Small Business Ideas For…

I saw this keyphrase in doing some search engine / marketing research and having worked with hundreds of small business owners, wanted to give some hidden, less-known, and business-killing-if-ignored guidance.

The fact you’re reading this is great: Read why you *must* start a business here.

While SwiftCloud is hardly any grand slam yet (i.e. $10Mil+ in my pocket is my benchmark and expectation), it’s a solid lifestyle business and more importantly, we’ve worked with several hundred businesses over the last few years, and have seen both successes and failures – and learned some patterns you can adopt from the winners, as well as my own digesting of 100+ of the best business books including MBA studies.

First, the most common mistake I’ve ever seen:

Mistake # 1: Starting with the product, instead of starting with the buyers, i.e. the flow of money. 

If you want money, start by talking to people who have money and want to spend it on your service or product. Most people are in the Nike school of business: Just Do It, which is a major reason the failure rate of new businesses is over 50% in the first year – they jump in, without a real and solid plan on how they’ll get customers. Most businesses fail because not because they have a product – but because they don’t have enough buyers. Get 50,000 shoe buyers and you’re probably guaranteed to earn a profit. Get 50,000 pairs of shoes and you might just have a very full garage.

This doesn’t have to be some big formal expensive study, but don’t talk yourself into what you want to be true. Most people get excited and jump in – that’s great, but make the sales and marketing more of a priority than the product itself at first. Find ways to get pre-orders, sell gift certificates. All your friends will tell you “that’s great! love it! Sunshine and rainbows!”, but the moment you ask them to actually buy, pull out a credit card – many will start the stories, reasons… and the real truth. If they actually hand you their credit card or cash and agree on a delivery date, and it’s profitable to fulfill – you’re in business, IF you can get strangers to do the same thing.

Start Marketing immediately, even before you have a product, office, store, etc. Most humans are busy creatures of habit and self interest and frankly don’t care about you or your goals. To stick into their minds as the provider of choice for your service/product requires a brand – impressions and marketing.

Tip: In 99% of cases, if you decided to start the business today, you have at a minimum a few months of work ahead of you, setting up the brand, location, office or store or website, etc.

Mistake #2: Starting while injured.

A lot of people seeking for “Small Business Ideas for…” might have just had a door closed – i.e. laid off or unemployed and simply see it as a logical choice. This contributes to the high failure rate of business. It’s going to be more work and more expensive than you think to get rolling, but momentum is a powerful thing – you get the flywheel spinning, reassign a few hats, and next thing you know you truly can make a great income with freedom and flexibility, and you stop trading your time for money.

If you’re recently unemployed or fired, and are not sitting on $100k+ liquid to drop into your  business, just realize you’re starting with a severe disadvantage. Personally I’d say get back to a day job or get an investor as soon as possible, then when stable, start “setting the table” for your upcoming business – start working part time, and get some money flowing.

Money is the ultimate problem solver in business. If you have lots of money coming in, you can probably solve everything else – but lack of actual incoming orders – paying customers – is a the biggest challenge you’ll face.

Mistake #3: Doing too much yourself

This gets back to why you can’t start weak: You need a team, but partnerships frequently sour. Personally, I am fine with stock options to win staff, but I’ve seen healthy businesses turn sour when partnerships turn bad – it’s like a divorce. For that reason, for better or worse, I’ve always started my own companies alone, then pay up and grow some momentum, then bring on minority shareholders if needed.

That’s just me. Some people swear by partnerships, but be advised, it gets messy.. ranging from secret drug use, affairs with under age employees leading to lawsuits, people who have widely varying work ethics and desires. Like a marriage, they always start with sunshine and roses – but thorns come out over time, especially in bad times, and your baby business can get killed in the crossfire.

Furthermore, business is about hats – you’re going to have to wear a lot of hats out of the gate (sales, accounting, management, operations, etc.) – the sooner you delegate these hats down to your core strengths, the more likely it is your business will succeed. Assembling your team early – before you even launch – is smart and will save you headache.

A good tax professional will save you more than they cost – and so will a marketing expert (like me). Lawyers? It depends – you can setup a business online using places like IncParadise.com or Legal Zoom, but for partnership agreements, you don’t even know what you don’t know. There’s buy-sell agreements, “key man” insurance, a ton of other issues and pitfalls.

But remember: start with the money. Everything is solvable if money is coming in (mostly). Get some money flowing as early as possible before spending thousands on legal fees before you even know there’s a real business.

Hidden Mistake #4: Not Creating a “Flywheel” – a repeatable, systematic method for getting customers and clients.

There are a couple key goals of a business:

  1. Create a profit-generation machine wherein for every $100 you spend, you get back $200 – i.e. a profitable method of acquiring clients.
  2. Giving away all the “hats” (roles to fill) as the business grows. You win when you have created a *profitable* business, and given all the hats away. At that time, you have effectively, a cash machine – it spits out cash to you even when you’re not working. This is also the type of business someone else wants to buy.

In the excellent book “Good to Great”, Jim Collins talks about a flywheel metaphor, which is a repeatable process that on each spin, yields profit and growth. Once  built, and you have a proven system, you simply need to spin the flywheel faster and faster.

Most small businesses never truly build a flywheel. They are essentially a “practice” – founder-driven, based on the founder’s “book of business” i.e. people who know, like and trust her or him. If the founder dies or quits, the business is dead.

That’s not a true business in my opinion. It’s a job. It might be an excellent job that pays millions per year, but it’s still a job. The neighborhood plumber, auto mechanic, insurance guy – these are usually “practices”, and prone to disruption.

Mistake #5: Not leveraging experts.

Experts will point out hidden value. None of us know what we don’t know. We have things we know that we don’t know, but that’s where experts and consultants come into play.

A business financing expert may be able to show you how to buy a business using, say, “factoring” (receivables financing) to raise capital to cover a short term bridge loan (home equity line of credit, for example) combined with seller financing for very little out of pocket.

A marketing expert might save you $30,000 on cost of customer acquisition based on a $500 consultation.

Your vendors might give you 90 day terms on goods you collect for up front, putting an extra $100,000 short-term-cash into play for you.

The help is out there if you ask, and the cost of hiring a professional is usually more than offset by the money they save you.

What’s next?

I realize I didn’t actually give you any small business ideas for whoever you are, but guidelines for success. The ideas are all around you if you watch the flow of money. Simply find the intersection of (1.) something you know a lot about and can delivery, and (2.) that’s profitable, and (3.) you don’t mind doing. You don’t have to love it at first, sometimes that grows out of truly helping people and doing a great job. Frankly, this whole “do what you love” Hallmark idea is a bit trite – nobody starts out wanting to be a janitor, which is why people get paid. Everyone wants to be a movie actor in hollywood, but at any given moment, 99.8% of them are unemployed, and have some other job (i.e. waiter). For many, the love follows helping people in some way, then the business grows, then you get freedom – then sell the business and do it again. Or retire young!

LinkedIn vs. Facebook for Business

I’ve always felt that LinkedIn was a place where everyone wants to talk and promote, but few if any want to actually listen. Does anyone actually go there to find a vendor? To shop? For validation?

The exception is people seeking a job – I think this is a strength for LI.

Don’t get me wrong – I think it’s a powerful prospecting tool, networking tool and reference point if you’re thinking of doing business with a vendor – but does anyone want to consume, shop, read?

For that reason, in the long run, I think Facebook is likely to win over LinkedIn, because it’s engineered for consumption first. Amazon recently announced it is getting into the services business, probably driven first by distribution and a desire to have an Uber* style army of delivery drivers, and to further leverage it’s considerable traffic and attention.

Amazon will succeed in this I think – because it’s a consumption driven brand.

I believe the obvious play for LinkedIn is to develop consumption, but along the lines its users want: build out sites like Service Magic or Thumbtack (for B2C) or refine the expertise side like Quora or StackExchange for B2B.

In general, the internet has matured enough that demand is always far more important supply.

Supply is plentiful and practically infinite for most services and products people want. Shoes? There’s 10,000 websites to sell them to you – and another plethora of sites that show you where to buy them locally.

But shoe buyers? That’s the business of Google, Amazon, and ad networks, with their billion dollar valuations. If you have 10,000 shoe buyers, you’re pretty much guaranteed to make money. If you have 10,000 pairs of shoes, you may be in good shape – or just have a lot of slack inventory. Product is a lot less of a guarantee than demand for most industries.

The business of generating demand isn’t going anywhere, and as more of the planet comes online, will get increasingly valuable. It’ll also get even more competitive, more polarized, with fewer big winners and millions of also-rans.

Fortunately, demand can be actively created.

3 Most Important Lessons in Internet Security

In the world of a dot-com startup, security is an easy thing to push to tomorrow.

Don’t get me wrong – we all know it’s important. But it’s rarely important AND urgent.

Until, of course, you’re reminded by the hackers.

Lesson 1: Schedule Security, or the hackers will schedule it for you.

Recently, due to *human* failure, one of our exterior-only (not core systems) was hacked, for simple commercial malware intent. Fortunately, losses were minimal, and he/she was not able to create a “back door”, and we know this was a reasonably inexperienced hacker, because he/she left a lot of “tracks” – the good ones immediately hide most of the evidence of their intrusion. He or she simply wanted to embed virus-installing malware links, which was removed within minutes. Nothing serious (no client data, no credit cards, etc.) was compromised – but it was a good reminder.

Lesson 2:  All hacks are either (1.) Opportunistic or (2.) Targeted

The opportunistic ones are fairly easy to deal with: Simply be a harder target than the next guy. As your e-business grows, and you have greater traffic, Google Pagerank (an unofficial semi-used indicator of SEO value) then the opportunistic attackers have greater reason to go after you. The opportunistic ones usually just want eyeballs to spam-ads, clicks to virus or malware, or hard drive space for as cheap and fast as possible.

The vast majority of hackers (99%) on the web are after simple things  – space in which to host malicious code, SMTP servers to spam from, zombie machines to swarm into a DDOS (Distributed Denial of Service attack), etc.

Much more scary are the targeted attacks.

Truly locking out 100% of targeted attacks is very, very difficult. Easier is making the cost and difficulty to hack you exceed the perceived or actual value of intrusion. Even major banks, the NSA and CIA, and internet security companies like Norton or Kapersky get hacked, often because a human dropped the ball more than code failure, but both happen. As SwiftCloud (company I founded) grows in scale / scope / perceived data value, I know it becomes a bigger target, and eventually, a hole will get found.

So for that, you’re left with the final major lesson:

3. Layer your castle walls

Internet security also includes human practices – the White House website was (maybe still is) written to a DVD-rom, then every 5 minutes uploaded to the live web server, so if anyone hacked it, their hack would live for a maximum of 5 minutes. This is fine for simple read-only sites, but impractical for today’s dynamic database-driven interactive sites, though it’s a useful lesson regardless. Keep backups and assume one day you will get hacked and everything wiped out. Recently we had a datacenter go down, and then the backup generator failed, and then the load balancer failed, causing a client’s mission-critical site to go down [note: this has since been revised, fixed, tested]. Assume the worst will happen, and restrict access to those who need it only, even if you trust them implicitly.

In our hack above, one of our employees was hacked, and the hacker then used that info to simply “walk in the front door”. Fortunately, we had restricted access enough it was just a lesson, instead of major cleanup or a reputation-killing public disclosure. In this case, the exterior site was isolated from the more crucial interior site, and the access was to a single domain, single database on a single server – I’m definitely not saying this to brag, I’m pointing out that security can and should be engineered in from day one. Tripwire and other security code is awesome – but it’s just one defensive tool of many.

Offensive plays make headlines, but require a solid defense to win.

Imaginary Advisory Board

This is my version of fantasy football – an imaginary advisory board.

It all started with from carefully studying the work of Ash Maurya, of whom I’m a big fan but don’t actually know in person (yet). I’ve read his book (some of it 2x – re-reading parts to dwell on it, make notes, think about application…). A problem would come up, and I’d ask myself “What would Ash Maurya tell me to do?”

Then it happened again with Nir Eyal’s awesome book “Hooked“.

So these guys – and others below – go hiking with me all the time, or hang out and cook dinner with me, thanks to Audible.com & Podcasts. Yeah, I’m sure Peter Thiel would be thrilled to know he’s on moonlit 2am walks with me after working with indian coders for hours. Lame? Sure, go ahead and judge, but that’s the influence I want, you can have your Jason Derulo. This is my fantasy football team, but more useful – I follow ’em, implement ideas, and ask myself what they’d advise me to do.

So, here’s a standing list of people welcome to my home in Los Angeles anytime for coffee / beer / dinner.

  • Jason Lemkin // via YouTube mostly and Mark Suster re: the big picture / $$ growth
  • Neil Patel & Noah Kagen re: growing eyeballs, with a tip o’ the hat to GrowthHacker.TV – but per Sean Ellis, until 40% of your clients would substantially miss your app, don’t bother too much with this – focus on the product. So, for that, focus on…
  • Ash Maurya & Eric Ries, who I found via Sean Ellis – this is the Bible (Quran? Torah?) for the first phase – where I’m at now.
  • Samuel Hulick, the onboarding master. This is the next big focus for us.
  • Nir Eyal at making a product sticky
  • Once you have a kickass product that truly delivers value, and it’s not leaking, it’s time to turn on the firehose: Start with http://tractionbook.com/
  • Tim Ferriss on active lifestyle design