David Cummings on Startups

Category: Entrepreneurship

  • More X-Factor Examples

    Thinking more about the X-Factor post from a few days ago, I realized there are a few more examples worth citing. As a quick recap, the general idea is that an X-Factor is a competitive advantage that is 7 – 10x better than the industry. Let’s look at some additional examples:

    • When Google introduced Gmail they offered 1GB of storage space, which was much more 10x the space of Yahoo! Mail or Hotmail
    • America Online, back in the 1990s, distributed over one billion (yes, billion) free trials on CD-ROMs, which is more than 10x their competitors
    • Salesforce.com, one of the pioneers of SaaS, reduced the cost of enterprise CRM software by more than 10x (NetSuite did the same for ERP software)

    I encourage entrepreneurs to look at products they use on a regular basis and ask themselves what X-Factors got the product to where it is today.

    What are some more X-Factor examples?

  • Publish an Industry Specific Book

    A year ago I received an interesting piece of advice: every entrepreneur should publish an industry specific book under their name. Of course, not everyone enjoys writing a 100+ page book, and thus hiring a ghost writer is a good alternative. Whether you like the idea of not, let’s look at some benefits of an entrepreneur publishing an industry specific book:

    • Positions the company and entrepreneur as a thought leader
    • Provides a great sales tool to hand out at tradeshows, send to prospects, etc
    • Enables the content to be turned into a series of white papers
    • Works as a training tool for employees and partners

    I recommend that entrepreneurs and startups consider writing an industry specific book and self publishing it.

  • Company Vision with a Core

    Yesterday, the EO program was actually a two part workshop with the first part on developing a vision with a core while the second part was on the X-Factor for entrepreneurs. The main premise behind a vision with a core: sustained corporate growth and excellence need a platform with which to measure all decisions against. Here’s what John DeHart, the presenter of the workshop, had to say were the three parts for a vision:

    • Core purpose – Why we do what we do
    • Core values – How we do what we do
    • Painted picture – Where we are going

    I enjoyed the workshop and would encourage entrepreneurs to read the Jim Collins books Good to Great and Built to Last to get a deeper understanding of the material.

  • The X-Factor for Entrepreneurs

    Today I had the opportunity to participate in the X-Factor workshop put on by the Entrepreneurs’ Organization. The workshop facilitator, Barrett Ersek, is a serial entrepreneur based in Philadelphia and is passionate about finding break through bottlenecks in industries to produce a 7 – 10x competitive advantage over competitors, hence the name X-Factor. Here are a few stream of consciousness takeaways from the event:

    • “Business is innovation and marketing” – Peter Drucker
    • Outback Steakhouse’s X-Factor was transforming manager tenure from 13 months to seven years by shortening hours and significantly increasing pay over time
    • Blockbuster Video’s X-Factor was guaranteeing in-stock new releases and funding it through revenue sharing with the movie studios
    • Hyundai’s X-Factor was taking back cars if a buyer lost his or her job, resulting in them being the only car company that increased sales in Q4 2008
    • Amazon.com Kindle’s X-Factor was reducing distribution friction, book costs, and increasing profit margins
    • The word impossible contains the exact letters for “I’m possible”

    I enjoyed the workshop and would recommend going through it.

  • Business Sustainability

    At our monthly EO Accelerator accountability group today we had the chance to discuss business sustainability. By sustainability, I mean the ability for the company to exist and thrive without the entrepreneur present. It is the proverbial “what happens if I get hit by a bus” question that is typically hard to answer. The general consensus of the group was that sustainability is important, and getting there requires serious training and trust of at least a general manager. Most people in the group were on the cusp of having a sustainable business but were probably an average of 12 months away.

    My recommendation is for entrepreneurs to keep in mind what it’ll take for the business to operate without them and ensure the proper planning has been done.

  • Startups and Lawyers

    Startups need lawyers, and good ones at that. I always recommend paying a professional to help set up the company properly and to think through key issues. Yes, it is expensive, and money is tight, but when you’re successful, the amount spent will be nominal in the grand scheme of things. Now, don’t go blow all your money on a $500/hr lawyer to do everything, but do ask for a fixed fee, evaluate referrals from several different sources, and go with the lawyer or firm that you trust the most.

    Unfortunately, in the Southeast anyway, there really isn’t much deferral of fees like on the West Coast where it is common to not pay the legal bill until the first round of funding. An important way to save money is to explain up front how successful the startup is going to be, ask for a fixed fee to cover everything needed to get going with an enumerated list, and then talk about the future companies that will be created as a serial entrepreneur. Lawyers want to invest in long-term, successful relationships, and entrepreneurs should sell them on just that.

  • Corporate Culture Can’t be Forced

    Tony Hsieh, the CEO of Zappos, has a presentation online titled Delivering Happiness, based on the talk he gave at the Tony Robbins Business Mastery conference. After going through the slides, the obvious struck me: corporate culture can’t be forced. The fact that the CEO of Zappos, a company recently sold to Amazon.com for $1.2 billion, is so maniacally focused on creating the best culture possible speaks volumes to the fact that the leaders of the company, all the way down to the part-time worker, need to care about the organization. But, naturally, you can’t force people to care.

    My advice: good corporate culture is critical for sustained success and needs to be genuinely pursed companywide.

  • EO Accelerator People Day

    Today was People Day as part of the EO Accelerator program. Naturally, the educational event was centered around employees ranging from topics like hiring, firing, motivating, and managing. One of the most beneficial sessions was role playing at the end. I know it sounds cheesy but entrepreneurs would present an employee issue they were having trouble with and the certified facilitator would take them through a mock conversation, providing feedback throughout and helping the entrepreneur build up confidence. It was well worth the time.

    Here are a few questions to think about that came out of People Day:

    • What are you doing to make employees happy?
    • How do you provide feedback and constructive criticism?
    • How do you assess different desired traits during an interview process?
    • What’s your meeting rhythm like?
    • What’s your number one thing you’re going to do this year to make the company a better place?

  • Seed Stage Startup #1 Challenge

    For seed stage startups, the #1 challenge is figuring out how to profitably acquire customers. In fact, this is closely aligned with what I believe is the biggest challenge for all entrepreneurs. In today’s world, the technology piece of the equation is much less difficult compared to 10 years ago, overall infrastructure costs are much less, and low cost outsourcing or crowdsourcing is readily available. Here’s what seed stage startups should focus on:

    • Cost of customer acquisition
    • Cost of customer on-boarding and ramp up
    • Lifetime value of the customer
    • Customer churn/attrition

    My advice: focus on customers.

  • EO Accelerator in 2010

    With the new year upon us, it is a good time to get involved in an entrepreneurial peer-to-peer group. One that I’m involved with locally, and has chapters around the world, is then non-profit Entrepreneur’s Organization (EO). EO is for entrepreneurs with company revenues over $1 million US dollars. EO has another program designed for entrepreneurs with revenues under $1 million US dollars called EO Accelerator. The three main tenants of EO Accelerator are as follows:

    • Quarterly education events from a certified facilitator on topics like people, money, strategy, and sales (three years worth of content)
    • Monthly accountability group meetings to share experiences in a small group setting
    • Workshops with the local EO chapter

    I’d recommend all entrepreneurs look into programs like EO or EO Accelerator in their local city.