Why are you so *#*$** happy, asked my business school banking buddy. "Because," I remarked, "This is Phase 2 of Globalization."

Banking friend, I am not you. My clients are not you. And we appear poised to benefit from the bafoonery that has taken hold. A bafoonery you, my banking friend, perpetuated in your fervor to do deals that did not add value to the end users, customers of your customers.

So how are my clients doing? Not bad at all.

Client 1: Her main competitor, the big fish, is owned by a private equity firm. They put in a standard O5WM (over 50 white male) and levered to the hilt. They're jacked up like a coke fiend. Since July she has been stealing market share everyday - slowly chipping until September 18th. Since mid-September she has grabbed the BULK of their online customer base. They have done nothing to fight her. Looks like being levered 4/1 ain't a picnic.

In all fairness, she is almost exclusively online and they have both online and offline enterprises, but had they really understood long term investment online (natural search (long) versus pay per click (painfully short)) and how customers want to be treated . . . that's the biggie, she would not have been able to step forward. Now, she is the dominant player in that niche online.

So what happened? Why did her main competition stop competing?

As far as I can tell, their line of credit dried up and their accordion line vaporized overnight. All spending stopped and layoffs seem imminent.

This jives with my conversations with small business CEOs (under $500M annual rev) in the past month. For those who chose to bump the edge of their lines of credit for short term debt instead of leaving it open for the daily working capital needs that you have when you sign new clients . . . they cannot sign new clients and therefore, no growth is possible. Literally.

Expect Boards to lower expectations rapidly. There simply isn't room to grow. If you cannot cover 90 days working capital, you cannot sign the new client. Ouch.

However, for those who managed their cash - this is the perfect time to simply TAKE the clients from your competitor. Go. Take. Win.

This is the time for the small, local or fast moving companies to quadruple revenues in 6 months. Outrageous, sure, but why not. Your competition is bloated and cannot move. By the time their capital is turned back on, you'd better be deeper. This is a special time of total disruption.

This is Phase 2 of Globalization. The rise of QUALITY over QUANTITY.

Phase 1: Quantity
Old Navy on every corner worldwide - everyone looks the same.

Phase 2: Quality
Local brand gets access to worldwide market - everyone looks exactly as they want, prosperity is distributed naturally . . . without government intervention.

To recession-proof a service business today you need more than hope, you need a concrete plan. You need the Blue Screen of Death method.

In times of economic woe, the first chops are areas that I call "maintenance." The important but not urgent activities. In your personal life they may be things like health club memberships. In your business, it may be motivational speakers and company retreats. After all, cash flow is King. We cannot pay employees with hope. We cannot pay the utilities with optimism.

So what do you do if you are that Motivational Speaker?

All of a sudden your ability to demonstrate the 15% productivity gains quarter over quarter is simply academic since your proof is likely fuzzy. Did they really gain productivity because of YOU?

You get relegated to the "Nice and important, but not urgent," category and that category gets slashed from the budget.

The question is, were you solving a complex problem for your client that allowed her to make those productivity gains or were you simply pumping up the staff for brief bursts of energy that happened to create those productivity gains? In other words, did you create long term or short term value?

If you are creating long term value for your clients you need to find a way to remind them of the complexity that you solve for them. An effective way to do this is the Blue Screen of Death method.

Blue Screen of Death Method (BSD):
Who hasn't experienced the agony of BSD? It never happens while you're reading the comics online, it happens when you are putting the finishing touches on the video presentation you will be making tomorrow. You may be willing to swim shark infested waters to avoid having BSD hit.

And that is the brilliance of Apple. Apple products have sub-par specifications and yet, people flock to them - non-turtleneck people, regular people. Because Apple brilliantly plays on your perpetual fear of the BSD. You start to hear voices in your head telling you that having an Apple means everything will just work. They very strongly compel anyone who has ever lost significant sleep over BSD to desire an Apple product.

And THAT is what you must do to save your service business from a recession. You must find your client's Blue Screen of Death that you can solve for them and focus them on fear of returning to that pain rather than proving how awesome you are. Pain is a much stronger motivation. Besides,if you really are so great, what you do will look simple to your client.Focusing on the pain keeps the complexity you are solving ever present and keeps your value invaluable.

Considering a way to recession proof your business? How about increasing the Volume.

Sure, you can cut costs, but you can't cut costs to zero and isn't it more productive to find a way to grow, profitably? If you are currently profitable, then you have every reason to dive into your market and go grab more share.

If you have a web component - whether full blown e-commerce or an information source - consider ways to boost your conversion and traffic. Are you driving sufficient traffic to the site. Is the traffic you are driving targeted? Are they taking the action you want? Your website should groom the right customer to join your sales funnel. Mind you, not every potential customer, but the right customer.

Your analytics program will show you that information. If that loses you, go get google analytics, put it on each page of your site (better yet, into the template) and start tracking. Make sure you have the functionality to track customers from entrance to action item and payment as appropriate.

Kraig Kramers of CeoTools.com agrees that now is the time to grab market share. As he puts it: "The idea with the expanded effort on direct sales is to take market share away from others who are caught in the recessionary doldrums (just drifting along with the economic decline)."

Yes!

At the very least, generate action items to increase your sales, and even better, keep a keen eye on prime market share starting to falter. Sure it sounds predatory, but think of it as searching for a parking spot at the mall during a holiday. If you want to get into the mall, you have to find a spot. Only now, you have better information and can pick the spot you want as close to the mall as you like.

In a recession the best defense is a strong offense, pump up your sales volume.

Recession proof your business this summer by unlocking your cash reserves. Start shopping! Now really is an excellent time to buy. Average and mediocre private equity firms are on the sidelines because they depend on the fast food of capital, cheap debt. Banks are skittish and recent deals are not unlocking their value at quite the rate some investors would like. Even the Financial Times mentioned that a number of PE firms would be returning capital to investors (6/30/08 FT) because they cannot meet return targets.

This creates the perfect opportunity for corporate investors to snap up some delightful complements. We are seeing interest in corporate entities rounding out their client interaction portfolio which is to say, making their communities tighter.

For the local Dental Clinics this means purchasing the local community user group that has 10,000 active and 20,000 moderately active users (interact once-a-month). While it is not unusual to see vertical integration, what is different now is the flavor of that integration. These are independent users bound only by an interest in being terrified by Dentists. The Dental Clinics get the obvious benefits of "listening in on user conversations" to enhance, reposition their products and advertising at cost, but the abstract benefit of expansion is much more real with a user group to lead the way.

Given that a number of these users are not as true local as would be necessary for a Dental Practice, the Clinics are using this (super cheap!) acquisition to open additional not-currently-local markets. These additional clinics will open in early 2009 and already have 2 month waiting lists in 4 of the 5 new markets. The doors will open cash flow positive. Not a bad gig if you can get it.

So open your FCF to acquisitions that can bring you closer to your best customers. Snuggle right up to them. The deals aren't cheap in most markets but the crazy auction format has ceded to a more reasonable due diligence style.

I like deals that complement your core offering. If your customer wants it anyway, why not benefit from providing it? Enjoy shopping through late-October.

The Plaza Project, our answer to the pain of local business owners, is in the Beta phase. So far the response is warm and we are almost cash flow positive on total investment. This project has huge implications for the way local business owners present themselves online. We need more staff and such, but the process is underway. We will have meaningful results by the end of August.

Three cheers to Jim for getting the basic technology behind the idea together in a useful and expedient manner.

Three cheers to our test users! Without this group of folks we would blissfully continue down the road without a second thought for things like the color scheme. You really don't care for gray. Got it.

A special thank you also to the brains at Wordpress and Google. You guys have made it possible for hacks everywhere to learn, develop and disseminate in ways that simply did not exist 10 years ago. As much as technology is derided for putting space between people, I see it moving us even closer together now - on our own terms. Isn't that something grand? Living on your own terms.

Soon you will be able to find the coffee shop the locals love, the architect who does Art Deco hangars for private ranches and the personal trainer who teaches Alzheimer patients, wherever you are, locally. We have a huge opportunity to help people share their very best. We are getting there.

A happy hack,
Kate
P.S. If you are interested in participating in the Plaza project or joining the PP team, send me an e-mail. We really do need team members (and advisers/Board Members). kmckeon @ paladinprincipals . com

An Online property's value is based on the mini-universe it has created tying users, content and products seemlessly together. The tighter the universe as exhibited through cult-like actions, the more valuable that online asset.

Sales Funnel * Conversion * Traffic Flow

The Sales Funnel is all of the products and services as offered in the natural progression of a relationship with the customer.

Conversion within the funnel is the rate at which people continue through the funnel. For example, 2% of the people who visit your sales page buy your book, 30% of your book buyers then buy the Home Study Course and 15% of those who buy the Home Study Course purchase the coaching plan.

Traffic Flow into the Funnel is the number of Unique visitors the top of the funnel receives as well as how targeted those visitors are.

SUMMARY: Old School Offline Businesses can successfully use the blogging structure to gain new clients and maximize value for existing clients with a very modest amount of effort.

While chatting with the SEO hacks the topic of blogging for business came up . . . does it make sense for a B2B business to blog? If so, how often? What is the payback? How can we advocate a nebulous ROI?

The most vigorous supporters of blogging pushed for 4-5 posts per day - none of whom have ever actually run an "old school business." An Old School Business (OSB) is a business that lives on even when the powergrid fails (not optimally, but…). OSBs represent businesses like Lumber Yards, Architectural Firms and Widget Makers. Sure there are ways to utilize the Internet in an OSB, but an OSB is not dependent on the Internet which means an OSB's clients are accustomed to interaction offline.

Does it even make sense to blog multiple times a day? Is the blog a vehicle for a steady stream of product information or is it a place for interested customers and vendors to mingle? What is the return on your blogging investment?

Frequency and ROI:
Well, with one simple weekly post on a very relevant industry topic and perhaps a very relevant monthly video upload, most B2B firms under $100M will strike a good resource balance. But if you want to rev-up sales,  and or generate a massive quantity of new leads, or you are just getting started, then more frequent blogging and hiring a dedicated blogger may be your best solution because of the mutltiplicative effects of good blogging: frequent interaction with your customers ("touches"), establishing yourself as an industry expert and generating new traffic sources - the positive effects of blogging.

Remember, your clients will reward your quality over quantity and the Search Engines attempt to do the same. Keep your eye on your business. Don't let the hoopla around blogging push you to create a monster. Yes, you probably need more traffic at your site, but NO, you don't want just any traffic. If you sell Commercial Architectural Services getting an extra 1000 visits daily from teenage boys does you no good.

Many of our clients are service firms: Architects, Dentists, Doctors, Financial Advisors and those who serve a strictly business to business clientele think it is inappropriate to have much video on the site. We too have struggled with how much video we want to include on our site.

Afterall, a slower loading time for your page and you will lose your visitor . . .

As of this morning we wrapped up a killer test of one such service provider who has a practice that serves 20-30 clients annually. Even we couldn't believe the outcome!

The full article and description of the test: Service Firm Marketing: Manageable Video Content.

What you should see quickly is that you don't have to commit to making a video each week or even a video each month. Though if you do, even better. Go for quality instead of quanitity. Google rewards you; your clients reward you and potential clients reward you. It is brilliant!
 

Branding: The act of intentionally creating a Name, Icon, Phrase or other gimmick to gain acceptance in the marketplace through intentional repetition.

It is one of the most, if not THE most, talked about Marketing gimmic. Yet, what does it do for you?

For Coca-Cola, Kraft and the State of Texas, it does a great deal. Is there any American who would not recognize the Texas flag? Is there any American who WOULD recognize the State of New Hampshire Flag? Obviously an image can be powerful and influential. But what about a phrase? Does the phrase, "Don't Mess with Texas," ring a bell?

So Branding must be good, right? Well…. It isn't evil, but does it give you an adequate return? Compare the return on your "Branding Campaign" to the return on your best and worst product lines. How does it compare? DId your PR firm tell you that you can't possible compare Branding in such a manner? Did they leave you thinking you were not quite with-it when you asked about the return you should reasonably expect? RED FLAG.

Yes, even Branding can and must be measured. As the Branding campaign rolls out, make sure there is a call to action in any placements (advertising, editorials, etc.) that will let you know the responder has seen and acknowledged your Branding efforts. If you pay your PR firm by successful client acquisition instead of the space they rent for you in a magazine (WHO thought of that anti-business model!!!), then they will demonstrate the effectiveness of your Branding campaign. Make sure you have an economically relevant measure to judge every marketing effort, even something as nebulous as Branding.

But before you spend and time or money Branding your entity, ask yourself these questions:

1. Do you know how your most profitable customers make their decisions? What metrics they use?

2. Does your team buy in to your vision?

3. Can you turn on the Sales spigot when needed? In other words, can you walk into your marketplace and ratchet Sales up by 10% or more?

If your team won't follow you, you will fail quickly. Money can't buy love. And even more importantly, if you don't know your customers and marketplace well enough to increase sales by 10% overnight, you are missing necessary institutional knowledge - this may be a one-shot 10% increase, but the point is, you know how to rocket sales if necessary.

Knowing WHO your best customers are, HOW to reach those clients, WHAT entices them, and WHY they will prefer to buy from you is the first step. The second step is to make sure your operation is in good shape - are your operational processes clear? Can a stranger jump in to run the operation if something happens to you? Only when step one and step two are successfully completed should you even begin to consider branding. Branding is not about your customers; it is about your ego. Until you are ready, leave the branding efforts for the Krafts and Coca-Colas of the world. You have business to do.

The Trouble with Branding:
 - It is ego driven.
 - It does nothing for your customer or client.
 - It is a ridiculous use of limited resources with no positive proof of positive ROI….

That being said, if you really think that your particular company needs to be a household name, make sure you find a great PR firm to do the work for you. Pay them the big bucks. You'll have to if you want your Brand to gain market acceptance.

The benefits of an economic recession can be painful to admit.

When capital flows freely, entrepreneurs and non-trepreneurs alike get to start companies - much like walk-ons get to chase their dreams of playing big league. In a downturn those not favored by the market get the boot. That is the benefit of a recession.

We cull the herd of would be entrepreneurs.

It's like cutting the 6th string on the football squad. The bus can't hold that many kickers…. AND, the soccer team needs that talent. So talent gets redeployed as it is fit. Sure there are very real consequences, and those who can shake off the rejection to move on will flourish in their new environment. Our economy depends on the flexibility and variability - without it, innovation and incentive to innovate would die.

It is no easy task to redeploy yourself, particularly if you must retrain yourself, but it is your ability to be flexible, adapt and embrace that promises you long term stability.

STABLE: "Not likey to fail."***

STASIS: "State of inactivity."***

You can be stable without being static. Long term stability requires that you stay in motion, improving with each day.
 

***Concise OED, revised 10th Ed.