There is one mantra that successful entrepreneurs often offer to aspirants – ‘Fail, and fail fast’. The premise is that you do not have to be an expert while launching a business. Rather, what matters is that you need to learn from your mistakes and pivot quickly.
Just about every job in the modern world involves new technology in some way, but if you can’t get enough of gadgets, code, and tech news, you’ll want to get your hands dirty in the deep end of tech careers. Continue Reading!
When you read about a young CEO selling his start-up company for millions, entrepreneurship seems so glamorous. What people don’t know is that being an entrepreneur can be a pretty difficult lifestyle and it requires focus and dedication to lead a company to a successful exit.
The most common route to starting a company involves raising venture capital (VC) funding; however, this is not the only option. Many successful companies start off by bootstrapping. I founded PK4 Media towards the end of 2009, and instead of going through rounds of funding from investors, I chose to bootstrap. In order for the company to grow organically, I have prioritized my attention to 3 specific areas, all of equal importance: Cash Flow, Time and Focus.
1. Cash Flow
Without the perceived “safety net” of VC funds, it is critical to keep a watchful eye on your cash flow. Tracking cash conversion cycles and understanding the tightrope balance between receivables from your clients and payables to your vendors is crucial. Inevitably, floating a customer’s net payment terms while trying to keep your vendors happy will lead to some tense times (and grey hairs!), but it is not an impossible feat. No matter how well you understand your business model, the balancing act will never work out perfectly every time.
A company in growth mode will always be short on cash. For those times when the balancing act tips in favor of your vendors, you need access to short-term, flexible cash alternatives. The most common options for bootstrapped companies are lines of credit from your bank, a receivable factoring company, or even loans from your friends and family.
A line of credit from the bank is my personal preference, since your company only has to pay minimal interest while the line is in use. Think of it like an emergency fund at a reasonable interest rate. Unlike a bank loan, if there is no balance on your line of credit you do not pay any interest. Traditional bank loans are better for purchasing assets, while lines of credit help cover cash-flow needs. Lines of credit stay open for a specific period, and can be adjusted up or down as needed. Creating a relationship with your bank is very important. In addition to your financials, the bank needs to understand your story and your business. Select your bank carefully and make sure you can grow with them long-term.
Even with the relationship, a line of credit can still be difficult to obtain. A bank may require you to be in business for two or more years before approving a loan or line of credit. If you find this to be the case, factoring or even a loan from friends and family may be a valid option.
In early stage start-ups, factoring companies can be useful by paying you early on your receivables. The difficulty with factoring is that the interest adds up quite a bit, perhaps as much as 36% per year. The key with factoring is these are short-term loans that you want to pay back quickly and only rely on if you absolutely need them. A source of cash with more favorable terms may be short-term loans from friends and family. When dealing with loans from friends and family, be sure to protect your relationship and put everything in writing. Treat it as you would any other loan and be sure to make payments in accordance with the terms you agree upon.
When running a bootstrapped company, your time is the most valuable asset you have. Time is the only truly limited commodity in the world. Being a start-up entrepreneur, there’s no doubt you spend every waking minute of your day thinking about your business. It is important that you are efficient in the usage of your time. Think about every minute and hour you spend working on a project, or segment of your business, as leading to incremental growth of the company. If what you’re working on isn’t adding value, drop it and focus on the parts of the business where you can create more value. Spending your time efficiently will allow for the maximum growth of your business objectives.
The time you spend on your company should be 100% tied to focus on the core of your business. What did you build your company for? This seems like an elementary concept, however, it is easy to be distracted by a myriad of opportunities that can chip away at your focus. Many young entrepreneurs get distracted chasing opportunities that don’t completely mesh with their business model simply because they are there. An easy dollar, low-hanging fruit, etc. But if these easy dollars come at the expense of shifting your focus from the core of your business you will stretch the company’s resources (and your time) too thin. Of course there are times when chasing the low hanging fruit may lead your company in different strategic direction. But if that is the case, shift your focus 100% as well. Staying focused allows you to maximize your resources and produce the highest ROI.
For the past four years, my team and I have put our heads down and focused on the core business, minded our time and kept an overly close eye on our cash flow. Only recently have we picked our heads and seen the amazing strides forward we’ve taken. Venture capital may seem like an attractive way to build a business, but it’s not the only way. So put on those boots, pull yourself up and keep your feet out of the mud!
Have you ever been hanging out with a friend, talking about things, when suddenly an exciting idea pops up in the conversation?
It can be a business idea or it can be any type of activity seemingly a bit out of the box given the context. From my own experience, these conversations are fun but usually aren’t taken seriously. It’s fun to talk about strange ideas, but to actually pursue them is a different story. And so the idea inevitably dies a quick death after a protracted silence or when somebody changes the topic. This could have easily happened to us, but it didn’t.
The idea for Spark Mints came to us while we were at the Dave Matthews Band concert at the Gorge Amphitheater in Washington State. It was late in the day and hot. We were tired. But we didn’t want to drink a lot because we were also standing in front of the stage, and leaving for a restroom break would make it more than difficult to get back to our spots near the stage. We needed a boost of energy without a drink, and we realized that an energy mint would have done the trick.
It sounded cool, but how do you make a mint? In particular, how do you make a mint with the things we want in it? This is beyond simply following a recipe to make cookies in the kitchen. Maybe this was just one of those times we faced something that excites us in our lives, but we should immediately dismiss it because it’s just too challenging.
In truth, making a mint only seemed challenging to us because we’ve never done it before. In fact, we’ve never made any food products before. However, other people have and we could learn from them. So the first thing we did was find an expert. An expert who has done exactly what we want to do.
The closest we were to a mint expert was a friend of mine who has her own successful baking company. I immediately thought of her and while we were discussing the idea right in front of the stage, I pulled out my phone and texted her for help. She responded that while she didn’t know how to make mints, she could point us in the right direction and she offered to help.
After I returned from the concert, I wrote down all the questions I had about mint making. How do I find a recipe? How do I get a prototype? How do I get ingredients, into retail stores, packaging material, distribution, and insurance? The list went on and on. I dumped all of my questions onto a sheet of paper, and then I took her out for a drink.
She spent over two hours with me going through all the steps she took to build her business and make her product. She told me how the food industry works. What food brokers are, what fees they charge, and what sort of margin we need to have in order to be profitable. She told me how to find mint manufacturers, which was simply a matter of looking on the back of labels of existing products and contacting the distributor listed on the product. She taught me the importance of the telephone, which is so often neglected these days. Her advice was to get on the phone and start making calls. With instructions to be confident yet inquisitive, she assured me that people would respond to our inquiries. She taught me that when roadblocks get in the way, I needed to ask people for referrals, for the name of someone else who could help.
The conversation I had with her gave me a plan, and suddenly the task of making a mint didn’t seem so daunting anymore. The plan provided a roadmap, a list of probable obstacles and expectations, and most importantly a mindset with tactics to deal with what was going to happen.
Looking back, this first step has been crucial for our development. My friend continues to be a mentor, advisor, and sounding board for our ideas, concerns, and progress.
The principle of finding a mentor cannot be overstated. Our mentor has saved us time, money, and loads of stress that we would have had to deal with. For anyone who wants to start a project, and has no idea where to start, the place to start is in finding someone who has done what you want to do. There are experts out there, and I believe that most people genuinely want to help each other. Why read an outdated article about someone’s experience when you can learn the tricks of the trade directly from the source?
I was lucky to have a friend in the industry, but if I didn’t, I would look on LinkedIn to get an introduction to a 2nd and 3rd degree connection who is an expert. I would ask for help by posting on my Facebook and Twitter accounts, and tell people what information I needed. I would email people in my network who are well connected and ask them if they know of anyone. The goal isn’t to network here – it’s to find a bonafide expert that can tell you how to get from A to B.
After you have a mentor or a few mentors in place the next step is to get on the phone. Blaze a path for yourself but do it over the phone. It’s faster than email and it develops better rapport. Call someone in the industry and piece your way to the solution you’re looking for. One phone call will lead to another, and the next thing you know that crazy idea of yours will start to look like there might be something to it after all.
While a competitive analysis should be a core part of a business plan for any organization — big or small — it holds a particular significance to startups and small businesses. By obtaining this type of insight into the specific channels of opportunity in your market, you can ensure that you’re focusing your efforts in the most effective way when budgets are small and resources are limited.
If you haven’t performed a competitive analysis for your business yet, you’re likely missing out on a high potential marketing opportunity. Simple as that.
A competitive analysis should cover seven key topics – and possibly more, depending on your specific goals and market:
- Your company’s competitors
- Competitor product summaries
- Competitor strategies and objectives
- Competitor strengths and weaknesses
- Market outlook
- A SWOT analysis
- Future strategy recommendations
Let’s take a close look at these one-by-one.
1. Competitor List
The analysis begins with a list of your company’s competitors, and a quick overview. Pick 4 or 5 that are either comparable to you in stature or are leading brands in the industry.
Consider, also, that there should be an eclectic nature of this list. – These may be competitors from a revenue, brand popularity or online visibility position. Plus, there will, undoubtedly, be additions to this list as your research begins.
2. Competitor Product Summary
Assess your own and your competitor’s products and services in terms of features, value and targets. Customer feedback will be key and can be obtained through surveys, reviews and online research. Get on the phone and talk to your current customers or come up with a set list of questions to send out via email.
Be a prospective customer of your competitors and find out more about their sales process, their funnel and have a clear picture of their products and features.
Finally, find out how your competitor’s manufacturer distribute and market their products. This should give you a basic understanding of what they do differently in comparison to you and each other.
3. Competitor Strategies and Objectives
Observe how your competitors market themselves, and take a look at their public reports to see if you can garner insights into what their current goals and strategies are.
Sales personnel can help you get this sort of information, which is why playing the role as a prospective customer can be key. Former employees and customers may also be able to help.
4. Competitor Strengths and Weaknesses
Here’s where we can really find the opportunity. What’s working well for your competitors? What isn’t? Why not? Where is there room for improvement, and what are the market needs that are not currently being met?
Take a look at this from several angles – the product, the sales process, customer service and, most importantly, their marketing. Analyze their website, social channels and where they’re spending their marketing dollars. Use readily available tools to perform a thorough SEO, SEM and paid advertising analysis.
If one form of marketing simply isn’t working for your competitors, it’s likely that it probably won’t work for you either. Finding that out sooner rather than later will save you time and money. At the same time, with so many marketing channels available these days, there’s sure to be an opportunity that your competitors are all missing out on that could be a perfect location for you to gain traction.
5. Market Outlook
Take a bit of time to also weigh up the overall outlook of your market. All of your competitor research could be for nothing if your particular niche is about to tank, perhaps for socio-economic reasons outside of your control.
How does the market overall look? Is it growing? Is it struggling? How does the economy and consumer behavior look like it will impact the market in the future?
Discover key demographics in your space, and which marketing opportunities best allow you to reach this market. Is there a section of your target audience that offers high potential ROI, or is it a packed market that you’ll always be facing tough competition in?
6. SWOT Analysis
Using all the information you’ve gathered in the steps above, you’re now in a great position to perform your SWOT analysis. This is a structured planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats for your business.
Where can you win, and where can’t you win? Which efforts should you capitalize on, and which should you sideline? What are potential future risks?
7. Future Strategy Recommendations
You might be an employee providing these recommendations to a manager or a consultant offering these to a client. Either way, this is where you take your research and turn it into a set of recommendations. These recommendations should then be used to create a formal strategy.
Writing a competitive analysis is both challenging and time-consuming, no doubt about it. But it’s incredibly valuable. You’ll learn a lot about your industry and your company, as well as your competitors, and such a report will become vital for your company in future strategy and planning.