Practice Entrepreneur Integrity As Seen By Others

As an entrepreneur, your personal integrity is critical for getting and keeping the support of investors and team members, and your company’s integrity is critical for getting and keeping customers and vendors. But in a practical sense, what does that really mean?

Most definitions of integrity include something like “the quality of being honest and morally upright.” Yet, I’ve found through experience that both honesty and morality are relative terms, depending on the reference point of both the speaker and the receiver. In business, the only view that counts is that of the receiver.

For example, it may not be easy to see when you are being blinded by money in closing a deal, but it’s easy for everyone else to see it. Here are five specific recommendations that will help team members, investors, vendors, and customers to see a high level of entrepreneurial integrity in you at all times:

1. Meet your commitments. As an entrepreneur, when you are late with a committed business plan or meeting with an investor, you lose integrity. As a company, if your customer feels you did not meet your product quality commitment, your company loses integrity. Your view or reason doesn’t matter.

2. Honest to a fault. This term is usually used to mean honest as seen by other people. Some think honesty is only related to what is said, but not telling the whole truth is dishonest, even in court. If you can’t deliver a service because of your company’s mistake, integrity suggests that you include the real reason in your apology.

3. Strong and consistent moral code. The target here is to meet the receiver’s moral code expectation. If your product or process is marginal or worse, you will lose that customer. If you are trying to find an investor for your new gambling site, you probably will be disappointed.

4. Treat everyone with respect. No one likes to be dis-respected (from their perspective). Respect is difficult to define in the abstract, but quick to be recognized by the receiver. Be courteous and considerate to all on cultural differences, positions, races, ages, or any other types of distinctions.

5. Build and maintain trust. Trust is a reliance relationship built on character, strength, and ability. It usually takes several good acts to build, and one bad act to lose. To build company trust, you need to personalize your company. People do business with people. Even internationally-known brands are judged daily by the quality of their people.

Integrity must start at the helm, and then it can percolate down through the deepest layers and become the heart and soul of the company’s culture. If the entrepreneur who runs the company does not have integrity, a startup usually falters.

Only people who don’t have integrity think it’s hard to detect. Lack of integrity is one of the easiest qualities to detect in people and companies you meet. It only takes a few actions or choices to set, but it will take many actions to reset if you go wrong. In business, it’s one of the most sought after qualities by customers and vendors.

In order to succeed as an entrepreneur, you need to have a good idea and the leadership to make it happen, and you need to demonstrate integrity at all times. In the words of President Eisenhower, "The supreme quality for leadership is unquestionable integrity. Without it, no real success is possible, no matter whether it is on a section gang, a football field, in an army, or in an office". Or as Alan K. Simpson said, “If you have integrity, nothing else matters. If you don't have integrity, nothing else matters.”

Marty Zwilling

Hungry Entrepreneurs Always Seem To Find Capital

Every startup needs access to capital, whether for funding product development, for initial rollout efforts, acquiring inventory, or paying that first employee. Most entrepreneurs think first of bank loans as the primary source of money, only to find out that banks are really the least likely benefactors for startups. Thus “creative” really means maximizing non-bank financing.

While sizing up the alternatives, I couldn’t help but pick up a recent book by Karlene Sinclair-Robinson with the creative title of “Spank the Bank: The Guide to Alternative Business Financing.” She plumbs the range of possibilities she has gained through personal experience as an entrepreneur, and as the “queen of business financing” in the financial industry.

The alternatives are many, but they are not easy. The most successful entrepreneurs are the ones who think creatively, not only about their offering, but also about how to acquire cash, and never say never. They have to sell themselves, more than their product, to close on every alternative source of funding. Here are ten top sources from Karlene, and my own experience:

1. Personal financing. You may not think this is very creative, but I’m amazed at the number of “wannabe” entrepreneurs who haven’t thought about saving any money before they start, or wouldn’t think of using their own savings to start a business. No investor I know will put money into a deal if they see that you have no “skin in the game.”
   
   
2. Personal credit lines. You qualify for a secured personal credit line based on your personal credit efforts. Credit cards can usually be acquired with even less history. We all know startups that have been built on one or both of these. The advantage is that you retain total ownership and control, as long as you make minimum payments.
   
   
3. Family and friends. These are people who should believe in you, without waiting to see if your idea works, or waiting until you have real customers, revenue, and hard assets. These commitments should always be positioned in writing as promissory notes, or so-called bridge-loans, which convert to equity at a rate determined by later investors.
   
   
4. Peer-to-peer lending. This is a process whereby a group of people comes together to lend money to each other. It’s been around many years, in examples like small business groups or ethnic groups supporting similar efforts. In the startup context, look for a successful entrepreneur peer willing to fund similar new ideas.
   
   
5. Crowdfunding. Here you use the power of the Internet to find a crowd of like-minded people, with small amounts each, to back your efforts. This approach is now spreading beyond non-profits, pre-sales, and memento rewards, to soon include the ability to make small equity investments via the JOBS Act passed a couple of years ago.
   
   
6. Micro-loans. There are many private companies and non-profits that offer small loans, up to $35,000, to promote entrepreneurship, to individuals who would not normally quality for bank financing. Examples include Patriot Express loans, and Small Office/Home Office (SOHO) loans.
   
   
7. Vendor financing. If you need tangible products for inventory, many manufacturers and distributors can be convinced to defer your payment until the goods are sold by you. This really means an extension of the normal 30-day payment terms to a period of months or longer, depending on your credit worthiness and extra fees.
   
   
8. Purchase order financing. The most common scaling problem faced by startups is the inability to accept a large new order, since they don’t have the cash to build and deliver the product. PO financing companies will often advance the required funds directly to the supplier, allowing the transaction to complete and profit to flow to the startup.
   
   
9. Factoring accounts receivables. This is similar in concept to PO financing, but applies the advance to unpaid amounts not yet due or collected from customers. In high volume startups starting to scale up, this will provide cash on your sales immediately, rather than waiting for 30 to 60 days or longer for payment.
   
   
10. IRA financing. Investment Retirement Account funds and 401(k)s are arguably the single most accessible alternative funding source available today for startups. You can’t use your own self-directed funds for your startup, but many others are willing and able to loan you money from theirs, for the right terms, if they believe in you and your cause.
    

Note that we haven’t yet mentioned the more conventional and less creative finance approaches of Angel and venture capital investors. For new entrepreneurs, these sources usually have very little interest in early-stage or seed financing, preferring the lesser risk of a proven business model, with real revenue and customers, ready to scale. Yet creative thinking wins here also.

Karlene’s book provides details on the how and why of all these forms of alternative financing for startups, and many more. Managing cash flow is just one of the many ways that entrepreneurs have to think creatively to innovate, beat the competition, and survive. If you figure out how to spank the bank, you can surely spank your competitors. The payback there is even better.

Marty Zwilling

When Are Business People Entitled To Be Entitled?

Where did this sense of entitlement in our business culture come from? I’ve written about this before, but I was reminded again a while back at a conference for startups when an entrepreneur started berating investors for not funding early-stage startups. It sounded to investors like me that they felt a funding entitlement for their startup idea. Of course, I’m sure entrepreneurs sense that many investors feel entitled to deals with no risk. It’s bad news either way.

As a society, we seem to think we've evolved to the point where we can fashion a large portion of existence according to how we wish it to be. We notice what we like and what we dislike, so we work to make society match our dreams. Somehow, these dreams and wishes have morphed in many people’s mind to an entitlement.

In later-stage businesses, entitlement is evident when employees treat customers with indifference, or feel they are entitled to their job by merely “showing up for work.” Here are some examples of people rationalizing their entitlements, especially when the fantasy serves to owe them money or power:

• “I put in more hours than most of the people here, so I expect a bonus.” A bonus should be all about results, not time worked. We all know people who seem to be always present and always working, but don’t produce results. People with entitlement expect bonuses because it is bonus time, not because recipients earned them.

• "We deserve our high pay since it was the other division that failed." We heard this from many of the Wall Street groups that survived a few years ago only with government bail-outs. A company succeeds only if all the teams succeed. That’s the way capitalism works. Being really good at what you do doesn’t matter if your firm is broke.

• "The pay seems to be the same whether I work hard, or hardly work.” No business can afford to reward mediocrity or less. Watch for the signs of entitlement and let it be known that the behaviors associated with entitlement will not be tolerated. Executives need to show up be the model, communicate the model, and enforce the model.

• "I did my job, so don’t expect me to jump when customers complain." Employees don’t see a connection between how the experience a customer receives today influences their feelings about buying from the company in the future. Make sure they understand the sense of urgency to address customer satisfaction and market needs.

• “I give my all to this company, so I deserve healthcare coverage.” Health care is a need, like water or food, and not a right. And like water or food, it isn’t free. Every company needs to promote equity among all employee levels, and relate benefit levels to profit levels. But demanding benefits that sink the company is not the answer.

• "Someday this business will be mine anyway." How many family businesses have met their demise because of this entitlement view? When heirs grow up believing that no matter how they act, the business will be theirs to run, they often end up with no business to run. Furthermore, once that seed is planted, it's very difficult to stop it.

Entitlement beliefs that are left unchecked lead to selfish, even more entitled expectations. Most psychologists believe that entitlement comes from a deep inner belief that the world is not fair. In some age group, this feeling can be rationalized as perhaps derived from an early life where parents gave them everything, and they now expect the world of business to do the same.

We’ve got to remind everyone, employees, entrepreneurs, and investors, that true success and leadership is built on a foundation of personal responsibility and self-discipline. Companies which feel entitled about their position in the marketplace will lose, and entitled employees will kill a company.

Few things frustrate me more than dealing with people who feel they are entitled. Everyone shares the challenge of changing our business culture of entitlement into a culture of merit. I do believe everyone is entitled to pursue success. No one is entitled to be entitled.

Marty Zwilling

Think Hard Before Jumping From Corporate To Startup

I talk to many people who have spent years struggling up the corporate ladder who dream of jumping ship and becoming an entrepreneur. I hasten to tell them that every job move is fraught with risk, but the move from employee to entrepreneur is on the high end of the risk curve. It’s a big jump, especially in today’s economy, so do your homework first on this one.

According to an article in the Harvard Business Review a while back, “Five Ways to Bungle a Job Change,” there are at least five common missteps that professionals make when moving to a new job. I will assert that each of these has a comparable relevance for those of you contemplating leaving a company employee role to create or join an entrepreneurial startup as follows:

1. Not reality checking your dream. In moving to a new company, the questions to ask are expectations, financial stability, cultural fit, and role responsibilities. All of these apply directly to starting your own company. Test your “dream” startup plans on some experienced entrepreneurs to get a reality check before you leave your current job.

2. Leaving for money. Remember, the grass always look greener on the other side of the fence. More money in the short term is unlikely as an entrepreneur. In fact, most startup founders pay themselves no salary for the first year or two, and investor money is hard to find. I tell new entrepreneurs not to quit their “day job” until they have real revenue.

3. Going “from” rather than “to”. If you are desperate to get out, you may just be lurching into entrepreneurship, only to find it more stressful and unsatisfying. People who feel competent but unsatisfied or bored in their current job make better entrepreneurs than people who feel overworked, under-appreciated, and over-stressed.

4. Over-estimating yourself. Search consultants say that many job seekers have an unrealistic view of their skills, their prospects, and their culpability. If you have had problems with several companies, you may be part of the problem. That part will be amplified in any startup, since you are now the company, so the blame stops with you.

5. Thinking short term. Moving from an employee to an entrepreneur is a lifestyle change, as well as a career change. Don’t make the misstep of assuming it is a short-term move to riches, or an escape from a problem. Starting a business is hard work, requires a lot of learning, and only pays off in the long term.

These missteps are obviously inter-dependent. When people overvalue themselves, they are prone to stress from job performance feedback and dissatisfaction with compensation. This leads them to jump, without real consideration of the fit and opportunity, into the entrepreneurial world, where they could be even more unhappy.

Every employee needs to evaluate these challenges, since the average baby boomer will have switched jobs 10 times, according to the U.S. Bureau of Labor Statistics. The days are gone, when we commit early in life to a lifetime career with one company, or a lifetime of entrepreneurship. The business landscape is changing rapidly these days, so we need to be willing to change as well.

A good question to ask before finalizing a change is “What if I’m wrong?” Be ready to cut your losses and move on. Jumping repeatedly to another bad situation is not the answer. In every case, take a hard look at your real strengths and weaknesses. Be willing to listen to an advisor or mentor on how others perceive you, and be willing to correct for those weaknesses.

The most important element is to understand for yourself what elements of a job role are the most satisfying to you, and what constitutes a healthy work-life balance for you. You spend most of your adult life at work. Life is too short to let career missteps make it unhappy.

Marty Zwilling

Build Your Brand By Embracing Your Personality

Sponsored by VISA Business

Starting a business is usually the result of a personal dream or need. Investors tell me that they invest in people more than the idea. Customers buy from people, not from a company, at least at early startup stages. That’s why it’s important to build a personal brand, in parallel and before your business brand. This will kick-start your business, and improve your odds of success.

So what does it mean to “brand yourself”? Branding yourself means making yourself visible, and communicating via all avenues your personal value and what your stand for, with total clarity and consistency. It’s especially important to highlight your uniqueness in some easy to remember way, so people will think of you and what you do, in case they need your product or service.

Next, do the same to brand your company. Branding guru Catherine Kaputa, in “Breakthrough Branding,” confirms that branding is all about building a recognizable identity, and associating it with benefits and positive consequences. She outlines some positioning strategies that I recommend, with the following key drivers of brand growth:

• Brand boldly – for your business and you. A common way to position your personal and business brand is to boldly “own” an attitude on a key attribute. Every product or service has specific attributes that are important to key customers, like integrity and trust, or customer focus. Craft a simple message to make that your identity.

• Dominate the category (even if you have to create a new one). Small brands that break through to grow big find a “small” idea that fills a gaping hole – a need in the marketplace that wasn’t met before – and they keep filling that need better than anyone. If you dominate the market, competitor copycats will only amplify your positioning.

• Figure out how to grow and scale the business. Businesses that scale have leverage and more rapid brand growth. Technology businesses can be very scalable because you can develop a core set of assets, such as software systems, and then you can monetize them at low additional cost. Build your business model on systems, not on people.

• Enchant your customers. At the end of the day, you’re only as good as your customers who love and appreciate you. That’s why having a special customer relationship model that’s hard to copy can propel your business growth. According to Guy Kawasaki, enchanted customers elevate your brand, like advocating a good cause.

• Put “growth agent” in everyone’s job description. Growth means change, and that doesn’t come naturally to most people. Keep everyone focused on one key objective and three measurable key results, so “business as usual” is not an option. Find people smarter than you in each aspect of the business, and hand if off as you scale.

• Strike the right balance between innovation and staying true to the brand. Ignore innovation and your competitors will quickly pass you by. Too much innovation will confuse your customers, and drain your resources. To stay true to the brand, use open innovation, and see the power of involving customers in the process of innovating.

• Take advantage of good luck and bad. Sometimes a sprinkling of good luck after bad, along with pluck, can propel your business idea into a breakthrough brand. The early startup period (“valley of death”) is your most vulnerable time but also your most opportunistic, because it is the time when you can create tremendous brand value.

As much as we might like entrepreneurship and branding to be a science, because it would be simpler that way, it is not. Being a brand entrepreneur, both for you personally as well as your business, requires learning, and is an ever-changing art without easy formulas.

An entrepreneur these days can’t afford to hide behind an impersonal website or hole up in the corner office. Social media such as Facebook, Twitter, and blogs connect your customers to one another, and you, twenty-four hours a day, seven days a week. If you don’t take charge of your brand, someone else will – and they are not likely to brand you in the way you want to be branded. It’s a lot more fun to be someone you always wanted to be!

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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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.

Where Is Your Technology In The Gartner Hype Cycle?

The Hype Cycle was a concept put forward by Gartner, Inc. back in 1995 meant to apply to technology product evolution and acceptance. As I was reading about it a while back, it occurred to me that the concept relates directly to how investors see startup opportunities and potential success as well, at least those with technology in their offerings.

For those of you unfamiliar with the concept, the Gartner Hype Cycle characterizes the over-enthusiasm or "hype" and subsequent disappointment that typically occurs with the introduction of new technologies. Hype curves then show how and when technologies move beyond the hype, offer practical benefits and become widely accepted. A hype cycle in Gartner's interpretation always comprises five phases:

1. Technology trigger. The first phase of a hype cycle is the technology trigger or breakthrough, product launch or other event that generates significant press and interest. This is the “truly disruptive technology” that startups often claim.

2. Peak of inflated expectations. In the next phase, a frenzy of publicity typically generates over-enthusiasm and unrealistic expectations. There may be some successful applications and startups using the technology, but there are typically more failures.

3. Trough of disillusionment. Technologies and related startups enter the trough of disillusionment because they fail to meet expectations and quickly become unfashionable. Consequently, the press usually abandons the topic.

4. Slope of enlightenment. Although the press may have stopped covering the technology, some businesses continue through the slope of enlightenment and experiment to understand the benefits and practical application of the technology.

5. Plateau of productivity. A technology reaches the plateau of productivity as the benefits of it become widely demonstrated and accepted. The technology becomes increasingly stable and evolves in second and third generations. Startups can now truly define a problem, and position their solution for rapid growth. Investors love this stage.

Late last year, Gartner released their Gartner's Hype Cycle Special Report for 2013, detailing some of the biggest trends in technology up to that time. This report evaluates the maturity of over 2,000 technologies and trends in 102 areas. New this year are brain-computer interfaces, autonomous vehicles, biochips, and quantum computing. It’s definitely worth a look.

According to this latest report, technologies at the overhyped stage include "big data", consumer 3D printing, gamification, and wearable user interfaces. The trough of disillusionment includes mobile health monitoring, NFC and cloud computing. Gesture controls, biometric authentication systems, speech recognition and predictive analytics are now in the plateau of productivity.

There have been numerous criticisms of the hype cycle, one of which is that it is not a cycle, and that all technologies don’t really have the same outcome. Another criticism is that the shape of the line has not altered or accelerated in ten years, even though all the evidence suggests that the half-life of new technologies is getting shorter, and the number of competing technologies is increasing.

So, of course you have the option of ignoring hype cycle predictions, and pushing forward with your latest technology startup. Just don’t be surprised if you get investor pushback while early in the cycle, and be prepared with counter arguments. Great startups know the hype, then set out to beat it.

Marty Zwilling