Monday, December 30, 2019

5 Ways To Engage The Right People In Your New Venture

BusinessPlanPresentationIn my work with new and aspiring entrepreneurs, I find that most struggle with putting together a written business plan, often pointing out that someone they know started a business without anything written down. My experience is that the discipline of documenting a plan will improve your likelihood of addressing all the right issues, as well as finding the right partner or investor.

It’s no secret that the rate of failure of new business startups may be a high as ninety percent, so we all need all the help we can get, validating the opportunity, clearly positioning against competitors, projecting financials, and planning all the necessary marketing and operating activities. I recommend the following short list of deliverables to keep you on a winning track:

  1. Create a new business overview brochure. Starting a new business starts with selling everyone, including yourself, on the viability and specifics of your idea. Just talking and waving your arms doesn’t do it. Most people will be engaged by a single-page double-sided glossy executive summary, and offer support or the right people to move forward.

    Whether you are looking for partners, investors, or future customers, you need to show a level of professionalism and leadership very early that will draw people to your idea. It can pay big dividends as this stage to get help from an experienced business advisor.

  2. Two-minute video highlighting you and your idea. Even people who read will be impressed with a video clip these days, as an introduction to you, showing your passion and commitment, and highlighting your business focus and direction. Be sure to net out the opportunity and the solution in the first thirty seconds. Make it light, but factual.

    For details and examples, check out these directions and suggestions. You really need at least a prototype product or customer to make the video come alive. Think of it as an infomercial. You don't need special lighting or equipment; keep it concise and simple.

  3. PowerPoint pitch for investors and partners. This section is especially important if you intend to attract outside investors or strategic partners. In my experience as an angel investor, the perfect pitch length is ten slides, outlining the business problem, your solution, opportunity sizing, competition, and financial projections for the next five years.

    Remember, investors or interested in acquiring a piece of your company, so keep the focus on the attractiveness of the company, rather than the product. Make sure you can cover all the material in as little as ten minutes – investors are easily bored.

  4. Prepare a business plan 20-page document. No matter how much you enjoy talking, you don’t have time to reach all the people who need to know, with the right level of detail, what you can put in a document. This document must cover all the content discussed earlier, with details to make it come alive without you talking to fill in the gaps.

    If you are an entrepreneur who doesn’t feel comfortable writing, there are many advisors, investment attorneys, and independent contractors who are available to help, for a fee. Review some examples to assure you have all the proper legal disclosures and content.

  5. Validate your financial assumptions with a model. I always recommend the creation of a simple Excel spreadsheet with your projections of revenue, cost, and other major financial elements over the first five years of your new business. You will likely need this work to properly answer potential investor questions, and test your own assumptions.

    The real objective here is convince both you and potential investors that the business is financially viable and lucrative over the long term. There are plenty of guidelines and sample models available on the Internet, so don’t be intimidated by the terminology.

While the completion of all of these items entails a lot of work, I assure you from experience that the results are worth it, to minimize the probability of a serious business failure and bitter disappointment on your part, and the confidence of people who believe in you.

In my years of work with new businesses, I’m more and more convinced that having the idea is the easy part – the real work, and ultimate success or failure, is in the execution. If you want to stand out above the crowd, my advice is to focus early on all five of the business plan elements outlined here, and enjoy the fruits of your labor for many years to come.

Marty Zwilling

*** First published on Inc.com on 12/14/2019 ***

0

Share/Bookmark

Sunday, December 29, 2019

5 Keys To Maximizing Your Impact In People Mentoring

Maximizing-mentoring-impactIf you are like most entrepreneurs I know, there just aren’t enough hours in a day to get all your own work done, as well as run the many one-hour meetings each team member seems to demand for decisions and mentoring. I have found it to be more productive and effective to lead with the model that no meetings will take an hour, and may be done in as little as five minutes.

Of course, this requires some discipline and focus on your part, as well as the willingness to trust team members and allow them to do their jobs. For example, you must forego the traditional meeting approach, where a team member presents a slide deck with all the background and multiple solution options on an issue, and asks you for a decision.

I recommend the elevator pitch-approach instead, which you probably learned in dealing with busy investors, where the person calling the meeting is asked to summarize the purpose, value and recommended solution in the first minute or two. That leaves three minutes, or maybe a few more, for you to clarify your understanding, approve their approach or suggest additional work.

Meetings at this level should never be seen as “working sessions” for actually solving the problem, but as mentoring and direction setting for team members. I have personally used this approach in leading startups as well as large organizations, in highly technical roles as well as business development and marketing. But it only works if you observe the following principles:

  1. Never hide from your team. If you are always hard to find, too busy or unavailable behind closed doors, no leadership or mentoring relationship can work effectively. The old principle of managing by walking around will give the background, and people always having to wait makes them talk longer when they get your precious attention.

  1. Listen and adapt your style to theirs. You rarely learn anything by talking. Practice active listening and respond with a simple affirmation, step-by-step instructions or an anecdotal story, depending on the style and experience of the team member. Five-minute meetings cannot be five minutes of anyone talking.

  1. What is said in a meeting must stay in the meeting. Of course, decisions and action items must be communicated immediately, but individual disagreements, comments and recommendations must never surface around the water cooler or in later reviews. You want team members to provide input openly, honestly and without fear of retribution.

  1. Provide immediate direct and constructive feedback. Team members need your critique of their work to learn, but attacking the person is never productive. Use every opportunity to clarify your goals and set the context for follow-on discussions. If you must provide negative feedback, make every attempt to highlight the positives first.

  1. Make it clear that team members are accountable and responsible. Your most valuable team members wouldn’t want to work any other way. Encourage them to come in with solutions, not problems, and empower them to drive their recommendations to success. Everyone learns best from failures, so failure should never be a feared option.

For one-on-one coaching from the startup founder, I call this approach five-minute mentoring. The goal is not to use your time doing the job for less-experienced team members, but instead quickly identifying their barrier to progress, and providing guidance on a next step. Even if multiple cycles are required to reach the goal, you will spend less time, and they will learn infinitely more.

I fully understand that the best entrepreneurs are problem solvers by nature, so this approach requires a mindset change from solving to a specific answer, to coaching on the process, which will pay big dividends for both of you as the company grows. You can be a problem solver and build a product alone, but you can’t build a successful business alone.

Your primary responsibility as a startup founder is to provide vision, leadership and communication to all internal and external team members. Long meetings behind closed doors are draining for you and not productive for the company toward these objectives.

Start today with five-minute meetings and mentoring to get the fun and productivity back.

Marty Zwilling

0

Share/Bookmark

Saturday, December 28, 2019

8 Friends Who Mean Well But Never Start New Ventures

business-idea-plan-actionEvery entrepreneur I know is dismayed by the number of friends who approach them with a line such as “I have an even better idea that will change the world, and one of these days I’m going to get around to starting my own business.” I always wonder what is more important to them on an ongoing basis than changing the world, since their startups usually never materialize.

With the cost of entry to be an entrepreneur so low today, the common excuse of “lack of funding” doesn’t get much sympathy from me. People can build great ecommerce sites with free tools, smartphone apps in their spare time and use crowdfunding to bypass the dreaded angel funding and venture capital penalties. There must be something deeper that slows people down.

So if you have a great idea, and funding isn’t an overwhelming challenge, what are the real reasons that the world is filled with so many “wannabe” entrepreneurs that never get around to starting up?

Based on my own experience mentoring real entrepreneurs and likely candidates, there are at least eight categories of non-starters. I’m sure you will recognize someone you know, maybe even yourself, in one of the following groups:

  1. Enjoy the dreaming, but not the implementation. These are people who often call themselves “idea people,” who like to talk about their vision and leave the implementation to some lesser beings. In my experience, there are a wealth of good ideas out there, and the harder part is converting the dream into a profitable business.

  1. Unwilling or unable to acquire business implementation skills. Our culture propagates the myth that business skills, like rocket science, can only be learned in a classroom or lab. In today’s world, with a pervasively connected and constantly updated Internet knowledge base, online self-learning is always available and more productive.

  1. Irrational fear of failure or embarrassment. Everyone has some fear of the unknown, and that’s a good thing for survival. Successful entrepreneurs are ones who overcome their fears and manage some risk and failures as a part of the learning process. Others are debilitated by their fear, avoid risk at all costs, and never start.

  1. Equally irrational fear of dealing with success. We have all seen people on the cusp of success, who seemed to intentionally undermine their momentum, only to fail near the finish line. Of course, too much early success can kill a business, but real entrepreneurs are certain that they can grow and learn from success, just as they do from failure.

  1. Insist on perfectionism, rather than pragmatism. I know very talented inventors who have been working on the same technology for 20 years, and still want to do more research to make sure it’s perfect before selling a product. In today’s rapidly changing market, perfection is a fleeting and impractical objective. Pragmatists create a minimum viable product (MVP), test it in the market and iterate to success.

  1. Unable to maintain their focus and resist distractions. “Focus” is the key to success as an entrepreneur. A business that tries to do too many things for too many markets will likely excel at none and discourage all potential customers. Focus means keeping priorities straight, separating important from urgent, organizing and delegating.

  1. Substitute excuses for accountability and responsibility. Excuses are efforts to rationalize failure after the fact or justification for never starting. The best attribute of a real entrepreneur is acceptance of the fact that “the buck stops here.” There are always alternatives, pivots and creativity to overcome any obstacle.

  1. Simply not a self-starter, leader or decision-maker. These are the products of the industrial revolution, who wait for others to tell them what to do, and love to find fault and play the victim.  When you adopt the entrepreneur lifestyle, it’s up to you to set the pace, stay positive, be the model and lead the follow-through.

If you expect someone else to make your decisions and bear the risks and responsibilities of implementation, then “one of these days” will probably never come for you. So my view of what it takes to be an entrepreneur is simply to adopt the right attitude and full accountability. People who want it bad enough will get around to it. How long will you be a “wannabe” entrepreneur?

Marty Zwilling

0

Share/Bookmark

Friday, December 27, 2019

6 Building Blocks Make Amazon A Global Market Leader

Amazon-logoEvery new business dreams of growing from a startup to a global market leader in a few years, like Amazon.com, but that goal is elusive. As a mentor to entrepreneurs, I often get asked for the magic that has made Amazon the world's most valuable brand, from a total unknown only twenty years ago. My simple answer is that they keep their focus on customers, rather than technology.

Thus I was pleased to see the evidence confirming that perspective in a new book, “The Amazon Management System,” by Ram Charan and Julia Yang. They present a convincing story that every entrepreneur has the same potential, but most get sidetracked and bogged down by their technology, competitors, and internal organization. Jeff Bezos has kept his focus on customers.

Of course, it’s never quite that simple, but I really like the authors outline of the six key building blocks that have driven Amazon growth since their early days, to keep their current market value hovering around a trillion dollars. In my view, every startup in today’s world would do well to adopt a management system with the same key objectives:

  1. Start with a customer-obsessed business model. At Amazon, Jeff Bezos leads a relentless drive to invent dramatic new ways to delight customers, not waiting for customer demands or competitors to show the way. These days, speed of delivery, rate of change, and automation are key, so these elements get attention for every customer.

    For example, when delivery costs and delays were still a major online sales hurdle, Amazon Prime membership was invented to offer free next day shipping. It has proven to be a huge customer growth engine, and now has over 100 million members globally.

  2. Practice continuous bar-raising for your talent pool. Contrary to popular belief, I’m convinced that business success is more of function of the right people, rather than the right idea. Amazon extends this concept to continuously and proactively seek better talent as they learn more from results. They find more and better owners and builders.

    In their recruiting process, they actually have a key insider designated as a “bar raiser” involved in ever interview, to make sure that the bar is never lowered due to any bias or pressing business urgency. They help hiring managers raise the bar for every interview.

  3. Incorporate AI-powered data and metrics systems. Jeff Bezos is a man of numbers, and he deals in large volumes, with quick turnaround, so he relies on the latest data technology. While others level off with a certain level of automation, Amazon continuously raises the bar on data analysis, just like they do on talent, and measure the return.

    When they need a new fulfillment center, they pick the best location by simulating all the orders and predicting an optimum location. Their pricing algorithm crawls the Web daily, and adjusts prices to always match the lowest price found anywhere, offline or online.

  4. Make your company a ground-breaking invention machine. Most entrepreneurs who have built thriving companies settle into a protective and defensive mindset, clinging to core competencies of the past. New inventions bring risk and cost, and they don’t see other companies using them until it is too late. The cost of being late is hard to recover.

    For example, few consumers recognize that Amazon has a subsidiary, Amazon Web Services (AWS), that has invented over 165 computing services for business customers, including new ones every month, that have become crucial to its continued growth.

  5. Insure high-velocity and high-quality decision-making. Bezos categorizes all decisions into two types: 1) Those that are irreversible – requiring deliberation and consultation, and 2) changeable, reversible –best made quickly by high judgment small groups or individuals. Most decisions fall in group two, and Bezos stays out of this loop.
  6. Forever reinforce and espouse your Day-1 culture. Normally, in the beginning most organizations function with speed, nimbleness, and a risk-acceptance mentality. Later, complexity and layers creep in, characterized by slowness, rigidity, and risk aversion. Bezos sees Day-2 thinking as leading to stasis, irrelevance, decline, followed by death.

In my view, Amazon illustrates that the world of business management has evolved, from command and control being dominant, to one designed for speed, agility, and scale in serving customers. Customers are now the drivers of your ability to survive and thrive in business.

People at the top and all levels, like Jeff Bezos, with an understanding and commitment to these values, are the key to success in every company today, more so than any management and delivery system. As an entrepreneur, how well do your values align with these? Your future satisfaction and success likely depends on your answer.

Marty Zwilling

*** First published on Inc.com on 12/12/2019 ***

0

Share/Bookmark

Wednesday, December 25, 2019

6 Tips On How To Really Prepare For Your New Venture

new-business-discussionDespite the rush in every academic institution to offer more courses on entrepreneurship, I still haven’t found it to be something you can learn in school. Of course, you can pick up the basic principles this way, but the problem is that the practical rules for success are changing so fast that no academic can keep up. The best thing you can learn in school is how to learn.

The successful entrepreneurs I have met and worked with over the years all seem to share that passion for learning, and they see rapid market change not as a problem, but as an opportunity for them to move ahead of the crowd in changing the world. Making big money is usually the last thing on their mind, and most are happy living on Ramen noodles in a sparse apartment.

From a practical standpoint, there are many ways to learn about business change, and the opportunities that may spring up at any moment. Here are six steps that every aspiring entrepreneur should take full advantage of:

  1. Communicate with peers who have “been there and done that.” The common term for this is networking, but I find that many aspiring entrepreneurs like to do all the talking about their latest new idea and fail to listen. You don’t learn anything while talking. Successful entrepreneurs love to share, but they respond better to pull rather than push.

  1. Research current success stories and role models. The Internet is better than the Library of Congress or any university, since it changes daily to keep up with reality and is interactive. Reserve some time each day for your favorite blogs and influencers, follow up with social networking and expand your personal contacts offline.

  1. Find a business mentor, as well as a friend. A mentor is someone who will tell you what you need to hear, while a friend might tell you what you want to hear. Actually, you need both, and the ability to tell the difference. I find that all entrepreneurs benefit from bouncing their ideas off someone else, and unique perspectives can add real value.

  1. Don’t skip new “learning how to learn opportunities.” These include the classes in school that focus on case studies and team exercises, but extend beyond the academic world to professional and industry seminars. Focus on the opportunities that match your needs for today, since you never know too far ahead what you need to know next.

  1. Volunteer to help organizations related to your interest. There is no better way to broaden your perspective and understand realities than to work in an environment where motivations are positive. You can get real leadership experience and real learning without long-term commitments and financial pressures.

  1. Start your own small business. The cost of entry for an entrepreneur is at an all-time low, with very low incorporation fees in most states, website creation tools for free and the ability to create and offer smartphone apps for a few thousand dollars. Learn from the challenges of a startup with a low-risk idea before you bet it all on the big dream.

I fully recognize that self-initiated learning is not for everyone. If you are one of those people who likes structured classes and counts on spending a couple of week in the classroom every year to catch up, I don’t recommend the entrepreneur and startup lifestyle. Starting a new and innovative business is not a highly structured process, and finding time for structured learning is unlikely.

Finally, it is always helpful to check your motivation to be an entrepreneur. If you see it as the path to easy money or as an escape from an existing job or family pressures, it’s time to recognize that learning doesn’t come easily if your heart isn’t in it.

There is no substitute for doing what you love, and loving what you do. Once you learn to love learning, you too can be a successful entrepreneur.

Marty Zwilling

0

Share/Bookmark

Monday, December 23, 2019

7 Ways To Jeopardize Key Startup People Relationships

business-office-contract-agreementRelationships are the key to survival and success for entrepreneurs, and first impressions usually turn into lasting impressions. As an advisor to many early-stage entrepreneurs, I caution them to always be prepared for that chance meeting with a famous investor, a potential partner or an industry guru. It’s not smart to believe that your passion and gift of gab will impress anyone.

Advance homework and preparation is key to every good first impression. With smart people, you can’t bluff your way past tough questions, and talking more and louder about your dreams won’t fill the gap of relevant content. Despite the fact that you can’t predict the circumstances of every first meeting, there are many faux pas that you can avoid, including the following:

  1. Failure to recognize an important person before introduction. Every entrepreneur should build a “cheat sheet” of 10 key individuals they hope to encounter at any given meeting or networking opportunity. The impact of responding first with facial recognition from LinkedIn or Facebook is huge compared to possible alternatives.

  1. Start talking immediately about your project and background. Asking questions and listening will leave a greater first impression more often than talking. Even more impressive are targeted questions that indicate you already have done your homework on their current role, expertise and company affiliations.

  1. Quick to name-drop common friends and business links. A mention or introduction from a shared friend will always give you an advantage. But be cautious about dropping names of people who may not really know you, or whose recollection of you may not be so positive. The investors I know are quick to do some real due diligence.

  1. Ask a thousand questions, with no apparent objective. To make a memorable first impression, you need to make your objective clear in simple and non-emotional terms, before the other party has to ask or guess. Think of it as not wasting the other person’s time, and always positioning the next step, like asking for a meeting or a partnership.

  1. Flaunt how much you know about every subject. It’s important to do your homework and appear knowledgeable on relevant subjects, but a good impression will turn bad if you interrupt every answer with a correction, or can’t stop talking about any given subject. Good initial conversations should never be turned into debates or political platforms.

  1. Easily distracted by a friend or someone more important. We all hate being dumped quickly in a business or personal situation for someone more attractive or important. Smart entrepreneurs learn how to smile and maintain eye contact, make transitions positively and proactively follow-up to solidify their impact, rather than lose it.

  1. Dress to make a statement or stand out in the crowd. Appropriate dress is all in the eye of the beholder, so that should be your criteria. If you are presenting to a group of angel investors, assume business attire or match the norm of members. Washed-out jeans may be your norm at work, but won’t impress most long-time business executives.

With a little forethought and business sense, all these mistakes can be turned into opportunities for you to be remembered. All it takes is the same diligence that every entrepreneur puts into solution development, their business plan and investor presentation. You shouldn’t be surprised to learn that first impressions usually last longer than any documents you prepare.

Psychologists say it only takes three to five seconds for someone to form a lasting first impression. Either consciously or unconsciously, people important to your future will make quick judgments about your professionalism, character and trustworthiness quickly.

Don’t jeopardize the future of your startup, and your chosen lifestyle, by assuming you can wing it. Only preparation will keep you and your image from flying astray.

Marty Zwilling

0

Share/Bookmark

Sunday, December 22, 2019

8 Steps To Making Good Decisions In Life And Business

Women_in_Decision-making_Christine_LagardeDespite many years of advising aspiring entrepreneurs and people in business, I continue to be surprised by the number of people who wait for decisions to be made by default, or allow others to make decisions for them. I assure you that this approach is not the road to happiness, and certainly not the route to optimal decisions. Making no decision is rarely the best approach to life.

For example, I know people who would love to have their own business, rather than be tied to another they don’t fully understand or believe in. Yet, starting a business requires much more than a gut feeling of interest or desire. Every successful new business requires focused work – targeting a specific opportunity, sizing the potential and resources required, and defining success.

None of these elements can be completed primarily by gut instinct, no matter what your background, as clearly argued by Gleb Tsipursky in his new book, “Never Go With Your Gut.” He calls himself a disaster avoidance expert, and bases his recommendations on years of working with and studying large companies, as well as small. My own experience supports his key points:

  1. Identify the need for a decision to be made. This point may seem obvious to some, but I find that many people have no trouble suggesting what others should do, but have trouble recognizing the need for a decision in their own life, especially when it’s not an emergency. The result is lost time, and the window of opportunity may have passed.
  1. Gather relevant information from multiple sources. Of course, your experience and gut instinct are relevant, but should never be used alone. These days, everyone has easy access through the Internet to an infinite variety of facts, insights, and analyses, which can be used improve the accuracy and timeliness of any decision. Do some homework.
  1. Decide on your relevant goals driving this decision. Each of us is different, so never let the goals of your friends or family make your decision for you. This world is full of unhappy, and often ineffective, people in the wrong position. Generally, there are three types of goals: based on time, interests, and long-term objectives. Always follow yours.
  1. Develop clear decision criteria to evaluate options. Here is another point where your gut should be only one input. The decision criteria in any setting are those variables or characteristics that are important to you in life. For most people these criteria would include relevant finances, experience, interest, and satisfaction. Minimize compromise.
  1. Generate viable options that can achieve your goals. This is the brainstorming step, so go for ones that solve your underlying challenge, and don’t judge options just yet. In my experience, the optimal choice almost always involves out-of-the-box thinking and innovation. That’s what successful startups are all about. Your gut may not be creative.
  1. Weigh the options and pick the best of the bunch. When weighing options, try to keep your gut feel out of the picture. Minimize the impact of personalities, relationships, and internal politics on the decision. Don’t be afraid to mix and match parts of different options as seems best suited to the situation at hand. It’s time to make a decision.
  1. Move immediately to implement the option you choose. Ensure clear communication around the decision’s enactment, and accept full accountability for implementation. Think about how your decision can go wrong, and move to guard against these failures. Some people seem to be able to make decisions, but never get around to implementation.
  1. Evaluate the implementation process for follow-up. A perfect implementation of a new business, or any new idea, rarely happens the first time, so be prepared for multiple iterations and revisions. Make this a positive learning process, rather than looking at it as a series of failures. Don’t let your gut derail you before successful implementation.

In reality, a first-rate decision making process like this one is a discipline that is teachable and learnable, and it goes far beyond gut instinct. Unfortunately, in my experience as an angel investor and business consultant, I see leaders at all levels of large companies as well as small, who skip some of the critical steps of this model, leading them to slow growth or even bankruptcy.

In my view, any decision is better than none, and a good decision process is critical to making the best decision for you today. Maybe it’s time for you to take control of your life, and learn to make good decisions, rather than trying to live by someone else’s view of your world. Remember, practice make perfect, and skip the shortcuts.

Marty Zwilling

*** First published on Inc.com on 12/06/2019 ***

0

Share/Bookmark

Saturday, December 21, 2019

8 Clues That You Need More Focus On Human Leadership

Richard_Branson_listeningMost entrepreneurs assume that success is dependent on their product expertise, coupled with some knowledge of how to run a business. In fact, I have found from personal experience and mentoring that both of these are necessary, but not sufficient, for building a business. Successful entrepreneurs today must practice human-centered leadership to compete and win.

There are many leadership styles out there that may have worked well in the past, including authoritarian and paternalistic. But in this new age of relationships, these often work against your business. There is more and more evidence that a more human-centered or heart-centered leadership yields the best results with your team and with customers in the long run.

As top business consultants and leading proponents of this leadership style, Susan Steinbrecher and Joel Bennett, in their classic book “Heart-Centered Leadership: Lead Well, Live Well,” do a good job on the details of why and how this approach leads to greater satisfaction and well-being for the team, and by extension, to the bottom line profit and impact of the business.

Here are some examples from their book and my experience of the many indicators, challenges that entrepreneurs will probably recognize, which highlight the value and need for increased focus on the human element:

  1. Collaborative team sessions seem to drag on. Entrepreneurs often complain about the amount of time wasted in meetings, because one of the team members just wants to be heard, or feels that what he or she has said is not valued. Great leaders learn to listen actively to conversations, so people don’t hold up progress just to be understood.

  1. Disruptive office politics start to show. Startups with weak directives, poor communication, and ineffective cultures are breeding grounds for negative interpersonal dynamics. Office politics are really about self-interest and self-esteem. Heart-centered leaders create engaged teams that are too highly motivated to waste time on politics.
  1. Investments and acquisitions fail. Failure is often not due to fiscal irresponsibility or lack of due diligence. Business-to-business relationships usually fail because the leadership team underestimates the impact and the importance of recognizing the human element. Effective entrepreneur leaders focus on getting people needs satisfied early.

  1. Team conflicts become personal fights. A conflict and a fight are not the same thing. The best entrepreneurs understand their people and embrace constructive conflict for steering through the maze of innovation and change common to every startup. Toxic relationships are emotional, often personal, disagreements which are counter-productive.

  1. Demand for coaching, counseling, and discipline training is high. The most-used workplace training programs are really about matters of the heart. Managers need training in coaching, counseling, and discipline because they resist or have difficulty communicating with team members. Punishment at work is not a motivator to change.
  1. Difficulties retaining key employees. Top team members rarely quit the company. More often than not they quit their boss. All too often, quitting is a response to a perceived lack of leadership or appreciation by key executives. Human-centered leaders connect with each team member at a personal level to assure ongoing commitment.

  1. Evidence of crossing the line ethically. If entrepreneurs show only an exclusive focus on the bottom line, team members may convince themselves that they have to bend the rules to be successful, which can easily lead to lying, cheating, and stealing. Leaders need to focus on a human-centered culture in their actions, as well as every message.

  1. Customer relationships culture is slipping. Your startup can’t sell and compete on the strength of your customer relationships, if the business culture in your startup is not human-centered. That startup culture has to come from the beginning and from the top, meaning heart-centered leadership from the entrepreneur.

There is an increasing body of evidence that teams and leaders focused on the human element not only live well, but are winning in their profit-making objectives as well. Examples of exemplary companies practicing this model include Starbucks Coffee and the Whole Foods. Both of these are human-centered businesses that boast high growth, high loyalty, and low employee turnover.

How evident in your leadership style is your commitment to personal understanding, open-mindedness, authenticity, trust and integrity? If you haven’t tried it, or you aren’t getting the feedback from your team than you want, maybe it’s time to take a hard look in the mirror. It’s never too late to learn.

Marty Zwilling

0

Share/Bookmark

Friday, December 20, 2019

10 Positive Signs For Starting Your Own Business Now

startup-nowWith the current strong economy I’m seeing a continued resurgence of entrepreneurial spirit, and more startup activity than ever before. I believe the days of the “job work” mentality are thankfully waning, with more people looking to get satisfaction by making the world a better place, rather than just tolerating brain-numbing work to fund enjoyment elsewhere.

According to current Kauffman Indicators of Entrepreneurship, the share of new entrepreneurs who started businesses to pursue opportunity rather than from necessity now exceeds 86%, more than 12 percentage points higher than ten years ago at the height of the last recession. In addition, young businesses that are still active after one year continues to hover at nearly 80%.

There is additional encouraging news for aspiring entrepreneurs on many fronts, just in case you are thinking about joining the existing ranks:

  1. Valuations of successful startups have hit an all-time high. An unprecedented number of startups, 427 at last count, are now valued above $1 billion, according to CB Insights. Three of these, JUUL Labs, Didi Chuxing, and Toutiao have already passed $50 billion. Thus a record number of entrepreneurs (and team members) are getting rich.
  1. Initial Public Offerings (IPO) are back as an exit strategy. Statistica reports that almost 20 percent more companies went public in 2018 versus 2017. The median deal size is back over $100 million. Investors are showing an increased appetite for new stocks, with a good percentage of deals pricing above the marketed share price range.
  1. Funding for early-stage startups is more available than ever. Last year 300,000+ American angels invested an estimated $25 billion in more than 70,000 startup deals. Crowd funding is setting new records worldwide, with $17 billion from North America alone, and VCs poured another $100 billion more into small growth companies last year.
  1. Cost of entry for a startup is at an all-time low. I can remember when creating a web site for eCommerce could easily require a million dollar investment. Now you can create a web site for almost nothing - and be on your way with your latest invention or personal services. Smartphone apps can be built for less than $10K, so who needs an investor?
  1. Startup incubators and accelerators are popping up everywhere. Business incubators were all the rage before the dot-com bubble (700 for profit, many more non-profit). After the bubble burst and the recession, more than 80% of them disappeared. Now they are back in every community, with the best even waving money at graduates.
  1. The world is a now single market, both homogeneous and heterogeneous. Entrepreneurs now can think globally about the opportunity, from day one but start locally. This approach, popularly known as “glocalization,” means you design and deliver global solutions that have total relevance to every local market you plan to attack.
  1. Social media is a boon for entrepreneurs and startups. With the key social media platforms today, an entrepreneur can tune a product, build a brand, and grow the business with very low cost and a high interactivity never before possible. The elements include communications, mobile platforms, and location-based services.
  1. Large corporations have lost their ability to innovate. Conglomerates, which were the engines of growth and vitality in the twentieth century, have proven themselves unable to innovate, and have a tarnished public image due to financial woes and poor management. Most now routinely buy startups for new technology and new products.
  1. Women are a growing force as entrepreneurs. According to the latest Women’s Entrepreneurship Report, overall female rates have continued to increase and the gender gap has narrowed. Women inherently should have an advantage, since women already control over 70% of household income and $20 trillion of consumer spending.
  1. Baby Boomers are joining the fun in record numbers. The percentage of startups created by entrepreneurs between the ages 55 and 64 continues to grow more than any other age demographic. Driving forces include their need to work and stay energized for the longer life expectancies, as well as the opportunity to give life to long-held dreams.

Looking ahead, Forbes predicts that in 2020 the supply of VC money will still be quite robust—with over $100 billion in investments across more than 10,000 deals. They also suggest that a business valuation discipline has returned to the Valley. The investment thesis has shifted from “growth at all costs” to “growth with fundamentals.”

The image of an entrepreneur is at an all-time high, so why would you continue to work in a job that you hate, or provides no satisfaction? Step into a new entrepreneur era where the definition of “work” is something you love. It’s never too late to start, but don’t forget the fundamentals.

Marty Zwilling

0

Share/Bookmark

Wednesday, December 18, 2019

5 Pivotal Decisions That Define A Great Entrepreneur

Pivotal-decision-making-leaderMost aspiring entrepreneurs are convinced that the strength of their initial idea somehow defines them as a leader, as well as the success potential of their derivative business. In my experience, it’s a lot more complicated than that. It takes leadership ability, as well as a good idea, to make a successful entrepreneur, and great leaders evolve from key leadership decisions along the way.

Fortunately, basic leadership and entrepreneurial skills can be acquired from experience and training. If you don’t have the entrepreneur leadership attribute or interest, but want to be an “idea person” or inventor, then I recommend that you find a partner with the requisite skills to implement and run the business from your idea.

Yet we all know that there is a big gap between good entrepreneurs and a great business leaders. Great leaders seem to make the right pivotal decisions at every critical point along the way. I’ve never been able to clearly define those key points, and what separates the good from the great at these points.

So I was happy to see Julia Tang Peters, in her classic book “Pivot Points,” tackle this issue a while back. She concludes from her work with many modern business leaders, including CEOs Bud Frankel (Frankel & Company) and Glen Tullman (7wire Ventures), that there are five pivotal decisions that propel certain entrepreneurs to be gifted leaders:

  1. The launching decision. At some point an idea captures your imagination and creating a business becomes more than just about income. You define goals that rivet your attention, galvanizing you to turn dreams into reality. The launching point establishes the platform on which every potential entrepreneur becomes an actualized entrepreneur.
  1. The turning point decision. This is the confluence of your willful decision to do more, and the pressing need to take action. It unleashes an extraordinary verve to take the idea or business to the next level. It tests your capabilities and capacity in various ways, stretching them far beyond your comfort zone and requiring total commitment.
  1. The tipping point decision. Here you are catapulted into leading and working on the business, as distinctly different from the work of mastering your subject and working in the business. At this point you will have built a team whom you trust with substantive responsibilities, freeing you to hone the art of leading, inside and outside the business.
  1. The recommitment decision. Now is the time when you as the leader look at where you are and where you want to go, knowing the need to renew the commitment or leave. For many this happens during disruptive change, like being acquired or being the acquirer. For others, it’s a personal decision to balance family life, or do something different.
  1. The letting go decision.  The ultimate test of leadership is letting go at a time of strength so that others can carry on the work. It may be a hold’em or fold’em business situation, or simply time to plan for succession. This decision point is the most emotionally challenging, since letting go is pivotal in defining the terms of the entrepreneur’s legacy.

I’m certain that an understanding of these points will equip you with the knowledge you need to take the right path on decisions when it matters most. The world is full of high-achievers and high expectations, but without the proper framework for turning entrepreneurial determination into real leadership accomplishment, you risk going nowhere.

I agree with Peters that entrepreneurial leadership is not all about people traits or characteristics, but often about the choices they make at key decision points along the way. Of course, skills in decision-making are not enough alone to make a great entrepreneurial leader. Here are some of the other characteristics I look for:

  • Willing to listen, and will address skeptical views.
  • Always an evangelist and a good communicator.
  • Willing to question assumptions and adapt.
  • Proactively sets metrics and track goals.
  • Ties rewards to performance results.
  • Aggressively takes smart risks.

So a great idea is necessary but not sufficient to make you a great entrepreneur and a great leader. Work on the right characteristics, and think hard about those five key pivotal decisions that can make or break your satisfaction and your legacy. It’s more fun when you are the entrepreneur leader you want to be.

Marty Zwilling

0

Share/Bookmark

Monday, December 16, 2019

5 Modern Ways To Make Your Product Uniquely Memorable

enchanting-detailed-pave-setting-with-diamondsEvery entrepreneur believes that their product or service is memorable, and that every customer will quickly see the advantage over competitors. Yet true product differentiation in the eye of the customer is rarely achieved. According to an old but still relevant survey by Bain & Company, 80% of businesses believe they have differentiated offerings, but only 8% of customers agree.

Even back then, experts projected that businesses with truly differentiated offerings had only an 80% chance of long-term success, compared to ‘me-too’ companies with a 20% chance. In my view both of these numbers have come down recently. Differentiation is still a key requirement for a successful startup rollout, and but it must be sustainable to keep ahead of new competition.

Since I’m a fan of real-world feedback, I was intrigued by the insights on differentiation in the classic book, “Roadside MBA: Back Road Lessons for Entrepreneurs, Executives, and Small Business Owners,” by Michael Mazzeo, Paul Oyer, and Scott Schaefer. As well as having great academic credentials, these guys traversed the USA getting lessons from real small businesses.

Here are a few of their conclusions relative to product differentiation, supplemented by my own recommendations from recent experience and other experts:

  1. Work on perceptions, as well as reality. It doesn’t do you any good to be different, if your customers can’t perceive the difference, or you don’t tell anyone about it. The days are gone for the “if we build it, they will come” mentality. Marketing and target customer relationships are always required, no matter how obvious the differentiation is to you.

    Of course, working on perception can backfire if the differentiation reality isn’t there. Remember the old saying, “You can put lipstick on a pig, but it’s still going to be a pig.” Like a damaged reputation, a discredited differentiation is extremely difficult to turn positive.

  2. Quantify the difference for your customers. Use numbers to make your offering the clear alternative. Fuzzy marketing terms like easier to use, lower cost, and higher quality are not effective differentiators, since they have been overused to the point of having no meaning.

    Real data and customer testimonials say it best, such as get it done in half the time, or half the cost, or comes with a 5-year warranty. In my experience, numbers less than 20% are not enough, since small numbers are not likely to overcome the inertia and learning curve required of most customers.

  3. Focus on customers you really care about, and who care about you. Trying to be all things to all people never works. Identify your target customer segment before you finalize your differentiation. For example, customers with high disposable income will likely respond better to unique features, rather than a lower cost.

    One business visited on the road had successfully implemented a product-differentiation strategy to appeal to the 20% of their clients who were the most profitable, and discourage the 80% who were more costly. They noted that customers’ loyalty grew with their real preference for the unique product features offered.

  4. Customize to differentiate, but do it efficiently. The new generation of customers expect to get what they want, when they want it, customized to their taste. So customization is an important differentiation strategy, but be sure to strike a balance between the revenue potential of the effort, versus the costs required to execute.

    We have moved from the era of mass customization to collaborative customization. Today, differentiated companies enable customers to determine the precise product offering that best serves that customer's needs. For example, MakeYourOwnJeans encourages customers to tailor-make jeans dynamically per their specifications.

  5. Define a unique selling proposition (USP), and keep it simple. Complex or highly technical selling propositions are not good differentiators, since they will likely not grab people’ attention or be remembered by most customers. A good example is Dominos Pizza “We’ll deliver in 30 minutes or less, or it’s free!”

Successful product differentiation requires a conscious and continuous effort, including listening on the right social media channels, being consistently helpful to your customers, and continuous innovation. But the results can put you in that coveted 8% that customers remember for real fun and profit. Isn’t that why you signed on to the entrepreneur lifestyle in the first place?

Marty Zwilling

0

Share/Bookmark

Sunday, December 15, 2019

8 Strategy Lessons For Establishing A New Business

Sun-Tzu-The-art-of-warWinning customers as an entrepreneur in a startup has many parallels to a young army trying to penetrate some formidable new and unfamiliar territory. You need a strategy as well as a goal, and you need to pick your battles well. Even in this age of purpose before profits, a business won’t survive by pretending there are no competitors out there to worry about.

I’ve long been aware of the 2500-year-old, but still current, masterwork on military strategy by Sun Tzu, “The Art of War,” but never thought very relevant to business startups. But Becky Sheetz-Runkle, in her classic book for small businesses, “The Art of War for Small Business,” gave me a whole new perspective.

In the context of offering some inspiring examples of small business success, she includes some timeless business lessons that I believe every startup entrepreneur should take to heart and follow in practice. As examples, I offer my interpretation of some of the key lessons here:

  1. Scout the territory first and pick your battles. A smart general going into battle always does the research first on the lay of the land, including critical high points that have the most value, before charging into the fray. Too many startups rush into battle early, assuming any progress will somehow give them the competitive advantage.

  1. Prepare thoroughly and strike fast. Lining up your resources is critical, but so is time to market. Some entrepreneurs get bogged down in planning and never get to the point of action, often called analysis paralysis (i.e. ready-aim-aim-aim-aim-aim...). A good general makes sure his troops are trained and prepared, and are not hesitant to act.

  1. Capitalize on strengths and shore up weak points. A winning military leader always knows the weaknesses of his troops, as well as the strengths. Entrepreneurs likewise must be able to recognize and leverage the competencies of the current team, while providing the backup and direction to minimize weaknesses in selecting target markets.

  1. Attack competitor weaknesses and be alert for opportunities. Every competitor, like every army, has weak points, and every territory has ready opportunities. Entrepreneurs must seek these out, pivot as required, and lead the team into battle. Small wins and some penetration builds momentum and bolsters morale for that major assault.

  1. Limit your focus to key objectives on a single front. No startup or army can manage more than 3 to 5 goals and priorities without becoming unfocused and ineffective. Pick the key challenges and attack them will all your resources, rather than stay spread so thin that every initiative is jeopardized. “Spray and pray” is not a winning strategy in any war.

  1. Capture territory the opposition does not yet own. In war, the smart general looks for territory that is undefended. Success there is assured, but the value of that position may also be low. In business, it’s always smart to look for new opportunities, or markets with few competitors, but beware of “solutions looking for a problem,” and lack of customers.

  1. Negotiate and leverage win-win alliances. Even in ancient times, creative diplomacy was a better solution than fighting to the death. Entrepreneurs need to learn that your toughest competitor may be your best strategic partner, leading to a win-win situation. This approach is called coopetition, and is too often overlooked as a key strategy.

  1. To win you have to take risks, but don’t be reckless. There is no safe position in business, or in war. In both cases, charging into battle with your eyes closed, is simply reckless, and will lead to destruction. Winning in either arena requires the skill and willingness to take smart risks, with trained resources, due diligence, and determination.

In fact, I now believe that all of Sun Tzu’s teachings are still relevant to entrepreneurs, who more than ever face fierce competition for customers, market share, and talent. Their very survival depends on strategy, positioning, planning, and leadership, just like it did for armies a thousand years ago.

With these lessons in hand, entrepreneurs today in startup companies can and do outsmart, outmaneuver, and overwhelm larger adversaries to capture market share, satisfy unmet needs, and emerge victorious in their chosen markets. That’s the challenge and the fun of being an entrepreneur. Believe me, it’s a lot more satisfying than the alternative.

Marty Zwilling

0

Share/Bookmark

Saturday, December 14, 2019

How To Highlight A Sustainable Competitive Advantage

competitor-analysisDon’t bash the competition. Every investor knows how vulnerable a new startup is to competitors, so investors always ask about your sustainable competitive advantage in the marketplace. How an entrepreneur answers this question speaks volumes about their knowledge of business realities, customers, confidence, and their ability to handle investor funding.

There is no perfect answer to the competitive advantage question, but investors are looking for how your offering will keep ahead of competition, not just at this moment, but throughout the life of their three to five-year investment. They are also seeking to find out how you handle one of the many tough questions that a new founder will get in today’s market.

A strong answer should be something like “Our product introduces a new lower-cost technology, which we have patented and trademarked, that makes us very attractive today, and will provide a wealth of additional products as we move forward.” That says you are competitive today, have a real barrier to entry, and the potential to remain ahead of the competition for a long time.

Based on my own experience as an angel investor, and feedback I get from many other investors, here are a collection of answers that we often hear instead, from the least credible to at least reasonable:

  1. Insist you have no competitors. Leading with this answer will likely terminate any further investment opportunity with this investor. He or she will assume your comment means there is no market for your product or service, or you haven’t looked. Neither speaks well for you or your startup. Even if you hedge by saying no direct competitors, we all know that existing cars are still big competition to your new flying automobile.
  1. Claim the first mover advantage. This is one of the most frequent responses I hear, and is rarely convincing. The problem is that startups have limited resources to keep them ahead of big companies. If your early traction highlights an opportunity they have missed, they can mobilize their huge resources and run over you. First mover advantages are only sustainable by large companies, or founders with deep pockets.
  1. Proclaim your solution as a paradigm shift. If you insist that your technology is so new and unique that it will disrupt your competitors and the whole market, investors will fear that neither they nor you can afford the time and marketing required to weather the change. They will likely decline on the basis that historically, pioneers get all the arrows.
  1. Highlight your world-class team as the secret sauce. Insisting that your team is better than any other, giving you a sustainable competitive advantage for the long term, will likely come across as naiveté or arrogance. Investors know that no startup has a lock on the best people and processes, and investors don’t deal with unrealistic founders.

  1. Declare that you will offer the product or service free. Free is a dirty word to investors, since they need a return on their investment. Perhaps you intend to collect money from advertisers, but this requires a large investment to get the audience you need before monetization can work. Facebook spent over $150 million before revenue.
  1. Intellectual property as barrier to entry. I like patents, trademarks, and trade secrets, so this answer is a better sustainable competitive advantage than the other five answers. Now all you have to do is defend your position, and we all know that patents can break a startup in court battles, and will have alternative implementations if the price is right.

Thus, there is no perfect answer to this question, so the best entrepreneurs see it as an opportunity to highlight their own advantages, rather than put down a competitor. Being negative is never the answer. For example, it’s tempting to say that your worst competitor has poor quality products, requiring costly maintenance, but it’s much better to say that you provide a five-year free warranty that no competitor can match.

After highlighting your best competitive features and your intellectual property barriers to entry, I encourage you to put on your humble face, and proclaim your determination to never stop improving your products and processes to out-distance competitors. You want investors to believe that you are a realist, but have the confidence and determination to win.

Investors know that winning in today’s highly competitive environment is more a mindset than a product feature. Competitor bashing is not a skill that you need to hone. I look for entrepreneurs that can sell themselves and their offering to discerning customers. Money from customers and investors is the same color.

Martin Zwilling

0

Share/Bookmark

Friday, December 13, 2019

10 Ways Owners Often Jeopardize Their Business Growth

negative-business-growthWhen you are starting a new business, every resource is precious, including time, funding, and people. Yet we can all look back, after the fact, and realize that we could have been more memorable. Obviously you can’t go back for a do-over, but you can certainly learn from your mistakes as well as all our successes. Most challenges you have are not unique to your business.

In the interests of helping you work smarter and last longer, I would like to offer my top ten list of key resource drains to avoid in early businesses and startups, based on my years of advising entrepreneurs and my own business experience:

  1. Expanding your product line too quickly for scaling. It’s always tempting to think that more product variations will satisfy more customers and lead to new sales. The problem is that more SKUs dramatically increases complexity and cost, when you can least afford it. My advice is to focus and sell more of what you do best, rather than adding new things.

  2. Buy too much inventory too soon to get unit costs down. Inventory is a balancing act, but I see too much inventory much more often than too little. Unit costs are important, but don’t forget about the cash flow hit, extra storage costs, and the probability of obsolete inventory due to necessary updates or pivots. Use multiple small orders at first.

  3. Lack of attention to team and process productivity. Some chaos is normal in every new business, but many wait far too long before they install metrics based on “best practices,” and fail to attack obvious bottlenecks with a vengeance. You may be the main problem, insisting on making every decision, and hiring cheap helpers rather than help.

  4. Poor communication and visibility from the top. As the business operation and the team grows, regular and effective communication from key personnel is critical. New businesses often burn excessive resources working on the wrong things, or doing things the wrong way. Daily updates from the top and documented processes are critical.

  5. People with the wrong tools or no training. As your business starts to scale, you can’t do everything manually anymore. Make sure people have the right tools, and know how to use them, for accounting, inventory tracking, and planning. Too often I see businesses of some size still using spreadsheets for inventory, or post-it notes for problem tracking.

  6. Measuring time worked rather than business results. It’s no secret that some people are more productive than others, due to skills, training, or commitment. We all know team members who work long hours, but are short on measurable output. Be sure to attach employee bonuses and even overtime opportunities to measurable business results.

  7. Ineffective and expensive marketing campaigns. The most cost-effective marketing approaches have changed; from catalogs to web sites, and from television commercials to social media. Yet I still see expense budgets based on traditional channels, with no strict metrics on cost of customer acquisition by channel, or lifetime customer value.

  8. Excessive support and return activities. Support-intensive products and high return rates can sink even the best run business. Support costs and return rates need to be regularly benchmarked against industry norms, and aggressive root cause analysis done to isolate the problem. Excessive resources required in this area are rarely recognized.

  9. Outsourcing services that could be done in-house. There is always a need for highly skilled or capital-intensive services, such as legal and manufacturing, that should be outsourced. But I often see premiums being paid for social media monitoring, standard accounting, and facilities mgmt. Outsourcing is an expensive solution for poor planning.

  10. Inadequate focus on hiring and people development. Where hiring seems to always be associated with a crisis, I rarely see an adequate assessment of candidate skills, culture, and future potential. This results in time and money lost due to high turnover, low productivity, and skill mismatches. Make employee management a proactive process.

In reality, there are an infinite number of ways to jeopardize the future of your business, but these are common ones I see that are often invisible to the business owner or founder. We all know that small businesses mush operate without a cushion, so unrecognized waste can easily lead to death.

In this age of new technology and new learning, you need to constantly be on the lookout for new tools and data to optimize your business. How much time have you spent recently working on the business, rather than in it?

Marty Zwilling

*** First published on Inc.com on 11/26/2019 ***

0

Share/Bookmark

Wednesday, December 11, 2019

10 Outside Staffing Quotes True Entrepreneurs Avoid

office-no-virtual-staffingThese days, it is almost impossible to find a small business where everything is done at the home location, by full-time employees. We are in the age of outsourcing, by any of many popular names, including subcontracting, freelancing, and virtual assistants. These approaches allow your startup to grow more rapidly, save costs, but costly mistakes can lead to business failure.

There are many books written on this subject, but this classic by Chris Ducker, “Virtual Freedom,” manages to pack a lot more practical guidance into a small space that many others I have seen. He is regarded by many as the number-one authority on virtual staffing and personal outsourcing, and is himself a successful entrepreneur based in the Philippines.

I was impressed with his summary of the top ten outsourcing mistakes made by entrepreneurs, followed by real guidance on how they can and should be avoided. In terms of quotes I hear too often, here is my interpretation of the most common mistakes, which every entrepreneur should avoid at all costs, before these assume that outsourcing will be their salvation:

  1. “With outsourcing, we won’t need many managers.” Contractors and freelancers, like any other business, manage their own internal processes, but they can’t manage your business. Don’t over-manage remote workers, but don’t expect them to manage your business. Hire and train your own managers for internal and external work projects.
  1. “With the high-speed Internet, our workers can be anywhere in the world.” Labor rates are lower in some countries, but culture and language match are the real keys to productivity. Countries near you may be in the same time zone for easy communication, but lack the skills you need. As with real estate, it’s still about location, location, location.
  1. “Let’s cut costs by outsourcing all from this point forward.” Some entrepreneurs get outsource-happy to save costs and begin outsourcing everything and anything that lands on their desks. Ideal outsourced tasks are outside your core competency, can be specified in detail, and managed with quantified deliverables and checkpoints.
  1. “Fixed price bidding is the only effective outsourcing model.” Getting a fixed price bid works for well-defined short-term projects, like blogging or programming. But trying to use it on call centers, affiliate marketing, or even data entry probably won’t be effective. Do your research with peers, and check the alternatives on every project. Be flexible.
  1. “Fair compensation is the lowest price we can negotiate.” Outsourcing won’t work if you don’t keep the virtual team happy. Unhappy workers will do a poor job, so cheap is not a good deal. Fair compensation is normally something higher than the market price at the outsourcing location, but lower than you would have to pay in your location.

  1. “I expect everyone working for me to adopt my culture.” The outsourcing team will always try to adapt to your situation, but success depends on their cultural work ethics, time constraints, social status, language quirks, and an overall attitude. Adapting to culture goes both ways, and training is the key. Recognize and embrace differences.

  1. “Current workers will manage the outsourcing as I grow.” Don’t set up outsourced projects under a professional who doesn’t want to manage, or is simply unavailable to the different work hours, or insensitive to cultural differences. Virtual teams need a lot of stability and structure, extra communication, standard protocols, and contingency plans.

  1. “My IT budget will go down as remote users use their own tools.” When you sign up remote workers, you’ll start to rely heavily on collaborative tools, Internet bandwidth, and new data security tools. You will need to invest more in training your own team, and increase your capital budget for new hardware and software. Don’t get caught off guard.

  1. “Utilization and personal growth of virtual employees is not my problem.” Some entrepreneurs view their outsourced employees as temps, or as a cheap way to staff the company during its startup phase. You should never hire internal or external staff based solely on what they can do now. Bored and unmotivated teams are never cost-effective.

  1. “I’ll outsource software development, since I don’t understand it.” Entrepreneurs need to know every component of their business at a management level, or have a cofounder who does. Relying totally on a virtual team implies they are managing your company, not you. If you don’t know where you are going, you probably won’t get there.

In summary, an entrepreneur should never approach outsourcing as an inexpensive and easy method of offloading work. With modern technology, and worldwide reach, it should be seen as an important tool for building an efficient, lean, and competitive business, optimized to give you more time for strategic focus.

As every entrepreneur quickly learns, their time is a scarce resource, and it can’t be outsourced. To grow the business, every entrepreneur needs to spend more time working on the business, rather than in the business. How many hours a day are you working on your company? Maybe it’s time for some smart outsourcing.

Marty Zwilling>

0

Share/Bookmark

Monday, December 9, 2019

5 Factors That Set Your Best Startup Funding Strategy

crowdfundingWith the advent and popularity of crowdfunding platforms, including Kickstarter and IndieGoGo, as a winning alternative for funding your new venture, I find that many aspiring entrepreneurs are confused about the need to ever seek a professional angel investor. I think it’s great to have more options, but I still see each one having a place, so don’t be too quick to limit your alternatives.

To refresh your memory, angel investors are typically high net worth individuals, accredited by the SEC and willing to invest their own money in a high-potential startup for a share of the ownership. See the popular TV show, Shark Tank, for a glamourized version of how they work, and what to expect in negotiation. In the real world, most angels are regular business people like you and me.

Crowdfunding, on the other hand, opens the investment door online to almost anyone who is willing to bet on a new product or service with an investment, typically for a chance to be first in line for the offering, and willing to forgo any equity or management position in the company.

In my role as a small business consultant and mentor to many entrepreneurs, I recommend the following key considerations for the best strategy to pursue for outside funding, if you choose not to fund the business yourself:

  1. Consumer products and trends need market validation. If your new startup is addressing a consumer need, such as a new gadget or food service, then crowdfunding response can give you the ultimate validation of a large-scale market, as well as full funding. Alternatively, with minimal response, you need to rethink your business plan.

    For example, many of you remember the Pebble 'Smartwatch', which raised over $20 million and made crowdfunding real. Yet overall more than two-thirds of crowdfunding campaigns do not meet their monetary goal and have to return anything they do collect.

  2. Business-to-business products need professional investors. If your target customer is a business, rather than a consumer, I recommend you skip crowdfunding as poorly applicable. This is the realm of the angel investor, who wants to own a piece of the new business, and probably knows how to run it and wants a seat on the Board.For B2B startups, every investor expects to see a proven business model, with a working prototype, and preferably a real customer or two. They don’t get excited by early stage research, development, or marketing hype. Crowdfunding is not the best platform here.
  3. Consider the need for multiple rounds of funding. Most startups need more money than they anticipated, to grow and expand their business, after development and rollout. Professional investors understand this need, and are prepared to support it, unless crowd funding was the first round. Investors are very wary of unknown owners and valuation.

    Facebook, for example, may seem like a reasonably simple consumer application. Yet it required fourteen rounds of investment totaling many millions, before it became profitable enough to fund its own growth, and reach a current market valuation of over $500 billion.

  4. Compare the time frames and costs of alternatives. In most cases, a crowdfunding campaign can be rolled out more quickly, and earlier in the development cycle than a campaign to find professional investors. On the other hand, crowdfunding platform fees cost more than finding investors; as much as five to ten percent of the money you need.
  5. Early visibility can be a curse or a blessing. For very competitive environments and disruptive products, you may want to limit your visibility before a high-profile rollout. You can do this by targeting specific investors, with non-disclosure agreements, but crowdfunding will require early and broad public marketing efforts of your timeframe.

    On the other hand, early marketing may increase your brand’s acceptance, and the crowdfunding platform may be the low-cost way to spread the word. If your campaign is funded quickly and generously, this also sends a very positive message to customers.

In reality, the most successful funding decision I still see is called ‘bootstrapping,’ or self-funding. Even today, the majority of successful businesses are bootstrapped or funded in the initial stages by the founders or bank loans rather than outside cash injections. The smart entrepreneurs I see evaluate all the alternatives, and pick the one that makes the most business sense for them.

Marty Zwilling

*** First published on Inc.com on 11/21/2019 ***

0

Share/Bookmark

Sunday, December 8, 2019

6 Considerations For Going Public Via Reverse Merger

With the current strong economy, as an active startup mentor, I’m seeing a new surge of entrepreneurs and startups, with the commensurate scramble for funding. There just aren’t enough angel investors and VCs to go around. Thus I’m getting more questions on new mechanisms, like crowd funding, or going public through the side door as a reverse merger.

A reverse merger is the acquisition of an already public company (usually a dormant shell) to avoid the Initial Public Offering (IPO) process and cost, to quickly get your startup on a public exchange for fund raising through visibility and selling stock. It sounds like a great way to raise money, but here are some of the challenges you need to consider before trying it:

  1. Make sure the shell you choose is squeaky clean. The image of shell companies has long been tarnished by true stories of lawsuits and “pump and dump” schemes. I recommend you work only with financial and broker organizations who have done the due diligence required, and who have a track record of success.

  1. It takes real money to get into the game. The cost of the shell, plus the cost of navigating the process, can add up to a half-million dollars, depending on the shell company, according to LawCast, a law firm based in West Palm Beach, Florida. This approach is thus not viable for entrepreneurs already out of money.

  1. Being a public company isn’t cheap or easy. Is your startup really ready to play in the corporate world? It better be an established company, with millions of dollars in annual revenue and profits, following generally accepted accounting, reporting, and audit procedures. A survey from a while back sets the burden at up to $2.5M a year.

  1. Increased jeopardy and less fun for the entrepreneur. The increased exposure and opportunity of a public company comes with a higher risk to you and your Board with severe civil and criminal penalties for regulatory mistakes and non-compliance. These looming constraints can turn your startup dream into a nightmare, all to increase funding.

  1. Reverse mergers may not get your startup on the Nasdaq. Most public shells ready for sale are not listed on a national securities exchange, but are instead traded in a less glamorous setting, such as the OTC Bulletin Board. Of course, they can be renamed and moved, but that may negate the cost and time advantages originally sought.

  1. Make sure that your team can motivate shareholders. The reverse merger process itself doesn’t raise any capital. That still requires a business team and story that continually motivates stock brokers and public stockholders. You may no longer have the option of investing all earnings into growth, or servicing your special corporate cause.

Yet reverse mergers are not all bad. Even the New York Stock Exchange did one with the acquisition of Archipelago Holdings via a "double dummy" merger way back in 2006 in a $10 billion deal to create the NYSE Group. Some people believe that reverse shell mergers may soon become the preferred IPO approach for emerging high-growth companies.

In fact, the number of companies taking the side door into a public exchange seems to be getting larger, and it has become the legal but still controversial and risky choice for Asian companies seeking to go public in the American market. Being public makes the company more visible to shareholders and potential acquirers, and provides a presumption of future liquidity.

Other than raising money, the reverse merger may be the quickest way to get you to other benefits of a public company. These include the ability to offer meaningful stock options to employees, the use of liquid shares to purchase other companies, and the credibility and public access to information you need to attract key customers and suppliers.

In summary, a reverse merger, or going public through the “normal” IPO process should never be seen as just a way to fund your startup. It is a strategic decision that may indeed attract more funding, but also will likely change the culture and focus of your company, and your role from an entrepreneur to a corporate executive. What price are you willing and ready to pay for funding?

Marty Zwilling

0

Share/Bookmark

Saturday, December 7, 2019

How Smart Entrepreneurs Don’t Hesitate To Seek Help

business-people-talkingWhile starting a new business always involves tackling many new challenges, I’ve personally found myself reluctant to ask for help. I suspect it’s a function of pride and confidence in my own problem solving abilities, but my hesitation has definitely cost me time and money. Thus, in my consulting with entrepreneurs, I always encourage them to get more comfortable asking for help.

I found some good guidance on this subject in a new book, “The Leader You Want To Be,” by Amy Jen Su, a managing partner in an executive coaching and leadership development firm. She suspects, like me, that no self-respecting entrepreneur wants to seem weak, needy, or incompetent, and none of us like to feel indebted to someone we see as a peer or a competitor.

Of course, there are good ways and bad ways to ask for help. We have all been frustrated by some who are constantly taking and never giving, or people who seem to always ask trivial or generic questions. Here are five concrete tips on doing it right, which I am paraphrasing from the author:

  1. Do your homework first, and ask for help on specifics. Most experienced business people love to help, but they don’t have the time or interest to give you a course on basic business concepts, like the need to be competitive. If possible, you should always couch your questions around a specific case, leading with the options you know or have tried.

    For example, I will admit that my least favorite question from an aspiring entrepreneur is “Where do I start?” I get much more satisfaction, and can provide more realistic help, in steering you through specific pricing, organizational, or competitive challenges you face.

  2. Clearly identify key constraints around your request. In business, we all have to deal with real constraints around every unknown, such as a limited budget, not enough time, and fickle customers. I would like to give you my best answer to your question, without first having to ask you a dozen questions before I even understand the context.

    With my IBM software product background, I could talk at length about competing with other players with big brands, but your problem may be a wealth of small competitors with no brand. I don’t want to waste your time, or mine, solving the wrong problem.

  3. Don’t assume that no one could possibly help you. Believe me, there aren’t many business challenges or problems that haven’t ever been seen before, in some context. You can cause yourself a lot of work and pain if you assume that nobody could possibly have knowledge or insight on this issue, or at least point you in the right direction.

    Sometimes asking peers in a different business can actually improve your chances of getting some real help. Bill Gates, for example, readily admits to asking Warren Buffett for insights, and vice versa, and these two are clearly not in the same business domain.

  4. Start by helping others, and they will return the favor. Not only will this activate the spirit of reciprocity in them, but you will be surprised by how much you learn in the process of helping others. Some of the best business leaders have found that collaboratively working on a problem with your peers yields the best solutions.

    There are several business peer groups, including Entrepreneurs' Organization (EO), with a stated purpose of providing guidance to peers, in a risk-free environment. With a small time investment on your part to help others, you may be the biggest beneficiary.

  5. Practice by asking for help from your own team. Not only does this process yield better results than relying only on your own knowledge, but it makes you more comfortable with asking for outside help. In addition, it creates a culture where asking for help is seen as a strength and encouraged, rather than a weakness to be penalized.

Based on my own experience in business, I’m more and more convinced that asking for help, if done correctly and strategically, is actually a sign of strength, rather than a weakness. In this complex and rapidly changing world, it’s impossible to know everything you need to know, and smart business people build real two-way connections with people who have been there first.

If you make asking for help a learning experience, rather than a search for excuses or a perceived weakness, you will find that the best feeling of comfort is less stress and more success in your business and your life.

Marty Zwilling

*** First published on Inc.com on 11/19/2019 ***

0

Share/Bookmark

Friday, December 6, 2019

10 Financing Alternatives For Your Next New Venture

Desert-Crater-Valley-DeathThe “valley of death” is a common term in the startup world, referring to the difficulty of covering the negative cash flow in the early stages of a startup, before their new product or service is bringing in revenue from real customers. I often get asked about the real alternatives to bridge this valley, and there are some good ones I will outline here.

According to a well-researched Motly Fool report, the challenge is very real, since around half of all businesses fail in the first five years. Only one-third make it past their tenth anniversary. The problem is that professional investors (angels and venture capital) want a proven business model before they invest, ready to scale, rather than early projections and product development.

My first advice for new entrepreneurs is to pick a domain, such as online web sites and smart phone apps, that doesn’t have the sky-high up-front development costs. Leave the world of new computer chips and new drugs to the big companies, and people with deep pockets. For the rest of us, the following suggestions will help you survive the valley of death:

  1. Accumulate some resources before you start. It always reduces risk to plan your business first. That includes estimating the money required to get to the revenue stage, and saving money to cover costs before you jump off the cliff. Self-funding or bootstrapping is still the most common and safest approach for startups
  1. Keep your day job until real revenue flows. A common alternative is to work on your startup on nights and weekends, surviving the valley of death via another job, or the support of a working spouse. Of course, we all realize that this approach will take longer, and could jeopardize both roles if not managed effectively. Set expectations accordingly.

  1. Get a loan or line-of-credit. This is a most viable alternative if you have personal assets or a home you are willing to commit as collateral to back the loan or credit card. In general, banks won’t give you a loan until the business is cash-flow positive, but there are notable exceptions. Nevertheless, it’s an option that doesn’t cost you equity.
  1. Solicit funds from friends and family. After bootstrapping, friends and family are the most common funding sources for early-stage startups. As a rule of thumb, it is a required step anyway, since outside investors will not normally consider providing any funding until they see “skin in the game” from inside.
  1. Use crowd funding to build reserves. The hottest new way of funding startups is to use online sites, like Kickstarter, to request donations, pre-order, get a reward, or even give equity. If your offering is exciting enough, you may get millions in small amounts from other people on the Internet to help you fly high over the valley of death.

  1. Apply for contests and business grants. This source is a major focus these days, due to government initiatives to incent research and development on alternative energy and other technologies. The positives are that you give up no equity, and these apply to the early startup stages, but they do take time and much effort to win.
  1. Join a startup incubator. A startup incubator is a company, university, or other organization which provides resources for equity to nurture young companies, helping them to survive and grow during the startup period when they are most vulnerable. These resources often include a cash investment, as well as office space, and consulting.
  1. Barter your services for their services. Bartering technically means exchanging goods or services as a substitute for money. An example would be getting free office space by agreeing to be the property manager for the owner. Exchanging your services for services is possible with legal counsel, accountants, engineers, and even sales people.
  1. Joint venture with distributor or beneficiary. A related or strategically interested company may see the value of your product as complementary to theirs, and be willing to advance funding very early, which can be repaid when you develop your revenue stream later. Consider licensing your product or intellectual property, and “white labeling.”
  1. Commit to a major customer. Find a customer who would benefit greatly from getting your product first, and be willing to advance you the cost of development, based on their experience with you in the past. The advantage to the customer is that he will have enough control to make sure it meets his requirements, and will get dedicated support.

The good news is that the cost for new startups is at an all-time low. In the early days (25 years ago), most new e-commerce sites cost a million dollars to set up. Now the price is closer to $100, if you are willing to do the work yourself. Software apps that once required a 10-person team can now be done with the Lean Development methodology by two people in a couple of months.

The bad news is that the valley’s depth before real revenue, considering the high costs of marketing, manufacturing, and sales, can still add up to $500K, on up to $1 million or more, before you will be attractive to angel investors or venture capital.

In reality, the financing valley of death tests the commitment, determination, and problem solving ability of every entrepreneur. It’s the time when you create tremendous value out of nothing. It’s what separates the true entrepreneurs from the wannabes. Yet, in many ways, this starting period is the most satisfying time you will ever have as an entrepreneur. Are you ready to start?

Marty Zwilling

0

Share/Bookmark