Category Archives: Mistakes to Avoid

Struggling for Traction

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It’s very easy to get caught up in the day-to-day of the hamster wheel inside the fishbowl of building your business and forget about the overall opportunity parameters.

If you are struggling for traction, it indicates that you may be:

  • Experiencing a mismatch between what you believe to be the opportunity and the reality of the opportunity (this is very common in the immediate-post-bar-napkin, just-keep-grinding and true-believer phases)
  • Building a solution looking for a problem (this is typical of engineering driven companies)
  • Not understanding who your ideal customer is and what their pain is (this is also typical of engineering driven companies)
  • Lacking sufficient ideal customers who are willing to pay for a solution to their pain at a price point that supports a sustainably profitable business model (this is a strategic leadership error, typically a variation of “it’s my idea so it must be good”)
  • Not effectively creating the perception of need in your prospects (this is marketing’s job, and this is fairly common when building solutions looking for a problem)
  • Not closing on the perceived need (this is sales’ job, and this one is rare compared to the others in this list)

Early Stage Priorities

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During the very early days of a business, in stage one, decisions are made which determines the initial trajectory of a business. While you can always pivot and change direction, every pivot costs resources.

In the early stages of a business, you don’t have much in the way of resources, so limiting the number of pivots is directly related to efficiency.

Here’s some counsel I recently provided to a couple of engineers who have an early stage Big Data startup:

You are currently early in stage one here: www.IdeaToExit.com. You have made some preliminary decisions regarding the business model, but have yet to progress through the most important stage one section: market sizing.

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A Swing and a Miss

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As part of my consulting services, I am tasked with evaluating companies for VC, private equity and angel investors.

I recently attended a private pitch by an experienced entrepreneur to evaluate the potential of the company for some interested investors.

The entrepreneur was the prototype of what many aspiring entrepreneurs or early stage founders wish they could be:

  • Silicon Valley startup veteran
  • Multiple startups
  • VC funded in previous companies
  • Had successfully exited and made his investors money
  • Talented engineer

In short, he had a sterling track record, impeccable credentials and noteworthy references.

To the run-of-the-mill tech startup founder, he was the poster child for “who gets funded when I don’t.”

And, he failed.

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Diverse Offerings

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This challenge is one I see a lot while providing management consulting, mentoring and coaching to entrepreneurs and startup teams.

For example, a business plans to offer the following products and services:

  1. web design
  2. web site maintenance
  3. web design instruction
  4. instructional packages for website owners
  5. life coaching
  6. photography
  7. public speaking
  8. writing
  9. professional skating instruction

You can make the case that 1-4 are related products and could be complementary offerings.

You can also make a case that public speaking and writing can address any of the other offerings.

However, you cannot make a case that attempting to sell all of these diverse products and services is possible in a brand coherent, much less an energy and capital efficient, manner.

I have personally been a professional photographer, public speaker and writer. I know, first-hand, how much time, energy and marketing focus is required to be a success in any one of those three endeavors.

And that is really the point here. It is tough enough to build a successful business around any one, single offering, much less nine, and especially nine that are either completely disparate or tenuously related.

Each offering you sell has its own set of development, maintenance, delivery and support requirements. Each offering has its own market and customers, each requiring very specific value propositions, brand positionings, marketing messages, sales channels and execution.

Each business is a bucking bronco in its own right.

Photo: Meralain via Flickr

 

Trying to ride multiple horses at once is tough enough as a rodeo trick.

It is not a valid business model.

You need to pick a horse and ride it.

Pick one horse, one market, one set of customers, one value proposition, one brand position, one marketing message, one sales channel and one business model to execute.

Find a market niche and own that niche. Then expand from there.

Nine horses is too many to ride.

Before you build a business plan, pick a horse and ride it.

 

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Accounting

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Accounting

Your accounting resource will be one of the most important vendor relationships in your business. An accountant often provides day-to-day tactical support via bookkeeping resources (or referrals to same). In addition, your accountant is a critical strategic resource for tax planning, networking and referrals into their network of professional services providers such as legal, consulting, business brokers, banking, etc.

Consequently, it is very important to have a solid, mutually beneficial relationship with your accountant.

Start by asking other business owners for referrals. Ask people who run businesses that you aspire to emulate for a referral. That immediately puts you into a network of professional and business suppliers that will match your business as you grow. If you start by asking business owners at the size and scale you are now, you can end up with an accounting resource that cannot scale with you as you grow and whose network is not well matched for your aspirations.

Next, talk with at least five potential accountants by phone and meet personally with at least three. Do not settle for anything less than a good to perfect fit with your accountant. In particular, it is critically important that you share common values related to integrity, honesty and trust.

Your accounting and bookkeeping resources can literally make or break your business, so choose them wisely and with due time, effort and consideration.

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The Nature of Change

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More than 9 out of 10 patients do not change their lifestyles in response to their doctor’s recommendations.

More than 70 percent of corporate change efforts fail.

Humans hate change.

It’s a simple fact of life. There isn’t any easy way around it. In general, humans hate change.

That rule extends beyond individuals into groups of humans: families, tribes, organizations, companies, communities and nations. Humans hate change.

As individuals and groups, we tend to get locked into a way of doing things, a set of perceptions and a set of expectations. Anything that forces us to change anything about what we consider normal is usually resisted.

Even in the face of overwhelming evidence for the need for change, we will resist change. For example, the majority of people who suffer heart attacks do not make long term changes in their lifestyles to eliminate or limit factors that contribute to heart disease. In other words, even when it’s a matter of life and death, humans hate change so much they won’t change even to save their own lives.

There are university degree programs in change management; multiple national and global professional associations of practicing change management consultants; countless thousands of trained, certified and degreed change management practitioners and a cornucopia of books, videos, workshops and tutorials on implementing change. In spite of all this learning and all these resources, there has been relatively little improvement in change rates in humans or groups of humans.

Why is this so?

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Fear, thy name is Ron Wayne

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One of the little known facts of Apple’s history is that Apple wasn’t the creation of Steve Wozniak and Steve Jobs. Apple was actually founded by three guys: Steve Wozniak, Steve Jobs and Ron Wayne.

The equity split was Wozniak 45%, Jobs 45% and Wayne 10%.

Wozniak recalls, “Steve had 45 percent of this partnership, I had 45 percent, and Ron had 10 percent, because both of us agreed that we could trust him to resolve any dispute, and we would trust his judgment.”

So what ever happened to Ron Wayne, a guy who had 10% founding equity in Apple?

Wozniak relates, “I had no money and Steve had no money. We didn’t own cars, we didn’t have savings accounts, we didn’t have houses. So Ron Wayne figured they’d come after him for his golden nuggets that he kept under his mattress. (He actually tells me it was in a safe-but he was afraid they’d come and get his gold.) So he sold out. It was too risky for him, so he sold out his 10 percent of Apple to [us] for a few hundred bucks. Maybe $600, maybe $800, maybe $300-but a few hundred bucks. And this was even when we had an Apple II designed and were heading toward future business. He was just scared that something was going to catch him.”

Apple’s market capitalization this morning is $181.7 billion, with a B. If Ron Wayne had stayed around (and assuming no dilution), his 10 percent of Apple would be worth $18 billion. With a B.

Fear, thy name is Ron Wayne.

 

Sources:

  • Founders at Work: Stories of Startups’ Early Days by Jessica Livingston
  • Yahoo! Finance