A version of this article previously appeared in the Wall Street Journal. Avoid a simple pricing mistake which could sink your startup. The “D” word - Discounts. I buy my cars in December. Why? Because I am cheap and I know that car dealers are incentivized by the manufacturer to hit quarterly and annual sales goals. The rewards are in the form of co-marketing dollars and commission spiffs. Thus, the value of a sale at the end of a quarter can be significant, if the sale contributes to obtaining a manufacturer's incentive. Individual salespeople are commissioned in a similar manner, based on attaining monthly and quarterly goals. If selling one more car at the end of a quarter will earn a sales rep a trip to Hawaii, they may be willing to forgo most or all of their commission to get the sale.
A version of this article previously appeared on Forbes. Raising too much cash, too early, can kill your startup. It can provoke spending on unproven business models, hiring employees before their talents can be fully tapped and entering into long-term, unsustainable relationships with partners, landlords and other third parties. To avoid these death knell mistakes, create a culture in which you and your employees (your CFO excepted) spend your precious cash with zero regard for how much money you have in the bank. Sound counterintuitive? Hardly. Startups should only spend their money on initiatives that deliver a discernible, measurable return on investment.
A version of this article previously appeared in the Wall Street Journal. “You miss 100% of the shots you never take.” Wayne Gretzky Imagine how difficult it would be to score in hockey if you were required to rely on someone who is not your teammate to convince another third-party, whom you have not met, to take a shot on your behalf. As crazy as this scenario sounds, it is very similar to the “scoring process” companies engage in when they track Net Promoter Scores.
A version of this article previously appeared in Forbes. Trade show veterans know that the louder you scream at an industry event, the less your voice is heard. Instead, you have to push the envelope of propriety to cut through the noise. Even at a show the size of Dreamforce, you can cut through the noise, but you have to push the envelope to do it. Dreamforce is the conference for sales and marketing professionals. Hosted by SAAS giant Salesforce, it is more akin to a circus than a professional event. The 2014 show hosted 135,000 attendees and boasted A-list guest speakers and performers like Hillary Rodham Clinton, Neil Young, Anthony Robbins, and Bruno Mars. There were 1,450 sessions and over 400 exhibitors, all vying for attention.
A version of this article previously appeared in the Wall Street Journal. Freemium business models are popular because they allow startups to quickly drive user adoption. Unfortunately, many of these companies fail to properly monetize such non-paying users. Let's face it. It's frankly easier to accelerate your startup's growth and show faux traction if you omit the pesky step of asking users to pull out their credit cards.Let's face it. It's frankly easier to accelerate your startup's growth and show faux traction if you omit the pesky step of asking users to pull out their credit cards. The freemium approach offers users access to online solutions at no charge. Yet too often, entrepreneurs embrace giving away their products and services for the wrong reason - they are simply reticent to ask for payment.
A version of this article previously appeared in Forbes. Despite the fact that I teach entrepreneurship at UC Santa Barbara, I do not believe that entrepreneurs are created in classrooms. Instead of trying to teach students to be an entrepreneur, I expose my entrepreneurial students to tools that will help them solve real-world problems.
A version of this article previously appeared on Forbes. Some of the all-time greatest business deals involve entrepreneurs who viewed the scope of their negotiations in terms of decades, rather than years. Too often, entrepreneurs negotiate deals which consider a relatively short-term time horizon. This tendency is understandable, as most business negotiations address near-term objectives, such as driving incremental revenue or acquiring customers. However, shrewd entrepreneurs look beyond a deal’s near-term impact.
A version of this article previously appeared in Forbes. In 1862, Charles Darwin predicted that an insect with an extraordinary tongue must exist by observing an orchid which stores its nectar at bottom of long stem. Darwin surmised the anatomical structure of the phantom insect based on the mechanics required to pollinate the flower. 130-years later, scientists discovered X. morganii praedicta, a moth with a freakishly long tongue which fed on the orchid’s pollen. Successful entrepreneurs make similarly educated guesses. By observing innovations and existing market conditions, they anticipate emerging technological trends.
A version of this article previously appeared in Forbes. Underdogs have a romantic appeal. Western societies relish fables which celebrate the victories of those who were expected to lose. Sophisticated entrepreneurs harness the power of their venture's underdog status, driving their teams to be unabashedly passionate risk takers who refuse to acknowledge failure as an option.
A version of this article previously appeared in Forbes. I recently came across a disturbing article entitled, "The American Dream Is An Illusion," written by a college Economics Professor. The Professor argues that, "... recent evidence suggests that, in reality, social mobility rates are extremely low. Seven to ten generations are required before the descendants of high and low status families achieve average status."