Entrepreneur | Martin Willoughby

29 Mar 2016

Sticky Post By overseer Posted in Entrepreneurship Permalink

ARE YOU A LEGALLY SAVVY ENTREPRENEUR?

Sticky Post By overseer On March 29, 2016

Unless you are a devout Apple follower, you likely a Microsoft product somewhere on your computer.? However, there were numerous situations that could have altered the trajectory of Microsoft that would have led to a different company dominating the software market over the last 30+ years.? I would argue that one of the reasons that Microsoft survived to become a dominant global brand is because of the legal savviness of its co-founder Bill Gates.

While Gates? passion, drive, and intellect helped him become one of the world?s richest people, what many people don?t know is how legally savvy he was in building his business. For example, when 19 year old Gates and Paul Allen read about the Altair computer in the 1975 issue of Popular Mechanics, they knew they could create some software to make it more useful for hobbyists so they contacted its manufacturer (MITS) and pitched them on the idea of building this software.? They persuaded MITS to enter into a 10 year deal transferring the exclusive rights to their first software product (BASIC) to the company.

Gates had a provision in the contract that said that MITS had to use ?best efforts? to market the software.? MITS was purchased by another company and they sent Micro-soft (as it used to be know back then) a letter saying that they would never sell to a competitor.? Well, that proved to be the ?smoking gun? in an arbitration suit that allowed Gates and team to have full rights back to BASIC which they went on to license to many other people.? The rest, as they say, is history.

When it comes to successful entrepreneurs, we often hear them described as visionaries, innovators, or creative geniuses, but I believe there is another quality that is available for anyone who wants to invest the time and effort.

?That quality is to be a legally savvy entrepreneur.?? I don?t mean that you have to have a law degree to be successful.? However, I do believe that it is important to take responsibility for the legal aspects of your business, understand the legal terrain of your business and industry, and make informed decisions on legal matters.

To help you consider whether you are a legally savvy entrepreneur, I have summarized below a series of questions to consider:

(1) Do you delegate all things legal in nature to counsel or are you actively engaged?

(2) Do you read the documents you sign?

(3) Do you understand the key provisions of the contracts your company enters into?

(4) Do you know the key legal issues in your industry? Your business?

(5) Do you view your legal counsel as ?necessary evil? or a strategic resource?

(6) Do you understand the key tools at your disposal?

(7) Do you understand basic legal terms and language?

As an entrepreneur, there are numerous issues to consider such as your product/service, competition, staffing, CASH FLOW, and managing risk.? Ultimately, you are trying to build a great business and increase the value of your enterprise.? Whether you like it or not, the law and legal matters are interwoven with all aspects of your compamy.? The question is whether you are addressing them in a proactive way.

Put simply, when you as the leader of your business sit down to negotiate your next deal, if you are not the more legally savvy entrepreneur at the table then prepare for trouble.?? In my next post, I will discuss some proactive steps you can take to be a more legally savvy entrepreneur.

29 Feb 2016

Sticky Post By overseer Posted in Business Development, Decision Making, Entrepreneurship, Managing Your Business, Uncategorized Permalink

HOW TO VETT A BUSINESS OPPORTUNITY

Sticky Post By overseer On February 29, 2016

Like other high-income earners, physicians are often sought after sources of angel investment funds for start-up or growing businesses. I am often asked to review and analyze these business opportunities for physician clients.? In this article, I am summarizing the key considerations for evaluating potential investment business opportunities in startups or growth companies.

Vision, Values, and Strategy

Can the company?s management articulate a clear vision and strategy for the company? In other words, do they know what they stand for, and do they have a plan for where they are going?? Many companies suffer from a lack of focus.? Research supports that companies with a narrowly focused strategy will generally outperform the competition.? I am wary of any company that can?t clearly articulate their value proposition in the marketplace in 30 seconds or less.? I also look for whether management and employees are all in sync on the company?s vision and strategy.? Many companies overlook the creation of a value statement.? I prefer companies that know what they stand for.? Difficult times will face every organization.? Value statements that have real meaning and adoption provide anchors during turbulent times.

Execution

This is one of the hardest things to actually find out in due diligence, but probably the most important.? Here, I am trying to determine whether the management team can actually execute the company?s strategy.? Many people confuse effort and activity with execution.? Successful companies have high functioning teams that execute with purpose and passion to get things done.? I ask questions about how management creates accountability in the organization or look for examples of past execution to try and determine whether the management is execution-oriented.? Other clues to whether a management team can execute is the level of organization, timeliness, and if they are goal oriented.? I like to see clear written goals and action plans.

Products/Markets

People raising money for a company should have a clear command of the marketplace they are competing in and how their products and services stack up against the competition.? Is the company swimming in the ?red ocean? of a very competitive market or the ?blue ocean? of new and untapped markets??? If they are in a very competitive market, then can they clearly articulate why their product/service is differentiated from the competition?? In a new market, how are they pricing their products and gauging the overall market opportunity?? Many companies venture out and find that their market is actually much smaller than they thought. It is helpful if the company?s industry has solid data on size and growth.? High growth companies need large and growing markets to thrive.? I look closely at the price sensitivity of the products/services and the barrier to entry of other people to compete.?? I also prefer recurring revenue companies versus companies that only have one-time sales.? Is the company a one trick pony or is there a pipeline of other products/services?

Management

No matter how good the products and services a company may offer, ultimately the success of a business depends on the quality of the people. ??When you invest in a company, you are really investing in the management team.? Most companies in early funding stages lack a complete management team. I try to determine the strengths and weaknesses of the management group, and I want to understand how they will shore up the deficiencies in the short term and what their long-term plans are for fully staffing the management team. ??Does the management group complement each other or is there too much overlap?? Are any of the founders part of the management that may soon have to be replaced?? Replacing a management team member can be a time consuming distraction for a company.? I prefer managers who have experienced both success and failure.? We all know we learn more from our mistakes than our successes.? I would prefer that a management team not learn their failure lessons with my investment.? Great managers are great leaders.?? They are high performers and can attract top talent.? I have found that the best leaders are great coaches and know how to get the most from their employees.?? You want to avoid know-it-all?s and micro-managers because they will ultimately prove to be poor leaders and will run off talented employees.

What is the Exit?

Most investors eventually want their money back out of the company in a reasonable amount of time.? A typical time horizon is 5-7 years.? What are the long terms plans of the company?? Are the founders creating a lifestyle business or a high growth company??? Typically, lifestyle companies will have slower growth but greater profitability.? High growth companies, often referred to as gazelles, usually focus on top line revenue growth.? These companies will typically lose money at first.? I look carefully at the ?burn rate? of these type companies and want to understand when profitability will occur.? It is critically important that the owners and management all be in sync on the trajectory of the company and the goals for exit.

The Deal

Ultimately, the opportunity to own part of the company must be for the right price tag. ?All pro-formas tend to look alike with slow growth in the early years and then the proverbial ?hockey-stick?? high growth in the later years.? The investment and corresponding ownership should be reasonable based on very conservative financial projections. There are also a number of ways to creatively structure a deal to provide additional risk mitigation for investors.? In addition, the legal terms and conditions of the corporate documents you will be signing are a major factor to consider.? Structuring the financial deal and key terms and conditions will be explored in more detail in a future column.

While this is an abbreviated list of due diligence considerations when vetting investment opportunities, hopefully it will provide you a framework to begin to consider future investment deals.? For an easy checklist summarizing these points and others, feel free to email me, and I will send you a copy.?? Good luck in your investment future!

22 Feb 2016

Sticky Post By overseer Posted in Business, Business Development, Managing Your Business, Motivation and Encouragement Permalink

GETTING THE EDGE

Sticky Post By overseer On February 22, 2016

Did you get skip that workout you planned to do today or indulge a little extra at that meal last night?

Did you opt to put off that important customer feedback project that you had been planning to launch?

These are just a few of the many minor decisions we make everyday in our lives and business, and they usually don?t have immediate consequences.? If I choose to skip my exercise today, there probably is not a significant effect on my health.? If I skip the entire week, I am probably just fine. In fact, if I skip a whole month of exercise, there is probably not a consequence except that my pants may fit a little tighter. However, in time, the daily decision to not exercise will catch up with me.? It may be years down the road, but my decisions regarding my health habits will have a compounding effect on my life ? either for better or worse.? My point is not to create guilt or motivate exercise fanatics, but to simply point out an important concept that relates directly to our success in business: we are the sum of decisions.

It has been said that if you want to understand where you are today, then you should examine your daily habits in the past.

If you want to understand your future, then you should examine what your daily habits are today.

These principles apply in our businesses as well as in our personal lives. We are always trying to get a leg up on our competition.? We read books, go to seminars, learn knew skills, work harder and faster ? all to try and inch out our competition in an ultra-competitive global marketplace.?? These are all important parts of building a successful business. ?For entrepreneurs desiring to build successful companies, there is another key ingredient that is often overlooked ? the ?Slight Edge.” ?Jeff Olson, in his book The Slight Edge, points out that the keys to your personal and business success are the things you do every single day, the things that don?t look dramatic or like they matter.? He argues that the little daily decisions not only make a difference ? they make all the difference.? The Slight Edge is simply a commitment to making the right choices day in and day out in your life and business.? It is a philosophy that helps us understand that we make decisions knowing that the results are long term.? We know that in time, if we make the right choices, our lives and businesses will be better off.

Most of us have seen the chart that shows us that if we start investing a few dollars in our early twenties and stick with it, then we will retire with lots of money.? These charts, which are often used by financial planners, illustrate the powerful principle of compound interest. When you look at the chart, it appears that you are making great progress for a number of years, but over time, the true power of compounding becomes evident.? For entrepreneurs, the key is to begin making good daily choices with your time and priorities early. Don?t let everyday distractions deter you away from doing the rights things for your business.? I often see companies ignore basic corporate housekeeping and other similar non-revenue producing activities in order to deal with urgent, but usually unimportant, issues.? While there is no immediate consequence to your business for skipping over these often seemingly mundane details, they can have long term consequences.? Often, when a company gets ready to sell or raise money and the microscope is turned on their business through due diligence, the compounding effect of poor habits in these areas truly come to light.

Most ?overnight? success stories are actually the result of years of hard work and effort.

We became spoiled in the dot-com era of companies starting up and then selling out for millions.? We need to be reminded that companies such as Starbucks, which has over 13,000+ stores in 39 countries, only had 165 stores after being in business 21 years.? The Slight Edge is no ?get-rich-quick? scheme. It is an invaluable philosophy to apply in your business to develop positive daily habits which will help maximize its potential to become a fast growth venture.

19 Feb 2016

Sticky Post By overseer Posted in Business Development, Entrepreneurship, Structuring Your Business Permalink

OFFENSIVE STRATEGIES DURING DIFFICULT TIMES

Sticky Post By overseer On February 19, 2016

It has been said, ?necessity is the mother of all invention.?

Likewise, a?recession and layoffs can?prompt many people to consider the path of entrepreneurship.? A recent report by the Kauffman Foundation, a leading entrepreneurial think tank, validates this trend.? The report showed that approximately 530,000 businesses per month were created last year compared to approximately 519,000 per month in 2007.? Notably, the formation of high potential income new businesses was down compared to low and middle-income potential businesses which were up. This trend indicates that many of the new businesses were probably formed out of necessity.

There is a myth that entrepreneurship is only for those with a high tolerance for risk.?

The truth is that successful startups are founded by people from all ages and backgrounds with a passion to bring their goods and/or service to the market and who effectively manage risk in changing environments.?

Whether you are exploring a career shift to being an entrepreneur or your business is trying to consider how to weather this storm, I have listed below some of the ways savvy individuals and companies are capitalizing on the state of the current economy:

Offer More for Less.? Most businesses are trying to stay competitive in a difficult economy utilizing less. Often with fewer people and less budget, managers are being challenged to squeeze increased productivity out of their limited resources. If your value proposition allows your target customer to do more with less, then you will always have a market.
Find Your Treasure in Another Person?s Trash.? Many businesses are buying up fixtures and supplies at a fraction of the cost from companies that are downsizing or closing their doors.? Similarly, proactive entrepreneurs are buying up distressed real estate, businesses, bank loans, and even whole banks at incredible bargains.?? These are people who don?t adopt a doom and gloom mentality but think clearly in times of difficulty and make sound long term investments.
Go on the Offense When Your Competition is on the Defense.?? As companies are pulling back their spending and hunkering down, customer service, marketing, and? product development often suffers.? This is a golden opportunity to go on the offense to grow your market-share. As big companies have frozen their R&D budgets, now is the time to bring your innovations to market.? Also, many companies are re-evaluating their supplier relationships to find cost savings. Again, this allows you to step in and offer ?more for less?.??? As one entrepreneur stated ?the hungriest wolves hunt best.??? This is the time to be on the hunt, not playing defense.
Go Fishing for Talent.? Whether you are looking for full time employees or part time contractors, now is the time to find talent at reasonable rates.?? Big companies are not just laying off their poor performers, many are laying off some of their best and brightest people as whole divisions are being forced to close.? This is a great time to strengthen your organization by attracting top talent to join your team.??? Don?t get caught up trying to make everyone a fulltime employee. Skillful entrepreneurs know the value in ?renting? mind share from the best and brightest people.
Show Me the Money.? Even though bank financing is still a scarcity, you may discover that finding investors is an available option for your business.? Since most real estate and stocks are not attractive alternatives right now, there is a tremendous amount of cash waiting to be deployed.? I am finding that the right deals are still being funded by those wanting to deploy cash in ?real? businesses.

I don?t discount at all the pain and hardship that many people are enduring as a result of an?economic meltdown.? However, I want to encourage those who seek to find opportunity out of difficult circumstances.? Those with a ?glass half full? mindset may find that even career and business decisions driven out of necessity may turn out to be tremendous blessings in the long run if strategic thought and action is properly applied.

17 Feb 2016

Sticky Post By overseer Posted in Business Development, Entrepreneurship, Lean Startup Permalink

BUILDING A FAST GROWTH COMPANY

Sticky Post By overseer On February 17, 2016

Recent research funded by the Kauffman Foundation tells us that over 440,000 Americans are starting businesses every month.

Most of these businesses are sole proprietorships or small firm ventures ? the type of companies that make up the backbone of our economy.? However, some of these new businesses have the potential to experience rapid expansion and become breakout growth companies.? These types of fast growth companies, often called gazelles, certainly succeed against the odds. Verne Harnish, author of the book Mastering the Rockefeller Habits, notes that there are 23 million firms in the United States and that only about 4 percent ever get above $1 million in revenue.? Of those, only 10 percent ever make it to $10 million revenue (0.4 percent of the total).

These stats lead me to ask the question ? what does it take to become a successful fast growth venture?

Uncovering the Principles of Success

I am fascinated with the art and science of how companies with dreams and desires to become fast growth ventures can successfully achieve their goals. For years, venture capital firms have struggled to locate the next big thing; however, we know that out of any portfolio there will likely be far more losers than winners. While that success rate may ultimately work out for the VC firms and their investors, those failures are not good outcomes for the dedicated men and women working in those businesses. Thankfully, recent research is starting to shed more light on how to increase the odds of success for fast growth enterprises. While there is no silver bullet, there are principles that can be applied to help businesses increase their chances of success.

Thinking ?On? Your Business

In this article, I will focus on one of the core principles for turning businesses into gazelles ? methodically sizing up your business. Management teams need to periodically and methodically stop and honestly size up their business. For most leaders, the path from startup to creating a stable business is a whirlwind of activity. I rarely see owners/management in this stage that routinely take stock of where they are in their business. Most business plans, if there ever were any, are usually collecting dust on shelves.? When you are in survival mode, it is understandable that taking time for seemingly theoretical concepts such as planning, analysis, and goal setting seem like a luxury. However, to help take the business to the next level, leaders need to begin the disciplined habit of critical analysis and planning.

Clarity

While the type of analysis will vary depending on the business and industry, the benefit of this principle is the same ? management should come away with a clear vision of the company?s strengths, weaknesses, market position, and where opportunities for growth may be available. For the owner, this is often also a chance to reflect and make sure the business is meeting his or her personal goals for being an entrepreneur. The key is to come away from the process with clarity.? This clarity will help focus the efforts of the team to propel the company forward. Without this clarity, the sheer volume of decisions, challenges, and opportunities can be overwhelming.

Planning For Success

In the late 1990?s, I had a unique opportunity to participate in a venture backed dot.com in Silicon Valley. While the dot.com ultimately failed, like many others at that time, the experience was memorable and invaluable training for working with fast growth entrepreneurs.

I was fortunate to meet many successful entrepreneurs during this period and was struck by their focused vision and execution. Almost every one of these individuals had a disciplined practice of methodically evaluating their business. In addition to these anecdotal observations, this principle of planning is backed by leading research which tells us that it plays an integral role in helping businesses achieve their full potential.

08 Feb 2016

Sticky Post By overseer Posted in Business Development, Entrepreneurship, Lean Startup, Managing Your Business Permalink

HOW TO VETT YOUR NEXT BUSINESS IDEA

Sticky Post By overseer On February 8, 2016

Entrepreneurs are people with big dreams and ambitious goals. They pour their time, energy, and resources into their business ventures in hopes of success. Unfortunately, the odds are stacked against most of them reaching their destination. Statistically, we know that most will fail within the first five years.? However, there are some people who defy the odds and somehow achieve success as serial entrepreneurs.?? Are some people just born with the Midas touch?? What is it that people like Sir Richard Branson, founder of the Virgin Group, Ltd, have that gives them the ability to repeatedly strike gold in the cut-throat marketplace?

While there is no one magic bullet, there do appear to be some consistent themes.? One quality worth noting is the ability to critically vet business ideas to make sure the new venture has a fighting chance.? This takes rigorous analysis and the ability to honestly and objectively review the idea and the entrepreneur?s own ability to execute.

Clark Love, a native Mississippian, has achieved the goal that most entrepreneurs only dream about ? he has successfully started a business, grown it, and sold out to a larger company. Love, a graduate of Ole Miss and Northwestern?s Kellogg School of Management, started Forest One, Inc. (later renamed Lanworth, Inc.) in 2000 at the age of 28.? Lanworth is an information technology company providing consulting services, applications development, and software to the forest products, environmental, and land management industries.? Love originally founded Lanworth with his college friend Dr. Henry Jones and grew the company to be a multi-million dollar enterprise with the main offices being in Jackson and Chicago.? In 2007, The Westervelt Company acquired Lanworth.

While Love achieved his goals for Lanworth, he has not remained idle.? His entrepreneurial drive has already rekindled as he in the process of launching several new ventures. Love?s analytical training as an engineer in college, his experience as a consultant with Accenture, and his ?real world? experience with Lanworth and other startups has allowed him to develop a framework for analyzing new business opportunities.? His checklist for a new business venture includes the following requirements:

Have a Cause

The product or service offered by the business should move people. ?Love added, ?It doesn?t need to move everyone, just the segment of customers I plan to go after and the people I will hire.? You want a business people will put their hearts and soul into.?

Know Your First 3 Customer?s By Name

An entrepreneur should know by name the first 3 customers for the product or services the business will offer.?? Many people have ideas about what will work in the marketplace yet they have never actually vetted the idea with a potential customer.? You need to know if anyone will actually buy your product or pay for your service.

Build a Recurring Revenue Model

A large majority of the revenue should be recurring so the business does not have to start from scratch each year.? Having a solid financial base of recurring revenue allows for more growth opportunities.

Be Passionate about Your Industry and Customers

Love noted, ?Starting a company is incredibly hard, harder than most people realize.? Pay and economic reward are not enough ? you really need to have a passion for the business and serve customers that you actually care about.?? This passion serves as the ?pull through? that helps you get through the difficult times as an entrepreneur.

This checklist can serve as a useful tool in analyzing any new business opportunity.?? I believe that serial entrepreneurs like Clark Love will play an integral part in Mississippi?s future in creating jobs and opportunities for Mississippians.? Hopefully, we can collectively make Mississippi, Tennessee, and the Mid-South attractive places for entrepreneurs to invest their passion and energy into creating world class businesses.