Wednesday, September 30, 2015

8 Steps to Exit Your Startup With Pride And Profit

pamela-dennis Once an entrepreneur, always an entrepreneur. Although many won’t admit it, true entrepreneurs can’t wait to exit their current startup, and build a new and better one with their next great idea. In addition, current investors want to see every startup go public or be acquired, as an exit event, so they can get their due return for that investment which has been tied up for the last few years.

For these reasons, I always look for an overt exit strategy in every startup I might consider for an angel investment. As a mentor to many entrepreneurs, I also encourage an entrepreneur exit focus early, and I really like the specific steps outlined in the new book, “Exit Signs,” by Pamela Dennis, who has helped companies through this critical transition for decades.

Her focus is a bit more on mature companies, but I believe the following eight steps, paraphrased from hers, are especially applicable to every startup and the entrepreneurs who create them:

  1. Think about the end game as you start. Running a mature company is totally different from running a startup. Most startup founders don’t relish the thought of managing repeatable processes, greedy stockholders, and endless regulation reports. Yet they often fall into these roles by not proactively preparing themselves for any alternatives.

  2. Set a target personal destination and timing. The first step is clarifying your personal goals and the legacy you want to leave. Exiting this startup is not the end, and may be the beginning of something even better, like Bill Gates philanthropy, or your next plan to change the world. At minimum, you need to get an exit advisor to keep you on course.

  3. Set your startup health gauges and use them. New startup founders keep all the operating metrics they need in their head. If you intend to exit, or even if you don’t, it’s never too early to think what an acquirer or stockholder looks for to assess your business health. This all starts with building a culture and strategy that can survive without you.

  4. Tune up your startup value and salability. Even if you don’t have a formal board of directors, it pays to have trusted advisors who will give you regular unbiased feedback on your team strengths and weaknesses, financial and operating ratio norms, and an external view of current company valuation issues. Listen carefully and act accordingly.

  5. Build relationships with potential acquirers. The best sale or acquisition is a gradual one, where the acquirer gets to know you through formal and informal relationships. Don’t wait for a distress situation in the business or your personal life, and hope that the ideal acquirer magically appears. Keep a critical lens on payment options and tax implications.

  6. Mature your business processes and customer base. Secure your company’s sustainability through multiple revenue streams and customer sets, and solid core business processes. Build an exit-transition plan for yourself, and a plan to retain key talent on the team. Anticipate customer and valued-supplier reaction to any change.

  7. Build a positive data bank and presentation. Well ahead of any planned move, you need to assemble hard data to support your historical and projected performance and sustainability. Your valuation and salability depends on the credibility of this effort. Plan to spend 30-60 percent of your time away from running your business during this phase.

  8. Lead your way out rather than wait for a push. The win-win startup acquisitions and successful transitions to public companies are led by the entrepreneur, rather than happen passively. You need to proactively engage the right people, drive improvements where required, and pay attention to all the external and internal factors gating success.

According to Dennis, an astonishing 87 percent of small and mid-size business owners don’t have an exit strategy or plan, leaving them to die at their desk, or get pushed out on terms they don’t like. If you are like most entrepreneurs, who look forward to a life of pride and profit after their current startup, it’s time to take some steps to make a startup exit more than a wistful dream.

Marty Zwilling

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Monday, September 28, 2015

10 Business Elements Required to Rise Above the Crowd

stand-out-above-the-crowd Too many entrepreneurs look for that one magic bullet -- an exciting new technology, perhaps, or their own determination to make the world a better place -- to override any shortcomings in their startup model. Yet, magic bullets are not sufficient to assure business success. If the elements of your business aren't expertly developed and aligned, even the best dream will be in jeopardy.

Common failures I see along these lines include: solutions that are "nice to have" but don't address painful problems; a business model that lacks a means for bringing in revenue; and a founder who has turned a blind eye toward his or her competitors.

Such failures ignore the essential business elements investors look for before committing to a startup. Here is my list of those elements, which every entrepreneur needs to develop before charging into the marketplace with high hopes and (sadly) a business that will likely get lost in the throng.

  1. An experienced and skilled team on board. Even the best solution won’t rise above the crowd unless it is driven by an equally outstanding team. In fact, most investors will assert that the team is more important than the solution in startup success. They look for a balanced mix of people with complementary skills, experience and determination.

  2. A large and growing market opportunity. Investors look for startups which can address large markets, meaning those larger than a billion dollars and growing at double-digit rates. Small markets tend to change more rapidly with the economy, and may be more easily influenced by fads and competitors with recognized brand names.

  3. A focus on a specific market segment. As a startup founder, you won’t have the marketing resources or brand recognition to appeal to all consumers. Instead, find and quantify the specific demographics of the subset that your solution best fits, and target all your features and messaging to those customers. Targeting multiple segments almost always weakens your business.

  4. A near-term customer value proposition. Customers buy solutions with value that's quantifiable to them today, meaning value which, compared to existing offerings, is half the cost or offers twice the productivity. Long-term value propositions to society, or paradigm shifts in technology, generate interest but don’t close sales in the time frame your startup needs to survive and prosper.

  5. Sustainable competitive advantage. Every solution has competitors and alternatives, or it has no market. Thus, it needs an advantage to rise above the crowd, such as a patent and trademarks, unique market positioning or support from industry partners. Too many competitors or a product with minimal differentiation makes a startup risky.

  6. Solution production and support. If your product is hardware, you need manufacturing, quality control and inventory. In all cases, you need customer support, formal processes and training in place. As an entrepreneur, make sure you understand your direct and indirect costs, staffing requirements, margins and metrics to make sure these elements are in place.

  7. Product distribution or service delivery. Physical products often require access to existing distribution channels. Website and smartphone solutions usually require referral partners and value-added resellers. If your scope is international, country-specific adaptations and translation are likely required. Smart startups have these in place early.

  8. Validated pricing and a sufficient revenue stream. Pricing needs to be set before rollout, based on the value delivered and the competition; pricing also needs to be tested with real customers. Free products may sound attractive, but every business requires at least one revenue stream to survive. An understanding of return-on-investment potential is critical to all founders and investors.

  9. An innovative marketing plan. Word-of-mouth marketing is usually just an excuse for no marketing and no money to spend. In the real world, marketing initiatives that go viral cost big money and effort for their innovation and execution. Investors look for specifics on sales channels, marketing collateral, social media initiatives and customer incentives.

  10. An understanding of cash-flow requirements. Many startups fail due to too much success too early, without the cash or investors to cover subsequent costs for manufacturing, inventory and receivables. Make sure your financial projections quantify the timing and amounts of cash infusions from investors. This will lead to investor-return calculations and exit strategies.

No single magic bullet can offset all these critical elements in any business. As an entrepreneur, you have the responsibility to build and execute a solid plan to turn your dream into a reality. In my view, if you adequately address the ten items outlined above, your startup will rise above those of at least 90 percent of your competitors. There is no better way to improve the odds for long-term success.

Marty Zwilling

*** First published on Entrepreneur.com on 9/18/2015 ***

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Sunday, September 27, 2015

Developing Leadership Skills: What You Need to Know

develop-leadership-skills These days, with the many Internet articles and new courses available, most new professionals readily cross the gap from lack of business knowledge to knowing, but many never make it over the knowing versus doing gap. Investors I know highlight this problem with the mantra that they fund founders and teams who can execute, rather than ones who just talk about their great ideas.

After many years of working in and starting businesses, I’m convinced that implementing new business ideas is much more difficult than coming up with the ideas. The first challenge is to overcome the natural human tendency to equate talking about an idea with actually taking action. The bridge from talking to knowing to doing is all about leadership, confidence, and initiative.

I found a good summary of the dynamics behind personal business leadership, and how to get there, in a recent book “Leadership Rigor!” by Erica Peitler, a well-known leadership performance coach. Here are the key principles she espouses, extended to leadership teams, based on my own background and mentoring new entrepreneurs:

  1. Learn to trust yourself and your team. Crossing the knowing-doing gap in a startup can create feelings of trepidation, fear, and embarrassing consequences of perceived failure. These are self-imposed barriers based mainly on your own negative self-talk. Learning to trust yourself is critical. Then you have to listen to and trust your team.

  2. Be patient and let the collective strength grow. Be aware of your anxiousness and practice self-management in being patient with yourself and team members. Resist the trigger of impatience. Slow down and trust the process, engaging the collective input of all. No one is the sole center of attention, so allow strengths to grow and unfold naturally.

  3. Take an escalation-of-risk approach. Start with a low-risk approach of discussion of your action plan in a one-on-one discussion with a trusted advisor. A more moderate-risk is to offer your plan to key team members, asking for feedback. Finally, the highest risk approach is to push your execution model directly on the whole team, and resolve issues.

  4. Take the fear out of team player decisions. It is easier to encourage team members to question current business processes and make innovative changes in an atmosphere of trust and safety. Getting beyond known limits requires courage from all, not fear. Driving the fear out of business pivots encourages thinking outside the box.

  5. Use metrics to support judgment in decisions. Metrics should be seen as guides, helping to direct and support good behavior, but not absolute measurements of good or bad judgment and wisdom. Metrics are necessary to acquire knowledge and turn it into action. What gets measured gets done. What is not measured is not seen as important.

These principles embody an incremental approach to the knowing-doing obstacles that entrepreneurs and their teams have to face head-on:

  • Overcoming the resistance of inertia. It’s easy for professionals to convince themselves that it’s okay to stay in the knowing stage a little longer while everyone strives for a greater level of confidence. Sometimes intellectual arrogance drives the conclusion that knowing is the most important thing, and almost the same thing as doing. It is not.
  • Taking risks and resolving unknowns is not comfortable. Individual and team leadership is about consciously demonstrating good business actions, in real time, through disciplined practice. Doing this will create experiences from which you and the team can learn and grow. Expertise requires iteration on learning, failing, and growing.
  • Fear of showing vulnerability. Every professional and team member has to get over the fear of showing others conscious incompetency in certain areas, and a willingness to struggle through the necessary learning curve to reach conscious competency. This is an important step in self-coaching, and in coaching others on the team.
  • Don’t let the memory of past actions limit thinking. Memory often serves as a substitute for thinking. Team members do what has always been done without reflecting. Business problem solving should mean drawing from past precedents, how things have always worked, and standard operating procedures, but not being constrained by them.

Professionals should judge their own competency, and that of team members, based on how well they perform, not how well they talk or how smart they seem. It’s easy to sound smart by being critical of the ideas of other team members, and it’s easy to make excuses about why a new proposal will not work, or why the present process is less risky than a new one.

Starting and leading a business is not rocket science. But is does require continuous decisions and sound execution. Thus the knowing-doing gap is one of the biggest inhibitors to success that I see. It’s time for every professional to take a hard look at themselves and their team to assess how well they stack up relative to the principles and challenges outlined here. All your competitors, investors, and customers are making the same assessment on you.

Marty Zwilling

*** First published on IvyExec.com on 9/25/2015 ***

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Saturday, September 26, 2015

7 Investor Term Sheet Demands Startups Need Not Fear

Mark-Cuban-Investor Most entrepreneurs looking for an investor can tell you how much money they need, but few have given much thought to what they are willing to give up for it. Perhaps they're way off in their valuation (usually far too high), or paralyzed by fear at seeing the other terms, because they have no idea what's normal, and what's worth a fight to the death (their startup's).

Investors, on the other hand, look at the money figure, and even the equity, as the easy part. What they worry about is a whole different set of issues, including how much control they will have over how their money is spent, what will happen when future investors jump in to dilute their position and how they will get some money back if things don’t go according to plan.

Still, no one wants the terms to be so complex that the deal never closes. The process should not be a game where investors and entrepreneurs are trying to kill each other, but one that defines a win-win arrangement: Both parties are protected and can work together with mutual respect in anticipation of a big win. Here is a summary of the key terms to expect on the term sheet, or the contract between the founder and investor:
  1. Consideration given for the money invested. In very early startups, which have no valuation, the term sheet may specify a convertible note. This is a loan with an option to convert to equity at a later date. For later investments, the price is equity, with a percentage of the owner stock to be assigned to the investor. Numbers in the 20 percent to 30 percent range are common.

  2. Type of stock assigned to the investor. Investors typically demand preferred stock, to give themselves certain voting and liquidation privileges over later shareholders. Even founder’s shares are common stock. Preferred shares are not possible with a limited liability corporation (LLC), so expect to convert to a C-corp to get an equity investment.

  3. Board of directors participation. Every investor would love to have a seat on the board, since that is where business control really lies. Smart entrepreneurs will limit these seats to one or two top investors, to keep the board size manageable, as well as to balance control with startup founders. A startup board of five or fewer members is optimal.

  4. Terms to prevent equity dilution relative to others. Investors always worry that later investors might come in at a lower valuation, effectively pushing out early investors. Accordingly, they include terms which allow early investors the right to buy shares at the new, lower price, or otherwise maintain their existing ownership share. This is normal and fair to all.

  5. Definition of investment delivery in "tranches." This simply means that the investor wants to deliver the cash in stages, dependent on the founder achieving specified milestones. Obviously, it reduces the investor's risk, but limits the flexibility of and increases the risk for the startup. Founders should negotiate this term away if at all possible, and get that cash now.

  6. Right to buy shares back from exiting investors. This “right of first refusal” allows existing owners to reclaim shares that are about to be sold to a new party, to prevent ownership fragmentation. Startup founders should insist on this option for themselves, and allow it for major investors. Venture capital investors normally insist on this option. 

  7. Investor liquidation priority. Investors want a contract preference to get their total investment back first in any company sale, to prevent founders who are struggling from deciding to sell at a loss. If the company is sold at a profit, liquidation preference can also help them be first in line to claim their profits. Smart investors will insist on this option.
To achieve maximum negotiating leverage, you should approach investors with your own term sheet, and keep it as simple as possible, including no more than the common terms defined here. Another alternative is to adopt the “standard” term sheet of a local angel investment group, which typically will not include the restrictive terms that individual investors might start with.

Term sheets are something you can’t avoid. Yet they need not be a mystery or a yoke around your neck. If you take the time to understand the basics, and start looking for investors before you are desperate, the whole process can be fun and exhilarating, rather than a gauntlet of fear and pain.

Marty Zwilling

*** First published on Entrepreneur.com on 9/16/2015 ***

*** Spanish translation on Bbooster.org

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Friday, September 25, 2015

10 Keys To Transforming Your Dream Into A Business

dream-to-a-business Business dreams are fun, but they don’t change the world or make you any money if you can’t turn them into a reality. Many aspiring entrepreneurs are stuck in the idea stage, and only a few have the discipline and the insight to move on to the execution phase. There is no magic formula for building a good business, but I’ve seen enough successful ventures to pick out some common elements.

In fact, as an angel investor, I find that many of the questions in the due-diligence process give me real insight into the maturity of a startup. I offer these same questions to you as a self-assessment of your own progress and ability to transform your idea into a business:

  1. Has your vision attracted smart people to you? A vision that you alone believe in won’t make a business. It’s really about clarity of communication to others. You need the right team to build and grow a business, and your first challenge is to show you can build a team, with effective continuous written and verbal communication. For some great specifics, see 15 Qualities of A Great Team Member.

  2. Have you defined a focused strategy and plan to get there? If you strategy and plan are not clear even to you, or constituents don’t seem to get it quickly, you can bet that potential customers also won’t get it. Strategies need no more than three elements, and plans that are written down are more easily understood and more likely executable.

  3. What level of stakeholder commitment do you have? The first and biggest stakeholder is you, the entrepreneur. Is this a spare-time-only effort that you have been working on for five years, or do you have real skin in the game? Investors expect to see a personal commitment, as well as team members, other investors or even customers.

  4. Is this a win-win opportunity for all the principals? Business ideas that win only at the expense of the customer, or investors or partners, will fail in the long run. With the best dreams, customers get great value as your business makes money. Pyramid schemes and work-at-home scams sound good in the marketing pitch, but nobody wins.

  5. Does your dream include automated and repeatable processes? We all know artists and consultants who bring great value, but their businesses won’t scale, since they can’t clone the founder, and can’t use tools to automate the process. Highly manual processes can’t be easily automated and measured, and tend to be very expensive.

  6. Are you able to show a “sense of urgency,” not a “sense of emergency”? Succeeding in business is all about keeping the focus on important things, rather than the crisis of the day. Good entrepreneurs are able to manage priorities, keep them to a small number and communicate effectively to all constituents to maintain commitment and momentum.

  7. Do you promote a culture of teamwork, mentoring, and training? It all starts with attracting and hiring the best people, and nurturing these individuals with support and ongoing growth opportunities. Too many entrepreneurs assume that everyone knows what needs to be done, and everyone is self-motivated and committed to the same dream.

  8. Can anyone see a pattern of team actions and results? Some entrepreneurs remain a “one-person show,” even with good team members around them. The entrepreneur has to assign and delegate the right actions, motivate real results and hold people accountable. At the same time, leaders need to be “hands-on,” not merely observers.

  9. Are there adequate milestones and measurements in place? Execution is achieving a series of small milestones, not just one big final success. Along the way, you can’t achieve what you don’t measure. I look for a focus on a few drivers, rather than a long list of deliverables. Things change rapidly in a startup, so strategy reviews are a must.

  10. Do team members get rewarded for the right things? Some entrepreneurs, by habit, are too focused on hours worked, rather than results. In all work environments, you get what you pay for. The best entrepreneurs set high standards for performance, but are quick to celebrate results with rewards, recognition and advancement.

If a potential investor doesn’t see enough of these attributes, it doesn’t mean your business efforts will fail, but it may indicate that your dream is still in the idea stage or early seed stage. More work is needed to transform it into a business. Otherwise you are likely to hear from investors and other constituents the dreaded “come back when you have more traction.”

Marty Zwilling

*** First published on Entrepreneur.com on 9/16/2015 ***

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Monday, September 21, 2015

7 Reasons Smart Startups Establish 'Coopetition'

coopetition-startup As a startup advisor, when I suggest cooperating with competitors, most entrepreneurs initially think I'm crazy or suggesting something illegal. But trust me, I’m not talking about anything sinister here, just a concept known in smart business circles as "coopetition," recognized as one of the best and fastest ways to grow a company. And growth is the lifeblood of every startup.

For example, think of all the specialized social-media sites that allow the use of your Facebook or Twitter credentials, instead of forcing a new one. That’s a win-win-win deal, since the ease-of-use attracts more people to the new site, it enhances the Facebook brand, and it simplifies the customer interaction. At least two competitors had to cooperate to make that happen.

As you will see, this example highlights only one of several ways that coopetition can supplement or even supersede all your efforts to accelerate organic growth, meaning growth from within. Here are the other reasons to use this strategy:

  1. It reduces common costs and customer learning curves. Similar startups, with competing products, almost always have overlapping areas, which cost money to develop and annoy customers with a new learning curve. If these elements are not your core competency or “secret sauce,” why not negotiate a sharing partnership?

  2. Complementary advantages can expand both markets. Every smart startup starts with a focus on a unique advantage, such as owning a distribution channel. A competitor may have complementary strengths. A strategic partnership, sharing common gains, should be a growth opportunity by expanding the market for both.

  3. There's an opportunity for follow-on sales to existing customers. Every business brings a set of existing customers who are great candidates for additional sales from a partner-competitor. That’s the reason why many ecommerce sites feature a house brand, but have partner relationships with logical competitors to attract and cross-sell customers.

  4. It can create new solutions through integration of competitor features. In many cases, two competitors are fighting a third one, and both are losing. With a strategic partnership, they can combine their product strengths with minimal cost and time, rather than each funding new development. Both then capitalize on new strengths and bundling for growth.

  5. It can establish architecture and industry-interface standards. Products in the same industry need to talk to each other and share data to facilitate faster customer adoption and faster growth for all players. Competitors can agree on common interfaces without exposing or jeopardizing their intellectual property or customer relationships.

  6. It leads to referral agreements and affiliate marketing. These are simple cooperation agreements, but many entrepreneurs are too proud or busy to consider them as a growth opportunity. Why not improve your customer satisfaction by referring customers you can’t satisfy to someone who can? If they so the same, you both win, along with the customer.

  7. Coopetition relationships lead to positive investments and buy outs. These days, most large companies, such as IBM and Merck, rarely develop new products internally. They invest in complementary startups, through internal venture funds and partnerships, and plan to acquire the best as they show the right traction. Be visible and be proactive.

If you are contemplating a win-lose relationship, hoping to put your competitor at a disadvantage, don’t do it. It's very risky, costs you a lot of time and money and generally backfires, since most competitors are not desperate or stupid. In every case, make sure your intellectual property is protected up front with a two-way non-disclosure agreement. Be cautious, but not paranoid.

Smart entrepreneurs realize that sometimes they have to fight that natural instinct to consider competitors as the enemy. If you keep your customer’s best interest as your first priority, you will know when it’s time to think outside the box. That thinking, including coopetition, will pay big dividends for your own startup's growth, as well as customer relationships.

Marty Zwilling

*** First published on Entrepreneur.com on 9/11/2015 ***

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Sunday, September 20, 2015

6 Tools To Assess Your Potential As An Entrepreneur

The_Self Too many people, young and older, let their career and their lifestyle happen to them, rather than proactively making things happen based on their personal passions, skills, and interests. Others make decisions based on someone else’s interests, such as the father who wants his son to take over the family business, or dreams openly of having a doctor in the family. Neither of these approaches is likely to lead to a satisfying career or personal happiness for you.

These days, with the instant access to information and experts in every field around the world, and the wealth of personal assessment tools available on the Internet, there is no excuse for not exploring and evaluating the alternatives before you make a step forward. A very credible starting point is the book “Promote Yourself: The New Rules For Career Success” by Dan Schawbel, managing partner of Millennial Branding, a Gen Y research and consulting firm.

Among other things, he outlines some of the popular assessment tools that I also often recommend as a mentor to entrepreneurs, including the following:

  1. MBTI (Myers-Briggs Type Indicator). Myers Briggs is one of the most widely used and recognized career assessments in existence, and does an excellent job of identifying your personality type so you can connect it to the right career and lifestyle. It can also help you better relate to others and become more self-aware.

  2. Gallup's Clifton Strength Finder. The focus of this tool is to help you discover your top five strengths and learn how you can use them to excel and perform at a higher level. The creator, Dr. Donald O. Clifton, is widely recognized as the Father of Strengths-Based Psychology, and has helped millions of people around the world discover their strengths.

  3. Marcus Buckingham StandOut Assessment. This one builds on the positive premise that the most effective method for improving people is to build on their strengths, rather than correcting their weaknesses. It’s the one to use if you have tried other assessments that claim to tell you who you are, but don't tell you what you can do with that information.

  4. Career Key. This one helps you identify careers and even college majors that match your set of interests, traits, skills, and abilities. It was developed by Lawrence K. Jones, a professor Emeritus in the College of Education at North Carolina State University, who specializes in the areas of school counseling and career counseling and development.

  5. MAPP™ Career Assessment. The MAPP career assessment is perfect for students, graduates and working adults. You'll get a wealth of information to help find the right career that matches your unique assessment profile. The MAPP career test was one of the first comprehensive career tests online for consumers, with over 7 million customers.

  6. Leadership Motivation Assessment. This one tells you how motivated you are to be a leader. After all, it takes hard work to become an effective business leader; and if you are not prepared to put this work in, or if, deep down, you're not sure whether you want to lead or not, you'll struggle to lead people effectively, and not be happy doing it as well.

If after taking one or more of these, you are still stuck on what domain you fit best into, whether you should be an entrepreneur, and how to get started, the following questions should help get those introspective juices flowing into action:

  • When have you been the most committed and passionate toward something in your life?
  • What talents do you use the most and what are your strengths?
  • Which roles and activities did you like and dislike in the past?
  • What aspect of those roles did you like the most and least?

After you get your own thoughts and assessment results together, it helps to get some feedback from people you respect, including parents, industry experts, and mentors. An outside perspective can be incredibly valuable as well, and help you narrow down what may seem like a long list, and relate that to the real world. Something you feel passionate about that doesn’t put food on the table, for example, may not be sustainable.

But the time to start is now. The most important point is to plot your own path, rather than be a victim of unpredictable circumstances and someone else’s whims. Don’t let other people be winners at your expense.

Marty Zwilling

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Saturday, September 19, 2015

7 Ways That Entrepreneurs Must Lead To Succeed

leadership-business One of the realities of being an entrepreneur is that you have to keep learning and changing to survive. Everyone on the startup team knows there is no buffer, and no personal isolation from impact based on your job description that can save you. Thus everyone has to make sure they are focusing on what is important, and making leadership decisions to save the business.

That is what business leadership is all about. Unfortunately, in mature companies, a larger and larger percentage of employees forget company survival and customers as the objectives, and focus only on their own personal gain. Risks to the business drift off their radar screen, resulting in poor business decisions, as well as less job satisfaction and declining professional success.

In a recent book exploring these issues, “Lead to Succeed: The Only Leadership Book You Need,” Chris Roebuck, an expert on transformational leadership, highlighted the positive impact of entrepreneurial leadership. I have worked in both large companies as well as startups, and I have observed first-hand the principles that he highlights:

  1. Total focus on delivering to the customer. Every startup team member is close to the customer front lines, so they see how every function does or does not add value to the service they give to the customer. People in larger organizations move away from day-to-day contact with the end customer, and focus becomes company internal and isolated.

  2. Optimizing risk, not minimizing it. Calculated risks must be taken to enable change, to improve, and meet new customer needs. Minimizing risk will eventually cause any company to fail. Mistakes will happen, so the objective should not be to eliminate all mistakes, but to catch them before they create disasters, and become repeatable.

  3. Constantly being creative and innovative to get better. Mature organizations forget that change is an opportunity, not a threat. Yet nothing stands still. Change allows everyone to be push the limits in response, to improve their opportunity for personal growth, improve the company competitive position and odds for long-term success.

  4. Taking personal responsibility for organizational results. The attitude that creeps into big companies is that individual employees have no results responsibility outside their own objectives. This causes company-wide inefficiency, poor communication, and poor alignment, and also tends to reduce the effectiveness of every individual leader.

  5. Understanding the wider picture. To get individual and team performance to the highest level, everyone has to be committed to the organization’s vision, values, and strategy, just as much as their personal objectives. An attitude of no responsibility outside of individual objectives is almost always detrimental to the company.

  6. Keeping things simple. Over time, people in large organizations tend to make things more complicated than they need to be. This may be to impress others with their expertise, or their desire to minimize risk. Entrepreneurial leaders know that complexity actually increases risk, as well as mistakes, and ultimately reduces customer satisfaction.

  7. Inspiring people around you with a clear vision and target. People need a customer-driven vision and some form of end destination to give meaning to why they do things, and engages them beyond their internal view. They also need step-by-step targets to help them visualize the journey to that destination, and see that it’s possible to achieve it.

In fact, large organizations need entrepreneurial leadership and thinking just as much as startups. The challenge to build and maintain this perspective is the same everywhere. It has to start with leadership from the top, hiring people with the right skills, giving them the right training and tools, and motivating them with the right leadership objectives, compensation, and growth opportunities.

I’m convinced that we are entering a new era of the entrepreneur. The cost of starting your own company is at an all-time low, and all the information and tools you need to lead are readily available on the Internet. More and more people are doing their own thing, freelancing, working from home, and starting their own companies.

But this doesn’t mean that everyone should start their own company to be an entrepreneur. Entrepreneurial leadership and thinking like an entrepreneur have just as much value, both to you and to your company, in big organizations as well as small. You can lead to succeed wherever you are. Do it now.

Marty Zwilling

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Friday, September 18, 2015

7 Ways To Work Less But Get More Business Traction

work-less-get-more-done Getting traction means not spinning your wheels without forward progress. In a startup, or any business with limited resources, the last thing you need is people who put in lots of time and effort, but never seem to move the ball. Successful entrepreneurs must never stop looking for ways to improve their own productivity, as well as the efficiency and momentum of the team.

The need for this focus may seem obvious to you, but I still hear many complaints from entrepreneurs and employees alike on the hours they work, and how they are underpaid for their time. In fact, most small companies still pay many key employees by the hour, without regard to their output. They seem to ignore the old idiom that you get what you pay for -- hours, not results.

Based on my own many years of experience as both an employee and an executive, here are my key recommendations to improve your business productivity, traction and momentum:

  1. Implement business metrics, and tie incentives to results. All team members, whether salaried or hourly, will get the message quickly if they understand what they are being measured on, and feel the positive impact of results. Incentives don’t need to be all cash. In fact, new studies show more results come from peer and non-cash recognition.

  2. Incentivize everyone to act rather than react. This simply means that everyone should be trained and motivated to prioritize and focus on the important items, and proactively attack those first. Don’t be driven by the “crisis of the moment,” which may have been averted by a little early effort. There are never enough hours to do everything.

  3. Practice and preach the Pareto principle. This principle, also known as the 80/20 rule, states that, in most environments, 80 percent of the results come from 20 percent of the actions. In most businesses, 80 percent of the revenue comes from 20 percent of the customers. Perfection is not an affordable target in product development, sales or customer support.

  4. Leverage the best tools and technology. I still find dedicated team members using calculators and paper for budgets and financial statements, rather than spreadsheets or other modern tools. As an entrepreneur or executive, it’s your responsibility to provide the tools and training to do the job productively. Your business traction depends on it.

  5. Promote a culture of balanced business-family lifestyle. Working 20 hours a day on a regular basis is not conducive to long-term momentum or business traction. As the entrepreneur, you set the model for others on the team by your own actions, and by the demands you make. Encourage time off for family, vacations and outside activities.

  6. Encourage more communication and less isolation. Executives and team members hiding in their offices, contrary to popular belief, are not optimizing business productivity. More and more companies are eliminating private offices, in favor of more open bays, where everyone naturally interacts, learns from each other, and works as a team.

  7. Celebrate key successes, even small ones. Entrepreneurs must never miss an opportunity to highlight results and milestones achieved for the entire team to demonstrate that the real focus is not on hours worked. Don’t burn yourself out, or let your employees feel like work is a forced march with no end in sight.

There is a definite connection between the fact that Google has been ranked by Fortune in 2015 as one of the best companies to work for. It has built a culture and a continuing focus on traction, working smarter and enjoying it more, rather than working more and enjoying it less.

It helps to think of you and your new business as a high-performance vehicle that has a long hard race to run before success. It takes careful attention to traction and momentum, not just at the start, but at every curve and obstacle along the way. Don’t burn out the tires and the engine on the first lap. Keeping the pedal to the metal blindly is not be the best way to win your business race.

Marty Zwilling

*** First published on Entrepreneur.com on 9/9/2015 ***

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Monday, September 14, 2015

8 Key Rules for Starting a Business on a Shoestring

business-idea-shoestring A few years ago, before the Internet was pervasive, before everyone carried a smartphone and before do-it-yourself software tools were available for free, it was difficult to reach a critical mass of new customers without spending a million dollars on a website, custom software and television advertising. Now you can match a big company with worldwide reach for a few thousand dollars.

It’s a new age for aspiring entrepreneurs, where anyone with a dream or a hobby should be turning it into a business. The bad news is that many are already doing it, with competition growing, so the longer you wait, the less chance you have of getting there first. The good news is that most haven’t learned the new rules, so there is still room to surge ahead of the crowd.

Here are some of the key new rules I have learned by starting my own company, investing as an angel in other startups and mentoring many more new entrepreneurs over the last few years:

  1. Do incorporate a company, but keep it simple. A limited liability corporation (LLC) can be formed in most states for less than $100 directly through the Internet without legal assistance. This will keep financial and legal liabilities away from your personal assets, but won’t cost you the big initial cost and ongoing time and fees of a C-corporation.

  2. Create a business plan online, but don’t wait for funding. Too many entrepreneurs still think plans are for investors, and investors are required to build a startup. Both are wrong. You need a simple plan to set real milestones, and you don’t need investors. Finding them takes too much time and effort, and takes away control and ownership.

  3. Work out of your spare room, and keep your own records. Don’t assume that you need to rent an office to start a business or hire an accountant to track expenses and assets. There are several easy-to-use accounting packages available, such as QuickBooks, which run nicely on your existing small desktop or laptop.

  4. Find do-it-yourself facilities for hardware prototypes. You no longer need to travel to China or hire an expensive prototyping expert to mock up your new design. Look for free help at a local university or find one of the new maker spaces, such as TechShop, where you can rent time and equipment to do the job yourself. Building the prototype can be fun.

  5. Create and register intellectual property online. In a new startup, there is tremendous competitive value in registering intellectual property early, but you don’t need to contract these tasks to expensive experts any longer. Trademarks, copyrights and even patents can be completed online by anyone through the U.S. Patent and Trademark Office site for a few hundred dollars.

  6. Use virtual assistants online to supplement your efforts. Skip the costs of payroll, office equipment and employee benefits by using remote contract services and low-cost freelancers available online. They provide the targeted expertise that you may need, with the flexibility to increase or decrease resources as you learn what has to be done to scale.

  7. Use low-cost subscription software and cloud computing. With Google or Amazon, you can get all the application storage and computing power you need without even thinking about an IT staff and big up-front costs for computer servers and applications. All costs are month to month, with scaling options to match the size of your business.

  8. Take advantage of social media and free websites for marketing. Many entrepreneurs today build and maintain their own websites, with powerful tools such as Shopify. Site marketing is easily extended through blogs, Twitter, Facebook and social media. Don’t sign up for outside search-engine optimization, public relations or other experts until your business is generating revenue.

Of course, not all new startup ideas can be developed this way, so pick an idea that fits. At worst, it will be a low-cost learning experience that will prepare you for the ultimate project you envision to change the world. In the meantime, I am convinced that are many good business opportunities now within the financial reach of almost anyone willing to do some homework.

But don’t wait too long to get started. I believe we are in the midst of a fundamental shift towards the entrepreneurial lifestyle, and away from the unsatisfying, highly specialized and highly focused hourly and salaried jobs. Now you can do what you love to do at a cost you can afford. The control is yours to keep. What is keeping you from getting started today?

Marty Zwilling

*** First published on Entrepreneur.com on 9/4/2015 ***

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Sunday, September 13, 2015

6 Ideal Team Members For Any Entrepreneurial Venture

business-idea-six-cofounders In 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 recent 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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Saturday, September 12, 2015

8 Keys to Dispersed Teams With Maximum Productivity

remote-teams-productivity Finding your entire team in the same office is a rare occurrence these days. Even small teams may be dispersed across town, working out of their homes or across the world in different time zones. Modern communication tools, including WebEx, Skype and video conferencing are a good start, but virtual teams remain a productivity nightmare for many companies.

I find that well-designed teams work very effectively this way, despite the challenges. As with all elements of business, finding the right people is the first step. In addition to bringing together the right set of skills, experiences and mindsets, it is important that every team member and their leader practices and believes in the following principles:

  1. Showing respect for other team members is paramount. To have real buy-in to common goals, all team members must respect and appreciate the skills and contributions of others. Virtual teams cannot survive with self-centered and abrasive members or loners who won’t share the load or risk. This requires a strong leader, and begins with good hiring.

  2. A willingness to share responsibility for success. All employees must accept their dependency on each other for results, and take personal responsibility for team actions. This means taking an interest in the work performed by all team members and willingly accepting even mundane tasks to assure the success of the project.

  3. Leaders foster a culture of collaboration and trust. Effective and frequent communication to all team members is the key, with a focus on strengths and desired behaviors, rather than personalities and faults. Team leaders and startup founders must be visibly and mentally present to be perceived as trustworthy and part of the team.

  4. Members practice regular communication with each other. Geographically dispersed teams won’t work if some members make themselves hard to find or consistently refuse to communicate. As a good practice, frequency standards and modes of communication must be set early, and all employees held accountable for making it happen.

  5. Necessary tools are provided and supported for collaboration. These tools may range from secure phone lines to compatible messaging software for everyone. Virtual teams need a tool-acquisition process, training program and support contact for all technology provided. Tool availability is the responsibility of the startup, not the individual.

  6. Conflict resolution procedures are well-defined. Even the best of teams have conflicts, but these can arise more quickly in remote teams from simple oversights and poor communication. Virtual team leaders must be especially proactive in following up and resolution, before productivity and trust are lost.

  7. Clear objectives and metrics are established early. These must include time constraints and budgetary limitations to be tracked by the team, as well as the leader. Everyone in an office environment may see and hear the objectives in other contexts, but team members working from home, or in another country, have less insight.

  8. High morale and a positive attitude drive team productivity. Team members who are quick to assign blame or find fault with the project will jeopardize the productivity of the entire team, and must be quickly removed. Maintaining positive morale requires an extra dedication to continuous relationship-building, recognition and compensation.

For truly global virtual teams, cross-cultural training may be required where members are separated not only by time zones and distance, but also by language and environmental and political differences. These differences add complexity to group dynamics, but also often add new value through new perspectives on creativity and productivity.

With the Internet, every startup today has global reach and visibility. Just think of your remote team members as closer to the customer, rather than farther from the team. Business success is all about value creation. Your value is in your teams, as well as your solution. Make every one count.

Marty Zwilling

*** First published on Entrepreneur.com on 9/2/2015 ***

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Wednesday, September 9, 2015

10 Strategies To Minimize The Perils Of A Startup

minimize-perils-of-a-startup There is an old saying that good lawyers run away from risk, while good businessmen run towards risk. Entrepreneurs see “no risk” as meaning “no reward.” In reality, all risks are not the same. Many risks can be managed or calculated to improve growth or provide a competitive edge, while others, like skipping quality checks to save money, are recipes for failure.

The challenge is to avoid the bad risks, while actively seeking and managing the smart risks. There are no guarantees in business, but it pays to learn from the experiences of entrepreneurs and business experts who have gone before you. As a long-time mentor to entrepreneurs, here is my collection of smart risks that investors and I look for in new startups:

  1. Focus on a tough customer problem rather than a fun technology. Investors hate technology solutions looking for a problem, due to the high risk of no customers. If the customer need is obvious and large, the calculated risk is in the quality of your solution, your team, and marketing. These are risks that can be mitigated with the right resources.

  2. Schedule frequent updates to your solution to maintain growth. Assuming that you can quickly recover after competitors kill your cash cow is not a smart risk. You need a plan to regularly obsolete your own offerings, with continuous innovation, before customers send you negative messages. It’s hard to recover from a tarnished image.

  3. Plan to deliver a family of products, rather than a one-trick pony. Even a great initial product, with no follow-on, won’t keep you ahead of competitors very long. A smarter risk is to build a plan, with associated greater resources, that will put you in position to expand your product line and keep one step ahead of competitors.

  4. Implement a modern real business model. Providing everything free, and growing users to the max for years, like Twitter and Facebook, is a high risk approach requiring deep pockets. Risk is more manageable with subscriptions and even freemium pricing. Even non-profits need revenue to cover their costs, and continue to provide services.

  5. Find a strategic partner to accelerate growth. Everyone wants to forge ahead all alone, and kill every competitor in sight. Almost always, risks are more predictable when you use coopetition for access to new customers, economies of scale, and shared resources. Finding win-win deals is a manageable risk, versus a battle with one winner.

  6. Use metrics to measure results of marketing initiatives. Too many entrepreneurs put all their resources in one big make-or-break effort they can’t measure, or they count on word-of-mouth and viral marketing, which are totally unpredictable. I like marketing plans that come from both inside and outside the box, but have milestones and measurements.

  7. Recruit the best team members and provide incentives. Trying to save money by recruiting family members, or hiring only interns, is a bad risk. Great team members may take more time to find, and cost you stock options, but a qualified and highly motivated team that stretches your budget is a good calculated risk.

  8. Build your business with minimum outside funding. More money is not more likely to solve your problems or reduce your risk. Investors know that startups with too much money fail just as often as those with not enough. Strategically, you need a plan to survive through organic growth, with outside funding to effectively accelerate scaling.

  9. Don’t rely on conservative forecasts to reduce risk. Investors don’t fund conservative forecasts, nor wildly optimistic ones, since both imply a lack of commitment or homework. Opportunity and revenue projections based on deep market and customer analysis are a smarter risk. Measurements and business intelligence along the way also mitigate risk.

  10. Be a leader rather than following in the footsteps of another. Many entrepreneurs think they can reduce and predict risk by emulating previous winners like Google and Twitter. But stepping into a crowded space to steal customers is more risky than attracting new customers looking for a solution. Customers like leaders, not followers.

The risks you want to take are the ones that you planned for in your resources, set up metrics to measure, and manage on an ongoing basis. All the rest are bad risks, including problems you didn’t anticipate, competitors you didn’t know about, and customer expectations that you can’t meet.

An age-old measure of startup health is how much time top executives spend on containing bad risks, versus proactively exploring new risk opportunities. If the majority of your time is in recovery mode, your whole startup is likely a bad risk.

Marty Zwilling

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Monday, September 7, 2015

8 Secrets To Credible Startup Financial Projections

Alexis_Ohanian_Projections Entrepreneurs often ask me why investors expect financial projections for a new startup even before the product is built and while the market is still being defined. I tell them that the projection process and results are most important for you the founder, to evaluate if there really is a business that can be built from the idea. You shouldn’t invest in an undefined business.

Investors can’t really evaluate any new business, but they can assess the logic behind your numbers, and compare that logic to their experience and rational business norms. Most have developed their own financial “rules of thumb” that will help them decide if your startup is fundable, in conjunction with their assessments of your team and your basic business concept.

If you are lucky enough to not be looking for an outside investor, meaning you are bootstrapping the business, the secrets that smart investors use to evaluate startups can help you understand your own risks and help you set reasonable expectations for yourself. Here are some key rules of thumb from my own experience:

  1. Financial projections must show a rational business strategy. I recently saw a startup projecting $50 million in revenue for the first year. Even Google couldn’t do that, so I would deem that not a credible strategy. I recommend five-year projections, to show the evolution of revenues and expenses and funding and profitability expectations over time.

  2. Target a company size that can produce premium returns. My rule of thumb is that startup-revenue projections in the fifth year better be between $20 million and $100 million. Less than $20 million implies a small potential investor return, and more than $100 million implies a very high risk or irrational exuberance.

  3. Growth projections should be aggressive, never conservative. Premium startup-acquisition targets usually at least double revenues every year, so conservative 20 percent yearly-growth projections will not win accolades. There is no startup premium for acquirers looking back in five years at exceeded conservative projections.

  4. Revenue projections show penetration of target opportunity. Some projections I see show a huge opportunity with trivial penetration, or vice versa. Neither extreme is good. Five-year revenues, based on your volumes and prices, should penetrate at least 10 percent of the target market segment.

  5. Gross margins should be in line with the industry. For most industries that means projected margins greater than 50 percent. I continually hear founders assert they will compete through lower margins and harder work. They haven’t yet faced the realities of new employee benefits, escalating salaries and the true overhead of scaling the business.

  6. Base your funding requests on projected cash shortfalls. If your business projects a negative cash flow of $800,000 before breaking even, it’s fair to buffer that amount by 20 percent and ask for a $1 million investment to cover contingencies. Think about the valuation implications and equity you are willing to give up for each investment amount.

  7. Explicitly include funding expectations as a line item. Funding inflows are not revenue, and should be listed under the year needed. Don’t show projections with no red ink, implying that no funding is required, or you won’t get any investor interest. Investors don’t like funding requests to buy you a building or put money in the bank at no interest.

  8. Show a liquidity event and investor return at the end of the period. If you are expecting outside-investor interest, you need to show a financial path to a satisfying return, in the range of 10 times their investment. This means an acquisition or initial public offering that will generate at least five times your fifth-year revenues, at a commensurate equity ownership.

Of course, if you are an entrepreneur with a track record of billion-dollar successes, all rules of thumb are irrelevant, and neither you nor investors need projections to test your credibility. For the rest of us, no credible projections will likely elicit the dreaded investor response of “come back when you have more traction.” That means they don’t like your projections and will wait for results.

Marty Zwilling

*** First published on Entrepreneur.com on 8/28/2015 ***

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Sunday, September 6, 2015

8 Ways Entrepreneurs Benefit From the New Networking

Freeport_llbean Successful entrepreneurs like Tony Hsieh of Zappos and Chris McCormick of L.L.Bean have long realized that networking is no longer something that you do to get what you want, but requires listening and relationship building to do what the other party wants, with a win-win outcome. We now live in a world where even subtle persuasion efforts are suspect, so it’s a bad idea to go into a networking situation thinking you’re going to talk somebody into doing your bidding.

If your business and your style is still focused on the old-school, hard-sell, push-marketing approach, it’s time to take a close look at how well it’s serving you these days. The new culture driven by social media is all about forging real connections and building relationships.

How this relates to networking with members of your team, business partners, and customers is clearly illustrated in a classic book Real Influence: Persuade Without Pushing and Gain Without Giving In by business psychiatrist Mark Goulston and executive coach John Ullmen. They start by describing a model for connecting with and influencing people in this new culture:

  1. Inspire people in order to achieve the outcome you desire. Focus on the three ‘R’s of a great outcome: Results, Reputation, and Relationships. Successful entrepreneurs with great networking skills have grand Results in mind; they build a Reputation worthy of long-term commitment; and they invest in Relationships to get buy-in to their desired outcomes.

  2. Master listening to learn where other people live. To network effectively, you need to fight the following common tendencies: listening while ignoring, defensive listening, and problem-solving listening. Effective networkers are curious to discover where other people are coming from so you can empathize with them, and to do this, you need to get to the fourth level of listening: connective listening into other peoples’ worlds. This means you have to make the leap and stop listening from your own perspective, and instead try to understand theirs.

  3. Engage and connect with people in their space. True engagement and connection requires that you get “it” (the other person’s issue reality), you get “them” (at a personal level), and you get their path to progress. They then sense that you are working with them, instead of manipulating around them.

  4. Go beyond expectations to make yourself unforgettable. This means adding value before, during, and after an interaction. Find ways to add value in expanding their thinking, making them feel better, and helping them take effective action. After you have mastered these steps, there is still room to take networking to the next level, and become a “power influencer.”

  5. Let adversity lead you to great outcomes. Don’t get stuck in the “I can’t” world, and don’t forget the positive lessons from every negative experience. Do acknowledge your feelings, because when you do, you can address them effectively. Do have the courage to let new great outcomes find you. And then share your experiences with others who may be going through similar struggles. Give others an advantage by showing what challenges you’ve overcome and how.

  6. Network by getting out of the way. It’s important for relationship building to understand when to move on or to let others shine. Every great outcome becomes a part of you, and it’s hard to let go, like handing over your CEO role, for example. If you are strong enough to get out of the way so others can take over, your great outcome can last forever, or become someone else’s even greater outcome. It also opens your door to more great outcomes.

  7. Network positively after you’ve made big mistakes. To repair the damage from the mistakes we all make, we need to learn how to make them right. Be brave enough and humble enough to make amends to the people hurt. Let others help you dissect the mistake, and they will respect you and learn from your efforts.

  8. Let gratitude magnify your influence. When you perform an act of gratitude, whether you are thanking a person directly or talking about someone else who has helped you, the person who is listening to you feels a strong sense of gratitude as well. That immediately creates a stronger bond between the two of you.

Being an entrepreneur has always been all about influencing others, but the rules of persuasion have changed. What worked in the days of Dale Carnegie doesn’t always work in today’s more sophisticated and less trusting world. Following these new rules of networking will help you achieve great outcomes.

Marty Zwilling

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Saturday, September 5, 2015

Are You An Inventor Or An Entrepreneur, Or Both?

Edison-inventor-entrepreneur Most of the technologists I know inherently believe that the terms inventor and entrepreneur mean the same thing, so they are frustrated and surprised when they build their products and no business evolves. They don’t understand that most great entrepreneurs, including Bill Gates and Steve Jobs, had a partner with complementary skills on the business or technical side.

In fact, I challenge anyone to name a famous inventor in recent times who also built a successful business without one or more partners on the business side. Building a business today is far more challenging than it was back when Thomas Edison alone built a business empire from his thousand inventions. Now we have online information overload, more government regulations and easy worldwide access to alternatives.

The term entrepreneur has always been defined as a person who builds a new business, which may or may not involve inventing a product. Sometimes great new businesses, such as Starbucks, are built on the oldest of base products, but with better customer service, distribution, marketing or a new pricing model, by a smart, determined entrepreneur such as Howard Schultz.

If you are an inventor looking to attract the next Howard Schultz as a partner on the business side, here are some defining entrepreneur characteristics that I suggest you look for in a partner:

  • A focus on building a business. Inventors focus on building a product, which investors often tag as a “solution looking for a problem.” A good entrepreneur starts with a problem that needs to be solved, including how many people have the problem, what people are willing to pay for a solution, how to make money and how to execute.

  • Shows passion and knows how to market. Even the best solutions these days need marketing and effective communication to get any attention and traction. An inventor’s attitude of “if we build it, they will come” is unlikely to lead to a successful business. The passion of a good entrepreneur is contagious to the team, investors and customers.

  • Thinks customer-centric vs. technology-centric. Finding and interacting with customers on requirements, value proposition, pricing and support must be an entrepreneur’s top priority. Understanding the relevant market segments and market trends is usually more important in building a business than technology trends.

  • Knows how to build and lead a team. Inventors are often lone scientists who don’t have the skills or interest to build a team around them. A team is often seen as a burden to an inventor, and may potentially dilute or steal ownership. Entrepreneurs know they need a team with many skills and enjoy the leadership role.

Inventors, on the other hand, also have some positive defining characteristics that every entrepreneur and business needs in a partnership, including the following:

  • Shows single-minded focus on a single idea. Too many entrepreneurs have multiple ideas, and are easily distracted by new market opportunities or trends. They need the perseverance and focus of an inventor to get to a solution, make sure it works reliably and really solves the problem. This requires a deep understanding of technology.

  • Follows a disciplined and methodical approach. Edison reportedly found a thousand light-bulb filaments that didn’t work, but he persevered in a rigid analysis and testing process until his invention materialized. Filing a patent and quality testing requires a level of documentation and a detail orientation that one rarely finds in an entrepreneur.

  • Brings realism to solution-development projections. Inventors hate budgets, required checkpoints and scheduled completion dates. They know you can’t schedule invention costs or the number of iterations required. As such, they bring some balance to the entrepreneur who wants everything done tomorrow, leading to a quick business exit.

  • Has an insatiable curiosity and an open mind. Successful inventors are always asking questions and seeking answers to technical problems, even when the solutions seem impossible. Thus they tend to build deep knowledge about a subject, and are able to keep an open mind on what may be the next solution or evolution of the technology.

As you might guess, the businesses that really change the world or deliver paradigm shifts embody a balance of both of these roles, and that balance is rarely found in a single person. The challenge for each of us is to take a hard look at our own strengths and weaknesses, and not be afraid to solicit and appreciate the strengths of a partner. Don’t let your ego get in the way.

Marty Zwilling

*** First published on Entrepreneur.com on 8/26/2015 ***

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Wednesday, September 2, 2015

8 Action Items Required To Sustain Market Leadership

sustain-market-leadership Sometimes entrepreneurs are so focused on making change happen for others, that they forget that continually changing themselves and their company is equally important. Some get stuck in a rut and get run over by competitors with new technology, like Eastman Kodak, and others get pushed into a crisis, like Apple did, before they reinvent themselves into a new market.

Everyone and every company needs to continually learn from their experience and adapt to a changing world to thrive. “If it ain't broke, don't fix it” is an old adage that really doesn’t work in today’s business world. If you don’t plan to reinvent yourself regularly, your competitors will make you obsolete, and any success to-date will likely be short-lived.

In his recent book “Invent, Reinvent, Thrive,” Lloyd E. Shefsky, Entrepreneurship Professor at the Kellogg School, highlights this message, and provides some expert insight on how entrepreneurs can apply the principles to their own career and company. Here are the key recommendations from both of us, based on my own business mentoring insights:

  1. Re-launch using your enhanced core competency. Use that same technical and business expertise that served you well on this startup to find the next opportunity. I’m sure you have seen many new ones, and now understand even better the due diligence required to validate the opportunity, and the executions steps required to make it happen.

  2. Ignore the voices of dissent again. Negative advice on an unknown is easy and safe to give, so every entrepreneur hears it over and over. As an entrepreneur with some success, you had the confidence to prove them wrong once, so don’t lose your nerve and try to play it safe now. Proven problem solvers only get better with practice.

  3. Listen and act on the ideas of others around you. Take advantage of the fact that you have surrounded yourself with key people who have good ideas, but may lack the skills or confidence to act on them. Skip the arrogance of “not invented here,” and re-invent your current company, or start a new one, before a crisis occurs.

  4. Move to a higher platform. Many entrepreneurs get their first taste of success running their own consultancy or practice. A few are able to move to higher platform, like moving from a sole practitioner physician to create and run a much larger medical organization. That’s a type of re-invention that can give you a major advantage over competitors.

  5. Changing times call for a new skill set. Smart entrepreneurs in any given industry, like publishing, recognize the appearance of new technologies which threaten their survival, including digital publishing and print-on-demand. The best immerse themselves in these technologies, and invent new businesses, rather than fight in the old one to the death.

  6. Seek out customer trends before they become an avalanche. Don’t stop doing the in-depth communication with customers that brought you initial success. Plan an annual set of customer sessions that you don’t delegate to subordinates. If customers don’t convince you to re-invent a part of your business each year, you probably aren’t listening.

  7. Find mentors who have the skills you lack. Proactively seek out mentors who will tell you what you need to hear, rather than what you want to hear. Work on the new skills you acquire from your mentor, and test incrementally what you have learned. With each new skill you acquire, your likelihood of long-term success is improved.

  8. Expand your investment alternatives. If your business success so far is based on family and Angel investors, perhaps it’s time to start working with institutional investors and external business partners. Their expectations and insights will broaden your view, and may incent you to upgrade your strategy, or re-invent a portion of your business.

Entrepreneurship is not a one-time transformation that qualifies you long-term success. It is a lifestyle, like many others, which requires constant effort to keep you ahead of the crowd in a rapidly changing business environment. Standing still is falling behind. What is your action plan to continually re-invent yourself and thrive?

Marty Zwilling

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