Last night, I was the featured speaker at one of the coolest events in Pittsburgh, the EnterPrize Business Plan Competition Awards (Phase II). In its 10th year now, it’s run annually by Melissa Unger of the Pittsburgh Technology Council (I think that’s the nation’s largest association of tech companies – and it’s in Pittsburgh; who knew). Promising business plans are judged by experienced entrepreneurs and the winners receive money and lots of positive PR.
Anyway, I was asked to share eight lessons learned from my 14+ years in startups. It’s not a comprehensive list, just some things that were top of mind at the moment.
1. I make a lot of red wine (note to the BATF – it’s less than the 200 gallon annual “personal” limit set by law). Right now I’m fermenting fresh Malbec, Cabernet, and Merlot grapes that I got from Chile (another note: If you like wine and have not seen the movie “Sideways”, add it to your to do list immediately). Anyway, most winemakers would agree that 90% of what makes quality wine happens in the vineyard. It’s the sun & the moon, the microclimate, the soil (collectively called “terroir” – pronounced tair-WAH), training & pruning, etc. The winemaker influences only about 10% of the finished product through his/her process, selection of yeast(s), oak barrels, etc. But guess what? The growers, who contribute 90%, have a profit margin averaging just 5%-7%; the winemakers, who contribute just 10%, have a profit margin averaging 30-40%. The lesson: In any supply chain, be the one who is closest to the customer.
By the way, vines under stress produce the best grapes. I’m wondering whether there’s a corollary for start-ups.
2. The #1 most important skill for an entrepreneur is the ability to present. More than any other single activity, you’ll be selling – selling to potential investors, selling great candidates on joining your fragile upstart, selling to key customers, and especially selling yourself, because a business plan rarely plays out exactly as planned and you’re the person your stakeholders will be relying on to figure out “the line through the rapids” as my last company co-founder Andy Fraley always said.
Mikki Williams (possibly among others) once said that the definition of sales is “the transfer of enthusiasm from one person to another.” If you can’t do this excellently, don’t start any business other than a self-funded sole proprietorship.
When selling, I always remember one other thing that Mikki said; every person on earth listens to WII-FM – “What’s In It - For Me?” Make sure it’s obvious and compelling to them. It’s not about you.
3. This one is going to sound really cliché, but mathematically, 99% of companies violate it. The idea is to hire the best, meaning the top 1%.
Have you ever heard the expression that “The cheapest man pays the most?” You should be very frugal (see Part 2) but not when hiring. I always aim to hire “top1%ers”. Such folks will cost you 20%, 30%, or 40% above market average compensation (maybe more), but they will be 2X, 3X, or 4X more effective in their jobs – better ideas, more productive, fewer mistakes, and better teamwork. From a value perspective, it’s a no-brainer. My fifteen-person TalkShoe team can beat a one-hundred-person division of almost any big company every time. Yet our total payroll cost is far lower than theirs.
4. On the topic of hiring, your most important hire will be your product manager. If you don’t have one, I’m confident that you’re wasting your money doing the wrong things at the wrong times. And you’re very likely committing the cardinal sin of being sales-driven or customer-driven.
Wow, that sounds contrarian, but it’s not. A product manager should be steering the ship that is your company, determining what is delivered, when, for whom. A product manager will look at the market and see not individual prospects, but rather market segments - large groups of prospects that can be served with a similar product or service. A product manager will balance current customer needs, against competitive threats, against new opportunities, against available resources and timeframes. A product manager will create written “requirements” and schedules before development work is started, so that you don’t waste time building the wrong things and constantly reworking them. And finally, s/he will strategically price your offerings to optimize revenue and profit margins. In differentiated businesses, cost-based pricing died long ago; the way to go is value-based pricing.
Come back to see the other four lessons learned in “Part 2”.
Most of us have a few things that we’re REALLY interested in. For me, it’s running, skiing, mountain biking, and especially home winemaking. Probably like you, I spend a lot of my online time pursuing these passions.
Have you noticed how the Internet has evolved? Not long ago, everything was static. Yes, it was amazing that you could find so much information but it was largely “read-only”. Now, everything is interactive.
I used to visit great winemaking sites like http://wineserver.ucdavis.edu/. I still do that occasionally but now every few weeks I schedule a TalkShoe community call to talk and chat with other winemakers online: Cellar Dwellers Home Winemaking
This is both amazing and exhilarating. One night, a world expert on oak barrels called in. In making red wine (and some whites including Chardonnay), oak is incredibly important. It was one of our longest group calls ever - hours - just incredibly interesting if you’re a winemaker. (Note to non-winemakers; I realize that you think I’m whacko at this point, but toasted oak is just splendid if it’s from Hungary or France).
Another evening, a winemaker called in from New Zealand (with ShoePhone, it’s free to call from anywhere on the planet). After comparing notes about winemaking and talking about the beauty of his country, we agreed to send bottles of our respective wines to each other. While I thoroughly enjoyed tasting his wines, let me warn you not to make such a pact. It cost over $100 to send two bottles of my wine to NZ and, at least in PA you have to lie to the UPS guy, telling him that you’re shipping “olive oil”. I worried that the BATF was watching my every move (and now they probably are).
Truly connecting with people who share our interests is one of the most satisfying experiences in life. The genius of TalkShoe, and of the Internet in general, is that it can almost magically help us make these connections.
As the founder and CEO of TalkShoe, I’ve been podcasting for more than two years. Well, more like live, interactive podcasting — what we call “Community Conference Calling”.
Anyway, to the point of this post, most people communicate online using text. Think: chat, SMS, email, writing on friends’ walls, commenting on blog posts, typing in a forum, or dozens of other flavors of text. If not texting, we’re sharing photos or videos. So why use our voices on the Internet; meaning literally?
Here are the four things that I love about voice:
1) Voice is a much richer form of communication. Text does a poor job of conveying emotions, even with smiley faces. I want to actually hear that you’re enthusiastic, or sad, or sarcastic, or whatever. Hey, our DNA has been wired to TALK across 100,000 years, whereas text is a newfangled tool we haven’t yet fully mastered.
2) Voice is immediate and CAUSES new ideas. How many times have you been talking with a group of people and had totally new ideas emerge — ideas that were not from any ONE person? It’s the wisdom of crowds, to cite a great book.
3) It’s easier to talk than type. No explanation necessary, or at least I don’t have the time to write one out here.
4) (This is the most IMPORTANT one) There’s a big difference between our eyes and ears. When we read text or watch video, we can’t do much else, at least not competently. But when we listen, we can still do almost anything else.
The world is insanely busy these days, yet we all have more time for “multiplexing” audio. So if you’re an audio dude (AKA live interactive podcaster) you can talk to people — live and recorded — as they drive, exercise, mow the lawn, whatever… without having to compete directly with other activities. It makes them much easier to reach and that’s the whole point.
I’m the community developer for the live, interactive podcasting service TalkShoe and a new media consultant in Kingston, Ontario. I live for the web and enjoy meeting new people and discovering new content and services online. Want to know more? You can check out my full bio to get more details. Tommy’s Blog is at http://www.tommyvallier.com/
Mark Juliano, TalkShoe’s senior VP, has started a new blog called: Startup Life - Entrepreneurship in Action. The blog will cronicle life at TalkShoe and focus on what other entrepreneurs can from his experiences. In addition to TalkShoe, Mark has started 4 other successful companies, and is an Adjunct Professor at Carnegie Mellon University.
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