If you want to raise capital,
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to watch the video.
"The TRUTH About
Most entrepreneurs fail to raise
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The Internet has created great
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"Barking orders" and other forms of
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Written by Dave Lavinsky on Tuesday, March 6, 2012
One of the challenges of running an organization is that you aren't directly accountable to anyone.
Of course, you're accountable to many people -- your clients and customers, your employees and stakeholders.
But you don't have one person to whom you report. With whom you set goals. And who forces you to make commitments and attain those goals.
Unless you have a Board of Directors or Advisors, of course, but even then, those encounters are often only quarterly or monthly at most.
Rather, as a business owner, you are most accountable to numbers; specifically the business numbers, metrics, or goals you want your business to achieve.
So, let me ask you a question:
Do you know what specific numbers, results and/or goals you absolutely must achieve in the next 12 months?
Clarifying these goals is a key part of the strategic planning process. And I'd be lying if I said this was always comfortable and fun. Because to do it right, you need to break down all of your big goals into parts (more on this below).
Accordingly, as business owners, we tend to put off developing our strategic plans since our employees and customers rarely if ever ask to see them.
It's one of those "Geez, I should probably get around to this" items that no one else knows about, so it's easy to keep on the perpetual back burner.
But what my students and I have found is that once you have a formal strategic plan in place, even if it's not perfect, the path in front of you becomes much clearer.
Specifically, when you set your goals, identify the Key Performance Indicators to monitor and improve and help you get there, and break down the big, ugly projects into smaller pieces, the future becomes much clearer and much more attainable.
In fact, the process of reaching your business goals can become a fun game to play--when you do this and truly know how to win!
Consider this...when you play tennis, or Scrabble, or some favorite game of yours, aren't your objectives usually the same (score the most, win the game), but the rules by which you score points and succeed along the way is different?
Tennis has its own unique scoring system (my wife was a competitive tennis player, so unfortunately I'm used to saying "Love-40" when I serve). And Scrabble has points and Triple Word Scores to shoot for along the way. Which leads to this key question: what are your business' key metrics that you must focus on in order to win?
Understanding and improving these key metrics, which we refer to as Key Performance Indicators or KPIs is the key to winning in business. So, what are some of the KPIs you should be monitoring?
First, there are some common KPIs that most businesses watch-the Revenues you generate from your products & services, your core expense groups, like Marketing Expenses, Operating/Fixed expenses, etc.
There's also your general Marketing indicators to watch, like the total number of new leads your ads generate within the time period you've chosen. You'll want to pay attention to what each new lead costs you, what percentage of them buy something, and what the average sale price per transaction is.
Some marketing indicators will be different for each kind of advertising you do. For example, if you're sending out direct mail, you'd want to know how many people you're sending mailers to and how many responded by phone (or online) to know your response % as well as your Cost per Lead for direct mail.
Or, if you're using Search Engines to help people find your business online, at the least you'll want to know which keywords you are trying to rank for, what your current rank is for each, and how much traffic and leads your website generates.
Improve Your KPIs to Win the Game
By improving your KPIs, for example, by increasing the number of leads, sales, and order amounts, or the return on investment of an advertising campaign, you will increase your revenues and profits, and move closer to victory in your market. Conversely, the market losers are the ones who only focus on "topline" metrics like total revenues and profits. By focusing on these, you never fully focus on and improve all the drivers of those figures (the specific KPIs).
In summary, identifying and improving your KPIs is THE WAY to reach your business goals and win the "game" you've created. Identify them with a fine tooth comb. Pay attention to them. Find ways to improve them. Work hard until you see results. And don't forget to have fun and enjoy the game!
Suggested Resource: You just learned the importance of watching and improving your Key Performance Indicators...part of a good strategic plan to guide you in growing your business. What else should you include in your current growth plan? To have a great strategic plan, there are 13 crucial sections. For your reference, they're listed in this video I put together. Watch it now.
Written by Jay Turo on Monday, March 5, 2012
This past week, I had the great fortune to attend the TED conference.
TED, for those that don't know it, is a great annual gathering of thought, business, and political leaders, of techno-optimists, and of passionate and decidedly idealist change agents from around the globe.
Past speakers at the conference have included Bill Gates, Bill Clinton, Jane Goodall, Malcolm Gladwell, Sergey Brin, educator Salman Khan, and many Nobel Prize winners.
The slogan of TED is “ideas worth spreading,” and they are probably doing a better job of it than any other organization in the world.
Over 1,000 “TED Talks” are available for free downloading on the organization's website. Amazingly given their often highly intellectual content, the talks have been translated into more than 81 languages and viewed in aggregate more than 700,000,000 times.
At this year's conference, the presenters included Peter Diamandis, Founder of the X Prize, Jim Stengel, former Head of Global Marketing for Procter & Gamble, T. Boone Pickens, and Reid Hoffman, founder of LinkedIn.
For my TED week, the story that resonated most was shared by David Kelley, founder of the legendary Palo Alto design firm IDEO, whose many design feats include the first mouse, the first PDA, and Steelcase’s Leap Chairs.
My favorite fun fact about IDEO – not only is it consistently ranked by BusinessWeek as one of the world’s 25 most innovative firms but most years it does consulting work for the other 24 companies in the top 25!
David’s talk was about creative confidence - how within all of us lies breakthrough, innovative thinking and doing that just sometimes needs a little push and inspiration to become real.
He shared the story of Doug Dietz, a General Electric engineer whose life work had been the design and manufacture of magnetic resonance imaging (MRI) machines.
David told of how Doug had been visiting a hospital when he saw a little girl crying, waiting to have her MRI done.
He asked the attending nurse if this was typical, and was shocked to hear that more than 80% of all children getting MRI scans needed to be sedated.
He went back to GE dismayed - thinking of all of the children that were having such harrowing experiences, and how the machines he had helped design and build had had a hand in causing.
Doug, under David’s guidance, reframed the problem as a creative challenge, and re-imagined the MRI experience for children - believe it or not - as a pirate adventure.
Well, how about painting the entire exam room in tropical collages, and giving the children adventurer costumes instead of pale hospital gowns?
And, in the tour de grace, the formerly foreboding MRI machine itself reimagined as a pirate ship - with the children guided to stay quiet and still as they “went aboard,” so as not to wake the pirates!
The result - sedation rates dropped from 80 to less than 10 percent, along with massive time and money savings of removing the need for anesthesia.
This is TED - entrepreneurial, creative thinking and acting to make the world a healthier, wealthier…
…and more thoughtfully designed and kindfully entertained place - one child at a time.
Written by Dave Lavinsky on Saturday, March 3, 2012
If you're like most people, you put some things off until the last minute. Picture a wife needing to take the kids to a ballgame, and the husband is in the middle of changing the oil on the car. Not very good planning on their part, and the result is less than desirable.
With a little planning, the husband could have accomplished the oil change earlier and everyone would be happy.
All too often in business, we fail to plan effectively for ourselves and our companies.
The first step to effective planning is to set the right goals. This is a two-step process as it is necessary to 1) set goals for the business in general, and 2) set goals for ourselves in order to reach the business goals.
Here are some key tips to setting exciting business goals that yield results:
- Be specific. Don't use generic terms like "a few" or "run ads." If you mean 3, state 3. If you have to guess between a range of numbers, be conservative.
Don't say "We really want to see our sales grow exponentially in the market." This does not express what you really want to accomplish. State something like, "With the implementation of our new marketing brochure, we expect to see a 25% increase in sales. We also expect to see a 42% increase in inquiries about our products."
These are measurable goals to which everyone in the organization can relate. You will also know if you're on track or falling short by comparing what actually happens with what you planned.
- Make your goals realistic. If you or the team looks at a goal and rolls their eyes, your proposed goal may be in trouble from the start. For example, setting out to be the #1 Realtor in an area is a good goal, but realistically, how are you going to accomplish that if you are currently a 1 or 2-person show? In this instance, an attainable goal might be to become a Top 10 Realtor during the first year and go forward from there.
- Ensure your goals have meaning for the team to which you are presenting. Letting the sales department know you want the trash cleaned out on a daily basis is not going to help them increase sales by 25 percent. This is a maintenance department's goal and doesn't mean a thing to sales team. Make sure the goals you develop are aimed at the appropriate audience. Make it something they have control over, or why should they care?
- Set deadlines and timeframes to meet milestones. Simply stating, "Our goal is to increase our sales to $1 million," for example, is specific, but doesn't provide a sense of urgency. There's an old saying, "A goal without a deadline is just a wish." Set a specific date for completion and it becomes REAL. Then work backwards from there to plan the steps needed to get you there, and the order they fall in.
Setting goals gives you and your team a target. This ensures all of your efforts are focused in the same direction enabling you to have a better chance at success. And, by developing specific goals, your team will have a sense of direction. They no longer just show up at work.
With this newfound direction, your team will begin to assume more responsibility and ownership of the projects that need to be completed. The goals you all commit to will give you measurable milestones to ensure projects stay on track and within time frames established. And make sure to celebrate along the way!
By implementing proper procedures for creating goals, you will have set the basis for creating a successful plan. After all, if something is worth doing, isn't it worth doing well? Considering the quality of your goals is the first step to getting what you want from your business and your life. So make sure you take goal-setting seriously and follow these steps.
Create your goals in the usual way, and they often get forgotten and fall to the wayside. Make them clear, specific, attainable, and involve your team, and you've got a powerful motivating force for positive change on your hands!
Suggested Resource: Goal setting is one key to improving your productivity and results. But there are many other keys. Keys that can double or even triple your results. Click here to learn how to triple your productivity.
Written by Dave Lavinsky on Tuesday, February 28, 2012
Two weeks ago, I kept a simple journal to track how I was using every minute of my time throughout the space of one workweek, and I was able to identify over five hours of time spent doing something I could be easily delegating to someone else!
This may not sound like a big deal, but consider this:
- Five hours is a lot of time-especially if you only have 10-15 hours per week to run your business part-time. Or if you're full-time, it adds up to 20 hours per month...and 260 hours per year!
- What would you give for an extra MONTH of productive, money-generating 8-hour days each year? Or, if you prefer, a month off each year to spend golfing, taking a vacation, time off with family, or whatever it is you love to do?
- I thought I was delegating everything I should be. But here, even the Master of Management has been caught red-handed. This goes to show that EVERYONE could stand to analyze their time every so often.
- What is your time per hour worth? If your time is worth $50 per hour, then it's hard to justify continuing to do something that someone else could do for $10/hr. Or, as many virtual assistants charge overseas, $4-5 per hour.
The things I caught myself doing were repetitive business items that have to be done every week-but those types of tasks don't move my business forward.
I kind of rationalized for a while, but then I realized I had a few projects on the shelf that I could knock out myself in about 10-20 hours that could start generating more income immediately.
Remember: Your time is best spent starting and managing new projects that will generate more cash. Hire people to help you carry those out and get there faster. And by all means hire an assistant or someone to carry out the Operations and repetitive tasks that must go on every week and month.
Let someone else hold down the fort while you're out pioneering. Your job is to discover and create new ways to advertise, make sales, and add products and services to your lineup.
So let's say you set out to find a virtual assistant abroad that you could outsource these tasks to every week and thereby free up 5 more hours of precious time.
Total cost: $20/week
Time Savings: $250 (saving you 5 hours of your time, valued at $50/hour)
This ROI would be several times what you invested, as long as you spend the new time you save doing something that generates $50 per hour or more, like your new projects (new sales team, creating a new product, testing new advertising methods-anything to create or increase revenue).
So take me up on this...Find out how you could "trim the fat" next week by cutting off 5 more hours of your work week and assigning it to someone else.
Then ask yourself what new project you could start, using your newly-saved time, and do the math. See for yourself how much more you could make by investing a little in others!
Suggested Resource: Now that you've freed up an extra MONTH of working time per year, you need to leverage this time. How? By doing exactly what the top 1% of entrepreneurs do (those who now have a net worth of $5,000,000 or more). Learn more by watching this Growthink's Insider Circle video.
Written by Jay Turo on Monday, February 27, 2012
Over the last three weeks, we have shared the lessons of liquidity, of outliers, and of leadership and luck we've learned from the stories of the extraordinary returns earned by Facebook's early investors.
But what about when things don’t work out?
When our early-stage private equity investments are stuck in illiquidity?
When growth is not progressing on that hoped for outlier path?
When the invested-in company - in spite of its leaders’ best efforts - just keep getting hit over the head with big, gooping dollops of bad luck?
What - in these oh so frustrating circumstances - is an investor to do?
Well, the first place to start is to recognize - for better or for worse - that this is the typical scenario.
The vast majority of companies are not Facebook, and the vast majority of investments of course do not have multi-thousand percent returns in just a few short years.
While most investors recognize this point intellectually, emotionally it is often a far different story.
This dichotomy flows from the basic nature of most entrepreneurs and of the fundraising process.
For starters, entrepreneurs are optimists of the highest order. It is what makes them special and why we love them so.
Then, the process of raising money for a company is fundamentally a sales undertaking.
One where the entrepreneur's fundamental optimism is combined with the necessity of promoting - with great persistence and passion - the brilliant investment prospects for his or her business.
From this highly positive charged state, money is invested and expectations are set high.
And then, real life and business return.
Characterized of course more often than not by long slogs. By unforeseen obstacles. And by just plain old - fashioned bad luck.
And investors naturally become disappointed, impatient, and often angry, too.
And then, for better or for worse, they often lash out at their once so-favored entrepreneur.
These of course are not pleasant emotions, but a key purpose they can serve is to test the entrepreneurs mettle.
As investors make their frustrated voices heard, how does the entrepreneur react?
Is he or she defensive? Defiant? Pollyanna? Inaccessible?
Is he or she able to channel the frustration into positive, moving forward energy?
Into - as is often found in the highest character entrepreneurs - a deeper, abiding, and more sober commitment to make investors whole?
Quite simply, is he or she able to stand in the center of the storm and keep both feet firmly planted on the ground and eyes firmly fixed on the prize?
When the heat is turned up high, the entrepreneurs that behave like this…
…well they are the straws that truly stir the drink of our capitalistic economy.
Very rarely because of simple probabilities will they build a Facebook.
And they won't be successful with every company they lead.
But with them, the odds are well in investors' favor of doing far better than average.
So when investing times get tough - as they often do - discovering that you have backed an entrepreneur like this is the kind of luck that every investor hopes and deserves to have.
Written by Dave Lavinsky on Friday, February 24, 2012
I just finished reading through the 2011 M&A reports (the reports usually come out a month or two after the end of the year). It's something I do each year. To see exactly which companies were acquired during the past year. To understand trends. And to understand precisely the kinds of smaller companies that bigger companies are buying.
Fortunately, with regards to the last factor, the characteristics of a sell-able company don't change much. I'll get back to that in a minute.
But for now, I'd like to hand out the award to the company that acquired the most companies in 2011 - Google.
Google made 25 acquisitions in 2011; buying companies including Clever Sense, RightsFlow, Apture, Katango, SocialGrapple and more. In doing so, Google made the 25 founders of those companies VERY wealthy.
And rightfully so; any entrepreneur who starts, builds and sells a successful company SHOULD be paid handsomely.
But Google's acquisitions weren't even a blip on the entire radar screen of acquisitions. According to research firm Berkery Noyes, in the "information industry" alone, there were 3,098 acquisitions last year (up 17% vs. 2010).
And in the Online & Mobile market, there were 161 acquisitions (up 39%). In the Software Industry there were 1,450 acquisitions (up 10%).
In the Media & Marketing Industry there were 1,435 acquisitions (up 17%). In the Financial Technology and Information Industry there were 1,450 acquisitions (up 10%). In the Education Industry there were 229 acquisitions (up 10%).
And transaction volumes were up in the healthcare and many other industries too.
I tell you this, because even though you may be years away from selling your company to a larger company, you need to start thinking and planning for your exit NOW.
Why? As Yogi Berra once said, "if you don't know where you're going, you're probably not going to get there."
Building a sellable business takes time. You need the right systems. The right products. The right customers. Etc. And building these things doesn't happen overnight.
And it's not just the result of having a good product or service that customers want.
Rather, you need to plan for it. You need to identify the skill sets to acquire and get them. You need to build a complete business from the ground up.
While it's impossible for me to tell you how to do all this in just one essay, or even 100 essays, I can give you an exercise that will really help you. And get you started on the right foot.
This exercise is for you to imagine what your business will look like on the day you sell your company to a larger entity.
1. What will be the date of that acquisition?
2. What will your revenues be on that date?
3. How many and what type of customers will you be serving?
4. Who will your key employees be and what roles will they perform?
5. Who will your key partners/joint ventures be with?
6. How many locations will your business have?
After you answer these questions, you need to start reverse engineering this vision. For example, how will you acquire the customers you will eventually have when you exit?
You need to start figuring this out, and planning this now. Since all great things take time and planning to achieve. Don't wait. At a minimum complete the exercise and write down your answers right now. And then tomorrow you can start building your action plan.
Suggested Resource: Building a sellable business is hard. And it's not something that happens overnight. That's why we've built a program that holds your hand month-after-month...so that with our support you can and will build a thriving business. That you can keep running or sell for millions. Check out Growthink's Insider Circle to learn more.
Written by Dave Lavinsky on Tuesday, February 21, 2012
Many of my newsletters and blog posts are on the topic of raising capital. I talk about how to raise angel funding. And venture capital, etc.
And don't get me wrong, I think, actually I know, that raising funding is critical. Because the #1 reason (by far) why entrepreneurs fail, is that they don't have or run out of cash.
But one thing I'd like to clarify is that you CAN start and grow a business without funding. Or with little funding.
In fact, many great businesses have been started this way. A survey of Inc 500 companies found that 48% started with $20K in financing or less, and 73% started with less than $100K in financing.
And, if you are looking for BIG funding sources, like venture capital, they will often want to see that you have bootstrapped or already raised other, smaller funding sources before they fund you.
So, if I misspoke or implied that you absolutely must raise lots of funding from the get-go forgive me. Rather, you must start by bootstrapping or raising enough funding to get you going, and then later on, many more funding sources will become available to you to help you grow your company.
Let me give you some examples of entrepreneurs who have done this. In fact, most of these entrepreneurs have started with these small amounts and then raised huge amounts of funding when they were ready for rapid growth:
- Under Armour's Kevin Plank funded his company's launch with credit cards.
- Brian Scudamore founded 1-800-GOT-JUNK, which now has over 200 franchised locations in the US alone, with just $700 of funding.
- Michael Dell launched Dell Computers with only $1,000.
- Jill Blashack Strahan launched Tastefully Simple, which offers easy-to-prepare foods and gifts with just $6,000 in savings. Her company now generates over $115 Million in annual revenues.
- Ben & Jerry launched with $8,000 in savings and a $4,000 loan.
- Pamela Skaist-Levy and Gela Nash-Taylor launched Juicy Couture Clothing with just $200 and a revolving line of credit. Juicy Couture was later sold for $53 million to Liz Claiborne.
- Google's Sergey Brin and Larry Page launched the company with credit cards (and later raised angel then VC funding among others).
And, in addition to these and other entrepreneurs who launched their companies with little funding, there are tons of entrepreneurs who have launched their companies with non-traditional sources of funding.
Such as Kenneth Cole, who raised hundreds of thousands of dollars in funding from a shoe manufacturer (vendor funding). Or Blowfly Beer, who raised tens of thousands of dollars in funding from customers (customer financing).
The key point I want to stress here is that the vast majority of entrepreneurs have the mindset that if they can't raise money from banks, angels or VCs, that they can't launch or grow their companies. This is simply NOT true. So don't fall into this thinking. As there are 38 other sources of funding, or bootstrapping, to turn to.
Suggested Resource: As you just learned, most entrepreneurs fail to get funded because they chase after the WRONG sources of funding. Do you want avoid this failure? And successfully raise funding to grow your business? Then check out our Truth About Funding program to learn how you can access the 41 sources of funding available to entrepreneurs like you. Click here to learn more.
Written by Jay Turo on Monday, February 20, 2012
Over the last two weeks, we have discussed the lessons of liquidity, sector, and outliers to be learned from the extraordinary returns earned by Facebook's early investors.
Now let's turn to the only topic that self-interested and red-blooded investors really care about when it comes to Facebook and its IPO.
Which of course is, how the heck can they get a piece of a company like Facebook before it becomes, well, Facebook?
Well, the painful answer is that for almost everyone - it just isn’t going to happen.
The reasons for this go beyond the obvious one of rarity - Facebook being the biggest business story of the new century, and correspondingly having one of the steepest valuation growth trajectories of all time.
And it goes beyond the fact that like so many of the great investment stories of the past 15 years - PayPal, YouTube, Zynga, LinkedIn, Yelp - Facebook’s early investors primarily came from a very small group of interconnected Silicon Valley investors.
No, the heart of the “find the next Facebook” challenge is that the vast majority of investors are either too poor or - more interestingly - too rich to even consider an investment like Peter Thiel’s $250,000 into Facebook in 2005.
Let's start with being too poor.
Forget about deal access and acumen.
Forget about taking the measure of the entrepreneur and just feeling it in “your bones” that he or she has the right stuff.
Forget all that and just deal with the fact that 99%+ of all investors are just too illiquid to write a $250,000 investment check to a private company.
And for those that do have the means, the vast majority are not okay with the very real likelihood that they might lose every last solitary cent of their very hard - earned (or at least hard inherited) cash.
Now, if it is any consolation, so too are the very rich mostly closed off from early-stage private investing.
This is because most of the “real” investment capital in the world today is in the form of professionally managed funds with sizes greater than $100 million.
So when the managers of these funds look at a company at Facebook’s 2005 stage of development, it is just hard for them to visualize how a 6 or low 7 figure investment could possibly “move the needle” of their overall fund return.
And oh yes, most fund managers – because of their career experiences, education, and mindset – are also so painfully lacking in the imagination, technological sophistication and general “hipness” that when presented with a paradigm-shifting business model like Facebook…
…they just don’t get it.
So if neither the rich nor the poor can do it, and if all of the best deals are snatched up by the Silicon Valley Technocrati anyway, what about the rest of us?
Well, at the start, recognize that, in a capitalistic economy, early -stage private equity investing is both the most exhilarating and the most vexingly challenging of all business undertakings.
It requires a full internalization of the Serenity Prayer:
God, grant me the serenity to accept the things I cannot change,
Courage to change the things I can,
And wisdom to know the difference.
Wisdom is needed to know when one is in over their head and that the prudent course is to not invest no matter how tempting.
Serenity is needed once an investment is made, as its destiny rests equally in the hands of the entrepreneur and in those of Fortuna – the Roman goddess of good fortune and luck.
And, of course early-stage private equity investing requires heaping platefuls of courage and guts.
And when stormy weather comes as it always does, courage’s cousin grace is needed.
To remind us that the only ships that never sink are those that never sail.
Written by Dave Lavinsky on Saturday, February 18, 2012
I hate to admit it, but I'm a bit of a dork.
You see, I did really well in school, so I guess I could have been considered a dork back then. But I was also a really good athlete, so that made me "cooler" and so I never got a dork label.
But I did something many years ago that clearly classifies me as a dork. What did I do? I had one of my articles published in Quirk's Market Research Review. Quirk's is a trade journal for market research professionals that mostly talks about new market research techniques and ways to tabulate data. Pretty exciting stuff, I know :-)
I think many of the other authors at Quirk's are like the guys from Revenge of the Nerds, complete with pocket protectors. But, when I submitted my article, I didn't care, because I had something important to share.
What I shared with Quirk's readers (this was way back in 1994 so they don't even have an archive of the article on their website), was what I call "The Improvement Matrix." I originally created these matrices for bigger businesses who paid big bucks for them.
But over the years, I realized they could be created much less expensively, and have HUGE value to entrepreneurs like you.
So what is the "The Improvement Matrix?"
It's simply a way of looking at your products and services and figuring out what you should improve and in what order.
Let me walk you through it. As an example, let's assume that I'm Sal. Sal's my landscaper. He frustrates me to no end since he's such a bad marketer [in fact he makes me think about getting into the landscaping business since I know I'd clean up....but I'll stop digressing].
OK. The first step is to identify what it is that your customers find most important.
So, as a landscaping customer, Sal should survey me and his other customers on the 8-12 attributes of his business that I find most important.
Maybe Sal would have chosen these attributes to survey:
1. Quality of lawn mowing
2. Quality of plant trimming
3. Offers to do additional work (e.g., clean leaves from gutters)
5. Value (fairness of price based on quality of service)
6. Ease of billing
7. Ease of communications with company
8. Professionalism of workers
For each attribute, he should ask customers, "How important are these attributes to you in your landscaping company?"
He could have used a 4 point scale as follows:
1 - Not important
2 - Somewhat Important
3 - Very Important
4 - Extremely important
The results may have looked as follows:
As you can see, Sal's customers considered "quality of lawn mowing" and "ease of billing" to be the most important attributes. Conversely, the least important attributes were "professionalism of workers" and "offers to do additional work."
The next question on Sal's survey should have been: "How do you rate my performance on these attributes?"
He could have used a 4 point scale again as follows:
1 - Poor
2 - Fair
3 - Very Good
4 - Excellent
Importantly, Sal should judge responses to this performance question against how important the attributes are. The results may have looked as follows:
As you can see from the chart, on attributes like "value," Sal's performance is in line with importance. But, on the key attribute of "ease of billing," Sal is vastly underperforming. And, on the non- or less-important attribute of "professionalism of workers" (maybe Sal has his workers dress in formal uniforms), he is over-performing.
So, what should Sal do? Well he should clearly focus on improving his "ease of billing" since this will improve customer satisfaction. Also, if he is investing too much money and time in "professionalism of workers," he should consider re-allocating those resources to improving "ease of billing."
As you can see, the beauty of the chart, based on simply 2 sets of questions asked to customers, is that it identifies the most important areas of your product or service to fix to better satisfy customers and gain competitive advantage.
Now, a final way to look at the performance chart is as a matrix, which I call the "Improvement Matrix." You can see the matrix below.
The Improvement Matrix is simply a different way of looking at importance vs. performance data. It plots the data and classifies each attribute into 4 quadrants:
1. Underperforming (but OK): you are underperforming in this area, but customers don't care much about it, so that's ok.
2. Overperforming: you are doing well in this area; but customers don't value it. Keep doing what you're doing, or consider allocating resources away from this area into a more important area.
3. Keep it up: these are areas that your customers care about and that you are doing well in. Keep it up.
4. Improvement Quadrant: this quadrant is the key. It shows those areas that customers find important, but for which your performance is not up to speed. You MUST get better in these areas ASAP.
As you can see, the Improvement Matrix will alert you to the key areas of your product and service that you must improve. All it requires is a simple customer survey and plotting of the data. And the results can revolutionize your business. So do it!
Suggested Resource: Would you like to know more ways to improve your business; and turn it into one worth $10 million or more? Then check out Growthink's 8 Figure Formula. This video explains more.
Written by Dave Lavinsky on Tuesday, February 14, 2012
Many years ago I was involved in a business targeting the shoe market. Through some connections I made, I was introduced to a potential investor. This investor was one of the original employees of L.A. Gear, a shoe company that at one point went public and was the third leading athletic shoe retailer behind Nike and Reebok.
Within 5 minutes of my conversation with him, one thing became extremely clear: this guy could give me a ton more value than just the dollars he could bring to the table.
He could tell me exactly how the industry worked. He could tell me what trade shows to attend and which to avoid. He could tell me which manufacturers to work with, and how to negotiate the best rates. He could introduce me to the best distributors to make sure my product reached as many retailers and customers as possible. And so on.
I tell you this because far too many entrepreneurs look at investors, particularly venture capitalists, solely as sources of cash. When it reality, many venture capitalists provide a ton more value than just the cash they offer. In fact, the right venture capitalist or VC is often the difference between your success or failure, or achieving minimal versus maximum success.
The three top areas where VCs often provide value include:
1. Contacts they have in their networks (these contacts can be for partners, employees, customers, distributors, vendors, etc.)
2. Advice in running your business, based on deep experience in your industry and in successfully growing and nurturing ventures
3. Contacts to additional sources of capital
Consider the following five VCs who are consistently ranked among the most respected VCs in the industry. Read their bios, and think about how their experiences and relationships could benefit your company.
Jim Breyer from Accel Partners. Jim Breyer is one of Facebook's earliest investors. He serves on the boards of Dell, Wal-Mart, and smaller ventures such as Etsy, Brightcove, ModelN, and Legendary Pictures. Jim also negotiated the sale of Marvel Entertainment to Disney for $4.3 billion and BBN Technologies to Raytheon for $350 million; and most recently closed two new venture capital funds in China.
Michael Moritz from Sequoia Capital. Michael Moritz was one of the early investors in Google, Yahoo, and PayPal. He invested in video camera maker Pure Digital (Flip Video cameras) which was later sold to Cisco for $590 million. He also invested and served on the board of Zappos. Michael has also invested in and sat on the boards of Earth Networks, Gamefly, Green Dot, Klarna, Kayak.com, LinkedIn, Sugar Inc and The Melt.
Brad Feld from Foundry Group and TechStars. You should know Brad's name as he's a frequent contributor to the Growing Your Empire newsletter. Brad's been an early stage investor and entrepreneur for over 20 years. Brad has invested in and/or sat on the boards of tons of companies including Abuzz, Anyday.com, Critical Path, Cyanea, Dante Group, DataPower, FeedBurner, Feld Group, Gist, Harmonix, NetGenesis, ServiceMagic, ServiceMetrics and Zynga. ALL of these companies have either gone public or been acquired.
Marc Andreessen from Andreessen Horowitz. Marc Andreessen co-founded Netscape, Opsware and Ning. He serves on the boards of Facebook, eBay, Skype and Hewlett-Packard. He made seed investments in Twitter and LinkedIn, and later stage investments in Groupon, Skype and Zynga.
John Doerr from Kleiner Perkins Caufield & Byers. John Doerr has made some of the best investments ever, investing early in Amazon, Netscape, Sun Microsystems and Google, where he currently sits on the board. He's also invested in online gaming firms such as Zynga and Ngmoco and clean tech firms such as Bloom Energy and OPower.
These 5 venture capitalists are clearly at the top of their game. But there are hundreds of others that could also provide tons of value to you. Look at the BILLIONS of dollars of value that these VCs created, by investing early in companies and helping them achieve massive success. And consider the vast number of connections these folks have, from investing in now ultra-successful entrepreneurs and sitting on boards along with other highly connected superstars.
Importantly, when seeking venture capital for your venture, find the venture capitalists that have the most relevant experience and contacts in your niche, that can thus add the most value to you.
Suggested Resource: In Venture Capital Pitch Formula, you'll learn exactly how to find and contact venture capitalists, exactly what information to include in your presentation, and how to secure your financing. This video explains more.