Entrepreneurs Relish The Challenge More Than Money

Over the years, I’ve had the privilege of working with some of the best entrepreneurs in Silicon Valley and elsewhere. On the average, the entrepreneurs I know are living on Ramen noodles. But one thing they all seem to have in common is a love for learning and change. They rush in with a passion to better the world, and money is just an indication of their progress.

The successful ones then invest their time and money in furthering their knowledge base. I’m not talking about academic classes, because at best these only teach you how to learn. In these days of rapid change, most experts believe that the facts college students learn as a sophomore are obsolete before they exit their senior year.

Learning should be viewed as an ongoing part of everything you do, and one of the most important things. It’s an unfortunate artifact of our educational system that young people spend a dozen years focused more on memorizing facts than the learning process, and then thinking that they will have all they need to know for the rest of their lives by the time they graduate.

In business, as in most other disciplines, there are practical steps towards learning what you need for the next stage of your company and your life. These include the following:

• Networking with people who know. A question I sometimes get from startup founders is “What do I talk to these guys about?” I say you can’t learn much if you are doing all the talking. Just ask investors what they look for in successful companies. I’ve never known any successful entrepreneurs or investors who were not happy to share their insights.

• Read entrepreneur stories. Most successful entrepreneurs have been written up on the Internet, or in magazines, or books. Spend some time with these biographies and soak up the insights and inspiration. Follow up online with social networking to make contact, dig deeper, and maybe even line up a mentor.

• Adopt a mentor. Boomers who have “been there and done that” make great mentors. They have the time and interest in “giving back” some of what they have learned to the next generation. Gen-X executives are too busy running their own companies to be mentors. A mentor is someone who doesn’t let ego or money get in the way of helping.

• Formal learning. Some formal learning is always advisable, but get beyond university MBA courses to professional seminars and case studies. Formal courses work best for basics, like a business start-up course or financial accounting. Go with topics you are interested in and need today.

• Volunteering with local organizations. Work is highly valuable in any environment of universities and professional organizations. The payback is that you can get experience for free, while working on real stuff. I’ve done business plan judging at local universities, and learned more than I contributed.

• Just start a business. There is no better way to learn about being entrepreneurial than starting a business. No matter how much advice and counsel you have been given, I guarantee that you will encounter new challenges daily, to enhance your learning opportunities.

If you are one of those people who likes structured classes for learning, and counts on spending at least two weeks per year in the classroom to “catch up,” that’s laudable, but don’t try to start a business at the same time. It won’t happen.

If you have decided to become an entrepreneur solely to make more money, you are also likely to be disappointed. It’s that double challenge of learning to overcome all obstacles, while still surviving on the financial front, that keeps a good entrepreneur motivated to face a new day. Join us if you dare.

Marty Zwilling

Entrepreneurs Must Not Confuse Action With Results

Too many entrepreneurs confuse actions with momentum and results. We all know someone who repeatedly tells us how “busy” they are, when it’s hard to see what they get done. Momentum is moving things forward (mass x velocity). Founders or employees in constant motion, but with no momentum, will never get off the ground.

It is true that motion in any direction is often better than no motion at all. But motion without momentum may be even less productive. For a more complete discussion of this phenomenon, see the book entitled “Fake Work: Why People Are Working Harder than Ever but Accomplishing Less”, by Brent Petersen and Gaylan Neilson.

So how do you fight this, and get real momentum going in your startup? Here are some key recommendations:

• Measure results, not work. Build your business plan and day-to-day operations around real results that are quantifiable and measurable. For example, a result is not forty hours of work, but a prototype complete, partner contract signed, or first customer sale.

• Focus and prioritize. There will always be more things to do than anyone has hours in a day. Focus means act instead of react, act on the important things. Don’t allow yourself to be interrupted by “urgent” issues of the moment, which may not be important.

• Live the 80/20 rule. Pick the 20% of your important tasks that will deliver 80% of the results. Judiciously apply the 20% of your energy where it will achieve 80% of the momentum you desire. Maintain that balance of work, family, sleep, and unwind.

• Communicate effectively. People can’t do the job you want unless you communicate effectively. So they scurry around trying to look busy, or work on random things that they hope might generate momentum. Tell people what results you expect, tell them how they measure up so far, and tell them how much you appreciate their results.

• Recognize the finish line. Don’t burn yourself and everyone out, by continuing a forced march after you pass the finish line, or even a major milestone. Gather your thoughts and savor the small successes along the way.

During the early start-up phase, most of the momentum in a new company derives from the entrepreneur's own commitment and self-sacrifice. You do almost everything by yourself, and your focus is on building enough cashflow so you can start bringing in people to help you. Watch yourself for wasted motion during this stage.

Cashflow is the element of momentum that allows you to hand over jobs to other people and do more of your core passion jobs, like creating content or designing new products. This creates more value in your business and increasing cashflow – more momentum.

What you then want is for the momentum to compound, with each new employee or outsourcer you hire to help, to give you get more time to create value and ultimately, increase profits. At this point especially is where you need to watch out for fake work, which thrives in less dedicated hires, outdated cultures, and old work processes.

Recent research indicates that across all business organizations, as much as 50% the work that people do in that stage is just motion not related to their company’s strategies. Think of the drag this can put on your momentum.

Starting a new business is a little like taking off for the first time as the pilot of a new airplane. You need to push that throttle all the way to the dashboard until your knuckles are white, but never forget the relationship between motion and momentum. Are you pushing the right levers?

Marty Zwilling

Digital Tools May Soon Make Business Cards Obsolete

In a second, with Google, I can find a phone number that was assigned to you ten years ago, but it takes me an hour to find your phone number on that business card you gave me last week. That’s just wrong. We need instant access to the most important of all resources: current contact info.

Too many of us have piles of business cards scattered around the office and home, as well as additional contacts on your smartphone, iPad, Outlook, LinkedIn, and Facebook. The result is we can’t find key names and phone numbers quickly when we really need them, and the data is outdated for the ones we do find.

The solution is simple to define. What we all need is a digital tool that can extract data from business cards, as well as sync it with your cell phone, your email, and the social networks you use. It needs to have great search and display capabilities as well as spreadsheet-like sorting so you can look at the information in various ways. Finally, we want it cheap (of course).

My old rolodex for 1000 business cards doesn’t do the job anymore, so I’ve been scouting around for something better, looking at the pluses and minuses. There is a wealth of new alternatives, but no universal solutions:

• Bump. Here’s a new free smart phone app that came out a couple of years ago, but doesn’t seem to be catching on. It allows users to simply tap their phones together, and with the right setup, they will exchange contact info. I predict Near Field Communications (NFC) will soon be pervasive on smartphones, so you won’t even need the bump.

• CamCard. With today’s smartphones, card scanning means taking a picture of a card, automatic trimming, optical character recognition, and cutting and pasting into Contacts (phone or Google). Another variation is an iTunes app called ScanBizCardsLite, which scans card images and extracts them into Contacts.

• Shopify. This smartphone app places all your contact information into a single QR code image. Anyone with one of the many QR code scanning apps on their phone can take a photo of your code to be taken directly to your contact information. You don’t even need your own copy in Contacts, since it’s always obsolete when you use it later.

• CardScan Personal. Here is the old standby low-end hardware-based solution – a simple business card scanner for $225, with software to synchronize the data with Outlook, Windows mobile devices and smartphones. That doesn’t address social networks and other lists you may have.

• Shareware. I found dozens of software packages available on the Internet for free download, or a nominal price. Several of these have good reviews, including PIMEX, Diasho, Enhilex, and Advanced Contact Manager. My experience is that shareware software is usually worth what you pay for it.

• Commercial software. There are hundreds of other alternatives and add-ons out there, like Quickbooks Customer Manager, Personal Information Manager, Beyond Contacts, and Goldmine. They range in price from $150 to over $4000, but check each for the features important to you.

Social networks have added additional layer of complexity to this challenge. LinkedIn supports the export of connection contact information to Outlook and Gmail, with no special software required. Facebook, however, does not provide this interface, and has specifically prohibited applications from being offered to solve the problem. They consider such data proprietary.

Even email is a problem. You need to capture contact details beyond the email address from email contents, including signature blocks. I did find a package named Copy2Contact, which can save you lots of cutting and pasting. Now if everyone included contact information in every email, I wouldn’t need to bump smartphones with you periodically to stay current.

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.

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A Valid Business Model Requires Real Customer Sales

“Will the dogs eat the dog food?” This rather crude expression weighs heavily on the mind of all good startup founders, no matter how confident they appear. We all know the products they give away, and the ones purchased by family and friends don’t count. The real milestone, proving the business model, is that first product sold for full price to a total stranger, leaving him happy.

So what can you do to expedite this event, or even improve the odds that it will happen at all? Of course, one sale isn’t really enough, so you need to get the first customer to recommend you to a second, and make sure the rate of sales ramps up quickly enough to keep the business alive and growing.

This whole process is particularly worrisome to many startup founders, since their expertise and background more likely technology than sales. If you are one of those, here are some basics principles you should follow and live by until that milestone is behind you:

• It’s the market, stupid. I still see too many entrepreneurs who build a product and spend lots of money because THEY are in love with the idea or technology. There is no substitute for good market research, talking to experts, analyzing the competition, and listening to potential customers from day one.

• Sell what you have, not what you dream. Customers don’t buy the impossible dream. I believe in pre-selling and early marketing, but make sure you don’t oversell what you can deliver. I recently knew a founder whose sales pitch was always the next generation of his product, and he never understood why customers always decided to wait.

• Your revenue model has to make sense. If you lose money on every sale, it’s hard to make it up in volume. On the other hand, if your price is over the moon, even the best product features probably won’t sell it. Many of the Internet business plans I see these days say the service is free, and revenue will come later from a huge user base. You need deep pockets to make this one work.

• You need a sales channel that works, and one you can afford. Even with the global reach of the Internet, selling your first product from your website will likely not be much of a business. To get the reach you need probably requires one or two levels of distribution, partnerships, or joint ventures. Direct sales are too expensive, and word-of-mouth is too slow.

• A product, without customer support, is not ready for sale. Remember that your ultimate goal is satisfied customers, not just the best product. The sales process has to be smooth, the customer support impeccable, and the customer-facing people delightful and empowered.

• Selling is a learned skill, and takes effort, just like building a product. Everyone in your startup needs to understand sales, and needs to be a salesman. Don’t assume that only “fast talkers” are good salesmen, or that you can hire a good salesman at the last minute to sell your product. The best salesmen know their products and their customers better than anyone else, and they believe in both. That should be you.

I’m certainly not suggesting that you wait until all these items are perfect before you open your doors. If you do that, you will never achieve this milestone. The real job of an entrepreneur is to manage the right variables, with the right level of risk, to get and stay just one step ahead of their competitors.

What I am suggesting is that you laser focus on that first real customer from the very beginning. His real requirements might keep you from getting sidetracked by all the neat features your technology could deliver, and your dreams of delivering the perfect product. What you really want is a successful business and all your customers to be happy puppies.

Marty Zwilling

10 Startup Shortcuts That Will Be Back To Haunt You

I’ve been advising and mentoring startups and growth companies for years, and find myself always pushing them to try something new, for the sake of growth and survival. When you try new things, you make mistakes, and I’ve seen many. Smart companies learn from their own mistakes, but some don’t pay enough attention to other people’s mistakes.

In the spirit of saving you a few lifetimes of pain, here are some common mistakes or shortcuts that seem to happen routinely:

1. Wait until your company is up and growing before you formalize it. Some entrepreneurs can’t decide if they want to be a Limited Liability Corporation (LLC) or a C-corporation, or they don’t have the money, so they put off doing anything until the first venture capital round, or until the first lawsuit occurs.

   The simple answer is to do something, and start simple. In almost every state, you can incorporate as an LLC with a minimal effort, and a cost in the hundred dollar range. This step shows everyone you are serious, and limits your liability on any mistakes. It also forces you to pick a name for your company and put other intellectual property stakes in the ground. It’s not that hard to change later to a C-Corp.

   Company and product naming may also seem simple, but should be a key early effort, because mistakes can be very costly. You may recall the Chevy Nova, a compact car from GM. Pundits in Latino countries quickly pointed out that the name, ‘no va’ means ‘does not go’ in Spanish. Professional advice in this area is highly advised. Cultural and religious implications must be very carefully considered.

2. Rely on informal agreements with partners. You may all be friends, or spouses, today, but things do change quickly in the stress of a growing company. The same principles apply to strategic partners. Early co-founders often drop out of the picture due to disagreements, and you forget about them, but they don’t forget about the verbal promises you made.

   Later, when your venture is trying to close on financing, or even going public, that forgotten partner surfaces, demanding their original share. This problem can be avoided by incorporating immediately after early discussions, and issuing shares to all founders. I know two former friends who are still killing each other financially years later over an unwritten agreement, remembered differently by each.

3. Be quick to hire and slow to fire. If you are growing quickly and desperate for help, you may skip on the homework of a proper job description, or validating applicant credentials are a fit before you proceed to interview. The message here is that if you don’t know exactly what help you need, you probably won’t get it. Hiring after one interview is like hopping a red-eye to Vegas to get married after one date.

   Equally bad, you may know what you want, but you are trying to force-fit the candidate into the position. Maybe she’s related to the boss, or you are confident that the candidate will be a good helper, and can learn a lot from you. Helpers are expensive, since it often takes longer to jointly do a job than it would take one qualified person to do it alone.

   On the other end of the process, don’t hesitate to pull the trigger fast when a new hire isn’t working, but don’t forget to be human and follow all the steps. Carrying a non-performing employee probably triples the costs, since you are paying two people to do the job, and at least one other is de-motivated by the inequity.

4. Only hire people who like you or think like you. Flattery feels good, but it doesn’t pay the bills. Look for the thoughtful challenge to your ideas, and practice active listening, when you are selling your vision. High three-digit intelligence has value.

   Some executives think they can mix business with pleasure, with inter-office relationships. We all have our favorite story on this one. Make it a rule to not fraternize with your employees, and choose your partners wisely.

5. Be super-conservative on your funding requests. Double-check both the money you need before funding, and the size of investor funding requests. You will be amazed at how many items you forgot to cover, and how fast the cash disappears. You should buffer the first by 50%, and the second by 25%. Severe cash flow problems are a big mistake, and may not be recoverable.

   When you have people and their families depending on you for their paychecks, and you are strapped for money, there certainly won’t be any money for growth. Even if you can find someone willing to help, it may be a very expensive proposition. Cash is more important than profit.

6. Let your accountants manage the expenses. Too many founders think it’s more important to work on products and customers. In reality, the most important task of every small company CEO is to review every expense with a miserly hand before the money flows out. Do not delegate this task.

   A variation on this theme is promising a burn rate to investors than you can’t deliver. That means managing a bottoms-up budget process, and living within the budget. The result of budget and expense overruns is not only lost growth opportunities, but lost credibility and lost support from investors and vendors.

7. Make all the decisions yourself. One person making all the decisions doesn’t mean better decisions, and certainly not faster ones. For a company to grow, the team has to grow, and decisions must be delegated. Smart growth companies hire decision makers, not more helpers.

   Even early in the startup process, you need someone like-minded but complementary in skills to help you with the startup plans. It’s always good to have someone to test your ideas, keep your spirits up, and hone your business skills.

   Lastly, make good use of your Board Members. One or two “experts” 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.

8. Assume defining the strategy is a one-time process. Your initial strategy will be wrong, no matter how carefully you think it out. Most startups I know have “refined” their target market and “pivoted” their operation several times during their rollout and growth phases. So be alert and be flexible.

   Plan for strategy changes by scheduling an adjustment review every month. Watch out for the unknown, such as an economic recession you hadn’t counted on, or a new competitor with deep pockets, or the changing trends in the industry. Be sure to communicate changes to the team effectively and often, so it doesn’t look like you are making random changes.

9. Let the daily crisis keep you from the “most important” issues. 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.

   If you allow yourself to be driven by the crisis of the moment, you will lose the ability to set priorities and focus on goals. Personal discipline is the key word here. Working in isolation and handling all the issues is fine during the creative phase of the startup, where the founder is often the designer and architect, as well as the builder. Now this same individual has to graduate from short-term thinking to long-term thinking.

10. Ignore the mistakes of others. The biggest mistake of growing companies is failing to learn from the mistakes of others, or even from your own mistakes. You can only learn from your mistake after you admit you’ve made it. Wise people admit their mistakes easily, and move the focus away from blame management and towards learning.

The list goes on and on. But the reality is that making mistakes is part of every successful growth effort. Therefore, mistakes should be celebrated and learned from. But the one unforgivable mistake you should never make is to repeat a previous mistake.

In the end, ask yourself this question: Is it better to try and fail, or never have tried at all? To grow in the business world, never trying is not an option.

Marty Zwilling