Think you need a business plan to have a successful website/web service? The statistics would actually indicate otherwise, as the most successful websites were from people who were able to ship a product out of the door for an audience to start using and then iterate upon.

“Winners Ship”

This is what I keep hearing like a broken record from people who know what it takes to make it work online. Are you worried about having all the features your clients might ever want? You are going about it completely wrong, what you should be doing is focusing on key features that work – and work really well. Beyond adding clutter and delaying your launch, feature bloat can actually detract from whatever primary pain point your service is supposed to alleviate.

Pick the top 3 or so features that are core to your service working and make sure that the value of each feature is incredibly clear so that a user has no doubts at all as to WHY your service exists in the first place. If a customer can’t quickly identify the value in your service then all is lost anyway.

Link > Plan

So if you axe the business plan and try to not over think your new service, how are you supposed to go out and try to acquire funding for your start-up? Y Combinator jokingly says that they value a company by “adding 500k in value for each engineer and subtracting 250k for each MBA” because investors today want to see progress on an idea, not just a bunch of words around how good an idea might be. So what do investors care about these days instead of just a business plan? A link to a (mostly) working product that has a little bit of traction in the marketplace. The cost barrier to entry for a new web service has been lowered to much that investors need to see this level of success before investing because they have the luxury of being more picky.

As entrepreneurs, we can often relate our business passions to that of our lives with a significant other. We put so much effort into things we like to try and see them succeed and grow into something truly amazing. Today I was listening to my iTunes when @MichaelBuble’s song came on ” Just Haven’t Met You Yet” and I couldn’t help but draw the similarities between an entrepreneurs quest to build something amazing and the human desire to find someone you love to spend your life with.

“I promise you kid, I give so much more than I get”

Starting a business isn’t easy at all – in fact I can say without a doubt that starting not one, but two businesses so far it has been the most challenging thing in my life. Every time you decide to put yourself on the line financially, emotionally, and mentally you run a huge risk of being hurt, battered and depending on the level of risk you might even feel broken by the end. But what entrepreneurs see is amazing OPPORTUNITY that makes the risk all worth it. If you aren’t this person out of your circle of friends, chances are that you know at least one or two who seem not only willing, but EAGER to do this kind of thing.

But what is incredibly important about entrepreneurs like us is that we are willing to take that risk. No risk, no reward.. this saying has always been true and always will be. I know that I wake up every morning and ask myself “Why am I doing this? Why am I putting all my chips on the table to try and do this?”. But every day I keep working at it because I know deep down I am far from satisfied with the status quo – I want to build something truly amazing.

There is an interesting difference between filling holes and innovation is often the application of the product or service. For instance, the very public issues with the iPhone 4 (which I now own) are ‘magically’ solved by the Apple produced bumper case. The fact that the product solves an issue that shouldn’t even be there in the first place rubs me the wrong way.

Build, Build, Build
In contrast though, there are some real opportunities in similar market categories. For instance I have a burning desire to buy a case for the iPhone 4 that is equipped with a threaded hole compatible with tripod stands.

I also know that I can’t be the only one who has this need because the picture quality on the new handset is equal to a flip cam and mid-level point and shoot camera. So why is there no product on the market? Time & Demand.

Time after a product launch is logical, and eventually goes away. But what about demand? I mentioned that there must be some level of demand for this based on quality, audience and usage. However gauging actual demand for a product is a daunting task and products that don’t fill holes cone with an added level of risk.

So is your product or service filling holes or innovating? If it’s filling holes, how can you more clearly define your value proposition?

By the I wrote this entire post on my new iPhone

When talking with other entrepreneurs, far too many say something along the lines of “we are too small to compete with the big guys”. The general mentality is that the competition is just so large and so strong that there is no logical way for them to fall 2nd place to a hungry and innovative start-up. As evidenced by the banking crisis and others, being “too big to fail” is certainly far from the truth as the banking system in the United States is on welfare as far as I am concerned.

Think Google just got lucky? When they originally launched there were at least 5 established search engines available on across the web who had saturated market share, and the appearance of being unstoppable. Remember Altavista? The reason that Google is dominating the market right now wasn’t because of some mysterious series of windfalls, but rather BECAUSE they were small.

How can being small be an advantage?

Being a small and “hungry” company gives you the advantage of compounding innovation. Think about how long it takes these giant companies to roll out any meaningful changes, shifts in policy or new products. By being a small company you are able to test your product in a more meaningful way, produce useful changes at a speed that very few companies have the opportunity to do. This pace of innovation over time can show a drastic difference between the quality of a product (especially in software) over even 6 months time.

So as Steve Jobs says “stay hungry, stay foolish” but most importantly use your unique ability to compound innovation against the big guys and stop thinking that being small is a downfall. The process of building something is what should be getting you excited to get up in the morning, and what will ultimately lead you to the success you are after.

As entrepreneurs we are often blinded by the enthusiasm behind our ideas, our passions and our drive to make it all come together. This thought process is made even less logical when you have tasted success in the past, but now must face the reality of a shifting market, a down economy and a business that is bleeding cash. I recently had a prospective client come to me who was in dire straights; her business had once been pretty profitable but is now dumping money left and right. This prospective client came to me because she had no web presence at all and her retail store has been losing money for over a year.

Her biggest question was “How do we capture users through the internet to grow my business?”. The sad answer to this was that in her particular category the margins were low (in dollars, but but high in percentage) and depended on high volume to make sense financially. As I looked through Google search volume in her appropriate keyword set it became apparent that the reason her retail store was dying off wasn’t just do to this area, but in fact the entire market has shifted away from her category. The only real way she would have had a chance right now is if she had been a first mover to shift towards the web and become an authority for her sector. Unfortunately now though, her sector is saturated, dying and EXTREMELY competitive; the numbers just simply don’t make sense anymore.

Her passion is admirable, and her work ethic is on par with what is needed to run a profitable business; however fire and hunger are simply not enough to make an unworthy market sector work. So as entrepreneurs, what have you done to create a separation from your idea to make the most logical and reasonable decisions about staying in business or not? The best entrepreneurs are the ones who have failed the most, but also known when to cut their loses and move on to a new idea.

Yesterday I talked about the number of “moving parts” that a business may have can be a huge turn off to investors. So what exactly does it mean to have a lot of moving parts in your business? Well to put it simply, moving parts can be related to a chain; this is because each “part” of your business that is required in order to create revenue or work, then each chance you have for less than expected results to occur. When this happens, much like a chain the weakest link can be your undoing and ultimately lead to business failure.

Business is a lot like logical reasoning, the most simplistic answer is usually the right one so do your best to create simplistic value that everyone can understand. For example, instead of trying to be “The new Digg + Yahoo – Flickr with Facebook Intergration” just try to do one simple thing, but do it EXTREMELY well. Examples of this streamlined business example could be things such as Groupon. This start-up company does one thing (creates group initiated coupons), but does it so well that is essentially printing money for its investors that is has snatched up a staggering 1.35 BILLION dollar valuation only months after launch. It is now on a war path to acquire other businesses and disrupt the entire coupon market.

Keep in mind that Twitter recently received a 1 Billion dollar valuation after being in business since 2006, and while the idea behind Twitter is simple, the revenue model is still being defined. Given that, a key to success for a simple business is a model where only a few functions take place, but they make sense financially for everyone involved. If you were to list all the features of your tech related start-up, how long would that feature list be? 10? 20? 50? History has shown us that business with less than 10, and closer to 5 are the ones who have the highest chances to succeed.

So what about the times when you just need an extra cash injection to beat your competitors to market, secure a new technology or push through new patents to give your business some protection moving forward? Unless you have a rock star team that has a proven success record, you likely aren’t going to be pitching to Venture Capitalists, instead you will find yourself face to face with Angel investment groups.

Let’s understand the difference between a Venture Capitalist (VC) and an Angel Investment. These are general references, obviously each case can vary, and please seek the advice of a lawyer before making any large decisions regarding your business and funding.

VC’s

Venture Capitalists are usually the most aggressive investors in the industry. Your company often times needs to have noteworthy revenues that are consistent, and a valuation of several million dollars before you get their attention. They usually look for:

• Investments of at least $100k or more
• Want 51% control of your company minimum
• 10x return on their investment within 5 years.

Angels

Angel Investors are much more common in the technology world. These investors typically really believe in the business idea and while they often invest less per business than a VC they make more frequent investments for a diverse portfolio. The type of landscape that Angels look for include:

• $5k – $75k investment range
• 3x-5x return on their investment over the course of ~ 3 years
• Less control of your company (20-30%), they want a say but not control

As a likely technology based start-up company to be reading this post, you probably have a pretty low overhead and are seeking Angel investment over VC capital. As you approach these investors make sure that you tailor your pitch to their appropriate interests. This is very important because these investors see thousands of pitches, so get to the point and assess interest levels.

1. Be clear about how much money you are asking for
2. What you expect the average return to be for the investor
3. Time to payout (Are we talking 2 years? 5 years? 10 years?)
4. Start with low control (20%) but make sure the numbers are reasonable

What should you specifically avoid in your pitch?

1. Don’t use a “top down approach”. EVERYONE says they only need 1% of the market to be rich, use a tangible metric like “if we have 3,000 users X $5 margin per user, we will have $15,000 of gross margin”.
2. What is the competitive landscape? You have competition regardless of how “innovative” your product or service is, it may just not be direct. What could customers be buying instead of what you offer? Note it and take it seriously.
3. How moving parts are their to your business? The KISS mentality is what investors want to see. Each new component that your business involves is another chance for a less than optimal outcome, and an overall decrease in your chances for success.

Those fundamentals are well understood by Jessica Kim who is the magician behind the curtain for BabbaCo baby products. You may be wondering why a typically technolog oriented blog is talking about baby products, and the answer is simple 1. The market in which you want to develop yourself has absolutely no bearing, the fundamentals are the same, and 2. Jessica Kim is an incredibly bright, outgoing individual who had her first taste of tangible success while in college.

Jessicas Wonders

As mentioned above, Jessica had already been able to check a genuine success off her list of to do’s by the time she generated market interest, investment and revenues around her first company called ‘Jessicas Wonders‘. This baked goods company had been her project from a dorm room her Sophomore year (at Brown no less) and generated a respectable $1 million by her senior year in seed capital. She was ultimately able to grow the business to $3 million, but the important part of Jessicas Wonders was that she finally understood not only what it took to create success but more importantly understood what it took to be happy with what she does on a day to day basis. This excitement and energy for life (which even over the phone is contagious) wouldn’t be contained for long and so began her new venture.. BabbaCo.

BabbaCo

As Jessica progressed with her life and with her family, the entrepreneur in her DNA started to itch with all the new opportunities and challenges that are associated with being a new parent. As she started to look at available solutions, it was obvious that there were practical needs for new products but the type of customer who buys the products also looks for a particular type of style that fits into their lifestyle and identity. So she started to create products that, much like their website, utilize crisp design and functionality to deliver product value few vendors are able to do in her space.

The creativity that is represented in her products, is only matched by the outgoing nature of her personality. If you don’t believe that after looking at her website, consider that she is now working with Gary Vaynerchuk the author of “Crush It!” because she was able to captivate his passion for personal brands and is now taking on clients through Vayner Media and I think that partnership is going to build Babba Co into a near unstoppable force in their market. In the next few years you can count on Jessica Kim to be the authority for baby products not only through her own company… but for the entire industry.

What it takes

So Jessica made it in baked goods, and now has a strong partnership in the baby product industry.. but how can I apply this to what I am doing, how can I expect to have the opportunity to sit down with Gary Vaynerchuk and be outgoing enough to get his attention and make him interested in what I am doing? The reality is that no matter what industry you are in, or who you think will help you facilitate what you are doing you need to remember a few key points:

• Be genuine. We live in an age that doing something negative or shady will always come back to bite you. Own who you are and what you are trying to accomplish and your audience will start to assemble itself.
• Have a vision. If you simply want to copy and clone people who have reached success in everything they have done, it may produce short term returns. However, only those who can think creatively see real success.
• Work your ass off. Nothing in life is free, but this actually a good thing for those willing to put in the effort. As Seth Godin describes in his book ‘The Dip”, those barriers to entry are your friend because it is what separates the leaders from the consumers. Put in the effort, stick to your passion, innovate and successful will soon follow.

What is your passion, what are you doing to make the big picture come together and what roadblocks are you running into? Let me know in the comments or on Twitter! Today is day 1 of your new success story.

It always amazes me how the simplest things can mean the difference between running a successful business, or running one into the ground. You would think that it is a common understanding for people to follow through with their promises in order to keep their customers happy. Aside from huge firms that can “afford” to lose the business of some clients, a startup or otherwise entrepreneur needs to make it their job to stick with the follow through.

Why is this such a crucial skill to have when building your business/brand? During the initial stages of your business, your clients will pick you almost entirely based on their relationship with you; this means that any misstep reflects poorly on your organization even if it appears to only be something small. Forget to call that customer back on time? Did that extra quote or minor tweak slip your mind? That may effect your ability to reinvest in your company so that you could grow and get the extra help that you need.

So we all forget things, and we have all procrastinated at some point. How do you get around this and make sure that clients you have worked to get in the frist place, remain loyal and build a lasting relationship with you?

Engagement

This could easily be a fulltime job depending on how much effort you wanted to put into it, and how lengthy each response would be. However, this is always the most rewarding experience for potential and current customers when establishing yourself/your new business; especially with your online presence.

By taking the time to respond to questions on Twitter, company forums, e-mails and comments on company blogs you will be establishing the perception of attention to detail. These factors are sometimes hard to quantify for clients but will make them more at ease with choosing you for their business. Your level of engagement also can sometimes offset a price war between you and the competition. The same old business rules apply, you build your business on relationships plain and simple.

Objectives

When bidding on a project, or working with clients on new projects make sure that you help define clear objectives and timelines for completion. Don’t be shy to ask your client for some effort in accomplishing the task because they have a sincere interest in seeing the project come to fruition as much as you do. Your motivation is getting paid, and theirs is to build something useful for their business (equity, software, utilities… anything). Establishing these objectives not only helps keep the economic structure of the project in check but will allow for your relationship to shift if any previous unknown variables arise.

Calendars

If you don’t use a digital calendar then you are doing something terribly wrong. This is true because you either a) are not busy enough to need one {unrealistic if you are going to stay in business} or b) you ARE busy, but are just missing things that don’t seem important but are ultimately damaging your relationships with clients. I am sure you already have a gmail account, and if you don’t… go get one RIGHT NOW. The calendar is free, easy to use and has alarms with to-do’s to keep you on track!

Attitude

In the Tech industry, it is common place to say “what did you do to break it?” when a customer has a machine that isn’t not operating correctly. While it is true that often times it is a PEBKAC or (problem exists between keyboard and chair), it is important to realize that these customers are the very reason you have a job. Instead of patronizing them for whatever they may have done, you need to take a genuine service approach, “feel” for their problem and offer a satisfied resolution for their needs. This is what will keep them coming back, paying more and referring you to their friends.

Follow Up

Haven’t heard from a customer in a while? How about trying to re-engage them to make sure they are still satisfied with the service you last provided. This will not only keep you in their top of the mind awareness but it will help resolve any potential issues that the customer may have felt were bad enough to move along to a new provider/product but not quite bad enough to come and complain about it. Encourage feedback from these users to better your business, keep them as a customer and make sure you giving the highest possible product/service.

This customer centric philosophy is exactly why Amazon paid so much money for Zappos.com not too long ago. It wasn’t necessarily that the company was absolutely crushing their market segment, but rather that they understood their customers came first and the rest would fall into place.

Think big businesses are the only ones able to make serious money in America? Do you think the Fortune 500 companies are too big to fail? Nothing has proven those theories more wrong than the past two years in American business. Big businesses are slow to innovate, have extreme overhead costs as well as a high cost of maintaining their brand image within the marketplace. Not to mention that such a complex organization has so many chances for things to go horribly wrong (from a public relations standpoint), that small business in many cases actually have the upper hand.

While it is true that 50% of small businesses fail within the first year of starting up, your business does not have to just be another statistic. In fact, 2010 may prove to be your best year yet and lead you into prosperous growth and sustainability. So what is going to make this year so much better than the last? There are four main principles, that if followed will make it all come together.

1. Innovation

Easily the biggest advantage that small businesses have over their larger counterparts is the ability to innovate at an incredible speed. When small firms see an opportunity or are able to find something that works they can capitalize on such events much quicker than the larger organizations can due to policies, chain of command etc. If you are a small business who can compound this effect over a period of time, your products and/or services will be so much more advanced than your competitors that a customer would have no logical choice than to choose you.

2. Relationships

Small business lives and dies off of its tightly knit customer base. Customers know this and appreciate it when firms/startups are able to provide stellar customer services that the big guys just don’t care about. Are you an unhappy customer who pays (i.e) Verizon thousands of dollars per year? It is doubtful that such an organization would be able to make any substantial leeway to earn your business. However, take that same amount of revenue in contrast with a small firm and your patronage makes up a much larger percentage of their income… you can bet they will listen.

3. Social Media

Want to get a quick answer to your question about how to get in touch with a representative at a company? Have you tried their Twitter account? Chances are that if you hit up Dell’s Twitter account you will get limited to no responses… Have you tried your local startup? I bet they reply right from their smartphone. Small firms are more connected and foster the warm feelings in which customers need to stay loyal to your business. When customers feel like they are a part of the conversation or movement, they then create an emotional investment within your firm that is not easily transferred.

4. Under Dog

Who do you root for in the SuperBowl? You may put your money on the team who is supposed to win, but most people want to see the under dog win the game. It is a more rewarding experience to see those who fight for something win it big time. This feeling is further compounded if it has the added benefit of allowing a customer to say “I used (product name here) before Oprah did”. Granted this can’t help you forever (or if it does you have bigger problems), but it should however help catapult your business into much more sustainable revenue levels.

So what is the moral of the story? This is the year to connect with your customers, make serious innovations and let your customers conversation drive your business. To all the startups out there.. 2010 is our year.