Who Gives This Type of Advice?

In a conversation with a client, we discussed a piece of advice he had received from a venture capitalist in regard to his business. He had been seeking an investment of a few million dollars, most of which would be spent on development and hardware infrastructure for the business. The business already had clients lined up to use the pair of products as soon as it became available, thereby crossing the first hurdle of getting the first paying customer.

With this validation under their belt, he hoped that the VC he was meeting with would see the promise. However, he left the meeting empty-handed, though the VC parted significant amounts of advice on how he might proceed. The reason he gave for declining the investment, though, was something along the lines of:

It’s not big enough for me to get involved. I think your business will do well, and will be profitable in the near future. However, you have a long road in front of you to reach the market, and the competition is quite strong. It’s not for me.

There are actually two types of investors who would make such a comment, and trying to differentiate between the two is complex at best, impossible at worst.

The first investor knows the industry, the competition, the existing products, and understands the business idea you’re proposing. He’s looked at how it compares to the current offerings, and has made an educated guess as to how the target market will respond. He’s factored in changes in the nature of the market itself – in this case, it’s age-specific, so understanding the generation that will be targeted to adopt the product is a key requirement to being able to project the business’ performance.

Once all this has been taken into consideration, this investor feels that the adoption rate will not be high, the product will not redefine the market as a whole, and there will be stiff competition. It’s unlikely that the business will do much beyond turn into “yet another” player in the specified market.

The second investor is likewise well-educated in the industry, but is also looking at it from the perspective of his own generation. That is, he sees how his generation would react to such a product, and projects that thought onto the current market. With limited adoption by that generation, a generalization of how it might be adopted by other markets is created, resulting in the same conclusion.

The difference between the two types of investors is that the first has made a properly balanced argument for why the business will not be the next shining star. The second, however, has merely projected an attitude against a new business, whose market he does not really understand. When the advice comes from the second investor, it should be taken dubiously, since he clearly does not get it.

The problem, however, is how to tell the difference between the two. For that, you need to know the people involved, past investments they’ve made, and then make a judgement call based on that.

Question: Favorite Place to Get Work Done

Today’s post is really short, because it’s actually a question, not an answer.

I was forwarded a talk by Jason Fried about Why Work Doesn’t Happen in the Office, in which he discusses where people like to go when they need to get some work done. Interestingly, the answers he got were pretty much anything but the office.

The question is the same as Jason’s question:

Where do you go when you need to get some work done?

It’s a Good Idea, Now What?

Often in my line of work, I have conversations with people who have thought of an idea for a product or service, and are looking to turn it into a business. The first barrier they need to cross, namely, having a GOOD idea, has been crossed via validation from potential customers of the product or service. The question they have, then, is what to do next.

The first thing that needs to be realized is that getting validation that the idea is a good one has ramifications for how to proceed. Some potential clients can help by working with you to refine the service or product. Other times, you have to go off on your own and figure it out.

One of the biggest mistakes someone new to the business world can do is to go out and try to raise capital. The reason is quite simple – you don’t know yet if you actually need any. Sure, it would be nice to have a budget of millions that you can spend on fancy offices and a huge staff, but do you NEED it?

The first approach, therefore, should be to determine how much of the product or service can be developed with what you have – namely, yourself (and any partners you may be working with). Commonly known as bootstrapping, you should be trying to build out with the minimum amount of resources possible.

If that’s not possible, see what you can get by reaching out to your network. People don’t expect to work for free, but you may be able to barter something of value (and note that shares in your business currently have little value at all) for work.

Don’t forget that you need to be thinking about multiple aspects to your business. You need more than just an idea, product or service – you need to be able to sell it. If there are legal ramifications to that, make sure you work them out up front. You may need a marketing plan, you might need to work out pricing schemes. If you know someone who’s been in business, talk to them – you should try to get a mentor if you can, if only to steer you clear of issues that you might not need to face.

However, start your approach with an eye toward frugality. That doesn’t mean trying to pay less than the value of a given item, but rather determining if you need the item in the first place. There’s a gray area between good enough and perfect, and usually, perfect isn’t worth the effort over good enough (though of course there are many exceptions to this).

Starting a Business

A recent course which was titled “Starting a Business” and ended being better named “Writing a Business Plan” got me thinking about what kind of advice I would give to someone just starting out. I thought back to a few businesses which started out as a single person, and have grown, and realized that there are two kinds of people who start businesses, and the advice to each is different.

First Time in Business

If you are in business for the very first time, then what you need to do is go out and find some customers. No fancy business plan, no expensive incorporation, just a phone number or email address at which you can be reached. Reach out to your network, announce that you’re in business (explain what type of business you’re looking for), and ask people to send you leads.

What you are trying to do is get some momentum, and the simplest way to do that in the early days of a business is to find one person who will pay for what it is you have to offer.

One friend started his business with $500 in his pocket – he unpacked the coffee machine, pulled out a list of phone numbers for every person he knew, and started calling each to let them know he was in business. A few years later, he has several people working for him on a variety of projects, and has some idea about where he’s taking his business. But the start was informal – just a bunch of phone calls.

What it comes down to is networking to find one client. Once you have that one client, you can worry about determining where your business should go – taking legal steps to protect yourself, setting yourself up to be as tax friendly as possible, etc. The first step for someone in business for the first time is always networking.

Been There Before

If you are starting your second or later business, then the steps are different. Finding your first customer isn’t as important as figuring out what this business will do. You have to reflect on your previous business to determine, from a business perspective, how you can do better. In that case, a formal business plan might be wise – you may have the time to do this, and can afford to spend valuable time researching your target market, the industry, raising capital, etc.

The steps aren’t as clear here either – what was the end of your previous business that pushed you to start a new business? Would you call your previous venture a success? How would you apply the lessons learned there to your next venture?

These questions, and other related questions, need to be answered in order to determine your best approach to starting anew.


If it’s your first time in business, then don’t over-think it – just go out and find someone who will pay you to do the kind of work you want to be doing. If it’s not your first time, then reflect on your previous endeavors and figure out how to apply the lessons learned there to your next venture.

Bad Marketing Pitch Raises Scam Alert

I use Twitter as a source of interesting articles, sites, and other content. Unusual for Twitter readers, I actually read an incredibly high percentage of posts in my feed (currently about 80% of what’s posted is actually read by me), and that’s without using lists or any service other than the website itself. When I saw the post below, I decided to check it out:

Google mistake Reported by Jill ChristopherI clicked the link, and found myself looking at a marketing pitch for a course on how to get other businesses to pay you to get a listing on Google. After watching for a few minutes, my scam radar starting beeping. One of the images just seemed wrong:

Google Local MapThe map was accompanied with an explanation that the items marked with letters were businesses who had claimed their listings, while those without letters (just a red dot) had not. Money could be made by listing a business for someone who doesn’t know how to do it, and then get paid a maintenance fee to keep up the listing.

This didn’t seem correct, and further investigation showed that the dots are actually for businesses who have ALREADY claimed their listings. The reason some are marked with letters is simply because they’re on the current page of Google listings. Not only that, but there is no maintenance fees to keep up the listing – once you’re listed, you can forget about it. A quick check online directed me to another page, which had the details of the scam, and so I passed it back to Jill in case she didn’t realize she had just posted a scam to her feed (the other posts from her I had read didn’t seem to be scams, after all):

Response to Jill Christopher about the scamPerhaps unsurprisingly, there was no response from Jill regarding her dubious post.

What is interesting, though, is that what triggered the scam alert was an actual lie – that is, what the map represented. Anyone even somewhat informed on Google would be aware that their statement was simply wrong, and therefore everything else claimed in the pitch (which is quite long and includes pop-ups trying to get you to buy a $97 course) is likely erroneous too. While marketing pitches are not always known for their accuracy, they do try to avoid flat-out lying.

Marketing is meant to draw people in, to lure them with the promise of something big, whether income, or a change in a formerly routine task. However, they should not be lying to people, because once the sale goes through, the truth will come out, and you’ll have some upset customers. (While some businesses thrive on negative publicity, it usually is not a recommended course of action.)

So, if you’re planning on creating a marketing pitch, make sure it’s accurate to reality. If it isn’t, someone will find out, and they may then decide to send some negative publicity your way.

Unique Value Proposition Turns into a Business

I was working on a business development plan for someone, and we discussed her business, what she envisioned being able to do for clients, and various approaches she could take to find new clients. This came, after some discussion, to the concept of unique value proposition – that is, what would set her business apart from her competitors. We discussed a few options, such as offering some merchandise to clients who sign up for certain packages, or pairing her services with those of someone offering a complementary service.

These are common spins on how to set your business apart from the competition, but we wanted to take this a step further. Eventually, we landed on offering a custom service that would be given to her clients at no charge, for as long as they were her clients. In the short-term, this might have reduced the amount she could charge each client, but it would also ensure that clients would stay with her for many years.

Working in IT, I went to determine how complicated it would be to build the web application we envisioned. I came back a day later and realized that the application itself, what we had considered to be a unique value proposition for one business, could actually fill a void in the market. That is, many of her competitors and non-competitors (i.e. people offering the same service to a different geographic market) would love such a service, and would likely pay to use it.

The assessment continued to the point where a price could be placed on developing the application, as well as sales models for it (usage and membership fees), as well as marketing angles (it’s a B2C service, so market it to other businesses). The whole business could actually be run in conjunction with her existing business, taking little effort to set up new users on the system (most of this would be automated), but would require significant effort upfront.

What ended up happening is that a business was created for the sole purpose of giving a unique value proposition to ONE client. However, anyone who wanted to use the business, even competitors, could do so – but for a price. That is, we found a way to get the competition to pay to be the competition.

When looking at a business, and its approach to attracting customers, sometimes it will be discovered that something that was added to the business to make it more appealing is actually part of another business. When that’s the case, it might be smart to spin that part of the business off into its own entity, so that you can charge your competitors for using what you give away to your clients.

Understand and Respect Boundaries

I attended a lecture recently in which the concept of boundaries came up, and how some people have a good understanding of other people’s boundaries, while some people do not. Naturally, when dealing with other people, knowing what boundaries exist is incredibly important, but unfortunately, finding those boundaries can be quite difficult.

As an example of this difficulty, someone showed up at the office about an hour later than expected. Asked for a reason, the person responded that it was personal. Later on, the boss found out that it was because of a dental appointment. Not terribly private, one might think… except the employee thought that it was.

This is a case of not knowing someone else’ boundaries. I might not think a dental appointment is a big deal to be talked about by others, but that’s just me. My lines, in terms of what’s okay to discuss in the open and what is not, lie in one place, which are unlikely to coincide with the boundaries of the people I talk to on a daily basis.

Additionally, complicating this is the fact that over time, people move their boundaries. Someone I met yesterday might have one set of boundaries now, but a year from now, topics that are currently taboo may be part of our normal conversations.

In the case of working with the boundaries of other people, be aware that if you aren’t sure if you might be going over the invisible line, that you might be, and adjust your conversation accordingly. Tactful people in general are more sensitive to the subtle (and sometimes not-so-subtle) clues people emit when lines have been crossed. But anyone can learn to turn on their radar, simply by understanding that their boundaries are not the same as those of other people.

Appropriateness of conversation is not dictated by one participant alone – it’s dictated by the boundaries of all the people involved, relative to all other people involved. The strictest rules apply – if one participant would find the conversation taboo because of a single other participant, then that subject is off limits.

If you’re not aware of what boundaries exist between two other people, then holding a three-way conversation can be difficult. If potentially sensitive subjects need to be discussed, try discussing them one-on-one first, which will assist in detecting the lines that have been drawn. Additionally, if personal issues are to be discussed, they should never be brought out in public unless you are absolutely positive that no boundaries will be crossed.

Documenting Business Plans

I’m in the midst of attending a workshop that was titled “Starting a Business”, but which I’ve learned would be better titled “Writing a Business Plan” since that’s what is being focused on. This raises at least one question, which is how fundamental is writing a good business plan to starting a business?

This came up during one of the sessions, when one attendee asked what it would cost to get a business plan written professionally, and the instructor replied that it cost about $3,000. However, he added the caveat that he would not recommend that an entrepreneur, or, as he called the class, micro-entrepreneurs, have someone else write the plan for them.

This evolved into a quick discussion about the fact that there are actually a few types of business plans, and the course is focused on one in particular. There is the plan that you use to show bankers or investors, for which you might pay someone else to write it to be sure it caters to the expectations of the readers. There is also the formal plan which may be several pages long that you use internally to help you manage and grow your business. Last, there is the brief, informal plan that I feel is the most important for people starting out in business.

The formal business plan has many guises, but it essentially runs through all aspects of any business, and summarizes them as it pertains to your business in particular in a single document. Starting with an Executive Overview, running through Market Research and Cash Flow Analysis, it brushes Marketing, Development, Sales, Distribution, and a variety of other topics. It is, all in all, a fairly detailed and comprehensive piece of documentation.

For many businesses, this document is much more than they need.

That’s not to say there isn’t value in it, but that for starting a business, you don’t need this much. What you really need is the much shorted business plan, the one that can fit on one or two pages. You need to know what it is you’re selling, an example of someone you might sell to (or already have), and a vague idea of where you would like your business to go.

In the class were a few people who had already started their businesses. Some of them described the fact that their business evolved as they found new customers. I don’t think anyone in the room already had a business plan, but I think that some of the people in the room would have been misled into believing that they needed a plan to be successful.

You can be successful running things by the seat of your pants. It’s been done before, and it continues to happen all the time. However, if you don’t run through the exercises that writing a business plan forces you to do (how can you fill out the Market Research section if you don’t know who else is in the industry, and what they’re doing to be successful?) then you strongly hinder your own ability to succeed.

The catch is to not get hung up on the document itself, but all the questions and answers it generates. If you choose to write it down in long-form, it can help you when it’s time to look for outside capital, or if you are trying to get a partner to join you. But it’s not a requirement.

Answering the questions, or at least identifying which questions need answering, is absolutely crucial.