going when he and his twin brother, Robert, were launching Nashville, Tenn.-based, an online clearinghouse for renting just about anything. (Jaeger calls it "eBay for rentals.") A former investment banker in New York, Jaeger got the idea for RentStuff when he had to endure considerable hassle to rent a mountain bike in Manhattan. Last summer RentStuff became one of six startups chosen for Jumpstart Foundry, a Nashville-based mentoring program. The budding entrepreneurs went through a grueling 14-week session in which they sharpened and tested their business models before presenting them to a roomful of 300 potential investors. For Jaeger, the process was both competitive and supportive.

"It's a natural sort of race-to-the-top atmosphere," he says. "My overall feeling about competition is that because you work in the entrepreneurial field, there is a natural competitiveness that fuels all of us. But there's also a very strong sense of brotherhood among entrepreneurs. I want to see other young people in this pool succeed. It's something that binds us together as entrepreneurs."

Today, with RentStuff up and running--and its recent expansion into Chicago, to the new 1871 space operated by the Chicagoland Entrepreneurial Center--Jaeger doesn't view other collaborative-consumption businesses as competitors, but as colleagues. These days, he says, he's competing mostly against prevailing consumer patterns, which generally don't include renting routine household stuff--lawn mowers, cameras, bikes--through a website. "As any one company gets traction, it means more and more people are getting this mindset," Jaeger says.

Sean D'Souza believes more entrepreneurs should follow Jaeger's lead and try to learn from their competition. A native of Mumbai, India, now living in New Zealand, D'Souza, who calls himself "a marketing iconoclast," writes books and conducts workshops on marketing in the U.S. and Europe. His site,, carries the slogan: "Why customers buy (and why they don't)."

"I really think you should find out what your competition is doing and what they're doing better than you and what they're doing worse than you," he says. "If they're doing better, it makes you feel like you have to sharpen up your act. And if they're doing worse, it makes you feel better, at least for a day."

D'Souza posits that most entrepreneurs are not willingly competitive. They only become so, he says, "when they're put in a position where if they lose, they're dead." He often tells entrepreneurs they'd be better off paying less attention to the competition and more to perfecting their own business practices. He calls it "playing emperor."

"This is why Apple is creaming the hell out of the competition," D'Souza says. "They play emperor all the time. They're not even considering the competition. They're just building from nothing. Once they're in the marketplace, other people are going to compete with them."

Just like competitors in a bike race, entrepreneurs have to step up when they see an opening on the business track. Rosenbarger knows--he and Kim opened their cake shop two years ago, figuring they'd focus on the retail end of the business. Then Whole Foods Market came calling, and the business plan shifted.

Today the cakes are sold in six Boulder-area Whole Foods and at Alfalfa's, a local grocery. "We got lucky," Rosenbarger says. "We were going to go for restaurants and coffee shops and that kind of thing."

Turning on a dime was something the former racer was accustomed to. But while his bike career endowed him with the work ethic and mental toughness necessary to succeed as a business owner, it did not prepare him for 11-hour workdays. Clearly, the new gig is no cakewalk.

"This is a hard business to be in," he says. "It's physically very demanding. It would be great for any endurance athlete to work in a regular job for a couple of years. It's taught me a lot about how luxurious I had it."

How Your Business Can Last Longer than a Twinkie

It's been a tough year for some once-golden brands. Hostess filed for Chapter 11 bankruptcy reorganization Jan. 11, followed a week later by the bankruptcy filing for Kodak, the company known for capturing the 20th Century on film. Remember those Kodak moments?

These brands had both achieved the dream of most companies. They were household names, and their products were universally known and well-regarded. Now, they are struggling to survive.

What happened? Times kept changing, and so did technology. Neither company kept up. They probably aren't the only big brands we'll see fall this year, either.

How did Kodak and Hostess go so wrong? Here are four ways to avoid their fate:

Don't get out of touch. When is the last time you ate a Twinkie? For many of us, it's a dim childhood memory, as people often try to avoid eating products that sport a long list of unnamable ingredients and have an almost unlimited shelf life. But as far as many can tell, Hostess doesn't sell any other kind.

The health-food craze began back in the 1980s, so, at some point along the line, Hostess should have realized it was time to diversify the product line. Like too many companies, Hostess made the fatal assumption that because something worked in the past, it would always work. By contrast, competing dessert-maker Nabisco has its junk food, but it also has whole-wheat Triscuits.

Extend your brand. Consider just one Nabisco product: Oreos. Once, there were just plain Oreos. Now, there are reduced-fat Oreos, golden Oreos, "Double-Stuf," mint, peanut butter, chocolate-filled, chocolate-dipped, and miniature Oreos, as well as 100-calorie packs of Oreos. There are more than 50 different kinds of Oreos for every occasion, diet and taste.

For its part, Hostess lists a total of one dozen products in the entire company. If they'd kept innovating, maybe a variant on one of their classics could have been a new hit and brought in more sales. Instead, the only thing I've seen a Twinkie do in recent history is get deep-fried at a fair. Where is the chocolate Twinkie, the bag of mini-Twinkies, the no-trans-fats Twinkie?

Embrace your new ideas. It's ironic to consider now, but Kodak developed and released the first digital camera. They created it, but the company didn't promote its digital products the way competitor Fuji did when it joined the digital revolution. Kodak execs saw digital as a threat to their cash cow, the print-film business, so they let the opportunity pass by.

Keep reinventing. Often, new ideas threaten a company's established success. But over the long haul, you've got to keep changing your business. Otherwise, you look up one day and what you're selling is the equivalent of the buggy whip.

How to Give Employees Independence Without Losing Control

Every business owner knows how to wear a lot of hats. When first striking out on your own, you have a hand in finances, marketing, product design, and everything in between. But as your company grows, you need to empower your employees to feel that same sense of independence.

Autonomy is one of our fundamental human needs--an essential component of a healthy workplace. "It fills our need for intrinsic motivation," says Ben Dattner, an organizational psychologist and founder of Dattner Consulting. By that he means our need to be driven by personal interest and enjoyment.

Employees that feel empowered are happier, more motivated, more committed to their jobs, and less stressed. The latter is especially true for demanding workplaces since independence gives workers a sense of control in stressful situations.

The benefits for business owners are clear: "[Greater autonomy] can lead to lower turnover and higher levels of creativity, innovation, and even performance," says Dustin Jundt, an organizational psychologist at Saint Louis University.

Consider these three tips to give employees independence without giving up control:

1. Specify the goal, not the means. "As you grow, you don't want the organization to be so hierarchical that it can't be adaptive," Dattner says. "You want people to experiment and make game-time decisions."

To encourage creativity, give clear guidelines for a project's quality, deadline, and purpose, but leave the rest up to your employees. Your team may not execute the project exactly as you would have, but their strategy may be just as good or better.

2. Set up checks and balances. As a business owner, you need to be passionate about your ideas, but that enthusiasm can become a liability when there's no room for second opinions. 

"Every leader is subject to biases and errors," Dattner says. "You need to build in mechanisms for being proven wrong and allow the freedom to debate other strategies." To do that, avoid surrounding yourself with "yes-men." 

"You want confident advisors who will push back and help vet your ideas rather than validating your own rose-tinted glasses," Dattner adds.

3. Know yourself. As you allow others more freedom and responsibility, understanding yourself can help ease the transition. 

"You have to be pretty secure to say, I'm going to hire a finance person who has more experience in finance than I do and I won't understand everything they're doing," Dattner says. Try taking a free, online personality test recommended by Dattner to assess your strengths and weaknesses. The online test was created in the 1990s by a psychology professor at Penn State University, DuBois. A free app version, iPsy also became available in 2011.

It's important to understand your own feelings and have a sense of what others are experiencing around you, which is referred to as emotional intelligence. You can then identify what motivates each of your employees and empower them in ways they'll find fulfilling.

4 Ways to Weed Out Rotten Clients and Grow Your Business

To grow a successful business, you need the best, most-promising customers. But you also can't effectively serve 100 completely different clients. Some have got to go, and you've got to give them the boot. Liken the process to that of the giant-pumpkin growers -- They follow the kill/ nurture process and turn out prizewinner after prizewinner.

Removing less-promising pumpkins from the vine is standard operating procedure for those farmers. There is no mercy here, no "Aw shucks, it may grow big one day." They just kill it -- fast. This is the system I followed that helped me build my own multimillion dollar companies. And if you do nothing else, this process will help grow your business and get your life back.

You might be thinking, "I cannot afford to lose a single client, so I'll just focus on growing my relationships with my top clients."

Buzzzzzz! (That's the sound of an annoying game-show buzzer going off.) You can't devote yourself to everyone all the time. When you keep rotten clients, you can't do the work needed to grow those good relationships.

It's time to remove the diseased pumpkins so your existing top clients, and other new clients, can blossom. If this step freaks you out, find the client who is the biggest pain and who, when fired, will have the least financial impact on your business. Fire that one first.

If you're still feeling nervous, remember, you can always go back to the jerk. They'll give you the old "I told you so," take you back, and treat you like garbage, as they did before. So know this, if you end up regretting it, you can easily get diseased clients back (which you shouldn't) . . . if you really want to (which you won't).

So how do you fire a client? Here are four ways to do it, without straight-up telling them.

1. Eliminate services. To get rid of clients who are downright nasty, just telling them you no longer offer one service so they don't come back and ask for your other services may not work; you may have to go about it differently. For example, you might eliminate a specific service or servicing a specific type of company (the same type of company your sucky client has . . . what a coincidence). To do this, use the industry expertise trick. Explain that "We have shifted all of our resources to serve an industry other than yours, and we can no longer help you."

2. Prioritize the stars. When the good clients call, they get serviced first. The cringe- worthy clients get pushed to the back of the line. When you're on the phone with a cringemeister and a star client calls, you (politely) hang up on the cringe client and move on to the good guy. The cringers will get the hint. Sure, it's a little bit Mean Girls, but it gets the job done.

3. Raise prices. If you really want to see bad clients run for the hills, raise your prices. And I don't mean a measly 10 or 20 percent. Increase your fees until it becomes prohibitive for the client. In rare cases, some clients will just rise to the occasion, paying you seriously good money just to keep working with you. Now they can't afford you failing, so they'll likely become all nicey-nice and help you.

4. Refuse to two-time. Another way of breaking ties with a diseased client is to say you have an agreement with a major client that prohibits you from servicing them any longer. I am not suggesting you actually create a contract; the goal is to have an explanation for the break. Just give your major client a heads-up—and get their nod of approval—that you are going to pin your breakup with a bad client on serving them (your good guy) better.

After you're through with the awful clients, it's time to get rid of the ones who simply aren't a good fit. Even great, friendly customers need to go away if they are unfit for your offering. When the nice folks want to do business with you, but are unfit, introduce them to another vendor who can serve them. You are giving them great service by introducing them to someone else who is the right fit.

Remember, just as in a pumpkin patch, weeding is a constant process. Companies change and clients come and go. Block off a day or two to evaluate customers and make the tough decisions. You never know when a pesky little weed or diseased pumpkin might worm its way in and take over your entire patch.

Insurance Strategies to Help You Protect Your Business

As a business owner, you need to ensure that you have adequate insurance coverage to protect family, business partner(s) and key employees, so that no matter what the future holds, the business can continue to provide for those who depend on it.

With the right insurance strategies in place, you can guard your business against financial loss due to illness, disability or death. Here are some tips for putting in place a proper plan that will help protect your business, yourself and your families’ needs.

Obtain adequate life and disability insurance to cover all assets

Did you take out loans secured with personal assets to start or grow your business? If your family inherits the company and the loans have not been paid off, they might have to sell or liquidate the business (perhaps at a discount) to satisfy the debts. Protect them with an individual life insurance policy that provides funds to cover debts, ongoing living expenses and future plans.

Have a plan in case a business partner becomes the only partner

A buy-sell agreement ensures that you or your co-owner will buy out the other’s share of the business when circumstances take one partner away from the company. 

Develop an exit strategy

Be prepared to leave your business, no matter what the reason, with a strategy that focuses on four key areas: estate planning, retirement planning, succession planning and business valuation.

Insure the right-hand man (or woman)

Purchase key person life and/or disability insurance for employees who greatly contribute to the bottom line of your business; the policy’s benefits can help make up for lost sales or earnings and help cover the cost of finding and training a replacement.

Take care of the employees, and they’ll take care of you

Workers consider employee benefits (health, life, dental, vision insurance, retirement plans) a decisive factor when evaluating a new job opportunity. However, employee benefits can be costly, so if you are a small employer you will want to share the costs with your employees. 

Reward the top executives

Section 162 plans (Executive Bonus Plans) are a simple way to reward top employees and offer certain tax advantages. Your employee purchases a cash rich insurance policy and names himself/herself as owner; you receive a tax deduction for paying the premiums, which are considered compensation to the employee.


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