Creating processes to become a great entrepreneur

creating processes

“Great entrepreneurs don’t have better ideas, they have better processes.” – Eric Ries

This quote is not suggesting that great entrepreneurs are building successful businesses out of terrible ideas. What it is saying is that what makes businesses successful, and the entrepreneurs that found them great, is execution. Developing processes and executing them is what allows a business to scale and become more than a sum of its parts.

The first step to developing processes is to start documenting everything you do. Anything you find yourself repeating is an opportunity to create a process. This can involve anything from onboarding customers to handling bug reports to processing expense reports. (StartOpz can help you with that last one.)

The next step is to write down each thing you do to complete the task. You have now documented the process and can find ways to streamline it, outsource it, or eliminate parts of it, All will help you be able to work more on your business rather than in your business. That is what ultimately will make you a great entrepreneur.

documenting processes

Documenting processes

There is no one way to document processes. You just have to find a system that works for you. At a previous employer the office manager kept dozens (it felt like hundreds) of spreadsheets to document different processes. It was an example of the process breaking down. Nobody knew about a new process unless they were told about it and, with no built in notification on completed tasks, if a process involved multiple people you had to rely on others to notify you they had completed their step and it was now time for you to work on yours.

I like creating project templates in Asana for each process as that handles the discovery and notification problem automatically. I duplicate the template each time we need to go through a process. For simple recurring processes (e.g. daily or weekly tasks) I create recurring tasks inside Asana and sub-lists inside of them if necessary.

Identify inefficiencies

When you are in the middle of a process you rarely stop to question it. You are concentrating on the task at hand. However, because you have them documented you are able to periodically review them and identify any inefficiencies they might have.

Frequently inefficiencies are there because “that is how it has always been done” or because something changed and nobody revisited the process when it did. Examples might be recording information that is no longer needed due to a change in your customer onboarding process or rolling out a new software solution and trying to create your old workflow when the software has a different, and better, workflow built in.

Bottom line is that if you make an annual effort to review all documented processes you will likely find steps you can eliminate and steps that can be done more efficiently.

Automation

In addition to identifying inefficiencies when you review your processes you can also look for steps that you can automate with technology. Techies might do that with shell scripts and cron jobs but there are plenty of tools that all of us can use.

A few ideas on easy automation wins:

  • Inbox rules to automatically file or forward emails or to create tasks from emails.
  • Zapier/IFTTT to pass data between different software systems that you use.
  • Excel macros for automating any repetitive tasks in spreadsheets.

Easier to hire

Documented process make hiring easier and training go a lot more smoothly. Hiring is easier as you can more readily identify the skills required for a position based on what processes and steps the position you are hiring is responsible for.

Training is easier as there is no question as to what needs to be taught in order to get the hire up to speed. You can just follow the process step by step.

blank notebook full of possibilities

Clarity

Part on the premise of the book Getting Things Done is getting all to do items out of your head and into your to do list. Doing so keeps you from having to remember the dozens of little things that crop up and instead work your list based on priority.

Perhaps the biggest reason to implement processes is so that you can maintain clarity and focus on the big initiatives that push your business forward rather than getting distracted by the day-to-day operations of your company.

Most recommended books on entrepreneurial podcasts

I used to be a voracious consumer of podcasts for entrepreneurs (and took notes on many of them) and still try to listen to them as time allows. I also love reading business books and am always looking for recommendations. These books are the most recommended ones on the podcasts that I listen to.

(contains affiliate links)

antifragileAntifragile
  • Lifestyle Business Podcast 4/4/13
  • Lifestyle Business Podcast 5/9/13
  • Tropical MBA 2/12/15

built_to_sell

Built to Sell: Creating a Business That Can Thrive Without You

  • Tropical MBA 11/30/12
  • Lifestyle Business Podcast 6/20/13
crossing_the_chasm

Crossing the Chasm

  • Tom Byers (STVP) – Entrepreneurial Thought Leaders 1/18/06
  • Aaron Levie (Box) – Entrepreneurial Thought Leaders 1/19/11
  • Drew Houston (Dropbox) – Entrepreneurial Thought Leaders 5/13/12
  • Lifestyle Business Podcast 4/11/13
getting_things_done

Getting Things Done: The Art of Stress-Free Productivity

  • Smart Passive Income 8/2/12
  • Lifestyle Business Podcast 3/28/13
  • Tropical MBA 8/29/13
  • Smart Passive Income 6/28/14
good_to_great

Good to Great: Why Some Companies Make the Leap…And Others Don’t

  • Lifestyle Business Podcast 3/28/13
  • Kyle Forster (Big Switch Networks) – Entrepreneurial Thought Leaders 4/22/15
hatching_twitterHatching Twitter
  • Startups for the Rest of Us 12/3/13
  • Tropical MBA 12/5/13
  • Startups for the Rest of Us 7/1/14

how_to_win_friends

How to Win Friends and Influence People

    • Smart Passive Income 3/17/14
    • Tropical MBA 2/12/15

mastering_the_rockefeller_habits
Mastering the Rockefeller Habits: What You Must Do to Increase the Value of Your Growing Firm
  • Lifestyle Business Podcast 2/7/13
  • Lifestyle Business Podcast 3/14/13

orbiting_the_giant_hairball

Orbiting the Giant Hairball

  • Frank Ricks (LRK Architecture) – Entrepreneurial Thought Leaders 11/16/05
  • Stephanie Keller-Bottom (Nokia) – Entrepreneurial Thought Leaders 4/26/06

the_hard_thing_about_hard_things

The Hard Thing About Hard Things

  • Startups for the Rest of Us 7/8/14
  • Tropical MBA 2/12/15

the_lean_startup

The Lean Startup

  • Startups for the Rest of Us 12/3/13
  • Jessica Mah (inDinero) – Entrepreneurial Thought Leaders 11/30/11

the_millionaire_fastlane

The Millionaire Fastlane: Crack the Code to Wealth and Live Rich for a Lifetime.

  • The Foolish Adventure 10/20/11
  • Lifestyle Business Podcast 12/27/12

the_one_thing

The One Thing

  • Tropical MBA 6/12/14
  • Tropical MBA 11/27/14

the_ultimate_sales_machine

The Ultimate Sales Machine: Turbocharge Your Business with Relentless Focus on 12 Key Strategies

  •  Lifestyle Business Podcast 8/9/12
  • Startups for the Rest of Us 3/16/15

traction

Traction: A Startup Guide to Getting Customers

  •  Startups for the Rest of Us 8/26/14
  • Tropical MBA 9/11/14
  • Startups for the Rest of Us 3/16/15
  • Tropical MBA 3/19/15

work_the_system

Work the System

  • Lifestyle Business Podcast 12/6/12
  • Lifestyle Business Podcast 4/25/13
  • Lifestyle Business Podcast 12/20/13
  • Tropical MBA 2/12/15
  • Startups for the Rest of Us 3/16/15

zero_to_one

Zero to One

  • Startups for the Rest of Us 11/18/14
  • Startups for the Rest of Us 3/16/15

Three places clutter kills concentration

I’m pretty sure that people universally despise clutter yet almost all of us let it invade most parts of our life. (My brother-in-law is one exception as he keeps the cleanest house you have ever seen which is quite a feat with two children.) There is always something more urgent to do than cleaning. But it must be done eventually and why put off until tomorrow that which can be done today?

These are three things that get always get cluttered for me and have a perceivable effect on my concentration and productivity.

Your desktop

I don’t mean your computer desktop though your file organization there could likely use work and reflects your overall state of organization.

I’m talking about your actual desk. This advice might not apply those that work in cafes all day but most of us work at desks. And unless there is a company policy about it those desks are likely covered in papers and post-its. Not everybody is wired the same way but for me a creative mind does not thrive in the clutter.

This one had the easiest fix. Really it is more of a hack. If your desk has drawers then open one and sweep everything inside of it. If not then get a manilla folder (I don’t know of anywhere that sells a single one so you can steal one from somebody else or your spouse when you meet up with then for lunch) and put everything in there. You will immediately feel better.

Now block out a half hour on your calendar at some time in the next week to organize everything in your drawer or folder.

Your browser

How many tabs do you have open right now?

Each tab represents a half-finished project. Yes, even your Gmail tab is a project. You’ll be much more productive if you only check it at set, scheduled, times of the day.

(Nobody’s job is to answer email. Nobody has that job title. Rather, responding to email is a means to an end. It is a tool, and only a tool, that you use for communications with people integral to what your real job is.)

If you’re like me then it isn’t that uncommon to have tabs open for two months or more. I have one particular tab that has been open for more than four. I am not proud of that.

What I should be doing is at the end of each day creating an Asana task for each open tab. (That would be a nice Chrome plugin. And as I finished up writing this Google Inbox prompts me to install a plugin that is the exact opposite which saves links to your Inbox. I find that to be a terrible idea.)

Your inbox

Just like you spend much of your day physically at your desk, you spend much of your day digitally inside of your inbox. Each email sitting there represents something you need to do. There are a couple ways to tackle this. The first is to handle it like you did your desk and create an email folder titled “Pending” and move all your emails into it.

The second is to start tackling it right here and now. My post on Inbox Zero provides some tips on that but you can start now by identifying any email that will take you less than five minutes and then responding to it. Create filters for any mailing lists you receive so that those are automatically moved to a sub folder. And finally create tasks for any emails that will take you longer than five minutes to respond to. (For software such as Asana, Trello, or Evernote you can forward the email. For Outlook you can drag the email to the Task button and a task will be created.)

Remember that you should always use the best tool for the job. Email is a communication tool–not a to do list.

All of this clutter compounds on each other and occupies just a bit of your brain as you are trying to work on the projects that move your business forward–the projects that deserve your complete creative brain.

Talk about your idea as much as possible

Creating something from nothing is a special process. Inspiration becomes an idea. An idea gets refined, work is put in, and eventually out comes something that creates value for yourself or others. Whether you are creating something for others or something just for yourself, I strongly urge you to talk to as many people as possible about what you are creating. Unfortunately many people are hesitant about talking about their ideas even though the benefits are numerous.

1459198455_ideaNobody is going to steal your idea

One of the most common reasons that entrepreneurs do not tell people about their ideas is because they think somebody will steal it. That is not going to happen. Likely you are not the first person to even have the idea.

Most people are too focused on their own ideas to steal yours. Besides ideas are pretty close to worthless without execution. The idea is the easy part. Now you have to work harder than you ever have before and smarter than any of your competitors.

People will want to help you

When you tell people about your idea they are going to try to help you if they can. They are going to be your users and your first evangelists. When they hear your idea they will say, “You really should talk to my friend. Let me connect you.” Early on those will be some of the most valuable conversations you have.

Your idea will get better

Early on you might think you have a clear vision of what you are creating. But more than likely it will morph over time due to the work you put in, the challenges you face, and, in particular, the feedback you receive.

Your idea becomes more refined as you talk through possible issues the you will face. People in your target industry or tangent industries will have a wealth of experience on which you can draw.

And of particular importance is to talk to potential customers early and often. Call them up or email them and introduce yourself as an entrepreneur. Ask them how they handle the problem you are trying to solve and shut up and listen. Follow up their response by asking why and then why again to really get past the problems or obstacles and to the root of what they are trying to accomplish.

You will get better at talking about it

The more you talk about your idea the better you get at telling your story. When looking for partners and investors, when hiring, and when making sales calls to prospective customers you are going to be saying who you are, what you’re doing, and why you’re doing it (your pitch). You’ll be a lot better the twentieth time you do it than you are the first time. And even better the hundredth.

Startup Stock Photos

You will remain excited about it

Some people warn against talking about an idea because it can feel like a substitute for progress. I think if that is the case then you are actually daydreaming rather than serious about building a product or business.

After having a good conversation about my product I usually want nothing more than to get back on the keyboard improving my product. That excitement needs to be leveraged and not let go to waste.

You will start building a list of potential customers

Those potential customers you have been talking to will be the first people you reach out to when you are ready to launch your product. Continue to engage them throughout your development process so they don’t forget about you and so that they will get excited to hand over money when the product is ready.

Make notes of your conversations

I really like carrying a small notebook and pen around in my pocket. While typing a quick note on my phone is good for one-off notes when I am by myself, I don’t think it is good to do when having a discussion with somebody. At best it is distracting from what is an engaging conversation. At worst it is rude.

Even better is to not take notes during a conversation and to find a way to be alone for five or ten minutes after in order to write your notes down. The person you’re talking with will respond more to your full attention and ideas will happen more rapid fire if they aren’t slowed down from you taking notes.

Wait a couple of days before implementing feedback

Wait a couple of days after getting feedback to implement it to make sure that you still view it as worthwhile. A lot of times you hear something, particularly after a few beers, and it sounds great at the moment but might not with the light of a new day.

Feel free to disregard feedback

Sometimes the advice you get isn’t good advice. The trick is knowing which advice to act on and which to disregard. Being able to tell which is which only comes from experience so get out there and start talking to people!

The Worst Product Meeting Ever

The title might be some hyperbole but a while ago I listened in on a product meeting that was eye opening in the sense that the bureaucracy explains why the product is in the state it is in after investing substantial amount of time in developing it. It was also a cautionary tale for every product and company I’m involved with going forward.

The meeting was a state of the union on the status of a project that had been in development for about a year but been talked about for a few. It also happened to be one that I think is the future of the business.

I pictured the product as having seven different sails all pointing in a different direction. Not making any progress anywhere but eventually one might get a big enough gust of wind that the only outcome will be capsizing.

This is a product that the high level management wants done so a lot of people are hitching their wagons to it. They hope it succeeds so they can get the feather in their cap but nobody is taking responsibility for its success. There is not a true, single project lead as everybody wants to have a say in every decision but the project is not the primary focus for anybody.

Without proper delegation nothing will get done.

The technical guys explained their choice of platform (there had been no discussion or due diligence done on this prior to development) not in terms of advantages but one which would result in the least amount of work for them when somebody wanted a report ran.

One person was not interested in what the product did only that they were able to harvest data from it for sales pitches.

It was very, very briefly acknowledged that in its current state there is no reason for anybody to use the product (one single user had logged in and used it in the lifetime of the product) but that was not deemed to be important enough for more discussion.

At no time were the actual needs of the users brought up.

As far as I can tell nobody ever asked, “What problem are we aiming to solve by building this product?”

I have no idea what the official takeaways were from the meeting. However some of my takeaways were:

  • Software is not a collection of features but a vision. Every decision that is made must contribute to and support that vision.
  • For users software is a tool used to achieve something. They do not care about any features that do not help them achieve their goal.
  • You cannot design a great product by committee. While many people may contribute, at the end of the day there needs to be a single, specific person who is the keeper of the vision and the arbitrator of all product decision.
  • When company leadership creates a product directive there are going to be many people trying to get the feather in their cap for moving it forward. Progress will drown in meetings and any that is made will be questioned and likely abandoned.
  • A meeting must have a specific, and written, agenda. When something comes up that isn’t on the agenda make a note of it and put it on the agenda for the next meeting.
  • A culture of open feedback is important. Every employee who touches the software or interacts with users is responsible for reporting bugs and passing on feature suggestions.
  • Always think of the user. If you cannot put yourself in their shoes with every decision then you’re going to lose them by creating something that does not address their needs.

There are many reasons a project can fail but if bureaucracy is unavoidable then it needs to be carefully managed otherwise an even worse fate can occur. That being a failed project that continues to consume resources as nobody will let it die.

How to set business goals for the new year

Business goals for 2016It is the time of year to set goals for your business. Some people are not the type to actually set goals. They have “wants” but those are different than goals. Wants typically are uninspired and very unactionable whereas goals are concrete and can be measured.

You are a business superhero so you produce results and you do so by setting, and then achieving, goals. And if you need a little bit of help with the process here are some steps to walk you through it.

Review last year

Take a moment and think back to where you were last New Year’s and what hopes and goals you had for the coming year. Think about what went right and what went wrong.

Reasons you might not have achieved your goals could be (in no particular order):

  • Tried to do too much
  • Bad health
  • Lack of time
  • Lack of focus
  • Market forces
  • Technological change
  • Life changes

Which of those things are temporary and which can you change going forward? These are where New Year resolutions come into play. Also, do what you can to get into the mindset that success is not a possibility but inevitable. You can only fail if you stop trying.

When looking at the things that went well ask yourself if those are things you should double down on in the new year. It is very likely that you can grow quicker by focusing on the things that you do well (and hire for the things you don’t).

“Understand your strengths and amplify them.” – Jeff Housenbold (Shutterfly)

Set realistic goals

You are setting goals for the next year. Make them goals that fit into that timeframe. The dreamline is a good exercise. In it you list five things you want to have within the next year, five things you want to be in the next year, and five things you want to do within the next year.

Set goals based on effort rather than results

While it might be counter intuitive, you will have a better chance of reaching your goals if you set them based on efforts instead of results. Effort is completely within your control while results are less so. A goal of emailing ten prospects a week is more actionable than signing up one new customer a week.

Breakdown goals

The key to achieving big goals is to break them down into smaller, and more actionable, steps. If your goal is to write a blog post a week then before you even begin writing you need to brainstorm topics and research the posts.

If your goal is to get to $10,000 a month in revenue then start by thinking about your first $100 in revenue. Set a goal for a certain number of cold calls or emails a day until you reach that. Then think about the first $1,000. After that you can look at what techniques worked on the first $1,000 in revenue and apply them to getting that next $9,000.

Revisit your goals

Write your goals down so that you can reference them throughout the year to stay on track. And then put an hour a month (or even a week) on your calendar to sit down with them and go over your progress and next steps.

Again, right now, go into your calendar and create entries for revisiting your annual goals.

Get to work

Yesterday is the best time to get started. Don’t be another day late and another dollar short. Get to work!

Building a Product vs. Building a Business

Building a Product vs. Building a BusinessToday is the launch day of StartOpz (!) which is my new app that adds premade processes to business tasks such as expense reports, time off management, and invoicing. I hope to grow it into a sustainable business. I had some thoughts on that process that I am sharing here along with the wisdom of many men and women smarter than myself.

While the goal I mention is a sustainable business it does start with a product. Without that there is no business. The better the product you build the better chance of success your business has.

If you can’t build a great product it doesn’t matter if you can build a great company. – Ben Horowitz (Andreessen Horowitz)

Building your product was a huge undertaking. Finishing it deserves a celebration. But it is only the beginning.

“Coding is 5% of the solution. It is only a portion of the story.” – Amit Chatterjee (Hara)

“There is a big difference between a feature, a product, and a company.” – Cyriac Roeding (Shopkick)

The product that you have poured your sweat, blood, and tears into is something that will make your customer’s lives better. You’re certain of it. You might have even tested the value proposition before building. But you have only just begun your journey.

“A startup is ultimately about whether or not you can create a business around the product.” – Ann Miura-Ko (Floodgate Fund)

Birthing your product unto the universe creates a tiny flicker of light amongst millions or billions of other stars. That light could takes years before reaching anybody.

Without marketing few people will see it. Without a sales process they will have no way to buy it. Without accounting you will have no way determine profitability and do your taxes. Without systems you will not be able to scale. Without a team you will not be able to build new products.

A business is the vehicle you will use to drive all of that forward.

“Building a company is very different than starting a company.” – William Hsu (MuckerLab)

Starting a company is paperwork. Building a business is harnessing the determination with which you built your product to the many activities required to allow it to live in this world.

A lot of the things you do while building your product you will also do when building your business. Instead of developing software you’ll be developing relationships. Instead of testing for bugs you’ll be testing marketing campaigns. And don’t forget about continuously improving your product!

Values and Ethics

I am starting off this look at building a company by looking at the somewhat abstract topics of ethics and values. Even though they are abstract they are the bedrock on which you build your company.

I have never been quite sure of the difference between the two so I’ll say that ethics are your values in action. Conversely, if your actions do not reflect your values then you are acting in an unethical manner.

“Values are what guide your behavior when no one is looking and you don’t think anyone is going to find out.” – Carly Fiorina (Former CEO, HP)

Business have responsibilities to their owners, their employees, and their customers. Capturing those in words as the company’s values will guide everything the company does going forward.

“Values are things we repeatedly come back to.” – Justin Rosenstein (Asana)

Challenges to uniformly acting ethically are that events in the real world are rarely black and white and that each person might view situations differently (relativism) due to different upbringings, education, or religious views. Being able to reference the company values for all interactions will keep the company, and all of the individuals that make it up, pointed in the right direction.

“It is a lot easier to make decisions if you have a value system.” – Mari Baker (PlayFirst)

One thing I had not thought about until I had heard the following quote was that even though the concept of values might be abstract the implementation of them might not be and thus something you can quantify and measure (something that will serve you well across all aspects of building a business).

“Have corporate values and measure performance on them.” – Mitch Kapor (Foxmarks)

Building a Team

If you have not already started hiring then it is something that you will do down the line as your business grows.

“Everything starts with having the right team.” – Thomas Prescott (Align Technology)

When you are in hiring mode it should take up an extraordinary amount of time as a bad hire early on in a company can have disastrous consequences. Those include morale, culture, and the time wasted on training them. Just as important is the opportunity cost as your first hires are the pipeline for many of your future hires as referrals are key.

“When you’re hiring the first ten people you’re actually hiring the first one hundred people because the first ten will bring ten along with them.” – (Patrick Collison)

For the first hires I often hear that you hire people whose strengths are where you are weak. If you are good at sales but poor at finances then hire somebody who is not just good, but great at them. That way you both can focus on your strengths.

“Surround yourself with the best and brightest minds.” – Amit Chatterjee (Hara)

The caveat is that even the best and brightest need to be a good fit for your team. If you create a position just to get somebody on the team then you will end up with confusion as to their role and, by extension, others’ roles. And do not forget to check their references.

“When you do reference checks, you’re not just looking for the bad stuff. What you’re really looking for from that person’s previous manager or co-worker is how you can help that person grow.” – Ben Congleton (Olark)

Some of the lessons I have personally learned over the years are to never hire somebody who has only worked for family (typically somebody right out of school), that what university somebody comes from is a poor indicator of their work ethic, that what university somebody comes from ceases to matter after a few years in the workforce (unless they are in sales or positions that require a good deal of networking) as they will learn a lot more in one year on the job than four years in any school, and that great employees can be anybody from anywhere.

“Celebrate diversity.” – Teresa Briggs (Deloitte)

Once the company is large enough that you are ready to delegate hiring to a specialized department, or to let each individual department do their own hiring, make sure that you are putting your best people in charge of the process.

“A-quality people hire other A-quality people and B-quality people hire C-quality people.” – Cindy Padnos (Illuminate Ventures)

At the end of the day you are potentially spending more time with your team that you are with your family. Make sure they are a group of people who bring out the best in you and each other.

“Build a team who can challenge who you are.” – Sukhinder Singh Cassidy (JOYUS)

Culture

Culture is something you should think about prior to hiring. It sets the tone for an organization that will last longer than many employees. Culture touches all parts of a company from employee interactions to customer service to investors.

“Culture is the most important part of any organization.” – Ken Wilcox (Silicon Valley Bank)

How excited (or not) employees feel when getting out of bed in the morning is hugely affected by the atmosphere of the office. Toxic culture leads to low job satisfaction and burnout.

As the business owner it is up to you to define the culture you want.

“Be conscious of what kind of company you want and what kind of culture you want.” – Mari Baker (PlayFirst)

A good culture might be one where everybody values the contributions of all employees from the janitor to the CEO. But you cannot just describe what you ideal culture is. Culture is not words and cannot be conjured out of thin air. Culture comes from all of the day to day interactions, policies, and structure that make up your business.

“Culture is the behaviours you reward and punish.” – Jocelyn Goldfein (Facebook)

When you get culture right you unleash your employees and get output that is more than the sum of its parts.

“Culture is a wind that blows everybody in one direction.” – Cyriac Roeding (Shopkick)

Your company is going to be leveraging the different strengths of the individuals that make it up in a way that is consistent with the company’s values.

Personally I am an advocate of a culture that values innovation as I believe it is the only way to become a leader in an industry (it is important to note there is a lot of room in any industry to innovate and the same can be said about any organization). Continuous innovation is the only way to maintain that position.

“Reward your risk takers because sometimes they are driving the most innovative ideas.” – Teresa Briggs (Deloitte)

Strategy

It is not until you have culture conquered that you can move onto developing strategy:

“A strategy without a culture is meaningless.” – Marten Mickos (Eucalyptus)

Strategy is the higher-level plans that dictate the direction the company will go while tactics are the ways you utilize resources to implement strategy. Strategy = big. Tactics = small.

“Think big. Think strategy.” – Ron Gutman (HealthTap)

A strategy that is too broad will be difficult to implement. Therefore you should create separate strategies, each with explicit resources and responsibilities, for each major component of your business.

“Have a customer development strategy in addition to a product development strategy.” – Ron Conway, Mike Maples Jr. (Angel Investors)

“Create a market positioning strategy.” – Stephanie Keller-Bottom (Nokia)

Executing on a poor strategy can actually lead you further from your goal of building a sustainable business and you will have wasted resources, possibly hurt morale, and shortened your runway. So creating a good strategy and implementing it is paramount to achieving your goal.

“Strategy and tactical implementation equals success.” – Mark Forchette (OptiMedica)

Your company does not exist in a vacuum and you cannot lead it with your head in the sand. Communication is an important part of strategy:

“The people capable of changing strategy need to be the ones hearing good news and bad.” – Steve Blank (Serial Entrepreneur)

If you are not getting feedback in the form of metrics or verbally then you are not going to know if you strategy is working, if it needs to be tweaked, or if you need to change course completely.

Of course while strategy is important you are going to be spending a lot more time executing it than you did thinking it up. And as always, ideas are worthless without execution.

“The business world is 1% strategy and 99% tactics.” – Matt Rogers (Nest)

Marketing

Sales differs from marketing and is very dependent on the type of business and the type of customer you are trying to close. If you are just starting up you likely do not have a huge budget to hire sales people (but it is absolutely something you should be concentrating on yourself). But businesses of all sizes should be doing marketing to get people into the top of their sales funnel.

Of course before you start implementing an initiative you should have a strategy on how you are going to do so.

“Before you can market you need to have marketing strategy.” – Donna Novitsky (Big Tent)

Current marketing wisdom, in particular for SaaS products, is to start marketing even before you have a product.

“The initial tests of sales and marketing doesn’t take a lot of capital. You can do it online.” – Kate Mitchell (Scale Venture)

Content marketing in the form of blogging, tweeting, or a mailing list will help you develop an audience who will be receptive to hearing about your product as you build it and will be your first customers when you finish it.

The recent “growth hacking” phenomenon is quantitative in that you set up your marketing efforts in a way that you can measure and then adapt your efforts by doing more of what works and less of what does not.

Importantly you should remember that marketing is a long game. Rarely does somebody become a customer the first time they hear about your product.

You shouldn’t worry about the current quarter. You should be focused on building a pipeline. – Amit Chatterjee (Hara)

Finance

For many entrepreneurs outsourcing many of the financial tasks such as bookkeeping and tax filing is a wise choice. They are time consuming and are not drivers of growth. However it is important for every business owner to understand them in order to gauge the financial health of the company and to allocate resources effectively. (And to make sure that the people you hire for those tasks do not take you for a ride.)

“Learn to read a balance sheet and understand cost accounting.” – Steve Ballmer (Microsoft)

Knowing where your business stands at any point in time is captured on a balance sheet. It shows the things that are owned by a company (assets), the amounts owed by the company to others (liabilities), and the investments by the company’s owners (equity).

Those balance out in the following equation:

Assets = Liabilities + Equity

An example of the balancing is when the company borrows money it creates a liability to the bank/bondholder/loan shark. That money is then deposited into the company’s account and listed as an asset.

Assets typically are cash in bank accounts, accounts receivable (money owed to the company by customers), equipment, buildings, and inventory (for businesses that manufacture products). Liabilities are typically debt, accounts payable (money owed by the company to suppliers), taxes, and wages.

The tracking of revenue and expenses is what is known as an income statement (called the Profit and Loss Report in Quickbooks). Having more revenue than expenses makes you profitable (yay!).

Revenue – Expenses = Income

As opposed to the balance sheet which captures a picture on a given day, an income statement looks at the business over a period of time. Specifically what the revenue and expenses were between two dates.

Do not forget about taxes and interest as expenses. You might have “operating income” (- EBIT – Earnings Before Interest and Taxes) when your gross margin is more than your cost of running the company but could end up with negative net income after you pay the bank their interest and the IRS your tax bill.

The last accounting report you will want to look at is the cash flow statement. A business runs on cash (“cash is king”) but for various reasons the earnings reflected on the income statement are not always available as cash when needed. For example you cannot make payroll with sales you have booked but have not been paid for. (This is where the differences between cash and accrual accounting become apparent.)

“Income statements and balance sheets are lagging indicators.” – Carly Fiorina (Former CEO, HP)

The equation for cash is more complicated that the others:

Cash = Current Liabilities + Noncurrent Liabilities + Equity – Accounts Receivable – Inventory – Noncurrent Assets

An example of the balance here is that when you pay the $3,000 bill from your lawyer you are reducing cash by $3,000 as well as current liabilities for $3,000.

Any accounting software you use will be able to automatically create all of these reports for you.

Keep a close eye on the financial statements (at least once a month) so that you are able to make educated decisions on the many spending decisions posed to you. Do not hesitate to ask your bookkeeper or accountant to explain to you anything you do not understand.

Operations

You are investing a lot of time, money, and effort in building a company. The more efficient a company is the more value it creates with every minute and every dollar.

“What you’re doing when you’re building a company is building an engine.” – Keith Rabois (Khosla Ventures)

Creating systems to manage your business will help free up your time as well as free up your mind. It is easier to delegate tasks when you have a system in place. A step-by-step checklist creates a repeatable output that you can hire people to implement. Also, having each step of the process written down allows you to question them (whether they are necessary at all), measure them, and make improvements on them.

(StartOpz can help you with some of the operating processes you currently have for your business or will be implementing to help you concentrate on growth.)

Even when you are a solopreneur taking away the worry about forgetting a step allows you to use your mind creatively. Getting ideas and tasks out of your mind and onto paper is the basis for Getting Things Done. When you can be certain that things are under control on the ground you can more easily think about things at the 30,000 foot view.

Conclusion

Building your product was just one step of your larger goal of owning and running a successful and growing business. Every day will bring new challenges and hopefully what was covered here helps provide a foundation and framework in which to meet those challenges (and turn them into opportunities!).

A great entrepreneur is focused on the goal. They make their companies successful by staying agile, passionate, driven, and tenacious. – Steve Blank (Serial Entrepreneur)

Best of luck with your entrepreneurial journey.

“Software Eating the World” is about demographics

Software eating the world is about demographicsFive years ago Marc Andreessen wrote a famous essay titled, “Why Software is Eating the World.” In it he states that “More and more major businesses and industries are being run on software and delivered as online services—from movies to agriculture to national defense.” The reasoning behind that are that the cost of running servers is only getting cheaper and he gives plenty of examples of new companies disrupting the old guard.

What he doesn’t address in his essay is what I believe to be the largest driving force to his conclusion. Software eating the world is as much about demographics as it is about software innovation. Younger people more readily embrace software solutions and services.

Young people are technologically literate and already open up bank accounts, brokerage accounts, insurance, and purchase automobiles online without any face-to-face or phone interactions. They are comfortable with using computers to manage their money and, to a certain degree, computers managing their money (any financial firm that uses algorithms for asset allocation or order placement). They will likely retain that comfort throughout their life or, at least, until their wealth gets to be large enough that it would take more time and knowledge than they have to manage (e.g. setting up trusts).

The second reason that I believe demographics are causing software to disrupt many industries is that younger people tend to be more price sensitive due to their lower income levels. They are willing to trade individualized service for service powered by algorithms if it means saving money.

The final, and most speculative, of my reasons is that I feel that many young people place a higher value on their time than their parents did at that age. Whether they use that time productively or for entertainment they definitely do not appreciate wasting it.

What that means is that software will end up replacing service industries (though it could take a long, long time before it is true that anything a human can do a computer can do better). It is happening in the banking industry (Simple), wealth management (the many robo advisors), legal industry (LegalZoom), accounting and tax industry (TurboTax), human resources (Zenefits and Gusto), and the health industry (Fitbit is as much about the software as the band on your wrist).

Right now many people still trust humans more than computers. They want to get “a set of eyes on it” before sending off a report. That is totally understandable. I still hear people blame their computers/Outlook/Excel with their bosses nodding understandably. Younger people will more likely blame the user.

The people that still write checks at the grocery store might never embrace the software revolution. Supporting them will become a niche of every industry with high costs. Everybody else will eventually view services that requires a face-to-face or phone interaction as nuisances with the time being better spent elsewhere.

Learn by Doing

Learn by DoingWhile people learn different things in different ways, business is one activity that I firmly believe is best learned while engaging in the activity. In fact I feel that most people learn more in one year on the job than they do in multiple years of school as so many facets and nuances of business really cannot be taught in books or a classroom setting with fictional stakes. The rubber meets the road when working with real people (who have real families), real clients, a real balance sheet, and a real income statement.

It is with that in mind that I picked Learn by Doing as the title of my latest (10th!) collection of notes from Entrepreneurial Thought Leaders lectures.

The book contains a wealth of insight from startup founders and business owners such as Ben Horowitz (Andreessen Horowitz), John Collison (Stripe), and Joshua Reeves (ZenPayroll). While it is free do not let that influence your thoughts on the value. These lectures have provided me tons of inspiration as well as great career advice. I urge you to give it a read and then follow up by listening to any lectures that strike you for even more insight.

Best of luck.

The End of Jobs

The End of JobsWhen I first heard about Taylor Pearson’s new book, The End of Jobs, I was worried that he had written the book that I have been researching. What I found was instead a practical book that outlines how the employment equation is changing, gives examples of people that are at the front of the wave of change, and provides a framework to adapt to the new job paradigm.

Two books that The End of Jobs reminded me of are Escape from Cubicle Nation and The $100 Startup. One of the people interviewed in The End of Jobs was Dan Norris who recently released a book titled The 7-Day Startup. This book is a good supplement to those but with more of a focus on the digital nomad aspect of the new world of business.

The overarching point the book makes is that now, more than ever before, you have the ability to design the lifestyle you want and that entrepreneurship is the avenue to do that. Increasingly it will be the only avenue to do that due to advances in technology and a changing business landscape.

I like his definition of entrepreneurship and a job:

“Entrepreneurship is connecting, creating, and inventing systems–be they businesses, people, ideas, or processes.

A job is the act of following the operating system someone else created.”

He goes on to lay out many of the skills (sales and marketing among them) needed to succeed in the world without jobs that he is envisioning.

There is a particular argument that Taylor laid out that struct me as very insightful if it turns out to be true. He said:

“We aren’t going through a global recession–we’re transitioning between two distinct economic periods.”

I really cannot say that theory is true or not but I am in absolute agreement that we all should prepare as if it is. I have seen a lot of the examples he has laid out with my own eyes as I think most people have. Jobs are less secure and entrepreneurial skills will help you survive.

If I had one complaint about the book is that I think some of his arguments seemed to jump from point to point and could have been fleshed out a bit more (while I’m a big fan of Warren Buffett I was lost about how value investing tied in) or benefited from better examples. In particular the example involving Morgan Stanley and IBM and a bond sale felt a bit tenuous. However he quickly bounced back with a wonderful thought exercise about your local community out of which I readily understood that: entrepreneurship > knowledge > capital.

One other quirk, and I don’t know if this is due to his subjects choosing to be anonymous or the writing style, but I would have liked to hear more detail about the people and their businesses that he used as examples.

One reason this book was particularly interesting to me, and might not necessarily be a factor for others, is that I feel like I know Taylor and many of the people featured in the book due to having listened to each episode of the Tropical MBA podcast over the past five years.

Even without that background I think many people yearning for more freedom or dreaming of making the jump from job to entrepreneur will enjoy the The End of Jobs. It is a quick and inspirational read.