Place your bets

As a business, an investor or an individual we must decide where to place our bets on a daily basis. Whether deciding where to go on a first date or where to invest $1 million every decision that we make sets a course of action that at times is irreversible. If you've ever played or watched poker you will notice that the best players utilize two basic processes for making a decision on where to place their bets and how much to bet.

1. What are the odds? What are the odds that you have the best hand, in other words the position of power. Do you have the big stack or will you be bullied by the larger corporation if the negotiations become contentious? What are the odds of you having to go all in and lose it all if your opponent pushes back or comes over the top?
2. How does my opponent play? Watch how your opponent plays. Are they loose and aggressive or very tight? If you know that your opponent plays very loose and aggressive than you must be prepared for them to come at you with ridiculous offers or bets because they want to test you to see if you will fold. If they play very tight than you should prepare for a very numbers driven process where the financials make the decision, not emotion.

Negotiation is an art form. How hard do you push? When do you push? At what point are you going to push the opportunity out the window? We all make mistakes the first time around, but here are some lessons that I have learned and practices that I now employ to help in those tight moments.

1. Be prepared. The more prepared and knowledgeable you are the more comfortable you will be in any negotiation to quantify and qualify any terms that you are requesting.
2. Be calm. Never, ever lose your cool. You will be tested, pushed and manipulated as the younger or less experienced party. That is ok, let them push, don't react... just take everything in and think before you speak.
3. Be patient. There is no rush. Don't feel like you need to make a decision in that moment. You can always use language like "I have to pass this by my board, but we will take everything into consideration." Waiting a week to provide a response is not going to kill a deal, a poor, unprepared response will.
4. Be willing to walk away. No matter the position or lack of strength your ability to walk away without your business being significantly compromised is the greatest negotiating power that you can have. Never put the success or potential failure of your business or job in the hands of one person, vendor or partner.

The question that will linger here is "how can I prepare for something I have never done before?" Well, I will beat the horse once again to tell you that it comes down to your team. Surround yourself with experienced individuals who will challenge you when you are missing something, encourage you when you are doing well and support you when you're in uncharted territory.

Do your homework!

There was a line in the movie Sentinel where Keifer Sutherland said that “once a forensics investigator has a notion of how a crime was committed all of the evidence they find is used to support their assumption”.

Many of us in business and life do the same thing. We guess, have a hunch or have talked to a few people and then look for evidence to support our theory rather than try to poke holes in it. The danger in that way of thinking is that you can quickly end up married to an idea that leaves you in debt and a year down a path that doesn’t really make sense. Don’t feel bad, there are a lot of great ideas that don’t make great businesses and we have all had that moment where we realize our great idea would be a terrible business.

The key to making good decisions is information. Whether it is an article, a traffic report, a lecture or a look that says I am going to slap you...Everyday we react based upon information, information that we seek out because knowing that Microsoft has just launched a competitive product, there is a back up on 76, your significant other is upset because their cousin passed away or the CEO of your company was arrested for streaking through city hall helps us to decide how we should act or react.

So why do entrepreneurs and business owners guess? Because, quite honestly gathering information is a pain in the you know what. We all hated homework when we were in first grade and nothing has changed. It may not be fun, but you have to do it. Knowing where potential customers live, work, what they buy the most, what they read or watch, how many competitors are in the area, how much it will cost to advertise, your advertising ROI and how much it will cost to start or grow your business… this type of information is either used to create an effective business plan or turns out to be an “oh #!&*” moment when it is too late.

Conducting effective market research starts with identifying what you need to know. What questions do you need to answer to ensure success? I will give you a few hints.

1. Size of the market opportunity/demand (how many consumers currently or could buy your widget?)
2. Market competition (how many businesses already serve this need?)
3. Operating costs (how much does it cost to run this business?... from office to supplies and marketing to staffing)
4. Revenue projections (how much can you make from this business?... this is the result of your marketing and advertising plan)

The Miracle of Child Birth, also known as Starting a Business

Sorry for the comparison ladies, but I am trying to make a strong point to all the entrepreneurs out there who have the wrong perception about what it means and takes to start a business. So guys let's be real, none of us really get this, but for those of you who have been through it with your significant other it is an intense roller coaster ride. So what does this have to do with business?... the steps in starting a business can be compared to the steps of conceiving a child.

1. You conceive the initial idea... That is always the fun part, your drunken moment so to speak... You think of this great opportunity, love the idea of creating your own business and enjoy the initial pursuit.
2. You find out your pregnant... this would be the oh my god moment when you see that this is real. You are excited and a little nervous. You actually start to ramp up preparing to open the business.
3. You start to feel the effects of pregnancy... morning sickness, bloating, eating for two, mood swings... You are excited one minute and mad the next because some things work out right and some don't. It is a lot of work to nurture a business from idea to reality. Incorporation, funding, marketing collateral, business strategy... it's not as fun as it was when you first found out you were pregnant.
4. Complications set in... we all pray that this never happens in giving birth especially, but in a business, however this happens all the time. Things happen, things out of your control start to drive the final delivery of your child.
5. Your baby is born... now comes the really hard part because having a kid is 3 full time jobs. You have no life, get no rest, spend every waking hour and penny on your baby and have no idea how all of this work will turn out. Will they be an astronaut, will your business succeed... will your child be a petty criminal, will the business fail... will your child live at home until they are 50, will the business linger on but never get out of the break even phase.

The real lesson is this, starting a business is not easy... so don't get discouraged, but don't be delusional. It requires a lot of work, patience, commitment and care. If you want to prepare for starting a business, talk to one of your female family members or friends with kids and ask them what it was like to carry, give birth to and raise a baby. It will have its glorious moments, but like anything in life, it will have its trials and tribulations.

From Cool to Dead Pool

I bet each of us could rattle off 10 applications or websites, web and mobile, that were hot today and gone tomorrow. What is it that makes a new app stick around for the long haul and what drives so many to the dead pool? Is it luck, a rock star management team, endless financial backing? It is the combination of a unique value proposition to the user and real revenue potential. You can get lucky and see a spike in user traffic from buzz on TechCrunch, you can have a ton of money poured into your business, but if the user value proposition isn't there or you don't have a viable self-sustaining business model you will be cannon balling into the dead pool very soon.

How do you know if you have a unique user value proposition and how do you combine that with a real revenue generating business model? A unique user value proposition should have a strong yes to the following questions.

1. Is there a real loss or gain that occurs for the user if they don't have a service like yours? Some examples; will they... miss their favorite band, be able to find old friends, be able to communicate in an emergency or have their website go down during peak usage.
2. Can the user need be filled easily and with a comparable quality through another source? This is the grey area. Every entrepreneur will say no, but the answer is almost always yes. You must challenge yourself to define what is truly different, why a user will choose you and stick with you.
3. Is this something people will share with others? Will they say, "you have to try google, it really makes doing research easy" "you should sign up for Facebook because you can find and keep in touch with so many old friends" "you have to get the iPod, you can actually listen to music and run with this little thing"

Don't fool yourself here. Everyone thinks they have a truly unique value proposition, but most do not. They have something cool, that is fun and will be replaced by whatever comes next two months from now.

This leads to the next test; do you have a real, sustainable business model. Can you make money, how much, how fast and from whom?

If you create value, real value then odds are someone will pay to target your loyal users or just to use your service. What that number looks like, how many will pay and how quickly is different for each industry, each market and each decade.

The two most important roles in a new company are the product manager and CFO. If you have an innovative, user-centric product manager and a tight-belted CFO you will give your business the best chance for success.

Strategic Business Planning

There is so much data available today and so many tools to measure search advertising effectiveness, email response rates, TV viewership, site opportunity, investment ROI... where do you start?

Start with your objectives. Do you want to drive brand awareness, user impressions, revenues, or target gross margins? Remember that your objectives do not have to be, nor should they be mutually exclusive. Creating an effective business strategy should involve the right combination of brand awareness, user impressions or revenues with target gross margins. The question really lies with what is of the uppermost importance today. What short term objectives do you have, long term goals and how do the two meet through your strategic business plan.

At the core of all strategic planning is data such as target customer behaviors, market size or financial projections. Data drives good business decisions. Good business decisions give you the best chance for success. Understanding how each piece of information translates back to your bottom line numbers is the key.

The challenges with data, in my opinion, are identifying what information is most important, what information is dependent and then turning the results into a plan of action.

Keep it simple and work backwards. What are your objectives based upon in hard numbers?

• How much money do you need to make this month to cover bills?
• How many impressions do you need to show up on the "buy list" for target advertisers?
• How many stores do you need to have your product in to meet your target sales growth?

Once you know what you need to achieve, identify what efforts can help you meet your objectives with the greatest margin. If you set up the right spreadsheet, for lack of a better term, you will easily be able to see which tactics move the needle across any category from impressions, to gross margins to product sales.

CEO's of the 21st Venture Century

There are hundreds of thousands of CEO's in the U.S. today and I would venture to say that the average age is 25. Not because major companies are being led by young rockstars, but because engineers are launching web-based products, iPhone applications and anointing themselves CEO's.

A fancy logo and a business card and they are out telling everyone that they are now the CEO of flipperdoodle.com... stupid name but how many of those have we heard of over the last 5 years.

All of a sudden they are a domain expert expecting c-level executives to take their calls, thought leaders to trust their opinions and consumers or companies to pay for their product.

With this title they feel entitled. But entitled to what? Building a product and building a company are two skill sets at the opposite end of the business spectrum.

Reality check, 99.9% of you will fail, be in debt and have very little marketable skills.

So now what? Realize your limitations. Hire a real CEO or let an advisor lead you... or, forget the business card and big dreams and make money. Demonstrate that you can build a business, not a product or cool website, a business that makes money and has customers.

You want the title, you have to earn it!

Worth your time

As an EIR with ETF Venture Funds I get to see a lot of entrepreneurs and the one thing that they all have in common is that they all think their idea or product will be the next $100 million exit.

I have learned a lot over this last year working with some of the brightest people in the industry over at ETF. The most important thing that I learned was that your time is your greatest asset. How you choose to value your time will define how others value it as well.

Over the last 18 months I have had hundreds of entrepreneurs come to me with opportunities. All of which are interesting and all of the entrepreneurs are the type of people you want to be around. It is so easy to be sold on the opportunity because entrepreneurs are so passionate that their enthusiasm becomes contagious. So how do you decide?

Well, here is what I do. I start with my high level goals personally and professionally. Those goals are:

1. Stability, I want to know that I have some sort of consistent flow of income to offset my bills
2. Personal freedom, I need the freedom to take time when I want it to go to a game, see my family or travel
3. Passion for what I am doing, I have to enjoy the role that I will play
4. Financial independence, I want a real upside... not "i will work for 40 years, save money each year and have something to pay my retirement home bills when I am at the end of my rope"
5. Make a difference, I want to feel like I have contributed back for all of the blessings that I have been given

Now that I know what my personal and professional goals are I simply weigh each option and come up with the option that provides the best balance.

All of life's decisions can't be put into this type of neat life matrix but the one thing we can do is take a step back and decide where our time will be best spent.

Entrepreneurs are a different breed. We are born with a different way of looking at life and it can lead to an exciting roller coaster ride or a rough existence.

Keep your eyes and ears open! Don't be sold! Don't be muscled! Don't be rushed! Don't be afraid to take great risks!

Ego vs. Arrogance

It is the same ego that makes an individual believe that they can build a $100 million business up from an idea that causes them to fail. When that ego turns to arrogance and the entrepreneur is no longer willing to listen to their team, their advisers, their competitors or the market conditions.

There are many smart people that fail time and time again because they don't know how to listen.

What is worse, having to shift directions and admitting that your vision or execution was off or trying to force it to prove everyone wrong and failing even more miserably? Stupid question, but many entrepreneurs don't consider the fact that if they are being told by many the people they trust that they will fail and they don't listen and fail anyway, not only have they tanked a business they've burned those relationships.

In the beginning and the end business is about relationships. People will work with you if they believe in you, not your business, you. If you fail, but you learn and they believe in you as a person they will bet on you again. If they can't work with you they won't work with you.

There are many smart young entrepreneurs that I know will work with one day. There are exponentially more entrepreneurs that I would never work with, not because they aren't smart, because they are too arrogant.

Listen to what people are telling you. When they say they don't believe in your business idea there is a reason, and the reason isn't that they just want to crush your dreams.

The entrepreneurial and investment community is very tight nit because we like to work with people we trust. Trust is gained through respect and demonstrating the ability to execute.

Every great leader knows that they must learn to follow to truly succeed. Following means giving up control and putting trust in your partner.

Be confident but check the ego at the door. Ego leads to arrogance and arrogance leads to failure.