Month: September 2022

I’ve seen there is often a disconnect between what you as entrepreneur want from the business and the risks you are willing to take. 

And this isn’t just a theoretical disconnect.  I’d argue you can’t develop meaningful goals for your business without reconciling this conflict.

Let’s deconstruct that, and then talk about a couple of examples. 

First, it is CRITICAL that you are clear about what you want from the business.  Income, yes – but how much?  Is it more important for you to make a comfortable wage, or are hoping to make a LOT of money growing or selling your business? 

How important for you is to to change people’s lives?  Or give back to your community? Or simple make something cool? Is it because you like building things?  Fixing a problem?  Making customers smile?

WHY do you want to create a business?  Or WHY EXACTLY did you create the one you have?   Some people tell me, “Oh, I don’t know.  I just knew I didn’t want to work for “the man” (or “the woman” – but that is not enough clarity to move forward with a successful business.   I always admire those people who seem very clear on their “why.”  Some people, I suspect – maybe because I’m a little jealous! – clearly state why they started and are running the business they are, and I’m not always sure if it’s the truth or just that they’ve perfected a good story line.  In any case, there are clearly some of you out there who really ARE CLEAR about why you started and are trying to grow your business every day.  You ARE indeed lucky!

Many of us truly aren’t very clear about WHY we started the business we did, or why we work so hard at it. 

If you’re struggling with your “why,” I have recommended in the past and wholeheartedly recommend again Simon Sinek’s “Start with why,” and his followup book, “find your why.” 

There are lots of other exercises out there on the internet, some of the best of which are linked here on my website  But I think Sinek’s books are the best – it is difficult to see ourselves clearly sometimes, and what I like about his books is that they take you through some of the mental – and emotional — preparation that’s needed to see ourselves and our motivations more clearly. 

OK, so that’s what we are entrepreneurs WANT from our business.  Now let’s talk about the other side:  what risks are you willing to take? 

The risks you take can take lots of forms.  Most people probably focus on the financial aspects.  And that’s a pretty important one.  Are you willing to mortgage your home or take on a second mortgage?  Are you willing to spend down all your savings?  Do you have enough cash saved up to last you for several months or even a couple of years? Are you willing to tap into your IRA?  Are you willing to take out a loan or borrow from friends or family? 

But it’s not just money.  Are you willing to move out of your comfort zone – sometimes frequently?  Receive criticism? Have friends and family think you’re crazy?  Spend long, long hours away from your family? Take risks when you have no idea whether you’re making the right decision? 

Whatever the risks in your situation, make sure you’ve VERY explicitly discussed these with your family, as well as your business partners.  As we talked about last week, all too often, the costs are greater than we anticipate, and that can leave you feeling stressed, overworked, and sometimes not even enjoying the process, but feeling trapped because you’ve come so far to throw it all away. 

I’ve seen quite a number of would-be entrepreneurs who can’t move forward, because they can’t reconcile this disconnect between what they want in a business and the risks they are willing to take.  A woman who wanted the security of a franchise restaurant model, but dreamed of creating new, interesting dishes with her daughter.  Another women who wanted to open a high-end daycare, but unwilling to mortgage her home to finance the facility investment she would need to make.  A physician with a novel medical device who insisted on being the CEO, but just couldn’t accept taking less than his current salary as a doctor with a successful practice.  Another man with his grandmother’s cupcake recipe, but who couldn’t make any decisions about how to create a business around this. 

As we talked about last week, the answers to these questions will drive a lot of your daily decisions – how you spend your time, who you hire and what you delegate to them, and how you invest in the business, and even were you look for funding and how much you are seeking. 

And as I said earlier, it is not possible to make meaningful goals without being clear about your tradeoff between what you want from your business and what you are willing to risk. 

You may find the risks are greater than anticipated, and so your goals may change once you realize that – and that’s OK.  It’s a normal part of the journey.

But your path will be much clearer if you’ve got a good handle on what you what from your business, and the risks you’re willing to take from the very start. 

Here’s something that I tell clients who are starting their businesses to think carefully about.   

Lots of entreperneurs – as their business is growing – don’t necessarily want to expand and scale their business as quickly as possible.  If you enjoy the interactions with your customers, being personally involved in the day to day operations of the business, and connecting with your local community, you  might lose much of that if you expand quickly. 

What I always advise my clients is to “Begin with the end in mind.”  I can’t take credit for that expression – it came from Steven Covey.  Although Covey wasn’t specifically talking about starting a business, it applies equally here.   In my experience, Many entrepreneurs don’t think in terms of what they want their exit from the business to look like, until the moment is nearly upon them.  And that’s generally not a good thing.

Because many of your daily decisions about your business affect your ability to successfully grow and manage and yes, exit your business, when the time comes.  I can think of a few examples, but if you think this through for your own business, you’ll see what I mean. 

Let’s take something as basic as how and where you find funding.  Let’s say your goal is to successfully sell your business or go IPO.  In that case, you may want to aggressively look for external funding from angel investors, family offices, and even VCs.  That will give you the cash to (ideally at least!) rapidly expand your business, showing amazing fast growth and producing the multiples that might lead to a lucrative exit. 

But the truth is that many entrepreneurs LOVE their business.  Many, many are the entrepreneurs who believe they want to scale their business and grow rapidly.  That will make external investors happy.  And if your goal is to make a bunch of money and move onto to your next venture or retire early, that’s great.  But all too often, the entrepreneur finds that it doesn’t make him or her very happy.  It often quickly pushes the entrepreneur founder into roles that are not nearly as much fun, are not very connected to the day to day hustle and bustle of production and interacting with customers.  Suddenly, the entrepreneur spends more time hiring people, delegating things to others, and focusing on policies and procedures and administrative headaches.  Remember, the goal for the founder is to make himself or herself essentially replaceable, so that the business can continue running in the future without them at the helm.  That’s the cold reality – if your business is acquired by a strategic, they may want you around for a short transition, but are often eager to start integrating the business into their own company.  If you go IPO, unless you are also a very effective manager and leader, your board or shareholders will often start pushing you out the door. 

The truth is that many people who are great at starting a business and even running a small business aren’t very good at scaling the business and running a larger enterprise.  And I believe – from the many entnrepreneurs I’ve worked with – that many of them have such a hard time extracting themselves from their business – their BABY – that it gets in the way of the scaling that is needed for rapid growth. 

I love Elaine’s clarity about Luft Balloons – she realizes that it is her baby, and that she not only makes good money for herself and for her team, with whom she is close – but gives her a great deal of personal satisfaction.   I suppose some people (rather sneeringly, I think) call this a “lifestyle business.”  I think we need to come up with a better name that gives this option the respect it deserves.  There is nothing magical about “scaling” nor is there anything AT ALL wrong with creating a thriving business that you, the founder, are in the middle of and want to stay in the middle of for a long time – maybe a very long time.  And there’s another way the end game affects your daily decisions – if you want to stay small, you might hire generalists and people who thrive in a small, family-like environment.  But if you want to scale, you will probably want different people – hard-chargers, maybe, or people with experience managing larger departments, probably people with more specialized expertise. 

I think the hard part is that many entrepreneurs don’t always know what they want when they start.  Many say they want to scale their business quickly (maybe because we’ve all been a bit brainwashed by the tech industry talking about huge IPO numbers), but when push comes to shove, that isn’t really want they find they really want.  But it sure helps if you have done some real soul-searching ahead of time or at least early on.  The world is full of founders who thought they wanted to scale and brought in external investors, only to find they have lost a lot of control over how the business grows.  Or, they’ve actually hired the wrong people. 

Take the time to step back and answer as honestly as you can, “What makes me happy?  What are the kinds of activities that I’m really good at and enjoy the most?” 

And design your business around that.  Because if it’s not fun, what’s the point?

I mentioned on a recent show that I read that 42% of startups fail because there is no market need for their products or services. 

Some people say this number is too high. I’m sure the number varies depending on the options listed, and most businesses fail for more than one reason. But I don’t care what the actual number is, because any number higher than zero is almost always avoidable.

I’ve since had a couple of listeners comment that they’re not surprised the number is high, since most startups don’t have the cash to do market research. 

If you mean hire an expensive market research company, this may be true.  But there are usually ways to do at least SOME valuable market research on a budget, especially if you’re creative and persistent.  Here are some suggestions to get your juices flowing!

1. Use the internet to research your competitors.  See how they position themselves, how long they’ve been in business, and where they market themselves.
2. Use surveys – there’s Survey Monkey, including a paid version of Survey Monkey that’s actually not very expensive. 

Be careful that you’re actually surveying your customers.  Some people will put surveys out on LinkedIn and social media sites, but do you know if YOUR future customers actually on there much or make their buying decisions there?

Also, I’ve had people tell me these don’t work – everyone is surveyed to death already!  And yet, the lack of survey response can be telling right there. 

For example, a colleague & I had an idea to create a whole training course on a topic, but we couldn’t get anyone to respond to our requests for feedback.  We dropped the idea – if no one cared enough to give us feedback, we figured it would be mighty hard to sell. 

If you do a survey or request feedback, consider making it fairly provocative.  Maybe take a devil’s advocate position or make a controversial statement & see if that improves the response.  People ARE surveyed to death, so you need to grab their interest!

• Make sure you’re asking the right questions.  Don’t just ask:  would you find my product/service interesting?  the answer might be Yes!  But make sure you ask: at what price? With what features/guarantees?
• My favorite suggestion:  chat up people. 

Some ideas here: 

1. Your existing network – really look at all those LinkedIn & Twitter connections – you may be surprised at the resources there.  You may also find out some surprising things about your neighbors and colleagues, as well, if you just ask. 
2. Trade association folks, or editors of trade publications.  These people know lots about their industry and have their finger pretty firmly on the pulse of their industry. 
3. Call up or talk to potential customers.  I recently helped a client with a new veterinary product with some market research and spent several days just calling up vet clinics of different sizes and types, asking them about their purchasing & use decisions.  It was extremely insightful, and once I got over my shyness about calling, was actually a of fun talking to actual customers and hearing their perspectives. 
4. The Google Machine

This may seem obvious, but it’s amazing the stuff that’s out there for free or for not much money.  Guest after guest on The Savvy Entrepreneur show has told me that Google has been one of their best resources. 

The Google Machine is great not only for demographic information, but also can produce a wealth of information about pricing, competitors, and even alternatives that you might not immediately think of as competitors. 

People sometimes forget, or just haven’t taken the time to get good at web browsing.  Don’t believe me? 

A venture capitalist guest on the show recently told me about an entrepreneur who was pitching to them to invest in his company.  He insisted that he had absolutely no competition.  The VC proceeded to do some quick Google searches on the spot and produced a list of several potential competitors.  The entrepreneur was flustered and unprepared for this.  Needless to say, he didn’t get funded by that VC! 

I’ve had some people tell me “I don’t time to do market research!” 

Well, actually yes, you DO!  What you DON’T have time for is dumping your whole life savings or the money given to you by friends & family & charging full speed ahead with an idea that may not have any traction. 

I’ve had people tell me that they don’t feel comfortable doing that – calling perfect strangers, and maybe getting hung up on.  Well guess what – if that’s you, you may not be cut out to be an entrepreneur.  Because you’re likely going to be spending a fair bit of time once you’re up & running doing just that! 

Also, when you’re chatting up folks, DO NOT, I repeat DO NOT try to sell them.  I recently listened in on some conversations an entrepreneur had with potential customers for a new medical device.  And it was clear he was trying to persuade them on the product.  Naturally, they told him all sorts of positive things. 

What you want with all of these folks you’re chatting up is HONEST feedback.  You won’t get that if you’re trying to sell.  You might almost consider the opposite – ask them to poke holes in your idea & make sure you LISTEN – look to clarify, but don’t push back! 

I am living proof as a failed entrepreneur that failing to do market research is ultimately a failure.  Two colleagues and I had the idea of creating a repository of template documents – things that HR professionals and supply chain professionals and marketers frequently use.  We invested a lot of time taking our various templates from corporate life and combining the best of them, perfecting, making them fillable. 

We also invested a lot of time and money on building a website and setting up an e-commerce platform.  And then promoting it on social media.  And we spent time loading all kinds of – what we believed was – useful content. 

We didn’t we do?  We didn’t do any market research to find out if people really wanted these, or what – if anything – they’d be willing to pay for them.  And truly shame on us – because one of the three of us was a marketer by training!

The result?  We made a few sales over the months, but not anything close to covering our out-of-pocket costs, much less our time.  We ended up shutting the whole thing down two years after we started, a lot poorer but wiser for the exercise. 

Please!  Don’t do what we did.  Don’t convince yourself that your idea that no one else has had is what people really need.  Maybe they do, maybe they don’t.  But do yourself a BIG favor by verifying your assumptions with some basic market research.