Extending your Runway!

Several years ago, I wrote a book entitled, Extending the Runway, using parallels to piloting a plane to equate to the process of creating and building a small company, making maximum use of resources to get to and beyond breakeven.   It is worth revisiting the most

Extending the Runway book available at Amazon

important point of that book, which was written to prompt discussion between entrepreneurs, professional managers, and their boards of directors about issues that could unite them or strain the relationships between them.

The five resources boards and investors can add to a company

There are five types of resources a great board or active investor can add to a company.   These are:  time, money, relationships, context and process.

Time as a corporate asset

The longer it takes to produce and release a product, the more fixed overhead is consumed, and the runway of remaining cash diminishes.  Expert help and good planning can reduce the time to market, saving cash in the process.

Money is what entrepreneurs expect from us

A board of directors is primarily responsible for oversight in the use of and the raising of money for the company.  There is a fine line between loading the company with too much debt and diluting the shareholders too early with additional equity investments.  But all agree that a good board will express its stewardship well by preventing the company from running out of money.

Further, just because someone volunteers to invest doesn’t make that person into a coach or expert, although many seem to think their investment gives them the right to be that coach or expert.

Relationships are often as valuable as an investment

[Email readers, continue here…]    One reason for having an effective board or connected investors is to give the CEO a resource for tapping into great relationships that are owned by those individuals, so that the CEO can reach out and find help in areas most needed.  In the case of board members, if a board member has few appropriate relationships in his or her field of expertise or from past experience, then perhaps the board member is not appropriate for the company at this time.  And if the board member refuses to volunteer or allow such relationships when needed by the CEO, that board member should be held to task by the other members of the board.  And it is wise to have a private discussion with that person because sometimes the reason for refusal to make such introductions is because of a lack of confidence or passion relating to the company or its founder.

 How about context as a basis for decisions about growth?

Every good board has recruited at least one industry expert, often as the fifth or mutually approved outside member.  With expertise in the company’s industry, that person can and should provide expert advice about the timing of the company’s product entrance and applicability in the industry it addresses.  A great product at the wrong time or a poor product or service unable to address the needs of the industry will fail in the marketplace.  That board member should be actively involved in questioning the positioning, marketing and even the design of the product to avoid just such a disaster.

Getting to product release: process insights

Here, most experienced board members can help to streamline the process of product development, manufacture, channel management and marketing.  Knowing how to scale from test to release or how to complete a process more quickly saves money and time, making this knowledge as valuable as raising more money for the company, but without the cost in dilution or debt.

Use your board or build one if you don’t have one

Use your board to help you to navigate through control over these five resources.  If you don’t have a viable, relevant board, build one no matter what your size and stage of development.  One thing is usually sure: an entrepreneur cannot successfully do it all alone.

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The tender issue of stealing time

It’s a big issue within any company. 

With easy access to Internet shopping, games, social networks and more, employees can find many ways to focus on personal issues while at work, detracting from productivity and demonstrating a disrespect for the time paid for by their employer.  In fact, if we were to be direct, we might label it “stealing time,” and consider it a crime of sorts.

But let us start this conversation by acknowledging that working from home especially in this new world we’re in, most employees don’t use a clock and certainly can and do interrupt their work with play, chores, family issues and shopping.   And that most make up for this by working at any hour of the day or night.  Self-driven, self-policing and effective employees.  But how about those at the office as we return to a more normal workweek – even with split home-office days?

Why should management worry?

Based upon the actual “loaded” cost of an employee per hour, stealing time is certainly not an insignificant cost for the employer.  Certainly, it amounts to many times the cost of stealing something tangible, such as a ream of paper from the supply cabinet.  Yet, many of us treat the latter much more severely than the former.

Consider some counter arguments. 

[Email readers, continue here…]   Attracting great employees often requires us to offer special incentives, including flexible hours, work from home even before and soon after the pandemic, unsupervised time off, and access to perks such as free food and soft drinks.  Often, employees just expect some degree of freedom when they work at the office, to be able to quickly shop or communicate with friends in the middle of their day.  In times past, older generations were perhaps more discrete when making personal phone calls (how ancient this sounds).  But they often did so anyway, and often spending more time and more company money in phone bills in those days than any cost for today’s typical employee distraction.

How about the counter to the counter argument? 

There is no way to sugar-coat the fact that paid time is for work, not for outside play.  The cost may seem small until someone calculates the combined cost over a year of time and screams “thief!”

Is there a middle ground or is this a universally expected perk?

As in all two-sided arguments, there usually is a middle ground. The boss who requires complete adherence to the work-every-minute ethic called for in the employee handbook generates ill will when enforcing the rule.  But the manager, who openly ignores the behavior, encourages more of it from employees who will fall in to follow the example they see openly acknowledged.

My solution in an in-the-office environment

Acknowledge the fact of life, equate it to personal time once used for personal calls, and define a ‘limit of acceptability’ publicly.  “We recognize how difficult and intense your work is.   We think it prudent for you to take breaks as often as every hour if you need them.  We expect your breaks to be self-policed and no longer than ten minutes, to be used for all personal issues including personal use of your workstation.  Remember not to stray out of bounds of corporate decency and confidentiality and be safe in protecting corporate security.”

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Posted in Depending upon others, Protecting the business | Leave a comment

Some great coaches are younger than you are.

Especially for social media-based businesses, we all need to recalibrate our thinking about who is the teacher and who is the student.  There is nothing wrong with a manager slowing a conversation to ask for more background when speaking to an often-younger and more involved associate.  You know what I mean… The conversation goes something like this: “We found it on x site and using y app with z as our data object.”

Does a manager need to know every detail?

First, managers could not be paid enough or have enough time to stay entirely current with all the details each employee or associate deals with daily.  Yet, many times that other person tries to explain an important finding or breakthrough, or make a significant comparison, using names of destination sites or apps or tools we have never used or heard of.

Does manager age play into it?

Yes, age often has something to do with it.  And occasionally, a manager has to work to join the club by trying new things, learning new tasks and using new language to relate to those already in the know.

My story of learning to be comfortable as an “adult” manager.

[Email readers, continue here…]   I recall vividly one such “adult” experience.  I helped to found an Internet game company, playing the role of founding investor, chairman and even temporary CFO.  The company was destined to grow into a large, very valuable enterprise that we sold for many, many times our investment.  But that first day with the new employees was a test for me.  Many years older than any of them, their initiation was to insist that I spend no less than forty-five minutes playing for the first-time first-person shooter games against Internet-based foes.  I had to acknowledge the difficulty of achieving high degrees of skill, and the size and terminology of the extended gamer community.  But most of all, I had to gain acceptance as “one of us” in an environment where my CEO coaching and my money did not count.

Is about respect or knowledge?

That was a lesson for me.  Taking the time to be taught by those able to master a skill or have extra knowledge is an important step to show respect for everyone at all levels in an organization.  And that respect flows in both directions, worth so much more than the time it takes to learn a skill or terminology or meaning.

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Posted in Depending upon others, Surrounding yourself with talent | Leave a comment

How often do you say, “Great job?”

How we usually do this in our businesses.

The best managers we all know are the ones who take the time to praise good work in public, before an employee’s peers.  Most of us have a monthly award for the top person in a group of employees. And if we are big enough to formalize the process in a regular meeting, we make it a regular part of that meeting.

And why it doesn’t work as planned.

If you have not already discovered this fact, such a process quickly becomes routine and predicable.  Small companies have trouble finding new people to honor after a while.  Some employees even disingenuously consider the process an exercise in pandering, discounting the effectiveness of the award, and disenchanting those very managers who thought they were reaching out to do a good thing.

Don’t wait for a scheduled meeting date.

For all of us, we should remember that the best possible way to honor great work is to do so immediately.  A “Great job!” coming at the right moment from the boss is valued as an honest recognition of good work, especially if done in front of an employee’s peers.

My story of unusual but powerful team recognition

[Email readers, continue here…]   At times, it is an entire team that deserves the recognition, again immediately after doing a great job.  I found a formula that worked for me where most of the employees were in several buildings on the same campus.  First arranging for my assistant to obtain the appropriate amount of hundred dollar bills from the bank, and then to follow me around checking off names, I had my own personal holiday celebrating each individual in the team with a handshake, words of thanks, and a C-note.  With lots of laughter and thanks, the celebration and words “Great Job” made for a completely memorable event.  And those pop-up thank you visits from the boss certainly contributed to the culture of the company.  Word does travel.

Remember to reward those not present at the moment, and remember that the amount should be grossed up to take care of taxes and be entered onto the payrolls of the employees so rewarded.

I’m sure you have your own way to making “Good job!” work for you and your team.   Just try not to make it so regular and predictable that it loses its value.

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Posted in Depending upon others, Surrounding yourself with talent | 2 Comments

Do you “over-welcome” your new employees?

A story of a CEO attuned to creating great company culture.

A CEO friend of mine who managed her one-hundred-person remote workforce as a virtual company told me her story of how she welcomed new employees as she grew her firm.  Strike that. She over-welcomed her new employees.

Preparing for the new employee

Days before the official start date, she made sure that the new employee’s business cards arrived in the mail, that the employee’s phone and Internet services were up and running, and that an email account was already established.  But many of us do that, maybe not so timely.

Then she topped her explanation with: “A few days before the start, a package arrived from us at the employee’s home with a welcome letter, a copy of the CEOs book, and a giant fortune cookie, with the fortune cookie message streamer clearly visible.”

“You will be successful at our company!” the fortune stated.

One pleasant surprise after another

What a great touch – especially for someone expected to be self-motivated enough to work long hours from home, to get to know fellow employees through Zoom, Slack or Teams, and texting, and to be productive immediately when hitting the ground.

The benefits of hitting the ground running.

[Email readers, continue here…]   It started me thinking.  How many days or weeks or even months do we expect a new employee to take in becoming acclimated to our company and its culture, to the marketplace, and to our ways of doing business?  For example, most of us expect a salesperson to be truly productive only after about six months of building a territory or client base.  But isn’t there a better way to approach this expensive process of acclimation?

Special considerations for salespeople

For a salesperson, how about paying an override commission to another salesperson for a short period to help find and close new business? Or how about helping the employee gain confidence by handing the first several accounts to the new person ready to close?  How about assigning a big brother or sister to each new employee to show them the culture and process?  How about teaching a class in corporate culture yourself to one or more new employees?  Some of us have done one or more of these things.  But what could we have done better to launch a new employee successfully?

The outcome from “over-welcoming”

My CEO friend created a great company with a culture so strong, every single employee was able to work from their home, wherever in the world it might be, and contribute at the highest level to the success of the enterprise.  And oh, yes, she sold her company recently for a tidy sum to a buyer anxious to spread such enviable practices throughout the parent organization.

So, considering the benefits, maybe we should start with a surprise fortune cookie with a personal welcome message.

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Six ways to make your site-app-product go viral.

It doesn’t happen by accident.  Not every new game-related site is a Steam, and surely not every social network is a Facebook. And not every texting application is a Twitter.

A story of an app from nowhere to near dominance

Then how did Discord “suddenly” become so hot that even Microsoft was rumored to want to buy it for staggering amount?  Discord is a great example of a company going viral mostly from word of mouth.  From its start in 2015, the number of registered users has “suddenly” climbed from 45 million in 2017 to a reported 300 million by the end of 2020.   That compares with a reported 330 million for Twitter which had a nine-year head start and so much more free press from famous users over the years.

Soon, Discord could become dominant, even before an entire generation of millennials even knows the name.  How has this happened, and are there lessons for us in this?

How do you make your product go viral?

What are the elements needed to focus upon in making the attempt to take a product viral?  Intrigued by the thought, I recently made a list. It was as much in reaction to my getting blank stares from entrepreneurs when I asked the above question as it was for me to better understand the problem itself.

Here is my list.

First: Planning. Retail or end user web sites aren’t even noticed  by potential users or customers without being discovered through a real marketing program, aimed at finding the flywheel effect (the moment of going viral that makes all the difference between failure and success.) In today’s world of social marketing, it takes someone knowledgeable if not expert in understanding how to use available resources in promotion and marketing.  Some apps, like Discord, attach a brand link to the bottom of each message so that every recipient can click upon the link and become a user of the product without further marketing by the company.  So, the lesson is: always find a way to make a second-generation recipient or buyer a future raving fan.

[Email readers, continue here…]   Second: channels.  I was chairman of a company that distributed its product through over one hundred fifty retail Internet travel channels, all websites where someone else spent the money attracting their users and attempting to go viral. We could not have begun to reach a fraction of that audience with any amount of money if we did not reach through these channels.  Sometimes, it is just the right idea to brand your product inside that of a known presence.

Third: cost. Even a great marketing plan to gain an audience fails if there is not enough money to prime the pump and start the flywheel effect moving.  And of course, that could easily require a large amount, far beyond the capability of a small company looking for its initial audience. And yet, word of mouth sometimes is all that is needed. Google became an overnight industry standard for search strictly by word of mouth, never spending a dime on advertising in its early years. Marketing cost is not the best measure of success. Accurate targeting measured by acceptance is more important, even if the cost is near nil.

Fourth: measurement. If you can’t measure the results of your attempts to gain a viral response, how can you know when to focus upon reinforcing or changing the effort?  Well-tuned metrics are an absolute must. And the tools for most are available, sometimes free, for the educated marketer.  You cannot be successful if you cannot measure the results of your effort.

Fifth: reactionIf everything goes right in finding the right plan, channel, cost, and measure of success, and if you do nothing to reinforce the success or change the focus, the rest of the effort can easily die a slow death.  Respond to positive niche adoption with increased focus upon those niches.

And sixth: the pivot.  A reaction is not often enough. Many times, it takes an intelligent repositioning of the entire offering to try again with revised ideas based upon learned experience.   And, like the story of Discord and Twitter, it takes continual product and feature updates to stay ahead of the competition or overtake a sleepy competitor.  A pivot or product enhancement in reaction to user or customer comments will advance your chances of success.

It is a cycle that must be learned and followed to successfully maximize an opportunity in any industry and for any product or brand.  So, where in that cycle are you today?

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Posted in Finding your ideal niche, Positioning | 1 Comment

When to pivot from your original plan?

Plans do not often work as devised. 

We are not always smart about the market or the product.  We may miss the context of the times and come to market too soon or too late. We might not have researched the market diligently or used a focus group or other market research.  Well, the good news is that great teams are not bound by their original product or marketing plan.  Greatness finds one definition in management’s ability to “pivot,” or change the plan in reaction to its early response from the marketplace.

How do investors usually react to a pivot?

Investors most often celebrate teams that quickly find flaws in the original plan and reallocate resources in another direction before more wasted resources.  Even the term, pivot, seems to call up images of a light-footed dancer able to move so very quickly in any direction.

My story of a great pivot

My favorite example of a world class pivot comes from the CEO and board of one of my most successful investments.  Green Dot Corporation was formed by an entrepreneur in the year 2001 to create a product to permit those without credit cards to purchase items on the Internet.  Think of it:  to shop on the web, you must have a card, not a nine- digit routing and bank account number.  The young, inexperienced entrepreneur had two assets that attracted me – rights to use the MasterCard name on this new product, and a laser focus to make this work in any form possible.

Early market experience can cause a need to pivot

[Email readers, continue here…]   Over the years, the original vision changed dramatically several times as the world’s first debit cards were invented by the firm, positioning the card to be used by the un-bankable, those unable to obtain credit cards or in some cases even checking accounts.  The firm grew to dominate its new field, create an infrastructure to allow any of its current 100,000 retail stores to simple activate or load the card with money from any cash register.  It replaced Western Union as the preferred way to send money across great distances.  And it built a billion-dollar market and then some – where the original vision and plan might have restricted the then-small company to a tiny percentage of that.

And we who held early stock celebrated together the ringing of the NYSE opening bell the day that often-pivoting company went public.

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Posted in Finding your ideal niche, Growth!, Positioning | 1 Comment

Switching costs: A competitive advantage?

We know that one of the ways we hold onto our customers is if there are high switching costs to move away to a competitor.  But how about the other side of the coin?  Do you have an estimate of the cost for a potential customer to switch to your side?  And are you prepared to help with concessions if needed?

Here’s important homework for your marketing effort.

Know the cost to move from your existing platform and estimate the switching costs for moving from a competitor’s product or service to yours.  Offer incentives to existing customers to stay, and for competitor’s customers to switch.  Protect your base with incentives to stay that are intangible – such as membership in an insider’s club, access to special deals not available to others, and attention from the executives at the top.

The costs of replacing a lost customer

The momentum from an old decision that took lots of effort to implement is worth something to a marketing professional.  To keep an existing customer, even if by offering discounts, is much less expensive than the cost of attracting a new one.  To reduce switching cost from a competitor is to lower the barriers to a quick decision that might have been otherwise much harder to make.

Consider increasing the cost of your customer’s switching

Increase the barriers to your customer’s switching, not just with excellent service, but with some form of personal touch.  Recognizing a longstanding customer with an appropriate gesture from the top is best of all.

A personal story to illustrate the point

[Email readers, continue here…]   Recently, I received a hand-written letter from two co-CEOs of a company I had helped with a few hours of time.  They accompanied the letter with a customized gift of their product that contained the logo and name of the college where they knew I was a trustee.

First, I have not received a hand-written letter other than a greeting card from any business associate in what feels like decades.  I was in such shock, I did not respond in kind.  What to do?  Pull out a piece of stationery that had been sitting unused for over a decade and write in longhand?  You aren’t supposed to respond using a less personal vehicle than the original one. So, email was out. A phone call might have done it, but not with the elegance of the original correspondence.  Now, every time I turn from my desk to the credenza behind, I see that letter and gift.  I am not willing to just file the letter or put the gift on the shelf.  That’s the power of a great outreach from the top.

The lesson from extraordinary effort

And that is a lesson for all of us in marketing.  Find the right way to reach existing customers that stands out from the usual.  Find an offer that makes switching easy for others. Pay attention to opportunities to differentiate yourself from the rest.

Someday I will file the letter and put away the customized gift.  In the meantime, those two guys got many more miles from a relatively simple gesture than I would have thought possible.

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Posted in Growth!, Positioning | 1 Comment

Entrepreneurism is all about personal risk.

Well, of course it is.  So, let’s dig a bit deeper. Sometimes, you can reduce your personal risk by taking in other people’s money in various ways, perhaps starting with a consulting contract with a customer, purchasing a going business where profit or loss is known, or spinning off an existing revenue-generating portion of an existing business.

But the risks don’t stop there

Even using one of the strategies just mentioned, the risks of having enough cash to fund daily operations or growth can be daunting.  The same is true about marketing. If you don’t directly engage the potential customer at the right time, place and mood, you are at a disadvantage from the start.  There are too many competitors for a customer’s time and money to make an error in your approach and offer.

Here’s the ultimate thing about entrepreneurism

If you don’t choose to enter the fight, it is impossible to win it.   And entering the fight without the proper resources usually assures defeat.  Resources such as money, experience, statistics about your target, experienced marketing and sales talent, and especially a compelling need and attractive product are all important to the ultimate success of an enterprise.

So, ask yourself:  Are you ready to enter the fight?  Do you have the resources necessary to at least give you a chance to win?  If not, what do you need to do so, and how can you get those resources?

Then there is the risk of underestimating time and money

[Email readers, continue here…]  I am often surprised at the inexperienced executive’s estimates of time to breakeven for a product or a company, about the time and cost to market, about the expense in overhead needed to stay in the game.   Most of all, I am surprised at that typical person’s inexperience in the marketing arena and understanding of the importance of marketing to the success of the product.

Research the market before allocating resources

You may have all the other ingredients. But without an excellent marketing plan and a way to execute upon that plan, the best product and the most cash reserves won’t bring in the customers.  Since great marketing means addressing the wants and needs of the customer, about distancing the product from any competitor, about getting the message out to the most people possible, you’ve got to commit resources and energy to the fight in order to have a chance to win it.

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Posted in General | 3 Comments

Your “drop dead” question for a customer survey

Here’s the question:

Sean Ellis, the marketing guru behind DropBox and other successes, advises clients that “The most important question on a survey is, ‘How would you feel if you could no longer use this product?’”  He goes on to quantify the response.  If more than forty percent of the respondents say they would be “very disappointed,” then the product should go viral and be a great success.  Conversely, if less than ten percent say this, those companies or products would have a hard time getting traction in the marketplace.

Why it’s a great question

What a great test.  It reminds us that our customers, especially early adapters, must want to continue to use our products to the extent that they “would be very disappointed” if unable to do so in the future.

Other question for a great survey

What other questions could we wrap around this critical one to form a great survey that is both short enough and powerful enough to be relevant to our marketing effort, let along our R&D and production efforts?

Using Sean again as a source, we might ask: “How did you discover our company?” and provide several checkbox answers, including ‘friend or colleague.’  Again, it is a sign of a viral marketing effort to get more than forty percent checking that box.  Then “Have you recommended our company to anyone?”  Use just ‘yes’ and ‘no’ as possible answers and look for more than fifty percent ‘yes’ responses.

…and the closing question for your survey

[Email readers, continue here…]   And there is always the great open-door question: “Would it be OK if we followed up by email to request a clarification to one or more of your responses?”  If more than fifty percent say “yes” you have a real hit on your hands.  It means you can use this respondent as a resource for case studies and marketing quotes in the future.

Keep your survey very short to insure many responses.  But do include at least one specific question about your product to be sure the respondent is an actual customer.

A final word: Other kinds of surveys

Most of us know of the “net promoter score” which is the ultimate survey.  One question. “On a scale of zero to ten, how likely are you to recommend our business to a friend or colleague?”  You’ll find more about this with a simple search.

Then there are the long surveys where you could attempt to find more about satisfaction with service, delivery time, quality of product, packaging and more.  You’ll soon find that the more questions you ask, the fewer responses you receive. The fact is that most of us will jump out of such a survey after seeing more than three or four short questions.

Which brings us back to the “drop dead” question and short survey we’ve outlines above. Be careful, short and focus only upon the most important question(s) to get the most responses and best answers.  Good luck!

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