What Entrepreneurs Should NOT Do

When entrepreneurs start businesses, they are susceptible to making mistakes that others have made before them, climbing an unnecessarily steep learning curve, and burning through dollars and emotional energy. Without the help of an experienced mentor and some principles of start-up management, it is no wonder that many start-ups are not in existence 5 years later. Yes–success stories abound–mainly because few want to read or write about businesses that didn’t make it!

David Bakke is a writer for Money Crashers, and was featured on Brazen Life, a Brazen Careerist site recently with the list below of mistakes an entrepreneur should seek to avoid (& can with mentoring and education): http://ow.ly/ataho

1. Starting a business in a new field

Trying to launch a business in an industry or area where you don’t have any prior experience can quickly lead to failure. Before you make the leap into starting a business, make sure you focus on your talents, passion and experience to pinpoint the right business for you. Combine your enthusiasm, experience and knowledge with a solid, organized business plan if you really want to succeed.

2. Trying to start your business on your own

Trying to go it alone will only hamper your efforts to grow and expand your business. Initially it makes sense to cut costs by working alone, but soon enough you’ll need to make intelligent, calculated decisions about working with like-minded individuals to help your business grow.

3. Not adapting to changing business conditions

Learn to adapt as you grow your business. Don’t be afraid to change your target market or scrap unsatisfactory marketing initiatives. Recognize the fluidity of your small business, focus on what positively and negatively affects your business plan, and adjust your growth model accordingly.

4. Being deathly afraid of making mistakes

You engage in a great deal of risk when you launch a small business, and most of it involves your personal finances. Learn to quickly identify errors in judgment, determine why they occurred, and make immediate adjustments so they don’t happen again.

5. Avoiding risk

Continue to take risks as your business evolves. If you encounter an idea to expand your business that feels “risky,” research the pros and cons of the concept. If the idea still seems viable after your analysis, go for it!

6. Quitting if you run out of cash

No successful entrepreneur ever let money stand in the way of achieving business goals. If you have a great business plan, a passion for the concept, and you’re willing to work hard, you can always find ways to fund your business proposition. Cut costs in your everyday life to free up capital, apply for an SBA loan, approach angel investors, or even approach friends and family after you’ve bootstrapped as much as you can.

If you can’t find funding, you don’t have to give up on the business idea altogether. Timing also plays a role in business success. It might make sense to start more slowly, and to put off aggressive expansion efforts and attempts to find additional funding until your business begins to show a steady profit.

http://www.Entredot.org is one approach to what entrepreneurs SHOULD do–come check it out!

 

Better Feedback Models

Traditionally feedback has been seen as occurring externally between a customer and a provider and internally as flowing from a manager to a direct report. Many changes in the work environment, including self-directed project teams, matrix management, flat organizational structures, and doing more with less resources, lead employees to work more closely with one another and become less dependent on management to provide them with feedback.

The Feedback Cycle graphic below illustrates that, these days, we must recognize that feedback – from project team members, peers, and direct reports – is the primary way to give and provide information and suggestions to each other to improve work output and performance. We must also be certain to listen for emotions and feelings as part of the feedback process. Whether your role is within a multinational corporation or a small start-up, the need to look around you 360 degrees and see yourself and your work product as others see it is critical to charting your own and team success.

Within the field of emotional intelligence, there’s a best practice of trying to see matters from another’s perspective. It is in this ability to “be on the outside looking in,” observing our decisions as a series of choices based on information we have processed, that we gain insight, perspective, and mutually desirable outcomes. Intentionally studying how our actions will affect others, asking for their input, and incorporating a “win-win” scenario into our decisions makes for better management of self, projects, and others.

In the start-up world, the Feedback Model can be used to test and validate “fit” with co-founders, employees, strategic vendors, investors, professional services providers, and so on. If the other party is not incorporating your input into their communication, planning, and execution, they are not a good fit. Likewise, if we are not able to receive feedback from others, we will not be successful in executing our business/departmental/project strategy.

Non Profit Your Way to Helping Others

One of the interesting things we are discovering at EntreDot is the power of a non-profit to garner collaboration. EntreDot™ is a newly formed business mentoring organization that is committed to ensuring entrepreneurial success. Our objective is to increase the chances of entrepreneurial success by creating high impact companies that are run by entrepreneurs with sustainable business management and leadership capabilities. By providing needed business assistance, we will help entrepreneurs increase revenue and job growth for their companies and communities.

Were we simply a management consulting firm, we would be perceived as being in competition with other consultants, certified public accountants, attorneys, angel funds, investment bankers, and so on… in which case, we would be left to ourselves to try and help one entrepreneur at a time. We knew that we wanted the cooperation of people from all of the categories above, plus many more, so it was a strategic business model decision to become a 501 (c) (3).

What we did not count on, however, is the strong community support. Whether it is the local government (Thank you Mayor McFarlane, Council members Bonner Gaylord and Mary Ann Baldwin for your support evident last night at the Innovate Raleigh event at REDii!), paragovernment organizations like the Cary Chamber and the Downtown Raleigh Alliance, educational groups like the NCSU School of Textiles and School of Design plus Wake Technical Community College, volunteers who serve tirelessly, or great sponsors, we have been overwhelmed at the synergy created by bringing people together who all want to see more entrepreneurs be successful.

The benefits to the entrepreneurs and to their communities are:

  • Avoiding critical errors that lead to business failure
  • Improving the business skills of local entrepreneurs
  • Having a second set of eyes on key business issues like financing, cash flow management, marketing programs, sales traction, and many more
  • Validating entrepreneurs’ their ideas and decisions
  • Helping entrepreneurs build the right management team to run their companies
  • Assisting entrepreneurs in building relationships with all their stakeholders, and potentially steering them to new customers, suppliers and financing sources
  • Retaining local entrepreneurs who will stay in their communities to create new businesses; reducing the “brain drain”
  • Increasing the number of good jobs within the rapidly growing new companies throughout NC, including in its most distressed counties
  • Increasing revenue to local communities via the expansion of local economies

Recently, I had the distinct pleasure of hearing Nobel prize winner Muhammad Yunus espouse the virtues of social business as a means to solve community issues. This is an idea whose time has come! We are excited to be helping entrepreneurs create better local economies, with the myriad of spillover effects.

What non-profit can you help create that will solve community needs through strong collaboration?

Successful Business Plans: 5 More Keys


EntreDot Executive Director Bill Warner wrote a blog post this week for the Raleigh Emerging Designers Innovation Incubator website about business plans. In it, he shares keys to success.  Yesterday’s post here dealt with 5 keys; 5 more are offered below:

“Have a compelling value proposition.”

  • Solve a truly important problem with an attractive return on investment.
  • Make sure it fits into your buyer’s priorities.

The Challenge: You must fit within your buyer’s priority list for planned purchases. The benefit of your product has to be at the forefront of your customer’s needs. The best way to express the value of your product or service is to present a return on investment (ROI) analysis. You should be providing either higher revenue or lower cost/expense, and it should take less than a year to pay the investment back. Anything else is probably a “nice to have,” and is unlikely to win in a market where buyers are only purchasing “must have” solutions.

“Have a targeted marketing plan.”

  • Know how to reach your buyer to gain awareness
  • Establish a cost effective lead generation plan

The Challenge: Select the right way to deliver your message to your potential buyer: advertising, trade articles, mail or email campaigns, telemarketing, distributors, value added remarkets, dealers or direct sales force. Many companies are over-reliant on franchises as offering a silver bullet strategy for support and getting started. They don’t sufficiently analyze what the franchiser brings to the table that you can’t do for yourself. Franchisees sometimes over-estimate the value of the support from the franchiser; in that, is it worth the franchising fee and the royalty payment? Can those costs be made up by efficiencies offered by the franchiser? Can those costs be passed on to your customer? If not, the franchisee is at a competitive disadvantage. Those with a “brand” that can bring customers in the door on “day one” and provide active business operation assistance, rather than arms length promises, are particularly worth looking into. Once you have generated qualified leads, manage them through the entire sales process.

“Create the most efficient sales channel and excellent customer support.”

  • Ensure the sales approach is affordable
  • Build satisfied customers

The Challenge: Establish a sales forecast. Hoping for sales is not planning. Sales forecasts are based on understanding the buyer in your selected market segment and on the experience of others in it. Many new companies underestimate the time it takes to build a business to the point where it is profitable. As a result, many new businesses are under-financed and have insufficient working capital to sustain themselves in the initial growth period or during seasonal downturns. Being new and small is no excuse for cutting corners in dealing with customers. Would you go into a shop in the mall with cheap looking furnishings and lighting? Don’t try to save money there. Your sales and support efforts should be guided to create a satisfied customer who is willing to be a reference to other potential customers and give you repeat business as well.

“Understand your entire financial model.”

  • Establish realistic sales, cost, capital and expense plans
  • Understand cash flow and profit dynamics

The Challenge: Establish a solid financial plan. Many new companies are unplanned or under-planned. Planning cannot deal with all the surprises in the real world, but why be surprised by things you can anticipate and deal with beforehand? Planning requires a highly detailed and kinetic vision of the future of the business that reduces that vision to the language of business, dollars and cents. A financial plan is required to raise money from banks and investors in addition to helping you set financial objectives. Many new companies try to save money by avoiding the costs of lawyers, accountants and insurance agents. One mistake can cost you many times the small cost of relying on experts. Operationally, the most important financial dynamic to understand is cash flow. Know how money comes into and goes out of your company and when the transactions occur. The penalty for not managing your financials well is running out of money and probably losing your business.

“Ensure you have a winning team.”

  • They should have the passion for success
  • Attract the best experience and know-how

The Challenge: Pick the best people for your company. Many new businesses reach too far in a single step; for example, starting a trucking business without any prior experience. Take it “step-by-step”. Often the first step is to get a job in a business similar to the one you want to start. Learn the business from the inside out. Then start your own business.  With the right experience under your belt, build your team with people that fill out the strengths that you need to run your business. Pick only the best people that can get the job done. Avoid hiring friends and family.

5 Keys to a Successful Business Plan

Bill Warner, in a blog post on the Raleigh Emerging Designers innovation incubator website this week, shares the following about successful business plans:

If you were to ask twenty experienced business people what it takes to have a successful business plan, chances are you will get many of these answers and more. Here is my view of what a successful business plan is made of.

“Most importantly, have the passion for your business.”

  • Confirm that your entire heart and soul is behind the business.
  • Insure you have family and friends supporting you.

The Challenge: Having the passion for your business means it is something you may want to do for the rest of your life. It is not a sideline until the job market improves. It is not something you can manage part-time while you are looking for a “real” job. You may not be passionate about the idea initially, but if you don’t become passionate as you do your research, beware. Sometimes, your passion will be the only thing that will keep you going.

“Define your market.”

  • Focus on large and growing opportunities.
  • Intimately understand your buyer’s wants and needs.

The Challenge: A market is a group of buyers that have common buying wants and needs. Business owners need to understand if the market is big enough to go after and whether or not it is reachable. Many small businesses fail to define their market, lack emphasis on customers and groups of customers (market segments), and how to reach buyers in those market segments. Your market definition should include market size, growth rate, market trends, market influencers, number of buyers, buyer wants and needs, competitive analysis and regulatory influences. Test your definition by meeting with other companies in your market segment and with potential buyers.

“Ensure you have a winning business model.”

  • Understand everything that affects your market segment.
  • Determine if your business will produce results.

The Challenge: A business consists of a market and a product or service; not just an operation or a product. You must define both. Export-import is not a business; rather, “importing decorative candles for sale by mail-order to wealthy collectors of oriental art” defines a business. You need to understand how your business will coexist in your selected market segment. How will your business operate within an environment of suppliers, manufacturers, distribution channels, competitors and buyers? Put the whole picture together so you know how your company fits in.

“Know how to beat your competitor(s).”

  • Understand their strengths.
  • Exploit their weaknesses.

The Challenge: New businesses need a creative concept. Sometimes they just follow the pack; thus have no competitive advantage. New businesses cannot ignore the competition. You must look for underserved niches in the marketplace. The creative concept does not have to define a totally new class of business, but rather a “twist” on an existing business may be adequate.  Know all about your competitors and clearly understand how you will beat them. With a product that is uniquely differentiated and satisfies the buyers need, you will win more than you lose.

“Create a winning product or service.”

  • Provide what the buyer wants and in the way they want it.
  • Have a plan to expand to new opportunities.

The Challenge: There are three strategies for success in dealing in a competitive environment: lowest cost (not lowest price), best product and market focus. The first two are difficult or impossible to achieve for most small businesses. The third, focus, requires management discipline and overcoming the urge to do too many other things. If you really understand your buyer and know what it takes to win against competition, your product or service will be easy to sell. Anything less will lead to failure.