19 Points to Ponder for Startup Founders to Remain Focused
Inovia Growth Hacking Tip #946
I’ve been a high-tech entrepreneur since the late 1980s, and have made many mistakes en-route to my successes. Today’s post is a collection of lessons learned along the way.
1. Be ready to fire your ideas once better ones come along
Being a startup company entrepreneur is a voyage of discovery, which means you are dealing with a lot of unknowns. When you deal with unknowns, you are sometimes wrong. When you are wrong, don’t be afraid to change, or to abandon the wrong ideas. The failure of an idea (or of a strategy, a hire, a product, a sale) doesn’t mean you are a failure. It means you are an experimenter — a point most people miss entirely.
In 2001, I co-founded a company, Jasomi Networks, with someone I greatly respected. We both believed that our product idea (a session border controller for the VoIP industry) would be a near-instant win. It turns out we were both wrong, though it took a year to realize it. Eventually, session border controllers took off, and the company was ultimately acquired in 2005. But in 2002, it looked very dark indeed. Funds were low, and our sales pipeline was slim. But every customer was talking about problems coping with punching holes through users’ firewalls (necessary to make their phones ring). Johnson Wu and I concocted a variation of Jasomi’s product, that would punch the right holes at the right times, and that became the company’s flagship (and award-winning) product while we waited for the main product’s market to heat up. It also allowed Jasomi the time it needed to recover from a near-disastrous first implementation of its product. If I had simply plodded forward with the original idea, the company would have died a fairly quick death. But by pivoting to another idea, that fate was avoided, and a good outcome eventually achieved.
Remember, the easiest way to never fail is to never try. But if you try, you will sometimes fail. And when you are just starting out, you’ll fail all the time. Best to simply learn from the failures, and carry on. And that segues nicely into the next point.
2. A business is a success if it leaves you with enough money and ambition to start the next one
It is too easy to look at a failed business experiment, and summarize it with something like “well, that didn’t work out.” But lost in the analysis is this: Every time you try something, you learn something that helps you do better next time. So, as long as you are left with enough capital and enough motivation to keep trying new things, and as long as you apply everything you’ve learned to each new thing you try, you will spiral upward. It is incredibly frustrating to realize that something you’ve poured your heart into hasn’t worked out. But as long as it leaves you with enough resources to try the next experiment, it’s not a failure, it simply becomes part of your experience.
My first business (FSA Corporation), progressed from systems administration consulting to UNIX security courses, and eventually on to product development. Consulting was a wonderful way to become exposed to the problems of a large number of customers, noticing what they had in common in the way of problems. But eventually, it became clear to me that consulting was not a scalable business (there was only one of me!), and so wouldn’t take me where I wanted to go (my idols were people such as Jobs, Gates, Ellison). I shut down the consulting, but not before it had left me with enough money to start a computer security seminar business, using the money built up from consulting (and the experience). Ultimately, though lucrative, I found the teaching to be a bit repetitive, and shut that down in favour of product development. But not before the teaching had built up enough money to let me start the product business. Were the consulting business and the teaching business failures? No, because they left me with the money and experience and ambition to start the next great thing.
3. Never let anyone else cannibalize your business. Either prevent it, or do it yourself
Most entrepreneurs ultimately find out that there is a better, faster, or cheaper way of doing whatever it is that their product does. And sometimes, the new way is so much cheaper than the old way, that they feel they couldn’t possibly adopt the new way, because doing so would result in them earning less money from customers than they currently get. If this happens to you, there is bad news and good news. The bad news is that if you do nothing, your competition will come in sooner or later and undermine your entire business model, with a better/cheaper product. The good news is that if you do it first, your competition will never get that chance.
There is an interesting calculus to be performed. Should you keep selling the old product but have the new product developed, so that you can start selling it yourself the moment a competitor enters the market to undermine you? Or should you simply keep on doing things the old way, and buy out any competitor who comes along with a disruptive idea? Or should you preempt the whole notion of being undermined, by moving now to the new idea, even though it cannibalizes your revenue? Each situation is different, but these must all be considered. Final thought for this point: Sooner or later, the new way will replace the old way, and your cost structure will need to change.
4. While seeking new business ideas, try up to 3 at once
Any more and you won’t be able to focus. Any less, and you waste time when some of them fail. It’s natural to be uncertain about whether your current idea is the right one to be focusing on. All businesses take longer to start up and catch on than we, as entrepreneurs, would like. And it is natural to want to try another idea to see if that one is any more successful than the current one. If you have lots of industry experience, you can likely dispense with most of these transient ideas very quickly, either through your own thought experiments, or through (in)validating the ideas with your industry contacts. But if you don’t have that experience, you’ll just have to try a couple things together, to see which one sticks better. You may even find yourself wanting to layer in a third business idea, if the existing couple are both slow to take off.
In my own experience, and from watching many other people over the years, three is a good limit for the number of simultaneous business ideas to try. If you find yourself wanting to add in a fourth, my strong suggestion is that you shelve at least one of the others. If you don’t, you’ll find that you aren’t able to devote enough time and brainpower to any of them.
Some people might say “You should never do more than one thing at once, because it defocuses you.” I agree with this wholeheartedly, except that it presumes you already know what you’re talking about. When one of the things you are bootstrapping is yourself, it can be expensive to pursue only one business idea at a time. Expensive not in terms of money, but in terms of elapsed time. Most novice entrepreneurs will pick the wrong business to start. By pursuing two or three at a time, you allow failure to occur in parallel with other failure, and that increases the rate at which you progress to the ultimate success you seek. Although one can carry this line of reasoning further and ask “Why not 10 at the same time”, the answer is that above three (and true, it is not an exact science — for you the number might be two or four), you aren’t really pursuing any of them, you’re just playing about with them.
So the takeaway here is: Try something. Then layer on something else while you wait for it to catch on. And maybe even a third something. But then it’s time to make the tough decision to close off one of your ideas before layering on another. This approach (mostly good for novice entrepreneurs) strikes a balance between going deep and going wide.
5. When in doubt, make money
There are many times where an entrepreneur asks “should I do this or should I do that?” Where the merits of the case do not immediately present themselves, pick the route that makes money. Making money means making people happy, and building trust with them. That trust will help you understand their other needs, maybe leading to a better line of business than the one you are following. Some advisors talk about how “you must fire your customers sometimes” and I agree. But unless you are rolling in dough, be careful. I’m more in favour of firing customers as an optimization technique for an already-successful business than as a way of simply freeing up time for the next (possibly) great thing.
6. Nothing has happened until somebody sells something
This maxim is about measurement, especially of self. True, you can move the company forward with a great hire, or with the release of a great product. But until someone actually pays money for it, you don’t have a business.
7. Business begins and ends with trust
It is very difficult to get someone to spend money on your product or service. Ultimately, the decision is made when they trust that you can do the job, and do it better/faster/cheaper than someone else. The more trust you have among the community of potential customers, the quicker you’ll be able to make sales, and they’ll be larger too. Even when selling to consumers, it’s all about trust. So, as Warren Buffett likes to point out: The most expensive thing you can do is damage your brand. Because your brand carries your trust.
8. If you are a late entrant, reinvent the category
If you aren’t first in your category, everyone will see you as a me-too copycat. To differentiate yourself from the pack of incumbents, try to redefine or reinvent the category. I can remember back to Jasomi Networks, when there was an existing category of “NAT Traversal” products, my team and I felt that we could not simply be another one of them. Nobody would write about us, and we wouldn’t be able to break through. So we invented a new term, “Far-end NAT Traversal”, that technically fit the bill, and marketed our product as the leader in that new category. Reinventing the category makes everyone else’s marketing materials look old, because they talk about last year’s big thing, not the up-and-coming new thing. It’s incredibly frustrating to the incumbents, whose R&D team tells their marketing team “… but we do all that stuff too!” And, of course they are right. But now, the name associated with the new thing is our name, not their name. And if they try to follow, they will be the me-too copycats, not you.
Of course, this leads to marketing warfare, which I find to be fun. It’s a cat and mouse game, where the enemy eventually catches on, and tries to reinvent the category again themselves. But … if you do it right, you’ll be ready for them, and will quickly be able to counter their moves. For example, let’s suppose my company was successful in redefining the NAT Traversal market (back in the day) as the “Far-end NAT Traversal” market. Eventually, the incumbents might start to talk to analysts and editors about their new “Stratified Far-end NAT Traversal” product. Naturally, it’s largely meaningless, but editors and analysts might still find it printable. To counter the move, I would need to be in contact with the various editors and analysts in the field, so that they would use me as a sounding board when they were writing about anything related to my industry. They’d ask something like “What do you think of XYZCo’s new Stratified Far-end NAT Traversal” solution? My reply must be something like “Yes, it’s a brilliant idea, and we were wondering if anyone would try it again. When we looked at that last year, we didn’t like the performance, and were particularly worried about the latency it would introduce.” This introduces doubt into the mix, and causes the writer to write cautiously rather than vigorously about it. I’d also try to mete out some new news for my own company, so that we would be mentioned in the piece too. You get the idea. It’s an information warfare game in which you must not be outplayed.
9. Remember how editors and analysts earn their livings. Give them good material
Sometimes, you will need to let a market’s customers know that you exist, and usually the best way to do this is to cause opinion leaders to introduce and recommend your product or service to those customers. Opinion leaders include editors and analysts to whom customers turn for information about the market. These include people working at blogs, magazines, trade shows, lobby groups, regulatory organizations, trade associations, and so on.
A very large part of what opinion leaders do is develop an audience for themselves. If people don’t read their writing and recommend it to others, those opinion leaders lose power and influence, becoming “opinion holders” rather than leaders. So they are intensely focused on “being interesting” to their audience. When you need them to write about you, all you need to remember is that if you give them something that will make them look interesting in the eyes of their audience, they most likely will use it.
In other words, to be written about, give them interesting things to communicate to their audience. And if you can’t do that, perhaps you should rethink why you are in the business you’re in, because if it isn’t interesting to write about, it’s not going to succeed.
Also remember that editors and analysts are always on deadlines, trying to fill “column inches” with interesting material. If possible, write it for them, saying “something like this might look good as part of one of your columns”. Write it in their style. Do their work for them. Likely you will be rewarded with print.
10. Your worst competition is the status quo, not others like you
You are competing for a limited supply of dollars. Your competition is whatever the customer is spending those dollars on now, even if it is nothing to do with your product or category. Many entrepreneurs miss this concept, instead thinking that their competition consists of companies selling products similar to theirs. The indirect competition turns out to be much harder to beat than the direct competition.
11. Minimize the risk your customer must take in order to trial your product
One of my other blog entries focused on the career risk that customers take when rolling out a significant new product to their employer. But even before purchase, there are risks to customers. What is the customer risking by trialing the product? If something goes wrong, could fingers be pointed at your customer? If so, this is a risk for them. Can the trial be done with less risk to the customer? If so, the customer will find it much easier to agree to the trial, and your sales cycle will accelerate.
12. Pain killers are much easier to sell than vitamins
In business, there are “pain killers”, which make something nasty go away, and there are “vitamins”, which make something nice even better. Pain killers remove negative consequences for customers. For example: if there is a new regulatory compliance mandate, the software that enables compliance is a pain killer. Something that prevents lawsuits is a pain killer. Something that helps the customer avoid losing business is a pain killer. On the vitamin side, something that improves efficiency, lessens costs or time expenditures, or generally increases the rate at which good business can be done, those are vitamins. Of the two, pain killers sell quicker and easier than vitamins, with the latter always being somewhat speculative in their effectiveness.
13. The difference between 30 seconds early and 30 seconds late is much more than 1 minute.
The difference between squeaking in ahead of schedule and a minor miss is technically small. But in the eyes of whoever is evaluating you, it can be binary. Get in on time and “you made it”. Miss it, and “you didn’t make it”. Do this more than once, and “you didn’t make it — again”. For very small effort, you can turn “you didn’t make it — again” into “you made it — as always”. Be on time. It’s cheap and effective.
14. Have what sells, but sell what you have
Inbound marketing will tell you what your customers love and hate about your product or service. It behooves you to “have what sells” — to ensure that your offering matches what the market wants. However, often, you will discover that there is a gap between what you have and what your market wants. When that happens, your sales force still has to “sell what you have”, because if they don’t, you’ll miss your numbers. The job of your sales force is always to overcome objections and “sell what you have”. But the job of R&D and your inbound marketing and product management roles is to “have what sells”.
15. Don’t believe all your competitors hype while disbelieving all of your own
One of the most demoralizing things that can happen to an up-and-coming entrepreneur is to begin to believe all the hype being issued by her competitors, while simultaneously discounting all her own company’s hype (because she knows the truth about her own hype). Remember, your competitor’s hype is just a mind game being played with the market, and you need to play the same mind game. Just don’t get so into it that you believe their hype while discounting your own.
16. Promise as much as you dare, but never deliver less
For startup companies, there will always be a race between developing functionality and learning what the market will buy (regardless of what the market tells you it wants from you). In many cases, the only way to win business is to make big promises. My suggestion is that you avoid being conservative in your promises, and instead promise to deliver a lot of capability to your customers. That is how you will win their business. However, don’t make the mistake of then under-delivering. Be careful with what you promise, but don’t sandbag.
17. ABC — Always Be Closing
Every prospective customer communication needs to have a purpose, a goal, an objective, and it should relate to bringing that prospective customer closer to being an actual customer. Never merely have “maintenance calls” with your prospects. Always have an agenda, a plan to a close.
18. Repetition breeds familiarity. Generate meaningful news often
It is very simple to become a “known quantity” in a market. Simply get written about often. When customers become used to hearing your name, they rapidly accept you as “legitimate”. This is why, at sports events, companies with nothing to do with sports simply plaster their company names on billboards. All they want is to be “in the background”, always present in people’s minds. You should do the same. Be written about often.
19. Tension closes deals
At the risk of sounding like a used car salesman, the thing that most directly results in forward progress toward a deal closing is the threat of the deal going away. If the deal might not be here tomorrow, it is more likely to be closed today. End of quarter discounts “specially authorized by my board of directors”; limited number of early trial customers; pending price increases; — these are some of many techniques to introduce tension into a customer deal. And the same kinds of things work when fundraising or selling the whole company.
