Thursday, October 31, 2013

10 Myths About Creativity Can Derail Your Startup

Creativity_is_boundlessEvery entrepreneur believes in their heart that their startup is more innovative and creative than their competitors. Yet none knows exactly where creativity comes from within, or how to pick and motivate the most creative people for the team. Most believe and follow one or more of the popular myths on business creativity, even though none of them have much scientific evidence.

Like most people, they think of creativity as something divinely-inspired, unpredictable, and bestowed on only a lucky few. A new study based on the latest research, “The Myths of Creativity,” by David Burkas tries to demystify the processes and forces that drive innovation.

His research supports what I have always believed, that anyone with a practical and common- sense mindset, grounded in reality, with the proper training, can deliver creative and innovative new ideas, projects, processes, and programs. The first step is to resist the urge to limit your thinking to the following long-standing myths:

  1. Eureka myth. This myth arises from the fact that new ideas can sometimes seem to appear as a flash of insight. Research shows that such insights are actually the result of hard prior work on the problem, usually followed by time to incubate in the subconscious mind as we connect threads, before the ideas pop out as new innovations.

  2. Breed myth. The belief here is that creative ability is a trait inherent in one’s heritage or genes. In fact, the evidence supports just the opposite; there is no creative breed. People who have the confidence in themselves and work the hardest on a problem are the ones most likely to come up with a creative solution.

  3. Originality myth. This myth is fostered by the long-standing emphasis on intellectual property, making a creative idea proprietary to the person who thought of it. The historical record, and empirical research, shows more evidence that new ideas are combinations of older ideas, and sharing those helps generate more innovation.

  4. Expert myth. Many companies rely on a technical expert, or team of experts, to generate a stream of creative ideas. Harder problems call for more knowledgeable experts. Instead, research suggests that particularly tough problems often require an outsider’s new perspective, or people who don’t know all the reasons why something can’t be done.

  5. Incentive myth. The expert myth often leads to another myth, which argues that bigger incentives, monetary or otherwise, will increase motivation and hence increase innovation productivity. Incentives can help, but often they do more harm than good, as people learn to game the system.

  6. Lone Creator myth. This reflects our tendency to rewrite history to attribute breakthrough inventions and striking creative works to a sole person, ignoring supportive work and collaborative preliminary efforts. Creativity is often a team effort, and recent research into creative teams can help leaders build the perfect creative troupe.

  7. Brainstorming myth. Many consultants today preach the concept of brainstorming, or spontaneous group discussions to explore every possible approach, no matter how far out, to yield creative breakthroughs. Unfortunately, there is no evidence that just “throwing ideas around” is enough to consistently produce innovative breakthroughs.

  8. Cohesive myth. Believers in this myth want everyone to get along and work happily together to foster innovations, so we see “zany” companies where employees play foosball and enjoy free lunches together. In fact, many of the most creative companies have found ways to structure dissent and conflict into their process to better push the creative limits.

  9. Constraints myth. Another popular notion is that constraints hinder our creativity, and the most innovative results come from people with “unlimited” resources. Research shows, however, that creativity loves constraints, so perhaps companies should do just the opposite – intentionally apply limits to leverage the creative potential of their people.

  10. Mousetrap myth. Other people falsely believe that once we have a new idea, the work is done. In fact, the world today won’t beat a path to our door, or even find the door, on an idea for a better mousetrap, unless we communicate it to the world, market it, and find the right customers. We all know of at least one “better mousetrap” that is still hidden.

If these are indeed the myths of business creativity, then what are the true components? Teresa Amabile, Director of Research at Harvard, asserts that creativity is really driven by four separate components: domain expertise, a defined creativity methodology, people willing to engage, and company acceptance of new ideas. Where these components overlap is where real creativity happens.

Thus if you believe that your startup success really depends on more creativity and innovation than your competitors, it behooves you to spend the time needed to understand and nurture the components of creativity in your environment, and not blindly following the historic myths. How creatively are you pursuing innovation in your business?

Marty Zwilling

*** First published on Entrepreneur.com on 10/25/2013 ***


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Wednesday, October 30, 2013

What Does It Take To Get Lucky In Your New Startup?

business-luckIf you have had some success in a business, I’m sure you bristle just like I do when someone says “You were just lucky…” I’m a strong believer that we all make our own luck, which means that the harder we work, the luckier we get. In reality, “hard work” is just a catch-all term for a list of principles that good entrepreneurs follow, allowing them to work smarter and improve their odds of success.

A short list of these “hard work” principles, published by Anthony Tjan in the Harvard Business Review summarizes them as heart, smarts, and guts. I agree with these, and most people recognize them when they see them in others, but the terms are still a bit abstract for learning purposes.

Therefore, other experts, like professors Alex Rovira and Fernando Trias de Bes, authors of “Good Luck: Create the Conditions for Success in Life & Business,” have identified five more definitive principles that seemingly lucky and successful entrepreneurs have in common:

  1. Accept responsibility for your actions. Business owners who feel that they have had good luck also feel responsible for their own actions. When things go wrong or the outcome of any given situation is other than intended, they never point the finger of blame at external factors or other individuals. Instead, they look to themselves and ask, "What have I done for this to occur?" Then they act accordingly to solve the problem.

  2. Learning from mistakes. Creators of good luck don't see a mistake as a failure. Instead, a mistake is an opportunity for learning. Thomas Edison is the classic example. The very first light bulb was invented by Sir Joseph Wilson Swan, who demonstrated the theoretical concept but gave up trying to develop a practical application after only three attempts. By contrast, Edison made his own good luck and designed a working light bulb after over 1,000 failures.

  3. Perseverance on all goals. Creators of good luck don't give up or postpone. When a problem or situation arises, they act immediately to either solve it without delay, delegate, or forget about it. This enables their energy to be fully focused on their work and avoid conscious or unconscious distractions, which only generate inefficiency.

  4. Confidence in yourself and others. The most powerful principle is often the most overlooked. Confidence in yourself is essential, and those who create their own good luck have high degrees of assertiveness and self-esteem. Closely linked to assertiveness and self-esteem is trust in others and respect for them, seeing other people as major sources of opportunity.

  5. Cooperation with others in your network. Synergy is key. Trust in others leads to a solid network of work colleagues and friends, which, in turn, provides more resources to carry out projects than if they were managed alone. Think cooperation rather than competitiveness. At the most basic level, any project or undertaking takes place in the context of the broader group, and everyone should have the chance to emerge a winner.

With these attributes and the right attitude, I believe that most of "business luck" can be meaningfully influenced. That lucky attitude, according to Tjan, is a combination of three traits – humility, intellectual curiosity, and optimism.

Therefore, the basic equation of developing the right lucky attitude is quite simple. It starts with having the humility to be self-aware of your own limitations, followed by the intellectual curiosity to ask the right questions and actively listen to input, and concluding with the belief and optimism that something better is always possible.

Any entrepreneur can have this mindset if they just believe that luck is not random. They need to realize that they alone are the creators of the conditions that foster the achievement of specific, visualized goals. Then, having seen it work, they will know how to repeat the success. Overall, that really is “hard work.” Are you doing the right hard work to get lucky in your business?

Marty Zwilling


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Tuesday, October 29, 2013

8 Tips On How Much Money To Ask For From Investors

investment-amountStartups ask me “How much money should I ask for?” The simple answer is the absolute minimum amount you need to make your plan work. Some entrepreneurs try to start with a huge number, hoping they can negotiate and close on a smaller one, while others understate their requirements, in hopes of getting their foot in the door with an investor.

Neither of these strategies is a good one, as both are likely to damage your credibility with potential investors, even before they look hard at your plan. Here are the parameters you should use in sizing your request, and be able to explain in justifying your request to investors:

  1. Consider implied ownership cost. If your company is early stage and has a valuation under $1M, don’t ask for a $5M investment. The investor would be buying your company five times over, and he doesn’t want it. If your valuation is around $1M, you can validly ask for $200K-$300K, and offer 20%-30% of your company in exchange.

  2. Type of investor. Angel investment groups usually won’t consider a request over $1M, while venture capitalists won’t look at anything under $2M. Amounts of $100K or less, are usually relegated to “friends and family.” Approaching any one of these groups with a funding request outside their range is a waste of your time and theirs.

  3. Company stage. If your company is still in the “idea” stage, you have no valuation, so size your investment request on the basis of “goodwill” that you have with your rich uncle, and your business track record. Angels might be interested during “early stage” if you have a prototype, but VCs won’t bite until you have a product, customers, and revenue.

  4. Calculate what you need, and add a buffer. Do your financial model first with the volume, cost, and pricing parameters you want. See where your cashflow bottoms out. If it bottoms out at minus $400K, add a 25% buffer, and ask for $500K funding. The request size must tie into your financials to be credible.

  5. Investment terms. The most common case is an equity investment, but there are many terms that can impact what request size is credible. I’m talking about things like anti-dilution clauses, preferred versus common stock, valuation tied to later round, warrants, and bridge loan options. More restrictive terms reduce the credible investment amount.

  6. Single or staged delivery. In many cases, a single investment request may be scheduled for delivery in stages, or tranches (often misspelled as traunchs or traunches), based on milestone achievement. Obviously, this reduces investor risk and allows a larger commitment, since they can limit their loss if you fail to meet key objectives.

  7. Use of funds. Investors expect to see a “use of funds” list, and they expect the uses to apply only to your core mission. In other words, don’t tell investors that you intend to buy a fancy office building or executive cars with your funding. Even executive salaries should be minimal at this stage.

  8. Projected return on investment. Most entrepreneurs skip this step, but it helps your credibility to include it. Estimate a return on investment (ROI) by projecting company valuation at exit, to show the investor who has 20% what he will get back for that initial investment. He’s looking for a 10x return, since he assumes only one in ten survive.

Obviously, determining the proper size of your investment request is a non-trivial exercise, but it’s one of the most critical factors for investors in making a decision to invest or not to invest in your company. You need to get it defensibly right the first time, because changing your request under pressure definitely will kill your credibility.

The days are gone, if they ever existed, when you could present an idea and a vision, and have investors throw money at you. Now you have to do your homework. Get busy, and have fun.

Marty Zwilling


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Sunday, October 27, 2013

How To Find An Angel Funding Match For Your Startup

paulgrahamFundraising is brutal. Actually, according to Paul Graham of Y-Combinator fame, “Raising money is the second hardest part of starting a startup. The hardest part is making something people want.” More startups may fail for that reason, but a close second is the difficulty of raising money.

A while back, I outlined “The 10 Best Sources of Cash to Start Your Business” for startups, listing angel investors as alternative #6. I still get a lot of questions on these mysterious and often invisible investors, so here is another attempt to bring them out of the ether.

By definition, an angel investor is not an “institutional investor.” Venture capitalists (VCs) are paid to invest other people’s money, and measured on the rate of return they get. Angels are typically high net worth individuals who are investing their own money, for a wide range of motives.

So “good” angels are ones with motives that are consistent with what you bring to the table. This means they usually invest in people who have the right “chemistry”, and areas of business they already know. They tend to work locally, so they can “touch and feel” their investments.

Angel investors also tend to limit the size of individual investments to $250K or less. If you need more, you need VCs or a flock of angels. So how do you find those good angels?

  • Use personal networking. The best angels you will find are the ones who know you personally, or know a member of your team or advisory board. If a potential investor gets to know you BEFORE you are asking for money, your credibility and investment probability will be improved by an order of magnitude.
  • Entice angels to play along. Of course, angels are really mortals. They want to make a difference. Asking an angel to work with your company in an advisory role is a great way to establish a relationship that may lead to a cash investment. If you impress the angel, it will likely make her at least an archangel (advocate) when it comes to funding.
  • Court local angel groups. Since angel investors most often focus only in their own geographic area, it’s most effective to court the local group, or even make a guest appearance with an archangel. If you can earn an archangel's confidence, he or she will invite you to pitch the group, and you'll have an edge in the voting.
  • Mine national databases. If you are still alone, submit your application to the leading online website national databases of angel investors, Gust (USA) and National Angel Capital Association (Canada). These sites have arrangements with hundreds of local groups and individual investors that you might otherwise have missed.
  • Remember angels beget angels. That means that once you get the first one, he or she becomes your best advocate for finding more. Investment angels don’t like to travel alone, so they will bring in others if they can (it’s called share the risk).
  • Don’t forget passive angels. These are angel investors who are private, meaning they don’t go to meetings, but will invest if someone they trust brings them an attractive opportunity. Find the right investment advisor, or member of your advisory board, and the “match-making” will happen.

Remember that angels have a culture all their own, and it pays to understand how to deal positively with them after you find one. There are some books out there to help, like the one I published with Joe Bockerstette “Attracting an Angel - How to get Money from Business Angels and Why Most Entrepreneurs Don't”, and an old standby “The Art of The Start”, by Guy Kawasaki.

Even if you follow this recipe, you are likely to find that fundraising is a brutal challenge. But if it results in a good angel or two watching over your startup, you will definitely be one step closer to heaven.

Marty Zwilling


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Friday, October 25, 2013

9 Tips To Business Success By Anticipating Problems

brian-tracy-self-disciplineCreating a startup, or managing any business, is all about problem solving. Some people are good at it and some are not – independent of their IQ or their book smarts (there may even be an inverse relationship here). Yet I’m convinced that problem solving is a learnable trait, rather than just a birthright.

Entrepreneurs who are great problem solvers within any business are the best prepared to solve their customers’ needs effectively as well. In fact, every business is about solutions to customer problems – no problems, no business. Problems are an everyday part of every business and personal environment.

Thus it behooves all of us to work on mastering the discipline of problem solving. Here is a formula from Brian Tracy, in his book “The Power of Self-Discipline” that I believe will help entrepreneurs move up a notch in this category:

  1. Take the time to define the problem clearly. Many entrepreneurs like to jump into solution mode immediately, even before they understand the issue. In some cases, a small problem can become a big one if you attack with inappropriate actions. In all cases, real clarity will expedite the path ahead.

  2. Pursue alternate paths on “facts of life” and opportunities. Remember, there are some things that you can do nothing about. They’re not problems; they are merely facts of life, like natural disasters. Often, what appears to be a problem is actually an opportunity in disguise.

  3. Challenge the definition from all angles. Beware of any problem for which there is only one definition. The more ways you can define a problem, the more likely it is that you will find the best solution. For example, “sales are too low” may mean strong competitors, ineffective advertising, or a poor sales process.

  4. Iteratively question the cause of the problem. This is all about finding the root cause, rather than treating a symptom. If you don’t get to the root, the problem will likely recur, perhaps with different symptoms. Don’t waste time re-solving the same problem.

  5. Identify multiple possible solutions. The more possible solutions you develop, the more likely you will come up with the right one. The quality of the solution seems to be in direct proportion to the quantity of solutions considered in problem solving.

  6. Prioritize potential solutions. An acceptable solution, doable now, is usually superior to an excellent solution with higher complexity, longer timeframe, and higher cost. There is a rule that says that every large problem was once a small problem that could have been solved easily at that time.

  7. Make a decision. Select a solution, any solution, and then decide on a course of action. The longer you put off deciding on what to do, the higher the cost, and the larger the impact. Your objective should be to deal with 80% of all problems immediately. At the very least, set a specific deadline for making a decision and stick to it.

  8. Assign responsibility. Who exactly is going to carry out the solution or the different elements of the solution? Otherwise nothing will happen, and you have no recourse but to implement all solutions yourself.

  9. Set a measure for the solution. Otherwise you will have no way of knowing when and whether the problem was solved. Problem solutions in a complex system often have unintended side effects which can be worse than the original problem.

People who are good at problem solving are some of the most valuable and respected people in every area. In fact, success if often defined as “the ability to solve problems.” In many cultures, this is called “street smarts,” and it’s valued even more than “book smarts.” The best entrepreneurs have both.

Marty Zwilling


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Thursday, October 24, 2013

10 Ways Self-Promotion Drives Entrepreneur Success

promote-yourselfToo many entrepreneurs I know still believe that that their great idea will carry the startup, and they may even minimize their own value, especially if they have introvert tendencies. Yet most investors agree that the “idea” is worth nothing alone, and it’s the entrepreneur execution that counts. That means that selling yourself is more important than selling your idea.

In the corporate world, experts have recognized for a long time that how people perceive you at work is vital to your career success. No matter how talented you are, it doesn’t matter unless managers can see those talents and think of you as an invaluable employee, or a game-changing manager, or the person whose name is synonymous with success.

In the entrepreneur world, your perception is equally critical, except the “managers” in this world are your investors, customers, vendors, business partners, and team members. I just finished a book by Dan Schawbel, “Promote Yourself: The New Rules For Career Success,” which will help you maximize these perceptions, and applies equally well entrepreneurs as well as professionals.

Everyone needs to realize that whether it’s in the workplace or in the startup community, business is a new world today with new rules. Whether you are a new young Gen-Y entrepreneur, or a Baby Boomer who is struggling to stay relevant, here is a quick guide to some of the changes that Schawbel sees in the workplace requiring self-promotion, that I have updated for entrepreneurs:

  1. Your startup “idea” is just the beginning. Your startup idea only scratches the surface of what is required to build a successful business. Use the idea to kick-start your relationships with co-founders, investors, customers and business partners. Your ability to promote yourself and learn from these will determine your ultimate success.

  2. You are going to need a lot of skills you don’t have right now. A recent Department of Education study shows that soft (interpersonal) skills have become more important for success than hard (technical) skills. Entrepreneurs need leadership, teamwork, listening, and coaching skills, which you can learn from advisors and networking with peers.

  3. Your reputation is the single greatest asset you have. Your CEO title might be good for your ego, but in the grand scheme of things, what matters more is how much people trust you, whom you know, who knows about you, and the aura you give off around you. What other people think you can do is more important than what you have done.

  4. Your personal life is now public. With the Internet and social networks, things you do in your personal life can affect your success in a big way. Manage your whole image, rather than ignore it. Even the smallest things, like how you behave, your online presence or lack of it, and whom you associate with can help build your brand or tear it down.

  5. You need to build a positive presence in new media. There are plenty of benefits to new media, if you maintain a positive presence. Your online social networks enable you to build your reputation, connect with people who have interests similar to yours, find educational opportunities, and put you in touch with people who can help your startup.

  6. You will need to work well with people from different generations. Because the combination of economic need and increasing life spans is keeping everyone in the workplace longer, you will need to work well with people of all different ages. Each generation communicates differently, and has a different view of the marketplace.

  7. The one with the most connections wins. We have moved from an information economy to a social one. It’s less about what you know (Google search will help you in seconds), and more about whether you can work with other people to solve problems. If you don’t get and stay connected, you’ll quickly become irrelevant to the marketplace.

  8. All it takes is one person to change your life for the better. Remember the rule of one. All you need is that one investor, that one major customer, or that one distributor to keep you ahead of competitors. It’s up to you to get that key person on board to support your business. Self-promotion in the right way can make all the difference.

  9. Hours are out, accomplishments are in. If you want to grow your business, stop thinking about how many hours you work, and aim for more milestones and traction. Success is more results, not more work. Measure your results and promote them to every constituent. Help them to realize your value.

  10. Your startup is in your hands, not your investors or even customers. Be accountable for your own business success, and take charge of your life. Look for win-win business relationships, since people won’t help you if you are not helping them. If you aren’t learning and growing, you have nothing to promote and aren’t benefitting anyone.

The challenge for all entrepreneurs is to gain visibility and show value without bragging and coming off as self-centered. Take personal credit where credit is due, but also share the successes of the team and the business milestones with everyone. Success leverages success.

Now, how do you start? I like Schawbel’s recommendation to do one thing every day, like add a new skill, or build a new relationship that will advance you. Developing this “One Step Forward a Day” habit will keep you current, make you feel more fulfilled and confident, and increase your ability to promote yourself. Are you promoting yourself today, or demoting your startup by default?

Marty Zwilling

*** First published on Entrepreneur.com on 10/10/2013 ***


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Wednesday, October 23, 2013

Investors Look First At The Founder, Then The Idea

James_H__ClarkInvestors are people too. They evaluate you like you should assess a possible co-founder or first employee. What are your credentials? What have you done that would convince me that my money is safe in your hands? Only after they see you as fundable, do they want to assess your plan for fundability, not the other way around.

Even with great credentials, it is all too possible for an entrepreneur to come across as a high risk investment. Here are some “rules of thumb” that indicate a marketable and experienced entrepreneur:

  • Highlights team strengths, more than his own. Some entrepreneurs seem to never stop talking about themselves, and all their accomplishments. The best ones talk more about how they have assembled a well-rounded team, and will continue to fill in the gaps.

  • Talks about the implementation plan, not the idea. Most entrepreneurs are great at envisioning their business idea, but the implementation is fuzzy. Experienced entrepreneurs talk about their implementation and rollout plan, with real milestones and quantifiable results.

  • Customer needs and benefits first, then product features. The best entrepreneurs show that their market domain knowledge is as strong as their product technology knowledge. They are able to weave their solution into the market, the opportunity, and customers, in a way that sounds like a natural fit, rather than a product sales pitch.

  • Focus is clear, not all over the map. Success means the entrepreneur must be laser focused on driving the business, passionate about a product, and passionate about a specific set of customers. If the business plan reads like a smorgasbord of offerings, there are probably not enough resources to do any well, and customers will be confused.

  • Rational business model, with prices and volumes. Unless the business is a non-profit, the entrepreneur needs to show how he will make money. The days are gone when investors want only to see a large market share or growth in eyeballs. Are revenues and costs reasonable and projected for five years?

As an entrepreneur, don’t let your ego get in the way, or believe you can take the world on by yourself. If you want to attract investors, you must be willing to listen and work with others, as well as share your ideas or your knowledge. Loner entrepreneurs won’t get their foot in the door with any investor I know.

If you are young or inexperienced, and don’t have business credentials yet, don’t hide this fact. I recommend a proactive approach, to highlight the accomplishments you have, the power of other team members, and show some humility in admitting a search for the rest of the team.

So you might ask, how do first-time entrepreneurs ever get the funding they need to prove that they can perform at the next level? The best answer is to team yourself with someone who has “been there and done that.” After a team success, you’ll find all members are “promoted” to the next level.

Another common approach is to bootstrap your first startup to success, possibly with some help from friends and family. As I said in the beginning, investors are people too, so get out there and make them your respected business friends before you try to sell your idea. Business networking is not the same as cold calling with a hard sell.

Every investor knows a few good entrepreneurs, like Marc Andreessen of Mosaic and Netscape fame, who could get millions of dollars of funding for just about any idea. He needed Jim Clark to help him get a first investment, yet now Marc is a major VC in his own right.

In fact, I don’t know one investor who has funded a “million dollar idea” without regard to the person and the plan behind it. Think about that the next time you pitch your idea, and never mention the people.

Marty Zwilling


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Tuesday, October 22, 2013

How Entrepreneurs Can Be Business Leaders And More

StandOutfromCrowdStarting and building a company is all about leadership – formulating an idea, building a unique plan based on vision and experience, and forging a path over and through all obstacles. Yet the image of leadership in business is at an all-time low, according to national leadership experts, considering the political debacles, record business bankruptcies, and executive fraud cases.

If the country is to recover financially and politically, new leaders will have to emerge to fill the leadership deficit – new leaders who understand that leadership is a privilege, not an entitlement, according to executive coach Michael Schutzler, author of the book “Inspiring Excellence – A Path to Exceptional Leadership.

Entrepreneurs are well positioned to become the new leaders, because they perceive problems as opportunities, and have the mental mindset to innovate and execute. They have the required passion, perseverance, and work ethic. What they don’t have by default are the skills required, or the relationships. These don’t come automatically with the CEO title.

Schutzler’s view of leadership is different than many academics and executive coaches, who feel that leadership is an innate character trait. He urges people to focus on developing a few key relationship skills, and I agree. Here are some key conclusions:

  • Leadership is a learned behavior, not a character trait. Good judgment, for example, is certainly a hallmark of exceptional leadership, but it isn’t something you are born with. “More than anything, good judgment comes from listening,” he says. It also comes from paying very close attention to every situation, and learning from it.
  • Listening is the most important skill for a leader. We need to pay attention to the words and actions of others while suspending judgment long enough to allow your intellect to catch up with your instincts. Why? Because as leaders, if we speak too soon, we shut off creation. We shut off contribution. We force the adoption of our ideas.
  • Communicating and storytelling. This is not a skill everyone is born with, but it’s a skill we can all develop. People on your team want to believe! They want to believe you know where we are going, or you will get us there even if you aren’t sure of the exact path at this moment. They want stories that compare what they are doing with others.
  • Acknowledging contribution. This is necessary to sustain motivation during the hard times. It’s not hard to do and doesn’t require a lot of effort or expensive gifts. A thank-you note or peer recognition is enough most of the time.
  • Negotiation is a practical skill for every leader. Negotiation is often misunderstood to be the domain of clever deal makers. It’s actually really simple. Make very clear requests for a promise. Understand exactly what the promise is - what is being done, when, and what the standard of excellence is, and then check up on the status to make it happen.
  • Too many leaders are focused on personal ambition. He believes that we need leaders who use power as a tool for inspiring others to create a better future, not as a tool for retaining their position or perks.

The middle four points are the essential skills for great leadership, inspiring excellence, and building a successful business. They are easily practiced, and serve as the foundation for successfully attracting talent, reaching consensus, making tough choices, and harnessing ambition.

In this fashion the general leadership deficit is really an “opportunity” for new aspiring entrepreneurs in business. So practice the leadership skills needed, and step in when you are ready. Now is your golden opportunity – let’s see how many of you are up to the challenge. We need you all.

Marty Zwilling


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Friday, October 18, 2013

Start Business Planning Now For The Holiday Season

holiday-planningIn the US, the holiday season of Thanksgiving and Christmas is fast approaching. But no matter where you live in the world, you should use the holidays to give thanks for the positives in your life and your business. Yet you can never forget the seasonal business cash flow and activity demands that are approaching, so to be prepared – you need to start the planning now.

Even though these last few years have not been great financially for entrepreneurs, it always helps to look at the cup as half full, rather than half empty. We often forget that one person’s loss is a gain for others. Here are a few of the many things that entrepreneurs should be thankful for this holiday season, to keep the challenges in perspective:

  1. The economy continues to rebound. The stock market reached a new all-time high in 2013, and is finally providing some liquidity relief to concerned investors and startups alike. Home prices are slowly coming back, and consumer spending reached a new high of almost $11 billion in May 2013.

  2. Venture capital investments are returning to startups. Venture capital firms raised $4.1 billion for 35 funds during the first quarter of 2013, an increase of 22 percent compared to the level of dollar commitments during the fourth quarter of 2012, according to a report from Thomson Reuters and the National Venture Capital Association (NVCA).

  3. New focus on a sustainable planet. The continuing rise in the price of fuel, combined with the ongoing evidence of global warming, has highlighted the need for alternative energy sources, and green products. Startups are springing up all over to capitalize on these opportunities.

  4. Incentive to do something you love. Lots of people tell me they are sick of the corporate grind, and they long for the opportunity to take their favorite activity or hobby, and make a business of it. Now many of them are doing it. Some are finding something more exciting after being laid off dead-end jobs.

  5. Holidays mean more time for the family. Keeping a sense of balance between work and family is always a challenge. With the workload reductions, some of you now have had the time to re-introduce yourself to your family and friends.

But remember, nothing happens in your business unless you make it happen. In all businesses, especially startups, cash-flow is king. Here are some key tips to optimize your cash flow in anticipation of these busy holiday periods:

  • Start with re-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.
  • 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.
  • 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 special holiday promotions. Check industry average statistics to make sure you are in the right range.
  • Holiday sales fluctuations eat cash. Sales surges means more inventory is required to cover the ups-and-downs. Every dollar in inventory is a dollar less in cash available, maybe even two dollars less if your gross margin is 50%. If you try to vary the number of employees to match, that costs even more cash for hiring, and later resizing.

As I suggested in the beginning, the business year has been a good one so far, and the coming holiday season has the potential to make it even better. Don’t let the demands of seasonal fluctuations spoil the party. Do your planning now, and drive your business to new highs, rather than letting the demands drag you down. How prepared are you to make this season a success?

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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Thursday, October 17, 2013

Startup Stock Options Are Not Reliable Compensation

stock-pricesWouldn’t you like to be one of the lucky people who joined Google and Facebook when these were startups, and now be a multi-millionaire? So people ask me “How many shares should I ask for when I join a startup today?” In reality, the number of shares doesn’t mean anything – it’s your percent of the total that you need to negotiate.

For example, 200,000 shares may sound like a lot, but if the startup has issued 20 million (a common starting point), that’s just 1% of the company. By the way, you will normally only be offered “options,” which vest over a 4-year period after a 1-year “cliff.” That means you will get none of these until after you work for one year, and the total only if you stay for four years.

Plus you have to remember that these 200,000 shares could still be worth nothing in four years, depending on the “strike price” today, compared to the market price four years from now. Many employees forget that there isn’t even a market for stock, until after the company has gone public, which hasn’t happened positively to many companies in the last few years.

Thus, stock doesn’t “pay the mortgage” today, so to speak. Unless you have a sizable nest egg, or a working spouse with an income to support you, I would recommend that you consider any stock options as a “potential bonus,” rather than a key part of your compensation for joining a startup.

With all that said, here are some “rule of thumb” guidelines on what might be a reasonable offer, as extracted from an old article by Guy Kawasaki, and based on discussions I hear rattling around the investor community.

  • CEO brought in to replace the founder, 5 - 10%
  • CTO, CFO, VP of Marketing or Sales, 1.5 - 3%
  • Chief Engineer or Architect, 1 - 1.5%
  • Advisory Board Member, 1%
  • Senior Engineer, .3 - .7%
  • Product Manager, .2 - .3%

If you are not on this list, just worry about getting whatever your peers are getting. It never hurts to ask in a job interview what stock options are available, and don’t fall for the offer which promises to “work out the equity terms later.”

Obviously, what you get will vary depending on what you bring to the company, and what the market will bear. The numbers I mentioned don’t have a level of precision that can be associated with a particular geography, or a particular business type. Offers near the high end of a range will come with a lower cash salary, maybe even 50% of the going rate.

Any offers of equity compensation before the first round of institutional capital should be considered purely speculative. You should also assume that your percentage will go down through dilution as the company raises additional rounds, and offer sizes will go down as the company grows.

Your compensation is the total package of stock plus salary plus benefits. At best, you should view stock as “deferred compensation” or a “bonus,” which has no value today, and a risk for the future that is much higher than mutual funds, or a conventional balanced public stock portfolio. Yet it has been a source of great wealth to a tiny percentage of people.

Couple all this with the fact that working at a startup is much tougher than working at bigger companies – despite all the hype you see about startups which provide free food, foosball tables, and totally flexible hours. Generally, less structure means more stress, and fewer people means higher expectations, longer hours, and a job that may be gone tomorrow.

The bottom line is that you shouldn’t even think about joining a startup, stock or no stock, unless you believe in it and are ready for the adventure of your life. It will always be a learning experience, but it may be a bumpy ride to nowhere. It’s a huge gamble. How many gamblers do you personally know that have won big?

Marty Zwilling


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Wednesday, October 16, 2013

Startup Founders Need To Manage Their Optimism

John-BradberryI’m sure we have all seen entrepreneurs with high levels of passion and confidence touting an idea that seems to make very little sense to us. Of course, we never see ourselves in this mode, yet we need to recognize that all humans see reality differently through a built-in set of “cognitive biases,” based on their own unique background of experiences, training, and mental state.

These biases are good, in that they allow us to quickly filter and make decisions in the constant barrage of information we face each day, but bad because they often lead to errors in reasoning and emotional choices. The worst case is called the “passion trap,” where a pattern of beliefs, choices, and behaviors feel good and become self-reinforcing, but lead to disaster.

John Bradberry, in “6 Secrets to Startup Success” identifies five key biases that sabotage many passionate entrepreneurs in their startup decision making. I challenge any entrepreneur to honestly tell me that they have never fallen victim to any of these while making startup decisions:

  • Confirmation bias. This refers to the human tendency to select and interpret available information in a way that confirms pre-existing hopes and beliefs. The antidote is to look for dissenting views that seem to form a pattern of concern. Then what you perceive as isolated exceptions, might indeed appear as a clear majority.
  • Representativeness (belief in the law of small numbers). Many entrepreneurs tend to settle on conclusions they like, based on only a small number of observations or a few pieces of data. The new founder who hears positive reviews from three out of four friends may assume that 75 percent of the general population will react similarly.
  • Overconfidence or illusion of control. Overconfidence leads founders to treat their assumptions as facts and see less uncertainty and risk than actually exists. The illusion of control causes startup founders to overrate their abilities and skills in controlling future events and outcomes. Both result is “rose-colored” plans, rather than realistic ones.
  • Anchoring. This refers to our mind’s tendency to give excessive weight to the first information we receive about a topic or the first idea we think of. It encourages founders to cling to an original idea or, if pressed, to consider only slight deviations from the idea instead of more radical alternatives. The ability to pivot sharply and timely is at risk here.
  • Escalation of commitment (“sunk cost” fallacy). Startup founders often refuse to abandon a losing strategy in an attempt to preserve whatever value has been created up to that point. They feel that they have put so much money, time, and energy into an idea or plan, that it must be the idea. Investing more into a bad idea doesn’t make it good.

Optimism, for example, is a typical entrepreneurial trait that improves performance, but only up to a point. In fact, moderately optimistic people have been shown to outperform extreme optimists on a wide range of task and assignments. There are a number of similar entrepreneurial characteristics that are recognized as good, but can be amplified to unhealthy levels, resulting in passion traps, or so-called “Icarus qualities.”

Every entrepreneur needs to be on the lookout for early warning signs of biases and passion traps that signal that you are in danger of undercutting your odds of startup success. Obvious ones are founders who are thinking or saying, “This is a sure thing,” or executives losing patience with advisors who point out risks or shortcomings in your plan.

In my experience, a great startup is more about great execution, rather than a great idea. It’s about converting your passion into economic value. To counter-balance the biases in your passion, the best approach is to look beyond your own mind and actively listen to your customers, your advisors and your team. When was the last time you really listened?

Marty Zwilling


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Tuesday, October 15, 2013

How and Why To Do Your Own Business Financial Model

Start-up ExpertMost entrepreneurs tend to avoid this area of the business, and as a result are badly surprised by cost realities, and investor expectations. They seem to think that financial projections are simply invented numbers for investors, and not useful. In reality, it’s like jumping in your car for a long hard drive with no destination in mind. Chances are, you won’t enjoy success from the trip.

What is a business financial model, really? In most cases, it is merely a Microsoft Excel spread sheet loaded with your cost and revenue projections for your startup, starting now in time and extending at five years into the future. For more value, a few variables can be added, like product volume growth rate, and number of salesmen, for “what if” analyses.

Why? For you to make decisions and manage the business - because we are all mere mortals and can’t possibly keep all these numbers and calculations in our head – to decide whether and when the business is going to be profitable given rational projections of costs and income (these assumptions are referred to as your business model). Secondarily, it will be required by potential investors to validate how much money you need to get started, and how much return they can expect on their investment.

When? The financial model should be running even before you incorporate the business and build prototype products (would you start driving your car on a long trip before you knew where you were going?). If you can’t make that objective, then at least don’t approach potential investors until your model is working – investors have little tolerance for startups with no financial plan.

How? Start with a “sample” business model, available in generic form or customized for specific industries, from many sources on the Internet. Another alternative is to download from my website a free sample model that I built for a specific startup, with elements suggested by Angel investors and venture capitalists, ready to be customized to your business.

If you are not computer literate in Microsoft Excel, your first task is to find someone who has the time and expertise to convert your base set of costs and revenues into projection formulas, cash flow summaries, and a profit and loss statement.

Do your own, if you can, because you know the numbers. In fact, this is the easy part. More challenging is ‘defining’ the business model (assembling all the real variables of your projected business, pricing assumptions, staffing requirements, marketing costs, sales costs, and revenue flows).

This business model can then be used for many purposes, such as risk and profit assessment, projecting the values of assumptions that are made based on existing market conditions, calculating the margins that are needed to avoid adverse situations, and various forms of sensitivity analysis. These are necessary to estimate capital investment requirements, plan capital allocation, and measure financial performance.

Creating financial projections allows you to see areas of strength and weakness in your proposed business model, enabling you to make critical changes that will allow your business to run more successfully.

While people start businesses for many reasons, making money is usually important. Even a non-profit can’t afford to lose money. You won't know if you can meet these expectations until you build a financial model with reasonable financial projections.

It’s a great learning experience, and you can do it yourself, but don’t hesitate to ask for help from a professional if you need it. You will be amazed at how clear the relationship becomes between pricing, cost, and volume. When you lose money on every item, it’s hard to make it up in volume.

Marty Zwilling


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Thursday, October 10, 2013

Are Founders Moving From Lifestyle To Quick Buck?

mark-zuckerberg-moneyUntil the recent recession, market research indicated that as many as 90 percent of the roughly 20 million American small business owners were motivated more by lifestyle than growth and money. Since 2008, the desire for profits has trumped passion in 54 percent of new startups, according to a more recent study. It seems that everyone wants to make a quick buck these days.

Being called a lifestyle entrepreneur should be a point of pride, not an insult. The term applies to anyone who places passion before profit, and intends to combine personal interests and talent with the ability to earn a living. This usually means not taking money from equity investors, since investors want fast growth, high profits, and an exit event, to allow investments to be recouped.

Of course, even lifestyle entrepreneurs want to be happy, and want their business to be “successful.” According to William R. Cobb and M. L. Johnson in their book, “Business Alchemy: Turning Ideas Into Gold,” these different success expectations are what separates a lifestyle entrepreneur from a growth entrepreneur:

  • Owner is the only one “in charge.” Every lifestyle entrepreneur starts their business to be their own boss and follow their passion, so they don’t even think about having investors, a board of directors, or going public. If you think corporate bosses are tough, wait till you start spending investor money, or try satisfying Wall Street and stockholders.
  • Insist on being engaged at the transaction level. If you are living your passion, you want to interact with customers, and “touch and feel” the product every day. Growth entrepreneurs find that this fun world quickly changes to managing personnel problems, tuning organizational structures, and dealing with testy investors.
  • Income generated is part of the owner’s personal income. The legal structure of these startups is usually a sole proprietorship, a Limited Liability Corporation (LLC), or a sub-chapter “S” Corporation. Under all of these, net income flows easily into your personal income. Corporate versus personal growth really becomes a lifestyle decision.
  • Startup funding comes from personal savings and family. There is no free lunch for money. Non-equity funding has to come from personal sources, or government grants, or bank loans. Of course, that doesn’t dilute the owner’s equity, but it may well limit you to organic growth, versus international rollouts and acquisition options.
  • Business model to maintain lifestyle is the primary driver. The lifestyle entrepreneur chooses a business model to make a long-term, sustainable and viable living, working in a field where they have a particular interest, passion, and talent. They operate the business to sustain a minimal level of cash flow necessary to support the lifestyle.
  • Maximizes owner personal tax privileges. This means that owners can look for every opportunity to get a personal tax advantage from the business, like charging vehicle operating costs to the business, renting facilities from themselves, or managing business and personal travel.
  • Enjoy being visible and active in the local community. Lifestyle business owners usually benefit and enjoy being a part of the local Chamber of Commerce, Rotary, and other civic organizations. These can become part of balancing your lifestyle, rather than part of the stress of business-driven networking.
  • No exit planned until retirement. A lifestyle business becomes an integral part of an entrepreneur’s identity and their life. If, and when, the time should come to “exit” from the business, they will often seek to transfer it to a family member, or simply close it down.

In my view, lifestyle entrepreneurship should be growing in popularity, rather than shrinking, as technology provides startups with the cheap digital platforms needed to reach a large global market. Also, more women have been jumping into entrepreneurship, and they have long wanted to make their business and personal lives and aspirations work more in harmony.

Younger Gen-Y entrepreneurs also tend to be more passionate, idealistic and not driven by money, so I would expect to see them trend up in lifestyle entrepreneurship. I’m told that Mark Zuckerberg of Facebook started out as a lifestyle entrepreneur. I’m betting that about now he wishes he had stayed on that path. What do you think?

Marty Zwilling


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Tuesday, October 8, 2013

Startups Need Mergers And Acquisitions For Growth

startup-growth-partnershipsEvery entrepreneur tries to maximize his startup growth by building and selling more product and services for the widest geographic area that he can support. This strategy is called “organic growth,” yet it alone may yield only a fraction of the potential you could achieve, unless you add the additional strategies of partnerships and M&A (mergers and acquisitions).

Many entrepreneurs are paranoid about the partnership approach, and think that M&A is only an alternative for large companies who are flush with cash. Both of these qualms are wrong and shortsighted. Laurence Capron and Will Mitchell explain why in their book, “Build, Borrow, or Buy: Solving the Growth Dilemma.” I like their recommended framework for emerging firms, as well as large multinationals, to help build an optimal growth strategy for your company:

  1. Evaluate internal development versus external sourcing. Building through internal development, or organic growth, makes the most sense when you have a core set of skilled internal resources. Use external sourcing to fill in the non-critical gaps.

  2. Add basic partner contracts or alliances. Using contracts with partners for growth resources (“borrowing”) is best when you can both define the resources clearly and protect them with effective contractual terms. Don’t use alliances for core competencies.

  3. Invest in selective strategic alliances. Borrowing by way of a more engaged alliance helps you obtain targeted resources when you and a partner collaborate through limited points of contact and have complementary goals for your joint activities.

  4. Actively pursue mergers and acquisitions. M&A is “buying” resources for growth. This makes sense when you anticipate needing the freedom and control to make major changes to enhance growth, with a credible integration path while retaining key people.

The real challenge here is balance. Too much emphasis on organic growth can become a straightjacket that leads only to incremental innovation and limited horizons. Too much reliance on growth via contracts and alliances makes you vulnerable to partners’ actions and conflicts of interest. Overreliance on acquisitions drains resources and de-motivates internal teams.

In every startup, as well as in mature companies, there is no substitute for constantly maintaining a pipeline of alternatives. This requires constant focus, as well as maintaining the skill set to do things like the following:

  • Locating and not losing knowledge from within. Startups often find it difficult to retain key personnel and to control proprietary ideas. Rather than push non-compete agreements on your superstars, it’s more productive to create incentive systems and creative ways for them to work more independently, just for you.
  • External scanning for resources. Startups can’t usually afford a business development team, so that effort is just one of the measurements that should fall on every CTO and CEO. Here is also an ideal opportunity to use your external advisors and Board to help identify external resources, potential partnerships, and acquisition opportunities.
  • Partial acquisition. Budget relatively small “educational investments” at early stages, to learn from a target firm without a full commitment, or without leading either partner astray. These can reinforce the operational and financial linkages through licensing or alliance agreements, and allow the relationship to develop prior to an acquisition commitment.
  • Spin-ins. This is a transaction whereby two firms agree on a set of milestones that would trigger a partnership or acquisition, if the innovator achieves the specified goals. The initiator funds the innovators’ development activities and gives them the flexibility to work independently.

There is no question that startups which manage the broadest alternatives for growth will gain competitive advantages. This selection capability is a skill and a discipline that every entrepreneur needs to nurture and develop over time. The world and current economic environments have changed. The past can be a deadly rear-view mirror. Look for new horizons.

Marty Zwilling


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Monday, October 7, 2013

Real Entrepreneurs Need to Accentuate The Positive

Trevor-BlakeEntrepreneurs need to listen to constructive criticism, but ignore negative vibes and complainers at all costs. If you are a complainer, and you are thinking of becoming an entrepreneur, think again. The world of an entrepreneur is tough, unpredictable, and fraught with risk. Most importantly, the buck stops with you, so there is no room for excuses and negativity.

Even listening often to negative team members and partners will reinforce negative thinking and behavior, and turn your normally positive perspective toxic. I’ve seen it too often in real life, and it was reinforced to me a while back in a book by Trevor Blake, “Three Simple Steps: A Map to Success in Business and Life.”

Trevor is a highly successful serial entrepreneur and success coach who has studied this phenomenon for many years, including the latest findings in neuroscience. Reviewing dozens of autobiographies of great entrepreneurs, including Steve Jobs, Henry Ford, and Andrew Carnegie, it seems that all had an unshakable belief in their ability to control their lives, with no excuses.

Here he offers, with some startup adaptation from me, ways that every entrepreneur needs to defend themselves against negativity – yours and others – so you can rewire your brain and boost the occurrence of positive thoughts and behaviors:

  1. Become self-aware. When you feel an excuse coming on, no matter how trivial, stop yourself. You can’t delete the thought, but you can revise it before saying it aloud. So instead of saying, “I’ll never get the funding I need in this economy,” you might say, “Let’s try this new crowdfunding approach, since our solution value is so easy to understand.”

  2. Redirect the conversation. When you participate in negative dialog with a complainer, you’ll walk away feeling depleted. If he says, “I hate demanding customers,” counter his negative thoughts with a positive image: “At least we have customers – how many of our competitors wish they had the backlog that we do?”

  3. Smother a negative thought with a positive image. If a negative thought pops into your mind, immediately input a different image. This is the process of “neurogenesis” – creating new pathways in your brain that lead to positive behaviors. So if you think “I’m working late again,” replace this with a pleasant image of the restful weekend ahead.

  4. Don’t try too hard to convert others. When trapped in a blatant complaint session with members of your team, simply choose silence. Let their words bounce off you while you think of something pleasant. If you try to stop them, you may end up alienating yourself and becoming a target. Let your positive results do the work in time.

  5. Distance yourself when possible. When you hear insiders criticizing your startup, excuse yourself and take a break somewhere quiet. Think of something pleasant before returning. You have to take this seriously, because negative people can and will pull you into the quicksand.

  6. Wear an invisible “mentality shield.” Imagine that an invisible shield like a glass cloak made of positive energy lightly covers your whole body. You can see perfectly well through it but it protects you from others’ negative words and emotions. This technique is used by professional athletes to deflect the negative energy of a hostile crowd.

  7. Create a private retreat. When you are stuck with a cohort who is spewing vitriol, you should mentally retreat to a private, special place where you plan to enjoy the successful fruits of your entrepreneurial labor. Concentrate on your vision of making the world a better place.

  8. Transfer responsibility. On occasions when you’re pressed against a wall while someone rants about all the injustices in their role, throw the responsibility back at them by saying, “So what do you intend to do about it?” If they just want to vent rather than find a solution, this tactic will stop them in their tracks.

  9. Forgive your lapses. Everyone complains sometimes. Your computer crashes. Deadlines pile up. It’s human to vent once in a while. Be kind to yourself and start afresh. The less frequently you complain, the more time will pass between lapses into negativity. This is how rewiring the brain works.

Trying to live with complainers in your startup is not only unpleasant, but it’s bad for your own well-being, and bad for everyone’s performance. New research shows that if they keep hearing negative messages, your team behavior will change to fit these new perceptions, and not in a good way. You can’t survive with that kind of help in today’s competitive environment.

Marty Zwilling


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Sunday, October 6, 2013

How To Counter a Negative Report on Your Startup

internet-reputation-managementEvery startup fears that one angry and unfair customer who can jeopardize the business by a negative post on Ripoff Report, Yelp, or one of the hundreds of other consumer complaint and review sites on the Internet. Most entrepreneurs don’t even know how to keep track of what people are saying about them on the web, much less how to respond or remove it.

Web reputation management, both business and personal, has become a top priority requirement. On the personal side, these items can kill your career, as I discussed in an old article “Google Yourself to See How Other People See You.” Luckily, the basic principles for reputation management are the same for both business and personal environments:

  • Your reputation is your responsibility. The first step is to recognize that you alone are responsible for managing the reputation of your business and your life. Doing nothing, or counting on more laws, is not an answer. Due to First Amendment rights, offensive content, once entered, is often untouchable, and the sources are immune from liability.
  • Actively monitor what people are saying about you. You may assert that monitoring the entire Internet space is an impossible problem. Fortunately, there are already tools out there, like Google Alerts (free) and ReputationDefender, which can do the work for you, and send you a daily email report of every link where your name or brand appears.
  • Proactively build a positive reputation. Maintaining a good reputation means you have to build one early and maintain it. There is a big difference between no reputation with one negative comment, versus 1000 indications of a positive reputation and one negative. Most people accept that no person or organization is perfect.
  • Quickly address every negative. Many negative customer experiences can actually be turned into positives, if you quickly and unemotionally acknowledge the problem, resolve it, and spread the positive message before the negative one gets amplified. Don’t emulate the “United Breaks Guitars” experience.
  • Push negative content out of view. In reality, most people will never find negative content, unless a link appears on the first page of search engine results. With the right focus on search engine optimization, or the help of companies like DefendMyName, you can usually push negative links out of sight into the swamp of the Internet.
  • Remove unwanted content, where possible. Removing your content from the Web is not as easy as canceling your accounts, nor is it completely impossible. You can easily remove content you own (comments on your site or accounts). Experts, like Reputation Defender, have proprietary techniques to correct or completely remove other unwanted content.

The upside to the difficulty of removing unwanted content is that it does justice to those who have come by their bad reputations legitimately. For curbing bad guys, the speed and visibility of the Internet can be a very useful thing. For all the rest of us, it’s nice to know that we can shout back quickly and broadly, when someone starts to whisper about us.

As I have discussed in previous articles, social networking sites like Facebook are now the most frequently used websites on the Internet. Unfortunately, they have also become some of the most abused websites on the Internet, due to the emotions of failed relationships and the immature whims of young users.

So the social networks are the early place to start, in learning the discipline of building and maintaining a positive reputation. If you get that right, the transition to your business will be easy. On the other hand, if you let your reputation slide early to be “cool,” it may take a lifetime to recover. It’s easier to make Google remember than to forget.

Marty Zwilling


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Saturday, October 5, 2013

10 Digital Marketing Secrets Set A Brand Experience

Rick-Mathieson-speakingViral marketing and word-of-mouth are not enough these days to make your product and brand visible in the relentless onslaught of new promotional media out there today. Innovation in marketing is perhaps more important than product innovation. Yet in the business plans I see, the marketing content and budget are smaller than ever.

More than just spending, you need to create an “experience” in this digital age which sets you apart from the banner ads, email blasts, and old-school websites out there today. According to a book a while back by Rick Mathieson, these have morphed into a digital universe of augmented reality, advergames, and virtual worlds – that are highly personalizable and uniquely shareable.

His title “The On-Demand Brand: 10 Rules for Digital Marketing Success in an Anytime, Everywhere World” characterizes the challenge of demanding attention from a new generation of consumers who want what they want, when they want it, and where they want it. Here are the new marketing rules I support:

  1. Insight comes before inspiration. Innovative marketing starts with customer insights culled from painstaking research into who your customers are, and how they use digital media. Then it’s time to innovate through the channels or platforms that are relevant.

  2. Don’t repurpose, re-imagine. Digital quite simply is not for repurposing content that exists in other channels. It’s about re-imagining content to create blockbuster experiences that cannot be attained through any other medium.

  3. Don’t just join the conversation, spark it. Create new online communities of interest, rather than joining existing ones. Ask why it should be, and why customers should care. Then give them a reason to keep coming back. Keep it real, social, and events-based.

  4. There’s no business without show business. Remember Hollywood secrets. Your brand is a story; tell it. Accentuate the personalizable, own-able, and sharable. Viral is an outcome, not a strategy. Make people laugh and they will buy.

  5. Want control? Give it away. Several companies, including Mastercard, Coca-Cola, and Doritos have let customers build commercials and design contests, with big rewards for the customer and for the company. That’s giving up control, with some risk, to get control.

  6. It’s good to play games with your customers. Games are immersive, but shouldn’t be just a diversion. They need to drive home the value proposition. Don’t forget to include a call to action, like leading people to the next step of the buying process.

  7. Products are the new services. Startups need to realize that products are the jumping-off point for building relationships with customers. Digital channels enable you to turn products into on-demand services that help customers reach their goals, and add value.

  8. Mobile is where it’s at. In addition to thinking of mobile as a new advertising distribution platform, remember it’s far more powerful as a response, or “activation mechanism,” to commercial messages we experience in other media – print, broadcast, and more.

  9. Always keep surprises in-store. Social retailing is the new approach, where real-world shopping allows customers to connect with friends outside the store, and try on virtual versions of fashions friends might recommend. Make your in-store services add value.

  10. Use smart ads wisely. The new generation of “smart advertising” enables the creation of an Internet banner ad to fit each viewer’s age, gender, location, personal interests, past purchase behavior, and much more. The trick is to do this without being invasive.

Remember everything you do, or don’t do, in the digital world is visible to your customers, and everything they say about you is visible on demand, all over the world. That means marketing can no longer be an afterthought, or something you can postpone until later, when you have more resources. Without effective and innovative marketing, you don’t have a business.

Marty Zwilling


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Wednesday, October 2, 2013

Entrepreneurs Must Measure ROI On Social Media

ROIIf you are an entrepreneur today, and not using social media to promote your business, you are missing out on a huge opportunity. But, contrary to what most people preach, it isn’t entirely free. Most social media outlets don’t require a subscription charge, but they certainly require an investment – in people, in technology, your reputation, and your time.

There are hundreds of consultants out there who will take your money for guidance in this area, but I recommend that you start with some free resources on the Internet, or one of the many recent books on this topic. One I read a while back, “How to Make Money with Social Media” by Jamie Turner and Reshma Shah, Ph.D., hits all the right points from my perspective:

  • There are risks as well as benefits. As with many startup activities, you only have one chance for a great first impression. You can jump into social media with a poor brand definition, poorly focused content, unrealistic expectations of customer service, or be killed by malware or viruses.
  • Assess social media relevance to your product or service. If your business is industrial B2B products, social media should be low on your list. Spend your time and money on other platforms. If you are selling to consumers, especially younger ones, your business won’t survive without an effective social media presence.

  • Attracting key stakeholders requires sensitivity. For some customers and many investors, a heavy focus on social networks and viral marketing may be a negative, rather than a positive. A balance of conventional and social communication and marketing is always advised.

  • Pick the right platform for your business. Within each of the platform categories defined above, there is a right one and a wrong one for your audience. For example, LinkedIn is attuned to business professionals, Facebook is dominated by the social and upwardly mobile crowd, and the fading MySpace is for tweens and creative types.
  • Communication and writing skills are required. Heavy texting experience is not a qualification for communicating via social media. In additional to strong journalistic writing and storytelling, you need business acumen, strategic thinking and planning, and the ability to do the right research. These days, video production is also a useful skill.
  • Make social media an integrated part of an overall strategy. An integrated marketing strategy starts with an overall brand management strategy, delivered through online and offline communications, promotions, and customer engagement vehicles. Your Twitter and YouTube messages better match your print advertising message.
  • Find the right tools to analyze the ROI. Return-On-Investment metrics are not new, but the tools are different. Get familiar with current social media tools, such as Google Analytics, SproutSocial, and HootSuite analytics. Over time, put together the data you need to measure your progress on a weekly/monthly/yearly basis.

The key social media platforms today include communications (Wordpress blogs, Twitter), collaboration (Wikipedia, StumbleUpon), and multimedia (YouTube, Flickr). In looking ahead, don’t forget the mobile platforms (iPhone, Android), and location-based services (Foursquare, ShopKick).

As with any resource or tool, you need to optimize your social media costs against a targeted return. That means first setting a strategy and plan for what you want to achieve, then executing the plan efficiently, and measuring results. It’s not free, but it’s an investment that you can’t afford not to make.

Marty Zwilling


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Tuesday, October 1, 2013

Do You Have The Moxy To Be A Parallel Entrepreneur?

moxie-parallel-entrepreneurWith the cost of entry at an all-time low, and the odds of success equally low, more and more entrepreneurs are starting multiple companies concurrently. This “parallel entrepreneur” idea has been around since at least the days of Thomas Edison, and for the new generation of entrepreneurs, who have been multi-tasking since birth, it’s probably not even a stretch.

Some entrepreneurs, like Paul Graham of Y Combinator, and Dave McClure of 500 Startups, mask their focus on multiple startups by running an incubator or accelerator, and providing seed funding for a number of individual efforts. They skip from one to the next, providing expert guidance and money, getting their satisfaction (and reward) from the best of the best.

For entrepreneurs who really try to be the CEO of multiple early-stage startups concurrently, the hot new term for this practice is “multi-table” entrepreneurs. I suspect this term is derived from the common online gambling practice of playing multiple poker games at the same time. In fact, I think that’s a great analogy, since the odds in a poker game may be similar to those of a startup.

Yet there are clear advantages to the parallel approach, if you have the moxy, resources, energy bandwidth and the ability to multi-task effectively:

  1. A portfolio approach versus all eggs in one basket. Investors have long argued the value of a portfolio to hedge and leverage the risk, so why shouldn’t entrepreneurs do the same? With the current low capital requirements for smartphone and Internet apps, and high market volatility, it makes sense to spread the risk around as much as possible.

  2. Optimize your advisers and investors. Advisors and mentors are busy people. In your weekly meetings, it’s as easy to cover multiple company issues as one. Investors building their portfolio love to hear about multiple startups in one sitting, to select the best fit. Investors look at the people first anyway, so a strong team is good common ground.

  3. Many entrepreneurs love investing in other startups. Most Angel investors I know have previously founded and run at least one startup. Both these roles require unique skills, but both can benefit from operating in the other mode. Multi-table investors are the norm, and the investment process is good training for multi-table entrepreneurs.

  4. Learn to manage resources like multi-divisional corporations. Allocating resources, financial and operational, between divisions has long been a strategy for conglomerates, and can work just as well for savvy entrepreneurs. Revenue from one startup can be “invested” in another, and assets like buildings and computers can be shared.

  5. Attract and share specialized talent and skills. It’s very hard to attract talented people to a single product startup, but much easier if the entrepreneur has a bigger vision, with several entities producing complementary products. Expensive “lean startup” specialists can see a career potential, work full-time, and drive multiple successes.

  6. Cross-fertilization from current market feedback. One thing that you learn in one company, at a given moment in time, is equally valuable or leveragable in a different way at your other companies. As your customer list grows in one, you own it for the second. The cost of finding new markets can now be split among multiple entities.

  7. Foster and enforce the art of delegation. For long-term success, every entrepreneur needs to know when to step in, and when to delegate. That’s a skill that may not get enough attention until too late by a single startup entrepreneur. With parallel startups, delegation is a requirement for entry, and a valuable skill for all environments.

  8. Multiply the pay-back. Many parallel entrepreneurs have already achieved financial security through earlier efforts. Now they may see a way to multiply pay-back and spread the risk by active involvement with multiple startups. Of course, it’s like a double-down in gambling as well, which can quickly turn into a double loss.

  9. Products need not be tied to a given company. With open-source tools and public APIs, every product is no longer owned by a given company. The company entity is now primarily used to allocate ownership, accountability, and tax consideration, and need not be bound to a given product or operational structure.

  10. Burns off high energy and bandwidth. Now we are back to the fact that there are people who love to multi-task, and anything less is simply boring. This is especially true of Gen-Y entrepreneurs, with fire in the belly to change the world. Some see startups as a lottery where more tickets mean a higher probability of winning.

Of course, there are huge risks when you try to ride multiple horses at one time. At the very least, you may not do either well, or won’t be fully there when the going gets tough. Even single entrepreneurs who maintain a day job, for a steady paycheck, feel the pain of juggling multiple initiatives.

The hard part is getting the management part right. Every startup has to have someone minding the store, and a clear path to “the buck stops here.” No one can be a full-time CEO and work “in” the business of multiple companies. Plus there is the challenge of making sure the multiple roles do not conflict, legally or otherwise. Tread carefully there.

The most common way people move into the parallel entrepreneur environment, if they are so inclined, is to start another one, while still exiting the current one. The risk here is that winding down one takes much longer than you would expect, and starting something new consumes more energy than anyone predicts.

Overall, for the first-time entrepreneur, my sense is that trying to focus on more than one equally exciting idea is a recipe for failure. But with the cost of entry going down, and the multi-tasking bandwidth of each new generation going up, I suspect parallel entrepreneurs may soon be the norm rather than the exception. Are you ready to step up to this table?

Marty Zwilling

*** First published on Entrepreneur.com on 09/24/2013 ***


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