10 Entrepreneur Milestones That Make Funding Easy

Every investor expects to see some business traction, both before and after a funding event. If you have been working 20 hours a day, and spent your last dollar, but have no results to show, investors will be sympathetic, but will probably tell you that your dream doesn’t have wheels. Traction means forward progress.

I hear a lot of entrepreneurs contemplating their great “idea” for several years with little discernable progress, and looking for money to start. Talk and time are cheap, but they need to understand that investors judge past results as a good indicator of future expectations. Here are some tips which will signal traction and fundability to investors, as well as to your team:

1. Document your business plan. It’s hard to build a business without a plan, just like it’s hard to build a house without a blueprint. If you have a product description, that’s necessary, but not sufficient. If you have neither, and choose to approach an investor, you will get no attention, and probably never again get a shot at funding with that investor.

   Forcing yourself to write down a plan is actually the only way to make sure you actually have a plan. Make sure your plan answers every relevant question that you could possibly imagine from your business partners, spouse, and potential investors. That means skip the jargon and include explanations and examples.

2. Set realistic milestones and achieve some. You can’t measure results if you don’t have a yardstick. On the other hand, if your objectives are off the chart, you look bad when you set them, and you look even worse when you miss them. Only written milestones are credible.

   Traction means that you have achieved one or more significant milestones, which will give you credibility with investors. Don’t expect them to believe your $100M revenue projection, if you are still waiting for the first revenue dollar. Only real results count.

3. Attract a well-rounded team. A great business often starts with one person, but it doesn’t end there. If you are strong enough to surround yourself with a strong team, that’s great progress toward success.

   A CEO who has “been there and done that” is traction, especially if teamed with a financial lead (CFO) and a product lead (CTO). A team of friends and family that work for free on weekends is not likely to impress investors, unless they ARE your investors.

4. Build qualified advisory board. If you can convince a couple of domain experts, or a couple of experienced executives to join your board and be your advocate, that’s traction. Investors love to have smart and experienced people in the boat.

   Investors are likely to make a few phone calls, so make sure these people really have taken the time and commitment to work with you, and know your business. Ideally, they will have links to distributors you need, or even be investors in your company as well.

5. Ship a minimum product now. For a true scientist, the product is never good enough, so it’s never done. For a business, you must define the absolute minimum features you need to satisfy the customer problem, and test it in the market. It will be wrong, so count on iterating, but you learn something each time, and that is traction.

   By using a laser focused approach for the first iteration, you may actually produce something and get a customer without funding. Now investors will pay attention, since scale-up funding is less risky and has a time frame.

6. Get a real customer and real revenue. If you give away your product or service to the first 10 customers, that’s a good learning experience, but it’s not real traction. It doesn’t prove your business model of pricing, distribution, and support. Sell one.

   Real customers give you real feedback, rather than just tell you what you want to hear. Funding for pre-revenue startups used to be the domain of angel investors, but they have moved up-stage. Without revenue, your investors are largely limited to friends, family and fools.

7. Register some intellectual property. File a provisional patent, register a trademark, and reserve your company domain names. These are things that can cost very little money, but go a long ways in convincing someone that you are making progress.

   Intellectual property is a large element of most early-stage company valuations, and this value determines what percent of the company an investor will expect to get for his money. It’s also the keystone to convincing investors that you have a “sustainable competitive advantage.”

8. Letters of intent or endorsement. If it’s too early for real customers, a Letter of Intent (LOI) or a written endorsement from a potential big customer is good traction to show potential investors. These show you have the ability to make the connections you need.

   Of course, a real contract or purchase order from a big customer is even better. If you have neither, you better have a prospect pipeline, connections to distributors, or partner relationship with a known company to bolster your credibility.

9. Show personal investment. Investors like to see that you have committed personal funds as well as “sweat equity,” and they like to see real progress at this level. If you haven’t risked anything or used funds effectively, investors won’t let you risk theirs.

   A related issue is your apparent commitment to the project. If your startup is an evening hobby for you and some friends, and they all have a full-time day job elsewhere, don’t expect investors to get excited.

10. Become a visible expert. If your business is a new job site for boomers, you need to establish yourself as the expert on this subject in the press, on social networks, and join related organizations. This is traction that will impress investors, and get you customers.

    Other ways to be visible include writing a blog, speaking at local groups, and issuing press releases which are related to the market need rather than the product you are producing. These efforts should be started well before you are ready for funding.

Your objective is to build a business that marches with power and purpose past its goals and objectives. Both your team and potential investors are watching, and if all they see and feel is words and work without progress, it’s easy to conclude that your startup is still a dream and a prayer.

Marty Zwilling

How Can An Entrepreneur Qualify For A Bank Loan?

Many entrepreneurs are convinced that banks are not worth the effort for startups, especially early-stage ones that still don’t have a revenue stream, or collateral to back up their financing needs. A question I get all the time is “Can I ever expect any backing from my bank for a great opportunity?” The short answer is that some banks will help, if you do your homework.

The first thing to remember is that banks only do loans – they don’t do equity investments like angels and venture capitalists (and vice versa). To get a loan, you generally need to satisfy their 3 C’s – credibility, capacity, and collateral. That traditionally translates to at least two years of positive cash flow, with enough assets or receivables to cover at least 80% of the loan.

If you don’t have that, there are things that you can do to compensate. All banks are looking hard right now to get back in the game, and certain ones, like Silicon Valley Bank, are more focused on small businesses. I found a great discussion with Mark Horn, a former Silicon Valley Bank senior vice president, published by Jill Andresky Fraser several years ago but still relevant today, which outlines the issues I believe every startup must address when pushing the limits for a loan:

1. A clear mission. You have to get past how great the product is to address clearly what your business rationale is, why it is different from the competition's, and why it will succeed. Be concise as well as complete. Show focus and your understanding that your company is something more than just a good idea.

2. A winning product or service. Provide a simple yet complete description of your product or service and its competitive marketplace. Include any empirical evidence--including market research or technical analysis, if that's appropriate--in order to bolster your case about why you believe you will succeed.

3. An impressive team. When we say 'team,' that's what we want to hear about: a group of people who are working with the person who had the original idea to give this company its market advantage, including salespeople and finance people. If you don't have a team on staff, then a banker is going to want to hear about outsourcing and advisors.

4. Management with a strong track record. When describing each key person on your team, it's important to describe his or her employment history, with an eye toward convincing the banker that the person's experience will help your company achieve its goals. Here, too, focus on outside advisers as well as on key executives.

5. Partnerships that lend credibility. Be comprehensive here. What a banker is looking for is validation of your idea. If you've succeeded in bringing savvy investors or corporate partners aboard, then that can be a pretty good sign that your idea can succeed in the marketplace.

6. Money from other sources. This question gets to the heart of what bank financing is and isn't supposed to accomplish. Bankers do not contribute equity. What they're looking for is a situation in which others have already done that, so the bankers want to see the owner's money involved.

7. A realistic cash plan. What any banker will want to know is, basically, how much money you've already raised and how quickly you've gone through it; how much you're currently spending; and finally, at what point you anticipate earning the revenues to sustain a positive cash flow.

Finally, remember that at almost any bank you will need to back up your financing pitch with audited financial statements, a well-thought-out business plan, credit check, and maybe even your personal tax returns as well. That's just reality.

In case you hadn’t noticed, the items highlighted by this banker are equally important to equity investors, so you need to do the work in either case. In the long run, bank loans are considered “less expensive” than giving up equity and giving up control, so a savvy startup should never skip this alternative.

Marty Zwilling

Don’t Be Fooled By All The Hype For Crowd Funding

The new hot topic for entrepreneurs the last couple of years is crowd funding, which is anticipated to at least supplement, if not replace, the slow and mysterious process of current Angel and venture capital investors. The problem is that crowd funding means something different to everyone, and even I have been confused by the different ways the term gets used.

So I have set out here to outline and offer some practical advice on the many different models currently used with the term “crowd funding” and “crowd sourcing.” The newest equity model was passed into law in early 2012 via the JOBS Act, and still has no scheduled date for availability in the USA, waiting for the rules to be defined by the SEC:

• Startup equity crowd funding. This new model (now only legal in the UK) will allow large numbers of “regular” people to invest small amounts each online to get an ownership position in early startups. This is not a get-rich-quick vehicle for consumers. As a current Angel investor, I can attest that any investments in startups are more risky than the commodity markets, and you shouldn’t expect to see any return for many years.

• Good-cause crowd funding. This model is a good thing, and has been around for years. Example sites include StartSomeGood and the Facebook Cause page. People can invest (donate) money to a project which has good moral/ethical value. No financial return should be anticipated, but contributors should enjoy the feeling of doing good.

• Pre-order crowd funding. Here people make online pledges with their credit cards during a campaign, to pre-buy the product for later delivery, if it is ever built. Kickstarter is the big player in this space. It has had some notable successes for entrepreneurs (over $1M in funding), as well as non-starters. There is no concept of ROI other than product.

• Rewards-based crowd funding. This is a variation on the two previous ones, where investors get the satisfaction of helping, and immediately get a pre-determined reward or perk of value, such as a t-shirt, or other recognition, but no equity or finished product. A good example site, and one of the earliest in this category, is IndieGoGo.

• Debt-based crowd funding. In this model, sometimes called micro-financing or peer-to-peer (P2P) lending, you borrow money from a number of people online and pay them back after the project is finished. This has been popular in many countries for years via sites like LendingClub and Kiva. The allure is fat returns, but they come with a huge risk.

• Ideas crowd sourcing. Technically, this model is not involved with funding at all, but “crowd sourcing” and “crowd funding” are often used interchangeably. Sites like IdeaBounty get your ideas off the shelf, and give you the wisdom of the crowds. Of course, this might also lead to investors, partners, and licensing opportunities.

• Software crowd sourcing. This is basically the Open Source concept, where sites like IdeaScale facilitate the outsourcing of application development to the Internet community in the form of an open call. Sometimes contributors may get compensated later, but usually the rewards are just kudos and intellectual satisfaction.

Don’t confuse any of the models with other popular funding sites for startups, like FundingUniverse and Startups.co. These are primarily matchmaking sites between entrepreneurs and professional investors or banks. Often they do sponsor pitch contests with small cash prizes for funding, as well as other valuable services to support entrepreneurs.

So it’s easy to see that whether you are a new entrepreneur or a new potential investor, the Internet has opened several new options for the crowd to help you. These also open new concerns about lost intellectual property, Internet scams, and long-term return on investment. Crowd funding is exciting new territory, but I don’t see it replacing Angel and venture capital investors any time soon.

Marty Zwilling

How To Avoid Investment Scams In The Startup World

After you have heard a few startup success stories, like Google, Facebook, and Microsoft, you may be tempted to invest some money yourself, maybe by pooling your funds with other investors who claim to have a great track record. My advice is to leave the investing in startups to the professionals (or friends and fools).

First of all, despite a few visible blowout successes, the odds of a payback from investing in startups is very low (that’s why VCs look for 10X returns to cover failures). Most investors agree the odds are better buying traditional public stocks, or even commodities. Even the hot new “crowdsourcing” companies springing up have yet to show any significant returns to investors.

Secondly, there are many scammers out there who look and act just like Bernie Madoff, even though he is safely tucked away in prison for the next 150 years. Most frauds are not on the scale set by Bernie, but even a few thousand dollars lost would hurt you and me as much as a few million did for some of his victims.

So what can you do, and what are the “red flags” to look for as you do your due diligence before pooling your money with other investors, or accepting money for your startup from investors? Here are some common sense tips:

1. Get financial statements and verify. Every reputable investment firm is registered with FINRA and files regular reports with the SEC. Look for these and investigate thoroughly to check the truth of every statement about the company. Ask for references, and call or visit previous “successes” of the company to verify experience and satisfaction.

2. Avoid “insider deals.” The Internet has just made it easier and faster for vultures to feed on entrepreneurs tempted by the possibility of an “inside deal.” Someone you don’t know promises you an “inside” deal. Why would a stranger pick you out to make rich? Does that make any sense?

3. Listen for “unnamed sources.” Run away if all current investments are with “sensitive” clients, who are unnamed or unable to be contacted. Remember the old newspaper publishing rule of “All facts must be verified by two independent sources.” People claiming to be unbiased may actually be paid promoters or company insiders.

4. Any mention of “offshore.” Watch out if someone has a complex plan involving offshore bank financing or gemstones or oil leases in Iran to make you rich. Why get involved in a complicated scheme you don’t understand, when there are plenty of opportunities that are legal and you can understand?

5. Sounds too good to be true. The age-old wisdom here is that if it sounds too good to be true, it’s probably not true. I continue to be amazed at the fact that the Secret Service still gets 100 calls per day from victims of the Nigerian unclaimed cash scam alone. What are these people thinking?

Here are a few questions you should ask that might allay any remaining qualms, or convince you to run immediately:

• How much am I paying in commission or fees?
• Has your source been involved in any arbitration cases or lawsuits?
• How do they get paid? By commission? Amount of assets managed? Another method?
• Has the firm ever been disciplined by the SEC or a state regulator?

Unfortunately, in the startup and investment business, we are trained to rely on networking, connections, and professional integrity for many decisions. Remember that people who run scams may be highly polished and sophisticated, and can wrap their con games in such an air of legitimacy it may be hard to see the truth.

Don’t assume you are safe now that Bernie is out of the picture. If you have evidence of fraud, don’t be too embarrassed to contact the Securities and Exchange Commission. If others had done this sooner, his clones wouldn’t be out there today looking to help you out (of your money).

Marty Zwilling

Tips for Gen-Y On How To Be A Great Entrepreneur

A lot of executives have noticed that the workplace is being flooded by a new generation of workers, and they are questioning who will be the winners, and who will be the losers. In reality, Gen-Y is here, and they are already inheriting our businesses, so let’s figure out how to make them winners, or we will all be losers.

By definition, Gen-Y is the generation born between 1977 and 1995 (synonymous with Millennials). There are about 80 million of them, and nearly two-thirds of them are already in the work place as entrepreneurs or with jobs. They will inevitably be taking over after Gen-X from the Baby Boomers, who are now running most companies, but pushing 60.

In fact, according to new data from a recent j2 Global survey, Gen-Y is undergoing a significant career shift today, trending away from applying for jobs and toward launching businesses of their own. As the most connected and technologically equipped generation in human history, Gen-Y entrepreneurs are using today’s tools of communication, collaboration and mobility to build startups with little or no startup capital and few employees.

According to a recent Gallup® poll, fewer Americans aged 18 to 29 worked full time for an employer in June 2013 (43.6%) than did so in June 2012 (47.0%). More than half of Gen-Y (54%) have started their own business or have the desire to start one as found in a recent report by the Kauffman Foundation.

This ability to start a business with cost-effective (and sometimes even free) cloud-based and mobile tools, and the benefits of working wherever, whenever they want – combined with a youthful drive and energy –explains why the overwhelming majority (94 percent) of Gen-Y entrepreneurs are very optimistic for their businesses’ growth for the rest of 2013.

This same j2 Global Survey also offers the following tips how to improve your chances of success as an Gen-Y entrepreneur, or even as a young professional working for a larger organization:

• Don’t let student loans rain on your parade. The federal government’s Student Startup Plan allows Gen-Y entrepreneurs to defer their loans or lower their interest rates to help them jumpstart their business, with an Income-Based Repayment Plan to make Federal student loan repayment more manageable. Other companies offer alternate repayment strategies.

• Don’t let the lack of experience bring you down. The successes of Facebook’s Mark Zuckerberg and Tumblr’s David Karp show that experience is not always a key factor for success. Resources abound on the web to help Gen-Y business owners learn from others and become long-lasting entrepreneurs.

• Lighten your load with technology. Gen-Y is learning that launching a business today takes far less cash than previous generations required. Cloud-based tools, like virtual phone solution eVoice®, let small business owners convey the image of a larger, professional enterprise for a fraction of the cost of a traditional business phone system.

• Avoid all work and no fun. Being a small business owner requires hard-work and dedication. According to a press release on a 2012 eVoice® survey, more than 40 percent of small business owners juggle at least four roles for their organization. The good news is that 60% of Gen-Y founders said they plan to take a vacation this year.

• Keep calm and carry on. The holidays will be around the corner, and for Gen-Y small business owners who are trying to capitalize the holiday hustle and bustle, it’s important to keep yourself together to win your staff’s respect. Explore ways to remain calm and prepare for problems that may come up.

For the rest of us, we have an opportunity to make an entire generation of 80 million people our competitive advantage early, or just wait until they take it away from us. Why not make it your strategic initiative, and a positive legacy for yourself? I’m accepting the challenge. How about you?

Marty Zwilling

6 Business Success Myths Entrepreneurs Must Avoid

All true entrepreneurs operate off a set of tenets that are built into their psyche, or drilled into them from training and mentors. These are represented by sayings like “You never get anywhere unless you take a chance” and “Passion and persistence are the keys to success,” Unfortunately, there are still other old, reliable tenets that don’t work anymore.

In a book a while back by Jeanne Liedtka and Tim Ogilvie from the Columbia Business School, “Designing for Growth,” the authors encourage managers to think more like designers. I assert that designers have a lot in common with entrepreneurs, since both must innovate and start a deep understanding of what their customer really wants (“customer-centered”).

In most other respects, design thinking is the opposite of business thinking. For example, businesses must deal with reality as fixed and quantifiable, whereas design deals with subjective experience and a social constructs. Entrepreneurs need to bridge both these worlds, and I believe the authors outline the key business management myths that limit startup thinking:

1. Myth: Think big. There are always pressures to be sure an opportunity is big enough, but most really big solutions began small and built momentum. To seize really new opportunities, it is better to start small and find a deep, underlying human need to connect with. A better maxim for entrepreneurs is: Focus on meeting genuine human needs.

2. Myth: If the idea is good, then the money will follow. The truth about ideas is that we don’t know if they are good; only customers know that. Entrepreneurs often express surprise at funding challenges, confident that their good idea would attract money on its own merits. In that light, a better maxim for entrepreneurs is: Build the right team and customer need, and funding will follow.

3. Myth: Measure twice, cut once. This one works fine in an operations setting, but when it comes to creating the as-yet-unseen future of a startup, there isn’t much to measure. Spending time trying to measure the immeasurable offers temporary comfort but does little to reduce risk. A better maxim for entrepreneurs is: Place small bets fast.

4. Myth: Be bold and decisive. In the past, business cultures have been dominated by competition metaphors (sports and war being the most popular). Organic growth, by contrast, requires a lot of nurturing, intuition, and a tolerance for uncertainty. Placing bold bets falls well short of the new entrepreneurial maxim: Explore multiple options.

5. Myth: Don’t ask a question you don’t know the answer to. This one is borrowed from trial lawyers, and it traveled into business because it always seems less risky to look smart. Unfortunately, new opportunities do not yield easily to leading questions and preconceived solutions. A better maxim for entrepreneurs is: Start in the unknown.

6. Myth: Sell your solution. If you don’t believe in it, no one will. When you are trying to create the future, it is difficult to know when you have it right. The key is to be absolutely certain you have focused on a worthy problem. You’ll iterate your way to a workable solution in due time. Follow two maxims here: Choose a worthwhile customer problem. Let others validate.

There are many other design-thinking principles that entrepreneurs need to heed, such as the fact that products and services are bought by human beings, not target markets segmented into demographic categories. Great designs, as well as great products, grab customers at an emotional level first, then at the economic level.

Exemplified by Apple, and the success of their elegant products, design-thinking is proving to be more and more the competitive edge for entrepreneurs. This is not to say that sound business principles should be ignored in your next startup. The challenge for every entrepreneur, is to find that right balance between the myths and reality of business, and the power and inspiration of an innovative design.

Marty Zwilling

8 Tips To Help You Dodge Common Startup Mistakes

Behind most great startup success stories is a long list of mistakes! Unfortunately, for every success story you see, there is an even longer list of failure stories with mistakes that you don’t see. But rather than dwell on the failures, I’ve tried to extract from them a list of practical action items that will improve your survival probability.

Every startup mentor has his favorite list of basic strategies to avoid pitfalls, and I’m no exception. If my experience and insights can save just one founder from the stress, lost time, and lost money associated with a startup misstep, then I’m a happy man. I offer these pragmatic recommendations:

1. Buffer your funding requirements. Consider both the money you need before funding, and the size of investor funding requests. You should buffer the first by 50%, and the second by 25%. You will be amazed at how many items you forgot to cover, and how fast the cash disappears. Severe cash flow problems may not be recoverable.

2. Adapt your strategy monthly. Assume your initial strategy will be wrong. Most startups I know have “refined” their target market several times during their rollout. So be alert and be flexible. Watch out for the unknown, such as an economic recession you hadn’t counted on, or a new competitor with deep pockets.

3. Reign-in expenses. The most important task of a startup CEO is to review every expense with a miserly hand BEFORE the money flows out. Do not delegate this task! Barter services and use equity to get things done for minimum cash. Make every effort to do things “in house”, rather than rely on outside services, accountants, and law firms.

4. Create intellectual property. Start early by registering your company, and reserving the name as your website domain name. Reserve the same names on the leading social networks and blogs. The patent process is far from perfect, but it’s a huge step ahead of no proprietary content. Also don’t forget trademarks and copyrights.

5. Make marketing and sales a priority. Every new startup needs to fight the urge to get the product out, and then start selling it. Do it in parallel, or the other way around, to keep from building the wrong thing. It takes leverage, effort and money to get in the public eye and stay there. Budget for it in time and dollars.

6. Find and use top-notch advisors. One or two “experts” (largely unpaid) who have “been there and done that” can head off many mistakes and suggest a calm recovery plan for the ones you make. Resist the ego urge to “go it alone” or to convince yourself that you are smarter than your competitors.

7. Temper theory with reality. There is no substitute for domain experience. No matter how well-educated you are, and how certain you are that you understand all the nuances of a business area, it is a good idea to work in a similar business for a few months to get a feel for the market and observe the unwritten rules before taking the plunge. This is especially true for students tackling their first venture.

8. Manage your time. It takes practice and effort to focus on the most important things first. In business, “most important” means time to market, customer service, low cost, and beating your competitors. It also means knowing when to delegate, when to rest, and reserving time for effective communication with your team.

A final recommendation, which is really the most important one, is to not start any business without an overriding passion, confidence, and commitment to it. These alone will play the largest part in defining your success along the way. Apply the recommendations outlined here, define your own rules and goals, and you will be well on the way to creating a successful and profitable business.

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 http://facebook.com/visasmallbiz 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 http://visa.com/business.

Are You ‘Hands On’ Enough To Succeed In A Startup?

There is no substitute for diving into the key details of a new startup. Executives from large companies have sometimes long forgotten how to do this (“My people will contact your people to work out the details.”). Others hire consultants, or outsource much of the real work. These executives won’t survive long in a startup environment.

An obvious reason is limited funds, but a more important reason is the need to know and intimately understand what is really going on in the business and the market. A diligent entrepreneur should certainly work the important details for his or her startup, especially when it comes to assessing any negative fluctuations in the business.

In his book, “Out-Executing the Competition,” seasoned executive Irv Rothman provides tips to corporate executives on how to dig in and “get their fingernails dirty.” I’ve taken the liberty of extending these for entrepreneurs, based on my own experience:

• Showcase your creativity on the front lines. Team members and customers expect startup founders to be innovative. Stay in the game by allowing others to see your creativity in action outside your office. CEOs need to do more and observe less. Action is observation in full motion. Don’t be afraid to share your view and ask for help.

• Keep the vision clear, but make it real. You need to show the team every day how your vision relates to their everyday tasks, with real examples that you can demonstrate. If a team member has a plan that is too ambitious and likely to set them up for failure, he or she needs your direct mentoring to dial it back. Check your ego at the door.

• Build relationships through “hands-on” assistance. Encourage transparent interaction and make yourself approachable by actively assisting people in their own domain. Getting lonely at the top is your fault, not the responsibility of others. Nurturing relationships is one of the most important items of real work that you can do.

• Balance the long-term with the short. Plans that are too long-range are cause for skepticism. Instead, set long-term business objectives and develop a framework for the trajectory your team needs to get there. A plan that extends out more than a year or two is not reliable. Strategy and the resultant plan must match up seamlessly.

• Track the team’s achievement against your plan. Scrupulously manage by and measure against the plan you have built. If a team leader is falling behind plan, he had better come prepared with defensible remedies. On the flip side, if a member is ahead of plan, assess what’s working well, and make sure that can be sustained.

• Practice regular and consistent reviews. Accountability is crucial. Update meetings must be on the calendar regularly. Be consistent when it comes to these meetings and what you hope to accomplish, and use a template so that all the participants know exactly what will be covered and can prepare accordingly.

• Show that the buck stops with you. Retain absolute veto power, but try to use it sparingly if at all. Create a system of clear-cut rules about quorums, and trust your team. If you can’t make a meeting, decisions should still get made. For startups, cash control is critical, so that’s a hands-on function that should be the last to be delegated.

Effective entrepreneurs actually enjoy spending time actually doing work (such as selling to customers) rather than just supervising. Too many entrepreneurs are reluctant to start the sales process, preferring to tweak and refine the product. The fun part of supervising is not giving orders and instructions, but mentoring performance and training team members for the next level.

A while back on an ABC “Shark Tank” episode, I watched a young entrepreneur, who had started a new type of retail store, assert that he no longer had to spend time in the store, but was living the LA lifestyle while working to expand his business. The investor sharks attacked this move away from “getting his hands dirty,” and needless to say, he didn’t get the investment he expected.

There will be a lot of demands on your time as an entrepreneur, and you can’t be in all places at once. But there are many times when your presence is critical. These times also count as rolling up your sleeves, or getting dirt under your nails. Don’t be selfish and wash your hands clean. Clean hands won’t out-execute the competition for long in any business.

Marty Zwilling

Baby Boomers Are Surpassing Gen-Y As Entrepreneurs

Contrary to what most of you might guess, the highest rate of entrepreneurial activity over the last few years is not Gen-Y young upstarts, but Baby Boomers in the 55-64 year age group. In fact, according to a study by the Ewing Marion Kauffman Foundation, these Boomers are actually driving a new entrepreneurship boom.

Some people are calling entrepreneurship the ‘new mid-life crisis’ for the 76 million-strong demographic once thought to be over the hill. Partially due to the economy, but also due to longer, healthier lives and changes in job tenure, 60% of working Boomers are now expected to stay in the labor force, with real power and influence, for at least seven more years, to 2020.

Here is a summary of indicative facts from the earlier study referenced, an update published last year, and others. These indicate that the correct icon for an entrepreneur may now have gray hair, rather than the warm glow of youth:

• The percent of entrepreneurs who are Baby Boomer starting a business since 1996 has grown from 14.3 percent to 23.4 percent last year.

• In every single one of the last 15 years, Boomers between the ages of 55 and 64 have had a higher rate of entrepreneurial activity than Gen-Y, aged 20–34.

• These trends seem likely to persist. In the Kauffman Foundation Survey of nearly 5,000 companies that began in 2004, nearly two-thirds of the founders are now between the ages of 35 and 54.

• Additionally, Kauffman research has revealed that the average age of the founders of technology companies in the United States is a surprisingly high 39 - with twice as many over age 50 as under age 25.

• While people under 30 have historically jumped from job to job, another striking development has been a deep drop in the incidence of ‘lifetime’ jobs among men over age 50.

• With longer life expectancies and greater health in later life, older generations are moving to start new firms -- and mentor young entrepreneurs. One new incentive is the falling transaction costs and barriers to entry for entrepreneurs of every age.

• Six out of 10 Internet users aged 50-64 use social media now, and the growth rate continues to increase. Social networking penetration by Boomers has now caught up with the other age groups, reaching about 80% across the board.

• The immigrant rate of entrepreneurial activity seems to be declining each year (now about .5%), but still remains higher than the native-born rate. Business-startup rates in America increased the most in the Midwest and South.

In addition, the Boomer demographic is also creating a slew of new market opportunities, including improved healthcare facilities, construction of senior-friendly facilities, and technical support for seniors, by seniors. What all of this means is that boomers will have more impact and power in the marketplace for a lot longer than most people expected.

Since entrepreneurship is a key driver of economic growth, this should bode well for America, and for world economic growth as well. In terms of job creation, innovation, and productivity, entrepreneurs drive growth. Many Boomers have the purchasing power and become enthusiastic early adopters who help lead the way. They are becoming the new early adopters.

Of course no one has any idea what the next big thing will be, but more often than not innovation comes from entrepreneurs. If you are one of the Baby Boomers who wants to redefine retirement, now is your chance for real impact. Find an opportunity you understand, follow your passion, and join the entrepreneurial majority.

Marty Zwilling

Smartphone Location Tracking Apps Next Wave Is B2B

These days, I’m hearing more and more that Location-Based Services (LBS) are transforming the smartphone Industry, but only for consumers. So far, it’s been focused on people wanting to find nearby shopping specials and friends (Shopkick and Foursquare). Entrepreneurs need to look more broadly into the business-to-business (B2B) space for more lucrative opportunities.

Segments that come to mind include product tracking, navigation, safety, security, local business search, and payments. Beyond mobile phones, the same concepts can be applied to embedded systems, portable navigation devices, and laptops.

As outlined a while back by Adam Holden-Bache on Social Media B2B, I’m convinced that business-to-business has more money and more untapped opportunities, still waiting to be found:

• Find strategic partnerships. If your B2B contacts are frequenting other non-competitive local businesses, LBS data could point you to more lucrative business partnerships. “Coopetition,” or strategic cooperation with a competitor is another angle.

• Broadcast sponsorships and advertising. If your B2B contacts check-in regularly at certain types of locations (entertainment venues, stores, etc.) then you may want to consider potential sponsorships or advertising opportunities with that business or venue.

• Channel incentives or rewards. Knowing what your contacts like to do will give you insight on ways you can reward them. If you see a large percentage of your contacts checking into coffee shops each morning, you may want to consider gift cards as a possible reward for an upcoming incentive program.

• Provide focused event marketing. Are you seeing a lot of your contacts attending certain business events? Whether it’s a local tweet-up or a major conference, this knowledge could be useful to help you plan what events you should sponsor or where you should set up your next booth.

• Inexpensive lead generation. Identify potential new relationships. See who is checking into your business. See who checks into your competition. See who checks in to the business events that your existing contacts attend.

• Targeted thought leadership. If you know your contacts’ real-life interests, you could use that information in your marketing efforts. Here we tread on that fine line between value delivery and individual worry about privacy invasion.

• Branded entertainment. Leave tips where your contacts go (maybe similar to what History Channel does on Foursquare). Groupon’s purchase of Whrrl suggests that Groupon will soon be leveraging location based social networking or "check-ins" on their popular group coupon site.

• Track the competition. Understand how users are physically interacting with your competition, and if so, what they are doing before and after those visits. If you notice any trends, you may be able to position your brand to cut-off a potential visit before it happens.

• Stronger nurturing and relationship building. During lead nurturing, you could use LBS data to better understanding your contacts’ interests and use that to your advantage. LBS data can not only give you information to drive the relationship, but you can also use it to identify your sales reps with similar interests and partner them with the prospect.

If you think location-based services are a long way from mainstream, take a look at the new Digby® report that 87% of retailers on the STORES’ Top 100 list provide mobile applications that help fans locate stores through location technology. And comScore tells us that there are already 140 million smartphone users in the US, which now exceeds 60% of the population.

Juniper Research forecasts that by 2014 the global opportunity for LBS will reach $13 billion, and Global Industry Analysts projects that by 2015 the global LBS market could be $21 billion. These numbers and the B2B applications are more than enough to catch the attention of venture capitalists and angel investors. All you need is an innovative idea and viable business model to get your startup in line for the real mainstream.

Marty Zwilling

Would You Be Able To Deal With A Startup Failure?

If your first startup fails, you are about average. Most entrepreneurs fail on at least one attempt. Investors agree that an entrepreneur who has never failed probably hasn’t pushed the limits. What investors look for is not that you never fail, but that you learn from the failure, maintain a positive attitude, and work with integrity on the next one.

According to Harvey Mackay in his book “Use Your Head to Get Your Foot in the Door,” how to rebound from failure or rejection is an essential skill to acquire for success. His bullets are about job hunting, but I believe the principles apply equally well to starting a business:

1. Analyze every failure, but never wallow in one. Failure is a condition that all of us experience. It’s our reaction to our failures that distinguishes winners from losers. A great entrepreneur is like a great racehorse. There’s no quit in them. Defeats are temporary. Heart and class are permanent.

2. Don’t rationalize away the hurt. Don’t kid yourself and try to cover up the hurt with “My idea is just ahead of it’s time.” Don’t let your worth be defined by others. Point your head in the right direction and get back in the game. Do rethink the path, but don’t abandon the goal.

3. Don’t walk around as if you’re wearing a scarlet letter. Whatever you do, don’t take a startup failure personally. It may indeed have nothing to do with you. We have just been through a recession, and big customers do change their mind. Self-pity has no positive applications.

4. Start worrying when they stop considering you as a contender. Thomas Edison tried over ten thousand different experiments before he finally demonstrated the first incandescent light bulb. Henry Ford’s first two companies failed, and Bill Gates' first company, Traf-O-Data, was a failure. Failure is staying down, not falling down.

5. Don’t give in on your values. Everyone sees themselves as honest, fair, and caring. Don’t sacrifice these values when the going gets tough to impress investors, creditors, partners, and clients. They will be disappointed, and likely not support you on your next opportunity, when you need them most.

The right approach is to focus on what you can learn from your startup failure. Here are some obvious things that should give you a competitive advantage the next time around:

• You gain insight into the real market. Maybe there wasn’t a market. Or now you know what customers will pay (or won’t pay), and who the competitors really are. You finally understand what usability really means, or how important customer service really is.

• You become an experienced entrepreneur. Now you know what has to be done first. You understand all the expenses that don’t get shown in a typical business plan. You understand the importance of relationships and effective communication.

• You have built a network of key people. You know the service providers who can help you, and you know the investors that work in your territory. Most investors agree, by the way, that entrepreneurs learn more from failures than from successes. Use that in a positive way the second time around.

Overall you become a better person when you have been humbled by failure. Now it’s likely you will be more understanding, supportive, sympathetic, wise, and accepting than someone who hasn’t been there yet. Be a great entrepreneur, and move from average to your best, when things are at their worst.

Marty Zwilling