Letting jealousy work for you

Jealousy can be a great motivator – don’t ignore it.

Constructive jealousy comes into play when you look at your colleagues, competitors and friends and see that they are doing better than you. When you look at what they are doing well you can emulate it yourself.  You want them to succeed so you can ride on their coat-tails or even do better than them. When a group of you start competing a little you will find that all of you improve dramatically. This is a like a chain reaction of behaviours.

Destructive jealousy is about copying people blindly and trying to prevent them from further success. You may buy the same clothes and model of car as them. You may tell your friends and family how much you hate them and how they don’t deserve what they’ve got. Your behaviours become destructive to others and yourself.

If you think I’m just making up all the above, then ask yourself why biographies and self-help books are bestsellers. We like to see what others have done to succeed and try and emulate them. 

Destructive jealousy mostly applies to your relationships with people in a similar circumstance to you – e.g. you went to school together, you were friends growing up, you both started your career with the same employer, etc.

Keep an eye on yourself and next time you feel that pang of enviousness try and find a way to turn it into a positive driver.

Your credit card is your working capital

Handouts for a startup business?

This piece of advice goes against everything your accountant and bank manager will say to you. If they take you to task just ask them politely if they have ever set up a business.

Taking out a small loan involves a lot of paperwork and distractions during normal work hours which take away from your core business.

Small businesses by definition don’t have comprehensive processes, so keeping it on credit card is one way to keep track of expenses.

It is simpler to use a credit card a lot of the time.

Applying for a working capital loan, including all requests for increase of limit involve a level of dealings with your bank that leave you feeling violated. Let’s be honest, a proctology examination would be relaxing in comparison.

A credit card is simply a pre-approved loan that has a high interest rate. If you are confident you can repay it when you get paid at a later date then there is no reason not to use it (except for higher interest costs).

Working capital is used to cover:

•  Timing delays between payments and receipts from customers (e.g. payroll, office costs, etc.)
• Unexpected expenses – e.g. a new computer, travel, software, accounting help when you are getting a surprise audit, etc.
• Your own costs when you can cover all your other costs but don’t have enough left over to feed yourself.

Be sensible about credit cards and don’t go into debt if you don’t have to, but also see them for the valuable tool they are.

When no one has the answers everybody has the answer

Let’s talk about what happens when your business isn’t working.

Customers aren’t buying. Your sales strategies have failed. You are running out of cash.

This applies as much to new stores in a bigger company and projects as much as it does to a startup.

If you are lucky all your people will stay calm and carry on. If however you employ normal human beings then 

you are going to some silly politics and potentially destructive behaviours.

We are all taught to be problem solvers at school and university. When things aren’t going well we then apply that mindset to the business.

One person says it is the price, another says it is the sales material, another says it is the lack of sales effort, another says it is poor leadership, another says it is poor systems, and sometimes people just plain blame each other.

Maybe people are right about individual issues, maybe the problem is a mixture of all of the issues, maybe your timing for entering the market didn’t match the economic cycle, or maybe the issue is that your product just plain sucks.

Hey, I don’t have an answer here other than to say that you should look out for the warning signs in your own behaviour and in your people’s behaviour. Find a way to keep people working together and from each other’s throats. 

Vanity Metrics

And this morning we was flying over the ocean, and the engine failed, and we crashed, and I saved all the ladies, and the dog in the cargo hold, then I fought the sharks and well all got home in time for dinner.

I only just learned this term from Getting to Plan B, and as someone who works with startups I am loving it.

When the CEO of startup says “I spoke to 50 people this morning”, I am wondering if they mean they were talking to themselves while catching a bus.

When hearing about all the sales calls a company is receiving from amazing clients I am preparing to ask how many have followed through to step 2.

When I hear about the amazing internationally reputable investors interested in the business I look at the amateur business plan and the lack of prototype product I know the investor isn’t opening their wallet anytime soon.

When I hear about the strategic approach they are taking to marketing and all the big companies they are talking too I am thinking that it is often amazing how many sales and opportunities are due to sheer luck, and that as a startup you cling on to your first potential major sale like a limpet on a rock.

When I hear about the amazing functionality coming in a product that will answer all my needs I am thinking that they need to deliver the core product first. I will discount anything that doesn’t exist yet, unless the founders impress me with their flexibility, determination and resilience.

Successful people and companies use metrics that count – like website visits converted to sales, total sales per month, average sales per customer, gross margin per employee, etc.

I like all entrepreneurs and recognise the potential business genius in even the most unlikely packages. A bit of bluster and self-deception goes with the territory, but if you are in a working relationship with me I am going to take a baseball bat to all your vanity metrics (in private of course.)

Or as they used to say, bullshit others but never believe your own bullshit. Yes, I am talking to you.

Startup versus starting a business

We're all taking a longshot

I have been hearing and reading a lot about the difference between a startup and starting a business of late, and I am getting a bit sick of the artificial distinctions being made. I call all new businesses startups, and I don’t care how many dictionary definitions and semantic/pedant emails you send me. Here’s why.

Both varieties share 90% of the same problems, with the 10% difference being whether the product is new or not.

Even that is artificial, as very very few startups are a genuinely new product. They are more often better versions of existing products, amalgamations of existing products or online enabled existing business models.

I have seen successful franchises set up in a new country and lose millions. Why? Because while their concept may be popular in one country in another it may fail dismally. Starbucks ongoing inability to thrive in Australia is a good example.

Just because a product already exists is no reason to assume that it will be easy to sell. Too many in the ‘startup’ tent throw rocks at normal businesses.

For both kinds of business, the problems of establishing and growing a business are identical.

1.  Your business model needs to make sense
2.  Customers need to buy your product
3.  You need to hire employees and you are relying on future income to pay for them as you don’t have the money yet.
4.  Raising capital is hard – many promise but few hand over the dough
5.  Getting your marketing message right is hard.
6.  Getting your website right is hard – nobody gets this right first time

Basically business is business – we are all going through the same learning curve on the same issues at the same time – maybe it’s time to share experiences instead of throwing rocks at each other.

Bring on SaaS

We know what is coming!!!

2012 is going to be a fascinating year for all of us – especially in terms of how technology can help us all.

As someone who runs a company I cannot begin to tell you how much I love and hate IT.

When everything is working all is good. When things break down – usually of their own accord and not due to changed settings, then life is not great. For example I have spent the weekend battling problems with Microsoft Outlook, my ISP who doesn’t provide support on weekends, and a major update to Windows and Office. I have put most of the weekend into solving IT issues.

Should I hire someone to sort through it. Yes, I should. Are they available at low cost whenever I need them, not a chance. Startups don’t have much cash.

Back to 2012. There are a number of trends converging in 2012 which will rewrite the way we think of and deal with IT issues.

1. Software as a service (SaaS) – imagine never having to install and maintain software releases again. I have been using Bullhorn – an online recruiting database/CRM/Email solution from the opposite side of the world, and continue to be amazed that I can touch type as fast as normal with absolutely no lag in what displays. Google Apps, the Zoho suite and Microsoft Office 365 are all the ones to watch.
2.  The Cloud is coming of age – get rid of the need for running your own servers and only pay for what you use. Online storage will become the norm – and even better, if they have RAID2 or better backups, then recovering data just got that much better too.
3.  Lawyers are finally recognising that we buy and use things as an individual or a family. A good example is Amazon allowing you to read your Kindle books on all your devices, after all how many sets of eyes do you have. For example, book publishers don’t genuinely expect everyone in a family to buy a separate copies of the same book do they. Likewise on an individual level you can have a desktop, a laptop, a smartphone and a tablet. These devices change regularly, but the one constant is the person or peoples using them.
4. Windows 8 is coming. I know a lot of people hate Microsoft, but I am not one of them. I value what they do, and as a businessman I look in admiration and envy at the same actions that thy call ruthless. If you are like a lamb in a lions den, expect to get eaten. From what I have seen of Windows 8 and its implications they are taking all of the above trends and combining them in a way that will be great for those of us who want to do business and not do IT. To put it more forcefully – I live on my iPad2 right now, but I will switch to a Windows 8 tablet and smartphone quicksmart if it allows it all to be integrated. I’ll even pay a decent amount for a Windows 8 tablet if I can use it as a real computer too.

Next year will be exciting.

Simplicity is coming

Do what needs to be done and nothing more - keep it simple

       

Right now we are all being held hostage to multiple software platforms, operating systems, devices, internet service providers, major vendors, etc.

Enterprise systems are ending in larger and larger failures. How many headlines are we all seeing that are along the lines of “Company abandons implementation after $50 million”? Almost weekly I know.

To me the growing answer is complexity.

Major vendors have platforms that can do almost anything for anyone, which seems great. Customers love the idea of having a platform to transact all their daily business in a manner that reflects the way they do business.

It is this that is one of the core drivers of complexity. Not only is it very expensive to tailor a system to match your company, but it is even more expensive to update the system when new releases to the underlying software arise every 6 months or so.

In my day to day business I am asked to put my teams into providing Microsoft Excel solutions for problems that clients have which they should be able to solve using their enterprise solutions. I used to think this is ridiculous and try to talk client’s into dealing with their enterprise vendor, but now I am getting it. It is about simplicity.

There aren’t really that many people available to freelance for updates to enterprise software. They tend to be available through a few companies and hard to schedule when you want.

We are all being held hostage to a few. It is like the old fashioned guilds that used to deny the ability for anyone to work in their area unless they sanction it.

Time to strike back. Enough is enough.

First off – bite the bullet and change your company’s processes to match that of the major software. Hundreds of thousands of hours of collective wisdom have gone into the design of the off the shelf solutions. Stop thinking that your way is the only way and adapt to the collective wisdom instead.

Second – Instead of looking at solutions that take care of all problems remember that the more integrated a system the less stable and predictable it is. Try to find core solutions that take care of the major processes and workflows. Then integrate when and as is sensible over time. Get the minimum viable solution up first.

If you think that I am making this up and you provide software solutions – beware. I know of one major international listed company that has banned Microsoft Access databases in its company – why? Because they don’t have enough expertise to set up and maintain Access databases, especially if the developer has left.

Want to know if you’re an arsehole – check the sick leave records

Being an arsheole can only get you so far

It takes a fair bit of stubbornness and ego to start a business and then nurse it on its way up.

You will need to provide leadership and vision at times when nobody knows what to do next and the future is seems so bleak that all around you deflate.

Providing certainty is your core job description. If people see you believe in the future of the company then they will have the courage to continue as well.

All strengths can also be a weakness.

As your company grows you will take on more and more people who have less experience with the stresses of a startup. You will need to lead, beg and cajole them to embrace the new working environment. 

Remember that the first few people willing to sign on with a startup are not the average employee. The willingness to embrace the uncertainty of a startup is quite rare, even with a generous employee share option plan.

When things aren’t working out when they should instead of taking it out on your employees take a bit of step back and turn a cold eye towards the situation.

Maybe you have chosen the wrong market, maybe your price is wrong, or just maybe you are holding the company back yourself.

One of the many dirty secrets of management consulting is that when called into a dysfunctional company they need to find ways to politely suggest that it is the behaviour of the founder and the management team that is causing the problems.

If you want to save yourself some money check the sick leave records for your companies. People usually get stressed and don’t come in for two reasons.

First, they may hate dealing with their boss and their co-workers. Basically nothing they do is valued so they feel sick at the thought of coming in to work. They may also be finding a way of avoiding conflict between other people – either so they don’t have to be part of it, or caught in the middle.

Second, they may be judging themselves on their own performance. This trait usually gets worse with higher intelligence and a strong sense of conscientiousness. These people may feel that the system or their boss won’t allow them to do what needs to be done.

I can’t tell you how many managers I have met who are friendly and seemingly competent to their equals or superiors, who are actually clueless idiots who damage their company all in the name of what they see as the right way to do things. You need to be vigilant for them.

The problem may be you, it may be your management team, and it may even be a few of the normal staff members. Patterns in sick leave are the early warning sign of imminent problems.

All important decisions are made in the space of 7 breaths

Sometimes you just need to act.

Time to shamelessly quote movie dialogue. Supposedly this is an old Japanese saying – and there is a nice grain of truth to it.

Think about some of the major decisions you have made in life. Think of things like accepting a new job, or quitting a job. How about whether to buy a house or not, or to make a long term commitment to your partner. If you think back you may understand this saying. I’ll bet you did things because they seemed right and you committed to the decision. Likewise, I bet there are a lot of situations where you knew that something wasn’t right and made a snap judgement not to spend any further time on it.

Part of this comes from temperament, some from your willingness to take on new situations, and a lot comes from your life experience.

With experience comes an understanding of the importance of things. As a new business owner you will be go through the same learning curve. A lot of things are new to you and seem important. You don’t want to make a mistake, so you spend time on every decision.

You need to go through this learning curve, and this is the reason I advocate starting a business to learn how to do business.

Also, a warning shot to all of those you with a university education – the long term study results are clear. The more university level education you have the longer will take to make a decision. 

Stop trying to do it all yourself

Why are you doing the work yourself?
But darling, I save on fuel.
Yes, but it takes us ten times as long to get there.

The formative stages of your new business venture are hard. You need to be doing a little bit of everything – marketing, legals, accounting, design, IT, HR and more.  You very rapidly learn to be a generalist.

If you can get across the fundamentals then you can help the company grow rapidly with a minimum of indecision. This works for a while, but sooner or later the company gets too big for one individual to be the decision maker – there are just not enough hours in the day.

I have seen many examples of fast growing companies topping out at about 20 employees and having trouble growing beyond that. I have no studies to back this up for you, but the maximum size of a company under a central decision maker seems to be in the 20-30 employee mark.

The issue here is the founder. Once they worked out how to do everything they then try to keep doing it. Sooner or later you need to start trusting your people and managers to do their job.

You can use part-timers to help out. Hire an accountant one day a week. Hire an experienced HR person on a 2-3 days a month basis. Put on salespeople on a commission basis. Have IT support on a retainer.

Give yourself a break and help your company live up to its potential and stop trying to do it all yourself.

Act like you own it

Nah ... not my problem.

When you own a business you own the successes and the failures.

As an employee it is always possible to find a way to put off decisions and deflect blame. A lot of people go their whole careers avoiding making decisions or taking responsibility – and to a degree they are correct as the system largely determines ability to make a difference to outcomes.

The experience of setting up a business is a bit like moving out of your parent’s home. It is scary. There are a lot of things you don’t know how to do, and you didn’t realise how much was done for you.

It’s the weather. It’s the competition. My employees are just lazy. The red tape is too much. My suppliers have it in for me. We have a great product but nobody recognises it.

All these are excuses I have heard and can guarantee I will continue to hear. These come from people who don’t own the outcomes of operating a business.

Now it’s just you. Accept this reality and get on with it.

If you think you’ve been screwed you probably have

Being stuck in the middle hurts  

When you go into business you leave the protected and cosseted world of being an individual. Now you are fully exposed to commercial law at its finest.

• You will never have all the information you need to make a decision.
• Contracts are legally binding – Yes this is obvious, but many people entering business think that they can change their minds at a later date and the other person will be reasonable. You are required to perform. I see this mistake all the time. Make friends with your lawyer.
• You don’t have time to do all the homework you need to.
• The other party is under no obligation to pass on any information, other than that which they are legally obliged to for the formation of a contract.
• They may pressure you into making a deal now (the ticking clock approach, and the ‘this is a one-time opportunity’ approach).
• If you don’t include all your costs and the conditions precedent for you in the contract you may not get them.
• You are required to seek your own tax and accounting advice. Your agreed price may end up costing you more than you thought.
• Some people get tricky with the conditions and pricing of their services/products. This can come back to bite you at a later date.

All this is a fun learning curve – but never forget that it is a learning curve.

The other person will always know something that you don’t. A good businessperson leaves something on the table to keep the other party in a long-term relationship. However, some people can’t help themselves and they have to screw every last penny out of a contract.

The worst are those who profess to wanting a win-win outcome but by their actions don’t care at all. These are usually the big corporate purchasers who tell the media that they want a sustainable supplier base, and then tell their consumers that they get them the best price they can. You are stuck in the middle getting screwed by someone with good PR – and it hurts.

Trust your instincts, and find ways to duck and weave, delay decisions, build in options and variations, build in ratchet points or other mechanisms to revisit price, or other ways to make sure that being screwed doesn’t destroy your business.

Fixed pricing – greater profits – greater risks

Get fixed pricing right and your company can take off

When you are offering services as your product line, the majority of your costs will be wages.

When you are in construction you have wages, material costs and equipment costs.

Everybody starts a business with the intent of fully charging through their costs to the client.

This is great when you can get away with it – and if you can – please do.

However, there are good reasons to go fixed price.

1. Your customer wants certainty of price for budget purposes.
2. You are in a competitive market, and you need to price to match or beat your competitors.

All is not lost. You may in fact be more profitable going fixed price.

When you are asked to give a fixed price the customer is shifting some of the risk back to you on your estimate of the time and effort required to complete the work. However, for all services based businesses the client can hinder your work, leading to cost increases. You need to build this in.

If you can anticipate your customer’s issues and guide them through the issues faster than you priced, then you end up with a better profit than planned.

As part of this approach you should also take a peaks and valleys approach. That is, you win some, you lose some. Over time you will get better at scoping, scheduling and pricing work.  Put aside windfall profits and take minor losses on the chin. For major cost blowouts caused by the client make sure you can claim variations.

Get fixed pricing right and you could find your gross margins improving.

Think long term – act short term

Big results come from a lot of smaller actions

When I was younger and naïve I used to believe the rhetoric about companies always needing to act only in their long term interests. Sounds good.

The only problem is that you have to survive long enough to have the kind of spare money to drop on to long term investments such as R&D. Alternatively you can have a job in government and spend other people’s money.

But you don’t have this option yet as a startup as your revenues won’t cover the long term just yet.

You can build up to delivering your long term vision by using short term results to build up the foundation for the longer term version of the company.

If you are one of the 99% of new businesses that don’t get funded by a venture capitalists, you are quickly going to hit the cold hard reality of how hard it is to win customers and make ongoing sales. Some of you may hit it lucky or have lucky streaks, but it is a hard battle.

For example it normally takes about 3 years to establish a regular customer base and a product/service offering that matches what clients want.

The other reason for acting short terms is that your business plan is your view of how you want the world to work. Not many business plans last contact with real customers. So every short term win you have sets the foundation for a new and better business model that has a better chance of success.

You don’t have to give up your long term goal, just think of it as a series of smaller short term wins.

Thank you friends for their kind advice – but ignore them

Supporters and those with constructive criticism are welcome

One thing you discover when you start a business is all the advice that your friends and acquaintance have for you.

On the one hand, it is really great to have all the interest in what you are doing.

However, what you will find is that what a lot of people tell you is really quite negative.

You will hear comments like, “it’ll never work”, “you aren’t an entrepreneur”, “what would you know about running a business”, etc.

When you get this from one or two people you can deal with it, but when you are getting this from many people it can absolutely crush any morale you have.

As to why people talk like this – I think the answer is simple – they are projecting their fears. They are imagining themselves actually taking the risks you are, and most of what they are saying are the reasons why they haven’t done anything yet.

Some of your friends will be constructive and supportive – keep talking to them.

But, don’t feel compelled to talk regularly with the negative people around you.

Be polite when you listen, nod a lot, don’t argue, and ignore most of what you hear.