The Power of Advisors


 

A great best practice for all companies of ambition is to establish and hold regular meetings of a well-qualified and experienced Board of Strategic Advisors.

Let’s set aside for now some of the mechanisms of setting up a quality board (of which more can be read about here) and instead focus on some of the “Tough Love” feedback a board can offer executives on what they are doing right…

…and far more importantly what they are doing wrong and how to fix it.

1. That Often It is Better to Receive than to Give:  While advisory board members, unlike a formal board, do not have liability nor fiduciary responsibility, their time and energy requirements to participate are significant.

And for most smaller companies, the financial incentives it can offer advisory board members are relatively little compared to the value of a board members’ time.  

A good if imperfect analogy is that for many senior executives their involvement with a smaller company advisory board is almost a philanthropic endeavor - where they give of themselves without expectation of direct reward - financial or otherwise.  

Correspondingly, the owners and managers of the small company must approach the sage advice and good energy offered by their advisory board fully in “receiving” mode.

For businesspeople of the mindset of always trading value for value and reciprocal obligation, this is hard. But only by clearing this space can the board’s counsel be best received.

And somewhat counter-intuitively, often only by management fully accepting the “gifts” of its advisors will the board member’s experience be richest.

2. Begin with the End in Mind: For companies beyond the startup phase, its operating executives are naturally pulled to the shorter-term challenges and realities - this quarter’s revenue and profits, this month’s sales, the challenges and angst of a difficult employee decision, etc.

In contrast, an advisory board discussion, by both its nature and by the kinds of folks attracted to serve on it, naturally pulls to the long view, to the big questions that all businesses should be regularly asking themselves but rarely do.

Or, as they say, the “Why” and the “Which.”  

The Why questions are hopefully embodied in the Company’s mission and its values, and need the regular attention of strategic planning sessions like advisory board meetings to keep them from just existing in “hot air.”

The “Which” questions are in many ways the harder ones that an advisory board dynamic can help address.  

You see, ambitious entrepreneurs and executives are naturally drawn to expanding their sense of their market opportunity, and correspondingly their list of product and service offerings.

This can lead to a diffusion of focus, of trying to be all things to all people.  

A thoughtful advisory board will challenge management to more clearly define where they are aiming to be 1 year, 3 years hence and beyond, and from this vision where resources and attention should be focused today.

3. Speak Little, Listen Much: Managers and owners of emerging companies are often also the lead salespeople, the lead “evangelists” for their companies.

As a result, their default mode is to always be selling, always be pied-pipering their incredibly bright futures.  

But there is often more insight to be gained from Negative Thinking, from grappling with all the things that can go wrong and are difficult / well-nigh impossible to overcome.

Even if, especially if, so doing is buzz-killing and / or depressing.

Why?  Because it is often only in this low energy state that a certain kind of reflective creativity can flourish and completely new approaches to solving vexing problems can be discovered.

4. Brevity is Next to Godliness: Strategic planning sessions in a modern business context should be tightly scheduled to last not more than 2 hours.  After this length of time, diminishing returns starts setting in fast.  

A tight frame also requires all participants to come to the meeting prepared.  And, in turn, that the meeting organizers select the right meeting homework and then plan and moderate the agenda with the proper balance of structure and free-flowing dialogue.

Doing all of the above requires work – a good guide is that for every hour of strategic meeting time there should be 5 hours of planning time by the meeting organizer and at least 2 hours of preparation time by each participant.

Conclusion: Given that the only way to increase the value of a business is to either a) increase its bottom line financials and/or b) to improve its strategic positioning and growth probability, creative planning sessions like advisory board meetings should be a FIRST priority of any responsible manager.

They are classic Eisenhowerian, “Non-Urgent and Extremely Important” activities.  

Ignore them at your peril, and benefit from them in ways well beyond predictable expectation.

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Getting the Right Things Done


 

Dave Allen, author of the great productivity best seller "Getting Things Done," has developed an almost cult-like following for his ideas, structures, and best practices around to-do list management, prioritization, and metrics and schematics that define what an effective and productive day should be.

Without question, there are great benefits to his methods, and I especially like his best practice of always ending a meeting, conversation, or work on an open-ended project with the simple question of "What is the Next Action?"

This discipline alone can greatly improve daily and meeting productivity, and perhaps more importantly reduce that sometimes suffocating sense of anxiety common to knowledge and entrepreneurial work that there is always way more that must be done than there are hours in the day.

But a focus on simple to do list management is far from sufficient.

You see, the dirty little secret that all of the self-help masters, all of the highly paid management consultants fail to tell you is that in our incredibly fast-moving, changing, competition from everywhere modern economy it is virtually impossible to design a plan or strategy that is in any way close to being assured of success.

The reason why is simple. Plans and strategies, by their nature, are speculative and assumptive.

They require the planner to survey the current market and competitive landscape along with assessing the current strengths and assets of their enterprise.

And then, from those assessments, forecast how a course of specific decisions or investments will be received by the market, by current or perspective customers, and responded to by the competition.

When stated this way, it becomes obvious that there is a very high likelihood that a plan as designed will not work.

It really doesn't matter if that plan is to introduce a new product or service offering, a new marketing or advertising campaign, a website re-launch, or an internal re-organization.

So, does this mean that planning is worthless? Of course not! 

But it does point to a pair of strategic best practices:

1.    Before commencing any planning process, first reflect deeply and document extensively what is working now.

These could be the practices and habits of a top sales person, a pay-per-click advertising campaign with positive ROI, an invoice collections best practice, a particularly profitable partner or affiliate.

Now to do more of these things that work, productivity and accountability best practices as outlined by the Dave Allens of the world are incredibly valuable and should be incorporated aggressively into the daily work habits and disciplines of the modern professional.

2.    But for everything else that falls outside of this realm, the right mindset is one of testing and exploration, of brainstorming, of speculation and possibility. Of open-ended questions.

AND it should be noted extremely well that it is usually in this mode that the big outlier, “black swan” ideas and strategies and relationships are usually discovered.

As for the question as to how much of #1, or playing more of the existing game better, we should do, versus #2, playing a new game…

…well that is a decision that the best managers, the best consultants and the most renowned self-help masters are paid a lot of money to answer.

My answer is - no surprise here if you've ever met me at a party - is to have my cake and eat it too!

Schedule time for to-dos and accountabilities to accomplish more of the stuff that you know works and leave plenty of open space to step out of the safe harbor and into the big sea and dream!

And when you balance doing and dreaming like this - and sprinkle in a little luck, you will very soon find yourself every day getting more of the Right Things Done.

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What Great Dealmakers Know and Do that You Should Too


 

How do the best dealmakers and investors make go / no decisions? How do they handicap the probability of a company or project’s return projections actually coming to pass?

And once they do, how do they determine fair terms and pricing upon which to do a deal?

It is upon these “Due Diligence” matters where the real - as opposed to the theoretical - money on deals is made.

Now, due diligence - as it is done by serious, professional dealmakers and investors - is an enormous undertaking.

It often requires hundreds and sometimes thousands of hours of accounting, legal and background reviews and checks, along with third party validation and research as to claims regarding market opportunity, competitive landscape and customer pipeline, traction, and satisfaction.

It can be as time and energy intense as any business process or project one could possibly imagine.

And because it is so, for those without very significant analytical resources and expertise, it is often also unrealistic to do it thoroughly and right.

Luckily, there are some shortcuts that can yield impressive similar insight and results.

I call them the “Who, Why, and When” 15 minute Modern Due Diligence Checklist.

Who. Easily the most important question to ask of any endeavor of importance: Who is involved? What are their personal and professional histories and backgrounds? Of leadership, business, investment and life success? Who are the professional partners (Law, Accounting, Banking, etc.)? Who is on the Board? (Is there a Board at all)? Who are the Customers? The Partners? The Employees?

When it comes to whether a deal is good or not, the answers to these “Who” questions is as often as not all you need to know.

Why. Why is a deal happening? Why are who are involved in fact…involved? Why is the deal being offered to youStart with Why.

When. The old adage that “Time kills all deals” is also a great harbinger into the likelihood of a successful investment outcome.

How long has the deal been shopped? How urgent/desperate are those involved to get the deal done?

Now, these question cuts both ways. I as much want to see principals that need to get a deal get done versus those that perhaps just want it to be so.

Need, in its best sense, drives urgency and action.

Want is often lighter, less substantial, and thus more prone to delays and “almosts” versus results and return.

Who. Why. When.

Mediocre answers to any of these and almost certainly the deal is not right.

But as they are all spot on, well then the next question to ask is often “What are you waiting for?”

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The Real Secret to Great Financial Projections


 

As any venture capitalist worth his salt will tell you, there is a chasm of difference between the mostly grounded-in-reality financial forecasts offered by public companies, and the almost never to come true "rosy scenario" projections offered as a matter of course by startups and small businesses.

And while large public company CEOs and CFOs are judged as a matter of the highest honor on their ability to deliver on projections, exceedingly rare is the entrepreneurial executive that comes anywhere close to meeting forecasted results.

For a sense of the extent of how bad this problem is, a partner I know at a prominent venture capital firm estimates that of the 30+ companies that his firm has invested in, only two have consistently met or exceeded their financial projections.

And let me add that it isn’t like the inmates are running the asylum at my friend’s fund - as a prerequisite of having them as an investor, each of their portfolio company CEOs are required to undertake and report on a vigorous, quarterly budgeting and forecasting cycle.

And also let’s not assume that my friend is just a lousy investor. Lack of consistent financial performance is pretty much par for the course for startups and small businesses.

So what is going on?

Are the entrepreneurs just not ready for prime time? Are their managerial skill levels that many levels below their big company brethren?

I’ll say this - it is certainly not for lack of trying.

Most small technology company executives work longer hours than businesspeople have at any time in history.

If you doubt this, pick up Ron Chernow’s masterful biography of John Rockefeller.

In it, we read enviously of Mr. Rockefeller's daily 9:15am visits to his barber, his afternoon naps, and his unwavering commitment to always leave the office each day, no matter the season, so he could be home before dark.

And it is not for a lack of know how.

Modern entrepreneurs - with their always-on, “click of a button” best practice knowledge and connections base - are a better informed and more globally networked lot than at any time in history.

So if they aren’t the problem, is it modern business itself?

Has it just become - with all of its technological bells and whistles, all its globalization and pricing pressures, all of its customer unpredictability and fickleness - just too unwieldy a beast for any small company to ever consistently ride?

And concurrently, has accurate financial forecasting become equivalent to throwing dice?

Or more disturbingly - is it not even worth doing as even when they do turn out to be accurate it just falls into the category of the blind mouse getting some cheese every now and then?

For better or for worse, modern business demands that we take a more “Balanced Scorecard” approach in judging managerial effectiveness and entrepreneurial progress.

Factors like intellectual property development speed, organizational design, and client satisfaction as measured by a companies’ Net Promoter Score are proving to be just as important predictors of a business’ value creation as is its forecasted-to-plan accuracy.

Please let me clear: On their own these factors do NOT make a business valuable.  

Rather, the right matrix of them, properly prioritized, IS highly correlated with businesses that attain high profit exit and investment outcomes.

As an added bonus, these non-financial key performance indicators (KPIs) can be designed to be far more consistently predictable than traditional projections.

As such, they are usually far better measures of executive effectiveness than budgeting and forecasting “gap analysis.”

You just have to have the guts to forget about the numbers for a quarter or two.

Or, if you are really get good at defining, tracking, and accomplishing the right non-financial KPIs, to forget about them permanently as they will just take care of themselves.

To Your Success,

 

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Why Do We Work?


 

Why - once we have met our basic needs for food, warmth, and safety - do we work?

There are the usual, default answers.

For Status. Power. In response to a "fight or flight" instinct, hardwired deep in us.

Because when we were young, we saw our parents do it and when we grew up, we wanted to be like them.

Phew.

What a bunch of hamster on a wheel mumbo-jumbo that makes folks at the end of their life look back and say why did I waste so much of my precious life on that?

Instead, how about this?

Let’s be heroes.

Wikipedia defines a hero as one “who, in the face of danger and adversity or from a position of weakness, displays courage and the will for self-sacrifice…for some greater good of all humanity.

Now that’s good.

It touches the various dimensions of our being.

Heroism in action is a strong, hard effort - a pushing to the limits of one’s physical endurance.

Heroes are intellectually wise. They are fair, sober, and big, and rarely let anger and fear get the best of them.

And when we are in the presence of a hero, we are spiritually risen up, are we not?

And you know what goes hand-in-hand with heroism?

Work.

Hard, honest work - taking great, exquisite care to do things right – is at heroism’s heart.

As is teamwork. And creative work, toward an idealistic end.

As is work on the behalf of the powerless, for and with the young and the old.

As is winning the right way - with grace and with recognition of those that aided in your journey.

And as is trying your absolute hardest and most honest best, and sometimes coming up just a bit short.

Heroic work, in all its forms, is work worth doing.

You know it when you see it. And unfortunately, also when you don’t.

Let’s look for the heroes in our lives - those right around us and those in their blessed multitude in this wide and inter-connected world of ours.

Let’s celebrate them and let’s strive to be like them.

 

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The Spirit of America


 

On this great day when we celebrate America, its freedoms and way of life, please enjoy (and as you are moved share with the hashtag #SpiritofAmerica) this list of thirty of why this is the greatest country in the history of the world:

#30. Gettysburg. Guadalcanal. Bunker Hill. Heroes lived here.

#29. Contract Rights. Judges. Juries of One’s Peers. Redress for grievances - practiced here.

#28. Yosemite. The Grand Canyon. Yellowstone. Natural Wonders - in abundance here.

#27. The Interstates. State Highways. County Parkways. The Open Road - Great to be on it here.

#26. Uber. AirBnB. Lending Club. The Economy – Shared Here.

#25. Lexington. Concord. Saratoga. Yorktown – Life, Liberty, and the Pursuit of Happiness. Fought for here.

#24. The Bill of Rights. The Supreme Court. The Rule of Law. Justice served here.

#23. The Stock Market. Home Ownership. Low Inflation. Assets built here.

#22. Driverless Cars (and Electric too!). Wearable Devices (the iWatch!). The Internet of Things. Tomorrow’s Technologies – Imagined Here.

#21. Diamandis. Kurzweil. Saffo. The future - abundant here.

#20. Hollywood. Disney. Broadway. Entertainment happens here.

#19. The World Series, The Super Bowl, The Masters. Sports are spectacle here.

#18. Jesus. Moses. Mohammed. The Buddha. Religion gets along here.

#17. Gates. Jobs. Page. Zuckerberg. BIG stuff - invented here.

#16. Murphy. Martin. Seinfeld. Rock. Life is a laugh here.

#15. Madonna. Mariah. Whitney. Elvis. Michael. Frank. Songs are sung here.

#14
. Faulkner. Hemmingway. Roth. Franzen. Stories are told here.

#13. Kaiser. Pfizer. Genentech. Merck. Healing happens here.

#12. Boeing. Caterpiillar. Deere. UPS. FedEx. Stuff gets built here and gets there.

#11. Amazon. eBay. Ecommerce - transacted here.

#10. Facebook, Twitter, LinkedIn. Networks - connected here.

#9. Google. Yahoo. Bing. Information - organized and accessible here.

#8. Kleiner. Sequoia. Mayfield. Ideas - backed here.

#7. The Inc. 500. The Fast Company 50. Entrepreneurs - inspired here.

#6. Alaska. Montana. Wyoming. Space - open here.

#5. Chicago. Boston. San Francisco. NYC. Cities pulse here.

#4. Jefferson, Lincoln, and Roosevelt walked the Earth here.

#3. The first guy in charge here voluntarily gave up power, when he could easily have been named ruler for life. Character stands here.

#2. The current guy in charge was born to an immigrant father and a teenage mother who was so poor that she received government assistance in raising her only child. Possibility abounds here.

#1. The Greatest Generation was born here, fought and won there. And then they came home, put their heads down, and built a new America. Civil rights, cities, suburbs, highways, schools, and more.

So on this day especially, we say THANK YOU!

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Want to Sell Your Company for a High Price? Do these Six Things


 

The saddest lament of entrepreneurs and owners of private companies seeking to sell and exit their companies is that they want their businesses to be valued on their future potential, and not its CURRENT profitability.

Given that the typical, offered purchase multiples for smaller businesses – as in those with less than $5 million in EBITDA – can be as low as 1 or 2 times last year’s tax return profits, this is understandable.

In fact, we often see purchase offers based on multiples of MONTHLY earnings – not exactly the “happily ever after” exit dreamed of when these businesses were founded!

Yes, getting a business valued and sold based on factors other than its earnings while by no means impossible nor uncommon, is HARD.

Yet…every month there are literally hundreds of companies that sell for very high multiples of profits, for multiples of revenue, and even companies that are in a pre-revenue stage that sell every day just on the value of their technology, their people, and their work processes.

What do they?

Well, here are six things that companies that sell for high multiples do that you can and should too.

1. They Are Technology Rich. Companies rich in proprietary technology in all its forms – patents, processes, and people – are far more likely to be valued on factors other than profitability and correspondingly attain purchase prices beyond a few times current year’s earnings.

As an example, the likelihood of a medical device company being sold or taken public is twenty times greater than that for a services - or a low-to-no proprietary technology company - doing so.

2.They Have Gold at the End of their Rainbows. Businesses that sell for high multiples communicate exciting and profitable future growth.

Their managers demonstrate understanding of the big 21st century “macros” - i.e. how technology evolutions and globalization will impact positively and negatively their industry, market, customers, and competition.

Concurrently, these managers understand the micros well too, especially how their business’ human capital will adapt and grow as change happens. 

All this translates into well-developed stories that if their businesses aren’t making it now, there is gold (and a lot of it!) at the end of their rainbows.

3. They Are Great Places to Work. Businesses that sell are usually characterized by that good stuff that we all seek in our professional environments.

They are culturally cohesive. If they don’t have low employee turnover, they at least have well - defined career progression paths. And their compensation policies align and pay well with desired performance.

Quite simply, they are great places to work and are reputationally strong within their industries.

4. They are Process and NOT People Dependent. Businesses that are overly dependent on charismatic owners or a few dynamic salespeople or engineers rarely sell because the majority of their value can simply walk out the door tomorrow and never come back.

Important aside: for those entrepreneurs that harbor the desire to sell but not the ambition to build a meaningfully sized, process-based organization should then focus their exit planning almost exclusively on technology and intellectual property development.

If they are unwilling / unable to do this, then they should put the idea out of their head for now and invest this energy into more meaningful pursuits.

Like my favorite - making absolutely as much money today as one possibly can.

5. They Have Good Advisors. Businesses that do everything right but have messy financial statements because of poor accounting, messy corporate records because of poor or non-existent legal counsel, and messy “future stories” because of poor exit planning and investment banking advice, simply do not sell.

Sure, they may get offers, but invariably these deals fall apart in diligence and at closing.

And as anyone that has ever been through a substantial business sale process knows, almost nothing in business is as time and energy-draining as is getting close to a business sale and not getting it done.

6. They Get Lucky. Luck remains a fundamental and often dominant factor that separates the businesses that successfully sell from those that don’t.

The best entrepreneurs and executives don’t get philosophical nor discouraged by this but rather they embrace it.

They try new things. They follow hunches. They make connections.

They start from the pre-supposition of “accepting all offers” and work backward from there.

They and their companies can be best described as “happy warriors” – modern day action heroes ready for the fight. When they get knocked down, they smile, wipe their brow, and get right back in the fray.

And you know what? Our happy warriors, living and thinking and working like this day after day channel some mystical power and draw great luck and more to themselves and their companies.

Yes, companies that sell are the good and lucky ones.

Follow the advice above and fortune just may smile on your company and those you invest in too.

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Turning Good Strategy into GREAT Execution


 

Last week, I wrote about the connection between vision, strategy, and action in a business, and how all three are made possible through and with Tough Love.

And essential to effective Tough Love is Balance.  Great organizations find the balance between:

a) Making the right changes at the right time and

b) Having the discipline to “keep on keeping on” and just doing more of what is working.

Note well that b) is particularly hard to maintain when the tasks and activities that ARE working become repetitive and lack in excitement and drama.

So how do executives find this balance - between being creative and just keeping their heads down and plowing forward?

Well, luckily in the past few years a large and impressive business literature has sprung up that codifies best practices of how to find this all-important balance.

It can best be summarized by the phrase “immersion plus spaced repetition” and goes like this:

1. Everything, of course, begins with ideas, with the best ones arising from a series of introspective strategic planning and goal-setting sessions that clarify objectives and the obstacles standing in the way of their accomplishment.

This immersive process - done at least annually but at the best companies quarterly - both defines what needs to be done and inspires all to take on the hard work of getting it done.

The value of inspiration cannot be underestimated – Thomas Edison famously said that “genius was 99% perspiration and 1% inspiration” but that 1% “spark” is uber-critical in propelling an organization through the various thresholds of change.

2. But, as anyone that attended an exciting or invigorating conference or strategic planning session can attest (and as I am sure Mr. Edison reflected on often during long nights at the lab), inspiration fades over time.

Even worse, when the inspiration is not followed through on, cynicism can set in and actually leave an organization worse off than if the planning sessions were never done in the first place!

So how to avoid this distressing fate?

3. Well, by keeping the ideas, goals, and objectives of the planning session alive through their regular review and adjustment.

Think of it this way - if a well-run strategic planning session is the essence of good leadership, then repetitive goals reviews are the essence of good management.

Great managers check in with their teams as often as daily - if only for 5 or 10 minutes - to review the day’s objectives and to keep the shorter term work flow aligned with the longer term planning and mission objectives.

The old adage that the only way to eat an elephant is one bite at a time is never more true than when is comes to these spaced and repetitive management check-ins.

When done right, they measure, acknowledge, and reward incremental progress and prevent the desire for the perfect from getting in the way of the doable and the done.

Then, the organization reconvenes and reviews progress against stated goals, assesses what worked and what didn’t, and then refines and updates the key goals and objectives.

And after this next round of strategic planning, what is done?

Well, the spaced and repetitive management check-ins begin anew.

Wood is chopped, water is carried.

Following this simple but disciplined formula, over time great ideas become great realities, businesses are built, and legacies and fortunes are made.

And for investors, far more than technology these “above the line” leadership, management, and company culture disciplines separate the well-run companies to back from the disorganized ones to avoid.

So what are you waiting for?

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Vision to Strategy to Action (All with and through Tough Love)


 

Every business needs a vision - a clear definition of what its leadership seeks the business to become.

And every business needs a strategy - a roadmap of how the business will reach its vision.

Once the vision and strategy are clear (and yes, this is hard), the next step is action planning – the day-by-day mapping of how all of this good but sometimes theoretical “stuff” will actually get done.

This, involves determining which projects will be completed (and as importantly, which ones will NOT be done), by whom and when, and how many resources - work hours, money, and assets - will be required.

Now, this is lovely for the whiteboard but what business more often than not looks like is this:

Unclear, Unshared Vision. With all the time most management teams spend talking to each other, it's surprising how often they have different pictures of what everyone is supposed to be doing and in what direction they are supposed to be heading.

It's the hard and repetitive job of leadership to repeatedly communicate the plan (i.e. the vision, the strategy, and the day-to-day roadmap of how to get there) until all are on the same page.

And then rinse and repeat.

Planning Once Per Year, Out Of Routine. So many of us, in January, think about our personal goals for the year ahead.

Similarly, many businesses work on their yearly plan during the same month of every year.

And then they forget about it.

The best businesses, in contrast, create, refine, and live their business plans in real time, every day.
Yes, this is hard, now more than ever because of…

The Tyranny of the Urgent. A HUGE challenge to executives and businesses attaining greatness is how difficult it is, because of technology, to not let those “urgent, but NOT important" activities dominate our days.

More than ever, we must fight for the time and attention to do the great and important work, and block out those insidious distractions everywhere and always around us.

No Process or Methodology For Strategic Planning. A best practice is to focus on vision and strategy in one set of sessions, and then on the day-to-day action planning, accountabilities, and progress measurements in another.

In discussing vision and strategy, we are in creative mode, exploring any and all options and ideas.

In contrast, figuring out action plans and accountabilities are best suited for separate, more “Tough Love” and analytical-type meetings.

With appropriate time set aside for vision, strategy, and action planning, a business can experience the collective joy that comes from knowing exactly what it is striving toward and how it will get there.

Everyone at the business will feel more grounded, balanced, and centered.

Being so all will come to work with greater purpose and passion.

And, at the end of the year, will have far more to show for their efforts.

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Why One for Three is So Much Better than Zero for Zero


 

“Success is not final, failure is not fatal: it is the courage to continue that counts.”
- Winston Churchill

At the very heart of entrepreneurship, small business, and investing sit risks, roadblocks, challenges, and delays.

The statistics are only debated to their degree but not their overall thrust - a small percentage of businesses ever become meaningfully profitable and a smaller percentage still are ever sold for a meaningful price.

In other words, the vast majority of businesses - by objective, financial measures - do not achieve their desired and sought after objectives..

Even worse, a lot them do so badly - never achieving even one dollar in revenue and / or go so deeply in the hole that they have significant and negative financial spillover effects.

Like business and personal bankruptcies and investors losing all of their money. 

In a word, the trials and tribulations of business are and can be traumatic.

Now it is not the kind of trauma that survivors of war and natural disasters experience, but in the world of work it can be about as bad as it gets.

Yet both domestically and around the world entrepreneurs are starting and growing businesses at a greater rate than at any time in the last 15 years…3% of the U.S. adult population annually start one, and a multiple of that contemplate doing so.

And investors make more money investing in startups and small businesses than in any other asset class.

So what gives?

Well, there is the financial view, namely that the rewards of a business sale are so great and life-changing that having any probability of its occurrence make the grave financial risks of business - building more than worth taking.

But this at best only explains half of the story. 

No, there is something else going on here, and research regarding of all things - Post Traumatic Stress Syndrome - points to what it is.

Research done by among others Dr. Richard Tedeschi of the University of North Carolina shows that strong, negative experiences like war and natural disasters are NOT as scarring as once thought.

In fact, the opposite is true.

Statistically, most survivors of traumatic experiences - like prisoners-of-war and victims of natural disasters - come out of them stronger and on most measures, out-perform those in their peer groups unaffected by the awful events.

Now everyday all of us should count our blessings dozens of times as “there but for fortune go I’ and offer nothing but great compassion and empathy for those suffering trauma, especially when it comes through no fault of their own.

But we also should take significant solace and inspiration from the rest of the story.

Life, as it does, goes on.

And according to the latest research, the old adage is true of that which does not kill you REALLY does make you stronger.

Now it would not be proper to equate a business failure with the physical and emotional traumas experienced by survivors of war and disaster, but entrepreneurs and executives can and should draw important wisdom from them.

Such as if you “fail” at this particular business, you won’t be broken and scarred forever.

And that professional and entrepreneurial growth is a participatory sport – learned only by doing and trying and striving and not by watching and fretting and waiting.

And then there are the related ideas of diversification and iteration. 

Such as, in business, it is almost always far better to have two business “failures” and ONE success than it is to go zero for zero.

For the entrepreneur this does not necessarily mean running multiple businesses concurrently, but it does mean that the business strategy should be iterative and testing based.

Successful Internet companies get this intuitively - see Amazon and eBay and thousands of others - and you should too.

As for investors, they should take advantage of the incredible opportunity that the modern financial system offers to back multiple entrepreneurial companies, and not just one or a handful.

With the average return of the startup company asset class being 2.5X in a mean time of about four years, the odds are strongly in your favor if you both invest right and diversify properly.

So entrepreneurs and investors get in the game!

Failure is no way near as bad as advertised and if approached with the right spirit and strategy, it can truly be the ultimate blessing in disguise.

To Your Success,


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