Wednesday, December 31, 2014

Business 2015 - Optimism, But Upgrade Your Strategy

2015-Business-Optimism Even though it has been a long haul since the recession, it’s nice to see more optimism as we close out this year and head into a new one. A November 2014 report by Kiplinger asserts that economic momentum is back on track. Growth is projected to continue at a 3 percent rate, consumer confidence is gaining strongly, hiring is on the rise, and job openings are at a near record level.

According to earlier studies from Forbes Insights, many entrepreneurs and small businesses not only feel the lessons learned during the past few years have helped them survive, but the recession also exposed flaws in their business strategies that they were able to fix. Here are some recommended strategic planning initiatives, culled from multiple studies, that you can apply to your business in the New Year:

  • Better Cash-Flow Controls: Obviously, falling income over the past years put additional pressure on small business cash flow. Some companies turned to cutbacks over boosting financial reserves; others focused on reducing overhead and expenses. But you need a balanced strategy, along with new lines of credit and financing.

  • More Focus on Strategic Planning: Small business owners now recognize the importance of planning amid the new economic environment and want to spend more time doing it. Less than half indicated they had a strategy in place during the recession, or to guide growth during the coming recovery period. This should be core for you.

  • Fight for More Government and Policy Support: Small businesses now believe they have played a key role in the U.S. economic recovery, but in spite of, rather than assisted by, support from the federal government. You can join the fight for action, particularly for even higher Small Business Administration (SBA) loan limits.

  • Continue to Increase Operating Efficiencies: A majority of small business leaders intend to be more aggressive going forward by implementing a range of actions to advance their businesses. Many cited a greater focus on cost cutting and efficiency as the number two step to achieving growth, with increasing sales still number one. See where you can maximize this type of profit.

  • Add New Revenue Streams and More Aggressive Marketing: At the same time, most small businesses plan to spend more on digital marketing in the year ahead, and pursuing new revenue streams is seen as a top priority for transforming bottom line profits. This approach will help you diversify and broaden your business’s product lines and services.

  • Grab Market Share from Competitors: A large majority of respondents to these studies acknowledged that the old way of doing business no longer works and that they need to find new ways to take advantage of market opportunities. Many are planning to be more aggressive in grabbing market share from competitors, and you should, too.

If small businesses tackle these initiatives, we will be supporting economists’ forecast and moving the U.S. economy toward a self-sustaining and continuing economic expansion. A healthy manufacturing sector, likely to gain even more strength in 2015, is creating an impetus to invest. Recent drops in gas prices are now extending to diesel and even home heating oil.

The National Federation of Independent Business’s Small Business Optimism Index is now up to 96.1, and is working its way back to pre-recession levels. This was led by a modest increase in the net percent of owners who plan to increase capital spending and more who expect higher sales in the next few months. But overall, small business owners are still looking for more clear direction to drive their optimism.

My take on all this is that entrepreneurs are seeing some light at the end of the tunnel, and the light is no longer a freight train heading straight at them. We always learn more when times are tough, and we should come away with more strength and determination, as well as real results. It’s time to soak up the optimism, do some real financial planning, and push the limits on all business fronts.

Marty Zwilling

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Saturday, December 27, 2014

Super Angels Are A Boon To Startups Needing Funding

brian_cohen Venture capitalists (VCs) have long been seen as the top of the pyramid for startup funding sources, but in fact angel investors now fund over 60 times as many companies, according the Center for Venture Research. A major chunk of this activity is provided by the new class of Super Angels, who may look more like micro-VCs, except that they are investing their own money.

Examples of some leaders in this space include Ron Conway in Silicon Valley and Brian Cohen, chairman of the New York Angels, who each may have over 500 startups in their portfolio. What characterizes them is the number of companies they invest in, as well as the size of their investments (less than $250,000), and the seed or startup stage where they specialize.

Based on the best evidence I can find, the genesis of this trend and the advantages come from several evolutionary changes in the startup investment industry, and some innovations driven by the recent recession:

  1. Venture capital funds are still recovering from the recession. Institutional venture capital dispensed thus far in 2014 has been up significantly over the last few years, but is still less than half of the peak hit way back in the year 2000 (over $100 billion). Individual angel investors have been filling the gap, and now match VCs in total amount invested.

  2. The cost of entry for tech startups continues to go down. Twenty years ago, it cost several million dollars to launch an e-commerce startup, which can be done today for a few thousand dollars. Mobile and web software apps may cost even less. The large investment amounts preferred by VCs are no longer needed to launch winners.

  3. Some VC firms are bogged down by their own weight. Many have disappeared, and others have forgotten how to be agile and innovative. They have too many highly paid partners, fat fees, an aging corporate infrastructure and difficulty raising money from institutions. Super Angels are individuals or small teams using their own money.

  4. VCs are committed to servicing existing portfolios. As lifecycle investment partners, they have become weighted down with portfolios still recovering from the economic downturn. Like big corporations with a heavy investment in existing product lines, it’s hard to stop linear investing to look for innovative new opportunities.

  5. The investment model is changing from hard selection to “spray and pray.” The conventional VC approach of giving a big boost to a few good startups that were born to be great, doesn’t seem to work anymore. Now the model is to seed many good teams with a smaller amount, and find out which ones can execute.

  6. Super Angels have greater scope to match talent with a startup. Because of their high visibility and huge portfolios, this new class of investors can match the right talent to the right startup quickly and efficiently with introductions and mergers. This helps the startups with the most opportunity move forward quickly to greater success.

Of course, every new direction has some challenges, so the Super Angel model isn’t perfect. Here are a couple of concerns and possible negatives to avoid:

  • More startups left in the funding gap. Angels of any size are usually not as capable or interested in multiple rounds of investment, leaving good startups that are not superstars stranded without funding after an initial round or two. VCs tend to carry their partners much longer, in hopes of a big public offering (IPO) that could produce a windfall.

  • Super Angels sometimes drive up valuations. Perhaps because of their focus on building a large portfolio, or their competitiveness, these angels sometimes accept valuations that cause later friction while moving to VCs, or even other angel groups. This can cause early investor dilution, lower ultimate returns or leave the startup stranded.

Yet, in my view, every early-stage entrepreneur should be exploring this new funding alternative before approaching VCs. It’s the right way to get money without giving up too much equity or control of your business. Yet, it is important to remember that the most optimistic Super Angel is looking for a proven business model, rather than research and development, or just an idea.

Marty Zwilling

*** First published on Entrepreneur.com on 12/19/2014 ***

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Sunday, December 21, 2014

The Discipline Of Execution Defines An Entrepreneur

TED-Conference-Dream When 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, and investors invest in the people who can execute, or even better, have a history of successful execution. Execution is making things happen, and for startups it usually means making change happen, which is even more difficult.

For most people, execution is one of those things that seems obvious after the fact when done correctly, but is hard to specify for those trying to learn to do it better. I found a book on this subject, “The 4 Disciplines of Execution,” by Chris McChesney, Sean Covey, and Jim Huling, which seems to talk well to startups as well as the corporate world it was written for.

These authors argue effectively that the hard part of executing most strategies is changing human behavior – first the people on your team, then partners, vendors, and most importantly, customers. No startup founder or leader can just order these changes to happen, because it isn’t that easy to get other people to change their ways. Changing yourself is tough enough.

Here are four key disciplines that I believe the best entrepreneurs follow to expedite the change and forward progress implicit in the successful execution of a million dollar idea:

  1. Focus always on one or two top priority goals. We all live with the stark reality that the more we try to do, the less well we do on any of the elements. Thus focus is a natural principle. Narrow you and your team’s focus to one or two wildly important goals, and don’t let these get lost in the whirlwind of daily urgent tasks and communications.

  2. Identify and act on leading measures first. Some actions have more impact than others when reaching for a goal. Hold the lagging measures for later (results available after the fact), and focus on lead measures first (predictive of achieving a goal). For example, more customer leads are predictive of more sales revenue later.

  3. Define a compelling scoreboard. People on your team play differently when someone is keeping score, and even better when they are keeping score, and even better when they have defined how their score is measured. This is the discipline of engagement. If the scoreboard isn’t clear, play will be abandoned in the whirlwind of other activities.

  4. Create a frequent forum for accountability. Unless we feel accountability, and see accountability on a regular cadence, it also disintegrates in the daily whirlwind. It’s even better if team members create their own commitments, which become promises to the team, rather than simply job performance. People want to make a contribution and win.

These four disciplines must be implemented as a process, not as an event. That means your team needs to see them as a normal and continuous focus, not a one-time push which fades in the rush of other daily priorities. The team needs to see the process practiced by the startup founder, as well as preached regularly.

Startup founders also need to realize that building and managing a company is quite different from learning to search for and solidify an idea that can grow into a company. Every entrepreneur has to navigate that personal change from thinking to doing to managing.

It’s not only the change from thinking to managing, but also the change and learning from constant iterations. Major changes, called pivots, are terrifying to a team that has put months of constant focus into executing what they thought was a great idea. If you don’t have an execution process, you have chaos.

Overall, every entrepreneur should be concerned if they don’t regularly feel stretched beyond their comfort zone, meaning mastering the art of execution if you are mainly creative, or developing creativity if you are mainly process driven. Don’t forget that the fun and challenge is in the learning, so enjoy the ride. The entrepreneur lifestyle is not meant to be comfortable.

Marty Zwilling

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Saturday, December 20, 2014

10 Approaches to Handle the Burden of Leadership

leadership-burden Most new entrepreneurs don’t anticipate the burdens of being the leader, including the sense of loneliness and isolation at the top. People outside the team can’t relate to the pressures of “the buck stops here,” and everyone on the team assumes that they are the primary ones under pressure to deliver. Even in a single entrepreneur startup, the leader carries a heavy weight.

This unexpected burden often results in a dysfunctional startup, as the entrepreneur reverts to micro-management, burnout or even grandstanding to get some attention or sense of direction and feedback. Those who have big egos often fall into the use of intimidation, edicts and even deception. Of course, that only leads to antagonism and further isolation.

As with other challenges, it takes effort and a special focus to lessen the burden and avoid the loneliness of being a founder or top executive. Here are some key approaches endorsed by successful entrepreneurs and leaders to stay healthy, and be a respected leader:

  1. Seek affirmation and guidance from your peers. Every business domain has organizations of peers, such as Vistage or Young Entrepreneurs’ Organization (YEO), where entrepreneur leaders can find and give support, and resolve problems with no jeopardy among like-minded leaders who face similar challenges.

  2. Actively solicit guidance from trusted members of your team. Even if they don’t see you as a peer, it’s your view that counts here. Don’t isolate yourself. You can always learn from the experience of others on your team. If your startup is a one-man show, there are outside advisors who can offer you an unbiased view as a team member.

  3. Keep your family and friends in sync with you as peers. Their feedback and perspective is vital to your health and success, if you maintain a balance between business and personal. Their guidance will help to keep you centered and effective. The best leaders learn to sometimes say no to work, and learn how to mix work and play.

  4. Separate your work and play environments. Everyone needs a regular change of scenery and separate time to switch modes from work to external challenges. These outside activities may be sports, non-profits or family activities where you can change roles, rely on someone else for leadership, or simply relax and recharge.

  5. Interact with customers in a non-pressure situation. Social-media vehicles, including Twitter and LinkedIn, allow interactions with hundreds of people, or one on one, without the pressure of your leadership role. Use the opportunity to anonymously test new ideas and strategies, with direct and unfiltered feedback.

  6. Proactively schedule business networking opportunities. Take the initiative on a regular basis to ask for time with peers or even competitors that you respect, without waiting for them to come to you. This not only counters isolation, but helps balance your business focus, and keep you up to speed on new developments in your industry.

  7. Actively improve your charismatic image. Charisma is that magnetic energy implying confidence and strength, arousing loyalty and admiration from others. Charismatic leaders don’t succumb to loneliness, and develop a wide range of positive habits. Key elements of charisma are listening actively to others, and reading body language.

  8. Inspire and empower your team members. The more you empower others in your organization, and the better you communicate your vision, the more they will be with you at the top. You won’t be lonely when you feel the team is with you every step of the way. This will strengthen the business for all of you, as well as relieve your burden.

  9. Share your fears and challenges with selected insiders. Too many entrepreneurs like to pretend that they have it all together, all the time. It’s healthy and productive to be more transparent with trusted team members and advisors. This leads to sharing progress on struggles, and discussing ways of mitigating business problems.

  10. Join your board of advisors, rather than contend with them. Accept that a good board will tell you what you need to hear, rather than what you want to hear. They really are on your side, so there is no need to be defensive or isolate yourself. Join them in actively looking for ways to lighten your burden at every opportunity.

More focus on improving your personal motivation is also a clear antidote to the burden of leadership. Of course the best antidote is incremental success and seeing real results, giving you the positive feedback that we all need. Make your leadership role the source of pride and accomplishment that attracted you to the entrepreneur lifestyle in the first place.

Marty Zwilling

*** First published on Entrepreneur.com on 12/12/2014 ***

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Friday, December 19, 2014

7 Ways to Feed The Growth Beast In Every Business

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

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

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

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

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

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

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

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

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

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

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

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

Marty Zwilling

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Monday, December 15, 2014

10 Incentives For Entrepreneurs To Bootstrap Their Startup

startup-funding I’ve always wondered who started the urban myth that the best way to start a company is to come up with a great idea, and then find some professional investors to give you a pot of money to build a company. In my experience, that’s actually the worst way to start, for reasons I will outline here, and also the least common way, according to an authoritative survey of new startups.

Based on the Startup Environment Index from the Kauffman Foundation and LegalZoom a while back, personal money, or bootstrapping, continues to be the primary startup funding source. Eighty percent of new entrepreneurs use this approach, with only six percent using investor funding. The remaining entrepreneurs borrow from family and friends, or acquire a loan.

So before you become obsessed with landing investors to fund your idea and minimize your risk, consider the following:

  1. Finding investors takes work, time, and money you can ill afford. Entrepreneurs who plan to complete a business plan the first month, find an investor the second, and roll out a product the third month are just kidding themselves. Count on several months of effort and costly assistance to court investors, with less than a 10% success rate.

  2. Anyone who gives you money is likely to be a tough boss. If you chose the entrepreneur lifestyle to be your own boss, don’t accept money from anyone. Every person who gives you money will want to have “input,” if not formal approval on every move. Be prepared to live with communication, negotiation, and milestones every day.

  3. Don’t give up a chunk of your company and control before you start. Even a small investor in the early days will take a large equity percentage, due to that pesky valuation challenge. At least wait until later, when you ready to scale, and have some “leverage” based on a proven business model, some real customers, and real revenue.

  4. You will squeeze harder on your own dollars than investor dollars. It’s just human nature that we remember the pain of earning our own dollars, versus those “donated” by someone else. Focusing on the burn rate and prioritizing every possible expense will keep overhead down, help you stay lean, and achieve a higher profit earlier.

  5. Sometimes survival requires staying under the radar. People who give you money like to talk about their great investment, and competitors see you coming. Sometimes creative efforts need more time before launch, or your efforts to run the company need tuning. Investors like to replace Founders who don’t seem to be moving fast enough.

  6. Managing investors is a distraction from your core business. Fundraising and investor governance are never-ending tasks, which will take real focus away from building the right product and finding real customers. Having more money to spend, but spending it on the wrong things, certainly doesn’t pave the road to success.

  7. Entrepreneurs need to start small and pivot quickly. Start with a minimum viable product (MVP), as well as a minimum viable team. Investors like a well-rounded team, working in a highly parallel fashion. That takes more money and time to set up, and more people to re-train and re-educate when forced to redirect your strategy.

  8. The best partners are ones who share costs and risks. With no investors, you will work harder to find vendors who will absorb costs and associated risks for a potentially bigger return later. Since they now have real skin in the game, they will also work harder to show quality and value, which is a win-win-win for you, them, and your customers.

  9. You will be happier and under less pressure. You should choose to be an entrepreneur to be able to do what you love. Yet we all apply pressure to ourselves to do these things to our own satisfaction. Investor money brings so many additional pressures, that personal happiness and satisfaction can be completely jeopardized.

  10. Show you are committed to your startup, not just involved. When you put your own financing on the line, your partners, your team, and eventually your customers will know that you are committed to solving their problem. That increases their motivation and conviction, which are the keys to their success as well as yours.

Of course, some of you will say, I don’t have a dollar and my big idea can’t wait. Unfortunately, outside investors are not an answer to this problem. To investors, having no money indicates that you may not have the discipline to manage their money, and manage a tough business process as well.

In these cases, I would suggest you work in another similar startup for a while, to learn the business, save your pennies, and test your startup concept on the side. A startup idea executed hastily and poorly will be killed more completely than any timing delay. Are you sure the money you seek is really your key to changing the world?

Marty Zwilling

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Saturday, December 13, 2014

10 Actions That Highlight You As A Business Leader

Phil_Libin_at_LeWeb People who have been followers too long as an employee don’t realize how hard it is to be a leader. Every new entrepreneur has to initiate the right actions to be perceived as a leader in their chosen business domain by their team and by their customers, or the road to success and satisfaction will be lost along the way.

Driving these actions are some basic principles that entrepreneurial leaders, such as Zappos CEO Tony Hsieh and Evernote CEO Phil Libin, seem to have learned early. These have helped them build trust and confidence among team members, and effectively sell their message to partners, investors, vendors and customers.

If you want to be like them, it’s time to take a hard look in the mirror to see how many of these actions already show in your persona, and which need a bit more of your focus and learning:

  1. Ability to communicate clearly where you are going and why. This requires that you first know who you are and what you stand for and have a vision for change. Then you need to be willing to communicate that vision to everyone around you. People won’t follow you if they have no idea where you are headed and why it’s good for them as well.

  2. Feels a passion and commitment to the cause behind your business. This conviction is what motivates everyone around you to their best efforts, and keeps them going in hard times as well as good. Building a business is harder than it looks. Seth Godin said that “the average overnight success takes six years,” and he is an optimist.

  3. Can demonstrate domain expertise and experience. In any business domain, there is no substitute for skills acquired by personal experience to supplement any academic training and the Internet. You have to lead by example, setting a personal standard for competence for all to follow if you intend to lead your competitors and customers.

  4. Constantly strengthening your network of relationships. No entrepreneur can build a business alone. Your network of connections needs to grow with you and your business. That only happens if you take an active role in your community and relevant business associations with like-minded people. Make an honest effort to help others.

  5. Willingness to make timely decisions and take action. Remember that a good decision made early will more likely save your business than a better decision made later. In general, any decision is better than no decision. Smart entrepreneurs take reasonable time to consider alternatives, and then move forward, never looking back.

  6. Practices self-discipline and calm predictability. People don’t like to follow a leader who is unpredictable, inconsistent and prone to daily changes in direction. Authentic leaders are willing to open up and establish a connection with everyone around them. They build trusting relationships that result in loyalty and commitment from others.

  7. Encourages innovation and out-of-the-box thinking. In business, this means fostering a mindset of creativity, risk-taking and continuous improvement. Don’t wait for competitors to force the need for better products, lower prices and better customer service. Reward failures as well as successes if the result is a lesson that advances the company.

  8. Allocates adequate resources to overcome constraints. Hoping for good luck and applying pressure is not leadership. Being able and willing to size and allocate the resources to win the small battles will ultimately win the war. This means hiring the right people, providing training and tools, and improving systems to overcome challenges.

  9. Incents business growth and people's well-being. As a role model, you must continuously upgrade your own skills, be alert for new developments and hone your listening ability. It means rewarding team member growth, no punishment for failures and opportunities for success. This applies to suppliers and business partners as well.

  10. Always accepts responsibility for business actions and results. Entrepreneur leaders don’t need excuses, like a down economy, bad timing or demonic competitors. Every company and every one of us makes mistakes, which are a normal consequence of tackling new business challenges and unknowns.

The good news is that no one is a born leader -- all of these habits and mindsets can be acquired by learning and a determination to improve. Leadership doesn’t come with success, but success does come with leadership. Don’t wait for someone else to show you the way -- you don’t want another entrepreneur out in front of you.

Marty Zwilling

*** First published on Entrepreneur.com on 12/05/2014 ***

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Wednesday, December 10, 2014

10 Innovative New Global Ways To Grow Your Business

innovative-marketing The world of marketing is changing faster than technology these days. Winning entrepreneurs have long since supplemented conventional print and video “push” marketing with digital online interactive “pull” marketing, and more recently added social-local-mobile (SoLoMo) to the mix. Mobile and global are driving all of these in innovative new ways to grow your business.

For all those entrepreneurs and startups who can’t yet afford a new age marketing agency, it’s impossible to keep up with “best of breed” marketing activities and strategies. I found some help in catching up via a new book “Sell Local, Think Global,” by marketing message expert Olga Mizrahi. Along with her insights, she offers 50 innovative new tips to grow your business.

I’ve paraphrased here a subset of her guidance which I believe characterizes the key changes and the implications for entrepreneurs just starting, as well as more mature businesses:

  1. Pinpoint your Unique Value Proposition (UVP). These days it is often more about being unique than being valuable. A UVP sells a product or service because it differentiates it from other products or services that are available. Skip the better, faster, or stronger; you need to be the best, fastest, or strongest to truly stand out.

  2. Reach your target audience intimately through interaction. Target marketing has moved to a whole new level both geographically and demographically. With social media, you can interact more precisely and create custom products and marketing to be almost all things to all people. The broad-brush push-marketing is no longer competitive.

  3. Build word-of-mouth into your product or service. The very best marketing is word-of-mouth from your very happy customers. You need to give them something to talk about and incentives to be brand ambassadors. These include an aura of exclusivity and cultivating an “under-the-radar” vibe that pushes people into one-up-style revelations.

  4. Proactively seek out win-win alliances. Voluntary open-ended alliances are more important than ever, and easier than ever. Consider collaborating via shared marketing efforts, trade-show both space, co-branding promotional products, referral agreements, and cross-linking web sites. With informality, these must be win-win relationships.

  5. Modernize the user website experience. The standards for user-friendly continue to move up. Make sure your users don’t have to think, and participating in your call to action is intuitive and organic. Modern web layouts flow smoothly and quickly for an easier to read, satisfying experience. How many website visits have you aborted in frustration?

  6. Incorporate live chat into every online service. No one wants to call an 800 help line anymore. Online shoppers like online chat, because it makes the experience more like in-store shopping. The same applies to other aspects of consumer experience: customer questions answered, problems fixed, and aggravations soothed, to close more sales.

  7. Understand the power of online reviews to your advantage. Stop fearing bad reviews, and see any review as an opportunity and an asset. Respond to reviews to give a personable picture of you, your company, and your products. People want to go with tried-and-true choices, and many positive reviews will offset that occasional negative one.

  8. Optimize how you website looks on mobile devices. Mobile will soon be the number one way people do web browsing, as it already is for e-mail. Yet nearly half of all small businesses still lack any website, much less a mobile-friendly one. Modern websites adapt to the mobile environment, or you can provide a separate mobile site at low cost.

  9. See the world through the eyes of Generation Z. The newest generation has never lived life unplugged, and their blend of innocence, simplicity, and pure excitement appeals to every customer. Optimize for them, and you will be a winner today, as well as in the future. It starts with a willingness to engage, listen, and learn without fear.

  10. Embrace giving back to the world community. Bring new awareness to your business by promoting a higher goal, which will garner additional respect and new business from your supporters. The first steps are effective communication to your clients, employee participation, and partnering with other organizations that have similar initiatives.

If you are not happy with how fast your business is growing, pick one of these areas to focus on first, then a second and third. Don’t try to do everything at once, and don’t expect that you can do it once and forget about it. Your business is a living entity, just like you are. Treat it with ongoing respect and attention, or the growth you expect and deserve will fade as the world changes.

Marty Zwilling

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Monday, December 8, 2014

7 Elements Of Inspiration From The Steve Jobs Model

quote-from-steve-jobs Steve Jobs was one of those entrepreneurs who seemed universally either loved or hated, but not many will argue with his ability to innovate in the technology product arena over the years. He was instrumental in creating Apple, which has pioneered a dazzling array of new products, and even surpassed Microsoft, to become the world’s most valuable technology company.

Carmine Gallo, in one of his books a while back on secrets, “The Innovation Secrets of Steve Jobs,” outlines Jobs “insanely different principles for breakthrough success.” I’m not convinced that Jobs’ world was that simple, but Carmine has boiled it down to seven principles, which I suggest every entrepreneur can learn from even today, as follows:

  1. Do what you love. Think differently about your career. Steve Jobs followed his heart his entire life and that, he said, made all the difference. Innovation cannot occur in the absence of passion and, without it, you have little hope of creating breakthrough ideas.

  2. Put a dent in the Universe. Think differently about your vision. Jobs attracted like-minded people who shared his vision and who helped turn his ideas into world-changing innovations. Passion fueled Apple’s rocket and Jobs’ vision created the destination.

  3. Kick start your brain. Think differently about how you think. Innovation does not exist without creativity, and for Steve Jobs, creativity was the act of connecting things. Jobs believed that a broad set of experiences broadened the understanding of the human experience.

  4. Sell dreams, not products. Think differently about your customers. To Jobs, people who bought Apple products were never “consumers.” They were people with dreams, hopes, and ambitions. Jobs built products to help them fulfill their dreams.

  5. Say no to 1,000 things. Think differently about design. Simplicity is the ultimate sophistication, according to Jobs. From the designs of the iPod to the iPhone, from the packaging of the Apple’s products to the functionality of the Apple Web site, innovation means eliminating the unnecessary so that the necessary may speak.

  6. Create insanely great experiences. Think differently about your brand experience. Jobs made Apple stores the gold standard in customer service. The Apple store has become the world’s best retailer by introducing simple innovations any business can adopt to make deep, lasting emotional connections with their customers.

  7. Master the message. Think differently about your story. Jobs was a great corporate storyteller, turning product launches into an art form. You can have the most innovative idea in the world, but if you cannot get people excited about it, it doesn’t matter.

Carmine suggests and I agree that these principles for breakthrough innovation will only work if you see yourself as the brand. Whether you are an entrepreneur working out of your bedroom, or a small business owner looking for ideas to improve your business, you represent the most important brand of all – yourself.

How you talk, walk, and act reflects upon the brand. Most importantly, how you think about yourself and your business will have the greatest impact on the creation of new ideas that will grow your business and improve the lives of your customers.

Thus you need to look inward first and assess your basic potential. Then imagine what you could achieve in business with the real insight and inspiration. Imagine what you could accomplish if you had Steve Jobs guiding your decisions. What would Steve Jobs do? Follow the principles above and you can do it too.

Marty Zwilling

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Saturday, December 6, 2014

7 Entrepreneur Traits That Let You Soar With Angels

Elon-Must-with-investor As a startup mentor, I’m always amazed that some entrepreneurs seem to be an immediate hit with investors, while others struggle to get any attention at all. Finally I realized that Venture Capital and Angel investors are actually humans, despite some views to the contrary. As with most business and personal interactions, first impressions tend to become lasting ones.

Investors know that building any business is a challenging and risky proposition, so they start with entrepreneurs who give a first impression of passion, commitment, and determination to succeed. There is no room in this realm for negativism, excuses, or lack of confidence. People like Elon Musk, who have the energy to work 100-hour weeks for years, will always attract investors.

But the right personal characteristics are just the beginning. Successful businesses are measured by their results, so relevant skills, attention to details, and problem-solving abilities are critical. Early in the relationship, every investor instinctively looks for some key indicators of the ability to get results, like the following:

  1. Communicates well in every business medium. Some entrepreneurs love to talk and produce videos, but hate to write anything down. Others send investors email and business plans in all uppercase or no punctuation. Effective communication requires real listening, as well as talking. Message delivery must be customized for each investor.

  2. Surrounded by the right people and track record. It takes more than one person to build a business, so the lone entrepreneur, without support from any visible team, advisors, partners, or potential customers, will not attract investors. Of course, previous successes provide more direct evidence of a network of the right people.

  3. Exudes integrity, humility, and stability. Even business plan has strengths and weaknesses, and the best entrepreneurs are able to recognize the difference. They seek to establish win-win relationships with all partners, including investors, and treat them all as trusted advisors, rather than win-loss opportunities.

  4. Registered patents and other intellectual property. From an investor perspective, understanding and acting early to establish a sustainable competitive advantage, and barrier to entry, is the best assurance of a financial return. Being the first mover or lowest cost is not a good long-term strategy.

  5. Already set and achieved initial milestones. Contrary to popular belief, most investors are not looking for entrepreneurs who are desperate for funding. They prefer to see a rational staged plan, already in progress, with some checkpoints achieved, as well as future ones planned. A proven business model, ready to scale, is particularly attractive.

  6. Evidence of adaptability and flexibility. A strategy of learning and willingness to pivot, based on market feedback, is a great survival skill and attitude, cherished by investors. Rather than hide seemingly non-productive gaps in your work to-date, investors look for logical actions, and iterative small steps that could be quick to market or quick to fail.

  7. Expert in your chosen domain. Many key insights to success in any business can’t be learned from books or the Internet. There is no substitute for experience and trained skills in the business area you are attacking. In this context, investors are attracted to thought-leaders visible on social media, and people with strong technical credentials.

By definition, entrepreneurs need to love the art of the start, and that love needs to come across as part of the first impression you deliver to any investor. Since your product or technology may still be in the early stages of development, the investor in actually investing in you, and your previous achievements, as much as your current startup.

My advice is to start your networking early with potential investors, to establish a relationship before they see you as an entrepreneur asking for money. The strengths of those early relationships can override all of these results indicators, and let you fly with the Angels without a second look when the time is right.

Marty Zwilling

*** First published on Entrepreneur.com on 11/28/2014 ***

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Sunday, November 30, 2014

The Right Startup Advisors Are As Valuable As Money

President Barack Obama meets with Warren Buffet in the Oval Office, July 14, 2010. (Official White House Photo by Pete Souza)

This official White House photograph is being made available only for publication by news organizations and/or for personal use printing by the subject(s) of the photograph. The photograph may not be manipulated in any way and may not be used in commercial or political materials, advertisements, emails, products, promotions that in any way suggests approval or endorsement of the President, the First Family, or the White House. If you are a new entrepreneur, or entering a new business area, it’s always worth your time to assemble an Advisory Board of two or three executives who have travelled that road before. You need them before you need funding, and if you select the wrong people, or use them incorrectly, no amount of money will likely save your startup. Even top executives rely on their advisors.

For perspective, you need to remember that boards of advisors, unlike directors, have no formal power or fiduciary duties, but rather serve at the pleasure of you the business owner. But they are not likely to stroke your ego, or be cheerleaders. They need to tell you the truth about you and your business, good or bad.

Using them effectively requires real effort on your part. If you give and ask for nothing, you will get nothing. Used correctly, they will be your best advocates to investors, and can save you from making major mistakes. Here are some tips on finding and using your advisory board effectively:

  • Select people who complement your experience. If your experience is primarily technical, get someone who has built a business. If your business is too small for a CFO, get an advisor with heavy financial experience. If the business area is new to you, find someone who has lived it. Balance is best.
  • Be specific on help needed. If you've chosen your advisory board members carefully, you're asking busy, successful people to carve even more time out of their schedule to help you. Let each one know how you see his/her expertise – it may be insight on trends, organizational advice, or funding connections. Set a fixed term, like one year.
  • Formalize the compensation. Most advisory board members sign up because the want to help you, not because of the compensation. Yet you should offer a reasonable monthly fee and/or some stock options to show you are serious about the position. If you want out-of-town members on your board, you reimburse the travel expenses.
  • You need to drive to process. It’s smart to schedule a monthly Advisory Board meeting, with a formal agenda, as well as informal communication to keep everyone on the same page. Advisors can’t help you if they only hear from you once every six months. They expect you to initiate specific requests, rather than having to ask for updates.
  • Respect their time commitment. For a business executive, nothing is more annoying than a poorly run meeting where the presenter is unprepared, rambles, and wastes time. Make sure every meeting is facilitated well so that concrete action steps, deadlines and assignments result. Have someone take notes so that decisions are recorded.
  • Recruit the best for your real Board. Your Advisory Board is a pre-cursor to your Board of Directors, a bit further down the line. This is your chance to test commitment, chemistry, and contribution for that more formal position. It’s a great networking opportunity to expand your connections to include all their connections as well.

On the other hand, if you find your Advisory Board is a burden on you, or you find yourself hiding things from them, then you have the wrong people, or you are letting your ego get in the way. Members can provide a mirror so that you can see your company as experts see it, as long as you look in that mirror with eyes wide open.

If you are looking for someone to fill an operational gap, or to do product design, it’s usually more productive to look for a partner, employee, or consultant. These can help you when you don’t know what you don’t know, or to create what you don’t have.

If you use your advisory board to feed your ego, or correct your mistakes, you will likely be disappointed. Worse yet, your image as an entrepreneur will be damaged. That will inevitably spread through networking across the business community. You don’t need that kind of help.

Marty Zwilling

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Monday, November 24, 2014

Surround Yourself With People Smarter Than You

smartpeople Helpers do what you say, while good help does what you need, without you saying anything. People who can help you the most are actually smarter than you, at least in their domain. Top entrepreneurs spend more time putting the right team in place to accomplish their objectives than they spend on any other components of their job.

Some entrepreneurs are so in love with themselves (narcissistic) that they insist on answering every question, and making every decision. That’s not only impossible, but also counterproductive. Effective entrepreneurs team with or employ people who can provide the answers directly, pertinent to their particular area of expertise.

True leaders also know how to move out of the way to let others do what they do best. If you’re working too many hours and following up on every detail you may want to look closer at your team to ensure you’ve surrounded yourself with the right people.

In short, if you can find people with more passion, more knowledge, and more desire to succeed than you have, it will push you to be better and take the organization to new levels. Here are some key characteristics to look for:

  1. Gets things done. Smart people know what’s required, or can figure it out, and are confident enough to make decisions without you. Getting things done is crucial to running a business. Often people with advanced degrees have academic smarts, but are not closers. You can’t afford to make every decision, or follow-up on every action item.

  2. Recommend their own ideas. How often do the people around you recommend sound ideas that you never knew were possibilities? If you’re teaming with people who are smarter than you, you should be frequently surprised with their new ideas and solutions. You will be constantly learning from them.

  3. Passionate and positive. The smart people you want are as positive and passionate about your business as you are. They take ownership and responsibility for their actions. They convince you with their actions and questions that they understand the big picture. They speak confidently and deliberately, rather than defensively.

  4. More listening than talking. Look for team members who are active listeners, where you can see yourself seeking them out for answers, rather than always the other way around. It’s great to team with inexperienced people who are growing so fast, that you can envision working for them soon, or having them take the helm of your business.

  5. Avoid the narcissists. Their energy, self-confidence, and charm make them look smart, but they resist accepting suggestions, thinking it will make them appear weak, and they don't believe that others have anything useful to tell them. Narcissists will take credit for all successes, and always find someone to blame for their failures and shortcomings.

One of the most important jobs of every entrepreneur, and definitely one of the toughest, is to find and nurture people who are smarter in their roles than you. Resumes don’t provide much of a picture in this regard. Supplement this with networking input, references, and your own personal interactions.

If you are looking for a potential business partner, count on building a relationship over several months, before you really know the person. The business relationship at that level is just as important as a personal relationship before marrying (no overnight affairs). If you are hiring, make sure you have multiple interviews, and input from multiple people on the team to balance your view.

In my view, one of the most important aspects of being a successful entrepreneur is surrounding yourself with people smarter than you. Don’t let your ego get in the way. It’s the best way for you to grow the business, as well as yourself.

Marty Zwilling

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Saturday, November 22, 2014

The Best Business Leaders Are Visible At The Front

SpaceX_factory_Musk_heat_shield True leaders realize that, by definition, the word "leader" places the leader at the front, and not the rear. Yet many, many executives try to lead through fear and intimidation. This isn’t really leading at all. It’s pushing. In all businesses, leading from the front means that you are not afraid to get your hands dirty, pitching in to get the job done.

True entrepreneur leaders see the big picture and recognize that their business is only a small piece of a much bigger community. They lead their own small community to pull together in a way that galvanizes the entire ecosystem of the market into a win for both sides.

For maximum leverage, every leader has to learn how to delegate. Delegation is a great skill to have, but you also have to lead effectively to earn the right to use it. Intimidating or berating other team members from a position of power isn’t delegation or leadership.

In every growing business, people are expected to wear multiple hats, each and every day. An effective leader that wears many hats easily creates loyalty. This is a quality that cannot be bought or bullied. Loyalty must be earned, and business executives who earn it generally do the following:

  • Communicate and demonstrate a clear sense of purpose
  • Provide great coaching, mentoring, and tutoring
  • Encourage, recognize, and reward achievement
  • Ensure credit is given where credit is due
  • Be consistently dependable and knowledgeable
  • Demonstrate accessibility to everyone
  • Treat people fairly
  • Listen well
  • Show patience and humility
  • Helpful and quick to expedite important matters
  • Prove loyalty by standing up for the team, defending them to other constituents, and when necessary, to customers

Funny thing about loyal team members - they respond very well to being led from the front. Your team’s level of motivation and attention to detail is always going to have a fairly direct correlation to your ability to keep things moving forward, despite the cyclone spinning around you.

People will make mistakes, so accept it now - certain tasks, even critical ones, can get lost in the noise. The 100% solution is never attainable - so forget about. Strive for 90% and try to get that part right. The rest will come in time.

Communicate effectively and constantly with your team. No news is not good news in times of crisis. Tell the truth even when it hurts. Don’t be caught stuck to your chair while the storm is swirling around you. You must stay on top of everything and everyone. And guess what, you will miss things, too. Get over it.

Unfortunately, a crisis often drives leaders to retreat behind closed doors instead of advancing to the source of the problem. They withdraw to their desk, get inundated with data, overwhelmed by numbers and lose the connection with their people. If one of your executives fits this mold, you need to get rid of them. Otherwise they will kill you in the end, one way or another.

Leadership is about being visible and setting the right example out front on the firing line, in good times, as well as times of crisis. There is no place for the bully, who fails to take the feelings of others into account and insists on his or her way, and no place for the tyrant, who feels superior and needs to rule the roost.

Now is the opportunity for real leadership, with all the economic challenges around the world, and continuing human suffering. There is a saying in the military that generals who lead troops from the safety of the rear, should have to take it in the rear. That’s not a comfortable position for anyone.

Marty Zwilling

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Monday, November 17, 2014

The Planned Iteration Startup Launch Minimizes Risk

Eric_Ries The traditional mode of starting a company has been to plan a serial process, where you complete once all the steps, leading to the “big bang” launch of the company. I strongly recommend a dramatic departure from this model, called “planned iteration” or Lean Startup methodology, where you assume you won’t get it right the first time, so you launch with a minimum viable product (MVP).

This idea was first articulated by Paul Graham in an old essay, called “Startups in 13 Sentences” in which he talked about “making a few people really happy rather than making a lot of people semi-happy.” One of his key points is that “launching teaches you what you should have been building,” and I agree.

All you old software development types will recognize the analogy to the traditional two year “waterfall model” of software development, which has been totally replaced with the Agile iterative methodology. Agile assumes and plans for iterative development, where requirements and solutions evolve as more is known and markets change.

Don’t mistake this for a license to launch an incomplete or poor quality solution. Your strategy today should be to define and excellently prepare the absolute minimum product that will excite a selected small segment of your intended customers, and roll it out to them – as a Beta, early promotion, or even a give-away.

Then you assess feedback, adjust your offering, and iterate until you get it right (have some very satisfied customers). Plan on multiple small launches, with iterations, rather than a big launch. Here are the advantages I see with this approach:

  • Faster time to market. If you launch fast, you can be working with real customers in 4-6 months from your start, rather than 1-2 years. In today’s fast moving marketplace, needs, competitors, and costs change rapidly, so even if you were right, two years later the wave has moved on. Equally likely, your first target was wrong, and you will need to adjust.
  • Show some traction before funding. Let’s face reality, the angel or VC funding process now takes 4-6 months of almost dedicated effort and time, and usually fails because you don’t yet have a product or customer. By using a laser-focused approach for the first iteration, you may actually produce something and get a customer without funding. Now investors will pay attention, since scale-up funding is less risky and has a time frame.
  • Fail fast and cheap. Since you can predict that your first iteration will somehow miss the mark, speed and cost of pivoting are critical. We all know how hard it is to turn a battleship. With a minimum viable product, your startup remains much more agile. The planned iterations can then be applied more productively to enhance the right offering.
  • Find customers, partners and channels early. There is nothing like a real customer pipeline to convince you that you need partners and channels, and to convince partners, channels, and investors that you are real. Get out there personally and find that first customer. It will narrow your development focus, and adjust your strategy for you. Spend your time finding renewable sources of customers and iterate.
  • Use social networking to start the wave. Costs are low these days to set up a credible website, do some search engine optimization, start blogging, and start mining the social networks for interest. It won’t cost you your whole funding pot to start some momentum, or to realize that your original strategy needs major tuning.

Think about it. Where did Google, eBay, and Facebook come from? They inched their way into public view before the first multi-million dollar funding rounds, and they have never had a big public launch. New product companies in the offline world start one store at a time, or in one geographic area.

Big bang product launches are the domain of big enterprises, and you can never match their clout and budget. The biggest advantages you have as a startup are speed and agility. Use them.

Marty Zwilling

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Monday, November 10, 2014

Crowd-Funding Success Usually Brings New Challenges

Pebble_smartwatch_size Many entrepreneurs seems to be convinced that the “crowd” of regular people using the Internet will somehow solve their startup funding needs, when they sense a lack of interest from accredited investors. Professionals maintain that there is plenty of money and equity for qualified startups, and funding marginal startups via any source will only make more people unhappy.

Well-known crowd-funding platforms on the Internet, led by Kickstarter and Indiegogo, have worked for years to provide non-equity “funding” for many startups, as outlined in my previous article Don’t Be Fooled By All The Hype For Crowd Funding. But safely seeking equity investments from the crowd via the Jobs Act of 2012 is problematic and has still not been defined.

A lesser variation, called crowd-pitching, by organizations like Funding Universe, is an offline event, which give several candidates an opportunity to pitch to a crowd of interested people for a couple of minutes, after which the crowd “votes” with some play-money to pick the best candidate, who then wins introductions and guidance in getting loan approvals or equity funding.

Certainly both of these crowd-sourcing approaches provide the entrepreneur with an opportunity to hone their pitch, get some free consumer feedback on the idea, and maybe some introductions to funding sources. But from my perspective in really helping entrepreneurs, both fall short on several counts:

  1. Focus too much on the product, not enough on the business model. When pitching to consumers, online or offline, the feedback will likely be on features and design. The key success factors of the business model (how a business survives and grows), management expertise, and financial projections will likely get overlooked.

  2. Amount of funding provided is usually not enough. The amount of time and money required for publicity and promotion of any crowd-funding activities may be more than the return. In reality, a few thousand dollars to a few winners, is tantalizing but probably not a return on the investment. Many fail spectacularly after exceeding their funding objectives.

  3. Multiple micro-investments are not manageable. Investors know how tough it is to get a set of terms accepted by even two investors, much less hundreds. The administration of legal conditions, signatures, disclosures, and distributions is a nightmare. In my opinion, that’s why micro-finance has rarely worked, even for loans.

  4. Proposal content is too short to be meaningful. In all cases, to keep non-professionals attention, the content of the offer online, or pitch presented, is very limited. No one contemplates including a business plan, investor presentation, or even the equivalent of an executive summary.

  5. Crowd sample size and makeup not representative of market. If the pitch is offline, the audience is likely to small and mostly budding entrepreneurs. Even online, the type of people who may respond to social media requests may bear very little relationship to the intended market.

  6. Investors are not prepared for the high risk of startups. Crowd-funding investors are not constrained to be accredited professional investors. They may not understand that nine out of ten startup investments provide minimal to no return, and the risk of securities law violations is very high.

  7. Intellectual property is jeopardized. Non-disclosure agreements can’t be done in these environments. In an environment populated by entrepreneurs rather than investors, when you are new to the game, you are exposing your plan to your biggest potential competitors.

Crowd-pitching groups are making an effort to mitigate these problems by pre-screening the candidates, and providing an experienced panel of investors to do the judging. This helps by making sure the feedback is realistic, and the presenters have a rational business opportunity to present. I’m already working with a couple of organizations along these lines.

Overall, there is no question that crowd-funding makes sense for non-profits soliciting donations, artists seeking support from fans, and many small entrepreneurial efforts. But in the competitive world of “the next big thing,” with millions of dollars at stake to be lost, counting on these mechanisms when professional investors decline is usually ignoring the real problem.

Marty Zwilling

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Friday, November 7, 2014

A Perspective On When A Business Plan Adds Value

notepad-business-plan As a startup mentor and investor, I am approached regularly by aspiring entrepreneurs who assert that business plans are a waste of time. They cite sources like the BusinessWeek story, “Real Entrepreneurs Don’t Write Business Plans” and this Forbes article. From my perspective, much of this advice is an urban legend and just plain wrong.

Based on my experience, a business plan always adds value to the entrepreneur – most people can’t build a complete plan in their head, and need the process of organizing it on paper to make it consistent and complete. The size of the document should be based on your style, but 10-20 pages or slides are usually more than adequate to outline even a complex business.

Beyond the value to the entrepreneur, let’s take a look at how and when a written plan might add value, or even be required, by other people who may be critical to the success of your startup efforts. Most of these scenarios involve attracting outside investors, strategic partners, or key team members:

  1. You are the team and you don’t need outside funding. Tiny bootstrapped teams usually don’t have a business plan, and probably don’t need one. They can iterate and evolve their business idea with a low burn rate and minimal dependencies. A formal plan will only add value after they finalize a model, build a team, and are ready to scale.

  2. You’ve built a successful startup before, and plan to use the same investors. If you have a proven track record, investors don’t have to see a written plan to believe you can do the job. In fact, they are probably in such a hurry to give you money that they don’t want you to waste time writing anything down and passing it along to new investors.

  3. You need funding, and plan to get it from friends and family. Hopefully you know your friends and family better than I do, so you decide when a business plan is required. If your rich uncle is an accountant, or has his own business, I recommend a good business plan. On the other hand, your mother probably won’t read one.

  4. You need money, and plan to do crowdfunding. Although the major crowd funding sites today, including Kickstarter and Indiegogo, don’t technically require a business plan, they do demand essentially the same information in a project format. Thus building a business plan ahead of time will improve your application and chances of success.

  5. You need an investor, and want a document to mass-mail to everyone. Creating a business plan for this purpose is a waste of time. In fact, the whole process is a waste of time. Most VCs and Angel investors don’t read unsolicited proposals, unless they have met you first, or have a glowing recommendation from another investor or acquaintance.

  6. You need an investor, and want to solicit professionals online. Major platforms are available online to find Angel groups or VCs, including Gust and AngelList. These platforms, and every investor who uses them to find entrepreneurs, expects to find a good business plan posted. You won’t even be considered without a business plan.

  7. You find an interested investor or bank, and need to close the deal. Most professional investors, even if they like your story, and were properly introduced by a friend, will ask for a business plan at the due diligence stage. They want to see if you have done your homework, have reasonable expectations, and are willing to commit.

You might fairly conclude from these points that a business plan is only “required” if you want to close funding from professional investors who don’t already know you or know your track record. Since the best VCs deal primarily with known and proven entrepreneurs, it’s easy for them to say that they don’t read business plans.

On the other hand, don’t forget Angel investors, who fund 60 times as many startups, to the tune of $20 billion last year, who start their search primarily from platforms like the ones mentioned above. A business plan may be a small investment to get a shot at that opportunity.

For the rest of you entrepreneurs, consider the value of a business plan when it is not required. Clemson University professor William B. Gartner looked at data a while back from the Panal Study of Entrepreneurial Dynamics, and found that writing a plan increased the chances by two and a half times that a person would actually go into business.

Of course, building a plan is not an alternative to getting out there and doing something. There is no substitute for knowing your customers first hand, and iterating on a minimum viable product to find the most marketable solution. Writing it down promotes both understanding and commitment.

Overall, I sense that not writing a business plan is more often an excuse rather than a time saver. Building a business is a long-term non-trivial task, like building a house. Would you give money to someone, without a plan, who had never built a house before? Hopefully you wouldn’t even build your own house without a plan. You should treat your new business with the same respect.

Marty Zwilling

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Monday, November 3, 2014

Bootstrapping Organic Growth Makes Startup Sense

business-organic-growth When someone asks me for the best way to fund a startup, I always say bootstrap it, meaning fund it yourself and grow organically. Bootstrapping avoids all the cost, pain, and distractions of finding angels or VCs, and allows you to keep control and all your hard-earned equity for yourself. Despite all the focus you hear on external investors, over 90% of startups today are self-funded.

I grew to appreciate this approach much more when I interviewed a popular serial entrepreneur, Rich Christiansen a while back, who has done almost 30 businesses wholly by bootstrapping. He published a book with Ron Porter, titled “Bootstrap Business”, that provides a wealth of practical examples and advice on this subject.

The essence of his approach is to dedicate yourself to becoming a frugal minimalist in everything you do. I like his approach, and have extracted some tips from his book and other sources on how to do it:

  1. Use a virtual office. Rent is one of the biggest expenses for any business. If you can, start your business in your home office, basement or garage (Bill Gates, Steve Jobs, and many other legends used this approach).

  2. Think minimum spending. Spend the absolute minimum for what you need (equipment, software, and services) to keep your business running. Don't justify over-spending initially with "long-run" thinking. If you do, there probably won't ever be a long run!

  3. Reinvest gross profit. Most startup founders already do this, rather than take a salary, to improve their offering. Take little to no net profit. Simply take enough to live on, but not to the point of your detriment.

  4. Act big, behave small. Create the illusion of ‘big’ without the large building and large staff. Use voicemail, a world-class website, and personal customer service, with small expenses, to beat your big competitors.

  5. Do it yourself. Network big to get connections and ideas, but do the work yourself. Every outside hire increases your cost and risk. Hire experts, not help. Low paid help isn’t cheaper if it takes them twice as long to do the job, or they do the job wrong.

  6. Don’t plan for failure. Planning for failure almost invariably leads to failure, or at least has a way of undermining your resolve. The tough times are what separate the survivors from the many strewn casualties lying alongside the startup highway.

  7. Practice creative marketing. One of the keys to keeping start-up costs low is to find creative and affordable ways of doing what you need to get done, rather than just spending cash. All you need is a blog, Twitter, email, some business card stock, and a little creativity.

  8. Don’t think about the exit. As soon as you bring in investors, they force you to plan for an exit (merger or sale) in three to five years. It’s critical to them, since that’s the only way they can realize a return on investment, but it limits your options for growth and change.

Sometimes the tiniest details will throw your startup company into disaster. Understanding your business totally will give you much better operational control. In most cases there is a direct correlation between the quality of your decisions and the size of your revenue stream. For minimum risk, you must understand fully this cause-and-effect correlation.

In summary, watch your costs, trust your gut, and drive forward with all the passion in your dream. The growth may be slower with bootstrapping, but it’s all yours.

Remember, the goal is to keep venture capitalists or any investors from sinking their teeth into your business. When you let them on board, you lose control of your destiny. Isn’t this contrary to why you signed up to be an entrepreneur in the first place?

Marty Zwilling

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Saturday, November 1, 2014

More Successful New Entrepreneurs Are Baby Boomers

Sir_Richard_Branson One of the biggest myths in the business world is that startups are no place for Baby Boomers, that aging generation born between 1945 and 1964. They couldn’t possibly understand the new social media culture, new technologies, or have the determination to beat their younger counterparts in the market. Yet credible reports on current trends tell us just the opposite.

According to the most recent report from the Kauffman Foundation, the highest rate of entrepreneurship in America shifted a few years ago to the Boomer age group, compared to Gen-X (1965 to1980) and Gen-Y (1981 to 1995). Today people over 55 are almost twice as likely to create successful startups as Gen-Y, age 20 to 34.

Another report from Gallup confirms that Boomers are still a third of the workforce, equal in size to the Gen-X segment and the Gen-Y segment. Don’t expect them to go away any time soon. Gallup says the Boomer demographic is the largest and still growing mainstream pool of experienced talent in the market today (76 million people strong).

Their trend toward entrepreneurship in that group is sometimes called seniorpreneurship, where people over 50 take the helm of a new leading-edge high-opportunity venture. They include people like Sir Richard Branson, born in 1950, who has founded over 400 companies, and claims to be just getting started.

In fact, they are well-qualified overall, having worked with high technology and computers for at least 20 years, are highly educated, and highly motivated. In addition to being the startup entrepreneur, there are other key roles where Boomers can be a force in driving successful startups, in concert with leaders from Gen-X and Gen-Y:

  1. Early-stage Angel investors. Boomer investors are much more likely to get in the game with a high focus on mentoring and give-back, as well as the financial return potential. They want to share your satisfaction in success, maybe as a reward for their own mistakes and learning earlier in life in their own businesses.

  2. Supportive co-founder and executive positions. Every young entrepreneur needs an experienced partner for credibility with investors, and as a trusted cohort for strategy and growth discussions. Often the Boomer is more willing to work for equity, and easily convinced to step aside when revenues reach that next threshold.

  3. Member of the Advisory Board. Every startup needs two or three key advisors who have the domain experience, connections, and complementary skills to guide the founders through those early crises. Boomers are more likely to give you the time and guidance that you need, and give your executive team additional visibility.

  4. Manage customer service. They probably have arbitrated differences many times before in their lives, and know how important it is to remain calm and soft-spoken in the face of emotional customers and processes that are not working. Often a little gray hair gives added credibility to their efforts, and provides a role model for other support roles.

  5. Personnel Manager. This is one of the key roles in a growing new company which can benefit from someone who clearly has experience dealing with people – whether it be hiring and firing, assisting in performance reviews, or dealing with the day-to-day crises of any growing business. All the learning from parenting pays big dividends here.

On the other hand, there are some roles in a startup where Boomers are probably not the best candidates:

  • Constantly-on-the-road sales territory management roles.

  • Software and hardware development architects and designers.

  • Marketing and sales to Gen-Y customers.

  • Labor-intensive roles, including warehousing and construction.

For aspiring new entrepreneurs of any age, this is an opportunity for a win-win situation, with the proper mix of Boomers with Gen-X and Gen-Y employees and executives. It’s time to think again that the domain of entrepreneurs is only for the under-35 crowd.

The large crop of Boomers is only going to get larger as we live healthier and work longer. You too will be one someday, if you are not already. Be inclusive, and let’s continue to make entrepreneurship one of the most fun things around.

Marty Zwilling

*** First published on Entrepreneur.com on 10/24/2014 ***

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Monday, October 27, 2014

The Good, The Bad, And The Ugly Of Software Patents

software-patent-minefield I always advise software startups to file patents to protect their “secret sauce” from competitors, and to increase their valuation. The good news is that a patent can scare off or at least delay competitors, and as a “rule of thumb” patents can add up to $1M to your startup valuation for investors or M&A exits (merger and acquisition).

The bad news is that patent trolls (non-producing companies that make their money from licensing patents) can squeeze the lifeblood out of unsuspecting entrepreneurs, as exemplified by the recent mess around Lodsys suing small Apple IOS developers. This patent holding company has charged infringement and demanded royalties from every app developer for the iPhone and Android, for a feature most agree has been in apps for many years.

Yes, the software patent process is a mess. I say this with conviction even after I survived the process, and have a software patent pending. Consider this list of commonly recognized software patent flaws, as summarized from my research, Paul Graham’s “Are Software Patents Evil?” original essay, and the “Enough is Enough” emotional Lodsys article by VC Fred Wilson.

  • Process is onerous, expensive, and time consuming. Count on spending $10K to $20K per patent just for a USA application today, unless you do most of the work. Even after your application is accepted, the issuing process takes a lifetime in today’s technology (4-5 years). Then you need to repeat the process for every country of interest.
  • Patents have become a tax on innovation. A lot of companies, like Lodsys above, buy up software patents that are over-broad, and hold startups hostage after the fact, through royalties and litigation. They know that these entrepreneurs don’t have the skill or resources to defend themselves. Patents only help the big guys who want no change.
  • Software technology changes rapidly. Software changes fast and the government moves slowly. The USPTO has been overwhelmed by both the volume and the novelty of applications for software patents, and they can’t maintain a qualified staff. Patents currently last 20 years, which is way too long in the software business.
  • Patents granted that don’t meet the criteria. To be patentable, an invention has to be more than new. It also has to be “novel” and non-obvious. Moreover, patent law in most countries says that software “algorithms” aren't patentable. So lawyers routinely frame a software algorithm as a "system and method" to meet the criteria.
  • Valid patents have been overturned by unpatented prior art. Until mid-2013, the USPTO still operated on the doctrine of “first to invent,” rather than first to patent. This hit RIM (Research In Motion) a few years ago, and cost them $650M to recover. At least that shouldn’t happen again, as the US process is now consistent with the rest of the world.
  • Applying for a patent is a negotiation. As a result, lawyers always apply for a broader patent than they think will be granted, and the examiners reply by throwing out some of the claims and granting others. They don’t insist on something very narrow, with proper technical content.
  • Different rules around the world. What I have described so far is the situation in the US. In Europe, software is already deemed not patentable, and other parts of the world are somewhere in between. In some countries, software patents are not recognized, and in others they are not enforced. We need a global solution.

So what’s the answer? I would argue to simply eliminate the software patent – since software is an implementation and is already covered by trademark and copyright law anyway. Others put their hopes in patent reform legislation, to tighten the definition of software patents and targets trolls. This legislation seems stalled in its tracks for now, due to lobbying efforts of the bio-pharmaceutical industry, along with universities and trial lawyers.

Either way, new computational technology algorithms would still be patentable, as long as the algorithm meets the defined requirements for novelty, usefulness and inventiveness. I’m a big supporter of building and protecting a portfolio of real intellectual property, and maximizing your startup’s valuation, but it shouldn’t be just a legal game.

Marty Zwilling

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