I like this story about Edison and the light bulb filament:

“Like Edison responded when asked if he would give up after ‘failing’ 700 times to create the filament for the light bulb… He responded that he did not fail, but instead discovered 700 ways that didn’t work.”

To survive today you have to try new things and you have to adjust rapidly.  Keep this in mind and try to build the fastest feedback loop possible.

I receive various newsletters from Venture firms with “tips” to founders and start-ups.  Today I received one that had tips on how to conserve your cash.  The unfortunate part is that while this is a great topic and one that all founders should be made aware of, it was written in a negative way.  As in “X number of ways to burn through all your cash”.  The post went in to great length of what you should do to burn cash.  There is no reason to use a negative scolding like tone as it got in the way of the message.  Do you really want someone (the VC) looking over your shoulder treating like a child?  What should be great advice was imparted with  smuggishness and condescension that is a hallmark of horrible VC firms.  The tone was so bad that the advice is immediately dismissed.  A shame as the topic of how to avoid burning through your cash should have been a great one.

The article was so offensive that it did nothing to help anyone and makes you wonder if the tone of the article represents the tone of the firm towards their portfolio companies…

I guess “I” will NEVER know.

It is hard if not impossible to get a “Fair” price for your business if you are pitching the business to people who do not understand the (1) business or (2) industry in which the business operates.  Just as the title to the post states why would you try to sell your cow in a pig market?  Why would you try to sell you business in a market that does not understand what your business does.  You may be able to sell it but not for a “Fair” price.

Two examples:

1. Was listening to a pitch the other day for a Health Care company.  After the pitch the room was dead.  No excitement. No questions. No discussion.  What was wrong?  Was it the company or the presentation.  I don’t believe so – it was that the people in the room were not Health Care people.  I myself simply did not listen to the pitch because I know nothing of health care and since I do not trust myself on the industry, I do not invest.  It was not that the idea was bad necessarily it was just the wrong venue.

2. Met with some great guys the other day.  Brilliant company concept, smart implementation.  They are totally on track.  They are having trouble raising funding.  They are starting to question themselves and their company.  Their problem is that their company is pre-revenue.  My message to them, “Don’t doubt yourself just recognize that your company is at a stage where most people you have pitched to will not invest.  It is outside their risk profile in “THIS” market.

In both cases the companies were selling cows in a pig market.  It is still possible, don’t doubt yourself,  but recognize that you will have to lower your price.

That is the question I will put to the business leaders in Louisville.  I will blog some of their answers and assemble an ebook from the rest.

My answer is the following:

Figure out the one metric that drives your business.  The one thing that keeps the cash flowing and measure it.  Track it relentlessly.  Focus your entire organization on that one metric.  I will give an example.  A restaurant owner calls in on a Friday night at 7:30 and asks, “What is the wait for a table?”  That one question can tell her how business is and give her an idea as to the revenue for the evening.  How can the wait do that?  The answer is simple – wait equals how busy the restaurant is which translates to people in the store, which when multiplies by the average check equals the cash take.

When you identify the metric that drives your business, and when you focus your entire organization on that metric, then the company moves as one.  One purpose, one aspiration, a single goal.  Know the metric, focus on the metric, drive the metric.

How would you answer the question? – Let me know.

I see this all the time.  People have good ideas maybe even great ones and do nothing.  They do nothing because they have built a life around having things – cars, houses, vacations, games, toys, etc. and need – no must have a steady income to support their addiction to things.  This need for a steady income adds to the reasons why many people do not go after their dreams.  I know a great engineer who is busy creating great products for his company when he could go off and create them for himself.  I know a product manager who had five “fund-able” ideas and yet took a job working for someone else working on a product that did not excite him.  A know many people like this as they continue on in their jobs because they create their cages and shackle themselves to their own desks.

I have done this as well – so if you feel this way do not despair you can break the bonds.  get rid of the junk – reduce your dependence and set a goal to buy your freedom from the tyranny of the paycheck.  Once you are free you can try all the things you dream about.  You can go “All In”.

When you do go for it their will be investors waiting.  If you want them (different story).

1. Establishing TRUST is the #1 biggest thing in business.  Without trust no business can take place.  Work hard to earn it and guard it like the gold it is.
2. Building a fluid culture will do more for your business’s survival than any other corporate value.  Building an Adaptive Culture that is unafraid of change means that you can be more responsive to changes in the market place – 2009 has been that if nothing else.
3. APIE is the answer.  What is APIE it is in essence Six Sigma, Continual Improvement, etc.  APIE stands for Assess, Plan, Implement and Evaluate.  Constantly striving to be better makes you better and builds on an Adaptive Culture.
4. Training and Cross Training helps the people in your business get better.  Better people = better service = Happy Clients.  They taught me about the importance of Cross Training at Wendy’s and I have only recently (2009) remembered the principle.
5. Repetition of core concepts helps people digest the message.  I view repetition as the key to communication.  It is not effectively communicated if you only say it once.  Think about this – when a fire breaks out in a crowded theater does the person only say it once?
6. What worked yesterday (yesterday’s value) does not not work today or in 2010.  If you rely on the methods of the past you will not deliver on the promises of tomorrow.  In order to add value a business has to add more value than yesterday.  Ask GM if it is OK to sell a car today that does not have air or power windows.  Better yet ask GM if they can even sell a car where that costs extra. (You may be asking if they can sell any car which is also a good question).
7. Look Back every once in the while.  Remember what worked and where you came from to appreciate your efforts; to remember success and failure.  It is good to remember the past but not to focus on it.
8. Excellent Failures beat Mediocre Successes – to borrow from Tom Peters who no doubt borrowed from someone else.  It is only in excellent failures that ground breaking opportunities are born.  A mediocre success is just that mediocre.
9. Build Raving Fans – You can interrupt people and tell them what you have to sell (Classic Marketing), you can beg (or pay) someone to tell your story (PR), or you can build Raving Fans by offering a unique or unexpected service that wins Raving Fans or Promoters and they – your clients – can sell for you.
10. Create more VALUE than you take.  I call this the secret of life – give more love =get more love, create more value = get more value.

These ten things are what I am going to remember in the new year.  I hope your New Year will be more successful and happy than 2009.

You must cannibalize yourself before others do.  Do you have a weak spot that can be exploited?  If so it will be.  I am not advocating selling you high end product for zero dollars.  What I am suggesting is that you must make sure that your point of differentiation provides real value.  Newspapers classified ads created real value for a hundred or more years but when confronted with new technology they stuck their collective heads in the sand and hoped it was a fad.  Their real value (providing reach in a local community) was eliminated and became a commodity.

Trends that will kill your business move slowly until they don’t.

Fast food managers know the cross training principle.  From the moment they walk in a store they are trained to cross train their crew.  I have seen a well cross trained crew handle 30% more volume with half the staff.  My belief is that team members who are cross trained in several functions like customer service, and training, or client marketing and brand marketing, or sales and marketing etc.  are exceptionally more valuable than single purpose workers.  They can handle more issues, work more efficiently, and can squeeze much needed leverage from the system.

If you are cross trained then the company can afford to pay you more or can afford to pay you in the first place.  As a manager you should seek out employees who can do more than one thing.  As a leader you must cross train your team to develop this type of leverage.  If you are a leader of a startup this is a fact of survival.

I served as the head of Human Resources for a publicly traded company during 2001 and 2002.  During which time I spent the majority of my time fixing policy errors, hiring mistakes, compensation issues and other abuses of my predecessors.  I learned a lot about people management during my stint with the company and have assembled a list of talent management “MUST DOs” :

• It is not “HR” it is Talent Management (start by placing the right adjectives on it)
• Talent management is every managers responsibility not just three clerks in a corner.
• Discussing people or the team is always a priority – building a great team is the same as building a great company.
• When the team comes to you and tells you one member does not fit – they don’t PERIOD!
• Invest in the talent – training is to people as repairs and maintenance are to plant and equipment – you certainly oil machines – so to do you need to “oil” your talent.
• All salaries do not have to equal but they do have to be equitable.  You better be able to justify salary differences.
• Bonuses must be tied to two things – first company performance and then and only then to individual performance.  It does no good to award personal performance if the company is failing. – The extra credit part of this is that I actually believe that client performance should be first but that is another topic.
• The head of Talent Management must sit on the executive team.
• Once a year for feedback is not acceptable.  Feedback must be given every single day!  Great coaches are constantly giving feedback during the game.  Why don’t managers? They were never taught to give direct constant feedback.

Today we celebrate our country’s Independence.  It was declared this day but we did not earn it this day.  we earned it over the coming years and we still are earning Independence.

A company is much like the United States.  You can declare Independence but you have to earn it every day by having positive cashflow.  Right now is a horrible time to raise money.  You give up more Independence today than ever before.  Stay cashflow positive – stay independant.  Stay cashflow positive stay alive!

If you are not cashflow positive I challenge you to make your own Declaration today and work for it.  Freedom and Independance is a great thing!