A Successful But Unsatisfying Startup is a Failure

It’s sad when the startup is “successful,” but the founder still feels totally unsatisfied. I see it happening all the time. The business is a winner, but the family or other relationships are broken by the stress. Or the entrepreneur started down this path to be their own boss and change the world, but find they are now answering to many more people, with nothing really changed.

I was just reading a new book, called “The Plan,” by John McKee and Helen Latimer, which focuses on the difference between being “successful” and being “satisfied” in your personal and professional lives. They start by asserting that many people feel more or less successful, but far fewer, even the successful ones, feel satisfied.

Their conclusion is that you need a plan for your life, as well as your business, and they discuss in detail six steps to get there. If you are an entrepreneur contemplating a startup, and you want both success and satisfaction in business, I recommend you complete these steps before you start any business plan:

1. Identify personal gaps. Find the gaps between the life you’re living and the life you dream of living. Look at the gaps that may exist in three key life areas: the personal/family side, the career side, and the financial side. It can be difficult to be honest about some of your own character traits. People often behave in ways they don’t understand.

2. Determine your purpose. Your purpose defines what you stand for. This is what should guide your entrepreneurial ambitions and dreams, gives you a picture of where you are going, and help you as you set the goals. Without purpose, you certainly will find yourself feeling unsatisfied even when you achieve business success.

3. Assess your strengths and weaknesses. Most of us have a fairly good idea of our weaknesses. Few of us take the time to really understand our strengths. Review your natural talents and build on the talents you’ve developed. You will see exciting stuff – new business opportunities, new directions.

4. Describe your dream. Many of us are clearer about what we don’t want that what we do want. Use visualization to create a very detailed picture of your dream, and write it down to see if it still makes sense. Feel what it would be like to have, be, or do what you want, to follow your purpose.

5. Create your path. Here the solution is to create short-term milestones. Having a strong desire for something is not enough. Your desire needs to be so clear that you can see each step you need to take to reach it. Taking these steps is absolutely essential and separates those people who succeed from those who don’t.

6. Live your best life. With the personal life plan complete, the most important step is to implement it. This is the time to have faith in yourself and begin to move towards the life you dreamed. If a business is in that plan, now is the time to start your business plan. That’s the only way to enjoy both a high level of satisfaction and success in both.

Even with all this, failures do happen. In the long run, the difference between success and failure can ultimately hinge on how you handle a failure. Don’t just repeat it in a different context, but do the work to understand it, and alter your plan. Try again – as many times as it takes. No matter how daunting. Step-by-step, day-by-day, you can get closer to your goal until you attain it.

Successful but unsatisfying professional careers are one of the primary reasons that people decide to become entrepreneurs in the first place. Thus it makes sense that before you start down the entrepreneur path, you would do some extra work to make sure you are not about to fail one more time. The last thing that this world or you needs is another successful business failure.

Marty Zwilling

How to Recognize Dysfunctional Startup Leadership

Founders almost always cite lack of money as the reason for failure, but if you look deeper, I believe the reason is more often about dysfunctional people and leadership. Sometimes it comes right back to the founder, in terms of a malaise often called “Founder’s Syndrome.” A few years ago I was intimately involved with a promising startup that taught me about this issue.

I’ll be short on specifics here, to protect the guilty, but I hope you get the idea. It’s not a disease, but it can kill your startup. You can find a more complete discussion of Founder’s Syndrome on Wikipedia, but here are a few of the “symptoms” I observed in the Founder and CEO in this case:

• Advisors and staff hand-picked from friends and connections. Personality and loyalty are apparently the key criteria, rather than skills, organizational fit, or experience. The executive is looking more for cheerleaders, rather than people with real insights and ideas.

• Reacts defensively and talks constantly. Sometimes it's time for quiet listening rather than talking. A strong and confident leader will always realize that a defensive response before the input message is complete does not impress investors, nor anyone else on the team.

• Staff meetings are for one-way communication. This Founder holds staff meetings only to report crises, rally the troops, and get status reports on assignments. There is no concept here of team strategy development, and shared executive agreement on objectives.

• With no input and no “buy in” from the team, sets extremely ambitious objectives. These objectives are set based on the desires and dreams of the Founder, with no recognition of technical realities, costs, or time required.

• Over time, becomes more and more isolated and paranoid. The first clue is some veiled comments about the motives of staff members, advisors, and investors. These become more specific as the situation gets more dire, to the point where key members begin to desert the ship in disgust.

• Highly skeptical about planning, policies, and advisors. Claims "they're overhead and just bog me down". Founder perception is that his experience is more applicable than the input of others, and formal planning and policies are just a way of introducing unnecessary bureaucracy.

In the beginning, we all found our startup Founder to be dynamic, driven, and decisive. He had a clear vision of what his organization could be. He seemed to know his customer's needs, and was passionate about meeting those needs. Just the traits one would expect for getting a new organization off the ground. However, he had other traits, including the ones listed above, which became major liabilities.

The undoing of the company began when a potential investor, after months of search, was ready to put up $1M, but made it clear that his firm would likely need to replace the Founder with someone with more credentials and experience in this industry. With that revelation, the Founder killed the investment deal, and every other potential deal which raised the same issue.

Of course, no situation is this simple. There were product development problems, pricing problems, and early customers who demanded more features and delayed contractual payments. The ultimate result was a startup founder who exhausted his personal funds, drained the investments capability of friends, and drove away the team one by one.

For me, this is a most frustrating and difficult problem for any advisor or team member to deal with, since communication and learning can only occur when someone is open and listening. If any of you out there have seen this, or have some experience or ideas on how to deal with this situation effectively, let me know. You can be a hero if you have the cure.

For all you Founders out there, if you find this article anonymously taped to your computer, it might be time to take a hard look at yourself in the mirror. We can’t change you, but you can change yourself. It could save your startup!

Marty Zwilling

Women In Business Catch Up After The ‘Mancession’

It looks like women have caught up with men in numbers in the workplace. For the first time in history, women in the USA now outnumber men in the workforce, and there are now more women in supervisory positions than there are males. The question is whether they will handle the downside of working any better than men.

According to an article by Ella L. J. Edmondson Bell, PhD, titled The 21st Century Workplace -- Are Women the New Men?, the economic downturn has hit men harder. They held nearly 80 percent of jobs that have been lost during what is now being called the "mancession." Will women now inherit the stress, pressure, exhaustion, burn out and heart attacks commonly associated with male leaders in business?

Some predict that this new female-dominated workplace will mean a softening of the corporate culture, with more benevolent leaders. Others foresee just the opposite. Ella says many women don't want to be seen as "soft" -- and others simply aren't. No one would call Carly Fiorina, the head of Hewlett Packard from 1999 to 2005, a wilting lily. According to her memoir, Tough Choices, she was sometimes referred to as Chainsaw Carly.

All this is especially relevant on the entrepreneurial side, since statistics show that women are starting businesses at more than twice the rate of their male counterparts. Some would argue that the growing success rate of women entrepreneurs shows that they are resourceful, and better able to succeed, despite the odds.

While I’m sure we will continue to see progress on the female side, I predict that they will struggle with the same major challenges faced today by men. These include:

1. Funding your dream. Raising money is hard, whether you are counting on friends, investors, or banks. I rarely see women at angel investment groups, either asking for money, or offering to fund new ventures. Men seem more focused on this one.

2. Need for increased confidence and mindset skills. Many women and men are paralyzed by perfection, plagued by pessimism, and the need to satisfy others, rather than themselves. We need more women leaders.

3. Motivation to succeed. Every entrepreneur needs to love what they do, and believe so strongly in their product or service that they can weather the tough times. On this one, it’s easy to spot the ones with passion, from either gender.

4. Manage time and priorities. Women, often more than men, try to do too much. It’s hard to balance the continual demands of the business, personal relationships, and home life. Every entrepreneur needs to prioritize the important tasks ahead of urgent tasks.

5. Never stop learning. After you start your business, the learning really begins. True entrepreneurs look at failures as their best learning experiences. Networking, and using your network is the next most important element of learning.

I don’t see any challenges which are so gender specific that they can’t be overcome by any entrepreneur. Yet I don’t think women should be convinced that the battle for equality is almost over. There is still the question of why there are so few women in high places, and why the average income for women in business is about 68% of men’s income.

What I am hoping is that women will not just be the new men, and suffer from the same maladies and limitations. I’ll be looking for women to create the “new business culture” that every worker wants – better role definitions, more effective and productive leadership, and better work-life balance. That would make women entrepreneurs the new women, rather than the new men!

Marty Zwilling

6 Tips for Services Startups When Profits Plateau

A good many startups I know have been “successful” over a couple of years in overcoming the challenges of starting the business, including incorporation, services development, funding, and setting up operations. Yet they still haven’t achieved a healthy growing profit, even though this was one of the main reasons they went into business for themselves in the first place.

It’s no fun on this plateau, just “making payroll,” and watching some employees make more then you as the founder. At this stage you were expecting to be working on creating a good business valuation to attract future buyers, or at least funding college accounts for your kids.

If you are in this category, first know that you are not alone, but then you need to take a look at the advice given by Patricia Sigmon in her new book “Six Steps to Creating Profit: A Guide for Small and Mid-Sized Service-Based Businesses.” I recommend her six tried-and-true tips to deal with the challenges that may be holding back your profits:

1. Stay visible and connected. It’s important to stand up to competition and wear your reputation on your sleeve. Accreditations, licenses, and certification – for your business or for individual employees – can set you apart from your competition. Take your reputation online, utilizing social media, your website, and a blog to connect to clients and make strategic alliances.

2. Maximize cash flow. One of the best ways to achieve a stable cash flow is to offer prepaid retainers or ongoing payment plans. Maintenance contracts are another great way to create a brand-new revenue stream. Consider once-a-year or once-a-month contract renewal fees, and manage credit payments to avoid fees or to take advantage of discounts and better terms.

3. Streamline management costs. Create a user-friendly system for employees and be sure to build in back-office, administrative time into your project fees, hourly rates, or ongoing charges. Automation will allow your business to run more efficiently, and will streamline your management overhead.

4. Raise the marketing bar. Today, marketing is all about immediacy. Give your business an instant presence through online networks, including Facebook and LinkedIn. Set up group meetings, sales presentations, and special promotions using webinars, webcasts, and podcasts, rather than travel and personal meetings. Don’t forget to measure all of your marketing efforts to see which ones are indeed cost effective.

5. Make everyone a salesperson. Ask employees what they would do to grow your business, fix business issues, or cut costs. Mix things up. Break the mold of the “rigid job description,” and open the door for employees to be involved in sales, profit-generating actions, and idea development. Reward employees who make an extra effort to represent the company inside and outside of work.

6. Change the rules of operations. The challenge here is to generate more sales, while reducing expenses and tweaking costly administrative processes. For services, switch to a “relationship-based” sales model by building in plenty of reasons (and financial incentives) for your clients to come back to you. Keep you office running lean and mean.

Is your service being replaced? Reinvent yourself to meet a modern market: If you are a paid technical instructor and your classes are shrinking, offer training over the internet. Instead of selling your services to everyone, expand your services “vertically” by targeting industries where you’ve already been successful.

An entrepreneur who has nurtured his startup like a beloved child may be reluctant to take a step backward and make the changes that need to be made. But don’t worry. If starting a business once brought out your creative juices, changing your business model to meet the demands of a new marketplace – resulting in a more profitable structure – can be equally exhilarating!

Marty Zwilling

Startups Need International, Without the Pitfalls

By Ernst Gemassmer

Fortune 500 companies such as IBM, Proctor and Gamble and others derive more than half of their revenues from international activities. We have heard that there are significant tax advantages in doing business offshore. All this sounds very enticing and many budding entrepreneurs can’t wait to fly to Paris or Shanghai to tap into the international markets. However, the startup CEO must evaluate a number of potential pitfalls, before jumping on the international bandwagon.

1. International requires patience. Relationships have to be built one-by-one in each country. Business contacts enjoy playing tour guide, having a meal together and getting to know you. So, do take time to get to know your partner and their country and its customs. Under no circumstances should you put your partner under pressure to sign a contract before your departure date. The partner should feel that you have all the time in the world to build and cement the relationship.

2. International requires capital. International travel is lengthy, exhausting and expensive. Local legal as well as accounting counsel is required in most countries. Hiring local staff requires establishment of a legal entity, which can be both expensive and time consuming. The hiring/firing process is lengthy, expensive and complex. Termination of a wrongly hired person can be a very expensive process.

3. The rules of the game are different in each country. These differences include: language, safety, currency, packaging requirements and numerous other considerations. Also, be aware of details pertaining to imports, such as duties and related paperwork, you may even be required to obtain import permits. If a country has currency problems, i.e. a shortage of foreign currency, you may succeed in obtaining an import license, but not the required foreign exchange cover. So, choose your target countries carefully.

4. Entering Europe is not a single effort. The classic mistake is to place an office in London and think that you have entered the EU (European Common Market). Although communication between the US headquarters and the London office may be good, proximity to local markets on the European continent are generally not achieved from London. Local presence in key markets is highly recommended, either through business partners of subsidiary/joint venture operations.

5. Manufacturing offshore could impact intellectual property. This comment applies especially to manufacturing in China. Even a trusted manufacturer generally employs numerous subcontractors and this can easily lead to unauthorized copying as well as loss of intellectual property rights, despite patent protection. However, the financial benefit may exceed the risk of losing partial patent protection.

6. Products must be adapted to local conditions and regulations. Documentation and software have to be translated into each local language. If you purchase a consumer electronic product in Europe, instructions come in numerous languages and tiny print. Electrical and safety requirements have to be met. Remember that even electrical plugs are different in most countries.

7. Carefully choose the head of international operations. Managing international operations includes several different functions, ranging from sales to a thorough understanding of finance, technology and legal. In addition the international manager must be a good communicator and diplomat both internally and externally.

The above points might discourage a new company from venturing into the international marketplace. However, my intent is to make the entrepreneur recognize and evaluate the challenges and the opportunities, before embarking into the global world.

As an emerging company, you will probably participate in one or more US trade shows. Frequently ‘international scouts’ will seek you out and promise to develop certain market places in exchange for exclusive business relationships. Do not, under any circumstances enter into exclusive relationships, as they can be difficult and expensive to sever later on. However, it is advisable to promise a potential partner a ‘head start’ in exchange for a volume commitment.

Good luck with your entry into the exciting, challenging as well as rewarding international marketplace.

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Today’s article is presented by one of the founders of our Startup Professionals team, Ernst H. Gemassmer. He has long helped entrepreneurs in Silicon Valley, as well as providing turnaround assistance as interim CEO for several companies in Europe. You can contact him directly at ernst@startupprofessionals.com.

Guess How Long Overnight Success Really Takes

Every startup founder knows implicitly that startup success is a long hard road. Yet we always dream that we are the exception to the rule. So once in a while it’s good to look at some facts to temper our imagination.

I was reading an article written by marketing guru Seth Godin a while back where he mentions that “it takes about six years of hard work to become an overnight success”. Based on a small sample of household names from Bill Gates to Mark Zuckerberg, he is an optimist. Here is some data from Wikipedia:

• Microsoft – Bill Gates founded Microsoft in 1975, to develop and sell BASIC interpreters for the Altair 8800. Six years later, he managed to land a contract with IBM to provide their IBM PC base operating system. Even still, it was another five years before Microsoft went public in 1986, making him an overnight success worth $350 million.

• Apple - It took Steve Jobs two decades to become an overnight dot-com billionaire. Established in Cupertino, California in 1976, Apple really didn’t get on the map until the advent of the Macintosh in 1984, eight years later. Even then, it struggled through the 80’s and 90’s, until the advent of the iMac and consumer products.

• Yahoo! - This company was founded by Jerry Yang and David Filo in January 1994. In April, 1996, Yahoo! had its initial public offering, raising $33.8 million, by selling 2.6 million shares at $13 each. Amazon.com and Yahoo! are the benchmarks in the industry for overnight success, but still required two to three years to really get going.

• Google - Larry Page and Sergey Brin started working on Google in 1996 – but three years later in 1999, few people had even heard of it yet. But add another five years, and Google had made it, going public in 2004 with a market capitalization of $23B.

• Facebook - Mark Zuckerberg, while attending Harvard as a sophomore, concocted “Facemash” in 2003 to get a lost girlfriend off his mind. He later changed the name to Facebook. In 2005, Facebook still showed a yearly net loss of $3.63 million. But within five years it became an overnight success, and now has about 400 million users worldwide.

• Amazon.com - Jeff Bezos founded Amazon.com in 1994 and took it public three years later, making him a multibillionaire. Amazon's initial business plan was unusual: the company did not expect a profit for four to five years; the strategy was actually more effective than his business plan predicted. Very rare case.

Take heed. These examples are generally recognized as the fastest growing companies in recent times, so your odds of matching their speed are not good. Investors will always look askance these days at a business plan which projects Amazon.com results.

With most businesses you rarely hear about the months and years of hard work behind the scenes. You rarely hear about the major catastrophes followed by major miracles that brought the businesses back from the brink. You rarely hear about the owners who took out second mortgages to make payroll or to hire a salesperson.

If you don’t have realistic expectations, you can quickly get into the wrong state of mind. You’ll be thinking that to be a success your business has to make you a billionaire in three years. Then you’ll give up way too soon.

This notion of overnight success is an urban legend, and very misleading. If you're starting something new, expect a long and challenging journey. But that's no excuse to move slowly. Many entrepreneurs think they are running, but find themselves falling farther and farther behind a rapidly moving target. Time passes quickly in this mode.

Marty Zwilling

Avoid Startup Opportunity Bubbles Ready To Burst

In finance, a bubble is too much money chasing assets, greater asset production and a herd mentality. In startup business plans, a bubble is too many entrepreneurs and too many investors chasing the latest “next big thing,” like Google search engine, Facebook social network, or Amazon e-commerce site. In all these cases, a bust is inevitable, and everyone loses.

The big question is how to spot these bubbles and jump to a better alternative, rather than get sucked into the vortex. I read a book recently by Vikram Mansharamani, “Boombustology: Spotting Financial Bubbles Before They Burst,” which gives some insight on the financial side, but I believe it can be equally applied to bubbles for startup ideas as follows:

1. Avoid the herd mentality. In theory, this is called the “emergence of group order” or swarm mentality, where everyone rushes in without regard to whether there is enough food to go around. For startups, investors usually toss business plans with ten or more real competitors, especially if a couple have the penetration of a Facebook or Google.

2. Overconfidence. In finance, “this time is different” is the beginning of a new bubble. In startups, it is the idea that “this solution is different,” without sufficient analysis of base anchoring features, differentiation features, or no new early adopters. Change is always hard, so people already on Amazon are not easy convert to another e-commerce system.

3. Supply and demand ignored. We all believe that supply and demand meet to create stable prices (reflexive). But sometimes higher prices create higher demand, causing a boom. Busts result when lower prices stimulate more supply. In startups, a great success like Google causes busts by stimulating more supply, without regard to demand.

4. Cheap money. The Austrian school of economics asserts that “cheap money is the root of all evil” as an explanation for all boom and bust cycles. This also works for startups, where cheap money occurs when too many investors jump on a bandwagon. Experts argue that a higher percentage of startups fail with too much money, rather than too little.

5. Policy-driven distortions. Government actions sometimes meddle with normal supply and demand equilibriums, or money allocations. In startups these days, governments are incenting green and alternative energy solutions, to intentionally create a bubble. All too often, that leads to a bust for startups who have not adequately prepared or executed.

6. High valuation, low profit. A sure sign of a bubble is when assets are artificially valued high, without a corresponding intrinsic value or cash flow. Social media darling Twitter is the most fragile of these bubbles. In my opinion, now is not the time to bet your startup on a Twitter clone.

Every startup wants to be the one to start the next bubble, but these are impossible to predict. It’s much easier to spot current bubbles, and resist the urge to build a “me too” product. The focus should always be on execution, revenue, and profits. Vision, growth over profit, and eyeballs won’t do it this time. Startups that master iteration, momentum, and the ability to pivot will win.

I’m personally looking to Gen-Y as the source of the “next big thing,” that will become the next bubble. To the rest of us, new great things often start out looking like toys, and Gen-Y knows their toys. In addition, they have less baggage, more creativity, and already understand the market segments with the most buying power.

I also believe we are beginning a new wave of startup investing. Angels are becoming more liquid as their stock market and real estate assets recover, and institutions again have earnings to put into venture capital funds. It’s a good time to start some new bubbles and win. Don’t let the fragile old ones burst your bubble as well.

Marty Zwilling

Don’t Ask Known Investors to Sign Non-Disclosures

Entrepreneurs often get the advice from their lawyers and friends to always get a Non-Disclosure Agreements (NDA or CDA) signed before disclosing anything about their new venture. Most investors and startup advisors I know hate them, and refuse to sign them. Who is right?

Let me try to put this question in perspective. If you are totally risk-averse, then push to always get signed NDAs. You won’t last long as an entrepreneur in this category, since a startup is all about taking risks. On the other hand, if you intend to patent an idea, you need a signed confidentiality agreement from everyone knowing details, or you will legally lose patent rights.

The format of an NDA is simple, and you can download a sample from my website. Here are some rule-of-thumb considerations that should help you decide when an NDA is really required, or actually has negative value:

• Trusted professional. If you want advice or funding, and the person you are about to pitch to is a certified investor, or a senior business advisor, skip the NDA. These people value their professional integrity, like your doctor or lawyer, and they are not competitors. Asking for an NDA is an insult and will jeopardize your case before you start.

• Unknown interested party. If you meet someone through Internet networking, or if someone with no visible professional standing contacts you with interest in your plan, an NDA is the least you should do protect yourself. Verifying credentials through multiple sources is even better.

• Strategic partner. The line between competitor and partner is a fine one these days. An NDA is highly recommended before you talk to a similar company about a joint venture, white labeling, or any investment options. I recommend a mutual non-disclosure, with a non-compete clause, for protection in both directions.

• Prior to patent application. As I mentioned earlier, you should never disclose details of a potential patent to anyone without getting a signed and dated NDA. That doesn’t mean you can’t talk in general terms about your idea, and even pitch to investors. Investors don’t need to hear the details anyway, until the due diligence phase.

• Trade secrets. A trade secret is a formula, practice, process, design, instrument, pattern, or compilation of information which is not patentable, but gives you an economic advantage over competitors or customers. When someone needs to know the details, get an NDA, even with your own employees.

• Period covered. Typically NDAs have terms of two to five years. In today’s fast moving world, a longer term makes no sense, and is viewed by the signor as an unreasonable restriction on future activities. You can always renew the NDA before it expires, if it is still relevant.

Venture capitalists and angel investors won’t sign NDAs for two reasons: 1) they don’t want the constraints or litigation a few have faced from rogue entrepreneurs, and 2) they feel that if by simply describing the problem you solve, you give away your business, there is almost no chance you will be able to create a defensible position in the market.

There will be some companies who, for perfectly valid business reasons, do not wish to sign an NDA. This doesn’t mean that they are dishonest, but simply that they may not wish to manage the risks involved. As an example, they want to avoid any future conflict with products they may already be working on.

Sharing original work which you intend to commercialize with a startup requires a high degree of mutual trust. Remember that without an NDA, you can still explain what your idea does, but not how it functions or how it’s made. That should be enough to excite interest at a first meeting, and the feedback is worth more than the risk.

Marty Zwilling

Should Startup Founders Keep Their Day Job?

Many entrepreneurs I know feel guilty about not quitting their day job when initiating their startup, worrying about not giving their all to an employer, juggling the multiple roles, or even a legal conflict of interest. I’ll try to offer some guidelines to address these issues, but I generally recommend you keep the day job until your new company is producing real revenue.

The exceptions to this advice would be if you are being paid for your startup position by external funding, or if you have enough money in the bank for both you and the startup to survive for at least a year. Otherwise, I suggest that founders be up-front with their employers, with an honest commitment that the “side” work on the potential startup will not jeopardize committed results.

Then there are the more pragmatic questions of how to make concurrent startup efforts productive. Many people simply can’t handle multitasking, so they struggle for years doing both, and really do both jobs poorly. Even if you are not in that category, I recommend the following guidelines, summarized from real experiences of Babak Nivi on Venture Hacks a few years ago:

1. Team with a partner. In a part-time effort, a co-founder is essential to keeping you on-track and working. At some point, you’ll hit a motivation wall, but if you have a partner who is depending on you, you will find a way past that. If you don’t have a partner, you’ll often lose interest and find something else to entertain you.

2. Pick a day and time per week where you always work together. Babek and his co-founder worked one weekday evening and one weekend day, every week. That doesn’t mean they weren’t working other days, but keeping a fixed schedule will help you through the phases of the project that might not be so much fun.

3. Set some real milestones. What will it take for everyone to dive in full-time? 5,000 active users? 10,000 uniques a week? Funding? The target should be a shared understanding. You don’t want one founder who is ready to go full-time while the other has reservations. That’s not fair to either one, and it leads to disasters.

4. Pick an idea that is viable part-time. Every startup is a hypothesis. If your hypothesis is, “we can build a better web-based chat client”, that’s something you could test quickly. If your hypothesis is “we can build a car that runs on lemonade”, that’s just not going to work as a part-time effort.

5. Understand that your first version will not be the final. Be prepared for a long journey and be surprised if your startup is an immediate hit. So with your first version, look for the tiny little flicker than you might be onto something. Use it to motivate you to make it better. Every week, make it better than last week and see if that flicker of light can be fanned into a tiny flame.

6. Use every spare moment at work getting smarter. While others are enjoying coffee or lunch, use the time to update yourself on your technology, your competitors, angel investors, or how to incorporate a new business. That said, be aware of the fuzzy line between using your cool-down time at work for your startup and stealing time or resources from your employer. If you’re paid to do a job, you need to do it first.

You also need to be realistic about the conflict of interest issue. If your startup could even have the appearance of competing with your employer’s business, you could lose everything later. Also check any employment agreement you may have signed that might dictate that “any” invention or development during employment is the property of that company.

Obviously, the alternative of quitting your day job early avoids these issues, and also removes any excuse that your startup is merely a hobby. There is nothing that drives a team like the fear of debt, starvation, and visible failure. Even you may be surprised what you can accomplish under pressure.

If all of this discussion still scares you, you probably need to keep your day job long-term, and give your startup idea to someone else. There is nothing wrong with a dependable salary, medical benefits, and a contributing 401(k) retirement savings account. At the very least, don’t take the entrepreneur plunge with your eyes closed.

Marty Zwilling

Four Easy Steps to Credible Startup Financials

Many entrepreneurs actually refuse to do financial projections beyond the first year, insisting that no one can predict the future. They need to realize that investors ask for projections, not merely as predictions, but more as commitments from the founder and his team. If you are not willing to commit, don’t expect anyone to back you.

In reality, you need to set these projections as goals for your own use, to convince employees as well as investors that you have a business which is challenging, but achievable. Projecting the financials should be the last step of your business plan preparation, since it assumes you already know the opportunity size, customer buying habits, pricing, costs, and competition.

Using your data, here are the basic elements of the projection process, which are measurable by milestones, and can be tracked to show when a re-forecast is required:

1. Start with sizing per-unit profitability. Margin is everything. Unless your volumes are in the millions or higher, the difference between manufacturing cost and customer price better be 50% or greater. That should be true even if your customer is really a distributor. Otherwise, sales, marketing, and operational costs will kill you.

2. Next comes sales volume by channel. Here is where you need a “bottoms-up” estimate from the people in your organization who have to deliver. This forecast is really their commitment. It’s tempting here to simply calculate one percent market share, and assume anyone can do at least that much. It’s not credible and won’t happen.

3. Don’t forget that pesky overhead. Even with the economic downturn, it’s amazing how fast office space costs add up, in conjunction with insurance, utilities, and administrative help. Then there are computer costs, trade shows, inventory, and a thousand other things. Check industry average statistics to make sure you are in the right range.

4. Cash flow is king. Your “burn rate” or net cash flow out is usually the single most important survival parameter to a startup. The holy grail is break-even, when revenues first catch up with the outflow. Projecting, tracking, and controlling cash flow is the single most important job of the CEO and all other startup officers.

Beyond these basics, here are some common-sense strategy elements which will maintain your credibility with investors, and minimize your opportunity for failing:

• Add a buffer to your required investment. Calculate what you need based on the cash flow calculations above. See where your cash flow bottoms out. If the bottom is minus $400K, add a 25% buffer, and ask for $500K funding. The request size must correlate to your projections to be credible.

• Plan to re-forecast every quarter. Everyone understands the reality that startups have to adjust to market fluctuations, and financial projections are an art rather than a science. Cost projections should never be missed, unless you suffer an emergency or get caught in a tsunami.

• Target aggressive but rational projections. Initial forecasts should be aggressive for credibility, but don’t shoot for the moon. Most investors have never seen a startup achieve its initial projection, so here is your chance to be a hero.

Just the process of doing financial projections allows you to see areas of strength and weakness in your proposed business model, thus enabling you to make critical adjustments sooner. For even more value, you should develop a financial model. With a few variables, like volume growth rate, and number of salesmen, a “what if” analysis is possible on cash flow, breakeven point, and revenue growth.

Financial projections can be intimidating. But a solid financial forecast is a required cornerstone for any business plan. Without it, you will likely prove the old proverb "He who fails to plan, plans to fail."

Marty Zwilling

Startups, Check Your Budget For Viral Marketing

Every time I challenge a business plan with little or no budget for marketing, I get the answer that they will be using “viral” marketing, which costs nothing. The founder explains that the product is so “buzz-worthy” that usage will spread rapidly through word-of-mouth only, meaning people loving it and recommending it to their friends.

First of all, Seth Godin pointed out a couple of years ago that viral marketing does not equal word-of-mouth. His view is that word-of-mouth is an unsolicited consumer action, positive or negative, which usually fades quickly, like a good or bad restaurant review.

Viral marketing is a deliberate marketing action, designed to grow attention at a compound rate, without further stimulus, by word-of-mouth. It usually implies an opportunity to win big, like a lottery, or experience something sensational, like an incredible video or free product.

At any rate, “buzz-worthy” and “viral” are marketing illusions that cost big money to create. In a business plan these are called marketing campaigns, which continue to rise in cost. Here are three elements of most viral marketing campaigns:

• Hire brand evangelists. Think of a brand evangelist team online as people blogging about your product, or posting links to it in every forum. Brand evangelists offline talk up your product lines at cocktail parties or recommend your services to friends while watching their kids' soccer game.

• Develop viral content. Someone has to design and create those entertaining or informative messages that are designed to be passed along in an exponential fashion, often electronically or by e-mail. It’s harder than it looks to exploit people’s propensity to share humorous, enjoyable or useful information - jokes, special offers, and games.

• Seed viral activity. People are more demanding and have more choices than ever before. This means spending more money on search marketing (SEM) to make it look like the buzz is working. It also means making the content appear omnipresent on the Web and in the marketplace, including dedicated video sites and blogs. In addition, special offers and competition prizes may be required.

As a result of the rising popularity of viral campaigns, the cost of developing one has increased significantly, and the increased ‘viral clutter’ has made it more difficult to stand out from the crowd. However, despite this, viral marketing can indeed be more cost effective than traditional marketing when done well.

Seeding is the most expensive aspect of a viral marketing campaign, with some video sites charging in excess of $10,000 to be featured on their home page for one week. Only a few years ago a humorous video or unique toy could be seeded into a couple of relevant online communities, and it would be hugely popular. However, the cost of entry has gone up as the concept of viral marketing has become pervasive.

In general a well-executed viral marketing campaign can cost anywhere from $100K to many millions. There is a reason that sites like Priceline.com Europe and Facebook, which everyone believes were made popular by viral marketing, have spent at least $50 million each becoming a household name.

Some startups not only ignore this and don’t budget for it, but they actually plan on the free viral marketing to generate enough revenue from click-through advertising to fund operations and future growth. That’s a double death wish.

We have all heard of a few cases where viral marketing resulted in a message “spread through the Internet like a cold in a kindergarten,” but counting on this can just as quickly lead to the death of your startup. Unless you have very deep pockets, plan for some very significant marketing costs to kick-start your dream.

Marty Zwilling

Social Networks Don’t Automate Personal Contacts

By Ernst H. Gemassmer

We all intuitively believe in maintaining personal and business contacts, but most of us don’t do well in this area. It takes real time and hard work to maintain contacts. Social networking can help, but a large list of online friends and followers is no substitute for a smaller list of personal and ongoing business relationships.

As background, I attended several educational institutions both in the US and abroad. My professional life started with a BS in Chemistry, an MA in International Relations and a Master of Business Administration. This provided me with a good education and numerous important contacts around the world.

Over the years I also lived in different parts of the US and abroad, meeting all the usual challenges of raising kids, changing jobs, buying and selling houses and trying to stay fit. I was totally focused on family and jobs. This was often challenging since a significant amount of my time was spent on business trips around the world, participating actively in the emerging global economy.

Changing jobs as I moved up the corporate ladder generally involved a move to a new location with all the associated tasks and challenges. Old colleagues, neighbors and friends were soon forgotten and I made almost no effort to stay in touch. The new environment kept me so busy that I had a good excuse for not keeping up with them. The higher I climbed in a corporate hierarchy the less time I had, or claimed to have, for thinking about the past, or keeping in touch.

For expediency I started to use various consultants to investigate and address current issues and provide me with information to make critical business decisions. It was simpler and more expedient to use third parties, rather than relying on my personal contacts. Using so called experts and well known consulting firms provided a degree of legitimacy, which would have been harder to achieve with less well known personal contacts.

Eventually I retired and had an opportunity to think about how I treated my personal, academic and professional contacts. Now that I had spare time I started to re-engage with educational institutions, professional organizations, neighbors and old friends. However, I found out quickly that special groups had formed over the years, and I was not involved in their formation, development or growth. Thus, it became a real challenge to re-engage with them and took a lot more effort than I had anticipated.

Many of my younger friends use various social networks on a daily basis and think that they will thereby avoid this problem. Obviously they disseminate a lot of information through these networks. However, these ‘updates’ are in small snippets or photos and lack detailed information. They are also somewhat impersonal since they are directed at such a wide and relatively public audience.

In my personal opinion such networks are useful tools, but do not replace dedicated personal contacts. If I had to do it over again, I would dedicate a certain amount of time, all the time, to keeping up with the development and evolution of all of my contacts. Don’t let the technology fool you into thinking you can take shortcuts. Believe me, the personal touch still pays big dividends!

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Today’s article is presented by one of the founders of our Startup Professionals team, Ernst H. Gemassmer. He resides on the West Coast, and has long helped entrepreneurs there, as well as providing turn-around assistance as interim CEO, and International coaching. You can contact him directly at ernst@startupprofessionals.com.

Ignoring Business Basics Can Kill Your Dream

I’ve noticed a great tendency among startup founders to ignore the essentials of business accounting in the early stages of their startup. Just because you are not profitable yet, doesn’t mean you can skip the record keeping.

In fact, just the opposite is true. When you anticipate losses for the first year or two, it is more important to properly document all expenses, including tricky ones like business travel, business meals, and your home office. Sloppy documentation and reporting of these expenses is an open invitation to an IRS audit, which is the last thing you need or can afford during the busy startup period.

Expense accounting is just one of the key record-keeping requirements for a successful business:

• Expenses and income. You'll need a check register, a cash receipt system, and a record of bills. Also you should include tax records, bank statements, cancelled checks, bank reconciliations, notices from and to your bank, deposit slips, and any loan-related documents. Keep good backups of all computer files.

• Corporate records. Include here articles of incorporation, bylaws, shareholder minutes, board minutes, state filings, stock ledger, copies of stock certificates, options and warrants, and copies of all securities law filings. In all cases, don’t forget permits, licenses, or registration forms required to operate the business under federal, state or local laws.

• Contracts. All the contracts you have, even expired ones, should be saved indefinitely. These would include equipment leases, joint venture agreements, real estate leases, and work-for-hire agreements. It is also good to keep correspondence sent and received by mail, faxes, and important e-mail that you might want in hard copy.

• Employee records. Include here completed employment applications, employee offer letters, employee handbooks or policies, employment agreements, performance appraisals, employee attendance records, employee termination letters, W-2s, and any settlement agreements with terminated employees.

• Intellectual property records. This is an especially important category. Make sure you file a copy of all trademark applications, copyright filings, patent filings and patents, licenses, and confidentiality or nondisclosure agreements.

Of course, these days you need a personal computer or laptop dedicated to your business with some basic software tools. You should investigate the wide variety of software systems that are on the market, and pick one you makes you comfortable, since you will probably be doing the basic data entry yourself. This not only will save you money, but it will keep you intimately aware of all expenses and the condition of your overall business. In my experience, the most common small business accounting system I see in startups is QuickBooks Pro by Intuit.

Even if you have the money to hire an accountant, you should keep a grip on your business financial affairs. You should be able to explain to yourself how much money you owe out to others, how much others owe you, and how much cash you have on hand. Don’t be shy about investigating local classes as adult education, or even a seminar with the SBA on bookkeeping.

An accountant may not be necessary, but you still can’t skip the tools. You can't walk in with a bag full of receipts. The more organized you are, the more organized you will be when presenting this material to an accountant. That translates to reduced bills from the accountant, and a reduced tax bill from the IRS. You will save time and money, and be more confident about your status.

Good record-keeping practices are required to comply with tax laws, and to operate your business properly. When you incorporate your business is the right time to establish the records system. Don’t let your dream get killed by ignoring business basics.

Marty Zwilling

To Survive the Rebound Will Require More Agility

Prior to the recession, many companies and even startups were acclimated to prosperity, maybe too comfortable. We have now been through some turbulent times, but has your strategy really changed? All too many have simply hunkered down to wait out the economy.

Smart entrepreneurs are making changes now, to be more agile in defining strategy, making organizational changes, and analyzing markets for change. The rebound may be here, but business will never be the same. Look for new volatility, caused by inflation or deflation, new government regulations, and of course new technology and even more determined competitors.

These volatile markets are already creating unexpected opportunities and risks – you must be alert and agile enough to spot them and adapt quickly to survive and prosper. Here are the key aspects of agility requiring focus:

• Eliminating bureaucracy. Inflexible organizational structures can exist in small organizations, as well as large ones. Organizations, as small as a single person, are made up of people – and inflexible people are the real problem. Make sure your team consists wholly of people who are open-minded, empowered, and motivated.

• Proactive pursuit of new markets. An agile business listens to customers and proactively embraces change, rather than waiting for the pain of competitors’ arrows. Because change is perpetual, make sure you have a process for innovation and an ongoing program to adapt to new opportunities.

• Constant redefinition of roles. If your key roles and titles have not changed for as long as you can remember, they are likely obsolete. If any given person has been in the same role for as long as you can remember, that person is likely obsolete. Rotating good people to new roles keep both them and their new roles agile. Eliminate deadwood.

• Plan to innovate. Sustainable innovation is really the only sustainable competitive advantage. But innovation doesn’t happen without a process, and requires commitment from every member of the team. Track results and measure ROI.

• Speedy strategy to execution. Create a performance culture, rather than analysis paralysis. Once the decision is made, automate, and outsource functions that are not core to the business. If it routinely takes you six months to change a process, your company is still in the dark ages.

• Quick to fail. If your new idea doesn’t seem to be working, don’t hang on to it forever. With innovation, we know many great new ideas don’t work out. Make sure you have a process in place to measure progress and success, or to discard untenable ideas, before you spend a fortune in dollars and time.

• It starts at the top. An agile company starts with agile leadership at the top. It’s up to you to communicate the message, manage resources, and ensure fluid movement between people and projects. Managing change is not an element of your job as a business leader; it is the job.

Increasing the agility of your company is not a “big bang” one-time effort. It’s making hundreds of small adjustments every day to reduce costs, increase revenues, and penetrate new markets. All you need are profits that are two to four percent higher than the market average to stay ahead of your competitors.

Simply put, business agility means being proactive and quickly able to adapt to change. It can exist in any company at three levels at least; operational agility, organizational agility, and strategic agility. Where is your company today in this spectrum? The rebound is happening now.

Marty Zwilling

Nine Habits That Make Contagious Startup Leaders

Startups 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 people 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 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 habits or 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

Most Startups Get No Professional Investor Cash

Money to build the business is the number one challenge for most startups. Don’t believe the urban myth that you can sketch your idea on a napkin, and professional investors will throw money at you. In reality, only 3 out of 100 companies who apply are successful with Angels, and the success rate with VCs is even lower. A large percentage of startups never apply to either.

You need to explore more common and more productive approaches for getting your startup moving forward. Of course, every approach has pros and cons. For example, with any outside investment, you give up some ownership and control, and with bootstrapping your growth curve will likely be longer and more organic.

Yet, I find that startup founders often fixate on one or two sources, often to the detriment of their business. Following is my prioritized larger list of sources, with some “rules of thumb” which may save you a lot of time and energy:

1. Bootstrapping. Self-funding is the preferred source of cash for your startup – if you can do it. The advantage is no time and effort searching and preparing for the other alternatives, and you don’t have to encumber yourself or give up control of your company. Just don’t quit your day job before your new company is producing revenue.

2. Friends and family. After bootstrapping, friends and family are the most common funding sources for early-stage startups. Use this approach before you have a real valuation, a real product, or any real customers. As a rule of thumb, it is a required first step, as outside investors will not normally consider providing any funding until they see “skin in the game” from one of these first two sources.

3. Small business grants. This source often gets overlooked, but it should be a major focus these days due to government initiatives on alternative energy and technology. It’s not a quick solution, but state and federal funding agencies do not want ownership or interest payments from your company. Related sources include local business development agencies. You have to be relentless in this pursuit to win.

4. Loans or line-of-credit. If your company needs only a temporary or small infusion of cash, you should try for an SBA loan, or a bank line of credit. Many people are afraid to tap into debt sources because they don't want to be burdened with the debt if the startup fails. However, if you don't believe in the company enough to place your own credit behind it, why should anyone else?

5. Startup incubators. A startup incubator is a company, university, or other organization which provides resources for equity to nurture young companies, helping them to survive and grow during the startup period when they are most vulnerable. These resources would likely include office space, consulting, and even a cash investment.

6. Angel investors. If you are looking for $25,000 to $1 million, the next step is to tap into a local angel network. If you don't know any “high net worth” individuals, use your advisors to find them. Networking is key here, and you need to find an angel who understands your industry and shares your passion.

7. Venture capital. As a rule of thumb, don’t try this one in the earlier stages, and don’t try it unless you need more than $1 million. An investment from a venture capital firm is usually expensive, in equity and control. If you go for venture capital, don’t expect a quick fix, so prepare to spend at least six months searching for and closing the deal.

8. Bartering services for equity. Bartering technically means exchanging goods or services as a substitute for money. An example would be getting free office space by agreeing to be the property manager for the owner. Exchanging equity for services is worth negotiating with legal counsel, accountants, engineers, and even sales people.

9. Partner with distributor or beneficiary. A related company may see the value of your product as complementary to theirs, and be willing to advance funding, which can be repaid when you develop your revenue stream. Consider licensing and “white labeling.”

10. Commit to a major customer. Find a customer who would benefit greatly from getting your product first, and be willing to advance you the cost of development. The advantage to the customer is that he will have enough control to make sure it meets his requirements, and will get dedicated support.

Just remember that you don’t get ‘something for nothing’ in any of these cases. All funding decisions represent complex tradeoffs between near-term and long-term costs, ownership, control, and time and effort. Your funding strategy is a key part of every business plan, so don’t hesitate to check out the real alternatives.

Marty Zwilling

Five Long-Term Pitfalls That Entrepreneurs Forget

Most entrepreneurs expect to face the “normal” challenges of starting a business, which include finding the right opportunity, building and executing a winning plan, and financing their venture. But many forget the pitfalls associated with traditional business jobs which can apply even to the smartest and most dedicated people running their own business.

Often these facets of entrepreneurship don’t rear their ugly head until well down the road. Yet before you start, you should think about what the impact might be on your psyche, and how to neutralize these challenges in your own plan. I’ll summarize them here, but you can see more detail in an article by David Finkel in D&B Small Business Solutions:

1. Long-term daily job grind. Sometimes entrepreneurs are so set on creating a successful business, they forget to create one that they love to work on every day. After a time, they find that they have merely created a job for themselves, with the same rote responsibilities and stress that they experienced in a prior corporate world. Daily attendance is mandatory in order for the business to succeed and be profitable, and the so-called freedom is hard to find. Vacations and time-off don’t happen for years.

2. Formal training courses. Larger enterprises are always sending their “high fliers” to leadership refreshers, new technology updates, and training on employee performance management. Entrepreneurs find themselves all alone in the trenches, without the time, money, or incentives to do these things. The result is a sinking feeling after some time that you are no longer vital and competitive in your own domain.

3. Personal wealth management. Entrepreneurs find that the business skills needed to grow their business are not the same as the personal wealth skills needed to manage a healthy personal wealth plan for their family and their retirement. Their business is their entire portfolio. They are at the mercy of innumerable catastrophes, making this a huge risk.

   For these individuals, a lack of financial fluency often leads to poor decisions after they no longer have their businesses. They wake up one day without their business, and with nothing to show for the years spent building it.

4. How society perceives you. As a young entrepreneur, everyone looks up to you for running your own business. But later you find that you may be perceived by many as a person without job security, unlike your classmates or ex-colleagues, who are sought after or being placed in well-known large company or multinational positions.

   Even worse, you find that your business domain has developed a negative stigma through no fault of your own, as has happened to investment banks, mortgage brokers, and many nightlife businesses. It’s no fun to hide your business role rather than proudly proclaim it.

5. Business must be more than the money. Years into a successful business, owners often wake up one day facing a painful question: Is this all there is? To truly be successful your business must be about more than the money.

   Good entrepreneurs find a great personal adventure, like Richard Branson, or great philanthropy, like Bill Gates. Guy Kawasaki says the best reason to start an organization is to make meaning – to create a product or service that makes the world a better place.

Every business startup has to have a viable idea, but it also needs a strong sense of realism on the possible pitfalls. Starting a company as an entrepreneur should be viewed as the beginning of a lifetime career, not a work project that you expect to be over in a few months. As such you should consider the long-term challenges as well as the short-term ones.

Life is too short to end up with pain and regret after a “successful” career.

Marty Zwilling

Use Pull Technology for Real Customer Enchantment

Traditional marketing says you have to “push” your message out to customers, over and over again, to get it remembered. A more effective approach in today’s Internet and interactive culture is to use “pull” technology to bring customers and clients to your story. You pull people in by providing new content with real value on your website at least every few days.

Guy Kawasaki, in his new book “Enchantment: The Art of Changing Hearts, Minds, and Actions” provides some in-depth recommendations on the “how to” of pull technology. Here are some of his recommendations for web sites and blogs that I particularly recommend to entrepreneurs and startups:

• Provide good content. This may seem obvious, but how many websites have you reviewed that are static and just plain dull? A website or blog without appealing or entertaining content for your market segment is not enchanting.

• Refresh it often. Ideally, you should update content at least every two or three days. Good content that doesn’t change isn’t good for long, and customers or clients will not return to your website or blog if you don’t regularly provide something new.

• Skip the flash (and Flash). You may think it’s cool that a sixty-second video plays when people enter your site, or pop-ups occur with every interaction. Most people come with a purpose, and if you won’t let them get to it immediately they won’t come back.

• Make it fast. It’s a shame when anyone can get right to your home page, but then has to wait for it to load. With today’s technology, there’s no excuse for a website that takes more than a few seconds to load.

• Sprinkle graphics and pictures. Graphics, pictures, and videos make a website or blog more interesting and enchanting. If you’re going to err, use them too much rather than too little, except for a Flash front-end and popups.

• Provide a Frequently Asked Questions (FAQ) page. People love FAQs because these cut to the chase. Figure out what the most common questions might be and answer them in one place to minimize hassle.

• Craft an About page. Visitors should never have to wonder what your organization does and why you do what you do. Provide all this information in an About page. Confusion and ignorance are the enemies of enchantment.

• Help visitors navigate. Enable people to search your website or blog to find what they are looking for. Also, a site map helps people understand the topology of your website. Forcing paging to complete a single message (to expose more ads) is not enchanting.

• Introduce the team. Few people these days wants to deal with a nameless, faceless, and location-less organization. A good “Who Are We?” page solves this problem, and is necessary to establish trust and expertise.

• Optimize visits for various devices. No matter what device people are using, your website and blog should look good. These days, 20% or more of your audience will be using smart phones or iPads, and they’re probably the most relevant customers.

• Provide multiple methods of access. Some folks like websites and blogs, and others prefer RSS feeds, email lists, Facebook pages, and Twitter feeds. Provide multiple methods to engage people and make these options easy to find.

Let’s face it, static websites are dead. You need a blog and social media interaction to keep your content fresh and responsive to the market. Interaction and repeated visits due to the pull of enchanting content will transform a potential customer transaction into a relationship. Everyone remembers a relationship.

Marty Zwilling

Entrepreneurs Need to Find the Best ‘Curators’

Every entrepreneur is flooded with information from all directions, but despite their best efforts to absorb it, they likely miss the information really needed to start a business. These days, we all have to rely on a few trusted sources to digest and filter information, net out the relevant messages, and steer us with links to accurate details.

These trusted sources are a new breed of professionals who may soon carry the new title of “information curator,” evolved from the “museum curator” role, where a domain expert filters and communicates the important elements of a past civilization or technology. The evolution and the real value of curator are outlined in a great new book “Curation Nation,” by Steven Rosenbaum.

In the past century, curators for business information were specialized news magazines like Forbes and Inc., and books for entrepreneurs like “Think and Grow Rich.” But with the speed of the Internet, these have become as old-fashioned as museum curators.

Modern digital curators for early-stage entrepreneurs are the expert bloggers who put “content into context.” They write and tweet every day, with the single guiding credibility and personality that the new social culture demands. Here are a few that I aspire to:

1. Venture Hacks, by Babak Nivi and Naval Ravikant. These are both experienced entrepreneurs and angel investors. VentureHacks also created AngelList, a mailing list of prominent business angels that facilitates entrepreneur fundraising.

2. Both Sides of the Table, by Mark Suster. Mark is a serial entrepreneur who is now active in the venture capital community for early-stage startups. He definitely has experience on both sides of the ‘entrepreneur versus investor’ table.

3. Lessons Learned, by Eric Ries. He brings a strong technology base to the table, as a former CTO, and creator of the Lean Startup methodology. He is the co-author of several books including “The Black Art of Java Game Programming.”

4. OnStartups, by Dharmesh Shah. Dharmesh is the founder and CTO of HubSpot, as well as a blogger and speaker on the topic of startups and Internet marketing. He also co-authored the book "Inbound Marketing" about the power of social media and blogs.

Then there are the aggregator curators that bring together the best of the best from a wide variety of sources, without the single guiding light to make sure they are consistent and integrated. These are great for understanding the big picture, spotting trends, and product reviews.

1. TechCrunch, founder Michael Arrington. This popular site has an outstanding group of writers and contributors for profiling startups, reviewing new Internet products, and breaking tech news.

2. Business Insider, Silicon Alley Insider, founder Henry Blodget. The Business Insider aggregates, reports, and analyzes the top entrepreneur and startup stories and blogs daily from across the web, and delivers them in a very readable format.

3. Forbes.com, Entrepreneurs, executive editor Brett Nelson. An invitation-only group of writers and bloggers comment daily on current events, trends, and all aspects of the entrepreneur role in the entrepreneur section and expert blogs.

4. Huffington Post, Small Biz Blog, co-founder Arianna Huffington. Contrary to popular opinion, HuffPo is not just a place for political commentary. For many people, it also serves as a one-stop news source about small businesses and entrepreneurs.

If you are overwhelmed by the daily flood of content, and have realized that Google and the other search engines can’t achieve the filtering and required value judgments, then you need to look for an effective information curator like the ones outlined above. You may even decide that the more exciting opportunity is to be a curator yourself in our new curation nation.

Marty Zwilling

The Best Entrepreneurs Have Some Common Traits

At some point in their life, hopefully everyone strives to be the best in their chosen profession. Most people think that being the best requires more intelligence, more training, and more experience. In reality, in business or even in sports, the evidence is conclusive that it is as much about how you think, as what you do.

I saw this illustrated well recently in a sports excellence book called “Training Camp: What the Best Do Better Than Everyone Else”, by Jon Gordon. His evidence and real life stories conclude that top performers in all professions have the same key traits listed below. I agree they certainly apply to the great entrepreneurs I have known. You need to think about how they apply to you.

1. The best know what they truly want. At some point in their lives, the best have a "Eureka!" moment when their vision becomes clear. Suddenly they realize what they really, truly want to achieve. They find their passion. When that happens they are ready to strive for greatness. They are ready to pay the price.

2. The best want it more. We all want to be great. The best don't just think about their desire for greatness; they act on it. They have a high capacity for work. They do the things that others won't do, and they spend more time doing it. When everyone else is sleeping, the best are practicing and thinking and improving.

3. The best are always striving to get better. They are always looking for ways to learn, apply, improve, and grow. They stay humble and hungry. They are lifelong learners. They never think they have "arrived"—because they know that once they think that, they'll start sliding back to the place from which they came.

4. The best do ordinary things better than everyone else. For all their greatness, the best aren't that much better than the others. They are simply a little better at a lot of things. Everyone thinks that success is complicated, but it's really simple. In fact, the best don't do anything different. They just do the ordinary things better.

5. The best zoom focus. Success is all about the fundamentals, and the fundamentals are little and ordinary and often boring. It's not just about practice, but focused practice. It's not just about taking action, but taking zoom-focused action. It's about practicing and perfecting the fundamentals.

6. The best are mentally stronger. Today's world is no longer a sprint or a marathon. You're not just running; you are getting hit along the way. The best are able to respond to and overcome all of this with mental and emotional toughness. They are able to tune out the distractions and stay calm, focused, and energized when it counts.

7. The best overcome their fear. Everyone has fears. The best of the best all have fear, but they overcome it. To beat your enemy, you must know your enemy. Average people shy away from their fears. They either ignore them or hide from them. However, the best seek them out and face them with the intent of conquering them.

8. The best seize the moment. When the best are in the middle of their performance, they are not thinking "What if I win?" or "What if I lose?" They are not interested in what the moment produces but are concerned only with what they produce in the moment. As a result, the best define the moment rather than letting the moment define them.

9. The best tap into a power greater than themselves. The best are conductors, not resistors. They don't generate their own power, but act as conduits for the greatest power source in the world. You can't talk about greatness without talking about a higher force. It would be like talking about breathing without mentioning the importance of air.

10. The best leave a legacy. The best live and work with a bigger purpose. They leave a legacy by making their lives about more than them. This larger purpose is what inspires them to be the best and strive for greatness over the long term. It helps them move from success to significance.

11. The best make everyone around them better. They do this through their own pursuit of excellence and in the excellence they inspire in others. One person in pursuit of excellence raises the standards of everyone around them. It's in the striving where you find greatness, not in the outcome.

Jon is convinced that people are not born with these traits, they must be learned by everyone. He talks about staying mentally strong, and maintaining a big-picture vision while taking focused action. So if you aspire to be the next Bill Gates or Larry Page, focus on your attitude as much as your business plan.

Marty Zwilling

6 Ways to Make Your Viable Startup Unfundable

New entrepreneurs often seem to confuse viability with fundability. Certainly a non-viable business should be not fundable, but many viable businesses are also not fundable. Thus when an investor declines your funding request, you need to curb your anger and understand the real reason for this outcome.

In my experience, here are the most common issues that cause funding requests for viable businesses to be rejected, in priority order:

1. Inadequate business plan. Some investors say half the ideas pitched to them don’t have any plan at all, even though some have great potential. Other entrepreneurs skip just some of the elements in Ten Keys to an Investment-Grade Business Plan. None of these get funded. Investors know that entrepreneurs who start a business without a written plan almost always fail.

2. Inexperienced team. Investors bet on the team, more than the business plan. Your business model may be very attractive, but if you are new to this, you may not be fundable. If you can find a partner who has deep domain knowledge and a track record of building businesses, I can assure you that your luck will improve.

3. Business domain is high risk or not squeaky clean. Certain business sectors have historical high failure rates and are routinely avoided by investors. These include food service, retail, consulting, work at home, and telemarketing. Also, don’t expect investor enthusiasm for your gambling site, porn site, gaming, or debt collection business.

4. Opportunity is not large or growing. Investors are looking for a large and growing market, to offset the huge risk of funding a startup. Rules of thumb include an opportunity projection that exceeds a billion dollars, with at least double-digit growth. Smaller numbers may easily make a viable business, but won’t attract investors.

5. No sustainable competitive advantage. The market may be large and growing, but you need some “secret sauce” or intellectual property to keep the big guys from jumping in, once they get the picture. Sleeping giants do wake up, and investors hate to see their money used to build a market for Microsoft, IBM, or Procter & Gamble.

6. Financial projections are too conservative or too optimistic. Investors won’t fund people who won’t push the limits, or inversely won’t recognize business realities. More rules of thumb. Your five-year revenue projections better reach at least $20M, but should not exceed Google’s actual revenues of $3B in the fifth year.

Don’t expect a straight answer on your rejection reason from most angels or venture capital people. They will probably tell you all looks good, but come back later, after you have finished the product, signed up a few customers, or reached some other future milestone. This is called “not burning any bridges,” in case you start to show traction and they want back in the deal.

Thus you need an experienced advisor who can do his own analysis of your plan, and follow-up informally with all investors to give you the real reason for your rejection, so you can fix it. I find it completely disheartening to see founders banging their head against the same wall over and over again with every investor, without even realizing their problem.

There were at least a half million startups last year, and only a few thousand received investor funding. In fact most of the others avoided all these rejections by simply using their own money (bootstrapping), or using the old standby funding source of friends, family, and fools.

Even if you don’t intend to “walk the gauntlet” of external investors, it will be worth your while to navigate your startup into a category that is both viable and fundable. Isn’t your personal risk just as important as investor risk?

Marty Zwilling