Monday, June 30, 2014

How To Build Startup Credibility Before Your Brand

blog-imageWith the estimated 510 million live websites at last year-end, and 280,000 new ones being added every day, the biggest challenge for an entrepreneur is to get found, and get some credibility for a new startup. I can attest from experience that publishing a regular blog to properly showcase your brand value, even before you have it, is a most cost effective approach in time and money.

The biggest excuse most startup founders mention is too much to do building a product, mapping strategy, investors, etc. For blogging to work, you need to do it consistently and frequently, at least once a week, or the value evaporates. I know that finding time is hard, and good writing is simply not what most people do. But here are some key reasons for giving it a priority early:

  1. You can validate the need and your solution before spending money. Too many entrepreneurs spend big money on development, only to find out that the solution isn’t quite right. Feedback from your blog will tell you quickly whether anyone agrees with your assessment, and whether you have a customer base waiting.

  2. Find potential partners. Most of the people you would want as co-founders are now cruising the relevant blogs for ideas and partners. It’s a great way to find like-minded people, and get a dialog going. From a networking standpoint, it’s a lot more efficient than going to seminars and other industry events.

  3. Populate your team. Smart potential employees are also reading blogs to stay up-to-date in their field, and find the new leaders. More and more, employees work for people they respect, rather than companies. Take the initiative to put yourself out there. Of course, ultimately you want employees who can blog for you and your company as well.

  4. Cultivate early customers. It’s never too early to start a dialog with customers, as long as you don’t mislead them about where you are in the cycle. Build your brand and get leads today. There’s also the opportunity to do some consulting with interested customers to provide needed revenue while the product is still under development.

  5. Build your credibility with investors. A blog is an excellent vehicle to meet investors, before you are ready to ask them for money. You will also learn about competitors, who can’t resist responding to a well-written blog. Once you gain real traction as an expert in your space through the blog, investors will put you at the top of their funding list.

  6. Hone your communication skills. Writing a blog is all about communication, and that’s your number one job as founder of a new startup. Trying to write something down for someone else to understand quickly, will tell you if you really understand it yourself. Even if you use a ghost writer for your blog, the briefing process will enhance your skills.

  7. Your Google ranking will go up dramatically. Whereas Google and other search engines may take two or three weeks to list your new website in search results, new blog sites and new blog entries are indexed every day. From comments, you will accumulate external links both into and out of your site, and get additional ranking from Google.

Since a startup by definition is not a recognized brand, you are the brand, based on the social media culture of today. People assume your startup is real, if they see real people, and they will attribute credibility to your startup, based on your own credentials and the quality of information you offer through your blog. No person and no blog puts your startup at the bottom of a long list.

The best part is that all this is not a revenue drain. The major blog platforms, including WordPress, Blogger, and TypePad are free, and can be linked directly into an existing domain name to consolidate your overall SEO impact. In fact, many people are now using WordPress as their base website, as well as their blog. This eliminates even the standard site hosting fees.

Business blogging, or value-blogging, is all about helping others and helping yourself at the same time. I wonder how many of the high percentage of startups that fail in the first five years don’t have a blog? What’s holding you back?

Marty Zwilling


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Saturday, June 28, 2014

5 Keys To Product Differentiation For Fun And Profit

MazzeoROADSIDEMBAEvery entrepreneur believes that their product or service is different, and that every customer will quickly see the advantage over competitors. Yet true product differentiation in the eye of the customer is rarely achieved. According to a survey by Bain & Company a while back, 80% of businesses believe they have differentiated offerings, but only 8% of customers agree.

To highlight the impact of being perceived as differentiated, other experts project that businesses with truly differentiated offerings have an 80% chance of long-term success, whereas companies with ‘me-too’ customer perceptions have only a 20% chance. Differentiation is a key requirement for a successful startup rollout, and must be sustainable to keep ahead of new competition.

Since I’m a fan of real-world feedback, I was intrigued by the insights on differentiation in a new book, “Roadside MBA: Back Road Lessons for Entrepreneurs, Executives, and Small Business Owners,” by Michael Mazzeo, Paul Oyer, and Scott Schaefer. As well as having great academic credentials, these guys recently traversed the USA getting lessons from real small businesses.

Here are a few of their conclusions relative to product differentiation, supplemented by my own recommendations from experience and other experts:

  1. Work on perceptions, as well as reality. It doesn’t do you any good to be different, if your customers can’t perceive the difference, or you don’t tell anyone about it. The days are gone for the “if we build it, they will come” mentality. Marketing and target customer relationships are always required, no matter how obvious the differentiation is to you.

    Of course, working on perception can backfire if the differentiation reality isn’t there. Remember the old saying, “You can put lipstick on a pig, but it’s still going to be a pig.” Like a damaged reputation, a discredited differentiation is extremely difficult to turn positive.

  2. Quantify the difference for your customers. Use numbers to make your offering the clear alternative. Fuzzy marketing terms like easier to use, lower cost, and higher quality are not effective differentiators, since they have been overused to the point of having no meaning.

    Real data and customer testimonials say it best, such as get it done in half the time, or half the cost, or comes with a 5-year warranty. In my experience, numbers less than 20% are not enough, since small numbers are not likely to overcome the inertia and learning curve required of most customers.

  3. Focus on customers you really care about, and who care about you. Trying to be all things to all people never works. Identify your target customer segment before you finalize your differentiation. For example, customers with high disposable income will likely respond better to unique features, rather than a lower cost.

    One business visited on the road had successfully implemented a product-differentiation strategy to appeal to the 20% of their clients who were the most profitable, and discourage the 80% who were more costly. They noted that customers’ loyalty grew with their real preference for the unique product features offered.

  4. Customize to differentiate, but do it efficiently. The new generation of customers expect to get what they want, when they want it, customized to their taste. So customization is an important differentiation strategy, but be sure to strike a balance between the revenue potential of the effort, versus the costs required to execute.

    We have moved from the era of mass customization to collaborative customization. Today, differentiated companies enable customers to determine the precise product offering that best serves that customer's needs. For example, MakeYourOwnJeans encourages customers to tailor-make jeans dynamically per their specifications.

  5. Define a unique selling proposition (USP), and keep it simple. Complex or highly technical selling propositions are not good differentiators, since they will likely not grab people’ attention or be remembered by most customers. A good example is Dominos Pizza “We’ll deliver in 30 minutes or less, or it’s free!”

Successful product differentiation requires a conscious and continuous effort, including listening on the right social media channels, being consistently helpful to your customers, and continuous innovation. But the results can put you in that coveted 8% that customers remember for real fun and profit. Isn’t that why you signed on to the entrepreneur lifestyle in the first place?

Marty Zwilling


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Friday, June 27, 2014

7 Critical Success Factors For A Services Business

critical-success-factorsThe critical success factors for a product business are well known, starting with selling every unit with a gross margin of 50 percent or more, building a patent and other intellectual property, and continuous product improvement. If your forte is a service, like consulting or web site design, it’s harder to find guidance on what will get you funded, and how you can scale your business.

On the product side, once you have a proven product and business model, all you need is money to build inventory, and a sales and marketing operation to drive the business. With services, scaling the business often implies cloning yourself, since you are the intellectual property and the competitive advantage. You have no shelf life, so you can’t make money while you sleep.

Indeed, there are some success factors that are common to both environments. For example, both need to provide exemplary customer service, build customer loyalty, and provide real value for a competitive price. Here are the additional success factors that are really key to a startup with a services offering:

  1. Get your service out of your head and down on paper. If you can’t quantify or document your service for repeatability and new employee training, you will kill yourself trying to grow the business. Even artisan-based services, like graphic design and writing good ad copy, have innovative processes and principles. Capture your “secret sauce.”

  2. Start with a service you know and love. A successful services business, more than a product business, comes from a skill or insight that you have honed from experience. If you don’t have a high level of commitment and passion, you customers won’t seek you out. Now all you have to do is pass it to the many new members as you grow your team.

  3. Don’t let your service be viewed as a commodity. Low cost and low margin products can be winners, if the volume is high enough. You don’t have enough hours in a day, or trained people, to succeed with lower margins in a services startup. Thus you need to highlight how your service is more innovative and higher value to your target customers.

  4. Recruit only the best people, with the right base skills. Customers won’t pay to see your new employees learning on the job, and outsourcing the real work to a cheap labor source is a recipe for disaster. Make sure they bring solid base skills, so your training can focus on the innovative and unique elements that your service brings to the arena.

  5. Be a visible and available expert in your domain. Be accessible on social media, write a blog or articles for industry publications, and participate in conference panels and speaking engagements. This substantiates your expertise and value, builds peer relationships, gives you access to the people and technology to keep you current.

  6. Practice being a good communicator. Customers can touch and see a great product, but services are a bit ethereal. You have to communicate how your service is the best, to your own team, as well as to your customers. If you deliver a great service, but no one knows it, your business will suffer. Make sure everyone knows your vision and values.

  7. The customer experience is more than the service. Product companies sometimes equate customer satisfaction with customer service, but it’s more than that, especially with services. Make sure that every interaction with every customer is positive, the service delivered is exemplary, and always follow-up for reference and repeat business.

For some entrepreneurs who feel the need to attract outside investors as a critical success factor, they should be aware that professional investors almost never invest in a services-only company. The investor perspective is that no manufacturing or inventory implies a minimal need for capital up front. They tell these entrepreneurs to sell themselves, execute well, and grow organically.

Thus your services business success totally depends on you, your skills and resources, and your ability to bring customers to the table. You are the ultimate critical success factor for your business. Are you ready to make it happen?

Marty Zwilling

*** First published on Entrepreneur.com on 6/20/2014 ***


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Wednesday, June 25, 2014

What Entrepreneurs Should Never Say To Investors

competition-pitch-to-investorsDon’t bash the competition. Every investor knows how vulnerable a new startup is to competitors, so investors always ask about your sustainable competitive advantage in the marketplace. How an entrepreneur answers this question speaks volumes about their knowledge of business realities, customers, confidence, and their ability to handle investor funding.

There is no perfect answer to the competitive advantage question, but investors are looking for how your offering will keep ahead of competition, not just at this moment, but throughout the life of their three to five-year investment. They are also seeking to find out how you handle one of the many tough questions that a new founder will get in today’s market.

A strong answer should be something like “Our product introduces a new lower-cost technology, which we have patented and trademarked, that makes us very attractive today, and will provide a wealth of additional products as we move forward.” That says you are competitive today, have a real barrier to entry, and the potential to remain ahead of the competition for a long time.

Based on my own experience as an Angel investor, and feedback I get from many other investors, here are a collection of answers that we often hear instead, from the least credible to at least reasonable:

  1. Insist you have no competitors. Leading with this answer will likely terminate any further investment opportunity with this investor. He or she will assume your comment means there is no market for your product or service, or you haven’t looked. Neither speaks well for you or your startup. Even if you hedge by saying no direct competitors, we all know that existing cars are still big competition to your new flying automobile.

  2. Claim the first mover advantage. This is one of the most frequent responses I hear, and is rarely convincing. The problem is that startups have limited resources to keep them ahead of big companies. If your early traction highlights an opportunity they have missed, they can mobilize their huge resources and run over you. First mover advantages are only sustainable by large companies, or founders with deep pockets.

  3. Proclaim your solution as a paradigm shift. If you insist that your technology is so new and unique that it will disrupt your competitors and the whole market, investors will fear that neither they nor you can afford the time and marketing required to weather the change. They will likely decline on the basis that historically, pioneers get all the arrows.

  4. Highlight your world-class team as the secret sauce. Insisting that your team is better than any other, giving you a sustainable competitive advantage for the long term, will likely come across as naiveté or arrogance. Investors know that no startup has a lock on the best people and processes, and investors don’t deal with unrealistic founders.

  5. Declare that you will offer the product or service free. Free is a dirty word to investors, since they need a return on their investment. Perhaps you intend to collect money from advertisers, but this requires a large investment to get the audience you need before monetization can work. Facebook spent over $150 million before revenue.

  6. Intellectual property as barrier to entry. I like patents, trademarks, and trade secrets, so this answer is a better sustainable competitive advantage than the other five answers. Now all you have to do is defend your position, and we all know that patents can break a startup in court battles, and will have alternative implementations if the price is right.

Thus, there is no perfect answer to this question, so the best entrepreneurs see it as an opportunity to highlight their own advantages, rather than put down a competitor. Being negative is never the answer. For example, it’s tempting to say that your worst competitor has poor quality products, requiring costly maintenance, but it’s much better to say that you provide a five-year free warranty that no competitor can match.

After highlighting your best competitive features and your intellectual property barriers to entry, I encourage you to put on your humble face, and proclaim your determination to never stop improving your products and processes to out-distance competitors. You want investors to believe that you are a realist, but have the confidence and determination to win.

Investors know that winning in today’s highly competitive environment is more a mindset than a product feature. Competitor bashing is not a skill that you need to hone. I look for entrepreneurs that can sell themselves and their offering to discerning customers. Money from customers and investors is the same color.

Martin Zwilling


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Monday, June 23, 2014

How True Entrepreneurs Make Themselves Accountable

Dog_ate_my_homeworkEveryone seems to like the aspect of being an entrepreneur that goes with “being your own boss” and “able to do things my way.” But sometimes they forget that this kind of freedom comes with a price of personal accountability. Accountability means “the buck stops here,” and “all the failures are mine.”

Too many people seem to do whatever it takes to avoid accountability, both before and after the fact. I suspect that this is largely caused by a fear of the unknown, and a lack of confidence in their own abilities. People with confidence problems and fear problems should avoid the entrepreneur role, since success without accountability is rare.

I’m sure you can think of better examples, but here are some comments that we have all heard from people who are trying to avoid accountability before the fact, who are setting themselves up for failure:

  • “I’d love to start a new company, but nobody will invest in me.”
  • “I’ll do the best I can, but the economy is totally unpredictable right now.”
  • “Investors always seem to put such unreasonable restrictions of me.”
  • “I can’t seem to find employees who are committed to my business.”
  • “Customer expectations these days can be unreasonable.”
  • “Every time I try outsourcing manufacturing, I get quality problems.”
  • “If there were just more hours in a day, I could get the job done right.”
  • “Investors want five-year projections, which is ridiculous considering all the unknowns.”
  • “My family expects me to always be there at a moment’s notice.”
  • “My biggest challenge is make sure everyone is carrying their weight.”

If you as the entrepreneur are willing to embrace accountability, here is how these same statements should come out:

  • “My idea is so big, I will bootstrap the business myself if I have to.”
  • “Even in a down economy, there are some things that everyone needs.”
  • “I really appreciate the real-world guidelines I get from my investors.”
  • “I couldn’t do this job without the full support of my team.”
  • “Exceeding customer expectations is my competitive advantage.”
  • “I select vendors carefully, and manage them well, to keep my costs down.”
  • “With limited time, I’ve learned to focus only on key issues, and delegate the rest.”
  • “I recognize that financial projections are commitments, so I don’t take them lightly.”
  • “With the support of my family, I can walk that fine line between family and business.”
  • “I trust my team, and I’m convinced that the total is more than the sum of the parts.”

If you are not yet ready to commit, you should consider getting more experience in your relevant business domain, or taking on a partner who has run a small business. Don’t assume that your perspective as an employee gives you a real view of the founder’s role. Also you shouldn’t assume that your experience in a large public company is applicable to running a startup.

Some entrepreneurs feel they can control other people by “holding them accountable.” This doesn’t work in the negative, because only personal accountability counts. It can work in the positive if you work in partnership with the team to get the outcomes you both seek, making you jointly accountable.

Entrepreneurship is all about assuming a risk for a reward, and accountability is core to generating the desired results. To make it work, you must trust yourself, your partners, and your startup. You should find there is a thrill and satisfaction to making decisions and standing behind them.

The next step is employee accountability. That’s the win-win combination that almost always leads to startup success. Are you there yet?

Marty Zwilling


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Saturday, June 21, 2014

The Maker Movement Is A New Mecca For Entrepreneurs

tech-shopBack in the early 2000s, the Maker Movement took hold in California, based on the emergence of such do-it-yourself (DIY) tools as 3-D printers, Google's SketchUp and makerspaces such as TechShop, with all the tools you need to make almost anything. Thus entrepreneurs began building prototypes and designing new products without the traditional huge investment.

The movement has spread across the country and across the globe, spawning innovative products such as the MakerBot Digitizer and all the things you can download from Thingiverse.com. Events for enthusiasts, called Maker Faires, now stretch far outside California to places such as Detroit, New York and even Shenzhen, China. A recent California event packed in 100,000 people.

I believe the Maker Movement and startups are made for each other. Here are some key positives from an entrepreneur perspective:

  1. Shorten the time and cost from idea to prototype. In today’s fast moving market, the basic product development cost and time are critical to survival. They come at the early stage while a startup has no revenue or valuation, so professional investors are hard to find. Low-cost design and fabrication tools are extremely valuable.

  2. Place to build skills and become familiar with new tools. Makerspaces, sometimes called hackerspaces, have sites and events, including tutorials, where people with common interests can meet, socialize and collaborate. With the new rapid prototyping tools, products can be physically built for analysis, rather than just conceptualized.

  3. Network with potential cofounders and strategic partners. Relationships are best built while working and learning together, rather than over drinks at a mixer or industry conference. There are already more than 500 active hackerspaces worldwide, as listed on Hackerspaces.org. Countless startup teams have already been spawned from these.

  4. Opportunity to meet investors and support organizations. Venture capitalists and investors are where the action is, to see first-hand what is possible, and who are the leaders. Makerspaces are becoming the new incubators and accelerators for startups, and support contacts, like lawyers and marketing groups, will be easy to find.

  5. Open your mind to new entrepreneurial opportunities. With low-cost digital design and fabrication tools, such as 3D printing and the ability to digitize almost any object, bold new innovations become apparent. Very young entrepreneurs get to “touch and feel” the results, and can experiment to their heart’s content. These ideas can grow quickly into real products.

  6. Meet the new consumer demand for customization. Customers today increasingly demand solutions that are customized just for them. Hobbyists and craftsmen have made custom solutions for a very long time, but companies have resisted this requirement to keep costs down. Maker tools are changing these economies of scale.

  7. Accelerate the trend to higher purpose startups. The new do-it-yourself capabilities and low entry costs mean that you don’t have be a Bill Gates to offer solutions that have an impact on society. The Maker Movement is already poised to transform learning in our schools, and offer low-cost solutions to solve environmental and third-world problems.

  8. Diversity breeds success. By collaborating with the Maker Movement, artistic entrepreneurs work with the technology freaks, and both benefit from other cultures around the world. New products emerge, as diverse as networked-art installations, Internet-of-Things innovations, and many other hybrid software-hardware solutions.

Makers are becoming real entrepreneurs, rather than just hobbyists and inventors. The new shared culture emphasizes learning-through-doing in a social environment, as well as fun and self-fulfillment. Have you tried it yet?

Marty Zwilling

*** First published on Entrepreneur.com on 6/13/2014 ***


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Friday, June 20, 2014

Improve Your Future By Thinking Like An Entrepreneur

think-differentMaybe starting a new business isn’t your passion, but in these days of rapid change, where everyone is dealing with uncertainty, I believe that thinking and acting like entrepreneurs will help you get ahead in any profession. In simple terms this means taking control of your life, going after something you love to do, and taking action. Stop letting life decisions happen to you.

As a long-time mentor to aspiring entrepreneurs, I’ve been convinced for some time that good entrepreneurs have the right mindset, and the right attributes, to be good at anything they want. Starting a new business is actually one of the toughest things that anyone could aspire to, since it always involves making decisions and progress in uncharted territory, with no one to follow.

So how do good entrepreneurs do it, and what do they do that everyone can learn from? I saw some good insights in a new book “Own Your Future,” by Paul B. Brown, who has been studying and writing about business leaders for many years for Forbes, BusinessWeek, and Inc.

He offers a collection of lessons regarding how entrepreneurs think and act, which relate equally well to almost any profession or lifestyle. I’ll summarize a few of his principles here as examples, and I’m adding a few from my own experience:

  • Use act, learn, build, and repeat to move forward in increments. The entrepreneurial approach is to decide what you want, take a small step toward that goal, pause to see what you have learned, build off that learning, and iterate the process. Other people often seem to bounce around randomly, and be the unhappy victims of other people’s actions.

  • Embrace smart risks, but don’t be reckless. Smart entrepreneurs work extremely hard to find smart risks, like really large opportunities, but limit potential losses, because they know that success is an iterative learning process, with many pivots required. Other people never take risk, or let their passion overcome them to bet the farm on a long shot.

  • Avoid overthinking yourself, leading to no action. When the future is unpredictable, as it is today, action trumps thinking. Action leads to evidence, in your job or in the market, which is the best fodder for new thinking. If all you ever do is think, you can gain tons of theoretical knowledge, but none from the real world, and make no real progress.

  • Nurture relationships with people who can really help. Entrepreneurs build listening relationships with peers, mentors, and investors who may not even be social friends, and ask them the hard questions they need grow their business. Other people think relationships are only for personal and social use, and only mention work while venting.

  • Find and sell your unique competitive advantages. Successful entrepreneurs focus on amplifying their strengths, while many people focus on eliminating their weaknesses. Everyone needs to sell themselves with the same fervor that entrepreneurs sell their product or service. If you don’t highlight your competitive advantages, no one else will.

  • Focus on problems you can solve and who is your target. A key step in selling yourself or your product is to identify your customer, and focus on value that you can deliver to that customer. Don’t discourage yourself by broadcasting your value to the wrong people, or not doing your market research on the problem they need solved.

  • Always see the glass as half-full, rather than half-empty. Maintaining and projecting a positive attitude is critical to career and personal progress, as well as business growth. How many people do you know that always focus on their setbacks, rather than their progress? Every hiring manager, as well as investors, reads your attitude carefully.

  • Generate energy, rather than sucking it out of others. Your actions must always create positive energy for those around you, or people will hasten to get away from you and your business. Entrepreneurs learn this early, to keep their team and customers motivated. You need to do this, to keep your lifestyle and your career moving forward.

I assure you that if you follow these principles in your current career, and think like an entrepreneur, you will advance more quickly, get more done, and be a happier person. According to a recent study by the Wharton School of Business, entrepreneurs running their own business ranked themselves happier than all other professions, regardless of how much money they made.

More career planning and more education is not always the answer, especially when the future is as unpredictable as it is now. Embrace entrepreneurial tactics, assume control of your lifestyle and career, and take action today to assure your own success. Are you still thinking about it?

Marty Zwilling


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Wednesday, June 18, 2014

10 Key Outsourcing Mistakes Made By Entrepreneurs

outsourcing-business-entrepreneurThese days, it is almost impossible to find a small business where everything is done at the home location, by full-time employees. We are in the age of outsourcing, by any of many popular names, including subcontracting, freelancing, and virtual assistants. These approaches allow your startup to grow more rapidly, save costs, but costly mistakes can lead to business failure.

There are many books written on this subject, but a recent one by Chris Ducker, “Virtual Freedom,” manages to pack a lot more practical guidance into a small space that many others I have seen. He is regarded by many as the number-one authority on virtual staffing and personal outsourcing, and is himself a successful entrepreneur based in the Philippines.

I was impressed with his summary of the top ten outsourcing mistakes made by entrepreneurs, followed by real guidance on how they can and should be avoided. In terms of quotes I hear too often, here is my interpretation of his most common mistakes, which every entrepreneur should avoid at all costs, before these assume that outsourcing will be their salvation:

  1. “With outsourcing, we won’t need many managers.” Contractors and freelancers, like any other business, manage their own internal processes, but they can’t manage your business. Don’t over-manage remote workers, but don’t expect them to manage your business. Hire and train your own managers for internal and external work projects.

  2. “With the high-speed Internet, our workers can be anywhere in the world.” Labor rates are lower in some countries, but culture and language match are the real keys to productivity. Countries near you may be in the same time zone for easy communication, but lack the skills you need. As with real estate, it’s still about location, location, location.

  3. “Let’s cut costs by outsourcing all from this point forward.” Some entrepreneurs get outsource-happy to save costs and begin outsourcing everything and anything that lands on their desks. Ideal outsourced tasks are outside your core competency, can be specified in detail, and managed with quantified deliverables and checkpoints.

  4. “Fixed price bidding is the only effective outsourcing model.” Getting a fixed price bid works for well-defined short-term projects, like blogging or programming. But trying to use it on call centers, affiliate marketing, or even data entry probably won’t be effective. Do your research with peers, and check the alternatives on every project. Be flexible.

  5. “Fair compensation is the lowest price we can negotiate.” Outsourcing won’t work if you don’t keep the virtual team happy. Unhappy workers will do a poor job, so cheap is not a good deal. Fair compensation is normally something higher than the market price at the outsourcing location, but lower than you would have to pay in your location.

  6. “I expect everyone working for me to adopt my culture.” The outsourcing team will always try to adapt to your situation, but success depends on their cultural work ethics, time constraints, social status, language quirks, and an overall attitude. Adapting to culture goes both ways, and training is the key. Recognize and embrace differences.

  7. “Current workers will manage the outsourcing as I grow.” Don’t set up outsourced projects under a professional who doesn’t want to manage, or is simply unavailable to the different work hours, or insensitive to cultural differences. Virtual teams need a lot of stability and structure, extra communication, standard protocols, and contingency plans.

  8. “My IT budget will go down as remote users use their own tools.” When you sign up remote workers, you’ll start to rely heavily on collaborative tools, Internet bandwidth, and new data security tools. You will need to invest more in training your own team, and increase your capital budget for new hardware and software. Don’t get caught off guard.

  9. “Utilization and personal growth of virtual employees is not my problem.” Some entrepreneurs view their outsourced employees as temps, or as a cheap way to staff the company during its startup phase. You should never hire internal or external staff based solely on what they can do now. Bored and unmotivated teams are never cost-effective.

  10. “I’ll outsource software development, since I don’t understand it.” Entrepreneurs need to know every component of their business at a management level, or have a cofounder who does. Relying totally on a virtual team implies they are managing your company, not you. If you don’t know where you are going, you probably won’t get there.

In summary, an entrepreneur should never approach outsourcing as an inexpensive and easy method of offloading work. With modern technology, and worldwide reach, it should be seen as an important tool for building an efficient, lean, and competitive business, optimized to give you more time for strategic focus.

As every entrepreneur quickly learns, their time is a scarce resource, and it can’t be outsourced. To grow the business, every entrepreneur needs to spend more time working on the business, rather than in the business. How many hours a day are you working on your company? Maybe it’s time for some smart outsourcing.

Marty Zwilling


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Monday, June 16, 2014

High Performing Virtual Teams Have 8 Key Attributes

virtual-teams-video-conferenceAlmost every startup is a virtual team these days, since most don’t start out with dedicated office space, and some or all members of the team work part-time or out of their own home. It’s a small world, so these team members may not even be in the same town, or the same country. Outsourcing is just another extension of the virtual team concept to people you don’t even know.

Working effectively with a virtual team of any sort has many challenges. How do entrepreneurs establish and maintain rapport with people they rarely see, and team members who have never met? How do they keep track of what everyone is doing and assure effective communication between all team members?

Experts on this subject, including Yael Zofi, in her book, “A Manager’s Guide to Virtual Teams,” has identified eight key characteristics of high-performing virtual teams that I have observed, and every startup founder should understand and enable:

  1. Members exhibit a global mindset – they look outward, not inward. Effective virtual leaders widen their focus from the local to the global, which implicitly creates an environment of respect. Respect engenders buy-in, without which members can’t take ownership of work product and work toward a common goal.

  2. Members share responsibility for achieving the mission. High performing teams have a sense of purpose where members internalize their piece of the mission, thereby transcending the isolation that defines working in a virtual environment. Team members develop an understanding about their mutual dependence to achieve objectives.

  3. A culture of openness facilitates trust and authenticity. Effective founders work to create and maintain an environment of team trust to defuse miscommunications. They focus on behaviors, not on personalities, because they know this engenders trust. Then they “say what they mean and mean what they say” to model authenticity.

  4. Members engage in meaningful communication with each other. High-performing virtual teams establish and maintain standards on frequency and modes of communication, and hold members accountable for acting accordingly. They also regularly use synchronous communication at critical points to speak with each other.

  5. An easy flow of information exists using various forms of technology. Everyone must have access to appropriate technology to enable reliable, current exchanges of information. The amount of “pushed” information (unfiltered e-mails and phone calls) to team members is lower than “pulled” data (e-bulletin boards and intranets).

  6. A conflict management mechanism. Conflicts are inevitable, and when even simple miscommunications don’t get acknowledged and fixed, trust gets eroded. The founder or leader must actively engage team members early, and follow up to ensure appropriate resolution. When this happens, lengthy energy-draining confrontations are avoided.

  7. Work systems produce deliverables within defined constraints. When team members are geographically dispersed, a rigorous effort is required by all team members to coordinate and align components of critical work systems to meet deadlines within time and budgetary constraints.

  8. Members have a positive “can do” attitude that spans time and distance. They must all assume their efforts will lead to success. When conflicts and tensions arise, as they inevitably do, members hold these situations within the context of the larger picture and look to quickly find solutions, rather than assign blame.

Technology has made virtual teams an everyday reality for entrepreneurs. Your challenge is to reduce the “virtual distance” between team members to zero, using personal communication, appropriate technology, and clear goals to maintain member satisfaction, collaboration, and innovation. Have you measured the virtual distance to your team members lately?

Marty Zwilling


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Sunday, June 15, 2014

Lessons For Entrepreneurs From The ‘Art Of War’

Winning customers as an entrepreneur in a startup has many parallels to a young army trying to penetrate some formidable new and unfamiliar territory. You need a strategy as well as a goal, and you need to pick your battles well. Even in this age of purpose before profits, a business won’t survive by pretending there are no competitors out there to worry about.

I had certainly heard of the 2500-year-old, but still current, masterwork on military strategy by Sun Tzu, “The Art of War,” but never thought very relevant to business startups. But Becky Sheetz-Runkle, in her recent book for small businesses, “The Art of War for Small Business,” gave me a whole new perspective.

In the context of offering some inspiring examples of small business success, she includes some timeless business lessons that I believe every startup entrepreneur should take to heart and follow in practice. As examples, I offer my interpretation of some of the key lessons here:

  • Scout the territory first and pick your battles. A smart general going into battle always does the research first on the lay of the land, including critical high points that have the most value, before charging into the fray. Too many startups rush into battle early, assuming any progress will somehow give them the competitive advantage.

  • Prepare thoroughly and strike fast. Lining up your resources is critical, but so is time to market. Some entrepreneurs get bogged down in planning and never get to the point of action, often called analysis paralysis (i.e. ready-aim-aim-aim-aim-aim...). A good general makes sure his troops are trained and prepared, and are not hesitant to act.

  • Capitalize on strengths and shore up weak points. A winning military leader always knows the weaknesses of his troops, as well as the strengths. Entrepreneurs likewise must be able to recognize and leverage the competencies of the current team, while providing the backup and direction to minimize weaknesses in selecting target markets.

  • Attack competitor weaknesses and be alert for opportunities. Every competitor, like every army, has weak points, and every territory has ready opportunities. Entrepreneurs must seek these out, pivot as required, and lead the team into battle. Small wins and some penetration builds momentum and bolsters morale for that major assault.

  • Limit your focus to key objectives on a single front. No startup or army can manage more than 3 to 5 goals and priorities without becoming unfocused and ineffective. Pick the key challenges and attack them will all your resources, rather than stay spread so thin that every initiative is jeopardized. “Spray and pray” is not a winning strategy in any war.

  • Capture territory the opposition does not yet own. In war, the smart general looks for territory that is undefended. Success there is assured, but the value of that position may also be low. In business, it’s always smart to look for new opportunities, or markets with few competitors, but beware of “solutions looking for a problem,” and lack of customers.

  • Negotiate and leverage win-win alliances. Even in ancient times, creative diplomacy was a better solution than fighting to the death. Entrepreneurs need to learn that your toughest competitor may be your best strategic partner, leading to a win-win situation. This approach is called coopetition, and is too often overlooked as a key strategy.

  • To win you have to take risks, but don’t be reckless. There is no safe position in business, or in war. In both cases, charging into battle with your eyes closed, is simply reckless, and will lead to destruction. Winning in either arena requires the skill and willingness to take smart risks, with trained resources, due diligence, and determination.

In fact, I now believe that all of Sun Tzu’s teachings are still relevant to entrepreneurs, who more than ever face fierce competition for customers, market share, and talent. Their very survival depends on strategy, positioning, planning, and leadership, just like it did for armies a thousand years ago.

With these lessons in hand, entrepreneurs today in startup companies can and do outsmart, outmaneuver, and overwhelm larger adversaries to capture market share, satisfy unmet needs, and emerge victorious in their chosen markets. That’s the challenge and the fun of being an entrepreneur. Believe me, it’s a lot more satisfying than the alternative.

Marty Zwilling


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Saturday, June 14, 2014

Tough Competitors Are Your Best Strategic Partners

steve_jobs_and_bill_gatesEntrepreneurs seem to have blinders on when looking at competitors. Generally they are so focused on killing competitors that they fail to see the positive potential of a strategic partnership or some other type of collaborative relationship. Sometimes you have to put aside the emotion and the passion, and just look at what is best for your business.

Strategic partnerships in this context can take the form of joint ventures, intellectual property licensing, outsourcing agreements, or even cooperative research. All of these offer the potential for a win-win relationship with a nominal competitor, rather than a win-lose deal, as long as both sides can remain humble and not try to dominate the relationship.

Always start with a formal proposal, limited in scope to a specific common objective or technology, for a limited amount of time, bounded by a two-way non-disclosure statement. With this agreement in place, there are a host of ways that both sides can win:

  • Share common technology. Every startup has a core competency which should not be shared. Beyond that, there may be a large percentage of common technology where they both need to minimize cost to gain share from the big dinosaurs who already have this advantage.

  • Expand the market for both. Typically, there are market opportunities that neither of your core competencies can win alone. A strategic evolution of your combined strengths may be able to open up a new segment that neither of you could do alone in the same timeframe or at the same cost.

  • Up-sell related products or cross endorsement. If your customers would benefit by having products from both companies, you might negotiate the opportunity to include the other’s product as an add-on. Where your competitor isn't really competing with your direct market, you can refer business to each other without anyone losing customers.

  • Benchmark your practices against a true peer. The best way to do this is to establish specific performance targets with incentive-based rewards for meeting and exceeding these targets. The information exchange from day-to-day interactions of engineers and marketers will drive you enhance your own processes to be more competitive.

  • Expand core competency and solidify strengths. Both partners must not forget they are still competitors. By sharing and learning in non-competing areas, they can focus their limited resources on solidifying their core competencies, and expanding their unique segment of the market. Let market response dictate a later split, merger, or acquisition.

  • Willing to learn from each other. Learning from each is part of the win-win equation. No entrepreneur has all the insights they need, and none should be so arrogant as to assume they hold all the cards. Of course, it’s important to start with a bounded agreement which clearly lays out expectations and areas that are off-limits.

  • Think about the future. Once you have established your credibility and value, a strategic partnership may extend to a financial relationship. They may have the finances you need to invest in a business area they know, where you have the core competency. Longer term, when ready, it may be time for merger or acquisition.

While most entrepreneurs think of strategic partnerships as big company deals, it actually works better for small companies. In large corporate environments, competitor cultures may be so set that collaboration is difficult, while I find that small company peer competitors usually have no trouble at all getting along. The industry leader arrogance has not yet set in.

Even for small companies, it is critical that all employees be well-informed about what skills, technology and information can be shared with their partner and what is off-limits. This will offset the normal instinct to think of a competitor only as a threat. It is smarter to capitalize on the positive aspects of a competitive situation rather than killing each other so no one wins.

Marty Zwilling

*** First published on Entrepreneur.com on 06/06/2014 ***


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Friday, June 13, 2014

Next Generation Customers Will Test Every Business

Alan-Trefler-Build-for-ChangeIf you think your business has weathered the storm, think again. In addition to obvious economic challenges, the emerging generation of customers is determined to radically change the rules for customer engagement. Their expectations of relationship and personalization are taxing businesses today, and their power through social media will kill those who can’t or won’t comply.

An eye-opening list of insights was just released in a new book, “Build for Change,” by Alan Trefler, Founder and CEO of Pegasystems. He makes a convincing argument that it’s time for every company to get prepared for the next customer generation, or your company is heading toward life support.

As a backdrop, he defines the evolution already in progress from current Gen Y customers to a more demanding and less tolerant state (Gen D) that will make them even quicker and more technologically able to demonize and destroy your business, if it won’t meet their norms of interaction, personalization, and purpose.

While I’m not so sure that I agree that these represent the ultimate apocalypse of customers, I do believe the solutions he recommends should be taken seriously by every entrepreneur. I summarize here my interpretation of his key points:

  • Take heed of serious next generation customer expectations. More and more, I see evidence that customers want to be pulled to your company, rather than feel that you are pushing yourself on them. They are not hesitant to engage the crowd through social media and sites like Yelp to drive you from the marketplace. Your reputation can be compromised by one bad oversight, like the United Breaks Guitars experience.

  • Don’t count on big data alone to save you. In reality, data today is only memory about past transactions. Responding to transaction trends without the proper context can lead to broken relationships. Your changes must allow them to discover something so awesome that they are excited, versus disgusted, that you seem to know who they are.

  • Add context and intent to your customer analysis. Use aggregated data from social media, professional market research, public sentiment, and key influencers for change analysis. Going beyond data to get intent is common sense, more than technology. Intent goes both ways, so make sure your customers understand your business as well.

  • Make sure all your processes are customer-centric. Most business processes today are driven by internal needs to cut costs and maximize quality. Customers want their interactions and transactions to be painless and personalized. It’s time to rethink every process from the outside-in, to be consistent with customer expectations.

  • Upgrade to modern information technology tools. Too many businesses still tolerate archaic IT tools, or resort to rogue mashups developed to circumvent the approved tools. Only modern tools can assure you the best and seamless execution for every customer interaction. Traditional waterfall development and outsourcing won’t keep up with change.

  • Rethink how you organize, train, and reward employees. The first step is to break the legacy silos and underground channels in the current organization, which usually means realigning executive leadership and roles. Integration of all groups is the key to an optimal customer experience, starting from the hiring process to pay for performance.

  • Adopt new core principles to stay competitive and assure survival. These must include democratizing how you do technology, thinking in layers, and using modern analytics to optimize continually. Technology need no longer be only the realm of expert gurus, business professionals in each layer of the business can build solutions, and executives with analytics can continuously refine the high-definition view of the customer.

Your ability to meet the test of the ever more-demanding and less-tolerant customer, as well as the emerging swarm of new competitors, is dependent on your willingness and ability to change your thinking and your company. The challenges ahead are great, but the opportunities are greater. Don’t be left behind in the ashes.

Marty Zwilling


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Wednesday, June 11, 2014

Every Technical Startup Wishes For This Dream Team

Dream_TeamIn my years of advising startups and occasional investing, I’ve seen many great ideas start and fail, but the right team always seems to make good things happen, even without the ultimate idea. That’s why investors say they invest in people (bet on the jockey, not the horse), rather than the idea. Yet every entrepreneur I meet wants to talk about the idea, and rarely mentions the team.

Thus I was happy to see a new book, “The Tech Entrepreneur’s Survival Guide,” by Bernd Schoner, PhD, and cofounder of ThingMagic, which leans heavily on the people side of the equation. He gives a wealth of practical advice on building a successful technical startup, including some specifics that I like on what constitutes a dream team of cofounders:

  1. The technical guru. You need to have a technical genius on the team to get your startup product off the ground. Outsourcing your core competency does not work. The technical skill can be highly specific, and the person may be a prima donna, but the role is required. If you’re lucky, your guru also brings some commercial contacts to the table.

  2. The trusted leader. Running a new company cannot always be a consensus-driven process, especially when hard decisions need to be made that affect everybody’s lives. Being the leader doesn’t mean more equity, nor does it mean the leader will necessarily be CEO. It just means that the cofounders trust one of their own and are willing to follow.

  3. The industry veteran. It takes a long immersion in the marketplace for someone to be a true insider, understand the subtleties of the competitive landscape, recognize the people who are true assets (independent of titles), and look through the propaganda of technical collateral and PR campaigns. These people also have the credibility to attract investors.

  4. The sales professional. Young high-tech startups are at constant risk of forgetting that they actually need to sell the wonderful technology they invented. A sales fanatic on the founder team helps to contain that risk. The combination of technical insight, founder authority, and sales experience is a hard-to-beat advantage in a competitive market.

  5. The financial suit.  You need a trained CFO to fill the financial gaps on your team. Outside professionals are always available, but they may have their own agenda, such as building a career, making money quickly, or managing up the stock price for a quick exit. If one of your cofounders has the necessary skills, your team will make the tradeoffs.

  6. The operations superstar. In the midst of high-tech development, funding, and selling, someone has to keep the office network running, get processes documented, and manage to keep everyone happy and busy. Fortunately, no combination of eccentricity, nerdiness, and charisma is required. Hard work and attention to detail are the key.

I’m not suggesting that you need all six of these as cofounders initially, but I always recommend a minimum of two founders with different perspectives. The rest can come from early hires (with stock options to assure commitment), equity investors, or even strategic partners. Outsourcing any of these critical roles is very expensive, and usually not very effective.

If you can’t recruit all of these onto your direct team, the next best alternative is to build a first-class Advisory Board of outside people, with the requisite skills and a wealth of experience. These should be hand-picked, come with a proven track record, be willing and able to help, and be completely trustworthy. The best startups have both strong cofounders and strong advisors.

What if you are convinced that your idea is great, but you just can’t seem to pull together the team and advisors you need? It’s time to think about licensing what you have to an existing company already in business, and give up developing and marketing it yourself. Remember the old adage that a small percentage of something is better than a large percentage of nothing.

Their success with your idea will at least give you the connections and the credibility to get the right team together on your next idea. Another alternative is to rely on that famous first tier of support, called friends, family and fools. Or you can always bootstrap the idea yourself, get some traction, and build your first startup organically. It’s a longer road, but may be more satisfying.

We all love the dark horse who comes from the rear to lead the pack and win the race, but very few of these really happen. Schoner and ThingMagic are now part of a multibillion-dollar public technology company, so success is possible without that initial dream team. My message is that it can be a lot more fun if you engage the right team at the beginning.

Marty Zwilling


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Sunday, June 8, 2014

How To Turn Friction Into Value In Your Startup

entrepreneur-listeningEntrepreneurship is not a job for the Lone Ranger. Every startup requires building and maintaining effective relationships with people, including partners, team members, customers, and investors. That means giving and asking for feedback, and learning from it, especially negative feedback.

“Friction” is feedback mixed with emotion or drama, making it all the more difficult to sort out the value. There should be no immediate assumption that one side is right, and the other is wrong. It may be an indication that one party isn’t giving the feedback well, or the other isn’t taking it well, or both. Both of these modes are wrong, and non-productive.

Unfortunately, many entrepreneurs I talk to confess that they put off giving feedback because they are uncomfortable. Others tell me they can’t deal with friction or negative feedback, so they don’t listen. If feedback is so important, why is it often ignored? Let’s look at what causes friction, and how to prevent it, resulting in productive feedback:

  • Make your feedback “information”, not a judgment or evaluation. Words such as “good” or “bad” telegraph evaluation, on the quality of work or rightness of behavior. Label words, such as “careless” or “disloyal”, signal judgment about a person’s character. Most people don’t like judgments, so they respond with friction, rather than listening.
  • Descriptions in neutral language lead to recognition. People tend to keep listening and consider changing when they recognize themselves in non-confrontational descriptions of an actual event. When they can’t relate to the data, you will have friction or tune out. Stick to what you know and what you observed.
  • Secondhand feedback poisons the process. Too many entrepreneurs create friction by highlighting comments from other people. This stems from two problems. First, this he-said-she-said doesn’t include concrete examples and clarifications. Secondly, people become defensive when feedback is not first-hand.
  • Pick an appropriate time and place for feedback. Getting feedback in front of your peers, or when you are rushing to meet a deadline, is embarrassing and prone to friction. If you are trying to give feedback with privacy, and the person never has time to listen, that’s a different problem.
  • Feedback given at work should be only about work. Don’t mix observations about commitment and loyalty on work issues with observations about private relationship actions seen at a party or elsewhere. Again, stick to the facts you know, your personal observations, and avoid absolutes such as “always” and “never.”
  • Minimize the perceived power difference to facilitate listening. Feedback to top executives is more readily received from outside experts and mentors, rather than less experienced team members. Inversely, feedback to newer employees should be given by their direct manager, or even peers, rather than a top executive.

Not all feedback should be about things that need improvement. Everyone needs positive reinforcement on items and actions done well, and it opens their mind to any feedback without friction. In fact, most psychologists agree that people advance more rapidly by positive reinforcement, rather than negative reinforcement.

We never see ourselves as other people see us. We see friction, and we react to friction, based on our standards, what we consider important, what we value, and what makes us uncomfortable. Understanding that, and understanding the triggers to friction outlined above, you as an entrepreneur need be able to deal with friction as the most important feedback of all.

Marty Zwilling


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Saturday, June 7, 2014

10 Ways To Lose Your First Million As An Entrepreneur

first-million-cashStarting a new business is a serious undertaking. Yet many aspiring entrepreneurs I know approach it as a fun project, get-rich quick scheme, or perhaps an expensive hobby. Others quit their day jobs and commit everything to their new passion, without regard for their own well-being, or the welfare of others around them. Neither of these approaches bodes well for success.

As an entrepreneur, you need to start early to implement the discipline and business practices that will lead to success. Even though everyone has an opinion on good early stage practices, I was impressed with the actionable blueprint in a new book by Scott Duffy, “Launch! The Critical 90 Days From Idea To Market,” focusing on the first few steps that determine long-term success.

Duffy emphasizes the often overlooked personal side of entrepreneurship, including balancing finances, relationships, and your health. I am paraphrasing here, based on his book, ten of the top failures we both see in the early stages of entrepreneurship, followed immediately by recommendations to mitigate losses from each of these items:

  1. Take the largest risk to get the biggest return. Startups always involve risk, but should not be risky. Every business move should be planned and well thought out, with milestones set in advance. Processes should be in place to ensure that even if something does not go as planned, you, your family, and even your job are secure.

  2. Let your passion drive your cash flow projections. Moderate your optimism. That means coming up with revenue and expense assumptions that balance your natural optimism and determine how much cash the business will really need. Then take your revenue projections and cut them in half. Now take your expenses and double them.

  3. Your idea will attract the funding you need. Assume that raising money from investors to get started will be difficult, unless you have a track record in business, or friends with deep pockets. Will key funding be your family’s entire nest egg, or just half? Are you going to bootstrap, or borrow from personal assets?

  4. Pretend your family doesn’t matter. Discuss the plan and the costs with your spouse or significant other. It’s essential that the two of you be in agreement on key milestones and how much to put on the line. It is better to risk less and be on the same page than to risk more and have your spouse worried and resentful day after day.

  5. Mix personal and business funds. Put your risk capital into a separate checking account before you start. Once you see it moved from your savings account to an account tied to risk, it becomes real. You now have a clear financial framework to help you make better decisions, and you will act more strategically, less impulsively.

  6. Use personal credit cards for business. Keep your personal credit cards separate from the business. You need to do this as a way of tracking, accounting, and leveraging business payments and expenses for tax purposes. Never commingle personal and business funds. Remember that credit card cash advances are very expensive loans.

  7. Keep business expenses in the bottom desk drawer. Hire a bookkeeper or setup a QuickBooks chart of accounts on your first day in business. If you don’t set up a system early, you will spend tremendous amounts of time and energy going back trying to reconstruct business transactions, for you, your investors, and tax preparers.

  8. Don’t formalize the business until you get revenue. Have an attorney set your business up as a Corporation, by the books, before the first transaction. We live in a very litigious society, so you need to at least protect yourself from liability. Set aside money to create a proper legal entity and get business insurance. It is not just about you.

  9. Strive for success before thinking about your own payback. Being unprepared for success is the fastest way to lose your first million. It is important to constantly expand your understanding of how investments work, so that as your business grows and spills off cash, you are able to manage personal profits.

  10. Hedge your bets by starting several initiatives or products. Decide to launch one business or product at a time. The best route to success is not to spread your energy and focus on ten things, hoping one will work. Give that one focus everything you’ve got, or you will likely not have the resources to anything well.

Obviously, avoiding all of these errors won’t guarantee success and won’t save you if you don’t have a viable offering or a viable business model. Being an entrepreneur may start with passion and an idea, but turning that idea into a great business is all about smart execution. Don’t let a million dollar idea turn into a million dollar loss, for lack of proper discipline, personal balance, and business execution.

Marty Zwilling


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Friday, June 6, 2014

Is Your Startup Ready For The Challenges Of An IPO?

facebook-ipoWith the recent apparent successes of several startups in taking their company public (initial public offering) and raising billions of dollars, I’m hearing a groundswell of enthusiasm from new entrepreneurs to follow in their footsteps to fund their companies and become billionaires overnight. "If Facebook, Yelp and Twitter can do it, then why not me?"

Current IPO activity feedback seems to support their excitement. In the first quarter of 2014, the U.S. IPO market showed more activity than any other first quarter since 2000, with 64 companies raising $10.6 billion. That is more than double the number of IPOs in the first quarter of 2013. With 103 new filings during the quarter, the rest of 2014 is on track to keep up this record pace.

On the other side of the coin, new entrepreneurs seem to forget that 64 startups is a miniscule percentage of the companies seeking funding during the first quarter. According to the Small Business Administration, about 600,000 new businesses are started in the U.S. each year, and a large percentage are always looking for money.

What should an entrepreneur look for in his own startup as a reality check on his own aspirations to be a serious IPO candidate? Here is my collection of the key considerations, based on my own experience, scanning the literature, and talking to experts in this domain:

  1. Taking a company public is an expensive process. It will take many months and require endless amounts of time, money, and energy. According to a 2012 study by PricewaterhouseCoopers, companies average $3.7 million spent directly on their IPO, in addition to underwriter fees of 5 to 7 percent of proceeds. It takes real money to find money.

  2. Make sure you can effectively use a big cash infusion. There is a big difference between needing a million dollars versus $100 million, or even a billion. New stockholders will expect to see rapid growth. You better have lined up a major international expansion, some major acquisition candidates, or a wealth of unfilled orders.

  3. There are real ongoing costs of maintaining a public company. You will need an experienced CFO, and the best legal and accounting help to comply with the audit requirements of the Sarbanes-Oxley Act. PwC estimates that public companies incur an average of $1.5 million in annual recurring costs as a result of being public.

  4. Exposure to increased liability risk. Public company executives are at civil and even criminal risk for false or misleading statements in the registration statement. In addition, officers may face liability for misrepresentations or speaking out in public and SEC reports. Executives shoulder new risks for insider trading and employment practices.

  5. The public company corporate culture may not fit you and your startup. Public ownerships usually lends prestige and credibility to your sales, marketing, and acquisition efforts, but it may work counter to your vision of saving the world. Most startup founders voluntarily exit or are pushed out, and the fun is gone. Analysts want escalating profits.

  6. Public companies bring new expectations of benefits. If you want to give stock options, or have already been giving them, the employees will love the liquidity of their options, and the thought of selling shares for a profit. On the other hand, “competitive” salaries will likely go up, and health and retirement benefits will jump to a new level.

  7. Market volatility usually hits public companies first. Private companies can often fly under the radar in turbulent times like the recent recession. Public stockholders are more easily swayed by emotion and the activities of the crowd, rather than real market conditions, and all performance numbers are public. Shareholders can jump ship quickly.

Before you forge ahead to an IPO, I recommend a thorough readiness assessment, to quantify the need, as well as to identify potential gaps within processes, areas needing internal controls, and positions requiring enhanced technical accounting skills to operate as a publicly-traded company.

The costs of an aborted IPO are sizable, and may not be deferred to a later period or offering. Along with the time and effort required, this can severely cripple your company for an extended period, not to mention your entrepreneur lifestyle.

While the wins can be big, I still see the IPO option as one to be considered only under exceptional circumstances, rather than as the default exit option. Your odds of hitting the lottery may be better.

Marty Zwilling

*** First published on Entrepreneur.com on 5/30/2014 ***


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Thursday, June 5, 2014

Small Business Success Doesn’t Come Without Travel

Visa_business_June2014_infographic_FINALSponsored by VISA Business

With all the new technology available today for video conferencing, interactive social media, and webinars, you may think that travel is no longer a requirement for starting a small business. You would be wrong. According to a recent industry report on travel spending, small businesses buy 37% more airline tickets than big business travelers, and spend 24% more when on the road.

Yet I still see business plans and funding plans for startups that have minimal or no allocation for travel. A baseline of $3,000 per quarter per potential traveler is the place to start, based on industry averages. Remember that small businesses don’t usually get favorable rate agreements with hotel chains and rental cars, and thus may spend more on the road than big companies.

While the Internet makes the world seem like a small place, it still costs money to travel, and there are still many valid business requirements to hit the road. Here are my top ten reasons why you should plan for significant travel expense in building your small business:

  1. Your business is small but the geography is large. Small businesses today may be highly specialized, but not highly localized. Through the Internet, it costs no more to deliver your message around the world, versus your local geography. Yet if your service is consulting, for example, real travel is required to deliver the product.

  2. Sharing your passion for the business live. It’s always valuable to meet new prospect clients face to face, rather than just by phone or email. Nothing beats looking them in the eye, so they can see your passion for your business. The same is true for important vendors, possible strategic partners, and potential investors.

  3. Speaking gigs help establish your expertise. I’m not talking here about getting on the national speaker circuit, and collecting big fees. I’m talking about volunteering to be on industry panels for visibility, participating in startup weekends for education, and talking to groups of distributors or potential customers on technology trends.

  4. Startup market research and focus groups. Market research should start in the library, but it better extend into meetings with potential customers in the various geographies and cultures that are part of your market segment. It’s amazing how much more you can learn face-to-face, compared to an analysis of aging statistics alone.

  5. Trade show and conference participation. Most young businesses with a new product plan to attend as many as ten shows or conferences per year across the country or around the world. Your presence in a booth to meet customers and vendors, and availability as a sponsor, will often keep you a step ahead of your competitors.

  6. Brand building requires travel time. With all the ads vying to get your customers’ attention, it’s hard to stand out. As an entrepreneur, you are the brand, so your visibility is as important as your product or service. Travel to key groups and participation in worthy causes, such as Habitats For Humanity, are an important marketing investment.

  7. Business development and strategic partners. Closing a deal with large customers, such as Walmart or Home Depot, will always require travel to negotiate terms and establish your credibility. Equally important to your growth will be new strategic partner relationships with resellers or white label opportunities. Face-to-face time is key.

  8. Mentoring and shared advisory board opportunities. We all need help from time to time, and some fresh inspiration. For some entrepreneurs, that comes from meetings with a respected mentor, and for others it comes from sharing what you have learned with newer startups and non-profits to help them and build your legacy.

  9. Networking events with other entrepreneurs. You can learn more from peers about how to run a business than you can from books, and they are much more likely to help you if they know you in person, versus emails and text messages. Every region has its own culture (Silicon Valley, Boston, Austin), so travel is well worth the cost and time.

  10. Your business team may be small but distributed. It is not uncommon today to see two founders located in two different cities, as well as key employees. Yet, travel is still a better answer than texting when it’s time to resolve a strategic issue. Even in today’s culture, executives need to meet personally with each employee a few times a year.

In addition to all these business reasons for travel, most people find it to be just plain fun (up to a point). It’s still part of the social fabric of our society, so it behooves all of us to find ways of combining business with pleasure whenever possible. You and your team will all be more productive if you recognize the requirements for travel, budget for them, and enjoy the destination.

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, June 2, 2014

10 Ways To Kill A Growing Business With Bad Hires

bad-hire-decisionEvery startup with any traction quickly reaches a point where they need to hire employees to grow the business. Unfortunately, this always happens when pressures are the highest, and business processes are ill-defined. At this point you need superstars and versatile future executives, yet your in-house hiring processes and focus are at their weakest.

The result is a host of hiring mistakes that sink many young companies, or take years to fix. The solution is to never forget that hiring is a top priority task for the CEO, which should never be delegated, and which often has to supersede the urgent crises of the day.

A key success element is to start by avoiding the known list of interviewing and hiring mistakes that have been documented many times by human resources professionals. Here’s a tongue-in-cheek summary of ten big ones to jog your recollection:

  1. “I’m not quite sure what we need, but this guy sounds like a miracle worker.” The message here is that if you don’t know exactly what help you need, you probably won’t get it. Do your homework on a proper job description, and make sure the applicant credentials on the resume are a fit before you proceed to interview.

  2. “He’s not quite what I’m looking for, but I think he is trainable.” This is the inverse of the first problem – you know what you want, but you are trying to force fit the candidate into the position. Maybe you are desperate to fill the position, or he’s related to the boss.

  3. “I’m confident this candidate can learn a lot from me.” This is the arrogant position that you know more than anyone you could hire, so all you need is a helper, not help. Helpers are expensive, since it often takes longer to jointly do a job than it would take one qualified person to do it alone.

  4. “I didn’t have time to read the resume, but he has great answers.” Some people talk a good story, but can’t produce results. Resumes won’t give you the positive conclusion, but they can highlight negatives, like job gaps, bad writing, and minimal experience.

  5. “He couldn’t keep up with me on results, but we have to start somewhere.” It’s always a mistake to judge a candidate by using yourself as the bar. You should assume that you are looking for someone who has skills you don’t have.

  6. “This one is such a good fit that I don’t need to waste time on a second interview.” No matter how good you are, we can all miss things the first time around. Never hire someone without a second interview, and without having a second interviewer verify your assessment. Everyone you hire has to fit effectively with many others on the team.

  7. “After my sales pitch, he was so excited I knew he could do the job.” Some hiring managers spend the interview selling the company under some mistaken impression that the level of candidate excitement they can generate is indicative of future performance.

  8. “He’s not perfect, but our only alternative is to let the work stack up even more.” This is pure desperation, guaranteed to have bad results. If you hire someone who can’t do the job, the work backs up more, and your work doubles to get them replaced.

  9. “His experience is light, but he seems like a good guy.” Avoid evaluating just personality in lieu of job skills. All the statistical research shows that there is very little correlation between a good personality and any specific job. Look for job knowledge first.

  10. “Based on the glowing terms I heard from my friend, I’ll just skip the reference check.” There are lots of factors that can’t be assessed in an interview, or by listening only to an advocate. In this litigious society, reference checks are more productive if you also listen to what is not said.

Another element is admitting that there are things you don’t know, and identifying what they are. Too many executives let their ego stand in the way, either in admitting that there might be things they don’t do well, or in identifying and communicating specific job requirements.

Take a lesson from an old Business Week article by entrepreneur Andy Dunn, aptly named “To Recruit the Best, Admit Weaknesses” where he admitted to the best applicants “I am not good at what you do, I need your help.” In my view, if every CEO and hiring manager followed this advice, as well as good hiring practices, their business would scale a lot faster with a lot less headaches.

Marty Zwilling


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Sunday, June 1, 2014

These 5 Decisions Define You As An Entrepreneur

Julia-Tang-PetersMost aspiring entrepreneurs are convinced that the strength of their initial idea somehow defines them as a leader, as well as the success potential of their derivative business. In my experience, it’s a lot more complicated than that. It takes leadership ability, as well as a good idea, to make a successful entrepreneur, and great leaders evolve from key leadership decisions along the way.

Fortunately, basic leadership and entrepreneurial skills can be acquired from experience and training. If you don’t have the entrepreneur leadership attribute or interest, but want to be an “idea person” or inventor, then I recommend that you find a partner with the requisite skills to implement and run the business from your idea.

Yet we all know that there is a big gap between good entrepreneurs and a great business leaders. Great leaders seem to make the right pivotal decisions at every critical point along the way. I’ve never been able to clearly define those key points, and what separates the good from the great at these points.

So I was happy to see Julia Tang Peters, in her new book “Pivot Points,” tackle this issue. She concludes from her work with many modern business leaders, including CEOs Bud Frankel (Frankel & Company) and Glen Tullman (7wire Ventures), that there are five pivotal decisions that propel certain entrepreneurs to be gifted leaders:

  1. The launching decision. At some point an idea captures your imagination and creating a business becomes more than just about income. You define goals that rivet your attention, galvanizing you to turn dreams into reality. The launching point establishes the platform on which every potential entrepreneur becomes an actualized entrepreneur.

  2. The turning point decision. This is the confluence of your willful decision to do more, and the pressing need to take action. It unleashes an extraordinary verve to take the idea or business to the next level. It tests your capabilities and capacity in various ways, stretching them far beyond your comfort zone and requiring total commitment.

  3. The tipping point decision. Here you are catapulted into leading and working on the business, as distinctly different from the work of mastering your subject and working in the business. At this point you will have built a team whom you trust with substantive responsibilities, freeing you to hone the art of leading, inside and outside the business.

  4. The recommitment decision. Now is the time when you as the leader look at where you are and where you want to go, knowing the need to renew the commitment or leave. For many this happens during disruptive change, like being acquired or being the acquirer. For others, it’s a personal decision to balance family life, or do something different.

  5. The letting go decision.  The ultimate test of leadership is letting go at a time of strength so that others can carry on the work. It may be a hold’em or fold’em business situation, or simply time to plan for succession. This decision point is the most emotionally challenging, since letting go is pivotal in defining the terms of the entrepreneur’s legacy.

I’m certain that an understanding of these points will equip you with the knowledge you need to take the right path on decisions when it matters most. The world is full of high-achievers and high expectations, but without the proper framework for turning entrepreneurial determination into real leadership accomplishment, you risk going nowhere.

I agree with Peters that entrepreneurial leadership is not all about people traits or characteristics, but often about the choices they make at key decision points along the way. Of course, skills in decision-making are not enough alone to make a great entrepreneurial leader. Here are some of the other characteristics I look for:

  • Willing to listen, and will address skeptical views.
  • Always an evangelist and a good communicator.
  • Willing to question assumptions and adapt.
  • Proactively sets metrics and track goals.
  • Ties rewards to performance results.
  • Aggressively takes smart risks.

So a great idea is necessary but not sufficient to make you a great entrepreneur and a great leader. Work on the right characteristics, and think hard about those five key pivotal decisions that can make or break your satisfaction and your legacy. It’s more fun when you are the entrepreneur leader you want to be.

Marty Zwilling


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