A venture capital firm is a financial institution that focuses on providing capital, in the form of equity, to companies who offer them the prospects of significant growth.
The partners and associates at venture capital firms are known as venture capitalists. The term "VC" or "VCs" applies to both venture capital firms and venture capitalists.
Unlike angel investors, who invest their own money, VCs are professional institutions that invest other people's money. VC firms raise capital for their own funds from sources which primarily include pension funds, financial and insurance companies, endowments and foundations, individuals and families, and corporations.
The VCs are then charged with providing a solid return on investment on this money. This is the one thing that every VC wants. By providing a solid ROI to their investors, VCs earn bonuses and raise more funds so they can stay in business.
VCs earn returns for their investors by finding high growth companies, making investments in them at favorable terms, guiding and nurturing them, and enacting a liquidity event (e.g., selling the company or having it complete an initial public offering).
Because they are utilizing other people's money, and are judged and compensated by the performance of their investments, venture capitalists are extremely rigorous in their investment decision-making process.
Importantly, VCs tend to only invest in companies with significant market potential of $50 million, $100 million or more. This is because even with all their relevant experience, the average venture capital firm will lose money on half the companies they invest in and only break even on a third.
Where VCs make their money is on the approximately 20% of companies they invest in that see explosive growth and provide remarkable returns of 10 times to 100 times or more on their investment.
Industry insiders sometimes refer to the 2:6:2 rule. This rule is that an average portfolio of ten VC investments will include two losses (e.g., companies go bankrupt), six moderately performing companies (may break-even on the investment or lose a little) and two very successful returns.
In fact, an analysis by Bygrave and Timmons of VC funding found that just 6.8% of investments returned ten times or more on the invested capital (these "home runs" are what give VCs high overall returns). Conversely over 60% of investments lost money or failed to exceed the amount of money earned if the capital had been put in an interest-bearing bank account.
The result of this analysis is that typically a venture capitalist will want to see the ability to get 10X their money back or more from investing in your company (they are seeking "home run" investments which compensate for the 60% of their investments that don't pan out) . As such, for every $1 million you are seeking from VCs, you must show them a realistic scenario where you can turn it into $10 million.
So, importantly, when approaching venture capitalists, remember 1) their primary goal is to make significant money from investing in you; and 2) you need to show them how they can earn a 10X return.
Now, if your company can potentially give VCs a 10X return, then seeking venture capital might be right for you. However, raising it is virtually impossible if you don't know what you're doing and haven't done it before. So follow this plan:
1. Develop a list of VC firms.
Start by creating a list of venture capital firms.
2. Narrow your list.
Each venture capital firm invests based on particular characteristics (e.g., some only invest in software firms), so you need to make sure your list only includes VCs that are interested in your type of venture.
3. Make sure the VC is active.
Many VC firms that have websites aren't active. That is, they aren't making new investments. You don't want to waste your time contacting and talking with these firms.
4. Find the appropriate person to contact.
This is critical. Venture capital firms are comprised of individual partners and associates. If you contact the wrong one, you'll be dead in the water.
5. Send the VC partner or associate a "teaser" email.
You don't want to send the VC a full business plan or executive summary initially. Rather, you need to send them a "teaser" email to see if they are interested. You don't want to "over shop" your deal.
Once the VC "bites" on your teaser email, the next step is generally to send them your business plan. Following that you'll do an in-person presentation(s), receive and negotiate a term sheet, and then sign a formal agreement and receive your funding check.
The process is a lot of work, but once you receive their multi-million check with which you can dramatically grow your company, you'll agree it's worth the effort.
Suggested Resource: In Venture Capital Pitch Formula, you'll learn exactly how to find and contact venture capitalists, exactly what information to include in your presentations, and how to secure your financing. This video explains more.
On March 3rd, Crowdfunding platform Kickstarter announced that is surpassed $1 BILLION in funding pledges. That’s $1,000,000,000 in funding for entrepreneurs.
Very interestingly, Kickstarter included lots of interesting statistics on these crowdfundings as follows:
Those are some very impressive numbers. And they ONLY represent one Crowdfunding platform. If we start adding other platforms, like IndieGogo, RocketHub, etc., the amount of Crowdfunding dollars raised and the number of backers skyrockets further.
And, perhaps most importantly, the trend for entrepreneurs is extremely positive as Crowdfunding is growing rapidly. Recall what I wrote above -- “more than half of the $1 billion was pledged in the last 12 months alone.” Now consider that Kickstarter launched on April 28, 2009.
That means that from April 28, 2009 to March 2, 2013, a nearly 4 year period, a half-billion dollars was raised on Kickstarter. They then raised the same amount in just the last year.
The fact remains that Crowdfunding is here, is here to stay, and is only growing. This is truly a blessing for entrepreneurs and is probably making right now the best time in history to raise money for any company. So, if you need funding, what are you waiting for?
Even billionaires need to raise money. Take Donald Trump. Each time he launches a new real estate project, he raises outside money for it. Why? Because why should he only invest his own money? Rather, Trump and other billionaires understand the importance of leveraging other people’s money.
So, what do billionaires like Donald Trump do to raise money? Below are five key tactics billionaires use, and perhaps more importantly, that you can too.
1. Leverage Relationships
Billionaires have lots of relationships that they leverage when seeking capital. They access their networks by telling them about their latest project and their funding needs.
You too have relationships. You have current and/or former bosses, co-workers, counsel (e.g., accountants, lawyers, etc.), family friends and so on. Leverage these relationships when seeking funding. Even if none of your current relationships can invest directly, some certainly know and can introduce you to others who can.
2. Get Creative on Deal Terms
A great investment makes sense for both the investor/lender and the entrepreneur. Oftentimes, in ensuring the investment works, you need to get creative on the deal terms.
For example, maybe you give the investor a small equity percentage in your business, monthly repayment of some of their investment, AND a small percentage of your venture’s future sales. While most investments only include one of these funding options (e.g., debt/loan, equity, or royalty payments), there’s no rule that you can’t get creative and combine deal terms. And when you do, you often make your deal/company more appealing to investors.
3. Sell Investors on the Opportunity
Regardless of how good your company or investment opportunity is, you need to “sell” it to investors and lenders. Billionaires like Donald Trump must also do this. For instance, Trump constantly convinces investors why his newest venture will be a huge success.
Marketing yourself and your company to investors is a crucial part of raising capital. You must prove to investors why your company will be successful and that they will get a solid return on their investment. Importantly, when “selling” investors, get specific. For example, don’t just say you will succeed because you have the best management team. Rather, explain the precise credentials of your team that make you the best.
4. Don’t Take Rejection Personally
Billionaires like Donald Trump have been rejected hundreds of times in their money-raising careers. The fact is that your investment is never right for everyone.
You must accept that you will get more “no’s” than “yes's” when raising money. Importantly, don’t let the “no’s” get to you. Remember that you only need one “yes.” So, even after 10 “no’s” or 25 “no’s” or even 50 or 100 “no’s” you need to keep going and persevere.
If you truly believe you have a great company or opportunity, and that it can provide a solid return to your investors/lenders, then never back down.
5. Strategically Incorporate Investor Feedback
When investors say “no,” use the opportunity to gain feedback. Specifically, ask them why they didn’t want to invest. Sometimes it has to do with your deal terms. Other times it has to do with concerns about your business or business model.
It is important for you to strategically assess this feedback. Don’t blindly follow the feedback or advice, as it may or may not be correct. But particularly if you hear the same feedback from multiple investors, you must strongly consider what they are saying. If multiple investors, for example, say your management team isn’t strong enough, then it’s generally time to agree with them and immediately start to bolster your team.
Similarly, when billionaires like Donald Trump have trouble raising funding, they modify their project and/or deal terms to better adhere to the needs of investors and/or lenders.
In summary, raising capital is essentially a partnership between you the entrepreneur and the sources of funding you seek.
The larger your network, the more potential funders or referrals to funders you have. After that, it’s about creating and selling an opportunity that funders can’t resist. Never give up, but also, don’t be stubborn -- realize that feedback from those who say “no” can often be invaluable to your ultimate success!
Every year I make predictions. I predict who will win the Super Bowl. I predict who will win this election or that. And so on. Like most people, sometimes I’m right. And often I’m wrong.
However, I rarely if ever make predictions publicly. Unless, that is, I am extremely confident my prediction will come true. Maybe this is a psychological flaw; that I don’t want to feel publicly humiliated by making a wrong prediction. If it is, so be it; the fact is that I only make public predictions when I’m close to certain they’re right.
In fact, my last public predictions came nearly 4 years ago today. On that day, in an email to over 80,000 entrepreneurs, I predicted that Crowdfunding (which had just begun) was going to be huge. It turns out, I was right.
1) The Growth of Crowdfunding
When I predicted the success of Crowdfunding in 2010, it wasn’t even an industry yet, so there are no formal statistics on it. But as you can see in the chart above, $1.5 Billion was raised with Crowdfunding in 2011. This amount increased by 80% in 2012 to $2.7 billion. And then from 2012 to 2013, Crowdfunding increased by 89% to $5.1 billion.
2) Why Crowdfunding Has Taken Off
There are several reasons why Crowdfunding has succeeded.
One reason might be that we are becoming more and more of a consumer society; which is defined as a society in which the buying and selling of goods and services is the most important social and economic activity. People simply like to buy things, and investing in a company is a type of buying.
Another reason is probably that people want to belong and be part of something. By investing in a nascent company, you essentially become part of it. If it succeeds, you were there from the beginning. That’s exciting!
Another reason is that we more and more live in an entrepreneurial culture. Entrepreneur success stories, like Mark Zuckerberg and Facebook, are now mainstream media. Top entrepreneurs have gained the public status formerly only occupied by actors, musicians and athletes. Likewise, television shows like Shark Tank have positively shined light on entrepreneurship.
3. Will the Growth of Crowdfunding Continue?
Yes, I am 100% confident that Crowdfunding will continue to rapidly grow. Here’s why. While the JOBS was signed in April 2012, it did not allow for equity-based Crowdfunding until the SEC approved certain regulations. Some of those regulations have since been approved. For example, "accredited investors" can now make equity-based Crowdfunding investments. But non-accredited investors still cannot. When this changes (which is expected later this year), and the general public can invest, the Crowdfunding market should grow like wildfire.
4) How Can You Take Advantage of the Rapid Rise of Crowdfunding?
To raise Crowdfunding, do the following:
1. Follow the 14 Step Formula
Below are the 14 steps I teach in my Crowdfunding Formula course 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
2) Become a Great Marketer
No matter how good your idea is, you will need to market it to others to get them to invest in it. A good analogy is this: every day thousands of people release videos hoping and thinking they will go viral, but they don’t. Even if their video is great, they need to get it in front of a bunch of people who watch it, like it, then spread the word.
In 2010 I called Crowdfunding the most exciting thing that’s happened in the entrepreneurial space since the first venture capital investment was made in the 1950s. Crowdfunding is helping entrepreneurs raise money and gain customers, and more and more Crowdfunding success stories will be featured in the media in the coming days. Hopefully it’s you they’ll feature!
If you want to generate new leads and sales, consider public speaking. Assuming you’re not deathly afraid of speaking in public, below are answers to the five most common questions about using public speaking to grow your business.
1. Where should I speak?
In determining where to speak, the goal is to speak in whatever venues will get you in front of the most target customers.
This could range from local organizations such as your local Chamber of Commerce to national trade associations. Simply brainstorm events in which your target customers attend.
Then, contact the event organizers and ask them to consider you as a speaker. For annual events, there is often a place on their website where you can apply to speak.
2. What should I talk about?
Figuring out what to talk about is fairly easy. Figure out the questions and problems your customers are having, and speak directly to that.
For example, let's assume your company provides outsourced customer service. To begin, you'd want an audience primarily comprised of business owners. Since you know they probably have questions about how to provide better customer service, a great topic would be “5 tips to improve customer service.” For each tip, you would include good and bad examples.
Importantly, in giving such a presentation, you will naturally promote your company's service (as the "good" examples will be ones that your organization has done) without directly pitching the audience.
As you can imagine, such a presentation would generate new leads and sales without you having to be "salesy."
3. Where do I get material for my presentation?
This part is easier than you think. Once you determine your topic, brainstorm everything you can think of that it entails. With the customer service example, you can discuss costs, delivery & fulfillment, billing, refunds, returns & exchanges, technical support, customer phone support, etc.
Since you are already an expert in your business, the information is probably already in your head.
4. How do I overcome my fears of public speaking?
Don’t create your presentation all at once. Rather, keep a journal for a couple of weeks in which you collect ideas and tips you’ll want to share. Then, assemble this information into an outline for your presentation. You don't have to write it out word for word. Rather, develop a slide presentation that guides you through your talk.
Of critical importance is to never add more than 30 or so words per slide. You want attendees focusing on you, not reading your text.
Practice giving your presentation by yourself so you can pause and think about how it sounded along the way. Then have someone else listen to you in order to give feedback.
When the day comes, relax and remember to talk as if you're on the phone with a friend. You don't have to hold eye contact with anyone in the audience, and they'll forgive you for any blunders as long as you're sincere and interesting. Remember that your audience is there to learn from you, not to critique you as a public speaker.
5. How do I get the most value from public speaking?
To get the most value from public speaking, do the following:
a) Get contact information from your prospects. The easiest way to do this is to tell the audience to email you if they want a copy of your slide presentation. This will result in a large email list of qualified prospects.
b) Invite prospective customers to hear you speak. Having them attend will give you great credibility (you actually gain great credibility even if they don’t attend) which will help close more sales.
c) Have someone record a video of you speaking at the event. As appropriate post all or part of the video on your website and/or on social media sites. The video will give you more credibility and position you as an industry expert.
d) Make sure you bring lots of business cards to hand out and budget time after your presentation to speak with attendees. Typically, after you present, several attendees will come up to you with questions and you want to be prepared.
Public speaking is an excellent way to find and secure new customers, employees, partners, investors and so on. Follow the advice in the five answers above so you can reap these key benefits for your business.
Suggested Resource: Public speaking is a great way to increase your company's credibility and get new clients. For even more "publicity" methods to grow your business, check out Growthink's Publicity Playbook.
Publicity is an extremely powerful form of marketing. If customers say positive things about you, particularly online, many new customers will learn about you and possibly buy your product or service.
Likewise, if the media covers your company, not only will more customers hear about you and possibly purchase your offerings, but it gives your company an implied endorsement and additional credibility.
However, the opposite can be true. That is, having customers and/or the media say negative things about you and your company could lead to its downfall. Below are 3 strategies to protect yourself from such negative publicity.
1. Take care of your customers
This first strategy is pretty obvious, but often overlooked. The challenge is that sometimes entrepreneurs get too focused on maximizing profits that they forget about the needs of their customers.
Customers are the lifeblood of any business, so take care of them. The more satisfied your customers are, the more likely they will be to spread positive messages about your company.
2. Respond to customer complaints
No matter how customer-centric you are and no matter how great your product or service, some customers won’t love it. Sometimes these customers are negative by nature or maybe they simply had a bad experience. For example, I’ve often looked at reviews for restaurants I love and have seen at least some negative reviews.
As an entrepreneur or business owner, you need to respond to customer complaints wherever they appear, from in your inbox to social media sites, etc. Doing so allows you to solve the issue and satisfy the customer, and/or at least let other customers know that you stand by your offering and support your customers.
In many cases, for example, I’ve seen customers complain online with regards to products they wrongfully bought (they purchased the wrong item to suit their needs). By posting that information, in a nice way of course, online, your company explains the negative remark and gains credibility with prospective customers.
3. Create your own media
A final way to protect yourself from bad press, and in fact ensure positive press, is to write articles yourself.
Clearly, if you are the author of articles appearing in the media, they’re not going to say negative things about you. On the contrary, any articles you write give you and your company great credibility.
I’ve been using this strategy for years. Many years ago I started publishing articles on article submission sites like Ezine Articles. As I gained more expertise and a track record, I started contacting editors at bigger news sources requesting they publish my articles. Today, I regularly contribute to Forbes, Entrepreneur and AllBusiness. I also frequently contribute articles to smaller magazines and blogs.
Don’t like to write? Well, these days, that’s not really important. You can simply come up with a topic that customers want to know about, and dictate your expertise on the topic into a microphone or your mobile phone. You can then email your recording to a dictating service or to a freelancer who will transcribe and edit it into a great article.
Once you have the article (and/or beforehand), contact websites, blogs, newspapers, magazines, trade journals, etc. who might be interested in your article to convince them to publish it.
You might have heard the expression that there’s no such thing as bad press. This is true to the extent that it’s always great to have media spread the word about your company so new potential customers hear about you. But clearly, positive press is far superior to negative press, so start using these 3 strategies today to get positive press that yields new customers, more sales and improved profits. For further strategies and step-by-step guidance to getting tons of great publicity for your business, check out my Publicity Playbook course.
The technology age has brought with it a long list of business related success stories. There are plenty of cases where a small startup has managed to grow into a billion-dollar company.
While most people will think of companies such as Facebook and Amazon, GoDaddy.com is actually one of the greatest successes in recent history. What started as a small company has since grown into an easily recognizable brand which owns a significant portion of its own market.
GoDaddy was created in 1997 as Jomax Technologies by Bob Parsons who had recently sold his other company, Parsons Technology Inc., to Intuit.
At the time, a company called Network Solutions was essentially the only place from which people could register domain names. That changed in 2001, however, and GoDaddy.com quickly grew.
In 2005, GoDaddy.com became the world’s largest ICANN-accredited registrar on the internet. In addition to being one of the most popular domain registrars in the world, it also offers website hosting and a whole range of business related technology solutions.
In 2011, 65% of the company was sold to a group of private equity firms for approximately $2.25 billion. GoDaddy’s rapid rise to prominence and continued success are due to a few key factors. Studying what they did right can help business owners of any type discover new ways to grow their own companies.
Lesson #1: User Friendly Innovation
Innovation has been at the heart of everything GoDaddy has done since its creation. What it has managed to do is take something which is ordinarily very technical, in this case domain registrations, and make it appeal to a wide range of customers.
It was not very long ago that most people were unfamiliar with the Internet. The idea of marketing domain registration and web hosting to everyday people was unheard of at the time. This is part of what has made them so successful. Their effort to bring these services to the average person effectively opened up a vast new market.
Lesson #2: Cutting Edge Branding
Part of what has made GoDaddy so successful is its ability to create a readily identifiable brand. Nearly every person on the Internet has heard of GoDaddy and a majority of sites are registered with the company.
The power of this brand has come from its extensive advertising. Buying up expensive advertising space during events like The Super Bowl, GoDaddy made a name for itself with racy and often controversial marketing efforts. Its commercials, utilizing seductive women and star athletes, brought a sexy and exciting feeling to what could otherwise be a dry and technical company.
Lesson #3: Soups-to-Nuts Offering
GoDaddy is far from just a domain registrar. It offers a number of services including website hosting and ecommerce solutions. This has helped make it successful because it essentially offers everything someone might need when starting a website.
The domain can be registered, the site hosted, the platform installed, and upgrades can be added as needed. When a customer comes to GoDaddy for domain registration they immediately have access to everything else. This allows the company to offer upsells and products with recurring payment options that are relevant to what customers have already purchased.
Lesson #4: Customer Service in Layman’s Terms
GoDaddy’s customers may not always be experts at information technology. There are a number of different problems that a customer might run into. GoDaddy has made a point of offering outstanding customer service that explains complex technology solutions in layman’s terms.
Due to its high level of customer service, in a way customers understand, GoDaddy.com has become one of the most trusted hosts and registrars around.
Lesson #5: Upfront, Competitive Pricing
Unlike make technology service providers who bury prices in obscure parts of their website or require a call for a quote, GoDaddy publishes its prices very visibly.
Furthermore, its pricing is competitive, and it has prepared numerous product bundles to make it easy for customers to find what they need.
Rather than demanding money for a number of different services, almost everything is optional and customers can spend as little or as much as they want. This competitive pricing, coupled with constant discounts and coupons, has made it difficult for other companies to compete.
What to Take from This
Owners of businesses of any type can learn a lot from the GoDaddy. Its rapid rise to the top is something which is enviable in any industry and implementing a few of its key strategies can help any business. While not every company will have a budget as large as GoDaddy, there are still several concepts, discussed below, which can be useful.
A. Challenge Accepted Notions
At a time when many people were still unfamiliar with the Internet, GoDaddy targeted their advertising towards regular, every day people. This was a risky move, at the time, but actually showed incredible foresight.
Look at your business model – where have you been playing safe? Are there bolder strategies you can test?
B. Invest in Marketing
Many of GoDaddy’s biggest critics claim they bought their market dominance through expensive advertising. While this is not entirely true, marketing has been a major source of success for it. GoDaddy advertised mainly through inexpensive online banners for years before it was big enough to implement sexy and eye-catching ads during The Super Bowl.
Dust off your branding and marketing plan and review it. Is it relevant in today’s market? Are you getting the results you want? If not, it may time to go back to the drawing board and perhaps invest in expert guidance.
C. Offer Everything You Can Do Well
Specialization can often be a good thing in business, but the possibility of branching out into related products and services should never be ignored. GoDaddy started as a domain registrar but soon included a variety of other services as well.
Offering related services can boost profits and avoid losing customers to competitors with a full-service solution. For example, a car repair shop that doesn’t replace tires can lose their regular oil change customers when those customers need new tires and find a full-service provider.
The caution is to only branch out if you can provide excellent service in all categories. Adding more services, but doing it poorly, will hurt rather than help you grow.
Father Knows Best
GoDaddy is a familiar name on the Internet and with good reason. Growing from a small start up to a multi-billion dollar company, it has proven it is expert at predicting future trends, understanding its intended audience, and delivering on what it promises.
Your job is to learn from GoDaddy. Take the time to review your business model using the concepts in this article. Outline steps you can take to promote your own growth, then take actions. Carefully track your results to learn what works best in your market.
Over time, you will have a proven recipe for strategies that generate growth for your business. How long before I write an article about you and your stellar success?
“Social proof” is a critical psychological principle that savvy business owners can use to dramatically increase sales and grow their businesses. The principle simply states that people are more likely to do something when they see others doing it. For example, after entering a new restaurant, customers are more prone to sit down and eat if they see others in the restaurant versus if it was completely empty.
Interestingly, there’s one famous example when the power of social proof caused unintended and negative results. The example was Nancy Reagan’s ‘Say No to Drugs’ campaign in the 1980s. While the campaign hoped to decrease drug use, the opposite actually happened. Yes, teen drug use actually increased in the 1980s as the campaign implied that many teens were using drugs. This social proof made other teens think it was ok if they tried drugs too.
On the other hand, there are countless examples of using social proof for benefit, such as the following:
1. Social Proof from Other Users/Customers
Showing other users and customers is the most common form of social proof. Here are some examples:
Even more powerful is when you get your customers to invite their friends to become customers. Hotmail did this extremely effectively by putting “join Hotmail” advertisements in the footer of all email messages. This prompted Hotmail to grow from 500,000 users at the start of 2007 to over 12 million users by year’s end. Likewise, allowing friends to invite friends to play through Facebook helped Zynga grow over 10 times, from 3 million to 41 million average daily users, in just one year.
2. Social Proof from Experts
This form of social proof is when you show approval of your product or service from credible experts.
I used this form of social proof when marketing my book, Start at the End. Specifically, I received, and subsequently promoted, reviews from several experts such as: Marshall Goldsmith, Kevin Harrington, John Jantsch and Brad Feld among others.
A similar example is Sensodyne toothpaste promoting that “9 out of 10 Dentists Recommend Sensodyne” for sensitive teeth.
3. Social Proof from Celebrities
An estimated 25% of television commercials in the US now use celebrities. For example, you’ve probably seen Catherine Zeta-Jones promote T-Mobile over the years. You may have also seen Beyonce promoting milk and William Shatner promoting PriceLine.com.
Even if you don’t have the funds to afford to big celebrity, you can use this form of social proof to your advantage. For example, when luxury pillow manufacturer Pillo1 received positive publicity from Oprah on Oprah.com, Pillo1 effectively showed this on their website.
4. Social Proof from Research and Past Results
Showing research and past results gives positive social proof to spur new customers to buy your offerings. Here are some examples:
5. Social Proof from “Borrowed Trust”
A final form of social proof is when you “borrow” trust from other brands. Examples of this include:
As you can see, there are numerous ways to use social proof to influence others to take the actions you want. Use these examples as a starting point in brainstorming ideas to leverage social proof in your business. And then use the other proven marketing tactics to take your business to the next level.
It was not very long ago that the United States Postal Service was the only means by which to ship physical packages in the US. While this service had been invaluable, its quality had progressively declined over the years. Letters were lost, packages were damaged and customer service was nearly non-existent. This opened the door for private corporations to pick up the slack.
FedEx was hardly the first private parcel delivery service but it quickly became the market leader. With regional, national and international services, FedEx has been filling the need for a reliable way to send packages. Over the years it has expanded its reach through acquisition of similar companies as well as adding retail locations.
FedEx’s success has been due to the satisfaction of both its customers and employees. When a customer hires FedEx, they know their package will be delivered on time. And the company’s competitive employee benefits and professional work environment have created an army of loyal employees that are fully dedicated to the company’s mission.
Combined with an intense focus on the quality of their work and a close relationship with customers, FedEx has become synonymous with quality and dependability.
The Big Screen
FedEx’s commitment to quality and excellence is typified by the movie Cast Away, starring Tom Hanks. This movie, released in 2000, tells the story of Chuck Nolan, a systems analyst for FedEx. His job of resolving problems and improving service sends him on a trip to Malaysia. During the flight, a storm hits and the plane goes down. Chuck finds himself washed up on the shore of a deserted island with nothing but a few damaged packages.
After four years on the island, Chuck resolves to make an escape. Building a raft from material he scavenged from the area, he is rescued by a passing cargo vessel. The only possession he manages to save is an unopened and, as yet, undelivered FedEx package. The final scene of the movie shows Chuck delivering that package, late but still intact.
The most surprising aspect of this movie is that FedEx paid absolutely nothing for the product placement. In fact, upon hearing of the plot of the movie, FedEx was reluctant to give its approval. After reading the script, however, the company realized what a great marketing opportunity this movie really was. FedEx had become so well known for its dedication to service and reliability that an entire movie was built around it.
Lesson #1: A Culture of Excellence
FedEx gained its reputation through a culture of excellence, from top to bottom. While there are multiple aspects to this company, they are all overseen by a main office that focuses on keeping the machine running smoothly.
Even the character portrayed by Tom Hanks had the responsibility of analyzing the entire system and improving its functionality. This dedication to excellence is part of why FedEx is as powerful as it is today.
FedEx strives to offer the best possible experience to all its constituents. From corporate employees to delivery personnel and even retail location customers, FedEx has become known as a corporation which never settles for mediocrity. This commitment to quality is so pervasive that it has become a part of the entire brand itself.
When a customer sees the FedEx logo, they know they are dealing with a company that will do what it promises, no matter what challenges it faces.
Lesson #2: Driven to Improvement
Here is another little known fact about FedEx: when the fax machine became a standard, FedEx’s business declined by 50%. FedEx had a choice: fold or evolve. It studied the market and made a simple realization – not everything can be faxed.
FedEx redesigned its model to focus on documents that required a live signature and packages. Then it catapulted itself to the top of the food chain by making deliveries fast and reliable.
FedEx has never stopped trying to improve what it does. Every step of the process is constantly analyzed and there are employees who exist only to refine and improve the way in which people send and receive packages.
One reason why FedEx has been so effective in accomplishing this is because it really listens to it customers. The company understands how important customer satisfaction is and strives to give customers exactly what they want. From its inception, FedEx saw a need and filled it, and then it kept working hard to fill that need in a better way.
Lesson 3: Checks and Balances
All of FedEx’s improvements, however, would do little good if they were not constantly monitored. Before it was rebranded as FedEx, the logistics of the company was overseen by FDX. Over time, it acquired a few more logistics companies and formed FedEx Global Logistics.
This portion of the company was created to oversee the vast operations of all the subsidiary organizations. Creating this allowed the company to consolidate the entire command infrastructure to better ensure that constant improvements were implemented correctly.
There are redundant processes in place to track even the smallest package. If a package is at risk of being misdirected, alarms go off. Think of your own business. If you were about to miss an appointment, what systems are in place to let you know and allow you to correct the problem?
The FedEx Test
Every business can learn a lot from FedEx. Nearly every business can be improved in many ways and there are a few simple questions that can help get a smart business owner on the path to FedEx’s level of success.
1. Is work delivered on time? Delivering packages on time is one of the most important elements in the success FedEx has enjoyed. When work is promised on a given deadline, customers and clients are relying on that promise.
No matter what it may be, all deadlines need to be followed as strictly as possible. This will help build a reputation for dependability and will create a group of loyal customers.
2. Is the quality consistent? Customers need to know that a company will always produce the same quality of work. It is imperative that quality be a main focus of any business.
Fluctuations in quality are the surest way to lose any loyal customers. If clients and customers cannot rely on consistent quality they will turn to a competitor who is more reliable.
3. Is improvement ongoing? Every business can be improved. Redundancies can be consolidated, procedures can be simplified and processes can be refined.
Constantly improving a business is an important aspect of long-term success. Markets will always change and customers will always want more. Improvement is something that should be a part of your daily operations and every employee needs to be engaged.
4. What do the customers think? The best barometer of success and satisfaction is your customers. If a business is not listening to its customers then all improvements are simply theoretical.
Offering incentives to encourage customers and clients to fill out surveys and questionnaires is one of the easiest ways to find out how they feel about your business and what they would like to see in the future.
Not up to writing a survey? Then pick up the phone and call your last 5 customers. Be friendly and ask them what they thought of your service. Avoid interrupting them. Listen, take notes, and do not argue. If you get a poor review, apologize and make it right.
Putting your business to the FedEx test is a great way to find out how to turn a good business into a great one. These simple questions will often reveal weaknesses in your company while offering suggestions for improvement.
By following the lessons of FedEx, smart business owners can set themselves up for long-term success based on a reputation for excellence and a solid base of loyal customers.
Today I thought it would be helpful if I detailed what I do at the end of December each year. This works very well for me, and I hope it will for you too.
1. Look back at the past year
The first thing I do is look back at the past year. I start with the annual goals that I set at the beginning of last year. Which goals did I accomplish? Which didn't I?
Next I go through each of my monthly goal documents. Fortunately my team and I create monthly goals each month. Seeing what our goals were in March 2013, for example, is very interesting. Perhaps more importantly, when I go through the monthly goal documents, I see just how much we accomplished this past year.
2. Be grateful
In viewing last year's annual and monthly goals, I'm never fully satisfied. That's just my personality, since I set aggressive goals that are hard to attain. So, chances are (and it's true again this year) that I didn't accomplish everything I had hoped for during the year.
But rather than focus on that, I always take a moment to be grateful for that which we DID accomplish. I think about all the hard work and all the great things we did do in 2013. I also like to think about how much better the company is now than it was 12 months ago.
3. Look ahead
Next I like to revisit my long-term goals. That is, where do I want my company to be in 5 years? Importantly, since I do this exercise annually, I simply pull up my answer to this question from last year. I decide whether my long-term goals have changed, and why. I then document my new 5-year goals.
I then work backwards to figure out what I must accomplish next year. I start by asking what I need to accomplish in 2014 to make it a great year and to put me on the path to achieving my long-term goals.
I think about financial metric goals such as the revenue and profits I'd like to generate in 2014. And I look at the business assets I must create in 2014. I think about what new products I must create in the coming year. I assess how many new clients I'd like to bring on. I document how many new employees I should recruit hire, and train in the next twelve months. And so on.
4. Plan out the year
I then start mapping my 2014 goals in a Gantt chart so I know exactly what has to be done and when. I document what I must accomplish in January, in February, and so on. Sure, I'll never get this exactly right, and during each month next year, I'll adjust my precise monthly goals. But this exercise gives me a great handle on what's possible to achieve in 2014.
A lot of what I've described herein is goal planning; setting goals, trying to achieve them, and then assessing your results. Importantly, goal planning takes practice. That is, the more often you set goals, try to achieve them, and then assess results, the better you get at setting goals that you actually can achieve.
As a result, every year I set and assess goals, I get better at planning out the next year, understanding what I can and cannot accomplish in 12 months, and maximizing my productivity so I build a great company. I hope you are able to do the same for your company. So plan out your long-term goals and 2014 goals now, and I wish you the best of success in achieving them!