Month: April 2014

“Focus on cash flow, not profitability” – Guy Kawasaki

Profitability is one of those spreadsheet things that we can sit down and calculate.  The inputs are price and cost and we can play with the numbers until they look good enough for investors….

Of course it’s not that simple but cash flow kills the startup quicker than un-profitability.  Cash flow adds the time dimension to the financials.  Not all customers pay on time and some don’t pay at all.  And yet, your suppliers expect you to pay them on time and your employes, for some reason, want a paycheck every two weeks or so and your significant other would like you to contribute to the rent.  This is why Freemium business models can be risky.  You get traction with endusers but you can’t control when they decide to pay you.

Maintaining cash-flow can be a significant challenge and one that most CEO’s are not prepared to deal with.  It’s not fun to bug people about money.  But you need a process to do so and that means you need to measure it… every day!  Who is paying and who is not?  Those that aren’t, how long have they been deadbeats?

Another important measure is how many days it takes to close a sale.  A sales process gets more expensive the longer it takes for the customer to decide to buy.  You need to keep an eye on this.  Some sales channels close more effectively than others.  Excuses don’t matter…only cash.

Sometimes you have to write letters and make phone calls.  Here the thing:  you’re managing your cash flow and all of the businesses in your value chain, including customers, are managing theirs as well.  That means they are deciding who gets paid first and who get’s put off.  It’s the law of the squeaky wheel.

If you are blest enough to receive venture capital, you can also run out of cash.  Going back for more gets REALLY expensive.

Read Reality Check by Guy Kawasaki.

Blogging Gazelle is published daily by Shawn Carson

“Talk very fast, hope something good happens, take the credit” – Dr. Who

For many, this sums up the art of the pitch.  But remember, Dr. Who has a world class group of writers behind the scenes and his witty phrases are the result of many takes and rehearsals.  Plus, he’s a pro.

Getting a great pitch together requires time, preparation, help and practice.  If you do the hard work behind the scenes, you’ll look great, sound great and pull it off with confidence and flair.

 

Blogging Gazelle is published deadly by Shawn Carson

“If you don’t take money, they can’t tell you what to do” – Bill Cunningham

This quote came from a book about bootstrapping.  The advice is to bootstrap as long as you can for two reasons.  First, the closer you get to selling your product, the more value you create in your startup and the less equity it will cost you should you decide to take on venture capital.  Second, when you take on investors, you take on partners who have a say in how the business is run.

As CEO, you are accountable to keeping your investors informed and you will have milestones to accomplish in order to continue receiving their money.

So let’s be clear about investment capital – it buys you time.  When you are ready to scale and really launch your product across your market, it takes a lot of money.  National campaigns are very expensive.  Sure you could grow incrementally through social networks and word of mouth but it takes months and years to get a large following.

Using other people’s money buys you that time but there’s a cost.  You share ownership and a Board of Directors who can decide to fire the CEO.

How important is your ego to you?

 

Blogging Gazelle is published daily by Shawn Carson

“Think in the morning, act in the noon, eat in the evening and sleep at night.” – William Blake

Routines help provide focus.  You need time to plan and you need time to get things done.  It’s easy to let other people and circumstances fill your schedule with meetings and drop-ins.  Scheduling your time for being offline can provide some control.

It’s also important to turn it off and be a regular person.  Have friends, hobbies and activities you enjoy.

 

Blogging Gazelle is published daily by Shawn Carson

“I do love a good toggle switch.” – Dr. Who

The two guitar amps I own both have a mechanical toggle switch that powers them up.  Perhaps there’s a good technical reason why these switches were chosen but if you consider the dozens of ways to turn a piece of electronics on, it seems odd that my amps still use mechanical toggles.

But I like them.

To turn on the device, you have to reach out, touch the switch, move it up and then look for the light to come on.  But there’s one more thing.  There is that solid firm sound of the “click”.  I just described an experience that involved three of my senses; sight touch and sound.

When developing new products, you would do well to involve as many senses as possible in the use of the product.  The more the customer can interact with your idea, the more the experience will leave an impression.

There are many examples. Harley Davidson sought legal protection for their classic rumble of the motorcycle engine.  Despite the improvements in automatic transmissions, sports car enthusiasts still prefer shifting gears manually.  Every Apple product I’ve owned not only looked good and sounded good, but they also felt good.  And that click sound you hear when you connect the power cord to the MacBook is not an accident.

Great user experiences may be hard to measure tangibly but they can make all the difference.

 

Blogging Gazelle is published daily by Shawn Carson

“What you accomplish through your efforts measures effectiveness. What you accomplish through others measures of leadership. How others respond measures success.” – Shawn Carson

Measuring a startup is a difficult thing.  Especially when you are in the pre-revenue stage.  Sure there are strategic milestones such as prototypes and product releases but these in themselves will not indicate success; only the result of effort.

You need to develop measures that indicate how others react to what you are doing.  We call these validations.  Here is a short list:

  • Customer Feedback – have you talked with 100 or more customers about your innovation?
  • Paying Customers – For the startup, these are supreme indicators that people will pay for what you are offering.
  • Key Employees – is your value proposition attractive enough to bring on highly qualified people who are willing to work for upside?
  • Partnerships – You won’t get there by yourself.  Do you have relationships with value added partners?
  • Advisors – Are there world class people offering their time through coaching and mentoring?
  • Investors – Has anyone shared your risk?

You should factor validations in your key measures and track them as carefully as any product development activity or financial data.  If the validations don’t come, you are on the wrong path.

 

Blogging Gazelle is published daily by Shawn Carson

“Do one thing well” – Chinese Proverb

“We have a platform technology” was the way the entrepreneur described her company idea.  Investors love to hear that your idea could benefit more than one market but it comes with a curse.  It tends to make the entrepreneur opportunistic.  Opportunism is the enemy of focus.

If, during your customer discovery process, you come across a new market that is very attractive, you might choose to pivot.  But understand this; a pivot is a move in a different direction which means you stop going down the path you did before.

You will spend 60 – 100% of the time and effort to develop your market and business model as you did developing the product itself.  As a startup, it’s really hard to do more than one.

Pivot means CHANGE DIRECTION, not stay the course plus add one.

 

Blogging Gazelle is published daily by Shawn Caroson

“Dear Boss: I am writing to tell you your services are no longer needed.” – Chris Guillebeau

Sooner or later, your startup will require your full time attention.  For one reason, investors don’t invest in part-time ventures.  But the main reason is there is simply too much to do in very limited time.

Having a job to pay the bills is a good thing, especially if you adjust your lifestyle to a level of simplicity that allows you to provide some initial funding.  And yet the sooner you can make the leap, the better for your startup because you are always competing against time – the time to get your product to the market quicker than your competitors and the time to capture enough market share to sustain the business.

Read “The $100 Startup” By Chris Guillebeau

 

Blogging Gazelle is published daily by Shawn Carson

“Never trust a man who doesn’t shine his own shoes.” – Alan Alda from West Wing

This quote has stuck with me for years but it’s meaning has only been revealed through time.

I think it’s about integrity.  It’s about people who make it through their own hard work and leadership rather than attaching their success to the efforts of others.  There are those who create value and the rest who try to leverage that value for rewards not earned.

Borrowing ideas from others to create new value in new markets is part of innovation but using other’s ideas to compete with them is a mere copycat.  Compete by doing something different and better.

 

Blogging Gazelle is published daily by Shawn Carson