Monday, August 31, 2020

5 Team Engagement Principles Are Vital To Leadership

Engaged-business-teamThe days of leadership without engagement are gone. With interactive social media and video everywhere, everyone needs to feel they have a relationship with their leaders, and every brand needs leader personification for customers to relate. Soon you won’t be able to name a business as one of your favorites if you can’t personally visualize and relate to company leadership.

In the same way, great entrepreneurs and company leaders should no longer rely on faceless and nameless processes to drive business strategy and innovation to stay competitive. The old way doesn’t work, and results more than ever in slow decision-making, lack of real connection with employees, and ignorance of what customers really want.

The new principles of engagement, as well as the dysfunctions of the old, are well illustrated in the insightful classic book, “Why Are There Snowblowers in Miami?” by Steven D. Goldstein. He speaks from a wealth of personal experience in private equity, as well as top executive positions at American Express, Sears, and Citigroup.

He found the dysfunctional engagement that sent snow blowers to his store in Miami every year. As a result of this incident and many others, he defined five key engagement principles which resonate with me as just as relevant for new business founders as mature business executives. Here is my adaptation of his engagement principles for all the aspiring entrepreneurs I advise:

  1. Learn to adopt an outsider’s perspective. Every entrepreneur, even though confident in his domain, needs to fight complacency in a world that changes almost daily. You need to look at everything through fresh eyes, continually ask questions not usually asked, and actively listen to contrary views. No change means you are falling behind as a leader.
  1. Interact with employees and customers on a regular basis. Authentic communication at all levels and encouraging feedback is how you find out what is really going on. More meetings in your conference room won’t get to the truth as well as simply talking to people who interact with customers directly. Never be too busy to talk to real customers.
  1. Focus on two or three pertinent metrics in any situation. Keeping it simple is the best course. No one can remember your top ten priorities and measurements. Unbundle projects into smaller elements, and personalize the top couple of metrics for each team. These simplified targets are crucial to motivating a team, and getting the focus you need.
  1. Help people know more, so they can do their job better. Knowledge is power, and good information flow and collection tools are of the utmost importance. Information that is relevant and timely needs to be shared widely and efficiently. It’s also important to share the evaluation insights, and to tie the next action steps directly to current results.
  1. Accept that whatever speed you are going is too slow. Time is the enemy in today’s global marketplace. Follow the guiding motto of Andy Grove at Intel, “Only the paranoid survive.” It’s vital to get quick wins, learn rapidly from failures, and get comfortable with constant change. Waiting is never an option, as competitors will always be moving.

In the same fashion, these engagement principles must be applied to customers. More and more, I see evidence that customers want to be pulled to your company by engagement, rather than feel that you are pushing yourself on them. There are a multitude of opportunities through social media to engage your customers, as well as getting out of your office into the marketplace.

Customer business leadership through brand icons, such as Ronald McDonald and Aunt Jemima, is fading fast. Customers as well as employees want to relate and engage with real people as leaders, and business leaders need to interact with real employees and customers to stay vital and current.

As an entrepreneur, you need to start this focus early, with the same passion you currently apply to your new idea and solution. Have you taken a hard look recently at where you are spending most of your time?

Marty Zwilling

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Sunday, August 30, 2020

7 Tips On Advancing Your Career To Being A Great Boss

businesswoman-boss-leadershipOne of the things I’ve learned in working with aspiring entrepreneurs is that managing and leading a team is a scary venture into the unknown for many people, even if they have worked as a business professional for years. Having worked in my own career on both sides of the fence at various times, I recommend that everyone practice thinking like the boss in every role to prepare.

This will improve your effectiveness in your current role, and give you a head start towards a future role, such as startup founder, where you are the boss. You will find that the same key principles apply in both situations, and that every business professional has a boss, and should be a leader in their own domain to others with less experience and expertise.

I found some good insights and details on this approach in the classic book, “How To Be A Great Boss,” by Gino Wickman and René Boer, who speak from years of experience working with leadership teams of both small and large companies. Here is my summary of their key principles on being a great boss, which I will characterize here as applying to any business professional:

  1. Surround yourself with great people. As an entrepreneur, executive, or team member, you are most impacted by the people you gather around you. The smartest team members and the smartest bosses spend more time with people who are smarter in the relevant domain than they are. Then when you have to hire people, you will pick the best.
  1. Make more effective use of your own time. We all know bosses and peers who are always too busy, but never seem to get much done. Make sure that person is not you. Free up time for others by eliminating low priority tasks, and delegating items to the right people. Work on habits that improve your productivity, and find better tools every day.
  1. Understand both leadership and management. In business, leadership consists of creating the vision and direction, while management is primarily about gaining traction to achieve it. You don’t have to be a boss to be a leader or a manager. You should be practicing both in every role, and there will be no surprises as your career evolves.
  1. Train yourself to follow leadership best practices. If you practice all the key elements of leadership in every role, you will make a great team member or a great boss. These elements include giving clear direction, providing tools and training to the right people, getting out of the way, walking your own talk, and reflecting regularly on the big picture.
  1. Focus on demonstrating accountability for your actions. Accountability is everyone’s obligation, to accept responsibility for their activities, and to disclose your results in a transparent manner. Accountability cannot be imposed on you by a boss or entrepreneur – it’s a practice that you must learn to impose on yourself to be effective and appreciated.
  1. Develop productive relationships with people around you. Effective relationships, inside your business and outside, are critical in every professional, management, and leadership role. The most productive people get things done by working in concert with others, not demanding actions and results, but by orchestrating win-win relationships.
  1. Learn to deal effectively with people who disappoint you. While highly productive relationships lead to success, dysfunctional relationships make you a poor employee and a bad boss. People issues cannot be solved by avoidance or edict. If you surface and manage relationship issues early with respect and minimum emotion, you will be seen as a good team member and a good boss.

Thus, putting yourself in your boss’s shoes to see what they see, and act as you would expect them to act, is the best way to assure success in your role today, or prepare you for the startup founder role you dream about. In fact, the best team members and managers I work with always see themselves as their own boss. Try it – you may find and train that great boss you never had.

Marty Zwilling

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Saturday, August 29, 2020

10 Alternative Funding Sources For Your New Venture

moneyOne of the most frequent questions I get as a mentor to entrepreneurs is “How do I find the money to start my business?” I always answer that there isn’t any magic, and contrary to the popular myth, nobody is waiting in the wings to throw money at you, just because you have a new and exciting business idea.

On the other hand, there are many additional creative options available for starting a business that you might not find for buying a car, home, or other major consumer item. If you have the urge to be an entrepreneur, I encourage you to think seriously about each of these, before you zero-in on one or two, and get totally discouraged if those don’t work for you.

Of course, every alternative has advantages and disadvantages, so any given one may not be available or attractive to you. For example, professional investors put great priority on your previous experience in building a business, and they expect to own a portion of the business equity and control for the funds they do provide. These are tough for a first-time entrepreneur.

Thus it is always a question of what you qualify for, and what you are willing to give up, to turn your dream idea into a viable business. Here is my list of the ten most common sources of funding today, in reverse priority sequence, with some rules of thumb to channel your focus:

  1. Seek a bank loan or credit-card line-of-credit. In general, this won’t happen for a new startup unless you have a good credit history, or existing assets that you are willing to put at-risk for collateral. In the US, you may find that the Small Business Administration (SBA) can get you infusions of cash without normal backup requirements.
  1. Trade equity or services for startup help. This is most often called bartering your skills or something you have for something you need. An example would be negotiating free office space by agreeing to support the computer systems for all the other office tenants. Another common example is exchanging equity for legal and accounting support.
  1. Negotiate an advance from a strategic partner or customer. Find a major customer, or a complimentary business, who sees such value in your idea that they are willing to give you an advance on royalty payments to complete your development. Variations on this theme include early licensing or white-labeling agreements.
  1. Join a startup incubator or accelerator. These organizations, like Y Combinator, are very popular these days, and are often associated with major universities, community development organizations, or even large companies. Most provide free resources to startups, including office facilities and consulting, but many provide seed funding as well.
  1. Solicit venture capital investors. These are professional investors, like Accel Partners, who invest institutional money in qualified startups, usually with a proven business model, ready to scale. They typically look for big opportunities, needing a couple of million dollars or more, with a proven team. Look for a warm introduction to make this work.
  1. Apply to local angel investor groups. Most metropolitan areas have groups of local high-net-worth individuals interested in supporting startups, and willing to syndicate amounts up to a million dollars for qualified startups. Use online platforms like Gust to find them, and local networking to find ones that relate to your industry and passion.
  1. Start a crowdfunding campaign online. This popular funding source, where anyone can participate, per the JOBS Act in the US, is exemplified by online sites like Kickstarter. Here people make online pledges to your startup during a campaign, to pre-buy the product for later delivery, give donations, or qualify for a reward, such as a tee-shirt.
  1. Request a small business grant. These are government funds allocated to support new technologies and important causes, like education, medicine, and social needs. A good place to start looking is Grants.gov, which is a searchable directory of more than 1,000 Federal grant programs. The process is long, but it doesn’t cost you any equity.
  1. Pitch your needs to friends and family. As a general rule, professional investors will expect that you have already have commitments from this source, to show your credibility. If your friends and family don’t believe in you, don’t expect outsiders to jump in. This is the primary source of non-personal funds for very early-stage startups.
  1. Fund your startup yourself. These days, the costs to start a business are at an all-time low, and over 80% of startups are self-funded (also called bootstrapping). It may take a bit longer, to save some money before you start, and grow organically, but the advantage is that you don’t have to give up any equity or control. Your business is yours alone.

You can see that all of these options require work and commitment on your part, so there is no magic or free money. Every funding decision is a complex tradeoff between near-term and longer-term costs and paybacks, as well as overall ownership and control. Yet with the many options available, there is no excuse for not living your dream, rather than dreaming about living.

Marty Zwilling

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Friday, August 28, 2020

8 Keys To Success In Your Next New Business Interview

business-meetings-interviewStartups and small businesses are different worlds from big enterprises, so the qualities you need to get a job in a new venture are different. Corporate environments are looking for depth of technical skills and experience, while small businesses need everyone to be customer-centric, with a broad range of perspectives and experiences, in addition to the specific skill requested.

Thus, in my experience, if you want to be that ideal candidate for an attractive position in a new venture or a small business, I recommend that you orient your resume and your interview discussion to all of the following attributes, in addition to your skills and prior experience:

  1. Focus on “people-smarts” rather than “technical-smarts.” The key to success in new businesses is good communication with other people, both peers inside and customers outside. Applicants who are people-smart demonstrate strong social skills, are good at reading body language, and are sensitive to emotions. They keep their ego under control.

    Sir Richard Branson, for instance, had no technical credentials, but he was able to found many technical companies, including Virgin Atlantic airlines, Virgin Galactic spaceflight corporation, and over 200 other companies. His forte is working effectively with people.

  2. Highlight your focus on results, versus time worked. Every startup and small business owner knows that the key to success is getting things done, not just working hard. Everyone has to take some risks, make a decision, or solve the customer problem. In a new business, show that you can deal with uncertainty, and still produce results.

  3. Communicate your willingness to think outside the box. In a new business, all the boxes have not yet been defined, so the founder counts on you to recognize the need for a new process, or when an existing process is not working for the business or your customers. The best candidates will be able to show how they go beyond when needed.

    People with this quality are always positive and confident, and have a low need for approval. They don’t need orders from above to start an initiative, and they are not always your best friend. You need them to solve your toughest new business challenges.

  4. Convince me that you have a “never give up” mindset. The small business world is fraught with many tough challenges, and persistent employees are required to keep the workload from falling back on you. Here is another opportunity for you to supplement your interview with stories that illustrate determination and ability to resolve difficult problems.

    For example, you might relate a story about a time in school when really wanted to be the top dog on your debate team or favorite sport, only to suffer an early humiliating defeat. You never gave up, and after hard work finally won that trophy you had dreamed about.

  5. Have built positive relationships with people in every job. Business leaders know that employees who build good relationships with team members and customers are more productive, increase customer loyalty, and foster the team culture that every business needs to stay ahead of competition. Relationships are more critical than skills.

  6. Demonstrate your ability to listen and ask good questions. In a new business, everyone has the responsibility to understand the whole business, customer expectations, and competitive alternatives. Business leaders put a premium on people with a natural curiosity for how the business works, and attention to market trends.

  7. Show your record of commitment and accountability. People who are willing and able to take responsibility for a required task, no matter what their job title, are extremely valuable. Use anecdotes from previous roles and your private life to illustrate this sense of commitment, and your willingness to go beyond the job description to deliver.

  8. Dress and interact appropriately for the business role. This simple action will convey your respect for the company and the interviewer, as well as build their trust for you and your ability to fit in. In a small company, it is critical that you fit in well with the other team members, as well as the culture of the customer segment targeted by your business.

Your resume may get you the interview, but how you match these attributes is key to landing the job in a small business or startup environment. Don’t let the fact that you are short on technical skills or years of experience discourage you from putting your best foot forward to compete for that ideal job opportunity. It may be the one that makes your long-term career worth all the effort.

Marty Zwilling

*** First published on Inc.com on 08/14/2020 ***

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Wednesday, August 26, 2020

7 Keys To Transforming Your Invention Into A Business

James_Dyson_inventionDo you have an invention that you believe is worth a million dollars? In fact, it could be worth much more than that, if you are able to use it to kickstart a successful business. Unfortunately, many inventors I know are stuck at this stage, being great technologists, but not so great as entrepreneurs. As a result, their inventions languish and never make them a dollar.

In fact, contrary to popular opinion, my experience as a business advisor tells me that building a business may actually be the hard part, compared to coming up with an innovative new idea, or even inventing the solution to a hard problem. You see, inventing a business is about attracting money from investors and customers, rather than spending money on a challenging dream.

Most advisors I know can only name one or two inventors, like James Dyson or Thomas Edison, who single-handedly become successful businessmen as well. Dyson, for example, invented over 5,000 prototypes before he perfected his bagless home vacuum technology with a constant suction. Then he was able to turn his genius to business and now has a $6.5 billion net worth.

If you consider yourself the consummate inventor, but haven’t yet broken through on the business side, I urge you to consider the following alternative keys to long-term success that inventors before you have capitalized on:

  1. Team with a business and marketing partner. Many inventors like to work alone, and are convinced that if their solution is amazing enough, investors and customers will come. In reality, the days of people finding you by word-of-mouth are gone. You need people with the same innovation in marketing that you have shown on the technical side.

    The Apple computer was really “invented” by Steve Wozniak, but it was the marketing and sales efforts of Steve Jobs that really led to Apple’s success. Don’t let your ego or fear prevent you from achieving the amazing business impact that you know is possible.

  2. Don’t aim for perfection before rolling out your invention. For the serious inventor, a given solution is never good enough. There is always the urge add just one more feature or enhancement, which makes the product harder to use for the average customer, more expensive, and delay introduction. It also increases your marketing and support costs.

    I urge every inventor and entrepreneur to adopt the minimum viable product (MVP) strategy. This approach emphasizes getting the product to market early, and making enhancements based wholly on customer and competitor reactions, not what you like.

  3. Switch your focus to expanding the market infrastructure. Often the challenge on the business side is not in selling your technology, but in providing the infrastructure. For example, electric vehicle technology has been around for decades, but it took Elon Musk to focus on standardizing battery technology and making charging stations easy to find.

  4. Target a higher customer need and ability to pay. You may have a technology solution to eliminate world hunger, but hungry people rarely have money to pay for the need, and governments don’t make good customers. The Segway personal motorized scooter is a great piece of technology, but most people just didn’t find it worth the cost.

  5. Formalize your intellectual property position. Many entrepreneurs are reluctant to complete the work to secure a patent on their invention, citing cost and secrecy concerns, only to find that investors lose interest when they learn you have no long-term advantage over potentially aggressive competitors. A business must have a sustainable win position.

  6. Emphasize simplicity versus level of change involved. I find that inventors are fond of referring to their new technology as “disruptive,” or a major advance. They don’t realize that both investors and customers see big changes as more risky, big learning curve required, and slow to be adopted. Save your technical bragging for the experts.

  7. Sell or license your invention to an existing company. Of course, this alternative requires you to swallow your pride, give up visible ownership, and likely forgo that financial bonanza you have always envisioned. Yet the joys of avoiding business survival stresses, as well as a royalty stream to finance future inventions, can be very satisfying.

My advice for every inventor is to remember that your technology creation is necessary but not sufficient to create a million-dollar business for you and your team. Once you have an invention, it’s time to put the same passion and innovation into creating a business, or selling it to someone who can do the business work for you. Only then will the fruits of your labor come drifting in.

Marty Zwilling

*** First published on Inc.com on 08/12/2020 ***

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Monday, August 24, 2020

7 Keys To A New Startup While Still In A Paying Job

Multitasking-WomanMany experts will tell you that you can’t succeed as a part-time entrepreneur, as any good startup will require a 100 percent commitment of your time and energy. But not many of us have enough savings to live for a year or more without a salary, fund the startup, and still feed the family. Thus I often recommend that entrepreneurs keep their day job until the startup is producing revenue.

Of course, if you have investors anxious to give you money, or a rich uncle to keep you afloat, there is nothing wrong with a dedicated and full commitment to the startup, with commensurate more aggressive milestones and growth expectations. We all understand the risk of competitors quickly closing in, and market factors changing before we can roll out our solution.

For those of you who do decide to keep your day job, here are some pragmatic recommendations I espouse on how to make the most progress in your startup, while simultaneously juggling your other critical family and employer roles. In fact, these suggestions have tremendous value, even if you are dedicated and committed full-time to your new startup:

  1. Find a co-founder who can keep you balanced. Two co-founders, both working part-time are actually better than one founder full-time. You both need the complementary skills, ability to debate alternatives, and the tendency to keep each other motivated, that neither could match working alone. One still needs to be the agreed final decision maker.
  1. Schedule fixed times and days for the startup, working with the team. Building a startup is hard work, and requires discipline to get it done. Working part-time doesn’t mean all working randomly alone. Commit to a regular weekend time and a couple of specific nights per week where you meet with the team and focus only on the startup.
  1. Get better at saying ‘no’ to your friends. Learning to manage your own time is critical. Everyone around you enjoys adding things to your schedule, and reducing their to-do list. The key is learning to say no without offering a long list of excuses, or whining about how busy you are. It’s never possible to satisfy everyone, so be true first to your own priorities.
  1. Set realistic milestones and take them seriously. It’s easy for part-timers to make excuses that other priorities caused you to miss milestones, but predictable results and metrics in this mode are even more critical than for full-time members. Use the 80/20 rule to maximize productivity – get 80 percent outcome from 20 percent of focused efforts.
  1. Select a business idea that has a longer runway. Some startup ideas are dependent on a rapidly emerging fad, or have many competitors fighting for a limited market. You can’t move fast enough on a part-time basis to win in these areas. On the other hand, if you have a new technology, with patent applied for, maybe you more time to get it right.
  1. Prepare yourself for a longer journey to success. Seth Godin is famous for saying that the average time for overnight success in a startup is six years, even working full-time. Like any startup solution, the first version will likely be wrong, and require one or more pivots. Learn to look for small indications of success to keep you motivated.
  1. Make learning your full-time vocation. No matter how many full-time, part-time, and family commitments you have, you always need to carve out time for learning new things. Learning is not stealing from any employer, and it prepares you for all your futures. Don’t wait for anyone to pay your way to class, or give you time off for training. It won’t happen.

The advantage of quitting your day job early is that it removes all excuses, and all qualms from you and others, that the new startup is only a hobby. There is nothing that drives an entrepreneur like being hungry, dependent on the outcome, and seeing mounting debt. Without self-discipline, many aspiring entrepreneurs find that a single focus is the only way anything ever gets done.

There is certainly additional risk associated with working a paying job during the day, and working on your startup nights and weekends. First is the risk to your health and family life, which if you lose these, all the business opportunity in the world doesn’t matter.

Then there is the risk of antagonizing your current employer by missing deadlines, reduced productivity, or even getting embroiled in a legal conflict of interest or intellectual property ownership rights. I suggest it’s best to be up-front with your employer, with an honest commitment that your startup work will not impact company commitments or results.

Potential conflict of interest issues with a current employer should be explored openly, and resulting agreement documented, to preclude the possibility that you might lose everything later as your startup succeeds. On the positive side, your employer may like what you have in mind, and become your first investor and biggest supporter.

If your conclusion after all these pros and cons is that the risk is too high for you, you probably need to keep your day-job long-term, and give your startup idea to someone else. There certainly isn’t anything wrong with a regular well-paid job and career, with health-care benefits, and a competitive retirement plan. But the entrepreneur lifestyle is still more fun, even part-time.

Marty Zwilling

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Sunday, August 23, 2020

10 Strategies That Work Best For Serial Entrepreneurs

Richard-Branson-serial-entrepreneurEntrepreneurs who experience success with their first startup are often amazed to realize that the risks and fears of doing it right the second time go up, rather than down. Encores are tough, especially in the high-risk world of startups, yet every entrepreneur I know can’t wait to start over and do it again. Sometimes their haste or ego causes them to ignore basics, and they fall hard.

Every startup success is a function of great people, products, and profits. But there is no magic formula on how to bring these together a second time, but I did see some good insights on the parameters in a classic startup business parable, “Endless Encores,” by Ken Goldstein, who advises startups and has built companies in technology, entertainment, media, and e-commerce.

I have pulled together here a few of our joint recommendations to every entrepreneur and startup that I advise. These work the first time, and are required every time for success:

  1. Seek extraordinary people and revere talent. In the heat of the battle, when you have the least time and money to attract the best, it’s easy for an entrepreneur to settle for who is available, rather than who can bring real value and innovation to the business. Repeat leaders think more about talent, while short-term leaders worry first about output today.

  1. Hire for character, competency, and compatibility. Hiring is the single most important thing you do as a leader, and firing is second. It’s more than filling an open slot on your team. You start with skills, but then you have to delve deeply into motivation, trust, ambition, chemistry, and experience.

  1. Diversity on your team expands thinking. Hiring people who are just like you may eliminate revolts, but it won’t get you outside your own box. Creativity requires constructive conflict, a willingness to collaborate, dealing with failure, and boundless iteration. Solution and business model innovation require pushing the limits.

  1. Self-demanding beats boss-demanding every time. Startup successes are never perfect. Too many entrepreneurs are their own worst enemy, trying to do everything right the next time. Remember to embrace pragmatic goals and solutions, and accept a little bit of luck and assistance along the way. Perfectionists never win in the startup business.

  1. Leapfrog products invent and reinvent markets. Incremental product ideas do not change markets. It takes a paradigm shift, like autos to airplanes. On the other hand, making the user experience easier, richer, and more pleasant, as Apple has done repeatedly, can reinvent existing markets. Focus on the customer for repeated success.

  1. Eat your own dog food. If you don’t, why should they? The basic premise is that if a startup expects paying customers to use its products or services, it should expect no less from its own team. There is no better way to get quick and honest feedback on strengths, weaknesses, and usability. Even encore startups should expect to pivot to get it right.

  1. A business model is not an after-thought. Passion and ego are no substitute for a business model that makes sense. Some entrepreneurs are so enamored by their first success that they inherently believe that their next idea will make even more money. If your solution is free, or you lose money on every sale, it’s hard to make it up in volume.

  1. Strategy is charting a course, not making a move. Implementing a strategy doesn’t force the answer you want, so it pays to map out the alternatives and envision the possible as well as the problematic. Markets change rapidly these days, so the strategy that brought you success the first time, may lead to your demise the second time.

  1. Recurring revenue is the foundation for growth. Everyone loves the subscription model, since transaction costs exclude the cost of acquiring a new customer. Investors love this and other recurring revenue models because they facilitate growth through scaling. Sometimes repeat entrepreneurs forget that they must acquire new customers.

  1. Use cash wisely, as if it were out of your own pocket. Every new startup has extensive cash flow out, before any flows in. Serial entrepreneurs, with new bigger ideas, often forget that part of the equation, and are caught short. Repeating successfully means the same focus and due diligence on cash you had the first time around.

Thus the path to repeat success in business is to utilize what you learned from your first experience, and subvert any illogical fear of being exposed as a fraud or a lucky accident. If you have been able to “bring the crowd to its feet” with the success of your first venture, the principles outlined here could bring you endless encores.

Marty Zwilling

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Saturday, August 22, 2020

6 Ways To Pull In Customers Without Push Marketing

Seth-GodinEntrepreneurs have always believed that their product or service must show real value to customers, but today the smart ones are even able to make their marketing valuable. The days are gone when marketing was all “pushing product.” Now customers seek out people who are willing and able to add value, with expertise and insight, even before they have a product.

This new approach is often called “pull marketing,” where the idea is to establish a loyal following and draw customers to your content, and eventually your solutions. Customers don’t even see this as advertising. For example, top bloggers today, including Rand Fishkin and Gary Vaynerchuk, find no need to advertise, as customers come to them for value from content alone.

The impact of the right marketing content, and the principles of providing it today are outlined well in a classic book, “Content, Inc.,” by the so-called godfather of content marketing, Joe Pulizzi. He provides details on six key principles that every entrepreneur needs to practice in building and executing any modern successful startup:

  1. Fill a need independent of your product or service. For example, Seth Godin’s daily articles online on marketing are so valuable that he pulls loyal customers without ever mentioning his publishing services, consulting services, or speaking engagements. Make your content answer some unmet customer need or question without pushing a product.

  1. Consistently deliver new and valuable content. The key is consistency. Startups that haven’t updated their website since rollout, or publish a new blog once a month or less, won’t be followed for valuable content. In this context, content is like advertising, unless customers see you every day, they won’t remember anything about you, good or bad.
  1. Customers relate to other humans and relationships. As a startup, you the entrepreneur are the brand. Customers like to think they know you, so you need to find a voice, and share it. If you have a story, share that too, and invite interaction and comments. It’s more true than ever that people buy from people, not companies.
  1. Value is in your point of view. Everyone knows how to use Wikipedia, universities, and textbooks for facts and history. Experts and advisors offer new value from their insights, opinions, and experience. Don’t be afraid to take sides on matters that can position you and your company as an expert. People appreciate that, and come back for more.
  1. Avoid “sales speak” and pushing your product. The more you talk about your solution, the less people will value your content. Pulizzi has measured that page views drop quickly by as much as 75 percent on self-serving content. Skip the flowery phrases and frequent adjectives that make up so much of the advertising copy we all recognize.
  1. Demonstrate best of breed through actions. Although you might not be able to reach it at the very beginning, the goal for your content is to be best of breed in your chosen domain. This means that, for your content niche, what you are distributing and your recommendations are the very best of what you and other experts have found.

Pulizzi argues, and I agree, that great content can be used by entrepreneurs to build an audience of potential customers first, before you have a product to sell. It’s the smartest and least expensive way to test the value of your concept, as well as the potential makeup and size of your target customer set. You then have the opportunity to monetize an already loyal following.

By experimenting with content, every entrepreneur can explore their own sweet spot, where they can comfortably offer value to an interested customer set. They can find their personal tilt that sets them apart, build a base of followers as a foundation to a business, and then harvest the audience for diversification and monetization.

What we call “marketing” has changed from a focus on “selling” customers with push marketing, to a focus on providing value early and in every way possible, such that customers are drawn to you as a trusted provider of value. That’s the loyalty you need, to have them recommend you to their friends, and keep you ahead of the many competitors easily visible on their radar.

Marty Zwilling

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Friday, August 21, 2020

7 Critical Resources For A Thriving Startup Community

thriving-startup-communityAs a mentor to aspiring entrepreneurs, I often feel the frustration of someone trying to build a startup in the wrong place and time, and wrongly attributing their struggle to personal limitations. It may not seem fair, but passion and commitment alone are not enough to make your startup successful – every business needs critical resources and favorable location-specific conditions.

Many of you are convinced that it’s all about finding investors, but my experience indicates that the critical resources needed go far beyond money. I saw these addressed well in a new book, “The Startup Community Way,” by Brad Feld and Ian Hathaway. These guys have been building startup communities like Techstars for over 30 years, so they know what works and what doesn’t.

I support their summary of the seven capital assets that are the core required to create a thriving entrepreneurial ecosystem, and produce real economic value for your startup and the rest of us:

  1. Intellectual capital – ideas, information, technologies. Contrary to popular belief, innovative new ideas don’t often spring from a single mind. You need to be stimulated by easy access to many sources of learning and leadership, including universities, research, and other businesses. The best ideas evolve iteratively, and are tested by the ecosystem.

    Many successful entrepreneurs, including Bill Gates and Mark Zuckerberg, admit to reading many books a year, as well as participating in panels and forums on national and global challenges. A commitment to constant learning will raise your intellectual capital.

  2. Human capital – talent, knowledge, skills, experience. I believe the best way to be successful in business is to surround yourself with people smarter and more experienced than you. Building a startup is not a solo operation. You need partners, mentors, and investors who can complement your own resources to make it a win-win for all involved.

    Most people I know credit Steve Job’s success to his ability to attract top technical talent, starting with Steve Wozniak who designed the first Apple computer. Apple has since capitalized on the top technical talent in Silicon Valley to stay ahead of the competition.

  3. Financial capital – revenue, equity, debt, funding. Key sources of financial capital for any startup community must include friends and family, local angel investors, and venture capital access. Despite the reach of the Internet and cold calls, there is no substitute for warm introductions. Of course, ultimately you must appeal to real customers to survive.

    Good entrepreneur communities learn from each other, and from advisors, how to acquire and manage financial capital, through organizations such as EO. Others look for more elusive sources of funding in the infrastructure, such as grants and bank loans.

  4. Network capital – relationships, connectedness. Networking events create opportunities for like-minded and supportive people to build partnerships. Cocktail party networking is not enough. Look for business-oriented and industry conferences, hackathons, and Startup Weekends, with outside speakers and experienced leaders.

  5. Cultural capital – mindset, behaviors, history. Vibrant startup launching communities have a buzz around entrepreneurship, where founders are role models, leaders, and even local heroes. People look to entrepreneurship as a viable career path, with a supportive view, an understanding of risk and reward, and a tolerance for failure.

  6. Physical capital – infrastructure, density, place quality. Startup neighborhoods develop more readily in larger cities, like Boston, New York, London, or the San Francisco Bay Area. These areas also have the diversity of genders, races, and points of view to encourage innovation and be productive as teams in a complex environment.

  7. Institutional capital – markets, system of laws, stability. While these factors may be less of a problem in advanced economies, I hear regularly from aspiring entrepreneurs around the world who are struggling with the lack of a supporting infrastructure. While the opportunity there may be large, it sometimes pays to relocate to a more friendly locale.

If entrepreneurship is your dream, it pays to look beyond your personal drive and location for the capital to make your chosen lifestyle fun and successful, rather than a constant struggle against huge odds. If you are already there, it’s time to help us all by gathering the right assets creating a viable startup community for the rest of us. All our futures and the next generation depends on it.

Marty Zwilling

*** First published on Inc.com on 08/07/2020 ***

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Wednesday, August 19, 2020

5 Ways To Conserve Investor Cash And Ensure Survival

money-back-up-save-moneyCash flow is a basic survival metric for every startup. Investors check your burn rate to assess your efficiency, and project your remaining runway before you run out of money and into a brick wall. Don’t wait until you are almost out of cash before managing every dollar spent, or looking for the next refueling from investors. Desperate entrepreneurs lose their leverage and die young.

It doesn’t take a financial genius to recognize that you need to keep your burn rate low. Yet it always amazes me that I can find two different startups, seemingly working on the same problem, with one having a burn rate several times higher than the other. Of course, their answer is that the second intends to get to market faster, but every engine has limits regardless the fuel applied.

If your runway is less than a year, it’s time to either begin looking for a new cash infusion or defining and implementing a Plan B to assure survival. Your goal is that magical breakeven point and hockey-stick profit-growth curve. Raising money from professional investors, even friends and family, takes time. Count on six months from beginning the funding process until a new check is cashed.

As a mentor to many entrepreneurs and startups, here are my best recommendations for keeping the burn rate low, planning ahead and maintaining credibility with investors:

  1. Manage cash flow personally every day.  A big influx of orders may feel like success, but can kill your business if you don’t have the cash to produce, deliver and wait for payment. The best entrepreneurs manage cash flow ruthlessly and never delegate decisions about spending money. Cash flow out equates to burn rate, and the runway depends on your reserves.

  1. Buffer your projected resource requirements. You will make mistakes. Things will cost more than you expect. Always add 20 percent to your best estimate of funding requirements when approaching investors. They understand startup realities. Better to ask for more early. Going back to investors for more money ahead of the plan is high in terms of credibility and leverage.

  1. Use future cash for payments where possible. Deferred payments start with stretching the payables period but, more importantly, include giving employee equity in lieu of a higher salaries and negotiating vendor deferred payments out of future revenues. Think of these alternatives as paying interest on a loan, and manage them wisely.

  1. Be a miser with contract services and facilities. One of the main reasons that former corporate executives often fail as startup CEOs is that they expect a big office and an entourage of expensive professionals to do the real work. Cash flow can be drastically reduced by working out of your garage. Tackling most of the support tasks yourself.

  1. Use social media for early marketing.  Hire a professional marketing and public relations agency once you have a good revenue stream but you don’t need them to start a free blog, establish Facebook and Twitter accounts with initial content and complete the basics of search engine optimization. Social media is not rocket science.

The timing of cash flow is everything. Waiting until you have something to sell before bringing on a sales and operations staff. Getting a sales contract before manufacturing inventory. Match your office, facilities and computer equipment to the size of the staff you have today, and intend to have in the next six months.

As a rule of thumb, your monthly burn rate should be less than 10 percent of your last funding raise or starting cash in the bank. For example, a software development startup raising $250,000 from angel investors better be able to operate on $25,000 per month. This could equate to two technical founders (with a minimal salary), funding two developers for a year.

In this case, the primary cash outflow would be for product development and operating expenses, with potentially enough runway to build the initial product, get a patent, attract some early adopters, and build the initial revenue stream. That should equate to an adequate valuation for a $2 million follow-on Series-A round, without giving away all the equity.

Overall, managing cash flow and burn rate is more critical to your business success than having the right idea and the right product.  It’s why most investors proclaim that they invest in people, more than the idea. If you adequately manage your burn rate, your startup is much less vulnerable to flaming out before you get to that elusive break-even point.

Martin Zwilling

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Monday, August 17, 2020

7 Due Diligence Checks On Your Idea To Save Some Pain

chasing-money-runIn my experience, consummate entrepreneurs tend come up with more startup ideas than they can ever implement, and some of the ideas may not even make business sense. But how does any entrepreneur know which ideas to implement, and which ones are best left behind?

After all, most great breakthroughs, like a computer in every home, seemed like a crazy idea before Steve Jobs and Bill Gates made it happen. Now we are seeing a computer on every wrist, and in most household appliances.

That doesn’t mean that entrepreneurs should ignore business and market realities, under the assumption that success is a random phenomenon. Passion, optimism, and determination are necessary but not sufficient to assure a successful startup.

Some analysis and due diligence along the following lines should be performed on every idea, as a reality check, before committing your efforts and other people’s money to building a business:

  1. Look for places where competitors are few. Even if the idea sounds unique to you, it’s worth your time to do a few Internet searches using relevant keywords. If you find more than a dozen solutions that loosely match your idea, it may be time to skip that one and try another. Don’t forget to consider customer alternatives, like trains versus airplanes.
  1. Check for intellectual property barriers in your way. These days, you can find existing patents and trademarks through Google and the US Patent Office online site without spending thousands of dollars with your favorite patent attorney. Of course, existing patents don’t stop you from innovating, but charging ahead into a wall is no fun.
  1. Find a recognized billion dollar and growing market. If you will be looking for professional investors to help you along the way, recognize that they expect to see data from credible market analysts on the size and location of your solution opportunity. Look for double-digit growth data from Nielsen, J.D. Power, Frost & Sullivan, or others.
  1. Separate nice-to-have ideas from ones solving painful problems. All your friends may love your idea on how to find the nearest bar or gym, but how many people are willing and able to pay money for your solution? Even good social causes need to bring in revenue to continue their worthy efforts. Ask domain experts to quantify value for you.
  1. Choose projects with financial resources within your reach. These days, you can build a new e-commerce website to sell home-made wares for a few hundred dollars. New smartphone apps cost only a few thousand, if you have the programming skills. Unless you have a rich uncle, it’s probably not smart to challenge Intel for the next computer chip, which would require hundreds of millions of dollars in investment.
  1. Minimize infrastructure dependencies. Sometimes your solution is impressive, but mass acceptance requires a big culture change, a large support system, or government legislation. For example, the Segway personal vehicle was proven technology 15 years ago, but is still constrained by right-of-way laws, liability issues, and charging stations.
  1. Availability of necessary skills and team members. Most startup projects require special skills and a motivated team. Entrepreneurs with ideas may not have access to the support skills required, or the ability to put together a motivated team. A successful startup is more about the right people and the right execution than the right idea.

Despite what you hear from some Internet spammers, there are no slam-dunk entrepreneur ideas that can make you rich with no risk and minimal effort. In fact, from painful experience, every real entrepreneur I know could probably add at least one item to this list of reality-check items. Thus I’m suggesting that you do your due diligence carefully, and pick the right idea before you start.

Sometimes I have to tell wannabe entrepreneurs that their million-dollar-idea is actually worth very little, in their own hands. It may indeed be better to freely donate your idea to a more qualified entrepreneur or team, rather than foolishly running it into the ground or sitting on it. One hundred percent of zero is still a small number.

Martin Zwilling

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Sunday, August 16, 2020

7 Characteristics Of Startup Founders Who Enjoy Life

man-tech-company-founderAs an angel investor and a mentor to aspiring entrepreneurs, I’m always disappointed to see founders who seem stressed out most of the time, and more annoyed than energized by the abundance of challenges they see in building their startup. The entrepreneurial lifestyle is a tough one under the best of circumstances, and it’s one you have to love in order to succeed.

Obviously, it’s not that simple, but making the right first impression is critical for an entrepreneur, not just with investors, but also with partners, customers, and even yourself. Even though I’ve been working with entrepreneurs for many years, I’m sure I’m not the only person who can quickly spot the ones whose mentality for the role is suspect.

We would all prefer that aspiring entrepreneurs take a hard look in the mirror early, before they assume they can step easily into the role of a Mark Zuckerberg, Richard Branson, or Bill Gates. Here are some key mindset attributes to look for, which I believe are essential for every entrepreneur to see in themselves:

  1. You relish the role of leading the charge. Being a visionary or an idea person is not enough; you have to be anxious to jump in and get your hands dirty. Most success stories in business are not about envisioning the next big thing, but about making that change happen. Investors and strategic partners look for entrepreneurs who can execute.
  1. Able to balance right-brain and left-brain activities. Most technical entrepreneurs are left-brain logical thinkers, even perfectionists. Yet every business today needs a focus on visualization, creativity, relationships, and collaboration, which are normally in the domain of right-brainers. Successful and happy entrepreneurs have that rare whole-brain focus.
  1. Enjoy being outside your comfort zone. New businesses are an adventure into the unknown. You need to be mentally prepared to enjoy the roller coaster ride, rather than face it holding your breath with your teeth gritted at every turn. Only then can you enjoy the thrill of victory when you survive a major turn, and be energized for the next one.
  1. Proactively seek input, but make your own decisions. Great entrepreneurs seek out critical customers and industry experts, and actively listen, but are not afraid to trust their own judgment as well. Ultimately they accept the responsibility of “the buck stops here,” meaning they live by their own decisions, and never make excuses.
  1. Willing and able to do a little bit of everything. Technology experts tend to have a very deep level of knowledge, but not very wide. If your real interests are not very broad, then building a business will likely be frustrating and expensive. Startups have limited resources, so the founders have to enjoy trying things, and learning from their mistakes.
  1. Viewed by others as a successful problem solver. The best ideas for a new business are solutions to a real customer problem, rather than great ideas looking for a market. Creating a new business means tackling one difficult problem after another, until success suddenly appears. Entrepreneurs see problems as milestones to success, not barriers.
  1. Don’t demand or expect immediate gratification. Seth Godin once said “The average overnight success in business takes six years,” and he is an optimist. For some entrepreneurs that success is financial, and for others it is a legacy of good deeds. Because it takes so long to get there, it is important to be happy with the journey.

I’m not suggesting that you need to fit every aspect of my view of an entrepreneur’s mentality for success. Certainly there are winning businesses run by people from every background and personal style. But if you are looking for investors, team members, and demanding customers, it helps to understand what their biases might be in committing to and helping the ideal partner.

I do believe that if every aspiring entrepreneur spent at least as much effort looking inward, understanding their own drivers and preparing, as they do in working outward by building solutions, seeking investors, and writing business plans, the startup success rate would go up.

Overall, the entrepreneur mentality is a state of mind that enjoys the activities and requirements of starting a business. Happiness is more likely to lead to success, than success leads to happiness. Are you certain that your desire and expectations of being an entrepreneur are being driven by the right perceptions?

Martin Zwilling

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Saturday, August 15, 2020

6 Keys To Translating Technology Into Business Value

technology-futuristic-scienceYoung entrepreneurs often are so excited by new technology or their latest invention that they forget to translate it into a value proposition that their customers or potential investors can understand and relate to. They become frustrated with investors, senior executives, and even customers who don’t seem to “get it,” with the result that everyone loses.

Senior business leaders, for example, are unlikely to relate when you pitch your latest web app, highlighting the mashup technology, which you derived from early online social networking applications. Mashup probably reminds senior leaders of a train wreck, and social networking is still seen by some business executives as a frivolous waste of time.

It’s really your responsibility and to your advantage to translate your message into values and priorities that the intended receiver can readily relate to and understand. Here are some key value propositions that will resonate with every business leader I know:

  1. Ability to adapt quickly to changing requirements. Every business leader knows how difficult it is to keep up with a changing market. If you can quickly explain how mashup technology facilities this agility challenge, the technology may quickly turn from a negative to a major positive. This priority applies to big companies, as well as startups.
  2. Customer data integrity and security. Customer data, as well as internal data, is a key resource for every business that must be secured and protected. If your message starts with a focus on this priority and related costs, the technology will likely be appreciated and valued, rather than challenged.

  3. Personal privacy protection. Customers are always looking for a better user experience, and they don’t want their privacy compromised. Before you focus a senior decision maker on your new cloud technology and distributed data, make sure he or she understands how it will lower user privacy exposures, rather than increase them.

  4. Reduce litigation risks and support costs. Often new technologies are seen by senior decision makers as new opportunities for litigation and hackers. You need to address these concerns early, by highlighting patents, encryption capability, or other features which mitigate these risks and costs. Skip the acronyms and implementation details.
  5. Payback on investment. Every business executive wants to understand how each new investment in technology relates to their bottom line. Quantifying the return on investment (ROI) is “top of mind” for every investor and executive. Entrepreneurs who make this case effectively will get the decision they want, no matter how esoteric their technology.

  6. Ability to integrate with existing apps. New applications which can’t communicate with existing data and applications are often more of a problem than a solution. Mashup technology may be your biggest plus, if you position it in this context. Highlight the mashup use of existing friendly interfaces, and use of existing data in a new solution.

I challenge every entrepreneur to see how many of these priorities they can integrate into their new technology solution elevator pitch. You may be able to turn a potential train wreck into a win-win decision for both you and the investor or customer. In any case, it pays to do your homework on the background and experience of the decision maker you face. Don’t assume their understanding of technology is commensurate with yours.

Entrepreneurs need to remember that every investment decision, whether by professional investors or customer executives, is primarily a financial decision, not a technology decision, driven by limited funds. If you can translate your technology power into a solution satisfying key business goals, you will win the investors you need, as well as the customers you need to make your startup a success.

Technology is the means, not the end.

Martin Zwilling

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Friday, August 14, 2020

6 Keys To Sizing Your Market For A New Business Plan

market-opportunity-analysisMany entrepreneurs are so enamored with their product vision that they believe their own hype, and are convinced that the market for their solution is so huge that no one will ask them for independent market research data. They don’t realize that business projections with no third-party validation have no credibility with investors, and smart potential investors will walk away.

Every good business plan needs an early section which sizes the total market opportunity, and then breaks down that total into the most relevant segments for your focus. If ten percent of these numbers, multiplied by your average product price, will get you the revenue you need to scale your business, you will get the love you need from angel and venture capital investors.

A common excuse I hear from entrepreneurs for not doing the work is that real market research takes too much time, and costs too much money. Perhaps that was once true, but in this age of the worldwide Internet, big data, and pervasive business intelligence in every industry, you can use the following steps to get the data you need with very little time and cost:

  1. Start your research with Google. Use your favorite search engine and keywords describing your solution to find online sales reports, trade association statistics, and online newsletters with the latest statistics. The wealth of data available online is already much larger than the entire Library of Congress, and much more current.
  1. Modern libraries are still worth a visit. Universities and large municipalities still maintain subscriptions to the latest market research reports from key sources, including Nielsen, International Data Corporation, and Gartner Group. In most cases, these are available to the public for free access, and can be referenced and footnoted in your plan.
  1. Explore municipal development resources. The local Small Business Association (SBA) offices, or their equivalent in other countries, can often provide market statistics on key market domains in your area. New business development specialists there can also provide good additional sources for the specific information you may need.
  1. Browse the business section of your favorite bookstore. These days, it’s a great way to get some work done, while enjoying a cup of coffee, so you may not even have to buy a book. Pay particular attention to the titles discussing the latest issues having big opportunities, like alternative energy, global warming, and technology trends.
  1. Peruse company reports from your business domain. Competitor annual reports, white papers, press releases, and presentations are great sources of data and trends that you can use to support your own efforts. These are also important for your product positioning in the competitor section of your business plan.
  1. Conduct your own customized market research. With social media and the new survey tools, it’s easy and fast to set up and run your own focus group, or opinion survey. Just make sure your results are statistically significant, rather than anecdotal, and avoid any personal biases in the questions which may be used against you.

You need to find just enough information to quantify the real need out there for your product or service. For example, if you are offering an accounting service for small business owners, you would want to quantify the number of enterprises in your area, with the size, age, and spending demographics that you are targeting.

Buying large detailed reports from market research freelancers and name-brand providers usually costs several thousand dollars, and often is not required to find the summary data you need to satisfy investors. One of the free sources above, or just the teaser data from an online report advertisement, often is more than adequate as a third-party reference for credibility.

We all know that people can use statistics to prove any point they want, but not having any opportunity sizing is certain to raise a red flag above your whole business plan. On the other hand, spending your entire startup budget on market research won’t improve your odds of success or funding.

Successful entrepreneurs get the job done quickly, without breaking the bank.

Martin Zwilling

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Wednesday, August 12, 2020

7 Keys To Being Viewed As Indispensable By Your Team

indispensible-business-team-memberIn my experience at all levels within large organizations as well as small ones, the team members valued the most, and usually promoted first, are the ones seen by others as indispensable or “goto” people. The challenge we all face is how to be one of these, without overworking, while still getting the right things done. What do these people know and do that you can’t do or learn?

I’ve been trying for years to net out the key elements of this answer, and I was pleased to find some real help in a new book, “The Art of Being Indispensable at Work,” by Bruce Tulgan. He has long been an advisor to business leaders all over the world, so he brings a global perspective, as well as his own to this issue. I’ll paraphrase here the key principles that we both have observed:

  1. Build real influence by doing the right thing for others. You get influence by facilitating success in others around you, by always doing the right things, and adding value to every single opportunity. You know you have power when other people really want to do things for you, make good use of your time, and contribute to your success.

    A key prerequisite to influence is trust. For example, at the executive level, Warren Buffett is such a trusted business leader that Bill Gates and other luminaries constantly seek him out for help and guidance on projects that have long-term business potential.

  2. Take charge but stay aligned with the chain of command. First you have to make the effort to learn how things work and what is allowed in the organization. Staying aligned requires communication up the line, as well as down, and diagonally. It’s important to take your own initiative, but don’t go rogue and overrun other people or processes.

    In my career, I’ve known many people who were willing to take on more work, but were frustrated and ultimately failed, due to their inability to work the chain of command. It always pays to stay aligned with key forces, both inside and outside the organization.

  3. Know when to say no and how to say yes. Remember that “yes” is where all the action is – to add value and build up your real influence. But to be effective, every “yes” must be timely, and preceded by some due diligence and a focused execution plan in your mind on what and how to deliver. Learn when to say no (or not yet), with the same certainty.

    A good no, well decided at the right time, is a huge favor to everybody. No one wins if you simply cannot do the job, are not allowed to do it, or you really believe that the work requested is not a good business decision. This is where trust and honesty are critical.

  4. Work smart by professionalizing everything you do. Brute force doesn’t work in business. Professionalizing means following best practices in your field, capitalizing on repeatable solutions, and using available tools or job aids. In today’s ever-changing world, you must keep expanding your repertoire, and build relationships with experts.

  5. Don’t be a juggler, and finish everything you start. Constant jugglers and multi-taskers will inevitably drop the ball. Take control of your time, break the work into bite-sized chunks, find openings in your schedule for each chunk, and keep your focus on results, rather than hours expended. Remember that “done” is better than “perfect.”

  6. Keep getting better and better at working together. Relationships are the key, but focus your relationship building on the “yes” work, not politicking or socializing. Celebrate successes with a big “thank-you,” and redirect potential finger pointing into lessons for continuous improvement. Plan ahead for the next opportunity to work together better.

  7. Promote collaboration throughout the organization. In addition to being a “go-to” person, you need to create new “go-to” people out of every “yes,” as well as find and use “go-to” people yourself. Foster a culture upward spiral where serving others is what being indispensable is all about. Other organizations will notice and emulate your lead.

In fact, the strategies outlined here are a win-win for both you and your organization. You get more recognition as an indispensable employee, and the company gets more of the right things done, greater team productivity, and more success in the longer term. You might even find that your work is fun and satisfying for a change. Wouldn’t that be a pleasant surprise?

Marty Zwilling

*** First published on Inc.com on 07/28/2020 ***

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Monday, August 10, 2020

8 Ways To Stay Competitive In Today’s Technical World

robot-technologyTechnology is so key to every business these days that experienced business-smart but non-tech entrepreneurs are feeling deeper and deeper in the hole. Even if they realize that they need real technical strength at the top, they are not sure how to attract and select the talent and expertise they really need. Should they go after high-tech nerds for partners, or professional technologists?

The right answer for a good business partner today is neither of the above. Startups succeed most often when the founding partners know how to build and run a business, rather than how to build and run technology. Only one component of running a business is managing technology, but it is a critical component, so no entrepreneur can afford to ignore it or totally delegate it.

That means every entrepreneur needs to learn how to attract, hire, and manage technical people for their team. Just like you don’t have to be a financial guru to recognize a good CFO, or a marketing genius to hire a VP of Marketing, you can find the right technical partner or team member by using the right evaluation and hiring steps, including the following:

  1. Engage a technical advisor to assist with recruiting and early interviews. Just like executive recruiters recognize the best executives, a technical expert in your business domain will recognize the right combination of skill, creativity, and experience you need for a co-founder or key team member. Don’t fall for a technical pitch you can’t fathom.
  1. Look for a match in culture and values, as well as technical strength. A great technical LinkedIn profile is a good start, but not enough to assure success in your environment. The non-technical leadership attributes of excellent communication skills, high integrity, passion, and perseverance are critical for the success of the whole team.
  1. Spend time informally with candidate peers and former employers. This approach works best with business associates that know you, or peers that you meet at industry conferences, or technical gurus that have no business connections to the candidate. Former employers will normally only give you candidate employment dates or good news.
  1. Let candidates educate you on attributes you need and they bring. The key here is to do more listening than talking in both formal and informal interviews. I find that many entrepreneurs are so passionate about their own idea that they can’t stop selling it to potential partners. They are attracted to people who agree, but may not be able to help.
  1. Evaluate their problem-solving ability in the context of your business. A business startup is not an academic environment, or a big company research organization. Practical problem solving, and communicating to business people, is often a big challenge for technical experts. Test them with problems outside their comfort zone.
  1. Challenge current team members to bring in the best and the brightest. Start with existing co-founders, extend the request to advisors and investors, and finally to existing team members. Make them part of the interview and decision process, since they all have a large stake in ultimate success of the new venture.
  1. Continually ramp up your own technical competence. Although technology is getting more pervasive in business, it’s not rocket science. If your kids can use computers by age six, every entrepreneur ought to be able to stay current with the latest social media marketing and e-commerce technologies. You can’t manage a technical team or negotiate with technical partners without understanding their view of the business.
  1. For non-core technical strength, look for outside partners. Outsourcing to expert freelancers or business partners is often a better solution for startups than managing everyone into the inside team. You may not have the breadth of technical challenge, or the budget, to lure in and keep motivated the caliber of technical expert you need.

Even if your company doesn’t sell high-tech products, like Zappos sells shoes, having and using the right technology in the business, for distribution, marketing, and customer support, can easily make the difference between winning and losing in today’s high-tech world. It’s no anomaly that Zappos CEO Tony Hsieh graduated from Harvard with a degree in computer science.

On the other hand, there are many technology companies successfully started and run by non-technologists. For example, Richard Branson, CEO of Virgin Group, with no technical background at all, has started and run many technical companies, including the futuristic Spaceship One and an orbital space launch system, and reportedly does his own social media work.

Thus non-technical entrepreneurs must not shy away from technical issues, and must also learn to find and effectively work with technical partners, inside their company and outside. Street-smart today means the ability to survive and prosper in a technical world. Are you there?

Martin Zwilling

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Sunday, August 9, 2020

5 Keys To Negotiating Your Fair Share Of Any Startup

Gates-and-BallmerI always tell entrepreneurs that two heads are better than one, so the first task in many startups is finding a co-founder or two. You need to find the skills or experience you don’t have in business, technology, or money. So the first question I usually get is what percent of the company or equity is that person worth? Giving a co-founder a salary won’t get you the “fire in the belly” you want.

The default answer, to keep peace in the family, is to split everything equally, but that’s a terrible answer, since now no one is in control, and startups need a clear leader. The next default of waiting until later is equally bad, since partners who bow out early will still expect an equal share of that first billion you make later.

Now comes the reality check. Just because it was your idea doesn’t mean you “deserve” 90% of the equity. The value in a startup is all about tangible results, so I see no equity value in the idea alone. Thus the real discussion must start with who will be doing the work, providing the funding, and delivering results. Each co-founder should get equity for value, based on these key variables:

  1. Lived a key role in a previous startup. Building a new business is quite different from an executive role in a mature company, so people from these backgrounds are often a liability. Value is embodied in previous success with investors, proven problem solving ability, and having built and executed a business plan with minimal resources.

  1. Experience and connections in your business area. Textbook knowledge and academic degrees don’t count here. Value factors include your related product breadth and depth, relationships with thought leaders, key vendors, and large potential customers. Building the product may be the easy part of your startup challenge.

  1. Key to required patents or trade secrets. In many cases, one of the co-founders may bring some work in progress that can be patented, trademarked, or copyrighted. Your idea is not intellectual property yet, so it has no inherent value. Every previous experience filing and winning a patent is a rare and valuable asset.

  1. Level of responsibility and time allocated. Co-founders only able to work part-time, with responsibility and major income sources elsewhere, don’t carry the same risk as others with more operational responsibility. Less dependence or startup success, or more cash compensation, generally means less equity assigned.

  1. Amount of venture funding provided. Investors may not be called co-founders, but they always get equity, commensurate with their share of the total costs anticipated, or share of the current valuation. The challenge is for real co-founders to keep their equity percentage above 50%, or they effectively lose control of operational decisions.

If none of these five items is a clear differentiator in your case, a logical approach would be to assign each an equal weight of 20% of the total, and partition the total equity based on each co-founder’s correlation to each variable. A friend or family investor thus might get 20% of the equity, even with no business activity contribution.

Because these considerations can be quite complex, very emotional, and have long-term implications, smart entrepreneurs don’t hesitate to get some legal advice at this early stage, in drawing up an agreement document to be signed by each of the co-founders. Obviously it should be amended later, as roles are more clearly defined, and execution proceeds.

Even with an agreed initial equity split, it’s smart to have Founder’s stock actually issue or vest over a period of at least two years, on a month-by-month basis. That way, if one of the partners disappears, or their role changes, a portion of the equity can be re-captured and reallocated to the other members. Other common terms, like the right to re-purchase, should be investigated.

In all cases, roles and titles should be clear, but not necessarily tied to any given percent of equity. In other words, the CEO need not be top equity owner, but should be the one with the most business skill and experience. The CTO of many technical startups was the original founder. The CFO may have a major financial background, but might be a minority owner.

Of course, all co-founders need to remember that allocated percentages will be diluted as angel and VC investors are brought in. Keep your wits about you to make sure that dilution is done equitably and evenly. Naïve cofounders have found themselves squeezed out in some well-known cases, including Facebook.

But don’t get greedy. It’s the power of the team that makes the business. Major equity in a startup that goes nowhere is not my idea of fun.

Martin Zwilling

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Saturday, August 8, 2020

5 Keys To Reducing Startup Risk By Building On Trends

Socialmedia-trendsIt may not be as sexy, but starting a new business which builds on an existing technology or business model is usually less risky than introducing that ultimate new disruptive technology. There are many levels of innovation that go beyond copying someone else’s idea, but stop short of pushing the leading edge (bleeding edge).

Many of the major business successes started this way. McDonalds didn’t invent the fast food model – they simply improved on the cookie-cutter White Castle process. Before Wal-Mart made the low-cost high-volume business model famous, there was Ben Franklin and Two Guys who touted it way back following World War II. And we all know Facebook didn’t invent social media.

The advantage of imitation, with innovation, is that it gives you a solid base for building experience. There is always time later for your next startup, using that disruptive technology of your dreams. Or you may decide that your dream was not really the great idea that you thought it was.

So don’t be intimidated by the negative image that imitation currently has in the startup world. Certainly I’m not recommending just one more Facebook, with a couple of features from Twitter, since social media has an unlimited potential for innovation. Risk level has always been directly correlated to the number of unknowns, so eliminating even one variable will improve your odds:

  1. Eliminate one aspect of research and development. According to a classic Harvard Research study, first inventors spend at least a third more on their initial technology than later innovators. In addition, we all know that patent disclosure rules often facilitate legal reverse engineering, and innovation at this point is now much cheaper.
  1. Capitalize on the lessons from early adopters and competitors. Smart startups save cost and time by capitalizing on the pivots of others before them. Market research can thus be based on real customers and a previously tested market. Studying and learning from the mistakes of others is the best way to reduce your own risks.
  1. Attract investors who fear pioneers catching arrows. Banks have always been more likely to support the franchise model of cloning an existing business, while they avoid, like the plague, a new and untested technology. Most equity investors tend to avoid truly disruptive technology startups, since they take longer and more money to scale.
  1. Imitation with continuous innovation predictably drives progress. The auto industry and others have used this model for generations, so business processes and metrics for innovation are well documented. Disruptive technologies are random and their success is unpredictable. Good imitators, like McDonalds, often bypass the original innovator.

  1. There is always a related market or new country. The world is now a small place, but startups usually don’t have the resources to saturate all the related markets at once. Imitation with innovation is a great way to jump ahead of the curve. Especially if that new market is your home country, you will have the advantage.

But don’t be fooled by thinking this approach is easier than rolling out a disruptive technology. In many ways, more effort and attention is required to make sure you know what works and what doesn’t work in a given domain. Timing is critical, as well as focus on marketing and customer satisfaction. Competitors can move quickly, and there is no huge technology gap to protect you.

If this approach appeals to you, I recommend that you start by looking for successful businesses, rather than failing businesses, and focus on innovations you could offer to make the businesses even more successful. Innovations are often as simple as better delivery, more customization, or better distribution. Who knows, your imitation with innovation may turn out to be the bigger than the disruptive technology of your dreams.

Martin Zwilling

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Friday, August 7, 2020

10 Strategies For Success Long-Term As Well As Today

strategies-for-successEvery one of you has had to deal with the conflicting requirements of optimizing your business in the short term versus the long term. In the short term you need customers to find you at any price, and in the longer term you need revenue, profit, and return loyalty. Even a million users on your social media site won’t pay the bills until you sell some advertising or a premium service.

In a larger public company, it’s all about making your quarterly numbers, versus investing in strategic growth alternatives that may not pay off until several quarters later. The challenge we all have as business leaders is balancing the focus between business today and tomorrow.

Based on my own experience in both large and small companies, I agree it can be done, with the essential principles outlined in a new book, “Winning Now, Winning Later,” by David M. Cote, former Chairman and CEO of Honeywell. Although his focus is naturally on bigger companies, I contend that his recommended strategies apply equally well to entrepreneurs and startups:

  1. Demand a mindset of deep thinking for the long term. Don’t allow you or your team to succumb to the mistake of narrowing the scope of thinking to solving today’s problem only. That keeps people from pushing themselves to develop the kind of new solutions that will permanently change the business for the better, versus short-term band-aids.

  2. Connect operations today with long-term goals. In my experience, even in startups, longer-term strategy often gets pushed off the agenda due to current challenges. Overtly connect every operational problem to your strategy, rather than putting strategy on a different plane and making it only an annual event. Don’t make growth a big-bang event.

  3. Separate serious business threats from daily crises. The natural human tendency is for people to treat all problems as short-term, and apply patches rather than solutions. Strategic threats, including new competitors, market changes, and environmental issues need deeper analysis and full resolution, before they jeopardize your business survival.

  4. Make process improvement a constant focus. Don’t wait for a short-term crisis, or a long-term one, to force process improvements. By being proactive, and empowering and rewarding your frontline employees for improving processes, you will enhance your business productivity and growth in both the short term as well as the long term.

  5. Build and model a high-performance culture. Every business team becomes inwardly- focused by default, comparing themselves only emotionally to others they know within the organization. It’s your job as a leader to be the model high performer, quantify the team view with metrics, and expand awareness to the best outside competition and new tools.

  6. Attract, train, and reward only the best leaders. This strategy requires allocating a significant portion of your time, even as daily crises grow, to the nurturing of the leadership pipeline, mentoring high potentials, paying them well, and rewarding results with positive short-term feedback, as well as strategic promotional opportunities.

  7. Constantly scan the horizon for growth opportunities. Distinguish growth opportunities from survival efforts, and make sure they are adequately funded, rewarded, and measured. Get outside the company regularly to get feedback on future customer needs, emerging technologies, and the views of influencers and experts in the field.

  8. Explore partners and M&A to solidify your strategy. These days, the market is moving so fast that it is rarely adequate to rely only on internal development to keep up with change. You need to be constantly assessing mergers and acquisitions, as well as divestitures. Hone your process for due diligence and integrating these new elements.

  9. Proactively prepare for downturns and recoveries. Make sure you are paying attention to macroeconomic and customer trends, and planning early moves, rather than waiting for the crisis. This means identifying initiatives early, communicating openly with your team, and asking for their help on the dilemmas of production cuts and layoffs.

  10. Initiate succession planning for all roles, including yours. Don’t let promotions and succession planning be driven only by your HR function. Everyone, including your Board, should have a role. Make sure internal top performers are vetted, as well as outside candidates. Can you name the top three candidates for key roles in your organization?

If you look deeply into the success of the most recognized business leaders today, such as Jeff Bezos, you will find that they practice many or all of these principles. Even though your work and solutions for short-term objectives often seem to conflict with strategic goals, I am convinced that, with focus, you too can balance these priorities, and build a legacy for all of us to be proud of.

Marty Zwilling

*** First published on Inc.com on 07/23/2020 ***

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