Wednesday, July 31, 2013

10 Keys to Team Engagement and Entrepreneur Success

bob-kellehrSuccess in a startup is not possible as a “one-man show.” An entrepreneur has to engage with team members, partners, investors, vendors, and customers. In my experience, the joy of positive engagement is sometimes the only pay you get in an early startup. Amazingly, many successful startups are built on this basis alone, with almost no money.

I will talk here primarily about building the internal team of a startup, but the same principles apply outside to your “extended team” and customers. I recommend the ten practical steps outlined by Bob Kelleher, in his book “Louder Than Words,” from his many years of experience in corporate environments. These are easily adaptable and equally relevant to the startup environment:

  1. Link high engagement to high performance. Don’t confuse engagement with satisfaction. The last thing you want is a team of satisfied but underperforming people. Kelleher defines engagement as “the unlocking of employee potential to drive high performance.” Set and reinforce high performance goals.

  2. Demonstrate engagement at the top. Leaders must demonstrate support for an engaged culture by personally living their company’s values. Then engage team members in tough decisions. In today’s recessionary times, leaders have large shadows – and team members are watching everything they do!

  3. Engage operational leaders first. Studies show that if one’s line manager is disengaged, his/her employees are four times more likely to be disengaged themselves. To stay engaged, I always practiced “management by walking around.” There is no better way to find out how engaged the rest of the team really is. It works at all levels.

  4. Focus on communication at all levels. If you neglect to articulate a clear vision of the future, expect only a minimum of energy to make it happen. Successful leaders provide robust communication, built on clarity, consistency, and repetition. It always amazed me as a leader how many repetitions were required before everyone heard the message.

  5. Individualize your engagement. Today’s leaders must tailor their communication approaches, rewards, and recognition programs to the unique motivational drivers of each employee. Communication must be tuned to the different generations, diverse groups, and each individual.

  6. Create a motivational culture. Long-term motivation comes from people motivating themselves, but you have to create the right culture. Leaders are more apt to get the discretionary extra effort of their team when they create a culture of empathy and concern about team members as real people!

  7. Facilitate and use feedback. For open and honest communication, your practices must include the means for that to happen. Entrepreneurs need to ask team members what they think, and then act on the feedback. The bases of feedback may be a suggestion box, social media, town hall meetings, or “open doors” all the way to the top.

  8. Reinforce and reward the right behaviors. Employees are incredibly motivated by achievement and recognition, more than money. Money can cause disengagement if team members perceive unfairness. On the other end of the performance spectrum, there must be consequences if you expect behavior to change.

  9. Track and communicate progress. Leaders need to reinforce progress real time and frequently, by telling their team members what is expected, how they’re performing, and where they fit in. These are key both for alignment of priorities and engagement.

  10. Hire and promote the right behaviors. Sometimes teams don’t have an engagement issue, so much as a hiring issue – hiring the wrong behaviors and traits to succeed in the startup culture. Also, promote only people who exemplify the behaviors that are most important to your success.

Always remember that your actions speak louder than your words or any written policies. Maximizing team engagement is the key to capturing that extra discretionary effort that separates winning startups from losing ones. This is a never ending responsibility that starts on day one. Are you living these steps today and every day?

Marty Zwilling


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Tuesday, July 30, 2013

10 Guidelines for Angel Funding Presentations

how-to-present-to-vcsangelsThe average length of a funding pitch to Angel investors is ten minutes. Even if you have booked an hour with a VC, you should plan to talk only for the first fifteen minutes. The biggest complaint I hear from investors is that startup founders often talk way too long, and neglect to cover the most relevant points. Or they get sidetracked by a technical glitch due to poor preparation.

If you start by pitching your extended life story, that’s the wrong point. Equally bad is an extended pitch on your new disruptive technology. Investors are more interested in your solution and your business, rather than your technology. Here are some tips on the right approach and the right points to hit:

  1. Match your material to the time allotted. If you have ten minutes, that means no more than ten slides. Then match your pace to cover all the material. I’ve seen several presentations that never moved past the first slide before running out of time. An obvious effort to keep talking after the time limit won’t save your day with investors.

  2. Remember you are pitching to investors, not customers. Some entrepreneurs seem to think that their product pitch is also their investor pitch. I outlined what investors expect to see in another article “Adding Slides Does Not Enhance Your Investor Pitch.” These are tuned to the ten-minute limit, but are just as adequate if the investor gives you an hour.

  3. Check the setup and set the stage. If the projector doesn’t work, or won’t connect to your laptop, you are the one that loses. Have at least one backup plan, such as copies of your slides to hand out and discuss, in case all else fails. The first words out of your mouth should be “Can everyone hear me, and read the screen?”

  4. Research your audience before presenting. The most respected presenters are the ones who have done the research before hand to know who is in the audience, and have tailored their message to these interests. If you know only a few people in the audience, acknowledge them, and convince the others that this is not a random cold call for you.

  5. Dress appropriately and professionally. It’s always better to be over-dressed than under-dressed. Business casual is the standard. Remember that most investors are from a generation where faded and torn jeans were on the wrong side of success in business.

  6. Let the top person do all the talking. Tag team shows don’t work in short venues. More importantly, investors want to see and hear the top guy – typically the founder or CEO. They will be judging his aptitude, his character, and his passion. Others can be present for effect, but deferrals to team members for answers are a sign of weakness.

  7. First, get their attention with your elevator pitch. Start with the problem and your solution. These are your hooks, and they better be covered in the first 30 seconds. State your value proposition, and what specifically you are offering to whom. Skip the acronyms, history of the company, and the colorful autobiography.

  8. Lead with facts, but skip the details. Skip the generic marketing phrases like more user friendly, massive opportunity, and paradigm shifting. “According to Gartner, the opportunity is 100 million by 2015, with 12% compounded growth.” Investors don’t need to know the implementation details of your patent or customer support plan.

  9. Don’t forget to ask for the order. How much money do you need, and what percent of your company are you willing give up for that amount? If you want investor interest, the business parameters of a deal should be presented as clearly as the product parameters.

  10. Close by asking for questions and promising follow-up. Acknowledging feedback and actually listening for ways to improve will always lead to a positive impression. You should answer questions with data if you have it, but avoid defensive responses in favor of a promise to follow-up after the meeting.

Most importantly, don’t forget to practice, practice, practice. Just because you have given a thousand pitches in your life, don’t assume you can finesse this one by reading the bullet points in real time from the slides that your team put together for you. You need to be totally familiar and comfortable with your pitch to give it effectively.

Forget the theory that you can “rise to the occasion” and impress everyone with your dynamic speaking ability. If you are pitching the wrong point in the wrong way, the occasion will be more the demise than the rise of your dream.

Marty Zwilling


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Monday, July 29, 2013

Idea Non-Disclosure Demands Kill Investor Interest

contract_and_penEntrepreneurs 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 to 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 at least 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.

They see the same good ideas so often, that if they signed a non-disclosure on just a few, they would quickly not be able to talk to new entrepreneurs. It’s the people that count anyway, not the idea. Besides, one of the reasons for talking to investors is that they will spread the word to other good investors, so you really want them to talk about you to others, to improve your funding odds.

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


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Sunday, July 28, 2013

Entrepreneurs Learn Best From Business Networking

business-networkingI 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?

The answer is still the same, but 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 startup discussions. There are other social networks of the 200 or so now recognized by Wikipedia that entrepreneurs use for networking, depending on where you are in the world, like Orkut, Netlog, and Sina Weibo, but talking to friends on Facebook 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 on the Internet, 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


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Saturday, July 27, 2013

10 Top Impediments to Creative Business Thinking

impediment-to-creativitySuccessful entrepreneurs are the ones who think the most creatively, not only in their initial product or service, but more importantly all through the stages of growth from startup to maturity. But even the best of them can easily slip into some bad decision habits that limit or hurt their business, due to natural human tendencies and the pressures of business challenges.

Obviously, the business of business has been around a long time, with many “best practices” well-defined and well documented, so creativity that ignores these is usually not a good thing. Thus every entrepreneur struggles to achieve that balance between methodically following “proven” processes, versus a new and creative approach which may be a real differentiator.

In my experience as a mentor, I find that keeping creative thinking in the balance is a challenge for every startup, due to the natural employee tendency to resist change. I agree with the new book by Ros Taylor, “Creativity at Work: Supercharge Your Brain and Make Your Ideas Stick,” which outlines some key psychological impediments to creative business thinking and change:

  1. Just use the data metrics. Shocking statistics, like unexpected losses last quarter, can generate a knee-jerk cost cutting decision, when further analysis and creative thinking might better close the gap with new revenue sources. Using data metrics alone for decisions, without seeking the root problem and alternative solutions, kills creativity.

  2. Let’s just be optimistic. Optimism is essential for long-term success, but it can delay or cloud short-term decision requirements. Entrepreneurs have to be careful not to look too hard for evidence that confirms their passion and positive perspective. Be a realist when making a decision and an optimist when implanting it.

  3. The way we do things. It’s human nature to believe that the way we have first learned and long done things is the best way, and other ways won’t work as well. It stops us from having to learn anything new. One of the reasons change is hard is that people have to unlearn the old way first, which is twice as hard as just learning something new.

  4. Tricked by recency. We tend to remember the first and the last things we hear – the primacy and recency effect. Sales people tend to remember the latest product when selling to clients, not the one best for that customer. So when decisions are to be made, we tend to remember recent information and issues. Not always to good effect.

  5. Group think will give the best results. Group results are often dominated by an autocratic leader, or represent assimilation of the lowest common denominator. Most people tend to be compliant, rather than risk conflict. Creative ideas are the outliers, and tend to be eliminated first, rather than evaluated fully. Diversity challenges group think.

  6. Low appetite for risk. With humans as well as with animals, you tend to get what you reward. If you reward ‘right first time behavior,’ you might get fewer mistakes but you will also get fewer attempts at trying new things. ‘Fast failure’ and ‘minimum viable product’ are startup concepts geared to facilitate creativity while still mitigating risk.

  7. Polarized thinking. Early failures tend to swing later decisions entirely in the opposite direction, which can have equally traumatic results. Some people tend to manage challenges with “either/or” thinking, rather than creative “both/and” thinking to try to solve the problem. If there are polar opposites, look for the positives on both ends.

  8. Generate more stress. The more critical a problem becomes, the less creative our decision making will be. Concentration is impaired by stress, judgment and logical thinking deteriorates, we tend not to communicate well, we tend to stop gathering data, and we tend to make quick, impulsive, short-term decisions. Work on reducing stress.

  9. No feedback or results analysis. Every decision needs review and continuous feedback from constituents for validation and tuning. In the world of business today, the only constant is change. Even good decisions today will require adjustments as the environment or customers change. Avoid the tendency to fix blame and look for excuses.

  10. Failure to learn. Experience is inevitable; learning is not. Review and measuring decision results facilitates learning, just like sales metrics facilitate a better understanding of sales. Creativity without learning will be short-lived and ineffective. Learning required effective listening, and creative thinking to make sense out of tough experiences.

It’s time to get past the myths and mystery about creativity. Creative people don’t have to have eccentric personalities, work in the arts, or work in isolation, to achieve results. It is possible to be creative on demand, and to demand creativity in your startup. In fact, if you don’t, you startup will too quickly join the ranks of the corporate world that you love to hate. Think about that one.

Marty Zwilling


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Friday, July 26, 2013

Startup Due Diligence Success Requires Advance Work

investor-due-diligence-prepIf your startup is great enough to get a term sheet from angel investors or a venture capitalist, the next step for the investor is to complete the dreaded due diligence process. This is the last step of the process, where surprises in the evaluation of the management team, documentation, and personnel problems can derail the investment.

Some startups do nothing to prepare for the due diligence process, assuming the people and business plan documents will speak for themselves. Others stage elaborate “training” sessions, to “assure” that everyone tells the same story. The right answer is somewhere in between.

I believe that proactive preparation for due diligence is a bigger job than the work for investor meetings, because your whole team is involved, not just you as the CEO. If there are financial anomalies, or someone on the team doesn’t know the current strategy, or is unhappy with you or the company, the investment will be jeopardized.

Even if you feel that all is well, here are some thoughts and actions I would strongly recommend:

  • Whole team must know the plan. Make sure the Business Plan and all related documents are current, synchronized, and in the hands of every key employee. If everyone gives a different story, you have no story.

  • Personnel situation is stable. Ask everyone to update their resume, and personally call probable references, so there are no surprises. You need to brief the investor ahead of time if there are career anomalies or personnel situations that could be a problem.

  • Don’t surprise the team. Call a company meeting to communicate what is happening, and why. This is a good time for the CEO to present the final investor charts, and answer any questions from employees. All need to know who will be there and what you expect.

  • Contact key vendors and existing customers. Explain that they may be called, and use the opportunity to check their satisfaction with your company and your product. Again, if you find problems you can’t fix, be up-front with the investor to avoid a surprise.

Depending on the availability of staff and needed information, the due diligence process generally takes 2–6 weeks to perform. During this time or earlier, you should also be doing your own due diligence on the investor, as suggested in a recent article on avoiding problem investors.

Here is a quick summary of the priorities normally covered by the due diligence process:

  1. Evaluation of key players. This is the highest priority item. As a starting point, an investor will ask for resumes of the “key players,” and will then follow-up to verify that executives are experienced, honest, and committed. That means questioning each of these key players, and calling references or prior associates.

  2. Validation of product. This will cover the technology, the current state of development, and customer satisfaction. Is it something consumers need or simply want, does it work, and is it ready to ship? What are the “kinks” or certifications that need to be resolved? If the product is in customer hands, expect some customers to be interviewed.

  3. Size of the market. Having a great product or service is not enough. One of the criteria for a good investment is a large and fast growing “potential market.” Investors will talk to their own experts on the size of the potential market and the expected growth rate. They will also assess trends in the market and how current economic, political, and demographic conditions relate.

  4. Sales and marketing strategy. This will involve an analysis of the company’s distribution channels, advertising, and pricing strategy. An investor will try to get an independent reading on competition, barriers to entry, price sensitivity, and what percentage of the market your company can expect to capture.

Remember, once investors contribute money to a company, a long-term relationship is created. Unlike a marriage, however, it may be very difficult, if not impossible, to get a divorce. Your objective is not only to survive, but also to make it an enjoyable win-win relationship.

Marty Zwilling


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Thursday, July 25, 2013

11 Key Traits of the Best of the Best in Business

warren_billAt 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 a while back 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 Warren Buffett or Bill Gates, focus on your attitude as much as your business plan.

Marty Zwilling


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Wednesday, July 24, 2013

Don’t Turn Your Business Dream Into a Nightmare

business-nightmareI’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


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Tuesday, July 23, 2013

Don’t Let Founder’s Syndrome Kill Your Next Venture

founders_syndromeFounders 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:

  1. 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.

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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


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Monday, July 22, 2013

7 Steps to Outstanding Sales Growth for Your Startup

growth_is_good_image“If you build it, they will come.” It's a line from an old movie "Field of Dreams" which is still leading to the demise of too many startups, led by entrepreneurs who really started their business to build an exciting new product or service. Most struggle with the idea and practice of marketing and sales, and see these as a necessary evil, if even required.

Of course, for a price, there are many marketing organizations and gurus willing to come to your aid. But marketing is not “rocket science,” so I’m a big proponent of self-help and practicing the pragmatics in-house first. A great resource for all is a new book by Drew Williams and Jonathan Verney, “Feed the Startup Beast: A 7-Step Guide to Big, Hairy, Outrageous Sales Growth.”

This book correctly characterizes every startup as a beast that has to be well fed to grow. The ingredients for growth are well known: patience, persistence, and a plan. The first two p’s are up to you, but an effective plan and execution in this new Internet world needs to be built around a minimum of the following seven steps:

  1. Ask the single most important question. The only question you need to ask is “How likely are you to recommend my [product/service/company] to a colleague or business associate?” In every constituency, there are fans, fence-sitters, and critics. Fans contribute 2.6 times more revenue than “somewhat satisfied,” and critics kill revenue at twice the rate that fans increase it. Too many critics and not enough fans spell disaster.

  2. Listen to targeted prospects through real engagement. Engage first, sell later. The laws of engagement require targeting the best prospects first, offering a real value proposition, and making an offer which is valuable, timely, and relevant. Continue building the relationship to nurture them into paying customers.

  3. Focus your resources to convert prospects to customers. Build a plan with automation to manage the volume, but every customer has to feel like you are reaching out to them personally. Fine-tune the marketing and sales conversion engine to narrow the funnel, and build a sales team to close every sales-ready lead.

  4. Attract and get found by the right prospects. The planning is done, and now it’s time to execute. Make your startup valuable and visible, with great content that can not be missed by online search, influencers, and offline events. Use social media in concert with a web site and offline media. In all venues, 20% of the effort gets you 80% of the results.

  5. Pursue and intrigue prospects who respond. Put your best efforts into helping prospects break through the clutter, engage them, and intrigue them. Your goal is to get them to think different, like Apple, or be surprised and delighted with the experience. Be sure to track the engagement rate, and be quick to pivot if the breakthrough rate is low.

  6. Nurture customers and influencers into real fans. Turning your customers into real fans is the best leverage you have. Fans have a triple impact: they are more profitable, stay longer, and bring in others. Effective fan-nurture programs include an advisory panel, a “constant contact” program, referral program, and a one-question survey.

  7. Grow and measure the conversion rate. Here are four essential conversion rates you need to track: prospects to engaged prospects (target 38%), engaged prospects to sales-ready leads (20%), sales-ready prospects to customers (35%), and customers to fans (60%). This kind of conversion can easily result in 100% year-over-year revenue growth.

If you want success in selling your product, you need to put the same focus, intensity, and innovation into marketing and sales, as you have put into building the product. It won’t happen magically, but it doesn’t require an army of experts or a huge budget. Really, it’s all about having great information, great tools, and the determination to learn what customers really value.

Completing each of the above steps allows your startup beast to pick up momentum, fueling a breakthrough in growth, and ultimately making it unbeatable in the marketplace. The modern day field of dreams mantra has pivoted to “If you market it, they will come.” Are your customers coming fast enough?.

Marty Zwilling


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Sunday, July 21, 2013

7 Reasons Startups are for the Young and Positive

Mike_MichalowiczTo be an entrepreneur, you have to be navigate lots of unknowns, and the path is fraught with risk. Once you are past a certain mental age, you know too many of the things that can go wrong, so you never start. Sort of like the old saying that if we didn’t have young men to fight our wars, we could achieve world peace in no time.

People who are young, or young at heart, don’t know all the negatives, or don’t worry about them. The result is that they achieve things that no one else ever thought possible. That’s the definition of a true entrepreneur. Many people, including Mike Michalowicz, in his highly irreverent book, “The Toilet Paper Entrepreneur,” have identified specific reasons for this:

  1. Resilience. Youth brings an ability to rebound that many people lose with age, unless they remain young at heart. This resilience allows you to bounce back after defeat and try again, unscathed. The entrepreneurial path is littered with pitfalls and roadblocks; you need the capacity to come back again and again relentlessly.

  2. No false pretense. The young foresee many more possibilities and great experiences ahead. As a young person your life IS still ahead of you. The best part is, you can determine just how great a ride it will be. In fact, at any age your life isn’t over yet. Smart people are still determined to make it a great ride, rather than a sickening spiral downhill.

  3. Responsibility pressures. Most young people fresh out of college don’t have children and spouses to support, so they can put real focus into launching a company. Later in life, when the kids are grown and gone, someone young at heart can again focus on dreams without overwhelming responsibilities.

  4. Energy and passion. No question, a young person has more energy than an older person. Likewise, a person at any age who is living their passion as tremendous amounts of energy. Those who are young at heart feel the same passion, and can even use their experience to do the same job with less energy.

  5. No preconceived notions. Young people, in general, are far more willing to try something new. As we age, we often look back at our younger years and can’t believe the crazy things we tried. But it’s never too late for some to be young, be crazy, and launch a company.

  6. Not schedule driven. One of the first freedoms that most young people enjoy is to ignore conventional schedules. They may party all night and work all day, or the other way around. Getting away from large company schedules is also one of the key reasons that experienced professionals jump ship to start their own company.

  7. Money isn’t a big deal. Since most young folks have yet to experience what it’s like to have lots of money, going without isn’t perceived as much of a hardship. On the other end of the spectrum, most people learn that money doesn’t mean happiness. The motivation to follow you dream actually can keep you young at heart.

There is plenty of evidence that raw intelligence and advanced degrees are not the key to success as an entrepreneur. What does matter is how smart you believe you are, how talented you believe you are, how driven you are, how focused you are and how persistent you are. These are the domain of the young at heart, of any age.

Launching a business is about surviving and doing it intelligently. If you have the will, there is a way. Being young or young at heart makes it even easier. As Mike Michalowicz would say, all you need is to get down to business. NOW!

Marty Zwilling


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Saturday, July 20, 2013

9 Founder Habits That Leave a Business Foundering

Dennis F. Strigl, former CEO of Verizon Wireless, speaks to MBA students in the Strategy and Organization Consulting course at the USC Marshall School of Business.After working with dozens of startup founders, I’m still amazed that some seem to be able to do the job easily and effectively, always in control, while others always seem to be struggling, out-of-control, and fighting the latest crisis. I am more and more convinced that it is the right founder behavior that leads to success, rather than some exceptional intelligence or training.

In that context, startup founders should carefully review the points made by Denny F. Strigl, former CEO of Verizon Wireless, in his book aptly named “Managers, Can You Hear Me Now?” He outlines the behavioral habits he has seen in managers who are successful, versus the bad habits of ones who struggle. These habits apply even more directly to entrepreneur startup leadership:

  1. Failure to build trust and integrity. Poor leaders often fail to build trust initially, or they erode trust during daily interactions and operations. Without trust, there can be little cooperation between team members. This results in little risk taking, diminished confidence among employees, and a loss of communication throughout the company.

  2. Focus on things that don’t really matter. Entrepreneurs who struggle spend too much time focused on things that don’t really matter. If it doesn’t fit into one of the Four Fundamentals: growing revenue, getting new customers, keeping the customers they already have, or eliminating costs, they should rethink what they are doing.

  3. Shirk accountability and role model. Founders need to realize their behavior is in a “fishbowl” and thereby highly visible for the team to see and imitate. What the founder says and does in stressful situations sends a signal to imitate that behavior, even when they are not under stress. Poor performers thrive in an unaccountable work climate.

  4. Fail to consistently reinforce what’s important. Managers often stress a particular message or a program for a couple of weeks, and then assume everyone gets it. When they change their message too often, team members become confused about what’s important. People perform best when what they hear is consistent and frequent.

  5. Over-rely on consensus decisions. Some founders go too far to become consensus builders. This takes too much time in our super-competitive environment, and the result of a total buy-in is usually a watered-down version of the original decision or action they intended. Informed decision-making is not the same as consensus decision-making.

  6. High priority on being popular. The first priority of a founder is to deliver results, rather than building friendships. Happy team members don’t necessarily bring you stellar results, although stellar results almost always bring you a happy team. Good managers don’t worry about shaking up the status quo, and realize that change is never initially popular.

  7. Get caught up in their self-importance. Many founders fail because they get caught up in the “aura” of their position, and seek recognition and glamour for themselves. They love to give speeches to groups and in places that don’t really matter. These people seldom see what is causing their own demise in their attention to “all-about-me.”

  8. Put their heads in the sand. Many founders struggle because they only want to hear good news. Team members quickly learn to report positives, while hiding problems. As a result, productivity suffers, employee morale decreases, and targeted results are missed. Encourage open, honest, direct, and specific communication always.

  9. Fix problems, not causes. Don’t fix a problem without addressing the reason the problem occurred. The most common excuses given include lack of time to immediately address the cause, lack of resources to address the cause, or problem is outside of their control. Good managers always find the means to fix the cause.

In order to stop struggling and start delivering, founders need to close the gap between what they know and what they do. Avoid the bad behaviors outlined here. Do the good things, day in and day out, until your behavior becomes habit for both you and your team. This can override pure intelligence and create real success and positive results from everyone on the team.

Marty Zwilling


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Friday, July 19, 2013

10 Dilemmas Every Startup Founder Must Deal With

The-Founders-DilemmasMost entrepreneurs struggle with many startup Founders dilemmas in building their business, and these key dilemmas are probably the biggest source of pain and failure for the entrepreneur lifestyle. People may jump into the lifestyle to be their own boss, achieve great wealth, start a new trend, or all the above. The dilemma is that these goals are usually mutually exclusive.

For example, is the person who starts a new trend likely to be the one who controls it through the growth phase? In a famous study of 212 new ventures a few years ago, Harvard professor Noam Wasserman found that half the Founders were no longer at the helm after three years, and over time 80% were forced out. That’s not an attractive statistic if you crave control and power.

Don’t wait for the harsh reality of the demanding business world to start thinking about these tradeoffs. The research from Wasserman and others outlines the following top ten dilemmas that every Founder needs to deal with sooner or later in their career as an entrepreneur:

  1. The make money or serve humanity dilemma. Your great idea for the next Facebook may make you wealthy, but it probably won’t help the hungry. The answer is to look hard inside yourself, to see what makes you happy and satisfied. If living on Raman noodles while you make the world a better place is fine, skip the investors and growth race.

  2. The right time to start dilemma. The right time to jump is a function of favorable career, personal, and market circumstances. While it’s unlikely that all three of these will ever be true at the same time, most experts don’t recommend jumping at the first opportunity, but first gaining some skill, financial, and business experience first.

  3. The founding team size dilemma. Should you start a company solo or find co-Founders to help you? With one or more co-Founders, you gain complementary skills, spread the workload and responsibilities, and reduce the risk. The downside is loss of control and financial dilution. In my view, two heads are always better than one.

  4. The co-Founder relationship dilemma. While long-time social friends and family may seem like the natural choice for co-Founders and team members, these relationships often get in the way of hard business decisions or necessary business adjustments. Old co-workers or new friends with complementary skills usually make the best partners.

  5. The Founder’s title and role dilemma. Usually co-Founders expect to get a C-level title associated with their area of interest, like CFO for the financial expert. Make sure these titles are handed out only to people who are willing and able to accept the responsibility and workload of the associated role. It’s tough to downgrade titles and roles later.

  6. The compensation model dilemma. Every founding member wants to be compensated richly for the risk and the unknown. You have very little money, and you don’t want to give away your equity. Recognize that the best people don’t work for free. Giving equity is realistic, but base it on contribution and role, with vesting after time and milestones.

  7. The right investors and right time dilemma. You don’t want to take money from friends and family, but it’s too early for Angel investors and VCs. No one wants to put in money until you have a product, and you need money to build the product. Bootstrap if you can, otherwise climb the pyramid of family, friends, Angels, and VCs.

  8. The right motivated employees dilemma. Very early, you need generalists who can cover multiple areas, but you can’t pay for experience. Later you need specialists and managers. Offer low cash early, with bonuses or stock options for milestones, to people in your personal network. Later use LinkedIn and other job sources for professionals.

  9. The Founder succession dilemma. Startups are usually founded by product or service experts who don’t enjoy the various growth phases. Should the Founder keep the company small, try to adapt, or step aside in favor of a seasoned business executive? Transition to a specialist role, plan to exit, be prepared to be pushed out, or plan to fail.

  10. The control and growth dilemma. If you take investor money, expect a push for hockey-stick growth and a liquidity event, like going public (IPO) or sale (M&A), to get the payback. If you prefer a private company with organic growth, keep control within friends and family, and prepare for the long haul. Otherwise exit and startup with another idea.

Not facing these dilemmas squarely and honestly is one of the biggest pitfalls facing every entrepreneur. You can’t have it all, just like your startup can’t be all things to all customers. You have to focus on the things you can do and love to do, and do them better than anyone else. Turn these top ten dilemmas into your strengths, and you will have a competitive advantage, as well as the fun and satisfaction you sought to find in the entrepreneur lifestyle.

Marty Zwilling


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Thursday, July 18, 2013

7 Reasons to Brand Yourself Before Your Startup

catherine_kaputaStarting a business is usually the result of a personal dream or need. Investors tell me that they invest in people, more than the idea. Customers buy from people, not from a company, at least at the startup stages. That’s why it’s important to build a personal brand, in parallel and before your business brand. This will kick-start your business, and improve your odds of success.

So what does it mean to “brand yourself?” Branding yourself means making yourself visible, and communicating via all avenues your personal value and what your stand for, with total clarity and consistency. It’s especially important to highlight your uniqueness in some easy to remember way, so people will think of you and what you do, in case they need your product or service.

Then do the same to brand your company. Branding guru Catherine Kaputa, in “Breakthrough Branding” says that branding is all about building a recognizable identity, and associating it with benefits and positive consequences. She outlines some positioning strategies that I recommend, with seven key drivers of brand growth:

  1. Brand boldly – for your business and you. A common way to position your personal and business brand is to boldly “own” an attitude on a key attribute. Every product or service has specific attributes that are important to key customers, like integrity and trust, or customer focus. Craft a simple message to make that your identity.

  2. Dominate the category (even if you have to create a new one). Small brands that break through to grow big find a “small” idea that fills a gaping hole – a need in the marketplace that wasn’t met before – and they keep filling that need better than anyone. If you dominate the market, competitor copycats will only amplify your positioning.

  3. Figure out how to grow and scale the business. Businesses that scale have leverage and more rapid brand growth. Technology businesses can be very scalable because you can develop a core set of assets, such as software systems, and then you can monetize them at low additional cost. Build your business model on systems, not on people.

  4. Enchant your customers. At the end of the day, you’re only as good as your customers who love and appreciate you. That’s why having a special customer relationship model that’s hard to copy can propel your business growth. According to Guy Kawasaki, enchanted customers elevate your brand, like advocating a good cause.

  5. Put “growth agent” in everyone’s job description. Growth means change, and that doesn’t come naturally to most people. Keep everyone focused on one key objective and three measurable key results, so “business as usual” is not an option. Find people smarter than you in each aspect of the business, and hand if off as you scale.

  6. Strike the right balance between innovation and staying true to the brand. Ignore innovation and your competitors will quickly pass you by. Too much innovation will confuse your customers, and drain your resources. To stay true to the brand, use open innovation, and see the power of involving customers in the process of innovating.

  7. Take advantage of good luck and bad. Sometimes a sprinkling of good luck after bad, along with pluck, can propel your business idea into a breakthrough brand. The early startup period (“valley of death”) is your most vulnerable time but also your most opportunistic, because it is the time when you can create tremendous brand value.

As much as we might like entrepreneurship and branding to be a science, because it would be simpler that way, it is not. Being a brand entrepreneur, both for you personally as well as your business, requires learning, and is an ever-changing art without easy formulas.

An entrepreneur these days can’t afford to hide behind an impersonal website or hole up in the corner office. Social media such as Facebook, Twitter, and blogs, connect your customers to one another, and you, twenty-four hours a day, seven days a week. If you don’t take charge of your brand, someone else will – and they are not likely to brand you in the way you want to be branded. Do you want the impossible task of undoing a negative brand?

Marty Zwilling


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Tuesday, July 16, 2013

How Do Entrepreneurs Build an Innovative Team?

the-innovative-teamMost entrepreneurs I know are individually very innovative, but a successful startup can’t be a one-man show (for long). That means they need to build an innovative team, which is not a skill that most people are born with. In fact, some very innovative individuals, known as ‘idea people’ or inventors, often end up creating the most dysfunctional teams.

A typical approach to dealing with team dysfunction or no innovation process is to work around it, which normally leads to startup failure. The only way to build productive, collaborative, innovative, and cohesive teams is by resolving core dysfunction issues and implementing a structured process for innovation.

There are many resources out there to help you address team dysfunction, but very few provide much insight on a process for maximizing startup team innovation once you have the motivated people. Chris Grivas and Gerard Puccio published a book, “The Innovative Team,” which seems to hit the issue directly, with stories to illustrate key points.

They outline a simple process or framework for fostering team innovation, called FourSight, which is composed of four steps, capitalizing on the leader’s and other team member’s strengths and interests, that is consistent with my own experience in big companies as well as small:

  1. Clarify the situation. Innovation is not all about coming up with new ideas. It really is first figuring out which challenges are the most important. Clarifying means sorting out the real problem from the symptoms or distractions, and focusing all team energies there to change things for the better.

  2. Generate ideas. This requires divergent thinking, with the strengths of every team member, to generate as many ideas as possible. Then it requires convergent thinking when there are enough ideas to choose from. Look for that sparkling new idea or “eureka” moment to develop into a workable solution.

  3. Develop the best solution. No idea is born perfect. Here the goal is to transform a novel idea into one that can be implemented successfully, with tinkering, adjusting, and polishing. True creativity brings novelty and usefulness together. This step includes verification will the solution will actually work, and the improvement can be measured.

  4. Implement plans. This is the stage where project plans are created and implemented. Now it’s all about action, and in many ways, about managing change. People who prefer this stage of the process tend to be drivers, known for making quick decisions and getting results. It always helps to temper their preference with patience and sensitivity to others.

In business today, it takes a team to get work done, whether we are talking about a startup or a large conglomerate. The potential of any team is defined by its members, not just individually, but collectively. Then the right process is required for innovative thinking that is greater than the sum of their individual talents and skills.

Although most startups say they want to create a culture of innovation, they should realize that there are implications. Leaders have to focus on open and honest communication to maintain trust. Founders have to be willing and able to reject ideas that won’t work, in a way that still encourages more creativity.

Entrepreneurs have to remain open to creativity and change, despite high-pressured investors driving more toward “making it through the day” and “timeline deliverables” than producing well-developed and novel products, improvements, or new directions.

By becoming more consciously and deliberately creative, entrepreneurs can enjoy their lifestyle with more satisfaction, enabling their team to do the same, and together produce results that no one has yet dreamed of. Are you building a team yet which fits this mold?

Marty Zwilling


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Monday, July 15, 2013

Business Plan Financial Forecasts Test Your Savvy

savvy-money-manMany 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 a slow economy, 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


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Sunday, July 14, 2013

10 Reality Checks to Verify Your Entrepreneur Fit

entrepreneur-reality-checkMaking the decision to become an entrepreneur is a major commitment, with huge implications for skills and lifestyle. Yet there is no standardized testing or certification required or available anywhere to help you decide if you are a good fit for entrepreneurship, or entrepreneurship is right for you. An MBA or other academic credentials just don’t do it.

Therefore, the least you can do is take advantage of some of the self-assessment tools and guides around, like “The Entrepreneur Equation,” by Carol Roth, which highlights personal characteristics and skills required. Some day, I expect there will be a more formal certification required, like lawyers and accountants have to pass, to hang out their shingle.

Until that happens, I recommend that you consider the following ten reality checks from Carol and myself on your entrepreneurial aspirations, before you step in so deep that it’s hard to back out:

  1. Critically assess your motivation. Are you bored, wanting to be free of a boss, or eager to showcase a hot technology? These are not valid reasons to start a business. But if you're focused on solving a real problem, believe you can do it better than anyone else, and confident in wearing many hats, you have the right start-up mindset.

  2. Say hello to multiple new bosses. When you start your own business, you are no longer in control. You will likely not have the freedom you dreamed of. You will be controlled by your customers, investors, lenders – and you are personally responsible for answering to all of them, all of the time.

  3. Evaluate how well you work with others. Many people dream of opening a business as an escape from annoying coworkers and overbearing bosses. But now you have to interface with even more people, including accountants, lawyers, as well as clients and team members. You need to be comfortable with people and have sharp people skills.

  4. Add up your responsibilities. Owning a business is very much like raising a child. It’s a 24/7 job. If anything happens to the business (including a loss of income), how will it affect your family or home life? Remember, the buck always stops with you.

  5. Look at your management and industry experience. Being able to manage employees and vendors is the type of skill assumed before starting your own business. You’ll also need to know your industry inside and out. It helps to work in a similar company before you start your own.

  6. Take stock of whom you know. Business comes down to not what you know, but whom you know. Good connections are worth their weight in gold. They will get you interest from investors and lenders, and you will receive better financing, prices, terms, and conditions from business suppliers and professional services.

  7. Be honest about your relationship with money. Don’t expect your relationship with money to change just because you’ve opened a business. Opening a business requires money, as well as sound financial management. Do you panic about spending money or avoid financial risk at all costs?

  8. Assess your personality type. If you are a person who likes stability and control, or if you prefer when things go as planned, the roller-coaster ride of a new business may not be right for you. Every new business has highs and lows, and plenty of the unexpected.

  9. Examine the marketplace and your competition. To brand your business and woo investors, you'll need to understand why and how you can outshine competitors. Both good and bad competitors will influence how successful your business will be.

  10. Test your scalability. Successful businesses rely on automation and delegation. Will you be able to teach other employees to do your work? If your business relies on your brain and skills alone, you might have a successful job, but not a successful business.

Please don’t take these steps as being too negative, but do remember that the risks are high. Statistics say that the failure rate for new businesses within the first 5 years is as high as 90 percent. That should indicate that a lot of entrepreneurs get more than they bargained for. Think twice before you invest your precious time, money, and energy, and then go for it!

Marty Zwilling


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Friday, July 12, 2013

Why Would a Business Avoid any Internet Presence?

Basic RGBThese days, if your startup does not have an Internet home base up and running, you are not ready for business or potential investors. Customers go there to check on the details of your offerings and verify that you are not a scam, investors look there to check out your management and sales approach, and suppliers expect to find contact information.

There should be no doubt that an Internet presence is as basic to success in business today, as brick and mortar was a hundred years ago. Yet I am amazed to see US Census Bureau data from 2012 that at least 50%, maybe up to 75%, of small businesses still have no presence at all. These are soon to be the walking dead, and the competitors you can beat today.

In fact, you need to have at least a prototype web site published several weeks before you expect anyone to find yours, since it takes that amount of time for the web search engine “spiders” to find you and index your content. I still remember my disappointment the first time I published my website, did an immediate Google search on the name, and it said my company didn’t exist.

There are many practical reasons for going to work early on your web site. Here are a few:

  1. Register domain name and set up hosting. I’ve said many times that the Internet domain name should be reserved at the same time you incorporate your company name – they need to be the same, or highly related. Yet I still hear stories of companies being well down the road on products and collateral with a given name, only to find out that everything has to be changed because of a domain name conflict or availability problem.

  2. Websites are a big job and take time. I’ve also known startups who have worked for months on the infrastructure of their business – front office, manufacturing, product design, marketing, personnel, and sales – then started work on a web site in parallel with their “grand opening.” Two months later they still didn’t have a web site, and didn’t have a customer. You should allow three months for the design, building, and rollout of your first site, and you can actually build it yourself these days.

  3. Finalizing the web site validates your product plan and sales strategy. Many founders find that building the web site forced them to commit on the product design, set final pricing, define ordering and delivery procedures, and actually schedule and staff the marketing events that they had in mind.

  4. Viral marketing needs a website. Everyone knows that word-of-mouth advertising is an effective and important part of any small business. But word-of-mouth and viral marketing doesn’t work without a web site. On the other hand, don’t assume that viral marketing is the only marketing you will need.

  5. The website can be a source of revenue. If your business and product are as attractive as you believe, the traffic to your web site will build quickly. Now you should monetize that aspect of your business through the use of Google AdSense to display ads for related products and businesses, and get paid for the “click-throughs.”

  6. Your web site will promote your business 24 hours a day, 7 days a week. Like you probably do, many people search for products and services on the weekends and in the evening. They are busy business people and very often this is the best time for them to concentrate on researching a new product or service. As a business owner, there is nothing more satisfying than having several orders and email inquiries waiting for you when you get up in the morning!

In fact, you can set up a web presence these days on social media alone, by creating a company page on Facebook, company profile on LinkedIn, or a free blog with static pages on WordPress. These may not have the globally recognized www.companyname.com domain name, but will certainly put you in touch with the new Internet generation.

I’ve heard all the excuses for not stepping up to this requirement - like I don’t have the time, skills, or money. But believe me, the costs these days are trivial, compared to the benefits. For the first time you have at your disposal the whole world market for whatever product or service you happen to provide. It’s time to turn the light on, and let the world know you exist.

Marty Zwilling


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Thursday, July 11, 2013

How to Make a Real Social Media Customer Connection

Visa Business_July Infographic_071013As I visit the websites of many startups, as well as more mature businesses, I still too often see a “contact” page offering nothing but a sterile form for customers to submit, never to be heard from again. Social media connections, if they exist, are buried elsewhere or reserved for monitoring purposes only.

Social media is here, and is the preferred mode of communication by a large segment of your customers, so make it a positive differentiator for your business. Don’t force them to use an automated phone response system, or a faceless unresponsive form. Customers are not all like you, and they have choices, so a “one size fits all” customer service is no longer a viable option.

There are now many resources out there to guide you on building social media into your business and improving your customer experience, including the book from multicultural marketing expert Kelly McDonald, “Crafting the Customer Experience for People Not Like You.”

Her focus is on crafting a customer experience that caters to people not like you, including social media aficionados, to bring in new customers and create a competitive advantage. Every startup these days must adopt this focus to survive and prosper. Here are some key recommendations I gleaned from her book to make this work:

  1. Empower your social media front line team. This front line team, often called community managers, are the “voice” of your company, and must have authority to make and carry out decisions that can make or break a customer’s experience. That means forget using interns or outsourcing this function. You need insider “deciders” here.

  2. Be proactive and put on your listening ears. You absolutely must listen online, because that is where you will find the unvarnished truth about what your customers and prospects think of you. Proactively asking the right questions will get you to that truth in a positive way earlier, rather than having to learn from damage control later.

  3. Respond online to feedback received online. Before social networking, an unhappy customer might tell three people. Now an unhappy customer can easily tell three million. If these three million see no timely response, your problem can go viral (like United Breaks Guitars). Respond online and let the positive vibes go viral instead. Don’t force customers to go offline to your customer support phone or email for resolution.

  4. Guide customers to the right social media channel. As a startup, you can’t be everywhere all of the time, so it helps to tell people through traditional channels, in a positive way, the best ways to find you. All social media channels are not equal, and customers are still learning, so they may also appreciate some guidance.

  5. Connect members of your market to one another. One vital aspect of relationship building requires that you become a true connector by introducing members of your market to one another, which will help them derive mutual benefit. A positive result could be a reputation that you put customer relationships first and sales second.

Providing the best customer experience to different kinds of people via different channels isn’t just the right thing to do, it’s the strategic thing to do. It will improve your business in several ways:

  • Grow your business by bringing in new customers.
  • Give you a significant competitive edge, by better serving broader customer groups.
  • Increase customer loyalty and therefore customer retention.
  • Help differentiate you from other businesses or similar enterprises.
  • Give you a greater understanding of and insights to diverse customer groups.

Although building social media into your customer experience sounds like work, don’t forget that social media is a gift to every startup and small business. The conversations that once took place only between people in private settings now occur more and more in public online environments, across a world geography.

By “eavesdropping” on the right customer conversations, startups can identify their own strengths and weaknesses, as well as those of their competitors on a real time basis. Essentially, you can think of social “listening” as a free tool for market intelligence, consumer research, and customer service all rolled into one.

But all this only works if you are wired into the conversation, your customers know how to find the conversations, and they trust you to treat them as respected and valuable members of your community. Where is your business along this spectrum?

Marty Zwilling

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

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

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


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