Growthink Blog

Entrepreneurial Malpractice


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MalpracticeA few weeks ago I went to the doctor. My throat had been bothering me for a while and I figured it was time to get it checked out.

It turns out that I had strep throat, and after 10 days of antibiotics I was fine.

Now, before the doctor gave me the antibiotics, he asked me a bunch of questions and took at look at my throat. And he gave me a strep throat test to confirm his diagnosis.

And the doctor's experience along with his diagnosis allowed him to solve the problem.

Let's consider a scenario though where the doctor was too busy to diagnose my condition. Perhaps I walked into his office and he didn't let me say a word. Maybe he looked me up and down and said, "I know what the problem is. It's this, and so I'm going to give you a prescription for this." Now, if this happened, chances are that he wouldn't have properly diagnosed my condition, he wouldn't have prescribed the right solution, and I wouldn't have gotten better.

And in the medical profession, this clearly would be serious. Because in the medical profession, the formula D < C = M holds true. Specifically, the formula is Diagnosis before Consultation equals Malpractice. And if my doctor tried to diagnose my problem and give me a prescription before doing a consultation, he could have landed in pretty hot water. In fact, he could have gone to jail.

So what's my point here? Because I think we all know that doctors shouldn't offer a diagnosis before doing a consultation.

Well, the point is that too many entrepreneurs commit this error. They diagnose the needs of their market without doing a thorough consultation. Many times, their consultation is simply on their OWN needs. Perhaps, they think, "what I would really like is an Italian restaurant in my town." And they think that just because they want it, that everyone else wants it. This is a common flaw in both marketing and entrepreneurship.

Rather, the entrepreneur destined for success is one who spends time consulting with their target customers. First they identify a need. But then, they really assess it. They speak to prospective customers. And figure out their true needs. What are they doing or buying currently to solve the need? What do they like about the current solution? What do they dislike? And so on.

Importantly, note that asking your friends what they think about your idea also tends to lead to faulty results. First, your friends probably think very similarly to you, and may not represent a good sample of the general population who will consider buying your product or service. And, oftentimes friends will say they like something just to make you feel good, rather than really scrutinizing the idea.

So, don't commit entrepreneurial malpractice. Do your homework. Really research the needs of your customers and/or prospective customers. And only launch products and services that truly solve these needs.


Obamafunding Will You Get Your Share?


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On Monday, President Obama signed the Small Business Jobs Bill. The bill provides $42 billion in loan incentives and tax cuts for entrepreneurs and small businesses.Obamafunding

Specifically, the Bill does a few important things:

1. The Bill increases the government guarantee on the SBA’s 7(a) loans to 90% through December 31.

Some explanation for some of you who are new to raising funding:

The SBA is the United States Small Business Administration. The SBA doesn’t lend money to entrepreneurs. Rather, local banks give out the loans, but the SBA guarantees a certain percentage of the loan amounts (so if the entrepreneur defaults on the loan, the SBA pays the bank 80% to 85% of the loan amount). With the new program, the guarantee is being raised to 90% which makes lending less risky to the banks.

The SBA’s 7(a) Loan Program is its primary program “to help start-up and existing small businesses obtain financing when they might not be eligible for business loans through normal lending channels.”

2. The Bill includes a new $30 billion lending fund that community banks can use to make loans to entrepreneurs and small businesses.

3. The Bill includes $12 billion in tax breaks for small businesses.

Overall, this is great news to entrepreneurs and small businesses who gain 1) more access to funding, 2) better funding terms, and 3) tax breaks.

This is also positive news for the US economy, as entrepreneurs and small business owners have historically created the majority of jobs and job growth in our country.

(Note: Want to tap into this new funding from the Small Business Jobs Bill? Growthink’s Step by Step Guide to Raising Capital From Banks and SBA Lenders will teach you how to quickly and easily get the right SBA and/or bank loan to fund your business.)


Why My Roommate Called Me a Cheater


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In my freshman year in college I took a very challenging Calculus class.

It turned out that my roommate was also in the class. Both of us had a hard time keeping up. And we were both nervous as the final exam approached.

We both studied hard for the exam.

And the results: He got a C+ on the exam. I got an A.

I don't think I was naturally any smarter than he was. And we both spent about the same amount of time studying for the exam.

So, why did I do much better?

Well, the one thing I did that he didn't was that I used Schaum's Outlines.  Schaum's Outlines, which I had come across in high school, are study guides that complement what you learn in class and in textbooks. Importantly, each guide include hundreds of sample problems along with the answers.

And so, while my roommate was only studying from the course textbook, I also used Schaum's Outlines to review nearly every conceivable type of Calculus question that I could be asked, and how to answer it.

Interestingly, when my roommate saw me using the Schaum's book, he questioned it. He didn't think it was fair for me to use it because the teacher never specifically told us about it. I remember him even saying that it was like cheating.

Well, clearly using supplemental materials to improve your performance is not cheating (unless those "supplemental materials" are performance-enhancing drugs to become a better athlete). Rather, I consider it being proactive and creative in order to achieve your objectives.

The same principle holds true in business. For example, would you ever try to do pay-per-click advertising without first learning how to do it right? If not, you'd probably lose your shirt.

Or would you ever put a full page ad in a magazine without either using an advertising agency with great expertise and/or spending time learning about how to create effective ads?

That's why I started creating information products at Growthink a couple years back. My thinking was like this: why would someone ever want to go into a meeting with a venture capitalist without knowing the questions they would be asked? That's suicide. So that's why I created a program for raising venture capital. Or why would someone want to create a business plan from scratch, particularly if they weren't 100% sure regarding what should be included in their business plan? And that's why I created a simple business plan template.

The key point is that you must seek out knowledge from the best possible sources to succeed in business. In fact, later today I will be driving to Maryland to attend a meeting with some of the top internet marketers in the world. I will spend a lot of money and time to attend the meeting, but it will pay for itself over and over again as I use the knowledge to increase revenues and profits.

Think about what skills would help you accomplish your goals. And then go out and find the best resources to gain them.


Avoid Failing as an Entrepreneur by Avoiding Shiny Objects


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Over the past several months, I've been helping an entrepreneur take his vision for a new consumer product to market.

During this time, he has made great strides; he now has product samples, a manufacturer lined up, his packaging designed and printed, etc.

The one thing he's lacking is proper funding.

So, he recently started looking for investors.

And so far, he's had one investor meeting and has scheduled one more for the coming days. The meeting he had was good. The investor showed interest. But wasn't quite ready to invest; he wants to see a bit more progress made.

And then I received an email from the entrepreneur that's all too familiar...

It went something like this:

Dave, I read about this guy who put up this website and made a ton of money. I think I can do the same thing. So what do you think of me doing that, making money, and using that money to fund my other venture?

To this, I replied, "I HATE IT!!!"

The issue, I told him, is that the new website idea is a completely different business from what he's doing. Could it work? Sure. But it would require ALL of his time and energy. And the odds were not in his favor of making it work. And then if it didn't work, he'd be sitting on two half-baked companies, neither of which had any real value.

Which led me to think of one of my favorite quotes from Thomas Edison -- "Many of life's failures are people who did not realize how close they were to success when they gave up."

This entrepreneur is really close to making his consumer product company a success. Sure he has a lot of work left to do, but he's already made tons of progress.

Like many other entrepreneurs, he's getting distracted by "shiny objects" - those cool things or ideas that catch your attention and get you off track. In my early days as an entrepreneur, I got distracted sometimes too. It's hard when you come across a new opportunity or idea that you think is great. You want to jump on it right away. But, in virtually every case, you need to stick with your current venture or project and see it to fruition. If not, you end up with a string of half-started companies that have no value.

Success in entrepreneurship requires dedication and hard work. And on the funding side, in most cases it's simply a numbers game. No matter how good your company or idea is, you can't expect to only meet with one or two investors and get funding. You need to increase your prospective investor pool, because if you speak to enough investors (and you present to them the right way), you WILL find investors.

And finally, to inspire you and to show you that one of the greatest entrepreneurs in history was also a strong proponent of hard work, focus and dedication, below are some more great quotes from Thomas Edison:

"Everything comes to him who hustles while he waits."

"Genius is one percent inspiration and ninety-nine percent perspiration."

"I have not failed. I've just found 10,000 ways that won't work."

"I never did anything by accident, nor did any of my inventions come by accident; they came by work."

"I start where the last man left off."


Review of YoungEntrepreneur.com's "Blog Money Bootcamp" Course


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I'm always on the lookout for know-how that will help entrepreneurs like you grow more successful businesses.

So, the other day, when I received an email from my friend Adam Toren about his new program, I took a look (Adam runs the popular entrepreneurship website YoungEntrepreneur.com).  Specifically, Adam wrote to tell me that they just released a brand new blogging course called Blog Money Bootcamp.


An Investor's Time = An Investor's Money


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I have a brief experiment I'd like to try out on you.

Please stand up, close your eyes, spin around twice, and then sit down.

Are you done?

Ok, how do you feel?

Actually, I'm not overly concerned with how you feel after doing the exercise, since that wasn't my point.

My point is this: the vast majority of you did NOT stand up, close your eyes, spin around twice, and then sit down. Maybe you visualized yourself doing it, but you didn't actually follow my directions.

Now, imagine you were reading a really good book. And within the first four chapters, the author gave you tons of valuable advice. And each time you followed it, you saw immediate benefits.

And then, at the beginning of chapter five, the author asked you to do the same thing - stand up, close your eyes, spin around twice, and then sit down.

In this scenario, there is a good chance you would have done it.

And finally, imagine you were in a face-to-face meeting with me and I made this request of you. In virtually every case, you would have stood up, closed your eyes, spun around twice, and then sat down.

OK, here's my point. The result of this experiment parallels the results you will get when developing a business plan and raising capital.

Let me explain...

The experimental request that I made at the very beginning of this post was like my Executive Summary, the first and most important page of your business plan. The idea of the author making the request in chapter 5, after he really has your attention and has built credibility, is like including the request in your business plan. And the idea of me making the request of you in a face-to-face setting is like an investor meeting.

Now here's the key: you can't expect the reader of your Executive Summary to jump through hoops. Nor can you expect them to take significant action. Because they won't. Rather, your goal is to convince them to take the next step which should be to read the full business plan or take a meeting with you.

Now, once your audience starts reading your full business plan things change a little. Before getting to your full plan, they have read the Executive Summary and become interested in your business (if they weren't interested, they would have stopped reading). So, in your business plan you have a little more latitude, and can get the reader to take a little more action and do what you request them to do. 

And finally, in your meetings with investors, you have a ton of latitude. Because they are in your presence, you can be more forceful in getting them to truly understand the power of your business. You can get them to answer questions. You can get them to demo your product or service. Etc.

The most precious resource for most of us, and particularly investors, is time. As an entrepreneur seeking funding, you must figure out how to get as much time from the investor as possible.

The key to achieving this is to present a compelling Executive Summary that they can quickly read, and gets them excited/compels them to take the next step, which is most likely to read your business plan.

And your goal with the business plan is to compel them to take the next step, which is to spend an hour or more meeting face-to-face with you. For any investor, this is a real commitment of time. And there's no way they're investing their money without first investing their time.

Time is money. I know that getting investors to meet with you by itself doesn't put money in your bank account. But the more investor meetings you get, the much more likely you are to raise the money you need.


That's Never Going to Work


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Light BulbIn 1880, Thomas Edison introduced his light bulb as a way to light office buildings.

One hundred years later, in 1980, Ted Turner launched CNN.

Both entrepreneurs launched to the same sound, specifically critics saying "it's never going to work."

Critics told Edison that offices didn't need light bulbs and switches, and that they were fine with lamps and candles.

And to Turner critics said "who would possibly watch or need news 24 hours a day?"

Yet, both entrepreneurs achieved extreme levels of success.

So, how can you overcome all the naysayers? All the folks who are telling you that your idea or company is never going to work?

Here are my favorite ways:

1) Show how you fit in. Show how your solution "fits" into the days and lives of the customers you are serving. YouTube, for example, could have said that its customers are already spending a lot of time online, making video consumption online more accessible/convenient for them.

2) Leverage the success of other companies. By saying "we are like [insert well-known company] but we're different because [insert why you are different]," you leverage already established credibility. This makes it hard for naysayers to deny your potential.

3) Simply cite other success stories like Edison and Turner and how their naysayers were proved wrong. Explain how it's easy to see how naysayers were critical at the time, but looking back, those innovations clearly made a lot of sense. Ask the naysayer to pretend they are in the future looking back, and to view your company from that perspective.

4) Plan out your venture. Your ability to complete your business plan and show others a clear, comprehensive growth roadmap will squash many of their doubts. It's much easier to poke holes in a concept. But when that concept has been converted into a plan, it gains massive credibility.

5) Gain social proof. Once you have a lot of people who believe in your vision, it's easier to get more people to believe. By getting advisors, beta customers, contingent employees, etc., or even just fans on your Facebook page, you create social proof. You can show that others already believe in your vision. Few people want to be the first to like or support something since they risk failure and looking foolish. It's always much easier for naysayers to support a cause that they see lots of others supporting.

Everyone loves to look back and say that they supported and/or knew about a now-successful company in its infancy. But the reality is that during the early days, there are much fewer supporters. So use the five techniques above to turn naysayers into supporters, and grow a successful business.


Referrals & Marketing Techniques to Find Investors


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1A study by New York University's Management Institute asked the following question to sales and marketing professionals, "What is the best technique to find new customers?"

A 1-5 scale was used, where 1 equaled "not important" and 5 equaled "very important."

The results were as follows:

Marketing Technique............Average Score

Referrals.............. 4.8
One-to-One Marketing.............. 4.5
Direct Mail.............. 3.8
Trade Shows.............. 3.2
Cold Calls.............. 1.5


It makes a lot of sense why "referrals" is the winning technique. Clearly, if someone you know and trust vouches for a product or service, you will be most likely to give it a try yourself.

Interestingly, "referrals" is also a top way to find new investors. For example, having a consultant or lawyer introduce you to an angel investor or venture capitalist is a great way to get in the door to present your opportunity.

However, many entrepreneurs feel they don't have connections that can refer them to investors. But, when you think about it, it's fairly easy to gain these connections. Gaining these connections can be as simple as meeting the right people at an event, meeting them online on a site like LinkedIn or Facebook, or even just sending them an email or giving them a call.

The other marketing techniques, such as Direct Mail, are also extremely applicable when seeking investors. While I don't recommend physical mail, direct e-mail is highly effective. Like it is with traditional direct mail, the key is creating a great list; mainly to create a list of investors that have an interest in your type of venture. For example, if you need funding for a restaurant, clearly you shouldn't be contacting an investor who focuses on medical devices.

In summary, whether you are marketing your product to consumers, or your company to investors, the processes are fairly similar. You have to understand who your target market is, figure out the best way to contact them, and then deliver a compelling message that gets them to take the actions you want.

Suggested Resources:

Venture Capital Pitch Formula shows you how to get referrals and numerous other ways to contact venture capitalists, how to create and deliver a compelling presentation to them, and how to close the deal and get your funding.  Watch the Venture Capital Pitch Formula video here to learn more.

The Ultimate Marketing Plan Template allows you to leverage all the top marketing techniques to quickly and easily find new customers, compel them to purchase your products and services, and exponentially grow your revenues. Watch this video to learn more.


You Don't Always Have to Win


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Last night I played tennis with my wife.

And I lost.

You see, my wife used to be a competitive tennis player. And she's started to play a lot again. So she's really good.

Now, even though my wife and I aren't really competitive when we play, losing over and over again isn't much fun.

But it didn't bother me at all.

Why?

Because I wasn't playing to win. I know that there's no way I can win. Unless maybe I got a bit lucky and/or she happened to play horribly and I happened to play great that day. But winning via luck wouldn't be overly satisfying either.

Because my wife is so much better than me right now, I was playing simply to get better. So that maybe in six months or a year from now I can win.

There is a really important business lesson here. Many of you have set big goals for your businesses. Which is great, because setting big goals is critical to your success. For instance, maybe your goal is to grow your business and sell it for $10 million.

In virtually all cases, this goal will take several years to achieve. And during these years, you need to constantly make progress towards achieving this goal, and you must stay positive.

Consider this -- if you sat down weekly and assessed whether you achieved your goal of selling your company for $10 million, you would say "no" each week. Essentially you would fail to accomplish your goal week after week after week. And at some point, with all that failure, your attitude would become negative, your energy would drop, and your chances of ultimately achieving your goal would drop precipitously.

The solution is to do what I'm doing with my tennis. Set a big goal. But, also set lots of smaller goals. My main goal yesterday was to improve my backhand. Next week it may be to work on my serve. And so on. And each time I set and achieve a smaller goal, I will be a step closer to achieving my bigger goal.

If you haven't done so already, write down your big business goal. In fact, you should have it written down on a piece of paper that you look at every day. Next, write down all the smaller goals that you will have to accomplish on the way to achieving your big goal. Finally, organize these goals into a timeline and use them to create your daily, weekly, monthly and annual goals and To Do lists.

Ultimately, your goal is to win in the game of entrepreneurship. But you don't always have to win. Rather, you need to constantly move closer to winning. You can achieve this by setting smaller goals that you can accomplish on an ongoing basis. And planning it out so that these smaller goals move you closer and closer to achieving your biggest ambitions.


In Entrepreneurship, There Are No Erasers


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I graduated high school a few years before computers in high schools were commonplace. So, like most students at the time, I learned to type using a typewriter.

The two things I remember most about the typewriter were how hard you had to hit the keys, and what a pain it was to correct a mistake.

Specifically, I remember that each time I struck an incorrect key, I would have to hit the backspace, insert a piece of white correction paper, hit the wrong key again (to "white out" the wrong character), then hit the backspace again, and then hit the correct key.

I don't know how journalists and authors survived through this arduous process...

Now, while the modern day keyboard and word processing software has made this process much more efficient, it does come with a price.

The price, as I see it, is that it has conditioned us to act a bit haphazardly, knowing that we can easily go back and correct ourselves later. There are countless times that I write non-stop, and then go back and make edits.

The key point to remember is this -- most other times in life, we can't go back and make edits.

Consider this great quote by American writer and former Secretary of Health, Education, and Welfare, John W. Gardner. Gardner said "Life is the art of drawing without an eraser."

This is a pretty scary concept when you think about it. Having to draw without the luxury erasing your errors. But it's very true. We've all made mistakes that couldn't be undone.

The concept that you only get one chance, and that there is no ability to "erase," is particularly true with human relationships. As an entrepreneur, I'm referring to your interactions with your current and potential employees, investors, partners, and vendors.

With each of these constituents, a wrong move can often have devastating effects. Sure, sometimes you can go back and right a wrong, but in many circumstances a misstep (e.g., approaching an investor incorrectly) results in complete failure.

Because entrepreneurship is clearly the art of drawing without an eraser, I recommend two actions to improve your success: planning and education.

With regards to planning, even a small amount of planning will nearly always improve both efficiency and performance.

For example, spending 5 minutes planning your day's activities will make you more productive and efficient. Planning out an investor meeting will maximize your chances of raising funds. And creating plans with your employees that ensure their tasks and actions and in complete sync with your company goals will help ensure their (and your) success.

Similarly, when you invest in education, you are better able to do things right the first time, and not have to learn through painful trial and error. You need to educate yourself on how to raise money, how to best hire and retain employees, how to better market your products and services, etc.

As an entrepreneur, you WILL make lots of mistakes. And that's fine. Particularly since you can recover from most mistakes. But, importantly, spend the time planning and educating yourself. This will save you time and money, help you avoid critical mistakes, and help you recover when needed.

Key things to consider:

Planning:

* Do you create a plan every day, week and month? If not, start creating them as they will make you much more efficient.

* When you have an important meeting, do you plan it out? Do you create an agenda and really think through your desired outcome? If not, start doing it.

* Who are you counting on for your success (e.g., partners, employees, investors, etc.)? Do you have plans in place to ensure that each of these constituents will perform as you need them to? If not, get these plans in place.

Education:

* What are the key tasks and accomplishments you need to achieve in the next year? Have you achieved success with similar projects in the past? If not, in which areas do you need education to ensure you succeed?

* What new skills would make you a more effective entrepreneur? How will you go about learning these skills?

* What skills do your constituents (e.g., employees, vendors, etc.) need to perform better? How will you ensure they get this education?


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