Posts filed under 'Open for Business Stage'
March 9th, 2010
A lot of bootstrappers start out by selling their product or services to friends or people they know and/or have worked with in the past. One of the early thresholds a team crosses is making the transition to “selling to strangers” (see the “Startup Maturity Checklist” for some relevant questions) and they can get tripped up on a number of points.
Two key challenges
- Free Consulting: strangers may want to learn more about the technology area you are addressing and request one or more sales calls while they listen attentively. The net effect is that you are offering free consulting to someone who has no intention of buying. Tipoffs: always encouraging, “tell me more.” They talk very little about their own challenges but are very interested in your offering or the technology arena that you are focused on.
- Column Fodder: potential buyers at large companies may need to solicit a minimum number of bids in addition to the team that they want to do business with. This means that they will put you through the exercise of generating a bid just so that they have three, even though they have no intention of working with you.
Here are four steps to take to immunize yourself against the default assumptions you made when selling to friends.
- Balance time invested against size of deal, probability of a win, and competing alternatives. Establish a marketing budget in hours in advance (e.g. default might be 15 minutes for an inquiry, 60 minutes for a phone call) and adjust it as your understanding of deal size, probability of a decision, and probability of a win evolve.
- Always put an expiration on any quote or proposal, if nothing else it gives you a reason for one last E-mail/call.
- The first payment is always the most difficult, if appropriate ask for a token payment after you have expended some marketing effort to assess interest level.
- If you are not certain of interest in getting started, float a later date (e.g. six weeks instead of two) for the follow up and see if they pull it in. If you are not having conversations every week or two then the deal is in percolate or nurture mode and is not active.
November 18th, 2009
Just a quick reminder, the early bird rate ends next week for our Jan 12, 2010 Idea to Revenue workshop in Redwood Shores, CA. If you are in formation or the early days of your startup this is a good opportunity to spend four hours on your business with your team members. We help you ask each other the hard questions so you can leave with a one page plan for your next steps. This will sell out, register now.
Update Jan-3: Sold out.
October 25th, 2009
George Grellas is an attorney in Cupertino whose firm has specialized in business and corporate law for more than 25 years. He has a number of excellent articles on startup legal issues “Startup Law 101 Series” including “Ten Essential Legal Tips for a Startup Team in Formation” that any team of two or more entrepreneurs should read.
He posts on Hacker News from time to time and in response to a question “Should Your Startup Have an Advisory Board” posted a very cogent set of tips that have yet to make it to his website. So that his answer is not lost to bit rot I am including it here.
I have worked extensively with startups in Silicon Valley since 1984 and have seen every shade of advisory board, ranging from those set up for pure window dressing to those used extensively by founders for insightful continuing advice.
The latter usually arise from pre-existing relationships between one or more of the founders and the advisors. Normally, the advisor is someone who wants to assist the founders and whom the founders accordingly want to reward by small equity grants via the advisory director role. These types of advisory boards, in my experience, tend to be of significant value to early-stage startups and are well worth the small equity grants involved (which, by the way, tend on average to be more like .1%/yr of service rather than the higher number suggested by the author of this piece). The informal nature of the relationship also avoids many of the hassles associated with trying to have such an advisory board meet from time to time in some formal manner. In essence, what you have with such boards is a healthy working relationship from which all parties benefit.
The “window dressing” variety of advisory board is often as phony as an undersized glass eye that spins randomly with every blink. This often involves the so-called industry luminaries used to make the startup look much more impressive than it really is. In essence, such advisors hire out their names (and, yes, they will insist upon larger equity grants and often for some form of cash compensation as well, as for example for every meeting attended). While one can never say categorically that such advisors do not add value to a startup, their primary function is to add name-value and hence the value of their contributions apart from name value tends to be limited. There are exceptions but, in my experience, not many. In general, these types of advisors are a clear mis-match for most early-stage startups, though they often help later-stage ones needing “company profile” dressing for IPO, etc.
By the way, founders still occasionally confuse the role of advisory director with that of a board director. There is no connection whatever between the two roles. The former is basically an outside consultant only and has no management-level authority; the latter, of course, has tremendous management authority (and corresponding liability risks as well, which the advisory director does not).
Here are some blog posts where I talk about the value and appropriate use of an advisory board or kitchen cabinet:
- Nov-23-2008 “Unfamiliar Pain”
If you don’t have a kitchen cabinet or board of advisers that you are accountable to, I would encourage you to create some mechanism for independent outside advice from folks with relevant experience. I have several other independent consultants that I compare notes with, we also take turns kicking each other in the ass encouraging each other to make hard decisions and do the things we know we need to do that are getting neglected. We having a meeting with all of our partners together for the first time in early December. I hope to use this as both a joint planning and joint accountability mechanism.
- Jul-16-2008 “Common Questions About Advisory Boards“
- Jan-21-2008 “Forming an Advisory Board“
VentureHacks has three relevant posts from 2008 that, while they are more focused on VC related issues than bootstrapping, are still worth reviewing:
October 16th, 2009
I think a bootstrapper’s true scarce resource is time. Determining how to be most effective with how you spend your time is more important than spending too many cycles on trying to save nickels. As a side effect of cutting out ineffective activities you will tend to cut unnecessary expenses.
“Lost wealth may be replaced by industry,
lost knowledge by study,
lost health by temperance or medicine,
but lost time is gone forever.”
Samuel Smiles
October 14th, 2009
I blogged about end of year issues last November in “6 Work Weeks or Less in 2008” and I thought I would issue the “Warning Dates in Calendar are Closer Than They Appear” a little earlier this year because a lot of new businesses need to take action in the next few weeks to get ready for 2010. Depending upon how you count it there are only about seven real work weeks left in the year.
- Oct-19: normal work week, but what the heck, take a weekday off and join us Sat-Oct-24 for “Getting More Customers.” [Full Week]
- Oct-26: it’s still possible to make sales calls that will lead to revenue this year. [Full Week]
- Nov-2: accountants are not that busy–compared to say next March when business taxes are due–if you don’t have one, schedule some appointments. [Full Week]
- Nov-9: If you have not incorporated, now is the time to get your paperwork in order. [Full Week]
- Nov-16: the last full week before Thanksgiving, if you are trying to close business it can get much harder between Thanksgiving and New Years Day [Full Week]
- Nov-23: a half week at best. We will have a Bootstrapper Breakfast Friday morning after Thanksgiving. [Half-Week]
- Nov-30: normally a good week, if you are not chasing opportunities this can be a good week to look back at 2009 and extract some lessons learned. [Full Week]
- Dec-7: normally a good week, if you have taken a look back at 2009 this can be a good week to look forward to 2010 and do some planning before the holiday spirit gathers full force. [Full Week]
- Dec-14: unless you are chasing end of year budget this is can be a very slow. But there will be at least one Bootstrapper Breakfast this week (Tuesday in Sunnyvale, and perhaps Friday in SF). [Slow Week]
- Dec-21: normally a good time to reconnect with friends and family; we will not hold a Bootstrapper Breakfast on Christmas Morning. [Full Week only for hermits]
- Dec-28: last chance to file paperwork with a 2000 deadline; and surprisingly we will not hold a Bootstrapper Breakfast on New Years Day. [Full Week only for hermits]
Some logistics issues you should take care of now instead of playing catch up in early 2010:
- If this is your first year in business get your accounting system (in most cases in the US this will be QuickBooks) in order now, schedule a meeting with your accountant (or interview candidates and select one) before December 11. If you are based in Silicon Valley we are huge fans of Ogden Lilly.
- Take some time to do both a recap of 2009 and a look forward for 2010, assessing what are appropriate goals in light of continued economic difficulties in most industries.
- If you’ve been working on a startup but haven’t incorporated yet, you may want to get all of your paperwork in order but postpone filing until the first week in January, in some states this will save you paying 2009 annual fees for a few weeks of operation in December and then 2010 annual fees. We like to see teams incorporate sooner rather than later if only because it gives you a vehicle to do business with that’s better than a collection of sole proprietorships.
July 15th, 2009
With Athol Foden’s encouragement I have submitted the following session (links added) for this year’s Silicon Valley Code Camp:
Software Startup Maturity Checklist
This session is for both aspiring and active entrepreneurs. We will walk through a 36 point checklist that covers Product Development, Customer Development, and Business Operations. You will leave with a better understanding of where you are today and what some logical next steps are for each of these stages:
Primary focus is on bootstrapping, there will also some discussion of what is required for a business to deserve outside investment. If you are thinking about doing a startup or you are underway and looking for a quick diagnostic on what to focus on next, this session will offer practical guidance based on the specifics of your situation.
This session does not require but will build on Athol Foden’s session on “From Code to Complete Product to Brand.”
Follow this link to indicate your interest in attending. It will be based on the Startup Maturity Checklist which is the first module in our “Idea to Revenue” workshop. Code Camp is Saturday October 3 and Sunday October 4 at Foothill College 12345 El Monte Road (Parking Lot 5) Los Altos Hills, CA 94022
As the description indicated, my session is a companion to Athol’s “From Code to Complete Product to Brand” which also looks good:
Before you can go out and market your code, you need to productize it. Whether it is for a small downloadable utility or an enterprise application, software seldom sells itself. Even for Open Source, it has to be packaged, promoted and presented correctly… and that is the start of your branding for the long term. For startups, product and company may both be dependent on this proper execution. This overview session will give you the highlights and a check list to do a proper product packaging and launch. For startups, continue this subject with Sean Murphy’s startup checklist talk
And follow this link to indicate interest in Athol’s.
Update Mon-Sep-2: The “SW Startup Maturity Checklist“ session is set for Sunday 1pm, Oct 4 2009 in Room 5501 at SV Code Camp.
Register here: Session 201 Sun-Oct-4-2009 Room 5501
June 3rd, 2009
We are facilitating another website peer review Thursday June 11 at PATCA. At our April 17 website peer review, we were asked by Jerry Rice to produce a similar event for PATCA and were happy to oblige. Theresa is a member of PATCA and regularly attends their events. She blogged about “Three Reasons to Attend a Website Peer Review” in April and her points are still valid:
We have done three other events like this in conjunction with sponsoring organizations like Innovation Denmark, SDForum, or Startup Epicenter. Participants have told us that they had three benefits.
- In reviewing another firm’s website and providing concrete feedback, they developed new perspectives on how prospects and other visitors might assess their own site.
- There are always so many things that can be done to improve a website it can be an endless sinkhole of time. Helping a peer with their site helped them identify the most important improvements to make next. Also some of the feedback provided by fellow CEOs were directly applicable to their own.
- They learned about a number of free and low cost tools and resources that are available for website design and analysis.
Details about the event:
- Date: June 11, 2009, 6:00-9:00pm
- Pre-registration Cost: $20 for PATCA members, $25 for non-members, $20 guest(s) of members, and $20 for first-time attendee
- Register here : advance Registration by June 8 strongly encouraged; register online by 5:00 pm June 8 to guarantee a meal. You can also call or email the PATCA office for reservations: 800-747-2822 or info@patca.org.
- Dinner included:Oven roasted tri tip with cabernet demi glace OR Sauteed Portobello mushroom and sun-dried tomato risotto in a Parmesan cream sauce
- Location: Pruneyard Plaza Hotel, 1995 South Bascom Avenue, Campbell, CA 95008
May 5th, 2009
Athol Foden of Brighter Naming is our guest speaker Friday May 8 for the Bootstrapper Breakfast™ at 7:30am at the Omega Restaurant in Milpitas. Athol has over 16 years of experience helping clients name companies, products, services, and taglines. Athol’s opening remarks will be followed by a question and answer session on developing the right name.
His website has a number of excellent articles on name generators, characteristics of good names, and naming biases and influences. His “Top 10 Characteristics of Good Name” is an excellent place to start. Brighter Naming offers a jump start program for early stage startups that takes into account their limited resources and need to move quickly, it’s worth contacting them. They also offer a self-service approach that you can follow if you need a good methodology.
The Omega Restaurant is at 90 S. Park Victoria Milpitas, CA, 95035. Turn to the right after you walk in, we are in the back room. To RSVP for the event sign up here: https://www.123signup.com/register?id=zdgrx We start promptly at 7:30am.
Related content
- Dec-15-08 “Last Full Work Week of 2008”
If you are stuck trying to pick a name we suggest you contact Athol Foden at Brighter Naming, his team has a clear process that’s startup friendly outlined on his website. You can pick which steps you would like assistance on and which you want to do on your own.
- Dec-7-2007 “One Name or Two for Product and Company”
Your startup is in competition for prospects’ awareness and attention. The reality for bootstrappers is that you do not have a lot of resources available to enter their awareness much less gain their attention. It’s twice as expensive to teach people two names instead of one…and to do name searches / trademark searches for two names. Pick one name for both the company and the product service. You can always rename the company or add a second product name later, but establishing the name in the prospect’s mind takes an enormous amount of effort: don’t double your workload. Also, finding one good name and agreeing on it is a challenge, finding two that are somewhat related and both acceptable is much much harder.
- Nov-30-2007 “If You Think You Have a Great Name, Think Again” an interview with Athol includes this exchange:
Q: What do you think is more important, a name or a logo?
In retail, a logo (or even more importantly a color scheme) are the most important when you are selling “off the shelf” via packaged goods. For items where the logo cannot be seen, for example fashion clothing, the name recognition is more important. In high tech, when selling via the internet or phone, the name is more important. In some cases, the icon (mini logo) may be also very important e.g. embedded in a website, cell phone, etc.
January 27th, 2009
I worked at Monolithic Memories from 1984 until 1988, in 1985 Irwin Federman, who was CEO at the time announced that the company was informally banning meetings on Fridays. It seemed reasonable to me and I thought it would probably make us more productive. A few weeks later he announced that the company was going to four day work weeks as a way to prevent layoffs at a time when the semiconductor industry was in a serious recession. Forgive me if you’ve heard this story before, I recounted it in “Two CEO Speeches I still remember” in June of last year. I still remember his closing remarks after a low key talk encouraging us to work together and follow a short list of actions to help cut costs and improve our profitability.
“And I hope that you all act on this, because if you don’t, fewer of you will be listening to someone else next year at this time.”
I have been reflecting on the lack of four day work weeks and other creative responses to the recession. And how few CEO’s seem to be making sacrifices to keep their workers employed. For some background Peter Capelli’s Jan-5-2009 article “Alternatives to Layoffs” makes for useful reading, here are some key excerpts but read the whole thing:
The idea that there are alternative ways of handling the need to cut costs without laying off individual workers is actually a very old story. In fact, up until the mid-1980s, the idea that an employer would dismiss workers permanently — that they were not expected to come back after business picked up — was so rare that the Bureau of Labor Statistics did not even keep track of such cuts. [...]
It was in this period that more creative alternatives to layoffs flourished. The most prominent of these alternative approaches was wage cuts, often negotiated by unions under the guise of concessions to existing union contracts, but the goal was always to reduce permanent job losses.
The range of other alternatives was impressive — reduced hours of work (and pay), job sharing where the same job would be split into two part-time positions, cutting back on outsourced work and the use of vendors to make work for regular employees whose normal tasks were no longer needed, etc. [...]
The best example of a significant company that is pursuing real alternatives to layoffs is FedEx, where they are cutting wages to reduce costs. What is particularly important about the cuts at FedEx is that the cuts are even bigger for executives: 10 percent for executive pay, five percent for everyone else. (Fed Ex also announced for the first time that it will not be advertising in the Super Bowl, another very public effort to save money.)
Why are so few companies pursuing any alternatives to layoffs? Why has the interest in these alternatives declined so much over time? It isn’t because the alternatives don’t save money: A five-percent salary cut saves much more money than a five-percent layoff because there are no severance payments; the legal liability and associated costs are much less; and the savings come instantly without the agonizing administrative process of figuring out who has to go and getting them out in a dignified manner, etc.
Morale might actually improve through a collective effort to save jobs, certainly as opposed to the morale-killing effects of layoffs and, of course, the ability to ramp up when business improves is dramatically accelerated.
It comes down to how long you think this recession will last and what you want your startup to be known for.
I am not advocating holding on to poor performers: I have had to fire many people over the years as a manager, it’s never easy and it’s never pleasant. But having to lay people off is much much worse. When I look back on places where I enjoyed the work and learned the most, it was when times were tough but we got creative and persevered.
As entrepreneurs we have to hold ourselves accountable for keeping the our team intact now so that we are better prepared when the economy comes back. And remember these times as you start to hire again, because that’s when you will plant the seeds for future troubles if you are not careful.
Update Jan-29: Venture Hacks juxtaposes this quote from Barry Diller with their link to this post.
“The idea of a company that’s earning money, not losing money, that’s not, let’s say ‘industrially endangered,’ to have just cutbacks so they can earn another $12 million or $20 million or $40 million in a year where no one’s counting is really a horrible act when you think about it on every level. First of all, it’s certainly not necessary. It’s doing it at the worst time. It’s throwing people out to a larger, what is inevitably a larger unemployment heap for frankly no good reason.”
Update Jan-30: I just read Ron Wilson’s “Why the Layoffs If We’re Still Profitable?” from Tue-Jan-27, he makes some interesting suggestions:
The most important thing is to understand your company’s cash-flow scenarios and its alternatives. [...] Sufficient bridge funding to keep cash flow above zero may be an insurmountable obstacle for a little fabless semi company, but a small risk for the huge system OEMs to whom the company is important. In fact from the system OEM’s point of view, ensuring survival for the supplier of a key component in a promising new product may be a very good short-term investment in their own cash flow. And in some cases, you can build a similar scenario for key suppliers: they may be richer, and have an interest in your survival much larger than the cost of ensuring it.
Now is the time for lateral thinking, not for reflexive conservatism. But lateral thinking means unprecedented sharing of information between engineering, financial, and corporate management. And it means resisting that reflex to pull back when the unknown yawns before us.
January 25th, 2009
Another excerpt from William Feather’s “Business of Life”
Dead Business
A neighboring grocery store went bankrupt, and a bookkeeper who was called in by the lawyers to help inventory the bankrupt stock says he never before realized the difference between a dead business and a going concern.
Here were cheese and vegetables and meat, he found, which would have been salable the next day if the store had kept open. Here were accounts with nearby customers which might have been paid by the next payday, but now would have to be turned over to a collection agency. Here were canned goods which could have gone to make up the weekday meals of a hundred families, but now would have to be sacrificed as “bankrupt stock.” No one who has not helped to salvage a disordered store and turn odds and ends into cash at a quick sale can realize how much it shrinks in value.
Every business accumulates a friendliness on the part of the customers which becomes part of its stock in trade. The habit of stopping at a certain store to buy, or the familiarity which leads one to ask for an advertised brand of anything, forms an asset as important as building and fixtures. It is this fact which enables companies about to issue stock for public sale to place a large value on their good will and to issue stock for its full amount. The money which has been invested in years of careful advertising builds up a fund of good will solid enough so that bankers lend money on it–when they lend money on anything.
My copy of “Thoughts on the Business of Life” is copyright 1949 with individual articles copyrighted between 1927 and 1949, so I can only limit the date of this article to between 1927 and 1949. It’s certainly still applicable today, and applicable to knowledge businesses a much as retail firms.
Entrepreneurs who are facing the challenges of closing a deal with their first few customers can be surprised how hard it is to get on prospect’s calendars and get them to return calls. Problems that will be an order of magnitude easier to manage once the prospects become customers. Established credit relationships with suppliers, partners, and customers can also take a long time to establish and are equally valuable.
As you consider how to get through the recession of 2009 (or what I hope will be called the recession of 2009, instead of the recession of 2009-2010) Feather’s observations from perhaps 80 years ago are well worth bearing in mind. Find a way to continue to operate, even if in a reduced fashion, as a set of ongoing customer and supplier relationships have considerable value and act as a force multiplier on your other assets.
I close with two related quotes on reciprocal obligations from Margaret Atwood’s essay “A Matter of Life and Debt”
Debt–who owes what to whom, or to what, and how that debt gets paid–is a subject much larger than money. It has to do with our basic sense of fairness, a sense that is embedded in all of our exchanges with our fellow human beings.
We are social creatures who must interact for mutual benefit, and–the negative version–who harbor grudges when we feel we’ve been treated unfairly. Without a sense of fairness and also a level of trust, without a system of reciprocal altruism and tit-for-tat–one good turn deserves another, and so does one bad turn–no one would ever lend anything, as there would be no expectation of being paid back. And people would lie, cheat and steal with abandon, as there would be no punishments for such behavior.
Here are some earlier blog posts that include excerpts from William Feather’s “The Business of Life.”
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