Author: jeanneleez

How to Keep Your Company from Failing – Inexperienced Team

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Picking your initial startup team can be tricky. A person who has been wildly successful at IBM may not do well in a startup situation. They may have had a legion of support staff. They may have become very political in order to survive in that environment. They may have no sense of urgency. They may not be willing to wear a lot of different hats and play multiple roles within your startup, and may become frustrated with the amount of grunt work they may deem “beneath them”.

You need someone who can focus on everything devoted to technology. You need someone else who can focus on finance and government compliance. You need someone with enough experience to manage everything in operations on a shoestring. You need someone with marketing experience to get your brand designed, and start working on business development planning while software development is still under development and testing.

Some of these jobs may be able to be filled with consultants, for example, the finance and legal compliance, and since any mistakes in this area could cost you money and lawsuits, this would probably be a good investment. You may want to hire an expert events management company to launch your company and its products or services. But operations and technology are your core intellectual property and should be overseen by people you trust in-house.

So where do you find these people? Some may be friends (but that can be a minefield), but your best bet is to get out there and network. Go to tech incubator and accelerator open houses, barcamps, tech cocktails, industry conferences, co-working spaces, and meet people. Find interesting people, get their business cards and do some research on them, even if it’s just to read their LinkedIn profile. See if you have mutual connections that you can contact directly for information on them. Angelist is another great place to find people comfortable in the startup environment, so check out what you can find there, too.

You can also connect with the investors in your circle for recommendations. They may know someone perfect that just had their startup shut down and are looking for something interesting in your industry. They may already have hit some of the stumbling blocks before and can help you avoid them.

Having the wrong people one your startup team, especially friends, could lead to a disaster. Just because you trust the guy and know he can generate beautiful code with his eyes closed, doesn’t mean he’ll be able to lead a team of people once you start hiring teams to support your leaders. Investors may see that the same person has never held a job, perhaps never went to college. Besides, are you will to risk your company on a friendship? If it fails due to your friend’s inexperience, what will that do to your friendship? They can do a lot of damage while in their role even without understanding they’re doing it. You may end up not only without a company, but a friend as well.

So choose wisely. Your initial team may be just you and a software developer to get your minimally viable product online. The longer you can wait, the longer you have to do the due diligence on the people who will help you build your business. Hire the smartest people you can find and let them do their job. You’ll be happy you did.

Do you want to outsource this type of work so that you can focus on higher level activities? Subscribe today to learn more about building your business and receive a free PDF “Process Plan for Creating Your Own Innovation Program”. Feel free to email us to learn more about how we can help you grow your business.

How to Keep Your Company from Failing – Superficial Market/Customer Research

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Many startups do very little market research. It is expensive, time consuming, and may indicate major issues that would keep your startup from becoming successful. Hiring a consulting firm to execute this step may be a viable option for you. However, this may also prove disastrous. At Lycos, I was responsible for tripod.com’s traffic and promotion. My KPI was to increase the number of page views per day from 12 million to 16 million in one year. When I joined I was handed a market research report that was around 250 pages long and indicated that the majority of visitors were white low to middle class women over 40. When I reviewed the pages that were the highest trafficked pages on the site, they were devoted to Backstreet Boys, Britney Spears, Nsync, J-Pop, and K-Pop – not the subject matter that that would be attracting what the marketing firm stated were our target market. Lack of product/market fit is typically fatal.

Lack of Product/Market Fit

Very often startups develop products for themselves instead of for a large market. They keep their development too close to their chest instead of involving test customers very early on – even before they create their first prototype. The result is often too far off from what the market needs. There may be multiple targets. For example, I built an overnight sourcing platform which guaranteed customers 12 matching resumes to their job order by 9 AM the next morning. I was targeting small businesses and was surprised that the majority of our customers were staffing firms and they were giving us just their junk – for example, a groundskeeper who was also a veterinarian, or a sales person for a company that sold $50,000 plastic trees to airports and other public buildings (none of which was spelled out in the job order). We were charging $59.00 for the service and would barely break even on each order. Completing do-overs for poorly submitted job orders cost us money, and the staffing firms felt the price should be much lower – around the $29.00 range. They wanted to know if they could get a discount. We failed to attract the small business owners who also felt the price was too high, so after a year, the project was scrapped.

We didn’t show our product to existing staffing firm clients because we didn’t want to cannibalize our current business. Perhaps we could have approached past clients to help plan the prototype and get feedback on the price. Perhaps we could have approached a few small business associations across the country to see if their members would be willing to BETA test the system for free.

Finding BETA testers is the hardest part. Identifying who to approach and getting on the phone with them takes time. You only need seven testers for each target market to get 98% of your issues. The good thing is that many of these testers typically will become paying customers when you open the system to the public because they helped you build it and feel a bit of ownership in your project.

Doing market research doesn’t have to cost a lot of money, but it does take time. If you want quality and you want to keep costs down, you’ll need time. If you don’t have time, you may need to pay for volunteers to BETA test your project and they won’t necessarily come back after you stop paying them.

Ultimately, it’s up to you to ensure you have a market and a product or service that your market can afford with a margin of four times the cost to company (4 x CtC) in order for your company to grow and become a sustainable business.

Do you want to outsource this type of work so that you can focus on higher level activities? Subscribe today to learn more about building your business and receive a free PDF “Process Plan for Creating Your Own Innovation Program”. Feel free to email us to learn more about how we can help you grow your business.

How to Keep Your Company from Failing – Missing a Long Term Vision

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Startups are a risky proposition. Even if you have your dream team in place, plenty of time, and more money that you need, you can still have a spectacular failure on your hands. I have had numerous sleepless nights trying to come up with ways to make payroll for certain startups, and others where everything just seemed to fall into place seamlessly and became wildly successful. This is the first of a series of posts listing the main reasons I’ve experienced as to why startups fail and how you can address them before they cause an issue for you.

Missing a Long Term Vision or Exit Strategy

Without a vision and a plan to get there, your startup will have a lot of issues staying focused. At one point, a web consulting company I founded in Chicago, had challenges getting sales after 9/11. Previously, we’d been creating web sites for a lot of law firms. Now they were asking us if we could do eDiscovery (computer forensics). Since the sales weren’t there for designing web sites anymore, we needed to pivot in order to keep the company going. Since the initial vision was no longer the focus, I cashed out since I was not interested in working in computer forensics. The five year plan I’d created was no longer the path the company would follow.

Regardless of whether you’re a product or service company, you will need a vision that can enable you to create a road map with milestones on how to achieve that vision. At a staffing firm, the vision was to have 25,000 employees on retainer by 2025. No one had done the math on that when I joined the company, but with our existing employee base and its organization, we would have to increase employees by 40% year-on-year to achieve that number. We decided that it was unrealistic to expect those results through our traditional business model, so we started to test new business models that could get us closer. In addition, we changed the vision to be the largest recruitment outsourcing company in the world by 2025. We developed a new road map, opened new markets, added new services, created new business models and they have grown significantly since the new vision was created.

Vision can also used to inspire employees. If they believe it, feel part of it, and understand the road map to getting there, they will become more productive, innovative and stay longer with your company.

When it comes to customers, they may not need to know or understand your vision unless it can be leveraged to become more interested in your value proposition and where your startup plans to go in the next few years. For customers who require very long sales cycles, for example, regulatory or government approvals, it may be critical for them to know what your future plans are in order to seal the deal.

It’s also easier to convince investors and partners, and attract top talent if you can express where you plan to take the company. They all want to see where you see the company going, revenue generation strategy and your exit strategy in order to evaluate whether your company has a long term plan as a sustainable business.

Planning this vision can take a while. Sit with like-minded people – ideally people you may want to work with at a later date – and decide where you’re going to go and whether that vision can be the start of a roadmap your people can follow, milestones that can be achieved, and ultimately build that sustainable business.

Do you want to outsource this type of work so that you can focus on higher level activities? Subscribe today to learn more about building your business and receive a free PDF “Process Plan for Creating Your Own Innovation Program”. Feel free to email us to learn more about how we can help you grow your business.

Customer Complaints: More Valuable Than You Think

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Whenever I’ve had the opportunity to work with customer service representatives, I have a three vital questions:

  • How the team is organized?
  • How they are compensated?
  • What is their primary objective?

Team Organization

Depending upon the size of your overall company, you may only have a couple of people answering customer calls or maybe the sales team handles all incoming calls. If you’re a call center responsible for the service of customers of a large organization (or more), the answer can be very complex. Regardless of the size of the team, the most vital answer to quality customer service is employee empowerment. They need to be able to resolve solutions without going up the chain of command to get permission to resolve a customer complaint.

There may be ways to gamify the organization. It may be achieving certain milestones, but could encompass many areas of employee development. The rewards could be automatic promotions, raises, or bonuses. Figuring out how to create this gamification is complex in large teams, so you may want to create smaller teams within the team. such as by client type, product line type, etc., and create milestones that make sense to each group.

Compensation

Compensation may be just a straight salary/benefits package or a performance-based program that focuses on certain key performance indicators (KPIs). Some organizations focus on number of resolved customer interactions per day or similar factors, but the most vital focus for quality customer service is exceeding expectations and creating delight in that customer.

This is not something that is simple to do, and it requires reaching out to customers regularly, asking them how we are doing, what else could we do, and would you recommend us to a friend or colleague? Were there any specific situations that arose since the last call that went well or did not reach a satisfactory conclusion? Can you tell us more? Any negative feedback should be regularly analyzed and resolved by the management team creating new milestones to encourage employees to reach those milestones and collect their rewards.

Primary Objective

What is your customer service team’s overall mission? Everyone has sat on hold for forty minutes or more trying to get an answer about a charge on your credit card, or to understand why your telephone bill doubled this month, only to get no answer that makes sense and the person you’re talking to doesn’t have a way to resolve your issue. Their primary objective should be to use their ability to create solutions that make the client loyal, tell a friend, rate your service at five stars, ultimately converting that client into an extension of your sales team and social proof that your company is a customer-focused organization.

Whenever a customer complains, it means that more than ten have simply just stopped buying from you, disappearing into the wind. It is vital to ensure that you document the types of complaints and set up a team that meets regularly to address them head on. It may mean scrapping obsolete products or services, or you may need to develop new options.

Complaints are valuable. They can speak volumes about what you need to do to streamline processes and expand your business, while increasing top line revenue.

Do you want to outsource this type of work so that you can focus on higher level activities? Subscribe today to learn more about building your business and receive a free PDF “Process Plan for Creating Your Own Innovation Program”. Feel free to email us to learn more about how we can help you grow your business.

Why Design Matters

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If you’re a product company, it’s endemic in the product. If you’re a service company, it’s the entire customer experience. I’ve worked at several startups that didn’t have a product or service yet, ready to sell, but needed to prime the market for their (hopefully) eventual launch. Some of these companies went spectacularly down in flames, while others merged with similar companies, or were bought outright.

I have found that bad design can really hurt your ability to generate revenue, acquire funding, and hire the right people. Bad design indicates a lack of professionalism and focus on your customers.

Branding

Your logo and everything that touches a potential client or existing customer should showcase the value you provide. A poorly made logo, a web site that does not address visitors’ needs, poorly designed sales literature filled with typos and cheap paper will reflect poorly on your company. Everything that a customer or potential customers sees should be consistent in their colorways, fonts, imagery styles, and content.

Online User Experience

Whatever social media touch points and your web site are vital to attracting new customers and creating more revenue. Some companies may not want to sell online and that’s perfectly fine. What matters is how you present yourself across these online opportunities, through well written content, well designed graphics and professionally looking videos will greatly enhance the user experience with your company.

Some things to look out for is that most people don’t want to register if they are just browsing; that’s like asking someone to marry you on the first date. When they are ready for the next step, have the right interface to make this simple to complete. That may be during the check out process or when subscribing to your emails. This is a huge pet peeve for me because when I start getting multiple emails a day notifying me of sales or new products available, I simply hit the SPAM button to get rid of them. That’s why most email companies you work with like opt-in, and double opt-in since spamming prospects can get you blacklisted and blocked from continuing your email campaigns.

Online chat bots are another issue. AI isn’t ready for all client requests, so there should at least be a human back up. Also, if you decide to do this, you need human chat support 24/7. I can’t tell you how much shopping happens late at night when your office is usually closed. You will lose out on sales because of this. I know I’ve left sites with a full cart ready to checkout but I needed to ask one question, for example, maybe I needed dimensions on a piece of furniture, or I needed to know the sunlight requirements for a particular plant. Leaving people to guess means users leaving their carts and going elsewhere. Test your web site design. You can get 98% of your issues by testing seven different target people.

Social Media can be both a boon and a burden, if you don’t use it wisely and in keeping with your brand. Design user experiences that make people want to share. That could be, for example, a baker videotaping the process of making their baguettes, or a yarn company that lets followers upload their finished work to their social media sites. You might be able to offer frames to go around their work, maybe create an album or a pin board for the best work. Design is negligible in social media since there are significant restrictions on what can be uploaded based on what social media sites you are using. Find the ones where your core market hangs out and design ways to create delight with your customers and prospects. Be sure sure to stay on brand with all written content. A small startup-focused law firm in Silicon Valley focused on copyright infringement and intellectual property law would have a very different voice than a global law firm serving several different practice areas.

Off-line Design

What does your office look like? Would you embarrassed to have clients visit you? Does the space work well for your employees? Painting walls with a fresh coat of paint in your brand colours can be a start. Designing a well functioning office space that lets employees meet casually as well as formally, enabling people in cubicles to have enough space to turn around to have quick team meetings, providing adequate lighting and windows for natural light, will lift employees up and make them more productive.

Print advertising, bus stop ads, bus wraps, radio spots – everything should conform to your brand and its voice. For example, one movie theatre may be focusing all their off-line design on creating items that showcase their premium services including food and beverage service brought to your recliners. Another movie theatre may focus on lower prices to fill all their seats. Each of these companies require very different design concepts, materials, and voice to attract the right consumers. Think about what offline activities would be optimal for each of these scenarios.

If you are a product company, design is obviously part of the equation. Products need to work flawlessly and also be a comfortable asset in your line of products that make sense. If you are a baker, for example, offering fish as well would not be on brand, and is a higher risk than launching desserts and fine pastries.

If you are a service company, it can all boil down to how you connect with clients and prospects. This includes your receptionist, customer service and finance department (especially when doing collections). They all need to mimic the brand’s voice. For example a customer service representative at company that makes skateboards, skateboard clothing, and accessories for customising skateboards directly to the consumer, should speak more like their customers. Hearing “Have a totally awesome day, dude.” makes sense there, but not at your bank.

All of your back office personnel have a role to play as well in ensuring they design policies and systems that help empower employees and eliminate obstacles. Most back office employees frequently aren’t empowered to “design” these procedures and policies to stream processes. You will find that when employee engagement and morale improves, your employees will be more productive, stay with the company longer, and refer friends to join as well.

Good Design Works So You Don’t Have To

Invest in a good logo. Make sure you have branding guidelines. Ensure IT removes all fonts from the bulk of your employees, so they don’t out a flyer that doesn’t match your branding guidelines. Make sure Marketing approves everything that touches a client to ensure design stays top of mind with all.

This may not seem like a design blog, discussing colourways, fonts, and product design in detail, but designing and formalizing processes and procedures that empower employees to create delight in customers is a hard thing to do well without disrupting the status quo, but it is essential in expanding your customer base and generating more revenue in the long term.

Do you want to outsource this type of work so that you can focus on higher level activities? Subscribe today to learn more about building your business and receive a free PDF “Process Plan for Creating Your Own Innovation Program”. Feel free to email us to learn more about how we can help you grow your business.

Innovation Can Begin with Your Unsatisfied Customers

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I once worked at a company where we made closed loop motion control devices – very complex components used in machinery that controlled the motion of manufacturing equipment down to the nanometer. A typical customer would be hard drive manufacturers that need to create tracks in hard drives in order for the hard drives to store information. When I first joined, the motion control devices we made were able to create 10,000 tracks per inch. Only one of our competitors were close.

During an annual offsite, the team created a three-way product development roadmap system between Sales, Marketing, and R&D. Sales would forward to Marketing any emails citing potential customers’ reasons for not purchasing our products (needed a smaller size product, needed a linear version when we only offered a rotary version, more feedback options, price, etc.), as well as complaints from current clients on why they were dissatisfied with the existing line. They also created a spreadsheet where they added the same data from phone calls they received.

This was shared with Marketing, who gathered all the data and created monthly reports which were shared with Sales, R&D, and upper management. Each quarter, all three teams met to review the reports and the roadmap. We would re-prioritize certain requirements. We would schedule new features to the software. This enabled the Sales team to know when new features were coming out and match them up with those clients and prospects who were looking for those features early – critical when manufacturing is engineering new machinery for new products they will be producing. These meetings were critical to ensuring we were developing products clients needed in their future as well as today.

This also enabled the Sales team to act as a partner instead of as just a vendor. For example, if a printer company was planning on making a portable printer that would be used in your car, the manufacturer doesn’t recreate the wheel. They will use components from vendors to design and assemble machinery to produce these new printers. The sales lifecycle is long, and depending on the industry, may require regulatory approvals, etc. If components are already approved, it helps them move more quickly. By gathering this data, and proactively planning, we could act as enablers and make it much harder for them to convert to a competitor at a later stage.

At the time, our only major competitor was a very large hundred year-old company who had barely changed their offering since the ’60’s. We were taking market share away from them industry by industry. R&D created something entirely new based on our three-way product development roadmap system – a series of products our competition would never be able to manufacture – motion control systems that could handle 100,000 tracks per inch.

MicroE Systems Full Page Advertising Launching Motion Control Systems Handling Up to 100,000 Tracker Per Inch -Ten Times What the Competition Could Offer, Essentially Cornering the Hard Drive Manufacturing Market | ibuildcompanies.com by Jeanne Heydecker

We started with the electronics market, then cornered the medical devices market, avionics and other critical industries where exact motion was critical.

We went further, based on this prospect/customer feedback data, and challenged R&D to do something about the size of the product line. While we had created something that changed many manufacturing sectors, there was more to do.

We developed an industry leading product line that was no bigger than 1/4″ square, literally unheard of and considered impossible. This got us noticed by GSI Group, who purchased the company for USD $54MM. They then merged with Celera Motion to become part of a much larger organization.

Innovation can come from anywhere and expensive focus groups and independent marketing consulting firms may not be necessary if you leverage what you probably already have: prospects that never became customers and customers who are not happy with your existing offering. See it as a challenge. It wasn’t hard to set up. It didn’t cost a fortune. It simply required documentation, communication, and empowerment of teams to work together to build innovation into their daily work.

Do you want to outsource this type of work so that you can focus on higher level activities? Subscribe today to learn more about building your business and receive a free PDF “Process Plan for Creating Your Own Innovation Program”. Feel free to email us to learn more about how we can help you grow your business.

ibuildcompanies Launches Online Business Courses

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SINGAPORE – March 31, 2020: ibuildcompanies.com is proud to announce BETA versions of five new online business courses focusing on starting up a business and leadership development to improving management communication skills to help be better leaders.

“I wanted to share the information that made me the type of leader I am today. Having worked in startups at different levels of scale all my life, I have experienced both success and failure. Even failure teaches you something, and I want to provide a sense of best practices for each participant. By allowing access to participants to ask me direct questions, their unique experience may also stretch my skill set and I can also learn,” Jeanne said. She went on to add, “I recently met a young man that worked for me nearly 14 years ago, and he thanked me for his career (now a high level employee at IBM). I told him that I saw potential in him then and that it was worth my time to teach him how businesses work. He did the work, put in the hours, and he is where he is on his own. I have created these courses to give other people with potential the opportunity to live their best lives as managers, leaders and mentors.”

The courses start at $19.99 and run up to $299.00 and each participant has exclusive access to our Founder and CEO, Jeanne Heydecker, during their progress through the courses. To learn more, click here.

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Adding Client Lifetime Value (LTV) to Your Bottom Line

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As a New Year’s resolution, my partner and I decided to eat healthy and started the Ketogenics Diet. We did some research and since both of us are too busy to cook, we planned on either find a food delivery service or hiring a chef to provide meals, at least for the first 90 days. Luckily I came across a blog post that discussed the seven food delivery services that provide keto meals in our city.

Now, all businesses are in business to make money. Something like a food-related service is risky since consumers are fickle, want the latest trends, and there is definitely a lot of operational issues like food spoilage, lost delivery personnel not getting food to clients on time, running out of popular dishes and so much more. Margins have to be pretty high to make it in this business. So I greatly respect anyone crazy enough to start a food delivery service in the first place.

Our experience with our first delivery service was not primarily a keto service but a rice bowl service catering to all sorts of dietary needs from halal, vegetarian, vegan and keto. There was exactly one item on their standard menu that was keto, but they has a “build your own” bowl which allow a user the choice to select all the ingredients to add to the bowl. However, no nutritional information was available and there was no way of knowing the amounts of each item until it arrived so you could individually weigh and calculate the carbs in your bowl. We tried using their service for a week and found that their food, especially the keto-specific items, never seemed fresh so we assumed that the company wasn’t prioritizing on keto and decided to try a different service. For that company, their mistake was that they tried to accommodate the specialized dietary needs of too many niche customers and their food ended up being mediocre.

Restaurants rely heavily on repeat business. Loyal customers that come back every week or months, recommend their establishment to others, bring friends with them on special occasions, hopefully adding new loyal customers as they go.

This is the definition of Client Lifetime Value. It’s not the single meal in the restaurant – it’s the amount of money one customer spends in your restaurant (or any other business) during the life of your business.

The experience during that first meal has to be pleasurable enough to keep them coming back. When dealing with a web-site based food delivery service, it all starts with the web site’s interface. How does the person order their food? What are the options for customizing each item they choose (for example, no tomatoes in their salad). How much description is there about the meal? Is there dietary information? How do they pay for the meals? How easy is it to schedule their orders?

Since our first foray into keto food delivery was mediocre, we decided to try another one. The menu was inviting and they had a variety of menu items listed. It was still limited. There was one photo for each item, and the only way you could learn the list of “featured” ingredients was through clicking the “add to cart” button (not intuitive). They were specifically missing some ingredients such as the oils the items were cooked in. Some menu items had calories/fiber/carbohydrates; others had no information at all.

One of the other issues was that the site required you to purchase “credits” which never evened out to a complete set of meals. There was always some money, but not enough, at the end of the set of credits that was free money to the business, but left a sour taste in the user’s mouth. We decided to try their large package for nine days of dinners and a couple of lunches. On the web site, they said they normally deliver lunch between 11:00 AM and 1:00 PM and dinner between 4:30 and 7:30 PM.

Here again, is where customer lifetime value comes in. You need, as a business, to create a sense of delight in your customer experience. For the first few days, it was okay – a lot of salads with cooked, but cold proteins on top. Again, we looked again at the items and weighed and counted fats and carbs and some of the items were way off the charts to be keto-friendly. Along with the monotony of the menu items, there was distinct inconsistencies in the cooking, and delivery times could be way off. On one weekend, we had our lunch delivered at 2:00 PM and our dinner at 4:00 PM. Another day, our dinner didn’t show up until 8:45 PM. We’re on the final couple of days now. When we called to complain, all we got was an excuse that there were so many orders that day that deliveries were running late. The next day, the final day, they sent an email saying they had run out of a main protein and asked us what we’d like to substitute it with. At this point, we had ordered our menu items over a week ago, so someone didn’t plan ahead. What if I hadn’t been watching my emails? Would they have called or simply substituted something else? We’ll never know.

We just completed an order through another service who’s web site was really beautiful. There were lovely photos of the food, and nutritional information on each item. The proteins were upscale and the menu itself came from a number of different cuisines. This service also sends everything frozen for you to heat up after defrosting, to cook in your oven, steamer or microwave. They even gave us a 5% off voucher for our first order. They only deliver three days a week, but since it’s frozen, that wasn’t an issue.

We plan to make this diet a long term way of eating, so finding a good service was pretty important for us keeping to the plan. Since this is long term for us, this delivery service could get orders from us for the entire year. Our Client lifetime value (LTV) would be extremely high compared to someone who only ordered once or twice.

Customer lifetime value was something I also learned a long time ago, before google existed and Lycos was the #2 search site after Yahoo!. I worked for tripod.com, where people could build their own web sites. I was responsible for building traffic and cross promotion within the network of Lycos sites. I had to import logs into MS-Excel and sort data on the number of visits and page views each of our sites got and realized that just under 90% of our traffic came from just under 5% of users. Their lifetime value was extremely important to the success of the company. If even one of them grew tired of our services and moved their content to geocities or another web hosting company, we’d lose a lot of traffic. This meant coming up with loyalty programs and special services for those in the “webgods” circle including flying them out to visit our offices, custom badges, highlighted at the top of directory pages, special highlights in our weekly emails, and other promotions. It helped us go from 12 million page views a day to 16 million page views a day in nine months.

Customer lifetime value is all about taking the long view on your business. How is your business operating today to increase customer value and ensuring they continue to stay a customer? Do you have systems in place to identify when a client has stopped ordering from you? Do you have loyalty programs to keep them coming back? Do you have emails going out to high volume buyers with special promotions or advance purchasing opportunities before items for sale go public? Consumers like to feel special, important, and valued. You can easily make that happen and when you do it right, your business will grow quickly.

So You Have a Great Business Idea but No Money. Now What?

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Picture this: you and your buddies are out having drinks in the evening, complaining about working for the man, and discussing if you ran the business, how that business would be different. As you talk, you share business ideas you want to try. Suddenly, everyone gets excited about your idea and you start writing down your business idea on a cocktail napkin. My business started with my best friend, a large jug of cheap white wine and a yellow legal pad. We wanted to start an events business. As we started working through the details, we realized that it was actually a very simple piece of software that consisted of three pages – a category page, a list page, and a details page. We then discovered that this architecture could work for just about anything – memberships, job listings, events, company team pages, etc. We eagerly found ourselves bootstrapping our company to one of Crain’s top 50 web design firms in Chicago in 2001. We never went for funding for this firm, but having done so prior to that and for years after, listening to pitches, here is my advice on how to start once you find that big idea and have figured out what you want to do once you have funding.

1. Validation

Have you validated your business idea with potential customers? Do you know who your target audience is and do you have access to a select number of them in order to ask them what they think about your idea? Does it solve a problem they have? How valuable would it be to have that product or service for them? How much would they be willing to pay for it? How many of their friends/colleagues would also need your product/service?

If all signs point to yes, it may be time to build out a minimally viable prototype (MVP). For software and SaaS, these can be simple sites with the bare minimum of features that work to produce the end result. You may want to look at crowdsourcing or showing up at a local Startup Weekend, BarCamp or Tech Cocktail to find people willing to provide the assistance you need. If your idea is a product, seek out a CAD designer who can assist you in developing your prototype and find a 3D printer near you to create a few different versions to show to your target audience. Ask the the same questions again and add a few more, such as, “What other features/components/colors/options would you like added to convince you to recommend this to others?”, “What differentiates this product/service from others you’ve seen in the market?”, “Who else has a product similar to this and what do you like about it/them?” Hopefully these answers will help you with the rest of this process. You’ll need at least seven people. This will give you approximately 98% of the issues/opinions you would see as trends in a larger sample.

2. Positioning

Are you able to articulate the precise positioning of your solution? Now it is time to really double down on your competitor research. You want to know exactly who’s out there, what they offer, what they charge, how they’re paid, how they distribute (if applicable), how they market their product/service, and to whom. Look also at peripheral companies as well.

You need to do a lot of research on your competition. No investor wants to hear, “there’s no one in our space,” because it’s absolutely untrue. You just haven’t found them yet. Maybe they aren’t on line. Maybe they’re regional. Maybe they are in academia or the R&D department of a multinational with deep pockets. But, they may also be looking to expand/commercialize, and are seeking funding to take their financially solid, mature and proven product/service to a larger market. If the investor can name even one company in your space, you haven’t listed, you could easily blow the pitch up right there.

For example, maybe you have a cool new shoelace idea. Don’t look at just shoelace manufacturers, but sneakers and other shoe manufacturers. Another example was when I was advising a client making high end computer-aided design software and hardware for the textile industry, and the price point was way too high for most people making printed fabrics, but I suggested looking at other manufacturers such as vinyl flooring, wallpapers, carpeting and other manufacturers of products that require large repeatable designs. This greatly expanded their market opportunity with large commercial manufacturers with big volumes that were in dire need of more modern design processes.

3. Monetization

How do you generate revenue? For all ideas, understanding what the market will bear is the first step in designing a diversified business model. “Diversified” and “recurring” are very attractive words to investors. Investigate all the ways you can monetize your product/service. Perhaps you have a web site where you can build in banner advertising. If you use Facebook, consider using instant articles and get an additional bit of income. Are you looking at all possible target audiences for your product/service? Have you explored different ways your product/service can be used? Are there add-ons you can create for those who love your basic product to customize or add features? Can you sell through associations or groups to their members with bulk discount rates? Are there companies that could sell your product/service as part of a suite of products they’re already selling? For example, some of the shoe manufacturers might be very interested in your innovative shoelaces to sell as impulse buys on high margins at their store cash registers.

4. Size of Market Opportunity

This determines your financing and go-to-market (GTM) strategy in a significant way. Investors want a big piece of the pie. If your market is defined as the entire US consumer market, that’s a big market. If you state you are confident you can achieve 5% market share within two years, that’s not thinking nearly big enough for most investors. They want to see 55% and your GTM strategy should illustrate that.

Business-to-Consumer (B2C) marketing is much more expensive than Business-to-Business (B2B) due to the heavy use of traditional print advertising and television commercials and infomercials. Reach out to a marketing expert who has experience in launching companies in your industry. They’ll know what it will cost to get you there and understand the pitfalls, the suppliers, the players, and future trends that may threaten your business, as well as consumer habits, pain points, price thresholds and more. That in-depth experience will more than pay for itself. Let’s say you can’t find someone with industry expertise. Find someone who at least has experience launching and growing small startups. Ensure they know how to get the research done internally.

5. Bootstrapping

Have you done enough bootstrapping before approaching investors? I fully and completely recommending bootstrapping for as long as you possibly can. Bootstrapping enables you to keep full control over where your company is going. Investors can pressure you into other options, such as ramping up quickly when the sales aren’t there to support it, significantly increasing your burn rate (amount of money you spend each month). This can lead to start pitching for additional funding and diluting your shares even more. The investors may want you to pivot or agree to be acquired, when you’re not ready or don’t want to. Only go to investors when you have the track record and have a significant need for funding to grow to the next level (it is never a good idea to seek funding when your company is about to close and you’re desperate to keep the doors open). Is your company fundable, or is it one that needs to be funded all the way to solvency? Making the decision to seek funding should not be taken lightly, and only when you see no other alternatives.

The caveat to this is “time”. If you need to ramp up quickly to get ahead of competition with a similar product/service, you’ll need a lot of money and as fast as possible. This is especially true of certain business models, such as jobs, travel, auctions, real estate, and other industries that require marketing for both buyers and sellers in a crowded market with established competition with deep pockets. Carefully consider whether your solution is radically different enough to engage industry media and disrupt the status quo. Your pitch to investors needs to demonstrate this very effectively or investors will pass.

6. Financing

Over 99% of the entrepreneurs who go out to raise money get rejected. So you have decided you really do need to raise money. Do you understand what it takes to raise money and what investors are looking for? Do you know how to assess what is fundable and what is not? Are you getting rejected by investors? Do you need to move to where the money is? Do you know what is the current valuation range for your company? Can you enhance the valuation? What are the levers? What are your different types of financing options and what are the mechanics of those? Before actually pitching investors, you might want to connect with a few through LinkedIn or Angelist that fund companies in your industry and ask for informational interviews to seek advice on how best to pitch investors (keep it generic). Connect with other entrepreneurs for the same advice. Network with entrepreneurs at local business networking events. They may be able to introduce you to investors they’ve pitched and give you advice on how to successfully pitch with them.

Investors are going to want to know why you need the money. It shouldn’t be to pay current outstanding bills but to take your company to the next level. Try to have a minimally viable product or service already launched and a few paying customers. You don’t have to be making a profit, but it helps. What you plan to do with the money is vital since VC’s are responsible for spending other people’s money and need to account for it. Have a clear plan on how the money will be spent and share the vision for what the company will look like once you’ve executed on your plan. Investors are incentivized by the number of positive exits they make, and the higher your pitch’s potential, the higher the likelihood they’ll fund you.

7. Customer Acquisition

What is your customer acquisition strategy, cost, conversion rate, channels, and costs per channel? Your customer acquisition cost can vary widely depending on your business model. You may have a variety of business models in place to diversify your revenue generation (a wise decision). Your go-to-market plan should clearly show your initial costs, but also consider the lifetime value of a client. Do you have mechanisms in place to extend the lifespan of a client beyond their initial purchase?

For example, that would be extremely hard if you were selling residential heating systems which are typically replaced once every 20 years. But you could sell annual preventive maintenance contracts and pre-sale equipment certifications before selling a home. Let’s say you sell HR software. Instead of one standalone software that does everything, porting it to a website as a SaaS software bundle of individual components enables you to sell individual components at lower price points and enables customers to add components as they grow or need additional services. Instead of selling the components once, enable then to rent the software for a small monthly fee based on a fixed set of features (basic, extended and premium) or number of users. This facilitates two things – recurring revenue with customers extending their lifetime value, and increased difficulty and cost to convert to a competitor. Once a customer invests their own time uploading all the information about their company and personnel, the likelihood of them moving elsewhere is significantly diminished. The only reasons they would move would be a significant increase in their costs using your software, poor quality software, or if they feel your customer service experience is poor.

8. Hacking Team Growth

How do you balance between your need to keep costs down and getting things done, as well as presenting a reasonably complete team to potential investors, in case you are soliciting financing? I once worked as a team of two, and to keep costs down, we split the company down the middle. I focused on customer engagement, product development, and marketing. My partner handled sales, HR, and finances. We took turns taking out the trash and vacuuming the carpets. As we grew, we took the least likable parts of our jobs and wrote process documents and job descriptions, then hired for those positions. As we kept expanding, transferring more and more of the operational aspects of the company to other staff, we were able to stop working IN the business, to working ON the business. What were we leaving on the table when pitching clients? Where should we expand? Locations? Services? What could we leverage today to build more tomorrow? Before we started hiring full-time employees, we hired unpaid interns of very high caliber from very good graduate schools that were instrumental in building the business. They were heavily involved in the marketing and product development parts of the business and gained real-world experience launching real products for real customers. It also enabled us to try out potential hires before we brought them on board full time. Investors want to see a team that has the education and experience to make your business achieve its goals, for you and the investor.

9. Practice, Anticipate, and Practice Some More

Developing a pitch deck should be simple. Bear in mind though, that if you have ten slides and you are asking for 10 million dollars, each one is worth one million so chose your content carefully.

You need to answer a few basic questions:

  1. Title: Company name, descriptive tag line and perhaps imagery that encapsulates or represents what you do. This slide sets the tone for the entire pitch.
  2. Problem/Opportunity: What problems does your company solve? Who and what size is the market?
  3. Value Proposition: What is your solution?
  4. Technology: One or two images are better than a lot of text.
  5. Business Model(s): What is/are your business model(s)? How are you diversifying your revenue?
  6. Go-to-Market Plan: Explain how you will reach customers and how much it will cost.
  7. Competition: Complete view of the landscape with a lot of detail. What makes your product/service better than your competition? Have their logos come up on the slide and keep a cheat sheet on each one for reference. You should ALWAYS know what they’re up to.
  8. Management Team: What does your team look like and what are their qualifications? Limit this to critical team members and their accomplishments. If your team is weak, try to build a robust board of advisors.
  9. Financial Projections: How much revenue are you generating along with last year’s major clients; include this year’s revenue YTD, current major clients, and those in the pipeline. Try to state your financial outlook for three years and have a way to defend the upcoming years plan. Key metrics should also be included such as number and size of customers, and conversion rates as well. This is the most important slide in your deck.
  10. Summation: Finally, what is your current status, accomplishments, timeline and how you plan to use the investment.

There is always more information that can be added to a slide, but condense it down and leep your pitch to around twenty minutes or less. I know. This is hard. Questions may come up that you don’t have in your deck. Anticipate them. Other sides to have available will come up in practice runs with your team, mentors, advisors, friends, etc. If they’re asking questions that aren’t on your ten slides, either find a way to answer them without cluttering the pitch deck, or keep them separate if you require more detail. For example, financial data may require additional slides, especially if this isn’t your first round. You may need to disclose who owns how many shares and how many are still available. Your team, if not as strong as you like, may need a slide indicating coaches, consultants or advisors you regularly meet with to help grow your business. You may need a slide for partnerships who may be assisting in the sales cycle. Your Go-to-Market plan may require a schedule/calender of events or milestones. Keep these more detailed slides available for if and when the investors ask. No need to waste their time on that level of detail if they’re not interested in it at this point.

10. Finding Your Potential Investors

Once you’ve practiced your deck and feel confident presenting your idea, the hard part is getting in front of the VCs to pitch at all. Start with tech incubators and other pitch days and weekends local to you to get feedback on what’s working and what isn’t. You may end up with an angel investor or two in the audience who may be interested in investing or may be able to introduce you to the right people. Also, don’t look down at LinkedIn and Angelist and other investment portals to start conversations. Make those introductions personal, even if it’s just “I noticed that you’ve been investing in [your industry] and would love some advice on how to get a meeting with investors in my industry. ” After he/she accepts, you can then start asking about what to do, what not to do, etc. when asking for meetings, which people do they think would be interested, would they be interested is seeing your deck to give feedback, etc. After that, it’s really up you! Good luck.

Types of Strategic Alliances to Build Your Business

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Strategic alliances are great way to rapidly expand your business and generally require less commitment than mergers and acquisitions where changes in ownership are required. The key motivation for alliances is to reduce the risk to both companies through the sharing of resources, access to prospective clients, knowledge sharing, and creating gains in scale and/or productivity.

There are four types of alliances: scale, access, complementary, and collusive.

Scale alliances require partners to work together to achieve advantages they could not easily achieve on their own. It may be better bargaining opportunities to reduce the cost of raw materials, or it could mean using one organization to “white-label” the manufacture of the original company’s products for resale in order to achieve more throughput.

Access alliances typically require one organization that needs the capabilities of the other organization in order to expand their market. For example in many countries, market entry can only be done through a local firm. This local company is exclusively allowed to sell your company’s products and services or you may have a number of companies within the country reselling your products. Local companies in other countries or regions may also want to license your patents, branding, or other intellectual property, expanding your market. Other ways access alliances work are through the ability to share client lists and sell complementary products or services to each other’s client lists.

Complementary alliances are used when one organizations identifies a gap or weakness within their structure or product offering that requires aligning with an organization that has those capabilities and has other weaknesses where the original company is strong. One example of this would be financial services, where one organization is registered for brokerage but not investment banking. A growing investment banking firm would be ideal to partner with in order to better serve each other’s clients with additional services.

Collusive alliances involve any number of companies to combine into cartels, reducing competition in the marketplace, increasing bargaining power with suppliers and price fixing. These types of alliances are more negatively-perceived, especially by regulators. DeBeers Diamonds and OPEC are typical examples of these types of alliances.

There are many potential advantages:

  • Faster speed of access to new product launches or market areas
  • Instant increased market share / increased market power
  • Economies of scale (perhaps by combining production capacity)
  • Securing new or better sales or distribution channels
  • Increased control of supply chain and vendor price negotiations
  • Decreased competition (by taking them over or partnering with them)
  • Acquire intangible assets (brands, patents, trademarks)
  • Overcome barriers to entry to target new markets
  • To take advantage of deregulation in an industry / market

…but they don’t come without risk. Alliances can turn out to be one-sided. Market changes may make alliances less desirable or make your alliance irrelevant. Your partner may go bankrupt, launch competing products, or become a pariah due to scandal or bad press. Growing a company can be done in many different ways. The most used ways are through internal growth or external growth through acquisitions and alliances. But starting out with a Product/Market Expansion Grid is always a great way to begin planning how you will take your company to the next level.