Want to Be an Entrepreneur? Eight Lessons I’ve Learned (Part 1)

| Author: Dave Nelsen | In Employee Blogs Print This Post

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”.

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