Tag: management

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Are You Addressing Your Business’ Problems or Just Its Symptoms?

by Cate March 9, 2015 4 Comments

As any entrepreneur knows, there are a never-ending number of issues that will arise as you run your business and, if you want to succeed as an entrepreneur, you need to make sure that you’re able to keep all of these trouble spots under control so that your business continues to move forward. However, it can be really difficult for an entrepreneur to attend to all of these issues and still stay focused on the strategic management required to build a successful business. Getting sucked into dealing with all of these daily fires and not having time leftover for strategic planning is what people in the industry refer to as an entrepreneur who is working in the business instead of working on the business, and it doesn’t bode well for the company reaching its full potential.

This incredibly common issue is actually just a symptom of a larger problem, however. I’ve talked about this before here on New Venture Mentor, and I will probably talk about it again, but today we’ll discuss one specific method for combating it – the 5 Whys technique.

Let’s take a look at some definitions: A problem is “a matter or situation regarded as unwelcome or harmful and needing to be dealt with and overcome,” while a symptom is “a sign of the existence of something, especially of an undesirable situation.” So, in more concise terms, symptoms tell you that a problem is present, but they are not the problem itself. Therefore, addressing a symptom does not solve the underlying problem, which will rear its ugly head some other way. If you’re spending your time focused on the symptoms in your business – the daily fires that pop up – instead of addressing the underlying problems, you’ll always have more and more symptoms to deal with and won’t be able to make real progress.

So how do you tell what is a symptom and what is a real problem? One of the best methods is the 5 Whys method, originally developed by Sakichi Toyoda for use in the Toyota Motor Company. As with most things that lead to success, this technique is incredibly simple, but sometimes difficult to implement. Basically, all you have to do to find the real problem instead of getting caught up in the symptoms is to ask a series of 5 Whys about any issue that arises in your business. For example, let’s say your profit has gone down at the restaurant you own. You’re tempted to obsess about the fact that profit has gone and come up with a bunch of strategies for various ways of increasing your profit – maybe you need to advertise more, maybe you need to stay open longer hours, maybe you need to offer more dinner options – but you shouldn’t jump in to brainstorming solutions just yet, not at this stage. Even though it seems that profit being down would absolutely be a problem in a business, if you use the 5 Whys technique you’ll see that it’s actually just a symptom. So, profit is down at your restaurant. Stop and ask yourself:

“Why is profit down at the restaurant?”

Profit is down at the restaurant because margins are down.

Next, ask yourself:

“Why are margins down?”

Margins are down because we’re selling fewer alcoholic beverages and desserts, our highest margin items.

Continue on here:

“Why are we selling fewer high margin items?”

We’re selling fewer high margin items because customers don’t know we have a full bar and wine cellar, nor that we have a pastry chef on staff.

“Why don’t our customers know about our offerings?”

Our customers don’t know about our offerings because we don’t advertise in our menus or marketing and our staff doesn’t mention it.

Why don’t we promote our highest margin items?

We don’t promote our highest margin items because our owner has been brainstorming advertising options instead of looking at our root problem and updating our menus and training our staff.

Okay, I’m clearly joking a bit there with that last answer but you get the point here. By going through the exercise of 5 Whys we realize that the restaurant owner should create a cocktail menu and wine list, perhaps including pairing suggestions with the top entrees, profile the pastry chef, and have the servers ask all guests directly if they’d like anything to drink or would like any of the award-winning pastry chef’s amazing desserts. These small, inexpensive tweaks will be far more effective for improving the bottom line than increasing advertising spend, but you wouldn’t have realized it without getting down to the root problem instead of focusing on the symptoms.

Appropriately enough, an owner who is too swamped with all of the business’ fires to focus on strategic vision is also usually a symptom, not a problem. The real problem – once you work through the 5 Whys technique – is usually something along the lines of an owner’s inability to delegate or a lack of systemization within the business. Moving forward with your business – and your life, really – you should always force yourself through the 5 Whys technique to make sure you get to true problem and don’t waste time on symptoms. You’ll be amazed at the effect it can have on your business. Also, please note that the 5 Whys technique doesn’t necessarily require 5 Whys – sometimes you’ll need 3 and sometimes you’ll need 13 to get to the real problem. The point is not the number of times that you ask “Why?” it’s that you continue to ask it until you’ve found the true source of the issue.

That’s it for this week here on New Venture Mentor. Thanks for watching and I hope you found this video helpful. If you liked it, please let me know by giving me a thumbs up on YouTube and, if you’re feeling especially generous, I’d be greatly appreciative of any small fan funding donation you can make to help me keep my channel alive and these videos coming your way. If you don’t want to give, no worries, but you should still subscribe to the channel and to my email newsletter so you’ll always be the first to get the latest tips and info to help you plan, launch, and grow your business.

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Business Building Tips Weekly Round-Up: October 17, 2014

by Cate October 17, 2014 No Comments

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 The One Mistakes That’s Killing Your Business

In this article for Entrepreneur, Alex Banayan explains why focusing on brand building isn’t going to help most small businesses succeed and argues instead that they need to focus on the strategies used by direct marketers. According to Banayan, when marketing a small business you should:

  • Always in include an offer
  • Give a reason to respond right now
  • Give clear instructions
  • Focus on tracking, measurement, and accountability
  • Only do no-cost brand building
  • Always follow up
  • Make it look like mail order advertising
  • Strengthen your copy
  • Focus on results
  • Go on a strict direct marketing diet.

To get all of the details, click the article title above.

 

Go Guerilla! 5 Unorthodox Ways to Market Your Brand

In this article for Entrepreneur, Mike Trigg discusses some of the most successful guerilla marketing campaigns in recent years and how you can utilize some of their strategies to promote your own business. According to Trigg, you should:

  • Have a hook
  • Be provocative
  • Sell an idea, not a product
  • Make it tangible
  • Take a risk

Click the article title above to get all of the details.

Top Startup Mistakes: Not Properly Handling Money

In this week’s New Venture Mentor article I remind us, yet again, of the importance of properly managing your startup’s or small business’ money if you want to succeed. Click the article title above to see some of the most common money mistakes new entrepreneurs make, so you can avoid them.

 

The 25 Tools Every Entrepreneur Should Know About

Who doesn’t want to find inexpensive or free tools to make your life as an entrepreneur easier? In this article for Entrepreneur, Sujan Patel shares 25 of his favorites.

 

The Art of Setting Your Price

Figuring out what to charge for what you have to offer can be one of the most difficult decisions for new entrepreneurs. In this article for Inc., Eric Holtzclaw gives you some pointers for choosing the right price point including:

  • Start with your direct costs
  • Take into account ALL of your costs
  • Ignore your competition
  • Cover your opportunity costs
  • Evaluate prior projects

To get all of the details, click the article title above.

 

5 Things You Must Do To Successfully Launch a Business

In this article for Entrepreneur, Christopher Hann reminds us of some of the very basics you need to make sure are covered before you can become a successful startup founder:

  • Validate your idea
  • Shore up your plan and budget
  • Build the right team
  • Establish a support system
  • Respond to feedback and refine your model

If you’d like to learn more, click the article title above.

 

 

 

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Top Startup Mistakes: Not Properly Handling Money

by Cate October 13, 2014 1 Comment

I post tons of articles that I find around the web and think will help you all move your businesses forward. Often, people write in asking me to elaborate on pieces of those articles so I’ve started a series to do just that. I recently posted an article from Entrepreneur about common mistakes people make when launching a new company. The next of those big mistakes: messing up your money!

One of the biggest mistakes new entrepreneurs make over and over again is making a complete mess of the company’s money. You would think we would all understand how important money management is given that a business exists to make money, yet we all too easily let things slide that we shouldn’t or forget to track certain things and end up with a huge financial mess on our hands.

I’ll be going a bit more in depth with quite a few of these in future posts because you really can’t expect to succeed without keeping the essentials in order. For now though, let’s just give a quick overview of the top ways new entrepreneurs mishandle their money:

Of course #1 is simply spending too much. Whether you’ve gotten outside funding or you’re bootstrapping on your own, it’s tempting to want to hire a team and advertise your tail off. You have to be strategic with your limited budget, however, and make sure you’re only spending on things with high ROI.

#2 is just the opposite of number 1: not being willing to spend enough. If you’re not the type that’s tempted to overspend, you’re very likely the type to refuse to spend on anything. But refusing to spend a penny and doing everything yourself is not the most efficient way to build your business. Again, you have to look at the ROI you’ll get for any money (or time) that you decide to commit to a project and sometimes it really does pay to hire an expert.

Another big way that new entrepreneurs mess up their money is just general sloppiness: their records are out of date, they’re not properly tracking, they don’t create budgets or do any forecasting, they don’t get the help of an expert, and they sometimes co-mingle funds between their personal and business accounts. All of that disorganization is common, but it’s also a disaster waiting to happen.

A fourth, very common mistake that entrepreneurs make that messes up their finances is the mis-classification of those that work for you and other HR no-nos. The IRS is not someone you want to get in trouble with so be sure you know who should be an employee vs. who should be a contractor, follow the rules if you’re using unpaid interns, properly pay out your employees’ for un-used sick or vacation days when they leave, make sure you don’t borrow from the money needed to pay your share of employment taxes, etc. You don’t want to be in hot water with the IRS so just follow the rules from the beginning. This is a case when maybe spending some money for expert help would make the most sense.

Finally, a major mistake many new entrepreneurs make is not understanding the best structure for their business and the tax consequences of the structure they do choose. If you’re not a CPA or a tax attorney, get some advice about the best option for you and your business.

Don’t screw yourself from the beginning by fumbling financially. It’s overwhelming to launch a new company and it’s easy to let the financial management basics slip through the cracks, but if you make a mess of your money you’re only creating headaches for your future self.

If you liked this video, please share the love by giving it a thumbs up on YouTube and Facebook and sharing it with your friends and colleagues. Also, don’t forget to subscribe to my channel and get yourself on the list for email updates so that you never miss the latest tips and info to help you plan and launch your new business. 

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Top Startup Mistakes: Screwing Up Hiring

by Cate October 7, 2014 1 Comment

I post tons articles that I find around the web to help my followers move your businesses forward. Often, people write in asking me to elaborate on pieces of those articles, so I’ve started a series to do just that. I recently posted an article from Entrepreneur about common mistakes people make when launching a new company. The first of those big mistakes that I want to address: getting the hiring process wrong. 

When you’re building a business, your team is everything. Who you hire will make or break your success. A great hire can add incredible value to your company and free you up to focus on your real strengths while a bad hire can tank your business by costing you time, money, and customers. That’s why the phrase “hire slow; fire fast,” is so popular.

Despite knowing this, however, messing up the hiring process is one of the most common causes of stress and even failure for new businesses, so here are some tips to prevent you from blowing in your business:

Firstly, make sure you’re not getting into the hiring process until you’re really ready for it. Sometimes when new entrepreneurs first get started building their businesses or they’ve recently raised funding or gotten a revenue infusion, they want to run out and hire a huge team. This could be because the entrepreneur lacks confidence and feels he or she needs to bring in a ton of experts to succeed or it could be because the entrepreneur wants the ego boost of having a bunch of people on the payroll. Either way is a bad reason to hire. The only right way to do hiring is to hire to fill gaps in company needs and to improve the efficiency of the company. Before you begin hiring anyone, assess whether what they bring to the table is more or less valuable than what you’ll have to pay them + the time spent training and managing them + the other costs of hiring like taxes, benefits, and payroll. If someone will have a negative ROI, don’t hire. It’s as simple as that.

Secondly, if you have decided that you’re ready to hire, make sure you hire the right person! New business owners spend most of their time feeling like they need to put out a million fires and that there isn’t nearly enough time in the day to get even fraction of their to do lists done. That means that once it’s time to hire, they often feel like the sooner they can get someone into the position and take some of the load off, the better. However, putting too much weight on getting someone onto the team quickly is a great way to end up with even more headaches because you’ve chosen the wrong person. Taking the up-front time to assess if a candidate is really the right person for the job will pay immense dividends down the road.

When you’re going through the hiring process, of course, look at the skills and experience of your applicants because you need someone who knows their stuff and can hit the ground running. However, perhaps even more important than the candidates’ skills are the candidates’ personality, work style, commitment to your company, and long-term goals. Finding someone who is a good fit for your company’s style and culture is just as make or break as finding someone with the technical skills you need.

Additionally, make sure you play by the rules in the hiring process and beyond. The last thing you need is a migraine-inducing lawsuit because you violated employment law or didn’t clearly document your compensation agreements. This is especially important if, after bringing someone onto the team, you realize that you’ve made a mistake and need to let that person go.

Remember the adage “hire slow; fire fast.” Hire slow means add roles only when necessary and take the time needed to find the best candidates for those roles. Fire fast means don’t let a bad hire poison the well with a negative attitude or sub-par work. If you made a mistake in hiring, rectify it quickly.

Making a mess of hiring is an incredibly common – and incredibly damaging – mistake made by all too many entrepreneurs. If you follow these tips, you’ll be ahead of the game and can save yourself a lot of future stress.

 

If you liked this video, please let me know by giving it a thumbs up on YouTube and Facebook and sharing it with those in your network who could benefit. Also remember to subscribe to my channel right here by clicking at the end of the video and get on the list for email updates so you never miss the tips and info you need to help you plan and launch your business. 

 

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Financial Sins of Startups and Small Businesses: Mis-Classifying Workers and Other HR Mistakes

by Cate September 30, 2014 No Comments

I post tons of articles that I find around the web to help you all move your businesses forward. Often, people write in asking me to elaborate on those articles so I started a series to do just that. I recently posted an article from Entrepreneur about common financial sins entrepreneurs make. The next of the big financial sins is the mis-classification of employees.

Some of the biggest mistakes that new entrepreneurs make are mistakes that, if they’re honest, they know they’re making while they’re making them but they just feel so busy and over-whelmed that things slip through the cracks. Other super common mistakes, however, are made completely accidentally, without the entrepreneur even knowing a major mistake is being made. These unknown mistakes aren’t any less harmful because you didn’t realize what you were doing, however, and one of the huge ones that the IRS, the Depatrment of Labor, and others are cracking down on lately is the improper classification of workers and other major HR no-nos in your business.

There are a few big oopsies that happen over and over again here, so let’s take a look one by one.

First up is the issue of classifying certain of your workers as independent contractors when they should be classified as employees. You all know I’m a big fan of bootstrapping and utilizing independent contractors is one technique to help entrepreneurs accomplish that. However, it’s important to remember that, while the use of independent contractors can be of great benefit to businesses in certain situations, you need to make sure that these independent contractors are actually independent contractors and not employees whom you’re just avoiding classifying as such.  This is such a big issue lately that I actually did another post just about distinguishing between employees and independent contractors. Stick around until the end of the video or head over to CateCosta.com, if you’re not already there, to get the link.

Next up is the improper use of unpaid interns. Again, as a huge advocate of bootstrapping I’ve talked about the value you can get from unpaid interns in the past. However, it’s important to realize, before you launch an internship program, that there are strict rules you need to follow in order to not run afoul of employment law when doing so. If you want to implement such a program, your best bet is to speak to an employment lawyer so you’re clear on all the rules in your state. The basics, however, are that the internship needs to be about the intern learning and gaining experience, not about your business benefitting. If you don’t have the time or inclination to mentor and nurture interns, if you don’t want to do the paperwork necessary for them to get university credit for their time as interns, or if you expect them to contribute to the team in a way that an employee would, an unpaid internship program is not right for your business.

Thirdly, there are bunches of other major HR no-nos that you need to be sure to avoid in your business:

  • Follow the rules in the hiring process so that there will be no issues of discrimination
  • Follow the rules in the firing process for the same reason
  • Take any reports of or complaints about issues in the workplace very seriously and follow the mandated procedures to protect your workforce
  • Abide by OSHA requirements
  • Don’t be slow or stingy about paying out workers who leave the company for unused sick or vacation leave

The list could go on and on, but the message should be clear: follow the rules and you’ll avoid future headaches.

If you liked this video, please share the love by giving it a big thumbs up on Facebook and YouTube and sharing it with your networks. Also, don’t forget to subscribe to the channel and to email updates so you don’t miss any tips or info to help you successfully plan and launch your new business.

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Sloppy Financial Management Is Like Death by 1,000 Paper Cuts for a Small Business

by Cate September 22, 2014 No Comments

I post tons of articles that I find around the web and can help you all move your businesses forward. Oftentimes, people write to me asking me to elaborate on pieces of those articles so I started a series to do just that. I recently posted an article from Entrepreneur about common financial sins entrepreneurs make. I’m going to roll a number of those sins up into one for this post here, and that’s general sloppiness when it comes to managing your business’ finances.

Whenever we talk about financial management it seems a bit silly because, for the most part, we all know what we should be doing. Every business owner is aware that the finances really are the business itself and that making a mess of the money means making a mess of the whole company. In practice, however, we all tend to get so busy with other things that seem more pressing that we can very easily let our financial management practices slide. I’ve done it, you’ve probably done it, almost everyone does it from time to time, but it’s an incredibly destructive habit that can sneak up on you and kill your business.

We’ve all heard the phrase “death by a thousand paper cuts” and sloppy financial management is the perfect example of this happening. In general, no single financial mistake or bit of financial management laziness is going to sink your business. However, if you consistently make little mistakes and frequently let things slip buy, all of those little “paper cuts” build on one another and eventually you’ve got a financial problem too big to solve and your business crumbles.

Clearly, none of us want that, so let’s remind ourselves of the top 4 sloppy financial management practices that entrepreneurs fall victim to.

First up is not keeping up to date records. Nobody likes the drudgery of tracking receipts, balancing the books, and keeping up on accounts payable and receivable, but these things are  the foundation of your business. It’s important to set a system in place that basically doesn’t allow you to not keep your records up to date. Use services that automatically update and apps that track your receipts for you. Do whatever you need to do to make sure you’re staying on top of this. One of the most common – and disheartening – reasons that small businesses fail is cash flow problems and you can nip any cash flow problems in the bud by staying up to date with your record keeping.

The second major bit of troublesome financial management laziness is not budgeting or forecasting. I get that it’s tempting to just figure stuff out as you go along and you probably have the mindset that if you just only buy things that you really need, you don’t need to bother with budgets. That’s a terrible way to look at building your business because it keeps you focused on the short term instead of creating a long-term strategy that will keep your business successful for years to come.

Thirdly, lots of brand new entrepreneurs don’t use the services of an accountant or bookkeeper because they’re trying to save their limited money upfront. I didn’t use an accountant when I started out. If you don’t know what you’re doing, however, you simply have to invest in someone who does. You’re shooting yourself in the foot if you try to take on a task that is so integral to the success of your business but that you don’t enjoy and don’t have experience with. A good accountant will save you major headaches in the future and will often save you enough on your tax bill to nearly pay for themselves.

Lastly, and this is a big one, is the co-mingling of funds. I’ve talked about this a few times before in a few different New Venture Mentor videos but it’s an issue that I see over and over and over again. Money is tight at the beginning of building a new business and things are generally totally unorganized. Sometimes you run to the store and forget to bring the right debit card and sometimes you need to cover a bill for just a couple of days and can put the money right back. It doesn’t matter what the excuse you’ve made up for yourself is. You cannot co-mingle your personal funds with your business’ funds. You need to have separate bank accounts, separate debit cards, separate credit cards, separate everything. Not only does co-mingling your personal money and your business’ money make a mess of things for you in terms of accurately tracking what’s going on, it creates a lack of division between you as a person and your business as a separate entity that will come back to bite you if your company is ever sued or when you’re trying to do your taxes if your company isn’t a pass through entity. If you’re currently mixing funds, resolve today to stop immediately. Take a look at the accounts, zero everything out to where it should be, and NEVER mix the two again.

These financial boo boos may seem minor, but if you add multiple of them up over a period of time, you’re creating major trouble for your business that will give you migraines in the future and could cost you your business altogether. Responsible financial management is the only way to keep your company healthy, so stop committing these sins today.

If you liked this video, please let me know by giving it a thumbs up on Facebook and YouTube and don’t forget to subscribe to my channel and sign-up for email updates so you never miss any tips or info to help you successfully plan and launch your company. 

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Top Startup Misconceptions: If You Build It, They Will Come (and Pay)

by Cate August 12, 2014 1 Comment

In my effort to provide useful information to entrepreneurs and aspiring entrepreneurs, I share helpful articles that I find around the web and think can help my followers move your businesses forward. Often, people write asking me to elaborate on those articles so I started a series that does just that. I recently posted an article from RockthePost about common misconceptions people have about launching a new company. The last of those misconceptions that I want to tackle here is the cliche that if you build it, they will come. 

Everybody’s heard the phrase “if you build it, they will come.” Unfortunately, that’s simply not true in the world of startups and it’s even less true that “if you build it, they will come and pay you for it.” This pesky assumption is the downfall of many a new business and combating it is precisely the goal of the super popular lean startup movement, which advocates the creation of a minimum viable product (or MVP) that you can quickly get feedback on to verify that customers will, in fact, come to get what you have to offer.

There are two main facets to this assumption that entrepreneurs need to be sure to overcome in their strategic planning if they want to be successful when building their new companies:

Firstly, this assumption is based around the idea that whatever product or service you’re going to offer is something that customers want enough that they are willing to pay you money for it. This is actually a HUGE assumption. Customers are simultaneously very fickle and very stuck in their routines. That means that while they may not be loyal to whatever they’re using now to deal with the problem that you intend to solve, they’re likely not going to want to put in much effort to switch. That means that it will take some work to convince them that it’s worth their time and effort to incorporate what you offer into their routine, but then don’t expect a huge ton of loyalty once you’ve won them over. They switched to you and they will be willing to switch away from you if a better option presents itself.

In order to make sure that you build something customers actually want to pay for, you should follow some guidelines:

  • When you’re first fleshing out your idea, stop thinking about what you want to sell and start thinking about what customers want to buy.
  • It’s much easier to sell something that solves an immediate problem or fills an immediate need than it is to sell something that “would be nice to have” but isn’t a necessity.
  • Start getting feedback from those in your target market as soon as possible and incorporating that feedback into your product development.
  • Make the cost – in money, time, and effort – of switching to your product or service as minimal as possible. I can’t stress this one enough. Humans are creatures of habit and we’re mostly pretty darn lazy so if it takes a lot of effort for me to start using what you have to offer, I probably won’t ever start.

Secondly, this assumption is also based around the idea that people will even know your product or service exists. Even if you have the greatest offering ever and everyone would want to buy it, if nobody is aware of the fact that you’re offering it, you still won’t see success. Drastically underestimating the time, energy, and cost involved in promoting a new business is one of the top mistakes that new entrepreneurs make. That’s why it’s so important to create a thorough marketing plan that lays out all of the ways you’ll get the word out about what you have to offer and how much time and money that will cost you. Don’t expect to shoot out a press release announcing your launch and have customers knocking down your door. You’ll need to do much more than that to get the attention your business needs to thrive. If you need to learn the basics of marketing a small business, try checking out my Curious course or picking up my book and jumping ahead to the section about developing your marketing plan. 

In the real world, the  saying “if you build it, they will come,” is false and harmful to aspiring entrepreneurs. The truth is that if you build it, you’re able to spread the word effectively, and they like what you have to offer they will come. Not so clean cut and easy, but a much more realistic way to look at building a customer base.

 

Thanks for watching another episode of New Venture Mentor! If you liked this video, please let me know by liking it on Facebook and YouTube and sharing it with anyone who would find it helpful. Also, don’t forget to subscribe to my YouTube channel and to email updates and to follow me on social media so that you never miss any info that could help your business succeed. 

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Startup Misconceptions: Raising Venture Capital Means You’ve Succeeded

by Cate July 29, 2014 No Comments

In my effort to provide useful information to entrepreneurs and aspiring entrepreneurs, I share tons of interesting and helpful articles that I find around the web and think can help answer questions for my followers and help you all move your businesses forward. Often, people write asking me to elaborate on those articles or pieces of those articles so I am starting a series that will do just that. I may combine a few or leave a few out here and there, but I will cover the topics that people most often asked me to elaborate on.

I recently posted an article from RockthePost about common misconceptions people have about launching a new company. The next of those misconceptions that I want to tackle here is the idea that raising funding means you’re a success.

As it’s portrayed in the media, venture capital, startups, and entrepreneurship are all about glitz, glamour, and overnight riches. Because of this, and because of the size of some of the checks that venture capitalists might turn over to entrepreneurs, many new entrepreneurs operate under the misguided idea that raising venture capital money is the goal and that doing so means you’ve succeeded.

The reality, however, is that venture capital investment is not the end goal. By its very definition, it is an investment in the future success of the business. That means that when a VC writes you a check, she’s is saying that she sees success in your company’s future, not that you’re a success right now. If you’d already arrived, how would the investor make money by realizing gains on the increased value of your company?

When viewed in this light, it’s clear that raising venture investment is just one stepping stone on the road to success, and it’s a stepping stone that costs the entrepreneur power, ownership, and control.

Clearly, successfully raising venture capital is an accomplishment and I am not saying that it’s not. It’s great to get the validation of seasoned investors, to know that others believe in your vision and in your ability to achieve it, and to have enough money in the bank to keep the lights on for another month. If you’ve just recently gotten funding, congratulations! You absolutely deserve to celebrate. However, the party shouldn’t last too long because you haven’t succeeded yet. You have to get back to work. Your investors are going to hold you accountable for hitting your milestones and you’ve given up ownership, so you need to increase the value of your company by at least as much as the value of that cash infusion before running through that cash just to get back to where you were. The VC’s check being deposited into your business account does not mean it’s time to kick up your feet.

If you haven’t yet raised venture capital, take the time to step back and honestly evaluate why you’re pursuing the investment and whether or not it’s the best course of action for your business. This isn’t rocket science but BAD reasons to pursue venture capital funding are:

  • You think it will make you look cool
  • You want to be able to pay yourself a 6-figure salary for the same work you’re doing right now
  • You think all startups are supposed to raise VC money

On the other hand, GOOD reasons to raise venture capital funding might include:

  • You’re building your business in an industry with high startup costs and venture funding is the only way to get the necessary amount of money
  • You’re experiencing very rapid growth and in order to maintain that momentum, you will need a quick infusion of a lot of cash

If you’re not sure what type of funding is best for your business, don’t chase venture capital just because it’s the most talked about. Less than 1% of all new businesses in the U.S. are funded by angel investors or venture capitalists and if it’s not the right type of investment for your company you’re going to regret chasing it. For a quick overview of the different types of funding available to new businesses, check out my previous post on just that.

The right type of funding is critical to the success of your business, so make sure you’re making a strategic decision about whether to pursue outside investment and what type of investment to pursue as opposed to making a vanity decision based on the perceived “street cred” of a venture investment. And, if you do raise venture capital, be sure to remember that raising that money means you just won a battle, not that you’ve already won the war. Congratulate yourself and then get back to work!

 

Once you’ve assessed what type of investment would be best for your business, let me know in the comments section below what your strategy is for attaining it.

If you like this video, please let me know by giving it a thumbs up on YouTube and Facebook and, if you think others would find it helpful, remember to share it on social media. Thanks for watching and we’ll see you next week on New Venture Mentor.

How Perfectionism Holds Back Entrepreneurs
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Startup Misconceptions: Everything Must Be Perfect Because It’s All or Nothing

by Cate July 15, 2014 1 Comment

In my effort to provide useful information to entrepreneurs and aspiring entrepreneurs, I share tons of interesting and helpful articles that I find around the web and think can help answer questions for my followers and help you all move your businesses forward. Often, people write asking me to elaborate on those articles or pieces of those articles so I am starting a series that will do just that. I may combine a few or leave a few out here and there, but I will cover the topics that people most often asked me to elaborate on.

I recently posted an article from RockthePost about common misconceptions people have about launching a new company. The next of those misconceptions that I want to tackle here is the idea that launching a business is all or nothing and, therefore, everything must be absolutely perfect before you can even begin promoting. 

A lot of entrepreneurs are perfectionists, and this can be good in a lot of ways because it will drive you towards high quality in your business. However, obsessing over getting every single detail exactly right before ever going to market is only going to hold you back as an entrepreneur. I’ve talked about this before, but it seems to be a recurring topic of discussion so I wanted to go ahead and address it again.

If you are new to entrepreneurship, you have to accept the fact that striving for perfection is actually just a means of procrastinating. You will never get to perfection so, if that is a pre-requisite for launching your business, you will never actually launch and never know if you could have succeeded. Now, clearly you shouldn’t just be throwing spaghetti up against the wall to see what sticks with no thought, research, or attempt at quality. I don’t argue that because perfection is not achievable you should stop caring about quality altogether, but I do argue that you should be cognizant of the necessary compromises you’ll need to make as an entrepreneur and realize that it’s often better to get something out into the world so that you can start to get feedback and build momentum than it is to wait until you’ve created a completely flawless product.

If the world’s biggest companies waited for perfection before releasing a new product, we’d never have any new software to play with or to make our lives easier. If a major corporation with thousands of team members can’t create something that is aesthetically pleasing, has every feature you’d ever want, and doesn’t have a single bug, why would you expect that you can? If you’re hung up on trying to make everything perfect before you start telling the world about what you have to offer, stop for a moment and ask yourself the following questions:

  • Does this version solve the problem that I set out to solve?

  • Are the things that aren’t perfect fundamental to the product or are they extras or aesthetics?

  • If it weren’t my product, would I be as critical as I am of it now or would I use it and love it and just hope for a few tweeks in the next update?

  • Can I build a user base with the current version or not?

If you’re hesitating because of things that are not essential and won’t hold you back from beginning to build a user base, get over and get going. Remember, even the Founder of Linkedin, Reid Hoffman said: “If you are not embarrassed by the first version of your product, you’ve launched too late.” (Click here to tweet this quote.)

 

Now I want to hear from you. Do you ever fall into the perfectionism trap? If so, how do you pull yourself out of it? Let me know in the comments section below and, if you haven’t already, don’t forget to sign up for my newsletter so you never miss out on any helpful info to help you launch and grow your business.

If you liked this video, please let me know by liking it and sharing it with a friend or colleague whom you think would benefit.

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Startup Misconceptions: It’s Easy to Build a Team & They’ll Stick with You Until the End

by Cate June 24, 2014 No Comments

In my effort to always provide a steady stream of useful information to entrepreneurs and aspiring entrepreneurs, I post tons of interesting and helpful articles that I find around the web that I think can help answer questions for my followers and help you all move your businesses forward. Oftentimes, people write me asking to elaborate on those articles or pieces of those articles so I am starting a series that will do just that. I may combine a few or leave a few out here and there, but I will cover the topics that people most often asked me to elaborate on.

I recently posted an article from RockthePost about common misconceptions people have about launching a new company. The next of those misconceptions that I want to tackle here is the mistaken idea that it’s easy to build a founding team and that those original team members will all still be together at the end. 

Many aspiring entrepreneurs believe that once they have their business idea, pulling together a kick-butt team that will help build the new company to success will be easy to do and that those team members will stick around until the end. Unfortunately, that couldn’t be farther from the truth.

Creating the right mix of talent and personality on a founding team is extremely difficult…and it’s a major key to success. You’ve surely read dozens, if not hundreds, of times that investors bet on a team even more than they bet on a product. That’s because they know that a killer team is much tougher to come by than a killer idea and they’re willing to put their money behind those that shine.

When building your founding team, you not only need to find talented team members that can really deliver in their area of expertise, but also, you need to find team members that will mesh well together, are committed to the same vision, have thick skins and honest mouths, and are comfortable with the business’ growth strategy and hierarchy. Look for team members who:

  1. Are superstars in their area of expertise, but can also see beyond their own silos
  2. Think big picture, but don’t need to be the captain of the ship
  3. Have complementary skill sets – you don’t need or want 6 clones of yourself; you need and want team members whose strengths balance out your weaknesses
  4. Are easy to get along with, but not because they’re push overs – you need people who will be honest and speak their minds but aren’t stubborn or difficult to get along with
  5. Share your vision of where the company should go and how it should get there
  6. Are reliable and responsible – everyone should be on a vesting schedule anyway, but you don’t want to have to rely on that to know that your team will get their jobs done

If you pull that all together, you’re basically looking for a magic unicorn of a founding team…and that’s why so many teams don’t stick together for the long haul and so many companies with great products or services fail. When you’re setting out on your entrepreneurial journey, make sure you give the building of your founding team the time and attention it deserves. If you need some more tips for how to pick partners, check out my old post on the topic of choosing a cofounder here.

You should also never assume that all of the original team members will be there until the end. No matter how careful you are at the outset when building your team, sometimes things simply don’t work out. Make sure you’re prepared for that by having structured the business in such a way that a founding team member’s departure doesn’t destroy your momentum or cost you dearly in equity. Always have an agreement in place that clearly outlines every founding member’s rights and responsibilities so that if there does come a time when someone needs to depart – amicably or not – you know exactly how it will be handled. For more information about what to include in that agreement, check out my older post here.

Despite being one of the most important pieces of the puzzle when building your business, so many aspiring entrepreneurs drastically underestimate the difficulty of building and maintaining a founding team and the unfortunate misconception that it’s easy to do can quickly cost them success.

 

Now I want to hear from you. Have you been shocked at how tough it is to build a solid founding team to launch your new business? What difficulties have you encountered and what tricks have you learned for making the process easier? Let me know your thoughts in the comments section below and, if you’re not already watching at catecosta.com, be sure to get over to the website to join the conversation. 

If you liked this video, please let me know by liking it and sharing it with anyone whom you think would find it helpful.