A follow up to Entre-U Class #1 – Small Business America.

And a bonus video… Finding the Magic Sauce (or Secret Sauce or Sustainable Competitive Advantage if you will…)

<< Are You An Entrepreneur?  - Successful New Business Ideas >>

I hope you were able to learn a little bit about yourself from the last article about character traits of entrepreneurs.  However, there is another, perhaps more important self-analysis to be done.  You need to figure out what your entrepreneurial strengths are.

Most people find they are one of three types of business people:

• Product/Service Guru – These are the product innovators, the engineers and the tech geeks of the world.  They are also the system junkies who figure out how to run the most effective and most efficient services with the highest bang for buck.
   
• Marketing/Sales Specialist – They are the extroverts that are REALLY excited about the company, its products and generally are not afraid to cold call or just pitch to random people walking down the street. (Do they still say “They could sell a catsup popsicle to a woman in white gloves?)
   
• Spreadsheet Geeks – These are the finance specialists.  The bean counters. They are constantly analyzing the risk/reward structure of the opportunity, the gross margins and forecasting and budgeting until everything makes financial sense.

I think when looking at the list above most people believe they are good at one of these areas.  Some believe they are strong in two areas.  But, if you are really honest with yourself you will realize that you are not strong in all of these areas.  I believe too that a lot of entrepreneurs are “technicians” in that they have technical expertise in some product or service making them Product Gurus.  This falls in line with Michael Gerber’s E-Myth: You need to work on your business not in your business.

Too many people find themselves as the chief cook and bottle washer (or the Chief Employee Officer).  Because they started their business based on some technical product or service knowledge they believe that is where they should work in their own company.  The problem is the company will never grow beyond the time you can put into it.  Further, it will never obtain any real value because all of the revenues will be tied to you…and when you leave the value leaves with it. 

In order to be a true CEO you need to recognize your strengths and either partner up, hire out, or outsource the rest.  Does this mean you have to give up two thirds of your company to take on two business partners to fill the gaps?  No, certainly you can hire on employees in marketing or finance if those are your week spots. 

If you can’t afford to pay a decent wage when you first start out consider profit sharing bonuses, stock options or even outsourcing.  There are many good small advertising agencies who can handle your marketing plans, brochure designs and media buys for a lot higher return then trying to do it yourself (usually poorly).  You can burn through tons of cash on poorly designed marketing pieces because you wanted to save a couple hundred bucks on the front end.  Also, the yellow pages typically lists scads of book keepers who cost a lot less than a CPA to do your monthly reports, quarterly taxes and other functions that don’t drive sales for a reasonable fee. 

The point is that when you are a Chief Employee Officer you are too busy putting out fires.  Too busy dealing with crappy employees who are trying to scalp a $20 from the till or run inventory out the back door.  Too busy checking the most recent inventory delivery to make sure a supplier didn’t short your order or overcharge an item.  Too busy to worry about marketing your business.  Too busy to look at last month’s financial statements.

I can tell you the end result because I see it in my office every day.  A business owner looks up and finds out that two years ago they lost $50,000.  Last year they lost $100,000.  And now they are most of the way through this year and they are out of cash and looking at me asking for a loan cause they are “just about over the hump”. 

And that may very well be true, but there is not a lot I can do for them at that point unless they have a time machine.  The time to ask for a loan was before they got sooo deep into the hole there is no way to dig out.  Had they paid attention to their financial statements they might have changed their business model or marketing plan.  But that would require working on their business not in their business. Giving your new business a change to survive, let alone thrive, is the name of the game and you just can’t do that if you are trying to fill all the roles…especially those that are not the highest and best use of your time.

This is the first installment of a series called Entre-U (or Entrepreneurship University). Other installments and future videos of each installment will follow. Think of this as the most straight to the point Entrepreneurship degree you can get without the $20,000 price tag. Most entrepreneurs learn by the school of hard knocks anyway so save yourself the time, energy and money and get started!

Next: Entre-U Class #2 – Are You An Entrepreneur? >>

Between 2008 and 2010 The United States GDP hovered around $15 Trillion Dollars.  Small Business has been responsible for about 50% of that economic impact here in the U.S or about $7.5 Trillion Dollars.  The World’s second largest economy is tied between China and Japan at around 5 Trillion dollars.  In effect, this makes Small Businesses in the United States the world’s second largest economy.   

Further, Over the last 30 years from 1980 to 2010 big businesses have experienced a net loss in employment while small businesses have been the driver of our economic growth.  A Kauffman Foundation March 2010 study entitled High Growth Firms and the Future of the American Economy supports this view.  One of its key findings is: “…the top-performing 1 percent of firms generate roughly 40 percent of all new jobs.”  The study also found that high growth young firms – or firms that are less than 10 years old – create most of the new jobs.  

Clearly changes in technology have brought this revolution in entrepreneurship to the forefront.  What only five or six years ago cost millions of dollars to start can be done with $10, some open source software and a few hours of work.   

But also changes in social norms have affected the entrepreneurial landscape.  According to a Center For Women’s Business Research from 2008-2009:

A major shift in societal norms has made women owned businesses, minority owned businesses, and (the super growth combination of) minority owned women businesses the fastest growing segments amongst entrepreneurs in the United States.  

If we look at the stock market as a proxy for economic growth we can see more clearly the stages of the United States Economy in the past and future:   

Ignoring the 200 years before World War II when the economy was dominated by agriculture we can see clear parabolic economic growth cycles that are spanning time periods that are smaller by half or less.  The Ag economy was 200 years, followed by a 50 year Industrial Revolution, a 20 year Technology Bubble and a 10 Year Housing Bubble.   

It is my opinion that the Age of the Entrepreneur is upon us.  One could argue that the entrepreneur has been present since the dawn of the Industrial Revolution with Innovation leading the way.  However, it was the vast changes of the Technology Revolution that brought affordable, powerful technology to the forefront. 

The massive unemployment and economic hardship brought on by the Housing Crisis has also brought with it great opportunities for those with an entrepreneurial spirit.  The unemployed and underemployed can be a boon to Small Business America if they would apply their creativity with collaboration and new technologies to become the job creation of tomorrow.  I believe in this country’s economic future because I believe that our citizens are the brightest most innovative people on the planet.  I believe in the American Entrepreneur.

Still one of my favorite startup videos all these years later.

A summary one of my students put together:

Guy presents on the top 10 pieces of advice when starting a business – The Art of the Start.

#1 – If you want to be successful the best reason to start a business is to make meaning, not make money.  If you make meaning you will make money.  If you just want to make money you’ll attract the wrong type of employees.

-          Increase quality of life – be creative and productive

-          Right a wrong – find something wrong and fix it so it is right

-          Prevent the end of something good

2 – Make a mantra for your organization – mission statement.

-          Mission statements should be something employees can repeat and understand.

-          As an entrepreneur, create a mantra – three or four words describing what we stand for, why we work here, and why we exist.

3 – Get going – Most people first want to prove there is a market.  Just get going!

-          Think different – do things 10 times better than everyone else.

-          Don’t be afraid of polarizing people.  Great products polarize people.

-          Find a few soul mates.  The concept of a solo entrepreneur is overrated.  You need people to balance you off – need marketing, operations, accounting, etc.

4 – Define a business model

-          Be specific.  Questions to ask yourself:  who is my customer and how do I get my money out of her purse?

-          Keep it simple.  Do not innovate on business models.

-          Ask women about your business model.  Men want to kill things.  They always say yes it’s a great idea!

5 – Weave a MAT (milestones, assumptions, tasks)

-          A new company is a fresh start – pure, clear, a start from scratch.  This makes it hard to prioritize.

-          Come up with a handful of milestones such as finish the design, decide on the software, etc.

-          Write down the assumptions of your company – customer ROI, cost to install software or product, etc.   These change the business model.  Important: write down and test.

-          Do tasks.

6 – Niche thyself – need to know this about marketing

-          Great value to customer but not doing something unique allows you to compete on price.

-          No value, only person doing it (unique) makes you stupid

-          No value, many other companies are doing this (not unique) makes you even more stupid.

-          High value, unique product – want to be here!

7 – You must follow the 10/20/30 rule:

-          You should have 10 slides in your powerpoint pitch – title, problem, solution, business model, underlying magic, marketing and sales, competition, team, projections, and status and timeline.

-          These 10 slides should be able to be presented in 20 minutes.

-          Smallest font you should use is 30.  This forces you to actually know your presentation and just put the core of your presentation on the slide.  Do not read your material!  Find out who the oldest person is in the audience and divide his/her age by two and that is your optimal font size… unless you are pitching to young people!

8 – Hire infected people.  Hire people who not only have work experience and an education, but also love your product.  Most people only consider these two factors.  You should look at if they love your product.

-          Ignore the irrelevant.  You can be successful just because you love the product.

-          Hire better than yourself  – need A players.

-          Apply the shopping center test.  Go to Stanford shopping center.  You see the job candidate but he/she has not seen you.  If you don’t have the first reaction of seeing the person and wanting to go meet him/her then do not hire the person!

9 – Lower the barriers to adoption:

-          Flatten the learning curve

-          Don’t ask people to do something that you yourself would not do

-          Embrace your evangelists – people that carry the battle forward for you.  Evangelist is based on the Greek word “bringing the good news .”

10 – Seed the clouds.

-          Let a hundred flowers blossom.  Let people use your products in different ways.  Just take the money!  Don’t let this bother you.

-          Enable test drives to make sales.  Let people take your product home to test it.  You are telling them that they are smart for taking it home and testing it.

-          Find the true influencers.  The higher you go, the thinner the air.  Focus on the people that do the work!

11 – Don’t let the bozos grind you down.  You may be tempted to believe them but don’t!