secrets of serial entrepreneurs...• presumption of success leads to premature scaling. hiring and...

Secrets of Serial

Entrepreneurs

Is Your Business Idea Worth Your Limited TIME, ENERGY &

MONEY?

\

Indiana Central Office 8500 Keystone Crossing, Suite 401 Indianapolis, IN 46240

317-226-7264 https://indianapolis.score.org/mentors

[email protected]

Promoting Responsible & Sustainable Entrepreneurship

What We Will Explore Today

• What do crazy SUCCESSFUL SERIAL ENTREPRENEURS know that you don’t?

• Learn how to AVOID FAILURE that so many other entrepreneurs experience.

• Any business CAN be started but SHOULD yours? • Greatly improve your CHANCES of SUCCESS. • Reduce RISK & UNCERTAINTY by following a PROVEN PROCESS. • Can you really AFFORD the PITFALLS & COST of starting a business that

isn’t VIABLE? • Do you 100% know what your CUSTOMERS REALLY WANT? Learn how. • Take the GUESS WORK out of WHERE your CUSTOMERS HANG OUT so

you can BE THERE to SELL to them. • Build your PRODUCT/SERVICE so your customers can’t RESIST buying it. • Know if your business is WORTH your limited TIME, ENERGY & MONEY

before you spend $1.

Agenda Startup Stats Limitations of Traditional Startup Planning Improved Business Planning Process


Questions

• How many of you think you would be a great golfer, skater or football player if you went to Dicks Sporting Goods today and bought you all the necessary accessories?

• Would you purchase a home without having a professional inspection?

• If you’re going to a foreign country, can you become fluent in

their language by having a cup of coffee with someone that is fluent?

• How many of you would advise your kids to marry someone

they've never met or dated?


How’s America’s Traditional Startup Strategy Measure Up?

For every business that opens each year, how many close?


http://news.uscourts.gov

BANKRUPCTY FILINGS Business & Personal

Year Total Non-Business Business

2016 833,515 808,718 24,797

2015 911,086 884,956 26,130

2014 1,038,280 1,006,609 31,671

2013 1,170,324 1,132,772 37,552

2012 1,367,006 1,320,613 46,393


http://www.statisticbrain.com/startup-failure-by-industry/

Major Cause Percentage of Failures

Specific Pitfalls

1 Incompetence 46 % Emotional Pricing

Living too high for the business

Nonpayment of taxes

No knowledge of pricing

Lack of planning

No knowledge of financing

No experience in record-keeping

2

Unbalanced

Experience or

Lack of

Managerial

Experience

30 % Poor credit granting practices

Expansion too rapid

Inadequate borrowing practices

3

Lack of Experiences

in line of goods or

services

11 % Carry inadequate inventory

No knowledge of suppliers

Wasted advertising budget

5 Neglect, fraud, disaster

1 %

Causes of Failure


http://www.statisticbrain.com/startup-failure-by-industry/

Causes of Failure Leading Management Mistakes

1 Going into business for the wrong reasons

2 Advice from family and friends

3 Being in the wrong place at the wrong time

4 Entrepreneur gets worn-out and/or

underestimated the time requirements

5 Family pressure on time and money

commitments

6 Pride

7 Lack of market awareness

8 The entrepreneur falls in love with the

product/business

9 Lack of financial responsibility and awareness

10 Lack of a clear focus

11 Too much money

12 Optimistic/Realistic/Pessimistic


Costs of Failed Businesses- Entrepreneur

Learning Opportunity (McGrath, 1999) Emotional & Traumatic (Cope, 2011; Shepherd, ‘03) Debt Loss of Income Bankruptcy (Cope, 2011; McGrath, 1999) Social Costs (Cope, 2011; Shepherd & Haynie, 2011; Sutton & Callahan, 1987)

Psychological Costs (Shepherd, 2003; Cope, 2011; Singh, 2007; Harris & Sutton, 1986; Singh et al., 2007; Bandura, 1991; Cardon & McGrath, 1999; Brunstein & Gollwitzer, 1996)

Family Stress (Davidson & Honig, 2003)

Effect on Future Generations? May be less likely to pursue entrepreneurial careers

Family stress Divorce is common


http://valueoffailure.com/english-docs/Module6/LifeafterbusinessfailureJrnlofMgmt2013.pdf

VERIFICATION is the perfect proof of a theory

Swami Vivekananda

Costs of Failed Businesses- Employees

One of Most Stressful Life Events Loss of Insurance Loss of Income – Unemployment Stress > Emotional & Physical Health Problems Family

Concern/Fear of Starting Own Business

http://www.ehow.com/info_7929339_impact-business-closures-employees.html http://smallbusiness.chron.com/impact-business-closures-employees-42056.html


Before you assume, try asking. curiano.com

Costs of Failed Businesses- Stakeholders

Banks Investors Suppliers Customers Community Government


ENOUGH already of doing the same thing knowing the results are overwhelmingly damaging.


Progress is impossible without change, and those who cannot change

their minds cannot change anything. George Bernard Shaw

https://www.udacity.com/course/how-to-build-a-startup--ep245

Lean Method Thought Leaders

The following concepts are in large part contributed by the Lean Method Thought Leaders.


1. Assumes business “can” be built as opposed to “should” it be built

2. Lack of compelling demand/need…idea only drives further action

3. Lack of business training/experience of founder 4. Based on secondary research- research done by

others, not the founder 5. Implies the “research” done by others is

credible and resulted in a viable business model 6. Initial assumptions aren’t validated by founder therefore model is untested with marketplace

7. Faulty business model

LIMITATIONS of TRADITIONAL PLANNING PROCESS – Steve Blank

8. Poor execution 9. Lack of funding 10. Right bus, wrong person in the driver’s seat 11. Failure to test the concept 12. Waiting to determine if the concept is viable

once product is built, leases are signed, money raised and quite job is too late…

13. Business plans rarely survive first contact with customers. Successful startups often launch with attributes resulting from pivots from initial planning assumptions.

14. No one besides venture capitalists require 5yr plans to forecast complete unknowns. These plans are generally fiction, and dreaming them up is almost always a waste of time.

15. Entrepreneurs now understand the problem, namely

that startups are not simply smaller versions of large companies. Companies execute business models where customers, their problems, and necessary product features are all “knowns.” In sharp contrast, startups operate in “search” mode, seeking a repeatable and profitable business model. The search for a business model requires dramatically different rules, roadmaps, skill sets, and tools in order to minimize risk and optimize chances for success.

16. Startups have been using tools (business plans) appropriate for executing a known business. But startups are all about unknowns.

• Business plans Flexible business models • Untested assumptions Test, measure, learn… Work with Facts • Uncertainty Certainty • Hunches, Guesses, Concepts Validated learning • High Risk/Chance Improved probability of success • Can it be built Should based on demand • Unknown execution ability Known execution skills • High failure rate More sustainable startups • Slow “to market” Accelerated entry w/ shortened development process • No learned process Duplicatable startup validation model • Wasted time, energy & resources Preserving limited commodities • Elaborate planning Searching for biz model, experimentation/tests….Proof! • Intuition Customer feedback • Front end costly development Customer developed iterative design • Spend upfront Preserve cash while searching for repeatable & scalable model • Negative ramifications to founder, employees, stakeholders, communities

Positive impact and societal benefits to all involved BETTER RESULTS BY GETTING OUT OF THE BUILDING & ENGAGING CUSTOMERS!

ENHANCEMENTS TO THE TRADITIONAL PLANNING PROCESS

• Winners also recognize their startup “vision” as a series of untested hypotheses in need of “customer proof.” They relentlessly test for insights, and they course-correct in days or weeks, not months or years, to preserve cash and eliminate time wasted on building features and products that customers don’t want.

• The best way to search is for the founders themselves to get out of the building to attain a deep, personal, firsthand understanding of their potential customers’ needs before locking into a specific path and precise product specs.

• The mix of Customer Development and Agile Engineering dramatically increases the odds of new product and company success, while reducing the need for upfront cash and eliminating wasted time, energy, money and effort.

• While established companies execute biz models where customers, problems, and necessary product features are all knowns, startups need to operate in a “search” mode as they test and prove every one of their initial hypotheses. They learn from the results of each test, refine the hypotheses and test again, all in search of a repeatable, scalable and profitable business model. In practice, startups begin with a set of initial hypotheses (guesses), most of which will end up being wrong. The ability to learn from these missteps distinguishes a successful startup from those that have vanished.

• Presumption of Success Leads to Premature Scaling. Hiring and spending should accelerative only after sales and marketing have become predictable, repeatable, scalable processes- not when the plan says they’re scheduled to begin.

Startup Metrics

Have the customer problem and product features been validated? Does the minimum product/service feature set resonate with customers? Who in fact is the customer, and have initial customer-related assumptions on the likes of value proposition, customer segments, and channels been validated through face-to-face customer interaction?


Customer Discovery – Phase 1

Customer

Segments

Key Activities Value Proposition

Key Resources

Customer

Relationships

Key Partners

Channels

Cost Structure Revenue Streams

Business Model Generation

• Translates a founder’s vision for the company into assumptions about each component of the business model and creates a set of experiments to test each hypothesis.

• The #1 goal of Customer Discovery

amounts to this: turning the founder’s initial assumptions about their market and customer into facts.

• At its core, the essence of customer

discovery is to determine whether your startup’s value prop matches the customer segment it plans to target.

Customer

Segments

· Target Market

· Target

Characteristics

· Purchase

Frequency

· Who Influences

Buying Decision

· Who Pays For

Purchase

· Pain Intensity

(scale of 1 low –

10 high

Key Activities

Most Important Things

Required to Make

Business Model Work

· Create Value Prop

· Reach Markets

· Maintain Customer

Relationships

· Earn Revenues

Value Proposition

-Problem/Pain

-Currently Address

Pain

-Features/Benefits of

Product/Service

-MVP

Key Resources

· Physical

· Financial

· Human

· Intellectual

Customer

Relationships

· How do you Get

Customers

· How to do Grow

Existing Customer

relationships

· How do you Keep

Customers

Key Partners

· Key Suppliers

· Strategic Alliances

Channels

· How Product Gets

From Company To

Customer

· Purchase Channel

(method product

gets from supplier

to your business)

· Channel Cost

Cost Structure

· Key Fixed Expenses

· Average Monthly Cost of Fixed Expenses

· Variable Expenses

· Average Monthly Cost of Variable Expenses

· Product Cost (per unit)

Revenue Streams

· What is the Revenue Model?

· Units You Will Sell on Average Monthly

· Retail Price (per unit)

· Gross Margin (per unit)

Business Model Generator

Business Model Canvas

Before you assume, try asking. Launching a startup with untested assumptions has been the root of many failures.


QUESTIONS TO BE ANSWERED

1. Do we really understand the customer’s problem?

2. Do enough people really care enough about the problem for this to become a viable business worthy of risking time, energy, capital and stakeholder resources?

3. And will they care enough to tell their friends?

Get out of the building to Test the PROBLEM: Do People Care?

Customer Discovery – Phase 2 5 KEY STEPS TO CUSTOMER INTERACTION

1. Designing customer tests 2. Preparing for customer contacts and engagement 3. Testing customers understanding of the problem

and assessing its importance to customers 4. Gaining understanding of customers 5. Capturing competitive and market knowledge

Customer

Segments

Key Activities Value Proposition

Key Resources

Customer

Relationships

Key Partners

Channels

Cost Structure Revenue Streams

Business Model Generator

PROVE Assumptions! Turn them into facts or

find out why they aren’t.

There are no facts inside the building so get the hell outside!

Steve Blank

Gain Customer Understanding

Validates your assumptions about how customers actually spend their days, spend their money and get their jobs done.

• NEED/PROBLEM • NEED INTENSITY • WILLINGNESS TO

SATISFY • WHEN • WHAT PRICE • WHERE/HOW TO REACH

Capture Market Knowledge

1. What are the adjacent markets?

2. What are the trends? 3. What are the key unresolved

customer needs? 4. Who are the key players in the

market and find out everything about them.

5. What should I read? 6. Whom should I know? 7. What should I ask? 8. What customers should I call? 9. Go to industry tradeshows. 10.Demo competitive products.

Purpose of the Customer Interaction



KEY STEPS TO CUSTOMER INTERACTION

1. Designing customer questions 2. Develop Pass/Fail metrics 3. Preparing for customer contacts and

engagement 1. Develop target market list of

approx. 50-100 potential customers 2. Contact and talk to 50-100

customers 3. Capture answers in Excel

Customer Segmentation

• What do you do professionally? • Who handles [process you’re improving] at your

home/office? • Tell me about your role at [company]? • How much time do you spend on [process you’re

improving]? • [Specific questions related to your

product/customer] – for example, do you have kids?

Are you talking to the right person? Are they really your Target Customer?

Pick up to 3

https://mfishbein.com/the-ultimate-list-of-customer-development-questions/

Problem Discovery

• What’s the hardest part of your day? • What are some unmet needs you have? • What product do you wish you had that doesn’t exist yet? • What tasks take up the most time in your day? • What could be done to improve your experience with

[process/role]? • What’s the hardest part about being a [demographic]? • What are your biggest/most important professional

responsibilities/goals? • What are your biggest/most important personal

responsibilities/goals?

Does your Target Customer have the Problem/Pain we “assumed” they do and how intense is it?

Pick those that best apply or tweak to your concept


Problem Validation

• Do you find it hard to [process/problem]? • How important is [value you’re delivering] to you? • Tell me about the last time you [process you’re

improving] – listen for complaints • How motivated are you to solve/improve

[problem/process]? • If you had a solution to this problem, what would it

mean to you/how would it affect you?

If your customer did not talk about the problem you wanted to address, use the below questions to begin validating/invalidating that your customer has the problem you think they have. In addition, it’s often not enough to just solve a problem, sometimes it also needs to be one that people are highly motivated to solve. Some of the below questions can help with that too.


Product Discovery

• What do you think could be done to help you with [problem]? • What would your ideal solution to this problem look like? • If you could wave a magic wand and instantly have any imaginable

solution to this problem, what would it look like? – I’ve found that about 80% the time the answers I get to this question are not very informative – solutions that aren’t feasible or most certainly wouldn’t be profitable. But the other 20% of the time there are some really informative responses that make the other 80% acceptable.

• What’s the hardest part about [process you’re improving]? • What are you currently doing to solve this problem/get this value? • What do you like and dislike about [competing product or solution]?

Questions to help generate ideas or to validate your idea. The below questions are intentionally very open-ended. By asking yes or no questions specifically related to your product, customers may feel inclined to agree with you or not be critical. By asking more open ended questions, you can be more confident that they’re giving you honest input. If in response to the questions below, your customers tell you they’re looking for similar to what you have in mind, you might be on to something.

Pick those that best apply or adapt to your concept


Product Validation

• What do you think of this product? – this question is intentionally vague.

Listen to whether they talk about wanting to use the product or how it could be improved. Given how vague the question is, the former is positive, while the latter may be a sign that improvement is needed.

• Would this product solve your problem? • How likely are you/would you be to tell your friends about this product? • Would you ever use this product? • Would you be willing to start using this right away? • What might prevent you from using this product? – might reveal ways

that you could improve the product. Potential hurdles might be budget, time, perception’s of the product’s value, a competing product, etc.

• Will you pay $x for this product? – see if they will put their proverbial money where their math is. Often times when you ask this question, no matter how small the price, you will start hearing key insights that you wouldn’t have heard otherwise.

Questions to validate/invalidate your idea.



Product Optimization

• What could be done to improve this product? • What would make you want to tell your friends about this

product? • What’s most appealing to you about this product? • What might improve your experience using the product? • What motivates you to continue using this product? • What’s the hardest part about using this product? • What features do you wish the product had?

Questions to help you improve your idea.



Ending Interviews

• [Summarize some of your key takeaways] – is that accurate?

– I usually do this throughout the interview. • So based on the conversation, it sounds like x is really hard

for you, but y is not. How accurate is that? • It sounds like x is very important to you, while y is not. How

accurate is that? • Is there anything else you think I should know about that I

didn’t ask? • Do you know anyone else who might also have this problem

that I could ask similar questions to? – small form of validation if they’re willing to give you referrals

• Can I keep you in the loop on how the product develops? • Can I follow up with you if I have more questions?

Questions to ask at the end of an interview. You may also need to ask for their contact information if you don’t already have it.


Capture Customer Feedback

Customer Discovery SCORECARD

Customer Excited Urgent Need

Personal/Business Impact

Current Work

Around

Would Purchase in

120 Days

Key Decision

Maker Total

A

B

C

…

Average

1: Low 2: Average 3: High

Is there enough customer excitement around the product to warrant further time, energy & resources?


PAUSE & ASSESS what customers

SAID

Move Ahead, Pivot, Run to the Door!

Update Canvas with Facts

Update Product/Service

Re-engage Target Market

Process Feedback

Move Ahead, Pivot, Run to the Door!

Assumptions Validate

Assumptions Stop or Continue

Market Driven Process Answers The Question – Should this be built?

Market driven process that proves: Compelling Need Build Business Model Around Need Founder Capable of Execution

Startup Metrics

Has the customer problem and product features been validated? Do we really understand customer’s problem? Who in fact is the customer, and have initial customer-related assumptions on the likes of value proposition, customer segments, and channels been validated through face-to-face customer interaction? Does the minimum product/service feature set resonate with customers? Do enough people really care about the problem for this to become a viable business worthy of risking time, energy, capital and stakeholder resources?


Proof of Concept

Update Canvas

Update Product/Service

Re-engage Target Market

Process Feedback

Update Canvas

Proof of Concept | Soft Launch


Proof of Concept – Phase 3

TEST PHASE TO PROVE CONCEPT 1. Contact Target Market previously interviewed –

already have relationships with them 2. Test Solution with limited resources/capital outlay 3. Make Sales 4. Measure Viability 5. TEST FOUNDER’S ABILITY TO EXECUTE BUSINESS

MODEL! 6. Market demand leads to gradual build which drives

more time, energy & resources

Review – Analyze - Adjust


Major Launch


Assumptions Validate

Assumptions Stop or

Continue Proof of Concept

Market Driven Process Answers The Question – Should this be built?

Market driven process that proves: Compelling Need Build Business Model Around Need Founder Capable of Execution

Questions?


https://www.udacity.com/course/how-to-build-a-startup--ep245

MENTORING

Score Office: Indiana Central Office 8500 Keystone Crossing, Suite 401 Indianapolis, IN 46240

317-226-7264 https://indianapolis.score.org/mentors

[email protected]

[email protected]

Score.org to Create Account Jeff:

mailto:[email protected]





secrets of serial entrepreneurs...• presumption of success leads to premature scaling. hiring and...

Documents