Archive for October, 2008
October 31st, 2008
The third form of happiness, which is meaning, is again knowing what your highest strengths are and deploying those in the service of something you believe is larger than you are.
There’s no shortcut to that. That’s what life is about.
Martin Seligman interview in Edge “Eudaemonia, The Good Life“
Here are three activities to cut back or stop altogether:
I was fortunate–although I didn’t realize it a the time–when our television screen gave out with a blue flash and a loud pop late last year. We took it into the shop and there were several weeks of diagnosis trying to determine which part to order and then realizing that the part would cost as much as a new set. We went shopping for a new one and couldn’t decide. At that point something funny happened. We stopped shopping because we realized we were getting more done and the boys were much better about chores and finishing homework. In the end we hooked up a projector to the DVD player and stuck with Netflix but have yet to replace the television.
OK, on those last two do as I say not as I do. That’s the problem with proverbs and rules of thumb. For challenges in the realms of idealized problem solving like mathematics or chess (anywhere there are child prodigies), you can learn a lot from a proverb. But many insights in life can’t be reduced to writing, especially those involving either self-mastery or other people (and startups, alas, involve both).
If you read the history of an event how does that compare to living through it? Can you learn to ride a bike from a book? The challenge with a startup–like many other things in life–is that you need to integrate many different inputs, your own hopes and fears among them, and negotiate a working consensus with your co-founders.
Things to do in your newfound time
- walks or other exercise: obligatory, again do as I say not as I do
- reading books: an excellent way of visiting another world or appreciating another perspective. They help to pull me out of a rut and give me access to information that’s not part of casual conversation or the daily news cycle.
- more time with your family: things change. At this point I find myself listening to Rush’s “Time Stand Still” more frequently, I just want to savor things as they are.
- reconnect with old friends and co-workers: they are your tribe. Not that you can’t make new friends.
- visiting nature, a museum, or other thin places where you can appreciate beauty: I was “home base” tonight for the Trick-Or-Treaters and I spent the early evening feeling a storm moving in and looking up at the clouds gliding across the sky. It reminded me of my boyhood: some days I miss St. Louis.
“Time Stand Still” lyrics excerpt:
I’m not looking back
But I want to look around me now
Time stand still
See more of the people and the places that surround me now
Freeze this moment a little bit longer
Make each sensation a little bit stronger
Make each impression, a little bit stronger
Freeze this motion a little bit longer
The innocence slips away
October 30th, 2008
In April of this year I started to post quotes for entrepreneurs on twitter/skmurphy. Enter your E-mail if you would like Feedburner to deliver new blog posts to your inbox.
Here are my quotes for October:
+ + +
“When I was young, I observed that nine out of ten things I did were failures. So I did ten times more work.”
George Bernard Shaw
+ + +
“These are just systems, and if you’re not honest with yourself about what went wrong, you ain’t gonna be able to fix anything.”
Don Arabian (hat tip to Brian Dunbar “Words to Live By“)
+ + +
“Gray hair is God’s graffiti.”
Bill Cosby
+ + +
“Code is not a static answer to a math problem but an evolving answer to newly discovered questions: make it easy to change.”
Paul Graham (http://news.ycombinator.com/item?id=341179 edited to twitter’s length limit).
+ + +
“It’s not the big that eat the small, it’s the fast (and efficient) that eat the slow (and sparsely connected).”
Jason Jennings (+John Smart)
+ + +
“In Silicon Valley on a Friday afternoon it’s not TGIF but ‘two more working days until Monday!!’”
Miles Kehoe
+ + +
“Between stimulus and response there is a space that is our power to choose, in our response lies our growth and our freedom.”
Viktor Frankl
+ + +
“Torkington’s Law: when VCs no longer emphasize becoming cash flow positive as soon as possible, you’re officially in a bubble.”
Nat Torkington
+ + +
“A good scare is worth more to a man than good advice.
Edward Howe
+ + +
“Jeff Bezos was not a dissatisfied customer. Amazon sold books because Bezos identified books as an arbitrage opportunity.”
Alex Krupp in Social Arbitrage
+ + +
“Sooner or later, everyone sits down to a banquet of consequences.”
Robert Louis Stevenson
+ + +
“In an always on world presence is meaningless. Of course you are on-line, who and what are you available for is the issue.”
Yori Nelken
+ + +
“Time moves in one direction, memory another: we create artifacts to counter the natural flow of forgetting.”
William Gibson “Dead Man Sings” (originally in Forbes ASAP )
+ + +
“To Travel Hopefully is a Better Thing than To Arrive,
the True Success is To Labor.”
Robert Louis Stevenson
October 29th, 2008
What follows is an e-mail thread converted into a blog entry. I got a suggestion on our contact form related to the Startup Maturity Checklist:
Some software companies will require you to sign an NDA before giving a presentation or sharing any other details about the company’s product. You may want to add this to the checklist.
My answer was that we don’t advise that approach. We do believe that employees should sign an invention and patent assignment form to protect internally developed IP but if you can’t give a basic demo w/o an NDA you are probably either giving the wrong demo or overly concerned. I covered this a little bit in “NuSym De-Cloaks Part 2“ about two years ago:
- Quiet mode (stealth mode): I am normally in favor of this, but if you are advertising jobs for folks and identifying yourself as associated with the startup in public forums it can’t hurt to to at least talk about the problem you plan to solve. Other opinions on “stealth mode startups”
He replied with some clarifications (link added, some identifying info removed at his request).
Thanks for the reply. I’m at a start-up in Santa Clara. I mentioned adding the NDA to your list, because I had talked to a few companies in the past who were selling ERP software, and they wanted me to sign an NDA prior to demonstrations.
These days as a startup you normally have to sign a larger company’s NDA form which tends to slow down the whole process for talking to a prospect to the point that it’s counterproductive.
Normally you only get into an NDA level presentation if you are discussing product roadmaps or other confidential information that would not be available in a standard datasheet or website briefing. What may be going on here is that they want to make the presentation seem special because it’s “under NDA.”
How did you come across our site?”
I came across your website and saw the section on bootstrapping breakfast gatherings. I would like to attend, but I do not have a software start-up company.
We get a number of technical consultants (some of whom are hoping or planning to add a software offering to their mix) as well as engineers who are considering striking out on their own. But we tend to have serious conversations that are most useful to folks already in a startup or close to starting one. You are welcome to attend if you have an entrepreneurial itch. Each meeting is different because we get different people attending with new information and new challenges.
With your permission I would like to convert this e-mail thread into a blog post (I would not name you or identify you by company, but mention that the startups that are calling on you ask for an NDA first). Thanks very much for your question and follow up, I will use it as an excuse to write a short blog entry if you don’t mind.
Please go ahead, but don’t use my name or company name. Thanks for taking the time to answer my question and for the various links in the email. I’ll check them out.
I welcome comments, questions, or suggestions on our Startup Stages Model or on other challenges you face bootstrapping your startup. Please use the contact form or e-mail me directly.
October 28th, 2008
A couple of thoughts on focus. Rizwan Virk, the Zen Entrepreneur, wrote about the Bootstrapper’s Dilemma early last year:
The question of focus is an important one for any entrepreneur. [...] But in a bootstrapped company without outside financing, this becomes a particularly tough issue: the question is where to focus and for how long? And what to do if the focus isn’t working? And is the current focus (the one you started with) blinding you to where the real opportunity is? Or is your real problem a lack of focus? [...]
1) you need enough cash and profits to keep the company going, and
2) you have very limited resources so it’s important not to spread yourself too thin.
In fact, these two demands are at the core of what I call the Bootstrapper’s Dilemma: If you have limited cash and need to keep company going you are likely to take any sales/revenue you can get, even if it’s not in the area of your focus. Furthermore, you may discover that the real opportunity is in a market/area that is adjacent to what your first guess was. But if you don’t focus, you are not likely to make much headway in any of the areas that you are attacking.
Shawn Hessinger acknowledged this dilemma and added his “Five Thoughts on Bootstrapper Focus” late last year
- In bootstrapping, reality determines your focus.
- There is no growth without survival.
- Cash flow always remains key.
- Concept is nice but execution is everything.
- Focus on the business not the idea.
Michael Gerber in the E-Myth Revisited identifies three key roles or functions in a company
- technician or expert who develops and refines a practice that constitutes a core competency of the business
- manager who manages and orchestrates the set of practices needed for the business to succeed
- entrepreneur who understands how to find opportunities for the business and scale it
So, put these together and what do you end up with. I think Rizwan Virk identifies a clear challenge for may bootstrapper: how do I keep the lights on but develop a focused set of problems and customers for my business. This is the entrepreneurial challenge: how to identify and pursue opportunities where you can create value for customers.
The management challenge is, given this set of problems and for a target group of customers, a niche market, how do we orchestrate the delivery of our product or service across the set of practices (e.g. development, testing, marketing, sales, support) that are necessary to create full value for the customer.
The technician or expert’s challenge is how do I engage in deliberate practice to improve skills and methods around a key process that will result in more value for the customer.
Since most bootstrappers start out as “technicians with an entrepreneurial spasm” to quote Gerber I think you end up with the following conceptual picture for a bootstrapping startup (or any small business that is relying on organic profit for growth for that matter).
- Technician must answer “What are we good at?”
- Manager must answer “How can we tell, how do we measure it?”
- Entrepreneur must answer “Who wants it, where can we create value, is this the most valuable problem we can solve?”
- All have to answer: How long should it take us to know? Do we have enough time/cash to get good enough to create differentiated value.
Another way to look at it:
- Do we have the right expertise or what are our core competencies?
- How do we orchestrate and measure results end to end for our customers?
- Are we pursuing the right opportunities?
- Do we have enough time and cash to run enough experiments?
- Do we have sufficient control of our internal practice to understand how to add new staff productively?
- Do are have realistic expectations for how long it will take to succeed and enough gumption and wherewithal to see things through together.
October 27th, 2008
What follows are some real questions I have answered either face to face or in e-mail over the last 90 days in response to the current downturn in Silicon Valley.
Q: I just completed my first two years of consulting–which were spectacular–after 20+ years of full time work. But long term clients have just dropped me, and after a rather frantic couple months of chasing every lead I could, and exhausting my list, I am facing the imminent need to shut down my operation and go back to getting a job somewhere. What can I do?
A: One book you might read is “Rainmaking” by Ford Harding (an excerpt from page 22, emphasis added)
For your own business you must gain a feel for two variables. The first is the typical gestation period from the time you first make contact with a prospect to the time you actually sign him as a client. Depending upon your business this can range from a couple of months to over a year. The second variable is the typical conversion rate from prospect from client. This may have several subsidiary rates. [...]
Understanding them will help you complete the following sentence, which underlies one of the key principles of marketing:
“I need x prospects today to have a reasonable assurance that I will have a new client in y months.”
Professionals do not often think enough about the implications of this sentence. They become focused on the pursuit of two or three hot prospects, and once these projects are either won or lost, find that they have too few others in the early stages of development to generate the business they will need in the months to come. This is one of the major causes of “porpoising,” the radical and repeated swing from too much work to too little that so many organizations face. To avoid porpoising you must market and not just sell. To minimize porpoising you will need to generate a continuing flow of new leads.
Q: Is there anything that a professional organization offers in aiding members to get more leads?
A: One of the principles of lead flow is that you have to give to get. Professional communities are not a lead generation service. One of the key points in the “Creating a Consultancy Out of What You Practice” article Theresa referred to in “Two Professional Groups for Consultants” was this one:
Consultants often refer one another to clients they can’t satisfy. “Some get more jobs than they can handle or they get a job that’s not quite right for their expertise,” says Mr. Maclay. They may recommend you to a client, and you should reciprocate when it makes sense, he explains.
As you are out there “frantic..chasing every lead” carry others folks cards and website addresses with you so that even thought it’s not a fit for you it may be a good fit for someone else. I refer business to other consultants frequently. You have to see yourself as part of a larger system or community that will prosper together (or not). See also my “Networking in Silicon Valley” from July of 2007 where I observed:
One of the secrets to navigating Silicon Valley, is that it’s actually a very small place with many connections: some that can take a while to discover are nonetheless quite potent. That being said the single most important thing to avoid is wasting people’s time. Time is more scarce than capital, technology, or knowledge.
Q: I’ve read all the books and really don’t see the merits of all the standard tricks about having a sexy website, publishing a regular newsletter, teaching seminars, etc. I’m sure it’d all help, but it seems like foolish advise for someone starting out. If you don’t have a personal inside referral, or unless the market is so hot and they’re so desperate that they are Googling for you, all the rest is just noise that they’d rather do without.
A: A website, a regular newsletter, seminars are all good ideas for marketing your expertise. They are not noise. Talk to folks who have been consulting five or ten years not just two. If you don’t have a website you don’t exist. I apologize if this sounds too judgmental, it’s certainly challenging times, but establishing a consulting practice that can survive a full business cycle is not easy. It may take longer to succeed than you have runway, in which case finding a part time regular job may allow you to ease into it or a full time job may be more of a fit with your nature. Here are some rules of thumb we have tried to follow over the last five years at SKMurphy, Inc.
- Once you let one client get to be more than a third of your revenue, certainly if they are more than half, you may have inadvertently let them become your employer because you become afraid to tell them “No.”
- As a consultant your job security is your ability to get new work. You need to be continually marketing yourself to avoid “porpoising” or going deep on one or two clients and then going idle until you can find your next big client.
- It’s almost always easier to look for new clients when you have existing client work: it increases your confidence and improves your negotiating position.
- One good book on consulting is Gerald Weinberg’s “Secrets of Consulting” (he also blogs at http://secretsofconsulting.blogspot.com/ ). He advises that in a week you spend two days doing work, two days marketing yourself, and one day getting better at what you do. If you are working on a product to complement your consulting you might modify that to three days doing work, 1 day marketing yourself, and one day developing your product. As work slacks off divide your time between additional marketing efforts and working on your product.
Update February 19, 2009: Ford Harding E-mailed me a reminder to link to his second addition of Rainmaking, called “Rainmaking Attracting New Clients No Matter What Your Field” which has 40% new material in preference to his older addition of “Rainmaking.” The page/quote cited in this blog post are from his first edition.
October 26th, 2008
The October issue of Inc. magazine made it to the top of my reading pile today and I was delighted to read another great “Street Smarts” column by Norm Brodsky “Secrets of the $110 Million Dollar Man” which offers ten guidelines for starting a successful business. Brodsky’s definition of success should be familiar to anyone who is bootstrapping:
By successful, I mean a business that lives off its own cash flow, provides a good living for its owners and employees, and generates the profit it needs to keep growing.
He offers ten rules from 30 years of entrepreneurial efforts that he continues to rely on. I have picked what I think are the top three for software entrepreneurs and encourage you to read the rest of the article
Numbers run a business.
If you don’t know how to read them, you are flying blind. A business is a living entity with needs of its own that the leaders must pay attention to or it will fail. the business will fail. The only way to determine business needs are to look at key numbers and the relationships between them. We spend a lot of time with clients on determining what the dashboard for their business should look like, typically starting with their sales funnel, and tuning strategies and tactics in response to the numbers.
A sale isn’t a sale until you collect.
You don’t collect on bad debt and how long it takes to collect can leave you short of cash even though you’ve made a lot of sales. Every business with receivables is in effect a bank. As I have written previously, every business that generates receivables is, in effect, a “bank.” When you deliver a product or a service in the belief that the customer will eventually pay you for it, you are making a loan. You need to determine whether a customer is creditworthy and monitor your average collection time on outstanding debt. Understanding cash flow and the credit risk you are assuming is key to getting through the downturn we are currently experiencing.
Forget shortcuts.
Everything a great business needs takes hard work and time:
- a diversified base of loyal customers
- experienced managers
- a vibrant culture
- efficient systems throughout the business
- a sales force that works as a team
- a great reputation in the industry.
This might also be called “the old man’s business model” in contrast to Paul Tyma’s “The Young Man’s Business Model.”
So why was Brodsky a $110 million dollar man? He is as frank about his shortcomings as his success:
I am more impatient than most and tried just about every shortcut in the book — like hiring salespeople from competitors and promoting employees just because they are available. It finally dawned on me that my shortcuts were serving only to prolong the process of building the great company I wanted. Why was I in such a hurry, anyway? A great company is one that can last forever, and I needed to make decisions in that frame of mind — even though I fully expected to sell the business someday. My records-storage business, CitiStorage, would be worth more if I took my time and did what was best for the company in the long term. Indeed, it was. As you may know, I ultimately sold it and two related businesses for $110 million.
October 25th, 2008
We had a great set of entrepreneurs at our “Idea to Revenue” this afternoon. The class was sponsored by CINA,the Chinese Information and Networking Association and held at Fenwick & West in Mountain View. Here are some of the comments from the feedback form:
- “Great overview of the early stage entrepreneurial process. I liked the interaction & open brainstorming.”
- “Some part are too high level, need more details.”
- “The face to face discussions went well.”
- “I would like more time on individual business discussions, ideas, and difficulties.”
- “Offered a good outline of startup business strategy.”
The format for this class involves an extended interactive session on goals and how the entrepreneur will monitor progress toward them. Everyone left with two one page worksheets filled out with a specific focus on their business. The first was a set of goals for the balance of 2008 and 2009, with two key objectives for 2008 identified and an additional four goals for 2009. The second was a description of their customer’s pain points, how they are addressing them today, and a list of key assumptions in their business plan.
It was a lot of fun but we were drained after it was over. We are offering it again in December.
October 20th, 2008
There is a risk of complacency for start-ups (and even larger firms) who have achieved a level of security in their first niche. Markets change, consumer needs change, and you need to continue to explore opportunities to sell your offering to new customers–non-customers–even though it’s a much harder sales process than a renewal, upgrade, or follow on sale to an existing customer. Peter Drucker warns about this in an interview in February 2002 issue of Information Outlook (hat tip to Pauline Harris “Peter Drucker’s at it Again!“)
Companies may know a good deal about their customers. They know nothing, as a rule, about their non-customers — the people who should be our customers but buy from someone else. Why do they do that? And yet it is the non-customer where important changes always start first.
It’s consistent with a 1994 article he wrote for Harvard Business Review entitled “The Theory of the Business.” He offers department stores as a cautionary example of a set of firms who had high customer satisfaction but didn’t realize that they were losing share. There were not talking to any non-customers, assuming that they weren’t customers because they couldn’t afford to be when in fact tastes were changing.
I was reminded of the value of talking to non-customers by a September 16 blog post by Brian Bailey entitled “Bye Bye Cadence.” Recent events may have rendered the title unintentionally ironic but the article relates a conversation Brian had with some Cadence employees after he gave a talk at CDNLive! (the exclamation point is part of the name).
Afterwards I was talking with a group of Cadence employees. They said that the total cost to put on such a show was significantly less than what they usually had spent on DAC. In addition they did not have to constantly look over their shoulders to see if someone was listening in to their conversations and the quality of the people who attended was so much higher than the leads they got from DAC. One person asked if they thought Cadence would ever go back to DAC. The consensus answer was – I don’t see why we would ever want to return to DAC.
I left a comment on September 25 (I only mention this to be clear that I am not “piling on” after the recent executive exodus at Cadence) that I wanted to end here with as well.
There is always strong value in a user group and communicating privately with your current customers. Not enough EDA vendors do enough to actually have a conversation with their customers. Full points for Cadence in doing so at CDNLive!
A trade show like DAC allows you to interact with prospects–potential new customers. It’s also a bigger draw than a single vendor (or even single vendor ecosystem) show. To the extent that Cadence wants to launch new products that carry them beyond their current customers they will need to do more than CDNLive! style events.
Clearly Cadence is already shrinking on a revenue basis, I would suspect that avoiding trade shows and other forums that would allow them to interact with non-customers will only allow them to continue to shrink more cost effectively.
Update June 15: What a difference a few months make. Thanks to a comment by Grant Martin on Daniel Payne’s recent blog post “DAC Transitions Over Time” I learned that Cadence has converted 2009 CDNLive into a series of webinars and is back at DAC with a much bigger footprint than 2008. In fact they are vectoring their customers to DAC for face to face meetings. See http://www.cadence.com/cdnlive/na/2009/pages/default.aspx
CDNLive! conferences give Cadence technology users around the world an opportunity to exchange ideas with their peers as well as with Cadence technologists. However, the current global financial environment is impacting everyone in the electronics industry, including many of our customers. Fewer resources are available to dedicate to critical projects. And travel budgets are limited.
To better accommodate our customers, who have expressed concerns over their ability to travel and take time away from their desks, we have decided to host this year’s CDNLive! Silicon Valley event as a series of webinars. These webinars will be an excellent opportunity for users to share their work and present their papers to an even larger audience—and a wider range of their peers—than what was anticipated at the face-to-face conference.
Our presence at DAC in San Francisco in July will provide an opportunity to meet face-to-face with customers. And this year’s CDNLive! events in Japan, Taiwan, Israel, and India will proceed as planned. We feel the decision to deliver this year’s CDNLive! Silicon Valley as a series of webinars is the right way to help our customers achieve productivity, predictability, and reliability.
Further details on the Webinar Series schedule will be posted as available.
October 19th, 2008
 |
John Smart, the prime mover behind the old Accelerating Change conferences, sent an e-mail reminder about Convergence08 unconference November 15-16 at the Computer History Museum in Mountain View.
It has a broad focus on some emerging technology areas that I hope will make for an eclectic and thought-provoking mix:
- synthetic biology
- artificial intelligence
- longevity intervention
Early registration ends tomorrow ($145 early vs. $195 normal), Monday October 20 so take a look and sign up for what I believe will be a two day look at some interesting possible futures. |
October 15th, 2008
Many mid-career professionals may take advantage of this latest Silicon Valley downturn to launch a consulting practice. Some of them find their way to the Bootstrappers Breakfast, where they are welcome. If they want to establish a consulting practice I encourage them to join organizations like PATCA and WIC as well.
In yesterday’s Wall Street Journal this is great article by Sarah Needleman “Creating a Consultancy Out of What You Practice” that some key things to consider as you are getting started:
- Expertise + Clients: successful consulting involves more than the ability to do the work, you also have to be able to get clients. This requires an ongoing focus on marketing and selling your services.
- Run it as a business: have a one page plan of attack (“Guerrilla Marketing for Consultants” by Michael McLaughlin and “Rainmaking” by Ford Harding are two excellent books for guidance on how to do a business and marketing plan for a consulting practice. Understand the tax implications of the various forms a business can take and if you are targeting the Fortune 500 (or Silicon Valley 150) what will be required for your firm to qualify as an approved vendor.
- Befriend your competitors. It can be a revelation to new consultants that they can both cooperate and compete with other consultants. There is a good quote from Walt Maclay, the president of PATCA, on this:
“Some get more jobs than they can handle or they get a job that’s not quite right for their expertise,” says Mr. Maclay. They may recommend you to a client, and you should reciprocate when it makes sense, he explains. You also may be able to secure referrals by joining a consulting industry trade group. Members often swap job leads with one another through email lists.
I am a member of PATCA and have attended several very educational meetings, the most recent was on payment processors. I have also found Women In Consulting (WIC) to be excellent in this regard. You can get a lot of useful help and information by joining WIC and participating in the mailing lists. Networking can be a way not only to discover new clients but to meet other consultants that you partner with for larger opportunities.
The article closes with this advice on how to spread the word.
Let everyone in your personal and professional network know about your new line of work and that you’re eager for referrals. Attend business events targeted toward executives at firms that could benefit from your services. Go to the events prepared with a 30-second commercial, advises Mr. Maclay. “You need a very good elevator speech, something that will get their attention,” he explains.
A short intro is always appreciated: stress the benefits of what you deliver and couple it with some good diagnostic questions and you can kickoff some serious conversations. In our case I say that we help startups find early customers and early revenue and I ask if they are having trouble pricing their product or looking for smarter prospects.
Update February 19, 2009: Ford Harding E-mailed me a reminder to link to his second addition of Rainmaking, called “Rainmaking Attracting New Clients No Matter What Your Field” which has 40% new material in preference to his older addition of “Rainmaking.”
Previous Posts