5 Benefits Of Business Leadership By Asking Questions

I’m a big fan of the old adage "There are no stupid questions, only stupid answers." We have all heard questions that begin, "This may be a dumb question, but …" used effectively by smart people who are not afraid of risking ridicule by challenging a questionable assertion from an intimidating speaker.

Most people in business seem to expect their leaders just to give orders. According to Gary B. Cohen in his classic book, “Just Ask Leadership: Why Great Managers Always Ask the Right Questions,” as leaders advance, they tend to oblige by asking fewer questions and providing more answers. This is precisely the wrong approach.

Entrepreneurs and business executives have to keep reign over a very broad domain. They need to ask the right questions in the right contexts to stay ahead of the game, and to empower coworkers to find solutions, embrace responsibility, and become accountable.

Cohen provides specific insights to seek in particular situations, while also explaining how to create a culture of question-based leadership. I agree with his outline of five critical areas:

1. Improving vision. Good vision requires insight from all levels of the organization. Forward-leaning questions can illuminate the values of both the leader and the team. This, in turn, will enable employee buy-in, and good choices with regard to interacting with customers and future goals.

2. Ensuring accountability. Having coworkers solve their own problems is critical to building their accountability, and it increases team performance. When job descriptions are clear and people are encouraged to act in good-faith, it’s easier to see who made the mistakes and who’s to blame. Failure must be used as an opportunity for learning, not an excuse for punishment.

3. Building unity and cooperation. It’s important to listen respectfully to coworkers’ questions and opinions since they’re all a part of the team. This creates a culture of trust. It requires asking good and fair questions – not “gotcha” questions. Getting everyone to participate isn’t always easy, but when coworkers realize their ideas have value and the organization is receptive to them, they’re more apt to share.

4. Creating better decisions. Most leaders make too many decisions, and fall into the trap of doing others’ work. The best decisions are often made by those down the chain of command, not up. Get the right answers by asking the right questions. In order to avoid the blame game, it’s important to know who is responsible for specific problems.

5. Motivating to action. “Because I said so,” is not a phrase that will inspire the team. Ask for success. Create a sense of urgency, appeal to people’s desire to be remembered, and energize coworkers by using shared responses – such as asking a group to say, “Agree,” after consensus is reached.

If you tell coworkers how to do their jobs, you are essentially limiting their options and stifling their initiative, says Cohen. You are not leading. Asking questions isn’t just about not knowing the answers – these questions lead to fresh ideas, committed action, and the creation of a new rank of leaders.

Socrates was the early master of asking the right question, He taught that when you ask questions, you show respect, and you are respected in turn. Of course, even the best question is moot if you don’t listen to the answer. Ask. Listen. Learn. Lead.

Marty Zwilling

5 New Marketing Rules For Today’s Customer Generation

As a business consultant, I often have to remind small business owners that their marketing needs to be more interactive, versus the traditional “push” model, where you broadcast your message to as many people as possible. New generations of customers respond better to the “participative” approach, where they get to provide input via social media and the Internet.

It started a few years ago with the advent of email satisfaction surveys after an online purchase, but now includes interactive Internet ads, as well as custom requests for input on the design of future products and influencers on social media. It seems that everyone these days wants an experience and a relationship, and is willing to become your best advocate via word-of-mouth.

Some call it a move from always “hunting” for new customers in the wild, to “gardening” or nurturing loyalty and value from the ones you already have. In any case, the new approach is important to all businesses, and I have learned that it embodies some new marketing rules which you need to focus on and learn:

1. Make your marketing exploratory and dynamic. The days of big-bang long-term campaigns that never change are over. You should be constantly trying new approaches via social media and online, and asking for feedback and input from influencers and customers. Scale quickly on good feedback, and move on if you get little engagement.

   A step in the right direction is to take advantage of the new tools available at a very low cost, including sponsored podcasts, blogs, visibility in online communities, and Twitter influencer support. Sometimes it’s as simple as updating your website format and videos.

2. Use experiments versus designing the ideal ad. Trends and customer interests change quickly, so use small experiments to find something that works today, and use innovation to push the envelope, before your competitors can copy and overrun you. The key is to be able to measure your return, adapt quickly, and learn from your efforts.

   According to the Harvard Business Review, E-commerce companies that conducted ad experiments saw two to three percent better performance per experiment run. An advertiser that ran 15 experiments in a given year saw a 30% higher ad performance.

3. Motivate customers to participate and engage. Reward customers for their advocacy and engagement with discounts and coupons, keep the interaction dynamic, and incent their return. This requires a sense of urgency on the part of your team, and a culture of accountability and focus on the customer. Marketing must be everyone’s top priority.

   For example, Dunkin’ Donuts did this through a photo contest, rewarding with discounts those who submitted a photo with the brand's handle and hashtag. Others highlight live experience and happy videos, submitted by customers, on their website and promotions.

4. Partner with others to create blended offerings. A very successful marketing effort created by a restaurant near me during the pandemic offered a carry-out from multiple sources – to combine flowers with food and drinks, all from different establishments, packaged creatively together. Everybody wins, and it spread quickly on social media.

   People remember and endorse you as the primary brand, who created the blended offering, as well as the other “endorsed” brands. The hybrid approach is also effective as an experiment if you are exploring ways to expand your own brand into new segments.

5. Market solutions as an experience or an event. Advertising more features, or even a lower price, is not as memorable to customers today as a great experience, or a unique event. These may be live, or immersive online experiences. Use social media to build anticipation and highlight successes, to get people talking and coming back for more.

The message here is that big blockbuster campaigns, and big marketing budgets, are no longer the key to results in new customer environment, where participation and relationships are key. Now is the time to ask your customers and partners for participative ideas, do some experiments, and scale up the ones that work. Be prepared to make frequent updates as trends change.

Marketing is no longer a one-way conversation, whether you are a startup or a legacy business. How long has it been since you changed your marketing strategy? Are your costs going up, and the returns going down? Try listening and learning, more than talking and pushing.

Marty Zwilling

*** First published on Inc.com on 03/15/2021 ***

In Your Business, You Can’t Learn If You Don’t Listen

When you are not presenting to investors or your team, try to spend more time listening than talking. You can’t learn anything new while you’re talking, yet many entrepreneurs seem to never stop. It’s a sad spiral, since the more you talk, the less people really hear, meaning they don’t learn anything either. If someone left this article on your desk, read extra carefully.

Building a business is all about building relationships, and one of the most important elements of a relationship is effective communication. Communication doesn’t happen unless both parties practice the art of effective listening. Check to see if you are practicing the key disciplines of listening, as outlined by Brian Tracy in his classic book “No Excuses: the Power of Self-Discipline”:

• Listen attentively. Listen as though the other person is about to reveal a great secret or the winning lottery number and you will hear it only once. Since you always pay attention to what you most value, when you pay close attention to another person, you tell that person that they are of great value to you. You will be remembered.

• Pause before replying. When you pause, you avoid the risk of interrupting the other person if they are reformulating their thoughts. It also enables you to hear not only what was said, but what was not said. Then you can respond with greater awareness and sensitivity.

• Ask for clarification. Never assume that you automatically know what the other person is thinking or feeling. It is when you ask questions and seek clarity that you demonstrate that you really care about what he or she is saying, and that you are genuinely interested in understanding how he or she thinks and feels.

• Feed it back. The acid test of listening is to see if you can paraphrase what you heard in your own words. It is only when you can repeat back what the other person has just said, in your own words, that you prove you are really listening, and understood the message. For all feedback, be sure to mirror the other person's pace and communication style.

Even good communicators average only about half their time listening. Yet experts assert that most people listen with only about 25 percent of their attention, hear about 25 percent of what is said, and after two months, remember only half of that. That’s not effective communication.

There are also things you can do to encourage others to listen to you, when you do speak, to improve the overall communication:

• Lower voice, no emotion. This causes the other party to listen more carefully, and facilitates a more pleasant and more effective conversation.

• Adapt to listener interests. Use analogies and terminology that are easy for the other person to relate to, and they will respond with attention and higher comprehension.

• Choose the right environment. Wait for the right opportunity, when you can be easily heard and understood, and the listener is in the right mood.

• Address people by name. This gets their attention and focus. Sometimes it helps to bring others into the conversation to support your input.

In business, you need to always be listening – to customers, to advisors, to investors, and to your team members. When you do talk, concentrate on making it effective. You don’t have the time to have things repeated to you four times before you really hear and understand them. Outbound marketing is all talking, and no listening.

Responsible, effective listening is a rare skill that will give you a sustainable competitive advantage over your peers and your competitors. It’s also a skill that can be developed with practice. You can never know enough in business, so even top entrepreneurs find time to listen. Are you learning anything these days?

Marty Zwilling

*** Kazakh translation provided by Alana Kerimova ***

6 Ways Dedicated New Ventures Have Mastered Hardship

We all know entrepreneurs who have overcome adversity, like the current pandemic or personal setbacks, and achieved success. There are famous people like Walt Disney and Nelson Rockefeller, who overcame learning disabilities, and people like J. C. Penney and J. K Rowling who struggled through personal bad times before finding their true legacy.

I’ve always been interested in how this works, and why it’s true. I’ve listened to several speakers with personal stories of overcoming adversity, and the message is always that tough times can make you stronger, wiser, and better. I’ve seen real examples, so I believe it, but the how and why are more elusive.

In the classic book I read a while back, titled “The Power of Adversity,” Al Weatherhead details his personal story of overcoming family and personal obstacles, including alcoholism, heart disease, and serious arthritis, to become an inventor, a wealthy entrepreneur, and active philanthropist. For most, I think it starts with having the survivor instinct, rather than accepting the victim role.

Beyond that, Al outlines his techniques for mastering adversity, which I believe can add value for every entrepreneur out there. Hopefully, your adversities are not as disastrous as his, but applying the same principles should still have a strengthening effect:

1. Use the power of positive attitude and mindset. Developing a positive attitude about adversity seems essential to tapping its power to enhance and improve your life. A wise man once said, "Adversity has the effect of eliciting talents, which, in prosperous circumstances, would have lain dormant."

2. Meditation is the art of letting go. Practicing meditation creates and sustains your positive mindset. Don’t think of meditation in the classic Zen sense, as exercising or swimming daily is also a way of letting your mind go. You may realize that adversity is just another name for the series of choices called life.

3. Communicate your goals and desires. A great gift of adversity is coming to understand that you can only resolve your problems when you share your life with others. You simply must reach out to others, or you will never overcome adversity.

4. Practice sharing, not controlling. Don’t confuse the need to control with connection. As you truly connect with others – revealing, extending, and expressing yourself – the layers of adversity will peel away like an onion. Surround yourself with strong people who can help you get through the tough times.

5. Acceptance is the key. Adversity at some point in your life is inevitable. The more you refuse to accept it and deal with it, the more you will lose. Denial and running away never helps. Those who choose to be strong, rather than choose to suffer, will overcome it and may actually thrive.

6. Embrace the bounce. In business and your personal life, it’s all about being resilient. That means look beyond the challenges of the moment, and identify and integrate the new insights and convictions that adversity so often presents.

Your challenge, like Al’s, is to turn adversity into success. He believes that you have to be both creative and patient to discover the multiple solutions that will unravel the knots of your adversity. In these ways, you will move ever closer to mastering it, and be that much more at peace.

But even with all this, I’m still not sure that I understand why this works. I’m sure many of you out there have been through more adversity than me (my life has been a walk in the park, compared to Al). Help me understand what worked for you and why.

Marty Zwilling

5 Key Success Attributes For An Aspiring Entrepreneur

As an entrepreneur mentor, my mission is to foster the attributes in you as a startup founder that I believe will lead to success. I know from experience that my friends who are angel investors are looking for the same indications, although none of us has a scorecard, or even know exactly what we are looking for. Sometimes good things are easy to see in others, but hard to see in yourself.

For example, I worked with an entrepreneur a while back who was clearly intelligent, had a great idea, and communicated well. Yet I was often disappointed by his habit of committing to a specific deliverable, but then not delivering. He always had a plausible excuse, such as an unexpected problem, or family conflict, but the frequency left me with low confidence in his ultimate success.

If you are having trouble finding an investor, or not attracting some key team members that you need, I encourage you to do a self-assessment against the following key characteristics, from an outsider’s perspective, to make sure you generate positive success vibes in each of the following:

1. After the idea, your focus must be all on execution. I sometimes find entrepreneurs who highlight that their strength is “ideas.” Unfortunately for them, building a business is all about implementation. Idea people must surround themselves with people who build momentum and get things done, including production, marketing, finance, and sales.

   As an example, I worked with Bill Gates early on, but I fear he may have failed without partners Steve Ballmer and Paul Allen. Gates was a software developer genius, but Ballmer upheld the marketing and business side. Paul Allen was the idea visionary.

2. You set goals and targets, and build a plan from these. Investors are not impressed when targets and plan are not focused, or seem to change with the wind. You will find that your team, partners, and vendors feel the same way. People expect goals to be hit more than missed, and you be willing to pivot as required, or take timely corrective action.

   Unless you sold your last startup for a billion dollars, the days are gone when you can just scratch your idea on the back of a napkin, and investors will throw money at you. They now expect a solid documented plan, with specific goals and targets based on data.

3. The ability to make timely and fact-based decisions. Some entrepreneurs have an abundance of passion, but are short on the realities of customer needs, market trends, and financial constraints. I expect decision making to be a rational process, decentralized as much as possible, and based on data, as well as sensitive to competitors and others.

4. Your organization, process, and team are in harmony. It’s amazing how much I can learn by spending a day at your office. I expect to find a positive and supportive team, with advisors, and just the right amount of process and structure, to get the job done. It must be evident that they all understand their role, and are aligned on the same agenda.

5. Employees are engaged, committed, and accountable. Technical entrepreneurs, in particular, who build an innovative product, often don’t realize that building a successful business requires an equal focus on hiring the right people, providing the right tools and resources, and communicating effectively. Business success requires buy-in from all.

As an aspiring entrepreneur, I recognize that you won’t have all these attributes on day one. That’s why you need to get used to hearing the standard rejection from investors – “I love your idea, but come back when you have more traction.” It’s never too early to take a hard look at yourself in the mirror, and focus on those attributes that you may be still developing.

A little farther down the road, the challenge is to retain these attributes for the long haul to success. During scaling, many entrepreneurs get complacent, and forget that focus on innovation, fast decision making, and a supportive team culture. They soon find that the market and competitors are changing faster than they are.

Business success is an elusive target. – every one of us needs to keep growing and learning how to make it happen. Start today.

Marty Zwilling

*** First published on Inc.com on 03/11/2021 ***

7 Tough Leadership Challenges Gauge Your CEO Ability

As a business advisor, I often talk to business professionals who are critical of their CEO, and are convinced that they could do the job better. Yet I suspect that few of you have seriously thought about the scope of problems that every CEO must face, and what capabilities are the key to success, whether your company is a small startup, or a multi-billion multi-national conglomerate.

I have my own views on what it takes to be an effective leader at the top, based on many years as an executive in large companies as well as small, but I was impressed with the solid points in a new book, “The CEO Test,” by Adam Bryant and Kevin Sharer. These authors bring far more experience to the table, as well as the results of interviews with 500 CEOs and other leaders.

To check your own potential as a leader, I offer you insights on their self assessment to better understand how to be more effective and successful leaders, and respond to key challenges faced by every professional in business, based on the authors and my own real-life experiences. You can project the results by assessing how well you might handle these seven key objectives:

1. Develop a simple plan for your complex strategy. Simplifying complexity and being ready to implement a solution are key. I have found that many people are great critics, or can study a problem forever. Far fewer are adept at getting to the heart of a challenge, and offering a simple strategy and plan. If this is your forte, you could be the next CEO.

2. Walk the talk to create a winning company culture. Every company talks about their culture these days, but in many places it is still messy and political. Only the best leaders and CEOs pay real attention to how and when people commit, how employees accept accountability, and how they win. If your focus is on an effective culture, you are a leader.

3. Build teams that work together to drive strategy. Teams that work together are ones that build trust, and have each other’s back, all while engaging with their leaders, and following a commonly developed strategy. CEOs who make this happen start by hiring the right people, communicating a strategy, and being the role model for collaboration.

4. Provide leadership to drive a transformation. There is no more dangerous position in business than clinging to the status quo. The challenge of reinventing almost every aspect of a company on an ongoing basis can be overwhelming to everyone, so you are expected to provide the passion, framework, and incentives for continuous innovation.

5. Really listen for danger signals and bad news. Too many CEOs today like to talk, trust their gut, but fail to listen to their team or the customer. They overlook danger signals, and make excuses for bad news. Great CEOs humbly invest the time and energy to walk the halls, travel to customers, and hold regular employee meetings, with real listening.

6. Avoid predictable mistakes in handling a crisis. Real leaders don’t run and hide, or try to deflect blame, when a crisis hits. You have to be visible, show a sense of urgency, and communicate a plan, with regular status, to everyone. Stay calm and project confidence, while marshalling your team to understand and attack the root cause of the problem.

7. Manage the conflicting demands of leadership. True leaders are expected to be optimistic, yet realistic; compassionate, yet demanding; create freedom with structure, and make unpopular calls, while keeping your ego in check. You have to appreciate the long-term rewards of a positive legacy, bringing out the best in others, and new learning.

So before you become a critic, take the time to do an honest assessment of your own capabilities and tendencies against these tough challenges. The business world needs more leaders and effective CEOs, to better serve their customers, their employees, and their company. Every day is a good day to start honing your skills. I’ll be watching, and I want to be your biggest advocate.

Marty Zwilling

*** First published on Inc.com on 03/10/2021 ***

How To Scale Your Startup Far Beyond Organic Growth

Every entrepreneur tries to maximize his startup growth by building and selling more product and services for the widest geographic area that he can support. This strategy is called “organic growth,” yet it alone may yield only a fraction of the potential you could achieve, unless you add the additional strategies of partnerships and M&A (mergers and acquisitions).

Many entrepreneurs are paranoid about the partnership approach, and think that M&A is only an alternative for large companies who are flush with cash. Both of these qualms are wrong and shortsighted. Laurence Capron and Will Mitchell explain why in their classic book, “Build, Borrow, or Buy: Solving the Growth Dilemma.” I like their recommended framework for emerging firms, as well as large multinationals, to help build an optimal growth strategy for your company:

1. Evaluate internal development versus external sourcing. Building through internal development, or organic growth, makes the most sense when you have a core set of skilled internal resources. Use external sourcing to fill in the non-critical gaps.

2. Add basic partner contracts or alliances. Using contracts with partners for growth resources (“borrowing”) is best when you can both define the resources clearly and protect them with effective contractual terms. Don’t use alliances for core competencies.

3. Invest in selective strategic alliances. Borrowing by way of a more engaged alliance helps you obtain targeted resources when you and a partner collaborate through limited points of contact and have complementary goals for your joint activities.

4. Actively pursue mergers and acquisitions. M&A is “buying” resources for growth. This makes sense when you anticipate needing the freedom and control to make major changes to enhance growth, with a credible integration path while retaining key people.

The real challenge here is balance. Too much emphasis on organic growth can become a straightjacket that leads only to incremental innovation and limited horizons. Too much reliance on growth via contracts and alliances makes you vulnerable to partners’ actions and conflicts of interest. Overreliance on acquisitions drains resources and de-motivates internal teams.

In every startup, as well as in mature companies, there is no substitute for constantly maintaining a pipeline of alternatives. This requires constant focus, as well as maintaining the skill set to do things like the following:

• Locating and not losing knowledge from within. Startups often find it difficult to retain key personnel and to control proprietary ideas. Rather than push non-compete agreements on your superstars, it’s more productive to create incentive systems and creative ways for them to work more independently, just for you.

• External scanning for resources. Startups can’t usually afford a business development team, so that effort is just one of the measurements that should fall on every CTO and CEO. Here is also an ideal opportunity to use your external advisors and Board to help identify external resources, potential partnerships, and acquisition opportunities.

• Partial acquisition. Budget relatively small “educational investments” at early stages, to learn from a target firm without a full commitment, or without leading either partner astray. These can reinforce the operational and financial linkages through licensing or alliance agreements, and allow the relationship to develop prior to an acquisition commitment.

• Spin-ins. This is a transaction whereby two firms agree on a set of milestones that would trigger a partnership or acquisition, if the innovator achieves the specified goals. The initiator funds the innovators’ development activities and gives them the flexibility to work independently.

There is no question that startups which manage the broadest alternatives for growth will gain competitive advantages. This selection capability is a skill and a discipline that every entrepreneur needs to nurture and develop over time. The world and current economic environments have changed. The past can be a deadly rear-view mirror. Look for new horizons.

Marty Zwilling

7 Key Startup Activities Where Follow-Up Is Critical

When someone introduces me to an “idea person,” I automatically jump to the down-side conclusion that this person doesn’t do follow-up. Of course there are people who are great at getting things done, but haven’t had an original idea in their life. Great entrepreneurs, like Bill Gates, are great at both.

I was with IBM in the early PC days when Bill worked with us to provide PC DOS and other software. He was relentless in his focus on getting a project done, and he always assigned himself the toughest tasks. At the same time, he was always pushing the limits of our business relationship with new ideas.

That’s the bar you should aspire to. I can think of several related aspects of starting and running a business where follow-up, or lack of it, can make or break your startup. Here are a few:

1. Business networking. For entrepreneurs, effective networking is required to find investors, partners, and customers. It doesn’t work if you don’t follow up on networking opportunities, networking referrals, and ongoing networking relationships.

2. Investor negotiations. Serious investors expect founders to have their homework done before the first interaction – documented executive summary, business plan, and financial model. They expect prompt formal follow-up to questions. Too many entrepreneurs try to talk their way through all of these.

3. Product development. For a great idea person, the product details keep changing for the better, but nothing ever gets finished. Lists of project milestones and technical issues are created, but nothing happens on time, because follow-up on issues is missing.

4. Time management. Some struggling entrepreneurs are totally event driven. They are too busy with the “crisis of the moment” to focus on follow-ups that may save a major customer, close a partner deal, or solidify a process that isn’t working well.

5. Effective marketing. Guerrilla marketing preaches the importance of prospect follow-up if you even hope to succeed in business. If you collect business cards at a trade show, make sure all have follow-up within 72 hours, and at least three more times after that.

6. Customer retention. More customers are lost to apathy after the sale than poor service or quality. Many experts suggest it costs six times more to sell something to a new customer than to an existing customer. A numbing 68% of all business lost in America is lost due to lack of follow-up after the sale.

7. Professional relationships. How many people do you know who have a thousand emails in their inbox, or just a few awaiting follow-up for over a week from people who matter? These procrastinations jeopardize your integrity and your relationships.

Everyone likes to be pursued, rather than the pursuer. There’s a reason that many people say that the fortune is in the follow up. When you follow up properly with people, your reputation will benefit, your business will benefit, and eventually your pocketbook will benefit as well.

As an aside, I would suggest that you should never aspire to be a manager or an executive if you don’t do follow-up. You won’t be happy, and you won’t do a good job, because that’s what they do most of the time. The idea time for most executives is in the shower, or during other non-work activities.

So which is the most important, the idea or the follow-up? If you intend to be a great entrepreneur, you need both. But I know some very good ones built on great follow-up with incremental improvements to existing products. On the other hand, a great idea without a business plan is a non-starter.

Marty Zwilling

9 Steps To Overcoming Your Biggest Startup Challenges

Creating a startup, or managing any business, is all about problem solving. Some people are good at it and some are not – independent of their IQ or their book smarts (there may even be an inverse relationship here). Yet I’m convinced that problem solving is a learnable trait, rather than just a birthright.

Entrepreneurs who are great problem solvers within any business are the best prepared to solve their customers’ needs effectively as well. In fact, every business is about solutions to customer problems – no problems, no business. Problems are an everyday part of every business and personal environment.

Thus it behooves all of us to work on mastering the discipline of problem solving. Here is a formula from Brian Tracy, in his classic book “No Excuses! The Power of Self-Discipline” that I believe will help entrepreneurs move up a notch in this category:

1. Take the time to define the problem clearly. Many entrepreneurs like to jump into solution mode immediately, even before they understand the issue. In some cases, a small problem can become a big one if you attack with inappropriate actions. In all cases, real clarity will expedite the path ahead.

2. Pursue alternate paths on “facts of life” and opportunities. Remember, there are some things that you can do nothing about. They’re not problems; they are merely facts of life, like natural disasters. Often, what appears to be a problem is actually an opportunity in disguise.

3. Challenge the definition from all angles. Beware of any problem for which there is only one definition. The more ways you can define a problem, the more likely it is that you will find the best solution. For example, “sales are too low” may mean strong competitors, ineffective advertising, or a poor sales process.

4. Iteratively question the cause of the problem. This is all about finding the root cause, rather than treating a symptom. If you don’t get to the root, the problem will likely recur, perhaps with different symptoms. Don’t waste time re-solving the same problem.

5. Identify multiple possible solutions. The more possible solutions you develop, the more likely you will come up with the right one. The quality of the solution seems to be in direct proportion to the quantity of solutions considered in problem solving.

6. Prioritize potential solutions. An acceptable solution, doable now, is usually superior to an excellent solution with higher complexity, longer timeframe, and higher cost. There is a rule that says that every large problem was once a small problem that could have been solved easily at that time.

7. Make a decision. Select a solution, any solution, and then decide on a course of action. The longer you put off deciding on what to do, the higher the cost, and the larger the impact. Your objective should be to deal with 80% of all problems immediately. At the very least, set a specific deadline for making a decision and stick to it.

8. Assign responsibility. Who exactly is going to carry out the solution or the different elements of the solution? Otherwise nothing will happen, and you have no recourse but to implement all solutions yourself.

9. Set a measure for the solution. Otherwise you will have no way of knowing when and whether the problem was solved. Problem solutions in a complex system often have unintended side effects which can be worse than the original problem.

People who are good at problem solving are some of the most valuable and respected people in every area. In fact, success if often defined as “the ability to solve problems.” In many cultures, this is called “street smarts,” and it’s valued even more than “book smarts.” The best entrepreneurs have both.

Marty Zwilling

8 Ways Your Values And Results Make A Trusted Leader

As an angel investor in new startups, I’ve long believed that investors invest in people, not ideas. But the magic that makes one entrepreneur stand out over others is hard to quantify – yet we all recognize it when we see it. In my view, it starts with your communication of real personal values, and ends your focus on results. In fact, these same attributes also bound your leadership skills.

As a mentor, my mission is to recommend actions that can strengthen your image with investors and peers, as well as help you get the startup job done. I believe all of us in business need to practice these actions to improve our effectiveness and leadership, to overcome the tough challenges, including funding and leadership, that we all face:

1. Identify a “higher purpose” that embodies your values. The most respected business leaders today or those who balance business growth objectives in the context of making the world a better place, through addressing social or environmental issues. Of course, these must always be balanced with winning business practices for maximum value.

   An example of a good balance is clearly Whole Foods, whose focus on healthy foods and a sustainable environment is legendary. Their mix of business success and a higher purpose is credited as the major factor in attracting Amazon with a $13.7 billion buyout.

2. Focus on customers and people over profits and ego. Especially in these modern times, both your customers and your team are looking for personal relationships to incent their engagement and loyalty. Practice being humble and demonstrating transparency in your communication of needs and challenges. Their support will make you a leader.

3. Use your values to lead people, not push them. The days of “push” marketing and autocratic control are gone. Use active listening to learn from your team, your customers, and investors. Provide solutions they want today, not something they could appreciate tomorrow, or is “nice to have” from your perspective. Be a role model for humility.

4. Practice logic and discipline rather than random walks. With discipline, people will see you as a leader who can overcome the tough challenges of business, rather than someone on an unpredictable or emotional roller coaster. Your values will help you build trust with team members and customers, increase your productivity, and inspire others.

5. Demonstrate persistence and stability in all challenges. The market may not yet recognize the value of your solution, so investors and peers are watching and analyzing your initiatives and pivots. While I recognize that you may be your toughest critic, there is no substitute for actions versus excuses, and the best actions come from strong values.

6. Highlight your values when discussing needs and decisions. All too often, I sense or hear “fear of failure” as the driver for help requests, and the answer to tough challenges. You need to show courage and a vision for overcoming fear, and discuss specific actions, rather than look for someone to provide an easy way out. There are no easy answers.

7. Calmly accept responsibility for failures and success. We all know that your plan is full of personal choices, and what you do with them, based on your values, governs your reality and success. Don’t play the blame game. Accepting responsibility for things is key to building relationships, effective communications, and creating loyal advocates.

8. Define and use real metrics to measure progress. Set quantitative goals for your business based on your values, and avoid the assessment of progress based on feelings. A vision and a dream are not a viable strategy for success. Take advantage of the latest tools for gathering data and tracking progress. Manual assessment is not productive.

So before you pitch your next idea to investors, or your next request to peers and customers, take a few moments to check the alignment with your personal values and how well these have been communicated to your audience. If you think that passion alone, or your other emotions, will get the message across - think again. Your leadership and success in business today depends on it.

Marty Zwilling

*** First published on Inc.com on 03/05/2021 ***

5 Ways To Be Successful In Business Despite Bad Luck

If you have had some success in a business, I’m sure you bristle just like I do when someone says “You were just lucky…” I’m a strong believer that we all make our own luck, which means that the harder we work, the luckier we get. In reality, “hard work” is just a catch-all term for a list of principles that good entrepreneurs follow, allowing them to work smarter and improve their odds of success.

A short list of these “hard work” principles, published a decade ago by Anthony Tjan in the Harvard Business Review summarizes them as heart, smarts, and guts. I agree with these, and most people recognize them when they see them in others, but the terms are still a bit abstract for learning purposes.

Even earlier, other experts, like professors Alex Rovira and Fernando Trias de Bes, authors of “Good Luck: Create the Conditions for Success in Life & Business,” identified five more definitive principles that seemingly lucky and successful entrepreneurs have in common:

1. Accept responsibility for your actions. Business owners who feel that they have had good luck also feel responsible for their own actions. When things go wrong or the outcome of any given situation is other than intended, they never point the finger of blame at external factors or other individuals. Instead, they look to themselves and ask, "What have I done for this to occur?" Then they act accordingly to solve the problem.

2. Learning from mistakes. Creators of good luck don't see a mistake as a failure. Instead, a mistake is an opportunity for learning. Thomas Edison is the classic example. The very first light bulb was invented by Sir Joseph Wilson Swan, who demonstrated the theoretical concept but gave up trying to develop a practical application after only three attempts. By contrast, Edison made his own good luck and designed a working light bulb after over 1,000 failures.

3. Perseverance on all goals. Creators of good luck don't give up or postpone. When a problem or situation arises, they act immediately to either solve it without delay, delegate, or forget about it. This enables their energy to be fully focused on their work and avoid conscious or unconscious distractions, which only generate inefficiency.

4. Confidence in yourself and others. The most powerful principle is often the most overlooked. Confidence in yourself is essential, and those who create their own good luck have high degrees of assertiveness and self-esteem. Closely linked to assertiveness and self-esteem is trust in others and respect for them, seeing other people as major sources of opportunity.

5. Cooperation with others in your network. Synergy is key. Trust in others leads to a solid network of work colleagues and friends, which, in turn, provides more resources to carry out projects than if they were managed alone. Think cooperation rather than competitiveness. At the most basic level, any project or undertaking takes place in the context of the broader group, and everyone should have the chance to emerge a winner.

With these attributes and the right attitude, I believe that most of "business luck" can be meaningfully influenced. That lucky attitude, according to Tjan, is a combination of three traits – humility, intellectual curiosity, and optimism.

Therefore, the basic equation of developing the right lucky attitude is quite simple. It starts with having the humility to be self-aware of your own limitations, followed by the intellectual curiosity to ask the right questions and actively listen to input, and concluding with the belief and optimism that something better is always possible.

Any entrepreneur can have this mindset if they just believe that luck is not random. They need to realize that they alone are the creators of the conditions that foster the achievement of specific, visualized goals. Then, having seen it work, they will know how to repeat the success. Overall, that really is “hard work.” Are you doing the right hard work to get lucky in your business?

Marty Zwilling

7 Ways to Convince Other People To Take A Risk On You

As a member of an angel investment group for years, I’m sometimes surprised to see founders with a good technical business case get rejected for funding, while others seem to have a hidden quality that gives them credibility to be fundable despite some missing elements. Investors often chalk this up to inbred charisma or charm, but I’ve often wondered if could be a learned skill.

I just finished a new book, “Backable,” by Suneel Gupta with Carlye Adler, which solidifies my belief than anyone can learn to be perceived as more credible and persuasive, and it’s a skill that every entrepreneur and business professional needs to master. Here are seven key steps which both Gupta and I agree are necessary for success:

1. Persuade yourself before you try to convince others. Passion and energy are key indicators that you believe strongly in what you are proposing. Just because someone else tells you that you can make money with this idea, doesn’t mean you can sell it. Do the research to fully commit to the how and why before you try to persuade others.

2. Put yourself in a story that makes your case memorable. Facts and figures can only go so far in convincing investors that your solution is a good one. People listen and remember a personal story and impact more than a large chart of facts. Highlight a personal anecdote and keep it in sight to make your message hit home and become real.

   For example, I know from experience that it is hard to turn down a funding request from an entrepreneur whose solution has rescued him from a health crisis, and now he wants to offer it to a large population of others facing the same challenge. I can easily relate.

3. Highlight some key info that goes beyond normal sources. People give real credibility to fresh insights that could not have come from Google search. Do something more, like assembling a group of potential customers, and convey unique insights you learned. This indicates your extra effort, and communicates your results already evident.

4. Show momentum that makes your vision inevitable. Show evidence that your vision is already underway, and appeal to the natural fear of every investor – the fear of missing out (FOMO). An example is the shift to working from home, caused by the pandemic. We already see momentum on new video tools, and there are many more opportunities.

   Elon Musk used this approach with Tesla, capitalizing on the growing momentum of electric engines, and a strategic mistake by GM which antagonized owners. His new technology and strategy was convincing, and now is a new benchmark for transportation.

5. Draw people into your story to make them insiders. This emphasizes the value of networking with potential investors so they have inside knowledge on your proposal, rather than a cold first look when you are asking for money. Pre-pitch discussions and warm introductions are a key practice for drawing people in, and building advocacy.

6. Adjust based on feedback from many practice rounds. Entrepreneurs who think they can “wing-it” with investors through natural salesmanship are rarely successful. There is no substitute for practice, practice, and more practice, with active listening. Ask people to explain back to you what they heard, and then make improvements with each iteration.

   Gupta reminds us of the “Rule of 21,” meaning success comes after twenty-one practice rounds, which keynote speakers and highly backable people easily relate to. In the world of new entrepreneurs, giving your pitch twenty-one times before success is not unusual.

7. Don’t let your ego show and make people defensive. Smart business people are quick to detect fake smiles, acting, and bravado. Practice being humble, yet confident and sincere, based on knowing your proposal inside out. Find a few sponsors and advocates to support your position, and don’t hesitate to bring them into the discussion.

I’m sure that you can see that none of these steps requires a super-human effort or special attributes from birth. These same initiatives apply not only to entrepreneurs seeking funding, but also to anyone seeking career changes, or re-entering the workforce after a life-changing event. You too can have that “it factor” that will make people take a chance on you when it really counts.

Marty Zwilling

*** First published on Inc.com on 03/01/2021 ***

10 Strategies To Keep Ahead Of Market Changes Today

I’m a very logical guy, so I still fondly remember when new solutions and technologies started trends on the basis of their logical strengths. In today’s world, it seems that emotion, not logic, sparks the new trends that become culture, and drives our devotion or disappointment in new products and brands. How does an entrepreneur best deal with that environment?

I saw some real insights in the classic book by Jeremy D. Holden, “Second That Emotion: How Decisions, Trends, and Movements Are Shaped.” He is a branding and research strategist who outlines how social contracts cause culture shifts, illustrates how they are created by emotion, and clarifies ways that they can make or break a new product, as well as a career.

Jeremy applies his culture shift tenants to political and generic social issues, but I have adapted them here more specifically to the business realm of entrepreneurs and startups:

1. Establish a social contract. Today consumers reveal themselves online, with pictures, opinions, ratings and reviews, interests and locations, and expect businesses to adapt to them, and honor the implied relationship contract. Businesses which ignore this contract are excluded from consideration, despite maybe having a logically better product or price.

2. Enlist disciples and a congregation. Social relationships are built around zealots and their disciples who ultimately engage a wider congregation and perpetrate the culture shift. Emotion, rather than logic, drives disciples. “Viral marketing” and “word-of-mouth” are tools of disciples in business today. Don’t underestimate their value and potential.

3. Create and leverage a chief disciple. Every startup needs a visible chief disciple today. The days of a new website and product with no personalization are gone. By default, the Founder is the chief disciple who displays the qualities to build the required social contracts. People today need a zealot, like Steve Jobs, to drive the desired culture shift.

4. Embrace illogical leaps. Culture shifts are usually illogical leaps. You can use projective techniques to unlock the unconscious or hidden motivations that are shaping people’s belief systems, leading to these leaps. Build a connection to your product, and leverage the momentum into more social contracts and bigger congregations.

5. Use social media to generate emotion. Social media is central to the creation of a social contract because it serves as an emotional beacon, and helps to fuel the invention of illogical leaps. Of course, its primary role is still to allow people to connect, organize, and engage, as well as provide startups with rich insights they might otherwise miss.

6. Deliver emotional certainty. No matter how illogical it may appear, we strive for certainty in all of our choices and affiliations. Social contracts give customers the feeling of self-affirmation that they are smart and knowledgeable enough to make informed selections. Inevitably, they feel more connected to the companies that give them this peace of mind.

7. Protect your principal symbols. Whatever tangible form your brand or message takes, it becomes the encapsulating beacon for a culture shift as well as an emotional conduit for a shift’s goals and beliefs. If the symbol changes, brands may see an erosion of their social contract, and it can feel as you’ve interfered with something deeply personal in their lives.

8. Avoid a breach. There is no such thing as reward without risk, and the emotional nature of people’s commitment to a culture shift means that any misstep, betrayal, or overt contradiction can be fatal. Disciples and ultimately the congregation decide if you have broken the social contract for the culture shift, so you had better understand their terms.

9. Ride your luck. When circumstances conspire to give your efforts unexpected momentum, it’s essential to be able to respond quickly and ride your luck, rather than remain strictly wedded to a plan or a strategy that hadn’t accounted for the new dynamic.

10. Timing is everything. Luck and timing are inevitably less certain than product build schedules or marketing programs. Be prepared to capitalize on the emotion of competitor missteps, changes in the economy, and other world events to drive new social contracts, new disciples, and broaden your congregation. Culture shifts are usually not planned.

Not all businesses or startups are dependent on a culture shift to be successful. But culture shifts have created most of the great recent companies, such as Apple, Amazon, Google, and Facebook. As much as it pains the logical me to admit it, if you want your startup to be the next one, it’s time to adapt to the “age of illogic.”

Marty Zwilling<

5 Early Entrepreneur Strengths That Can Limit Growth

Once you are able to achieve some real “traction” with your business (paying customers, revenue stream), it may seem the time to relax a bit, but in fact this is the point where many founders start to flounder. All the skills and instincts you needed to get to this level can actually start working against you, and you can fail to scale.

Investors often say that successfully navigating the early stages of a startup requires lots of street smarts, guts, and luck. For successful scaling of the business, there has to be a transition to “executive” mode in the more traditional business sense. Certain behaviors between these two modes are incompatible, and can cause real problems.

Many years ago, John Hamm published some definitive work on this subject in "Why Entrepreneurs Don't Scale" in the Harvard Business Review. Here is my interpretation of that work, incorporating my personal experience, identifying some strengths of an entrepreneur during early startup stages which can become a problem for scaling:

1. Perseverance. This is generally a required quality for a successful entrepreneur, but it can turn into an unhealthy stubbornness during the scaling stage. The key is to make decisions from data and feedback, once your business has real customers and real products. Trusting your gut at this stage isn’t good enough.

2. Absolute control. During the early stages, you are the company, processes are not documented, you don’t have much help, so you need a fanatical attention to detail. To scale the business, you have to find people who can do the tasks, and delegate appropriately. Control freaks are doomed to failure.

3. Individual loyalty. Most founders form very close relationships with the small team that gets the startup off the ground, and that is important. Scaling requires that you expand the team, probably with people you haven’t known. You also have to deal with the inevitable personnel challenges, even within the original team. Total loyalty can be toxic.

4. Isolated and insulated. Working in isolation is fine during the creative phase of the startup, where the founder is often the designer and architect, as well as the builder. Now this same individual has to step into the spotlight, and meet with customers, analysts, and investors. Insulation from the real world will not work during scaling.

5. Tactical versus strategic. Early stage startup founders have to think tactically. Even business school courses don’t teach you to operate strategically, deal with people objectively, and create loyalty within a diverse workforce. These are areas where past stumbles are the best teachers. Investors don’t want to fund your stumbles.

Every founder moving into the executive role has to step back and take a hard look at what works, and what doesn’t work. The best ones can do that, and they adapt. Investors and advisors see this as a critical part of their role, and often are the “bad guys” who ask the founder to step aside, while they bring in a “more experienced” CEO to take over the helm.

Unfortunately, some founders won’t adapt, and won’t step aside. Even if they are pushed out, they can cause terminal damage to the business by negative versions of their strengths, now seen as stubbornness, unwillingness to give up control, testing loyalty, and hiding from reality.

Thus my best recommendation, if you want to scale and to survive, is to open up and work closely with an “outsider” that you trust, such as a respected board member, a coach, a mentor, or an investor. The key is to expedite your learning, and take deliberate steps to confront your shortcomings. That way, you will become the leader your company needs, learn to stop floundering, and begin to fly.

Marty Zwilling

10 Mistakes To Avoid When You Want To Sell A Business

There comes a time in the life of every business owner when you need to move on to something new, retire, or let your business go to someone with new energy and ideas. As a business advisor, I always have qualms about recommending this move, because the process of selling your business can generate more pain and loss than continuing to run it yourself.

Since I’m not an expert in this area, I was pleased to see a new book, “Exit Rich,” by a couple of leading authorities on how to do it right, Michelle Seiler Tucker and Sharon Lechter. They not only focus on the positives, but include some succinct advice on what not to do. Their top items of guidance resonated with what I have seen in my own experience, paraphrased here as follows:

1. Don’t wait until you are burned out or lost interest. Selling your business requires the same energy and passion as growing it. Once you have lost that edge, and potential buyers will sense it quickly, the value of your business will trend down quickly. You should plan an exit strategy, and optimize your activities and timing to get top dollar.

2. Refrain from telling associates that you are selling. It’s amazing to me how people always assume the worst. Especially if people hear rumors of your interest in selling, they will assume that you are fighting bankruptcy, being pushed out, or your personal life has fallen apart. Limit your disclosures only to business brokers, and serious potential buyers.

3. Decide to do it yourself, without professional help. Selling your business is much like starting it, and not something you can do in your spare time. The critical tasks, which require professional skills, include packaging the business, actively marketing it, negotiating terms, and due diligence. Trying to do all this yourself is a recipe for disaster.

4. Depend on a real estate broker vs business broker. Selling a business is not just selling a business property. The buyers are different, the rules and contracts are new, and focused marketing is required. I recommend contracting early with an experienced M&A advisor or business broker, and following their lead, rather than finding a friend.

5. Negotiate based on current month-to-month lease. If your location is key to the value of your business, make sure you have a long-term lease, or at least a guarantee of renewability. What you don’t need is a buyer dealing directly with your landlord to get your key asset, leaving you with no leverage and minimum value for the sale.

6. Price the business based only on your instinct. Selling a business, like any other asset, requires a realistic appraisal of value. Many owners have no appreciation for the value they have built up over the years, while others tend to always have an inflated view of their worth. Neither perspective is good for credibility or a fair result from your sale.

7. Disclose proprietary information to incent interest. I have found that entrepreneurs often don’t appreciate the need for intellectual property or their “secret sauce” when looking for an investor, and are quick to give away the details when selling the business. Not getting a signed non-disclosure before negotiating can cost you dearly in value.

8. Sign with a buyer without proper due diligence. Just like potential buyers will do the due diligence on you, you should be as thorough in checking their credentials, intent, and history. Don’t risk your business, your personal legacy, and your time on unqualified buyers and scams. This task is a key one for your professional business broker.

9. Grab the first buyer’s offer without a plan B. The evidence I see indicates that less than forty percent of business sales come to fruition the first time around. Create a sense of urgency by setting up back-to-back buyer meetings, and letting potential buyers see each other. Always be ready to talk about future growth plans, as an alternative to a sale.

10. Assume that selling to an employee is quick and easy. Here the evidence is strong that sales to employees don’t work out well. Most employees have a limited perspective on the role and financial requirements to be an owner. In addition, normal negotiations may cause employees to become emotional and leave the business or work against you.

I always remind business owners that their business is likely their most prized possession, and the sale is one of the biggest decisions in their life. It’s a very complex process, as well as an emotional one. From your own experience, you know that complex decisions should never be made on emotion. Get good professional help here, and enjoy the legacy you deserve.

Marty Zwilling

*** First published on Inc.com on 02/25/2021 ***

8 New Venture Smarts That You Can’t Afford To Ignore

A while back I received a discouraging note from an entrepreneur with a patent and a medical software application who couldn’t find a dime of investment, and was grousing that seed funding just wasn’t available anymore. After exchanging a couple of notes, I concluded that she was more likely a victim of item #1 on my reject list below, rather than a drought on seed funding.

Too many people still believe the urban myth that you can sketch your idea on a napkin, and people will throw money at you. Fundraising is indeed brutally tough at all stages, and seed funding is the hardest to find. The simple answer is that if you need funding, do your homework early and completely.

I seem to see common threads in the stories from people who don’t get money, so I checked my list against ones quoted in the classic book by Barry H. Cohen and Michael Rybarski, titled “Start-Up Smarts.” We agree on issues we see sabotaging most funding efforts, in decreasing priority sequence:

1. Lack of a compelling story. That story has to begin with a painful problem shared by a large collection of viable customers, with your competitive solution. Additionally, you need to be able to communicate the essence that story and value to investors in a couple of sentences – your elevator pitch.

2. Lack of clear objectives/goals. Often, the number one question that entrepreneurs fail to address is: “How much money do you need, and what valuation do you place on your company?” Then you have to have evidence to support your request. I’ve asked this question many times of presenters in Angel meetings, and often get a blank look.

3. Failure to prepare for due diligence. Any serious investor will perform a thorough review of your business and personal background before signing the check. They don’t like surprises, so you should explain any possible issues first, in the best possible light, before being asked.

4. Lack of understanding of the funding process/rules. The key here is to create a win-win partner situation for your investors. Discussion of risks and rewards in an open fashion, without sleight-of-hand or shortcuts, will convince investors that they can count on you, and will avoid shareholder lawsuits later.

5. Reliance on inappropriate business professionals. Using well-respected professionals to bolster your endeavor is key. If you can attract well-known advisors, attorneys, and accountants, it will give potential investors comfort that you have been able to get implied endorsement of your concept, as well as your integrity.

6. Poor choice of funding sources. It is not helpful to you for funders to love an idea that does not fit the criteria for their investing capability. Don’t waste time talking to VCs for requests less than $1M, or very early stage, and don’t expect professional investors to jump in if you have no “skin in the game.”

7. Not doing due diligence on the funding source. You need to complete due diligence on your prospective funders as they complete due diligence on you. Find out what they have invested in recently, what stage, and what is their track record of expectations and follow-through. You don’t need surprises or disappointments either.

8. Being unprepared for the next steps. After a good elevator pitch or initial presentation, investors will ask for your formal business plan and financial projections. Don’t derail their enthusiasm or risk your professional image by not having these materials immediately available. The same thing goes for incorporating your company, having key hires lined up, and facilities arranged as required.

There are many others opportunities for you to shoot yourself in the foot. Rather than play the victim, you can be proactive on all these items, and stay one step ahead of your “competitors” in professionalism, timing, and preparation. The resources are out there to help you, like the book mentioned, this blog, and many more. Use them and win.

Marty Zwilling

Startups Spawned By Big Companies Have Extra Hurdles

“Intrapreneurs” are entrepreneurs inside big companies, who do corporate spin-offs. A spin-off is merely a startup spawned by a mature parent (company), and conventional logic would dictate that it has a survival advantage over the lowly startup. Yet spin-offs seem to most often fail to launch in the real world. I was part of one myself a few years ago, and felt the pain.

My first thought is that spin-offs are like struggling adolescents with over-protective parents. When companies spin off a division (sometimes called a demerger or deconsolidation), they naturally want it to grow and succeed on its own merits, just as they have. But like protective parents everywhere, they tend to shelter it in ways that stunt its growth in the long run.

Before we look at my specifics, I should mention some of the reasons companies make the spin-off or divestiture decision in the first place. Contrary to popular belief, according to a report by A. T. Kearney, these go well beyond an organization getting rid of its "problem children:”

• Deconsolidate—shed non-core functions to focus on core competencies. An example would be Time Warner spinning off AOL—to end a disastrous, dot.com-era marriage.
• Mingle and learn from the startup culture and new technology – without losing control. Foreign companies in the US like to use spin-offs to find expansion opportunities.
• Unlock shareholder value, which the spin-off can do as an independent entity. They may not be so constrained by monopoly fears and Sarbanes-Oxley controls.
• Grow faster, which a spin-off can do outside the parent company. Airlines, for example, have difficulty scaling up through mergers and acquisitions (M&As), but they can spin off their maintenance businesses and let the spin-off do the M&A in its own field.
• Grow in new dimensions from the parent company. Service operations such as call centers can grow far beyond their parent companies, especially if their services are more generic.

In retrospect, in the case I was part of, I believe there were several areas in which the parent company consistently fails in their discipline of intrapreneurial efforts:

• Rewarding without earning. The parent company guaranteed the spin-off a revenue stream and provided incentive bonuses based on artificial objectives, rather than competitive or market driven targets. The guaranteed revenue and incentives were only loosely tied—at best—to the spin-off’s performance.

• Fostering dictatorial leadership. Effective management skills in a startup are actually quite different from those in a large enterprise. The dictatorial leaders who survived and prospered in the enterprise parent, were ill-suited for the collaborative and highly adaptive spin-off and startup requirements. Yet they had “earned” the right to run an autonomous unit, and were not easily dislocated.

• Supporting them for an undefined period. Parent companies provide services or infrastructure to the spin-off at below-market prices or for an excessively long period of time. In the reverse direction, this “support” carried the high overhead that is standard in the enterprise, but not financially sustainable in the spin-off.

In my view, fostering successful spin-offs, like raising adolescents, often requires tough love, embodied in the tough financial objectives and a firm timeline that startup investors impose on their charges. No free passes, and no bailouts. HP tried to come to grips with all these issues a few years ago, in spinning off its PC business, but ultimately backed down.

In most ways, the success of a spin-off depends on the same factors that are critical to a startup, but sometimes get forgotten or taken for granted as a corporation matures. These include a clearly articulated vision and business strategy, communicated from leaders in a way that heightens motivation and lessens team anxiety of the unknown.

For entrepreneurs, this analysis should be a positive message, but it should also be a wake-up call to the overriding value of leadership and effective communication. For all of you who all too quickly tie your business success or failure to funding, or the lack of it, think again. Sometimes it helps to be “hungry” in that respect.

Marty Zwilling

6 Fear Of Success Qualms Can Lead To Startup Failure

In working with entrepreneurs and other business people over the years, I often hear stories of entrepreneurs who were so close to success, but somehow let it slip through their fingers. They could always give a rational excuse, like the market changed, but somehow it seemed that they were actually afraid of success, so they subtly undermined their own efforts.

I couldn’t really believe that anyone would be afraid of success, until I read the classic self-help book by Patrick Daniel, “Finding Your Road to Success.” This is billed as a must-read for any entrepreneur who needs a shot of optimism. Relative to my suspected entrepreneur fear of success, Patrick outlines six rationales that my positive-thinking mind would never even consider:

1. Success will lead to loneliness. Some entrepreneurs believe that success will mean working long hours, neglecting their spouse and children, which in turn could result in divorce. Women, in particular, sometimes believe that success will make them unlovable and intimidating to men.

2. Success will lead to envy. Many people want what others have, and the more success a person achieves, the more envious are that person’s friends, neighbors, and colleagues. This is a reality that some entrepreneurs don’t want to deal with, and some apparently undermine their own success to avoid it.

3. I’m not good enough for success. This belief can result from many things, such as having negative parents and not having a college degree. With this belief often comes “I don’t deserve success,” so they sabotage their own efforts in that direction. If this resonates with you, I don’t recommend the entrepreneur lifestyle.

4. Success will change my lifestyle. Some entrepreneurs fear that the changes that come with success will actually make life less enjoyable. They believe that will have less time to, for example, enjoy sports, surf the Internet, spend time with their family, or relish the excitement of building the business. My logical mind would assume just the opposite.

5. Success is too expensive. There is a cost to everything, and success is not an exception. Sometimes, to make money you have to spend money, and some entrepreneurs just can’t face the risk of making that initial investment. Certainly I know many people who would never put other’s people’s money at risk to start their business.

6. I won’t be able to control everything that happens. If you fear all the things you can’t control, you should never step into the entrepreneur lifestyle. Startups have to deal with many factors outside their control, so this fear can cause an unhealthy stress and worry. Successful entrepreneurs usually relish their ability to control at least one thing that no one else has managed to figure out.

Ironically, these “fear of success” rationales are often restated by entrepreneurs as a somewhat less embarrassing, equally deadly, “fear of failure.” Fear of failure in generally recognized as one of the strongest forces holding entrepreneurs back. Yet failing in a startup is practically a rite of passage, according to investors, as well as successful entrepreneurs.

Overall, I would suggest that if you let your fears control your actions, you probably have a hard and unhappy road ahead as an entrepreneur. Most successful entrepreneurs are not fearless, but they know how to transform these fears into positive actions rather than negative ones, and they take every failure as a positive learning experience.

I assure you that no entrepreneurs are born successful. Every smart entrepreneur has a fear of the unknowns in their new business initiative. Only those with the passion and conviction to start anyway will have any chance of success (you can’t succeed if you don’t start). Likewise, you can’t succeed if you give up too early, or sabotage your own efforts due to a fear of success.

Make sure you don’t let fear paralyze you at any stage of your startup.

Marty Zwilling

7 Startup Laws Of Finance That You Dare Not Shortcut

Many startups fail before reaching that magic “cash-flow positive” position they have been striving for, despite seemingly reasonable financial projections. A closer analysis often indicates the cause to be a lack of diligence in handling common business finances. These mistakes are usually masked by excuses, like the economy turned on me, or my competitors played dirty.

I found a good summary of the most common mistakes in a classic book by Kelly Clifford, “Profit Rocket,” written primarily to help you on the other side of the equation – skyrocket your profits. I’m sure all you accountants will agree that fixing the mistakes listed here does not require rocket science, but I’ve seen them so often that to be forewarned is to be forearmed:

1. Failing to factor in fixed costs when pricing. Don’t forget to add all pesky “overhead” costs, with fixed elements, like rent, insurance, and administration, and variable elements, like delivery, customer support, and commissions. Always use a break-even analysis to measure what volume and price are required to offset total costs.

2. Thinking you are profitable once money begins to flow in. Money flowing in has to exceed all costs, including inventory, credit, and your salary, before there is a real profit. Many startups see initial revenue from customers, and love the fast growth, but fail to anticipate the cost of early vendor payments, monthly overhead costs, and later taxes.

3. Considering the job done once a client has been invoiced. A startup must ensure that the payments are collected per agreed terms. A required metric is average days to payment compared to expectations. If you expect payment in 30 days, many customers will stretch this period to 45 days or even 90. This difference will kill your profit margin.

4. Not paying close enough attention to cash flow. In startups, cash is king. If you fail to pay a cash obligation when it is due, the business is technically insolvent. Insolvency is the primary reason firms go bankrupt, even while making a profit. Entrepreneurs should sign every check and manage cash personally, rather than delegate this task to anyone.

5. Not producing and reviewing financial reports regularly. Too many entrepreneurs hate the numbers side of the business, so they assume their accountants will warn them of danger signs. But administrative people rarely see the big picture, which you need for profitability and survival. It’s well worthwhile to learn the basics and use financial reports.

6. Not having a budget. A budget is the financial plan and road map to get you from your business plan to profitability. Without a road map, you can be lost and not know it. Make sure you have a budget which is specific, measurable, achievable, realistic, and timed (SMART). Prepare it, update it regularly, and use it.

7. Wasting money unnecessarily. Every business ends up buying things they don’t need, or paying more than they should, due to lack of attention and lack of negotiation. Review supplier terms regularly, and don’t be afraid to shop around. Take advantage of early payment and volume discounts, where possible

Above all, avoid self-sabotaging behavior that you may not even be aware of, like blaming others rather than taking responsibility for all decisions, or not charging what your product or service is worth, due to lack of current market information or a personal bias.

For example, I find many entrepreneurs are certain they can make a profit on a 20% margin, even though most of their competitors target 60% margins, or even higher. Unless you are a Walmart, with very high volumes and an existing infrastructure, you won’t survive for long on a 20% margin.

It’s fair to use your vision, creativity, and innovation to change the world with new and better products and services. But don’t forget that the underlying laws of finance are harder to change, much like the laws of physics, so try not to ignore these basics. In business, when you lose money on every sale, it’s hard to make it up in volume and still be profitable.

Marty Zwilling

7 Current Market Forces Bring Startup Opportunities

Startups are the corporations of the future, so I have long believed that entrepreneurs who study existing corporate models, rather than ignoring them with disdain, will likely profit from the exercise. In today’s fast-paced world, that means recognizing early and capitalizing on the changes that are bringing many big companies to their knees, before that company is yours.

We see evidence in the news every day of these irresistible forces of change, like the pervasive global penetration of the Internet, the impact of terrorist activities even to peaceful countries, the power of social media in building business relationships, and the depletion and pollution of natural resources. These are all huge challenges, as well as huge opportunities, for entrepreneurs.

A classic book by global business consultant Diana Rivenburgh, “The New Corporate Facts of Life,” highlights these challenges and opportunities to the corporate world, but I believe they need to be understood as well by every startup. Here is my interpretation of Rivenburgh’s forces for the entrepreneurs out there:

1. Disruptive innovation. This occurs when a new product, service, or business model renders the old way of doing business obsolete. It used to happen only a few times per century, but now I see disruptive innovation highlighted in almost every business plan I read. That means if your new startup doesn’t plan for continuous innovation, the company may never reach corporate status.

2. Economic instability. Financial uncertainty today threatens all countries, industries, and people. Our hyper-connected world links economies around the globe, so manufacturing moves to emerging nations, and tiny country woes ripple quickly to impact the most innovative companies, like Apple and Nike. But instability is also an opportunity to prosper.

3. Societal upheaval. Poverty, pollution, unemployment, limited education, and inadequate health care are sparking some of the biggest opportunities for social entrepreneurs today. The best startups also see these as opportunities for brand recognition and viral marketing, to simultaneously benefit people and boost the bottom line.

4. Stakeholder power. Customers and employees are the new stakeholders for every business. Public companies have been too focused on Board members and shareholders as the only stakeholders with power, leading to unintended consequences. Explore new models like Conscious Capitalism™ and Benefit Corporation to win with all stakeholders.

5. Environmental degradation. The old model that humans can plunder the earth at will and suffer no consequences is obsolete. Negative perceptions of a company’s impact on the environment decrease brand value; positive perceptions increase it. Going green doesn’t always hurt the bottom line, and investors now look for startups with sustainability.

6. Globalization. Markets are now hyper-connected, where communications technology and rapid transportation link all citizens of the world together. We now talk about “reverse innovation,” where customers in developing countries adopt new technologies first, and global reach allows scaling of young companies to happen almost overnight. Be there.

7. Demographic shifts. With more people on the planet, and faster shifts from one demographic to another, more products and services are consumed, from basics to high technology. Luxury goods flood into emerging nations, and urbanization brings needs for sustainable development. Startups can win carrying less baggage onto this playing field.

The new facts of business life will not go away any time soon. These facts will increasingly determine whether you will succeed or fail as an entrepreneur. So every time you make a business decision, whether large or small, local or global, strategic or cultural, you must consider the implications with respect to the new business facts of life.

For every startup, a key step is to design a resilient organization from the start. Organizational resilience means building in the flexibility to manage anticipated as well as unanticipated challenges, putting in place a future-oriented structure to distribute accountability, linking functions with networks to get thing done, and a heavy focus on the best people practices.

Great entrepreneurs and great leaders are the ones who are energized by these opportunities, rather than overwhelmed by the challenges. They love to engage all the stakeholders, both internal and external, and engage to excel. Is your energy and your new business idea big enough and bold enough to set the model for the new corporate world?

Marty Zwilling

7 Ways To Balance Your Heart And Logic With Investors

Based on my own years of experience in startups and big business, and more recently as an angel investor, I often cringe when I see one of you entrepreneurs missing a cue that I have seen work for many before you. I’m a big fan of leading with your heart and your passion, but I’m also convinced that logic has a big role in business, so don’t forget to highlight your balance as well.

For example, it’s great to pursue a higher purpose, like feeding the hungry, but don’t forget that running any business is a hungry mouth you have to feed. A passionate entrepreneur I met a while back had found that a certain algae could be grown cheaply, and could end world hunger. Yet he forgot that hungry people rarely have money, so his business case was not fundable.

To keep you on a positive track with potential investors, I recommend the following logic principles, to balance your passion in presenting your vision of a new business:

1. Make sure your plan includes some business metrics. Making people happy or improving usability are laudable goals, but projected product margins, volumes, and business growth are necessary realities for a successful business. You need to have quantifiable objectives, with measurements, to keep you on the path to success.

   For example, if you have ever watched the Shark Tank show on TV, they always ask about the cost of customer acquisition. It still amazes me that some entrepreneurs seem totally at a loss on this question, or customer retention rate, or even margin expectations.

2. Show that you have to ability to move the ball forward. I often hear about efforts that have been stalled for several years, pending more funding, economic change, or other priorities. I find that good entrepreneurs always find ways to keep their project moving forward, in good times and in bad. I’m looking for all your initiatives, not your excuses.

3. Demonstrate a balance between instincts versus advice. Investors want to see a willingness to follow outside guidance, tempered by your own convictions. Blindly following someone else’s strategy, or even your own, will not facilitate learning and an ability to pivot along the way. Every startup demands logical changes along the way.

4. Don’t forget to focus on the value of you and your team. For early stage investors, you probably don’t enough results to prove the power of your solution. Thus investors are investing in you and your team, so you need to highlight the skills you have mastered, past accomplishments, and the connections you have established in your industry.

   If this is personally your first startup, it’s very important to highlight prior leadership experience in school, business, or public life, and your ability to attract skilled people for your team, as well as advocates from your industry, social media, or prior relationships.

5. Pitch a rational plan for expansion and growth. Most entrepreneurs underestimate the resource and time requirements for scaling, and overestimate their own range of capabilities. Building a sustainable business is more like a marathon than an event. You need to talk about partnerships, employee roles, distributors, and strategic alliances.

6. Postulate competitive reactions and your responses. Competitors, like the market, never stand still as you disrupt their space. Show that you anticipate this, how they will react, and how you have ongoing strategies to stay ahead. This may include plans to merge or buy competitors, as well as a continuing plan to introduce new innovations.

7. Present a viable exit strategy for investors to cash out. Equity investors realize that they won’t see any real return until an exit occurs, such as a sale, merger, or IPO. Try to give some clear direction or when and how you see this happening, based on similar companies in your marketplace, or connections you already have in the pipeline.

Some people argue that presenting an exit strategy implies a lack of a long-term commitment by the entrepreneur. In my experience, I have just the opposite reaction, where no exit strategy indicates no strategic plan for how this startup will build a legacy.

Certainly every new business needs a purpose, as well as a heart. But don’t forget to address the basic elements of business logic – as these allow you to consistently deliver on your promises to customers. Every investor looks for that balance which assures a satisfying return for everyone involved. Use the principles outlined here to make your dreams a reality and change the world.

Marty Zwilling

*** First published on Inc.com on 02/16/2021 ***