Monday, March 25, 2013

7 Worst Entrepreneurial Perceptions From Engineers

Larry-Page-reality-glassesEvery engineer who has invented some new technology, or is adept at creating solutions, believes that is the hard part, and it should be a short step to take that solution to market as an entrepreneur. In reality, that short business step embodies far more risk, and a poor technology solution is not near the top of most lists of common reasons for business failures.

In fact, a Duke and Harvard survey of over 500 technology companies showed that only 37% of their leaders even have engineering or computer science backgrounds. Clearly, engineers should think twice before assuming they have an advantage over the rest of us toward being an entrepreneur.

Now there are many resources out there to help engineer entrepreneurs, such as the book by Krishna Uppuluri, “Engineer to Entrepreneur: The First Flight.” He identifies the key business misperceptions of most engineers, and provides a workbook approach to provide a quick-start on various business lifecycle topics. I’ve summarized his points, and added my own, as follows:

  1. “Everyone loves ‘cool ideas’ and new technology.” Before investing a lot of time and money into any idea, entrepreneurs should assess the commercial viability. That means evaluating third-party market research, getting real customer feedback from prototypes, and listening to concerns of successful executives in the same business area.

  2. “I need to go-it alone to assure quality and elegance.” Engineers assume that the business issues can be resolved later. Working alone, or with other engineers, is great for the average engineer introvert, gives them better control, and minimizes distractions. A team with diverse skills is harder to manage, but more likely to build a thriving business.

  3. “Marketing is fluff and selling is black magic.” The old adage, “If we build it, they will come” came from engineers. In reality, building a solution won’t make it connect with customers, manage competition, or communicate and proselytize the offering in the industry. With today’s information overload, selling is always required.

  4. “We need to get functionality maximized before we focus on customers.” The business reality is that you can’t engineer the functionality right UNTIL you focus on customers. Superfluous functionality, from a customer perspective, is a failure. The mantra for an entrepreneur today should be to ship fast, make changes, and iterate.

  5. “A good engineer hates unpredictability and risk.” A good entrepreneur embraces risk as an opportunity, whereas most engineers are risk averse and cautious. The result is that engineer-driven solutions often are too little, too late, if they ever ship, in today’s fast moving market. Managing risk is good; eliminating risk is bad for startups.

  6. “We can’t worry about making money until we get it built.” If you can’t make money, it isn’t a business. Business constraints, such as market size, customer demographics, manufacturing, distribution, and support costs need to be set, or there is no context for getting it right. Getting it right at the wrong cost will get you no customers.

  7. “Outside funding causes loss of control and undue pressure to deliver.” Funding is like a turbocharger for a startup company, if used correctly. Investors love to fund growth and scaling of a proven business model for entrepreneurs, and they avoid at all costs funding research and development for engineers. Hence the pressure to deliver.

Certainly there are many examples of great companies led by engineers, including Microsoft with Bill Gates, Oracle with Larry Ellison, and Google with Larry Page. This is strong evidence that it is possible to make the step from engineer to entrepreneur, or team with someone who can provide the complementary skills and perspective.

In fact, as Krishna says in his book, the stars are uniquely aligned these days for engineers to be entrepreneurs. The Internet is the great equalizer, allowing all of us to develop broad, as well as deep, skills and insights quickly. With the economy on the rebound, we need more entrepreneurs to satisfy new demands and solve new problems. It is time for more engineers to take the first big step.

Marty Zwilling



Friday, March 22, 2013

Startups Must Adapt to New Customer Buying Dynamics

Brian-SolisMany entrepreneurs think that adapting to the new technologies, like smart phones and Internet commerce, are the key to attracting new customers. In fact, businesses need to adapt just as completely to the changes in the buying and social behavior of consumers. High-technology product startups, without customers, don’t make a business.

Today’s customer buying dynamics are all about “user experience,” according to Brian Solis, in his new book “What’s the Future of Business?.” This thought leader in new media asserts that every business needs to understand social psychology and rethink their business models, approach, and relationships in order to create unique and memorable experiences for both customers and employees.

Solis outlines the heuristics of social psychology that are key to building positive customer experiences today. These begin with the following Cialdini’s Six Principles of Influence, that consumers use to make decisions, buttressed by results from various social media surveys he references in the book:

  1. Social proof – follow the crowd. During today’s dynamic customer journey, consumers often find themselves at a point of indecision. When uncertain of what to do next, social proof kicks in to see what others are doing, or have done. Survey results show that 81% of consumers now receive advice through social networking sites prior to a product purchase.

  2. Authority – the guiding light. Perceived authorities guide decision making, by investing time, resources, and activity in earning a position of influence, leading to a community of loyalists who follow their recommendations. 77% of consumers now research online product reviews, blogs, YouTube, Twitter, and Facebook, for authoritative guidance.

  3. Scarcity – less is more. Greater value is assigned to the resources that are, or are perceived to be, less available. Driven by the fear of loss or the stature of self-expression, consumers are driven by the ability to participate as members in exclusive deals. 77% of people like getting exclusive offers that they can redeem via Facebook or other sites.

  4. Liking – builds bonds and trust. There is one old saying in business that is still very true in this age of social media: People do business with people they like. We all have a natural inclination to emulate those we like and admire. Almost 50% of shoppers surveyed admitted to making at least one purchase based on a social media friend recommendation.

  5. Consistency. When faced with uncertainty, consumers tend not to take risks. Rather, they prefer to stay consistent with beliefs or past behavior. When these do not line up in the decision-making cycle, consumers feel true psychological discomfort. The result is that 62% of online shoppers are brand loyal due to other online satisfaction data.

  6. Reciprocity – pay it forward. Perhaps the greatest asset in social capital is that of benevolence. We have an innate desire to repay favors in order to maintain social fairness, whether those favors were invited or not. Every month, over 25 billion pieces of content are shared on Facebook alone, with a major portion oriented toward reciprocity.

Social psychology in general deals with how individuals relate to one another. In today’s social networks, the social economy is defined by how people earn and spend social capital. Based on the commerce of actions, words, and intentions (or actions, reactions, and transaction), people build their own standing. Startups earn relationships and resulting stature the same way.

Another aspect of the social psychology of consumer buying today is the four stages where customers take actions that move them toward you or away from your startup. These are sometimes called the four moments of truth:

  • Zero Moment of Truth. The few moments before people buy, where impressions are formed and the path to purchase begins. It is that moment when consumers grab their laptop or mobile phone, and start learning about a product or service.

  • First Moment of Truth. This is what people think when they see your product and it’s the impressions they form when they read the words describing your product.

  • Second Moment of Truth. It’s what people feel, think, see, hear, touch, smell, and (sometimes) taste as they experience your product over time. It’s also how your company supports them in their efforts throughout the relationship.

  • Ultimate Moment of Truth. It’s that shared moment at every step of the experience that becomes the next person’s Zero Moment of Truth. This one is required to generating word of mouth, advocacy, and influence.

So for all you technologists, who routinely focus their resources on a great product (“if we build it, they will come”), it’s time to balance the business success equation. Learning how to craft and nurture great customer experiences around your product is critical. The future of your business these days depends on it.

Marty Zwilling



Monday, March 18, 2013

10 Entrepreneur Alternatives to Executive Isolation

young-steve-jobsOne of the toughest things about running a startup is the feeling of loneliness and isolation. You are on your own and nobody supports you because it’s hard for them to see what you see and feel the excitement that you feel at the critical stages. This is especially true if you run your startup from your garage.

The leadership position alone can cause loneliness and disconnectedness, and that sometimes results in self-defeating behaviors. If your personality already leans toward narcissism, being the boss will likely bring out the worst in you, leading to intimidation, deception, and the use of coercive power. Of course, that leads to further isolation.

It doesn't have to be lonely at the top. Here are some ways to burst through the loneliness of being a founder or top executive, and be the healthy and respected leader of your business:

  1. Join peer business groups. Join business organizations of like-minded executives. They provide a safe harbor to come talk about issues of leadership with other business owners. Groups like the Inner Circle and Entrepreneurs’ Organization (EO) are perfect.

  2. Build a trusted team. Most people by nature get some satisfaction from team interaction, working toward the same goal. Even if your startup is a one-man show, you can find an intelligent outside mentor or advisory board member to bounce ideas off.

  3. Balance home and family. The best leaders are able to maintain a balance in their lives. They have learned to say no. They accept that their families and their subordinates sometimes need to say no. They turn their work into play and then play hard.

  4. Don’t work where you live. Just being able to live and work in separate environments can really help. The change of scenery and external stimulation, whether a coffee shop or just the sunlight, will allow you to switch gears and keep a healthy attitude.

  5. Meet customers online. Use Twitter and Facebook to make connections with clients, customers, and peers online. It helps to socialize with several hundred people all at once, even if you never see them face-to-face, and you can “instant message” one-on-one.

  6. Plan regular networking lunches. Get out of the office on a regular basis to break up the frustrations of daily crises. This combats the isolation that sometimes comes with leadership, helps you broaden your perspective, and gives moments of pure relaxation.

  7. Nurture your charismatic side. Charismatic leaders don’t feel the loneliness, and use a wide range of methods to manage their image. If you are not naturally charismatic, practice diligently to develop these skills of body language and verbal language.

  8. Maintain non-business activities. Hearing about your virtual coworkers going hiking, or just spending some time resting and relaxing can be very detrimental to your self esteem. Work to keep up on your own hobbies, and participate in community action events.

  9. Let a select few see your frailties and fears. Pretending we have it all together only builds the walls of loneliness higher. On the other hand, opening the door to our frailties invites others in. A trusted team member is usually a safe start.

  10. Build a good board of directors or advisors. People under-estimate the value of a good board. Yes, a board does decide whether you stay or go. They probably won't be your friend all of the time. But a good board can collaborate with you openly, provide advice, and provide you back-up especially when taking a risk.

Entrepreneurial leaders can also become de-motivated after working so hard and so long on something for which the reward may be months or years away, or perhaps never to come at all. Motivation, momentum, and clear progress are strong antidotes to loneliness.

But the best antidote to loneliness is successful leadership. This will give you the positive feedback you yearn for, and will allow both you and your business to become more than you ever dreamed possible.

Marty Zwilling



Monday, March 11, 2013

How to Minimize the Red Tape and Taxes of a Startup

red-tape-taxesOne of the first questions that I get from many entrepreneurs is “How should I set up my company to minimize my setup costs, tax liabilities, and risk of lawsuits?” The answers are different in every part of the world, but the parameters here in the US should give you the considerations you need in any environment. I’ll offer you a few simple rules of thumb.

If you are certain that you are building a large national corporation with more than 100 investors, and multiple classes of stock, then you might as well start with a Delaware or Nevada C-Corp. If you aren’t so sure, need something fast, or need to keep your costs low, then an LLC is the best legal and taxable entity to facilitate your startup. Here are the key steps:

  1. Form the simplest legal entity early to cover your efforts. Don’t wait for that first investor, the first prototype, or that first lawsuit. Incorporate your startup after the business plan, but before you spend a dollar on product development. The alternatives include a sole proprietorship, LLC (Limited Liability Company), S-Corp (Subchapter-S Corporation), or C-Corp (US Corporation).

    While the sole proprietorship is the simplest, it is essentially co-mingling your personal and business assets. The harsh downside is that you might lose your house and all personal possessions if your business fails, or gets sued. Each of the other three has the great legal advantage of limiting liability to the entity, preserving personal assets.

  2. Declare a separate taxable entity to optimize taxes. Many entrepreneurs don’t realize that the tax entity election doesn’t have to match the legal entity. For example, an LLC with two or more members (even husband and wife) will default to a partnership for tax purposes, and report income through Schedule K-1.

    Any LLC or S-Corp can elect to be treated for tax purposes as a sole proprietorship (Schedule C) or partnership (Schedule K). Or any LLC can use Form 2553 Election by a Small Business Corporation to be treated for tax purposes as an S-Corp. Now would be a good time to see your lawyer or accountant if you need more details.

  3. The initial paperwork defines the start date of your business. The first step can be done online in a few minutes by filling out Form SS-4 to request an EIN (Employer Identification Number). An LLC or S-Corp or C-Corp requires several more forms to create, and publication in a newspaper. If you do it yourself, this process will likely take a couple of months and cost a few hundred dollars (much more if you use a lawyer).

  4. Every startup business needs annual tax return coverage. For corporations, the annual tax return due date is March 16th in the US. LLCs and sole-proprietorships become part of your personal tax filing package, so the due date for these is April 16th. In addition, corporations have quarterly filing requirements, and even monthly ones, if you collect sales taxes and hire employees.

  5. Upgrade your business entity as required. Legal requirements and tax requirements change as a business grows, so your entity needs to be reviewed regularly. For example, you and your partner may be perfectly happy with an LLC, but venture capital or Angel investors may insist on having “preferred” stock, forcing an upgrade to a C-Corp. A few states, like Delaware and Nevada, offer tax advantages to large companies.

If you need help, there are plenty of places you can go online, like If you are totally confused by the online information, make an appointment with a local agency such as your industry association, your local SCORE office, or your nearest Small Business Development Center (SBDC). If all else fails, hire an attorney to guide you through the special cases.

But don’t be misled. Minimizing red tape and taxes is a necessary, but not sufficient, effort to ensure the success of your startup. On the other hand, I’ve seen several innovative and substantial startup efforts derailed by lack of focus on legal or taxation issues. That’s a painful way to die, or wish you had never started.

Marty Zwilling

Disclosure: I am blogging on behalf of Visa Business and received compensation for my time from Visa for sharing my views in this post, but the views expressed here are solely mine, not Visa's. Information and opinions are presented solely for informational purposes, and are not intended, nor should they be construed, as a substitute for legal, accounting or tax advice. You should consult an attorney or tax advisor for individual advice regarding your own situation.

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Every month, the Page will introduce a new theme that will focus on a topic important to a small business owner's success. For additional tips and advice, and information about Visa's small business solutions, follow @VisaSmallBiz and visit



Sunday, March 10, 2013

10 Entrepreneurial Lessons From the ‘Gang of Four’

jobs-zuckerberg-page-bezosEvery startup, as well as mature business, needs to learn as much as possible from Amazon, Apple, Facebook, and Google, who have set the standards for fast growth and success in today’s business world. These companies, designated the “gang of four” by Eric Schmidt a couple of years ago, are clearly driving a consumer and business revolution on the Internet today.

According to many technology pundits, including Phil Simon, in his book “The Age of the Platform,” these four exemplify the rise of platforms with applications as a business model, rather than a single product or service. Whether you believe his conclusion or not, you can learn a lot from the lessons he offers on how to build a competitive business model today:

  1. Act small. “Bigness” and all of its attendant problems – bureaucracy, politics, infighting, and the like – put any business model at risk. Bureaucracy and excessive democracy kill speed. Shake organizations up often to avoid stiff and inflexible management structures.

  2. Be open and collaborative. Startups as well as large companies must be open to all sorts of new ventures, partnerships, and offerings. Make application programming interfaces (APIs) open and freely available to developers, partners, and consumers.

  3. Seek intelligent acquisitions, extensions, and directions. Plan on making strategic acquisitions to enhance your core competency, both in terms of depth and breadth. Leverage existing solutions and platforms for extensions, rather than re-invent the wheel.

  4. Make little bets and encourage experimentation. Growth companies in this age develop many different small projects and many ideas. To be sure, a majority will fail, but the most successful product launches often emanate from small ideas and side projects.

  5. Fail forward and embrace uncertainty. There’s nothing wrong with failing, if the bet is small, and you learn from it. Insisting on perfection before rollout hurts much more than it helps. To build a model, you have to be willing to take chances. Safe is the new risky.

  6. Temper expectations and overshoot on technology. Building an effective platform takes time, and is usually slow to show traction. Always buy more computer resources than you need. It’s better to have too much than not enough for a great first impression.

  7. Know when to punt. Many people and businesses stubbornly and mistakenly refuse to adapt to new economics, business realities, and technologies. No one wants to leave a great deal of money on the table, but don’t be penny-wise and pound foolish.

  8. Breadth trumps depth. True platforms are multi-faceted. Having significant depth in one niche area is important, but robust platforms evolve to add a bevy of products, without requiring existing users and customers to learn a new user interface or convert data.

  9. Move quickly and decisively when spotting a niche. Don’t confuse patience with inertia. Waiting too long means that an opportunity may disappear permanently – or someone else may beat you to the punch. Temper expectations, but make the bet.

  10. Use existing tools. It’s time consuming, expensive, and simply unnecessary for every company to create its own tools and base functions (planks) from scratch. By using outposts, businesses increase serendipity, exposure, and cross-pollination.

Building one of the new platforms definitely doesn’t assure business success. Skeptics may point out that platforms have been around since the advent of computers, in the form of operating systems, networks and APIs, yet today the new platforms are becoming table stakes. Businesses with primitive sites cost themselves credibility and customers, and risk becoming invisible to the world at large.

Just as important, the new platform business models can never be finished. Each must continue to expand in many ways and directions. Today’s dizzying pace of change shows no signs of abating. If anything, it is likely to accelerate. So do everything you can to heed these lessons today, to be as prepared as possible for a vastly different tomorrow.

Marty Zwilling



Monday, March 4, 2013

7 Indicators of the Work Ethic in Your Startup Team

Warren_Buffett_KUGreat entrepreneurs have long been the epitome of people with a great work ethic. But many complain to me that it is becoming harder and harder to find team members and employees who demonstrate and live the same culture. Somewhere along the way, work ethic seems to have been replaced by a pervasive sense of entitlement, especially in the younger generations.

Now is the time to assess your own situation, set out clearly what you expect from each and every team member, and unleash the entrepreneur inside every employee. As a guide, I enjoyed the analysis of Eric Chester, in his book “Reviving Work Ethic,” which provides a leader’s guide to ending entitlement and restoring pride in the emerging workforce.

His focus is on young employees, whose habits and ideals might be more easily moldable. But with people of any age, work ethic is knowing what to do and doing it. Warren Buffett has been a tireless model of this work ethic for the last thirty years. According to Eric, there are seven elements which are essential to an individual’s work ethic, as follows:

  1. Upbeat, optimistic, energetic, and positive. Attitude is nothing more and nothing less than a person’s outward expression of his internal views. A positive attitude at work is infectious, so the more you call it out to others and encourage it in key team members, the easier it will be for you to radiate it throughout your culture.

  2. Reliable, no matter what. Reliability begins with showing up – being where you are supposed to be when you are supposed to be there. It extends directly to your customers through dependable products and services. It isn’t a value that only benefits the employer and customers. It makes for a valued worker, who will stay in high demand.

  3. Neatly groomed, appropriately dressed, and well mannered (professionalism). A professional puts the job ahead of personal norms and desires. Nonconformity is not the culture in most businesses. The best time to address expected norms is before hiring, and mentoring with one-on-one conversations must supplement rulebooks.

  4. Ambitious and dedicated (not satisfied with merely “good enough”). Initiative is all about the discipline of investing now – putting in the effort, sacrificing, doing more than the minimum, rather than waiting for the world to change (“Pay now, play later”). Leaders need to clarify the initiatives they expect to see, and reward exemplary results.

  5. Trustworthy (uncompromising respect). Every job relationship must start with the employee giving respect, before demanding it in return. This means respecting the work contract, coworkers, and the line between work and socializing. Entrepreneurs need to clarify expectations and rule relevance, mentor employees, and reward compliance.

  6. Integrity and coach-ability. Nothing will win coworker respect and admiration like honesty. Aim to be100 percent ethical and above board, 100 percent of the time. Talking about integrity is not enough. You need to call attention to it when you see it, recognize it, reward it, and celebrate it so that it radiates throughout your organization.

  7. Determined to do anything necessary to delight every customer and coworker (gratitude). You need your team members to show gratitude in all phases of their job. In this context, problems are good things to have. A valued employee understands that his job exists to solve problems, so he doesn’t run away from them, but toward them. That will delight your customers, and set you apart from competitors and less-diligent workers.

The Gallup Organization estimated over ten years ago that there were 22 million employees with a poor work ethic, or actively disengaged, costing the American economy as much as $350 billion dollars per year in lost productivity including absenteeism, illness, and other problems. The longer-term problem is slow growth, and an ultimate failure to compete.

Are you and your company part of the problem, or part of the solution? Remember that a poor work ethic by even one person in the organization is a virus, which can spread like wildfire and bring down the whole organization. The antidote is daring to face the work ethic issues in yourself and your company, early and often, to keep you in the ranks of the great entrepreneurs.

Marty Zwilling