Newsletter ArchiveSUBJECT:Take on Dot-com Failures Welcome to The Internet 800 Directory Newsletter. Last week I covered some basic ideas on media planning. One of our readers has written a book that covers this complicated subject in an easy to understand manner. You can find the book at http://www.freeadvertisingbook.com/ This week Steve Jackson our CEO and President is going to share his thoughts on the recent fallout in the Dot-com field. Steve has a perspective I think you will enjoy. ----------------------------------------------- Steve Jackson's Take on Dot-com Failures: The Basics are the Basics With the all of the hand-wringing and the general public fear about the demise of "dot-coms", it seems to me that it is time to step back and take a look at why? It seems like twenty to thirty years ago (and it was) that I was a CFO and/or a CEO for several ventures that were important to the community and to their employees. These included a national truck line, a bank, a private charter airline, a car dealership, 2 old-line road construction companies, office buildings and a hotel, a brick manufacturing plant, restaurants and nightclubs, and several other real estate ventures. Nearly all of these companies were either bankrupt or upon the verge, and I was asked by either the existing management or the bankruptcy judges and attorneys to take them over and salvage them. Since I had to learn accounting by going to the library and checking out books, because I had no formal schooling in that profession, I was surprised to see how simple and obvious that it is. However, having been thrown, by fate, into an arena where people were looking to me to be their salvation, it occurred to me that I needed to know how their business operated. What I was amazed to learn was that, regardless of the type of company, all businesses must follow standard financial principles in order to be successful or even to exist. Most of them are plain common sense. As an example, in every single case where I took over a company, some of which had been in existence for over 50 years and were now faced with bankruptcy, the total number of employees far exceeded the need. If one looked as to why, it was because as these companies grew and became successful, they simply would add an employee because they thought they needed one or out of management ego. Every new VP needed a secretary that filed her nails and an assistant that was a gopher. Almost every single time one could reduce staff by 30% and not lose a beat in revenues and suddenly become profitable. I recognize that this seems to be a generalization, but it is also one that I have found to be true. This could not have been more prevalent than with the new dot-coms and their so-called venture capital advisors. I remember being aghast when I had one very high-level executive at a major brokerage outfit tell me that we couldn't do an IPO because we didn't have enough people! It was not that he could justify the need for more personnel, it was simply that there weren't enough. By the way, he has gone the same direction as some of the dot-coms he represented. The next problem is a premise that is more insidious and harder to comprehend. It involves something that is inherent to all of us, and it's called habit. Or, better yet, the inability or unwillingness to change. I bet I have heard people tell me 100 times or more that the reason that they are doing something the way they are doing it is because, "We've always done it that way." or, "It can't be done any other way." They never stopped to ask why, they just accepted it. What had happened was that, as they grew, they started to ignore the methods that had made them money. Their spending got out of hand and they didn't innovate to keep up with the changes. To paraphrase an old adage, "If your income doesn't keep up with your outgo, then your upkeep will be your downfall." The Internet fiasco is a perfect illustration. Things that were proven over time to be sound business practices were simply ignored by the start-ups. How or where any company thought they could make up a $250 million loss without knowing from whence their revenues would come is beyond my comprehension. Plus, spending 75% of one's venture capital in one single media play, like a Superbowl ad, even makes it worse. About the only good thing that has happened to the industry is that it has culled out many who should have never been allowed to be in it. The consolidation will continue, and the strong should get stronger - but not without adherence to basic financial and common sense business practices. All Contents Copyright ©1995-2001 The Internet 800 Directory Subscribe To The Newsletter: |