The SEC, Securities and Exchange Commission, quietly released a revision of the 1933 Securities Act that regulated how businesses raise funds through equity and how individuals can invest. I know the original Act itself sounds onerous to most of my fellow libertarian-minded colleagues, but this was really needed back in 1933 and the revisions are nothing less than amazing in 2015.
First, the 1933 Act put a whole lot of snake oil salesman out of business and protected a lot of simple folk from being bilked out of their life's savings. To start with, it required businesses to register with the commission to keep an eye on them. And it prevented them from using wide-scale advertising for investors. If you wanted to invest, you had to work through registered/accredited agents like accountants and professional investors. The investor also had to be accredited having a net worth that was deemed sufficient to protect you from ruin should the venture fail. I know this sounds like big brother protecting folks. But keep in mind, this was 1933, the height of the Great Depression and people were desperate.
Fast forward to 2012 and something amazing happened - crowdsourcing and crowdfunding. The SEC correctly recognized that the internet allowed vast access to capital for small businesses and that crowd could help vet businesses, adding a layer of protection for investors. And so, Jobs Act Title II was passed allowing businesses to cast a wide net on the internet to solicit investment for equity. The investors and businesses, however, were still required to be accredited. The intermediary like WeFunder.com, likewise and rightly, needed to be accredited by the SEC. And the SEC spent the next 2-3 years taking comments from players, monitoring progress, and developing something truly amazing, Jobs Act Title III.
Jobs Act Title III of the 1933 Securities Act, effective May 16, 2016, allows nearly anyone to invest in nearly any business through an online intermediary. This includes NON-accredited investors with minimal income and assets. There are some rules to follow such as registration requirements for all involved. But they don't represent a major hurdle and the onus is on the intermediary crowdfunding sites to maintain. In this Act, folks making less than $100,000 per year can invest the greater of $2,000 or 5 percent of the annual
income or net worth and 10% of the annual income or net worth
of an investor, if either the
annual income or net worth of the investor is equal to
or more than $100,000.
This is huge! Investment is no longer the advantage of a privileged a few and any great product or business can seek funding - even concepts. Those tired, dated, and arrogant Angels and VCs, most of whom know nothing about your product or industry, will now have to take a back seat to the general public.
By example, if you have a great concept but lack the funds to create a prototype, the crowd can invest. You don't need to spend time developing networks and risking exposure of a great idea to folks with deep pockets. Alternately, if the concept sucks, the crowd is sure to let you and every other potential investor know why. As an investor you can invest as little as $100 in as many projects as you like. And you don't have a to have a bucket of cash and can spread the risk around by investing in several projects. You might even get a piece of the next Apple.
Of course there are requirements in the 772 pages of required reading including a well-designed business plan and strategy and review by accredited third parties. This is what we do. We align your product with the market and SEC requirements to increase your chances of being funded. One analysis can validate your product features, target market, identify cash needs in a format required by the SEC for equity crowdfunding.
What are you waiting on?
GJC Business Strategy Consulting
860-970-2645
Thursday, November 19, 2015
Friday, November 6, 2015
How to Get Funding for a Startup
Product design, prototyping, customer segmentation, marketing strategy, marketing campaigns, manufacturing and distribution channel design, communications design, management strategy and design, and so much more. You may know your stuff when it comes to what you do as a small business owner, but no one can know all there is to know about all of these things. But these are the things that an investor wants to see.
My job as a business strategy, likewise, is not to know all of these things, but knowing they are needed and how to align them in the most cost effective and efficient way possible. This is what a business strategist does - align the business concept with the market and funding.
So I know what you're first reaction is; I can't afford all of those parts. This is where we provide the value you need. Most of our work involves preventing you from wasting money and, instead, investing money where it's needed. This is bootstrapping at any level. We're huge fans of bootstrapping and so are investors.
Check out our short article about BOOTSTRAPPING here.
My favorite examples of large scale bootstrapping involve a Soy Milk producer and the never too old story of how VHS beat Betamax to the market.
Looking at soy first, the milk industry actually sued the makers of a popular soy milk for using the word milk in the label and causing confusion with the customer. The suit was settled when the Milk industry agreed to distribute Soy Milk. This provided additional income for dairy distributors, allowed them to hedge their bets should soy replace milk, and gave Soy Milk folks a bonanza of not having to develop and maintain distribution and marketing channels.
Likewise, my personal project, Kronicity, a research tool that allows users to easily collect and associate data from any device, was faced with very large costs for content, marketing, and distribution in academia. My solution was to make it free for all educators along with revenue potential for teachers and professors. I saved a ton of cash and will launch months earlier than expected.
As for VHS, they faced a competitor in BetaMax that was backed by industry tech giant SONY that developed the Betamax nearly two years earlier. VHS countered with a product that allowed recording of movies 2 hours long (betamax bet on hour long television recording preferences for the consumer), and more significantly through an agreement with Blockbuster video to provide movies, marketing and distribution. The customer naturally gravitated to the machines that played all those Blockbuster movies. JVC used business strategy to collaborate the pants off of SONY.
In most cases, going it alone, spending the long dollar to reinvent the wheel, more accurately the distribution, marketing and manufacturing channels is a waste of precious time and money. You can get to market a lot quicker and for a lot less than what you thought through a good strategy that involves a few collaborators. Create and execute a plan like this and you're much more likely to launch with the cash you have and attract investors to grow to the next level.
For another example of really well spent money, consider our next post: "How Can I Reduce Development Costs".
My job as a business strategy, likewise, is not to know all of these things, but knowing they are needed and how to align them in the most cost effective and efficient way possible. This is what a business strategist does - align the business concept with the market and funding.
So I know what you're first reaction is; I can't afford all of those parts. This is where we provide the value you need. Most of our work involves preventing you from wasting money and, instead, investing money where it's needed. This is bootstrapping at any level. We're huge fans of bootstrapping and so are investors.
Check out our short article about BOOTSTRAPPING here.
My favorite examples of large scale bootstrapping involve a Soy Milk producer and the never too old story of how VHS beat Betamax to the market.
Looking at soy first, the milk industry actually sued the makers of a popular soy milk for using the word milk in the label and causing confusion with the customer. The suit was settled when the Milk industry agreed to distribute Soy Milk. This provided additional income for dairy distributors, allowed them to hedge their bets should soy replace milk, and gave Soy Milk folks a bonanza of not having to develop and maintain distribution and marketing channels.
Likewise, my personal project, Kronicity, a research tool that allows users to easily collect and associate data from any device, was faced with very large costs for content, marketing, and distribution in academia. My solution was to make it free for all educators along with revenue potential for teachers and professors. I saved a ton of cash and will launch months earlier than expected.
As for VHS, they faced a competitor in BetaMax that was backed by industry tech giant SONY that developed the Betamax nearly two years earlier. VHS countered with a product that allowed recording of movies 2 hours long (betamax bet on hour long television recording preferences for the consumer), and more significantly through an agreement with Blockbuster video to provide movies, marketing and distribution. The customer naturally gravitated to the machines that played all those Blockbuster movies. JVC used business strategy to collaborate the pants off of SONY.
In most cases, going it alone, spending the long dollar to reinvent the wheel, more accurately the distribution, marketing and manufacturing channels is a waste of precious time and money. You can get to market a lot quicker and for a lot less than what you thought through a good strategy that involves a few collaborators. Create and execute a plan like this and you're much more likely to launch with the cash you have and attract investors to grow to the next level.
For another example of really well spent money, consider our next post: "How Can I Reduce Development Costs".
How to Reduce Developer Costs"
I like to cite examples of what to do using my personal startup, Kronicity. Kronicity is a free research tool that generates revenue through user engagement and publishing. Greta idea, but getting it developed has been a pain in the ASCII. I literally went though 5 developers to get the product to a place where we can anticipate a launch. And I've come up with a few rules for development and a new tool in my business strategy tool box.
1. Never use equity as payment for a developer. They're just too few around and they're so easily pulled away by paying customers.
2. Vet the hell out of them. This doesn't mean looking at sites they've developed. You really have to get in there and talk to the owners of the site they've worked on and even the developer's partners. Sorry to say guys, but development seems to attract the real awkward kind of folks - folks no normal human can work with.
3. You can save a bundle gong offshore, but Don't go directly offshore. Use a third party in the USA that can be held responsible. More on that in the example.
4. Talk it over with a lot of folks.
Here's how I accomplished all of these rules in Kronicity. First, I found a developer in hartford, CT that outsourced his work to Egypt. He's a very likable and competent sort and, critically, bound by law to adhere to his contract with me. I get the security of a local developer but paying offshore prices. He came with personal references and paid him for a test of his skills that went quite well.
Next I took on a developer as partner. Not just any developer. I found one that I can work with - not awkward and argumentative. His job is to make sure the contract developer is doing his job, on time and under budget. As a business strategist and paleontologist, I have no idea when I'm having the wool pulled over my eyes. He also utilizes his network of developers to discuss and adjust our development - something I could never do. Bottom line is that his motivation is the same as mine.
The results have been amazing - half the development time and $123,000 less than planned. We've since added development services to GJC Business Strategy Consulting service list. We work with you to not only develop good business, marketing and channel planning, but also build and guarantee the site for a fraction of what most think possible.
We're available for free consultation in the Hartford area. Looking forward to hearing what you're building.
Fo more on the value of Business Strategy, see post: "What Does a Business Strategist Do?"
1. Never use equity as payment for a developer. They're just too few around and they're so easily pulled away by paying customers.
2. Vet the hell out of them. This doesn't mean looking at sites they've developed. You really have to get in there and talk to the owners of the site they've worked on and even the developer's partners. Sorry to say guys, but development seems to attract the real awkward kind of folks - folks no normal human can work with.
3. You can save a bundle gong offshore, but Don't go directly offshore. Use a third party in the USA that can be held responsible. More on that in the example.
4. Talk it over with a lot of folks.
Here's how I accomplished all of these rules in Kronicity. First, I found a developer in hartford, CT that outsourced his work to Egypt. He's a very likable and competent sort and, critically, bound by law to adhere to his contract with me. I get the security of a local developer but paying offshore prices. He came with personal references and paid him for a test of his skills that went quite well.
Next I took on a developer as partner. Not just any developer. I found one that I can work with - not awkward and argumentative. His job is to make sure the contract developer is doing his job, on time and under budget. As a business strategist and paleontologist, I have no idea when I'm having the wool pulled over my eyes. He also utilizes his network of developers to discuss and adjust our development - something I could never do. Bottom line is that his motivation is the same as mine.
The results have been amazing - half the development time and $123,000 less than planned. We've since added development services to GJC Business Strategy Consulting service list. We work with you to not only develop good business, marketing and channel planning, but also build and guarantee the site for a fraction of what most think possible.
We're available for free consultation in the Hartford area. Looking forward to hearing what you're building.
Fo more on the value of Business Strategy, see post: "What Does a Business Strategist Do?"
Wednesday, October 28, 2015
BOOTSTRAPPING or HOW MUCH CASH DO YOU REALLY NEED?
Here's the scenario I encounter almost daily: Entrepreneur has great idea in great market and wants a half a million dollars to get started. And that half million is earmarked for founder salaries, administrative costs, office space, new equipment and so on. And they're quick to point out that this "investment" will pay off for the investor because the idea is just so right.
Problem is that experienced investors invest in proven entrepreneurs - ideas are a dime a dozen. And I'm not talking about an investor with a track record of one or several successful businesses. What the investor is looking for is an entrepreneur that can get things off the ground without investment. A crafty individual that can leverage assets, utilize collaborators, and put some personal risk into the game. Someone who can move the needle forward just enough to validate the business model and more importantly, his or her abilities. Someone who needs some cash to take the proven model to the next level.
So, if you're just starting out, consider these two steps:
1. You don't need as much cash as you think. I wish I had a great class A space office to work out of the luxury of a salary to allow me to focus on building my business. But in reality, no one, outside a wealthy relative, is going to fund this. And this is a good thing. This forces you to work hard and act fast. And every good entrepreneur needs to do both, because your competition definitely is. And choosing to spend cash on new equipment and expensive office space is a clear signal to an investor that you're really great at wasting cash.
2. You are going to need cash, a whole lot of the stuff down the line for growth. Good business strategy plans for this with projections. And an investor is looking to invest in this growth and the entrepreneur that has realistically planned for this on top of the startup bootstrapping.
Summing up, investors invest in great people who can bootstrap a great idea and anticipate long-term costs. Be that entrepreneur. Getting from here to there is business strategy. It may seem academic, but nothing is more critical to an investor. When he or she asks the tough questions, have the right answers.
Problem is that experienced investors invest in proven entrepreneurs - ideas are a dime a dozen. And I'm not talking about an investor with a track record of one or several successful businesses. What the investor is looking for is an entrepreneur that can get things off the ground without investment. A crafty individual that can leverage assets, utilize collaborators, and put some personal risk into the game. Someone who can move the needle forward just enough to validate the business model and more importantly, his or her abilities. Someone who needs some cash to take the proven model to the next level.
So, if you're just starting out, consider these two steps:
1. You don't need as much cash as you think. I wish I had a great class A space office to work out of the luxury of a salary to allow me to focus on building my business. But in reality, no one, outside a wealthy relative, is going to fund this. And this is a good thing. This forces you to work hard and act fast. And every good entrepreneur needs to do both, because your competition definitely is. And choosing to spend cash on new equipment and expensive office space is a clear signal to an investor that you're really great at wasting cash.
2. You are going to need cash, a whole lot of the stuff down the line for growth. Good business strategy plans for this with projections. And an investor is looking to invest in this growth and the entrepreneur that has realistically planned for this on top of the startup bootstrapping.
Summing up, investors invest in great people who can bootstrap a great idea and anticipate long-term costs. Be that entrepreneur. Getting from here to there is business strategy. It may seem academic, but nothing is more critical to an investor. When he or she asks the tough questions, have the right answers.
Wednesday, October 21, 2015
So-Called Entrepreneurial Expert Part 2
A developer/investor and all around genius at everything according to himself decried Kronicity's mission and vision as too broad, demanding "Do one thing and only one thing!" He complained we were timeline generators - I never stated that and were, 'cause we're not. He complained about our market segment as well stating that our focus should be "schools or not schools" and not the general public. He said commercial accounts for health and fitness and music were way too different and would doom Kronicity to failure.
Idiots like this are really great at quoting crap like that without actually understanding what the originator of the statement meant. Kronicity does focus on one thing. It's in our Vision and Mission Statements:
Vision (Where we tell ourselves we want our future to look like)
Provide validation, perspective, and enhanced value to the internet by becoming the world's next technological jump in how data is collected, disseminated, and integrated into the human quest for knowledge.
Mission (Internal statement of How we plan to do it)
to create a web-based platform for easy data collection, organization, validation, and value enhancement from any source.
We're not a collection of timelines and we don't create content. We provide tools for others to do this in any field of study. I mean seriously, does microsoft office focus only on law practices? Does google focus solely on schools as a market? Absolutely not, they provide tools to be used in ways they never considered.
Lesson here is to understand your product and its market segment. You've been living this project for months or even years. If someone thinks they understand it after a few minutes and insist they know better than you, leaning on a stack of best selling How To books, just walk away.
What you do want to look for is an investor who will ask more questions than dwell on obstacles. The fist meeting is to understand the product and the market. If you can't get past that, stop. If they do understand both and have valuable insights, usually from working in that market, start the dialogue.
Idiots like this are really great at quoting crap like that without actually understanding what the originator of the statement meant. Kronicity does focus on one thing. It's in our Vision and Mission Statements:
Vision (Where we tell ourselves we want our future to look like)
Provide validation, perspective, and enhanced value to the internet by becoming the world's next technological jump in how data is collected, disseminated, and integrated into the human quest for knowledge.
Mission (Internal statement of How we plan to do it)
to create a web-based platform for easy data collection, organization, validation, and value enhancement from any source.
We're not a collection of timelines and we don't create content. We provide tools for others to do this in any field of study. I mean seriously, does microsoft office focus only on law practices? Does google focus solely on schools as a market? Absolutely not, they provide tools to be used in ways they never considered.
Lesson here is to understand your product and its market segment. You've been living this project for months or even years. If someone thinks they understand it after a few minutes and insist they know better than you, leaning on a stack of best selling How To books, just walk away.
What you do want to look for is an investor who will ask more questions than dwell on obstacles. The fist meeting is to understand the product and the market. If you can't get past that, stop. If they do understand both and have valuable insights, usually from working in that market, start the dialogue.
Five Minute Expert Critiques
This Blog was started to promote my consulting business by sharing what I've learned from 29 years of independent consulting work and from lessons learned obtaining my MS in Technology Commercialization. But lately it seems to have morphed into a journal, nay, a sounding board for frustrations I've encountered while building Kronicity. One of my partners laughed that it would be great to have Kronicity fully developed to chronicle all these frustrations along a timeline. With any luck, that's 12 weeks away and I do plan to use it for that purpose.
Today's frustration deals with entrepreneurial experts - and who isn't one today. After all, the $12.95 latest "How to think outside of the box" book that literally ships to the newly minted expert in an actual freaking box is all it takes. They're usually 200 pages of mantras that could fit on a post card - easy to understand and repeat. I was actually able to mouth along with the objections of one self ordained expert as he quoted from one of the more popular best sellers. I reactively argued my point with a few of these fellows, but only a fool argues with a fool and I've come to understand that a polite and rapid exit is usually the best thing to do.
One of the latest in my long list of frustrations is from a so-called Venture Capitalist. He passed on Kronicity, as if I was actually considering him, citing we had too many partners and our target market was too difficult to work in. But I didn't have to argue with the guy. He'd already let loose the reasons not to.
First, he described how he'd made a mint from selling a tech-based company. Had he left at that, I'd have lengthened the conversation a bit. But I used a technique I've adopted years ago. I let him keep talking. He continued to describe how he knew absolutely nothing about the industry he operated in, that it developed in the early 1990s and the real kicker, that he started it as part of his dad's business at dad's request and, of course, funded by dear ole dad. I immediately thought I should be talking with dad. But I kept quiet and it got better. He then complained that I had too many partners to deal with. I have seven critical thinkers in my business including myself. He and his accountant then started talking about diluting the current partners as quickly as possible. Hello! I'm right here idiot! He then concluded with talk about how rich he was and how my financial needs were nothing to someone like himself.
This guy was telling me he was going to be trouble, would create a hostile environment and had an inferiority complex in our first five minutes. A few more minutes of complaining about how difficult it was to sell to schools made it obvious he didn't even understand our business model. We're free to schools.
As for it being difficult to work with schools, everything your dad doesn't fund is going to be hard dude. Obstacles are opportunities for entrepreneurs.
This may be the first of a series of posts as my encounters are so numerous. But, ending on a positive note, I've managed to avoid a host of these self appointed experts forcing me to be clever enough to fund Kronicity with minor investments in cash and major investments by qualified partners and collaborators. We're a better company because of this. And by the way, I believe there were nearly 50 equity partners in What'App that sold for $19 billion. You can dilute me all day long for those figures.
Today's frustration deals with entrepreneurial experts - and who isn't one today. After all, the $12.95 latest "How to think outside of the box" book that literally ships to the newly minted expert in an actual freaking box is all it takes. They're usually 200 pages of mantras that could fit on a post card - easy to understand and repeat. I was actually able to mouth along with the objections of one self ordained expert as he quoted from one of the more popular best sellers. I reactively argued my point with a few of these fellows, but only a fool argues with a fool and I've come to understand that a polite and rapid exit is usually the best thing to do.
One of the latest in my long list of frustrations is from a so-called Venture Capitalist. He passed on Kronicity, as if I was actually considering him, citing we had too many partners and our target market was too difficult to work in. But I didn't have to argue with the guy. He'd already let loose the reasons not to.
First, he described how he'd made a mint from selling a tech-based company. Had he left at that, I'd have lengthened the conversation a bit. But I used a technique I've adopted years ago. I let him keep talking. He continued to describe how he knew absolutely nothing about the industry he operated in, that it developed in the early 1990s and the real kicker, that he started it as part of his dad's business at dad's request and, of course, funded by dear ole dad. I immediately thought I should be talking with dad. But I kept quiet and it got better. He then complained that I had too many partners to deal with. I have seven critical thinkers in my business including myself. He and his accountant then started talking about diluting the current partners as quickly as possible. Hello! I'm right here idiot! He then concluded with talk about how rich he was and how my financial needs were nothing to someone like himself.
This guy was telling me he was going to be trouble, would create a hostile environment and had an inferiority complex in our first five minutes. A few more minutes of complaining about how difficult it was to sell to schools made it obvious he didn't even understand our business model. We're free to schools.
As for it being difficult to work with schools, everything your dad doesn't fund is going to be hard dude. Obstacles are opportunities for entrepreneurs.
This may be the first of a series of posts as my encounters are so numerous. But, ending on a positive note, I've managed to avoid a host of these self appointed experts forcing me to be clever enough to fund Kronicity with minor investments in cash and major investments by qualified partners and collaborators. We're a better company because of this. And by the way, I believe there were nearly 50 equity partners in What'App that sold for $19 billion. You can dilute me all day long for those figures.
Wednesday, August 26, 2015
Customer as Product
My startup, Kronicity, is building a free site with paid upgrades, of course, designed to scale quickly. This scale will be monetized through a humber of means. The latest, I read a How to think out of the box book that came in an Amazon box, argued that my user was the product and my customer was the marketer and that I should build for them. He pointed to Twitter users as product and marketers as the actual customer.
Here's my take. There is no such thing as a user who is only a product. The user is both customer and product. Kronicity is designing for two customer segments, the user and the marketer. I FIRST have to develop a product the user will love and use. Only then will I be able to market to the marketer for all that lovely advertising money.
There's a pretty important distinction here. Defining who your customer is is critical. Every feature and design decision must focus on customer experience and customer perceived value. If you're monetizing your users, you have at least two customer segments. This requires viewing your product through two lenses and building two marketing strategies. And, if done properly, seamlessly integrating both segments into all planning phases.
Here's my take. There is no such thing as a user who is only a product. The user is both customer and product. Kronicity is designing for two customer segments, the user and the marketer. I FIRST have to develop a product the user will love and use. Only then will I be able to market to the marketer for all that lovely advertising money.
There's a pretty important distinction here. Defining who your customer is is critical. Every feature and design decision must focus on customer experience and customer perceived value. If you're monetizing your users, you have at least two customer segments. This requires viewing your product through two lenses and building two marketing strategies. And, if done properly, seamlessly integrating both segments into all planning phases.
Wednesday, August 12, 2015
What Does a Business Strategist Do?
The simplest explanation, is we consider and align every possible aspect of a business. Think of your business as a natural extension of the natural world, which it is. Alexander Pope’s reference to a “Vast Chain of Being” applies to the interconnected parts of a business just as much as to the success or failure of a species in the wild. Cockroaches, for example, are really well-aligned animals. Mammoths - not so much.
How We Do It
We do this utilizing a large number of tools and usually involves enlisting the advice and assistance of numerous other experts. I could talk all day about this, but let’s try to break it down into a few simple components.
Competitive Forces Analysis
Most startups think of competitors as the firm down the street competing for the same customers. And this is partly true. But trust me buddy, there a whole lot of other things trying to kill you. Is the technology ready for your product? Is the customer ready? Can they find a cheaper alternative? Are economies of scale working against you or in someone else’s favor? Has your competitor locked up all existing manufacturing and distribution?
By example, did betamax fail because it was too soon for a new media format? Or was it that VHS aligned themselves with Blockbuster to create a customer pull strategy? If so, VHS succeeded because they identified the superior product competitor and outcompeted with a superior distribution channel.
One of my favorite examples is a lawsuit, “Silk” versus the Milk Industry. It was settled with a collaboration where Milk wholesalers distributed the “Silk” product. In this case, the milk industry recognized a potential threat and decided to join rather than fight. Distributing gave them insights and profits. Silk recognized a powerful competitor and ore importantly a potential collaborator that provided them with a a well-established efficient low-cost distribution and marketing channel. The consumer won as well. Quoting Charles Darwin: “In the long history of humankind (and animal kind, too) those who learned to collaborate and improvise most effectively have prevailed.”
These are just a few of many competitive forces to consider. A business strategists considers all of them and recommends solutions and strategies to accommodate.
Channel Design
Understanding the competitive landscape is critical in identifying channels that need to be developed. The “Silk” example above was a very efficient and low cost solution to a problem most businesses face. Recognizing the actual competitive forces allowed them to collaborate and not only eliminate competition, but to develop low cost distribution and marketing channels. Most startups instinctively and reflexively seek the lowest-priced raw materials and manufactured goods. Big mistake! Your product is priced based on overall cost to create and deliver to the end user. A high priced manufacturer may also have well-established channels/access to your customer. They may open doors to new customers, share marketing costs, even distribute for you. Understanding channels is critical.
Financing
Let’s assume you’ve developed a better mouse trap that requires only biodegradable paper components. And you only need a $40,000 to get to market. As a business strategist, my first thought is to negotiate a partnership with a paper manufacturer to produce the product at cost, reducing your cash needs to about half or $20,000 and then borrowing that cash from the same paper manufacturer. Of course it would have to be a damned good mouse trap. But even if deemed a risk by the manufacturer, with a good marketing plan, such as using their distribution network, there is still some room for negotiation.
Marketing
Align all the parts! Can your customer be reached through an established network? Are any partners in your channels connected to them? Lord knows your manufacturers are vested in your success. Perhaps there’s a collaborator with a complimentary product? You could share costs and tap into each others customer base. The competitive analysis above can fine tune who your customers are and better target your campaigns. Your partners can share insights on what worked or didn’t work for them. Have you identified substitutes that you have to position yourself against? I witnessed a customer at a high end tea shop complain she could find an oolong at a quarter of the price the shop was asking just down the street. The manager responded that they too could sell cheap oolong but decided to maintain high quality tea did not compete on price. he shop had done their homework, priced and packaged and marketed accordingly. The customer paid the price.
Communication Channels
How many times have you gone to a retailer or restaurant and was so disappointed in the service that you never went back. Or maybe you had a suggestion that would have really helped out a new small business. I pity the poor business owner who doesn’t know of your experience nor learned of your suggestion. But in reality, it is their fault for not having established communication channels that make it easy for customers to interact with your business AND for employees to act on this data. And this communication extends from customer to business owner and straight on back to manufacturer and raw goods provider. And a well designed communications channel allows a business to respond quickly to change. Again, I quote Darwin: “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.”
As you can see, just as in the “vast chain of being” in the natural world, there’s a lot of overlap in all categories. Aligning them is critical to survival. Your goal as a business owner or manager is to try NOT to be a mammoth. We can help.
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| https://upload.wikimedia.org/wikipedia/commons/0/0a/MammothVsMastodon.jpg |
How We Do It
We do this utilizing a large number of tools and usually involves enlisting the advice and assistance of numerous other experts. I could talk all day about this, but let’s try to break it down into a few simple components.
Competitive Forces Analysis
Most startups think of competitors as the firm down the street competing for the same customers. And this is partly true. But trust me buddy, there a whole lot of other things trying to kill you. Is the technology ready for your product? Is the customer ready? Can they find a cheaper alternative? Are economies of scale working against you or in someone else’s favor? Has your competitor locked up all existing manufacturing and distribution?
By example, did betamax fail because it was too soon for a new media format? Or was it that VHS aligned themselves with Blockbuster to create a customer pull strategy? If so, VHS succeeded because they identified the superior product competitor and outcompeted with a superior distribution channel.
One of my favorite examples is a lawsuit, “Silk” versus the Milk Industry. It was settled with a collaboration where Milk wholesalers distributed the “Silk” product. In this case, the milk industry recognized a potential threat and decided to join rather than fight. Distributing gave them insights and profits. Silk recognized a powerful competitor and ore importantly a potential collaborator that provided them with a a well-established efficient low-cost distribution and marketing channel. The consumer won as well. Quoting Charles Darwin: “In the long history of humankind (and animal kind, too) those who learned to collaborate and improvise most effectively have prevailed.”
These are just a few of many competitive forces to consider. A business strategists considers all of them and recommends solutions and strategies to accommodate.
Channel Design
Understanding the competitive landscape is critical in identifying channels that need to be developed. The “Silk” example above was a very efficient and low cost solution to a problem most businesses face. Recognizing the actual competitive forces allowed them to collaborate and not only eliminate competition, but to develop low cost distribution and marketing channels. Most startups instinctively and reflexively seek the lowest-priced raw materials and manufactured goods. Big mistake! Your product is priced based on overall cost to create and deliver to the end user. A high priced manufacturer may also have well-established channels/access to your customer. They may open doors to new customers, share marketing costs, even distribute for you. Understanding channels is critical.
Financing
Let’s assume you’ve developed a better mouse trap that requires only biodegradable paper components. And you only need a $40,000 to get to market. As a business strategist, my first thought is to negotiate a partnership with a paper manufacturer to produce the product at cost, reducing your cash needs to about half or $20,000 and then borrowing that cash from the same paper manufacturer. Of course it would have to be a damned good mouse trap. But even if deemed a risk by the manufacturer, with a good marketing plan, such as using their distribution network, there is still some room for negotiation.
Marketing
Align all the parts! Can your customer be reached through an established network? Are any partners in your channels connected to them? Lord knows your manufacturers are vested in your success. Perhaps there’s a collaborator with a complimentary product? You could share costs and tap into each others customer base. The competitive analysis above can fine tune who your customers are and better target your campaigns. Your partners can share insights on what worked or didn’t work for them. Have you identified substitutes that you have to position yourself against? I witnessed a customer at a high end tea shop complain she could find an oolong at a quarter of the price the shop was asking just down the street. The manager responded that they too could sell cheap oolong but decided to maintain high quality tea did not compete on price. he shop had done their homework, priced and packaged and marketed accordingly. The customer paid the price.
Communication Channels
How many times have you gone to a retailer or restaurant and was so disappointed in the service that you never went back. Or maybe you had a suggestion that would have really helped out a new small business. I pity the poor business owner who doesn’t know of your experience nor learned of your suggestion. But in reality, it is their fault for not having established communication channels that make it easy for customers to interact with your business AND for employees to act on this data. And this communication extends from customer to business owner and straight on back to manufacturer and raw goods provider. And a well designed communications channel allows a business to respond quickly to change. Again, I quote Darwin: “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.”
As you can see, just as in the “vast chain of being” in the natural world, there’s a lot of overlap in all categories. Aligning them is critical to survival. Your goal as a business owner or manager is to try NOT to be a mammoth. We can help.
Tuesday, July 28, 2015
How to Avoid The Crazy Developer Partner
Chances are, as a startup, you need some development work. If you're NOT a developer yourself, consider these rules for developers.
RULE One:
NEVER make the guy developing your product your equity partner. NEVER! If you don't speak the language, be it HTML5, or java, or what the hell else, you're at his or her mercy.
RULE Two:
See Rule One, there are no other rules.
I personally have had more smoke blown up my ass by partners that are developing products for me than I care to discuss. But I have found a solution that I desperately want to share.
A developer is the most important stakeholder in your business. But never have that person develop your product. There's a serious conflict of interest there. If you can afford to, hire one as CTO to handle your development work. Their role is to understand the product, assist with development of the product specs, create requirements documents, assist in development of developer contracts, and critically KEEP AN EYE ON THE DEVELOPER BUILDING THE PRODUCT. If you're cash poor, partner with one for equity.
Considering each part of the developer partner's role, understanding the product is key. If he or she doesn't get it after a meeting or two - LOOSE 'em. They never will get it and can't help you. Some will actually argue that features are needed or not needed based on their $12.95 how-to for startup book, when they are actually guiding you to change the product to suite their development skills. If they can't build an iFrame, they simply argue it's not needed.
Your CTO should be able to assist with development of the product. Again, after two meetings they should be able to not only understand the product but be able to offer unexpected solutions that enhance the product and not change it.
Product specs are critical when outsourcing development. The CTO developer is best suited to do this. This is an accountability checklist for the developer building the product as well as the developer guiding the project for you.
Developer contracts have been around for decades. They point to the requirements document and require deliverables to be paid. Your CTO should have these at his disposal or be able to create one. Of course you'll want your lawyer review this. Your contract with the CTO should list his duties in detail as well.
Finally, both the CTO and Product developer must meet certain personality requirements. Let's be honest, folks who couldn't possibly make it working with the public, children or with normal humans can find work and happiness securely hiding behind the glowing screen. And steer clear of the developer who is an expert at everything entrepreneurial as he read the latest $12.95 How-To build a startup business book. Appropriate folks are out there. So don't let desperation and frustration tempt you to tolerate or, heaven forbid, to partner with one of these guys. If the product is a good one, FIND A STRATEGIST TO ALIGN IT, TO ATTRACT STAKEHOLDERS, AND TO FUND IT.
A side-note: If you already have an impossible developer-partner, and you know deep inside that you do, dump him or her at any cost as soon as possible.
A good startup strategy starts with a great team that includes a developer. If you're not one, take on one as partner or hire one to guide and advise. At George J. Constance, Jr., Business Strategy Consulting, we align your business with the market, key stakeholders and away from the dangerous alliances that can kill even the best ideas.
RULE One:
NEVER make the guy developing your product your equity partner. NEVER! If you don't speak the language, be it HTML5, or java, or what the hell else, you're at his or her mercy.
RULE Two:
See Rule One, there are no other rules.
I personally have had more smoke blown up my ass by partners that are developing products for me than I care to discuss. But I have found a solution that I desperately want to share.
A developer is the most important stakeholder in your business. But never have that person develop your product. There's a serious conflict of interest there. If you can afford to, hire one as CTO to handle your development work. Their role is to understand the product, assist with development of the product specs, create requirements documents, assist in development of developer contracts, and critically KEEP AN EYE ON THE DEVELOPER BUILDING THE PRODUCT. If you're cash poor, partner with one for equity.
Considering each part of the developer partner's role, understanding the product is key. If he or she doesn't get it after a meeting or two - LOOSE 'em. They never will get it and can't help you. Some will actually argue that features are needed or not needed based on their $12.95 how-to for startup book, when they are actually guiding you to change the product to suite their development skills. If they can't build an iFrame, they simply argue it's not needed.
Your CTO should be able to assist with development of the product. Again, after two meetings they should be able to not only understand the product but be able to offer unexpected solutions that enhance the product and not change it.
Product specs are critical when outsourcing development. The CTO developer is best suited to do this. This is an accountability checklist for the developer building the product as well as the developer guiding the project for you.
Developer contracts have been around for decades. They point to the requirements document and require deliverables to be paid. Your CTO should have these at his disposal or be able to create one. Of course you'll want your lawyer review this. Your contract with the CTO should list his duties in detail as well.
Finally, both the CTO and Product developer must meet certain personality requirements. Let's be honest, folks who couldn't possibly make it working with the public, children or with normal humans can find work and happiness securely hiding behind the glowing screen. And steer clear of the developer who is an expert at everything entrepreneurial as he read the latest $12.95 How-To build a startup business book. Appropriate folks are out there. So don't let desperation and frustration tempt you to tolerate or, heaven forbid, to partner with one of these guys. If the product is a good one, FIND A STRATEGIST TO ALIGN IT, TO ATTRACT STAKEHOLDERS, AND TO FUND IT.
A side-note: If you already have an impossible developer-partner, and you know deep inside that you do, dump him or her at any cost as soon as possible.
A good startup strategy starts with a great team that includes a developer. If you're not one, take on one as partner or hire one to guide and advise. At George J. Constance, Jr., Business Strategy Consulting, we align your business with the market, key stakeholders and away from the dangerous alliances that can kill even the best ideas.
Friday, June 19, 2015
We're adding In-House Development to Our List Of Services!
The best lessons are the ones that burn the most. My latest is a real doozy.
I was recently put through the ringer by a developer who insisted I create detailed requirements documents for every freakin' thing on my proposed site. How to login, what to data to collect, and what message to display when something went wrong. After a year and half of not getting anywhere, aside from really neat requirements documents, I fired the developer and went with another guy. The new guy didn't require a single document from me. He looked at images of what I wanted, asked I annotate some and took notes. A few weeks later he delivered a pretty close working beta that we used to fine tune the next set of notes he took.
Here's the difference, new developer asked why would I waste time developing such detailed requirements when he, like most developers, was going to use well-designed and well-tested plugin from a library of features, login included. He then showed me samples that allowed customization and included features neither one of us considered.
Bottom line and lesson I took, was find a developer who thinks like a startup. New guy wasn't interested in process, nor paranoid about finger pointing later. As a service-oriented developer, he took responsibility for documentation, a few hand notes and a drawing in this case, upon himself and started work immediately. It took us an hour to get requirements down and 5 weeks to deliver.
I've added new guy to my arsenal collaborators and now offer development work for your startup or growing business. From concept through web development, marketing and sales, we deliver. And we align all of this for maximum efficiency - saving you money and getting up and and running in a fraction of the time most others can.
So call us!
I was recently put through the ringer by a developer who insisted I create detailed requirements documents for every freakin' thing on my proposed site. How to login, what to data to collect, and what message to display when something went wrong. After a year and half of not getting anywhere, aside from really neat requirements documents, I fired the developer and went with another guy. The new guy didn't require a single document from me. He looked at images of what I wanted, asked I annotate some and took notes. A few weeks later he delivered a pretty close working beta that we used to fine tune the next set of notes he took.
Here's the difference, new developer asked why would I waste time developing such detailed requirements when he, like most developers, was going to use well-designed and well-tested plugin from a library of features, login included. He then showed me samples that allowed customization and included features neither one of us considered.
Bottom line and lesson I took, was find a developer who thinks like a startup. New guy wasn't interested in process, nor paranoid about finger pointing later. As a service-oriented developer, he took responsibility for documentation, a few hand notes and a drawing in this case, upon himself and started work immediately. It took us an hour to get requirements down and 5 weeks to deliver.
I've added new guy to my arsenal collaborators and now offer development work for your startup or growing business. From concept through web development, marketing and sales, we deliver. And we align all of this for maximum efficiency - saving you money and getting up and and running in a fraction of the time most others can.
So call us!
Thursday, June 18, 2015
Entrepreneurial Course at MCC
As a business strategist, I charge $210 per hour. Not the best option for most cash-strapped startups. But because I know a few of them, like Satto Technologies, may have really high potential, I tend to let the hourly rate slip for the first few causal meetings. Great way to screen potential clients and to offer help to some folks who just need it.
I still offer these casual meetups at cafe's and co-working spaces. But I've also added a new strategy - I'm teaching a 2-day weekend course on entrepreneurialism at Manchester Community College's Viscogliosi Entrepreneurial Center. Great way for me to meet and help a large number of startups and save them a great deal of money.
So, if you have a startup that's struggling or considering starting one, I'd love to hear all about it, share my insights and offer resources.
I still offer these casual meetups at cafe's and co-working spaces. But I've also added a new strategy - I'm teaching a 2-day weekend course on entrepreneurialism at Manchester Community College's Viscogliosi Entrepreneurial Center. Great way for me to meet and help a large number of startups and save them a great deal of money.
So, if you have a startup that's struggling or considering starting one, I'd love to hear all about it, share my insights and offer resources.
BUSINESS The Entrepreneurial Sequence for
Business Start-Ups
CRN 20802 | Fee: $165 2 sessions, Saturday & Sunday | 7/25-7/26 10 AM-4 PM | MCC on Main
Instructor: George Constance
For full course description, see page 47.
https://www.manchestercc.edu/wp-content/uploads/2015-Summer-Credit-Free-Catalog.pdf
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