The success of young entrepreneurship has been on a steady decline over the past decade, as reported by the Kauffman Foundation. Often, entrepreneurs in their twenties catapult to CEO and founder status without proper training or guidance. Leadership is one of the most important skills needed to build a company, one that reaches success. It is learned from years in the workforce and absorbing inspiration and management styles from mentors.
Allowing personality to define a startup’s culture will help set it apart from others. For an entrepreneur looking to venture into the startup world, regardless of age, there are four things to remember when beginning a company:
Know where you’re going. Set actionable and attainable goals over a marked period of time. Create a detailed and realistic road map for your first year, and then your first three years. The last piece you ever want to change is your end goal, but you may change how you get there, which is why being able to pivot and remaining fluid as you move through milestones is very important to your success in the startup journey. The first key to identifying when to pivot is to understand what is working and what is not, so that you can look for alternative paths to get you to your intended goal. Sometimes methodologies and tactics you envision don’t always have the most thoughtful impact on your company, so flexibility is truly the key to hitting your end goals.
Foster an open company culture. If you create a work environment where all employees feel important and included, everyone will enjoy their experience and contribute at their highest levels to the organization. You want employees to exhibit passion and strive toward the same goal. Being transparent is the best way to create this type of a culture. One of the ways we show transparency at MrOwl is through our company retreat and bi-weekly meetings where employees are encouraged to speak up. Employees at all levels of the organization have contributed valuable ideas. I like to share my thoughts on strategic direction for the company that in other places might not go past the executive team. Feedback I’ve received is that these meetings help the team understand our big picture goals, feel included and re-energizes them in continuing to work toward the same goals as the rest of the team.
Ask the right questions to get the best hire. You’re looking for a diversity of thought, which requires that you hire smart people who may have varied backgrounds from yourself. When I interview candidates, my questions explore matters of logic and problem-solving skills. I almost never go into an interview with a list of questions or with a “check the box” mentality. Finding out what people are passionate about often indicates what kind of person the candidate is. For a startup, those joining the team should fit within the culture, and have a willingness to add to the company’s overall vision.
Make a realistic and honest budget. Too frequently, startups fall into the trap of either under-budgeting or over-budgeting in their first year. This can create a strain on your employees and create conflicts in the information you present to future investors. Save yourself the headache and make a real budget and stick to it.
The successful companies we read about every day had their beginnings as startups, whose founders followed similar steps in order to become great leaders. In the end, your company is your vision and it takes your entire team to be successful.
A book that has helped guide me along the way is “You Only Have to Be Right Once” by Randall Lane. Lane’s collection tells success stories of startup powerhouses like Facebook, Snapchat, WhatsApp and others. Knowing the narratives of successful companies can help give your business a boost when you feel like giving up. Remember that refusing to give up is what defines you and is what will make you successful.
I became an athlete when I was 7 years old. I chose to be a javelin thrower, drawn to the sport for its excitement, challenge and sheer thrill of competition. At that time, my definition of success was “just do your best.” I sincerely believed that by following this logic, I would achieve the impossible. Of course, I wanted to participate in the Olympics and to win medals, but even if I didn’t end up a winner, I would still know I did my best.
Later in life I met Inge Solheim, the famous survivalist and extreme expedition guide, who specializes in achieving the “impossible.” Meeting Inge was one of the turning points in my career and life in general. I was excited to tell him that I was determined to reach my goals in sports and life and ready to do my best. After hearing my life philosophy, he looked at me and said, “Doing your best is not enough. You have to do what it takes!”
Inge was the best example of that. I was most inspired by his work with disabled and wounded people. He led a group of wounded servicemen and servicewomen to the South Pole, and has guided people with disabilities to the most extreme destinations of the world that would be daunting to even the fittest people.
Looking back at my experience as an athlete, I realized that all my life I was pushed by my coaches beyond what I believed I could achieve. With their guidance, I could keep pushing my limits. As I finished my sporting career and didn’t have coaches setting high goals for me, I became too soft with myself. I was too scared to set big expectations for myself, and was not confident in my abilities.
The encounter with Inge made me realize what an important role my coaches played in my success. With them, I’ve pushed my boundaries and have seen others go beyond what I thought imaginable. In order to arrive at the top, you must forgo yourself, focus on a bigger goal than you and do what it takes.
I now know that it takes a lot to be successful, whether it’s in sports or in life. Unfortunately, most people don’t realize they are capable of even more, no matter if they are already successful or are only trying to figure out their path in life.
It takes a lot to be successful, but you are capable of even more! It’s just a matter of training. No athlete was born to be great. None. It’s all about non-stop daily dedication to your goal. What can we learn from centuries-old techniques on how to develop elite athletes and how to set yourself up for success? Here are my tips:
Coach. Why does every athlete have a coach? Do athletes lack motivation? Don’t professionals already know what to do? A coach is needed because we don’t see ourselves well from the outside. Just look at pictures or videos of yourself. Was the image in your head close to what you saw? To achieve success, you need to be guided by experts. Find an expert coach or mentor with whom you can push your abilities to achieve your best.
Discipline. You have to work every day to achieve your dreams, and you must be focused. The skills that you need for your craft, your mind, your endurance and strength are all muscle that get weaker if you don’t continue training them.
Plan. You have to know what the processes of growth for your business and yourself as a person are. You must know where you are at every given moment so you don’t quit when challenges arise.
Environment. You need to have fast-moving, inspiring experts in their fields around you for constant motivation, so you will never stop!
Testing. To build the best product or service, you have to constantly test it. In order to grow, you also need to test in order to see what you have already achieved and what you are capable of.
In order to succeed, you need to keep developing your craft and yourself, like athletes develop their sports technique and their willpower. My partner, Alex Monaco, and I wanted to build a mental gym for people who desire to keep achieving more from life, which is how we built our online motivational training course.
With these tips, now you can become a champion in the sport of life and get the maximum from each and every day. No matter your image of yourself, you have to do what it takes!
Many entrepreneurs are the “big picture” people among us; they have that rare combination of dreamer and doer. As such, most of the calls I get from entrepreneurial clientele is after they have started up their new business and, as it grows, they realize they are going to need some sort of insurance policy. Insurance conversations can become complicated, but they don’t have to be. Understanding a few things about business insurance can help make your experience go more smoothly and get you the policy you need at an affordable price.
Your industry experience will help your agent find you coverage
You might not realize it, but your agent’s ability to find you coverage for your new business hinges on the details of your new venture, and your experience in that kind of work. Your agent needs to put a narrative together for the company’s underwriter, and the more positive information he or she can provide about you and your business, the more options they will typically be able present to you.
If you are starting up a business, the insurance company doesn’t have a historical track record to go off of in order to evaluate what kind of owner or business manager you are. However, if you have numerous years of experience as a worker or manager in the same industry, this is relevant information that can help your agent place your coverage.
When your new venture begins to grow, it is likely you are going to need to hire some employees. Many entrepreneurs and business owners hire an employee or two in order to fill an immediate need, and then look to get workers’ compensation for them after the fact. It is difficult to determine the affordability of an employee without first evaluating the carrying costs associated with a new hire.
Depending on your industry, workers’ compensation premiums can be the most expensive item on your balance sheet aside from your actual payroll expenses. For example, if you are starting a business where your employees will be working at significant heights, such as a roofer, or they are encountering potentially toxic materials, such as certain paint fumes, the classification of your workers may have rates of $20 (or more) per $100 of remuneration. This means that for every $100 you pay your employee, you will pay $20 of workers’ compensation premium. Some worker classifications may be significantly lower, such as the case with clerical employees, which are typically rated under $1 per $100 of remuneration.
These kinds of insurance expenses need to be factored into your business plan and growth goals. As expensive as it may seem to be, workers’ compensation is mandatory in every state, and the penalties, fines and liability you may assume by not carrying this coverage will sink your business if something does go horribly wrong and a worker is injured. Since it is not an optional coverage, the best approach is to first evaluate and understand what the costs will be before you hire any employees.
Additionally, understand that it is likely that, as a startup, you will need to obtain workers’ compensation insurance through a state workers’ insurance fund, instead of through a private insurance company. Once you have a couple years of favorable experience without claims, private companies will be more likely to come and offer a competitive quote for your business.
Establish a separate legal entity to help your agent place coverage
Your accountant might tell you that it is easier, for tax purposes, to run your business as a sole proprietor. However, an insurance company’s preference is to write business insurance for a legal entity rather than an individual sole proprietor. The reason is that, because of the way the liability insurance language reads in your policy, insurance companies have a hard time parsing out specific business activities. This means that the company must be okay with all the products you make and all operations you conduct under your personal name if they are to write your policy.
You may have called for a policy to cover your office cleaning business, but you sell baked goods under your individual name, as well. Since the insurance policy wording states that liability coverage is provided for “your” products and “your” operations, this includes all of the products and operations you produce and conduct as the name insured on the policy declarations page. Instead of finding a company that is comfortable with writing insurance for your cleaning business, your agent now needs to find a company that is comfortable with insuring a “John Smith” who cleans offices and sells baked goods. There are likely fewer options for that wide range of business activities.
Setting up a separate entity for the cleaning business, ABC Cleaning, LLC, for example, allows the company to insure the LLC entity and not the individual sole proprietorship which is selling the baked goods. Some of this is nuance within the contractual language of the insurance policy, but just remember, the more business operations you conduct under the same entity name, and the more diverse they become, the more difficult it can be to find you business insurance at an affordable price.
When you are starting a new business, it’s a good idea to involve an insurance agent in the conversation, even if it is only at a high level. An experienced agent can lay out realistic expectations for you so that you can have a general idea of the potential hurdles you may face from an insurability stand point. Protecting your personal assets and your revenue streams with an insurance policy is important, but the costs and any difficulties in obtaining the proper coverages should be considered when developing a comprehensive business plan.
Disclaimer: Information and claims presented in this content are meant for informative, illustrative purposes and should not be considered legally binding.
While every organization works hard toward meeting its business objectives, this year we will see workplaces taking a greater interest in promoting work-life integration along with emphasizing employees’ pursuit of goals outside of the office. Rather than putting stress on employees and rewarding those who put work before everything else, employers will look to adopt a more personalized approach to handling individual recognition and the fulfillment of personal goals (i.e. getting in shape, writing a book, taking guitar lessons) as a way to create a driven, loyal and motivated workforce and balanced company culture.
This approach will keep your startup’s employees focused, helping each other to excel, and operating as a high-performance team.
Millennial values will combine with Gen X values
The concepts of meaning and empathy will become a huge part of the workplace DNA for startups this year. It’s no secret that these values are extremely important to millennials (who will occupy 46 percent of the U.S. workforce by 2020) and will now become equally necessary to build a healthy, high-performing workforce. Employers who previously shrugged off the millennial mentality toward the workplace will need to adapt to motivate teams past the basic incentives of extra pay and perks.
While millennials dominate the workplace in numbers, the often overlooked Gen X will assume the majority of leadership roles. Gen X are ambitious leaders and share the desire of millennials to have more purpose in work and work/life integration. The winning formula for your startup’s company culture ideally appeals to both groups by being clear about its vision and purpose, while also clearly outlining goals and accountability.
Gen X managers are independent thinkers that are driven by meritocracy. They’re happy to give millennials a promotion or raise as long as they are willing to accept the accompanying KPIs and accountability that come with that responsibility. Honest feedback will become more frequent and transparent, while also championing praise (something that millennials crave), while more “radical candor” about what’s not working and areas where people need to improve will balance the equation. The path to creating a culture of high performance and profitability can only be successful if employees are motivated, directly challenged and personally cared for at the same time, as advocated by Kim Scott.
Leadership has a huge role to play in shaping a startup’s culture. To build and promote a satisfied and engaged team, entrepreneurs in leadership positions should focus on:
Establishing core values that are the building blocks of company culture
Core values are the guiding principles for a company and help inform your company culture. Including your team in the creation of those values can help employees feel more connected, aligned and empowered. Most importantly through, they are operationalized as the backbone of workplace processes (e.g. promotions, hiring, employee rewards and transitions). If you really have core values properly integrated, no one should need a piece of paper to recite what they are. They know them by heart and act on them.
Respecting and holding employees accountable
Cultivating an environment that embraces respect, values accountability and encourages healthy debate with different points of view is key. Additionally, empathy (especially in the wake of recent, and seemingly never-ending, workplace harassment stories) will change the way leaders interact and communicate with employees. We’ll see a softer touch from leadership and an eye toward more discerning behavior.
Listening to employees and creating a culture of continuous feedback
Consistently seeking feedback, hearing everyone within your startup and being transparent about any changes the company is adopting will also be key alongside “open book” management. It’s also important to be transparent with employees by regularly sharing progress on the company’s performance. When employees understand the financial impact of their work, it boosts creativity and productivity to drive the business forward.
Coaching is estimated to be a $2 billion global industry and is rapidly growing. The new year will see leaders increasingly focused on ways to coach and mentor teams, which will help them develop and make the most of their strengths to add value.
The value of a coach or mentor within your startup cannot be understated. Investing in a coaching program can provide your team with vital lessons in accountability and provide a framework for achieving new internal and personal benchmarks. Employees today, especially in the modern (millennial) workforce, want to have guidance and mentorship as a way to better learn and advance toward their goals, which can oftentimes be outside of their comfort zones. This means coaches can become an excellent avenue toward maximizing employee potential across the board.
Overall, a well-defined company culture is no longer only about benefits and hefty bonuses. Startups with strong cultures are often more specific about who they are, who they aren’t and what they stand for. Moreover, they are consistent, and live and breathe the culture they share every day.
By now, many of us are owners of an Amazon Echo, a Google Home, or other voice-activated assistant. These gadgets are equipped with lots of tricks to smooth the running of a household, but the companies that produce them know that the big market is in applications for businesses. That’s what will move these from novelties to essentials. There are skills you can use in your workplace now that are especially useful for a startup or small business.
To begin with, a voice assistant can remove a little bit of desk clutter. They make great timers for those who use Pomodoro, FlyLady or similar time management systems; and replace sticky note reminders. In fact, you probably have the skills of Microsoft’s Cortana or Apple’s Siri on your computer, so you may not even need a new device. On the other hand, you can run multiple Amazon Echo or Google Home from the same account, a nice feature if you are a solopreneur with an outside office.
Next, check out the lists of Skills available, which are growing daily for each of the different assistants. These Skills can allow you integrate your calendar and to-do lists with voice commands. If you have employees, a single office voice assistant can help you share status reports or add things to each other’s to-do lists, helpful if you and your staff keep different hours. Another use is placing supply orders. It’s easy to add things to a list and send them to a vendor. After all, one reason that Amazon invented the Echo is to generate sales, and the competing devices have these capabilities, too. You can also place catering orders through Skills that connect you to restaurant delivery services. Set it up once, then reorder with a simple request.
Skills can integrate with other devices and technologies that you use through a service called If This Then That (IFTTT), which lists applets that extend different devices. For example, if you use Trello for project management, you can connect it to Alexa or Siri through IFTTT.
Voice assistants work with a range of lighting systems, security features and appliances at home or the office. Want to get the coffee maker running in your office? Ask Alexa as you walk out the door at home. You can also set up a smart doorbell to see who is knocking on your office door and let them in without getting up from your desk, or control lights and temperature settings remotely.
Amazon is upfront about its desire to get Echo devices into business environments. For now, its biggest use is in conference rooms, but that is likely to change. Echo (and many other voice assistants) can connect to calling services like Skype, giving you the services of a conference speaker without any wiring or additional cost. The voice assistant manufacturers also offer ways to make custom Skills that may help you do a specific work task, or offer a new service to your customers.
Voice assistants aren’t indispensable – yet – but they will be before long. There are enough business applications now that you may want to get ahead of the curve. Why not?
For centuries, philosophers have wondered whether or not a tree that falls in a forest makes a sound if no one is around to hear it. Entrepreneurs ponder a similar question when it comes to creating their own website. If a startup has a website, but it doesn’t get noticed, does it even exist?
Yes, the website still exists — your domain receipts are kind of a dead giveaway here. However, if you want to make waves, you’ll have to do more than build a site and expect everyone online to find it and keep returning. Getting your new website noticed requires playing into the needs of search engines, creating valuable content and getting creative in spreading the news to others. If you’re ready to put your new website on the map, here’s what you need to do.
1. Start researching keywords
What should you talk about on your website that will attract the attention of your desired audience? The best way to determine this is to research keywords as part of your SEO strategy. These keywords should be specific terms that your audience will type into search engines in order to find businesses in your industry. The more relevant keywords you use, the higher your site will rank in these searches. You can use the Keyword Planner from Google AdWords to find out which terms get the most searches and to optimize broad keywords and make them more specific to your business. Once you have your keywords ready to go, add them just about everywhere on your website — on site pages, in blog posts and as image and alt tags.
If you’re looking to bump your site’s organic traffic, create and maintain an active blog. Write articles that utilize your keywords and establish you as a thought leader in your field, invite influential guest bloggers to write and boost traffic, and share interactive content, like infographics. You can also add CTA blurbs at the end of every post that encourage readers to leave comments or share the content via social media.
Pro tip: the more blog posts you create, the more abilities you’ll have to create internal backlinks in articles. That means you’ll be able to include backlinks to related posts in your new content, which gives readers the chance to check out your previous work.
3. Grow your business through local listings and reviews
Want to establish credibility quickly with new visitors to your website? Encourage existing customers to share reviews about your company on sites like Yelp and TrustPilot and get your business listed through local listings and in online directories. Make sure that the information you’re listed under is accurate in order to build further credibility, too. The more visible your business is in listings, the easier it makes it for customers to find you, which ultimately helps boost your SEO results, visibility and sales!
4. Invest in paid search
If organic traffic isn’t taking off as quickly as you had hoped, you may want to invest in paid search strategies. Google AdWords tends to be one of the most popular avenues to get started with and allows businesses to test their strategies through a couple different variations of the budget that suits them best. Play around with A/B testing as needed until you find the formula that works for your business.
Last but not least, don’t forget to share your content on your website’s social media handles! You can use these handles to engage with your audience and further cement yourself as a thought leader within your field. Use scheduling software, like Hootsuite, to ensure you are regularly posting content and utilize hashtags on Instagram for a wider reach. Also, follow relevant hashtags to see what trends in your industry look like, and join in Twitter chats to share expert commentary and network with other like-minded users.
Mike Faherty is the founder and CEO of ProSales Connection, a marketing firm that specializes in working with B2B companies to build their sales pipelines. From inbound marketing to content marketing to conversion strategies, Faherty says his company’s competitive advantage is its commitment to bring value to its clients, which strengthens relationships and opens more opportunities for the company.
Q: Why did you start the company?
A: I started the business nine years ago. Before starting the business, I spent around 14 years leading inside sales teams as well as field sales teams for a couple different companies. Over my career, I had opportunities to outsource various inside sales functions to third-party sales companies. After the financial meltdown in 2008, I was downsized when the company had to cut costs dramatically. I was faced with the opportunity to think, “What would I do if I could just do anything?” I did an inventory of what my skills were and what I enjoyed doing. I kept circling around inside sales; I really had the most success and enjoyed building inside sales teams. That’s when the thought came to mind, “Why don’t I just become one of those outsourcers that larger companies are going to for this expertise?”
(Image courtesy of Mike Faherty)
Q: How did you finance the company at the start?
A: I made a deal with myself that I wouldn’t start the company until I found someone to give me money – actually write me a check for my services. My first client paid me $5,000. I went to the bank, deposited the money, incorporated the company, and secured a tiny little office space. I was able to cash-flow the first month based on that investment. That obviously wasn’t enough to support my household needs, so I used a little bit of severance money from my previous employer. Then, I turned to personal savings and took some early disbursements from my 401K.
Q: What’s the biggest mistake you made at the start?
A: One of the assumptions I made was that a customer wouldn’t pay us until we had completely delivered the service. I operated under that assumption for the first few years of business until I had a conversation with a client who asked me whether I wanted a check before I started or not. That was literally a light-bulb moment when I realized that someone might pay us before actually starting the work. That became the new policy, which certainly helps from a cash flow perspective.
Q: What’s the smartest thing you did at the start?
A: I’ve always been really careful with expenses. I was OK working out of very, very modest office space in the early days. Just being humble about that and not putting on airs that I was something that I’m not probably saved me a lot of money in the early days when I really needed that. I never got caught up in trying to look like something that I wasn’t. We were tiny and never took on more than we could handle.
A: We use QuickBooks to manage our finances. I have a bookkeeper and CPA who do a good job of keeping track of where we’re at from an accounting standpoint. That was a hard lesson I learned. The first four or five years, I fumbled along doing that myself and not very well. As the business grew and got more complicated, I had to remove that from my day-to-day responsibilities.
In the early days, when cash flow was tight, I would use credit cards to offset shortcomings. I would always work to pay that off as soon as the cash came back. I maintained a small credit line on a personal credit card that I used back and forth if we encountered slow-paying clients or if we had to make an investment that wasn’t necessarily planned for. About two years ago, I secured a more substantial line of credit with a bank that I use today to offset short-term cash flow issues.
Q: What’s the most challenging thing about running the business?
A: The most challenging thing about running a service company is that you are your people. The hardest thing is to attract and retain the right caliber of people. Especially as a small business, attracting high-caliber people can be a challenge.
Q: What’s the most rewarding thing about running the business?
A: For me, it’s such a creative outlet. There’s something empowering about having the final decision and having to think creatively about how to solve problems you’ve never seen before. A close second is the autonomy I have. I’m in control of my time and I decide when I work and how much I work. That’s usually 60 hours a week, but that’s my decision.
Q: What advice would you give to a new entrepreneur?
A: Unless you’re 100 percent passionate about it and committed, it’s too hard. I just wouldn’t do it unless you really, really love it. It’s going to be twice as hard as you think it is and it’s going to take twice as long as you think it will to get where you want to go. You’re going to have some pretty significant challenges along the way.
A: The future is really exciting for us. We started out being exclusively phone based. Over the last few quarters, we’ve broadened our capabilities to include digital marketing and content marketing as well as inside sales and sales development programs. We are now positioned to be able to offer more value to our clients than ever before.
This article originally appeared on Nav.com by Ashley Sweren.
Many people equate the idea of innovation with disruptive innovation. “But the fact is that for most businesses, placing big bets on high-risk ideas is not only unfeasible, it’s unwise,” says Adam Bluestein, a contributing writer at Inc.
On average, the most successful companies devote about 70 percent of their innovation assets (time and money) to “safe” core initiatives; 20 percent to slightly riskier adjacent ones; and just 10 percent to transformational, or disruptive, ones. That’s according to a 2012 report by innovation consultants Bansi Nagji and Geoff Tuff.
Core innovation involves making incremental changes to improve existing products for existing customers—think selling laundry detergent in capsule form. Adjacent innovations draw on a company’s existing capabilities and put them to new uses—see Procter & Gamble’s Swiffer, a re-envisioning of the old-fashioned mop to attract a new set of customers. Transformational (a.k.a., disruptive) innovations involve inventing things for markets that don’t exist yet—say, the automobile or the internet.
The 70:20:10 ratio isn’t set in stone. “Depending on your industry, your competitive position in it, and your stage of growth, you may need to make adjustments,” Bluestein says. Tech companies, for example, tend to spend less time and money improving core products because their market craves novelty, and so they may put more effort into risky ideas. Consumer-products companies with established product lines tend to focus mostly on incremental innovations.
Of course, when a disruptive innovation succeeds, the returns can be enormous, with 70 percent of total returns coming from breakthrough initiatives. Bottom line: Every business needs some practice coming up with ideas that will change everything, but it is unwise to let the pursuit of the breakthrough overshadow the many smaller initiatives that sustain a business over the long run.
Here’s a look at three more innovation misconceptions.
“You can’t have too many ideas.” Sure you can, if you don’t know what to do with them.
Coming up with ideas isn’t nearly as hard as determining which ones are any good and figuring out what to do with them. Small companies can be crushed under the weight of too many ideas. When you’re running a business, a big part of your job is to kill the weak ones.
But most companies lack processes to decide which ideas to pursue, much less ways to measure their success. Picking the right ideas starts with being clear about your company’s mission. A cool idea that excites your engineers should never become a working project until someone can articulate how it actually solves a pressing problem that your customers have. The business case for pursuing an innovation should include an indication of how to measure its impact, says Robert Sher, founding principal of the Bay Area consulting firm CEO to CEO. “The goal could be increasing brand awareness, customer satisfaction, customer retention,” Sher says. “Make sure you measure something crucial to your outcome.”
“Innovation is about stuff.” It’s not—and you might want to consider a business-model revamp instead.
Most companies focus most of their innovation efforts on new products and product extensions, according to research by the consultancy Doblin. But these kinds of innovations, it turns out, are the least likely to return their cost of investment, with a success rate of only 4.5 percent. Instead, Doblin found, companies get the highest return on investment when they focus on things such as improving business models, internal processes, and customer experience.
“The most valuable innovations are platform-level innovations,” says Larry Keeley, a director at Deloitte and the author of “Ten Types of Innovation.” Though Apple is rightly famous for well-designed devices, he says, “Apple’s most valuable innovation is the iTunes store.” Almost as integral to Apple’s success have been the company’s aggressive tax-avoidance strategies—such as creating offices and subsidiaries in low-tax locales such as Nevada, Ireland, and the British Virgin Islands. “It’s created a very advantaged business model,” says Keeley.
Similarly, Amazon makes little money on Kindle sales. The device’s real value comes from the way Amazon has linked it to its massive inventory of eBooks. Other examples of non-product innovation include the collaborative-consumption models of Zipcar or Airbnb, Zappos’s positioning of itself as “a service company that just happens to sell shoes,” and the values-driven strategies of Patagonia and Whole Foods.
Rather than obsessing over your next new product or service, it might be smarter to work on a new profit model or a better customer experience.
“Innovation is costly.” Actually, spending has little to do with results.
Apple, ranked as the most innovative company for the past three years, spends just 2.2 percent of its sales on R&D efforts. That’s well below the industry average of 6.5 percent for computing and electronics and far less than rivals such as Google, Samsung, and Microsoft. In fact, Apple ranks fifty-third among the 1,000 top R&D spenders in all industries.
“There’s a logic fallacy that if you spend more, you get more innovation,” says Michael Schrage, a research fellow at MIT and an advisor on innovation to companies such as Procter & Gamble and Herman Miller. Measuring innovation properly, Schrage says, means getting away from looking at inputs—that is, your R&D dollars—and focusing on the outputs that your efforts are generating with customers. “Unless you can show that customers and clients are getting more value from your new offerings,” Schrage says, “it’s less likely to be innovation and more likely to be waste.”
“Start a Successful Business: Expert Advice to Take Your Startup from Idea to Empire” is available now at fine booksellers and can be purchased via StartupNation.com.
Cash flow is one of the top concerns for small business owners and entrepreneurs, according to a recent report on the state of small business. That’s because having consistent cash flow is a necessity for success in any field. Unfortunately, the ebbs and flows of business, slow paying clients, operating expenses and other factors can create the occasional cash squeeze. This is where a business line of credit enters the picture.
Here’s why every entrepreneur should open a business line of credit:
1. A business line of credit is flexible “revolving” capital
A business line of credit functions like a business credit card, except that you can access cash. This makes use of funds that are much more flexible, as you can utilize the money for basically any business need, from buying inventory to reducing other debts to paying employees.
A business line of credit differs from other loan products in that it’s considered to be revolving capital. You don’t get a lump sum of cash upfront, like you do with term loans. Instead, you’re free to access the money as you need. Your credit limit replenishes as you repay what you borrowed.
For example, if you’re approved for a line of credit of $50,000, and you withdraw $10,000, your remaining available credit will be $40,000. Once you repay that money, your available credit will be back up to $50,000. In this sense, as long as you consistently make payments, you’ll have access to a supply of money. That comes in handy when the unexpected occurs.
Of course, the exact rates and terms you get depend on your credit, revenue, time in business and other factors. Obviously, if you have an established business with consistent revenue, the more likely you are to get a high credit maximum at attractive rates and terms. Be sure to compare with other options before agreeing to an offer.
Additionally, you only pay interest on what you withdraw. So, when business picks up and you don’t need to tap into your credit line, you won’t be charged interest.
3. A business line of credit keeps you in control
Few financing options offer you control like a business line of credit does. Not only do you get to use the funds as you need and see fit, you also don’t have to meet the demands of lenders and investors.
For example, it’s alarming that many entrepreneurs that build successful companies actually aren’t in a leadership position when the business goes public. According to research from Noam Wasserman, a business professor and expert on entrepreneurialism, for startups in the late 1990s and early 2000s, only 50 percent of founders remained the CEO after three years into the venture. This is mainly because investors insisted they relinquish control.
So, while going to investors for capital can lead the business to great success, it can also lead to conflicts with managing your company. Conversely, a business line of credit gives you funding — without having to answer to others. This way, you can build your business in the way you’ve dreamed.
4. A business line of credit has a relatively easy approval process
A line of credit is a solid and accessible financing product for young businesses as well as established ones. Generally speaking, you only need to be in business for at least six months and have at least $50,000 in annual revenue. Keep in mind, of course these terms depend on the strength of your business.
Also, it’s possible to get an unsecured line of credit, which is backed by a personal guarantee instead of collateral or a deposit. This takes a lot of risk out of borrowing for you, personally. However, you should note that unsecured lines of credit may come with a higher interest rate and/or stricter qualifications.
If rates are much better on a secured line of credit, opt for that instead. You can back lines of credit with equipment, invoices and other business assets to get approval and lower rates.
5. A business line of credit works well with other financing options
Different loans work well for different things. As Marco Carbajo, a business credit expert, notes, a business line of credit “provides companies the flexibility needed to meet their short-term funding needs. When the need for cash is there, funds are there.”
Since a business line of credit keeps you secure in the short term, it works well with financing products geared for the long term.
For example, a term loan from the SBA can provide a lump sum of cash to use for business expansion over the next five years or longer. During that time, a line of credit can serve as a supplement when daily cash needs arise.
With a smart loan combination, you can ensure a lack of capital never holds your business back. This allows you to focus on what matters: funding a successful, sustainable company.
No loan option is perfect. But there are reasons why a business line of credit is one of the sought-after financing products for businesses. It’s flexible, affordable, accessible for most, and gives borrowers more control.
As long as you do your due diligence and compare options, you can benefit from opening a line of credit. Considering combining with other financing products if needed. You’ll meet all your funding requirements — and you’ll be able to get going on building your business.
A good idea and entrepreneurial spirit are certainly required if you want to establish a new business. But many entrepreneurs find out the hard way that the most critical success factor is opportunity. Great ideas arise all the time, but as a potential business owner, you must be able to translate your idea into a venture that satisfies a need and does so at a profitable price. Here’s a closer look at when good ideas translate into good business.
Turning your good idea into a good business
A good business idea is a concept with the potential to make money. It involves a product, service or combination of the two that can be delivered to customers in a way that is feasible and, eventually, profitable. Every successful business was sparked by an idea. Note that the idea need not be all that original or even be thought up by the erstwhile entrepreneur. Whether you or someone else is the source of the inspiration, the business idea forms the foundation of an operating business.
At inception, business ideas have no commercial value. They are often abstract, fuzzy and sometimes hare-brained. Other times they are very specific. Whatever the size and scope of the idea, you have no guarantee it will generate a profit in the rough and tumble world of business competition.
It thus falls upon the entrepreneur to evaluate a business idea for feasibility. To do so, you should be familiar with the important characteristics of an idea that has the potential to drive a profitable business:
Relevancy: A good idea must be relevant to solving a problem or satisfying a need. Sometimes it fills a need that customers don‘t yet know they have, and part of the entrepreneur‘s challenge is to communicate that fact to the marketplace.
Innovation: Something about an offering must be different from the fare already available in the marketplace. The innovative quality might be a better, cheaper or easier way to accomplish a task. A disruptive idea is one that is so innovative, it produces a new paradigm that threatens or creates whole industries.
Uniqueness: What differentiates your offering from others? If your idea is too close to an existing product or service, you have to ask yourself how you would steal another company‘s market share. An existing business earned its slice of the market with its own ideas and has a head start in solving all the operational and financial problems that must be overcome to turn a profit.
Focus: Will the market understand and accept your offering? You must be able to focus the market‘s attention on why it wants what you‘re selling. That means you must offer benefits that are easy to understand and appealing to a market of sufficient size to generate a profit.
Profitable: The idea is not viable if it doesn‘t result in a profitable business. You need to understand how to monetize your idea and how much money it will generate. There are several roads to profit, including better solutions to existing problems, cheaper products or services, and higher quality or more prestigious offerings.
A good opportunity exists if your idea can be translated into an ongoing business that generates income and, eventually, profits. Budding entrepreneurs must research how to build and deliver their offerings such that the launch of a new venture has a reasonable opportunity to succeed. You must understand the market—supply and demand—for your offering, the costs for creating your solutions and the income you‘ll need to generate.
Let‘s assume you‘ve come up with a great idea—a better mousetrap, a breakthrough concept, a lower-cost alternative to existing offerings, or some other inspiration that you think could be the basis of a successful business. If you want to get serious, you must first understand the differences between a good idea and a good business.
Your idea assumes that there will be sufficient interest in your offering to make the effort worthwhile. However, it might not make for a good business if:
There isn’t a sufficient market for your offering
There is a sufficient market, but existing competitors can quickly copy your idea and grab the market share you need to make your business work
The demand for your offering is initially strong but, for various reasons, soon diminishes below the point at which you can operate profitably
The demand for your offering is seasonal, and cannot drive a business year-round
You can‘t produce your offering at a cost that’s low enough to be able to price it competitively
Technological, regulatory or management obstacles prevent you from producing your offering with sufficient quality and reliability to maintain market share
You lack the temperament, knowledge, skill or interest in running an enterprise—the business might be good, but not good for you
You can‘t or won‘t delegate sufficient authority to keep the business from overwhelming your time and/or energy
You cannot secure sufficient funding to launch your business, or to keep it running as you build toward profitability
The business is vulnerable to too many risks to ensure long-term survival
Together, these drawbacks add up to a lot of cold water to throw on a good business idea. But if the idea is solid, and and you think you can overcome the obstacles, the business can still fly. After all, America was largely built by entrepreneurs who started small but made it big.