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



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



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



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



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



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



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



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



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



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



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



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 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



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 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



Wednesday, July 10, 2013

Startups Can’t Survive With ‘Downers’ on the Team

downerA “downer” is defined here as someone who seems to dwell on the negatives of every business challenge, and loves to highlight bad news or potential problems. No matter how smart or experienced this person may otherwise be, things must change or they will kill your startup.

I’m not talking about someone who has an occasional bad day, but rather people who when asked, “How are things?” will proceed to give you a 20-minute dissertation on their latest health symptoms, the latest company problem, and the sad state of the world in general.

This brings down the mood of everyone around them, and often leads to a self-fulfilling prophecy. We all know this kind of person, but they never seem to recognize themselves. So here are a few clues that you can look for in yourself, to see if you slipping into this abyss:

  • “It’s just another long day at work.” You can’t remember the last time you were positively excited by something you did at work, or even in your personal life. Your brain has leveled all events and activities into a desert of sand dunes, where just getting from one to another is a struggle, and there is nothing new to see over the next hill.
  • “I’m always tired or stressed out.” You may know this, but you assume that it’s not obvious to anyone else. Yet, think of your own office, you noticed on the first day those people that speak slowly in a low monotone, walk or sit with their head down most of the time, and rarely contribute anything without being asked.
  • “If it’s not broken, don’t fix it.” This can happen to business executives, once able leaders, who have spent too many years doing the same job. They know their processes and team aren’t perfect, but they no longer notice these imperfections. They are bored, or no longer interested in improvement opportunities.

If you recognize yourself in these points, or you feel yourself slipping in that direction, what can you do to turn yourself around before the company pushes you out, or a competitor pushes your company out? Here are a few suggestions:

  • Get a medical checkup. You may be fighting a health problem that can be easily solved by proper treatment or medication. Even more severe medical problems, like chronic depression, can be mitigated once they are recognized and understood.
  • Change your environment. Ask for a new assignment at work, or look for a new job before you are fired from this one. Make a concerted effort to wake yourself up to the positives, and re-engage in processes that once excited you. Start a log on your efforts and progress. Measurable progress is itself exciting.
  • Ask a mentor for support. Choose a friend or mentor (not your spouse) whom you trust to tell you the truth, and ask for help. Then listen to the recommendations. These people can’t change you, but you can change yourself. Focus on identifying strengths, and capitalizing on them.

Let me assure you, every startup faces more challenges than any other business – unproven product, new processes, new management, and unpredictable customers. This is not the place for downers. If you are a downer, find a new place to work. If you run the startup, and you don’t deal with this issue quickly, your fledgling business is in jeopardy.

As I’m writing this, I’m thinking that these points are so obvious that they don’t need to be reiterated here. Yet I still find this to be one of the most common drags on startup productivity, as well as employee satisfaction. Remember that being a downer is not something that someone did to you; it’s something that you did to yourself. Therefore, it’s up to you to fix it.

Marty Zwilling



Monday, July 8, 2013

An Entrepreneur Platform To Put You Above the Crowd

michael-hyatt-on-the-platformThe space for startups is more crowded than ever. First of all, it’s now international, so you have startups from every country in the world competing for your customer’s attention and their business. Then there is the Internet, delivered through every media, including your smart phone, where the volume of data spewing out is like a new Library of Congress every 15 minutes.

According to the most recent study by the Ewing Marion Kauffman Foundation, there were approximately 514,000 new businesses created per month in the US in 2012. The days when you could launch your business with a new web site, and the phone would begin to ring, are long gone. Even the Google search engine crawlers may take up to two weeks to find you.

So what’s an entrepreneur to do to get his new business noticed these days? According to many experts, including Michael Hyatt, in his book, “Platform: Get Noticed in a Noisy World,” you need to build the highest platform you can, to stand out and be heard above all the rest.

Today’s platform is built of people, including yourself, followers, and contacts, who can amplify your message through social media and spread it to your target customers. Most entrepreneurs I know are too busy creating a compelling product to give proper focus to the four phases of building a people and media platform that Hyatt says are equally critical for long-term success:

  • Platform creation prior to launch. Make sure you have the five basic platform tools in place well before the launch – social media profiles with a great headshot (Twitter, Facebook, LinkedIn, and YouTube), website (with blog), business cards, email signature block, and an email address on your domain name. If these are not complete and consistent, your platform will always be splintered and lost in the noise.
  • Building your home base with personal and product traction. Start your campaign and blog early, to get the message and vision out there (no selling), establish your value and expertise, show your commitment, and start building your home base of contacts and followers. Build a media kit, publicize endorsements from friends and beta customers, get dialogs going on Twitter, and optimize your website landing pages.
  • Using the platform to expand your reach. For startups, you as the founder are the brand and the most important part of your platform. Be visible online and to traditional media, volunteer to lead, write guest posts for others, be responsive, give stuff away, and provide many ways to communicate. Nurture those links into other sites, and network to the max in relevant business organizations and trade shows.
  • Make your customers your platform. Engage your customers through blog comments, product reviews, and personal customer service. Soon you will find that they are re-tweeting your messages, referring their friends to your products, and becoming your biggest evangelists. Your platform is now many times taller and stronger. Your customers will now be helping you to monitor, defend, and amplify your brand.

Success today is more than ever about who you are and who you know, and the platform is all about both of these. Your product or service is the “what,” and of course, that needs to have a “wow factor” to get above the noise, as well. Make sure you create products that exceed customer expectations, that you would personally use, and solve real problems.

The message here is that it’s necessary, but just not sufficient today to build a wow product. People are more distracted than ever, and competition has never been greater. You have to get your customer’s attention. Getting noticed is not about ego or being the center of attention. It’s about having something of value to others and finding the most powerful way of getting that message to those who can benefit from it.

The best entrepreneurs are stubborn, committed, and driven by their vision to produce a product with a wow factor, and to build a platform that rises above the noise. Their startups will get noticed. How about yours?

Marty Zwilling



Sunday, July 7, 2013

Internet Entrepreneurs Think Beyond Get Rich Quick

get-rich-quickMany aspiring entrepreneurs are looking to the Internet as an opportunity to get rich quick, instead of a place where you can start a business you love, for very little capital and minimal technical expertise. The reality is that if you build a business you love, you may in fact make big money, but if you start a business to get rich, you will probably fail.

In my experience, there are good reasons for starting a business, and good ways to go about it in the new online world, but even entrepreneurs with good intentions often don’t have a clue on key principles to follow for this rapidly changing platform.

The best place to learn is by scouting around the Internet today. See what other people are offering, and think about a niche where you could be unique, and have some fun at the same time. There are also many other good sources of guidance, including “Click Millionaires” by Scott Fox.

He addresses the dream of many to be a (click) millionaire, but emphasizes the need to start with an assessment of your own goals and interests. Starting an Internet business is a new lifestyle, so you need to understand the implications. On the business side, I am adapting here his seven success principles, too often overlooked by people who leap before they look:

  1. Find a niche to help real people. Look for real problems to solve, like losing weight, staying healthy, or gaps in a popular product line. “Nice to have” sites like Facebook and Twitter look attractive, but they are much higher risk, and a thousand fail for every one that succeeds.

  2. Position yourself as an expert. People tend to buy from people they perceive as “experts.” Expert status is no longer a formal degree or certification. Today it more often means a “trusted friend” who seems real, visible, and doesn’t “push” products. Don’t hide behind a website with no address, picture, or direct contact information.

  3. Automate to the max. Take advantage of software tools to automate routine business functions, like taking and delivering orders. Provide website forums to help customers solve their own problems. Use free e-commerce software and services like PayPal before building an expensive customized solution. Generate revenue around the clock.

  4. Use the Internet to outsource staff. Hiring virtual assistants for each specific project can be a lot more efficient and cheaper than hiring and managing employees. Start with sites like and for specialized tasks you can’t do yourself. Pay others to handle small stuff, and keep your time available for bigger priorities.

  5. Let your audience help with content creation. Audience contributions, like product reviews, discussion board conversations, and comments on your blog are invaluable because they create more credible content and attract more money from advertisers. Even more valuable are success case studies and testimonials.

  6. Define a business that is scalable. First, pick an opportunity that has a worldwide appeal, like eco-friendly products. Then implement automation on production and tracking so you don’t need hours of manual work on each order. Finally, use customer feedback or promotions to attract more and more customers with less and less effort.

  7. Focus on recurring revenues. A great way to make more money more easily online is to replace one-time sales with automatically renewing subscriptions. With a stable base of subscribers, this can mean a continuing revenue stream from newsletters, support, or advice on demand.

Even with all this, don’t expect it to be easy. Unreasonable expectations lead to frustration and giving up too soon. Remember, being an entrepreneur is a lifestyle, one that requires constant learning and problem solving, and that’s half the fun. The other half is doing what you love to do, and possibly even making lots of money.

There are more and more Internet millionaires (and billionaires) out there every day. Most are not as visible and well-known as Mark Zuckerberg, but their money spends the same way. Can you be the next one?

Marty Zwilling



Saturday, July 6, 2013

5 Startup Culture Crises That Need Immediate Action

startup-culture-crisisMost entrepreneurs start their company with the highest of ideals, and wouldn’t dream of building one with a culture of indifference or downright unethical behavior. Yet all too many succumb to the pressures of survival, driven by demanding investors or a cutthroat competitive environment. How does a Founder recognize the warning signs, let alone know what to do about it?

Some key insights on this issue are provided for corporate environments in a recent book by David Gebler, “The 3 Power Values: How Commitment, Integrity, and Transparency Clear the Roadblocks to Performance.” I‘m convinced that the underlying points are even more relevant to entrepreneurs, with some adaptation for the realities of the startup world:

  1. A switch to survival mode. When customers don’t appear as fast as the Founder projected, and cash runs short, everyone on the team starts to worry about losing their job. Suddenly “closing the sale,” no matter what is required, takes precedence over the grand team vision of changing the world.

    When a startup team is in survival mode, they need straight talk from leaders they respect and trust. Founders are often tempted so sugarcoat information. If you want employees to stay engaged, tell them the truth, with specifics on what is required to turn things around, and the team will surprise you with their commitment.

  2. Big bad investor interference. Investors provide funding, but they also have their own set of expectations on how things should get done, with aggressive milestones. For the team in the trenches, these pressures can cause tensions to run high, and commitment to high level goals is lost. The culture changes to satisfy the investors at any cost.

    Make your investors part of the visible team at the startup, and make sure all key milestones are well understood up front. Then make sure you communicate regularly to your investors so they don’t get surprised. Investors are people too, and with regular communication, will trust people to do their job, without sacrificing integrity and ethics.

  3. Misunderstood pivots. Virtually every startup has to make real-time changes to their product, plan, or market, as they learn from initial customer interactions. Without proper communication to the team, these changes look like random shifts in direction, which negate the efforts of team members, and raise a cloud of fear and indifference.

    Entrepreneurs must resist the urge to withdraw and isolate themselves as they deal with the pressures of changes to their original plan. Instead, they need to be more transparent, and spend more time listening to the team as well as communicating the value of a pivot.

  4. Troubling talk around the water cooler. In every organization, large or small, there are people who become disillusioned or negative about the current direction or progress, usually due to personal problems. Negative people and messages are a virus that can kill your culture, and cause others to turn a blind eye to the real priorities of the business.

    Leaders need to pick up these negative messages quickly by listening and really engaging with their team, and then dealing with them with integrity. Non-productive complainers need to be moved off the team quickly, or everyone reverts to that level.

  5. Lack of communication from the top. With today’s 24/7 flood of information and social media, the team expects to be constantly updated on what’s going on at the top. When they see the information they need is missing, outdated, or flat-out wrong, frustration is inevitable, and this will eat away at your culture.

    Make sure your team knows how decisions are being made, as well as what they are. Be transparent, set goals, and then tell internal and external stakeholders where you are in meeting those goals. Invite employees to join in and contribute to this process.

So commitment, integrity, and transparency are the catalysts that every startup team expects from their leaders to maintain a healthy culture, strong values, and superior results. When a good startup starts to experience slippage on any of these catalysts, the team can slip rapidly into disengagement, rationalization, and self-deception. Have you checked the signs in your organizations lately?

Marty Zwilling



Wednesday, July 3, 2013

How to Turn Your Million Dollar Idea Into a Startup

ideas-into-million-dollar-startupsBased on my own experience and feedback from friends, every investor is approached by at least ten entrepreneurs with a “hot idea” for a new business, for every one who has a real “plan” for a new business. That’s why I often say that ideas are worth nothing, until they are put in the context of a business plan and real people committed to executing the plan.

In fact, you can find websites full of ideas, like these “Free Innovative Ideas,” by serial entrepreneur Kim E. Lumbard of CalTech. Or you can find books of free ideas, like “Ideas,” by Matt Schoenherr, providing 101 great ideas for increasing your visibility and profitability. Most investors will tell you that they rarely see a new idea that they haven’t heard before.

I’m sure you all realize that there is quite a distance between a good idea and a good business, or even a plan for a business. A complete resource planning software like MRP ERP systems will prove to be very useful during the planning stage. Here are a few tips on how to bridge the gap. The first step is to pick one idea (idea people find it hard to focus on only one), and go to work along the following lines:
  • Do some specific market research. Scan the Internet for existing patents and some “credible unbiased third party” data that confirms there is really a market for a solution resulting from your idea. Just because you or your friends think it is a great idea or great technology, that doesn’t mean that a large number of customers will buy it.
  • Make sure the idea is technically viable. I hear many ideas that sound more like dreams, rather than products. It’s not hard to come up with the idea that a cure for cancer would make a great business, but some things are harder than they look. You need some evidence of a real solution before any business plan makes sense.
  • Draft a business plan summary. Rather than starting with a full business plan, I recommend that you start with an executive summary of a couple of pages, or an executive level presentation of maybe ten charts. It’s easier to see the big picture, and find out if your strategy can excite people before you work on a detailed plan.
  • Prepare 5-year financial projections. For most people, this is the hardest part, because it forces you to contemplate real costs, prices, delivery, and volumes. Yet these are the elements that make a business, so without them no one can assess the potential for success or failure. Don’t spend time on precision here – that comes later.
  • Start your search for key resources. These would include people and money first, and maybe software or manufacturing later to produce and deliver the solution. Other important elements of every business include the name, logo, type of company, licenses, location, advisors, and operational details.
Obviously, some of these can and should be started and executed in parallel, rather than sequentially, depending on your own time and skills. Don’t be surprised if your base idea changes considerably as you learn more about the market, technology, and the sales process. It’s a lot cheaper to learn it early, rather than after spending critical time and money.

If at all feasible, I recommend starting your rollout early with a pilot or “beta” phase, before the main rollout. You will be amazed at how much you learn about the market, the scope of the opportunity, and the real product features required. Iterate at this level to get it right before you try to scale up, or even finalize the plan.

So if you know someone who is always talking about their hot ideas, just suggest, like the investors I know, that they come back for money when they have completed the above steps. The reality is that customers only pay for solutions, and there is no market for ideas. Everyone dreams of having the magic “million dollar idea,” but I haven’t seen anyone pay that yet.

Marty Zwilling

Disclosure: This blog entry was sponsored by IQMS and I received compensation for my time, but the views expressed here are solely mine.



Tuesday, July 2, 2013

6 Investor Rationales for Not Funding Your Startup

Rejection-Investors-StartupNew 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 potentially 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 a couple of the elements outlined in my previous article, “These 10 Key Elements Make a Business Plan Fundable.” Investors know that entrepreneurs who start a business without a good 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 “run 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



Monday, July 1, 2013

8 Reality Checks That Every Startup Founder Dreads

guy-kawasaki-talks-with-mashableStarting a business is a lot like starting a marriage. At first, all parties are in dreamland, with a vision of changing the world, having lots of fun, and raking in the profits. But all too soon, reality sets in. Product development is stuck at that 90% mark, a key person leaves, and customers are talking but not buying.

In his book Reality Check, Guy Kawasaki summarizes some of the key issues. I’ve seen them too often, and they seem to be the same for every company (and every marriage) no matter how great the team is. I challenge any startup to show me they have avoided all of these:

  1. One of the founders isn’t delivering. Maybe he was the only guy around who could design the product you envisioned, but delivering a scalable, quality product is another story. Besides, he is now more interested in designing the next product.

  2. The product is behind schedule. When I was a software development manager, I tried to get a “bottoms up” time estimate from the team, and then pad it by 50%. Invariably we were in crisis mode by delivery time, and the common complaint was that “management” always forced unrealistic schedules on developers.

  3. Sales aren’t meeting projections. The team buys its own propaganda, and fully expects customers to be leaping tall buildings to get to your product. You never dreamed that customers would be slow to accept an unproven product from an unknown startup in the middle of an economic downturn.

  4. The team is not getting along. Things go wrong. People on the team haven’t worked together before, and they don’t fully trust any ideas except their own. As the top executive, you have to make some tough decisions, and spend much more time than you expected on communication and mediation.

  5. Your marketplace buzz is non-existent, skeptical, or even negative. You have been too busy with your own issues to be out there building the wave, but your competitors have been actively positioning you far below them. The press is focused on things that exist, rather than your early marketing hype.

  6. Requirements changed in the middle of the cycle. While everyone was busy building the product and business model you detailed in your business plan, early feedback from the field makes it clear that you were somewhat wrong. Or the economy has taken a sudden turn for the worse, so your high-end product no longer has a market.

  7. Investment partners are squeezing you. It may look like micromanagement, but they are just nervous that the milestones you promised have disappeared from your charts. Maybe you think they aren’t “rolling up their sleeves,” but that can’t happen until you actually admit your failures and ask for help.

  8. Cashflow is killing you, with no new money in sight. You scaled up your infrastructure, to make sure early sales didn’t swamp you. Nothing is coming in, money is going out, and you are too busy managing pennies to look for a new funding round.

If you are a true entrepreneur, these should scare you, but they shouldn’t immobilize you. As I asserted earlier, virtually every new startup experiences these problems. What separates the successful ones from the failures is how effectively they handle the problems, rather than how many they avoid in the first place.

So I encourage you to take full control and responsibility for your company’s destiny, learn from the challenges, and emerge from every crisis stronger than before. Remember that when the honeymoon is over, that’s when the real fun begins.

Marty Zwilling