Here Is When Your New Business Needs A Written Plan

If you sold your last startup for $800 million, you probably already know how to build a business, and even conservative investors won’t worry about the quality of your next business plan. But, for the rest of us, don’t believe the Silicon Valley myth that all you have to do is sketch your million-dollar idea on the back of a napkin, and investors will line up to give you money.

Based on my experience as an investor and mentor to aspiring entrepreneurs in Silicon Valley and elsewhere, one of the quickest ways to kill your credibility and your startup is to offer a poorly written business plan, or none at all. There really is no excuse these days, with samples on the Internet, business-plan books in every bookstore, and dozens of apps to automate the process.

A great business plan doesn’t have to be a book in length, with extensive financial statements.

Most good ones I see are in the range of 25 pages, which is more than enough to describe concisely all the business what, when, where, and how. The plan must simply answer every relevant business question that you could imagine from your team, partners, and investors.

In fact, the process of organizing and documenting these elements is the best way to make sure you understand the answers yourself. Would you be comfortable buying a house from a builder, or building one yourself, with no plan on timeframes, costs, and features? I hope not. Most investors tend to think of startups without a plan as expensive hobbies.

There is no magic formula for a formal business plan format or sequence, but I would recommend the following ten sections, in this sequence, with relevant content:

• Executive summary
• Problem and solution
• Company description
• Market opportunity
• Business model
• Competition analysis
• Marketing and sales strategy
• Management team
• Financial projections
• Exit strategy

A business plan that skips one or more of these topics is not complete, so don’t jeopardize your one chance to make a great first impression by offering a partial plan. It only takes a little extra work to make it a professional document, with a cover page, table of contents, headings, and page numbers. Don’t try to impress constituents with technical terms, jargon, and acronyms.

If you don’t have the time to write things down, or your writing skills leave something to be desired, don’t be afraid to get some help. No executive I know writes all his own contracts, but every smart one owns every one that is written for him, and understands every element. An entrepreneur who can’t manage a plan, probably won’t be able to manage the new business.

Of course, if you don’t yet understand all the elements, it’s time to learn. My advice here is to check your ego at the door, and find a mentor or a partner who has business experience and domain knowledge to help you plan a viable business. Your idea may be technically right, but without a business plan, it could be dead right, which is not the result anyone is looking for.

There are no guarantees, but various studies have found that entrepreneurs who create a good plan generally double their chances of securing funding and building a successful business. In any context, and especially in the high-risk world of startups where more than 50 percent fail, you need every advantage that you can get.

Marty Zwilling

7 Keys To Making A Business Out Of Your Great Product

Most technical entrepreneurs focus hard on building an innovative product, but forget that an elegant solution doesn’t automatically translate into a successful business. Businesses require an equally elegant business model, with the right price, messaging and delivery channel to the right target customers to keep the dream alive and growing.

Defining the right business model requires the same diligence as designing the right product, but the approach and skills required are different. That’s why investors acknowledge that two co-founders are often better than one -- with one focusing on the technical solution, and the other focusing on defining and building the business model. These two jobs need to be done in parallel.

This dual-leadership approach would have avoided the frustration I felt in a startup a few years ago where beta customers loved our software solution as a free prototype, but we couldn’t sell one in the first few months for a price that seemed reasonable for all our work and innovation. The founder had simply not done the work to validate a price and customer segment.

In the investment community, this work is called proving the business model. It starts with validating a business opportunity (a large customer segment willing to pay money to solve a real problem), in much the same way as your proof of concept or prototype validates your technical solution. Here are seven steps I recommend for establishing the right business model:

1. Size the value of your solution in the target segment. Customers often complain that existing approaches are not intuitive or integrated, but old solutions may be familiar and locked in. Estimate your costs, including a 50 percent gross margin, as a lower bound on a price. Products too expensive for the market won’t succeed, and prices too low will leave you exposed. Match with competitor prices and market demographics.

2. Confirm that your product or service solves the problem. Once you have a prototype or alpha version, expose it to real customers to see if you get the same excitement and delight that you feel. Look for feedback on how to make it a better fit. If it doesn’t relieve the pain, or doesn’t work, no business model will save you.

3. Test your channel and support strategy. Now is the time to pitch the entire business model to a group of customers or a specially selected focus group. This is not just a product pitch, but must include all elements of your pricing, marketing, distribution and maintenance. Here again is your chance to make pivots for almost no cost.

4. Talk to industry experts and investors. A small advisory board of outside people with experience in your domain can give you the unbiased feedback you need, as well as connections for setting up distribution and sales channels. It’s also valuable to talk to potential investors for their views, even if you are bootstrapping the effort.

5. Plan and execute a pilot or local rollout. Good traction on a limited rollout is great validation of a business model. It allows you to test costs, quality and pricing in a few stores or a single city, with minimum jeopardy and maximum speed for recovery and corrections. Save your viral campaign and major inventory buildup for later.

6. Focus on collecting customer references. Give extra attention to those first few customers, and ask for publishable testimonials and word-of-mouth support in return. If you can’t get their support, even with your personal efforts, take it as a red flag that the business will probably not scale at the rate you projected.

7. Target national trade shows and industry association groups. You need positive visibility, credibility and feedback from these organizations as a final validation of your business model, as well as your product model, in the context of major competitors. This may also be a great source for leads as a key part of that final rollout and scale-up effort.

Your business model can be a better sustainable competitive advantage than your product features, or it can be your biggest risk exposure. Too many of the business plans I see are heavy on competitive product features, but light on business model details and innovations.

If you or someone on your team hasn’t spent at least the same effort on the business model as on the product or service, you are only half prepared for the real world of business today. It’s hard to win by doing half the job, especially if that is the easier half.

Marty Zwilling

7 Reasons A Good Team Merits Priority Over Procedure

Every one of you business leaders I know struggles with the competing demands of finding and keeping employees motivated and satisfied, versus building and enforcing a set of repeatable processes that work. Obviously, both are required for a company to stay healthy and growing. In my experience, providing people leadership is the tougher challenge, but the more critical one.

As a long-time business advisor and mentor to entrepreneurs, I consistently find that the most thriving businesses are people-centric, and those team members create the best processes, rather than the other way around. Dysfunctional teams will cause even the best processes to fail.

Here are the key reasons that I recommend that aspiring leaders focus on people before process:

1. Customers judge the business by the people quality. Whether it be in person, on the phone, or implied in your marketing, your people and their engagement level is the key driver of customer loyalty, advocacy, and sales growth. People-centric leaders realize that the right motivated and accountable people are their real competitive advantage.

2. Only people can look ahead and prepare for the future. Processes can focus only on efficiency and repeatability now. Your team, properly selected, trained, and engaged, can focus on tomorrow’s requirements, learn from mistakes, and implement the constant improvements required to stay competitive. Even process changes require people first.

3. Helping your team motivates them to drive your business. Leaders who demonstrate a real focus on their people will get trust and extra effort in return. You need their full support in today’s rapidly changing market. Processes are fixed, once implemented, and act only as automatons to process consistently in never-changing environments.

4. Only good people are capable of thinking outside the box. A healthy business must be constantly looking for innovative ideas, analyzing customer feedback, and taking risks, rather than just following fixed processes. Your first priority must be to motivate and reward the right thinking, and weed out people who merely follow existing processes.

5. Honing people communication has value beyond the team. Leaders who focus on team communication are also more successful in dealing with partners and customers. You must learn how to share your values and goals effectively, to get buy-in for the challenges always ahead. Better relationships are necessary for a better business.

6. Engaged people are more productive than your best process. Self-motivated team members are leaders, whereas processes are always followers. You need their efforts to complement yours, providing more total focus on strategic issues and opportunities that lead to business growth. Un-motivated people are also a huge drain on all resources.

7. People will determine your legacy that will be remembered. Not only the success of your business, but your own personal legacy will be set by your people, not your processes. The best legacy that any leader can hope for Is being remembered by their team, as well as customers, as one who advances the right values and goals for all.

In my experience, one of the best ways to build an enduring legacy is to empower team members to take the initiative and make decisions, including process changes and taking risks along the way. That takes less time and gives everyone greater satisfaction.

As an entrepreneur with a new venture, or a business leader in a mature one, the demands for your attention and guidance will often exceed your bandwidth. You may be tempted to delegate people issues to human resources specialists, and focus your time on process issues, which are more concrete and specific. For all the reasons outlined above, don’t let that be your downfall.

The most successful managers I know spend up to fifteen percent of their time each week with each team member, coaching them, motivating them, and helping to resolve problems. Of course, too much time and attention will be viewed as micro-management, can actually reduce productivity, and will limit your ability to deal with necessary process changes.

When was the last time you did a self-audit of how you spend your precious leadership hours at work? The results, and listening to employee feedback may surprise you, and changing your priorities may surprise you as well by improving your image, job satisfaction, and business results.

Marty Zwilling

*** First published on Inc.com on 01/15/2021 ***

8 Angel Funding Realities In Search Of A New Venture

Most entrepreneurs have found by now one or more of the many popular crowdfunding sites, and have the name and contact information for at least one of the big venture capital firms. But many have no insight or connections to the ethereal angel investment community, which In the U.S. contributes more than $25 billion to fund 70,000 startups every year.

In fact, there are a few key sites to help you find angels, including AngelList and Gust, but these don’t tell you very much about how angels work, and how to find the right ones for your startup. As an active angel investor, I can tell you what doesn’t work is broadcasting your idea description to flocks of angels, hoping that one will swoop down to anoint you with funding.

A better approach is to first understand who these people are, why and how they invest, and then focus on the ones who are the best match for your particular startup stage, location and industry. Here are eight key insights that will help you find a productive match:

1. Angels want equity ownership, not causes. By definition, angels are accredited investors, who invest their own money for a percentage of the business. Each has met legal securities minimums for net worth and professionalism, to reduce the risk to entrepreneurs. Their realm fits between crowdfunding and venture capital sources.

2. Most share expertise as well as money. Angels are typically current or former entrepreneurs who want to bring more than money to your startup. They prefer local opportunities where they can meet and work face-to-face with your team. Thus, angel investments from across the country or internationally are rare.

3. Individual investments are limited to less than $100,000. Groups of angels may syndicate multiple individual amounts, but if your total request exceeds $1 million, you need to focus on the venture capital alternatives. On the other end of the spectrum, crowdfunding or “friends and family” amounts might be as low as a few dollars.

4. Angels prefer strong teams to big ideas. That means you need to lead with your credentials, rather than your disruptive technology. Warm introductions from common friends are even better, so networking with potential peers and future investors is highly recommended well before it’s time to ask for money.

5. Your pitch and business plan are important. Perhaps you can get money from friends and crowdfunding with no plan, but angels look for the extra discipline and effort demonstrated in a written plan. Make sure these cover your business model and exit strategy, so the angels see how both of you will make a reasonable return.

6. Opportunity sizing and financial projections must be credible. Every investor likes to see opportunities that are large, with double-digit growth. To be fundable, fifth year revenue projections need to be in the $20-$100 million range. Larger numbers are not credible, and smaller ones may make a great business, but won’t attract angels.

7. Avoid risky or questionable business domains. Don’t expect angels to invest in work-at-home schemes, gambling sites or debt-collection type business proposals. Other notoriously risky or specialized businesses usually avoided by angels include brick-and-mortar retail, restaurants, telemarketing and consulting.

8. Early stage research and development won’t excite angels. Every angel looks to scale the business after you have funded product design, perhaps with friends and family. Angels need to see a proven business model, with a working prototype and preferably a real customer or two. Look to grants and strategic partners for seed funding.

Above all, remember that angels are really business people, just like you and me. They expect you to always show integrity and respect for their position, just as they respect yours, since they were likely once in your situation. They probably won’t respond well to large egos, failure to do your homework or pressure tactics.

Persistence and passion are seen as virtues by angels, so rejection should be only a temporary setback. The common response of “come back when you have more traction” means exactly that.

But before you return to the same angel, remember there are more than 250,000 others in the U.S. alone. That’s the real reason that more startups get funded this way than most entrepreneurs realize.

Marty Zwilling

10 Tips For Managing Work Expectations On Your Time

Every entrepreneur I know can’t find enough hours in a day to do the good things they want, and yet they often find themselves saying yes to new requests. Perhaps because they are optimists by nature, or they just hate to disappoint others, they end up hurting their health, credibility, and effectiveness by not being able to deliver on everything they promise.

In addition to saying yes too often, some entrepreneurs under pressure say no poorly, by attacking the requestor or by avoiding any definitive response. Either of these approaches always make a difficult situation worse, often leading to guilt or a later accommodation.

A successful entrepreneur must be accountable for all commitments, and manage expectations to make this possible. So here are some tips I have learned over the years from strong leaders that can help you say no without damaging current business relationships or future opportunities:

1. Establish boundaries and honor them for all to see. Let your constituents know your priorities and limits. Don’t continually break your own rules about when you are available or what requests are acceptable. Your actions must match your words, so don’t say yes when you mean no, or hope to squeeze out later.

2. Ask for time to check your calendar. It’s acceptable business practice to review your schedule, or converse with other principals, before committing to an answer. Don’t respond with a quick yes that you can’t deliver, or a quick no that will ruin a relationship. In all cases, it’s important to commit to a date or time for a final yes or no.

3. Give credence to your initial instinct. Recognize that your brain and your body often register information that is more accurate than an optimistic emotional reaction, or a negative reaction after a long hard day. Take a deep breath, clear your mind of any external distractions, and analyze your gut reaction before providing any answer.

4. Voice both the pros and cons to a trusted cohort. Speaking the considerations out loud will help you make sure you understand the full implications of either a yes or a no answer. Every yes answer increases your workload, and every no answer may cut off an opportunity you need down the road. Talking it out also buys you time.

5. Explore the possibility of a reciprocal favor. This will help the requester understand the impact of the request, and potentially reconsider. In other cases, you may actually get back more than you give up. Every yes should be a win-win proposition, just like strategic partnerships can bring huge growth to both businesses, despite the work.

6. Explain your constraints before saying no. Rejection without giving a context implies an unreasonable request or a problem with the requestor. People making a request may not understand your budget limitations, current workload, or competitive pressures. In this context, you can also make an encouraging statement about future requests.

7. Say yes to the person and no to the task. Make sure the requestor understands first how positively you feel about them, despite the fact that the requested task cannot be accommodated in your current workload, strategy, or other boundary. Requestors are then less likely to be left with the impression that your rejection is a personal affront.

8. Sandwich your no between two positives. Make your answer more palatable with a positive explanation. For example, if your partner asks you to cover a conference, but you have development deadlines at risk, explain these commitments (first yes), how they lock you in town (no), and finish by confirming your focus to an on-time product (second yes).

9. Defer the decision to a better environment. Ask for the opportunity to discuss the request when you can give the requestor your full attention. When you are in the normal chaos of the startup day, both parties can be easily misinterpreted. Pay attention to body language and tone that often make the negative response more difficult to receive.

10. Make sure your words are non-defensive but clearly stated. No one wins when a requestor reads your softly spoken no as a yes or a maybe. Long detailed explanations are usually read as defensive or confrontational. The answer should be strong and non-emotional. Just say no clearly, and smile as you say it.

You don’t have to be viewed as a yes person to be viewed as a leader. In fact, if you look at the leaders around you, they are not afraid to say no to the conventional wisdom, and they gain respect for doing it. They have learned the art of saying no with the same conviction and passion they use in saying yes. That’s the best way to change the world and save yourself, so start today.

Marty Zwilling

How To Prepare Your New Venture For Investor Scrutiny

For the elite startups and entrepreneurs who manage to attract the investor they dream of, and survive the term sheet negotiation, there is still one more hurdle before the money is in the bank. This is the mysterious and dreaded due diligence process, which can kill the whole deal. In reality, it is nothing more than a final integrity check on all aspects of the business and the team.

Some entrepreneurs do very little to prepare for due diligence, assuming all the talking has already been done, and the business plan and results to-date tell the right story. Others schedule exhaustive training sessions for everyone on the team, including showcase customers, to make sure that everyone paints a consistent picture. My best advice is to stick to the middle ground.

The Founder needs to remember that meetings up to this point have been primarily off-site, with staged demos, and managed personally by the CEO or a small team. Due diligence always involves on-site visits, informal discussions with any or all members of the team, vendors, and good customers as well as bad.

If there are conflicts within the team, or differing views of the strategy, or evidence of missing processes and tools, the investment process will likely be terminated. Even if the entrepreneur feels that all is well, it’s well worth the effort to prepare with the following actions:

1. Make sure the whole team is up-to-date on the plan. That might start with the CEO giving the investor pitch to the whole organization, and distributing the current business plan document to everyone. Make sure all business processes are documented and integrated. If everyone has a different view of reality, you have no reality.

2. Take time to review and resolve any personnel distractions. You need to brief the investor early if there are pending changes that have to be made, or conflicts that may become apparent during the due diligence process. Make sure everyone accurately posts their role with your startup on social media profiles, resumes, and references.

3. Communicate what is happening and why to everyone. Don’t let the due diligence process be a surprise to the team. Make yourself available to answer any questions, show your enthusiasm, and explain both the positives and negatives of the external investment process.

4. Visit reference customers, partners, and vendors. Use this opportunity to validate their satisfaction and support for your company and your solution. If you find open issues that can’t be immediately resolved, be sure to proactively communicate these to investors, with an action plan, rather than hope they won’t be found.

Based on the size of the investment, and the runway available, the due diligence process can take several weeks, or even a couple of months to complete. In any case, before the process starts on your startup, you should be doing your own reverse due diligence on the investor, as outlined in this article I published a while back.

For reference, here is a quick summary of key elements which most investors include in their due diligence process:

• Key personnel review. In all cases, an investor will ask to talk to all key players, and will likely follow-up by calling references and prior associates to verify background, commitment, and experience. Since investors tend to invest in people, more than the idea, the personnel review is normally the highest priority item.

• Status of the solution. Here investors are looking for feature problems or quality issues on the current product. A hard look will be taken at the technology maturity, the current development progress, and customer satisfaction with early product shipments. In addition, manufacturing and inventory levels will be reviewed.

• Review of opportunity and segmentation. A key criteria for a good investment is a large opportunity with double-digit growth. This should be a validation of prior assessments, based on any recent changes in trends, economic conditions and customer feedback data.

• Traction in the marketplace. A smart investor will take an independent final reading in the market on barriers to entry, active competition, demographics, and price sensitivity. Sales and distribution channel activity will be analyzed, as well as cost of customer acquisition, to make an independent assessment of your financial projections.

The key theme for a successful due diligence is full disclosure and no surprises before or after the commitment. If more marriages were subjected to the same rigor, the divorce rate would likely not be in the current fifty percent range. In business as in other relationships, people on the team that have to be above reproach, committed, and working on the same page.

Startup equity investments imply a long-term business relationship, lasting an average of five years. During that period, it is very difficult for either party to get out of the deal, since there is no public market for the stock, and business divorces normally mean bankruptcy. It’s worth your time to do a little extra work here, and make the honeymoon phase a win-win one for both sides.

Marty Zwilling

6 Ways To Transform Startup Constraints Into Benefits

Most entrepreneur that fail are quick to offer a litany of constraints that caused their demise – not enough money, time, customers, or support from the right players. Ironically, as a startup investor and mentor, I have seen too many failures caused by just the opposite – too much money spent too soon, taking time to get product perfection, and assuming customers will wait.

In reality, resource constraints should be seen by startups a competitive advantage, by forcing them to develop new markets, and to think differently and act differently than existing players. The result, called resourcefulness, allows entrepreneurs to create opportunities in the face of scarcity. It allows them turn resource constraints into stunning new businesses.

In this context, constraints might more reasonably be seen as beautiful by entrepreneurs, just as they are described in the classic book, “A Beautiful Constraint,” by renowned marketing consultants Adam Morgan and Mark Barden. I like the way the authors outline how to see and turn constraints from punitive to liberators of new possibilities and opportunities, as follows:

1. Look for ways to improve productivity. Every startup needs to think hard daily about what problem or challenge is holding back progress, what really matters today, and what entirely new possibilities exist. How many times have you actually made up work to keep an idle person busy? Startups funded by rich uncles rarely think about productivity.

2. Rethink or reframe the challenge. Constraints are the best motivators for finding new approaches to solving a problem, building a product, or crafting an effective marketing campaign. Perhaps success itself needs to be redefined or reframed. Every entrepreneur needs to avoid locked-in ways of thinking. Let your constraints drive innovation.

3. Find the benefit in subtraction. Isn’t it amazing how often all the necessary work gets done, even when resources are removed or the budget is reduced in an ongoing project? The benefit of working harder and more efficiently is success despite constraints. Subtraction leads to simplicity, better usability, and easier education of your customers.

4. Find new ways to augment. The fastest way to grow your business is to find partners who can amplify or sell what you already have, and you can sell what they have. That’s a win-win relationship, which almost always takes less time and money than building something new. Adding priced services is another way to augment a product business.

5. Create new kinds of solutions. Using the solution technology that you already have, in new ways, takes fewer resources than inventing or sourcing new technologies. That’s why computer makers offer desktops, laptops, notepads, and now even smartphones. Without constraints at the forefront, computers tend to get complex and more expensive.

6. Build entirely new business models and systems. Pricing constraints and the need to attract consumers drove the invention by startups of the freemium model, subscription model, razor-blade model, and others. Today we see whole new ecosystems and opportunities driven by environmental constraints, safety concerns, and social issues.

Some entrepreneurs never get past the victim stage for constraints. They see every constraint as an inhibitor to their ability to realize their ambition, and an excuse for not persevering. Others proceed to the neutralizing stage, which means they tackle problems as they are encountered, and get some satisfaction by finding a way around each one. It’s still a hard road to success.

The smarter entrepreneurs jump quickly to the transformer stage, where constraints are proactively or responsively used to prompt wholly different and potentially breakthrough new approaches and solutions. They even impose constraints on themselves and their team to stimulate better thinking and new possibilities. Then they size the potential in the constraint.

We live in a world of over-abundance of choices, yet seemingly ever-increasing constraints, driven by a scarcity of time, expertise, and money. How entrepreneurs respond to these will become a larger and larger determinant of startup growth, competitive position, and success. What is your resource constraint mindset and action plan today?

Marty Zwilling

6 Ways To Test Your New Venture Sustainability Early

How do you convince investors that your business model will really work, before you have a revenue stream that exceeds your expenses? Even if you are bootstrapping your business, and you are the only investor, you should be asking yourself the same question. Too many founders have learned that passion and free beta products do not imply a sustainable business.

Proof of any business model starts with a finished product or solution, sold to a new customer for full price, with high satisfaction for the value received. Of course, that has be a repeatable event, with enough revenue to sustain the business. The conundrum is that once you have really proven the business model, you no longer need the investor money you asked for to start the business.

So what should an entrepreneur do to convince themselves, as well as potential investors, that they have a viable business model before it is totally proven? Here are some basic principles from my own experience that will improve your odds and keep you on the right track:

1. Recognize that you are not the market. No matter how passionate you are about your solution, it doesn’t mean that if you build it, they will come. Don’t skip the market research, input from influencers, analysis of competitors, and the simple act of really listening to potential customers via social media, before quantifying your opportunity.

2. Start selling it before you build it. Marketing is everything these days. On the average, it takes as long to build marketing momentum as it does to build the solution. If you wait to begin marketing until your product is final, you will find it very expensive to pivot to meet real world input, or the whole opportunity may have moved on without you.

3. Plan for a real revenue model. The free model, with a loose intent to monetize later, made popular during the tech bubble, doesn’t work anymore. No matter how good your cause, it takes real money to sustain a business. Decide early where and when money will come from, set some milestones and metrics, and work to a plan, or be caught short.

4. Word of mouth is not adequate for marketing and sales. Even though the Internet is pervasive and free, you should not assume that a website is all you need for sales and marketing. To get the visibility and distribution you need will likely require one or two levels of partner relationships and a real model for marketing, events and promotions.

5. Customer support is more than handling exceptions. Customers expect to be delighted in all phases of the product life cycle -- understanding features, pricing alternatives, returns and problem resolution. A detailed process, with empowered employees and adequate budget, are mandatory to any viable business model.

6. Everyone must be part of the sales process. Don’t assume that only customer-facing employees need to understand sales, and that these people can be hired and trained at the last minute. Everyone on your team must maintain the mindset that customers are the key to your business model, rather than technology or accounting.

I’m not suggesting that all these business model elements need to be perfect before you ask for funding or open doors for business. As an active angel investor, I do expect founders to be able to communicate a plan to implement all key business model elements, just as I expect them to understand and plan for all the elements of their technology and their solution.

In my experience, every great product is not a great business, and every great business model involves far more than a great product. Your challenge is to present a total business solution to the right customer set to build your credibility and momentum. Without these, your dreams and your business model may never get the fuel they need, and will burn out quickly.

Marty Zwilling

6 Ways Chutzpah And Confidence Can Make Your Startup

Based on my experience as a business advisor, I’m convinced that most startup investors invest in the entrepreneur, as much as a solution or product. In that context, I’ve long realized that some players seem to command real attention, even if their proposal sounds far-fetched or very risky. The attribute most often mentioned in this regard is supreme self-confidence or chutzpah.

Examples of this today would obviously include Elon Musk, and Steve Jobs a few years ago. In a new book, “The Unstoppable Startup,” by Uri Adoni, a widely respected venture capitalist from Israel, I was pleased to see real specifics on how you can successfully demonstrate the right level of confidence and boldness, without stepping over the line into arrogance and insolence.

The book author’s background and experience is with entrepreneurs and startups in and from Israel, but I believe the key rules he outlines, which I am paraphrasing here, are equally applicable and important to aspiring entrepreneurs and startups everywhere:

1. Challenge status quo and currently accepted reality. The attitude of taking nothing for granted, of disbelieving the conventional wisdom, of challenging the way things are done, is essential for a winning entrepreneur. Of course, this passion must be backed up by documented evidence and logical arguments, not just loud talking and arm waving.

   While “personal” computers are taken for granted today, I can easily remember my early days in IBM when no one could conceive of a computer outside of business. Only people like Steve Jobs and Bill Gates had the chutzpah to propose a computer for every home.

2. Dominate or create the market category you seek. I often hear the argument that this opportunity is so large, that even a tiny percentage will be a good business. Without the self-confidence, secret sauce, and a plan to become the dominant player over time, investors know too well that you will likely be overrun by competitors or lost in the crowd.

3. Innovate to meet future demands you foresee. Investors are most impressed with entrepreneurs who are part futurists and part prophets, with insights to see “around the corner,” and innovation and production plans to get there first, even in a today’s rapidly changing market. They readily admit to challenges, but display confidence to proceed.

   When Elon Musk talks about us becoming a multi-planet species, or alleviating earth travel congestion with a network of tunnels, people now listen, especially when he can show that SpaceX and The Boring Company are already demonstrating results.

4. Convince people the market needs what you have. Steve Jobs is known for asserting, “people don’t know what they want until you show it to them.” Chutzpah is often required to create and expand markets, especially in cultures that are stifled by acquiescence and authority. You have to overcome existing players, and the human resistance to change.

5. Bend the conventional rules of what is possible. Most of us have an innate sense of what is physically possible, and what is considered “good business practice.” Disruptive innovations challenge one or both of these assumptions, and it takes real self-confidence to bend these rules with credibility and integrity. Solicit experts to support your assertions.

   Another approach is to seed your team with “divergent thinkers.” These are people with the uncanny ability to think “outside the box,” and come up with free-flowing ideas, as opposed to their convergent-thinking counterparts who think in a linear fashion.

6. Show, don’t tell people what your product can do. If you can provide living proof of what your product can do, with a proof of concept (POC) or minimum viable product (MVP), people can’t help but believe you. Entrepreneurs with the right level of self-confidence are always ready to back up their talking with action and results.

How potential partners, investors, and customers see you is critical to their ultimate support and acceptance of your proposal and your solution. They have to believe in your confidence, as well as your ability to deliver. The principles outlined here, carefully embodied in chutzpah, will put you in an elite category of entrepreneurs. Then all you have to do is to demonstrate results.

Marty Zwilling

*** First published on Inc.com on 01/06/2021 ***

6 Sources of Help For Early Stage Concept Exploration

Angel investors and venture capitalists are looking for startups with real products and a proven business model, ready to scale. Yet I still get too many business plans that clearly are looking for money to do research and development (R&D) on a new and unproven technology. If you need funding for these early stage activities, I have some suggestions on better strategies to follow.

The first is to be more precise in your definition and understanding of where you are, and how the money will be spent. If this is your first foray into the entrepreneurial arena, with no track record in business or technology, your best and perhaps only supporters will be that class of investors known in the trade as friends, family and fools (FFF). They believe in you above all else.

Beyond these believers, you need to match your credentials and interests with the multitude of public, academic and government organizations that proclaim to foster research and early development, to satisfy the long-term needs of the people or organizations they support. In this context, there are at least six stages often included in the scope of R&D to narrow your focus:

1. Search for new technologies. This early stage is often called basic research, well before any specific commercially viable products might be envisioned. Here your options are limited primarily to large organizations with deep pockets, including government grants, universities and large enterprise sponsors searching for disruptive technologies.

2. Technology pilots. This is the transition stage from basic research to applied research. Applied research is still primarily scientific study, seeking to solve practical problems, but doesn’t yet focus on a commercial product. Funding sources for this stage extend from grants to large private fund incubators, such as the IBM Watson initiative a while back.

3. Commercial product prototypes. Funding for commercial product prototypes is still R&D in the eyes of venture capital investors, but in business areas with large opportunities, this activity will catch the eyes of specialized angel investors. It’s still considered high risk for investment, since manufacturing and quality issues are likely.

4. Product verification and clinical trials. These days, almost every new product is not deemed scalable until it has been certified as meeting a multitude of quality and agency standards, including the Environmental Protection Agency (EPA), Food & Drug Administration (FDA) and Underwriters Lab (UL). Specialized VCs start to jump in at this stage.

5. Business commercialization. Product development at this stage is the process of scaling up for manufacturing and marketing rollout. The technology is now embodied in a solution that can be replicated to reliably solve a real customer problem. Your fundability with investors now depends primarily on the execution capability of your team.

6. Expanding the product line. Even for mature startups, there is always a need for further product development and research to compete and diversify the business, and investors understand this. But to prevent confusion with basic R&D, these costs should never be called out the major category in your use of funds statement to investors.

While all forms of technology research and development will always be required, entrepreneurs need to understand that the funding for these efforts comes from many different sources, depending on the stage. Business equity investors are buying a portion of your business, so they are looking to fund a specific business with a specific offering, not a generic technology.

Don’t waste your time and energy talking to angels and VCs about technology funding when you could be focused more productively on grants, private funds and future business partners. Business investors and customers want to hear about solutions, and tend to back away from technology, until it is proven.

Fortunately, in many attractive business domains, including mobile software, Internet apps and ecommerce, the cost of product development is at an all-time low. Developers are using powerful technology tools to build mobile apps and websites for a few thousand, rather than millions of dollars. Thus the best entrepreneur strategy for funding is to build solutions, not technology.

Marty Zwilling

10 Keys To Building Unstoppable Startup Partnerships

A common challenge faced by every entrepreneur is that they don’t have the bandwidth, interest or skills to do everything that is required to build their startup. Of course, they can outsource part of the work or hire employees, but that approach means more time and money to manage the work, which they don’t have. The right answer is to find a co-founder with complementary skills.

Two heads are always better than one in a startup. Both need to share the passion, long-term opportunity and risk, rather than just getting paid to do a job, win or lose. Investors worry about a single entrepreneur getting overloaded, disabled or led astray, with no balancing and supporting partner. The challenge is how to find that elusive perfect-fit partner.

Don’t expect someone else to find the partner for you, since it’s really very much like finding a life partner. Your version of the right chemistry, similar values and passion for your solution probably won’t match mine. Yet from my own years of experience in the startup community, here are ten common steps that have worked for other entrepreneurs:

1. Write a "job description" for that ideal partner. Your best friend, spouse or a family member is the least likely candidate, so don’t start there. Take a hard look at your own business strengths and weaknesses, and write down what partner skills and experiences would best complement yours. Seek input from seasoned investors and peers.

2. Network to find co-founders just as you network to find investors. In fact, many of the same venues, such as industry conferences, entrepreneur forums and local business organizations are useful for both. Online, it pays to join entrepreneur groups on LinkedIn and Facebook, and interact with people who meet your criteria on Twitter.

3. Join online "matchmaking" sites for business partners. Co-founders are business partners for startups, so don’t be afraid to join and explore sites such as StartupWeekend, StartupAgents and CoFoundersLab. Also start a discussion on the wealth of business blogs frequented by entrepreneurs, where you can make your interests known.

4. Attend local university entrepreneur activities. University professors and student leaders always know a host of top entrepreneurs, alums or staff members who are just waiting to find the perfect match for their own interests, skills and entrepreneurial ideas to change the world. Support local activities and you support yourself.

5. Look for a partner from a different background. In today’s global economy, your ideal partner may be half way around the world, from a different geography and business culture. Every startup infrastructure is flush with smart people from all cultures, many of whom may be ready and able to bring new energy and creativity to your startup.

6. Follow up with associates from prior job assignments. If you were impressed with someone’s drive and capabilities in a prior work role, now is the time to connect again to check their interest and availability, or recommendations they may offer. Use caution to avoid employer conflicts of interest and non-compete clauses.

7. Relocate to a more likely geography. Finding a high-tech co-founder in the middle of Kansas may be a long search. There’s a reason that Silicon Valley and Boston are hubs for high-tech startups. These areas may have not just your co-founder, but also the robust ecosystem your startup needs for investors, programmers and customers.

8. Explore candidate common interests outside of work. Co-founder chemistry and interest matches are best explored outside the office. Find some common hobbies or sports to get acquainted before giving away half your company. Business partnerships are long-term relationships, so take your time getting acquainted before closing the deal.

9. Jointly define major milestones and key metrics for the startup. This process is the ultimate test of a true shared vision and working style. Building a startup is hard and unpredictable work, and people get busy, so now is the time to jointly commit. If you can’t work as a team now and easily agree, it probably won’t happen at all in the future.

10. Negotiate and document roles early, including who is the boss. No matter how equal you all are, there is only room for one at the top to make the final decision on hard issues. Especially when everything feels good today, don’t be hesitant to ask the hard questions of each other. There can be only one chief executive officer.

For the success of your startup, finding the right co-founder is one of the most important things that a new entrepreneur needs to do. There are so many challenges in a startup that no founder should try to go it alone. When you find someone that works, I’m betting you will be together on your next startup, and the one after that. Great teams persevere, and success breeds success.

Marty Zwilling

6 Ways To Calibrate Your Fit To The Right New Venture

Being an entrepreneur seems to be one of the most popular lifestyle aspirations these days. According to most definitions, anyone who starts a business is an entrepreneur, but most people don’t realize there are many startup types out there, and picking the wrong one can be just as disastrous as being stuck in a cubicle at work, or doing things with no interest and no skills.

In my view, this mismatch of motivation to your business model is the primary reason that 90 percent of startups ultimately fail, and a shockingly high 80 percent of employees are dissatisfied at work. Thus it behooves every entrepreneur to pick the startup model that best matches their real motivation. Here are six considerations to get you started on the right startup:

1. Invented a solution to a painful existing problem. You have proven that you can create an innovative product, but creating a business is a whole new challenge. The old adage of “if we build it, they will come” doesn’t work anymore. Every business needs marketing, distribution, a positive revenue model and intellectual property to survive. You won’t be a successful and happy entrepreneur if you aren’t motivated to build a business.

2. Aspire to be in control of your own domain. There are many business types that don’t assume any new invention or service, such as franchising, multi-level marketing (MLM) or freelancing. These do require business management and execution skills, as well as the discipline to manage yourself. Just don’t look for an investor to fund your efforts here, since investors will likely be tougher bosses than corporate managers.

3. Looking for a path to dramatically increase your income. This is a tough one, since most of the overnight startup successes I know took six years or more. Franchises and consulting businesses have an earlier and higher success rate, but typically have a lower return. With new products and services, you can hit the jackpot, but many struggle or fail.

4. Trying to fulfill family or peer expectations. Don’t try to be an entrepreneur just to prove something to a loved one, friend or sibling. There are no business types that work well here, except maybe an existing family business that is already successful. If you must proceed, at least pick something you love, or a social cause to benefit society.

5. Seeking a new career challenge to follow an existing success. If you have a comfortable position from a previous success, and are not looking to retire, a great business is to share your expertise and experience through consulting. Another great learning opportunity and win-win deal is to co-founder a new high-tech startup team.

6. Fulfill your legacy and responsibility to society. Environmental startups and non-profit businesses are just as challenging as the next disruptive technology startup, and just as likely to change the world. Leaving a personal legacy is a great motivator to switch to entrepreneurial work, if you have that passion and determination.

No matter which of the entrepreneur business models you choose, don’t expect the work to be easier than a corporate job. In fact, most successful entrepreneurs would argue just the opposite. Success in any entrepreneur role requires a serious commitment, determination and learning from setbacks. Switching business models is not usually a shortcut to success and happiness.

I often recommend to aspiring entrepreneurs that they first take a job with another startup in the same realm as the one they envision to get some practical insight into the challenges, make contacts and learn more about their own motivations. Then take the big step of starting your own business, with fewer surprises, some good connections and likely more accumulated savings.

Overall, it is important to remember that happiness breeds success more often than success breeds happiness. Every aspiring entrepreneur should play to their strengths and interests, rather than listen to all the well-meaning advice you will hear from friends and experts. The exciting part about being an entrepreneur is that you can tailor the role to match your real motivations.

Marty Zwilling

How To Prevent Your Founder’s Shares From Vaporizing

When an entrepreneur first incorporates a business, they may find themselves the proud owner of 10 million shares of common stock, commonly called founder’s shares. It’s disconcerting for most to realize that these shares are initially worth nothing, and the challenge is to get that value up as quickly as possible, without losing it just as quickly to investors, lazy partners, and taxation.

This is where things get technical, but the principles are really quite simple. Every entrepreneur needs to understand the following basics, to be addressed at company formation, as they engage a qualified attorney to draw up the paperwork:

1. Allocate founder’s stock commensurate with commitment. Even though initial stock has no value or market, it is extremely valuable in dividing entity ownership between multiple co-founders, commensurate with their investment, contribution and role. Startup owners need to assume a three to five year wait for a liquidity event, such as acquisition or going public, before they can cash out. At that time the original split makes all the difference.

2. Make sure the government waits for a stock sale to collect taxes. In the U.S., every entrepreneur should incorporate early and file an 83(b) election with the IRS within 30 days of founding the company. Failing to file, or waiting to incorporate until a first investor arrives, is a common mistake, and will lead to a nasty tax bill when you can least afford it.

3. Spread stock issuance over an earning period. This is the purpose of a vesting schedule, which issues allocated stock over time. Typically, vesting in startups occurs monthly over four years, starting with the first 25 percent of shares vesting only after an owner has remained active for at least 12 months (one year cliff). Key founder vesting should have no cliff.

4. Retain the right to reclaim stock from anyone leaving the startup. To retain control, the original founder must reserve the right of first refusal to buy shares back at cost from a partner who decides to leave early or stop working. Otherwise, people with no ongoing effort (“free riders”) will own the value growth that you are adding after their departure.

5. Minimize your own loss of ownership as major investors contribute. This is called stock dilution control. While new equity owners always have to get it from someone, actual re-allocation of existing shares should be based on a formula to maximize the value of your remaining founder shares.

6. Accelerate your own vesting if pushed out or the startup is acquired. Don’t lose the value of stock not yet vested if your startup is bought out before the normal vesting schedule comes to a close. If new investors want to replace you as the founder early, make sure this action triggers an accelerated vesting clause as well.

7. Facilitate an upgrade of founder’s common to founder’s preferred. Investors typically demand preferred stock to give them more control and first payouts, but these advantages can be at least partially offset (up to 20 percent) if you plan ahead. The acceptance of this option is now common, even though introduced only a few years ago.

8. Limit board seats and manage member selection criteria. More board members is usually not better for the startup. Target no more than five members, with at least two being founders. This allows the entrepreneur more influence in controlling dilution of his or her shares, investment terms and acquisition decisions.

Every entrepreneur has heard the stories of a startup selling for millions of dollars or going public with the founder being squeezed out of all the gains. This situation only can be prevented by incorporating early, avoiding negative tax situations and managing your shares like gold.

Founder’s shares are just paper when you get them, and it’s up to you to turn them into a gold mine.

Marty Zwilling

6 Market Environments Where Execution Trumps Planning

As a business adviser, I often see entrepreneurs practicing what Tom Peters calls the “ready-fire-aim” go-to-market strategy to their detriment. Yet even I have been known to recommend that approach, in cases where you have a highly innovative product, speed is of the essence, and no clear existing market is available. In fact, you probably won’t get it right the first time anyway.

Certainly I believe the traditional ready-aim-fire strategy approach works best in most cases, and that should be your default. There is no substitute for talking to customers, analyzing your competition, and honing your solution to meet a target market segment. As a counter, here are some situations where it definitely makes sense to short-circuit the traditional approach:

1. The market won’t wait for your planning cycle. The real solution in this case is to shorten your planning cycle, but sometimes unusual situations, such as the current global pandemic, make this impractical. The ready-fire-aim approach makes sense here, but it should be combined with metrics to learn from feedback, and make pivots as required.

   In general, I see that the strategic cycle for most companies gets longer and longer as they mature, which kills any ability to stay competitive. I recommend a living strategic plan, updated on a regular basis, so that the total plan cycle gets shorter over time.

2. Cost of a solution execution experiment is low. When serious new technology is involved, and it’s not clear how it will be perceived and used, a highly focused execution cycle may be your best planning cycle. To keep the cost low, I always recommend the “minimum viable product (MVP)” approach, and a short duration for analyzing results.

   More and more companies are settling on the incremental and experimentation approach to new products, business models, and processes. They find the costs, the structured approach, and the solution experimentation myths don’t hold in today’s market.

3. Opportunity and competitor data are not available. Be careful with this one, because no opportunity or competitor data is usually a clear indication that there is no market for your solution. Yet we all get surprised every day by new trends and changing cultures that defy conventional market logic. Be prepared for some misfires, and high risk.

   We all tend to remember those great product successes that evolved from no apparent market opportunity, including Rubik’s Cube, Star Wars, or even Apple’s iPhone, but remember that these are rare, and you shouldn’t bet your business on a gut feel.

4. Your team seems stuck in the getting ready stage. If you have a development organization which is never ready to ship, and insist on continually adding new features, or doing more testing, the ready-aim-fire approach will not likely happen. Firing at some market will at least give you the feedback necessary to direct appropriate development.

   My experience as a software executive with IBM is that smart engineers always have a few more key features that they need to add to the product before it is ready for sale, just because they can, as well as a large amount of additional quality and usability testing.

5. You already have a large and loyal customer base. Some customers are so loyal that they will follow you anywhere. Why waste time planning when you already know the conclusion? Even with this situation, it pays to keep a close tab on customer whims and feedback, as the newer generations of consumers are fickle, and can dump you quickly.

6. There is a powerful advocate or cause driving demand. In this age of outspoken experts and “influencers: on social media, your new fashion or cooking solutions can likely skip the traditional market planning cycle. Similarly, if your solution satisfies a government-driven demand, such as healthcare, speed to market is more critical.

Despite the possibilities that you may hit your target without aiming, I always have to remind entrepreneurs of the probability that you will shoot yourself in the foot instead. Thus I believe it behooves every one of you to build a go-to-market strategy, even before you build a solution. A solution without a market is an embarrassing frustration that every business owner can avoid.

Marty Zwilling

*** First published on Inc.com on 12/30/2020 ***

8 Keys To A Major Source Of Funding For New Ventures

Many first-time entrepreneurs find themselves unable to bootstrap their startups, and also unable to find early funding at the venture capital level or even with angel investors. Their only recourse is that first tier of investors, fondly called Friends, Family and Fools. These are the only people likely to believe in newbies, with only minimal product evidence or business experience.

Yet surprisingly, according to statistics on the Fundable crowdfunding site, friends and family are the major funding source for entrepreneurs, investing over $60 billion in new ventures per year, almost triple the amount coming from venture capital sources. The average amount per startup has been $23,000, usually in the form of a convertible loan, rather than an equity investment.

Of course, most startups ultimately need much more than this amount to scale the business, but some prior contribution from friends and family (as well as your own sweat equity) is normally expected as a qualification before professional investors will consider entering the game. Their logic is that if your family won’t invest in you, then why should they?

This is confirmation that the right people are always more important than the right product. Here are some key ways that you can be viewed as the right people, whether seeking an investment from friends and family, fools or even later from professional investors:

1. Ask for a specific amount to meet a specific milestone. Shy introverts may be great technologists, but they won’t be entrepreneurs until they learn to nurture relationships with friends and family, practice their elevator pitch and respectfully ask for funding. Waiting for someone to give you a gift with no specific objective is likely to be a long wait.

2. Offer a formal agreement as well as a handshake. The vehicle of choice is most often a convertible note, which is really a loan with a specified duration and interest, with an option to convert it to equity when professional investors come in later. Hire an attorney to make sure the terms are fair. This shows respect and professionalism.

3. Let people see your own investment and commitment. Friends and family are quick to differentiate between a passionate hobby and a sincere effort to change the world. Show them that you have done your homework with industry experts and potential customers, and convince them you are not asking for charity or a donation.

4. Build a prototype first on your own time and money. We all know people who are good at talking, but never seem to risk anything or find time to get started on the implementation. Every good entrepreneur needs to invest skin in the game, to show credibility and leadership to others. Investors want to be followers, not the leaders.

5. Don’t ask for more than your friends or family can afford to lose. In other words, don’t be greedy, and remember that you have to live with these people even if your startup fails. Ask for the minimum amount you need to reach a significant milestone, with some buffer for the unknown, rather than the maximum amount you can possibly foresee.

6. Communicate the plan and the risks up front. Remember that no investment is a gift, and everyone who buys in deserves to hear what you plan to do with their investment, and expects regular updates from you along the way. Be honest with naïve friends and trusting family members, since more than 70 percent of startups fail in the first five years.

7. Focus on well-connected friends with relevant business experience. A wealthy uncle may seem like an easy mark, but a less wealthy friend who has connections and experience with startups in your domain can likely help you more than any amount of money. Remember that you are looking for success, not just money to spend.

8. Tie re-payments to revenue growth in the startup. Rather than set a fixed repayment schedule, tie investment payoffs to a percentage of new product revenue, or a plan to convert the debt to equity. Use the minimum viable product concept to get revenue early, and allow market and product pivots at minimal cost.

In any case, avoid the urge to think of friends and family as a last funding resort, when they should always be your first focus, and maybe the only one you will ever need. If you succeed, there is no joy like sharing the feeling and the money with people close to you.

But make sure you do it right, per the above recommendations, or you may be the biggest fool.

Marty Zwilling

7 Keys To Success In Today’s Popular Sharing Culture

In the last few years I have seen a popular business model emerging which embodies a greater focus on social and environmental responsibility, and a new requirement for trust and sharing, as well as customer and community collaboration. Companies like Airbnb, Uber, Zappos, and Whole Foods are setting the example, and leading the way in profitability and purpose.

In her classic book, “We-Commerce: How to Create, Collaborate, and Succeed in the Sharing Economy,” veteran marketing strategist Billee Howard calls this movement an economy centered on the power of “we” instead of “me.” She presents a roadmap to help us navigate this new business landscape, retaining the best of the old, while innovating the path to success.

In my work with many entrepreneurs and investors, I also see and support the strong movement to this business model, which can be characterized by the following attributes she outlines:

1. Deliver value to the greater community, as well as customers and insiders. Provide real value and give-back to the global community and employees, generating trust and loyalty, which in turn brings in more customers. The result is a win-win situation, with more profits for the business, satisfied customers, and happy employees at all levels.

2. Develop a personal-engagement extraordinary service mentality. The days of mass production and commodity pricing as an asset are gone. The new customer generation wants to provide input, and wants to be treated as one-of-a-kind in their solution, delivery, and service. Being good in business now looks like an art, with creativity and innovation.

3. Customers and team members must be inspired, rather than pushed. Companies that offer value beyond their product or service, for social and environmental good, are seen as leading the way forward to a shared future abundance. This results in a new loyalty inside the organization, as well as outside, building momentum and profit.

4. Grow bigger by thinking smaller in the beginning. Start with a niche that you want to be known for, and knock it out of the ballpark by being the best. Narrowing your focus actually broadens your appeal and allows you to charge a premium because you are “the expert.” This give you the credibility to expand to other niches and grow the market.

5. Make innovation, creativity, and artistry your core competency. This requires team members who’ve been taught to think like innovators, and a reward system that fosters creativity. It requires actively listening to customers, and a culture of change. Most of all, it requires leadership and communication from the top on purpose and shared goals.

6. Tell your purpose story for engagement and improved recollection. Stories have been an essential driver of change and engagement throughout human history. Good stories make us think and make us feel. They stick in our minds and help us remember ideas and concepts in a way that numbers and text on a slide with a bar graph won’t.

7. Bridge the physical and digital worlds for your customers. Make sure all relevant customer interaction data, regardless of channel or source, is immediately available at every step of the customer’s journey. Empower all team members and customers, both in-store and online, with the right information they need in order facilitate a buy decision.

On top of the current pandemic, the business world has been forever altered by the growth of the world-wide Internet and global telecommunications. The customer and business universes are now globally and totally connected. This means that all customers see social needs and the environment as part of their own world, and expect these to be part of every business focus.

Thus, as the new sharing economy challengers continue to evolve their new business models, the traditional incumbents are being forced to change, or forced out of the marketplace. It’s time to take a reading on where you are in this spectrum. Is your company innovating a path to success, or riding an old wave into a cliff?

Marty Zwilling

8 Keys To Preparing Early For Your Next New Venture

Once an entrepreneur, always an entrepreneur. Although many won’t admit it, true entrepreneurs can’t wait to exit their current startup, and build a new and better one with their next great idea. In addition, current investors want to see every startup go public or be acquired, as an exit event, so they can get their due return for that investment which has been tied up for the last few years.

For these reasons, I always look for an overt exit strategy in every startup I might consider for an angel investment. As a mentor to many entrepreneurs, I also encourage an entrepreneur exit focus early, and I really like the specific steps outlined in the classic book, “Exit Signs,” by Pamela Dennis, who has helped companies through this critical transition for decades.

Her focus is a bit more on mature companies, but I believe the following eight steps, paraphrased from hers, are especially applicable to every startup and the entrepreneurs who create them:

1. Think about the end game as you start. Running a mature company is totally different from running a startup. Most startup founders don’t relish the thought of managing repeatable processes, greedy stockholders, and endless regulation reports. Yet they often fall into these roles by not proactively preparing themselves for any alternatives.

2. Set a target personal destination and timing. The first step is clarifying your personal goals and the legacy you want to leave. Exiting this startup is not the end, and may be the beginning of something even better, like Bill Gates philanthropy, or your next plan to change the world. At minimum, you need to get an exit advisor to keep you on course.

3. Set your startup health gauges and use them. New startup founders keep all the operating metrics they need in their head. If you intend to exit, or even if you don’t, it’s never too early to think what an acquirer or stockholder looks for to assess your business health. This all starts with building a culture and strategy that can survive without you.

4. Tune up your startup value and salability. Even if you don’t have a formal board of directors, it pays to have trusted advisors who will give you regular unbiased feedback on your team strengths and weaknesses, financial and operating ratio norms, and an external view of current company valuation issues. Listen carefully and act accordingly.

5. Build relationships with potential acquirers. The best sale or acquisition is a gradual one, where the acquirer gets to know you through formal and informal relationships. Don’t wait for a distress situation in the business or your personal life, and hope that the ideal acquirer magically appears. Keep a critical lens on payment options and tax implications.

6. Mature your business processes and customer base. Secure your company’s sustainability through multiple revenue streams and customer sets, and solid core business processes. Build an exit-transition plan for yourself, and a plan to retain key talent on the team. Anticipate customer and valued-supplier reaction to any change.

7. Build a positive data bank and presentation. Well ahead of any planned move, you need to assemble hard data to support your historical and projected performance and sustainability. Your valuation and salability depends on the credibility of this effort. Plan to spend 30-60 percent of your time away from running your business during this phase.

8. Lead your way out rather than wait for a push. The win-win startup acquisitions and successful transitions to public companies are led by the entrepreneur, rather than happen passively. You need to proactively engage the right people, drive improvements where required, and pay attention to all the external and internal factors gating success.

According to Dennis, an astonishing 87 percent of small and mid-size business owners don’t have an exit strategy or plan, leaving them to die at their desk, or get pushed out on terms they don’t like. If you are like most entrepreneurs, who look forward to a life of pride and profit after their current startup, it’s time to take some steps to make a startup exit more than a wistful dream.

Marty Zwilling

8 Initiatives To Heighten Your Customer’s Experience

Most leaders agree that poor customer service is a business killer today, in terms of lost customers, reduced profits, and low morale. Yet the average perception of customer experience has not improved. Young entrepreneurs and startups, in particular, often remain naively unfocused, despite their passion, of what it takes to provide the high-quality service expected.

It’s a tough job, and inexperienced entrepreneurs just don’t know where to start, and how to do it. Chip Bell and Ron Zemke, who are experts in this area, provide some of the best specific insights I’ve seen, in the classic book “Managing Knock Your Socks Off Service.” Their eight initiatives should be required reading for every entrepreneur:

1. Find and retain quality people. You have to start with hiring only people who are willing and able to make serious customer service happen. Make sure you know and communicate well exactly what you mean by high-quality service. Train them fully, give them authority, make them accountable, and tie their pay to customer satisfaction.

2. Know your customers intimately. This means personally listening, understanding, and responding to your customers’ evolving needs and shifting expectations. Then make sure that everyone on the team does the same, and are motivated to improve the match with your startup. Seek out complaining and lost customers for the most important input.

3. Build a service vision that everyone sees as clearly as you. This means articulating and living the customer service mindset for the team, in front of customers and in the board room. It must be understandable, written down, and verifiable, with regular measurements and metrics to make it real, benchmarked against the competition.

4. Make your service deliver process “happy.” A well-designed service delivery process will make you easy to do business with. The process must be employee friendly, as well as customer friendly, and have feedback mechanisms to correct poor results. If service employees are not happy, the process isn’t working yet.

5. Train and coach continuously. Companies with great service routinely spend 3% to 5% of salaries training team members – experienced as well as new. Leaders have found that keeping everyone on top of changes in technology, competition, and customer demands is critical to success. Service people need this as required team support.

6. Involve, empower, and inspire. Involve team members in the fix to customer problems, as well as fixing the faulty process causing the problems. Empower them to look beyond simple rules for solutions, not out of habit, routine, or fear. Inspiration is the process of creating excitement, enthusiasm, and commitment, by your passion and actions.

7. Recognize, reward, incent, and celebrate. By human nature, he team that works for and with you want to do a good job. The best incentive is to give them something good back in return. This should start with constructive feedback on how well they are doing, and what they can do to improve. Don’t forget recognition for accomplishment and efforts.

8. Set the tone and lead the way. Like it or not, you are the personal role model for all the people in your startup. How they see you deal with and talk about peers, partners, team members, and customers tells them what the real rules of conduct are for customer service. You can’t con or manipulate people into doing quality work.

Customer service is not just handling exceptions, something that you can think about later, once the business is up and running. It’s a core process that must be up and effective when you deliver your first product or service. If you still doubt the consequences, consider the following facts from research by MTD Training Group:

• More than 50% -- Scrapped a planned purchase because of bad service
• 60% – Consider switching businesses after 2-3 instances of poor service
• 69% – Spent more money on purchases from satisfied businesses
• 90% – Tell others about their service experiences.

In the past, competitive advantage was all about economies of scale, advertising power, and service versus price. With instant low price search, ordering via smart phones, and unfiltered online reviews via Yelp and Foursquare, the advantage today has shifted to companies who can make every experience positive. Prepare for it, and don’t jeopardize your future on the first day.

Marty Zwilling

8 Strategies For Sustaining Momentum In Your Startup

Every new business I know dreams of building momentum in their business, where growth continues to increase, customers become your best advocates, and employee motivation is high. The most common approach I see to achieving this is to do more of everything for everyone. Unfortunately, with limited resources, this isn’t possible, and it frustrates customers and the team.

Based on my experience advising new entrepreneurs as well as more mature businesses, I recommend the following strategies for building business momentum, while still optimizing the limited resources of every small business:

1. Find more customers that like what you do best. Fight the urge do more things, to attract more customers in a broader market. In reality, too many choices actually dilutes customer interest in your existing market, and makes your job of production, marketing, and support much more complex. Focus first on finding more of the right customers.

2. Focus on the mainstream customer majority. New entrepreneurs, especially technical ones, are excited by early adopters, and tend to focus on their feedback, which will always suggest more product features and options. Ongoing momentum requires a move to mainstream, or even late adopters, who demand simplicity in your base function.

   I’m sure it wasn’t early adopters who suggested that Amazon implement a simple “big red button” for a “one-click-buy,” but many experts now attribute huge online growth to this simplification for less tech-savvy customers. Most ecommerce sites highlight this feature.

3. Select a single dimension to measure momentum. Your focus for momentum could be sales, profitability, or number of customers, but trying to keep all possible parameters growing is simply not practical. It’s important to define your growth strategy, document it, communicate it to your team, and align metrics and employee rewards to target goals.

4. Build a strong employee culture focused on growth. One person can build a product, but it takes a dedicated team, with strong leadership, to build a business. Momentum requires a team culture of high motivation and engagement. These attributes require an effective employee feedback and reward system, as well as fostering collaboration.

   For example, Mark McClain, cofounder and CEO of SailPoint Technologies, created an employee growth culture resulting in growth of forty percent a year, with more than $100 million in revenues. The company has since gone public, and is still a market leader.

5. Plan a long-term strategy, and avoid crisis moves. In most companies, maintaining momentum requires the right strategic partners and acquisitions, in lieu of short-term price adjustments and special sales. That means you need to focus early on where you need to be in five years, and focus on strategic planning on a regular basis.

6. Maximize key customer transaction efficiency. Momentum normally requires an ever-increasing volume of transactions, so you must make sure that key ones can be handled smoothly and quickly. Customers have no tolerance these days for multiple interactions, necessary support requests, poor customer service, or bureaucratic processes.

7. Utilize outside expertise and mentoring. No matter how much energy, experience, and passion you have, there is always more you can learn from an Advisory Board of external experts or a mentor. Maintaining business momentum requires constant analysis and vigilance for market and technology changes, as well an internal focus on optimization.

8. Track competition to stay ahead of copycats. Don’t wait for negative momentum to alert you to new competition – recovery is much more difficult than proactively making focused changes to retain customer loyalty and repeat business. Incremental changes are always easier to make and market to existing customers than disruptive products.

I’m sure that you have all seen how quickly business momentum can shift, as from MySpace to Facebook, or more recently in the explosive growth of Amazon and e-commerce compared to retail. Today’s customers quickly sense the growing momentum of specific businesses, or lack of it, via social media, online reviews, and texting with friends, and change their habits accordingly.

Thus you should never be complacent in your business about the growth you have achieved, or your loyal customer base. I urge you to practice the strategies outlined here both to build that initial business momentum, as well as to sustain it. Your long-term success and satisfaction depends on it.

Marty Zwilling

*** First published on Inc.com on 12/22/2020 ***

7 Reasons Why Every Business Leader Needs A Mentor

After working many years in business, both in large companies as well as startups, I’ve realized that you can learn more from peers and mentors than from any formal education program. Of course, nothing beats learning from your mistakes, but that’s a painful and very time-consuming journey. Best of all, I find mentoring to be fun and fulfilling for both the giver and the receiver.

In fact, I’m convinced that the establishment of business mentoring relationships is the missing link between our education system and people who want to lead businesses today. Building and running a business is not rocket science, but it does require making practical tradeoffs, building solid relationships, and taking smart risks, all of which a one-on-one mentor can help you with.

Based on my own mentoring experience, here are seven key lessons I have learned, and offer to you as a potential source of inspiration and satisfaction, after some success in your business:

1. Relationships are the real key to business success. We all probably thought that our initial ideas and the right products were the key, but realized later that business is all about win-win relationships with partners, team members, and customers. Mentoring will help you, as well as your mentees, find and build the right relationships for success.

2. Focus on real issues and skip the hypothetical cases. Keep your discussions centered on actual business and market challenges, in lieu of speculation on possible future problems. These days, the pace of change is so great that trying to predict the future is not likely to be productive, even for the most confident business leaders.

3. We all need help in honing our communication skills. Effective two-way communication is the key to every successful business transaction, and we all need practice and good feedback from someone we trust and respect on how to improve it. Mentoring gives both parties the opportunity to test their listening skills, as well as talking.

4. Mentoring works best one-on-one and person-to-person. It pays to take the time to meet personally in a relaxed environment to absorb the body language and the inspiration required to communicate effectively. Mentoring supplements but doesn’t replace the need to continue education through industry conferences and networking.

   Bill Gates and Warren Buffett both have very busy schedules, and have always been in. totally different businesses, but they still find time to meet and talk regularly. Both give much credit to the other for success, and claim to have learned much from each other.

5. Mentoring keeps you in tune with new culture trends. Our educational systems today do very little to help you keep up with new generations of customers, employees, and partners. One of the toughest challenges is to adapt to changing global cultures, and how people think differently today. Pick your mentor carefully to meet this need.

   In that context, one of the most unusual mentoring relationships I can recall was between Mark Zuckerberg and Steve Jobs. Early in the Facebook era, Steve convinced Mark to visit a temple in India for a month to better understand future social and culture trends.

6. Existing leaders use mentoring to find their replacement. While I tend to look at mentoring as a source of satisfaction and social responsibility, many more active executives and companies consider it one of the best ways to identify and nurture high-potential people in their organization as the next generation of replacement leaders.

   According to Deloitte, high-potential millennials say that having an experienced mentor assigned is one of their key factors in selecting a place to work and remaining with it. Long-term company success is all about having good leaders today, as well as tomorrow.

7. Sharing through mentoring amplifies your satisfaction. Every business owner and professional I know enjoys paying it forward as much as the learning and success. This can be particularly satisfying as you enter the later stages of your career, where your passion and energy for tackling the daily problems is more limited by health and family.

But don’t be fooled into taking mentoring lightly. It’s not easy to ask for help, and organizing times to meet, understanding the ins-and-outs of effective communication, establishing goals for your time together; all of these are reasons that mentor relationships don’t always work. Yet if you commit, and make your best effort, it can be one of the joys of business that you will never forget.

Marty Zwilling

*** First published on Inc.com on 12/16/2020 ***