Friday, January 31, 2020

Why Successful Startups Often Have A Pair Of Founders

jobs-and-wozniakIn my work with new startups, I often find people who believe that the terms “entrepreneur” and “inventor” are interchangeable. Yet I find a big difference between “starting a new business” and “creating a new product.” In my experience, most successful entrepreneurs have indeed created a new product, but most people who claim to be inventors have a hard time starting a business.

The simple solution I recommend to inventors is to find a partner who can focus on business and marketing, while you focus on technology. Bill Gates did this with Microsoft, by teaming with Steve Ballmer from Proctor & Gamble, and Steve Jobs, who started Apple, did it in reverse by teaming with Steve Wozniak. Two people with complementary skills are often equal to three.

Unfortunately, most inventors I know tend to look for partners who are also technologists, perhaps because they feel more kinship with them, or they assume great products will lead to great businesses, without any real effort on the business side. Here are some of the key entrepreneur characteristics most often overlooked by inventors:

  1. Driven by customer-centric view of needs, rather than technology. Understanding what drives customers to buy, in different market segments and cultures, is usually just as challenging as creating and combining technology to deliver function. In fact, many customers have an inherent fear of new technology and the complexity it often brings.

  2. Ability to raise money, manage it, and think in financial terms. A good entrepreneur starts with quantifying the problem, rather than a solution looking for a problem. They worry about the infrastructure needed to attract and support customers, including investors, employees, organization, marketplace coverage, manufacturing, and delivery.

  3. Skilled and motivated by building a multi-disciplined team. A great inventor is most often a lone technologist who doesn’t have the interest or skills for building and managing a team. In fact, they may fear team leadership as a burden, or a potential dilution of their ownership. Certainly interfacing to the outside world may not be an inventor forte.

  4. Master of multi-platform communication and marketing. Even the best solutions these days need to be marketed on multiple platforms, including online, social media, and the proper industry and customer channels for customer geographies. The old philosophy of “if we build it, they will come” doesn’t work in today’s information society.

  5. Proven ability to spot new trends and willing to take risks. Believe it or not, the business world changes even faster than technology, so you need to see changes coming in your industry, and even drive them. That means taking calculated risks with new business models, new customer segments, as well as new products and services.

On the other hand, inventors and technologists have some key attributes that every entrepreneur can benefit from in a partnership, including the following:

  1. Turns customer needs and desires into solutions. Dreaming and talking about potential solutions is not enough. Someone has to have the skill and discipline to turn these dreams into reality. Inventors follow a structured process to assemble and test solutions, file patents for intellectual property protection, and define production details.

  2. Provides the focus to balance entrepreneur distractions. Good entrepreneurs are often diluted in their potential by trying to attack too many new market opportunities or customer requests concurrently. They need the reality check of good technologists to keep their interests bounded, and provide realistic risk assessments on new demands.

  3. Ability to keep track of new technology advancements. New business and product opportunities come from the world of science, as well as the world of customers. Inventors have the required connections and interest to track these evolutions, and assess their potential for the business at hand, including non-technology challenges.

Mark Zuckerberg and Elon Musk are often cited as two of very few modern entrepreneurs who also have a strong technology background. Mark personally invented the early Facebook social network, while he was at Harvard, and went on to build a huge business. Elon Musk has a deep technical background that has helped him lead multiple businesses, including SpaceX and Tesla.

Thus I recommend to every inventor and every entrepreneur that they take a hard look at their personal strengths and interests, and not be hesitant to solicit a complementary partner who can make one-plus-one equal three, and get all of us where you want to go in business a lot faster.

Marty Zwilling

*** First published on Inc.com on 01/17/2020 ***

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Wednesday, January 29, 2020

7 Keys To Active Listening For Real Customer Feedback

experience-customer-feedbackEntrepreneurs and business executives seem to be even more focused on their technology than the rest of us, and less inclined to listen to the voice of the customer, even if they remember to ask. Real two-way conversations with real customers, including the all-important body language, are unheard-of these days. Being connected to the Internet many hours a day is not enough.

In fact, being connected on the Internet has taken on a whole new meaning to me, since I noticed a study commissioned a while back by PC Tools, which found that more than a quarter of people using the Internet have no problem with staying online during sex. Others admit to surfing the web even during religious services. I doubt if any of these are really listening to their customers.

If you are looking for a way to get a competitive edge, now is the time to start building a relationship with your customers, which includes active listening. In a business context, here are some old-fashioned guidelines for effective listening, for you and the members of your staff who have been distracted by all the things you can now do online:

  1. Forget selling while asking for customer feedback. It’s easy to focus first on selling, and to treat all customer input as objections to be overcome. It’s harder, but necessary, to resist the response urge and actively listen to customers, while logging their input for later analysis. Customers will sense the relationship being built, and both of you win.
  1. Observe customer body language, as well as words. Whether it’s while listening or talking, some studies show that as much as 60 to 90 percent of the communication is nonverbal. This means meeting personally with real customers, in an environment friendly to them. Email surveys and voice response units are not effective listening.
  1. Eliminate pride and ego from the equation. If your customer senses your ego is talking, they know you won’t be able to listen. Pride is good, but can easily be heard as selling. You can’t listen if the customer isn’t talking, so make sure more than half of the conversation is input rather than output.
  1. Always ask open-ended questions. Questions that start with “why” invite a defensive response, and usually don’t lead to a productive dialog. You are not looking for one-word responses. More effective questions usually start with “what,” and focus on that person as a customer, rather than you, your product, or your service.
  1. Pause thoughtfully rather than reply immediately. People sense that you are not listening, when you respond too quickly. Even with the best of intentions, responding on the spur of the moment often results is something we wish we had not said, or said differently. Always listen carefully for nuances, and think before you speak.
  1. Respond to general comments with focused questions. Forget the script, and think on your feet to go where the discussion leads. This requirement for effective listening is why customer satisfaction online and phone surveys may identify big problems, but don’t really address customer needs for future of your business.
  1. Make social network contacts into two-way conversations. Social network streams that are all output, or all input, are not effective. You need to post non-defensive responses to all inputs on a timely basis, to show you are accessible and listening. Requests for input that are thinly disguised sales pitches won’t work.

Customers want and expect two-way personal relationships with their providers, and they know that the technology now allows for this. “Push” marketing messages are perceived as clutter, and are often simply ignored. Business relationships build loyalty, in the same way that personal and peer-to-peer ones do.

My final message is that you need to be listening online and offline to what customers are saying about your competitors. Listening more effectively to current customers will maintain their loyalty, and listening more effectively to the customers of your competitors will bring you the new ones you need to grow. Talking too much can cost you both.

Marty Zwilling

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Monday, January 27, 2020

8 Errors To Avoid In Your First Minute With Investors

elevator-pitchAs an aspiring entrepreneur, one of the most important things you need is a memorable “elevator pitch,” to communicate your startup value proposition and leave a great first impression on friends, investors, employees, and future customers. As a startup advisor and potential investor, I’ve heard too many that are heavy on emotion, but light on quantifiable value and impact.

In that critical first minute, no one needs to hear that you have a passionate dream of changing the world, introducing new disruptive technology, or a product with more features than competitors. What they want to hear is quantified value to them. If you find people’s eyes glazing over in the first minute of your pitch, take a hard look for any of the following errors, and fix it:

  1. Trying to paint an interesting background first. No matter how amazing your efforts and insights have been to get you to this point, the journey is irrelevant until the investor or customer understands the problem, the solution, and the potential impact on them. Save the story for a later meeting, after the context and value have been driven home.

  2. Lead with your best marketing pitch and conviction. Of course, it’s always good to speak with conviction, but marketing terms such as “improved productivity” or “lower cost” won’t make your offering memorable. Focus on quantifiable and relevant specifics, such as “reduces your cost by 40 percent,” or “increases productivity by 50 percent.”

  3. Save your best “grabber” for the ending big close. It’s better to start with a hook than to assume that people will stay with you to hear it at the end. The best hook for snagging an investor is a succinct definition of a real problem, followed by your unique solution. For example, “I have patented a new tire that will double the wear mileage at half the cost.”

  4. Describe technology and features, not competitiveness. Customers think about alternatives, and investors worry about competitors. Too much technology and too many features can scare off both. You should be highlighting your unique advantages, added value, market sensitivities, competitor limitations, and intellectual property.

  5. Highlight the solution more than the team. Customers still buy from people, and investors invest in you and your team, more than the solution. They need to know why you are the best “horse to ride” in this race, based on all unique qualifications and any previous track record. If you don’t yet have a team, it may be necessary to build one first.

  6. Tend to overstay your welcome and talk too fast. The attention span for elevator pitches is usually limited to 30 to 60 seconds, and only 150 to 250 words. Doubling or tripling the message length will only ensure a bad first impression, or at best, key elements of the message will be lost. Stay highly-focused and look for time limit cues.

  7. Forget to identify and ask for the next step. You shouldn’t expect to get an investment commitment in the elevator, or close a customer deal in the first minute. Thus your last key element of every elevator pitch must outline and request the follow-up session needed to fill in details and answer questions. Always solicit specifics for this session.

  8. Assume your words are the only necessary take-away. For reinforcement and later questions, you should always be prepared to provide physical takeaways. For investors, an executive summary of your plan is appropriate. For customers, a sample, demo device, or at least a brochure will solidify the message and your readiness to deliver.

I recommend that a good elevator pitch is not just for riding with someone in an elevator. It should be imbedded in the home page of your web site, the introduction section of your business plan, the heart of your executive summary, and the first slide of your investor pitch. You should also deliver it at the beginning of every networking opportunity, and train your team to do the same.

Don’t forget to update it based on feedback from customers and investors, and as your solution gathers momentum in the marketplace. Remember the key here is not to hide behind too many words, or assume you can stretch the ever-decreasing attention span of key people today. Check yourself by taking a few sample rides in the nearest high building to see if you can beat the elevator to the top.

Marty Zwilling

*** First published on Inc.com on 01/13/2020 ***

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Sunday, January 26, 2020

Startups Need Your Data, But Consumers Are Still Wary

data-security-breachNeither people nor computers can really help you as a personal assistant unless you are willing to share data about what you like, what you feel, and who and what’s important to you. Even the best technology can’t read your mind, which is why a simple Google search often gives frustrating and irrelevant results, and online advertisers bombard you with opportunities of no interest.

In addition, consumers have traditionally been reluctant to share personal information with any non-human entity, fearing some misuse or privacy invasion. As an advisor to entrepreneurs and a technologist, I’m happy to report that the tide may be turning, and we are experiencing a new era of opportunity for entrepreneurs, and a new appreciation of the power of the digital world.

In his classic book, “Digital Context 2.0: Seven Lessons in Business Strategy, Consumer Behavior, and the Internet of Things,” David W. Norton, Ph.D., a leading researcher on consumer behavior and the impact of digital, reports that decision makers, social media users, and younger demographics are more and more comfortable sharing data in order to close the gap between thought and action.

His latest study breaks the online consumer audience into the following four categories, based on their level of comfort with sharing personal information, likes, and needs online:

  1. High-comfort consumers – 12 percent. These are willing to share data with a variety of companies if there is a perceived beneficial effect to the consumer behind the sharing. They believe that the benefits of sharing data are very much worth the price of providing access to their data. These are typically decision makers, shoppers, and early adopters.
  1. Context-comfortable consumers – 27 percent. For these people, data is willingly shared when it leads to more empowerment and better control. Examples cited include biometrics, tool productivity, environmental control, social visibility, relationship data, and brand insight. This is the most rapidly growing segment, based on year-over-year data.
  1. Reluctant consumers – 44 percent. This shrinking group is willing to share location, brand history, and tool productivity data, but is still reticent to share social, biometric, and environmental data. They continue to be more strongly influenced by traditional purchase motivators, such as store discounts, recommendations, and proximity to a retailer.
  1. No-comfort consumers – 17 percent. These tend to be older consumers, with an average age of 52. They neither frequently use nor derive much satisfaction from social media, and would be classified at late adopters of new technology. They still experience feelings of creepiness online, and feel more susceptible to impulse purchases and offers.

Not surprisingly, brand trust plays a big role in consumer willingness to share data online, across all categories. Google scores high for tools, location, and social media data sharing, but not for biometric data. Apple gets great marks for consumer productivity, Walmart for brand data, and Fidelity for finance data. Another key factor is perceived value, such as rewards and discounts.

The concern over the ability of companies to maintain security and a level of privacy of consumer data is still the biggest inhibitor to consumer comfort with digital systems. Continuing incidences of personal identity theft, as well major personal data breaches, including Capital One (2019), Marriott/Starwood (2018), and Yahoo (2014) still weigh heavily on their decision process.

The biggest positive is the inherent ability of digital tools and digital channels to organize and prioritize the natural consumer tendency to meander and try to do multiple things at the same time. Digital channels create queues and allow truly parallel processing capabilities for individuals, despite the daily distractions of life and business. That’s real value for everyone.

With the advent of the Internet of Things (IoT), every ordinary household object has the potential of becoming a digital tool that can communicate personal data to the owner, businesses, and other consumers. Thus it’s both a challenge and a business opportunity for every entrepreneur to expand into new markets and grow their business. Is your business ready to ride the wave?

Marty Zwilling

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Saturday, January 25, 2020

8 Strategies To Optimize Your Business Pace Of Change

Innovation-Blog-ImageEntrepreneurs and startups are big believers in innovation, but sometimes they forget that innovation must be continual to assure long-term success, rather than the one big-bang idea that initiated their journey. By default, innovation in every business decreases over time, and continuous innovation requires ongoing initiatives and measures of customer perceived value.

The long-standing rule of thumb that companies have ten years between significant disruptions was reset a few years ago to five years, according to experts Larry Downes and Paul Nunes. From an insider perspective, 37 percent of CFOs now see the required target as a significant innovation every one-to-three years, according to the most recent IMA innovation survey.

Getting innovation to happen this regularly requires some real disciple and processes. Check out the classic book, “Advancing Innovation: Galvanizing, Enabling & Measuring for Innovation Value!” by Patrick J. Stroh, which details the principles and metrics to follow for fostering innovation in any organization. Here are his key recommendations from my perspective:

  1. Surround yourself with a great team. Get the right players on board and enable them to do great things. Don’t wait too long to swap out players that don’t fit from a skill standpoint or a cultural perspective. Hire slowly and fire fast. Build trust and motivation in your teams consistently, and prepare to be surprised at the speed of innovation.
  1. Ensure that you have good advisors. Every entrepreneur, no matter how experienced, will benefit from a personal board of directors or advisors to guide them in facets of their business. Good advisors will tell you what you need to hear, while friends will tell you what you want to hear. You need both in business, with the insight to tell the difference.
  1. Recognize that customers care about the whole experience. People pay for a great user experience, in finding the right product, buying it, using it, and getting support. Today they demand it or walk to competitors, who are not far away. When is the last time you listened to customers and clients directly, and acted on their feedback immediately?
  1. Target a portfolio of solutions, not just one product. A startup may start with a focus on one solution, but long-term growth and success requires a range of solutions, with annual innovations on every one. Sometimes the hardest thing for companies to do is to retire a cash cow product, before its declining market is reinvigorated by a competitor.
  1. Incent everyone on the team to be an innovator. Normally the best innovations come from the people on the front line, rather than a top manager or designer. Yet most of the people who count are often paid to make things work the way they have always worked. Remove fear of failure, then demand and measure innovation as key to job performance.
  1. Give customers what they want, even if they don’t know they want it. Good people listen intently to customers, apply a knowledge of the industry, and imagine a better experience, based on insights and talent applied to unspoken customer needs. Great innovations always seem obvious and simple to customers, after the fact.
  1. Align the interests of partners and other constituents. In many cases, those that appear to be your competitors can actually be your allies, and through partnerships (co-opetition) and agreements you can create more value together than you can achieve separately. Aligning interests fosters growth and innovation from all constituents.
  1. You can’t improve something if you can’t measure it. Use the Innovation Value Score® approach described in the above book, or any relevant yardstick, to measure and compare with other companies and achieve more innovation value. It’s all about results, benchmarked against strategic plans and a vision of what is possible.

As the pace of change in the marketplace increases, innovation is required at a faster pace in every organization, old and new, to stay competitive. According to an often quoted McKinsey report, 94 percent of existing company executives said they were dissatisfied with their company’s innovation performance, compared to competitors.

That fact should convince you that galvanizing innovation only gets harder as your company grows and matures. Thus it behooves every new startup to build the suggested innovation practices into their culture and organization from the beginning. Catching up later is not a viable strategy for survival.

Marty Zwilling

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Friday, January 24, 2020

7 Lessons For Mobile App Developers To Beat The Odds

wall-breaker-clash-of-clansOne of the quickest ways to become an entrepreneur these days is to develop and publish a smartphone app. The price of entry can be less than $10,000, so the competition is huge and growing rapidly. According to Tim Cook at Apple, there were over 20 million registered developers in 2018. Yet according to other statistics, vanishing few of these ever generate a significant profit.

We all hear about the big winners, such as the game Clash of Clans, which still pulls in over a million dollars a day, and the smartphone version of Skype, which is making money through credits as an extension of the website version. We don’t hear about the remaining several million apps that are mostly free, and garnering only trivial revenue through advertising.

Yet I still recommend apps as a good starting target for aspiring technical entrepreneurs, since they don’t require a large initial investment, and you can learn an incredible amount about the realities of business, without risking a lifetime of effort and several investor fortunes.

I also recommend the app development strategies outlined in the classic book, “Vaporized: Solid Strategies for Success in a Dematerialized World,” by Robert Tercek, who has lived on the digital edge for many years. Here are some ways we both recommend to beat the odds and thrive in today’s app ecosystem:

  1. Sell a digital service through your app. The ideal business model is to establish a direct-to-consumer service that enables you to bill the customer directly. You provide the free app in the App Store that gives subscribers mobile access to your service. After this connection, you need not share the 30% of all revenue collected by the store platform.

  1. Make your app support all platforms. Port every app to all the popular platforms – IOS and Android. Compensate for low profit by aiming for maximum reach. Cultivate a preferred relationship with Apple, Amazon, Facebook, Microsoft, and Google to ensure the best possible placement of your offering.
  1. Offer premium services after user is hooked. Through a free base product, you give the first taste of the service or game away for free, get users hooked, and then convert as many as possible to paying customers. This freemium model has been used for years by web apps. Even a conversion rate of one percent can build a healthy business.
  1. Build your own marketplace platform. This is a tough one to accomplish, but it has paid off handsomely for the first to win in other categories, such as Amazon Kindle and Netflix. To accomplish this move, you must remain studiously neutral on all contributors, and be prepared to fight to preserve your direct relationship with the customer.
  1. Commoditize complementary products. Complements are products that must be bought together in order to be useful, like apps with mobile phones, and fitness products to go with your fitness app. If you want to drive up the demand for your core product, one smart tactic is to drive down the price of all complementary products.
  1. Look for value points to control. No company has more value control points than Google, which spans advertising, e-commerce, social media, video and mobile, as well as a full suite of hardware products. But there are a wealth of other categories, new ones are constantly appearing, and the ecosystem is always shifting. Be aggressive and alert.
  1. Position yourself to capitalize on the next frontier. Information is certain to grow faster than anything else generated by humans, and the Internet of Things (IoT) is a huge contributor. Apps are adept at collecting information and condensing it, whether it be for healthcare, home control, or gaming. Be there intentionally rather than randomly.

Above all, don’t forget to develop a comprehensive marketing and promotion strategy. Just getting an app accepted into the Store won’t get it found and downloaded by your targeted customers. ‘Free’ doesn’t make it stand out when there are a million alternatives at the same price. Promote your app vigorously, facilitate customer engagement, and listen to the feedback.

Marty Zwilling

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Wednesday, January 22, 2020

9 Keys To Finding The Perfect Angel Investor For You

Perfect-angel-investorAs a long-time advisor to entrepreneurs, and a former angel myself, I still find startups confused about the definition of an angel investor, and how and when to attract one. Angels are actually serious investors who invest their own money, versus venture capitalists who invest institutional money, or regular people who invest in crowdfunding. Thus they don’t live or fly above the clouds.

Despite the recent growth of crowdfunding, angels continue to be one of the major sources of financing for new ventures, so it behooves every aspiring entrepreneur to understand who these people are. You need to know why and how they invest, and then focus on the ones who are the best match for your startup. Here are some key points to consider in finding one for you:

  1. Look for accredited angels and groups rather than individuals. There are organizations of angel investors in most major cities, as well as national groups, starting with the Angel Capital Association. Make sure your angel investors in the USA are accredited as having an income of at least $200K in annual income and $1M in assets.

  2. Angels spread their risk by making multiple smaller investments. Typically, individual investments will be less than $100K, but a group of angels may syndicate multiples. Venture capitalists, on the other hand, rarely consider requests below $2M. For amounts needed of less than $10K, consider crowdfunding or friends and family.

  3. These investors are not looking for startups in the idea stage. Their interest is in a business which has proved the viability of a new and innovative product, and even sold a few already, and are ready to scale the business. Speculative ideas, research, and early development won’t appeal to them. For these you should look to friends or crowdfunding.

  4. They are attracted to “squeaky-clean” business images. Don’t expect angels to invest in business ideas that may have legality implications, or appeal to people’s weaker instincts, such as gambling or drugs. They prefer to fund innovation in known and existing business domains, rather than innovations requiring infrastructure or education changes.

  5. Most focus primarily on their own areas of experience. Angels are typically business professionals who have accumulated some cash from their own success and expertise, and they look to leverage that by helping you do the same. Thus they prefer local opportunities, similar to their own, where they meet regularly and contribute face-to-face.

  6. They expect a high return on a long-term investment. That means they are looking to buy a share of a company that can generate real profits over time – not a charity, social cause, or a get-rich-quick scheme. Since they know that most startups fail, their target return is ten times investment, so be prepared to talk cost vs revenue and product life.

  7. Decisions are based on the startup team vs the product. This bias is based on the belief that the right people make all the difference, rather than the right idea. Thus, with angels, early networking with potential investors and successful peers is highly recommended. Lead with your credentials, rather than with your technology.

  8. Document your plan and your financial projections. Angels look for entrepreneurs with the discipline to create a plan, including financial projections, rather than just talk and arm waving. Perhaps your friends and family believe in you, and will provide funding based only on your excitement. For later rounds with VCs, you need the detail anyway.

  9. Set a realistic valuation for your startup to attract angels. Remember than angels are buying a share of your company based on its value today, not some time in the future. A typical valuation for an angel investment is $2.5M, meaning a $500K investment will cost you 20 percent of your company. Successful valuations above $5M are rare for startups.

Above all, remember that angels are experienced business professionals, who have driven some success. They expect you to act with integrity, and always show respect for their position, just as they respect yours, since they were likely once in your position. They probably won’t respond well to hard selling, intimidation, large displays of emotion, or failure to do your homework.

Persistence and learning are seen as virtues by angels, so prior failures and rejection should be viewed as only a temporary setback. The most common rejection response of “come back when you have more traction” means exactly that, so don’t be too discouraged. Most entrepreneurs have found that attracting an angel who can help you is far more valuable than just the money.

Marty Zwilling

*** First published on Inc.com on 01/08/2020 ***

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Monday, January 20, 2020

5 Crowdfunding Approaches To Tempt Every Entrepreneur

Pebble_watch_trio_groupEven if you ignore all the hype around crowdfunding, there can be no doubt that it is a real alternative for entrepreneurs to achieve visibility and funding today. According to a recent article on Thrinacia, there are now aver 600 crowdfunding platforms in existence, currently estimated to add more than $89 billion to the economy at a compound growth rate of 17% from 2019 to 2022.

Yet as I mentor entrepreneurs around the country, it still seems to be one of the least understood approaches to startup funding, with more myths than accredited angels and professional venture capital investors combined. The primary challenge seems to be that the crowdfunding term is used to encompass so many different concepts that everyone is confused.

In fact, perhaps the most important model, equity crowdfunding for non-accredited investors was only legalized via the SEC in 2016, so its impact is still in the early stages. Even with this, crowdfunding today means any one of the following five quite different models:

  1. Rewards model. Many platforms, such as IndieGoGo, allow startups to solicit funding commitments from non-professional investors in exchange for a pre-defined reward or perk, such as a T-shirt or other recognition, but no ownership in the company. The crowd gets the satisfaction of helping, with minimal risk, and no expectation of any high return.

  2. Product pre-order model. With this model, a startup pre-sells their product early, at a cheaper price, in exchange for a pledge. A much-touted early success was the Pebble Watch on Kickstarter, now owned by FitBit, with advance orders exceeding $10 million. Of course, there are thousands of other companies that don’t achieve their minimum goal, requiring all contributions to be returned.

  3. Donation good-cause model. This model facilitates donations to charities and creative projects, and has been around for a long time via sites such as GoFundMe. No startup ownership or financial return should be expected, but contributors can enjoy the satisfaction of furthering non-profits or causes with a passion to change the world.

  4. Interest on debt model. In this model, often called micro-financing or peer-to-peer lending (P2P), people contribute with the intent to create a pool for all to borrow against. This model been popular in many countries for years, where banks loans are not available, via sites such as LendingClub and Kiva. The allure is the ability to get small loans easily, or excellent returns from the interest, but the risks are high.

  5. Startup equity model. In the U.S., only accredited investors can use crowdfunding sites such as EquityNet to buy ownership in their favorite startup. In Europe, other investors can buy equity, with platforms such as Seedrs. Equity investing is very risky, but huge returns are possible if you pick the next Facebook, but failure means your entire investment is lost.

Beyond these models, the crowdfunding term is often used interchangeably or confused with crowdsourcing idea and open source development sites, such as BrightIdea, to get your ideas off the shelf and give you the wisdom of the crowds, or IdeaScale to facilitate the outsourcing of application development in an open source call to others on the Internet.

Other popular sites for startups, including StartupNation and Startups.co are not for crowdfunding, but actually are matchmaking sites between entrepreneurs and professional investors or banks, or incubators. These sites often sponsor pitch contests with small cash prizes for funding, as well as other valuable services to support entrepreneurs.

In fact, entrepreneurs can and do gain from any and all of these approaches, either by achieving some funding, or at least testing their approach and the level of public interest in their startup idea. Smart entrepreneurs often learn the most from their failures, using the feedback to pivot their solutions before squandering a large investment from friends, angels or VCs.

Concurrently, I am seeing an upswing in the number of entrepreneurs and startups, with the cost of entry at an all-time low, and the new focus on entrepreneurship in every university and every community development organization. Since there is never enough money to feed the startup beast, I don’t see crowdfunding replacing or crowding out angels or VCs in the near future.

Marty Zwilling

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Sunday, January 19, 2020

6 Insights To Current Funding Trends For Your Startup

business-super-angelVenture capitalists (VCs) have long been seen as the top of the pyramid for startup funding sources, but in fact angel investors now fund over twice as many companies, according the Crunchbase. A major chunk of this activity is provided by the newer class of “super angels,” who often look more like micro-VCs, except that they are investing their own money.

Examples of some leaders in this space include Ron Conway in Silicon Valley and Jeff Bezos, CEO of Amazon, who each may have over 500 startups in their portfolio. What characterizes them is the number of companies they invest in, as well as the size of their investments (often less than $250,000), and the seed or startup stage where they specialize.

Based on the best evidence I can find, the genesis of this trend and the advantages come from several evolutionary changes in the startup investment industry, and some innovations driven by the recession several years ago:

  1. Venture capital funds are still regaining momentum. Institutional venture capital dispensed in 2019 was down a bit from record highs the previous year, but up significantly over the last few years. Individual angel investors and crowdfunding have been adding to the momentum, some say exceeding VCs in total amount invested.

  1. The cost of entry for tech startups continues to go down. Twenty years ago, it cost several million dollars to launch an e-commerce startup, which can be done today for a few thousand dollars. Mobile and web software apps may cost even less. The large investment amounts preferred by VCs are no longer needed to launch winners.

  1. Some VC firms are bogged down by their own weight. Many have disappeared, and others have forgotten how to be agile and innovative. They have too many highly paid partners, fat fees, an aging corporate infrastructure and difficulty raising money from institutions. Super angels are individuals or small teams using their own money.

  1. VCs are committed to servicing existing portfolios. As lifecycle investment partners, they have become weighted down with portfolios still recovering from the economic downturn. Like big corporations with a heavy investment in existing product lines, it’s hard to stop linear investing to look for innovative new opportunities.

  1. The investment model is changing from hard selection to “spray and pray.” The conventional VC approach of giving a big boost to a few good startups that were born to be great, doesn’t seem to work anymore. Now the model is to seed many good teams with a smaller amount, and find out which ones can execute.

  1. Super angels have greater scope to match talent with a startup. Because of their high visibility and huge portfolios, this new class of investors can match the right talent to the right startup quickly and efficiently with introductions and mergers. This helps the startups with the most opportunity move forward quickly to greater success.

Of course, every new direction has some challenges, so the super angel model isn’t perfect. Here are a couple of concerns and possible negatives to avoid:

  • More startups left in the funding gap. Angels of any size are usually not as capable or interested in multiple rounds of investment, leaving good startups that are not superstars stranded without funding after an initial round or two. VCs tend to carry their partners much longer, in hopes of a big public offering (IPO) that could produce a windfall.

  • Super angels sometimes drive up valuations. Perhaps because of their focus on building a large portfolio, or their competitiveness, these angels sometimes accept valuations that cause later friction while moving to VCs, or even other angel groups. This can cause early investor dilution, lower ultimate returns or leave the startup stranded.

Yet, in my view, every early-stage entrepreneur should be exploring this new funding alternative before approaching VCs. It’s the right way to get money without giving up too much equity or control of your business. Yet, it is important to remember that the most optimistic super angel is looking for a proven business model, rather than research and development, or just an idea.

Marty Zwilling

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Saturday, January 18, 2020

Startups Are Not Just The Realm Of Young Generations

Baby-boomer-generationOne of the biggest myths in the business world is that startups are no place for Baby Boomers, that aging generation born between 1945 and 1964. They couldn’t possibly understand the new social media culture, new technologies, or have the determination to beat their younger counterparts in the market. Yet credible reports on current trends tell us just the opposite.

According to the most recent report from the Kauffman Foundation, the highest rate of entrepreneurship in America shifted a few years ago to the Boomer age group, compared to Gen-X (1965 to1980) and Gen-Y (1981 to 1995). Today people over 55 are almost twice as likely to create successful startups as Gen-Y, age 20 to 34.

Another report from the Pew Research Center confirms that Boomers are still a third of the workforce, equal in size to the Gen-X segment and the Gen-Y segment. Don’t expect them to go away any time soon. Pew says the Boomer demographic is the largest mainstream pool of experienced talent in the market today, and will be for the foreseeable future.

Their trend toward entrepreneurship in that group is sometimes called seniorpreneurship, where people over 50 take the helm of a new leading-edge high-opportunity venture. They include people like Sir Richard Branson, born in 1950, who has founded over 400 companies, and claims to be just getting started.

In fact, they are well-qualified overall, having worked with high technology and computers for at least 20 years, are highly educated, and highly motivated. In addition to being the startup entrepreneur, there are other key roles where Boomers can be a force in driving successful startups, in concert with leaders from Gen-X and Gen-Y:

  1. Early-stage angel investors. Boomer investors are much more likely to get in the game with a high focus on mentoring and give-back, as well as the financial return potential. They want to share your satisfaction in success, maybe as a reward for their own mistakes and learning earlier in life in their own businesses.
  1. Supportive co-founder and executive positions. Every young entrepreneur needs an experienced partner for credibility with investors, and as a trusted cohort for strategy and growth discussions. Often the Boomer is more willing to work for equity, and easily convinced to step aside when revenues reach that next threshold.
  1. Member of the Advisory Board. Every startup needs two or three key advisors who have the domain experience, connections, and complementary skills to guide the founders through those early crises. Boomers are more likely to give you the time and guidance that you need, and give your executive team additional visibility.
  1. Manage customer service. They probably have arbitrated differences many times before in their lives, and know how important it is to remain calm and soft-spoken in the face of emotional customers and processes that are not working. Often a little gray hair gives added credibility to their efforts, and provides a role model for other support roles.
  1. Personnel Manager. This is one of the key roles in a growing new company which can benefit from someone who clearly has experience dealing with people – whether it be hiring and firing, assisting in performance reviews, or dealing with the day-to-day crises of any growing business. All the learning from parenting pays big dividends here.

On the other hand, there are some roles in a startup where Boomers are probably not the best candidates:

  • Constantly-on-the-road sales territory management roles.
  • Software and hardware development architects and designers.
  • Marketing and sales to Gen-Y customers.
  • Labor-intensive roles, including warehousing and construction.

For aspiring new entrepreneurs of any age, this is an opportunity for a win-win situation, with the proper mix of Boomers with Gen-X and Gen-Y employees and executives. It’s time to think again that the domain of entrepreneurs is only for the under-35 crowd.

The large crop of Boomers is only going to get larger as we live healthier and work longer. You too will be one someday, if you are not already. Be inclusive, and let’s continue to make entrepreneurship one of the most fun things around.

Marty Zwilling

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Friday, January 17, 2020

5 Steps To A Winning Personal Brand For Entrepreneurs

entrepreneur-business-rocketAlthough most people believe that being a successful entrepreneur is all about having the right idea, I’m convinced from my years of experience as a startup advisor and investor that’s it’s more about you as a person. If you can brand yourself as someone to remember, and someone who can deliver, I assure you that you will have no trouble finding investors, as well as customers.

So how do you develop that reputation such that everyone believes in you, and customers jump to try your solution first? The key points are comparable to those involved in branding a business, as outlined in the new book, “Be Different!: The Key To Business And Career Success,” by noted business leader Stan Silverman. You have to stand out from your peers and competitors:

  1. Build a reputation for getting any job done, and doing it well. The best entrepreneurs are not just dreamers of the next big thing – they have to be great facilitators and problem solvers. By definition, every successful startup has to be different from the competition, with many unknowns, new challenges to overcome, and new customers to be attracted.

    If you don’t have a successful prior startup to demonstrate your ability, it’s time to be creative. Pull some examples from your private life, prior jobs, or academia, where you demonstrated personal initiative, determination, and results in overcoming challenges.

    It it’s too early to show a track record, it may be time to find a partner who believes in you, and can complement your strength as a thinker. Most successful startups I know were built by a team, rather than a lone entrepreneur, so don’t be afraid to ask for help.

  2. Highlight your expertise and results as a thought leader. These days, with the pervasive presence of social media, blogs, and online access to information, it’s easy to get your message out there, and engage a following. People need to see you as an “influencer,” who is able to sell your new ideas, as well as communicate the future.

    For example, Elon Musk has long been a bold and provocative thought leader on space travel. He used his expertise on rocket ships to sell the future potential in interviews, blogs, and public speaking opportunities, long before he started SpaceX as a company.

  3. Demonstrate honesty and integrity in everything you do. Investors and customers do not want to deal with entrepreneurs or startups whose reputations are tarnished or questionable. For brand image, it simply means truthfully communicating the challenges faced, and then putting in the honest legwork to address those challenges.

    Without excuses or disavowing responsibility, you must deliver on all promises, past and present, pay attention to the common good, and surround yourself with people offering solid character and a positive attitude. Show total respect for all customers and investors.

  4. Show that you are a leader that others want to work for. A little known fact is that potential investors, including myself, often visit a startup to gauge the level of respect and commitment of employees to their leaders. Leadership dissent in the team is the quickest way to kill an investment, and customers will tell you it is the quickest way to kill a brand.

    We have all experienced or heard stories of entrepreneurs that refuse to listen to their team, such as Theranos founder Elizabeth Holmes, when their pin-prick blood test could not be validated, causing a billion-dollar startup to fail and promising careers ended.

  5. Always project a positive attitude of a world of possibilities. Entrepreneurs with positive, but rational, attitudes are supported and move forward with their plans. Those with a negative attitude, including competitor bashing, do not. When starting a business, as we all know, there will be difficult periods, and we want to know you will keep going.

    Investors, for example, listen for the words you use when you are faced with a specific difficulty. Instead of saying, “I have a problem,” you might say, “I am faced with an unexpected opportunity.” Customers want to hear about creative solutions, not problems.

In addition, unlike a business brand, a personal brand is broader than just one business segment. An entrepreneur with a great personal brand, such as Elon Musk, can work in any number of segments influencing people and the market. Your name is your brand to make your business.

The next time you approach someone with a great new idea, make sure you include your brand story as well. At the very least, both together will make a great first impression, and that first impression image will last longer and have more impact than any solution image you can offer.

Marty Zwilling

*** First published on Inc.com on 01/03/2020 ***

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Wednesday, January 15, 2020

10 Goodwill Elements To Raise Your Business Valuation

business-valuationValuing a business based on assets and financial performance is a well-understood process, but every investor knows the real value goes well beyond these parameters, either higher or lower. The key elements of leadership in a company, both individual and organizational, are less tangible, but very critical in setting a market value for investment, acquisition, or going public.

In the investment community, these leadership elements are often called “goodwill.” For early-stage startups, the goodwill component can easily exceed the size of all the financial elements together, or can just as easily mark a company with good financials as not investable.

In his classic book, “The Leadership Capital Index,” Dave Ulrich, a best-selling author, business consultant, and business school professor, provides some real insights and metrics on what makes up the elements of goodwill in the minds of top valuation experts. I have paraphrased his key points here as follows:

  1. Leader personal impact. For startups, the entrepreneur and founder is almost always the face of the company. Investors, partners, team members, and customers implicitly value or devalue a startup based on the leader’s physical presence, emotional identity, social skills, intellectual agility, moral values, and past performance in the domain.

  1. Strategic proficiency. These same constituents are looking for leaders who can create the future – focus forward rather than backward, seem to see around corners, can turn their vision into committed actions, and are able to engage all the right people into bringing the future into the present.
  1. Execution leadership. Everyone wants leaders who get things done and meet commitments. Leaders are judged on key elements of execution, including a focus on priorities, ensuring clear accountability, managing decision making, mobilizing others, adapting quickly, and communicating execution urgency.
  1. People relationship focus. No leader can do the job alone, so investors assign great value to leaders who take care of their people. Positive people management elements include good communication skills, building strong teams, finding time for coaching, strong people relationships, and facilitating growth and succession.
  1. Leadership brand development. Every business and brand has unique requirements to fit into their market environment. Leaders are assessed for their ability to fit into the brand community, embody the values required, maintain the right strategic priorities, and deal with the current organization stage.

In addition to goodwill justified by a great leader and an outstanding team, investors will use their due diligence process to assess the organizational structure and effectiveness as well. The key parameters of this evaluation will always include:

  1. Strength of the business culture. Research has confirmed that culture is a primary driver for financial performance, customer experience, and team productivity. Companies are valued based on their ability to create and align their people with the desired culture, and their ability to communicate that culture to customers, suppliers, and partners.

  1. Focus on talent and people growth. Investors want organizations that manage people talent and growth, through good hiring, performance feedback, development on the job, and building commitment. They look for the use of talent analytics, such as productivity per employee, as well as the practices and attitude toward employee satisfaction.
  1. Performance accountability processes. Good performance management is more about rewarding desirable behavior than penalizing bad performance. Processes must be in place to clearly define standards, differentiate performance, link to consequences, provide rewards for accountability, and provide regular follow-up.
  1. Modern information management tools. Power, and the ability to influence others, comes from knowledge. Having information is more than access to data; it requires knowing how to synthesize, interpret, and act it. Organizations are assigned value by how well they take advantage of the best technology, and turn information into action.
  1. Stable and friendly work environment. The most valuable organizations are able to govern their work environment through innovation, to cope with the increasing pace of change in culture and the marketplace. This means adapting to social trends, new technologies, economic conditions, regulatory requirements, and worker demographics.

Investing in strong leaders, including entrepreneurs such as Steve Jobs, or corporate icons such as Jack Welch, has long been recognized as a key to reduced risk, and the key to high valuation on the side of the seller. That’s one of the best reasons I know for every business owner to up his game on leadership and organizational excellence. How much goodwill can you and your company command today?

Marty Zwilling

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Monday, January 13, 2020

7 Personal Attributes That Attract Investor Attention

Business man in suit ready for meetingAs a startup mentor, I’m always amazed that some entrepreneurs seem to be an immediate hit with investors, while others struggle to get any attention at all. Finally I realized that venture capital and angel investors are actually humans, despite some views to the contrary. As with most business and personal interactions, first impressions tend to become lasting ones.

Investors know that building any business is a challenging and risky proposition, so they start with entrepreneurs who give a first impression of passion, commitment, and work ethic to succeed. There is no room in this realm for negativism, excuses, or lack of confidence. People like Elon Musk, who have the energy to work 100-hour weeks for years, will always attract investors.

But the right personal characteristics are just the beginning. Successful businesses are measured by their results, so relevant skills, attention to details, and problem-solving abilities are critical. Early in the relationship, every investor instinctively looks for some key indicators of the ability to get results, like the following:

  1. Communicates well in every business medium. Some entrepreneurs love to talk and produce videos, but hate to write anything down. Others send investors email and business plans in all uppercase or no punctuation. Effective communication requires real listening, as well as talking. Message delivery must be customized for each investor.
  1. Surrounded by the right people and track record. It takes more than one person to build a business, so the lone entrepreneur, without support from any visible team, advisors, partners, or potential customers, will not attract investors. Of course, previous successes provide more direct evidence of a network of the right people.
  1. Exudes integrity, humility, and stability. Even business plan has strengths and weaknesses, and the best entrepreneurs are able to recognize the difference. They seek to establish win-win relationships with all partners, including investors, and treat them all as trusted advisors, rather than win-loss opportunities.
  1. Registered patents and other intellectual property. From an investor perspective, understanding and acting early to establish a sustainable competitive advantage, and barrier to entry, is the best assurance of a financial return. Being the first mover or lowest cost is not a good long-term strategy.
  1. Already set and achieved initial milestones. Contrary to popular belief, most investors are not looking for entrepreneurs who are desperate for funding. They prefer to see a rational staged plan, already in progress, with some checkpoints achieved, as well as future ones planned. A proven business model, ready to scale, is particularly attractive.
  1. Evidence of adaptability and flexibility. A strategy of learning and willingness to pivot, based on market feedback, is a great survival skill and attitude, cherished by investors. Rather than hide seemingly non-productive gaps in your work to-date, investors look for logical actions, and iterative small steps that could be quick to market or quick to fail.
  1. Expert in your chosen domain. Many key insights to success in any business can’t be learned from books or the Internet. There is no substitute for experience and trained skills in the business area you are attacking. In this context, investors are attracted to thought-leaders visible on social media, and people with strong technical credentials.

By definition, entrepreneurs need to love the art of the start, and that love needs to come across as part of the first impression you deliver to any investor. Since your product or technology may still be in the early stages of development, the investor in actually investing in you, and your previous achievements, as much as your current startup.

My advice is to start your networking early with potential investors, to establish a relationship before they see you as an entrepreneur asking for money. The strengths of those early relationships can override all of these results indicators, and let you fly with the angels without a second look when the time is right.

Marty Zwilling

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Sunday, January 12, 2020

10 Attributes That Make You An Entrepreneur To Follow

Airbnb_Co-founder_and_CEO_Brian_CheskyPeople who have been followers too long as an employee don’t realize how hard it is to be a leader. Every new entrepreneur has to initiate the right actions to be perceived as a leader in their chosen business domain by their team and by their customers, or the road to success and satisfaction will be lost along the way.

Driving these actions are some basic principles that entrepreneurial leaders, such as Airbnb CEO Brain Chesky and LinkedIn CEO Jeff Weiner, seem to have learned early. These have helped them build trust and confidence among team members, and effectively sell their message to partners, investors, vendors and customers.

If you want to be like them, it’s time to take a hard look in the mirror to see how many of these actions already show in your persona, and which need a bit more of your focus and learning:

  1. Ability to communicate clearly where you are going and why. This requires that you first know who you are and what you stand for and have a vision for change. Then you need to be willing to communicate that vision to everyone around you. People won’t follow you if they have no idea where you are headed and why it’s good for them as well.

  1. Feels a passion and commitment to the cause behind your business. This conviction is what motivates everyone around you to their best efforts, and keeps them going in hard times as well as good. Building a business is harder than it looks. Seth Godin said that “the average overnight success takes six years,” and he is an optimist.

  1. Can demonstrate domain expertise and experience. In any business domain, there is no substitute for skills acquired by personal experience to supplement any academic training and the Internet. You have to lead by example, setting a personal standard for competence for all to follow if you intend to lead your competitors and customers.

  1. Constantly strengthening your network of relationships. No entrepreneur can build a business alone. Your network of connections needs to grow with you and your business. That only happens if you take an active role in your community and relevant business associations with like-minded people. Make an honest effort to help others.

  1. Willingness to make timely decisions and take action. Remember that a good decision made early will more likely save your business than a better decision made later. In general, any decision is better than no decision. Smart entrepreneurs take reasonable time to consider alternatives, and then move forward, never looking back.

  1. Practices self-discipline and calm predictability. People don’t like to follow a leader who is unpredictable, inconsistent and prone to daily changes in direction. Authentic leaders are willing to open up and establish a connection with everyone around them. They build trusting relationships that result in loyalty and commitment from others.

  1. Encourages innovation and out-of-the-box thinking. In business, this means fostering a mindset of creativity, risk-taking and continuous improvement. Don’t wait for competitors to force the need for better products, lower prices and better customer service. Reward failures as well as successes if the result is a lesson that advances the company.

  1. Allocates adequate resources to overcome constraints. Hoping for good luck and applying pressure is not leadership. Being able and willing to size and allocate the resources to win the small battles will ultimately win the war. This means hiring the right people, providing training and tools, and improving systems to overcome challenges.

  1. Incents business growth and people's well-being. As a role model, you must continuously upgrade your own skills, be alert for new developments and hone your listening ability. It means rewarding team member growth, no punishment for failures and opportunities for success. This applies to suppliers and business partners as well.

  1. Always accepts responsibility for business actions and results. Entrepreneur leaders don’t need excuses, like a down economy, bad timing or demonic competitors. Every company and every one of us makes mistakes, which are a normal consequence of tackling new business challenges and unknowns.

The good news is that no one is a born leader -- all of these habits and mindsets can be acquired by learning and a determination to improve. Leadership doesn’t come with success, but success does come with leadership. Don’t wait for someone else you can follow -- you want your team, as well as customers, to follow you.

Marty Zwilling

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Saturday, January 11, 2020

7 Key Strategies To Ensure Long-Term Customer Growth

business-chart-growthIn my experience working with entrepreneurs, once they feel they have a winning formula for their business, they are often hesitant to change or update it. They forget that adapting their company and themselves as their customers evolve is the key to long-term survival. Think of Blockbuster and Toys ‘R’ Us, both of whom missed customer changes and the move to online.

Every business owner needs to plan to reinvent their business regularly, or their competitors and their customers will make them obsolete. I’m not talking about just making incremental improvements in their products and processes, but more fundamental changes to the business model, such as the following:

  1. Announce a new market launch that fits your core competency. Every recognized brand, including Sears and Nintendo, need to show new life and vibrancy on a regular basis to keep the attention of new generations and existing customers. Of course, it’s smart not to stray too far from your core competency for credibility and risk reduction.

    For example, Uber recently made the move into food delivery with UberEATS. By drawing on the current network of drivers and the app technology it already has in place, UberEATS could be a major competitor for food delivery services such as DoorDash.

  2. Create an overt strategy to react to emerging customer trends. Remember when you were a startup? You didn’t wait until a new market was totally proven before entering. You always need an element of your organization whose mission is to actively look for early markets, and a process to test solution viability with real customers in the market.

    Don’t be the next Xerox who totally missed the personal computer market, even though they had the technology and the processes well before Apple, IBM, and others. They were successful with business computers and technology, but didn’t see the change.

  3. Expand into key new sales and delivery channels. Today the Internet is the best example of a new sales and delivery channel that has transformed many businesses, and killed others. For you, the future could be in using distributors, licensing to other brands, or international subsidiaries. When was the last time you tested on of these channels?

    Apple is an early example of adding a channel to expand, to become a “click-and-mortar” retailer, meaning they operate both physical and online stores. This were done in a complementary fashion to provide support and education, and not undermine sales.

  4. Continually update your team with new people and technology. While fully utilizing the skills of a proven team, it’s also critical that new blood and new technology be brought in regularly to challenge your norms and expectations. Changing times calls for new skill sets, insights, and new cultures. You don’t need people fighting for status quo.

  5. Look and act on ideas from your best and brightest within. These are the people who really know your strengths, and the interests of your customers. In addition, if you don’t listen to and provide new challenges for them, they will leave and become your toughest competitors. Not every initiative will succeed, but a culture of change is critical.

  6. Enlist outside advisors who tell you what you need to hear. We are all guilty of being too close to an issue, or harboring bias against change. Thus smart business leaders proactively seek outside board members and advisors from other customer domains who can stretch their thinking, and give critical feedback on the existing strategy and actions.

  7. Use outside investment and acquisition to expand your scope. Even if your business success so far has been based on bootstrapping, it may be time to look to institutional investors to help you with acquisitions and new initiative funding. Their insights will broaden your view, and enhance your ability to keep up with a rapidly changing market.

Building a successful business is not a one-time effort. Long-term success and vitality requires a constant focus on finding the new magic in a new marketplace with new customers. What worked for you yesterday probably won’t keep you alive and competitive tomorrow.

Standing still is actually falling behind. What have you done lately to reinvent your business in the eyes of your customers?

Marty Zwilling

*** First published on Inc.com on 12/20/2019 ***

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Friday, January 10, 2020

10 Ways For Entrepreneurs To Enhance Their Leadership

leadership-entrepreneurMost new entrepreneurs don’t anticipate the learning burden of being the leader, including the sense of loneliness and isolation at the top. People outside the team can’t relate to the pressures of “the buck stops here,” and everyone on the team assumes that they are the primary ones under pressure to deliver. Even in a single entrepreneur startup, the leader carries a heavy weight.

This unexpected burden often results in a dysfunctional startup, as the entrepreneur reverts to micro-management, burnout, or even grandstanding to get some attention or sense of direction and feedback. Those who have big egos often fall into the use of intimidation, edicts and even deception. Of course, that only leads to antagonism and further isolation.

As with other challenges, it takes effort and a special focus to lessen the burden and avoid the loneliness of being a founder or top executive. Here are some key approaches endorsed by successful entrepreneurs and leaders to stay healthy, and be a respected leader:

  1. Seek guidance and affirmation from your peers. Every business domain has organizations of peers, such as Vistage or Entrepreneurs’ Organization (EO), where entrepreneur leaders can find and give support, and resolve problems with no jeopardy among like-minded leaders who face similar challenges.

  1. Actively solicit input from trusted members of your team. Even if they don’t see you as a peer, it’s your view that counts here. Don’t isolate yourself. You can always learn from the experience of others on your team. If your startup is a one-man show, there are outside advisors who can offer you an unbiased view as a team member.

  1. Keep your family and friends in sync with you as peers. Their feedback and perspective is vital to your health and success, if you maintain a balance between business and personal. Their guidance will help to keep you centered and effective. The best leaders learn to sometimes say no to work, and learn how to mix work and play.

  1. Separate your work and play environments. Everyone needs a regular change of scenery and separate time to switch modes from work to external challenges. These outside activities may be sports, non-profits or family activities where you can change roles, rely on someone else for leadership, or simply relax and recharge.

  1. Interact with customers in a non-pressure situation. Social-media vehicles, including Twitter and LinkedIn, allow interactions with hundreds of people, or one on one, without the pressure of your leadership role. Use the opportunity to anonymously test new ideas and strategies, with direct and unfiltered feedback.

  1. Proactively schedule business networking opportunities. Take the initiative on a regular basis to ask for time with peers or even competitors that you respect, without waiting for them to come to you. This not only counters isolation, but helps balance your business focus, and keep you up to speed on new developments in your industry.

  1. Actively improve your charismatic image. Charisma is that magnetic energy implying confidence and strength, arousing loyalty and admiration from others. Charismatic leaders don’t succumb to loneliness, and develop a wide range of positive habits. Key elements of charisma are listening actively to others, and reading body language.

  1. Inspire and empower your team members. The more you empower others in your organization, and the better you communicate your vision, the more they will be with you at the top. You won’t be lonely when you feel the team is with you every step of the way. This will strengthen the business for all of you, as well as relieve your burden.

  1. Share your fears and challenges with selected insiders. Too many entrepreneurs like to pretend that they have it all together, all the time. It’s healthy and productive to be more transparent with trusted team members and advisors. This leads to sharing progress on struggles, and discussing ways of mitigating business problems.

  1. Join your board of advisors, rather than contend with them. Accept that a good board will tell you what you need to hear, rather than what you want to hear. They really are on your side, so there is no need to be defensive or isolate yourself. Join them in actively looking for ways to lighten your burden at every opportunity.

More focus on improving your personal motivation is also a clear antidote to the burden of leadership. Of course the best antidote is incremental success and seeing real results, giving you the positive feedback that we all need. Make your leadership role the source of pride and accomplishment that attracted you to the entrepreneur lifestyle in the first place.

Marty Zwilling

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Wednesday, January 8, 2020

5 Strategies Recommended For Successful Bootstrapping

Bootstrapping-yoour-businessAs an advisor to entrepreneurs, I often hear the desire to run their own company, to avoid having someone else telling them how to run the business. They then ask me to help them find investors who can provide the funding they need. They don’t seem to realize that investors can be the most demanding bosses your ever had, since it’s their money you are using and potentially losing.

I have to explain that if you really want to exercise total control of a new venture, they you need to do it without external investors, bootstrapping your way with your own resources. Sure, this may limit the type and scope of your startup, but it’s the only way to get the control and freedom you want.

Although I’m a big fan of bootstrapping, I still recommend you use the same business discipline in starting and running a new company, as you might be forced to use with investors:

  1. Create and use a formal Board of Directors early. Although technically a board of directors or advisors is never required with bootstrapping, a well-experienced group of two or three outside advisors can be worth its weight in gold, to keep your focus on the right targets, and prevent you from making strategic and operational mistakes.

    I recommend that you keep your board diverse in age as well as scope of experience. Avoid family members and close personal friends. Although board members should be compensated to assure commitment, I suggest company shares rather than cash.

  2. Define a set of management objectives and milestones. Even if you don’t have a board of directors, you need to set some targets for yourself, so you can measure progress and declare success for both you and your team. For focus, the list should be short, maybe five or less, and updated on at least an annual basis, based on progress.

    In the first five years, these objectives should normally include when you intend to first become profitable, a scaling strategy and target, some short- and long-term milestones, and the key performance metrics you will use to steer and manage the business.

  3. Personally manage cash flow processing and procedures. With bootstrapping, you don’t have other people’s money to spend, and probably not as much of it. That means not delegating spending decisions, personally handling inventory decisions, and following-up on overdue receivables. You will also need a line of credit for financing.

    I strongly advise you create a separate bank account and credit card for your business, even though it is all your money. Use of a business credit card is actually encouraged, since this automatically provides the detailed reports and line of credit you need.

  4. Update board members and key employees regularly. If you want employees to stay committed, don’t keep them in the dark on status, progress against milestones, and the health of the business. For directors, your credibility and their ability to help is at stake. Running a business is not a job for an introvert who chooses to hide in an office all day.

    By law, board meetings may only be required once a year, but for small companies I recommend a frequency of at least quarterly, if not monthly. Email status reports to board members and key employees should be delivered more frequently, as key events unfold.

  5. Never keep bad business news a secret from your team. Too many small business owners try to spare their board members and employees any pain by not acknowledging key negative company, customer, or even outside events that have a potential substantial impact on the business. They find out the news anyway, and it only hurts your credibility.

    In reality, people assume the worst when they don’t hear from the leader, and may assume you are part of the problem. What they need and want to understand is the why, and what they can do to help. This transparency also keeps good people from leaving.

For many, bootstrapping may appear to be the hard way to start a business, but most entrepreneurs I know who started this way are happier and more relaxed than those who have to deal regularly with investors. In addition, by bootstrapping, you own all the gains from your efforts, instead of only a share.

Contrary to popular perception, a large majority of the fastest-growing private companies in the U.S. are still bootstrapped today, often starting with less than $10,000 of personal funds. So before you get frustrated by the “advantages” of outside investors, I recommend that you take a hard look at what you can really do with your own resources.

Marty Zwilling

*** First published on Inc.com on 12/18/2019 ***

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Monday, January 6, 2020

5 Startup Financial Questions Every Investor Will Ask

startup-financial-modelIf you think that financial modeling for a new business is arcane magic, limited in value to financial wizards and professional investors, then you have been listening to the wrong advisors. In reality, a simple Excel spreadsheet model customized around your assumptions can save you hours and avoid a wasted expense in validating alternative vendor and marketing decisions.

The way to start is with a sample financial model, available from many sources on the Internet, such as over 200 downloadable free from the Corporate Finance Institute website. Another alternative is to build one yourself, starting with a few formulas to extrapolate early revenues and expenses into the five-year projections normally requested by banks and investors.

Don’t try to build the “ultimate” business model, for all possible alternatives, in multiple business domains. For maximum value with the least effort, focus on only the “what ifs” that are the highest priority in your mind for your own startup. In my experience, the top candidates will include the following:

  1. What if you have to cut your targeted price? Pricing is always a tricky issue. Vendor costs are subject to change, customers are fickle, competitors come out of the woodwork and the economy can take a downturn. You need to quickly calculate the long-term impact on profitability of pricing and business model changes.

  1. What if you need to change your market size and volume projections? The manual calculations to translate market assumptions into costs, volumes, expenses and net return are massive. Yet they can be done by a simple financial model in a few milliseconds. Investors will test your savvy by asking where your business breaks.

  1. What if your growth and scaling projections are too aggressive? Most entrepreneurs realize that doubling their revenue each year puts them in a premium category with investors, so that may be your first target. But targets need to be adjusted as the reality of early returns sets in. Projections you know to be wrong won’t help you.

  1. What if I offer you only half, or double, what you ask for? With a financial model, it’s relatively easy to apply these amounts to your marketing, manufacturing and administrative costs, as well as business volumes, to predict the impact. Your credibility with investors, and your confidence in any request, depends on these answers.

  1. What if your customer acquisition cost assumptions have to change? The cost to acquire a customer, or traffic to conversion ratios, are critical to the success of most startups. This can be projected top down from market share assumptions, or bottom up from actual costs and sales results.

The time to start building your model is even before you incorporate the business and spend real money on building products. Just like planning a long trip with your car, you need to know where you are going before your start, or you probably won’t get there. If you are not computer literate, it’s never too early to find a partner or learn tackle this critical element of every business.

The financial model obviously has to be built in concert that the overall business and pricing model that you are implementing. The most common business models these days include the subscription model, freemium model and ecommerce. Each has a different set of variables for sales, revenue flow, marketing costs and personnel.

Creating a financial model is perhaps the only way for you to see key areas of strength and weakness in your business, before the money is spent and it’s too late to recover. It’s a great learning experience and is not rocket science, so you can do it yourself. But don’t hesitate to ask for help from a professional if you need it.

You may be surprised how clear the relationship appears between product pricing, cost and customer count. You will quickly understand the old adage that if you lose money on every customer, it’s hard to make it up in volume.

Marty Zwilling

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Sunday, January 5, 2020

8 New Ways To Focus On Customers For Trust And Profit

Zappos-customer-centricAs an advisor to entrepreneurs, I find that I often have to remind them that the world of customers has changed since they started their last business. Customer expectations of a relationship and personalization are stretching every business today, and pervasive use and confidence in social media by customers can override all your image building and marketing messages.

Of course, part of the change is that Gen Z (born after 1996) now outnumbers the Millennials (born after 1981). But even the older Boomers have learned to use technology and social media as the source of expectations from your business, more so than your own traditional marketing.

I’m not suggesting that you abandon traditional advertising and image building efforts, but definitely it’s time to supplement them to address the following changes that I recommend:

  1. Meeting next generation expectations is key to survival. Pushing yourself on customers by touting features and price doesn’t work anymore. Today’s customers want to be pulled to you by the positive feedback from others, and the positive image you present through good deeds, like Patagonia’s work with environmental groups.

  2. Use analytics to see why customers are buying, as well as what. Most businesses use big data to analyze past transactions for volume and location, but they now need to look deeper. I believe it’s time for analysis of social media, and more detailed attention to customer feedback, complaints, and testimonials to better focus your offerings sooner.

  3. Pursue a customer-centric strategy in everything you do. Customers will remember you, and come back, if all their interactions feel painless and personalized. We’ve all been frustrated with businesses that have multiple waiting lines, treated us impersonally, and made simple things complex. Rethink every process from a customer perspective.

  4. Make customer trust the heart of your business model. Although customers today are comfortable providing personal information in return for a better experience, they are also quick to write you off if you misuse the data, disclose it, or use it to push irrelevant products. Trust requires that you have a strong privacy policy in place, and use it.

  5. Regularly ask your customers what they think and why. Start with employees and executives who are willing to really listen to customers, and make them do it regularly. Supplement this feedback with more formal modern satisfaction surveys, like the Net Promoter Score. Yet all of these do very little unless you follow-up and act on the input.

  6. Use new technology to personalize and expedite. Too many businesses tolerate old systems, which may be slow or require extensive typing, rather than upgrade to devices that can move around the store, or identify a customer by name and interest, rather than a customer number. Make shopping a satisfying experience, whether online or in-store.

  7. Hire, train, and reward employees who are customer-centric. This process has to start at the top, and extend through all levels of your organization. Most importantly, total integration of all groups is the key to memorable customer experiences, with measurements and rewards aligned accordingly.

  8. Walk in your customer’s shoes to check all interactions. Periodically, you personally, as well as all key people in your organization need to accompany real customers as they interact with your business. You need to experience first-hand what their needs are at each interaction, how well you meet them, and where opportunities for improvement lie.

Most importantly, don’t get complacent. If you think your business has already turned the corner, just remember that customer expectations, competitors, and economic conditions will continue to turn corners, probably at an ever-increasing rate. Your challenge is to keep up, without jeopardizing your ability to remain financially healthy and keep their trust.

Both Amazon and Zappos are prime examples of brands that are customer centric and have spent years creating a culture around the customer and their needs. Not only does focusing on the customer make sound business sense, but research indicates that customer-centric companies can be up to 60% more profitable. How far have you come along this spectrum?

Marty Zwilling

*** First published on Inc.com on 12/16/2019 ***

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