Saturday, September 23, 2017

It’s Time For A New Way Of Thinking About Business

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

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

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

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

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

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

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

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 Non-industrial large organizations cling to outdated business models.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

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

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

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

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

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

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

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

Marty Zwilling

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Friday, September 22, 2017

8 Coaching Myths To Avoid In Building Your Team

team-coaching-mythsBusiness productivity is all about having the right people, even though I’m bombarded daily with online tools and mobile apps that promise to solve every problem with automation and data. In reality, business success and satisfaction is about doing the right things at the right time, which requires leadership and coaching. But coaching doesn’t always work the way you expect.

In fact, I’m a strong proponent of coaching and mentoring in the workplace, but I recognize that these efforts can only go so far in eliminating your human resources problems, and increasing team morale and performance. Some managers work too hard on fixing the weaknesses of the people they have through coaching, rather than enhancing the strengths of the right people.

Most companies still operate around a set of related coaching myths I saw described well in a new book, “The Power of People Skills,” by Trevor Throness. Trevor is a veteran coach who has helped hundreds of entrepreneurs, organizations, and business families across the country. He knows well when it works, and when it doesn’t.

For example, he says that he has never yet worked with someone who succeeded because they had a well-honed set of strong weaknesses. I have paraphrased here his summary of the most common coaching myths:

  1. Coaching is to help people manage their weaknesses. Everyone has weaknesses, including your star employees. The focus of coaching should be to capitalize and extend their strengths, not manage their weaknesses. Coaching is helping a person increase self-awareness and adjust their role to take better advantage of their greatest strengths.

  2. People’s basic weaknesses will change if they’re coached. In reality, if you like the basic package of who your employee is now, know that they will get better with coaching and training. If you don’t like today’s package, all your effort, time, and money will not turn them into a different person. People can change themselves, but you can’t change them.

  3. Coaching will fix the behavior of stubborn, poor performers. A good test of your poor performer is to mention the possibility of receiving coaching. If their ears perk up, and they express interest, maybe there’s hope. If you see no enthusiasm, don’t waste your time with elaborate, ongoing coaching efforts that go beyond the basics.

  4. Tough coaching conversations damage relationships. Ironically, more often than not, just the reverse is true, if the conversation is direct and without undue emotion. Superstar leaders are able to have difficult conversations without making enemies. They earn trust and loyalty because they’re willing to tackle these issues, without being judgmental.

  5. Successful coaching suggests making sweeping life changes. Typically, sweeping changes are short-lived. Real change happens more gradually and takes more enduring effort. A successful coaching engagement is more like a marathon that a sprint. All it takes is someone committed to getting a little bit better each and to finishing the race.

  6. All age generations can be coached the same way. If you use the same approach with every age group, you will miss the mark for all. Members of different generations tend to view the workplace differently. The best leaders and companies adapt the role and guidance to the people they have, rather than expect people to adapt to assigned roles.

  7. The person with the best qualifications wins every time. Skill is needed, but if you have to weigh skill against culture fit, choose fit every time. Hire for fit; train for skill. People who are bright, people-savvy, and eager to learn and grow are always a good fit. Look for natural-born leaders with drive, vision, purpose, and a focus on the customer.

  8. Personal life changes need not be allowed to impact work. At the end of the day, your personal and professional lives are the same life. If your work life is going badly, your loved ones feel it at home, and vice versa. The best leaders don’t dodge personal issues, but add coaching to minimize the work impact, and adapt roles where possible.

Effective coaching starts with sitting with each of your team members, helping them identify their greatest strengths, and brainstorming with them about how they can capitalize on strengths. Coaching is not pouring time into people who are not interested in growing, not pleasing customers, or not moving ahead. Focus on people coaching, and the tools will do the rest.

Marty Zwilling

*** First published on Inc.com on 09/07/2017 ***

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Wednesday, September 20, 2017

6 Funding Sources For Good Causes, Without Angels

Investing_moneyAngel investors and venture capitalists don’t make equity investments in nonprofit good causes. The simple reason is that it’s impossible to make money for investors when the goal of the company is to not make money. Yet as an active angel investor, I still get this question on a regular basis, so I’ll try to outline the considerations in common-sense terms.

A nonprofit organization is generally defined as an organization that does not distribute its surplus funds to owners or shareholders, but instead uses them to help pursue its goals. Examples include charitable organizations, trade unions, and public arts organizations. In the US, a nonprofit is technically any company who qualifies as tax exempt through IRS Section 501(c).

Obviously, these companies still need money to get started, or finance growth, just like a for-profit company. What options do they have available to them, since they can’t sell a share of the company (no equity investment)?

  1. Individual and institutional philanthropy. For a nonprofit, bootstrapping is self-funding from donations and fund-raising. The advantage is no time and effort is spent searching and preparing for the other alternatives, and no repayment terms or collateral are required. There is no discussion of equity, or return on investment.

  2. Loans from a bank or other financial institution. Non-profits can apply for a bank loan or line-of-credit, just like any other individual or company. However, like anyone else, they will first need some collateral, or someone to guarantee the loan, and some evidence of a viable business, like receivables and inventory.

  3. Personal loans from individuals, employees and board members. Personal loans are certainly an option, but should be avoided if possible. As in any company, they can lead to employee problems, or messy legal issues. A nonprofit can also issue bonds to board members and members as a way of borrowing funds from those same people.

  4. Government grants. The grant source often gets overlooked, but it should be a major focus these days when relevant due to the Obama administration initiatives on alternative energy and healthcare. The down side here is that real work is required to put in a winning application, and the award may be a long time in coming.

  5. Private endowments. This is a funding source for nonprofits that is made up of gifts and bequests subject to a requirement that the principal be maintained intact and invested to create a source of income for an organization. Endowments are usually limited to a specific area of interest by a philanthropist, and have many qualifications, so be careful.

  6. Bartering services. Bartering occurs when you exchange goods or services without exchanging money. An example would be getting free office space by agreeing to be the property manager for the owner. This could work to get you legal or accounting services, but won’t get you cash to pay employee salaries.

Hopefully you can see from this list that the people and processes involved in financing a nonprofit have little in common with angel investors, or the venture capital process. You still start the process with a business plan, but then you look for a philanthropist rather than an investor.

Some nonprofit entrepreneurs think they can skip the whole plan, rather than just the sections on valuation, equity offered, and exit strategy. All other sections, starting with a definition of the problem and the solution, opportunity sizing, business model, competition, executive team, and financial projections, are just as critical for nonprofits as for-profits.

A nonprofit is still a business, maybe even tougher than for-profit to run successfully, so the best angel is a great entrepreneur at the helm for fund-raising, as well as operations. In addition, the best nonprofits turn out to be the angel, rather than require one. That’s a higher calling.

Marty Zwilling

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Monday, September 18, 2017

8 Attributes Of The Most Creative Startup Founders

creative-business-peopleAn entrepreneur is literally “one who creates a new business.” The best new businesses are ones that have never been done before, so mastering creativity and recognizing creativity are key skills and mindsets. But how does one recognize and nurture creativity in a person or team?

In researching this question, I reviewed a classic book by Bryan Mattimore, “Idea Stormers: How to Lead and Inspire Creative Breakthroughs,” which details eight attributes of the most creative people, which seem to match the mindsets of some of the best entrepreneurs I know. Investors look for these in the people they fund, and you should be looking for them in yourself:

  1. Forever curious. Endless curiosity is the number one indication of the creative mindset. It allows entrepreneurs to challenge what is already “known” to extrapolate that to an original idea. Curiosity infuses you with the determination needed to figure out or learn how to turn an original or innovative idea into a reality.

  2. Always open to new things. Thinking this way can be viewed as quieting the opinions of the judgmental mind long enough to allow the creative mind the time and space it needs to generate interesting insights, associations, and connections. This opens creative possibilities, rather than categorizing new things into self-limited dead-ends.

  3. Embrace ambiguity. This is the capacity to entertain contradictory or incomplete information without discomfort and anxiety. To the creative mindset, contradictions are an invitation to more focused creative thought, to resolve the paradox, and derive a new un-ambiguous potentially great idea.

  4. Finding and transferring principles. There are two parts to this mindset. First is the mental habit or discipline of continually identifying the creative principles inherent in an idea in a given context. The second part is adapting the principle to another context to create a new idea. It’s the ability to work from the specific to the general.

  5. Searching for integrity. This is the desire to discover, and the belief that there exists, an insight or connection that will unite seemingly disparate elements into a single integrated whole. When it happens, it’s exciting and magical, and it feels absolutely, positively, and completely right. Integrity doesn’t need to explain itself.

  6. Knowing you can solve the problem. This is the confidence that you can tackle the difficult, even seemingly impossible challenges, with inevitable dead-ends, to make a creative breakthrough. As with a success mentality, knowingness is the persistence to make creativity a self-fulfilling prophecy.

  7. Able to visualize other worlds. This is the most imaginative mindset, with the ability to visualize whole new worlds and everything in them. It’s the province of game designers and creators of new social media platforms. It’s imagining original themes, people with new roles, and things with unique designs.

  8. Think the opposite. Some of the most creative entrepreneurs (and teenagers) always seem jump to opposite end of the spectrum from conventional wisdom. But many times, to think differently and creatively, you have to think illogically. Logic and common sense have a habit of leading us to the same conclusions.

Of course, it normally takes more than the right mindset to master the creative mind. Smart entrepreneurs leverage their startup creativity with techniques like involving everyone early and often, ideation, and attending to the details. Professional facilitation also helps. Most often, it’s a long hard road from a good idea to successful innovation.

The most creative entrepreneurs create more value and wealth, not only in physical products and services, but also in their intangible assets such as their brand, reputation, network and intellectual property. Of course, they are always looking to free up time and money for their next big idea. That’s really the best indication of a true entrepreneur.

Marty Zwilling

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Sunday, September 17, 2017

Tips On How To Approach Tough Decisions In Business

tough-decisionEvery so often a promising entrepreneur seems to freeze in the oncoming headlights and gets run over by his competition. Why is it that his idea which seemed so fundable only months ago fails to attract investors today? The team is the same. The company's market is the same.

The only change might be a visible new competitor, or another economy downturn, resulting in investors holding their money, and that makes all the difference. Herein lies a key principle of decision making - “Any decision is better than no decision.”

Even better than any decision is a good decision made quickly. What separates good decision-making from bad decision-making? H.W. Lewis, author of the old classic book “Why Flip A Coin? The Art and Science of Good Decisions,” summarizes good decision making as:

  • Identifying all reasonable actions.
  • Listing the potential consequences of each action and the utility of each consequence.
  • Evaluating the probability that each action will lead to a given consequence.
  • Choosing the action quickly which has the best expected outcome or positive contribution.

These points may sound obvious, but the process is certainly contrary to the popular “shoot from the hip” approach that is practiced by some entrepreneurs. The idea here is following a process can actually force you to think. You don't have to do it perfectly to stay ahead of the game.

Beyond not thinking, another failure is not really knowing what you want to achieve through the decision. This is a problem with many product-based companies. Their goal is to create profitable products, but too often they don’t research what their customers really want, and what they are willing to pay. It's difficult to create a high-demand product by guessing.

In all cases, be sure to distinguish between ideas and opportunities. A business idea is not a business opportunity until it is evaluated objectively in the context of a specific business plan. I like focus, but if you focus too early on only one business idea without a plan, you are more likely to become attached to it, and lose your objectivity.

Some entrepreneurs seem to know instinctively that a certain product or service has great potential for success. This comes from much industry experience, and is not irrational. On the other hand many unsuccessful would-be entrepreneurs are unsuccessful precisely because they were irrational, so avoid that pitfall.

Decision-making in the face of risk is one of only a handful of unique characteristics that successful entrepreneurs possess. After all, the very nature of a true entrepreneur is one that embraces risk. Often this risk-taking is mistaken in part to be “the reason” the entrepreneur succeeds in their business.

Some decisions involve risk, at times a great deal of it, but there are a greater number of decisions that can be thought through and analyzed to determine on some basic facts, whether or not they are good or bad ideas. Smart entrepreneurs always use facts, when they have them, rather than their gut.

If you are someone who never uses your gut, and exhaustively researches a purchase prior to making it, you are most likely not cut out to be an entrepreneur. This type of decision making, careful and cautious, is certainly a great attribute to have in the corporate business world, but it’s a killer in startups.

Making no decision doesn’t work in any business. So your first test here is to see if you can decide which category of decision maker you best fit. The headlights are approaching…

Marty Zwilling

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Saturday, September 16, 2017

10 Steps To Investing Successfully In New Ventures

investment-successInvesting in entrepreneurs and startups is a fun but different world from investing in conventional stocks, bonds, and commodities. First of all, it’s more of an investment in people than in a business, since the startup is usually an idea barely half-baked when they need your money. Secondly, the risk is very high, since as many as 90% of startups fail in the first five years.

On the plus side, it’s an opportunity to get in early and really help make things happen that will change an industry, or change the world. It’s an opportunity for that “big bang” return of 10X to 100 times your initial investment, like early investors in Google, Microsoft, and Apple. Finally, it’s an opportunity to “give back” what you have learned in your own career for the next generation.

Today most startup investors still register with the SEC as “accredited” investors before they buy any startup equity in the U.S. This requires a simple signature that you have a net worth of at least $1M or have made at least $200K each year for the last two years. But these requirements have been relaxed with the Crowdfunding JOBS Act implementation in 2016.

With all these considerations, I recommend the following steps and considerations for investors newly interested in startups:

  1. Build a balanced investment portfolio. Just like a seasoned stock investor would never put all his investible resources into a single stock, don’t put all your money into startups. Begin with perhaps 5-10% of your total investment base, and be prepared to lose it all. The growth target should be 5-10 times your initial investment in five years.

  2. Start in a business domain you know well. Since there are no bellwethers like Apple or IBM in the startup arena, your best bet is to pick one in a business area you know well. Don’t be fooled by thinking that social networks are hot, so you should invest in the next startup you see in that realm. Remember that 9 out of 10 startups fail in every realm.

  3. Fund an entrepreneur you know and trust. In the business, this is called investing at the first tier for startups - “Friends, Family, and Fools (FFF).” Most entrepreneurs start asking for money from this tier, when they have very little more than an idea. Here you are definitely betting on the person, rather than the idea, but the upside potential is huge.

  4. Join an existing angel investor group. This is the second tier of startup investors, and offers the comfort of working with more experienced investors with similar interests, to help gather and vet startup investment proposals. Some of these groups also offer you the option of putting your money into a multiple-startup fund to spread your risk.

  5. Diversify your total investment across several startups. Angel investment amounts per startup per investor usually range from $25K to $250K. These may be aggregated by an angel group up to about $1M for an angel round. If a startup needs more than this in a single round, they should talk to venture capitalists, who invest institutional money rather than their own personal money.

  6. Use the new Crowdfunding sites for small amounts. The hottest new way of investing in startups to go to popular online sites like Kickstarter and IndieGoGo. There you can get in for as little as $20, or even less. Typically these are used only for non-equity rewards or pre-orders, but the JOBS Act does allow equity investments with many restrictions.

  7. Participate as a mentor in local startup incubators. Incubators are a great place to learn about potentially great startups, and participating as a mentor helps you learn which ones are a good fit for you. The best known ones, like YCombinator, led by Paul Graham in Silicon Valley, and TechStars, located in Boston, provide excellent networking to investors, and on-site technical leadership, which can make your investment less risky.

  8. Do your homework before investing. Public companies with stock usually have industry analysts and SEC filings to give investors a quick view of the company stock value. Startups are private companies with no common document filing requirements. Thus it is incumbent on every potential startup investor to ask for and read their business plans, current financial statements, and investor presentations.

  9. Invest local and take an active role. Most angel investors only invest in companies and people local to their geography. Skip international and other opportunities you can’t touch and feel. Many negotiate a Board Seat for themselves as part of the investment Term Sheet. This allows them to ask for and get regular updates from the company, and allows them to have a say on how their money is used.

  10. Think long-term. It’s a lot easier to buy stock in a startup than it is to sell it. Once invested, you should expect no return until the first “liquidity” event in 3-5 years, maybe longer. Liquidity events include merger or acquisition (M&A), or Initial Public Offering (IPO) when the stock goes public. There is no “exchange,” so you can’t sell the stock at will.

In summary, investing in startups can be very rewarding, both financially, and in your ability to really help someone who needs help. But it’s always a risky proposition, probably well beyond the risk of the commodities market, since there are so many unknowns and few controls.

My advice to new startup investors is to start slowly, stick to business areas that you know well, and put more weight on your assessment of the entrepreneur and the team, than on the idea. Successful startups are all about the execution. You don’t want to end up on the wrong side of that equation, but you do want a bite of the next Apple.

Marty Zwilling

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Friday, September 15, 2017

7 Effective Approaches For Navigating Office Politics

office-politicsRunning a business would be so much easier if we didn’t have to deal with office politics. Every business professional not only have to deal with their own office politics, but also with those in their customer offices, vendors, and partners. According to some sources, 47 percent of workers feel that office politics take away from their productivity, and is one of the top 10 stressors.

Yet “Basic Office Politics” is one of those required college courses that, as far as I know, still doesn’t exist. We all have to learn the hard way all the tactics to use and avoid to be productive within the complex network of power and status that exists within every business, large and small. In my own case, it took me many years of trial and error to find some paths through the swamp.

Fortunately, today there are some good books around to get you started, including “How to be an Even Better Manager,” by Michael Armstrong. His handbook on business skills has been the textbook for business professional through all its ten editions, and has been translated into twenty-one languages. Here are his key points and mine on how to capitalize on office politics:

  1. Identify the political players and stakeholders. We all start out naively assuming that all business leaders make decisions based wholly on fact and merit. The first challenge is to develop your “political sensitivity” – observe and ask questions about how things are done in your business, where the power bases are, and who has hidden agendas.

  2. Learn how to keep political players comfortable. Every individual and leader has their comfort zone – behaviors, values, attitudes, fears, and drives that result in productive relationships. Actions outside these comfort zones will likely lead to feuds, hidden decisions, excessive arguing, counter-productive lobbying, and back-biting.

  3. Build your cases to align with decision makers. Before coming and launching a fully- fledged proposal at a committee or in a memorandum, it’s smart to test opinion and find out how key people will react, This enables you to anticipate counter-arguments and update your proposal to answer objections and to accommodate political realities.

  4. Work the network of key people on decisions. Facts and merit don’t make decisions – people make decisions. Just as you do your homework on the facts, also it pays to do your homework by visiting the players in a given situation. Effective management is the process of harmonizing individual interests with the goals of all business stakeholders.

  5. Identify the gatekeepers and norms for action. Focus your powers of persuasion on the right people, and the right issues. Politically insensitive business people often try to steam-roll others with emotion, a barrage of facts, or a claim of high-level support. In fact, a political approach is often the best solution where clarity of goals is not absolute.

  6. Support others as often as you ask for support. Successful businesses are run by building relationships, and every relationship is a two-way street. If you are viewed as always demanding support, but never giving it, your effectiveness will be greatly reduced, even when you are right. Always communicate the win-win element in every decision.

  7. Be prepared to stand firm and lose some deals. When your integrity and values are at stake, do not fold. Everyone needs to see that you do have strong principles, and are not merely compliant with the whims of a political power center. Even the most powerful influencers don’t win every battle, and need to show that they are still part of the team.

There are obviously occasions when a subtle or indirect appeal, rather than a direct attack will pay bigger dividends in highly-charged political situations. It is never legitimate or appropriate to tread on other people’s faces, or revert to buck-passing, memoranda wars, or back-stabbing.

In summary, whether you hate it, admire it, practice it, or avoid it, office politics is a fact of life in every company and organization. Whether you learn it in school or in real life, office politics is not rocket science, but something that you need to master to assure your own success. Complaining about it won’t help.

Marty Zwilling

*** First published on Inc.com on 08/23/2017 ***

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Wednesday, September 13, 2017

10 Steps To Scaling Your Startup Toward A Fortune 500

Crossing_Growth_ChasmEarly-stage entrepreneurs rightly keep their focus on creating an innovative product or service. After celebrating success at that level, they often find themselves ill-prepared to move to the next stage, for scaling their business into a high-performing enterprise. That’s where I see too much entrepreneur burnout, growth plateaus, and founders being replaced, to their chagrin.

By definition, second-stage ventures generally have 10 to 99 employees and/or $750,000 to $50 million in revenue, and see that as just the beginning. Of course, not every entrepreneur wants to tackle this challenge. According to one study a while back, only 45% of founders plan to exit after stage one, and my guess is that less than half the remainder survive the next stage in their own company.

If you are one of the many entrepreneurs who aspire to get beyond the “art of the start,” there are some proven principles to follow. In his classic book, “Second Stage Entrepreneurship,” Daniel J. Weinfurter, talks about making the leap a couple of times himself, and the perspective he gained from many years of consulting with other companies who have done the same.

I like the ten steps he outlines, which I characterize here as follows:

  1. Seek major capital infusion. Very few startups are cash-rich enough to self-finance aggressive second-stage growth. They need a large infusion from venture capitalists, private equity, bank loans, or mezzanine financing. Of course, that means a new level of risk, giving up some control, and a new business plan. There is no free lunch.

  2. Install a real board of directors. Most entrepreneurs are mavericks, and their passion drove their new business. But to scale the business, they need the complementary expertise, experience, connections, oversight, and new capital connections of a formal board of directors. Recruiting, compensating, and engaging the board is a critical priority.

  3. Focus on creativity more than smashing competitors. To achieve second-stage growth you need to stay at the top of your creative game, more than a focus on beating competitors. Growth is more than simply repackaging existing products, and adding bells and whistles or slick incentives. Keep delivering something new and fresh.

  4. Hire more help than helpers. Smart staffing is a key step to ensure your success at the second stage. In addition to fresh products, you need people smarter than you for real help, with the right combination of skills, experience, and passion to foster and manage new growth. You don’t have the bandwidth to keep filling positions with more helpers.

  5. Switch your attention from product development to sales. Second-stage growth usually requires a formal sales model, an experienced and disciplined sales team, and a well-defined process to meet your new goals and demands. These only come with the proper training, investment in tools, and focus on customer relationships.

  6. Managing business growth is more than metrics. You can hire the best salespeople, have great products and define good metrics, but without decisive and innovative managers, the sales organization will not reach its full potential. Leaders are needed to coach each salesperson, keep the team on message, and spur new growth and goals.

  7. Separate marketing from sales for further leverage. In the second stage, marketing and sales are highly specialized functions. Marketing shapes the concept, branding, packaging, pricing, and positioning. Sales builds relationships, translates needs, makes proposals, and closes the deal. The skills required are complementary, but not the same.

  8. Optimize the total customer experience. Successful second-stage companies often create an entire organization devoted to one-on-one relationships with their customers, not just customer service for exceptions. Delivering a superlative experience is the only way to get truly loyal clients, repeat business, and expansion through social networks.

  9. Build a winning culture and make it pervasive. In these rapidly changing times, in your own rapidly evolving company, culture will be the rudder that guides your path in a fashion that is consistent with your vision and values. Reinforce the values and operating principles with clear behaviors and guidelines to keep the culture healthy and thriving.

  10. Separate management from leadership, and provide both. Leadership is the quality that inspires people to do their best every day. Management guides people in what needs to be done, by creating sustainable and repeatable systems, with education and guidance to make sure all efforts are productive. Neither is effective without the other.

Many startups are family businesses, and these don’t need to be grown into large enterprises. Yet the steps outlined here still have value in building a business that lets you enjoy the entrepreneur lifestyle, and lets you work “on the business” once in a while, rather than “in the business” 24 hours a day, 7 days a week.

On the other hand, if you aspire to be the next Bill Gates or Steve Jobs, these principles for aggressive growth to the enterprise level are absolutely required for survival. It really is a decision to grow and have fun, or die. Are you enjoying your entrepreneur lifestyle today?

Marty Zwilling

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Monday, September 11, 2017

10 Negatives That Still Make Going Public A High Risk

ipos-are-high-riskIn the old days, every entrepreneur dreamed of easily taking their startup public, and making it big. Today the rate of startups going public (IPO – Initial Public Offering) is up from the dead zone, but is still half the rate of 15 years ago. Smart entrepreneurs are just now starting to look at this option again, due to its unpredictability and the challenges of running a public company.

According to a recent Ernst & Young global report, the first half of 2017 was the most active first half by global number of IPOs since 2007. Yet they still see warning lights in many geographies around the world, due to political uncertainties. Today around 90 percent of successful startups are still acquired by bigger companies, as the safer and preferred method of growth and funding.

The reasons are a lot more complex than the meltdown of key investment banks in the US a few years ago, so don’t expect a big change in the numbers soon, even with recent stock market rallies. In my view, the key reasons that IPOs have lost their luster from an entrepreneur and investor perspective include the following:

  1. The US IPO process is still stumbling. Too many startups have experienced early financial losses and technical glitches, like Groupon and the Zynga IPO a while back, which antagonized individual investors and startup executives as well. In addition, most ordinary investors are convinced that IPO rewards only go to insiders.

  2. Going public is an expensive process. Typical costs for startups today range from $250,000 to $1 million, even if the offering does not go through. In addition, huge amounts of executive time are required, as well as hits to key operational, accounting, and communication processes. The M&A alternative looks simple by comparison.

  3. Constant pressure to increase earnings. Because public shareholders usually take the short-term view, they want to see constant rises in the stock's price so they can sell their shares for a profit. Thus, there is tremendous pressure to increase current earnings, and little appetite for strategic investments.

  4. Startups going public are laid open to competitors and critics. Startups are typically run by a couple of executives who are reluctant to disclose via the prospectus and SEC reports all the decision-making criteria, operational financial details, and compensation formulas. With thousands of shareholders, dealing with critics is an onerous challenge.

  5. Complying with Sarbanes-Oxley requirements is a heavy burden. Public companies of any size must comply immediately with the full reporting requirements of the SEC. There is no accommodation for smaller public companies, who can’t be competitive in their space with the new accounting, documenting, and reporting processes required.

  6. Public companies are always at risk for takeovers. Friendly or hostile takeover attempts are just a couple of the many ways that company founders sense a loss of control of their own destiny. The board of directors, as well as public stockholders, are no longer part of the inside team focused on the founder’s vision to change the world.

  7. Increased liability risk exposure. Public company executives and directors are at civil and even criminal risk for false or misleading statements in the registration statement. In addition, officers may face liability for misrepresentations in public communications and SEC reports. Executives are also at risk for insider trading and employment practices.

  8. Violent market swings usually hit public companies first. Private companies in less-relevant market segments can often fly under the radar in turbulent times like the recent recession. Public stockholders are more easily swayed by emotion and the activities of the crowd, than real market conditions.

  9. Startup founders don’t fit in a public company. Most just don’t enjoy all the challenges of communicating to analysts, placating demanding stockholders, and keeping up with legal reporting requirement. They know they can be quickly tossed aside for not maintaining the right image and the right relationships with people they don’t like.

  10. The image of large public companies is negative. In the last few decades, the paternal image of large multi-national company leaders like Thomas Watson at IBM and Henry Ford is gone. Now the mistakes of large companies like Enron and BP have set a new image of public companies as being led by greedy and uncaring executives.

These negatives have largely overshadowed the potential IPO positives of increased capital for the startup, possible huge increase in personal net worth, broader access to investors, market for their stock, the ability to attract top-notch professionals, and the peer prestige of running a public company.

Thus most startups I know don’t even mention the IPO exit option, when applying for angel funding, and most angel investors will react negatively if you do mention it. As best, you should reserve this option for later stage VC discussions, once you have a well-proven business model, large market following, and substantial revenue.

More importantly, make sure first that you really want to give up the entrepreneur lifestyle for the challenges of a public company executive. I’m betting that Mark Zuckerberg of Facebook fame still has second thoughts from time to time, despite being worth $71 billion as a result.

Marty Zwilling

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Sunday, September 10, 2017

7 Action Items For Introverts Starting New Ventures

introvert-business-ventureYou can’t win as an entrepreneur working alone. You need to have business relationships with team members, investors, customers, and a myriad of other support people. That doesn’t mean you have to be a social butterfly to succeed, or introverts need not apply.

It does mean that you need to look, listen, and participate in the business world around you, and network through all available channels, like business-oriented social networks online (LinkedIn), local business organizations (Chamber of Commerce), and events or conferences in your school or industry.

I hope all this seems obvious to you, but I still get a good number of notes from “entrepreneurs” who have been busy inventing things all their life, but can’t find a partner to start their first business, and others trying to find an executive, an investor, or a lawyer.

What these people need is more relationships, not more experts, more blogs, or more books. So I thought I would drop back to some essentials in building and nurturing business relationships (most of these apply to personal relationships as well):

  1. Build your network. These are people of all levels that have been there and done that, meaning people who know something that you need to know. See my article from way back “Entrepreneurs Learn Best From Business Networking” on how and where to get started. You don’t need a thousand friends, but a few real ones can make all the difference.

  2. Give and you will receive. Relationships need to be two-way, and can’t be just all about you. If you are active in helping others with what you know, they will be much more open to help you when you need it. The more you give, the more you get in return, both literally and figuratively.

  3. Work on your elevator pitch. This is a concise, well-practiced description of your idea or your startup, delivered with conviction to start a relationship in the time it takes to ride up an elevator. It should end by asking for something, to start the relationship.

  4. Don’t skip all business social settings. Face time is critical, even with the current rage on social networks, phone texting, and email. Studies show that as much as 50-90% of communication is body language. That’s usually the important relationship part.

  5. Nominate someone as your mentor. Build a two-way relationship with several people who can help you, and then kick it up a notch with one or more, by asking them to be your mentor. Most entrepreneurs love to help others, and will be honored to help you.

  6. Cultivate existing allies. These are people who already know and believe in you, but may not be able to help you directly in your new endeavors. But don’t forget that each of these allies also has their own network, which can be an extension of yours, if you treat them well.

  7. Nurture existing relationships. We all know someone who claims to be a “close friend,” but never initiates anything. They never call, they never write, and wait for you to make the first move. If you don’t follow-up on a regular basis with someone, there is no relationship, only a former acquaintance.

On the positive side, many attributes of an introvert lead to better business decisions, such as thinking before speaking, building deep relationships, and researching problems more thoroughly. Mark Zuckerberg, Facebook founder, is currently the most famous introvert entrepreneur, so don’t let anyone tell you it can’t be done.

One of Mark’s secrets seems to have been to surround himself by extroverts like COO Sheryl Sandberg, and people who have a complementary energy. But working alone doesn’t get you very far. It takes a team to win the game of business, so take a look around you to see how you are doing so far.

Marty Zwilling

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Saturday, September 9, 2017

7 Cultural Myths That Can Destroy Your Moral Compass

moral-compass-appNew entrepreneurs tend to focus only on getting the product right, and assume that the right culture and ethics will come later simply by hiring good people. In fact, they need an early focus on developing their moral compass, as well as setting the right ethical tone. Building an ethical business is more than just compliance and meeting legal requirements, and it has big paybacks.

One 11-year classic study of over 200 companies, detailed in “Corporate Culture and Performance,” found that those working on their culture improved revenue by 516%, and increased net income by 755%. Conscious Capitalism, a recent business movement which includes a large focus on culture and ethics, claims 3.2 times the return of other companies over the last 10 years.

One of the keys to setting the right ethical tone is understanding and avoiding the myths and pitfalls of others. I saw a good summary of these in a recent book reissue, “Ethical Leadership,” by Andrew Leigh, an expert in this area. I like his specifics for business leaders on improving and sustaining the best company cultures, and his summary of the culture myths facing new business leaders:

  1. It’s easy to be ethical. This myth ignores the complexity surrounding ethical decision making, particularly within business organizations. Ethical decisions are seldom simple. For example, people often do not automatically know that they are facing an ethical choice. Any given individual may not recognize the moral scope of the issues involved.

  2. Business ethics are more about religion than management or leadership. Behind this myth lies the confused belief that ethics are a means of altering people’s values. The reality is different. An ethical culture deals with managing values between the individual and the company, to best handle the inevitable conflicts that crop up in every business.

  3. Hire only ethical people, so further time on business ethics is not needed. This is usually an excuse for not developing ethical policies and practices. These can be as simple as how to handle customer over-payments, or more complex in how to handle the choices every employee may face between conflicting customer and company interests.

  4. Business ethics are best left to philosophers and academics. Deal with this myth by sharing with colleagues some of the highly practical tools for making sense of the issue – such as ethics audits, behavior codes, risk strategies, targeted training and leadership guidance. Business ethics is a discipline that must be practiced every day by everyone.

  5. Ethics can’t be managed. While codes of behavior do not guarantee an ethical culture, they do clarify desired behavior and articulate for employees what is expected of them. Every business has complex and diverse dilemmas which are not specifically covered in documented procedures, so employees need clear values leadership for guidance.

  6. We’ve never broken the law so we must be ethical. Many perfectly legal actions can still be deeply unethical. As an example, companies often realize that faulty products are slipping out, but they delay a recall, sighting that strictly legal requirements are being met. Unethical behavior can even with something low key which initially goes unnoticed.

  7. Unethical behavior in business is just due to a few ‘bad apples.’ In reality, most unethical behavior in business happens because the environment tolerates it, usually through benign neglect. When it comes to ethics, even good people tend to be followers, and if told to do something, they will do it, without considering the ethical implications.

Company ethics are a prime example of where you and your company only get one chance for a great first impression, and if you lose it, it’s almost impossible to regain. Don’t follow the examples of institutions in the recent financial meltdown, or certain oil companies working offshore, or the many smaller company examples we have seen in our own neighborhoods.

Every business, new or old, needs to remember that an ethical culture, or lack of it, shows in the actual behavior and attitudes of all team members, rather than just in policy documents and videos from the top. A successful business is far more than a good product and a good business model – it’s equally about projecting and executing with a great culture. Can you vouch for the culture and ethics of your company, from top to bottom?

Marty Zwilling

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Friday, September 8, 2017

Are You Involved With Business, Or Fully Committed?

involved or committedIn my role as advisor to small businesses, I often think of the old joke, “In a bacon-and-egg breakfast, the chicken is very involved, but the pig is committed.” Some business owners claim to be committed, but seem quick to look to someone else to make the hard decisions, or some external factor to blame for challenges. On the road to success, the buck always stops with you.

Some argue that success is all about being "blessed with talent" or even just lucky. Billionaire Mark Cuban writes on his blog that it took an incredible amount of commitment and work to benefit from his luck. When starting his first company, he routinely stayed up until two in the morning reading about new software, and went seven years without a vacation.

Even after many years running his company, retiring, and returning, Starbucks CEO Howard Schultz still gets into the office by six in the morning and stays until seven PM. Schultz then talks to overseas employees even later at night from home. He goes into the office on Sundays and reads emails from his thousands of employees on Saturdays. That’s commitment.

On the other hand, I often hear from “wanna-be” entrepreneurs who dream of being their own boss, and working their own hours by running their own business. Let me assure you, if you don’t have the mindset to fully commit to all the rigors of owning a business, you will be happier taking orders, and a paycheck, from someone else.

From my own experience, for your own calibration, here are some indications of what I believe truly committed means for a business professional and leader today:

  1. Actively proclaims leadership and responsibility. The most successful business owners are not hesitant to ask for advice, but would not dream of letting someone else make the final decision. They only blame themselves when things go wrong, but are quick to try again, and never give up. They don’t like to share rewards or responsibility.

  2. Demonstrates ongoing passion for the business. Committed owners love their idea, and you can hear the commitment in their voice and dedication. Often they connect their work with a higher purpose, such as changing the world, rather than just making money. My challenge as advisor is to help them find facts and structure to validate their passion.

  3. Does not seek repeated confirmation of value. In business, count on it being lonely at the top. If your psyche is one that needs regular positive feedback, and a commensurate paycheck to stay motivated, you need to find a real job rather than an entrepreneurial one. The best businesses are innovative, which means venturing into the unknown.

  4. Gives priority to business demands over social. If you find yourself unable to clear your head of work-related thoughts at the end of the day, that’s commitment. Social relationships are important, and you do need to blank out work from time to time, but if social priorities are at the top of your list, you won’t enjoy the business owner role.

  5. Gets satisfaction from solving business challenges. Some people need a predictable schedule, for personal reasons or just peace of mind. Entrepreneurs need to be flexible, and assume there will be long working hours. If you are annoyed rather than exhilarated at the unpredictable schedule at your business, you may be involved but not committed.

  6. Never finds time or interest in a real vacation. Most business owners I know can’t remember the last time they had a “real” vacation (without bringing their work along). This may not be healthy, but it illustrates the level of commitment of your competitors in the marketplace. Many see trade shows or business expositions as their vacations.

  7. The thought of retirement suggests boredom. Most employees involved with a business are working hard, but are looking forward to retirement. The most committed entrepreneurs wouldn’t think of retiring, even if they made millions from the current project. They enjoy work too much to retire, and can’t wait to start their next venture.

These characteristics are not a statement of right or wrong, but just different strokes for different folks. The next time you have the urge to chuck your day job and jump to your dream role, remember to test yourself first against these principles of commitment. It’s a hard landing, and a big climb back up the cliff, if you change your mind after the jump.

Marty Zwilling

*** First published on Inc.com on 08/18/2017 ***

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Wednesday, September 6, 2017

7 Ways To Be The New Venture Leader Investors Seek

RichardBransonSanDiego8Jul13In the beginning all businesses are just people playing out an idea. It’s never the other way around – there is no idea so big that it doesn’t need people to make it succeed. Investors know this, hence the saying “Bet on the jockey (founder), not the horse (idea).” A great jockey is a great role model.

Like it or not, everyone looks to the entrepreneur as the jockey role model in a new business. Typically this energizes new startup founders, but some struggle trying to live up to their own, as well as everyone else’s expectations. In reality, nobody really expects anyone to be superhuman, but it can feel like that.

We certainly wouldn't expect superhuman behavior from the people looking to us for guidance, nor would we want them to expect flawless behavior from themselves. If not flawless behavior, what characteristics and actions do they look for? Here are some frequently mentioned ones:

  1. Demonstrate confidence and leadership. A good role model is someone who is always positive, calm, and confident in themselves. You don't want someone who is down or tries to bring you down. Everyone likes a person who is happy with how far they have come, but continues to strive for bigger and better objectives.

  2. Don’t be afraid to be unique. Whatever you choose to do with your life, be proud of the person you've become, even if that means accepting some ridicule. You want role models who won't pretend to be someone they are not, and won't be fake just to suit other people.

  3. Communicate and interact with everyone. Good communication means listening as well as talking. People are energized by leaders who explain why and where they are going. Great role models know they have to have a consistent message, and repeat it over and over again until everyone understands.

  4. Show respect and concern for others. You may be driven, successful, and smart but whether you choose to show respect or not speaks volumes about how other people see you. Everyone notices if you are taking people for granted, not showing gratitude, or stepping on others to get ahead.

  5. Be knowledgeable and well rounded. Great role models aren't just "teachers." They are constant learners, challenge themselves to get out of their comfort zones, and surround themselves with smarter people. When team members see that their role model can be many things, they will learn to stretch themselves in order to be successful.

  6. Have humility and willingness to admit mistakes. Nobody's perfect. When you make a bad choice, let those who are watching and learning from you know that you made a mistake and how you plan to correct it. By apologizing, admitting your mistake, and accepting accountability, you will be demonstrating an often overlooked part of being a role model.

  7. Do good things outside the job. People who do the work, yet find time for good causes outside of work, such as raising money for charity, saving lives, and helping people in need get extra credit. Commitment to a good cause implies a strong commitment to the business.

True role models, like Richard Branson of Virgin Group and Elon Musk with Tesla, are those who possess the qualities that we would like to have, and those who have changed the way we live. They help us to advocate for ourselves and take a leadership position on the issues that we believe in.

We often don't recognize true role models until we have noticed our own personal growth and progress. That really implies that it takes one to know one. Thus, if you are asking the question, that may mean you are well along the road to being that role model already. Don’t stop now.

Marty Zwilling

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Monday, September 4, 2017

6 Symptoms Of A Dysfunction That Can Kill Your Dream

businessman-founders-syndromeFounders almost always cite lack of money as the reason for failure, but if you look deeper, I believe the reason is more often about dysfunctional people and leadership. Sometimes it comes right back to the founder, in terms of a malaise often called “founder’s syndrome.” A few years ago I was intimately involved with a promising startup that taught me about this issue.

I’ll be short on specifics here, to protect the guilty, but I hope you get the idea. It’s not a disease, but it can kill your startup. You can find a more complete discussion of founder’s syndrome on Wikipedia, but here are a few of the “symptoms” I observed in the founder and CEO in this case:

  1. Advisors and staff hand-picked from friends and connections. Personality and loyalty are apparently the key criteria, rather than skills, organizational fit, or experience. The executive is looking more for cheerleaders, rather than people with real insights and ideas.

  2. Reacts defensively and talks constantly. Sometimes it's time for quiet listening rather than talking. A strong and confident leader will always realize that a defensive response before the input message is complete does not impress investors, nor anyone else on the team.

  3. Staff meetings are for one-way communication. This founder holds staff meetings only to report crises, rally the troops, and get status reports on assignments. There is no concept here of team strategy development, and shared executive agreement on objectives.

  4. With no input and no “buy in” from the team, sets extremely ambitious objectives. These objectives are set based on the desires and dreams of the founder, with no recognition of technical realities, costs, or time required.

  5. Over time, becomes more and more isolated and paranoid. The first clue is some veiled comments about the motives of staff members, advisors, and investors. These become more specific as the situation gets more dire, to the point where key members begin to desert the ship in disgust.

  6. Highly skeptical about planning, policies, and advisors. Claims "they're overhead and just bog me down." The founder perception is that his experience is more applicable than the input of others, and formal planning and policies are just a way of introducing unnecessary bureaucracy.

In the beginning, we all found our startup founder to be dynamic, driven, and decisive. He had a clear vision of what his organization could be. He seemed to know his customer's needs, and was passionate about meeting those needs. Just the traits one would expect for getting a new organization off the ground. However, he had other traits, including the ones listed above, which became major liabilities.

The undoing of the company began when a potential investor, after months of search, was ready to put up $1 million, but made it clear that his firm would likely need to replace the founder with someone with more credentials and experience in this industry. With that revelation, the founder killed the investment deal, and every other potential deal which raised the same issue.

Of course, no situation is this simple. There were product development problems, pricing problems, and early customers who demanded more features and delayed contractual payments. The ultimate result was a startup founder who exhausted his personal funds, drained the investments capability of friends, and drove away the team one by one.

For me, this is a most frustrating and difficult problem for any advisor or team member to deal with, since communication and learning can only occur when someone is open and listening. If any of you out there have seen this, or have some experience or ideas on how to deal with this situation effectively, let me know. You can be a hero if you have the cure.

For all you founders out there, if you find this article anonymously taped to your computer, it might be time to take a hard look at yourself in the mirror. We can’t change you, but you can change yourself. It could save your startup!

Marty Zwilling

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Sunday, September 3, 2017

Startup Marketing Should Skip Traditional Advertising

word-of-mouth-crash-courseThe power and influence of paid media advertising, including print ads, TV commercials, radio, and even online digital campaigns is waning, in favor of unpaid earned and owned messaging from your website, social media, key market influencers, and existing customer word-of-mouth. But startups need to remember that even zero paid media doesn’t mean that marketing is free.

The case for zero paid media as the new marketing model was highlighted in the classic book, “Z.E.R.O.” by Joseph Jaffe and Maarten Albarda, both experienced marketers working with new companies, as well as larger firms. They advocate investing in their new framework, where the Z.E.R.O. initials take on meaning as follows:

  • Zealots, disciples, and influencers. New products and startups often require a culture shift to drive acceptance, which can best be accelerated by zealots or a visible chief disciple, like Steve Jobs. Other sources stronger than paid media today include key social media influencers, such as “mommy bloggers” and popular YouTube events.
  • Earned media. This is media exposure from a neutral third-party, such as an unpaid news story on your product or service to highlight innovations or social value. This exposure is highly credible, since you don’t control the message, and extremely valuable since it is not viewed as part of any advertising context.
  • Real customers. Marketing media content from real customers in real time is now commonplace via sites like Yelp, Foursquare, and online reviews. This word-of-mouth media source is also highly credible and valuable, since it comes from “peer” customers, rather than you as the source, or any paid source.
  • Owned media. This includes your website, blog, and presence on social media platforms, including Facebook, Twitter, Pinterest, Tumblr, Instagram, and many more. These usually provide a customer’s first impression of your offering, and should not be blatantly self-promotional, but instead informative, educational, and even entertaining.

As I mentioned, this framework is powerful, but none of these elements are free. A while back in a blog article, I pointed out that none of these justify a startup business plan with little or no budget for marketing. All require planning, deliberate actions, and quality content and event creation which will likely absorb all the savings from reduced paid media campaigns.

In any case, reframing the conversation from paid media marketing to the new framework requires a balance, and measurements along the way to better manage return on investment. In the book, Jaffe introduces three new sets of metrics for gauging progress:

  • Medium-term metrics. This is essentially a series of interim forecasts not dissimilar from mile-markers in a marathon race that advise whether it’s time to pick up the pace or slow down to smell the roses. Examples include counting members of an advocacy program, app downloads, tenured customers, or subscribers to an e-mail list.
  • Long-term sales. We often talk about short-term sales and long-term relationships in mutually exclusive terms. They are polar opposites in terms of their time frames, but how about building a bridge of compromise between them? Whereas every short-term initiative is akin to a traditional campaign, the long-term sales effort is the commitment.
  • Short-term wins. Accountability is not optional, as it’s still important to have something to show for your efforts quickly. Only this time, consider the large “W” (big win), the small “w” (small win) or in some cases even the small “l” (small loss), which represents failing fast or failing smart, insights, lessons, learnings, or pleasing initial results.

I’m not suggesting that paid media channels should be seen as dead to young companies, since even the revolutionaries, like Google, Facebook, and Apple, still rely on paid media to optimize their own efforts. And paid media are hardly standing still, continually figuring out ways to be more effective, using big data and other innovations to get more customer attention.

Thus while I see startups quick to jump on the zero paid media bandwagon (for budget reasons), I recommend a balance. First, go for that earned and owned media channel, using the same budget parameters you might have previously allocated for paid media. Later, you can lower the budget as the metrics show results, or apply the remainder to paid media as a follow-on step.

In all cases the tone and resources must be focused on capturing today’s customers, who are looking for engagement and connection, rather than the traditional loudest noise. Z.E.R.O. marketing is not zero marketing.

Marty Zwilling

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Saturday, September 2, 2017

Can Your Business Survive The Traditional Life Cycle?

Economic_cycle.svgSuccessful startups seem to follow similar paths to greatness, and unfortunately all too often that path leads them back down the hill much faster than they went up. Big company powerhouses, like IBM and Xerox, took fifty years to make the cycle, but new companies today, in the age of the Internet, often make the cycle in five to ten years, or even less. Consider MySpace and Webvan.

Thus it behooves every entrepreneur to start watching these things more carefully from the very start. By definition, most startups begin as a result of some innovation in product, process, or service. The problem is that innovations in most business areas are coming so fast these days that yours can be overrun while still be scaled across geographies and other products.

In other words, the challenge today is to build a culture of continuous innovation, as well as continuous scaling, and continuous consolidation, all concurrently. That’s a tall order, especially when your business culture has to fit into the myriad of international and local cultures that are part of every market these days.

In the classic book, “Fish Can’t See Water,” Kai Hammerich and Richard D. Lewis explore these culture issues, both national and international, that can make or break your company strategy. Incidentally, I love that book title, which seems to me applicable to most aspects of business (and even people), as well as business culture.

To set the stage for all the cultural issues and timing, the authors start with a summary that I like of the five lifecycle phases every company is likely to experience over the long-term or short-term, regardless of culture:

  1. Innovation. This business phase is where every entrepreneur starts. It’s a volatile period for every company, where most struggle with getting commercial and technological traction, usually based on a single product or service. A particularly critical moment is when the founders hand over the leadership to a more managerial regime.
  1. Geographic expansion. This phase is characterized by rapid expansion either regionally or globally for growth (scaling up). This is where the culture of the startup has to adapt to the cultures of the markets served. A common practice is to hire local employees who know the geographic culture, even though this may well dilute the company culture.
  1. Product-line expansion. For additional growth, most companies expand the product portfolio to cater to more customers, and sell more to existing customers. The challenge during this phase is to stay innovative and agile. This usually marks the end of organic growth, as partnerships and alliances aid growth, but again dilute the focus on culture.
  1. Efficiency and scale. As the business matures, there is a natural drive towards more efficiency often through sheer scale and a desire for a stronger market share. Companies with an innovative and creative bias, which thrived during the innovation phase, usually struggle in this period. The emphasis is on global processes and tight execution.
  1. Consolidation. This is the end game for an industry, and many companies, characterized by mergers and acquisitions to a few dominant players. Value creation for major shareholders is frequently hampered by integration issues and culture clashes. The crises definitely hits here, if not earlier, and even the survivors can be dragged down.

In fact, crises can and do hit an any phase, due to poor execution, complacency from success, less competitive strategy, change of leadership, and many other reasons. It’s important to note that a company under crisis often will revert to its core national culture, which only further exacerbates the problem.

Thus it’s important to set your company culture early to be a global company, without a specific national bias, since the speed of change is so great. You need the global outlook, even though digitalization and Web 2.0 means you don’t have to have a physical presence in other countries to participate in the global market.

As companies grow in today’s high-speed Internet environment, with constant pivots and new products, they won’t even see the lifecycle phases flashing by, and in fact may be experiencing all of them concurrently. There is no time to be changing your culture to match the lifecycle. How hard are you working to avoid the “fish can’t see water” syndrome?

Marty Zwilling

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Friday, September 1, 2017

8 Steps From A Control Freak To Effective Delegator

boss-control-freakFor a few, delegating comes easily, maybe too easy. For others who are perfectionists, letting go of even the most trivial task is almost impossible. If you are in this second category, you probably don’t like the references behind your back that you are a “control freak” or a “micro-manager.”

London business school professor John Hunt notes that only 30 percent of managers think they can delegate well, and of those, only one in three is considered a good delegator by his or her subordinates. This means only about one manager in ten really knows how to empower others.

The challenge is delegating the right things, and not delegating the wrong things. If you don’t get it right, you are busy, but working on the wrong things. Almost every entrepreneur needs to improve their skills in this area, so I did some research on the basics. Jan Yager, in her classic book “Work Less, Do More,” has outlined eight key steps to effective delegation which I endorse:

  1. Choose what tasks you are willing to delegate. You should be using your time on the most critical tasks for the business, and the tasks that only you can do. Delegate what you can’t do, and what doesn’t interest you. For example, non-computer types should consider delegating their social media, website, and SEO activities.

  2. Pick the best person to delegate to. Listen and observe. Learn the traits, values, and characteristics of those who will perform well when you delegate to them. That means give the work to people who deliver, not the people who are the least busy. This requires hiring people with the right skills, not the least expensive or friends and family.

  3. Trust those to whom you delegate. It always starts with trust. Along with trust, you also have to give the people to whom you delegate the chance to do a job their way. Of course the work must be done well, but your way or the highway is not the right way.

  4. Give clear assignments and instructions. The key is striking the right balance between explaining so much detail that the listener is insulted, and not explaining enough for someone to grasp what is expected. Think back to when you were learning, when you were a neophyte.

  5. Set a definite task completion date and a follow-up system. Establish a specific deadline at the beginning, with milestones. In this way you can check up on progress before the final deadline, without fuzzy questions like “How are you doing?”

  6. Give public and written credit. This is the simplest step, but one of the hardest for many people to learn. It will inspire loyalty, provide real satisfaction for work done, and become the basis for mentoring and performance reviews.

  7. Delegate responsibility and authority, not just the task. Managers who fail to delegate responsibility in addition to specific tasks eventually find themselves reporting to their subordinates and doing some of the work, rather than vice versa.

  8. Avoid reverse delegation. Some team members try to give a task back to the manager, if they don’t feel comfortable, or are attempting to dodge responsibility. Don't accept it except in extreme cases. In the long run, every team member needs to learn or leave.

Almost everyone who has grown their startup from a one-person entity to a going concern with many employees has struggled with letting go of any task. On the other hand, executives who come from a large company to a startup tend to delegate too much, resulting in high costs and lack of control.

Finally, every entrepreneur needs to set aside their fear of delegating. If you do it right, as outlined above, every task will likely be done better than you could do it. The only thing you can't delegate is “the buck stops here” role. That can only be done by the person in charge, and it better always be you.

Marty Zwilling

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Wednesday, August 30, 2017

7 Leadership Metaphors To Motivate Business Leaders

leadership-metaphorsIn building successful businesses, I find that creating a new and innovative product or service is usually the easy part. The hard part is providing the leadership required to align and motivate all the constituents and players – from engineers, to investors, vendors, and ultimately customers. Great entrepreneurs are not just idea people and then managers, they are extraordinary leaders.

Most investors admit that they invest primarily in people, not ideas, and they inherently believe that they can sense this leadership ability needed to get the rapid growth and 10x return we all strive for. Yet beyond a list of noble attributes, like vision, courage, and integrity, it’s hard for them to define what separates an ordinary entrepreneur or manager from an extraordinary leader.

I saw a new approach in the classic book “Leadership Transformed: How Ordinary Managers Become Extraordinary Leaders,” by Dr. Peter Fuda, which identifies seven leadership themes, presented as metaphors. I believe these will really help anyone recognize great leaders, and even more importantly, accelerate their own entrepreneur leadership transformation:

  1. Demonstrates a burning ambition and a burning platform (fire metaphor). These are the forces that initiate and sustain transformation efforts. The top two on the personal side are “urgency” and “desire,” but these have to be matched on the business side with the willingness to burn the platform (change any aspect of the business) without a crisis.

  2. Sense of accountability and momentum (snowball metaphor). This means no excuses and no rationalization, sweeping team members into mutual accountability. The leader then builds momentum from small successes into a snowball that will grow into a large, powerful, and eventually unstoppable business. Have you addressed all sources of drag or friction on your snowball?

  3. Artfully applies tools, and strategies for change (master chef metaphor). New entrepreneurs are really amateur chefs learning to cook a new business. Existing business frameworks are the recipes, and great entrepreneurs creatively use new tools and strategies to hone these frameworks, just like a master chef.

  4. Works with other team members on mutual aspirations (coach metaphor). It is not about leaders becoming coaches; it’s about leaders letting themselves be coached by others – advisors, team members, and even customers. A team’s captain is dependent on the support of their teammates, requiring trust and respect from both parties, and humility on the part of the leader.

  5. Does not mask authentic self, values, and aspirations (mask metaphor). Too many entrepreneurs put on a mask to conceal personal imperfections, or they adopt an identity not aligned with their authentic self, values, and aspirations. This façade is a burden soon recognized, so dropping the mask is more effective, as well as more comfortable and more fun.

  6. Enhance their self-awareness and edit their own performance (movie metaphor). Great entrepreneurs recognize that leadership is like a movie, and it can be honed and improved by disciplined reflection (see yourself as others see you), edited for impact, and directed by experts on your team. Reflect on how often you operate from judgment as opposed to perception. Think about who could help you reflect-on-action.

  7. Embed their personal journey within the business journey (Russian dolls metaphor). Business is really a set of journeys that interact with an entrepreneur’s personal journey. Up-line this may be your interaction with your Board, investors, and family. Down-line it’s the leadership model you use with your internal teams and external partners. Focus on improving your up-line and down-line dolls with your personal journey.

In addition, here are five strategies that Dr. Fuda and I both agree will lead to a more empowering approach to entrepreneur leadership, and help you optimize all the themes described above :

  • Shift your focus from your business content to market context.
  • Spend more time showing others what is required, rather than telling them.
  • Focus more on collaborating with others, rather than competing.
  • Evolve from guru to guide, and coaching others to find answers for themselves.
  • Move from critic to cheerleader, from what is going wrong to what is going right.

If you are an investor, you need to recognize and mentor entrepreneurs to extraordinary leadership. If you are a startup Founder or executive, you need to strive continually to change yourself and your business to build and maintain the leadership you need to out-perform your competition, and generate the results to meet personal and financial objectives. How many of these themes and strategies are you practicing today?

Marty Zwilling

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Monday, August 28, 2017

5 Reasons Every Smart Business Owner Seeks A Mentor

business-mentorAdvice is cheap. As a new business owner, you don’t have to take any advice you hear, but failing to listen and learn from someone’s prior experience can cost you a fortune. As a long-time mentor and business advisor, I find it ironic that many look only to friends for advice. They forget that friends tell you what you want to hear, while good mentors tell you what you need to hear.

When the message is the same from both, you probably don’t need the mentor anymore, but you always need the friend. Also don’t confuse a business mentor with a business coach. A business mentor helps to fill an experience gap, while a coach helps fill a skill gap. Both may be required.

A mentor’s aim is to teach you by using specific examples of what to do and how, unlike a coach who helps you develop your generic skills for deciding what to do and when. Before you are ready for a mentor, you must know yourself. Have you assessed your strengths and weaknesses? What are your goals? Where are you heading?

Unless you know these things, no one can help you. Also, you need to be mentally prepared to accept advice and criticism, if it is honest, helpful, and given in a friendly way. Once you are ready, what are some attributes of a good mentor and advisor that you should look for? You need someone who can:

  1. Focus your ideas toward viable business results. Most business owners have lots of ideas. Some can be put into practice easily, but others will be off-the-wall and need refinement to implement. A good mentor will have knowledge and some perspective on almost every business subject, to keep your focus in the right ballpark, and the right ball.

  2. Assess time spent on daily crises versus priorities. It’s easy to be driven most of the time by the crisis of the moment. As such, it’s easy to neglect the real priority for growing the business. Sharing your goals with your mentor means that if you don't complete goals, you have a credible voice to remind you and help get you back on the right track.

  3. Recommend required pivots and exit strategies. A successful business is constantly innovating. You need alerts to new pivot requirements, growth strategies, and partnering alternatives, with a realistic understanding of the costs and resources required. Then, there is the exit strategy which needs planning, connections, and forethought.

  4. Introduce you to the contacts and partners you need. When you need contacts for investors, equipment, and legal or accounting advice, your mentor has the contacts and knows where to find the information. More importantly, the mentor tells you what you need to do to build and maintain your own list of contacts.

  5. Provide an unbiased and pragmatic status perspective. A good mentor knows what to look for, and sees what your customers see. It’s natural to become so immersed in your business that you forget to step back and look in from the outside. It’s like living next to the railroad tracks; after a while you don't even see or hear the trains.

How do you find that all-knowing business mentor who is a perfect match for your temperament and your business? The best approach I know is make a short list of the people you most respect in your domain, who are accessible, do your homework, and get to know them personally. If the relationship works, ask for their help. Compensation may be offered, but is often not required.

An ideal candidate is someone from the Boomer generation, who is semi-retired, but still active in local organizations or the investment community. Another alternative would be a business professional who does this for a living, or a role model in a related business who is willing to share.

Even famous billionaire business leaders, including Bill Gates and Mark Zuckerberg have mentors. Of course, many of these are now friends as well. But in the beginning, you should assume that you need at least one of each, and the ability to tell the difference.

Marty Zwilling

*** First published on Inc.com on 08/14/2017 ***

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