CEO Unplugged

Trying to survive the recession? Swim upstream.

I get asked by customers and other entrepreneurs quite frequently these days: when do I think the economy is going to turn around?  Of course, like everybody else, I don't have any idea.  What I do think is remarkable is how quickly things turned bad.  In one month, things went from looking slightly down to everybody slamming on their brakes.  In the explanation of this phenomenon might lie some of the answers we are all looking for.

Even in the aftermath of September 11th, consumer demand and global markets did not drop as sharply as they did in late September and on into October.  Surely the shock of 767's flying into skyscrapers was more terrifying to the average person than the failing of Lehman Brothers, an insitution whose business most Americans could not accurately describe? This makes me think that everybody was feeling over-extended and over-borrowed, and was just looking for an excuse to be afraid.  In other words, we were already afraid, but keeping it inside, and as the house of cards started to wobble everybody started blowing.  Carrying large balances on credit cards, buying houses we couldn't actually afford, having to spend $100 to fill up our tanks--it all just got too overbearing.  Suddenly, being reasonable and responsible felt better than trying to be cool and keep up with the Joneses.

But this national psycho-reversal, assuming it happened, still doesn't explain the supposed complete suspension of consumer demand.  Perhaps it was the reporting of the initial "smoke" of the financial crisis by the 24 x 7 media (yes, especially the bloggers) that actually fanned the flames into an inferno?  For those of us who haven't lost our jobs, what has actually changed about our purchasing power?  Gas is 50% cheaper than it was two months ago.  Everything is on sale at the shopping malls.  It hasn't been this cheap from an inflation-adjusted perspective to buy a house in over a decade.  Your dollar even goes further overseas.  So, if your income is still the same, your purchasing power has almost doubled!

The answer is, I believe, that we live in more of a fear-based economy than ever.  When people are afraid of what lies ahead, they examine every behavior, every purchase, every career decision.  They also stop taking risks with their money and their jobs. 

So, if you're like me, you're wondering what this all means for the future of entrepreneurs and small business owners.  First, consumers are definitely cautious, and buying their necessities plus a few low-priced forms of entertainment (good for movie theaters, Walmart and Hooters, not so good for luxury resorts and high end restaurants).  Second, there are fewer businesses taking risks or spending "into the wind."  Which means, there is an opportunity.

If you can find a way to tailor your products and services to meet the needs of the cautious consumer, it has never been cheaper to advertise your services and build your products.  Employees are just looking for a steady paycheck and good benefits.  Customers want great value, and even better service.  Media outlets of all kinds are dying for your advertising dollars, no matter how small.

The businesses who will survive this downturn are the ones with real customer bases, great value, and high quality products and services.  The businesses who thrive at the end of this downturn are the ones who will find opportunity and hope where everybody else sees downturn and dispair. 

As my grandpa used to say, when you're swimming upstream all you have to do is open your mouth if you want to catch the fish. 

--jsk

Starting a business today

If I were starting a business today

I often get asked by our customers, friends and colleagues for advice with a business that they are starting.  How would I go about starting the business?  solving some specific problem?  finding the right talent? devising a growth strategy?  they ask.  I often feel like a bit of an impostor when I answer, because the truth is that I don’t have a lot of generic business experience—just experience at one company, in one specific industry, and one point in time.   Most of what has worked for our business over the years has been random luck, the third or fourth try to solve the same problem, extremely basic “blocking and tackling,” or some combination thereof.

The rest of what I know about starting and running businesses has come as an advisor, board member, or observer.  It is often from this perspective—as a more distant viewer—that I see the simple things most clearly.  When you are down in the muck of the day-to-day operations, you often miss the forest for the trees.

So,  after years of trying to give some useful advice to fledgling businesses, I have developed a few “truths” that I’m pretty sure any new business should ignore at their own peril.  At the least, these are the things I would do if I were going to starting a business tomorrow:

1.       Think web first.

2.       Have a human capital strategy.

3.       Find a channel, then build a product—not the other way around.

4.       Plan now for success—or it will never come.

5.       Raising money is not your biggest problem, being able to spend it appropriately is.

6.    You're not thinking big enough!

I will be posting on each of these topics in the near future, but if you have suggestions or questions on these topics, let me hear them.

--jsk

The new Intuit Small Business Web

First of all, let me start with one of those lame apologies about how long it's been since I last posted.  I've been heads down getting used to the Intuit world and my new job within it.  I basically have two full time jobs now (my old one running Homestead and my new one at Intuit--more on that in a minute).

People who work in big companies have always told me how much I'm not a big company person, and for the most part I can now state from experience: they were right.  However, being inside a big company has given me a totally new appreciation for a) how much easier it is to get stuff done in a small company and b) how hard it is to build and keep a massive organization functioning and growing.  It's way easier to grow a few million dollars of revenue by 100% than it is to grow a few billion dollars of revenue by 5%.  It's way easier to keep a few hundred employees fired up (even if they are underpaid and overworked) then it is to keep a few thousand employees from grinding to a halt. 

Having said all of that, Intuit is really an awesome place.  There are tons of passionate, smart, dedicated people who easily pass the old Homestead "no jerks, no idiots" rule.  The customer loyalty and product excellence is even better than it appears from the outside.  Basically, everything I predicted about the people/culture/values in my original post about the acquisition has come to pass.  But it's way bigger than Homestead (which already felt big with a whopping 175 employees!), and with that comes new ways of getting things done.  We are all still learning the best way to work with each other.

But enough about that... what I wanted to post about was a cool thing that has come out of Homestead joining Intuit's Small Business Division.  We have recently created a new "SB Web Group" that includes not just Homestead's various assets, but most of Intuit's other small business web products including JumpUp, QuickBooks Online, StepUp and MyCorporation.  

Intuit actually has a ton of great stuff happening on the web, but it's often overlooked by the press and the public because of the prominence of TurboTax, QuickBooks and Quicken.  But did you know that Intuit is already one of the world's largest pure SaaS ("software as a service") players in the small busines space?  Or that Intuit's online communities are extremely in-depth (check out JumpUp--it rocks) and visited regularly by millions of customers?  Or that Quicken Online rocks compared to the Web 2.0 darlings Mint and Wasabi (okay, that is just my opinion)?  Or that three of the most downloaded iPhone applications are Intuit products?

I can't say too much about our plans in SBWeb yet (stay tuned), but let's just say that we're planning on making a big splash that will continue the mission of leveling the playing field for small businesses.  I can say that the 350+ employees coming to work every day on our team are going to give all of the "big guys" a run for their money... okay, I guess we are one of the big guys now.  Still getting used to that.  :o)

Finally, lest you all believe that I sold my soul when we sold Homestead to Intuit, I thought you would enjoy the following video.  At the "all hands" meeting for the several thousand employees in the Small Business Group, I played one of my infamous songs about being a part of my first "big company" reorg.  As my mom says, you can take the boy out of Kansas, but you can't take the Kansas out of the boy... sorry my singing sounds so bad--I hope it's because I had a cold and not because I always sound like that.

Click here to see/hear the song.

Thanks to all of you for your continued support.  Believe me, we're still rockin' on.

--jsk

Eliot Spitzer, Emperor's Club and Homestead

Last week was unusually exciting around the old Homestead offices, thanks to our brush with one of the more newsworthy events of the decade.  It turns out that the high-end prositution ring Elitot Spitzer has confessed to patronizing--Emperor's Club VIP--built their website using Homestead.

To be clear, we do not monitor the content of the sites built using Homestead... we have way too many sites to monitor, even if we wanted to.  What's more, it turns out that for legal reasons we cannot monitor our customers sites unless they are brought to our attention by a complaint, the legal authorities, or a call from the owner of the site or other "normal course of business."

So, when news broke like a tsunami last Monday about the Spitzer site, and every web browser in the free world starting hitting www.emperorsclubvip.com (and within minutes had taken down the New York Times and www.ny.gov websites) Homestead's servers started receiving almost 150% of their normal traffic.  The good news is that our servers handled the traffic just fine.  The bad news is that our system soon automatically disabled the site because it had exceeded (big time) it's alloted gigabytes of traffic and guess what everybody saw instead?  A friendly Homestead logo and a message stating "Sorry, the site you are looking for is temporarily unavailable because it has exceeded its bandwidth limits."

Old board members called.  My new employer called.  NBC Dateline (and other press) called.  My mom even called (you can imagine what that conversation was like).

But that's not the whole story.  It turns out, unbeknownst to me, that the FBI had contacted us a few months ago and informed us about emperorsclubvip.com and asked us to cooperate with their sting operation.  This is not as unusual (or Hollywood) as it sounds.  We get several inquiries like this from law authorities every month, and we actually have a well-practiced process that dictates how we balance cooperating with criminal inquiries while also protecting the privacy of our customers.  In this case, because of the evidence presented by the FBI--which corroborated with data on the site--we agreed to cooperate with their sting operation.

The FBI failed to mention their prime suspect was the governor of New York.

Thus, because this type of thing is unfortunately rather routine, I was not aware that we were involved with the investigation--or that it was a Homestead site--until everybody else.

Which brings me back to why last week was so eventful.  It brought into public view an aspect of our business that has been central to much of Homestead's ten year history.  Something that Intuit, our new parent company, has never had to deal with--until last week. 

When you introduce a technology or tool to society, you are not in control of how it is used.  Most of the time inventors are not even aware of how their invention is ulimately used, but when the technology is on the internet, you can actually WITNESS it.  This is a beautiful thing--people do amazing things with it that you (the creator) never imagined.  This is also a terrifying thing--people do things that you wish they wouldn't, or which violate your sense of right and wrong.  There are many sites hosted at Homestead which are legal, but make my skin crawl (see www.michaelsavage.com).  Even though I despise what sites like that say, I really would die to defend their right to say it.

Luckily for us, over the years less than 1/100th of one percent of our (millions of) sites have come to our attention as being objectionable or illegal.  But each time we have had to balance the rights of our customers to use this platform that we nurtured and created with the laws of the country and our responsibilities as a business.

When all the dust settled last week, the feeling I was left with was what a great privilege it is to have created (and still run) a business that has such interesting ethical, constitutional, and social implications.

Now if I could only get my new parent company to enjoy it as much as I do. :o)

--jsk 

New year, new company, same dream

First off, Happy New Year everybody!

Well, it's official.  For the first time in my career, I have a boss.  It's kind of fun, actually. (I always wanted to know what it felt like to talk about the boss behind his/her back!  Oops, guess we'll see if he really reads my blog...)  Our acquisition by Intuit officially closed in mid-December, and for all of our customers who expressed some doubt, the earth still appears to be rotating around its axis!

I have gotten many comments from friends, family and customers along the lines of "man, this must feel SOOO good" or "how long until you buy your <insert material sign of wealth here>?" or "so you're totally checked out about now, right?"  Not exactly.  I appreciate the sentiments, but it doesn't really feel like that.  The people who have best related to our range of emotions are other entrepreneurs and very close friends/family who have watched us care and feed Homestead over the past ten years.  The simple fact is that selling your baby is hard and, once you do, it doesn't make you care about it any less.

No question, it does feel good to have external validation for something we've worked so hard to build.  But, as I shared with you in my original post about the acquisition, this is not why we strap on our boots every day.  In fact, having a third party pay a significant amount of money for our "work in progress" actually makes us feel even more of a responsibility to keep building.  We don't really know what else to do in both good times and bad, except keep building. 

I think this explains why people like Bill Gates and Steve Jobs and Richard Branson keep showing up for work every day.  You get addicted to building things, not just for the financial reward, but for the feeling you get when you see employees loving their jobs, or customers who are addicted to your products, or a world that--in some small way--has one less problem, or one more smile.

So, I know I speak for all 150 people on the Homestead team when I say that selling our company doesn't mean we've reached the destination.  It's just a big milestone on a long journey.  And it hasn't changed our dream, except to make it bigger.

Thanks for all of your continued support, and we look forward to lots of exciting new adventures in 2008.

--jsk

More on Intuit + Homestead (inquiring minds want to know)

Wow.  Thanks to all of the amazing feedback over the past week concerning our announced merger with Intuit.  Between the hundreds (almost 1000!) of congratulatory emails, the lively discussion on the blog, and the massive coverage in the press and blogosphere, it's been quite overwhelming. Throw in a buck-fifty (note use of web lingo proving I'm hipper than I seem) excited Homestead employees, a bunch of Silicon Valley well wishers, and several thousand buzzing Intuit people and you've got yourself a party!

I have not been able to reply personally to many of the emails or inquiries, so I thought I would respond to some of the common themes.  Here we go (by order of popularity):

Theme #1 (roughly 60%):
CONGRATULATIONS/CONGRATS/WOO HOO!/ROCK ON/ETC.

What I would say if I could respond to each of you individually:
Thanks, dudes.  Much appreciated.  You guys rock, and your support means a ton to all of us.  We have not forgotten in all of this that, without you, we would have nothing.

Theme #2 (roughly 20%):
YOU'RE GOING TO RAISE PRICES/PLEASE DON'T RAISE MY PRICE/U IZ A RICH BAZTARD NOW DON'T RAIZ R PRICES!/YOU PROMISED CHARTER MEMBERS YOU WOULD NEVER RAISE OUR  PRICES ARE YOU GOING TO KEEP THAT PROMISE?

What I would say if I could respond to each of you individually:
We have absolutely no intention of raising prices!  We do intend to accelerate our development of new products, and we'll probably charge for some of these additional features and include others for free in your packages.  As for Charter Members, who have been with us since the very beginning, my promise to you of never raising your price again is still in tact--you don't honestly think I could get away with that and look myself in the mirror?

Theme #3 (roughly 10%):
YOU'RE GOING TO OUTSOURCE YOUR SUPPORT TO INDIA/THIS IS THE END OF YOUR EXCELLENT SERVICE/NOW YOU'RE GOING TO GIVE US BIG COMPANY SUPPORT/THEY ARE GOING TO RUIN HOMESTEAD

What I would say if I could respond to each of you individually:
I was really pleased to read all of your notes and comments about how you much you like Homestead's support.  Words like "Homestead is the gold standard of web support" or "Homestead agents always know how to make us dummies feel smart" were music to my ears!  We're still working hard at figuring out how to deliver world class support to all of our customers and, in spite of the many generous comments this week, we still have work to do. 

As for whether we are going to outsource it--no, no no!  In fact, this week was exciting for another reason.  We opened our new customer service center in Denver.  Yes, as in Colorado, as in the good 'ol U.S. of A.  It should have 100+ additional folks by the end of next year, combined with the great team we already have here in California.  One of the major reasons Intuit wanted to join forces with Homestead is because of our unique philosophy of actually wanting to talk to our customers on the phone.  We've figured out ways to do this profitably, and we're not going to be changing this approach.

Theme #4 (roughly 5%):
NOOOOOOO!/YOU IDIOTS, THIS IS GOING TO END JUST LIKE PHOTOSITE/I CRIED WHEN I GOT YOUR NOTE/IT'S DEJA VU ALL OVER AGAIN LIKE PHOTOSITE/IN TWO YEARS THEY ARE GOING TO SHUT DOWN HOMESTEAD!

What I would say if I could respond to each of you individually:
I totally understand how a few paranoid folks might think this story ends like our sale of PhotoSite did.  But trust me, people, this is totally different.  We sold PhotoSite because we couldn't afford to continue running it ourselves at the time.  It was a labor of love, but nowhere near a mature business (i.e. it was losing a lot of money) which was directly related to its ultimate demise.  In contrast, Homestead is a very healthy business, and is growing rapidly.  A company as well run as Intuit isn't going to pay $170M for a company and then shut it down. This is more like Ebay's acquisition of PayPal, Google's acquisition of Keyhole (became Google Earth), or Yahoo's acquisition of RocketMail (became Yahoo Mail)--all previously established businesses that expanded rapidly in their new homes.  Finally, shutting down Homestead is going to happen over my dead body (and the dead bodies of about 150 other people).  And we're not going anywhere.

Theme #5 (roughly 5%):
MAYBE NOW YOU CAN MAKE MY MAIL SYSTEM WORK/DON'T TRIP OVER YOUR PILES OF MONEY ON THE WAY OUT THE DOOR/<INSERT RANDOM BIBLE CITATION HERE>/THIS IS THE LAST NAIL IN THE COFFIN OF HUMANITY/OTHER CYNICAL OR HUMOROUS REMARKS

What I would say if I could respond to each of you individually:
God bless the Web.

--jsk

 

Intuit and Homestead join forces

Big news in the Homestead universe today!  We announced this afternoon that Homestead has entered into a definitive agreement to be acquired by Intuit for a generous amount of cash.  You can read the standard-issue press release here.  It's expected to close early next year.

The backstory is a bit more interesting.

Ever since I started Homestead in 1997, I have kept two lists.  The first list is all the acquisition offers we have received over the years (it's nineteen long, not counting this one).  The second list is a "wish list" that contains companies I would actually consider selling our "baby" to; companies that have resonated with me and the Homestead philosophy of doing business over the span of my career (this list has four members).  Intuit is on the first list twice and, as you might guess, a member of the illustrious second list.

You have to understand that when you start a company in your bedroom because you don't want to work for "the man," it is quite exhilarating (and a bit amusing) the first time another company comes along and offers to pay you a lot of money for what you've created.  I've never intended to sell Homestead, but then again I've never intended not to sell it either.  It just hasn't been a primary focus.  It's much more fun to hire amazing employees, build great products, and delight the pants off of your customers.  In fact, you can ask my wife: getting an acquisition offer is a major distraction and usually knocks my world off of its axis for a few weeks until we eventually say no.

Saying no, even though we've done it a lot of times, is not a simple matter.  We have investors who have put millions into our company, and they deserve a rewarding and timely return.  We have employees who have spent many years laboring away, and they deserve to sock away some money in their kids' college funds, maybe upgrade from their 1200 square foot million-dollar Silicon Valley house (or buy one at all).  We have white boards full of product plans that don't see the light of day because of scarce resources.  We have 100's of thousands of business websites that are counting on us being around--and staying the best in the industry--for many years to come.

I have to weigh all of those factors (and consult with many folks) every time this happens, before I can give a response that I feel is fiducially and ethically responsible.  Nineteen times that calculus has resulted in a "no."  Last week it came out with a resounding "yes."

Here's why.  We don't get our kicks out of delivering financial returns for our shareholders (although it feels good, we think of it more as a responsibility than a thrill).  As I said above, our thrills come from employees, products and customers.  So if we can deliver a great return to our shareholders--while accelerating our dreams for employees, products and customers--an acquisition makes a ton of sense. 

Which brings us back to the second list.  A suitable acquiring company for Homestead has to be a place that we all can feel as strongly about as we do about Homestead.  It has to have a set of core values that matches the Homestead Creed.  It has to have a hiring policy similar to our "no jerks, no idiots" rule.  It has to believe in giving back to the community.  It really helps if we can keep our brand, our offices, our wacky traditions, our identity.  And we absolutely have to keep all of our people, and be able to maintain the sense of ownership and pride that we all feel today.

I'm happy to report that Intuit passed all of these tests with flying colors.  I'm 100% confident the merger between Intuit and Homestead is in the best interest of all 5 Priorities that Homestead's Creed spells out.  To our Shareholders (#5), we'll feel proud that we delivered for them as we bid them a fond farewell and begin serving different financial stakeholders.  To our Community (#4), we'll be announcing several fantastic initiatives in the coming months (stay tuned).  To our Customers (#3), you'll notice no changes (except a new privacy policy and a little "an Intuit company" logo under our name); however, we'll be rolling out more great Products (#2) even faster.  And finally, to our Employees (#1), you'll have to buckle your seat belts once again--this wild ride is only going to get more exciting in the years to come!

Oh, and the blog stays, too.

--jsk

PhotoSite Update

I wrote a few months ago about the unfortunate news that United Online, the company that bought PhotoSite from us, was shutting down PhotoSite.  While that has happened, it is still the case that you can move your photos for the next few months by using a migrator that the folks at SmugMug built.  I thought I'd post the instructions if you want to try the migrator:

You can download and install the tool at http://www.smugglr.net/. You’ll need Firefox to run this since it’s a Firefox extension. After you install the tool go into the Firefox Tools menu and click on Smugglr. This will launch the migration wizard which is pretty self explanatory. You’ll need to enter your PhotoSite login / password and your Smugmug login / password into the tool for it to migrate the data over. So make sure to create a Smugmug account before running the tool. You can use the coupon code “photosite” to get 50% off the first year of your Smugmug membership.

Enjoy!

--jsk

Wooden pens

I spoke to a homestead customer the other day who makes beautiful "turned" heirloom wooden pens and bowls.  The customer had some gripes which he emailed me about, so I called him back.  I can't stress enough how important and beneficial it is to engage customers who have complaints or issues with your service or product.  Think of each customer who reaches out to you as a gift--worth much more than whatever cost you incur to speak with them, resolve their issue, and/or refund their money.   

I try to personally respond to every customer who emails me (sometimes over 100 per week, so I can get behind!) but I typically call ones who have complaints--as long as they are reasonable and constructive.  This is where I learn the most, not only in the many ways we could be better serving our customers, but also in improving my understanding of work our employees do on the "front line."  This latter point can be crucial, as our failure to empower them with the proper tools/products/policies handcuffs their ability to delight our customers.  And it's very easy to lose touch as your company grows and you're busy "at the top."

But back to wooden pens.  One thing that struck me as I was talking with the wooden pen maker was this: he wasn't going to be happy, no matter how great his website was (it was actually pretty great), until it actually started delivering him real revenue.  And his definition of real revenue was pretty significant.  He wanted to know why he wasn't first in the Google search for "wooden pens," why he couldn't easily create back links, why his SearchLight campaign had "salad bowls" as a word when he didn't make salad bowls, etc.  Reasonable but challenging demands.

The "aha" moment for me was that no matter how hard we try to be the best "DIY website" company out there, what our customers actually need is for us to be a "DIY online business success" company.  Now, there is no way we can single-handedly make small businesses successful online--they need quality products, business sense, a marketing plan, and a lot of entrepreneurial drive.  But there is so much more we could be helping them with, above and beyond building a website.  So I'll promise right here and now that we will dedicate much of our product resources over the coming years to helping our customers not just build websites, but build successful businesses.  And I think I'll start with our customer who makes such beautiful wooden pens: click here to check out his work.

--jsk 

Happy 10th Anniversary Homestead!

We just hit a big milestone here at Homestead: 10 years in business!  Technically, we didn't launch the first version of Homestead until January 1998, but we use October 1st as our official birthday because it lines up with the anniversary of the original company, KartoffelSoft.  I started KartoffelSoft on October 1st, 1994, so it's the 13th anniversary of our company if you trace it back to the very beginning.  It's amazing how far things can progress once they gain a momentum of their own.

KartoffelSoft was an educational software company that paid the bills by "bootstrapping" (read: doing anything that was legal for money) while we tried to invent great software that would free us from the indentured servitude of technical consulting.  All these years later we've built something quite different than what we set out to do, but in many ways it is much more exciting and bigger than our original dreams. 

Maybe there is a lesson there for aspiring entrepreneurs?   You rarely recognize the true "big idea" at the beginning, but if you don't start somewhere you are guaranteed to get nowhere.

Happy Birthday Homestead.  A sincere "thank you" to our hundreds of employees and millions of customers who have been a part of our journey so far!

--jsk