Business & Finance

The $800k Hotdogs

: Image via Wikipedia

I heard a story recently that went something like this…

(This is a true story, although the actual conversation below is fake)

A guy calls a reputable consultant for advice. This consultant also happens to be an Ivy League Law School Alumni, successful investor, and successful entrepreneur. Let’s just say he knows a thing or two about business.

The call goes something like this:

Caller: Hey Mr. Consultant. I got a great business that I need help with.

Consultant: Ok, what kind of business?

Caller: I sell hot dogs. I have 2 hot dog carts.

Consultant: You sell hot dogs?? Why the Fu*# are you wasting my time?

Caller: Well, I grossed over $800k last year from just two hot dog stands.

Consultant: Wow, ok. Now you have my attention…

Now, you can only imagine what the next obvious question is…

Consultant: …where are your hot dog stands located?

Before I give you the answer, just think about this for a second or two. This guy, in a cash business, made over $800,000 gross profit from selling hot dogs. Yes, hot dogs!

So you might say the hot dog stands were located in a city. Maybe Times Square. You might say the hot dog stands were located in a mall or perhaps some football stadium. Maybe a baseball stadium.

If you guessed any of these you’d be wrong.

The reality is, the hot dog stands were located in front of…

Home Depot.

Crazy? Not really, and think about that for another second.

From the minute Home Depot opens to the minute it is closed (around 7am – 11pm depending on the local store) subcontractors and construction workers are in and out buying materials, tools, and other wonderful construction accessories for their jobs. Middle class, blue collar workers who are looking for a quick bite to eat, and what could be a better snack then a $2.00 hot dog with perhaps a $1.00 can of soda?

Moral of the story here?

If you are thinking about the next, new big idea, just remember this guy. He took a very old idea but gave it a new twist. A boring idea perhaps, but this guy will never go hungry.

Loosing Your Virginity – Getting Your First Piece of…Business – Runaway Productions

CraveRedCrossEventSAE — First contracted event

During my sophomore year of college my fraternity was shut down. As a result, all of our events were canceled and to make matters worse we couldn’t even participate in other organized events within the Greek system.

This sucked. It was a huge problem especially for my group of friends who enjoyed going out and doing the social thing.

But where there was a problem, there was also a solution.

At this point in time, my friend and I decided to build a college marketing company that would encompass three themes: (i) host events in a safe and secure environment (ii) be honest and upfront with our partners and vendors (iii) create recognizable and memorable marketing events that would promote the company brand in a positive and unique light.

In the short aftermath of my fraternity’s suspension, we hosted our first event. The first was all it took. It gave us some confidence, experience, and most importantly, momentum. From that point on we were able to grow the business, form new partnerships, hire more help, and keep the ball moving forward.

We were beginning to be featured in the local newspapers and magazines and were starting to become a focal point of the local community’s social scene:

“Yet another alternative to Freakfest is Runaway Productions Halloween 2006, the first event of its kind to be held at Madison Avenue. Runaway Productions, a company run by UW students, organized this 18-and-up event with Sony/BMG Music Records and CO-ED Magazine to provide an alternative environment for those in search of a riot-free good time. According to Managing Partner Daniel Reich, the Halloween 2006 event was created as a “legitimate venue so people can party in a safe, controlled environment.” Instead of wandering around aimlessly amid the drunken antics of State Street, students will have the opportunity to dance to their favorite artists at the dance club on University Avenue.

Runaway Productions intends to appeal to all sorts of listeners with a variety of musical acts. Hip-hop, reggae and rock fill the bill with artists including Golden, Collie Buddz, Fahrenheit and Displace. Also performing is special guest Sa-Ra from Kanye West’s record label GOOD. The event runs tonight and tomorrow, and attendees can purchase tickets from ExchangeHut.com.”

–The Badger Herald, State Street not only show in town this Halloween

(Disclosure: Sa-Ra never came and the headliner was Collie Buddz. It was his first live US show. One of his songs here)

At the end of the day, “the first” was all it took. Although we did many events and functions thereafter, “the first” is what really put us over the top. It is probably the hardest thing to do when starting a business or doing sales, but once one is knocked down, the rest just kind of fall into place.

Sidenote: It’s been three years since we parted with Runaway Productions and three years later it is still going strong.

(Posters from other events below)

(Pictures from other events below: Collie Buddz and Golden performing)

Will I-Banking bonuses ever be the same?

About a month or so ago I had a conversation with a VP from Goldman Sachs. We talked about work hours versus compensation in the investment banking world. We also talked about how he was seriously considering leaving the banking world to pursue an entrepreneurial endeavor. The conversation could pretty much be summed up by this graph:

Until recently, many undergrad and graduate students had one career and one purpose in mind: Work for an investment bank – make a ton of money (most of which came from big bonuses).

Today, those huge bonuses are gone yet some people are sticking around these jobs thinking that one day the tide will turn and the bonuses will be back. Part of me believes this is true, that history repeats itself, and one day big paydays will be back (it’s only a matter of time before someone else exploits a flaw in the open markets).

But the other part of me thinks that this will not happen for a very, very long time.

I recently asked my cousin David Wise, who works as a compensation consultant, what his thoughts were on the big bonus payouts. In short, he made a few really good points:

Investment banks are dead. They are now Bank Holding Companies.
These banks’ Return on Equity (ROE) have dropped anywhere from 20%-30% to 10%-15%. Less money for shareholders. Less money for employees.
The current compensation and incentive structures are broken and need to be fixed.

It’s going to be a very interesting 2009, 2010, 2011….

David’s take on compensation below in a recent CBS news interview:

Watch CBS Videos Online

Business Grads Looking Beyond Wall Street (nytimes.com)

Become Rich: Made in China. As Seen on TV.

: Image via Wikipedia

We’ve all had these moments:

“Hey, Wouldn’t it be cool if we made….”

“I’ve got a really great idea. We should make…”

“Dude, This is genius. We are going to make….”

If you’ve recently had one of those light bulb, Velcro, post-it note, window in envelope idea moments, now is the time to make it and sell it.

Here’s how:

MADE IN CHINA – Go create an account at alibaba.com and find a Chinese manufacturer that can make your “whatever it is” idea for cheap.
INFOMERCIALS – Take your product to TV using infomercials.

With the economy still somewhat in free fall, advertisers are cutting back on marketing budgets especially in mediums like print and television. Networks are having hard times filling premium commercial slots with premium commercials, so instead, they turn to infomercials which are mostly direct response advertisements.

From CNN Money:

McAlister and other direct marketers hope to prosper through the downturn. With top-tier marketing firms slashing their ad budgets, competition for airtime has steadily declined, making room for a new class of advertisers. Infomercials were once relegated to the wee hours of the morning, when slots come cheap. Now they’re turning up in prime time, even squeaking onto the Super Bowl telecast: Cash4Gold, a direct advertiser that melts down jewelry, made headlines in January by snapping up an unsold 30-second slot.

Chances are good that a person calling one of those cheesy infomercials, are most likely going to buy the product. Why else would they pick up the phone in the first place?

Infomercials Hit Prime Time As Ad Market Slows (huffingtonpost.com)
Haggle Now for a Better TV Price (lifehacker.com)

Dear Jeff Jarvis – Here’s Some GoogleJuice

I recently finished reading What Would Google Do by Jeff Jarvi s.

This book is important for so many reasons, but the most important point of the book is that fundamentally, business in general is changing. Economics, supply and demand, manufacturing, education, fashion, government, finance, all of it is changing and unless you understand these changes and adopt a newer way of thinking, you will be in for a rude awakening when you realize everything you learned in Econ 101 no longer applies.

From Jeff’s Book:

“Many industries built their value on scarcity. Airlines, Broadway theaters, and universities had only so many seats, which meant they could charge what they wanted for them. They were scarce and thus more valuable. Newspapers owned the only printing press in town and you didn’t, so they could charge you a fortune to reach their audience. Shelf space in grocery stores was limited, so manufacturers paid for the privilege of selling their boxes there. Television networks had finite number of minutes in the day with only so many eyeballs watching, so advertisers competed to buy their commercial time. Scarcity was about control: Those who controlled a scarce resource could set the price for it.

Not anymore. Want to sell your product to a targeted market? You don’t need to fight for a spot on the shelf in 1,00 stores; you can now sell to anyone in the world online. Looking for a dress everyone else doesn’t have when everyone else shops in the same mall? Today you can find no end of choice only a click and a UPS delivery away. Don’t want to buy The New York Times on the newsstand or pay for access to WSJ.com for news on your industry? There are countless sources of the same information. Even if The Journal reports a scoop behind its pay wall, once that knowledge is out – quoted, linked, blogged, aggregated, remixed, and emailed all over – it’s no longer exclusive and rare. It’s no longer possible to maintain that scarcity of information.”

As the world becomes flat we all become equalized and democratized. Success requires newer business models, stronger brands, and deeper focus. Google is only the beginning.

Well done Jeff. Well done.

Charles Warner: NY Times Charges for Web Content (huffingtonpost.com)
Media Companies Demand Higher Rankings In Google Results (paidcontent.org)
Revenue Rebirth for Newspapers? (revenews.com)
Big Publishers Lobby Bigger Google for Special Treatment (themoderatevoice.com)

How to save the Auto, Housing, and Credit industry in 4 easy phases

Here is how we are going to fix the housing, auto and credit crisis in 4 phases:

1. Phase I – “The Boot”

All of the people that bought houses they couldn’t afford get thrown out and forced somewhere else. Apartments, affordable housing, shelters, or cardboard boxes.

(Note to clowns: Next time you go shopping make sure you check your wallets.)

2. Phase II – “Stimulate This”

The government should take some of that stimulus money, pay GM $10 Billion to create new, energy efficient vehicles, help broker a deal between GM and U-Haul, and than offer free “get outta your house” moving services to those clowns that payed too much for a house. The old and outdated GM vehicles can also be used as new living quarters for the clowns mentioned in Phase I.

3. Phase III – “Affordable Housing – Premium Cardboard boxes”

All of those houses that foreclosed should be absorbed by the government and turned into affordable housing and gradually sold back to people with money, while in the short term, made available as premium, 5-star rated, cardboard boxes.

4. Phase IV – “Green U-Hauls”

Those new energy efficient moving trucks should move all of the people who were booted in Phase I and move them into the affordable housing created in Phase III. (Note to Green U-Hauls: You probably don’t need a lot of space in your trucks because there probably isn’t much to move)

Now look where we are? The homeless have homes, we have energy efficient cars, and I’m not stuck paying the bills for the clowns….

O ya…Wall Street i-Bankers have to drive the Green U-Hauls.

It all works out..

This video is probably the best visual representation I’ve seen of the current credit crisis.

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Thanks to Eric at Marketing.fm for making me aware of this video.

Salanalytics

Sales People: How much time do you spend with your clients discussing numbers, data or research?

Analytics & Quant People: How much time do you spend interfacing with clients?

The line between being a sales person and being an analytics/quant person is fading and fading fast.

Technology has enabled anyone and everyone with access to huge amounts of information at any given point of time and more importantly, has allowed them to access this information in real time. As a sales person, this makes differentiation that much more important especially in these tough economic times. How are you different from your competitors? What data can you not only show me, but what does that data mean?

In these situations, the tendency has typically been to rope in analytical individuals that are best suited to answer these questions. These are the individuals that are experts on the data and interpretation relevant to clients and their organizations.

Even so, can these individuals convey the data in the capacity needed to maintain, build and grow relationships? Furthermore, can the “relationship” people convey the data needed to grow business and establish meaningful credibility with a client?

I recently had conversations with a close friend of mine who works in the finance industry. His description of the sales-quant/analytics relationship relates directly to my experiences in the digital media industry. Numbers and sales are becoming one and it is becoming increasingly important to have skill sets in each discipline.

This begs the question…Is it better to be an expert in sales with the ability to understand data and analysis? Or, is it better to be an expert in data analysis, interpretation, and reporting with the ability to convey an overall, hierarching theme?

Both are critical and both are necessary in today’s environment. Today, you must become a salanalytic (Sales + Analytics = Salanalytics) but if you had to choose one skill set, which one would it be?

Glorified Plumbers

: Image via Wikipedia

I always thought I wanted to be a doctor when I was younger. I joined the National Ski Patrol at age 14 (EMT on a snowboard), attended a National Youth Leadership forum on Medicine, signed up for Biomedical Engineering in college, sat in on 3 open heart surgeries (thanks to my uncle who is an electrophysiologist), and set out on a path to
becoming Dr. Reich.

Now while I have THE utmost respect for doctors, above every single profession (most of my family are just that..and builders), I realized one day that doctors were nothing more than glorified plumbers.

(Before you say how absurd that comment is, please continue reading)

As I got older, gained some experience and business intuition, it just became clear to me that being a doctor was limited in growth potential. My earnings and output would be tied to a fixed amount of patients or hours, unless I pursued tangent endeavors. If I was going to become a doctor, I wanted to do just that and not become some medical adviser for a television station, movie consultant, etc for additional income.

When I told my parents I didn’t want to be a glorified plumber they laughed with discerning looks on their faces.

“A doctor is by no means a plumber. Are you fu$!ng crazy?”

I didn’t think I was crazy at the time and still don’t now.

I am currently reading The Black Swan by Nassim Nicholas Taleb (have to see what all of this hype is about), and while most of this book is fairly obvious, what he wrote did however validate all of my “doctor” thoughts:

“Some professions, such as dentists, consultants, or massage professionals cannot be scaled: there is a cap on the number of patients or clients you can see in a given period of time….

If you are an idea person, you do not have to work hard, only think intensely. You do the same work whether you produce a hundred units or a thousand. In quant trading, the same amount of work is involved in buying a hundred shares as in buying a hundred thousand, or even a million. It is the same phone call, the same computation, the same legal document, the same expenditure of brain cells, the same effort in verifying that the transaction is right.”

The profession is not, as Nassim puts it, “scalable”.

Thank you Nassim. Case closed (at least for me).

What other jobs are scalable? What jobs aren’t?

Disclosure: I believe serving and helping others is THE very best thing a person can do, and there is no real way around this other than being a “glorified plumber”. This will be my 8th consecutive season volunteering or “glory plumbing” for Mount Snow Rescue. I will be volunteering this weekend for the AST Dew tour competition.

Just buy something.

If you have some cash lying around, why not buy something in this market.

Prices are cheap, and while they may get cheaper, you can get a good deal on most companies listed on the market. If you are looking to get rich quick, then stay on the sidelines. But if you are looking to pick up some equity in your favorite companies and hold on to those shares for a few years, now is the time.

Consider the following when doing so:

Pay no attention to macroeconomic trends. You cannot possibly predict the future.
Stick to your “circle of competence”. Buy companies that you understand.
Try looking for managers that treat their shareholders money as if it were their own. Mangers that might have bought back their company stock in this environment. People interested in creating value.
Study prospects and competitors of a potential investment. Who else is in that space?
When you are convinced that a company is a good company and meets this criteria, why not buy it?

Believe it or not, these are some of the basic and core principals Warren Buffet lives by. Although it’s unlikely that you will ever come close to his skill at dissecting businesses, prices are cheap enough that you can get away with finding a good deal.

Gamesmanship

Collection of modern safety razors: Gillette F... — Image via Wikipedia

It’s like playing chess only with companies.

Quick story:

In the 80’s Gillette and BIC battled out market share for the disposable lighter. They each had their own product, and each tried to outsell and out perform the other.

Gillett’s solution to compete with BIC was to completely stop making lighters. Let me repeat. In order to make more money, they would make less product.

So what happened? BIC reallocated their resources into this new, non-competitive landscape, while Gillette reallocated their resources to their disposable razor product. The disposable razor blade market was much greater the than the disposable lighter market.

Gillette: 1st move

BIC: 2nd reactionary move

Gillette: Checkmate

This thought process is called Gamesmanship and there are 3+ orders of thinking:

0th order: You do something because you want to, without considering what your competition might do.

1st order: You do something while thinking about your competition.

2nd order: You do something to try and manipulate your competition.

3rd order: You do something to try and manipulate your competitors against one another.

There are all sorts of great ways to think about this stuff and even associate real value with a move you might make. See Alex Van Putten.

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