Tuesday, July 26, 2011

"Invest in Lines, Not Dots"

Mark Suster is a prominent 2x entrepreneur turned Venture Capitalist in Los Angeles who came up with a concept that will stay with me forever – “invest in lines, not dots.”

I had the pleasure of hearing him discuss this philosophy in a USC classroom last year and thankfully he wrote a blog about it that you can read here.

So what does it mean to invest in lines instead of dots?  Here’s a loose translation of how Suster described it in that USC classroom:

“An entrepreneur sends me a business plan.  That’s a dot.  A month later they let me know that they’ve secured their first customer.  Another dot.  I see them at a networking event a few months after that and they tell me a major player is moving into their space.  Dot three.  A month after that they tell me how they maneuvered around the major player and are back on track with their projections.  Dot four.  Then, a little while after that, they tell me about a significant strategic partnership they just formed.  Yet another dot.  And so forth.  After a while, all these dots turn into a line with a clear trajectory.  Invest in the lines that are rising quickly.”

Now, this concept is seemingly obvious and one that we all intuitively practice on a daily basis - but there are three things that make it truly valuable to me:
  1. It’s transferable to many aspects of business.  For example, when hiring/promoting employees, analyzing growth opportunities, expanding into new markets, exploring strategic partnerships, etc. … “invest in lines, not dots.”
  2. It’s also transferable to many aspects of personal life.
  3. It’s a great reminder to be patient, conduct ample due diligence and avoid impulsive decisions.  “Don’t get too high when things are going well or too low when things are going poorly,” as my Dad often told me.
There are three things that I think are worth adding to Suster’s description … goals, if you will, to implementing this philosophy well:
  1. Get enough dots to form a consistent line.
  2. Be sensitive of the time function – you don’t want the dots to come in a burst, and you don’t want them to have too much time in between.
  3. Create your own dots – don’t rely on third party sources (and their natural biases) to create lines for you.
So whether you’re researching a new idea, running a business or potentially committing money/time/resources to anything else in your life – I encourage you to follow Suster’s advice and “invest in lines, not dots.”

Good luck and happy entrepreneuring.

(You can read the original version of this blog, tailored to the franchising world, on the Franchise Business Review’s website by clicking here.)

Tuesday, July 19, 2011

Have You Reached Out to Your Customer Today?

I took a Feasibility course in entrepreneurship while getting my MBA and it was the best class I took in 20 years of schooling.  The professor, Steven Mednick, started every class by putting this slide on the overhead:

He then went around the room and randomly asked students – “Have you reached out to your customer today?”  It was a relevant question because I was in the fully-employed program, so everyone worked during the day and went to school at night.

The great thing about the exercise was that the room was filled with people who worked at everything from Fortune 100 companies all the way down to start-ups and held positions in every department possible … and yet, the question was applicable to all of us regardless of employer or occupation. 

Why?  Because lessons in entrepreneurship apply to every company and every person in the workforce.

And the key point of this class, and USC’s entrepreneur program as a whole, was that entrepreneurship is all about the customer.  No customer, no business.  It’s a simple message.  Seemingly obvious.  But brilliant nonetheless because it’s so important and so often forgotten.

I’d always looked at entrepreneurship as being about that great idea – the one we come up with in that glorious moment of clarity.  And to a degree, it is.  That’s the starting point.

The valuable lesson for me was learning what happens after that idea is conceived.  Historically, I would develop the idea by putting together a business model and product roadmap using my opinions and beliefs. 

Then I learned that my opinions and beliefs don’t matter.

What matters are the opinions and beliefs of the customer.  And there’s no way to know what those are without talking to them.  A lot of them.

Which is exactly what this course required.  We had to create an idea by the second class and then spend the rest of the semester analyzing and stress-testing it through this “Feasibility Funnel” created by Professor Mednick:

Each step required talking to people.  And not just customers.  Suppliers, partners, industry members, etc.  On top of that, we were required to keep a “Stranger’s Diary” where we had to talk to at least 50 strangers about the concept and record the key takeaways from each conversation.

The result was that my original idea took many twists and turns over the course of the semester.  This was 100% the result of talking to customers.  Let them build your castle for you, as I’ve discussed previously.  And the business plan became much stronger as a result.  I've since used this model to analyze several growth opportunities at TGA and elsewhere.

The great thing about the Feasibility Funnel and customer-centric approach to business is that they apply to start-ups and large companies alike.  Entrepreneurship and its principles live everywhere and I bet they’re applicable to you regardless of your company or position within it.  

Thus, every afternoon, I encourage you to ask: “Have you reached out to your customer today?”

(Post-it notes on my desk help remind me):

(Images, quote and content courtesy of Steven Mednick - Assistant Professor of Clinical Entrepreneurship & Graduate Coordinator at University of Southern California, President of Plenum Revenue Group and a great professor.)

Tuesday, July 12, 2011

Let's Solve Pains & Problems

Summer at TGA Premier Junior Golf is synonymous with one word for me – sales.  I’m responsible for the company’s franchise development and this is always our busy season as franchise candidates want to start the business prior to the new school year.  This year we decided to significantly increase our advertising budget, so the quantity of leads is even larger than normal and the profile of inquiring candidates has changed due to these efforts.

Thus, right now I’m doing little besides thinking about – and talking about – sales.

Sales skills are worth developing because everything in the professional world involves them.  Whether you’re selling a product to a customer, selling a service to a business, selling a co-worker on the best way to do something, selling a superior on a project idea – everyone in the workforce is selling something to someone. 

And sales is not the dirty concept that many make it out to be.  When people think of sales, they often think of that caricature of a slick, slimy and shady used car salesman.  But in reality, sales is a beautiful thing.  It generates the revenue that makes business possible and creates the jobs in finance, accounting, HR, etc.

Additionally, the best salespeople are a customer’s best friend because they solve problems and kill pains.  How great is that?

I’ve been fortunate to have had several recent conversations with folks who are very talented at sales.  Since this is the lifeblood of any entrepreneurial endeavor, I wanted to share with you a couple of the key points (in addition to the 10 Commandments of Sales featured above, which I LOVE) that have been helpful to me.

Sell to a Pain

Figure out what the customer’s pain/problem is. 

Sometimes the pain is obvious – i.e. a lady goes to McDonald’s because she is hungry. 

Sometimes the pain is not obvious – i.e. a lady goes to a car dealership … but why?  Is she starting a family and in need of a bigger car?  Has her old car deteriorated to the point where she needs a new one?  Is she going through a midlife crisis and in need of a sportscar to make her feel better?  Was she recently laid off, causing her to need a cheaper car?  Did she get a big promotion and now she wants to show off her new status class?  Etc.

The best way to sell to a pain is to ask questions and engage the customer in a two-way conversation.  Focus not on the product’s features or your standard “pitch,” but rather find out what pain/problem is driving the customer’s motivation to talk to you – and then focus on how your product or service solves that pain.

Some great initial exploratory questions for the customer (with the corresponding question being answered for the salesperson in parenthesis) include:
  • What brings you in today? (What’s the pain?)
  • What about this product/service caught your attention? (What features of our product/service should I focus on?)
  • Have you been looking at other similar products/services?  If so, which ones and what have been your feelings so far? (Who am I selling against and how much do they know about the market?)
  • Are you looking into this for you or someone else? (Is it your pain or someone else’s I need to solve?)

Earn the right to learn about the customer

Customers control the money and usually have many options, so they come to you, the seller, seeking information.  They expect to be the one asking questions.  They expect to be sold.  They do not expect to be the ones getting interviewed. 

Thus, you have to earn the right to dig down into the secondary and tertiary levels of their pain and their subsequent motivation for talking to you.  To do this, you need to build a level of comfort and trust.  Be an expert on the company and product.  Be friendly.  Show that you’re concerned with solving that person’s problem, not with making a sale (which sometimes requires pointing them in a different direction if you’re not a great fit).  Most importantly, be authentic.

A good process to follow when working with a customer is this:
  1. Start the conversation by speaking generally.  Focus on the typical pains your product solves.  Speak passionately.  Get the person excited.  Stay at a 50k foot level.
  2. Ask a few gentle questions (reference above).
  3. Provide a brief overview of the company and product.
  4. Ask questions as a lead in to talking about features.  i.e. “Do you listen to music a lot when you drive?”  If the answer is “yes” you know to highlight the awesome stereo system.  If the answer is “no” you know to move on to other features that the customer will find more relevant.
  5. Work on the customer’s timeframe and don’t be pushy about changing it.
  6. Say what you do and do what you say.
Keep in mind that everyone in the workforce is a salesperson to some degree and sales is about solving pains and problems.  If you approach sales with this mentality and are authentic about wanting to help people - whether it's a customer, colleague, supplier, superior, etc. - you’ll likely see a lot of long-term success in the business world. 

I hope these thoughts help you down the road to happy entrepreneuring.