Written by Dave Lavinsky on Tuesday, November 2, 2010
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.
Written by Dave Lavinsky on Friday, October 29, 2010
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).
Written by Dave Lavinsky on Thursday, October 28, 2010
What companies do you think of when you read the following phrases?
"Overnight" (delivery) = ________________
(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
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.
Written by Dave Lavinsky on Tuesday, October 26, 2010
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.
Written by Dave Lavinsky on Friday, October 22, 2010
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.
Written by Dave Lavinsky on Wednesday, October 20, 2010
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.
Written by Dave Lavinsky on Monday, October 18, 2010
This two-and-a-half-minute video has had 5 million views on YouTube so far.
My sister had to stop watching it half way; it made her anxious.
I looked at it VERY differently -- from the perspective of an entrepreneur.
Here it is:
As an entrepreneur, watching this video made me think of the great quote from Samuel Goldwyn: "The harder I work, the luckier I get."
You see, that's what frustrates me about the video. I'm not a big fan of luck that's not predicated by hard work.
Because it sends the wrong message. It sends the message that you can attain success via luck. Which is sometimes, but rarely, true.
To be a successful entrepreneur, you need to create your own luck like Goldwyn did (Goldwyn was born in Warsaw, Poland without a penny to his name).
You need to work hard and try lots of things. Importantly, you must realize that MOST of the things you try will fail. But with persistence, success will come. Funny enough, a lot of people consider this "luck."
Was Edison "lucky" when he created the light bulb? Sure he was. In each of his experiments, I'm sure he hoped that he would get "lucky" and invent one which worked. If his first try would have worked, it clearly would have been at least a little lucky. But what about his second, his tenth, or his hundredth tries? Clearly, when he experimented over 1,000 times, it was hard work and not luck that prevailed.
I think that a simple timeline is one of an entrepreneur's greatest tools, and one that helps ensure that you will get "lucky" from good planning and hard work.
This timeline should start with where your business is right now. And it should end with where you want your business to be in 5 years. In creating your timeline, you should provide much more detail for the next 12 months, as you have more control over this time period. What do you hope to accomplish? What dates should you set to accomplish each goal? And so on.
By going through this exercise, you start to realize the numerous steps you'll need to take to achieve your goals. You'll start to better understand the things that might go wrong, or that might be more challenging than you initially thought. And you will have a roadmap to follow. But importantly, remember that many of your attempts will fail or take longer than planned. So build this into your timeline.
And when time passes and you attain your goals at the end of the timeline, many people will call you lucky. But you and I will know that luck had nothing to do with it!
Written by Dave Lavinsky on Friday, October 15, 2010
Looking for money for your business?
Written by Dave Lavinsky on Saturday, October 9, 2010
I predicted that Crowdfunding would be big, and I love to see that more and more new ventures are using it to quickly and easily raise funding.
Written by Dave Lavinsky on Thursday, October 7, 2010
Now that summer is officially over, venture capital activity is picking up.
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