Are You Getting Ready To Succeed?

With all the buzz about entrepreneurship, and running your own business, many people are getting ready to succeed at starting a new business and working for themselves. However, all the effort they are placing in preparing for this may be for naught – as George Bernard Shaw said, Those who say it cannot be done should not interrupt those who are doing it. The effort put into getting ready to do anything is not nearly as useful as the effort put into doing it.

Chris Brogan of social media fame writes:

I think we’ll see more solo people tucking in with bigger organizations. I also think we’ll see smaller groups banding together to form stronger groups, not just in marketing, but in any of the newer businesses out there.

This is reality. There is safety in large companies, in that they are better equipped to handle fluctuations in the market, in the demand for their products. A small business which does $50,000 in sales per month is going to be much harder hit by a 20% reduction in sales one month – a large business can absorb that more easily (at least in the short term).

What does this have to do with preparing to succeed? The fact that many people (myself included) do not want to live under the fear of their business going under. We like the security, we like shifting the risk to someone else. Therefore, before we dive into a new venture, we will work as hard as possible to reduce the risk as much as possible. But as Robb Sutton says, ‘One Day’ is too late.

At some point, you need to jump, you need to take some risk. All the time spent preparing could be better utilized by doing. Take the following as an example:

On the CBC show Dragons’ Den, Claire Copp of Vancouver, BC came on the show looking for an investment in her software product, Trader II. One particular point that Claire made was that she had been working on this program for 20 years and had yet to sell a single copy. Now, there are a lot of lessons that can be learned from her presentation, but I’m just going to talk about one. Claire Copp had spent 20 years preparing to succeed, instead of going out there, finding out if there’s a real demand for her product, how much people would pay for it. (As a side note, if you search for “Trader II” Claire Copp, the first two results are Dragons’ Den, and my other blog where I posted a review of the episode.)

Of course, Claire is an extreme case, but the lesson remains. If you want to succeed, then you need to act now. If you keep waiting until all the risk has been removed, you may find that you’re left with nothing at all.

Goals for 2010

It’s that time of year again. With the holidays fast approaching, it’s time to think about where you’re going in life, whether that be personal, professional, or any other aspect of your life. Many people make New Year’s resolutions, but how many of you actually follow through on those resolutions?

Some people dream of success, while other people live to crush those dreams.

Some people dream of success, while other people live to crush those dreams.

What I did last year was to post some of my professional resolutions for all to see. Whether or not that was a good idea is debatable. There is a study that shows that the more you share, the less likely you are to do. I don’t agree completely with that study, and so I’m going to do it again.

First, however, a follow-up to the goals for 2009:

  • Only one of my contracts from the start of 2009 is still in development, and it is scheduled for completion with two weeks.
  • I have not picked up one new contract per month, however, the past 3 months have been very good to me with 2 new clients and one returning client.
  • I haven’t taken any courses this year, but am in the process of learning PHP and the Zend Framework.
  • I have continued to use C# for some development, and am increasing my level of proficiency.

All in all, I feel good about what I’ve accomplished in 2009. While I haven’t met all my goals, I did strive to do so, and had I met all my goals, it would be an indication that I had not set my sights high enough. So, without further ado, here are my goals for 2010:

  1. Learn PHP and Zend to a degree of proficiency whereby I can construct an entire website based on those technologies in a reasonable amount of time (i.e. in under 250 hours for a fully-functional site, and not including the design of the interface).
  2. Launch the product I’m currently working on, Client Data Tracker, to beta in January 2010 and live to the public before the end of March 2010.
  3. Continue developing my consulting to the point that I am putting in 30+ hours per week in billable time on various projects.
  4. Complete the work required for KNIRL.COM and get the site up and running.

These are my goals that I’ll be using to measure my success against in 2010. What are your goals? How do you intend to measure success?

Dragons' Den Special Holiday Episode

I watched the holiday special episode of Dragons’ Den, and it a great way to end Season 4. In case you’re wondering, Season 5 will start January 6, 2010 and looks to be even better than Season 4, and I’m really looking forward to it.

There were, as usual, two deals on the Den. The second was a case of Brett Wilson helping to boost creativity and dreams on the part of two girls, 11-year olds Abby Somer and Megan Boudreau who invented a game called Let’s Dance Board Game and came on the show asking for $10,000 for 50% of their company. Rather than invest in the abilities of the two girls to sell their product, who had yet to sell a single unit, Brett gave them $500 to get them started. If they made money within a year, they could pay him back, but if not, he would write it off. This went against the rules of the Den, which state that you have to get all the money you ask for in order to get a deal, but hey! it’s the holiday spirit!

The other deal, which actually happened first, was presented by Allan, Patricia, Melissa, Jordan, and Amanda Kotack for their company, Cosy Soles. Retailing at about $40 a pair, the family developed the product in response to a need for heated slippers, and have created a second product, heated mittens, which retail at about $25 a pair. Their business was growing, with a steady increase in sales over the last couple of years.

They came on the show asking for $150,000 for 35% equity. The problem, however, was not in the valuation, which seemed fairly accurate, but in the fact that none of the 3 children would get involved full-time in the business. This aversion to taking risk drove most of the Dragons away from the deal. It was as though the family wanted someone to come in and take over the business, and pay them a salary for their work.

Brett did give them a deal, but on different terms. He gave them $30,000 in exchange for 10% equity in their company. The balance of the money, $120,000 was given as a line of credit to help them offset their expenses in the short term. He made a clear point, however. The family would not be getting his time.

The lesson here to future entrepreneurs – going on Dragons’ Den is not like going to the bank with a pitch for a business. At the bank, all you want, or can expect to get, is money. On Dragons’ Den, the coveted deal includes expertise.

Getting Your Questions Answered

I was recently introduced to a new website while reading Bob Walsh’s book, The Web Startup Success Guide. Although I’ve had that book for several weeks now, and have, in fact, read through it three times already, I’m still only scratching the surface of what that book has to offer. You can read my original review of the book, if you like, although I must say, in hindsight, the review doesn’t do the book justice.

The site in question is OnStartups, and the section in particular which I find especially useful, is the answers section. This is a great resource for people running businesses, and while the focus is small businesses just getting off the ground, there are other questions being asked which relate to larger businesses.

If you’re looking for answers to questions about the business of business, then that’s the place to go. If you want to contribute in some way to the next generation of entrepreneurs, then that is also a place where you can provide your knowledge and experience to helping the next entrepreneur.

Dragons' Den Episode 10 – A Review

Having watched Dragons’ Den for a few months now, I’ve developed a certain expectation for the show, and each episode in particular. There’s a certain sense of drama that is played out over the show, with the entrepreneurs fighting to win the coveted deal from one or more of the Dragons. As usual, there were 8 pitches on this week’s episode, and as is also becoming the fashion, there were 2 deals, and 2 follow-ups to past pitches on the den (one going back to last week and the holistic healer).

I’ll briefly recap the two deals here, but then I intend to focus on one pitch in particular which highlighted a potential pitfall for hopeful entrepreneurs.

The first deal was for a smoothie company (Euphoria Smoothies) which was started by a husband and wife team, Sam and Bisma Haider from North Bay, Ontario. They asked for $500,000 for 20% of their company in order to grow from 40+ stores internationally to hundreds of stores. Unfortunately, their product was not unique enough to interest most of the dragons, as there was a strong risk of another company starting up with a similar product. However, their pricing model was different, charging licensing fees instead of franchise fees, and making a margin on their branding. Different enough to interest Jim Treliving of Boston Pizza to invest, but for 50% of the company. While they had $2,500,000 in sales in 2008, the market for their product is quite flooded, the risk high, and sales alone don’t dictate a valuation.

The second deal reeked of sleaze. Mark Chadwick and Neil Currie of Vantage Wire, a company which provides real-time stock quotes, came out with 2 girls and a pitch targeted directly at Kevin O’Leary. The girls had nothing to do with the product, which insulted the other dragons, and showed the entrepreneurs to be out for the quick sale. It also undermined their integrity, which caused the other dragons to bow out.

Kevin, however, wanted to hear more – they had sales numbers to back up their valuation. However, Kevin looked past the girls and saw their lack of integrity, and therefore refused to trust them with his name. He therefore offered the $150,000 for 50% of the company, plus a 5% royalty to be paid until the investment had been repaid. This would allow him to protect his name from being mis-used (Kevin suggested he would likely rebrand the product entirely). Mark and Neil took the deal.

Now comes the more interesting part of the episode – two deals that failed.

Eric Brideau of Augenstern Diamonds came on the show asking for $275,000 for 30% of his company, which manufactured diamonds from human hair. In addition to having the dragons find his product creepy, he also made a crucial mistake – he claimed to have a personal net worth in excess of $10 million. With that kind of personal finances, his need for the dragons is highly questionable. While he claimed that the dragons could provide him with contacts that would help him rapidly grow his company, this also shows that he lacks a certain degree of trust in his own idea.

The other failed deal that provides an even greater lesson is that taught by Claire Copp from Vancouver, B.C. and her software called Trader II. She walked on the set without a demo, a valuation of $3,375,000, and no sales. She talked about the size of the market. She talked about growth forecasts. But she couldn’t talk about her product.

When pushed by the Dragons to explain her product, and how they would make back money, Claire explained how sales of a certain degree would earn back the investment. But she couldn’t explain why anyone would buy the product, nor why she had been unable, in the 20 years she had been working on the product, to sell any copies.

The lesson here is fairly simple. When an entrepreneur comes onto the Den, (s)he needs to be prepared to state the following:

  1. How much money do I want, and what am I prepared to give up to get it
  2. What is my product, and why would anyone pay for it
  3. Who is using my product today, and what are past sales numbers
  4. What is the investment money to be used for

An entrepreneur who cannot answer these questions should be asking themselves whether they’re in the right business in the first place. They can also expect that even if a deal is offered on the Den, it will likely cost them at least 50% of the company, because these questions are of the type that any leader of a company can answer about the company they run.

10 Questions to Keep Asking About Your Business

Since this morning, I have seen several posts on Twitter in regard to the Forbes list of 10 Questions You Should Never Stop Asking published on November 20, 2009. A summary of those questions is copied below, for the full commentary, I recommend you read the original article.

  1. What is our purpose for existing?
  2. Who is our target customer?
  3. Why does anyone need what we’re selling?
  4. If there is a need, is it enough to support a profitable business?
  5. What were our competitors up to?
  6. Can you reduce expenses–without harming the product?
  7. Do we have the right leadership?
  8. Do we have the right employees?
  9. How will we continue to drive revenue?
  10. How are your employees holding up?
Courtesy of Flickr.com by misallphoto

Courtesy of Flickr.com by misallphoto

This list, however, is targeted to a business of a certain size and upward. What should you be asking if you are a one-person shop? To complement this list, I’ve prepared some additional questions that you may find useful, that will hopefully lead you to being in the position to use the list from Forbes.

  1. What am I trying to accomplish?
    Similar to the first question on the Forbes list, this question makes you look at your goals. If you don’t have any yet, then you should sit down and write a few down. It’s hard to get somewhere in particular if you don’t know where you’re going. Alternatively, the answer to this question might be “nowhere in particular” and “let’s see where this takes us”. Both of these are valid, but you should be aware of the answers.
  2. How am I going to reach my goals?
    This question addresses both short-term and long-term goals. If the answer to your first question was to build an application soon to be included on all mobile devices, then the answer to the second question will include points such as:

    • Develop the key components to the application
    • Contact mobile device manufacturers
    • Monitor available applications for those devices for possible improvements
  3. Do I have all the skills needed to reach those goals?
    No one person is perfect for all tasks involved in running a business. You may be really business savvy, but lack some technical skills, or you might be an expert salesman, but don’t know how to deal with copyright laws. You’re either a Jack-of-All-Trades, Master of None, or, more likely, you are the Master of One. If you don’t have a needed skill, how are you going to fill in the gap? (The answer might be that you’ll hold out for a little while.)
  4. Who will pay for my skills or product?
    This corresponds to questions 2 and 3 on the Forbes list. Your idea might seem to be really good to you, but do you know whether or not it’s viable as a business? Have you spoken to any potential clients about it?
  5. Who am I competing against?
    If you don’t understand your competition, then you might not understand your own product. Be aware that your clients will know about your competition and ask you about them. You can demonstrate your expertise by being aware of the differences between what you offer and what your competition offers. If it’s exactly the same as what the competition is offering, however, most potential clients will prefer the business that’s been around longer. Which leads to the next point:
  6. How do I expect to succeed against them?
    This is also known as your Secret Sauce by some business writers. This is the factor that makes you, or your business, different. It might be a customized algorithm. It might be a new approach to an old concept. Whatever it is, this is what will set you apart from your competition.
  7. How am I spending money, and can I reduce that?
    It is incredibly important to keep track of your expenses and revenues, and to constantly review that record. You should know where every dollar is coming from, and where it’s going. For example, if you have a small office with a coffee urn, do you know how much it’s costing to run it? How much did you pay for your business cards? Who owes you money, how much, and for how long? What does it cost you to keep your website running? Are you getting good value for your dollars?
    Only by keeping track of your budget can you hope to keep your business profitable, and be able to grow. How else will you be able to reduce your expenses without compromising your product?
  8. Is it time to hire someone?
    Hiring your first employee can be an extremely difficult decision to make. You become responsible to pay them, and they will get paid before you do, always. In order to make your first hire, you should know what it is that employee should be bringing into the company. Do you want someone with the same skills you have, or do you want a specialist? If you find yourself spending excessive time on administrative tasks instead of working on your clients’ projects, your first hire might be an administrative assistant who can do most of that work for you.
    What’s important to remember is that the hire needs to be worth the investment. If you pay them $40,000 a year, then they need to be adding that much value to the company and then some. In other words, you should see as a result of hiring that person your revenues go up by more than $40,000 per year. Some would say that this number should be around 3 times their salary, or $120,000 per year. The exact number is not relevant, though, but what is relevant is that the employee be worth their salt.
  9. What are my clients saying about me?
    In the age of social media, word about you and your business can spread extremely quickly. It’s important to be listening to what your clients are saying about you. This will let you address issues before they become problems, or to head off potentially damaging rumors (which are not, in fact, correct, or at least, not correct anymore). Gone are the days where customers and clients could be treated with impunity, as they now have outlets to vent against individuals and companies. Make sure you’re listening! (Chris Brogan talks about how to do this.)
  10. Am I balancing my work life with my personal life?
    Too often overlooked, it’s important that you don’t lose track of the bigger picture. Are you spending some time on your family and friends, or are they all forgetting about you? Yes, you’re busy running a new business, but remember to set aside some time on a regular basis to keep those aspects of your life strong.

This list is by no means complete, but hopefully, it will give you a start on keeping your business strong and growing. If you have a question that you think belongs here, please let me know in the comments. I would love to hear what you are doing to ensure that your business is on track to success!

Dragons' Den Episode 9

I particularly liked the deal made last night on Dragons’ Den (if you haven’t seen it yet, click here to watch it online). There was another deal made during the show, between Clayton Hollingsworth and Brett Wilson, for $5000 ($500 of which Clayton received before he left the set), but while Clayton was providing a service, it was not an investment.

The deal which was more interesting was between Ross Lipson & Howard Migal of Grub Canada, and Brett Wilson (yet again). They came in asking for $200,000 for a 20% stake in their company. According to their site:

GrubCanada.com allows you to order food online from all your favourite restaurants for delivery or take out. We make ordering food, fun, fast, easy and much more convenient…

How It Works?

  1. Place order online for delivery or take out.
  2. Restaurant receives and confirms order via email.
  3. Restaurant prepares and delivers or you pick up your meal.
  4. You enjoy the hot, fresh food that just came so quickly and easily!

However, once they presented their numbers, it was clear that their valuation was priced too high at $1,000,000. In the month before their appearance on the show, their income was a mere $12,000. Extrapolating based on their growth and sales forecasting, their annual, after-tax income for that year would be about $70,000.

Ross and Howard, however, knew their company, and the numbers. Their membership was growing consistently between months. Sales were on the rise. Their biggest issue was marketing, and pushing their site around. While their valuation was high, consideration was being given for the fact that they were a young company, and still undergoing natural growth.

Kevin O’Leary started the negotiation with an offer of $200,000 for 50% of the company, to which Robert Herjavec joined in, but contingent on the willingness of Jim Treliving or Arlene Dickinson to join the deal. Arlene, however, was not interested, as she found herself attracted to the business smarts of Ross and Howard, but not the idea itself. Jim was also not interested on account of their business model.

The business makes money by taking 9% of the price of any food ordered from the restaurant as a royalty. Jim, as owner of Boston Pizza, found this to be quite steep, and felt that Ross and Howard would have a hard time getting franchises to be interested in working with them. As soon as Jim declined the deal, Robert backed out, and Kevin decided to withdraw his offer.

At this point, Brett made his offer – $200,000 for 50% of the company, and 1% of the 9% royalty being charged to the restaurants. The other dragons encouraged Ross and Howard to accept the deal – at a $400,000 valuation, they were still getting a higher valuation than their numbers justified, and they were not likely to do better from anyone else (not that there was any other deal to discuss).

The end result? Ross and Howard accepted the deal, and Kevin was left asking if this was the deal that got away from him.

The Art of Customer Management

I was reading a post by Jeremy Lichtman about Website Development where he raised an interesting point – he mentions the concept stage of development, where the initial idea is evaluated, and says:

It isn’t easy to tell a potential customer that their ideas are terrible, or to try and make them modify their concepts in order to allow them to work better online.
Part of that is that developers and designers are by nature creative people, and we don’t like raining on somebody’s parade.
Part of it is also the risk of losing a possible customer.

This triggered a brief discussion in the comments about how to learn the skills required for dealing with [potential] clients. It’s not something covered as part of a standard degree in Computer Science or the like. It’s not part of a certification in web development for most colleges. As a result, many would-be web developers working for themselves fall into one of the following two categories:

Customer Management Chart

Customer Management Chart

  1. They treat the client’s opinions and ideas like gold, and implement them regardless of whether or not it’s a good idea. While this is good for getting work, it’s not good for developing a business, as you end up spending too much time dealing with the whims of ill-informed clients. This prevents you from developing your business of building quality websites that fill real needs. In the end, your clients are not happy because the site doesn’t live up to their expectations (regardless of whether those expectations were reasonable) and you end up losing the client.
  2. You build what you like building, or what you think is a good idea, and if the client likes it, that’s great, and if not, they can go bother someone else. I don’t think this method needs much explanation as to why it’s a bad idea.

What’s needed here is to find a good balance between the two extremes, a sprinkle of tact, and some of your business experience.

Evaluate what your [potential] client is proposing, and try to figure out what the client is trying to achieve. Then confirm your guess with the client. For example, the client talks about creating a blog where every web developer in the world will spend all their time (not going to happen). But what the client really wants is a way to market their new product for web developers.

Now, rather than putting down the idea completely, gather some facts about what the client is trying to do, and what they’re trying to achieve. For example, you might collect some articles about how many web developers have A.D.D. or the fact that there are thousands of sites out there for developers, and the largest such site only has 200K members. Get some examples of how similar products are marketed (e.g. show Eclipse vs. Rational Application Developer for a Java IDE) and what their numbers look like. Try to gather as many quantifiable facts as you are able.

Next, present an alternative to the client, from the perspective of someone who understands what they are trying to achieve. “In order to market your software using various social media platforms, how about we run through some options, and what some companies which are similar to yours are doing.”

There, you’ve said it – what you’re trying to do (market software), there will be choices (some options), and where they came from (other companies). Now, outline the ideas clearly, and demonstrate the breadth and depth of your knowledge by having answers ready for common questions to each option. Don’t show off, just be knowledgeable, and if you don’t know, ask: “Can I get back to you on that?”

Knowledge is Precious

Knowledge is Precious

Not every client is reasonable, but then again, not every client is yours. The key here is not to attack their ideas, but to understand where they are coming from. Why did they choose you for the project? It’s because you know more than they do about how to do it. Share your expertise, use your special knowledge. Make sure your opinions are clearly delineated from the facts.

At the end of the day, you may be able to reason with your [potential] client and land a project that is a good idea, that’s well structured, and balanced.

Some [potential] clients will still insist on a bad idea, despite your feedback. However, you’ve already told them it’s a bad idea, just not in those words. You’ve outlined what they’re trying to do, and you got that right. You’ve outlined some real options that would reach that goal, and they’ve been turned down. What now?

Now you need to look at your business, and the impact accepting this client, and their bad idea, will have on the rest of your business. Will it help improve cash flow because it’s a short project (i.e. high profit margin for minimal resources)? Will this client refer you future business, thus making this a strategic move? Is this a client who has other projects with you, thereby putting pressure of losing other contracts?

Or will this project keep you busy, stressed out, and prevent you from pursuing better clients who will help your business reach its goals?

The answer to these questions will help you determine if you should be accepting or rejecting the bad idea. (Note that while you may refuse the project, treat the client with respect, and you may end up with a valuable connection as a result.)