Monday, March 30, 2020

10 Startup Practices With A Proven Record Of Failure

startup-failure-chartUnfortunately, many entrepreneurs seem to prefer to fail their way to the top, rather than do some research and learn from the successes and mistakes of others. It seems to be part of the “fail fast, fail often” mantra often heard in Silicon Valley. As an advisor to many startups, I’m convinced it’s an expensive and painful approach, but I do see it used all too often.

In general I try to focus on the positives and tell entrepreneurs what works, but sometimes it’s important to reiterate the common things that simply don’t work. I remember a classic book by MJ Gottlieb, “How To Ruin A Business,” that highlights failures. He humbly outlines fifty-five of his own less-than-stellar business anecdotes over a career in business for all to see and avoid.

Here is my selection of the top ten things to avoid from his list that I have seen lead to failure most often. I’m sure each of you could add one or two more from your own experience, and I’m desperately hoping that together we can convince a few aspiring entrepreneurs to avoid at least one practice that lead to losses and suffering:

  1. Spend money you don’t yet have in the bank. In the rush of a startup, it’s tempting to start spending the money you expect any day from a rich uncle or a major new customer. But things do go wrong, and you will be left holding the bag. It’s not only embarrassing, but one of the quickest ways to end your entrepreneurial career.
  1. Open your mouth while in a negative emotional state. Many entrepreneurs have destroyed a strategic alliance, an investor relationship, or lost a key customer by jumping in with harsh words after a bad day at home or at the office. If you don’t have anything nice to say, keep quiet and wait for another day. You may be dead wrong.
  1. Over-promise and under-deliver. Always manage expectations, and always under-promise and over-deliver. As a bleeding-edge startup, you can be assured of product quality problems, missing business processes, and customer support issues. Use the rule of “plan early, quote late, and ship early,” to be a hero rather than a zero.

  1. Create a market you can’t supply and support. If your product is really new and disruptive, make sure you have supply to meet the demand at rollout, and a patent to prevent others from jumping in quickly. Too many entrepreneurs have had their new positions in the marketplace taken away by competitors and others with deep pockets.
  1. Count on someone who offers to work for free. As a rule of thumb, expect to get exactly what you paid for. People who work for free will expect to get paid soon in some way, or they may take it out in trade, to the detriment of your business. Student interns are an exception, since their primary objective should be learning rather than money.
  1. Underestimate the importance of due diligence. No matter how good a supplier or investor story sounds, it is not smart to skip the reference and credit checks. Visits in person are always recommended to check remote office and production facilities before any money is paid up front on a contract.
  1. Grow too quickly for your finances and staffing. Growing quickly, without a plan on how to implement that growth can be a disaster. Learn how to reject a big order if you are not prepared to handle it. It takes a huge investment to build large orders, and large customers are the slowest to pay. In the trade, this is called “death by success.”

  1. Be confused between working hard and working smart. In business (as in life), you should never reward yourself or your team on the quantity of time spent, rather than results achieved. Quality works at a thousand times the pace of quantity. Prioritize your tasks, take advantage of technology, and constantly optimize your processes.

  1. Be afraid to ask for help, advice, or even money. Entrepreneurs often let pride and ego stand in the way of leveling with trusted friends and advisors. The advice you don’t get can’t save your company. I always recommend that a startup create an advisory board of two or three outside experts, who have connections to even more resources.

  1. Rely on a verbal agreement in business. Get every agreement on paper early and always, put a copy in a safe place, and have the agreements updated when people and environments change. People come and go in every role, and there is no such thing as institutional memory. People only remember the agreements which benefit them.

If all these failures seem intuitively obvious to you, why do I see them repeated over and over again by new entrepreneurs? Perhaps it is because entrepreneurs tend to let their egos cloud their judgment, they don’t like to be told what to do, or because there is no single blueprint for business success.

The good news is that, I continue to see articles with evidence that entrepreneurs are happier and healthier than their employees, or even most other professions, regardless of how much money they make. even with the pitfalls outlined here. I suspect that most of these have failed their way to this top satisfaction.

Marty Zwilling

0

Share/Bookmark

Sunday, March 29, 2020

How To Change Your Perspective And Create Innovation

turn-on-innovationIn today’s fast moving world of business startups, learning trumps knowing every time. What established businesses know through experience keeps them from looking for the new and innovative ways to do what they do better, cheaper, and faster. I’m convinced that’s why most mature companies are slowing down or buying their innovation through acquisition, rather than building it.

In her classic book, “Rookie Smarts,” Liz Wiseman, one of the top thought leaders in business, amplifies this point as it relates to hiring and cultivating the curious, flexible, youthful mindset in keeping a mature company young and competitive, as well as keeping experienced employees more productive.

She outlines four distinct ways that business people doing something for the first time, whether they be entrepreneurs, or people in a new role in a larger company, tend to think differently than experienced veterans. With my focus on startups, I can translate very easily how her points lead to more innovation even in the entrepreneurial environment:

  1. Maintain an unencumbered mind. True entrepreneurs, like backpackers, are ready to explore new terrain, more open to new possibilities, and don’t get stuck in yesterday’s practices. They tend to ask the fundamental questions, see new patterns, and notice the mistakes of others. They are not afraid to act boldly, and tend to recover quickly.
  1. Seek out experts and return with ideas and resources. Startup founders need to be more like hunter-gatherers, seeking out experts and trying new ideas to address their challenges. They are not entrenched in their domain, and don’t look for data that confirms what they already know. They don’t hesitate to disseminate the knowledge to their team.
  1. Take small calculated steps, moving fast and seeking feedback. Experienced business professionals tend to take big steps, move at a comfortable pace, and are not on the lookout for changing conditions. Entrepreneurs have to be like firewalkers, take a risk, move quickly one step at a time, searching for milestones on the way to success.

  1. Improvise and work tirelessly while pushing boundaries. Great entrepreneurs, like pioneers, work hard, keep things simple, and focus on core needs. They don’t have a comfort zone or protocol to fall back on. They assume that new tools and structures will have to be built along the way. Progress on the learning curve is their satisfaction.

But even as an entrepreneur, you can fall back too quickly on prior experience, or settle into habits that are too comfortable. Here are some things we all need to do change perspectives and learn to learn all over again from time to time:

  • Transport yourself in time and place to your first professional role. Remember how you felt then, what you did, and how you approached work. Use this insight to reset your own thinking, and to provide great leadership guidance to other members of your team.
  • Multiply your expertise with additional experts. Avoid the temptation to jump in first, and consult other experts to bring new insights into the challenge at hand. Don’t give up until you have found new patterns to an area you thought you knew.
  • Reverse the learning role with new team members. By asking a junior colleague to mentor you, you will more likely hear new approaches or technologies and get new insights on your customer base or business challenges.
  • Expand your professional network to new groups. Actively look for people with views contrary to your own. As you change the stream of information and consider alternative views, your thinking will expand.
  • Take a step back and remap your terrain. Try to visualize your domain the way a newcomer would see it, without the filters you have already built in your mind. Map out the current players, rules of the game, cultural changes, and constituent alignments.
  • Swap jobs with a colleague for a day. Use the exchange to gain new business and customer insights, and to formulate the naïve questions that a newcomer might ask. The swap will be an exciting learning experience for both of you.

True entrepreneurs thrive on the experience of learning, maybe more than the experience of success. That’s why the best entrepreneurs I know can hardly wait for a chance to exit their current startup as it stabilizes, and start again down a less familiar but new learning path. Once you stop learning, you stop having fun, and you stop succeeding.

Marty Zwilling

0

Share/Bookmark

Saturday, March 28, 2020

7 Key Culture Elements That Drive Value In A Startup

office-business-drive-valueAs an entrepreneur, it’s never too early to set the culture you need for a thriving business, as well as thriving employees, customers, partners, and vendors. In fact, in my experience, cultures are very hard to change, so if you don’t get it right the first time, the road ahead will forever be difficult. “The Art of War” culture as an analogy for business doesn’t always work anymore.

I’m seeing more and more business success stories like the one in the classic book “Uncontainable: How Passion, Commitment, and Conscious Capitalism Built a Business Where Everyone Thrives” by Kip Tindell. He is the Founder of the very successful Container Store, while still making Fortune magazine’s 100 Best Companies to Work For list for seventeen consecutive years.

He offers a set of seven principles and values for his ultimate win-win philosophy and harmonic balance among all stakeholders, as a roadmap for any company to develop a profitable, sustainable, and fun way of doing business. I recommend that every aspiring entrepreneur and serious business professional take each one of these to heart from day-one of their startup:

  1. Talent is the whole ball game. When you surround yourself with hugely talented, passionate, dedicated, and genuinely kind people, you will succeed in whatever you do. Tindell’s mantra is that one great person is equal to three good people. Start with only the very best people, demand excellence, and train them to stay ahead of the pack.
  1. Craft mutually beneficial relationships. This requires spending the extra time needed to really get to know your employees, vendors, and customers, and letting them get to know you. Know the issues they face, and search for ways to help them, make them happier, more productive, and more profitable. The result is more win-win than win-lose.
  1. Reframe selling as an activity that improves customer’s lives. If you get to know your customers well enough, you can provide solutions that make selling and service the same thing. It’s a win-win deal that keeps customers coming back, helps your company, and incents customers to bring in their friends through word-of-mouth and social media.

  1. Great communication is the best leadership. How can people trust their leaders if they’re not being fully informed about what’s at stake? The objective is to communicate everything to every person. It starts with daily ongoing communication between team members, and extends to the top with executive updates and informal listening sessions.
  1. Simultaneously deliver the best selection, service, and price. Stick with what you know and do it better than anyone else. Keep is simple, and think solution rather than item-based, for the proper perspective. The best relationships with vendors give you price and selection leverage, and the best service relationships bring customers back.
  1. Team members must act intuitively, based on training and motivation. Intuition is nothing more than the outcome of previous training and experience. More training on your solutions and customer needs means better intuition and anticipation of how to help customers. Happy and motivated employees won’t be afraid to use their intuition.
  1. Build and maintain an air of excitement in your company. Faithfully following the first six principles will build that sense of excitement where everyone wants to be there and feels the sense of energy, customers and employees alike. You can’t force that feeling of warmth and caring, it has to be authentic and come from the hearts of talented people.

The great management guru Peter Drucker once said, “Culture eats strategy for breakfast.” Today company culture is more important than ever in driving strategy and value, not the other way around. A great culture in an entire business infrastructure of executives, employees, vendors, and customers working together to achieve a common goal of everyone thriving.

No leader can “create culture,” but they must create the environment where the desired culture can emerge and flourish. Leaders do this by driving values, values drive behavior, behavior drives culture, and culture drives performance. High performance makes new leaders. This is the self-reinforcing circle of excellence every business needs to succeed. Are you driving the right values in your business?

Marty Zwilling

0

Share/Bookmark

Friday, March 27, 2020

5 Entrepreneur Lifestyle Drivers That Lead To Success

achievement-entrepreneur-driverAs a startup advisor, I see many aspiring entrepreneurs whose primary motivation seems to be to work part time, or get rich quick, or avoid anyone else telling them what to do. Let me assure you, from personal experience, and from helping many successful as well as struggling entrepreneurs, that starting a business is hard work, and doesn’t come with any of the benefits mentioned.

Yet, for those with more realistic expectations and the right motivation, the entrepreneur lifestyle can be the dream life you envisioned. Based on a classic study by the Wharton School of Business, in a survey of 11,000 MBA graduates over many years, those running their own businesses ranked themselves happier than all other professions, regardless of how much money they made.

So what are the right motivations, and how do you candidly assess your own? Indeed, there are many self-assessment tools available online, but I was more impressed with insights provided in a classic book “What Motivates Me: Put Your Passions to Work,” by Adrian Gostick and Chester Elton. These guys are workplace culture experts, and claim to have inputs from 850,000 people.

The authors offer portraits of some key individual personality types, such as achiever and thinker, and tie the relevant motivators for business success and happiness to these types. I have amplified these here from my own experiences to focus on the entrepreneurial subset of businesses:

  1. You love doing your own thing and being in control of your destiny. As an achiever, you thrive on tight deadlines, ambitious goals, and leadership challenges. Even in chaotic startup environments, you normally finish required tasks on time and to high standards. Team members see you as high-energy, determined, and action-oriented.
  1. You are driven by a cause or purpose to change the world. As a builder of new things and people development, you are not afraid to speak out on significant issues and world challenges. You cultivate loyal friendships, people growth, and thrive in strong team environments. You see success as making a difference in the world around you.
  1. You are tuned into others’ emotions and want to help people. As a caregiver, you understand the problems of others, and are determined to provide solutions which will make their life better. You love to have fun at work, and believe that balancing work and family is critical. People see you as great for demanding customers and team bonding.
  1. You are driven to compete and win in the marketplace. Being reward-driven, you are driven to win money, customers, applause, and the admiration of others. This determined nature can help you accomplish great things in new organizations. You are seen as a doer, but one who needs recognition and incentives to produce your best work.
  1. You simply know there is a better way or solution to the problem. As a thinker, you love to learn, use your imagination, and enjoy the feel of adrenaline rush now and then. You get frustrated with bureaucracy, and won’t accept that things have always been done a certain way. Team members see you as the lifeblood of innovation in the organization.

In a critical extension to this thinking, the authors and I would outline another dimension to these personality types and motivators, by defining five motivation grade levels that also impact entrepreneurial motives, actions, and satisfaction:

  • Level A. Primary motivation is to make a difference in the world, with a secondary motivation of earning a living. These people define their roles in terms of their customers’ or employees’ or coworkers’ needs, not their own.
  • Level B. Primary motivator becomes making consistent return for stockholders. These are still good people with an intent to provide great products and services, but making a difference takes a back seat. This often happens when a Level A company goes public.
  • Level C. At this level, it’s not just money but the love of money that becomes the primary motivator. Entrepreneurs at this level will seek the minimum cost and quality to be more competitive. Advertising, pricing and support practices may show questionable integrity.
  • Level D. At this level, greed takes over as the primary motivator. Unethical acts are tolerated, and customers may be treated unfairly or harmed. We all know a corporate giant or two at this level who went out of business in the financial crisis a few years back.
  • Level F. At the lowest level are those involved in Internet scams, Ponzi schemes, or organized crime. Entrepreneurs motivated to work at this level harm not only themselves, their employees, and customers, but also society in general.

In the long-term, entrepreneurs in Level A are the happiest, successful, and most productive. Certainly we see some Level C and Level D entrepreneurs who appear to be prospering, but appearances can be deceiving and fleeting. Make sure your motivation to be an entrepreneur is more than a dream, and will stand the test of time for you and all the people around you.

Marty Zwilling

0

Share/Bookmark

Wednesday, March 25, 2020

7 Tips To Maximize Breakthrough Thinking In Business

Breakthrough-thinking-in-businessMost of you realize that survival in business today requires grabbing hold of tomorrow’s opportunities with disruptive innovation, before your competition or a new startup gets there. The challenge is to create a culture of forward thinking in your company, and avoid the traps of following the paths of least resistance and most comfort that appear in every mature company.

For example, Hewlett Packard, the recognized leader in scientific calculators at the time, rejected Steve Wozniak’s idea for a personal computer as having no opportunity, since they were sure that no ordinary person would ever need to use a computer. Wozniak’s ideas were too far outside the HP comfort zone of business and scientific users, but Steve Jobs wasn’t ignoring the clues.

I just finished a new book, “Create the Future: Tactics for Disruptive Thinking,” by Trend Hunter CEO Jeremy Gutsche, who outlines his proven methods you can use to break free of the traps that limit future thinking in most companies as they grow and stabilize. I see these traps all too often in my role as business advisor to small companies as well as large.

Thus I support the following key strategies, recommended in the book, to help you and your team realize your full potential in keeping up the ever increasing pace of change in the marketplace:

  1. Spot the subtle clues that hint toward great ideas. The first challenge is to make time to scan for ideas, filter down to the best ones, and look for patterns. This means talking to your loyal customers, as well as non-customers who are in related market segments. It also helps to bring in outsiders periodically to suggest ideas you might be overlooking.

  2. Eliminate learned behavior and mental shortcuts. We are all human, so our creativity gets limited by learned behavior and all the things we do to function as productive adults. One antidote in any business organization.is to schedule a monthly “fun day” to foster and reward creative thinking, team bonding, and set the culture for breakthrough ideas.

  3. Maintain a sense of urgency and need to be proactive. Most entrepreneurs remember the sense of urgency they felt in startup mode, but don’t see it in their team today. In stable businesses, you get what you reward, so you must incent urgency with metrics for number of proactive projects, expected implementation guidelines, and no failure penalty.

  4. Expand rather than reduce options for future choices. In business, you tend to make decisions that get short-term results, not realizing that certain choices can fix you to the path you are on and reduce your future potential. You need to push yourself to consciously make decisions that open up options for the future, rather than close options.

  5. Don’t let success make you complacent and protective. Every business needs a balance of hunting for new opportunities, versus farming the results of the market you have won. Too much farming, and you fail to adapt. Many of the most iconic brands suffer from the traps of farming. Maybe it’s time to reorder your top ten priority list.

  6. Bypass linear thinking in an exponentially evolving world. As we are bombarded with what’s happening today, we fail to forecast tomorrow, because we forget that the pace of change is not simply faster, but accelerating. It helps to track the amount of change in your market, and maintain scenarios to disrupt it or avoid being disrupted.

  7. Master discomfort to achieve breakthroughs. New ideas are awkward, because they require you to change. We all have many traps that create discomfort and block us from seeing the potential from change, including unknown risks and hidden costs. Accept that comfort is not a good thing in business, and counter it with the anticipation of success.

Now is the time to be excited as an innovator during the greatest period of change in human history. You, your team, and your kids need to choose to enjoy the enhancements, disruptions, and changes of key technologies that reinvent humanity and business. You can make it a great time to be alive, or an oppressive burden. I find the former to be a lot more fun and satisfying!

Marty Zwilling

*** First published on Inc.com on 03/11/2020 ***

0

Share/Bookmark

Monday, March 23, 2020

9 Keys To Effective Networking, In Person Or Virtual

Global-Business-NetworkingToo many entrepreneurs I meet in my role as a business advisor still seem to believe networking is all about selling and convincing everyone that what you have will change the world. While selling is still key with customers, networking with peers and investors today is still about building relationships, listening to the needs of someone else, and suggesting a win-win opportunity.

For example, if that person is an investor, listen for a background in technology or a focus on financial returns, before highlighting your vision to change the social culture. If the peer is a potential co-founder, find out what complementary skills they could bring to your startup before wasting time for both of you, and missing a relationship, by pitching the product or technology.

If your networking style and mindset is still focused on the hard-sell, push-marketing approach, it’s time to take a close look at feedback, and your own frustration with the results. The way to win today is to build relationships first, by listening and responding, whether it be in person or through social media, before kicking into full sales mode. Here are some techniques that work for me:

  1. Focus on listening more than talking for the first five minutes. Effective networkers are quick to empathize with other people, to understand their position and where they are coming from. Practice connective listening, and minimize your tendency to be defensive, go into problem-solving mode, or simply tuning them out until it’s your turn.

  2. Find common ground and engage them in that space. Ask questions first to find what people or interests you might have in common, and then explore these at a personal level to build a positive relationship. Once a relationship is established, you will have their trust to listen to your mission and needs, and get the most positive feedback and interaction.

  3. Lead with your achieved results rather than future aspirations. Your goal is to inspire people with demonstrated abilities which make them want a stronger relationship. Leading with problems or needs automatically make most people wary of a commitment, and they see you as needing them, rather than them benefitting from your relationship.

  4. Make yourself memorable with a couple of personal anecdotes. People remember positive personal stories, and these will make you unique from the many other people met at most networking events. If possible, select stories that add value or highlight a comparable situation for the other person, giving you more credibility and interest.

  5. Highlight instances where you have overcome adversity. Don’t hesitate to mention the positive lessons you have gleaned from challenges or un-anticipated problems. If possible, relate these to similar situations in the lives of the people you meet. Have the courage to share your feelings, since shared feelings will strengthen any relationship.

  6. Express gratitude for any insights and expressions of support. Any act of gratitude or appreciation on your part for feedback and advice will create a stronger bond and interest in continuing the relationship. An even more positive form of gratitude is offering to follow-up on questions, make relevant people introductions, or pass along information.

  7. Don’t try to monopolize one person’s attention or time. Sometimes the most positive thing you can do is recognize that it’s time for both of you to move on. Gather the information you need, exchange business cards, if appropriate, and politely say, “I’m sure you would like to do some mixing now. It’s been a pleasure speaking to you.”

  8. Dress professionally and appropriately for the venue. You only get one chance to make a great first impression in business, and what you wear is a large part of that impact. This does not mean that you need to wear the most expensive clothes, but networking is not the place to make a statement or appear to be defying authority.

  9. Follow-up with a connection via social media or a meeting. Especially in this digital world of social media and virtual relationships, closing the loop on both sides is important. If you do your initial networking online, close the loop by suggesting a meeting at their office or over coffee. If you met at an event, make the digital connection to close the loop.

In my experience, a successful business is today still more about people relationships than products. Who you have on your team, both inside and outside the company, and how you interact with them, are the critical elements. Networking is where and how most of these relationships start, so don’t push or ignore the people you meet, either in person or online.

Marty Zwilling

*** First published on Inc.com on 03/09/2020 ***

0

Share/Bookmark

Sunday, March 22, 2020

6 Keys To Managing Funding From People Close To You

business-funding-from-friendsIn their passion to succeed, too many entrepreneurs treat friends and family investments as “low-hanging” fruit, only to find out later, after a stumble, that the pain of lost relationships is greater than the loss of their beloved startup. Other entrepreneurs never start their adventure, because they can’t face the prospect of even approaching friends and family for an investment kick-start.

The only way an entrepreneur can really dodge this issue is to totally fund the startup with personal funds (bootstrapping). Then you don’t have to worry about the fact that most angel investors and venture capitalists won’t take a bet on you if none of your friends and family have given you a vote of confidence with money.

This is a sensitive and critical area for new entrepreneurs, and it’s important to get it right the first time. Brian S. Cohen and John Kador, in their classic book “What Every Angel Investor Wants You to Know,” includes these great points of practical advice on this subject:

  1. Manage expectations before the fact. Even if you passionately believe that your idea is a winner, it’s smart to remind friends of the historical facts with startups. More than 50% fail in the first two years, and even the “overnight successes” take six years on the average. In the interim, there is no market for the shares, and no dividends or interest.
  1. Make sure the money is discretionary. If friends and family are still willing to take the risk because they believe in you and love you, you need to be convinced that they can afford to lose it all without major impact, and their emotion won’t generate unreasonable expectations over time. If you are not sure on this matter, then don’t take their money.
  1. Be professional about it. Treat the transaction as you would expect to be treated by an angel investor or VC. That means writing down and signing the terms of the agreement, after making sure everyone understands them. Insist on paying market rates for commercial loans, since the IRS can instigate some nasty consequences on “gifts.”
  1. Tie payments to your product or service revenue. Try to avoid obligations with fixed repayment schedules. With “cash flow” obligations, investors receive a percentage of your operating cash flow (if any) until they have been repaid in full, or have achieved a specified percentage return on their investment.
  1. Loans are a safer option than equity. Offering debt is better than offering direct equity, especially in early stages when you have no valuation for setting equity percentages. Many use a convertible loan note that may be converted into equity upon the closing of the first formal angel or VC round of financing, with a more realistic valuation.
  1. Pay the money back, with thanks, as quickly as you can. This money is real, so don’t assume it doesn’t have to be repaid. Some founders are too focused on quick repayment, and they compromise strategic decisions. That’s why it is better to use institutional investors and loans when you are able, with realistic time frame expectations.

Don’t forget a couple of additional potential negative realities. For entrepreneurs, friends and family money usually represents the smallest increment of funding, yet requires the most time to manage. Everyone wants to keep up and even have a say in your activities, and that can be a lot of conversations to manage.

A second harsh reality for entrepreneurs is the realization of how little power you have to protect the position of these early investors. New money from professional investors sees no value in old money, so the equity of early investors is “crammed down” and often lost in the scale-up surge. Later investors all think you have given away too much of the company too soon.

These realities are part of the reason that this first tier of very early investors are often referred to as “friends, family, and fools.” Most experienced entrepreneurs and investors can recount a horror story of families and friendships torn apart by money lost on someone else’s dream. In these cases both the entrepreneur and the friends are the fools. Don’t be one or create one.

Marty Zwilling

0

Share/Bookmark

Saturday, March 21, 2020

10 Strategies For Attracting Investors That Will Fail

entrepreneur-detailed-business-planMany new entrepreneurs are so excited by their latest idea that they can’t resist contacting every investor they know, assuming the investor will be equally excited and want to contribute immediately. Others will work hard on a business plan, and then mail it indiscriminately to every potential investor they can find on the Internet. Both of these approaches are a waste of your time and theirs.

The best professional investors receive dozens of proposals a day, so they are conditioned to look for quantitative data, rather than passion, for credibility and potential. They also look for entrepreneurs they know from past experience and warm introductions, or for evidence that you have previously built a successful startup, and sold your last one for maybe $800 million.

If you are not in that rare category of known and proven entrepreneurs, you should avoid the following list of my top ten turnoffs that I have personally experienced as an angel investor. These will put your proposal in the circular file, and even future good opportunities from you may go to the bottom of my list:

  1. “Give me a call to hear about an opportunity that can’t fail.” Teasing or spamming an investor is not the way to his pocketbook. Also suggesting that they check out your website or video and tell you what they think will not likely peak their curiosity. Every pitch should start with a concise statement of the problem and your innovative solution.
  1. “Attached is a copy of my full business plan for your review.” Too much detail at first contact is just as much of a turnoff as no information. The first page of the business plan better be an executive summary which gives the investor a taste of the financials, as well as opportunity, competition, and key executives.
  1. “I don’t have a business plan, but the technology is disruptive.” Investors are buying part of the business, not the product or service. They only want a quick overview of the product, not detailed features and patent secrets. If you haven’t yet finalized the business model, cost projections, and customer segments, you aren’t ready for investors.
  1. “Excuse the typos and cleanup -- I’ve been too busy to finalize.” Don’t send investors documents and notes that would be rejected by any high-school teacher. These will quickly convince investors that you will be equally unprofessional in your attention to detail in running the business. Investors invest in the jockey, more than the horse.
  1. “I’ve used a few well-known acronyms and abbreviations for brevity.” Technical jargon may be natural for you, but investors read this as arrogance or laziness on your part, if not an intentional effort to intimidate the reader and obfuscate facts. Every acronym should at least be spelled out and defined at its first appearance in any content.
  1. “I think you will find the business plan answers all your questions.” Business plans the size of a small book are a big turnoff to investors, and will only serve to make your business seem more complex and more risky. A tightly-worded plan of approximately 20 pages is effective in painting the overall picture, including all the key financial elements.
  1. “An additional level of detail is included in the various appendices.” It’s always impressive to have stand-alone supporting documents for product specifications, sales plan details, and backup financial reports. But including all of these in the base plan to make it look more impressive will probably backfire.
  1. “I really can’t find any worthy competitors in this space.” Avoid degrading or demeaning your competitors, unless you can quote third-party data. Investors read this approach as naïve, even bordering on unethical. Talking about competitors should be your opportunity to make positive statements about the advantages of your own product.
  1. “Let me show you a demo rather than a business plan.” Demos never go according to plan, and ones that work go on far too long. Remember that investors can’t see the business from a demo or prototype, and they won’t appreciate all the love and work you have put into building the product. The best demos to investors are 30 seconds or less.
  1. “Look how many social media ‘likes’ my site has generated.” We all know how to get friends and peers to pump up our story online, but investors want to see feedback from paying customers. Real contracts, testimonials, and even statements of intent are much more effective, if not real revenue and growth statistics.

As a new entrepreneur approaching an investor, you only get one chance for a great first impression. Passion is necessary but not sufficient to get their attention. My advice is to pick your opportunities carefully, prepare thoroughly, and focus more on the financial side of your story. It’s a lot easier to turn off an investor than it will be to get them turned back on later.

Marty Zwilling

0

Share/Bookmark

Friday, March 20, 2020

6 Reasons Your Hockey Stick Growth Curve Can Go Flat

annual-report-growth-flatEvery entrepreneur thinks he can relax a bit after his business model is proven, funding is in place, and revenues are scaling as projected up that hockey-stick curve. Unfortunately, the market is changing so fast these days that any upward climb can level off quickly, as the core business growth begins to stall. This S-Curve, with no correction, can quickly lead to disaster.

I’m not talking here about a small pivot. I’m talking about the kind of change that moved Apple from personal computers to music distribution to consumer electronics, and Amazon from books to e-Commerce to cloud computing services. On the other end of the spectrum are companies that fell behind the curve and may never recover, including MySpace for social networking, Yahoo with online ads, and Groupon with discounts for group purchasing.

To sustain long-term growth, every company needs to build a repeatable process for innovation and finding new opportunities before their core business growth disappears. The reasons for this requirement, and some practical guidelines for how to prepare, are outlined in the classic book “The Curve Ahead: Discovering the Path to Unlimited Growth,” by Dave Power.

Power has been guiding growth companies for 25 years, and now teaches innovation at the Harvard Extension School. He has helped many companies with this problem, and as an advisor to startups, I see the same common themes leading to growth slowdowns. These are appearing earlier and earlier in emerging companies, as well as in mid-sized and mature companies:

  1. Your original market becomes saturated. Initially, all companies sell to customers who are the easiest to reach and most excited about the new product. As a company begins to penetrate its market, it begins to work hard and harder, often in new geographies, to find more prospects. Marketing costs and time go up, and the growth curve flattens.
  1. Competitors see the same opportunity. New players jump in, and existing players broaden their offerings to cover the same territory. They steal a share of your market, slow down customer buying decisions, making it harder to close new business, and put the brakes quickly on your exponential growth.
  1. Prices begin to decline quickly. The first customers are early adopters who are the least price-sensitive. Unfortunately, the mainstream customers who can really drive revenue care more about price. Thus even if unit sales keep increasing, revenues can lag due to the need for lower prices as the mainstream market takes over.
  1. Customer acquisition gets harder and more expensive. Scrappy guerilla marketing based on personal contacts and word-of-mouth campaigns gives way to more expensive customer acquisition using advertising, trade shows, and a marketing agency. You suddenly need to enhance your in-house social media efforts with a public relations firm.
  1. An expanding customer base demands better support. Serving a growing customer base – with a great customer experience – requires more time and dedicated resources. In the early days, your product engineers could handle customer support. Over time, however, a continuous growth company needs a trained and dedicated support team.
  1. Management overhead and skills required go up. In the beginning, your entire team could meet in your office. As the company grows, functional leaders need to build and manage larger teams, recruit and develop talent, and manage remote offices. Managing the scale and complexity requires more formal processes, which slow the momentum.

Your first objective should be to stretch the S-Curve, which can buy you a few months or a few years. Among the most common ways to stretch the curve include deeper penetration of current markets, expanding into new geographies, new market segments, optimizing pricing and packaging, and driving consolidation through acquisition of competitors.

Ultimately you need to find the next S-Curve, and then the next, and build the process into your strategy, for unlimited growth. This means you need to find new sources of revenue growth to offset a slowdown in the core business. It means finding a large underserved market and addressing this market with a product or service innovation, often with a different business model.

Successful entrepreneurs and successful companies never stop re-inventing themselves. The alternative of not anticipating the curves, and not building the navigation systems into your core engine, is likely to be a long and painful fall off a high cliff. Do you have a plan in place yet?

Marty Zwilling

0

Share/Bookmark

Wednesday, March 18, 2020

5 Forces That Kill Momentum For Business First-Movers

Business men raceIs your strategy as a business leader to be a first-mover or a follower? Despite the fact that most of the CEOs I advise would claim to be in the first category, when I dig deeper I find that at best they are fast followers, due to the time consuming challenges of transforming any business in this digital age. Fast change today requires commitment and an adaptive learning culture at all levels.

I found this reality addressed well in a new book, “Fast Times,” by McKinsey Partners Arun Arora, Peter Dahlstrom, Klemens Hjartar, and Florian Wunderlich. They outline and give some positive recommendations to counter the key organizational impediments to fast transformation that I see all too often, even in businesses with top management committed to first-mover speed and agility:

  1. Passive resistance to change from within the organization. Concern about what the future might hold often results in hidden waves of passive resistance. These must be countered by a focus on changes and training that benefit your people, as well as your business. Set up training courses that highlight agility, and adopt agile working practices.

    For example, when I was with IBM, in an era where constant change was necessary to compete, we made job rotation and training a prerequisite for good performance ratings, so that team members sought change and new learning, rather than passively resisting.

  2. Transformation fatigue from continual challenges. The passion and commitment that characterizes startups inevitably fades, particularly if things aren’t always going well. It’s important to note slippage indicators, including less internal feedback on requirements to fight competitors, and more focus inward than outward on customers needs and trends.

    One effective intervention is to take a step back every few months, and review how things are going. Assess many change initiatives have come to fruition from your team, visit a couple of key customers and listen for future needs, and study your newest competitor.

  3. Difficulty in securing and protecting funding. Even in the best of times, funding for change initiatives can become a tempting target. You need to maintain explicit C-suite and Board buy-in for constant transformation through effective communication, highlighting the struggles of peer businesses, and establishing the right metrics.

    The authors recommend, and I support, the establishment of a transformation advisory board, including key board members, the CEO, and a couple of outside experts who understand the market, to set mandates, define milestones, and make funding decisions.

  4. Keeping priority on what matters for long-term success. By default, short-term-wins get the priority, as we all get drawn to the “crisis of the moment.” Future growth and vitality requires equal attention to different metrics, including customer satisfaction, partnership growth, time to market tracks for new products, and internal change counts.

    Other experts point that your employee improvement culture, sense of direction, personal purpose, and job satisfaction may be more important than any metrics. It is your responsibility as a company leader to communicate a winning long-term strategy, and then put into the place the incentives to drive team behavior to deliver on the strategy.

  5. Maintaining digital transformations through a downturn. While many leaders minimize new initiatives during a business recession, the best ones expedite changes to accelerate scaling, acquire assets more cheaply, and divest poor-performing business elements. They view downturns as an opportunity to get ahead of key competitors.

    Amazon, for example, “grew up” in the last recession by continuing to expand their range of products and focused on automation. They grew sales by 28% in 2009, while most companies were hunkered down and losing share. In the same year, Lego's profits soared 63% as they expanded their initiatives and operations in Asia and Europe.

In my experience, every business transformation will take longer to implement than you expect. You and your team both need that sense of momentum and having the wind at your back to carry you through the challenges and tough times. The only way to build that momentum, and stop it from evaporating over time, is to drive through the challenges outlined here, no matter what.

Marty Zwilling

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

0

Share/Bookmark

Monday, March 16, 2020

8 Personal Strategies For Winning With Relationships

Business-leader-relationshipsBased on my years of experience in both startups and large companies, trusted relationships are more the key to success than a great business model, how smart you are, or how much money you have. Aspiring entrepreneurs who struggle in a corporate environment often can’t wait to start their own company, only to find that relationships are even more critical and volatile there.

Many pundits will point to great entrepreneurs, including Steve Jobs at Apple, and Larry Ellison at Oracle, as examples of opinionated and egotistical leaders who succeeded without consideration for relationships. Yet insiders will tell you that both studied and valued the people interactions of prior leaders, and built very loyal relationships with many people who were key to their success.

The message here is not to use the public personas of leaders and entrepreneurs as the model for building and maintaining your business relationships. I’m convinced that the following personal strategies are required and practiced by every successful business leader, regardless of Silicon Valley myths to the contrary:

  1. Lead with business and technical acumen for people who count. As an angel investor, I’ve seen aspiring entrepreneurs who seem to be convinced that bravado and passion are a good substitute for real information and a plan. You only get once chance for a great first impression, so don’t forget that content wins in relationships over style.
  1. Building the right relationships requires proactive efforts. Don’t wait for the right people in business to find you – developers, investors, partners, or key customers. Part of the challenge in every business is to first recognize who can help you, and secondly take the initiative to build a productive relationship with that person or team.
  1. Avoid naysayers and downers. Smart business people learn to quickly recognize negative personality types, and avoid them at all costs. Innovative businesses are tough and unpredictable, so relationships with procrastinators, people handy with excuses and all the reasons something can’t be done, are not helpful and will drag you down as well.
  1. Maintain competitor relationships and seek alternate views. Good entrepreneurs recognize that strong competitors are smart people as well, and it pays to learn from competitors. Some of the best business partnerships come from “coopetition,” or finding ways to build win-win relationships rather than win-lose transactions with competitors.
  1. Don’t be afraid to ask for help from people who are ahead of you. These include other business leaders, mentors, visionaries, and influencers. Bill Gates still relishes his relationship and advice from Warren Buffett. Maintaining these relationships will require you to push your limits, think outside the box, and carry your own weight with them.
  1. Incent others to contribute to your success. This can be as simple as giving back as much time and emotional effort as you absorb from others, or it can be offering real business payback or equity for contributions. Smart business people understand their own agenda, and they figure out the agenda of others, to build win-win relationships.
  1. Don’t back away from conflicts that can be constructive. Some conflict is inevitable. Strong leaders learn how to manage conflict to make it productive, bring out alternate views, and strengthen relationships. If you surround yourself with “yes” people, you may feel good for a while, but the unmentioned problems no one surfaces will hurt later.
  1. Actively and positively end relationships that are not productive. We all have limited bandwidth, and it’s not possible to maintain relationships with everyone. Sometimes it’s better to move on, without burning bridges for the future. Smart entrepreneurs recognize when relationships have been outgrown, or need to be limited do to conflict of interest.

Today’s business world more than ever is a networked economy, requiring collaboration, and is most productive with trusted relationships, rather than a reliance only on legal contracts. Building relationships is not rocket science, and can be learned by anyone. It is the common ground between corporate professionals and entrepreneurs. Start practicing it today wherever you are.

Marty Zwilling

0

Share/Bookmark

Sunday, March 15, 2020

7 Keys For Moving A Startup To A Sustainable Business

Richard-Branson-many-businessesAs a business advisor, I have too often seen technical entrepreneurs get a product or service off the ground with ease, but then struggle mightily when their business reaches a couple of million in annual sales, or the employee count grows beyond a handful. It’s at this stage that the job changes from creative and tactical to managerial and strategic. Many don’t survive the change.

In fact, I believe the majority of true entrepreneurs are not interested in this new role, and jump ship quickly by hiring an experienced CEO or merging with another company, to start their next entrepreneurial effort. For example, entrepreneur Sir Richard Branson has started or grown over 400 companies, from record labels to space travel, so for him the joy is clearly in the startup.

Bill Gates, on the other hand, spent most of his career building Microsoft to a multi-billion dollar company, so he made the transition from startup to growth company. Both he and Branson are billionaires, so there is no one right way for entrepreneurs to succeed. Management of a growing company is a learnable skill, and in my view it starts with a focus on the following key principles:

  1. Management is getting results through people and processes. That means your primary responsibly changes from building a solution, to building processes and directing other people. Effective communication is the key, both written and verbal, since the plan can’t exist just in your head. Everyone needs to know what they are responsible for.
  1. Strategic planning takes priority over tactical planning. True entrepreneurs love the tactical and problem solving challenges. Good managers are more interested in anticipating and preventing problems. That means making sure the right people are hired, trained, and in the right place at the right time. Spend more time on the future than today.
  1. Focus on volume growth and repeatability. With a startup, everything is an experiment. Now the experiments are over, and high productivity is the objective. Creativity and innovation are applied to increasing output and lowering costs rather than solution design and building a viable business model.
  1. Implement metrics and set objectives for every organization. You can’t manage what you don’t measure. Processes and organizations that have no objectives will produce less and less over time as they attempt to remove risk and potential problems. Every process needs a feedback mechanism to ensure continuous improvement.
  1. Practice leadership by example beyond your business entity. This requires spending visible influencer time on external initiatives and building relationships in your industry and your community. This is also the time for business development focus, related social causes, and exploring common ground (coopetition initiatives) with competitors.
  1. Spend real time on people development and succession planning. Long-term success requires planning for leader development in every organization, rotation of high-potential employees through key roles, and support for outside executive education programs. Growing the company means growing people through mentoring and training.
  1. Balance your own life for the long haul. The startup process is a sprint, and entrepreneurs tend to focus on it like there is an end in sight, forgoing personal relationships, healthy time off, and planning for retirement. Good executives and managers maintain a more balanced perspective, and plan for vacations and family.

Moving from startup mode to a sustainable business requires an overt effort on the part of an entrepreneur – it doesn’t happen automatically. The alternative is to lose the business or get pushed out by investors or Board of Directors, after a painful crisis or business growth failure.

Great entrepreneurs actually have much in common with great managers, including a focus on results and a focus on execution. In addition the best of both groups maintain a focus on customers, love to learn new things, and are always thinking. Anyone who can put all these attributes to work can survive and prosper in any environment. Just decide where you want to fit, and go for it.

Marty Zwilling

0

Share/Bookmark

Saturday, March 14, 2020

8 Funding Proposal Red Flags Every Startup Can Avoid

red-flags-to-avoidAfter many years of working with angel investors seriously trying to find new ventures worthy of their hard-earned money, I find their frustration often exceeds that of entrepreneurs sincerely looking for financial help. That’s a lose-lose situation, so I’ve given a good bit of thought to how every entrepreneur can improve their odds, and keep investors less frustrated at the same time.

My first suggestion is that entrepreneurs need to forget the old myth that all they need to do is sketch an idea on a napkin, and investors will line up to invest. That approach may work for an entrepreneur who just sold a successful business for a huge profit, but it doesn’t work for the rest of us who are not proven successes yet, or don’t even have a business yet.

Getting investors to trust you with their money is always a challenge, and it’s even more difficult in the early stages, where you don’t have a significant revenue stream, a few customers, or maybe even a product yet. At these stages, it’s all about you, and your ability to communicate and execute effectively. Here is my list of red flags that cause many investors to look elsewhere:

  1. No well-defined need or viable customer set. The most investable ventures stem from painful needs by customers who have money to spend. “Nice-to have” and “easier-to-use” products, or social ventures needing government support, are not likely to provide a financial return to investors. Investors expect a good value proposition in every pitch.
  1. Non-credible funding request or unreasonable valuation. Investors are looking to buy a chunk of the business, not the product. They need to know how much money you need, and what portion of the current business you are willing to offer for the investment. Future unproven projections don’t set today’s valuation. Ask only for the money you can justify.
  1. Naïve expectations on funding terms and process. Experienced entrepreneurs understand investor expectations of Board representation, preferred stock, and payments based on interim milestones. Founder insistence on non-dilute clauses, arms-length relationships, and quick closure without due diligence will short-circuit active interest.
  1. Dysfunctional or non-functional team members. Investors invest in people, often more so than in the product. Therefore evidence of team members who don’t fit, family members who don’t have a role, or evidence of conflicting priorities will quickly derail investor interest. All internal teams need to have relevant skills and experience.
  1. Undefined business model or very low gross margins. Potential return on investment cannot be calculated without a clear understanding and evidence of actual costs, revenue flows, and margins. Marketing programs and distribution channels are required for even the best solutions, with an appropriate and viable rollout and growth strategy.
  1. Solution development undefined or incomplete. Investors are most interested in providing money for scaling of a proven solution. They are not interested in research and development, or funding at the idea stage. For seed stage funding, entrepreneurs should be looking to friends and family, crowd funding, and relevant institutions.
  1. Lack of intellectual property. Having a patent, trademarks, or other “barriers to entry” are always a critical advantage in attracting funding, since investors need to see real commitment to beating competitors. Being first to market is not a strong competitive argument for startups, since larger existing players can easily overrun this position.
  1. Surprises during due diligence. Smart entrepreneurs pre-disclose any possible due diligence issues, with full and open explanations and no excuses. Due diligence also normally involves onsite visits and employee discussions, so the entire team needs to be fully aware of expectations. Investors pass if they find conflicted team members.

Certainly there are many other red flags that will discourage investors, but every entrepreneur will find that it pays big dividends to be proactive on the key items outlined here. If your startup is dependent on investor funding, you should remember that your first competitors are peer startups who are also fighting for scarce resources.

Your job is to stay a step ahead of them in professionalism, communication, and preparation. You make your own luck in this game.

Marty Zwilling

0

Share/Bookmark

Friday, March 13, 2020

10 Keys To Investor-Friendly New Venture Financials

entrepreneur-financial-projectionsIf you need to attract investors to your startup, your financial projections have to be as attractive as the idea. The problem is that these business financials are future projections, while the idea is “now,” so you believe the idea can do most of the selling. Your challenge is that investors recognize a good business, and they judge your idea by how you translate it into financials.

For example, every investor I know can tell you about meeting a passionate entrepreneur who is pitching a great technology innovation, but has not done the financial homework on making it a good business. Thus the investor can’t visualize any return on investment (ROI), so the entrepreneur gets no money, and a good opportunity is lost to all.

Even if you are bootstrapping the business, and not looking for outside investors, the “rules of thumb” that smart investors look for should be the same ones that you use to assess your own risks and set reasonable expectations for progress and success. In that context, I offer the following financial projection strategies, from my own experience:

  1. Forecast a business that has plenty of room to grow quickly. Find some credible opportunity statistics that can support your own revenue expectations of between $20 million and $100 million in the fifth year. A larger number exceeds most investors’ rational growth expectations, and a smaller one implies a limited return potential.

  2. Demonstrate an understanding of business operation realities. No matter what the potential, every business is constrained in growth by the time and effort required to hire people, spread the message, and deliver and support solutions. If you insist on projecting $100 million in sales the first year, smart investors will likely run for the nearest exit.

  3. Assume margins and prices that are realistic in your target market. As an investor, when I see projected margins below 50 percent, I see low resources for scaling the business, high risk, and likely no return on investment. Even if you work harder than everyone else, you probably won’t stay ahead of rising costs and new competitors.

  4. >Market penetration and revenue targets related to opportunity size. Five-year projections should show at least a 10 percent penetration of the market segment you target, but not more than 50 percent. Don’t assume that you can dominate the market in a few years, or that the potential is so large that even a trivial entry will mean success.

  5. Project growth equal to or better than current premium startups. Companies that get investor attention usually double their revenue or more every year. Lower targets indicate a very conservative team, or challenges that have not been disclosed. Investors want to bet on someone with aggressive targets, and a demonstrated track record, if possible.

  6. Clearly delineate the break-even point in your projections. Investors today are not interested in startups that don’t even plan to cover their own expenses for the first five years. A reasonable break-even point is two or three years out, which indicates an ability to manage your own show, and allows for investors to collect their own good return.

  7. Break funding requests into tranches, with dates and milestones. Rather than ask for a single million dollar investment now to forestall future requests, it’s much more credible to ask only for what you need in the next year. That may translate to $200K now, with increments of $400K to follow every eighteen months, based on specific milestones.

  8. Prepare an itemization of your intended use of investment money. Highest on your list of fund usage categories should be business scaling requirements, such as marketing, inventory building, and staffing. Unattractive uses, from an investor standpoint, would include research and development, buying a building, or large salaries.

  9. Define an exit strategy for investors to liquidate their share. Investors have learned that simple buy-outs of their share by owners often become major squeeze-plays. They prefer a liquidity event such as an IPO or an acquisition by an existing large industry player, with a valuation at that time of five multiples or more of your projected revenues.

  10. Back up your projections with a simple financial model. No matter how good your projections appear, you should anticipate being asked questions by investors, such as what happens if your costs go up, growth slows, or market explodes. With a simple Excel spreadsheet, you can answer these questions quickly and totally impress everyone.

Of course, projections don’t make reality, but they do force you to declare. Don’t create a fairy tale for investors, and hope to protect it with fast talk from probing and knowledgeable investors. You have only once chance for a good first impression with investors, so do your homework first and put together a plan that will get all of us excited and optimistic.

Marty Zwilling

*** First published on Inc.com on 02/27/2020 ***

0

Share/Bookmark

Wednesday, March 11, 2020

7 Ways To Maximize Team Motivation And Productivity

team-motivation-and-productivityI was shocked to read an old Gallup study that indicates only 13 percent of employees worldwide are actively engaged at work, and more recent data shows only a small change in the right direction. In my own experience as a startup advisor and mentor, I find that entrepreneurs who can’t attract and maintain a highly motivated team rarely even get off the ground.

Thus if you want to change the world with your new business, you need to follow the example of startups like Zappos, which hires according to cultural fit first. Another example is Facebook, maintaining motivation with food, stock options, collaborative office space, an on-site laundry, and a competitive atmosphere that fosters personal growth and learning with great benefits.

These companies, and many others, are finding that strong leadership and personally-tuned benefits are the key to long-term satisfaction and motivation, certainly more effective than high salaries and financial incentives alone. Here is my personal list of the key practices that I recommend to every entrepreneur and business executive alike for motivating their team:

  1. Bring passion and positive vibes to the workplace every day. Nobody likes a downer, especially for a boss. Every team member is motivated by being able to absorb energy from others, rather than being sucked dry by their own leaders. As a startup founder or executive, you need to subvert your own troubles for the sake of the team.
  1. Fuel a reserve of positive energy outside of work. First of all, that means taking care of your health, getting enough sleep, and regular exercise. Find ways to recharge your emotional batteries, through supportive relationships and community activities. Team members need to see you at work, but they also need to know you have a life after work.
  1. All work and no play creates a de-motivated team. Fun is always motivational, and it’s not inconsistent with work. There are many ways to add levity to a tough challenge, and engaging the team occasionally in some fun activities will work wonders for your team’s productivity and motivation. Don’t take yourself too seriously as well.
  1. Always treat your team as your highest priority. Investors have long agreed that you invest in the team, more than the product. Yet many managers unintentionally de-motivate their team by being too busy with business challenges to communicate, understand, or help people. Good hiring, training, and mentoring are the best motivators.
  1. Practice every day what you preach. Everyone is a role model for the people around them, and everyone needs a role model. Your team members follow your actions on integrity and follow-through, much more than any written company policy. Your display of pride in the company and respect for the customer will translate directly into motivation.
  1. Consistently ask for and implement ways to improve engagement. Building morale is not a one-time task. It requires ongoing listening to team members, implementing and tuning new incentives over time. Examples include work time flexibility, transportation assistance, exercise opportunities at work, and rewards for setting the right example.
  1. Provide timely personalized feedback and incentives. Everyone needs to be treated like an individual, rather than just another soldier. Tie incentives to measurable personal goals, as well company achievements. In today’s fast moving world, the time frame for giving recognition keeps getting smaller. Positive feedback has a diminishing half-life.

I believe that increasing your team’s motivation will be more effective than providing new and advanced tools for increasing productivity. The Hay Group, a global management and consulting firm, found offices with motivated and engaged employees were 44 percent more productive than the others. Other sources see the potential as high as doubling productivity through motivation.

So if your mission is to change the world, a great idea may be necessary, but is not sufficient. Your parallel challenge is to build and lead a highly motivated and engaged team that can execute with you, and can effectively motivate your customers to the same level. If you can do it, motivation can easily be your biggest competitive advantage. Start today.

Marty Zwilling

0

Share/Bookmark

Monday, March 9, 2020

8 Keys To Scaling The Business After Initial Traction

scale-the-businessA common pain of startups after an exhilarating first surge of early adopters is a long and frustrating plateau of slow growth, where it seems like nothing you do will get your business to profitability. Too many entrepreneurs don’t know what to do at this point, largely accounting for that disappointing 50 percent of startups that fail in the first five years, according to Gallup.

Some make big mistakes, such as Webvan expanding too fast with a huge infrastructure, and Pets.com, trying to grow the business with a negative margin, under the mistaken assumption that winning customers is more important than making a profit. Others do far too little, assuming the viral effect and word-of-mouth will soon kick in, and sales will suddenly grow exponentially.

In any case, it’s no fun to be stuck in this stage, struggling to make payroll, and dealing with impatient creditors and unhappy investors. First you need to take consolation from the fact that you are not alone, and more importantly you need to implement an active growth and marketing plan to include the following initiatives:

  1. Ramp-up visibility and strategic alliances. It’s easy to get so pre-occupied with handling the business rollout that you forget to maintain and increase your social media interactions, search engine optimization efforts, and highlighting positive customer reviews on your website. Continually add new marketing and distribution partners.
  1. Real growth always requires real marketing. Word-of-mouth and social media may get you started, but there is no substitute these days for special promotions, webinars, presence at trade shows, and actively calling on decision makers. There is no magic lever for growth, so several initiatives are required, with metrics to assess value returned.
  1. Ask every employee to focus on sales. This starts with multiple messages from the top that growth is now the highest job priority, and key to survival. Openly reward employees who make the extra effort, champion cost-cutting issues, and enhance the sales process. Ask everyone to be an advocate of the business to their friends and connections.
  1. Personally optimize every cash flow transaction. Resist the urge to delegate accounting decisions, under the assumption that incoming revenue takes the pressure off. Now is the time to take advantage of volume discounts and deferred payment plans. Many entrepreneurs forget that the growth phase may be your tightest squeeze on cash.
  1. Increase the pipeline and the conversion rate. Now is the time to formalize lead-generation efforts, and initiate efforts to maximize the conversion rate to sales closure. Real growth requires new and innovative ways to find customers, as well as old-fashioned advertising and email blasts. Shorten the close cycle to grow faster.
  1. Introduce automation consistent with growth rates. Manual processes and people are always the most expensive to scale, so every process needs metrics to determine when automation is appropriate. Some startups hire more people to delay automation, or spend money wildly on new tools for the future. Both are strategies for business failure.
  1. Introduce new products and enhancements every month. One of your best sources of growth is existing customers, who are always looking for more opportunities to buy, and new offerings. Capitalize on competitor weaknesses that you can fill with minimal new investment. Actively listen to customer feedback, and don’t be a one-trick pony.
  1. Aggressively enter new markets and sales channels. If your local market isn’t giving you the growth you expected, it may be time to expedite your expansion to new major cities or export opportunities. If your website isn’t pulling in the growth you need, expand to Amazon and other channels. Growth requires market innovation as well as product.

An entrepreneur who has struggled to fund and build a dream solution may think they can relax when the first wave of customers come in. Unfortunately, the challenges of scaling a business, and making it profitable, often last longer than the product development phase. The good news is these challenges are not rocket science, so anyone can do it. Don’t give up your dream too early.

Marty Zwilling

0

Share/Bookmark

Sunday, March 8, 2020

8 Business Realities You Only Learn From Experience

Bill_Gates_stressEvery new entrepreneur who has not spent years in corporate life has the advantage of an unbiased look at business opportunities, but at the same time has the disadvantage of missing critical business experiences that can cost them dearly in their first startup venture. In my experience, building a successful business is more difficult than building an innovative solution.

Fortunately, despite their lack of basic business experience, the destined-to-be-great entrepreneurs never give up, following Bill Gates after his first failure with Traf-O-Data, and Jeff Bezos after early failure with his online auction site. All too many others are so discouraged or financially destroyed by their business learning experiences that they never try again.

Fortunately, I’ve had the opportunity to work and learn for many years in both the corporate environment (IBM), as well as the exploding Silicon Valley startup environment of the 90’s. As an advisor to many startups since that time, here is my list of key business growth challenges that every first-time entrepreneur may not anticipate:

  1. It takes relationships to make a business work. An innovative solution is necessary but not sufficient to build a business. Businesses require people relationships, to find the right team, investors, contract vendors, and attract customers. As an introvert and a techy, I know well the challenges of building relationships in today’s competitive world.
  1. Startups don’t come with formal training courses. New entrepreneurs quickly find that what they learned in business school is no substitute for real-world business experience and training. Larger enterprises let you learn as you go, with minimal risk, and they pay for leadership training, employee management, and new project management tools.
  1. A successful business is a long-term effort. Entrepreneurs are an optimistic and passionate group, who normally expect their idea to go viral soon, and success to follow shortly thereafter. They aren’t mentally prepared for the long-term grind, with repeated tough challenges along the way. It’s a 24/7 job with no time off for vacation or fun.
  1. Personal finances must be kept separate from the business. Being an entrepreneur is a lifestyle, making it hard to isolate the startup finances from family financial stability and future retirement requirements. Startups don’t come with pension, health, or 401(k) plans included. Startup setbacks can easily cost you your house and credit rating.
  1. Building a startup is more about love than money. People with experience in big businesses have learned that you won’t be happy even if well paid, unless you enjoy the job. Entrepreneurs who love to invent new things, but hate business, need to find the right partners before embarking down the path to a new business.
  1. Not having a predictable income is an ongoing source of stress. People don’t appreciate a regular paycheck until they don’t have one. Entrepreneurs never know when they will be hit by technology advances, new competitors, economic downturns, or loss of a major customer. Early funding is a full-time effort, and it’s no fun for anyone.
  1. Running a business is lonely at the top. Once you have formally established a startup with you as the CEO, all former teammates will see you in a different light as the boss. Quickly, it will be difficult to get unbiased input, and everyone will wait for you to make the final decisions. It’s hard to find someone to share your fears and challenges with.
  1. Peer perceptions of you as an entrepreneur are not always positive. It’s popular today as a young entrepreneur to talk about your dreams and initiatives, and everyone seems to look up to someone running their own business. Later, colleagues with jobs in large corporations may look down on you as a person without job security or a career.

In all cases, I recommend to aspiring entrepreneurs that they spend some time first working for another startup, or in a corporate environment, if they aren’t absolutely certain about their lifestyle preferences. Life is too short to spend most of it in stress and pain, handling challenges you never anticipated, even if you are convinced that you can change the world.

Marty Zwilling

0

Share/Bookmark

Saturday, March 7, 2020

10 Personal Attributes That Indicate Real Potential

entrepreneur-speaking-presentationAs a startup advisor and investor, I’ve met many aspiring entrepreneurs, and I often get asked the question, “I have a great idea for a startup – do you agree that it real potential?” They don’t know that most experts agree the person is more important than the idea, yet I’ve never been asked, “I have a great idea for a startup – do you agree that I have real potential as an entrepreneur?”

Nevertheless, I’ve given a good bit of thought to some questions I might ask, or you should ask yourself, to get some indication of whether you have the right stuff to succeed and be happy in the entrepreneur lifestyle. Here are ten sample questions that I believe will reveal positive indications of your potential as an entrepreneur, and also indicate that you will select good ideas:

  1. You see creating a business as a fun challenge. Many techies and inventors I know hate the thought of running a business – their fun and challenge comes from creating the innovative solution. For these, I recommend that they find a partner first who is willing and able to run a business. “If we build it, they will come” is not a viable startup strategy.
  1. You tend to ask for forgiveness rather than ask for permission. This attitude indicates that you are comfortable making decisions, and ready to be your own boss - a major prerequisite for succeeding in any entrepreneurial endeavor. Of course, you do need to consider how often that strategy has worked for you, and how often it backfired.
  1. Making big money excites you, but is not your major driver. If you are dreaming of an opportunity to get rich quick, the entrepreneur route is not for you. Most great founders lived on Ramen noodles, without taking a salary, for longer than they like to remember. For them, money is a positive indicator of success, but not an end in itself.
  1. You relish the opportunity to set your own goals and targets. Real entrepreneurs are self-motivated, and hate to be driven by someone else’s deadlines and priorities. Arbitrary rewards, like salary bonuses or vacation perks, seem to just get in the way of achieving really great results. The fun is in the journey, as well as the destination.
  1. You treasure your breadth of interests, rather than your depth. To build a startup, you have to enjoy the broad range of challenges, from technical to marketing to sales to personnel. Big corporations need specialists, which is why most entrepreneurs move on to start their next business when their first startup gets too large.
  1. You enjoy building relationships as well as products. A startup is no place for the Lone Ranger. An entrepreneur has to be as adept at building a team, finding the right external partners, and finding customers, as building the solution. At the very least, you need to nurture a trusting relationship with a complementary partner to get things going.
  1. The perks of a big title and corner office are not important to you. Most startup founders are happy to work out of their garage or home office, where they can dress comfortably, have no set schedule, and interact easily with family and friends. With the Internet and easy global communication, title and offices are not competitive advantages.
  1. You see yourself as more of a do-er than a dreamer. People who pride themselves as the “idea” person most often fail as the lead entrepreneur. Startups are rarely at a loss for ideas, but always need a good problem solver to tackle the latest challenge. Businesses are all about implementation, production, and processes, rather than dreams.
  1. You usually keep your cool, even in tough situations. Entrepreneurs need to be passionate without being too emotional. The realities of starting a business are not all under your control, and partners and competitors with don’t always play fair. Your team and customers need to see you as a stable leader, not an unpredictable tyrant.
  1. Not afraid to actively listen as well as talk. Good entrepreneurs have an ego, but they are able to keep it in check. Selling your idea or product requires an understanding of the view of others, and the willingness to change based on customer feedback. Even the most famous entrepreneurs, such as Bill Gates, has a trusted advisor like Warren Buffett.

If you recognize yourself positively in most of these characterizations, then I recommend the entrepreneur lifestyle for you. There is no better time, with the cost of entry being at an all-time low, and the public image of an entrepreneur at an all-time high. Startup investors and customers alike are waiting to line up behind you. And I’m already sure your idea has great potential.

Marty Zwilling

0

Share/Bookmark

Friday, March 6, 2020

7 Business Experimentation Myths That Are Outdated

experiment-innovationIn my work with you as an entrepreneur or small business owner, I find that most understand the need try out new business models and product innovations, but trust their intuition rather than running a disciplined business experiment first. The result is that you often take a big financial hit, and lose key customers, before you realize that the change didn’t work. There is a better way.

For example, several years ago Apple was so convinced that their new Apple III model would be a winner that they rolled it out broadly, rather than do a controlled release first with some key customers. The result was a huge negative quality hit for Apple in the marketplace that could have been avoided, and high repair costs that took years to recover.

I just finished a new book, “Experimentation Works,” by Stefan H. Thomke, which shows how to make experiments pay off, describes best practices, and provides some great examples of the process done right. He also debunks the most common myths I have heard about business experimentation, including the following:

  1. Experimentation-driven innovation will kill intuition. Before you can experiment, you still need intuition and creativity to come up with innovations to test. Thus experiments are complementary to intuition, not mutually exclusive. Unfortunately, even expert intuition has been proven unreliable in predicting customer behavior, so we need both.

  2. Experiments will lead to incremental, but no big changes. Incremental change has proven to be less risky, and multiple small change cycles done quickly often lead to a breakthrough. Even big changes, like a new business model, can have few elements and be validated by an experiment. Changing too many factors at once is never a smart risk.

  3. We do so few changes, we don’t need formal testing tools. The pace of change to stay competitive in business today continues to increase. Every organization needs to look ahead to keep up with Amazon and Booking.com, who are rolling out hundreds or thousands of changes each year. Now is the time to update your processes and tools.

  4. Brick-and-mortar companies don’t have enough transactions. While online retailers may define a sample as fifty thousand customers, a realistic test group for a physical store may be dozens or less. Yet a large sample does not necessarily lead to better data. In addition, even a small sample size shows statistically valid results for large changes.

  5. A/B testing has been used often, with only modest results. This type of experiment has been around a long time, and many executives have an unreasonable expectation that the cumulative business impact should be at least the sum of the results. In reality, better techniques are now available, so don’t skip experimentation based on old news.

  6. Big data will show results quickly, so experiments waste time. Analytics show results, while experiments isolate the cause. Thus these are actually complementary, and understanding causality is necessary for effective follow-on enhancements. Using intuition to deduce the cause is unreliable, and even dangerous in the case of medicine.

  7. Experiments on customers without consent is unethical. Of course, every new offering to customers must be lawful and delivered ethically, and every business model and product is essentially an experiment in providing maximum customer value. A bigger ethical risk is not to experiment and forgo a change that’s critical to increasing that value.

Tricking customers or persuading them to do things that go against this value objective make no sense, and simply won’t work in the long run. Thus it makes sense to be as transparent as possible, and to do your testing with as much speed as technology allows.

To counter these myths, there is more and more evidence of the value of building a business experimentation culture in your company, compared to relying on intuition or flying blind. The tools are out there to collect data in real time, and provide the analysis that you could never do manually to show what innovations are working with customers, and which are not contributing.

Looking ahead, as customers get more demanding, and competition continues to expand worldwide, the ability to iterate more quickly and effectively will be key to your survival and growth. It’s time to take a hard look at how you and your organization make change decisions today, to make sure you are ready for the changes your customers expect from you tomorrow.

Marty Zwilling

*** First published on Inc.com on 02/20/2020 ***

0

Share/Bookmark