If you want to raise capital,
then you need a professional
business plan. This video
shows you how to finish your
business plan in 1 day.
to watch the video.
"The TRUTH About
Most entrepreneurs fail to raise
venture capital because they
make a really BIG mistake when
approaching investors. And on
the other hand, the entrepreneurs
who get funding all have one thing
in common. What makes the difference?
to watch the video.
The Internet has created great
opportunities for entrepreneurs.
Most recently, a new online funding
phenomenon allows you to quickly
raise money to start your business.
to watch the video.
"Barking orders" and other forms of
intimidating followers to get things
done just doesn't work any more.
So how do you lead your company
to success in the 21st century?
to watch the video.
Written by Jay Turo on Monday, October 22, 2012
A great best practice for all companies of ambition is to establish and hold regular meetings - in person - of a well-qualified and experienced board of strategic advisors.
Let’s set aside for now some of the mechanisms of setting up a quality board (of which more can be read about here) and instead focus on some of the “tough love” feedback a board can offer executives on what they are doing right and far more importantly what they are doing wrong and how to fix it.
That Often It is Better to Receive than to Give: While advisory board members, unlike a formal board, do not have liability nor fiduciary responsibility, their time and energy requirements to participate are significant.
And for most smaller companies, the financial incentives it can offer advisory board members are relatively little compared to the value of a board members’ time.
A good if imperfect analogy is that for many senior executives their involvement with a smaller company advisory board is almost a philanthropic endeavor - where they give of themselves without expectation of direct reward - financial or otherwise.
Correspondingly, the owners and managers of the small company must approach the sage advice and good energy offered by their advisory board fully in “receiving” mode.
For businesspeople of the mindset of always trading value for value and reciprocal obligation, this is hard. But only by clearing this space can the board’s counsel be best received.
And somewhat counter-intuitively, often only by management fully accepting the “gifts” of its advisors will the board member’s experience be richest.
Begin with the End in Mind: For companies beyond the startup phase, its operating executives are naturally pulled to the shorter-term challenges and realities - this quarter’s revenue and profits, this month’s sales, the challenges and angst of a difficult employee decision, etc.
In contrast, an advisory board discussion - by both its nature and by the kinds of folks attracted to serve on it - naturally pulls to the long view, to the big questions that all businesses should be regularly asking themselves always but rarely do.
Or, as they say, the “why” and the “which.”
The "why" questions are hopefully embodied in the Company’s mission and its values, and need the regular attention of strategic planning sessions like advisory board meetings to keep them from existing only in “hot air.”
The “which” questions are in many ways the harder ones that an advisory board dynamic can help address.
You see, ambitious entrepreneurs and executives (especially after they taste a little success!) are naturally drawn to expanding their sense of their market opportunity, and correspondingly their list of products and service offerings.
This naturally leads to a diffusion of focus, of trying to be all things to all people.
A thoughtful advisory board will challenge management to more clearly define where they are aiming to be 1 year, 3 years hence and beyond, and from this vision where resources and attention should be focused today.
Speak Little, Listen Much: Managers and owners of emerging companies are often also the lead salespeople, the lead “evangelists” for their companies.
As a result, their default mode is to always be selling, always be pied-pipering their incredibly bright futures.
Even if, especially if, so doing is buzz-killing and / or depressing.
Why? Because it is often only in the “low negative” energy state that a certain kind of reflective creativity can flourish and completely new approaches to solving vexing problems can be discovered.
Brevity is Next to Godliness: Strategic planning sessions in a modern business context should be tightly scheduled to last not more than 2 hours. After this length of time, diminishing returns starts setting in fast.
A tight frame also requires all participants to come to the meeting prepared. And, in turn, that the meeting organizers select the right meeting homework and then plan and moderate the agenda with the proper balance of structure and free-flowing dialogue.
Doing all of the above requires work – a good guide is that for every hour of strategic meeting time there should be 5 hours of planning time by the meeting organizer and at least 2 hours of preparation time by each participant.
Conclusion: Given that the only way to increase the value of a business is to either a) increase its bottom line financials and/or b) to improve its strategic positioning and growth probability, creative planning sessions like advisory board meetings should be a FIRST priority of any responsible manager.
They are classic Steven Covey, “non-urgent and extremely important” activities.
Ignore them at your peril, and benefit from them in ways well beyond predictable expectation.
Written by Jay Turo on Monday, October 15, 2012
Probably the worst way for an entrepreneur to begin his or her day is to read the newspaper.
Or watch the news.
Or, for that matter, to surf the net or even check in on the latest and greatest on Facebook, LinkedIn, Twitter, et al.
It is not to say that keeping up with events is necessarily a bad thing, and of course for many types of businesses and professions, it is part of the job description to do so.
But for the busy and ambitious entrepreneur, doing so first thing in the morning at best is highly distracting, and at its worst misdirects one's mind and energy in the absolute wrong direction.
Well, unfortunately the overwhelming majority for what passes as “news” these days is a downbeat recital of the things that either have, are, or are about to go bad the world over.
War. Economic crisis. National disasters. Scandal.
All usually presented in that oh-so depressing of "yes this is bad, but just wait because it's only going to get worse" tone.
Not the best “stimulus” with which to start one’s day to get out and conquer the world, now is it?
Yes we should be informed.
But really, it is not the “informed” that change the world for the better.
Rather, it is the men and women of action, purpose, and zest that do.
And these energized and effective souls don’t start their day with the “news.”
Rather, they feed their spirit, minds, and bodies wholesome fare.
They meditate. They read inspirational literature. They exercise vigorously.
They set their day's goals and get right after the most important ones first thing.
They recognize that the first hour is the rudder of the day and so they tack their daily ship in the best direction right from the day’s get go.
And once they are good and going…
…well, then they take a peek at a few tweets, they accept a few friends requests, and they indulge themselves in a little of the “news.”
But not too much.
This blog post is a reprint of an article written by Jay Turo in this month’s Vistaprint Small Business Blog.
Written by Jay Turo on Monday, October 8, 2012
As any venture capitalist worth his salt will tell you, there is a chasm of difference between the mostly grounded-in-reality financial forecasts offered by public companies, and the almost never to come true "rosy scenario" projections offered as a matter of course by startups and small businesses.
And while large public company CEOs and CFOs are judged as a matter of the highest honor on their ability to deliver on projections, exceedingly rare is the entrepreneurial executive that comes anywhere close to meeting forecasted results.
For a sense of the extent of how bad this problem is, a partner I know at a prominent venture capital firm estimates that of the 30+ companies that his firm has invested in, only two have consistently met or exceeded their financial projections.
And let me add that it isn’t like the inmates are running the asylum at my friend’s fund - as a prerequisite of having them as an investor, each of their portfolio company CEOs are required to undertake and report on a vigorous, quarterly budgeting and forecasting cycle.
And also let’s not assume that my friend is just a lousy investor. Lack of consistent financial performance is pretty much par for the course for startups and small businesses.
So what is going on?
Are the entrepreneurs just not ready for prime time? Are their managerial skill levels that many levels below their big company brethren?
I’ll say this - it is certainly not for lack of trying.
Most small technology company executives work longer hours than businesspeople have at any time in history.
If you doubt this, pick up Ron Chernow’s masterful biography of John Rockefeller.
In it, we read enviously of Mr. Rockefeller's daily 9:15am visits to his barber, his afternoon naps, and his unwavering commitment to always leave the office each day, no matter the season, so he could be home before dark.
And it is not for a lack of know how.
Modern entrepreneurs - with their always-on, “click of a button” best practice knowledge and connections base - are a better informed and more globally networked lot than at any time in history.
So if they aren’t the problem, is it modern business itself?
Has it just become - with all of its technological bells and whistles, all its globalization and pricing pressures, all of its customer unpredictability and fickleness - just too unwieldy a beast for any small company to ever consistently ride?
And concurrently, has accurate financial forecasting become equivalent to throwing dice?
Or more disturbingly - is it not even worth doing as even when they do turn out to be accurate it just falls into the category of the blind mouse getting some cheese every now and then?
For better or for worse, modern business demands that we take a more “balanced scorecard” approach in judging managerial effectiveness and entrepreneurial progress.
Factors like intellectual property development speed, organizational design, and client satisfaction as measured by a companies’ net promoter score are proving to be just as important predictors of a business’ value creation as is its forecasted-to-plan accuracy.
Please let me be clear: on their own these factors do NOT make a business valuable.
Rather, the right matrix of them, properly prioritized, IS highly correlated with businesses that attain high profit exit and investment outcomes.
As an added bonus, these non-financial key performance indicators (KPIs) can be designed to be far more consistently predictable than traditional projections.
As such, they are usually far better measures of executive effectiveness than budgeting and forecasting “gap analysis.”
You just have to have the guts to forget about the numbers for a quarter or two.
Or, if you are really get good at defining, tracking, and accomplishing the right non-financial KPIs, to forget about them permanently as they will just take care of themselves.
Now wouldn’t that be nice.
Written by Jay Turo on Monday, October 1, 2012
Holding constant for socioeconomic factors, the typical entrepreneur makes less money, work more hours and suffers more work-related stress than their employed counterparts.
And when we combine these statistics with those that show a very incredibly low percentage of startups and small businesses ever attaining meaningful profitability, it is remarkable that people ever even dream to be entrepreneurs and start businesses at all.
But start them they do!
Quite possibly the most amazing and inspiring number in all of American business is 550,000.
That is the approximate number of new businesses that are started in American each and every month, or more than 6 million per year.
Now these opposing statistics beg the question, “Why?”
Why would 550,000 people - who statistically are far better educated and wealthier than the population as a whole - engage in behavior that on the surface clearly seems contrary to their self-interest and dare I say, delusional?
Well, on the cynical side, many of these brave folks probably think the odds of economic success are greater than they really are.
And even if they know the odds, they think that they don’t apply to them.
On the slightly less cynical but still not totally inspiring side, one could argue that businesses are started out of boredom - out of the need for that “action rush” that in the realm of business often only an entrepreneurial endeavor can truly provide.
Inspirationally, many believe like I do that entrepreneurship is the greatest force for positive change in the world today, and they start and grow businesses to be positive change agents, on levels big and small.
They start restaurants to create and share beautiful food, service, and atmosphere.
They open day care facilities to provide quality, spirited child care for working families.
They start creative agencies - graphic design, public relation, web development firms, and the like to leverage their business and creative talent to its most effective end.
And they start drug development and medical device companies to help people live longer, healthier lives.
And thousands of types and forms and sizes of business in between, led by entrepreneurs with aspirations big and small, driven by motivations both pedestrian and soaring.
But at the heart of all of their reasons for starting businesses, at least of the ones that survive, is that often begrudged but really most inspiring motivation of them all.
They start businesses to make a lot of money.
Now the key word in that sentence is make - as in bringing into existence through creativity, effort, and as often as not more than a little serendipity and luck, something that did not exist beforehand.
Making money is the difference between Mo Ibrahim becoming a billionaire through bringing inexpensive mobile telecommunications to millions in Africa and Mo Gaddafi stealing billions of his people’s money at the point of a gun.
It is the difference between Steve Jobs and Apple creating $630 billion in market capitalization - and untold additional hundreds of billions in economic and multiplier effect.
Now often, for the entrepreneur and those that back them, the touching of this money often takes many years, even decades, of under-paid, hard, and often thankless work, before a cash windfall in the form of a business sale or a public offering.
But that is a story for another day.
For now, find those entrepreneurs that can truly make money, encourage and back them, and you and the world will get to a better place.
Written by Jay Turo on Monday, September 24, 2012
Modern businesses, massively reliant on information technology, are faced with a fundamental question - should they organize “traditionally” via single locations where salaried “W-2” employees work, or should they exist primarily in “the cloud” - with far flung networks of “1099” contractors, vendors, affiliates and the like?
Let’s label the two approaches “old school” and “new school” and explore their pros and cons:
W-2 Old School Positives. You can spin virtuality anyway you like, but human beings are fundamentally designed to work together in 3 dimensions, in-person.
Among many other, an incredibly KEY benefit of the old school way - training and professional development.
While e-learning holds great promise, almost all of us have had the vast majority of our educational, development and collaboration experiences in the “real world.”
And unless and until there is some radical re-ordering of parenting and elementary school norms, this will always remain so.
As for reaching “hearts and minds,” working out of one’s spare bedroom, or from the kitchen table is convenient and all, there are few experiences of “true aliveness” like working in-person with colleagues you respect, toward accomplishing missions and objectives of value and high ideals.
Old School Negatives. It is 2012, folks, and markets and competitive conditions in our brave new world move far faster than the traditional, “one roof”, employer - employee organization dynamic.
Combine this with the fact that it is getting increasingly difficult to attract and retain the best and most creative self-starters to traditional corporate environments, and it is easy for organizations to devolve to both personnel mediocrity and a mismatch between what the market dictates and what the employee rolls reflect.
New School Positives. Sites like LinkedIn, Rent-a-Coder, Craigslist, and dozens of other have made it cheap and easy to find and transact with talent with the skill sets an organization needs as it needs it.
And while cynical, it is also true that it is easier to downsize a virtual workforce than one where folks are eating, laughing, and co-habiting together daily.
New School Negatives. This new school advantage is of course also its biggest weakness – the detachment of virtual workers makes it almost impossible to create that inspired workplace which visionary leaders like Tony Hsieh, Richard Branson and Sam Walton hold as the ONLY sustainable competitive advantage in modern business.
So what to do? There are of course no hard and fast rules, but a good shortcut is to deeply ask – “What is absolutely critical, absolutely core to my business and what is merely tactical?
That which is core, go old school.
Everything else, go new school and outsource it to that always-on, increasingly omniscient big data cloud of global talent and run your business to modern daylight!
Written by Jay Turo on Monday, September 17, 2012
Younger workers, the so-called Millennials or those born after 1982, offer unique challenges and opportunities for 21st Century managers seeking to build well-functioning teams that work and win together.
Here are five best practices:
#5. Revel in the Importance of Company Culture. In a world where everything can and is easily and quickly borrowed, copied, and sometimes just plain old stolen - the only sustainable competitive advantage is how a company organizes and aligns, inspires and challenges its people.
Or, in a word, its company culture.
Taking it further, the modern manager is doubly vexed by the unsettling (yet exciting) reality that the plan today will almost certainly not be the plan tomorrow, and as the plan changes, so must change both individual roles and team dynamics.
And thereby so must the culture change.
Please let’s not jump over this point too quickly. It is all too easy for the ambitious, hard-working, and often older manager to just throw up his or her hands and lament over “these kids” and how “if they only knew how things were like when I was starting out” that they would think and act differently.
And how they should be just happy to have a job and not just be so – well young and self-absorbed.
Well, that is dead-end talk.
Building high-performing 21st century teams requires winning hearts and minds and doing so each day anew. The best managers REVEL in this challenge as opposed to shirking from it or whining about it.
#4. Empowering and Coddling are NOT The Same Thing. Some may read the above and shake their heads and think that this is a “coddling mindset” or entitlement culture and is exactly what has gotten us in America in trouble in the first place and a big part of why China is kicking our you know what every which way.
This is where leadership and administrative creativity are of such importance in building win-win work structures that both inspire and challenge the younger worker to work harder and get better faster.
AND allow for balance and acknowledge those aspects of work that are not so “goal-driven.”
What are these? Well, that sense of community and common cause and healthy friendship and competition that make the best workplaces, for lack of a better word, fun.
And fun, as high-performing cultures like Southwest and Richard Branson’s Virgin have demonstrated so inspirationally is - surprise, surprise - very good for the bottom line.
#3. Understand that Entrepreneurship and Youth Go Hand-in-Hand. Most ambitious young people today don’t grow up dreaming about getting that “good state job” or to work for the same company for 30 years.
Rather, and following up on that overriding sense of “specialness” with which we now raise our children, young people want their star to shine. They want to come up with the new, great ideas, and to be acknowledged and rewarded for it.
They, in essence, want all of the recognition and empowerment and self-definition and financial opportunity that attract people of all ages to become entrepreneurs.
This is a great and good thing, and is at the heart of why we live in golden, global age as young people the world over are being raised with the right kind of high self-esteems to dream and act BIG.
BUT many of even the best of them on balance do not want the headaches and heartaches and vexing, painful choices and compromises that are just as much part and parcel of the real entrepreneurial “lifestyle.”
So how do you work with this? The deep desire and burning ambition that all companies desperately want in their people on the one hand, and a wariness and even a distaste for all of the prosaic, “not fun” stuff on the other?
Well surprise, surprise, this is tough.
A general rule here is as opposed to fighting this energy, go with it and reframe the “tough stuff” as opportunities for personal and professional growth and then profusely recognize and acknowledge these “less fun” challenges are taken on.
Not easy to do for sure, but it is this leadership that both modern organizations and younger workers desperately need and want.
#2. Recognition is Key. Having 2 young sons has helped me immeasurably in understanding the sometimes gentle psyches of younger employees. Long gone are those days of fear and punishment-based parenting and schooling. Rather, understanding that a recognition-based milieu is how most high-performing young people have been raised and schooled is a key to effective organization-building.
Authors Chester Elton and Adrian Gostick in their books and on their great website – Carrots.com - describe recognition done right as being “positive, immediate, close, specific, and shared:”
Positive - managers sometimes use a recognition presentation as a time to talk about how far someone has come, or how they could have done even better. This is not the time or place. Comments must be positive and upbeat.
Immediate - too often by the time an employee is recognized for a job well done, weeks if not months have passed. Obviously the closer the recognition to the actual performance the better.
Close - recognition is best presented in the employee’s work environment among peers. Invite the person’s team members and work friends to attend.
Specific - a great presentation is a time to point out specific behaviors that reinforces key values.
Shared - typically, recognition comes from the top down; however, recognition that means the most often comes from peers who best understand the circumstances surrounding the employee’s performance. Peers, as well as managers and supervisors, should be able to comment during the presentation.
#1. Embrace Fluidity. This is perhaps the hardest reality and where the rubber really hits the road with building 21st century, knowledge-based entrepreneurial organizations dependent on younger people.
They just get up and leave.
On a moment’s notice and often for the simple and defensible reason of valuing experience and variety over the often hum-drum and slow career - building that is part of staying and growing with one organization over time.
Again, as opposed to fighting this energy, go with it. Work to design the organization and refine the business model based on relatively short tenures - say 3 years or less - and with the ability to plug new people in and have them produce quickly.
To accomplish this requires strong and well-defined training styles and processes, clearly defined and “bounded” roles and responsibilities, and a knowledge management system that captures and processes the intelligence of the organization so that it doesn’t walk out the door when that “year overseas” calls.
How About Investors?
As for investors looking for emerging companies to back, my strong suggestion is to evaluate these softer “above the line” qualities in a corporate culture and a leadership team as much as the below line technology and balance sheet factors that are usually at the forefront of an investment evaluation.
For it is the right company culture - one that gets the best out of people of all ages - that both endures and provides for success for the long term.
Written by Jay Turo on Monday, September 10, 2012
The old adage that banks are really only in the business of providing capital to those that don't need it has never been more true than it is today.
These days, most commercial and neighborhood banks only lend against quickly “liquidatable” assets or at a small multiple of historical cash flow.
Given that most startups and small businesses have neither of these, for them attaining traditional bank financing has such a low probability of success that it is rarely even worth the time to pursue.
So, where should the creative and committed small business owner go for funding when the banks say no?
Here are three places to look:
1. Crowdfunding. Popularized by donation - based platforms like Kickstarter, Indiegogo, and Rockethub, crowdfunding allows entrepreneurs to efficiently raise capital in small amounts from one's social and professional networks.
Important timing note here: While equity-based crowdfunding was approved by Congress in the recently passed JOBS Act, it is still working through the process of SEC rule-making.
See crowdfunder.com - a startup that is developing one of the best platforms for equity-based crowdfunding - for the most timely updates in this regard.
2. Family and Friends. Since time immemorial by far the most popular funding source for new and small businesses is to ask those that know you best to stake your entrepreneurial journey.
For sure it is emotionally loaded, as so many of us don't want to mix our personal and professional lives, but it does provide a great “gut check” as to how serious, committed, and “sold” you really are on your business.
Well, it is one thing to lose the money of strangers, quite another to do so of Uncle Jed who you'll be seeing each holiday season.
A way to “reverse the frame” in these family and friends dialogues is to recognize that while yes, a relative or friend is doing you a big favor by investing in your business, you in turn are returning the favor and more by providing an opportunity for an outsized investment return along with the unique excitement of being a stakeholder in a small business.
3. Sell Services. Especially for technology and consumer product companies, the long pathway of research, product development, and establishing distribution mean that often years can go by in the dreaded “pre-revenue” stage.
So as opposed to relying solely on investment capital to “deficit finance” this gestation period, how about generating some cash through selling consulting services in the interim?
As examples, a company building a new and proprietary mobile application could in parallel build apps for others, a new restaurant could do catering, or a consumer product business could sell research services regarding their market niche.
And, if structured right, in addition to paying the bills, consulting projects like these can also be utilized to iterate one’s product development forward.
Use these three strategies - and do so as with all matters related to starting and growing a business with creativity, determination, and persistence - and soon you will be laughing all the way to the bank.
This blog post is a reprint of an article written by Jay Turo in last week’s Vistaprint.com’s Small Business Blog.
Written by Jay Turo on Tuesday, September 4, 2012
The four letter word in all conversations between entrepreneurs and investors is risk.
Investors are always interested in gaining ownership stakes in high potential companies but are also always weary of the considerable risk-taking necessary to actually do so.
The best investors and entrepreneurs I know take a dispassionate and detached approach.
They don’t get caught up in the “drama” that the word risk has unfortunately garnered in our "it bleeds it leads" media and in our litigious culture.
Rather, they view risk for what it actually is - simply a measurement of the likelihood of a set of future outcomes.
In the context of startup investing, it has three main drivers:
1. Technology Risk. Can the entrepreneur actually bring-to-market the product or service and on what timeframe?
2. Market Risk. Once the product is in the market, will anyone care?
3. Execution Risk. Can the entrepreneur lead and manage a growing enterprise?
Critically, investors do their risk calculation not by adding, but rather by multiplying, these factors together.
As such, poor grades on any one factor has an exponential impact on the business' overall risk profile, and thus its investment attractiveness.
And as should be obvious, companies that raise capital simply have better answers when queried regarding the above - their technology plans are better thought out, they understand their market and customers more deeply, and their people have better resumes and track records.
But it goes deeper than that.
Deals judged as higher risk are disproportionately prejudiced against, even when their expected return more than compensates for their higher risk.
As a result, higher risk deals are normally underpriced while the lower risks ones are usually over-priced.
That is good knowledge for investors, but what about the entrepreneur?
Well, it should be to always remember that the real dialogue going through the mind of the investor when considering a deal is not really about technology, or market, or management, even when that is what they want to talk about…
No, it is almost always about risk - both its reality and its perception.
Address this concern above all others, head-on, thoughtfully, confidently, and candidly.
And then risk will be put back where it belongs – as a factor to consider - and not something that just automatically stops a deal.
Written by Jay Turo on Monday, August 27, 2012
Debt crises in Europe.
Medicare, education, and deficit crises at home.
Middle East crises for as far as the eye can see...
Things seem pretty bleak out there, don’t they?
And isn’t the tone of our civil discourse so polarized that not only do we have tough problems, but doesn’t it feel as if our ability to proactively address them is less than it has ever been?
But maybe we have met the enemy and it really is us.
Maybe we have let our “it bleeds, it leads” media - the drumbeat of negativity that we are subjected to on a daily basis - play havoc with our psyches.
Maybe we are putting so much emotional weight and heft into the things that are bad, the things that can go wrong, that it is crowding out the things that are positive, the things that can and are going so very right.
Maybe the statistical odds are actually overwhelmingly in favor of everything just getting better.
For all of us, our children, our grandchildren.
As in more prosperity, better education, more safety from premature death and disease, and yes even more happiness.
Maybe when we pull our heads up and look around, what we will see is that what we are really living in is a golden age of technology, of prosperity.
And of possibility.
Maybe optimism - as author Matt Ridley describes it – is really the intelligent, intellectual choice.
Peter Diamandis in his outstanding book “Abundance” talks about the “rising 3 billion” - how between now and 2020 the number of people connected to the global Internet and productivity grid will rise from its current 2 billion to 5 billion.
And that as it does as opposed to this creating crisis, how it will lead to the greatest economic boom in the history of the world.
A boom driven by innovation, by technologies with us now in dynamic new fields like cloud computing, robotics, 3D printing, synthetic biology, digital medicine, nanomaterials, and artificial intelligence.
So now this is exciting stuff, and I feel personally blessed that my professional life revolves around a company like Growthink with its so inspirational mission of helping entrepreneurs succeed.
As, of course, it will be the entrepreneurs – working at companies large and small and ones yet to be even dreamed and conceived - that will drive and create this new boom and these new innovations.
But even more excitingly, is the age that we are moving into is one driven by a power greater than that of technology and entrepreneurship.
And that will be one driven by the power of comparison.
As has been happening for the past 30 years, those individuals and locales and states and countries that “get it” - and let technology in, let entrepreneurship in, let freedom in, well they will continue to be the ones that get ahead and get richer and richer and dare I say happier and happier.
And those that don’t get, well they will fall further behind.
And for the first time in human history, there are now billions of people the world around with this power of comparison - of trial and error, of split testing, of modeling and mimicking best practices.
The power of information and intelligence and an entrepreneurial spirit and an empowerment to do something about it.
And because of this power, yes the statistical odds are overwhelmingly in favor of things just getting far better than any of us even dare to dream.
Written by Jay Turo on Sunday, August 12, 2012
The elephant in the room when it comes to entrepreneurship and small business is FAILURE.
The statistics are only debated to their degree but not their overall thrust - a very small percentage of businesses ever become meaningfully profitable and a smaller percentage still are ever sold for a meaningful price.
In other words, the vast majority of businesses - by objective, financial measures - fail.
Even worse, a lot of them fail badly - never achieving even one dollar in revenue and / or go so deeply in the hole that they have significant and negative financial spillover effects.
Like business and personal bankruptcies and investors losing all of their money.
In a word, business failure is traumatic.
Now it is not the kind of trauma that survivors of war and natural disasters experience, but in the world of work it can be about as bad as it gets.
Yet Americans today are starting businesses at a greater rate than at any time in the last 15 years…3% of the U.S. adult population annually start one, and a multiple of that dream about doing so.
So what gives?
Well, there is the financial view, namely that the rewards of a business sale are so great and life-changing that having any probability of its occurrence make the grave financial risks of business - building more than worth taking.
But this at best only explains half of the story.
No, there is something else going on here, and new research regarding of all things - Post Traumatic Stress Syndrome, points to what it is.
Ground-breaking research - done by among others Dr. Richard Tedeschi of the University of North Carolina - shows that strong, negative experiences like war and natural disasters are NOT as scarring as once thought.
In fact, the exact opposite is true.
Statistically, most survivors of traumatic experiences - think prisoners-of-war and tsunami victims - come out of them stronger and on most measures, out-perform those in their peer groups unaffected by the awful events.
All I can say is wow.
Now everyday all of us should count our blessings dozens of times as “there but for fortune go I’ and offer nothing but great compassion and empathy for those suffering trauma, especially when it comes through no fault of their own.
But we also should take significant solace and inspiration from the rest of the story.
Life, as it does, goes on.
And according to the latest research, the old adage is true of that which does not kill you REALLY does make you stronger.
Now it would not be proper to equate a business failure with the physical and emotional traumas experienced by survivors of war and disaster, but entrepreneurs and executives can and should draw important wisdom from them.
Such as if you “fail” at this particular business, you won’t be broken and scarred forever.
And that professional and entrepreneurial growth is a participatory sport – learned only by doing and trying and striving and not by watching and fretting and waiting.
And then there are the related ideas of diversification and iteration.
Such as, in business, it is almost always far better to have four business “failures” and ONE success than it is to go zero for zero.
For the entrepreneur this does not necessarily mean running multiple businesses concurrently, but it does mean that the business strategy should be iterative and testing based.
Successful Internet companies get this intuitively - see Amazon and eBay and thousands of others - and you should too.
As for investors, they should take advantage of the incredible opportunity that the modern financial system offers to back multiple entrepreneurial companies, and not just one or a handful.
With the average return of the private equity investing asset class in some cases being over 27% annually (see research at Right Side Capital), the odds are strongly in your favor if you both invest right and diversify properly.
So entrepreneurs and investors get in the game!
Failure is no way near as bad as advertised and if approached with the right spirit and strategy, it can truly be the ultimate blessing in disguise.