Saturday, November 30, 2013

The Old Ways Of Social Media Marketing Are Broken

new-social-mediaIsn’t it frustrating to think you understand something new in business, like marketing with social media, only to realize that the landscape changed while you were looking at other priorities? For example, it used to be that marketing via social media meant buying banner ads on Facebook, or buying a position on search engine results, or sponsoring some blog entries, but these don’t work anymore.

I just finished a new book by Jim Tobin, “Earn It. Don’t Buy It,” which asserts that “earned” social engagement drives far better business results than paid social exposure. Jim should know, since he is the president Ignite Social Media, of one of the best known social media marketing agencies. If you want to get current, here are a few of his bits of wisdom along these lines:

  1. Nobody clicks on Facebook ads anymore. Banner ads routinely average a .1% click through rate and Facebook manages to be about half as good as that. That’s 99.96% of people not clicking on those ads. When the glass is only .04% full, you should start looking for a new container.

  2. Where are the young social media users going? They are going to Instagram, Tumblr, Snapchat, Kik, and other applications. By some measurements Twitter was the fastest growing social network of 2012. Teens fueled that growth when in 2011 12% of teens reported using Twitter. In 2012 that number skyrocketed to 26%.

  3. You need influencers more than advocates. Brands need influencers working on their behalf because they provide the third-party credibility and social proof that validates their products. 92% of people trust “recommendations from people I know” and 70% trust “consumer opinions posted online.”

  4. Where did your friends go? SocialBakers, a site that tracks data, reported in December 2012 that 1.4 million active users in the United States disappeared that month. Out of 160 million active Facebook users in the U.S. alone, it’s a small percentage, but it is an early warning sign.

  5. Maybe they just don’t care. Pew Internet & American Life Project reported in May 2013 that their focus groups found “waning enthusiasm for Facebook” among teens, that Facebook has become a “social burden” for them, and that “users of sites other than Facebook express greater enthusiasm for their choice.”

  6. New can turn old very quickly. Friendster was a fad, Second Life was a fad, MySpace was a fad, and Facebook suddenly seems old school. Don’t connect the latest platform, which may be transient, with the larger phenomenon of digitally enabled social conversations. If you can figure out why people care about your product, you’ll have success regardless of the platform du jour.

Earning social media clout for your business, rather than buying it, seems to be all about engagement. Engagement occurs when customers and stakeholders become participants by sharing ideas with you, or talking to their friends about you, rather than merely viewing what you publish. Each participant becomes part of your marketing department, as other customers read their output, and become part of the conversation. It’s the principle underlying “viral marketing.”

So how do you facilitate engagement and conversation with your solution? According to an explanation I first saw on Social Fresh, it’s really a cycle consisting of three key phases:

  • User to product (engaged user base). This part isn’t new. In order to build any following, you need a solution that solves a real problem, not just technology that wows you, or great functionality with a painful learning curve. How engaged people are will depend on how much value they see, and how much they enjoy using the product.
  • User to brand (engaged audience). Once someone is engaged with your product, you’ll want to get them engaged with your brand. This happens today when you talk to people through social media and responsive customer service. Get in the habit of having genuine conversations with your engaged users to create an engaged audience.
  • User to user (engaged community). Now you have an engaged audience of people who feel an emotional connect with your brand and product. Time to start connecting them with each other. You can do so using conversation platforms like forums, Facebook groups or build something yourself.

So that’s how you earn customers through social media, rather than buying them with banner ads. But don’t be misled, social media marketing to get customers and brand recognition through engagement still costs money (and time and effort). There is no free lunch. But don’t spend your money on things that don’t work anymore. That won’t build any competitive advantage.

Marty Zwilling


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Friday, November 29, 2013

No Startup Founder Was Born With All Skills Needed

Peter-Drucker-portraitI have met several young people in business recently who believe that they are natural born entrepreneurs, and actually seem to feel that traditional training and experience may be a detriment to their success in this new world. I concede that some natural born skills do exist, but more often I tend to agree with Peter Drucker, who said “It’s not magic, it’s not mysterious, and it has nothing to do with genes. It’s a discipline, and like any discipline, it can be learned.”

On the natural born side, some entrepreneurs seem to have a strong vision and the ability to inspirationally lead others. It is this vision that is the beacon to drive the right people behavior, leading to the success of the business. If you don’t feel a vision in your heart, or if you don’t have the strength to inspire people, entrepreneurship is probably the wrong road for you.

If you feel you do have the vision characteristics, you can still benefit from some learnable skills and disciplines that improve the success and impact of every entrepreneur. Here are some of the key ones you may not have, assembled from an old interview with Herb Kelleher of Southwest Airlines and other executives:

  1. Ability to set priorities and focus on goals. Many people allow themselves to be driven by the crisis of the moment. Personal discipline is the key word here. Set yourself some priorities and goals, and live by them.

  2. Able to identify important issues. Some people call this common sense; others call it “street smarts.” In the normal startup environment, there are multiple forces competing for your attention every day, and you need to learn to delegate or ignore many. It relates back to experience and knowledge, more than genes.

  3. Conviction to be a passionate advocate. When you believe in something enough to turn your passion into action, you have become an advocate. That power and voice is then used to persuade others to make the correct decision. An effective advocate requires conviction, usually acquired during related first-hand experience or training.

  4. Broad knowledge and experience. Experience allows one to tackle challenges with confidence in a given area. Broad knowledge facilitates the same success in other business areas. Entrepreneurs need this, because their challenges are across the spectrum from technical to legal, operational, financial, and organizational.

  5. Active listening skills. Above all, the ability to listen and understand the real meaning of what people are saying (and not saying) is paramount, because the most important information never arrives in reports or email. Some people pick this up from experience, and others find classroom courses most helpful in setting the focus.

  6. Sound judgment. I don’t think anyone is born with sound judgment; it has to be learned, but can be started at a very early age. Every entrepreneur must have the capacity to assess situations or circumstances shrewdly and to draw proper conclusions.

  7. Pleasant skepticism. Skepticism is not doubting, but applying reason and critical thinking to determine validity. It's the process of searching for a supportable conclusion, as opposed to justifying a preconceived conclusion. It is a learned skill.

These all revolve around the larger theme of team building. In short, to succeed, the entrepreneur must see and articulate a vision in order to attract and motivate a team, then be able to identify the key issues, challenge the views held within the team, and make judgments from among the varying perspectives in the team.

Every entrepreneur enters the game with a unique combination of genes and skills. If the things mentioned here feel natural to you, and you are young at heart, have a healthy curiosity and zest for life, the entrepreneurial world may have a place for you, too. Give it a try. If you are having fun, you probably have what it takes.

Marty Zwilling


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Thursday, November 28, 2013

7 Entrepreneur Oversights That Will Crash Profits

rocket-scienceMany startups fail before reaching that magic “cash-flow positive” position they have been striving for, despite seemingly reasonable financial projections. A closer analysis often indicates the cause to be a lack of diligence in handling common business finances. These mistakes are usually masked by excuses, like the economy turned on me, or my competitors played dirty.

I found a good summary of the most common mistakes in a recent book by Kelly Clifford, “Profit Rocket,” written primarily to help you on the other side of the equation – skyrocket your profits. I’m sure all you accountants will agree that fixing the mistakes listed here does not require rocket science, but I’ve seen them so often that to be forewarned is to be forearmed:

  1. Failing to factor in fixed costs when pricing. Don’t forget to add all pesky “overhead” costs, with fixed elements, like rent, insurance, and administration, and variable elements, like delivery, customer support, and commissions. Always use a break-even analysis to measure what volume and price are required to offset total costs.

  2. Thinking you are profitable once money begins to flow in. Money flowing in has to exceed all costs, including inventory, credit, and your salary, before there is a real profit. Many startups see initial revenue from customers, and love the fast growth, but fail to anticipate the cost of early vendor payments, monthly overhead costs, and later taxes.

  3. Considering the job done once a client has been invoiced. A startup must insure that the payments are collected per agreed terms. A required metric is average days to payment compared to expectations. If you expect payment in 30 days, many customers will stretch this period to 45 days or even 90. This difference will kill your profit margin.

  4. Not paying close enough attention to cash flow. In startups, cash is king. If you fail to pay a cash obligation when it is due, the business is technically insolvent. Insolvency is the primary reason firms go bankrupt, even while making a profit. Entrepreneurs should sign every check and manage cash personally, rather than delegate this task to anyone.

  5. Not producing and reviewing financial reports regularly. Too many entrepreneurs hate the numbers side of the business, so they assume their accountants will warn them of danger signs. But administrative people rarely see the big picture, which you need for profitability and survival. It’s well worthwhile to learn the basics and use financial reports.

  6. Not having a budget. A budget is the financial plan and road map to get you from your business plan to profitability. Without a road map, you can be lost and not know it. Make sure you have a budget which is specific, measurable, achievable, realistic, and timed (SMART). Prepare it, update it regularly, and use it.

  7. Wasting money unnecessarily. Every business ends up buying things they don’t need, or paying more than they should, due to lack of attention and lack of negotiation. Review supplier terms regularly, and don’t be afraid to shop around. Take advantage of early payment and volume discounts, where possible

Above all, avoid self-sabotaging behavior that you may not even be aware of, like blaming others rather than taking responsibility for all decisions, or not charging what your product or service is worth, due to lack of current market information or a personal bias.

For example, I find many entrepreneurs are certain they can make a profit on a 20% margin, even though most of their competitors target 60% margins, or even higher. Unless you are a Walmart, with very high volumes and an existing infrastructure, you won’t survive for long on a 20% margin.

It’s fair to use your vision, creativity, and innovation to change the world with new and better products and services. But don’t forget that the underlying laws of finance are harder to change, much like the laws of physics, so try not to ignore these basics. In business, when you lose money on every sale, it’s hard to make it up in volume and be profitable.

Marty Zwilling


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Wednesday, November 27, 2013

Founders Need A Vision and A Plan, Not Just An Idea

steve-jobs-visionA popular approach for aspiring entrepreneurs these days seems to be to corner anyone who will listen, with a pitch on their current “million dollar idea.” The initial monologue usually ends with the question “How much money do you think this is worth?” In my humble opinion, ideas are a commodity, and are really not worth much, outside the context of a visionary leader and a plan.

Over the past couple of decades, experts have perfected the art of brainstorming and other idea-generation techniques. Executives and investors are now increasingly exposed to a wealth of ideas. The result is that ideas are no longer in short supply, and no longer a differentiator in competition.

Visionary leaders, on the other hand, are not so common. A visionary is someone who can make sense out of the wealth of ideas, and weave together a plan for implementation that will make a difference in the world. Steve Jobs, for example, probably received millions of ideas from his friends, but he was able to focus a few of these into initiatives that showed real innovation.

What separates an idea person from a visionary leader? Most experts agree that a visionary leader not only has ideas, but also has a vision of where these ideas can lead, with strong core values, key relationships, and demonstrates innovative actions, as follows:

  • Commitment to core values. Visionary leaders radiate a sense of energy, strong will, and personal integrity. This usually results in a focus on multiple related ideas, leading to real innovation, rather than bouncing from one idea to the next, looking for the “holy grail.”
  • Positive inspirational communication. People with vision usually start by communicating an inspirational picture of the future, and then integrating individual innovative ideas into this fabric, and show how to get there. The best ones can make the impossible look easy, so everyone, including investors, line up to commit.
  • Build strong relationships with strong people. Great relationships are key to every leader. They see people as their greatest asset, and listen as well as talk. Theirs is not the autocratic style of leadership, which tells people what to do and dominates them, but a style which treats partners, investors, and customers as family.
  • Willing to take bold actions. These actions somehow always seem to embody a balance of rational (right brain) and intuitive (left brain) functions. Visionaries are often “outside the box” of conventional approaches and move toward long-term change and innovation. They are proactive and anticipate business change, rather than reactive to events.
  • Radiate charisma. People with a real vision can communicate ideas with almost a spiritual charisma that energizes people around them to go a step beyond normal boundaries, to solve a technical problem, sign on as a team member, or invest resources, when conventional wisdom would suggest otherwise.

Every investor wants to fund the true visionary leader, but the truth is that these people often don’t need funding, or don’t ask for it. The best investor pitch, then, is to sell the vision with such conviction that people want to be a part of it, with their money, their skills, or whatever they can bring to the table.

But not every entrepreneur has to be a visionary. There is still plenty of room for incremental improvements, and creativity in providing solutions to short-term problems. This is really the realm of bootstrapped startups, and a small segment of the angel investor community that is looking for a “quick hit” with a quick return.

So my message to entrepreneurs is to tune your approach and your expectations accordingly. I’m always impressed with entrepreneurs who pitch how they plan to bootstrap an idea, but if you need a million dollars, you better be able to communicate and lead with a vision.

Marty Zwilling


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Tuesday, November 26, 2013

Keep Your Business Plan Succinct Yet Impressive

simple-business-planIf you want people to invest in your idea, then my best advice is first write a business plan, and keep it simple. Don't confuse your business plan with a doctoral thesis or the back of a napkin. Keep the wording and formatting straightforward, and keep the plan short. For minimum content, see my article “These 10 Key Elements Make a Business Plan Fundable.”

The overriding principle is that your business plan must be easy to read. This means writing at the level of an average newspaper story (about eighth-grade level). Understand that people will skim your plan, and even try to read it while talking on the phone or going through their e-mail.

But don't confuse simple wording and formats with simple thinking. You're keeping it simple so you can get your point across quickly and effectively to team members and investors. With that in mind, here are some specifics that bear repeating updated from an old article on simple plans by Tim Berry:

  1. Keep the plan short. You can cover everything you need to convey in 20 pages of text. If necessary, create a separate white paper for other details and reports. The one-page Oprah plan is a good executive summary, but it’s not enough to get the investment.

  2. Polish the overall look and feel. Aside from the wording, you also want the physical look of your text to be inviting. Stick to two fonts in a standard text editor, like Microsoft Word. The fonts you use should be common sans-serif fonts, such as Arial, Tahoma or Verdana, 10 to 12 points.

  3. Don't use long complicated sentences. Short sentences are the best, because they read faster, and reader comprehension is higher in all audiences.

  4. Avoid buzzwords, jargon and acronyms. You may know that NIH means "not invented here" and KISS stands for "keep it simple, stupid," but don't assume anybody else does.

  5. Simple straightforward language. Stick with the simpler words and phrases, like "use" instead of "utilize" and "then" instead of "at that point in time."

  6. Bullet points are good. They help organize and prioritize multiple elements of a concept or plan. But avoid cryptic bullet points. Flesh them out with brief explanations where explanations are needed. Unexplained bullet points usually result in questions.

  7. Don’t overwhelm the plan with too many graphics and flashy colors. Pictures and diagrams can effectively illustrate a point, but too many come across as clutter.

  8. Use page breaks to separate sections. Also to separate charts from text and to highlight tables. When in doubt, go to the next page. Nobody worries about having to turn to the next page.

  9. Use white space liberally, spell-checker, and proofread. Include one-inch margins all around. Always use your spell-checker. Then proofread your text carefully to be sure you're not using a properly spelled incorrect word.

  10. Include table of contents. No investor likes searching every page for key data, like executive credentials, or exit strategy. Most word processors these days can automatically generate a table of contents from your section headings. Use it.

Investors hear from too many entrepreneurs that envision a great business opportunity, but don’t have any written business plan at all. They think they can talk their way to a deal. It won’t work. On the other end of this spectrum are entrepreneurs who present long product specifications with a few financials at the end. This is a failing strategy as well.

If you're not the type who can connect with people based on a simple message, told succinctly, then hire someone who can. In fact, simplicity and readability is one of the most effective strategies for selling even the most complex proposal. A business plan that is easily understood and looks professional is already half sold. Simple is not stupid.

Marty Zwilling


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Monday, November 25, 2013

Your Venture Is All About You, Not Your Invention

intellectual-venturesIf you expect to succeed in the thrill-a-minute, roller coaster ride of a startup, let me assure you it takes more than a good idea, a rich uncle, and luck. In fact, the idea is often the least important part of the equation. Most investors tell me that they look at the people first, the business plan second, and only then at the idea.

If you want some tips to beat the insurmountable odds, take a look at the following concepts, adapted from Richard C. Levy’s book, “The Complete Idiot’s Guide to Cashing in On Your Inventions.” He was talking about inventions, but I think his concepts apply perfectly to any entrepreneur starting a business:

  1. Don’t take yourself too seriously. Don’t take your idea too seriously, either. The world will probably survive without your idea. You may need it to survive, but no one else does. But there is no excuse not to love and laugh at what you are doing. I’m convinced that people who love their work are more innovative, as well as happier.

  2. The race is not always for the swift, but for those who keep running. It’s a mistake to think anything is made overnight other than baked goods and newspapers. You win some, you lose some, and some are rained out, but always suit up for the game and stick with it. It’s not speed that separates winners from losers; it’s perseverance.

  3. You can’t do it all by yourself. Entrepreneurial success is almost always the result of unselfish, highly talented, and creative partners and associates willing to face with you the frustrations, rejections, and seemingly open-ended time frames inherent to any business startup.

  4. Keep your ego under control. Creative and inventive people, according to profile, hate to be rejected or criticized for any reason. An out-of-control ego kills more opportunities than anything else. While entrepreneurs need a healthy ego for body armor, it can quickly get out of hand and become arrogance if not tempered.

  5. You will always miss 100 percent of the shots you don’t take. Don’t be afraid to make mistakes. If you don’t put forth the effort, you won’t fail, but you won’t succeed, either. Inaction will keep opportunities from coming your way.

  6. Don’t start a company just for the financial rewards. We all want to make money. That’s only natural. But you should be motivated by the opportunity to “make meaning” as well. People who do things just for the money usually come up shortchanged.

  7. If you bite the bullet, be prepared to taste gunpowder. Not every idea or decision works. For every action, there is always a criticism. Odds are, you’ll encounter far more criticism than acceptance. Learn from your mistakes, and don’t blame someone else.

  8. Learn to take rejection. Don’t be turned off by the word “No,” because you’ll hear it often. Rejection can be positive if it’s turned into constructive growth. My experience is that ideas get better the more times they are presented. “No” means “not yet.”

  9. Believe in yourself. One of the first steps toward success is learning to detect and follow that gleam of light Emerson says flashes across the mind from within. It’s critical that you learn to abide by your own spontaneous impression. Allow nothing to affect the integrity of your mind.

  10. Sell yourself before you sell your ideas. Be concerned about how you are perceived. You may be capable of dreaming up ideas, but if you cannot command the respect and attention of associates and investors, your proposal will never get off the mark, and you may not be invited back for an encore

As with all the other “principles of success” articles I have seen, you should take these tenets with a grain of salt. Yet I’m betting that every entrepreneur out there can relate to these principles and practices, and most of the long aspiring and unhappy entrepreneurs have broken one or more of them. Maybe it’s time to learn from your mistakes, forget the past, and go for the trophy.

Marty Zwilling


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Sunday, November 24, 2013

Entrepreneurs Can Revitalize The Image Of Business

Lehman_Brothers_Times_Square_by_David_ShankboneLarge corporations and conglomerates, the engines of growth and vitality in the twentieth century, have lost their edge and their image. They have proven themselves unable to innovate, and they have lost more jobs than they create. My friends who “grew up” with lifetime careers in General Motors, Exxon Mobil, or even IBM, are now often too embarrassed to even mention it.

On the other hand, everyone wants to be an entrepreneur. We can all aspire to grow companies like Google, Facebook, and Apple, which have the aura of fun, while still improving your lifestyle and offering the dream of untold riches.

I recently finished a new book by thought leader Suresh Sharma, “The 3rd American Dream,” which summarizes the business accomplishments of the 19th and 20th centuries, and then lays out the potential of a new entrepreneurial business ecosystem for the 21st century. His focus is on America, but what he says applies to every other country as well.

I agree with Sharma that it’s time to move on to a new way of thinking, living, and doing business, especially after the recent demoralizing recessionary times. This next frontier lies in building your own enterprises as an entrepreneur, rather than waiting for innovation and opportunity from large corporations. They have become a by-product of innovation rather than the cause of it:

  1. Conglomerates grew from industrialization, not innovation. Most of their new claims to innovation are acquired through mergers and acquisitions from the entrepreneurial pipeline. Internal corporate processes thwart innovation due to inherent inefficiencies of scale, high overhead, and the risk of impact on the corporate bottom line.

  2. Existing technologies have been “commoditized” globally. Many countries have learned to make products cheaper and better. Competitive advantages are rapidly vaporizing on these. Having only a large capital base and distribution channels, with no innovation, is not a sustainable business model.

  3. Large corporations no longer create jobs in their home location. There is no shortage of data to support the assertion that the old large corporations have lost more jobs than they’ve created at home. Outsourcing and manufacturing “offshore” have become the norm. Entrepreneurs growing companies create more value and more jobs.

  4. Non-industrial large organizations cling to outdated business models. Financial institutions, for example, count on pure capital plays without innovation that can disappear quickly. Government bail-outs do not promote innovation. These companies usually end up going extinct, like Lehman Brothers, WorldCom, and Enron.

The new corporate model is a distributed entrepreneurial model. Customers today demand products and services personalized or tailored to local needs with embedded quality of life services. Scaling is done first by customer alliances through social media, and later by distributed joint ventures and coopetition. We need the new wave of entrepreneurs to facilitate:

  1. A new era for manufacturing enterprises. New emerging manufacturing technologies (e.g., digital and 3D printing) in small shops or a town’s industrial and innovation hub can bring manufacturing back home. The new twenty-first century corporation can be born virtually anywhere. Single-node factories may be home-based with a global market.

  2. New goldmine of innovations and technology. Universities and other R&D groups have created a large number of new inventions and innovations, mostly lying dormant on the shelves of our researchers and labs, waiting to be commercialized by aspiring entrepreneurs, with minimal up-front costs for licensing.

  3. Next wave of economic expansion. The time is ripe for the new entrepreneurial dream. People are emerging from recent economic disasters with a new appetite for change, and making the world a better place. Gen-Y is approaching the business world with solid personal goals, and expect to create something that is creative, fun, and rewarding.

  4. The cost of entrepreneur entry is at an all-time low. With e-commerce, Internet, and smartphone apps, anyone can be an entrepreneur today for a few hundred dollars, without a huge investment, bank loans, venture capitalists, or Angels. With the global market, the growth opportunity is huge, starting local and scaling at any pace.

If you are already in the entrepreneur lifestyle, you probably realize that it’s hard work and very risky. Nobody said it would be easy, but nothing that is easy satisfies for long. The days of easy and safe jobs in the large corporate world are over, and certainly not very satisfying either.

We need this new generation of entrepreneurs who relish the challenge and the opportunity of rebuilding our business engine to fit the culture and the global needs of the twenty-first century. What’s holding you back from jumping on the wave?

Marty Zwilling


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Saturday, November 23, 2013

7 Key Realities Many Startup Founders Never Learn

Bill-McBeanWhen I started mentoring entrepreneurs and startups a few years ago, I anticipated that I would get mostly tough technical questions, but instead I more often hear things like “Where do I start?” I find that the basics are actually the hardest to answer, just like your parents found out when they first tried to fill you in on the “facts of life” a long time ago.

Most entrepreneurs are not born with the knowledge to run a successful business, so the right place to start is some business training in school, or some practical work experience in a business of your interest, prior to starting your own company. Jumping into a business area you don’t know, because you see a chance for big money, is a surefire path to disaster.

I also found a wealth of books are available to address the basic facts of business life, like one by Bill McBean, aptly named “The Facts of Business Life,” based on his forty years running large and small businesses. Bill does a great job of outlining the key realities as follows:

  1. If you don’t lead, no one will follow. Good business leadership begins with defining both the direction and the destination of your company. That’s where you start. From there you need to hone a whole set of skills to survive and prosper, including effective communication, leadership under pressure, and constant adaptation to change.

  2. If you don’t control it, you don’t own it. Control in business requires teamwork, which occurs in successful companies when team members, products, and processes work in unison. You have to define the key tasks that must be handled every day, and institute the proper controls to make sure they happen effectively and consistently.

  3. Protecting your company’s assets should be your first priority. Assets include the obvious equipment, accounts receivable, and cash. Maybe more importantly, your long-term survivability is tied to intellectual property, like trade secrets and patents, as well as other less tangible items like your customer base, your experience, and your skills.

  4. Planning is about preparing for the future, not predicting it. Planning is not just an early-stage activity, but must be an ongoing activity, based on current accurate information as well as educated guesses on future changes. Planning should keep you focused on what’s important, and prepare you for what lies ahead.

  5. If you don’t market your business, you won’t have one. Marketing and advertising are business realties. Word-of-mouth and viral are not long-term solutions. It doesn’t matter how good your product or service is if most of your potential customers don’t know about it. With 150,000 new websites per day, customers won’t find you by accident.

  6. The marketplace is a war zone. Every company has competitors, or there is no market for what you offer. Successful entrepreneurs know they have to fight not only to win market share, but to retain it as well. Past success is no guarantee of future success, and the only way to remain successful is to maintain a fighting mentality.

  7. You don’t just have to know the business you’re in, you have to know business. Understanding one’s industry is necessary but not sufficient to be successful. Many businesses fail simply because they ignore or do poorly one or more of the basic aspects of every business, like accounting, finance, personnel, or business law.

In business, as with people, there is a life cycle of birth, constant maturing, change, and rebirth. Entrepreneurs are ultimately responsible for guiding their business through this life cycle, rather than getting suck in any one stage. This means the entrepreneur has to focus correctly not only on what is important, but also on when it’s important.

Before you start building a business, you really do need to know the basic concepts of leadership, management, and operations, and you need to know how these areas change as a business goes through its life cycle. These are the “street smarts” that many entrepreneurs try to acquire by fast talk and bravado. That’s a painful and expensive way to learn any facts of life.

Marty Zwilling


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Friday, November 22, 2013

Too Many Startup Founders Sabotage Themselves

sabotage-yourselfIn working with entrepreneurs and other business people over the years, I often hear stories of entrepreneurs who were so close to success, but somehow let it slip through their fingers. They could always give a rational excuse, like the market changed, but somehow it seemed that they were actually afraid of success, so they subtly undermined their own efforts.

I couldn’t really believe that anyone would be afraid of success, until I finished a self-help book by Patrick Daniel, “Finding Your Road to Success.” This is billed as a must-read for any entrepreneur who needs a shot of optimism. Relative to my suspected entrepreneur fear of success, Patrick outlines six rationales that my positive-thinking mind would never even consider:

  1. Success will lead to loneliness. Some entrepreneurs believe that success will mean working long hours, neglecting their spouse and children, which in turn could result in divorce. Women, in particular, sometimes believe that success will make them unlovable and intimidating to men.

  2. Success will lead to envy. Many people want what others have, and the more success a person achieves, the more envious are that person’s friends, neighbors, and colleagues. This is a reality that some entrepreneurs don’t want to deal with, and some apparently undermine their own success to avoid it.

  3. I’m not good enough for success. This belief can result from many things, such as having negative parents and not having a college degree. With this belief often comes “I don’t deserve success,” so they sabotage their own efforts in that direction. If this resonates with you, I don’t recommend the entrepreneur lifestyle.

  4. Success will change my lifestyle. Some entrepreneurs fear that the changes that come with success will actually make life less enjoyable. They believe that will have less time to, for example, enjoy sports, surf the Internet, spend time with their family, or relish the excitement of building the business. My logical mind would assume just the opposite.

  5. Success is too expensive. There is a cost to everything, and success is not an exception. Sometimes, to make money you have to spend money, and some entrepreneurs just can’t face the risk of making that initial investment. Certainly I know many people who would never put other’s people’s money at risk to start their business.

  6. I won’t be able to control everything that happens. If you fear all the things you can’t control, you should never step into the entrepreneur lifestyle. Startups have to deal with many factors outside their control, so this fear can cause an unhealthy stress and worry. Successful entrepreneurs usually relish their ability to control at least one thing that no one else has managed to figure out.

Ironically, these “fear of success” rationales are often restated by entrepreneurs as a somewhat less embarrassing, equally deadly, “fear of failure.” Fear of failure in generally recognized as one of the strongest forces holding entrepreneurs back. Yet failing in a startup is practically a rite of passage, according to investors, as well as successful entrepreneurs.

Overall, I would suggest that if you let your fears control your actions, you probably have a hard and unhappy road ahead as an entrepreneur. Most successful entrepreneurs are not fearless, but they know how to transform these fears into positive actions rather than negative ones, and they take every failure as a positive learning experience.

I assure you that no entrepreneurs are born successful. Every smart entrepreneur has a fear of the unknowns in their new business initiative. Only those with the passion and conviction to start anyway will have any chance of success (you can’t succeed if you don’t start). Likewise, you can’t succeed if you give up too early, or sabotage your own efforts due to a fear of success. Make sure you don’t let fear paralyze you at any stage of your startup.

Marty Zwilling


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Thursday, November 21, 2013

Entrepreneurs Should Rollout Local, But Plan Global

business-global-localNew entrepreneurs who want to survive, and optimize the growth of their startups, need to think globally, and act locally, from day one. This approach, popularly known as “glocalization,” means you have to design and deliver global solutions that have total relevance to every local market in which you operate.

Recognizing this is as much about culture as about language, ensures an understanding of regional motivators, cultural taboos and local customs – so that your solutions are ideally designed and marketed to deliver value that has genuine local relevance.

What all this doesn’t mean is that you should roll out your product in every country at the same time. But it does mean that you think about the global implications at every step of the process:

  • Pick your company and product names carefully. Don’t pick a name for your company or product that has a negative or totally different meaning in another language. Remember when the Chevy Nova required a rename, once Chevrolet realized that Nova meant "no go" in the Spanish market (not a great name for a car).
  • Anticipate greater growth outside of North America. Not every international market matters, but some are larger than life. The middle and above-middle class population of China will grow from 172 million in 2010 to 314 million by 2015. Just the middle class in India is equal in size to the entire population of the United States. And aging populations in Europe and Japan will join the retiring baby boomers in the U.S. with demands for new products and services. Be ready.
  • Reinforce your brand in international markets. An international brand will command higher prices and additional customer demand. This is called brand goodwill, a hard-won value resulting from the trust that a strong name engenders among buyers and partners. As you begin to saturate the demand in domestic markets, let your brand take you international at low cost.
  • Balance your business between geographies. When buyers in one region start to slow down, look for buyers in other geographies to take up the slack. Companies with diversified portfolios can focus their energy on other global markets that are doing well.
  • Speak the customer’s language. People tell me that a multi-lingual website can double your local online business in many parts of the U.S. These days, customers begin their buying cycle online, where they can get answers to their frequently asked questions, product information, and transactions — all in a language they really understand.
  • Find global sources now. This may not be politically correct these days, but smart startups are looking globally to source their products from the very beginning. Software can be developed “offshore” for a low cost, manufacturing volumes are quickly available from China, and European designs have increased opportunities in every country.
  • Selectively protect your intellectual property worldwide. At present, no world patents or international patent process exists, so you need to apply in every relevant country. Trying to get patent protection worldwide at the beginning is prohibitively expensive, so pick your geographies and timing carefully and strategically.

These days the world is a single market. It is both homogeneous and heterogeneous. The communication revolution and the advent of the Internet has brought about a new age of globalization. Easier access to international markets is creating limitless sales opportunities on a worldwide basis.

The result is that every startup company now needs to consider every aspect of management, sales and service on a global basis. However, to gain a true competitive edge, you still need to implement effective solutions first at the local level. Don’t try to do it all at once.

Marty Zwilling


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Wednesday, November 20, 2013

Intrapreneurial Efforts Need Tough Love to Compete

intrapreneurship“Intrapreneurs” are entrepreneurs inside big companies, who do corporate spin-offs. A spin-off is merely a startup spawned by a mature parent (company), and conventional logic would dictate that it has a survival advantage over the lowly startup. Yet spin-offs seem to most often fail to launch in the real world. I was part of one myself a few years ago, and felt the pain.

My first thought is that spin-offs are like struggling adolescents with over-protective parents. When companies spin off a division (sometimes called a demerger or deconsolidation), they naturally want it to grow and succeed on its own merits, just as they have. But like protective parents everywhere, they tend to shelter it in ways that stunt its growth in the long run.

Before we look at my specifics, I should mention some of the reasons companies make the spin-off decision in the first place. Contrary to popular belief, according to a report by A. T. Kearney, these go well beyond an organization getting rid of its "problem children:”

  • Deconsolidate—shed non-core functions to focus on core competencies. An example would be Time Warner spinning off AOL—to end a disastrous, dot.com-era marriage.
  • Mingle and learn from the startup culture and new technology – without losing control. Foreign companies in the US like to use spin-offs to find expansion opportunities.
  • Unlock shareholder value, which the spin-off can do as an independent entity. They may not be so constrained by monopoly fears and Sarbanes-Oxley controls.
  • Grow faster, which a spin-off can do outside the parent company. Airlines, for example, have difficulty scaling up through mergers and acquisitions (M&As), but they can spin off their maintenance businesses and let the spin-off do the M&A in its own field.
  • Grow in new dimensions from the parent company. Service operations such as call centers can grow far beyond their parent companies, especially if their services are more generic.

In retrospect, in the case I was part of, I believe there were several areas in which the parent company consistently fails in their discipline of intrapreneurial efforts:

  • Rewarding without earning. The parent company guaranteed the spin-off a revenue stream and provided incentive bonuses based on artificial objectives, rather than competitive or market driven targets. The guaranteed revenue and incentives were only loosely tied—at best—to the spin-off’s performance.
  • Fostering dictatorial leadership. Effective management skills in a startup are actually quite different from those in a large enterprise. The dictatorial leaders who survived and prospered in the enterprise parent, were ill-suited for the collaborative and highly adaptive spin-off and startup requirements. Yet they had “earned” the right to run an autonomous unit, and were not easily dislocated.
  • Supporting them for an undefined period. Parent companies provide services or infrastructure to the spin-off at below-market prices or for an excessively long period of time. In the reverse direction, this “support” carried the high overhead that is standard in the enterprise, but not financially sustainable in the spin-off.

In my view, fostering successful spin-offs, like raising adolescents, often requires tough love, embodied in the tough financial objectives and a firm timeline that startup investors impose on their charges. No free passes, and no bailouts. HP tried to come to grips with all these issues a few years ago, in spinning off its PC business, but ultimately backed down.

In most ways, the success of a spin-off depends on the same factors that are critical to a startup, but sometimes get forgotten or taken for granted as a corporation matures. These include a clearly articulated vision and business strategy, communicated from leaders in a way that heightens motivation and lessens team anxiety of the unknown.

For entrepreneurs, this analysis should be a positive message, but it should also be a wake-up call to the overriding value of leadership and effective communication. For all of you who all too quickly tie your business success or failure to funding, or the lack of it, think again. Sometimes it helps to be “hungry” in that respect.

Marty Zwilling


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Tuesday, November 19, 2013

Investors Do Not Fund Research And Development

research-and-developmentI still get business plans, looking for an investor, that say all too clearly that the primary “use of funds” will be to do research and development (R&D) on some promising new technology, like superconductivity or cancer cures. Entrepreneurs forget that investors are looking for commercial products to make money, rather than R&D sunk costs, so investment hopes are sunk as well.

In fact, the term ‘research and development’ covers a continuum of activities, so you need to use a more precise term to maximize your funding likelihood. There are opportunities all along the continuum, and they need to be mapped to the right academic environments and public- and private-sector development organizations before a funding source can be determined.

Let’s consider the six stages normally associated with R&D, and the boundaries and project-specific activities interwoven therein:

  1. Basic technology research. The first stage is basic research on a technology that shows a potential for solving a difficult or expensive problem. Look only for grants, universities, and enterprise sponsors at this stage. Real products are only speculation at this stage, and mentioning a large list of them won’t help get outside investors.

  2. Technology development. This stage is the transition to pilot-scale research on the technology. It may entail a number of false starts, but no products. A successful result is a one-of-a-kind technology that shows enough promise both technically and economically to warrant demonstration. Funding sources are still the same as stage one.

  3. Prototype development. Now we are ready for demonstration tests conducted on first-time or early-stage products. The demonstration stage usually implies substantial redesign and debugging until final robustness can be established. Angel investors are definitely interested at this stage, but VCs usually wait until stage five or six.

  4. Verification. Verification is testing and publicly reporting the performance of a commercial-ready technology using specific standards (EPA, FDA, etc.). Results, if positive, are used for marketing a product directly to customers. If these required tests are common and low risk, VCs may jump in at this stage.

  5. Commercialization. The fifth stage includes preparing for, financing, and implementing full-scale manufacturing and marketing activities. The technology can be reliably replicated and produced. This includes entering into partnerships, arranging for manufacturing facilities, and developing channels for distribution. All is definitely fundable now.

  6. Diversification. At this point the technology is ready for implementation with a full-scale marketing plan for an array of products, including interfacing with appropriate partners, and commercialization. The term research and development should never be mentioned, even though ongoing efforts for the next product are always required.

While I certainly applaud basic research, I try to remember that people buy solutions and products, rather than buying technology or a new platform. There is even a small group of customers, called ‘early adopters’ who seek out new technology solutions. However, we all need to remember that the mass market tends to wait for the product image to supersede the technology.

So investors, looking for a near-term large and growing market, see technology development as a big red flag. They defer to others, like government agencies, universities, and large corporations to take that risk. You can participate, of course, with private funds and grants, but don’t expect venture money to be thrown your way just yet. Get used to the message, “We love your proposal, so come back when you have a real product and a real customer!”

Marty Zwilling


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Monday, November 18, 2013

How To Make An Ethical Difference In Your Business

business-ethicsMany people seem to have the sense that ethics are spiraling downward in business, yet most business professionals and entrepreneurs I know don’t believe they can make a difference. They don’t realize that if they don’t take an active role in the solution, they really become part of the problem.

I do believe that most business people want to do the right thing, but many just don’t have the skills to develop an unemotional ethical position, or confidence to act on their ethical beliefs, or simply are not sure how to go about making a difference in their daily actions, without jeopardizing their own career.

Most people don’t need tools to agree on the ethical problem with Lockheed bribing foreign officials to get business, but many may come to different conclusions on how safe a startup’s innovative new child car seat has to be before it is sold. If people are dying of cancer every day, how many clinical trials should be required for a new drug that clearly saves some lives?

I found some good analytical tools on how to sharpen your own ethics sense in a new book by Mark Pastin, “Make an Ethical Difference.” Pastin has consulted with many organizations around the world on ethics issues, and I like his practical steps to get beyond the emotion and the theoretical, to pragmatic yet ethical solutions for tough problems:

  1. Identify the ground rules of the all parties. When a situation presents an ethical issue, look beyond the actions of individuals, groups, and organizations to uncover the ground rules of each that help explain their actions. Only then can you understand what you have to change to be a successful ethical change agent.

  2. Reason backward to find the interests. Summarize the possible outcomes, and reason backward from each to find what interests each outcome will serve and for whom. Unstated or hidden interests are often the key to resolving ethical issues. Support outcomes that advance many interests without violating any ground rules.

  3. Face the relevant facts. Look for facts that all parties, irrespective of their ground rules and interests, will agree upon. Then look for non-debated facts, and finally contested facts. The acid test for each fact is that if it were true, would it change your judgment as to what is right in the situation. Now you have the potential to make an ethical difference.

  4. Stand in the shoes of affected parties. Once you understand who is affected, reduce the distance between you and them. Pick ones that differ from you the most and meet with individuals or group members. Verify or reject each interest and ground rule. You remove obstacles to the functioning of the ethics eye by bringing its objects closer.

  5. Use the global benefit approach to rate possible outcomes. Ask which course of action produces the greatest balance of benefit over harm for all concerned. You first ask who counts, then what counts, as a benefit or harm in considering the possible outcomes. Any action with great benefits without violating ground rules could be the right one.

Real agreement in ethics only exists when what your ethics eye shows to be the right action matches what the ethic eyes of others see as the right action at the same time. Thus these steps are part of an iterative convergence process that all relevant parties must follow to reach the right solution. Pastin provides examples of this process transforming good ethics into decisive action.

It does work, but in all cases each of us has to accept at the outset that our own ethical perspective may be the one that changes in the process of seeking ethical agreement. There is no room in any business decision for hard unbending positions, with closed eyes and ears and an open mouth.

If you and I disagree about ethics, there are only three ways to reach agreement. You change your mind. I change my mind. Or we both change our minds. When you under-take a sincere process of seeking ethical agreement, two of the three options for doing so involve learning and changing your mind. But how does that differ from every other challenge where you have made a difference in moving your business forward?

Marty Zwilling


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Sunday, November 17, 2013

8 Startup Gaps That Will Frustrate Funding Efforts

mind-the-funding-gapA while back I received a discouraging note from an entrepreneur with a patent and a medical software application who couldn’t find a dime of investment, and was grousing that seed funding just wasn’t available anymore. After exchanging a couple of notes, I concluded that she was more likely a victim of item #1 on my reject list below, rather than a drought on seed funding.

Too many people still believe the urban myth that you can sketch your idea on a napkin, and people will throw money at you. Fundraising is indeed brutally tough at all stages, and the seed funding is the hardest to find. The simple answer is that if you need funding, do your homework early and completely.

I seem to see common threads in the stories from people who don’t get money, so I checked my list against ones quoted in a book by Barry H. Cohen and Michael Rybarski, titled “Start-Up Smarts.” We agree on issues we see sabotaging most funding efforts, in decreasing priority sequence:

  1. Lack of a compelling story. That story has to begin with a painful problem shared by a large collection of viable customers, with your competitive solution. Additionally, you need to be able to communicate the essence that story and value to investors in a couple of sentences – your elevator pitch.

  2. Lack of clear objectives/goals. Often, the number one question that entrepreneurs fail to address is: “How much money do you need, and what valuation do you place on your company?” Then you have to have evidence to support your request. I’ve asked this question many times of presenters in Angel meetings, and often get a blank look.

  3. Failure to prepare for due diligence. Any serious investor will perform a thorough review of your business and personal background before signing the check. They don’t like surprises, so you should explain any possible issues first, in the best possible light, before being asked.

  4. Lack of understanding of the funding process/rules. The key here is to create a win-win partner situation for your investors. Discussion of risks and rewards in an open fashion, without sleight-of-hand or shortcuts, will convince investors that they can count on you, and will avoid shareholder lawsuits later.

  5. Reliance on inappropriate business professionals. Using well-respected professionals to bolster your endeavor is key. If you can attract well-known advisors, attorneys, and accountants, it will give potential investors comfort that you have been able to get implied endorsement of your concept, as well as your integrity.

  6. Poor choice of funding sources. It is not helpful to you for funders to love an idea that does not fit the criteria for their investing capability. Don’t waste time talking to VCs for requests less than $1M, or very early stage, and don’t expect professional investors to jump in if you have no “skin in the game.”

  7. Not doing due diligence on the funding source. You need to complete due diligence on your prospective funders as they complete due diligence on you. Find out what they have invested in recently, what stage, and what is their track record of expectations and follow-through. You don’t need surprises or disappointments either.

  8. Being unprepared for the next steps. After a good elevator pitch or initial presentation, investors will ask for your formal business plan and financial projections. Don’t derail their enthusiasm or risk your professional image by not having these materials immediately available. The same thing goes for incorporating your company, having key hires lined up, and facilities arranged as required.

There are many others opportunities for you to shoot yourself in the foot. Rather than play the victim, you can be proactive on all these items, and stay one step ahead of your “competitors” in professionalism, timing, and preparation. The resources are out there to help you, like the book mentioned, this blog, and many more. Use them and win.

Marty Zwilling


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Saturday, November 16, 2013

Great Early Stage Startup Behaviors Limit Scaling

scaleOnce you are able to achieve some real “traction” with your business (paying customers, revenue stream), it may seem the time to relax a bit, but in fact this is the point where many founders start to flounder. All the skills and instincts you needed to get to this level can actually start working against you, and you can fail to scale.

Investors often say that successfully navigating the early stages of a startup requires lots of street smarts, guts, and luck. For successful scaling of the business, there has to be a transition to “executive” mode in the more traditional business sense. Certain behaviors between these two modes are incompatible, and can cause real problems.

Several years ago, John Hamm published some early work on this subject in "Why Entrepreneurs Don't Scale" in the Harvard Business Review. Here is my interpretation of that work, incorporating my personal experience, identifying some strengths of an entrepreneur during early startup stages which can become a problem for scaling:

  • Perseverance. This is generally a required quality for a successful entrepreneur, but it can turn into an unhealthy stubbornness during the scaling stage. The key is to make decisions from data and feedback, once your business has real customers and real products. Trusting your gut at this stage isn’t good enough.

  • Absolute control. During the early stages, you are the company, processes are not documented, you don’t have much help, so you need a fanatical attention to detail. To scale the business, you have to find people who can do the tasks, and delegate appropriately. Control freaks are doomed to failure.
  • Individual loyalty. Most founders form very close relationships with the small team that gets the startup off the ground, and that is important. Scaling requires that you expand the team, probably with people you haven’t known. You also have to deal with the inevitable personnel challenges, even within the original team. Total loyalty can be toxic.
  • Isolated and insulated. Working in isolation is fine during the creative phase of the startup, where the founder is often the designer and architect, as well as the builder. Now this same individual has to step into the spotlight, and meet with customers, analysts, and investors. Insulation from the real world will not work during scaling.
  • Tactical versus strategic. Early stage startup founders have to think tactically. Even business school courses don’t teach you to operate strategically, deal with people objectively, and create loyalty within a diverse workforce. These are areas where past stumbles are the best teachers. Investors don’t want to fund your stumbles.

Every founder moving into the executive role has to step back and take a hard look at what works, and what doesn’t work. The best ones can do that, and they adapt. Investors and advisors see this as a critical part of their role, and often are the “bad guys” who ask the founder to step aside, while they bring in a “more experienced” CEO to take over the helm.

Unfortunately, some founders won’t adapt, and won’t step aside. Even if they are pushed out, they can cause terminal damage to the business by negative versions of their strengths, now seen as stubbornness, unwillingness to give up control, testing loyalty, and hiding from reality.

Thus my best recommendation, if you want to scale and to survive, is to open up and work closely with an “outsider” that you trust, such as a respected board member, a coach, a mentor, or an investor. The key is to expedite your learning, and take deliberate steps to confront your shortcomings. That way, you will become the leader your company needs, learn to stop floundering, and begin to fly.

Marty Zwilling


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Friday, November 15, 2013

10 Reasons Not To Write A Business Plan First

10-reasons-you-dont-need-business-planIf you are one of the new age of entrepreneurs who hates the thought of doing a business plan as a first step in starting your new venture you will love this message. More and more professionals agree that a better strategy is to explore and fine tune your assumptions before declaring a specific plan with financial projections based only on your dream and passion.

In the process, you may save yourself considerable re-work and money, or even decide that your dream needs more time to mature, before you commit your limited resources, or sign up with investors to a painful and unsatisfying plan.

I just finished a new book on this approach, “Beyond the Business Plan,” by Simon Bridge and Cecilia Hegarty, which outlines tradeoffs and recommends ten principles for every new venture explorer. Here is my edited summary of their ten principles, which I like and may convince you that you don’t need a business plan at all, or at the very least will help you write a better one later:

  1. A new venture is a means, not an end. A new enterprise should be pursued primarily to help you achieve your goals, like providing a better life for others, satisfying a passion of yours, or enjoying the benefits of a technology you have invented. In that context, it could be a social enterprise, or even a hobby, and a business plan may not be beneficial.

  2. Don’t start by committing more than you can afford to lose. New ventures are usually exploratory and risky in nature, so don’t let any business plan process convince you to commit more than you can risk as a person, if your exploration fails. Start with an effectual approach, which evaluates risk tolerance, and suggests more affordable means to an end.

  3. Pick a domain where you have some experience and expertise. Don’t handicap yourself by starting something for which you have to build or acquire knowledge, skills, and connections from scratch. No business plan will save you if you are just picking ideas at random, or copying others, just because the story sounds attractive.

  4. Carry out reality checks and make appropriate plans. Before a business plan has any validity, some work is required to validate that your technology works, a real market exists, and your assumptions for cost and price are reasonable. Don’t be totally driven by your own passions, the emotional enthusiasm of friends, or even third-party research.

  5. The only reliable test is a real one. Market research techniques for trying to predict the market’s response to a new venture can be costly and are often unreliable. Testing for real is the assumption behind approaches such as Lean Startup. It is also what explorers do – they go and look, instead of trying to predict from a distance what they will find.

  6. Get started and get some momentum. Too much hesitation will kill any new venture, as markets move quickly and difficulties mount. Getting started helps to generate momentum and the sense of having done something, which provides encouragement, more incentive to keep going, and can carry your startup over obstacles. Early perseverance pays off.

  7. Accept uncertainty as the norm. You will never remove all uncertainties, so accept them, and plan your activities in an incremental fashion. Too often, a business plan is seen as a mechanism for eliminating uncertainty, lulling the Founder into complacency. Eliminate major uncertainties before the plan, and update any plan as you learn.

  8. Look for new and best opportunities. Many useful opportunities are either created by what you do early, or are only revealed once you have started and can see out there. So keep your eyes open and respond to new customers, new markets, and new partnerships. You will also find that looking hard also eliminates opportunities that are not acceptable.

  9. Build and use social capital. Social capital is people and connections. No entrepreneur can survive as an island. Social capital is as important as financial capital for all ventures. As with all capital, you can use only as much as you have acquired to date. If you have no social capital, no business plan will likely get you the financial capital you need.

  10. Acquire the relevant skills. Three basic skill sets are required for successful delivery of almost every venture. These include financial management, marketing and sales, and the appropriate production ability. If you don’t have the relevant skills and knowledge, take the time to build them or find someone to partner with, before you attempt any business plan.

If you do decide after exploring these principles to continue building a conventional business, especially with investors and employees other than yourself, I’m still convinced that a business plan is a valuable exercise. You should do it yourself, to make sure you understand all the elements of the plan, and facilitate communication of the specifics to your team and to investors.

In essence, building a complete and credible plan is the final test of whether your venture has “legs,” meaning that the opportunity matches your resources, skills, opportunity, and a level of risk you are prepared to handle. The entrepreneur lifestyle is all about doing something you enjoy, without undue stress, uncertainty, and risk. Are you having fun in your venture yet?

Marty Zwilling

*** First published on Entrepreneur.com on 11/06/2013 ***


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Thursday, November 14, 2013

7 Keys To Business Success Learned From The Street

streetsmartsAs a mentor and advisor to entrepreneurs, I find it’s easy to recognize “street smarts” when I see them, but it’s hard to explain the specifics to someone on the other end of the spectrum, even if they are willing to learn. Some people argue that street smarts are only a natural born skill, but I disagree. I believe they are disciplines that can be taught and learned.

In the urban world, being street smart means instinctively knowing how to keep yourself safe from scams and bad guys. It means you know your way around, how to handle yourself in tough situations, and how to “read” people’s intent. In reality, the startup world contains those same very risky streets, but in the business context.

Thus I was happy to see some help in a book by John A. Kuhn and Mark K. Mullins, “Street Smart Disciplines of Successful People” that put some meat on the bones of what it means to be street smart in business. I like their outline of seven key disciplines, all of which can be learned and practiced, that may actually be required for business success:

  1. Work smart. This means using discipline to get smart before you start working. Find out everything you can about the business domain you are targeting. In addition, maintain a change-oriented and future-focused mentality, with an actionable execution plan. When someone tells you they are working hard, it’s usually an excuse for not working smart.

  2. Present everything. If you are trying to gain commitment or persuade someone, practice the discipline of thinking beyond conversational chatter. The four steps of a successful presentation always include preparation, practice, delivery, and asking for the order. Make these part of every interaction with partners, customers, and team members.

  3. Deal with people. People do business with your people, not your startup. Finely tuned people skills make you more likeable, warm, friendly, open, and effective. Put yourself in their heads to see things from their perspective. Have patience, and listen actively before speaking. Street smart entrepreneurs practice this discipline until it is not work.

  4. Watch your money. It’s not unusual for creative entrepreneurs to find finances difficult to understand, intimidating, or just a numbing bore. If you feel that way, find a partner who loves that critical side of the business. In reality, the discipline to manage cash does not require a financial genius. It just requires a discipline of relentless focus.

  5. Get more business. This discipline is the art of making a constant of new business opportunities, new customers, and new revenue flowing into your startup. Develop an aggressive prospecting mentality, stay close to current and past customers, get referrals, and optimize Internet marketing. If you startup isn’t evolving and growing, you are failing

  6. Manage yourself. Entrepreneurs will always be wearing many hats in their business and personal life. Even the more important activities can sometimes be excuses to avoid the underlying challenge of working toward your life-changing goals. Learn and practice time management disciplines. Banish procrastination. Be decisive. Have fun.

  7. Everybody sells. It may not be in their job descriptions, but everyone in a startup should be selling. The very first moment that you have contact with an investor, or a customer has contact with your team, an impression and a perception is created. That perception is your reality, and you only get one chance to make it a good one.

Overall, street smarts also requires that you can put all these things together for problem solving, and to dodge and weave effectively through the risky business streets. It means balancing your idealistic vision of how things could be, against the realities of the business world. Confidence and a positive attitude are also required to be a street smart and successful entrepreneur.

But attitude and problem solving are not sufficient, without the basic disciplines outlined above. No one is born with all these disciplines. These represent the knowledge and experience of many successful business people. Study them carefully and practice them religiously. The alternative is a long and painful learning curve, which neither you nor your investors can afford.

Marty Zwilling


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Wednesday, November 13, 2013

How To Qualify As The Next Exceptional Entrepreneur

eric-schmidt-larry-page-sergey-brinI tell entrepreneurs that Google was an “exception” to all the investment and startup rules, but I’ve always wondered what it takes to be an exception. Since every business is built by unique individuals, I’m totally convinced that exceptional people are the key to an exceptional company.

To check out the Google founders, and because I still see so many business plans that are modeled after Google (more search engines, and more billion dollar growth models), I had to take a look at the definitive book about them, called “Inside Larry & Sergey’s Brain,” by Richard L. Brandt. It didn’t disappoint me.

This book was not sanctioned by Larry Page and Sergey Brin, so it’s not a love story. All the controversy is highlighted, but the message still seems to be that these guys were and are exceptional in their efforts to build a company. Here are some lessons from the book that all entrepreneurs should wish they could emulate:

  • Independently outstanding, but complementary founders. Larry is the primary thinker about the company’s future direction, and weighs in heavily on key hiring decisions. Sergey, a mathematical wizard, is the arbiter of Google’s technological approach. Both have a deep sense of moral values and ethics, and work well together.
  • Unique business tactics. Technology alone does not make a great company. Business tactics do. Google developed the most profitable form of advertising anyone had ever seen, ads selected real-time based on search terms. They focused on small advertisers looking for bargains. The model was a perfect fit for the Internet Age.
  • Survived phenomenal growth. In 2003, just four years old, sales hit $1.5 billion, profit was $100 million, and it had taken over some 80 percent of the world’s search queries. Google now employs about twenty thousand people. Most founders don’t survive this kind of growth and change, but Larry and Sergey are still a well-balanced machine, with a net worth of over $20 billion each.
  • Loved and hated at the same time. Larry and Sergey have been wickedly clever. They break the mold. They challenge old industries and make a lot of enemies. They’re ruthless businessmen. Yet through it all, they’re idealists, believers in the power of the Internet to make the world a better place.
  • Surround themselves with the best people. Early on, they were able to get money from the likes of Andy Bechtolsheim and John Doerr. They convinced Eric Schmidt to take the reins with them for growth as interim CEO and current Executive Chairman, and had Dr. Larry Brilliant for the philanthropic arm for several years. Amazing.
  • Continue to think big. According to the book, both founders continue to think big. Some of their ideas are as flighty as space travel; others are as grounded as the DNA that makes them who they are. No one proclaims to know where its leaders will take Google next, but everyone expects more great things.

Even the pros should probably pay attention here, to sharpen their game and to improve the accuracy of their assessments about people in general, as well as Google’s motivations and intentions. I think Larry and Sergey have shown a relentless focus on innovation that puts them miles ahead of competitors on all fronts.

I challenge each of you, as you reflect on your own vision and entrepreneurial plans, to take a lesson from Larry and Sergey. Do you have the intestinal fortitude to walk away rather than be “corrupted by financial interests,” or to ignore conventional wisdom and follow your own instincts? If so, then you too may be the exception that even the best and the brightest will line up to support. This world needs more exceptional people. Act like one and you too may be one.

Marty Zwilling


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Tuesday, November 12, 2013

7 Strategies For Beating The Failure Odds Online

beat-the-oddsIt seems like everyone has an Internet startup these days. The cost of entry is so low – you can create a web site for almost nothing - and you are on your way to riches with e-commerce, your latest invention, or personal services. But the low cost also means that your competition will also be there in force. Mashable claims there are 150,000 new web sites created per day.

In addition, every business has operating costs, like customer acquisition, fulfillment, inventory, and customer service. Without a sustainable strategy, these challenges lead to the terrifying statistic that nine out of ten online businesses will fail, and lead to the current ratio of Internet failures to millionaires being thousands to one.

So what are the key strategies that can improve the success odds for your online startup? In the latest book by business guru Joe Wozny, “The Digital Dollar: Sustainable Strategies for Online Success,” I found a good summary of some great strategies, with some practical advice on how to implement them:

  1. Understand what’s in a name on the Internet. In the online world, you need a solid connection between your domain name and your product, brand, or business. In addition, you must reserve consistent names in key online channels like Twitter, Facebook, and others. Failure can stall business strategies, and bring digital momentum to a halt.

  2. Content is king of the road. Having a web site is necessary, but not sufficient. The site must have more and better content (information presented) than your competitor. Digital content includes text, graphics, sound, and video, with presentation style, currency, and appeal. The best content gets attention and keeps momentum growing.

  3. Beware of no-cost and low-cost marketing. Marketing requires content, and nothing is “free.” Social media activities require professional effort and time, so beware the hidden costs. No-cost efforts usually have no value. Content that does not change loses its value quickly. Assess cost versus value with analytics and measurement tools.

  4. You have to be found and favored by search engines. Search engines like Google are still the primary method for finding information on the Internet. If your web site is not optimized for search engines (SEO), all your online content and marketing efforts are wasted. “Paid search” will mitigate this to some extent, but is not a sustainable strategy.

  5. Engage your audience with social media. Social media is more than the “Big 4” of Facebook, YouTube, LinkedIn, and Twitter. It’s sharing features built into your web site content like social bookmarking, emailing, or auto posting and interactive features like comments and voting. It is integrated features for smart phones and tablets. Do them all.

  6. There is still a place for paid advertising. Online advertising is the promotion of your site and content on other sites such as pay-per-click contextual ads, banner ads, rich media ads, and ads in newsletters. Key measurements should always include return on investment, and visibility to the targeted audience.

  7. The route to success is not a random walk. From a strategic perspective, all the above should start with an overall digital roadmap, where you define your goals, outline the steps required, and articulate your success measurements. Plan to update this roadmap at least once a month, based on results, new information, and competition.

For sustainability against competitors, every startup needs to practice strategic business decision making, rather than managing the crisis and the opportunity of the moment. That means continual focus and change based on the existing customer base and existing competitors, as well as new opportunities for growth.

“Pivoting” is another name for a strategic change decision, or for changing your strategy, your business model, target customers, or direction, and this is an integral part of evolving a company. According to Steve Blank, research has shown that a typical successful Internet startup experiences up to three pivots in their evolution. If four or more pivots occur (or none), then the chance of success goes down.

So while the cost in dollars of entry to an online business is low, that doesn’t prevent a failure from hurting badly. Don’t let the low entry cost lure you into a false sense of security, or convince you that you don’t need to make strategic plans to be sustainable. How many of these key strategies are in your plan, or already implemented?

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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Monday, November 11, 2013

10 Common Startup Flaws Leading To An Early Demise

failing-bar-chartBased on my experience as a mentor and an entrepreneur, if you fail on your first startup, you are about average. That’s not bad, but who wants to be average? Every young entrepreneur knows implicitly that startup success is a long hard road. Statistics show that the failure rate for new startups within the first 5 years is higher than 50 percent. How can you improve your odds?

Of course, a real entrepreneur always takes a failure as a milestone on the road to success. They count on learning from their mistakes, and use the experience to move to the next idea. But why not learn as well from the mistakes of others, without suffering their cost, time, and pain? In that context, I offer you my list of ten top startup failure causes, seen over and over again:

  1. No written plan. Don’t believe the old urban legend that a business plan isn’t worth the effort. The discipline of writing down a plan is the best way to make sure you actually understand how to transform your idea into a business. Take heed of the words of an old country song, “if you don’t where you’re going, you might end up somewhere else.”

  2. Business model doesn’t make money. Even a non-profit has to generate revenue (or donations) to offset operating costs. If your product is free, or you lose money on every one, it’s hard to make it up in volume. You may have the solution to the world hunger problem, but if your customers have no money, your business won’t last long.

  3. Idea has limited business opportunity. Not every good idea is a good business. Just because you passionately believe that your technology is great, and everyone needs it, doesn’t mean that everyone will buy it. There is no substitute for market research, written by domain experts, to supplement your informal poll of friends and family.

  4. Execution skills are weak. When young entrepreneurs come to me with that “million dollar idea,” I have to tell them that an idea alone is really worth nothing. It’s all about the execution. If you are not comfortable making hard decisions, taking risk, and taking full responsibility, you won’t do well in this role. Remember, the buck always stops with you.

  5. The space is too crowded already. Having no competitors is a red flag (may mean no market), but finding ten or more with a simple Google search means this may be a crowded space. Remember that sleeping giants do wake up if you show traction, so don’t assume that Microsoft or Proctor & Gamble are too big and slow for you to worry about.

  6. No intellectual property. If you expect to seek investors, or you expect to have a sustainable competitive advantage against sleeping giants, you need to register all your patents, trademarks, copyrights, and trade secrets early. Intellectual property is also often the largest element of early-stage company valuations for professional investors.

  7. Inexperienced team. In reality, investors fund people, not ideas. They look for people with real experience in the business domain of the startup, and people with real experience running a startup. If this is your first time around, find a partner who has “been there and done that” to balance your passion and bring experience to the team.

  8. Resource requirements not understood. A major resource is cash funding, but other resources, such as industry contacts and access to marketing channels may be more important for certain products. Having too much cash, not managed wisely, can be just as devastating as too little cash. Don’t quit your day job until new revenue is flowing.

  9. Too little focus on marketing. Viral marketing and word-of-mouth are not enough these days to make your product and brand visible in the relentless onslaught of new media out there today. Even viral marketing costs real money and time. Without effective and innovative marketing across the range of media, you won’t have a business.

  10. Give up too easily or early. In my experience, the most common cause of startup failure is the entrepreneur just gets tired, gives up, and shuts down the company. Many successful entrepreneurs, like Steve Jobs and Thomas Edison, kept slugging away on their vision, despite setbacks, until they found the success they knew was possible.

Note that the lack of a university degree or MBA is not even in the list of common failure causes. In fact, we can all point to examples of successful entrepreneurs who dropped out of college, like Mark Zuckerberg and Bill Gates, but still went on to be way above average. The most important thing you can learn in school is how to learn.

The best entrepreneurs value “street smarts,” in addition to “book smarts,” to temper their passion with reality principles, like the ones listed here, to stay ahead of the crowd. It’s good to say you never make the same mistake twice, but success is even sweeter the first time around with no mistakes. Go for it.

Marty Zwilling


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