I'm not always a big fan of high profile entrepreneurs such as Marc Andreesen. Many times, in my experience, they make blanket statements about specific things such as business models, management teams, etc that are often misunderstood by the entrepreneurs. For example, the statement below about CEOs and who should run a start-up is too general. These types of decisions have to be made based on a number of factors that can't be generalized. At the same time, this particular article by Sarah Lacy is pretty interesting and is an easy read.

(Posted on TechCrunch, June 5 2009)

Marc Andreessen and Ben Horowitz are launching their much-anticipated $300 million venture fund this evening, aptly called Andreessen Horowitz.

The fund will make investments of $50,000 to $50 million (yes, $50 million), but will generally focus on early stage opportunities. And here’s a fun fact: they don’t currently have a website, and apparently they aren’t sure they will have one in the future. For now they’ve reserved a16z.com for use if they do ever launch a site. Basically, if you don’t already know Andreessen or Horowitz, or know someone who knows them, getting in contact with them is going to be…difficult.

Andreessen has long been one of my favorite people to interview, because he is tapped into nearly every hot company and isn’t afraid to answer questions directly. That is, when you can actually get him to sit down with you and a camera, notepad or tape recorder. But last week, he had to chat it up with the press since he and long-time partner Ben Horowitz were announcing their the new venture fund. This is not going to be your typical venture capital firm.

For one thing, there’s that $300 million fund size. That’s pretty big for a first-time fund and gargantuan when you consider there are only two general partners, Andreessen and Horowitz. It’s big enough that some people didn’t think they’d be able to pull it off.

How did they? Well, did we mention Andreessen was one of the partners? Heard of the browser? And the lesser-known Horowitz is no slouch. He was the CEO of their second venture, Opsware, which sold to Hewlett-Packard for $1.6 billion. As instant as Netscape’s success may have been, Opsware was the opposite, a hard post-bubble slog.

It’s too early to tell how well Andreessen’s third company, Ning, will do, but Andreessen and Horowitz’s angel stakes in companies like LinkedIn, Delicious and Twitter show their savvy at picking good teams and how much other entrepreneurs in the Valley value their advice. For instance, Andreessen is the only independent member on Facebook’s tiny board of directors. And investors were impressed by the 45 or so companies that Andreessen has independently invested in over the years. Just one, TipMobile, has gone under so far.

So, that’s how they raised $300 million in the worst fundraising environment in 40 years, here’s why: Andreessen says there are only fifteen companies started each year that matter. By “matter,” he means they’ve got the potential to generate $100 million year or more in revenues, and those companies wind up making up 97% of the aggregate industry returns. The firm wants the flexibility to invest as much as they want in those fifteen names, whether it’s $500,000 or $50 million per deal. Considering the two have run big teams and small teams over their time at Netscape, Opsware and Ning, there’s no logical reason they should tether themselves to just one stage of investing.

Like Founders Fund and unlike most everyone else, Andreessen and Horowitz are more comfortable investing when an entrepreneur wants to stay the CEO. Hiring a “grown up” CEO always sounds like a great idea, but almost always hastens a company’s failure, Andreessen argues. There’s strong evidence that the biggest hits come when the founders stay engaged at a C-level position. See: Google, Oracle, Microsoft, Hewlett-Packard, Amazon, Apple and Facebook.
Another distinction: They’re not meddlers. Because there are just two of them, Horowitz and Andreessen won’t always take board seats. If they pick the right entrepreneurs, Andreessen argues they shouldn’t have to.

The whole interview lasted about an hour, and you can see many of the highlights on my Yahoo show, TechTicker, today. Meanwhile, here are five other interesting things he said:

1. Twitter and Facebook’s investors aren’t worried about monetization, but “it’s sweet” of you to. Twitter has spent about $15 million acquiring 30 million users. It’d be a no-brainer to recoup that if need be. Meanwhile, Facebook will generate more than $500 million in revenues this year—it’s spent far less than that to build the company to date. In other words, these are pretty fiscally conservatively run businesses with huge growth potential and no trouble raising additional cash.

2. Digg isn’t done. Andreessen is still bullish on Digg, citing the fact that Kevin Rose is no longer distracted with Pownce and Jay Adelson is moving to San Francisco to manage the company full-time. He thinks having both guys focused on the company will make a huge difference in the next twelve months.

3. The venture capital market should stop whining about Sarbox and other factors that are hurting their ability to take companies public. Says Andreessen, “Build Companies More Valuable and You Won’t Have this Problem.” That said, he sees a conceivable scenario where public markets are no longer how investors get returns at all. Instead, the same institutional names that used to buy the bulk of the shares at an issue, will just buy out VCs at premiums in private deals. That’ll essentially mean everyday Joes can no longer invest in high growth companies. That’s a good thing or a bad thing, depending on how many scars you have from the dot com bust.

4. At least 300 venture firms will go out of business in the next five-to-ten years.

5. Innovation and opportunities to build businesses on the Web aren’t done. They won’t be done for a long time because the Web is one of the only inventions that’s pure software, compared to computers, the television or even the railroads. That means it can completely change without having to fit into set molds. Anyone—Andreessen included—is deluding themselves if they think they know where it’s going. (In other words, don’t listen to anyone making Web 3.0 predictions.)

NEED CAPITAL - GET ATTENTION!

Aside from prayer and/or doing the moondance naked through an investors office there are only a few real-world things you can do to get their attention. Guess what? Without their attention you don't get a check. So, pay attention!

Your business plan is one of the most important tools that you can have to create buzz about your project. The Executive Summary in your plan is often the first and last section that investors will read. If your Summary is positioned and written well then the investor will have lots of questions about your business model. If not, they will most likely show you the exit. Most entrepreneurs make the mistake of making their Executive Summary a description of their business written in operational terms with piles-o-jargon. As Guy Kawasaki puts it, the "Executive Summary is about selling not about describing."

We have had much success using a simple and straight-forward approach that includes 5 key components. Although I can't guarantee that your plan will generate a check, I can tell you that these 5 components will help you position your business for investment and perhaps soon you'll be off changing the world with your new product or service.

In the next 5 blog posts I will define these components:

1. The Problem

2. The Solution

3. The Business Model

4. The Request

5. The Exit

INSANITY VERSUS CASH FLOW!

I recently was listening to a podcast of the Frank Peters show focusing on Angel Investing. The guest on his show, Permjot Valia, is an early stage investor. He has an interesting perspective on the start-up and Angel investing worlds.

He had a very interesting philosophy with regards to what financial metrics are most important in a start-up. Often entrepreneurs manage their entire business around the profit and loss statement. Permjot recommends managing from a cash flow perspective.

Here's his philosophy in summary:

- Focusing on Revenue = Insanity
- Focusing on Profit = Sanity
- Focusing on Cash Flow = Reality

Here's a good article from Entreprenuer that started with this question...

Q: Can you give me some tips on managing the cash flow of my new business?

TAKE YOU DOWN...DOWN TO CHINA TOWN!

As most of you know, I run a boutique firm that specializes in helping entrepreneurs define their start-up idea or business and be able to explain it to potential partners, employees, vendors, investors, bankers, etc. Without a doubt the most common element that our clients overlook is their EXIT STRATEGY...more specifically a COLLECTIVE EXIT STRATEGY. This is the process where all founders, partners, investors, etc. have a clear understanding of how each will exit the business and hopefully capture ROI through a liquidity event.

Here are some common exit strategies:

1. Sell the business to another party such as a competitor, strategic partner, or other business of some type
2. Take the company to the public markets
3. Don't exit and keep the business as a cash flow or life-style business

At any rate, whatever your intended plan is to exit the company you would be well advised to have detailed and thorough discussions with all shareholders prior to launching the business. Also, discuss these strategies with an attorney that specializes in exit strategies. It's well worth the expense.

Here is a great video that is brief but highlights some key points when considering an exit strategy. It's from our friends at FundFindr.tv.

READ THIS FIRST!

Well it's election day and I'm sure we are all distracted. However, I just read through this blog post from Rob James. It's a good one and he breaks down the 8 things he wishes he had been told prior to starting his business. I especially like his paragraph about business planning.

Here's a sneak peak...

3. Have a model, not a planOk, this is a bit of a ‘bum steer’. You do need a plan, but a fully documented business plan that is 100 pages long is so, um dotcom. Nobody reads those things, and at this stage, your business is changing by the day, if not the hour. The reason you have a business plan is to show that you have thought through all the issues. Good sessions in front of the whiteboard, and scribbling in paper gets the same result. You may want to have a 2 pager, but I generally find that whenever someone asks for one, I will rewrite from scratch anyway. But I can’t stress enough how important a model is. A model is just your spreadsheet plan of how you are going to make money. Not only is it good for any potential investors, but it is good for you. Because in your grand plan, you may have not worked out how to make money out of this idea yet. Well, if you don’t figure this out, who do you think is going to do it for you? The investors? Keep dreaming cowboy! Firstly, I speak to a lot of Angel Investors, Private Equity and VC’s and they are constantly frustrated by how many people come to them this way, and its a waste of time. If the VC does see the money potential, do you think they are going to disclose it to you? Of course not! They have to think of their investors. So they will try and get into the deal for as little as possible, and then they will make money from it. The model is also going to be good for you. After putting it together, you might see that you are not going to be cashflow positive for 24 months, can you last that long? How will you last that long? Or you might see that to realise a profitable business, you need 10 Million registered users, is that realistic? Believe me, you will live and die by your model - work on it often and don’t be scared to change it!

Read more here...

STAY CONNECTED!

Staying connected to helpful resources is a vital for any business person but increasingly urgent when you are a start-up. Here's a quick list of websites that may be helpful...

Try one of these sites:

Biznik: This site emphasizes collaboration and encourages members to attend local Biznik networking events.
Go BIG: Members range from entrepreneurs to investors to freelancers looking for work. It's free to sign up.

Vator.TV: This site is excellent for learning what other entrepreneurs are up to as well as for pitching your idea.
PartnerUp: Partner-Up's members include entrepreneurs and investors, as well as consultants, board members and other professionals.
Spoke: An online database featuring more than 900,000 companies for business networking or sales prospects --J.P.

Start-Up Nation: This site has it all! You can participate in discussions with other entrepreneurs, listen to podcasts, or find vendors.

A HIGH TOLERANCE FOR PAIN!

You've probably seen a news clip about the new Brazilian airline called Azul. This is the current project that David Neeleman the Founder and former CEO of JetBlue is working on. David is a very successful entrepreneur and apparently has developed a much needed high pain tolerance. If you remember JetBlue took a beating a few years ago when it left hundreds of passengers stranded on the tarmac due to an ice storm.

So, here's a guy who obviously has made some money and probably doesn't need the massive headache associated with starting a new airline. Why does an entrepreneur subject themselves to this type of experience? With crude oil at all-time highs it's not an easy time to enter into the airline travel space. So, what is it that drives this type of entrepreneur? Why not just sleep on a bed of nails, walk barefoot over hot coals, or put on your old Milli Vanilli cassette? (come on...I know you had one!)

What is it that drives us?

ITZ TIM 2 MUV 2 BIZ 2.O

I've rattled on a few times about the importance of moving your start-up from business 1.0 to business 2.0. In fact, I've even hosted a whole audio-cast on this subject and had a well respected guest speaker that rattled on about it as well. The basic gist is this...run your business like a business and not like a hobby. To do this you need to get some help. This help doesn't have to be in the form of employees. Those may come later. It may come in the form of some good tools.

So, I've decided that I will periodically introduce a tool that I think will benefit my fellow entrepreneurs. My first tool is called GnuCash. Guess what? IT'S FREE!!! Woohoo! Oh, I guess I should explain what it is before getting too excited about it being FREE! Woohoo!

GnuCash is a solid small business accounting application. It is very intuitive, which is perfect for those of us that don't like numbers. IT'S FREE!! Here are a few quick features:

• Double Entry System - which means it ensures your "books balance"
• Reporting System - It has customizable reports and graphs for your P&L, Balance Sheet, Cash Flow Statement
• Multiple Currencies
• Small Biz Accounting Features - Vendor tracking, invoicing, bill payment, taxes, etc.
• General Ledger
• Check Printing
• The list goes on...

Here's the bad news...we entrepreneurs no longer have an excuse for poorly managed financials.

Did I mention that it is FREE!!!

2 TYPES OF CHANGE - HOW IT IMPACTS YOU!

Most entrepreneurs love it when things change. That's what makes us entrepreneurs, right? If we didn't love change we would still be working for "the Man" doing our best to keep things status quo. Actually, to be more accurate, entrepreneurs love influencing change or having some level of control over how to react to change when it hits the business or industry.

There are two ways to classify change:

Cyclical Change: Neck ties get wider and then skinnier and then wider again. Hair styles get longer then shorter then longer again. 80's metal hair bands should be cycling back around soon...right? Anyway, I bet you get the idea. Essentially, things come into favor then go out of favor and then come back again.

Structural Change: Here's an example...the IBM Selectric typewriter. Is it coming back? I don't think so. How about the horse? Is the horse going to replace the automobile? I don't think so unless aliens attack us and use their advanced weaponry to render all of our machines inoperable. We've had a structural change that has impacted businesses in the past 15 years. It's called the internet.

My Point: It's important to be thinking how change impacts your start-up. What if you are working on a product or service that will be obsolete in the next few years. Paying attention to the different types of change that may be shaping your industry can improve the sustainability of your business.

Action Plan: Make a list of as many changes as you can in at least the following areas -

• Technology - what technology changes and new innovations will impact your customers, vendors, etc?


• Economic - what economic changes are shaping your industry? For example, how is the weak dollar going to impact your customers, vendors, etc?


• Demographic - what changes are shaping your customers buying habits? For example, if your customers are closing in on retirement then how will this impact their purchasing habits?

WHAT'S YOUR SOLUTION?

In my previous and magically well-written post we discussed the importance of clarifying the "problem" that your customer has that you intend to solve. This can also be stated as the customer pain that you are alleviating. This is a very important piece when starting your business. Your business plan should contain a clear description of not only the the problem that your customer has but also the solution that you are offering.

Gaining some intense clarity around these two important elements of your start-up will ensure that you are not just a solution looking for a problem. If you've spent some time identifying your specific customer's pain then you will have less trouble selling your solution and ultimately have more success in passing the wallet test.

As entrepreneurs we tend to get overly excited and often overly attached to our great ideas. When this happens it is easy to focus on the technical aspects of our product or service without enough focus on what the customer's problem truly is. However, if you think about it, our great ideas aren't really so great if there isn't a customer with a problem or pain that our business can alleviate.

Additionally, investors, partners, and vendors will be much more excited about the size of the problem than with the elegance of your solution.

WHAT'S YOUR PROBLEM?!?!

Actually, this post is less about "your" problem and more about your "customer's" problem. When starting your business, you need to begin by answering some basic blocking and tackling elements...aka...fundamentals.

Today, let's discuss FUNDAMENTAL NUMERO UNO...

THE PROBLEM: You need to clearly identify the problem that your customer has or the pain they have that you can alleviate.

For Instance:

Problem: I'm a coffee drinker but I hate truck stop or convenient store coffee.

Problem: I spend all day dialing phone numbers.

Problem: My weapon doesn't load fast enough.

Problem: I can't carry everything I need when I go out.

Problem: I'm tired of getting out of bed to turn off the TV and lights.

Problem: I'm tired of waiting in line for rides at Disney Land.

Problem: It's a hassle to try to return items I've purchased on the internet.

Problem: I have to go inside the restaurant to get the food.

Action Plan: Yes, whip out the trusty sheet of blank paper and jot down what your customers problem is or the specific pain they have that you can alleviate.

Stay Tuned: In the next post we'll address the "solution" you provide your customer.

6 POWERFUL WAYS TO MANAGE CASH FLOW! (part 2 of 2)

4. Increasing Sales. One would think that increasing sales would lead to increased cash flow. However, if you invoice your customers for a large portion of your sales, when sales increase, your accounts receivable increase, not your cash. At the same time, inventory is depleted and must be replaced. Because receivables usually will not be collected until 30 days after the invoice, a substantial increase in sales can quickly deplete your firm's cash reserves. So, yes, increasing sales can help to improve cash-on-hand. However, this will be dependent on how well you manage your receivables. (additional tip: we have many clients who have used PayPal or Google Checkout to improve their cash position)

5. Managing Payables. A key strategy in managing cash is to shoot for bringing cash into the business as quickly as possible, then hold onto your cash as long as you can by managing your payables. That means, quite simply, take as long as you're allowed-without incurring late fees or interest charges-to pay your company's bills. Remember that a bad credit history can stifle your business, so you need to protect yours. Know which vendors you need to pay first. Better yet, negotiate with some of your vendors to extend to your payment terms. Also, you have to balance this with the necessity to have solid relationships with your vendors. You want to manage your payables but you also want to have a partnership with your vendors.

6. Investing Spare Cash. If your cash flow has become stable and predictable, you can consider investing your excess cash. This is also applicable if you raise a large sum from angel investors or venture capitalists and you will not need to spend it all quickly. You can earn additional interest income, as well as have the necessary cash to dip into during tough times. Can I interest you in some swamp-land in Florida?

Here's a recent audio cast from our Start-It-Up Cafe Cast on managing your books: http://startitupcafecast.blogspot.com/2008/03/get-your-books-in-order.html

6 POWERFUL WAYS TO MANAGE CASH FLOW! (part 1 of 2)

The Importance of Good Cash Management:

Cash flow is the lifeblood of your start-up businesses. Cash comes from sales, collections of account receivables, and the sale of assets as well as loans and credit lines. On the other hand, cash flows out to meet all expenses and debt obligations of the business. The goal of good cash flow management is to have enough cash on hand at those important times such as when it's time to pay employees. This is a simple concept, yet in practice, it eludes even the biggest operations. So long as more money seems to be coming into the business than going out, many entrepreneurs do not give cash management a second thought. This leaves them vulnerable to a quick and painful death.

Learning good cash flow techniques ensures that the company always has enough cash to meet its obligations. Adequate cash helps obtain whatever funds are required from external sources at the right time, in the right form, and on the best possible terms. A shortage of cash flow could result in the loss of valuable trade discounts or, in extreme circumstances, financial embarrassment and bankruptcy.

Your start-up can increase cash-on-hand in a number of ways:

1. Collecting Receivables: Start-ups can improve their cash position simply by making certain that their billing, collections, and payables systems are operating as efficiently as possible. If this means getting help...then get help any way you can. Small businesses do not have the luxury of large accounting and collection departments of big corporations. More so if you are a home-based entrepreneur working alone. First, get your customers to pay you as soon as possible! To the extent possible, adopt the business practice of requiring up-front deposits when making sales. However, if the account payment is a receivable, then make sure that you actively manage its collection by billing promptly, aggressively following-up on overdue invoices, and quickly collecting on overdue accounts. You stand to lose revenues if your collection policies are not aggressive. The longer your customer's balance goes unpaid, the less likely it is that you will receive the full amount. Then you have to consider hitman alternatives starting with limbs. (Did I say that outloud?) (Legal disclaimer: I was joking.)

2. Tightening Credit Requirements: If you think that you offer the best product or service relative to your competitor, you can obtain the best possible credit conditions. I know this is a tough one for start-ups because you just want to close deals. But, be sure to tell your potential customers upfront about your credit terms - before you provide your product or service. To improve your cash flow position, you can be more stringent in your credit terms, requiring more customers to pay cash for their purchases. This will increase the cash-on-hand and allow you to sleep at night. However, there are trade-offs to tightening credit in the short and in the long run. Looser credit allows more customers the opportunity to purchase your products or services. But, this can lead to spending more time chasing down bad-debt. Another way is to get as much information from the client as you can in the form of a "customer agreement." The more information you have about the customer or client, the easier it is to take their first born in the event the person rescinds on the payment.

3. Short-Term Loans and Credit Lines: Loans from various financial institutions are often necessary for covering short-term cash flow problems. Revolving credit lines and equity loans are types of credit used in this situation. Don't be afraid to use them, with care.

AN EASY TIP FOR CONNECTING WITH CUSTOMERS!

Here's a quick and easy tip for enhancing your ability to connect with a customer, investor, or employee. Consider the individual's natural "pace." What this means is that some people are tend to be more fast-paced and some more moderate or slow-paced.




Recognize them by:

Fast-Paced

• they talk fast


• walk fast


• make lots of hand gestures


• think and make decisions fast


• outgoing and direct

Slow-Paced

• they talk more slowly


• move slower


• more reserved


• they think things through thoroughly so it seems they think slowly


• less animated in their gestures

This is an important tip for entrepreneurs as you try to build your business. You will need to try to "match" the pace of the individual that you are communicating with. For example, if you are talking with an important new customer or investor and they seem to be more slow-paced then you should consider slowing your pace down to match theirs. If you don't then you may risk not connecting with them as effectively as you could have. A slower paced individual might be thinking about a concept or sentence that you said 2 minutes earlier and because you're more fast-paced you are too busy yapping to realize. The opposite is true also. If you're more slow-paced, naturally, then consider lifting your pace to match the individual who may be annoyed that you're not rattling off the important key points at mach speed.

Here's a good site for more non-verbal communication tips.

FRONTIER AIRLINES...WHAT THE @#%$!

Some of you may have never even heard of Frontier Airlines. They are a carrier based out of Denver, Colorado. I personally love this little airline that could. However, today they became the 4th carrier in as many weeks to file Bankruptcy protection. Although, on the positive side, they will still be maintaining operations until they can get a grip. Good for me since I am on one of their flights tomorrow morning.

At any rate, this news prompted me to blab about the greatness this airline possesses in a few critical areas. One of these key areas is CUSTOMER EXPERIENCE. This airline simply provides a superior traveling experience. The planes are new and include, leather seats, satellite TV, and a generally acceptable and fun-loving staff. Note: "generally acceptable" equates to superior in this business.

My Point: It's hard to make a best practice case out of a Bankrupt business. However, I'm taking a stab at it anyway. They have done a great job of dialing-in the customer experience. This is an element of any business that we entrepreneurs must continue to focus on and revisit on a regular basis. If nothing else, Frontier Airlines serves as a reminder to me to continuously improve the experience my customers have.

WHY ARE YOU AN ENTREPRENEUR?

A recent report by the U.S. Small Business Administration looked at 685 businesses.


MOTIVATIONS FOR STARTING A BUSINESS: Women are more likely than men to start businesses to achieve a work-family balance. Women also more often listed a desire for self-fulfillment and job satisfaction as reasons for starting a business and wanted to be challenged personally and have self-determination. They also are more likely to start a business to gain the recognition of others. Men are more likely to start a business to make money or build a company.



My Advice: Be sure you are starting a business for reasons that are close to your heart. Whether it's to spend more time with family or to build something using your creativity. Remember building a business and being an entrepreneur is very different than being an investor in a business. They are two different animals!

I was involved with a franchise start-up a few years ago. I had several partners at the time and the business had a very successful launch and is still doing very well today. However, it wasn't the type of business that interested me very much. I believed in the concept but there was no passionate involvement from me. I wound up having disagreements with my partners, which is very normal, but the business became more of an investment for me where I ended up cashing out early. Had I been more emotionally attached to the idea then I probably would have put more effort into making the partnership work.

So, what are the reasons for starting your business?

PUT YOUR SHOES HERE! (A SNAPSHOT OF A WINNING BUSINESS)

I'm on my way to New York City this week. Love that place...not. Actually, NYC is a great place to visit...well...you know the rest.

Anyway, as I was going through the security gate today in Denver, I approached the area where you remove your shoes and place your belongings on the x-ray belt thingy. I grabbed one of those bins to place my laptop and shoes in and there on the bottom was an ADVERTISEMENT. Wow, where else will they think to put an ad? At any rate, the ad was for a company called Zappos.com.

I know this company pretty well and have studied their business model a good bit. This is a company that entered into the over-crowded footwear market and has gone from $0 in sales to $1 billion in just ten years. It's not because they invented some fancy new shoe but rather they simply provide a way to buy shoes that is hassle-free, convenient, and low-cost. Their slogan is "powered by service." If you ever have to call them for any reason then you will experience the difference first-hand. Their customer service team is trained to make your life easier and they have the uncanny ability to befriend you in 2 minutes flat.

My Point: For those entrepreneurs out there that are concerned about too many competitors...don't be! Try positioning your business around delivering a superior type of value. If customers want it fast then be the fastest. If they want customization then spend time fully understanding their needs. If they want innovation then give them the latest and greatest.

A Common Trap: Don't try to be all things to all people. Find out how you can differentiate your product or service and focus your efforts on that. Zappos.com doesn't spend time or money on innovation or bells and whistles. They create an easy to navigate webstore that makes the shoe buying experience hassle free and fast.

5 CRITERIA FOR SETTING GOALS

All to often when I ask entrepreneurs if they have clearly written goals they say "not written, but in my head." Having thought about your personal and professional goals is great but writing them down is even better. Why? Writing them down makes them more tangible and links to the brain visually and kinestetically.

I've been fortunate to know some of the best athletes in the world that live in my hometown of Boulder, Colorado. Boulder is the kind of town where you can throw a rock and hit two or three Olympians at once (not that I've tried this). I've also been fortunate to know quite a successful entrepreneurs, CEOs, and investors. Many of them share a similar phenomenon and that is clarity of their objectives.

Here is a time-tested method for clarifying goals. It's called SMART goals:

• S = Specific: Your personal goals and the goals for your business need to be clear-cut and unambiguous. For example, if your goal is to start a business then you might write down something like this, "I am going to start a my own business in the fast-food industry." To be even more specific try stating, "I am starting my own organic burrito fast-food company."
• M = Measurable: The more specific you are about your business goals the more easily they can be measured. There needs to be some type of measurement or metric involved in goal-setting, or how will you know if you've reached them, or how will your partners and employees know? For example, "I will reach $1000 in organic burrito sales."
• A = Attainable: Goals must be realistic and attainable by you and your employees. The best goals require you to stretch a bit to achieve them, but they aren't extreme. That is, the goals are neither out of reach nor below standard performance. Goals that are set too high or too low become meaningless, and guaranteed you will naturally come to ignore them.
• R = Relevant: You, your partners, and employees have a laundry list of activities that you can choose to perform every single day. You will also have a number of different things that you could choose as goals. However, the essence of business success in choosing what not to do. Pick goals that are relevant to improving your business and that make you different from your competition. For example, if you differentiate by delivering speedy service then set goals that are relevant to that. I'm consistently amazed at the number of organizations and entrepreneurs that set goals that don't differentiate, they set them because they were considered a best-practice. This becomes particularly important if you are pitching your business to an investor. Your objectives/goals should make you distinct.
• T - Timed: Attach an expected date in which you would like to have achieved the goal. For example, "I will generate $1000 in burrito sales by October 1." I heard a smart business person say once that the difference between a goal and a wish is that a goal has an expected date of delivery.

I use the SMART criteria as do most of our clients. We think it's the best way to ensure that you are setting goals that will ultimately put cash in your wallet.

THE ONE THING YOU MUST HAVE!

The pros of starting a business far out weigh the cons. However, to be successful you had better be ready to endure hell and high water because, at times, you will have both.





So, what's the ONE THING you must have?

POISE

EXIT...STAGE LEFT!

When starting a business the first thing you should do is consider your life goals and objectives. As a part of this consideration you need to dial in what you ultimately want from your business. This is referred to as an Exit Strategy.

Here are some possible exits:

• Sell your business to a competitor or another company that wants to enter your space


• Take your company public (IPO)


• Sell your business to another entrepreneur


• Sell your business to your partner


• Sell it to your employees


• Keep it as a lifestyle or cashflow business until you keel over

Give this some thought if you haven't already. Knowing how you want to exit the business will help shape many of the decisions you make early on. For example, it will largely determine how your accountant structures your financial statements and how much EBITA you show. Your exit may also shape what entity you use to set up your business, such as an LLC versus a C-corp. It may also influence operating decisions, such as strategic partners, distribution channels, etc.

Additionally, if you have partners (partner = headache) then it is increasingly important that you have alignmnet on how and when you both want to exit the business.

mmmm...coffee...

Does anyone have a story about how they exited their business?