So you want to launch a business...

Top 10 Questions for Entrepreneurs

OOPS.  Make that the Top 11.  Or is it 12?

My colleague and fellow blogger, Anne Clelland, pointed me to a great post for prospective entrepreneurs.  On Read, Write, Start, Bernard Lunn recently complied a list of the top 10 questions you should ask before starting a new venture. 

Given my experience with entrepreneurs, the ten questions were all right on target.  But one was conspicuously missing, as least from my viewpoint.  In fact, I just posted on this vital topic a few days ago.  The authors from whom Lunn selected his list apparently failed to value the simplest question of all, "Why?"  That has to be Question 11.  Or perhaps it should really be Question 1.

I am absolutely convinced that the strength of the answer to the question "Why?" is a dominant factor in entrepreneurial success.  Without a clear understanding of the expected payoffs and a powerful commitment to those payoffs, entrepreneurs simply run out of gas.  Even the biggest tanks of enthusiasm and perseverance run dry.

Here's the issue - plain and simple.  As I posted before...

In a recent post on Inc.com, Joel Spolsky recalls asking Jessica Livingston (author of Founders at Work) to speak about why start-ups fail.  "That would be boring," she told him. "They all fail for the same reason: People just stop working on their business."

Spolsky goes on.  "The more I thought about it," he says, "the more I realized Jessica was onto something. Why do start-ups fail?  As she pointed out, it's usually a collapse of motivation -- everyone wanders back to civilian life, and the start-up ends, not with a bang but a whimper."

Think about that.  "People just stop working on their businesses."

Wow.  They just plain run out of gas.  They exhaust their supplies of MOXIE.

And, as Anne regularly points out at Handshake 2.0, your network is also crucial.  "It's still who you know," she reminds us.  Or, in my words, Mentors are among the Four Fundamental Factors governing success.  So, Question 12 might well be, "Who do you know?"

So did Mozart

What do you do?  And why do you do it?

Creating a business is one of the ultimate forms of self-expression.  A fresh approach to a meaningful opportunity touches hearts and minds just as surely as a painting, a poem, or a piece of music.  An innovative entrepreneur is an artist.  Really.

What is an artist, after all?  Various definitions converge on something like "a creative person whose work shows sensitivity and imagination."

And what personal qualities do we commonly associate with artists?  Passion?  Certainly.  No one accuses artists of being dull.  Perseverance?  I think so.  Artists are commonly said to have "suffered for their art."

Once created, a work of art is available to touch the lives of viewers or listeners or readers.  Once conceived and launched, a business touches the lives of employees, customers, suppliers, investors, and countless others.

So, entrepreneur, what do you do?  And why do you do it?

What passion drives you to over-invest your time, and energy, and money in your emerging enterprise?  And whose lives will be enriched by your creation?

What strange Moxie drives you to create Magic for the Market?

Oh, you mostly just want to make a bunch of money?  OK, that's cool.  So did Mozart, by the way.

Pressing the Flesch

"Any sufficiently advanced technology is indistinguishable from magic."
                                                                                    Arthur C. Clarke

"Any sufficiently obfuscated meaning is indistinguishable from baloney."
                                                                                    Jim Flowers

I've posted on this topic before; but it's important enough for a return engagement.

Your hot new invention may well be over-the-top incredible.  Unfortunately, if the language you employ to describe it is not clear, powerful, and direct, all your creativity and effort may be wasted.  Your Magic will not work because your Message is weak.

OK, you say, I get it; but what's the point of the title for this post.  And why did you leave a typo in the headline?

Hah!  Gotcha.  The Flesch to which I refer is exactly that, Flesch, not flesh.  Rudolph Flesch is the godfather of readability analysis.  I was recently reminded of Flesch by Joe Roy, aka "Mr. Clarity," in a post about "readable writing."

It happens that I can test my writing for readability right inside Word.  So can you.  Here's how.

Open your Word document.
Check (turn on) “Check grammar with spelling.”
Check (turn on) “Show readability statistics.”
Left-click “OK.”
Spell-check your document. (Press the Flesch.)
After the spell-check, you will see a report of “Readability Statistics.” The Flesch Reading Ease score is the second-last number in the list.

Mr. Clarity also provided a handy scoring comparison scale for reference.  The numbers are Flesch ratings, just like the one at the end of your spell check.

60s Reader’s Digest
50s Time magazine
40s The Wall Street Journal
30s Harvard Law Review; white papers
20s IRS forms; academic papers
10s Many high-tech web sites

So, Mr. Entrepreneur, if your linguistic skills are insufficiently advanced so as to avoid obfuscation, your contemporaneous paucity of revenue-producing events may well be exacerbated.  In actuality, you may even commit inadvertent prevarication as a consequence of perplexity on the part of your intended patron.

All silliness aside, I owe special thanks to Joe for the George Carlin example of clear writing, even if it is PG-13. ("63.6 on the Flesch Reading Ease test of readability – higher than every Fortune 500 company annual report issued last year.")

Reflections on Market Research

"Market research is for discovering what people want, need, or believe. It can also involve discovering how they act. Once that research is completed, it can be used to determine how to market your product."
                                                                                                     Wikipedia

Of course, things don't always work out quite so nicely in practice.  As Mark Twain pointed out some time ago, "We all do no end of feeling, and we mistake it for thinking." 

It is a common failing of would-be-tycoons to interpret data concerning the world's various conditions so as to validate their favorite presumptions. 

Oddly enough, in some circles this sort of revisionism is considered to be appropriate professional license.  Somewhat earlier than Twain, Herodotus pointed out that, "Very few things happen at the right time, and the rest do not happen at all: The conscientious historian will correct these defects."

Now, Twain (Yes, I like Twain.) was a stickler for accuracy in the research, but did side with Herodotus regarding the downstream use of the facts.  "Get your facts first," he said, "...and then you can distort them as much as you please."  And this is probably a practical way of approaching the issue.

To paraphrase Twain -

Market research is a tool for reducing investment risk.  Don't delude yourself by coloring the data.  That would be just plain silly.  It would increase the risk, not reduce it.

Whether you choose to fool others later is a different issue, not of risk, but of morals.

"Baseball, hot dogs, apple pie, and Chevrolet"

They left out motherhood.  But sometimes more is too much.

I have no idea how well that old campaign theme fared in the ad wars, but I just love it!  And I can still sing it.

What a great example of warmth by association.  And it doesn't even involve sex.  Those were the good old days.  (1974 or 75, I think.)

Metaphors, delivered in various forms, can evoke strong feelings.  Companies substantially improve market acceptance by identifying with a feeling that their prospective customers would like to experience.

How about "...when it absolutely, positively, has to be there in the morning."  Or "...the real thing."  Or "Irish Spring." 

They can also identify themselves with a strong symbol, such as the lonely Maytag repair man, the classic personification of product reliability.

Recently, Apple has managed to personify their competitor, the PC, as a buttoned-up, stuffy, slightly befuddled, "organization" man - in contrast to a 20-something, hip, relaxed, with-it fellow with more important things to do than fuss with a confusing computer system.  Pure genius.

Sometimes the metaphor is used to clarify complex situations or product features.  Here's one I especially like.

Think of your business (or proposed business) as an automobile, perhaps even a Chevrolet.  The Market is your destination - where you want to go.  Your Magic is the powerful engine that takes you along the road.  Mentors are the dials and gauges giving you important information that reduces your risk.  And Moxie is your gasoline.  Without Moxie, nothing happens.

Omigosh.  Moxie is motherhood.

And good metaphors give great force to your Message.

Six reasons to sell out early

Your company will probably be sold earlier than you expect, and for less than its maximum value.  Here's why.

1-  You will create a problem for a large competitor and they will offer to buy you out – to get you out of their hair.  Your alternative to selling at their price is to wait for them to grind you to a pulp.

2-  You will get divorced and the settlement will require liquidation of all your assets.

3-  You will suffer an untimely death; and your heirs will not want to run the business.

4-  You will be hit by a bus and disabled.  By the way, disability is much more likely than early death.

5-  You will have a falling-out with your partner(s).

And the biggie...

6-  You will simply tire of it and decide to quit.

I wrote about this particular phenomenon a few weeks back.  Here's an excerpt from that post.

In a recent post on Inc.com, Joel Spolsky recalls asking Jessica Livingston (author of Founders at Work) to speak about why start-ups fail.  "That would be boring," she told him. "They all fail for the same reason: People just stop working on their business."

Spolsky goes on.  "The more I thought about it," he says, "the more I realized Jessica was onto something. Why do start-ups fail?  As she pointed out, it's usually a collapse of motivation -- everyone wanders back to civilian life, and the start-up ends, not with a bang but a whimper."

Think about that.  "People just stop working on their businesses."

Wow.  They just plain run out of gas.  They exhaust their supplies of MOXIE.

So, you will probably sell out earlier than you planned, and realize less money than you expected.  UNLESS, of course, you anticipate the various contingencies and protect yourself and your business from their possible ill-effects.

Entrepreneurs, check your egos at the door.

A man is like a fraction whose numerator is what he is and whose denominator is what he thinks of himself. The larger the denominator, the smaller the fraction.   
                                                                                                                Leo Tolstoy

One of the most dangerous consequences of self-importance in an entrepreneur is inappropriate confidence in hunches about Market behavior.  Watch carefully for, in particular, the appearance of phrases such as "they just don't get it," or "you'd have to be nuts not to buy this."

The Market is, in fact, always right, as I have pointed here many times before.  It may not always be wise.  After all, somebody did sell a bucket load of pet rocks.  And it may not always be rational.  People do buy military off-road transport vehicles to commute to work in crowded cities.  But it is, nevertheless, always RIGHT.  It will do as it pleases, regardless of your opinion.

And Modesty is always in vogue.  Self-confidence is good.  Self-importance is bad.  Unfortunately, the boundary between them is very fuzzy.

The power of questioning...

"In physics, the term observer effect refers to changes that the act of observation will make on the phenomenon being observed. This is often the result of instruments that, by necessity, alter the state of what they measure in some manner."   

Wikipedia entry

For example, measurement of the properties of electric current requires attachment of some device to the circuit being studied.  The presence of the device in the circuit changes the characteristics of that circuit, which affects the properties of the current being measured.  A casual observer can see, for instance, a battery connected to a light bulb by a few wires, which may be interrupted by a switch.  But ammeters and voltmeters are necessary if one is to understand the hidden electronics of the system.

What does this have to do with a start-up business?

Buried under any observable strategy are numerous assumptions about marketplace size and expected behaviors.  These assumptions commonly vary in validity from widely observed and accepted statements of fact to casual hunches.  The number of people in a developed country, for example, is reasonably well known and reliable.  The number of them who may have a compelling need for a particular product is much more difficult to measure.

Open-minded and thorough questioning of the validity of strategic assumptions is almost certain to induce a change in the overall launch strategy.  Weakly validated assumptions are extremely dangerous.  They may be, in fact, correct.  But what if they are not?  What if their opposites are true?

Serious questioning of founder assumptions is one of the most powerful services that can be provided by Mentors - another reason why Mentors are one of the Four Fundamental Factors.  It amounts to a deliberate application of the "observer effect."  In the case of a pre-launch business plan, encouragement of change in the system through measurement of underlying properties is a really good idea. 

It is almost guaranteed to reduce risk.