David Cummings on Startups

Category: Entrepreneurship

  • Personal Financial Goals – An alternative to cash in the bank

    When asking entrepreneurs about personal financial goals, the most common response is “I want to have enough money in the bank to not have to worry about making money.” Drilling in a bit deeper, and asking for a specific dollar amount, it’s usually liquid assets between $5 million and $10 million. With $5 million liquid, and an expectation of earning 4% per year, that results in $200,000 per year in annual income before taxes.

    While having the cash in the bank earning passive investment income is awesome, I like to point out that it’s often more attainable to build a business with recurring revenue that pays out $200,000 in annual dividends. Meaning, a better goal is to build a company that is self sustainable without the entrepreneur that then helps the entrepreneur meet his or her financial goals without the requirement of a large liquidity event. Liquidity events are rare, incredibly rare. 99% of companies sell for less than $30 million and only a handful of companies sell for over $100 million each year. The odds of a large exit aren’t great, while the odds of building a business that can make money on an annual basis in a manner that provides individual freedom are 100x better.

    What else? What are your thoughts on personal financial goals and the idea of a sustainable business paying dividends as more achievable than a large exit?

  • Never Forget the Golden Data Rule

    Recently I was talking to an entrepreneur and we were discussing the importance of data control in business applications. Now, this is control in the sense of which application dictates who gets access to the data as opposed to which company owns the data (the customer always owns the data). During the conversation it occurred to me that there’s the Golden Data Rule just like there are the two common Golden Rules.

    Golden Rule A: do to others what you would have them do to you.

    Golden Rule B: he who owns the gold, makes the rules.

    Golden Data Rule: he who controls the data, makes the rules.

    This comes into play when considering business ideas and strategies that involve other application data (whether accessed through a plug-in, an API, or some other means). Big risks here include being a sharecropper on someone else’s land (they can take away access), “borrowing” the most successful features from your product and incorporating them into their product, or charging increasingly higher fees to access the data (taxes to access SaaS systems are more common than people realize).

    At the end of the day, never forget the Golden Data Rule when building your company.

    What else? What are your thoughts on the Golden Data Rule?

  • Atlanta Tech Village Accelerates Results for Ambitious Entrepreneurs

    Much has been written here about the Atlanta Tech Village and lessons learned over the past 10 months, including the benefits as a sales and recruiting tool, instant community, and more. There’s another observation that crystallized for me recently: the Village accelerates results for entrepreneurs that work hard and take advantage of what the community has to offer. Let me explain.

    With a large, active entrepreneurship center, there are always opportunities to move a startup forward. Here are a few examples:

    • Learning programs for continuing education (it’s important to pick the ones that are the most relevant and not waste time)
    • Guest speakers, panels, and VIP tours that also double as a prospect hunting ground (be tactful and pleasantly persistent — it’s very easy to cross the line and be annoying)
    • Media events where journalists come through to meet startups, and the more relevant and timely the entrepreneur story, the better

    So, the takeaway is that the entrepreneurship center provides a number of great resources but just being in the community doesn’t translate into results. Getting involved and being smart about it results in significantly more progress than working on an island.

    What else? What are your thoughts on the idea that the Atlanta Tech Village accelerates results for ambitious entrepreneurs?

  • Entrepreneurs Should Hire a Sales Assistant Sooner than Expected

    Early on in the B2B startup adventure, the majority on an entrepreneur’s time is tasked with finding product / market fit through customer discovery and sales. While cold calling and emailing (see Predictable Revenue) isn’t a high priority on most people’s to do list, it works for getting in front of prospects and gathering information. Because it’s so valuable, entrepreneurs should hire a sales assistant sooner than expected as it helps the entrepreneur make better use of his or her time.

    Here are a few reasons why hiring a sales assistant makes sense for an entrepreneur:

    • Building lists of companies, names, emails, and phone numbers is time consuming and easily delegated (see the SalesLoft Prospector tools)
    • Coordinating meetings, web demos, and conference calls takes more time than people expect (see Calendly)
    • Staying top-of-mind with personalized, relevant email is a key way to continue dialogue with leads, and a sales assistant can handle most of the heavy lifting

    Yes, a sales assistant will cost $15 – $20/hour, but it’s well worth it if the startup can afford it. When budgets and future hires are being discussed, consider a sales assistant.

    What else? What are your thoughts on the idea that entrepreneurs should hire a sales assistant sooner than expected?

  • Pulse of the People Person

    Recently I was talking with an entrepreneur about a key team member of his. This individual wasn’t on the executive team but he was referred to as “the best person in the company to gauge the pulse and morale of the company” and he would tell him when things were off. I thought about it for a second and said yes, I know exactly what he means. Having a pulse of the people person is critical, especially if it doesn’t come to you naturally (I don’t have that skill, personally).

    Here are a few reasons why it’s important to have a pulse of the people person on your team:

    • No matter how hard you try, certain issues and challenges aren’t going to be explicitly stated and must be inferred
    • Some people are inherently good at “feeling” how others are doing and can sense issues without trying
    • As a startup grows, it becomes more difficult to keep a pulse on the team, making a pulse of the people person even more important

    It’s hard to interview for a pulse of the people person but it’s easy to recognize when you have one on your team, and they’re a tremendous asset.

    What else? What are your thoughts on pulse of the people persons?

  • 5 Steps to Startup Success in 30 Words

    Earlier today I was talking to a student about entrepreneurship. Naturally, he was very focused on the traditional model of identifying a problem, writing a business plan, building a product, and finally talking to customers. I told him that everything he was doing was backwards except for identifying a problem. After the conversation, I thought to myself that there had to be a concise way to describe the necessary steps for startup success.

    Here are the five steps to startup success in 30 words:

    1. Find a problem in a big market.
    2. Line up customers willing to buy it.
    3. Build a great team and culture.
    4. Build a great product.
    5. Build a repeatable customer acquisition process.

    In 30 simple words we have five actionable steps in order of priority. While there are many more details, this provides a great outline for entrepreneurs to follow.

    What else? What are your thoughts on these five steps and 30 words for startup success?

  • Shutting Down a Startup

    A few weeks ago I was talking to an entrepreneur who was out of money and deciding what to do. I asked if he was going to shut it down completely or let it live on like many of the zombie startups out there. He decided to shut it down completely so that he could move on and have a fresh start.

    Here are a few thoughts on shutting down a startup:

    • Make a conscious decision to fully shut it down or to let it limp along without any attention — regardless, make a decision
    • Talk with a lawyer to go through the necessary legal steps to dissolve the legal entity and any other legal requirements
    • Reach out to customers, investors, advisors, etc and explain the decision as well as rationale
    • Connect with friends, colleagues, and peers and share with them lessons learned (very cathartic)

    Shutting down a startup is never easy as there’s so much time, energy, and effort in the journey. Take it one step at a time and properly lay it to rest.

    What else? What are some other ideas around shutting down a startup?

  • The “What Do You Do” Question

    Over the years I’ve struggled with providing a consistent answer to the “what do you do” question that gets asked at social events. It’s not that I don’t know what I do (although some people question me on that), it’s more so how do I present it in a manner that’s both interesting and relevant.

    For many years, I simply said that I was the co-founder of a software company. The most common response to that was the following question: do you work out of your house? Naturally, I’d answer that question and start thinking about how I answer the first question in a way that doesn’t lead to that second question. My new standard answer was the following: I’m the CEO of a software company with X number of employees in Buckhead. Providing more context in the response made for better conversations.

    When “what do you do” question comes up I still provide the same response and also add that I’m helping a great group of people build the largest tech entrepreneurship center in the Southeast.

    What else? What are your thoughts on the “what do you do” question?

  • Matching Brand Promise and Reality

    Last week I met an entrepreneur working on a Software-as-a-Service (SaaS) product where one of his main value propositions was product ease of use. The market is cluttered with a number of vendors, mostly a decade old, that have a distinctly web 1.0 feel. The entrepreneur sees an opportunity to be better, faster, and cheaper with a focus on ease of use. Only, after seeing his investor slide deck and current website, it screams complicated and not easy to use.

    Brand messaging and reality need to match up.

    Looking at it from an investor perspective, the entrepreneur immediately lost credibility as things didn’t match. My advice is to hire a professional designer, either through a crowdsourced design site like 99designs and crowdSPRING, or hire a local like Two Way Dialogue or Nebo Agency.

    Make sure the presentation and product match the brand promise.

    What else? What are your thoughts on disconnects between brand promise and reality?

  • Time is Precious — What’s your hourly rate?

    Recently I was talking to a successful entrepreneur and we got to discussing the precious nature of time. Once the business or entrepreneur has all the financial resources needed, time becomes even more valuable. On the individual front, there are always requests for time-related things: coffees, lunches, panels, events, conferences, etc. It’s easy to set up a personal schedule with tons of meetings and not accomplish anything.

    Now, when thinking about time as a precious resource, the logical way to quantify it is to determine your hourly rate. A great hourly rate estimate for time is as follows:

    Take your annual compensation for last year (e.g. $100k), divide it by two and drop the thousands, and the result is your hourly rate (e.g. a $100,000/year would be $50 per hour).

    So, the next time someone asks for an hour of time and you’re unsure about the value, think about the hourly rate and where best that time is spent.

    What else? What are your thoughts on time being precious and the hourly rate as part of the opportunity cost?