Marketing is the voice for your products.  It’s the tool for creating conversation with everyone you need to talk to, from prospective customers to existing customers, partners, investors and everyone else.

Just like any conversation, there are things you should and shouldn’t do.  When talking to someone, you wouldn’t normally poke them in the eye, act like a crazy person or insult their intelligence. And generally it’s not wise to do that with your marketing either.

But as someone way smarter than me once pointed out, no matter where you are of what kind of conversation you are having, there are three frequently overlooked components.

1.    What you mean
2.    What you say
3.    What people actually hear

You’d be shocked at how utterly disconnected #3 can be from where you started.

For example (all inspired by personal experience)…

1.    You mean:  “Everyone needs to pull together and get this done”
2.    You say:  “The project’s behind.  We need to get back on track”
3.    They hear: “You’re not pulling your weight – I’m doing everything and YOU are slacking off”.

1.    You mean: “The product will ship sometime between May and June 2009”
2.    You say:  “The product will ship in Q2, 2009”
3.    They hear: “The product will ship in April, 2009”

1.    You mean: “This product will make your life way easier and do all kinds of things to simplify your life”
2.    You say: “Our extensive suite of Business Intelligence tools will provide insight into your KPIs (key performance indicators) and improve operational efficiency within your organization”
3.    They hear: “This tool is expensive and may or may not help your business”

What you mean to say is seemingly the easiest – you know you, right?  So when you start to craft a marketing message, think about what you are really trying to say and write it all down. For example:

We really believe this product is great for you and we want you to buy it.  It has a ton of features that will really make your life simpler and easier.

What you say is much trickier because at that point you are no longer talking to yourself.  When you’re talking to any kind of customer, they will have their own view of the world and a matching vocabulary.

For example, one of my clients makes a tool related to expense tracking.  In their messaging they talked about simplifying expense reports.  Seems obvious and intuitive, right?  However, their typical customer is the owner of a very small business.  That’s not someone who thinks about expense reports – for them it’s simply book-keeping.  Expense reports are really the domain of bigger companies.  The net result was that the typical customer read the messaging and heard “our tool is for bigger companies and you can’t afford it”.

Now the difference between “expense tracking” and “expense report” is extremely small.  But in the mind of the customer it’s the difference between “sounds good” and “not for me”.

Another company I recently talked to makes a financial modeling tool.  It’s pretty simple and of great value to their customers.  It quickly and easily shows strengths and weaknesses of the business while allowing for some simple “What if?” scenarios e.g. what if I hire one more admin, or one more partner.

The tool is promoted as a financial modeling tool for small medical practices.  Sounds good, except that most small medical practices probably don’t think they need financial modeling.  However, they’d probably get a much better response if they promoted it as a simple tool that provides feedback on employee and partner performance while making it easy to explore the cost and rewards of adding extra staff or partners.

So the next time you’re talking to a customer, partner or investor, take a moment to explore what you mean, what you say and what you think they’ll hear.  And it’s always good to ask them what they heard so you can check that you hit the mark…

Categories: Thoughts 'n Ideas
No Comments »

Cast your mind back to high school math (sorry). Scalars have magnitude e.g. driving at 30mph. Vectors have magnitude and direction e.g. driving at 30 mph due east.

One of my recent consulting gigs has been a constant reminder of how startups can fall in to the trap of treating effort like a scalar quantity, not a vector.

It is incredibly important to be applying effort and running fast in a startup. You want to be traveling at 100 mph all the time. But just as important as speed is direction. Running fast in the wrong direction (or worse, with no direction) is a waste of time, energy and morale.

And when you pick your direction, it is just as important to plan how you’ll get from starting point A to end point B.

A couple of weeks ago, I stumbled across a great visual example of why direction and planning are important. Get direction and plan your route, and hopefully your startup won’t share this truck’s fate…

Yes, a low bridge apparently works like a can-opener on your average truck.

P.s. For the worry-warts out there, other than the truck, no-one was hurt…

Categories: All Business, Thoughts 'n Ideas
No Comments »

While I was at BarCampRDU the other weekend, I got chance to catch up with Dugald Wilson. Dugald holds a special place in my business heart as he was the first person ever to publicly admit to reading the disruptorMonkey blog…

In his blog just before BarCamp, and while I was talking to him in person, he posed an excellent question

I want to start a business that isn’t headed for an IPO or acquisition. Is there a place for me in RTP?

A lot of the energy around new companies in the triangle seems focused on the startup pattern of developing a business plan, finding investors, developing product, heading for an exit event. There doesn’t seem to be a lot of support or resources for folks simply interested in starting their own business outside of that pattern. I’d like to start a discussion on this and hopefully identify the resources that are out there

Having tried to go down both the bootstrapped path as well as the VC path, I have fairly firm opinions about both (imagine that, me with a firm opinion).

First, let’s talk about some fundamental differences between the two approaches. As with many things in life, it’s all about the cash…

Most lifestyle businesses are completely bootstrapped. The company is built on a project by project basis, or maybe with some “friends and family” money or a loan. Everyone expects to get repaid their investment plus a decent chunk of interest, say 15% a year.

Now consider a VC-backed company. VCs have to answer to their investors (called “Limited Partners” or LPs) and they pretty much only make money if their LPs make money. The VC business is very high risk but offers the possibility of large rewards. The only reason a Limited Partner invests in a VC firm is to get those large rewards — there are much lower risk ways to get an okay return on your money.

So when a VC invests in a company, they are doing so on the assumption that the company can deliver a huge return on investment. Ideally, “huge return” means 6X or better. i.e. an investment of $5M needs to return $30M or more to the VC firm. The return has to be that good in order to offset the investments in companies that fail, or simply don’t deliver a good return.

But wait, there’s more. VC’s raise money in chunks, called “funds”. Each fund has a limited lifespan. From first investment to last is usually 5 years or less. The LPs like to get their money within a few years of the last investment.

So not only does the VC need a 6X return, they need it in 8 years or less.

Those of you with calculators or mad Excel skills will have realized that reasonable rates of compound interest are never going to deliver the kind of results you need to get. So you can’t just “borrow” money from a VC and pay it back with interest. Sounds a bit like a loanshark, no?

The only way for the VC to get their money back is to have an “exit event” i.e. the company gets bought or goes public. Going public is tricky (especially now), so acquisitions tend to be more common.

Let’s run some very sloppy numbers that skip a lot of details… A company raises $5M based on a $10M pre-money valuation - i.e. the VC owns ~33% of the company. To get to a 6X return, the company has to be worth $90M when it sells in 8 years or less. Let’s go with a middle ground target of 6 years and assume that it may take a year or so before you start generating any sizeable revenues. If you are in a market where companies are acquired for 8x revenues (many acquisitions are done at 3-6x, so this is generous), your sales will need to MORE THAN DOUBLE EVERY YEAR FOR FOUR YEARS. Now it might be “easy” to go from $500k to $1M in sales in one year, but going from $5M to $10M in 12 months is incredibly hard to do.

So for a VC to want to invest in a company, it has to be a growth company that can have an exit. And to be a growth company that has a big exit, you pretty much have to have the kind of money a VC would invest. In other words, it becomes a self-fulfilling prophecy.
Back to Dugald’s question. High growth companies make for good news & gossip and they get a ton of coverage. Thanks to Google and many others, there’s an aura of glamor that surrounds the idea of the two guys (or gals) making it super big. But for every VC funded startup, there are hundreds of low profile “lifestyle” businesses making good money and just getting on with business.

In my opinion, a healthy entrepreneurial community has a good mix of both types of business. Both should be supported and the existence of both adds value to all.

What’s more, there’s a lot the two types of business can learn from each other. At the end of the day, it’s hard to build a sustainable business and doing it requires that you know who your customer is and how to sell to them. Just because one has more money does not mean it will be run better or smarter.

And there is nothing wrong with a business that makes you happy and pays your bills.

BTW, if you’d like to know more about the inner workings of a VC fund, check out some great recent posts by Fred Wilson of Union Square Ventures here, here and here.

Tags: BarCampRDU
Categories: BarCampRDU 2008, Thoughts 'n Ideas
1 Comment »

Brad Feld is apparently very fond of asking “What do you suck at?”, a topic he’s blogged about on a few different occasions.  I thought I’d make a contribution.

Exhibit A - Pride Comes Before A Fall

Since I now own a house with some land around it (compared to Phoenix) and things can theoretically grow well here, I’ve been trying a feeble hand at growing some veggies.

And that is a pepper I grew all by myself (with some help from my father in law).  I tried growing three plants and only one actually flowered, but it was the Little Pepper That Could.

I was so proud.

Exhibit B - The Suck

One storm and 24 hours of not-paying-attention later…

Doh.  I tried to take a picture of the nasty creepy crawly that was inside my prized pepper, but it just didn’t come out well.  I seriously considered eating the Pepper anyway, but my smarter-than-me wife talked me out of it (thanks!).

So yeah, despite my relatively determined efforts, I really suck at gardening…

Categories: Things I Suck At
No Comments »

Fred Wilson has posted a few times about arrogance & ego. He’s mentioned that some folks find him arrogant, which is far from the impression I get from his blog. What I see is competence derived from experience.

But I’ve noticed in my own career that there are plenty of folks who confuse knowing something from experience with arrogance. When you’ve experienced a problem or set of circumstances before, you’ll have a clear idea of what did or didn’t work last time around. It’s easy for your own “oh, that’s obvious” moment to come across as arrogance…

Some of the blame doubtless lies with me — I’m not known for being tactful when something needs to be said. Generally I err on the side of blunt as it’s how I prefer to be treated. So I might state something as a fact, or simply act based on the information at hand based on prior experience. And that doesn’t sit well with everyone.

But I have three nifty items to keep it under control, one of which has come up a few times lately so I thought I’d share.

Exhibit A: I have a Producer credit on a PS2 Video Game, but…

During my career, I’ve worked on some interesting projects… some of which I am very proud of (an A&E documentary, a Christmas special for ABC Family among others).

I’ve also worked on some total turkeys.

Reminding myself of the latter less-than-impressive projects is a great way to keep perspective.

Oh. The shame.

Yeah… Britney’s Dance Beat. That Britney. Oh boy. In my defense, I was only a producer for the animated cut scenes — the rest of it was not my fault. But still, it’s not something I’m proud of. At least she still had a career back then.

Exhibit B: I have a credit on an album, but…

This one requires a bit more explanation. Back in High School, there was a period when we were “encouraged” to go get an internship at a real job. I couldn’t see the point in getting a real job, especially since (a) I was planning on going to college and (b) I could presumably get a real job at some point in the future. At the time, I was an avid musician, so I called every recording studio in town until I found one that would take me on as an intern. The owners of the studio I worked at were putting together their own album and I ended up doing some audio engineering work on it (very minor stuff like “okay, press record now”). They were gracious enough to give me a credit on the LP when it was released. So I have my name on the sleeve notes of a vinyl LP. And that is incredibly cool.

Unfortunately, the album pretty much sucked. The only reference I could find online gave it a 2 out of 5.

So while they sound neat in principal, both of those trophies are humbling in the ego department

Exhibit C

My third check and balance is my personal favorite: my ever supportive and ever bluntly truthful wife. She does a fantastic job of walking the line between encouragement and realism, telling me like it is when I need to hear it most. And unlike my other two ego checks, I’m always proud to have her with me.

Categories: Live 'n' Learn..., Thoughts 'n Ideas
1 Comment »