A Startup Guy

Image by Nathan T. Baker via Flickr

The second Nashville Startup Weekend (NSW) will take place from October 9-11. I was fortunate to have taken part in the first NSW. Our team developed an iPhone game named Assassins. It was the only startup that actually ended up launching. However, the experience was fantastic for nearly everyone who participated in the event.

One of the coolest things about NSW is that you get the full experience of the startup. Some groups imploded, due to legal issues with their product or personality conflicts. Some found they simply needed way more startup capital than they could raise. And some simply required more of a commitment from the founders than they were willing to give. Every company had to deal with figuring out a revenue model, product development and marketing plans. All of this is stuff that every startup company deals with. And it was a great learning experience.

Unfortunately, I won’t be able to attend this year’s event (my wife and I are expecting our second litle startup), but many of the same great people involved in last year’s event are involved in this year’s. Anyone interested in startups should attend.

There’s this image out in the world of the lone entrepreneur anonymously toiling by himself, carving the next great company out of the wilderness with his bare hands. I admit I’ve held that image myself. I think it comes from the stories we hear as kids of Americans being rugged individualists.

But the image isn’t really true. People who accomplish great things, including business startups, do it with help. Lewis had Clark. Hewlett had Packard. Robert E Lee had Stonewall Jackson. Larry Page has Sergey Brin (and Eric Schmidt).

You don’t have to have partners, but you need someone to talk with. Someone you can bounce ideas off of. Someone to brainstorm with. Someone to be an advisor. Someone to call you out when you do dumb stuff. I think author Keith Ferrazi has a new book out about this, Whose Got Your Back.

I spent years trying to go it alone, without much help, advice, support or feedback. It sucks. Don’t do it that way. As I’ve considered this situation I’ve come to realize that I’ve got to get out in the startup world. Mix it up with the upstarts out there. (I really want to name a startup “The Upstarts”!) Find people I can collaborate with, exchange advice with and, sometimes, just shoot the bull with. So I’ve created and scheduled an event named Startups Over Coffee. it’s similar to groups like Geek Breakfast and Startup Drinks, and we’re going to meet at 9am on Saturday, July 11 at Fido coffee shop on 21st Avenue in Nashville. If you’re into startups and in the area, come on by. We’ll be meeting and mixing with other startup enthusiasts. Come share some ideas and grab a great cuppa joe. Who knows what might come out of it.

We’ve already got some smart people signed up for the event and I”m excited to see what happens.

In local startup news, knowledge sharing network Moontoast has secured a $780,000 round of financing, accoring to Milt Capps of Venture Nashville Connections. Moontoast launched at the South by Southwest Interactive event in March. They are currently undergoing a private beta, according to their website, which is allowing them to gauge user feedback and tweak their system, which allows users to find and consult experts on any kind of problems or challenges they may be facing. According to their site, they expect to relaunch publicly in August 2009.

Moontoast recently announced the appointment of Stephan Collins (formerly of DoubleClick and Juris) as acting CEO and Marcus Whitney (former parter at Emma and founder of Remarkable Wit) as Chief Technology Officer.

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I’ve been thinking a lot lately about business and product ideas. Probably because I’ve spent a ton of time working on new ones for myself.  I wrote a post recently about how ideas are a dime a dozen. Then a few days ago I heard an episode of a podcast named Entrepreneur Myths in which the podcaster took exception to the concept that ideas aren’t worth anything. He made a valid point that a good idea is definitely worth something. I agree, but try and sell one and you’re probably going to be disappointed. As I said before, it’s the execution of a good idea that pays off.

The hard part isn’t coming up with ideas. I’ve got a friend who keeps all of his ideas in a spreadsheet. He’s literally got hundreds. In the last week, I’ve started filling a page with a good number of ideas myself. But what makes up a good idea? The criteria for a good business idea can be both general and personal. Here are a few.

General:
Your idea should fill a need. There are a lot of product and service ideas that are cool, but they’re a solution in search of a problem. Find a pain point for people and then solve their problem.

The idea must appeal to a sizable audience. There are a few products that you can get rich off of by selling just a handful. But for the rest of us, our products need to appeal to a large group. If I come up with a widget that solves a problem, but only 10 people have this problem, it’s not a good basis for a business.

Your idea must be worth paying (enough) for. Say you’re sick of Twitter’s fail whale and you decide there’s a need for a reliable Twitter-like service. But you decided to actually have a revenue model; you’re going to charge people $5 a month for it. It’s unlikely that you’ll succeed. Most people just aren’t willing to pay for what they can get free, even if it’s a bit more reliable. Or if you develop a new widget that truly solves a problem millions of people have, but the cost of development and production is $45 million and your marketing plan projects you can sell 5 million units, but only if you charge $2.50 each. Bad idea.

Personal:
Your idea should revolve around something you have an interest or passion about. This isn’t a hard-and-fast rule, but it’s a great idea. You’re going to be spending LOTS of time with this idea. Make it something that can hold your attention. I’d have a hard time doing a bank startup. It just doesn’t interest me.

It should be something you have (or can get) the money to start. I think a healthy fast food restaurant is a great business idea. Someone’s going to get rich on this idea some day. However, it won’t be me. The cost of startup is too steep for me to afford and I refuse to borrow the money.

You may have lots of great business ideas. That part is not nearly as hard as getting a few good business ideas that are right for you.

What are your criteria for a good business idea? What are your criteria for a good idea for you?

One of the best pieces of advice I ever got before launching a business was, “Be sure you have something to sell.” Makes sense. And yet so many Internet entrepreneurs ignore this simple advice.

I think part of the problem is that our point-of-view has been distorted. We often see things through the lens of successful companies like Google or, worse yet, Twitter. Google made money from search – LOTS of it. Twitter still has no discernable business model. And yet they’re rolling in cash. So lots of startups take the stance that they’ll just launch and figure out a business model later. Or figure they’ll get rich from selling ads like Google.

Here’s the truth of the matter. Once you launch, you’re going to be insanely busy. If you can’t figure out a business model in the calm of business planning, you’re not likely going to have time to figure one out in the midst of startup chaos. You need to have a plan on how you’re going to separate your users from their cash. That plan may (probably will) change somewhat after you launch. But you need something to start with.

Even Google couldn’t survive on search. They had to institute selling ads to make money. They are now, essentially, an ad company that uses search and information organization to draw in attention for those ads.

For many startups, the “punt” answer is to sell advertising. Take it from someone who learned the hard way. There is lots of money in online advertising, and most of it already goes to just a handful of companies. You must have thousands, if not millions, of visitors to even begin to make this business model worthwhile. Google succeeded at this because they were first and got it right. A handful of others have picked up enough of the leftover scraps to make it worth their while. You’re too late! It’s already a mature business that is not growing much any more. If this is your business model, STOP NOW! Revise your model to actually have something to sell.

Invest the time now to create something people want to buy. It will make your crazy startup life a little easier later.

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Recently, I’ve had several people pitch me what they term their “million dollar idea.” Of course, what they mean is their idea is so good that implementing it will make a million bucks. And, of course, being a startup guy, they’re hoping I’ll take the ball and run, make a million, and cut them in on their rightful share. It was their “million dollar idea”, wasn’t it?

The truth of the matter is, there are no million dollar ideas. I can’t think of a single idea I’ve ever heard that was a million dollar idea. There are big ideas, but that’s differnt. Ideas are actually a dime a dozen. Heck, they’re more like a penny for 1,000. Need a business idea? There are tons of websites offering them free. There are even sites like Half Bakery that poke fun at how silly most of the ideas are. There are NO million dollar ideas. There are, however, million dollar (and BILLION dollar) execution of ideas!

It’s how well you execute an idea that pays off (as I recently proved). A well executed bad idea will likely not succeed, but a well-executed big idea can make you (and lots of other people) rich. So, the next time you have a great business idea, remember it’s not worth a hill of beans until you actually do something with it.

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A project I’ve been working on for the last two years came to an ubrupt halt this week. Major fail on my part.

I’ve written in the past that failure happens and is even encouraged. Failure teaches us what not to do next time, what doesn’t work, how to succeed the next time around. That having been said, it still hurts incredibly bad. When you’ve poured your heart & soul into something  you’re incredibly passionate about, and it fails, it’s devastating.

The real test, though, is will you persevere and come back for more. You can’t let it beat you. Losing this time is a failure. Letting it beat you makes you a failure. The difference is all up to you.

Me? I’ve already got a list of new projects to start on. I’m down, but never out. On to the next startup.

Have you ever heard the term “Fair Weather Fan”? Those are the sports fans who love a team when they’re up and turn on them when they’re down. Funny thing! You often see the same thing in business. My grandmother was a loyal JC Penney customer for decades. Once she was on an extended trip to visit family (4 weeks) and during that time her Penney’s credit card bill came due. She didn’t get the bill because she was away. It was all of $3.50. Just before returning home she went shopping at Penney’s and learned they had cut off her account. She had spent thousands with them over the years and they cut off her card for a mere $3.50 that was just a couple of weeks overdue. I’ve even had a utility turned off because I mistakenly underpaid my bill by $2.00. I’ve heard of banks charging customers $35 NSF fees for $0.30 overdrafts.

I’m not suggesting that businesses should let customers run roughshod over them. And I’m not suggesting that customers should shirk their agreements. But sometimes, life happens and customers have a problem. And a little flexibility and loyalty on the part of a business could go a long way to earning long-term customer loyalty. And in this day and age, customer loyalty is getting harder and harder to find. In part, because it’s not returned by companies. I’ve heard the phrase “customer loyalty” used in business discussions for years. I can probably count on one hand the number of times I’ve heard businesses discuss loyalty to their customers.

So, how do you institute loyalty to customers? Here are a few ideas:
1. Love your customers: This one sounds a bit silly, but there are actually many businesses out there who don’t really love their customers. They realize they need customers, but they could care less if you walk through the door or if it’s someone else; just so long as a warm body comes in. I’d rather go somewhere they’re genuinely happy to see ME. In my town there is a great store just off the downtown square named The Country Gourmet. They LOVE their customers. They know us by name and they even save bubble wrap for my 4-year-old son who loves the stuff. I visit them often just to say hello… and I almost always spend money, no matter if I was planning to or not. I just love them!

2. Allow team members to use their judgement: If you can’t trust your team’s judgement, why did you hire them? Allow them to determine (at least in reasonable cases) if something should be handled a different way. “Uh, boss, are you sure we want to cut this long-time customer’s credit line off over $3.50?” Most of these issues arise due to strict corporate policies. “Company policy is….” If this statement comes up in your business frequently, you have a problem. Some company policies are necessary. Many are simply a crutch to give employees an excuse to not make a decision.

3. Figure out what your break even point is and don’t haggle about money below that: I used to work customer service for a major national book distributor. We had a standing rule there, if the customer is resquesting a credit under $5, just give it to them. The hassle factor, time needed to research issues and aggravation factor for customers cost way more than five bucks. It was cheaper for the company to just resolve the issue immediately, removed a workload that would bottleneck more serious issues and simply made the customer happier to just handle it. “You got a defective paperback in your shipment? Nah. Don’t waste money returning it. I’ll just send you a credit.” Problem solved. Compare that to my utility issue. I made a small error, and over $2 they cut off my utility, made me go through the aggrivation of aruging with them over it, made me wait to have it turned back on, then charged me a $40 reconnect fee. If utilities weren’t a monopoly, I’d have fired them that day.

How does your company practice loyalty to customers? Share your tips and ideas in the comments section.

Setting a price for your products or services can be a real challenge for entrepreneurs. What’s a good price that will attract customers, but still deliver an attractive profit for the business?

In past decades it wasn’t quite as much of a struggle. Businesses would frequently just use simple formulas. Cost plus x% for profit margin gives you a price. Want to be the cheapest? Just price your product x% lower than your competitors (without taking a loss). Formulas can still be extremely helpful, but we have a myriad of additional options, features, prices, sizes, colors, flavors and even peer pressures to consider that weren’t as much of a factor in the past.

This is the challenge I’m facing right now. I’ve got a product I designed a year ago and put on the shelf, ironically enough, because of pricing issues. My profit margins appeared to be just pennies if I was going to price my product competitively. However, it’s such a fun product that I’m revisitng the business model again. Has anything changed? Yes, me! I’ve come to realize that I’m offering something different, so I don’t necessarily have to reflect the pricing structure of the big, established brands. In fact, not doing so will help to differentiate my product even further.

Another option would be to find a way to bundle my new product with some other product(s) that are inexpensive for me to buy, but carry a higher perceived value. We used to do this all the time at another company I worked for. We could package our products with cassettes or CDs that we bought for less than $1, but carried a list price of $9.99 & $14.99. Suddenly, our $20 product was worth $40 or $50 as a package, but our cost was only a couple dollars more than the single product alone.

So, with a couple more hurdles to leap, it looks like I may be able to finally roll out this fun product. So, what’s my pricing strategy going to be? I’ll be using both of the above strategies – x% markup initially and find items to bundle to improve value and profitability. Wish me luck!

One more thought, I’d rather price a bit to high initially than too low. Why? It’s harder to increase your pricing without a good reason for your customers – especially if your product is fairly new (see iPhone). Permanent price reductions (not temporary discounts) are always welcome by customers.

Do you have a set pricing strategy? Feel free to add a comment and share it with us.

Dyson image via Wikipedia

I love great products. I don’t mean products you want to tell people about, but products you HAVE to tell people about. I felt that way about the iPod Touch when I first tried one. I felt that way about my TiVo when I got one. You don’t find many products like that, but every once in a while one comes along.

My wife and I recently purchased a Dyson vacuum. It was expensive and, truth be told, I didn’t really want to spend the money on it. (Thankfully, we’d just received payback on our interest-free loan to the government. Read: tax return.) I’d read lots of great reviews online, but couldn’t imagine a vacuum being worth $500. Then I used it. Wow!

It cleans better than any vacuum I’ve ever used. It’s cleaned our house, removed tons of dust we thought we couldn’t get rid of – ever, and the house even smells better. Now, I can’t imagine how we did without it. It’s so great, I think it’s worth three times what I paid for it. (I couldn’t afford it at that price, but it’s worth it.) If you don’t own one, save y our money and buy one. You won’t be sorry!!

Here’s the challenge for the rest of us. What can you (I) do to make your (my) product a Wow! product? Talk to your customers, listen to the marketplace, really look at your product and think about what would make it zing. Don’t let good be good enough. A Wow! product is the best marketing you can invest in. Give people something to talk about… something they HAVE to talk about.