Jamie Ontiveros

I almost never play the lotto. The odds of winning, as you know, are very low. I always use to say that I was just as likely to find the winning ticket on the sidewalk, as I was to purchase a winning ticket myself. While not a scientific analysis, you get the picture. Both events are unlikely!

Large public companies are required to have internal audit departments. Small and medium sized businesses are not. Most of you know that I’m an auditor. Auditors don’t have many friends on the job. It makes sense, right? Who likes being audited? If you have a business, you should. My specialty is Operational Auditing. I focus on reviewing business process and computer systems for process improvement and cost reduction opportunities.

Far too often business owners make process or policy decisions but fail to revisit them on a regular basis. I call this running on ‘auto pilot’. Perhaps you’re too busy fighting fires, i.e. running from one issue to the next. Either way, you need to take time to revisit every decision that you’ve ever made about your business.

Why? Maybe your supplier hasn’t been as reliable as they have in years past. Perhaps technology trends have shifted and there are better, cheaper options available today. Businesses of all sizes are hurting right now. They typically go into cost cutting mode by reducing employee headcount, selling non-core businesses, and purging anything on a temporary basis that will help keep their head above water.

This is survival mode for sure. While necessary in situations that many find themselves, it’s my opinion that businesses should always devote time and resources to saving money. The truth is that it’s far too tempting to “celebrate” sales and customer number figures when times are good, but I digress.

I recently “found” approximately 2 million dollars while conducting a process review. Sure the company is a multi-billion dollar company, so this too is a drop in the bucket. That’s not the point. Large companies have the resources to devote to this type of review. Small businesses don’t have the cash flow to bring in a 3rd party for an independent review. That’s why it’s very important for entrepreneurs and management to carve out time to make sure they continue to run lean and mean. If you’ve only now started reviewing your operations due to the recession, then I encourage you to keep it up. You’ll be glad that you did.

Disclaimer:

I’m bringing this post over from another blog as I have a few more thoughts about the subject. My apologies for being a dated read. It was originally posted on September 8th, 2009.

State of the Industry

It’s safe to say that the Used CD Market isn’t what it use to be.  While it was a vibrant business model several decades ago, it has been reduced in cultural importance. Used CD shops have have resorted to selling higher margin yet non core items such as DVD’s, t-shirts, magazines, etc.  Let’s discuss the state of the industry…

• Restrictive Copyrights

The Music Industry is challenging the Doctrine of First Sale and states like Florida and Rhode Island have passed “pawn shop” laws.  The Recording Industry is perpetually making it more difficult for Used CD stores and their patrons by introducing ‘finger printing’ and ‘waiting periods’.

• Digital Downloads

Advances in technology have made it more convenient to acquire music (legally and illegally).   iTunes, Amazon, Rhapsody, Wal-mart offer MP3 quality downloads.  Bands like Radiohead & Nine Inch Nails were two big name bands that made brand new albums available directly to their fans via digital download.  Peer to Peer Networks, such as Bit Torrent, are used to download MP3′s.  Illegal downloads hurt used cd sales as well.

Product Life Cycle

If we look at the Product Life Cycle, it becomes evident that popularity for used cd’s has peeked.  Niches have presented themselves recently, but the growth era for used cd’s is in the past.  Long story short, technology and regulation have pushed the used cd’s further along the curve.

The retail music industry as a whole has consolidated and even contracted.  This begs the question, how much longer will the pressed disc be available?

Industry Spotlight – Competitive Environment

• RIAA

The RIAA has been waging a two front war: suing their customer base and lobbying the government.  While some of the defendants have begun having some success against the lawsuits, it remains to be seen how the lawsuits will impact demand for music long term.

• iTunes & Amazon

Both of these services offer inexpensive digital downloads and ala cart pricing.  The convenience of paying a nominal amount and having near immediate access to the music is incredible. These services introduced true a la carte music collections. Amazon initiated DRM free MP3 downloads and iTunes followed suit. CD singles were successful in their day, but were typically offered only for top hits.

• Musicians

Bands have begun using digital downloads as a promotional tool.  Radiohead offered a ‘pay what you think it is worth‘ model for the ‘In Rainbows’ album for a limited time. Many downloaded the album for free.  Nine Inch Nails went further by offering their album entitled ‘The Slip’ for free with a better sounding audit codec (FLAC instead of MP3).

• Peer to Peer

There are many P2P networks which all have a lot of music on them.  While illegal, it still accounts for a significant way that people gain new music.

Marginal Cost

The concept of marginal cost can help explain these phenomenon.  The Marginal Cost (MC) to produce one additional unit, or cd in this case, decreases and then rises.  Electronic media costs next to nothing to replicate.  This fact pushes the cost of music down towards zero.  Prince, Radiohead, and NIN are bands at the forefront who understand this concept.  It remains to be seen if industry developments will make the traditional cost curve apply to the digital realm.

SWOT Analysis

That’s a lot of information to take in.  It always helps me to summarize.  While this isn’t a comprehensive list, it does quickly summarize the current state of the industry.  Most of the items have been addressed or are self explanatory.

Here are some quick points and then we’ll move on to the opportunities.  Strengths – CD’s still provide better audio quality than iTunes and Amazon.  Weaknesses – The current business model is dependant on sellers to provide new inventory.  Threats – dependence on aggressive record labels to continue pressing CD’s. The Strengths, Weaknesses, and Threats frame the discussion and form the current ‘state of the industry’.

Let’s focus on the opportunities as all is not bleak.  An updated model is key to creating new demand for used compact discs. How can you create new demand?

• Pricing!

That’s right, Used CD stores need to update their pricing. I know what you’re thinking. You’re thinking that prices are already as low as they can be. That’s not exactly true if you consider the frequency of the sale and buy back program. Ramp them both up, and you can make up margin with volume.

• Community

Used CD stores have long been cornerstones of their communities, and they need to leverage their standing with their existing customers. Memberships or clubs coupled with Social Media can revitalize the communities of yesteryear.

• Inventory Control

All of this relies on a tighter inventory system however. Used cd stores that I’ve been to hold on to their inventory too long. Part of the allure was to find that rare disc among the mountain of titles. Who has time for that anymore. Get rid of the junk, and only buy discs that stand a chance of moving.

The world doesn’t need another used cd store. It just needs the existing ones to get with the times.  There isn’t anything wrong with selling t’s and dvd’s but with some effort, used discs product a bump to the bottom line.

Last summer I attended a meeting put on by the Denver chapter of the Social Media Club. I was introduced to a New Media consulting company called the Kendall Media Group.

KMG was presenting a project for one of their clients, The Giggling Greek, a Greek catering business based out of Longmont, CO. I love it when traditional businesses use new media. I think that the design of TGG website can be improved, but that’s a topic for another day. Traditional websites and menus don’t make me want to drive 45 minutes to try a new restaurant. Nothing can mobilize this self-proclaimed foodie like the sights and sounds of the meal being prepared. Is there a lesson here? You betcha…

Don’t take my word. See for yourself.

For some reason, I’m unable to embed the video on this blog. It’s worth clicking the link to view their video however.

Giggling Greek – Authentic Greek Take-out & Catering in Longmont CO from Kendall Media Group on Vimeo.

I get asked this question from time to time, so I thought that I’d post my usual response. There are several costs when it comes to creating a website. Some of them are ongoing costs, and others are one time. My first recommendation is to evaluate all of the requirements individually. I.e. don’t buy all of these services from the same provider.

Domain Name Registration – Think of this as your annual license plate registration. You get to pick your own name: E.g. YourName.com. The cost is relatively low. I usually dissuade using Networking Solutions or GoDaddy. Networking Solutions is more expensive. GoDaddy uses sex to sell, and they have been accused of locking you into their service. I’m not a prude, but we’re evaluating technology here.

Key Decision Factors: Cost, Lock In

Recommendations: Namecheap.com is as their name suggests, inexpensive. They are also a great provider. Name.com is based out of Denver and I am friends with their Community Manager. I’ll likely give them a try for my next registration.

Design – Your website is a collection of interrelated files that is comprised of the actual code (pages), images, and text. Unless you’re a designer, you’re likely going to have some upfront cost. I’m assuming that you’ll want a professional looking site, but you can save money by purchasing a previously made template and tweaking it to suite your needs. Don’t get cheap when buying a template, if you’re to skip on the designer. Your site may end up looking flat.

Keep in mind, that logo design is typically separate from website design. You may have to hire two different people to get the website that you’re looking for. Once finished, you need to share your website with the world.

Key Decision Factors: Cost (RFQ), Prior Work, Availability

Recommendations: Available upon request. I know several designers who bid for your job (High to low end).

Hosting – You’re renting space on a computer in a data center. It’s sole purpose is to serve up your website 24/7/365. Naturally you want to have zero downtime. Don’t worry too much about capacity stats, e.g. bandwidth, storage capacity, etc. A standard website for brick and mortar business will never come anywhere near these limits. Email is another story. Check out this post if you’re a blogger or developer type.

Key Decision Factors: Cost, Uptime, Support, Community

Recommendations: Joyent is my favorite hosting provider. I’ve been with them for years, and could not be happier.

You need all three to take your site live. Feel free to contact me to discuss in more detail.

Given:

I have the original iPhone and it’s been two years.
I am no longer in a contract, and am on a month to month arrangement with AT&T.

Problem:

Next year’s iPhone promises to be dual processor, which would be game changing.  I’ve noticed that my OG iPhone has slowed, and I’m looking for something a little zippier.  I should also be able to keep my Iphone and use it as a iPod Touch.  AT&T’s service is another story all together.  There was significant downtime in downtown Denver this summer when AT&T upgraded their network for MMS. There were times when the downtime interrupted important calls, but it was easy enough to manage.

Sprint is known as the ‘telco’s telco”.  I’ve never been a Sprint customer, but have always secretly envied their network. Sprint offers reasonably priced all you can eat data plans, and don’t gimp their phones the way other carriers do. AT&T & Verizon. I thought about the new Web OS powered phones for a second, but decided to go strongly consider a Google Android phone instead.

So, should I wait for next year’s iPhone, or get a Google phone today?

If Google, go with the Samsung Moment, or the HTC Hero? I.e. Vanilla Android, or a customized flavor?  Tethering would be nice.

This is a second post related to our recent trip to Portland. My wife and I have had ‘A to Z’ wine before and are quite fond of their Pinot Noir. Our plan was to go to the ‘A t0 Z’ winery in the Willamette Valley for a tasting.

We learned a lot about the history of the wine and wineries. Incidentally we learned that ‘A to Z’ purchased Rex Hill Vineyards and produce a Pinot Noir that we liked even better than the ‘A to Z’ variety. We did buy a bottle of the ‘Night & Day‘ to bring back home with us. I didn’t pay much attention to the bag at the time. I noticed something after we got back to Denver.  The bag wasn’t an ‘A to Z’ bag, nor was it a Rex Hill bag.  It read ‘Willamette Valley Wineries‘.

Interesting.  A trade association. Why would the Willamette vineyards print up special bags together?  It actually makes a lot sense when you think about it.  All of the local vineyards share the task of communicating just how good their wines are to the public.  Associations can do more than merely share advertising costs.  They can also help raise awareness for a lot of good causes. While they also compete with each other, Oregon wines have to compete with their Californian, French, Australian, and South American brethren. They have decided to put up a united front against the rest of the world. In this case, wine truly thicker than blood.  While it may not make sense for ever industry to develop a trade association, collaboration can benefit all.

Recently Denver coffeehouses came together as part of ‘Employee Appreciation Week‘ and offered free coffee to anyone who showed up for one hour.  Hopefully you were able to stop by for the cup.  I definitely did.  The corporate chains definitely stand out among the participating coffeehouses.  Local businesses have a lot to learn when it comes to collaborating.  Perhaps coffee is also thicker than blood. Right click image to view all of the participants and sponsors, or view them here.

There are a lot of good reasons why it makes sense to register your own domain name, and I think that most business owners intuitively understand this from a marketing perspective.  Once over the initial hurdle of “should I” market online, many fail to vet out two other very important aspects of domain name registration.  This ultimately leads to trouble.  I’ve learned a lot over the years mostly through stories of others’ misfortune.  Two things stand out: 1. Manage the Domain yourself & 2. Pick a reputable domain registrar.

1.  Manage the Domain Yourself – There are a couple of reasons you want to so this.  First of all, domain names are assets that are sold for thousands or millions of dollars.  When you think about domain registration in this fashion, it becomes more evident that you need to handle the registration yourself.  Letting a web designer or web host register your domain on your behalf is asking for trouble.  Here are some other reasons why:

• Difficult to leave – You may become unhappy with your web host for any reason and wish to find another. People have reported problems because the domain is in their name, not yours. This is a form of service lock in.  No one likes cell phone contracts, because they limit your choice for a period of time.  Don’t lock yourself in under the guise of ‘free’ registration.  See the Terms & Conditions for one such provider.

Here is our domain policy from our Terms & Conditions:

“7) TRANSFER OF DOMAIN NAME. When (COMPANY NAME REMOVED) purchases a domain name for your website, the domain name is owned by (COMPANY NAMED REMOVED).  However, upon request we will transfer ownership of the domain name to the subscriber for a $15 fee.  It will be necessary for the subscriber to have an account on a domain registrar, and we can help with this process.  It will not be possible to transfer a domain name until at least 60 days after purchase, due to regulations for domain names.”

• Overpriced – The domain registration business is very competitive.  That’s good from the buyer’s point of view as it lowers prices.  However, most companies that register on your behalf jack up the price (e.g. Free $20 value).  The market price is usually less than half of what they boast to save you. These companies often will sell the domain back to you, but at the inflated amount.

Remember, there are no free lunches.  It may just look that way.  You’ve giving up quite a bit when you sign on for hosting with “free domain registration”.  It’s your name, and it’s your name alone on the title of an automobile when you buy and register that asset.  Domain name registration should be no different.

2. Pick a Reputable Domain Registrar – The downside of a competitive industry is that there are many companies to choose from.  This makes the decision very difficult as you try to differentiate the services between potentially hundreds of companies.  Its really boils down to three things: Cost, Domain is registered in your name (See above) and  ICANN accreditation.  Cheaper is better of course.  If the domain is registered in your name, you have legal recourse.  If the registrar goes out of business, then another ICANN accredited registrar will gobble them up.
Recommendation: My unendorsed recommendation is Namecheap.com.  As the name suggests, they are cheap, but good also.  I’ve used their name services for years without any issues. You won’t go wrong.

Not in your best interest – Believe it or not, registering domains is in the their best interest, not yours. You are relying on the provider to be your agent, and do what is ethical and right.  They are not your agent from a legal perspective. How can this impact you?  District9.com is a domain owned by Portland Design and Marketing firm, Quango Incorporated.  It is also the name of a blockbuster motion picture. Suppose the studio came calling to purchase the domain years before the movie was released.  Imaging if Quango’s web host owned the domain.  Would they be tempted to sell the name if it meant hundreds of thousands of dollars in profit?  Remember the domain is registered in their name, not yours. Registering the domain in your own name removes the risk.

In February 2009, The Denver Post started a series that checks in with six local small business owners to see how they are coping with the economic downturn.  The first round of video interviews were conducted in February 2009.  The second pulse check was completed in May 2009.  It will be interesting to see how their perspectives change overtime.

The first business is the Denver Bookbinding Company.  Gail Lindley is the current CEO, and is a third generation entrepreneur.  The history of the family owned business is quite impressive, and I invite you to read it.  The interviews follow.

February 2009 Interview

There are many key takeaways from this initial interview.  Gail indicated that the journaling industry is shifting from the traditional bound journal, to a digital or online  journal.  This change coupled with the economic downturn has severely impacted (down 20-30% over five years) this historically rich family business.

Key Initiative: Cost Cutting

• Removed Filtered Water
• Optimized Cell Phone Service Plans (A Must Do)
• Asking/working with Vendors (A Best Practice)

Projected Economic Outlook:

• 2009 Tough Time
• 2010 Start to see Upturn

May 2009 Interview

Good news.  The Denver Bookbinding Company (DBC) received a significantly larger (80%) order than initially projected, which resulted in their ability to increase head count/payroll.  In this economy Cash Flow is king.  DBC has taken measures to manage cash flow by tiering their customers.

Gail and company know that you can only cut costs so much, and that revenue is needed to drive any business.  They are focusing on new marketing, and are very close to finding out how successful that marketing has been.  Also, a new market opportunity related to the down economy has presented itself (cost of rebind vs. new books).  You never know if this opportunity would have presented itself if DBC did not put the extra effort into Marketing.

Key Initiative: Cash Flow Management

• Tier Customers (A Best Practice)
• Grant payment terms based on relationship (A Best Practice)
• Asking/working with Vendors (A Best Practice)

Key Initiative: Find new Market Opportunities

• Rebind vs. New Books (A Best Practice)

Projected Economic Outlook:

• 2009 Changed Outlook, Positive forecast, Things are looking up!