“Being in love is a complete submittal to fully understanding, experiencing, and becoming that higher sense of self and purpose.”

Recently I have been through a few tough moments and thought it would be a good idea to take some time for a self-reflection excursion. To this point, my life has been incredible in every way I could have imagined – or so I thought.

During this time I realized something every aspiring or current entrepreneur should know. It wasn’t an ‘ah-ha’ moment or even a spark of genius that popped into my head, but a viewpoint honed through a culmination of years and years of lessons learned. When I realized this new notion, I was lifted into a whole new level of understanding of the world and why we each do what we do, as well as how important it is to be fully ‘in tune’ with the understanding of self – also known as an ‘actualized self.’

UNCOVERING NEW SELF

Until recently, this new notion simply hadn’t revealed itself because (like most ‘too busy’ business owners) I rarely take time to reflect upon life and the correlations and truths unearthed as a byproduct of my experiences.

As I sat back overlooking the serene countryside from a hammock, alongside peaceful chirping of birds and waves from a lake crashing at my feet, I realized what years of building great companies and relationships had taught me in just five simple words: true love fosters authentic creation.

Whether it is an existing or new idea or relationship, at the root of our genetic makeup lies an abundant force driving each of us to create meaningful purpose in this world and discover our true selves.

One can argue what ‘great’ means, but to me it is having learned something of practical value – lesson(s) to leverage going forward in the journey called life. Length of time in a relationship or how much money a company makes I believe (in the context of authentic creation) are linear barometers in understanding what ‘great’ means because life experiences dictate interpretation. Life is complex, sometimes tethered and sometimes disaggregated, and no two lives can, will, or should ever be the same. Thus, what is important to me might not be important to you, or vice versa.

THE BEST OF YOUR OWN SELF

A second enlightening tidbit also came – true love is meant to help uncover the best of your own self.

There are three things which individuals overlook in their quest toward true love:

1. Knowing exactly what to look for: be able to articulate what you need, from whom, and why.
2. Understanding life is not about doing everything yourself (not even close): a singular mindset on the world will only take you so far.
3. Believing in what you deserve: stop making excuses, living a sedentary lifestyle, or settling for someone or something because it’s ‘easier that way’ or ‘too hard’ otherwise.

Everyone should realize:

• the world is at our fingertips (literally) and we all deserve better than #3
• constantly being open to revising #1 is imperative
• having the gusto to relinquish full control is the only way #2 can be resolved.

The point: anything worth living for is not easy; the hardship is what makes the journey toward that person or idea even more special. Stretch boundaries. Buck the trend. Laugh in the face of sadness. Love like there is no tomorrow. Be free and enjoy all the life can offer. Follow your heart…. all in an effort to realize your full potential.

Being in love, whether it’s an idea/vision that you’re insanely passionate about or a person who fulfills your every hope and desire, means you’ll experience the gift of a secure and complimentary framework throughout your life. This will compel you to let your guard down and take chances, which is what life is all about, including how to: fully appreciate, embrace, experience, and give without regret.

AUTHENTIC CREATION: A PHYSICAL MANIFESTATION OF LOVE

Finally, the culmination of what I realized while sitting on the hammock was this: true unwavering love creates an authentic and tangible manifestation of itself.

What does that mean?

When it comes to a loving relationship, this means creating a family through the birth of a child. There is nothing more beautiful than being immersed in the intangible (love) in an effort to create the tangible (another person).

On the flip side, throughout this post the word ‘idea’ was chosen instead of ‘company’ when talking about love. Why? Because an idea that truly resonates at the core of our being has the opportunity to become a scalable, meaningful company that individuals around the globe can become a part of in a meaningful way. There are countless examples of this; Zappos is one of the more recent.

EMPOWERMENT

One central point to this manifesto: entrepreneurs we are truly blessed more than any other profession in the world.

Why?

Because entrepreneurs have the ability, through their own authentic love, to do something even more powerful than create a life or build a company – we have the opportunity to empower others to authentically create.

In my opinion, there is no greater way to express true love than by creating someone or something that empowers others around the world to love authentically in a way that is meaningful to them.

However, if you’re an entrepreneur and you have a start-up, one little complaint can be a very, very bad thing for you – both personally and professionally.

Let’s take a look at how you can leverage customer service as the corner stone of your company, as well as how it can sink you faster than the Titanic.

The Best Case Scenario

Since it’s always better to err on the side of optimism, let’s imagine that your company is a paragon of customer service. Everyone who deals with you winds up walking away with a smile on their faces, knowing that one day, they’d like to do business with you again. This technique can be honed by understanding sales triggers, which I have written about previously.

But it doesn’t end there. The next time one of their friends, family members or co-workers says ‘Gee, I need an X widget,’ that previous customer jumps right in, telling them where to find you. When that person walks away happy, they tell their friends and family, and pretty soon, you have a loyal customer base, who want to deal with you, because they trust you. This is the Rule of 13 – whether your customer services was good or bad, the customer will eventually tell 13 people. The more emotionally engaging customer service program you have, the likelier they are going to 1) Tell more than 13 people 2) Tell them sooner rather than later.

As an entrepreneur, you should know that the single best way to build your company is through word of mouth – leveraging the personality credibility and network of your customers.

The bottom line? The customer may not always be right, but they are your most important advertising tool.

During my time at Nordstrom I would have customers call looking for a specific shoe. Usually I wasn’t sure if we had stock, so I would normally take their name and number and promise to call them right back. I cannot tell you how many times I heard “Wow….. you really checked? You are the first person in months who I’ve actually called and who’d even bothered to follow through. Thank you.” Even if they didn’t buy that time, guess who they asked for when they came to the store next time? Guess who just acquired a loyal customer in a matter of minutes? Exactly.

The Worst Case Scenario

Of course, every coin has a flip side. Let’s say you’re just starting your company. You have a few clients, but you’re not particularly focused on making them happy. Instead, you just want their money.

The first time someone walks away feeling cheated ignored or otherwise mistreated, you’re in for a big surprise. Because just like the power of word of mouth can work for you…… it can also work (powerfully) against you.

Now, you might be thinking that there are plenty of fish in the sea. You’d be right. But what happens if that person happens to write for a local paper, publish a blog, or know competitors in the industry? What if they know someone who works for, or even owns, one of your biggest corporate clients? That one unhappy client can snowball rapidly, eating away at your customer base and your profits like termites on wood.

Before you know it, you’re so busy fending off bad press and ‘fires’ that you hardly have time to focus on your company. A good example of this is when Wikileaks first launched – minimizing public embarrassment because the focus of many Fortune 500 companies – at a very expensive cost to shareholders. Not an ideal situation by any stretch of the imagination, is it?

Compromise Is Key

Of course, there’s the old saying ‘you can’t please all of the people all of the time.’ You also can’t be a complete marshmallow, who gives in to every small complaint. You’d be out of business before you know it with that strategy.

What you need to do when dealing with less than happy clients is aim for compromise. Come to a solution that leaves both of you satisfied, if not entirely happy. Be reasonable, listen to their requests, and keep them in the loop. Premium customer service creates scalable brand equity for your business – which translates to steady profit margins regardless of the economy.

The truth is, most people are not entirely unreasonable. If you explain something to them, and help them understand why fixing their problem is taking so long, and the proactive steps you’re taking, they’ll appreciate such thorough communication. They’ll also tend to give you the benefit of the doubt and longer leash going forward.

Look To Yourself

Any business owner is also a consumer. We all buy things every day, whether it’s products or services. We also sometimes have complaints. How those complaints are handled makes all the difference whether we continue to deal with a particular company.

So, when you find that your customers aren’t happy about something, put yourself in their shoes. Would you be happy if the roles were reversed? If not, what would you want done to rectify the situation?

By handling unhappy clients this way, and doing your very best to offer the best quality service you can, before and after a sale, you can be ensure that even unhappy clients are likely to become loyal followers of your company.

One bad apple can spoil the tree – don’t let that outcome even be an option after all the hard work you’ve invested into your company.

But for most that have this dream, they stop dead in their tracks even before giving themselves an opportunity to put their pen to paper. This is because there is a cultural mentality here in America that has been ingrained within each of us- fear of failure.

Our society structures education and thought around consequences, instead of possibility.

In school we’re taught to be ‘perfect’ – to get good grades and memorize the total of 12×12 – because this is supposedly what success looks like. In the world of entrepreneurship, this couldn’t be farther from the truth.

Realize that failure is not the end of anything – it’s an important journey as an entrepreneur, and it’s also just the beginning of your learning and growth.

Think of failure as a speed bump on the sometimes rocky road toward success. There are very few ‘hockey stick’ companies in this world. Most companies face a plethora of trials and tribulations at every step of their growth.

If you don’t believe me, then just take a look at the stories of some of the biggest successes around, and how they failed their way into becoming legends:

R. H. Macy

Let’s start right here in the New York community, with the founder of the world famous Macy’s department store chain.

No one would argue that they are a huge success, would they? Except the department store chain was not R.H. Macy’s first attempt at business…..or his second.

R.H. Macy founded SEVEN other failed companies before he finally found success in New York.

Thomas Edison

World renowned for having invented the light bulb and founding General Electric, everyone knows the success of Thomas Edison.

But guess what – he did not strike it lucky the first time round – not even close. In fact, it took Edison no less than ONE THOUSAND attempts before he finally succeeded in perfecting the light bulb.

Henry Ford

Ford may be one of the world’s biggest motor corporations, and the first to have commercial success with car production, but Henry Ford certainly didn’t succeed the first time round either.

Henry tried, and failed, FIVE times to start other companies before he finally started what is still one of the world’s biggest motor companies.

Walt Disney

Walt Disney’s visions have given us fantastic movies, created theme parks that put most others around the world to shame, and a legacy that continues to this day.

Once again, Disney wasn’t always a huge success though. In fact, before he founded the start-up that would one day become the Disney empire, Walt Disney was fired from a newspaper job.

The reason? The editor did not think he had any imagination.

Everyone Fails

The harsh reality in life is that hardly anyone gets it right on their first attempt.

Abraham Lincoln failed in the army, in business and even in politics before he became one of America’s most famous presidents. Scientists like Sigmund Freud and Charles Darwin faced ridicule before they found fame. Western Union turned down an offer from Bell Telephone to buy them out, because they could not see the project being a success.

Each legend featured above eventually proved their critics wrong, and that’s exactly what successful entrepreneurs do – they accept criticism, realize that failure is inevitable, but (in the face of adversity) keep going anyway.

Everyone fails sometime in their lives – it’s what you do with that failure that makes all the difference.

What Do They Have In Common?

At first glance, this motley crew of entrepreneurs don’t seem to have much in common. Macy founded one of the world’s greatest department stores, Edison brought his own dreams to life, Ford took other people’s inventions and made them a commercial success, and Walt Disney captured the imagination of children and adults around the world.

The one thing these entrepreneurs did have in common though was the belief that one day, somehow, they would succeed. Instead of letting failure, being broke, and even the ridicule of others stand in their way, each entrepreneur embraced their setback as a learning experience. They knew that every failure brought them one step closer to success.

Failure Can Help You

Whether you’re trying to get a company off the ground in a competitive market like New York City or out in the middle of nowhere in Montana, there’s a lesson in this for you.

The lesson is that failure is a great learning tool – it’s the start of something even better.

There’s a world of possibility out there, and giving up is not an option. And if you do think giving up is an option, go back to your 9-5 job, because that’s the mentality at a desk job.

Samuel Beckett once said:  “Ever tried. Ever failed. No matter. Try Again. Fail again. Fail better.”

Remember – as long as you keep trying, one day, you’ll succeed.
It’s only when you quit that you truly fail.

Why does this matter? Because the type of entrepreneur you are dictates a plethora of different business variables, such as your management style. Personality characteristics and traits have a direct and impactful effect on the achievement potential of an entrepreneur over the course of their career.

What makes the difference? The overwhelming differentiator between those who catapult themselves forward and those who continue to drag their feet is simple: deciding to take some of the below into account when making fundamental business decisions (or not). Those who do will play toward their strengths and outsource their weaknesses to others much smarter than themselves in a particular area of expertise. Those who do not – good luck.

The below details several types of entrepreneurs, alongside the pros and cons associated with each particular personality style. Figure out which personality you are and learn how to leverage those characteristics to your advantage.

The Gung Ho Enthusiast

This entrepreneur has an enviably enthusiastic attitude about their company. The trouble is, they also have unrealistic expectations and believe their new business will become the best thing since sliced bread overnight. That very rarely happens.

Keep the enthusiasm – it is what keeps many entrepreneurs going when things get tough. However, be a little more realistic. It’s better to have lower expectations, and exceed them, than to aim too high, and miss your goals.

The Passionate One

These entrepreneurs are driven by one thing and one thing only – a passion for their business and/or industry. While they may be the best in the business at what they do, they usually lack business acumen, or even the inclination to prioritize and tackle imperative tasks (especially at scale) such as administration and finances.

Passion is important– it will make going to work feel like anything but a job. However, business does require you to do the tasks you do not like to do from time to time. Aim for a healthy balance and you will be just fine.

The Business Veteran

Business veterans are older entrepreneurs (50+ yrs) who have been around the block a time or three. While they have the skills and knowledge to make a business work, they shy away from technology and other modern approaches to business. That can mean a significant up-tick in the amount of intensive labor needed versus integration of simple, new and innovative solutions.

Leveraging decades of business knowledge to build a company is what makes ‘gray hairs’ so prized in organizations at any stage. Just make sure to combine lessons learned with innovative and up-to-date time saving methods and technologies. If you’re not comfortable with doing so, hire a team that is, and while you take care of the business, let them take care of the tech integration.

The Lone Wolf

This entrepreneur tries to do everything, and be everything to everyone, all by themselves. While it’s great to know every aspect of your business inside and out, no man is an island, as they say. If you try to sustain the lone wolf approach for too long, you’re heading one way: burnout.

If you can’t afford to hire staff to help you full-time, find people or companies you can outsource some of your work load. This is especially true for mundane tasks – after all, time is money, isn’t it?

The Ideas Guy

Another type of entrepreneur is someone who is brilliant at developing new ideas, but not so great during integration. Either the idea never makes it off the drawing board, or it fizzles out along the way, because this personality lacks the appropriate skill set to both envision and implement.

Ideas are the lifeblood of entrepreneurship. If you are not too great at taking them from concept to product, enlist a partner who is able to do so. A well balanced team, made up of an idea person and a ‘doer’ is the entrepreneurial dream team.

The Philanthropist

This entrepreneur usually spots a need for a certain industry in their community or elsewhere, or they find a way to help communities by starting a small business of some kind.

While helping people is a worthwhile cause, the first goal of any entrepreneur is to have a profitable business. Do not let your need to help others cloud your business sense. Find a balance between helping others and growing your business – this way you can achieve all of your goals.

What Kind of Entrepreneur Are You?

I am sure there are plenty of folks out there who could add a few types of entrepreneurs to this list. Nevertheless, the fact remains that all entrepreneurs have strengths and weaknesses. How an entrepreneur decides to leverage those strengths and weaknesses (and keep them top of mind) will determine how successful they are over the course of their career.

If you haven’t seen a description that suits your entrepreneurial style on this list, then why not sit down with a piece of paper and list the areas where you are strong, alongside what needs work? Then, develop ideas to get around those weaknesses, and capitalize on strengths. Essentially, do a SWOT analysis on yourself – strengths, weaknesses, opportunities, threats.

Each and every one of us has the potential to succeed as an entrepreneur. Being honest about what you can and cannot do is the first step toward accomplishment. So figure out where you excel, where you may need a little help, and then go out there and crush it.

Everyone tells you that you need to be determined, to follow your heart in spite of the odds, and if you encompass passion for the idea, success will follow. Yet, then those same folks will turn around and advise you to pay attention to your inner critic.

The truth is, this is just one of many challenges faced by entrepreneurs in their quest to find the right balance that ultimately brings success. Below details why you, the looney entrepreneur, must pay attention to the little voice of reason in your head (yes, the one that really does talk to you) – sometimes.

What Your Inner Critic is Telling You

No matter how determined you are as an entrepreneur, and how ‘gung ho’ you are about making it against the odds, there will be times when a little voice in the very back of your mind (the lizard brain) will try to tell you that something is wrong. It is well known that many successful entrepreneurs and executives suffer from what’s known as the inner critic- our inner voice that has our best interest at heart.

Usually, it’s either when something does not feel quite right – a new business deal, a partnership or an expansion that you aren’t quite ready for. It is your mind trying to override blind enthusiasm, and remind you that great entrepreneurs take calculated risks – they don’t rush blindly into disaster.

Another time most entrepreneurs start noticing their inner critic acting up is when they have done something that is not quite up to the standard they expect from themselves. This is particularly important when it is something you have done for a client – after all, you want your clients to be happy, right?

The point – if your inner critic is telling you that something is not right, listen!

Tapping Into Your Inner Critic – An Exercise in Objectivity

No one likes being told they are wrong – least of all, the entrepreneur. Of course, you left the safe world of employment to be your own boss, so that you never needed to be criticized again, didn’t you? However, as an entrepreneur, you will need to exercise objectivity, and weigh your own desires and feelings against the good of the company. Here’s how:

• Pay attention to what your inner critic is telling you. You can only act on problems if you admit they exist.
• Sit down when you have a quiet moment, and write the problem down on a piece of paper.
• List the pros and cons of not acting on the issue. Consider the cost of not rectifying the problem and what it will do to your reputation. List everything that can go wrong if you don’t take action. Usually, you will find that the only pros will be saving time and money, in the short-term. If you want to be a success as an entrepreneur, you need to think long-term.
• List possible solutions to the problem. Write down as many as come to mind within 5 minutes.
• Decide on a solution and execute.

Being an entrepreneur is a freeing experience – it frees us from having to answer to anyone for our actions – or the lack thereof. However, it also means that you need to learn self discipline, and to make tough decisions on your own. That is where listening to that inner critic comes in. All great entrepreneurs do, and if you want to be one of them, it’s an imperative skill to learn.

You Don’t Have to Do it Alone

The good news is that while becoming an entrepreneur, building a company is sometimes a lonely and friendless endeavor, but finding ways to deal with issues that your inner critic raises does not have to be.

When you start to notice something weighing on your mind, speak to someone. It could be your spouse, your parents or your mentor. You do not have to ask for advice, or even comment, but sometimes, just saying the challenge out loud can help you to decide what to do.

Make no mistake however, in business, as with life, doing nothing is almost always worse than doing the wrong thing. As long as you take action and do something, you start the momentum needed to keep going, and will eventually fix the problem. When you ignore it, or hope it will go away, it will almost always does not go away and will only have a compounding (and disastrous) effect.

The Bottom Line

Just as you have that burning feeling in your gut that your big idea WILL be a huge success, and that if you just follow your dreams, they will all be attainable, you need to realize that the same is true of the negative.

When something does not feel right, it is usually not, and you need to be prepared to tackle the bad, as well as the good. The sooner you do, the sooner you can put it behind you and move on toward what you are passionate about, and ultimately drives you – building the very best business you can.

Further insight from a few additional trusted sources:

Seth Godin
Wall Street Journal

Recommended book (which I have read many times over):

“Embracing Your Inner Critic” by Hal Stone

The first goal with any business, as it should be, is to bootstrap the company into profitability. Most of the profit in those initial years must be reinvested right back into operations to keep the company running, nurturing its ever-growing market share and ensuring the company grows from infancy into a substantial and viable product/service.

A savvy entrepreneur puts every single fiber of themselves into their start-up. But even in the face of such dedication, chances are the company will reach a plateau – the point at which there are only two choices – stay small, or lever the business up and grow. It may seem impossible when first embarking on the bootstrapping adventure, but that point actually comes a lot sooner than one would think. Below is a quick guide on how to transcend from a bootstrapped operation to profitability and the ultimate goal – scalability, without ripping your hair out in the process.

Set Realistic Short, Medium and Long-Term Goals

Too many entrepreneurs shy away from bootstrapping. They obsess over the big, expensive long-term goal stuck in their head. As a byproduct, many entrepreneurs unfortunately miss the short and medium-term opportunities right in front of their faces.

Want to own a boutique, a restaurant, or some other type of asset intensive upstart business? Great. But also realize, due to the immediate and high fixed asset costs necessary, it is unlikely (especially bootstrapping), those businesses can be scaled appropriately right away. So in the near term, a savvy entrepreneur would be well served to start off by designing and manufacturing clothing to sell at a local flea market. This begins their entrance into the market and serves as a significantly cheaper gateway toward establishing building brand credibility and relevance in the marketplace.

Start Small

The key to bootstrapping, as most successful entrepreneurs will advise, is to find a way to start working on that big dream right now. This means scaling down and finding a near term idea which can be launched with little or no capital and provides the flexibility needed for saving up a war chest of funds.

While it is useful to start working on that big dream early on and honing out a niche to bootstrap toward, it is not essential. Simply start doing something that turns a profit and save a portion of those profits to utilize toward bankrolling your big dream. There is something out there everyone can do to make money – just make the effort to look hard enough. Find that something, and get started! What are you waiting for?

Start With Services

It is a known fact among entrepreneur communities around the world that there is an exponential decrease in barrier to entry (resulting from low startup costs) for service-oriented businesses. The reason is simple: service businesses require less overhead (storage space, equipment, etc). For example, if your entrepreneurial dream is to one day open a pet store, get started by walking dogs – there’s no outlay, you will be selling your time and establishing/building brand credibility in the marketplace.

Leverage Entrepreneur Resources

When most first-time entrepreneurs think about starting a business the only resource they pay attention to is obtaining funding – a very myopic focus. Rest assured there are plenty of other resources to leverage. For instance, throughout the country there are agencies that help entrepreneurs develop business plans, lend office space and lease equipment at very low rates.

Each cost saving option provides a bootstrapping entrepreneur that means to hold on to as much of their most precious resource as possible – cash. Right now, especially in this economy, cash is king.

Mingle With Peers

Bootstrapping can be a lonely business. I know because I have spent those countless hours trying to figure out how to make everything happen on a shoestring budget. The good news is that you are not alone.

Find out when entrepreneur meet-ups and networking sessions are happening in your area. These types of events place like-minded individuals together – those just like you – folks who are crazy enough to bootstrap their business dream into reality.

Entrepreneur meet-ups not only offer a chance to mingle with like-minded folks who understand the trials, tribulations and successes you are going through, but they can also offer valuable business leads. If just one person whom you meet knows someone that may be interested in your business, then it was a worthwhile investment in terms of time and effort.

Plan for Growth

Last but not least, once on the path from small-time bootstrapping entrepreneur to rockstar scalable business owner – make sure to plan for growth. For instance, it is easy to start a successful business baking muffins in your own kitchen. But there’s going to come a time when demand will outstrip the businesses ability to supply.  At that point you are going to be forced to invest additional resources (primarily cash) into the business.

Make sure a plan is in place that budgets for this investment in infrastructure. Doing so is the only way the business will scale, because at a finite point, it is imperative for the long-term viability of the business to invest in growth through increases in production, employees and/or larger office space.

Do not wait until the last minute, plan now and plan often while still in the early stages of bootstrapping, so that when the times comes, you are ready, willing and able to implement and execute immediately. After all, as they say ‘those who fail to plan, plan to fail.’

Let’s face it, taking the leap from security into the unknown must be backed by a healthy dose of optimism. If that wasn’t the case, most people wouldn’t do it, would they? No one would start a business if they weren’t completely convinced deep down in their gut that they were sure to succeed.

However, if you want to build a strategic plan, access funding through angel investment or venture capital, and deal with those first few tough years, you need to temper your enthusiasm with a healthy dose of reality.

The Best Case Scenario Trap

My sister is someone who loves making lists. She estimates all of her earnings for one month and the full year, and calculates the figure she expects to earn. The trouble is, in her ‘perfect’ model she works on the assumption of working with the maximum number of clients for every Monday through Friday of the month – a best case scenario. Then she makes an even bigger mistake – and one that many entrepreneurs make too – she bases her cash flow on her projections.

Of course, when life and business intrudes on reality, the ‘perfect’ model she created becomes increasingly less accurate, leaving her disappointed, frustrated and stressed.

It’s a mistake that many entrepreneurs make. They base all their projections on the very best possible scenarios, not taking into account the everyday hassles that make a ‘perfect’ model an impossible goal to achieve.

Being Overly Optimistic Pushes Funders Away

Of course, it’s not just your own cash flow and planning that being overly optimistic puts at risk – it also can scare off potential funders.

As an entrepreneur, you probably already know that if you are trying to woo investors, whether they’re venture capitalists or angel investors, you’re going to have to construct a business plan and slide deck. Overestimating earnings and underestimating costs is very likely to be one of the reasons why potential funders don’t take you seriously.

Faced with a business plan jam packed with overly optimistic figures, potential funders are likely to think that you are at best naive, and that’s not a trait any investor wants to see in an entrepreneur they are considering funding.

Learn to Temper Your Enthusiasm

• You know that your latest invention, XYZ Widget, is going to be the best thing since sliced bread?
• You are convinced of your die hard entrepreneurial spirit, and that your business is going to take off and break-even in record time?

The above are both very important mindsets to encompass – you’re going to need that enthusiasm as you build your business.

However, instead of basing your projections, calculations and plans on everything going right 100% of the time, why not just 50%? That way, you’re likely to plan better, spend less, and achieve your targets. Heck, you might even beat them. What could be a better motivator than beating your targets?

The smart entrepreneur lives by the old mantra: hope for the best, plan for the worst. Aim low and be realistic -“ you’ll most likely meet and exceed your goals. Aim too high -and you’re likely to fall short.

A Last Word on Reality – You Don’t Know Half as Much as You Think You Do

Unrealistic financial projections are one failing aspect in an entrepreneurs business plan. Another, which is exponentially more detrimental in both the short and long-term for an entrepreneur’s business -believing you know it all.

You may understand every aspect the business you’re planning to start inside and out – which you should in the first place. But even if you’ve worked in the field for decades, you’ve never tried to run a company at the same time, have you?

The business of business (and success as an entrepreneur) depends on much more than just being an expert in a particular field. You will need to learn new skills, acquire knowledge and face situations you’ve never imagined – all without the security blanket you once had in the corporate world. You will need to engage the sales process, plan your finances and keep a close eye on the nuts and bolts of your business as it begins to scale – undoubtedly a steep learning curve.

Whether you’re a new or current business owner, the humble approach would be to realize you do not know everything. In reality, embracing the fact that there’s always an opportunity for you to learn is a far better idea. Take advice from entrepreneurs who’ve been in business for years and are successful.

Listen when potential funders reject your ideas – there are always valuable lessons to be learned in their criticism. Pay attention when clients complain – they’re the back bone of your business.

While you don’t have to relinquish the passion and enthusiasm for your business, you must realize that while it’s an exciting world, entrepreneurship is also very tough – if it wasn’t, everyone would do it. Being realistic and keeping your feet solidly on the ground will help you deal with the daily grind, and allow you to take any potential disappointments in stride.

Once you learn to be realistic and take both big and small challenges in stride, you just might reach those lofty goals and faraway dreams after all. Even if you don’t though, you’re still more than likely as a result of your realistic outlook, to do pretty darn well.

As far as entrepreneur blogs go, the flavor of the month appears to be the debate about whether the seed funding phenomenon is a bubble waiting to burst, or whether it’s a viable means of funding pre-revenue/start-up businesses. This is my take on the landscape.

First Off – What Are Seed Funds?

There was a time when if you wanted to fund your company you had four options, approach:

1. A bank
2. An angel investor
3. A venture capitalist

4. OR ………… have an asinine risk tolerance and fund the project yourself with your own money.

At a certain threshold of funding, there was a catch twenty-two because banks are notoriously risk averse, and don’t normally fund businesses that have yet to prove themselves. Meanwhile, traditional VC firms couldn’t justify investing less than $3M-$5M in a Series A round, mainly because ROI based on growth trajectory (when investing in small amounts) wasn’t worth their while, especially when holding $700M+ under management.

This left the entrepreneur with little choice but to either:

• Take a small angel round
• Settle for a crappy mid-size “hodgepodge” round that diluted the heck out of their equity
• Bootstrap their business and risk getting stuck behind better funded market entrants
• Come up with the collateral the banks demanded (usually a lien on their home)
• Give up their dream (NOT an option)

Enter the emergence of a fifth player, seed capital funds.

All of a sudden they are popping out of the woodwork. Most notably are Lowercase Capital ($5MM) by Chris Sacca, 500 Start-ups ($30M) by Dave McClure, and Floodgate ($73M) by Mike Maples.

These types of funds are set up specifically to provide funding to mostly “wet behind the ear” ideas and entrepreneurs. Based on deal flow that has recently been funded, aside from a great idea and a rockstar team, the requirements for an entrepreneur to get their hands on that crucial first funding injection are low in comparison to previous thresholds. However, it certainly is worth noting that there are folks who stick to their investment strategy no matter the deal size, such as Brad Feld of Foundry Group.

Second – Where Did They Come From?

Seed funds have arisen due to a perfect storm in the funding environment:

• Start-up costs continue to be driven lower = more efficiency = less investment needed = exponential decrease in barrier to entry
  • Ex. off shoring, open sourcing technologies, search engine marketing
  • Dissemination of high quality and value add content (blogs, videos, events)
  • Venture Hacks and their very worthwhile project AngelList
    • HUGE props to Nivi & Naval for making the process more fluid
• Venture capital funds have gotten HUGE = restricted to certain size investments
  • The downside to companies needing less money is that VC’s essentially become pigeon-holed. They’re stuck investing a certain amount or risk their LP’s having a heart attack
    • OR are they stuck? (see two sections down)
• IPO market remains virtually stagnant = must explore other options for exit = can’t drive up valuation (to make ROI) or there won’t be a buyer
• Valuations are lower = companies are more attractive through an outright acquisition
  • Especially if they’re a cash flow machine
    • Companies want a secure means to cash in this economy (called a “war chest”)
• Elasticity on the back-end is created when less money is poured into the company on the front-end. Why?
  • Founders keep more of the pie = they’re happy
  • Company hasn’t been overpriced. = investor is happy
    • Note: When companies raise a ton of money on the front-end everyone is forced to hit toward only a “homerun.”

What are the Strategies Seed Funds Employ?

Well, to be frank, it goes one of two ways:

• A “Fly by Night” Strategy = Quantity
  • Writing a check after a 20min presentation
  • Little to no communication with the entrepreneur (except when they’re raising money)
  • Primary goal: obtain an ROI on their investment
• A “Operator” Strategy = Quality
  • Performing meaningful due diligence
  • Acting as a mentor – tinkering but not with overruling brashness
  • Primary goal: investing time/energy into the growth of the co-founders and ultimately building a profitable and scalable company

I could provide examples of both investing strategies on both coasts (Silicon Valley and New York City) but I will leave that tree for someone else to bark up.

Which do you want? Based on my experience, I will take an “operator” any day – never the fly by night. What’s best for you? Well, weigh the cost/benefit of both and make an educated decision. You know your business better than anyone else on this planet.

But WAIT…. There’s More…… VC’s Enter the Market

The interesting thing is that we’re now seeing tons and tons of venture capital firms pushing down into the seed space as well. That is both a good and bad thing for entrepreneurs. Literally, this is a good thing for entrepreneurs if you’re informed, and a bad thing if you don’t take the time to read posts like this or others which try to educate you on what’s going on right now.

THE GOOD – Why have venture capital firms pushed into the seed market?

They’ve realized that since companies don’t need as much money as they used to, then they have to increase the frequency of investments. That’s not very scalable as you go up the funding hierarchy ($5MM+).

So instead, VC’s pivoted and decided to do two things:

• Keep investing in the $2M-$5M space as they always have (with follow-on rounds of course)
• Push down with an allocated amount of their fund, remain true to their investment strategy, and invest in 2x, 5x or even 10x more companies (with $50K-$2M) than what they would have through their normal strategy.

Before the seed funding phenomenon, most venture capitalists were putting all their marbles in 7-10 companies/yr. Although that seems like a “portfolio strategy,” I would argue this new Seed/VC model mitigates risk significantly more.

Additionally, since companies have less cash invested = less pressure to meet a high valuation = easier to exit. What does this translate to for the VC industry? A VERY BIG DEAL. The fact that VC’s can invest $125K into 30 companies (hoping for modest returns) versus investing a $4M chunk into one company (hoping they’ll hit a “homerun”) is HUGE for everyone. Just as pointed out above, it creates elasticity and everyone is happy.

THE BAD – Who are all these Venture Capitalists?

Mark Suster clearly delineates his investment strategy here. Most venture capital firms do not. Furthermore, as the seed investment line for angels, super angels and venture capitalists has blurred – so has reality for some investors that they’re qualified to enter additional funding spaces. That is not a good thing.

As outlined above – understand what your VC is looking for and the investment strategy they employ – are they in it as an “operator” or are they looking for “fly by night” opportunities? Trust me, it makes a big difference whether your investor is looking as their investment as a “true investment” (operator) or just simply as options on the next round (fly by night).

The Interesting Byproduct – Regardless of Who Funds You

Another byproduct of the fact that start-ups are significantly more efficient in getting off the ground and scaling is that their timeline to revenue has become much shorter.

Many companies become revenue wheel-houses in just a few short months now –a-days (although varying industry dynamics play a role) because the s-curve of innovation for companies has drastically sped up within the past few years. Thus, the time in which it takes companies to reach a real (and sustainable) business model has drastically decreased. That is a good thing for all stakeholders.

Seed Fund Opinions Numero Uno – The Nay Sayers

In a recent blog post, Paul Kredowsky voiced his disapproval of the seed funding phenomenon. However, his post is less about the entrepreneur, than the seed funding companies themselves.

His argument boils down to the fact that he believes many of the seed investors out there are running on very tight budgets themselves. They’re investing small amounts in lots of new ventures, in hopes that one or two of those ventures will become “homeruns.” That of course is not a good idea.

His point of view has validity. The challenge with seed funding investors spreading their own resources too thin is that if something goes erroneous in one of their portfolio investments, and capital must be deployed unexpectedly, the investor’s hands become tied. The funder also won’t have the necessary capital to allocate toward companies that actually do succeed, and who seek a follow-on second round of funding. This dynamic will force entrepreneurs to then search out their funding from traditional venture capital firms – which is the most expensive money they could take.

Seed Fund Opinions Numero Dos – The Fans

In response to Paul Kredowsky’s post, warning of a seed funding bubble burst, Chris Dixon made a post of his own, which tempered enthusiasm with caution.

As Chris points out in his post, we’ve come a long way from the dotcom bubble of the nineties. Both entrepreneurs and seed fund investors are savvier, and more skilled in business than their forerunners.

Chris rightly points out that as long as:

• Seed fund investors are exercising a little caution choosing their investment vehicles
• Entrepreneurs have both business acumen and a good idea

….. then the seed funding model can work, and is a valuable asset to a market where company founders struggled for years to obtain funding.

Of course, Chris’s post also mentions a huge wild card that traditional banks, VC’s and seed funds must watch out for – the economy in general. Then again, business is all about risk.

Time Will Tell

Of course, not everyone has a definitive negative or positive outlook on the seed funding phenomenon. Both Fred Wilson and John Boyd chimed in on the discussion and agree that the seed funding model is necessary, but that it will need a lot of tweaking to become a long-term viable option for start-ups.

A few years ago, entrepreneurs who sought to secure small amounts of funding to launch their start-up would have struggled to find any options that matched their needs. With the proliferation of seed funds, that’s no longer the case.

In the end, there are only two real questions:

• Have the seed funders have backed the right horses?
• Will the funders be able to deploy capital when the next round of funding is needed?

I certainly hope so on both fronts.

What It All Means For You – The Idea & Early-Stage Entrepreneur

Of course, you may be wondering how this all relates to you. Well, if you’ve been hoping to build a start-up but have been stumped about where to turn to find the seed capital you need, now just might be the right time for you.

If you have a great idea and your funding options are limited or nonexistent, then seed funding might just be the alternative to bootstrapping that you’ve been looking for.

However, BE AWARE – as the industry matures, there will be may be interesting consequences:

Skyrocketing valuations – What is your Justification?

There are two reasons I believe valuations could skyrocket literally overnight:

• The year 2008 sets a perfect prescient for this point – as was the case with the private equity buyout craze – seeing that more professional seed funds are entering the market, supply and demand (number of potential companies and their valuations) will begin to shift.

As a result, bidding wars will begin and valuations will skyrocket. This will inevitably drive out certain investors – whether individuals, seed funds, or VC’s playing the seed game and most likely bring the horse right back to the water – true venture capital funding terms ($2M-5M).

• Funders and entrepreneurs actually become too savvy at the process – because of too many entrants.

I know I am going to get some push back here because many folks will refute that there are a ton of great companies out there to fund (lots of supply). Let me be clear: I do agree with that statement. However, my point is if the seed funding game gets too big, meaning too many angels and VC’s magically think they can run a seed fund, then there’s going to be a lot more white noise in the marketplace. This becomes a forcing function for why funders and entrepreneurs will get more savvy in the process and why valuations will go up – because those who don’t know what they’re doing will make noise, create fragmentation and the result are valuations rocketing upward.

A simple solution to the above though would to build another simple platform such as TheFunded. Instead, lets call it “TheSeeding.com” (domain is open at the time I wrote this) so that everyone has an open source way of knowing who’s full of b*llshit and who is not.

On the flip side, I also believe there are a few variables that may keep the valuation war from happening regardless:

• Investors won’t tolerate ridiculous valuations because they know the IPO market is stagnant. High or overly optimistic valuations are not a good thing today.
• Another shift in technology that exponentially decreases the barrier to entry once again

My advice is to do your homework before searching for seed funding, and make sure that you have a backup plan for your second round of funding – just in case things go pear shaped.

Opportunity Knocks When You Least Expect It

Most of the conventional wisdom about entrepreneurship would have you believe that entrepreneurs should plan, plot their progress, and plan some more. Planning is great, but sometimes, things will come at you out of left field, and you have to be ready to recognize the opportunity, and make the most of it, almost immediately.

For all the careful planning entrepreneurs do, ask anyone who has enjoyed success (from small business owner to VC-backed company), and they’re likely to tell you that there was a definite turning point. A suggestion, request, or contract that came along, that presented an opportunity that they just couldn’t refuse. It was probably unexpected, and might even have been something entirely new. Learning to seize those opportunities is what makes all the difference.

Good Sales People Are Fast on Their Feet

Maybe no one told you this yet, but when you get started in entrepreneurship, you also begin a career in sales. Except when you are an entrepreneur, you’re not hoping to make your sales target so that you can make a good commission; you’re selling so that your business will succeed.

Good salespeople think on their feet. If they notice a client pulling away from the product or service they’re pushing, they mentally change gears, and offer a different option. They keep that up until they find the item that the client is most interested in buying, and then they close the deal.

As a business owner and entrepreneur, you will need to be able to do exactly the same thing. With clients, suppliers, financiers and everyone else you meet. You’ll have to adjust your pitch almost instantaneously until you find the one that they want to hear. That takes some mighty fancy mental footwork.

What You Do Now Affects Your Entrepreneurial Future

There are many people out there who would like to make entrepreneurship their livelihood, but don’t have any big ideas. Some are stuck in jobs they can’t leave, and they think that being an entrepreneur is something other people do. Not so.

Even if you don’t have any ideas of your own, or you can’t afford to leave your job and dive right into entrepreneurship, there are business ideas you can use.

Take franchises for example. When new franchises become available, they’re often a lot cheaper than they will be five or ten years down the line. If you want to become an entrepreneur, then learning to choose a great franchise opportunity can be as important as coming up with a fantastic new idea of your own. Then again, you could take an old idea, and put your own spin on it.

The light bulb moment for most people comes when they realize that there’s plenty of money out there in the world. All entrepreneurship really is, is finding a way to get it from out there, into your pocket. Making split second decisions, and following your gut, is one way to make sure that happens.

How to Take Advantage of Opportunity

It’s all very well saying that you need to learn to pivot on a dime, and take advantage of opportunity, but it’s a lot harder to put into practice. Here are a few tips you can use to learn to recognize opportunity, and capitalize on it:

• Good entrepreneurs are tuned into opportunities. They listen to everything people say, even in passing. That way, they’re always ready to take advantage.
• If they have an idea, but they lack the business resources to pull it off, they figure out how to go about it. Great entrepreneurs never waste an idea – they work on it until they can take action.
• Just because you’re sure that your business idea is the answer to a specific problem; don’t discount other uses for it. Many great inventions were intended for something completely different to the use they eventually became famous for.
• Never pass up an opportunity. Whether its new franchises, or a business partnership offer, consider everything carefully. You never know when your big break will arrive.

So, if you’re dreaming of entrepreneurial success, start by learning to change course as new opportunities arise. Remember, business is fluid. Nothing is written in stone. Don’t be afraid of change. Embrace it!

The article can be found here.