Entrepreneurship

Fundamentals

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 Table of Content
0. Introduction
01. Welcome……………………………………………………………………. 4
02. Using the exercise files………………………………………………. 4
03. Are you an entrepreneur……………………………………………. 4

1. Finding Your Big Idea

01. Finding a problem to solve…………………………………………. 8
02. Playing in your own field……………………………………………. 9
03. Playing to your distinctive strengths………………………….. 11
04. Determining whether you have a business or a hobby. 13
05. Finding your first customer………………………………………… 14

2. Starting Your Business

01. Writing a business plan……………………………………………… 17
02. Setting prices…………………………………………………………….. 18
03. Deciding between online vs. brick and mortar…………… 20
04. Building a financial model………………………………………….. 22
05. Deciding on a legal structure……………………………………… 24
06. Protecting your intellectual property…………………………. 26
07. Gearing up operationally……………………………………………. 28
08. Bootstrapping your business……………………………………… 29

3. Building a Team
01. Deciding on a cofounder……………………………………………. 30
02. Hiring the right people………………………………………………. 32
03. Getting the right advisors on board…………………………… 34
04. Tapping into networks of expertise……………………………. 35

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4. Marketing Your Business
01. Telling your story……………………………………………………….. 38
02. Building a website……………………………………………………… 39
03. Chasing customers until you catch them……………………. 41
04. Serving your customers……………………………………………… 43
05. Refining your business idea……………………………………….. 45
06. Becoming a thought leader………………………………………… 47

5. Scaling Your Business

01. Using the right metrics………………………………………………. 50
02. Learning to negotiate…………………………………………………. 52
03. Minding your cash……………………………………………………… 53
04. Put failure in its place…………………………………………………. 55
05. Managing stress…………………………………………………………. 56
06. Documenting processes……………………………………………… 58

6. Funding Growth
01. Understanding capital options…………………………………… 61
02. Crowdfunding……………………………………………………………. 63
03. Pitching investors………………………………………………………. 65
04. Valuing your company……………………………………………….. 67
05. Reaching a deal………………………………………………………….. 69

7. Conclusion
01. Preparing mentally…………………………………………………….. 72
02. Staying true to your vision…………………………………………. 73
03. Balancing entrepreneurship and life………………………….. 75

Resource………………………………………………………………………… 78

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 00. Introduction
01. Welcome
Nearly every day, I meet someone who wants to start a business or who
has already started a business but isn't sure what to do next. These
individuals dream of doing something grand. They dream of becoming
successful entrepreneurs. I'm here today to help you realize this dream.
My name is Whitney Johnson. I've been in the trenches as an investor and
entrepreneur for over years. I want to share with you what I've learned
about starting and building a business.
From finding your big idea, to picking co-founders, to marketing, scaling
and funding your business, this course is about providing you with the
fundamentals of entrepreneurship. Let's get started.
02. Using the exercise files
If you're a Lynda.com member, then you'll have access to the exercise
files for this course. I've included checklists for your business plan,
refining your big idea, and documenting processes along with links to a
White Paper evaluation and a sample term sheet. I've also included a
bibliography for each section should you want to do more research.
Whether I'm building a financial model, becoming a thought leader, or
valuing your company, I encourage you to print these additional materials
out and refer to them as you work through this course.
03. Are you an entrepreneur
So, how do you know if you have what it takes to be an entrepreneur?
You may be thinking entrepreneurs are young and geeky. Someone like
Mark Zuckerberg from Facebook. There are a lot of young men and
women that start businesses. But did you know that the average age of
an entrepreneur is 40? You may also be thinking you don't have enough
money to start a business. This may be true. Certainly it's prudent to start
small and do it on the side. But for many would-be entrepreneurs it's not
a lack of money holding them back. It's fear of the unknown, or fear of
failure.
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The reality is, you won't know if you have what it takes to be an
entrepreneur until you try.
The first step is to start. You'll also need to hone your ability to persuade.
Research suggests that to be successful as an entrepreneur, you need to
get buy-in for your ideas to help people to see the future you see. And,
you need to be a person who sets goals, takes initiative and responsibility
for their actions. It's that simple. As an entrepreneur, you can help the
economy grow and create jobs, both for you and your community. In fact,
in the United States, entrepreneurial activity creates 40 percent of all new
jobs annually.
Becoming an entrepreneur will require you and your loved ones to work
harder than you have ever worked. But, in building a business you will be
filling one of the deepest yearnings of the human soul, which is to create.
To be clear, this course is not a deep dive on any single topic. It provides
an overview with high-level considerations:
• Ranging from generating and vetting a business idea,
• Crafting an initial business plan and financial model,
• Building a team,
• Managing the stress of entrepreneurship,
• Funding your business.
As an entrepreneur, there will be times when you are scared and lonely.
That's certainly been the case for me. Some days I felt a loss of identity,
no longer being affiliated with a name brand company.
There have also been days when I felt like I was on a thrill ride to zero
cash flow. But what I've learned, as I've immersed myself in the theory of
disruptive innovation over the past decade, is that to do something truly
new, you need to play where no one else is playing.
Sarah Ban Breathnach said, "The world needs "dreamers, and the world
needs doers. "But above all, the world needs dreamers who do." When

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you become an entrepreneur, you are a dreamer who does. You are
daring to control your own destiny, to make a dent in the universe.

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 01. Finding Your Big Idea
01. Finding a problem to solve
"Is your company hiring?" This is a commonly asked question amongst
job-seekers.
The dictionary's definition of hire is "To engage the services of a person,
for payment." But, have you ever considered that the term "hiring" has a
much broader definition? That hiring extends to every product and
service we use. Whenever we buy something, we are hiring the product
or service to meet an unmet need. To do a job.
With few exceptions, every job that people want done has emotional,
social, and functional elements. Buying a home or an apartment, for
example. The obvious unmet need, put a roof over your head. But if that
person buys a much larger house than required, for shelter, there's also
an emotional job underfoot.
I want to share with you four simple steps that can help you find an
unmet need. A job to be done.
1. Step number one is to make a list of your dreams. Whether
personal or professional, big or small. When we dream, we are
hungering for a better life. This intense desire leads us to a
heightened level of engagement, making problem-solvers of us all.
Letting nothing stand in our way. Ed Hoffman, the Chief Knowledge
Officer at NASA has said, "Dreams lead to problems. Problems lead
to innovation. "Innovation is one of the foundations of
entrepreneurship."
2. The next step to finding an unmet need is to make note of
problems that need to be solved. As you consider how to make
your dream happen, roadblocks will be inevitable. For an
entrepreneur, these roadblocks present an opportunity to find a
way around, over, or underneath. To innovate.
3. Step three. Once you've identified a problem research what
products or services people currently hire to solve that problem.
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 There may already be a product that satisfies this unmet need. But if
you, in your problem-solving mode, haven't found it, it's quite
possible there isn't a tidy or simple solution.
4. The final step is to ask "Why?" As you observe what people do to
meet this need, you'll not only discover the functional jobs to be
done, but peer into the emotional and social needs that are or are
not being met.
Scott Cook wanted to start his own business, and he heard his wife
complain about paying bills. His opportunity came when the desire to
start a company intersected with his wife's frustration at paying bills, and
advances in personal computing. His product-marketing hat on, he
wondered, "Couldn't easy, hassle-free software be built "to manage his
family's finances?" Scott Cook is the founder of Intuit, that brought is
Quicken and Turbo Tax.
Another great example is Erin Newkirk. After the birth of her first child,
Erin's life became so busy, she felt out of touch. The desire to strengthen
her relationships was the impetus to launch Red Stamp, an easy way for
people to be thoughtful on the go.
Whether you've yet to come up with a business idea, or are looking to vet
an idea, remember the best ideas start with articulating a dream. Figuring
out how to accomplish this dream begins to inform everything you do.
Helping overcome roadblocks.
Becoming an extension of your natural curiosity. When you ask "Why?"
you will nearly always come up with a job that needs to be done. The
kernel of a business opportunity.
02. Playing in your own field
Two summers ago, my friend's year old triplets wanted to earn some
money. As children often do, they set up a lemonade stand. But instead
of earning the usual friends and family dollars, these kids made nearly a
hundred dollars in a half an hour.

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It was late August. They set up shop next to the football field. Students
were finishing up hours worth of practice. They were thirsty, very thirsty.
And here were my friend's children with their lean-to lemonade stand.
These kids intuitively understood the difference between competitive and
market risk. There was no guarantee there would be customers, but in
this particular location there was no competition. If there was going to be
demand, these entrepreneurs were going to make much more than a
pittance.
As you start a business, you need to think about how you can postion
yourselves so that you are taking on market, rather than competitive risk.
Here are three questions you can ask yourself to help figure this out
(determining marketing risk).
First, is it easy to find information about the market opportunity? When
an entrepreneur says to me, "There's a huge market and I've got the
projections to prove it." It may well be that there is a competitor that has
already scoped out that market. In which case, they will be taking on
competitive risk, competing against established rivals. If there's very little
information, you don't know if there's a market for the problem you want
to solve, but there are no competitors. That's market risk.
Number two, is there an established competitor that has the incentive
to co-opt to your idea? The incentive being that by offering this product
or service, the competitor can increase revenue and expand margins. The
grocery store could have come to the football field, but it didn't because
it didn't make financial sense. In other words, how likely is it that your
idea will be co-opted or quashed, leaving you crushed? TiVo, for example,
was co-opted by cable and telecom companies who poured millions of
dollars into embedding a digital video recorder into the set-top box,
making TiVo redundant. TomTom GPS was a great idea, until GPS
functionality was built into the smart phone. If your product or service
involves doing what a well-capitalized player is already doing, and

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requires their cooperation or worse, could involve a game of chicken until
you get squashed like a bug, that's competitive risk.
Third, are you going after people that haven't historically been anyone's
customers? These are people who would be customers but haven't been
able to gain access to the product. The kid who can't get to the grocery
store, for example, because he's on foot. He wants to consume
lemonade, but he doesn't have transportation. A good example of this is
BioLite. A low cost, biomass cooking stove that uses half the amount of
wood as an open fire, which reduces smoke emissions by 90%, while
generating electricity to charge mobile phones and LED lights. Now that's
a problem solved. Eliminate energy poverty while saving lives. Or consider
Southern New Hampshire University. years ago, it was a 2000 person
college with declining enrollment. Instead of trying to turn the school
around by competing with ivy leagues, they decided to play where no one
else was playing at the time - Online. Today, it's considered the Amazon
of Education with 34000, students enrolled.
When you try something new, as BioLite and Southern New Hampshire
University have done, you may still fail but according to disruptive
innovation theory, when you take on market vs. competitive risk, the
odds success are six times higher and the revenue opportunity 20 times
greater.
As you're vetting your potential business ideas, eliminate the competitive
risk whenever possible. This is the difference between a "friends and
family" lemonade stand that earns a few dollars and one that makes
multiples of that. Because, customers are truly thirsty for your product,
and you are the only one serving it up.
03. Playing to your distinctive strengths
The most successful entrepreneurs play to their distinctive strengths or
what they do uniquely well. The trouble with distinctive strengths is that
they're easy to overlook because you do them reflexively well.

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As Malcolm Forbes said, "We tend to undervalue what we are "and
overvalue what we aren't."
Here then are a few clues for tapping into your strengths:
The first is to ask what makes you feel strong? Marcus Buckingham,
author of Now Discover Your Strengths, frames it well. "Our strengths
clamor for our attention "in the most basic way; using them makes "you
feel strong, you feel invigorated, "inquisitive, successful." Erin Newkirk,
the founder of Red Stamp, for example, has built a business on what
makes her feel strong, sending notes and cards to loved ones.
A couple of other clues to your unique abilities. What do you think about
when there's nothing you have to think about and when are you
exasperated? The frustration of genius is in believing if it's easy for you, it
must be easy for everyone else.
The second question is what do others identify as your best skills? What
do people endorse you for on Linked In, for example. Keep an ear open
for those compliments you habitually dismiss. It's possible that you're
discounting a strength that others value. Your biggest superpowers may
not even be on your resume because you overlooked them.
The third question is do you have a confluence of skills? As you mine for
your unique abilities, your distinctive skill may not be one skill but an
unusual intersection of ordinary proficiencies. For example, programmer,
Ed Weissman, shared, "It may be tough to claim to be one of the world's
"best PHP programmers, Unix gurus, "or Apparel eCommerce experts,
"but there may not be many excellent "PHP programmers who are also
good at Unix "and very good at eCommerce. "For the right customer, "this
is a distinctive strength." Or consider Jane Barratt, founder of Vested
Interest, a platform to help first-time investors. Jane cut her teeth in
advertising. She's also a savvy and mature investor. Her two-sided
expertise allows her to help advertisers understand that a company's best
customers are its investors while persuading investors that a stock is the

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ultimate consumer product. The intersection of Jane's proficiencies is a
distinctive strength, one that powers Vested Interest's business model.
In building a business, it's easy to identify the things you do reasonably
well. You've likely worked very hard for these skills and no doubt you'll
use them, but to build a truly robust business, play to your distinctive
strengths, what you do remarkably and uniquely well.
04. Determining whether you have a business or a hobby
As an aspiring entrepreneur, one of the questions you need to ask
yourself is, do I have a business or a hobby?
The word "hobby" comes from the word "hobbyhorse," a fancy toy,
hence the sometimes pejorative use of the word. Historically if you did
something "just for fun" you were described as an amateur, which derives
from the French word "lover of." Whereas if you engage in an activity for
a reward, you were considered a professional.
Over the last century as we've had the resources to give our dreams more
sway, especially in the developed world, more and more hobbyist are
becoming experts and there is more and more demand for a hobbyist
expertise:
The first step in determining if your hobby is something you can do for
fun and earn money is to gauge interest or demand. Are there people
stopping you on the street asking about what you're wearing,
downloading your do-it-yourself instructions, or watching you explain
what you do on YouTube? That's a good sign. Once you've determined
there's interest.
The next step is to find out are people willing to pay for what you do.
Scott Heimendinger, for example, has always cooked as a hobby. In trying
to make meals as tasty as possible he discovered the sous vide technique
that allows for scientifically accurate temperatures. When he couldn't
find a Sous vide cooker, he and his friends built one. After posting the DIY
instructions online, downloads were so high he wondered if people would

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actually buy one. After pre-funding, the entire first production run on
Kickstarter, in a matter of hours, he knew they would.
The third thing to consider, as you decide whether you have a business, is
to ask the IRS if you do using the profit or three of five test. Have you
earned money on this activity in the last three out of five years, including
the current year? If you have you are presumed to be spending money to
make money or have a profit motive. The IRS's concern is that you are
deducting indulgences as business expenses. From a tax perspective this
also applies to passion, or social-good projects. Wether you're raising
cancer awareness, or trying to raise the self-esteem of teenagers. I
learned this the hard way. I had spent a lot of money, on the initiative
Know Your Neighbor in order to help build community. "A wonderful
thing to do!" said my accountant, but without having gone through the
proper steps to become a non-profit this was a hobby. My expenses were
not tax deductible.
In addition to the three out of five test you'll want to show proof that
you are trying to make money. For example, do you have business cards,
a well maintained set of books, a separate business account, current
business licenses and/or marketing expenditures that would persuade an
auditor that you really are in business.
Now, more than ever, people can make a living doing what they love. So,
if you're still looking for a business idea why not start with what you've
already invested considerable time and money on, your hobbies.
05. Finding your first customer
You've got a business idea. You're confident that there will be customers,
but you don't know. It's time to find out.
To do this as quickly and inexpensively as possible, I recommend the
Minimum Viable Product or MVP Approach popularized by Eric Reese,
author of The Lean Start-up. The MVP is the version of the product that
allows you to collect the maximum amount of learning about customers
with the least cost.
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It's an iterative process of:
• Idea generation,
• Prototyping, presentation,
• Data collection,
• Analysis,
• Learning.
A good example of this iterative process is Groupon. Groupon was initially
intended to be activism platform bringing people together to fund raise
for a cause.
The founders prototyped and tested this idea, collected and analyzed
data. Results were disappointing so they circled back to idea generation.
The next idea was group coupons. The prototype was a WordPress blog
skinned to say Groupon with a new post every day. They sold T-shirts in
one color and size. In the write-up they'd say, if you want a different color
e-mail us. This allowed the founders to collect and analyze data at a
minimal cost. Hand-made PDFs, T-shirt coupons, and a blog were enough
to launch Groupon.
Building an MVP is the opposite of the stealth approach used by many
start-ups where they're developing products behind closed doors with
little to no feedback. With this approach you start working backwards by
starting with a paying customer. If you're relying on patents there may be
challenges with releasing an early version of your product, but because
patents tend to be issued for defensive reasons, the learning benefits
typically outweigh the risk.
Whether you have a physical product or service there are a number of
different ways to affordably prototype:
First is with a physical product. For example you can work with a -D
printing factory, such as CraftWorks, to build a low cost prototype that
you can put in the hands of potential customers.
You may even want to post DIY instructions.
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If downloads far exceed expectations, the next opportunity for data
collection is a Kickstarter campaign asking customers to pre-fund a build.
For handmade goods, Etsy is an ideal marketplace.
If you're a service business, you may want to consider the concierge
approach. A good example is Intuit, the financial servies company behind
Quickbooks. They discovered that the farmers in rural India had trouble
accessing commodity prices. So they began experimenting, manually
texting price and buyer information. Only when they had cycled through
the process of building, testing, and learning with their MVP did they
green-light building a sophisticaled text message based platform using
complicated algorithms for the service known as Fasal.
You can also consider a video Minimum Viable Product. Because it was
impossible to demonstrate how Dropbox's software would work via a
prototype, founder Drew Houston produced a three-minute video, in
prototype form, targeted at early adopters.
The same applies for ideapenuers or aspiring thought leaders. Rather
then writing a full length book, start with:
• Tweets,
• Blogs,
• Podcast,
• A quick video.
As you do the work to provide customers with a product they want,
remember that building a Minimum Viable Product is an iterative process
of generating ideas, prototyping, presenting, collecting and analyzing
data, and learning. You'll eventually get the right product market fit or
you won't. Either way you will have affordable determined if you have the
makings of a viable business.

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 02. Starting Your Business
01. Writing a business plan
You have a product or a service, you have your first customer, now you
need a plan for how you're going to make money.
A business plan is a formal statement defining your business goals, the
reasons you think they can be achieved, and how you're going to achieve
them.
There are several different types of business plans:
the elevator pitch, a second summary or teaser for potential investors
typically used at informal meetings,
A pitch deck with an oral narrative also to pique the interest of potential
investors.
There's also a detailed written proposal targeted at external stakeholders
such as when you're trying to secure a business loan.
An internal operational plan that includes detailed guidelines for how
management plans to execute on its business idea.
As you turn your idea into a business, it's important to think like a CEO.
Creating a business plan can be an initial step in this transformational
process.
In writing this plan, there are a number of different resources available
such as Bill Sahlman's How to Write a Great Business Plan, but for now
you want to just get started and getting started starts with a simple
checklist.
For example:
• I want you to think about what will you sell?
• What problem will you solve?
• What will you charge?
• And who will buy your product?
• How will people find out about you?
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 • How will you make the product or provide the service and what will
it cost?
• Do you have competitors?
• Why will customers prefer you?
• Are you disrupting another company?
• Does this business play to your strengths?
• What are some obstacles or challenges you are going to face?
• And by when will you start?
It can be that simple.
You may at some point need to do a more in depth and detailed business
plan, especially if you need external funds, whether borrowing money or
raising equity, but in the spirit of a minimum viable product, this is a good
first iteration, one that you can use to vet your idea with trusted advisers.
Be aware that your plan will change. In fact, if your plan isn't changing,
you may not be learning enough about your product and potential
customers.
As stated in the module on finding your first customer, business is about:
• Idea generation,
• Prototyping,
• Data collection,
• Analysis
• Learning.
The importance of the plan is far less about where you end up but rather
thinking through how you will get there. How you make money may
change, but start with a plan.
02. Setting prices
In order to have a successful business, it's important to determine the
right price for your product.
Price too high, and your business stalls before it starts.

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Price too low, volume may be high right up until you go belly-up.
To get the price right, here are several considerations. Ask your target
customers what they pay for a similar product or service.:
• Do they buy online or prefer to buy at the store?
• Do they like a la carte or all-in-one pricing?
What price ranges don't require outside approval, a manager if you're
selling to a business or BB, significant other if you're selling to individuals
or BC. Use this as a starting point.
The next step is to benchmark against competitors. If your product is
better than the competition, demonstrate it and charge more.
Conversely, if your product has fewer features, acknowledge it and justify
a lower price.
Next, err on the side of pricing too high. You can always lower your prices.
But once you have published prices, it's a lot more difficult to raise them.
More often than you'd expect, entrepreneurs price their goods and
especially services too low. If you don't have obvious competitors, you
may want to experiment with prices or A/B tests, like Amazon does. One
day, a book will cost dollars and cents, Another, fourteen ninety-nine. Do
this for several consecutive weeks and measure which price point
generated the most revenue.
If offering services anchor around value, meaning calculate how much
value you could create for an individual, and then charge them to percent
of that value, with the expectation that they will earn two and a half to
three times their money. For example, if a customer believes that your
products will give them a hundred dollars of value, then you should
charge them 30 to 40 dollars.
Also, be aware that payments promote satisfaction, which likely explains,
at least in part, the popularity of subscription models. When customers
pay once, after a while, the product or service feels free. They use it less
and satisfaction declines. A simple tool, look at the nine and zero effect.
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Most people associate the number nine with value, and zero with quality.
A burger meal may cost 4.99, while a gourmet meal, 30 dollars.
Sometimes you can increase sales by signifying value, other times by
indicating quality. In addition to thinking about what the market will bear,
also consider what you need to charge to make money.
One rule of thumb is whatever the product costs you to make, market up
by a hundred percent. So that once you factor in overhead, including
keeping the lights on and paying your employees, you are profitable.
Finally remember that price shapes customer perception. According to a
study out of MIT, people received identical painkiller placebos. Half of the
participants were given a brochure that described the painkiller as a
newly approved painkiller that cost two dollars and cents per dose. While
half were told it cost ten cents per dose, without being told why.
In the full price group, 85% percent of the participants experienced a
reduction in pain after taking the placebo. In the low price group, only
61% percent experienced less pain.
Pricing is so much more than just what people will pay, and what you
need to be profitable. It is a cue to the customer about value.
03. Deciding between online vs. brick and mortar
Let's say you have your business plan ready, you know who your
customers are and what you're going to charge them.
Now it's time to set up shop. The question is, "Bricks and mortar, online
or both?" It depends. Some businesses require a physical presence. Bricks
and Mortar refers to a physical space, store or office customers can walk
into during business hours. Bricks and Mortar being a figure of speech
that derives from the traditional materials used in the construction of
buildings.
If you require a storefront, you're going to start a spa for example there's
no question, a physical space. When it's not so clear as you in have a

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consumer product or service that could be sold entirely online, in addition
to web presence, do you also set up a store or push for retail distribution?
My recommendation is start online if at all possible. The start up and
overhead costs are significantly lower, frequently an order of magnitude
lower. You'll still have to work hard to acquire customers, but if you make
the right amount of noise you'll have more people visiting your business
than could possibly visit a physical space.
And if you aspire to retail distribution or an actual storefront at some
point, think of an online presence as your minimum viable product which
is what online retailer Shabby Apple did.
It seems obvious today but in when the site launched, it wasn't. Because
Shabby Apple, a designer of shabby chic dresses, bypassed wholesale and
retail distribution selling directly to customers online it became profitable
quickly. Only now seven years later with over two million dollars in online
sales are they contemplating a storefront. If and when you decide on a
Bricks and Mortar approach, here are a few things to consider so that you
are more than a showroom for Amazon.
The first step is to choose a specialty. Find a niche and cater to the
enthusiasts. Specialize in something you know well, your distinctive
strength and then offer exclusive items, events tied to goods or services
tied to those goods. For example, Best Buy's Geek Squad will install a
home theater at a deep discount. It is essential that you offer something
that Amazon or other large businesses cannot provide.
The second step is to curate your inventory. Whereas an online retailer
has the largest possible selection because it isn't constrained by inventory
capacity. Too many choices can lead to shopper paralysis. Because you're
the expert you whittle down the options, stocking only the best solution
products.
The third step is to place an emphasis on noncommoditized items. Sure,
you'll carry some mass produced items but focus on those that aren't,

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providing the best products at different price points. Also look for ways to
provide additional value even something simple like a lollipop.
The fourth consideration is to have a great website. Even though
customers may want the gratification of shopping locally they're probably
still going to check you out before they show up. Make sure they can find
out when you're open, see images of your inventory and size availability
and information about your return policy. They may even want to know
that you would deliver the product today.
The fifth consideration is to emphasize exclusivity and/or privacy.
Sometimes customers want their service or product providers to cater to
their taste to feel that they have been invited to the club. Meanwhile
Amazon may be able to give good service because it's tracking your every
online move but it's also tracking your every move. When you purchase at
a local retailer the transaction is relatively anonymous.
The final and most important consideration is to hire only superb
customer facing employees; employees who are knowledgable perhaps
enthusiasts empowered to make it right for the customer always.
Whether on or offline, customer experience is your battleground. The
entrepreneur that can provide the most frictionless experience at the
lowest cost will be the victor. What's going to work for you? Clicks or
bricks?
04. Building a financial model
Once you put together your business plan, it's time to build a financial
model.
The purpose of a financial model is to set short-term targets to keep you
focused, track costs, monitor cash, and to see if you have a viable
business.
In short, to tell the story of your business using math.

21
As your business gains traction, you may want to build an expansive,
detailed model. But as a start-up, you want to keep the calculations
simple, focusing on just a few line items.
The first item you forecast is revenue, which is price times volume. From
your business plan, you've made a first pass at how much you'll sell and at
what price. Is this forecast data driven, meaning if you're estimating you'll
sell units, what are the assumptions behind that number. For example, if
you have an online business, and you know that the average conversion
rate for your industry is three percent. This implies, visitors to your
website each month. Is that realistic?
You probably won't get the right numbers initially. That's ok. The point is
to think logically and quantitatively about how you're going to generate
revenue. This will give you a credible basis for analyzing your prospects,
having short-term targets will also keep you and your team focused.
Next, calculate your costs. What are you spending to make and market
your product, on employees, on office space. Is the cost of acquiring a
customer lower than the revenue per customer? Are costs going up or
down as a percentage of sales? While your revenue projections are just
that, projections, you should be able to account for and categorize every
penny spent. A surprising number of businesses go bust not because
there's no revenue, but because the owners have no idea where the
money is going, or can't keep a lid on costs.
The next step is to solve for the profit or loss. If you can operate at a
profit immediately, your business model works. If your numbers don't
add up, analyze why. Do you need to sell more at a lower price, less at a
higher price, or simply lower costs. You want to be patient for growth,
impatient for profits. There is an equation underlying your business.
Iterate until the equation works.
Finally, know your burn rate. This is how much cash you use each month,
and know your runway, or how long you have before you need to shut

22
down. For example, if your burn rate is 20$, per month, and you have 8$,
in the bank, then you have eight months of runway.
Ideally, you'll build your business using resources on hand. But if the
business doesn't lend itself to boot strapping, you want to enough
runway that you can think strategically, but not so much that you don't
feel the pressure to generate profit post haste.
If you're a proponent of the discovery driven approach to
entrepreneurship as I am, it may be tempting to forgo building a model.
After all, you can't predict what will happen next. But if you want a clear
read on your company's prospects, you need to look at the numbers.
More importantly, a financial model is a barometer for your bottom line.
Because for an entrepreneur, cash really is king.
05. Deciding on a legal structure
Once you've run the numbers, you'll want to get serious about a legal
structure. This is sometimes referred to as business formation. How you
structure your business has implications for how profitable you are, how
protected you are if something goes wrong, and how readily you can raise
capital.
There are five basic structure:
The first is a sole proprietorship where one person legally makes up the
whole company. If you have little concern about liability, this is the way to
go. There are no setup costs, you have complete control and it's tax
efficient. No taxes are paid by the business. They pass through directly to
you. This is often referred to as pass-through taxation. Service businesses
such as landscaping, computer support, daycare, contractors are typically
sole proprietors.
The second is a limited liability company commonly referred to as a LLC.
An LLC does involve some set up costs and legal filings but it's separate
from you. With an LLC as an individual, you have limited liability and your
personal assets are protected, meaning a business creditor can't come
after your house. As with the sole proprietorship, an LLC enjoys pass-
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through taxation. There's also the added benefit that you can issue stock
and therefore raise outside capital.
The third structure is a partnership. Law or investment firms are
frequently structured as partnerships. It costs less to set up than an LLC
and is a pass-through tax entity. However, the partners are responsible
for the business obligations and debts, meaning, like a sole
proprietorship, a business creditor could come after the personal assets
of you and your partners.
The fourth is the subchapter S corporation or S-CORP. If you expect your
business to be generating alot of cash quickly, the S-CORP could provide
significant tax savings. Like an LLC, an S-CORP provides liability protection
and pass-through taxation. But the tax rate is lower. Whereas members
of an LLC are subject to employment tax on the entire net income of the
business, with an S-CORP only wages are subject to tax. Further, if a
shareholder sells, leaves, or dies, the S-CORP doesn't dissolve as it would
with an LLC. The solidity of this structure does come at a price. Start up
costs are higher and there are more legal requirements.
The fifth and final is a C CORP. This is the structure you will want and
need should you intend to raise venture capital or conduct an initial
public offering. It's an independent entity, separate from the owners.
None of your personal assets will be at risk. But there's double taxation.
Not only are C CORPs subject to corporate income tax, earnings
distributed as dividends are taxed at the individual rate.
Regardless of your legal structure, be sure to keep your business and
personal accounts separate. Hire a bookkeeper if need be. To run a
business like a business, and make sure your life is much easier come tax
season, you want to avoid mixing business and personal accounts. Now,
for a disclaimer, because there's always a disclaimer with legal matters,
make sure to consult with an accountant and lawyer so that you form
your business properly, and obtain the necessary business licenses and
approvals. If you want or need a low cost solution initially, take a look at a
service like Legalzoom.
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Finally, remember this isn't a binary operation where you get the
structure right or wrong. As with your financial model, put an initial
structure in place, probably sole proprietor, maybe LLC. Then in a few
months, assess and if necessary, adapt.
06. Protecting your intellectual property
Intellectual property, commonly referred to as IP, is an important legal
consideration for all start-ups. Now, before you say intellectual property
is only about patents, which I used to do, consider these questions posed
by IP expert, Jill Hubbard Bowman. What if you pick a name for your
business that infringes on someone else's trademark? Or you haven't filed
for protection of your own great brand names? What if you've hired an
independent website and logo designer? Have they assigned the rights
over to you? What if your website code incorporates open-source code
that has licensing restrictions? Intellectual property actually covers an
array of legal ownership claims, which include five basic types.
The first is trade secrets. These are defined as confidential information
that gives a business its competitive edge. Trade secrets can include
business plans, customer lists, pricing, designs, or procedures. At launch,
you'll want to make sure that neither you nor your employees are using
unauthorized IP from a former employer. As your business develops its
own secrets, it will be important to have employees, independent
contractors, and vendors sign nondisclosure agreements or NDA's. NDA's
are critical in court as evidence of a trade secret.
The second kind of IP is a trademark. Trademarks can be names, words,
slogans, pictures, graphics, or sounds that distinguish a product. By
making sure that you have a legal claim to each of these trademarks, you
build brand identity and goodwill but also ensure that you can use the
trademark and that others don't pass off your services as theirs. To see if
someone already has a trademark, there are three quick checks. Number
one, look at domain registrations. Is a dot-com taken? Number two,
Google the name you want to use. Number three, do a free TESS or
Trademark Electronic Search System search in the Federal Registry, to
25
check for registrations. A coherent brand strategy includes the
registration of core trademarks.
The third kind of IP is copyright. Copyright law does not protect titles,
slogans, names, or common expressions. Copyright protection only
extends to original works of authorship fixed in a tangible medium of
expression, giving you the exclusive rights to copy, sell, distribute,
perform, and display a work. If you have a website, you will want to pay
attention to copyrights. If you don't have a copyright or clear license, a
web developer or designer could claim that the website is theirs and shut
you down. The best way to protect your rights is to have a written
agreement that assigns the intellectual property rights to your company
for the works you paid to create, including patents, which is the fourth
type of IP. A patent is a set of exclusive rights granted to an inventor in
exchange for detailed public disclosure of an invention.
A patent can be obtained for inventions that are new, useful, and non-
obvious. Each of these concepts sounds simple, but it's complicated and
based on case law. Because the process of filing for a patent with the
Patent and Trade Office, or PTO, can costs tens of thousands of dollars,
filing a provisional patent with the PTO, which you can do yourself, is a
nice stopgap before formal application.
The fifth and final is publicity rights. The right of publicity or personality
right is the right of an individual to keep one's image and likeness from
being commercially exploited without permission or contractual
compensation.
What this means for you, as you build your business, avoid using anyone's
name or likeness without permission. Intellectual property is so much
more than patents. Protect it. It's one of your most valuable assets, and if
you'd like to know more on intellectual property, I encourage you to
watch Intellectual Property Fundamentals with Dana Robinson here on
Lynda.com.

26
07. Gearing up operationally
Now that you've run the numbers and are confident that you've got the
makings of a real business, let's drill down on the what, where and when.
A great way to do this is to prepare an operational checklist based on
your business plan. For your reference, I've included this checklist in the
Exercise files.
For example:
• What are the processes and procedures you will use to produce
your product or provide your service?
• What inputs do you need, whether physical goods or information?
• How will you source these materials?
• Who are your suppliers or vendors?
• How will you choose them?
Next, take a look at inventory management or how you'll track what you
sell. If you have physical goods:
• Where will you store them?
• Will you build to order or build to stock?
You'll then want to consider logistics and delivery. Once you have
something to sell, what are the logistics involved to get the product or
service to the customer?
For example:
• What are your delivery channels?
• Will you deliver the products yourself or will you outsource?
• If you're delivering a service or information, how quickly will that
delivery happen?
It seems like an obvious question, but when you think about your online
experiences, speed and simplicity are paramount. One of the most
important elements of operations is Customer Service. In preparing a
business plan, you articulate why customers will prefer you to any would-
27
be competitors. How do you need to operate your business so that they
actually do prefer you? And, as you add your first and second employees,
what are your expectations around service?
We sometimes think of the customer experience as marketing. Marketing
is what we say we are. Operations is about making our marketing true.
It's the day-to-day details of running a business.
As an idea person, operations may not be your thing. In a large
organization, delivering day-to-day results would typically fall to the COO
or Chief Operations Officer, while the CEO focuses on long-term strategy.
At some point, you may want to bring on a co-founder or employee who
can be the tactical yin to your strategic yang.
In the meantime, as you look to get your business up on its feet,
remember to focus, not only on the "why," but the "how."
08. Bootstrapping your business
As you build your business, you will likely be short on money, time, or
expertise. If so, terrific. This means you'll need to bootstrap your business
and the need to do so may actually hold the key to your success.
First, what if you're short on money? Real estate entrepreneur Nick
Jekogian shares, "When I started my business, money was the biggest
"constraint. I found ways to turn that into "an advantage and ten
phenomenal years ensued. "When easy money came into the picture in ,
"because I stopped focusing on innovation, "substantial problems with our
business model "occurred, and we experienced significant "losses during
the downturn." When it's do or don't eat, we are highly incentivized to
get the business model right. It pays off. In 2007, Entrepreneur magazine
compiled a list of 500 the fastest growing companies in America. Only
28% percent had access to bank loans or lines of credit. Only 18% percent
were funded by private investors and only 3.5 percent received funding
from VCs. In other words, the majority of these very successful businesses
were pulling themselves up by little more than their bootstraps.

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The second scarce resource is time. While running a business, how can
we turn the panic of not enough time to do everything into an asset?
Several years ago I had purchased an add on the Design Mom blog and
needed to have content up on my blog every day, which I didn't have
time to write. So I invited people to guest blog. As I dared these women
to grapple with the why, what, and how of their dreams, the conversation
happening on my blog was exponentially enriched and my content
became more valuable. The stories shared by these guest bloggers
became integral to my first book, Dare, Dream, Do. My time crunch
produced assets I couldn't have dreamed of.
Finally, what if you lack expertise? A lack of experience or knowledge
about a particular aspect of your business can be a stumbling block, but it
can also have its advantages. After her career in international
development was derailed by poor health, Athelia Woolley started
Shabby Apple, a popular online dress shop. Athelia had almost no
knowledge of fashion industry protocol or jargon because she wasn't
aware of the industry practice of hiring an expensive wholesaler to
represent the clothing line to buyers. She simply set up an online shop,
saving much needed cash and avoiding unreliable partners. The only
manufacturer who agreed to work with her gave her just two choices of
fabric. Because each seam, pleat, and button in a dress costs extra money
to produce, Athelia kept making her design simple, making the design
process easier and faster. In every way, a lack of expertise ended up
contributing to the success of Shabby Apple, which generated over two
million dollars in 2013.
When you don't know how to do something, you can approach it in a
completely fresh and innovative way. If you've let a perceived lack of
resources stand in the way of growing or starting your business, maybe
it's time to think again. It may just be that your expertise in making do
might empower you to do more.

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 03. Building a Team
01. Deciding on a cofounder.
As you launch your business you will need to decide if you are going to fly
solo or form a founding team.
There are number of reasons why you may decide to go solo:
• You have enough of what you need, expertise, networks and money
to get off the ground.
• You want to retain 100% percent of the equity and decision making.
• You like to work alone.
According to Noam Wasserman and author of The Founder's Dilemma,
there is a case to be made for going this route. When companies fail, they
frequently fail because of complications around building a team including
disagreements over roles and compensation.
Ironically though, if you do go solo there's a higher risk that your start-up
will either fail to reach its full potential or fail outright.
In Wasserman's data set of high potential tech and life science start-ups,
only 16.1 percent were solo founders whereas more than one-third had
two founders and 50 percent had more than three.
If you decide to go the route of a co-founder, here are some tips for
ensuring that you pull together a founding team that works:
First, you want to look at the relationships of the co-founders. There
were be an allure to founding a company with family and/or friends. I
know. I've done it. It didn't end well on several occasions. While my
experience is anecdotal, Wasserman's research suggests that if you want
your business to succeed, the odds will improve considerably if your co-
founders are people you've worked with previously.
This is in part because with the prior work relationship you have already
thought carefully about your respective roles and have verified that you
have complementary rather than overlapping skills and that you can
actually work together. Further, one of you has probably already emerged
30
as the leader and it won't necessarily be the person with the idea. Making
a call about who will be in-charge likely implies you've made a decision
about how you will make decisions. There will still be disagreements so
be aware of the titles you give yourselves and their implications.
Third, you need to think about how to divide the spoils. This will be the
hardest conversation you have. If you've worked together before it will be
a bit easier. Ideally though, you'll wait as long as possible to divide the
equity. Apportioning equity is typically based on the founder's past and
present contributions, opportunity costs and motivations.
Because roles and responsibilities invariably evolve, a dynamic equity
split is advised. This involves breaking down the launch of the start up
into separate phases weighting the importance of each phase.
Let's say you're starting a business with two other individuals. You decide
that the pre-launch phase of your product will create 40 percent of the
companies value and that you with the idea will contribute 60 percent of
the value during that period while each of your partner is just creating 20
percent of the value respectively.
On that basis, for the first phase or pre-launch phase, your equity split is
60 percent of the 40 percent or 24 percent while your partners receive 20
percent of 40 percent or 8 percent of the total equity of the company. In
the subsequent phases, the remaining 60 percent of the equity will be
allocated.
As you develop this template together you can focus on criteria,
weightings and responsibilities rather than quibbling over specific
numbers.
The most common type of a dynamic equity split is vesting which requires
founders to earn their equity stakes based on time or milestones. Again,
this is a hard conversation, but if you can't have it you may have the
wrong partners.
Working with a co-founder is similar to marriage. In fact, it's frequently
more difficult to dissolve a business partnership than a marriage. To move
31
through the ups and downs, it's vital to sort out relationships, roles and
rewards.
From my experience it's also important to have a lawyer in place who can
protect your interest. Once that's in place it is vital that you look for every
opportunity to reinforce trust because when you have a business partner
who has your back, you can go through nearly any up and down the
business throws your way.
02. Hiring the right people.
Your business is growing. You can no longer do everything by yourself. It's
time to hire your first employee.
You know it's a critical decision. How do you get this right? The first
suggestion is to identify what you really need the hire to do. This is
surprisingly difficult because there's often a gap between what we think
we need and what we actually need.
Further, according to recent research, we tend to hire people similar to
us. This helps with communication, but there also needs to be enough
difference so skill sets are complimentary, not redundant.
In order to piece together a high-performing team, there are a number of
diagnostics available such as Teamability and Plumb.
Just as the Myers-Briggs test helps you identify your personality type,
these diagnostics help you determine your team type or what kind of
team player you are.
The second is: "Try before you buy." Some people interview extremely
well, others don't, which is one of the reasons that hiring is so tricky. It's
like running for President of the United States. Campaigning requires a
very different skill set than actually governing.
During a trial period, you can gauge how hard a person works, uncover
their true super powers, and most importantly, see how they respond to
stress.

32
Everyone has bad days, you just want to make sure that your bad and
their bad isn't a dangerous cocktail. There used to be a stigma attached to
asking people to free-lance for a time, but with our work force becoming
increasingly modular, a trial stint is more common.
A corollary to this is to hire for expertise, not credentials. As Francis
Pedraza, CEO and founder of EVRST says, quote: "The experienced
candidate might have a resume, "which, on paper, gives you a lot of
confidence, "but you have to be open to the possibility "that it might be
the candidate with less experience, "or with an unconventional
background, "who is the right person for the role. "Some of my most
expensive hires I made "ended up not working out, while several "of my
unconventional hires have been total game changers. "For example, one
engineer without "a college degree almost instantly transformed "the
entire engineering culture at the company. "Not only was he a great
individual contributor, "creating very dramatic overnight improvements
"in the performance of our application, "he has won the respect of the
entire product team, "and eventually the entire company, as a leader."
End quote.
A fourth is to think of employees as 'assets', and not 'cost centers'.
Athelia Woolley, the CEO of Shabby Apple says, quote: "For several years,
I was 'penny-wise "and pound-foolish' about hiring. "I tried to control
costs by spending "as little as possible on employees. "A couple of years
ago, I hired several people "to be Customer Service Representatives "and
paid them slightly above minimum wage. "At the time, I thought that it
was an easy job "and shouldn't cost the company much, but I thought
wrong. "After spending an inordinate amount of time spinning "in the
revolving door of surly and irresponsible hires, "I learned that if I just paid
several dollars "more per hour when I hired, I would attract better people.
"Now my payroll costs are higher, "but I spend much less time managing
poor hires, "and our customers receive service "from helpful and happy
employees." End quote. Booker T. Washington said: "Few things help an
individual "more than to let him know that you trust him."

33
Once you've done your homework on a hire, hammered out the rules of
engagement, it'll be time to do the seemingly impossible: Let go and trust
them to do their job.
03. Getting the right advisors on board.
As you build your company, you may decide that you want or need an
Advisory Board.
An Advisory Board is the committee of typically four to ten individuals
who lend their expertise, networks, and cachet to the organization,
without taking on the fiduciary and legal responsibilities of a governing
board.
Neither case, board members are expected to be ambassadors or walking
billboards for your company.
In putting together your board, identify what you don't have but need to
take your organization to the next level. Whether it's strategic
partnerships, improving customer acquisition, scaling operationally,
driving down costs, or personifying your target market.
One clue to what you need is to observe which tasks you and/or your
team put off doing saying, "I know that's important, but I'll deal with it
later," but they never do.
Most of us have things we worry about almost obsessively. Those things
get done. With your Advisory Board, you want to bring on an advisor who
will worry about the things you don't want to think about.
Next, be aware of an inclination to bring on more experienced versions
of you. These are the people you most admire. You may even want to be
like them when you grow up. One of these individuals on board is good.
They can act as an in-house mentor, but the more overweight you are on
expertise you don't need, the more likely you will be underweight the
expertise you do need.
Then, only bring on people you trust. Because your Advisory Board
members will have core competencies that are complementary to yours,
34
they will know things you don’t, which means you may feel
vulnerable. You need to feel safe, so you can ask stupid questions.
Once you've got the right people on board, make specific asks such as: "I
would like to know I can reach out to you for advice "and you will respond
within 48 hours." Or "I would like you to review the company financials
"once a quarter and make suggestions for our "KPIs or key performance
indicators." Or "review our RFP or request for a proposal "for a new
technology platform."
Other possibilities are make recommendations around customer
acquisition, refine our investor pitch, connect us with media outlets or
introduce us to prospective investors.
Because you're drawing on hard-earned expertise, it's important to find
ways to compensate your Advisory Board members. Depending on what
your company does, offering the product you produce can often be an
appropriate way to compensate board members. Another common form
of compensation is cash, which can range from a few hundred dollars per
quarter to several thousand.
For growth startups, the CEO often offers equity. A typical equity
allocation is to basis points or 25% to 50% of 1% of equity per advisor. So,
what does this look like? Well, let's say your company is valued at
500000$, 1% of that is 50000$. A sake of 50 basis points is worth 2500$.
Finally, find people who love your company. Advisors can be among your
most important advocates. Hunt for people who love you and your
product and would likely tell people about you, even if they weren't on
the board. Paraphrasing the Beatles, "You really can't buy my love." If it's
not just a little personal, you're not in business.
04. Tapping into networks of expertise.
You know it's important to bring on the right co-founder, hire the right
people, and get the right advisers on board. But how do you actually find
the right people. Much as a computer network is a collection of
computers that facilitate communications and allow users to share data,
35
we network to gain access to broader resources including expertise and
capital.
Here are a few tips for activating and expanding your network.
Once you've done the hard work of identifying resources you need to
build your business, make sure you can articulate what you're looking for
30 second elevator pitch style.
Distill ask will make it easy to tap into your network. You'll want to start
by networking with your friends and family. They may not understand
exactly what you're doing, but because they want to see you succeed
they will likely be supportive and helpful. If you can simplify what you
need, the people you build strong ties with will do what they can to help
you reach your goals.
While individuals with whom you have strong ties have a vested interest
in you, don't discount the value of your weak ties or acquaintances,
which you have more of than ever because of sites like LinkedIn.
A distilled ask gives them something to trade or to barter with as they
expand their own network. Just as people are more likely to find a job
through weak ties according to social psychologist Mark Granovetter, you
are more likely to build your business through weak ties, as they can
expand your access to expertise beyond friends and family.
A weak tie can be the node or connection point into an entirely different
network. In addition to your ask being clear, you'll want to ask the right
person for the right thing. Ideally, something that may be valuable to you
but is very low cost for them. For example, the CEO of a start up I advised
had spent a number of hours on market research not getting an answer.
Because I know someone in this particular industry, I was able to get an
answer very quickly. The CEO got valuable information at a low cost to
the expert I asked. And remember, networking should be transactional, a
give for a get. Asking someone to do something for you just to be nice can
deplete your social capital very quickly. When you ask for help and

36
receive it, I would recommend asking what you might do for the giver, no
matter how asymmetrical things may seem in your relationship.
You may be surprised by what a person of higher status might need and
you might provide for them.
According to social anthropologists Melinda Blau and Karen Fingerman,
"Most of us like to think of ourselves as independent agents, "marching
through life to our own Ipod soundtrack. "But our relationships propel us
as well. "The problem is that networks are like traffic jams. "You can easily
see the cars "that surround you, your intimates. "But it takes a helicopter
to view your "entire entourage, your social convoy. "Seeing our lives from
this aerial view, "allows us to understand that life is as "much about who
you associate with as who you are. "And the ability to bring people into
your convoy "when you need them is a key coping "mechanism in a
complex world."
To build a business, we need to network. We may be wary of considering
transactions or trades in the context of a relationship, but we will be far
more effective by remembering the give and get rule. Networking is, in
fact, a lot of work. But if we do it well, we can get so much more done.

37
 04. Marketing Your Business
01. Telling your story
In order to persuade customers to buy your product, suppliers to provide
lines of credit, banks to lend and investors to invest, you will need to tell
your story.
In crafting your story, the first thing you want to do is answer the
question "Why? "Why did you start your company? "Why this product or
service? "Why you?"
Be patient with yourself during this process. Getting this story on paper
when the startup is your brainchild and you've pored so much of your
time, talent, and identity into the business can be surprisingly difficult.
To help you get started, I'll share with you the Second Why of Nicole
Hamilton, the CEO and founder of TacFi, a software platform that makes
the mortgage process simple for both broker and buyer.
When Nicole re-financed her home a few years ago, the process was
opaque and she spent , dollars in unnecessary costs. She decided to build
a software platform that would simplify the sale of mortgages so that
others wouldn't have to experience the same pain and frustration. As she
notes, "For many, a home is the biggest "investment they will ever make.
"If my expertise and concern for the customer "helps save them money
and illuminate the process, "I've done my job."
To help you figure out the why of your product, you may also want to ask
your customers, "Why do they buy your product? "Why do your
employees want to work at your company?" And when people engage
with your brand on social media, what do they say?
The second thing you will want to do is to make your message
memorable. There are a number of techniques you can employ to do this.
Emmy Award-winning journalist, Kare Anderson, suggests that you use
familiar slogans in fresh ways. Piggybacking on the famous "Got Milk?"
slogan, a hospital in California launched a billboard campaign seeking

38
blood donations with "Got Blood?". She also advises "startle with
specifics", such as this from Bill Gates: "10 times as much funding is
devoted to research "on the prevention of male baldness "as malaria, a
disease that kills "more than one million people each year."
Third, make it easy for people to share your story. One of the best ways
to do this, according to world-renowned pitch coach, Sam Horn, is to craft
a rhythmic catchphrase people can repeat, word for word.
The best way to craft an airtight sound bite is to use alliteration, iambic
meter, or five syllables, and rhyme. For example, "Click it or ticket." is
better than "Buckle up for safety." She also suggests that you come up
with a business name that people get and enjoy the first time they hear it.
Zappos, Google, and Yahoo are fun to say. GPM Technologies and
Sempran BioScience, are not.
When people can repeat your story and delight in saying your name, they
are more likely to become brand ambassadors. In terms of getting people
to share your story online, in addition to putting your story in writing, tell
your story with images and with videos. In an era where content
marketing is king, for brands the content has become the ad.
As a startup, the best advertising you have is a compelling genesis story.
Whether customer, supplier, lender, or investor, we want to buy from
entrepreneurs with a passion for what they are doing. It's a given that you
want to make money. And your business plan and financial model will
help tease out the market opportunity and whether there's early traction.
But it's the passion that predicts grit and staying power. One of the best
ways for a customer to gauge passion is to say, "Tell me your story."
02. Building a website
There are several elements to building a good website.
The first is usability. Because users are not patient enough to spend a lot
of time trying to figure out where information is.
• Menu items need to be clear.
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 • Text needs to be readable.
• Navigation should be easy with important information less than
clicks away.
• The site should be designed to work with any type of browser and
on any type of device, whether on a laptop, tablet, or smartphone.
The second consideration is structure.
Just as a builder uses blueprints to build a house, you want a blueprint for
your site.
Creating a website goes much more smoothly if you take the time to
sketch either by hand or on a computer.
• What the pages will actually look like?
• Where menus will go? What they will be called?
• And where photos and text blogs will go?
You'll then want to consider layout. The layout should be:
• clean and engaging to the primary users and customers.
• Branding, colors, and fonts should be consistent throughout.
And remember to optimize your site for lead generation and conversion. I
recommend that you use HubSpot's free marketing grader, a tool that
measures and analyzes all of your marketing efforts as checklist.
If you build the website yourself, there are number of good options.
• The first is WordPress, which can be used as a blog or the back end
of a regular website.
• Another is Squarespace, a hosted service that allows you to build
sites with a drag and drop editor.
• If you're looking for an E-commerce solution, Shopify and Big Cartel
are reputable.
If you decide to hire someone to build your website, be aware that there
is a difference between a web designer and a web developer. The
designer is like an architect, the creative expert who creates the look of
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the site. They work with you to make sure the pre-designed sketches look
the way you want. The designer then mocks up the site and hands it off to
the web developer.
A web developer is like a builder, the one writing the code. Taking the
creative vision of the client and designer and making sure the website
looks and functions correctly.
For basic sites, you may want to go the route of a designer who can do
basic programming customizations on WordPress or Squarespace. Even if
you are outsourcing the build, you will still need to give some real
thought to the structure and layout. Will your blog run ads? Do you need
to shop? What do you want people to learn about the services and/or
products you provide?
Designer Macy Robison who I frequently work with, always asks for
inspiration images or even a lists of links to other sites I like, so as to get
an idea of my aesthetic as well as out of my competitors.
The designer will ask you if you already own a domain and have hosting
set up. They can either instruct you on how to acquire these or they will
provide that service for you. They will also ask for any logos, marketing, or
design elements previously utilized by your business to make sure the
branding is cohesive. Your website is both the calling card and point-of-
sale. You want to get this right.
03. Chasing customers until you catch them
Once you have a product or service that you know will sell, it's time to
start marketing.
One essential tool is a blog. A blog is a long-term marketing asset that will
bring traffic to your website. The more blog posts you publish, the more
indexed pages you create for search engines to display in their results.
The stickier the content, the better. This doesn't necessarily mean pretty,
professional or well-written. It means unique, memorable and shareable.

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Which leads to the second way to drive traffic to your site, social media.
What you use will depend on your preference and where the customers
are.
Artifact Uprising, for example, they make high-quality photo books. They
focus on Instagram. While in-bound marketing company Hubspot,
concentrates on Linkedin. It used to be that the best way to get SEO or
Search Engine Optimized traffic to your site was to accumulate as many
backlinks as possible. These incoming links are still helpful, but social
media coverage is increasingly important in driving SEO power.
Now that you're successfully pulling in visitors to your site, you're ready
to focus on Lead Generation or the process of converting visitors on your
website into leads. A person usually becomes a lead when they fill out a
form in return for some sort of offer, whether it's a webinar, a free
product or something else of value on a targeted landing page.
You'll then want to identify Brand Ambassadors. While you need to be
able to tell your story, it is typically more effective to have others talk
about you, than to talk about yourself. Brand Ambassadors already like
you. As you incentivize them, they'll talk about you even more. The
incentive doesn't need to be monetary. It can be a discount or you can do
what Diet Coke did. On Brand Ambassador, Callie Schweitzer's, birthday,
they delivered a year's supply of Diet Coke to her doorstep.
To further drive traffic, consider ad campaigns. CEO, Athelia Woolley,
says Google ads, Yahoo ads, Bing ads, Facebook ads, they work. But she
recommends you hire someone to manage them. It may seem tempting
and cheaper to manage them yourself, but it is not recommended. This is
a service worth paying for.
A cheap online marketing tool is the Affiliate Program or a fee-for-
referral. Two of the largest marketplaces are Commission Junction and
Pepperjam. As with ad campaigns, you need to understand how it works,
so you don't get taken advantage of. Again, from Woolley, "Commission
Junction offers "free online seminars on how to either "hire affiliates or
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become one yourself. "Even if you decide to outsource your affiliate
program, "you may want to take one of these courses, "so that you can
understand the details behind the marketing system." Once you're ready
for prime-time, contact media outlets. If you're contacting media outlets
yourself, forego the large, national publications. Instead, opt for smaller
bloggers, Instagramers and YouTubers.
Offer to give them something in return for talking about your product. If
you're looking to hire an agency, try to find one that you can pay on a fee-
for-service basis, like Live in Five PR. Not on a monthly retainer. Retainers
create misaligned incentives and lock you into a service.
Finally, remember that nothing ruins a bad business faster than good
marketing. There are so many ways to get the word out about your
company. You'll know you've hit upon the right mix because when you
market well, customers will find you.
04. Serving your customers
As you think about your customers, there are several things I'd like you to
consider. The first is, do you love your customers?
Marketing guru Seth Godin says there are two ways to think about your
customers.
You love your customers because they pay you money, or you love your
customers and sometimes there's a transaction.
In the first, the customers are a means to an end, in the second, you exist
to serve customers and profit allows you to do that.
If you don't love your customers, that's not necessarily a bad thing, but it
may be a cue that you're on the wrong business for you.
When you find customers for whom you can be all in, you wanna show
them the love. All too often we spend every waking hour and huge line
items in our budget on customer acquisition.
Once a prospect becomes a customer, we forget them, just as we
frequently do in our personal lives. When we're dating, we continually
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find ways to delight our beloved. Surprise texts, special meals, hard-to-
come-by event tickets but once we've converted them to a boyfriend,
girlfriend, husband, wife, we put the relationship on maintenance. For a
time we stay engaged, but once we become secure, we start to take the
relationship for granted.
There are a number of ways to show love.
One is to find the yes in a customer request. Companies that say yes are
more likely to go viral. This is easier said than done because it means you
empower your employees to do what they need to do when the
customer needs it. Which means you need employees with good
judgment. Therefore, you need to hire well.
You'll also want to be responsive. Most customers want to be left alone
until they want something. When they ask, hop to it. An increasing
number of internet users who reach out to a brand online expect an
answer back within 30 minutes.
And, learn to apologize. Customers may not always be right. In fact, they
frequently won't be. According to research out of the University of British
Columbia, customers are rarely willing to shoulder the blame if they've
made a mistake in obtaining or using a product or service. The study show
that 79 percent of those who perceived it was their fault were likely to
shift the blame to someone else. Even so, customers need to win.
Amazon is a great example of a company that gets this.
Finally, you'll want to follow up. A big difference between good and great
service is follow up, not customer service surveys. These take time, but
personalized follow up. When the customer asks for something
specifically, get back to them quickly, calling them by their formal name.
Delight them, and then some.
According to Jeff Riddle, an expert in customer experience, based on the
analysis of huge amounts of data, 70 to 80 percent of new customers are
generated not by formal marketing and acquisition initiatives, but by

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word of mouth, from the five percent of existing customers that were
most delighted with the product and service.
The cost of customer acquisition continues to climb. The irony is that if
you care about your customers, they will trust you, and trust, is a shortcut
to customer acquisition. If you really wanna build your business, stop
spending time and energy on would-be customers, and give your current
customers some love.
05. Refining your business idea
You've made a lot of progress in building a business. Now it's time to take
a breather and survey the scene, to see what you've learned and where
you want to flex, possibly event pivot.
Let's begin by reviewing your sales.
• Where are your customers coming from?
• Are you solving the problem you thought you would solve?
• Selling more or less than you thought you would?
• What about the price point?
Initially, you're going to look at vanity metrics, like number of visits. We
all do. On the surface, this is exciting, but it isn't going to give you any
information or insight about why your business is growing or not.
• Like, what percentage of visitors to your site are returning visitors?
• What percentage of visitors are converting into leads,
• Meaning signing up for something on your site?
• Is this percentage increasing or decreasing?
Now, I know you may be thinking, whoa, this is a lot of questions. To
make reviewing and considering these questions easier, I've included a
list of questions in the exercise files. Be sure to take a look and follow
along.
So, one of the best ways to really get at whether your product or service
is actually improving is cohort analysis. At its simplest, this means

45
dividing up your customers into related groups, rather than viewing them
as one unit.
For a start-up, cohort analysis usually involves clustering users by the day,
week, or month they first started using your product. The great thing
about this kind of analysis is that each new group provides the
opportunity to start with a fresh set of users. This allows you to gauge
how well you're engaging with customers or audience, independent of
growth.
Next, you want to examine costs.
• Are they higher or lower than expected?
• What about the cost of customer acquisition?
• Which source of customers is most cost effective,
• and which would be easiest to scale?
• Again, using cohort analysis, is the cost of customer acquisition
increasing or decreasing?
It's also time to do a check-in with your co-founder.
• How are you working together?
• Are your roles and responsibilities stable or are they shifting?
• If you agreed on a dynamic equity split, is it time for an adjustment?
Consider your employees. Are you in compliance with the labor laws?
Specifically, is everyone who should be classified as an employee,
classified as such? There are stringent laws about paying people as
independent contractors. And are your employees happy? Is their ability
to serve the customer improving? Are they improving the bottom line? If
someone isn't really working out, are you dismissing the person quickly
and appropriately?
Based on everything you've learned,
• how is your burn rate, the amount of cash you're losing monthly,
changing?
• What adjustments are required?
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Among the most important questions are those that involve self-
reflection.
• Are you still playing to your strengths?
• And are you still enjoying being an entrepreneur?
As you complete your periodic check-in, if you find yourself going in a
different direction, you won't be alone. Seventy percent of all successful
new businesses end up in a different place too, from Groupon that
started out as an activism platform and Netflix that began as a door-to-
door DVD rental service.
As an innovator, you are in pursuit of a something that is yet to be
defined. While it's important to develop a business plan, a financial
model, you still need an emergent strategy. You've now taken a step
forward, you've gathered feedback. Today, it's time to adapt.
06. Becoming a thought leader
One of the most important things you can do to grow your business is to
become a thought leader. A thought leader is a person who is on the
cutting edge of a field. A thought leadership isn't just about expertise. It's
also the ability to leverage the brand equity that comes from being a
thought leader.
When an idea multiplies and distributes throughout the internet with
your name attached, leadership becomes thought leadership.
You may be thinking I've got enough to do as an entrepreneur. I don't
have time to become a thought leader too. But the fact is being a thought
leader will be a boon to your business.
The first reason is that when you're the expert, you beat the
competition. If a potential customer has to decide between a company
that has a CEO who produces content as an expert in their field, Steve
Jobs, Sheryl Sandberg, Tony Hsieh, and a regular company, who will they
choose?

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The second reason for becoming a thought leader is it's a tool for lead
generation. When you generate knockout content, people will want to
hear what you have to say.
Clay Christensen, the father of disruptive innovation is a terrific example.
Because people wanted a piece of his intellect. He's launched a
consultancy, a think tank, and an investment firm.
When a prospective customer consumes your ideas, they are one step
closer to buying your product.
As for how you become a thought leader, begin with your genesis story.
• Why your product?
• Why your company?
• Why you?
All of which you want to share on your website. You are taking a position
establishing a point of view.
The next step is to start blogging. You may be thinking, "Why don't just
publish a book?" But at the outset, it's tough to get published. You might
also not know exactly what you want to say.
A blog is a low cost way of writing your way to a point of view and
socializing your ideas. If writing isn't your strength and conversation is, try
podcasts. A visual design, look at SlideShare. The camera loves you, video.
Whatever the medium, analyze the ROI or return on investment on each
platform and prioritize accordingly.
Next, you want to pitch online publications. It used to be that you needed
to be a professional writer, a reporter, but now seasoned enterprenuers
can pitch great ideas and get published.
Kathryn Minshew, founder and CEO of Daily Muse, a workplace site for
millennials is a good example of this. Kathryn has written several pieces
for Harvard Business review. There are also publications that don't
involve gatekeepers. Those with national reach like Huffington Post,

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Medium, or LinkedIn. There are local papers, local websites, which you
can cover local politics and events.
While publishing on platforms much bigger than your personal or
company website helps amplify your message, social media is still a must.
You don't need to be on every platform. Not only because your audience
isn't, but because some are better suited to your strengths than others.
Finally, speak at conferences. Speaking is a great way to establish your
expertise. Whether as a keynote or a panelist, provided of course that
you're prepared. One of the most important traits of a successful
entrepreneur is the ability to persuade. And who better than you to take
the lead on persuading people to buy your products and services.

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05. Scaling Your Business
01. Using the right metrics
As a startup, you won't have everything figured out, but you do need to
know you're moving in the right direction.
This is where metrics come into play, having access to numbers that can
provide a snapshot of how your business is doing.
The good news is you only need to focus on five metrics:
• acquisition,
• activation,
• retention,
• referral,
• revenue
Or AARRR, commonly referred to as pirate metrics which were
popularized by venture investor and PayPal alum, Dave McClure.
I'm going to talk about these metrics in the context of an online business,
but you'll quickly see that with minor tweaks they can be applied much
more broadly.
The first metric is acquisition or how many people visit your store or site?
So let's say you search engine optimized your site, are engaging on social
media, and you may even have a few mentions in the press. You've got
visitors. If you're like me, you're tracking how many probably using
Google analytics. You'll know if you have the right kind of visitors or
potential customers by tracking your bounce rate. Your bounce rate is the
percentage of customers that visit your store or site but leave
immediately without completing a transaction. A healthy bounce rate is
around 30 percent so if you have 100 visitors, 30 actually land.

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The second metric is activation or the percentage of users who not only
land on your site but have a happy first visit. They stay more than
seconds, read two plus pages for example. You want this number to be at
least 50 percent of all your visitors. From here, you're looking for at least
20 percent to click on a link or a button.
The most important metric is retention. This doesn't mean a visitor has
made a purchase. It just means that they're signaling they plan to come
back by providing you with their contact information, for example. This
number should be at least 10 percent of total visitors, but of course will
vary depending on your business. A simple way to get started with
retention is interviewing customers and potential customers or as Steve
Blank say, "Get out of the building." This will likely mean engaging on
social media, reading and responding to inquiries quickly, anything that
will better acquaint you with what people are really hiring your business
to do.
The fourth metric is referrals, the customers who recommend you. A
successful business has a viral coefficient greater than one, meaning for
every customer they recommend you to more than one person. What you
need here is for at least one percent of your visitors, and thus a sizable
percentage of your actual customers, to tell more than one person about
you and the sooner the better.
The final metric is revenue. You want lots of visitors who sign up, come
back and talk about you, but you are only in business if people are willing
to pay you so the question is how well are you monetizing visits?
The conversion rate or percentage of visitors that become customers will
vary depending on your business but should be, at the very least, one to
two percent.
Shortly, you will be ready to scale your business, at which point the
number of metrics you track may multiply. But during this
experimentation phase when you are seeking empathy, stickiness and
virility, the pirate metrics are the ones that matter. And remember, if
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your metrics make you just a little bit embarrassed, then be assured
you've got the right ones.
02. Learning to negotiate
One of the skills that you must have as an entrepreneur, is the ability to
negotiate. Here are a few suggestions on how to do this.
The first is signalling when you're transacting. If you've come out of the
corporate world, unless you're in sales, you're just always a soft sell.
There's a transaction, but you may never actually negotiate. As an
entrepreneur, you will negotiate continually, with your customers,
suppliers, and possibly investors. It's important to give cues so the people
know when you're entering into a negotiation, such as, "This is what my
company does. "Here's the problem we solve for our customers." This, by
the way, is one of the reasons it's easier to do business with people
you've worked with before. That you're transacting is a given, but it's just
not always the case with friends.
The next thing you want to do is learn to sit on both sides of the table.
Another way to say this is to look for the win-win, learning how to lay out
the logic of what you're proposing in the context of your relationship. This
also means that you don't negotiate just to negotiate. Sometimes what
the party has presented is fair enough, and for the sake of the
relationship, you stop. When it's not about me, but we, you're sitting on
both sides of the table.
The next thing I would suggest you do is to avoid ultimatums. In film and
television we often see stand-offs and ultimatums, they make for great
drama, but don't try this at work. When you are at an impasse, be
creative. Consider the whole deal. What do you have that is valuable to
your counterpart, and vice versa? Also ask yourself, "What deal would
make me "over-the-moon happy, or trigger my resent-o-meter?" Now,
strike a deal somewhere in-between. This doesn't mean you never say no.
When you set a price or a point at which you need to walk away, you
remove stress and anxiety. If you know when a transaction is
unprofitable, you will do more deals that make sense and less the don't.
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Another thing I'd recommend is you negotiate is to look to the horizon.
Thinking about the long term requires confidence, though. You have to
believe you can get to where you want to go, so it's scary, but it's vital. It
will guide you in tactical negotiations that drive short term business
results and push you to negotiate in such a way that you preserve the
relationships you need to stay in business.
Now, something I want you to watch for is wanting a deal too much.
When a negotiation becomes charged with emotion, there's usually
something else at play. It's important to figure out what it is, because it
makes you vulnerable, and that means you're probably about to give up a
lot, and you still won't get what you really wanted.
Nothing will improve your bottom line, personally, professionally and
emotionally more consistently than being able to effectively negotiate.
Some of us are good at the get, others at the give. But a one-sided
approach to negotiation leads to fractured relationships. Learn to do
both, and you can build a business, and relationships that last a lifetime.
Now, if you'd like more information on effective negotiation skills, be sure
to check out Negotiation Fundamentals with Lisa Gates, right here on
Lynda.com.
03. Minding your cash
According to the US Small Business Administration, nearly 30 percent of
the businesses declaring bankruptcy cite problems with the financial
structure of the company. And the fact is, as a startup, cash will probably
be tight. At a minimum, you should know what your cash burn rate is so
that you know how much runway you have.
For a refresher on burn rate and runway, check out the video in chapter
two on building a financial model. Again, though, this is at a minimum. In
order to run your business well and without the stress that uncertainty
brings, you will need to know more.
On that score, you may find the advice from entrepreneur, Chris Johnson,
founder of Wakefield Media, especially helpful.
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The first step is to see how much cash you have once a week. Look at the
balance of your accounts, checking, savings, and anywhere else you may
have available funds. That's your cash on hand. Then look at your
receivables, money you've earned but haven't yet collected. What could
convert into cash this week? Is it possible that you can nudge the
collection process forward and what do you need to pay this week? As a
startup, you can't possibly think in years and not really even in months.
You've got to know where you are week to week.
As a second step, act like you're broke and do a -week cash flow
forecast. You may have plenty of cash, but if you act like you don't, your
cash will last longer and you'll have more of it. What are your expected
inflows over the next weeks, your outflows? Watch out for confusing
revenue with cash flow. Some people take longer to pay than expected or
they don't pay. Anticipate unexpected expenses. A -week time frame will
allow you to capture the ups and downs of a quarter to think concretely
and realistically. Sure, you have projections, but for a startup, any
forecast beyond a few months is fiction.
The third step involves what is referred to in accounting as closing the
books. While a hard closing is an involved technical process which you
will need to implement as you scale, for now a soft close will suffice. It
involves categorizing your transactions. This, by the way, is something
you may want to outsource. A bookkeeper, for example, can track your
receivables and payables and make sure all your receipts, contracts, and
invoices are accounted for. This process allows you to be in tune with
your numbers and it will make end of the year accounting much less
torturous.
The net affect of tracking your cash will be higher revenues and
collections, lower costs, and a signal that you need to start fundraising
before your situation becomes bleak. We improve what we measure,
mind your cash, and ka-ching.

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04. Put failure in its place
You've started a company and it goes belly up, or you launched a new
product and not only does it fail to sell, customers actually hate it.
What happens when you dare to dream, make that dream real, and then
fail? As I've grappled with my own "this just may break me" failures, I am
increasingly convinced that building a business is a process, and engine of
experimentation.
As we learn by doing, something will eventually and inevitably not work.
As former DARPA official, Ken Gabriel, said, "An important part of
disruption is "having the nerve to take on a really big failure."
At this point, we have to decide how we'll approach failure. As you see
here ask yourself "Did I fail my way into a black hole? "Or is failure a tool
that will help me "build a more successful business?" Here are a few tips
to get you started.
First and foremost, acknowledge the emotional effect failure has on you.
When you start a company, there is a fantasy that most of us engage in.
You'll work hard, your business will succeed. You will find contentment
and happiness with your accomplishments. But business isn't one straight
shot to success. There are ups and downs like the stock market, with the
occasional zero. Then what? When I backed a business that imploded,
apart from feeling mortified, I was heartbroken. I had been all in. I had
envisioned a future in which I would achieve a goal. Perhaps be hailed as
the conquering hero. And then I wasn't. I've learned it's important to
grieve. When we sublimate the sadness, we risk losing our passion, which
is essential to building a business.
Next, ditch the shame. If you let failure become a referendum on you, the
millstone of shame will drown you and your dreams. According to Doctor
Brene Brown, "When the ethos is kill or be killed, "control or be controlled,
failure is "tantamount to being killed." Being perceived as weak can illicit
tremendous shame. For example, the business I fronted that went belly
up, shouldn't I have better read the situation? How could I claim to be a
55
savvy investor? If we don't ditch the shame, we will never throw
ourselves into another venture. Pull shame out of the equation when you
fail and there's no limit to what you can accomplish.
As you deal with failure and building your business, the narrative you
construct is key. It's about learning the right kind of lesson, or what Lean
start-up guru, Eric Ries, describes as validated learning. Ask the question,
"What valuable truth did "you discover about the present and future
"prospects of your start-up, by failing? Was my take away, when the
business that imploded, to never invest in another friend's business?
Instead, I gained the valuable insight that vetting prospective partners is
vital. As are clear rules of engagement. "Learning is the essential unit of
progress "for start-ups," says Ries.
For most of us the mere prospect of failure is a take no prisoners mind
game, pushing us to the edge of an emotional cliff, where shame would
happily push us over. But in a world in desperate need of your start-up
mentality, it's important to bury shame and to see failure for what it is, an
opportunity to learn valuable truths and a signal that our start-up really
matters. So much so that we're willing to invest, not only our minds, but
our hearts.
05. Managing stress
As an entrepreneur, you are a dreamer, dedicated to achieving your
goals. Your passion will make you successful. It can also cause stress.
Which means that your mind and body don't yet have the adaptive
capacity to deal with what is happening.
This can affect your memory and immune system and overall health. And
because people pick up on and mimic your stress level, when you're
stressed out, your team likely is too.
The question then is how will manage the stress of high expectations,
long hours, setbacks, and successes? And importantly, increase your
adaptive capacity as an entrepreneur?

56
The first step is to give yourself a break. You can do this by approaching
your business as a marathon, not a sprint. According to marathon training
expert, Jeff Galloway, the best way to do this without injury, is to adopt
the run, walk, run approach.
Another aspect of this is you need to build stamina and endurance. If
you're not used to working flat out, starting at a sprint pace is
unsustainable. You need to work up to it. Therefore, figuring out how
you're going to gradually increase your pace is also an important part of
this approach.
One thing I do is to work in 15 minute increments. Setting the timer on
my phone, after which I take a five minute break. At night, I've stopped
checking my phone. And wait for 15 minutes in the morning before
checking messages. Thinking about what's really important. It can be
through prayer, meditation, or journaling.
Also, consider resting one day a week. It's counterintuitive, I know. But
trust me, you will be more productive in the remaining days.
The next step to managing stress is to take care of your body, exercise.
When you take a five minute break from working, walk for five minutes.
Eat good food, meaning eat or drink more of what makes you feel good,
avoiding what debilitates you, mine is sugar.
And follow Arianna Huffington's advice to get more sleep.
Pick just one. Exercise, food, or sleep, and work on it this coming week.
The third step is to maintain connections with the people who will love
you, whether your business is successful or not. Maybe you call a friend
or a family member once a day. You'll know if the person is the right
person because there's no transaction, nothing bought or sold when you
hang up the phone. Even better, have lunch with or take a walk with a
friend once a week. If you have children at home, have dinner together
whenever possible. When you have a world that revolves around
relationships outside of your work, you will be happier and better able to
adapt to the stress of startup life.
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Finally, do not underestimate the power of your mind. If you, like me,
subscribe to Carol Dweck's notion of a growth mindset, there is nothing
about us, our bodies or minds that is fixed. Which means if you will give
yourself a break, take care of your body and connect to those you love,
you will increase your adaptive capacity, becoming better at dealing with
the stresses of startup life and at turning setbacks into success.
06. Documenting processes
As a start-up, everything you do is in essence an experiment. Frequently,
it is a messy process of trial and error. With some things working well,
others poorly. As you start to figure things out, and are ready to scale
your business to it's ideal size, it's essential that you transition from
messy trial and error to well oiled machine.
Scaling is simpler when a business is running efficiently. Efficiency frees
up money, time and resources that can then be plowed back in to grow
your business.
The best way to become efficient is to codify or document your
processes. Outlining the critical tasks that take place at your company. A
process document explains how you do what you do.
It eliminates confusion amongst your employees and as you articulate
your current practices, you will unearth flaws. This will allow you to
improve.
As you codify your processes, you'll want to start with just one process,
rather than the entire workings of the organization.
And I'd recommend starting with the process that's in a reasonably good
working order. Maybe it's accounting or bookkeeping, or how your team
communicates and shares information, how you pay invoices,
manufacture your product, or retain customers.
Once you've decided on a process, you'll want to interview the people
involved. Ask them to show and tell how they do what they do. Require
step by step instructions or checklists documenting how they accomplish

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this task. Don't make assumptions. Just as it's important to decide
between the jobs people say they want done and they actually need
done, it's important to examine how people work, not how they think
they work. If you want to document reality, observation is key.
Now, you're ready to create a one page visual representation of the
process. The very steps of how you manage your cash, retain a customer,
or pay an invoice can be diagrammed in flow chart. This will include and
applicability matrix or an outline of who is responsible for each part of the
process.
Focus on role function like C-O-O, rather than individual names.
Next, engage in an "if then" exercise. With your one page flow chart in
hand, talk to the impact this process has on delivering your product or
services and what happens if there's a failure in the process. For example,
if you don't contact a new customer within hours, what happens?
Sociologist, Heidi Grant Halvorson, says "If-then planners are percent
"more likely to acheive their goals."
Now, you're ready to document the process from beginning to end. Use
your process flow diagram as a guide for drafting the text. Use as much
detail as possible. And because technology is so vital to scaling a business,
make sure your diagram includes the computer systems, software, and
apps that you use.
As a last step, you'll want to review the document with all impacted
parties. This will not only allow you to make sure that everyone is on the
same page.
If used properly, this document can be the starting point for increasing
efficiency, a precursor to scale. If you're still small, this may be very
difficult to persuade yourself to do. And if you're like me, you'll probably
wait until it is so painful, either financially or emotionally, to not be
productive until you actually get serious about process. Fight the
inclination to procrastinate.

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Demanding process efficiency early on can prevent bad habits and
wasteful practices, so that when you are ready to scale, you'll scale more
quickly and profitably. And then you'll really be in business.

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 06. Funding Growth
01. Understanding capital options
- Financial capitol is one of the key inputs for growing your firm. This is
the money you use to buy what you need to make your products or
provide your services.
Your motivations and goals will impact the types and amounts of capitol
you raise. You may be driven by financial gains and rapid growth. You may
want to be your own boss or do something you genuinely love. Augment
family income while balancing work and family. Or maybe you're pulled
into entrepreneurship by an unmet need in the market.
Your motivations will not only impact the kind of business you start, but
also what kind of financial strategies you use. If you want and need your
business to scale quickly, you may decide to bring in equity investors,
otherwise you may be able to finance the business through person
savings and earnings.
However you decide to finance your business, remember that
bootstrapping will allow you to get the most out of your plan.
Bootstrapping involves techniques that lower expensive and leverage the
resources you already have on hand.
These could be:
• Number one: working out of your home,
• Two: attaining low cost or no cost services, such as using equipment
at a local restaurant or church,
• Three: leasing rather than buying,
• Four: delaying compensation,
• Five: using temporary personnel, or
• Six: bartering to obtain products and services.
It could even involve a Kickstarter or CrowdFunding campaign in order to
prototype or pre-fund your product. For more on this, you can listen to
the modules on bootstrapping and crowd funding.
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Once of the most common sources of start up financing is debt. Because
banks rarely lend to early stage start up, debt financing usually involves
loans, from friends or family, credit card debt or personal loans.
While you may need to take on personal debt initially, once your business
is established, with steady sales, profitable growth and collateral, you
should try to do debt financing through your company.
The advantage of debt financing is it allows you to maintain full control
over your business. Plus, interest on a business loan, is tax deductible.
The disadvantage is that you have to service the debt, which could be a
risk. If your business doesn't generate sufficient cash to make the debt
payments, you may need to use money from your personal accounts to
service the debt, otherwise you will likely suffer the consequences of
defaulting on a loan.
Another common source of financing is equity. This is usually most
appropriate for business looking to scale quickly. Equity financing involves
selling an ownership stake in your business for cash. Equity investors may
come in the forms of friends and family, angel investors, high net worth
individuals who take a personal stake, or venture capitalists, a
professional investment organization that invests in order to make a
profit.
At some point, you may even explore an accelerator, which typically takes
five to eight percent equity in exchange for a small amount of start up
cash and mentor-ship.
Not surprisingly, this is the hardest type of financing to obtain because it
comes at a huge risk to the investor. More than a third of all new
businesses fail within the first year, so you will need to persuade the
investor that you, the entrepreneur, and your business are a risk worth
taking.
Further, once you sell a stake in your company, you've got partners. This
will involve collaboration and shared decision making. If the business
does fail, you don't need to pay the investors back, but it's important to
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be aware of the implications for relationships if you do loose their money.
You could loose something much more valuable. So take this very
seriously.
One other option that may make sense for potential high growth business
is convertible debt. This is a hybrid between debt and equity. You're not
ready to decide on valuation or you want the option of paying back the
cash. This is typically issued to angel or venture investors who are looking
to back you and are ready to provide a smaller initial round of financing.
Now that you know what kinds of financing options are available to you,
circle back to your motivations and what kind of business you're starting.
Once you've decided on the why and the what you'll have a good idea of
the right financing strategy for you and your business.
02. Crowdfunding
An emerging form of financing is crowdfunding. This is the collection of
funds through small contributions from many different people in order to
finance a particular project.
For entrepreneurs looking to eventually attract investors, a crowdfunding
campaign can demonstrate market demand and attract publicity.
As for how to successfully orchestrate a crowdfunding campaign, I spoke
to my friend Kelly Keenan Trumpbour, the founder of See Jane Invest, and
she suggests the following:
• First use the campaign to fund a very specific project or product
run within the business. It's not an open-ended call for money.
• Second, limit how much money you try to raise. The majority of
successful campaigns are looking to raise 25000$, or less.
• Third, there's a reason it's called a campaign. Like a political
campaign, successful crowdfunding is dependent on well thought
out marketing and a grassroots strategy that will take three to six
months to come to fruition.

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 • Fourth, tend to the campaign daily. Once launched you need to
have a dedicated person who promotes awareness through
targeted emails and social media on a daily basis.
• Fifth, expect to work hard to reach your target. Also, you want to
have a budget for the campaign that factors in the administrative
costs of using a crowdfunding platform. The costs to deliver the
incentives or rewards to donors.
You'll also want to be sure you can comply with all the fine print that
comes with using a crowdfunding platform, like Kickstarter or Indiegogo.
If you violate any of their policies they have the right to terminate your
campaign, withhold funds or even sue.
In addition to demonstrating market demand, crowdfunding gives you the
chance to interact with your target demographic to learn what people like
or not about your product or service. It's a great testing ground for your
product and team. And in effect a graduated form of bootstrapping.
Also, using donor based or rewards based crowdfunding allows you to
raise money for your business without taking on debt or giving up
company ownership.
All too often, entrepreneurs turn to crowdfunding when they have
exhausted other funding options. If your pitch is fund me or my dream
dies, you're in trouble. But if your pitch is fund me so that you can have
first dibs at this fabulous new idea, you are proving market demand.
While a successful crowdfunding campaign is not a guarantee of
continued success it is a sign of good business. And if you reach your
funding target and deploy the capital as promised, you significantly raise
the odds of getting additional funding because you've proven there's
demand for your product. And within this microcosm of a business, that is
your business, you've proven you've got the goods to execute.

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03. Pitching investors
If you decide that your business requires equity financing you will need
equity investors, whether friends, family, angels, or venture capitalists.
Here're some tips for how to make that happen.
First, prepare an elevator pitch that you can deliver in under a minute to
anyone you meet. You never know who may have interest in financing
your business. If you can explain what problem you solved, why you were
the one to solve it, and why this will make money for investors in less
than a minute, even a chance meeting can turn into a pitch.
An easy to understand and share elevator pitch is a great way to leverage
your whole network and generate buzz for your business. You'll also want
to be able to explain what you do in writing in no more than a paragraph
or two. More and more introductions are made via email. If you're
looking for a warm introduction, you want to make it as easy as possible
for the intermediary to tell your story. For more on what makes a
memorable story, refer to the Tell Your Story video I covered earlier in the
course.
Second, build an angel list profile which allows investors to learn about
you, and you about them. Creating a profile about who you are and what
you do makes it easy for investors interested in your type of business to
find you. Then when people follow either your personal profile or your
company, send them a personal note.
Third, create a list of investors you'd like to meet with. Angel lists can be
helpful in finding investors interested in your industry. After you
eliminate people who are invested in your competitors, you'll probably
have a list of 40 to 50 investors to reach out to. Build a spreadsheet and
then start coming up with a plan for reaching out.
Fourth, scan your networks. While it's possible that you already know
potential investors, you probably don't. Cultivating intermediaries,
individuals who can introduce you to potential investors, can be vital. For
me, as a professional investor, when someone I know and trust suggests I
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look at a company, I am far more likely to take a look, than if I am cold
called. I suspect this is true for all investors. Rarely, if ever, do they invest
in someone who has reached out without an introduction. Also be sure to
understand what a warm introduction is. If you are asking someone you
don't know well, or who's not excited about your company, to put their
reputation on the line for you, rather than a warm introduction, you're
likely to get a cold shoulder.
Fifth, do your homework. A good example of entrepreneurs doing the
homework to know their audiences is a reality show in the US called
Shark Tank. Before you walk into a meeting, you want to know about
prospective investors. Usually you can find the basics of what you need to
know on LinkedIn. Tailor your pitch to what interests your audience and
highlight aspects of your company that will most intrigue and excite the
investor. You will want to tell a story in minutes or less with the pitch
deck providing the back-up data to your oral narrative. And practice,
practice, practice. This is a speech of a lifetime.
Six, focus on storytelling. Start with a grabber, and talk about the
progress your company is already making by saying something like "We
grew a hundred and " 50 percent in sales in five weeks." Note how this
allows you to tell a story while underscoring your fluency with the
numbers. Then, move to the problem you're solving and why this matters
to you, and how you and your team can solve it. You'll also want to know
your competitors, why you have a competitive advantage, and your exit
strategy, or how they're going to actually get a return on their
investment. I cannot overemphasize how important knowing your
numbers is. Not how big the market is, they can look that up. But the
actual economics of your business, as per our discussion in the video on
Your Financial Model.
Finally, you'll want to say how much money you're raising, the current
valuation if there is one, and be specific about what you will do with the
money.

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As Bill Reichert, managing director of Garage Technology Ventures
opined, "VCs do not not invest with their brains. "They invest with
companies they fall in love with. "Then they use their brains to rationalize
their decision." While this is possibly an exaggeration for effect, my
experience bares this out. Investors invest not just for money, but also for
love.
04. Valuing your company
If you decide to take on outside investors, you'll want to prepare. There is
no better way to destroy your company and your sanity than taking
money from someone without having clear rules of engagement. And this
begins with you deciding what your company is worth.
If your business is already established, you own a restaurant, for example,
taking in outside investors can be relatively straightforward. To get a feel
for evaluations in this context, take a look at online marketplaces like
BizQuest and BuyBizSell where you'll see that a restaurant generating,
50000$ dollars in cash per year, after expenses and taxes, would be
valued between , 100k to 150k, or two to three times cash flow.
There are a variety of factors that increase or decrease what an investor
will pay for a stake in your business like location, but this will provide you
with a starting point.
Valuations become much more complicated and subjective if your
company doesn't yet have revenue. How then do you place a value on
your company?
The first thing you have to come to grips with is that your business is only
worth what an investor is willing to pay. However, if you believe you have
a high growth business, one that can grow to 20,000,000 dollars in five
years, there are some well accepted methods for determining valuation.
One is the Berkus Method, which provides you with an initial
approximation. Here's how it works.

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Number one. If you could convince an investor you have a sound idea,
you may be worth up to 500,000 dollars. It could be less, but 500,000
dollars is the maximum.
Two. If you have a prototype which reduces technology risk, add up to
another half a million.
Three. If you have a quality management team which reduces execution
risk, add another half a million.
Four. If there are strategic relationships which reduce market and
competitive risk, add another half a million. Because these are
maximums, your value will be, at most, 20,000,000 dollars.
Again, it will be up to you to persuade an investor to buy into your
valuation.
A slightly more complicated method of determining valuation for high
growth companies is Bill Payne's Scorecard Methodology. This
methodology starts with a baseline number of 1.5 million dollars, and
then adjusts the valuation up or down, based on a subjective appraisal of
the management team, size of the opportunity, and competition.
In the exercise files, I've included a detailed white paper by Payne on this
topic. Once you've come up with a valuation for your company based on
your business as it is today, I'd also take a look at the VC or Venture
Capital method devised by Bill Sahlman. This starts with the terminal
value, or what you could sell your company for in five years. A simple way
to calculate the terminal value is to start with what you estimate revenue
will be in year five.
Given that you're building a high growth business, let's start with
20,000,000 dollars. Let's also assume that you can sell your business for
two times revenue, which is often the case for software companies. Then
your terminal value will be 40,000,000 dollars.
The next step is to divide the 40,000,000 terminal value by the return an
investor will require. Because early stage investing is very risky, an
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investor will expect at least a twenty times return on their money. Your
post-money valuation, or the value of your company after you have
raised money, is then equal to the terminal value divided by anticipated
return, or 40,000,000 divided by 20 equals 2,000,000 dollars.
Your last step is to solve for your pre-money valuation. This is based on
how much cash you need to get to your next major milestone, which is
typically about 18 months out. That amount is 500000 dollars, then your
pre-money valuation is 1.5 million.
Determining the value of your company when you are pre-revenue is
definitely more art than science, but if you do your homework and
consider these three valuation methods, you will be able to triangulate on
a reasonable starting point, and then, you can let the negotiations begin.
05. Reaching a deal
You've identified people who are interested in investing in you and your
company. Now it's time to establish rules of engagement.
As a first step, there will be a term sheet. This is a nonbinding document
that outlines the terms of your deal. It will include how much of the
company the investor will own and at what price. How much stock needs
to be set aside to attract talent. What kind of rights the investor has if the
company is sold. Who will be on the board of directors, and when the
deal closes.
In the exercise files I've provided a link to a sample term sheet from the
National Venture Capital Association. In evaluating this term sheet, you
would want to build a capitalization table. This is a spreadsheet that
shows how much each person owns with the company. As you negotiate,
you'll want to keep in mind the investors perspective. Your first outside
investment will probably come from an angel investor. A high net worth
individual, who is putting their personal capital at risk. Usually in the
amount of 25,000 to a 100,000 and typically wants to own to 20% of the
company.

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This will have you circling back to valuation. You need to have done the
work to value your company. If you know you need 100000$, to get to
your next major milestone, and the investor wants to own 20%, then your
pre-money valuation is 400000$,. Post-money 500000$,. Again valuation
is more art than science.
Note too that the principal factor affecting real valuation, is the investors
liquidation preferences. Meaning, "What happens if you sell the
company?" Investors will typically own preferred stock, while you as the
entrepreneur own common. If the company gets liquidated, the preferred
stock has priority.
The standard term is that preferred stock holders get one time or all of
their money back before the common holders get anything. Afterwards
the spoils tend to be equally divided. You'll also want to be aware that
control of the company is driven by the terms of the invested documents
not just ownership.
Investors can negotiate veto rights or [later financing] or a sale of the
company for example, no matter how much they own. It's important not
to negotiate every term. Know what a standard, then choose your issues.
As investors are conducting due diligence on you, you want to conduct
due diligence on them:
• Does the investor understand your business? Your industry?
• Do they have enough money so that if you need to raise more
capital, they can participate?
• How is this investor interacted with other entrepreneurs?
If you're talking to Venture Capitalist, you may want to check
funded.com, a site where entrepreneurs actually rate VC's.
Consider to the advice that my friend startup attorney Ellen Corenswet,
when you as the founder negotiated term sheet, you are negotiating on
behalf of the company not yourself. You need a lawyer for the company
and for you, which brings me to my final point.

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No matter how good you are at negotiating, get an experience lawyer,
one that's been referred to you. It is invaluable.
When you bring on an investor you are bringing on a partner. But no
matter how invested they are in you and your business, you will need to
negotiate your rules of engagement. Walk into a negotiation expecting to
get and willing to give and your partnership will pay off.

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 07. Conclusion
01. Preparing mentally.
Building a business is both exhilarating and terrifying. You want to believe
that if you work hard, you will be successful, and you will be, but not
necessarily immediately, because in a complex system, like a business,
cause and effect may not always be clear. You can't simply flip a switch
and the light goes on. There are often time-delayed relationships, in
which huge effort yields little in the near term.
S-curve math, which not coincidentally, helps us gauge how quickly a
disruptive innovation will be adopted, helps us deal with these time
delays, providing milestones we can watch for.
At the outset, growth will be quite slow. Once a tipping point is reached,
which is typically at 10 to 15%, you enter hypergrowth. At 90%, or
saturation, growth slows. With Facebook, for example, assuming a market
opportunity of one billion people, which it's now exceeded, it took
roughly four years to reach 10%. Once it reached a critical mass of 100
million users, Facebook moved into hypergrowth and added not 100
million but 800 million users in the next four years. We could quibble
over whether Facebook has already reached saturation, but there is no
question the rate of growth has begun to slow.
Likewise, as you build your business, initially progress will be slow. It may
even be a bit scary and lonely, if you're disrupting and playing where no
one else is playing, but as you put in the time and effort, you will gain
traction, entering into a virtuous cycle that propels you into a sweet spot
of accelerating competence and confidence. Then, as you approach
mastery, the vicious cycle commences. The more habitual what we are
doing becomes, the less we enjoy the feel-good effects of learning. These
two cycles constitute the S-curve.
One anecdotal example of how the S-curve model can help us better
predict the future is the experience of golfer, Dan McLaughlin. He'd never
played golf. He quit his job as a professional photographer to become a
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top golfer through 10000 hours of deliberate practice. During the first
months, he improved slowly, as he practiced putting, chipping, and his
drive, but as he began to put the various pieces together, his
improvement accelerated, consistent with hypergrowth behavior, and 28
months into the project, he had surpassed 91% of the 26 million golfers
who register a handicap with the US Golf Association. Not surprisingly, his
rate of improvement has slowed, as he now faces competition from the
top 10% amateur golfers.
Just as understanding the S-curve can keep discouragement at bay as you
start your business, it also helps us understand why boredom can kick in
once you reach the plateau. This boredom or complacence explains why
large businesses become ripe for disruption. Once you approach mastery,
you're learning rate decelerates, and while the ability to do something
automatically implies competence, it also means our brains are now
producing less of the feel-good transmitters. The thrill ride is over.
As you start your business, there will be ups and downs. You will feel
lonely and scared on occasion. There will be times when you are working
hard and nothing happens. Understanding this will help you navigate the
psychological terrain of an entrepreneur. You'll also know that when it
starts to get easy, too easy, it's time to jump to a new curve.
02. Staying true to your vision.
I've encouraged you to be discovery driven in building your business, to
get comfortable with not seeing the end from the beginning, to take a
step forward, gather feedback, and then adapt.
I've also recommended that you create a business plan. Business plan
usually implies you have a view of where you want to go. Presumably you
can then plot your entrepreneurial journey on a map, a straight forward
road with no road blocks or alternate routes.
You may now be asking, "How do I reconcile the two?" "What place does
vision have in the midst of discovery?" And, "Where exactly do business
plans and accounting spreadsheets fit in?"
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I believe knowing where you want to go is imperative to staying the
course when you're building a business. A would-be entrepreneur who
hasn't defined their why will easily be enticed back into the safety of the
known. "Compare Abraham Lincoln to Ulysses S. Grant," says negotiating
expert Jim Camp. Lincoln had a vision of saving the Union at any cost. As a
general of the Union troops, Grant hued without hesitation to Lincoln's
vision. "But as a president, Grant was a failure, taking bad advice, making
bad decisions, mainly because he didn't know why he was president and
what he hoped to accomplish."
If you don't have a powerful answer as to why you're disrupting, you can
easily get distracted and lose your way. You may be thinking, "I don't
know what my why is", but there are probably indicators in your hopes
and dreams. Almost any dream can germinate into a why. Whether it's
being your own boss, doing something you love, financial gains, or all of
the above. You may also want to look at your three favorite quotes,
whether lyrics of a song or passage from a book. These quotes will tell
you what is motivating you.
Remember Erin Newkirk, the founder of Red Stamp? She provides a good
case study in grappling with this paradox. After her first child was born
and her dad became critically ill, she became so busy she felt out of touch
with loved ones. In trying to live in a world she'd envisioned, Erin started
an online reminder service mixed with high end occasion cards. That was
2004. But as her business grew, what she envisioned became blurry as
she focused on the accouterments, of correspondence or fine paper and
cards, rather than on relationships. Only when she pivoted and refocused
on making it easier for people to connect, and utilized mobile technology,
which by 2008 had become available, did Red Stamp evolve into an easy
way to send correspondence, not only via mail, but also email, text
messaging, Facebook, and Twitter.
Once you know your greater purpose, there are lots of roads that will
take you there. Consider, for example, the journey of a solitary email
message. Whenever you send an email it's broken up into packets. Those
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packets may travel the same route as all of the other packets of the
message, or none of the routes.
Ultimately, the route the packet travels is irrelevant so long as the email
gets to the recipient.
General Grant knew his how. A purpose was harder to come by. When
Erin Newkirk pulled her why into focus, she could discover her way to a
how.
When we know our why, instead of seeing drudgery, we see discovery.
And once we know our why, there will be a way.
03. Balancing entrepreneurship and life.
You are an entrepreneur. This is your dream. I've shared with you my
thoughts on how to become a successful entrepreneur. Remember to
check out the exercise files for this course, which includes a great list of
resources for further studies.
Now one final thought. As an entrepreneur, the most important thing
you need to do is to show up. According to the research, the odds of a
scientist writing a groundbreaking research paper are correlated not to
how smart the scientist is, but to how many papers the scientist has
written and once a business makes it to the final round of a pitch contest,
there's no statistical difference between the returns of the finalists and
the actual winners.
It's called the Equal Odds Rule. If you want to write a frequently cited
paper, publish a lot. If you want a successful business, show up to work.
At the same time, show up to your life and to those you love. As you bring
your dream into reality, you will develop as a person in unexpected
positive ways. Bring those that you love along with you to be your
accountability and thought partners. Tell them what you're trying to
figure out. Invite them to work alongside you.
According to psychologist, Robert Johnson, every woman and man comes
equipped with a psychological structure that includes feminine and

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masculine traits. The ability for relatedness and nurturing is feminine
while the ability to wield power and control situations is masculine. To
become a complete person, we need to learn to do both, to become a
harbor and a ship. As you set sail to your ship full of dreams, keep your
foot on the dock of family life by inviting those you love to set sail with
you. Be an entrepreneur that builds a business and a life.

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77
Entrepreneurship
Fundamentals
with Whitney Johnson

Additional Resources
00_03
“New Research: The Skills That Make an Entrepreneur”
http://blogs.hbr.org/2012/12/new-research-the-skills-that-m/

“Entrepreneurship and Job Creation”

http://www.gallup.com/strategicconsulting/157253/entrepreneurship-job-creation.aspx

“Entrepreneurs Get Better with Age”

http://blogs.hbr.org/2013/06/entrepreneurs-get-better-with/

“10 Personality Traits Every Successful Entrepreneur Has”

http://www.businessinsider.com/traits-of-successful-entrepreneurs-2013-2

01_01
“What Job Does Social Media Do For You?”
http://blogs.hbr.org/2011/08/what-job-does-social-media-do/

“Clay Christensen’s Milkshake Marketing”

http://hbswk.hbs.edu/item/6496.html

“What Products Will Customers Want to Buy?”

http://usatoday30.usatoday.com/money/industries/technology/maney/2003-11-12-inno-
vators-solution-excerpt.htm

“The Customer-Centered Innovation Map”

http://hbr.org/2008/05/the-customer-centered-innovation-map/ar/1

01_02
“The Amazon of Education”
http://www.slate.com/articles/life/education/2014/01/southern_new_hampshire_universi-
ty_how_paul_leblanc_s_tiny_school_has_become.html

“Discovering New and Emerging Markets”

http://hbr.org/product/discovering-new-and-emerging-markets/an/1556BC-PDF-ENG

lynda.com course: Disrupting Yourself

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01_04
For further reading:
“Is It a Business or a Hobby?”
http://www.sba.gov/content/it-business-or-hobby

01_05
Further study:
The Lean Startup by Eric Ries
http://www.amazon.com/The-Lean-Startup-Entrepreneurs-Continuous/dp/0307887898

“The Bootstrapper’s Guide to Launching New Products”

http://www.inc.com/magazine/20091001/the-bootstrappers-guide-to-launching-new-
products.html

Minimum Viable Product - Wikipedia

http://en.wikipedia.org/wiki/Minimum_viable_product

“3D Printing Could Be a Boon for Small Business”

http://www.forbes.com/sites/capitalonespark/2013/05/06/3d-printing-could-be-a-boon-
for-small-business/

02_01
For further study:
Business Plan - Wikipedia
http://en.wikipedia.org/wiki/Business_plan

The $100 Startup by Chris Guillebeau

http://www.amazon.com/The-100-Startup-Reinvent-Living/dp/0307951529

Business Plans for Dummies by Paul Tiffany and Steven Peterson

Alex Osterwalder, Business Model Canvas
“How to Write a Great Business Plan”
http://hbr.org/1997/07/how-to-write-a-great-business-plan/ar/1

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02_02
“You Get What You Pay For? Costly Placebo Works Better Than Cheap One”
http://www.sciencedaily.com/releases/2008/03/080304173339.htm

“Using Pricing Strategy to Boost Sales”

http://blogs.hbr.org/2012/07/use-pricing-strategy-to-boost/

“8 Pricing Strategies You Can Implement Now”

http://smallbiztrends.com/2008/08/8-pricing-strategies-you-can-implement-right-now.
html

“Pricing your product from scratch”

http://market-found.com/pricing-product-scratch/

“Poor Pricing Kills Startups”

http://market-found.com/poor-pricing-kills-startups/

“Circles” an HBR Case Study

http://hbr.org/product/circles/an/898043-PDF-ENG

02_03
More study:
“The Rise of Virtual Brick-and-Mortars”
http://blogs.hbr.org/2013/05/the-rise-of-virtual-bricks-and/

“How can you preclude your stores from becoming showrooms for Amazon?”
https://www.quora.com/Retail/How-can-you-preclude-your-stores-from-becoming-show-
rooms-for-Amazon

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02_04
Learn how to build a financial model:
http://foresight.is/

“4 reasons you should build a financial model for your startup”

http://www.irishcentral.com/business/startups/4-reasons-you-should-build-a-financial-
model-for-your-startup.html

“Startups Throw Out Your Financial Models: The Argument for Lean Modeling”
http://www.forbes.com/sites/jjcolao/2013/02/21/startups-throw-out-your-financial-mod-
els-the-argument-for-lean-modeling/

02_05
For Further Study:
“Business Structure Basics”
http://www.entrepreneur.com/article/75118

“Common Business Structures for Independent Workers”

http://www.mbopartners.com/independents-guide/plan/common-business-structures-in-
dependent-workers

“Should My Company be an LLC, an S-Corp or Both”

http://www.sba.gov/community/blogs/community-blogs/business-law-advisor/should-my-
company-be-llc-s-corp-or-both

02_06
For further study:
“10 Intellectual Property Tips Entrepreneurs Can’t Afford to Ignore”
http://yfsmagazine.com/2012/06/05/10-intellectual-property-tips-entrepreneurs-cant-af-
ford-to-ignore/3/

“10 Ways to Protect Your Intellectual Property”

http://www.inc.com/kelly-fitzsimmons/ten-ways-to-protect-your-intellectual-property.html

“Conquer the Legalese of Business Formation”

http://yfsmagazine.com/2009/12/21/conquer-the-legalese-of-business-formation/

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03_01
The Founder’s Dilemmas by Noam Wasserman
http://tech.co/founders-dilemmas-noam-wasserman-2013-10

http://www.amazon.com/The-Founders-Dilemmas-Anticipating-Entrepreneurship/
dp/0691158304

“3 Biggest Mistakes When Choosing a Cofounder”

http://onstartups.com/tabid/3339/bid/97391/3-Biggest-Mistakes-When-Choosing-a-Co-
founder.aspx

03_02
“Daniel McFarland: What Is the Secret to a Happy Collaboration?”
http://www.gsb.stanford.edu/news/headlines/daniel-mcfarland-what-is-secret-happy-col-
laboration?utm_source=twitter&utm_medium=social-media&utm_campaign=entrepre-
neurship-collaboration

“Collaboration is risky. Now get on with it.”

http://blogs.hbr.org/2011/06/collaboration-is-risky-now-get/

03_03
“4 Tips for Getting the Right Advisors for Your Business”
http://ventureneer.com/vblog/4-tips-getting-right-advisors-your-business

“12 Point Advice on Start Up Advisory Boards”

http://www.analysttoangel.com/2013/08/12-point-advice-on-start-up-advisory.html

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03_04
Consequential Strangers by Melinda Blau and Karen Fingerman“
http://www.amazon.com/Consequential-Strangers-Everyday-Encounters-Life-Changing/
dp/0393338452

“Building a Network that Works Takes Work”

http://blogs.hbr.org/2011/04/building-a-network-that-works/

“For a Career That Lasts, Build Real Relationships”

http://blogs.hbr.org/2013/03/for-a-career-that-lasts-build/

“Are you Stuck in a Girls’ Club?”

http://blogs.hbr.org/2011/12/are-you-stuck-in-a-girls-club/

04_01
“Craft an Attention-Grabbing Message”
http://blogs.hbr.org/2011/12/craft-an-attention-grabbing-me/

Win Buy-In from Decision-Makers in 60 Seconds or Less

http://samhornpop.wordpress.com/2014/01/27/thats-intriguing-96-10-tips-to-perfect-
your-pitch/

“Can you have a baby AND run a startup? Here’s how WeeSpring manages it.”
http://thenextweb.com/entrepreneur/2014/04/02/can-baby-run-startup-heres-weespring-
manages/

04_02
“Web Design -- The Old & New Ways”
http://webdesignfromscratch.com/design-process/web-design-the-old-new-ways/

“The 7 Elements of Modern Web Design”

http://blog.hubspot.com/marketing/elements-of-modern-web-design-list

“What Makes a Good Website?”

http://ezinearticles.com/?What-Makes-a-Good-Website?&id=1011305

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04_03
Wikipedia entry on lead generation
http://en.wikipedia.org/wiki/Lead_generation

“4 Ways to Generate Higher Quality, Sales-Ready Leads”

http://blog.hubspot.com/blog/tabid/6307/bid/5863/4-Ways-to-Generate-Higher-Quality-
Sales-Ready-Leads.aspx

“The Compounding Returns of Content Marketing: The Data Behind Why Persistence
Pays Off in Blogging”
http://www.linkedin.com/today/post/article/20130702174741-4444200-the-compound-
ing-returns-of-content-marketing-the-data-behind-why-persistence-pays-off-in-blogging

“Inbound Leads Cost 61% Less Than Outbound”

http://blog.hubspot.com/blog/tabid/6307/bid/31555/Inbound-Leads-Cost-61-Less-Than-
Outbound-New-Data.aspx

http://www.stateofinboundmarketing.com/

04_04
“Do you love your customers?”
http://sethgodin.typepad.com/seths_blog/2014/02/do-you-love-your-customers.html

“The Power of Delight”

http://www.jonathanfields.com/the-power-of-delight/

“The Covert Questions Your Customers Want Answered”

http://www.fastcompany.com/3003976/covert-questions-your-customers-want-answered

“7 Awesome Examples of Surprise and Delight That Will Blow your Mind”
http://www.brainsonfire.com/blog/2013/02/12/7-awesome-examples-of-surprise-and-de-
light-that-will-blow-your-mind/

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04_05
Wikipedia entry for cohort analysis
http://en.wikipedia.org/wiki/Cohort_Analysis

“Introduction to Cohort Analysis for Startups”

http://jonathonbalogh.com/2012/03/24/introduction-to-cohort-analysis-for-startups/

“3 Rules to Actionable Metrics in a Lean Startup”

http://practicetrumpstheory.com/2010/07/3-rules-to-actionable-metrics/

“Top Ten Employment Law Tips for Startups”

http://www.startuplawblog.com/2011/05/26/top-ten-employment-law-tips-for-start-ups/

04_06
Breaking Out by John Butman
http://www.amazon.com/Breaking-Out-Build-Influence-Competing/dp/1422172805

Ready to be a Thought Leader? By Denise Brosseau

http://www.amazon.com/Ready-Be-Thought-Leader-Influence/dp/1118647610

“Branding: How to Become a Thought Leader”

http://www.inc.com/become-a-thought-leader.html

“How to Become a Thought Leader”

http://mashable.com/2013/07/09/thought-leader/

“Make Your Innovative Idea Seem Less Terrifying”

http://blogs.hbr.org/2013/10/make-your-innovative-idea-seem-less-terrifying/

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05_01
“Startup Metrics, a love story”
http://www.slideshare.net/andreasklinger/startup-metrics-a-love-story

“Why bother talking to customers and how to not waste your time doing it”
http://www.hackertalks.io/robfitz/why-bother-talking-to-customers-and-how-to-not-waste-
your-time-doing-it

“Startup Metrics for Pirates: AARRR!!!”

http://www.slideshare.net/dmc500hats/startup-metrics-for-pirates-long-version

“Lessons Learned -- Viral Marketing”

http://www.forentrepreneurs.com/lessons-learnt-viral-marketing/

05_02
lynda.com Negotiation Fundamentals by Lisa Gates
http://www.lynda.com/Business-Business-Skills-tutorials/Negotiation-Fundamen-
tals/101504-2.html

“6 Tips for Reluctant Negotiators”

http://blogs.hbr.org/2014/04/6-tips-for-reluctant-negotiators/

“15 Rules for Negotiating a Job Offer”

http://hbr.org/2014/04/15-rules-for-negotiating-a-job-offer/ar/1

“Bullying Is a Confidence Game”

http://blogs.hbr.org/2012/07/bullying-is-a-confidence-game/

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05_03
lynda.com Accounting Fundamentals by Jim and Kaye Stice
http://www.lynda.com/Business-Accounting-tutorials/Accounting-Fundamen-
tals/158665-2.html

“Accounting for Startups: Why Cash is King”

http://www.huffingtonpost.com/ryan-buckley/accounting-for-startups-w_b_5031050.html

“Here’s Where Your Startup’s Cash Went”

http://www.forbes.com/sites/chrisjohnson/2013/11/18/heres-where-your-startups-cash-
went/

05_04
“Put Failure in Its Place”
http://blogs.hbr.org/2012/10/put-failure-in-its-place/

“The Long of Coming Up Short”

http://blogs.hbr.org/2010/06/the-long-of-coming-up-short/

“The Trouble With Bright Kids”

http://blogs.hbr.org/2011/11/the-trouble-with-bright-kids/

Daring Greatly by Brené Brown

http://www.amazon.com/Daring-Greatly-Courage-Vulnerable-Transforms/dp/1592407331

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05_05
“Run Walk Run”
http://www.jeffgalloway.com/training/run-walk/

“Hemingway, Thoreau, Jefferson and the Virtues of a Good Long Walk”

https://www.linkedin.com/today/post/article/20130829191440-143695135-hemingway-
thoreau-jefferson-and-the-virtues-of-a-good-long-walk

“Go Ahead, Take that Break”

http://blogs.hbr.org/2011/07/go-ahead-take-that-break/

Sabbath by Wayne Muller

http://www.amazon.com/Sabbath-Finding-Renewal-Delight-Lives/dp/0553380117

“Manage Your Energy, Not Your Time”

http://hbr.org/2007/10/manage-your-energy-not-your-time/ar/1

“How to Sleep Your Way to the Top – Literally”

https://www.linkedin.com/today/post/article/20121002115548-143695135-how-to-sleep-
your-way-to-the-top-literally

“Getting in Shape Doesn’t Have to Be Such a Drag”

http://www.linkedin.com/today/post/article/20140311212757-143695135-getting-in-
shape-doesn-t-have-to-be-such-a-drag

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05_06
“Get Your Team to Do What It Says It’s Going to Do”
http://hbr.org/2014/05/get-your-team-to-do-what-it-says-its-going-to-do/ar/1?utm_cam-
paign=Socialflow&utm_source=Socialflow&utm_medium=Tweet

“What Does ‘Scale’ Mean in Business”

http://joshlowryblog.com/2012/03/15/what-does-scale-mean-in-business/

“How to Write Process Documentation”

http://www.ehow.com/how_6944598_write-process-documentation.html#ixzz30fKyIfsy

“How to Document Internal Controls & Processes”

http://www.ehow.com/how_6162124_document-internal-controls-processes.html

“How to Start a Startup”

http://www.paulgraham.com/start.html

06_01
A Rising Tide by Susan Coleman and Alicia M. Robb
http://www.amazon.com/Rising-Tide-Financing-Strategies-Women-Owned/
dp/0804773068

“Comparing Equity, Debt And Convertibles For Startup Financings”

http://www.forbes.com/sites/georgedeeb/2014/03/19/comparing-equity-vs-debt-vs-con-
vertibles-for-startup-financings/

“Accelerator vs. Incubator: What’s the Difference?”

http://www.inc.com/christina-desmarais/difference-between-startup-accelerator-and-incu-
bator.html

“Startup = Growth”
http://paulgraham.com/growth.html

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06_02
“Best and Niess: Crowdfunding Will Change the World”
http://www.forbes.com/sites/devinthorpe/2014/01/08/best-and-neiss-crowdfunding-will-
change-the-world/

http://seejaneinvest.com/about/

06_03
“If You Do This, Your Emails Might be Rude”
https://www.linkedin.com/today/post/article/20140515114346-69244073-if-you-do-this-
your-emails-might-be-rude

“8 Mistakes Investors Make When Pitching to Investors”

http://www.forbes.com/sites/allbusiness/2013/07/09/8-mistakes-entrepre-
neurs-make-when-pitching-to-investors/

Watch the Shark Tank – a fantastic tutorial on how to pitch investors.

http://abc.go.com/shows/shark-tank

“Investing in Start-ups: For Love and Money”

http://blogs.hbr.org/2011/03/investing-in-start-ups-for-lov/

“500 Startups’ Paul Singh: What not to do in a start-up pitch”

http://www.washingtonpost.com/business/on-small-business/500-startups-paul-singh-
what-not-to-do-in-a-start-up-pitch/2012/02/08/gIQApFoE4Q_story.html

“5 Steps to Finding Investors for Your Startup”

http://www.forbes.com/sites/dailymuse/2013/02/13/5-steps-to-finding-investors-for-your-
start-up/

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06_04
“How Startup Valuation Works – Measuring a Company’s Potential”
http://fundersandfounders.com/how-startup-valuation-works/

“Startup Valuations: The Venture Capital Method” by Bill Payne

http://billpayne.com/2011/02/05/startup-valuations-the-venture-capital-method.html

The Berkus Method: Valuing an Early Stage Investment.

http://berkonomics.com/?p=1214

“What Is A Good Venture Return?”

http://avc.com/2009/03/what-is-a-good-venture-return/

“Early Stage Investor Due Diligence: A More Detailed Take On What Matters”
http://www.analysttoangel.com/2013/10/early-stage-investor-due-diligence-more.html

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06_05
“What’s in a Term Sheet”
http://www.foundersfund.com/uploads/term_sheet_explained.pdf

Founder’s Fund Term Sheet

http://www.foundersfund.com/termsheet/

“How To Draw Up A Capitalization Table”

http://www.huffingtonpost.com/fred-wilson/how-to-draw-up-a-capitali_b_981800.html

Term Sheet Series by Brad Feld and Jason Mendelson

http://www.feld.com/wp/archives/2005/08/term-sheet-series-wrap-up.html

Sample Term Sheet from National Venture Capital Association

http://www.nvca.org/index.php?option=com_content&view=article&id=108&Itemid=136

“Do You Speak VC? A Beginner’s Guide to Investors”

https://www.themuse.com/advice/do-you-speak-vc-a-beginners-guide-to-investors

“What A Straight Forward, Non-Jargony Term Sheet From A VC Looks Like”

http://www.businessinsider.com/a-plain-english-term-sheet-venture-capitalist-2013-6

“Entrepreneurs Want VCs Friendly but Not Too Hands-On, Study Says”
http://blogs.wsj.com/venturecapital/2013/07/23/entrepreneurs-want-vcs-friendly-but-not-
too-hands-on-study-says/

“6 Tips for Reluctant Negotiators”

http://blogs.hbr.org/2014/04/6-tips-for-reluctant-negotiators/

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07_01
lynda.com course Disrupting Yourself
http://www.lynda.com/Business-Business-Skills-tutorials/Disrupting-Yourself/153829-2.
html

“Throw Yours Life a Curve”

http://blogs.hbr.org/2012/09/throw-your-life-a-curve/

07_03
Dare, Dream, Do by Whitney Johnson
http://www.amazon.com/Dare-Dream-Do-Remarkable-Things/dp/1937134121

“Always, Always, Always Show Up”

http://blogs.hbr.org/2013/10/always-always-always-show-up/

“Why I Still Dream of Having It All”

http://whitneyjohnson.com/why-i-still-dream-of-having-it-all/

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