Music Album World

I’m not proud to admit it, but I’ve made some dumb business purchases during my career and now I’m ready to come clean.  Here are a few that come to mind that are particularly relevant to startups and were either committed by myself or other startups that I’ve known over the years.

Office Space

Go Virtual.  Why?  Because it is easy and it’s cheap. 

Staff no longer need to be in the same building to be productive.  Furthermore, you don’t need a building for phones, conference rooms, or a place to escape to from your home office.  There are plenty of virtual phone services, plenty of executive suites that allow you to rent conference room time, and plenty of coffee shops with Internet connectivity to escape to.

I made the mistake of office space on several occasions only to find no client meetings ever took place, rarely were staff in at the same time to even think about collaboration, and worst of all was the additional line item expense labeled Rent that haunted me every month until the lease was up. 

Accounting/Bookkeeping Services

Don’t hire someone to do your books.  You need to be in the numbers every day in order to stay on top of the business and the never ending twists and turns that come with running small business or startup.  If you can’t handle the books, you shouldn’t be starting a business.  They just aren’t that complicated to maintain.

Swag

Don’t you dare buy a t-shirt or a pen with your company logo on them!  And if you do, don’t think it is a marketing tactic because I guarantee the pens will end up in a drawer at home and the t-shirt on one of your kids after the cheap thing gets shrunk in the wash.  I highly doubt your target audience is a bunch of Kindergarteners so it won’t buy you much exposure.

Back in 2001 I was involved in a startup in which we secured funding to support business development activities that would ultimately bring together a large network of realtors.  While my brain kept telling me that a good strategy and business case would be the lynchpin of our success, my youthfulness stumbled across the world of on demand custom printing.  Within a few weeks of securing the biz dev funds, we purchased pens, pads for note taking, and a few other things I thought were just cool (err “useless”).  In the end, most of the stuff never made it to the meeting, nor did it make a difference.  In fact, I still stumble across some of it at home in boxes or desk drawers.

Software/IT Systems

Unless you are a specialized business that requires specialized software/systems, I’d argue you can do most of what you need to do with a word processing program, a spreadsheet, and some accounting software (remember, you’re doing the books!). 

I once made the mistake of purchasing some online collaboration software because I felt like we weren’t communicating well enough.  Six months later (and 6 monthly payments later) I was the only one that ever logged into the system more than 2 or 3 times. 

Software and IT Systems won’t be the lynchpin to your success or failure so just forget about them when getting started. 

What should you spend your money on as a startup? 

While the situation is different for every company, there are a few common expenditures that are worth making in the startup world.  Maybe I’ll cover those in another post as to not drag this one out any longer.  Anyway, in the end what you don’t spend (waste) money on is much more important.

Although it’s not common knowledge, there is a list of Laws to Interface Design (which is credited to Jef Raskin, the author of The Human Interface).  Most of us designers and developers “play it by ear” but end up forgetting a lot of these things (or just downright taking them for granted).

Interface Design is more practically used when developing any type of application since that is the time when users will spend most of their interaction.  Websites can take on most of these laws, although I would argue that this list holds a lot more importance for startups that are building products, particularly web applications.

You can also use these laws to “fine tune” your applications at any point in their development.  Most startups will rapidly prototype and push their alpha and beta versions, which are just as good a time as any to implement these strategies (in fact, it may cause your early adopters to appreciate your apps even more if you do).

1. Visibility – How clear are you being with the user?  What is the goal expected of the user?   Are icons being used to portray this?  The underlying psychology shows that icons become very important for repetitive tasks when many choices are available.  Give clear icons and a clear path to portray what the user should be doing.
2. Feedback – Are you sending information back to the user after a certain action is performed?  What type of feedback is given when a user does something right, or wrong?  Does a sound play?  Is there a visual cue (ie graphical or textbox) that will indicate, and if so, does it suggest an alternative for the user?
3. Affordance – Are particular elements clear and obvious to the user?  Do you clearly define what something does for the user?  A great example: you’re going to the movie theaters, and you have no idea whether the door is supposed to be pulled or pushed.  Half of the time you push it, look like an idiot, and realize that you’re supposed to pull.  Affordance would mean putting a “Push” sign on the doors.  Don’t get fancy or creative, just design for the lowest common denominator (think kids).
4. Simplicity – Are you keeping it simple, stupid?  Are you adhering to the old high school KISS rule?  A classic example in desktop applications is to put an “Open File” option on a menu, underneath the “File” tag.  Nothing complicated, nothing fancy, nothing overly created or overanalyzed.  Keep it deadly simple.
5. Structure – Are you organizing the information in a way that makes sense to the user?  Is your information cluttered or is it grouped into sensible and related chunks?  Include all similar information within a dialogue box, separate from other distinguishable groups of information.
6. Consistency – Do you have a uniform and constant theme to your product?  Are the elements positioned thoughtfully?  You will see an X in the top right corner of this screen, don’t get fancy and try to put it in the bottom left because you want to be “different.”  That’s just being confusing.  If there is already a popular way of positioning something, try to follow it so that your software is easy to pickup and doesn’t create any unnecessary tension on the user.
7. Tolerance – Are you proactively trying to prevent users from making errors?  Are you giving them an easy way out if they do?  See #2.  Hide options that aren’t appropriate in a certain context, and don’t give more information to the user than is absolutely necessary at any point in time (although provide a means to get access to it).
   

In the movie Liar Liar, Jim Carrey plays attorney Fletcher Reede, who’s been cursed with the inability to lie. Every attempt Fletcher makes to lie results in him blurting out the God’s honest truth instead.
Imagine what would happen if an entrepreneur were cursed with the same affliction. What would their pitch really look like?

The Sales Pitch

“Hello, I’m Wil Schroter, and thank you for being the only client that was willing to return my phone call. I’ve borrowed my roommate’s car to get here and you’ll probably notice that while it’s the middle of August, I’m wearing a 3 piece wool suit that I bought for a $1 from a thrift store yesterday.

Since this is the first time a real customer has ever looked at my product, I’d like to pitch you on every last idea we’ve ever had for the product, hoping that one of these ideas is something you’re potentially looking to purchase today.

Unlike pitches I’ve given for previous employers that simply meant a bigger commission in my regular paycheck, this time I’ll be pitching for the money that pulls me out of a mountain of debt. In many ways, your reaction to this pitch will determine whether or not I can pay my rent next month, so I certainly hope you like it.

The Product

You may not realize from my fancy PowerPoint presentation that the wonderful product I’m presenting is nowhere near completion. In fact, there has been more product development done in Adobe Photoshop to make these slides look legitimate than on the actual product itself.

Regardless, I’m hoping you share my excitement about the potential of this product, despite the lack of any tangible value that I could deliver today. The beauty of an intangible, undeliverable product is that I can not only make it into anything you desire, I can also sell it to you for any budget you’re willing to pay.

Don’t bother holding your questions to the end of this presentation, because I can already tell you the answer – it’s “yes.” Wondering if the product is effective? Yes. Can we deliver upon your made up timeline? Yes. Are we the best possible vendor for a product that hasn’t even been proven? Well, yes, we are.

The Company

Of course you’ll want some background on our startup company, so let me fill you in on the details.

The company was founded when I realized I could make more money competing against my last employer than working for them. I am taking advantage of this opportunity by draining all of my personal savings, selling every possession I have, and giving my friends and family basic “visiting hours” by which to contact me.

We’re currently in discussions with some very large venture capital firms about investment. So far our discussions have gone so far as to say “who is the person I would speak with to send in our business plan?” and we’re anxiously awaiting their responses.

In addition, we’ve lined up key partnerships with major companies like AT&T (when we signed up for our cell phone), American Express (when we got our credit card), and Dell computer (when we used our Amex to buy a laptop). These vendors are very excited about getting in on the ground floor of our startup company.

The Team

The Team I’ve assembled has an incredible amount of experience in just about everything but starting a company. The man standing beside me is not only our CFO, but is also my cousin-in-law who actually works at H&R block as a tax prep counselor and is on his lunch break for this meeting as a stand-in.

We (and by “we” I mean “I”) have attracted top notch players to our company, especially our all-star Board. You’ll recognize many of the names on our Advisory Board, even if the people on the Board wouldn’t ever recognize ours.

The Close

In closing, I’d like to beg for you to part with even a nickel so we can land our first customer. You’d be shocked and appalled if you knew how little we really had to deliver on a completely underfunded and unstaffed product idea. We hope you’ll look past that to do business with us.

We’re so passionate about what we want to accomplish that we’re completely unaware of what we’re committing to. We’re told that’s what being an entrepreneur is all about, and we assume only other entrepreneurs could be that clueless.

Despite the fact that our whole presentation today is a joke, if you even hint that you’ll work with us, we’re going to be incredibly relieved. We’re going to spend every waking hour from this point forward cow towing to your every whim because frankly, we have no other choice.

We want to be open and fair about how excited we are about this opportunity. Let’s face it – honesty is the best policy, right?”

A question many have tried to answer through a series of books. A question that many have assumed to which they know the answer. A question that may not have a direct answer. It poses threats to true believers, and most would ignore it. What makes an Entrepreneur?

I do not want to try to answer this question. But would like to reflect on it, in hopes to push you to reflect on any assumptions you may have.

Entrepreneurs "are people who imagine things as they might be, not as they are, and have the drive to change the world." - Anita Roddick, Financial Times

An Entrepreneur "turns he most trivial condition into an exceptional opportunity. The Entrepreneur is the visionary in us. The dreamer... The imagination that sparks the fire of the future. The catalyst for change." - Michael Gerber, The E-Myth Revisited

Many would suggest that an Entrepreneur is a person who loves change and creation of the new. Some would suggest, and myself included, that a true Entrepreneur works on his business, not in it. An Entrepreneur doesn't need to be a part of their own system for the business to run profitably. But there is a gentle slap in the face when one assumes this. There are those that create, make new things, create new brands, change the world and consumer perception but need to be in the business for it to function. This is most apparent in the Entertainment industry.

Some entertainers have created a whole new brand in their field, like Sacha Baron Cohen (Borat), Jay-Z, and Dane Cook. Borat is a new humor unlike that previously viewed in American mainstream comedy. Jay-Z changed the face of Hip-Hop along with many other rap artists; Biggie Smalls, 2-Pac, and Ludacris. Dane Cook has developed a new hard-hitting animated comedy sketch. His recent tour is designed unlike any I've seen before and he has even created an emblem for himself.

These people have created brands, changed the way consumers perceived the market. They can quickly adapt to consumer wants, and develop new products. However, without them in the biz, their brands would not exist. Does this mean they’re not Entrepreneurs? Does this mean they can't share the space of Michael Gerber, Steve Jobs, and Bill Gates? What about Oprah? She's the first African American Billionaire. But if she disappeared tomorrow, would her brand disappear with her? With Oprah gone, how long would O-Magazine Last? The above mentioned have created brands outside themselves. Jay-Z made a majority of his money outside of music, but he also created Roc-a-fella Records. Ludacris created Disturbing Tha Peace, a record label of his own. Is this the act of an Entrepreneur, or simply an entrepreneurial act?

A friend of mine, Marshall Beck, is an entertainer in the metal community of Arizona, is well known by many and even ridiculed by the press. He can tell you it’s a rough business, and without quick adaptability and creativity of new revenues streams you can go down quick. He claims (and I support him) that entertainers definitely have to be entrepreneurial. Otherwise they wouldn't succeed.

So I leave it up to you to decide. We all have an Entrepreneur inside us... But are only the true Entrepreneurs those who do not work in their systems? Can we consider entertainers and those that need to be in the biz Entrepreneurs or simply entrepreneurial?


Merlin Ward is a young social entrepreneur and co-founder of Club E Network, a Broadband TV & Social Network for entrepreneurs. Club E provides original television programming and resources for entrepreneurs and connects business owners around the world through its online community and on the ground chapters.

The year is 1957. James Vicary has the entire advertising world convinced that he has successfully demonstrated a technique that would enable advertisers to allow them to control anything consumers do. He claims that he has broken the code of subliminal messages by placing them in motion pictures, bringing in audiences, and recording the results. His claims showed that the embedded messages of "Eat Popcorn" and "Drink Coca-Cola" increased the sales of popcorn by 57.5% and Coca-Cola by 18.1%. He holds a press conference, taking retainer fees (an up-front deposit) from advertising agencies. Shortly after, he packs up, leaves town, and disappears, never to be seen or heard from again. He beat the reporters and was gone before the story even surfaced. He left no trace; no bank accounts, no forwarding address, and he also left with $4.5 million (equivalent to $22.5 million today) in both advertising agency and client money. Wherever you are, Jim, you've pulled off the largest scam in advertising history.

There's a lot of history in advertising, and deception is one of the biggest issues. You can trace most of the negativity towards advertising back to The Great Depression. It's not to say that advertising is a bad profession (it actually used to be an elitist profession), but there's a lot of distrust towards advertisers and claims that can't be backed up.  That may affect us as entrepreneurs, even to the point where we may resist using many forms of advertising and marketing in our startups.

I think a lot of us would say that most of today’s startups were created without a penny put into advertising or marketing.  I love the examples of YouTube and PayPal because they were started by alumni of the university that I attend, and I’ve had the opportunity to chat with both of the founders from these companies.  I have also spent some time looking at YouTube and PayPal’s marketing strategies and found them to be great examples of models for explosive growth.  It’s easy to look at the successful companies today and say “Yeah, they didn’t do any advertising.  They just had the right thing at the right time at the right place.”  But I think these companies deserve a lot more credit than that.  First, let’s dispel the myth that YouTube and PayPal paid little attention to their marketing tactics.

YouTube was started by giving away an iPod every day, for several months.  I don’t remember this happening because I was a “late adopter” and found out about YouTube from another friend that found a particular video funny; he sent me a link through an IM program. That’s kind of cool how it works though: people could video tape their iPods that came through the mail, and then upload it to YouTube, for other people to watch. YouTube didn’t just tune in on marketing though.  They also placed a lot of importance on product development and rapid iteration.

My current stance on marketing vs. product development is that you can’t exist without the two.  I would argue that product development and marketing are the two things that will launch any startup with a valuable concept into explosive growth.  Of course, no method of advertising, no matter how great it is, will ever completely be responsible for sustained growth over long periods of time.  Advertisers would probably argue that YouTube and PayPal never technically “advertised,” because the definition is strictly defined as a “massive, paid attempts to persuade an audience to buy or do something.”  Either way, they had to spend a little to make a little.

PayPal is another good example, and it was another startup I wrote off as “one that didn’t pay any attention to marketing.” PayPal  originally offered $10 to each member that signed up, and $10 for referring a friend.  I remember signing up, but I forgot that I was actually paid $20 when I first jumped on board.  I remember not being interested, and the thing that sealed the deal for me was getting the $20.  A lot of PayPal’s early stage funding was spent on making PayPal's growth explosive, and offering incentives to sign up is just as good a reason as anything else.  It also helped that PayPal was backed by Ebay, which was a substantial boost to their growth as well.

If you walk away with anything, you should realize that product development and marketing is becoming a huge barrier to entry for competing startups. If you can build a great product that finds its way in front of a large audience, you’re set. If you want to be #1, don't be afraid to use different forms of advertising (whether you or your own users are doing it) and spend money, just don't do it carelessly. Don't let your negative views on advertising affect your decisions to promote your startup effectively--at the end of the day, there are many methods of marketing and advertising that still work very well.