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.
In 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.
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
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.
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.
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.
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.
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:
* 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.
* 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?
Albert Einstein is well known as one of the great geniuses of all time.
What most don't know is that Einstein started his career as a patent examiner. For two years he worked at the Swiss Patent Office evaluating patent applications.
During this time, Einstein encountered thousands of entrepreneurs doing the same thing - trying to convey why their ideas were unique and thus should be granted a patent.
To a large extent, this is the same challenge that entrepreneurs have in raising money; convincing investors that their ideas are unique and thus should be worthy of their money.
Interestingly, one of Einstein's most famous quotes provides great value to both the entrepreneur seeking a patent and the entrepreneur seeking funding. This quote is this -- "If you can't explain it simply, you don't understand it..."
Failure to concisely convey a business idea is one of the top reasons why business plans don't get read (if you can't convey your idea concisely in the first paragraph, the reader will most likely stop reading) and why most companies fail to raise money.
However, I would expect many entrepreneurs, particularly those who haven't been able to simply explain their businesses, to disagree with Einstein. And to feel that they really do understand their business.
And to a large extent I agree with those entrepreneurs. Yes, they may understand their business. But, they probably haven't fully thought through their business.
Let me explain. When you properly complete your business plan, you are forced to think through all aspects of your business, and answer questions such as:
* What customer pain are you solving?
* What are customers currently doing to solve that pain?
* What are the strengths and weaknesses of these solutions?
* What is the demographic and/or psychographic profile of your ideal customer?
* Why is your company uniquely qualified to succeed?
Importantly, answering these questions helps you to better understand your business. And thus to create a more concise explanation of it. Which is the point of Einstein's quote, and which is the key to raising money for your business.
So, make sure you have asked and answered all of the key business plan questions. And then, sit down and review your answers and come up with the one line or paragraph that most simply describes your business.
Now that September is here, venture capital activity will pick up as usual. That's not to say that tons of VC deals were done over the summer; since they were.
Here are a few of the companies who raised venture capital in August that I found really interesting.
JiWire: JiWire has created an advertising network which reaches users at wi-fi hotspots. The company raised $2.1 million from Draper Fisher Jurvetson, Panorama Capital and Comcast Interactive Capital.
Zimride: Zimride is a ridesharing service that combines social networks and a route-matching algorithm, to make it easy for people to share seats in their cars or catch a ride. The company raised $1.2 million from Floodgate, K9 Ventures and two angel investors.
CloudCrowd: CloudCrowd has created a unique Labor as a Service outsourcing platform. The company raised $5.1 million from Draper Fisher Jurvetson.
WePay: WePay helps groups easily collect, manage, and spend money. The company raised $7.5 million from Highland Capital Partners and August Capital.
Payfone Inc: Payfone has built a mobile payments platform. The company raised $11 million form Opus Capital, BlackBerry Partners Fund and RRE Ventures.
I'm not totally sure why these 5 caught my eye...maybe because they're products/services that I would use. Or maybe because they show that all types of companies can raise venture capital. Or maybe both.
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.
Last year I watched a seminar given by public speaking coach Patricia Fripp.
In it, she repeated the phrase, "We speak to be remembered and repeated" over and over again.
And I think she's right. We do speak to be remembered and repeated. After you speak with an investor, or a prospective customer, or an employee, would you like them to immediately forget what you told them? Or would you like them to clearly remember what you said, spread the word about you, and take whatever desired actions you asked them to do. Clearly, you want the latter.
Unfortunately, few entrepreneurs speak to be remembered and repeated. Rather, most have so much to say that they rant uncontrollably.
I get this all the time. Whenever I'm at a party and an entrepreneur finds out what I do for a living, he or she starts to talk my ear off about their idea.
Now, I love what I do and I love listening to and helping entrepreneurs. But what I don't love it when 100 words can be replaced with 10, or a 5-minute company description can be shortened down to 30 seconds.
The key is this; you MUST spend however long it takes to create a concise, easy-to-remember elevator pitch for your company. If not, it's going to cost you dearly. You will turn off investors, partners, customers, and employees among others.
This is because in today's fast paced environment, no one's going to invest the time to listen to your full presentation or read your full business plan if they don't get it right away.
Here are two exercises I recently developed to help you create an elevator pitch that others can "remember" and "repeat":
1. Tell your pitch to a child and then have them repeat it back to you. One of my Crowdfunding clients read his originally highly complex business summary to his 6-year old granddaughter. The 6-year old repeated back a concise summary that anyone in the world can immediately understand. We went with the 6-year old version.
2. Try to develop a 30-second television spot. I recently worked on a 30-second television spot where I tried to explain who I am, what I was offering, and what I wanted the audience to do next. In doing this I put together 10 extremely brief PowerPoint slides. I then read the slides aloud and timed it. It took 53 seconds. Getting it down to 30 seconds was serious work. But the result was a really concise message.
Try doing the same thing. Put together a draft 30-second commercial. What would you want your audience to learn? To remember? To repeat? And to do after watching your commercial? If you can achieve this in 30-seconds it will help with every aspect of your business. And start teaching you to be more concise, more memorable and more impactful.
Are you a thermometer or a thermostat?
Thermometers are instruments that measure temperature.
Thermostats are devices that control the desired temperature.
The difference between the two is critical.
Thermometers are reactive. They sit by passively and accept whatever conditions their environment has created for them.
Conversely, thermostats exert control. When the environment isn't quite right, perhaps it's too hot or too cold, the thermostat pro-actively adjusts to obtain the desired conditions.
I think that few of us are completely on one side or the other, being completely reactive or completely controlling.
But I do think that most of us need to be more like the thermostat. We need to be less accepting of our current circumstances, and exert more control into positively changing them.
In fact, virtually all budding entrepreneurs are trying to improve their current environments. Typically they are not living the lives they have dreamed about. And thus, they use entrepreneurship as their thermostat. Specifically, they start their companies to change their circumstances and to achieve their goals.
But oftentimes, the fight to become a successful entrepreneur is truly great. It's rarely easy, and things don't always go as smoothly as we'd like. But if it was too easy, everyone would be an entrepreneur and there would be less opportunity.
The key is to CONTINUE to act like a thermostat through thick and thin. You must act like a thermostat at the beginning of your entrepreneurial journey. This is when you take the idea out of your head and first jot it down on paper, and then you develop your business plan and incorporate your company.
And then, you must NEVER stop acting like a thermostat. You must constantly be pro-active in raising funding, getting customers, hiring and managing your team, etc.
What are you doing today that's truly proactive? What should you be doing? Here's an exercise to try right now:
1. Make a list of things in your environment that you are not satisfied with? Are you not making enough money? Do you not have enough customers? Are you dissatisfied with the performance of some of your team members? Do you not have enough funding to execute on your plans? Etc.
2. Prioritize your list to figure out which items are most important for you to change.
3. Create an action plan to start achieving your most important item. Then move on to number 2, 3, etc.
Think about the most successful entrepreneurs of today and yesteryear. Individuals like Thomas Edison, Henry Ford, Bill Gates and Sir Richard Branson. Do you think any of these individuals accepted undesirable circumstances and environments? Do you think they complained about them? I doubt it. Rather, they identified these negative environments, and went about fixing and overcoming them. We all need to do the same. Every day.
Throughout my life I've met a lot of really smart people. People with really high IQs that excelled in school.
And I've also met and worked with a lot of extremely successful entrepreneurs. Entrepreneurs worth 7, 8 and even 9 figures (yes, that means they're worth over $100 million).
And interestingly, the two groups are pretty much mutually exclusive. That's not to say that the extremely successful entrepreneurs aren't smart. They are. But not as smart as a lot of the other folks I know.
So why is it that the high IQ folks haven't achieved as much success in life?
The answer is that IQ, your intelligence quotient, is less important then RQ, your risk quotient.
To become successful as an entrepreneur, you must take risks. You must get out of your comfort zone and try things that might not work.
Interestingly, throughout our early lives, we were trained NOT to take risks. I know I do this all the time with my kids. "Don't cross the road until there are no cars in sight," I tell them. Or "stop playing lacrosse; it's getting late and I don't want you getting hit in the face with a ball." We were all taught this to improve our survival.
But once we get older, survival is not enough. I don't want my tombstone to read "Dave survived." I want it to read that I thrived. That I accomplished my potential. That I made a difference.
And the only way to do this is to take risks. Some risks have relatively little downside. Like starting a new business that could possibly lead to bankruptcy. Other risks have bigger downside. Like Dr. Martin Luther King Jr.'s risk to fight for civil rights which ultimately resulted in his death. But, Dr. King's risk also resulted in such amazing positive change, and the betterment of millions upon millions of lives.
I'm not suggesting that you take such a risk as Dr. King did. I am suggesting that you need to get out of your comfort zone if you aspire to be a successful entrepreneur. You need to have an honest talk with yourself. Write down what goals you truly want to accomplish with your life. And then write down what you're willing to risk. Since if you're not willing to risk anything, your goals will remain dreams.
Jay Turo, my co-founder at Growthink, wrote a great blog post called "Entrepreneurship and Overstating Fear of Loss" a few years back about how "human beings greatly over-estimate the pain they think they will feel regarding a prospective future loss." Basically, when we do take risks and fail, the pain isn't so bad.
So how can you increase your RQ quotient? Try this:
1) Write down your goals.
2) Write down all the actions and associated risks you might have to take in achieving these goals.
3) Start taking the actions with the smallest amount of risk. As you start taking risks and getting out of your comfort zone, taking bigger risks will get easier an easier.
For me, the biggest inspiration that helps me take risks is my tombstone. While not trying to be morbid, I think about how people will remember me and how I want them to remember me. How do you want people to remember you? Once you figure that out, figure out that actions and risks you have to take to achieve it.