Up and Running Blog

February 2010

Top Startup Mistake 6: Ideas vs. Opportunities

by Tim Berry on February 9, 2010

(This is number 6 in my list of top 10 startup mistakes.)

A business idea is not necessarily a real opportunity. You need to filter those business ideas, sifting through them, looking for the opportunities.

What’s the difference? An idea is just that. It has no value unless you make a business out of it. An opportunity is an idea that can be implemented, for which resources are available, that will prosper.

Opportunities are far rarer–and way more valuable–than ideas.

Business planning is a great way to filter the ideas and find the opportunities. Take the idea and lay out the basics, like starting costs, realistic sales, costs of sales, expenses and such. Take a good, hard look at the market, what the real needs and wants are, and whether or not people–enough people–will spend money on it. Think through the resources required. An idea becomes an opportunity when you can act on it.

Very few startups succeed or fail because of the business idea. It happens, but it’s rare. For every new-idea-based business, there are tens of thousands of new businesses based on giving people more value or better value or something they like better, somewhere it’s easier to get to, or get to more often.

So business ideas are great, hooray, but not really what makes the difference. Make sure you have an opportunity, not just an idea.

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Top Startup Mistake 7: Investment or Bust

by Tim Berry on February 8, 2010

Hooray for bootstrapping. My startup mistake number 7 is accepting the popular myth that has startups always requiring winning investment from some outsider. This idea is way too common in business schools, blogs and books.

Sure, a few thousand high-profile startups get investment each year, but the vast majority of startups are bootstrapped. I saw a Wells Fargo study just a few years ago showing that the average startup cost in this country is $10,000. And that, obviously, isn’t something you get from outside investors.

In addition, we gloss over the glaringly important fact that investors make money when a startup sells itself to some large company–called the exit. Just staying healthy and growing isn’t enough. Exits used to include going public with stock, so anybody could trade it; but that rarely happens anymore.

Lots of great companies don’t exit. They start, survive and grow. Their owners make money, their employees (often the same thing, owners and employees) make money, but there’s no exit. Or at least, not within the three- to five-year period that investors need.

And investors aren’t bad people (I’m an investor myself, through the Willamette Angel Conference, and I like me). But they invest to make money, and they don’t make money unless there’s an exit.

So, if your own pet startup can’t get investment, get a clue. Revise the plan. Start smaller. Focus better. Get some early sales. Or keep your day job.

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Retail is Not Dead

by Guest Author on February 5, 2010

Circuit City shut its doors, office supply stores are reporting slow quarters, and consumers are staying home. The slow economy has reduced sales in just about every retail store. If your company is selling in the retail channel (or thinking about it), the news can be frightening.

IMG_6759One year ago I could read the writing on the wall. The retail channel was either dead or mortally wounded. Consumers’ buying habits had changed and product sales in brick and mortar stores were in a steep decline. I had the dubious pleasure of steering a once profitable sales channel into the ground.

During a period when retail sales reports were appalling and getting worse each week, Palo Alto Software chose to review every aspect of its retail channel plan. We didn’t expect to be able to fully rebound; we were hoping that we could find a way to slow the decline. We looked at every partnership, channel position, and retail decision. We challenged ourselves to make wholesale changes where necessary. We threw out all of our preconceived notions and started from scratch.

Was our software selling on-shelf in the right stores? Did our pricing model maximize revenue? Did we know where our customers were shopping? What was our competition’s strategy? Were retail sales in the process of dying off? Every aspect of our retail strategy was researched, challenged and weighed. Our start-from-scratch approach immediately brought glaring problems to the surface.

By asking the right questions, our management team was able to get a better understanding of the retail market. We were able to correct our mistakes and identify some very significant opportunities. A year later, Palo Alto Software has a thriving retail channel that continues to realize significant growth, month over month. Retail is not dead, it’s not wounded, it’s just changing!

In retail, the learning curve can be very steep and unforgiving.

Over the next couple of weeks I will be blogging about the lessons we learned in retail. Hopefully this series will challenge your business to take a fresh look at retail. It is a complicated, time-consuming sales channel, but the returns can be well worth the effort.

daveDavid Shear is the Channel Sales Manager at Palo Alto Software, where he oversees all academic, corporate, government and retail sales.  David came to Palo Alto Software from the banking industry where he was a regional and national sales manager for Indymac Bank, Optium Financial and Rainland Mortgage; David worked in correspondent and wholesale mortgages for over a decade.

Having attended University of Oregon’s Law School, David is quick to point out that while the Oregon Ducks are his first love, sales come in a close second.

(editor’s note: David’s status with UofO was incorrectly listed as being an Alum. This is completely a miss on ‘Chelle’s part and not a devious attempt on David’s. )

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Top Startup Mistake 8: Misunderstanding Equity

by Tim Berry on February 5, 2010

There is only 100 percent ownership in a company. It’s for founders who are totally committed to it, for investors who spend money and, later, for the most important trusted key employees.

It’s not for your cousins, your in-laws, the lawyer who did the initial paperwork or the vendor who did the website. It lasts forever. Ownership belongs with those who are fully dedicated to the company.

I like this summary by Asheesh Avani, who’s a brilliant strategist and a true expert on the ins and outs of small business and startup financing. Asheesh founded Circle Lending, which was purchased by the Richard Branson group and is now Virgin Lending. This is from one of his columns, called “A Fairer Share”:

In simple terms, founder stock is issued early in the life of a startup to the founder and co-founders. It determines how the ownership is divided up and it is typically based on each founder’s contribution to the key assets of the company. Unlike stock that is acquired as the business grows, founder stock is primarily granted for sweat equity–so it’s difficult to distribute fairly if there are multiple founders with different roles and levels of commitment.

I see so many startups that throw ownership around like it’s free admission to the opening day celebration. This is so often a no-win solution. If your new company never does anything, it’s just a waste, a disillusion. And if your company takes off, those early owners are there forever, causing problems, exercising minority ownership rights and scaring away professional investors.

One of the worst ways to save startup money is to give away ownership to service vendors.

Be careful. It’s not a casual favor. A co-owner is a long-term relationship. Make your equity count.

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Top Startup Mistake No. 9: Incomplete Teams

by Tim Berry on February 4, 2010

(This is number nine in my list of top 10 startup mistakes. I started yesterday with number 10, and will going from these less significant issues all the way to number 1, the most important mistakes to avoid .)

So many of us do it. I certainly did, in my early startup days. We think entrepreneurship is supposed to mean that we do everything ourselves. Make the product, make the sales, do the books, and take out the garbage.

Doing it all works sometimes, for some people, but it’s the exception to the rule. Most of us need to build a team to build a company.

Think about likes and dislikes, and strengths and weaknesses. Some people like numbers, some like people, some like machines, some like lines of code and keyboards. There’s a lot of like in a team that has different people with different skills. The admin person and the operations person and the (golden-tongued) sales person and the creative marketing person and the programmers don’t have to all be the same people. Usually they’re different people.

And don’t forget the professionals. While it’s smart to do your homework to minimize the legal bills by understanding the standard questions and the main tradeoffs, you still need an attorney you can trust. And while it’s smart to manage your bookkeeping yourself, or with an hourly bookkeeper, most of are going to need a CPA to manage taxes.

Doing it yourself isn’t always the best way. Sometimes you need to develop a team.

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Top Startup Mistake No. 10: Unrealistic Forecasts

by Tim Berry on February 3, 2010

This is number 10 on my list of top 10 startup mistakes. I used the list last week at the Growth 2.0 conference in Miami, so I want to share it here.

Once upon a time, I sat down for lunch with a venture capitalist friend of mine.

To the standard rhetorical how are you question, he answered,

“If I see another hockey stick forecast this week, I’m going to throw something at somebody.”

I asked what that meant, and he answered:

That means that sales are going along flat and boring, with nothing happening . . . but things are going to shoot up as soon as I get your money.

It’s not just the hockey stick forecasts, either. It’s all those unrealistically optimistic forecasts with no real basis. For example, the forecasts that assume some new venture can get a small but significant percentage of a very large market. No, you can’t get half a percent of the $50 billion widget market.

And with an unrealistic forecast, you naturally have an unrealistic expectation of capital needs, cash flow break-even, and a lot of other numbers.

And, speaking of hockey stick sales forecasts, they’re actually great when they’re real and believable. Back them up with early sales results, letters from buyers, demographics, conversion rates, and other real data. Then they work.

But anybody can type spectacular numbers into a spreadsheet. The real trick is to meet those numbers in real life.

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Jump In, the Water’s Fine

by Guest Author on February 2, 2010

Technology and its Effect on our Lives and Business

I remember reading a book when I was young which made an attempt to predict the future and how we would be living today. Most of the changes had to do with technology–specifically along the lines of a popular TV show from the 1960s, The Jetsons. I remember the large picture telephones in one of the illustrations that were predicted to be in everyone’s home. And of course there were the gadgets and vehicles that were going to make our lives more convenient and enjoyable. While some of the things were a little “off” (don’t know if we’ll ever live in sky apartments; is it really necessary?), for the most part the representations have become a reality. And I must tell you, most of the developments that I see are pretty wonderful.
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I think for most of us, technology is still a bit of a shady character that few want to fully embrace. Books, movies, and TV shows have mostly depicted technology and the future as a cold, soulless world. Some movies even depict the future as a world where technology “takes over” and enslaves the population in some manner. These dystopias do nothing to communicate all the good that technology provides. Technological advances in communication today allow us to connect with virtually anyone in the world instantaneously. For many of us, there is a negative knee-jerk reaction which comes with that. After all, who really wants to hear from that third-grade classmate? My belief is that the good far outweighs the bad.

In spite of our ambivalence, technology and improved communication trudges on. The Pew Research Center says that 74% of American adults now surf the Internet (do I really need to remind you of the ever-increasing Internet usage statistics?). People of all age groups, income ranges and education levels are shedding the fear of “Big Brother” and plugging in. And the prediction for the future–more of the same.

I had the opportunity to speak to a local engineering association. In the audience was an engineer who openly scoffed at the idea of using online sites to communicate and market his services. He knew of the massive number of people who had accepted the Internet as a way to get information quickly and to communicate; yet because of his skepticism, or fear, he has effectively rejected technology (If you can’t see the irony of an engineer rejecting technology, then I haven’t explained it right). But I don’t think he’s alone in his rejection. I think we all continue to hold technology at arm’s length.

Perhaps the best thing to do is to position technology in our lives as a partner rather than a rival–something that makes us more productive, while at the same time allows us to maintain a level of privacy. My guess is that social media sites will continue trying to give you a tremendous level of communication when you want it while shielding you from unwanted contact… in a sense keeping the good and shedding the bad. We’ll see. But in spite of the positioning, technology and improved communication march on, making inroads into every area of our lives. While I’d prefer that you welcome it and make it a partner in your life rather than have it forced upon you (see engineer…what are his options?), technology and improved communication will continue to become a bigger part of our lives.

I’m still amazed by the number of businesses that are “unplugged” today. Granted, I can understand the need for privacy on a personal level, but gaining clients has to do with visibility and promotion. Over time, it’s my estimation that businesses will simply have to plug in to compete. Having a website will be a starting point, along with a business license. Letting others know what you do in mass (social media, etc), will be a routine marketing activity. And the companies that will be the most successful are the ones who harness technology the most effectively.

How is your business, technology-wise? Are you online? Do you have a website? Maintain a blog? Use online advertising? Are you plugged in to the social media world? Have you integrated your offline marketing with online marketing? With all the numbers of people jumping online looking for products and services, is it time to set your business up so that they can find you easily? With the enhanced privacy features of a lot of online tools, is it time to jump on in? I think so…the water’s great!

ducttapemarketingbadgeScott Campbell is the President of Impact Marketing, a results-oriented marketing coaching/consulting firm. They focus on helping small business grow using repeatable marketing processes…using mainly online tactics such as website development, search engine optimization, and social media. Their website is located at www.impactyourcompany.com

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What If There Are Already Lots of Competitors?

by Tim Berry on February 2, 2010

New kinds of businesses, based on entirely new ideas, are extremely rare. The vast majority of new businesses are new attempts at existing types of business. And that’s fine. Don’t ever focus too much attention on the new idea, as if that were the only foundation for a good new business.

For a specific example, think about graphic artists, consultants, attorneys, accountants, bookkeepers, restaurants, and so on. Somebody comes up to me after a talk, saying he or she can’t be a graphic artist because there are so many of them, and I say of course you can. Do it.

These are displacement businesses. They’re looking to pick up some of a market that already exists. They churn. New restaurants appear, old restaurants go under. There is lots of opportunity.

You don’t have to be alone in any market. Nobody is the only one out there. You don’t have to be first. And just because there are a lot of other people offering similar services doesn’t mean that you can’t succeed. And if nobody else at all is doing it, maybe you should get a clue.

Do what you do well. Give value. Open up the doors on time, answer phone calls, get stuff done. And you can succeed.

In the world of entrepreneurship we talk too much, in classes, books, blogs, and so on, about the interesting new businesses. As if every new business needed a new idea. Start in an existing business, and displace the ones that aren’t doing well. Do it better.

(Image credit: istockphoto.com)

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What you must know to make all your presentations powerful, compelling and persuasive.

by Marketing Masters on February 1, 2010

Business people often say the presentation of any concept or sales call is as important as the content, in some cases even more important.

So what are the ingredients of a successful presentation? What practical insights are there on how to improve your personal skills? What do you need to know to create presentations that not only get rave reviews, but also succeed in getting recommendations approved and vigorously supported?

business pitchIn 30 years of teaching presentation effectiveness at one of Canada’s premier business schools, we’ve had a real life lab in what works, and what business owners, executives, and sales people really need. They told us they want a way to reduce the time required to prepare a presentation significantly. They want to know how to respond to challenges and objections from the audience; and, they want to stay in control of the situation and not have their meeting hijacked. And of course everyone wants to know how to control the nerves and fear of standing up to present.

This is a rich subject for discussion. Let’s start by looking at what we see are the biggest mistakes people make every day.

As a starting point, please realize that nobody wants to talk about your product or service! Your business is the most important thing to you, but your prospect’s or client’s business is the most important thing to her. A good rule of thumb is to talk a lot about them, and very little about you. Your audience wants to know one thing only: how is your product or service going to help me compete in a dynamic, cluttered, and puzzling market. So don’t tell them about how fast your widget processing speed is, tell them how much faster their product will get into customers’ hands and start pumping out cash.

Start your presentation with a promise of value. We feel so strongly about this we insist that all our clients begin their presentations with these exact words, “At the end of this meeting you will have…” Make it as relevant as you can.

A good trick is to find out what the audience’s biggest frustration is with your product or service category, and build a promise around solving it. You might say, “At the end of this meeting, you will have a proven solution to your inventory problem, which will increase stock turns by 14 percent.” Be focused. Be specific.

End your presentation with a clear request for meaningful action, and double your chances of getting a positive response by demonstrating that you have skin in the game too. This simply means that you will ask your audience to do something, and promise to do something meaningful in return.

Here’s how that might go: “Bob, I’m asking you to purchase twelve dozen of our gizmos for delivery by the end of the month, and in return I will provide our advanced training for the whole team a week before the stock is delivered.”

Simple rules that will make a real difference in how well your presentations and sales calls go: talk more about the customer than about your company; start with a promise; end with a clear “ask” and another promise.

Why does this work? Well, when we talk to heads of companies large and small and ask them what bugs them most about sales calls and supplier presentations, they tell us (and very frankly I might add): people who don’t understand their business; lengthy meetings with no clear outcome or value proposition for them; and no commitment by the supplier to contribute to success.

There’s an old sales guy motto you might recall right about now: the customer is always right. In this situation, it’s worth paying attention to.

ducttapemarketingbadgeKen Burgin and Elizabeth Walker are the Marketing Masters (www.MarketingMasters.ca), a full-service marketing and advertising partnership that helps build busy businesses. Send your ideas on How to Thrive in Times Like These to liz@marketingmasters.ca or ken@marketingmasters.ca, or call 1-866-908-5720.

web: http://www.marketing,masters.ca
blog: http://thebuzzwithkenandliz.blogspot.com/

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Help for Teaching Entrepreneurship

by Tim Berry on February 1, 2010

Are you teaching a class on starting a business? If you are, then I’d like you to be aware of course.bplans.com.

That’s where I’ve put up a full curriculum/syllabus including lesson plans, exercises and assignments, online videos, and more than a dozen PowerPoint slide presentations complete with slide-by-slide notes and distribution-friendly photos and graphics.

This is material I’ve worked on for years, originally just for my own use as I taught a course in starting a business for undergrads at the University of Oregon. I’m not going to be teaching that course this spring, after 11 years of it, because I’m more involved with angel investment via the Willamette Angel Conference. But I do want to make it available to others. Why not?

The whole curriculum is free to professors on that site. And, just so you understand the motivation, yes, the coursework requires Business Plan Pro, Guy Kawasaki’s The Art of the Start, and my books the Plan-As-You-Go Business Plan and 3 Weeks to Startup (co-authored with Sabrina Parsons). So my company, Palo Alto Software, does make money by selling those to your students. But we have academic pricing, so your students can get all three for less than the $130 average cost of an entrepreneurship textbook. I’d like to think everybody wins.

That’s at course.bplans.com. You’ll find instructions there to get your free registration as a teacher. This was done especially for SBDCs, members of the National Association for Community College Entrepreneurship, community colleges and undergrad business education classes. We’ve been a sponsor of the ASBDC network for 15 years now and of NACCE for two years; so we like to think we understand those needs.

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