gordeeva_o_g_praktikum_po_perevodu_ekonomicheskih_tekstov_s

Why Less Is More for Startups

A company running on a tight budget will perform far better than a company that has gotten a chunk of cash from VCs

If I only had another few million dollars to spend on…

Less is more

Yes; it's a cliché. But it's the best piece of survival advice for young companies, bar none. When a company is running on a tight budget, it will perform far better than a company that has gotten a chunk of cash from VCs. While this seems like common sense, it's actually news to many entrepreneurs (and aspiring entrepreneurs) who learned that raising venture capital is essential for high-growth companies.

Seasoned Pros Want Perks

A growing body of research implies that the correlation between raising money and success of startups has been exaggerated. In a study released this month of 79 tech companies funded over a 10-year period, David Townsend, an assistant professor of entrepreneurship at North Carolina State University, along with a co-author, professor Lowell Busenitz at the University of Oklahoma, found that a venture's success isn't necessarily dependent on funding. "Contrary to conventional wisdom, undercapitalization is not a death sentence. We found that moderate levels of undercapitalization—even capitalization ratios as low as 20% of the venture's initial goals—are not statistically related to a venture's probability of surviving. What appears likely to matter more for these ventures is the creative transformation and use of resources at hand and a disciplined approach to cash management," says Townsend.

First, a CEO will usually feel pressure to bring in a "grown-up" management team. But seasoned managers want big salaries and large chunks of equity. VCs usually expect a portfolio company to use a preferred headhunter to find the rock star VP of sales. Naturally, the headhunter also wants an equity stake, on top of a finder's fee in the neighborhood of six figures. When the rock star manager arrives, he or she expects rock star perks—an assistant, first-class travel, etc. Now imagine these distractions aren't limited to one new hire but half a dozen or more.

Putting Profits Ahead of Growth

Second, bringing in outside money usually creates expectations of very rapid growth. VCs want a home run, not a single or a double. And

92

they want the home run within five years or less. But founders, not outside investors, should determine the proper pace of growth for a company. And a founder who is about to lose his or her life savings is far more likely to drive a company towards profitability. A founder in this position turns every person in the company into a salesperson—and that's the best model for a scrappy startup. In the end, creating a culture that emphasizes long-term profitability over rapid growth is critical for success.

Furthermore, in an economic downturn like the current one, increasing sales quickly is far harder since consumers and businesses are spending less. So a focused, eager team is essential.

Hard-Learned Lessons

Yes, sales folks should be hungry. But they should also take a longterm view on customer relationships and push for profits rather than topline growth.

Third, outside money means that founders spend less time thinking about customers and more time thinking about keeping the board of directors happy. Founding management is invariably far closer to the customers than the board. And the more time and focus management can direct toward customers, the better. The outside money blurs the perception of who pays the bills. In the short run, it may actually be the VCs who just sunk a chunk into the company. But in the long run, it's always the customers.

Hungry Teams Get Results

None of this is to say that a board and talented VCs can't be a huge asset. And sometimes a big injection of capital is required for fast growth. Bringing in rock star management can give a company added boost and lift fundraising if, for example, the company is truly running on fumes and is almost out of options.

But it is preferable to take an inexperienced, hungry, cash-strapped startup team over a well-oiled team of Google or Microsoft veterans any day of the week. Hungry companies figure out ways to keep eating because they don't know whether there will ever be another meal. Industry veterans and serial entrepreneurs worry less about failure and are therefore more likely to fail. This, in a nutshell, is why it's so hard to find examples of people who have grown more than one company to considerable size.

And this is also why less money means more chances for success at most startups. So don't worry if you think you don't have enough capital. Instead, be grateful for the sense of urgency.

93

But two successful launches doesn’t mean market is back, expert says

NEW YORK - There is growing evidence that the market for initial public offerings is rebounding after essentially disappearing at the height of the credit crisis as two new issues raised a combined $10 billion Wednesday.

However, analysts say the market's re-emergence isn't open to every company, and that only the strong can successfully launch stock sales right now.

"It's still very much of a company-by-company situation," said Francis Gaskins, president of IPOdesktop.com.

Both of Wednesday's IPOs are well known and established companies in their industries. Verisk Analytics Inc. is the largest provider of data to the property and casualty insurance sector. Spain's Banco Santander offered shares in its Brazilian unit, which is Brazil's third-largest private sector bank behind Itau-Unibanco and Bradesco.

A broad stock market rally and a sense that investors are growing more comfortable with the equity market is prompting a range of companies, including biotechnology company Talecris Biotherapeutics Inc. and for-profit education company Education Management Inc., which both had IPOs last week, to go public.

Still, it's undeniable that investors are hungry for new opportunities to invest as the global economy rebounds from the depths of recession and near stagnant credit markets in late 2008 and into early 2009. U.S. IPOs more than tripled in the third quarter compared with last year, according to business information provider Hoover's. There were 17 new issues in the third quarter in the U.S. Another 30 filings were submitted to the Securities and Exchange Commission during the quarter for future offerings.

"The IPO market in the U.S. is akin to a wound up coil spring, and demand for capital continues to increase," Menlow said.

94

Of the two new issues, Verisk was the more impressive performer Wednesday, its shares opening at $27 each, $5 above their IPO price and trading as high at $28.97. In afternoon trading, the stock rose $5.43, or 25 percent, to $27.43.

1. На сегодняшний день, в связи с экономической нестабильностью во всём мире, организовать собственный бизнес довольно затруднительно. Именно поэтому для организации собственного дела необходимо подбирать такие бизнес идеи, которые не требуют крупных финансовых вложений и принесут гарантируемую прибыль.

2. Владелец небольшой веб-студии создал компанию с помощью бизнес-ангела, он трудно переживает кризис, но не намерен бросать начатое дело

Компанию Пипл Текнолоджиз, занимающуюся разработкой сайтов, Евгений Ходаков основал в конце 2008 года. Несмотря на то, что нынешний кризис довольно тяжело ударил по его бизнесу, предприниматель говорит, что не жалеет о решении открыть свое дело. Он стойко переживает трудности, не теряет оптимизма и продолжает поиск новых клиентов.

Средства на развитие компании Е.Ходаков привлек, обратившись к частному инвестору. Таких инвесторов еще называют бизнес-ангелами. Бизнес-ангелы - это состоятельные частные лица, вкладывающие собственные деньги в стартующие бизнесы в обмен на возврат вложений и долю в капитале начинающей компании.

«Вопрос с инвестициями решился случайным образом. Я пришел за советом к хорошему знакомому, как организовать бизнес и получил предложение о финансировании», - рассказывает Е.Ходаков. В итоге знакомый вложил свои деньги и получил долю в капитале Пипл Текнолоджиз .

95

Exercise 4

Translate the following into Russian.

Stock market; to go public; initial public offering; publicly traded company; privately held company; listed company; venture-capital firms; mutual-fund investors; to sell a majority stake; shareholder; to vote by proxy.

UNIT V

MANAGEMENT AND MARKETING

№ 5.0.

A. Management in business and human organization activity, in simple terms means the act of getting people together to accomplish desired goals. Management comprises planning, organizing, resourcing, leading or directing, and controlling an organization (a group of one or more people or entities) or effort for the purpose of accomplishing a goal. Towards the end of the 20th century, business management came to consist of six separate branches, namely:

•Human resource management

•Operations management or production management

•Strategic management

•Marketing management

•Financial management

•Information technology management responsible for management information systems

Basic functions of management

Management operates through various functions, often classified as planning, organizing, leading/motivating and controlling.

•Planning: deciding what needs to happen in the future (today, next week, next month, next year, over the next 5 years, etc.) and generating plans for action.(What to do?)

•Organizing: (Implementation) making optimum use of the resources required to enable the successful carrying out of plans.

•Staffing: Job Analyzing, recruitment, and hiring individual for appropriate job.

96

•Leading/Motivating: exhibiting skills in these areas for getting others to play an effective part in achieving plans.(To make individual work willingly in the organization)

•Controlling: monitoring -- checking progress against plans, which may need modification based on feedback.

Formation of the business policy

•The mission of the business is its most obvious purpose -- which may be, for example, to make soap.

•The vision of the business reflects its aspirations and specifies its intended direction or future destination.

•The objectives of the business refers to the ends or activity at which a certain task is aimed.

•The business's policy is a guide that stipulates rules, regulations and objectives, and may be used in the managers' decision-making. It must be flexible and easily interpreted and understood by all employees.

•The business's strategy refers to the coordinated plan of action that it is going to take, as well as the resources that it will use, to realize its vision and long-term objectives. It is a guideline to managers, stipulating how they ought to allocate and utilize the factors of production to the business's advantage. Initially, it could help the managers decide on what type of business they want to form.

The objective of Human Resources is to maximize the return on investment from the organization's human capital and minimize financial risk. It is the responsibility of human resource managers to conduct these activities in an effective, legal, fair, and consistent manner.

Human resource management serves these key functions:

1.Selection.

2.Training and Development.

3.Performance Evaluation and Management.

4.Promotions.

5.Redundancy.

6.Industrial and Employee Relations.

7.Record keeping of all personal data.

8.Compensation, pensions, bonuses etc in liaison with Payroll.

97

9.Confidential advice to internal 'customers' in relation to problems at work.

10.Career development.

B. Management Secrets: 5 Signs of Good Management

Getting other people to do what needs to be done is a simple, but pretty basic, definition of management. But management certainly isn't simple, at least not the way we Americans approach it.

If you consider the vast sums of money we spend on formal management education - not to mention what's spent on books, software and other tools - one would think that this management mystery should have been solved a long time ago. But we're still looking for those elusive management "secrets" that will transform us and our organizations.

The truth of the matter is - notwithstanding the millions paid to CEOs - there are no secrets to managing. Being a good manager requires reasonable intelligence, common sense, a desire to accomplish something and a bit of brass.

Whether or how good managers are born or made, who knows. But look for these signs that a company has them:

1.The company knows its business. The least convoluted the response to "Just what is it that XYZ Co. does?" the better. If management can't explain what the company does in simple English, it probably doesn't know.

2.The business makes money. Call me old-fashioned, but when a company earns a profit it means that management has at least figured out what people in the real world want and how to produce it for less than the price people are willing to pay.

3.People listen. Good management means that humility is encouraged, and arrogance is discouraged. Salespeople listen to customers, managers listen to salespeople and bosses listen to workers. This is the way a company learns, improves and grows. If management doesn't listen, it's not just deaf, it's dumb.

4.Reasonableness rules. It's important to aim for the stars, but if management demands excessive returns or non-stop extraordinary performance - without understanding how work gets done or without providing adequate resources - watch out for severe politicking, blaming and corporate upheaval.

5.A sense of mission. Does making a millionaire CEO richer or completing a meaningless project turn you on? I hope not. Good

98

management gives people emotionally satisfying reasons to care about their work. Sure, pay is important, but good managers know the importance of caring about something bigger.

C. Marketing strategy

Once the company has obtained an adequate understanding of the customer base and its own competitive position in the industry, marketing managers are able to make key strategic decisions and develop a marketing strategy designed to maximize the revenues and profits of the firm. The selected strategy may aim for any of a variety of specific objectives, including optimizing short-term unit margins, revenue growth, market share, long-term profitability, or other goals.

To achieve the desired objectives, marketers typically identify one or more target customer segments which they intend to pursue. Customer segments are often selected as targets because they score highly on two dimensions: 1) The segment is attractive to serve because it is large, growing, makes frequent purchases, is not price sensitive (i.e. is willing to pay high prices), or other factors; and 2) The company has the resources and capabilities to compete for the segment's business, can meet their needs better than the competition, and can do so profitably. In fact, a commonly cited definition of marketing is simply "meeting needs profitably."

The implication of selecting target segments is that the business will subsequently allocate more resources to acquire and retain customers in the target segment(s) than it will for other, non-targeted customers. In some cases, the firm may go so far as to turn away customers that are not in its target segment. The doorman at a swanky nightclub, for example, may deny entry to unfashionably dressed individuals because the business has made a strategic decision to target the "high fashion" segment of nightclub patrons.

In conjunction with targeting decisions, marketing managers will identify the desired positioning they want the company, product, or brand to occupy in the target customer's mind. This positioning is often an encapsulation of a key benefit the company's product or service offers that is differentiated and superior to the benefits offered by competitive products. For example, Volvo has traditionally positioned its products in the automobile market in North America in order to be perceived as the leader in "safety", whereas BMW has traditionally positioned its brand to be perceived as the leader in "performance."

99

Ideally, a firm's positioning can be maintained over a long period of time because the company possesses, or can develop, some form of sustainable competitive advantage. The positioning should also be sufficiently relevant to the target segment such that it will drive the purchasing behavior of target customers.

Wikipedia, the free encyclopedia

100

Maytag Slashes Targets and Plans Job Cuts

Maytag, the third largest US manufacturer of home appliances, yesterday abandoned its second-quarter earnings target, cut its full-year forecast and unveiled a “major restructuring” involving a 20 per cent cut in its salaried workforce.

The Iowa-based owner of Hoover and Neptune washing machine brands in the US has been struggling with high labor and fixed costs and rising raw material prices.

Most of its production facilities are in North America in contrast to many of its competitors, which have outsourced to Asia and other lowcost areas. Over 95 per cent of Maytag’s 20,000 employees worldwide are based in the US.

Laura Champine, home products analyst at Morgan Keegan, a Memphis-based investment bank said Maytag had “over-built” inventories and under-estimated rising raw material prices. “In part they asked us to put in some pretty aggressive projections for Hoover to make some miraculous recovery this quarter and it’s pretty clear that’s not happening,” she said. Maytag has been in restructuring for most of the last three years, trying to shift towards production of higher-margin products such as better-equipped kitchens and refrigerators.

Ms Champine said production costs were still a fundamental problem for Maytag in spite of the restructuring. “It still doesn’t address the fundamental issue, which is that the company is not making the products in the best factories in the best cost locations.”

The Financial Times June 2004.

Big Blue Takes Bold Steps Back to the Future

IBM’s $1bn plan to expand its software business is part of a new and aggressive strategy to regain some of the world’s largest computer company’s former glory of the 1970s, when it led global technology markets.

101