I recently came across this poster:
Pretty funny (although not for the fish).
While it's amusing, there is an important lesson to it.
That lesson takes shape when you consider that starting and growing your business is your "journey of a thousand miles."
And when you haven't clearly planned out where you want to be at the end of the thousand miles, and precisely how you're going to get there, it could end very, very badly.
As Yogi Berra once said, "if you don't know where you're going, you might not get there."
This is very true for your business. In developing your business plan, you need to think through your vision for your company. Where would you like to see it in one year, three years, and five years?
What will your company look like at these times? How many employees will it have? What will you be doing on a day-to-day basis? What other companies will you be working with? And so on.
Once you have that clear vision, think through what it will take to get there. What specific milestones and accomplishments will you need to achieve? What are realistic dates for achieving them? What resources (money, people, etc.) will you need to achieve them?
The last thing you want is to go the thousand miles only to have your company fail (or be eaten by the bear in the poster).
So, spend the time now formulating your vision and your action plan for achieving it. And document it in your business plan. Sure, your business plan will change over time; it is not set in stone. But you must create it (and continually modify it) if you expect your journey to end with the success you desire.
Think about the successes you've achieved in your life already. For each of them, did you previously envision success? Did you have a formal or informal game plan that led to your success? Please answer these questions in the Comments section below. I look forward to reading them!
Tony Schwartz, the author of The Power of Full Engagement and The Way We're Working Isn't Working, among others, recently wrote a great blog post entitled Six Keys to Being Excellent at Anything.
In his post, he makes the key point that each of us has the ability to build any skill or capacity. He also cites the great Aristotle quote "We are what we repeatedly do."
Now, clearly this is not revolutionary thinking. I think we all know that if we practice something over and over again, that we can get considerably better at it.
The challenge however, is that practice is rarely enjoyable. Sure, the success that results from practicing and achieving your goals is highly satisfying. But, you first need to go through the pain of practice.
In his post, Schwartz sites six ways to improve the way your practice in order to get the results you want.
1. Pursue what you love. You must love what you do if you are going to excel at it, and be willing to put in the hard work and practice needed to succeed. Mark Twain said it best when he said, "The secret to success is making your vocation your vacation."
2. Do the hardest work first. Brian Tracy calls this "eating the frog." Because we try to avoid pain and gravitate towards pleasurable activities, we naturally procrastinate on tackling the most challenging but important tasks. By doing those things first, a) they get done, and b) we get more energy to complete other tasks thereafter.
3. Practice intensely, without interruption for short periods of no longer than 90 minutes and then take a break. We need to practice the areas we need to improve. And marathon practices are not the way to go; rather, practice for less time but frequently.
4. Seek expert feedback, in intermittent doses. Vince Lombardi said, "Practice does not make perfect. Only perfect practice makes perfect." Make sure you get expert feedback to make sure you are practicing the right way. Getting a business advisor is a great way to get ongoing expert feedback.
5. Take regular renewal breaks. As an entrepreneur, you cannot work 24/7. You will burn out eventually. Make sure you schedule some downtime. Physically you need it and mentally, the downtime will spur your creativity.
6. Ritualize practice. According to Schwartz, "the best way to insure you'll take on difficult tasks is to ritualize them - build specific, inviolable times at which you do them, so that over time you do them without having to squander energy thinking about them."
I do this with regards to going to the gym. I go every Monday, Wednesday and Friday after work. It's part of my routine. I don't even think about it; I just go. If I had the mindset that I would go to the gym if/when there was time, I would go much less frequently. By building this activity into my schedule it gets done nearly 100% of the time. Think about what skills you need to improve, and build practice time into your routine.
Follow these six tips to make sure you build the skills you need to become a successful entrepreneur. And realize that your skill-building will never end. Even the most successful entrepreneurs continue to invest in education and practice; since there are always areas in which you can improve. So establish the best methods for you and make this practice part of your daily life.
On your path to becoming a successful entrepreneur, you will make a lot of mistakes. In fact, even after you become a successful entrepreneur, you will continue to make a lot of mistakes. Importantly, the difference between success and failure is often how you handle these missteps.
A recent article "How to Deal With Angry Customers" discusses how top restaurant owners deal with dissatisfied customers and provides some good lessons on what you should do when you screw up.
These lessons include:
1. Pamper Them: when a customer seems evenly remotely upset, go way out of your way to ensure their happiness. Just knowing that you really care about them and are looking out for them will go a long way to ensuring their satisfaction.
2. Make No Excuses: When was the last time you voiced a concern as a customer, got a reply that it was somebody else's fault (e.g., the waiter saying that the chef must have screwed up and overcooked the food), and were satisfied? Never. Making excuses and/or passing the buck never works.
In fact, I love this quote by the executive chef at a New York's Maialino restaurant, "Excuses will only elevate the customer's sense of your restaurant's incompetency."
Importantly, most often the person at your organization receiving the complaint will not be the person who made the mistake. So make sure you build an organization with a culture that avoids passing the buck; a culture where everyone is empowered to make decisions to satisfy customers, and not make excuses.
3. Comp Judiciously: Simply put, if a customer is not happy, refund their money. I have taken this one to heart and as you may know, every single one of Growthink's products comes with a 100% money back guarantee.
Now, this is actually a little extreme, and most businesses can't "comp" or refund customers so openly and still maintain profitability. But you must consider refunding your customers in order to maintain their satisfaction. In making this judgment, consider the customer's potential lifetime value and their potential ability to spread good or bad word of mouth (it's hard to tell these days who has this power, as any particular customer may have a Twitter or Facebook account with a huge following). Finally, consider how badly you screwed up (and if you screwed up really badly, you should give the refund).
4. Focus on the Solution, Not the Problem: Customers don't want to hear a lengthy discussion of the problem; they just want it solved. So in the short-term, focus exclusively on providing a solution to the upset customer. Later, after the immediate situation is resolved, figure out how the problem possibly could have been avoided in the first place.
5. The Customer Is Not Always Right: An important point is that the customer is not always right. Oftentimes this type of problem can be avoided by setting expectations before the product is delivered. For example, if the waiter said that the steak was prepared with a pink center while the customer was ordering, the customer wouldn't be upset when they received it (versus if they were expecting it to be cooked more and then saw that the center was pink).
Even if the customer is wrong, your organization must determine the best way to handle the situation in order to lessen the impact.
Finally, I've been shopping quite a bit on Amazon.com lately. And I generally look at the customer reviews. Consider the book "Think and Grow Rich" which is a classic great book. On Amazon.com, it has 489 customer reviews with an average rating of 4.5 which is pretty much unheard of. While 75% of buyers gave it a full 5 stars, 36 buyers (7%) gave it just 1 star.
The point is that you are never going to satisfy all of your customers all of the time. So make sure you have a culture and systems to deal with dissatisfied customers. Since this can greatly impact your success!
When you're in serious pain, what do you take? Probably an aspirin or ibuprofen.
When you're trying to be healthy, what do you take? Probably a vitamin.
Now, which product do you think you crave more? The aspirin when you need it to alleviate an immediate and serious pain? Or a vitamin that may help ward off future illness?
Clearly, the aspirin is the winner.
Interestingly, according to a recent article in Fast Company entitled "Turning Vitamins Into Aspirin: Consumers and the Felt Need", making sure that your product or service is more like an aspirin than a vitamin is crucial to your success.
In fact, the article cites one little tweak that Netflix made to turn its service from a vitamin into an aspirin. And how this little tweak was the #1 cause for its success (without it, Netflix probably would have failed).
What was this tweak? Well, initially, Netflix operated like every other movie rental company. You received the movie from Netflix, and if you didn't return it on time, you had to pay late fees.
Sure, Netflix added some convenience by allowing customers to rent and return movies through their mailbox, and not have to go out of their way to their local video store. But, it turns out that the real customer pain was complete convenience, including not having to pay any late fees.
And when Netflix moved to its subscription model, which eliminated late fees, its sales started skyrocketing. In fact, it knew nearly immediately that it had a winner; in the first month after starting its subscription business, 80% of customers who signed up for a free Netflix trial became paying customers!
According to Fast Company, "Netflix as a DVD mailer was a vitamin. But Netflix as a late-fee vanquisher was an aspirin. It eliminated a pain."
Importantly, if you are seeking venture capital, know that most venture capitalists also think in these terms. They look at your product and service and assess whether it is an aspirin or a vitamin. And if it's a vitamin, chances are that they won't fund it.
But even if you're not seeking venture capital, you must figure out how to make your products and services aspirins. If your customers crave something, they will buy it. Consider cell phone carriers. Many cell phone carriers offer high prices and poor customer service. But since consumers now consider cell phones to be a necessity (or an aspirin) they continue to buy cell phones and service plans.
The key to creating a product or service that is an aspirin is your customers. And specifically figuring out what pain is your customer in with regards to your product or service. To gain this intelligence, speak to current and prospective customers. And watch them using your product to see how they interact with it (once great example here was Sony, which years ago gave its camcorders to a group of kids and observed them; it quickly noticed that the left-handed kids had a really hard time using them; as a result Sony invented the first camcorders with a swiveling holder that could be used by both lefties and righties).
The final note I'd like to make here is a point I make a lot. Which is this - rarely is your first idea your best idea. In Netflix's case, its subscription model was NOT its first idea. Rather, the founder, Reed Hastings, simply TOOK ACTION on his initial idea. And by taking action and starting his company, he was able to solicit customer feedback and try new ideas to arrive at the ultimate solution.
If he had never taken action on his initial somewhat flawed idea (that people would rent movies via the mail simply because it was a little more convenient than renting from storefronts), it wouldn't have achieved success. And more recently, Netflix has been growing it's video on demand business. Once again, this wasn't even a consideration when Hastings started the business, but a natural outgrowth of a going concern started by an entrepreneur who took action.
Here is a quick quiz to find out if you could become a better leader:
1. Do your employees care as much about the success of your organization as you do?
2. Are your employees psyched to come to work every day?
3. Would your business thrive if you took the next month off?
4. Are your employees considerably better than your competitors' employees?
5. Do your employees stay up at night thinking about ways to improve your organization?
Now if you answered "no" to any of these questions, then clearly there is room for you to become a better leader.
You see, being great at the key tasks your company performs (e.g., like preparing foods, manufacturing widgets, providing services, etc.) is helpful when you start a company.
But to successfully grow a company you need to hire, train and motivate others to do these tasks exceptionally well too.
And that's where virtually all entrepreneurs break down. They just can't transfer their skills to others nor get them to work with the motivation needed for them and the company to be really successful.
So, if you answered "no" to any of the questions above, regardless of whether you've started or plan to start your business in the future, be sure to check out my Leadership Blueprint video here so you can improve your leadership skills ASAP.
I received a great question from one of my subscribers the other day.
It read as follows:
Is crowdfunding an option for my business? It seems that most of the crowdfunding is for artsy, music or non-profit projects or companies. I have a [blanked out for confidentiality] that I want to [blanked out for confidentiality]. I need $250,000 to [blanked out for confidentiality]. Would crowdfunding be right for me?
Great question. Here's my answer.
The biggest Crowdfunding platform right now is Kickstarter.com. And the majority of projects on Kickstarter are artsy, music or non-profit projects or companies like you mentioned. However, Kickstarter has also been successfully used by many for-profit business ventures like Diaspora ($200K+ raised) and Glif ($120K+ raised) who both raised a lot of money.
Also, another key Crowdfunding platform, RocketHub.com, does not favor artsy/music/non-profit projects as much.
With regards to the amount of money you can raise via Crowdfunding, $250,000 is too much to ask for. That's not to say you can't raise $250,000, but it's too much to ask for. Consider that both Glif and Diaspora set their goals at only $10,000. The key is this -- Crowdfunding raises all or nothing, and you can go over. So if you set your funding goal at $10,000 and raise $99,000, you keep all $99,000. But if you set your funding goal at $100,000 and only raise $99,000, you get nothing.
One of the keys to Crowdfunding success is to show your donors that you can create value with just the dollars they give you. For example, you don't want to ask for money just for research purposes. Ideally, with the money, you can create some type of real product or service. And also ideally, you can offer that product or service as a "reward" to those who donate to you.
Glif is a great example of this. Glif's founders came up with an idea for an iPhone stand. They created a prototype, but had no money to actually build it and distribute it. So, via Crowdfunding, they raised money. And importantly, as a reward for donors contributing $20 or more, the donors would receive the Glif product when it was ready for sale.
So, in essence, Glif used Crowdfunding to pre-sell their product to a mass audience they found online, and they used the proceeds to actually build the product. (Note that in Crowdfunding Formula, we go through many Crowdfunding techniques to raise a lot more dollars than just the dollars from pre-sales).
So, to reiterate, the ideal time to use Crowdfunding is when you can accomplish something tangible (e.g., build a sellable product or service) with just the Crowdfunding dollars you raise. That's NOT to say that this will be your best product or service (e.g., the eventual product you create with all the bells and whistles). And it's not to say that you will not need other funding to grow your business (since you clearly will).
So, in this case (the question that was posed above), when the entrepreneur needs $250,000, he could use Crowdfunding to raise some money (most likely a bit less than $250,000), and achieve key milestones with that funding (e.g., building a sellable product or service, getting customers, etc.).
At the same time, or just after completing the Crowdfunding raise, the entrepreneur should seek other funding sources like angel investors or bank loans. The beauty is that with the milestones accomplished from the Crowdfunding raise, the entrepreneur's chances of raising funding from angels, banks and other sources skyrockets (because when you show these funding sources that you have completed milestones, they view you as a less risky investment).
What companies do you think of when you read the following phrases?
"Overnight" (delivery) = ________________
"Low Prices" (retail) = ________________
"Organizing the world's information" (internet) = ________________
"30 minutes or less (food)" = ________________
"Thick" (spaghetti sauce) = ________________
(The answers are at the bottom of this post.)
I would guess that most of you got all or most of these correct. Now, I want you to think about how valuable this is to those brands. How incredibly powerful is it that when you think about delivering a package overnight, Fedex comes to mind. Yes, it's incredibly powerful. And it's the reason that companies like Fedex are valued at many times their earnings (because their branding helps ensure they will attract customers for years to come).
Now, let's think about your business. What do current and prospective customers think about you? And what words trigger your brand in their minds?
What we're talking about here is having a strong Unique Selling Proposition (USP). Your USP separates your product or service from your competitors. It makes your product or service a "unique, must have" item. And it helps customers to remember you when they need a product or service in your category.
In fact, great USPs have been noted as the keys to success for companies in multiple industries such as these:
i. The Domino's Pizza USP is "Fresh hot pizza delivered to your door in thirty minutes or less, guaranteed" (key USP elements are quality (hot/fresh) and timeliness (30 minutes or less))
ii. The Federal Express USP is "When it absolutely, positively has to be there overnight." (key USP elements are reliability and quick delivery)
Building a great brand and getting widespread awareness of your USP takes time. But the first step, defining your USP, can be done pretty quickly.
Simply follow these steps/exercises to create your USP:
1. Put together a detailed description of who your customers are and the problems and desires they are looking to solve/fill.
2. Describe the key values and/or benefits that your customers will receive from buying your products and/or services.
3. Describe how customers will feel after consuming your product or service (e.g., their teeth will be whiter, they will feel more confident, they will feel safer, they will have more energy, they will have more money, etc.).
4. Write down ways in which your company is different, and ideally stands out from competitors (factors such as price, location, exclusivity, results, safety, timeliness, etc.)? (And if currently nothing really makes you unique, come up with some new ideas!)
5. Branding: How would you like customers to think about your business? (e.g., as being the guaranteed lowest cost provider, as being the most reliable company, etc.) (e.g., customers think of WalMart as low price; they think of Lexus as luxury, and Toyota as value).
6. Long USP summary. Take your answers to questions 1-5 and create a paragraph that portrays your unique selling proposition.
7. Final USP. Condense your long USP summary to just one line. Use the Domino's and Fedex examples as inspiration. Realize that you can't say everything in just one line, but you must get your key points across.
"Overnight" (delivery) = Fedex
""Low Prices" (retail) = WalMart
"Organizing the world's information" (internet) = Google
""30 minutes or less" (food) = Domino's Pizza
""Thick" (spaghetti sauce) = Prego
Recommended Resource: Creating your USP is 1 of 12 essential elements of your marketing plan. To learn the other elements, and create a marketing plan to maximize your revenues and profits, watch this video.
In 2007, the Washington Post conducted an incredible experiment. The Post had world renowned violinist Joshua Bell play music in a popular Washington DC subway station.
What's cool was that Bell was dressed casually; in jeans and a baseball cap, like most other street performers might.
But Bell was also playing a $3.5 MILLION violin. And he sounded incredible.
Watch this 35 second clip to see the experiment for yourself.
The Joshua Bell experiment set out to determine whether people would stop and listen and/or give money to the performer, particularly since the vast majority of them wouldn't know who Bell was. But would they immediately recognize the quality of his music and stop?
Leonard Slatkin, music director of the National Symphony Orchestra, was sure people would stop. He expected that 10% of those who passed by would stop and that a crowd would gather. Surely this would occur for one of the greatest violinists alive.
But Slatkin was wrong. Very wrong.
During the 43 minutes in which Bell performed six classical pieces, 1,097 people walked by. Only 7 of them (0.6%) stopped what they were doing for at least a minute to listen, and only $32 was donated to Bell.
So, what does this experiment have to do with raising money for your business?
Let me explain.
The key principle at work here was "value attribution." Value attribution is a psychological term that refers to the fact that our minds quickly assign value to people, objects and/or situations, and cause us to act appropriately.
For example, in Joshua Bell's case, most passer-bys attributed very little value when they saw Bell in his jeans and baseball cap. Even though his music was incredible, he looked like any other street performer and was thus attributed little value in the minds of those who passed.
Another example that perhaps all of you can relate to is when you see something interesting in someone's trash or at a flea market. For example, if you see a beautiful desk outside someone's house about to be thrown away, how much value do you attribute to it? Most people immediately think there must be something wrong with it. Since its owner, by throwing it away, isn't attributing any value to it.
So, let me explain where value attribution falls into raising money for your business. Value attribution also affects our perception of people. So if you contact an investor by yourself, their perception of you may be neutral or negative, and your chances of getting them really interest in funding you is relatively low.
Conversely, if you were introduced to that same investor by someone the investor respects, than their perception of you would be great, and your chances of funding much higher. In fact, an introduction from the right person could lead to such great value attribution that the investor writes you a check on the spot.
So the bottom line is that getting introductions and referrals to investors not only gets you in touch with those investors, but it starts the conversation off in an extremely positive light. And as the quality of the individuals who refer you grows, so does the perception of you, and thus your chances of raising money.
So right now, you should start making a list of people for which you have a lot of respect, and think investors respect. Get a meeting with them to discuss your business. Ideally ask them to be a member of your Advisory Board. And then request that they introduce you to investors they feel might be a good fit for you and your business. These introductions will get you great meetings. And the investors will attribute great value to you and your company, putting you in the best possible position to raise the money you need.
I spent the last hour or two looking at different Q&A websites where entrepreneurs ask their questions and get answers from other members.
And I left pretty frustrated.
You see, a lot of times good questions are being answered by other newbie entrepreneurs who don't have a clue.
Now, I don't want to mention the sites where I read these questions and answers, as I don't want to create any new enemies. But I want you to be warned that a lot of the answers on these sites are really bad. And following some of this poor advice could get you in trouble.
So, as always, I strongly suggest that you get at least one Advisor who's "been there, done that" and can help you on your entrepreneurial journey by expertly answering your key questions. Read this blog post for more on the importance of Advisors. Also, as a shameless plug, you can join Growthink University, which, as one of its benefits gives you the ability to email, 24/7, all of your key questions and get answers from me and my colleagues at Growthink.
So, here is one question that I just read on a Q&A website that got butchered.
The question was "What percentage of my company should I give to matchmakers that introduce me to venture capitalists?"
One of the answers was as follows:
In the words of Michael Corleone:
"Senator? You can have my answer now, if you like. My final offer is this: nothing. Not even the fee for the gaming license, which I would appreciate if you would put up personally."
Give them nothing. They want equity just to make an introduction? That is ridiculous.
Now, I'm a big fan of the Godfather movies where this quote came from, so I have to admit that reading the answer made me smile at first. But the answer is dead wrong.
I can't reiterate how important it is to raise the money you need for your business. In general, without money, there is no business. Do you want to own 100% of an idea, or 20% of a $50 million company (realizing that an idea that's not now or soon generating revenues is pretty much worthless)? I'll take the $10 million over nothing.
Vince Lombardi once said "We didn't lose the game; we just ran out of time." My feeling is that if you're able to raise enough funding, you can NEVER run out of time. And in fact, most of the time your game can't even really START without funding.
So, if you have to pay someone to introduce you to investors, then do it. Likewise, if an investor wants a little more equity than you'd like to give them, give it to them anyway so you can raise the money (that being said, if you raise money properly, you'll have multiple investors interested in funding you and you'll be much better able to dictate the terms).
Once again, you absolutely positively MUST raise the funding. So you need to be flexible.
Finally, with regards to matchmakers, I'd like to add that you generally never pay them too much. For example, even if a matchmaker requires you to pay them 25% of the proceeds of the money they raise for you, most likely the funding source won't like this (because they want the money to go to you to grow your company). As a result, if the matchmaker's fee is too high, it likely will get negotiated down during the final transaction negotiations.
So focus on raising money. And don't be greedy. If it costs a little more (in cash and/or equity) to raise the money, so be it. Use the money to grow an enormously successful business. And when you cash out, you can start another business. And this time, you'll have plenty of your own money to do it with.
I just read an interesting study about business failures commissioned by the U.S. Small Business Administration. You can access the study here.
The study aimed to see why businesses fail, and to understand the difference between businesses that fail versus businesses that close for other reasons.
And, as the chart below indicates, the number one reason why businesses fail is lack of funding. In fact, nearly half of the businesses that failed attributed lack of funding to their downfall.
Another factor that significantly influenced failure rates was the age of the entrepreneur. The study indicated that entrepreneurs below the age of 35 are more likely to fail than older entrepreneurs.
I've always considered age to be an interesting factor in regards to entrepreneurial success. Here's my thinking:
Oftentimes younger entrepreneurs have an advantage in terms of time, energy and freedom. With regards to time, they often don't have families and thus can work later and on weekends. And they might have a little more energy, or be a little "hungrier," since they haven't achieved as much business success as older entrepreneurs. And finally, because they may not have mortgages and other financial obligations and assets, they may have a little more freedom to take risks than older entrepreneurs.
Older entrepreneurs, on the other hand, are probably more successful due to experience and expertise. Older entrepreneurs generally have more maturity and experience, allowing them to make more informed decisions and to learn from past mistakes. They typically also have more domain expertise (i.e., a deep knowledge of their market from working in it for so long).
Fortunately for young entrepreneurs, there is a great solution to their lack of experience, which is to get Advisors and/or build an Advisory Board. (Note that I define Advisors as successful people that you respect and that agree to help your company. Advisors are generally successful and/or retired executives, business owners, service providers, professors, or others that could help your business. An Advisory Board is simply a group of Advisors.)
In fact, I often site the following four reasons why ALL entrepreneurs (young and old) should have Advisors:
1. Practice: if you can't successfully pitch an advisor to invest time in your business, then you are not going to successfully pitch anyone to invest money in your business. So, practice your pitch on prospective advisors first, and use that practice to perfect it.
2. Connections to capital: as successful individuals, advisors often have the ability to invest directly in your company; and/or they tend to have large, high quality networks of individuals that they can introduce you to.
3. Credibility: having quality advisors gives your company instant credibility in the eyes of lenders and investors. For example, if you started a new hockey stick company, having Wayne Gretzky as an advisor would certainly give you great credibility (and connections).
4. Operational success: mentors and advisors are an entrepreneur's "single most controllable success factor" according to Dr. Basil Peters, a successful entrepreneur, angel investor, venture capitalist. Having Advisors with whom you can discuss key business matters as you grow your venture will help ensure you make the right decisions, particularly if they have encountered and dealt with the same challenges already in their careers.
So, while the #1 predictor of startup success may be funding, you may want to focus first on getting Advisors. Since this will help not only with getting funding, but with giving your organization an experienced sounding board to make high quality decisions.