How To Kill A Startup

How To Kill A Startup

Memo: To All BizTrekers
From: Gil Gerretsen, President

New businesses are started every day. Within a year or two, most hit a deadly growth ceiling (plateau) they cannot get past. Following are "seven deadly sins" that cause this almost universal experience. If you see your business in even ONE of these, take action quickly to avoid your demise!

1) Self-Centered: A large number of new businesses launch as a one-person enterprise. Most have not thought through how they will grow their business beyond themselves. They have no clear vision or path to scalability. As a result, these entrepreneurs have sentenced themselves to a life of unending hard labor with restricted freedom and wealth potential. To solve being self-centered, build enough margins into your pricing so you can hire help or outsource tasks that you don't need to be doing.

2) Product Worship: Many budding entrepreneurs launch their business focused on the product or service they have created. Being product-focused is the fastlane to failure. Many businesses have introduced products and services that nobody wanted. To solve product worship, become customer-focused. Know what potential customers want or need and what it takes to solve their problem.

3) Thinking Small: Many new ventures focus on a marketplace that is ultimately too small. It may become hard to reach enough potential customers. Competitors may have already dominated the market. As a result, growth quickly grinds to a snail's pace and the business cannot expand. Often they subsequently discover that there is nowhere else to go. To solve thinking small, you should look before you leap or quickly move to a different pond. Some people are happy being the big fish in a very small puddle, but it's wiser to think that through before you jump in and muddy the water.

4) Equal Partners: This is one of the biggest business killers I have ever seen. If you have business partners or investors, it is tempting (and often seems fair) to make each partner an equal owner with equal voting rights. Sometimes minor investors wield far too much influence. Eventually, this mindset almost always blows up into a disaster. It is unlikely that all partners will always agree on all aspects of the business or perform proportional shares of the work. To solve future partnership disagreements, decide early on who will have the final authority on tough matters. Ideally, give them the legal position to do so. Further, that partner will need to have sufficient engagement (golden handcuffs) to stay motivated.

5) Lack Of Faith: Many wannabe entrepreneurs never even get their business off the ground because they seek instant success. For true entrepreneurs who are properly prepared, the leap of faith is the launch pad. People who constantly wait for the right time never seem to find it. This also applies to people stuck on a growth ceiling. This is really just a marketplace indicator that some changes are needed before advancing. Anyone who gets complacent will generally fall from the cliff. To solve lack of faith, set a new target, do you homework (get wise counsel from a skilled outsider if necessary) and take action. Remember this. "When you get to the end of all the light you know and it's time to step into the darkness of then unknown, faith is knowing that one of two things will happen. Either you will be given something solid to stand on, or you will be taught how to fly."

6) Expensive Acquisition: Too many startups do not tie project performance to spending. They do not monitor, or even require, proper returns on investment (ROI). This is most common in the customer acquisition arena. Habitually spending too much on unfocused customer acquisition projects becomes a bottomless pit. Piñata Marketing is a term I coined many years ago to describe the approach used by disoriented entrepreneurs (and/or their sales managers) who blindly swat their marketing stick at a piñata bag of random tricks and tactics which they hope will spill abundant riches with just the right stroke. Sadly, they often completely miss the mark as they flail about. That wild and unfocused tendency means they often miss key opportunities and fall short of true potential, resulting in significant loss of wealth (and even failure). To solve poor amplification, make sure you don't spend more money acquiring customers than you earn from them. Require a profit on your efforts or don't do them. Make sure that anyone who spends money on customer acquisition knows how to measure the returns against the cost.

7) Pinching Pennies: This may sound like the opposite of #6, but too many startups do not do proper homework in advance. You must legally protect your patent and brand before you go too far and suddenly find out that you have to redo everything or cease operations. This extends into basic business planning as well. Most entrepreneurs do not write business plans (I'm okay with that) but every business should have a Strategic and Tactical Blueprint to ensure that everyone is focused on the right things. If your panning processes don't light the way for the next 30-days, then the risk is high that major matters will be overlooked. To solve pinching pennies, make sure you check with skilled legal, financial, and marketing counsel before you go too far. [Click here to know more about Strategic and Business Blueprints].

Never Write A Business Plan Again!

Never Write A Business Plan Again!

Memo: To All BizTrekers
From: Gil Gerretsen, President

This is the time of year when many of us are looking at the year ahead and revisiting our business plan. I suggest you don't bother! Here's why ... and what you should do instead.

I’ve learned that most entrepreneurs are optimists by nature. If we weren’t, then we'd never take the risks that go with starting a business. Whatever business concept we have, we are certain that it is quickly going to become a roaring success. Sure, we know that we’ll have to work hard for a while and iron out a few details, but we also believe with every fiber of our being that our dream will soon be realized.

However, for most startups, success seldom comes as quickly as expected, if it comes at all. In almost every case, entrepreneurs must go through a long and often painful process of testing and tweaking their business. They generally find that the concept they finally settle on often bears little resemblance to what they had in mind when they first opened their doors. They discovered that it took a lot of experimentation and real-time adjustment to develop an approach around which they could build a successful business.

In my career as a marketing consultant and mentor to many startup founders, I have seen a lot of good business ideas come and go. I've noted many lengthy business plans that seemed to have little or no correlation with ultimate success or failure. I have seen business owners invest hundreds of hours in developing intricate and thorough business plans, only to discover that reality is quickly pushing (or dragging) them in another direction. 

Once written, the carefully crafted plan almost universally gets put on a dusty shelf and is eventually discarded while the business founder reacts to the reality of changing market forces. I have found that most entrepreneurs seldom refer back to their business plan because the world changes so quickly around them. New realities leave the business plan far behind within just a month or two. Most entrepreneurs discover that it takes entirely too much work to keep the plan up to date and relevant. So why bother?

So, if no one benefits from a business plan, why do we continue to do it?

The stark answer is that most entrepreneurs DON'T bother unless they need financial help. Only then will they work through the tedious process. The business plan document is more for the pleasure and security of investors or bankers than it is for the owner. I have seen many eloquent business plans that were designed only for the purpose of securing financial support. The plan was designed more to sell the possibility for a safe and promising return on investment. It was never perceived as a working document. 

The business plan was created because the banker said that they wanted to see one. Why? I have met few bankers or investors that have based their loan agreement or denial on not much more than the executive summary and the financial projections. Most admit they never read the full document. They cannot justify the time required to read and critique an in-depth business plan just to make the size of loan needed by the typical small or medium-sized business. The truth of the matter appears to be that if you have a long and carefully crafted business plan, then the banker makes the emotional decision that you have done your homework and are a better candidate for a loan. They feel safe as long as your pro-forma numbers look good.

The banker or investor often does not know enough about a particular industry or opportunity to accurately understand whether the assumptions made are valid or realistic. In far too many cases, the projections I have seen were closer to pipe dreams than they were to the reality that subsequently unfolded. This happens even when entrepreneurs create three sets of forecasts: worst-case, probable, and stretch. What really happens is still far from the image printed in the business plan.

So, is there a better way? The answer is short and sweet. Yes! 

To succeed in business, you must first get the concept down and then you can begin building up your business over time. You need to follow the same process with every business, unless you get lucky, in which case you will probably draw the wrong conclusions and make some colossal errors later.

In developing your start-up or expansion growth plan, there are three stages you must pass through. Each has a very special way of doing it. It is a process that I call “blueprinting.”

STRATEGIC BLUEPRINT

Every homebuilder begins with a set of blueprints. It is a simple and easy to read outline of key design elements and where they are located in the big picture. Every business should also have a guiding blueprint. Your strategic blueprint should contain the following elements and be no more than one page in length.

  1. Your Mission – Create a single sentence that reminds you why you started your business and what difference you will make in the world around you. It serves as your emotional authority to continue your existence.
  2. Your Vision – Briefly articulate your basic method or approach for achieving your mission.
  3. Your Community – Focus on building a customer base that will make the business viable (able to operate from generated cash flow). State clearly who your target customer is and where/how you can connect with them. All people "hang out" within existing social or physical networks and you must be able to connect with them on their turf (never expect to create your own community). Clarify why you selected them instead of another potential audience. Thereafter, concentrate on building your customer base and deepening those relationships.
  4. Your Promise – Explain why your target customers would choose to do business with you over your competitors. In effect, what is your advantage?
  5. Your Philosophy – Create a short guiding statement about the kind of company you will run. What are your core values and culture? What things are not open to compromise?
  6. Your Metrics – Write down the key measurable objectives that will evaluate your business success. Focus on the 3-4 elements that you expect to achieve in the coming 12 months and then 1-3 elements that might take longer (i.e. 3-5 years). 

TACTICAL BLUEPRINT

After the Strategic Blueprint page, you should create a Tactical Blueprint and Calendar. The Tactical Blueprint summarizes in point form how you will go about acquiring new customers and keeping the ones you have. It will also clarify where you will spend money and why. Every business begins as a puzzle. Unless the pieces just happen to fall into place (a rare experience), you need to spend an extended period of time identifying the pieces and putting them together in a way that creates a meaningful image. The only way to do that is through experimentation and letting the market give you the answer. You must find a business formula that you can use to build a solid base of repeat customers. Once you have outlined the key tactical elements, put them on a sliding month-by-month calendar (1-2 pages) for easy review and adjustment.

CASHFLOW BLUEPRINT

Every new and expanding business has a limited amount of money to work with. The key is to make it last long enough for you to get through the “proving process.” Too many entrepreneurs start out with big plans and develop emotional comfort with the expenses they see as necessary to achieve their dream. Too many new businesses fail because their expenses are not in line with the “proving process.” It is always wiser to spend behind the growth curve than ahead of it. History has proven that it is always better to be catching up with sales than paring back resources in crisis mode. To manage the cash, create a rolling 12-month cash flow plan (one page) showing anticipated revenues and expenses and how you will manage the expenses in relation to the revenues that actually develop.

STICK WITH WHAT WORKS

There is a risk to the tinkering process. If you keep changing too many things, then your marketplace gets confused. The key to your success is building a loyal customer base. Any changes you make should be focused on that objective. Too many entrepreneurs become bored with repetition and often begin to make changes just to push away their boredom. That's a sure way to stop your forward progress. Although you may be bored with certain elements, it is that reliability and consistency that keeps your customers coming back. You need to stay with your ship and see how far it goes.

Why does business blueprinting work better than business plans? It's because, by their very nature, that most entrepreneurs have trouble maintaining focus. They see opportunity everywhere and tend to forget that there are two limited resources … time and money. You cannot afford to waste either one at any time. When growth opportunities present themselves, both resources are often stretched to the limit. By creating a living business blueprint instead of a stuffy business plan, you will find it easier to keep your focus and adjust to inevitable market shifts without losing your way.

Stupid store owner!

Stupid store owner!

Memo: To All BizTrekers
From: Gil Gerretsen

Last weekend, my wife and I were visiting the quaint mountain town of Saluda, NC. This town has one main drag that is the place for tourists to go. There's certainly some great Christmas shopping opportunities. While making our rounds, my wife noticed this store down one of the side streets. It elicited quite a conversation. She walked over to it, but ultimately decided not to enter. She was in a buying mood yet decided this store did not appeal to her. It did not draw her in.

Do you see the problem? First, it is next to impossible to figure out what kind of store it is. When I finally got REAL close to the sign I discovered it was a cafe. It sure didn't look like it from the outside. The sign should have SCREAMED COFFEE! Rather, it looked like a knick-knack store ... and not a very appealing one at that. Lesson to learn? Make sure it's real easy for people to understand what you do ... in a glance. Don't make them work too hard to figure it out. They won't bother.

Store Trouble.jpg

Why Entrepreneurs Can't Ignore Blockchain

Why Entrepreneurs Can't Ignore Blockchain

Memo To All BizTrekers:

Bitcoin has been all over the news lately and there are many lively debates about its future value. Will it go up in value? Will it go down in value? Will it crash?

What people are NOT talking about is what it means for the future of business. There is a seismic shift coming and it is similar in magnitude to when the internet emerged and completely changed the landscape of how business was done. Many of those who didn't understand or ignored the internet were generally left behind. Their businesses suffered greatly or even ceased to exist.

Blockchain may well be the new technology that flips the business world on its head. It will likely rock the world of those who are unprepared, and unfortunately, most entrepreneurs currently know next to nothing about it. They might mumble something about Bitcoin or cryptocurrency, but they would struggle to go much further than that.

Here's why blockchain needs to be on your radar screen. In a study by Juniper Research, they found that over half (57%) of large corporations are actively moving towards the implementation of blockchain technology and over 2/3 expect full integration next year. Yes … in 2018! If the big guys are actively engaged, it will certainly impact the rest of the business world too.

It is outside the scope of this PepTalk to go into detail about what blockchain is, but there are many good primers available on the internet. Here's a YouTube link to one of them.

Blockchain will not change the fundamental principles of marketing, but it will change how transactions with customers happen. Blockchain technology allows anyone to transfer assets from one person to another without a third-party trust broker (i.e. bank). The data and information is protected by its' decentralization and peer overwatch. Right now, a hacker can rob a single data center, but hacking a blockchain would be like trying to rob 10,000 secure data centers at exactly the same moment. 

“What’s your blockchain strategy?” will soon become a common question among cutting-edge entrepreneurs and marketers. Your answer should at least be, "To know what it is and how it might impact what we do." You need to recognize that blockchain technology will soon begin to reset the control of data, relationships and value creation.

Although the technology is still being shaped, and too expensive for smaller businesses, you need to be informed about it. Your first step should be to start studying and watching folks who are beginning to dabble with the technology. It will seem complex and boring at first, but keep your entrepreneurial eyes open and you will protect yourself from a sudden market shift.

As you watch and wait, pay attention to how changes in blockchain technology will affect key areas of marketing, such as identity verification, information management, and consumer trust.

Certainly, the days where some marketers fabricated and spun their tales are coming to an end. Bullshitting and "fake it until you make it" will no longer be a viable business tactic. "Fake news" will quickly go the way of the dinosaur. Everything can, and will be, validated in an instant.

The genie is out of the bottle. You can decide what to do with the information but you'll never be able to say you didn’t know it was coming. 
 

Why content is NOT king!

Why content is NOT king!

Memo To All BizTrekers:

They say "Content Is King" right now. We think that's a bunch of malarkey!

Everywhere we turn, we see lots of people and companies generating masses of content that nobody looks at or cares about. It reminds us of the same people who think that huge numbers of social media fans somehow equates to more revenue (it seldom does).

We live in a world where more and more people are looking for ways to REDUCE the clutter. They are overloaded and bombarded with stuff from well-meaning people who truly provide no value. Those "content providers" never see the light of day or are banished to the trash bucket with a second or two!

So ... if content is NOT king, then what is? Memorize this next phrase and embed it into your company culture. RELEVANCE IS KING! It does not matter how much content you pump out. Some people who pump out far less are likely outperforming you because they are finding ways to be relevant. So, with that in mind, here are 7 ways you can be relevant:

1) Be a source for new ideas: The world moves fast, so we all need a way to keep up with fresh ideas to feed our brain.
2) Show the way to a better future: Everyone has aspirations to make their life better and we need folks who help us get there.
3) Be a micro-specialist: There are a lot of social communities (hobbies, sports, careers, skills) that interest a deeply embedded network of loyal fans.
4) Provide wise counsel: We like to know what smart people think and why they believe it.
5) Help people feel good: The world around us can feel heavy at times, so we enjoy people who lighten the burden.
6) Be a center of debate: Sometimes spirited dialog with others helps us make sense of things and work through or modify our own opinions (yes, even politics and religion).
7) Be a targeted news channel: Many of us don't trust the big guys. We want to know what people on the front lines of our community or industry see and think.

How to go from bland to engaging

How to go from bland to engaging

Memo To All BizTrekers:

Have you ever noticed that picking up and checking your mobile device gives you a little chemical kick? Researchers have noted that when you do so, you get a tiny shot of dopamine. However, that little chemical response does not last long. So, when you interact with your audience, keep it short, because reader enjoyment goes down fast.

More than half of mobile device users now rank brevity as a crucial factor in reading messages and then responding or sharing. We are constantly bombarded with messages on every front, so anything that takes more than about 30 seconds bores us. We no longer have the patience to go longer. If you have more to say than fits in this tiny window of opportunity, segment it into multiple messages, or even spread it across different interactive platforms. (BTW this message is 215 words).

So what will people look at, and then share? Two thirds (67%) will engage with something that triggers an emotional reaction or laughter. Almost as many (60%) will share something that is helpful or informative. Finally, about 60% will respond to something that hits a deep personal nerve. If you want to stand out from the crowd, capitalize of people's low expectations and surprise them with something they value. 

The future way to gain market traction

The future way to gain market traction

Memo To All BizTrekers:

If you are OVER 40, you'll probably groan when reading this, but after a few moments to think, you'll realize the truth of what follows. If you're UNDER 40 you'll totally understand and start to see new businesses opportunities ahead.

The modern social world has become highly fragmented, and the fragmentation is increasing rapidly. Friendships with neighbors and locals are becoming less common while friendships with distant kindred spirits are increasingly more common. Think about people you know who share vegan recipes, or actively participate in a band's fan club, or spend hours in discussion forums about a particular breed of dog.

Many people have more "online friendships" than they have face-to-face friendships. If they ever have face-to-face visits with those online friends, they will often travel significant distances to attend an event designed specifically for that group of people.

The social world, which was once hyper-local, is now hyper-specialized. More than ever, people enjoy letting their freak flags fly. Which is why over 80% of new business growth now happens within extremely narrow social clusters. 

However, gaining traction within these clusters is difficult. People have built these communities on their own time, and they have many protective barriers to keep outsiders out. You won't get far, or last long, if you try jump in with both barrels loaded. Rather, seek and build relationships with key leaders or influencers. Use them to help you learn the lingo. Gain their trust slowly and you will be properly rewarded. However, always remember that you are a visitor, not a member.