Growthink Blog

Entrepreneurial Success: The One Thing You Need


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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.


Successful Exit Strategy Planning: 5 Insider Tips


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Why do entrepreneurs start new businesses?

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:

 


Can You Believe This Guy?


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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.

Growthink on the Town: The Convergence of Cocktails, Cuisine and Conversation


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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?

Thanks to Zócalo Public Square for organizing the event - to read more about the panelists/sponsors and about Zócalo, which is a non-profit  that builds community by broadening access to civic discourse (where were they during Prohibition?? Kidding!), click the following link: http://www.zocalopublicsquare.org/thepublicsquare/2009/10/thank-you-zcalo-supporters/

In the meantime, head out this coming weekend and try something new - there's a cocktail napkin with your name on it and, I'm quite certain, a bartender named Joe.  

Maybe even a soapbox for good measure.
 
 
Ms. Moffa on her soapbox: the red carpet! 

The Most Interesting Company You Have Never Heard Of


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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.

Jay Turo
CEO
Growthink, Inc.

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Growthink Honors Christopher Columbus and His Spirit of Entrepreneurship By Staying Open On Monday


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Los Angeles, CA. October 9th, 2009. For Immediate Release. Jay Turo, CEO and co-Founder of Growthink, today announced that it honor of Columbus Day on Monday, that Growthink offices will be open for business.

"Being of proud Italian heritage, I have always admired the spirit of entrepreneurship, initiative, and good old-fashioned going for it that Christoforo showed on his great trip," Turo said. "And those of in the capital-raising business (especially as Columbus Day falls right in the middle of capital-raising season) can all learn a LOT from the strategic, angel investing round he raised from Queen Isabella to finance the trip. And he put his presentation together, I understand, without the latest versions of Powerpoint and Excel."

"In honor of his achievements and his spirit, Growthink, unlike the yesterday's news post office and the bailed out banks, is excited to be working and serving the world's entrepreneurs this Monday."


Luis Villalobos, Founder of Tech Coast Angels, Dead at 70


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Very, very sad news today that Luis Villalobos, Founder of the Tech Coast Angels and angel investor in 57 early-stage ventures, died suddenly yesterday at the age of 70.

I had the extremely good fortune to have Luis be one of the first clients of Growthink back in 1999. Luis hired us to do a lot of the "blocking and tackling" work in assembling a business plan for a fund/incubation concept - Gazelle Labs - that he and a number of the other principals of TCA had established. Truth be told, we should have paid Luis to work on the project. 
First of all, because even at that time, he had forgotten more about entrepreneurship and early-stage investing strategy than most of us will ever know. And because of his attention to detail and intellectual rigor, he set a standard and an expectation of work product that we have tried to carry through with here at Growthink in the last 10 years. Wisdom worth many, many, many times the fees we earned on the engagement.

I have fondly reflected on my experience of working with Luis over the years.  He embodied the best qualities of the American entrepreneur and angel investor - hard-headed and brutally realistic, challenging AND extremely giving of his time and energy in support of aspiring entrepreneurs.

He will be missed. May America produce more of his kind.

Who Has a Vested Interest In Your Business?


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Imagine a business opportunity that had a 95% chance of success.

Would that interest you?

Now, what if I further told you that not only was there a 95% chance that you would make money year after year from this opportunity. But that you would also continually be building equity in a business that you could sell in the future and retire.

Sound good?

Well, I'm not here to tell you about a specific business opportunity like this. But I am here to tell you about an interview with someone I did who has experienced over 1,000 opportunities like these.

That person is Ed Pendarvis.

Around 30 years ago, Ed founded Sunbelt Business Brokers Network, LLC. He has since grown Sunbelt into the world's largest business brokerage firm with approximately 300 licensed offices. Also, Ed has personally managed the sale of more than 1,000 businesses.

Few, if any, people have this level of experience and expertise. So, I was fortunate to get Ed on the line to get answers from him on key areas to help you grow a successful business.

And one of the incredible things that Ed told me was the approximately 95% of businesses which are purchased succeed.

Now, after digging a little, the reason we concluded that this happens is because there is a serious vested interest in these business.

To begin, typically with these businesses, the buyer invests all or a substantial portion of their life's savings in buying the business. As such, they have a serious vested interest in the business' success.

And, Pendarvis goes as far as stating that he would not buy a business if the seller didn't provide seller financing. The result of seller financing? The seller doesn't get paid if the business doesn't succeed.

As a result, the seller has a vested interest in the business' success and works to train the new owner how to expertly run the business.

Which leads to the question of "who has a serious vested interested in your business?" Obviously the more and better qualified the individuals and companies which have a vested interest in your business, the better the chance of your success.

So, if you have not done so already, get qualified personnel, advisors, joint venture partners, investors, and others who can take a vested interest in your company, and your success should skyrocket.



--------------------------------------------

Growthink University members can download the full audio of the interview I conducted with Ed Pendarvis here:

http://www.growthinkuniversity.com/members/357.cfm

In the interview, Ed revealed tons of great tips and information regarding buying a business, including:

* Why the success rates of buying a business or buying a franchise are over 10 times greater than starting a business from scratch
* The key things you should look for when buying a business, and the first thing you must do
* The most qualified person in the world to teach you how to run the business you bought
* The easiest place to find ideas to grow your new business
* How to maximize the productivity of your workforce once your acquisition is complete
* The 3 places to get financing for the business you buy
* Why buying a business is so much different than buying a house

In addition to great information on buying a business, I got Ed to reveal tons of useful information for those starting a new or growing an existing business, including:

* How to build a business that makes others want to buy it at the highest price
* The common traits he has found in over 1,000 successful business owners
* The technique he used to ensure quality control as he grew Sunbelt from just one to over 300 offices
* How Ed ensures that he is as productive as possible every day

If you are looking to start, buy and/or eventually sell your business for a lot of money (which I hope applies ALL of you), this is an interview you want to check out!

Listen to the full interview here: http://www.growthinkuniversity.com/members/357.cfm

Non-members can listen to a brief clip of the interview by clicking on the blue triangle in the player below:


The Story of Jeff Bezos’ $250,000 Investment into Google in 1998


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To be filed firmly in the categories of the rich get richer and it does usually make sense to be both lucky and good, this week’s New Yorker notes that 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.

The story is this - in 1998 when Larry Page’s and Sergey Brin’s Google offices were a Menlo Park, California garage - Bezos invested $250,000 of personal funds into the fledgling search engine in a $1 million follow-on investment round.

When Google went public in 2004, that $250,000 investment translated into 3.3 million shares of Google stock. At Google’s IPO that represented a  stock share position worth over $280 million!

While Bezos 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.

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 more tellingly he adds, “I just fell in love with Larry and Sergey.”

In addition to being a tale to which the normal reaction is to just say “wow,” Bezos’ Google investment offers a number of great lessons for aspiring, private company investors:

1.    He Thought Long Term. Even though Google has been the fastest rocket ship growth company in the history of capitalism, it was still SIX YEARS from Bezo’s investment in the company to liquidity. Private equity overnight successes simply do not exist.

2.    He Got In Early. Sure, it would have been great to get into Google at its IPO price of $85/share, especially as the shares are up over 535% since then. But Bezos got in, after adjusting for stock splits, at EIGHT CENTS PER SHARE!

Talk about leverage. That translates to a 112,000 percent increase from investment to IPO, and then if he held onto the shares to another 535% on top of that.

3.    He Invested in People. At the time of Bezo’s investment, there were a large number of very well-funded and far more successful search engines already on the market. Remember this was 1998 not 1994. Yahoo. Alta Vista. Lycos. Excite. Looksmart. Webcrawler. Infoseek. Inktomi and GoTo to name just a few.

But Bezos was attracted to Page and Brin as people, as technologists, as leaders. And obviously their customer-centric focus really tracked the way that Bezos looks at the world and is embodied in the Amazon customer service experience.

So while a business opportunity, in its abstract is great, evaluating the people leading a business is a FAR MORE RELEVANT investing best practice.

4.    He Took a Shot. For every Jeff Bezos who invested in Google, there are stories of literally dozens of investors that were presented with the opportunity and did not.

This of course does not mean that the probability of any early stage private company investor having a Google-like success in their portfolio is anything but very low, but it does mean that it is far greater than the ZERO percent likelihood of success of those who did not invest.

As they say, you can’t win if you don’t play.

5.    He Got Lucky. As hard as it is for many to accept, luck is a key, and sometimes the key, variable in successful investing.

As opposed to fighting or getting philosophical re this reality, a far better question to ask is “How can I improve my likelihood of, for lack of a better turn of phrase, getting lucky?
 
Best regards, and look forward to connecting.

--
Jay Turo
CEO
Growthink, Inc

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I Got a C+ on This and I'm Not Too Happy About It...


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I just finished a great book called The Inspired Leader.

And while I was reading it, I tried to see how I stack up against the great business leaders discussed in the book.

And unfortunately, I didn't rate myself so well.

Maybe I'm being a bit harsh on myself, but there's clearly a lot of room for improvement. And importantly, I will be making a personal effort to improve. And I hope you will too. Because, a key attribute of a successful entrepreneur is that he or she be an effective leader.

As you know, few successful companies have just one founder and no employees. As you grow your business, you will most likely grow your employee base. And, as you do this, your ability to effectively lead your workforce becomes more and more important.

In fact, according to management expert Peter Drucker, most businesses would double their profits if they increased employee productivity by just 10%. 

Let me repeat this critical point - most businesses would double their profits if they increased employee productivity by just 10%. 

That fact alone should inspire you as an entrepreneur to improve your leadership skills. It certainly did for me.

Now, the key premise of the book is that there is one leadership skill that trumps all others. That skill, as the book's title so aptly points out, is the leader's ability to inspire employees. (The proof? The book's authors, through rigorous market research and analysis, repeatedly found a high correlation between success and a leader's ability to inspire the employees around them.)

So let's talk about nine ways that you and I can be more inspiring to our employees:

1. Increase our energy and enthusiasm. When inspiring leaders enter a room the energy level and excitement should go up. Employees should want to be around you.

2. Provide clarity on your goals. Inspiring leaders are very clear about the company's goals and how each employee can contribute to the company's success.

3. Set challenging goals and objectives. Setting "stretch" goals (goals that are challenging but obtainable) releases employees' conserved energy and increases their productivity as they try to achieve those goals.

4. Have a formal plan for personal development. No leader has all the skills they need. Every leader can become more knowledgeable in multiple areas and needs to continually educate themselves and keep abreast of best practices.

IMPORTANT NOTE:  
If you go to Growthink University (http://www.growthinkuniversity.com), you 
will note that we recently added three "Departments" - 1) Building Your Team, 2) Growing Your Revenues, and 3) Protecting Your Business. Over the coming months, I will be developing (myself and with the help of various experts), expert content in these and several other areas to ensure that the entrepreneurs who enroll in Growthink University have all the skills they need to succeed, and are constantly learning best-of-breed success practices.

5. Provide coaching and mentoring. Inspiring leaders help employees develop new skills and abilities.

6. Share information. To be a great leader, you need to share important information with other team members. In the information age, where the sheer quantity of information is so great, this becomes more challenging as leaders want to provide enough information, but not too much information such that it bogs down employees.

7. Do as you say and say as you do.

8. Encourage feedback and ideas from employees. Great leaders don't come up with all the great ideas themselves. They get constant feedback from their teams. And they don't criticize feedback. Or else, the feedback quickly stops coming.

9. Provide helpful feedback on performance. Great leaders periodically review their employees' performance and give feedback regarding what is good, what needs to be improved and how.

If you're curious to see why I gave myself a C+, I feel that I can do a much better job of 1) setting stretch goals, and 2) periodically reviewing and helping to improve the performance of each of my team members.

Finally, to ensure that I do a better job on ALL NINE of these ways to inspire my employees, I have created a monthly worksheet for myself that I will complete on the first of each month. I uploaded a copy of the worksheet here:  http://www.growthink.com/InspiringLeader.pdf, so you can use it too. 

Just fill in the blanks and post it on your wall. If you see it every day, you are more likely to execute on it.

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