Starting/Growing a Business

Less is more on your favorite restaurant menu

Jessica Dunker is president and CEO of the Iowa Restaurant Association.

As I write this, I am lamenting the end of the premium grilled chicken wrap at McDonald's.

I liked it, and now it’s gone.

It was introduced by the quick-service giant as part of a strategy to compete with the various sub sandwich chains and to attract millennials who were “demanding healthier, fresher” menu items.

As the proud parent of three millennials, who spent a decade pushing apple slices in place of fries, I am pleased to know that this generation is demanding such things. But are they really? Sales numbers would say differently. People like what they like, and regardless of generation, restaurants rarely go wrong by offering fries in any form (shoestring, cottage, waffle, etc.).

Healthy stuff with your burger? Not so much.

But this isn’t an indictment of closet fry-eaters. Rather, it’s a recognition that restaurants, like all businesses, have to evolve — and that includes changing their menus — and dumping sales losers.

This methodical evaluation of a menu can be easier for chains than for locally owned restaurants. You’re not likely to find any sentimental value attached to “mom’s favorite flan” recipe in a national chain. Independent restaurateurs are much more likely to resist dumping an item on the off chance it is one of their regular patrons' (or their own) favorites. That’s why you may notice a local restaurant’s menu grow and grow, and grow some more.

But that’s rarely a good business decision. Restaurants, particularly those locally owned places, cannot be everything to everyone. And if the menu is too long, quality — of food and service — can suffer.

Thankfully for those owners who have trouble letting go, the move toward shorter restaurant menus is actually considered “trendy” these days, and that can make unloading a few rarely ordered menu items more palatable.

What’s more, research shows that today’s busy diner doesn’t want to be met with hundreds of options when eating out. They generally prefer easier-to-read menu formats — less is actually more.

Take a look at the relatively sparse menus from some of the Golden Circle’s newest restaurants, add to that the offerings from your favorite food truck, pop-up restaurant or single-item food venue, and you quickly realize that it isn’t a lack of ideas keeping these menus small. Rather, it’s a movement toward focused, specific menu items.

National brands like Chipotle figured this trend out early. In an effort to capture the dollars of diners who want to customize meals but not wade through large, confusing menus, Chipotle offers four main items. Customers then walk through and choose from 20-plus optional ingredients. It’s a short — but very customizable — menu.

Other chains (and independents) are following suit. A recent Washington Post article noted that the country’s 500 largest restaurant chains have cut more than 7 percent of their menu items this year. Small independent restaurants would be well served to follow suit.

In the past, restaurants tried to differentiate themselves with the breadth of their menu offerings. Today sharp owners recognize that too many choices make it hard for diners to choose anything at all. Diners don’t judge a restaurant on how many items it offers, but rather on how well it executes specific offerings.

So if you notice your favorite restaurant has shortened its menu, you can bet that the items that remain are likely winners and will consistently taste great. You win, and so does the operation. Flat out, that’s just good business.

Ag Technology now, here

- Brent Willett, CEcD, is executive director of Iowa's Cultivation Corridor. 

Central Iowa is a natural hub for one of agriculture’s most innovative sectors, but that's no guarantee

Iowa’s agriculture innovation ecosystem received an important upgrade in May this year when Iowa State University and a group of investors announced the creation Ag_Tech_Financing
of the Ag Startup Engine, a development program for agriculture technology companies. The Startup Engine will serve as a business acceleration resource for startups across the agricultural innovation spectrum, including biotechnology and ag technology (or what we used to call "precision agriculture"). The initiative will “provide mentoring services to agricultural entrepreneurs, as well as infrastructure for developing prototypes and products. It also will provide training in how to finance a business.”

Then, another upgrade. On Aug. 30, the Cultivation Corridor and the Greater Des Moines Partnership announced that John Deere, DuPont Pioneer, Farmers Mutual Hail and Peoples Company will invest in a new ag technology startup accelerator in Central Iowa that will further establish Central Iowa’s reputation as a global leader in cutting-edge agricultural technology. The accelerator is designed to build upon one of the state’s key industries of agriculture and the entrepreneurial activity that can advance technology in the industry. It is expected to welcome its first cohort of startups in Spring 2017 and continues to accept investors.

These two developments taken together represent a decisive announcement to the world that Iowa’s education, economic development and private sector leaders are committed in real monetary and organizational terms to establishing Central Iowa as a premier destination for capital and research in what is perhaps the fastest growing segment of an otherwise distressed ag sector. And it couldn’t have happened at a more important time. 

Work in ag technology, broadly termed to be research and innovation resulting in hardware, software and platform improvements in the agriculture sector, has exploded in the second decade of the 21st century. According to AgFunder, in 2010 the broader agriculture technology sector saw roughly $400 million in venture financing activity. Just five years later, that figure had grown 11-fold to $4.6 billion in 2015. As low commodity prices put more and more pressure on the sector, AgFunder reports $1.8 billion in activity for the first half of 2016. Still, the trend is real and growing -- exceptional volumes of venture and institutional capital are flowing toward the ag technology sector. 

As agriculture’s role increases in addressing the global challenges we all face in the coming decades related to nutrition, energy and environmental sustainability, the Ag_tech_states prominence that rapid technological innovation is taking in today’s agricultural companies is intensifying. Natural to such a cycle is the emergence of a startup class of companies that is growing in sophistication and value. And that’s where Central Iowa comes in.

Iowa has been a home of agricultural innovation for more than a century. Farmers, in addition to being some of America’s longest-standing small business owners, are perhaps our most pure professional innovators. And Iowa boasts more of these farm innovators than anyone else. Humble beginnings for Iowa farm innovators have produced spectacular economic, social and cultural returns for our state for many years -- be they seed breeding on the homestead (Harry Stine), solving equipment challenges on the farm (Gary Vermeer) or building a weed control empire from an Ankeny basement (Dennis Albaugh). 

Despite Iowa’s remarkable farm innovation pedigree, we of course possess no guarantee that the next generation of ag innovators will look to Iowa as a destination for the incubation and acceleration of their ideas. In fact, AgFunder’s data on investment in ag technology companies lists the top 15 states by dollars invested in startups for 2015. Hawaii is on the list. Alabama is on the list. Iowa is not. We cannot take for granted our longstanding reputation as leading agriculture state to presume Iowa will naturally attract investment in perhaps the most important emerging field of agriculture. We cannot, and so we must invest in programming and institutions like the Ag Startup Engine and the Ag Tech Accelerator to enhance our competitiveness as a destination for the next generation of ag technology capital and talent.

Since January, at least three other ag technology accelerators have been announced in the U.S. -- one at Research Triangle Park in North Carolina, one in rural Washington and another in Memphis. Does this suggest that Central Iowa is late to the party and playing catch-up with is recent Ag Technology Accelerator announcement? Not at all; the rapid-fire emergence of accelerators pursuing startups in the ag space, if nothing else, reinforces the argument that the time is now to establish our region as a place of innovation in an industry sector that is growing rapidly. 

None of the people I am working with on the Ag Tech Accelerator would be surprised if four or five more ag-oriented accelerators are announced by year’s end. The market will saturate, but with the announcement of two startup support assets -- supported by major players in agriculture including John Deere, DuPont Pioneer and Summit Group -- to support startups in the space in the first half of 2016, Central Iowa has made clear that it intends to compete at the highest levels globally to attract agriculture startups to our state.

Contact Brent Willett:

Human: 515-360-1732

Digital: / @brent_willett /

Finding the right pace for growth

- by Michelle DeClerck, CMP

One major challenge of running a small business startup is growing it at the right pace. Many of those who start their own business probably think they will ramp it up slowly and deal with growth-related issues later. I thought the same thing, but I quickly had more work than I could handle. While I would have preferred that the business grow more slowly, I suddenly found myself in a position in which researching how to hire and employ staff members was as much a priority as handling my clients’ requests.

Because employing others can affect many of the reasons you went into business for yourself, it’s important to give it careful consideration before you take that step.

When the time comes to think about adding staff, I recommend being very mindful of how and when you start spreading the word, as your friends will likely be eager to help you find someone — perhaps even before you’re ready to do so. This could result in a hiring decision you may later regret.

Next, ask yourself the following important questions:

• Do I truly understand the ramifications of hiring a friend?

• What will the working arrangement look like? If the business is home-based, how can I discern whether someone is self-motivated and self-directed enough to handle the unique challenges of working from home?

• Will the work be consistent enough to ensure I won’t hire someone only to have to terminate them later due to lack of funding? Remember, your staff will be depending on your business to help them pay for things like their kids’ braces and soccer fees.

• Do the numbers really add up? After workers’ compensation insurance, bookkeeping, paperwork, mentoring, managing and everything that goes into a meaningful employment situation, am I really making enough money to cover both the addition of the staff member and the time it will take me away from the core work I was doing? (These things usually take more time than you would think.)

• What’s the real reason I’m adding staff? If it’s to grow the company based on your strategic objectives, you’re probably on the right track. If it’s because you don’t want to turn down business, first make sure it’s really the type of business you want your company to handle. Next, consider whether the client would be OK with your delegating the work to a staff member rather than handling it yourself. Clients often hire small businesses based on the business owners. A candid conversation with the client may be necessary and may help you with your hiring decision.

Lastly, I highly recommend that you discuss all of these considerations with other successful small business owners. Keep an open mind and learn as much as you can from their experiences.

Deciding when and how much to grow is a challenge. However, if you give it the right type of forethought, you can grow at a pace at which you can continue to find the same level of enjoyment and fulfillment you originally sought when you decided to go into business for yourself.

Long-term planning can thwart your success

- Michelle DeClerck, founder of Conference Event Management (CEM) and Financial Speakers Bureau, is a frequent contributor to Lift IOWA weekly e-newsletter and now is a contributing writer to on the topic of Starting and Growing Your Business. 

Many aspiring entrepreneurs delay starting their own business because they’ve heard they can’t start a business without a three- to five-year plan. I disagree. That kind of thinking would have left many of today’s successful companies in non-existence—including my own.

“A good plan, violently executed now, is better than a perfect plan executed next week.” —General George Patton

Now entering my thirteenth year in business, my team and I operated for the first eight years without an official long-term plan. The lack of such a plan didn’t keep us from moving forward and achieving great success and growth.

My decision to operate without a long-term plan early on may come as a surprise to many, as I’m known for being a planner by nature, but I didn’t create one because I didn’t know specifically what I wanted in terms of the company’s growth.

During those early years, we were exploring, creating and testing different paths so we could decide where we wanted to go. We had doubts about growing in some areas and fears of tackling other unknown areas. The economic downtown in our niche market also meant we were dealing with challenging day-to-day emergencies and reacting to being consistently too busy. During those years, I knew I should and would create a long-term plan—eventually, but relied instead on strategic visioning.

As many successful companies have proven, long-term business planning may be bypassed when other strategic visioning and goal-setting steps are in place. We certainly had a strategic vision of where we thought we wanted to go, and we diligently worked toward achieving it.

After employing the services of several leading professional business consultants and companies, and combining their advice with my team’s vision, we’ve since created a business plan for the company—a short-term plan. That’s right, we’re still avoiding long-term planning, and I believe most business owners should do so, as well. Why be locked into a plan that can quickly have you losing sales and market share?

Technology and adaptability allow companies that embrace change to stay on the cutting edge. These are the companies that will succeed and grow by being nimble. They can create an immediate solution to a client or industry-wide challenge, or even develop an unforeseen new product line in unprecedented time.

Shorter-term planning also allows more of your employees to have a voice in the company’s goal-setting, and in turn, to be more engaged in achieving them. Perhaps even those goals will be set aside on short notice, and new ones set to achieve even greater success.

Following a traditional three- to five-year long-term business plan nearly guarantees your competition will pass you by. Is what you wanted three years ago still what you want today? Don’t get stuck with a plan that doesn’t allow you to pivot and go in a completely different direction if needed.

You still need to have aspirations and goals—and a process to get there—but you may want to consider setting shorter timeframes for them. I recommend you review and rewrite your business plan a few times per year, and when it isn’t working, or it needs adjusting, change it immediately—not later.

For those of you waiting for just the right time to start your own business, there will probably never be a perfect time. If you have an idea and the passion to get a business off the ground, then that’s the time to get started. Create your vision, solicit feedback from other business owners and then engage business consultants to create a short-term plan that will help you quickly attain your potential while avoiding costly mistakes.

Even if you can’t put forth that much effort, analyze the risk and perhaps you’ll decide you’re willing to start your business with little more than your idea, your passion and your willingness to put in a tremendous amount of work. In that case, a short-term plan, paired with an ultimate strategic vision, can be enough to get your business off the ground and on the road to success—sooner rather than later.

As a contributing editor on the topic of starting and growing your own business, Michelle DeClerck will share her expertise and a successful businesswoman while revisiting the topics she writes about in her own business. She believes it’s essential for business owners to continually review their processes in order to grow. Share feedback with her at

For more information, visit

Phone: 515-254-0289 ext. 9.


SBA help for repaying business mortgages returns

-Pat Brown-Dixon is the administrator for the Small Business Administration's Region VII and oversees SBA programs and services for the states of Iowa, Kansas, Missouri and Nebraska.

Last month, the U.S. Small Business Administration regained, on a permanent basis, a powerful lending program that will help continue America’s recovery from the great recession of 2008!

The SBA’s 504 Refinance Program was very popular, but it was only a pilot lending tool under the Small Business Jobs Act of 2010. As such, it began in October 2011 and expired in September 2012. Its purpose was to provide extended capital to help small businesses pay off nongovernmental commercial mortgage loans.

I recently met a small business owner who had just been able to get property refinanced under this loan program before it expired in 2012, and who was very happy about it.

The program had a good repayment history and was used for small businesses ready to expand or save jobs but who needed to extend commercial mortgage payments in order to do so. The SBA asked Congress to extend the pilot, and now that they have, and President Obama has signed it into law, it has become a permanent part of our 504 loan program.

The SBA started processing applications on June 24.

One of the requirements of the 504 Loan Program is that the small business borrower must create or retain jobs in the community or meet a community development or public policy goal. Application is made through community Certified Development Companies (CDCs), nonprofits set up to spur community development. A 504 refinancing project has three components:

  • A loan secured with a junior lien from the CDC covering up to 40 percent of the cost, and backed by a 100 percent SBA-guaranteed debenture.
  • A direct commercial loan from the private sector covering the amount covered by the debenture on the project and secured by a senior lien.
  • A contribution of at least 10 percent equity from the borrowing business.

The program offers loans of up to $5 million.

Some rules do apply for borrowers who choose to refinance their existing mortgage with the 504 Loan Refinance program.

1. The commercial mortgage/deed of trust debt to be refinanced must be at least two years old.

2. The loan (or loans – the package could comprise more than one eligible loan) being refinanced must not have any late payments in the previous 12 months, and evidence of that must be presented.

3. The property financed by the original loan must be a minimum 51 percent owner-occupied and meet all other eligibility requirements of the SBA 504 program.

4. The loan program is for refinance-only projects whose maximum LTV (loan to value ratio) is 90 percent.

5. Cash-out refinancing is permitted to cover most eligible business operating expenses.

6. Only conventionally financed commercial mortgages/deeds of trust are eligible. Existing "government backed" loans, such as 504's, 7(a)'s or USDA loans, cannot be refinanced under this new program.

If your small business could benefit and grow from getting out from under a previous mortgage with high interest or short terms, the SBA’s 504 Refinance Program might be just what you need to put that second wind under your small business sail.

For more information, or to get the process started, go to this link and select “Iowa” to find your local Certified Development Company. You can also contact the SBA Branch Office in Cedar Rapids at (319) 362-6405. They can provide assistance and information about our other loan guarantee programs, as well.

Do equal, 50/50 shareholders owe each other fiduciary duties?

SealIAMatt McKinney is an attorney at BrownWinick Attorneys at Law

Fiduciary duties are often described as the highest duties recognized under the law. Their application, however, is often challenged by litigants in court.  In a recent case before Iowa's Business Court, the Honorable Judge John Telleen was tasked with determining whether equal, 50/50 shareholders in a corporation are charged with exercising fiduciary duties in their dealings with each other. 

Judge Telleen began the June 4, 2015 opinion by explaining Iowa's long history of applying fiduciary duties: (1) by directors and officers of a corporation to the corporation and its shareholders; (2) between a majority shareholder and a minority shareholder; (3) between joint venturers through the life of a venture and its dissolution; (4) between partners in a partnership; and (5) between shareholders in closely held corporations.  After reviewing and explaining Iowa's well-established history of applying fiduciary duties in numerous business settings, Judge Telleen concluded, "[e]qual shareholders owe each other a fiduciary duty" (emphasis added).  In support of this holding, the court explained

[i]f equal partners, joint venturers and shareholders in closely held corporations owe each other [sic] fiduciary duties, the Court sees little reason why those same duties should not be required of equal shareholders.  

Based upon the holding in this June 2015 opinion, 50/50 shareholders in Iowa corporations should consider exercising caution in their dealings with one another consistent with the fiduciary duty concepts adopted and imposed upon Iowa shareholders.

Click here to learn more about the who, what, when, where, and why of fiduciary duties.  

Download a copy of the June 4, 2015 Opinion.  A special thank you to Ben Weston, of Lederer, Weston, and Craig for providing a copy of the opinion.  

Shhh... Can your business keep a trade secret?


Matt McKinney is an attorney at BrownWinick Attorneys at Law.

It's no secret that trade secrets are often invaluable to Iowa businesses. Without adequate safeguards, however, your trade secret's protectable status, value, and the business it supports may cease to exist. Indeed, whether information (a formula, technique, process, customer list, etc.) qualifies as a trade secret under Iowa law, and thus receives legal protection, may hinge upon whether and how your business guards the secrecy of its valuable trade secret.  

One of the most iconic and frequently cited examples of a trade secret is the authentic Coca-Cola formula. Playing on the secrecy of their formula and the extremes to which they guard their valuable trade secret, Coca-Cola released this advertisement:


With the foregoing in mind, businesses and business owners often inquire whether their valuable information will receive legal protection as a trade secret in Iowa. In November 2010, the Iowa Court of Appeals published an opinion (Full Opinion Here) identifying six different factors a court may consider when determining whether information qualifies as a trade secret in Iowa. The six factors the Iowa court cited are: (1) the extent to which the information is known outside of the business; (2) the extent to which it is known by employees and others involved in the business; (3) the extent of measures taken to guard the secrecy of the information; (4) the value of the information to the business and its competitors; (5) the amount of effort or money expended in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. As may be gathered from these factors, generally speaking, the more secret and valuable the information, the more likely it will receive protection under Iowa law.

So, in coming full circle, can your business keep a trade secret? To read more about trade secrets in Iowa, including the type of information (such as a formula, process, list, data, technique, etc.) that may qualify as a protectable trade secret, click Here.

Learn to pitch

I have seen marginal ideas funded and great ideas shot down for the same reason: The pitch.

While business plans, financial plans, market research, product development and the rest are all absolutely important, they can all be undone in a 10 minute pitch. Learning to pitch is straightforward. You need to practice. Start by practicing in front of a mirror. Speak out loud. Believe me, I have spent many hours pitching out loud to a mirror or wall. This will get you comfortable with your content and voice. Next, you need to practice in front of a friend or co-worked. Someone who understands what you are talking about so they can help you improve the message. 

From here most go straight to the major leagues. They pitch an investor. Though this can work, it is risky. You are only going to get so many investors to pitch to. You do not want to waste these opportunities. Thankfully there is another step available here in Iowa from the Technology Association of Iowa (TAI). It is called Pitch and Grow. On September 18, Pitch and Grow X  happens at the Innovation Expo in Coralville Iowa.

At Pitch and Grow, entrepreneurs will pitch their business to a supportive group of peer CEOs, CIOs, business development experts, industry professionals and business-savvy people. In return, they have a unique opportunity to receive constructive feedback on areas such as fundraising, value proposition, business plan, management team, sales/marketing/support and building strategy. Many past presenters have made critical connections and picked up great feedback on how to make a stronger pitch. Check out Pitch and Grow X and sign up to Pitch today

-Mike Colwell

See more of Mike Colwell's personal blog at

Keeping your focus - Make it better or shut it down

2012 Ford F-150 SVT Raptor Crew Cab2012 Ford F-150 SVT Raptor Crew Cab (Photo credit: MSVG)

I am a big fan of Jason Fried of 37Signals. I think what they have accomplished is not only amazing but sets a model for others to pursue. Recently Jason wrote a post for Inc. Magazine titled "Walking Away From A Product". In the post, he tells the story of his teams' decision to shut down a profitable product and the resulting reactions from others. Understand, the product was making a profit for them. And they are shutting it down or selling it. Why? In a word, focus. 

For many starting or growing a business, the highest pressure comes from having too much to do. There are so many things on your plate, some days you struggle just to get a list of all the things needing to be done finished. The second highest pressure is to grow revenue. Revenue is the life blood of a compay. So why would Jason suggest killing off a product that is making money? Simple. Focus! Focus the precious time you have on the products or projects that make money and have the greatest potential to grow. Say you have a total of 6 hours a week available to work on growing your products or services. You do not want to spread that 6 hours around too much. You certainly should not spend it on the lowest potential or performing product or service. 

Jason is correct is saying that if you are not making a product better, you need move away from the product. Beyond just focus, you need to recognize that these days competition is constant and relentless. If you are not going to improve your product, you may want to sell it to your competitor who does focus in the product's area.  At the end of the day, focus your precious time in the place with the most potential. This will increast you opportunity for success. 

Mike Colwell

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Naming your product

Business Plan Template - Product Box ShotBusiness Plan Template - Product Box Shot (Photo credit:

Many of my clients are creating a new product. Some of these clients are brand new companies and others are existing service providers who have recently developed a product. When you are a brand new company no matter what the company name, it will require an introduction. When you are an existing company that already has name recognition, don't change the name of your company just because you now have a product to compliment your services.  

Some companies consider renaming their company to their new product name. Beyond the reasoning above, there are a few additional reasons not to do this. First, keep in mind you may end up with multiple products so you do not want the company name tied to any one product. Second, it is possible that someday another company buys one of your products but not your company. You will want the ability to separate the two.

When you name your product, consider focusing on something descriptive, something that denotes the solution you provide. Think about a sales call where you will introduce your new product. You have just introduced yourself and your company. If you are a new company, they will not have any point of reference. If you are an existing company, it is likely they will have a certain level of trust based on your reputation. With that, you need to introduce them to your product. Focus on the problem you solve so that when the potential customer hears the name, they can envision the problem solved. It will also naturally move the conversation along. Here is an example:

“Hi, I am Mike from Standard Software. We have a new product called Connection Monitor. This product is targeted at small businesses that are higly dependent on their internet connections. The user of our product can keep up-to-date on the status of their connections and program alerts....." Upon hearing this, the customer will most likely respond with questions, how, where, to what extent, who etc.

By choosing a name that denotes the solution, you will lead the conversation to the next logical step. While the name may not seem thrilling or bold to you, it will help your customer understand what you are providing. 

Mike Colwell

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Negotiations in business - practice, practice, practice

Customers talking to a Relationship Manager du...Customers talking to a Relationship Manager during the Edelmetallmesse (Photo credit: GoldMoneyNews)

Doing business is a series of negotiations. From the moment you plan to start a business to serving your customer, you find yourself negotiating. For most people negotiations brings to mind price, but there are many other areas you must negotiate. 

For the service provider, the details of the service, the delivery time-frame and the definition of "complete" are some of the many items that must be determined. For the product company, delivery time-frame, extended warranty, financing options, product specifics (color, options, etc) all must be negotiated.

Negotiations is a required skill all business people must learn and refine. Many experienced business people will tell you they are still learning how to be a better negotiator. For those getting started, here are a few points to consider;

  • Some people like to negotiate. It is like a sport to them. Be prepared to spend the necessary time. It is not just about the end goal, it is the process these people enjoy. Don't hurry them. It will be harder to close the deal.
  • Many times a customer request for a price allowance may indicate you have not overcome product objections. Make sure you have dealt with any objections before negotiating price
  • Keep your emotions in check and do not make the process personal. This is not about you winning or losing, it is about taking care of the customer. Making the process a win/lose proposition immediately puts you in competition with the customer. 
  • If you must negotiate price, give up in very small increments. If the customer offers you 25% less, counter with 3% less or some similar amount. First, this lets the customer know you will not be giving up huge amounts. Second, you will quickly find out if the issue is price or product.
  • Finally, unlike some in politics, there is no room for absolutes in business. Bluntly stating there is no room for compromise is stating you are not open for business. Stay open to listening and considering offers. Some may be surprisingly beneficial. 

Practice your skills of negotiation every day. Not just with customers but with vendors, partners, employees and others you come in contact with. After each encounter, think through what you did, what worked and what you could have done better. This will pay off in the long run. 

Mike Colwell


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What is an angel investor?

Following the launch of the Plains Angels this week, I have had several people ask me what an Angel Investor is. According to the Angel Capital Association:

An angel is a high net-worth individual who invests his or her own money in start-up companies in exchange for an equity share of the businesses. ACA recommends that entrepreneurs work with investors who are accredited investors (who meet requirements of the Securities and Exchange Commission) and who can add value to the company via high quality mentoring and advice. Other important things to know about angels include:

  • Many angels are former entrepreneurs themselves
  • They make investments in order to gain a return on their money, to participate in the entrepreneurial process, and often to give back to their communities by catalyzing economic growth.
  • Angels make a return on their investment when the entrepreneur successfully grows the business and exits it, generally through a sale or merger
  • It is estimated that angels invested 19 billion in more than 55,000 start-up businesses in 2008 (Source: Center for Venture Research)
  • Angels tend to invest in companies that are located near them regionally (or to co-invest in a wider geography if a local investor they know and trust is involved)

The key thing to me at the end of the day is can the angel investor add value to the company. This is commonly referred to as "smart money", or money that comes with skills, connections, knowledge, or other valuable resources. 

Remember, if you take outside capital from angel investors or other sources, you need to plan in advance how you will return the capital with a good gain. As stated above, this generally occurs when the company is sold or merged with another company. 

Mike Colwell

Partnerships - a guaranteed divorce

partnership agreementpartnership agreement (Photo credit: o5com)

Many of the clients I advise are in partnerships.  It is a common situation.  Two or more people get together to solve a problem and the next thing you know a partnership is born.  If you listen to the first-time partners, they will tell you their priorities are to get the product into the market and grow the business. If you listen to partners who have been through years of business together, you will hear something different. 

What older, wiser partners will tell you is to plan the divorce.  It is coming.  It is guaranteed.  At some point the partnership must end.   Whether for reasons of death, indifference, disagreement, or a multitude of other reasons, it will happen.  The key these wise people will tell you is to plan the divorce in advance.  Setting the value of the company and how one partner might buy out another partner well in advance sets the rules if things go bad. I sincerely hope that things will not go bad for you in your partnership.  But in case they do, have the ground rules set in advance. 

My good friend Rush Nigut at Brick Gentry has presented on this topic many times in the past.  Check out the video of him on this subject "Rush Nigut on Partnering" for an in-depth analysis of why this is so critical and how you can protect yourself. 

 Mike Colwell

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Let go or be dragged

Stunt show at Texas Hollywood, AlmeriaStunt show at Texas Hollywood, Almeria (Photo credit: Wikipedia)

So the other day I was getting ready for yoga class when one of my classmates told us about something she saw on Facebook. Someone, I do not know who, posted "Let Go or Be Dragged" on their page. As the class talked about this from the standpoint of life in general I thought about how this applies to startup and growth businesses. 

One of the key failure points in a business is when the owner or general manager cannot let go of certain aspects of their business. Recently I was working with a VP of marketing at a small manufacturing company. She was adding a dedicated sales manager to her team. Her manager, the president of the company, who was probably trying to do the right thing, interjected a whole different organization structure on this VP. While it is his prerogative as her manager, he unintentionally cost her a lot of time and trouble. She was having to drag him along to where she needed him to be. He needed to trust her and let go. 

The problem here is knowing what things to let go of and what things to stay in control of. If you want a company to grow, you have to get the right people engaged in the team. Once you do this, you have to let go. Keeping tight control of a talented, motivated employee is a fast way to lose that employee. 

The same thing holds true for founders. While they are the ones that start the company, that is no guarantee they are the right ones to grow the company. In fact, I will argue that in most cases the founder will not be the right one to grow the company. The necessary skills are not the same. Sure, there are exceptions, but they are few. 

In the end, if you are an owner or manager, stay aware of the people on your team. Are they dragging you along? Do you need to let go?

Mike Colwell

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How do I tell you...?

Sad(Photo credit: Wikipedia)

Dear Small Business Owner,

How do I tell you? 

  • How do I tell you that the tops of all the napkin holders in your restaurant are covered in dried, crusted food?
  • How do I tell you that your email is delivering "permanent failure to deliver" messages to me?
  • How do I tell you that your phone has no answering machine?
  • How do I tell you that you forgot to deliver my goods three times in a row?
  • How do I tell you that you never write down what I need, then often apologize a month later for missing something?
  • How do I tell you that I waited for five minutes at the register and no one came?
  • How do I tell you that your facebook page is not connected so I cannot communicate with you?
  • How do I tell you that I cannot depend on you returning my phone calls?
  • How do I tell you that you have billed me three times for something I already paid you for?
  • How do I tell you that I cannot trust you?

How do I tell you that you are killing your own business?

Mike Colwell


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Mentors: Why, who, when, and what next

16775bMentors play an important role in business.  Most successful business people I know will attribute some of their success to having good mentors.  So what makes for a good mentor?  Well, it depends on you.  First you have to decide what you want from your mentors.  You will notice I say mentors plural as you likely need more than one.  One place to start is where you are weak.  Face it, we all have weaknesses.  The best mentors for you are probably strong where you are weak.  If you are strong in finance, you may not need a financial mentor.  Whereas if you are weak in sales, you may want to find a mentor who is experienced in this area. A great way to figure out your strengths and weaknesses is through a book and an assessment tool called Stengths finder

Next, how often should you meet with your mentors?  Should you meet with several at once or each individually?  This is very dependent on what your needs are.  If you have the ability to have regular meetings with your mentors, do it.  I find monthly meetings about right for me in most cases.  Use this time to explore not only tactical issues you have in their area of expertise but also ask for their help on longer term strategy.  For large scale decisions you may want to meet as a group in a more advisory panel approach. What ever you do, make sure you are not taking too much of these people's time.

What if you do not agree with the guidance of your mentor?  There is going to come a time when your mentor says something you do not agree with.  Start by asking their reasoning.  Make sure you understand why they are taking the position they are.  Respect their opinion even if you do not agree with it.  If you are concerned that your divergent views might harm your company, ask another mentor to give you feedback on the situation.  At the end of the day remember that you are the person responsible.  It is your decision, not your mentor. 

Mike Colwell


The business sayings of my father

English: Car dealership on Ipswich RoadImage via Wikipedia

I grew up the son of an entrepreneur.

My father was Bill Colwell.  For anyone who was in Waterloo, Iowa in the early 70s you could not miss him.  He ran TV commercials on channel 7 every night for Schukei Chevrolet. This was when I was in junior high.  Every night my dad would get on TV and say, "Hi, I'm Bill Colwell for Schukei Chevrolet and I'm crazy!"  

Yes, I got tough fast.  But more importantly, growing up around an entrepreneur who did not finish high school and did not have a direct path to success, it was a learning experience. 

My Dad had a lot of sayings.  Many of these have been of great value to me in my career.  I would like to share a few of these with you as they have helped me grow my businesses.

  1. Tell the truth, you never have to remember what you said.  Boy is this more true than ever. Back in his day there was no internet and social media data pile storing everything you ever said or did.  I cannot tell you how many times this has saved me with a customer or vendor.

  2. Sell what you can see, don't see what you can sell.  When I first starting selling cars, I would come back into the store and tell my dad that "if we just had xxx car" or "if it just had power seats" I would have sold it.  My dad pointed to the rows of cars and said "see those cars, that is all the money we have.  We have to sell those cars".  That was the long version of "Sell what you can see, don't see what you can sell".  In business you have to sell what you have to sell. 

  3. Smile and dial.  We did a lot of cold calling.  Can you imagine taking out a phone book and dialing random numbers to try to sell someone a car?  Well, I tried to do it.  One thing my dad taught me was "Smile and Dial".  In other words, when you are talking to a customer, smile!  You will sound much more positive.  Also, look up and straight out to the horizon.  Your voice will be more clear. 

  4. Shut up and Write.  When the customer said yes, shut up and write up the deal.  If you keep talking, you may say the wrong thing and talk the customer back out of the deal.  Even today I will have experiences where a salesperson keeps talking and starts to confuse the situation.  They need to "shut up and write!"

My dad learned by failing many times.  These sayings of his are hard won knowledge.  My dad passed away in 2001 of lung cancer.  I miss him.  I will never forget him or his sayings.

Mike Colwell


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The paradox of a new idea

Deutsch: Logo von YahooImage via Wikipedia

Recently I drove by a closed restaurant.  It had been a steakhouse most recently. I thought about how tough it would be to compete against the other steak houses in the area and wondered if that was why it did not survive.  As I drove on, I thought about all the types of food available today at restaurants from German to Italian, to Mexican to Chinese to Thai, to bagel shops, well, you get the picture.

I realized the one thing harder than competing against the steakhouse or any other type of restaurant probably would be if a new restaurant came along with a whole new type of food or way of doing business.  At least if you are a steakhouse, the customers will know what to expect. This is the paradox of a new idea.  While many customers will say that they are seeking something new, they tend to gravitate to the familiar. 

If you are starting a business that is truly a new idea, how do you get customers to try you out? Groupon leveraged the analogy of a coupon, something everyone already understood. When Yahoo became be one of the first mainstream search engines, they spent a lot of money on memorable ads that demonstrated what a search engine was, then added a unforgetable holler of "Yahoo!"

How does the small business or startup entrepreneur best compete with a new idea?  After all, they do not have the millions of dollars Yahoo.  That is one of the most challenging questions for the truly new idea based business.  Here are a few paths to consider:

  • Like Groupon, create an analogy to a recognizable product idea
  • Offer it as a complimentary product to an existing well-known product.  Want to sell an "after desert palate cleanser"?  Sell it with desert.
  • Offer a known product at a very low price then bundle the new idea product on top.  Are you going to steam clean office desks to get rid germs?  Better sell it with the rest of the cleaning process.

Offering a brand new, unrecognizable product to a market that does not know what it is, will most likely lead to failure.  Make sure your new idea can be recognized and understood in context to it's use. 

Mike Colwell


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Do not compete on price, unless...

Been asked by many friends lately to help them...Image via Wikipedia

There was an interesting article about a new start-up company called AutoSlash in the New York Times this past weekend.  AutoSlash says they will get you the best price on a car rental by constantly checking for better deals even after the reservation is made.  What caught my attention was how many of the auto rental companies had decided to allow AutoSlash to work within their reservation systems and coupon systems to deliver these low prices. 

This seems like an interesting move. I can understand why the low dollar rental companies may want to pursue this, but one company that is connected is Hertz.  Given their reputation for being on-premise and having covered parking for the cars among other ammenities, it just seems odd. Maybe they figure that in a tie on price they will win the business?

For a new business starting out or a business trying to grow, competing on price does not make sense long term.  Sure, you can use price to bring new customers into your business, but only if you think you can keep them over time for repeat sales or sell them something else while they are there.  Walgreens is famous for this strategy.  They will discount something heavily to get customers to the store but they make up for their loss leader sales with other purchases.

Competing on price alone signals to the customer they should always expect the lowest price. While this will win you some business, you will have a harder time keeping your customers long term.  A price-only buyer does not tend to be a loyal customer.

Use price where needed to bring customers into your business.  But when doing this, make sure you know you will keep them over time at reasonable margins or sell them other items that will make up the margin hit. 

Mike Colwell



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What can we learn from the Komen Foundation polarization

Twitter 6x6Twitter 6x6 (Photo credit: Steve Woolf)

In the aftermath of the controversy surrounding the Susan B. Komen foundation decision and the reversal of the same decision, perhaps the best thing we can all do is learn from the situation.  Regardless of the side you might be on, if you own a small business, you should be thinking about how to avoid these types of situations. 

We all live in a time of increasing polarization concerning issues. When you combine this with the ability of almost everyone to speak with a loud voice via Facebook, Twitter, Blogs, and other social media platforms, you have a situation which is entirely new. In a matter of hours, the opinion of literally millions can be heard. And there is nothing you can do about that.

Now take that same combination to the local level.  These days it is common to comment on local news sites, in fact it is encouraged. Any issue can get amplified to a higher level than desired. Some time back, a local restaurant owner found out the hard way when his not-too-polite comments were broadcast around the Des Moines metro for all to hear, over and over again. 

If you own a business, you must take extra care not to cast your business into the light of polarizing issues. Sounds easy, but it isn't. Who decides what is polarizing? Everyone. Here are a few polarizing issues that may or may not surprise you:

  • A restaurant has a pig roast in the parking lot.
  • A hardware store fires an employee.
  • A mechanic has a religious symbol on his wall.
  • A veterinarian clinic has to euthanize an animal.
  • A man walks into a shopping center carrying a gun.
  • A woman enters a funeral visitation wearing a revealing dress.

Are these polarizing?  The answer is yes, for a certain group of people. What will cause the loudest of outcries will most likely depend on your response to someone raising the issue as polarizing in the first place.  Does the funeral parlor ask the woman to leave because others are complaining? Does the hardware store respond to an accusation of bias? How does any business person deal with this? The answer is complex, but here are some guidelines to consider.

  • Be consistent in the way you manage and operate your business. 
  • Be polite to everyone. Everyone!
  • Ask others that don't share your personal views for their opinion on how to respond to a sensitive issue. Have an issue raised by a gun owner? If you have time, ask a couple other gun owners you know and trust for their thoughts. You may learn more about where a perceived issued is coming from.
  • Anticipate all potential outcomes so you know what you will do. Plan ahead. It is like playing chess. You have to play a few moves ahead to stay safe. 
  • If you think something you are going to do is going to polarize the community, ask yourself if your business can survive the impact. If not, you shouldn't do it.
  • Do not over react to those who are not civil or respectful. 
  • Communicate clearly and consistently concerning the situation.

Lastly, don't lie. People have a much greater ability to sense when someone is lying that most people understand.

Mike Colwell

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So, who is ready to step up to the next level?

English: Flight of steps Running up to the rai...Image via Wikipedia

Growing a business quickly requires that you can bring new employees into your business and bring them up to speed in their tasks. Too often, bringing a new person on requires one of your best employees to take precious time to train the new person. The same can be said about developing new processes which you want everyone to start using. Whether these are processes used in serving the customer or managing information, everyone involved needs to know how to do these new procedures correctly.

I have had great success managing this problem through my employees. Many of my employees would ask for opportunities to learn new things on the job or just work on something different. My solution was to have the employees write written instructions on how do do certain procedures. I fell into this by accident one evening late when I was trying to create a document for my employees.  It finally dawned on me that many of the employees knew the details much better than I did.  I can be a bit slow at times! Perhaps this sounds simplistic, but think about it.

  • If the procedure is new, the person who developed it is probably best suited to write down how to perform the procedure.
  • Writing the process down moves company knowledge onto paper and out of a single person's mind - great insurance should that person leave. This is also a great way to deal with new locations or virtual employees.
  • Asking the employees to write out processes engages them in the entry point of management and challenges them to try new things. This is a quick way to find out who is ready for the next level.
  • Asking the rest of the employees to improve the instructions over time is a great crowd-sourcing approach to improving the process over time.

Finally, asking the employees to develop, write and improve the processes your company uses, engages the employees in the business and enables you to grow faster.

Mike Colwell

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You get what you measure for

Illustration of a vernier caliperImage via Wikipedia

I was taught that saying many years ago.  You get what you measure for.  If you measure only for profit, you may have fewer but profitable sales.  If you measure for sales volume, you may not get the profit you want. If you measure everything, you will run out of time!

Choosing what you measure is critical to long term success.  Just as critical is to make sure you re-evaluate those measurement targets to make sure you are measuring what is relevant at that time.

In a startup business, number of users / customers and cash flow break even are two critical measurements.  In a more mature company you probably want to measure profitability and return on invested capital. Deciding what to measure when is the key.

  • Measure those things that sustain you.  Revenue, gross margin, profit.
  • Measure those people who sustain you.  Customer renewals and satisfaction.
  • Measure those who enable you. Vendor or partner satisfaction, employee productivity.
  • Measure those things that create growth in your business, new customers, new product success. 

You need to find a balance of enough relelvant measurements without overloading. You also need to spread out the job of measuring to everyone on your team.  The act of measuring the business will hopefully more fully engage team members in what is important. 

- Mike Colwell

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What your business culture says about your business

Vector handshakeImage via Wikipedia

Ok, restaurants again.  As you can tell, I eat out - alot. 

I was at the local Applebees in Ankeny the other evening.  It is a favorite place of mine.  The food is good but not the reason I go there.  I go there because of the staff.  The staff they have stays long term because of the culture.  The general manager is one of the hardest working people in the place.  He never stops moving.  He is the first to wipe down a table or sweep up the floor.  He treats his employees as equals.

I see a similar attitude in the staff of HyVee.  I recently was checked out by a manager at my local HyVee because her staff were already helping others.  She opened a lane and checked me out. I did not have to ask or encourage her.  You could tell that it is just the way they do business.

The actions of you and your staff are what we customers use in understanding your culture.  If you own a restaurant where the tables are filthy and the manager is leaning against the bar talking to the hostess, I know your culture.

I personally do not like spending a lot of time talking to my teams about culture.  I believe you simply model the behavior you expect of everyone else.  Those who can emulate your model are the ones you keep and reward. Those who do not need to leave.

Make sure you are modeling the culture you expect from your employees at all times.  It is the strongest form of communications you possess. 

- Mike Colwell


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New owners are at a disadvantage...don't make it worse

U.S. Division-North Sustainment HeroImage by United States Forces - Iraq via Flickr

It is truly a disadvantage to be a new business owner. To start with, you are an unknown to most potential customers.  You probably do not have a long list of referral accounts or a line of customers out your door. So how do you make up for this disadvantage?

There is one thing you can do that will make up for most of the "new business owner" challenges.  Professionalism.  It is a big word both in number of letters and in fulfilling the attribute.  Professionalism is not accomplished through a single action or method.  It is a constant state of being.  Here are a few examples.  See if you can spot the professional.

You make an appointment over the phone with an auto repair facility.  At the end of the call, the person on the other end says:
    a) G'bye
    b) See you then
    c) Repeats back to you the time, date and expected work to be accomplished.

You walk into a retail store. The clerk is at the back of the store is talking to another person. The clerk:
    a) Keeps talking to the other person
    b) Makes eye contact but does not engage you
    c) Greets you and tells you s/he will be right with you

You are working with a consultant. You ask for a proposal for the cost of doing some work you have been discussing. The consultant respond with:
    a) A verbal cost
    b) An email with a "Thank you for the opportunity" and a price
    c) A written proposal including all terms, conditions, scope, price, payment terms etc. 

Being professional will set you apart from the crowd.  If you have employees, make sure they understand the same concept and are professional at all times. 

- Mike Colwell

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The staircase approach to building a business

Teutonic's grand staricaseLeImage via Wikipedia

Stand at the base of a set of stairs, 10 to 15 steps will do.  Now get ready and leap to the top!  That is what many entrepreneurs attempt to do when starting a business. Unfortunately most do not have the strength or skill to make it on the first leap. 

It is easy to convince yourself that you must have everything done the day you begin. Take the marketing for a new business.  While you may want to have all of your marketing in place before you begin, many of your best marketing ideas will come from the first few customers you serve.  Start with a simple approach of what you offer to the market.  Stick with the problem you solve and the value you provide.

That can be your first step. 

As you gain a couple clients, ask for a testimonial to use in future marketing, perhaps on your website or on your ads.  That is good second step. As you move forward, ask your clients what made them choose you.  Revise your ads and promotional copy to bring in some of the new things your customers told you as an additional step. Next, start to look for other businesses that are complimentary to your business and ask them to work with you in marketing each others businesses through referrals or working together.  Another step. 

Moving step-by-step through your marketing or any other area of your business will allow you to use your your funds more efficiently and stay focused.  It will also keep you from falling down from trying to leap to the top step.

- Mike Colwell

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Don't act on your assumptions

Series of air conditioners at UNC-CH.Image via Wikipedia

It had to be right, right?

When we purchased our house in 2006, it was brand new. We had flown in from Seattle in April and bought the house from the builder then flew back to Seattle to finish the school year. When we arrived on the 5th of July the temperature was over 90 degrees. Our realtor had called me earlier in the day to tell me she had turned on the air conditioning so the house would be cool when we arrive.  It was a nice touch. 

Entering the house late that day, it was very warm inside.  I am fairly handy around the house so I did the usual, check the breaker, fan and thermostat. No luck. On the furnace was the sticker from the company that did the installation.  I gave them a call. This was during the building boom that led up to the crash of 2008 and HVAC contractors were working some unbelievable hours. I ended up talking to one of the general managers as everyone else was in the field. I explained the problem. He asked the usual questions, did I check the filter, the breaker etc. I could tell he was assuming that everything was fine and I was the problem. After all, it was a brand new house and they had installed the system. It had to be right, right?

I was finally able to convince him that he needed to send someone out. Since everyone was working hard, he came personally. When he arrived it was in the early evening and he looked like he had been having a bad day.  I could tell he was not happy about coming out to, he was sure, show me something simple. I walked with him as we first checked the thermostat, the furnace in the basement and finally the condenser outside.

He took one look at the condenser and said something to the effect that this was the problem as the fan was not blowing.  Closer inspection showed that the entire wiring harness had never been installed that connected the condenser to the electrical supply.  This is analogous to the car that won't start which turns out to have had no gasoline! 

Well, he was pretty embarrassed.  We both knew immediately that whoever had installed the system had never checked to make sure it worked.  To his credit, he corrected the problem that evening.

While it was not right to begin with as he had assumed, he made it right.  To this day I do business with this company.  They listened to me when they "knew" I was wrong.  They did not act on their assumptions. 

- Mike Colwell

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"Let's deal with it later..." No, let's not

Lightning bolt!Image via Wikipedia

A guy comes up with a business idea. It is a pretty good idea.  He starts working on it.  The idea takes hold. Others start encouraging him. Customers begin to say a tentative "yes" to his offer. The guy gets a friend to help him out. The guy tells the friend he cannot pay him but can share some equity and that they should discuss the amount and terms. The friend says no, don't worry about it.  Let's deal with it later.

Later happens. The discussion takes place. The friend is insulted by the percentage offer of equity.  The friend bails on the business idea. They are no longer friends.

The difference of opinion on equity percentages was probably a factor of 10. As sad a situation as this is, it is not as bad as many I see. Partners must discuss these types of arrangements up front.

Waiting until after the fact is terribly dangerous. Not only are feelings hurt, there are potential legal ownership issues to deal with. To top it all off, if the two parties cannot come to a break-up agreement, it becomes a "he said" vs. "he said" issue and resolution becomes extremely difficult.

Do not leave partnership or ownership issues for later. If someone is going to be in business with you, make sure they know going in what they are signing up for.

What failure can teach you

99c Store Going Out of BusinessImage by RodBegbie via Flickr

At the Technology Association of Iowa's Pitch and Grow 5 gathering last week, I participated in a panel discussion on failure.  Any successful entrepreneur will tell you that failure is part of being an entrepreneur and part of finding success.  My fellow panelists included Christian Renaud of StartupCityDSM, Daniel Shipton of BitMethod, John Jackovin and Brian Thompson of Equity Dynamics.

Here is what I took away from the session:

  • Failure is a teacher if we recognize it as such.  Choose what you are going to do with what you learn from your failure(s).  That much is your choice.
  • It is challenging to recognize failure before it is terminal.  Make sure you have advisers that you are listening to and who are giving you honest feedback.
  • Failure can be tactical or strategic.  We fail every day. 
  • Many first time entrepreneurs will not recognize the failure before it is critical.  It is only through failing hard (like a face plant in skiing) do we tend to learn to see a failure coming and have an opportunity to correct or preempt.
  • You may not be able to avert the failure but you can potentially soften the landing.

For those starting a business you need to plan on failing.  Do everything you can to make sure the failure is not terminal.  For those helping others in business, give honest, direct feedback. 

- Mike Colwell

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Is your idea marketable?

marketImage by dcJohn via Flickr

Here is a hard truth for most first time entrepreneurs.  There are a lot of great ideas out there and many of them  are not original.  A great idea is a beginning to the entrepreneurial road, but it is not even a full first step.  The first full step is determining if your great idea is marketable. 

So what does it mean to be marketable? Here are a few starting points.  Keep in mind this is by no means a complete list.  Bookshelves have been filled with volumes on what it means to be marketable!

  1. Can I reach my potential market at a cost I can afford?
  2. Am I solving a problem my customers believe they have?
  3. Can I deliver my product at a cost that leaves room to make money?
  4. Who are my competitors and how do I compare?  Keep in mind there are always competitors including those favorites of mine, excel spreadsheets and apathy. 
  5. Will customers pay for what I have to sell.

Inc Magazine had a great post titled "How to Assess the Market Potential of Your Idea"  It is worth the read. They listed five ideas on how to asses the market potential:

  1. Ask the right questions
  2. Google it
  3. Collect Feedback
  4. Sell something, anything
  5. Just Do It

I have to say you must be careful with the "Just Do It" idea.  I think that is great when your investment in "Just Do It" is something you can afford to loose.  Those who blindly launch into the market are often the first to fail.  On the other hand, Sell something, anything is great advice.  The vast majority of entrepreneurs are not good sales people yet they will spend their days selling their products and their ideas.  Selling is the education most entrepreneurs need. 

What would you add to these lists?

- Mike Colwell

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Make the customer's life easier - Tell them the price!

Lincoln on U.S. one centWikipedia

Price gets in the way of doing business. For those who have sold for a living, you could probably each write a book about getting around the price issue. Yet for most businesses this is a self-inflicted wound.

Today, the worst example of this is booking an airline trip. Try it. Try to get a complete final price for a trip. Unless you know exactly how many bags and their individual weight, it is impossible to get the final price.

In the on-line world, a recent change by on-line retailers is to provide free shipping as a standard offering. This is happening based on evidence that purchase rates increase for items with free shipping.  Evidence also exists that these customers tend to comparison shop less where free shipping is offered. I believe this is simply a case of making it easy for the customer to buy. 

One key market that is just beginning to change pricing practices is the services area.  A good example of this change is in the practice of law.  Most people know that lawyers typically charge by the hour.  Many of us start off our discussion with a lawyer trying to figure out what the work we need done will cost us.  This is especially true if the client-lawyer relationship is new.

Recently, several firms in town have started providing some services at a fixed price.  In the area I work, mentoring start-up companies, this is a real change for the good.  When your cash balance is precious and there is little or no revenue coming in, it is hard to engage in an open-ended-fee relationship.  A good example of this change is Start-up Launchpad by Davis Brown Law.  For a set fee, the client receives a set of services that are typically needed by a new start-up company.  Even better, potential clients can sign up for access to the site for free and access valuable information without cost.

So think about the average start-up business person facing the long list of tasks to start a business.  Getting all of the legal work done is only one item on that long list.  Which do you think the entrepreneur will choose, the hourly rate with the unknown total cost, or the flat fee bundle of services?  The customer choice just became so much easier.

By providing a clear price for a product or service, you are taking away a roadblock to business.  Look at your business and find new ways to make the buying decision easier for your customer.  They will thank you. 

- Mike Colwell

1% of 4% of 7 Billion - Who's in your market?

Earth - IllustrationImage by DonkeyHotey via Flickr

Big markets attract a lot of attention. After all, with that many potential customers you can see a path to huge revenues. The challenge is getting heard by that big market.  On the flip side, a small market does not have a huge number of customers so the revenue potential is not as large. However, it is much easier to make sure that small market knows about you and your product. 

Here in Iowa we are 1% of 4% of 7 billion people.  While 3 million people in Iowa sounds like a big number, it is an incredibly small number compared to the earth's population.  You have a choice when you start marketing your product or service. You can cast your marketing net wide and try to let as many people know as possible, or you can target your marketing on a small segment. Which is right? 

It depends. 

If you need to scale large just to break even, you must cast a wide net and gain as many customers as you can, as quickly as you can. That means you will be spending a very large amount of money on marketing and sales. You likely will spend far more on marketing and sales than you do on your product.

If you have a product or service that gets you to profitability quickly, you have the option of starting with a small marketing budget pointed at a very defined, narrow grouping of potential customers.  As you gain customers you can incrementally increase the size of the market to which you communicate. 

Either way, you need to know who's in your market and make sure you have the funds needed to reach them. 

- Mike Colwell

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The first ten customers

Go 10Image via Wikipedia

It is inevitable that a new client will present his or her marketing plan, stating the market size and the percentage of the market they are going to gain.  The math may be good but the business plan is not.  Whether starting a new business or launching a new product in an existing business, know your first ten customers.  They are the key to your success:

  1. Identifying your first ten customers will help sharpen your focus on who your target market really is.
  2. Talking to your first ten customers before they buy will give you valuable feedback on your product or service offering.
  3. Landing the first ten customers will help you refine your pitch and value proposition.
  4. Delivering the product or service to the first ten customers will help you refine and prove your processes for executing you business plan and point out the weaknesses you must correct to grow.
  5. Following up with the first ten customers after the sale will provide additional insight on how to improve your offering.
  6. If you do the above well, the first ten customers will tell others about their experience.  In turn your customer base will grow along with your business.

Do not launch your business or your new product until you can identify the first ten customers by name. You may not land all ten but you will learn a great deal about your business plan. 

Mike Colwell


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What Would You Tell Your Best Friend?

A male Mandarin Duck at Slimbridge Wildfowl an...Image via Wikipedia

From time to time, many of my clients come to me with a difficult decision they need to make.  They have thought through all sides of the decision and are struggling with what to do.

They ask my advice.

  • Do I shut down my start-up and disappoint my employees and customers?  I don't think I can make it.
  • Do I let my co-founder know she or he needs to leave? That the company has out grown them and they are limiting the company? She or he is part of what got us here.
  • Do I fire the motivated salesperson who is not performing? Everyone likes them.
  • Do I tell the customer no? We can't meet his needs, but I desperately need the revenue.

Recognize any of these? Here is a good test. If your best friend came to you with the problem you are facing, what would you recommend? Would you take your own advice and:

  • Shut down your start-up and disappoint your customers and friends?
  • Tell my co-founder it is time they leave?
  • Fire the salesperson?
  • Tell the customer no and fine another?

Well, would you? Or do you continue to hide from the issue and pretend you can't make the call. You own the business. You have to make the call. 

Mike Colwell

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Too much on your plate?

IndecisionImage by Bichuas (E. Carton) via Flickr

We all have a lot on our plates these days.  Everyone I talk to responds "Busy!" to the question, "How are you?" It is a good sign that people are busy. The economy is improving.  Business is picking up for almost everyone I know.  So what do you do when you are too busy? Start by looking in the mirror. 

I am willing to bet that many of the things on your list of to-dos are there because of you. There are two general causes. The first is not taking the next step. One of the most popular books on self organization is "Getting Things Done" by David Allen. In his book, he discusses at length the idea of identifying and doing the next step. Get out your list. Focus on the items you seem to be struggling with. Identify the next step for each of these items and get on them!

Secondly, and probably the most problematic, is indecision. A while back, Mark Suster wrote a great post titled "Avoid Decision by Indecision." It is a very accurate view of indecision as it relates to start-up companies and those who finance them. From one-person companies to major corporations, the challenge of indecision is immense.  You must identify the items on which you are procrastinating. I can guess the categories these items will fit into: employees, spending a lot of money, bad news and upset customers. These items are the cause of your full plate. 

Each time you take something off the plate, one of these issues returns to your plate to fill the space. If you have a problem employee, deal with them. You know in your heart the issue will not go away on its own. Deliver bad news immediately. If you wait, others will spend too much time wondering why you withheld the news in the first place and not focus on going after the problem. Upset customers are a today problem. There is no tomorrow with an upset customer, unless you want them out there telling everyone else how bad you are. 

Finally, if you are working on a spending money decision, try this process: Decide the time horizon for this decision. Does it need to be made this month, this quarter, when? Gather all the facts you have. List out the (reasonable) facts you do not have and when you will have them.

When is the key. Many times we put off large money decisions because we are waiting to know more. If the data is coming soon, great. If you have no idea when the facts will be available, you're just delaying. You have to take on the decision with the facts you have.  Do not fall into the trap of waiting for facts that are not going to arrive!

Mike Colwell

Bumper tag and business: how to not get customers

monster trucks (12)Image by lairdscott via Flickr

I was getting on the interstate the other day.  The intersection I was at had a dual left turn lane and a two-lane on-ramp. I am in the left lane with some cars behind me. Suddenly, a very large four wheel drive truck (when did Ford start making the F13500?) pulls up in the right lane. The truck is about 8 feet off the ground so all I can see is the sign on the door.  "X----------X Home Remodeling" the sign says and below that is a tagline about care and trust.  

So the light turns green and I begin to turn left.  The large four wheel drive truck accelerates and starts to turn as well. The next thing I know, he has "merged" into the left lane, cutting me off and making me hit the brakes hard. The car behind me barely got stopped before hitting me.  Needless to say I was not thinking kind thoughts about the driver of the truck. 

So let me ask you, do you think I will be calling "X-----------X Home Remodeling" any time soon? Do you think I am buying his tag line about care and trust?  

We hear people talking about being careful about what you say on Facebook and Twitter.  When you are in business, you need to be careful about all impressions you leave - your own front yard appearance, your personal hygiene, your appropriateness of dress and how you drive.

Who you are is judged by others based on your actions and appearances. Especially when you name is on a sign on your truck!

Mike Colwell

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Hiring about to get hard again

The Starting LineupImage by thatmushroom via Flickr

For many, the economy has started to turn around. Sales are growing and businesses are starting to hire again. What many may not have considered is how difficult it will be to hire the people you need now and in the future. While there are many people looking for a job today, that is changing.

  • The demographic change, the aging workforce, is going to reduce the number of available employees.
  • Our world is becoming much more diverse. Is your employment base?
  • Many people are looking for much more than just a paycheck. What are you offering to entice the people you need?
  • Can you leverage the talents of those with a disability? They can be great employees.

Here are some questions you should be considering in starting or growing your business:

  1. Are you sure you can hire the talent you need at the time you need them?  
  2. Are you open to building a diverse workforce? 
  3. Are you building a culture that others want to be part of?
  4. How will you recognize great work when you see it?

Finding and keeping great talent has always been hard and is going to get harder. Make sure your plans include the time and cost of finding the right people. Also, make sure that you cast your net wide to include those you might not have considered in the past. There is a big, diverse world out there, both in customers and in employees. 

Mike Colwell

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Is your problem everyone else's problem? Prove It!

Sliced breadImage via Wikipedia

No, I am not talking about personal problems here.

Many businesses started with someone who solved a problem that they personally experienced.  It is a recommended way to explore being an entrepreneur.  Solve a problem.

Here is the hard part.  Do others have the problem and will they pay you to solve it?  Can you prove it?

It is really hard to do.  Three buddies in a bar (after two drinks) telling you it is the greatest thing since sliced bread is not proof.  Having someone ask you your price and giving you the money is proof.

Large companies spend a lot of money on market studies and test marketing to see if people will buy the proposed product.  This is how they get their proof.  Even then, sometimes things don't work out.  Most small businesses do not have the knowledge or cash to test market their offering. 

If you wonder why so many tech companies start up these days it has a lot to do with the question of proof.  Many times, the product can be built and delivered for the same cost of testing the market.  And in the end the product is available for the next buying customer.  That is still not all the proof you need.

The final bit of proof required is can you reach the potential buyers.  Not only do you need to prove people will buy but:

  • you must prove you can reach them
  • and get them to listen to you
  • without spending more than you will make on your product each time you sell it
  • in a way you can repeat over and over
  • and deliver on what you promise

Can you do it?  Prove it!

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The Lazy Chef Salad - So Who Gets To Be Lazy?

Red bell peppers.Image via Wikipedia

There are two restaurants in Ankeny - where I live - that I like to go to. As part of trying to live a more healthfully, I tend to eat a lot of salads.  In one restaurant, the salad is served with all of the various ingredients finely chopped.  I can put on my dressing and start to eat.  In other words, I get to be lazy.  I do not have to work too hard for my dinner. 

At the other restaurant, the chef is lazy and I have to work for my dinner. The same basic ingredients are in both salads. The different is that at the second restaurant the ingredients consist of large wedges of tomatoes, huge rings of green pepper, large circles of onion and very large pieces of lettuce. You get the picture. 

So who gets to be lazy, the chef or me? Since I am paying for each of the salads, I assume that I would get to be the lazy one.

In your business, you do many things to keep the amount of time spent to a minimum. This is completely understandable with the financial pressure all businesses are under. Make sure that your time efficiency efforts are not viewed by your customers as laziness on your part. Customers want to be served. Be aware of being perceived as the lazy chef. All else equal, I am going to the restaurant where I can be lazy. Let the chef do the work!

Mike Colwell

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Best book of 2010 - Business Model Generation

Business Model Generation Cover A client showed me a book called Business Model Generation.  It is fantastic.  I have rarely found a book so useful to an entrepreneur.  It is a perfect resource for determining your business model.  For those who do not understand what a business model is, it is an even better resource! 

The book is organized into six sections.  The first lays out the elements of a business model and a visual representation (the Canvas) of the model  Each element is clearly explained.  The second section of the book puts many companies you know business model in the context of the canvas.  This is a great way to internalize how the canvas works. The third section deals with designing business models.  If you are in a small group trying to get your start-up model refined, this is a great resource in itself.  The fourth section is on strategy and the last two sections deal with Process and Outlook. 

I am going to make this required reading for my clients going forward.  It is on my shortest of short lists for best books for a start-up. 

If you haven't figured it out by now, I think you need to buy and read this book!

There is a 72 page preview available here.  Take a look.

Mike Colwell


The Cash Forward Business Model

Cash MoneyImage by jtyerse via Flickr

In the economic downturn, many businesses suffered or even failed as their receivables remained unpaid. For many, the receivables issues had often been viewed as just a part of doing business or an industry standard. Going forward, many businesses are looking seriously at how to build business models where the cash comes up front. For some businesses, this is easier than others.

As you are growing your business, consider changing your product or service offer to drive cash forward in your sales process. Look carefully at how you can leverage your customers' cash through discounts or other incentives. Consider focusing your marketing on segments, where long-pay terms are not common. 

In the early days of Dell, what separated the computer company from the others was its custom-product model through the Web. By allowing the customer to choose options from a menu, Dell enabled charging the customer credit card before building the computer. By not going through traditional retail channels, they avoided the need to build large inventories of product with their own funds. 

Even in retail this strategy can work. Instead of stocking three popular colors of a product, offer to order any color the customer wants. Ask the customer to pay in advance as the product is custom to the customer desire.  

Many times your cash management is a function of your sales offer and process along with you market selection. Make sure these are done to your advantage. 

Mike Colwell

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