Why early stage companies should not spend time thinking about differentiation

There exists a vast body of knowledge to support those starting  a business. In this mass of knowledge, each entrepreneur must apply discretion and balance in order to adopt and utilise that which is peculiar to their line of business.

While general business knowledge requires that we determine beforehand what differentiates us from competitors, I was quite fascinated when I read this post (by Daniel, an MBA candidate at Stanford Graduate School of Business) which basically  states that in certain situations, determining that differentiation is not our job as entrepreneurs....(think) "you are not your customer".
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Know your competitors and know why you’re different. Seems like a simple enough truism in business. Except, in early stage companies still searching for traction, this thinking can quickly cause you to spend time on the wrong things.

I was sitting in a meeting the other day discussing a sales test we wanted to run for a new product offering. We quickly outlined the product offering, the target customers, and the specific problem we could solve for those customers. Then someone asked the next logical question: “How are we different from companies A, B, and C who offer something similar to what we’re proposing?”

The team proceeded to spend the next 30 minutes posing answers to this question. As I sat and listened to the discussion, I couldn’t help but think it was a useless exercise for a product offering with no traction and for a sale we had never yet attempted. Nobody in the room REALLY knew the answer to why our product was different and it wasn’t going to emerge from conversations within the walls of the building.

There are two reasons why spending time thinking about differentiation is a waste of time:

In large, fast-growing markets, there’s plenty of share to go around.

Most startups operate in newly developing markets that are growing fast. In these scenarios, differentiation typically takes a back seat to simply solving a really important customer problem and having a team that can execute on acquiring lots of customers with that problem quickly. In early stage companies, traction IS differentiation. The winners acquire more customers faster than the losers. In short, there’s plenty of market share to go around, so spend less time worrying about how to steal it from your competitors.

In uncertain environments, those who learn faster from customers win.

You might say: “But, in order to acquire customers, we need to describe why we’re different than all the other companies trying to sell them the same thing.” This may be true in some conversations, but a good sales team will figure this out quickly after trying to sell to a few potential customers. Don’t spend time attempting to guess at what differentiates you. Even more importantly, don’t spend time forming a product roadmap that creates differentiation before trying to sell what you currently have to customers. Instead, go try to sell the product and then build the things that are preventing customers from buying. In short, customers will tell you in the sales process if you’re differentiated. It’s more important to learn quickly from customers and adapt to meet their needs.

Next time you’re in a meeting and someone brings up the topic of differentiation that’s not based on direct feedback from customers, stop the meeting and force everyone to go sit in on a sales call or try to sell the product. You’ll likely find that differentiation is unimportant or that your hypotheses about what makes you different were wrong all along.

Work Life Balance; Why you're not balancing

Work-Life balance for most professionals has become a mirage; we've heard of it, we understand its importance, but we never seem to get to that point of perfect balance. While some have decided to quit trying, many of us are still very much interested in having that balance for varying reasons.

The not-so-good news is that work-life balance can never be achieved in the way most of us perceive it. The good news however is that, with better understanding and a little tweak in perspective, work-life balance is something we can all achieve easily.

When most people think about work-life balance, they think of a situation in which they get to devote equal amount of time to their work and their family. This is the first of two misconceptions about work-life balance. Firstly, work-life balance is not trying to share your time between your work and family, there is much more to it.
There are five different sections that make up our lives, two of which are Work, and Relationships(family falls under this section). The other three components are Health, Spirit, and Interests. Therefore when we think about work-life balance, we are trying to create a balance between;
*What you do for a living
* The people that matter to you
*The state of your physical and mental wellbeing
*Your beliefs and a sense of commitment to something bigger than you
*Your interests, likes, hobbies, and passion.

The second misconception, which is what makes work-life balance seem unattainable, is that we need to devote an equal amount of time to all these areas of our lives. This, as you most probably have found out, is absolutely impossible. What then is the whole balance thing about?

Actually, work-life balance is less about making the remaining four sections of your life compete with your work for your time, its more about making "small investments" in the right place. Its less about taking long trips and family vacations;its more about making sure that the little things gets done.

A lesson from my social media class says "one minute everyday is better than 10 hours on Saturday". Work-life balance is achieved using this same principle. Forget the cliches (plan your day to perfection, set goals, prioritize etc) and focus on what really matters. Humans will always live as humans, so there is no point adopting a robot culture. To achieve that balance we desire, we simply have to ensure that we make those small investments in the right places. In context of the different sections our lives here are examples
* Smile even after a tough day, a broad daily smile is better than a laughter filled 2-day vacation.
* A 20 minute workout every morning is better than 5 hours at the gym once a month
* Listen to a sermon on your way to work each morning, instead of trying to squeeze out time for a 3 day retreat.
* Carve out a nice article from your work notes for your company newsletter, instead of hoping to complete that novel when you retire.

The whole idea of work-life balance is hinged upon the need to ensure that other areas of our lives do not get neglected due to the pressing demands of the work area. Therefore, the important thing is to make sure that on a daily basis, we take advantage of every opportunity to give expression to those other aspects of our lives. This will not guarantee a perfect balance of shared time between sectors, what it guarantees rather is a well rounded, happy, and less demanding life; the life of a human.

Here's How To Value Your Business

Understanding business valuation is an essential piece of business start up information that you need to learn as an entrepreneur. If you are considering starting a business or purchasing an existing one, you need to understand how to evaluate the value of a business, and here are a few things to consider about business valuation.

 

There are many different methods that you could potentially use in order to value a business. All of them have some legitimate points and a few weaknesses. Essentially, the value of a business is what someone else is willing to pay for it. Therefore, there is no hard and fast rule when it comes to valuing a business. You have to take several different approaches and weigh them against each other to come up with the closest thing to market value.

Book Value

One of the simplest methods of business valuation is using the book value. This is also sometimes referred to as net worth. With this approach, you are simply going to total up the assets of the company and the liabilities. You are then going to subtract the liabilities from the assets of the company. The value that you are left with is the value of the company. While this strategy is very simple, it leaves out a lot of other variables. For example, you are not taking into consideration the human capital or projects that you have in the works. 

Capitalization of Earnings

Another method that you could use to value a company is the capitalization of earnings method. This method is going to take a hard look at how much the company has earned in the past. You might look at a certain period of time, such as how much was made during the last fiscal year. You would then use a capitalization rate to determine how much the business is actually worth.

Economic Conditions

When you are evaluating the value of business, you are going to need to take a look at economic conditions. Most reports that come up with a business value start out by summarizing the current economic situation. During a good economy, the business is going to be worth more than it is during a down economy.

Total Approach

When you are trying to come up with an accurate value for a business, you are going to need to look at all of the different factors involved. Instead of looking only at the liabilities and assets, you need to factor in the employees, the patents that the company has, and anything else that could affect profitability.

While business valuations might not be at the top of your priority list as a small business owner, it is an essential component that you must understand...if you are really thinking long term. If you want to take your business into the big leagues, learn what the big guys know.

To learn more about the world of business finance, you can visit www.finweb.com 

Thanks for taking out time to learn via this platform. If you have enjoyed this post, please share it with your friends. If you haven't, please let us know exactly how you feel using the comment section.

Cheers to your success

DON'T UNDERESTIMATE THE CASUAL MEETINGS

By: Adam Callinan

 

Building a strong network can be quite an art, one that is often built over years of trial and error, largely resulting in learning through many mistakes.

There are, however, an abundance of opportunities to garner help, connections and support from many of the people around you or that you have the chance to casually meet. You just need to open your eyes and learn to step outside your comfort zone to take advantage of these opportunities.

Here’s the deal: You have absolutely no idea who the person that you just met and are casually talking to knows or to where their experiences may lead. For example, I recently had a casual breakfast with a friend who brought another friend along that happened to live near me. There wasn’t a real purpose or premise for the breakfast aside from 'we live close by and should just know each other'.

Shut up and listen. It turns out, after an hour or so of listening -- note that I didn’t say talking -- I learned he’s been outrageously successful, having built and sold multiple behemoth companies. He's effectively taken over three struggling public companies as the CEO and completely turned them around, making them super profitable. I had no idea prior to having breakfast with him. Who do you think he knows or is connected to, aside from everyone you could imagine?

It’s a good idea to treat everyone that you meet as if they’re the most important person ever. Yes, there are major social benefits to this mentality, but remember that you only get one chance at a first impression.

Look local. Whether you’re building a new business or working inside one that is already moving along, you have no idea how many people you are connected to through people that you see and interact with constantly, largely because they’re casual interactions.

Are you in medical sales and trying to land that top doctor? I bet one of your neighbors knows him or her personally and you have no idea because you’ve never cultivated the relationship or, even more simply, just asked.

I’m not suggesting that you go door to door through your neighborhood and pester your neighbors for their contacts, but spend the time to better know those that you see and interact with regularly. If you have a solid relationship with them, don’t be afraid to ask for help or connections. Good people have a natural tendency to want to help other good people.

Garner respect. It’s also important to reiterate that you can’t ask someone for help or a connection that you don’t have a relationship with. Well, let me rephrase that -- you can but it won’t work and you’ll permanently burn that bridge. It’s really one of the most common mistakes new networkers make.

You must build trust and connection with the person first, because you need them to want to help you and trust that you’re not going to embarrass them when they introduce you to someone. If you are, however, focused on creating real relationships that are built on respect and have the potential to benefit both parties -- even if that’s just enjoying the interaction or from helping you -- you’ll be amazed at where your relationships can take you.

7 TIPS TO GUIDE YOUNG ENTREPRENEURS

By: John Pilmer

The world needs new entrepreneurs. Entrepreneurs create jobs, lift the standard of living, usher new technology into society, and keep competition alive in the marketplace. Starting a business is difficult, and it’s crucial that the next generation has as much ammunition as possible. We are all relying on you to carry on the proud tradition of innovation.

 

As the CEO of a successful startup myself, with decades of experience launching prosperous companies, I know what it takes to make it. If I could go back and give my 20-something self a bit of advice about starting out as an entrepreneur, these are the seven tips I’d start with:

1. Passion. You will fail. That is part of the game. Your failures are most likely to lead to success if you get involved with something you believe in. Starting a business just for its own sake will leave you directionless, burned out and ultimately, back where you started. Choose an interest that you can be passionate about. Marrying charity to traditional business models may be a great way to combine the things you – and potential consumers – care most about.

2. Define your market. You’ve heard this before. It’s one of the most common mistakes that entrepreneurs make. Go with something that makes sense for your scope. If you’re a small startup and still a student, staying local or targeting fellow students might be the best direction. The Internet gives us almost infinite reach, but it’s vital to narrow your market down to what is realistic, and stick with those who have a reason to be interested.

3. Price point. Risk taking is important in any new business venture, provided that it is sensible. Consider providing your product or service at the most basic level possible (also called minimum viable product). A small investment up front can hook new customers/donations before risking more money. Your target defines the ideal price. Survey your defined market and adjust accordingly. You can always reevaluate your prices as you grow.

4. Be honest. This advice applies to yourself, your employees and your customers. Be honest about what you can commit to your business. It doesn’t do any good to over-extend yourself when in truth; you don’t have the cash or the hours to commit to a project. Be honest about what your partners can expect from, and what you expect in return. And be honest with clients. At PilmerPR, our #1 rule is “First be good, then talk about it.”

5. Utilize, but don’t over-use, social media. Young people are always eager to jump online, and that’s not a bad thing. But it is important to think carefully before plastering marketing materials on the Internet. Social media is obviously a powerful tool. Focusing it on your business can get word out quickly and cheaply. That said, be careful not to put all of your eggs in the online basket. Experiment and measure results, then constantly evaluate and decide what is working, and what you are wasting resources on.

6. Don’t forget PR. Traditional and online press relations can yield coverage that has longer shelf life and costs less than advertising. Think about what makes your product new, interesting, and relevant. Then, talk to the media about it. You might get great reviews, mentions on blogs, or even appear on news segments. Many media outlets have sections dedicated to people in the community doing outstanding things. Even an article in your campus newspaper can be a valuable source of publicity.

7. Look for mentors. The beginning of any venture can be exhilarating, frustrating, liberating and terrifying all at once. Remember, although younger generations can be more tech-savvy than those who have been in business for years, there are still basic principles that are refined by experience. Many communities offer networking opportunities for entrepreneurs young and old. Take advantage of this, and you may be surprised at the wealth of knowledge your colleagues have to offer.

These tips won’t earn you certain success, but every bit of knowledge you can gather before you begin your entrepreneurial career can help you avoid serious mistakes.

3 MUST-TRACK METRICS FOR BUSINESS SURVIVAL

"Businesses are separate legal entities". When most entrepreneurs hear this, they don't think beyond "...yes, my business can sue or be sued" however, there is more to the statement than meets the eye. Having looked deeply into it, I have uncovered something even more powerful.

Every human being is born with a survival instinct. We do not need to be lectured on the need to breathe, eat, or create value to get money, these things are found out almost naturally. To continue to exist and live well, we need to make sure we breathe, eat, and create value.

In the same vein, businesses (as intangible persons) also needs to survive by making sure that it breathes, eats, and create value. These three components are vital to business survival and growth so every entrepreneur must pay close attention to it. So what does a business breathe, what does a business eat, and how does it create value? What  are those metrics you need to monitor to ensure your business doesn't die? Here.

1. CASH-FLOW: Cash is king, and even more importantly, cash is air. If you have a startup or you run a business, you will agree that everything revolves around cash; thus it is referred to as the air of the business. With enough cash, the business lives, with no cash, it dies.

Because  cash-flow is so important, the first metric every entrepreneur must monitor closely is the cash-burn rate. The cash burn rate tells you how long before your business will run out of cash. It details how much cash you have available, the biggest bills you must pay  and when the payments are due.
If you have more than a year's worth of cash in the till, you are in good shape. If you have between eleven months and three months before you run out, you should be getting nervous. And if there's less than three months, you have a cash crisis that will require a big financial infusion, huge layoff, or an orderly shutdown.

2. CUSTOMER BASE: Every business feeds on (or off) its customers, and every customer is important. No matter the industry, every business is designed to sell something to certain people. So if there is no one (or too few) to sell to, such businesses are on the highway to demise. It is therefore highly important for businesses to track the growth of their business through the Customer-growth monitor.
The customer-growth monitor tracks the growth rate in number of customers and revenue. It details the number of users of your product and  how frequently they use it, how many of them are recommending your product to people in their network, how many of them are paying for it and how much they shell out.
Your customer-growth monitor is flashing a green light if more people are using your product frequently, if many of them are recommending it to their network and if an increasing proportion is paying a higher price for it. If customers are not recommending the product and very few are willing to pay for it, find out why and change your product. And if you’re not getting more customers or they’re not paying for your product, then you need to take more radical measures.

3. PRODUCT: It is the job of every business to create value and solve problems; that is how money is earned in return. The value being created can either be a product, a service, or both but whatever it is, it has to give people a compelling reason to give money in exchange, which is why every business needs a Product-development tracker. The product-development tracker lets you know whether you are on schedule for building the right products. It details the timeline for your products, whether your team is meeting its milestones and if not, what’s holding things up and the feedback you’re getting from
customers about the prototypes you're releasing to them.
Your product-development tracker will flash green if you are ahead of schedule and customers are giving useful feedback on the prototype. If you are falling behind on the
schedule and not getting customer feedback on the prototype, you're in trouble -- and should investigate why and make changes

Its vital for every businesses to pay close attention to these metrics. They should be monitored at all times, and not at the end of the year. Every other thing can wait till then but not these.
As Peter Cohan puts it, put them on your business dashboard. This will help you to spot danger signs and respond to them in timely fashion.

Cheers to your business' success

ARE BUSINESS PLANS REALLY NECESSARY?

Whenever we have those ‘light bulb’ moments and great ideas pop into our heads, conventional business wisdom teaches us to scribble down the idea as fast as we can; after which we take out time to examine the feasibility and viability of the idea. When this is done, we are then required to devote our resources into the creation of a business blueprint i.e. the business plan. This plan is supposed to describe (in detail) the main idea, the business model, the market, and the operational steps necessary to convert the idea into a successful business within a specified time-span. Not only does the business plan show the roadmap, it is also said to be a vital tool in raising finance and getting the necessary support and resources to execute the business idea.

However, my experiences as a business owner and a SME consultant have engendered the need to question this wisdom. I have had many entrepreneurs ask me questions such as: are business plans really needed, do they work, is there something better, etc. In an attempt to provide answers to such questions, let’s examine the value of the business plan in light of its uses as a roadmap and a tool for raising finance.

To start with, we live in a world of fast paced change. The dynamism of the modern day business environment has obligated businesses to be highly flexible in structure. This has led some to argue that the business plan is an obsolete business practice due to the need to constantly change business strategies.

However, one factor which is common to today’s successful businesses is their ability to change with the times while remaining true to their essence. The business plan is more or less a long term plan built around certain core ideas and values which serve as the very essence of the entity. This makes it a necessary document even in a highly volatile business environment. Certain elements may change along the way, but through these changes, the business plan helps to monitor the direction of the business in line with set standards.
Also, we should consider the fact that in using the business plan as a roadmap, the entrepreneur is forced to think through his idea bit-by-bit until he arrives at the workable model. This is an invaluable experience in the entrepreneurial journey.

On using business plans as a tool for raising finance, I have found the success rate to be relatively low. To most investors, the business plan is just a bunch of assumptions. They would rather have the business model canvas and a proof of concept. With these, savvy investors can make their decision on whether or not to invest. The business plan might be required for clarity, but it is not a vital requirement.

In addition, the idea of bankable business plan is outdated because entrepreneurs are continually advised not to start businesses with bank loans for obvious reasons. Moreover, banks will rather provide loans to ‘proven businesses’ and not ‘risky start-ups’.

Judging from the two issues raised, it is safe to conclude that although the business plan is of decreasing prominence both in operational and financing matters, it remains an essential document for entrepreneurs especially at the start-up stage.

VERDICT: The business plan is necessary mainly because it helps to fine-tune ideas and arrive at a workable business model. Moreover, you are better of with it than without it.

Do you agree or disagree? Kindly, state your thoughts in the comment section below.