Monday, July 29, 2013

Idea Non-Disclosure Demands Kill Investor Interest

contract_and_penEntrepreneurs often get the advice from their lawyers and friends to always get a Non-Disclosure Agreements (NDA or CDA) signed before disclosing anything about their new venture. Most investors and startup advisors I know hate them, and refuse to sign them. Who is right?

Let me try to put this question in perspective. If you are totally risk-averse, then push to always get signed NDAs. You won’t last long as an entrepreneur in this category, since a startup is all about taking risks. On the other hand, if you intend to patent an idea, you need a signed confidentiality agreement from everyone knowing details, or you will legally lose patent rights.

The format of an NDA is simple, and you can download a sample from my website. Here are some rule-of-thumb considerations that should help you decide when an NDA is really required, or actually has negative value:

  • Trusted professional. If you want advice or funding, and the person you are about to pitch to is a certified investor, or a senior business advisor, skip the NDA. These people value their professional integrity, like your doctor or lawyer, and they are not competitors. Asking for an NDA is an insult and will jeopardize your case before you start.
  • Unknown interested party. If you meet someone through Internet networking, or if someone with no visible professional standing contacts you with interest in your plan, an NDA is the least you should do to protect yourself. Verifying credentials through multiple sources is even better.
  • Strategic partner. The line between competitor and partner is a fine one these days. An NDA is highly recommended before you talk to a similar company about a joint venture, white labeling, or any investment options. I recommend a mutual non-disclosure, with a non-compete clause, for protection in both directions.
  • Prior to patent application. As I mentioned earlier, you should never disclose details of a potential patent to anyone without getting a signed and dated NDA. That doesn’t mean you can’t talk in general terms about your idea, and even pitch to investors. Investors don’t need to hear the details anyway, until at least the due diligence phase.
  • Trade secrets. A trade secret is a formula, practice, process, design, instrument, pattern, or compilation of information which is not patentable, but gives you an economic advantage over competitors or customers. When someone needs to know the details, get an NDA, even with your own employees.
  • Period covered. Typically NDAs have terms of two to five years. In today’s fast moving world, a longer term makes no sense, and is viewed by the signor as an unreasonable restriction on future activities. You can always renew the NDA before it expires, if it is still relevant.

Venture capitalists and angel investors won’t sign NDAs for two reasons: 1) they don’t want the constraints or litigation a few have faced from rogue entrepreneurs, and 2) they feel that if by simply describing the problem you solve, you give away your business, there is almost no chance you will be able to create a defensible position in the market.

They see the same good ideas so often, that if they signed a non-disclosure on just a few, they would quickly not be able to talk to new entrepreneurs. It’s the people that count anyway, not the idea. Besides, one of the reasons for talking to investors is that they will spread the word to other good investors, so you really want them to talk about you to others, to improve your funding odds.

There will be some companies who, for perfectly valid business reasons, do not wish to sign an NDA. This doesn’t mean that they are dishonest, but simply that they may not wish to manage the risks involved. As an example, they want to avoid any future conflict with products they may already be working on.

Sharing original work which you intend to commercialize with a startup requires a high degree of mutual trust. Remember that without an NDA, you can still explain what your idea does, but not how it functions or how it’s made. That should be enough to excite interest at a first meeting, and the feedback is worth more than the risk.

Marty Zwilling



Sunday, July 28, 2013

Entrepreneurs Learn Best From Business Networking

business-networkingI often recommend business networking as the most effective way for a startup founder to find investors, advisors, and even key executive candidates. But what if you are an introvert, or new to this game, and don’t know where or how to start?

The answer is still the same, but I have learned over the years that there is an etiquette to this process, just like there is for social networking. Here are a few of the “do’s”:

  • Post your profile on LinkedIn and Twitter, and join in startup discussions. There are other social networks of the 200 or so now recognized by Wikipedia that entrepreneurs use for networking, depending on where you are in the world, like Orkut, Netlog, and Sina Weibo, but talking to friends on Facebook probably won’t help you.
  • Join and actively participate in local business organizations. Business groups like TiE-The Indus Entrepreneurs and EO-Entrepreneurs Organization are places to meet people you can help, as well as people who can help you. Remember it helps to give a little to get something back. Another place to start is the local Chamber of Commerce.
  • Get introductions from existing business contacts. Start with the people you know, who know your work, and would recommend you to others. It isn't always the first introduction, but the friend of a friend that may be the one that pays dividends.
  • Volunteer to help out with entrepreneur activities at your local university. All universities love and need to get help from people in the “real world” for coaching and judging activities in their Entrepreneurship and MBA programs. In return, you will meet or be connected to many people who can help you.
  • Attend an investment conference. These events are swarming with potential investors, and this is the forum where they are actively soliciting new opportunities, so don’t be shy about handing out your business card at breaks, lunch, mixers, or scheduled activities.

Join a local investment group. If you can meet the SEC “accredited investor” criteria ($1M net worth or $200K annual income), this is a great way to be seen by potential investors as peers before you need money. Plus you will see how the process really works from the other side of the table – the best preparation you could have for your own approach later. In most cases, these groups don’t require that you invest in others, as a condition of membership.

If all of these are obvious to you, then you are already on the right track, and you probably wouldn’t consider doing any of the “don’ts.”

  • Don’t do cold calls or email blasts of your resume and business plan to potential investors.
  • Don’t corner and barrage that heavy hitter you heard about with your life history at a social gathering.
  • Don’t send your unfinished business plan unsolicited to every VC or investment group you can find on the Internet, just to see if they like the concept.
  • Don’t hand out your business cards to everyone in the room, in hopes that one will be impressed with how unique and expensive it looks.
  • On LinkedIn, don’t complain to everyone that you are limited to only 3000 invitations, and request them to send you an invitation to become friends.

Back on the positive side, I like to say, especially for us introverts, that networking is more about listening that it is about talking. Believe it or not, most successful investors have big egos, and will probably remember you better if they do most of the talking at first. Nevertheless, have your elevator pitch honed, and don’t be shy about giving it. Don’t forget your enthusiasm, and have fun, but remember your manners!

Marty Zwilling



Wednesday, July 24, 2013

Don’t Turn Your Business Dream Into a Nightmare

business-nightmareI’ve noticed a great tendency among startup founders to ignore the essentials of business accounting in the early stages of their startup. Just because you are not profitable yet, doesn’t mean you can skip the record keeping.

In fact, just the opposite is true. When you anticipate losses for the first year or two, it is more important to properly document all expenses, including tricky ones like business travel, business meals, and your home office. Sloppy documentation and reporting of these expenses is an open invitation to an IRS audit, which is the last thing you need or can afford during the busy startup period.

Expense accounting is just one of the key record-keeping requirements for a successful business:

  • Expenses and income. You'll need a check register, a cash receipt system, and a record of bills. Also you should include tax records, bank statements, cancelled checks, bank reconciliations, notices from and to your bank, deposit slips, and any loan-related documents. Keep good backups of all computer files.

  • Corporate records. Include here articles of incorporation, bylaws, shareholder minutes, board minutes, state filings, stock ledger, copies of stock certificates, options and warrants, and copies of all securities law filings. In all cases, don’t forget permits, licenses, or registration forms required to operate the business under federal, state or local laws.

  • Contracts. All the contracts you have, even expired ones, should be saved indefinitely. These would include equipment leases, joint venture agreements, real estate leases, and work-for-hire agreements. It is also good to keep correspondence sent and received by mail, faxes, and important e-mail that you might want in hard copy.

  • Employee records. Include here completed employment applications, employee offer letters, employee handbooks or policies, employment agreements, performance appraisals, employee attendance records, employee termination letters, W-2s, and any settlement agreements with terminated employees.

  • Intellectual property records. This is an especially important category. Make sure you file a copy of all trademark applications, copyright filings, patent filings and patents, licenses, and confidentiality or nondisclosure agreements.

Of course, these days you need a personal computer or laptop dedicated to your business with some basic software tools. You should investigate the wide variety of software systems that are on the market, and pick one you makes you comfortable, since you will probably be doing the basic data entry yourself. This not only will save you money, but it will keep you intimately aware of all expenses and the condition of your overall business. In my experience, the most common small business accounting system I see in startups is QuickBooks Pro by Intuit.

Even if you have the money to hire an accountant, you should keep a grip on your business financial affairs. You should be able to explain to yourself how much money you owe out to others, how much others owe you, and how much cash you have on hand. Don’t be shy about investigating local classes as adult education, or even a seminar with the SBA on bookkeeping.

An accountant may not be necessary, but you still can’t skip the tools. You can't walk in with a bag full of receipts. The more organized you are, the more organized you will be when presenting this material to an accountant. That translates to reduced bills from the accountant, and a reduced tax bill from the IRS. You will save time and money, and be more confident about your status.

Good record-keeping practices are required to comply with tax laws, and to operate your business properly. When you incorporate your business is the right time to establish the records system. Don’t let your dream get killed by ignoring business basics.

Marty Zwilling



Sunday, July 21, 2013

7 Reasons Startups are for the Young and Positive

Mike_MichalowiczTo be an entrepreneur, you have to be navigate lots of unknowns, and the path is fraught with risk. Once you are past a certain mental age, you know too many of the things that can go wrong, so you never start. Sort of like the old saying that if we didn’t have young men to fight our wars, we could achieve world peace in no time.

People who are young, or young at heart, don’t know all the negatives, or don’t worry about them. The result is that they achieve things that no one else ever thought possible. That’s the definition of a true entrepreneur. Many people, including Mike Michalowicz, in his highly irreverent book, “The Toilet Paper Entrepreneur,” have identified specific reasons for this:

  1. Resilience. Youth brings an ability to rebound that many people lose with age, unless they remain young at heart. This resilience allows you to bounce back after defeat and try again, unscathed. The entrepreneurial path is littered with pitfalls and roadblocks; you need the capacity to come back again and again relentlessly.

  2. No false pretense. The young foresee many more possibilities and great experiences ahead. As a young person your life IS still ahead of you. The best part is, you can determine just how great a ride it will be. In fact, at any age your life isn’t over yet. Smart people are still determined to make it a great ride, rather than a sickening spiral downhill.

  3. Responsibility pressures. Most young people fresh out of college don’t have children and spouses to support, so they can put real focus into launching a company. Later in life, when the kids are grown and gone, someone young at heart can again focus on dreams without overwhelming responsibilities.

  4. Energy and passion. No question, a young person has more energy than an older person. Likewise, a person at any age who is living their passion as tremendous amounts of energy. Those who are young at heart feel the same passion, and can even use their experience to do the same job with less energy.

  5. No preconceived notions. Young people, in general, are far more willing to try something new. As we age, we often look back at our younger years and can’t believe the crazy things we tried. But it’s never too late for some to be young, be crazy, and launch a company.

  6. Not schedule driven. One of the first freedoms that most young people enjoy is to ignore conventional schedules. They may party all night and work all day, or the other way around. Getting away from large company schedules is also one of the key reasons that experienced professionals jump ship to start their own company.

  7. Money isn’t a big deal. Since most young folks have yet to experience what it’s like to have lots of money, going without isn’t perceived as much of a hardship. On the other end of the spectrum, most people learn that money doesn’t mean happiness. The motivation to follow you dream actually can keep you young at heart.

There is plenty of evidence that raw intelligence and advanced degrees are not the key to success as an entrepreneur. What does matter is how smart you believe you are, how talented you believe you are, how driven you are, how focused you are and how persistent you are. These are the domain of the young at heart, of any age.

Launching a business is about surviving and doing it intelligently. If you have the will, there is a way. Being young or young at heart makes it even easier. As Mike Michalowicz would say, all you need is to get down to business. NOW!

Marty Zwilling



Monday, July 15, 2013

Business Plan Financial Forecasts Test Your Savvy

savvy-money-manMany entrepreneurs actually refuse to do financial projections beyond the first year, insisting that no one can predict the future. They need to realize that investors ask for projections, not merely as predictions, but more as commitments from the founder and his team. If you are not willing to commit, don’t expect anyone to back you.

In reality, you need to set these projections as goals for your own use, to convince employees as well as investors that you have a business which is challenging, but achievable. Projecting the financials should be the last step of your business plan preparation, since it assumes you already know the opportunity size, customer buying habits, pricing, costs, and competition.

Using your data, here are the basic elements of the projection process, which are measurable by milestones, and can be tracked to show when a re-forecast is required:

  1. Start with sizing per-unit profitability. Margin is everything. Unless your volumes are in the millions or higher, the difference between manufacturing cost and customer price better be 50% or greater. That should be true even if your customer is really a distributor. Otherwise, sales, marketing, and operational costs will kill you.

  2. Next comes sales volume by channel. Here is where you need a “bottoms-up” estimate from the people in your organization who have to deliver. This forecast is really their commitment. It’s tempting here to simply calculate one percent market share, and assume anyone can do at least that much. It’s not credible and won’t happen.

  3. Don’t forget that pesky overhead. Even with a slow economy, it’s amazing how fast office space costs add up, in conjunction with insurance, utilities, and administrative help. Then there are computer costs, trade shows, inventory, and a thousand other things. Check industry average statistics to make sure you are in the right range.

  4. Cash flow is king. Your “burn rate” or net cash flow out is usually the single most important survival parameter to a startup. The holy grail is break-even, when revenues first catch up with the outflow. Projecting, tracking, and controlling cash flow is the single most important job of the CEO and all other startup officers.

Beyond these basics, here are some common-sense strategy elements which will maintain your credibility with investors, and minimize your opportunity for failing:

  • Add a buffer to your required investment. Calculate what you need based on the cash flow calculations above. See where your cash flow bottoms out. If the bottom is minus $400K, add a 25% buffer, and ask for $500K funding. The request size must correlate to your projections to be credible.
  • Plan to re-forecast every quarter. Everyone understands the reality that startups have to adjust to market fluctuations, and financial projections are an art rather than a science. Cost projections should never be missed, unless you suffer an emergency or get caught in a tsunami.
  • Target aggressive but rational projections. Initial forecasts should be aggressive for credibility, but don’t shoot for the moon. Most investors have never seen a startup achieve its initial projection, so here is your chance to be a hero.

Just the process of doing financial projections allows you to see areas of strength and weakness in your proposed business model, thus enabling you to make critical adjustments sooner. For even more value, you should develop a financial model. With a few variables, like volume growth rate, and number of salesmen, a “what if” analysis is possible on cash flow, breakeven point, and revenue growth.

Financial projections can be intimidating. But a solid financial forecast is a required cornerstone for any business plan. Without it, you will likely prove the old proverb "He who fails to plan, plans to fail."

Marty Zwilling



Thursday, July 11, 2013

How to Make a Real Social Media Customer Connection

Visa Business_July Infographic_071013As I visit the websites of many startups, as well as more mature businesses, I still too often see a “contact” page offering nothing but a sterile form for customers to submit, never to be heard from again. Social media connections, if they exist, are buried elsewhere or reserved for monitoring purposes only.

Social media is here, and is the preferred mode of communication by a large segment of your customers, so make it a positive differentiator for your business. Don’t force them to use an automated phone response system, or a faceless unresponsive form. Customers are not all like you, and they have choices, so a “one size fits all” customer service is no longer a viable option.

There are now many resources out there to guide you on building social media into your business and improving your customer experience, including the book from multicultural marketing expert Kelly McDonald, “Crafting the Customer Experience for People Not Like You.”

Her focus is on crafting a customer experience that caters to people not like you, including social media aficionados, to bring in new customers and create a competitive advantage. Every startup these days must adopt this focus to survive and prosper. Here are some key recommendations I gleaned from her book to make this work:

  1. Empower your social media front line team. This front line team, often called community managers, are the “voice” of your company, and must have authority to make and carry out decisions that can make or break a customer’s experience. That means forget using interns or outsourcing this function. You need insider “deciders” here.

  2. Be proactive and put on your listening ears. You absolutely must listen online, because that is where you will find the unvarnished truth about what your customers and prospects think of you. Proactively asking the right questions will get you to that truth in a positive way earlier, rather than having to learn from damage control later.

  3. Respond online to feedback received online. Before social networking, an unhappy customer might tell three people. Now an unhappy customer can easily tell three million. If these three million see no timely response, your problem can go viral (like United Breaks Guitars). Respond online and let the positive vibes go viral instead. Don’t force customers to go offline to your customer support phone or email for resolution.

  4. Guide customers to the right social media channel. As a startup, you can’t be everywhere all of the time, so it helps to tell people through traditional channels, in a positive way, the best ways to find you. All social media channels are not equal, and customers are still learning, so they may also appreciate some guidance.

  5. Connect members of your market to one another. One vital aspect of relationship building requires that you become a true connector by introducing members of your market to one another, which will help them derive mutual benefit. A positive result could be a reputation that you put customer relationships first and sales second.

Providing the best customer experience to different kinds of people via different channels isn’t just the right thing to do, it’s the strategic thing to do. It will improve your business in several ways:

  • Grow your business by bringing in new customers.
  • Give you a significant competitive edge, by better serving broader customer groups.
  • Increase customer loyalty and therefore customer retention.
  • Help differentiate you from other businesses or similar enterprises.
  • Give you a greater understanding of and insights to diverse customer groups.

Although building social media into your customer experience sounds like work, don’t forget that social media is a gift to every startup and small business. The conversations that once took place only between people in private settings now occur more and more in public online environments, across a world geography.

By “eavesdropping” on the right customer conversations, startups can identify their own strengths and weaknesses, as well as those of their competitors on a real time basis. Essentially, you can think of social “listening” as a free tool for market intelligence, consumer research, and customer service all rolled into one.

But all this only works if you are wired into the conversation, your customers know how to find the conversations, and they trust you to treat them as respected and valuable members of your community. Where is your business along this spectrum?

Marty Zwilling

Disclosure: This blog entry sponsored by Visa Business and I 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. Visit to take a look at the reinvented Facebook Page: Well Sourced by Visa Business.

The Page serves as a space where small business owners can access educational resources, read success stories from other business owners, engage with peers, and find tips to help businesses run more efficiently.

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



Monday, July 8, 2013

An Entrepreneur Platform To Put You Above the Crowd

michael-hyatt-on-the-platformThe space for startups is more crowded than ever. First of all, it’s now international, so you have startups from every country in the world competing for your customer’s attention and their business. Then there is the Internet, delivered through every media, including your smart phone, where the volume of data spewing out is like a new Library of Congress every 15 minutes.

According to the most recent study by the Ewing Marion Kauffman Foundation, there were approximately 514,000 new businesses created per month in the US in 2012. The days when you could launch your business with a new web site, and the phone would begin to ring, are long gone. Even the Google search engine crawlers may take up to two weeks to find you.

So what’s an entrepreneur to do to get his new business noticed these days? According to many experts, including Michael Hyatt, in his book, “Platform: Get Noticed in a Noisy World,” you need to build the highest platform you can, to stand out and be heard above all the rest.

Today’s platform is built of people, including yourself, followers, and contacts, who can amplify your message through social media and spread it to your target customers. Most entrepreneurs I know are too busy creating a compelling product to give proper focus to the four phases of building a people and media platform that Hyatt says are equally critical for long-term success:

  • Platform creation prior to launch. Make sure you have the five basic platform tools in place well before the launch – social media profiles with a great headshot (Twitter, Facebook, LinkedIn, and YouTube), website (with blog), business cards, email signature block, and an email address on your domain name. If these are not complete and consistent, your platform will always be splintered and lost in the noise.
  • Building your home base with personal and product traction. Start your campaign and blog early, to get the message and vision out there (no selling), establish your value and expertise, show your commitment, and start building your home base of contacts and followers. Build a media kit, publicize endorsements from friends and beta customers, get dialogs going on Twitter, and optimize your website landing pages.
  • Using the platform to expand your reach. For startups, you as the founder are the brand and the most important part of your platform. Be visible online and to traditional media, volunteer to lead, write guest posts for others, be responsive, give stuff away, and provide many ways to communicate. Nurture those links into other sites, and network to the max in relevant business organizations and trade shows.
  • Make your customers your platform. Engage your customers through blog comments, product reviews, and personal customer service. Soon you will find that they are re-tweeting your messages, referring their friends to your products, and becoming your biggest evangelists. Your platform is now many times taller and stronger. Your customers will now be helping you to monitor, defend, and amplify your brand.

Success today is more than ever about who you are and who you know, and the platform is all about both of these. Your product or service is the “what,” and of course, that needs to have a “wow factor” to get above the noise, as well. Make sure you create products that exceed customer expectations, that you would personally use, and solve real problems.

The message here is that it’s necessary, but just not sufficient today to build a wow product. People are more distracted than ever, and competition has never been greater. You have to get your customer’s attention. Getting noticed is not about ego or being the center of attention. It’s about having something of value to others and finding the most powerful way of getting that message to those who can benefit from it.

The best entrepreneurs are stubborn, committed, and driven by their vision to produce a product with a wow factor, and to build a platform that rises above the noise. Their startups will get noticed. How about yours?

Marty Zwilling



Wednesday, July 3, 2013

How to Turn Your Million Dollar Idea Into a Startup

ideas-into-million-dollar-startupsBased on my own experience and feedback from friends, every investor is approached by at least ten entrepreneurs with a “hot idea” for a new business, for every one who has a real “plan” for a new business. That’s why I often say that ideas are worth nothing, until they are put in the context of a business plan and real people committed to executing the plan.

In fact, you can find websites full of ideas, like these “Free Innovative Ideas,” by serial entrepreneur Kim E. Lumbard of CalTech. Or you can find books of free ideas, like “Ideas,” by Matt Schoenherr, providing 101 great ideas for increasing your visibility and profitability. Most investors will tell you that they rarely see a new idea that they haven’t heard before.

I’m sure you all realize that there is quite a distance between a good idea and a good business, or even a plan for a business. A complete resource planning software like MRP ERP systems will prove to be very useful during the planning stage. Here are a few tips on how to bridge the gap. The first step is to pick one idea (idea people find it hard to focus on only one), and go to work along the following lines:
  • Do some specific market research. Scan the Internet for existing patents and some “credible unbiased third party” data that confirms there is really a market for a solution resulting from your idea. Just because you or your friends think it is a great idea or great technology, that doesn’t mean that a large number of customers will buy it.
  • Make sure the idea is technically viable. I hear many ideas that sound more like dreams, rather than products. It’s not hard to come up with the idea that a cure for cancer would make a great business, but some things are harder than they look. You need some evidence of a real solution before any business plan makes sense.
  • Draft a business plan summary. Rather than starting with a full business plan, I recommend that you start with an executive summary of a couple of pages, or an executive level presentation of maybe ten charts. It’s easier to see the big picture, and find out if your strategy can excite people before you work on a detailed plan.
  • Prepare 5-year financial projections. For most people, this is the hardest part, because it forces you to contemplate real costs, prices, delivery, and volumes. Yet these are the elements that make a business, so without them no one can assess the potential for success or failure. Don’t spend time on precision here – that comes later.
  • Start your search for key resources. These would include people and money first, and maybe software or manufacturing later to produce and deliver the solution. Other important elements of every business include the name, logo, type of company, licenses, location, advisors, and operational details.
Obviously, some of these can and should be started and executed in parallel, rather than sequentially, depending on your own time and skills. Don’t be surprised if your base idea changes considerably as you learn more about the market, technology, and the sales process. It’s a lot cheaper to learn it early, rather than after spending critical time and money.

If at all feasible, I recommend starting your rollout early with a pilot or “beta” phase, before the main rollout. You will be amazed at how much you learn about the market, the scope of the opportunity, and the real product features required. Iterate at this level to get it right before you try to scale up, or even finalize the plan.

So if you know someone who is always talking about their hot ideas, just suggest, like the investors I know, that they come back for money when they have completed the above steps. The reality is that customers only pay for solutions, and there is no market for ideas. Everyone dreams of having the magic “million dollar idea,” but I haven’t seen anyone pay that yet.

Marty Zwilling

Disclosure: This blog entry was sponsored by IQMS and I received compensation for my time, but the views expressed here are solely mine.


Monday, July 1, 2013

8 Reality Checks That Every Startup Founder Dreads

guy-kawasaki-talks-with-mashableStarting a business is a lot like starting a marriage. At first, all parties are in dreamland, with a vision of changing the world, having lots of fun, and raking in the profits. But all too soon, reality sets in. Product development is stuck at that 90% mark, a key person leaves, and customers are talking but not buying.

In his book Reality Check, Guy Kawasaki summarizes some of the key issues. I’ve seen them too often, and they seem to be the same for every company (and every marriage) no matter how great the team is. I challenge any startup to show me they have avoided all of these:

  1. One of the founders isn’t delivering. Maybe he was the only guy around who could design the product you envisioned, but delivering a scalable, quality product is another story. Besides, he is now more interested in designing the next product.

  2. The product is behind schedule. When I was a software development manager, I tried to get a “bottoms up” time estimate from the team, and then pad it by 50%. Invariably we were in crisis mode by delivery time, and the common complaint was that “management” always forced unrealistic schedules on developers.

  3. Sales aren’t meeting projections. The team buys its own propaganda, and fully expects customers to be leaping tall buildings to get to your product. You never dreamed that customers would be slow to accept an unproven product from an unknown startup in the middle of an economic downturn.

  4. The team is not getting along. Things go wrong. People on the team haven’t worked together before, and they don’t fully trust any ideas except their own. As the top executive, you have to make some tough decisions, and spend much more time than you expected on communication and mediation.

  5. Your marketplace buzz is non-existent, skeptical, or even negative. You have been too busy with your own issues to be out there building the wave, but your competitors have been actively positioning you far below them. The press is focused on things that exist, rather than your early marketing hype.

  6. Requirements changed in the middle of the cycle. While everyone was busy building the product and business model you detailed in your business plan, early feedback from the field makes it clear that you were somewhat wrong. Or the economy has taken a sudden turn for the worse, so your high-end product no longer has a market.

  7. Investment partners are squeezing you. It may look like micromanagement, but they are just nervous that the milestones you promised have disappeared from your charts. Maybe you think they aren’t “rolling up their sleeves,” but that can’t happen until you actually admit your failures and ask for help.

  8. Cashflow is killing you, with no new money in sight. You scaled up your infrastructure, to make sure early sales didn’t swamp you. Nothing is coming in, money is going out, and you are too busy managing pennies to look for a new funding round.

If you are a true entrepreneur, these should scare you, but they shouldn’t immobilize you. As I asserted earlier, virtually every new startup experiences these problems. What separates the successful ones from the failures is how effectively they handle the problems, rather than how many they avoid in the first place.

So I encourage you to take full control and responsibility for your company’s destiny, learn from the challenges, and emerge from every crisis stronger than before. Remember that when the honeymoon is over, that’s when the real fun begins.

Marty Zwilling