Tuesday, April 22, 2014

10 Key Traits Of An Ideal Entrepreneur Partner

Schmidt-Brin-Page-GoogleA while back I talked about how and where to find a co-founder in “For a Startup, Two Heads are Always Better Than One”. The feedback was good, but some readers asked me to be a bit more specific on attributes that might indicate an ideal startup partner. Even if you are looking in all the right places, it helps to know what you are looking for.

In this context, I’m broadening the definition of partner from co-founder to “business partner.” The reason is that good attributes apply equally well to “external” partners, as they do to internal partners, like a co-founder or CTO. A good overall example is the synergy between Google co-Founders Sergey Brin and Larry Page, as well as with Chairman Eric Schmidt.

In all cases, the challenge is the same, of finding people that you can work with and enjoy in the business relationship. The relationship has to have trust, communication, and respect in order to work. Otherwise, like a marriage, it will be doomed to constant conflict, second guessing, and unhappiness. So the following traits have to apply to both sides of the partnership to work:

  1. Enjoy working with other people. You may be too independent to be partner material. If you find it hard to trust others, love to work alone, always have to be in control, or insist on micro-managing, you probably won’t find a partner who will satisfy you.

  2. Does not need to be managed. Good partners are people who are confident in their own abilities, and willing and able to make decisions, take responsibility for their actions, and able to provide leadership, rather than require leadership.

  3. Compatible work styles. Most entrepreneurs work long hours and weekends to get the job done. If you team with a partner who likes sleep until late morning, and reserves the weekend for other activities, the partnership will likely not work.

  4. Common vision and commitment. It doesn’t take long to sense someone’s real commitment, or vision and desired outcome of a joint project. Is your project seen by both as an end in itself, or a means to another end?

  5. Similar values and goals. If one of your core values is exceeding your customer expectations for quality and service, and your potential partner ascribes to the low cost, high profit mantra, a successful partnership is highly unlikely over the long-term.

  6. Level of integrity. High levels of integrity are important in business, but more important is your level of comfort with your partner’s integrity. This is a critical element of a good relationship, but a tough one. This is probably the best place to apply your “gut” feeling.

  7. Complementary skills. If both of you are experts at software development, even though one loves design and the other loves coding, that still won’t get the marketing done. Look at the big picture first of development, finance, and marketing/sales.

  8. Passion for what they do. The passion has to be in the business context – meaning results oriented, customer oriented, and sensitive to competition. In many cases, experts with academic or research credentials are not good partners for a business venture.

  9. Ethical and diversity boundaries. How the leaders of your company handle adherence to the spirit as well as the letter of the law will be seen by all employees, customers, and investors. Ethics and the view of personal boundaries should be explored fully.

  10. No historical baggage. Partner decisions are more important than hiring decisions. Thus you should do the same or more due diligence on educational background, previous work, and references. Look impartially from all angles and do the follow-up.

Beyond the core team of two or three startup partners, every startup should seek to “outsource” the rest of their strategic requirements to external business partners. It’s faster and cheaper than building a large team in-house, and usually more effective.

By using this checklist, you should be able to objectively match potential partners with your own needs and expectations. Then, as I suggested before, it’s time to establish a formal agreement or contract to cement the partnership. With that, you will have a strong foundation for success, as well as a great working relationship for the next thirty years.

Marty Zwilling


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Monday, April 21, 2014

How To Find Your Business Leadership Blind Spots

jamie-dimonEvery business leader has blind spots which limit their effectiveness and success, but due to ego, over-confidence, or deferential subordinates, many live totally in the dark. Some are smart and humble enough to assume that they don’t know what they don’t know, but lack an effective process for shining a light on their blind spots. Both are equally surprised by their every setback.

I recently found some real insight on this subject in a new book by Robert Bruce Shaw, aptly named “Leadership Blindspots.” Shaw specializes in organizational performance and has helped a wealth of business leaders identify and overcome their weaknesses. He provides a detailed analysis of the blind spots of many well-known business powerhouses, including Steve Jobs of Apple, Ron Johnson at JCPenney, and Jamie Dimon at JPMorgan Chase.

Shaw argues that every successful leader balances two conflicting needs. The first is to act with a confidence in their abilities and faith in their vision for their organization: The second is to be aware of their own limitations and avoid the hazards that come with overconfidence and excessive optimism. That means that they have to see themselves and situations accurately.

I agree with him that the best way to do this is to continually ask the right questions, in the right way, to identify blind spots. Here are some key guidelines that he offers to drive this process:

  1. Avoid yes-or-no questions. Closed-end questions (yes-no) are efficient, but don’t surface data that may be critical to a leader’s understanding. Questions are called open-ended when they allow for a variety of responses and provoke a richer discussion. These allow a leader to know what he doesn’t know, and ultimately make a better decision.

  2. Don’t lead the witness. Hard-charging leaders often push to confirm their own assumptions about what is occurring in a given situation and what is needed moving forward. This can result in questions that are really disguised statements, like “doesn’t this mean that we really don’t have a quality problem?” These usually prevent contrary points of view and further data from surfacing.

  3. Beware of evasive answers. All too often, people will avoid giving direct answers to direct questions. They may not know the answers or not want to provide the answers, to appear smart, or not want to offer incriminating data. Leaders need to keep coming back with directed questions until they get a straightforward answer or “We don’t know.”

  4. Ask for supporting data or examples. Leaders need to ask questions that surface points of view and, at the appropriate time, also clarify which answers are based on fact and which are based on speculation. They should encourage people to say what they know from data and what they think they know, and make sure they clarify the difference.

  5. Paraphrase to surface next-level details. One technique to push people to provide more information is to paraphrase what you are hearing. While this may result in a yes or no response, proceeding to next-level questions opens up the dialogue. Smart leaders sometimes mis-paraphrase what they are hearing in order to provoke a richer dialogue.

  6. Ask for alternatives. Another approach to surfacing non-confirming data is to overtly ask for an opposing point of view. A related line of questioning is to ask the respondent to alter his or her fundamental position, like “You are asking for $10 million to grow this brand. What more could you do if we gave you $25 million?”

  7. Give an opening for additional input. Leaders also need to provide an opportunity for others to offer additional input and, in particular, dissenting views. Often, the final moments of discussions are the richest, as people will wait until that time to surface what is really important to them. Ask if there is anything left unsaid that should be heard.

In today’s global business world, you should assume that all your peers are smart and experienced, but have blind spots just like you. These are automatic behaviors that are not flaws, but they do need to be identified and mitigated by continually asking the right questions as outlined here. Otherwise they will undermine your organizational performance and may well destroy your legacy when you least expect it. Early learning is a lot easier than a later recovery.

Marty Zwilling


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Sunday, April 20, 2014

Does Doing Good In Business Imply Doing Less Well?

Christoph_LueneburgerMany entrepreneurs still don’t understand that building a business culture today of doing good, like helping people (society) and planet (sustainability), is also a key to maximizing profit. Employees and customers alike are looking for meaning, not simply employment and commodity prices. Every company needs this focus to attract the best minds and loyalty in both categories.

I just finished a new book by Christoph Lueneburger, “A Culture Of Purpose,” which details how to build this new culture, and why it is becoming more instrumental in bringing about success, as well as sustainability, in organizations as diverse as Unilever and Walmart. He outlines a three-phase process to develop the necessary business culture of energy, resilience, and openness:

  • Nurture your current leadership strengths. Learn how to recognize, cultivate, and leverage the competencies of your current talent to develop your leadership team. Highlight leaders with business acumen as well as purpose as role models. Change leadership is a critical competency in the early stages of a transformation.
  • Hire the right team. Ask the right questions to identify the innate personality traits in potential new hires, regardless of level and function, to bring on board those most likely to succeed in and shape your organization. Employees with a purpose actually are easier to recruit and retain. They also tend to stay longer with the organization, reducing costs.
  • Craft your culture into an actionable plan. Create an environment that unleashes these competencies and trains and pushes them to the fore. Shape how people relate to one another and collectively go for what would be out of reach to them individually. Success is people moving from a reactive to a proactive focus on doing good.

In summary, the transformation starts with placing leaders with a purpose at the core, hiring talent with a purpose at the frontier, and then building and extending the culture of purpose both inside and outside the organization. I can think of at least five ways that this benefits the business, as well as customers:

  1. Products in a purpose culture more readily sell at a premium price. Evidence is growing that consumers are willing to pay at least a small premium for sustainability, and have started to demand a discount for “un-sustainability.” Companies can use this strategy to improve their profitability and competitive advantage.

  2. Doing good opens the door to a broader customer base. By adding to perceived value, a company attracts more sophisticated and demanding customers less expensively and more quickly. More and more customers choose a company based on their perceptions about the good that they do, as well as their price and service.

  3. Customer loyalty and trust go up for companies with a purpose culture. According to the Edelman 2012 Trust Barometer, 76% of global consumers believe it is acceptable for brands to support good causes and make money at the same time. We all know the cost of retaining customers is far less than the cost of new customers.

  4. Companies with a purpose culture have more productive teams. Doing business is a human process. Team members interact on a daily basis with the stakeholders of the company and the way they feel about the organization has a major and direct impact on how they perform their tasks and do their job at the end of the day.

  5. Investors like startups that foster planet and social responsibility. Investors believe these startups demonstrate more integrity and less risk, as well as being better positioned to deliver long-term, sustainable value to their stakeholders. Of course, investors still require a profitable business model, and the potential for high returns.

Thus doing good leads to doing very well, not less well. Lueneburger contends, and I agree, that the most effective and remembered leaders of our time, and the most successful companies, will be builders of cultures of purpose, which inspire the hearts and minds of people both inside and outside the organization. Is your personal leadership shining well or less well in this direction?

Marty Zwilling


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Saturday, April 19, 2014

8 Guidelines For Friends And Family Startup Funding

early-stage-fundingMost entrepreneurs have learned that it’s almost always quicker and easier to get cash from someone you know, rather than Angel investors or professional investors (VCs). In fact, most investors “require” that you already have some investment from friends and family before they will even step up to the plate.

You see, investors invest in people, before they invest in ideas or products. Since they don’t know you (yet), their first integrity check on you as a person is whether your friends and family believe in you strongly enough to give you seed money for your new idea. If they won’t do it, they why would I as stranger invest in you?

Friends and family will likely not expect the same level of sophistication on the business model and financials as a professional investor, but they do expect to see certain things. Here is a summary of some key items to think about as an entrepreneur before approaching friends, family, or even fools:

  1. Don’t be afraid to ask, carefully. If you set around quietly waiting for someone you know to offer you money to fund a startup, you will probably have a long wait. On the other hand, if you open every conversation with “I need money,” you won’t have any friends or any money. Practice your “elevator pitch,” and end it by asking for the order.

  2. Be upbeat and respectful. Nothing kills everyone’s optimism and desire to help quicker than a negative or arrogant attitude. If they are going to put cash into your company, chances are that they will expect to spend a fair amount of time together, either helping you or certainly discussing progress. Nobody likes a downer.

  3. Be passionate about the idea. Friends and family will quickly detect your level of sincerity and thought behind the idea. You need to convince them that you have been working on this vision for a long time, and have done the “due diligence” on all the potential knockoffs. Daydreams and “the idea of the moment” won’t get much respect.

  4. Demonstrate progress and your own “skin in the game.” Saying that you need money to start is not nearly as convincing as saying that you have built a prototype on your own dime, but need more to roll it out. We all know people who can talk a good game, but never get around to building anything.

  5. Ask for the minimum rather than the maximum. We would all love to have a million dollars of funding to “do it right” and build the company of our dreams. But your chances are minimal of finding someone who will give you that much to start. Set some milestones for three or four months out, and show what you can do, then ask for more.

  6. Communicate the risks, and write down the agreement. Be honest with naïve family members and friends about the inherent risks of a startup – at least 70% fail in the first five years. Don’t take money from family or friends who can’t afford to lose it. Think hard about the consequences of a possible startup failure and the loss of their funding.

  7. Show some incremental value along the way. Look for ways to get some traction with a minimal product, while you are still developing the main event. In high technology, this is called “release early and iterate,” which allows you to make corrections as you go, as well as adjust for the market changes. It also shows progress to early backers.

  8. Network to build investor relationships before you ask for money. Having a real project, rather than just an idea, is a strong positive when networking for Angels or VCs. Now you really have something to discuss, and real credibility as an entrepreneur. Build the friendship first, ask for advice on a real project, then maybe money later.

Overall, don’t think of friends and family funding only as a last resort. There are massive advantages, like sharing profits with friends and family, as well as the strategic credibility than can be gained from funding from someone you know, rather than from a professional investor.

I hope all of these points seem like common sense to you, and you wouldn’t think of handling it any other way. Yet, I’m continually amazed at how often I am approached as a professional investor by strangers asking for a million dollars to fund an idea, without hitting even one of the above points.

We can all recount horror stories of families and friendships torn apart by money lost on someone else’s speculative dream. In these cases both the entrepreneur and the funding partner are the fools. Don’t be one.

Marty Zwilling


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Wednesday, April 16, 2014

Is An Ideal Entrepreneur Right Brain Or Left Brain?

EinsteinTraditionally, the majority of entrepreneurs have been logical thinkers, problem solvers, and pay attention to details. These are the stereotypical left-brain engineers. Yet I see a big shift from the knowledge age, with its left-brain foundation, to a critical focus today on visualization, creativity, relationships, and collaboration, which are more in the domain of right-brainers.

Of course, the best solution would be a new wave of so-called whole-brain thinkers, but this term is usually reserved for Einstein and Picasso, and no entrepreneurs that I can name. Even right- brain dominant adults are hard to find, according to many expert views. They say most children start out this way, but after their years in school, less than ten percent retain their high creativity.

That means we need all the help we can get to bring out the right-brain attributes we need to be the best entrepreneurs in this challenging new age. Fortunately, there are resources available to help, like the new book by right-brain entrepreneur Jennifer Lee, “Building Your Business The Right-Brain Way,” which teaches you to capitalize on these strengths, and still build a business.

Obviously, there are places for right-brain thinking as well as left-brain thinking, as it relates to starting and building a business. Lee offers the following guiding principles to right-brain thinkers who need to balance their focus, but I’m convinced that the same principles apply to every entrepreneur-minded person:

  1. Be uniquely you and embrace your creativity. Creativity is the key word here. Engineering creativity, like innovate low-cost solutions, needs to be combined with marketing creativity, like viral social media campaigns, to build a sustainable competitive advantage today. Be visual and imaginative, but don’t forget the business details.

  2. Dream big but start small. Don’t be seduced by the bigness of your right-brain vision and expect everyone to follow, based on the strength of your passion alone. Challenge your left-brain side to break things down into manageable pieces and structure a practical plan to unfold things over time. It doesn’t all have to happen at the same time.

  3. Keep it simple and focused. Opt for easy, broad strokes instead of detailed, complicated solutions. The advantage goes to right-brain thinking on this one. Too many entrepreneurs (engineers) I know define the ultimate system and processes that even a large company can’t afford, and no startup has the money or time to execute.

  4. Take action, make it real, and tweak as you go. Be willing to take action and put yourself out there, even when you don’t feel ready and even if your idea is not yet perfect. You’ll actually learn more and gain more clarity the more you interact with your idea and get feedback. Neither right-brain nor left-brain entrepreneurs will success without action.

  5. Look for the learning and repeat what works. Always have your eyes peeled for valuable new insights to help you continuously improve. Then, when you find something that works, keep doing it until it doesn’t work anymore. Don’t be afraid of using your intuition and feelings to guide you with customers, but don’t ignore real data.

  6. Consider where you are headed and don’t get ahead of yourself. Stay ahead of the curve but don’t advance so fast that you overwhelm yourself. Make sure you have a solid foundation first to support your future vision. Left-brain logical and sequential thinking usually has the edge on this one. Some creative people are always working in the future.

  7. Recognize where you’ve come from. Even as you move forward, also acknowledge how far you’ve come, and celebrate each step of the way. Recognizing past achievements and reflecting on your success helps keep your circuitous progress in perspective. Thomas Edison found his best learning was from his failures.

  8. Know thyself. Building a business is a journey accompanied by personal growth. Understand what makes you tick, and be willing to courageously move past your comfort zone. When you transform yourself, you transform your business. Success in business is often about knowing when and who to ask for help.

As you can see, it’s hard for most of us to be adequately right-brained and left-brained at the same time. Thus I always recommend that two heads are better than one, meaning seek a co-Founder who supplements your natural skills and tendencies. It’s hard to beat entrepreneur teams like Bill Gates (engineer) and Steve Ballmer (marketing) in the early days at Microsoft.

So my conclusion is that while the opportunities are growing for right-brain thinkers, the ideal entrepreneur is still a team that can work together to accomplish whole-brain thinking, and whole-team execution. Have you assessed the thinking-balance and the effectiveness of your team and yourself in your own business lately?

Marty Zwilling


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Monday, April 14, 2014

‘Do-It-Yourself’ Startups Have Never Been Easier

do-it-yourself-ecommerceSponsored by VISA Business

If you have a unique product or service, and you are not selling it around the world on the Internet, now is the time to start. The cost of entry has never been lower. Anyone can be an entrepreneur today, without a huge investment, bank loans, lawyers, venture capitalists, or Angels.

In the early days (20 years ago), most new e-commerce sites, for example, cost a million dollars to set up. Now the price is closer to $100 if you are willing to do the work yourself. Here are the key steps for a personal home-based business website selling your consulting service or a few products (as an alternative to eBay):

  1. Go online to reserve a website domain name. Be sure it matches your business, and get a hosting agreement from one of the popular providers like GoDaddy. The cost for the domain name is maybe $10/year, and the hosting starts around $50/year. Start simple.

  2. Download free website tools. Many hosting services offer free tools, or will build a default website for you. Other popular tools are available at low cost, with built-in e-commerce capabilities (pay via credit card), including this Top Ten list for 2014. Or, fall back to the old standby DreamWeaver by Adobe.

  3. Personalize a simple web site. Customize your website using one of the tools above, selecting one of the standard templates for design and layout. You probably want at least a home page, product page, order page, and contact page. The menu should include a link to your blog, separately set up on Blogger, Wordpress, or TypePad – all free.

  4. Publish the site and now you are in business. But, don’t be fooled into expecting people to flock to your site after you tell a few friends. Now the real work begins – promotion, marketing, blogging, and all types of search engine marketing. But even these can be done for almost no cost, if you are willing to learn and do the work yourself.

Obviously, commercial e-commerce sites handling thousands of products and back-office functions are more expensive, and usually require professional help to do the custom programming and special site navigation features. All this may cost a few thousand dollars, but don’t get talked into an Amazon.com replacement just yet.

The next step in complexity is building a software product that you can offer as a service to your customers, or a mobile smartphone app. A simple example might be a mortgage calculator to add to your real estate sales site. Any credible software developer should be willing to tackle this kind of tool for a couple of thousand dollars.

Then there are full-featured software sites like Facebook. The logic behind all these features is millions of lines of code, and cost millions of dollars to develop and maintain. Don’t expect that you can create a new social networking site in your garage, and steal all the users away from Facebook. Facebook is making big money today, but only after a $150 million investment.

Even Facebook started simple, and then developed more and more robust iterations as user interest caught on. I give this advice all the time – “launch fast and iterate.” You can’t get it all right the first time, and the market will be gone if you try to include every feature in the first version.

The net is that if I see a website business plan today with a projected development cost greater than $200K, I suspect the founder must be including some fancy perks, or they don’t understand the market dynamics of website applications today.

Budding entrepreneurs and home-based businesses should be writing business plans before they start, so they understand and can manage the tasks ahead, but no outside investor need ever see the plan. Fund-it-yourself (bootstrapping) and do-it-yourself entrepreneurs are the best kind, because they can focus on the business, rather than fundraising, and have full control of their destiny. Life is more fun that way.

Marty Zwilling

Disclosure: This blog entry sponsored by Visa Business and I received compensation for my time from Visa for sharing my views in this post, but the views expressed here are solely mine, not Visa's. Visit http://facebook.com/visasmallbiz to take a look at the reinvented Facebook Page: Well Sourced by Visa Business.

The Page serves as a space where small business owners can access educational resources, read success stories from other business owners, engage with peers, and find tips to help businesses run more efficiently.

Every month, the Page will introduce a new theme that will focus on a topic important to a small business owner's success. For additional tips and advice, and information about Visa's small business solutions, follow @VisaSmallBiz and visit http://visa.com/business.


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Sunday, April 13, 2014

Team Member Competency Is Critical To Your Startup

Peter-Principle-bookMost people think that the Peter Principle (employee rises to his level of incompetence) only applies to large organizations. Let me assure you that it is also alive and well within startups. I see startup founders and managers who are stalled transplants from large organizations, as well as highly-capable technologists trying to start and run a business for the first time.

Forty years ago, in a satiric book named “The Peter Principle”, Dr. Laurence J. Peter first defined this phenomenon. The principle asserts that in a hierarchy, members are promoted so long as they work competently. Sooner or later they are promoted to a position at which they are no longer competent, and there they remain, unless they start or join a startup to get the next level.

In all environments, the move to incompetence often occurs when competent technical people try to step into management or executive positions, for which they have no aptitude, interest, or training. How many technologists have tried to run startups and failed?

So what are the keys to avoiding this problem for yourself, and recognizing the signs and requirements in your own team, before the “level of incompetence” paralyzes your startup:

  1. Focus on communication skills. The ability to communicate effectively and often to your team and to the outside world becomes more and more critical as you move up the role ladder. Practice and training are critical. If communication to others is not your forte, then stick to a highly focused non-management role.

  2. Look for ability to direct, as well as act. Many people have trouble directing the task and not doing it themselves. Both are hard work, and both are valuable. Executives get paid for what they know, not for what they can do with their hands—for managing the job and not actually doing it.

  3. Comfortable with a spectrum of responsibilities. As a manager, there will be many new responsibilities, most of which are a little fuzzy. A tech promoted to manager must change his mindset from one of focusing on a problem and solving it, to multi-tasking a broad range of responsibilities, and keeping them all moving.

  4. Consistent demonstration of high-level competencies. You need ‘portable’ competencies—those that you can take with you to any level of the corporate ladder, and which you can tap into in a managerial capacity. For example: be solutions-oriented, able to balance both sides of an issue, and be a quick study.

  5. Provide mentoring and formal management training. If you are seriously looking at shifting someone to a management role, make it top priority to get them formal training, not only on business management itself, but especially on people management and interaction skills. Talent and good intentions are not sufficient.

  6. Evaluate passion and current position. A management position is not for everyone, and a specialist career may be much more exciting. Great technical gurus get paid very well, and have visible top positions like Chief Technical Officer (CTO) for prestige and respect. You can still be the founder, and bring in a CEO to run the business.

Another important point is to recognize and deal immediately with occurrences of the Peter Principle. If you are the CEO, and you tolerate ineffective people in important positions, they will suck the life out of your startup. The good people will fade away, and only the bad will remain. You will be tagged as the one with the Peter Principle.

It’s something that we all have to deal with, in our own career, and with other team members. In a small startup, everyone has to carry a maximum load for survival, and everyone sees the non-performers. If you are the last to see the problem, or the last to react, maybe it’s time to look in the mirror.

Marty Zwilling


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