Category Archives: Business Mistakes

Why Market Numbers Are Like Patents: Good, But Not To Be Believed

December 17, 2010Business Mistakes, Business Planning, Venture CapitalChris Dixon, market numbers, patentsTim Berry

I was enjoying Chris Dixon’s Size markets using narratives, not numbers when I realized his point is a lot like a point I like to make about patents:

good to have, but not to believe in

On sizing new markets, with startups looking for investors, Chris says:

The only way to understand and predict large new markets is through narratives. Some popular current narratives include: people are spending more and more time online and somehow brand advertisers will find a way to effectively influence them; social link sharing is becoming an increasingly significant source of website traffic and somehow will be monetized; mobile devices are becoming powerful enough to replace laptops for most tasks and will unleash a flood of new applications and business models.

That makes good sense to me. He adds:

For early-stage companies, you should never rely on quantitative analysis to estimate market size. Venture-style startups are bets on broad, secular trends. Good VCs understand this. Bad VCs don’t.

I’m with Chris on this (although I like to call them stories, instead of narratives; just a matter of style). Markets are future developments that haven’t happened yet, and stories picture the developments better than data.

But even as I write that I realize that as a frequent reader of business plans, for judging and investment purpose, I also like the numbers. I want to see how many buyers now, or how many people who meet those criteria, how much money now, a certain amount of numbers to give me a sense of size.

Which takes me back to the patents reference: I realize the best is having them but not believing them. I want entrepreneurs to realize their numbers are more background than data. Show me what it could be, but don’t think it proves anything. And with patents, well, here’s what I wrote about that last March, in 10 requests from your business plan reader:

Show me your patents if you have them but if you do, show me something about how defensible they are (if at all) and make sure your projections include legal expenses to defend them.

Does that make sense? Is there a parallel there? Both are good to have, but not to believe in? I wonder how much of business planning, entrepreneurship, and startups fit into that same basic category.

(image: Sergej Khakimullin/Shutterstock)

Business Words Losing Meaning

December 9, 2010Business Mistakes, Marketing, Writingawesome, cliches, Howard Cosell, user-friendlyTim Berry

Sometimes words and phrases lose their meaning. They get so diluted by overuse that they end up meaning nothing at all. And that’s important to track when we use them in business.

I first noticed that phenomenon back in the early 1980s with the phrase “user friendly,” as in “user-friendly” software. That phrase was so attractive to users and advertisers that publishers swarmed all over it. Within a matter of a year or so, “user friendly” lost all meaning. Ironically, lots of software, then and now, is actually user hostile. But we in the industry had to look for different wording. That phrase was empty. We all laughed at “user friendly.”

And isn’t this awesome? When I was a kid, “awesome” was reserved for a very few things that truly inspired awe, like Yosemite Valley, the Grand Canyon, and the powers of God (or gods). Hurricanes and earthquakes were awesome. Awe was the active word. You could look it up.

I wonder how much we were all influenced by one particular sportscaster (Howard Cosell) who liked to call a really good play awesome. We had awesome tackles and awesome catches. Whether it was that in particular, or just evolution, awesome now means “good.” Or even “nice.” We have awesome sandwiches, awesome suggestions, and awesome t-shirts.

Think about some of the business phrases we use all the time. How quickly we lose meaning. Nobody thinks inside the box anymore. There are no worst practices, not even intermediate or common practices, just best practices. And good luck with the basic math of giving 110% to anything you do. Even when the hold time is half an hour, the menu is nine levels deep, and the answers scarcer than user hostile software, we are still told, as we’re waiting, that customer satisfaction is that organization’s priority. It’s hard to image what customer service would look like if it weren’t a priority.

Take a look at your business messages. Are you using meaningless phrases?

Wishing You’d Had The Perfect Response?

December 7, 2010Advice, Business Mistakes, Personal Productivityoffice politics, second thoughts, workplaceTim Berry

… you can often go back later and change what you said.

Do you know what I refer to? Some exchange in the workplace, it all happens very quickly, and later you find yourself wishing you’d said something else, or something different? You don’t like your answer, but the moment has passed.

If you don’t have any idea what I’m talking about, then you’re very lucky. You have great instinct. Enjoy it.

If you do, then consider this advice: a lot of times you can go back later and reopen that conversation. You can revise what you said. You do get a second chance. No, not always; and you can’t unsay anything anymore than you can unring a bell.

I don’t know why it is, but I’m sure a lot of us think conversations, once had, are locked up and closed. Not always. Try it some time. Go back later and revisit that same issue, but with a changed mind. Try this:

“You know, I’ve been thinking about what we said the other day, about _____, and I think we missed something.”

Or maybe it’s as simple as saying “I think I got it wrong” or “I think we both missed something.”

We live in a very fast world. It’s hard to get everything right the first time through. Some people are better at the initial go-around, and some people take more time to digest.

So do yourself a favor. If you with you’d handled it differently, don’t give it up entirely. Reopen it and add some more conversation to it.

True Story: Winning a Lawsuit Was a Hollow Victory

December 1, 2010Advice, Business Mistakes, Business Storiesfalse advertising, lawsuit, pyrrhic victory, temporary injunctionTim Berry

In all my life I’ve only sued somebody once. It was a business lawsuit by my company and we won big. But it probably wasn’t worth the time, money, or effort.

A competitor had released a retail package that made claims so patently false that when we sued in federal court we won the case in a single day. We got an immediate injunction against them, which, I’m told, is as good as it gets for false advertising. They were told to stop selling those boxes immediately, and forever.

Sounds great, right? A good argument for suing somebody? But no. The rest of the story is that it costs us just under $75,000 in legal costs, and our adversary weaseled out of compliance with a collection of excuses and delays, and there was no authority to actually enforce the injunction well. We would have had to file another lawsuit.

And the fact that they were blatantly imitating our packaging, changing colors to match ours, stealing tag lines, confusing people on purpose? Even the judge noted, in the opinion, their intention to copy. Our own sales reps complained at first that we had released a new version without telling them. But that’s not illegal.

If we could go back in time, would we do it again? I say yes, begrudgingly. The false claims were really messing with our market. Did we really win anything worth winning? I doubt it. Does this conclusion make sense? No. There’s no way to tell what might have happened had we not objected, so whether it was worth it or not is impossible to really tell.

Live and learn. And maybe you can learn from my stories without having to duplicate my mistakes.

Harness the Power of Procrastination

November 23, 2010Business Mistakes, Personal Productivitydecision sciences, procrastinationTim Berry

(Suggested background music: the Rolling Stones, Time is on My Side)

With all the hoopla we make about decision making and how much we frown on waiting, sometimes putting a decision off is the best thing you can do.

I got this in a decision sciences class at business school. While not everything in decision sciences is to be taken as gospel, try this one on:

Never make a decision now when there is no penalty for waiting.

Shocking as that might seem, it’s good practice. Think about it: Often there is a penalty for waiting. Flights get booked, projects fall behind schedule, windows close. But when there isn’t a penalty — and you know, if you think about it, when there is and when there isn’t — then wait and see. You’ll be glad you waited.

This is especially important when you know there is more information coming. Wait, breathe, keep your options open, and see what happens. We agreed, by definition, that we’re talking about the decisions that don’t carry a penalty for waiting. So wait.

Here’s a corollary:

Never make a decision now when there is no penalty for waiting, and there is more information coming.

Good decision making doesn’t mean jumping in fast and all decided, even if you could wait, and even if there’s more information coming. And yet, if you watch for it, you’ll often see people jumping early.

When time is on your side, wait.

Top 10 Business Planning Mistakes #5: Doing It All

October 28, 2010Business Mistakes, Business Planning, Weblogsbusiness plan, business planning, displacement, strategy is focus, top 10 business planning mistakes, top 10 listTim Berry

(Note: this is the sixth of a 10-part series listing my revised top 10 business planning mistakes. The list goes from 10, the least important, to 1, the most important.)

Let me start this with one of my favorite quotes:

“I don’t know the secret to success; but the secret to failure is trying to please everybody.” Amen to that. In fact, you can package that up and call it small business strategy 101.

And I’ve written about the displacement principle in small business:

In a business, everything you do rules out something else that you can’t do.

And this fits very well with what I call strategy:

Strategy is focus. It’s as much what you aren’t doing as it is what you’re doing.

One of the most common worries I get as I sit as a judge in business plan contests, or more recently in a group of angel investors as a member, is the problem of too many moving parts. That comes back to you can’t do everything.

Trying to do everything usually leads to doing nothing very well.

(Image: istockphoto.com)

Top 10 Business Planning Mistakes #6: Hiding Behind Market Numbers

October 27, 2010Business Mistakes, Business Planningbusiness plan mistakes, hockey stick projections, top 10 business planning mistakes, top 10 listTim Berry

(Note: this is the fifth of a 10-part series listing my revised top 10 business planning mistakes. The list goes from 10, the least important, to 1, the most important.)

Planning is a lot more than just market numbers; its about what’s supposed to happen. The market numbers are nice when you have them, sure. But they’re about why, and planning is about what.

Showing there’s a billion dollar market isn’t enough. Showing hockey stick projections isn’t enough. Tops-down doesn’t usually cut it. Build it from the ground up.

I’m not advocating ignorance. Yes, your planning should deal with your real market, customer demographics, customer stories, customer needs and wants, and why people buy. Target marketing is critical. You have to know that market extremely well. I love it when a plan is built on real stories of real buyers, how they found a business, what they wanted, and why they wanted it.

But numbers aren’t the opposite of ignorance. Big market numbers are easy to hide in. Producing a huge market doesn’t mean you’ll be able to sell into it. In summary, my post here last week: Don’t aim for a tiny piece of a huge market. Create your own new market. Divide and conquer.

Beware of fake, contrived, unbelievable numbers. Sure, investors and analysts and professors want to see projected growth shoot up like a hockey stick. But not if it’s not believable.

So what makes market numbers believable? Market knowledge. Segmentation. Understanding the market need. Understanding the competition. And, by far the best validation, actual sales. People spending money.

When I read a business plan I look for the bottom-up projections that start with something very real, and build up from there to a larger potential. Don’t hide in big numbers.

(Image: Nicolas McComber/shutterstock)

Top 10 Business Planning Mistakes #7: Buying Instead of Building

October 25, 2010Business Mistakes, Business Planningbusiness plan, business planning, business planning mistakes, top 10 business planning mistakes, top 10 listTim Berry

(Note: this is the fourth of a 10-part series listing my revised top 10 business planning mistakes. The list goes from 10, the least important, to 1, the most important.) It drives me crazy: I see all those ads for prepackaged business plans, with preposterous claims like “investor-proven” and “guaranteed success” and “just fill in the blanks.” And then there’s that big myth that you can farm out a business plan as if it were soybeans or potatoes, delivered when done. don’t buy a business plan. Build your own. Every business is unique. Your goals, how you define success, your resources, your strategy, your team, your target market, and your business offering are always unique. There’s a post on this blog called Sample Business Plans Suck, a rant about people thinking a sample business plan is anything but just an example to generate ideas and show them what a finished plan looks like. There’s another post on this blog called My Worst-Ever Consulting Engagement, a true story of how three entrepreneurs thought having a business plan was a problem solved, whether they knew what it said or not. So, if you wanted to take a trip, would you hire somebody to plan it for you? Would you buy the trip plan? If you wanted to take up golf or tennis, would you hire somebody to take lessons for you? If you wanted to get in shape, would you buy some diet and exercise?

(Image: Snail Pace/Flickr cc)

Give Me Planning over Inspirational Speeches Any Day

October 13, 2010Back to Fundamentals, Business Mistakes, Business Planning, EntrepreneurshipTim Berry

You’ve probably heard and read the “you can do it” speech, directed at starting your own business and entrepreneurship, often. A lot of people, usually people who have actually done it, give that speech. They tell stories of overcoming obstacles to build a business. They cue the stirring music. You can do it. All you need is (more stirring music) to believe in yourself. Keep trying. Never give up.

Not necessarily.

Running repeatedly into a brick wall, or digging yourself deeper into a hole,can be bad for your business, your dreams, and your life.

That’s why people need to plan first. They need to take a good long look at realistic sales potential, realistic costs, expenses, and cash flow. It’s not just some document, it’s a matter of breaking down the uncertainty, understanding what it’s going to take, and making real decisions based on decent best guesses. No, you’ll never really know, but yes, you can break what you don’t know down into more meaningful pieces.

You’ve probably heard of the 3, 4, or 5 Ps of marketing, right? How about the more important P equation of starting a business: planning is worth more than patience, persistence, and perseverance put together.

Inspirational speeches are usually delivered by people who made it across the chasm. They mean well, but are they taking responsibility for the people who will never make it, when they encourage them to jump?

I don’t believe that every business idea is an opportunity. I don’t believe that patience, persistence, perseverance and such is enough. Maybe you shouldn’t spend your life’s savings on that business you dream of. Maybe you’ll just lose your life’s savings.

Be realistic. Be skeptical. Watch for fatal flaws. Test your assumptions. Be careful.