Category Archives: Entrepreneurship

5 Simple Rules for Better Business Decisions

Business Mistakes, Growing a Business

Yes No MaybeThey teach decision sciences in business schools. Those of us doing business, either as entrepreneurs, business owners, or careerists, talk a lot, and think a lot, about business decisions. We all want better business decisions. I’ve taken some of those courses and heard a lot of the talk, and I’ve survived running my own business for a lot of years. Here are five tips I’ve come up with.

1. Know when time isn’t money … it’s information.

Don’t get pressured into fast decisions. Decisiveness is not just deciding fast; it’s deciding well.

Step back and think. If there is more information coming, and no penalty for waiting, then wait. More information is better. You may have little penalty for waiting, and more information available to you. For example, wait until you land the contract before you change the website. Wait for more sales to clear the pipeline before changing the messaging.

2. Live comfortably with uncertainty

No amount of data and research can completely eliminate the doubt about what’s going to happen. Don’t expect to know for sure, ever, when it’s about what will happen, as opposed to what did happen. Almost all of forecasting is using the past, or sample data, to predict the future. Get used to it.

Work for the educated guess. Make your guesses as educated as you possibly can. Yes, do the research; but don’t just believe the conclusion. Don’t just go by the proverbial seat of your pants or gut, without tempering that with information. But don’t ignore your gut either. Consider alternatives.

3. The crucial difference between wishy-washy and insightful

Smart people change their minds. Thoughtful people change their minds. What’s supposed to happen is that new information prompts new thinking, and what you had thought before might be revised by what you know now.

Never assume that what has always been true is still true. Never assume that what has never worked in the past won’t work now.

4. Use your whole brain

The whole left brain vs. right brain theme is probably a myth, according to the research that turns up with a simple web search. We all use both kinds of process, the gut (or heart, or intuition) and the rational (or logical, or mathematical). But some of us purposely try to block one or the other side as we look at decision making for business. For every go-with-the-gut” suggestion there’s somebody else saying let’s go with the data, or the research.

Use both. Respect both. Let the data temper your gut. Use the “let’s sleep on it” method sometimes. Let the decision percolate, or simmer. Write it out, think, dream, meditate, and see what your brain says.

Be  careful not to let the data or the research do the decision on its own, when it doesn’t check with your intuition. It takes people to make good decisions, incorporating both research and experience.

I’ve encountered several times the delightful phenomenon of people mapping decisions with spreadsheets, trying to make it all math and logic … and then skewing the results with intuitive inputs to the spreadsheet variables.

5. Give up on democracy

Remember the old adage that when committees choose colors, every wall ends up beige. In the early days of a startup, everybody shares decisions. As a business grows, it develops functional expertise. Good decisions aren’t made by committee. Let the marketing people decide the colors for the packaging, and the finance people decide how to fund working capital. And the owner, ultimately, has to decide strategy. Consensus is comfortable in the beginning, but doesn’t work on the long term.

Adam Osborne on Product Release Brinkmanship

Entrepreneurship, Growing a Business

Ah yes, software product release. When do you let that product go? When is it good enough? What if there are more problems? This is publishing at its best.

The joy of easy updates

I will say that what we do with software today is sheer joy compared to the stress of releasing a product in the middle 1990s. Back then we had to finish the software, test it, test it again, and then duplicate physical disks and assemble packages and send them out in pallets to the stores. Some undiscovered mistake could be a disaster. It could literally kill companies. The disks were out there, thousands of them.

Today, in contrast, we can change the masters of downloadable software whenever we want. We can post updates on the web. New versions happen as soon as we add features. We update LivePlan caref when we packaged them up and duplicated disks and sent them out to the world with the assumption that we wouldn’t discover problems soon after. Those disks had a life of their own. Nowadays we can update a web app constantly, let people download the software, change the latest version overnight.

Adequate is good enough? Maybe.

What I do want to write about is the late Adam Osborne, founder of Osborne Computers, writer, columnist, and inspiration to a generation of computer writers turned entrepreneurs.

I had the privilege of dealing with Adam Osborne a few times during the early Silicon Valley days. Two of his sayings come to mind:

  1. “Adequate is good enough,” he said, more than once. He was talking about product development and technology business. “Ship it.”
  2. He also espoused what he liked to call the Adam Osborne Trade Show Theory of Productivity, which was, in detail: “80% of the GDP is finished the night before the trade show opens.”

I have to admit, looking back, that I’m glad now that we have a different system.

Infographic: Women in Business

Current Affairs, Entrepreneurship,

Thanks to Balboa Capital for this infographic today with a summary of statistics on women-owned businesses.  This all looks like good information to me. With limits. For example, I chronically question the research on factors considered important because I think these surveys are politically motivated and set up to serve political agendas. So in this one, I don’t believe business owners are really concerned about macro economics or tax rates. They are concerned about increasing sales, hiring people or now, and cash flow. But that’s just my opinion.

I also note that according to this, women-owned businesses are financed the old fashioned way, not by high profile angel investors or venture capital. And that the playing field is not level by any means, even after 50 years of attention to gender equality. Women still have a tougher time, in general, building their businesses.

By the way, I recommend Women on Business, the website and blog, as my favorite source for women in business and writing about business. That site has no relation to this infographic.

Infographic: 46 Facts on Entrepreneurship

Entrepreneurship

I want to share this infographic today because it has a lot of good information. I like some of the surprises in some of the numbers. The credit is down at the bottom. I don’t think every detail here is true (I don’t believe startup failure statistics demystify business failure statistics) I do think the research is sound and the numbers a good reminder, in several points, of the realities of worldwide entrepreneurship.

 

(Infographic courtesy of dealsunny.com)

How to Make Money on Your Brilliant Business Idea

Angel investment, Bootstrapping, Starting a Business

So you have a brilliant business idea that will be very successful. My congratulations to you. Now read all ideas are brilliant and nobody is going to pay you for your ideas. Are you still sure? All right then, let’s continue.  And – this is important – do not even think about getting investors yet. Do a lean business plan.

1. Gather a team

Can you execute on the brilliant business idea yourself? That does happen. For example, take your browser to KiddoLogic.com. That’s a venture built by one very smart woman, on her own. She used her own money and paid the providers she needed, to get going. If you can do that yourself, without help, then I applaud you. Go for it. Forget investors; just do it. You don’t need them.

For the rest of us, your next step is to gather a team of people who have the skills and experience you need to get going. Look for people different from you who can do what you can’t and who know what you don’t.  If you don’t know anybody, or don’t know the right people, that’s a damn shame; but it’s your problem to solve. If you can’t solve it, then keep your day job. Other people have solved that problem millions of time.

If you can afford to pay them…

If you can find suitable people, then  you have to convince them to join you. If you can afford to pay for their services with your own money, then maybe you don’t have to convince them of the idea. Just pay them. This puts you in the category of the smart person on your own. Just do it. You’re special, the sole entrepreneur with a great idea and the means to execute. Skip to the next section.

However, if you can’t afford to pay people, then you need to convince them to join you as co-founders and work on this idea for free. Don’t feel bad about that; that’s what most successful entrepreneurs had to do. And if you can’t convince the right people to join you, then get a clue. Your idea was one of the many ideas that seem brilliant but won’t work. Keep your day job. Revise your plan. Focus on a subset you can do yourself. Or give up.

Get your people together and revise that early plan. Bring it up to date with what you’ve learned while gathering the team, and what your team members were able to contribute to the plan. Remember that plans are made to be reviewed and revised and kept live and up to date.

2. Execute. Get traction. Prove it.

You have a team and you have a plan. Execute on it. Follow your plan. Go as far as your team can take you towards early website, product prototype, discussions with potential buyers or distributors, so-called minimum viable product. Maybe you go on Kickstarter or one of the other sites for pre-launch selling. Get traction. Prove to yourself and future investors that you idea will work. You’ll have to know what that means in your specific case. It’s different for every business.

3. Seek investment if and only if…

Don’t go for investment unless you really need it.  Never bring in investors unless you need them to address an huge opportunity that makes sharing your business ownership with outside investors good for you and them. Read the startup sweet spot.

Furthermore, don’t go for investment if you’re not going to get it. Only a few businesses are good investments. Read this self assessment will you get angel investment, 10 things angel investors ask about your plan. And be aware that the advice in those two posts applies to the U.S. market only. The realities of angel investment are vastly different in other markets.

(Note: I have no association with Kiddologic. I saw her pitch for local angel investors and was very impressed.)

Startup Culture is as Leaders Do

Business Mistakes, Starting a Business,

The question over on Quora was How should a new startup develop and sustain a strong company culture? I decided not to answer the essential how-to, but rather to share my experience in this area, which is more like a reality check on startup culture than anything else.  The following is straight from my Quora answer.

Culture is not what you say

Culture isn’t what anybody says, it’s what the leaders do. You can write mottos and pin poster on the wall, send memos around, write mission statements and mantras, develop tag lines, and repeat seemingly meaningful phrases at meetings … but what determines the culture is what leadership values – not what it says it values, either, but what it actually values with actions, policies, decisions, priorities, rewards, praise and everything else that happens all day every day.

Leaders, as people, rarely change who they really are. They will nurture new ideas or not, listen or not, treat their people fairly or not, depending on their values, their past, and who they are. Sometimes people can change over time, but that’s rare.

Leaders frequently believe their words and ignore or fail to realize that their actions contradict their words. This is why businesses are so full of hype and spin and meaningless drivel in mission statements and the like. Have you ever seen a company that doesn’t say they believe customer service (for example) is extremely important? But how many flow that thought into actual policies and performance. Similarly, is there any business that doesn’t say it values innovation? But how many businesses actually reward people for questioning authority or trying to do things differently? These are big-company examples everybody knows, but I use them to make a point about startups.

What’s a strong culture?

And your question itself offers an implicit example in itself. You say “strong culture.” What’s that? One leader could say a strong culture is when people compete with each other constantly, spend infinite hours in the office, and value stress. The next could say strong culture is one that develops a mission to make the world a better place, treats everybody fairly, and cares about its customers. Which is strong?

What matters is who you are and what you do, not who you want to be, or what you say you believe.

 

The Natural Intersection of Entrepreneurship and Meaning

Business Ethics, Entrepreneurship, Work Life Balance

Thanks for Why should you build your business around happiness? over at typeform.com for the fascinating image featured here, about the intersection of entrepreneurship and meaning. It comes from an interview with Laurence McCahill of The Happy Startup School.

Normal people care about meaning

This matches my belief that making meaning or changing the world or having a reason why matters to people. And it matters to startups. And investors too. I can’t offer any sort of rigorous data to prove it. But my experience tells me that normal humans care about right and wrong, not doing harm, and spending their time on something that makes the world around them better. Do you agree?

The post I took this from cites research showing

“Workers with a Purpose-Orientation are the most valuable and highest potential segment of the workforce regardless of industry or role. On every measure, Purpose-Oriented Workers have better outcomes than their peers.”That means:

  • 20% longer expected tenure

  • 50% more likely to be in leadership positions

  • 47% more likely to be promoters of their employers

  • 64% higher levels of fulfillment in their work

That strikes me as completely credible. And it matches my experience. I posted along those lines on this blog with Build a Mission, among others.

Startups Make Meaning

I’ve seen this factor come up often in startup pitches to angel investors. Investors naturally give more weight to a proposed startup that does something the world needs doing. Founders are more credible, and more likable, when they grow the business from roots in entrepreneurship and meaning.

 

I see this same idea recurring in a lot of different places. One that comes to mind immediately is Guy Kawasaki’s use of “Make Meaning” as a driver of business ideas in his book The Art of The Start.

I also like to remind entrepreneurs – just as this image does – that success is not simply a matter of doing what you love and following your passion. It is also doing what other people need, want, and will pay for.

 

What? Me do a Business Plan? But I’m Not a Start-up!

Business Planning, Growing a Business

Are you a business owner? Do you have a business plan? Is your answer to that question: “Business plan? but I’m not a start-up. Why would I want a business plan?” 

My answer is that you do want business planning. You want business planning as a way to set strategic focus, priorities, effective tactics, measurement, and task assignments. Make those clear and record them so you can revisit monthly. Then track progress and performance as you do a monthly review. Add in plan vs. actual accounting to compare projected sales and spending and use that process to kep a close eye on cash flow. Anticipate problems. Accommodate rapid change. Give yourself a process to optimize your management.

Maybe you don’t want a traditional business plan

The disconnect is the problem of what is a business plan. I agree that you don’t want a business plan if you think of that as a formal traditional business plan document. The traditional static document, that you do once and then forget, is not useful to real businesses.

The shame, though, is what gets lost in the shuffle. The real business planning process is such a great tool for growing a business, but so many people dismiss it as a one-time plan used only to start a company or raise financing. That myth of the business plan for start-ups only gets in the way far too often. If you own or run a company, you probably want to grow it.  And if you want to grow a company, then you want to plan that growth. And the planning is only the beginning; you want to use the full planning process to manage growth.

The real benefits of business planning

Think for just a minute about how many different reasons there are for an existing company to plan (and manage) it’s growth. There’s the need first of all to control your company’s destiny, to set long-term vision and objectives and calculate steps to take to achieve vision. Without planning the company is reacting to events, following reality as it emerges. With planning, there’s the chance to pro actively lead the company towards its future.

For an existing company that wants to grow, planning process is essential. Everybody wants to control their own destiny.  The planning process is the best way to review and refresh the market and marketing, to prioritize and channel growth into the optimal areas, to allocate resources, to set priorities and manage tasks. Bring a team of managers together and develop strategy that the team can implement. Work on dealing with reality, the possible instead of just the desirable, and make strategic choices. Then follow up with regular plan review that becomes, in the end, management.

This normally starts with a plan.  The plan, however, is just the beginning.  It takes the full cycle to make a plan into a planning process.

Why Bootstrapping is Better

Bootstrapping

The normal startup process doesn’t go from idea to plan to funding by outside investors. Funding is the exception, not the rule. Most startups are bootstrapped. That means we start a business with what resources we have. We fund it from early sales, promises, savings, and maybe friends and family; not outside investors.

We all undervalue bootstrapping

In business schools, in popular blogs, in business publications, and in general discussion of starting a business, we undervalue bootstrapping. We teach starting a business as if every new business requires sophisticated venture capital. I understand how this can be educational. It means teaching business planning, which is the ultimate business teaching tool, and investment analysis, ROI, IRR etc. Still, of the five or six million new businesses launched in this country every year, only about 5,000 had VC (venture capital) money, and maybe 75,000 had angel investment. The rest were bootstrapped.

I think the investment option is overrated. It’s better to own your own than to land investment, at least if you can pull it off. As the old song says, “God bless the child that’s got its own.” The opportunity itself should determine whether investment is required. lf it takes more resources than the founders can muster, then it needs investment.

The cliché asks which is better, a piece of a watermelon or a whole grape. But what if that comparison is skewed wrong? Which would you rather have, a slice of an orange or a whole tangerine?

I have good associations with bootstrapping. I was on the board as Philippe Kahn took $20K from his father, plus one $90k bundling deal from a PC manufacturer, and levered up Borland International without outside investment until he didn’t need it. He did it with a great product, strong demand, smart management, and cash-only sales instead of the mainstream, working-capital-hungry channels. Borland went public less than three years after it started. Palo Alto Software grew slowly without outside capital. We had to slipstream a larger vendor whose advertising budget was 10x ours. We ended up with 70% share in our niche and owning the company outright.

The value of owning your own

Bootstrapping isn’t just about owning the whole pie. It’s also about the luxury of being able to experiment and, at times, making mistakes. Philippe was unconventional. Could he have had that freedom if he’d had conventional VC financing?

I spend a lot of time these days answering questions I get through email, often with posts on this blog. Way too often people asking me those questions assume that the normal startup process requires getting funding from outside investors. That’s not the real case. Develop your idea, do your plan, and don’t wait for funding. Get going.

The important exception

Some businesses require serious deficit spending to make an opportunity work. For example, the so-called critical mass businesses that need to acquire a large number of users before the product is viable, such as review sites and social sites. In these cases, the opportunity is big enough to offer a return to investors as well as founders. Even for these businesses, however, the founders are better off getting going and doing some of the work before they seek investors.

For more on this: 10 good reasons not to seek investors for your startup.