If you want to raise capital,
then you need a professional
business plan. This video
shows you how to finish your
business plan in 1 day.
to watch the video.
"The TRUTH About
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?
to watch the video.
The Internet has created great
opportunities for entrepreneurs.
Most recently, a new online funding
phenomenon allows you to quickly
raise money to start your business.
to watch the video.
"Barking orders" and other forms of
intimidating followers to get things
done just doesn't work any more.
So how do you lead your company
to success in the 21st century?
to watch the video.
Written by Dave Lavinsky on Thursday, September 8, 2011
If you want to build a great internet marketing strategy, you need to start with great research.
Specifically, you need to understand:
* The keywords your target customers search
* The demographic make-up of your target customers
* The trends in your market
* What your competitors are doing
Here a five tools that I consistently use in conducting this research.
1. KeywordSpy.com (http://www.keywordspy.com/)
KeywordSpy allows you to see how your competitors are marketing themselves online. Among other things, you can see the keywords they are advertising on, their estimated ad budgets, their advertising copy, and what keywords they rank organically on.
This analysis allows you to identify where your competitors are getting their best online traffic, so you can replicate it.
2. Compete.com (http://www.compete.com/)
Compete.com allows you to see how much traffic a website is getting, how that traffic is changing over time, and how it compares to others in the market.
Within the premium (i.e., paid) features of Compete.com, you can see the demographic profile of the visitors to your and your competitors’ websites, and the sites that refer the most traffic to them.
This is really cool; particularly since if you know the sites which refer the most traffic to your competitors, you can contact them and try to get links to your website included there too, so you can "steal" some of their traffic.
3. Quantcast (http://www.quantcast.com/)
Quantcast allows you to see the demographic profile of visitors to your website and your competitors’ websites.
You’ll learn whether users tend to be male or female, the age breakdown of visitors, their ethnicity, whether or not they have kids, their income levels and their level of education.
If your competitors get a fair amount of website traffic, Quantcast can also show you some cool additional data, including other sites which visitors to your competitors’ websites also visit, and traffic frequency (e.g., % repeat vs. one-time visitors).
4. Yippy Cloud Creator (http://cloud.yippy.com/)
Yippy Cloud Creator is a relatively unknown tool that I came across a few years back. Simply enter a keyword and Yippy will show you other keywords that searchers of those keywords also search.
Let me explain. There are several research tools such as Google’s Keyword Suggestion Tool that allow you to search on keywords like “tennis racket” and see closely related keywords like “tennis racket reviews” and “tennis racket strings.”
Conversely, when searching “tennis racket” in the Yippy Cloud Creator, you see results such as “badminton” (showing that many people who search on “tennis rackets” are also interested in “badminton”) and Amazon.com (showing that many people who search on “tennis rackets” also frequent Amazon.com).
You can then use this intelligence to improve your online marketing.
5. Google Insights for Search
The final tool I want you to know about is Google Insights for Search, which you can access at http://www.google.com/insights/search/. To start, simply enter the core keyword (e.g., tennis rackets) that best represents the product or service you sell.
Then, using the “Compare by” and “Filter” fields, you can quickly see how the search volume for your keyword has changed over the past years, which cities, states and countries are most interested in the keyword, and related keyword search phrases, among other things.
Using these 5 tools will quickly give you a great snapshot of your market. You will better understand your customers’ needs, learn what your competitors are doing, and identify opportunities to better market yourself.
Written by Dave Lavinsky on Friday, September 2, 2011
Happy Labor Day!
For those of you outside the United States, today is a national holiday called Labor Day.
Interestingly, most Americans don’t really know what Labor Day really is.
According to the United States Department of Labor, “Labor Day, the first Monday in September, is a creation of the labor movement and is dedicated to the social and economic achievements of American workers.”
So there it is -- Labor Day celebrates the achievements of American workers. Which includes us entrepreneurs and, importantly, all of our employees.
I think many entrepreneurs feel that giving their employees the day off today is an adequate reward. Maybe ten years ago it was, but today, I don’t think so.
Consider these recent statistics from research conducted by First Command Financial Services:
- 24% of American workers are dissatisfied with their job, up from 21% last year and 11% in 2009
- 39% of American workers report they are job hunting, up from 29% last year
Pretty sobering, huh. In most cases, a sizable percentage of your workforce is dissatisfied, or worse yet, actively looking to leave your company and join another firm.
Now, if only your lowest performing employees were looking for a new job, I guess that wouldn’t be so bad. But that’s never the case. And importantly, the cost of losing a good employee is huge.
Think about one of your best employees. How much time, energy and money would it cost to recruit and train a similar employee? Having recruited and trained many employees over the years, I can tell you that the cost is incredible.
Writing up job descriptions, posting them on job boards, interviewing tons of candidates, checking references, getting new hires on payroll and insurance, training, etc. -- it all adds up to a LOT of work.
So, this Labor Day, I’d like you to think about what you can do to make sure your employees are really satisfied and give you their all each and every day. Here are five things I suggest:
1. Spend more time with your employees. Sounds easy? That’s because it is. You need to spend time with your employees to find out their concerns and desires. Just showing you care enough to talk with them to learn about their needs will go a long way.
2. Have your employees participate in setting company goals. When employees help set company goals, they become more motivated. They feel that they are part of something big. And this makes them much happier with their work.
3. Encourage employee feedback. We all know that most employees gripe amongst themselves. And this griping creates even more dissatisfaction. By encouraging employee feedback, you learn what these gripes are, and importantly, you can help fix them. And fixing them greatly improves employee satisfaction.
4. Increase your own energy and enthusiasm. We’ve all been around people that have lots of energy and make us feel great about ourselves. That’s the kind of boss you need to be. Because if your employees want to be around you, they’ll be more satisfied working for you.
5. Make sure your work environment is comfortable. I recently walked through my offices and wasn’t inspired visually. I felt the walls were drab and the furnishings weren’t exciting enough. This was probably because nothing had changed much in the last year. So I gave my team a budget to spruce up the place. By buying items and furnishing the office in the way the team likes, my employees will be more excited to come to work each day.
So enjoy Labor Day, and think about how you can celebrate and satisfy your employees tomorrow and in the year to come.
Written by Dave Lavinsky on Thursday, September 1, 2011
I believe that Crowdfunding is the most significant new fundraising tactic for entrepreneurs in the past decade. In fact, it might be one of the most important fundraising tactics ever.
In this essay I will let you know exactly what Crowdfunding is and how to get it.
What is Crowdfunding?
According to Wikipedia, “Crowd funding (sometimes called crowd financing or crowd sourced capital) describes the collective cooperation, attention and trust by people who network and pool their money together, usually via the Internet, in order to support efforts initiated by other people or organizations.”
In layman’s terms, Crowdfunding is getting a group of regular individuals (versus banks, venture capitalists or angel investors) to collectively fund your venture.
What are the 3 Core Types of Crowdfunding?
I have identified three core types of Crowdfunding.
The first is debt-based Crowdfunding also known as peer-to-peer lending. This is offered by sites like LendingClub.com and Prosper.com. On these sites, entrepreneurs (and individuals) can solicit loans from other individuals. Because they are loans, they must be paid back. Generally these loans are capped at $50,000 per year.
The second type is equity-based Crowdfunding. This is offered by sites like ProFounder.com and GrowVC.com. With these sites, individuals who give you money become investors and own equity in your company.
The final type of Crowdfunding is donation-based Crowdfunding. This type of Crowdfunding is the most popular and is offered by sites including Kickstarter.com, RocketHub.com, IndieGoGo.com and several others.
Donation-based Crowdfunding is my favorite since you neither give up equity nor have to repay the debt you receive. And it’s MUCH easier to raise since there are tons more potential funders than funders of debt-based or equity-based Crowdfunding.
However, there is an important caveat with donation-based Crowdfunding. Which is this: generally people don’t donate money to your cause simply out of altruism. Rather, the companies who have successfully raised donation-based Crowdfunding offer rewards in return for donations.
Specifically, these rewards typically include the product or service the company intends to produce and/or offer. For example, San Francisco’s Peter Dering wanted to raise money for a new product he conceived called the Capture Camera Clip System (an accessory for photographers that secures their cameras to their other gear).
So, as a reward to those who donated $50 or more, he promised to ship them the Capture Camera Clip System product when it was developed.
So, as you can see, this type of Crowdfunding is essentially pre-selling your products or services to your customers. Which is really the same as customer financing, which has been around for a while. But, with the internet, it’s so much easier to reach tons of prospective customers.
What I also love about donation or rewards-based Crowdfunding is that it is amazing market research. I mean, if customers are willing to buy your product or service before it’s even available, you clearly have a winner on your hands.
Oh, by the way, just last month Peter Dering raised $364,698 in Crowdfunding for the Capture Camera Clip System. Yup, it works!
And in case you were wondering whether donation or rewards-based Crowdfunding can work for you, below is a sample of companies who have recently raised funding with it:
- An online magazine who raised $3,895
- A mustard manufacturer who raised $4,293
- A cupcake retailer who raised $7,240
- A butcher shop who raised $16,405
- A portable hot water heater which who raised $60,642
- A speaker company who raised $88,321
- A bike lock which raised $108,065
- A video company who raised $120,514
- A cell phone accessory which raised $131,220
- A battery charger which raised $145,034
- A digital camera which raised $169,209
- A tablet stand which raised $190,352
- A social networking company who raised $200,642
- A coffee temperature device which raised $306,944
What are the Steps to Attaining Donation-Based Crowdfunding?
Below are the 14 steps I’ve identified that are critical to successfully raising donation or rewards-based Crowdfunding.
1. Choose your Crowdfunding platform
2. Create an account
3. Create your funding project
4. Categorize your project
5. Create your project tagline
6. Create your project teaser text
7. Create your full text project summary
8. Determine the right fundraising amount
9. Determine the right donation time
10. Develop your list of rewards
11. Create your project visuals
12. Create your project video
13. Promote your project to your network
14. Maintain and update your project
Follow these steps and you can get hundreds or thousands of individuals to donate money to your venture. And then you’ll be off to the races.
I recently developed a simple-to-follow program called Crowdfunding Formula.
The program is a series of videos I recorded that walk you through each of the 14 steps to raising donation or rewards-based Crowdfunding. To access Crowdfunding for your business, check out Crowdfunding Formula now.
Written by Dave Lavinsky on Saturday, August 27, 2011
My first job, nearly 20 years ago, was at a market research firm.
About six months into the job, I had an idea for a new product.
My idea -- rather than giving clients access to a large database of information, I took
the database and created pre-defined reports that allowed them to access key
pieces of data quickly and easily.
Written by Dave Lavinsky on Sunday, August 21, 2011
As you may recall, both my 10-year old son and 7-year old daughter play lacrosse.
Even though I never played lacrosse, I was a high-school and college athlete (soccer & wrestling) and am a huge proponent of kids playing sports.
I was recently sent an article written by the US Lacrosse Association entitled "10 Steps to a Positive Lacrosse Experience" on what parents can do to foster a better experience for their kids. I didn't find the article eye-opening -- just common sense stuff in my opinion -- until I started thinking about it in a business sense.
Specifically, these steps can be directly applied and serve as a great guide for being an effective leader. Let me show you why...
# 1: Be supportive of your child by giving encouragement and showing an interest in his or her team.
As a leader, you need to constantly give encouragement to and show sincere interest in your employees if you want to motivate them and boost their performance.
# 2: Attend games whenever possible. If you cannot attend, ask about your child's experience, not whether the team won or lost.
Great leaders see what's going on in the workplace. They walk around. They attend meetings. And they speak to their employees to understand how things are going.
# 3: Be a positive role model by displaying good sportsmanship at all times to coaches, officials, opponents and your child's teammates.
Effective leaders are positive role models. If you don't act in the manner you'd like your employees to act, they won't.
# 4: Let your child set his own goals and play the game for himself/herself. Be your child's "home court advantage" by giving him or her your unconditional support regardless of how well he or she performs.
Great leaders allow their employees to set goals. Sure, those goals need to align with the organization's goals. But employees are much more successful and dedicated to achieving goals that they set or helped establish. And employees who do not meet their goals should be supported and helped so that they improve and meet their goals the next time.
# 5: Let the coach coach. Refrain from giving your child advice when he or she is playing.
If your organization has multiple levels of management, this comes into play. For example, if a manager tells an employee one thing, the organization's president needs to be careful not to tell that employee conflicting information. All management needs to be on the same page - this is simply done via effective communications.
# 6: Respect the decisions of the referee or umpire. This is an important part of honoring the game. Your child will pay more attention to how you act than to what you say.
Things will not always go right in organizations. Some battles you will win, and others you will lose. When you lose a battle, the answer is never to point fingers or complain about external reasons that caused the failure. Rather, you must accept the failure, and figure out how to improve and avoid failure next time.
# 7: Read the rule book. A full understanding of the rules will help you enjoy the game and educate others.
In my opinion, the only real rule book in business is the ethics rule book. By being a positive role model (see #3) and showing a high degree of ethics, your employees will most likely do the same.
# 8: Get to know who is in charge. Meet with the leadership of the program, whether it's school-sponsored or recreational, to discuss topics such as cost, practice and game scheduling, insurance coverage, emergency procedures, etc.
Effective leaders get involved in their industries. They go to industry events. They meet other leaders. They sit on industry boards.
No organization operates in isolation. Understand and get involved in your industry. This will help with setting industry policies, finding partner organizations, and becoming well-known, which will positively influence sales, the number of quality employees seeking to join you, etc.
# 9: Get involved! A great way to support your child's lacrosse experience is by becoming a volunteer for the program. Some of the ways you can get involved: keep the scorebook, run the clock...
See #2 -- make sure you circulate around your workplace and get involved.
# 10: Sit back and enjoy the game. Remember, lacrosse is played for FUN.
Great leaders enjoy the journey and not just the end result. Running an organization is hard work, but it should be fun. You should be doing what you love to do. And if your employees are motivated and truly care about the welfare of your organization, running your organization is an extremely rewarding experience.
To get a step-by-step roadmap to becoming a great leader and leading your company to success, watch my leadership video here.
Written by Dave Lavinsky on Friday, August 19, 2011
I recently read the following quote from Apple CEO Steve Jobs:
"You can't just ask customers what they want and then try to give that to them. By the time you get it built, they'll want something new."
Job's statement reminds me of a similar statement made by Henry Ford many decades before, which was:
"If I had asked people what they wanted, they would have said faster horses."
Both of these statements imply that there's no value in market research. This couldn't be further from the truth.
However, I think there is a valid point made by each quote when applied to game changing technologies. The automobile was a game changer. As a result, before automobiles were around, the average individual couldn't really fathom what an automobile would be like, let alone state in a survey that they wanted one.
Likewise, before digital audio/MP3 players were invented, it would have been hard for the average consumer to voice their need for such a product.
But importantly, after each of these product categories were launched, market research became critical. Market research determined what new features to add. For cars, it was market research that told manufacturers to increase fuel efficiency, to add better stereo systems, and to increase cargo capacity among others.
For digital audio/MP3 players, it was market research that told manufacturers to increase screen sizes, increase the battery life, and add storage capacity among others.
And, even before these game changing technologies were invented, the right questions WOULD have yielded the right market intelligence.
For horse owners, if you asked, "would you be interested in a faster way to get from your house to your best friend's house a town over?" the answer probably would have been "yes."
For Sony Walkman owners, if you asked, "would you be interested in a smaller player that holds 100 times more songs and lets you access each song more easily?" the answer also probably would have been "yes."
The key is that market research IS critical and highly useful, particularly if you ask the right questions.
Below is my 5-step process for conducting market research to understand the wants and needs of your customers, so you can develop the right new products and services:
Step 1: Choose your audience
You need to make sure you survey the right audience. For example, if you are trying to understand the needs of seniors, you obviously don't survey teenagers. Generally you will survey current customers and prospective customers, and particularly for prospective customers, you need to choose your criteria precisely.
Step 2: Create your survey questions
There are two core types of questions I like to ask. The first type are demographic and psychographic questions. These are questions such as how old you are, what zip code you live in, and what TV shows you watch.
The reason for these questions is that they allow you to filter and/or segment your results. For example, you may find that consumers in one zip code have different needs than consumers in a different zip code.
The second type of questions I ask are needs and wants questions. These are questions designed to identify what customers like about current solutions, what they don't like, and what an ideal solution might look like.
In soliciting this feedback, I use ratings scales, multiple choice questions and open-ended questions (which are questions in which there are no "set" responses and the user has to type in their answer).
Step 3: Do a reality check on your survey questions
Most surveys have two problems that go hand in hand: they ask questions that are un-actionable and they are too long.
With regards to un-actionable questions, read each question to yourself aloud and then imagine how the responses might come back. And then ask yourself if having that response would lead to an action you can take.
Then remove the un-actionable questions, and make sure your survey can be completed in 5 to 10 minutes tops.
Step 4: Decide how to administer your survey
In the "old" days, you could mail surveys, conduct them face-to-face, or conduct them via telephone. Today, conducting surveys online using tools like SurveyMonkey.com are considerably easier, faster, and cheaper. So, nearly always, I recommend administering your survey online (unless of course your target customers are not computer savvy or computer literate).
Step 5: Analyze your results
Analyzing your results is the fun part. Fortunately online tools such as SurveyMonkey.com make analysis quick and easy as they tabulate the results for you.
Importantly, once you review your results, you should start to take action. Because there is validity to Steve Jobs' quote, in that customer needs and wants do change. And if you wait to long to satisfy their current needs, by the time you do, their needs might have changed.
I often quote Jay Abraham's line, "Your customers are geniuses; they know exactly what they want." Because it's true. But as a marketer and entrepreneur, you need to get this genius out of them. You need to ask them the right questions at the right time in order to pull the information you need to better satisfy them and gain competitive advantage.
Written by Dave Lavinsky on Friday, August 12, 2011
A couple of years ago, a colleague of mine told me the following story. Is it true? Maybe. But even it it's not, it illustrates a critical point, and one that will significantly boost your success.
Here it is:
There was once a young man who had just graduated from college with an engineering degree. He did what most of his classmates did and got a job as an engineer. Within the next few years he got married and had his first child. And then another child.
But after working "for the man" for twenty years, he decided to start his own firm; an engineering consulting firm. While at first business was slow, over the years he built up his firm. In fact, 30 years after founding his company, he was generating millions of dollars in annual revenues.
But then, at the age of 72, he died.
And he left the business to his 71 year old wife.
Now his wife had never run a business in her life. In fact, lately, most of her days were spent at the country club golfing and dining with her friends.
But within a year, she doubled the firm's profits.
How did she do it?
Simple. She visited the company a week after her husband passed and sat down with the management team.
And then she told them to do two things:
1. Make me a list of the 5 things that worked the best in the last 12 months
2. Make me a list of the 5 things that worked the least in the last 12 months
The list of things that worked included items like upselling current clients, getting new clients from partnerships they formed, and their program that hired and trained new sales reps.
The list of things that didn't work included radio advertising, sponsoring trade shows, and a new service offering that just didn't catch on.
So the widow made one demand. She said, "Do more of the 5 things that worked, and stop doing the 5 things that didn't work."
The management team listened. And within a year, the company's revenues and profits both doubled.
Yes, it's that simple.
But most of us don't do this. Here's why. Throughout our lives, we've been told to improve our weaknesses and never quit. So, in business, when something doesn't work, our first impression is typically to fix it.
However, that's generally not the best solution. Rather, the best solution is typically to do more of what is already working. Those are the things that are proven to work. So why try to fix an unproven concept, when you already have figured out a winner?
Now, when it comes to marketing, I DO suggest to always tweak and test new ideas. Since creating new promotional vehicles which are profitable can give you competitive advantage. But in most other areas, you should focus more on your winners.
So, take out a pen and paper and:
1. Make a list of the 5 things that worked the best for you in the last 12 months
2. Make a list of the 5 things that worked the least for you in the last 12 months
And then make sure to focus the vast majority of your efforts on doing more of what's worked.
Written by Dave Lavinsky on Thursday, August 11, 2011
Luke Fishback is a smart guy. After graduating college with an engineering degree, he got a job at Lockheed Martin. But within a few years, he had had enough.
Well, Luke realized he was an entrepreneur at heart, and needed to start his own company. In fact, Luke had been an entrepreneur earlier in his life. When he was just 14 years old, he started Luke's Garbage Service, a waste disposal and recycling service for a rural community in Georgia.
So Luke started a company called PlotWatt. The company creates technology that helps people reduce their energy bills by providing customized money-saving recommendations.
But there was one thing Luke was missing: money. Luke needed money to build his team, develop his technology, and start marketing his company.
Fortunately Luke didn't follow the failed path that most entrepreneurs take; which is to try to secure millions of dollars in venture capital right away.
Rather, Luke understood the Funding Pyramid -- the fact that 1) some sources of funding are much easier to get than others, and 2) once you get the easier sources of money and progress your business, it's MUCH easier to raise the harder (and bigger) sources.
So, Luke entered PlotWatt in GE's Ecomagination Challenge competition in early 2011. And he won!
Now while the Ecomagination prize was only $100,000 (not chump change, but not as much as Luke needed), it was just the catalyst he needed.
The $100,000 allowed him to make progress in building his technology and team, and the press from the award elevated his company's profile.
As a result of this, Luke and PlotWatt were quickly able to assemble a $1 million seed round of funding. And now they're off to the races.
Importantly, Luke's story illustrates 5 keys to raising money for your company today:
1. Know that funding is a progression. No matter how cool your company or idea, you're generally not going to receive a $10 million check from the get go. Rather, you will typically raise several "rounds" of capital. You start with smaller amounts, and then as your business makes progress (and your valuation increases), you are eligible for larger rounds of funding.
2. Find the right sources of funding for now. As mentioned above, some forms of funding are much easier to raise than others. And based on your stage of development (e.g., startup vs. established business ready to scale), different forms of funding are more relevant. The key is to go after the right sources. No matter how good your venture is, if you go after the wrong funding sources, you'll fail. Even Google failed when it initially targeted venture capitalists (Google then successfully raised funding from angel investors, and went back to venture capitalists thereafter).
3. Cultivate relationships early. Even though you won't get the $10 million venture capital check today (if you haven't raised money before), you CAN start forming relationships with venture capitalists who can write you a $10 million check tomorrow. 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."
4. Create your business plan now and keep it up-to-date. Your business is always changing. And as it changes, different forms of funding become available, and you'll come across different types of lenders and investors. Importantly, when you meet a lender or investor, you must 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 (in fact it often doesn't win). Rather, the best marketers win. That is, the entrepreneurs that are best able to market their companies to lenders and investors are the ones who raise the money. In Luke and PlotWatt's case, their marketing efforts were aided by the PR they received from winning GE's Ecomagination Challenge. In many other cases, it's the entrepreneur marketing themselves via networking, sending emails, making telephone calls, getting and leveraging Advisors, etc.
Six months ago, Luke Fishback was bootstrapping PlotWatt. The company was making progress, but funding was holding back its potential. Today, the company has a million dollars in the bank and is poised for phenomenal growth. Funding can do that for you; so go out and get it.
Would more funding allow you to significantly grow your company?
Then you need to figure out which sources of funding you can raise today. The key to this is understanding and accessing the Funding Pyramid.
Watch this video to see the Funding Pyramid in action.
Written by Dave Lavinsky on Sunday, August 7, 2011
Once they launch their companies, most entrepreneurs fall into a very dangerous trap. What happens is that they get very myopic; they get so close to their businesses that they fail to see the bigger picture.
So, they run their businesses on a day-to-day basis, constantly fighting fires and striving to squeak out a little more profit each year than they did the year before.
Conversely, the most successful entrepreneurs ask two key questions that others don't.
The first question they ask is "What is the end game?" Then they ask sub- questions such as: Is my goal to run this company until I die? Do I want to eventually sell my company? Or do I want pass it down to family members?
It turns out that the most successful entrepreneurs are the ones who build their companies with the eventual goal of selling them. Why? Because this is where the big bucks are. In fact, research shows that 80% of pentamillionaires (those with a net worth of $5 million or more) are entrepreneurs who started and sold their companies.
Think about it this way: the work required to start and grow a company from $0 to perhaps $10 million is MUCH more valuable than the work required to grow a company from $10 million to $100 million.
With regards to the latter, there's no shortage of corporate executives who have the skill sets to grow existing brands and companies. But there are few people out there (the ultra successful entrepreneurs) who have the ability to build a company from scratch to the point that a larger corporation wants to buy it.
The second key question that the most successful entrepreneurs ask is "How do I build VALUE that multiple acquirers would want?"
Building value is different than simply running a business. When you simply run a business, typically your goals are to keep the lights on and earn a profit. When seeking to build value, you set different goals.
For example, Shutterfly recently announced that it was acquiring Tiny Prints for $333 MILLION. In making this acquisition, what did Shutterfly value? Well, it valued Tiny Prints' revenues, customer base, marketing skills, intellectual property and operational processes among other things.
Importantly, Shutterfly did NOT value Tiny Prints' profitability. In fact, Tiny Prints' EBITDA (earnings before interest, taxes, depreciation and amortization) was a miniscule 2-3% of its revenues.
So, in addition to thinking about your end game, create a list of the factors that multiple potential acquirers would want to see in your company. Maybe it's significant revenues. Maybe it's a high profit margin. Maybe it's unique products or intellectual property. Etc.
And importantly, once you have this list, make sure you integrate it into your daily, weekly, monthly, quarterly and annual action plans. And rather than looking back each quarter and simply thinking about how much revenues and/or profits you generated, consider how much VALUE you built and how much you progressed toward reaching your end goal.
Written by Dave Lavinsky on Wednesday, July 27, 2011
When launching their business, or launching a new product or service, many entrepreneurs dream big. They picture tons and tons of customers buying their products or services, and sailing off into the sunset. Now, the dream of massive success is great. But the strategy is generally flawed.
Here's why: these entrepreneurs typically believe that every man, woman and child will want to buy their product or service. So, when asked "who's your customer?" they say "everyone."
There are two problems with this answer. The first is that marketing to "everyone" is really hard and expensive. Sure, occasionally you have companies like Facebook and Groupon that enjoy organic growth via viral word of mouth. But this is rare. For the rest of us, marketing to "everyone" costs millions of dollars.
The second problem is that when you try to serve too many customers, often times you don't do a great job serving any single customer. That's why there is the following great saying: "When you try to be everything to everyone, you end up being nothing to anyone."
Even behemoth Walmart is not everything to everyone; there are many folks who have never stepped foot in a Walmart. And clearly the retailer doesn't target the upscale market. What Walmart does well is picking one large customer segment (customers who want low prices and high value) and serving them very well.
So, the solution is to target a smaller audience and serve it really well.
In doing so, a few things will happen. First, you will be able to more effectively market to the needs of your smaller market and gain revenues and profits. Second, even without specific marketing, you will undoubtedly serve some customers outside of your target market (e.g., while not their core audience, upscale customers do occasionally shop at Walmart). And third, via brand extensions, you can always target additional customer segments later.
So, more specifically, here is my 3-step plan to achieve more success with any new company or product/service by focusing on fewer customers.
1. Pick a more narrow market. Make sure to really define your target market. Understand that it is better (and easier) to achieve a 20% share of a smaller, more defined market, than a 0.1% share of a huge market.
2. Leverage the 80/20 rule. The 80/20 rule states that 20% of your customers will result in 80% of your sales. Figure out who these 20% of customers are. And then focus on attracting them.
3. Create an avatar based on the 20%, and speak to that avatar. An avatar in this case is a person who embodies the characteristics of your ideal 20% of customers.
Once you have identified this avatar, market your company as if you were speaking one-on-one to the avatar. By doing so, you will better speak to the needs of your customers.
Let me give you an example. Growthink's customer avatar is a man named Rick. He's a 41 year old entrepreneur who is looking to grow his company. He has a wife and two young kids and enjoys running and cycling.
So, when I write this blog post or do advertising, I have Rick's needs, thoughts and desires in mind. And as a result, I am better able to attract and serve him.
Now, you might be thinking, Rick really only represents one customer of ours. Because it would be pretty rare for another customer to embody the exact same attributes as Rick (e.g., 41 years old, likes cycling, etc.).
But that's ok. The message I give to Rick, also resonates pretty well with Mary, a 58 year old entrepreneur with two college-aged kids, and Tony, the 22 year-old single entrepreneur as well. Etc.
But, my message to Rick does not resonate with non-entrepreneurs (who could buy and benefits from several of our products and services, but who are not worth targeting from an ROI and focus perspective).
When you market to a faceless group of target customers, it's hard to really speak to their needs. By creating an avatar and giving your customers a face, you can serve them better. You can think about what's bothering them, and what their hoping for. And then you can give them solutions.
In summary, you need to start by thinking small to achieve your big dreams. Start by defining and better serving a smaller group of customers. And parlay that into more customers and market segments. By doing so, you will achieve greater success!