Saturday, April 20, 2019

5 Problems To Solve With Unlimited Startup Potential

Image via jisc 
Potential startup founders are always looking for ideas to implement, when they should be looking for problems to solve. Customers pay for solutions, but there is no market for ideas. I’m often approached by people with a “million dollar idea,” but I haven’t seen anyone pay that for one yet.

Equally often, I see startups who are on the road to implementing an idea, but haven’t figured out what problem it solves – the business plan waxes on eloquently for 20 pages about how great this product and technology is, but never gets around to defining the problem (investors call this the “solution looking for a problem” syndrome).

A related “red flag” in a business plan is a missing competitive analysis section, or a short paragraph that essentially says, “this product has no competition.” My reaction is, if there is no competition, then there is no market demand for your product, so why are you building it?

Luckily, many startups are smart enough to keep morphing their idea, until it finally fits a real-world problem, and they can move forward in the marketplace. Unfortunately they could have saved themselves much lost time, money, and heartache if they had just focused on identifying the problem before they built a solution.

Smart startups also don’t forget that startup ideas are solutions for someone, and companies have to make money. The way to make money is to make something people or companies need (not necessarily what they want). Here are five solutions from a classic essay by Paul Graham on “Ideas for Startups” that I believe have even more potential in today’s fast changing environment:
  1. Automate a labor intensive process. This is the traditional realm of computers. Microsoft Excel applied it to accounting spreadsheets, and Google applied it to information mining on the Internet, but Henry Ford even applied this principle to auto manufacturing. There are still millions of these opportunities for startups out there.

  2. Fix something that’s broken. In business, it seems to me that the traditional banking business models are broken or at least no longer fit the purpose. On the other end of the spectrum, Internet dating sites don’t seem to work. There are new ones sprouting up every day, so they must be offering something people want. Yet they work horribly, according to most people who have tried one.

  3. Take a luxury and make it a commodity. People must want something if they pay a lot for it. Yet most products can be made dramatically cheaper as technologies improve. This opens the market opportunity, you sell more, and people start to use it in different ways. For example, once cell phones were so cheap that most people had one, people started adding functions and using them as cameras and Internet devices.

  4. Make something cheaper and easier to use. Making things cheaper means more volume and more profit. For a long time making things cheaper made them easier, but now even cheap things are too complicated. Computer applications today are cheap, but often still impossible to use.

  5. Take a current solution to the next level. Solve the currently intractable problems that impact all of us. Tackle the global warming problem, predict where earthquakes will occur, find alternative energy sources, cure cancer, and unlock the keys to aging. There is no shortage of opportunity here.
Combine these with the value of a good understanding of promising new technologies, and the value of having associates with complementary skills to extend your thinking. Problem solutions are the ingredients that startups are made of. Start solving a problem today that you can use as the basis for the “idea” for your next startup.

Marty Zwilling
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Friday, April 19, 2019

6 Keys To Turning Your Failures Into Business Success

Mark Cuban image via Flickr by jdlasica 
We all have had setbacks in business – the challenge is learn from each one to improve skills and decision making, rather than let failures get you down and reduce your chances of ever achieving success. The best entrepreneurs and business owners have experienced failure multiple times before bouncing back to a level of achievement they only dreamed of.

For example, most people don’t realize many billionaires, including Mark Cuban, Jack Ma, and Richard Branson experienced multiple business failures before becoming recognized business leaders. According to the well-known motivational speaker and writer Steve Harvey, Warren Buffett said that he would not invest in any business where the owner hasn’t failed at least twice.

I found some real practical insights on how to turn your failures and fears into success in a new book, “Fail More: Embrace, Learn, and Adapt to Failure As a Way to Success,” by Bill Wooditch. For over 25 years, he has failed his way to success in his own businesses, and helped transform large and small companies along the way. I’ll paraphrase several of his guiding principles here:
  1. Recognize when fear is disguising itself as procrastination. Too often fear of failure is rationalized as waiting for the perfect opportunity, a better time, or less risky idea. Whether you are seeking to build a startup or advance in your career, you can’t succeed without starting, and you need to embrace failure as the key way to learn and adapt.

  2. Don’t let “fear-of-failing” inhibit your decision making. Fear can cause you to avoid making a decision, which more often results in lost options than better outcomes. Also by not making decisions, your decision-making abilities can never improve, causing every decision to increase self-doubt. Commit to learning from every decision, good or bad.

    In business, often the stakes are high, the information incomplete, and the environment volatile. In these cases, such as new product development, it helps to break down the big decision into smaller steps, and learn from success or failure on completing each step.

  3. Build relationships with advisors who see your blind spots. One of the best ways to improve as a decision maker and leader is to ask people you trust to analyze your failures, and guide your learning. Also you must accept feedback with humility and without defensiveness, with a commitment to find a pocket of success in every failure.

  4. Remember to approach “risk-of-failure” intelligently. Every time you make a choice in life, even non-choices, you are taking a risk. Use past failure experience to inform the present and positively influence the future. Start out with small steps that lean into your uncertainty and discomfort. Make uncertainty and discomfort your growth indicators.

    Carrying out small “experiments” is a great way to evaluate “risk-of-failure.” Test interest in a new product, before you spend money building it, by presenting it to the market in a blog or through crowd funding. If you see no interest, you can fail quickly at very low cost.

  5. Determine worst-case and best-case results before decisions. Failures teach you that you must understand the worst case, before you jump to a decision based on your best case assumption. Suppress your ego, and bring in advisors and experts to test your assumptions and improve your decision-making skills. Always manage the downside first.

  6. Use emotions, but don’t bypass logic, in making decisions. As a human, you will always feel emotions, both negative and positive, but they must be only one tool in a decision. You always have to move beyond emotions, to include logic in making successful decisions. Analyze and learn from failures, to separate logic from emotion.

    For example, I deal with aspiring entrepreneurs every day whose emotion is so strong for a new idea that they forget to evaluate the business viability. You may be positive you have a cure for world hunger, but don’t forget that hungry people rarely have any money.
Use these principles to capitalize on “failing more” as “trying more.” Experience is the residue of failure, more than success. Failing is the strategic way to collect and apply tactical knowledge and methods you can use for future benefit along the path to a more successful business, career, and life. Always celebrate your failures, as well as your successes.

Marty Zwilling

*** First published on Inc.com on 04/04/2019 ***
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Wednesday, April 17, 2019

How To Set A Balance Of User Growth Vs Profitability

Image via Max Pixel 
A question that I still hear debated often is whether a new startup growth strategy should focus on user count or profits. First of all, the glory days of “dot.coms” are gone, when investors “didn’t care” about profitability, and all the big money was focused on user count growth.

In the long run, everyone wants both profitability and user growth, but the question is which comes first. Most startups and investors I know don’t have unlimited funds, so the first question they should ask and do ask today, is “When is your company going to be profitable (self-sustaining)?”

Of course, growth is implied in that equation, and is also required for maintaining a sustainable competitive advantage. The challenge is not to undermine growth by a blind focus on profits. You might sell one of two of your widgets for $1 million each, entering profitability immediately, but then die because you can’t grow sales at that price.

I think you will find that most investors will relate to the following strategy for keeping the right perspective and getting the profit versus growth balance right:
  1. Pick an idea that has the potential to make money. That means it solves a real problem for real customers who are ready and able to spend real money. The number of current potential customers is large and growing. Solutions that may be viewed as “nice to have” or “satisfies a higher-level need” won’t get funded.

  2. Design a product or service that you can sell. Sure, you may need to give the product away for free to get traction, but assume you will have to sell something someday to get profitable and stay alive. MySpace, for example, launched in 2003 and boomed for five years without a revenue model. When their deep pockets went empty, Facebook stepped in, but demanded revenue from ads. MySpace wasn’t ready for this, and it soon faded. Don’t count on finding investors supporting growth alone on your new startup.

  3. Build a business plan for profitability in your lifetime. This simply means you need to be sensitive to costs, revenue projections, and a timeline, such that there is light at the end of the tunnel. Most Internet businesses should show profitability in two years, while new medicines may take ten years to pass FDA and other safety tests. Investors will look at competitors in your industry for the norms.

  4. Identify the total investment required for profitability. A very common mistake of early stage startups is to request a small investment to get started. They are usually thinking only of costs required to get “in business,” rather than the total costs of marketing, scaling up, and going international. Be ready to answer the investor question “Is that all you need to get profitable?”
So unless you are building a non-profit, I say focus on profit all the time, every time. Of course, growth is implied in every focus, and profit enables growth. But some of you will surely say “What about Facebook and Snapchat, who focused on growth first and are clearly successful?” So let’s take a look.

Facebook is indeed the largest growth site on the web, with well over two billion user accounts, all free. Yet it took almost six years to become profitable, with revenue only from advertising. What most people don’t realize is that the total outside funding to get it there is estimated at over $800 million, which is a bit more than you will get from any angel investor.

Yet I can’t argue their success in the value proposition, since they turned down a billion dollar offer from Yahoo way back in 2006, and their market cap today is around $400 billion. It has taken some very deep pockets to get to this point, so now you know why I smile when you tell me your plan emulates the Facebook model. Even Snapchat is now trying hard to generate revenue.

I’ve heard all the arguments that a push for early profits on new business models will lead a company to fall back to a lesser model that provides short-term results, but short-circuits risk-taking that could lead to more long-term value creation. That’s a great argument if you have unlimited funding, but if you are just one of the “rest of us,” I suggest you focus on getting to cash-flow positive first.

Marty Zwilling
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Monday, April 15, 2019

8 Positive Lessons From Facebook On Building Momentum

Image via Flickr by stockcatalog 
Many new business owners I know have learned the hard way that you can never be everything for everyone. As a startup, you need to use your limited resources to excel at a few core things for your best customers, in order to stand out and get the momentum going. Focus on a few key principles is the key to success, and it takes discipline and determination to make this happen.

I found some good lessons in this regard in a classic book, “Becoming Facebook,” by Mike Hoefflinger, the former Head of Global Business Marketing at Facebook. He talks in detail about ten of the key challenges that Facebook faced in their growth, to move from a tiny social media upstart to one of the most successful companies in the world.

Based on my experience advising new businesses, all of the principles that he outlines, including the following subset which I generalize here, should be taken to heart by every entrepreneur:
  1. Give customers fewer things that matter more. Your customers’ biggest need is not for more things. Your best strategy is to find more customers that fit the things you do best, rather than building more things. Too many choices confuse all customers, and make your job in marketing, distribution, and support much more difficult. Less is more.

  2. Pick a single metric that is the focus for all growth. Today’s world is full of metrics leading to business growth, including customer logins, revenue per customer, retention, and average solution price. Facebook’s winning strategy was a laser focus on increasing active user counts and time spent online. Revenue and competitive position followed.

  3. Speed is a key feature in every customer experience. Customers today have adapted to a fast-moving world, and they expect every business to keep up. They have no understanding or patience for extra steps and delays caused by bureaucratic processes, disengaged employees, complex networks, or software usability problems.

  4. Strive to cross the chasm from early adopters to mainstream. Many new companies become bogged down with the more vocal early adopters, who have an appetite for more function and new players. The mainstream majority want simplicity and base function, and we they get it they will come in droves, and be very reluctant to jump ship. Get there.

  5. Disrupt your own success before someone else does. In this age of technology, the advent of a better alternative is inevitable. To retain the initiative – especially when you’re winning – shape the disruption through your own moves instead of falling victim to those of others. Waiting for the crises of customers often means an impossible recovery effort.

  6. Maximize employee engagement by fitting roles to strengths. Employee engagement starts with looking beyond experience, to talent, determination, results, and a fit to your company values and culture. On an ongoing basis, engagement requires a focus on motivation, match to strengths and interests, and active career planning.

  7. Take care of business, but always play the long game. For many companies, the long game is choosing the right strategic partners and acquisitions. For others, including Facebook, it is penetrating China despite political constraints, and India, where only thirty percent of the population is on the Internet. But never take your eye off today’s customer.

  8. Getting acquired or going public should be a result, not an intent. A focus on looking good as an acquisition or IPO candidate has undermined many startups. Zuckerberg had so much confidence and determination to stay independent that he turned down an early $1 billion offer from Yahoo. Now Facebook’s market cap is nearly 500 times that number.
Facebook may seem like an overnight success, but in reality it faced the same challenges as any new business, including existing well-known social media competitors like MySpace and Friendster. Facebook competed against the model of free customer use paid by advertisers of Google, and the sophisticated data delivery infrastructures of YouTube and Netflix.

I’m convinced that the lessons outlined here can help you become the next Facebook or YouTube in your business domain. How many do you already practice today?

Marty Zwilling
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Sunday, April 14, 2019

7 Steps For Assuring Business Success And Fulfillment

Image via Pixabay 
Is it possible to be successful in business and not fulfilled? The answer is a resounding yes today, and I’m convinced that it will be even more true tomorrow, as young idealistic entrepreneurs try to adapt to the long-standing business culture if success is only measured in the money you make for yourself and your business.

That isn’t very fulfilling to the growing number of entrepreneurs whose vision and satisfaction comes from making the world a better place, and enjoying a leisurely lifestyle with friends and family. In fact, it’s already a problem with more successful entrepreneurs than you know, based on the classic book by serial entrepreneur Brian Gast, “The Business of Wanting More.”

As I have also seen in entrepreneurs, he outlines how he and others have failed to move from success to fulfillment, and offers the following points as guidance to make sure you don’t follow in his footsteps. His perspective is from later in his career, so I’ve re-arranged these a bit for those of you at an earlier stage:
  1. Create a vision for your life early. To create a vision, you simply have to envision yourself enjoying the fruits of your dreams, goals, and principles. Write down the “what” of your vision, but let go of “how” it will be achieved; you can’t control the precise manner, form, or timing. Maintain some reality by listing vulnerabilities, risks, and costs.

  2. Draw a road map to the future you want. If you have no strategic plan, your emotions and opportunities of the moment, or someone else, will drive your decisions and actions. A truly fulfilled life means meeting the four core needs: acceptance, connection, purpose, and service. It’s vital to have a specific plan for meeting those needs.

  3. Take a fearless inventory of your life now. Fulfillment is a choice. After honestly assessing what’s working and not working now in your life, you have to take personal responsibility for all of it before you can empower yourself to effect change. Don’t wait for a personal crisis to highlight gaps – use your strengths now to focus on fulfillment.

  4. Burst your bubble. Your bubble is a lens through which you unconsciously interpret every experience, set by your background, family, and long-standing beliefs. It limits your view of opportunities and actions in yourself, and in others. To the degree that it’s inconsistent with your vision, you need to burst the bubble to act and think outside of your pre-set boundaries.

  5. Build your support team. Go-it-alone leaders are common in startups, but they often crash if they don’t build effective support along the way. Brian defines an effective Court of Support as one professional coach, one accountability partner, one mentor, and six to nine group members. Look for a mix of talent and balance in your support team.

  6. Methodically remove the barriers to fulfillment. Develop your inner CEO to make decisions informed by all areas of your life – not just your career and finances, but also your relationships, core needs, and the needs of others. Beware your shadow and the risk-averse side of your being, which cause you to overreact and behave in ways not conducive to fulfillment.

  7. Create a positive personal practices regimen. Being fulfilled, and staying fulfilled, takes work. It takes a personal regimen to create and sustain a life fortified against the distractions of a culture that relentlessly promotes material success. Focus on practices that help you stay open and have faith, but don’t force it. Don’t be afraid to take test drives.
Following these steps early and always in your career will allow you to be the entrepreneur you want to be with a whole-life view. You will be able to tap unused skills, create better ways to respond to high-stress situations, while still generating more powerful results. Most importantly, you will be able to stay on the road to fulfillment, as well as success.

The best evidence that you are on the road to fulfillment and success is that you love what you do. When you love what you do, it’s not just self-evident, it’s evident to others. You don’t think of your career as going to “work” every day. How many of you can say “I strive to do my best at what I love to do?” Fulfillment and success need not be mutually exclusive.

Marty Zwilling
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Saturday, April 13, 2019

7 Keys To Optimizing Your Investment In Social Media

Image via Pixabay 
If you are a business owner today, and not using social media to promote your business, you are missing out on a huge opportunity. But, contrary to what most people preach, it isn’t entirely free. Most social media outlets don’t require a subscription charge, but they certainly always require an investment, sometimes large, in people, in technology, your reputation, and your time.

There are hundreds of consultants out there who will take your money for guidance in this area, but I recommend that you start with some free resources on the Internet, or one of the many recent books on this topic. One of the original classics, “How to Make Money with Social Media” by Jamie Turner and Reshma Shah, Ph.D., hits all the right points from my perspective:
  1. There are risks as well as benefits. As with many startup activities, you only have one chance for a great first impression. You can jump into social media with a poor brand definition, poorly focused content, unrealistic expectations of customer service, or be killed by malware or viruses.

  2. Assess social media relevance to your product or service. If your business is industrial B2B products, social media should be low on your list. Spend your time and money on other platforms. If you are selling to consumers, especially younger ones, your business won’t survive without an effective social media presence.

  3. Attracting key stakeholders requires sensitivity. For some customers and many investors, a heavy focus on social networks and viral marketing may be a negative, rather than a positive. A balance of conventional and social communication and marketing is always advised.

  4. Pick the right platform for your business. Within each of the platform categories defined above, there is a right one and a wrong one for your audience. For example, LinkedIn is attuned to business professionals, Facebook is dominated by the social and upwardly mobile crowd, and Instagram leads as the top social media app for teens.

  5. Communication and writing skills are required. Heavy texting experience is not a qualification for communicating via social media. In additional to strong journalistic writing and storytelling, you need business acumen, strategic thinking and planning, and the ability to do the right research. These days, video production is also a useful skill.

  6. Make social media an integrated part of an overall strategy. An integrated marketing strategy starts with an overall brand management strategy, delivered through online and offline communications, promotions, and customer engagement vehicles. Your Twitter and YouTube messages better match your print advertising message.

  7. Find the right tools to analyze the ROI. Return-On-Investment metrics are not new, but the tools are different. Get familiar with current social media tools, such as Google Analytics, Kissmetrics, and HootSuite analytics. Over time, put together the data you need to measure your progress on a weekly/monthly/yearly basis.
The key social media platforms today include communications (Wordpress blogs, Twitter), collaboration (Evernote, StumbleUpon), and multimedia (YouTube, Flickr). In looking ahead, don’t forget the mobile platforms (iPhone, Android), and location-based services (Foursquare, Curbside).

As with any resource or tool, you need to optimize your social media costs against a targeted return.
That means first setting a strategy and plan for what you want to achieve, then executing the plan efficiently, and measuring results. It’s not free, but it’s an investment that you can’t afford not to make.

Marty Zwilling
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Friday, April 12, 2019

5 Startup Cost Realities Most Founders Underestimate

Image via Flickr by Phil Gyford 
Starting a new venture still costs real money, even though the entry price has come down dramatically in last few decades. For example, I come from a software background, and back in the early PC days, it could easily cost half a million dollars for a team of professionals to produce a commercial product. Now, with powerful high-level tools and open source software, winning smartphone apps can be built by a good hacker for a few thousand dollars.

Unfortunately, even today, building a good product doesn’t guarantee you a business. Most entrepreneurs realize and budget for the additional costs of incorporating a business, marketing, equipment costs, and manufacturing. Yet, in my experience as a small business advisor, they consistently tend to under-estimate or overlook a wealth of other costs that every business faces:
  1. Taxes and insurance payments. Even in your early days, before you break even and have to pay taxes on profits, various governmental organizations will be after you for payroll taxes, sales taxes, unemployment, and a host of fees, licenses, and permits.

    Then there is the need for liability insurance, workmen’s compensation, as well as life and health insurance for your key team members. These always seem to come when you are in your tightest cash-flow squeeze, if you haven’t budgeted adequately ahead of time.

  2. Ramp-up facilities and utilities required. It’s amazing how fast your startup will outgrow your garage or home office. You find that you need to be near major customers, or employee transportation hubs, where rents are higher than you ever anticipated.

    Depending on the size and location of your business, you could easily also end up paying thousands of dollars a month in internet costs and other utility expenses, including electricity, phone service, water, janitorial services and beak-room supplies. Your frugal role model of bringing your own lunch won’t be convincing to most employees.

  3. Staffing and people-management costs. Every smart entrepreneur I know thinks he can do everything personally, perhaps with a few interns or family members to help. As you scale up the business, you realize how many people you really need, including full-timers, managers, and hourly workers.

    Salary costs go up rapidly, as people require training, bonuses, expense reimbursals, and an office with a requisite support team and supplies. Just the process of hiring and interviewing takes critical time, recruiting fees, and expenses you never remembered.

  4. Subscription software and computer hardware. You find out that all your free software tools have paid professional versions that are required to manage a business that is rapidly growing, and all your employees need a copy, as well as a computer to run them on. Then you need an expensive server and network for sharing and remote access.

    These days, computer hardware also extends to smartphone subscriptions, iPads, and laptops as your employees and customers expect mobile operation. Then there is the need for more substantial business accounting, database, and social media monitoring.

  5. Unanticipated pivots, quality write-offs, and shrinkage. Every startup I know, in this changing world, has incurred delays and strategy pivots before they zero-in on the best customer solution and business model. New manufacturers and new technology are hard to get right the first time, so you will have unusable inventory and emergency repairs.
These are just a few of the expenses that will sneak up on you as an entrepreneur. No matter how well you plan your financials, there’s no way for you to account for all the unknowns. Obviously, the more detailed your business plan, the better. It helps to also have your plan reviewed and critiqued by an experienced advisor in the same industry.

Also to prepare for unanticipated business realities, I recommend that you buffer your budget calculations and funding expectations by 25 to 50 percent. This will give you some recovery room for unpredictable expenses and general emergencies. Remember the old saying that it takes money to make money. Don’t get caught short.

Marty Zwilling

*** First published on CayenneConsulting on 03/28/2019 ***
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