Saturday, April 30, 2016

9 Entrepreneur Habits That Lead To Long-Term Success

steve-jobs-drawingBeing an entrepreneur is a lifestyle that requires staying power, because starting a new business is a long-term process with many tough challenges. As an angel investor, I look diligently for signs that an aspiring startup founder has what it takes to thrive and prosper for the long haul ahead. Passion and vision are necessary, but not sufficient, to really change the world.

Many of the best-known entrepreneurs who achieved long-term successes, including Howard Schultz (Starbucks) and Steve Jobs (Apple), shared a common set of attributes and habits, including the following:

  1. They never gave up, despite some major setbacks. In investor circles, it is often said that the number one cause of startup failures is that the founder gave up too early. Great entrepreneurs will tell you that they may have pivoted many times, down to their last dollar, but have never given up. I look for that same determination in every new founder.

  2. The founder talks about lessons learned, not excuses. Successful entrepreneurs are always ready, willing, and able to learn from challenges, rather than trying to find something or someone to blame. Howard Schultz readily admitted that early success created hubris and entitlement in his team, which took a major initiative to correct later.

  3. They proactively replace their current offerings. When the revenue starts to flow, it is easy to ride the wave and only react when competitors start to cut deeply. Steve Jobs was quick to obsolete his own best-selling products every few months, to keep the momentum and the Apple brand image growing. That’s a challenging but winning long-term strategy.

  4. They focus only on highly-differentiated solutions. The most common startup proposals I see are for yet another social media niche solution, or for solutions which are “all-in-one” integrations of multiple existing platforms. Entrepreneurs who think long-term look for innovative new solutions in large and growing markets, despite the increased risk.

  5. They work hard on finding complementary channels and partners. Never assume that a great solution will sell itself, or won’t need the help of dominant distribution channels and partners with existing customer bases. Entrepreneurs with a habit of thinking long-term focus on their core competency to build a recognizable brand. They don’t try to do it all.

  6. They spend as much time on relationships as the business. There really is something to the saying that a successful business depends on who you know, as much as what you know. That ability and determination to nurture win-win relationships with peers, potential partners, and competitors, separates long-term entrepreneurs from short-term flashes.

  7. They surround themselves with strong and positive people. Great entrepreneurs have a habit of selecting associates who are smarter than they are, and provide complementary skills. These are not “yes” people, but they always offer a positive perspective, rather than reasons why something can’t be done. The result is that 1+1 equals three or more.

  8. They know that making money is critical, but secondary to a higher purpose. Steve Jobs often attributed his long-term success to a desire to change the world, but suffered setbacks when he took his eyes off revenue flow for too long. Even the best cause does not sustain a business alone, and a higher cause is needed to drive long-term success.

  9. They work harder and longer than most, and relish it. Not only do they put in more hours by habit, they get far more done than others. Yet they are known for their extreme focus on selected critical elements, and their extreme depth of knowledge on key subjects. They consistently embrace a workload that would seem crazy to others.

The entrepreneur lifestyle is all about vision, working hard, getting things done, and learning from every step, forward or backward. When investors see a founder with the habits described above, they hardly care what solution he or she is pitching – the odds are good of a long-term success. Have you checked your work habits lately, to see how well they project your staying power?

Marty Zwilling

*** First published on Entrepreneur.com on 04/20/2016 ***

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Friday, April 29, 2016

6 Leadership Behaviors Drive Continuous Innovation

vijay-govindarajanEvery entrepreneur and business executive knows that continuous innovation is required to survive, but most struggle with this more than any other challenge they face. They know they need to act proactively, but still are often blindsided by a new competitor coming out of the blue with a future they never imagined. Innovation driven by the next crisis is not leadership.

I just finished a new book, “The Three-Box Solution: A Strategy for Leading Innovation,” by Vijay Govindarajan, one of the world’s leading experts on strategy and innovation. He succinctly outlines the key behaviors that I believe every business leader must focus on, to drive innovation without waiting for the next competitive crisis:

  1. Avoid the assumption that current gifts will keep on giving. This is a trap of the past to be avoided at all costs. The best leaders selectively forget the past, and are constantly on the lookout for the future’s raw material of new ideas. They overtly set out to create the future as a mission distinctly separate from their performance engine of today.

  2. Be alert to “weak signals” of non-linear shifts and trends. To do this, leaders must eliminate the noise of obsolete ideas and activities, by creating protective structures, including dedicated teams focused on innovation. They need to regularly listen to a few mavericks and outsiders who routinely generate nonlinear ideas and trends.

  3. Create the future as a day-to-day business process. The future needs to be treated as today by a team and a process that is insulated from interference, but empowered to draw on necessary performance engine resources. The trick is not to sweep everything aside, but to balance relevant aspects of now while making room for what is new.

  4. Sponsor experiments and measure like new investments. Experiments on today’s revenue engine necessarily focus on short-term financial goals. Experiments on future ideas should be measured like investments, and judged on longer-term potential, allowed to iterate, and focused on learning and adapting quickly. Both are always recommended.

  5. Constantly build new skills to be resilient in the face of change. Ensure your firm’s fitness to act on new opportunities, and develop an evolving sense of where the future lies. A business that relies on static skill replacement is falling behind, and ripe for the next competitive crisis. Build a process also for divesting those who have lost their value.

  6. Invest more energy in the “horse you can control.” Most executives admit to spending huge amounts of time and energy on issues they can’t control, including the economy, regulatory changes, and competitor moves. The best leaders spend more time on their own processes, skills, and hard decisions on what to keep and what to divest.

Govindarajan recommends a simple and practical “three box” framework for allocating time, energy, and behaviors in the proper balance to foster continuous innovation. These three boxes include managing the present, escaping the traps of the past, and generating breakthrough ideas. This is the only way to exploit change and let go of old ideas, while still profiting from the present.

He relates actual examples of how major companies, including GE, Hasbro, and IBM, have used this framework and strategy to selectively let go of the past and remake themselves on a regular basis to stay vital and competitive. On the other end of the spectrum, technology startups also really need this mentality, since the rate of change there is rapid, and competition is so intense.

Thus, I believe the approach actually works and applies to leaders at all levels – from a small team startup entrepreneur, to a business unit leader in a larger organization, to the chief executive of a multi-national conglomerate. It allows any leader to actively invent the future, rather than consistently be reacting to it. How much of your time is currently spent in crisis reaction mode?

Marty Zwilling

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Wednesday, April 27, 2016

For Equity Investors, A Startup Has To End To Win

startup-ipo-exitThe last thing a new entrepreneur wants to think about for a new startup is how it will end. Yet one of the first things a potential equity investor asks about is your exit strategy. The answer you give can make or break your ability to get an investment, so you need to have the right answer ready before anyone asks. Here are three important reasons for the question:

  1. Good investment paybacks normally require an exit event. Equity investments are not loans, so there is no loan payback period or interest payments. Equity is stock, but private company stock has no market value until the company goes public or is sold or merged with another company. These events may take three to five years at a minimum.

  2. Startups with no exit planned will minimize investor returns. If the entrepreneur plans to grow the company into a family business, or keep it private, they will either never be interested in buying out investors, or will certainly not be motivated to provide the 10x return that investors are looking for. Investors hesitate to invest under these conditions.

  3. Most entrepreneurs like the startup role, but not the big-company role. Investors know that the fun of a startup turns into managing production processes, sales processes, and personnel in a few years. You probably will do that job poorly, unless you plan your exit early, to move on to your next startup role, to do that better the next time.

Of course, if you are able to bootstrap your startup, and don’t anticipate the need for outside investors, you can technically ignore the first two points. Even still, in the context of all three points, I recommend that you evaluate the most common exit alternatives and considerations, and integrate the right one into your startup strategy and plan:

  • M&A - merger or acquisition by another company. This should be perceived as a win-win event, where your startup is bought or merged into a larger peer or competitor, allowing both you and investors to cash out. The resulting entity will gain complementary skills, economies of scale, new customer sets, and hopefully a larger growth opportunity.
  • IPO – public company initial public stock offering. According to recent National Venture Capital Association statistics, only 16% of venture-backed startups now use this alternative, due to high liability concerns, demanding shareholders, and high costs. Most experts don’t recommend this approach as your default strategy anymore.
  • Find a private equity firm or friendly individual. This alternative differs from an M&A, since the result is still your original single company. Yet it is an opportunity for you and your investors to cash out. The buyer has the challenge of scaling the business, and managing all the operational growth requirements. You can kick-off your next startup.
  • Position the company as a cash cow to fund spinoffs. If you can convince investors that your startup will generate a solid revenue stream, and the market won’t go away any time soon, they may see an opportunity for an ever larger return. You can maintain ownership, and even find someone you trust to run it for you, as you focus on spinoffs.
  • Liquidate the assets, cash out investors, and keep the rest. This is not a recommended strategy, since business shutdowns are usually seen as distressed situations, meaning the value of hard assets will be highly discounted. Less tangible assets like the brand name, business relationships, and even your reputation may be lost or damaged.
  • No exit. If your startup strategy is to be a lifestyle company, or a family business that will grow organically and never go public, then no-exit is a valid exit strategy. This alternative is often paired with a personal no-exit strategy. If you expect investors to help your startup scale, it probably won’t happen, as discussed in the first points of this article.

While exit discussions may somehow seem negative, an exit strategy should always be seen as positive. It’s a plan to develop the best opportunity for you, your startup, and your investors, and capitalize on it, rather than a plan to get out of a bad situation. Think of it as a succession plan, to keep you and what you have started growing. It may be the end of your startup phase, but it should be the beginning of a more mature and stable business.

Marty Zwilling

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Monday, April 25, 2016

7 Reality Checks On Your Funding Odds With Investors

The_Reality_CheckIf you expect an equity investment from reputable investors for your new startup, you need to know the boundaries that often limit their interest. In the jargon of investors, certain businesses may be viable but not fundable. For example, investors recognize that online gambling sites or a medical marijuana site may generate big returns but may tarnish their squeaky clean reputation.

There are many other more mundane reasons that your startup might be deemed non-fundable, depending on your own circumstances, where you live, or the case you have put together. As an active angel investor, here are some key ones I have seen, with some guidance on how to improve your odds.

  1. Poorly written or missing business plan. If you recently sold your last startup for $800 million, you probably don’t need a business plan at all to get money for your next startup. On the other hand, if you are a new entrepreneur, a well-written and complete business plan demonstrates that you understand the issues and have a real plan for execution.

  2. Team not a good match for the challenge. Outside investors bet more on the team than the solution. If you and your team have no experience in your chosen domain or no credentials starting a business, you will have trouble attracting investors. A solution would be to find a co-founder with the requisite background or investors who know you.

  3. Business is a good cause, but has limited returns. Your plan may eliminate world hunger -- but hungry people don’t have much money. If you have a great social cause, perhaps you should be looking for philanthropists instead of investors. Other social ventures may make good family businesses, but scaling and profitability are limited.

  4. 'Secret sauce' or competitive advantage is not clear. Investors are wary of startups with no intellectual property, even with a first-mover advantage. They know that showing market traction will attract big companies, like Apple or Google, who can easily overrun the best startup. It costs very little to file a provisional patent to begin your protection.

  5. Revenue and profit projections are not credible. Attractive businesses to investors may show revenues that double every year but don’t exceed the gross national product of your country. Investors do expect gross margins that exceed 50 percent, and double-digit penetration rates by the fifth year. Find existing cases to validate your numbers.

  6. Market is new or unproven, or your solution is 'disruptive.' When Facebook first started looking for investors, there was so social-media market. In these cases, you need to show more traction, or find highly motivated investors with vision. Also, disrupting an existing market typically takes too much time and money to interest the average investor.

  7. Go-to-market strategy is missing or not clear. Entrepreneurs with exciting new technologies too often assume that the technology will sell itself. In fact, it is your job to show how the technology will be embodied in a solution that satisfies a painful customer need, what channels will be used for sales and what business model maximizes return.

My advice to non-fundable startup entrepreneurs is to look past individual investors for partnerships with potential acquirers, grants from related institutions and support from your rich uncle. If all else fails, I recommend bootstrapping your own efforts, at least until you get enough traction to relieve the qualms of accredited investors.

In any case, it pays to listen to investor feedback, update your plan and make the rounds of additional funding sources after each new milestone has been achieved. Real customer revenue and thousands of new users represent traction and are the best indication of fundability. The right business advisors can also build your investor credibility through market connections.

Even if you aren’t searching for outside investors, don’t forget that you are making a major investment of yourself into your startup. Thus, these reality checks should always be taken seriously. The odds of finding funding generally correlate highly to your odds of business success -- and your personal risk is even more critical than outside investor risk. Minimize both.

Marty Zwilling

*** First published on Entrepreneur.com on 04/15/2016 ***

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Sunday, April 24, 2016

9 Great Paths To Recurring Revenue For Your Startup

NetflixDVDEvery new business quickly realizes that revenue coming in every period on a committed basis is the Holy Grail to survival and growth. According to many experts, getting new customers is five to ten times harder than getting additional revenue from existing customers. Thus the subscription model (low fixed monthly payments), is rapidly becoming the norm for new products and services.

Subscription pricing has been around for a long time for magazines, cloud-based software, and gaming, but now I’m seeing it used for just about anything, including for more stylish clothes via Mr.Conection, gourmet foods via TryTheWorld, and toys for your kids via Pley. If you are an entrepreneur not using this model, it may be time to consider a pivot.

In fact, in a recent book “The Automatic Customer,” by John Warrillow, who runs the successful subscription based research business SellabililityScore, I saw the nine most common variations on the subscription model today. If you are looking to start a new business in any domain, it’s definitely worth your time to check your fit for one of these models:

  1. Membership website model. With this model, you provide website access to insider information for a regular subscription payment. It works best in a tightly defined niche market, like antique car owners, or rare-coin junkies, or woodworking enthusiasts, where experts hare hard to find, and members can gain from interacting with each other.

  2. All-you-can-eat content model. By providing access to a large variety of titles, like NetFlix with streaming movies, or Hulu for TV shows, with new content added regularly, there is always a reason to keep up your subscription. If you already have many followers for some limited free offerings, this also becomes a natural freemium upgrade.

  3. Private club model. On the other end of the spectrum, if your service or experience is in limited supply, make it a status offering for the strivers out there who want to act and feel like affluent consumers. Here the key is to convince customers that you have something really rare, and maybe even entice them into a long-term but affordable relationship.

  4. Front-of-the-line model. If you can help with a relatively complex product or service, this one is especially appealing to customers who are not overly price sensitive, or ones for whom waiting in line can have catastrophic consequences. It works for the need to resolve IT issues in a small business, to avoiding long lines at popular clubs and hotels.

  5. Consumables model. You should consider this subscription model if you sell things that naturally run out, like Diapers.com or Birchbox for cosmetics. People are willing to pay for convenience today, but don’t underestimate the logistical challenges involved in fulfilling orders and providing services to thousands of subscribers in out-of-the-way places.

  6. Surprise box model. This model involves shipping a curated package of goodies to your subscribers each period. It may have started with wine club memberships, but has now been extended to include BarkBox for family dog treats, Standard Cocoa for those who love chocolates, and SpicySubscriptions for lovemaking paraphernalia.

  7. Simplifier model. Everyone these days wants to simplify their life, so this subscription model works well for personal service businesses, like pet grooming, tutoring, window cleaning, and even bookkeeping. The key is making sure the customer doesn’t have to remember the scheduling, deal with immediate variable payments, or worry about quality.

  8. Network model. This model works best where your product or service utility improves as increasing numbers of people join in. It was popularized with dating sites and LinkedIn, but now is popping up with many services, like Zipcar for car-sharing, BeatsMusic for music sharing, and WhatsApp for international messaging for a low predictable fee.

  9. Peace-of-mind model. This one is an extension of the insurance model into new domains. For example, Amber Alert GPS will make sure your kids don’t wander outside of safe zones, Site24x7 will let you know if your web site is down, and Radian6 monitors social networks so you know what people are saying about your brand.

If your startup is in the Business-to-Business (B2B) world, you need to realize that the subscription model has evolved considerably since SalesForce.com introduced Software as a Service (SaaS) way back in 1999. Popular variations of cloud subscription services now include offerings billed as Platform as a Service (PaaS), and Infrastructure as a Service (IaaS).

So now may be the time to start or transform your business into a recurring revenue engine with subscriptions, or just add an option to get some extra sales growth. But be aware, these models bring with them a whole new psychology of selling, supporting, and measuring your success with customers. Do your homework before jumping in with both feet.

Marty Zwilling

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Saturday, April 23, 2016

10 Tips On Finding The Best Career Fit In A Startup

start-entrepreneurToday is the new age of the entrepreneur, and I see an increasing number of new startups as the economy stabilizes. For new aspiring entrepreneurs, that’s the good news and the bad news, as it increases opportunities, but also increases the startup risk. Thus I often recommend taking a job in a startup first, to build connections and learn what you can, before stepping into the lead role.

Yet finding the right startup for your job interests and skills, or having them find you, is no small challenge. Startups generally don’t have the money or time for executive searches or large job boards, and many don’t even know what to look for. Other entrepreneurs don’t even realize that they badly need a co-founder or team leader who can complement their own skills.

Thus the burden is heavily on the job seeker to sell their value, and proactively find the roles that will get their entrepreneurial career off on the right foot. Here are my top ten tips to get the best ones interested in you, as well as deciding if the entrepreneurial fit is right for you:

  1. Optimize visibility and image on the Internet. No online presence these days may brand you as irrelevant, or not able or interested in contributing. A non-professional or negative image will likely eliminate you from consideration. How you manage your “personal brand” on the Internet is indicative of an ability to manage a startup brand later.

  2. Extend network through startup organizations. The more people you know in existing startups, and the more entrepreneurs who know you, the more likely you will be found as a candidate for the right jobs, and will recognize potential bad fits or low potential opportunities. Despite the Internet, networking is still a person-to-person activity.

  3. Build a list of startups to begin marketing yourself. If you wait for startups to find you, or limit your attention to posted job opportunities, you won’t convince anyone that you can be an entrepreneur. Demonstrate your communication skills and your marketing skills in researching opportunities to add value, and practice relationship building and closing.

  4. Volunteer for temporary roles to get experience. Practical job experience is often more valuable than academic training in the startup world. In addition, working with people already in the business gives you connections to others and insight into areas where you may need to update your portfolio. It also prevents a gap in your resume.

  5. Be an expert on new markets and new startups. Do your research on the top ten startups in your area of interest and be ready to best and worst attributes of each. Update yourself on their history, founder backgrounds, and competitors. With startups, the big picture understanding and value are more important than technical skill depth.

  6. Adjust your lifestyle to work for equity value. Whether you are working for a startup, or running your own, get prepared for living on Raman noodles, or depending on the support system of a spouse. Entrepreneurs are in it for the long-term payback, and have to be comfortable with the lifestyle constraints. Expecting a large salary won’t work.

  7. Make a list of questions to validate viability. You won’t help your image or your experience by joining a startup that quickly fails. Be prepared to ask some hard questions, including current traction, burn rate, and runway before the next cash infusion. These are questions you need to understand well for you own business.

  8. Ask questions and do more listening than talking. Practice active listening with advisors and startup founders. This is important for finding a startup job, and later when you have your own startup, it’s important for finding investors, business partners, and even customers. Practice exuding humility and confidence at the same time.

  9. Be sensitive to culture and operating mode. Look for a fit in long-term values and mode of operation, as well as what you wear to work or to an interview. It’s smart to visit the office before an interview, or talk informally to other employees to make sure you understand what is expected. T-shirts and beer are not the norm at every startup.

  10. Sign up for some career coaching and auditing. Not everyone is cut out to be an entrepreneur, or even to work in the unstructured environment of a startup. There is no time like the present to take a hard look at your strengths, weaknesses, motivations, and aspirations. This life is too short to go to work every day stressed out and unfulfilled.

As an entrepreneur, or while working in a startup, only you are responsible for your career. You won’t find a fine-tuned human resources organization to pave the way for you, or protect you. If that frightens you, then I recommend the more traditional corporate career path.

Just remember that according to most surveys, entrepreneurs have more fun, and a higher probability of really changing the world. Use these tips to join the revolution.

Marty Zwilling

*** First published on Entrepreneur.com on 04/13/2016 ***

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Friday, April 22, 2016

7 Leadership Tips When The Business Is Struggling

Richard-LindenmuthIt’s easy for an entrepreneur or a CEO to feel like a leader when things are going well, but the challenge is to keep that confidence and drive in the face of economic downturns, business turnarounds, and stressful personnel situations. Working twenty hours a day, losing your cool, and falling back to a no-risk strategy are not conducive to long-term success.

I saw some practical tips for business leaders under pressure a while back in the book “The Outside the Box Executive,” by Richard Lindenmuth, a seasoned interim CEO, who has stepped in and revitalized more than his share of struggling companies. I’m convinced that his advice is equally relevant to early startups, where the challenges are legion and the path is far from clear.

I agree with Lindenmuth that emotional intelligence and stability is a must in these environments. He calls it strategic empathy, which is sincerely focusing on the individual, but always with the big picture of the business as top of mind:

  1. Expect anxiety on the team and deal with it directly. When things are not going well, or when the future is clouded with unknowns, expect to find people on the team who are scared and angry. You have to act quickly to communicate strategy, be the role model for calm, and stand up to outliers before the whole team becomes dysfunctional.

  2. Let them say no, and actively listen to team input. Of course, no leader wants to hear negative views, but it’s important to show empathy and reach everyone on an emotional level, while containing your own emotions. People need to know that it’s safe to express their opinions. Once you get beyond the negatives, most people have real contributions.

  3. Focus on team members who will tell it like it is. In any organization you will find people who will tell you what you want to hear, or who are fighting for their own survival. Although you must listen at every level, the best leaders look carefully for that middle ground or middle manager that can see the big picture and effectively implement change.

  4. Don’t send a representative in lieu of direct contact. Lack of your physical presence is read as detachment, or lack of leadership. Direct contact, to people at every level, is the best way to generate trust, respect, support, and action. A recipe for failure is assuming that you can deliver a message once, and get it passed down by subordinates.

  5. If you see something broken, fix it now. Decisive action inspires confidence. People’s perception of your leadership and trustworthiness is directly related to your word-action alignment and behavioral integrity. Show them what you expect, and people will follow your example. If everyone is fixing problems with confidence, the business will prosper.

  6. Everyone has to pull their weight in the same boat. Create an environment that encourages and rewards participation and progress, with no penalties for missteps. Define a common goal, such as improving the customer experience, and eliminate any contention between the internal towers of development, marketing, and sales.

  7. Practice the eight out of ten rule. Generally, out of ten ideas, eight are not usable, but that’s the only way to get to those two good ones. So welcome all suggestions and praise every attempt, which will encourage more ideas. This may also be stated as the Pareto principle, where 80 percent of the results come from 20 percent of the efforts.

When the business is struggling, it also makes sense to bring in outside help for a fresh perspective. This could be a peer, or independent business advisor, ideally one who has been through a similar kind of struggle in their business. The best leaders put aside their pride and emotion, and listen carefully to guidance from outside the organization.

When real change is required in business, a unilateral top-down business leadership strategy is rarely effective. Successful CEOs and entrepreneurs instead listen, learn, empathize and include everyone in the challenge. With their leadership, and everyone invested in the company’s survival, the odds of success go up dramatically. Are you ready for that really tough challenge?

Marty Zwilling

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Wednesday, April 20, 2016

8 Qualities That Put You In The Virtuoso CEO Category

Yo-Yo MaAs an angel investor in early-stage startups, I’ve long noticed my peers apparent bias toward the strength and character of the founding entrepreneurs, often overriding a strong solution to a painful problem with a big opportunity. In other words, the entrepreneur quality is more important than the idea -- in investor jargon, people invest in the jockey, and not the horse.

I’ve often wondered if anyone has quantified the implied assumption that leadership character is indeed a critical element of the success equation for startups, so I was pleased to see a recent book “Return On Character,” by Fred Kiel, a renowned leadership consultant. He has completed a study of more than 100 CEOs, with feedback from over 8,000 of their employees on this topic.

His research concluded that CEOs who received high scores for character also achieved much higher business results – nearly five times the average return on assets (ROA) during the two-year period covered. On the other hand, those CEOs with the lowest character scores (self-focused) were distrusted and suspected of telling the truth only slightly more than half the time.

Through interviews, Kiel identified eight common traits and habits exhibited by all the CEOs with a top character ranking (deemed virtuoso CEOs – masters of the skills and art of leadership):

  1. Displayed and demanded high moral principles. These are summarized as the four keystone character habits of integrity, responsibility, forgiveness and compassion. The authors found these to be achievable through self-training and practice, rather than requiring a genetic endowment. That means all of us have a chance.

  2. Embraced a worldview of positive beliefs. The scope of the positive leadership views included human nature, organization life, and personal purpose. The lower character leaders were consistently more negative and pessimistic in their worldview. In both cases, the beliefs tended to become realities.

  3. Developed a higher level of mental complexity. A leader judged high on cognitive complexity tends to perceive nuances and subtle differences that a person with a lower measure does not. High leaders continually challenged their own ideas and were quicker to adapt them to encompass new information, experiences, and meaning.

  4. Sought out and listened to critical feedback from others. High scoring leaders seek and positively respond to feedback from three critical groups: peers, customers, and direct reporting team members. Self-focused leaders, on the other hand, are more likely to resort to denial when faced with unpleasant feedback.

  5. Find and enjoy the company of one or more mentors. The leadership benefits of mentoring start in childhood, but are just as important at the mature CEO level. Virtuoso leaders recognize and seek three types of mentoring – career mentoring for the longer term, peer mentoring for tactical guidance, and life mentoring for quality of life balancing.

  6. Demonstrate the ideas and behaviors of self-determination. Leaders with a high level of self-determination continually seek more competence in their chosen domain, relatedness and connectivity to other stakeholders, and the autonomy to act in harmony with an integrated view of themselves.

  7. Virtuoso leaders know their life story. By crafting a coherent narrative of their life, they are better able to understand the major events and influences that have shaped their personal development and use that understanding to assess and improve their response to new situations as they arise.

  8. Sought and accepted help from many supportive people since childhood. Leaders who have sought help from natural helpers since childhood, including parents, teachers, and business influencers, usually feel more accepted, respected, and affirmed, and pass that feeling on to followers.

While Kiel’s focus was not specifically on startups, I believe the insights and conclusions apply equally well, if not more so, to startup environments. Every entrepreneur needs to understand the importance of character and leadership is to their growth and success, as well as their ability to attract investors. The return on character in business is well worth the investment.

Marty Zwilling

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Monday, April 18, 2016

Leadership Is From Experience, Mentoring and Failure

leadership-learned-failureCommittees don’t create successful startups. A single visionary entrepreneur almost always is the initial implementer of an innovative new venture, but that lone entrepreneur doesn’t have the bandwidth to grow the business alone. He or she needs the multiplier of growing from the “doer” to a team builder and leader. That’s a big transition, and many entrepreneurs never make it.

These entrepreneurs know instinctively what needs to be done, but they may have no idea how to get it done through others. Some will argue that people leadership is a skill you have to be born with, but I’m convinced that it can be learned from experience, mentoring, and failures. The ones who learn quickest are the ones who move from good entrepreneurs to good business leaders.

In my experience working with entrepreneurs and business leaders, I have found no magic formula or recipe to get you there, but there are some key leadership principles that anyone can aspire too and learn from, including the following:

  1. Become an ardent student of leadership. Entrepreneurs who become business leaders study the successes of peers, and seek to emulate them. They reach to find mentors who have been there, read books on the subject, and participate in leadership development programs. Leadership requires focus and effort, and doesn’t happen by title.

  2. Set personal leadership goals and solicit feedback. Business leadership requires spending more time working on the business, and less time working in the business. You can measure these activities yourself, and get validation from your team. How much of your time is spent on futures, strategizing, and coaching versus fixing daily crises?

  3. Tackle new challenges outside your comfort zone. If you never push your limits, and never fail, you never learn new capabilities. As a new entrepreneur, perhaps you have no experience with hiring and delegating, yet these skills are not rocket science. Don’t be afraid to ask for support from more experienced peers and human resources experts.

  4. Celebrate small successes and learning from failures. People who demand perfection from themselves are rarely good leaders. Learn to celebrate small steps in the right direction, and failures that are a source of real insight. Be humble and transparent in involving your team and even your customers in your successes and your mistakes.

  5. Recognize and reward leadership successes around you. Working to recognize and celebrate leadership in others will supplement and solidify your own capabilities. The more often you walk in the shoes of leaders around you, the easier and more natural it will be for you to define and capitalize on your own leadership elements.

  6. Demand strong performance and deal quickly with mediocrity. Recognized business leaders are known for their expectation of excellence from their team, and from themselves. They do not tolerate mediocrity around them, which keeps their teams highly motivated and proud to be associated with the leader as a role model.

  7. Work on improving your communication skills. Effective leadership requires effective communication, including verbal, written, and body-language. Your team, customers, and partners need to understand your vision, goals, and what is expected of them, before they decide to follow you. Great leaders also practice active listening and full attention.

  8. Go forward with passion and a positive attitude. No one wants to follow a habitually grumpy or negative entrepreneur. Business people are naturally attracted to passionate, motivated, and enthusiastic peers. A side benefit is that you will feel happier and more fulfilled when surrounded by similar positive people. This is a self-fulfilling prophecy.

To grow from being an entrepreneur to a business leader is a personal challenge, and not one that everyone can deal with. The core principles are the same for both – develop and articulate a vision, act decisively, and build personal relationships. The leadership multiplier is required to effectively incent others around you to do the same. How well is that multiplier working for you?

Marty Zwilling

*** First published on Entrepreneur.com on 04/08/2016 ***

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Sunday, April 17, 2016

Services Professionals Join The Entrepreneur Ranks

entrepreneur-service-professionalThe era of stable lifetime jobs for business professionals within a single company are gone. Companies are rightsized quickly now as markets change rapidly, and business professionals are quick to jump to new opportunities for growth and survival, with no ties to special benefits or pension plans. Thus smart business professionals are rapidly becoming the new entrepreneurs.

As a mentor to startups, I see more and more startups that are really an individual professional, marketing themselves as a consultant or freelancer. This is a positive in uncoupling them from a dependency on a single company or boss, but the downside is that they have to suddenly manage all facets of a business, including finances, strategy, and savings for the future.

Of course, entrepreneurs delivering services have existed for some time, including business consultant, independent contractor, and freelancer titles. But these titles are not descriptive of specific roles or skills, and have always had marginal credibility in the business community. I suggest that new entrepreneurs lead with their “professional” title, which suggests their focus and specialized skill, and can be applied to almost any role. Here are some examples:

  • Marketing Professional. Every company and startups needs marketing experts, who are skilled and knowledgeable in the development of marketing programs, content creation, lead generation, and the utilization of social media. This world changes rapidly, and needs a professional with experience in digital and conventional media to keep up.
  • Software Development Professional. Even big companies I know find it hard to keep their in-house programmers up to speed on the latest technologies, including mobile devices, the latest Web technologies, and multi-tenant applications in the Cloud. More and more are scouring LinkedIn for specialists willing to do short-term relationships.
  • Staffing Professional. Staffing requirements come and go in every company, big or small. One of the harsh realities for most product entrepreneurs is that they have deal with hiring and firing as their company grows, and they have no experience or idea where to start. For existing trained professionals, it’s an opportunity to become an entrepreneur.
  • Administrative Professional. Long ago, these were called secretaries, often starting in the typing pool, with the best aligning themselves with an advancing executive, leading to a long career. Now the new breed of these is a self-managed entrepreneur, working remotely, with real expertise on the administrative tools and ways of business today.
  • Sales Professional. The best sales people in any company are highly focused, and self-motivated by the commissions they can earn by closing a few big deals. They know how to capitalize on social media, viral marketing, events, and the new tools of the trade. They are always ready to move on to the next big opportunity as markets change.

I’m sure you can think of a dozen more examples today. Tomorrow you may be looking for a Personal Finance Professional, Health-Care Professional, or even a Startup Professional. We are becoming a society of entrepreneurs. Even the education system is starting to recognize this, with entrepreneurial courses and majors springing up in every university across the world.

Thus you don’t need to invent an innovative product or technology to be a real entrepreneur. The cost of entry as a services professional is at an all-time low, with powerful free tools to create your own website, cheap incorporation of yourself as a Limited Liability Corporation (LLC) via the Internet, and community colleges offering courses for anyone in the new technologies.

The challenge is that not everyone is ready and willing to take on the responsibility for their own skills, lifestyle management, and financial stability. Many of these new entrepreneurs come to me looking for an angel investor or crowdfunding, which will never happen. Investors don’t fund entrepreneurs offering services, since these don’t scale, don’t have large margins, and need just a customer contract to start.

So if you have some resources, some skills, and some confidence in yourself, maybe it’s time for you to jump on the entrepreneurial bandwagon. There is no longer any excuse for a professional businessperson to be stuck in a position they don’t enjoy and can’t control. The entrepreneur lifestyle is much more satisfying, and has unlimited potential.

Marty Zwilling

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Saturday, April 16, 2016

The Number-One Rule Is to Stay Business-Focused

business-brand-focusAfter listening and working with hundreds of entrepreneurs, I have heard many focused only on their next million dollar idea, but very few make any money from an idea alone. On the other end of the spectrum, others focus totally on building a product, assuming a great product will assure business success. Both groups are missing the essence of an entrepreneur – the business focus.

A focus on business execution certainly includes selecting the right idea and developing a marketable solution, but it also requires selecting a viable target market, attracting customers, winning against competition, and delivering a value proposition which is attractive to customers as well as the business. Most importantly, it requires the discipline to integrate all of these.

In my experience, there are several key elements to this discipline, which always include the following:

  1. Staying customer-centric in all business actions. Every startup requires countless tradeoffs in time, money, and priority. It’s easy to let your personal passions and interests fill in for objective customer data. With today’s access to social media, interaction with customers is easy, and must be used for technical, financial, and opportunity data.

  2. Prioritizing activities weekly, and focus on the top three. People who try to do too many things only succeed in doing everything poorly. Even with a limited focus on the most important items, don’t allow the chaos of daily crises to break your discipline of completing and communicating the high priority activities to the right constituents.

  3. Managing cash flow daily – into and out of the business. It’s not unusual for technical entrepreneurs to find finances difficult to understand, intimidating, or a boring distraction. It does require a discipline of relentless focus. A business can be on budget, but still run out of cash, or worse yet, profitable but broke. Investors rarely give you a second chance.

  4. Setting and communicating compelling targets for the team. Everyone must be actively engaged to grow a business, and the team won’t have an engagement discipline if they don’t know where they are going, or don’t have any targets to fight for. As well as setting targets, you have to keep score to prevent random high motion but no progress.

  5. Selling is a job for everyone all the time. It may not be in their job descriptions, but everyone in a new business should be selling. The very first moment that you have contact with an investor, or a customer has contact with your team, a perception is set. That perception is your reality, and you only get one chance to make it a good one.

  6. Defining leading and lagging measures on progress. You can’t manage and make rational decisions on things you don’t measure. Structure and monitor leading measures first, such as customer leads and solution costs. Lagging measures come later, including volumes achieved, cost of customer acquisition, and market penetration.

  7. Insisting on and nurturing total team accountability. Getting things done effectively in a new business requires total individual and team accountability. You can’t afford excuses and multiple people doing the same job. The best entrepreneurs are role models of accountability, with no excuses, not punishing mistakes, and rewarding results.

  8. Keeping team members as well as customers motivated. An unhappy team can’t create a satisfied and loyal customer base. Highly motivated and engaged teams create customers who work and feel like part of the team. Add sustainability and social responsibility initiatives, and you can double team productivity and business growth.

Every entrepreneur needs ideas and the focus on building a great solution. But these are not enough. The winners also bring key business disciplines to the execution, which stretch even the best beyond their comfort zone. Don’t expect the process to be a cakewalk, so make that part of the fun and the learning. Enjoy the journey as well as the destination.

Marty Zwilling

*** First published on Entrepreneur.com on 04/06/2016 ***

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Friday, April 15, 2016

Are You Ready Yet To Be An Entrepreneur Full-Time?

Mark-Cuban-EntrepreneurThere seems to be a big debate these days about the best approach to starting a new business. Some argue the only way to start is to drop everything and jump in with both feet, while others recommend an overlapped approach to the lifestyle, including not quitting your day job until you have revenue and a proven business model. I’m definitely a proponent of this latter approach.

Billionaire entrepreneur and "Shark Tank" co-host Mark Cuban is an outspoken proponent of the all-in early approach, and has made it clear that he gives no credibility and low odds to founders seeking funding who have not fully committed their time and efforts to their cause. Obviously his approach of absolute focus, getting up early, staying up late has worked for him.

On the other hand, I just finished a new book, “The 10% Entrepreneur: Live Your Startup Dream Without Quitting Your Day Job,” by Patrick J. McGinnis, a well-known venture capitalist and private equity investor. He makes some good points in the book for the overlapped entrepreneur approach that I espouse:

  1. One job is not enough these days. The smartest people I know these days always have several things going concurrently – and more in the queue. With the rapid pace of change and all the unknowns in the world, everyone should be working on multiple options, including a conventional paying job as well as an entrepreneurial opportunity.

  2. The early entrepreneur lifestyle is not much fun. Even with high passion and a good cause, early startup efforts are stressful, lonely, and things always take longer than expected. I see no reason not to balance these frustrations with the satisfaction of more conventional work accomplishments and the people relationships we all need to thrive.

  3. Startups cost money but don’t pay a salary before revenue. Most entrepreneurs don’t get the satisfaction of a salary for the first couple of years, even if their startup is well funded by investors. Living off credit cards and borrowed money, instead of other work income, can ruin your personal finances and kill your startup motivation far too early.

  4. Maintain the status and affirmation of an existing job. Not all friends and family will see your entrepreneurial efforts as visionary and prestigious. You can choose to keep your startup efforts “below the radar” to keep peace in the family until your business has the momentum and visibility to overcome the qualms of skeptics important to you.

  5. Make sure you have the right idea before risking all. I very much respect the passion and enthusiasm of a new entrepreneur, but I’m seen enough as a startup advisor to know that more time and effort is often required as a reality check. Reality checks are best before you have put everything on the line, essentially eliminating the ability to back out.

  6. Odds are you are going to fail before you succeed. Historical and current statistics still show the chances of failure on any given startup are better than even. The good news is that you can learn from that failure, improving future odds. Having another job is more good news, since it improves the financial, emotional, and social ability to try again.

In my view, entrepreneurship is an endurance sport, rather than a quick dash to success. When you are starting a new venture, raising capital, and landing those initial customers, the obstacles keep coming, so you need all the flexibility and resilience you can muster. It pays to be able to step into a more familiar role from time to time to clear you mind and hone your strategy.

Over time, I do find that the entrepreneurial lifestyle is more addictive and usually more fulfilling than more conventional business roles. As a result, I know many successful entrepreneurs, including Mark Cuban, who can’t resist starting or investing in a second or third business concurrently, or even hundreds. That’s another variation of a part-time entrepreneur.

As a mentor to aspiring entrepreneurs, I often advise them to start with another alternative, of working for an existing startup, before or while starting their own. I recognize that everyone is unique, with different levels of risk tolerance, energy, and motivation. Thus I encourage you to take a hard look in the mirror, and you’ll know when you are ready to be a full-time entrepreneur.

Marty Zwilling

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Wednesday, April 13, 2016

7 Reasons For Startups To Maximize Early Visibility

change-is-comingIt’s still popular these days for startup founders to operate in stealth mode, meaning no details about the idea or progress are shared with anyone until the big reveal and rollout. The common reason given is that this prevents any competitor from stealing their idea and beating them to market. In my view, this paranoid approach costs them much more than the risk of being open.

I’m not suggesting that a startup should ever disclose patent details to others before filing, but I can’t imagine why a startup would not seek visibility and feedback for their idea and solution while they could still make changes with minimal cost. Pivots and corrections are inevitable for startups in this age of rapid change, and the earlier you make them, the quicker you get to success.

Being open is the new business culture around the world. Entrepreneurs talk to customers and competitors talk to each other about the new trends and technologies they see. Coopetition is the new mantra for growing your business faster. Here are seven key reasons that being open is better for your startup than trying to fly under the radar:

  1. Visibility generates interest. You can’t get any word-of-mouth or media activity by hiding. Before you finalize the product is the best time to talk about it and see if you can get some buzz started. This will do more for your first mover advantage than more time in the lab. Most people agree that even negative media attention is better than none.

  2. Evaluate customer response prior to development. It’s never too early to get real feedback from the people who count. No matter how passionate and certain you are that your idea is perfect, the reality is that you will likely need to pivot at least once. Why not make the change before you have wasted significant time and money?

  3. Get competitors to surface early. You may be convinced that no competitors exist, which is very unlikely. If there really are no competitors, then there is likely no market opportunity, or you haven’t looked yet. If your position is so tentative that knowledge of your idea puts you in jeopardy, you need to know it sooner, rather than later.

  4. Demonstrate a minimum viable product (MVP). Surface your prototype, get customer feedback, make corrections, and iterate until you get it right. Startups in stealth mode often have a false sense of security that they can take extra time to do the job right the first time. Customer feedback is required to get it right, and hidden time is wasted time.

  5. Meet investors before asking for money. The time to build investor relationships is before you need the investment. It gives you credibility to mention your idea in general terms, without immediately asking for money. This can help you get in the door when you are ready, and asking questions early will give you insights on investor priorities.

  6. Pivots can be done gracefully at this point. Customer credibility actually improves when they see you making changes based on their input, and the cost of correcting mistakes early is lower. Operating in stealth mode for an extended period tends to convince entrepreneurs to believe their own biases, and visibly fight the need to change.

  7. Optimize your web history and presence. Stealth mode normally means no time for search engine optimization prior to product launch, not to mention relevant blogging activity, and link building. This means your whole startup effort will appear as very early stage for investors, and will likely not be adequately tuned for customers.

On the other hand, stealth mode does make sense for large companies, like Apple and IBM, who will likely be sued for pre-announcing a future product, since other companies have used this ploy in the past to freeze the market and lock out new competitors. Of course, even startups can get into serious trouble by talking about products and direction with no intent or ability to deliver.

I also realize that there are a limited set of startups, facing particularly entrenched and unscrupulous competitors, where early stealth mode is necessary. With most other classes of startups today, including smartphone apps, web services, and social media applications, early customer feedback is critical, and time to market is of the essence, so secrecy is more of an excuse than an advantage. Who are you fooling by not allowing your startup to be found?

Marty Zwilling

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Monday, April 11, 2016

8 Innovation Inhibitors Challenge Every Entrepreneur

ehang personal droneI’m a practical guy, so I recognize that expecting the real world to be fair is a dream that every entrepreneur needs to put aside as they reach the age of majority. As a business advisor, I see entrepreneur passion often so focused on an innovation that is certain to change the world yet ignores the potential impact of one of the many business inhibitors that kill too many startups.

As an example, I am intrigued with the innovation and technology associated with flying drones of all configurations. I especially like the newest personal flying car, introduced at the most recent Consumer Electronic Show (CES) in Las Vegas. Yet, I anticipate a long hard road for startups in this space due to the practical reality of innovation inhibitors, including several of the following:

  1. Dependency on new infrastructures and support. It’s easy to see the value of electric power versus fossil-fuel engines, but we are a long way from the network of drone service stations and mechanics that exist today for conventional transportation. Necessary infrastructure is an inhibitor to many startup innovations and can take generations to fix.

  2. Demand for safety and usage regulations. New technology solutions often raise the specter of new government regulations. Even the most obvious rules can take years to get debated and passed nationally or internationally. Witness the struggle of the Segway human transporter, introduced back in 2001.Technology can change faster than laws.

  3. People are slow to change and embrace technology. For most people, an “easier to use” innovation means change and new learning effort that can easily offset the value of the change. Investors have a rule of thumb that simple cost reductions of less than twenty percent are not enough to convince most users to change to a new solution.

  4. Investor risk tolerance limits. Every investor has a risk bias against specific innovation types based on investment experience. They like risk, up to a point, after which your startup will always be told that more traction is needed. Trusted business advisors can tell you the real issue, and recommend alternative investors or risk reduction techniques.

  5. Closed community of owners or experts. Some business domains and technologies are so dominated by a small group of “owners” that outside innovations are discouraged or actively attacked by incumbents. Attempting innovation in these domains without first penetrating the fortress is extremely risky. Do your homework first to improve the odds.

  6. Low startup founder resilience and persistence. The best innovators never give up and are not discouraged by setbacks. Thomas Edison failed more than 10,000 times before finding the right light bulb design. Challenged by contemporaries, Edison responded: "I have not failed. I have just found 10,000 ways that won't work."

  7. Qualified and motivated team members are hard to find. It takes more than a single entrepreneur with an innovative idea to build a business. Every startup needs a team with the right skills and experience to complement those of the founder. The right people are hard to assemble due to low near-term returns, high risk and lack of training options.

  8. Limited availability of financial resources. I put this constraint at the end, but it’s an important one. There is never enough funding to deal with the development and rollout costs required for big innovations. Every entrepreneur knows that he or she could do more -- and take more risk -- with more help. The best are able to do more with less.

I’m not suggesting that you let any of these inhibitors keep you as an entrepreneur from tackling the innovation of your dreams, but simply realize that fore-warned is fore-armed. Understanding the constraints up front gives you a tremendous advantage in overcoming them, and it can save you from serious pain and frustration. The entrepreneur lifestyle has always been a fun and satisfying experience. Let’s keep it that way.

Marty Zwilling

*** First published on Entrepreneur.com on 04/01/2016 ***

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Sunday, April 10, 2016

Validate The Pedigree Of A Startup Before You Jump

startup-due-diligenceEvery startup founder loves to prompt for questions from investors and potential key team members about their vision, and the huge opportunity that can be had with their disruptive technology. Yet if you are on the other side of the table, there are some other key questions that you need to ask, which will tell you more about the real success prospects for this business.

Enthusiastic startup founders may try to deflect or minimize these questions in true media-training style, so you need to be patient, calm, and persistent to get the whole story. From my perspective as an investor, I recommend that every founder needs to know the answers to these questions, be open and honest in answering them thoughtfully, and without making excuses:

  1. What is the current runway and burn rate? These terms quantify how fast money is being spent, and how long the business can survive before another round of investments is required. Early stage burn rates over $50K per month, or a runway of less than six months may indicate an inefficient or desperate startup. Think twice before you jump in.

  2. How complex is the capitalization table? The allocation of shares among the founders, and the number and size of outside investments, will tells volumes about the health, stability, and management of the business. Most founders like to talk about their many months or years of sweat-equity, but cash invested is a stronger commitment.

  3. When did this effort really start, including pivots? If the company has been around for more than a couple of years, and still has no product or revenue flow, there better be a good explanation. One more key employee or one more investor will probably not turn the situation around. History gaps and founder turnover may indicate a long road ahead.

  4. Does everyone on the team have a clear role and mutual respect? You won’t get this answer directly from the founder, so ask to talk to other key team members to make sure everyone is carrying their weight, and communicates effectively. Some conflict and differing perspective is healthy, but too many titles or close relatives should be suspect.

  5. Any outside advisors or board members available for discussion? Every startup should have at least a couple of outside advisors who are not major investors or family members, anxious to talk to new investors and key new hires. These should be people with complementary skills to the founders as well as industry expertise or connections.

  6. Is there a real customer willing to give a testimonial? Don’t be sidetracked by potential customers in the middle of a free trial, or friends of the founder. If it’s too early for customers, make sure you understand exactly when the product ships, how detailed is the rollout and promotion plan, and how many times these plans have changed.

  7. Are any lawsuits and challenges to intellectual property pending? Before you invest your life savings, or bet your career on this startup, you need to know how much of a barrier to entry the brand and patents are projected to be. If you have questions or concerns, now is the time to seek legal advice, not after the fact.

  8. How much and when can I reasonably expect a payback? Since nine out of ten startups fail completely, serious investors look for a 10X return on their investment within five years. Look for examples of similar companies and revenue multiples achieved from acquirers. Calculate employee stock option values and vesting times, as well as salary.

These questions are the key ones in every due diligence effort, always done by accredited investors, but almost never done by key employees and new partners. Ironically, startup investors are normally in less personal jeopardy than early startup employees. Smart investors know that many startup investments will fail, while employees always plan on million dollar payouts.

In any case, in addition to the grand vision and the chance to change the world, I recommend that it’s worth your while to calmly and assertively get some good answers to some hard questions from a passionate startup founder before you sign your life away.

Marty Zwilling

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Saturday, April 9, 2016

Too Many Bells and Whistles Will Not Sell a Product

feature-creepTechnical entrepreneurs love to compare the number of features in their product to competitors, and they love to keep adding features -- just because they can. Unfortunately, this approach often turns off mainstream customers, who find the result hard to use. Even worse, this “feature creep” often makes the final product late to market, sluggish and more expensive than competition.

“Focus” is the key to success in a startup, and a minimum viable product (MVP) that does a few things better than anyone else will get more attention quicker from your market. From that base, you can then iterate more effectively, based on customer feedback, to add additional features that really expand the market. Early adopters, who love to count features, are not your major market.

As a former developer, experienced technical entrepreneur, and an advisor to many startups, I recommend that every technical startup adopt and live by some strict strategic and organizational rules to counteract the urge and risks of feature creep. These include:

  1. Separate requirements gathering from product implementation. Every startup team needs a “product owner” role who is not an engineer or coder to collect from customers, prioritize and document required features. Then developers size the implementation alternatives, and startup executives draw a line based on vision, costs and funding.

  2. Define and enforce role and decision authorities. Developers should get the last word on implementation, sizing and duration alternatives. Marketing and product owner negotiate the minimum viable product level based on competition and customer expectations. Financial executives set staffing budgets and monitor spending.

  3. Communicate and commit to a formal development process. With agile and other incremental development processes, schedule and track the allowable time boxes -- one to four weeks -- per cycle. In my experience, where development cycles and timeframes are completely open-ended, the number of features goes up, and the quality goes down.

  4. Update or substitute features as required, but keep the same total. The team must deal with changes from the market and technology but resist any urges from anyone to add features without pruning or removing others. Maintain role responsibilities as previously defined including executive sensitives to overall progress and opportunity.

  5. Focus on stability, usability and performance of key features. The urge to add more features often takes priority over confirming that the basics have been implemented with a competitive level of quality and ease of use. A bloated product with more features done poorly will not survive against a simpler product that does a few things very well.

  6. Incrementally add features in small numbers to follow-on releases. Including too many features into initial release dramatically increases time-to-market and the likely need to pivot. Customer requirements should be re-confirmed and re-prioritized after each release. Plan incremental releases every few months -- but not too frequently.

  7. Avoid adding features for a single customer to close a sale. Sometimes it pays to say “no.” Features added which have not been evaluated to have general appeal make your product more difficult to support, dilute your development effort for important features and complicate the usability and installability for all customers.

  8. Build multiple products versus a single product with many features. The advantage of a multiple-product strategy, with integration capability, is that it allows a natural planning cycle for market requirements, resources required and marketing efforts. Customers are not “forced” to buy features and complexity they don’t need.

In reality, most customers and marketers can’t remember or name more than a half-dozen key features of any solution, so extending your implementation to double or triple this number is counter-productive. The negatives outlined here of “feature-itis" in a startup far outweigh the potential positives of appealing to more customers. Don’t let your business be a victim of feature creep.

Marty Zwilling

*** First published on Entrepreneur.com on 03/30/2016 ***

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Friday, April 8, 2016

6 Key Risk Factors When Scaling A Business To Global

Protest_against_Uber_-_BudapestWith the availability of high-speed Internet and social media access around the world, it’s easy for entrepreneurs to assume that the world is just one big homogeneous market, and project their business will scale accordingly. Nothing could be further from the truth. Large businesses, as well as small, still fail often by not addressing the very real cultural, economic and political differences.

The challenge is to know what to look for when stepping outside your native market, be able to quantify the downside risk, and implement the required strategy in each of the new markets. In a new book, “Global Vision,” by NYU Stern School of Business scholar and leader Robert Salomon, I finally found some great insights on what to look for, and how to make the necessary changes.

His perspectives have been derived primarily from the travails of several major brands, including Walmart, IKEA, and Tesco. Yet, I believe the conclusions and strategy recommendations are equally valuable for every new entrepreneur who intends to expand outside their local country:

  1. Size market potential granularly based on local economics. The most common mistake is overestimating a particular market’s potential, based on your domestic context. Foreign markets typically have less information available and more variability in sales estimates, which is a setup for failure. Do more local homework and validate cautiously.

  2. Assume large and frequent economic swings. The inability to accurately predict or prepare for sudden changes in the local economic environment creates risks for the markets you know, but can wreak havoc for global initiatives. These economies are often ill-prepared to deal with economic shocks. Double the risk may mean half the opportunity.

  3. Currency exchange fluctuations can wipe out gains. The potential for large currency swings may change the way you need to manage transactions, specify contract terms, and project futures. Smart entrepreneurs have learned to lock in exchange rates, collect on transactions immediately, and pay indigenous organizations to hedge the risks.

  4. Factor in basic infrastructure quality and services. The cost of doing business in any market is heavily dependent on local transportation, energy, technology, and financial services. These components can totally change your customer value proposition, or the business model that you have honed. Re-validate your business model in every market.

  5. Evaluate the political climate and operational processes. Uber and Airbnb are current examples of entrepreneurial efforts that are struggling with government regulations in new markets. It pays to research markets proactively, and engage local experts to negotiate a path early, rather than reactively dealing with fines and tarnished reputations.

  6. Honor cultural sensitivities and assumptions. Cultural traditions often dictate business roles, procedures, and customer expectations. The local culture affects not only the decisions an entrepreneur must make, but also how a market views the company. The best strategy is to engage people in the local market to manage your business there.

My summary recommendation is to quantify the context difference or institutional distance to each new market. The greater the difference between your current and the new context, the more challenging it will be to expand there. Salomon outlines how to convert the comparisons into “risk spreads” that mathematically capture and accurately reflect global market opportunity differences.

But don’t look for any magic algorithmic procedure to solve the complex globalization problems. The challenges are continually evolving and are, at their root, a product of social interaction, economic evolution, and political dynamics. It will always take smart entrepreneurs, armed with the latest knowledge and modern analytic tools, to minimize the risks and maximize opportunities.

Tapping into global markets, especially the large and under-developed ones, not only promises market growth beyond our most optimistic vision, but also empowers people the world over to share in a better economic future. How many global scaling opportunities are you missing today?

Marty Zwilling

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Wednesday, April 6, 2016

Bootstrapping Is Much More Fun Than Investors

business-bootstrapIf you really want to start a business your way without a boss or professional investor hovering over you, then just fund it yourself or through friends and family, and grow it organically. It’s more possible to bootstrap today than a few years ago, as the cost of entry continues to go down. According to many experts, over 90 percent of successful businesses currently start this way.

With one of the new free tools and a dose of sweat equity, you can create a website for almost nothing -- and you are on your way to success with ecommerce, your latest invention or personal services. It’s equally easy to go online and incorporate your new entity, register some intellectual property and have some fun with social media for marketing and interacting with customers.

The key to successful bootstrapping is to master the do-it-yourself approach, defer compensation or barter services whenever possible and become a frugal minimalist in all things requiring a cash outlay. Here are the key principles I recommend as an advisor to many entrepreneurs:

  1. Start your business in your own home. With the advent of the Internet, the size and address of your office is irrelevant. Most new teams are geographically dispersed these days anyway, so paying rent for an office should be differed to later stages when revenue is plentiful. You will be in good company with the many legends who used this approach.

  2. Barter services for access to required resources. Don’t rationalize a big investment in basic equipment with long-term requirements thinking. Look for a part-time job in a local or family business to provide access to things you will need only occasionally, such as a high-speed printer, video equipment or product assembly tools and storage.

  3. Learn to be a generalist rather than a specialist. With the unlimited access to “how-to” videos and detailed instructions on the Internet, you shouldn’t need to hire experts for most things. Likewise, too many volunteers and interns will only increase your workload and rework costs. Use your networking to get advice, but all jobs can be do-it-yourself.

  4. Operate small, but show a big-company image. You don’t need a large building and staff to be visible and heard worldwide. Use multiple social-media channels, blogging, email and voicemail to build the same image and responsiveness as larger competitors. Keep expenses down, but keep customer visibility and sensitivity as a top priority.

  5. Practice living on a shoestring budget. Most successful entrepreneurs take only a very minimum salary during the formative business years and reinvest all profits back into the business for organic growth. Defer your desire for expensive perks and vacations until later when you have time for them. You can have fun without spending big money.

  6. Favor profitability over revenue and user growth. Adding free users or customers to increase valuation makes sense for a venture-backed startup looking to go public, but will kill bootstrapping. Self-sustainability, independence, and real fun requires paying customers, profitability and an early cash-flow-positive business plan.

  7. Use your equity for key executives and business partners. Bootstrapping doesn’t mean that you don’t share equity. You can use it best to entice new team members and partners, giving you more horsepower and commitment for the long run. Investors seeking equity for cash typically want more control and cash-return quickly.

  8. Don’t assume you must plan for exponential growth. Investors have spread the word that you can’t get “hockey-stick” growth without a large cash infusion. In fact, you don’t need exponential growth to give you a good return and be declared successful. You may not be acquired for 10-times revenue, but quick exits and public offerings are no fun.

In summary, bootstrapping means living within your means, watching costs carefully, finding alternatives to cash for building the team and expanding the business infrastructure. Bootstrapping does require a full confidence in your own passion to make decisions and change the world with no investors to lean on or blame. But isn’t that why you signed up to be an entrepreneur in the first place?

Marty Zwilling

*** First published on Entrepreneur.com on 03/25/2016 ***

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Monday, April 4, 2016

8 Leadership Practices That Will Make You Memorable

Richard_Branson_2012Almost every employee or team member can remember that one special boss in their career who was the role model of a leader, always commanded respect, and was able to get the most voluntarily from everyone all the time. Every entrepreneur and business executive I know wants to emulate that boss, but most can’t even describe the attributes required.

They know these exceptional leaders seem to have a way of finding and enticing the best people into the organization, getting exceptional performance out of them, and fast-tracking their careers both inside and outside the organization. In my opinion, great examples in today’s entrepreneur world include Elon Musk (Tesla), Jeff Bezos (Amazon), and Richard Branson (Virgin Group).

I’ve also struggled trying to define the characteristics that set these bosses apart, so I was impressed with the new book, “Superbosses,” by Dartmouth professor and consultant Sydney Finkelstein. Here is just a small selection of the sometimes counterintuitive practices he observes that I believe are common to this level of leadership:

  1. Create master-apprentice relationships. These leaders not only recognize team members who have high potential, but they willingly and selflessly customize their coaching to what these special protégés really need. Great leaders provide opportunities and personal growth assignments that go far beyond conventional training programs.

  2. Measure by relationships as well as competitiveness. Exemplary business leaders understand the cohort effect, where peer relationship building is as important to winning as knowledge and power. Good connections and team building are the keys to success. They mentor protégés on talent spotting, creativity, and motivation as well as strategy.

  3. Encourage employees to move on to new opportunities. Nobody likes it when great employees leave for a new challenge, but the best leaders don’t respond with anger or resentment. They know that former direct reports can become highly valuable members of their network, and new business partners as either rise to new major roles elsewhere.

  4. Adapt the job or organization to fit the talent. In today’s rapidly changing world, it makes sense to focus on the talent you have at the moment rather than tasks. Twitter and GrubHub are just a couple of examples where CFOs have been asked to absorb COO responsibilities in the last couple of years, to capitalize on individual strengths.

  5. Take chances on unconventional talent. Larry Ellison (Oracle) preferred a candidate who had accomplished something genuinely difficult over one with formal qualifications. If they were gifted enough, they would rise to the technical challenges. This is a win-win approach, since it often helps people accomplish more than they ever thought possible.

  6. Always searching for new talent sources. The best business leaders never wait until a position opens up to start searching for talent to fill it. They are always on the lookout for talent by peer networking, studying competitors, and working with top university contacts. The goal is to always have a backup plan to facilitate incumbent growth opportunities.

  7. Willing and able to hire on the spot. A few top business leaders seem to have the insight to recognize exceptional talent, and the confidence to go after it, without resumes and extensive interviews. I don’t recommend this approach to new entrepreneurs until you have a few successes under your belt from conventional hiring approaches.

  8. Accept high talent turnover as a sign of success. It makes sense to assume that highly talented people will be in demand, and will want new challenges, so expectations of long-term job commitments are not realistic. Great bosses capitalize on fresh new perspectives, the lure of no career constraints, and the benefits of a supportive network.

Especially in this new world of millennial values and rapid market change, every business leader and entrepreneur should aspire to this imperative of nurturing exceptional talent, and forgetting the tired old assumptions about retention and churn. Maybe then you can be the superboss you always wanted to see again.

Marty Zwilling

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