Tuesday, July 31, 2012

Dual Founders Manage Technology Startups Better

I often hear the qualms of business-smart but non-technical entrepreneurs, wondering if they really have a chance in this high-technology marketplace. I tell them that if their idea or solution is technology intensive, they clearly need technology strength on the team. Then the question becomes “How do I evaluate and attract the best technical talent?”

The simple answer is to find a business partner, not an “implementer,” who already has the technical experience you need, and is willing and able to run that side of the business. Finding that person is not a hiring challenge, since neither of you really get paid until you both succeed. Here the principles of finding any top executive apply, as I’ve covered in a previous article.

If you are an entrepreneur, like Andrew Mason, CEO of Groupon, with a degree in music and no technical business partner to be found, your job is a bit harder. Yet the smart entrepreneur can still bootstrap the technical team, using one or all of the following evaluation and hiring approaches:

  1. Hire an expert consultant for initial interviews and recommendation. This is the technical equivalent of an “executive recruiter.” It definitely works, but may be beyond your budget. On the other hand, it may save you more time and dollars than you will expend recovering from a hiring mistake.

  2. Start with great credentials, and focus on the culture fit. For any technical position, a great resume is necessary but not sufficient for a team fit. Your non-technical interview needs to determine if there is a chemistry match, passion, integrity, and willingness to work with others on your team.

  3. Interview former employers, more than the candidate. This approach only works if you know them, are willing and able to talk face-to-face, or meet them in at a conference or another business setting. Most employers, due to fear of lawsuits, will only confirm employment data and give you positive feedback over the phone.

  4. Ask early candidates how they differentiate themselves from their peers. Then use their insights in questioning other candidates. You might be surprised at how fast you get to be an “expert” on a given technology, and how easy it is to eliminate candidates who don’t have a clue. Evaluate how clearly they answer the question, as well as the answer.

  5. Use questions to test analytical and problem solving ability. Pick a domain you are familiar with, and test the candidates ability to think outside the box and communicate logically. Sometimes brain teasers are a good start. Ask the candidate about things they have built on their own, and what they do to challenge themselves.

  6. Use existing team to find a new manager or peer. If you already have some technical people on board, like software developers, and need a new manager, you supply the candidates based on credentials, and let them do initial interviews and make recommendations.

  7. Outsource your technical requirements. If you can clearly define the specifications for your technical project, and you are willing and able to manage the efforts closely, then outsourcing it to a local or remote technical group beats hiring technical employees. It leaves you with no long-term personnel commitment, but low control of your core assets.

In general, unless you are a quick learner, these alternatives don’t solve your long-term challenge of managing and keeping up with a high-technology business. You need full control of your core technology, so I suggest you supplement your own expertise as soon as possible, to tackle the never-ending technical questions of architecture, competition, scalability, and customer support.

It is just really hard to found a technology company successfully with only one founder, technical or non-technical. Investors know this, and look for two or three-person teams who have the requisite complementary skills. If you are the non-technical one, don’t try to hire your way out of this problem. Focus on finding the right partner to double your strength rather than dilute it.

Marty Zwilling



Monday, July 30, 2012

You are the Best One to Build Your Startup Brand

As an entrepreneur, it’s never too early to start selling yourself and your idea. I hear lots of excuses from startup founders, like “I’m too busy,” concern over IP security, can’t afford an agency, and it’s too early. The result is they get no feedback, no credibility, no visibility, and no investors until months later than they expect.

I’m definitely not lobbying here for promising things you can’t deliver, or hiring a publicist before your first programmer. I’m talking about doing some real networking to test your elevator pitch, and get to know some potential investors before you ask them for money. How about talking to some real customers to see if they are as excited about your idea as you are?

You don’t need an agency and you don’t want a third party to be involved at this point. You need to do it yourself. Here is a list of ways that you can use public relations to benefit your startup, even before it is started:

  • Make yourself a spokesman for your domain. Start writing a blog, speaking at local groups, and conversing at networking meetings about the need you see in the marketplace, before you pitch a solution. People will soon see you as an “expert” on solar power, as an example, so your later solar power offering will have credibility by default.
  • Practice your message. Publicists always tell you to stick to the crafted message, which was probably wrong anyway. If you start early, you can improve your message with every cycle, until you have an elevator pitch for your startup that resonates with the right people.
  • Even bad coverage is better than no coverage. It’s better to push the limits, or be a bit controversial, than not to be visible at all. Because of human nature, controversy gets people’s attention much more quickly than total agreement. People forget your early mistakes if they haven’t bought your product yet.
  • Be unabashedly aggressive. Don’t wait for journalists to find you; they all publish their email addresses, and they’re looking for something interesting to write. Give it to them. Start forum discussions on LinkedIn and Facebook, and send out regular tweets on your direction. Comment on other people’s blogs, as well as writing your own.
  • Hand out memorable business cards. When you leave your business card with another person, your memory and impact is tied to that piece of paper. Make it professional and unique, with a visual image that conveys your message, even without the words.
  • Keep in touch with your audience. One networking introduction will likely not leave a lasting impression. Be sure to follow-up with key people by writing thank-you emails, asking for a personal meeting over coffee, or adding them to your monthly newsletter distribution.

At any point, hiring a professional to generate your PR may be well worth the cost, but it’s not required. Try to think like a reporter, editor, or producer, analyze their audience, and come up with “the hook.” Don’t forget your personal story as a possible hook – what you have overcome or left behind, and why you decided to become an entrepreneur.

Perhaps your product or idea addresses a social issue or event. If the hook isn’t obvious, create one by orchestrating an event, holding a contest, or donating something to charity. The earlier and more you learn about marketing, the more effective you will be later. In a startup, you are the brand. Start building it now.

Marty Zwilling



Wednesday, July 25, 2012

Good Entrepreneur Ethics Increase Business Value

Did you ever wonder how a new entrepreneur knows how to “do the right thing” for his business? Most experts believe that the essence of doing the right thing is ethics. Translating that into business value, a study by Wirthlin Worldwide concluded that 80% of customers still base a good portion of their buy decision on their perception of that firm’s ethics.

Ethics are generally defined as a set of societal standards that encompass the norms of the community. These norms are not genetic, and they have to be learned. At the base of these are moral values, but in my view most of the rest are gleaned from experience, parents, and formal education.

In the real world, the latest updates come from good business books, like the one by David M. Shedd, “Build a Better B2B Business.” This one focuses on the generic attributes, as well as specific processes, which add up to the ethically right thing for most businesses.

The generics include integrity and honesty, as well as the above mentioned moral values. The specifics for business include providing leadership in building the business, but also in contributing to the greater good:

  1. Communicate your values and business goals. Do the right thing for the business starts with defining core values. Then create business goals to tackle the few critical issues and opportunities for the business. To be effective, communication has to be two-way and continuous, to keep the “right thing” as “top of mind” for all team members.

  2. Align the organization to your values and goals. Ensure everyone is in alignment to live the values and focus on and execute the goals. Make the tough decisions to ensure the success and profitability of the business, and make the tough personnel decisions to put the right people in the right positions, giving them the training they need.

  3. Manage priorities for the short-term as well as the long-term. Just as people must manage their personal and work responsibilities, so, too, must companies balance their priorities. Prioritize on the constraint in the business – that which is important, not on what is most urgent.

  4. Endeavor to beat, not meet, industry standards. Doing the right thing is not just “getting by,” or squeezing within the letter of the law. It means knowing and living by the spirit of the law, as well as not waiting for new laws and regulations to fix problems. The same is true of employee standards, and social responsibilities.

  5. Create winning teamwork. Leading people to do the right thing as a team is one of the most challenging things to teach and coach. Making a team work well requires constant communication, demonstrating accountability, ensuring motivation, recognition, and continual learning.

  6. Look at yourself from your customer’s perspective. The right thing is for every business leader to value every customer and realize the importance of each in building the business. Your appreciation of your customers and focus on delivering value to them is a pre-requisite to customer satisfaction, growth, and success.

  7. Balance work and life. We are all in business to be successful, but we are all people too. Another way to send a strong message about doing the right thing is to step up to the thorny “quality of life” issues, including balancing one’s work and personal life, work at home, and providing the right health, social, and spiritual needs.

Since ethical behavior is the base, the traits to foster this must always be sought out and nurtured. These traits include day-to-day work consciousness, enhanced discipline to foster a combined business and ethical acumen, and empathy for a high level of engagement. This insures that everyone is joined together, feeling a common imperative to do the right thing and make the right decisions.

So don’t assume that “doing the right thing” comes naturally, and doesn’t require any effort. Yet the evidence indicates that a startup which consistently does the right thing has a competitive edge, and a higher success rate. Are you ready and willing to take the high road for the ethics of your team and your company?

Marty Zwilling



Monday, July 23, 2012

A Startup Advisory Board Dream Team is Priceless

Every startup faces a myriad of challenges that are well beyond the scope of any founder, so you need a few guiding lights to illuminate the road ahead. These should be carefully selected, with a proven track record, willing and available to help, and be completely trustworthy. Make sure they are willing to check their egos at the door.

Let’s talk specifics. I recommend that every early-stage startup find three Advisory Board members. These should all be people who bring credibility and value to your company just by their very association with your company name. They should have deep backgrounds and experience in a relevant domain to your startup, and executive experience in running a company.

For example, if your startup is building a high-tech software product, a dream team of advisors would be a former CEO or high-level exec in another software company, a former software marketing executive, and a former financial executive. I use the term “former” here to imply that they may now be slowing down or retired – this being a good thing in that they may actually have the time and inclination to help you (but we all know some very busy people who still find time to help).

Even still, you should expect to offer compensation. Based on my experience, it is reasonable to offer 1% ownership in your company to each advisor, plus expenses, and a small annual stipend of maybe $1000. For this, you should expect participation in monthly strategy and review meetings, and unlimited access via phone or email for questions, mentoring, and advice. Even more importantly, you should expect these members of your team to be your advocates to angel or VC investors, or even be part of your friends and family financing round.

With such meager compensation and high expectations, you might ask, what would motivate such highly qualified professionals to agree to work with you? Here a few potential benefits that you should highlight to your best candidates:

  • Opportunity for crash course in new technologies and new business initiatives
  • Sharing of their experience with next generation of entrepreneurs
  • Meet new contacts that might help them in their own business
  • Potential to meet new partners, customers, and friends
  • Personal satisfaction of contributing to a successful business
  • Increase in prestige or broadening of resume

It’s reasonable to do your recruiting informally, but a professional touch is to put together a formal agreement to seal the deal. Besides laying out the benefits, your advisory board invitation letter also might include:

  • Your business plan executive summary
  • The Advisory Board's objectives and focus
  • Minimum and maximum time commitment and involvement level

The Advisory Board is quite different from a board of directors, which is required of some private companies in many states. It is more of a mentorship role, and its members have no fiduciary responsibility to the company or its stakeholders. Once your company is past the startup stage, you do need a board of directors. What better candidates than your Advisory Board?

To bring real money and credibility to your company, and help you avoid costly mistakes in development and strategy, a first-class Advisory Board is a small investment. Don't be afraid to ask people outside of your realm to serve. The more experienced and blunt your board members are, the better. The worst thing that can happen is that they reject you, which costs nothing here. Later on during funding or execution, rejection can cost you your company.

Marty Zwilling



Thursday, July 19, 2012

Entrepreneurs Need Market Data to Back Their Vision

Most startup founders know exactly what they want to design and sell, and they are personally convinced that everyone will buy one. Yet they often fail to realize that their view is likely biased, and will be instantly discounted by potential investors. Business plans with no “industry expert” data on your target opportunity size and growth are routinely rejected.

Your business plan must have an “Opportunity” section, where industry market size and growth projections are included. Within this section, investors look for footnotes referencing external sources, or quotes from notable domain experts. Absence of these raises a big red flag.

Yet most startup teams have no idea where to start, and what kinds of data to look for, in building this key section of their business plan. Is it possible to get this information with minimal cost? Let me offer a few suggestions which should allow you to do the work yourself:

  1. Use Internet search engines. The Internet today is like the Library of Congress at your fingertips. Search on any product name for census data, online research reports, trade association publications, and online newspapers with relevant statistics. Look for growth and opportunity tables than can be copied and footnoted in your plan.

  2. Visit your local university library. On or off the Internet, there are dozens of reputable market research reports available for purchase. To give you a look first, and often get the data you need, visit a university library where many of these are stocked for free access.

  3. Check local economic development offices. Almost every county and municipality has an economic development office which features market research on popular market segments in your area. Also, this is a good place to ask for pointers to other sources.

  4. Visit the local bookstore. Browsing in the business section of your local bookstore is a great way to do market research, while enjoying a cup of coffee. Information here is more current than your local library, and you might even buy a book for later research.

  5. Purchase online reports for a fee. After exhausting all the free sources, go back to the Internet and order for a fee any additional report or association journal that you need. Credible sites include Gartner Group, Market Research Reports, and Frost & Sullivan.

  6. Informal focus groups. In conjunction with some outside expert data, it is acceptable to add your own research, like setting up a small focus group and documenting results. Variations include online bulletin boards, telephone surveys, and direct-mail surveys.

There are two types of research you'll want to collect. The big-picture market opportunity data is called secondary. It consists of previously collected data like demographic information, industry trends and census information. Next, you need data as specific as possible to your product and your market. This is called primary research, and may include information that you generate yourself.

The information you discover will help you build a profile of your market and the industry. For instance, if you're developing a product for vehicle owners, you'd want to find out the number of vehicle owners broken down by gender, age, and geography. Then how much this market spends on vehicles, spending growth or shrinkage in the past 10 years, and industry projections.

Having no data to back up your opportunity and financial forecast is the kiss of death for any startup funding request. We all know that you can use statistics to prove any point you want, so just quoting data doesn’t mean your plan is sound. Certainly, paying more for the data doesn’t make it any more sound either, so check the low budget alternatives first.

Marty Zwilling



Monday, July 16, 2012

New Early Stage Financing Options for Entrepreneurs

If you are new to the entrepreneurial world of startups, you are likely confused by the terminology of seed-stage, lean startups, micro-VCs, and Super Angels. Don’t be embarrassed, since even professional investors are often confused these days by the new terms, as well as old terms used with new meanings. In any case, it’s time to look again at the options you really have.

A while back I heard a talk by Dave McClure, a long-time angel investor, who also proclaims to be one of the “new breed” of venture capitalists in Silicon Valley, as CEO of 500Startups, which is either a micro-VC seed fund, or a startup incubator, or both. He is going gangbusters, and is now targeting a $50M second round of funding. The good news is that he is all about helping early-stage startups. The hard part for entrepreneurs is figuring out what it takes to play.

Here is just a sampling of the latest terminology and lingo that I gleaned from Dave, and from some additional research on the Internet, that I think every entrepreneur should know, who may be looking for funding now, or down the road:

  • Micro-VCs. These are emerging group of professional investors (venture capitalists, ala VCs), who are investing from a fund of other people’s money, with a particular focus on seed-stage startup opportunities. Seed-stage means promising companies that don’t yet have a revenue stream, and may not yet have a proof of concept.

  • Super Angels.These are angel counterparts to VCs, who traditionally only invested their own money, but now have begun raising funds from outside investors, to do more than a few deals per year. Like most angels and micro-VCs, however, they still start with relatively small sums of money, often investing only $10,000 to $50,000 in the first increment.

  • Series-seed round. Since the economic downturn started, neither angels nor VCs have given much attention to startups without a product and a revenue stream. That was left to the realm of friends and family. In the last year, there has been a resurgence of interest, some say a bubble, by both angels and VCs, in a pre-Series A kicker to identify promising startups with seed funding, before major equity has been given away.

  • Early-stage startup.Every startup is early-stage to someone. For a startup founder, this stage is when the “big idea” has become a passion for him, but he hasn’t written anything down yet. For angel investors, early-stage means there is a good business plan and maybe a prototype, but no customer revenue. For VCs, early-stage means customer revenue is less than $10M. Thus the more precise term these days for early startups is “seed stage.”

  • Business accelerator. This term is replacing “startup incubator,” which is a facility provided by an individual, university, or local community for any new startups to congregate for almost no cost, with the hope of learning from each other. The business accelerator model is YCombinator and TechStars, who select only the best applicants, have a demanding process, provide experienced coaching/mentoring, some seed funding, with a required exit in about six months. Incremental investment may follow.

  • Lean startup. This is a concept coined (and trademarked) by Eric Ries a few years ago, primarily for software and web applications. Lean startups operate on minimal money, an open source environment, and assume multiple iterations, with customer feedback, to get it right. A popular phrase heard in this environment is “rinse and repeat.” Today, if you do well in this mode, you will get funded if and when you need it.

  • Crowd funding.The recently passed JOBS bill now allows even non-accredited investors to contribute small amounts to new startups through “crowd-sourcing” sites, like Kickstarter and Crowdtilt. While the exact rules are still being set, suggested limits for a given startup will likely be a maximum of $1M, with each investor limited to an amount equal to the lesser of $10K or 10% of their annual income.

Overall, the biggest issue for early-stage startups still is funding – how much should you expect, who provides it, and how much of your future company should you give up to get it? The trend for investors, including micro-VCs and Super Angels, is to place “lots of little bets,” ($10K to $50K) with milestones applied, which can then lead to incremental and larger funding checks.

Pundits call this the “spray and pray” approach to funding. Even though significant deal vetting and filtering is performed by the investor teams running these seed programs, in effect, they spray little bits of capital onto as many good ideas as possible, help them along, and pray some eventually strike it big.

Despite these pundits, I sense a fundamental change in the early-stage financing eco-system. With the Internet and other powerful but inexpensive business tools, the cost of development and rollout of new startups is lower than ever before, so the “big bang” theory of funding no longer makes sense. This should be a wake-up call for traditional entrepreneurs and investors alike.

Marty Zwilling



Thursday, July 12, 2012

Make Sure Your Startup Domain is Investor Friendly

We are talking about angel investors here, meaning people who invest their own money in early-stage startups for a share of the equity. These people are highly focused on investment areas they know, which have a large opportunity for growth, revenue projection of $20M or more in five years, and a high return that can be realized via an exit within five years.

Generally, the same criteria applies to venture capital investors, although they invest other people’s money, at a later stage, in larger amounts. Both are excited by innovative new products and services, and neither is normally interested in deals in the following domains:

  • Consulting services. This type of business is usually based on the expert skill and reputation of an individual or small group. Such a business shouldn’t need a large investment to get started (no product to develop), and it probably won’t scale quickly (limited supply of experts). Accordingly, investors will decline.
  • Restaurants and retail. Local and family businesses, such as cafes and retail shops, are also not investments that angels tend to consider, unless you are proposing a new national franchise. Otherwise these will not scale, and cannot show a growth and return rate to excite professional investors.
  • Gambling and porn sites. Most professional investors value their integrity and image so much that they would never consider investing in a business that might be offensive to many, or raise legality questions in the minds of business associates and future clients. This is definitely the space for bootstrapping and personal networking.
  • Real estate. Angel groups almost never supply financing for real estate purchases, or personal loans. Even in today’s market, there is capital available from financial institutions at a lower cost for these purposes. It doesn’t make financial sense to give up equity ownership on an asset purchase, with built-in collateral.
  • Non-profit businesses. I think investments in non-profits are called “contributions.” In fact, many angels investors are also philanthropists, but the process of finding them and working with them in this context is totally different from the angel investment process. It’s hard to promise a high financial return from a non-profit.

Be wary of brokers who claim they can find angels in these domains, for an up-front fee and a percentage of the investment. In general, you shouldn’t be paying a fee to have someone evaluate your investment opportunity, or “guarantee” to find you investors. I recommend going only with legitimate angel groups, accessible through national websites like Gust, or locally publicized organizations.

Even if you are in the right domain, you should remember that angels invest in people, even more than ideas or specific business ideas. They put high premium on entrepreneurs who are experienced in building a business, and experienced in the domain of their current proposal. First-time founders will find that most angels turn into mirages.

Entrepreneurs in an unfamiliar domain better find a partner who has been there before they apply for funding. Early-stage these days means early customer revenue received, and early product in the market. If you have no product, no customers, and no revenue, talk to friends and family for that initial funding.

So if your domain is among the ones outlined above, you probably won’t find any angels lurking. That doesn’t mean you should give up your dream. It just means you have to take a harder look at the other alternatives listed in my earlier article on the “The 10 Best Sources of Cash to Start Your Business” for startups. A real entrepreneur loves a little challenge, to be the shining light in the crowd.

Marty Zwilling



Wednesday, July 11, 2012

Six Criteria for Outsourcing the Right Processes

Since my background includes software development, I often get the question about when to build a solution in-house, versus outsourcing it to a local company, near-shore service, or off-shore organization in China, India, or Eastern Europe. In the USA, “near-shore” is a euphemism for connected countries, like Mexico and Canada.

There is no simple answer to that question for all cases, but there certainly are some key considerations which will help you select the optimal solution for your case. In fact, the considerations are not unique to software development – they apply almost as well to any product or service you have:

  1. Control of core competency. Don’t outsource your core competency. If your software is your solution and “secret sauce,” don’t entrust it to outsiders of any kind. It’s like giving up control of your company. If the software is ancillary to your mission, proceed through the rest of these considerations.

  2. Intellectual property content. Some country cultures have little appreciation for software as intellectual property. For example, 90% of the software used in China and Vietnam today is pirated. Near-shore and local outsourcing alternatives are manageable with contracts and non-disclosure agreements. Protect your intellectual property.

  3. Technology level. If you expect your solution to incorporate the absolute latest in software technologies, scalable to millions of users, with multi-system failover and recovery, don’t count on out-sourcing. On the other hand, if it is maintenance and testing on non-core software, use the lowest cost solution.

  4. Cost factors. Companies in Asia and Eastern Europe can still provide direct cost reductions of up to 75%. In these calculations, be sure to include indirect costs of remote work, such as more project management, more travel, and less efficient communication. The net may be less cost reduction than you thought.

  5. Product or services. Once product software is written, it doesn’t take much effort to deliver it to customers. Software services, on the other hand, involve the creation of software customized for a specific situation, with a relatively low level of leverage and reuse. Outsourcing for services needs to be carefully managed, and almost never works.

  6. Creative or operational. Creative products, like chip design programs, architectural rendering, or consumer games are not easily outsourced. Operational products, like process automation or reservation systems, may be large but mundane, and more easily outsourced. In all outsourcing cases, a detailed specification is required.

The typical software startup these days is a one or two person operation, founder and co-founder, who do the work themselves on the first product with no salary. With today’s tools, they can do the work of a six or eight-person team 10 years ago, so software outsourcing is not appropriate.

On the other hand, if your startup is not software oriented, but you need some work done (not central to your product and core competency), it is usually better to outsource, either locally or remotely, than to hire employees, manage them, pay benefits, and maybe have to lay them off later.

If you do decide to outsource, build the relationship first, and manage the project carefully. Watch for evidence of inadequate staff and training, high turnover, poor or inadequate process, and lack of vendor project management. On your side, the killers are poor specifications, no acceptance criteria, and scope creep.

Overall, I believe that the demise of software entrepreneurs has been greatly exaggerated. Whether you are outsourcing software development, manufacturing, or accounting, the considerations are the same. Outsourcing is a process, not the problem or the solution.

Marty Zwilling



Tuesday, July 3, 2012

How to Survive Four Common Worst Case Scenarios

The best survival guides tell you how to be proactive and avoid the probabilities of ending up in a worse case scenario. Of course you need to learn how to recognize a bad situation before it bites you, and you need to know all the secret ways to wiggle your way out, before you succumb.

The challenges stem from the simple fact that every entrepreneur is starting something new, where things are predictably unpredictable. There are unknowns at every turn, leading product development, attracting customers, managing cash, and dealing with human resources and office politics.

Several whole books have been written on this subject, such as “The Worst-Case Scenario Business Survival Guide” by David Borgenicht and Mark Joyner, so you should consider this article a simple introduction. Here is their and my perspective on the most common problems that will threaten your survival:

  1. People are the problem and the solution. Probably 80% of the startups I know have found human resource issues to be the most treacherous. Trusted partners quit, personal friends become enemies, and staff management becomes a huge burden. Some say that if we could only run a company without people, the entrepreneur’s job would be easy.

    The proactive solution is to hire sparingly, and spend the time and effort needed to hire existing experts in all cases. Don’t hire your friends and family, don’t assume they can learn on the job, and don’t assume that cheap is best. The best will save your sanity, avoid most potholes, and pull you out of disasters you never anticipated.

  2. Missed or no target expectations. Setting the wrong or no expectations is another of the most consistent problems I see with every startup. Missed milestones de-motivate the team, unrealistic financial projections will put you in crisis with investors, and you find you need to double every product development timeframe when talking to sales and marketing.

    Add an advisory board or experienced mentor to reality-check your financial projections, timeframes, and milestones before you publish them. But not defining or publishing expectations is not the solution; that leads to quick disasters as everyone sets different ones, based on their own experience, or lack of it. “Stretch” goals in early-stage are not advised.

  3. Too slow or too fast to change. Ironically, startups that are all about change often are slow to see the need, or slow to implement. Yes, it’s your vision, and it’s good to be relentless, but don’t be blind and stubborn. The other side of this coin can be equally disastrous; the change of direction based on every customer or investor comment.

    Maintain your focus, but assume that changes in your plan will be required. Make it clear that you intend to re-forecast your plan every three months, and communicate changes proudly to your team, rather than apologetically. Build a learning organization that shares your vision and drive.

  4. Strategically timid and haphazard marketing. To get competitive leadership, you can’t be an industry follower. Too many startups simply follow the standard distribution channels, use standard pricing, and count on their one extra feature to give them the market. Marketing is done in fits and starts.

    Instead, you need to undertake an aggressive campaign in the new media, with creative selling messages and promotions. Don’t wait until you are in crisis mode to think about doing something new. Look for ways to offer additional value, rather than slash prices.

Overall, there are no silver bullets, and the entrepreneurs who recover from the most worst case scenarios are the ones with the most drive, determination, and positive mindset. Experience helps, so every worst case you survive makes you stronger for the next one. If you really believe that failure is not an option, you can make success happen, despite the odds.

Marty Zwilling



Monday, July 2, 2012

Assume Your Market is People Like You, Then Fail

Face reality. As an entrepreneur, you should assume none of your customers is like you, yet I find that most entrepreneurs assume just the opposite. Customers don’t have your technical base, the passion, and interest in your solution. In fact, even if they did, they couldn’t find you in the clutter. An underrated portion of every startup effort must be about communication and marketing.

By habit, people market to customers like themselves, because they know what they like and need. The challenge is attracting customers not like you, since that isn’t so intuitive. Kelly McDonald, who runs a top ad agency, takes on this challenge in “How to Market to People Not Like You.” Her focus is on companies facing change, which of course includes every startup. Here are my key recommendations from her book:

  1. Get out of your marketing “comfort zone.” Go beyond the “spray and pray” approach to marketing (spray your message out there as widely as possible and pray it sticks). A better approach today is “narrowcasting” – learning as much as possible about your target audience, and communicating to them frequently, richly, and relevantly.

  2. Get to know the customer you’re not getting, but should be. Don’t guess, or let your own biases be your guide. Go online and read everything you can about the group you want to target. Attend events, meetings, and gatherings of your potential customer observe and talk to attendees. Don’t forget to ask them what they want and need.

  3. Tweak your product or service offerings. This process alone communicates validation that you are actively reaching out. It says “I see you, I value you, and I want you.” People will pay a premium for what want, so you need to accurately tune and relate your offering to their values, needs, and wants.

  4. Make sales and customer service friendly. Little things make a big difference, so you need to tune your operational readiness and support to these new customer segments. Maybe your shopping bags need handles, or your employee attire needs adjusting. Don’t forget showing respect for other cultures, values, languages, and priorities.

  5. Develop marketing messages based on their values. Make sure your message has relevance to your new customer target, and is authentic and sincere. Make sure it fits in with their life and lifestyle. As you move to new support new languages, don’t just translate, but “transcreate” (express the same meaning and nuances).

  6. Use technology to reach your prospects. Everyone must have a web site that is complete, inviting, and easy to use. Create and maintain your own database of targeted prospects, and don’t rely on generic email lists for marketing. Use social media, search engine optimization, blogging, and mobile media. These will beat word-of-mouth any day.

  7. Proactively deal with naysayers. As you expand your market, act to minimize negative feedback or backlash from core customers by explaining what you are doing, your motivation, and why it is good for all. Team members need to understand these things as well, and need to understand exactly what you expect of them.

An obvious place to look for customers not like you is in the generational segments outside your experience. You personally can’t be in all five of the core segments – Matures, Baby Boomers, Gen X (thirties), Gen Y (twenties), Gen Z (tween). Each has different interests, spending habits, and priorities. Focus on the most important one first, and broaden carefully.

Then there are women versus men, immigrants, and the unique cultures of 195 different countries in the world, with many more races, religions and political views. Obviously, most of your total potential market is not like you. It’s never too early to start going after it. Your long-term business success depends on it.

Marty Zwilling