“If it really was a no-brainer to make it on your own in business there’d be millions of no-brained, harebrained, and otherwise dubiously brained individuals quitting their day jobs and hanging out their own shingles. Nobody would be left to round out the workforce and execute the business plan.”—Bill Rancic
“The critical ingredient is getting off your butt and doing something. It’s as simple as that. A lot of people have ideas, but there are few who decide to do something about them now. Not tomorrow. Not next week. But today. The true entrepreneur is a doer, not a dreamer.”—Nolan Bushnell
You should always be asking yourself, what type of relationship do our customers what us to establish and maintain with them? Have you already established relationships but don’t know what to do to maintain them? Ask yourself what it costs to create and maintain those relationships. And, do the relationships fit in with the business or are they distracting you from the real customer?
Nothing is ever going to be perfect. You have to get the stupid idea out of your head that your website or your pitch has to be perfect. Just get it out there and then you can make changes. Change it every day if you have to but don’t let perfect stop you from launching or starting.
Chasing growth is a big distraction. Beware the desire to grow for growth’s sake. I’m sure for shareholders of publicly traded stock the idea of never-ending growth seems like a fine idea. But when businesses focus on growth they forget about other things. You can’t grow to an enormous size without losing some quality or the connection to your customers along the way. Being bigger doesn’t guarantee that you’ll be more profitable or less likely to fail. Being the owner of a $2M business with 50% margins is so much better than owning a $20M business with 5% margins. Less to manage but with the same result.
Consider working from your house/apartment to start, especially if you have clients that will never visit you. Keep your expenses down! Working out of a basement for a year (or two) will pay off more than you know. We worked out of a friend’s basement for a year, then graduated to a crappy (but cheap) office. When we finally could afford it we moved to an A grade location. Even when we got there we negotiated for 3 months to get the price down by 50%.
“People mistakenly assume that their thinking is done by their head; it is actually done by the heart which first dictates the conclusion, then commands the head to provide the reasoning that will defend it.”—Anthony de Mello
Your website is your most important marketing and sales tool. Don’t settle for a $5 template and hosting service on this significant element. We get calls every week from people asking for help fixing a crappy website. You wouldn’t arrive at a big meeting in a $5 thread-bear suit from the charity store, would you?
If you are starting something new don’t plan a long building period. Create a prototype. Create a first revision. Create something for everyone to see and experience. Design something to start taking money within a few months then you have something to fuel marketing costs with. Having money gives you options and flexibility. That’s a good thing.
Grow yourself, not just your business. Get educated and adjust as you. Educate the people in your business about where you are going and what you will need to get there. Educate your clients. They need to know what you are good at and how you can help them. Host a webinar or a seminar. Host a party and give a small speech.
Never get too comfortable. Success can breed laziness, which takes your eye off the ball. Continuous improvement is a habit. Think about your business like a page that needs editing. Edit every day. Be uncomfortable with being finished.
Mike Maples at Maples Investments observes that the quality of pitches from entrepreneurs get better as you climb the “Hierarchy of Proof.”
1. On the bottom, and least convincing are statements about your “idea.”
2. Next are hypothesis – “I think customers will care about x or y “
3. Better are facts from customers – “We interviewed 30 customers with 20 questions”
4. Even better is “Customer Validation”– “We just got $50K from a customer” or “we got 100,000 users spending x minutes on our site”
5. Finally if you’re ever so lucky – “Everyone’s buying in droves and we’re here because we need money to scale and execute”
It occurred to me earlier this week that being an entrepreneur is, at times, probably the most lonely thing you can do professionally. When you’re just starting out, you often have little to no support and you’re completely on your own. If you “hit it big”, you don’t know whether people are interested in you for you OR your success/fame/money/influence or other selfish reasons. Either way, you’re on your own. I often feel like it’s just me against the world, and that’s a lonely place to be.
Time and time again I have looked to “friends” to help me on this journey. After all, friends are the people you know and trust… right? Often times they come to me, ambitiously volunteering their time and talents for the betterment of one of my various entrepreneurial endeavors. Every time I allowed this to happen I was pleasantly surprised by my friend’s initial interest and enthusiasm in joining my company. I felt good knowing that someone saw value in what I was doing so much so that they wanted to be involved. Sadly, every time I’ve allowed this to happen I am eventually let down: lied to or about, blackmailed, criticized, or worse.
Probably the worst mistake I have made (more than once) as an entrepreneur is assuming that friends of mine would double as good employees. It’s logical to think that a personal relationship can translate into a professional one as well. Based on my experiences, this couldn’t be farther from the truth. Even if you are best of friends with someone chances are they’ll take a mile (or two) for every inch you give them as an employee. I suppose the best analogy I could is that hiring your friends is like having a friend as a roommate; both situations never seem to end well.
In hiring or working with friends, I am 1 for 4. That is, out of the 4 “friends” I have hired or worked with over time, all but 1 turned into a negative situation in which I was made to be “the bad guy” for one reason or another. Most recently I hired an individual I knew personally only to be extremely disappointed with his performance, or lack thereof. After several missed deadlines, multiple forgotten or ignored tasks, and two unhappy customers, I decided against furthering his employment just one month after he started. Of course, he now resents me and demands that I pay him for tasks he didn’t even complete. For a small business owner, throwing away money for nothing (which is what the company gets in return) isn’t a viable option. So, I either (a) pay him for nothing or (b) refuse to pay him the amount he demands and in turn have him attack my character to everyone we know, failing of course to tell the whole story. In the end, I’m damned if I do, damned if I don’t. He’s “the victim” even though my company suffers.
Ultimately, the person at fault here is me. While he (and the others) may have made mistakes that led to their eventual termination, the only mistake that really matters is the fact I made the mistake of hiring a “friend” yet again. Regardless, it cannot be overlooked that of the people I work with, the ones that never seem to disappoint are the ones with which I didn’t have have a relationship to prior to working together. Take for example one of my partners, whom until working together we didn’t really know each other. When asked to do something, he gets it done. He works hard, meets deadlines, and generally exceeds expectations. Moreover, he gives a damn about what we’re trying to accomplish as a company and isn’t involved solely to make money.
Regardless, I always ask myself if I’m just too hard on the people I work with. While I am admittedly a perfectionist and very detail oriented, most entrepreneurs are. Is it too much to ask for accountability and timeliness from an employee? I assume not, but every time an employee is a “friend” it seems like you’re unable to ask anything of them and their role is not at all “value adding”. Instead, they ask for jobs solely for the purpose of being paid based on the assumption that because you’re their friend, poor performance or no performance at all is somehow acceptable.This include coming to work late, ignoring assigned tasks, or even mistreating customers. I guess anything is acceptable when “the boss” is your “friend”.
The moral of the story is not to “never hire friends”, but tread carefully. If you’re seriously considering offering employment to someone you know personally, always draft some sort of employment agreement and a carefully-worded job description. That way, if and when they fail to do something, you have objective reasons and proof of their errors. Also, always require some sort of a time sheet or report as to what was completed and when. If the friend-turned-employee fails to even complete a time sheet, that’s probably a sign that things won’t work out.
Truly, there’s few things worse than losing a friend, especially if you’re doomed to be the one at fault even if you just asked them to do the job they said they wanted.
“Making money takes practice, just like playing the piano takes practice. No one expects anyone to be any good at the piano unless they’ve put in lots practice. Same with making money. The more you practice the better you get. Eventually making money is as easy for you as piano is for someone who’s been playing for 10 years.”—Jason Fried, 37 Signals
Word of mouth is the best marketing tool. Get you existing customers, vendors, partners and friends to talk about you by providing excellent service and kindness. We took our business from zero to over a million in revenue without spending a single dollar on marketing. We did the best possible job we could (even though we sometime screwed up) and we always asked for referrals when we thought it was appropriate.
Focus on the “how” you do things and not just on the “what” you do. There is no substitute for getting things done. All the planning in the world won’t get you to where you need to be. Aim, fire, aim, fire. Make a list every morning and tick off the tasks you complete as you go. Begin the day by focusing on the biggest tasks so you will build momentum and feel energized for the rest of the day. Better to iterate a hundred times to get the right feature right than to add a hundred more.
“At the Silicon Valley 40 under 40 awards event, we were asked to answer what factor most contributed to our business success. Many people cited their teams, others a divine entity. My answer as a little different: “Stone cold, iron-willed determination.”—Aaron Patzer
“I pitch Mint to everyone from investors to engineers, young and old, and I do it pretty much the same way: Here’s the problem in the market place, here’s how we solve it, and here’s how we make money.”—Aaron Patzer, from BNet article
If there’s one thing to remember from this blog, it should be this point. Proper pricing is the one thing that keeps the business alive, on multiple levels. When you charge appropriate amounts for the work, the client will feel like they hired the right people or bought the right product; when you undercharge, the client will know this and take advantage of you by demanding similar rates in the future.
“It’s deeply liberating when you find focus in your business. You stop thinking about all the things you should be doing and focus on the things that matter. It’s like a big weight off your shoulders.”—Richard Banfield
Make sure to keep a solid paper trail with clients, and that means a real, physical file with hardcopies of proposals, contracts, invoices, time sheets and anything else you can think of that relates to the project. This also includes all financial records, bank statements, receipts, deposit slips, etc.
Before beginning your business, establish several important things. First, design a consistent and scalable filing system for all the forms. Whether you organize by client or project is irrelevant, but make sure you can find the information when you need it. Make sure to have airtight contracts. Get a good template, tweak it and have your lawyer read it over. You will also need to look for NDAs (non-disclosure agreements, for contracting work out to other freelancers), RFP (request for proposal) templates for clients to fill out, expense reports, invoices, and time sheets. Every project is different, so be prepared to make changes on these forms. Make sure all contracts, whether they are with clients or vendors, have all the necessary signatures. Seems like an obvious thing, but you’d be surprised. Don’t do any work without one, because legally, you will have a very hard time forcing a delinquent client to pay without one.
Getting the right investment partner is like marriage. Don’t enter into an investment agreement without careful consideration. Not all money is equal. Ask around your circle of lawyers and accountants to find out who has the best reputations. Before signing anything with an investor ask them for a list of companies they have worked for and call the CEO’s to get the other side of the story. If the investors can’t provide you with references it’s better to keep looking. Under funding a company is not wise but you’re much more likely to have a clear sense of exactly where that money is going to go than if you raised too much money.
Technical people like to build a “better mousetrap” but you need to be able to commercialize your ideas. Make sure someone on your team can productize, market and sell your mousetrap. Without a customer you have nothing but a hobby.
If you are a tech startup you need to ask what the one thing is that will become the most memorable feature. A pile of mediocre features doesn’t compare to one really good one. The best part of this approach is that you can focus your energy on key features instead of getting messed up with the usual scope creep that happens.
“You need to focus on a few things you care about. Moving fast. You need to give up some things you need to do that. I think a really big part of a CEO’s job. You hire the team that’s going to go build everything. You set up the direction. What really comes off is what trade-offs you’re going to make.”—Mark Zuckerberg
Each year, Echoing Green awards 12-15 two-year fellowships to social entrepreneurs. Fellows receive up to $90,000 in seed funding and technical support to turn their innovative ideas into sustainable social change organizations.
“One of the biggest breakthroughs an entrepreneur will have is when they understand that building a business, any business, is a team sport. You cannot do any of it on your own. The worst thing our media has tried to sell is that these rockstar individuals like Jeff Bezos and Bill Gates are some kind of one-man company building machines.”—
For years I’ve worked with entrepreneurs as they go from bright idea to start-up business. Some people agonize over whether or not to launch. Others become reluctant entrepreneurs by inheriting a business or due to the sudden need for additional income. The decision to open a business can be complex both personally and professionally and for this reason the pre-start-up issues occupy a great deal of time in my introductory workshops. Start by asking yourself some questions. First, why are you starting this business? Is this an outgrowth of another career, do you have the “better mouse trap” the world is waiting for, or are you seeking a new stream of income?
Before opening a business there’s a lot of homework to be done. You need to thoroughly research your industry and your competition. After you launch is the wrong time to find out you don’t know who your target market is. Whether or not you plan to seek outside funding, your financial house should be in order as well. Your business plan should include a realistic view of projected cash flow and you need a good understanding of the responsible use of credit.
Do a personal assessment of your skills and talents. How are you going to fill in the gaps in your skill set? Most successful entrepreneurs have team around them to provide the specialized knowledge and abilities outside their core business talent. You will have to budget for and pay for some of these experts to do things like set-up your books or file your taxes. What’s your business model? Some businesses require you maintain an office, while others can be operated totally online. Are you looking at renting a storefront or will virtual office space be smarter? Location and communication methods are dependent upon knowing your market and how and where they shop.
The self-employed are some of the happiest people around. But like any major life decision you need to think carefully before taking the path of entrepreneurship. Consider how running a business will fit into your life and how you will pay bills during the start-up phase.
“The more visionary the entrepreneur, the more difficult it is to really pivot, really seek out what’s in customers’ heads, and really create a minimum viable product. And so startups – great and terrible alike - are prone to give these ideas lip service, but fail to really take maximum advantage. That’s why a process of rigorous root cause analysis is so critical. After every major milestone, the company has to ask: what did we learn? Why didn’t we learn more? And, most importantly, make incremental investments to do better next time. This is the ultimate startup discipline, the hardest to master, and the one that pays biggest dividends. If you can embrace continuous improvement from day one, you can actually speed up as you scale. It’s an awesome thing to watch.”
Failure rates for businesses are very high. I don’t know the exact number but I’ve heard 80% of new businesses will fail in their first year. Most people think it’s because the original idea was bad or the company lacked enough capital but that’s a symptom not a cause. Businesses fail in their first year because their founders either run out of patience or don’t adapt to the world around them.
The real secret to success is not a great idea or boatloads of investor money, it’s patience and hard work.
An investor of mine told me that he’ll invest in people not ideas. “Smart people can adapt and mold their ideas into great ideas but stupid people can’t let go of their ideas and it eventually kills them”, he said.
Patience is that quality that allows you to see the long road ahead and adapt accordingly. Hard work is what gets you through the ups and downs along the way. Don’t labor over your business idea if it’s not working the way you expected. Mold it and improve it to make it something worth working hard for. Don’t drink your own Kool-Aid and think your idea is the best thing since sliced bread, even when no one will pay for it.
The good news is that everyone can work hard. Hard work levels the playing field. Patience weeds out the people who won’t go the distance. That leaves lots of opportunity for those people willing to work a little harder for a little bit longer.
The best business you can create is one that helps other people be successful. Sometimes you might be a platform for other people’s businesses and sometimes you might be making a lot of money for them. Either way the rising tide lifts everyone to new heights.
Today is the final judging and presentations for the Babson Entrepreneur Forum. There are three finalists from the semi-final submissions of 26 plans. What strikes me about all the plans, with one exception, is that they are poorly written for the purpose of raising money and impressing potential investors. Here’s the bare minimum you need to include:
What’s the customer problem you are solving and how will you make money by solving that problem?
What part of this market can you realistically serve in the first few years? I do not want to see suggestions that this is a billion dollar market place and you only need to dominate 1.5% to make a fortune.
Who does what in your team and what experience do you have to suggest you can perform those roles adequately? If you need to add some other team members to make up for gaps in experience please explain that.
Why do you need outside money and how will you spend it?
How will you market and sell your idea?
How many customers or how much revenue do you have? Even one is a good start. If you don’t have any then it’s really just an idea, not a business.
If it’s a physical or software product can you show me a prototype or evidence that you idea has evolved beyond just being an idea?
Tonight I was attending a pre-event event (I know, right) for the Babson Entrepreneur Forum day being hosted tomorrow. We met some of the business plan competition entrants (disclosure, I’m a judge of the competition). One of the finalists has 6 founding partners. This is a big problem because they haven’t yet figured out their roles and responsibilities.
If you are starting a business please take the time to have the “who does what and for what compensation” conversation early on. The earlier the better. Partner problems and cap table disputes are probably one of the top three reasons startups never get off the starting blocks. Figure it out. It’s pays in the long run.