Entrepreneurs must have many skills. They must be able to spot opportunities. They must be able to create plans to seize those opportunities. And they must execute on those plans.
And, for most opportunities, and clearly for those opportunities that are really big, execution involves hiring and managing employees. Because no single entrepreneur can do everything themselves.
But you just can't have any employees. Companies that succeed have employees that are highly motivated.
So how do you ensure that your employees are motivated to succeed?
Clearly, giving them fair salaries helps. And clearly, stock options that allow employees to benefit when the company benefits are good practice.
But, there is an even better way. In fact, authors Adrian Gostick and Chester Elton in their book, The Carrot Principle, found a better way.
Where did they come up with this better way? Well, they conducted a study involving 200,000 people over a ten-year period.
Importantly, their study showed that the key characteristic of the most successful entrepreneurial managers is that they provide their employees with frequent and effective recognition.
That's right, significantly better business results were realized when managers offered recognition in the form of constructive praise and meaningful rewards (typically non-monetary).
The authors found that recognition is most effective when it is:
Positive (don't mention any negatives when giving praise)
Immediate (comes soon after the job well done)
Close (presented to employee(s) with their peers in attendance)
Specific (precisely recognizes why the task/job they performed merited recognition)
Shared (allows employee's peers to also comment during the recognition presentation)
Carrots are needed to motivate employees. But what I found most interesting about the author's findings was that recognition is more effective than monetary rewards. This is a critical finding for all managers, and particularly entrepreneurial managers who typically operate in cash-restrained environments.
Knowing how to motivate your employees will allow you to build a team that is as passionate about success as you are. And this will ultimately lead to your company achieving its goals. So, while it may not seem like a mission-critical focus today, it's definitely worth your time and effort. So don't delay...
Do you remember the Faberge Shampoo television commercial from the 1980s?
The one in which the woman says, "I told two friends about Faberge Shampoo, and they told two friends, and they told two friends and so on, and so on..."
Now imagine this happened to your product or service....that one buyer told two more buyers, who told two more buyers, and so on, and so on. Your revenues would go through the roof, and with virtually no marketing expense.
Ah, the entrepreneur's dream.
Unfortunately, I actually categorize this as a "dream" because I don't think any company can count on this type of viral marketing. Even if your product or service is that great, there's no guarantee that people will refer it to their friends.
But you CAN change that.
You can maximize the chance that people will refer your product or service if 1) you make it really easy for them, and 2) you give them the right incentives. In fact, employing a proven referral marketing program can be your most cost-effective marketing tool.
To learn more about referral marketing programs and other cool, cutting-edge marketing techniques, I interviewed Trevor Shanski, the founder of eWORDofMOUTH Inc.
I was not only interested in interviewing Trevor because eWORDofMOUTH seemed so cool, but because I knew Trevor was such a great executor. Specifically, in his previous position as COO of Warehouse One Ltd., he helped grow the company from 13 local stores to 108 national stores, and grew revenues to nearly $100 million in sales.
In the interview, Trevor provided some great tips on referral marketing including:
- What you need before you generate referrals: all you need are current customer and/or prospects
- The key requirement to get people to refer your business to them: they must be satisfied with you or they will not refer you
- How to reward people for giving you referrals: give them something of value; but that something doesn't necessarily have to cost you anything
- Tips to generate the most possible revenues via referrals: give rewards that encourage them to buy even more from you; for example, if you give them discount coupons, redeeming them would increase your sales
Trevor also gave some great tips on improving your email marketing success including citing the importance of personalizing your emails to recipients and to keep an eye on your open rates in order to determine the right frequency of your emails.
Importantly, Trevor gave me a private demo of the eWORDofMOUTH platform which combines email marketing with referral marketing into one, simple-to-use system. The system also allows for text messaging and multi-location emailing (i.e., if you have multiple business locations, you can centrally manage and customize emails to customers of each location) making it extremely powerful.
As you can imagine, by using eWORDofMOUTH, you can generate a significantly higher ROI on your marketing dollars than traditional marketing methods.
Not only does the interview cover referral marketing, email marketing and mobile media marketing, but I got Trevor to reveal his secrets to operational success (as mentioned, as COO of his last company, he grew it to nearly $100 million in revenues) and how he developed a highly-impressive, nine-person Board of Advisors.
To hear a short clip of the interview, click the blue triangle in the player below:
"Dave, thank you very much for your review of lessons learned these past 10 years and thanks to everyone for attending tonight and sharing this milestone accomplishment with us. Particularly want to thank Rocio Melgar and Melissa Welch for all of their hard work and energy in putting this event together.
Before I dive into my “Where Will be in 2019 predictions, I would like to share a couple of stories with you. First one about a very, very famous and successful entrepreneur and angel investor and secondly, the story of how I got involved with Growthink.
As many of you know, Jeff Bezos was one of the early investors in Google. Yes, that Jeff Bezos. Founder of Amazon.com. #33 on last year’s Forbes’ 400 with a net worth of over $8.7 billion.
Here is the backdrop:
In 1998 when Google’s offices were a Menlo Park, California garage - Bezos invested $250,000 of personal funds into the fledgling search engine.
When Google went public in 2004, that $250,000 investment translated into 3.3 million shares of Google stock. And a stock share position worth over $280 million!
While he does not disclose how many of those shares he still holds, at the current price of Google stock they would represent an investment position of over $1.5 billion.
So why did Bezos invest in Google? In his words, “…There was no business plan…They had a vision. It was a customer-focused point of view.” And he adds, “I just fell in love with Larry and Sergey.”
So, now my story. Before business school and before Growthink I owned an ice cream business on Cape Cod in Massachusetts. It was a very nice life. I worked 4-5 months out of the year, lived in a beautiful place (Cape Cod), and did work that was heck a lot of fun. At age 30, I was all set. I had a business, a car, a house, and a girlfriend.
But then, in the summer of 1999, my MBA classmate Dave Lavinsky called me with this idea for a company at the height of the Internet boom. If I just worked with him for a few short months, we would be able to aggregate positions in a bunch of rocket ship gazelle companies – soon to be know as “the next Googles.”
Seemed like a great deal, So, I sold the business, the car, the house, broke up with the girlfriend, packed my bags and headed, Jed Clampett-style – not to Beverly Hills, but to Venice to start Growthink with Dave.
And here I am, 10 years later. With an amazing wife and 2 beautiful children!
And timeless truths remain:
First of All, Think Long Term. Even though Google has been the fastest growth company in the history of capitalism, it was still SIX YEARS from Bezo’s original investment in the company to liquidity. Overnight entrepreneurial successes simply do not exist. While certainly all of us would have liked to have had a Google in our lives by now, as Saint Augustine once said, Patience is the companion of wisdom.
Secondly, Get in Early. Sure, it would have been great to get into Google in 2004 at its IPO price of $85/share, as the shares are up over 500% since then. But Bezos, after adjusting for stock splits, got in at EIGHT CENTS PER SHARE!
The beauty and the allure of entrepreneurship is the opportunity to be a part of something VERY, VERY big very, very early. This is how great fortunes are made.
Third, Invest in People. At the time of Bezo’s investment, there were a large number of very well-funded and successful search engines already on the market. Remember this was 1998 not 1994. Yahoo, Alta Vista, Lycos, Excite, Infoseek to name just a few.
But Bezos was attracted to Page and Brin as people, as technologists, as leaders.
Lesson – we overcomplicate business. Great, talented leaders drive and build businesses. Everything else is secondary.
Fourth, Take Your Shot. For every Jeff Bezos who invested in Google, there are stories of dozens that were presented with the opportunity that did not.
This of course does not mean that the probability of having a Google-like success is anything but very low, but it does mean that it is far greater than the ZERO percent likelihood of success of those that don’t swing the bat.
And Finally, Get Lucky. As hard as it is for many to accept, having fantastic, great luck is a key variable in success.
Success IS assured with thoughtful, disciplined, day-in, day-out hard work. And with hard work as the given, magical success sometimes blooms.
And in the spirit of great luck, let me make my 2019 predictions:
PROBABILITY of 100% - On October 22nd, 2019, if Jay Turo is still of this earth and of animate form, he will be 51 years old.
His 2 sons, Jay Jay and Teddy, now 3 and 2, will be entering their teenage years. Dave Lavinsky’s son Max, whose conception at that particular time and place in 1999 was the magically unpredictable act that led to the founding of Growthink, will be entering his senior year in college.
Growthinker Tristan Sigerson, who started as an intern from UCLA and whose youthful cheer and spirit lifts us daily, will be 36.
Growthinker Jeff Jones, our VP of Business Development, who loves to flaunt his youth and athleticism at us 40-somethings, will be 40 himself.
Only my mother, who traveled here from West Boylston, Massachusetts to be with us tonight, will fight this trend, as she will still be celebrating, as she has for as long as I can remember, her 39th birthday.
Let’s all take a short pause here and reflect on how old YOU will be in 10 years. Does it impart you with a sense of urgency? Of dread? Of disbelief?
PROBABILITY of 90% - The NASDAQ and Dow will be trading at, respectively, above 10,000 and above 30,000.
Why – really quite simple – even getting to those levels will mean a return of less than 5% annually from 1999 to 2019. It points to how poorly the investment markets have performed in the last 10 years. The NASDAQ in particular has performed terribly, down almost 50% from where it was 10 years ago.
In short, all of us in the worlds of technology and entrepreneurship must have a deep and abiding FAITH that in the next 10 years all of the amazing technological progress we have seen and are sure to see more of will result in investment return.
PROBABILITY of 90% - The Fear of the Rise of China Will Be a Thing of the Past – America Will Still Lead the World.
Are you as tired of me as hearing about how China will catch the United States and then surpass it? There is very, very little chance that a society with no free press, with a monolithic educational system, with a totalitarian government, will EVER lead the modern world.
Lest we forget – we live in the information age. This is the age of software. All GREAT software companies – have you noticed – are AMERICAN companies? This is not by accident. Our freedom-loving, creative society is BUILT to birth great technology and great idea companies. Sure, America has problems, but compared to the problems and limitations of every other country and society in the world, we are still by far the most likely place for the companies and ideas that will shape the 21st century to be born and to grow.
PROBABILITY of 90% - The Cloud, The Cloud, The Cloud
Following up on the above, cloud computing will transition from not just being a business model or a business sector, but will become business itself. Even today there really isn’t such a thing as a technology company and a non-technology company – it is a 20th century legacy misnomer. Everything is technology and soon all of it will be run on the ether.
And we will interact with it with via devices and implants and virtual reality machines that today we can only imagine.
PROBABILITY of 100% - Growthink will be a publicly traded company and will have a market capitalization of greater than $1 billion.*
Let me put this bravado in perspective – as a grizzled consultant, as an MBA, as a risk-taker that has been well-trained to see sell all sides of the story, I am very much aware of the challenges and the probabilities.
But as a CEO, as an entrepreneur, I know the power of faith and commitment, that positive momentum is simply force positively applied. Quite simply, by sticking to our original principles – thinking long term, getting in early with charismatic and dynamic entrepreneurs, taking a LOT of shots, and being open to magic in our lives and our professional endeavors, success is assured.
Thank you, enjoy the rest of your evening, and see you in 2019!"
*Do note that as much as all of us would like it to be this is not an investment guarantee. It is, however, a statement of great confidence in the Growthink business model, in our team, and in our growth prospects.
I just finished conducting an interview on how to be an entrepreneur.
And near the end of the interview I asked an interesting question.
I wasn't sure regarding the response I would get, but I was pleasantly surprised.
The question I asked was, "What do you think makes the difference between a good and a great entrepreneur?"
I was expecting a list of qualities that the great entrepreneurs have.
But instead, entrepreneurship expert Dr. Bruce Barringer, gave a really great answer.
He said, "A great entrepreneur makes a difference in your life."
He went on to explain that the founders of Google have changed his life as he spends so much time on Google these days. But you don't have to be the next Google to be a great entrepreneur.
The founders of the local coffee shop have also changed his life. As have the companies that created the podcasting technologies that he employs every day.
The point is that great entrepreneurs are those that create products and services that truly benefit their customers in such a way that the customers integrate them into their lives.
When I think about my life, I can concur. The entrepreneurs who started the gym I go to, the gasoline station I frequent, and the supermarket where I buy my lunch have done a great job creating products and services that meet my needs. If they didn't, I'd patronize their competitors.
So, as you start and/or grow your business, you should make all of your key decisions with this question in mind: "will this decision allow my company to better serve customers and make a bigger difference in their lives?" As Dr. Barringer pointed out, if you solve the customer need, the money will follow.
To hear Dr. Barringer's answers to all of my questions on how to be a more successful entrepreneur, listen to the full interview on Growthink University here:
The other day, a BusinessWeek reporter contacted me with a question about entrepreneurial success.
She wanted my thoughts on a new business opportunity that one of their readers was considering.
The opportunity was "to open a sports store to sell products just from the four major sports teams in my city."
I hated the concept.
I immediately wrote back to the reporter:
"Is there really a need for this store? Who else is currently selling these items (stadiums? national retailer like Champs?) If there is no directly competing store, maybe there is no market? Is it hard to purchase these items online? I would think most of these items are easily found online at decent prices.
Will you offer anything that a national chain (http://www.champssports.com/) doesn't. Even a formerly local store (http://www.cosbysports.com/ in NY) now sells all teams' stuff online. And Cosby has a lot of unique items (e.g., autographed equipment and pictures that you can't find elsewhere).
The only thing that I think could work is offering unique items that you can't find elsewhere, mainly stuff like autographed pictures/equipment and collector's items. This stuff is available on eBay, but many people still like seeing/touching used stuff over buying online. With new items, I can't see this concept working since there's too much competition.
Finally, note that with the new items, the online stores have so many items. A physical store can only have so many SKUs or the inventory cost will go through the roof.
Once again, the concept only seems to work if the store offers items not available elsewhere (which will also make it more authentic - which is GOOD)."
So, why I am telling you all this?
The point that I want you to get is that your success in business is predicated on just one thing - your ability to solve the needs of your customers better than alternative methods.
In this case, unless the store carried merchandise that others didn't, it simply didn't solve customer needs any better.
So even if this entrepreneur quit their job, raised money and worked 24 hours a day, they probably would fail.
You need to worker smarter and not harder. And working smarter means that you are always looking to better satisfy customer needs; since that is the key.
Whether you are a detergent company looking to get clothes even cleaner, or a chair manufacturer looking to make chairs even more comfortable at a lower price, you must constantly be thinking about solving your current and potential customers' needs.
Well, for some, they simply love the thrill of starting a new business. For others, they have a great idea that they think will help people, and are eager to fulfill this unmet customer need. For some, they want to create a paying job for themselves and/or not have to answer to a boss. And for still others, they have grandiose plans to "change the world."
While the individual goals for each entrepreneur may vary, most sophisticated entrepreneurs share one common goal when starting a business - to eventually exit the business for a large sum of money.
Savvy entrepreneurs know that they can make money day-to-day running a successful business. But, they know that the real money comes when they "exit"; that is, when they take the company public, or more likely, sell the business. That is when the million-dollar windfall comes that most entrepreneurs dream about.
Having successfully bought and sold businesses in the past, I have my own views on the topic of "exit strategy planning" or how to prepare a business to maximize the likelihood of 1) selling it and 2) the price at which it eventually sells. (Note that I tend to equate "exit" with "selling a business" since this is the most likely form of a successful exit.)
But, in order to provide more expertise on this subject, I recently interviewed John Davies.
Not only is John the co-author of "Selling Your Business For Dummies," but he has significant experience buying and selling businesses as the CEO of Merrymeeting, Inc.
In fact, not only does Merrymeeting own Sunbelt, the world's largest business brokerage firm, but Merrymeeting owns and/or has a majority interest in numerous national and international service franchise businesses.
In my interview, John conveyed his five insider tips for successful exit strategy planning.
The first is to make yourself replaceable. That is, if you as the business owner are too critical to the business' success, no one will want to buy it. You need to make sure that you have trained others that can run the business successfully in your absence.
The second tip is to make sure that your business has "predictable future revenues." The predictability of revenues has to do with how many new customers you get and the number of times your customers buy from you over time.
Clearly, a business that has repeat customers is more valuable than a business that has to constantly search for new customers. If your business is the latter, you need to figure out how to extend the lifetime value of your customers.
To learn more about these two insider secrets, get three more great secrets, and to learn John's personal 3-point plan that he's used to start, grow and run numerous multi-million dollar empires, listen to the full interview on Growthink University here.
To hear a short clip of the interview, click the blue triangle in the player below:
The more I learn about this guy, the more impressed I am.
And if you've been reading my emails, you've heard me talk about him. In fact, he's mentioned in Growthink's Definitive Guide to Creative & Alternative Financing Sources because he initially financed his business via credit cards (in the Guide, I present the best way to do this in addition to 27 other overlooked funding sources).
I'll tell you who he is in a second. But first, let me tell you why I thought of him again. Well, next week, we are celebrating Growthink's 10 year anniversary with a party at the Los Angeles Sheraton. And at the anniversary event, I will be giving a presentation on the key entrepreneurial lessons that we've learned over the past 10 years.
In putting together this presentation, I started assembling a timeline of interesting business events that have occurred over the past decade; like the formation of Napster in 1999 and the founding of Facebook in 2004.
And in doing this research, I thought it would be interesting to see how this guy's company has fared since Growthink launched in 1999.
Well, the guy's company, which he founded in 1996, reached the $1 million sales mark for the first time in 1999. And, when I searched to find his company's revenues today, I learned that last year (they haven't reported revenues to date in 2009 yet) their revenues reached $725 million.
That's right -- $725 MILLION!
Now, that's not even what got me so pumped up. What got me excited was that in 2008, the company's founder's goal was to reach revenues of $775 million.
And, when he didn't achieve that, he cut his $500,000 annual salary to just $26,000.
Yes, even though he generated $725 million in revenues, since it didn't meet his expectations, he cut his salary to a mere $26,000.
The "guy" that I'm talking about is Kevin Plank, founder and CEO of sports apparel company Under Armour.
This is a guy who maxed out his credit cards when he was starting a company in his mid-20s. Not to mention that he was launching a company in a very crowded space with massive competitors. Not many other people I know would have the nerve to compete head-to-head with Nike, Adidas and Reebok to name just a few.
Kevin Plank is the true entrepreneur. He had undying faith in his vision and put his money (and his credit) in his belief. And when he didn't meet his goals (like generating $725 million instead of $775 million in revenues) he accepted the blame himself. He didn't blame others. No, he took a massive pay cut to improve the company's financial performance in challenging economic conditions.
I hope that Kevin Plank inspires you like he does me. I'm sure he has many faults like the rest of us, but his faith in his business seems unparalleled. This happens when you truly love your company and truly believe in it.
I am fortunate that I truly love Growthink and truly believe in our mission. The result has been 10 years of success and ambitious plans to grow in the future. I hope that each of you are as passionate about your own businesses. For this passion is essential to your success.
There's an ever-increasing trend, of late, taking place in the restaurant/nightlife industry. Surely, those of you in major metro areas - where the hip, retro, and trendy tend to congregate - have seen it: the cocktail throwback to drinks like the Sidecar Martini, the Mint Julep and the Manhattan (yes, please, whiskey and vermouth!); as well as to glammed-out, vintage bartenders - suspenders for the lads, pearls and hair-flowers for the lasses.
Guys and dolls and gin-lovers, the nouveau speakeasy has arrived! Sans Prohibition, thank you kindly.
Thus was the theme for an event I attended at LA's Union Station last weekend. Hosted by Pulitzer Prize winning food critic, Jonathan Gold, the evening centered on the "Cocktail Culture" and its impact on lifestyle; especially with regard to cuisine. An impressive panel of chefs, venue owners and bartenders weighed in on social and historical trends that are shaping today's restaurants and their food/beverage offerings. Did you know that there's an Italian guy, named Vincenzo Marianella, who is renowned solely for developing cocktail menus at some of the country's top fine-dining establishments?
Nor did I.
While it's not surprising that an Italian is whipping up spirits (note: my last name is Moffa), what I found particularly interesting is that - more and more - food pairings are not just with wine. In today's en vogue dining destinations, cuisine is created with cocktail infusions in mind; and vice versa. The thought process is around a theme and an experience, from the décor through to every last morsel and sip. Now, while I use the term "speakeasy" in a tongue-and-cheek fashion, I do see new concepts harkening back to the supper-club days, when a night out was special; when people dressed to the nines and 'painted the town red.'
Having worked for one of the leaders of this "retro" movement - Ivan Kane (owner of Forty Deuce and Café wa s) - prior to joining Growthink last year, I've experienced first-hand the planning and detail that goes into bringing a restaurant to life. Working since, with many other developers and owners in the nightlife industry, I applaud them for the creativity they bring to cities like Los Angeles; and for the impact groups like 213 Downtown have made on the gentrification of the city proper and the renovation of architectural gems. Like the cocktails to which we seem to be returning, all of this really emphasizes an appreciation of the past. It says "thank you" to history, with a twist.
So, I sipped my Manhattans and other bourbon beverages as I took in the conversation and the music last Saturday, reveling in the feeling that - just for a little while - I was suspended in a different era. What an experience... and shouldn't that be the entire point of a night out?
Tired of reading about the same over-shopped, over-hyped, over-followed technology companies? Intel. Cisco. Dell. Microsoft. Even Google, Amazon, and Apple.
All great companies for sure but the under-reported truth is that the real money has already been made on them. They are already big and famous and have lots and lots of smart people following and trading them. As investment opportunities, they are yesterday's news.
Hot Technologies of the Next 10 Years
Now, if you want to make real returns, you need to identify the growth stories of the next 10 years. Companies that are early in their lifecycle. Ones that have protected positions in fast growing market niches.
And you need to invest in them BEFORE everyone and their Uncle knows about them.
How To Do It
It is really as simple as 1 - 2 - 3.
First, find a dynamic growth industry. Second, identify a company within it that is well-positioned to grow as the industry does - the proverbial "boat lifted by the rising tide." And finally, investigate the company's guts - its technology, its historical and projected financials, and most importantly, the quality and determination of its management.
Solid State Drives - A Classic Next Generation Technology Play
Let's take a look at the solid state drive (SSDs) business. Solid state drives, based on computer memory rather than a rotating disk, are replacing traditional hard disk drives at an increasingly rapid clip.
This is a technology transition not unlike when we moved from cassette tapes and LP records to compact discs, or from compact discs to MP3 players. The basic idea is accomplish the same functionality - in this case electronic data storage - and to do so faster, more reliably, and with lower power consumption.
Well this transition is happening in the SSD industry big time. The industry as a whole is growing at a rate of over 80%/year (IDC).
IDC further estimates that the market for SSD devices will grow from $932 million in 2009 to $5.6 billion in 2012. Other industry analysts take a similar view, with some foreseeing over 100% annual market growth for a number of years as the technology transition heats up.
Ok This Makes Sense - Now What Do We Do?
Now let's find a company uniquely well-positioned within this industry. It would be even better if this company was one that not a lot of people know about, yet already has GREAT products that consumers love.
And even better - suppose this company was not a dreamy-eyed startup but one with a 7-year history of going from startup in 2002 to over $150 million in revenues last year?
Finally, dig a little below the surface and get a sense of their plan for growth. Are they thoughtful in all their business aspects - technological, marketing, operations? Is management both intense and mature? Can they protect their place in their market niche from the big boys? And most importantly, can they grow as the industry around them grows?
If you can find a company that has this kind of 1 - 2 - 3 logic, and if you can get in on it at the right price, you have something special.
How To Find a Company Like This?
Well guess what, we are right now connected with a company like this. One on the verge of having its shares publicly traded, and one that is looking to connect with a select group of investors to fuel its growth.
Best regards, and look forward to your attendance.
Most entrepreneurs fail to raise
venture capital because they
make a really BIG mistake when
approaching investors. And on
the other hand, the entrepreneurs
who get funding all have one thing
in common. What makes the difference?