Written by Dave Lavinsky on Sunday, March 30, 2014
In my Crowdfunding Formula program, I teach the 14 steps you must follow to successfully raise money from Crowdfunding.
It turns out that Jeremy Smith from Provo, Utah, not only followed these 14 steps to a "t", but really perfected them.
The result: while he set out to only raise $12,000 for his new night light product (the SnapRays Guidelight), he ended up raising over $430,000 (he raised the $12,000 he needed in just 2 hours).
You can see the Crowdfunding raise for yourself at Kickstarter here.
Here are the key reasons Jeremy and the SnapRays Guidelight were successful in their Crowdfunding raise. Make sure you keep these points in mind if/when you use this great new funding source.
The video explaining the product and the Crowdfunding raise was excellent. It starts by explaining the problem (i.e., existing nightlights have lots of issues such as bulkiness, etc.). It goes on to explain the benefits of his solution (e.g., ease of install, energy efficient, etc.). It even does a side-by-side comparison versus an existing solution showing how much better it is.
Then, about 2 minutes into the 2:45 minute video, co-founder Sean appears and says “thanks for watching” and explains how he and his team has “poured their lives” into the project or years. This personalizes the video, makes you like him, and thus makes you want to fund the project more.
Finally, the video has inspiring music in the background. While it’s just “stock” music footage, it gets the viewer excited.
Beneath the video, there are tons of pictures of the product, a great description, and answers to all the frequently asked questions people have about it. Where did they uncover what frequently asked questions to answer? Well, from previously presenting to potential investors and partners they developed a list of all the key questions people have.
Variety of Reward Options
When doing a Crowdfunding raise, you offer rewards to those who back you. This company wisely created 11 different types of rewards based on contributions of just $12 to $120. By having this variety, they were essentially able to price discriminate. People who were only able to offer $12, spent that amount, while those with deeper pockets provided more support.
Quality Social Media Marketing
Everything I’ve mentioned so far about this Crowdfunding raise would have been a waste had the founders been unable to drive people to their page. And that’s just what they did. Via a very effective and concerted effort, they took to Facebook and Twitter and generated a big buzz for their raise. As a result, they drove a lot of people to their Crowdfunding page, and those people often funded the company and/or told even more people about it.
Like everything else, it’s all about execution. Having a great idea is one thing. But the magic is when you perfectly execute on it, and raise over $430,000 in under 30 days!
Written by Jay Turo on Thursday, March 27, 2014
Global Technology Mergers & Acquisitions Activity is now at its highest year-to-date level since 2000 (in terms of both dollar volume and deal number).
Overall there has been $65.2 billion of M&A activity announced year-to-date (Thomson Reuters).
And then layer in the the crowdfunding boom (both donations and investment-based) and the exploding growth of peer-to-peer lending sites like Lending Club and Prosper.com, and never before have there been so many and so good “digital” places for those seeking and those providing capital to connect and transact.
More entrepreneurs and businesses having access to outside capital than ever before and...
…for the first time investors having the ability to efficiently build diversified portfolios of private equity and debt investments with strong, positive expected value.
Now compare all of this freshness and innovation against the ongoing dreariness of the “public” markets.
From 2000 to today, the Dow Jones has risen from 11,078 to approximately 16,268 (as of 03/26), or approximately 42%.
During that same time inflation has reduced the dollar’s purchasing power by almost exactly that same amount (38%).
So basically 15 years and ZERO real investment return.
Now what do these two fast diverging worlds, the increasingly innovative and transparent one of private investing on the one hand, and the flat and more opaque than ever one of the traditional public market returns on the other, mean for the entrepreneur and for the smaller investor?
Quite simply, it is all good.
For investors, it means access to higher returns.
Research from the Kauffman Foundation Angel Returns Study and the Nesta Angel Investing study, compiled by Robert Wiltbank, have demonstrated that the "...average angel investor (across the U.S. and UK) produced a gross multiple of 2.5 times their investment, in a mean time of about four years.
And for the entrepreneur, it means more, quicker, and cheaper access to capital, especially in smaller amounts.
Which leaves more time and energy for what entrepreneurs want to do and what we all need them to do…
…starting and growing profitable and innovative companies that make the world a better place.
Amen to that.
To Your Success,
P.S. To listen to a replay of my Thursday webinar, where I explored some of the key lessons learned from Sequoia Capital's $58 million investment into WhatsApp - and subsequent $3 billion windfall - upon Facebook's purchase of the messaging app last month, click here.
A version of this article originally appearedin Entrepreneur Magazine and can be seen here.
Written by Dave Lavinsky on Tuesday, March 25, 2014
The right story can grow your business into an amazing success. That being said, consider this great story:
On a beautiful late spring afternoon, twenty-five years ago, two young men graduated from the same college. They were very much alike, these two young men. Both had been better than average students, both were personable and both - as young college graduates are - were filled with ambitious dreams for the future.
Recently, these men returned to their college for their 25th reunion.
They were still very much alike. Both were happily married. Both had three children. And both, it turned out, had gone to work for the same Midwestern manufacturing company after graduation, and were still there.
But there was a difference. One of the men was manager of a small department of that company. The other was its president.
Have you ever wondered, as I have, what makes this kind of difference in people’s lives? It isn’t a native intelligence or talent or dedication. It isn’t that one person wants success and the other doesn’t.
The difference lies in what each person knows and how he or she makes use of that knowledge.
And that is why I am writing to you and to people like you about The Wall Street Journal. For that is the whole purpose of The Journal: to give its readers knowledge - knowledge that they can use in business.
The above story/sales letter, written by Martin Conroy, was used by the Wall Street Journal for 25 years starting in 1974. Doing the math regarding how many people this letter was sent to, the percentage of orders that came from it, and the subscription prices, it is estimated that this story resulted in $1 billion in sales for the paper.
So, what’s the point?
The point is that stories are an extremely effective, but often overlooked, sales tool that can allow emerging ventures to compete with large established companies. Stories allow companies to get their prospects involved in their message. It gets them excited. And then they want to learn more.
Here's an example of another startup who crafted a great story...
I’m about to tell you a true story. If you believe me, you will be well rewarded. If you don’t believe me, I will make it worth your while to change your mind. Let me explain.
Lynn is a friend of mine who knows good products. One day he called excited about a pair of sunglasses he owns. “It’s so incredible!” he said. “When you first look through a pair you won’t believe it.” What will I see? I asked. What could be so incredible?
Lynn continued. “When you put on these glasses your vision improves, objects appear sharper, more defined. Everything takes on an enhanced 3D effect and it’s not my imagination. I just want you to see for yourself.”
The story goes on to discuss all the benefits of Joe Sugarman’s BluBocker sunglasses… over 20 million pairs of which have now been sold!
Does your company have a great story? If you do, great. If not, create one.
And once you have a story, where should it go? To start, it should go in your business plan. Use your story to excite investors, and others like potential partners and employees. And use your story in your marketing like the Wall Street Journal and BluBocker sunglasses did.
Success can be a simple as crafting a great story (and then delivering on the story’s promise of course). So start crafting today!
Written by Luke Brown on Monday, March 24, 2014
From businesses come needs – like raising capital. Raising capital usually means pitching investors.
So which businesses are most likely to be among the approximately 5% who raise funds from professional investors? The chart below tells the brutal truth quickly and easily.
A great business which gives a great presentation is most likely getting funded.
A lousy business with a lousy presentation isn’t getting funded.
But what about a good business with a lousy presentation? Is it more or less likely to get funding compared to a good business with a great presentation? The answer probably won't surprise you.
After speaking with over 110 angel investors, VCs, entrepreneurs and educators, the consensus was solidly in favor of the good business with a great presentation. The deciding factor came down to the team, the single factor which most influences investors.
A person and a team who made a great presentation took the time to practice. Investors like to see the results of preparation and hard work. A great team willing to practice may simply need some advice and be willing to pivot, changing a good business into a great business.
A good business which gives a lousy presentation says to investors, “We didn’t care enough to put in our best effort.” The lack of preparation and the condescending attitude toward investors will derail just about any business seeking capital.
At the very least, it says the team is not ready, not mature enough, and probably not coachable. With plenty of investing opportunities from which to choose, investors quickly move on.
Want to improve your chances when pitching to investors? Follow the eight recommendations below to maximize your chance of raising capital.
PRACTICE your pitch
If you didn’t practice 25-50 times before presenting, it will show in your lack of confidence, poor pacing, and use of filler words like “uh”, “um” and “like”. Then you’ll likely resort to the boring reading-slides-to-your-audience-with-your-back-turned method of pitching. Buy the coffin. You’re dead.
GENERATE some enthusiasm!
No one expects you to have over-the-top local sportscaster enthusiasm. But don’t pitch with a sleep-inducing monotone, either. If you don’t have passion for your business, neither will an investor.
PREPARE for contingencies
Fertilizer happens. Prepare for it.
* Know every slide in your pitch deck by heart
* Have two thumb drives with your pitch deck saved in PowerPoint / Keynote and PDF
* Bring your own laptop, projector, clicker, batteries, microphone, cables and cords
* Inspect the room beforehand, if possible. Know the lighting and sound conditions
BREVITY is king
Got 10 minutes to pitch? Finish in 9:45. Almost nobody finishes with a strong close in the allotted time. Investors love someone who can manage time effectively. It sends the message that you can manage other areas of business effectively, too. Keep your pitch deck to 10-12 slides maximum.
NAIL the opening and closing
Tell a brief story; do something unexpected; focus on emotion. Those are great concepts to open a pitch. Close powerfully with your call to action. Now think about how most people open speeches – and don’t do that.
Sprinkle in stories to drive home a point, to magnify emotions, and to keep your audience engaged. Generally, a single story should take no longer than about 7% of your total pitch time. For a 10 minute pitch, a story is most effective when 45 seconds or less.
Use storyboarding, a technique invented by Walt Disney in the 1930s, to create your overall theme. Do this before designing your pitch deck.
VISUALS, not text
Your pitch deck should be primarily visual. You’re the focus, not your pitch deck. If your slides are full of text, your investor audience is reading the slides and not listening to you. Your audience can read faster than you can speak. When they finish and you’re still talking, they’ll disconnect. After that, they’re almost impossible to re-engage. Great visuals enhance your story because vision is the most dominant sense in people.
WIIFI: What’s In It For Investors?
Why you? Why now? Why should an investor care? When your pitch answers those questions in a concise yet detailed manner, your chance of funding improves.
Knowing your investor audience is essential. Pitching friends and family is somewhat causal, pitch angel investors is more serious and pitching institutional investors is sophisticated. Tailor your pitch accordingly.
Successfully raising investor funding is often a long, frustrating and complex process. Getting turned down dozens or hundreds of times will test an entrepreneur’s patience. Persistence doesn’t guarantee success but quitting guarantees failure. Investors use the process to find the most resilient entrepreneurs worthy of funding. Getting investor funding will often change your life and your world for the better. The guidelines above will make your process faster and easier.
P.S. The author Luke Brown is an Engagement Partner with Growthink. If you would like to discuss how Growthink could help in creating your presentation for you, do reach out to Luke directly at [email protected], and / or at 310-846-5047.
Written by Jay Turo on Wednesday, March 19, 2014
An endearing, but dangerous quality of entrepreneurs and small business owners is their propensity to go all-in -- not only pouring all of their lives, hearts and souls into their business, but all of their money too.
Of course, many entrepreneurs simply need every penny they have and more to fund their businesses and there just isn't any money left to invest in anything else.
But once an entrepreneur gets beyond the survival stage, they need to think about how and where money is working for them in their own business, and where it could do better.
Oftentimes, a lot better.
The first challenge: Entrepreneurs live, breath, and too often suffer their own businesses so much that when it comes to investing, they can’t think straight.
I encounter a lot of entrepreneurs who have this massive built-in bias toward ongoing, disproportionate investment in their own businesses are correspondingly are often just blasé, disinterested, and even, dare I say lazy when it comes to thinking about money and investments outside of their “baby.”
So they take one of two approaches. The first is the passive one -- outsourcing money and investment decisions outside of one’s business to a wealth “manager.” While there are compelling financial planning reasons to do this -- i.e. "we need to save and invest this much and earn this rate of return by this date to comfortably retire" -- the expectation for actual investment returns via this approach should be kept pretty low.
In fact, the S&P Indices Versus Active Funds Scorecard (SPIVA) shows that average "managed money" returns trail the index averages by almost the exact percentages of the fees charged for managing the money.
The second approach is more scatter shot - whereby investments in “one-off” real estate, startups, oil and gas, and collectables opportunities, among others, are presented to the entrepreneur by a varying lot of well-meaning and potentially pilfering parties.
And entrepreneurs, as they are wired fundamentally as optimists, find these opportunities naturally appealing.
So they invest – sometimes to good and lucky effect, but often disastrously so.
Is there a better way?
Can the hard-working entrepreneur have his or her money earn a good rate of return? While managing risk?
And dare we dream – adoing so in a way that is in alignment with their entrepreneurial values and leverages their entrepreneurial skill sets, experiences, and industry knowledge?
Of course there is!
An approach built on diversification and one that leverages traditional managed money vehicles like public market stocks, bonds, and mutual funds, but also offers the opportunity for above average, and with a little good fortune, potentially excellent investment returns.
It looks, quite simply, like this: Invest in what you know.
Or, in other words, a restaurateur could invest in other people’s restaurants and food service businesses.
Healthcare entrepreneurs could evaluate investment opportunities in healthcare.
Those owning distribution or light manufacturing businesses, look at other people’s distribution and light manufacturing businesses.
Now, of course there are caveats to this approach.
The first is to be cautious and conscious as to industry risk – factors such as an uncertain regulatory environment or perilously fast changing technological change that create risks beyond the control of any one or several companies in an industry.
Secondly, to undertake this form of investment, especially when owning minority positions in private companies, transactional and deal term sophistication is a must.
So if you don't understand aspects of private equity investing like valuation, capital structure, control and anti-dilution provisions, it is probably better to either avoid this form of investing, or do so through a managed or private equity fund vehicle approach.
You may be asking: Why go through all the trouble?
Well, when done right, a properly executed and diversified "angel" investment approach like this can earn a very high investment return.
Research from the Kauffman Foundation Angel Returns Study and the Nesta Angel Investing Study, compiled by Dr. Rober Wiltbank, have demonstrated that the "…average angel investor (across the U.S. and UK) produced a gross multiple of 2.5 times their investment, in a mean time of about four years."
Returns like this will not be found via traditional managed money approaches, and rarely -- especially when accounting for the huge opportunity costs of running a company -- in one’s own business.
So for those entrepreneurs with the stomach and the work ethic for it, an "Other People’s Business" investment strategy like this is one well-worth considering.
To Your Success,
P.S. To listen to a replay of my Thursday webinar, What's Up with WhatsApp?, where I explored some of the key lessons learned from Sequoia Capital's $58 million investment - and subsequent $3 billion windfall - upon Facebook's purchase of the messaging app last month, click here.
A version of this article originally appeared in Entrepreneur Magazine and can be seen here
Written by Dave Lavinsky on Sunday, March 16, 2014
A venture capital firm is a financial institution that focuses on providing capital, in the form of equity, to companies who offer them the prospects of significant growth.
The partners and associates at venture capital firms are known as venture capitalists. The term "VC" or "VCs" applies to both venture capital firms and venture capitalists.
Unlike angel investors, who invest their own money, VCs are professional institutions that invest other people's money. VC firms raise capital for their own funds from sources which primarily include pension funds, financial and insurance companies, endowments and foundations, individuals and families, and corporations.
The VCs are then charged with providing a solid return on investment on this money. This is the one thing that every VC wants. By providing a solid ROI to their investors, VCs earn bonuses and raise more funds so they can stay in business.
VCs earn returns for their investors by finding high growth companies, making investments in them at favorable terms, guiding and nurturing them, and enacting a liquidity event (e.g., selling the company or having it complete an initial public offering).
Because they are utilizing other people's money, and are judged and compensated by the performance of their investments, venture capitalists are extremely rigorous in their investment decision-making process.
Importantly, VCs tend to only invest in companies with significant market potential of $50 million, $100 million or more. This is because even with all their relevant experience, the average venture capital firm will lose money on half the companies they invest in and only break even on a third.
Where VCs make their money is on the approximately 20% of companies they invest in that see explosive growth and provide remarkable returns of 10 times to 100 times or more on their investment.
Industry insiders sometimes refer to the 2:6:2 rule. This rule is that an average portfolio of ten VC investments will include two losses (e.g., companies go bankrupt), six moderately performing companies (may break-even on the investment or lose a little) and two very successful returns.
In fact, an analysis by Bygrave and Timmons of VC funding found that just 6.8% of investments returned ten times or more on the invested capital (these "home runs" are what give VCs high overall returns). Conversely over 60% of investments lost money or failed to exceed the amount of money earned if the capital had been put in an interest-bearing bank account.
The result of this analysis is that typically a venture capitalist will want to see the ability to get 10X their money back or more from investing in your company (they are seeking "home run" investments which compensate for the 60% of their investments that don't pan out) . As such, for every $1 million you are seeking from VCs, you must show them a realistic scenario where you can turn it into $10 million.
So, importantly, when approaching venture capitalists, remember 1) their primary goal is to make significant money from investing in you; and 2) you need to show them how they can earn a 10X return.
Now, if your company can potentially give VCs a 10X return, then seeking venture capital might be right for you. However, raising it is virtually impossible if you don't know what you're doing and haven't done it before. So follow this plan:
1. Develop a list of VC firms.
Start by creating a list of venture capital firms.
2. Narrow your list.
Each venture capital firm invests based on particular characteristics (e.g., some only invest in software firms), so you need to make sure your list only includes VCs that are interested in your type of venture.
3. Make sure the VC is active.
Many VC firms that have websites aren't active. That is, they aren't making new investments. You don't want to waste your time contacting and talking with these firms.
4. Find the appropriate person to contact.
This is critical. Venture capital firms are comprised of individual partners and associates. If you contact the wrong one, you'll be dead in the water.
5. Send the VC partner or associate a "teaser" email.
You don't want to send the VC a full business plan or executive summary initially. Rather, you need to send them a "teaser" email to see if they are interested. You don't want to "over shop" your deal.
Once the VC "bites" on your teaser email, the next step is generally to send them your business plan. Following that you'll do an in-person presentation(s), receive and negotiate a term sheet, and then sign a formal agreement and receive your funding check.
The process is a lot of work, but once you receive their multi-million check with which you can dramatically grow your company, you'll agree it's worth the effort.
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 presentations, and how to secure your financing. This video explains more.
Written by Jay Turo on Thursday, March 13, 2014
Last week, I shared how between 2011 and 2013, Sequoia Capital invested approximately $60 million in WhatsApp – the instant messaging subscription service bought last month by Facebook for $19 billion.
And how Sequoia’s return on that $60 million was close to $3 billion, or more than 50 times its original investment.
I then offered to share some of our research findings as to the selection strategies that early-stage technology investors like Sequoia now utilize to identify companies with this kind of return potential.
Not surprisingly, the response was overwhelming.
So much so that only a very of those who wanted to learn more were able to get in before registration sold out.
So to accommodate all of the requests I have agreed to re-present our findings and will do so via web conference tomorrow at 7 pm ET / 4 pm PT.
To register, click here: https://www2.gotomeeting.com/register/647747626
On it, I will share:
• Why the majority of investors presented the opportunity to invest in WhatsApp declined to do so
• How Sequoia partner Jim Goetz diligence the deal and decided to invest in WhatsApp instead of the literally hundreds of comparable messaging applications then and now in the marketplace
• How Big Data and Black Swan portfolio theory and modeling were critical to Sequoia’s valuation analysis on the deal
• How today’s booming IPO market, with through March 1st more than 42 IPOs raising $8.2 billion – the highest YTD activity since 2007 – is affecting (positively and negatively) the technology deal marketplace
• And much, much more
Register now via the below link:
To Your Success,
Written by Dave Lavinsky on Sunday, March 9, 2014
On March 3rd, Crowdfunding platform Kickstarter announced that is surpassed $1 BILLION in funding pledges. That’s $1,000,000,000 in funding for entrepreneurs.
Very interestingly, Kickstarter included lots of interesting statistics on these crowdfundings as follows:
- 5.7 million people funded these projects (versus less than 1,000 active venture capital firms worldwide)
- More than half of the $1 billion was pledged in the last 12 months alone
- The 5,708,578 people who have backed a Kickstarter project represent 224 countries and territories, and all seven continents
- These are the top Countries & Territories by dollars raised:
- United States: $663,316,496
- United Kingdom: $54,427,475
- Canada: $44,913,678
- Australia: $31,776,566
- Germany: $21,607,047
- France: $10,131,159
- Sweden: $7,150,257
- Japan: $7,139,419
- Netherlands: $7,033,026
- Singapore: $6,710,981
- 1,689,979 people have backed/funded MORE than one project
- 15,932 people have backed/funded more than 50 projects
- $619 million has been pledged by returning backers
Those are some very impressive numbers. And they ONLY represent one Crowdfunding platform. If we start adding other platforms, like IndieGogo, RocketHub, etc., the amount of Crowdfunding dollars raised and the number of backers skyrockets further.
And, perhaps most importantly, the trend for entrepreneurs is extremely positive as Crowdfunding is growing rapidly. Recall what I wrote above -- “more than half of the $1 billion was pledged in the last 12 months alone.” Now consider that Kickstarter launched on April 28, 2009.
That means that from April 28, 2009 to March 2, 2013, a nearly 4 year period, a half-billion dollars was raised on Kickstarter. They then raised the same amount in just the last year.
The fact remains that Crowdfunding is here, is here to stay, and is only growing. This is truly a blessing for entrepreneurs and is probably making right now the best time in history to raise money for any company. So, if you need funding, what are you waiting for?
Written by Dave Lavinsky on Sunday, March 2, 2014
Even billionaires need to raise money. Take Donald Trump. Each time he launches a new real estate project, he raises outside money for it. Why? Because why should he only invest his own money? Rather, Trump and other billionaires understand the importance of leveraging other people’s money.
So, what do billionaires like Donald Trump do to raise money? Below are five key tactics billionaires use, and perhaps more importantly, that you can too.
1. Leverage Relationships
Billionaires have lots of relationships that they leverage when seeking capital. They access their networks by telling them about their latest project and their funding needs.
You too have relationships. You have current and/or former bosses, co-workers, counsel (e.g., accountants, lawyers, etc.), family friends and so on. Leverage these relationships when seeking funding. Even if none of your current relationships can invest directly, some certainly know and can introduce you to others who can.
2. Get Creative on Deal Terms
A great investment makes sense for both the investor/lender and the entrepreneur. Oftentimes, in ensuring the investment works, you need to get creative on the deal terms.
For example, maybe you give the investor a small equity percentage in your business, monthly repayment of some of their investment, AND a small percentage of your venture’s future sales. While most investments only include one of these funding options (e.g., debt/loan, equity, or royalty payments), there’s no rule that you can’t get creative and combine deal terms. And when you do, you often make your deal/company more appealing to investors.
3. Sell Investors on the Opportunity
Regardless of how good your company or investment opportunity is, you need to “sell” it to investors and lenders. Billionaires like Donald Trump must also do this. For instance, Trump constantly convinces investors why his newest venture will be a huge success.
Marketing yourself and your company to investors is a crucial part of raising capital. You must prove to investors why your company will be successful and that they will get a solid return on their investment. Importantly, when “selling” investors, get specific. For example, don’t just say you will succeed because you have the best management team. Rather, explain the precise credentials of your team that make you the best.
4. Don’t Take Rejection Personally
Billionaires like Donald Trump have been rejected hundreds of times in their money-raising careers. The fact is that your investment is never right for everyone.
You must accept that you will get more “no’s” than “yes's” when raising money. Importantly, don’t let the “no’s” get to you. Remember that you only need one “yes.” So, even after 10 “no’s” or 25 “no’s” or even 50 or 100 “no’s” you need to keep going and persevere.
If you truly believe you have a great company or opportunity, and that it can provide a solid return to your investors/lenders, then never back down.
5. Strategically Incorporate Investor Feedback
When investors say “no,” use the opportunity to gain feedback. Specifically, ask them why they didn’t want to invest. Sometimes it has to do with your deal terms. Other times it has to do with concerns about your business or business model.
It is important for you to strategically assess this feedback. Don’t blindly follow the feedback or advice, as it may or may not be correct. But particularly if you hear the same feedback from multiple investors, you must strongly consider what they are saying. If multiple investors, for example, say your management team isn’t strong enough, then it’s generally time to agree with them and immediately start to bolster your team.
Similarly, when billionaires like Donald Trump have trouble raising funding, they modify their project and/or deal terms to better adhere to the needs of investors and/or lenders.
In summary, raising capital is essentially a partnership between you the entrepreneur and the sources of funding you seek.
The larger your network, the more potential funders or referrals to funders you have. After that, it’s about creating and selling an opportunity that funders can’t resist. Never give up, but also, don’t be stubborn -- realize that feedback from those who say “no” can often be invaluable to your ultimate success!
Written by Dave Lavinsky on Monday, February 24, 2014
Great leaders delegate. They get other people to do the work for them. They focus on vision and strategy, and getting their people to perform at their highest possible level. And when their people perform, the company executes on the strategy and achieves its vision.
While much about leadership has been written over the years, much of it has changed. Because many of the old rules and strategies, such as the “it’s my way or the highway,” strategy no longer apply. People are different today than they were even a decade ago. We have different needs and thinking, and nurturing your team to get them to perform is more complex.
In fact, when it comes to outsourced employees, leadership is even more complex. Because when you can’t look your employee in the eye, it’s hard to tell if they’re bought into your strategies and goals, and if they will perform to your standards.
What makes this so more important is that any good HR strategy nowadays includes outsourcing. Because outsourcing certain roles allows your company to achieve great progress at a significantly lower expense, and without increasing your fixed costs which decreases flexibility.
This being said, the following are five things a great leader would never do when managing their outsourced employees.
1. Rely exclusively on email. Email is generally the easiest way to communicate with outsourced employees, particularly if they live in different time zones. However, email is rarely the most effective communications method, particularly when you want to motivate people. Rather, make sure that occasionally you also use telephone calls and video calls using services such as Skype. By seeing your employee, and having them see you, you can gauge and influence their levels of engagement and excitement.
2. Give vague directions. If someone’s seen you do something several times, and then you ask them to do it, they might do a good job. But if someone’s never seen you do something, particularly when they don’t work in your office, they’ll generally fail wildly. Unless, that is, you give them precise directions. When you outsource a task, be sure to document precisely what you want done and why. This will guide the employee and set expectations for them to meet.
3. Wait to see finished work. When you outsource a project to someone, don’t wait until the end to judge their work. Rather, check in periodically. Ideally, break the work into pieces. For example, if an outsourced employee is responsible for creating a video, natural pieces or project stages might include: 1) writing the video script, 2) sketching or finding the images to be included in the video, 3) creating a video draft, 4) finalizing the video. If you wait to see the final video, you inevitably will be disappointed. Rather, check in after each stage and provide feedback. The end result will be infinitely better.
4. Fail to set deadlines. Employees, particularly outsourced employees who don’t see you, need deadlines. If not, they’ll generally take way too long to complete a task. When employees work in your office, they should have deadlines too; but, because you see these employees, if there is a deadline, you’ll simply remember to tell them. You don’t have this luxury with virtual employees, so make sure they know the deadline for each of their projects.
5. Fail to give time expectations. Even when you set a deadline, you still must set time expectations, particularly if you are paying your outsourced employee on an hourly basis. While two people can both complete a project in a week, for example, you’re clearly paying a ton more if one worked ten hours per day and the other two. So, at the beginning of each project, have the employee give you an estimate of the work hours, and have them check in periodically to let you know if their estimate is on track or not.
When you outsource properly, you can dramatically grow your company at a fraction of the cost as your competitors. But, make sure you avoid these leadership mistakes; when you do, you can effectively manage your outsourced workforce to get the most benefit from this key HR strategy.
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