The Rules for Entrepreneurs

Venture Files founder and former curator, Steven Fisher, wrote a series last year that remains one of the best of its time. Even though he has moved on and is working with Network Solutions, I think it’s as important now (if not more so) than it was last year at this time. This is a consolidated (and updated) version of that series.

Pay Yourself First

Over the last 9 years and two startups I have learned many things and screwed up royally in some cases. This series is about providing you best practices of lessons learned and avoiding the mistakes I have already made.

In the past, I have had good years and bad years. When you have employees, they expect to be paid and when you mess with payroll (and payroll taxes, but that is a post for another time) you create such a negative culture that nothing will get done.

With that said, when you are starting your business regardless if it is a service or product company, you will have startup costs and probably forgo paying yourself for 6-12 months to keep growing the business. That is fine and to be expected. What you should not do (and what I did) is keep adding staff and sacrifice your own salary in the name of growth. If you keep going like that and have a bad quarter you will have nothing saved for a rainy day and if the business fails you will probably be in immense debt and got nothing out of the business.

Granted, the balance between growth and cash flow is a tenuous one but it is one thing you should never defer to someone else in beginning. Plus, there is a difference between creating a lifestyle business and an enterprise. A lifestyle business is really making enough money for yourself and having some contractors or 1-2 people that gives you a good salary but is more about freedom. An enterprise is a business that scales and gets big over time but you will be working intense amounts in the beginning but will need to hire those smarter than you with the intention that you are looking for an exit and will have time for freedom when you cash out.

So when you are growing the business you should work the first 6-12 months paying off the initial capital expenses and getting about 6 months of cashflow for yourself before you hire anyone else. Once you have that done, start paying yourself something, even if it is small and will ramp up over six months, pay yourself first. This will get you in the habit of being committed to making the business pay for itself and you so you are not worrying about living month to month and let you find some resources to help you deliver while you continue to sell and grow the business.

Once you are looking at hiring someone use these two rules as a starting basis:

– Have six months of payroll for that person in the bank on top of your salary

– Have 90 days of projects or sales committed for that person to deliver so they not only have something to do but are earning their keep.

You may have to be conservative at first in your growth but in the end you will scale better and create a business that is focused on delivery and customer service without putting you and your employees on a cash flow roller coaster.

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Marketing Plan Series: Part 4 – Objectives

In Part 4, we continue building out the goals that must be accomplished through the marketing plan. This section, called “Objectives” is usually only a page in length and are the milestones that you will achieve as you execute your business on a daily basis.

The KnowThis web site has a great explanation of the Marketing Objectives section:

“Marketing success is quantifiable using several non-financial market metrics. You want to show the underlying conditions and circumstances facing the company that are not easily seen within financial measures. The marketing objectives section should indicate targets to be achieved across several marketing decision areas. To add additional strength to this section include marketing metrics where possible.”

The Chamber of Commerce web site identifies three major areas for your objectives:

  • company definition (e.g., “to be a manufacturer of 100 percent all-natural snack food products”)
  • market definition (e.g., “to attain leadership in dollar market share and volume for the healthy, all-natural snacks segment of the salty snacks category”)
  • technology (e.g., “to become known in the industry as the leading developer of new vegetable protein products”)

KnowThis web site has a great breakdown and outline of how you should structure the objectives section:

1. Target market objectives

  • market share
    • total
    • by segments
    • by channel
  • customers
    • total
    • number/percentage new
    • number/percentage retained
  • purchases
    • rate of purchases
    • size/volume of purchases

2. Promotional objectives

  • level of brand/company awareness
  • traffic building
    • (e.g., store traffic, website traffic
  • product trials
    • (e.g. sales promotions, product demonstrations)
  • sales force
    • (e.g. cycle time, cost per call, closing rate, customer visits, etc.)

3. Channel objectives

  • dealers
    • total
    • number/percentage new
    • number/percentage retained
  • order processing and delivery
    • on-time rate
    • shrinkage rate
    • correct order rate

4. Market research objectives

  • studies initiated
  • studies completed

5. R&D objectives

  • product development

6. Other objectives

  • partnerships developed

Next time in the Marketing Plan Series, in Part 5 – Strategy we discuss how having a well written guideline that sets forth the business’s marketing strategy is critical to the success of your business.

Next time in Part 5, we will discuss the strategy section which lays out a plan for the situational analysis and the problems and opportunities must be addressed by the marketing plan.

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Marketing Plan Series: Part 3 – Problems and Opportunities

As we discussed in Part 2 – Situational Analysis, there is room for the SWOT (Strengths, Weaknesses, Opportunities and Threats) Analysis. However, what I like to do is take a separate section that really dives into the opportunities and problems deeper so that they can be addressed by specific marketing strategies.

Identifying and Maximizing Opportunities

This is where you look externally for areas your competitors are not fully covering, then go a step further and think how to match these to your internal strengths. Try to uncover areas where your strengths are not being fully utilized. Are there emerging trends that fit with your company’s strengths? Is there a product/service area that others have not yet covered?

Once you have uncovered these opportunities take each one and discuss how you will market them. Will it be a mixed marketing campaign? A targeted sales effort? What resources will you need (e.g. new collateral, selling guides, web site content, e-mail marketing)?

Addressing and Overcoming Problems

Problems are not necessarily a bad thing. They are just issues that need to be overcome. It is better to get out front of problems that may exist than have them rear their ugly head when you are selling or raising money. Problems could be strong competitors, your product lacking critical features that you are not able to roll out yet or a long sales cycle.

You should list each problem and discuss an approach to overcome them in a sales situation and with specific marketing messages that counter what a customer might be thinking.

Next time in Part 4 – Strategy

In our next part, we will discuss the strategy section which lays out a plan for the situational analysis and the problems and opportunities must be addressed by the marketing plan.

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