For the above entrepreneurs, wearing pajamas for a day at the office isn’t far from reality. From pet care to virtual assistants and even online dating, we found entrepreneurs who are not just enjoying work from their living rooms and bedrooms, but they are also making a good living at it. In one case, a business owner grossed $10 million in a year, and cleared half that amount. Here’s a look at the hottest industries for home-based entrepreneurs — illustrated with some fun CEO self-portraits.

Pet Care — Paul Mann, Fetch! Pet Care

Virtual Assistant — Tawnya Sutherland, VAnetworking.com

Bargain Hunting Website — Karen Hoxmeier, MyBargainBuddy.com

Accounting Services — Melissa Nash Andrews, Accounts Receivables

Technical Staffing — Bill Foster and Ruben Santana, XRoads Consulting

Home Improvement and Organization — Allan Young, ShelfGenie

Green Construction — Nic Darling, Chad Ludeman, and Courtney Ludeman, Postgreen

Graphic Design Services — Sam Feuer, Mindsmack.com

Resume Writing — Kathy Sweeney, The Write Resume

Corporate Educational Services — Joseph Pickett, Experts Briefings

Online Dating Site — Markus Frind, PlentyofFish

Two years ago, Noah Weiss, a young programmer who spent the summer working here at Fog Creek Software, came to me with a business idea. Noah, who was still in college, had noticed that a lot of smaller tech-related blogs were running classified ads for job listings. He suggested that we do the same thing on my company’s blog, Joel on Software. The site is read by thousands of programmers a month — the ones who are so good at programming they have spare time at work to read the self-absorbed drivel I publish there.

Building an online classified ad system would be easy, Noah argued. (As any programmer would tell you: “It’s one table!”) And Fog Creek already had systems in place for charging credit cards, printing receipts, and accepting purchase orders, so the whole project wouldn’t take much work.

At first, I resisted. I had never run ads of any sort on the site and liked the idea of keeping it commercial-free.

But Noah kept arguing. “These 37signals guys are getting 50 ads a month,” he said, referring to a well-known software company in Chicago. “At $250 each, that’s — ”

Wait, I interrupted. They charge $250 for each ad? I had imagined that the going price to run a job listing would be, oh, I don’t know, $4?

That’s right, Noah said. They charge $250 per ad. “Besides,” he went on, “a job listing is not really an ad — it’s providing a community service.”

By then I had almost stopped listening. Little gears were turning in my head: $250 times 50 ads times 12 months — that revenue would allow me to hire another programmer! So we added classified ads to the site. Noah wrote the first draft of the code in about two weeks, and I spent another two weeks polishing and debugging it. The total time to build the job listing service was roughly a month.

Instead of charging the going rate of $250, we decided to charge $350. Why not? I figured we could establish ourselves as having the premium product simply by charging a premium. In the absence of additional information, consumers often use prices to judge products, and I wanted our site to be the Lexus of job listings. A few months later, 37signals raised its price to $300.

By the time you read this, that little four-week project will have made Fog Creek Software $1 million — nearly all of it profit.

That raised a question: How do you properly compensate an employee for a smash-hit, million-dollar idea? On the one hand, you could argue that you don’t have to — a software business is basically an idea factory. We were already paying Noah for his ideas. That was the nature of his employment agreement with us. Why pay twice?

But I felt we needed to do something else to express our gratitude. Should we buy Noah an Xbox 360? Pay him a cash bonus? Maybe present him with a certificate of merit, nicely laser-printed on heavyweight bond paper? Or a T-shirt that said “I Invented a Million-Dollar Business and All I Got Was This Lousy T-shirt”? We were stumped.

And what about everybody else at Fog Creek? Those people were doing their jobs, too. Simply because one programmer’s idea translated visibly and directly into a lot of money didn’t mean that the other team members weren’t adding just as much value to the business, albeit in a less direct way. At around the same time Noah came up with the classified ads idea, most of my employees were hard at work developing FogBugz 6.0, a smash hit that just about doubled our monthly sales.

Noah’s case was only the most dramatic example of a question that has long intrigued me: How do you pay employees based on performance when performance is so hard to quantify? The very idea that you can rate knowledge workers on their productivity is highly suspect and always problematic. If you mess up, the consequences are very real.

Psychologists talk about two kinds of motivation: intrinsic and extrinsic. Intrinsic motivation is what drives you to do something regardless of whether you will receive a reward. Why do you spend an hour cleaning the inside of your stove? Nobody looks in there. Your intrinsic motivation compels you to do a thorough job. We all have it — in fact, most people start out with the desire to excel at whatever they do. Extrinsic motivation is the drive to do something precisely because you expect to receive compensation, and it’s the weaker of the two.

The interesting thing, according to psychologists, is that extrinsic motivation has a way of displacing intrinsic motivation. The very act of rewarding workers for a job well done tends to make them think they are doing it solely for the reward; if the reward stops, the good work stops. And if the reward is too low, workers might think, Gosh, this is not worth it. They will forget their innate, intrinsic desire to do good work.

And the grumblers have a point: It’s impossible to know whether that bug that David fixed on Tuesday made more or less money for Fog Creek than the code Ted added on Wednesday. We are not a piecework sweatshop sewing doggie coats, where David made five and Ted made seven, so Ted should obviously get 40 percent more money.

In an environment in which judging performance is a subjective exercise, you are bound to make decisions with which employees disagree. Human beings, by their nature, tend to think of themselves as, how can I put this politely, a bit more wonderful than they really are. All of your B performers think they are A performers. The C performers think they are B performers. (A couple of your A performers think they are F performers, because they are crazy perfectionists or just clinically depressed. But they are the exceptions.)

So even if you did magically have the ability to accurately measure how good someone was at a job, the average worker, with his or her above-average opinion of his or her work, would still feel undervalued.

Throughout my career, I have observed that companies with formal systems that tie cash bonuses to performance end up with far more than half of their staff sulking and unhappy. Back when I worked at Microsoft, one of my friends got a lousy review that was neither fair nor correct: His bosses rated him based on the 5 percent of the job they observed (his infrequent interactions with them) instead of the 95 percent of his job where he was exemplary (his frequent interactions with customers). Based on that review, he almost quit in despair. But he held on, and now he is a very senior executive in charge of a product so important that you, personally, will almost certainly use it today.

So, back to Noah, the guy with the million-dollar idea. Though we don’t believe in performance bonuses, we still wanted to recognize his contribution. We decided to give Noah 10,000 shares of stock — conditional on him coming back to work for us full time when he graduated. Because Fog Creek is private and our stock is hard to value, we could say “it’s only fair that you share in the wealth” without assigning an actual dollar amount to it. It wasn’t the perfect solution, but everybody thought it made sense.

Noah seemed pleased, and we hoped the stock would entice him to come back to Fog Creek to take a full-time job. Which…he didn’t. Google made him a better offer. That’s another flaw with performance-based rewards: They are easy for one of your competitors to top.

Oh, well. Thanks for the summer, Noah. We are keeping an empty office here in case you change your mind.

[via Inc Magazine] by Joel Spolsky

Twelve years ago, Jeff Koeze surprised his wife, his parents, and himself by agreeing to give up a comfortable life teaching law to take over the then-86-year-old family business. At 36, the professor was going to become a nut man.

His father, Scott Koeze (pronounced KOO-zee), was sick of running Koeze Co., which was doing about $7 million a year, mostly in mail order, primarily in cashews. That worried Jeff enough that he insisted that his father not stick around any longer than two years. If the elder Koeze ended up refusing to leave, Jeff had a golden parachute: two years of salary. Moving from the University of North Carolina at Chapel Hill, Jeff and his wife, Kate, even chose a house in Grand Rapids, Michigan, where Koeze Co. is based, that they figured would be easy to resell. “I wanted a risk-free out if it didn’t work,” Jeff says.

Instead, a few months after Jeff showed up, his father went on vacation and didn’t come back. Didn’t return phone calls, either. “I know your dad — he’s retired,” a longtime worker told Jeff.

Koeze was in disbelief. “That just can’t be,” he replied. But it was.

Thus began the education of an educated CEO, a lawyer and tenured professor steeped in book learning but lacking any business experience; given to endless research, at a company that had been built and run by his shoot-from-the-hip father; accustomed to debating with colleagues and letting the best argument prevail, at a company where workers had no expectation of knowing why a decision had been made.

In his early years at the company, Koeze despaired — not about going bankrupt but over the fear that he would never turn the place into anything resembling his view of himself: intellectually curious, blunt and transparent in speech, and able to shift rapidly from one challenging task to another.

He didn’t want to be a smart guy running a dumb business, even if it did make money. And, anyway, he suspected profits wouldn’t last long unless the whole place got smarter.

It did. Here’s how, one lesson at a time.

IT DOESN’T MATTER HOW YOU LEARN — JUST LEARN

Before leaving, Koeze’s father managed to throw him this piece of advice: “You can’t learn to run a business by reading a book.”

But the younger Koeze, so unlike his intuitive and impetuous father, had always turned to books for guidance. Besides, the old man wasn’t around to show him the ropes. Workers at Koeze weren’t going to be much help; they knew only the old ways, and that wasn’t at all what Jeff Koeze had in mind. “I attacked it like I attack every problem,” he says, “with a stack of books 18 feet high.” (For a sampling of Koeze’s influences, see “The Well-Read Entrepreneur“.)

Among the workers he inherited, he says, he saw “intellectual passivity.” People weren’t interested in learning new skills. “My employees were extremely good in the narrow base they’d built up over time. But that narrow base gets outdated pretty fast.”

Koeze’s wide smile often turns down, into a faint grimace. And his eyes widen and his brows lift frequently to suggest a shared secret. But his voice is steady in volume and pace, almost never excited. “I am neither a firer nor a screamer,” he told himself. “If I can’t get better at this, I am going to have to sell this company.”

Koeze, 48, went to remarkable lengths — hauling in consultants, a shrink, a philosophy professor; reading a library full of organizational behavior books; trotting off to pricey seminars — to challenge both the workers and himself to adapt to one another and perhaps forge a better way of working together.

Is selling nuts really so complicated? Koeze packages them as business gifts in fancy glass jars, priced to compete with a nice necktie. Send out a million catalogs. Roast and pack. Take orders and ship. But extreme seasonality, with 96.5 percent of sales coming in the fourth quarter, requires rapid expansion and sudden shrinkage. It’s jarring. Year-round employment of about 40 swells to some 130 before Christmas. Koeze needed to launch new products and sell through new channels to expand. And doing a good job at even mundane stuff — buying packaging, running retail outlets, hiring people — seemed to a business newcomer to invite endless reading and research.

Koeze’s eventual success — he has boosted sales to $12 million, improved profit margins, introduced new products, and modernized manufacturing and order taking, and many workers have ultimately embraced the boss’s rigorous data-driven decision making — isn’t an argument for or against business by book learning. Rather, it’s an argument for learning, by whatever means an entrepreneur and his or her company can manage it.

Koeze is now a seasoned entrepreneur, with lessons also learned on the shop floor. But still, his first reference in discussing business is almost always a book. Why, I ask him, is his desk organized so meticulously — 80-some file folders, labeled and displayed in an amphitheater of to-dos?

“David Allen’s Getting Things Done,” he replies and gives a faithful and succinct synopsis of the book. Having laid out the concept, he then talks about how he applies it to Koeze Co. He operates with a calendar of meetings but no to-do list. A quick scan of his desk, however, can remind him what’s hot on his agenda.

EVEN IF YOU’RE GREEN, TRUST YOUR INSTINCTS

Jeff Koeze’s first full year in charge, 1997, Koeze Co. ended the holiday season with $600,000 in unsold merchandise. A lot of it was mixed nuts.

Koeze had to heavily discount the stuff. “A one-time, half-million-dollar working capital reduction” was the result, he says.

Should he have been worried? The company was still profitable. Many of his workers didn’t seem surprised or troubled. The financial statements — they made no distinction between finished and unfinished inventory and thus gave no clue about unsold nuts in prior years — were no help. Still, it didn’t seem right to Koeze to have missed the sales plan by such a wide margin. “I was certainly shocked,” he says.

The old method was to estimate the coming year’s sales — essentially tweaking last year’s results — and schedule the plant in long, uninterrupted runs to produce the necessary inventory: cashews, mixed nuts, candies. Even if orders came in that didn’t match expectations. It was convenient for production workers but ultimately costly to the company.

Koeze got the production, sales, and shipping people together and told them to fix the problem. “A huge improvement came by just saying this really matters,” he says. In 1998, unsold merchandise was $200,000. “A number I can live with,” he says. Also a glimmer of hope that his workers, if asked to, could actually help solve a problem. Radical change, including twice-daily meetings to adjust production to sales results as the holiday season heats up, has now brought unsold merchandise down to less than $150,000, even as sales have almost doubled.

IF YOU’RE NOT CAREFUL, YOUR BUSINESS’S HISTORY WILL BE YOUR DESTINY

Scott Koeze had been forced at age 28 to take over the business when his father died suddenly, and he had had a love-hate relationship with Koeze Co. ever since. He had always made sure Jeff felt absolute freedom in choosing a career. Though the two were vastly different in temperament, they sought each other’s company. When he was a kid, Jeff recalls, his father left for work at 5:45 most mornings. “But if I could hold him up until 6, Looney Tunes would come on, and he would watch with me for an hour.”

As a youth, Jeff sometimes went to the plant with his father, shoveling peanut skins away from the roaster and into burlap bags, and wedging his slender body into tight spots to inspect for rodent droppings. But Jeff never saw himself running Koeze Co.

And it was peculiarly his father’s company. Scott Koeze had made some smart moves. He had sold his biggest product line, private-label peanut butter (a $10 million operation), when he realized the business was about to get squeezed by supermarket consolidation. He had built a business selling Koeze’s nuts and candies through community groups doing fundraising. And he had built up the catalog business to spread sales nationally.

But he had a touch of the crazy boss in him. Weeks after being hired as Scott Koeze’s assistant 26 years ago, Deborah Owsinski introduced her new boss to her husband. ” ‘I’m so happy to meet you. I love your wife,’ ” she recalls Scott saying. “And he turned and planted a big wet kiss on my mouth. That sort of set the tone. He was hilarious. I loved working for Scott. He was not predictable.”

Not everyone was laughing. Tom Lakos, who runs Koeze’s two retail outlets, both in Grand Rapids, recalls Scott Koeze sneaking up on him “just to catch me not working.” More than once, the boss yelled at Lakos so thoroughly, over a variety of matters, that a co-worker dissolved into tears.

Inconsistency led to dysfunction. Scott Koeze was known for asking employees to look into his latest whim. Then he would forget about it and express surprise or lack of interest when workers reported back to him with proposals. So people began ignoring his requests.

Jeff Koeze, unaware of this little drama, was perplexed when, as the new boss, “I’d ask people to do stuff — and they wouldn’t do it.” He only later found out why. “As it turns out, it was entirely logical behavior,” he says.

Indeed, it took Jeff some time to realize he was having a personality clash — not with any individual but with the established rituals at Koeze Co. It’s a problem that blindsides many who enter a new business at the top. Hyperrational, by his own description, and accustomed to university colleagues who were also wired that way, Jeff expected workers at Koeze Co. to behave similarly.

But they had learned from Scott Koeze. “I never had a plan,” Scott says. “I got up in the morning, and I ran like hell.” It’s easy to believe him. These days, he dresses like a cowboy, a lanky man in hat, boots, and a snap shirt. And he can’t seem to sit still in his own house, which perches on a hill overlooking Lake Michigan on the Leelanau Peninsula. When I visit, he drags me out for a buggy ride behind a duo of big Frisian horses across his sprawling property.

Coaxing the horses at every turn, he pleads guilty to micro-managing. “I’d say, ‘Move aside and let me do it,’ ” he says. When he discovered that his workers had compiled a guide to handling customer complaints, he told them, “Burn that file. I want to handle every complaint.

“I had people problems, and I knew it,” Scott Koeze says. “And I could not take my business one step further. I’d had a bellyful of that business.”

Jeff Koeze initially bought a minority stake from his father, financed over 10 years. About five years into running the company, convinced he wanted to stay on, he persuaded his father to sell his voting control. “You know as well as I do, people have done odd things as they get older,” he explained to his father. The note for that part of the sale has five more years to run. Jeff now owns two-thirds of the company, and his parents own the remainder.

PEOPLE RESIST CHANGE

If something sounds like a smart idea to Jeff Koeze, he will generally try it. He has always been that way. He opted to switch high schools his junior year, moving to Cranbrook, a private boarding school in the Detroit suburbs, where he knew he would get more challenging studies. He wasn’t afraid of being the new kid. “It’s every high schooler’s dream, right?” he says. “You get to start over.”

Shown the wisdom of change, surely Koeze Co. workers would embrace it. Koeze needed the company to be a place where criticism was shared and accepted. He brought in a North Carolina colleague, organizational psychologist Roger Schwarz, who now runs his own consulting firm. Schwarz advocates a particularly open form of communication between businesspeople. No hidden agendas. No sneak attacks in meetings. His theories can be particularly annoying to powerful people, because he argues that leaders, by communicating poorly (sandwiching criticism between dollops of insincere praise or asking questions about a touchy subject without first explaining why), often cause the very behavior in underlings (failure to hear criticism, refusal to volunteer bad news) that most irks them.

When Schwarz asked Koeze’s managers to write up accounts of conflicts they had had with one another, an exercise in dissecting unproductive speech habits, some resisted. They viewed Schwarz’s methods as BS and weren’t wild about opening old wounds. One refused to participate. Koeze didn’t see what the big deal was. “The only risk was someone would start to cry,” he says.

And though Schwarz regards Jeff Koeze as one of his clients most devoted to the methods — “Jeff is easily a nine or a 10″ on a 10-point scale — Koeze to this day feels his crew tiptoes around difficult topics. “Notwithstanding all of our training,” Koeze wrote as part of a case study for one of Schwarz’s handbooks, “I recently described the avoidance of delivering negative information concerning the performance of others as a core feature of Koeze’s culture.” Without a freewheeling discussion, how could he get the staff to embrace different ways of doing business?

Koeze brought in a local philosophy professor, Michael De-Wilde, who uses literature to get varied groups, including prisoners, to discuss their situations. At Koeze, DeWilde assigned Steinbeck’s Of Mice and Men. The workers were soon comparing one another to its characters. “You’re like Lennie” (the mentally dim worker who doesn’t know his own strength), one Koeze employee bluntly told another. DeWilde says the exercise helped two workers realize they wanted to leave Koeze, and that eased problems in the production shop.

In 2004, DeWilde helped Koeze face up to a service problem at his retail stores. Workers were too passive in service — they camped behind the counter rather than prowling the store to engage indecisive customers. And they were too aggressive when it came to handling complaints; they were reluctant to simply give an unhappy customer a new jar of nuts. Neither problem was huge, but Koeze knew any failure to resolve a complaint in the customer’s favor would risk losing that person for good. And sales weren’t going to rise on their own — his retail workers needed to sell.

Koeze asked DeWilde to fix the service problem, and in a way that would keep him from being surprised by problems a second time. For 10 months, the retail workers met every other week — in two-hour sessions, fully paid — and shared their ideas and frustrations. Marcia Huber, who has worked nearly a decade at Koeze stores, says her initial training was “next to nothing.” She knew whom to call with a problem but hadn’t been told how to solve problems. The occasional upset customer, then, was a source of great worry for her and others.

With DeWilde’s help, the salespeople decided that it’s OK, when a customer knocks on the door after closing time, to let him or her in; customers could sample anything in the store; and if a customer was unhappy with something, staff should replace it free of charge and without question. “That did take a lot of anxiety out of seeing someone walk through the door with a Koeze bag,” Huber says.

Upon meeting DeWilde, she says, “At first we were intimidated by his education.” But over time, she adds, “I felt very pleased that the company would put forth that much effort. It built our confidence.”

Still, change was often coming too slowly to suit Jeff Koeze.

SOMETIMES, THE BOSS NEEDS TO CHANGE

By his sixth or seventh year at Koeze Co., Jeff says, he felt “a great deal of personal frustration.” Being a boss, he realized, often meant delegating to people with skills inferior to your own. It also meant much of your own company is hidden to you, because workers don’t share a lot of what they know. Those problems, of course, no boss can fix. He wondered if he should sell.

“I was not well suited to this or any business,” Koeze remembers thinking. “There were things that had to be fixed about me. I was probably rational to a fault.” As an undergrad at North Carolina, he had flourished at Chi Psi, the school’s nerdiest fraternity. For his blunt debating style, his brothers voted him “most obnoxious Yankee” seven semesters in a row.

“He relished earning that distinction,” says Donald Beeson, a Chi Psi brother. “He was very direct.”

As a professor, among colleagues, Koeze operated under the assumption that the best argument wins any given point. “Formal authority is rarely used,” he says. Inherent in that approach is the belief that people shouldn’t be told what to do. Rather, they should be taught to decide what to do.

But the approach was foreign to the workers at Koeze Co. It took the help of Schwarz, DeWilde, and others, but Koeze eventually came to see “how unlikely it was that I was going to be able to argue people into doing things my way. The other piece of it is my own reluctance to use authority.”

Indeed, he sometimes had to simply give orders. He had to stop researching and just make a decision. “He’ll get so anal on numbers, he’ll overanalyze it,” says Paul Bernhard, an accountant who advised Scott and Jeff Koeze on succession issues.

So, Koeze did change. He took some of the Roger Schwarz medicine he had been prescribing for others: He began to share his thoughts, and that put people at ease. At DeWilde’s urging, he also became more patient. And Koeze listened to and changed his own speech. He realized he confused people by verbally debating with himself the very issue on which he was about to give an order. “It’s made worse by a habit I have of thinking out loud,” he says. “Somewhere in here, there’s an order. That’s all they’re listening for. ‘When are you going to tell me what to do?’ ”

And Koeze stopped yearning for workers he couldn’t afford and instead invested in the ones he had. “We can’t afford to hire fancy folks,” he says. “But we need them.” He learned to spot traits in his existing workers — compulsiveness, curiosity — that translate into business skills. His dissatisfaction, he decided, “was mainly just me getting snippy with people.”

HOW YOU RUN YOUR LIFE AFFECTS HOW YOU RUN YOUR BUSINESS

As he settled into Koeze Co., Jeff Koeze got heavily involved in outside activities, some that too closely resembled running a business. He was serving on the board of an antitobacco group, and he was on his church’s vestry. His creative director, Martin Andree, convinced Koeze he was overextending himself. “People’s livelihoods and families are depending on you,” Andree told him. “You’ve got to take care of yourself.”

Mike Redman, a former Steelcase executive who met Koeze on the church vestry and then came to work at Koeze Co., also warned his new boss, “If you want to grow this thing, you’re going to have to give up some of these outside things.”

Koeze listened. He relinquished his board seat with the antitobacco group in 2002 and scaled back other commitments. He took up mind-clearing hobbies such as skeet shooting and beekeeping (still allowing himself a stack of books on such topics). The change gave him more energy to tackle projects that had seemed too difficult. He relaunched the peanut butter business, but as a premium brand, Cream-Nut, sold at high-end retailers. He finally got a strategic plan written, in 2007.

APPLIED OVER TIME, CRITICAL THINKING SKILLS SUCCEED

As he became more patient, he realized that some workers had in fact grown. Debbie Stokes, a longtime employee, remembers wondering, upon Jeff’s arrival, “Who’s the geek with the bow tie?” But as the years went by, she saw a kindred spirit, and she understood that her own compulsive urges to organize could now be unleashed at the office. “It was fun to set up all these new processes,” she says.

Koeze Co. became smarter. A lot of running a business is project-based stuff few entrepreneurs do frequently enough to truly master. Reading up helped Koeze and his employees pull off a series of big improvements.

The mail-order catalog, 30 to 40 items on 12 pages when Jeff arrived, is up to 100 items this year, on 28 pages. The million copies are sent out bearing about 70 key codes, which allow the company to track sales by cover art, days the catalogs are mailed, and which rented mailing list was used.

A new phone system is being installed. Before the company signed a contract, Deborah Owsinski, now an executive, read up on the topic and then produced a 10-page request for proposal. It resembled something that a far larger company would issue, says Mike Borowka, director of business development at Quantum Leap Communications, the vendor that won the contract. “They had it all storyboarded out, this whole process. It’s a little intimidating,” Borowka says.

Koeze asked Owsinski to research incentive pay. She had done so several times for Scott Koeze, only to see her work ignored. But she read up again and became enamored of a book, Punished by Rewards, by Alfie Kohn, that argues against individual incentives for children, students, and workers. She persuaded Koeze to implement a profit-sharing plan without individual bonuses. It rewards collective performance. “I wouldn’t run an investment bank this way,” Koeze says. “But it works for us.”

Fixing the call center in 2007 may have been Jeff Koeze’s finest hour. A sample of orders taken showed that a disturbing 35 percent contained errors: the name Whithead typed in as Shithead; the gift greeting with our love rendered as with out love. Those were caught before they went out. Who knows what wasn’t caught?

Koeze Co. has a 550-page training manual for the dozens of temporary workers it hires every fall to staff the call center, and some get as much as seven weeks of paid training for their 10 weeks of productive work. But there was a history of bad blood between the auditors and supervisors who correct order mistakes and those who take the orders.

All the measuring in the world wasn’t going to fix that. So Jeff Koeze hired Marybeth Atwell, a clinical social worker with minimal business experience, to counsel the opposing groups. As Schwarz had, she examined speech patterns. Auditors and supervisors stood over the order takers, and she suggested sitting down next to them to discuss errors. The auditors and supervisors tended to command (“I need to talk to you”) rather than ask (“Do you have a minute?”). And they voiced exasperation (“You made the same mistake you made yesterday. What’s the deal here?”) instead of constructive suggestions (“I notice you made this mistake on a number of occasions. Can you go back and examine how you did this?”).

Order takers, many returning from previous years at Koeze, needed a fresh outlook, too. “If you start a dynamic in the group of hating the supervisor, then nobody benefits,” Atwell told them. “A lot of these people are unemployed and really wanting work,” she says. “So they bring a lot of their own frustrations.”

Order-taking errors declined to as low as 10 percent, and nearly all mistakes are caught before shipping.

A SMART BUSINESS IS MORE THAN JUST PROFITABLE

The cashew company, after a dozen years, bears a strong resemblance to its owner. Numbers-obsessed but compassionate. And smart. In long conversations, DeWilde, the philosophy professor, and Koeze, the cashew man, talked about Aristotle’s notion of friendship: surrounding yourself with people who challenge you to be your best. For Jeff Koeze, the business is that friend — or, in DeWilde’s words, “an avenue for him to be who he wants to be.” Koeze, he adds, “wants to go to work in the morning. That wasn’t always the case when I met him.”

And Koeze says he remembers his father’s advice — that you can’t learn to run a business by reading books. “I guess I’d say you can, by reading lots and lots of books, and then running it.”

[Via Inc. Magazine, December 2008] by: Jeff Bailey

After a string of rough years and falling values for private companies, here’s some good news: Now just might be the best time to sell a business that we’ve seen in quite some time.

Why? Jay C. Jester, marketing director of Audax Group, a Boston-based private equity and mezzanine firm, explains that many private equity companies and venture capital firms raised money for investment funds with capital-deployment time limits several years ago, and now the clock is ticking ever closer to midnight. “There’s a ton of private equity with a fuse on it,” Jester says. “You’ve got pent-up supply and pent-up demand coming together. There’s activity in just about any sector you can think of.” Of course, some sectors are hotter than others. Right now, telecommunications equipment and semiconductor companies are starting to fetch good prices again as those industries bounce back after having been down for years. For obvious reasons, companies involved with various aspects of security are hot — home security systems, devices that control access to buildings, retinal identification. Many companies dominate various niches of the medical instrument sector, and as the population continues to age they’ll command premium prices.

During the past several years, as the market stagnated, buyers eased their demands that acquisition candidates have at least $20 million in annual revenue — in part because fewer companies qualified. More and more buyers are now willing to consider $10 million or even $5 million. Andrew Cagnetta, CEO of Transworld Business Brokers in Fort Lauderdale, Fla., reports that in the past five years individual buyers from around the world have started to check out businesses advertised by his firm on the Internet. They arrange to come here, and if they like what they see, they apply for a visa on that first trip, buy the business, and move here. Cagnetta cites Venezuela, Colombia, Canada, and Great Britain as some of the most common homelands of these new immigrants. In addition, says Phil Steckler, a principal with business brokerage Country Business in Brattleboro, Vt., a tight job market means that lots of downsized-out-of-a-job executives are looking for businesses to buy and run. Given the way private equity firms and their funds have multiplied, however, the odds are much better than they were five years ago that a buyer will be a company rather than an individual.

Even if you’re not interested in selling your business right now, it’s a good idea to put your company through a valuation process regularly (see “Judgment Day,” page 69). You can even do a self-valuation; that’s what Kelly Flatley and Brendan Synnott, owners of Bear Naked Granola, do quarterly (see “Maximizing a Company’s Value,” below). They would eventually like to sell a majority stake in their business, but because they’re in no hurry, they can afford to wait for the perfect fit and the right price. Meanwhile they can hone their strategic plan and continue to grow.

“There’s a ton of private equity with a fuse on it. You’ve got pent-up supply and pent-up demand coming together.”

Right now, service seems to be the hottest sector. If you turn to the “Trends by Industry Group” charts on page 78, you’ll see that multiples for service businesses jumped in 2003 — meaning sellers at service businesses got a higher price per, say, net income or cash flow than they had in recent years. An example from Stanley Feldman, chairman of independent valuation firm Axiom Valuation Solutions and associate professor of finance at Bentley College in Waltham, Mass., shows how some service businesses are making the most of the improving economy. Medical practices, Feldman says, might sell for a lower multiple than dental practices (our data shows the opposite, see page 81). The difference, he says, is that dentists have the greater ability to go after discretionary spending by encouraging, say, whitening, straightening, or cleanings four times a year. Doctors are much more dependent on insurance and on the political pressure to keep health care costs down. “They’re trying to pay doctors less and less money,” says Cagnetta of Transworld Business Brokers. “So as doctors are bringing in less and less money, people aren’t buying doctor practices the way they used to.”

Retail and wholesale businesses also saw healthy increases in multiples last year. In particular, several business brokers and private equity executives report that food distribution is hot — especially small ethnic and natural food distributors, which are being snatched up by larger companies as their fare continues to grow in popularity.

By contrast, manufacturing has drifted, with multiples of earnings neither rising nor falling much. But buyers are paying much less for book value. “There’s tremendous discomfort with domestic manufacturing because of outsourcing overseas,” says Bill Landman, chief investment officer at CMS, a Philadelphia investment firm. “A lot of people that used to concentrate on domestic manufacturers are trying to buy them for less.” Buyers don’t want to pay a lot for costly production facilities in the U.S. When they do make a purchase, there’s a good chance they’ll move the plants overseas.

Current owners of manufacturing concerns are doing the same. “Companies that can move quickly and adopt new market economics will receive higher multiples,” says Linn A. Crader, president of Crader & Associates, a mergers and acquisitions boutique in Lake Oswego, Oreg. “And companies who don’t move or stay with the old economic ways of doing business will decrease in value.” This may well mean outsourcing production to someplace like China. It could mean “componentizing” — having other, most likely foreign, manufacturers make your components, assembling the components at your own offshore facility, and selling the completed product here at a price below what it would have cost to manufacture it here. Companies with annual sales of as low as $20 million now need to consider these measures, says Crader. And this doesn’t apply just to manufacturing. If services are your thing — processing health or benefits records, for example — you can batch them here, send them to India overnight, and have them back in the morning at 20% of the cost of doing it all here.

A word of caution when it comes to comparing business valuations: Many participants in private markets say obsession with multiples is unwise. “Value is in the eye of the beholder,” says David Malizia, managing director at Florida Capital Partners, a Tampa-based private equity firm. Malizia believes that many valuation experts take an overly technical approach to their craft that’s inappropriate for private businesses, the most illiquid of all the markets. Malizia compares selling a business to selling a house. “If you sold your house at $200 a square foot, and your neighbor wants to sell his house, he might want $200 to $205 a square foot. But the houses are not the same. It’s not the same floor plan; it’s not the same decoration; it’s not the same landscape. Too many business owners think that if that business over there sold at that multiple, I should get the same multiple. But there are different management teams; there are different product lines; there are different profit margins; and there’s a different emphasis on strategies and tactics.”

“I’m a three- to five-times cash flow valuation man.”

On the other hand, if you’re looking to sell a business, you’ve got to watch out for people who tell you not to pay attention to multiples. “Sellers should recognize that buyers are obviously trying to come in and get it at the lowest possible valuation,” says Steven Rogers, clinical professor of management and finance at Northwestern’s Kellogg School of Management. Rogers recommends that sellers use the discounted cash flow model, which forecasts the amount of cash a company will be able to throw off in future years, then derives a present value from that prediction. Interestingly, Rogers likes the technique precisely because of the uncertainties involved in making future projections and the flexibility those uncertainties provide. Unlike Malizia, Rogers is a believer in multiples as eternal verities. “I’m a three- to five-times cash flow valuation man,” he says. As he explains in his book, The Entrepreneur’s Guide to Finance and Business, in a typical deal, in which a buyer finances 75% of the purchase with debt, he expects to be able to pay off that debt in five to seven years. That means he shouldn’t be willing to pay more than five times cash flow for a business.

Another important part of the value equation is you, the owner. How long are you willing to stay on as a manager and a minority owner so you can transmit your unique feel for the business? Crader says an ideal seller is an owner in his mid-fifties who is willing to stay on as a manager with an equity stake for three to five years. But Jester tells those owners really interested in getting out not to worry, that he’s got plenty of people ready to take over “if somebody says it’s time to ride off into the sunset.”

In any case, now is a good time to consider selling, and now is always a good time to value your business. The process means considering multiple variables and running multiple scenarios. Potential buyers may emphasize the more pessimistic assumptions and outcomes, but they may also be able to create grander strategic plans than you ever could imagine with resources and connections you didn’t know existed. Good business brokers or independent appraisers should be able to do the same.

[via Inc Magazine] by Jim Melloan

Recently, a business associate came to my office for an important meeting. During the meeting, I had to take a phone call, and while on the phone, I watched as my guest wandered around my office looking at the various photos and framed memorabilia that I have hanging on my walls. When I was done with the phone call, he pointed to my one and only diploma and laughed.

Before you judge his behavior as rude or offensive, let me say that the diploma he was looking at wasn’t from one of our country’s many fine colleges or business schools. It was from a kindergarten. It was my actual kindergarten diploma. It’s the only diploma I’ve ever hung on any wall. It’s the one that I feel gave me the skills necessary to succeed in life — and in business.

I think much of what we learn in kindergarten can be applied directly to starting a business. Following are some tips based on what I feel were the most important lessons I learned in my critical, formative years.

Be open-minded. When we went to kindergarten, we didn’t go with a preconceived notion of what our day would be like. We knew why we were there, but we were open to an infinite number of possibilities. When starting a business, understand your mission, but stay open to different ways of defining and executing it.

Be creative. Teachers give students crayons and paper, and ask the children to draw, often without specifying what they should draw. In business, the canvas is yours, too. Be creative. Be different. Think out of the box.

Know when to talk — and when to listen. Teachers have always appreciated students who participate, yet many have an equal amount of disdain for those who don’t know when to be quiet. Managing a business today necessitates being a good listener. Listen to your employees, vendors, managers, and of course, your customers. The best listeners are often the most successful entrepreneurs.

Learn how to choose a team. When playing in the schoolyard, if you were picked as “captain,” you had to decide whom you’d pick for your team to ensure the highest chance of success. In business, assembling the right team is even more important than on the playground. Choose wisely so that the skills and talents of the group are maximized to ensure success.

Show respect. Respect for teachers, administrators, and other students was critical to a successful kindergarten experience. It is equally so in business, particularly at the beginning. Show respect at every level. It will bring reward beyond measure.

Give people some space. In kindergarten, if someone was building a castle in the sandbox or a tower out of blocks, it was important to back off and let him or her execute his or her vision. In business, this concept is equally important. Give associates in your organization the space they need to show you how they envision the building process.

Don’t be a crybaby. Last but not least, one of the most important lessons learned in kindergarten was learning not to get upset when things didn’t go your way. As your parents and teachers always preached, “life isn’t fair.” Neither is business. Maintaining your composure when things don’t go as planned is critical to the success of any business.

It’s been said that everything you need to know you learn in kindergarten, and in many respects, I’d have to say that I agree wholeheartedly. Think through the issues as a businessperson, and if that doesn’t work, you just might want to climb back into the sandbox and start thinking like a kindergartner.

[via Inc Magazine] by Warren Struhl

Just like the impending recission, the election is a great time for inventive, smart entreprenuers to make a buck. In the latest issues of Inc Magazine, take a look at how some great ideas have sprung political profits.

Calvin Coolidge once said, “The business of America is business.” Cal was also known to take a long afternoon nap, so he didn’t exactly reflect the industry and tenacity of the typical American entrepreneur. But the sentiment stands: If there’s money to made, business owners will find a way to make it, and in two of America’s big cities, there is money to be made right now off the political convention business. Later this month, Democrats will gather in Denver to nominate Sen. Barack Obama of Illinois; a few days later, Republicans will convene in Minneapolis-St.Paul to nominate Sen. John McCain of Arizona. Naturally, there will be local entrepreneurs in both cities who will attempt to use the conventions as an opportunity to increase sales and visibility. Here’s a sampling of some of the people who are finding ways to enjoy this political seasons regardless of their own political affiliations:

Democratic National Convention, Denver, Aug. 25-28

Convention Insider: MAKS
Security measures prevent Kristi King from saying a whole lot about the graphic design work she’s done for the DNC. The local artist was hired to create the official convention credentials that some 55,000 delegates, journalists, and attendees will use to enter the Pepsi Center, the site of most of the nominating convention. King’s three-person company, MAKS, produced four different (but similar) looks, one for each day of the event. In keeping with the Democrats’ environmental policies, they will be printed on 100 percent recycled material.

Local Hero: Jared Polis
Why would a highly successful young entrepreneur want to enter politics? Just ask Jared Polis, the 33-year-old CEO and Inc. 500 alum who is running for Congress in Colorado’s Second District, which includes Boulder, Vail, and Beaver Creek. “Congress lacks creativity and innovation and entrepreneurs excel at introducing new ideas,” he says. On this score, Polis has bona fides: He successfully took his family’s greeting card company, Blue Mountain Arts, to the Web and then launched another company, Proflowers (No. 7 on the 2003 Inc. 500), which he took public and later sold to Liberty Media for $477 million. His latest business endeavor is TechStars.org, a program that brings 10 business owners to Boulder for a summer-long boot camp. The entrepreneurs are given a $5,000 stipend, office space, legal council, mentorship, and networking opportunities in exchange for giving TechStars a small equity stake in their company. During the convention, Polis will be out-and-about, co-hosting receptions, and meeting with movers-and-shakers as well as grassroots organizations. So what’s Jared’s prediction for November? “Barack Obama will win Colorado and be the next president of the United States.”

A Place to Meet the Locals: The Corner Office
The greater Denver metro area has a well-earned reputation as a tech hot-spot, and The Corner Office has been labeled “bloggers row” for the Democratic convention. The restaurant signed a deal with MySpace to be its official headquarters during the event, which means that it will be opening its “Oval Office” dining area to the laptop brigade. Peter Karpinksi, a senior vice president at parent company the Sage Restaurant Group, says The Corner Office serves “global comfort food” that will encourage bloggers to get a buzz from martinis like the “Buzz Aldrin.”

Awesome Souvenir Shop: The Tattered Cover
Denver’s beloved independent bookstore will host a series of events and book signings throughout the convention, including an appearance by House Speaker Nancy Pelosi. Owner Joyce Meskis opened her first store in 1974 (during Watergate) and now has three stores, including a large one on Colfax Avenue that carries more than 150,000 titles. Marketing director Heather Duncan says the Tattered Cover will be stocking up on political books of all stripes in the run up to the convention. She expects an even bigger sales bump will come from sales of Colorado travel books, such as a Denver walking tour guide by local historian Tom Noel.

Friendly Watering Hole: Wynkoop Brewing Company
Denver’s Democratic Mayor John Hickenlooper founded this craft brewery in 1988, before its neighborhood became known by the fashionable tag “LoDo.” Housed in the J.S. Brown Mercantile building, the business keeps 12 brews on tap at all times and hosts the annual contest to find America’s “Beer Drinker of the Year.” In 2007, Hickenlooper sold his stake to a trust that represents his chefs, managers, brewers, and other longtime employees.

Local Outfitter: Rockmount Ranch Wear
Former CEO Jack Weil, who passed away on Aug. 13 at the age of 107, was at one time one of the leaders of the Colorado GOP. But his grandson Steve, who now runs the company day to day, is happy to welcome the Democrats to town. The apparel company is planning to stay open throughout the convention, and it has already taken an order to make custom western shirts for local Congresswoman Diana DeGette and her staff.

Headquarters for the Radical Extreme: Mercury Cafe
Marilyn Megenity has been thinking about sustainability almost since she opened her business back in 1975. The Mercury Cafe was the first Denver business to generate power from private wind turbines. Megenity also recycles water and coffee to irrigate the elaborate gardens on her property, and she has designs on going off the grid and becoming completely self-powered. Nearly all of the items on her menu are organic and local vendors supply 75 percent of her produce. In addition, Megenity is a pacifist (the “No More War” burrito with green chili, spicy tempeh, and avocado has been on the menu for 10 years). Throughout the convention, the Mercury Café will serve as home base for card-carrying members of the left-wing fringe.

Republican National Convention, The Twin Cities, Sept. 1-4

Convention Insider: Ustream.TV
Co-founder Brad Hunstable describes Ustream as “similar to YouTube, except we’re live.” The year-old website runs on a completely open platform, so anyone can join and let the world see what they’re up to. The 22-person business has raised $14 million in venture capital and currently has 10 million unique visitors a month checking out the eclectic programming that’s recently included graduations, weddings, funerals, music lessons, 50 Cent, the Dalai Lama, and all of the major presidential hopefuls. The RNC hired Ustream to handle all of the live-streaming at the convention, which was a thrill for Hunstable. “I’m a Texan who went to West Point, so it’s not hard to figure out my politics,” he says. “But we’ve had great success with people on both sides of the aisle.”  The company is also live-streaming for the progressive website Daily Kos at the Democratic convention in Denver.

Local Hero: FLSConnect
This $25 million communications company works with Republican candidates and conservative advocacy groups. The business did extensive work on the 2004 Bush re-election campaign. CEO Jeff Larson is currently moonlighting as CEO of the convention host committee. In that capacity, he oversees a $58 million budget, 250 employees, and more than 8,000 volunteers. Larson says he’s excited to see old friends (and meet new ones who need tickets for the convention), but he would have been equally happy, he says, to host the Democratic convention.

Place to Meet the Locals: Q Kindness Café
“Minnesota Nice” is a phrase locals use to describe Gopher State charm. Nowhere is that expression more appropriate than the Q Kindness Café, which first opened in 1961. Located two blocks from the convention center, they will be open for dinner during the event and serving “hot dishes” like Tater Tot surprise and tuna casserole. Husband and wife co-owners Lisa Cotter Metwaly and Jimmy Metwaly also started a pay-it-forward “kindness campaign” and hope to have seven businesses and 7,000 people smiling on their brother by September. The Metwalys walk the walk. Instead of wallowing after a $250 February burglary (it included $50 in waitress’ tips), the couple bought $100 worth of hand warmers and handed them out to customers waiting in the cold at the bus stop.

Awesome Souvenir Shop: Urban Junket
The two former marketing executives who left Best Buy to start a fancy laptop handbag company in 2005 want your vote. Tracy Arnold and Tracy Dyer will be holding a sample sale during the convention and every purchase includes a free luggage tag with a red elephant or a blue donkey to match your party affiliation. When starting out, the women got financial tips and contacts from WomenVenture, a 30-year-old St. Paul non-profit that’s helped some 90,000 clients. Last year, Urban Junket had sales of $550,000 through boutique stores and online retailers. Dyer says both entrepreneurs, “lean a little bit left, like most of the state.”

Friendly Watering Hole: Nye’s Polonaise Room
If the approval ratings of the GOP get you down, put some Oompah-pah into your step at this legendary bar, which first opened its doors in 1949. On Friday and Saturday nights, tuba aficionados can dance to local Polka bands while eating traditional dishes like spare ribs and sauerkraut. After dinner, guests can take their Zywiec beer to the side room to sing along to “Sweet” Lou Snider’s piano ditties. The septuagenarian has been tickling the ivories here every day for the past 41 years. Alternatively, country club Republicans should check out the Grill at the St. Paul Hotel. Located steps from the Xcel Energy Center, it acquired four bottles of Macallan 55 for the convention, and boasts that it will be the only place whiskey drinkers will find it in Minnesota. Make sure a lobbyist is paying; each one-ounce shot costs $525.

Local Outfitter: Zubaz
The infamous zebra-striped pants of the late 1980s have returned just in time for 2,000 red, white, and blue pairs to be given away in the official convention gift bag. The creators of Zubaz, Dan Stock and Bob Truax, sold the fast-growing-but-cash-poor business in 1995. When it eventually failed, Stock and Truax decided to buy back the rights to the brand, which they relaunched last year. They’ve spent about $100,000 so far. The company is being run out of Press Gym, a 16,000 square-foot work facility owned by Stock that includes a mixed-martial arts studio and a tattoo shop. Muscleheads always dug Zubaz, and now, for $29.99, they have six colors to choose from. More hues and prints including snakeskin will be available soon. “Zubaz are tried-and-true and we have enough customers to last 100 years,” Stock says, “it’s been a blast coming back.”

Headquarters for the Radical Extreme: Koscielski’s Guns & Ammo
The last gun shop left in Minneapolis opened in 1995; it’s the birthplace of the “Creditcard Shotgun” — a weapon small enough to carry in your wallet. Owner Mark Koscielski says it took more than two years and seven prototypes to get the design right, and government approval on the weapon is still pending. But assuming the ATF gives the product its blessing, Koscielski plans to sell the four-barrel guns for between $150 and $195. The guns, which take special .25 ACP ammo only available to the licensed gun owners at the store, probably won’t be available for the convention. But Koscielski still hopes that the convention will have an impact on his bottom line. “A lot of people have contacted me about buying mace,” he says.

[via Inc Magazine]

Felix Dennis is the founder of Maxim Magazine, along with a number of other publications. In his new book, How to Get Rich: One of the World’s Greatest Entrepreneurs Shares His Secrets, Dennis shares some of the secrets that made him a near billion dollar man. He’s preaches that becoming successfully rich involves not working for anyone but yourself.

Inc Magazine interviewed Dennis at his New York offices.

For a book called How to Get Rich, you spend a lot of time dissuading potential entrepreneurs from trying. You say I’ll need to get used to groveling and failing, and I’ll need to be so driven, it may put my marriage at risk or hurt my relationship with my kids.

It’s kind of a crazy thing to decide that you’re going to be worth tens and tens and tens of millions of dollars and set out to do that. It doesn’t suit everybody. I warn people throughout the book that if you’re not driven by this desire, you really shouldn’t try. It will lead to a lot of heartache and a lot of sacrifice — and not just you doing the sacrificing.

OK, so say I’m ready. I have a great idea. Now what?

I think having a great idea is vastly overrated. I know it sounds kind of crazy and counterintuitive. I don’t think it matters what the idea is almost. You need great execution. A lot of people say they’ve got this great idea, and “if only I had the capital” they’d go out and do it. Usually this is a fantasy. It’s just an excuse for not confronting their fear of failing.

How does fear of failure come into it?

You’re bound to fail sometimes. It’s a 100 percent certainty. You’ve just got to ignore the fact that some people will laugh at you. It makes them feel better that they haven’t even tried.

But a great idea can’t hurt, can it?

As long as you do not become more interested in proving to others that your idea was right. I made this mistake with Blender, which in its original form was a magazine on CD-ROM. It wouldn’t sell, but I became seduced by the technology — Instead of listening to what the numbers were telling me and what wiser heads in business were telling me. I was just so in love with the idea — and proving that I’d been right to back it – that I kept pouring good money after bad. I wasted four, five, six million bucks.

You advise borrowing capital from friends and family and suppliers — anything to avoid trading a piece of the company for venture capital. Why?

I’ve seen so many young women, young men who use the shares in their companies as an incentive to employees and to people who are loaning them capital. They should not do that. It’s a cardinal error for which you will pay and pay and pay. Getting rich all comes down to ownership. Every single percentage point counts. You don’t need to start handing out shares like sweeties, because it will come back to haunt you. In the end, you’re going to get your money from the sale of an asset. The less of that asset you own, the less money you will get. It is as brutal and as simple as that.

It can’t be fun putting your friends’ and relatives’ money at risk.

You should tell them you are going to risk losing their money. But if you haven’t got the balls to ask people for money because you’re going to lose it, then you’re certainly never going to get rich. People will surprise themselves at how much money they can raise. There are a lot of vendors who are willing to take a risk on you — if you are totally up front with them and as long as they don’t risk too much. That’s the way I did it. There was a printer that I stuck with for 25 years because he was the only guy that would print for me when in the early years he was not entirely certain he would get all his money.

What have you learned about negotiating?

Serious negotiations should be reserved for serious occasions — when you’re selling a company, or buying another company. And the people you use to manage your company, who are constantly “negotiating” with staff — these wonderful managers who work hard to keep everybody happy — those are not the people you want in a room when serious negotiations are going on. They’re too empathetic with the other side. What you want in the room is cunning. You want experience. And you want an empty, Zen mind.

Say what?

You have to persuade yourself that you absolutely don’t care what happens. If you don’t care, you’ve won. I absolutely promise you, in every serious negotiation, the man or woman who doesn’t care is going to win.

You give the impression that you’re willing to walk away …

Not give the impression. Walk away. No deal is a must-do deal.

You write about the need to be ruthless in business, sharpening the “sliver of ice” that you say is inside every successful entrepreneur. But you write poetry and seem like a nice guy. How do we reconcile that?

Because you only need to really be that way in very serious negotiations. On a few occasions. Maybe on 20 or 25 occasions in my business life, and I’ve been at this for 40 years. You shouldn’t go around the world behaving ruthlessly when you don’t have to. Sometimes you do have to. There is only so much pie to go around. If you’re going to take more than your fair share of pie, as socialists would look at it, then someone else is not getting his. That means you’ve got to take it away from them.

Last year you sold the U.S. versions of Blender, Maxim, and Stuff to a private equity firm for a reported $240 million. Is this your endgame? Are “lad” magazines — or all magazines — a fading business?

I think I’ve sold about 60 magazines in my lifetime. To me this was just a sale of three more. I still own 50 magazines and Web sites. We have acquired a magazine since then, begun a joint venture launching five ink-on-paper magazines in India, and launched e-zines that reside on your computer, including a Maxim-type e-zine called Monkey that’s already making money. It is true that magazines are going through very challenging times, but this is a very slow decline. It is not a collapse by any means, and there are still huge sums to be made.

And then after all the work, you want to give your money away before you die?

Don’t forget to give it all away. And, if you can, develop another passion other than your business. If I had started writing poetry when I was 30 instead of when I was 53, I would have been a better businessperson, and I would not have succumbed to the idiocy I did in the middle of my journey, where I threw about millions because I had nothing better to do.

Isn’t there a risk then of becoming a starving artist?

There is. I cannot deny it, there is. It’s a risk you’ve got to face up to.

[via INC MAGAZINE]

They are the true believers in the world of start-ups. Inc Magazine presents a guide on searching for and courting these diamonds in the rough.

Inc Magazine Angel Investors Guide

Also, check out Jason Nazar’s Guide to Raising Money for a Startup Company. Jason is the CEO of Docstoc.com, an online community for document sharing.