Tag Archives: Growth

Gifts Aren’t Us

You know how difficult it can be to come up with an idea for a present when you’re down to the wire? If not, you may not appreciate the business concept of the cover story of Entrepreneur Country this month–unless you know someone who suffers from the malady. Like a guy. Or a lot of guys. Many guys opt for the classic gift card solution when faced with such a dilemma. With Man Buys Present, however, one can come off looking great–even when the only good idea was to outsource what is usually a painful, unimpressive task.

Rachael Robertson (a former HR exec with Hewlett Packard in the UK) and Kate Rider (a very successful property developer) met at school and soon launched their idea. One (Rachael) is an ideas person, the other strong on management and implementation. Key observations influenced their decision to go into business:

  • a good reputation is hard to earn and easy to lose
  • having a really smart husband who gave gifts that showed no sensitivity or understanding
  • a solutions mentality is very different than trying to be thoughtful

With these factors in mind, they developed a web-based business with mass customization features. In addition to a sourcing strategy that aimed to procure products from exclusive suppliers, the duo had a website built with nifty “bells & whistles”:

  1. A “Get Out of Jail” concept to buy restitution gifts on short notice,
  2. The “Buy One, Get One Free” option to buy something cute or funny to complement a serious gift,
  3. Assistance for dads buying gifts for their spouse to be given by their children,
  4. Facebook downloads of birth dates,
  5. Gift suggestions, and
  6. Tracking of prior gift purchases.

Kate seems to really like the entrepreneurial pursuit, noting that big business has taken it on the chin in the UK and around the world. Rachael says that the stress  she feels is offset by having fun. Both women enjoy the flexibility to work remotely, while simultaneously juggling child-rearing and spouse time.

When asked to comment on how they feel about the role of the education system in Britain in preparing their children (or others) to launch successful businesses, they lamented that traditional jobs are still the focus of skill development. Access to adequate capital for those who are not born into money is cited as a big challenge. Kate recommends that students in all subject areas learn finance (distinct from “math”) as a critical life skill. Further, she offers that all fields of study would benefit from seeing their talent or skill through the lens of running a business for oneself. Learning how to explain a business concept and position both the business and yourself as credible are great life skills.

Learning how to not let perfection control your life is an acquired mindset they recommend. Receptivity to different approaches gives the leadership team the ability to grow themselves and the company well beyond what they would have thought. Finally, the ladies have each learned how to turn aspects of their personality that they don’t like into strengths in a collaborative environment.

A few thoughts, then, in reaction to this heartwarming story:

~ American education is in a similar rut to British–we need to do something about it!

~ We all observe problems that need fixing, but rarely start a business to solve the problems.

~ Offer solutions after being thoughtful!

 

Soccer, Fighter Planes, and Strategy

In most other countries around the world, soccer (“futbol”) is the national past time and a great source of the good kind of pride. It inspires its observers to sing national anthems, set differences aside, and salute efforts where one or many “put it on the line.” During the course of the weekend, I have been observing UEFA 2012, the European tournament held on the same four year schedule as the Olympic games.

One of the interesting things that occurs in the format of the tournament is the pairing of teams against one another wherein one appears–on paper–to have far superior credentials to another. In many cases, a starting lineup for one side can be stacked with players who have 100+ games (matches) on the international stage. With such vast experience, the veteran side enjoys a presumed advantage over the opposition. Often, the more veteran team enjoys an additional upper hand due to the superior ball-handling, striking, and passing skills of its players.

The scenario is analogous to young or smaller businesses trying to compete against prohibitively endorsed large, mature businesses. Yet, whether in futbol or in business settings, we see the underdog come out on top often enough that we realize competition is not decided through analysis and predictions. What, then, are some of the reasons that a presumably out-manned competitor emerges victorious?

If I may bring in yet another comparison without losing the train of thought, I’d like to reference the story of the Tuskegee Airmen, revived through the recent Red Tails movie produced by George Lucas. In the movie, the African-American pilots are disdained by both their own armed forces as well as the haughty Luftwaffe (German Air Force). The heroes are initially perceived as being less intelligent, having slower reflexes, and lacking the experience to get the job done of protecting U.S. bomber squadrons during the second World War strategic air campaigns to reach Berlin and help the Allied forces achieve victory. What the featured pilots bring to the air battles (at least in the movie version) are the following distinctives:

  1. They were not fighting for individual glory,
  2. They were not afraid to take reasonable risks,
  3. They were (for the most part) disciplined in their consistent approach.

In business, it is very important to observe how applying these distinct characteristics would benefit a company’s performance–whether going against peers or seemingly over-matched foes. In order to build the “esprit de corps” requisite to compete will require emotional intelligence. More self-awareness and significant amounts of empathy and self-regulation are traits that are uncommon in the masses, but very evident in those who are not selfish.

Risk taking and management of the risk-rewards trade-off is a nuance rather than the exact science some would have us to believe. As depicted both in the movie and in a game between Spain and Italy this weekend, there is a “right time” to go for the gusto. Italy was successful playing quick attacks over the top of the Spanish defense and the Red Tails had success in attacking peripheral targets after primary targets were taken out. Business strategies that include both a primary objective and additional (discretionary) targets are wise.

Finally, the commitment to the plan–a resolute determination to dismiss the criticism of others and stay focused–is vital. Don’t mistake this focus, however, for sticking to a bad idea too long. Strategies must be proven to be successful before being implemented far and wide and held up as the “best practice.” Once featured, the strategy should be re-evaluated based on results and feedback. While being pursued, however, there can be no dissension among the ranks.

Only Superheroes Make Tough Sales

Whether you are in the process of launching a business or have been at it a while, one of the things that is an important factor in your success is the ability to covert sales leads. The more prestigious the prospect, the more pressure we feel to say just the right thing and win the other party over. But…sometimes the meeting doesn’t go as planned and you feel the opportunity slipping away. 

Greg Digneo, the author of the blog Sales Leads in Thirty Days, recommends that, in order to become better at converting these opportunities consistently, you become a superhero. Surely you have seen the resurgence in movies about superheros of late. Why is that? Because we all want to believe that things will turn out rosy if we just had some hidden power that gave us an advantage. Just like Batman, or any other, superhero, you want to be able to save the prospect who is in distress from this situation and deliver them to the safety you can uniquely provide. How? Digneo recommends in an article that you find a superpower:

What’s Your Super Power?

I used to run a marketing agency where we helped B2B companies generate online sales leads in thirty days. Promising to get clients sales leads in thirty days is such a bold claim that it subjected me to a large helping of cynicism. That’s when I morphed from a mild-mannered marketing consultant into a superhero.

Here’s how it went down:

The prospect would be disengaged and skeptical. Then I would say: “I know you think what I’m proposing is impossible, but if I can get you sales leads by the end of this week, would you consider hiring us?” The prospect never believed we’d come through, so they usually answered “yes.” At the end of the week, when we had gotten the prospect sales leads, they were so impressed that hiring us became a no-brainer.

And you can do the exact same thing in your business!

The process to becoming a superhero, according to Digneo, requires the following 4 steps:

  1. Find the Ideal Prospect
  2. Identify the Problem
  3. Unleash Your Superpower
  4. Make the Sale

To find your ideal prospect, he recommends that you ask yourself three questions:

  1. Do you know who you want to work with?
  2. Do they need your services?
  3. Can they afford to pay you?

Only if you can answer “yes” to these three questions can you move on to the next step.

In order to identify the problem, one most overcome the objection to spend money with you. However, every prospect has a problem you can help them solve. Using consultative listening skills and asking poignant questions, you can develop a good understanding of the nature of the problem, what has been tried to resolve it, and how much a solution may be worth. 

Your “phone booth” trick is your ability to solve what confounds the prospective customer. Think up several ways you can demonstrate impact/success for your prospect. Digneo offers two examples–If you have a book keeping service, you know your prospect wants help with cash flow management. Or, your heroic deed may be that you show the prospect how they can source parts cheaper, making an immediate impact on their bottom line. Find a way to be wonderful!

Making sales becomes much easier once we have established credibility and respect. Promising, then delivering on what it takes to solve problems sets the table for sales.

Dispense With Heroics; Be Practical

Last night we tackled three themes from Contentrix founder Alice Seba’s top 40 lessons learned. As a reminder, the themes were: get others involved, focus, and execute. Tonight, in looking over numbers 21-40, we take a look at three more themes: batch processing, succession planning, and prioritization.

#21. It’s okay that a lot of people don’t understand what I do

#22. Technology is my friend, but I don’t mess around with it more than I have to or am capable of

#23. Customer service is a critical part of your business, but it’s a productivity inhibitor

#24. Other people’s blogs can be useful

#25. Nothing on the Internet is private

#26. If you don’t own the site you’re publishing too, you really don’t own that content

#27. Working in batches is great for productivity

#28. I used to think religion and business don’t mix

#29. There is no one quite like you, but you are dispensable…or at least you should be

#30. Tools and Software don’t grow your business, you do

#31. You don’t have to explore everything to diversify

#32. Listen to your audience…they can teach you a ton

#33. There is no shame in selling

#34. If you’re not confident, they’ll know

#35. Knowing the words to use is also important

#36. It’s okay to take a break when you just aren’t into it

#37. To do lists are always meant to be shortened

#38. Use your freedom to do good things

#39. Appreciate and be thankful for what you have

#40. Take care of yourself

People who are gifted at time management have been touting the virtue of “chunking your time” for years. The phrase means to set aside times when one type of activity is pursued exclusive to all others, thereby avoiding distractions and staying on course. Grouping tasks together into batches of similar issues can help build momentum.

Seba urges the entrepreneur to think of him/herself as dispensable.  “Start with the end in mind.” If we approach the process of building a business as trying to make it less and less dependent on the founder, then we are a.) empowering others to add their collective strengths to the development of the enterprise and b.) purposefully preparing for the day when others are making more of the major decisions. To arrive at the place where the business is capable of being handed over requires working on the business rather than in it.

It is so easy as a company founder to have an endless list of things that all seem important and urgent. We drive ourselves to work, work, work in headlong pursuit of milestones that indicate the business is on track and successful. With each passing day, the perfectionist inside drives towards an exhaustive, never-ending cataloging of “things to do.” here’s a secret: reduce the list to only a few things, execute at least the top two, and feel accomplishment rather than lack of fulfillment. You will be glad you did!

The combination of planning your own exit, prioritizing your work, and pursuing it in batches  should be beneficial for you. It has been for many others.

 

Watch Your Burn, Then Take Off!

When entrepreneurs start businesses, one of the last things they want to think about is running out of money. Whether the money is one’s own, that derived from friends and family, angel investors, or the bank, it has to be managed so that cash outflows are balanced by reserves and inflows. The term “Burn rate” is used commonly to describe  negative cash flow in a start-up. It indicates the speed of depletion of invested capital form shareholders. Once the cash reserves are used up, the company will either have to start making a profit, find additional funding, or close down. Venture Capitalists (VCs) are obviously very concerned about burn rates because they don’t want to see their investments wasted.

[Tom Tunguz, of Redpoint Ventures, in his blog, Ex Post Facto, writes the following:]

How does a VC think about your burn rate? First, it’s important to note that every company is different. Second, geography is an important factor. Third, pure consumer companies’ finances will differ dramatically from  e-commerce or SaaS companies. Given all those caveats, I’ve made a table of the rough figures that I expect to see in a company of various stages, immediately after financing.

When I make an investment, my aim is to fund the company to a milestone that enables the company to raise a subsequent round. Such a milestone tends to be achievable in 12 to 14 months. But a startup should raise 18 to 24 months’ capital to ensure some flexibility in case things don’t go according to plan.

A good rule of thumb in Silicon Valley is that every employee costs about $10k per month. By that estimate, a company of 20 people burns $200k for staff plus 25% for overhead, or $250k per month/$3M per year. This is on the richer side of burn rate calculations but given the rate of increase in engineering salaries recently, it may be closer to the norm.

For revenue generating companies, net burn (revenue – expenses) should be kept under $400k – $500k. A company burning more without the immediate prospect of revenue can be a concern because of how quickly these high burn rates reduce runway. Additionally, the company should aim to reach cash flow break even sometime after the Series B, before a Growth round. Again, every company is different, these guidelines are the mental model I’ve built of typical companies who have pitched us and worked with us.

Granted, Silicon Valley is more expensive than many other locales. Similarly, labor rates/salaries that drive the burn rate math are higher than in other regions. Even still, Tunguz makes a good point about the need to raise about 50% more than one expects will be required in terms of time to reach milestones. The “runway” referred to is the total amount of time before the venture crashes and burns due to lack of cash. As your company grows from solopreneur to employing 5+ people, these guidelines should come in handy to successfully manage the enterprise and its valuable cash.