While catching up on some email today, I came across an confluence in my inbox. First, I catch the following Computerworld headline in a technology industry email newsletter:

As rumors swirl, Twitter says no rush for business model

A few email later, I run across a humor email (that I’m sure everyone has seen by now) that discusses derivative market explained for laymen. It starts off:

Heidi is the proprietor of a bar in Detroit. In order to increase sales, she decides to allow her loyal customers – most of whom are unemployed alcoholics – to drink now but pay later.

My first raction to Heidi’s business plan is ‘how acinine, she’ll never see any money by loaning drinks to alcholics.’ By now we all know the rest of the story about the derivative markets, banks kept giving Heidi loans based on her debt assets only to never see their money come back.

And now we switch over to the alcholic users of the web 2.0, where everyone can get drunk for free off of their favorite services. So, will Twitter’s VCs and Investors ever see their investement dollars turn into the lucrative cash flow that Heidi’s bankers thought they had? Or will Twitter end up with some risk manager calling in the marker and cause the fall of the micro-blogging derivative markets?

Guess Twitter needs to determine which definition of business they want applied to them:

3. a person, partnership, or corporation engaged in commerce, manufacturing, or a service; profit-seeking enterprise or concern.

or will they keep focused on features and building more mass market appeal adding more noise to the signal until they reach

11. excrement: used as a euphemism.

Round and round we go…last call, drink up!

I have noticed an interest change in behavior lately, and it’s been mostly from my customers.  A number of them have started to place the toll conference line number in their meeting invites (some even first with the title of Preferred).  Could it be that they read the post I made back in December advocating just this type of behavior as an easy way to help save corporate money on conference calls?

I’m more than happy to take the credit. How about a small 1% of the savings commission fee?

By now it should be no surprise to anyone that every business is looking to cut costs.  In an economic recession like the one we are in, even those business that are still doing well are cutting costs as the future is so unknown.  There is one area of cost cutting that is so simple and so close to everyone in a company…and yet most companies don’t really focus on it.

The Conference Call.

With so many remote employees, the conference call line is necessity of modern business.  As a career member of sales teams, I have always had my own personal conference line.  This conference line consists of both a toll free and a toll dial in number.  Most of the time when I get a conference call invite in my inbox, the location is the toll free conference line number.  And most of the time this is costing the company more money that it should.

At a previous company, an analysis was done of our telecom usage.  It was concluded that we were wasting over $100,000 a year on duplicate phone charges from our conference calls alone (and this was a company of less than 500 people).  Every time we would dial the toll free conference call number, we were paying substantially more than if we were to use the toll number.  Add on to that the fact that we were usually dialing that toll free number from a company phone, and we were getting double billed: once for the local phone change and once for the toll free conference line.

By raising the awareness of this situation to the entire company and by adapting user’s behaviors — we all started to include both the toll and toll free conference line number in meeting invites and always dialed the toll number when using a company paid for phone line — the company was able to save a substantial portion of this $100,000 per year phone waste.

Extrapolate this estimated wastefulness up (or down) to the size of your company and see how much money you might be wasting yearly.  Changing your corporate and personal behavior is an easy way to reduce this waste.

A helpful tip for companies of all sizes during these economic times.

Update:  A client of mine brought up an interesting point during a recent discussion on this topic.  His company uses IP Phones internally. With the phones leveraging the exising data network, calls within any location for the company world wide are free.  But, when someone dials a toll-free conference call number, they are routed outside the network and start to incure a phone charge.  This client happens to produce their own conferencing solution, so the costs really start to add up when the toll-free confernce numbers are called since the entire conference system is “free per use” as long as they don’t leave their IP network.

Tonight I attended an interesting panel discussion that featured three Bay Area venture capitalists discussing the impact that today’s recession based economic conditions are having for startups and their fund raising processes. Two things from this discussion jumped out at me.

The first being that all three of the VCs agreed that if you can bootstrap your company and or drive to profitability with taking very little money, then do it! This isn’t what you would expect to hear from a VC, but when you consider that most VCs are “businesses” that are structured to do large deals, this makes sense. Smaller business opportunities exist all around us that could be grown to a $10M-$50M exit. Most VC’s can’t invest the time into those opportunities when these entrepreneurs are looking for under $500k of investment. Those are the deals that a few dedicated entrepreneurs could bootstrap and grow by staying focused and end up with a very nice payout with the majority going to the entrepreneurs.

The other topic that jumped out at me (but by no means surprised me, I agree with it) is that fact that most entrepreneurs or managers in startups and small companies don’t dream of taking their company public anymore. There is so much overhead and pain involved with being a public company today with regulations, requirements, and value being driven by those who don’t focus on long term fundamentals of a company that it isn’t really worth it unless you are large enough or have a unique and defensible enough value proposition. Add on top of this the increased public distrust and angst toward senior executives of public companies that the reasons for being an executive in a public company are far out weighed by the headaches involved.

On that same thread, I find it amazing how some very large companies who are sitting on Billions of dollars of cash are completely abusing their employees right now in order to increase their stock price. I have heard some scary stories as of late that take cost cutting to new highs and lows, and employees are having to take some of these cost cutting measures directly to their bottom line. It’s one thing when the company is fighting for it’s survival, but another when the company is sitting on Billions in cash and has growing revenues. The reason for this in my opinion is that stock prices currently are not being valued based upon the fundamentals of the company. Yet the senior executives of a public company can’t follow their best business sense to do what’s right toward their employees and customers because they have to cow tow to wall street analysis and fund managers who are are influencing their stock priced based on the macro economic situation.

Who wants to be a public company CEO in this climate?

(Though with the right company, right now is the time to invest with these artificially deflated stock values…)

This morning I was listening to This American Life which aired one of the best layman’s analysis’ I have heard yet of the current financial crisis.  Back in May I mentioned their Global Pools of Money and Sub-Prime Crisis show.  Today’s show, Another Frightening Show About the Economy, was a continuation of that program but focusing on the current Financial Crisis and the Bailout Package.

Every person in America needs to list to today’s show!  (the link seems to be getting a lot of traffic, so be patient…it’s worth it.)

The net-net that I took away from the show was that we are where we are today because of too much borrowing and greed of exotic financial creations that didn’t create any real value but were just gambling.  This show talks about the credit market for businesses and how it’s freezing up over the past two weeks has raised awareness of this crisis.  Those credit markets are linked to the large financial institutions that we all know by heart now.  And how these financial institutions (and others that we may not have heard of, yet) were writing Credit Default Swaps (CDOs) to show greater profit on paper without any knowledge of what other CDOs where out there.  Essentially creating a financial house of cards all based on bets.

Now this financial bail out package that the government has been debating over is the government spending our money to fix a problem that they helped create.  The issue is that the bailout package that we have all been hearing about is the US Tax Payer giving these financial institutions money to buy their worthless debt that has created the freezing of the credit markets (we are left holding the bill with the greatest risk of never seeing any of our (borrowed) money again).  This is the same package that most economists in the country publicly got together to say was a bad idea. What I found surprising from the show is that apparently there was some subtle language added at the last minute by someone that gives the option of not just buying the debt but of making the US Taxpayer stock holders in the companies that we take the the debt over from with front priority of getting our money back.  Just because this option exists, doesn’t mean that it will be exercised; but I am much more hopeful that someone somewhere is pulling the right strings behind the scenes and that Tax Payer might not get as screwed in all this when the look back at this 1, 3, or 10 years from now.  (and the last 7 years will be talked about for the next 70…)

Personally, I believe that we are in for more rocky times ahead and that things will get worse before they better.  That being said, now more than ever each person needs to education themselves on the financial markets that shape their everyday lives (even more so considering the elections coming up).  On that token, I regularly browse the Planet Money blog on NPR and Investor Insights blog.  I also read John Mauldin’s Outside The Box financial newsletter (goes into some hairy details, but also good for just picking up the hot topics).

Educate yourself on how this stuff works so that you can call shenanigans on the rhetoric that is getting tossed out there on both sides.

I heard a great story yesterday on NPR’s All Things Considered. It was a story that analyzed the sub-prime mortgage crisis from the aspect of “why did this happen, how could bankers ignore their core tenants when giving out loans”. Global Pool of Money Got Too Hungry was created by in conjunction with This American Life, so they take an interesting view on the entire situation. Well worth the 13 minutes to listen to this report.

Update 20080520: The original story, which is much more expanded, was aired this weekend on This American Life. In my opinion, the story The Giant Pool of Money is something that every American should listen to if they want to understand why banker’s forgot their principal rules of loaning money: make sure the borrower can pay the loan back.

Yesterday while driving back and forth across the bay area, I listed briefly to an interview with Law professor Michael Greenberger, professor at the University of Maryland School of Law and the director of the University’s Center for Health and Homeland Security, on NPR’s Fresh Air. This interview is one of the best descriptions of the current economic situation in the United States that I have heard to date. Greenberger’s explanation of where we are and how we got here (as well as what else we could expect) is simple enough for the layman to understand. Granted, you still need to pay attention and think through all the connections while trying not to get confused with all the complicated financial terms, but you should be able to do that without needing to reference any text books.

Every person in the United States should listen to this interview. I think the general population would be shocked to learn that (according to Greenberger) this whole mess happened because of a rider added to an omnibus appropriate bill that was passed by Congress in December 2000. And that this rider wasn’t really understood by the authors of the bill, it was written by lawyers from investment banks on wall street. The effect of this rider was to de-regulate certain financial markets at both the federal and state levels. The end result of this bill is the current situation…sub-prime mortgage crises, credit crisis, recession, and a tax payer bail out of some of the same investment banks that created the entire mess. What happened to the motherly wisdom of teaching your children a lesson: “you made the mess, you clean it up”?

And the real kicker…wait till you hear who the person is that was responsible for that original bill and was talked into adding the rider…and what he’s doing now…

Today I overheard a strong indicator that we are in a recession. Listen to any economist and they will say that the one thing that has kept the economy humming along was the housing market. People were still spending money either on their houses or because of the equity in their houses. Once the sub-prime mortgage crises came to lite, we had various opinions on what would happen to the economy.

Today I learned that 3 Day Blinds will be closing 64 of their stores/showrooms. This is almost 40% of their 170 stores across the country. For those who aren’t familiar with 3 Day Blinds, they make custom blinds with a 3 day turn around (as if you couldn’t figure that out from the name). They do business via their website as well as their stores. Considering the nature of buying blinds, most of the time you want to see what you’re going to get before placing your order, it makes sense that they would have stores. With the strength of the housing sector, they had good business and growth.

But, now with consumers spending less, even on their homes, they are shuttering stores. It will be interesting to watch the stock returns of the other companies that revolve around the home owner (i.e., Home Depot, Lowes) and see what their returns are from the last quarter. If the consumer isn’t spending as much money on their own house…that’s the strongest indicator that we we are in a recession.

I came across this interesting article a few days ago talking about how SaaS companies might be vulnerable in a recession. This was timely as yesterday I was having conversations with some entrepreneurs on a similar topic. These were all early stage startups and I was curious what their thoughts were about the current economic situation in the US and abroad.

This group didn’t have much though about the the current economy (Are we in a recession? Are we heading toward one? Are we coming out of one?). Largely, this is because in an early stage startup, all your energy is focused on just getting stuff done. Recession or not, it’s still a struggle for a startup to close those first few customers, build that buzz. One interesting bit that came out of the question was a sense that the cost of outsourcing will continue to go up over the next year. There are indications that outsourcing to Eastern European locations will catch up to the cost of outsourcing to India within a year. A rising tide raises all boats…eventually.

I find it interesting that this article focuses primarily on SaaS for the enterprise. If/When there is a recession, SaaS offerings for consumers would be the first ones to be hit. If a consumer is spending $25/month or $150/year for a SaaS service, they may start asking themselves if they really need it. And that is the beauty of it, if they don’t or can’t afford it anymore, cancel it.

The really interesting question is will consumers do that?

As the economy shifts, you will start to see the true management abilties of the leaders behind all SaaS offerings. How efficient is their operation? Do they have a cash cushion to weather the storm? What will they do during that storm? There was an interesting interview with the CEO of SaaS provider Zoho who boot strapped his company and continues to do so. I found an interesting correlary to the previous questions and how AdventNet (who own’s Zoho) weather a few previous storms in their past. I find it interesting how they used downturns in their market and economy to spin up other SaaS based offerings. I also found the comment about the number of Engineers at SalesForce very interesting.

SaaS will be an interesting area to watch in the next 9-18 months.