David Cummings on Startups

Category: Entrepreneurship

  • 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.

  • The Scrappy Startup Mindset

    All startups, funded or not, should start from day one with a scrappy mindset. Every penny needs to be conserved due to the many zigs and zags, and time, required to find success. That’s not to say every penny needs to saved to the detriment of proving a thesis, but rather, where logical, go the cheap and frugal route. Let’s look at some ways to be scrappy:

    • Seek out office sub-leases to save 50% off the market rates as well as enjoy shorter lease terms — shorter leases are key because you don’t know how many employees you’ll need in two to three years
    • Purchase used furniture from Goodwill, or look for a local company that is downsizing — most companies that are downsizing will give you furniture for free because they’ll have to pay to have it removed (no used furniture dealers are buying furniture in this market)
    • Purchased refurbished laptops and monitors off TigerDirect.com or Craigslist — never buy them new, and purchase laptops instead of desktops so that employees have mobility
    • Use a VoIP phone systems like Vocalocity or Cbeyond instead of a traditional analog line as they are considerably cheaper and much more feature rich

    Here are a few things you should not skimp on: a good coffee machine, natural light/lighting, a location people want to come to, and the fastest Internet you can buy.

    One more benefit of establishing the scrappy mindset at the beginning of the business is that this will continue to persist as the business grows. You want everyone to treat the company’s money as if it was their own money.

    My advice to entrepreneurs: incorporate a scrappy mindset at time of incorporation and increase your chances of success.

  • Why Most Tech Entrepreneurs Should Talk to VCs

    Most technology entrepreneurs should talk to VCs, even if they  aren’t planning on raising money in the near term, or possibly ever. Why? Well, there are lots of reasons why. Let’s take a look at a few:

    • Developing rapport with VCs now helps in the event you do decide to raise money in the future as the fundraising process can’t be rushed, and typically takes twice as long as expected
    • VCs regularly encounter hundreds of businesses, thereby offering a sounding board, insight into trends, what’s working, and what’s not working
    • VCs are generally well connected, offering introductions to prospects, partners, etc. which can be invaluable
    • VCs ask the tough questions, forcing you to more critically analyze your business, and better understand key metrics

    My recommendation is to reach out to VCs and start developing relationships, even if you don’t have current fundraising plans.

  • The Seed Stage Entrepreneur’s Sales Assistant

    I’ve talked with many seed stage entrepreneurs, generally with revenues of $50k – $500k, that say sales is their biggest challenge — not raising money, not product development, but rather, selling their stuff. Of course, I like to drill in and find out how they currently sell their product or service. Inevitably, it is from word-of-mouth referrals or a partner that brings in business. It is almost never from outbound marketing and lead generation.

    When I probe deeper to find out how they meet people, the response is usually trade organizations, chambers of commerce, or general business networking events. My recommendation for these entrepreneurs: hire a sales assistant to set up and manage sales appointments. No, the sales assistant isn’t the subject matter expert that is pushing the product. His or her only responsibility is setting up appointments, in-person or conference call, for the entrepreneur. Entrepreneurs have a fear, rightfully so, that if anyone other than them tries to sell on their behalf, they’ll misrepresent the business and potentially embarrass the entrepreneur. It is unfounded. With the right value proposition, and demeanor, a good sales assistant can set up relevant appointments and help start the process of taking the business to the next level.

    Many entrepreneurs fear hiring sales people. The idea that someone likes to sell means they can sell themselves well, so sales people come across as someone who will be successful, and the entrepreneur can’t tell which ones will actually succeed. Most sales people fail. A simple solution is to hire an intern for $10/hour to set up appointments and then pay some performance compensation of $50 to $100 for every completed appointment with a prospect that fit the ideal customer profile. If this works, great, hire someone full-time and invest in it. If it doesn’t work, read The Ultimate Sales Machine and try some different ideas.

    My advice: hire a sales assistant to set and manage appointments to facilitate growth during the seed stage.

  • Mark Suster’s Entrepreneur Tough Love

    Mark Suster, serial entrepreneur turned VC, has one of my favorite blogs over at BothSidesOfTheTable.com where he talks about his experiences and shares insightful anecdotes. One aspect of the blog that is dissimilar from most startup blogs is that he provides much more tough love for entrepreneurs. What I mean by tough love is that many bloggers talk about how great entrepreneurship is, how people should try it, and frankly, all around glamorize it. Mark sets the record straight and offers some great color commentary. Let’s look at some tough love now:

    I recommend you head on over and read Mark Suster’s blog.