I’m a firm believer that everyone is born with a spark of creativity inside of them. It’s the energy that spins the dynamo and as children causes them to dream big wonderful dreams. As we age we often start getting “sensible”, stop dreaming and life backs us into a corner of mediocrity when we were meant to soar like eagles!

How many times have you shared an idea with a work colleague to find you’ve become the butt of everyone’s jokes? Or maybe it’s been your parents that tell you to just knuckle down and get a job as that’s going to be your future…..when deep down inside you want to do something else. I’ve met so many people that have had their dreams smashed before their eyes and they end up crawling back to the weekly grind they despise.

Don’t get me wrong, there’s nothing wrong with a job, especially if the other option is to not have one at all. The question each of us needs to ask is whether we have a secret desire to do something else? Yes, it may be a business but like Richard Gere’s character in the movie “Shall We Dance” it could be to dance. It could also be to do something quite different.

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.

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.

I recently launched a new business and it’s been an abject failure. The service I was selling was great and I was sure that customers would absolutely love it but no one has even looked at it. My marketing efforts even went as far as involving some giveaways and I still didn’t get a result…..although the potential customers loved the trinkets.

So my shiny new bird bath is still sitting forlornly outside my study window with not a bird in sight. The birds loved the bread that I put out for them each day. I even placed the enticing morsels ever closer to the bath with the hope that I could watch them splash around on a hot summers day. But my customers have rejected all my efforts…..sigh….

How many of us have launched a new business only to discover that no one is interested in our services or products? With ever increasing frustration we put our hand deeper into our pocket to pull out more cash to throw at the market with the hope that someone will buy.

I hate to say this but someone has bought…..and that’s you. You managed to drink the kool-aid of your own business to the extent you’re no longer listening to your proposed target market. You could keep on shoveling cash out the door or you could do something a little more adventurous…..and that’s pivot.

When a business is in the process of failing, before you run out of cash, you sometimes need to take a close look at what you do and decide to do something else entirely. Maybe it’s completely revamp your product or target an entirely different market or even use your service as a loss leader for a different revenue model.

I’ve met many business people that have either killed a business too early or too late. In many instances, a little creative thinking is all that is required to rescue the situation. Maybe if you’re running a restaurant it’s as simple as taking the food to the people rather than waiting for the people to come to your food.

If you find yourself in a situation where you’re going out the back door then whatever you do, don’t keep on doing the same thing as you’ve always been doing and expect a different result. Pivot and pivot fast!

For me, I’m going to pivot and take the bird bath to my customers by putting it in the middle of the lawn rather than outside my window. With any luck, a few birds will hop in and have a great time. You’d think they’d realized that all of this was for their own benefit……and a little of mine. Wish you me luck!

Have a great weekend.

Michael

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.

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.

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?

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.