Category Archives: Entrepreneurship

What? Founders with Kids?

Entrepreneurship, Starting a Business

The question surprised me: “Is it a red flag for a founder to have a child while a startup is still in an early age?” It’s an odd view on startup founders with children. Enough to prompt me with this blog post. I could summarize my answer with simply, “absolutely not.”

But here’s my more complete answer:

No, of course not. It is in no way a red flag for a founder to have a child while a startup is in the early stage.

This question assumes several common myths about entrepreneurship. None of these is true:

  1. That entrepreneurs are more likely to be 18–25 than 25–50 (not true).
  2. That entrepreneurs are supposed to ignore everything else in life in single-minded obsession on the business (not true).
  3. That having a life is bad for business (not true).

Here’s a general reminder: building a business is supposed to make your life better, not worse. It’s business serves life, not life serves business.

True, many, maybe most, entrepreneurs work like hell for a while, especially at the beginning, seem obsessed, and sacrifice some other elements of life, temporarily. There’s no denying that. But most of those who do (I did) realize later on that having a life actually enhances your business, rather than detracts from it. People are more productive in 8-hour days than 14-hour days. People are more productive when they have the rest of their life, and their people, to provide balance. IMO.

The original came on Quora.com, the question-and-answer site. Here’s the link to that: Is it a red flag for a founder to have a child while a startup is still in an early stage?

Image by Neil Dodhia from Pixabay

Horror Story of Small Business Fraud

Business Mistakes, Business Stories, True Stories

If you’re a business owner, and especially if you’re in the expert business, you should know this small business fraud story. It involves a very sophisticated scheme, including a fraudulent cashier’s check, and a very well faked charity, that would have fooled me.

This could happen to me or to you

Click on the image for the podcast

Melinda Emerson, a good friend, tells the story herself in her SmallBizChat podcast from earlier this month.

That it fooled Melinda is very impressive. She is as knowledgeable and sophisticated about small business ownership as anybody I know. She is best-selling author of small business advice, and true small business expert. She’s on the web, and in social media, as Small Biz Lady.

A fake cashier’s check?

What would you do? You have a cashier’s check that arrived via Fedex overnight. You took it to your bank and the bank cashed it. So you spend a part of it, as agreed with the sender.

A cashier’s check is like cash, right? An automatic assurance? That’s Melinda thought, and what I thought too. But no.

The bank took the cashier’s check and put the money into Melinda’s account. She’s a longstanding trusted client. And then she donated part of it to a fake charity. Why not? After all, a cashier’s check is like cash, right?

A week passed. Then it turned out that the cashier’s check was fraudulent. The bank took that money back. And meanwhile, Melinda’s donation disappeared into a fake charity out of the country. The bank apologized as it docked her account the amount of the cashier’s check. But what Melinda spent as quid pro quo charity donation had already disappeared. So she was plain out of luck. And out of a lot of money too.

They are targeting experts

It’s a very sophisticated small business fraud. It involves people in three countries, a fake cashier’s check, a fake charity, and several websites and related materials, all fake. Melinda of course reported it to the FBI and is now cooperating with an investigation that includes other victims, apparently many of them are experts, like Melinda, who write books, give webinars, post on blogs.

But they could be coming after you next. Expert or not. So be aware.

The Best Place to Start Your Business …

Business Mistakes, Entrepreneurship, Starting a Business

… is where you are. Sure, there are exceptions. Maybe you’re young, and have no roots. Or maybe you just want to move to somewhere else. But, barring special cases, look around you. The best place to start you business is where you are.

In my email and on Quora I get a steady stream of questions about moving first to start a business. Today, specifically: “If LA is so expensive, why do people start a business there?”

And also today, what is the best country to start a business...?

To be fair, this may be a flaw in Quora, a question-and-answer site I frequent. They started paying people to ask questions that generate answers.

However, it’s also something that’s been coming up off and on for the four decades I’ve been involved with startups. Should I move to Silicon Valley? What are the best startup hubs? Is New York city a good place?

Myth and misunderstanding

What bugs me is that — at least in the US — the idea of the best location, or a better location, is so much myth and misunderstanding. The best place to start your business is where you already are. That’s where you have a home, roots, contacts, vendors, and a sense of local market.

And furthermore, in the US, the Internet is everywhere. Phones, couriers, libraries and airports are everywhere. While there may be more investors in California and Washington than in Idaho and South Dakota, the off-the-hub startups get investment too, when they are good investments. A few years ago I met two young entrepreneurs located in the woods about an hour from Talkeetna, Alaska. They’d go months unable to reach even Talkeetna, which is a very small town, four hours from Anchorage. The two of them were running several websites and making tens of thousands of dollars monthly.

I can think of three general exceptions:

  • Maybe you’re young, left home for college, and want to start your life somewhere else, a new home, not where you grew up. The catch here is that young people are the exception in startups. Research shows that the vast majority of successful startup founders are in their 30s or 40s.
  • Maybe you aren’t young, but you do want to move. I get that. My wife and I moved from Mexico City to Palo Alto in our 30s, and from there to Eugene OR in our 40s. There’s nothing wrong with that. But that’s not moving because your location is better for business.
  • Maybe you are in an exceptionally bad location. Generally the urban vs. rural trade-offs work reasonably well, but if you’re hours from an airport, or can’t get good broadband, then maybe your location is a disadvantage for your startup.

Otherwise, the best place to start a business is where you already are.

Think it through… have you ever moved?

Moving is a royal pain in the rear. It’s very hard to find a new place to live, home or apartment, especially from long distance. When you get there, you suddenly have to find a new bank, new restaurants, new stores, new organizations, new people. Nobody knows you. Your social structure is back to zero. Your business contacts, locally, are back to zero. It’s hard.

Starting a new business is also really hard. Doing it in an entirely new place makes it a lot harder.

The obvious conclusion

The best place to start a business is where you already are.

Where Can I Sell Business Ideas?

Business Ideas

I get it. What a nice dream … just sell business ideas, and let somebody else take the risk, find the money, and do the work.

Sounds great, right? Just sell business ideas?

Except that the work, the risk, and the money is what gives the business idea value.

So nowhere. The answer to your question about where is: nowhere. Business ideas have no value. Nobody owns them. A good idea is like a beautiful day: do something with it or shut up. Execute on the idea or let it go.

Wait, what? Why am I such a downer? Why discourage you? No, I’m encouraging you. Get to work. Take the first steps. Get started. Give that idea value by doing the work to create something with it.

Start with a simple lean business plan. Set strategy, tactics, major milestones, metrics, and essential projections. Don’t sell business ideas, build a business.

You have to do the work

At the same time, start recruiting a team. Find people you trust with the skills you need. Get people who are different from you, not the same.

And don’t talk about the idea indiscriminately. Tell only people you need on the team, whom you trust. No bragging, no sharing, because the only way you protect your idea, for now, is to shut up. Ultimately, you protect your idea by building a business on top of it. And people will copy it if it’s successful. So get going, and stay ahead of them.

Please browse through the business ideas topic here on this blog. And search this site for business ideas.

7 Very Common False Assumptions in Entrepreneurship

Entrepreneurship, Work Life Balance

These are very common false assumptions in entrepreneurship.

“What gets us into trouble is not what we don’t know. It’s what we know for sure that just ain’t so.”

— Mark Twain

I answered a Quora question about this. Here’s my list of seven:

  1. That being profitable means having cash in the bank. Seems obvious, but spending on inventory, waiting on accounts receivable, buying assets and some other spending suck up cash while not having anything to do with profits. Profits ≠ cash. For more on this, The Difference Between Cash and Profits.
  2. That the lowest price option usually wins. That’s just not often true. Price is the strongest marketing message there is, and high-value high-price options are often the best strategy for a startup. Having the lowest price doesn’t necessarily generate volume (think of discount sushi, for example) and usually takes a lot of capital.
  3. That if you build it they will come. Actually, no. Not if they don’t know about it. Some really good products and services failed for lack of getting the word out. Meaning: marketing.
  4. That the highest quality product will win. Yeah, I wish this were true. But there’s marketing, sales, distribution, and all the rest of the business. In my four decades in business I’ve seen many better products lose out to better marketing.
  5. That the first to market wins. Nope. Rarely. Apple, Google, Facebook weren’t first. The winner is a combination of work, luck, strategy, resources, positioning, capital, and other factors.
  6. That you can’t do it if somebody else is already doing it. Actually, you can. See my point #5 above. Just do it differently, or better, or in a different market, or with a different strategy. Businesses are always copying other businesses.
  7. That more hours wins. People who work 80 hours a week rarely get more than a few percentage points of additional production over those who work 40 hours a week. Work smarter, not harder. To generate productivity in a group, acknowledge that people have lives, families, and need for downtime, regular exercise, etc.

Note: this was originally my answer on Quora.

Startup Founder Compatibility is Vital

Entrepreneurship, Starting a Business

Please don’t ever estimate the importance of startup founder compatibility. It’s vital. And it may not be what you think.

The relationship among founders of a healthy business is like a marriage. Compatible goals, thinking, values, and decision-making styles is really important. Even if a well-run and successful business, there will be a lot of times when disagreements come up and compromise is necessary.

To start at the beginning with people who don’t agree on the very fundamentals of the business is a bad idea. It’s a recipe for a painful failure.

On the other hand, don’t confuse compatibility with sameness. It takes a mix of different skills and backgrounds to build a business right. Somebody has to mind the money and administration, and somebody has to create the product, somebody has to build it (or deliver the service), somebody has to get the work out, and somebody has to close the sales. You want complementary skill sets and backgrounds and expertise, not everybody all alike. And that, by the way, does support diversity. In genders, backgrounds, ethnicity, and other factors.

You Have to Know When to Quit

Advice, Entrepreneurship, Starting a Business, Work Life Balance

I recommend you read Nat Eliason‘s piece No More Struggle Porn. He’s attacking one of the more pervasive startup myths around, the idea that the struggle itself, the overwhelming and overpowering struggle that pushes everything else out of your life, is a good thing. He defines struggle porn as:

I call this “struggle porn”: a masochistic obsession with pushing yourself harder, listening to people tell you to work harder, and broadcasting how hard you’re working.

And his take on it, in a nutshell, is this:

Working hard is great, but struggle porn has a dangerous side effect: not quitting. When you believe the normal state of affairs is to feel like you’re struggling to make progress, you’ll be less likely to quit something that isn’t going anywhere.

The Myth of Persistence

I agree with him. Emphatically. I’ve posted here before on The Myth of Persistence:

Why: persistence is only relevant if the rest of it is right. There’s no virtue to persistence when it means running your head into walls forever. Before you worry about persistence, that startup has to have some real value to offer, something that people want to buy, something they want or need. And it has to get the offer to enough people. It has to survive competition. It has to know when to stick to consistency, and when to pivot.

So persistence is simply what’s left over when all the other reasons for failure have been ruled out.

Knowing When to Quit

And, with that in mind, I like Seth Godin’s take on quitting, which is the main point from his book The Dip (quoting here from Wikipedia🙂

Godin introduces the book with a quote from Vince Lombardi: “Quitters never win and winners never quit.” He follows this with “Bad advice. Winners quit all the time. They just quit the right stuff at the right time.“

Godin first makes the assertion that “being the best in the world is seriously underrated,” although he defines the term ‘best’ as “best for them based on what they believe and what they know,” and ‘world’ as “the world they have access to.” He supports this by illustrating that vanilla ice cream is almost four times as popular as the next-most popular ice cream, further stating that this is seen in Zipf’s Law. Godin’s central thesis is that in order to be the best in the world, one must quit the wrong stuff and stick with the right stuff. In illustrating this, Godin introduces several curves: ‘the dip,’ ‘the cul-de-sac,’ and ‘the cliff.’ Godin gives examples of the dip, ways to recognize when an apparent dip is really a cul-de-sac, and presents strategies of when to quit, amongst other things.

Don’t let the struggle porn startup myths get you down. I’ve been through startups. I’ve been vendor and consultant to startups for four decades, and I started my own and built it past $9 million annual sales, profitability, and cash flow positive, without outside investors. And I’ve never believed that anybody is supposed to give up life, family, relationships, and the future to build that startup with 100-hour weeks and forget-everything-else obsession. Here’s what I say:

Don’t give up your life to make your business better. Build your business to make your life better.

Pervasive Startup Myth: Don’t Work for Free

Entrepreneurship, Starting a Business

Startup myth: The one about founders having to work for free to impress angel investors. This supposedly shows passion. Don’t believe it. Investors want people committed to working their startups, and that usually takes getting them paid. I’ve been getting a lot of upvotes on my answer to this question in Quora:

How do entrepreneurs live without a salary to sustain their families and pay bills?

My Answer

That startup founders are supposed to work for free, and that investors want them to work for free, even as there is capital to work with. That’s just a myth. IMO.

As an entrepreneur, I built a business and supported my family at the same time by continuing to consult in the same field I was developing software for. That’s not unusual. I did not have the luxury of not making an income. When I started Palo Alto Software, we already had four kids and a mortgage. Not making money was not an option.

So that was a lot of work. It was hard. But it’s what really happens most of the time … entrepreneurs do a lot of work on the side, in between, to build their business without the luxury of working full time for free.

As an angel investor, I expect founders to work without formal compensation only during the very earliest phases, because they have to. I expect that to be temporary. And when I invest in them, I want there to be enough money to pay them. I don’t believe startup founders working for free is a sustainable idea as they grow a business. People have lives. They need money.

I don’t like it when founders promise to work for free over any extended period. It doesn’t work. They burn out. They need jobs and income so they quit.

(Click here for the original on Quora.com)

Business Success: Talent, Skill, or What?

Business Strategy, Entrepreneurship, Growing a Business, Leadership

I received this question: Is succeeding as an entrepreneur a matter of luck or do only the talented ones make it?

And this is my answer:

Luck isn’t enough, and talent isn’t enough either. You can have either one, or even both, and still fail. What you’re missing, with your question, is the work. Business success takes work. You can succeed without luck, and also without talent; but not without work.

Interested in other answers to this question? They are on Quora, my favorite question-and-answer site.

10 Business Plan Myths That Hurt Your Business

Business Mistakes, business plan,

The need for good business planning is as strong as ever, and the potential benefits are as important as ever. Every business owner ought to have a business plan. But the best strategies for business planning are different than they used to be. And these 10 pervasive business plan myths get in the way, much too often.

This post includes the 8 business plan myths that I listed on my March 2 post on the SBA Industry Word blog, plus two others that weren’t included.

Why does it matter? Because business planning, done right, is a management tool that can help you steer your business.

1. A business plan has to be long (false)

Not necessarily so. A business plan can take whatever form is most useful, even if that’s just a few lists and tables.

2. A business plan is hard to make (false)

It doesn’t have to be. List your key strategy points and key tactics, and a few important major milestones (like deadlines, tasks, the new launch or new website, and necessary hires). Include projected sales, costs, expenses, and cash flow. Voila! You have a business plan.

3. Nobody creates business plans anymore (false)

Well-run businesses use business planning the right way. They keep a simple, lean plan up-to-date and refreshed. The review and revise it monthly. In straw polls I’ve taken for years at management workshops, the best 20% or 30% of the companies represented have a management process that includes a lean business plan as well as regular reviews and revisions.

Smart startups use basic business planning to help them see starting costs, projected early sales and spending, cash flow, and key strategy points and milestones before they launch. Then, they review these monthly.

4. Business plans are for only startups (false)

True, well-run startups generally use business planning to help figure out which steps they need to take, and which resources they need. But that doesn’t mean mature businesses can’t use business planning to constantly set milestones, strategy reminders, and forecasts. Mature businesses keep a business plan up-to-date, and review and refresh it often. The more a business grows, the more it can benefit from good business planning.

5. You can’t plan because change comes too fast (false)

In the real world, a good business plan manages change. It isn’t voided by change. You keep the plan current by making revisions as real events unfold.

It’s like dribbling in basketball: if you plan to go a certain direction, and the other team blocks you, then you go a different way. Having a plan means that you’ll have the information you need to make quicker, easier, and more natural revisions.

6. Forecasts are useless (false)

Forecasts are almost never accurate. But having a forecast gives you a tool to instantly compare what you expected to what actually happened (we call that plan vs. actual analysis, or variance analysis). Then you make business decisions to adopt to change.

Are sales better than expected? Then you look at the causes, and adjust marketing and other expenses to take advantage. Not what you expected? Use your plan vs. actual analysis to make the best changes.

7.   Having a plan means you have to follow it (false)

There is no virtue whatsoever in just sticking to a plan because you have a plan. It has to make business sense. Good business planning is about a bare-bones plan and tracking with review and revision to make it useful.

When things change, your plan changes. The benefit is in the tracking and information that serves like a dashboard, helping you manage the change and make adjustments.

8. All business plans need market research (false)

I read and review lots of business plans from mature businesses that don’t include fancy market research. Business owners have to know their market, and taking a step back to review your market is a good idea. But with good planning process in a business, you can stay on top of your market. You don’t need to include market research in every version of your business plan.

Only in special cases will you need market research to prove your market to outsiders. For example, startups looking for investment, or businesses applying for loans, might need market research. Mature businesses know their market and plan without the research requirement.

9. Investors don’t read business plans (only half true)

I was in an angel investment group for eight years. We didn’t read business plans for all the proposals that came in. We rejected many on the basis of summaries alone. For those that interested us, we invited them to present their pitch decks. From there, we narrowed the list down further.

For those that remained, the business plan was a vital part of due diligence. And for all of them, they should have had their bare-bones business plans made before they wrote their summaries and pitch decks. Without the business plan, the pitch and the summary are like movies made without scripts. Ultimately, seeking investors without a plan doesn’t work.

10. Nobody needs a business plan

Does every business need a plan, strictly speaking? No. But every business would benefit from good business planning.

People, even experts, still say nobody needs a business plan, but only because they are locked into the decades-old mentality of the big business plan document. If we redefine the business plan the way it should be, as a flexible record of key strategy points, tactics, milestones, and essential numbers, then all those experts would agree with me – that every business deserves a business plan.