Friday, October 19, 2018

7 Push-Backs That New Venture Founders Must Overcome

push-back-on-ideasIn business, and in your personal life, the ability to anticipate and overcome criticism is one of the biggest differentiators between leaders, who make things happen, and followers, who may have great ideas but never seem to get things to go their way. In fact, leaders are not remembered for their dreams, aspirations, or intentions – they are remembered because they achieved results.

In my role as an advisor to entrepreneurs, I often find founders who have such conviction and passion for their new idea, that they can’t believe anyone could challenge it. They bristle quickly when investors or even potential customers raise issues with real value, competition, risk, and sustainability. The reality is that important change is always challenged, so you need to expect it.

The best entrepreneurs and business professionals learn to anticipate these push-backs before they happen, and respond calmly and effectively. I like the specifics on how to do this in the classic book, “The Agenda Mover: When Your Good Idea Is Not Enough,” by leadership expert Samuel B. Bacharach, Cornell Professor and cofounder of the Bacharach Leadership Group.

Bacharach details seven possible criticisms that every leader with a good idea should anticipate, and provides guidance on how to overcome each. I’ll paraphrase a few of his key points here, with comments from my own experience in business:

  1. Your new idea is too risky. A new idea is a step into the unknown, and always represents some risk. Rather than arguing the level of risk, a better strategy is to highlight the size of the reward. Then mobilize your support for these rewards through testimonials, input from experts, and traction. Increasing your credibility will reduce the perceived risk by all.

  2. The idea will only make things worse. Resistors often make the argument that while the idea seems fine on the surface, something later is certain to turn things upside down. This usually means that your message needs clarification to offset generalized qualms. Narrow your focus through specific case studies and quantify value and results.

  3. This idea won’t change a thing. When faced with this type of “paternal” criticism, the best path is to again ground your case in very specific examples to show that while the idea might not be a total paradigm shift, it will at least represent a significant change in cost or return. Negotiate the time and resources to do a trial, and measure results.

  4. You don’t know the issues well enough. The main goal of this type of criticism is to challenge your ability to lead and question your credibility. The antidote to such criticism is usually less passion and more facts to show that you have done your homework, assembled expert validation, and are interested in full disclosure and opposing views.

  5. You’re doing it all wrong. “The way it’s always been done” may work well for routine repetitive tasks, but it never applies to new ideas. This argument is actually attacking your ability to execute, rather than the idea. To offset this criticism, you need to highlight your prior experience, the expertise of your team, and the quality of your advisors.

  6. It’s been done before. This sort of resistance is predicated on the assumption that there is historical knowledge or past experience that makes your idea irrelevant or doomed to failure. This can be countered best by a proactive comparison of specific elements of your new idea to past practice and experience. Burst the balloon of generalities.

  7. Someone has ulterior motives. This challenge is one of trust, implying some hidden agenda or self-serving motivation for you and your allies, such as huge financial rewards or positions of power. The best strategy here is to not to over-react or be defensive, and highlight specific value to customers. This is where real leaders let others do the talking for them.

In all cases, the key words for countering criticism and moving things forward are anticipate, mobilize, negotiate, and sustain. Anticipate the agenda of others, mobilize your resources, negotiate buy-in and support, and get things done to sustain momentum in your campaign.

Don’t allow yourself to get involved in an escalating competition of egos, which can make others think that your ego is more important than seeing your idea come to fruition. True leaders in business with million-dollar ideas, like Bill Gates and Elon Musk, don’t stop until they have billion-dollar results. Where do you fit in this spectrum?

Marty Zwilling

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Wednesday, October 17, 2018

8 Tips For Quantifying Traction In Your New Venture

Vehicles-Drag-Race-tractionWhat is the definition of traction for a business startup today? According to most investors I know, traction is some clear evidence that the “dogs are eating the dog food” – usually meaning that you have at least one customer paying full price for your solution. If your phone app or service is free, then the number of users or downloads better be impressive and growing exponentially.

Another term often mentioned is “momentum,” or growing visibility and advocacy within your customer set. This can happen through early marketing, independent of whether you have yet delivered a single product, proven your business model, or have any real customers. Most great crowdfunding campaigns, for example, are the result of momentum built through social media.

Unfortunately, your personal assessment that you have traction probably won’t be convincing to potential investors and partners, so it’s important that you create and track your progress against some metrics. Here are some of the key specifics for credibility and acceptance as you create and use these metrics:

  1. Itemize investment levels from you, insiders, and family. Professional investors expect traction discussions to begin with the size of your own investment, in money and time, plus support received from friends and family. Next would be the level of support from key insiders who would clearly benefit from the success of your solution.

  2. Define metrics on customer feedback and user counts. Early examples of traction for any solution, especially free ones, would include website traffic, number of blog comments, likes, downloads, and active user rates. Investors are wary of initial surges due to friends, family, and early adopters, so sustainable growth rates over time are key.

  3. Count connections with experts, media, and influencers. You need outside advocates who will back your assertions of traction and valid metrics. Relationships with recognized and influential bloggers, relevant media, and industry analysts are priceless. Traction with these people usually is indicative of later traction to come with customers.

  4. Assemble a credible inside advisory board and partners. Investors and potential partners measure your credibility by the quality of your advisors and peer partners. If Elon Musk is an advisor to your transportation startup, that is major traction, even without a product or revenue. Who you know is still often more important than what you know.

  5. Build an experienced technical and executive team. A sure sign of no traction is a lone inexperienced entrepreneur looking for an investor. You need a well-rounded team, including technical, financial, marketing, and operational experience, and your ability to attract the right people is a strong indication of fundability and traction.

  6. Demonstrate key customer prospect evidence of interest. If you don’t have revenue, it definitely is valuable to have orders, letter of intents, value testimonials, or even calls returned and email responses. While these may not be advertised publicly, they should be celebrated internally and highlighted informally to potential investors and partners.

  7. Show validation data for business model key elements. One important measure of traction would be a metric on how many of the key business model elements have been proven, with actual data or multiple experiments. These would include cost of customer acquisition, cost of leads, sales channel, cost of goods, and pricing strategy.

  8. Quantify progress against generic growth constraints. In every industry there are known barriers to traction, including regulatory approvals, safety standards, and clinical trials. These need to be listed as a metric, with breakthroughs counted and resolution times projected. Investors need to see your accomplishments, and the barriers ahead.

Without measures like these, you will likely hear the most common rejection from investors – “Come back when you have more traction.” Be aware that there is no magic threshold of user signups or customer revenue that will assure success. It all depends on the overall level of perceived risk, your credibility, and the size of the potential opportunity.

It’s up to you to define what traction means in your new venture, and then show your progress against these measures. Your level of passion is no substitute for some real data and analysis. In reality, all traction metrics are for you as the business owner, to measure your progress and growth in your new venture. Don’t be fooled by your own hype.

Marty Zwilling

*** First published on CayenneConsulting on 10/04/2018 ***

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Monday, October 15, 2018

6 Story Attributes Will Highlight Your Business Pitch

business-woman-telling-storyThe biggest challenge for every entrepreneur and every startup today is to get noticed and remembered in today’s information overload. The number of entrepreneurs worldwide is huge, starting an estimated 50 million new businesses per year, or 137,000 per day. Every one of these probably has a unique story, but in my years as a startup advisor I only remember hearing a few who capitalized on their story.

The impact of a memorable story was highlighted for me recently as I reviewed the classic book, “Sell With A Story,” by Paul Smith, who is an expert trainer on increasing business results through storytelling. His focus is primarily on improving the results for traditional sales professionals, but I’m convinced that the same principles are equally critical for entrepreneurs selling their startup to investors, strategic partners, and customers.

I say that because I’ve heard too many abstract pitches about the next paradigm-shifting technology, which I can’t relate to, and only a couple with stories that really grabbed me. The best story I remember related the family impact of devastation wrought by Alzheimer’s disease, leading to the development of a mitigation process, and I am now fully committed to this effort.

I learned from Smith that a memorable story doesn’t have to hit you personally, but it does have to include six key attributes to raise it above the standard sales pitch, or new venture problem statement, opportunity sizing, and value proposition. These attributes include the following:

  1. Specific moment-in-time indication. Most entrepreneurs were incented to start their venture at a specific moment they remember well, so telling the story of when and how this happened is a natural. The result will always have more impact than merely outlining a new technology, cutting costs, or tackling a known problem, such as world hunger.

  2. Place where it happened. A memorable story needs to start with location specifics to make it real. Stories relay events, and these events have to happen somewhere. The words can be simple, like “I was meeting with a customer in Boston,” or “When my home was devastated by a tornado.” It’s even acceptable to make up a place with a “what if.”

  3. Every story needs a main character. This should be obvious, but much of what passes for “a story” these days are things like elevator pitches or product descriptions that have no characters at all. In the context of new venture stories, the character would most likely be the entrepreneur, a potential customer, an investor, or all of the above.

  4. The obstacle or the painful need. This is the villain in the story, which should be the problem you are solving. If could be a disease you are designing medicine to combat, missing data that your solution provides, or a safety risk in a common process. The explanation of your solution, financial return, and the rollout comes later.

  5. A worthy goal. The main character in a story must have a specific goal, ideally one that is appreciated or even noble in the eyes of the listener. These days, it’s not cool to have a primary goal of making lots of money, but it is smart to include evidence that the new venture is sustainable as a business, and will provide a satisfying return to constituents.

  6. Something has to happen. Statements about your product’s amazing capabilities or your service commitment, or testimonials about how awesome your company is, are generally not stories because they don’t relay events. They are just someone’s opinion about impact which still belong in marketing collateral, but won’t make you memorable.

If possible, every entrepreneur should craft a unique story, or tune their story, for different audiences, such as investors and customers, to convey your values and your commitment in their specific context. Add emotion, surprise, dialogue, detail, data, and other elements to make your story fresh and effective. Always close stories with succinct lessons and recommended actions.

A compelling story is best used as a “grabber” to get people’s attention and make your venture and brand memorable, but it doesn’t replace any of the new venture basics, such as the business plan, investor deck, or financial model. It can be your competitive advantage over peers and existing players, and it is fun to do. How prepared are you to tell your best story?

Marty Zwilling

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Sunday, October 14, 2018

Businesses Need Employee Engagement More Than Process

engaged-employeeThe days of leadership without engagement are gone. With interactive social media and video everywhere, everyone needs to feel they have a relationship with their leaders, and every brand needs leader personification for customers to relate. Soon you won’t be able to name a business as one of your favorites if you can’t personally visualize and relate to company leadership.

In the same way, great entrepreneurs and company leaders should no longer rely on faceless and nameless processes to drive business strategy and innovation to stay competitive. The old way doesn’t work, and results more than ever in slow decision-making, lack of real connection with employees, and ignorance of what customers really want.

The new principles of engagement, as well as the dysfunctions of the old, are well illustrated in the insightful classic book, “Why Are There Snowblowers in Miami?” by Steven D. Goldstein. He speaks from a wealth of personal experience in private equity, as well as top executive positions at American Express, Sears, and Citigroup.

He found the dysfunctional engagement that sent snow blowers to his store in Miami every year. As a result of this incident and many others, he defined five key engagement principles which resonate with me as just as relevant for new business founders as mature business executives. Here is my adaptation of his engagement principles for all the aspiring entrepreneurs I advise:

  1. Learn to adopt an outsider’s perspective. Every entrepreneur, even though confident in his domain, needs to fight complacency in a world that changes almost daily. You need to look at everything through fresh eyes, continually ask questions not usually asked, and actively listen to contrary views. No change means you are falling behind as a leader.

  2. Interact with employees and customers on a regular basis. Authentic communication at all levels and encouraging feedback is how you find out what is really going on. More meetings in your conference room won’t get to the truth as well as simply talking to people who interact with customers directly. Never be too busy to talk to real customers.

  3. Focus on two or three pertinent metrics in any situation. Keeping it simple is the best course. No one can remember your top ten priorities and measurements. Unbundle projects into smaller elements, and personalize the top couple of metrics for each team. These simplified targets are crucial to motivating a team, and getting the focus you need.

  4. Help people know more, so they can do their job better. Knowledge is power, and good information flow and collection tools are of the utmost importance. Information that is relevant and timely needs to be shared widely and efficiently. It’s also important to share the evaluation insights, and to tie the next action steps directly to current results.

  5. Accept that whatever speed you are going is too slow. Time is the enemy in today’s global marketplace. Follow the guiding motto of Andy Grove at Intel, “Only the paranoid survive.” It’s vital to get quick wins, learn rapidly from failures, and get comfortable with constant change. Waiting is never an option, as competitors will always be moving.

In the same fashion, these engagement principles must be applied to customers. More and more, I see evidence that customers want to be pulled to your company by engagement, rather than feel that you are pushing yourself on them. There are a multitude of opportunities through social media to engage your customers, as well as getting out of your office into the marketplace.

Customer business leadership through brand icons, such as Ronald McDonald and Aunt Jemima, is fading fast. Customers as well as employees want to relate and engage with real people as leaders, and business leaders need to interact with real employees and customers to stay vital and current.

As an entrepreneur, you need to start this focus early, with the same passion you currently apply to your new idea and solution. Have you taken a hard look recently at where you are spending most of your time?

Marty Zwilling

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Saturday, October 13, 2018

7 Ways To Be A Great Manager And Leader For Your Team

i-am-the-bossOne of the things I’ve learned in working with aspiring entrepreneurs is that managing and leading a team is a scary venture into the unknown for many people, even if they have worked as a business professional for years. Having worked in my own career on both sides of the fence at various times, I recommend that everyone practice thinking like the boss in every role to prepare.

This will improve your effectiveness in your current role, and give you a head start towards a future role, such as startup founder, where you are the boss. You will find that the same key principles apply in both situations, and that every business professional has a boss, and should be a leader in their own domain to others with less experience and expertise.

I found some good insights and details on this approach in the classic book, “How To Be A Great Boss,” by Gino Wickman and RenĂ© Boer, who speak from years of experience working with leadership teams of both small and large companies. Here is my summary of their key principles on being a great boss, which I will characterize here as applying to any business professional:

  1. Surround yourself with great people. As an entrepreneur, executive, or team member, you are most impacted by the people you gather around you. The smartest team members and the smartest bosses spend more time with people who are smarter in the relevant domain than they are. Then when you have to hire people, you will pick the best.

  2. Make more effective use of your own time. We all know bosses and peers who are always too busy, but never seem to get much done. Make sure that person is not you. Free up time for others by eliminating low priority tasks, and delegating items to the right people. Work on habits that improve your productivity, and find better tools every day.

  3. Understand both leadership and management. In business, leadership consists of creating the vision and direction, while management is primarily about gaining traction to achieve it. You don’t have to be a boss to be a leader or a manager. You should be practicing both in every role, and there will be no surprises as your career evolves.

  4. Train yourself to follow leadership best practices. If you practice all the key elements of leadership in every role, you will make a great team member or a great boss. These elements include giving clear direction, providing tools and training to the right people, getting out of the way, walking your own talk, and reflecting regularly on the big picture.

  5. Focus on demonstrating accountability for your actions. Accountability is everyone’s obligation, to accept responsibility for their activities, and to disclose your results in a transparent manner. Accountability cannot be imposed on you by a boss or entrepreneur – it’s a practice that you must learn to impose on yourself to be effective and appreciated.

  6. Develop productive relationships with people around you. Effective relationships, inside your business and outside, are critical in every professional, management, and leadership role. The most productive people get things done by working in concert with others, not demanding actions and results, but by orchestrating win-win relationships.

  7. Learn to deal effectively with people who disappoint you. While highly productive relationships lead to success, dysfunctional relationships make you a poor employee and a bad boss. People issues cannot be solved by avoidance or edict. If you surface and manage relationship issues early with respect and minimum emotion, you will be seen as a good team member and a good boss.

Thus, putting yourself in your boss’s shoes to see what they see, and act as you would expect them to act, is the best way to assure success in your role today, or prepare you for the startup founder role you dream about. In fact, the best team members and managers I work with always see themselves as their own boss. Try it – you may find and train that great boss you never had.

Marty Zwilling

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Friday, October 12, 2018

7 Tips To Test Your Idea As A Part-Time Entrepreneur

part-time-jobMany experts will tell you that you can’t succeed as a part-time entrepreneur, as any good startup will require a 100 percent commitment of your time and energy. But not many of us have enough savings to live for a year or more without a salary, fund the startup, and still feed the family. Thus I often recommend that entrepreneurs keep their day job until the startup is producing revenue.

Of course, if you have investors anxious to give you money, or a rich uncle to keep you afloat, there is nothing wrong with a dedicated and full commitment to the startup, with commensurate more aggressive milestones and growth expectations. We all understand the risk of competitors quickly closing in, and market factors changing before we can roll out our solution.

For those of you who do decide to keep your day job, here are some pragmatic recommendations I espouse on how to make the most progress in your startup, while simultaneously juggling your other critical family and employer roles. In fact, these suggestions have tremendous value, even if you are dedicated and committed full-time to your new startup:

  1. Find a co-founder who can keep you balanced. Two co-founders, both working part-time are actually better than one founder full-time. You both need the complementary skills, ability to debate alternatives, and the tendency to keep each other motivated, that neither could match working alone. One still needs to be the agreed final decision maker.

  2. Schedule fixed times and days for the startup, working with the team. Building a startup is hard work, and requires discipline to get it done. Working part-time doesn’t mean all working randomly alone. Commit to a regular weekend time and a couple of specific nights per week where you meet with the team and focus only on the startup.

  3. Get better at saying ‘no’ to your friends. Learning to manage your own time is critical. Everyone around you enjoys adding things to your schedule, and reducing their to-do list. The key is learning to say no without offering a long list of excuses, or whining about how busy you are. It’s never possible to satisfy everyone, so be true first to your own priorities.

  4. Set realistic milestones and take them seriously. It’s easy for part-timers to make excuses that other priorities caused you to miss milestones, but predictable results and metrics in this mode are even more critical than for full-time members. Use the 80/20 rule to maximize productivity – get 80 percent outcome from 20 percent of focused efforts.

  5. Select a business idea that has a longer runway. Some startup ideas are dependent on a rapidly emerging fad, or have many competitors fighting for a limited market. You can’t move fast enough on a part-time basis to win in these areas. On the other hand, if you have a new technology, with patent applied for, maybe you more time to get it right.

  6. Prepare yourself for a longer journey to success. Seth Godin is famous for saying that the average time for overnight success in a startup is six years, even working full-time. Like any startup solution, the first version will likely be wrong, and require one or more pivots. Learn to look for small indications of success to keep you motivated.

  7. Make learning your full-time vocation. No matter how many full-time, part-time, and family commitments you have, you always need to carve out time for learning new things. Learning is not stealing from any employer, and it prepares you for all your futures. Don’t wait for anyone to pay your way to class, or give you time off for training. It won’t happen.

The advantage of quitting your day job early is that it removes all excuses, and all qualms from you and others, that the new startup is only a hobby. There is nothing that drives an entrepreneur like being hungry, dependent on the outcome, and seeing mounting debt. Without self-discipline, many aspiring entrepreneurs find that a single focus is the only way anything ever gets done.

There is certainly additional risk associated with working a paying job during the day, and working on your startup nights and weekends. First is the risk to your health and family life, which if you lose these, all the business opportunity in the world doesn’t matter.

Then there is the risk of antagonizing your current employer by missing deadlines, reduced productivity, or even getting embroiled in a legal conflict of interest or intellectual property ownership rights. I suggest it’s best to be up-front with your employer, with an honest commitment that your startup work will not impact company commitments or results.

Potential conflict of interest issues with a current employer should be explored openly, and resulting agreement documented, to preclude the possibility that you might lose everything later as your startup succeeds. On the positive side, your employer may like what you have in mind, and become your first investor and biggest supporter.

If your conclusion after all these pros and cons is that the risk is too high for you, you probably need to keep your day-job long-term, and give your startup idea to someone else. There certainly isn’t anything wrong with a regular well-paid job and career, with health-care benefits, and a competitive retirement plan. But the entrepreneur lifestyle is still more fun, even part-time.

Marty Zwilling

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Wednesday, October 10, 2018

10 Ways Entrepreneurs Find Money To Start A Business

money-to-start-a-businessOne of the most frequent questions I get as a mentor to entrepreneurs is “How do I find the money to start my business?” I always answer that there isn’t any magic, and contrary to the popular myth, nobody is waiting in the wings to throw money at you, just because you have a new and exciting business idea.

On the other hand, there are many additional creative options available for starting a business that you might not find for buying a car, home, or other major consumer item. If you have the urge to be an entrepreneur, I encourage you to think seriously about each of these, before you zero-in on one or two, and get totally discouraged if those don’t work for you.

Of course, every alternative has advantages and disadvantages, so any given one may not be available or attractive to you. For example, professional investors put great priority on your previous experience in building a business, and they expect to own a portion of the business equity and control for the funds they do provide. These are tough for a first-time entrepreneur.

Thus it is always a question of what you qualify for, and what you are willing to give up, to turn your dream idea into a viable business. Here is my list of the ten most common sources of funding today, in reverse priority sequence, with some rules of thumb to channel your focus:

  1. Seek a bank loan or credit-card line-of-credit. In general, this won’t happen for a new startup unless you have a good credit history, or existing assets that you are willing to put at-risk for collateral. In the US, you may find that the Small Business Administration (SBA) can get you infusions of cash without normal backup requirements.

  2. Trade equity or services for startup help. This is most often called bartering your skills or something you have for something you need. An example would be negotiating free office space by agreeing to support the computer systems for all the other office tenants. Another common example is exchanging equity for legal and accounting support.

  3. Negotiate an advance from a strategic partner or customer. Find a major customer, or a complimentary business, who sees such value in your idea that they are willing to give you an advance on royalty payments to complete your development. Variations on this theme include early licensing or white-labeling agreements.

  4. Join a startup incubator or accelerator. These organizations, like Y Combinator, are very popular these days, and are often associated with major universities, community development organizations, or even large companies. Most provide free resources to startups, including office facilities and consulting, but many provide seed funding as well.

  5. Solicit venture capital investors. These are professional investors, like Accel Partners, who invest institutional money in qualified startups, usually with a proven business model, ready to scale. They typically look for big opportunities, needing a couple of million dollars or more, with a proven team. Look for a warm introduction to make this work.

  6. Apply to local angel investor groups. Most metropolitan areas have groups of local high-net-worth individuals interested in supporting startups, and willing to syndicate amounts up to a million dollars for qualified startups. Use online platforms like Gust to find them, and local networking to find ones that relate to your industry and passion.

  7. Start a crowdfunding campaign online. This popular funding source, where anyone can participate, per the JOBS Act in the US, is exemplified by online sites like Kickstarter. Here people make online pledges to your startup during a campaign, to pre-buy the product for later delivery, give donations, or qualify for a reward, such as a tee-shirt.

  8. Request a small business grant. These are government funds allocated to support new technologies and important causes, like education, medicine, and social needs. A good place to start looking is Grants.gov, which is a searchable directory of more than 1,000 Federal grant programs. The process is long, but it doesn’t cost you any equity.

  9. Pitch your needs to friends and family. As a general rule, professional investors will expect that you have already have commitments from this source, to show your credibility. If your friends and family don’t believe in you, don’t expect outsiders to jump in. This is the primary source of non-personal funds for very early-stage startups.

  10. Fund your startup yourself. These days, the costs to start a business are at an all-time low, and over 80% of startups are self-funded (also called bootstrapping). It may take a bit longer, to save some money before you start, and grow organically, but the advantage is that you don’t have to give up any equity or control. Your business is yours alone.

You can see that all of these options require work and commitment on your part, so there is no magic or free money. Every funding decision is a complex tradeoff between near-term and longer-term costs and paybacks, as well as overall ownership and control. Yet with the many options available, there is no excuse for not living your dream, rather than dreaming about living.

Marty Zwilling

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