Human Scale Business

Dave Bayless of Human Scale Business speaks with Heather Kearney about her experience as a new Kiva Zip borrower.

Dave Bayless of Human Scale Business speaks with Warren Vaughan regarding his experience as a Kiva Zip lender and trustee and what it takes to be a successful borrower.

Tessa Burnett, Owner of Hattie Rex

Tessa Burnett was teaching high school Spanish in Rolla, Missouri, when her new puppy, Pablo, became a part of her life. Unsatisfied with the mass-produced dog tags available through the big box stores, Tessa bought some metalworking stamps, tin snips, and copper sheeting and made her own tags.

Although she’d never considered herself an artist, Tessa had been creative growing up and took a pragmatic approach to making art. For instance, when she needed a painting to hang on her wall, she’d paint something. Not surprisingly, Tessa approached metalworking with the same growth mindset.

Pablo’s first dog tag left room for improvement. So, Tessa kept making incremental changes until she felt the tags were right. Little did she know that she’d embarked on a path that would change the course of her career and her art into a business.

A Part-time Etsy Shop Becomes an Art Business

Call My People Tag by Hattie Rex

After making her initial tags for Pablo, Tessa started making dog tags for the pets of friends and family. Encouraged by the feedback she was getting, she took a stab at selling at the Grape and Fall Festival in nearby St. James, Missouri. A strong response at the festival meant that Tessa’s next step was to open an Etsy store under the name Hattie Rex.

She then put her teaching career on hold to attend graduate school with every intention of returning to public school teaching. However, while designing, making, and selling product part-time, income from her Etsy store soon eclipsed the salary she had been making as a high school teacher. That’s something Tessa couldn’t ignore. So, upon graduation, Tessa moved to Bozeman, Montana, and set out to see what she could make happen working at Hattie Rex full time.

Connections to Pets, People, and Places

Montana Love Necklace by Hattie Rex

Over time, Tessa had expanded her offering to include jewelry for people as well as pets. She’d come to understand that her creations helped make tangible the emotional connection her customers felt with their family, pets, and the places they love. In fact, her bestselling item continues to be the Montana Love necklace, which has sold in the thousands. In essence, Tessa’s designs “bring you home.”

Pragmatically Creative

Tessa creates art because she enjoys the process. In addition, her pragmatic approach to experimentation, learning, and adaptation have served her well. Initially, she resisted her customers’ entreaties to make jewelry with their child’s name and birthdate. After all, Tessa understood her niche to be unique, handmade dog tags. Nevertheless, she tried. In the process, Tessa discovered bigger opportunities.

Do you want to be a starving artist, or do you want to be a working artist?

Although the creative thrill has long since passed with the Montana Love line of necklaces, those products generate the profit that allows Tessa and Hattie Rex to continue to innovate, which fuels the artistic side of Tessa’s being. Balancing the needs of the business with the needs of the artist comes with the territory, As Tessa puts it, “Do you want to be a starving artist, or do you want to be a working artist?”

A graduate of West Point and a veteran of the war in Iraq, one might not expect Tom Morkes to fear much. Nevertheless, he readily acknowledges his fear of writing for a public audience. Like many of us, Tom is uncomfortable with how publishing makes us vulnerable to criticism and rejection. That's one reason why he was open to the concept of "pay what you want" pricing. By putting the buyer in control, Tom lowers the barrier to building a direct – and profitable – relationship with the audience for his work.

In the United States, we've grown accustomed to the seller setting a fixed price for the goods or services they offer. As consumers, our choice is typically limited to deciding whether or not to pay the offered price. The system works – particularly for commodity products for which there are several competing suppliers.

However, fixed pricing doesn't work so well when the product is unique. Perceived value is personal and contextual. Set the price too high, and you'll fail to attract many buyers. Set the price too low, and you'll leave money on the table. What if you let the buyer set the price? Does she have an incentive to pay anything? A growing body of evidence suggests she will...in the right circumstances.

* Pay what you want pricing works best when there is a direct connection between the seller and buyer. That's a key advantage of a human scale business: we can connect one-to-one with other humans. In the process, we can build trust and a sense of mutual value and reciprocity.

* By asking customers to support our creativity, we give them the opportunity to be generous. Offering our generous support of the work of others' feels good. In part, that's because it makes us feel like true patrons. We're not only motivated by a sense of reciprocal obligation. Sometimes, we like to give extra to support a cause we believe is worthwhile. Our motivation is intrinsic.

* Pay what you want isn't just for beginners. When we are just starting a creative venture, the risk of mispricing our art, music, book, or other work is high. Consequently, the pay what you want mechanism is certainly appropriate for newbies. However, Tom makes the case that it can work for established authors and musicians, such as Radiohead.

* Your market may be broader than you think. If you are offering your product online, force yourself to think in terms of a global audience. As Tom puts its, a $10 ebook may not be out of reach for somebody in the U.S., but it may represent a significant investment for somebody in the Philippines, for example. Pay what you want pricing allows customers engage with you on their terms.

Of course, pay what you want doesn't work in all situations. If the marginal cost of your product is high, you'll need to set a minimum price, which is not unlike the reserve price for an auction item. Pay what you want is probably not the best approach for a commodity product offered by a faceless corporation. However, if you create differentiated products and cultivate a meaningful connection with your audience through consistent action, pay what you want pricing may yield a higher degree of profit than traditional, fixed pricing.

Tatum Johnson and her sister created The Foundry so they could move their business, Intrigue Ink, out of their garage. Somewhat unexpectedly, they found a community. I spoke with her about the benefits of co-working spaces for creatives.

Born of Necessity

Like many innovations, The Foundry was born of necessity. Tatum had grown tired of working out of her garage and migrating from one coffee shop to the next in order to meet with people. Off-the-shelf real estate was either too expensive or inappropriate. So, The Foundry was born as a way to give Intrigue Ink the space it required and the downtown location Tatum desired in a manner that allowed for costs to be shared with others.

Stimulation and Accountability

It's not too surprising that working alongside other creative entrepreneurs can be stimulating. Somewhat unexpectedly, Tatum has found that co-working fosters a sense of accountability. It may be that working in plain site amounts to a public declaration of our intentions, which makes it more likely that we'll follow-through.

Walking the Walk

In her own life, Tatum found that it's easy to "talk the talk" of being a creative, but she found that she really wasn't "walking the walk." Because of The Foundry, Tatum finds herself in the midst of a support network that enables her to be more productive and enhances her sense of accomplishment.

Chris Murphy is the co-founder of Helio & Company, a digital creative agency. I had the chance to speak with Chris about art and business. More specifically, he shared his thoughts on the complementary nature of artistic passion and business education.

Helio works with brands like Vans, Leica, Red Bull, and GE to craft compelling stories. A film and photography major in college, Chris has played a principal role in creating a highly regarded and growing firm in little more than six years.

Chris touched upon several themes during the course of our conversation:

* Passion and commitment are foundational. At an early age, Chris knew that he was committed to making a living making films. Then it became a matter of creating the conditions under which that was possible.

* Adopt a growth mindset. Chris isn't an architect, but he designed his own home. He learned how, because he knew he could.

* You are going to make a lot of mistakes. Mistakes are an unavoidable byproduct of creating something new. Learn from them.

* Artists are problem solvers. Creative people are, by their nature, problem solvers. That's a source of business advantage and joy.

* Learn about business. Chris didn't learn how to "monetize his art" in film school. Learning how to do so is essential to supporting yourself and creating value through your art.

Passion combined with a growth mindset are necessary, but insufficient, conditions for success. Without heartfelt passion for your art and a commitment to learning what it takes to succeed, you're unlikely to persist long enough to succeed in an increasingly global marketplace. What's also necessary is the business acumen to understand how to find and solve valued problems within the scope of your passion. For Helio & Company, those valued problems lie in helping established brands dig deep to uncover and convey meaningful stories about the people who define them.

To some founders, hiring an accountant can seem as daunting as accounting itself, a mysterious code or awkward translation of the actual orders shipped and raw materials purchased.  But Jen Nord, an accountant with Rudd & Company, says the numbers can reveal how our business is doing in near-real-time and provide valuable insight to decision making.  She offers these tips on how (and whether) to hire an accountant or bookkeeper.

When to Hire

If you’re feeling overwhelmed by paperwork, wondering if you can use resources more efficiently, or simply unsure where you are in achieving your goals, these are cues you may want hire an accountant. While bookkeepers enter business data in accounting formats, accountants have the training to analyze and interpret the numbers, so you can read a coherent story of what’s unfolding. Interpreting the numbers can help you decide how much inventory to hold, or anticipate whether purchasing a building is a good use of capital. But, Jen cautions that hiring an accountant may not be a good use of scarce resources if you are comfortable learning the financial language to express your business activities. And there is little reason to bring on an accountant or bookkeeper as an employee when excellent expertise is available on a contract basis, whether a few hours a week or a few hours a month.

What to Ask

A good accountant will readily provide references of current and former clients. Knowing they’re entrusted with confidential aspects of businesses, accountants are accustomed to having multiple ways to verify information, including information about themselves. Jen encourages founders to ask about specific accounting software with which candidates have the most experience, as well as about work logistics—where the person intends to work, what resources will be needed, and what flexibility might be valued. Another important part of managing expectations comes from discussing how much of the founder’s time the accountant believes she will need, and how much time and explanation the founder wants, along with preferred modes of communicating.

How to Make Sure What You See is What You Get

Jen advocates reviewing candidates' profiles on social media to view how they represent themselves. If they’re going to be intimately familiar with your business, you want to make sure you see to whom you’re entrusting your livelihood. She suggests that a business owner never turn over all banking and transaction resources to another person. You can design processes, for example, for posting refunds and payments to customer accounts, so that no single person does both, or so that you review all transactions posted by another. Banks can provide read-only access for accounts to people providing services to your firm to help maintain a separation of duties. Even if you like and trust your accounting service-provider, you can protect her or him from professional vulnerability with measures such as these.

The numbers associated with your ongoing business activities tell a story. If you aren't yet confident in reading the drama for yourself, you’ll want to learn. Meanwhile, Jen's suggestions can help you find a trustworthy ally for interpreting the action.

Before Kim Scurry joined the mergers and acquisitions group of one of the largest technology companies in the world, she bought and sold Wizbang Hats. I spoke with her about what she learned about buying and selling a small business.

Buying Wizbang

At age 46, Kim was reconsidering her career choices and was thinking about buying a small, established business in order to test her entrepreneurial chops without risking her life savings. After two years of casual hunting, circumstance and opportunity came together in April 2012 when Kim came across Wizbang Hats in Bozeman, Montana.

How Can You Add Value?

It was important to Kim that she buy a company that fit her interests and strengths. She'd come across lots of businesses for sale, but none seemed to need what she was particularly well suited to provide. In Wizbang, Kim found a match. The founder had been most interested in product development and had neglected sales and marketing, two of Kim's strong suits. With Wizbang, Kim understood how she would add value to the business.

Don't Let Your Emotion Get the Better of You

Kim loved the company, really liked the founder, and had a clear understanding of how she could create value through developing sales and marketing. In retrospect, she may have loved the opportunity a little too much. That is, her enthusiasm may have diminished her appetite to negotiate harder. As a consequence, Kim may well have left money on the table.

It's a tough balance. On the one hand, the fit – including a degree of passion for the business – is important. Success comes hard and requires commitment that's tough to fake for an extended period of time. On the other hand, falling in love with a deal is the bane of many a buyer. Overpaying puts you in a financial hole that can be extraordinarily difficult to climb out of.

Selling Wizbang

After buying and operating the company for two years, Kim decided that her entrepreneurial experiment had run its course. Experience had confirmed her capacity to manage all the varied aspects of a small consumer products company, including sales, marketing, product design, hiring, manufacturing, and finance. However, Wizbang wasn't large enough to fully support her financially, which meant Kim was living a second life as a half-time consultant. Something had to give, and Kim concluded that growing Wizbang aggressively would require changes that would make it less fun. So, she decided to sell.

Take Time to Prepare to Sell

Having a propensity to act, Kim didn't waste time selling the company. Looking back, she feels that was a mistake. In her experience, it takes time to position a company for sale – maybe a year or more.

Although prospective buyers need to see evidence of the potential for growth in your business, they are unlikely to pay a premium for anticipated improvements in profit. After all, realizing those profits is likely to take their sweat and equity. Kim found that current profitability is the major driver of perceived value. Consequently, managing expenses with an eye toward near-term profit often makes sense if you are preparing to sell your company.

Craft Your Business Story

What makes your brand special? Where is the untapped potential? Why haven't you pursued such potential? These are the kinds of questions to which potential buyers want answers. Make the effort to craft and hone your business pitch. Collect real customer stories and anecdotes that will provide buyers with a real reason to believe.

Create a Buyer Persona

When you are developing a product, it makes sense to craft a highly detailed persona – a profile of the person you think is your most likely buyer. By personalizing your customer, you can be more empathetic to their needs and objective and, thus,