The Ten Big Steps From Idea to Winning Execution

After the idea, it’s all about execution. I often hear from investors that a great idea is necessary, but not sufficient. The most important thing is a proven team, meaning one who has built a startup before, and has experience with the execution process in this domain.

I’ve talked before about the best personality traits for a good entrepreneur, but I’ve never talked about the importance of process. Yes, even entrepreneurs need to follow a disciplined execution process if they want to maximize their probability for success.

Even though John Spence in Awesomely Simple, was talking about larger organizations, I think his concepts adapt equally well to a startup. Here is my adaptation of the key steps to ensure a winning execution in any business:

1. Create a vision and instill values. The vision may be yours alone, but the communication has to include your team, potential investors, and customers. For most people the communication is the hard part – written, verbal, over and over again.
   
   
2. Define a focused strategy. Limit the focus to a few critical areas that will yield the highest possible return. If your strategy has more than ten elements, it’s not focused. Not everything can be a priority. Do not spend any time on unimportant goals.
   
   
3. Get stakeholder commitment. People who are not committed cannot be held accountable for delivering ambitious results. The guiding coalition must demonstrate 100 percent unity, or there will be a mutiny. The worst case is a silent mutiny.
   
   
4. Align the objectives of principals. I have seen startups implode when principals were pitted against each other on mutually exclusive objectives, like adding more technology versus keeping costs down. Quantify time and cost goals early, get agreement from all, and measure results regularly to verify alignment.
   
   
5. Every process needs a system. Define and use well-thought-out systems, manual or automated, to ensure repeatable success of every key process. The most basic element of every startup system is a written, agreed, and measurable business plan.
   
   
6. Manage priorities. You must relentlessly communicate to all constituents the current priorities, and keep the total to a manageable number. One of the biggest mistakes I see in startups is a new and larger set of priorities every week, causing the team to lose momentum and lose commitment.
   
   
7. Provide team support and training. People are your most valuable asset, so start with the right ones, and make sure they have the tools and training to deliver the results you are asking for. Don’t assume they know everything you know, or learn as fast as you do.
   
   
8. Assign and orchestrate actions. Leaders must make sure all team members are taking the right actions (and behaviors) on a daily basis to deliver long-term performance. Even after all the previous steps, great leaders can’t afford to be merely observers. Lead by action.
   
   
9. Measure, adapt and innovate. Things change in a startup, and things will go wrong. You won’t notice if you don’t measure. Measure four or five key drivers, not twenty or thirty things. Motivate everyone with an insatiable curiosity to make things one percent better every day (kaizen).
   
   
10. Reward and punish. What gets measured and rewarded gets done. Be exceedingly generous with praise, celebration, recognition, small rewards, and sometimes money. Set high standards for performance and use the three T’s (train, transfer, or terminate) to deal with people unable to effectively execute the plan.

I’m not suggesting that your task execution will be perfect if you precisely follow these steps. There are far too many pitfalls and risks in a startup to imply they can all be avoided. But if you adopt this blueprint, it’s much less likely that when things get tough, your investors will be thinking of an alternate meaning for the term “execution.”

Marty Zwilling

A Blog Can Be A Startup’s Most Valuable Investment

With the an estimated 150K new websites and 7M new pages added to the Internet every day, the biggest challenge for every entrepreneur is to get found, and get some credibility for a new startup. I can attest from experience that publishing a regular blog to properly showcase your offering, even before you have it, is a most cost effective approach in time and money.

The biggest roadblock is that startup founders already have too much to do building a product, mapping strategy, courting investors, etc. So finding time is hard, and good writing is simply not what most people do. But here are some key reasons why you need to give it some priority:

1. You can validate the need and your solution before spending money. Too many entrepreneurs spend big money on development, only to find out that the solution isn’t quite right. Feedback from your blog will tell you quickly whether anyone agrees with your assessment, and whether you have a customer base waiting.
   
   
2. Find potential partners. Most of the people you would want as co-founders are now cruising the relevant blogs for ideas and partners. It’s a great way to find like-minded people, and get a dialog going. From a networking standpoint, it’s a lot more efficient than going to seminars and other industry events.
   
   
3. Populate your team. Smart potential employees are also reading blogs to stay up-to-date in their field, and find the new leaders. More and more, employees work for people they respect, rather than companies. Take the initiative to put yourself out there. Of course, ultimately you want employees who can blog for you and your company as well.
   
   
4. Cultivate early customers. It’s never too early to start a dialog with customers, as long as you don’t mislead them about where you are in the cycle. Build your brand and get leads today. There’s also the opportunity to do some consulting with interested customers to provide needed revenue while the product is still under development.
   
   
5. Build your credibility with investors. A blog is an excellent vehicle to meet investors, before you are ready to ask them for money. You will also learn about competitors, who can’t resist responding to a well-written blog. Once you gain real traction as an expert in your space through the blog, investors will put you at the top of their funding list.
   
   
6. Hone your communication skills. Writing a blog is all about communication, and that’s your number one job as founder of a new startup. Trying to write something down for someone else to understand quickly, will tell you if you really understand it yourself. Even if you use a ghost writer for your blog, the briefing process will enhance your skills.
   
   
7. Your Google ranking will go up dramatically. Whereas Google and other search engines may take two or three weeks to list your new website in search results, new blog sites and new blog entries are indexed every day. From comments, you will accumulate external links both into and out of your site, and get additional ranking from Google.

Since a startup by definition is not a recognized brand, you are the brand, based on the social media culture of today. People assume your startup is real, if they see real people, and they will attribute credibility to your startup, based on your own credentials and the quality of information you offer through your blog. No person and no blog puts your startup at the bottom of a long list.

The best part is that all this is not a revenue drain. The major blog platforms, including WordPress, Blogger, and TypePad are free, and can be linked directly into an existing domain name to consolidate your overall SEO impact. In fact, many people are now using WordPress as their base website, as well as their blog. This eliminates even the standard site hosting fees.

Business blogging, or value-blogging, is all about helping others and helping yourself at the same time. I wonder if the 70% of startups that fail in the first five years are the same 70% that don’t have a blog? What’s holding you back?

Marty Zwilling

A Winning Business Keeps the Team Highly Engaged

By David Shedd

Is your team fully engaged to give their best, day in and day out? In a recent study by TowersWatson, an international HR consulting firm, fewer than 21% of employees surveyed described themselves as “highly engaged,” down from 31% in 2009. 8% admitted to being fully disengaged. Having only one-fifth of your employees highly engaged is not the hallmark of a “Winning Business.”

Other studies show that employee engagement derives from three important factors:

1. Alignment of the employee with the goals and vision of the company.
2. Faith of the employee in the competence of management and their commitment to realize the goals and vision.
3. Trust in their direct supervisor that he or she will support his or her people and help them to succeed.

It has often been said that employees rarely quit companies. Instead, employees quit their managers or supervisors by leaving the company. Mark Herbert, a consultant focused on engagement, says: “Engagement lives and dies on the front line of your business.”

Increasing positive managerial behavior and reducing negative managerial behavior will go a long way towards improving employee engagement. When your talented employees are engaged, they are able to perform spectacularly and build and improve your winning business.

Here I offer a short list of “do’s and don’ts” to get managers and supervisors started in focusing on ways to improve engagement (and to be better managers). The list is not exhaustive. I welcome additional thoughts and ideas from you. First are the don’ts:

• Don’t get angry. “Getting angry is easy. Anyone can do that. But getting angry in the right way in the right amount at the right time, now that is hard.” (Mark Twain) Anger does not belong in your managerial kit bag.

• Don’t be cold, distant, rude, unfriendly. Especially in difficult times, employees take cues from their immediate supervisors and need to hear from them. As such, your team will judge you by your action, moods, and behaviors, not by your intent.

• Don’t send mixed messages to your employees so that they never know where you stand. Keep your message simple, focused and prioritized. Too many messages and initiatives just confuse and alienate people.

• Don’t BS your team. This includes saying things that you don’t believe in. This includes hiding information and just plain lying. By the time each of us is in our early 20′s, we have all developed very well-tuned BS detectors.

• Don’t act more concerned about your own welfare than anything else. Your success will come through the success of your team. “Self-serving detectors” are also very well-tuned in most employees.

• Don’t avoid taking responsibility for your actions. You are the boss. As such, you are accountable and the buck stops with you. You are trying to develop accountability throughout your company. So, lead by example.

• Don’t jump to conclusions without checking your facts first. A few years ago, I watched in horror as a colleague of mine started screaming at an employee of his who had missed an important meeting that morning. After several minutes, the employee responded: “I apologize and should have contacted you. But, I just got back from the hospital as my mother has been diagnosed with terminal cancer.”

Here are the do’s, which are even more important than the don’ts:

• Do what you say you are going to do when you are going to do it. There is no better way to communicate the message that you are accountable for your promises and that everyone in your company should be accountable as well.

• Do be responsive (return phone calls, emails). As a manager, your team can be considered to be your customer. You want your sales team to punctually respond back to customer requests, so you should do the same.

• Do publicly support your people. Your disagreements and disappointment with your employees can be communicated later and in private. Nothing appears so hollow as your attempt to blame your team for failures.

• Do admit your mistakes and take the blame for failures.

• Do recognize your team. “You can never underestimate the power of simple recognition for a job well done.”

• Do ask and listen. “The manager of the future will know how to ask rather than how to tell.” (Peter Drucker) Some of the most dangerous words for a manager to ever say include: “But, you just don’t understand…” “Because I said so…”

• Do smile and laugh. Have some fun. But, be genuine; programmed fun and faked laughter is worse than doing nothing. When appropriate, laugh at yourself; it will humanize you.

Employee engagement is a pre-requisite for a winning business. By addressing the actions and behaviors or the managers and supervisors throughout your organization, business leaders can go a long way to enhancing the dedication, commitment, and engagement of their most important asset: their good people.

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Today’s blog is presented by my friend David Shedd, now living in Phoenix, Arizona, who is an experienced corporate executive, and a consultant specializing in winning B2B leadership. See more articles by him at http://davidsheddblog.com or contact him directly at davidshedd@cox.net.

Count Your Blessings on This Thanksgiving Holiday

If you live in the USA, today is the national Thanksgiving Holiday. But no matter where you live in the world, you should use the opportunity to give thanks for the positives in your life and your business. High on my list is the joy and satisfaction of having helped many entrepreneurs face-to-face this year, and hopefully many more by my blog reaching out over the Internet.

These last couple of years have not been great financially for entrepreneurs, but it always helps to look at the cup as half full, rather than half empty. We often forget that one person’s loss is a gain for others. Let's list a few things this Thanksgiving day that many entrepreneurs can be thankful for:

1. The economy continues to rebound. The stock market is up 7.2%, which is finally providing some liquidity relief to concerned investors and startups alike. Home prices are slowly coming back, and personal savings rates are now as high as levels last seen in the USA in the mid 1990’s.
   
   
2. Venture capital investments are returning to startups. Venture capitalists invested $4.8 billion in 780 deals in the third quarter of 2010, according to National Venture Capital Association (NVCA). The number of startups that took slices of the pie went up by 9 percent.
   
   
3. Mergers and acquisitions pace improving. According to Hugh Hoffman, managing director at Craig Hallum Group, merger-and-acquisition activity topped $2 trillion globally, up 20 percent year to date and hit a respectable $600 billion in the United States, up 7 percent.
   
   
4. New focus on a sustainable planet. Recent surges in the price of fuel, combined with the continuing evidence of global warming, have highlighted the need for alternative energy sources, and green products. Startups are springing up all over to capitalize on these opportunities.
   
   
5. Incentive to do something you love. Lots of people tell me they are sick of the corporate grind, and they long for the opportunity to take their favorite activity or hobby, and make a business of it. Now many of them are doing it. Some have been laid off dead-end jobs, and found something more exciting.
   
   
6. High quality talent available. The down side is that the unemployment rate is still high, but the upside for startups is that there is more high quality talent available for a reasonable price. You can afford to set the bar high for those key positions in your new business.
   
   
7. Office space available for a reasonable price. Remember when you couldn’t find an available storefront, and contemplated converting the deserted gas station on the corner into your office? Now you can get prime space for $10 per square foot in some cities, versus $30 a couple of years ago.
   
   
8. More time for the family. Keeping a sense of balance between work and family is always a challenge. With the workload reductions, some of you now have had the time to re-introduce yourself to your family and friends.

I trust that you can add a couple more positive items from your personal business experience this year. From my perspective, this has been a great year, for my business and my blog. I am truly thankful for all my readers, your comments and your feedback.

They have allowed me to get more exposure for my message, including the Harvard Business Review, Huffington Post, the Business Insider, and The Examiner. I published my first book this year, Do YOU Have What It Takes To Be An Entrepreneur, and my following on the social networks now exceeds 275,000.

As I suggested in the beginning, my hope is that each day I am able to bring a little more inspiration, information and education into your entrepreneurial life. So, from me and mine, to you and yours, Happy Thanksgiving!

Marty Zwilling

There are Many R’s to Motivation in a Startup

One of the keys to maximizing the productivity of your team, as well as yourself, is motivation. It has been estimated that the average team member at any given time works at less than 50% of his capacity. Thus mastering the art of employee motivation could double your chances of success over the average competitor.

While there are many books written on this subject, most entrepreneurs I know simply assume that their own vision, motivation, and drive will be adopted and maintained by partners and employees, based on a one-hour inspirational talk by the founder or business leader, supplemented a reasonable salary, and a dose of fear for good measure.

Unfortunately, it’s not that easy. Motivation has to be a constant priority and tone, focused more on the positive emotional and internal needs of a person, rather than their opportunity to simply make more money. My review of the research indicates that most experts have settled on four R’s for motivation, but I have found at least six, and you can probably add a couple more:

1. Respect. Every professional expects to be treated with respect. We all watch our leaders body language, facial expressions, as well as their words, for indications of respect and disrespect. Never forget to offer only constructive criticism, and not in front of co-workers, as a sign of respect. Show by your actions that you value their opinions.
   
   
2. Recognition. This is something that you should always do in front of co-workers. When you recognize and celebrate individual achievements, large and small, in front of peers, people feel wonderful about themselves. They feel more competent and eager to repeat the success or take on additional responsibility.
   
   
3. Reward. People need rewards to maintain their motivation, or they will start to feel that the recognition is all “show,” with no substance behind it. Cash incentives are a good start, but tokens indicating performance, like prizes and certificates often work just as well. Even intangible rewards, like lunch with the boss, can be powerful motivators.
   
   
4. Reinforcement. When a team member shows increased skills or results, following prior rewards, reinforcing that progress will result in a motivational multiplier. Reinforcement is recognition and rewards on steroids.
   
   
5. Relationships. Positive social interactions with fellow team members leads to improved job satisfaction and motivation. Inversely, people who are negative and bring negative interpersonal attitudes to the workplace will destroy the motivation of others. If not addressed immediately, these people will drive good employees to seek work elsewhere.
   
   
6. Responsibility. New responsibilities, when done with respect and moderation, prevent stagnation and challenges us to perform at even higher levels. Most people will rise to the occasion, see their progress, and become even more motivated. The best people love to learn and accomplish new things.

In reality, people motivate themselves, and all these themes are simply ways to facilitate personal motivation. The key to increasing anyone’s intrinsic motivation is to align the feedback and rewards with things they deeply value. Therefore the first step is to get to know your people, talk to them, and ask them what they are passionate about. Don’t try to guess the answers.

In all cases, it is important to provide on-going communication and training to make sure employees know what is expected of them in their role, and what constitutes acceptable and exceptional performance. Nothing de-motivates a person more than not knowing what is expected.

Use these key motivational themes to double the productivity at your startup, and make it the enjoyable and exciting place that your own vision of the business says it should be. It’s a win-win situation for everyone.

Marty Zwilling

With a Microbusiness, You Can Skip the Investor

I’m hearing more and more these days about a new type of small business, called a “microbusiness” (or microenterprise). These are usually characterized as owner-operated, with five employees or less, and less than $250,000 in sales. With the low cost of e-commence entry, and powerful Internet technologies, they require minimal capital to start, perhaps as little as $500.

I see the potential for these to become big business in this entrepreneurial and struggling economy. According to The Association for Enterprise Learning in Chicago, microbusinesses added more than 2.5 million jobs to our economy in the last two years. Microbusinesses are usually run out of the home, and range the gamut of consulting services to e-commerce.

Dal LaMagna, in his humorous new book “Raising Eyebrows: A Failed Entrepreneur Finally Gets It Right,” leads with the foundational principle of microbusinesses, which is to start small. This allowed him to learn enough from all his early mistakes to hit it big with a global beauty tools company called Tweezerman. He offers several additional principles as follows:

1. Tailor the business to you. Do you love antiquing? Fishing? Cars? Cooking? Now, think about what pursuing this passion might mean for your lifestyle. Think how you want to spend your day; where you want to live; whether you want to work with people or alone; in the morning or at night, and so on. Eliminate any aspect of your business that doesn't create your preferred lifestyle -- and will work against you.
   
   
2. Be frugal. Don't spend money you don't have. Don't invest in anything you don't need. If this means baking cupcakes in the local church basement and delivering your signature pastries by bicycle to local stores -- two dozen at a time -- do it. Take the money you make and put it right back into the business.
   
   
3. Record every expense. From the dollar you gave to the homeless guy on the way to meet a prospective client, to the new tie you bought to look professional, write down every single penny. The key to launching a microbusiness is to keep expenses under control and fully accounted for.
   
   
4. Keep a monthly profit-loss. For the first two years of your business, complete a monthly profit-loss statement. This helps you stay on top of where your business is going, where it could do better, and why it fluctuates.
   
   
5. Find free stuff. Many items needed to start and run your small business are available for free or next to nothing. Be creative. Use freecycle.com; ask friends if they have an old computer or printer; or visit a thrift shop for office furniture or office supplies.
   
   
6. Write down agreements. With a very small business, your clients sometimes make the assumption that they don't have to sign an agreement. Wrong. Get in the habit of thinking like a company founder and get promises in writing. And while you're at it, keep your side of agreements.
   
   
7. Keep it simple. When Dal first started Tweezerman, he did nothing but focus on tweezers and selling them to cosmetic counters, one store at a time, which he did very well. If you can do one thing well, don't dilute your efforts until you have been turning a large profit over a consistent stretch of time.

My net recommendation is that if you consider yourself a do-it-yourself entrepreneur, preferring to do things yourself rather than forking over money to consultants, then definitely the microbusiness approach is for you. The down side is that you business will probably grow slowly and more organically.

If you prefer to rely on others for most things, or want to get there fast, the investor approach may be the best answer, but the price is higher in time, dollars, and control. It’s your choice, but remember that the wrong choice probably won’t get you there at all.

Marty Zwilling

Making the Transition from Entrepreneur to ‘Boss’

By Mark F. Herbert

Making the transition from individual contributor to manager, or entrepreneur to “corporate” executive, is one of the most difficult shifts most of us will face in our careers. A study conducted by a national management consulting firm a few years back indicated that more than 40% of newly appointed managers fail in their first 18 months on the job!

As a consultant working with many entrepreneurs attempting to grow their businesses either for continuity purposes or for sale I see them experience many of the same issues.

In many cases these issues boil down to developing and maintaining effective relationships.Our educational system has a bias towards “technical” skills and individual achievement. Winning means getting the best grades and “setting the curve” as an individual.

Here are some of the most common mistakes I have observed in “new” managers:

1. They fail the “politics quiz.” Organizational politics are a fact of life. Don’t sacrifice key relationships because a colleague or subordinate has a talent for getting face time.
   
   
2. Don’t try to “clone” yourself. Of course you’re brilliant, that’s why you were promoted. However, good management is getting the best out of the staff you have. Improving employee performance is a process not an event.
   
   
3. Failing to communicate. You avoid giving feedback because you are sensitive to past relationships. People desperately need and desire good, balanced feedback.
   
   
4. The Sprint. Don’t try to accomplish everything on day one to validate management’s decision. Learn your staff and their capabilities. All priorities aren’t equal.
   
   
5. Trying to be Dr. Feelgood. Everybody wants something and it’s hard to say no. Special, confidential deals never stay that way. Your job is to be the boss, not their friend.
   
   
6. You’ve arrived. Management is a continuing improvement and learning process. Seek out opportunities to improve your skills and refine them.
   
   
7. You’re the star. It is very tempting to fall back into doing the “technical” things you did before. You were good at it. Competing with your staff is bad management. You need to transition from player to coach.

When you look at that list I have seen a number of those and a unique set of challenges for the entrepreneur. The common entrepreneur’s issues from my list are number 2, number 3, and number 7.

Even more so than the newly promoted manager, the entrepreneur is the business. There is a tendency to attempt to replicate yourself or in some cases turn the business over to a family member who doesn’t share your passion or acumen.

One of the things we learn in large organizations is that different leadership styles are appropriate in different stages of the business. The passion, vision, and daring of the entrepreneur often need to evolve to the calm hand and head of a professional manager.

Feedback often times is especially difficult for the entrepreneur. It is either provided inconsistently or not constructively. The business isn’t a hobby to them it is their life and others lack of “engagement” can be frustrating.

Similarly, transitioning to “coach” is difficult. Typically the entrepreneur makes all or most of the key decisions. Delegating those decisions is hard, especially without the skills to support effective delegation. Equally difficult is that some of your responsibilities will probably be have to be shared by more than one person. That can be especially difficult.

The entrepreneur also keeps much of the most critical information in their head and within their personal control. Giving up that control and trusting is hard!

As I summarized here, this transition is a difficult one. Achieving results through others is usually a critical component to long term success. As a corporate person it is the key to advancement. As an entrepreneur, if you are the business, the value leaves with you, or its ability to grow is gated by your personal skills. Either way, this is a critical transition.

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Today’s article is presented by my friend Mark F. Herbert, now living in Phoenix, Arizona, who is an experienced corporate executive, and a consultant specializing in optimizing organizational performance. Find out more about him at www.newparadigmsllc.com or contact him directly at mark@newparadigmsllc.com.

Ten Ways for an Entrepreneur to Expand His Reach

As an entrepreneur, you always need to be on the lookout for ways to expand your current business, and always on the lookout for your next big thing. The competition never stands still, and new opportunities are evolving, based on culture changes in your customers, new technologies, and new problems in the world which need to be solved.

Steven Schussler, in his new book “It’s a Jungle In There” characterized this well in relation to his own success by recommending to all entrepreneurs that you observe the world around you and make a consistent, conscious effort to ask yourself: “Is there something here I could change (by providing a service or product) that would bring me financial gain?”

He provides several examples of how he used this approach to advantage in his own career. I’ve netted out his and others to create the following basic strategy for entrepreneurial growth:

1. Apply your core competency to related markets. Look for competitors that have the same capabilities as you in a different market area, or for different customers. By utilizing economies of scale, location, and common design, you may be able to provide a better solution faster for a lower cost.
   
   
2. New products or services to existing customers. You already understand your existing customers and have a relationship with them. They know you and your brand, so this should minimize your customer acquisition cost for the new product.
   
   
3. Add services that are complementary to your product. Or add products that are complementary to your services. These could be support related, or education related, or a package of product and services for a new class of customers.
   
   
4. Extrapolate the technology you already know. With today’s rate of technology movement, you need to assume your current products will be superseded quickly. Look hard at where the technology is going, and don’t hesitate too long to kill your “cash cow.”
   
   
5. Open more locations, expand online and globally. The alternative to selling more volume more often to existing customers is to reach out to new ones with the same needs. In addition to adding physical locations regionally and globally, the cost to provide an online Internet presence is now at an all-time low.
   
   
6. Offer your business as a franchise. Franchising is essentially cloning your business, and contracting with others to run the clone. It may sound easy, but requires tremendous effort to document every process, establish vendor relationships, and monitor all stages of every implementation.
   
   
7. Merge with or acquire another business. M&A is a common way of acquiring new products and services, without the incubation time of building and testing the product. This often works best if you find a company similar to yours with great potential, but drowning in debt, or short on the necessary skills.
   
   
8. License your product to a partner or alliance. If your bandwidth is exhausted, or you lack access to a key market segment or customer set, licensing your product, adding a strategic partner, or building an alliance with a related company will help.
   
   
9. Hire people smarter than you. They will see things that you don’t see. Foster an active culture and reward program for new ideas. If you don’t, the smart people in your company will give their ideas to someone else, or leave to be your competitor.
   
   
10. Be an active part of your community. Volunteering to help your community will provide insight into current problems, challenges, and business opportunities. At the same time, you are building the credibility that future customers will pay for.

Great entrepreneurs must always be on the lookout for new products and services that people need, and at work on ways to provide these needs in exchange for fun and profit. Not looking forward or standing still as an entrepreneur means you are slipping backward.

Marty Zwilling

Startups Need the Eight P’s for Successful Funding

By Joseph A. Bockerstette, Main Street Venture Fund

As I outlined last week, trophy angel investors are always looking for trophy entrepreneurs. In many areas, not enough entrepreneurs meet the criteria, so it’s still a buyer’s market. The result is that the Main Street Venture Fund consistently has more money available than good opportunities for investment.

After considering about 200 investment opportunities over the past two years, we have established a decision making process to identify trophy entrepreneurs and startups. It consists of eight major criteria, which we call the “Eight P’s for Successful Funding”.

1. Proposition. A poorly understood value proposition causes false starts, lost time, costly mid course corrections and general frustration for all stakeholders involved. The value proposition is a short statement that clearly communicates the target customer, the customer’s problem and the pain that it causes, the unique solution that addresses this problem, and the net benefit of this solution (value derived versus relative cost) from the customer's perspective. Creating a strong value proposition requires substantial customer insight, thorough study, an understanding of the real value of intellectual property, thoughtfulness, and several iterations.
   
   
2. Potential. Once we understand the target customer and value proposition, we need to know how many of these customers exist and how often they will buy the company’s products or services. While most entrepreneurs want to prove an enormous market size potential, rarely does the entrepreneur know how many real customers exist and how many products they could potentially buy over a period of time.
   
   
3. People. There is no product idea good enough to overcome bad partners. We look for many attributes amongst the team, including communication, leadership and management skills, subject matter knowledge, business expertise, relevant experience, openness to influence, team cohesion, motivation, integrity and credibility.
   
   
4. Plan. Unfortunately, we read far more poorly written business plans at Main Street than good ones. Entrepreneurs tend to write business plans that are difficult to read, heavy on technology, and give little thought to the business model and commercialization strategy. A good business plan should be no more than 20-25 pages long and tell a compelling, cohesive and complete story about the proposed business. Repetition will kill an otherwise acceptable business plan. Supporting detail should be included in an appendix, where the reviewer may read it if desired.
   
   
5. Profit. The financial plan should include a profit and loss statement, balance sheet, and cash flow statement that ties together and is consistent with the business plan narrative. This area can be especially challenging, as the skills required to complete a competent financial plan often exceed the entrepreneur’s ability. Particularly important is the capital structure plan that the business intends to follow as it moves toward commercialization.
   
   
6. Price. We see many entrepreneurs who grossly over value their company when attempting to obtain outside investment. The trophy investor wants to know how much money is needed, where the money will be spent, how long it will take to spend it, the long term strategy for future spending and funding, and how the valuation will grow over time. Planning for valuation growth and investor exit should begin prior to the investment.
   
   
7. Participation. Main Street members consider our involvement in our portfolio companies as important as our investment. A Main Street member typically joins the board of directors and actively participates in corporate governance and as an advisor to management. If needed, we will also take a more active role in the company in the area of business planning and execution monitoring.
   
   
8. Partnership. Main Street has a desired investment term of three to five years. While our members invest individually, their interests are represented collectively through our board of director seat. Our board member monitors the company’s progress monthly and reports back to the members. We have learned that even with successful relationships, the time, attention and support required to create a great company is inevitably greater than we had estimated.

So, if you want to attract a trophy investor, first do your homework and hone your skills on these eight P’s. Then you too can be a trophy entrepreneur, with dollars raining down on you.

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Today’s article is presented by my friend Joseph A. Bockerstette, now living in Phoenix, Arizona, an active investor, business advisor, and a founding member of the Main Street Venture Fund. You can contact him directly at jbockerstette@me.com.

Your Business Will be Run by Gen-Y – Get Over It

A lot of executives have noticed that the workplace is being flooded by a new generation of workers, and they are questioning who will be the winners, and who will be the losers. In reality, Gen-Y is here, and they are already inheriting our businesses, so let’s figure out how to make them winners, or we will all be losers.

By definition, Gen-Y is the generation born between 1977 and 1995 (synonymous with Millennials). There are about 80 million of them, and nearly two-thirds of them are already in the work force with full- or part-time jobs. They will inevitably be taking over after Gen-X from the baby boomers, who are now running most companies, but pushing 60.

Morley Safer of CBS News 60 Minutes fame, has long been the negative voice with his tongue-in-cheek quotes like “They were raised by doting parents who told them they are special, played in little leagues with no winners or losers, or all winners. They are laden with trophies just for participating and they think your business-as-usual ethic is for the birds. And if you persist in that belief, you can take your job and shove it.”

At the other end of this thought spectrum is Jason Ryan Dorsey, who last year published “Y-Size Your Business,” on how Gen-Y employees can save you money and grow your business. Naturally, he is a member of Gen-Y himself, and he presents an insider’s perspective on how these career starters bring tremendous potential to the workplace.

He argues that the generational disconnect that many employers are experiencing with Gen-Y is pretty standard. Every new generation that enters the workforce causes criticism, frustration, and stress for the generations already employed. I think it’s pretty obvious that he is right.

Although every new generation causes friction and head shaking in the workplace, Ryan points out three factors converging on our current workforce that are extraordinary – factors that are radically raising the stakes for companies to figure out how to best utilize Gen-Y:

• The economic downturn is still affecting the national and global economy. At many companies, employee costs are the largest operational expense. Gen-Y is often the least expensive employee to hire, especially when you factor in benefits. The challenge is knowing how to employ them, and how to manage them.

• Gen-Y’s have a fundamentally different attitude toward work. Gen-Y is the first generation to enter the current workforce without any expectation of lifetime employment. Earning their loyalty means doing things differently, but not necessarily paying more. Gen-Y has to feel a fit, and then they are intensely loyal.

• A four-generational collision is happening in the workplace. For the first time ever, four distinctly different generations are working side by side – Matures (born before 1946), Boomers (1946-1964), Gen X (1965-1976), and Gen-Y. When generations don’t work well together, operational costs go up and effectiveness goes down.

Safer and many others are convinced that the workplace has become a psychological battlefield and Gen-Y has the upper hand, because they are tech savvy, with every gadget imaginable almost becoming an extension of their bodies. They talk, walk, listen, and text - sometimes all at the same time.

I don’t believe it should be viewed as a battlefield, and I’ve written previously about how to productively lead Gen-Y, and how to capitalize on the change they bring to the workplace. In fact, I’m convinced that the current tough economic times will be the reality check that many of them need to balance their idealism, and solidify their work ethic.

You have an opportunity to make an entire generation of 80 million people your competitive advantage early, or just wait until they take it away from you. Why not make it your strategic initiative, and a positive legacy for yourself? I’m accepting the challenge. How about you?

Marty Zwilling

Success is More Inspiration and Less Perspiration

There is no doubt that both inspiration and perspiration are always required in a startup. Yet many people seem to be stuck on one end or other of this equation – all perspiration with no dream, or all inspiration with no reality. Success is the right balance of both for fun and profit.

Aspiring entrepreneurs ask me why their great idea hasn’t sold; they talk about it endlessly, and they expect others to do the development, finance, and marketing work for them. Those at the other extreme don’t look up from the grindstone long enough to notice whether all their work is producing sweat equity or just sweat.

Starting a business may be fun, but it’s not easy. No matter how many times you’ve done it – the stresses are tremendous. It can also be very inspiring, as you watch your dream morph into reality, or as you feel each little element of success:

• Watch your team develop new skills. There is nothing more inspiring than seeing the results of your mentoring and leadership. Your own learning should be the biggest inspiration of all.

• Your solution fills a real market need. Truly satisfied customers are a joy to every business person. Watching the orders come in, or the product moving off the shelf, is the feedback you have been looking for.

• A business model that works. You have figured out how to undercut your competitor’s price, and still hold your margin. Taking that first salary after a long dry spell is an inspiring moment, and a great celebration with friends.

• Love that sustainable competitive advantage. Working on that unique design, or completing the breakthrough for an innovative patent, are moments of inspiration that you will never forget, especially if they become your competitive edge.

• Bask in the success as it happens. Maybe it’s that first customer testimonial, or that first congratulations from someone you respect, or seeing your story in the newspaper. You knew all along that you could do it.

Of course, never forget those ongoing perspiration items that seem to haunt you every day:

• Create intellectual property. Incorporate, register your domain name, trademarks, and copyrights, then patent if possible. Reserve the same names on the leading social networks and blogs.

• Marketing is top priority. Start even before the product is ready. Word of mouth advertising and viral marketing cost big bucks these days so budget for it. It takes leverage, effort and money to get in the public eye and stay there.

• Reign-in expenses. Review every expense with a miserly hand. Do not delegate this task! Make every effort to do things “in house”, rather than rely on outside services, accountants, and law firms.

Though innumerable factors are a part of every success, it’s arguable that the ratio of effort to inspiration can make the difference between just spinning wheels, on the one hand, and ideas that never come to fruition, on the other.

Some say the Internet is a metaphor for our brains. Both are networks. Maybe inspiration is feeding your brain as much information as possible and then figuring out how it connects when the time comes. Perspiration is the lubrication to keep your senses open to all the possibilities.

Marty Zwilling

Pick the Right Investor Type for Your Startup

If your startup desperately needs an investor, you may not care if the investor is a so-called “angel” investor, or a venture capitalist (VC). The money is the same color in either case. But I have found that making the right choice at the right time can have a major impact on your long-term success, and the decision process is complex.

The basics are simple. Angels are typically high net-worth individuals, investing their own money, interested more in early or “seed” financing of amounts starting as low as $25K. Venture capitalists are professionals, investing other people’s money from a fund, interested mostly in later rounds, in chunks of money from $2M up. Between these extremes is a large overlap.

But beyond the numbers, there are many factual and subjective issues that you should be aware of before you step into the game. These include the following:

1. Investment control. Angels typically have simpler term sheets, don’t squeeze so hard on valuations, and are more realistic on time-frames. VCs tend to exert more control over the team and assert financial control over the company, its strategy and exit plans. Ultimately a larger VC investment can also narrow exit options.
   
   
2. Type of startup. Venture capitalists seek to fund businesses with the potential to be enormous. In addition, most venture capitalists want startups that have clearly defined economies of scale (such as software companies) vs. ones that scale linearly with some factor (such as service companies). Angels are less type-focused.
   
   
3. Expected return rate. Most venture capitalists tell you that they look for 30% annual return, or 10 times initial investment in 3-5 years. Another rule of thumb is a target of 50% IRR (a discounted cashflow calculation). Angels will look at lesser opportunities, but both recognize that many ventures fail, meaning the targets are high to improve the average.
   
   
4. Total money needed. I already mentioned that if you are looking for a specific raise of less than $2M, you are in angel territory. But it goes further than that. If the total money you're looking to raise over the life of your company to be cash-flow positive is greater than $3M, or you will likely need money to scale, you need to work the VC territory.
   
   
5. Team experience. Successful serial entrepreneurs usually find it easier to raise money from venture capitalists. If you're a first-time entrepreneur, that doesn't mean you can't raise VC money, but you're going to find it more difficult getting VC traction.
   
   
6. Founder network. If you've never met a venture capitalist before and none of your colleagues have built companies with VC funds, you probably won’t get VC traction either. In contrast, if your best friend's father is the CEO of a Fortune 1000 company, you might readily find a valuable set of angels.
   
   
7. Value-add. This is the most debated, but most important item. The value-add of both angels and VCs is totally dependent on the individuals involved, but on average VCs are likely to add more value than angels. They focus on specific business areas, have multiple deals running concurrently, understand deal flow, and usually have more current insights, connections, and resources.

Personally, I think it all comes down to the investor fit and the stage of the start-up game you are in. It’s definitely better to have people who have built businesses on your side. If you plan to exit in the near future, it’s important to have investors who have backed high-growth businesses.

For all cases, relationship is the key ingredient to a successful deal. It is very important to be able to communicate with your investors openly and honestly. If they respect and trust you as a person and you respect and trust them, it will be much easier to weather the inevitable storms. It’s easy to take any money that’s green, but in the end it can be more costly than it’s worth.

Marty Zwilling

The Do’s and Don’ts of Today’s Business Networking

I often recommend business networking as the most effective way for a startup founder to find investors, advisors, and even key executive candidates. But what if you are an introvert, or new to this game, and don’t know where or how to start?

I have learned over the years that there is an etiquette to this process, just like there is for social networking. Here are a few of the “do’s”:

• Post your profile on LinkedIn and Twitter, and join in relevant discussions. There are other networks that also work, depending on where you are in the world, like Ryze, Plaxo, and Facebook, but setting up an account on MySpace probably won’t help you.

• Join and actively participate in local business organizations. Business groups like TiE-The Indus Entrepreneurs and EO-Entrepreneurs Organization are places to meet people you can help, as well as people who can help you. Remember it helps to give a little to get something back. Another place to start is the local Chamber of Commerce.

• Get introductions from existing business contacts. Start with the people you know, who know your work, and would recommend you to others. It isn't always the first introduction, but the friend of a friend that may be the one that pays dividends.

• Volunteer to help out with entrepreneur activities at your local university. All universities love and need to get help from people in the “real world” for coaching and judging activities in their Entrepreneurship and MBA programs. In return, you will meet or be connected to many people who can help you.

• Attend an investment conference. These events are swarming with potential investors, and this is the forum where they are actively soliciting new opportunities, so don’t be shy about handing out your business card at breaks, lunch, mixers, or scheduled activities.

Join a local investment group. If you can meet the SEC “accredited investor” criteria ($1M net worth or $200K annual income), this is a great way to be seen by potential investors as peers before you need money. Plus you will see how the process really works from the other side of the table – the best preparation you could have for your own approach later. In most cases, these groups don’t require that you invest in others, as a condition of membership.

If all of these are obvious to you, then you are already on the right track, and you probably wouldn’t consider doing any of the “don’ts.”

• Don’t do cold calls or email blasts of your resume and business plan to potential investors.

• Don’t corner and barrage that heavy hitter you heard about with your life history at a social gathering.

• Don’t send your unfinished business plan unsolicited to every VC or investment group you can find in the phone book, just to see if they like the concept.

• Don’t hand out your business cards to everyone in the room, in hopes that one will be impressed with how unique and expensive it looks.

• On LinkedIn, don’t complain to everyone that you are limited to only 3000 invitations, and request them to send you an invitation to become friends.

Back on the positive side, I like to say, especially for us introverts, that networking is more about listening that it is about talking. Believe it or not, most successful investors have big egos, and will probably remember you better if they do most of the talking at first. Nevertheless, have your elevator pitch honed, and don’t be shy about giving it. Don’t forget your enthusiasm, and have fun, but remember your manners!

Marty Zwilling

Five Reasons for Setting Startup Strategy Early

All too many startups are founded simply on the basis of a new and exciting technology invented by an industrious technologist. This is the origin of the “solution looking for a problem” and “if we build it, they will come” syndromes, which result in surprise and frustration waiting for funding, and waiting for customers that don’t materialize.

The right approach is to start by solving a problem causing real pain to a large number of customers willing to pay real money for a solution. Develop the solution with your technology, and develop a strategy to maximize your impact in the marketplace. I’ve talked about the solution part several times, so this article will focus on the value of a strategy.

Here are five good reasons for setting the strategy early, as summarized by Mark Thompson and Brian Tracy in their new book “Now, Build a Great Business!” They emphasize that before the “What” should come the “Why?” Although their book is written for businesses of all sizes, I believe the principles apply especially to startups as follows:

1. To increase return on equity invested. The first purpose of a strategy is to organize and reallocate your resources to increase return on the amount of money invested in your startup to-date. It is to earn more bottom-line profit-ability than a random walk.
   
   
2. To position yourself relative to your competitors. Business strategy allows you to change customer perceptions and responses to your product or service offerings. Don’t simply become a “me too” offering, but work on innovative approaches and changes in customer preferences that may not yet be covered by competitors.
   
   
3. To capitalize on strengths and opportunities. You must take advantage of those special team talents and product capabilities that make your startup superior to your competition, and do things that your competition cannot duplicate in the short term.
   
   
4. To form a basis for making better decisions. All strategic and business thinking must lead to immediate action to increase sales and profitability potential, relative to your competition. No strategy leads to no decisions or poor decisions.
   
   
5. To attract investors and financing. Look at your startup through the eyes of a potential lender or investor, and create a strategy and plans that make your company an attractive place to invest. The startups that typically receive the most dollars in first-time financings are ones that have at least four things going for them:
   
   
   • Experience in related fields. Investors highly prize gifted leaders who are business veterans with experience in similar ventures, who can move quickly and effectively.
     
   • Great business model. Your offering should open new, large markets in ways that are tough for competitors to copy quickly.
     
   • Scalability. Show that your business can build the necessary products and services rapidly and achieve economies of scale with minimum capital and labor.
     
   • Intellectual property (IP). Patent protection is no guarantee, but it does improve the chances of building businesses that have a sustainable competitive advantage.

Your business strategy starts with your value proposition and core competency. Most startups that find themselves struggling have a weak value proposition. This is why your value proposition is a critical piece of business strategy.

A successful startup, like chess, requires proper strategy, risk assessment, and effective decision making. Your focus on the end goal will dictate the choices you make, the ability to stave off threats, and lead to your success. Now it’s your move.

Marty Zwilling

Splitting Startup Equity for Your Piece of the Pie

One of the first tough decisions that startup founders have to make is how to allocate or split the equity among co-founders. The easy answer of splitting it equally among all co-founders, since there is minimal value at that point, is usually the worst possible answer, and often results in a later startup failure due to an obvious inequity.

Another common “failure to start” situation I see is one where the “idea person” insists that the idea is 90% of the value (and 90% of the equity). In the real world, the "idea" is a very small part of the overall equation. A startup is all about "execution" - meaning the equity should be allocated based on the value that each partner brings to the table in each of these dominant variables:

1. Experience running a startup business. Running a new business starts with building a solid and credible business plan, working the investor funding process, and building an organization from nothing, with minimal resources. Successful Fortune 500 executives need not apply, since most would have experience with any of these tasks.
   
   
2. Domain expertise and connections. If you are recognized as an expert in the business area of your startup, with a good reputation, and you know all the key vendors and customers, your value is huge. Building a product doesn’t get it distributed and sold. Expertise can be marketing, technical, financial, or sales.
   
   
3. Pre-existing intellectual property. Ideas are not intellectual property, until they have been converted into patents, trade secrets, trademarks, or copyrights. In many cases, one founder has started earlier and brings an important completed piece of work to the table, and that can have great value.
   
   
4. Sacrifice and time commitment. A part-time commitment, while holding down a “real” paying job, is obviously not the same as a full-time executive role, especially if the cash compensation is nonexistent, deferred, or at high risk.
   
   
5. Funding. Providing the major funding source for an early-stage startup is a totally different dimension, but it usually trumps all the items above in demanding some equity. For purposes of commitment and business decision making, I always recommend that execution partners retain control of at least 50% of the equity.

An arbitrary, but perhaps rational equity factoring approach would be to assign each of these five items as 20% of the total, and allocate equity based on each partner’s relative contribution to each. For example, if your rich uncle is providing all the initial funding, but has no active business role, it might be smart to offer him a 20% slice of the pie.

Equity allocation is usually the first point in a startup where outside help should be considered (legal counsel, potential investors, startup advisors), as they may be able to provide experience and more importantly, an unbiased view that the entire team can trust.

An important key is NOT to dodge the discussion up front, come to some agreement quickly, and write it down. If you and your potential partners can’t get through this discussion in a timely fashion and come to agreement, then it’s unlikely that your startup can ultimately survive anyway. Startup decisions only get harder later, never easier.

Even still, regardless of the initial equity split, you should seriously consider vesting your founders shares over at least two years. This means they will be metered out month-by-month, and a partner who changes his mind or defects early will not walk away with half the company.

The next big challenge for a multi-partner startup is the allocation of roles. Who will be the CEO, CFO, and CTO? The same variables apply, but here skills and experience are paramount. If you are an inventor and have the key patent in hand, that doesn’t mean you should be CEO. Of course, holding key assets and money always provide leverage to management rights as well as economic rights.

All partners should never forget that their allocated shares are only the beginning, and will be diluted proportionately when outside funding is later required from angels or venture capitalists. Investors will be quick to remind you that a small percentage of something is worth more than 100% of nothing. The same logic applies to splitting equity with co-founders.

Marty Zwilling

Trophy Entrepreneurs Can Land Trophy Investors

By Joseph A. Bockerstette, Main Street Venture Fund

Angel investing in most parts of the country remains a relatively informal and unstructured process. The depressed economy has dampened the angel community’s appetite, making the identification of the trophy investor more important than ever. Professional angel investing takes time, knowledge, skills and resources. The trophy investor understands these challenges and has developed a professional process to manage his investments.

Main Street Venture Fund LLC, an angel fund of about 25 private investors, was formed by Ruffolo Benson LLC in northeast Indiana with the intention of bringing together area entrepreneurs and private investors to create economic value for the region. I will share several of our group’s insights from the past two years.

For an angel investor, it’s a buyer’s market. At Main Street, we consistently have more money available than we have found good opportunities for investment. The ideal angel investor possesses a variety of personal characteristics that likely have contributed to successful achievements in his or her own careers. In seeking the trophy investor, consider these traits:

• Financial capability. The investment amount under consideration should be comfortable for the angel investor. The investor must see this class of investment as completely discretionary, where all of the money may be lost, but the experience will be one that the investor benefits from and enjoys nonetheless. If the investor stresses over the investment, the interests of the investor and entrepreneur can easily grow at odds with one another.

• Business wisdom. Prized angel investors not only contribute money to an opportunity, but also important wisdom acquired from prior experience in areas such as stakeholder relations, employee hiring, and strategic planning. Ultimately, it’s this intangible capability that can add the most value to the company.

• Emotional maturity. Entrepreneurship is inherently full of mood swings. A trophy investor is a great coach and mentor, sometimes providing the only shoulder an entrepreneur can cry on during difficult times. Good investor/entrepreneur relationships often grow informally into regular communications covering a wide range of topics. This mentoring can be particularly useful to the entrepreneur working through the personality issues that tend to dominate start up companies.

• Expertise. Along with business wisdom and emotional maturity, the trophy investor will possess specific expertise in the business. Some angel investors only invest in industries where they have knowledge and prior experience. The more industry experience an investor has, the more useful she can be.

• Network. The trophy angel investor typically participates in networks of other angel investors and venture capital firms that are available for evaluation, feedback and syndication. This access can be extremely valuable to an entrepreneur attempting to find additional funding.

As we have considered about 200 investment opportunities over the past two years for the Main Street Venture Fund, we think of our decision-making as a process based on eight major criteria, which we call the “8 P’s for Successful Funding.” I’ll be outlining these in a follow-on article.

Successful entrepreneurs have many skills that play important roles at different times during a company’s life cycle. The skills required for obtaining funding, such as business plan writing, pitch presentation and group communication are different than the skills needed to grow and operate a successful business. Entrepreneurs who ignore their weaknesses and hope investors don’t notice are making a mistake. Landing a trophy investor requires the personal skills, competency, integrity and experience that comes from being a trophy entrepreneur.

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Today’s article is presented by my friend Joseph A. Bockerstette, now living in Phoenix, Arizona, an active investor, business advisor, and a founding member of the Main Street Venture Fund. You can contact him directly at jbockerstette@me.com.

Startups are Low Risk Compared to Work-at-Home

If your confidence is low about starting your own business, and you are tempted to “reduce the risk” by signing up for one of the many “work at home” startup offers you see, think again! These offers that you see on every social network and Craigslist are invariably scams.

The problem is getting worse. To stem the tide, the web giant Google late last year launched a legal battle against more than 50 companies that allegedly infringe upon the Google name to promote "work-from-home" scams. Their lawsuit came less than one month after a separate class action complaint was filed against one of these companies for a work-at-home scheme.

My definition of a scam here is any deal that wants some sort of cash payment before you can start "making money". Typically you need pay a registration fee; or buy a starter kit, training materials or a database of hot leads. Take that as the base warning flag - you should never have to pay money to work!

If you are still tempted to beat the odds, and would like to be convinced that yours is the one-in-a-thousand “real” offers, here are a few more action items you should consider before you commit:

1. Contact the company. Try to find out the company name and contact information. If there is only an email address, they are likely not a legitimate business. Test the contact info. If it’s an 800 phone number, listen to see if the ringing tone changes while you're waiting to be connected: that’s a giveaway to calls diverted to an overseas base.
   
   
2. Ask for an interview. Ask yourself what kind of company would hire someone based on an e-mail, rather than a face-to-face or phone interview. If the company does not require an interview, as a potential employee or contactor you have a right to ask them why. You can also ask them what kind of screening they do for their employees if they do not interview them.
   
   
3. Check company location. Is the company overseas, or have no location specified? Beware of companies or individuals overseas who ask you to cash money orders or checks and offer to let you keep a portion - these are always scams.
   
   
4. Google name or details. An Internet search could give you revealing information about the company or let you know how their scam operates. It is wise to do an Internet search of a company before you begin to work for them or before you send a payment. An Internet search may show feedback from other people who have been scammed by the company.
   
   
5. Check posting frequency. Many scammers use an automated spamming program to post jobs repeatedly and throughout different cities. If you notice a posting that is re-posted every day or multiple times a day, this is usually a telltale sign that the post is a scam.
   
   
6. Pay by credit card. This one may sound counter-intuitive, but liability for online credit card purchases is usually limited to $50, if you are dissatisfied and report the transaction. Some credit card issuers will even waive the $50 deductible.

Of course, it goes without saying that you should never provide personal information, like social security number, bank account info, or credit card numbers to anyone to secure a job opportunity. The final test is that when something sounds too good to be true, assume it is a scam.

So even if your confidence is low about running a business, remember that you can actually reduce your risk by doing your own startup, compared to the other “low risk” alternatives on the Internet. Keep your wits about you, and save a friend tomorrow by helping Google clean up the problem today.

Marty Zwilling

Ten Ways to Differentiate Your Customer Service

A while back, I wrote about the importance of a “sustainable competitive advantage,” and outlined the business plan value and limitations of patents and competitor feature comparisons. But once you start selling products, all of these pale in comparison to your level of customer service.

I agree with John Spence, in his book “Awesomely Simple,” that in a world of nearly limitless product options and highly educated consumers with instant access to price, features, and benefits of almost every product, delivering consistently superior customer service is the only differentiator left for creating loyal and engaged customers.

Here are the top ten suggestions from John and others for how to create a culture of extreme customer focus in your organization:

1. Create a customer service vision. Much like creating a vision statement to direct the organization, you should also create a clear and compelling “customer service vision” that describes the level of service your organization aspires to deliver.
   
   
2. Exceed customer expectations. Show a relentless commitment to exceeding, not just meeting, expectations. Customers can’t tell you how to exceed their expectations, but they know it when they see it, they remember, and they tell their friends.
   
   
3. Continuous customer service innovation. Many companies have an ongoing product innovation focus, but rarely think about customer service innovations. Define specific innovation objectives and rewards for improving the customer experience.
   
   
4. Create superior customer value. Focus on creating superior value for your customers, and they will love you. This means know your competitors, technologies, and alternatives available. Match your offerings to your target customers better than anyone else.
   
   
5. Own the “voice of the customer”. The only critic whose opinion counts is the customer. Create strong, trusting relationships with your customers. Solicit feedback, communicate that feedback to the entire organization, and then be sure to take action on the feedback.
   
   
6. Be the expert on delivering superior customer service. Find out everything you can about how to deliver great customer service. Steal the best ideas, benchmark against the top performers, and make improving customer service a core competency.
   
   
7. Train every employee to be a customer service champion. Empower employees with the tools, training, equipment and support they must have to deliver excellent service consistently. Reward and praise those who deliver, and deal quickly with any employee who does not embrace the service values.
   
   
8. Destroy barriers to delivering superior service. Look at all systems, policies, procedures, reports and rules. Wipe out anything that creates roadblocks or frustrations in the effort to delight and amaze the customer. Stupid rules that make it hard for employees to serve superbly can kill your business.
   
   
9. Measure, measure, and communicate. Create a clear, specific, well-thought-out and over-communicated program for systematically collecting and communicating the most important customer service delivery measurements to the people who can then act on them. Make it easy for your people to win.
   
   
10. Walk the talk. Every level of the organization, starting at the very top, must be a living example of your service strategy. If you do not deliver excellent service to your internal customers—promptly returning phone calls, showing up on time for meetings, and acting professionally—there is no hope that your front-line people will deliver great service.

Sustainable competitive advantage was once based primarily on characteristics such as market power, economies of scale, technology lead, and a broad product line. The advantage today has shifted to companies whose customer focus is superior. As a startup, you have the opportunity to lead. Use it, and don’t lose it.

Marty Zwilling