Sunday, February 28, 2021

10 Strategies For Finding Stronger People Connections

positive-business-relaionshipsJust because you are an entrepreneur, or work in a startup, you can’t ignore the rules of building and maintaining relationships. Many despise these experiences in corporate environments, and leave for a startup, only to find that they have to be able to navigate a similar minefield there of workplace and business relationships to be successful.

Jan Yager, Ph.D., an author and speaker on this and related subjects, outlines in her classic book “Productive Relationships: 57 Strategies for Building Stronger Business Connections.” From my experience and hers, here are ten top relationship strategies, as practiced by Richard Branson and other well-known startup leaders:

  1. Create a favorable first impression. You only get one chance for a first impression. Don’t miss an opportunity for face-to-face communication, where you can use body language that welcomes relating, estimated at over 50% of all communication. Limit the use of e-mail and texting for early interactions.
  1. Avoid negative personality types. By recognizing negative personality types, like the control freak, the blameless type, the idea thief, and the entitled, you will have a better chance of not taking his or her behavior personally. Avoid associating with them.
  1. Proactively form relationships with positive types. These are the people who will help you to thrive and prosper. They include real mentors, facilitators, visionaries, motivators, and negotiators. Of course, it still pays to keep your eyes open and carry your own weight.
  1. Find a way to motivate others to want to get along with you. Understand your own agenda, and figure out the agenda of others, hidden or obvious, to make it a win-win relationship. How can you appeal to others on an emotional level to work together?
  1. Reexamine your attitude toward conflict. Some conflict is inevitable. The key is how to deal effectively with it. Recognize points of view, respond to what happened, resolve what needs to be resolved, and reflect on the lessons learned. Then move on.

  1. Deal with the “back-off” before it turns antagonistic. Rather than have a confrontation, someone backs off. You can’t make someone want to deal with you, but you can try to increase their motivation to deal with you – like getting together for lunch, or trying to communicate in another way.
  1. Benefit from harsh feedback about your work. Receiving criticism is never easy. Try some recovery techniques, like taking a deep breath, give yourself time, and look at the issue from their perspective. Keep your initial response short and sweet and in control.

  1. Cope with the “lonely at the top” syndrome. One of the prices that you pay for being a CEO is giving up a lot of the social relationships within the company. There is a line beyond which you cannot go. You cannot compromise what is right for the company just to be liked. Join associations, or rely on your family for support and feedback.
  1. Say goodbye, if leaving is the best option. Sometimes it’s better to just move on, rather than endure extended pain. Even if you cannot quit this instant, you can at least start looking for a new job. Be proactive in planning for your next position.
  1. Use social networking to improve your work relationships. Savvy workers at all levels are using these sites to develop and strengthen their business relationships as well as to reconnect with previous business connections. Make your own luck by giving and seeking referrals.

Compounding these strategies in today’s startup environment are two divergent concepts: a heightened degree of competitiveness, and a greater emphasis on teamwork. This means you need even more emphasis on effectively engaging others, and learning to deal effectively with potentially negative work relationships.

The startup world of the past, run by a couple of autocrats, no longer works. To succeed in today’s collaborative, customer-driven, networked economy, requires real business relationship efforts by everyone involved. No matter where you are in the spectrum, there is no time like the present to kick it up a notch.

Marty Zwilling

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Saturday, February 27, 2021

8 Ways An Incubator Can Accelerate Your New Venture

startup-incubator-iconMore and more entrepreneurs are hearing about the successful graduates and investors queued behind a few well-known startup incubators, including Y Combinator, TechStars, and the Founder Institute. They dream of appearing at the door, with their idea on the back of a napkin, and popping out a few months later with investor money to burn. The reality is far different.

By way of a definition, a business or startup incubator is a company, university, or other organization which provides resources to nurture young companies, usually for a share of the equity, hoping to capitalize on their success, or at least strengthen the local economy. According to the National Business Incubator Association (NBIA), there are currently over 1,200 members in 30 nations.

The good news is that a few of these do have an envious success record. Y Combinator, led by Paul Graham, claims success with 3000 companies over 15 years, with a combined value of over $300 billion. Founder Institute, founded by Adeo Ressi in 2009, claims over 4500 graduates, now up to 1,000 companies annually worldwide, with 90% of these companies still running.

Yet success may not be any real indicator of help received, since once could argue that the really great entrepreneurs didn’t need any help from the incubator, and might have been even more successful without it. All the rest of us might be the real beneficiaries, with a lot more to learn. Here are several key lessons I assert you can learn from a good incubator:

  1. Aptitude reality check. Adeo Ressi believes his preliminary test of applicants is predicting more and more accurately whether you have the DNA of an entrepreneur, before even being accepted. His tests focus on personality traits alone (ignoring your startup idea), looking for fluid intelligence, openness, and agreeableness. Why spend years struggling and all your money if entrepreneurship is just not your thing?

  1. Initial funding. Many incubators do provide seed funding for entrepreneurs selected, usually in small amounts like $10,000 to $20,000, and usually taking 5% to 15% of your equity in return. This investment can get your startup off the ground in an otherwise impossible financial situation, but should not be viewed as the main reason for joining.

  1. Expert mentoring and training. In my view, the quality of incubator leadership is the single biggest potential value provided and learning opportunity for entrepreneurs. Every successful incubator has strong leadership and staff with business and investment credentials. Skip the ones who seem to be offering you space and facilities only.

  1. Peer support. In addition to the formal mentoring, the peers you’ll be working alongside at startup incubators provide much more than emotional support. You will find expertise in areas you need, as well as quick advice from entrepreneurs just ahead of you in every phase of the business cycle.

  1. Facilities support. Of course, we can’t eliminate the value of affordable office and meeting space, administrative support services and advanced communications technology to struggling entrepreneurs. But don’t believe the myth that incubators are all about ‘cheap rent,’ and avoid business incubators in otherwise vacant buildings.

  1. Learn by doing. An incubator allows entrepreneurs to get their ideas out of their mind and out of the classroom, while still retaining a modicum of structure and discipline. That’s as close as possible to real experience, and there is no teacher like experience. It’s an opportunity to succeed or fail fast, with a minimal investment to time and money.

  1. Follow-on funding and connections. Success in an incubator means likely access to venture capital, and connections to industry gurus and business opportunities. About 80% of TechStars startup graduates go on to raise venture capital or a significant angel funding round, versus maybe 1% of all startups who seek funding.

The bad news is that the odds of getting in are still hugely stacked against even the most dedicated entrepreneurs. At Y Combinator, maybe 80 out of 1000 applications are accepted per cycle, and more than half of these fail to complete the program. You can get into less famous ones more easily, but the learning and chance of getting funded at the end go down accordingly.

You also may be hearing more about “business accelerators” as an alternative or improvement on the incubator model. The key difference between them, according to purists, is that accelerators compress the timescale for startups, to drive entrepreneurs from ideas to marketable products in a matter of months. Overall the learning opportunities are essentially the same.

My conclusion is that the best incubators can really help you, but are no shortcut or substitute for the right mindset, hard work, and a real solution to a real problem with a big opportunity. Then it’s time for due diligence on the incubators in your area, to see who has the track record and credentials you need. The success of your career and your business depend on it.

Marty Zwilling

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Friday, February 26, 2021

10 Keys to Remaining Cool And Calm Despite Pressures

stress-business-pressuresOne of the most valuable attributes of a good business professional and leader is to be able to control emotional outbursts, to maximize your credibility and respect, and to maintain your own health. The best of you train yourselves to show emotions sparingly and strategically, while the rest are convinced that emotions cannot be controlled, and are a function of culture and genetics.

Based on my own many years as a business executive and advisor, I have seen many professionals “mature” from hotheads to cool and calm under pressure, becoming better leaders and decision makers in the process. With some coaching and mentoring from other leaders, I was able to do it myself, so I know you can do it too, by committing to the following strategies:

  1. Train yourself to always look for positives, not negatives. Optimistic business leaders see value in every new business challenge, rather than stress and risk. You must recognize that change is the new norm in business, so problems represent opportunities to learn something new, improve your productivity and competitiveness of the business.

  2. Write down your top 5 core values and review them often. Pressure and emotion in business is often an indication of core value conflicts. Once you see and understand the conflict, it’s easier to make a decision, respond rationally, or simply remove yourself from the role. Don’t try to be someone you aren’t, or be everything to everyone.

  3. Create a short to-do list at the beginning of each day. A mind overloaded with a large and growing list of critical items is not efficient, and will always be prone to burnout and emotional outbursts. I recommend a three-item high priority list for focus. Then limit the external interruptions, so you can comfortably and effectively address each, and more.

  4. Practice delegation and decline unreasonable requests. Learn how to courteously turn back requests outside your realm of responsibility, and recommend others who may be more qualified. The most respected business leaders know their limitations, and are not afraid to admit them. Do the same for any commitments to the community and family.

  5. Never schedule more than 80 percent of your time. Pressure and emotion become dominant when your schedule is overloaded, or too many predictable interruptions occur. Of course, most professionals are optimistic, so they tend to over-commit and underestimate work requirements. We all need a buffer to handle those special cases.

  6. Put more focus on building the right relationships. Since business is generally not rocket science, relationships with peers, partners, and customers are often more important than skills. Find time in your work schedule for networking, working lunches, and business conferences, where you can test your ideas, learn, and generate support.

  7. Define a clear break between work and private activities. Practice a ritual, such as a cup of coffee with a peer, to define your workday beginning, and maybe tea with your spouse to reset to family time. Then diligently don’t let these worlds intrude on each other, except in emergencies. Use the transition to reset stress pressures and emotions.

  8. Never use emotion as a substitute for preparation. Effective business professionals always prepare for tough issues and key meetings, by doing their own research, and getting early counsel from experts and coaches. Not only do they do the homework, but they prepare mentally and physically to be at their best, rather than on the edge.

  9. Take satisfaction from wins to balance against setbacks. No one in business wins every battle, so frustration on any issue needs to be offset by other wins and achieving incremental thresholds along the way. For most of us, this requires setting aside some contemplative time on a daily basis to measure key item progress and enjoy small wins.

  10. Maintain at least one non-work passion for energy balance. Everyone needs a focus outside of work, such as a hobby, exercise regimen, or sports, to grant relief from work pressures and reset emotions. Lack of cool, and emotional outbursts are often indicative of burnouts and pending meltdowns. Spread your energy to family as well as work.

Because business is not rocket science, don’t let anyone tell you that what you can accomplish is limited by your culture or old habits. Everyone has the ability to control their own actions and emotions, which I find to be the keys to success in most business roles. I encourage you to learn and practice the strategies outlined here, to minimize stress, and enjoy the journey as well as the destination.

Marty Zwilling

*** First published on Inc.com on 02/12/2021 ***

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Wednesday, February 24, 2021

7 Keys To Scaling A Startup into A Thriving Business

business-people-growthAs an advisor to many startups today, I still see that most of you entrepreneurs see yourselves as the sole driver of your new solution, and the key driver of your new business. That’s not all bad in the beginning, but as you scale, every business has to build a team to keep up with the wide range of skills needed, fight new competitors, and respond to changes in the marketplace.

For many, it’s hard to make the switch from that top-down order-giving culture, and it’s hard to find the time to recruit and coach the new team members you need to scale the business to success. Many new businesses fail at this stage because they don’t build the required team culture to keep teams engaged and committed, and founders burn out trying to do too much.

Based on my own experience in large companies, as well as small ones, here are seven key strategies I recommend for building the teams and culture that will drive business success:

  1. Admit to yourself and others that you need help. Don’t let your ego and passion prevent you from building a team around you, listening to others with complementary skills, and delegating decisions as far down as possible. We all need to be humble and recognize that what we need to know about technology and the market changes daily.
  2. Identify a business purpose and goals that motivate any team. Today, modern teams are engaged by a higher purpose, such as improving the environment or helping the underprivileged, more than just money and profit. You need them to make a personal commitment to customer service, improved quality, and change to improve the future.

    Blake Mycoskie, TOMS shoes founder, set a goal of donating a pair to the needy for every pair sold, and maintains team commitment by providing international trips to assist partners in distributing shoes in interesting places, including Nepal and Honduras.

  3. Encourage your team to make decisions and take action. Many teams I know are frustrated by the never-ending debates and constant requests for more analysis by management. Satisfaction and commitment come from choosing a path to move forward, evaluation results and customer feedback, and learning from all their best efforts.
  4. Keep teams small, diverse, and collaborative. I find that teams greater than 8 or 9 people often get bogged down on internal politics, and have trouble really sharing data effectively or reaching consensus. People all need to trust each other, and be able to recognize the value of diverse perspectives. Avoid long and never-ending projects.

    As an example, CEO Jeff Bezos at Amazon is known for his two-pizza rule: no meeting or team should be so large that two pizzas can't feed the whole group. He is convinced this assures maximum productivity, and that no one's ideas get drowned out or ignored.

  5. Practice active listening and open team communication. As the size and number of your teams grow, the amount of time you spend listening and communicating must also grow. Resist the urge to limit what teams need to know, interrupt negative messages, or jump quickly from listening to a solution. Promote the sharing of ideas and feedback.
  6. Foster a culture of constant learning, even from failures. Many new business leaders can’t wait to implement fixed team processes to improve productivity and minimize risk. While productivity is important, the bigger risk is not learning from customers and the market, and falling behind. Reward new ideas, experiments, and critical team feedback.
  7. Be the model of customer focus for the team. Too many business leaders I know retreat farther and farther from the customer as their business scales. Make sure you schedule time for regular customer visits, and make sure your team understands that providing value to more customers is your definition of growing the business.

As your business grows from a startup to a sustainable business, you too have to grow from an entrepreneur to a business leader. Of course, if your interests and passion don’t lean in this direction, you can always bring in an outside CEO who already has the skills, or you can merge or sell your startup to another enterprise, and move on to start your next new venture.

Just be aware that a winning team makeup and culture won’t happen by default. It takes recognition of the need and effort on your part. I urge every entrepreneur to take a hard look at their own situation – you may be a key part of the problem, or the driver of the next unicorn business solution.

Marty Zwilling

*** First published on Inc.com on 02/09/2021 ***

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Monday, February 22, 2021

8 Keys To That First Investment From People You Know

funding-friends-familyMost entrepreneurs have learned that it’s almost always quicker and easier to get cash from someone you know, rather than angel investors or professional investors (VCs). In fact, most investors “require” that you already have some investment from friends and family before they will even step up to the plate.

You see, investors invest in people, before they invest in ideas or products. Since they don’t know you (yet), their first integrity check on you as a person is whether your friends and family believe in you strongly enough to give you seed money for your new idea. If they won’t do it, they why would I as stranger invest in you?

Friends and family will likely not expect the same level of sophistication on the business model and financials as a professional investor, but they do expect to see certain things. Here is a summary of some key items to think about as an entrepreneur before approaching friends, family, or even fools:

  1. Don’t be afraid to ask, carefully. If you set around quietly waiting for someone you know to offer you money to fund a startup, you will probably have a long wait. On the other hand, if you open every conversation with “I need money,” you won’t have any friends or any money. Practice your “elevator pitch,” and end it by asking for the order.
  1. Be upbeat and respectful. Nothing kills everyone’s optimism and desire to help quicker than a negative or arrogant attitude. If they are going to put cash into your company, chances are that they will expect to spend a fair amount of time together, either helping you or certainly discussing progress. Nobody likes a downer.

  1. Be passionate about the idea. Friends and family will quickly detect your level of sincerity and thought behind the idea. You need to convince them that you have been working on this vision for a long time, and have done the “due diligence” on all the potential knockoffs. Daydreams and “the idea of the moment” won’t get much respect.

  1. Demonstrate progress and your own “skin in the game.” Saying that you need money to start is not nearly as convincing as saying that you have built a prototype on your own dime, but need more to roll it out. We all know people who can talk a good game, but never get around to building anything.

  1. Ask for the minimum rather than the maximum. We would all love to have a million dollars of funding to “do it right” and build the company of our dreams. But your chances are minimal of finding someone who will give you that much to start. Set some milestones for three or four months out, and show what you can do, then ask for more.
  1. Communicate the risks, and write down the agreement. Be honest with na├»ve family members and friends about the inherent risks of a startup – at least 70% fail in the first five years. Don’t take money from family or friends who can’t afford to lose it. Think hard about the consequences of a possible startup failure and the loss of their funding.
  1. Show some incremental value along the way. Look for ways to get some traction with a minimal product, while you are still developing the main event. In high technology, this is called “release early and iterate,” which allows you to make corrections as you go, as well as adjust for the market changes. It also shows progress to early backers.
  1. Network to build investor relationships before you ask for money. Having a real project, rather than just an idea, is a strong positive when networking for Angels or VCs. Now you really have something to discuss, and real credibility as an entrepreneur. Build the friendship first, ask for advice on a real project, then maybe money later.

Overall, don’t think of friends and family funding only as a last resort. There are massive advantages, like sharing profits with friends and family, as well as the strategic credibility than can be gained from funding from someone you know, rather than from a professional investor.

I hope all of these points seem like common sense to you, and you wouldn’t think of handling it any other way. Yet, I’m continually amazed at how often I am approached as a professional investor by strangers asking for a million dollars to fund an idea, without hitting even one of the above points.

We can all recount horror stories of families and friendships torn apart by money lost on someone else’s speculative dream. In these cases both the entrepreneur and the funding partner are the fools. Don’t be one.

Marty Zwilling

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Sunday, February 21, 2021

Why Every Startup Needs To Select Customers Carefully

Customer family magnifying drawingMost startups are happy to find any customer, and will hang on for dear life to every one. Only later do they realize that some of these cost more than they are worth, or lead into commitments they can’t sustain, but no business wants to violate the golden rule that every customer needs to be treated as if they were the only customer.

In reality, the real world is full of pragmatics. Every smart entrepreneur needs to realize that trying to treat every customer the same, with limited resources, may mean that you are treating them all poorly, or at least limiting your own growth. Mike Michalowicz, in his classic satirical book “The Pumpkin Plan,” makes some excellent points with the analogy of how growing a business is like a farmer who struggles to grow championship-size pumpkins.

They generally treat all pumpkins with respect, but they don’t treat them all the same. Likewise, you have to rank your customers, fire the troublemakers, and eliminate unfit ones. Then you can focus your energy on the core client group, and keep these folks so happy that they will never leave you for the competition. Here are some key principles we both recommend along the way:

  1. Favoritism . . . it’s a good thing. Playing favorites is nothing to feel guilty about. It’s simply good business, and mandatory for your success. Your top clients or customers need to know they are special, to feel special. Go out of your way to help them grow their own business. Don’t try to make every pumpkin a giant pumpkin, because it never works.
  1. The customer isn’t always right. But the right customer is always right. Make them your favorites. Think of your business as a membership organization, with reasonable rules to join. The rules are for you and your team only, so no potential customer needs to feel excluded. Your goal is to grow every joining member into a record-breaking pumpkin.
  1. Under-promise and over-deliver. This ability seems to be a lost art these days, which makes it so powerful in making your special customers feel special. Masters of this process plan to have the work done before it’s due, so there is no panic and no freaking out. Remember, you will be measured by your actions, not your words.
  1. Don’t hide the secret sauce. With the Internet, the days are gone when you could hide your key advantage, to keep competitors from catching up. Be the first to share the knowledge that demonstrates you are better. Secrets make people nervous. The more they trust you, the more they rely on you, buy from you, and sell for you.
  1. Keep yourself an inch ahead of your competition. It only takes an extra pound to beat the world record. Equal isn’t good enough. But manage your focus and resources carefully to be a little bit better, a little bit more helpful, and a little bit more creative for the long haul, as well as for the moment. Both you and your customers will be the winners.

On the other side of this equation, how do you fire a customer that doesn’t fit your business? Mike suggests the following approaches, which do take effort and discipline, and need to work within accepted norms and legal business practices:

  • Prioritize the stars. When the best clients call, they get services first. The cringe-worthy customers get pushed to the back of the line. Each will get the message you are trying to send, and you will have the differentiation you want.

  • Eliminate services. Sometimes this simply means you need the will power to not accept customer requests that you can’t satisfy. Another approach is to explain that you have shifted all your resources to another segment, and can no longer help this customer.

  • Raise prices. If you really want to see bad clients run for the hills, raise your prices. If your prices go up, your perceived value will go up, and you may no longer be the whipping boy of commodity customers. Point them to big-box providers for low prices.

  • Refuse to two-time. Another way of breaking ties with a demanding client is to explain that you have an agreement with a major client that prohibits you from servicing anyone else any longer. Introduce them to an alternate vendor, to make it positive.

The net message from “The Pumpkin Plan” is to plant the right seeds, weed out the losers, and nurture the winners, for maximum growth. Discover the unfulfilled needs of the customers you want, innovate to make their wishes come true, and over-deliver on every single promise. Just be aware that it’s easier said than done. Maybe it’s time to take an audit in your own startup, to check your own words versus actions, and the results.

Marty Zwilling

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Saturday, February 20, 2021

10 Reasons That New Ventures Are All About Execution

startup-executionI’ve always said that startups are all about execution. Sometimes I encounter self-proclaimed entrepreneurs who have been “thinking” about a concept for many years, and haven’t started yet. Some of these may be visionaries, but none are real entrepreneurs - yet. Elon Musk has built several innovative companies, including SpaceX and Tesla Motors, and is worth about $185 billion. I’m told he spent more time executing than thinking about any one of them.

Great entrepreneurs live by the principles discussed by Leonard A. Schlesinger, President of Babson College, in his classic book titled “Action Trumps Everything” which he wrote in conjunction with friends Charlie Kiefer and Paul Brown. In it he explains how the power of entrepreneurial action helps people create what they want in an uncertain world.

One of these principles is that action trumps thinking, when the future in unpredictable. This one caught my eye, since the future of everything for startups on any day is unpredictable. Here are ten key reasons that I can certainly relate to:

  1. You find out what works and what doesn’t. Every startup will tell you that no matter how certain they were of their solution, and the path to success, they had to pivot a few times in the face of unforeseen challenges. Great solutions are never obvious before the fact.
  1. If you never act, you will never know if you are right or wrong. You may think you know, but you won’t be able to point to anything concrete to prove you are right. The problem with that, as Mark Twain pointed out, is: “It ain’t so much the things we don’t know that get us into trouble. It’s the things we know that just ain’t so.”
  1. You will find out if you like it or you don’t. Your action, for example, the decision to take steps toward starting a restaurant, may cause you to find out that you love the cooking but hate talking to people, may convince you to go into high-end catering and hire someone to deal with the clients.
  1. Acting leads to a market reaction, which could take you in another direction. Action leads to evidence, which becomes fodder for new thinking. You act, therefore something changes, and in observing that reaction you gain knowledge that could never have been gained from thinking alone.
  1. As you act, you can find people to come along with you. For example, in talking to your suppliers, you end up meeting the world’s most organized person. She may soon be a 10% owner running the day-to-day operations of your catering business.
  1. As you act, you can find ways to do things faster, cheaper, better. You discover, after making your world-famous chicken Parmesan fifty times, that you can prepare the dish in eight steps instead of eleven.
  1. If you act, you won’t spend the rest of your life wondering “What if . . .?” If all you ever do is think, you can gain tons of theoretical knowledge, but none from the real world. You become like that woman in the fable who knows the price of everything but the value of nothing.
  1. If all you do is think, you are less interesting as a person. In other words, if all you ever do is think . . . all you do is think. Who would you rather sit next to on a plane, someone who started a rock-climbing store, or someone who only thought about it?
  1. If you act, you learn from other people. You always want to know what’s real. Talking to people is acting . . . at zero cost. You can learn an awful lot, and it usually doesn’t take much time. Just make sure you act on what you learn.
  1. Thinking without acting feels like zero cost, but actually may have a huge opportunity cost. From a dollars-and-cents point of view, zero cost may be right. But while you are still thinking, somebody else could be stealing your market or the opportunity itself may end.

But before you act, you should always double check to see that the future is as uncertain as you think. If there is a more than reasonable chance that the future is knowable, you are better off going with a prediction, and that is a good thing.

If there is no way of knowing what the future will be like, act. It is the quickest way to learn. Take one small step toward your goal when it is far away or difficult to accomplish. Then evaluate where you are. A journey of a thousand miles really does begin with a single step.

Marty Zwilling

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Friday, February 19, 2021

8 Ways To Beat The Odds Of A Consultant For Startups

consulting-business-startupLet’s face it, consultants have a bad image. Businesses want experienced people who get their hands dirty, rather than experts who give presentations, make recommendations, and disappear. Even consultants don’t like their job, since they don’t often get to see results, and too much of their time is spent looking for the next gig.

The Internet has changed the world. If you need to know how to do something, just look it up online. You will probably find more current alternatives and more recommendations on any given subject than any consultant could muster. For example, there are a dozen articles like this one for every area of expertise.

But certainly the Internet doesn’t do the job for you. My message today is to avoid the consultant stigma by signing up to do the job, not just talk about it. Then lead by example. There are a myriad of ways to make this happen in the world of startups. Here are a few:

  1. Take the end-role directly. An approach I suggest these days is for freelancers to contract for the actual role, probably part-time, of startup CFO, VP of Sales, or President. In this mode they take on the “doing” role directly, rather than any “consulting” role.

  2. Specialist versus consultant. Small groups of consultants have now become groups of specialists – CFO Services, Marketing Services, or Management Services. Specialists are consultants who do the work, rather than just make recommendations.

  3. Charge by task or fixed-rate. Another mistake many consultants make is to charge by the hour, and customers lose track and lose confidence as things change. A fixed rate will make sure there is no surprise at the end, and you will stand out in the crowd.

  4. Report within the organizational structure. In the past, consultants were taught to report only to the top executive, and to assume leadership rights in the organization. Today’s specialists have to earn their leadership, and prove their contribution to the department executive.

  5. Dress to fit in. Gone are the days when you can make a great impression by over-dressing. Dress to fit into the company culture, no more, no less. Share the everyday life of the startup team you are working with.

  6. Produce results. “Results” these days are not PowerPoint slides, or theories and recommendations. If you are the CFO, showing results means you set up the accounting system, and generate the first P&Ls. Speak to people, rather than write a document every time you want a change.

  7. Have "customers", not "clients." This is a minor semantic point, but an important one to the customer. A "client" implies that the consultant is in charge, while "customer" suggests that the service provider is beholden. All aspects of customer service apply.

  8. Be exceptionally easy to find. When your customer phones or emails you, his timer starts, so it behooves you to return his call or email quickly. Scheduling of a meeting at the end of the next week definitely tags you as a consultant whose focus is elsewhere.

So for all you consultants, maybe it’s time to consider changing your mode of operation as well as your title. If you have real experience in key business roles, or you are an expert in any one, then you have a good set of modern credentials. Use your credentials to figure out how to join a startup team.

Don’t be an outsider in attitude, recommendations, clothes, or rules of engagement. Every startup I know is looking for more team members, but none are looking for more consultants. If you find the right team, and do the right work, you won’t even need to look for a next gig.

Marty Zwilling

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Wednesday, February 17, 2021

6 Cost-Cutting Recommendations For New Entrepreneurs

co-working-spacesIt wasn’t so many years ago that starting a new e-commerce business on the Internet was a complex custom development project, usually costing a million dollars or more. Now you can do it for free, or a few hundred dollars, with one of the many web building tools available, like Shopify or Weebly. A programmer can build a new smartphone app for a few thousand dollars.

With the appearance of do-it-yourself services on the Internet, entrepreneur curriculums at every university, and a wealth of new books on the subject, the need for expensive consultants and business advisors has also been mitigated. Almost anyone can start a company today on a shoestring budget, following these cost-cutting recommendations:

  1. Establish a solid legal structure for your business. Setting up the business as an LLC or C-corporation can now be done online with low registration fees and minimal risk. The same is true for filing patents, registering trademarks, and filing copyrights. Required legal fees now average $5K or less, compared with $20K or more as a minimum.
  1. Work out of your home, and keep your own books. You can now skip the mandatory office space rental, with secretary and bookkeeping staff, or outsourcing. With a little help from a friend, you can handle expenses, revenue, and payroll, with QuickBooks or a similar package. These steps alone can reduce your monthly burn rate by at least $10K.
  1. Use the cloud and subscriptions for computing technology. Gone are the days of required $50K computer servers onsite, with big software license fees up-front. Servers needed expensive IT consultants for setup and maintenance, and required excessive power and cooling. With Google, you get all the storage you need in the cloud for free.
  1. Social media facilitates marketing and sales. For startups, social media and color printers have essentially replaced the need for external public relations and marketing services. You can optimize your website and spread your marketing messages across the world through the Internet. Savings here can easily reach another $10K per month.
  1. Minimize investment in prototypes and tooling. With do-it-yourself makerspaces such as TinkerMill, you can avoid expensive prototyping iterations. You can now get tooling and products built very quickly either in the US or in China, with delayed payment options. The need to build a new million-dollar factory for each new product is gone.
  1. Use freelance and work-at-home to reduce payroll. As an old rule-of-thumb, startups realized that employees cost double the salaries paid, to cover office costs, health-care benefits, and workers compensation. Today, productivity is way up, you can do most anything yourself, and you can outsource to contractors with more skill and less cost.

Of course, not all new businesses can benefit from all these recommendations, so think carefully about what you can do, and what you can’t. For example, if you have no technical background, you probably can’t create or sell an enterprise software product for a low price, even today. Maybe you should start with an online e-commerce site, based on your favorite hobby expertise.

My point is that one or more entrepreneurial opportunities are now within the financial reach of almost everyone. You don’t need to count on the old myth that all you need is a new idea on the back of a napkin, and investors will throw money at you. It never happened in any time frame I can remember, and it definitely won’t happen today.

If you can’t afford today to start the business of your dreams, even with all the suggestions here, the growing number of startups is still a positive for you, since you might be able to join another entrepreneur as a co-founder, or simply work for another startup to build up your skills, experience, customer savvy, and resources.

But don’t wait too long if you want to stay ahead of the curve. I see a historic shift taking place toward the entrepreneurial lifestyle, and away from the corporate job cubicle environment. People are using the new cost equations brought about by the Internet and social media to do what they love, and love what they do. Isn’t it time that you joined the movement?

Martin Zwilling

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Monday, February 15, 2021

6 Ways To Win By Creative Partnering With Competitors

partner-with-competitorStartup founders are known for their passion for their startup idea, and for their passion to kill every competitor. Thus they often overlook the fact that their biggest growth opportunity may be a win-win collaboration with a serious competitor, known in the business as coopetition. Of course, this path involves some risk, but you never get anywhere unless you take a chance.

For example, I once worked for a small software company selling a sophisticated enterprise workflow solution. It provided an industry-leading graphic development interface, but was not so strong on modeling and simulation. We regularly went head-to-head in the marketplace with a competitor whose strengths were on the other end of the spectrum. They sold by minimizing the value of our features, and highlighted theirs. We both often lost as a result.

As small companies, neither startup could afford to extend their product alone, but through creative leadership, we were able to negotiate a win-win strategic partnership for a joint product. As a result, we shared in capturing a new high-end market, without major new marketing or development. All this was done without damaging anyone’s credibility, or stealing customers.

This example illustrates only the first of six potential growth wins provided by creative coopetition between startups, as well as larger companies. Here is a summary of each:

  1. Complementary strengths allows extended market penetration. It’s very unusual for two competitors to have exactly the same strengths – in development, marketing, distribution, or customer support. A strategic partnership, negotiated with a win-win attitude, can accomplish growth faster and cheaper than either could do alone.
  1. Capitalize on shared costs and common distribution. Similar companies, even though competitors, usually face economies of scale and overlapping distribution channels. The auto industry learned this a long time ago. Even the giant General Motors has alliances with smaller competitors, like Peugeot, to reach certain small car segments.
  1. Ability to up-sell customers with related products. In many cases, the products from competitive companies are complementary, or many customers are natural candidates for both. That’s why most retail outlets are not company stores, meaning they sell products from multiple competitors to optimize their own growth. You can do the same.
  1. Bundling and product integration to create new solutions. With the proper contracts, it’s quicker and simpler to extend your product line with coopetition, rather than funding new development. This works especially well when the new solution takes business away from a common enemy, and strengthens both of your market positions.
  1. Affiliate marketing and link exchange agreements. Similar to the preceding point, you can grow the business of both parties this way without sacrificing customers from either. This approach has been used for years, and implies very little risk, but many startups are still “too busy” to pursuing possible partners. Simple referral fees can bring real growth.
  1. Competitors can become strategic investors or merger candidates. Good strategic partnerships often lead to strategic investments, or great acquisition relationships. These days, most large technology companies, like HP and Apple, routinely buy successful and known startup competitors rather than developing new products from scratch. They also manage internal venture funds that may be your growth lifeline.

Before you start negotiating any of these coopetition deals, I do recommend that you spend some time thinking about where and how you will be competing, and how you will be cooperating. Deals that are not win-win won’t work, and may indeed jeopardize your whole future. Make sure you don’t violate even the spirit of local laws or customs, and make sure your intellectual property is protected with proper two-way non-disclosure agreements before you start.

Think about your core values and priorities, and look only at potential partners who have the same culture. For example, if your reputation was built on excellent product quality, don’t jeopardize your future by teaming with another company whose focus is mass produced commodity products at the lowest price.

Thus, while your natural instinct may be to kill your competitors, or fight for win-lose deals, remember that you can often do the most good for your customers, as well as yourself, by thinking outside the box. It’s a lot more fun to enjoy your company as it grows and succeeds, rather than make every step a fight to the death, any one of which you might lose.

Marty Zwilling

*** Finnish translation provided by Elsa Jansson ***

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Sunday, February 14, 2021

6 Keys To Funding Based On Your Marketplace Advantage

elon-gridIn their passion and excitement about a new product or service, entrepreneurs tend to continually narrow the scope of potential competitors, and often claim to have no direct competitors. This raises a big red flag with potential investors, who conclude that no competitors means no market, or you haven’t looked, and the new startup is likely not investable.

They are looking for startups that have a sustainable advantage over direct and indirect competitor offerings, as well as obvious value to customers living without your product today. First to market, for example, is not normally a sustainable advantage for startups. Startups simply don’t have the resources to keep ahead of large competitors who see initial traction and go after it.

A narrow scope doesn’t help your case either. Competition for your new hydrogen fuel auto engine is not limited to other hydrogen auto engine offerings, or even other autos. Remember the transportation transitions from horses to autos to trains to airplanes. All of these are competitors in terms of speed, price, or luxury.

A sustainable advantage also has to be quantifiable and large enough to overcome the natural resistance everyone has to change, or learning a new approach. My perspective as an angel investor is that once you get past early adopters, most people won’t switch to a new approach unless they perceive a cost or time savings or speed advantage of at least 20 percent. Non-specific terms, like better usability and low cost don’t incite customers to action these days.

So what are some of the key points that you should highlight in your investor slides to convince investors that you indeed do have a long-term competitive advantage over other alternatives in the marketplace? Here are some of the key ones:

  1. Patent protection in place as a barrier to entry. Investors understand that patents can be broken by unscrupulous competitors, but they prove your conviction that you have created something innovative, and are willing to do the work to defend it. Other intellectual property has similar value, including trade secrets, copyrights and trademarks.
  1. Your solution is just the beginning, not the only solution. Your startup needs to be focused on a specific solution, but you need to show a long-term plan for a continuously innovative product line, or a series of follow-on solutions, that will keep you ahead of competitors. No investor wants to be tied to a “one-trick pony.”
  1. Order-of-magnitude cost reduction or productivity increase. Entrepreneurs often proclaim that they will work harder and more efficiently than competitors, thus reducing costs and improving productivity. This approach is not convincing. Investors are looking for technology, process, or business model breakthroughs, to move costs to a new level.
  1. Startup team with experience and connections is this domain. Teams that have worked together in a previous startup are always a plus. Expert knowledge in the relevant business domain is another plus. Warm connections to required distributors, suppliers, and large potential investors is a major plus. Investors check connections.
  1. Thought leadership position in your market and customer set. Prior recognition and visibility in the target market is invaluable from a competitive perspective. Successful entrepreneurs start early building their own brand through social media, industry forums, scheduled events, book publishing, and speaking engagements.
  1. Clear product differentiation and a singular focus. Solutions that primarily integrate the functions of several existing products will likely not provide a sustainable competitive advantage. The focus is diluted, it’s hard to keep up with individual product changes, and you will always be on the defensive. Investors want focus and breakthrough innovation.

Almost as bad as positioning no competitors is trying to position a large list of competitors (ten or more). I recommend never naming more than three specific ones, and using each of these as representative of a group of competitors. For example, “Company A is representative of many who provide commodity solutions in this space.” Investors are wary of a crowded space.

Of course, a great competitive advantage won’t do you much good if your market opportunity is small or not growing, or you don’t have the resources to deliver. Investors like billion dollar opportunities with double digit growth rates.

Now that I think about it, your biggest competitive positioning challenge with investors may be your peer startups down the street, also looking for investor dollars. How do you stack up against the ones you know?

Marty Zwilling

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Saturday, February 13, 2021

5 Keys To An Unbeatable Solution For Your New Startup

matrix_photography_designIn my role as advisor and mentor to many new entrepreneurs, I often find myself suggesting that they think bigger. I’m a techy at heart, and I love to see real innovation, but too often I see just “copycat” proposals, or at best incremental thinking. For example, I’m not sure the world needs one more social media niche site, or another dating site, or yet another flavored drink alternative.

I’m convinced that this “me too” or incremental thinking is one of the key reasons that ninety percent of new startups fail, and most of the investors I know won’t sign non-disclosure forms, since they claim to hear the same startup ideas over and over again. We all are excited to hear real innovation, and struggle daily to increase every potential entrepreneur’s scope of thinking.

Based on my experience of many years in the startup community, here are some key principles that seem to generate real innovative thinking within the most successful entrepreneurs I know:

  1. Push yourself to go “outside the box” for real change. Ideas to improve the usability of an existing product, or ways to extend its audience, are not likely to be unique to you, and difficult to win over competitors. Major innovation, with major payback, requires real change, addresses a major pain point, and hits a large customer segment who can pay.

    For example, smart entrepreneurs look for recognizable patterns in disconnected domains. You might find that a problem people in manufacturing face is similar to a problem in your own industry, and their unique solution can be adapted for your use.

  2. Collaborate with experts and people with experience. A successful startup requires a full understanding of multiple domains, rarely embodied in one person. You may be a product expert, but have little experience with running a business, or marketing, or sales. Successful people look for complementary co-founders, and hire a multi-faceted team.

    Many entrepreneurs are reluctant to expose their idea to others early, often called stealth mode, for fear of it being stolen. I do recommend non-disclosures and patents, but more can be gained than lost by talking to outside experts. Two heads are better than one.

  3. Be prepared to ship a minimum viable product and pivot. I always look for room in your plan for change, and the mindset to learn. In the startup world, even the best-laid plans are probably wrong, so there is a need to be able to launch fast, have metrics in place to measure progress, learn from real customer feedback, and pivot as required.

    The concept of a minimum viable product (MVP) was first proposed by Eric Ries, and is still popular, as a way for start-ups with limited resources to get a product out the door quickly, and get feedback from real customers, before adding unappreciated features.

  4. Communicate and market your solution to the max. Even in this era of a pervasive Internet, your customers won’t find even the best new solutions by default. Pervasive communication to your market is always required, including ads, trade shows, viral videos, and online influencer courting. Marketing should begin even at the idea stage.

    I still see too much evidence of the “if we build it, they will come” strategy, which postulates that your innovation is so valuable and obvious that minimal or no marketing is required. The value of “word of mouth” advertising is largely overrated.

  5. Gauge your potential and progress by data, not passion. I see many committed entrepreneurs and teams, who are often blinded to business challenges by their passion for an idea, rather than results. Thus I encourage the use of experiments with real customers, the use of experienced advisors, and real data to back up projections.

    First you need to investigate industry norms and third-party statistics to understand what is possible and likely. Then you need to set goals and metrics to use as the benchmark for your own results and expectations. Use your passion to get there, not to set the goals.

Really innovative solutions always begin by knowing your customer, so I never recommend that you expand your thinking outside the customer set you know. The shift in thinking I am looking for applies more to defining the solution than finding the problem. Be the entrepreneur that sparks the thinking to make real change happen, or you will watch it happen, or wonder what happened.

Marty Zwilling

*** First published on Inc.com on 01/29/2021 ***

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Friday, February 12, 2021

6 Tips For Ramping Up Your Work Culture For Tomorrow

prosthetic-research-ucsdThe future of work is definitely changing, accelerated by the current pandemic. There is always the next generation of workers coming of age who expect more, as well as the current generation already having the lowest engagement and productivity levels that business has ever seen. It seems they are both looking for more personal satisfaction and sense of purpose for their efforts.

Obviously, more work from home is likely one of the results, but that alone could actually be less satisfying, with its reduced ability to interact with peers, and all the distractions of a home and remote environment. Based on my experience as a business advisor, I recommend that every business owner and entrepreneur focus on the following tips to provide a better work culture:

  1. Invest in integrating new technology, not just forcing it. Even the simplest of new technologies, such as Zoom for remote meetings, can be a detriment to work satisfaction if workers are not trained on how to use it effectively, causing video and sound problems, as well as background distractions. Technology as an add-on by edict is not satisfying.

  2. Display an open mind to innovation in work processes. As businesses mature, I find that leaders often become less accepting of change, chiding employees to simply follow existing processes that have long worked. You need to overtly reward change efforts, and show a mindset of recognition of the need for more team satisfaction and purpose.

    For example, Elon Musk says he seeks out innovations from his team by constantly asking them how they can make things better, how often they get out of internal meetings and into customer shops, and actively encouraging them to try new things.

  3. Spend more time mentoring and coaching your team. Giving orders and assignments is not coaching. Real mentoring always improves engagement and productivity, because team members know the “why” of their work, and how it benefits them, as well as your customers. Focus on employee interests, and how their work can help their future.

  4. Adopt and communicate a higher purpose than profit. To get more commitment from your team, as well as customers, today and tomorrow, your company values must include value for the environment and social good. You should expect these to change over time, so you need to constantly adapt your work culture to keep it current and relevant.

    Consider CVS Health's Project Health program, in which pharmacy employees provide free health screenings to disadvantaged and underserved patient populations. In addition to a tangible brand boost, CVS has found more fulfilled and productive employees.

  5. Integrate freelancers seamlessly into your team. The days are gone of treating contractors as automatons, with their own set of rules. They are now, or will soon be, a majority of your workers, and definitely need the same sense of personal satisfaction and purpose, as well as coaching and communication, as the remainder of your employees.

  6. Demonstrate personal presence, empathy, and leadership. Even in today’s world of more remote work, people need to see and hear you, and feel a real relationship. Get out of your office to talk to individuals and join meetings, local or remote. Show empathy for their needs and ideas, and make sure their roles match interests and capabilities.

    The old adage of “management by walking around” will probably be replaced in the future with “management by FaceTime” for individual remote employees. That definition of a personal relationship today is a new key to any work commitment and engagement.

There is no doubt that change in the workplace has been needed for some time, but the current pandemic has forced the issue. Don’t be the last to resist change in this regard, or you may find your company being left behind by your best employees, to find competitors offering more job satisfaction and fulfillment. Remember, satisfied employees are always your most valuable asset.

Marty Zwilling

*** First published on Inc.com on 01/29/2021 ***

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Wednesday, February 10, 2021

8 Essentials For Being Unstoppable In Your Business

Unstoppable-in-businessWe all know at least one entrepreneur who always gets things done, and appears unstoppable in his quest. All of you probably know many others who talk incessantly about their great ideas, but never seem to even get started, or they give up at the first obstacle. What are the attributes that make an entrepreneur unstoppable, and is it possible for people to learn to be unstoppable?

According to my own observations, and the classic book by Bill Schley, “The UnStoppables: Tapping Your Entrepreneurial Power,” there are some key “emotional mechanics” that put entrepreneurs in motion, and principles that help entrepreneurs succeed in startups, as well as big companies. I believe we all have the power within us to learn and adapt to these principles.

Every entrepreneur needs to accelerate his proficiency by adopting and using this proven set of skills, rules, and emotional power principles, like the Graham Weston experiences at Rackspace summarized in the book. Here is an outline of the key essentials:

  1. Follow the law of motion versus contemplation. Everyone dreams and talks. Successful entrepreneurs do. This means yearning and starting, not quitting, and ultimately achieving some value that wasn’t there before. In a startup, the founding team and their key employees have to all be entrepreneurs, with an impassioned leader.
  1. Limit focus to the top three or four priorities. It turns out that focusing on three or four activities at a given point, like positioning your brand, prospecting for leads, or managing cash flow, are all that you need to survive. It’s also all that any entrepreneur can manage concurrently with proficiently. Adhere to the familiar 80-20 rule.
  1. Rely on mental “rules of thumb” or heuristics. Being unstoppable must include the power to think and innovate on your feet under real conditions in real time. That means developing an intuition or “gut feeling” based on preset “rules of thumb,” continually updated from peers, advisors, positive experiences, and prior failures.
  1. Simple beats complicated. If your unique difference can’t be explained on the back of a business card, you don’t have one yet. There is virtually no idea, no process, and no vision that simplicity and brevity can’t improve – and never let a consultant, attorney, or investor try to tell you otherwise.
  1. Find the center of an issue and go there. Unstoppable entrepreneurs wake up every day on a quest to keep the center of their brand, their performance, their culture, or their status as #1 choice locked in the crosshairs. They win by going all in where it counts, and nothing counts more than the center.
  1. Conquer the fear that is preventing action. When a person has something important to do, and they are not doing it, then some type of fear is stopping them. The biggest counter to fear is love – as in passion for the idea, love for teammates, and desire to change the world.
  1. Seek out smart risks. We can’t achieve any human progress without risk. In this new dynamic world, where change is accelerating all around us, the safety we feel by hiding behind a rock instead of putting ourselves in motion has become an illusion - the riskiest decision of all. It’s always less risky to do it, than to have it done to you.
  1. Embrace the unsurpassed power of belief. Henry Ford said simply, “If you think you can or think you can’t, you’re right.” Thinking “it’s possible” triggers confidence, determination, and energy. Thinking the opposite makes any task impossible. Belief is the outcome of mastering all the other emotional mechanics

Notice that none of these mention anything about how much money you need to start, extraordinary intelligence, or academic credentials. Accelerated proficiency is all about the art and science of getting entrepreneurs to be Minimally Functionally Qualified (MFQ) in a sharply accelerated time frame so they can get in motion, start doing, and effectively teach themselves, rather than talking and observing.

To be unstoppable, every entrepreneur has to decide to dream, to dare, and to do. Decide to stand with your fear, and turn the struggle into your best advantage. Decide to learn the essence, then get in motion. Where are you along this spectrum as an entrepreneur?

Marty Zwilling

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Monday, February 8, 2021

5 Reasons To Enlist Outside Advisors For Your Startup

business-meeting-with-advisorIn my experience as an angel investor for new startups, I’m always surprised by how many entrepreneurs are looking for funding without outside advisors. An experienced Board can give them credibility, as well as advice on the many pitfalls of starting a new company. Especially if you are a first-time business owner, the payback for this initiative is well worth the effort and cost.

In fact, the cost may be minimal, if you do your networking and build a relationship with an experienced business executive or two in your domain who are willing to share and give back for a nominal retainer, perhaps one percent of your new startup equity. The payback can be a pointer to a winning strategy, introduction to key investors, or a line of credit for your beginning inventory.

Here are some key reasons why I believe every entrepreneur should create a formal Advisory Board or Board of Directors before they ask for funding, or even build their business plan:

  1. We all need a bit of reality to balance our passion. Unfortunately, I see too many new entrepreneurs who let their passion for a new idea or invention blind them to the stark realities of customer need, opportunity size, or pricing and cost implications. The sooner you face these issues, the more success you will garner from investors and customers.

    For example, I once was approached by an entrepreneur, passionate that his new algae strain would cure world hunger and make him rich. He seemed to ignore the fact that hungry people rarely have money, and governments are very unpredictable customers.

  2. Board members provide inexpensive expertise. Building and managing a business is a wholly different world from building an innovative solution. Unless you have a co-founder or two with the business skills to complement your technical ones, you need a friendly Advisory Board. The cost of a co-founder is usually fifty percent of your equity.

    Even if a board member won’t work for equity, and demands a monthly stipend, the value of their contacts can easily make the difference between a successful rollout, versus an expensive pivot. Remember that people make a business, more often than a product.

  3. Key board members multiply your networking efforts. Starting a new business is all about establishing relationships with investors, suppliers, channels, and future customers. You need all the help you can get to find the right ones early, and nurture them to closure. Learn how to budget your time and select productive relationships.

    In this respect, who you know is often more important than how much you know. At the very least, these board members extend your bandwidth to provide a presence at more industry events and networking conferences. Bandwidth is a constraint we all feel.

  4. Learn how to build and manage a small team. Communication and team organization is a challenge for every new entrepreneur, so I recommend that you start with only a couple of advisors. Over time, this may grow due to “observer” members, including investors, or other contracting requirements. What you learn will apply to employees.

    Key advisors may be your first “team” to manage, but their value is multiplied as you apply what you have learned, with their guidance, to the larger teams you need to operationally grow the business. People management is key to every business success.

  5. Advisory members are Board of Directors candidates. Once your business is mature, and you are contemplating going public, you legally must establish a Board of Directors. An early Advisory Board is the best way to evaluate candidates for this formal Board, to be your boss, and accountable for business reporting. Skip insiders, friends, and family.

    Bad board members can make running your business very unpleasant, and they can jeopardize your CEO position (you can be fired from your own company). I’m sure that Steve Jobs wishes he had started earlier in recruiting his first board member for Apple.

Thus, I find that many investors make their investment decision based on the presence and reputation of committed outside advisors, more so than the appeal of the solution, or the experience of the entrepreneur. In today’s rapidly changing business environment, you need every advantage to stay one step ahead of the market, and your competitors.

Marty Zwilling

*** First published on Inc.com on 01/25/2021 ***

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Sunday, February 7, 2021

6 Reasons Technical Expertise Does Not Make A Startup

kumar-rajanWell over 25 years ago, Michael E. Gerber wrote a best-selling business book called The E-Myth: Why Most Businesses Don’t Work and What to Do About It. The E-Myth (“Entrepreneurial Myth”) is the mistaken belief that most businesses are started by people with tangible business skills, when in fact most are started by “technicians” who know nothing about running a business. Hence most fail.

Some pundits argue that the E-Myth principle is now outdated, due to the instant access to information via the Internet, pervasive networking via social media, and courses on entrepreneurship at all levels of education. Perhaps an innate business savvy is no longer a requirement for starting a successful business.

Let me assure you that based on my experience, I’m not convinced. I still see too many businesses started by technicians who haven’t acquired the basic skills or knowledge, or still assume that business acumen is a minor part of the new business equation. I also see no evidence that the percentage of new business successes has gone up in the last couple of decades.

I believe that most entrepreneurs today, at least in the technology domains I frequent, still work in the business (“Technician’s Perspective”), rather than on the business (“Entrepreneurs Perspective”). Here are some key ways these views differ:

  1. The Entrepreneurial Perspective asks the question: “How must the business work?” This perspective looks at the business as the product, competing for the customer’s attention against a whole shelf of competitors. The Technician’s Perspective asks: “What work has to be done?” In this view the product features, cost, and support are the key to success.
  1. The Entrepreneurial Perspective sees the business as a system for producing outside results for the customer, resulting in profits. The Technician’s Perspective sees the business as a place in which people work to produce inside results for the Technician, producing employee income.
  1. The Entrepreneurial Perspective starts with a picture of a well-defined future, and then comes back to the present with the intention of changing it to match the vision. The Technician’s Perspective starts with the present, and then looks forward to an uncertain future with the hope of keeping it much like the present.
  1. The Entrepreneurial Perspective envisions the business in its entirety, from which is derived its parts. What’s important is the business as a whole: how it looks, how it acts, how it does what it is intended to do. The Technician’s Perspective envisions the business in parts, constructed from the bottom up, based on technical tasks.
  1. The Entrepreneurial Perspective is an integrated vision of the world, where the customer need is an opportunity to make meaning. The Technician’s Perspective is a fragmented vision of the world, where customer satisfaction represents a series of problems to solve, with price, features, availability, and support.
  1. To the Entrepreneur, the present-day world is modeled after a vision of a better way, one that will stand out with customers from all the rest in the past, and give the joy and satisfaction of success. To the Technician, the future is modeled after the present-day world, the model of past experience, and the model of getting paid for effort or results.

The challenge of every Entrepreneur and Technician is to maintain the right balance of views to get things done, win in the marketplace, and keep everyone happy. As startups grow, they quickly realize that they need a third personality, called the Manager, to build systems and processes. The Manager craves order, and often ends up cleaning up after the other two.

Perhaps someday our education system and other resources will facilitate everyone starting a business to have that balanced view, but I don’t see it happening any time soon. In the interim, I recommend you use advisors, social media, and the Internet to find your alter-ego. Two heads are still better than one, to get the right business started, and get it started right, without worrying about the E-Myth.

Marty Zwilling

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Saturday, February 6, 2021

10 Questions To Lead You To Timely Successful Change

Ask Question Free Clip ArtChange is hard. I see entrepreneurs every day who are trying to change the world with a new idea, and startups that are trying to survive their hyper-growth phase by changing processes to meet demand. In both cases, it’s easy for them to become frustrated and give up, since most have never been trained in change management, and don’t even know what questions to ask.

A while back, I spotted a book for change management leaders in large organization, and I realized that many of the issues they face are the same as ones faced in every growing startup. Phil Buckley, in his book “Change With Confidence,” provides practical answers to fifty of the biggest questions that keep change leaders up at night.

Here are ten of the key questions that apply equally well to the world of startups and entrepreneurs, as they do to large organizations. If entrepreneurs answer these questions for their startup, they will definitely stay ahead of most of their competitors in the startup world:

  1. What is the “secret sauce” that my startup brings to the problem? Your passion is necessary but not sufficient to motivate real change. You need to quantify change results that constituents can see, feel, smell, or taste. Words alone, like “improved efficiency”, “paradigm shift,” and “breakthrough technology” won’t convince people to follow you.
  1. Who are the stakeholders who can most influence success? Stakeholders are key people impacted, or leaders who influence key people. For example, early adopters may be easily sold, but new technology product success really hinges on adoption by certain demographics, perhaps more influenced by celebrities or mommy bloggers.
  1. What do I need to know before I commit to deliverables? The last thing you need in a startup is a false start, where you can’t deliver on a product change deadline, or a new marketing channel. Deliverables and the resources you have to achieve them are two sides of the same equation. Make sure they match before you commit.
  1. How do I measure success? Define hard (data) and soft (anecdotal) metrics on the change, as well as on the quality of your leadership. That means you have to start with assessing the current state against the same metrics, before you can assess progress or change. Make sure metric results are available to the team, to keep them motivated.
  1. Will my proposed change actually achieve the desired outcome? It’s important to separate optimism and dreams from market realities. Ask yourself, “If I were an investor, would I support this effort, given the costs and promised returns?” Just because Google sales hit $1.5 billion in 4 years doesn’t mean any other startup can do it.
  1. How do I avoid scope creep? Expanding a project without additional time or resources is called scope creep. It takes a strong team and strong leadership to manage it. What works is a documented change request and review process, as well as quantification of resources required as well as anticipated incremental results.
  1. What does a good plan look like? A good plan is a written one, approved by all key players, which maps out all activities and provides a framework for leaders and team members to follow. Calibrate the plan with resources available to deliver it. Keep the plan simple, focused, and flexible.
  1. How do I know what resources I need? Without adequate resources to support your efforts, you will be faced with trade-offs that often lead to a poor transition to new ways and a burned-out team. What works is documenting early a fact-based resourcing plan, using credible sources, with a reserve allowance of 10% for contingencies.
  1. How do I prepare people to work in the new ways? Most important changes require new ways of working: a combination of new knowledge, skills, mind-sets, behaviors, relationships, and processes. Provide step-by-step job aids, training, and hiring for critical aspects of the new plan. Allow adequate time for this preparation before implementation.
  1. How do I reduce risk? A key aspect of mitigating risk is to first identify the risk elements before you start, and build in contingency plans, in case the risks materialize. Then establish trigger points to clarify when contingency plans need to be activated. This will speed up remedial actions and minimize damage.

Everyone learns and celebrates changes done well during startup hyper-growth from zero to a profitable business, and everyone loses when a promising but challenging startup fails. I hope these points illustrate that the best strategy for every startup evolution is to answer the key questions early, and don’t wait for the first crisis to think about risks and contingencies.

The ultimate objective of every entrepreneur and every team is to make change an opportunity for success, rather than an excuse for failure. When was the last time you approached change with confidence, rather than fighting it all the way?

Marty Zwilling

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Friday, February 5, 2021

4 Simple Steps Will Get Startup Financial Projections

startup-financial-projectionsMost aspiring entrepreneurs understand that you can’t build a business if you won’t commit to delivering a product or service, but many are hesitant or refuse to commit to any financial forecasts. Yet every business requires revenue and volumes, as certainly as it requires a product to sell. Thus, financial projections for up to five years are a necessary element in every business plan.

External investors will demand a financial forecast, but it’s equally valuable to you, even if bootstrapping. How else will you be able to convince yourself and your team that your business is viable? You need these projections to set internal goals and milestones, and to measure your progress toward reasonable success objectives.

For investors, and even for yourself, it’s also a bit of an intelligence test. Per the words of an old country song, “if you don’t know where you’re going, you will probably end up somewhere else.” If you don’t have a destination, don’t waste your money trying to get there, and don’t expect anyone to support you along the way

Projecting financials is a natural extension of the homework every entrepreneur needs to do on customer opportunity size, product costs, pricing, competition and customer value. There is no black magic involved in predicting the future, if you use these four simple steps, with my basic rules of thumb to keep you on the right track:

  1. Determine your margin on sales. Per-unit cost less cost of goods sold is your gross profit or margin. If you are losing money on every unit, it’s hard to make it up in volume. As a rule of thumb, most viable businesses need a gross margin above 50 percent, even on wholesale prices, to cover operational expenses and survive as a business.
  1. Forecast sales-volume expectations. Project based on your market size how many widgets you will sell in every channel. This should always be a “bottoms-up” commitment from your sales team, not your own optimistic guess. Don’t assume penetration numbers greater than 5 percent in early periods. Doubling revenue each year is a good target.
  1. Quantify overhead costs. It’s amazing how fasts costs escalate as you grow. You need 5 percent or more of revenue for marketing, maybe more for ongoing development, and people costs will double as you add benefits, insurance, training, IT and new processes. Check competitor numbers and industry average statistics to get you in the right range.
  1. Calculate investment amounts and timing. Initial sales success means more cash will be needed for inventory, receivables, facilities and people. Project your cash burn rate to keep at least 18 months between venture capital or angel investments. Controlling cash flow is critical as founders move from working “in” the business to working “on” the business.

From a planning and strategy standpoint, I offer these additional recommendations to maintain your credibility with outside investors, and to balance your risk due to market uncertainty:

  • Always buffer your investment requests. Investment requirements should always be based on financial projections and cash-flow calculations, not on what you think you can negotiate. If your cash flow shows a shortfall of $750,000, add a 33 percent buffer, and ask for a million. Be willing to give up 20 to 33 percent of your equity to support this.
  • Update your financial projections every quarter. Financial forecasts for startups are assumed to be estimates that will be updated as real data comes in. Plan to re-forecast revenues quarterly or even monthly, and replace forecasts with actuals as soon as a period ends. A business plan with old projections instead of actuals has no credibility.
  • Avoid conservative projections, as well as irrational ones. Investors want entrepreneurs to be aggressive, but don’t make projections that make you look like the next Google. Entrepreneurs tend to be driven by their own targets, so pick an aggressive one, and you will likely do better that starting with a conservative one.

I always recommend that entrepreneurs do their own financial projections, rather than rely on an outsider, because it’s the process that adds the value, more than the numbers. For additional value, I suggest the use of a spreadsheet such as Excel as a financial model, with a few variables, like price and volume. This allows a quick analysis of price change and revenue impacts.

You don’t need an MBA to do financial projections for a startup business plan. On the other hand, without financial projections, you don’t have a business plan. When you start a business, as in most other ventures, having no plan is a plan to fail. That’s no fun for you, your investors or your customers.

Marty Zwilling

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Wednesday, February 3, 2021

8 Keys To Personal Self-Fulfillment In Your Business

satisfied-business-executiveAs a long-time mentor to new entrepreneurs and business owners, I have noticed that many no longer associate more fulfillment and satisfaction with more money, power, and success. It seems that fulfillment to these new entrepreneurs is all about changing the world and legacy. In fact, customers today also seem more attracted to companies with a higher purpose than profit.

In all cases, I’m convinced that whether you see personal fulfillment as more business success, or making the world a better place, there are some common strategies to get there that I recommend. Here are some key ones from the most satisfied business leaders that I know:

  1. Develop your own plan to get where you want to go. Don’t count on someone else’s plan and priorities to work for you. But if you have no plan, you probably won’t get there, or you certainly won’t be able to gauge your progress along the way. For most people, a truly fulfilled life means active pursuit and high engagement in pursuing your own goals.

  2. Don’t wait for a crisis to decide what is important. Not only is this approach painful, but it’s hard to think straight when you are down. Before you start your business, think hard about your vision for fulfillment, and write it down. Recognize that you can never control the precise sequence and time line, and list some key costs and risks.

  3. Assess your position and progress on a regular basis. We all learn from our actions and our mistakes, and the changes that are happening in the world every day. Pivots are a normal part of every business, and they have to be a part of your journey to fulfillment. Unless you take inventory of where you are, you won’t be able to adjust your path.

  4. Assemble a complementary support team to help you. People in business can’t succeed or even survive as the lone ranger. Nor can they succeed surrounded by “yes” people, or “helpers” rather than help. We all have weaknesses, so you need healthy relationships with people who have complementary, but different, skills and insights.

  5. Proactively attack fulfillment blockers, one by one. Too many people see the barriers to their fulfillment, but wait and hope that all will magically go away, rather than facing each directly. In this respect, you cannot procrastinate, look the other way, or hope that things will change given more time. Decide and act to remove each barrier to fulfillment.

  6. Push yourself to get beyond your comfort zone. Staying inside your comfort zone will ultimately become boring, and never give you a real sense of accomplishment and fulfillment. Every business will offer you many opportunities in this regard, including honing your communication skills, new business models, and exciting customers.

    For example, Jeff Bezos credits much of his success and job satisfaction at Amazon to his strategy of often committing to new projects proposed by trusted internal teams, even though his comfort level disagrees. He enjoys the learning from these calculated risks.

  7. Mentor others to share what you have learned. One of the keys to my own fulfillment has been coaching, mentoring, and give-back of what I have learned along the way. This can include time, money, and skills transfer. Helping others has clarified my own thinking, and solidified my own view of what is really important in my life and business.

  8. Celebrate each step of progress along the way. Self-fulfillment in a journey, not a destination. It’s important to recognize and reward yourself even for small steps along the way. This can be done by taking some time off for that special trip, or spending a day treating yourself to some fun when you achieve a key milestone, such as first profitability.

Talking to me as a mentor, the best evidence you can provide on the road to self-fulfillment is espousing that you are doing what you love, and you love what you do. All too rarely, I hear entrepreneurs saying they can’t believe they are being paid for the “work” they do. You too can prove that fulfillment can lead to success, but success doesn’t necessarily lead to fulfillment.

Marty Zwilling

*** First published on Inc.com on 01/20/2021 ***

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