Do what you say you’re going to do.

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Entrepreneurs don’t usually have a lot to stand on. You may have put everything you have into this business but there is one very important concept you MUST perfect and it comes down to accountability. Being accountable is probably the biggest asset any entrepreneur has and it’s completely up to them. Accountability will show your integrity and people will relate that integrity to your business. You will begin building trust in your network and the word will begin to spread.

As an entrepreneur you’ll make promises to people and say you will complete task X by date Y. Do it. One of my strategies, if time allows, is to make a deadline further out than I know I can make, and then I beat it. One thing this does is that it strategically sets your deadlines to account for any unforeseen circumstances so you are insuring your position and the trust you have built with that person or company. It also allows you to come in and provide your product or service earlier than they expected. In many cases, this is well received and viewed as being extra attentive to their specific needs.

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To think of this more basically I’d like you to think of people in your life. Who’s accountable and who’s flaky? Who would you loan $20 bucks to with no expectation of repayment? Who would you loan $20 to and expect them to pay you back? Who would you never loan $20 to? The truth in this example is that the people you think have extremely high integrity and accountability you would probably loan $20 and not really expect them to pay you back but they would anyways because that is who they are. The next person is someone who is mostly accountable but has failed on a few occasions. You’ll want that cash back sooner rather than later. The third person is the one you don’t trust whatsoever. You wouldn’t financially burden yourself for their sake because you’ll never see that $20 again.

 

Now, apply that to business. The same principle applies and if you want to be successful as an entrepreneur, you need to be person #1. Doing what you say you’ll do, even if it results in a failed venture, is the most important key success factor for entrepreneurs. It’s my strong belief if you lack integrity and accountability, you simply will fail over and over as an entrepreneur without the chance of success.

Build your business on the principle of integrity and accountability first before you think about anything else. This is an internal decision the founder makes and espouses within their company. It’s up to you to set the culture and set the tone for your business. When you begin to hire others, you will focus on their integrity and accountability and they will begin to adapt to your culture and help you build it as you expand.

When have you stopped dealing with a business because of poor performance? When did you do more business with a company because they seemed to go over and above? Leave a comment!

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You Don’t Have To Do It All!

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Many entrepreneurs get lost in starting a business and that’s okay. You’re doing things you never thought you’d have to do. When did you think you would have to create business strategy, monitor and maintain your business finances, operate, design, sell, market, improve, monitor your competition, find a strategic position, refine your offering…. etc! You know what I mean when I say that it is daunting and difficult. The reason many companies fail in their development stage is because of a deficiency in these areas. This is where you can begin to differentiate yourself from your competition.

Find a competent Co-Founder who can bring experience to the table you can’t. 

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I think one of the most common things I see in co-founders is that they are nearly the same. They think that because they are the same that makes them a good fit. In one dimension, this is true. However it leaves them at a strategic disadvantage to those that picked their co-founder strategically. In a startup, you don’t need two people who can do the same thing twice. You need someone who can handle certain areas within their expertise and someone who can do the same in their respective expertise area. Next, these two people can work together on areas they struggle such that they create a collaborative best effort for the deficient areas. If you and your co-founder are only strong in the same areas, you are likely to struggle more than those who have found a co-founder that counterbalances their abilities.

If you can’t do everything, don’t. 

This is one of my favorite topics on this subject. I have talked with so many people who want to start an APP or software company but then say they have to learn software engineering to do so. NO. Stop right there. You don’t have to learn this. Yes you need to have a general understanding but the truth is, you need to find the funding to hire someone who is the expert. In the time it takes you to learn the trade, the opportunity you thought you had will have likely passed you and you are left empty handed.

The key concept here is to remember that you are not the expert in all that is business and to realize that you are not the best in every specialty. Realizing and admitting you need help is a big step forward. You need to focus on running and developing the business the best you know how. If you’re wasting time on accounting and monitoring finances, hire a few hours of an accountant’s time each month to take a look at your books for you and to keep you on track. You can contract with many specialties until you grow large enough to hire your own people. This is a great strategy when your business is in it’s infancy.

Ask for help. 

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Sometimes just asking for help will make a world of difference for your business. It may be as simple as asking your family to take care of your kids one extra day of the week or asking a friend what they think of your business or product. It may be as simple as exploring the resources you have in your community that specialize in helping entrepreneurs such as yourself. For instance, in Reno we have organizations such as UNR Small Business Development Center (SBDC), EDAWN, Entrepreneurs Assembly (EA), and others that focus solely on this purpose. They won’t do the work for you but they will definitely point you in the right direction and help you get the resources you need to make things happen.

What have you done to get your business started? Did you contract with outside people or did someone help direct you? Leave a comment!

“Fireproof” – Why you should invest in your own business

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To start this post, I want to paint a picture for you. I know people this happened to  which is probably yet another reason I have found myself in entrepreneurship. For the purposes of this example, I will use an example of a pilot but this example applies to most all industries. Try to apply this to your job and I think you’ll agree with me at the end.

Imagine you are a young guy or gal who’s dream was to be a commercial pilot (back in the 80’s). It was a highly respected profession and a highly sought after career. Many pilots were selected from military programs and many men and women went though those programs as a means to an end to become a commercial pilot. These people worked their entire careers with the goal of becoming a commercial airline captain. The job paid extremely well, benefits were great, and almost always paid retirement plans. This was the ultimate goal when planning their future.

So, these people worked hard and were dedicated. They did not dabble in most of the party life as many other average Americans did. They had to stay on the straight and narrow due to the restrictive nature of FAA requirements for pilots and their medical requirements to maintain the proper ratings. They focused their whole life on that goal and did everything right. The ones that made it to the captain level made no mistakes, had perfect records, were exemplary employees, and well regarded pilots. What could go wrong?

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The game changed and external forces completely changed the face of commercial aviation. September 11, 2001 cost the airline industry billions of dollars. Pilots and other employees were laid off, lost their retirement plans, and airlines went under and as unfortunate as these events were, they had a ripple effect on the entire industry that cost thousands of people their jobs. The airline industry was hit hard again in 2007 when the US was hit with the recession. When the airlines couldn’t stay afloat, they began to layoff employees and sell off assets.

The point I’m trying to make here is that when you are an employee, even with a perfect record, when it comes down to the business losing money, you are not on the priority list. The company will put company first and you’ll be on the chopping block. You may have bought yourself some cushion based on your performance vs your colleagues but usually not much, especially in an industry where the top pilots are always good.

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But that didn’t stop them from losing everything late in their career. The retirement plans they worked for and the lifelong plan they made for themselves just disappeared almost overnight. Not only were they now out of a job, they were mostly overqualified for positions that were available. They took significant pay cuts to even keep a job.

I look at this kind of situation and one key point stands out to me. A professor during my MBA program said, “I’d rather spend 20 years building my own company rather than putting my life in the control of someone else.” If you think about it, if you work for the same company for 20-30+ years, you will eventually become a very expensive employee. In today’s world, employers can hire two, maybe even three people to do your job more efficiently and probably for less than they were paying you after 20-30 yrs. Some people think that company loyalty will keep them safe but I assure you that is a false assumption that will likely leave you empty handed and wondering what happened.

I like to refer to entrepreneurship as a fireproof profession. Obviously this makes sense but what I think of when I say fireproof is that in entrepreneurship you are investing in yourself. You are investing in your knowledge base and skillset and relying on yourself and your experiences to build your empire. You are relying on your abilities and drive and for me, that is much more valuable than a company salary.

Imagine what 20 years spent on your own business would look like. Now compare that to spending 20 years at a company. What do you have to show for what you did with that company? Some savings? Some material things? Do you really think its a wise investment of your most valuable asset?

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For me, I think it’s less risky to rely on yourself to build your sustainable lifestyle. You may believe you are doing this by earning a big salary but ask yourself if you’d be ok if they let you go TOMORROW. This is a reality you must consider and face as an option. Don’t be part of the crowd saying “it won’t happen to me” because I guarantee it can and it will.

What do you think? Agree/disagree? Leave a comment and let me know!

 

Entrepreneurship – What makes you happy?

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I recently spoke with a classmate of mine who I ran through the mechanical engineering program with. We had nearly every single class together from the first year through the fourth. He posed the question to me: “What makes you happy?”

I was surprised by the question and it made me think about what I consider as success. It made me think about what I’m doing in my network and if I’m sending the proper messages. Do they think I’m materialistic or do they see my true passions? Materialism is easy to mistake in entrepreneurship because we are in business not only to solve a problem for our customers, but to also make a profit.

Recently, I toured the distribution center for Patagonia.  I found that many of the employees do not focus on earning an income. Rather, they focus on the bare fundamentals of what they need to achieve an extrinsic and intrinsic value needed as applied to personal success. They identified their personal needs and success goals. Many entrepreneurs forget to define what is success in relation to their perspective goals. They need to remember to think about why they are starting a business in the first place. Why are they driven to do what they are doing?

I want to reiterate that you must find your passion and your motivation. You must find what you love to do and what drives you and develop it into a business. BUT, beyond that passion and motivation, entrepreneurs need to find what makes them happy. Without this fundamental focus, they will eventually fail as entrepreneurs. Ask yourself how many unhappy entrepreneurs you know. Likely, you know more than a few. Next, ask these entrepreneurs if they started a business that made them happy or if they pursued a goal that followed their passions. I would bet that one of the two answers will be no. Because they neglected one of the two, they became imbalanced.

Its easy to forget why we are in business. We need to find a way to strategically fit our goals and our passions in such that they lead to our happiness as entrepreneurs. This is no easy task. If it was, everyone would be and entrepreneur. Entrepreneurship is tough and it requires the utmost dedication and follow through. Finding the alignment with your happiness is not easy and will likely only be found with some trial and error. You will likely fail in your initial attempts to become an entrepreneur and start your own business.

The first mistakes will be fundamental business mistakes. These are easy to identify as they will be things such as missed accounting details or missed engineering design criteria that would make or break your company. Next, if you make it past the initial foundational steps in the business, your failures will be more close to your passions and reasons why you started the business. You have lost sight of what makes you happy and what direction you intended to take the business in the first place. It is paramount that you do not loose track of this identification in your business. Your goals, passions, and things that make you happy are why you are in business in the first place. These are your avenues to success.

Have you lost track of your goals or what makes you happy as an entrepreneur? Leave a comment!

 

Don’t listen to your customers. Yet.

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As an entrepreneur, you want to get feedback as soon as you can on your product or offering. Leading experts say this, my MBA program teaches this, and so do many articles, how to’s, and so on. I agree with these – mostly. Let me explain.

I think one of the biggest mistakes and entrepreneur can do is to listen to their customers too early. Coming from an engineering and design background, I find that many times the customer doesn’t actually know what they want and when they don’t completely understand what you have to offer, they may provide feedback that steers you off course. The quote by Henry Ford paints this picture perfectly: “If I had asked people what they wanted, they would have said faster horses.” I think that you need to develop your business model or product to the MVP stage so that when you introduce it to a potential customer, they have a better grasp and where you’re headed.

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Next, I think you need to be careful with the feedback you receive and ensure you are getting the full picture. Many times, you are responding to only the loudest reviewer of your product who may not necessarily represent the common perception of your product or business. As the saying goes, “the squeaky wheel gets the grease.” I recommend that you avoid greasing that wheel unless you have a clear understanding of the majority of your customers and they agree on this deficiency or change.

One thing I like to keep in mind is that bad experiences are more likely to inspire reviews. These bad (squeaky) reviews will seem to stand out and make you want to change your offering. Yes, you’ll want to see what you can do to help these customers in the long run but not at the expense of the overwhelming majority who may be satisfied with your current product or business model.

When you combine listening to your customers too early, showing off a business or product pre-maturely, and listening to the squeaky wheels, you have found yourself a recipe for failure. This is ok however you are much better off if you can identify it early on. There are a few points I follow to make sure I’m not falling into this cycle.

  1. Do I have an MVP?
    1. Yes
      1. Begin showing this to customers to receive feedback.
      2. Use surveys to compile the data
      3. Study the data and find the majority opinion.
    2. No
      1. Make an MVP before I start talking to customers.
  2. How many positive reviews do I have vs how many negative?
    1. Follow the majority. Ensure to sample as many people as possible to ensure you are not looking at a small market segment. Find diversity in your customers which will help you paint a better picture of your customers true perceptions.
    2. How many outliers are in the reviews (i.e. 0 stars or 5 stars)
      1. What did the 0 stars hate? Is there an indication the majority may feel somewhat the same?
      2. What did the 5 stars love? What can we do to do more of that?
  3. Do the customers purchase more than once?

After looking at all of your feedback, its time to move on from the MVP and develop a product that begins to incorporate things from your sample groups. The more work you do here, the more likely you are to succeed.

Overall, the moral of this post is to realize that you need to develop you idea to a point that is understandable. You must work the problem enough so you can adequately explain your business (be the expert) and answer difficult questions. By following these guidelines, you will be more prepared for changing market conditions and more in tune with your product or business which will help you achieve your goals.

Have you changed your product too soon such that it ended up being something completely different than you wanted? Or maybe did you change your business before it had any legs? Leave a comment!

The Entrepreneur’s Sunk Cost Fallacy

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So you’ve worked hard to start your business. You’ve sacrificed time with family, time with friends, and spent an inordinate amount of your own time to get this business started. You’re doing everything you can to make it successful and you’re doing everything right. BUT what happens when none of that is working and the business is failing? How do you avoid the sunk cost fallacy?

First of all, you must understand the basic principles of failure and its relationship to entrepreneurship. Failure is not the end of the road in entrepreneurship; it’s a stepping stone. Fear of failure is one of the most common reasons we fall into the sunk cost fallacy. For instance, if you pay for a vacation, plan the trip, buy the airline tickets, then on the day of the vacation you are sicker than you ever have been, you still go. Right there, you’ve made the decision that all the planning and time spent to make the trip happen would be “lost” if you didn’t go not to mention the cost. You have fallen into the sunk cost fallacy.

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In entrepreneurship, fear of failure will likely cost you more money and more headaches than if you were to just accept that failure will likely happen at some point or another. One professor I had during my MBA mentioned that when you’re starting a business, do everything you can do to fail quickly. This way, you’ve limited the amount of time and money spent finding out your idea doesn’t work. He’s not saying that you should fail on purpose, but he’s saying that you should find all the holes in your plan as soon as possible. If you can fill them then do it. If not, move on to your next business idea.

So how do you actually avoid this fallacy? You must forget about your fear of failure and think in terms of the future of your business. Strive to gain perspective over the entire business and do everything you can to remove your emotional connection to the business. Our emotional connection to time and money causes us to make decisions we otherwise wouldn’t make especially if we are failing or losing money. If you find yourself saying “well we’ve spent this much time and money and etc. etc. etc. on this project so we shouldn’t stop now” you should literally stop right there and change perspective. Get a high level view of where you are going with the business and what it would take to reach your goals on your current track. Stand back and truly see if what you’re doing will get you where you need to go. Next, get into what I call the business mindset where you begin to look at the numbers and figures for the future without incorporating what you’ve already spent. Look at what it will take to get the business up and running or to complete the development of the project. Only look forward into the future and decide if there is a clear path to make this work. Are there any holes in that plan? Are there areas that need more definition? Can it even be defined?

The reason I say only look forward is because you should be able to more clearly see what is necessary to reach your goals. You may see that there is no end in sight or that there is no potential for this business you’re developing. Regardless of what you’ve done in the past, a forward looking perspective is the best bet at beating the sunk cost fallacy. Sunk costs are always in the past and hopefully you are able to get a high level view before you’ve spent too much time or too much money learning that your business will fail.

When have you seen this fallacy in your business? What did you do to counteract it? Did you end up losing more money? Leave a comment!

Entrepreneurs must know their customers

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Entrepreneurs must know their customers. I don’t mean literally know them in person, although that’s not a bad idea, but in general they need to understand what drives them to make a purchase. They need to especially understand what drives them to purchase from you! Understanding their purchasing habits and converting that into strategy will be how you find some competitive advantage over your competition who fails to do so. You will also be able to maneuver changing business environments based on what your customers value in your offering.

A key point to remember when attempting to understand your customers is that they do not value the same things you do. Most of the time, what you think your customer values may be completely wrong. It’s up to the entrepreneur to figure out these gaps and work to close them. You need to align your value proposition with the perceived value your customers assign your business.

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If this isn’t quite making sense, I’d like to show you an example. Take, for instance, a small outdoor equipment shop. It has great customer service and a good environment. Subconsciously you, as the customer, assign a value to that business without actually looking at the price of the items. You will assume a higher price from this business when in fact they may actually offer lower prices than the larger retail chains selling the same or similar product.

Using that example, the entrepreneur needs to understand where their customer values their product. They can use value based pricing in order to capture some of the value that may be left on the table. If the customer is already placing higher price on their items, they may have better financial results by capitalizing on that perception and raising their price to match.

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If this still doesn’t make sense, I recommend reading the pricing portion of Principles of Marketing Engineering by Gary Lilien which covers some of these concepts in much greater detail.

Understanding your customer will also help you control your cash flow and better understand your business. Another way to begin to understand your customer is to use surveys. Survey data can really help you begin to form solutions that are important to your customer even though they may seem useless to you. The thing to remember with survey data is that some can be skewed, especially if you are asking people about price preferences. Customers will always want the lowest price for what you provide. Remember to account for this if you are surveying pricing data.

The entrepreneur can use tools such as MEXL to analyze many sorts of data. The key is that you actually put the survey data to use and understand it fully. You’ll be able to segment your market, identify perception gaps between you and your customers, identify the key attributes of your product or service that actually matter to the customer, and a variety of other possibly helpful analysis metrics.

Overall, knowing your customer is crucial to finding your success. Remember to be humble with your ideas and realize that theirs are usually more important since they are the ones who will be paying for your product. I’m not saying to give up your vision for the customer, but to find a way to utilize what you know about them to improve your offering.

What have you done to understand your customers? Leave a comment!!