5 Risk Reduction Strategies For Your Next New Venture

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

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

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

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

1. Eliminate one aspect of research and development. According to a classic Harvard Research study, first inventors spend at least a third more on their initial technology than later innovators. In addition, we all know that patent disclosure rules often facilitate legal reverse engineering, and innovation at this point is now much cheaper.

2. Capitalize on the lessons from early adopters and competitors. Smart startups save cost and time by capitalizing on the pivots of others before them. Market research can thus be based on real customers and a previously tested market. Studying and learning from the mistakes of others is the best way to reduce your own risks.

3. Attract investors who fear pioneers catching arrows. Banks have always been more likely to support the franchise model of cloning an existing business, while they avoid, like the plague, a new and untested technology. Most equity investors tend to avoid truly disruptive technology startups, since they take longer and more money to scale.

4. Imitation with continuous innovation predictably drives progress. The auto industry and others have used this model for generations, so business processes and metrics for innovation are well documented. Disruptive technologies are random and their success is unpredictable. Good imitators, like McDonalds, often bypass the original innovator.

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

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

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

Martin Zwilling

7 Ways Your People Skills Are The Key To Your Success

The critical success factors for a product business are well known, starting with selling every unit with a gross margin of 50 percent or more, building a patent and other intellectual property, and continuous product improvement. If your forte is a service, like consulting or web site design, it’s harder to find guidance on what will get you funded, and how you can scale your business.

On the product side, once you have a proven product and business model, all you need is money to build inventory, and a sales and marketing operation to drive the business. With services, scaling the business often implies cloning yourself, since you are the intellectual property and the competitive advantage. You have no shelf life, so you can’t make money while you sleep.

Indeed, there are some success factors that are common to both environments. For example, both need to provide exemplary customer service, build customer loyalty, and provide real value for a competitive price. Here are the additional success factors that are really key to a startup with a services offering:

1. Get your service out of your head and down on paper. If you can’t quantify or document your service for repeatability and new employee training, you will kill yourself trying to grow the business. Even artisan-based services, like graphic design and writing good ad copy, have innovative processes and principles. Capture your “secret sauce.”

2. Start with a service you know and love. A successful services business, more than a product business, comes from a skill or insight that you have honed from experience. If you don’t have a high level of commitment and passion, you customers won’t seek you out. Now all you have to do is pass it to the many new members as you grow your team.

3. Don’t let your service be viewed as a commodity. Low cost and low margin products can be winners, if the volume is high enough. You don’t have enough hours in a day, or trained people, to succeed with lower margins in a services startup. Thus you need to highlight how your service is more innovative and higher value to your target customers.

4. Recruit only the best people, with the right base skills. Customers won’t pay to see your new employees learning on the job, and outsourcing the real work to a cheap labor source is a recipe for disaster. Make sure they bring solid base skills, so your training can focus on the innovative and unique elements that your service brings to the arena.

5. Be a visible and available expert in your domain. Be accessible on social media, write a blog or articles for industry publications, and participate in conference panels and speaking engagements. This substantiates your expertise and value, builds peer relationships, gives you access to the people and technology to keep you current.

6. Practice being a good communicator. Customers can touch and see a great product, but services are a bit ethereal. You have to communicate how your service is the best, to your own team, as well as to your customers. If you deliver a great service, but no one knows it, your business will suffer. Make sure everyone knows your vision and values.

7. The customer experience is more than the service. Product companies sometimes equate customer satisfaction with customer service, but it’s more than that, especially with services. Make sure that every interaction with every customer is positive, the service delivered is exemplary, and always follow-up for reference and repeat business.

For some entrepreneurs who feel the need to attract outside investors as a critical success factor, they should be aware that professional investors almost never invest in a services-only company. The investor perspective is that no manufacturing or inventory implies a minimal need for capital up front. They tell these entrepreneurs to sell themselves, execute well, and grow organically.

Thus your services business success totally depends on you, your skills and resources, and your ability to bring customers to the table. You are the ultimate critical success factor for your business. Are you ready to make it happen?

Marty Zwilling

7 Keys To Strategic Partnerships That Profit Everyone

Entrepreneurs seem to have blinders on when looking at competitors. Generally they are so focused on killing competitors that they fail to see the positive potential of a strategic partnership or some other type of collaborative relationship. Sometimes you have to put aside the emotion and the passion, and just look at what is best for your business.

Strategic partnerships in this context can take the form of joint ventures, intellectual property licensing, outsourcing agreements, or even cooperative research. All of these offer the potential for a win-win relationship with a nominal competitor, rather than a win-lose deal, as long as both sides can remain humble and not try to dominate the relationship.

Always start with a formal proposal, limited in scope to a specific common objective or technology, for a limited amount of time, bounded by a two-way non-disclosure statement. With this agreement in place, there are a host of ways that both sides can win:

1. Share common technology. Every startup has a core competency which should not be shared. Beyond that, there may be a large percentage of common technology where they both need to minimize cost to gain share from the big dinosaurs who already have this advantage.

2. Expand the market for both. Typically, there are market opportunities that neither of your core competencies can win alone. A strategic evolution of your combined strengths may be able to open up a new segment that neither of you could do alone in the same timeframe or at the same cost.

3. Up-sell related products or cross endorsement. If your customers would benefit by having products from both companies, you might negotiate the opportunity to include the other’s product as an add-on. Where your competitor isn't really competing with your direct market, you can refer business to each other without anyone losing customers.

4. Benchmark your practices against a true peer. The best way to do this is to establish specific performance targets with incentive-based rewards for meeting and exceeding these targets. The information exchange from day-to-day interactions of engineers and marketers will drive you enhance your own processes to be more competitive.

5. Expand core competency and solidify strengths. Both partners must not forget they are still competitors. By sharing and learning in non-competing areas, they can focus their limited resources on solidifying their core competencies, and expanding their unique segment of the market. Let market response dictate a later split, merger, or acquisition.

6. Willing to learn from each other. Learning from each is part of the win-win equation. No entrepreneur has all the insights they need, and none should be so arrogant as to assume they hold all the cards. Of course, it’s important to start with a bounded agreement which clearly lays out expectations and areas that are off-limits.

7. Think about the future. Once you have established your credibility and value, a strategic partnership may extend to a financial relationship. They may have the finances you need to invest in a business area they know, where you have the core competency. Longer term, when ready, it may be time for merger or acquisition.

While most entrepreneurs think of strategic partnerships as big company deals, it actually works better for small companies. In large corporate environments, competitor cultures may be so set that collaboration is difficult, while I find that small company peer competitors usually have no trouble at all getting along. The industry leader arrogance has not yet set in.

Even for small companies, it is critical that all employees be well-informed about what skills, technology and information can be shared with their partner and what is off-limits. This will offset the normal instinct to think of a competitor only as a threat. It is smarter to capitalize on the positive aspects of a competitive situation rather than killing each other so no one wins.

Marty Zwilling

8 Strategies to Boost Your Leadership Impact at Work

As a business consultant and mentor to many young entrepreneurs, I often get questions about leadership challenges, and what you can do to solidify your leadership position and impact. It seems that today’s worker generation is more demanding, and less willing to accept guidance and direction from anyone with a leadership title. They want a role in every leadership decision.

There is no question that the business world has changed from a “command and control” environment, to a much more collaborative one based on values and team empowerment. There are no easy answers to leadership challenges, but I was moved by the insights presented in a new book, “Don’t Wait for Someone Else to Fix It,” by Doug Lennick and Chuck Wachendorfer.

Based on their long careers assisting in leadership development with large companies as well as small, they detail eight keys to enhancing your leadership impact at work, home, and anywhere else that needs you. I will outline and paraphrase their recommendations here, with my own insights added as follows:

1. Live in alignment with principle-driven values. Living in alignment is shorthand for the notion of aiming to live your business life as closely as possible to the principles and values that guide you, your personal goals, and the decisions you make to achieve your goals. The behavior you display to constituents determines your leadership effectiveness.

   Don’t expect to fool anyone into following you when you say one thing and regularly do something else. To build a following, you have to be authentic, trustworthy, and do something worth following, as well as communicate effectively to your potential followers.

2. Maintain a self-awareness of your leadership. Be realistic about your real self, including weaknesses as well as strengths, failures as well as successes. Pay attention to feedback from others, as well as how your emotions impact your thinking. Today’s world demands that you lead up, down, and across, to get your constituents to follow.

   Nearly all business leaders, no matter how much success they have, face blindspots in their personal and business lives. It's common for all of us to focus externally to solve our issues rather than looking within ourselves. Looking hard within is painful but effective.

3. Ignite integrity and responsibility in teams. The key to integrity is your willingness to tell it like it is, with genuine reasons for hope and optimism. If you keep your promises, this encourages others around you to take responsibility for their actions and become leaders also. Serve others by providing resources and by helping them grow their skills.

4. Embrace empathy and compassion for people. Empathy and compassion start with your awareness and understanding of another person’s challenging thoughts, feelings, and behavior. The next steps include overtly helping your followers, making sure they understand that you care, and moving forward with them in a shared sense of purpose.

5. Make decisions without biases and emotions. The way you make wise decisions is to first consistently gather relevant data, then identify options, a make a decision, and then follow-through to implementation. Always do this in the context of the big picture and values, and be willing to reframe your thinking as needed, based on input from others.

6. Cultivate mental agility and a learning mindset. Experts have found that your willingness to “let go of what you know” is the overarching component of learning agility. Top leaders are always intensely curious, even to the point of being uncomfortable in pursuit of growth, and this motivation to learn is characterized as a learning mindset.

7. Build a plan and achieve purposeful goals. Your visibility in building and executing a plan to achieve purposeful goals is a major key to being perceived as having leadership intelligence. Once you have this recognition, don’t forget to “pay it forward” by finding ways to help others achieve their goals and improve their leadership ability and following.

8. Clarify expectations and empower others to lead. The essence of empowerment is that when team members are empowered, they are encouraged to act and lead with authority, make decisions, and perform various acts consistent with their competence and motivation. Empowerment done right ramps up your leadership results as well as theirs.

Above all, remember that every leadership journey has setbacks, so expect some bumps in the road. Always be reflective to figure out what caused your setback, don’t be afraid to reframe your approach, and rebound with courage and determination. Don’t forget to help followers manage their own setbacks, and you will both emerge stronger to lead us into the next millennium.

Marty Zwilling

*** First published on Inc.com on 04/12/2023 ***

7 Reasons That Worker Empowerment Rules The Workplace

As I work with businesses who are struggling to restore staffing and recover after the pandemic, I see a new culture and a new generation of workers who have found strength in working remotely from their homes, and savoring their ability to survive on their own terms. Many business leaders are assuming this is only a temporary situation, but I’m convinced this model is the new norm.

If you have a different view, I urge you to see the data presented in a new book, “The Nine: The Tectonic Forces Reshaping the Workplace,” by Phil Simon, a globally recognized authority on technology, collaboration, and the future of work. Among other things, he presents convincing reasons why employee empowerment is now a force that is here to stay in today’s workplace:

1. A new generation of workers are flexing muscles. Like it or not, social mores have changed. Workers are looking for a more balanced lifestyle, meaning they are no longer willing to be tied to office devices every day, or tolerate toxic work environments. Unions are making new inroads at sacrosanct companies, including Kickstarter and Amazon.

   For office jobs, most of us have heard the new strong preference for working from home versus commuting to the office every day. There are obviously pros and cons to working remotely, including productivity, costs, as well as balancing work and personal lives.

2. Millions have bowed out of the labor market. Compared to previous decades, fewer people are looking for jobs. The recent pandemic has convinced many, on both ends of the age spectrum, that they don’t need the pressures of full-time employment to survive and thrive. They expect more than free lunches and office snacks to keep them engaged.

   In my view, the greatest change in this area has been Boomers who were laid off or isolated at home during the pandemic, who found they could survive without a full-time job, and enjoyed the newfound freedom. Many of these retired from the labor market.

3. Since the pandemic, the US has added more jobs. More jobs are now available than people to fill them. The unemployment rate remains historically low, at about 3.7 percent. Small business growth over the past three years has been phenomenal. Layoffs from bellwethers make headlines and scare us, but these are now mostly behind us.

   New and old entrepreneurs submitted over five million startup business applications in 2021 and again in 2022, making these the most popular years on record, according to data released by the U.S. Census Bureau. These are job openings for many new people.

4. Immigration to the US has sharply declined. Thanks to COVID-19 and the policies of previous US administrations, immigration to the US sharply declined from 2017 to 2022. Even if immigration rates change over the next few years due to new policies, fresh entrants will likely not turn around the current culture now embedded in the workplace.

   Immigration has always been a key source of diversity in the workplace, which is known to drive innovation and employee empowerment. Global entrepreneurs continue to find opportunities in the US, and I’m certain these always bring a more empowered culture.

5. The birth rate in many countries is declining. Americans are clearly procreating less. Japan, France, and other industrialized countries are experiencing the same issue, and it began well before the pandemic. Fewer births mean fewer workers later. A related culprit is the growing child-care cost, which burdens mothers in their prime child-bearing years.

6. Inflation has caused an increase in side-hustles. Millions of folks need to find supplemental income to rebuild their eroded purchasing power. The problem is particularly acute for middle-class, non-managerial, and exempt employees who don’t qualify for overtime pay under tightening labor laws, and high big-company expectations.

7. Number of non-compete agreements is way down. For decades, companies have restricted current and former employees from working for competitors, for up to two years after employment ends. These restrictions are ending as employees rebel, and even the Federal Trade Commission admits that non-competes depress wages and kill innovation.

Around the world, workers are holding their best cards in years, and they know it. That means the more emboldened employees are here to stay, and they won’t fall back easily to being largely silent and compliant. If you expect your business to stay competitive and succeed in this new world, you will start today looking for more ways to empower your team and lead the way.

Marty Zwilling

*** First published on Inc.com on 04/10/2023 ***

5 Recommendations Before Funding An Appealing Startup

After you have heard a few startup success stories, like Google, Facebook, and Microsoft, you may be tempted to invest some money yourself, maybe by pooling your funds with other investors who claim to have a great track record. My advice is to leave the investing in startups to the professionals (or friends and fools).

First of all, despite a few visible blowout successes, the odds of a payback from investing in startups is very low (that’s why VCs look for 10X returns to cover failures). Most investors agree the odds are better buying traditional public stocks, or even commodities. Even the hot new crowdfunding companies carefully don’t talk about their record of returns to investors.

Secondly, there are many scammers out there who look and act just like Bernie Madoff, even though he is now passed away after years in prison. Most frauds are not on the scale set by Bernie, but even a few thousand dollars lost would hurt you and me as much as a few million did for some of his victims.

So what can you do, and what are the “red flags” to look for as you do your due diligence before pooling your money with other investors, or accepting money for your startup from investors? Here are some common sense tips:

1. Get financial statements and verify. Every reputable investment firm is registered with FINRA and files regular reports with the SEC. Look for these and investigate thoroughly to check the truth of every statement about the company. Ask for references, and call or visit previous “successes” of the company to verify experience and satisfaction.

2. Avoid “insider deals.” The Internet has just made it easier and faster for vultures to feed on investors tempted by the possibility of an “inside deal.” Someone you don’t know promises you an “inside” deal. Why would a stranger pick you out to make rich? Does that make any sense?

3. Listen for “unnamed sources.” Run away if all current investments are with “sensitive” clients, who are unnamed or unable to be contacted. Remember the old newspaper publishing rule of “All facts must be verified by two independent sources.” People claiming to be unbiased may actually be paid promoters or company insiders.

4. Any mention of “offshore.” Watch out if someone has a complex plan involving offshore bank financing or gemstones or oil leases in Iran to make you rich. Why get involved in a complicated scheme you don’t understand, when there are plenty of opportunities that are legal and you can understand?

5. Sounds too good to be true. The age-old wisdom here is that if it sounds too good to be true, it’s probably not true. I continue to be amazed at the fact that the Secret Service still gets 100 calls per day from victims of the Nigerian unclaimed cash scam alone. What are these people thinking?

Here are a few questions you should ask that might allay any remaining qualms, or convince you to run immediately:

• How much am I paying in commission or fees?
• Has your source been involved in any arbitration cases or lawsuits?
• How do they get paid? By commission? Amount of assets managed? Another method?
• Has the firm ever been disciplined by the SEC or a state regulator?

Unfortunately, in the startup and investment business, we are trained to rely on networking, connections, and professional integrity for many decisions. Remember that people who run scams may be highly polished and sophisticated, and can wrap their con games in such an air of legitimacy it may be hard to see the truth.

Don’t assume you are safe now that Bernie is out of the picture. If you have evidence of fraud, don’t be too embarrassed to contact the Securities and Exchange Commission. If others had done this sooner, his clones wouldn’t be out there today looking to help you out (of your money).

Marty Zwilling

7 Secrets To Bank Equity Funding Without Collateral

Many entrepreneurs are convinced that banks are not worth the effort for startups, especially early-stage ones that still don’t have a revenue stream, or collateral to back up their financing needs. A question I get from time to time is “Can I ever expect any backing from my bank for a great opportunity?” The short answer is that some banks will help, if you do your homework.

The first thing to remember is that banks only do loans – they generally don’t do equity investments like angels and venture capitalists (and vice versa). To get a loan, you need to satisfy their 3 C’s – credibility, capacity, and collateral. That traditionally translates to at least two years of positive cash flow, with enough assets or receivables to cover at least 80% of the loan.

If you don’t have that, there are things that you can do to compensate. All banks are looking hard these days to get back in the game, and certain ones, like Silicon Valley Bank, are more focused on small businesses, even though that focus has cost them dearly in recent weeks.

I found a great discussion with Mark Horn, a former Silicon Valley Bank senior vice president, published by Jill Andresky Fraser a generation ago but still relevant today, which outlines the issues I believe every startup must address when pushing the limits for a loan:

1. A clear mission. You have to get past how great the product is to address clearly what your business rationale is, why it is different from the competition's, and why it will succeed. Be concise as well as complete. Show focus and your understanding that your company is something more than just a good idea.

2. A winning product or service. Provide a simple yet complete description of your product or service and its competitive marketplace. Include any empirical evidence--including market research or technical analysis, if that's appropriate--in order to bolster your case about why you believe you will succeed.

3. An impressive team. When we say 'team,' that's what we want to hear about: a group of people who are working with the person who had the original idea to give this company its market advantage, including salespeople and finance people. If you don't have a team on staff, then a banker is going to want to hear about outsourcing and advisors.

4. Management with a strong track record. When describing each key person on your team, it's important to describe his or her employment history, with an eye toward convincing the banker that the person's experience will help your company achieve its goals. Here, too, focus on outside advisers as well as on key executives.

5. Partnerships that lend credibility. Be comprehensive here. What a banker is looking for is validation of your idea. If you've succeeded in bringing savvy investors or corporate partners aboard, then that can be a pretty good sign that your idea can succeed in the marketplace.

6. Money from other sources. This question gets to the heart of what bank financing is and isn't supposed to accomplish. Bankers do not contribute equity. What they're looking for is a situation in which others have already done that, so the bankers want to see the owner's money involved.

7. A realistic cash plan. What any banker will want to know is, basically, how much money you've already raised and how quickly you've gone through it; how much you're currently spending; and finally, at what point you anticipate earning the revenues to sustain a positive cash flow.

Finally, remember that at almost any bank you will need to back up your financing pitch with audited financial statements, a well-thought-out business plan, credit check, and maybe even your personal tax returns as well. That's just reality.

In case you hadn’t noticed, the items highlighted by this banker are equally important to equity investors, so you need to do the work in either case. In the long run, bank loans are considered “less expensive” than giving up equity and giving up control, so a savvy startup should never skip this alternative.

Marty Zwilling

10 Keys To Real Innovation In Your Next New Business

As a startup advisor in this age of the entrepreneur, I see many more startups, but innovation is still hard to find. The most common proposals I hear are for yet another social networking site (200 on Wikipedia), or another dating site/app (over 1500 in the USA). Startups which display real innovation, such as alternative energy sources and new medical treatments, are still rare.

In my experience, finding real innovation in existing company environments is even tougher. Overall I like the principles in the classic book “Robert’s Rules of Innovation: A 10-Step Program for Corporate Survival,” by Robert F. Brands. He outlines the key steps which together spell INNOVATION, that I believe apply equally well to startups as well as corporate environments:

1. Inspire. Whether we are talking about startups or corporations, innovation requires a leader who can inspire others to step into the unknown. Followers and linear thinkers need not apply. Inspiration requires a vision, and an ability to communicate it to others.

2. No risk, no innovation. An entrepreneur looking for a sure thing will never innovate. Savvy investors tell me that startup founders who claim to have never failed are either lying or have never tried anything innovative. Failure is the best teacher.

3. New product process. Innovation is not a random walk into the unknown. It starts with a vision, but benefits quickly from a structured process of idea generation, evaluation, prototyping, customer feedback, and success metrics. Set milestones and meet them.

4. Ownership. A technical champion may drive a specific innovation, but the business leader has to own the result, in order to drive an appropriate business model, customer acquisition, support, and a growth strategy. Business risks are not just development risks.

5. Value creation. Innovative technologies have no value until they are turned into solutions to real customer problems. Creating intellectual property, including patents, is the kay to long-term value and a sustainable competitive advantage.

6. Accountability. Many innovations are jeopardized by team members and leaders who are hesitant to accept full accountability. This includes personal and team commitments to delivery schedules, quality assurance, manufacturing, and distribution requirements.

7. Training and coaching. Proper hiring of people with a natural curiosity, open-mindedness, and ability to see the big picture is the way to create and enhance the right mind-set. Ongoing coaching from the top is essential to maintain the attitude and spirit.

8. Idea management. Build and manage a pipeline of ideas. From time to time, include customers and sales members in ideation sessions. Make sure all team members have some connection with the product – has either used it, or sold it, or assembled it.

9. Observe and measure. Tracking results are essential to optimal ROI. Product life cycles keep getting shorter and shorter, which mandates accelerated innovation cycles. Once a new product is launched, a key metric is the ratio of new product sales to overall sales.

10. Net result and reward. Based on ROI, incentives should be developed for all participants. Reward your people. Frequently, the key motivator is less financial than it is recognition for a job well done. People are your best innovation resource.

Sustainable innovation is really the only sustainable competitive advantage. But innovation is hard, because people by nature resist change, and company cultures are most comfortable with status quo.

Yet survival in today’s world of rapid business change requires that you keep one step ahead of your competition. Innovation is what gives life to your business initially, and keeps it alive in the long term. Make sure your business can spell it.

Marty Zwilling

10 Tips For Continuously Disrupting Your Own Business

As a business owner or key professional, your challenge is to keep up with and stay ahead of the rapid market change today, or lose your livelihood tomorrow. In my business consulting activities, I often get asked for help in looking ahead, and I well understand your primary day-to-day focus on setting repeatable processes and creating a stable environment for existing team members.

Looking ahead and implementing predicted changes can be very disruptive to the business, so I’ve never had any magic solutions to recommend. Thus I was impressed with the practical rules suggested to facilitate anticipatory changes to survive in business today, in a new book “Secrets of Next Level Entrepreneurs,” by Alex Brueckmann, an experienced executive consultant:

1. Create change by inspiring people to follow. It’s no longer a top-down or command-and-control world. I recommend that you position yourself as a guide and steward of the grand vision. You must inspire people on your team to execute plans that are in the company’s best interest, and nurture all relationships that provide positive support.

2. Start early to envision the future landscape. Ask questions of your customers, team members, and experts now to determine what the landscape will look like in the next five or ten years. Plan for multiple possible outcomes and be prepared to shift and ride the wave as it happens, instead of struggling for air after the wave passes over your head.

3. Strive to recognize power shifts in society. Use your connections and employees viewing and participating in various social platforms to see firsthand how power is shifting and status quo is changing. Recognize the natural resistance to embracing disruption and encourage a comfortable transition for your management team and team members.

4. Build openness and trust in the organization. Trust is earned by transparency and active listening to team members, leading to more accountability and a positive culture for everyone. Listen to and validate concerns, and then take actionable measures quickly. Addressing problems as they come up fosters more trust than you might think.

5. Embrace healthy conflict to disrupt the status quo. There will be conflict and disagreement – it goes hand in hand with change and disruption. I recommend that you approach conflict with the belief that everyone has the best of intentions at heart, rather than avoidance and resentment. Be prepared to give feedback directly without emotion.

6. Develop leadership that owns their decisions. It all begins with shifting the mindset of decision-makers from gatekeepers to facilitators and devising a structure and clear guidelines that help define the limits. Your role is to make sure there is support in place to encourage and validate the decision making role as employees continue to develop it.

7. Overcome the inherent resistance to change. Team members naturally resist change because they don’t know how to deal with uncertainty. To mitigate this fear, you must set goals and reward employees when they shift their mindset. Don’t let them feel stressed out or a failure if they don’t always hit the goals. Make it a positive learning experience.

8. Leverage digital technology to grow relationships. Use social media, video, and other channels to build new relationships with customers and other constituents. Digital technology today can be used to hone your ability to listen, care, share, and be more engaging. Share more stories that will align people around common goals and objectives.

9. Replace perfection with focus on being excellent. Excellence is the opposite of perfection because zero errors mean you and the team are not learning. Try setting impossible deadlines to spur action, and build the confidence in your teams to make decisions without all the data in hand. Time is of the essence in this fast-moving world.

10. Find balance by imposing discipline around change. Disruptive change always feels chaotic and exhausting, so discipline in the process helps people feel more comfortable. Amazon has a process for proposing a change requiring a one-page press release from the future, combined with a six-page FAQ document. People can touch and feel it.

I believe these recommendations apply equally well to mature businesses, as well as startups. Both need to keep their core business strong, while giving everyone clarity and expectations of their roles in getting to the end goal of constant alignment with customers today, as well as staying one step ahead of competitors. Perhaps it’s time to take a hard look at your own priorities.

Marty Zwilling

*** First published on Inc.com on 04/05/2023 ***

5 Venture Periods Call For Unique Funding Strategies

Time is too precious to waste trying to close a deal with the wrong investors at the wrong time. Luckily, not all investors are looking for the same thing, so it pays to know what type of investors are most interested in what your startup brings to the table.

The key is understanding how potential investors see you, and especially how they view the maturity stage of your startup. For example, if you have a proven product, real revenue, a big potential market, and are ready to scale up the business, every investor will be interested. On the other hand, if you are a new entrepreneur, still in the idea stage, professional investors will only tell you to come back later when you have traction (customers and revenue).

Thus your startup maturity and growth stage is the primary key to success with potential funding sources. Different types of investors tend to specialize in capitalizing on businesses at different stages. Venture capital firms look for the most mature companies they can find, Angel investors typically deal a tier lower, while friends and family are most likely to help you get started.

It never hurts to start networking personally with all levels of investors early, but sending out teasers and business plans to every name you can find on the Internet is a waste of your time and theirs. It will be much more productive to categorize your startup in one of the following five stages, and limit your investor focus accordingly:

1. “I have a great idea and I need money to turn it into a business.” For investors, this is the idea stage, where you may have a great idea, but no plan, product, or customers, and probably no success record in this business domain. No professional investor will be interested at this point, so count only on yourself, friends, family, and fools for money.

2. “My invention and prototype works, but I need funding to continue.” Investors call this the seed stage, where money is required to build a market and a real product. Government grants and industry partners are you best bet here, but Angel investors might give you $250,000 to $1 million, if you have the right business case and credentials.

3. “The final product works great, and all the early users love it.” You are now entering the rollout stage, with money required for marketing, hiring a full-time team, and a production process. At this point, most Angel investors and a few early-stage VCs will be happy to talk, assuming you have the business model validated, and a large opportunity.

4. “It’s time to scale up and I need money to keep up with demand.” Congratulations! Every investor wants to be part of your growth stage, after your first $1 million in revenue. They call first investments at this stage the “A-round,” and often follow with a B-round through G-round. Growth stage investments from VCs are usually $5 million and up.

5. “The ride has been fun, but I need my money out to start the next big thing.” This is the exit stage for the entrepreneur, and for all earlier investors. The new investors you need at this stage are investment bankers, private equity, or competitors, to buy you out via merger or acquisition (M&A), or to go public with an Initial Public Offering (IPO).

Obviously, maturity and growth are a continuum, so the rules are never absolute. My message is that your startup will attract a different class of investors, as it passes through each stage, just as it has to supplement and tune the team, process, and product to keep up with the needs of a growing company and customer base. Tune your investor pitch and funding expectations accordingly.

Another good indicator of your real stage is the valuation you can set for your company at any given moment, to determine what portion of your equity an investor will expect of his money. Prior to the growth stage, your company valuation is limited to goodwill based on intellectual property and team experience, since you have no revenue. Future opportunity size doesn’t count in the early stages.

Contrary to popular opinion, all investor money is not the same. Friends and family believe in you, and only want to see you achieve success. Angel investors probably will know your business, and want to be mentors along the way. VCs normally come with the highest expectations of board seats, controlling votes, and milestones to meet.

Don’t sign up for one, expecting the other. If you want to avoid all these stage and investment considerations, you can always bootstrap the business (fund it yourself, and grow organically). Otherwise, be sensitive to first impression you leave on every investor, and the efficiency of your time spent on funding. You will enjoy the lifestyle a lot more when you find the right investor.

Marty Zwilling

7 Ways To Improve Return On Your Marketing Investment

Contrary to popular opinion, viral marketing has not eliminated the need for old-fashioned lead generation to bring customers to a startup. Indeed, while the rules and technologies for lead generation have changed, Forrester and other experts still see it as the most effective way for businesses with limited budgets to maximize their return on marketing investment (ROI).

One of these experts, David T. Scott, published a classic book that I still recommend, ”The New Rules of Lead Generation,” highlighting the changes wrought by the internet and social media. His professional background includes having held marketing-executive roles at big companies as well as startups.

Here is my summary of the seven most successful lead-generation vehicles he and I still recommend today, despite the popularity of viral marketing: 

1. Search-engine marketing.  For new product startups, search engine marketing (SEM) is still one of the most cost-effective and scalable lead-generation approaches. It’s also one of the most accountable, with in-depth data provided by search engines about performance. You can start an SEM campaign with as little as $50 today and get results very quickly.

2. Social-media advertising. Social-media advertising relies on popular social media sites (such as Facebook, LinkedIn and Twitter) to generate leads through pay-per-click ads and tweets on sites that target customers in specific demographics. You bid on the amount you are willing to pay for a click or promoted tweet (such as $2), and a daily budget (like $1,000).

3. Display advertising. To use online display ads to generate leads, you post ads on websites frequented by your target audience or ones with content related to the ad. Display ads on mobile devices, including video and audio, also offer a new opportunity to reach target customers.

4. Email marketing. This one has been around a long time but still works well if your target demographic is well defined and you do your homework to buy or rent a top-quality mailing list. New technology allows for psychographic targeting (such as finding people who like to travel) and geotargeting (specifying a certain neighborhood) for improved response and spam avoidance.

5. Direct mail marketing. Some consider direct mail very expensive or dead as a lead-generation tool. Yet it is more alive than ever before. Nearly $50 billion is being spent annually on direct mail, according to statistics, and the amount has been increasing each year. Compared with other methods, it does require the largest up-front investment, mostly for printing and shipping.

6. Cold calling. This is still one of the best vehicles if your business has a small, well-defined purchasing audience as do government agencies or medical establishments. You need to first purchase or build a targeted list of clients from a trustworthy source, then refine it with some new tools, like LinkedIn and Gist, before contacting them with a good script.

7. Trade shows. Such forums are still the best opportunity for you to meet face-to-face with people who should be interested in your products or services and to display your goods in person. Pick the right shows, start small and work hard ahead of time on your marketing materials, giveaway tchotchkes and booth staffing.

In all cases, it is crucial to set specific goals for each lead-generation campaign, keep track of the overall costs and measure the return on your marketing investment in terms of cost-per-action and cost-per-sale. Don’t hesitate to use small test projects to compare the results of multiple approaches.

Technology and consumer feedback have indeed changed the landscape. Telemarketing and robocalls, once a popular approach to lead generation, have been the subject of continuing legislation, which many believe will soon minimize these options. The last thing a new business needs is to antagonize potential customers or become embroiled in controversy.

Plus lead-generation strategies can be updated by the flood of new technologies and software, including use of near-field and Bluetooth communications, QR codes, social check-in promotions, mobile search, mobile web, text, SMS, MMS and geolocation.

Whether you are an entrepreneur with a new startup, or a more mature business charged with improving your growth and competitive posture, don’t fall into the trap of assuming that the new social media initiatives and focus on viral will mitigate your need to do proactive lead generation. How many of these lead generation techniques are funded in your business plan?

Marty Zwilling

10 Leadership Strategies For Today’s Employee Culture

The reigning theory in business has long been that “alpha” leaders make the best entrepreneurs. These are aggressive, results-driven achievers who assert control, and insist on a hierarchical organizational model. Yet I am seeing more and more success from “beta” startup cultures, like Zappos and Amazon, where the emphasis is on collaboration, curation, and communication.

Some argue that this new horizontal culture is being driven by Gen-Y, whose focus has always been more communitarian. Other business culture experts, like Dr. Dana Ardi, in her classic book “The Fall of the Alphas,” argues that the rise of the betas is really part of a broader culture change driven by the Internet, towards communities, instant communication, and collaboration.

Can you imagine the overwhelming growth of Facebook, Wikipedia, and Twitter in a culture dominated by alphas? These would never happen. I agree with Dr. Ardi’s writing, that most successful workplaces of the future need to adopt the following beta characteristics, and align themselves more with the beta leadership model:

1. Do away with archaic command-and-control models. Winning startups today are horizontal, not hierarchical. Everyone who works there feels they’re part of something, and moreover, that it’s the next big thing. They want to be on the cutting-edge of all the people, places and things that technology is going to propel next.

2. Leaders of tomorrow need to practice ego management. They should be aware of their own biases, and focus on the present as on the future. They need to manage the egos of team members, by rewarding collaborative behavior. There will always be the need for decisive leadership, particularly in times of crisis, so I’m not suggesting total democracy.

3. Winning contemporary startups stress innovation. Betas believe that team members need to be given an opportunity to make a difference – to give input into key decisions and to communicate their findings and learnings to one another. Encourage team-members to play to their own strengths so that the entire team and organization leads the competition.

4. Put a premium on collaboration and teamwork. Instead of knives-out competition, these companies thrive by building a successful community with shared values. Team members are empowered and encouraged to express themselves. The best teams are hired with collaboration in mind. The whole is thus more than the sum of the parts.

5. In the most winning companies, everyone shares the culture. Leadership is fluid and bend-able. Integrity and character matter a lot. Everyone knows about the culture. Everyone subscribes to the culture. Everyone recognizes both its passion and its nuance. The result looks more like a symphony orchestra and less like an advancing army.

6. Roles, identities and responsibilities mutate weekly, daily, and even hourly. One of the big mistakes entrepreneurs make is they don’t act quickly enough. Markets and needs change quickly. Now there is a focus on social, global and environmental responsibility. Hierarchies make it hard to adjust positions or redefine roles. The beta culture gets it done.

7. Temper self-esteem and confidence with empathy and compassion. Mindfulness, of self and others, by boards, executives and employees, may very well be the single most important trait of a successful company. If someone is not a good cultural fit, or is not getting it done, make the change quickly, but with sensitivity. Pain increases over time.

8. Every individual in the organization is a contributor. The closer everyone in the organization comes to achieving his or her singular potential, the more successful the business will be. Successful cultures encourage their employees to keep refreshing their toolkits, keep flexible, keep their stakes in the stream.

9. Diversity of thought, style, approach and background is key. Entrepreneurs build teams, not fill positions. Cherry-picking candidates from name-brand universities will do nothing to further an organization and may even work against it. Put aside perfectionism, don’t wait for the perfect person – he or she may not exist. Hire track record and potential.

10. Everyone need not be a superstar. It’s about company teams, not just the individual. In case you hadn’t noticed, superstars don’t pass the ball, they just shoot it. Not everyone wants to move up; it’s ok to move across. Become their sponsor – onboarding with training and tools is essential. Spend time listening. Give them what they need to succeed.

Savvy entrepreneurs and managers around the world are finding it more effective to lead through influence and collaboration, rather than relying on fear, authority, and competition. I believe beta is rapidly becoming the new paradigm for success in today’s challenging market. Where does your startup fit in with this new model?

Marty Zwilling

7 Excuses I Don’t Want To Hear For New Owner Failure

When I heard a friend and business mentor say, “Your startup won’t fail if you don’t quit,” I realized that every entrepreneur should adopt “never give up” as their mantra. Rather than quitting, there are always alternatives, like pivoting the business model or merging with new partners for support. Either could improve the statistic that half of startups fail within the first five years.

Nothing is more discouraging to aspiring entrepreneurs than the high failure rate. So why do most startups fail? Many experts have said for a long time that running out of money is not the primary reason. The number one reason seems to be that the founders just walk away. Of course, they may be out of money as well, but that is often more of an “excuse” than a reason.

Here are some common face-saving excuses that I hear from entrepreneurs abandoning their startup, along with some suggested alternatives to the hard stop and exit:

1. “I’ve lost my passion. I’m not enjoying this anymore.” This suggests that you've become discouraged with your current business model, possibly because of an unanticipated problem or pivots you made to avoid a competitor or make more money. My suggestion is to morph the current business idea back into one than you can love and enjoy rather than your quitting and accepting an employee role that's not your preference.

2. “My idea is just too far ahead of its time.” You probably realize that the leading edge is very near the bleeding edge, where only early adopter customers dare to tread. On the other hand, if you wait for competitors to get there first, you may be left in the dust with no customers. Yet if you already have some early adopters, that's a good indication that real marketing and education will likely bring your product or service mass acceptance. So hang in there and get busy. 

3. “I can’t find any trustworthy investors these days.” If you can’t bootstrap the venture yourself, find a partner, friend or family member, rather than a professional investor to carry some financial weight. Otherwise, look for advances from distributors, vendors or even future customers. Try bartering services you have for something you need. I’ve seen countless creative solutions to the cash-flow problem by entrepreneurs who don’t quit.

4. “The people on my team are not really committed.” We all make people mistakes or set employees' expectations too high. So you made some bad hiring or partner decisions. Now is the time to face up to these issues and reset your expectations or move out the people who don’t fit. The sooner it's done, the happier you all will be.

5. “I just don’t have the business skills I need to compete.” Acquiring business skills is not rocket science; they can be learned on the job, as well as supplemented by coaching from an experienced team and advisors. If you knew all the answers, you would be bored and lose interest (see number 1).  Half the fun lies in the learning challenge, so don’t quit now.

6. “It’s now obvious that there is no market for what I created.” It has never been enough to build a solution and then wait for people with the right problem to find you. There are a wealth of tools available today, relying on social media and marketing, to create or foster the market your company needs. Big markets never spring up fully grown out of the ether.

7. “My company grew too fast, and the pressure and costs are killing me.” Perhaps it's time to reset your course to focus on business basics, so you can lighten your load. Or maybe it’s time to scale back and focus more on organic growth. But quitting right as your company is encountering success is foolish. Professional investors would love to help you scale your business

Most people agree that entrepreneurs learn more from their mistakes and pivots than they do from easy successes. Investors tell me that they are wary of funding an entrepreneur who refuses to admit any prior failure. So it’s smart to admit your struggles, rather than let them defeat you or drive you to excuses.

It's worth remembering that nothing really important is all that easy. Starting a business is just like building a new relationship; it takes work. At times you might feel like running your business is not worth all the effort, but just walking away is not very satisfying. Learning, solving some hard problems and achieving success are a lot more fun than failing. Why not make “never giving up” your mantra?

Marty Zwilling

5 Ways to Lead Positive Change in Your Life and Work

Change is hard, in business as in your personal life. In my small business consultancy, I see this daily, per you owners and professionals struggling with the challenges of new markets and new competitors. Leading change is even harder, trying to balance the demands of the customers against the needs and expectations of employees. But you have to change to survive and thrive.

If you are in a position of some responsibility and power in business, it’s hard to stay positive, and know how and when you are doing the right thing. I’m often asked for guidance on the mindset required to get to the right answer, and how to get others to follow your guidance. My approach has always been to look at the specifics of each case, rather than try to offer a general solution.

Thus I was pleased to see some excellent generic change guidance and experience in a new book, “Good Power,” by Ginni Rometty. She recently retired as Chairman and CEO of IBM, and interweaves her personal story with a set of principles for leading positive change in our personal lives, workplace, and the world. Here is my summary of her insights, with my thoughts added:

1. Strive to make things better by serving others. In parallel with fulfilling your own needs, always use your power to fulfill the needs of customers and team members. Make balancing the needs of others with your own a win-win solution and positive change. Rely on feedback and listening to understand where to find the maximum value for everyone.

   In leadership circles, this focus on people, often called servant leadership, is building a larger and larger following. The idea of servant leadership is that the typical hierarchy where employees are supposed to serve their bosses is turned upside down. It works.

2. Use influence, not authority, to inspire people. This is especially true as you and they face difficult change. You must use authenticity and personalization to bring people along and earn followers, and bridge emotion and execution. Building belief is a never-ending effort, both in jump-starting a change journey, and in sustaining a long-term commitment.

   Of course, the end goal of leadership by influence is to get others to willingly engage and follow due to your knowledge, honesty, and heart, rather than because of your title. I encourage you to embrace transparency, and lead with humility in all change initiatives.

3. Think critically and creatively on tough choices. You need to first decide what must change, and what must endure. You can change products and services, but service and quality to customers must endure. The challenge is how to change, without negatively impacting the work culture, and still optimizing the current talent, knowledge, and skills.

   I find that critical thinkers are more comfortable than most with disagreement when a change is proposed. They seek out those who see the world differently and try hard to understand why. You may still disagree but may reframe your own thinking for the better.

4. Drive trust and inclusion by advocating for others. Trust is the foundation of strong relationships, and relationships make businesses work, just like private lives. You must be inclusive in your leadership to understand that different people are at various places along the continuum in their journey, and bring unique perspectives to every challenge.

   I believe that advocating for others needs to start with active listening and acceptance of ideas from team members around you. This leads to public recognition for a job well done, high-potential job assignments, and to career-enhancing change opportunities.

5. Be resilient as change takes time and relationships. Nourishing relationships will provide you with perspective to see things from a wider lens and more creatively solve problems and implement change. It is important for you to maintain a positive attitude in driving and implementing change, and leading organizational resilience to setbacks.

   Experts agree that resilience falls under the umbrella of emotional intelligence, which is the ability to identify and manage your own emotions. It is another word for toughness, to deal with challenging events, face pressure, and still preserve everyone’s mental health.

The most effective leaders in business today use these key principles positively to accomplish the change and growth they need through collaboration and engagement with constituents, rather than relying on the power of their position. I recommend that you follow their example, and you too can experience the legacy and satisfaction of long-term success and satisfaction.

Marty Zwilling

*** First published on Inc.com on 3/28/2023 ***

10 New Venture Factors To Consider Before You Commit

If you are one of the new age of entrepreneurs who hates the thought of doing a business plan as a first step in starting your new venture you will love this message. More and more professionals agree that a better strategy is to explore and fine tune your assumptions before declaring a specific plan with financial projections based only on your dream and passion.

In the process, you may save yourself considerable re-work and money, or even decide that your dream needs more time to mature, before you commit your limited resources, or sign up with investors to a painful and unsatisfying plan.

In a classic book on this approach, “Beyond the Business Plan,” Simon Bridge and Cecilia Hegarty outline tradeoffs and recommends ten principles for every new venture explorer. Here is my edited summary of their ten principles, which I like and may convince you that you don’t need a business plan at all, or at the very least will help you write a better one later:

1. A new venture is a means, not an end. A new enterprise should be pursued primarily to help you achieve your goals, like providing a better life for others, satisfying a passion of yours, or enjoying the benefits of a technology you have invented. In that context, it could be a social enterprise, or even a hobby, and a business plan may not be beneficial.

2. Don’t start by committing more than you can afford to lose. New ventures are usually exploratory and risky in nature, so don’t let any business plan process convince you to commit more than you can risk as a person, if your exploration fails. Start with an effectual approach, which evaluates risk tolerance, and suggests more affordable means to an end.

3. Pick a domain where you have some experience and expertise. Don’t handicap yourself by starting something for which you have to build or acquire knowledge, skills, and connections from scratch. No business plan will save you if you are just picking ideas at random, or copying others, just because the story sounds attractive.

4. Carry out reality checks and make appropriate plans. Before a business plan has any validity, some work is required to validate that your technology works, a real market exists, and your assumptions for cost and price are reasonable. Don’t be totally driven by your own passions, the emotional enthusiasm of friends, or even third-party research.

5. The only reliable test is a real one. Market research techniques for trying to predict the market’s response to a new venture can be costly and are often unreliable. Testing for real is the assumption behind approaches such as Lean Startup. It is also what explorers do – they go and look, instead of trying to predict from a distance what they will find.

6. Get started and get some momentum. Too much hesitation will kill any new venture, as markets move quickly and difficulties mount. Getting started helps to generate momentum and the sense of having done something, which provides encouragement, more incentive to keep going, and can carry your startup over obstacles. Early perseverance pays off.

7. Accept uncertainty as the norm. You will never remove all uncertainties, so accept them, and plan your activities in an incremental fashion. Too often, a business plan is seen as a mechanism for eliminating uncertainty, lulling the Founder into complacency. Eliminate major uncertainties before the plan, and update any plan as you learn.

8. Look for new and best opportunities. Many useful opportunities are either created by what you do early, or are only revealed once you have started and can see out there. So keep your eyes open and respond to new customers, new markets, and new partnerships. You will also find that looking hard also eliminates opportunities that are not acceptable.

9. Build and use social capital. Social capital is people and connections. No entrepreneur can survive as an island. Social capital is as important as financial capital for all ventures. As with all capital, you can use only as much as you have acquired to date. If you have no social capital, no business plan will likely get you the financial capital you need.

10. Acquire the relevant skills. Three basic skill sets are required for successful delivery of almost every venture. These include financial management, marketing and sales, and the appropriate production ability. If you don’t have the relevant skills and knowledge, take the time to build them or find someone to partner with, before you attempt any business plan.

If you do decide after exploring these principles to continue building a conventional business, especially with investors and employees other than yourself, I’m still convinced that a business plan is a valuable exercise. You should do it yourself, to make sure you understand all the elements of the plan, and facilitate communication of the specifics to your team and to investors.

In essence, building a complete and credible plan is the final test of whether your venture has “legs,” meaning that the opportunity matches your resources, skills, opportunity, and a level of risk you are prepared to handle. The entrepreneur lifestyle is all about doing something you enjoy, without undue stress, uncertainty, and risk. Are you having fun in your new venture yet?

Marty Zwilling

5 Recipes For A Team Culture To Drive Business Growth

Many business leaders I meet in my consulting practice are frustrated by the challenge of getting their teams working together, increasing engagement, and tackling market change requirements. We all realize that the pace of change is increasing, and new global markets makes it critical that every team member is focused on the market, rather than internal battles and risk aversion.

In fact, recent studies and surveys continue to show that team member engagement is at an all-time low approaching 30 percent, both within teams and across the field of larger organizations. I’m sure you can imagine how much that impacts any business or startup’s ability to react to changing customer needs and growth opportunities, no matter how insightful their leaders.

I don’t believe there is any single magic bullet to solve this problem, but I do see and recommend several practices and strategies to mitigate the impact that you can start today, and at least provide a step in the right direction:

1. Create a culture of trust in peers and the business. If you and your team are confident in each other, and proud of your business solution, you will not be afraid to innovate as customer requirements change. Building this culture requires that everyone is recognized for their contribution, see setbacks as learning opportunities, and celebrate wins together.

   Don’t forget that trust and influence is a two-way street. A key way for you to be trusted by peers is to listen. Active listening is more important than active talking. Listen to everyone's input, encourage people to speak up, and repeat back what you have heard.

2. Promote team inclusive activities and diversity. Regular team events and success celebrations, including family members, raise the level of teamwork, trust, and empowerment needed to accept and respond positively to executive and customer feedback. Open office layouts and common relaxation areas are key to this initiative.

   Research continues to show that diversity and inclusion are crucial for improved team morale and engagement, as well as in ensuring the team brings it’s best to the market. These also improve ingenuity and make the teamwork more rewarding for all members.

3. Facilitate coaching and mentoring, inside and outside. Every team member needs stimulation to broaden their horizons, correct weaknesses, and understand competitive strategies. This means sending them to industry conferences, supporting professional organizations, as well as allocating time and roles for internal mentoring and coaching.

   On every team, you will find experienced members as well as new, and experts as well as neophytes. Remember mentorship and coaching are advanced forms of leadership, and develop strong bonds among team members. This is a win-win for the business.

4. Provide frequent peer recognition for individual initiatives. Many studies have shown that hidden bonuses and infrequent large rewards have less impact on team performance than frequent public recognition from small wins, including saving a key customer, leading a social media campaign that benefits the business, and public speaking events.

   We all know that recognition starts with a simple ‘thank you’ or ‘well done’ from one team member to another on the same team, or from a member of another team, or from an executive or recognized leader. These cost very little and have large returns for all.

5. Highlight career advancement opportunities and examples. Team members who see peers rewarded by career advancement and extra visibility from team initiatives, rather than just given more work, will be incented to enlist the whole team in their own innovative efforts. Encourage rotation of high-potential team players around the business.

   Most successful companies I know work hard at identifying high-potential team members, and give them frequent growth assignments to new projects or staff assignments to top executives. The result is high engagement, and reduced loss of talent to competition.

I believe that you will find these practices to have a high payback, in terms of solidifying a team culture of collaboration and engagement, and in terms of business growth and innovation in the face of change. It’s time to make your own assessment of the team culture in your organization, and take action before it is too late.

Marty Zwilling

*** First published on Inc.com on 3/25/2023 ***

8 Employee Behaviors Challenge Every Business Leader

The most valuable assets of a new startup are the people on the team, and the most challenging task of the entrepreneur and team leaders is to spend their leadership time and energy productively. Cash isn’t always the scarcest resource startups have to invest – more often it’s the leadership capital of under-experienced and over-stretched entrepreneurs and co-founders.

Most new startup founders start out by assuming they need to spread their leadership efforts evenly across all team members. They soon find that doesn’t work, and they fall back to dedicating their efforts to the performance issue or crisis of the moment. Unfortunately this often makes them enablers of team member bad behavior, and spiraling down to a dysfunctional team.

I found some guidance in the classic book, “Lead Inside the Box: How Smart Leaders Guide Their Teams to Exceptional Results,” by Victor Prince and Mike Figliuolo, two top thought leaders in the field of leadership development. While their experience and focus is more on large organizations, I was struck by how similar the considerations are to my experiences with startup teams.

The authors define a leadership matrix of four behavioral categories and eight team member subtypes. Every entrepreneur needs to take a hard look at their current startup team, based on the nature of each team member’s behavior, and future requirements, to assess their leadership challenge ahead:

1. Domain masters. One of the most desired team member types for startups is the domain expert who is satisfied with their existing position and leadership. You count on these to deliver ongoing outstanding results. They require your lowest energy investment for the highest output. The challenge is to reward them well and not lose their loyalty.

2. Rising stars. These team members are the ones who perform well in current roles, with minimum leadership, but they expect leaders to provide them with a stepping stone to larger roles and responsibilities. If they don’t see that happening, they are prone to leave your startup for better opportunities, or revert to a squeaky wheel or even a slacker role.

3. Squeaky wheels. Team members who are capable of great results, but require an inordinate amount of hand-holding are often called squeaky wheels. An entrepreneur’s challenge with these is to wean them from their dependence on the leader, while continuing to generate solid results. Any other action will drive them to a lower category.

4. Steamrollers. Some team members may get results, but at the high cost of damaging team morale and destroying the goodwill you and your team have accrued with others. Your challenge is to reduce the friction they are causing, while building their people skills and improving their ability to positively influence others. Their friction is usually toxic.

5. Joyriders. These team members are always busy, and spend an inordinate amount of time at work, but focus on tasks they want to do, not tasks you need them to do. Your leadership task is to refocus their attention on their core responsibilities, and remove any possible distractions. Make sure they get rewarded for desired results, not time spent.

6. Stowaways. We all know the team member who expends the bare minimum amount of effort required to keep getting paid. Stowaways need their leaders to engage them on a regular basis, and measure them against peers to make sure they are carrying their own weight. At the least, other members need to see you holding this person accountable.

7. Square pegs. These are people who simply don’t have the skills they need to do the required job. The leadership challenge is to find the training or mentoring to fill the skill gap, or to find a new role that is a better match for the skills they do have. The leadership capital, and other costs to support square pegs is a huge startup resource drain.

8. Slackers. At the bottom of the value chain are team members who have the skills to do the job, but lack the drive or motivation. The leadership challenge here is to unlock their motivation to apply themselves to their work, or remove them from your startup before they have drained the drive and energy from the rest of the team.

Effective team leadership, or leadership inside the box, is really only half the challenge that every entrepreneur faces. Equally important is leadership in the marketplace, with customers, outside partners, and industry thought drivers. The time and energy to do both is beyond most mere mortals.

It’s time to take a hard look inside your box to see if you are spending leadership capital there that you can’t afford.

Marty Zwilling

6 Tips On Positioning Your Needs For Investor Funding

Entrepreneurs looking for investor funding often fail to realize that all money comes with strings. For example, if you have watched the Shark Tank TV series, you probably noticed that the Sharks always ask the entrepreneurs for their intended “use of funds.” Those who respond with one of the wrong answers, such as “I want to pay myself a salary,” usually go home empty-handed.

You may think this question is just an artifact of good television, but let me assure you that in my experience as an angel investor, it’s a standard “make or break” inquiry posed to every entrepreneur. Here are some guidelines that will help you with the right answers, not only in closing your next investment, but in planning when and how much money to ask for:

1. Investors are most interested in helping you scale the business.  That means they normally only invest in startups with a working product that has already been sold to at least one customer for full price (beta tests, giveaways and best friends don’t count). They are willing to cover marketing, inventory and scaling, but not product development.

2. Make your focus and priorities clear. A long list of everyday expenses is not helpful here. I recommend that you simplify your use to no more than three items or categories, with a percent allocation to each. An example might be 50 percent for marketing, 30 percent for inventory and 20 percent for staffing. Have backup charts for investors wanting more detail.

3. Funding for founder salaries at this stage is a red flag.  Investors expect you to “bet on the future” with them. You may pay salaries to your team, but your salary should come from earnings, when they occur. Taking your cut before earnings exist implies that you are not willing to take the same risk of no return, as you are asking of investors.

4. Make sure allocation amounts are reasonable.  These days, even viral marketing requires real money, for events and promotions. Startups whose marketing budget is trivial lose credibility and most likely the investment. Conversely, a huge marketing budget implies an intent to “spray and pray,” in hopes that something works.

5. Use of funds must be tied to projected cash flow negatives. If you ask for a million dollars, your financial projections better show a negative cash flow approximating that number (with a 20 percent buffer). Investors are not interested in giving you money to keep in the bank for backup, for investing in real estate or a fancy new car.

6. Tie use of funds to real traction milestones.  A valid milestone might be closing a specific big-name customer or channel, such as Walmart, or it might mean getting your first 100,000 social-media followers, by a given target date. Building a huge inventory before you have a confirmed customer is not a convincing strategy.

If you are really looking for research and development money, and you didn’t sell your last startup for $800 million, professional investors are not the place to start. Hopefully, you can find some friends or a rich uncle who believe in your potential. The other alternative is to find a strategic partner who knows the space well and will benefit from your solution.

Professional investors always look for a proven business model and an existing revenue stream to minimize the risk. Then they look at the people behind the model, the execution status and how they might get their money back. Your proposed use of their funds will be seen in these three contexts. They will look to your business plan for cash flows and specific return on investment projections.

In all cases, your goal must be to explain how the investment will help you scale up the business and become more profitable sooner. You should always be prepared to mention a plan B, if possible, to grow more slowly by reinvesting initial earnings over time. Confessing that you are in survival mode, desperate for money now, will not improve your odds with investors.

Whether it be in the context of a five-minute elevator pitch or a more formal presentation to professional investors, the projected use of funds should be summarized and prioritized into three “chunks.” These must remain focused on scaling the business.

Investors want to be convinced that your use of their money will maximize their returns in the first five years, as well as yours. After that, all you have to do is make it happen. Have fun!

Marty Zwilling

6 Key Steps To Transform Business Dreams Into Success

Many of you business professionals I meet in my business consulting and mentoring roles seem very determined to advance their career, or even start their own business. They are searching for that magic formula to get them from some vague dreams, to specific goals, to an actionable plan with real results. I believe the challenge is the same one you face in every aspect of your life.

The best I can offer, based on my own experience as a business professional and a business owner, is a summary of the steps that have worked for me and others I know, for turning ideas and aspirations into results, with some measure of progress along the way. Every one of us would like this to be the “big bang” theory, but the reality is just plugging along one step at a time.

I find many of you can talk at length about your innovative ideas and passions, and ask a lot of good questions, but never make much progress or build a real plan. Thus my challenge to you is to start today in documenting specific goals, putting some metrics in place to measure progress, and start celebrating every bit of progress, no matter how small, along the way as follows:

1. Convert dreams into specific written objectives. Most people find that the act of committing something to paper forces them to face the reality of getting started and measuring progress. Make sure the objectives are really yours, and not a restatement of what others think you should do. Don’t underestimate your own capability or potential.

2. Start networking selectively to build relationships. We all need help in achieving our objectives, whether it be mentoring, education, or resources. Your success and growth are a function of the people you associate with, including friends, business professionals, and leaders. You can’t succeed alone, or with relationships counter to your objectives.

   Most business professionals I know surround themselves with peers like them, or people who tell them only what they want to hear. You can learn more from people who will give you honest feedback on shortcomings, or broaden your perspective with outside topics.

3. Build a plan including a roadmap and checkpoints. Setting real milestones Is the only way you can judge progress and know when to celebrate successful steps along the way. It’s fair to work both backward and forward from major events, and you must review and update your plan on a regular basis, as you encounter and overcome obstacles.

4. Identify and complete skill upgrades and education. We all have weaknesses and strengths, so complete a self-assessment early to identify yours. Always play to your strengths, but also actively schedule and measure progress in shoring up those areas holding you back from achieving your goals. Use self-study and coaching as required.

5. Focus on measuring real progress weekly or daily. Most of the people I know allow themselves to be distracted by daily crises, and they lose the momentum they need to get over major challenges encountered along the way. Success requires a commitment to keep moving forward, and the discipline to always be looking at least one step ahead.

6. Pivot to add and revise your plan as you learn. Today’s business environment is in constant change, so you must be agile in responding to new situations and new learning. Don’t get stuck on any single item, and don’t be afraid to ask for outside help when you see a roadblock that may require extensive recovery or modification to your original plan.

I encourage you not to feel guilty by focusing heavily on your own business goals. The first rule of productivity is that doing what you know and love is the key to maximizing your value and output, making it a win-win for everyone around you. In addition, it’s not very satisfying in the long run to be chained to someone else’s goals, especially if they are not consistent with your own.

I still find too many highly capable business professionals who somehow assume that hard work alone will lead to success, without any specific plan to get there. For confirmation that planning, determination, and focus are the keys to a brighter future, just review the stories of successful business leaders today, such as Jeff Bezos. Make today the first day of your best business life.

Marty Zwilling

*** First published on Inc.com on 3/21/2023 ***