Welcome, entrepreneurs!

This blog is for you, whether you are dreaming of starting a business, getting your new company off the ground, looking to raise capital, or just making sure your startup is on the right track. You’ll find topics like: What’s in a business plan, how to determine whether you’ve got a good idea for a business, and how to think about financing your venture. You’ll see that my approach favors speed and flexibility - a combination I find practical for today’s environment. You’ll also find me saying that the most important aspect of business planning is the thinking behind the plan.  Need some help? Click here to learn how UpStart Advisors can help you launch your venture. And click here to follow me on Twitter.

Startup Diary: Entry 3 (hair on fire)

If I had hair, it would be on fire today. I’m only a few days into my startup, but there’s already so much to do, it’s nearly overwhelming (It’s also exhilarating, and I’m a closet stressmonger. Shhhh).

As an entrepreneur, with or without hair, you’ve got to wear a lot of hats. Today, I drafted the content for an online class, hired a graphic artist to design my book cover, pitched my business to a potential marketing partner, made some changes to my legal entity with my lawyer, and conducted a client coaching session.

But the toughest part about a day in the life as an entrepreneur is the tyranny of choice. There are 100+ things on my to-do list, and nobody to tell me what’s what. So, I’ve got to prioritize up the wazoo. That’s one of the untold secrets of entrepreneurial success: Figure out what to do now, and what NOT to do now (aka ever).

Startup Diary: Entry 2

When I meet with a client planning a business, the first question I ask is “what are your goals?” So simple, but it’s amazing how many people get started before they think through their goals. Setting goals gives you a sense for whether all the hard work could payoff in a way that makes it worthwhile to you. Goals also frame the way you’ll approach raising capital (e.g. if you are looking to build a modest sized business, rule out venture capital). And of course, without goals, it’s tough to measure your performance.

Here are my goals:

• Keep startup costs below $25,000 for the first 3 months of operations, and again for the second 3 months (if I get there). I’m bootstrapping this. In part to practice what I preach – stay lean, move fast, and take a phased approach to maximize flexibility and reduce risk. I’m also bootstrapping out of necessity. I have a new baby at home, got burned by Madoff, and have most of my assets tied up in illiquid investments. Not ideal, but it sure does light a fire under my behind. I won’t rule out raising capital in some way or another down the road, but first I want to get some traction and understand the dynamics of the business.
• Generate revenue within 3 months, and reach break-even within 6 months. This goes hand in hand with bootstrapping. I don’t want to empty my savings account into this venture. Starting TODAY, the meter is running.
• Build a business that can generate over $1MM in revenue / yr, profitably, within 3 years. I’d like the company to throw off enough cash so I can support my family and save for the future (btw I live in NYC so that’s a lot).
• Maximize the chances of success.  I’ve tried swinging for the $100MM fences, and it’s a rush. But right now I’d rather have a 90% chance of building a business with modest revenue and profits, than a 2% chance of hitting it big.
• Create assets I could potentially sell down the road. That means I need an exit strategy – a sense for what this could be worth, to whom, and when.
• Work with a small team of people I like and relate to, within a flat organization. I don’t want to spend my time managing a big team. I’d rather have a few key lieutenants or partners.

Did I leave anything out? Screw anything up? What do you think?

Startup Diary: Entry 1

I write a blog about planning and launching businesses. And now I’m planning to launch a new business myself. So, it just seems natural to share my experiences in the blog.

First, a little background.  After a few years of jobs with bosses and paychecks, I set out to become an entrepreneur. My first startup was a social network based on alumni affiliations, launched in 1996 (too early; my bad).  My second startup ran ads and promotions on milk containers. Odd, but it worked out well, despite my lactose intolerance.

In between launching ventures, I did consulting for other startups. I helped Moby, the musician, launch an iced-tea business. I helped the world’s top makeup artist plan a cosmetics business. I worked with Mark Gordon, a big Hollywood producer (Gray’s Anatomy, 2012, Saving Private Ryan), assessing some innovative startup ideas. And I helped athlete and journalist Tiki Barber with some of his sports and philanthropic ventures.

That all worked out well, but I needed to build something.  Also, most entrepreneurs can’t afford consultants, so I wanted to teach them how to plan and launch companies themselves.

That brings me to today. It’s just after New Year’s, 2010. And I’m planning to build an online school for startups.  As I develop my business plan and launch the business, I’ll keep you posted. I’ll be open with you about what’s working and what’s not, and about both the hard facts and the underlying emotions. Along the way, please post comments about anything that comes to mind. It’s too hard and lonely to go this alone – I need your help.

Half-baked startup idea o’the day.

In most cases, a startup idea isn’t worth all that much. The idea itself may generate 5% of the value, while execution accounts for the remaining 95%. So when my plate is full, like it is now, and I come up with an idea, I’d rather share it than forget about it.

Today’s idea isn’t so much of an idea, as a problem: Scheduling meetings. Let’s say you and I want to meet. We’re busy, so we start planning via email. I throw out a few days that work. Then you reply with counter-offers. Then back and forth a few times until we find something that works. Sometimes we have to find a meeting place too, like a spot for lunch or drinks that’s convenient for one or both of us. It’s all pretty inefficient. And while I’m a 98lb tech weakling, it seems like this is a problem that could be solved with technology.

That’s all I’ve got. No clear solution. No business model. No idea how much it will cost to build. To say it’s half-baked would be generous. Then again, you’ve got to start somewhere.

Like the idea? Lemme know. I’ll earn my 5% helping you figure it out. Got an idea of your own? Instead of letting it gather dust, run it by some people for feedback. You never know…

Forget “stealth” mode

Just read this comment in the google group “lean-startup-circle”.  Author Mike Brown from Indianapolis was kind enough to share:

“I see so many people saying, 1I’ll tell you what I’m doing after you sign an NDA.’ …Unless you’re talking about some really deep technology that REALLY pushes  the bounds of what we do (think Project Natal from Microsof), you most likely aren’t the only one doing what you’re doing.

… The sooner you get a working product that your users can play with, the sooner you can get feedback and in many cases ideas that will significantly improve your product. Going stealth I would argue (counters that approach). Think about it in terms of software development. With software… one primary goal is to get a working application in front of  your stakeholders quickly so that they can provide feedback as the application is evolving.  (That) avoids the problem of spending a year working on a project only to get feedback at the end from the customer that you totally missed the mark.

If you want to kill a startup, the quickest way is to spend a year developing a product that no one wants because you were in ’stealth mode’…. By letting people know what you’re doing, you’re likely to get a lot of feedback that you’d pay a lot of money to get otherwise. Such as ‘this reminds me of…[insert competitor you didn't know of]‘ or ‘I’m building something similar, want to team up to make a unified product” or “I like [feature x] but I really wish I could do it by [method y]‘. All of this feedback can be used to help you adjust your launch trajectory.

That’s the true definition of Lean (startups).

A little advice… on getting advice

I’m all for getting advice about your startup idea and approach – before, during, and after you launch. But not all advice is created equal. Before you seek advice from a person, be sure to think about what they know, and don’t know. Here are a few types of experts you may want to consider getting advice from:

Functional experts. People with expertise in roles like sales, marketing, team building, product development, technology, law, manufacturing, etc. The more relevant their expertise the better. For example, if you are launching a training business that will sell to large corporations, get sales advice from someone who has sold similar types of services to similar types of companies. Advice from someone with expertise on selling consumer products to retailers may not be on target, and could even steer you in the wrong direction.

Industry experts. People with expertise in particular fields, like mass market retail, food and beverage manufacturing, or consumer e-commerce. Once again, the more specific, the better. And watch out for people who can’t see beyond outdated industry standards. For example, someone in publishing who doesn’t see how e-books, self-publishing, and other innovations threaten to change the rules of the publishing game.

Startup experts. Running a startup with limited resources is obviously very different than being an executive at a large corporation. If you haven’t started a business before, be sure to get the perspective of someone who has been there, done that.

Beware bad partners bearing cash

I met with a successful consumer products entrepreneur today, and he told me how he spent the past few months unwinding a partnership–complete with legal costs, wasted time, and frustration.

Long story short, he took investment capital from a wealthy person with nothing to do and a desire to be involved in running the business. That person proved to be a lousy operator and awful partner. The story made me cringe, not only because I’ve heard it before, but because I made the same mistake many years ago.

I know, I know, you need capital now to start–or preferably to grow–your business. But be very careful about mixing investors and partners / employees. Think about whether you need to fill a specific role on your management team. Then profile the skills and experience of your dream candidate for that role. Before you even consider having an investor fill the role, be sure they are a great fit, and that they’re someone you know very well , trust, and want to work with every day.

6 great things about starting your own business

1. It never feels like work, even when you are at it for 100 hours a week. When you are building a new venture, it can be more stressful to take a vacation than to go to the office.
2. You hold all the cards. You may not prosper or even survive, but you will be in the driver’s seat. Chances are, you will not get fired or downsized (though you should be willing to step aside and let more experienced management take over if that’s best for shareholders—including yourself).
3. You can turn on a dime. When you want to make a change in your business, you may have to run it by a few people, but generally you can act very quickly. No waiting for next quarter’s budget. No half-day meetings or extended approval processes. Just flexibility and speed.
4. You get to choose which people you work with all day. That includes partners, employees, suppliers, and even customers to an extent. Why spend most of your waking hours with people you don’t like, or at least respect?
5. You are constantly learning. You’ll be wearing lots of hats, particularly in the early stages. You may have to learn about accounting, finance, marketing, hiring, firing, training, sales, manufacturing, customer service, new product development, law, technology, product launches, market research…the list goes on and on.
6. If successful, you will experience a powerful sense of accomplishment and a source of self-confidence for years to come.

4 traits of successful entrepreneurs

Here are a few traits of successful entrepreneurs:

1.Tenacity. Starting a company is not for the meek. Sure, some people get lucky. But odds are that you will experience failure in many forms along the road to success. That’s especially tough because entrepreneurs tend to be so passionate about their ventures, that their self esteem gets tied to their company performance. To succeed, entrepreneurs must have intestinal fortitude to get through the tough times.

Want to get inspired by some real world entrepreneurs of yore? Read Giants of Enterprise: Seven Business Innovators and the Empires They Built by Richard Tedlow – one of my favorite professors of all time. You’ll learn about people like George Eastman, who dropped out of high school when his dad died and clawed his way to a successful career as a banker. Oh, and by the way, he tinkered around with chemicals every night after work for 6 years before creating a photography business, and another 20 years before marketing the Brownie, which essentially created the billion-dollar consumer photography industry.

For a more recent example, consider Sir James Dyson. Dyson spent 15 years and his entire life savings trying to develop a bagless vacuum cleaner. During that time, he created 5,126 prototypes that failed. He also failed to sell his invention to the vacuum cleaner market leaders. Number 5,127 succeeded, and now he’s a billionaire. So much for “third time is the charm”…

2. Flexibility. I ride a bike to meetings in New York City when the dress code, weather and logistics allow for it. Each time, I know where to begin, and where I want to end up, but I can never quite predict the path I’ll take. My route shifts, as I try my best to dodge traffic, red lights and the occasional open taxi door. It’s not a bad metaphor for entrepreneurship. Truth is, while it’s important to have a viable idea as we’ll see in the next chapter, most great entrepreneurs don’t succeed the way they expected at the outset. They do a fair amount of planning to come up with a seemingly valid approach, test the waters, and then modify their strategy, tactics – even their entire business model. A survey of Inc. Magazine’s Inc. 500 Award winners showed that 65% of CEO’s that wrote business plans “strayed significantly from their original conception, adapting their plans as they went along.” So entrepreneurs need to be good at rolling with the punches.

3. Salesmanship. Selling is a big part of starting a venture. As an entrepreneur, you may or may not be the one selling your product or service to your customers or clients. But for sure you’ll have to sell yourself and your ideas. You’ll have to persuade suppliers to work with a company that doesn’t have an established track record. And you’ll have to convince employees to forgo less risky jobs, and quite possibly to take lower salaries and less attractive benefits. You may also have to convince investors or partners to bet on you.

This scares some people. They think great sales people are born closers, or at least have the charisma of a fraternity president. While that couldn’t hurt, what’s important is that you can inspire trust, and be charismatic and persuasive. I once had a Chief Technology Officer (CTO) who could practically write code in his sleep, but had always thought of himself as a back-office guy – someone you’d never put in front of a prospective client. A few years after we parted ways, he tried his hand at selling tech development and recruiting services, and was very successful. Turns out he could sell anything as long as it was related to his passion for technology.

4. Resourcefulness. Many entrepreneurs don’t have ample resources, like support staffs or cash reserves. But good entrepreneurs have a knack for making the most of what’s available to them. Many founders work part-time as consultants to keep the lights on during startup mode.

One of my clients, Amanda, is a perfect example. She started an email newsletter about personal finance for women. Her first goal was to build a subscriber base. She couldn’t afford to launch paid marketing or PR campaigns, so she got creative. She had all her friends sign up and encourage their friends to sign up. She used social media like Facebook, Twitter, LinkedIn, and her alumni networks to spread the word. And as her list grew, she swapped promotions with other email newsletters. She also syndicated her content to other websites for women, and on personal finance, providing free articles in exchange for links back to her sign-up page. She positioned herself as a leading expert on personal finance for young women, and used that positioning to generate press. Within months, she had thousands of subscribers, at the low, low cost of zero dollars.

If you have the entrepreneurial traits I’ve described, you are off to a great start. If not, you’ll just have to break the rules – something else most entrepreneurs are good at.

Are you cut out to be an entrepreneur?

An estimated 31% of Americans have considered starting a business but haven’t taken the plunge. Many of these “wannabe” entrepreneurs aren’t sure what to expect, or whether they are cut out to start companies.

There are lots of misconceptions about what it takes to start a business. Many people hear “entrepreneur” and picture a 22 year old computer prodigy, or a newly-minted M.B.A. with a Blackberry full of venture capital contacts. Others picture a seasoned veteran, who has started several companies over the course of many years.

In reality, entrepreneurs don’t fit neatly into demographic buckets.

Myth 1: Most entrepreneurs are fresh out of school, or experienced veterans.

A quick glance at the age of the 2009 Inc. 500 list dispels that one:

Myth #2: Entrepreneurs from top schools have a big advantage.

If you want to raise Venture Capital funding, it’s helpful to have classmates in high places. Peruse the bios of Venture Capital partners, and you’ll see a lot of Harvard, Stanford and Wharton MBAs, for example. But most startups don’t raise Venture Capital; how important is a fancy degree to them? Not very. According to a Kauffman Foundation research study of 549 founders of successful high-growth businesses, only 6% went to Ivy League schools.