Human Scale Business

In a recent post to the TechCrunch website, Samuel Scott led off with the following in an article titled, "How Google Analytics Ruined Marketing."

Marketers in the high-tech world who use phrases such as “social media marketing,” “Facebook marketing” and “content marketing” do not understand the basic difference between marketing strategies, marketing channels and marketing content. And Google Analytics is to blame.

Those are provocative assertions. Are they substantive or merely the rantings of a crank unsettled by a changing world?

HOW GOOGLE ANALYTICS RUINED MARKETING

Thoughts of a Marketing Veteran

Our friend and marketing pro, Doug Fletcher, brought the article to my attention. I spoke with him about Scott's piece and why Doug thought it worthy of mention. Read the article and listen to what Doug had to say.

The Digital Channel Is Important...But It's Not the Only Channel

Doug highlights Scott's concluding thought:

How would you market yourself if the Internet didn't exist? Answer that, and it'll help your online marketing too.

We can be reflexively drawn to the activities surrounding digital marketing channels for several reasons:

* Fear of missing out - most of us have figured out that this internet thing is going to be huge, but it's not entirely clear how we and our businesses fit in the digital realm. We immerse ourselves in all things digital because we want to learn and explore. That sometimes means, though, that we neglect other channels.

* The allure of the measurable - tools such as Google Analytics offers us the prospect of measuring the impact of our marketing efforts. That's appealing, as so much of the return on our marketing investment is difficult to gauge. But not all that is measurable is worth measuring, and all that analysis comes at a cost.

* Lack of marketing background - most of us aren't trained marketers (any more than we are trained product developers, webmasters, or financiers). That's not always a disadvantage, as it frees us from the constraints of hidebound dogma. On the other hand, lack of familiarity with frameworks and concepts that have stood the test of time can inhibit our critical thinking and make us susceptible to the fashionable or limit us to the readily accessible.

It's not that digital channels aren't of increasing importance to most of us. It's just possible, though, that we are often insufficiently thoughtful about how we choose marketing strategies, channels, messages, and measurement tools such as Google Analytics.

Dave Bayless and Doug Fletcher discuss Samuel Scott's provocative TechCrunch article, "How Google Analytics Ruined Marketing."

For most of us, marketing is more than digital, and digital marketing is more than search engine optimization (SEO). Nevertheless, anyone who wishes to build an audience online must follow some fundamental SEO best practices. The secret to search engine optimization is there is no secret.

Learning from Affiliate Sites

Doug Cunnington, founder of Niche Site Project

Doug Cunnington is the founder of the Niche Site Project, where he writes about using effective project management and digital marketing techniques to create profitable Amazon affiliate sites. Affiliate sites contain highly focused content – product comparisons for instance – that earn high search engine rankings. The sites also include "buy now" links that point to Amazon.com. When visitors use those links to navigate to Amazon and make a purchase, the owner of the referring affiliate site earns a small fee.

For example, I Googled "best juicer" and the top result was www.juicerfanatics.com ("Guide to the Best Juicers"). The site is chock full of comparison tables, ratings, product photographs, demonstration videos, articles, tips, recipes, and other content very useful to somebody shopping for a juicer. Of course, "buy now" buttons are ubiquitous:

Juicer Fanatics Amazon Affiliate Site

A highly trafficked and effective affiliate site can generate thousands of dollars per month of "passive" income for its owner. Furthermore, such sites rely almost entirely on organic search traffic. Consequently, people like Doug are highly motivated to develop and apply effective search engine optimization techniques. You don't have to manage affiliate sites to learn from those who do.

VISIT NICHE SITE PROJECT

The Secret to Search Engine Optimization

According to Doug, search engine optimization results stem primarily from the disciplined and consistent application of a handful of best practices.

Here are the four key action items I took away from my conversation with Doug:

* Focus – really work hard to define your niche. Value is personal and situational. Put yourself in your target's shoes. What kind of questions is she likely to ask? It's not a coincidence that Juicer Fanatics is focused on, umm, juicers and not the much broader category of home appliances.

* Create Great Content – Doug emphasizes the need to do your homework in order to create content that hasn't already been done a million times before. If your content isn't useful to visitors, your site isn't going to rank high in search results.

* Research Keywords Upfront – search engines yield results for specific search phrases. Use a tool such as Google Keyword Planner to find out what phrases people actually use. Why guess?

* Solicit Backlinks – identify other sites that might find your content useful and ask them to link to your website. Links to your site from numerous, authoritative sites will increase the visibility of your site. As a rule of thumb, Doug recommends that you spend as much time marketing your content as you invest in producing it.

What Is Great Content?

My mom thinks all of my work is great. That means diddley when it comes to search engine optimization. Notwithstanding the artistic merit of your content, the requirement for cutting through the noise of the internet is quite high. That means there is never an end to your efforts to improve.

A few years ago, Rand Fishkin (a co-founder at Moz, the SEO tools company) asserted "uniquely valuable" conte...

Getting the most from your accountant—especially at year-end—requires a bit of preparation on your part. But rather than being onerous, you can make some of that work like brushing your teeth: it’s just good business hygiene, and it can be practiced more regularly than once a year. I spoke with Jen Nord, with Montana Community Development Corporation and an experienced accountant working with many human-scale businesses, about her tips to help your accountant help you.

There is no accountant out there who loves it when you come in with a box of receipts or say ‘Here is what I THINK I have for the year.’ You need to be organized.

Communicating with Yourself

Jen Nord is a CPA and a CMA

Jen’s first tips focus on being straight with yourself in three ways:

* Review your bank and credit card statements. This is best done on a monthly basis. You’re looking for any charges you don’t understand, as well as making sure that the inflows and outflows match with your actual experiences. Reviewing these accounts monthly makes year-end collection and review of these statements easier, too.

* Check your business’s financial statements—the income statement, cash-flow statement, and balance sheet. This can be done monthly or quarterly, depending on the velocity of your business, but certainly must be done annually. Do the financial reflect what you see on your bank and credit card accounts? Jen advises “taking a step back”—does this record of your business make sense, given where and how you spent your time and energy?

* Compare the current year’s results with last year’s. Here you are checking which elements have changed. Has your cost of goods increased? Are revenues steady or declining? If you hired someone during the current year, are you recognizing the benefits in revenues, margins, or profits you anticipated? Forming clear explanations—and specific questions—about why these changes have occurred will help you have productive conversations with your accountant.

Communicating with Your Accountant

The next tips focus on interacting with your accountant.

* Organize your documents. Find out whether your accountant prefers electronic records or paper copies and store the records as you accumulate them in the preferred format. While setting up an electronic or in-office filing system may seem like something you never have time for, buy yourself a latte and sit down and create the categories. Then as you encounter records on your desk or as they come into the business, put them in the appropriate place.

* Think about the upcoming year. Your accountant can become your ally in planning what’s next, as well as helping you document what’s past. If you want to buy some new equipment or spend your time differently in the coming year, talk with your accountant about the possibilities. Accountants can help you think about both feasibility and most useful approaches for accomplishing what you aspire.

* Get on your accountant’s calendar EARLY. Jen said setting appointments before the crunch of tax deadlines can help you get the most from your accountant’s expertise and generative thinking.

While the need to file taxes may be as certain as death, it doesn’t need to be feared. Following this advice will help you spend less money while getting more value from the accounting services you retain. Over time, you can build confidence in your abilities to document and interpret the numbers as you engage your accountant as an ally for your human-scale business.

Admit it. You love product development, marketing, and sales. But the thought of having to fulfill orders can make you cringe. It can get to the point that you almost regret making a sale.  When you started your e-commerce business, you hadn’t anticipated how much time, effort, and money the act of fulfilling sales requires. There’s no avoiding it, though. Customers—retail and wholesale alike—have increasing expectations regarding timely, reliable, and cheap delivery of the products they order from you. Consequently, finding the right e-commerce fulfillment partner is crucial.

DOWNLOAD FULFILLMENT BY AMAZON CALCULATOR

The Rise of the E-commerce Fulfillment Partner

Jake Rheude, Red Stag Fulfillment

Businesses were integrated, once upon a time. That is, many or most of the functions of business—product development, manufacturing, distribution, marketing, sales, etc.—were the responsibility of a single organization. More recently, new technologies have precipitated the unbundling and re-bundling of those functions into new businesses. What we call human scale business is one of those emergent forms:

* Highly focused products built upon empathetic relationship with customers

* Direct-to-consumer and multichannel sales enabled by e-commerce technologies

* Outsourced manufacturing

* Outsourced fulfillment and logistics

The smallness of human scale businesses allow them to really know—and connect with—their customers. That said, their small size also puts them at a disadvantage when it comes to aspects of manufacturing and fulfillment that benefit from scale and specialized knowledge (e.g. maintaining a sophisticated enterprise resource management information system).

Maybe not surprisingly, third-party fulfillment and logistics (“3PL”) companies have emerged that focus on the needs of e-commerce companies. Red Stag Fulfillment is one such company. In fact, as Jake Rheude explained to me, frustrated e-commerce entrepreneurs founded Red Stag.

What 3PL Companies Do

At first blush, 3PL companies all seem to do pretty much the same thing:

* Store – they receive products from you or your manufacturing partner and store them in their warehouse(s) until an order is placed by one of your customers.

* Pick – they retrieve product from the warehouse as sales orders are received.

* Pack – products are packed in cartons for shipment.

* Ship – packed orders are placed with the appropriate parcel or freight company for delivery to the destination specified in the sales order.

Different 3PLs might offer custom packaging or kitting services as well as inventory management and customer returns services.

When to Use a 3PL

When starting something, “Flintstone first.” Do it yourself. Get to know your product fulfillment process by doing the job. Set up a visual inventory system in your spare bedroom. Figure out the points of friction during picking, packing, and shipping. Learn what materials and procedures cost the most—in money and time. Your hands-on experience will yield insight into your product and packaging design that is otherwise hard to get. It will also prepare you to determine which 3PL is right for you, your business, and your product. That’s because do-it-yourself doesn’t scale, and your time and talents are probably better directed elsewhere in the long run.

That’s even truer in today’s environment of rising expectations. Companies like

Your passion has inspired you to create a unique product, but you've struggled to sell online. E-commerce requires the mastery of unfamiliar technologies. Customer feedback is incomplete and indirect. Furthermore, you hadn't anticipated that you would have to become a multimedia publisher. Digital marketing gurus preach the gospel of customer engagement, but how?

READ ABOUT PRIORITIZING YOUR DIGITAL MARKETING EFFORTS

Product Descriptions are Fundamental

Too often, we don't give our product descriptions the attention they deserve. After all, if a visitor to your site takes the time to read a product description, she's clearly interested. It's your time to shine. A compelling product description can build engagement, differentiate your offering, and build trust. Easier said than done, but the effort is worthwhile. Well-crafted product descriptions represent a real point of leverage.

Elements of a Story

My business partner, Laura Black, started her career as a writer and editor for an award-winning travel magazine. Later, as a consultant and college professor, much of her work involved telling complex stories in engaging ways. After all, if people aren't engaged, they won't pay attention to what you have to say. I spoke with Laura recently about the elements of authentic storytelling.

Laura explains that stories contain these elements:

* Characters

* Challenges

* Transformation

The stories of your business and products, too, have characters who face a challenge. The customer is always the main character. They face a challenge: the gap between their current state and their desired state. Through the purchase and use of your product, they can experience transformation and overcome their challenge.

For example, consider the LOFTi, a modern take on a timeless laundry drying rack design:

The LOFTi by The New Clothesline Company

The customer-character in this story needs to dry her laundry and wishes to do so in an environmentally friendly way. However, they don't have a lot of space to devote to a clothesline. Buying and using a LOFTi allows a customer to overcome the basic challenge of drying clothes in a way that stylishly communicates her value of environmental responsibility.

Authentic Storytelling Means Revealing Values

Identifying a customer challenge and describing your product as a solution seems like basic marketing. It is. That said, the marketing challenge for makers of unique consumer products sold online requires us to demonstrate our real, valid, and true empathy with our would-be customers. To do so, we must share evidence of the values that drive our decisions about design, materials, and sourcing.

Laura presents the case of Penzeys, which sells spices:

Penzeys Bay Leaf Whole

Consider the way Penzeys describes bay leaves:

Turkish bay leaves are the best in the world. Though not as strong as the California variety, they have a natural depth of flavor that the California bay leaves can't hope to match. Bay leaves grow wild on the hilly mountains of western Turkey in the area around Izmir (Smyrna).

In a very concise way, Penzeys communicates the care they take in selecting spices. That's a value a potential buyer can share and can be the basis for a meaningful connection with the product.

The Customer Need Not Be the Only Character in Your Story

When assessing the pros and cons of selling through wholesale versus direct-to-consumer online channels, a first obvious difference is margins. Selling direct-to-consumer allows the human scale business to retain healthy margins to reinvest in the business, while selling wholesale to other retailers requires you to lower margins, creating room for the retailer’s markup, often double your wholesale price. In essence, you are paying the retailer to manage the marketing, logistics, and transactions for you. In addition to pros and cons, there are other dimensions of channel choice worth considering, Dave Bayless says. I spoke with him about elements of channel choice.

DOWNLOAD PODCAST TRANSCRIPT

Pacing

Developing a robust online business takes time. Even though plug-and-play storefronts like Etsy and Handmade at Amazon, or popup storefronts like Shopify or Squarespace or Etsy’s Pattern, allow you to start selling goods quickly, developing a following who finds you, likes you, and buys from you can be a slow process. Selling wholesale to retailers may allow you to achieve higher volumes of sales more rapidly. It’s worth asking: How fast do you need to reach a certain sales volume, and why?

Activities

Activities for selling wholesale include going to trade shows and talking with retail buyers to land the accounts—and then reliably and intensively managing the supply line, obtaining the financing to cover delays between paying your suppliers and receiving retailers' payments, and communicating with the retailers, many of whom have specialized portals for vendors. Selling direct-to-consumer, on the other hand, involves digital publishing, such as creating videos and blogs that authentically tell the story of you and your products, as well as technical back-end work, fulfillment logistics, and managing financial transactions with your customers. What exactly do you like to do? While you can outsource or automate some aspects of some activities, a founder cannot afford to be unfamiliar with or ignorant of any part of the business.

How it feels

Dave provides insight into how the business founder may feel while managing different channels. While selling direct-to-consumer provides you with more control in shaping your customers’ experiences of your product and message, the operations of selling online can feel isolating and lonely. And while you may get a rush talking with buyers at trade shows, operational follow-through may require you to babysit retailers’ concerns about packaging, pallets, and exception reports. Being aware of the range of feelings you may experience as you manage each kind of channel can help you recognize what you’re getting into—and also help you practice great self-care, so you find ways to get emotional nourishment along the way.

Today most businesses sell and distribute through multiple channels; the single-channel seller is the exception. This opens opportunities for you to emphasize different channels during different eras of your business trajectory. What does your business need at THIS point?

Selling through established retailers can help build legitimacy for your products as well as provide valuable information about which target markets find your goods appealing when you’re starting out. Do you need to achieve certain monthly sales volumes to break even and cover your fixed monthly expenses? Selling wholesale may help reach higher volumes more quickly, but helping your business thrive, and not just survive, may require a quantum leap in steady sales volumes beyond that.

Selling online allows you to communicate in authentic, specific ways that just cannot be replicated when you’re relying on s...

Crowdfunding – the practice of financing a business by raising relatively small amounts of money from a large number of people, typically via a web platform – comes in several forms. While donation and rewards-based crowdfunding such as Kickstarter can be the right choice to get your business rolling, small businesses are increasingly turning to marketplace lending and investment crowdfunding platforms to finance their growth.

Differing Approaches to Investment Crowdfunding

Investment crowdfunding platforms such as Crowdfunder and AngelList focus on tech startups. CircleUp takes a somewhat different tack. It's a marketplace that matches consumer companies with individual investors. However, CircleUp, like the others, is oriented toward accredited investors and fundraising amounts of more than $1 million – hardly in the sweet spot for human scale businesses needing tens or hundreds of thousands of dollars. Localstake seeks to fill the void by helping consumer businesses raise amounts ranging from $50,000 to $500,000.

GO TO LOCALSTAKE

Lower Offering Costs Enable Lower Offering Amounts

Localstake helps businesses raise money in the form of preferred stock, convertible debt, and revenue share loans. In the not-too-distant past, the "private placement" of such securities (i.e. outside of a registered public securities offering) was typically only realistic when offering an amount in the millions of dollars. Restrictions on how such offerings were communicated to potential investors and other costs of compliance with Federal and state securities laws required a lot of expensive, specialized labor. Transaction costs in the hundreds of thousands of dollars were the norm. If it costs that much to raise capital, you'd better be raising millions.

Over the last few years, emerging technologies and more relaxed regulations have lowered the upfront cost of raising money as well as the ongoing cost of managing relationships with dozens of individual investors. That's what makes offerings of less than $1 million plausible.

A Conversation with Ryan Flynn at Localstake

I spoke with Ryan Flynn, a co-founder of Localstake, to learn more about his company's investment crowdfunding niche.

Making an offering of preferred stock, for instance, is a much more involved process than is pre-selling a product or getting a bank loan. Regulations must be navigated, deals must be structured and documented, and investors must be cajoled toward a timely closing. In other words, the functions of the investment banker must still be performed. Ryan said, "We are helping our customers at every point along the process of a capital raise." That help comes in several guises throughout the fundraising journey:

* Analyzing the appropriate type and timing of an offering

* Developing a business story

* Managing communications with prospective investors

* Collecting indications of interest ("soft circles")

* Gathering investment commitments ("hard circles")

* Creating documents and getting everybody's signatures

* Transferring funds, and

* Administering reports and payments to investors

Ryan says, "We definitely are trying to utilize technology as much as possible throughout the process." The effect of the application of technology is reflected in Localstake's current pricing structure:

* Phase 1: Build a profile and connect with investors – $199 per month

* Phase 2: Sign investment documents, verify investor eligibility (if applicable),

McCabe Callahan, Co-founder and CEO of Community Funded

McCabe Callahan is a co-founder of Community Funded. Founded in 2011 in Fort Collins, Colorado, the company offers white labeled crowdfunding platforms that leverage and strengthen existing communities, including universities such as Colorado State and towns such as Goshen, Indiana.

GO TO COMMUNITY FUNDED

The company was born, in part, as a result of McCabe's personal frustration with his failed attempts to raise expansion capital from conventional sources for his coffee shop business during the Great Recession. Ultimately, McCabe was able to turn to his customers, who supported his vision and funded the expansion. Inspired by that experience – and further encouraged by the emergence of Kickstarter, Indiegogo, and GoFundMe – McCabe and his collaborators sought to create a compelling financing tool for other entrepreneurs.

Today, Community Funded pays its bills by providing fundraising solutions to large institutions, but its heart and soul remain focused on entrepreneurs. That's why Community Funded powers the efforts of nonprofits such as The Local Crowd to help bring internet-fueled crowdfunding power to rural communities. Community Funded also offers the use of its platform for free (except for a credit card processing charge).

Screenshot of Community Funded Platform

A Conversation About Community-powered Crowdfunding

I spoke with McCabe about what makes community-based funding different.

DOWNLOAD THE TRANSCRIPT

A Useful Five-dollar Word

Community Funded emphasizes propinquity to a greater extent than other crowdfunding platforms. Even though technology-enabled interactions can stimulate communities of interest that are a source of propinquity, physical proximity remains a powerful force. Recognizing that, Community Funded seeks to "provide online technology that causes real-world impact."

In social psychology, propinquity (/prəˈpɪŋkwᵻtiː/; from Latin propinquitas, "nearness") is one of the main factors leading to interpersonal attraction. It refers to the physical or psychological proximity between people. Propinquity can mean physical proximity, a kinship between people, or a similarity in nature between things.

Source: Wikipedia.org

As McCabe puts it, "Community Funded has always had a vision to connect, support, and empower. It's really about connecting good ideas with a community of people who care and who can share resources to make those ideas happen."

The Crowdfunding Fallacy

Although crowdfunding platforms have opened new opportunities for entrepreneurs, artists, and others, they aren't magic money machines. McCabe notes, "A lot of people are still just wrapping their heads around this idea of what we call the crowdfunding fallacy, which is, 'If you post it, they will fund.' There's not this community out there that's just waiting for you to post your idea so they can throw money your way. It really comes down to sharing a compelling story, being authentic as a human, and building that community before you even ask them for a dollar."

A lot of people are still just wrapping their heads around this idea of what we call the crowdfunding fallacy, which is, "If you post it, they will fund."

To state the obvious, we sometimes need to raise financial capital because we don't have enough money. However,

You make a unique consumer product. You can sell directly to individual consumers via your e-commerce website, or you can sell indirectly by selling wholesale to a smaller number of relatively high-volume retailers. Wholesale versus retail – which marketing channel should you emphasize? How do you decide? It's a classic dilemma for human scale businesses.

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The Dilemma

Imagine you know the following about your average retail (direct channel) and wholesale (indirect channel) customers:

Table 1

Your retail price is $100 per product, so you have to sell it wholesale at a 50% discount, or $50. Your direct costs include the net costs you incur to get your product to your customers. Bulk packaging and shipping offers some cost advantage in selling to wholesale customers, so your direct cost per product is $25 for a retail customer and $22 for a wholesale customer. You figure your average retail customer will buy two of your products per year. Let's say your wholesale buyers tend to be fairly small, niche retailers, themselves. So, they don't buy enormous quantities of your product. Nevertheless, the average wholesale customer still buys 164 items per year.

On the one hand, that retail margin is really attractive: ($100 price per product - $25 direct cost per product) / $100 price per product = 75%. That said, even with an apparent profit of $75 per product, that only translates to $75 per product x 2 products per year per customer = $150 per customer per year.