Stop BS’ing Yourself

Another repost from The Altucher Confidential. This is a great case study to evaluate on one of the main mistakes entrepreneurs make.

Written by James Altucher

I woke up at about 4am, made coffee, and read stories by Miranda July, Charles Bukowski (from his book “Hot Water Music”) Nora Ephron (from her book “I remember nothing”) and half a story from John Updike before I was ready to start my own writing for the morning. It was 4:47am when I got an instant message on Facebook.  “Hi James. Can I just get one piece of advice from you”. I didn’t recognize his name. “Ildar” something.

The sun was just peeking through the curtains. I felt good. Within a few minutes, the first train going into the city would pass by the house. I like the sound of it. I don’t like to talk to people so early in the morning. I like morning sounds. Privacy. That’s why I wake up early to start writing. I wasn’t sure I wanted to IM with anyone at 5 in the morning. But…

“Sure,” I wrote.

He had a business selling eco-friendly bags. And he wanted to raise money from venture capitalists and wanted to know how to go about it. Here’s his business: www.ECOcentricBags.com

Here’s a bag:

The IM conversation is below. My notes are in brackets. I apologize in advance to Ildar if I was a little rude. I want to be helpful.

–

Me: Do you have customers? You should get health food stores or other organic-focused stores to buy bulk from you.

Ildar:  Well, my main concentration is not reusable bags, but handbags, backpacks, messenger bags etc. No stores. We’re only selling to consumers.

[ Mistake #1: Not a broad enough definition of who their customer is. When just starting out, the focus should be to sell to anyone you can and be creative about it. You absolutely need to get a customer. No customer, no business. Important rule: you want to take the hard problems and make them easy ]

Me: its hard to market to consumers. Unless you get a huge distribution partner like a Walmart or Macy’s.  Can you get a big chain to invest / take equity/ in exchange for distribution?

And then you can raise money but by then you might not need it. No matter how much money you raise, money wont buy you distribution. It will just buy you marketing. and marketing to consumers is very hard.

Ildar: …look at ebags.com. They had investors, market to consumers, and now they have a multi-million dollar business.

[ Mistake #2: incorrect comparison to others. You have to make sure you are not BS-ing yourself every step of the way. I’m not being critical here. But once you start BS-ing youself you can end up going down a wrong street, end up in a dark alley, and thugs are standing there waiting to strap their belts around your neck.

Here’s a post on how Ebags got started and succeeded.

Ebags.com raised $30mm from Benchmark Capital…in 1999. 1999 does not equal 2011.

Its hard to sell things. You can’t just put up a website and begin selling organic bags. In an earlier post, I said the easiest way to be an entrepreneur is to start with a customer.]

[Rule: The 5 Wins Principle]

Me:  you need to have 5 “wins” in order to even THINK about attracting venture capitalists. Sample wins include: stores buying your bags, Walmart taking equity in exchange for distribution, revenues increasing month over month, light at the end of the tunnel in terms of profitability, some cheap way to market.

Raising money is very, very hard. Find easier problems to solve first. Solve them. Then go for harder problems.

Ildar:

Here’s our wins:

1. we have all our vendors drop shipping products for us – we don’t have any physical stock – so limited expenses for inventory and warehouse, etc

2. we’ve seen constant growth in sales and revenue over past 6 months due  to increase in rankings in google, and other marketing

Me:

#1 is no good. Everyone has it. This is the Internet. The entire idea of the Internet is you don’t have to carry physical inventory.

#2 is good  [but not really. See below.]

Ildar:

3. we live in the time of “organic boom” and sales of organic products will be constantly going up, besides with ban of plastic bags in many cities – we are in a good shape for future profitability

4. we developed a strategy when we give 5-10 % of every sale to charity – that will create word of mouth, and good for PR

Me:

#3 is only ‘ok’ if you can prove #3 by getting distribution or getting some store to bulk buy your stuff. Otherwise, if no proof, then nobody cares about “organic”. [Rule: Dont BS Yourself. If no customers, then no business.]

#4 is no good at all. Venture capitalists don’t care about charity. They’d rather you take that money and build your business. The PR value of giving to charity is almost zero.

Better PR is having naked girls carry your bags on subways while making out with each other.

Ildar:  hard to convince them probably 

Me: Yeah, thats why its good PR. Its too easy to give to charity.

Ildar: Not everyone does, though, even if it’s easy

[ Mistake #3: Why argue with me about this? ]

Me:

People want to get bags that make them look good. The organic stuff  helps a tiny bit. You dont have to further give to charity. Its like you’re begging your customers to buy your stuff. ‘oh, we are so good you should buy us even though you might not like the bags.’

So… the only real “win” you have is increasing sales for six months. How have sales increased? What were sales last month.

Ildar:

still in single thousand digits

Me: Ok, so you can’t count that as a win. No BS! You need to do something drastic after six months of sales and ‘single thousand digits’ sales.

– You HAVE to sell to stores in bulk or give up equity to get distribution. Go door to door to stores. Hustle. Get one store to buy a bunch of your bags and you have a customer.

– or see what happens if Kloe Kardashian tweets you ever day (use something like celebritytweets.com to get her to tweet your bags for $3000 a tweet)

– or… get naked girls making out in subways while “wearing” your bags. Do it simultaneously in every subway in NYC.

(Khloe Kardashian Tweets Cost $2500 according to celebritytweets.com)

Ildar:

  I see

Me:

Nothing else will work

If ebags didnt raise that amount they would’ve been out of business almost immediately. You want to avoid that if you can. So you have to sit down today and start thinking really wide outside the box

Ildar:

Yeah, i guess retail business is tough to be in

Me:

It doesn’t have to be. But you have to go crazy to make it work.

Give up equity to get customers, go to the heads of stores, go to a Kardashian, do something crazy in the marketing. Just organic bags online is not going to do it. You have to sit down right now and come up with 50 ideas for going completely crazy.

Give up 90% of equity to a walmart if you have to. Again, i’m taking an extreme. but thats the way you have to think. Think WAY out of the box from how you’ve been thinking

——- [End of IM conversation. Ildar said thanks and I signed off.]

Now its 5:50am. I just spent an hour of writing time. Claudia is up. I ask her if she thought it would be interesting for me to write down the IM conversation in an article.

Yes, but only if he gave permission?

He did.

Because you don’t want to do anything over the line.

Its ok. He gave permission. He was fine with it. I’m even going to link to his site.

You know what else is over the line?

What?

Not refilling your wife’s coffee.

So I did.

The Easiest Way To Succeed As An Entrepreneur

This is a repost from The Altucher Confidential. It is kind of long but worth the read.

Written by James Altucher

I was the worst pizza delivery guy. Fraternity guys would chase after me as I was peeling out of their driveways after a delivery. Why? The sauce and cheese fell all to one side.  I couldn’t help it. I also never got tips. Wende, my partner in our restaurant delivery business, always got tips. But she was beautiful, blonde, great smile, had personality, etc. And I secretly loved her.  I couldn’t compete. I always hoped I would deliver to a frat party where all the girls were running around naked. But that never happened.

We also started a debit card for college kids. From the first day we were open for business we had college kids signing up for our card (there were no credit cards for kids then). And anyone who had our debit card could order food from the 20 or so restaurants in town and we’d deliver, but with a 25% markup.

I loved delivering food because it gave me twenty, or even forty minute breaks from my girlfriend. We were having troubles at the time. I’d sometimes stop the car between deliveries and just read. I was a screwed up 19 year old then. Now I’m only a mildly-screwed up 43 year old.

I’ve had seven startups since then. And some profitable exits. And another 20 or so that I’ve funded.

When I think “entrepreneur” I think Mark Cuban or Larry Page or Steve Jobs. I don’t usually think of myself. In part because I feel shame that after all of these startups I don’t have a billion dollars. Many startups fail. But I’ve had a few successes as well. Successes in a startup makes you feel immortal.

I was going to make this post: “the 12 rules to being a good entrepreneur” and I outlined the 12 rules that have consistently worked for me.  But rule #1 is taking up 1500 words already. Tim Sykes tells me I need to break these posts up more. So this one rule is going to take up the whole post. But, for me, this is the most important rule.

The MOST IMPORTANT RULE: Have a customer before you start your business. This is a corollary of the phrase, “ideas are a dime a dozen”.

There is another corollary: lazy is best. If you have to work for two years before one dollar of revenue comes into business then thats too much work. I’m lazy so I like money coming in with as little work as possible. Mark Zuckerberg, of course, is different. He put in years of work before dollar one of revenue came in. But we’re different people.

In about twenty minutes I’m going to go to the local café here, The Foundry, and bring a pad, order a coffee and muffin, and write down ideas for businesses. Then I’ll probably throw the piece of paper out. Because ideas are useless. They are just practice to keep your idea muscle in shape.

FAKE RULE: People say, “Execution is important”. That’s not really true either. Execution is useless. It’s a commodity. The only thing that’s important is money. You get money by having a customer. You get a customer by satisfying a need that’s so important to them they would be willing to pay for it.  If you have a customer that’s willing to pay you money, then execution becomes a lot easier. Life as an entrepreneur is hard. Why make it harder for yourself?

I like stability as much as I like taking risks. So for me, I need a customer. It’s a matter of how much risk you want to take. In an earlier post I suggest reasons why people need to quit their jobs and jump into the abyss. If a customer happens to be waiting for you in the abyss then you won’t be lonely there.  Loneliness is bad for a startup.

Example: How Stockpickr Started

Tom Clarke, the CEO of thestreet.com called me up in mid 2006. He wanted to meet and brainstorm ideas with me. So I had about two weeks to prepare. I called up a development firm in India. MySpace had just been acquired by NewsCorp so I sketched out what I considered the “MySpace of Finance”. I threw in every idea from my own trading.

In other words, I wanted to create a site that I would use as a professional trader and so I knew other traders would benefit from it. And, I had a theory about making a quality financial site that basically had no news in it. I’m going to be blunt: 99% of financial news is useless and misinformed and misleading, if not outright lying. My ideas for the site were purely based on my own ten years experience as a professional trader. In fact, I had just turned down working for a multi-billion dollar hedge fund based on a specific strategy I had. Instead, I implemented that strategy within stockpickr.com.

Within a week, for free (because I told the company in India that I would be building the site with them if they sent back good screenshots, which was true), the company sent me back screenshots. I met with Tom and told him, “I’m almost done with the site. Here it is.” (I exaggerated) And I showed him the screenshots. I had set up meetings with Yahoo and AOL as well to discuss them so it wasn’t a stretch to say, “I’m also talking to Yahoo and AOL.” Nobody wants to be the first customer, so you have to create the aura of many customers.

And so he said, “why are you talking with them? You’ve been with us forever. Lets do this together.” So we negotiated right there. I said, “great, how about you guys take 10% of the company and put all your extra ads on all of our pages and let me link from every article back to Stockpickr.com (the name of the company).”

He said, “I thought we were partners. Lets do it 50-50.” So right away, I had given up 50% of the company. Most people I spoke to thought this was a horrible idea. In fact, one of my employees quit because I did this: but giving 50% of your company away is often better than giving 10% of your company away. When you give 50% of the company away, your partner is obligated to follow through and be a real partner. He can never forget about you. Its also always a good thing when the most popular person in financial media, Jim Cramer, was also a 50% partner in my business since he was the founder of thestreet.com. If you can get the top person in your field to take equity, you’re golden from day one. Again, its all about making life easy. With family responsibilities, health, life in general, why make things even harder for yourself?

Its like that saying when you owe the bank a million, they own you. When you owe the bank a billion, you own them. Three years later I watched another company thestreet.com only took 10% of almost disappear because Thestreet.com was not obligated to follow through.

So, at that point, without even having a site finished (or even started): I knew I had three things going for me:

A)     I was going to get traffic. I could write three or four articles a day and link each one back to stockpickr all over the article. The street.com got 100mm pageviews a month so I knew I would get some percentage of that.

B)      I was going to make money. If I got even 3 million pageviews a month and the average CPM of thestreet.com (according to their SEC filings) was $17,  I would make about $50 thousand a month with expenses nearing zero. What if I put 3 ads a page on the site? Then I would make even more. Slap a 40x multiple on a growing company and before I even started I had real value.

C)      Profitability and growth from day one meant I could put the company up for sale almost immediately. But that’s another story.

With my first successful company, Reset, I had about 10 paying customers before I finally made the jump to running the company fulltime: HBO, Interscope, BMG, New Line Cinema, and Warner Brothers were all paying customers before I jumped ship from HBO to run Reset fulltime.

(the Wu-Tang Clan was a paying customer)

When I started my fund of hedge funds I didn’t put one dime into the expense of setting it up until I had the first $20 million commitment. $20 million with a 1.5% management fee meant an instant $300 thousand in revenues, plus extra money for legal fees, etc. Enough to pay a salary or two. It took a year of cultivating my network before I had that commitment, but it worked.

This is just me, personally. Some people don’t mind starting a company without any customers. I’m too conservative for this. I’m happy to even give up equity to get that first customer. 50% of a profitable company is better than 100% of a company that will probably quickly go out of business.

How do you get that first customer?

–          Who? List the 20 CEOs or high level executives you would like to meet. If you have a rolodex, great. If you don’t, then you might have to write to 40 people. This is why its important toExploit your Employer and use some of the other ideas mentioned throughout this blog. But its ok if your rolodex is cold. Many successful businesses I’ve been involved with started with cold emails.

–          Ideas. Develop 20 ideas for each person. Get your idea muscle in shape first.

–          Communicate. Write them all, giving at least 10 of the ideas, in detail, and how you would implement them. Sometimes you have to dig for their email address. Like I did here.

–          Meet. All this does is get you the meeting. Once you’re in the door, the conversation can go anywhere. Of the 20 people you write, rule of the universe is you’ll get six meetings.

–          Ask. In the meetings ask the question, “what one product can I build for you that you will definitely buy?” Remember, execution is a commodity. Because of globalization you can build anything for cheap. I built the first working version of Stockpickr.com for $3000 in Bangalore. Throw in another $150 from a design made in Siberia. You need zero skillset for that. Just a good idea muscle, an ability to sell, and modest ability to manage a project.

–          Never say No. Never. If someone says, “can you do this?” Yes. “But can you do this?” Yes. Can you do it for this? Yes.

–          Follow up every day. Nice to meet you. Here’s my sketch of what you want. Is this right? Should I start today?

–          Equity. If necessary, give up equity for that first customer. Or first two customers.

–          Done. If more than one CEO wants the same product or service, and the price is right, then now you have a business. Build the product, sell it, and you’re in shape.

–          Repeat. You’re not really “Done”. Every day you have to go back and see if your customer is achieving more success BECAUSE of your products. If he is, then ask him what else he needs and then build it. If he isn’t, then ask him what else he needs and builds it. Your easiest new sales will be with your old customers.

This has worked for me on three different occasions. And each time resulted in great profits for me. By the way, this technique has also worked for people who have contacted me with their own ideas.

Listen. You’ve been hypnotized. You’ve been told you need a corporate job. You need a college degree. You need stability. You need the white picket fence. You need the IRA and the health insurance. Snap your fingers in front of your face. The American Religion is a myth, just like the movie, Thor, is based on a myth. Stability is only in your mind. There’s $15 trillion dollars in our economy, recession or no recession. Its falling like snow. Reach out with your tongue and taste it.

The X Factor to Success

In the next 5 weeks, ZERO will be discussing The X Factor to Success. To discuss this topic we will analyze several success stories and compare them at the end. At the end of each week, ZERO will feature an exclusive interview with prominent business owners.

We are interested in seeing what you attribute to entrepreneurial success. Follow this link to share your ideas and to engage in a conversation on The X Factor to Success.

Interactive Presentation – Ok, I Understand Social Media but What Next?

The interaction presenation to ZERO’s last social media campaign has finally been released! – Ok, I Understand Social Media but What Next?

Click on the following link to view

Continue to interactive presentation

Sara|Oliver invited to tweet Martha Stewart’s 1000th episode, LIVE!

Today marks the beginning of the countdown to the Martha Stewart show’s 1000th episode on the Hallmark channel. Every day until the April 20th celebration Martha will be giving away prizes on her website from sponsors like All-Clad, Kitchen Aid, Hallmark and Wustof knives .

For the actual 1000th episode to air live on April 20th, 2011, a very exclusive amount of social media experts were chosen to tweet live for Ms. Stewart herself.

Sara Ann Kelly, CEO of Public Relations for Sara|Oliver, was one of the LUCKY few!
Stick with us over the next few weeks to see how we are preparing for the big day, and of course tune in to the Hallmark channel April 20th to celebrate!

Twitter: @saraoliver_prmk
Facebook: http://www.Facebook.com/saraoliverprmk
Sara|Oliver, LLC

The Importance of Post-Surveys

At the end of each social media campaign you want to conduct post-surveys to see how effective your campaign was. Post-surveys will help you determine if your campaign was helpful, if your content was found useful, and how you can perfect your content for your next campaign.

As simple as it is, be sure not to disregard this step as it is one of the most important.

Tomorrow we will discuss why it is important to end your social media campaign with post-surveys. Be sure to follow The Conversation on Facebookwhere you can give your own suggestions and see what other business owners are saying about social media. Or scan the Blackberry barcode at the top right of your screen and BBM sara|oliver to ask any PR or Marketing questions that you may have. Talk to you soon!

The Final Social Media Touch Point

So how does Foursquare fit into your overall social media strategy? Well lets first look at the above picture. Wouldn’t it be great if people reacted like that to everything that you did? I wonder what would have happened if Apple didn’t enclose the iPhone into a glass case? Or even better, I wonder what the difference in iPhone sales would have been if Apple didn’t draw people to a specific location to lust over their new product. What would have happened if Apple would have just left the release of the iPhone up to their social media outlets?

It’s one thing to raise awareness of its launch and product offerings online but to raise anticipation and then take it a step further and to tease your audience by ‘almost’ being able to touch it? Well, it’s the cherry on the top. Would they have received the same reaction on the day the iPhone was released? Maybe… this is pure speculation but I doubt it. It all comes down to your touch points.

Within old marketing strategies you would have touch points from when their customer was at home in their living room, to when they were in the store making the decision to purchase their product. Commercials on their tv, magazine ads, billboards, window poster ads, in-store marketing, aisle advertisements, and finally packaging. In the days of social media, you have to follow the same concept but it is just done differently. You start your audience off by engaging in your content that you provide on your blog, whitepapers, eBooks, and interactive presentations. They hear about it through Twitter and email newsletters. Then they follow it to your LinkedIn and Facebook. Then they finish by attending your events and following you on Foursquare.

Foursquare is your last social media touch point. It’s the end of the cycle. That is what you have been working your audience up to. Where you are able to get them to make their transaction. And that transaction is to turn them into brand evangelists. To empower them with an experience to tell everyone that they know. To go onto their twitter and Facebook and tell everyone that is within their network. Think about it like this: How often do people tweet on a regular basis? And how often to they tweet about what they are currently doing? Then why not bring them to your environment so that they can tweet about you? The concept is as easy as that. It only makes sense.

Don’t disregard Foursquare and make sure that you add it to your overall social media strategy. Also, make sure you follow me on Foursquare by clicking here.

Tomorrow we will discuss why it is important to end your social media campaign with post-surveys. Be sure to follow The Conversation on Facebookwhere you can give your own suggestions and see what other business owners are saying about social media. Or scan the Blackberry barcode at the top right of your screen and BBM sara|oliver to ask any PR or Marketing questions that you may have. Talk to you soon!

Last Phase: The Power of Foursquare

To conclude our discussion on the life cycle of social media, this week will discuss Foursquare, events, and post surveys. As you can see on the SmartArt the last phase is all about brand engagement, personal interaction, creating incentives and promotions, as well as getting feedback.

Foursquare is an amazing tool that few businesses utilize. Which is sad because Foursquare can add so much value to any business. After you have drawn your audience in and they have engaged in conversations with you, used your content, and followed you to your website you want them to experience another side of your business. It is one thing for them to follow you onto your website. But when you get your audience to go to a location specifically to complete a task on behalf of you business, they are not just clicking on a screen to interact with you, they made a personal decision to get out of their home and interact with you. This makes their experience with you heartfelt and more personal. This is where your chance arises to build loyalty and brand evangelists.

Tomorrow we will further discuss ways to incorporate Foursquare into your overall social media strategy. Also, be sure to follow The Conversation on Facebookwhere you can give your own suggestions and see what other business owners are saying about social media. Or scan the Blackberry barcode at the top right of your screen and BBM sara|oliver to ask any PR or Marketing questions that you may have. Talk to you soon!

Equip The Right Tools To Build Your Network

The absolute right tool to use to help you monitor each of your social media platforms is Hootsuite. Hootsuite is your social media hub. It links up your Facebook profile and page, LinkedIn, WordPress, Twitter, Ping, Myspace, Foursquare, and mixi accounts. Hootsuite lets you track results, collaborate with teams, assign tasks, schedule updates, monitor what people are saying about you, schedule tweets, upload files, post updates, print and export stats, view thread conversations, and so much more. Hootsuite is all that you need.

Hootsuite has been extremely beneficial to me because I am able to monitor all of my social media as well as all of my clients social media in one place. It makes social media easy, almost too easy.

Hootsuite offers two service plans. You can get a free plan which lets you monitor up to 5 social profiles or for $5.99/month…. yes only $5.99/month (Which includes a free 30 day trial), you can monitor unlimited social profiles. It only makes sense. ZERO is all about finding cost effective tools for business owners and Hootsuite is more than highly recommended.

Tomorrow we will have an exclusive interview from a successful business owner. Also, be sure to follow The Conversationon Facebookwhere you can give your own suggestions and see what other business owners are saying about social media. Or scan the Blackberry barcode at the top right of your screen and BBM sara|oliver to ask any PR or Marketing questions that you may have. Talk to you soon!

How To Properly Communicate Through Facebook and LinkedIn

It is interesting how much an online location can determine how a person acts. As you can see in the comic above, depending on the online location, you can ask a person the same question and receive different answers. You are targeting the same audience but that doesn’t mean they act the same where ever they are. Then how do you know how to approach your audience, you may ask?

Facebook gives you a chance to humanize your brand. As you can imagine the way your target customer looks and the things they do throughout their day, your audience wants to be able to imagine the type of person that is behind your company. Before social media brand personality was mainly left to internal branding. Today your people are interested in what is real and they want to experience your brand culture as well as get a sense of your brand personality.

Remember that Facebook and LinkedIn are touch points, not end points. The key to Facebook is to not make your content or conversations about you. Because Facebook is a network of friends, you wouldn’t talk to a friend that always spoke about themselves. You could care less.

Be sure to always comment on all interactions that happen on your page. This lets people know that there is a human monitoring the page that they could interact with. Be sure to comment on other pages and make sure that every interaction on your page is seen by more than just yourself. Your goal of using Facebook is to get people talking about you. The more people see your name or something referring to you, the more you are brought up in conversations, and the more people are then going to your website where you can get more information on your business.

LinkedIn is your chance to humanize the professional behind your business; to represent your business professionally, display your expertise, and create professional relationships with individuals. Even though LinkedIn in centered around displaying your services and expertise, be sure to not let it always be about yourself. Your goal on LinkedIn is to show people what an asset you are to them. Be sure to point out others expertise and congratulate them on their successes. Even though LinkedIn is centered around professionalism, it’s still about personal relationships. People are more prone to doing business with someone they like than someone with a great resume. Make sure you give before you get.

LinkedIn also opens up the opportunity to be a part of professional groups. There are many professional groups on LinkedIn that you can contribute to that will help you expand your network. The more you interact with others, the more they will interact with you.

Tomorrow we will discuss tools that you can use to help monitor Facebook and LinkedIn. Also, be sure to follow The Conversationon Facebookwhere you can give your own suggestions and see what other business owners are saying about social media. Or scan the Blackberry barcode at the top right of your screen and BBM sara|oliver to ask any PR or Marketing questions that you may have. Talk to you soon!