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Part 5 - How To Get New Customers

Part 5 - How To Get New Customers

Many readers are aware that I recently launched a new business and that I was having trouble enticing customers to the service. It just so happens the business is a new bird bath outside my study window and the customers are birds (the flying ones).

Escrow.com

Although there’s been a lot of funny anecdotes there has also been a serious thread of discussion about how to attract customers to a new business. Every new business has a vision of their ideal customer and a “full proof” plan on how to attract them. The problem is that years of experience has proved plans look great on paper and reality is something else entirely.

For example, I had a great vision of birds flocking to my wonderful bird bath and I would enjoy them singing away outside as they happily splashed away. My reality was a bird bath that was entirely ignored.

The one thing that a start-up has to their advantage is their ability to quickly change direction. If the plan isn’t working, then change the plan. Don’t burn more cash…..move!

In my case, I tried to entice the birds with bread. They loved the bread on the ground and completely ignored the bird bath. I then moved the bird bath. That still didn’t work so I moved it again. I constantly tweaked my “business” with the end goal of attracting my customers (ie. birds).

If a start-up is to succeed, then it must get customer feedback as fast as possible. There is no point in building the ultimate product that no one wants. For those people who tell you they love what you’re doing then ask them the same question with a charge attached.

I’ve seen so many businesses give their products/services away in the name of “market share” only to find that once they try to charge no one wants what they’ve built. A sale isn’t a sale unless ultimately there is a financial transaction attached. Anyone can give a service away…..it’s much harder to sell it.

So where am I at? As can be seen by the pictures I now have multiple different species of birds enjoying the bread and the bird bath. This is important as the different species indicate that I’ve now tapped into not just a single market but multiple different market segments.

Magpie

A start-up needs to quickly classify what customer segments are buying their products/services. This means really paying attention to what customers are buying versus the time wasters and then focusing your efforts to exploit the revenue opportunities.

I should say that my feathered customers are also paying customers. The other day, Roselyn and I woke up to a magpie warbling beautifully outside our bedroom window. That was payment enough for us both. For me, it was wonderful to know that I’d managed to successfully launch another little start-up business.

Battleframe

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Part 4 – Building a Business – Extending the Runway

Part 4 – Building a Business – Extending the Runway

In this article, I plan to pick up where I’d left off in the series on Building a Business. As you may have guessed from the title we will be exploring the importance of generating revenue and why it should be the fundamental goal for the vast majority of businesses. This may seem obvious, but so many entrepreneurs lose sight of the revenue in the quest for building a better widget.

Escrow.com

Revenue is the first part of the profit equation:

Profit = Revenue less Expenses

Many people look on this equation as being obvious without really understanding it in the context of a startup business. For a startup, the equation is all about runway. The less negative the profit is (ie. small the losses) the longer it will take a new business to run out of cash.

You can achieve this by hamstringing the business on the development side by reducing the expenses. This strategy often defeats the purpose of raising capital or being the first to market in a land grab. If you’re initially committed to your expense line, then the only other option is to generate revenue.

This then raises one of the largest challenges for a startup business. Short-term revenue versus long-term success. It’s often the leadership of the founder that empowers the business to achieve both.

For instance, should you go to the market with a half-baked product when you know customers won’t be enamored with the offering? If you launch into the market will competitors see what you’re doing and eventually eat your lunch? What is the PR implications of going to market now? These are just a few of the questions then plague founders.

On top of all this, focusing on revenue can be a complete distraction from the core objective. As a founder, you’ll suddenly find yourself managing a sales team (their often not that fun) who bring nasty things called clients that demand a level of quality from your half-built solution. This will then cause you to think about bringing onboard support staff. In the meantime, the core team wants to know where you are because you’ve been buried in all the noise.

So what gives first? I can tell you that it’s going to be your personal time which is quickly followed by waving good-bye to loved ones as you spend increasingly more time at work. On top of all this, the next board meeting with your investors will make you acutely aware of your shortcomings and the fact that you’re not hitting targets for what they invested in.

Does this sound like fun still? Remember the dreams you had in the bar with a few friends about building something great? Hang on to them and don’t let go as they are often the only way you’ll get through this patch.

What’s the solution to revenue? A number of years ago I watched an episode of the political drama “The West Wing” and the president of the USA was talking to one of his staff members.

President Josiah Bartlet: You got a best friend?
Staff Member: Yes, sir.
President Josiah Bartlet: Is he smarter than you?
Staff Member: Yes, sir.
President Josiah Bartlet: Would you trust him with your life?
Staff Member: Yes, sir.
President Josiah Bartlet: That's your chief of staff.

It’s a really good job interview for the conditions in building a team and most notably the crucial role of your second in command. Every successful business that I know has been built not by an individual but by a high-powered team.

As the founder of the start-up you can’t be expected to do everything. If you try to then you’ll fail. Get good people around you and delegate the revenue task as the focus of your second in charge. I’ve found that in most start-ups there is low hanging fruit that will unlock some revenue without distracting the core.

Remember, the purpose of doing this is to lower the business’s cash-burn and extend the runway so the core product/service can be released. The danger with this approach is if the founder gets distracted by the revenue and loses focus on the vision….so keep your vision firmly in sight.

In the next article I will continue the discussion on revenue.

Battleframe

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Part 3 – Building a Business – The Pitch

Part 3 – Building a Business – The Pitch

In Part 2 of this series you’ve expressed your passion to me about your new business idea. I’ve seen a prototype built out of bits of cardboard stuck together with glue and although it doesn’t do anything you’ve sold the vision. So what’s next?

Escrow.com

I love passion but passion combined with a plan leads to action. At this stage, I’m after a one page summary document. I want to see whether you have the wherewithal to be able to synthesize your entire business onto a single page.

Before you tell me that’s impossible, Rupert Murdoch, founder of billion-dollar global international company News Limited, receives a one page summary every day that summarises his businesses across the world. If Rupert can do it then I’m sure you can.

So what’s on this page?

  • The product/service in a maximum of two sentences.
  • What problem is it solving and for which target market?
  • How will you reach the target market?
  • Financial opportunity
  • What will it take to secure the opportunity?
  • Who is currently involved?

Assuming I’m still interested then I will next ask you to present a summary deck of slides which dive a little deeper into the opportunity. I will work under the assumption that the dozen or so slides are backed up with a rigorous analysis which can be quickly accessed in an appendix.

Amongst other things, I’m wanting to drill down into any existing financials you may have. If I see a great big liability in the balance sheet you can be sure that I’ll ask what it is so please don’t try and cover it up.

If it’s a loan to shareholders then don’t be surprised when I suggest that it be forgiven…..the reason why you are raising capital upon a certain valuation is because of that input. Either that or massively drop your valuation. The whole point of putting cash into a fledgling business is to help it grow, not to pay back debts!

So what’s going to be on the slides?

  1. What is your vision and value? What are you trying to achieve?
  2. What problem you are solving and why this is important?
  3. Who is your target market? You can describe this as John Smith who is struggling with….. Or do a full market analysis of the potential
  4. The solution you are bringing to the market to solve its problems.
  5. How are you going to make money from your offering? What is your position in the competitive landscape? Are you the high-price, high service offering or the low-cost mass market solution?
  6. Do you already have some existing sales or early adopters? Have you proven your offering and are looking for expansion investment/help or are you yet to launch?
  7. What is your marketing and sales strategy? What are the barriers to growth? How long will the sales cycle take? Do you have some winning solution that will beat customers compared to your competitors?
  8. Are there any competitors (there always are) and state why your solution is better. What is your position in the competitive landscape?
  9. The existing team – brief bio on each member
  10. Financial projections and existing sales (if any). It’s important to highlight any key assumptions here.
  11. What is the deal? You are wanting to raise $X for Y% of equity. Investors really would like to see the difference their investment will make to the business and where the investment will be spent.
  12. You may include here what the exit strategy will be? IPO, trade sale etc.

The entire deck should take a maximum of 20-30 minutes to present and each slide should be succinct and to the point. The rest of the meeting with me will be you fielding questions as I prod around the assumptions and come to grips with your product/service.

Remember, I’m not trying to be mean! I’m trying to work out whether putting time into your venture will be a higher return compared to other opportunities.

Other documents you will want to have on-hand.

  • Executive summary page
  • Any technical documentation on the product
  • Detailed financial modelling…..and I mean detailed.
  • Proper market research that describes your target market in detail and who else is playing in the space. A good rule of them is the SWOT Analysis (Strength, Weakness, Opportunities and Threats). Think of your venture in these terms.

Some people have pitched for me not to invest cash but my expertise and they’ve wanted me to participate as an advisor. If the business is interesting enough then this may be the first step we take together.

With any investment, whether it be time or money there is always a dating period before a marriage. We both need to more fully understand how we can work together and make the venture successful.

I hope you've found this article worthwhile and that it helps you pitch not just to me but to others that may be interested in investing in your new business.

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Part 2 - Building a Business - Getting Buy-in

Part 2 - Building a Business - Getting Buy-in

At the end of Part 1 I indicated that this article would be focusing on how to land a business partner/investor for your great idea. I’m going to use myself as a case study but understand that every investor will have different motivations for wanting to spend their time in a new venture.

Escrow.com

Like any good business, it usually begins with something drawn on the back of an envelope. That spark of an idea that seems to ignite the very ether with potential and every time you think about it your heart skips a beat.

What am I looking for? In one word, passion. I’m sitting at the bar at NamesCon and you’ve come to me with your idea (I’m not going to steal it) and during your story telling about how you came up with the idea I’m looking for how much you want it. Are you going to crawl across broken glass, traverse a desert or swing across a chasm to see your idea flourish?

So many potential entrepreneurs pitch their ideas in such a boring manner that causes me to look for someone else to share a drink with. If your unexcited when your baby is about to be born, then what are you going to be like in six months when you’ve been up all night because it’s been crying? Get animated and make the story interesting!

For example, it could be like….I was having a shower the other day and it suddenly hit me. People having been trying to do “X” for so long and if I just did “Y” I could solve all of their problems. It was like a shining light from heaven! I couldn’t get out of the shower fast enough to write it all down. Have you ever had one of those moments where a whole lot of things just seem to click into place?

At this point I’m thinking this is a cool story and an interesting person that’s causing me to reflect on the times I've had my own epiphanies! Very importantly I instantly know how this new business is going to solve a problem for the target market.

At this point in our discussion, you pull out of your pocket a sheet of wrinkled paper and say, “Here’s the idea when I first came up with it while dripping wet from the shower.” I take a look at it an instantly notice that some of the writing is a little blurry from where the ink mixed with the water from your dripping hand.

I now know you’re either crazy or so passionate you don’t want to let your idea out of your sight! Let’s face it, most entrepreneurs are a little nuts as we have this inner burning desire to break new ground and build things where others have said it would be impossible.

If I believe you’re passionate then I’m next going to weigh up whether you’ve done anything since the idea first came to you. In other words, are you capable of getting the big boulder moving up the hill.

I’ve had so many people tell me that they can’t start because they need a whole pile of cash. As soon as I hear this then my mind has exited the conversation. What they’ve just proved is they can’t do anything unless someone else helps them. What am I? Your nanny?

Get a prototype together. I don’t care if it’s been made out of bits of string, lego or a picture on a power point slide. Sell me the dream! Get your phone out and show me what your wrinkled-up piece of paper is all about. I want to see you’ve begun thinking about the problems and how to overcome them.

Get off your backside and begin researching everything you need to make your dream come true. When you think you’ve done everything you can then look again. So many people are dreamers and very few are doers. I’ve even had some people try to convince me that they haven’t taken the idea forward because they were waiting for an investment so they could be paid to develop it further……now I know their nuts!

What you need to appreciate is that I'm time poor because I have no shortage of ideas to develop and projects already on the go. When you’re trying to attract me to your business what you’re saying is your business is so incredible that the returns will far surpass anything else that I’m currently working on

I know this is a really tough to understand, any successful entrepeneur will be in a very similar position to me. Remember the axiom.....if you want something done give it to a busy person. People with lots of time on their hands won't ever get around to what you asked them to do....a busy person knows how to manage their time.

If I end up making the decision to get involved with your venture then I can guarantee that I will put everything I can to get behind it. I have a lot of resources and I want anything I'm involved in to be successful.

In the next article I’m going to go through what you need to do for me after I’m convinced you are passionate and willing to do whatever it will take to get your business going.

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Part 1 - Building a Business - Moving From the Idea

Part 1 - Building a Business - Moving From the Idea

So you’re having a shower (where all truly great ideas come from) and it suddenly hits you like a blinding light from heaven…..the most incredibly brilliant business idea to build out a domain you’ve ever had! There’s just one problem, what’s next?

Escrow.com

So many great ideas remain just that, a great idea and nothing more. Just today I was approached by a domainer to purchase a domain name and as a part of their pitch they told me that it would be fantastic as a particularly type of business. Based upon this “idea” they believed the price of the domain was justifiably inflated.

My immediate thought was to ponder, if it was such a great idea why didn’t they build the domain into a business themselves? Let’s face it, they were trying to price the domain based upon all the work that I would do to create a profitable business. That just doesn’t work for me….

A domain has value but don’t fall into the mistake of pricing in, not just the value of your domain but also the value of a mythical business that the buyer would have to create on it. Many domain owners make this mistake and wonder why they don’t sell any of their inventory.

Let’s put the pricing discussion aside for now as it’s the subject of another blog series. So how do you move from an idea to a profitable business?

For the past 34 years (time does fly!) I’ve been identifying opportunities, developing, selling and building businesses….most of them online or back in the days of bulletin board systems. A solid grounding in my MBA (Master of Business Administration) tempered with experience has helped me to quickly analyse opportunities to ascertain whether they are real or not.

I get pitched ideas all the time but I hate to say it most ideas are a complete distraction from what I could be doing. Every now and then something comes along which is worth further investigation but it’s rare to find the diamond in the rough.

I’ll be completely open and honest so I do apologise if I’m a little blunt. Most successful entrepreneurs DO NOT have a shortage of opportunities. They are in a deal stream that allows them to pick and choose which one to put their effort and possibly finances into. When you pitch your idea to get a successful business person involved then you need to be aware that it has to be really compelling.

Likewise, be careful whom you pitch to. Some people are sharks and will devour you with preference shares and equity ratchets, while others are fair and reasonable. The question you need to ask is what does the potential investor bring to the party…..and it had better not just be money.

As an example, let me share with you how my company, ParkLogic was founded. I will cut a long story short in an effort to focus on the pertinent points I'm raising.

I’d just sold a large domain portfolio which allowed me to enjoy six months touring the USA with my family, get my pilot’s license and do some other really cool stuff. I wasn’t in a hurry to leap into a business for business sake but I was very interested in learning how to improve myself personally. In Maslow’s hierarchy of needs, I wanted to spend some time working on “self-actualisation”…..the top tip of the triangle.

This sounds introspective but it was an important personal goal that focused my attention on why I would found my next business. I did a personal “check up” and concluded that I had a lot of strengths but like most people I also had a lot of weaknesses. Rather than going out solo I decided that it would be in my best interest to find a partner that complimented my skill set. This would allow me to learn how to improve my weaknesses and ideally improve myself.

As I said, I wasn’t in a hurry so I thought about a lot of people I knew and settled on one individual who has been my current business partner and co-founder of ParkLogic for the past ten years. He has an incredible amount of experience and our skills almost perfectly complement one another. Also, high on my list of potential partners was the fact that he is highly ethical.

So how did I get him onboard? I pitched the opportunities in the domain industry and essentially gave him half the business. From my perspective, ParkLogic was worth zero at the beginning and since I wanted to get a partner involved whom I could learn from I decided to make the offer compelling.

So what’s it been like over the years? Ninety-nine percent of the time it’s been fantastic and the one percent has been either one of us learning a great deal from one another. I’ve learned an incredible amount and my co-founder has as well. ParkLogic has grown dramatically and has gone from strength to strength where we’re now optimising domain traffic for people all over the world.

So many people get hung up on equity and how much they are giving away but they really haven’t sorted out why they are getting into business in the first place. They try and drive crazy deals or pitch to anyone that happens to have some money. In my opinion, this is a highly questionable strategy.

Remember, if you really want a partner, don’t rush, and get the right one. Go after them and make your pitch really compelling! Right now, your equity is essentially worthless but with the right partner it could be worth a LOT more. Think about yourself and what you want BEFORE you launch your business.

In the next article, I’m going to use myself as a case study and propose how you may get me involved in your new or existing venture. What do I look for and what do I bring to the table? Hopefully you will be able to use these thoughts to attract someone to your business.

Greenberg and Lieberman

Recent Comments
Charles
Nice business tips. I have always wondered how to generate some momentum and move past the idea stage. Thanks for sharing... Read More
10 February 2017
mgilmour
Thank you for your kind comments Charles.
10 February 2017
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