Monday, July 28, 2014

Practice Entrepreneur Integrity As Seen By Others

integrityAs an entrepreneur, your personal integrity is critical for getting and keeping the support of investors and team members, and your company’s integrity is critical for getting and keeping customers and vendors. But in a practical sense, what does that really mean?

Most definitions of integrity include something like “the quality of being honest and morally upright.” Yet, I’ve found through experience that both honesty and morality are relative terms, depending on the reference point of both the speaker and the receiver. In business, the only view that counts is that of the receiver.

For example, it may not be easy to see when you are being blinded by money in closing a deal, but it’s easy for everyone else to see it. Here are five specific recommendations that will help team members, investors, vendors, and customers to see a high level of entrepreneurial integrity in you at all times:

  1. Meet your commitments. As an entrepreneur, when you are late with a committed business plan or meeting with an investor, you lose integrity. As a company, if your customer feels you did not meet your product quality commitment, your company loses integrity. Your view or reason doesn’t matter.

  2. Honest to a fault. This term is usually used to mean honest as seen by other people. Some think honesty is only related to what is said, but not telling the whole truth is dishonest, even in court. If you can’t deliver a service because of your company’s mistake, integrity suggests that you include the real reason in your apology.

  3. Strong and consistent moral code. The target here is to meet the receiver’s moral code expectation. If your product or process is marginal or worse, you will lose that customer. If you are trying to find an investor for your new gambling site, you probably will be disappointed.

  4. Treat everyone with respect. No one likes to be dis-respected (from their perspective). Respect is difficult to define in the abstract, but quick to be recognized by the receiver. Be courteous and considerate to all on cultural differences, positions, races, ages, or any other types of distinctions.

  5. Build and maintain trust. Trust is a reliance relationship built on character, strength, and ability. It usually takes several good acts to build, and one bad act to lose. To build company trust, you need to personalize your company. People do business with people. Even internationally-known brands are judged daily by the quality of their people.

Integrity must start at the helm, and then it can percolate down through the deepest layers and become the heart and soul of the company’s culture. If the entrepreneur who runs the company does not have integrity, a startup usually falters.

Only people who don’t have integrity think it’s hard to detect. Lack of integrity is one of the easiest qualities to detect in people and companies you meet. It only takes a few actions or choices to set, but it will take many actions to reset if you go wrong. In business, it’s one of the most sought after qualities by customers and vendors.

In order to succeed as an entrepreneur, you need to have a good idea and the leadership to make it happen, and you need to demonstrate integrity at all times. In the words of President Eisenhower, "The supreme quality for leadership is unquestionable integrity. Without it, no real success is possible, no matter whether it is on a section gang, a football field, in an army, or in an office". Or as Alan K. Simpson said, “If you have integrity, nothing else matters. If you don't have integrity, nothing else matters.”

Marty Zwilling


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Sunday, July 27, 2014

Entrepreneurs Today Don’t Need A Big Budget To Start

entrepreneur-lifestyleIt wasn’t so many years ago that starting a new e-commerce business on the Internet was a complex custom development project, usually costing a million dollars or more. Now you can do it for free, or a few hundred dollars, with one of the many web building tools available, like Shopify or Weebly Store. A programmer can build a new smartphone app for a few thousand dollars.

With the appearance of do-it-yourself services on the Internet, entrepreneur curriculums at every university, and a wealth of new books on the subject, the need for expensive consultants and business advisors has also been mitigated. Almost anyone can start a company today on a shoestring budget, following these cost-cutting recommendations:

  1. Establish a solid legal structure for your business. Setting up the business as an LLC or C-corporation can now be done online with low registration fees and minimal risk. The same is true for filing patents, registering trademarks, and filing copyrights. Required legal fees now average $5K or less, compared with $20K or more as a minimum.

  2. Work out of your home, and keep your own books. You can now skip the mandatory office space rental, with secretary and bookkeeping staff, or outsourcing. With a little help from a friend, you can handle expenses, revenue, and payroll, with QuickBooks or a similar package. These steps alone can reduce your monthly burn rate by at least $10K.

  3. Use the cloud and subscriptions for computing technology. Gone are the days of required $50K computer servers onsite, with big software license fees up-front. Servers needed expensive IT consultants for setup and maintenance, and required excessive power and cooling. With Google, you get all the storage you need in the cloud for free.

  4. Social media facilitates marketing and sales. For startups, social media and color printers have essentially replaced the need for external public relations and marketing services. You can optimize your website and spread your marketing messages across the world through the Internet. Savings here can easily reach another $10K per month.

  5. Minimize investment in prototypes and tooling. With do-it-yourself makerspaces such as TechShop, you can avoid expensive prototyping iterations. You can now get tooling and products built very quickly either in the US or in China, with delayed payment options. The need to build a new million-dollar factory for each new product is gone.

  6. Use freelance and work-at-home to reduce payroll. As an old rule-of-thumb, startups realized that employees cost double the salaries paid, to cover office costs, health-care benefits, and workers compensation. Today, productivity is way up, you can do most anything yourself, and you can outsource to contractors with more skill and less cost.

Of course, not all new businesses can benefit from all these recommendations, so think carefully about what you can do, and what you can’t. For example, if you have no technical background, you probably can’t create or sell an enterprise software product for a low price, even today. Maybe you should start with an online e-commerce site, based on your favorite hobby expertise.

My point is that one or more entrepreneurial opportunities are now within the financial reach of almost everyone. You don’t need to count on the old myth that all you need is a new idea on the back of a napkin, and investors will throw money at you. It never happened in any time frame I can remember, and it definitely won’t happen today.

If you can’t afford today to start the business of your dreams, even with all the suggestions here, the growing number of startups is still a positive for you, since you might be able to join another entrepreneur as a co-founder, or simply work for another startup to build up your skills, experience, customer savvy, and resources.

But don’t wait too long if you want to stay ahead of the curve. I see a historic shift taking place toward the entrepreneurial lifestyle, and away from the corporate job cubicle environment. People are using the new cost equations brought about by the Internet and social media to do what they love, and love what they do. Isn’t it time that you joined the movement?

Martin Zwilling


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Saturday, July 26, 2014

Hungry Entrepreneurs Always Seem To Find Capital

creative-funding-alternativesEvery startup needs access to capital, whether for funding product development, for initial rollout efforts, acquiring inventory, or paying that first employee. Most entrepreneurs think first of bank loans as the primary source of money, only to find out that banks are really the least likely benefactors for startups. Thus “creative” really means maximizing non-bank financing.

While sizing up the alternatives, I couldn’t help but pick up a recent book by Karlene Sinclair-Robinson with the creative title of “Spank the Bank: The Guide to Alternative Business Financing.” She plumbs the range of possibilities she has gained through personal experience as an entrepreneur, and as the “queen of business financing” in the financial industry.

The alternatives are many, but they are not easy. The most successful entrepreneurs are the ones who think creatively, not only about their offering, but also about how to acquire cash, and never say never. They have to sell themselves, more than their product, to close on every alternative source of funding. Here are ten top sources from Karlene, and my own experience:

  1. Personal financing. You may not think this is very creative, but I’m amazed at the number of “wannabe” entrepreneurs who haven’t thought about saving any money before they start, or wouldn’t think of using their own savings to start a business. No investor I know will put money into a deal if they see that you have no “skin in the game.”

  2. Personal credit lines. You qualify for a secured personal credit line based on your personal credit efforts. Credit cards can usually be acquired with even less history. We all know startups that have been built on one or both of these. The advantage is that you retain total ownership and control, as long as you make minimum payments.

  3. Family and friends. These are people who should believe in you, without waiting to see if your idea works, or waiting until you have real customers, revenue, and hard assets. These commitments should always be positioned in writing as promissory notes, or so-called bridge-loans, which convert to equity at a rate determined by later investors.

  4. Peer-to-peer lending. This is a process whereby a group of people comes together to lend money to each other. It’s been around many years, in examples like small business groups or ethnic groups supporting similar efforts. In the startup context, look for a successful entrepreneur peer willing to fund similar new ideas.

  5. Crowdfunding. Here you use the power of the Internet to find a crowd of like-minded people, with small amounts each, to back your efforts. This approach is now spreading beyond non-profits, pre-sales, and memento rewards, to soon include the ability to make small equity investments via the JOBS Act passed a couple of years ago.

  6. Micro-loans. There are many private companies and non-profits that offer small loans, up to $35,000, to promote entrepreneurship, to individuals who would not normally quality for bank financing. Examples include Patriot Express loans, and Small Office/Home Office (SOHO) loans.

  7. Vendor financing. If you need tangible products for inventory, many manufacturers and distributors can be convinced to defer your payment until the goods are sold by you. This really means an extension of the normal 30-day payment terms to a period of months or longer, depending on your credit worthiness and extra fees.

  8. Purchase order financing. The most common scaling problem faced by startups is the inability to accept a large new order, since they don’t have the cash to build and deliver the product. PO financing companies will often advance the required funds directly to the supplier, allowing the transaction to complete and profit to flow to the startup.

  9. Factoring accounts receivables. This is similar in concept to PO financing, but applies the advance to unpaid amounts not yet due or collected from customers. In high volume startups starting to scale up, this will provide cash on your sales immediately, rather than waiting for 30 to 60 days or longer for payment.

  10. IRA financing. Investment Retirement Account funds and 401(k)s are arguably the single most accessible alternative funding source available today for startups. You can’t use your own self-directed funds for your startup, but many others are willing and able to loan you money from theirs, for the right terms, if they believe in you and your cause.

Note that we haven’t yet mentioned the more conventional and less creative finance approaches of Angel and venture capital investors. For new entrepreneurs, these sources usually have very little interest in early-stage or seed financing, preferring the lesser risk of a proven business model, with real revenue and customers, ready to scale. Yet creative thinking wins here also.

Karlene’s book provides details on the how and why of all these forms of alternative financing for startups, and many more. Managing cash flow is just one of the many ways that entrepreneurs have to think creatively to innovate, beat the competition, and survive. If you figure out how to spank the bank, you can surely spank your competitors. The payback there is even better.

Marty Zwilling


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Thursday, July 24, 2014

Agility Is The Key To Survival In Good Times And Bad

business-agility-petMost small businesses are trying to forget the recent recession, and get back to “business as usual.” They don’t realize that business as usual is gone forever. With social media and smart phone conversations, real product information spreads at astounding speeds. Entrepreneurs that are not listening, not engaging, and not changing will be left behind even in the best of times.

Business agility is defined as the ability to adapt rapidly and cost efficiently. It is required today for new innovation strategies, analyzing markets for new opportunities, and organizational changes. Today’s customers are much more proactive in going online for the latest information, rather than simply reacting to the “push” messages that businesses traditionally use to drive commerce.

According to a recent survey conducted by Dimensional Research for Zendesk, 90 percent of respondents asserted that positive online reviews influenced buying decisions, and 86 percent admitted buying decisions were influenced by negative online reviews. Yet there is evidence that as many as half of the small businesses out there still don’t even have a website or go online.

If you as an entrepreneur are not “listening” to your online reviews, and not moving quickly to make changes, you are losing ground. Moving forward, you should expect the market volatility to increase, driven not only by customers, but by new technology, changing government regulations, and a surge in new competitors.

For a business, volatile markets are a source of great opportunities, as well as great risks. Every entrepreneur must be alert enough to spot the change early, and agile enough to adapt quickly. Here are some key elements of agility that are required for you to survive and prosper:

  • Stamp out organizational inflexibility. Bureaucracy can appear quickly in startups as well as large companies. The real problem is inflexible people. Every organization must constantly review its hiring practices, training, and leadership to make sure the focus is on people who are motivated, open-minded, and empowered.

  • Continually watch for new opportunities. Don’t wait for your competitors to uncover new markets that you wish you had jumped into early. An agile business doesn’t wait for their current product line to fail, before planning some enhancements. The days of the “cash cow” are gone. Make sure you have a process in place to find your next big thing.

  • Rotate team members into new roles. If a key person in your organization has never changed roles, that person is likely limiting their personal growth, as well as the growth of your business. Maybe it’s time to find the real strength of your team by giving top performers additional new responsibilities, and rotating the lower performers out.

  • Define a continuous innovation culture. Innovation doesn’t happen without active leadership, a mindset of commitment from the team, and a defined process. Discipline is required to continually track results, return on investment, and customer satisfaction. Let your continuous innovation become your sustainable competitive advantage.

  • Foster a performance culture, and avoid analysis paralysis. A strategy of speedy execution is required. If you organization routinely thinks in terms of months or years to make any change, it’s falling behind and probably already obsolete. Don’t wait for expensive outside consultants to tell you it’s time to change, or make it happen.

  • Practice small change experiments often. The “big bang” theory of change, where innovations only come through huge and expensive new projects, with big rollouts, is a thing of the past. New innovations should be seen as experiments, which are inexpensive, measurable, quick to fail, and without retribution if they don’t work.

  • It all starts with agile leadership. If you are the entrepreneur, or the top executive, you set the model and the tone of your business. You can’t have an agile business without effective communication, an empowered team, and a constant influx of new ideas. Managing an agile business means managing change, not solidifying a status quo.

Business agility is simply to ability and intent to make small changes, on a daily basis, to penetrate new markets, add new revenue streams, reduce costs, and prune out products that are no longer carrying their weight. All you need to win with customers is to be slightly more visible and have a few more evangelists in the marketplace.

It’s time to take a hard look at your own business. Is it pulling ahead, or falling behind? Standing still in not an option.

Martin Zwilling


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Monday, July 21, 2014

9 Ways To Inspire Your Startup Team To New Heights

contagious-leadership-habitsStartups provide business leadership with new products, services, and new revenue models, but leadership startups can only be built by entrepreneurs who are leaders themselves, and incent leadership in the team around them. Leadership which incents other people to be leaders is called “contagious leadership.”

John Hersey, in his book “Creating Contagious Leadership,” describes nine required skills or habits for inspiring a contagious leadership culture within a startup, as well as within other types of businesses, or even life in general. He and I believe that leaders have to make the overt decision to acquire these skills, and don’t have to be born or trained into them:

  1. Spotlight leadership acts of others. This is the habit of focusing attention, directly or indirectly, on leadership efforts and accomplishments of another team member or group. For managers and non-contagious leaders (contained leaders), the spotlight seems to always be on themselves.

  2. Cultivate positive character qualities. Contagious leaders have a habit of highlighting effective choices about “how” things were accomplished, and not just “what” was accomplished. It’s not just about the numbers, but how character played a role, and who made the right decisions along the way.

  3. Provide in-depth recognition. Don’t just articulate specific actions that deserve praise. Contagious leaders tell Harry why and how he did a good job, whereas managers and contained leaders just say “Good job, Harry.”

  4. Emphasize strengths, leading to greatness. Conventional managers focus on people’s shortcomings and point them out as often as possible. Contagious leaders nurture the habit of recognizing others strengths, and help them extrapolate these to greatness.

  5. Communicate often and effectively. The habit of constantly exchanging information, thoughts and feelings openly and honestly builds morale, enhances productivity, and fosters contagious leadership. Too many managers “tell ‘em only what they need to know and not a moment before they need to know it.”

  6. Provide an unobstructed vision. Contagious leaders foster the habit of focusing actions on a clear and sensory-rich picture of the desired result. Managers tend to have only a vague picture of where the company is going, so they are unable to share a coherent vision with others.

  7. Really touch people’s lives. Nurture the habit of truly knowing your most valuable asset – people. Managers avoid any real, deep involvement. Most don’t know if the people reporting to them are married or single, or anything about them. Contagious leaders know their people personally and do things for them, not because it’s good for business, but because they truly care.

  8. Passionately support your people. Managers are always controlled, rather than being fully committed and willing to take a risk. Contagious leaders are quick to support their team, and always stick up for them, even in the face of adversity.

  9. Mentor a permission mentality. Contagious leaders mentor their team to always assume they have permission to do things their way. They try to extend the concept of contagious leadership, rather than constrain it. Managers want a staff of imitators and followers. They want people to do what they want, and to do it their way.

In summary, leaders are not the same as managers. Managers focus on the process, while leaders focus on the people. Leaders influence people to make things happen, rather than tell people to make things happen. Contagious leaders create a culture that inspires everyone to be fully engaged in the startup. The result is that your whole startup will be the leader.

Marty Zwilling


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Sunday, July 20, 2014

When Are Business People Entitled To Be Entitled?

startup-funding-entitlementWhere did this sense of entitlement in our business culture come from? I’ve written about this before, but I was reminded again a while back at a conference for startups when an entrepreneur started berating investors for not funding early-stage startups. It sounded to investors like me that they felt a funding entitlement for their startup idea. Of course, I’m sure entrepreneurs sense that many investors feel entitled to deals with no risk. It’s bad news either way.

As a society, we seem to think we've evolved to the point where we can fashion a large portion of existence according to how we wish it to be. We notice what we like and what we dislike, so we work to make society match our dreams. Somehow, these dreams and wishes have morphed in many people’s mind to an entitlement.

In later-stage businesses, entitlement is evident when employees treat customers with indifference, or feel they are entitled to their job by merely “showing up for work.” Here are some examples of people rationalizing their entitlements, especially when the fantasy serves to owe them money or power:

  • “I put in more hours than most of the people here, so I expect a bonus.” A bonus should be all about results, not time worked. We all know people who seem to be always present and always working, but don’t produce results. People with entitlement expect bonuses because it is bonus time, not because recipients earned them.
  • "We deserve our high pay since it was the other division that failed." We heard this from many of the Wall Street groups that survived a few years ago only with government bail-outs. A company succeeds only if all the teams succeed. That’s the way capitalism works. Being really good at what you do doesn’t matter if your firm is broke.
  • "The pay seems to be the same whether I work hard, or hardly work.” No business can afford to reward mediocrity or less. Watch for the signs of entitlement and let it be known that the behaviors associated with entitlement will not be tolerated. Executives need to show up be the model, communicate the model, and enforce the model.
  • "I did my job, so don’t expect me to jump when customers complain." Employees don’t see a connection between how the experience a customer receives today influences their feelings about buying from the company in the future. Make sure they understand the sense of urgency to address customer satisfaction and market needs.
  • “I give my all to this company, so I deserve healthcare coverage.” Health care is a need, like water or food, and not a right. And like water or food, it isn’t free. Every company needs to promote equity among all employee levels, and relate benefit levels to profit levels. But demanding benefits that sink the company is not the answer.
  • "Someday this business will be mine anyway." How many family businesses have met their demise because of this entitlement view? When heirs grow up believing that no matter how they act, the business will be theirs to run, they often end up with no business to run. Furthermore, once that seed is planted, it's very difficult to stop it.

Entitlement beliefs that are left unchecked lead to selfish, even more entitled expectations. Most psychologists believe that entitlement comes from a deep inner belief that the world is not fair. In some age group, this feeling can be rationalized as perhaps derived from an early life where parents gave them everything, and they now expect the world of business to do the same.

We’ve got to remind everyone, employees, entrepreneurs, and investors, that true success and leadership is built on a foundation of personal responsibility and self-discipline. Companies which feel entitled about their position in the marketplace will lose, and entitled employees will kill a company.

Few things frustrate me more than dealing with people who feel they are entitled. Everyone shares the challenge of changing our business culture of entitlement into a culture of merit. I do believe everyone is entitled to pursue success. No one is entitled to be entitled.

Marty Zwilling


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Saturday, July 19, 2014

Smart Entrepreneurs Know Customer Buying Moments

customer-buying-momentsToday’s customers are much more in control of their buying decision, as they have more choices and more information than ever before. Almost instantly, via the Internet or on their smartphone in the store, they can find the lowest price alternative or their favorite features, without waiting for push marketing or listening to your best sales person.

This can be an advantage to startups who don’t have the resources and brand awareness of mature businesses, if they understand and position themselves to win in the decisive moments of the new customer buying process. These decisive moments, and how to respond, are outlined in Robert H. Bloom’s recent book, “The New Experts: Win Today's Newly Empowered Customers.”

Bloom is a widely known expert on managing business growth, and he starts by summarizing the three key weapons of current customers, which include an instant summary of choices, prices, and features. His research indicates that they don’t have any old-fashioned customer loyalty, and they want precisely what appeals to them at the moment, preferably customized just for them.

New startups actually have a flexibility advantage over more mature businesses in anticipating and reacting to the four key decisive moments that Bloom outlines and I have observed in the new customer buying process:

  1. Survive the now-or-never moment. You only get one chance to make a great first impression. If you can’t get a positive customer perception at this first moment, you will likely never get another chance – with so many other alternatives. The key to winning in that moment is to think like a buyer, not the seller. Build a relationship and trust quickly.

  2. Win the make-or-break moment. You win here by getting the customer immediately engaged, and keeping him there, by knowing their interests and expectations better than any competitor or alternative. Avoid the extended period of evaluation and negotiation during which the customer will likely move to other transaction alternatives.

  3. Sustain the keep-or-lose moment. The buying process is just the beginning of the customer experience, and it has to remain a good one throughout the time that your customer actually uses your product or service. Great startups manage to continually improve the relationship through outstanding follow-on support and service.

  4. Capitalize on the multiplier moment. Of course you want your customer to come back, but the best ones also become your evangelists in bringing their friends to you, and broadcasting their positive experiences to the world through social media. This is a key moment where your customer acquisition costs go way down, and your profits go way up.

This new world is all about empowered customers. As an entrepreneur and startup, you should love this environment and cater to it. Many existing businesses see it as a big problem, and can’t adapt easily. That’s your chance to step in and compete at every moment of the customer buying process, usage experience, and follow-on events.

As you bring on employees to facilitate your growth, they have to embrace the new reality. Empowered customers required empowered employees, and your internal business processes have to be aligned with the same principles and the same smartphone and Internet technologies. Make sure you adopt the right hiring practices and training to keep your team responsive.

Then you have to trust the team to think and act proactively on behalf of your vision and mission. Of course, both you and they will make mistakes, which are the best learning experiences. Continuous innovation and change are the keys to staying current, reducing complexity, and delivering the winning customer experience to keep you ahead of the competition.

What most companies don’t realize is that businesses don’t drive customer trends anymore, customers drive business trends. Consumers are well aware of the latest technologies, and their expectations are usually ahead of even the most forward-thinking startups. It’s up to you to understand and capitalize on the decisive moments of empowered customers, or you will become a “has-been” before you even start.

Marty Zwilling


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