Trust Your Instincts

By | Feasibility | No Comments

Mark Pincus, serial entrepreneur and founder of Zynga, said “an entrepreneur’s instincts are right 95% of the time.” When you first start your company, it usually starts with an instinct. You can feel in your gut that there’s a big problem that needs to be addressed. Then you have an idea as to how to solve that problem, and this is where you need to be careful. According to Mark, you’re instinct is right 95% of the time and you should trust that feeling. But the initial idea you have to solve that problem is usually WRONG. According to Mark, your initial idea is only right 25% of the time. This means that while you can trust your entrepreneurial instinct, you have to be flexible on how you try to solve that problem. In fact, when first starting your company you should EXPECT to change your idea multiple times. Listen to your customers and be open to how you solve the problem so you can build products and services that really solve the problem for customers.

 

Think Backwards

By | Investors | No Comments

When thinking about how much money you should raise from investors, think backwards. First, figure out which milestones you want to hit. These should be meaningful BHAGs – Big Hairy Audacious Goals. Usually, these milestones are achievable in an 18-24 months timeframe.  Then, you have to build a plan in reverse that is designed specifically to achieve the milestones you created in the future. In this way, you are actually building your plan backwards, starting with the milestones in the future and working in reverse to the present. Building out a detailed financial model of what will be required to achieve those milestones gives you the total amount of funding you’ll need. And be sure to add a small buffer for unknowns along the journey.

Play to WIN

By | Building the Business | No Comments

You can’t play not to lose. You have to play to win.  When you play not to lose, you won’t have a winning mindset and strategic approach. You hedge your bets, and don’t go all in on a strategy or business model. If you want to build a world-class company and dominate the industry, you absolutely have to have a winners attitude. For example, you are hedging when you refuse to pick just one customer segment and instead try to serve all customers in a market. If you try to serve both large and small customers, you’ll split your forces and divide your focus. By not focusing on one segment, you are destined to be mediocre at best. Your sales teams, product managers, and customer service will all be split between many different types of customers with different requirements.  If instead you play to WIN a certain type of customer, it’s possible to WOW that customer beyond all expectations and dominate that segment. After WINNING the first segment, you can proceed to other market segments.  This is just one way you have to play to WIN.  This WINNING mindset should cascade throughout the entire organization and impact every aspect of the business.  The stakes are big, so play to WIN!!

Focus on the Key Points of Leverage

By | Building the Business, Technology Startups | No Comments

“Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.” –Archimedes

Any company trying to achieve massive scale needs to find their “lever.”  Think about your leverage as your unfair advantage, or something that only your company can wield to its advantage. Your job is to identify the leverage, protect that leverage as much as possible (e.g., patents, trade secrets, etc.), then exploit it to achieve sustainable, explosive growth.

As a resource-constrained startup, you can’t tackle everything at once. You can’t vertically integrate 100% if your product, and even if you could it wouldn’t make sense to try. Instead, identify the key points of leverage in your business where you can get an damn-near-impossible-to-copy competitive advantage. Then, make sure you OWN that advantage. Focus ALL of your efforts and resources on achieving and maintaining that advantage. This is the essence of a sustainable competitive advantage, and if you can do this it will be very difficult (if not impossible) to compete with you.

Without some kind of leverage in your business, fending off the competition will be impossible. The moment another talented team of entrepreneurs and engineers sees the potential of your innovation, they will be quick to steal it.

There are many kinds of leverage that you can exploit in the world of startups.  Most of the time, the leverage comes from a significant technical advancement. Any technology that’s significantly better/faster/cheaper gives you leverage. By definition, a cutting edge technology-based startup will have leverage over the competition.  This technology might allow you to profitably price your products below competitors’ costs. Another way leverage can come into the picture is through your business model. Any aspect of your business model, from distribution to revenue model can reveal significant points of leverage. Tesla’s core competitive advantage comes from its highly differentiated centralized OS architecture is so counter to conventional car manufacturing that it would be impossible for incumbents copy.

10 Things You Should Never Do Before Starting

By | What to Know Before You Go | No Comments

Whatever you do,

  1. Don’t write a business plan – this comes later
  2. Don’t try to get a loan – you won’t qualify anyway
  3. Don’t start building immediately – get feedback first
  4. Don’t rent an office – work from home
  5. Don’t advertise – what would you advertise, anyway?
  6. Don’t buy fancy equipment – rent or borrow, save your cash
  7. Don’t quit your job – there’s a lot of setup you can do first
  8. Don’t incorporate – worry about this distraction later
  9. Don’t look for a partner – explore the idea first
  10. Don’t hire for employees – start building it yourself

These are fatal mistakes that can doom your startup from the beginning.  They are either major distractions that pull your focus away from what matters, or they’re a waste of your precious startup capital.  Put first things first, and avoid these ten temptations.

Congratulations, It’s a Boy!

By | What to Know Before You Go | No Comments

Founding a company is like having a baby. It takes just as much time, energy, and attention. Like raising a child, your startup is a direct reflection of you, and it’s up to you to make sure that it has the right values and mission. You have to protect it when it’s young, and help it grow up to be strong and independent. You pour your heart and soul into it, and will do anything to make it succeed. It sucks your bank accounts dry and you gladly pay.

If you have a business partner, it’s like having a spouse. In fact, in the early years you will likely spend more waking hours with your partner than your spouse.

Like parenthood, owning a business is also one of the most rewarding things you can do.  To watch your business grow into a powerhouse is amazing and inspiring.  To see that you created something where before there was nothing, to know that you made your own little dent in the universe, creates an unparalleled feeling of pride and satisfaction.

Before you get started, recognize that starting a company is a serious commitment.  If you are going to succeed, it will take the same dedication and lifestyle rearrangement as parenthood.  Are you sure you’re ready to bring a baby into this world?

A Family Affair

By | What to Know Before You Go | No Comments

You already know that starting a business is an all-consuming pursuit.  What you may not realize is that it will consume your family as well.  Starting a business is truly a family affair. To one degree or another, everyone will have to step up and make sacrifices.  Your income will decrease significantly for the foreseeable future, which means you won’t be able to afford many luxuries.  Instead of leisure time, your family will probably end up putting in time on your business. You will be working for most of your kids’ childhoods.

Startups have broken up many happy homes, so set expectations from the beginning. Make sure your significant other is 100% on board, and ready to make the necessary sacrifices.  Starting a business usually does one of two things: it brings you closer together or drives you apart. Make sure your relationship can withstand the stresses of a startup.  Address any hesitation or trepidation up front, with an open and honest discussion. Your family’s unwavering support will be critical to overcome the challenges you’ll inevitably.

Welcome to the NFL

By | What to Know Before You Go | No Comments

This isn’t your neighborhood little league.  You’re competing against the best, and you have to be the best if you hope to win in the marketplace.  Capitalism is ruthless, so don’t expect any mercy.  Customers are flippant.  One day you’re flying high, the next you’re bottoming out.  Entrepreneurship is as competitive and cut-throat as the NFL.  You’re going to have to pour it on and give it everything you’ve got.  Just when you think you nailed it, the market will shift, a new competitor will enter, or something will go wrong.  Right when you reach the top, you’ll get knocked off.  To win, you’ll have to excel at the fundamentals, stay eternally vigilant of encroachers, and always search for new opportunities.  Then, the moment you start to get traction you can expect company.  Current competitors or other aspiring entrepreneurs will take notice of your success and copy your model.  Start your business with your eyes wide open, know what you’re getting into, and understand how truly difficult the startup path is.  If it was easy, everyone would do it.

Unadulterated BS

By | What to Know Before You Go | No Comments

People like to think that there’s a typical entrepreneur personality. Yes, entrepreneurs are all passionate, good at selling, and diligent about follow-through.  Beyond this, there’s no such thing as a “typical” entrepreneur.  Entrepreneurs come in all shapes and sizes. Every now and then you’ll see a personality profile quiz that purports to help you understand whether you’ve got what it takes to become an entrepreneur.  These profiles are pure, unadulterated BS.  The personalities of successful entrepreneurs are all over the map, from neurotic and obsessive compulsive, to kind and easy-going. Your personality does not determine whether you should start a business.  However, it does play a role in what kind of business you should start, and what kind of culture you will create.  Don’t let a personality profile tell you that you don’t have what it takes.  As long as you have the prerequisites of passion, salesmanship, and follow-through, then you have what it takes to build a business. There’s a place for everyone, so find your niche and pursue your dreams with everything you’ve got.

Plan B: Get Franchised

By | What to Know Before You Go | No Comments

If you’re dying to start a business, but don’t have much experience, a franchise might be the way to go. Franchises are great because they are turnkey.  They teach you everything you need to know to run the business, and help with everything from choosing a location to figuring out the right marketing mix.  The franchisor has already figured out a winning formula that works, and you get the benefit of this knowledge when you sign on.  Since you don’t have to reinvent the wheel, you will have fewer startup headaches, and can save a lot of time and capital.  On top of all this, the franchise headquarters wants nothing more than to see you succeed. They make money when you make money.  Plus, they have to show successes and failures to future franchisees, so their success rate is important.  Instead of being on your own, you have a highly experienced team that you can call on for help or advice.

Franchises aren’t for everyone.  Everything is already scripted, and you have to follow the franchisor’s directions down to a tee.  If you march to the beat of your own drummer, then a franchise probably isn’t for you.  But if you’re not sure where to start, or want guidance, a franchise could be a great option.