Written by Dave Lavinsky on Tuesday, September 17, 2013
Raising funding is hard. This is actually a good thing. Because if it were easy, everyone would raise money and start a business, and competition would be ferocious. Better yet, since most entrepreneurs won't take the time to read this essay, you'll know this insider information and have a huge leg-up on them in raising capital.
So, here are 7 things you must know to raise money today.
1. Understand That Funding Doesn't Take Place All At Once
No matter how great your company or idea is, you are probably not going to get a $10 million check right away. Rather, you will typically raise several "rounds" of capital.
You start with a smaller round or amount of funding. Then, as your business grows, you are eligible for larger rounds of funding. This is because your business proves itself over time (eliminating some risk to investors) and your valuation rises as you grow (enabling you to raise larger sums of money).
2. Choose the Proper Source(s) of Funding
Choosing the right source of funding is the key to the Growthink Funding Pyramid™. Some forms of funding are much easier to raise than others. And based on your stage of development, different forms of funding are more relevant.
For example, the funding sources available to a pre-revenue startup are very different than the sources available to a 3-year old company generating $1 million in annual revenues. Case in point: Google initially failed when it tried to raise money from venture capitalists. The key is to go after the right sources of funding at the right time.
3. Build Relationships Early
According to Fred Wilson of Union Square Ventures, "The perfect entrepreneur/VC relationship is one where each has established respect and trust with the other well before an investment transaction is broached."
The key is to build these relationships early. So, even if you don't qualify for a $5 million round of venture capital today, start meeting with venture capitalists so they know you when you do qualify a year from now.
4. Keep Your Business Plan Current
One of the most important things to show in your business plan is what you've accomplished in your business to date. And ideally, every month you are accomplishing more. So, be sure to update your plan with this progress.
Importantly, when you meet a lender or investor, you want to be able to give them your business plan in a timely manner. So finish your plan now, and keep it up-to-date, so you can send it off at a moment's notice.
5. Always be a Marketer
In raising money, the best company doesn't always win. Rather, the best marketer wins. That is, the entrepreneurs that are best able to market their companies to lenders and investors are the ones who raise the money.
Marketing is the process of finding the right investor, convincing them to meet with you, and then convincing them to invest in your business. Yes, this is very similar to how you market a product or service. So make sure to use your marketing skills.
6. Have "Thick Skin"
When raising funding, be prepared for a lot of "no's." Going back to the Google example, even when Google was ready for venture capital, the majority of venture capitalist said "no."
When an investor says "no," it doesn't necessarily mean that your venture is not a good one. It simply means that the venture is not a good investment fit for them. You must have "thick skin" and be able to bounce back from lots of "no's" and persevere.
When failing over and over again to create the light bulb, Thomas Edison famously said, "I have not failed. I've just found 10,000 ways that won't work." Have the same mentality with investors. That is, think, "I have not failed. I've just found 100 investors that aren't a good fit."
7. Adapt as Needed
While you must have "thick skin," that doesn't mean to be foolishly stubborn. What I mean by this is that if you hear the same feedback from investors over and over again, you shouldn't ignore it. Rather, you should adapt.
For example, if several prospective investors tell you they want to see a sample of your product or service before considering funding you, create it for them. Don't just plow forward with contacting more and more investors in this case.
By adapting to the needs of investors, particularly when you hear the same feedback multiple times, you can make the requisite changes to raise the money you need.
Understanding these seven funding truths will help you raise the funding you need to grow your business. For additional assistance, this "truth about funding" presentation will prove quite helpful.
Written by Jay Turo on Sunday, September 8, 2013
“Success is not final, failure is not fatal: it is the courage to continue that counts.”
- Winston Churchill
At the very heart of entrepreneurship, small business, and investing sits FAILURE.
The statistics are only debated to their degree but not their overall thrust - a very small percentage of businesses ever become meaningfully profitable and a smaller percentage still are ever sold for a meaningful price.
In other words, the vast majority of businesses - by objective, financial measures - fail.
Even worse, a lot of them fail badly - never achieving even one dollar in revenue and / or go so deeply in the hole that they have significant and negative financial spillover effects.
Like business and personal bankruptcies and investors losing all of their money.
In a word, business failure is traumatic.
Now it is not the kind of trauma that survivors of war and natural disasters experience, but in the world of work it can be about as bad as it gets.
Yet Americans today are starting businesses at a greater rate than at any time in the last 15 years…3% of the U.S. adult population annually start one, and a multiple of that dream about doing so.
So what gives?
Well, there is the financial view, namely that the rewards of a business sale are so great and life-changing that having any probability of its occurrence make the grave financial risks of business - building more than worth taking.
But this at best only explains half of the story.
No, there is something else going on here, and new research regarding of all things - Post Traumatic Stress Syndrome, points to what it is.
Ground-breaking research - done by among others Dr. Richard Tedeschi of the University of North Carolina - shows that strong, negative experiences like war and natural disasters are NOT as scarring as once thought.
In fact, the opposite is true.
Statistically, most survivors of traumatic experiences - think prisoners-of-war and victims of natural disasters - come out of them stronger and on most measures, out-perform those in their peer groups unaffected by the awful events.
All I can say is wow.
Now everyday all of us should count our blessings dozens of times as “there but for fortune go I’ and offer nothing but great compassion and empathy for those suffering trauma, especially when it comes through no fault of their own.
But we also should take significant solace and inspiration from the rest of the story.
Life, as it does, goes on.
And according to the latest research, the old adage is true of that which does not kill you REALLY does make you stronger.
Now it would not be proper to equate a business failure with the physical and emotional traumas experienced by survivors of war and disaster, but entrepreneurs and executives can and should draw important wisdom from them.
Such as if you “fail” at this particular business, you won’t be broken and scarred forever.
And that professional and entrepreneurial growth is a participatory sport – learned only by doing and trying and striving and not by watching and fretting and waiting.
And then there are the related ideas of diversification and iteration.
Such as, in business, it is almost always far better to have four business “failures” and ONE success than it is to go zero for zero.
For the entrepreneur this does not necessarily mean running multiple businesses concurrently, but it does mean that the business strategy should be iterative and testing based.
Successful Internet companies get this intuitively - see Amazon and eBay and thousands of others - and you should too.
As for investors, they should take advantage of the incredible opportunity that the modern financial system offers to back multiple entrepreneurial companies, and not just one or a handful.
With the average return of the private equity investing asset class in some cases being over 27% annually, the odds are strongly in your favor if you both invest right and diversify properly.
So entrepreneurs and investors get in the game!
Failure is no way near as bad as advertised and if approached with the right spirit and strategy, it can truly be the ultimate blessing in disguise.
P.S. Click here to complete our survey on investing and entrepreneurship and have a free cup of coffee on us!
Written by Dave Lavinsky on Sunday, September 8, 2013
Modeling a business strategy after someone else's prior success is typically a great idea.
Interestingly, these models of success can come from rather unexpected sources. While most people will turn to other businesses when looking for new ideas, the world of popular music can teach us quite a lot about business growth and sustainability.
Madonna, for example, has long been the undisputed queen of popular music. Whether you love or hate her music (or her), Madonna has proven to be more than a singer and dancer. She has a savvy business mind that's supported a successful career spanning more than 30 years and an empire of music sales and merchandizing valued at $500 Million. You have to admit, the Material Girl has had a good run.
Here are 3 powerful lessons we can learn from Madonna and use to create success in our own businesses:
1. Constant Reinvention
Madonna is well known for constantly reinventing herself and each album she releases has been different from the last. Reinvention has actually been one of the greatest signatures of her career and has allowed her to stay relevant in a constantly changing market.
As the industry matured, Madonna's music and image have also changed in an effort to constantly bring her fans what they want.
The lesson: Staying relevant is extremely important for businesses of any size. Markets are always changing and a business that allows itself to lose its relevancy has been left behind. Stay in touch with your customers/audience and market evolutions.
2. Pushing the Boundaries
If Madonna is known for one thing it is pushing boundaries. She has been creating controversy throughout her career and much of this stems from her willingness to challenge commonly accepted notions. She created sexier songs with racier lyrics and began challenging what society saw as acceptable entertainment.
In fact, in 1990, when her music video Justify My Love was banned by MTV she packaged it as a single and sold it. This had never been done with a music video before. This innovative, bold, in-your-face move earned her millions in revenue when the video sold like hotcakes.
The lesson: Knowing how and when to push boundaries is an important skill for any business. Challenging accepted notions is often what leads to innovation. Those companies who have come to dominate their markets through innovation were always willing to push things a little further, to do what no other company had yet done.
Pushing boundaries can be a worrisome concept because innovation is almost always met with resistance but without risk there can be no reward.
3. Leverage Platforms & Distribution
Madonna is an impressive businesswoman and she has always understood the importance of leveraging existing platforms and distribution channels. In fact, part of the reason she rose to prominence so quickly is because she made highly effective use of the very young MTV platform. Here was a chance for her to access a vast consumer market in a unique and novel way. Her focus on high quality videos, filled with great music and alluring imagery, set her apart from the other musicians of the time.
The lesson: Madonna was far from being the first successful popular musician but she was one of the first to harness the new and highly effective market of music video television. Think of the iPad. While similar tablet technology came years before it, Apple was the first to package it in a unique style with functionality that appealed to consumers.
Business owners need to be vigilant in looking for new and emerging markets and platforms and then be assertive in establishing themselves in each one. As the market/platform grows in popularity, the prominence of the company also rises.
Like a Virgin
Madonna's career can be a great example from which to draw a number of useful concepts. Her unique voice and readily identifiable fashion sense helped to establish her as a brand early in her career but she was never afraid to reinvent herself to remain relevant. The great impact she has had on the world of popular music comes from her desire to continually push boundaries, to challenge accepted notions and create something new and desirable.
Businesses can never stagnate; they must remain dynamic and able to change to meet the demands of a growing market. Schedule an hour of quiet time this week. You can do this alone, with your advisor, or your core leadership team. Consider these questions:
- What have I been afraid to do in my business for fear or "rocking the boat" or being "too edgy?"
- What new technologies, markets, product innovations, or unique services can I offer? How can I go beyond what currently is and create an appetite for a new product or solution?
- Where can my company get head of others? What ideas do I have that I can validate and get to market before my competitors? What client needs can I solve before anyone else?
- What established platforms or distribution channels are my target customers already using or buying from? How can I leverage them to get my product or service in front of these customers?
The answers can be powerful and open doors to opportunities. Remember, brainstorming and documenting ideas is great, but profit and growth only come from action.
Just like Madonna, be willing to take proactive, out-of-box, bold action.
Written by Jay Turo on Tuesday, September 3, 2013
Last week, I wrote about the power of business intelligence dashboards.
How, for the first time, smaller businesses can harness the power of big data to more efficiently and profitably manage their companies.
Some readers expressed skepticism that this "stuff" actually works.
That it is just more "noise” that causes entrepreneurs to get “lost in the weeds” versus long-term thinking and planning.
There is some truth to this.
Heck, “Big Data” at its worst is probably best personified by Wall Street “quant jocks” who equate positive expected value "bets" with larger, more foundational truths of right and wrong, and of good and bad.
To these concerns, let me offer a few suggestions as to how to best utilize business data to support, but not drive, leadership and managerial decision-making.
The first point is that for the vast majority of small businesses “getting lost” in the data is the least of their concerns.
A far bigger one is simply analyzing anything more than the barest minimum of balance sheet - "i.e. How much money is in the bank?" and profit and loss statement - i.e. “What were our sales last month?” data.
And when broader data, like the number of incoming leads, sales proposals, average call hold time, marketing spend per action, e-mail open and click-through rates, is analyzed…
…so much of it is either incomplete or just flat-out incorrect to make doing so an exercise in futility.
AND the data that is complete and accurate sits in so many places, Excel worksheets on the sales manager's computer, deep in a little understood (and used) CRM, in the reporting functionality of software as services like Grasshopper, IfByPhone, Constant Contact and Google Analytics to name just a few…
…that a way too high percentage of the time and energy set aside to analyze it is outright wasted in simply accessing the reports from the data sources that house it!
The simple answer to these challenges is to utilize a best-of-breed business intelligence dashboard that:
• Automatically collects and updates all the data in one easy to access place;
• Has alerts built-in to flag incomplete or way-out-out-the ordinary data; and,
• Is arranged and presented in a visual and formatted way that works for the executive reviewing it.
But it goes deeper than this.
You see, leading and managing a business based on proper data collection and analysis is no longer a choice - it is a necessity.
Because all of our best competitors are doing it.
And doing so along with proper and appropriate strategic repositioning as the consistent and correct interpretation of the data allows, affords, and demands.
Or, as David Byrne of the Talking heads once so famously said “This ain't no party…this ain't no disco…this ain't no fooling around. “
You see, when it comes to data-driven decision-making, it has become a matter of going big or staying home.
As in admitting that one is really not that serious about growing and sustaining a business of lasting value - one agile enough to adapt and evolve in the face of technological and marketplace change, and of competitive threat.
Now, I don't believe this.
No, the best entrepreneurs I know are as serious as they can be about not just surviving but thriving in this massively opportunity-filled world of ours.
Just take it one step, one click, one API integration at a time.
Sooner than you think, your business will be running more responsively, more nimbly than ever.
Then watch the profits follow.
P.S. Like to demo the Growthink Business Intelligence Dashboard? Then click here to learn more.
Written by Dave Lavinsky on Tuesday, August 27, 2013
Mobile marketing is here, and it's here to stay.
Interestingly, I both hate and love mobile marketing.
Here's what I hate about it, and particularly, my frustrations with mobile phones:
1. I've seen families out to dinner together where 2 or more of the family members are on their mobile phones (come on, it's family time)
2. I've seen kids spending too much time texting and playing games on mobile phones, when they should be reading, playing sports, doing school work, etc.
3. Texting and driving has gotten out of control, and has made driving much more dangerous (According to AAA, 46% percent of all teenage drivers admit to text messaging while driving).
4. I've seen too many cases of mobile phones being used to entertain children so their parents can converse amongst themselves. It just concerns me that kids brought up with constant entertainment and less inter-personal communications are going to have issues later.
So, as you can see, my frustration with mobile phones is largely when they are abused. I clearly thing there's a time for them. But we (kids AND adults) need limits.
Ok, I'll get off my soapbox now, and talk about the positives of mobile phones, and specifically mobile marketing.
The fact is this: mobile marketing is highly effective and it's growing like crazy.
In fact, earlier this month, Facebook announced in its second-quarter earnings. In it, Facebook disclosed that a whopping 41 percent of its advertising revenue was generated by mobile users. This was up 11 percent from just one quarter earlier.
What this means to all marketers is that smartphones and tablets are becoming more and more prevalent over desktop computers as a means of accessing information (and time spent).
Here are some of the benefits I see of mobile marketing:
1. Mobile marketing is where your customers are. 80% of Americans have their mobile phones with them virtually all the time. Since your customers and prospective customers are on their mobile devices, you have a better chance reaching them there versus most other channels (e.g., telemarketing, print ads, etc.).
2. Mobile marketing incurs a very low cost. Mobile advertising is relatively inexpensive. And mobile marketing activities like sending text messages only costs pennies.
3. Some forms of mobile marketing are very intrusive and thus get seen. Text messages are highly effective. In fact, according to the CTIA Wireless Association, while it takes 90 minutes for the average person to respond to an email, it takes just 90 seconds for someone on average to respond to a text message. Likewise, most mobile ads are more intrusive, and thus more seen by customers, than ads in other media like print and web.
4. High response rates: Response rates to mobile marketing are nearly 5 times higher than response rates to print advertisements.
These benefits mean that mobile marketing should be part of every company's marketing plan. Mobile marketing allows you to reach customers quickly. Customers will get more and more used to paying you and other companies via their mobile device.
And mobile applications will continue to grow like wildfire, and are not only a way for you to stay in front of customers, but they could be a huge revenue source for your company. Note that in the first quarter of 2013 alone there was an 11 percent increase in mobile app downloads versus the entire year of 2012.
So, personally, I ask that you don't abuse mobile phones per my frustrations above. But do embrace mobile marketing as it's a must-have in your marketing plan.
Written by Jay Turo on Monday, August 26, 2013
This past week, I had the pleasure and honor to present to John Morris' Woodland Hills, California Vistage Group.
For those that don't know it, Vistage is one of the world's largest CEO and business owner organizations, with more than 17,000 members in 15 countries.
This is an impressive group - leaders of companies with average sales revenues of $32 million and competing and prospering in industries that run the gamut - from services and manufacturing, to construction, retail, and real estate.
At the core of Vistage are their peer advisory groups -"Mastermind” meetings of 10 to 15 executives that over time develop a productive and high-trust dynamic through which to attain breakthroughs of insight and accountability around and about strategic, tactical, and management challenges.
Expertly moderated by trained chairs like John - a tour de entrepreneurial force in his own right as co-Founder and Chairman Emeritus of the Tech Coast Angels - Vistage groups are where the hard, methodical work of small business building and growth gets done.
I was asked by John to present on best practices, as they apply to smaller companies, of data-driven decision making and business intelligence dashboards.
It is obviously a very timely topic - as “BI” tools and software have matured in the last few years to become for the first time truly easy to use, effective, and affordable for smaller companies and organizations.
In my presentation I talked about how the companies getting the highest “BI ROI” connect the dots between their "old" and "new" school strategic planning and thinking.
They are old school (in the absolute best, non-pejorative sense of the term) in that they recognize that strategy…
…arrived at through Mastermind get-togethers like Vistage, through board and advisory board meetings, through corporate “retreats” and through any form “step back and reset” get togethers - remains fundamental in attaining and maintaining long-term business success.
And they are new school in their leveraging the very many best-of-breed business application software as services to arrive at this strategy.
Tools like CapitalIQ, Simplycast, The Resumator, Box, Grasshopper, Wufoo, Smarsh, IfByPhone, SnapEngage, Docusign, Hootsuite, Infusionsoft, and Interspire that automate traditionally laborious and repetitive business functions.
And, as they do, collect massive reams of data on much of the marketing, sales, operations, finance and management activities of a business.
And, for the first time, the technology has finally matured to where all of this collected data can be automatically organized, standardized, and consistently presented on an always-on, always-accessible, and graphically “Appleized” Dashboard.
I was thrilled that John offered me the opportunity to present both Growthink’s "Old School meets New School" business intelligence philosophy, along with our dashboard offering.
And as I did, I truly felt blessed to live and work in a time when technology has created such promise and power to allow companies to run better, easier, and more in alignment with their missions than ever before.
And as they do, well…
…the best numbers on the best dashboards are starting to show increasing piles of profit and cash, too.
Written by Dave Lavinsky on Tuesday, August 20, 2013
There are many websites, such as ODesk, Guru, and Elance, on which you can find people and firms to which you can outsource projects. Regardless of the site you choose, the key is to get the largest pool of qualified providers to apply for your project. This way, you have more people from which to choose.
Even if you only hire one, you can go back and contact the same pool of talent for future projects later. Consider applicants as being in your "rolodex" of people to contact in the future.
Below are tips to keep in mind when posting your project. In a nutshell, you want to include all of the information that an applicant needs to know, but do so succinctly.
If anything is left out, you'll have to go back and answer their questions about it later. It's always easier to clarify everything up front.
Create a Clear Project Title
Here, include the work to be performed, on what, and in what industry. For example, "Help Developing Ebook" could mean anything from research to writing to editing to cover design. Compare that to "Writing 10,000 Word Real Estate Ebook." The latter will be more likely to catch the eye of writers with real estate knowledge.
Create a Clear Project Description
This sounds simple enough, but you should try to answer as many possible questions as you can, which means addressing certain areas, like:
- The scope of the project. In the above example, wanting a 10,000-word Ebook written vs. 20,000 words would be helpful information for applicants to know. This helps them estimate the time it will take them and therefore their bid for the project. If you are paying hourly, it will help prevent misunderstandings later.
- Software needed. Make sure they at least have Microsoft Word and Excel, if that's what you use. Other software is industry-specific, like Adobe Photoshop among graphic designers.
You may or may not know what software is needed for things you don't specialize in, but you will soon enough. All other things equal, choose the person who already has the best software for the job, as you'll get better results.
- Programming languages. Some website projects require that the provider knows certain programming languages besides standard html, such as PHP, AJAX, etc. In these cases, it's better to post "PHP Programmer Needed to..." than just "Programmer." You'll get fewer, but more qualified responses. If you don't know what languages are needed, either ask a friend or do a Google search beforehand, or you could post in the project that you don't know what language is needed, and ask them to make suggestions.
Ideally, you will want to hire people who can educate you, so this sets the tone right from the beginning. I know some people who post $10 projects for 30 minutes of a programmer's time just to have their questions answered.
- Payment amount. First, decide if you want to pay them by the hour, or for the whole project. There are pros and cons to both. If you estimate that something will take 5-8 hours, going hourly is fine. For work that will take longer than that or that has a higher likelihood of uncertainty, I would try a project-basis.
Sometimes you can't estimate how long something will take, in this case, hire them on an hourly basis for a little while to get started and figure things out. Sometimes applicants will claim that they can't estimate how long it will take, while others can. I would go with people who are able to give you specific information as it shows they're more organized and have done something enough times to know how long it should take.
- Payment terms. I would never pay more than 50% up front. In this case, I would pay the remaining 50% when the work is done, or have a milestone payment of 25% and 25% upon completion.
Also, never pay someone the final payment if there is still work left to be done; you may never see your project finished.
- Payment methods. When you outsource through third party websites, they will typically handle the payment method. If or once you start outsourcing directly, you will have to figure out the best method for paying your contractor. In the latter, there are multiple options such as PayPal and Dwolla.
Upload samples of what you need
You can write 5 paragraphs trying to explain the final product, or you can show them something similar you have had done before (or someone else's to model yours after). The latter is typically more effective.
Most sites will allow you to upload files to show the contractor what they'll be working with or making. You can also insert links in the project description to websites, files, audios, or videos showing or explaining things more vividly.
Particularly if you are asking the person to develop a website, you must show them examples of other websites you like. If you don't, I can nearly guarantee you'll be disappointed with the results.
Choose the time period for bidding
On outsourcing websites, you are typically given options like 3 days, 5 days, 7 days, 15 days, or 30 days to accept bids. I lean towards giving a longer time period, unless the urgency of your project means that you don't have as much time to wait.
In general, the more time that providers have to find and respond to your project, the more qualified applicants from which you'll have to choose.
Also, some of the best providers are also the busiest, so by giving a longer time frame to respond you are more likely to catch them when they're available.
Follow these tips and my other key outsourcing strategies to get a qualified pool of outsourced applicants to complete your projects. These outsourcers will give you the manpower and expertise you need to grow your business at a very economical price.
Written by Dave Lavinsky on Sunday, August 18, 2013
The term "outsourcing" describes contracting out of a business process to a third-party, that is, someone or some firm outside of your core organization.
Outsourcing generally refers to ongoing processes versus one-time processes. For example, the development of your website is generally a one-time process. Conversely, the maintenance of your website is an ongoing process. However, some people consider both one-time and ongoing processes to be outsourcing when you select someone outside of your organization to complete them.
Regardless of your definition, outsourcing has many benefits, my favorite of which are these four:
1. Focus: Outsourcing allows you to focus on your core competencies and activities. For example, if you own a chain of restaurants, you generally don't have (nor should you) the skills to develop a cutting-edge website in-house.
2. Cost Savings: You can often outsource to individuals and firms in areas with lower costs of living and thus lower prices than you can attain in-house.
3. Expertise: When outsourcing to individuals and firms who specialize in a certain area, they will have expertise that you simply don't have.
4. Flexibility: Outsourcing allows you ramp up and/or ramp down more quickly than maintaining a full-time staff for all functions.
Unfortunately, when they start outsourcing, most entrepreneurs and small business owners make several mistakes. Below are the 5 most common ones to avoid.
Mistake #1: Failing to define tasks/projects clearly
If you don't clearly and comprehensively define the task or project you need fulfilled from the start, your project will inevitably fail. You might choose the wrong person for the job and/or they won't perform to your expectations if you haven't completed this crucial step.
Mistake #2: Failing to hire someone without enough experience
Nothing is worse than the blind leading the blind. When I hire someone to do something that I do not know how to do personally, they need to know how to do it. They need to educate you on their chosen skill set, not the other way around.
Your role is to describe the end result you want, ask for and listen to their suggestions, and rely on their expertise and talent to achieve it according to your description. Make sure you check their past work and references to ensure they have a track record of getting similar work completed on-time and to the satisfaction of those who've hired them.
Mistake #3: Failing to establish and abide by the timeframe
If you've ever provided services for a client in a rush, you know how stressful it can be to drop everything at the last minute and make their emergency yours. The people you outsource to are no different, and it will benefit you to plan and begin things in advance and not at the last minute.
So, map out by when you need to hire someone, when the work needs to commence, and when it must be completed. Create milestones within each of these processes, such as by when you will complete your project description, and when the contractor must complete the first draft, etc.
Mistake #4: Failing to adequately communicate
Just because you hired a great person, it doesn't mean the project will go smoothly. The key here is to effectively communicate with them.
Make sure you check-in with them and get status updates. Get them to send you drafts of their work, and then provide detailed comments regarding what you like and don't like.
The fact is that the more and more thoroughly you communicate with them, the better they will perform. This is true up to an extent of course; because if you micro-manage (or manage too aggressively) it will take up too much of your time and often aggravate the contractor.
Mistake #5: Failing to leverage talented outsourcers
Once in a while, when you outsource, you will find gems. Gems are those outsourcers who do a phenomenal job.
The key is this: once you find these gems, keep them. Give them additional projects. And if you don't have any, refer them to others you know. And keep in touch. At a minimum, email them every month or two to say hi.
In fact, I've had amazing success with just this. I hired an outsourced tech person on August 16, 2005. He did a phenomenal job. I've often kept in touch since then, and he's helped me with several projects. And even though he now has a full-time job (he's in India), he still helps me on the side a lot. And he still does a great job each time!
Knowing how to effectively outsource is a critical skill all entrepreneurs must have. It allows you to accomplish more, accomplish it with more expertise, accomplish it faster, and accomplish it with less money. These are key benefits you can't do without.
Suggested Resource: In today's competitive business environment, you must outsource to stay competitive. Outsource the right way using Growthink's Outsourcing Formula.
Written by Dave Lavinsky on Tuesday, August 13, 2013
Over the past 15 years, I've helped over 500,000 entrepreneurs and business owners to develop their business and strategic plans.
And, as you might imagine, I've spent a lot of time discussing business plans and strategic plans internally. Enough so that among other things, I use the acronym "BP" for business plans and "SP" for strategic plans.
Now, because these terms are often used synonymously, let me explain the key difference as I see them. Business plans or BPs are plans created for the primary goal of convincing an investor or lender to fund you. Conversely, strategic plans or SPs are developed to determine and document your strategy so your company understands and can attain its objectives.
As you can see, both plans serve very different and very important purposes.
Below are the 5 key sections that a strategic plan must have that need not be included, or require much less focus, in a business plan.
1. Elevator Pitch
An elevator pitch is a brief description of your business.
It is included in your strategic plan since your elevator pitch is both important to your business' success, and should often be updated annually.
An elevator pitch got it's name because you need to be able to describe your business succinctly and within the time it takes to travel from the ground to the top floor in an elevator.
A quality elevator pitch:
- Gets everyone in your company on the same page regarding what your business is and what the key objectives are.
- Allows everyone in your company to give a concise and consistent explanation of your business which leads to more customers.
In a business plan, you do include your elevator pitch in the Executive Summary section to concisely explain your company to investors and lenders. In your strategic plan, it is used to ensure consensus within your organization.
2. Company Mission Statement
A mission statement explains what your business is trying to achieve.
For internal decision-making, it helps as key decisions should be made with regards to how well they help the company progress in achieving its mission.
Also, for internal (e.g., employees) audiences, the mission can inspire and get them excited to be part of what the company is doing.
While your mission statement is often also included in your business plan, investors and lenders are generally more concerned with your ability to earn them a return on investment. As such, it's not as heavily emphasized in your business plan.
Some great examples of mission statements include the following:
- Google's mission is to organize the world's information and make it universally accessible and useful.
- Kiva's mission is to connect people, through lending, for the sake of alleviating poverty.
3. Goal Specificity
Because your strategic plan focuses on setting your company's vision and getting your team to execute on that vision, your strategic plan must include a greater focus on your goals than your business plan.
While your business plan focuses more on your long-term goals, your strategic plan is more granular. Specifically, your strategic plan should lay out your company's 5 year goals, 1 year goals, and your upcoming quarterly and monthly goals.
4. Key Performance Indicators (KPIs)
As the name indicates, your "KPIs" or Key Performance Indicators are the metrics that judge your business' performance based on the success you'd like to succeed.
Identifying and measuring your KPIs is absolutely critical to ensuring you are effectively executing on your vision and plans. Conversely, if you don't measure your KPIs, you have no idea whether you are achieving the success you desire.
In your strategic plan, unlike in your business plan, you must identify the KPIs your business must track in order to achieve your goals.
5. Identification of Required Strengths
In your business plan, you should stress your existing strengths that make your business uniquely qualified to succeed. This helps convince investors and lenders to fund you.
Conversely, in your strategic plan, you must identify the strengths you need to develop. For example, how could you gain competitive advantage by modifying your products or services? Or by hiring and training certain personnel? Or by creating new operational systems? Etc.
By asking and answering these questions in your strategic plan, you can create a strategy for building a rock solid company that's the envy of your industry.
To summarize, the right business plan allows you to raise money to fund your business' growth. The right strategic plan gives you and your team the vision, goals and game plan to achieve this growth. Finally, using the right strategic plan template helps you create your strategic plan quickly and easily so you can start growing immediately.
Written by Jay Turo on Monday, August 12, 2013
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Last week, I talked about the communication breakdowns that occur when investors and entrepreneurs talk about risk.
Well, in most forms of angel and early-stage private equity investing, these breakdowns flow from a misunderstanding of the power and nature of outliers.
The concept of outliers and how they apply to early stage private equity investment was best described by the Lebanese thinker and writer Nicolas Taleb, in his best-selling books "Fooled by Randomness" and "The Black Swan."
In the Black Swan especially, Taleb described the nature and importance of outliers in a modern, inter-connected economy:
“What we call here a Black Swan is an event with the following three attributes. First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable."
Taleb continues, "I stop and summarize the triplet: rarity, extreme impact, and retrospective (though not prospective) predictability. A small number of Black Swans explain almost everything in our world, from the success of ideas and religions, to the dynamics of historical events, to elements of our own personal lives."
Less famous, but more helpful when it comes to designing an effective private equity investing strategy is Taleb's theorizing on how technological interconnectedness vastly intensifies Black Swan impacts.
This idea of technological interconnectedness is related - though not exactly the same – as that of the much ballyhooed Network Effect that is so much at the heart of many of the biggest technological and investment success stories of the last 15 years, Facebook, Twitter, and LinkedIN, being first and foremost amongst them.
In its simplest form, the Network Effect posits that the value of a network increases exponentially with each new user on it.
Or, in other words, the primary reason why folks use Facebook, Twitter, and LinkedIN is because there are a lot of other folks that use Facebook, Twitter and LinkedIN too.
And, as more users join, such the value for others to join grows that much greater.
And so on and so on.
Thus, one of the first screens that the intelligent early stage investor should utilize is the degree to which a network effect is present in a company's business model.
Now, let’s get to the rub of the matter as to how Taleb’s interconnectedness concept both informs and signals danger for the thoughtful investor.
Simply put, global technological inter-connectedness drives the winning business models to heights never seen before …
…and because of this, there are a lot fewer of them.
Simply put, the winners are bigger and happen faster than ever - Facebook's IPO was bigger and faster than that of Google’s which was bigger and faster than that of Microsoft’s, which was bigger and faster than that of Apple’s.
And because the winners are bigger, there are less of them.
So that giant sucking sound you hear is the consuming of so much of the energy and return in the deal economy into fewer, bigger and more lucrative deals.
To put it another way, turning $500,000 into $1.8 billion in seven years as Peter Thiel did as a small minority investor in Facebook is just not beyond extraordinary - it is also unprecedented.
And, correspondingly, returns of this scale crowd out and widely skew the distribution to fewer, higher returning deals.
Now, how should we respond to this brave new and highly challenging investing and entrepreneurial world?
Well, one obvious response is to proceed extremely carefully.
Investing in early stage private companies can be great fun and you can make money beyond your wildest dreams if the stars are aligned right doing it….
…but the probabilities of doing so in any one company or deal are low…and getting lower.
And unfortunately, this is true no matter how enthusiastic, how passionate, how hardworking, how brilliant the entrepreneur that is pitching his or her deal happens to be.
So does this mean that early stage private equity investing is for the birds? And that we all should just stay away?
Of course not.
You just have to do it right.
Next week, we’ll share how today’s most successful investors and entrepreneurs do just that.
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