- 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.
- 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).
- 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.
- 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?
- 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.
- If successful, you will experience a powerful sense of accomplishment and a source of self-confidence for years to come.
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.
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.
8 x 10 mini whiteboard. $20 for 10. Sometimes the best way to prove a complex point is to draw a simple diagram. You can do that on paper, but a whiteboard makes it easier to edit on the fly, and pull your investor / client / partner into the process. Just in case there’s no whiteboard in the room, I keep this mini whiteboard in my bag at all times.
BOSE noise canceling headphones. $350. Ok this was a splurge, but I use them every day. Noisy train / plane / starbucks making you crazy? Slip these babies on, and you may as well be in the basement of a library. Goodbye, ADD. Hello, laser focus.
HP12C Calculator. $65. Standard issue MBA calculator. Frankly, I forgot how to do most of the things this baby is capable of, like calculating bond yield curves. Once in a while I’ll run a Net Present Value on it, but the real reasons I use it are twofold. First, nobody ever steals it, because they can’t figure out how to use the damn thing. And second, it makes a statement: I can crunch numbers with the best of them. So yes, I put some real thought into my projections, and no, you can’t pull the wool over my eyes with that fancy deal structure.
Moleskine notebook. $18. How many meetings have you had in the past 3 months? Remember who you met, when, and what the next steps were? Me neither. That’s why I jot everything down in a moleskine. They are uber portable, and sophisticated enough to pull out in the board room. If they were good enough for Picasso and Hemingway, they’re good enough for me.
This is the second in a series of posts following a BootStrap Bootcamp I ran in NYC in July.
Should you bootstrap your venture?
Before answering that, I’d ask you this: Do you have a choice? If you haven’t launched a successful startup before, don’t have a stellar track record within the industry you are pursuing, and don’t have a strong network of angel and venture capital investors, you might find it very tough to raise capital. Even if you can do it, it might take you nine months or longer to scrape together your funding. That’s going to be a long, painful process.
But what if do have the ability to raise capital. Should you always do it?
- You’ll be able to pay your rent without eating into savings
- If you budget properly, you’ll know you can keep the business going for some period of time
- You’ll probably be able to move faster
- You may find it easier to sleep at night – at least when it comes to your own personal risk
- Once you raise capital, you have to a responsibility to someone else. That means you’ll have to consider their interests when you make big decisions, which means you probably won’t have as much flexibility. For example, if you decide to change your business model, you’re going to want to get your investors to agree it’s the right thing to do. Even if you’ve only sold a small stake, you don’t want pissed off investors for a multitude of reasons (e.g. You need their help, they can make life difficult for you, etc.). That also means, you’re reputation with future investor prospects will be on the line.
- If you’ve got the money, you’ll spend it. That’s just human nature. The flipside of this is that if you don’t have the money, you’ll probably do more with less.
- Even if you have great contacts, it can take months to raise capital. Your time might be better spent operating your business.
In this environment, it’s especially important to get “traction” (i.e. progress toward your ultimate goals for the business) before raising capital from outside sources. Here’s an example:
I worked with a client recently I’ll call Kelly. She developed an innovative concept for a line of fashion accessories. She and her friends loved the product ideas, and she had a simple prototype. She came to me thinking she needed a business plan in order to raise startup capital. But as we got to talking, it became clear that she hadn’t proven that demand existed. Would customers in her target market buy the products, and at a price that would let her turn a profit? She just didn’t know.
Before convincing investors, she needed to convince herself. Unfortunately, she couldn’t afford to hire a company to conduct market research and testing. Instead, we came up with a bootstrap alternative:
- She got a friend in brand management to help her define the characteristics of her target market, and conduct focus groups with consumers in their neighborhood.
- The focus groups helped her identify certain target consumers that were most likely to purchase the accessories. With more help from her friend, she created a survey and used a web-survey company to get quantitative feedback from hundreds of consumers in each target profile.
- She couldn’t get appointments with buyers at the big chain stores, so she found ex-buyers, and owners of smaller “mom & pop” retailers. She created a survey, and interviewed them one by one, asking whether the product would sell, how it would have to be priced, packaged, displayed, etc.
- Once she honed in on the right stores to hit her target consumers, she negotiated test campaigns with them. She produced a small quantity of products (knowing her costs would come down with volume later), and had the stores sell them on the condition that she’d buy back any unsold inventory. She also got permission to mingle with customers in the stores, getting their feedback on the product – including why people didn’t buy.
Kelly’s still following the plan – the whole process will take a few months. But afterwards, she’ll have a much more compelling story for prospective investors – and more confidence that she’s sprinting down the right path.
Last week I met an entrepreneur I’ll call Brad. His business idea has many of the attributes I look for in a bootstrap-friendly startup. Here’s why:
First of all, Brad found this idea by hearing business clients ask for it, so he knew demand existed. That’s in contrast to a lot of entrepreneurs who come up with products or services, but aren’t sure if anyone will really want them (not always bad, but it requires an extra step that can be time consuming, difficult and expensive).
Next, he found a way to modify open-source software to provide a customized solution for these business clients. That let him develop a solution quickly and inexpensively.
Then, Brad gave early clients a break on price, in exchange for feedback about product development, and ownership of the intellectual property. That way he got to learn exactly what features clients wanted, and build them into his software.
Finally, Brad’s concept combines two ideal characteristics:
1. The short term profit potential of a service business, like a web design firm, and
2. The long-term scalability of an Internet-based marketplace. After providing services for a critical mass of clients, Brad plans to throw a switch and give those clients the option to interact with each other – and with a slew of other types of companies. That gives him a potential pot of gold to shoot for at the end of the rainbow.
Good thinking, Brad.
This morning I was interviewed by Allison Hemming, founder of TheHiredGuns, about a workshop I’m doing for them on business planning. Among other questions, she asked me “Is this a good time to start a company?”.
I thought about telling her that many successful companies have been started during recessions, including GE, HP, Fedex, Microsoft and Burger King. Yawn.
Then I thought about making my usual pitch for bootstrapping… As I’ve said before on this blog, bootstrapping is about starting with limited funding, operating on a limited budget, concentrating on cash flow, etc. It’s always a great way to start a business, because it forces entrepreneurs to be resourceful, flexible, and tenacious, etc.
But then I thought of a painfully simple alternative. When you’ve got a good idea and the right team to execute it, that’s the right time to start a business. Of course, proven demand and favorable market conditions help define a “good idea”. But there are many other factors – plenty of which are personal. So, it might be the right time for you to start a business with person Y about idea X, but a bad idea for some other combination of ideas and teams.
Bottom line: Focus on the fundamentals, and don’t get scared off by the headlines.
I’ve seen many situations where founders planned businesses the wrong way. Here are two real examples, with fictitious names:
- Pamela Perfection. Pamela was holding back tears when she came to me. Months earlier, she had started a fashion accessories line, and her products were flying off the shelves at the chicest boutiques in NYC. Then she hired a group of bankers to write her a business plan, and raise capital for her. But by the time we met, all she had to show for it was an 80 page, spiral-bound Private Placement Memorandum (“PPM”) that she couldn’t even begin to decipher. No investors. No slide presentation. And no money left to fill customer orders. Pamela had wasted time on the wrong kind of plan, at a critical juncture.
- Wally Wingit. I met with Wally at the suggestion of a considerate friend in Venture Capital. Considerate because Wally had completely blown his presentation to the VC, and the VC was nice enough to give him a point in the right direction. A tech prodigy, Wally had spent months developing a whiz-bang Facebook application. Unfortunately, he spent 20 minutes giving the VC a demonstration, but failed to articulate critical elements of the business, such as his business model and marketing plan. He had heard stories about founders raising millions with a plan sketched on the back of a napkin, and hadn’t taken the time to develop his business plan.
What exactly is an upstart? Yes, some are entrepreneurs working in their attics, but even the world’s biggest brands can find themselves in the position of being upstarts. And that’s a good thing.
I recently had the pleasure of running a project for a leading child care brand. They weren’t happy with their website. They were writing their own content, which was costing them a bundle, and wasn’t generating much consumer activity or revenue.
I was working with a brilliant creative team, including some of the best creative directors in the NYC and SF. But before they could work their magic, they needed a little dose of McKinsey. That’s where I came in.
First I looked at the client’s goals and resources. They wanted to generate a profit from their website, and to boost online traffic and activity. When I started nosing around, I found that they had several million active customer email addresses. Interesting….
Then I looked at the competitive landscape. The big competitors fell into a few camps. Some sold products. Some fostered conversations between consumers. And others provided expert opinions. Not much room to move in on their turf.
But once again, I did some poking around, and found that there were some things consumers were already doing that none of the big competitors had embraced: Sharing the joys of raising children. For example, some happy baby videos on YouTube were getting over 80 million views. 80 million!!! Baby scrapbook numbers were also off the charts.
I’m NDA bound, so I can’t go into more detail. But we put these pieces together, and found a way to leverage the client’s unique assets, satisfy proven – but unmet – customer needs, establish a leadership position in the market, and achieve profit and usage goals. Pretty nifty, right?
And while the numbers were on a much bigger scale, the thinking wasn’t that different from the way an entrepreneur would approach the problem. After all, to stay relevant, even the most established players need to think like upstarts.